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Brazil Punishes U.S. With Tariffs On Cars, Ketchup

Mon, 03/08/2010 - 6:57am
Bradley S. Klapper, Associated Press Writer

GENEVA (AP) — Affecting products from Ford automobiles to Heinz ketchup, Brazil announced Monday a range of sanctions against American goods in retaliation for the United States' failure to eliminate billions in illegal cotton subsidies.

The higher tariffs affecting dozens of products from fresh fruit to sunglasses comes after the World Trade Organization authorized Brazil last year to set $829.3 million in annual penalties against U.S. economic interests for years of anticompetitive subsidies paid to American cotton growers.

Brazil says the ruling allows $238 million worth of penalties on U.S. trademarks, patents and commercial services, which will be announced later this month. Monday's first part deals with $591 million in penalties on goods, which will remain in place as long as the U.S. continues to break international trade rules, the Latin American country said in a statement.

"The Brazilian government regrets having to take these measures, since it believes that trade retaliation does not constitute the most appropriate means to attain international trade on a fairer basis," it said in a statement.

"However, after almost eight years of litigation and over four years of continuing noncompliance ... it remains for Brazil to exercise its right" to the sanctions.

The list of goods was delivered to the WTO in Geneva on Monday, with a notice that the sanctions will start next month.

Brazil says the U.S. has been able to retain its place as the world's second-largest cotton producer by paying out some $3 billion to American farmers each year. China is the largest exporter of cotton, while Brazil is fifth.

The WTO has condemned the payments in a series of rulings, that have also been cheered by West African countries who say the subsidies hurt their competitiveness in international markets. The WTO has found that the subsidies unfairly help U.S. producers undersell foreign competitors and depress world market prices, dealing a double blow to cotton growers in Brazil and elsewhere.

In response to the legal defeats, the U.S. Congress has scrapped some export credits and in 2006 repealed the "Step-2" cotton-marketing program that made payments to exporters and domestic mill users as compensation for buying higher-priced American cotton.

But in 2008 it approved a new farm bill worth nearly $300 billion that left a number of other contentious cotton programs intact.

The Brazilian list affects a wide range of U.S. goods. Fresh fruits such as cherries and pears would face a tariff of 30 percent in value instead of 10 percent, while the import tax on ketchup rises to 38 percent from 18 percent.

Sugar-free chewing gum more than doubles to 36 percent, while passenger cars increase to 50 percent from 35 percent.

There are also, naturally, steep penalties against the U.S. cotton industry. Raw cotton jumps to 100 percent from a current levy of 6 percent. Woven fabrics rise to same level from 26 percent now.

The cotton sanctions are the second largest authorized in the WTO's 15-year history. The biggest also penalized the United States, specifically for tax breaks it offered large U.S. companies operating overseas.

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