Dispute in the Cotton Industry Sees a Resolution

Oct 02, 2014


A dispute between the US and Brazil has finally come to an end after more than a decade of disagreements. The two countries were able to recently settle a dispute that had been previously raised by the Brazilian cotton industry.

The dispute originated from the US farm bill in 2002. Brazil had successfully argued to the World Trade Organization that US cotton subsidies had created overproduction and low world prices. Brazil had threatened to issue sanctions against the US after the WTO had ruled on two separate occasions in favor of the Brazilian cotton industry. After the US had failed its requirement of paying an annual fee on two separate occasions of $147 million towards the South American country, Brazil would threaten to impose tariffs worth $800 million to American products.

Recently, both countries came to a resolution to the long standing debate. The US would pay a fee of $300 million to assist in building the capacity of the Brazilian cotton industry. In return Brazil would drop sanctions it had threatened to impose. Combined the tariffs that Brazil had threatened could cost upwards of more than $800 million. The Brazilian government had issued these threats after the United States failed pay the $147 million due to budget disagreements in congress. The fee was part of an agreement that would give the money to an assistance fund for workers in the Brazilian cotton industry.

The agreement is seen as extremely positive for both countries. Brazilians have agreed to abandon future rights to enact countermeasures against US trade. The agreement also specifies that Brazil no longer has the right to contest US cotton programs for the duration of the 2014 farm bill. This however only applies if the US cotton program is consistent with the agreed upon terms.

The resolution has ended a long standing dispute between the countries. However, Brazilians see this as more than an agreement but as a triumph for Brazilian agriculture as a whole. The Brazilian Cotton Producers Association views this as an opportunity for Brazilian agriculture to equally compete in a free and fair world market.

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