WTO Authorizes Brazil to Impose Millions in Countermeasures Against U.S. in Cotton Dispute
The World Trade Organization has issued its arbitration reports allowing Brazil to suspend trade concessions (impose countermeasures) against the U.S. stemming from the U.S.-Brazil Cotton dispute.
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The Office of the U.S. Trade Representative has also issued a press release on this dispute.
The arbitration followed a 2008 WTO ruling that the U.S. had not complied with the original findings in the Cotton dispute. (See ITT's Online Archives or 06/13/08 news, 08061325, for BP summary of the WTO ruling against the U.S.)
Brazil May Impose Millions in Countermeasures Against U.S. Goods
Brazil is authorized to impose countermeasures against U.S. goods on an annual basis. The annual value of the countermeasures will vary from year to year based on the formula set out by the WTO arbitrators. Such countermeasures against goods usually take the form of increased duties.
The WTO arbitrators stated that Brazil is entitled to impose countermeasures of a fixed amount of $147.3 million per year and a variable amount to be updated each year. The variable amount for fiscal year 2006 is $147.4 million.
(When the U.S. and Brazil met for WTO arbitration proceedings in this dispute, Brazil requested $2.5 billion annually in countermeasures and the opportunity to apply them to trade in goods, intellectual property, and services. In its first requests for countermeasures in the Cotton dispute, Brazil asked for more than $4 billion in annual countermeasures.)
U.S. Intellectual Property, Services May be Affected if Countermeasures Calculated to Exceed Threshold
The arbitrators denied Brazil's claim that it had an unconditional ability to impose countermeasures against U.S. intellectual property, and services, so-called "cross-sectoral" countermeasures.
However, the arbitrators found that Brazil may impose cross-sectoral countermeasures if the total amount of countermeasures for a particular year exceeds a threshold calculated for that year based on a subset of Brazil's imports from the U.S. For 2007, that threshold was $409.7 million.
The arbitrators also denied Brazil's request for an additional one-time $350 million in countermeasures in connection with the repealed Step 2 payment program for cotton.
(Step 2 is part of a larger farm program that pays domestic users and exporters to buy U.S. grown cotton whenever U.S. cotton prices exceed world market prices. The Step 2 program was repealed in 2006 by the Deficit Reduction Act of 2005.)
(See ITT's Online Archives or 03/06/09 news, 09030620, for BP summary of the U.S. and Brazil meeting for WTO arbitration proceedings.
See ITT's Online Archives or 02/10/06 news, 06021005, for BP summary of the President signing the Deficit Reduction Act of 2005 into law.)
USTR press release (dated 08/31/09) available at http://www.ustr.gov/about-us/press-office/press-releases/2009/august/ustr-statement-awards-brazil-cotton-dispute
WTO arbitration reports for U.S.-Brazil cotton dispute (posted 08/31/09) available at http://www.wto.org/english/news_e/news09_e/267arb_e.htm