U.S. seeks to end Brazil cotton spat with changes

The United States on Tuesday headed off a move by Brazil to impose penalties on a wide range of U.S. goods by offering concessions on a export loan guarantee program and said it would try to negotiate an end to a long-standing trade spat over cotton.

The last-minute proposal came as Brazil was set to impose tariffs and lift patent protections on $829 million in U.S. goods, which would have been its right after a 2009 World Trade Organization ruling against U.S. cotton subsidies and export credit guarantees.

The WTO ruling was significant because it gave Brazil the right to “cross-retaliate” by lifting patent protections on pharmaceuticals, chemicals, and intellectual property rights on film and music.

“We now have a clear path forward, one that is in the best interest of both the United States and Brazil,” Trade Representative Ron Kirk said in a statement.

The U.S. plan prompted Brazil to delay its planned moves, pending further bilateral talks, which Washington hopes will be agreed on by June.

But, at home, Kirk and Agriculture Secretary Tom Vilsack will also face the task of convincing lawmakers of the merits of long-term changes to farm subsidies, which will become a focus as Congress works on its next Farm Bill for 2012.

“I look forward to working with Congress and Brazil to craft a long-term, mutually-agreeable solution to this dispute that meets the needs of American farmers, workers and consumers,” Vilsack said.

Blanche Lincoln, the chairman of the Senate Agriculture Committee, and her Republican counterpart, Saxby Chambliss, said they would work with the U.S. Agriculture Department and USTR “as both sides explore modifications” for the 2012 Farm Bill.

“Ultimately, Congress, and the Senate and House Agriculture Committees in particular, are responsible for crafting changes to these programs,” the senators noted.

The U.S. National Cotton Council, which represents farmers, also said it was pleased that the negotiations on long-term changes will be handled by Congress in the Farm Bill process.

In the near term, the U.S. government will make changes to its export credit guarantee program and will work with Brazil to create a fund of about $147.3 million per year for unspecified technical assistance.

The guarantee program helps boost sales by guaranteeing payments if buyers default, making lenders more willing to participate in the business.

Brazil complains the program is in effect a subsidy for U.S. producers.

The USDA extended about $5.4 billion in export credits for a wide variety of farm exports in fiscal 2009, which ended September 30.

The news did not have an immediate impact on cotton futures prices. One trader said the market would be watching for further details of changes to the export credit guarantees, which USDA and USTR representatives said were not immediately available.

USDA also said it would work to find ways to allow imports of fresh beef from Brazil.

Developing nations have targeted export credits in trade negotiations as an unfair trade practice. The United States has argued its export credits are fair.

The Brazilian case has become a symbol for African nations railing against U.S. farm subsidies.

“The U.S. may be buying time with this agreement, but only a full reform of U.S. cotton subsidies will benefit vulnerable cotton farmers around the world and preserve the integrity of the multilateral trade system,” said Laura Rusu, a spokeswoman for Oxfam America, a poverty action group.