GENEVA/WASHINGTON, (Reuters) – The World Trade Organization set conditions for how Brazil can retaliate against the United States over its cotton subsidies yesterday, but the two sides started a new fight over what the sanctions were worth.
The countries disagreed about whether Brazil will be able clear a hurdle set in the ruling that would allow “cross-retaliation” against intellectual property.
If Brazil can lift patent protection on pharmaceuticals or software, rather than simply raising tariffs on U.S. goods, that could create pressure within the United States to overhaul its payments to cotton farmers.
“This decision obviously sets up a new challenge for the United States in carrying out our farm programs,” said Tom Harkin, chairman of the Senate Agriculture Committee, who said the decision was “flawed” because it was based on past data.
“Still, the decision is final and we must now find a practical way to deal with it,” Harkin said in a statement.
Brazil said the ruling would entitle it to about $800 million in sanctions against the United States this year, including $340 million of “cross-retaliation” against intellectual property or services.
The United States said the sanctions would be worth about $300 million, and that Brazil would be unlikely in the near future to be able to retaliate against intellectual property.
“While we remain disappointed with the outcome of this dispute, we are pleased that the arbitrators awarded Brazil far below the amount of countermeasures it asked for,” U.S. trade spokeswoman Carol Guthrie said in a statement.
The complex WTO arbitration ruling brings to a climax one of the most politicized disputes in WTO history, which goes to the heart of developing countries’ calls to reform world trade in agricultural goods.
Brazil is the plaintiff in this case, but U.S. subsidies have affected cotton producers all over the world, especially in sub-Saharan Africa.
Poverty action group Oxfam America said the WTO ruling confirmed that U.S. subsidies hurt farmers in poor countries.
“American farm policy is broken and bloated, and now other sectors of the U.S. economy may suffer as Brazil retaliates,” said policy director Gawain Kripke in a statement.
Groups representing big U.S. drug makers and the music industry said they did not expect to be hit with sanctions because of the formula.
