Brazil's WTO Case Against the U.S. Cotton Program [November 22, 2011]   [open pdf - 502KB]

"The so-called 'Brazil cotton case' is a long-running World Trade Organization (WTO) dispute settlement case (DS267) initiated by Brazil--a major cotton export competitor--in 2002 against specific provisions of the U.S. cotton program. In September 2004, a WTO dispute settlement panel found that certain U.S. agricultural support payments and guarantees--including (1) payments to cotton producers under the marketing loan and counter-cyclical programs, and (2) export credit guarantees under the GSM-102 program--were inconsistent with WTO commitments. In 2005, the United States made several changes to both its cotton and GSM-102 programs in an attempt to bring […] The framework agreement--which lays out a number of 'steps and discussions'--represents a path forward toward the ultimate goal of reaching a negotiated solution to the dispute, while avoiding WTO-sanctioned trade retaliation by Brazil against U.S. goods and services. As a result, Brazil has suspended trade retaliation pending U.S. compliance with the framework agreement measures. Key aspects of the framework agreement include (1) payment by the United States of a $147.3 million annual fund to a newly created 'Brazilian Cotton Institute' to provide technical assistance and capacity-building for Brazil's cotton sector, (2) quarterly discussions on potential limits of trade-distorting U.S. cotton subsidies (recognizing that actual changes will not occur prior to the 2012 farm bill), and (3) near-term modifications to the operation of the GSM-102 program coupled with a semi-annual review of whether U.S. GSM-102 program implementation satisfies certain performance benchmarks. These U.S. commitments are intended to delay any trade retaliation until after the 2012 farm bill, when potential changes to U.S. cotton programs will be evaluated. However, in the interim, several failed legislative attempts have been made to ban U.S. payments to the Brazil Cotton Institute."

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