U.S. objects to Brazil's request for WTO compliance panel

The U.S. Trade Representative’s office objected to the formation of a new WTO panel to review U.S. compliance with an earlier panel’s ruling favoring a Brazilian complaint against the U.S. cotton program.

But the action probably provided only a temporary reprieve for U.S. cotton farmers who have become the poster boys — and girls — for a campaign that appears to be aimed at trying to “level the playing field” for cotton farmers in least developed, third world countries.

The Government of Brazil has been threatening to request a compliance panel almost since the moment USDA made the first changes to the U.S. export credit guarantee program required by the initial ruling in July 2005.

“With respect to some of the recommendations and rulings, the United States has adopted no implementation measures at all,” the Brazilian government said in its request for a compliance panel Sept. 1. “The implementation measures it has adopted fall far short of compliance.”

Brazilian officials said they believe the United States has not sufficiently changed the export credit guarantee program that the WTO panel ruled contained illegal export subsidies. They also faulted the United States for not moving to eliminate cotton’s Step 2 program until the end of the 2005-06 marketing year July 31.

The WTO dispute panel had set a deadline of September 2005 for discontinuing the Step 2 payments to merchants and mills. But the National Cotton Council argued the payments should not be discontinued in the middle of the cotton-marketing year, and Congress agreed.

Brazil also claimed the United States has failed to address the finding that the U.S. cotton program had caused “serious prejudice” against Brazilian farmers since no changes have been made to the U.S. marketing loan or counter-cyclical payment programs.

“Given the significant — and, frankly, difficult — steps the United States has taken to implement the recommendations and rulings, it is particularly disappointing Brazil alleges in its panel request the ‘non-existence of measures taken to comply,” the United States said in its response to Brazil’s request.

“The facts also fail to support Brazil’s claims,” it said. “Accordingly, the United States considers Brazil’s request for a compliance panel is unnecessary and without basis.”

Brazil made its request at the regular monthly meeting of the WTO’s trade dispute settlement body. The United States could block the first request for a compliance panel but cannot prevent its establishment if Brazil asks for it again. The next meeting of the settlement body is scheduled for Sept. 28.

Gretchen Hamel, spokeswoman for U.S. Trade Representative Susan Schwab, said the United States had made several attempts to resolve the issues Brazil raised, “but Brazil did not accept our offers.”

If a compliance panel rules in Brazil’s favor, the latter could ask for permission from the WTO to impose retaliatory duties on U.S. exports. Most of those would fall on the U.S. manufacturing and services sectors since Brazil imports few farm products from the United States.

When it first began threatening retaliation in July 2005, Brazil reserved the right to impose trade sanctions of $3 billion against the United States. Later, it said it would seek only $1 billion.

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