- The Washington Times - Thursday, March 3, 2005

The World Trade Organization yesterday said U.S. payments to cotton farmers violate global trade rules, upholding a previous ruling and potentially undermining American agriculture support programs.

“It’s a very significant decision for all of U.S. agriculture. We don’t expect any immediate change in the U.S. cotton program, but it certainly will require us to discuss with Congress and the administration what it does mean,” said Bill Gillon, an attorney for the National Cotton Council, an industry trade group based in Memphis, Tenn.

The decision is the first at the WTO against a country’s domestic agricultural supports and also may affect other commodities, such as American-grown rice.

Brazil filed the case claiming that U.S. subsidies to cotton farmers harm Brazilian producers by encouraging overproduction and lowering world prices. The South American nation filed a similar case against European Union (EU) sugar subsidies and won an initial hearing at the WTO.

“I think it’s going to put a lot of pressure on U.S. and [EU] subsidy programs. I think what it says is both … have export subsidies that are prohibited,” said Scott Andersen, a Geneva-based attorney who headed the litigation team for the Brazil cotton producers.

U.S. cotton subsidy payments vary from year to year, reaching $3.8 billion in 2001 but falling to $1.37 billion for fiscal 2004, according to U.S. Agriculture Department figures. The subsidy estimate for 2005 is $4.72 billion, roughly $355 per acre planted.

Brazil argued that without subsidies, U.S. producers would export significantly less cotton, raising world prices about 12.6 percent.

The United States said its cotton program did not violate WTO rules, but a WTO appellate panel disagreed.

“We’re disappointed with aspects of the report,” said Richard Mills, spokesman for the Office of the U.S. Trade Representative.

Agriculture payments have come under fire at the WTO as developing nations accuse Europe, the United States, Japan and other wealthy countries of essentially robbing their farmers of a fair income.

The Bush administration has agreed to eliminate export subsidies and curtail other farm supports, but only in step with other wealthy nations and in return for easier access to markets in countries such as Brazil.

“We are a leader in pursuing global agriculture reform, including for cotton. We continue to believe that negotiation, not litigation, is the most effective way to address distortion in agricultural trade,” Mr. Mills said.

It is not clear what impact the case will have on ongoing negotiations at the 148-nation WTO. The talks faltered in 2003 because of disagreements on agriculture, but have since gained momentum.

Mr. Anderson said Brazil and other developing nations would gain stronger negotiating positions because of the case.

Mr. Mills noted that Brazil and other countries are not free from policies that distort markets.

“Those who live in glass houses should not throw stones,” Mr. Mills said.

While U.S. farm programs have been targeted by other nations, they also are receiving closer scrutiny at home. President Bush in his 2006 budget proposed trimming payments to farmers as a way to control the deficit.

U.S. subsidies for all commodities are estimated at $24 billion for 2005.

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