The last-minute proposal came as Brazil was set to impose tariffs and lift protections on $829 million in U.S. goods, which would have been its right after a 2009 World Trade Organization ruling against U.S. cotton subsidies.
The plan is a pragmatic fix for a WTO ruling significant because it gave Brazil the right to "cross-retaliate" by lifting patent protections on pharmaceuticals, chemicals, and intellectual property rights on film and music.
"The Brazilians made it pretty clear to me that they really were not interested in retaliating," said Jon Huenemann, a trade consultant with Washington law firm Miller & Chevalier, who represents clients that would have been hit with retaliation.
"What they needed to have was a sincere interest on the part of the U.S. to address what they thought were their legitimate concerns," said Huenemann, a former long-time official with the U.S. Trade Representative's office who has worked extensively on Brazilian trade issues.
Under the plan, the United States pledged to make some short-term tweaks to its export credit guarantees and give Brazil about $147.3 million per year in damages for a "technical assistance" fund.
Brazil will give the U.S. Congress more time to figure out a longer-term solution to programs ruled illegal by the WTO.
"We now have a clear path forward, one that is in the best interest of both the United States and Brazil," U.S. Trade Representative Ron Kirk said in a statement. The U.S. plan prompted Brazil to delay its planned moves, pending further bilateral talks, which Washington hopes will be complete by June.
Bigger Decisions Rest with Congress
Brazil recognized that it was impossible for the Obama administration to make major changes to farm programs without changes in legislation in Congress -- difficult to accomplish quickly in a sharply partisan environment, Huenemann said.
"The notion of breaking off something for just cotton outside of the Farm Bill process is an extremely tall order, and the Brazilians knew that," he said.
The plan buys Congress time to deal with cotton in its five-year Farm Bill law, due for renewal in 2012.
"I look forward to working with Congress and Brazil to craft a long-term, mutually agreeable solution to this dispute," U.S. Agriculture Secretary Tom Vilsack said.
Blanche Lincoln, chairman of the Senate Agriculture Committee, and her Republican counterpart, Saxby Chambliss, said they were open to looking at changes for the Farm Bill.
"Ultimately, Congress, and the Senate and House Agriculture Committees in particular, are responsible for crafting changes to these programs," the senators noted.
The U.S. National Cotton Council, which represents farmers, also said it was pleased that the negotiations on long-term changes will be handled by Congress in the Farm Bill process.
The USDA announced on Tuesday it would cancel unused export credit guarantees by April 9, and would offer any remaining credits under new rates, with details still to be announced.
The news did not immediately affect cotton futures prices. One trader said the market would watch for further details.
USDA also said it would work to find ways to allow imports of fresh beef from Brazil.
Deal Eases Attention on US Programs
The deal may help turn world attention to trade practices by major cotton producers like China and India, which U.S. producers have blamed for distorting markets, Huenemann said.
The Brazilian case has become a symbol for African and other developing nations railing against U.S. farm subsidies.
"The U.S. may be buying time with this agreement, but only a full reform of U.S. cotton subsidies will benefit vulnerable cotton farmers around the world and preserve the integrity of the multilateral trade system," sa
