US, Brazil Reach Agreement in WTO Dispute
United States and Brazilian officials announced that the two countries have concluded a Framework Agreement with respect to the WTO dispute involving the export credit guarantee programs and certain provisions of the upland cotton program.
The Framework Agreement delays trade retaliation by Brazil through the development of the ’12 farm bill and further indicates that a mutually agreed outcome in the next farm bill would provide a long-term settlement of the dispute. The two countries had until June 21 to conclude an agreement or Brazil would have imposed trade sanctions on up to $800 million worth of US goods.
The NCC expressed appreciation for the Administration’s efforts to conclude a framework agreement with Brazil in the dispute.
"The framework agreement between the U.S. and Brazil reflects a significant effort by the Administration to forestall the imposition of damaging retaliatory trade action by Brazil while preserving the normal policy process in the United States,” NCC Chairman Eddie Smith stated. “It was a difficult agreement to negotiate, and we commend the Administration for its determination to find common ground with Brazil."
A Brazilian government press release indicated that the basis for the discussion on US cotton policy would be an annual limit on trade-distorting cotton subsidies that would be "significantly lower" than the average for the years ’99-05 (the years covered by the WTO dispute). The Framework also provides benchmarks for changes to the US export credit guarantee program that would affect all participating US commodities. According to Brazil, the export credit guarantee changes would focus on a reduction in the length of the guarantees (maximum length of 16 months) along with potential increases in risk-based premiums to be charged. The increase in premiums would be tied to the overall level of use of the export credit guarantee program.
The Framework also calls for quarterly meetings between the United States and Brazil to discuss progress in the ’12 farm bill debate. Both countries stated that the Framework was not a "permanent" solution to the dispute, but provided a process and actions that were to occur during a "transition" period that would end with enactment of the ’12 farm bill. As long as the Framework is in place, Brazil agreed not to impose trade sanctions. However, Brazil reserved its rights to terminate the Framework Agreement at any time.
"We will work with Congress and the Administration on the 2012 farm bill,” Smith stated, “in order to develop cotton policy that will continue to provide the safety net needed by U.S. farmers while helping assure our trading partners that U.S. cotton programs do not cause unfair trade distortions in the world cotton market."