Brazil agreed to end a decade-old World Trade Organization case against U.S. cotton subsidies and to a peace clause for the life of the 2014 farm law in exchange for $300 million and technical assistance for its cotton sector. A memorandum of agreement sets constraints on U.S. use of export credit guarantees. U.S.-Brazil accord removes the threat of $800 million in retaliatory tariffs on U.S. products. WTO ruled in 2005 and 2008 that U.S. cotton supports distorted world trade.
The new farm law created a new cotton program, based on a floor price and revenue insurance. Some critics in Brazil said the new system might be unfair as its predecessor, so there were months of negotiations between the countries. “Today, the two governments have reached an agreement that provides for formal termination of the Cotton case at the WTO Dispute Settlement Body within 21 days,” said the U.S. trade representative’s office.
The National Cotton Council, an industry-wide trade group, said the new farm law brought free-market reforms to cotton supports. The American Farm Bureau Federation said the bi-national agreement assures the U.S. farm program will stay intact.
Like the United States, Brazil is one of the largest cotton producers and exporters in the world.