A framework agreement in the World Trade Organization’s Brazil case “took a tremendous amount of pressure off the cotton industry and the U.S. government that could have resulted in costly retaliatory measures by Brazil on imports into their county and suspension of intellectual property rights,” says Craig Brown.
In the recent agreement between the governments of the two countries, Brazil would suspend its right to place countervailing duties on U.S. imports into their country, says Brown, who is vice president of producer affairs for the National Cotton Council, Memphis, Tenn.
“More significantly, Brazil has agreed to suspend the waiver of their intended suspension of intellectual property rights, which is a huge issue for U.S. businesses,” he said at the joint annual meeting at Grenada, Miss., of the Mississippi Boll Weevil Management Corporation and the Mississippi Farm Bureau Federation’s Cotton Policy Committee.
“It’s not just cotton that’s affected in this case — when you start talking about intellectual property rights, that affects almost all the U.S. economy. So, there has been a lot of pressure on the U.S. to avoid the imposition of these countervailing duties, and particularly the suspension of intellectual property rights.
“It is to the credit of the USDA and the Office of the U.S. Trade Representative that they were able to reach this framework agreement.”
Even though everyone refers to the WTO/Brazil decision as “the cotton case,” Brown says, “a larger part of it — which is not getting much media attention — has to do with the United States’ GSM102 export credit program, which applies to a large number of commodities, including livestock. There were very significant administrative changes made that will be to the U.S.’ advantage.
“Part of the Brazil case includes this program being declared an illegal export subsidy of the U.S.
“Under the framework agreement, the U.S. government will make an annual $147 million payment to a fund in Brazil, run by an independent agency, for capacity building in the cotton industry. Contrary to what has been reported in the mass media, the money is not going to Brazilian cotton farmers — in fact, that is specifically prohibited.”
While these are short-term impacts, Brown notes, “In the longer term, what Brazil really wants is changes in the basic structure of the U.S. cotton program, particularly focused on the parts that they deem to be market disruptive — countercyclical payments and the marketing loan.
“The framework agreement says that these measures will be in effect as long as the $147 million annual payment is made, and some changes are made in the cotton program in the next farm bill. “The USDA can’t dictate changes in the cotton program — changes have to be through legislation — so, the Brazil agreement will put some added pressure on Congress to include these changes in the 2012 farm bill.
“We don’t yet know specifically what changes will be needed to satisfy Brazil.
“So, when you combine the pressures from the U.S. government’s budget crunch and the challenges from Brazil, we’re going to have our work cut out for us on the next farm bill,” Brown says. “Our No. 1 goal is to maintain an effective cotton policy and to maintain a strong support for cotton in Congress.”