Brazilian Cotton Case Could Signal Trouble for U.S. Dairy Exports

The newest turn of events in a longstanding U.S.-Brazil cotton controversy might result in trade retaliation against U.S. imports, including several dairy commodities. Last week the Brazilians drew up a list of 222 U.S. imports that may be potential targets for trade retaliation, including milk powder with less than 1.5 percent fat and whey. In 2008, the U.S exported about $10 million of these commodities to Brazil.

The dispute began in 2002, when Brazil initiated a World Trade Organization case against provisions in the U.S. cotton program. To comply with the WTO findings, the United States made several changes to its cotton program over the years, but Brazil continued to challenge U.S. actions.

In August 2009, the WTO authorized Brazil to suspend trade concessions in the United States or impose trade sanctions equivalent to the damage caused by cotton subsidies. Brazil is now requesting authority to retaliate against certain U.S imports.

"What was once just a cause for concern within the cotton industry now carries potential danger for a wide range of American industries," said Clay Hough, IDFA senior group vice president and general counsel. "We urge the U.S. Trade Representative to address the WTO decision without causing harm to U.S. dairy manufacturers."

USTR is reviewing the list of goods targeted by Brazil. The office has expressed hope that it will be able to strike a compromise with the Brazilians and avoid import sanctions.

Sugar Lobby Attempts to Restrict U.S. Sweetener Trade with Mexico

In late October, the American Sugar Alliance (ASA) released a report calling for modifications to the North American sweetener market. IDFA opposes the modifications, which would place new restrictions on Mexico's ability to import sugar from third-party countries and abolish the refined sugar re-export program.

Sugar trade is critical to IDFA members that use refined sugar in dairy products like ice cream and flavored milk. Trading with Mexico is especially important because the market is now unrestricted under the North American Free Trade Agreement.

"Current U.S. stocks of refined sugar are at a historic low, and the ASA proposal would only further tighten sweetener supplies," said Katie Sparrow, IDFA manager of international affairs. "It also could restrict trade by decreasing U.S. exports and cause job losses on both sides of the border."

According to ASA, North American sweetener supplies cannot be adequately assessed, making it difficult for either the U.S. Department of Agriculture or Mexican officials to accurately project market needs. The growers are asking for better data collection to make sure American growers have plentiful options for selling their products.

This is the second time in two years that the sugar lobby has made this policy recommendation; the first attempt to include sweetener trade restrictions in the 2008 Farm Bill was unsuccessful.