Brazil may retaliate if US stops cotton payments

Brazil's Foreign Minister Antonio Patriota has said the government may retaliate to the US if it stopped paying Brazil compensation for cotton subsidies.

Brazil will decide whether to retaliate in the next months, he said Thursday during a business lunch, raising the possibility of imposing retaliation over intellectual property as well as exports, reported Xinhua.

His remarks came a day after US Agriculture Secretary Tom Vilsack said Washington would stop paying a $147 million annual settlement to Brazil over long-standing US cotton subsidies when the budget year begins Oct 1.

Vilsack said he didn't have the authority to continue payments beyond September because Congress hasn't yet passed a new farm bill or a budget. The current farm law expires Sep 30.

The US, the world's largest cotton exporter, agreed to the payments in 2010, just before Brazil was set to raise tariffs on hundreds of millions of dollars in American goods.

Brazil won the challenge against the US cotton subsidies at the World Trade Organization (WTO) in 2004 which led to the bilateral deal under which Washington paid into a fund for Brazilian cotton farmers in exchange for exemption of Brazilian sanctions against US products.

The US has paid Brazil $147 million per year since 2010 and the payments were supposed to last for several years while Washington wrote a new farm law that would eliminate cotton subsidies.