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Brazil's Cotton Victory against Subsidies

Farm and Food File for the week beginning Sunday, May 9, 2004

Brazil opens cotton?s can of worms

Alan Guebert

Brazil added a new product, American hide, to its list of global ag
exports April 26 when the World Trade Organization leaked word it likely
would grant Brazil?s request to declare some American cotton subsidies
illegal in mid-June.

Wow. Brazil stuck its thumb in the WTO pie and pulled out an American
plum, making it the national dish of any country that challenges American
producer payments at the WTO.

U.S. cotton producers were livid; Congress was in shock. U.S. Trade
Representative Robert Zoellick dove deeper into his Doha bunker, his
residence since the Cancun crack-up, mumbling ?more negotiations, more
negotiations.?

More negotiations? Brazil just kicked major U.S. farm trade butt; it
didn?t just catch us with our hand in the cookie jar; it smashed our cookie
jar. The victory means fewer negotiations, if any.

Moreover, if the WTO ruling remains standing after a year of
anticipated wrangling and appeals, the carefully constructed farm subsidy
policies of America, the European Union, Japan and other developed nations
are in line to also be smashed by the WTO.

(The ruling against U.S. cotton could be substantially confirmed
before the appeals process runs its course. Brazil has a parallel subsidy
challenge, this one against EU sugar handouts, pending at the WTO now.)

If upheld, the WTO?s action packs two enormous consequences. First,
rich nations can?t put perfume on a pig and declare it clean. Attaching new
or fancy names--like Freedom to Farm and decoupling--to domestic farm
support policies doesn?t ensure they are WTO-legal.

In farm-speak that means if Grandpa had the guts and good sense to buy
Alabama cotton land or Illinois corn ground 70 years ago, his foresight may
not be enough of a reason for you to receive government assistance today.

And, unless you can definitively prove that your farm program
payments--pick one or any from the long, long list--do not distort global
production, prices or trade yesterday, today or tomorrow, it?s likely the
payments will be challenged at the WTO by anyone with the cash and will to
file a claim.

Brazil had--and has--both. At the WTO, it griped that 1999 and 2001
program payments to U.S. cotton producers easily exceeded the $1.6 billion
subsidy cap the U.S. had agreed to in 1995 when the WTO was born during the
Uruguay Round of trade talks.

In its reply, the U.S. didn?t dispute the bigger numbers, $2.3 billion
in 1999 and $2.06 billion in 2001. It did note, however, the payments were
"decoupled;" they weren?t linked to U.S. production.

Call 'em what you want, countered Brazil (using American experts as
their chief witnesses, adding insult to injury), but they caused our farmers
$600 million in lost cotton sales around the world during the 2001-02
marketing year.

The second consequence of the interim WTO ruling is that it demolishes
America?s negotiating strategy in the troublesome trade talks: we?ll put
American agriculture on the table in return for other nations, especially
developing nations, granting us market access anywhere anytime.

In short, we?ll sell out American farmers (remember the proposed
Australia and Central American free trade deals?) if American corporations,
through the WTO, can make your nation a partially- or wholly-owned
subsidiary.

Should the WTO maintain its April 26 cotton ruling, however, that we?
ll-give-you-farmers, you-give-us-access plan collapses. ?(The U.S was)
counting on trading these farm subsidies for other concessions from
developing nations, but it turns out they aren?t worth anything,? a
Washington D.C. trade lawyer told BusinessWeek last week.

The WTO decision blindsided USDA and its agbiz buddies. When Secretary
of Agriculture Ann Veneman agreed with a House Ag Committee member at an
April 28 hearing that Brazil?s status as a ?developed nation? should be
challenged, trade rep Zoellick, alongside, publicly scolded her.

Our approach has been not to get lost in endless debates of that,? he
noted sharply. Right and ?our approach? has yielded ... what?

Internationally, mostly scorn and WTO losses.

Domestically, Congress now has a new reason to re-open the 2002 Farm
bill. With, by the way, a scalpel.