The Brazil–United States Cotton Dispute
Updated August 2017
Compiled by Mark S. Langevin, Ph.D., Director of the Brazil Initiative
Elliott School of International Affairs-The George Washington University
The Brazil–United States cotton dispute was a World Trade Organization (WTO) dispute settlement case (DS267). The case focused on United States cotton production support programs and agricultural commodity export credit guarantee programs that were found to be non-compliant with the WTO Agreement on Agriculture (AoA) and the Subsidies and Counter Measures (SCM) Agreement. Brazil brought the case to the WTO in 2002. The WTO’s Dispute Settlement Body (DSB) ordered the U.S. government to eliminate its cotton production subsidies as well as its agricultural commodity export guarantee programs in 2005. The United States appealed, but eventually lost the case altogether in 2009 when the WTO arbitrator approved the largest trade sanctions in history. The arbitrator also ruled that Brazil could impose so-called “cross-retaliation measures” that could include intellectual property protections.
Following the 2009 decision, the U.S. government quickly moved toward negotiations with Brazil. In early 2010, a temporary bilateral agreement was negotiated and the U.S. agreed to pay the Brazilian Cotton Institute $147.3 million a year, an amount based on the WTO arbitrator’s calculation of average annual damages to Brazilian cotton growers, until a mutually agreeable solution could be negotiated. On May 17, 2013, the Brazilian cotton producer’s association, known as the Associação Brasileira dos Produtores de Algodão, and the U.S. National Cotton Council signed a “Letter of Joint Recommendations” that aimed to assist the two governments in negotiating a final solution to the case.
On October 1, 2014, Brazil and the United States reached an agreement to resolve the long-running cotton dispute by signing a new memorandum of understanding (MOU) that included: 1) Brazil relinquished its rights to countermeasures against U.S. trade or any further proceedings in the dispute; 2) the United States agreed to new rules governing fees and tenor for the GSM-102 export credit guarantee program; 3) Brazil agreed to a temporary Peace Clause with respect to any new WTO actions against U.S. cotton support programs while the Agricultural Act of 2014 is in force or against any agricultural export credit guarantees under the GSM-102 program as long as the program is operated consistent with the agreed terms; and 4) the United States would make a one-time final payment of $300 million to the Brazil Cotton Institute (IBA).
This partial annotated bibliography assists efforts to further examine the cotton dispute, the underlying global political economy, the WTO dispute settlement mechanism, and bilateral relations between Brazil and the United States. The bibliography was compiled by Mark S. Langevin, Ph.D., Director of the Brazil Initiative and Research Professor at the Elliott School of International Affairs-The George Washington University and International Advisor to the Associação Brasileira dos Produtores de Algodão (ABRAPA).
Review the entire annotated bibliography here.
Please send additions and corrections to Mark S. Langevin, Ph.D. at: firstname.lastname@example.org.