Brazil Cotton Growers Pessimistic on U.S. Subsidies Dispute

Brazilian cotton producers visiting Washington were pessimistic that the U.S. Congress would finish wrangling over farm policy in time to comply with international rules on cotton subsidies and avoid trade sanctions on U.S. exports to Brazil.

Brazil challenged U.S. cotton subsidies at the World Trade Organization and won the right to impose $830 million in retaliatory tariffs on U.S. goods ranging from cars to milk powder. But sanctions were put on hold while Washington wrote a new farm law that was expected to eliminate the long-standing subsidies.

The farm bill is already more than a year overdue and Brazilian cotton producers said after visits to Capitol Hill this week they were not reassured that the legislation, which could pass this month, would comply with WTO rules against trade-distorting subsidies.

"In visits to Congress we have not yet seen sufficient effort to make the new farm bill comply," Gilson Pinesso, president of the Brazilian Cotton Growers Association (ABRAPA), told reporters on Tuesday.

Although Brazil's growers want to resolve the dispute amicably, sanctions were looming if the farm bill did not pass soon or failed to meet WTO rules, a concern which has also been raised by U.S. business groups.

"We are in the position where there are no options left but retaliation," said Welber Oliveira Barral, former Brazilian secretary of development, industry and trade, who was part of the delegation.

Brazil's foreign trade commission (Camex) said in December it would hold public consultations in January with a view to finalizing retaliatory measures by Feb. 28.

In 2010, Brazil published a list of some 100 U.S. goods that could be targeted, including a tariff increase on cars to 50 percent from 35 percent, a rise on non-hard wheat tariffs to 30 percent from 10 percent and a 48-percent levy on milk powder, up from 28 percent. Cotton would be charged a 100 percent import tariff, the highest on the list.

ABRAPA and the U.S. National Cotton Council have put forward a joint proposal to resolve the standoff but ABRAPA international advisor Mark Langevin said the proposals had to be taken as a package, not mix and match.

In a letter in May 2013 to the U.S. Trade Representative and the Department of Agriculture, the two groups called for a formula-based loan program for upland cotton producers, voluntary revenue insurance and more cooperation between U.S. and Brazilian industry groups.