Brazil, US Study Resolution To WTO Cotton Ruling Impasse

Brazil and the U.S. remain open to a negotiated settlement regarding a recent WTO decision condemning U.S. cotton subsidies, though the content of negotiations will depend on the implementation of WTO recommendations by the U.S. government, top diplomatic officials from the two countries indicated Thursday.

A meeting between U.S. Trade Representative Ron Kirk and Brazilian Foreign Relations Minister Celso Amorim Thursday produced no specific proposals for resolving differences on the matter.

“We would usually prefer a negotiated settlement, but in the wake of the conclusion of this long process, the time is for reflection on our next move,” said Amorim. “At the moment we’re studying what measures we might take in case the U.S. resolves not to change its position on subsidies.”

Following an 8-year dispute, Brazil last month won an $800 million ruling against the U.S. at the World Trade Organization allowing it the right to retaliate across various sectors, including intellectual property and other commerce.

Kirk, meanwhile, said the U.S. would hold off on making any proposals until Brazil made a determination on whether it planned to use direct retaliation.

“Brazil needs to come to a decision on what kind of measures it might want to impose,” Kirk said. “We’ll wait for their next decision and then we’ll seek to move forward.”

Top Brazilian industry officials earlier in the day said they did not favor direct retaliation by the government in the cotton dispute as that could damage Brazilian commercial interests.

The talks surrounding the cotton dispute also come as the U.S. lobbies to win a lucrative Defense contract with Brazil’s government for the purchase of $36 billion in jet fighters.

U.S. Boeing Corp. (BA), France’s Dassault, and Sweden’s Gripen have been named as finalists in the bidding by the Brazilian government. The competition, however, has revolved around bidding countries’ willingness to transfer technology to Brazil with a potential sale.

Kirk Thursday reinforced U.S. interest in making the sale, but did not disclose whether the U.S. was willing to meet Brazil’s requirements.

“As a general rule we’d like to sell aircraft to any interested buyers as long as they meet the right conditions, but as far as technology transfer requirements that will be a question for the Secretary of State and the Department of Defense,” he said.

Beyond the cotton dispute, the officials Thursday also looked to lay the groundwork for advancing other matters regarding multilateral and bilateral trade.

Both Amorim and Kirk reiterated recently expressed optimism regarding the resumption of WTO Doha round of multilateral trade talks that were suspended last year.

“On multilateral issues, we’re both looking for a way to thread the needle to make an agreement on Doha become a reality,” he said. “If we enter into negotiations in good faith, there’s a possibility to get it done in 2010.”

Kirk dismissed the notion that domestic political disputes in the U.S. and elsewhere could sideline interest in the talks, and said recent changes in governments in countries like India and Japan could favor the resolution of long-standing differences that have blocked the conclusion of Doha.

Alongside multilateral talks, the officials Thursday aired the possibility of working toward a bilateral free trade agreement. Amorim, however, cautioned that any eventual accord would be restricted by Brazil’s commitments within the South American Mercosur trade bloc.

“We won’t enter into any agreement that infringes on Mercosur rules,” he said.