Brazil may retaliate because of cotton subsidies that remain in Farm Bill

According to ambassador Roberto Azevedo, Brazil’s permanent representative at the World Trade Organization, “Brazil does not want to retaliate due to United States cotton subsidies, but may be forced to do so.” The ambassador’s comment followed approval by the House of Representatives of a new Farm Bill (the present bill expires in September) that maintains cotton subsidies and other farmer benefits that have been judged illegal by the WTO.

American cotton subsidies, which have been part of US legislation since 1934, are actually scheduled to increase in the new Farm Bill. For that reason, ambassador Azevedo expressed concern, calling the situation “uneasy.” He said there was no convincing justification for American congressmen to have approved a bill that was even more harmful to Brazilian cotton growers than the former bill.

“Farming should be based on market forces, not government subsidies,” said Azevedo, as he pointed out that the new Farm Bill “distorts market competition.”

The ambassador reported that Brazil and the United States have been discussing the cotton subsidy controversy and the new Farm Bill in an effort to avoid Brazilian retaliation under provisions of a direct compensation ruling (that allows cross retaliation) by the WTO dispute settlement panel in 2004.

At the same time, under a framework agreement, the United States has been making monthly payments of $12.275 million to the Brazilian Cotton Institute (“IBA”), as part of reparation payments to Brazilian cotton growers for losses due to US subsidies.