By Adam Behsudi
Brazil is eyeing a World Trade Organization meeting on April 25 to advance litigation aimed at U.S. farm bill provisions that the country says have failed to resolve a long-running case over illegal U.S. cotton subsidies, sources familiar with the case have said.
The request for a compliance panel at the next meeting of the WTO dispute-settlement body would launch at least a yearlong process to determine if new crop insurance provisions in the farm bill (PL 113-79; HR 2642) are an appropriate replacement for direct payments, which the WTO deemed illegal in 2009.
Brazil could slap more than $800 million in punitive tariffs and suspended intellectual property rights on U.S. imports if a WTO panel finds that the farm bill provisions fall short.
There has been a flurry of work recently to prepare for the case despite a meeting last week in Brasilia between U.S. and Brazilian officials, sources said.
The March 26 meeting, facilitated by Brazil’s Ministry of Agriculture, was meant to bring U.S. trade officials and Brazilian cotton producers together to resolve their disagreements, a source familiar with the meeting said.
Brazil’s cotton producers argue that the farm bill’s Stacked Income Protection Plan, a new shallow-loss revenue protection program meant to replace direct payments, would cause an even greater distortion to the world cotton market than the direct payments did.
Brazilian growers laid out their arguments in greater detail to the U.S. delegation, which included Darci Vetter, deputy undersecretary for farm and foreign agricultural services. Vetter was recently nominated to be chief agricultural negotiator at the Office of U.S. Trade Representative, and her appointment is pending Senate confirmation.
“Nothing was really concluded in those meetings,” the source said, adding that it was mainly an opportunity to show how much pressure Brazil’s cotton producers are putting on the Brazilian government to challenge the farm bill provisions.
The U.S. has touted the farm bill as a solution to the case, but Brazilian cotton growers have balked at that claim. Under the new program, the U.S. government will subsidize insurance premiums by as much as 80 percent if world cotton prices dip below a certain level, which critics say could create incentives for farmers to produce more of the commodity than the market can bear to continue receiving the payments, further suppressing cotton prices. The Brazilian cotton growers association ABRAPA pressed the argument in a visit to Washington in January.
When the WTO handed down its 2009 ruling on direct payments, it granted Brazil the right to retaliate, but Washington pledged to insert new provisions in the next version the farm legislation to resolve the case. As a stopgap measure, the two sides agreed to an interim settlement in which the U.S. would pay Brazilian cotton growers more than $12 million a month through a special fund.
However, the U.S. prematurely stopped the payments last October, prior to the passage of the farm bill, citing budget pressure as a result of the sequester. The breach of the agreement allowed Brazil to once again consider retaliation, which is now on hold once again until the WTO compliance panel issues its decisions.
It will take 30 days to formally establish the panel if Brazil goes through with its request at the WTO’s meeting April 25.