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Feds say they will stop cotton payments to Brazil

The United States will cease paying a $147 million annual settlement to Brazil that is part of a long-running trade dispute over cotton subsidies, Agriculture Secretary Tom Vilsack said Wednesday.

The United States agreed to pay the money to Brazil in 2010, just before the South American country was set to raise tariffs on hundreds of millions of dollars in American goods, including autos, pharmaceuticals and electronics. Stopping the payments could prompt Brazil to threaten retaliation again.

Vilsack said in an interview from Brazil that he doesn't have the authority to continue payments when the budget year begins Oct. 1 because Congress hasn't yet passed a farm bill or a budget.

The World Trade Organization said in 2009 that Brazil could raise the tariffs on American goods because the United States had failed to get rid of subsidies the WTO said are illegal. A farm bill pending in Congress would attempt to bring those cotton subsidies into compliance, but it is now stalled amid disputes between the House and Senate.

The Brazilian government brought the case to the WTO in 2002, alleging the United States remained the world's second-largest cotton producer by paying out the subsidies. The 2010 agreement was designed as temporary until Congress could resolve the issue.

"The only way that can be done is through the passage of a farm bill," Vilsack said. "We need (Congress) to get down to brass tacks here and get this done."

The Brazilian foreign and agriculture ministries declined to comment Wednesday. Vilsack said when he met with Brazil's minister of agriculture and foreign minister, they said they would be watching the farm bill progress in the United States "very closely" but did not give a deadline for action to avoid retaliation.

"They reminded us fairly pointedly that their patience is not limitless and their options are few," Vilsack said.

Vilsack has been pressuring Congress to finish the farm legislation, which would set policy for farm programs and food stamps. Both the House and Senate versions of the bill would restructure cotton payments in an effort to please the WTO, including eliminating cash payments known as direct payments and creating a new cotton program that works more like crop insurance.

Progress on the bill has slowed as House conservatives have insisted on deeper cuts to the food stamp program, which has doubled in cost in the last five years to $80 billion annually. But the Democratic-led Senate and the Obama administration have objected to those cuts.

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