RIO DE JANEIRO Aug 8 Brazil's foreign minister,
Antonio Patriota, said on Thursday he could not rule out
retaliation if the United States stopped paying Brazil monthly
compensation for controversial cotton subsidies.
The dispute flared up days before the arrival of U.S.
Secretary of State John Kerry, who is to plan an October state
visit to Washington by President Dilma Rousseff.
The payments to Brazil could be suspended under automatic
spending cuts that would take effect if the Obama administration
and Congress fail to agree on the size of the U.S. deficit for
the fiscal year starting Oct. 1.
Ties between the two countries have been roiled by recent
revelations of U.S. spying on Brazil's Internet communications.
"We are going to study our options and one option that
cannot be excluded is cross-retaliation," Patriota told
reporters in Rio de Janeiro, where he met with Canada's foreign
minister John Baird. "We are facing an interesting situation
that will require a decision by Brazil," he said.
Brazil, the United States' top trade partner in South
America, has already identified possible targets for
retaliation. In March 2010, before Washington agreed to the
payments, the Brazilian government published a list of some 100
U.S. goods that could be subjected to import tariffs.
The list included 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
Cotton would be charged a 100 percent import tariff, the
highest on the list. The foreign ministry estimated the annual
impact of the retaliation would be $591 million. Brazil was also
considering lifting patent protection on U.S. products.
Brazil won a challenge against U.S. cotton subsidies at the
World Trade Organization in 2004 that led to an agreement under
which Brazil said it would not impose $830 million in sanctions
against U.S. products if the United States paid into an
assistance fund for Brazilian cotton farmers.
The temporary resolution, under which the United States has
paid Brazil $147 million a year since 2010, was supposed to last
for a couple of years while Washington wrote a new farm law that
would eliminate long-standing U.S. cotton subsidies. The U.S.
Congress is months behind schedule in drawing up the
The Obama administration did not propose carrying the
payments beyond September on the expectation that a new farm
bill would end the dispute.
U.S. Secretary of Agriculture Tom Vilsack visited Brazil
earlier this week, accompanied by Senate Agriculture Committee
chair Debbie Stabenow, and told Brazilian authorities that the
cotton compensation payments would be temporarily suspended
because of the automatic spending cuts.
Vilsack told the Brazilians he does not have the authority
to make the payments and that they would have to wait until the
new farm law resolved the dispute, according to the agriculture
newsletter, The Hagstrom Report. The Brazilians said their
patience was not endless, the newsletter reported.