UPDATE 3-Brazil details US cotton retaliation, wants accord

Mon Mar 8, 2010 5:53pm EST

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* Brazil details U.S. products for retaliation

* U.S. has 30 days to agree to cut cotton aid

* Brazil could take compensation until new U.S. farm bill

* Brazil aims to increase wheat tariff to 30 percent (Adds U.S. lawmakers' comment)

By Raymond Colitt

BRASILIA, March 8 (Reuters) - Brazil detailed on Monday its planned retaliation against the United States over U.S. cotton subsidies but said Washington still had a chance to settle the trade dispute through negotiations.

The Brazilian government published on Monday a list of U.S. goods subject to import tariffs that will go into effect in 30 days, unless the governments can reach a last-minute accord.

The World Trade Organization gave Brazil the formal go-ahead last year to impose sanctions on U.S. imports after the body ruled the U.S. government spent too much subsidizing cotton farmers and on an export credit guarantee program.

The United States said it was disappointed by the move.

A spokeswoman for the U.S. Trade Representative's office said: "USTR has worked to reach a solution to the issues in this dispute without Brazil resorting to countermeasures and we continue to prefer a negotiated solution."

U.S. Commerce Secretary Gary Locke may address the matter when he visits Brazil on Tuesday, although key U.S. lawmakers said they'd been assured Locke was not carrying a proposal to resolve the long-running trade spat.

"We cannot negotiate with a partner that is unwilling to voice what it wants," Senators Blanche Linclon and Saxby Chambliss, the top Democrat and Republican on the Senate Agriculture Committee, said in a statement.

The U.S. government is willing to strike a deal, but is "waiting for Brazil to start the process," the lawmakers said.

Bilateral trade between the two countries fell to $36 billion in 2009 from $53 billion in 2008.

The trade dispute began in 2002 and is one of the few in which the WTO allowed cross-retaliation, meaning the wronged party can retaliate against a sector not involved in the case.

"Retaliation is not the best way to reach fair international trade but after nearly eight years and no concrete proposals to help solve this dispute, Brazil must insist on its rights," Lytha Spindola, executive secretary of the Brazil's Foreign Trade Chamber, told a news conference.

The list of around 100 items includes a tariff increase on cars to 50 percent from 35 percent, a rise on non-hard wheat tariffs to 30 percent from 10 percent, and a 48 percent levy on milk powder, up from 28 percent.

INTELECTUAL PROPERTY

Cotton and cotton products would be charged a 100 percent import tariff, the highest on the list. Click on [nN09197474].

The U.S. National Cotton Council said the move imposed unwarranted harm on Brazilian and American interests in times of economic hardship and added the cost of U.S. cotton price-related programs were down sharply.

The estimated annual impact of the retaliation is $591 million, Brazil's foreign ministry said in a statement.

Brazil is expected to publish by March 23 a separate list worth an additional $238 million in annual cross-retaliation penalties. That list would be subject to public hearings for 20 days and focus on intellectual property rights and services, ministry officials said.

The WTO has previously granted two other countries the right to cross-retaliate in trade disputes, but Brazil would be the first nation ever to apply it.

It could break patents and copyrights in the pharmaceutical or music industries, analysts said, potentially making U.S. industries more susceptible to farm disputes.

"That will impact much more than goods -- it could set an important precedent and harm the United States in other cases," said Haroldo Cunha, head of the Brazilian cotton growers assocation Abrapa.

Brazil had intentionally chosen a wide range of products with relatively small tariff increases in order to impact a broad range of producers in the United States.

"The idea was to distribute the retaliation broadly in order to maximize pressure. U.S. farm subsidies are condemned world-wide. ... This archaic practice must stop," Carlos Marcio Cozendey, head of economic affairs at Brazil's foreign ministry, told the news conference.

Washington could enact partial changes, but a major overhaul to both programs would require the approval of the U.S. Congress.

Brazil could accept a U.S. proposal with a pledge to send a reform bill to Congress if it were compensated for damages until its approval. Some Brazilian business leaders have proposed compensation through U.S. investments into cotton research, as well as more U.S. imports of Brazilian beef, orange juice and ethanol.

"It's up to the U.S. government to show it is committed to the international rules of trade," said Paulo Skaf, head of the influential Sao Paulo state industry federation.

As one of the world's agriculture powers, Brazil is the leading exporter of beef, orange juice and coffee. (Additional reporting by Bruno Peres and Doug Palmer in Washington; editing by Paul Simao and Todd Eastham)

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