A decade-long dispute between the U.S. and Brazil over U.S. cotton subsidies will come to an end within 21 days, U.S. Secretary of Ag Tom Vilsack and U.S. Trade Representative Michael Froman announced Wednesday.
The dispute in the World Trade Organization centered on U.S. support of cotton producers that Brazil found to be inconsistent with WTO commitments.
In 2009, WTO arbitrators allowed Brazilian countermeasures against U.S. trade, but in 2010, framework was agreed upon to avert such countermeasures. A related Memorandum of Understanding also pledged monthly payments from the U.S. to the Brazil Cotton Institute for technical assistance and capacity building activities for the sector, USDA said.
The framework expired on Feb. 7, 2014, when the 2014 Farm Bill, which provides several changes to U.S. cotton domestic support programs, was enacted. Over the last several months, U.S. and Brazilian governments have been working to fully resolve the cotton dispute, USDA said.
Under the new MOU, Brazil will relinquish all rights to countermeasures against U.S. trade and payments to the Brazil Cotton Institute will end with a final payment of $300 million. Additionally, new disputes against U.S. cotton domestic support programs are also limited in the MOU.
Additional details can be found on the full 2014 Memorandum of Understanding Related to the Cotton Dispute, available from USDA and the USTR.
"Through this negotiated solution, the United States and Brazil can finally put this dispute behind us," Vilsack commented in a USDA statement. "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. This removes that threat and ensures American cotton farmers will have effective risk management tools."
The National Cotton Council Wednesday celebrated the agreement and underscored the efforts taken to resolve the dispute.
"The new U.S. farm bill includes several necessary changes to cotton policy and the GSM export credit program," NCC Chairman Wally Darneille said in a provided statement. "When compared to previous programs, cotton policy is more market-oriented with the primary safety net conveyed through insurance products that must be purchased by the producer."
Darneille commended USDA and USTR officials for their help. "With the conclusion of the case, the U.S. cotton industry can bring a renewed focus to the challenges that lay in front of us," he said.