WASHINGTON — Brazil is threatening to launch a full-blown trade war against the U.S. next month, accusing Congress of ignoring an order by the World Trade Organization to stop subsidizing its domestic cotton growers.
It’s evolved into an ugly dispute: The impact could sweep through more than a dozen cotton-producing states – including South Carolina – and, some fear, cost thousands of jobs in other industries.
“It’s serious,” said Charles Dittrich, the vice president of regional trade initiatives for the National Foreign Trade Council in Washington, a business advocacy group.
Cotton ranked fourth on South Carolina’s cash crop list in 2012 – the last year for which figures were available – and roughly 800 S.C. farmers harvested 258,000 acres of cotton last year, according to the S.C. Department of Agriculture.
The argument might escalate next month, with Brazil moving to impose sizable tariffs on more than 100 American products, making it more expensive to export everything from cars to carpeting. A final decision is expected by Feb. 28.
The case is an example of the inconsistencies in global trade: Just last week, the Obama administration complained that China had ignored WTO rules in a dispute the U.S. won over high-tech steel.
It’s another example of the sometimes-confusing complexity that surrounds farm policy. Congress spends billions to subsidize farmers in California, Texas, Florida, North Carolina, South Carolina, Georgia, Mississippi, Missouri, Kansas and another eight cotton-producing states.
But since 2010, the United States has been spending $147 million a year to prop up Brazilian cotton growers, too.
Democratic Rep. Ron Kind of Wisconsin, who introduced a bill last year that would junk the Brazilian payments, called them “absurd public policy.”
Congress began making monthly payments of more than $12 million to the Brazil Cotton Institute as part of an interim settlement. In return, Brazil agreed to postpone retaliation, even though the WTO gave it the green light to proceed with tariffs of $829 million per year, the second largest amount the world body had ever authorized. (The largest was the $4 billion it authorized the European Union to impose in 2002 in retaliatory tariffs against the U.S. for offering a system of tax breaks to businesses that it said was illegal.)
But the U.S. payments stopped last October, which is fueling the impatience. Brazilian farmers were surprised, expecting the payments to continue until Congress approved a new farm bill. The Obama administration stopped the payments because Congress hadn’t yet approved a farm bill. Members of Congress have been feuding over the level of crop subsidies and how much to spend on food stamps, among other things.
Critics called the payments bribes and pushed hard to end them. Brazilian growers charge that the U.S. action is more proof that it doesn’t want to follow the rules of the WTO, which it helped create in 1995.
The U.S. Chamber of Commerce is siding with the Brazilian cotton growers, saying the payments had staved off more than $2 billion in trade retaliation over the past three years. In a letter to the White House in November, the chamber’s president, Thomas Donohue, said it was imperative to resume the payments “to avoid costly job-killing trade sanctions against U.S. manufacturers, farmers and innovators.”
In 2010, Brazil published a list of 102 U.S. goods in line for retaliation, with tariffs of 14 to 100 percent. The list included farm products such as dairy, fruit and grains and other products such as chemicals, biotechnology, motion pictures, music and pharmaceutical drugs. U.S. cotton growers would effectively be locked out of the Brazilian market, since American cotton would be hit with a 100 percent import tariff.