WTO says Brazil can retaliate in US cotton dispute

WTO says Brazil can retaliate in US cotton dispute
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First Published: Mon, Aug 31 2009. 06 22 PM IST
Updated: Mon, Aug 31 2009. 06 22 PM IST
Geneva: Brazilian officials have informed that Brazil will be permitted to retaliate against the US in its dispute over US cotton subsidies under a World Trade Organisation (WTO) ruling to be published on Monday.
“But the exact form of the compensation, approved under arbitration by the WTO, is not yet clear because of its complexity,” they said.
The arbitration ruling is the climax of a trade dispute dating back six years which goes to the heart of developing countries’ calls to reform world trade in agricultural goods.
The WTO is due to publish the ruling at 6:30pm.
“To be frank it’s a very thick dossier and we are still trying to comprehend what the contents are,” said one official, speaking on condition he was not identified.
Brazil had sought $2.5 billion in annual retaliatory trade sanctions — which would normally be in the form of additional tariffs on imports of US goods — but the US had said a figure of $20-30 million was appropriate.
Another official, also speaking on condition of anonymity, said that the arbitration had not awarded a fixed sum but set compensation according to a formula to be calculated each year.
The dispute, launched in September 2002, has become one of the most politicised in the history of the WTO.
Brazil is the plaintiff in this case, but US subsidies have affected cotton producers all over the world, especially in sub-Saharan Africa, where the entire gross domestic product of most cotton exporters is smaller than subsidies paid by the US to its 25,000 cotton farmers.
The US is also under pressure to cut cotton subsidies in the WTO’s Doha round on a new trade deal, on which key ministers are meeting in Delhi this week.
Brazil previously asked the WTO to arbitrate on compensation in 2005, seeking $4 billion in annual retaliation at that point.
But the two countries agreed to suspend the arbitration process while the WTO examined whether the US had complied with earlier rulings against its subsidies.
After the US lost an appeal in those hearings last year, Brazil asked for the arbitration to resume.
Among the subsidies challenged by Brazil were marketing loan and counter-cyclical payments, as well as export-credit guarantees, which Brazil said also distorted trade in other agricultural commodities such as rice, poultry and pork.
Besides the size of the compensation, a key question is whether Brazil will be allowed to cross-retaliate.
That would allow it to target US service or intellectual property, for instance by breaking patents on US pharmaceutical products, as Brazil imports little US cotton and its economy could suffer if it imposed sanctions on US manufactured goods.
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First Published: Mon, Aug 31 2009. 06 22 PM IST