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W.T.O. Rules Against
U.S. on Cotton Subsidies
By Elizabeth Becker
WASHINGTON: Brazil won a preliminary ruling at the World Trade
Organization on Monday night that could force the United
States to lower the subsidies it pays farmers to grow cotton
and, eventually, most subsidized crops.
 The
decision supports Brazil's contention that the subsidies paid
to American cotton farmers violate international trade rules.
A final ruling against the United States could lead to stiff
penalties if it fails to change its practices. In another
recent case involving steel, President Bush chose to remove
subsidies and therefore did not have to face the penalties.
The ruling also puts the Bush administration in a tight bind
in an election year, when Republicans are counting on support
from the Farm Belt. The largest American farmers have grown
dependent on the $19 billion they receive in annual subsidies.
If the final decision in June goes against the United States,
the administration is expected to appeal, if for no other
reason than to delay action until after the election. Nearly
all preliminary opinions are eventually upheld by the W.T.O.
As the first successful challenge of a wealthy nation's
domestic agricultural subsidies, the Brazilian case could also
force the United States, the countries of Europe and other
well-to-do nations to act this summer and offer new
compromises at global trade talks that have been blocked over
this agriculture issue for more than a year.
The $300 billion in annual farm subsidies and supports paid by
the world's wealthiest nations have been the bane of Third
World farmers. The United Nations, the World Bank and
charities like Oxfam have said their elimination or reduction
would provide the single biggest possible benefit for the
economies of poor countries with many subsistence farmers.
Brazilian officials said they brought the case against the
United States out of frustration, saying that all attempts by
poorer nations to negotiate a reduction of the subsidies had
failed.
 The
ruling Monday night was not publicly disclosed, and the United
States and Brazil have agreed not to discuss the findings in
detail until the final decision is made in June. At a news
conference in Brasília, however, top government officials said
they were pleased and gratified with the ruling.
"This is a precedent; this is a war that must continue," said
Roberto Azevedo, the top legal adviser to Brazil's Foreign
Ministry.
The Brazilians accused the United States of breaking trade
rules that limit to $1.6 billion the amount of subsidies it
can pay American cotton growers every year. The United States
defended the additional financing as domestic subsidies that
do no harm to global markets.
But using data from the United States Department of
Agriculture, Brazil argued that the programs led to increased
American cotton production that destroyed Brazil's export
markets and undermined the livelihoods of its farmers.
Without the subsidies, Brazil estimated that United States
cotton production would have fallen 29 percent and that
American cotton exports would have dropped 41 percent. That
would have led to a rise in international cotton prices of
12.6 percent, which would have helped Brazil's cotton farmers.
Brazil also said that the United States was providing illegal
export subsidies to American agribusinesses and manufacturers,
who were given $1.7 billion to buy American cotton.
 Ken
Cook, the president of the Environmental Working Group, a
nonprofit organization that posted a database of subsidies on
its Web site that was used by Brazil, said that the ruling was
putting into question how the government would pay subsidies
in the future.
"This could mean problems for all domestic subsidy programs,
for corn, wheat, rice, everything that receives big direct
payments from the United States Treasury," he said.
A United States trade official said Monday night that the
administration would appeal the decision if the final report
remained unchanged.
"United States farm programs were designed to be and are fully
consistent with our W.T.O. obligations," said the official,
who spoke on condition of anonymity because of the
confidential nature of the ruling. "We have serious concerns
with aspects of the panel report."
American farmers have benefited handsomely from the expansion
in world trade, and their exports have exploded over the last
years. One out of every three acres in the United States are
now planted for exports.
The cotton subsidies have helped make the United States the
world's top cotton exporter, with more than 40 percent of the
world market.
Poor nations have long contended that this expansion is based
unfairly on subsidies that fuel overproduction and drive down
world prices. Those prices do not harm the big farmers in the
United States because they are subsidized by American
taxpayers.
 The
United States argued in its submission that its subsidies were
not linked directly to the production of cotton and,
therefore, did not distort trade. But the Monday night ruling
threw that argument into doubt, thereby calling into question
the basis of much of the domestic agricultural subsidy system.
In its complaint, Brazil also accused the United States of
additional unfair subsidies — including the federal farm
program that pays American agribusinesses and manufacturers
$1.7 billion to buy the American cotton that is already
subsidized.
Brazil was joined in the W.T.O. case as third parties by
Argentina, Australia, Benin, Canada, Chad, China, the European
Community, India, New Zealand, Pakistan, Paraguay, Taiwan and
Venezuela.
The existing subsidies for American cotton farmers — $10
billion over seven years — were partly responsible for the
breakdown in global trade talks in Cancún, Mexico, in
September.
West African countries, some of the poorest in the world, made
cotton a test case of the W.T.O.'s commitment to remove
barriers to poor nations' ability to trade their agricultural
products. But the United States offered, instead, to study the
cotton issue and consider reducing subsidies as well as
removing nontariff and other trading barriers on cotton,
synthetic fibers, textiles and clothing.
With the United States and Europe vowing to revive those
stalled trade talks over the summer, the question of
agricultural subsidies and supports, especially now for
cotton, will be back on the agenda. A compromise reached in
trade talks could be less painful than penalties from the
cotton case.
NY Times
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Pakissan.com;
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