The United States this week has lost a battle in its dispute over cotton subsidies with Brazil at the World Trade Organization (WTO), said international organization Oxfam. The WTO confirmed the injury caused by these subsidies and authorized Brazil to retaliate against the US. “American farm policy is broken and bloated, and now other sectors of the US economy may suffer as Brazil retaliates,” said Gawain Kripke, policy director for Oxfam America. Total direct support to cotton production hovered over $3bn in the 2008-2009 growing season, or an equivalent of 50 cents per pound of actual production, according to the International Cotton Advisory Committee.
“The global trading system depends on countries obeying rules and submitting to orderly dispute resolution,” said Kripke. “Thus far, the US has ignored the ruling of the WTO adjudication and continues large subsidies for cotton production. If the US continues this way, the integrity of the multilateral trade system is at stake.” An Oxfam study found that with a complete removal of US cotton subsidies, the world price of cotton would increase by 6-14%, resulting in additional income that could feed an additional million children for a year or pay school fees for at least two million children living in extremely poor West African cotton growing households.
The longstanding dispute started in 2002. In 2005, the WTO ruled that US cotton subsidies harmed Brazilian cotton farmers and violated WTO rules, but the US did little to abide by the ruling and reduce its trade distorting subsidies. In September 2006, Brazil asked for a WTO “compliance panel” to determine whether the US has done enough to comply with the ruling and the WTO confirmed that the US has failed to reform its agricultural subsidies enough to comply. The recent ruling confirms that Brazil is entitled to start retaliation procedures, and possibly cross-retaliate by lifting intellectual property protections.