Brazil gained a definitive victory at the World Trade Organization (WTO) against US cotton subsidies. The WTO came to the conclusion that the United States subsidize the production and export of cotton.
Brazilian cotton farmers lose around US$ 480 million a year due to the American subsidies. The WTO has determined a series of actions for the elimination of these subsidies, and this will now be negotiated with the United States. There is a 15-month grace period for the measures to be put into practice.
The World Trade Organization (WTO) confirmed the decision that forbids the government of the United States from subsidizing cotton, accepting the arguments presented by Brazil.
The US government has until July 1st to eliminate the subsidy it pays American exporters of the product and the domestic subsidy cannot last more than 16 months.
The complaint against the subsidy was brought up before the WTO by the Brazilian government in October of 2004.
Therefore, the general-coordinator of Litigation of the Brazilian Foreign Ministry, Roberto Carvalho of Azevêdo, believes that the decision is a “reward to the cooperation between the Brazilian government and cotton growers.”
Starting now, Brazil and United States can define the periods to implement the decision. However, in case the USA do not comply with the decision, they will be subject to sanctions and fines, since there are no more appeals in the case.
According to Azevêdo, the decision is a victory to Brazil: “It represents the consolidation of the legitimacy of the Brazilian complaint in the organization. It is an important step in the liberalization of the agricultural international trade and for the end of the distortions of the international subsidies.”
Carvalho believes that, besides Brazil, the African countries that produce cotton will also be benefited by the decision.
The soy, the corn and the rice are also included in the decision. However, only concerning credit warranties. Azevêdo explains that the American government gives incentives for exports of these products at costs a lot below those practiced by the world market. The WTO also prohibited such practice.
Data from the Brazilian Association of Cotton Producers (Abrapa) indicate that the United States used US$ 12,5 billion approximately in subsidies to help American cotton growers between 1999 and 2003. This subsidy meant a loss of US$ 1,5 billion to Brazil in this period.