Cotton production figures don't justify Brazil's WTO complaint

If anyone thinks the U.S. cotton program is adversely affecting Brazil's cotton industry — as has been charged in a World Trade Organization case — here are a few statistics from Craig Brown of the National Cotton Council:

  • Brazil is expected to increase its 2004 cotton production by 85 percent over 2001.

  • China is expected to increase its 2004 cotton production by 19 percent over 2001. What's the United States doing? “We're probably going to reduce our cotton production,” says Brown, the council's vice president of producer affairs, who spoke at the summer conference of the Southern Cotton Ginners Association in Lafayette, La. “So, who's prejudicing whom in the world cotton trade?

“Combined, Brazil and China are expected to increase cotton production in 2004 by over 8.6 million bales; the U.S. is expected to increase production by 2.7 million bales over 2001 levels. We think that makes a fairly compelling case. We'll see if the rest of the world agrees.”

Pointing out that the WTO decision on the Brazilian complaint isn't final yet, although parts of it have been leaked to the media, he says if press reports are accurate, the panel's ruling was against the United States, and particularly the cotton program. “The decision is still confidential and won't be made public until it has been interpreted in all the WTO languages.”

It's important to understand, Brown says, that the U.S. government will appeal the decision — a very formal process that will take 90 days. “So, this is far from over; those counting the cotton program out have prematurely done so. This will probably carry out over the rest of this year, and will probably come out about the time of the National Cotton Council's annual meeting.

“Depending on what the ruling is, we'll have to decide what has to be done. But whatever the ruling, it doesn't change U.S. law. Most of the things they're addressing deal with U.S. farm law, and only Congress can change that. Even if there is a negative ruling from the appeal, there still will have to be a decision by U.S. negotiators as to how they will react, what they will do, how they'll legislate, how broad the impact will be — so it's far too early yet to speculate on what the final decision will mean for the cotton program.”

In the council's analysis of the decisions, as based on press reports, Brown says, “We think some of the claims the WTO panel made against the cotton program are greatly exaggerated and aren't really accurate; we feel we have a decent chance of winning some very specific issues on appeal. We think our program is WTO-compliant, that Congress went to great efforts when it wrote the farm bill to comply with what it, and most countries, interpret as the WTO agreement. So, we were a bit taken aback by this ruling on the cotton program and some provisions common to other commodity programs.

“Although this a cotton-specific case, it has implications for some of the common provisions of other programs: counter-cyclical payments, direct payments, the loan program, which are at the very heart of our entire farm policy. We think claims of the impact of our program on Brazil or the international cotton market are greatly exaggerated; in fact we've seen independent studies from Texas Tech University and other analyses that the impact of the U.S. cotton program on the world price of cotton is not near as dramatic as the WTO case contends. We hope the government will make this very clear in the appeals process.”

The Brazilian decision may also have an impact on the Doha round of the WTO negotiations, Brown says. “We think it will give pause to our negotiators, and probably to European negotiators. This has really put some doubt into the whole process. We think it's going to make it more difficult to negotiate a comprehensive worldwide reform of agricultural programs, which is what the United States is trying to do in the latest revitalization of the Doha round.”

Noting that the last session, in Cancun, failed, Brown says the United States is trying to lead the effort toward revitalization of the round. “We've seen a draft of the general framework of what they hope to start up again, and it has caused the cotton industry quite a bit of concern. We've expressed that concern to U.S. Trade Representative Zoellick and key members of Congress and the administration.

“We don't like the specific references to cotton in the draft framework, and we're concerned about some of the positions some of the West African countries have taken about our cotton program. We're working closely with some of the African countries, in areas where we can make a difference, trying to redirect their efforts in a more positive way. I think we're having some success, but the proof will be how they act during the negotiations.

“We're concerned about this framework agreement,” Brown says, “and we're having ongoing discussions with the administration and Congress. Our trade agenda is quite crowded right now, occupying a large amount of our time. It's a very complex and convoluted policy area that's hard to get arms around, but it's something that can affect your livelihood as much as farm policy or economic policy or any of the other major policy areas.”

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