Source: http://worldcityweb.com/home/MIA/publications/magazine/21/677/

Cotton is new pawn in global trade talks

by Jeffrey Sparshott

‘Brazil’s victory proves that the WTO isn’t a plaything of subsidized U.S. Agriculture,’ says one trade group.

But the ruling is significant, because it sets an important precedent at the WTO, it gives a clear legal and moral victory to developing nations, and it likely will affect ongoing negotiations to create new rules governing global trade.

"Brazil’s victory proves that the WTO isn’t a plaything of subsidized U.S. agriculture,” said Ken Cook, president of the Environmental Working Group, a Washington-based policy shop and vocal critic of farm payments.

The verdict by the WTO’s highest court which cannot be further appealed found that taxpayer money funneled to American cotton farmers distorts markets by stimulating overproduction, effectively lowering world prices and robbing Brazilian farmers of a fair income.

It’s the first time the WTO has ruled on domestic subsidies, but not the last. Brazil also has a case pending against European sugar subsidies and may be eyeing a case against American soybean subsidies. The March case directly affects U.S. rice farmers and may be applied to others.

Poor nations have long railed against rich-country farm programs. The matter came to a head in 2003 when four African nations Benin, Burkina Faso, Chad and Mali demanded special negotiations to address distorted world cotton markets, and prevailed. But the gesture was not enough. Sharp disagreement on agriculture protection and support contributed more than any other factor to a spectacular breakdown in negotiations during that year’s summit of trade ministers in Cancun, Mexico.

U.S. leadership last year helped overcome lingering bitterness since the collapse. But U.S. leadership did not stop Brazil’s WTO case, which was closely followed throughout the developing world. Countries from Asia, Africa and the Americas celebrated the ruling.

"It confirms that these subsidies are not fair and must be phased out in a very, very short time," Benin’s ambassador to the WTO, Samuel Amehou, told Reuters. "We are going to push now that the U.S. has to really move forward in the discussion of phasing out subsidies which are distorting the international market."

It is not clear, though, that the United States will be pushed very far, if at all. The payments are worth a lot to the very strong American farm lobby, and are a prized program in Congress. Total cotton subsidies 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. To get a little technical, the WTO especially condemned socalled Step 2 payments, which were worth $2.16 billion between 1995 and 2003, according to the Environmental Working Group calculations.