U.S. cotton farmers got a reprieve when the United States blocked the formation of a WTO panel to review U.S. compliance with an earlier panel's ruling on the U.S. cotton program.
The respite is likely to be short-lived, however, because Brazil is expected to again request the panel when the World Trade Organization's dispute settlement body has its next meeting in Geneva Sept. 28.
Few doubt the WTO would balk at another public “spanking” for U.S. cotton farmers who have become the poster boys — and girls — for a campaign that appears to be aimed at trying to “level the playing field” for cotton farmers in least developed, third world countries by destroying the U.S. cotton program.
The Government of Brazil has been threatening to request a compliance panel almost since the moment USDA made the first changes to the U.S. export credit guarantee program required by the initial ruling in July 2005.
“With respect to some of the recommendations and rulings, the United States has adopted no implementation measures at all,” the Brazilian government said in its request for a compliance panel Sept. 1. “The implementation measures it has adopted fall far short of compliance.”
Brazilian officials said they believe the United States has not sufficiently changed the export credit guarantee program that the WTO panel ruled contained illegal export subsidies. They also faulted the United States for not moving to eliminate cotton's Step 2 program until the end of the 2005-06 marketing year July 31.
The WTO dispute panel had set a deadline of September 2005 for discontinuing the Step 2 payments to merchants and mills. But the National Cotton Council argued the payments should not be discontinued in the middle of the cotton-marketing year, and Congress agreed.
Brazil also claimed that the United States has failed to address the finding that the U.S. cotton program had caused “serious prejudice” against Brazilian farmers since Congress has made no changes to the U.S. marketing loan or counter-cyclical payment programs.
“Given the significant — and, frankly, difficult — steps that the United States has taken to implement the recommendations and rulings, it is particularly disappointing that Brazil alleges in its panel request the ‘nonexistence of measures taken to comply,” the United States said in its response to Brazil's request.
“The facts also fail to support Brazil's claims,” it said. “Accordingly, the United States considers that Brazil's request for a compliance panel is unnecessary and without basis.”
Brazil made at its request at the regular monthly meeting of the WTO's trade dispute settlement body Sept. 1. The United States could block the first request for a compliance panel but cannot prevent its establishment if Brazil asks for it again, which it is expected to do on Sept. 28.
Gretchen Hamel, spokeswoman for U.S. Trade Representative Susan Schwab, said the United States has made several attempts to resolve the issues Brazil raised, “but Brazil did not accept our offers.”
If a compliance panel rules in Brazil's favor, the latter could ask for permission from the WTO to impose retaliatory duties on U.S. exports. Most of those would fall on the U.S. manufacturing and services sectors since Brazil imports few farm products from the United States.
When it first began threatening retaliation in July 2005, Brazil said reserved the right to impose trade sanctions of $3 billion against the United States. Later, it said it would seek only $1 billion.
On the day the United States blocked the initial Brazilian request on Sept. 1, Oxfam America, the U.S. arm of the British-based Oxfam International charity organization, issued a statement accusing the United States of failing to make sufficient reforms to its cotton program.
The group said the United States is still paying billions of dollars in trade-distorting subsidies to its cotton farmers, despite losing the WTO case brought by Brazil in 2005.
“Trade distorting subsidies are not just unfair, they are illegal,” said Gawain Kripke, senior policy advisor for Oxfam's Make Trade Fair campaign. “With the farm bill expiring next year, Congress has the opportunity to ensure that supporting U.S. farmers does not undermine the livelihood of millions of poor farmers in Africa and other developing countries.
“It should be little surprise that a new global trade agreement — the Doha Round — has stalled considering that the United States has failed to abide by the rules of the last agreement,” he said. “Brazil is certainly within its rights to pursue sanctions, especially since the U.S. refused to negotiate serious reforms to U.S. cotton subsidies.”
The Oxfam spokesman conceded the United States has made changes to the export credit guarantee programs and has eliminated Step 2. “But these programs represent only 10 percent of the U.S. cotton, and some of the most trade distorting programs were left untouched.”
In 2005, he said, U.S. cotton subsidies totaled almost $5 billion for a crop that was worth $4 billion. (Assuming last year's 23-million bale crop sold for only 50 cents a pound for the lint, Kripke's $4 billion figure is off by $1.52 billion. That's not considering the value of a crop that is estimated to turn over seven times before it reaches the end product stage.)
In the last four years, Oxfam has been mounting an extensive public relations campaign aimed at convincing World Trade Organization member countries that U.S. cotton growers are responsible for the impoverishment of 20 million African farmers who rely on cotton for their livelihood.
Oxfam has lined up interviews for major media outlets, given scholarships to newspaper reporters to travel to Africa and issued numerous statements to the media during the Doha Round organizations.
During last fall's Doha negotiations, the West African cotton-producing countries, supported by Oxfam and other non-governmental organizations, demanded an 80 percent cut in all domestic cotton support by developed countries in 2006 to be followed by 10 percent each in the next two years.
National Cotton Council leaders say the Oxfam campaign has been long on rhetoric and short on facts.
“The NGOs wave $2 billion to $3 billion in annual spending for the U.S. cotton program as prima facia evidence of damage,” said Council President and CEO Mark Lange in a speech last winter. “These are easy numbers to find in USDA reports and then blame the overbearing culturally bereft Americans for all the world's ills.”