Cotton: the United States and Brazil put an end to their power struggle

By

Matthieu Guinebault

Published
Oct 6, 2014

The United States will make a one-time payment of 300 million dollar to Brazil to put an end to the power struggle regarding cotton between the two countries.

Condemned by the WTO in 2009 for dumping, the United States will compensate Brazil via a special tax placed on products exported to the South American country. But Brazil has accepted to renounce this procedure in lieu of regular payments from the United States, concerned about saving its producers.

But with the coming into effect of the new American Farm Bill, the payments stopped. Thus, Brazil had been threatening to file a new complaint to the WTO since February.

And so it was during discussions between the two countries, with the WTO serving as arbitrator, that they finally found a compromise. If the United States commits to making a one-time payment, Brazil will refrain from filing a new complaint on the matter to the WTO.

The United States and Brazil are the 3rd and 5th largest cotton producers in the world, respectively producing 2.8 and 1.6 million tonnes during the 2013-14 season. The other three largest producers are China, India and Pakistan. The two countries are this in direct competition on their side of the Pacific.