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US Dillydallies with WTO Cotton Ruling Compliance

U.S. Changes Export Programs Due to Ruling

Friday July 1, 2005 3:31 AM

By LIBBY QUAID

Associated Press Writer

WASHINGTON (AP) - The United States is changing export programs that
help farmers sell crops in an attempt to comply with a World Trade
Organization ruling against U.S. subsidies for cotton growers.

The Agriculture Department said it would alter three export credit
guarantee programs as of midnight Friday, the deadline set by the WTO
for illegal export subsidies and domestic payments to end.

``Today's announcement demonstrates the U.S. intent to live up to its
WTO obligations,'' Agriculture Secretary Mike Johanns said in a
statement released late Thursday. ``The administration continues to
evaluate other steps that could be taken to comply with the WTO cotton
decision.''

The department announced the changes late Thursday after the Senate
passed a contentious free trade deal with six Latin American nations.

The alterations are intended to satisfy a WTO finding against export
credit guarantees, which help U.S. growers sell commodities by making
financing available to foreign customers.

But the department didn't address the WTO finding against the
government's cotton marketing program, called Step-2, which makes
payments to exporters and domestic mill users to compensate them for
buying higher-priced U.S. cotton.

Lawmakers have indicated they will try to deal with the issue during the
congressional budgeting process this year.

The department will use a new fee structure for the Export Credit
Guarantee Program, called GSM-102, and the Supplier Credit Guarantee
Program. It will discontinue a third program, the Intermediate Export
Credit Guarantee Program, or GSM-103.

Brazil brought the complaint to the WTO, arguing that the U.S. has
maintained its dominance as the world's top cotton exporter, and
second-biggest cotton producer, through subsidies to cotton growers
averaging more than $2.7 billion annually from 1999 to 2003.

The U.S. said its payments to farmers fall within levels allowed under
WTO rules, arguing that many of the payments don't meet the WTO
definition of subsidies and should not have been considered government
aid.

The department said producers won't feel a significant impact from
changes to the export credit guarantee programs. The new rules will make
fewer countries - probably smaller, less developed ones - eligible for
financing.