Brazil's apparent success in persuading members of a WTO panel that the U.S. cotton program injured its producers could be a long time bearing fruit and could actually work against world trade reforms, U.S. officials warned.

Testifying before the House Agriculture Committee, Ambassador Robert Zoellick said his Office of the U.S. Trade Representative almost certainly will appeal the ruling, a process that “could last months or possibly a year or years.”

Zoellick also said the ruling, details of which have been leaking out since it was transmitted to the Brazilian and U.S. governments April 26, could undermine ongoing efforts to reform world agricultural trade in the Doha Round negotiations within the World Trade Organization.

“There is no immediate impact for farmers and ranchers around the country,” said Zoellick in an apparent reference to newspaper headlines that have said the WTO ruling would mean the end of U.S. farm programs. “This is a marathon, not a sprint.”

While U.S. and Brazilian officials have agreed not to disclose details of the ruling, sources have said the three judges — one from Australia, one from Chile and one from Poland — on the WTO dispute panel found largely in Brazil's favor.

Brazil, which filed the complaint in September 2002, has said that the U.S. cotton program, and in particular, Step 2 of the farm law's Three-Step Competitiveness program encouraged U.S. farmers to increase their production, resulting in lower cotton prices worldwide.

But farm-state lawmakers have criticized Brazil's claim that excess U.S. production pressured world cotton prices.

Force market loan

“Brazil claims that our policies caused low prices, but the fact of the matter is that low world prices from 1999-2001 caused supports such as marketing loan gains to kick in,” said Rep. Randy Neugebauer, R-Texas, said in a statement.

“Our commodity programs are fully consistent with commitments made in the last WTO agreement, and an analysis done by cotton economists at Texas Tech University in Lubbock shows that world prices would not significantly increase with elimination of our cotton programs.”

House Agriculture Committee Chairman Bob Goodlatte of Virginia and ranking member Charlie Stenholm of Texas noted that many countries regularly deny access for U.S. agricultural products for many reasons, including non-scientific barriers for U.S. beef, grains, fruits and vegetables.

“We have said repeatedly that gaining access for U.S. agricultural products is the most important objective of the ongoing WTO negotiations,” they said. “Changes to countries' agricultural policies should come through the give and take of negotiations, not through decisions that do not appear based on WTO rules.”

Zoellick said he believes the WTO ruling, if not corrected, sets a bad precedent for the future of the WTO's agricultural trade negotiations.

“If other countries decide to stand back and litigate their way, as opposed to negotiating a new agreement, I think it will be a very complicated and nonproductive approach for everyone.”

National Cotton Council leaders, who have accompanied U.S. Trade Representative attorneys to the WTO hearings on the Brazilian complaint, said they believe the ruling will be overturned on appeal.

“If the published reports are accurate, the interim decision is unfortunate and, we believe, incorrect,” NCC Chairman Woody Anderson said. “This dispute highlights the difficulty associated with any nation designing farm policy to serve domestic goals while meeting international trade commitments.”

NCC commitment

Anderson said the National Cotton Council will continue to work with the Office of the U.S. Trade Representative to ensure the final WTO decision is in keeping with the intent of the Uruguay Round Agricultural Agreements. “The Brazil cotton case is very complex - with many decision points throughout. It is unwise to speculate about the WTO panel's ultimate conclusions using incomplete press reports.”

Anderson said the NCC understands that the United States has not commented directly on the confidential Interim Report. He 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.

“The council is very appreciative and encouraged by the vigilant defense of the farm bill in separate statements by Senate Ag Committee Chairman Cochran, House Ag Committee Chairman Bob Goodlatte of Virginia and ranking member Charlie Stenholm of Texas, and the Bush administration,” the Texas cotton producer said.

“We are in consultation with the U.S. government concerning the report. It is very unlikely there will be any immediate impact on current U.S. programs. Any changes to the cotton program that are warranted, given the panel decision, will only affect future crops of U.S. cotton.”

Anderson said that the Brazil challenge covered a wide array of U.S. programs over a significant number of years and Brazil had a good chance, given the broad scope of its challenge, for the panel to side with them on a few points.

“We hope that, when given a chance to review the entire determination, we will have a better idea of how the panel ruled on a number of technical items,” he said. “We can fully evaluate the impact of this decision on the U.S. cotton program only after we completely understand the panel's rationale.”

e-mail: flaws@primediabusiness.com