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US Congress Cuts Cotton Subsidy, Bows to WTO Pressure


US Congress scraps cotton subsidy

The US Congress has approved the scrapping of major subsidies to the cotton
industry, in a move that could help producers in the developing world.

The administration agreed in December to implement a World Trade
Organisation (WTO) ruling against the subsidies, but it needed congressional

Brazil, which brought the case, said government help for American cotton
farmers distorted the global market.

The subsidies included incentives to buy cotton from domestic farmers.

Aid agencies said the system was particularly damaging to cotton-producing
nations in West Africa which, they say, did not get a fair price for their

Powerful lobby

The House of Representatives passed the bill on Wednesday, following
approval by the Senate late last year.

The congressional vote, which came with protests from the agricultural
lobby, means that US exporters and manufacturers will no longer receive an
incentive for buying their cotton from domestic farmers.

The Bush administration has already scrapped two credit programmes for the
farmers, to comply with the WTO decision.

BBC Americas editor Simon Watts says US cotton subsidies have been at the
centre of a global trade battle for years, with successive administrations
paying billions of dollars annually to farmers in the American South, who
have a powerful lobby in Washington.

US trade officials believed the subsidies were legal, but in a landmark
ruling in 2004 the WTO decided that much of the assistance broke its rules.

In Brazil, the resolution will be seen as vindication of the government's
strategy of tough diplomacy at the WTO, in coordination with other
developing nations, our correspondent says.

At one stage, Brazil even threatened trade sanctions if the US did not
implement the ruling.
Story from BBC NEWS:

Published: 2006/02/02 08:18:19 GMT