Cotton ruling goes beyond the South

Brazil added a new product, American hide, to its list of global ag exports April 26 when the World Trade Organization leaked word it likely would grant Brazil’s request to declare some American cotton subsidies illegal in mid-June.

Wow. Brazil stuck its thumb in the WTO pie and pulled out an American plum, making it the national dish of any country that challenges American producer payments at the WTO.

U.S. in shock. U.S. cotton producers were livid; Congress was in shock. U.S. Trade Representative Robert Zoellick dove deeper into his Doha bunker, his residence since the Cancun crack-up, mumbling “more negotiations, more negotiations.”

More negotiations? Brazil just kicked major U.S. farm trade butt; it didn’t just catch us with our hand in the cookie jar; it smashed our cookie jar. The victory means fewer negotiations, if any.

Global impact. Moreover, if the WTO ruling remains standing after a year of anticipated wrangling and appeals, the carefully constructed farm subsidy policies of America, the European Union, Japan and other developed nations are in line to also be smashed by the WTO.

(The ruling against U.S. cotton could be substantially confirmed before the appeals process runs its course. Brazil has a parallel subsidy challenge, this one against EU sugar handouts, pending at the WTO now.)

Implications. If upheld, the WTO’s action packs two enormous consequences.

First, rich nations can’t put perfume on a pig and declare it clean. Attaching new or fancy names – like Freedom to Farm and decoupling – to domestic farm support policies doesn’t ensure they are WTO-legal.

In farm-speak that means if Grandpa had the guts and good sense to buy Alabama cotton land or Illinois corn ground 70 years ago, his foresight may not be enough of a reason for you to receive government assistance today.

More challenges. And, unless you can definitively prove that your farm program payments – pick one or any from the long, long list – do not distort global production, prices or trade yesterday, today or tomorrow, it’s likely the payments will be challenged at the WTO by anyone with the cash and will to file a claim.

Brazil had – and has – both.

At the WTO, it griped that 1999 and 2001 program payments to U.S. cotton producers easily exceeded the $1.6 billion subsidy cap the United States had agreed to in 1995 when the WTO was born during the Uruguay Round of trade talks.

In its reply, the United States didn’t dispute the bigger numbers, $2.3 billion in 1999 and $2.06 billion in 2001. It did note, however, the payments were “decoupled;” they weren’t linked to U.S. production.

Call ’em what you want, countered Brazil (using American experts as their chief witnesses, adding insult to injury), but they caused our farmers $600 million in lost cotton sales around the world during the 2001-02 marketing year.

Selling out farmers. The second consequence of the interim WTO ruling is that it demolishes America’s negotiating strategy in the troublesome trade talks: We’ll put American agriculture on the table in return for other nations, especially developing nations, granting us market access anywhere anytime.

In short, we’ll sell out American farmers (remember the proposed Australia and Central American free trade deals?) if American corporations, through the WTO, can make your nation a partially- or wholly-owned subsidiary.

Should the WTO maintain its April 26 cotton ruling, however, that we’ll-give-you-farmers, you-give-us-access plan collapses.

“(The U.S was) counting on trading these farm subsidies for other concessions from developing nations, but it turns out they aren’t worth anything,” a Washington D.C. trade lawyer told BusinessWeek last week.

Where is USDA? The WTO decision blindsided USDA and its agbiz buddies.

When Secretary of Agriculture Ann Veneman agreed with a House Ag Committee member at an April 28 hearing that Brazil’s status as a “developed nation” should be challenged, trade rep Zoellick, alongside, publicly scolded her.

“Our approach has been not to get lost in endless debates of that,” he noted sharply.

Right. And “our approach” has yielded … what?

Internationally, mostly scorn and WTO losses.

Domestically, Congress now has a new reason to re-open the 2002 farm bill.

With a scalpel.

(The author is a freelance ag journalist who lives in Delavan, Ill. He can be reached via e-mail at: AGuebert@worldnet.att.net.)

© 2004 ag comm