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AP: USDA says it will stop cotton payments to Brazil

Aug. 7 5:04 PM EDT

WASHINGTON (AP) ‹ The United States will cease paying a $147 million
annual settlement to Brazil that is part of a long-running trade dispute
over cotton subsidies, Agriculture Secretary Tom Vilsack said Wednesday.

The United States agreed to pay the money to Brazil in 2010, just before
the South American country was set to raise tariffs on hundreds of
millions of dollars in American goods, including autos, pharmaceuticals
and electronics. Stopping the payments could prompt Brazil to threaten
retaliation again.

Vilsack said in an interview from Brazil that he doesn't have the
authority to continue payments when the budget year begins Oct. 1 because
Congress hasn't yet passed a farm bill or a budget. Current farm law
expires Sept. 30.

The World Trade Organization said in 2009 that Brazil could raise the
tariffs on American goods because the United States had failed to get rid
of subsidies the WTO said are illegal. A farm bill pending in Congress
would attempt to bring those cotton subsidies into compliance, but it is
now stalled amid disputes between the House and Senate.

The Brazilian government brought the case to the WTO in 2002, alleging
the United States remained the world's second-largest cotton producer by
paying out the subsidies. The 2010 agreement was designed as temporary
until Congress could resolve the issue.

"The only way that can be done is through the passage of a farm bill,"
Vilsack said. "We need (Congress) to get down to brass tacks here and get
this done."

The Brazilian foreign and agriculture ministries declined to comment
Wednesday. Vilsack said he met with Brazilian Minister of Agriculture
Antonio Andrade and Eduardo dos Santos, the No. 2 diplomat at the foreign
ministry. They said they would be watching the farm bill progress in the
United States "very closely," Vilsack said, but did not give a deadline
for action to avoid retaliation.

"They reminded us fairly pointedly that their patience is not limitless
and their options are few," Vilsack said.

Vilsack has been pressuring Congress to finish the farm legislation,
which would set policy for farm programs and food stamps. Both the House
and Senate versions of the bill would restructure cotton payments in an
effort to please the WTO, including eliminating cash payments known as
direct payments and creating a new cotton program that works more like
crop insurance.

Progress on the bill has slowed as House conservatives have insisted on
deeper cuts to the food stamp program, which has doubled in cost in the
last five years to $80 billion annually. But the Democratic-led Senate
and the Obama administration have objected to those cuts.


Associated Press writer Stan Lehman in Sao Paulo contributed to this


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