Brazil to dispute US subsidies

Brazil to dispute US subsidies
By Jonathan Wheatley in São Paulo

Published: August 3 2008 18:50 | Last updated: August 3 2008 18:50

Brazil is preparing to take action against the US over what it says are illegal subsidies and other trade barriers following the collapse of the Doha round of talks at the World Trade Organisation in Geneva last week.

“The clock is ticking,” Celso Amorim, Brazil’s foreign minister, told the Financial Times in his first interview after returning from the failed talks. “Our understanding with the US was good throughout and it never came to acrimony. But they are the biggest subsidisers in the world in terms of what affects us, so we will have to see them in court.”

In June the WTO upheld a complaint by Brazil that Washington had not done enough to remove illegal subsidies to its cotton farmers, opening the way for Brazil to request WTO authorisation for more than $1bn in retaliatory sanctions on US services and intellectual property. Mr Amorim said Brazil would still rather avoid taking action but that this was now the only option.

At the end of last week President Luiz Inácio Lula da Silva called President George W. Bush of the US in an attempt to revive the Doha round. “A lot of advances were made for Brazil and for other countries and it would be wrong to see that lost,” a member of Mr Lula da Silva’s staff told the FT. The move seemed to mirror a proposal by Susan Schwab, the US trade representative, to keep talking on individual issues covered during the round. While Mr Amorim said he would not reject any proposal from the US, he described such initiatives as “wishful thinking”.

“I don’t have any problem if they want to offer a partial deal that puts a cap on their subsidies,” he said. “But countries want the power to say no to some things in order to get what they want. I don’t think [partial deals] work in a system like the WTO.”

In addition to retaliatory measures on US cotton subsidies, Brazil would prepare legal action against US import tariffs on Brazilian ethanol of 54 cents a gallon, which Mr Amorim described as “discriminatory”. Mr Amorim also said Brazil and Canada had prepared joint action against the US on subsidies in general. “This was in slow motion and now it will be accelerated,” he said.

Brazil previously opted not to retaliate against US cotton subsidies in the hope that a successful conclusion to the Doha round would produce across-the-board reductions in US subsidies that affect Brazilian exports of cotton, ethanol and other farm produce.

But Mr Amorim said the failure of the talks would lead to an increase in protectionism instead of the hoped-for reduction. Brazil’s agricultural sector has expanded strongly in recent years and the country has become the world’s biggest producer and exporter of several foods as well as industrial commodities. It had much to gain from the Doha conference and played a leading role in the talks, making a series of concessions in the hope of achieving a multilateral agreement. But Brazil’s willingness to lower barriers to manufactured goods was not matched by other developing nations, particularly India. “Maybe one or two of our partners need to understand what they are going to lose by not having the agreement,” Mr Amorim said.