US and Brazil suspend trade dispute

Americas Society Website – US-Brazil Military Pact on the Horizon / The New York Times – US and Brazil Reach Agreement on Cotton Dispute / Latin America Monitor – Good Will to Avert US Trade Dispute / Business Week – Brazil, U.S. Agree to Avoid Tariffs in Cotton Dispute / Latin American Herald Tribune – US Hopeful of Settling Trade Dispute with Brazil over Cotton / Financial Times – Tax move by Brazil risks US trade war / The Economist – Picking a fight Brazil fires another salvo in its dispute with America over Cotton Subsidies

Brazil and the US reached a temporary agreement on Tuesday April 6, over Federal subsidies to US Cotton Farmers. The Brazil-US trade dispute began in 2002 when the Brazilian government filed a case with the WTO alleging that the US was violating trade agreements by providing Cotton subsidies to US farmers. Brazil won the case in 2005 and 2008 with the WTO finding that the US subsidies violated trade agreements. In August 2009, Brazil won WTO approval to impose sanctions on US goods over the Cotton subsidies. The WTO granted Brazil the right to impose annual sanctions of approximately $829 million. Prior to this agreement, Brazil was set to start imposing the sanctions this week.

Under this agreement, the US has agreed to create a $147.3 million fund that would provide assistance to the Brazilian Cotton industry. The US would keep the fund in place as long as Cotton subsidies exist for US farmers. The US opted to provide assistance to Brazilian Cotton farmers rather than eliminate the Cotton subsidies that it provides US farmers. Reports also indicate that the US will lift import bans on Brazil Beef that stem from foot and mouth disease and other livestock infections. The US Agriculture Department will also modify a program that will allow foreign banks access to loan guarantees for purchase of American agricultural products by foreign buyers.

Both countries hope that they can reach a permanent solution in the coming weeks. Many fear that the dispute could erupt in to an all out trade war between the two countries. Brazil planned to impose a 100% tariff for cotton prices, duties on cars, and suspend intellectual property rights. The dispute also threatened Barack Obama’s goal of doubling US exports over the next five years. US Agricultural Secretary Tom Vilsack stated, “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.” Analysts indicate that this agreement will push any changes to US Cotton subsidies to the 2012 farm bill.

Reports also indicate that Brazilian Defense Minister Nelson Jobim will travel to the US to meet with US Defense Secretary Robert Gates during the upcoming week to finalize a military agreement between the two countries. This will be the first military agreement between the two nations since 1977. Experts have speculated that the agreement would create a joint military base in Rio de Janeiro. The agreement would also likely provide for joint training, collaboration and exchanges between military experts, defense related commercial visits, and naval visits. The US will likely utilize the new agreement to combat narco-trafficking from Rio de Janeiro. Analysts have asserted that the agreement stems from ongoing negotiations about proposed United Nations Nuclear Sanctions against Iran, as Brazil has been a key holdout in opposition to strong sanctions against Iran.

Discussion Questions:

Was this agreement a response to the growing presence of Russia in Latin America?

Will Brazil and US be able to work out a permanent agreement before the 2012 US Farm Bill?