USCA (April 9, 2010) - On April 6, U.S. Trade Representative Ron Kirk and Secretary of Agriculture Tom Vilsack announced that the U.S. and Brazil have agreed on a path toward a negotiated settlement with Brazil over the cotton dispute. The U.S. Cattlemen’s Association (USCA) says that while it supports U.S. producers of cotton, grains and other agriculture products, the settlement agreement compromises the U.S. cattle industry and risks the introduction of animal disease into the U.S.
What’s known as the "cotton dispute" is a long-running dispute brought by Brazil against the U.S. at the World Trade Organization (WTO). The WTO has twice, once in 2005 and again in 2008, ruled that subsidies paid to U.S. cotton producers and export credit guarantees are inconsistent with WTO commitments. WTO arbitrators subsequently found that Brazil could impose countermeasures against the U.S. that include a fixed amount of $147.3 million for cotton payments and an amount for export credit guarantees that vary based on program usage. USDA estimates that the current total of authorized countermeasures is $820 million.
On March 8, 2010 Brazil announced a final list of products that would face higher tariffs beginning April 7, 2010. Goods on the list include automobiles, pharmaceuticals, medical equipment, electronics, textiles, wheat, fruit and nuts and cotton.
On April 1, U.S. trade representatives met with Brazil officials to discuss a possible resolution to the dispute. As a result of those discussions, Brazil agreed not to impose any countermeasures on U.S. trade on April 7. Terms of the resolution agreement include the U.S. agreed to publish a proposed rule by April 16 recognizing the Brazilian State of Santa Catarina as free of foot and mouth disease (FMD) and to complete a risk evaluation currently underway to determine whether fresh beef can be imported from Brazil while preventing the introduction of FMD into the U.S.
"U.S. cattle producers have grave concerns about this proposed resolution," stated Jon Wooster, USCA President, San Lucas, California. "The U.S. cattle industry cannot afford the disastrous economic impact of a FMD outbreak, which, according to the study conducted by Kansas State University, would result in nearly a billion dollars in losses to the State of Kansas alone if an outbreak occurs."
Doug Zalesky, USDA Region IV Director and Trade Committee Chairman said USCA has focused its efforts on Capitol Hill to prevent the regionalization of countries infected with FMD for the purpose of exporting beef and cattle to the U.S. "This proposed resolution is tantamount to trading lower auto tariffs to Brazil for higher animal health risks in the U.S. Our focus has been on seeking a more level international trade playing field, yet this move tilts the playing field further away for U.S. cattle producers. Rather than liberalizing our animal health standards, we should be making every effort to upwardly harmonize sanitary and phytosanitary and food safety standards."
Historically Brazil has had large subsidies involving low interest loans for pasture improvement, unlimited credits to subsidize farm machinery, subsidized loans for breeding programs, along with state and municipal subsidies for credit and tax breaks, as well as long-term subsidized loans for packing facilities and numerous subsidized export programs, which historically have been in the billions of dollars.
"It’s interesting that U.S. sanitary and phytosanitary issues are being compromised to address concerns that Brazil has with U.S. cotton subsidies in light of the numerous subsidies Brazil has offered its agriculture producers along with the numerous environmental and labor issues in Brazilian production arenas that are below U.S. standards," said Leo McDonnell, USCA Director Emeritus. "It is unclear how anyone can claim that trade distortions in the global arena for U.S. beef and cattle producers are being addressed when we see countries using WTO and OIE rules only when it is in their best interest."
McDonnell pointed out that the proposed resolution conflicts with previous U.S. trade arguments. "During the Uruguay Rounds, the U.S. vigorously and successfully argued to allow individual countries to maintain their own standards regarding animal health and food safety issues," he noted. "The U.S. produces the safest, most nutritious beef in the world and a cornerstone of that fact is our steadfast unwillingness to relax or reduce our health standards and our refusal to allow those standards to be traded away at any time."