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Brazil Recognizes WTO Award in Cotton Case

U.S. launches efforts to mitigate impacts from countermeasures.

John Otte 1, Economics Editor

November 20, 2009

3 Min Read

Thursday, the World Trade Organization's Dispute Settlement Body officially recognized the August 2009 Arbitration Panel finding in the case brought by Brazil against the U.S. export credit guarantee program and portions of the U.S. cotton program.


Under the ruling, Brazil can impose up to $147 million annually in countermeasures related to the U.S. cotton program. The amount of countermeasures Brazil may impose due to the U.S. export credit guarantee program will vary from year to year based on a formula established by the Panel. The U.S. has provided data to Brazil that will enable them to make the necessary calculations.


Damages could reach $800 million. Brazil has previously implied that it will be entitled to over $650 million in retaliation for the export credit guarantee program, bringing total countermeasures of more than $800 million.


Earlier in November, Brazil published a list of 222 items being considered for additional duties.


"Although commonly referred to as the cotton case, the U.S. export credit guarantee program accounts for a large amount of the total damage award claimed by Brazil," says Mark Lange, National Cotton Council president. "The countermeasures related to the cotton portion of this dispute are only $147 million annually, they are fixed, and they are well below what Brazil sought."


Where to from here? Lange contends that the United States has made significant changes in both cotton program and GSM program since 2005.


"We would like the United States to resolve the dispute through bilateral negotiations with Brazil or through the U.S. Trade Representative seeking a WTO compliance panel to help settle the disagreement."


United effort. In September, NCC joined 34 other agricultural organizations in a letter to USTR urging the United States to seek a new WTO compliance panel to update the ruling on the GSM-102 export credit guarantee program. The Council believes the WTO's decision does not reflect changes made to the GSM-102 program since 2005.


Additionally, the ruling does not appreciate the market and policy changes for U.S. cotton since 2005.


"It is astonishing to think to that anyone would conclude today that U.S. cotton production is damaging Brazilian cotton interests," stated NCC Chairman Jay Hardwick of Newellton, LA. Hardwick contends that "world cotton production data continue to demonstrate that the U.S. cotton program cannot be damaging Brazil's or any other country's interests.


Why? "U.S. cotton production in 2008 was more than 45% below the 2005 level while combined production in Brazil, China and India rose more than 20% since 2005. If surplus cotton is damaging the interests of Brazil, it certainly did not come from growers in the United States. The U.S. share of world cotton production has declined to 12% of total world cotton production - an eight percentage point decline since 2005 and the lowest since 1983."


Chairman Hardwick stated, "The Council will continue to work with USTR, USDA and Congress to ensure that the many changes previously made to the U.S. cotton program and the export credit guarantee program are fully understood and considered by the WTO."

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