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WTO Rules US Cotton Subsidy Illegal

The WTO has ruled on a complaint by Brazil that US cotton subsidies represent a WTO-illegal unfair trade practice. One can assume that other agricultural subsidies will also run afoul of the WTO. Agri-business may be in for trouble.

WTO rules American cotton subsidy illegal

Ashley Seager
Wednesday April 28, 2004
The Guardian

Brazil has won a landmark victory at the World Trade Organisation that could spell the beginning of the end of rich countries' subsidy payments to their farmers.

The WTO, based in Geneva, has ruled that $1.5bn (?830m) of annual subsidies given by the United States government to its 25,000 cotton farmers are mostly illegal.

The provisional ruling is confidential, but trade sources said pubic confirmation would be available as soon as next month and could start a domino effect whereby much of the ?300bn in subsidies lavished on the rich world's farmers might tumble.

"This could be the first domino," one said.

The ruling is the first time a developing country has won such a decision from the WTO when arguing against one of the big trade powers.

The European Union is also under pressure from countries such as Brazil, Australia and Thailand over the massive subsidies it makes available to sugar beet growers.

The agricultural subsidies attracted by farms in the richer nations have been one of the main sticking points in the latest round of world trade talks, known as the Doha round, which collapsed spectacularly in Mexico last year.

The US is poised to appeal against the WTO ruling and keep the issue of its subsidies to cotton farmers off the agenda until after the November presidential election.

Few appeals against WTO rulings, which the US urges other countries to respect, have succeeded. Analysts said, however, that, even if the US Congress agrees to scale back cotton subsidies, implementing the changes could take up to two years.

A spokesman for the US trade representative, Robert Zoellick, said America considered all of its foreign programmes to be fully consistent with WTO obligations.

"We think this should be dealt with at a multilateral level through the broad WTO trade talks. And the US government was the first to propose measures to reduce annual, global, trade-distorting domestic measures by $100bn," he said.

But campaigners were not convinced. Matt Griffith, a trade policy analyst at the charity Cafod, said: "That Brazil brought this case is a sign of desperation that so little has been done to tackle rich-country subsidies. It sets a valuable precedent in an attempt to call the US and other lavish subsidisers to book."

Oxfam spokeswoman Celine Charveriat agreed: "This would be a huge victory, not just for Brazil but particularly for 10 million poor African farmers whose livelihoods have been crippled by unfair competition."

Minneapolis-based thinktank the Institute for Agriculture and Trade Policy said the WTO decision should prompt a rewriting of American farm policy to lift market prices and bring a halt to agricultural dumping.

"This ruling points to the disastrous results of US farm policy, which is designed to drive down commodity prices and then make up the difference in subsidies," said spokesman Ben Lilliston.

The thinktank calculates that the US accounts for more than 40% of world cotton exports, up from 24% in 1996.

The effect of the increase has been to depress cotton export prices by two-thirds over the same period to 37 cents a pound, 61% below the cost of production.

This "dumping" hits cotton farmers hard in poorer countries by depressing prices they are paid for their produce.

As well as sugar, many other American and European crops - such as soya beans, wheat, maize, rice, beef and dairy produce - could be the target of similar WTO action.

Ultimately the US is likely to use the ending of subsidies to its own cotton farmers as a lever in negotiations with other major trading powers to persuade them to reduce subsidies seen as hurtful to American interests.

fresh air 29.Apr.2004 02:35

lover of good news

so refresing to hear some good news. thanks.

interesting to see how First World reacts! 29.Apr.2004 06:15


On the one hand, good news for Brazil and other cotton exporters.

On the other hand, it shows that these countries will be stuck in the false hope that the WTO is systemically going to serve them. It is going to serve only the major industrialized/subsidized areas of America and Europe. For places like Brazil to 'hope' for the WTO as an institution with any legitimacy toward sustainability or democracy, is like paying billions of dollars for a lottery ticket, and being satisfied you lost.

On the next other hand, (the third hand?), AND PERHAPS MORE INTERESTING, I suppose I applaud this decision, because it may set up a context where the WTO will be destroyed from WITHIN the First World, as the US pulls out like it has pulled out from all the other fake-globalist instituitons--once they actually go after the organized criminals in the United States government. I take for example the US's pulling out of the World Court frameworks--once it began to focus on the largest criminal rogue state of them all: the United States actions in Iraq and in the wider sense, opening the Pandora's box of focusing on the MAIN ISSUE IN THE WORLD: the US's network of over 300 military bases on foreign soil, and how they are interlock for CIA, large financial banks, covert intelligence, supported as they are by the apolitical political establishment in both the Democratic and the Republican parties.

Pehaps this will be the straw that breaks the camels back, and the US will begin to reconsider supporting such WTO frameworks--that it would only be behind if it could use them like a secret police and attack other smaller countries when convenient to expand private corporate administration of these areas. So watch the US's reaction: perhaps it will expose a bit how the WTO was only a velvet glove technique to introduce supposedly 'globalist' institutions that are only meant as a puppet to further decimate the world in the name of the low population, unrepresentive financial core areas of the First World.

not a chance 03.May.2004 10:34

Boss scott@irwin.org

There is no way this is ever going to get past the House of Representaives--as it shouldn't. The House and likely the Senate will see this as an affront to soveriegnty and kill it. The US should not worry about what happens to third world farmers as they shoud grow crops that they can make money on. Agriculture specialists need to go to these third world farmers and teach them what will be the best cash crops to grow that are unique to their area and what better farming practices to use. If the US wants to do something internally (i.e. subsidise cotton farmers) who is the WTO or anyone else to say they can't?