Brazil Agrees to Suspend Retaliation in U.S. Cotton Dispute

June 21, 2010

The Office of the U.S. Trade Representative (USTR) and Brazil's Ministry of Development, Industry and Foreign Trade (MDIC) have announced that they have reached a framework agreement as the two sides work toward a final resolution of the World Trade Organization (WTO) upland cotton dispute.  The agreement, which still needs to be signed, continues the elements which the two sides agreed to in April 2010 and avoids Brazil's imposition of countermeasures on more than $800 million this year, including more than $560 million in countermeasures against U.S. goods and $238 million against U.S. intellectual property rights and services.

The MDIC has stated that the framework agreement will remain in place until the end of 2012, when the two sides will evaluate pending changes to be made by the 2012 Farm Bill.  The MDIC has further indicated while Brazil has agreed not to impose any countermeasures while the framework agreement is in place, either party is free to remove itself at any time.

According to the Office of the USTR, the framework agreement has two major elements.  First, it provides for quarterly consultations between the parties with regard to limiting trade-distorting cotton subsidies until the 2012 Farm Bill is finalized.  Next, the framework agreement would provide benchmarks for changes to certain elements of the current GSM-102 program.  According to the MDIC, the United States has agreed to specific modifications concerning payment terms, premiums, etc.