Brazilian tariffs could stall exports

WTO authorizes Brazilian tariffs because of U.S. cotton subsidies

By WES SANDER
Capital Press

For Northwest fruit growers, Brazil's retaliatory expansion of tariffs on U.S. exports present both potential and immediate impacts.

Brazil raised tariffs on some fruits, nuts and dairy products, along with a list of other goods, in retaliation for subsidies on U.S. cotton and exports that the World Trade Organization has deemed illegal.

Brazil raised tariffs on several fruits and nuts from 10 to 30 percent.

Brazil raised its tariffs on cotton, including fabrics and clothing, to 100 percent, and on dairy products from 28 to 48 percent.

The episode puts a damper on growing optimism for Brazil as a market for U.S. cherries, said B.J. Thurlby, president of the Washington State Fruit Commission.

"We're earmarking Brazil as an emerging market," Thurlby said. "It has the potential to be a great market."

Over the past five years, Northwest cherry growers have sold an average of 5,000 boxes annually to Brazil, making the country a small market. But last year, the number jumped to 20,000 boxes, Thurlby said.

The tariff episode is "sad and disappointing, because last year we finally saw the light go on in Brazil," Thurlby said.

Brazil announced on March 8 its list of increased tariffs, which includes a range of products from cars and sunglasses to toiletries and appliances. It totals $591 million in penalties, which take effect after 30 days unless the two countries can settle the dispute.

The World Trade Organization authorized Brazil to levy $829.3 million in annual penalties. The country says it will announce an additional $238 million in tariffs on intellectual property later this month.

Alteration of either the cotton subsidy program or USDA's export credit guarantee program, which guarantees export loans, would require action by Congress.

"It's very hard to know whether that can occur, given the current political climate and mid-term elections" coming in November, said Mark Powers, vice president of the Northwest Horticultural Council. "The question is, can you find a solution before we need to ship pears by next October?"

Pears, which the council promotes, represent a greater stake in Brazil than cherries do. The country was the third-largest buyer of U.S. pears for the 2009 crop, Powers said.

Northwest producers sold 512 cartons to Brazil this year, a 90 percent jump from last year, Powers said. That accounted for up to $12 million in sales, largely attributable to a large crop.

But the impact to pears won't show up until Northwest producers, who are responsible for most U.S. pear exports, begin shipping to Brazil in October.

Unfortunately, tariff actions impact industries unconnected with those at the focus of a dispute, Powers said.

"You're putting someone in harm's way, and that's how retaliation works," he said. "Unfortunately, we tend to be the (victim) of retaliation, and not the beneficiary."