BRASILIA – Brazil’s government said on Wednesday it has reached a settlement with Washington that brings an end to a dispute over subsidies to U.S. cotton growers.
Representatives of the two governments signed a document in Washington that “successfully resolves a dispute that dates back more than a decade,” Brazil’s Foreign Ministry said in a statement.
The statement says the United States agreed to make a one-off $300 million payment to the Brazil Cotton Institute to compensate for the trade-distorting impact of the subsidies.
The dispute began in 2002 when Brazil filed a complaint with the World Trade Organization, accusing the United States of violating trade rules.
The WTO ruled in favor of Brazil seven years later and gave the South American country to right to impose punitive tariffs of up to $829 million on U.S. goods.
Brazil, however, decided not to take that measure for fear of retaliation in other sectors and instead secured a commitment by the United States to pay “$147.3 million annually to the Brazil Cotton Institute until the subsidies were eliminated.
Those payments, however, were halted in 2013 and a new U.S. Farm Bill that preserved crop subsidies was passed months later.
After that legislation was approved, Brazil could have filed a new complaint with the WTO but instead opted to seek a negotiated solution.
The settlement reached Wednesday is restricted to the cotton sector and preserves Brazil’s right to challenge, if it deems it necessary to do so, the legality of U.S. farm legislation affecting other crops, the ministry said.