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Brazil and US Don’t Want Trade War. They Are Getting Ready for It, Just in Case

Brazilian cotton US Commerce Secretary Gary Locke said that Washington was seeking talks with Brazil before it imposes retaliatory trade tariffs for US cotton subsidies the WTO ruled as discriminatory.

After meeting with Brazilian Foreign Trade Minister Miguel Jorge and cabinet chief Dilma Rousseff, Locke said US President Barack Obama’s administration would launch negotiations with Brazil shortly.

Jorge said neither Washington nor Brasilia wanted a trade war and that Brazil was “ready to negotiate.” Neither official confirmed any upcoming trade talks and provided no further details of the effort.

Brazil announced on Monday it would raise tariffs on 591 million dollars worth of US products in the latest twist in its showdown over US cotton subsidies it has blasted as unfair. The list of 102 products included luxury consumer items such as cosmetics, televisions and cars.

The World Trade Organization, which ruled in June 2008 that subsidies to US cotton producers were discriminatory, has allowed Brazil to impose up to US$ 829.3 million in retaliatory sanctions against US products.

The authorized sanctions include US$ 238 million worth of US intellectual property and services.

The punitive tariffs, which under WTO rules can be imposed until the offending party brings its trade regime under international rules, will go into effect in 30 days unless the two nations find a way of averting a costly trade war.

After the meeting, Jorge told reporters that Brazil “is hoping for negotiations… but that have to come from them,” meaning the United States should take the first step.

The Brazilian official said “no proposals” came of his meeting with Locke, “because it was not a meeting about negotiations,” adding that the trade dispute was now being handled by the foreign ministries of both countries.

In Washington, a US lawmaker warned Tuesday that the United States could be on the losing end in a trade war with Brazil.

“You would be shocked at how much international support Brazil has. I think if you were to go in that direction, Brazil would have a lot of friends,” said Republican Senator Mike Johanns.

“The Brazilian government does not 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 US wheat sales, which will see tariff increases to 30% from 10% currently. Brazil bought US$ 45 million in wheat from the US in 2009 and US$ 318 million in 2008.

In addition to the increased tariffs, Brazil said it would impose US$ 238 million in other retaliations against the US, hoping to punish industries such as those involving intellectual-property rights and services. Spindola said that the government would publish another list by March 23 detailing guidelines for retaliation in those areas.

According to Brazilian Foreign Relations Ministry Economic Department Director Carlos Cozendey, Brazil hopes that sectors in the US outside the cotton industry will bring pressure on members of the US 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 US$ 829 million in retaliation as part of a WTO trade ruling on a case filed in 2002 against an alleged 12 billion USD in illegal subsidies offered by the U.S. to its cotton industry between 1999 and 2002.

Bilateral trade between the two countries fell to US$ 36 billion in 2009 from US$ 53 billion in 2008.

Mercopress

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