Minnesota farmers and agribusinesses already facing potential cuts in the multibillion U.S. farm program have a fresh reason to worry: A World Trade Organization ruling that the nation's cotton subsidies are illegal could be used to challenge subsidies for other crops.
The world trade panel sided last week with Brazil in its challenge over payments to U.S. cotton growers and companies. Brazil contends that U.S. cotton subsidies violate world trade rules by driving down world prices, distorting trade and hurting Brazilian farmers.
"This case has broad ramifications for our other commodity programs that operate similarly -- primarily corn, soybeans, wheat and rice," said Ben Lilliston of the Minneapolis-based Institute for Agriculture and Trade Policy. "All these programs could face similar WTO challenges in future years, depending on their spending levels."
At stake are direct payments to U.S. farms under the 1996 and 2002 farm bills, as well as emergency assistance given to farmers, such as for crop losses due to catastrophic weather.
U.S. farmers received a total of $12.15 billion in subsidies from the U.S. Department of Agriculture in 2002 for a variety of crops ranging from corn to cotton to soybeans. Minnesota ranks fifth among the states for subsidies, with local farmers getting $467.5 million in 2002.
Details of the interim decision on April 26 were not released except to the parties involved, but Brazilian trade leaders quickly lauded the ruling in the press. President Bush said he will appeal if the decision stands, as many expect, after a final ruling this summer.
The interim ruling is already causing consternation among agricultural companies.
"We think that this is a significant decision that may have repercussions in a lot of different areas with respect to domestic farm policy as well as the ongoing WTO negotiations," said Bryan Edwardson, director of public policy for Cargill Inc., said from Washington, D.C.
Cargill Inc., the Minnetonka-based agribusiness that operates in 67 countries, is a large cotton trader. It ranked fourth highest among U.S. agribusinesses receiving cotton subsidies from 1995 through 2002. Cargill received about $87 million during that period, according to EWG.org, a nonprofit watchdog that runs a farm-subsidy database. In the future, Cargill's other commodity operations could be affected if the decision sticks.
"Anytime anything like this develops, it creates another level of uncertainty and concern," said Allen Anderson, vice president of governmental affairs for CHS Inc. Based in Inver Grove Heights, CHS is a farmer-owned cooperative that trades grain worldwide.
"We as a commercial handler of grain are anxious to make sure there's some level of certainty to our trade policy and farm policy," Anderson said.
Those in the industry say the ruling might encourage other countries to challenge subsidies for other commodities.
"I suspect there are going to be some countries that have decided, 'Oh, goody, somebody has tackled America and has won. Now let's us try some other commodity,' " said Al Christopherson, president of Minnesota Farm Bureau.
He and American Farm Bureau President Bob Stallman have been meeting this week in Geneva, Switzerland, with trade leaders from India, Japan, Brazil and other nations to discuss agriculture, the most contentious issue for WTO before talks resume this summer.
Still, Christopherson played down last week's WTO interim ruling, saying much could change behind the scenes before the final ruling or before any changes could take effect.
More broadly, some industry observers said the Brazil case highlights how our farm programs have failed farmers in the United States and worldwide.
"Ultimately, the problem with our programs are not subsidies -- it is about extremely low prices paid to farmers for what they produce," said Lilliston of the Institute for Agriculture and Trade Policy.
"Our programs are designed to encourage farmers to over-produce, which drives prices down. The subsidies then kick in as a result of low prices. We need to make changes that lift market prices for farmers here in the U.S. so that subsidies aren't necessary, which will have a ripple effect around the world."
Most of the U.S. subsidy cash is doled out to large companies and farmers, with 71 percent of the subsidies paid to the top 10 percent of U.S. farm operations, according to the USDA. About 60 percent of farmers do not receive subsidies.Star Tribune:
