The Brazilian government has announced trade sanctions against a variety of American products in retaliation for U.S. subsidies to cotton farmers. Brazil and other critics have said that the U.S. has given its cotton growers an unfair advantage by paying them billions of dollars each year. They say the U.S. subsidies hurt their competitiveness in international markets. In 2008, the World Trade Organization ruled that subsidies to U.S. cotton producers were discriminatory. The WTO found that the subsidies unfairly help U.S. cotton producers undersell foreign competitors and depress world market prices.
Brazil said they regret imposing the sanctions, but they feel it is necessary because eight years of litigation has failed to produce results. Brazil published a list of 100 U.S. goods that will be subject to import tariffs in 30 days, unless an agreement is reached between the two countries. If no agreement happens, Brazil will raise tariffs on $591 million worth of U.S. products. For example, the tariff on cars will increase from 35% to 50%; wheat tariffs will increase from 10% to 30%; milk powder will see an increase from 28% to 48%; ketchup rises from 18% to 38%; and sugar-free chewing gum doubles to 36%. Cotton and cotton producers would be charged a 100% import tariff, which is the highest tariff on the list. The head of economic affairs at Brazil's foreign ministry said, "The idea was to distribute the retaliation broadly in order to maximize pressure." In a rare move, the WTO has approved the sanctions. This is one of the few instances in which the WTO allowed cross-retaliation -- where the wronged party can retaliate against a sector not involved in the dispute. The Office of the U.S. Trade Representative said it was "disappointed" with Brazil's decision and called for a negotiated settlement.
Cotton producers in the U.S. say that cotton subsidies systems have changed since the WTO made its original ruling in 2005. A chief economist at the National Cotton Council said that the U.S. has made changes in the cotton program as well as the export guarantee program, and that U.S. cotton production is now 40 to 45% lower. In 2006, the U.S. Congress scrapped some export credits and ended their cotton-marketing program that paid exporters and domestic mill users for buying higher-priced American cotton. But in 2008, the U.S. approved a new farm bill worth nearly $300 billion that left a number of other contentious cotton programs in place. (Full Story) (Full Story).
The Thai government has said they will invoke emergency law March 11-23 in Bangkok and seven surrounding provinces. They instituted the Internal Security Act as a result of a planned march by opposition protesters ("red shirts"). The red shirt protesters are mainly supporters of the former prime minister, Thaksin Shinawatra, who was ousted in a military coup in 2006. Last month the Supreme Court ruled that over half of the assets belonging to Mr. Thaksin or his family, which were frozen since the coup, should be seized. The red shirt movement, which is led by the United Front for Democracy Against Dictatorship (UDD), is said to be planning a huge, but peaceful, demonstration. They are planning on rallying until the current coalition government calls for new elections. The red shirt movement has already been holding smaller rallies, meetings, and "political schools" in various provinces in preparation. Now convoys of vehicles are expected to carry protesters to the capital this weekend.
The International Security Act puts the military in charge, and they have the power to impose curfews, restrict numbers at gatherings, and set up check points if they deem the actions necessary. Thailand's finance minister said, "There is a very small minority who is trying to cause instability through, frankly speaking, potentially violent acts." He added that the government intends to "use all means within its powers, within the laws of the country, to make sure that the property and safety of its citizens are protected." He also admitted that political reconciliation in the country remained a distant dream.
The last time the ISA was invoked was during the ASEAN meeting held in Thailand in October (which was initially planned earlier in April, but was postponed as a result of red shirt protests). In October, the police had failed to stop the red shirts as they took over conference center, and then the army asserted control to keep Mr. Abhisit's government in power. (Full Story)
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