Sanctions on US products introduced by Brazil

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Friday, March 12, 2010

Brazil has announced, and the World Trade Organization (WTO) has approved, new trade sanctions on US goods, in response to illegal subsidies paid by the US government to American cotton growers.

A list was published by Brazil of the items on which import tariffs would be placed, which includes more than 100 different American products, worth nearly $600 million. Cotton products would face the highest penalty, with the tariff increasing from 6% to 100%. Other American products will be included in the sanctions as well, although the tariff increase will not be as significant.

According to a Brazilian official, a wide range of products was chosen, in order to "maximize pressure." The tariffs will go into effect in 30 days, unless the two countries can reach an agreement before then.

The subsidies cited by Brazil as justification for the tariffs pay out around $3 billion to American cotton growers annually. Brazil has argued for eight years that these subsidies were the reason that the US was the second-largest producer of cotton in the world, and in 2008, the WTO ruled that they were illegal. The National Cotton Council in America, however, argued that that the system of subsidies has changed since the WTO's first ruling on the matter in 2005.

A senior executive at the council said that the subsidies were justified, and that they were an "important financial safety net for producers."