A World Trade Organization decision that U.S. cotton subsidies have hurt producers in other countries and violate WTO rules has made lawmakers from major farm states including Sen. Kent Conrad, D-N.D., and farm lobbyists worried that it could require changes in the 2002 farm bill and in subsidies on other crops such as corn and wheat.
"This has the potential to have extraordinary consequences up and down every main street in rural America," Conrad told the New York Times on April 27, the day news of the preliminary decision leaked out.
The decision still is preliminary and confidential to the officials of the countries involved, but a WTO dispute resolution panel apparently has agreed largely with the contention of Brazil and other that U.S. cotton subsidies from 1999 to 2002 led to overproduction, lowered world prices and gave U.S. producers a larger market share than they would have enjoyed if free market conditions had prevailed. A Brazilian official has said his country is "satisfied" with the decision and U.S. Trade Representative Bob Zoellick has said he has "serious concerns" about it and expects to appeal it.
Feeling the impact
The details of the criticism of the U.S. cotton program - or its implications for other crops - are not known because the WTO procedure is to issue a preliminary decision and allow the countries involved to comment beforre issuing a final decision, which, in this case, is scheduled to be released June 18. Because the cotton subsidies were continued in the 2002 farm bill, the ruling could affect the current farm bill. If the farm bill was rewritten and cotton subsidies reduced, it could be difficult to get southern members of Congress to support it. Passage of the farm bill has depended on regional agreements.
Brazil's apparent success in bringing the case raises the possibility that other countries might file WTO cases against the United States, the European Union and Japan on other farm subsidies.
Bush administration officials and members of Congress have said it would take at least until next year for the decision to have an impact on U.S. farm programs and also are trying to discourage other countries from filing more challenges to the U.S. farm program. At an April 28 House Agriculture Committee hearing, Zoellick said that after an appeal a period of compliance would come into effect and the changes required might be "modest." Zoellick did not mention the possibility the United States could win on appeal, apparently an indication he thinks the case is lost.
"It would be a very big mistake to try to solve these issues through litigation," Zoellick said and instead encouraged other countries to participate fully in the current Doha Round of trade negotiations. "Everyone needs to come to the table," he said, adding, "If other countries decide to litigate instead of negotiate, it is going to be a very unproductive result." He also said litigation would produce "a circle, a cul de sac. It won't get us where liberalizers want to go."
Zoellick also stressed several times that if the United States is going to make concessions in the Doha Round, other countries are going to have to reduce subsidies and open their markets to U.S. agricultural products.
Appeal or not?
Members of the House Agriculture Committee, including Rep. Earl Pomeroy, D-N.D., said they supported the appeal, but they also said the decision would make it harder to pass free trade agreements in the House. If the United States loses the cotton case in the WTO, the Bush administration should not bother to bring a Free Trade Area of the Americas agreement to the House, Rep. Bob Etheridge, D-N.C. told Zoellick and Agriculture Secretary Ann Veneman during the hearing. If the final ruling were in Brazil's favor, "it would be a waste of time to bring the FTAA before this body," Etheridge said.
House Agriculture Committee ranking member Charles Stenholm, D-Texas, said the cotton case means "we have a new dimension in our trade negotiations. It's called litigation." Stenholm said that trade policy has been bipartisan, but that the cotton decision "is going to cause this member to sit back for a moment until we can figure out what this really means." House Agriculture Committee Chairman Bob Goodlatte, R-Va., said he considers the cotton decision to be "the beginning, not the end of the process," and that while it would "not be the end of farm programs, it could be the end of the ability to negotiate at the table."
But Senate Finance Committee Chairman Charles Grassley, R-Iowa, a longtime critic of big farm payments did not praise Zoellick for planning to appeal the case. "This raises a lot of important issues about the U.S. cotton program which deserve review," Grassley said. "We need to keep the big picture in mind, and that is to create a more level playing field in the international market for U.S. farmers through the successful conclusion of WTO agricultural talks."
National Cotton Council Chairman Woody Anderson said, "If the published reports are accurate, the interim decision is unfortunate and, we believe, incorrect. This dispute highlights the difficulty associated with any nation designing farm policy to serve domestic goals while meeting international trade commitments." Anderson added that "the NCC believes that the current farm program provides an important safety net for the farm economy while complying with our commitments under the WTO."
Neither the American Farm Bureau Federation nor other mainstream commodity groups had issued a statement at press time. The ruling also put some leftist organizations in a difficult position since they have often agreed with criticism of the cotton program because the payments to cotton growers are some of the largest. Public Citizen, a frequent WTO critic, did not issue a statement. A spokesman said Lori Wallach, the Public Citizen trade director, was in Bangkok and could not be reached.
The National Farmers Union favors limitations on farm program payments, but NFU President Dave Frederickson said he was "disappointed" in the WTO decision, but added, "I am not surprised by WTO's stance since the rules of international trade basically have eroded our country's sovereignty in determining domestic farm policy."
Frederickson said, "It only takes into account some economic factors of agriculture policy and does not recognize the benefits of domestic farm programs such as national food security, food safety, economic security for domestic producers or environmental protection. The process also fails to recognize all of the factors that distort international trade such as currency, labor standards and environmental regulations." Noting that only 10 percent of all agriculture production in the world is traded internationally, Frederickson said the WTO allows this small amount of production to dictate the laws governing the production of the 90 percent of farm products not involved in international trade.
American Corn Growers Association President Keith Dittrich said the decision "reiterates that it is time to rethink U.S. agriculture policy. We need to change course to secure farmer livelihoods worldwide. We need to move away from subsidies and toward a policy that supports a fair price for farmers."
But Dittrich also said a recent report by Daryll Ray, a professor at the University of Tennessee, showed that "the simple elimination of U.S. subsidies will not help." Ray has proposed acreage diversion through short-term conservation uses and longer-term acreage reserves, a farmer-owned food security reserve, price supports as a replacement for direct government subsidies and renewable energy crops as an alternative to short and long-term acreage diversion options.
The Minneapolis-based Institute for Agriculture and Trade Policy, which is concerned with farm policy in other countries, particularly developing countries, as the United States, praised the WTO decision, saying it "points to the disastrous results of U.S. farm policy, which is designed to drive down commodity prices and then make up the difference in subsidies."
ITAP favors inventory management programs for agricultural products, enforcing international law on dumping of products and addressing the problems associated with the oligopoly power of larger multinational agricultural corporations in WTO rules.
The proposals made by Ray and the American Corn Growers and ITAP would require action by Congress, the governments of many other countries and the WTO itself. They also would be subject to challenges under the WTO system and there is no indication whether they would be any more compatible with the WTO rules than the current U.S. cotton program.Grand Forks Herald:
