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Brazil Happy with US Congress’s Decision to End Cotton Subsidies

Brazil’s Ministry of Foreign Relations reports that the Brazilian government is satisfied with the approval by the US Congress of a bill which eliminates the principal cotton subsidies that the United States had.

Brazil had complained about such subsidies before dispute panels at the World Trade Organization. The bill now goes to president Bush and, if he signs it, will go into effect in August.

The subsidies in question, known as "Step 2," are payments made directly to exporters and indirectly to US consumers of cotton goods to make up the difference between prices in the US (which are higher) and those on world markets. As a result of those payments, US cotton was more competitive on world markets.

In a note, the ministry says it will continue to monitor the cotton market and maintain contact with US authorities to ensure that all WTO decisions are complied with.

As recently as the end of last year, the Brazilian government complained that the United States had not yet complied with the World Trade Organization ruling that its cotton subsidies were illegal and should be halted.

"This weakens WTO credibility," declared Brazilian minister of Agriculture, Roberto Rodrigues, at the time.

Rodrigues pointed out that the farm sector is extremely important for Brazil and internationally competitive. What Brazil wants is for rich countries to reduce subsidies that distort markets so that developing nations can compete in the farm sector on a level playing field, he said.

The Brazilian farm sector, in 2004, accounted for 30% of GDP, over 40% of all exports and 30% of the country’s jobs.



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