Market News & Headlines >> U.S. , Brazil Settle Cotton Dispute

The U.S. and Brazil on Wednesday resolved trade dispute over U.S. cotton subsidies that had dragged on for more than a decade, with the U.S. agreeing to pay $300 million in exchange for Brazil giving up its right to retaliate against U.S. products.

The battle started when Brazil brought a World Trade Organization dispute settlement case charging cotton subsidies contained in the 2002 U.S. farm bill were inconsistent with U.S. obligations to the WTO.

In 2004, a WTO dispute settlement panel ruled against the U.S. on several key issues in the case, and in August of 2009, after a series of recourses by both the U.S. and Brazil, the WTO decided the case in favor of Brazil and awarded Brazil the right to impose retaliatory tariffs on $830 million worth of U.S. products.

The U.S. had been making annual payments of $147 million to the Brazilian Cotton Institute since 2010, just before that country was set to raise tariffs on a variety of U.S. goods, including autos, pharmaceuticals and electronics.

"Under the terms of the agreement, Brazil will terminate the cotton case, giving up its rights to countermeasures against U.S. trade or any further proceedings in this dispute," the U.S. Trade Representative said in a press release.

 "Brazil has also agreed not to bring new WTO actions against U.S. cotton  support programs while the current U.S. farm bill is in force or against  agricultural export credit guarantees under the GSM-102 program as long as the  program is operated consistent with the agreed terms," USTR added.

USTR Michael Froman, Agriculture Secretary Tom Vilsack and their Brazilian counterparts signed the agreement in Washington.