U.S. and Brazilian officials have agreed on a path for a negotiated settlement for Brazilian’s long-running dispute with the United States over its cotton program.

Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack announced the agreement in a joint press release from Washington April 6. The agreement could prevent Brazil from implementing trade restrictions against a number of U.S. products.

“I am pleased our teams have been able to make substantial progress towards the goal of a negotiated settlement which would avoid the imposition of countermeasures against U.S. trade, including U.S. exports and intellectual property rights,” said Ambassador Kirk. “We now have a clear path forward, one that is in the best interest of both the United States and Brazil.”

As a result of the discussions, the United States has avoided imposition of higher tariffs against hundreds of millions of dollars in U.S. goods exports which were scheduled to go into effect this week, Kirk noted.

For background see http://southeastfarmpress.com/cotton/world-trade-0902/index.html.

“I am so pleased that we were able to agree on a path forward with Brazil that will avoid the imposition of countermeasures on U.S. agricultural products and industrial goods that Brazil had announced would go into effect on Wednesday,” said Vilsack. “Both the United States and Brazil will benefit by working together to resolve our dispute.

“I am also 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.”

In 2005 and again in 2008, the World Trade Organization found that certain U.S. agricultural subsidies are inconsistent with WTO commitments. Those included:

• Payments to cotton producers under the marketing loan and countercyclical programs;

• Export credit guarantees under the GSM-102 Program, a USDA program used to provide guarantees for credit extended by private U.S. banks to approved foreign banks for purchases of U.S. agricultural products by foreign buyers.

Last Aug. 31, 2009, WTO arbitrators issued arbitration awards in this dispute. These awards provided the level of countermeasures that Brazil could impose against U.S. trade. The annual amount of countermeasures has two parts: 1) a fixed amount of $147.3 million for the cotton payments and 2) an amount for the GSM-102 program that varies based upon program usage. Using the data that we have given Brazil (in accordance with the arbitrators’ award), the current total of authorized countermeasures is $820 million.

The arbitrators also provided that Brazil could impose cross-sectoral countermeasures (i.e. countermeasures in sectors outside of trade in goods, specifically intellectual property and services). It may impose cross-sectoral countermeasures to the extent that it applies total countermeasures in excess of a threshold.

The threshold varies annually, but is currently approximately $560 million. Therefore, of the approximately $820 million in countermeasures Brazil could impose now, about $260 million of that could be cross-sectoral, according to USDA officials.