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Brazil Asks WTO to Investigate Likely "Trade Illegal" U.S. Soybean Subsidies

Latin America Brazil to Ask for WTO Probe of U.S. Soybean Subsidies
(Update2)

Feb. 15 (Bloomberg) -- Brazil, the world's second-largest soybean
exporter, plans to ask the World Trade Organization to investigate U.S.
soybean subsidies of more than $2 billion a year, stepping up its drive to
lower agriculture trade barriers. Brazilian Agriculture Minister Roberto
Rodrigues said he is in talks with farmers to seek a WTO probe, known as a
panel. The U.S. spent $11 billion on farm subsidies last year to guarantee a
minimum price for crops including soybeans, making it difficult for Brazilian
farmers to compete, Rodrigues said in an interview in Brasilia. ``Farmers
are thinking about asking for a panel, and we are encouraging them to do
so,'' Rodrigues, 62, said. ``Developing countries simply don't have the means
to compete with the U.S.'' Targeting soybeans represent an escalation in
Brazilian President Luiz Inacio Lula da Silva's strategy to use the WTO to
force the U.S. and Europe to cut subsidies and help open up new markets for
farming exports. Brazil pursued and won the first two WTO cases challenging
subsidies for U.S. cotton farmers and European sugar producers. Rodrigues
last month said Brazil wants to make such farm subsidies a focus of global
WTO free-trade talks in December aimed at reaching an agreement in 2006.
Rodrigues declined to say when Brazil may file a soybean case at the WTO.

``I am surprised they would do this because it be very expensive and
probably wouldn't be resolved until after the WTO agreement,'' said Ron
Heck, chairman of the American Soybean Association and a 3,600-acre corn
and soybean farmer in Perry, Iowa. ``I think it's just posturing ahead of
the talks.''

U.S. farmers consider Brazil's demands unfair because Lula's
government helps producers with low-interest loans for crops and tractors,
tax breaks for soybean exports, and incentives for buying new land, said
Heck. U.S. payments to soybean farmers are allowed by the WTO because they
aren't tied to production, he said. ``This kind of case would be without
merit,'' he said. U.S. Department of Agriculture spokesman Ed Loyd declined
comment, referring inquiries to the U.S. Trade Representative Robert
Zoellick. Richard Mills, Zoellick's spokesman, reached by telephone from
Washington, said he couldn't immediately comment. Brazilian soybean sales
accounted for $10 billion of revenue, or about 10 percent of total exports
last year, helping drive an expansion of South America's largest economy.
U.S. farmers receive subsidies that guarantee them a minimum price for the
crops, which has unfairly helped a 37 percent drop in soybean prices in the
past year, Rodrigues said. Soybeans for May delivery slipped 1 cent, or 0.2
percent, to $5.355 a bushel on the Chicago Board of Trade, close to
yesterday's one-month high but almost half a 15-year high of $10.64 in April.
Lula Challenge Brazil is the world's biggest producer and exporter of
coffee, orange juice and sugar, and is second in terms of soybean exports
after the U.S. Lula wants to take advantage of Brazil's relatively lower
costs and unfarmed land to increase its share in the global food export
market. Lula, 59, has rallied China, India and other developing countries to
pressure for reductions in the $300 billion of annual aid that the
Organization for Economic Cooperation and Development says is given to
farmers by governments in industrialized countries. In 2003, Lula formed a
bloc of developing countries, known as the G-20, which scuttled WTO talks by
demanding reductions in farm subsidies. Lula wants agriculture to help drive
economic growth by having farmers expand. Brazil's agriculture ministry
estimates there are 140 million hectares of fallow land and pastures that
could be converted into crop land, more than double the current agriculture
land in use and equal to 80 percent of all farmland in the U.S.

To contact the reporter on this story:
Michael Smith in Rio de Janeiro at mssmith@bloomberg.net

To contact the editor responsible for this story:
Laura Zelenko in New York at lzelenko@bloomberg.net