US and Brazil resolve decade-long trade fight over cotton subsidies

Economic Indicators Associated Press

The United States and Brazil have resolved a decade-long trade battle over subsidies Washington provided to U.S. cotton growers.

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The agreement announced Wednesday resolves a bitter trade fight that had strained relations between the two countries since 2002, when Brazil brought a case against the United States charging that the U.S. cotton subsidies were a violation of global trade rules. The World Trade Organization ruled in Brazil's favor and the United States had been forced to make annual $147 million payments to Brazil.

The United States agreed to pay the money to Brazil in 2010, just before the South American country was set to raise tariffs on hundreds of millions of dollars in American goods, including autos, pharmaceuticals and electronics.

U.S. Trade Representative Michael Froman, Agriculture Secretary Tom Vilsack and their Brazilian counterparts signed the agreement in Washington Wednesday. Under the terms, the United States will make a final one-time payment of $300 million to Brazil and Brazil will drop the cotton case.

"Today's agreement brings to a close a matter which put hundreds of millions of dollars in U.S. exports at risk," said Froman.

The agreement would allow the Obama administration to fully implement the farm bill passed by Congress in February. That measure included a new insurance program for cotton growers that was crafted to comply with the WTO ruling. Under the new agreement, Brazil agreed not to bring new WTO actions against U.S. cotton support programs while the current farm bill is in effect.

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The United States and Brazil had held discussions over the last several months seeking to resolve the dispute.

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Associated Press writer Mary Clare Jalonick contributed to this report.