BRASILIA (Reuters) Brazil on Thursday suspended retaliatory measures against U.S. goods over a cotton subsidy dispute, freezing until 2012 a long-running row that has demonstrated the South American nation's trade clout.
The government said a deal agreed between the two countries in April to head off up to $829 million in World Trade Organization-sanctioned retaliation against U.S. goods would stay in place until a new U.S. farm bill is passed.
The current U.S. farm law, which contains subsidies for U.S. cotton producers the WTO ruled were too high and therefore illegal, is set to expire on September 30, 2012.
Under the deal, the United States pledged to make some short-term tweaks to its export credit guarantees and give Brazil about $147 million a year in damages for a "technical assistance" fund for cotton growers.
"Brazil doesn't rule out taking countermeasures at any moment," Roberto Azevedo, Brazil's envoy to the World Trade Organization, told reporters in Brasilia. "It is just a suspension of this right".
He said Brazil could retaliate at any time if the United States did not uphold the agreement, but added that Brazil had no interest in retaliating.
"This process of negotiation and reform is better than retaliation that doesn't bring benefits to anyone in Brazil's private sector."
Analysts had expected Brazil to explicitly retain its right to apply sanctions if Congress doesn't act.
The deal to avoid retaliation kicks down the road the tough work on subsidy reform to the haggling over the 2012 Farm Bill by the U.S. Congress -- a body known first and foremost for taking care of domestic interests.
"We are pleased that we were able to reach an agreement with Brazil on a Framework regarding the WTO Cotton dispute, which would avert the imposition of countermeasures," said Nefeterius McPherson, a spokeswoman for the U.S. Trade Representative's office.
The World Trade Organization ruled last year that Brazil had a right to retaliate after it found U.S. cotton subsidies and its export guarantee program illegal.
In April, Brazil delayed for 60 days trade retaliation against the United States after the U.S. government met the last of three conditions Brazil had set for suspending import duties on U.S. goods.
The assistance fund for its cotton sector will go toward areas such as technical assistance, marketing and market research, rather than subsidies for Brazilian farmers.
Brazil had been considering retaliation by lifting patent protections, which would have hurt U.S. makers of pharmaceuticals and chemicals. The WTO has previously granted two other countries the right to retaliate in trade disputes but Brazil would have been the first nation to apply it.
