Brazil to impose trade sanctions against US in cotton subsidy dispute

Brazil undertook its broadest attack against cotton subsidies given by the US to its farmers by dweclaring its intent of imposing punitive sanctions on certain US goods from next month, but left a window of opportunity for the US to settle the dispute through negotiations.

Yesterday the Brazilian government published a list of 100 US goods that would be subject to import tariffs in 30 days, unless the two governments reached an understanding through negotiations by then.

After Brazil's eight-year relentless pursuit at the WTO, the world trade body had ruled in its favour last year, which allowed the country to impose tariff increases of $295 million annually on US goods as long as the US continued subsidising its cotton farmers.

In June 2008, the WTO had rejected a US appeal against an earlier decision that found the US had breached trade rules over its subsidies for cotton farmers, putting Brazilian producers at a serious disadvantage. (See: Group of 20 slams US farm bill as Brazil celebrates WTO win over cotton subsidy)

That ruling gave Brazil the right to demand sanctions, once it was examined by the WTO's dispute settlement body.

Brazil estimates that US subsidies for cotton producers were worth $12 billion between 1999 and 2002, compared with the $13.9 billion of cotton produced during the period - a subsidy of some 89.5 per cent.