US SEEKS ARBITRATION IN COTTON DISPUTE WITH BRAZIL

On 17 October the US formally asked the WTO Dispute Settlement Body for arbitration (WT/DS267/27) in its dispute with Brazil over cotton subsidies, arguing that both the type and amount of retaliation that the latter was seeking were inappropriate.

This was an expected step after Brazil asked for permission to cross-retaliate against US intellectual property rights holders and services providers earlier this month (see BRIDGES Weekly, 12 October 2005). That request sought annual sanctions worth USD 1.037 billion until the elimination of the offending measures. Arguing that this amount was disproportionate to the damage caused by its cotton subsidies, the US contended that Brazil had not followed the required procedures for cross retaliation. Brazil maintains that it was not practicable for it to retaliate against US goods, as imposing additional duties on imported goods would hurt Brazilian industry and encourage inflation.

Notably, Brazil insists that the new arbitration will not supersede the two countries' July 2005 arbitration on a different set of subsidies in the same dispute. That arbitration was suspended by mutual agreement in July, after the US announced legislative changes to the subsidy programme in question (see BRIDGES Weekly, 13 July 2005).

ICTSD reporting; "WTO Asks Arbitrator To Settle Brazil Sanctions Request Against US," FORBES, 18 October 2005; "U.S. Starts Arbitration in Cotton Case To Determine Scope of Brazilian Retaliation," WTO REPORTER, 19 October 2005.