- The Washington Times - Sunday, March 13, 2005

The World Trade Organization has in effect bolstered U.S. interests by ruling against the administration’s position on U.S. cotton subsidies. While it may be an annoyance for Americans to have a multilateral organization pass judgment on U.S. policy, cotton subsidies have been a liability for the U.S. taxpayer — not to mention poor cotton producers around the world. The payments have also failed to bolster the small American cotton farmer. We welcome the WTO decision, as it helps bring U.S. cotton and other farm subsidies to a speedier end. Such a move would also help drive the ongoing Doha trade round.

A WTO dispute panel upheld an earlier ruling that about $2.7 billion in annual U.S. cotton subsidies were illegal under existing trade rules. The ruling came in a suit brought by Brazil and supported by West African cotton-producing countries. The WTO decision was final, confirming a September 2004 decision, and related to both farm payments and federal credit programs. The United States has until July 1 to comply with the ruling or face possible trade sanctions.

The WTO ruling was the first on U.S. farm subsidies. The organization has also made an initial ruling against European sugar subsidies in a case which is still under appeal. The ruling on U.S. cotton payments could also affect a broad range of EU farm subsidies, such as those involving milk, and other U.S. farm-export credit subsidies.

About 78 percent of U.S. cotton subsidies benefit the largest 10 percent of U.S. cotton producers. More generally, U.S. taxpayers spent $131 billion over the past nine years on federal farm programs. Cotton is one of America’s most subsidized farm commodities.

The cost to small producers in poor countries is also considerable. The subsidies prompt U.S. producers to dump cotton on the world market, causing losses of almost $400 million between 2001 and 2003 for poor African cotton-producing countries, where more than 10 million people depend directly on the crop. A typical small-scale cotton producer in West Africa makes less than $400 on an annual cotton harvest.

It is little surprise that the U.S. subsidies, and the European Union’s even larger farm payments, would be a focus of the ongoing WTO trade round, given their impact on global trade. Although a framework agreement has been made on farm subsidies, the important details have yet to worked out.

U.S. negotiators should ensure that Europe and other heavy subsidizers make reductions that are proportional to U.S. cuts. Fairness dictates such a reciprocal approach, as does the U.S. political environment. U.S. agribusiness has been a key supporter of a host of trade agreements, and the administration needs that kind of support to continue.

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