US, Brazil settle cotton dispute

The United States has agreed to pay Brazilian cotton producers $300 million to settle a decade-old dispute over cotton subsidies.

U.S. Trade Representative Michael FromanMichael B.G. FromanUS trade rep spent nearly M to furnish offices: report Overnight Finance: Trump hits China on currency manipulation, countering Treasury | Trump taps two for Fed board | Tax deadline revives fight over GOP overhaul | Justices set to hear online sales tax case Froman joins Mastercard to oversee global business expansion MORE and Agriculture Secretary Tom VilsackThomas James VilsackUSDA: Farm-to-school programs help schools serve healthier meals OVERNIGHT MONEY: House poised to pass debt-ceiling bill MORE announced on Wednesday that the U.S. and Brazil have settled their longstanding cotton disagreement in the World Trade Organization (WTO).

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To that end, the United States will make a one-time final contribution of $300 million to the Brazil Cotton Institute.  

“I am pleased that the United States and Brazil have found a permanent resolution to the cotton dispute,” Froman said.

“Today’s agreement brings to a close a matter which put hundreds of millions of dollars in U.S. exports at risk."

In exchange for the one-off payment, Brazil also relinquishes their ability to take countermeasures against the United States.

Under the deal, Brazil also agreed not to bring new WTO actions against U.S. cotton support programs while the current farm bill is in force or against agricultural export credit guarantees.

“Without this agreement, American businesses, including agricultural businesses and producers, could have faced countermeasures in the way of increased tariffs totaling hundreds of millions of dollars every year," Vilsack said.

"This removes that threat and ensures American cotton farmers will have effective risk management tools."

The farm bill included significant changes to U.S. cotton domestic support programs.

But one House Democrat expressed concerns about the agreement. 

Rep. Rosa DeLauro (D-Conn.) said the United States, “never should have been in a situation where we have to pay off Brazil while vulnerable families suffer.”

“Our farm subsidies need serious reform and the last farm bill simply extends the status quo,” she said.

“The best way to resolve this issue is to remove our market-distorting cotton payments.”

In 2005 and again in 2008, the WTO found that certain U.S. agriculture programs were inconsistent with its commitments.  

In August 2009, WTO arbitrators provided the level of countermeasures that Brazil could impose against U.S. trade.

In June 2010, the United States and Brazil signed a framework agreement to avert the use of those retaliatory measures that would have allowed for more than $800 million in sanctions on U.S. products, including intellectual property rights.

Those measures were suspended after U.S. officials agreed to make payments into an account to help Brazilian cotton farmers.

Chuck Dittrich, vice president for regional trade initiatives at the National Foreign Trade Council (NFTC) said his group was “encouraged to see that the U.S.-Brazil agreement contains adjustments to the U.S. cotton program to make it more WTO compliant in the long term, rather than just a short-term fix.”