Brazil to the US: enough is enough (retaliatory tariffs for US cotton subsidies)

Brazil imposes retaliatory tariffs on the US in response the US’s refusal to budge on illegal cotton subsidies. Under the WTO, Brazil has legal recourse to retaliate by imposing tariffs on US goods.

The US has become infamous for its “do as I say, not as I do” attitude toward economic policy. It decries protective measures when other countries have them, but doesn’t hesitate to subsidize its own (corn, milk, cotton, et al.) and dump them on the world market, where the ultracheap prices ruin entire economies (take Ghana, for instance, where local rice farmers can’t compete even at their own village markets with the ultracheap US rice). Brazil has finally said “enough is enough.” We’ll see how this plays out.

As reported:

“The Brazilian government doesn’t believe that trade retaliation is the most appropriate means to achieve fairer international commerce,” said Brazilian Foreign Trade Secretary Lytha Spindola. “But after eight years of litigation, and in the absence of more concrete options for resolving the dispute, all that’s left for Brazil is to make good on its rights as authorized by the WTO, if even only to safeguard the credibility of the system of conflict resolution.”

The list included mostly nonessential consumer products such as cosmetics and electronic devices. It also included some pharmaceuticals, hospital products, and food items, as well as some bigger ticket imports such as automobiles.

Among the heaviest penalized imports were U.S. wheat sales, which will see tariff increases to 30% from 10% currently. Brazil bought $45 million in wheat from the U.S. in 2009 and $318 million in 2008.

According to Brazilian Foreign Relations Ministry Economic Department Director Carlos Cozendey, Brazil hopes that sectors in the U.S. outside the cotton industry will bring pressure on members of the U.S. Congress to seek changes in subsidy programs.

“We’ve received indications at several political levels that there’s interest in negotiating a solution, but until the moment there hasn’t been anything concrete,” Cozendey said.

Brazil was awarded the right to impose up to $829 million in retaliation as part of a WTO trade ruling on a case filed in 2002 against an alleged $12 billion in illegal subsidies offered by the U.S. to its cotton industry between 1999 and 2002.

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The Geneva-based WTO in August ruled that Brazil may impose annual sanctions on U.S. imports because the cotton subsidies violate trade regulations.

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Cotton and cotton products would be charged 100% import tariff, the highest on the list.

The Office of the US Trade Representative said it was “disappointed” by Brazil’s decision and called for a negotiated settlement.

Critics say the US has given its cotton growers an unfair advantage by paying them billions of dollars each year.

“US farm subsidies are condemned worldwide. This archaic practice must stop.” (Carlos Marcio Cozendey, from Brazil’s foreign ministry)

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