Cotton industry to Brazil: Farm bill program follows WTO rules
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MEMPHIS, Tenn., Feb. 20, 2014 - The National Cotton Council today reiterated its support for the new Stacked Income Protection Plan (STAX) in the 2014 Farm Bill, saying the measure should satisfy the complaints Brazil has made to the World Trade Organization (WTO) about the U.S. cotton program.
NCC Chairman Wally Darnielle said the council is also encouraged by statements from Brazilian officials “which indicate a preference to resolve the case through continued discussions, rather than retaliation.”
A spokeswoman for the U.S. Trade Representative's Office (USTR) said that while Brazil's foreign trade board has authorized officials to request a WTO panel to assess whether the farm bill put the cotton program in compliance with international trade rules, the Brazilian government has “indicated it will not request a compliance panel at this time.”
Instead, Brazil has indicated “it will work with the United States to find a negotiated solution to the WTO cotton dispute,” the spokeswoman said. “The United States remains committed to working with Brazil on a negotiated decision,” she said.
Today's action is just the latest in a drawn-out conflict between the two nations on cotton policy.
STAX, Brazil has said, continues to insulate farmers against losses and protects the United States' domestic industry. U.S. policymakers, meanwhile, say the measure was designed to comply with WTO rules. The program allows for an additional area-wide insurance policy on top of the crop insurance policy made available to producers, paying farmers 80 percent of an operation's insurance premium.
In 2002, Brazil requested consultation with the U.S. on its upland cotton policy. At that time, producers received direct payments through the farm bill. By 2009, the WTO Appellate Body had ruled in favor of Brazil, directing the U.S. to pay out over $1 trillion per year for violating international trade rules.
After Brazil threatened retaliatory tariffs, trade negotiators reached a memorandum of understanding (MOU) in 2010, which directed the U.S. to pay Brazil's cotton industry $143 million per year for “technical assistance and capacity building,” according to the USTR.
By 2012, however, the dispute had heated up again, after the 2008 Farm Bill authorizing direct payments expired. Though the countries did not dissolve the MOU and the subsidy programs continued, U.S. ceased its annual payments to Brazil.
The current conflict over STAX could take over a year to resolve.
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