The Age (Melbourne) | By Josh Gordon | April 28, 2004
Canberra -- Australia and developing nations stand to gain lucrative access to the heavily protected world market for cotton after the United States appeared to lose a key trade battle on cotton subsidies.
Brazil claimed that the World Trade Organisation had ruled in favour of its complaint that US cotton subsidies distorted world prices, violated global trade rules and priced developing nations out of the market.
The decision would be a significant win for Australia, the world's third-largest cotton producer. About 90 per cent of Australia's crop is exported, but little penetrates the heavily protected US market.
A spokesman for Trade Minister Mark Vaile said yesterday that it was too early to comment on the specific case because the WTO's decision was not officially due until the middle of the year and Australia had not seen the interim report.
"We do believe that the international market for cotton is one of the world's most distorted," the spokesman said. "We strongly urge the elimination of all cotton subsidies."
Australia, through the Cairns Group of farm trade reformers, has been pushing the European Union and the US for improved access for agricultural produce, including the scrapping of export subsidies and domestic support schemes.
The free trade agreement with the United States, if it passes through Parliament and the Congress, will see US cotton quotas phased out over a 17-year period. However, a WTO decision would represent a test case for global trade reform and would provide new access to US and other markets.
Brazil's top WTO negotiator, Clodoaldo Hugueney, said the WTO had agreed with a substantial part of Brazil's arguments.
"This panel is going to show how important it is that you really change this policy of developed nations," Mr Hugueney said.
Brazil's decision to take the issue to the WTO in February 2003 was the first challenge to the domestic farm policy of a rich country.
The WTO interim ruling could lead to an avalanche of challenges against US, European and Japanese farm subsidies. It could weaken their defence of farm payments in the present Doha round of global free trade talks meant to wrap up this year.
The US gave out nearly $4 billion in cotton payments in the 2001-2002 season for a crop valued at only $3 billion.
The ability of US farmers to sell cotton below cost price meant Brazilian farmers lost $600 million in sales during the 2001 marketing season alone, Brasilia argued.
US trade officials said their subsidies were consistent with WTO rules and they would appeal against the decision if the final report was not changed.
Brazil accuses the US of breaking trade rules by paying out more subsidies to cotton farmers than allowed and giving export subsidies to manufacturing industry.
A statement from the office of the US Trade Representative said: "We have serious concerns with aspects of the panel's report."
The exact details of the WTO decision were not released by Brazil or the US because of a confidentiality clause. The two countries have until May 10 to respond to the decision before the final version is made public on June 18. The WTO then has up to three months to review any appeals. -- with Reuters:
