USDA Says It Will Stop Payment Of Cotton Settlement In Brazil

US Agriculture Secretary Vilsack (Tom Vilsack) said the US will suspend payment of US $147 million in annual settlement of Brazil, which is part of the long-term trade dispute over cotton subsidies.

The United States agreed to pay the money to Brazil, when Brazil was preparing to increase tariffs on American goods by hundreds of millions of dollars, including automobiles, medicine and electronics. Stopping payment may prompt Brazil to threaten retaliation against the United States again.

In an interview with Brazil, Vilsack said that because Congress had not yet passed the agricultural law or budget, he had no power to continue to pay for Brazil in the budgetary year beginning in October 1st. The current agricultural law will expire in September 30th.

The World Trade Organization said in 2009 that Brazil could raise tariffs on US goods because the United States failed to cancel WTO's illegal subsidies. An agricultural law waiting to be passed by Congress tried to implement these cotton subsidies, but now the agricultural law is shelved because of disputes between the house of Representatives and the Senate.

The Brazil government submitted the problem to the WTO in 2002, claiming that the United States remains the second largest cotton producing country in the world. The 2010 agreement is temporary until the Congress can solve this problem.

"The only way to solve the problem is through the agricultural law," Vilsack said. "We need (Congress) to accomplish this matter in a down-to-earth way."

On Wednesday, the Ministry of foreign affairs and agriculture of Brazil declined to comment. Vilsack said he met with the Minister of agriculture and foreign minister of Brazil. They said they would pay close attention to the progress of the US agricultural law, but did not give a deadline for action to avoid retaliation.

"They remind us sharply that their patience is not unlimited, and their choices are few," Vilsack said.

He has been urging Congress to complete agricultural legislation, and the agricultural law will establish agricultural plans and food stamp policies. The house and Senate version of the bill will restructure cotton to pay for the WTO, including eliminating cash payments known as direct payments, and creating a new cotton program, much like crop insurance.

The progress of agricultural law has slowed down, because conservatives in Congress insist on further reducing food stamp schemes, and the food coupons plan has doubled in the past 5 years to 80 billion dollars / year. But the Democratic Party's Senate and the Obama administration are opposed to cutting plans.