Should U.S. Trade Officials Try to Derail The World Trade Organization’s Pending Decision Against U.S. Cotton Subsidies?




While the preliminary ruling in Brazil’s World Trade Organization case against U.S. cotton has not been released, reports indicate the three-person panel favored more of Brazil’s arguments. Rightly so, our trade officials plan to appeal if this is the case.

Brazil has chosen to litigate rather than negotiate at a time when nations are coming to the table to hammer out a new WTO agreement. Brazil wants to twist the meaning of the current agreement, arguing that long-standing interpretations of the commitments nations made no longer hold up.

The Brazilians are barking up the wrong tree with this approach. If they think we need to change our farm programs, they should join us at the WTO negotiations where these issues are being discussed. If they want to redefine WTO disciplines on agriculture support, we’ll negotiate that.

U.S. farm programs were crafted carefully, both in 1996 and in 2002 when Congress revised them, to live up to the commitments made in the Uruguay round.

In that agreement, we committed to keeping most domestic supports non trade-distorting. Those supports that may have some impact on trade were capped. We have maintained our programs that do not impact trade consistently, and we have not exceeded our other support allowance.

The fixed, decoupled payments that farmers of all major commodities, not just cotton, can receive are just that, unlinked to prices and planting decisions. This puts them in the WTO-defined “green box” of non-trade distorting support.

Farmers decide what crops they want to plant based on factors such as crop rotations, input costs and expected market returns.

Brazil argued that these decoupled payments impact trade and should count in the trade distorting box, causing the United States to exceed its allowance. If the criteria are being changed, that should happen in a forum where all nations can have a say, rather than let a three-person panel decide.

Outside of our non-trade distorting programs, other programs help farmers only when market prices are low. We are spending 30 percent less on agriculture support than was predicted when Congress passed the 2002 Farm Bill.

Prices have been higher the last two years due to increased demand in China and other nations and poor crops from some suppliers. In the late 1990′s world prices and prices received by U.S. farmers were low for cotton and nearly all other commodities.

The Brazilians and others like to single out U.S. cotton programs as the culprit for past low prices. If U.S. programs caused the low prices, are those same programs causing today’s higher prices?

Worldwide supply and demand, as well as unfair currency manipulations, subsidized textile industries, and state-controlled farm inputs, drive cotton prices, not U.S. farm programs.

I commend U.S. negotiators for their aggressive agenda in the Doha round, committing to reduce domestic supports in exchange for new market access and elimination of export subsidies.

The European Union recently agreed to put its export subsidies on the table, giving the talks a much-needed boost. All three pillars of agriculture support-market access, export subsides and domestic supports-must be addressed in this round by all nations.

If Brazil doesn’t like how the current agreement classifies and limits supports, they should push for a successful Doha round. Instead, they have not been forthcoming in the negotiations.

It will be the end of the year before the appeals process in this case is exhausted and even longer before any appeals decision is implemented.

Regardless of the outcome, Brazil will have won nothing if it continues to single out one commodity and does not become an active, constructive participant in reaching a Doha round agreement that furthers fair and free trade for all of agriculture.

Rep. Randy Neuegebauer is a first-term Republican from the agriculturally rich Lubbock and Midland areas in central Texas and a member of the House Agriculture Committee. Readers may write him at 1026 Longworth House Office Building, Washington, DC 20515 and visit his web site at


Dennis Avery


America’s renewed and even more lavish cotton subsidies have flunked their first international test-unleashing a trade war that might collapse the whole farm subsidy system.

A decade-long “cease fire” on World Trade Organization farm subsidy complaints expired last year. In the war’s first salvo, the WTO ruled our cotton subsidies violate Brazil’s international trading rights.

The real winners could be 10-million poor African cotton farmers. Their prices have been depressed as much as 26 percent by some $4-billion per year’s worth of U.S. cotton surpluses.

Oxfam, the international relief organization, says the U.S. in 2001 paid its cotton farmers subsidies worth 130 percent more their total sales earnings that year. Naturally, this encouraged U.S. farmers to grow cotton, no matter how low the price.

Another WTO case is pending with Brazil and Thailand challenging Europe’s vast sugar subsidies. U.S. sugar subsidies could be next. And Argentina is considering a complaint against dairy payments, encouraged by the ruling against U.S. cotton.

The Bush Administration says it will appeal the WTO cotton decision. John Kerry almost certainly will agree. Both Republicans and Democrats avidly sling subsidy cash at a relatively few farmers-especially in the Great Plains and other nearby farm states where they can impact the 2004 election of nearly half our senators.

The good news is that a WTO farm trade war might finally take abusive farm subsidies away from the politicians.

While that would ease our tax burdens modestly, it would allow poor countries to grow economically by exporting significantly more of the cotton, meat, and sugar they produce so efficiently. That’s not a total loss for America since many of those nations would be able to afford more high-tech products from this country.

Without trade barriers, densely populated China and India would also import more farm products from Iowa and Poland, instead of clearing their steep, species-rich wildlands to grow more low-yield crops.

American farmers would be able to earn more from expanded exports of crops that the world needs than from the subsidies Congress now gives them for growing things the world doesn’t want.

The world will demand more than twice as much food in 2050, and we already farm half of the global land not covered by deserts and glaciers.

Thus, our wildlife has a huge stake in growing the crops where they grow best. Tropical Brazil gets double the sugar yield per acre of American sugar beets, while American farmers double Brazil’s wheat yields. Well-watered French farms get higher yields than non-irrigated lands in India.

Third World countries had already been flexing their muscles more vigorously in the WTO. The U.S. and Western Europe tried to present a united front against radical farm subsidy changes at the meeting in Cancun, Mexico, last fall. Third World countries refused to renew the “peace clause” and then walked out.

The WTO’s free-trade rules have cut the average tariff on non-farm products from 40 percent to 4 percent in the past 50 years, spreading more economical products and better wages world-wide. Farm tariffs, however, still average more than 60 percent.

Every country excuses its farm import barriers and tariffs as “preserving family farms.” History says, however, that the high-tech farmers get subsidies, plus more profits, and buy out smaller neighbors.

Some big farms in Texas and California get $1-million or more in annual cotton subsidies, for thousands of acres planted, sprayed, and harvested by big machines.

In Africa, millions of small farmers grow perhaps one acre of cotton apiece, using short-handled hoes, and hand-picking their fiber into burlap sacks.

Farm subsidies currently drain $350 billion per year from rich country budgets, and may cost poorer countries nearly that much in lost growth.

A good farm trade war may be just what the world needs.

About Alex Avery

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