TWN Info Service on WTO and Trade Issues (Mar10/08)
15 March 2010
Third World Network

Brazil announces countermeasures against US in cotton dispute
Published in SUNS #6880 dated 10 March 2010

Geneva, 9 Mar (Kanaga Raja) -- The Brazilian government on 8 March published its final list of goods originating from the United States that will be subject to increased import duties, in line with the authorization it received from the Dispute Settlement Body of the World Trade Organization to suspend the application to the United States of concessions and other obligations in the upland cotton dispute.

The increased import duties (retaliation measures), notified to the WTO, will take effect 30 days from the Brazil government's resolution (on 8 April or after). Other retaliatory measures (in the areas of intellectual property and other WTO remits) are to be announced after the conclusion of a process of public consultations to be launched by 23 March.

On 31 August 2009, in two separate reports concerning arbitration proceedings in the US-Brazil upland cotton dispute, the Arbitrator ruled that Brazil may request authorization from the Dispute Settlement Body (DSB) to suspend concessions or other obligations totaling some $294.7 million annually.

In the first report, the Arbitrator determined that the annual level of appropriate countermeasures in relation to GSM 102 payments - prohibited subsidies - amounts to $147.4 million based on Fiscal Year 2006 data. In its second report, the Arbitrator determined that the annual level of countermeasures in relation to the marketing loan and counter-cyclical payments - actionable subsidies - amounts to $147.3 million. (See SUNS #6764 dated 1 September 2009 for full details on the Arbitrator's ruling.)

On 19 November 2009, the DSB granted Brazil's request for authorization to suspend the application to the United States of concessions and other obligations in the cotton dispute.

Subsequently, on 21 December 2009, Brazil informed the DSB that, on the basis of complete data related to fiscal year 2008 and calendar year 2008, obtained from the United States and other sources indicated by the Arbitrator, the total amount of countermeasures authorized to Brazil would be $829.3 million.

On the basis of the same period, the threshold above which Brazil is entitled to take countermeasures in other sectors and agreements outside trade in goods would be $561 million, it said.

In its announcement on 8 March, Brazil said that the list of goods, which has been approved in a Resolution by the Council of Ministers of the Chamber of External Trade (CAMEX), is also being notified to the WTO on the same day.

The CAMEX Resolution will take effect in 30 days, said Brazil in a press release on the announcement.

According to the Brazilian press release, the list of goods corresponds to an amount of retaliation of $591 million.

The remaining annual amount of retaliation to which Brazil is entitled - $238 million, which adds up to the total authorized value of $829 million - will be applied in the sectors of intellectual property and services.

Brazil said that the retaliation level that was authorized and determined by the WTO Arbitrators is the second highest in the history of the Organization.

The Brazilian press release said that this results from the US non-compliance with the rulings of WTO panels and its Appellate Body, which confirmed four times that the US subsidies to its cotton producers and exporters breached multilateral trade disciplines.

"The authorized countermeasures may remain in effect as long as the United States persists in the current situation of non-compliance with those disciplines," said Brazil.

Brazil further said that the authorization granted to it to take countermeasures in the areas of services and intellectual property reflects the recognition, by the WTO, that in the present case, it would not be "practical" or "effective" to adopt countermeasures solely with respect to goods.

Such authorization also stems from the fact that "circumstances are serious enough" to justify resort to measures in other areas, so as to induce the United States to heed the decisions of the highest instances of the WTO.

According to Brazil, the list of goods will be complemented, in the near term, by a list of measures related to intellectual property and other rights, following the conclusion of a process of public consultations that is expected to be launched by 23 March, the date of the next CAMEX meeting.

While expressing regret over having to take these measures, Brazil however pointed out that after almost eight years of litigation and over four years of continuing non-compliance with the rulings of the Dispute Settlement Body on the part of the US, and in the absence of the offering of concrete and realistic options that could allow for the negotiation of a satisfactory solution to the dispute, it remains for Brazil to exercise its right, as authorized by the WTO.

Brazil added that it remains open to a dialogue with the US that may facilitate the achievement of a mutually satisfactory solution to this dispute.

In a brief statement released in Washington DC following the announcement by Brazil, a spokesperson for the Office of the United States Trade Representative said "We are disappointed to learn that Brazil's authorities have decided to proceed with countermeasures against US trade in the WTO cotton dispute."

"[The] USTR is working to reach a solution to the issues in this dispute without Brazil resorting to countermeasures and we continue to prefer a negotiated solution," Ms Nefeterius McPherson added.

According to media reports, both US Commerce Secretary Gary Locke and Michael Froman, a deputy national security advisor on economic issues, are expected to be in Brazil on Tuesday. The cotton dispute is expected to be taken up with Brazilian officials.

The list of goods that will be subject to suspension of Brazil's concessions and other obligations in the WTO include food products such as frozen herring, fresh or dried hazelnuts and walnuts, fruits such as dried grapes, fresh pears, cherries and plums, mixtures of juices, medicaments, and household items such as beauty creams, shampoos, soap products and tooth brushes.

Also included in the list are items such as cotton and woven fabrics of cotton, carpets, textile fabrics and items of clothing such as trousers (both men's and women's as well as boy's and girl's), articles of jewellery, wrist-watches and plastic furniture.

The list further includes household electric and electronic equipment such as freezers, mowers, cookers and roasters, portable telephones, cameras (digital and television), video camera recorders, and sound amplifier sets and loudspeakers, as well as motor cars and other motor vehicles, motorcycles and motorboats.

All of the products will see increased import duties from the current applied levels and will be applied to US goods only.

Cotton and woven fabrics of cotton will see the greatest increase in tariffs, from the current 6-26% to 100%.

Food products such as frozen herring, fresh or dried walnuts, dried grapes, fresh pears, fresh cherries and fresh plums will see an increase in tariffs from 10% to 30%.

Duties on household beauty products such as lip make-up preparations, beauty creams, tonic lotions, shampoos, pre-shave and after-shave preparations, amongst others, will increase from 18% to 36%.

Among other examples, tariffs on household goods such as freezers, cookers, and digital and television cameras would double, from 20% to 40%. Motor cars and other motor vehicles will see an increase in tariffs from 35% to 50%. +