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article imageBrazil confirms it will impose trade sanctions against U.S.

By Chris Dade     Mar 9, 2010 in Business
Brazil announced on Monday that it is proceeding with trade sanctions against the U.S. that were approved last year by the World Trade Organization (WTO) as a response to subsidies paid by the latter country to its cotton farmers.
Considered to have one of the fastest-growing economies in the world - along with China, India and Russia it helps form BRIC - Brazil last week informed the U.S. it would not be supporting Washington's call for the UN to impose sanctions on Iran.
U.S. Secretary of State Hillary Clinton was advised of the Brazilian stance when she met the Latin American country's President, Luiz Inácio Lula da Silva, in Brasilia.
And now the subject of sanctions could be set to strain U.S.-Brazil relations further after Marcio Cozendey, head of the economic department of Brazil’s foreign ministry, confirmed that his country will be imposing $830 million in sanctions.
According to Bloomberg the $830 million in sanctions are to consist of $560 million on goods, with the remainder imposed on intellectual property rights and services.
When the WTO first decided in August that Brazil was entitled to impose sanctions the amount involved was $294.7 million.
However Xinhua noted in November, when the WTO endorsed its own preliminary decision from three months prior, that the Brazilian Foreign Trade Chamber was considering sanctions closer to $800 million.
Bloomberg explains that Brazil feels entitled to impose greater sanctions than were first approved as "U.S. payments to cotton farmers exceed a specific cap".
There are 222 items - including diverse items such as electronics, cosmetics, chewing gum and medical equipment - from which those against which sanctions are to be imposed may be chosen and Marcio Cozendey has indicated that breaking patents may form part of the sanctions on intellectual property rights and services.
He is quoted as saying:The broader our retaliation the better it will be, as it increases the pressure on the U.S. Many sectors of the American society will want their government to follow WTO rules
For its part the U.S., reportedly the world's largest cotton exporter and apparently criticized by the likes of Oxfam America for its subsidy program, has said it wants to end the current level of subsidies, citing difficulties in persuading Congress to agree to a move of that kind.
Noting that 100 items will eventually be selected for sanctions by Brazil, which began the case against the U.S. in 2002, The Commerical Appeal reports on opposition to the move by Brazilian authorities voiced by the Tennessee-based National Cotton Council (NCC) and the Office of the U.S. Trade Representative (USTR).
For the USTR Nefeterius Akeli McPherson spoke of the U.S. being:disappointed to learn that Brazil's authorities have decided to proceed with countermeasures against U.S. trade in the WTO cotton dispute. USTR has worked to reach a solution to the issues in this dispute without Brazil resorting to countermeasures and we continue to prefer a negotiated solution
In its statement on the matter the NCC said:Given world cotton market conditions and the dramatic changes that have been made in the U.S. cotton program, Brazil’s latest actions are imposing unwarranted harm on Brazilian and American interests in times of economic hardship for all. Historically,dispute settlement is frequently made more difficult,not easier by the application of retaliatory trade measures. Both Brazilian and American firms will find themselves economically disadvantaged by the imposition of such duties.
Brazil is taking retaliatory steps even though world cotton prices are more than 50 percent higher than 2005, which served as the basis for the original Panel ruling. U.S. cotton harvested acreage and production are down by more than 40 percent, while production in Brazil, China and India has expanded
In response to the findings of the original World Trade Organization (WTO) panel,cotton's Step 2 program was eliminated in 2006. The 2008 U.S. farm bill lowered the upland cotton counter-cyclical target price and made changes in the marketing loan program, effectively lowering the average loan benefit to producers. The costs of U.S. cotton price-related programs are down more than 80 percent from the previous five-year average and are projected to be minimal for the foreseeable future
The arguments presented against U.S. subsidies to cotton producers are that they lead to excess production and a lowering of prices. Lower prices then hit developing nations hardest.
More about Brazil, World trade organization, Cotton farmers
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