Brazil Raises Stakes over U.S. Cotton Subsidies

Brasilia took a simmering trade dispute with Washington a step further this week when it announced intentions of suspending a number of U.S. patents and copyrights. The measure builds on a March 8 decision to impose tariffs on over a 100 American goods unless the United States abides by a World Trade Organization ruling that deems illegal Washington’s $3-billion subsidies on cotton. The United States has until April 7 to find a solution before Brazil’s multimillion-dollar retaliations take effect.

The dispute dates back to 2002, when Brazil first introduced its complaint to the World Trade Organization (WTO) over policies that protect U.S. cotton farmers from price fluctuations and allows loans for foreign buyers. Last year, the trade body ruled that Brazil could take retaliatory measures against the United States, which stands as the world’s top cotton exporter and accounts for a third of the world’s trade in raw cotton. The WTO ruling allowed Brazil to impose $830 million in retaliatory measures.

On March 8, Brazil unveiled a plan for duties worth $591 million on 102 U.S. goods ranging from cotton to cars to cosmetics. The announcement appeared timed for maximum effect, just as U.S. Commerce Secretary visited Brasilia to highlight the Obama administration’s National Export Initiative. Locke said the Oval Office would seek negotiations to halt a trade battle. Brazil’s Foreign Trade Minister Miguel Jorge, who met with Locke, indicated similar sentiments: “Brazil is also not interested in a trade war. Nobody is. We’re ready to negotiate.”

Then, on March 15, Brazil announced it may also suspend $238 million-worth of patents and intellectual property rights on goods that include pharmaceuticals, chemicals, music, films, and software. The Office of the United States Trade Representative (USTR), which had expressed disappointment over the tariffs announced a week earlier, suggested the move to sanction intellectual property rights could hurt investment in Brazil. If Brazil opts to apply the intellectual property measure based on a WTO ruling, it would be the first country to do so.

Brazilian President Luiz Inácio Lula da Silva said the disagreement stems from Washington’s failure to ink an agricultural agreement during the Doha round. “If the United States had, along with Brazil, made a deal in the Doha Development Round, we would not be fighting now, and the African people would be selling their cotton in the U.S. and Europe,” said Lula on March 10. His comments came after U.S. Secretary of State Hillary Clinton’s visit to Brazil in early March, when she said negotiations were possible and the hope that “we can bring this movie to happier ending.” Bringing an end to subsidies would require action from U.S. Congress, but both Brasilia and Washington have said starting preliminary negotiations could help prevent Brazil from enacting the measures.

U.S.-Brazil bilateral trade hit $46.3 billion last year. With U.S. exports to Brazil valued near $26.2 billion in 2009, Brazil ranked as the Washington’s tenth largest export market.

Learn more:

• World Trade Organization dispute settlement over U.S. subsidies on cotton.
• Office of the U.S. Trade Representative's facts on bilateral trade with Brazil.
• U.S. Department of Agriculture briefing page on cotton.
• Brazilian government’s list of U.S. goods facing increased tariffs as a result of dispute.
• Brazil’s Chamber of External Trade statement about suspension of intellectual property rights in relation to the cotton dispute.