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Washington, April 6 – United
States Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack
announced Tuesday that the United States
and Brazil have agreed on a
path toward a negotiated settlement with Brazil
over contested U.S.
cotton program
supports. The U.S. hope
is that continuing negotiations will
lead to an agreement which avoids having Brazil impose retaliatory measures
under World Trade Organization (WTO) rules.
“I am pleased that our teams have been able to make
substantial progress towards the goal of a negotiated settlement which would
avoid the imposition of countermeasures against U.S.
trade, including U.S.
exports and intellectual property rights. We now have a clear path forward, one
that is in the best interest of both the United
States and Brazil,” said Ambassador Kirk. “As
a result of our discussions with Brazil
we have avoided imposition of higher tariffs against hundreds of millions of
dollars in U.S.
goods exports which were scheduled to go into effect this week. This
demonstrates how our two countries, working together, can solve problems. I am
hopeful that this will enable us to build upon our strong relationship with Brazil,
to the benefit of both of our economies.”
“I am so pleased that we were able to agree on a
path forward with Brazil
that will avoid the imposition of countermeasures on U.S.
agricultural products and industrial goods that Brazil had announced would go into
effect on Wednesday. Both the United States
and Brazil
will benefit by working together to resolve our dispute,” said Secretary
Vilsack. “I am also pleased that our path forward respects our Farm Bill
process and the role of Congress in shaping our commodity programs. I look
forward to working with Congress and Brazil to crafting a long-term,
mutually-agreeable solution to this dispute that meets the needs of American
farmers, workers and consumers.”
BACKGROUND
The Cotton dispute is a long-running dispute brought
by Brazil against the United States.
In 2005 and again in 2008, the World Trade Organization (WTO) found that
certain U.S. agricultural subsidies are inconsistent with WTO commitments: (1)
payments to cotton producers under the marketing loan and countercyclical
programs; and (2) export credit guarantees under the GSM-102 Program, a USDA
program used to provide guarantees for credit extended by private U.S. banks to
approved foreign banks for purchases of U.S. agricultural products by foreign
buyers.
On August 31, 2009, WTO arbitrators issued arbitration
awards in this dispute. These awards provided the level of countermeasures that
Brazil could impose against U.S.
trade. The annual amount of countermeasures has two parts: 1) a fixed amount of
$147.3 million for the cotton payments and 2) an amount for the GSM-102 program
that varies based upon program usage. Using the data that we have given Brazil
(in accordance with the arbitrators’ award), the current total of authorized
countermeasures is more than $800 million.
The arbitrators also provided that Brazil could impose cross-sectoral
countermeasures (i.e. countermeasures in sectors outside of trade in goods,
specifically intellectual property and services). It may impose cross-sectoral
countermeasures to the extent that it applies total countermeasures in excess
of a threshold. The threshold varies annually, but is currently approximately
$560 million. Therefore, of the approximately $820 million in countermeasures Brazil
could impose now, about $260 million of that could be cross-sectoral.
On March 8, 2010 Brazil announced a final list of
products that would face higher tariffs beginning on April 7, 2010. Goods on
the list include autos, pharmaceuticals, medical equipment, electronics,
textiles, wheat, fruit and nuts, and cotton. Brazil
had not made a final decision on which U.S. intellectual property rights
might be affected by cross-sectoral countermeasures, but it had begun a process
to make this determination.
On April 1, Deputy USTR Miriam Sapiro and USDA
Undersecretary for Farm and Foreign Agricultural Services Jim Miller met with
Ambassador Antonio Patriota, Secretary General of Brazil’s Ministry of External
Relations to discuss possible resolution of the dispute. As a result of that
dialogue, the Government of Brazil agreed not to impose any countermeasures on U.S.
trade on April 7. In exchange, the United States
agreed to work with Brazil
to establish a fund of approximately $147.3 million per year on a pro rata
basis to provide technical assistance and capacity building. Under terms to be
agreed by the United States
and Brazil
in the Memorandum of Understanding, the fund would continue until passage of
the next Farm Bill or a mutually agreed solution to the Cotton dispute
is reached, whichever is sooner. The fund would be subject to transparency and
auditing requirements.
The United
States also agreed to make some near term
modifications to the operation of the GSM-102 Export Credit Guarantee Program,
and to engage with the Government of Brazil in technical discussions regarding
further operation of the program. The United States also agreed to publish a
proposed rule by April 16, 2010, to recognize the State of Santa Catarina as
free of foot-and-mouth disease, rinderpest, classical swine fever, African
swine fever, and swine vesicular disease, based on World Organization for
Animal Health Guidelines and to complete a risk evaluation that is currently
underway and identify appropriate risk mitigation measures to determine whether
fresh beef can be imported from Brazil while preventing the introduction of
foot-and-mouth disease in the United States.
Following implementation of these initial steps, the United States
and the Government of Brazil agreed to continue engagement on these issues,
with a view to agreeing on a process by June that will allow us to reach a
mutually agreed solution to the Cotton dispute.
To read a joint statement from Senate Agriculture Committee Chair Blanche Lincoln and Ranking Member Saxby Chambliss welcoming progress in cotton negotiations with Brazil, go to: www.agri-pulse.com/20100406P2.asp. To return to the News Index page, click: www.agri-pulse.com
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