WTO finds against U.S. cotton subsidies

Upholding a Brazilian complaint, World Trade Organization judges ruled on June 18 that U.S. cotton subsidies are illegal. Brazil alleged that the United States maintained its place as the world’s second-largest cotton grower and largest exporter due to $12.5 billion in subsidies paid between August 1999 and July 2003.

Woody Anderson, National Cotton Council chairman, said it would be unlikely the WTO decision will affect U.S. subsidies immediately. “It’s far too premature to speculate on any such changes. We must review the (decision) and wait for the appeal process to conclude before we can begin to evaluate what, if any, changes need to be made to the U.S. cotton program.”

The case is important because it is the first where prosperous nations’ agriculture subsidies have been targeted. With Brazil’s win, say many trade analysts, it’s expected that more disputes over agriculture subsidies will occur.

The ruling wasn’t a surprise — it simply affirmed a preliminary decision in April. At that time, the WTO said the annual $3 billion-plus payments to U.S. cotton farmers were unfair because the subsidies exceed commitments made a decade ago. The WTO also found that $1.6 billion of U.S. export credits (including price support for soybeans and corn) must be removed.

Following the April news, the Bush administration promised an appeal. It continues to do so: “U.S. farm programs were designed to be and are fully consistent with WTO rules,” said Richard Mills, a spokesman for the U.S. Trade Representative. “This litigation will take many months, and maybe years to resolve. The best way to address any distortions is through the WTO agriculture negotiations.”

Mills later said: “We will defend US agriculture in every forum we need to and have no intention of unilaterally disarming.”

It’s expected the WTO’s decision against the United States will strengthen Brazil’s other complaint: a challenge to EU sugar subsidies. Those subsidies allow European farmers to produce and sell sugar at several times the cost of its production in tropical countries.

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