U.S. avoids Brazil’s retaliatory tariffs — for now
With Brazil poised to retaliate against the U.S. for its cotton subsidies that were deemed unfair by the World Trade Organization, the two countries announced on April 6 that they had reached an agreement to forestall Brazil’s announced actions to slap tariffs on about 100 U.S. products imported by Brazil, including several products relating to intellectual property. The tariffs and countermeasures were to go into effect today.
In making the announcement U.S. Trade Representative Ron Kirk and U.S. Secretary of Agriculture Tom Vilsack said that the agreement takes steps to recompense Brazil over the shorter-term while continuing discussions regarding how to eventually resolve the cotton dispute through further negotiation and the 2012 Farm Bill. Under the WTO’s finding in the cotton dispute brought by Brazil, that country was entitled to impose about $820 million in countermeasures.
The USTR press announcement detailed that the U.S. will establish a fund of approximately $147.3 million per year on a pro rata basis to provide Brazil with technical assistance and capacity building. The U.S. will also modify its Export Credit Guarantee Program, and make a risk-based determination whether fresh beef can be imported from Brazil while preventing the introduction of foot-and-mouth disease in the U.S.
One can only hope that the fix the U.S. found itself in as a result of giving in to cotton producers and other special interests in the 2008 Farm Bill will make policymakers realize that providing subsidies and hand-outs to special groups can be costly for other producers and consumers. But don’t bet on that. Farm bills are one of the worst examples of bi-partisan lawmaking, with politicians ever ready to provide pork for their farm constituents – with taxpayer money that they think of as their own.