Because he’s trying to put pressure on Congress to pass a Farm Bill and resolve a Brazil trade dispute.
Ever been invited by a friend to a dinner party, despite the fact that you owe them money, and then loudly announce that you’re not going to pay your host the money owed to them? That would be pretty rude, right?
That’s sort of what US Secretary of Agriculture Tom Vilsack did yesterday. He announced that the US will stop paying the $147 million annually to Brazil, a settlement that we agreed to pay in 2010 after we lost a WTO case on cotton subsidies. The payment was offered instead of reforming US cotton subsidies and to mollify Brazil who was preparing to impose trade sanctions on the US.
It seems a little rude to do, especially since Secretary Vilsack and Senate Agriculture Committee Chair Debbie Stabenow (D-MI) are currently in Brazil on an official visit. Table-manners aside, this seems part of the multi-dimensional chess game that is US trade policy, the WTO, and the Farm Bill. Given that Vilsack made the statement in Brazil, you might think the Brazilians were the intended audience for Vilsack’s statement. But really I think the audience is the Congress in Washington (who are actually not in Washington at the moment).
Vilsack is claiming that he doesn’t have the authority to continue paying the $147 million vig. The logical consequences are as follows:
1) The US doesn’t pay Brazil.
2) The US-Brazil agreement is nullified.
3) Brazil takes up trade retaliation against the US, including potentially waiving US intellectual property rights in Brazil.
4) Major economic harm is cause to US exporters and US intellectual property owners. (Think entertainment, software, pharmaceuticals, etc.)
The alternative is that Congress passes a Farm Bill that reforms cotton subsidies to comply with WTO rules and the Brazilian case is closed.
At least I think that’s the implicit story that Vilsack is telling. Effectively, he’s trying to put pressure on Congress, especially the House of Representatives, to pass a Farm Bill to resolve this international trade issue.
Whether the Farm Bill will resolve the dispute is debatable. Brazil has not indicated that it thinks the versions of the Farm Bill that the House and Senate have drafted would resolve their claims. So there’s clearly a lot more play before this chess game is over.