Iowa Public Television


WTO Rules Some Subsidies Illegal

posted on September 10, 2004

U.S. trade problems aren't limited to the Pacific Rim. Repeated battles with Europe, South America, Canada and Mexico are in the news every week.

One recurring theme is Brazilian complaints over U.S. cotton subsidies. Brazil alleges America has kept its place as the planet's second-largest cotton producer and largest cotton exporter because the U.S. government paid billions of dollars in subsidies to its farmers between 1999 and 2003.

After spanking the U.S. last week for what it labeled illegal anti-dumping laws, the World Trade Organization this week issued a final ruling on the Brazilian cotton claim that again had U.S. farm interests fuming.

WTO Rules Some Subsidies Illegal Unlike last week's decision by the World Trade Organization, this week's decision might be best described as "you win some and you lose some." Brazil, a world leader in cotton production and export, accused the U.S. of handing out trade distorting subsidies. It was further alleged that financial support, like counter-cyclical payments, were hurting the bottom line of Brazilian farmers. It was those payments that supposedly were encouraging U.S. farmers to produce more cotton at a cheaper price. The cheap cotton could then be dumped on the world market, allowing the U.S. to preserve its market share.

In its decision, the WTO ruled that farm support payments, as outlined in the 2002 Farm Law, were not harming Brazilian cotton farmers. Even so, export credit guarantees were found to violate global trade rules and should be stopped immediately.

United States Trade Representative Robert Zoellick, was pleased with most of the outcome but vowed to appeal the parts of the decision where the U.S. was found at fault. Officials with the USTR reiterated their commitment to reducing trade distorting subsidies through negotiation with WTO members. They also were quick to point out the ruling would not impact U.S. farm programs in the near future.

The National Cotton Council issued a statement condemning the decision as a misinterpretation of previous WTO agreements.

Brazilian agricultural officials were pleased with the split decision. They considered the finding as further evidence that U.S. farm subsidies violate global trade rules.

Tags: agriculture news trade