Total cotton payments over $800 million
wTotal U.S. payments to Brazil’s cotton growers to settle the World Trade Organization cotton case will amount to $805.5 million, an Agriculture Department spokesman told The Hagstrom Report today.
The $805.5 million includes $505.5 million that the United States has already paid to the Brazilian Cotton Institute and a final payment of $300 million to be made this month under the resolution agreement announced Wednesday by U.S. Trade Representative Michael Froman and Agriculture Secretary Tom Vilsack.
The $805.5 million is a little less than the $829 million in U.S. goods on which Brazil had the right to impose as punitive tariffs annually after WTO panels determined that the old U.S. cotton program had violated WTO rules and damaged the Brazilian cotton industry, the USDA spokesman pointed out. Brazil gave up that right in the agreement.
“What we have now is certainty,” Vilsack said on a call to reporters today.
The $505.5 million in payments were made under a 2010 agreement that called for the United States to make payments of $147.3 million per year until the next farm bill resolved that issue. The Agriculture Department stopped making those payments in 2013.
The memorandum of understanding that Brazilian and U.S. officials signed on Wednesday allows the final $300 million to be spent on a wider range of activities than the previous payments, according to Mark Langevin, a Washington-based consultant to the Brazilian cotton industry.
Langevin said the 2010 agreement was not nearly as detailed about what activities the Brazilians undertake with the money, but that they could not engage in research. The MOU, he noted, allows research projects in which the Brazilians can collaborate with U.S. universities and USDA, and also allows spending to lower the logistics costs for cotton production and delivery in Brazil.
The agreement “is where the Brazilian cotton producers wanted to land,” Langevin noted in an interview. He added that the Brazilian growers “wanted to be respected” but that they also recognize that the finest cotton research in the world takes place in the United States.
Langevin said he believes the joint projects will benefit the cotton industries in both countries. The MOU lists 14 technical and capacity building activities on which the $300 million can be spent. and includes auditing procedures for the U.S. government to monitor the spending. (See link)
Langevin also noted that, while some may consider the settlement large, he estimates that the U.S. government will spend $300 million on the new cotton program in its first year of operation.
The Brazilian government has promised not to raise any issues with the new U.S. cotton program in the World Trade Organization for the life of the 2014 farm bill, which is in effect until September 30, 2018. Brazil also agreed not to raise further issues about the GSM-102 export credit program, which the U.S. government has agreed will not offer loans for longer than 18 months.
The Agriculture Department spokesman also noted that the punitive tariffs would have affected other agriculture sectors and other U.S. industries.
The U.S. wheat industry praised the agreement today, noting that it had removed a threat to U.S. exports to Brazil.
“Brazil has been a major U.S. wheat importer since 2013,” said Shannon Schlecht, vice president of policy with U.S. Wheat Associates. “U.S. wheat growers support the settlement because it protects our competitive position in Brazil, preserves the GSM-102 Export Credit Guarantee Program and provides certainty for trade with Brazil.”
National Association of Wheat Growers President Paul Penner, a Hillsboro, Kan. producer said, “NAWG applauds the administration’s efforts to settle this ongoing dispute, which will allow U.S. wheat growers to continue their strong trading partnership with Brazil. In addition, NAWG is pleased that negotiators found a path forward with Brazil that decouples trade opportunities for both countries from policy disagreements.”
–The Hagstrom Report