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U.S. & Brazil Reach Agreement on Cotton Dispute

posted on April 8, 2010

In its latest assessment of global trade, the Agriculture Department forecast increased agricultural exports in 2010.

Citing global economic recovery and favorable commodity prices, USDA predicted agricultural exports will amount to $100 billion this year, up more than 3 percent from 2009.

When the government released its estimates in February, it forecast soybean and cotton exports would be higher due to stronger prices, greater global demand, and less competition from other suppliers.

Since then, South America has produced a huge crop of soybeans, and the outlook for cotton may have changed this week.

On Tuesday, the United States and Brazil announced they had finally worked out terms of a settlement of a long-standing trade dispute over billions of dollars in subsidies paid to U.S. cotton farmers.

U.S. & Brazil Reach Agreement on Cotton Dispute

The announcement came just one day before Brazil was to raise tariffs on hundreds of millions of dollars worth of American goods including wheat, textiles, autos, pharmaceuticals and electronics.

The Brazilian government brought the case to the World Trade Organization, or WTO, in 2002, alleging the United States remained the world's second-largest cotton producer by paying out the subsidies. Last August, the WTO ruled that American subsidies to cotton growers violated global trade rules.

As part of the agreement, the U.S. will set up a $147 million annual assistance fund for Brazil –the value of the retaliation the WTO had authorized American payments to cotton producers.

The deal was applauded by U.S. and Brazilian officials alike. Both Democratic and Republican lawmakers on the Senate and House Agriculture Committees approved the agreement. The Brazilian government said the measure "may establish the basis for a future and final mutually satisfactory solution for the dispute." While the chairman of the National Cotton Council called the deal "a positive development in this very long dispute." And, he added, "The deal avoids the immediately harmful economic effects of trade retaliation and it puts the serious discussion concerning changes in the U.S. cotton program before Congress in the 2012 farm bill."

The U.S. produces between 12 and 20 million 500-pound bales of cotton annually. It exports about 70 percent of the crop, totaling roughly $4 billion.


Tags: agriculture Brazil cotton foreign relations news South America trade