WTO allows Brazil sanctions in US cotton row

GENEVA/WASHINGTON, (Reuters) – The World Trade  Organization set conditions for how Brazil can retaliate against the  United States over its cotton subsidies yesterday, but the two sides  started a new fight over what the sanctions were worth.

The countries disagreed about whether Brazil will be able clear  a hurdle set in the ruling that would allow “cross-retaliation”  against intellectual property.

If Brazil can lift patent protection on pharmaceuticals or  software, rather than simply raising tariffs on U.S. goods, that  could create pressure within the United States to overhaul its  payments to cotton farmers.

“This decision obviously sets up a new challenge for the United  States in carrying out our farm programs,” said Tom Harkin, chairman  of the Senate Agriculture Committee, who said the decision was  “flawed” because it was based on past data.

“Still, the decision is final and we must now find a practical  way to deal with it,” Harkin said in a statement.

Brazil said the ruling would entitle it to about $800 million in  sanctions against the United States this year, including $340  million of “cross-retaliation” against intellectual property or  services.

The United States said the sanctions would be worth about $300  million, and that Brazil would be unlikely in the near future to be  able to retaliate against intellectual property.

“While we remain disappointed with the outcome of this dispute,  we are pleased that the arbitrators awarded Brazil far below the  amount of countermeasures it asked for,” U.S. trade spokeswoman  Carol Guthrie said in a statement.

The complex WTO arbitration ruling brings to a climax one of the  most politicized disputes in WTO history, which goes to the heart of  developing countries’ calls to reform world trade in agricultural  goods.

Brazil is the plaintiff in this case, but U.S. subsidies have  affected cotton producers all over the world, especially in  sub-Saharan Africa.

Poverty action group Oxfam America said the WTO ruling confirmed  that U.S. subsidies hurt farmers in poor countries.

“American farm policy is broken and bloated, and now other  sectors of the U.S. economy may suffer as Brazil retaliates,” said  policy director Gawain Kripke in a statement.

Groups representing big U.S. drug makers and the music industry  said they did not expect to be hit with sanctions because of the  formula.