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More on Brazil's WTO Cotton Challenge

Food Routes
Issue #96 - Fri, Apr 30, 2004

Brazil opens American cottons can of worms

The match lit by Brazil, China and other developing countries during the World Trade Organization s Ministerial in Cancun last September has burned its first victim, US cotton producers, and American farmers and politicians are red hot under their cotton collars because of it.

In a preliminary decision to be finalized in mid-June, the World Trade Organization ruled April 26 that the US regularly exceeds its WTO limit of $1.6 billion in annual subsidies to American cotton producers.

The decision, in response to a WTO challenge filed by Brazil, opens a Pandora s Box of woe for the US farmers who, charge developing countries, rely on WTO-illegal money to overproduce and then dump --sell below the cost of production--the unneeded cotton on global markets.

Brazil could not have found a better poster child for its WTO farm subsidy fight than American cotton. According to US Department of Agriculture data, American cotton producers have received nearly $20 billion in direct and indirect (like export assistance) subsidies from 1995 through 2004.

In 2000, a year of low cotton prices, American cotton producers harvested $3.9 billion in government aid; in 2002, the assistance totaled $3.3 billion. Even last year, a season of good prices and fast-rising exports, US cotton growers pocketed a fat $2.7 billion from of Uncle Sam.

Brazil claims government grease eases the way for America to grow 29 percent more cotton than it would without the subsidies and sell--again, dump--41% more cotton on world markets than without the aid.

The overall effect, figures Brazil, a rising thorn in American farmers side, reduces global cotton prices by nearly 13 percent which, in turn, harms Brazilian cotton growers.

What Brazil may not have realized--and if it did, the WTO filing was an act of brilliant madness--is the hallowed historical and political ground occupied by cotton in American agriculture.

Cotton is to America what wine is to France, wheat is to Italy and sheep are to New Zealand. Attacking US cotton is like spitting in church; it simply is not done.

That sacred reverence came through loud and clear during a House of Representative s Agriculture Committee hearing to review agricultural trade negotiations April 28. The hearing quickly turned into a WTO and Brazil slander competition.

To set the stage, the Committee s chairman is Robert Goodlatte of Virginia, a cotton state. The Committee s ranking minority member is Charles Stenholm, a working cotton farmer from the nation s largest cotton-producing--2 billion pounds in 2003--state, Texas, which is also the home of President George W. Bush.

Moreover, Stenholm is known among Capitol Hill colleagues as Cotton Charlie.

And there s more: One-half the members of the House Ag Committee are from cotton states and the chairman of the Senate Agriculture Committee, Thad Cochran, is from Mississippi, the nation s second largest cotton-producing state.

Get the picture? American cotton farmers are protected by rock-hard layers of thick political insulation that no one has successfully penetrated since the rise of modern American farm programs in the 1930s.

Then again, no one has dared to challenge them, either.

But now comes Brazil and American newspapers happily jumped to join it. The New York Times lead editorial April 28 was titled Those Illegal Farm Subsidies; the Wall Street Journal endorsed Brazil s gutsy move with the The Cotton Club.

Most in Congress, however, are most unhappy.

At the House hearing April 28, Goodlatte and Stenholm wasted little time in filing their displeasure with the day s star witnesses, US Trade Representative Robert Zoellick and US Secretary of Agriculture Ann Veneman.

We have a new dimension in our trade negotiations, offered Cotton Charlie; it s called litigation. Chairman Goodlatte, a lawyer by trade, echoed the remark to say sueing Brazil and the WTO would be the place to start.

Zoellick tried to cool the cotton boys passion.

It would be a very big mistake to try to solve these issues through litigation, he moaned. He then urged the farmboys to stay the WTO negotiating course because everyone needs to come to the table before the fight turns global.

And it could. Brazil has fired the first shot in a fight all WTO negotiators have quietly and carefully avoided. The reason is simple: if one farm subsidy challenge against a developed nation succeeds, more are sure to follow. The Doha Talks then crumble.

For her part, Veneman took the bait offered by Goodlatte when he commented that Brazil, a developing country, has legal room to challenge US and European farm policies in the WTO because of its status. Goodlatte openly wondered if Brazil really was developed, thereby losing its white hat in its WTO challenge of US cotton.

Many countries, Veneman said, are deemed developing generally, (but) I do not believe they should be deemed to be developing for agricultural purposes.

While her remark accurately reflects most US farmers views of the developed-versus-developing nation farm subsidy squabble, Zoellick swiftly slammed the door on Veneman s blatant misstep.

Our approach has been not to get lost in endless debates of that, he scolded her.

But scolding--harsh, bitter and always wrapped in the American flag--is what Zoellick and Veneman can expect if the WTO s formal June announcement takes US cotton to the Geneva woodshed for a beating.

They know--as farmers are loudly reminding them--US cotton is a god, an American icon, not to be trifled with. If it can be torn down, then US soy, rice, corn, wheat, sugar and other subsidies will quickly face similar challenges.

Should that happen, American farmers know the whole subsidy ball of string will quickly unwind.

Perhaps Zoellick and Veneman should order tons of cotton bandages because this fight is going to get very bloody very quickly this summer. Especially for diehard Doha defenders like them and their friends in the Bush Administration.

Funny, isn t it, how many times you get run over by the same wheel that you started rolling?