U.S., Brazil reach accord on cotton subsidies

Lawmakers applauded on Tuesday an agreement on cotton dispute that lets the U.S. avoid paying $820 million in higher tariffs that Brazil was set to impose on U.S. exports this week. 

Trade Representative Ron Kirk and Agriculture Secretary Tom Vilsack announced the deal in a release that the two nations had "agreed to a path in the long-standing cotton dispute." A final deal is expected in June. 

Senate Finance Chairman Max Baucus (D-Mont.) called the agreement "a significant step forward toward final settlement" of the dispute. "As a result of this agreement, Brazil will refrain from imposing higher tariffs on U.S. goods, including Montana wheat, and will not withdraw protections for U.S. intellectual property.

"Today's announcement that Brazil has decided to pursue negotiations with the United States, rather than to impose countermeasures on U.S. agricultural and manufactured goods, services and intellectual property, is a positive development," said Rep. Sander Levin (D-Mich.), chairman of the House Ways and Means Committee. 

Vilsack noted that the cotton program wouldn't need rewriting until the 2012 farm bill because of Tuesday's agreement. 

In 2005 and 2008, The World Trade Organization found that certain U.S. payments to cotton producers and Agriculture Department export credit guarantees used to provide guarantees for credit by private U.S. banks to approved foreign banks for purchases of U.S. agricultural products for foreign buyers were inconsistent with WTO commitments. The WTO ruled that Brazil could impose $147.3 million in countermeasures for the cotton payments and retaliate against the credit programs, which could've targeted U.S. goods as well as intellectual property.

The agreement calls for the U.S. to establish an annual fund of around $147.3 million to provide technical assistance and capacity building for Brazil's cotton industry. The fund is set to continue until passage of the next farm bill or a mutually agreed solution on the cotton dispute is reached, whichever is soon.  

On March 8, Brazil announced a final list of products that would face higher tariffs beginning April 7. Those goods included autos, pharmaceuticals, medical equipment, electronics, textiles, wheat, fruits, nuts and cotton. Brazil hadn't made a final decision on which U.S. intellectual property rights might be affected but it was in the process of deciding.

"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," Vilsack said.