WTO Cases • Volume 12 • Number 23 • 25th June 2008
Brazil to Seek US$4 Billion in Sanctions against US
Brazil’s top trade official said Friday that his country would soon re-commence arbitration at the WTO to seek permission to impose retaliatory measures worth as much as US$4 billion on US goods.
“We will. The only decision is when,” Roberto Azevedo, Brazil’s chief trade official, told journalists, according to Reuters.
The announcement comes three weeks after the WTO’s Appellate Body upheld Brasilia’s challenge to the support that the US offers its upland cotton producers. The panel ruled that the US subsidies, which include marketing loans, counter-cyclical payments and export credit guarantees, were inconsistent with the country’s WTO obligations.
Brazil had complained that the payments artificially depress global cotton prices, pushing Brazilian producers out of the market (See BRIDGES Weekly, 11 June 2008, http://www.ictsd.org/weekly/08-06-11/wtoinbrief.htm#2).
But before it can take any retaliatory measures, Brazil must re-activate its request, first submitted in 2005, for permission to take countermeasures against the US. Usually, complainant countries apply sanctions to goods from the same sector in which the dispute occurred. In this case, however, Brasilia plans to renew its request for authorisation to ‘cross-retaliate’ in other sectors. Specifically, it will ask permission to suspend intellectual property protection obligations (in copyrights, trademarks, industrial designs, patents and the protection of undisclosed information), and to suspend concessions in several services sectors.
If and when Brasilia re-commences arbitration, the WTO panel will need to rule on both the type of countermeasures that can be taken as well as the level of sanctions that can be applied. Brazil is considering making two requests, one for US$1 billion and one for US$3 billion.
However, Brazilian officials have said that it would be at least a few months before any request is submitted. The issue of retaliation is especially complex and will be considered with great care, especially as Brazil must consider the risk of US retaliation in another sector.
Meanwhile, the US has again declared its disagreement with the recent ruling of the WTO Appellate Body, saying that the decision was based on outdated evidence. Washington claims that the land devoted to cotton in the US has fallen by 38.5 percent in the last two years, that subsidies have been reduced and that marketing loans were eliminated in September 2007. Furthermore, Washington has suggested that it will not take additional measures to remove its cotton subsidies. That sentiment, coupled with the farm bill passed by the US Congress last month - which generally maintains payments to cotton producers - has led many in Brazil to denounce the Washington’s lack of goodwill on the issue.
ICTSD reporting. “Brazil to seek U.S. trade sanctions over cotton” REUTERS, 20 June 2008; “Brazil Ponders on How to Retaliate Against US Cotton,” BRAZZILMAG.COM, 22 June 2008; “Brazil to Pursue $4 Billion in Sanctions Against U.S. on Cotton” Bloomberg, 17 June 2008; “EUA não devem rever política do algodão” AGENCIA ESTADO, 20 June 2008.