Farm Journal South

December 11, 2009 03:59 PM

WTO Rules Against U.S. Cotton

Brazil wins. Well, sort of. In a ruling issued in late August, the World Trade Organization (WTO) determined that Brazil can retaliate against the U.S. as a result of a cotton subsidy dispute ongoing since 2002.

Brazil can now impose $147 million in annual sanctions against U.S. goods. Brazilians originally asked for as much as $4 billion in compensation, so the ruling is a hand-slap compared with what it could have been.

U.S. cotton industry leaders are still irritated by it, however. Jay Hardwick, National Cotton Council (NCC) chairman, points out that the WTO decision is based on the 2005 growing season, when U.S. cotton production was high. Since then, the 2008 farm bill decreased cotton subsidies and U.S. production dropped 45%. At the same time, Brazil, China and India increased cotton production 20%, Hardwick notes.

"This makes it difficult for U.S. cotton. If I produced some product that is exported to Brazil and found the Brazilians putting a tariff on it because of cotton, I wouldn't be happy about it,” says Mark Lange, NCC president.

Brazil, the world's fifth largest cotton producer, imports little U.S. cotton. That means retaliatory tariffs would have to come on other U.S.-made products.

"Our industry believes once the reduction in supports in the 2008 farm bill are taken into consideration, no further changes are needed in the U.S. cotton program. In addition, our reduced production means our ability to influence world markets is significantly down,” Lange says.

A positive note. Lange applauds efforts in the case by the Office of the U.S. Trade Representative (USTR). In a statement issued after the ruling, Carol Guthrie, USTR spokeswoman, said, "While we are disappointed with the outcome, we are pleased that the arbitrators awarded Brazil far below the amount of countermeasures it asked for.”

USTR is also pleased that the Brazil-ians cannot take action on U.S. intellectual property or services and that the WTO denied Brazil's request for an additional one-time $350 million in countermeasures connected with the now-repealed U.S. cotton industry's Step 2 payments program.

Lange and other U.S. cotton industry leaders would like the WTO to take a hard look at increasing subsidization by India and China.

"India announced this past spring an export subsidy program that is inconsistent with WTO commitments. India also purchased more than 12 million bales of cotton, now held in stock. That continues to depress world cotton prices,” Lange says.

China and India have substantial subsidies for polyester production, which hurts market opportunities for cotton, he adds.

"Their polyester subsidy exceeds half of world polyester production.

We have been in discussion with the U.S. government regarding India and China's cotton and polyester policies. At this point the U.S. government has announced nothing, but we believe there is concern with what is going on in India and China,” Lange says.


Fast Facts

The world's top cotton producers:

1. China: 33 million bales

2. India: 25 million bales

3. U.S.: 13.25 million bales

4. Pakistan: 9.2 million bales

5. Brazil: 5.5 million bales

2010 Beltwide Cotton Conferences

Coordinated by the National Cotton Council and its cooperating partners, the Beltwide Cotton Conferences focus on the latest research developments and their practical applications in cotton production and processing. The 2010 conferences, which include reports, panel discussions, hands-on workshops and seminars, are Jan. 4–7 at the New Orleans Marriott Hotel and Sheraton New Orleans Hotel in New Orleans, La. Go to for more information.

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