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Published April 12, 2010, 12:18 PM

US, Brazil reach preliminary cotton deal

WASHINGTON — The United States and Brazil reached agreement on April 6 for a negotiated settlement in the longstanding dispute over cotton in the World Trade Organization. The settlement will avoid Brazil imposing up to $820 million in retaliatory measures on U.S. products and eventually may allow Brazil to export more pork and beef to the United States.

By: Jerry Hagstrom, Special to Agweek

WASHINGTON — The United States and Brazil reached agreement on April 6 for a negotiated settlement in the longstanding dispute over cotton in the World Trade Organization. The settlement will avoid Brazil imposing up to $820 million in retaliatory measures on U.S. products and eventually may allow Brazil to export more pork and beef to the United States.

Final in June

In a joint news release, U.S. Trade Representative Ron Kirk and Agriculture Secretary Tom Vilsack said the two countries had reached an initial agreement that would be completed in June. In the same release, Vilsack indicated he was pleased that the agreement would not require a rewrite of the cotton program until the 2012 farm bill.

“I am 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,” Vilsack said.

WTO panels in 2005 and 2008 had found that certain U.S payments to cotton farmers and certain USDA export credit guarantees for foreign buyers of U.S. agricultural products were inconsistent with U.S. commitment to the WTO and that Brazil could impose $147.3 million in countermeasures for the cotton payments and a varying amount of retaliation for the credit programs depending on usage. The retaliation for the credit program could have been focused on U.S. intellectual property rights as well as goods.

Under the agreement, the United States has agreed to establish a fund of approximately $147.3 million per year to provide technical assistance and capacity building for the Brazilian cotton industry and that the fund will continue until passage of the next farm bill or a mutually agreed solution to the cotton case is reached, whichever is sooner. 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 in technical discussions with Brazil regarding further operation of the program.

Beef, pork trade

The United States also agreed to publish a proposed rule by April 16 to recognize the state of Santa Catarina, Brazil, 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. In the agreement, the United States also noted its plans to complete a risk evaluation that currently is under way and identify appropriate risk mitigation measures to determine whether fresh beef can be imported from other parts of Brazil while preventing the introduction of foot-and-mouth disease in the United States. But a USDA official stressed that there would not be any pork exports from Santa Catarina or beef from other parts of Brazil coming to the United States any time soon.

The official said that the proposed rule on pork would require comment and the risk evaluation on beef has not advanced to the rulemaking stage. The official also noted that even if rules were completed declaring pork from Santa Catarina and beef from other parts of Brazil not to be a problem from a disease and sanitation standpoint, Brazil still would have to go through the Food Safety Inspection Service process for certification that its slaughter plants meet U.S. equivalency standards.

The National Cattlemen’s Beef Association and the National Pork Producers Council had not commented on the agreement at press time, but R-CALF USA said the decision to move forward with the rule declaring the Santa Catarina province free of foot-and-mouth disease appeared to be a concession to Brazil and called on USDA to abandon plans to publish the rule.

The American Meat Institute said it was satisfied with USDA’s processes.

“AMI supports trade in meat and meat products in accordance with science-based international standards,” AMI executive vice president James Hodges said in an e-mail. “We are pleased that the Animal and Plant Health Inspection Service is following a rigorous regulatory process to protect the U.S. livestock industry. This process could lead to greater trade opportunities in the future,” he added.

Brazil’s retaliatory measures would have included higher tariffs on U.S. wheat, but the bigger debate in Washington was over Brazil’s plans to retaliate against U.S. intellectual property.

Biotechnology Industry Association President Jim Greenwood said in a release, “On behalf of BIO and its members, we applaud the Obama Administration for the progress they have made in their discussions with Brazil. Thanks to our U.S. negotiating team, we have been spared the imposition of retaliatory measures on a number of products including pharmaceuticals and agricultural seeds.

Senate Agriculture Committee Chairman Blanche Lincoln, D-Ark., and ranking member Saxby Chambliss, R-Ga., whose constituents in Arkansas and Georgia include large numbers of cotton growers, said they were pleased that retaliatory tariffs and other countermeasures had been avoided and encouraged that the two countries had agreed on a negotiated solution.

“Ultimately, Congress and the Senate and House Agriculture Committees in particular are responsible for crafting changes to these programs and we look forward working with Ambassador Kirk and Secretary Vilsack as both sides explore modifications for consideration during the 2012 farm bill process,” they said.

National Cotton Council Chairman Eddie Smith said in a release that the U.S. cotton industry viewed the agreement as a positive development.

“The two critical aspects of the agreement are that it avoids the immediately harmful economic effects of trade retaliation and it puts the serious discussion concerning changes in the U.S. cotton program before Congress in the 2012 farm bill,” Smith said.

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