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WTO’s final ruling says subsidies violate global trade rules ''by depressing world prices and harming cotton farmers''

GENEVA, Switzerland - 03/11/05 - The World Trade Organization (WTO) has upheld a ruling it reached last year charging that US government subsidies to cotton farmers violate global trade rules by depressing world prices and harming cotton farmers in Brazil and several other countries.

In announcing the decision, the WTO's Appellate Body said the US policy was "inconsistent with the global agreement on cotton" and that the cotton subsidy mechanism should be brought "into conformity with its obligations."

"If we want to keep exporting American cotton, we're going to have to abide by the WTO ruling," said Rep. Clay Shaw (R-Florida), Chairman of the trade subcommittee of the House Ways and Means Committee. "It certainly gives you cover to make some of the corrections needed."

According to the WTO Appellate Body, Washington has 15 months to comply with the decision.

Richard Mills, spokesman for the Office of the US Trade Representative, told the media, "We will study the report carefully and work closely with Congress and our farm community on our next steps."

Brazil was quick to respond to the decision from Geneva with Roberto Azevedo, the official in charge of trade disputes at Brazil's Foreign Ministry, telling reporters that "this decision ratifies what is just and what is legal."

Sources have said that Brazilian officials had used data from the US Department of Agriculture to argue that the US violated the WTO rules that limit the subsidies that it can pay cotton growers every year to $1.6 billion annually.

Washington had paid US cotton growers more than $10 billion over seven years and defended the additional financing as "domestic subsidies" that do no harm to global markets.

But Brazil said the subsidies increased American cotton production, and, in turn, closed many global markets to its cotton exports. 

Argentina, Australia, Benin, Canada, Chad, China, the European Union, India, New Zealand, Pakistan, Paraguay, Taiwan, and Venezuela joined Brazil in the case.

US Under Secretary Of Agriculture J.B. Penn said the WTO decision "points to the urgent need to push forward in the Doha Development negotiations."

The US, he said, "believes that negotiation, not litigation, is the most effective way to address distortions" in agriculture.

"Lasting reform can be achieved only through multilateral negotiations that address all global market distortions - market access, export competition and domestic support," he said.

The Bush Administration is "disappointed" with the decision "because US programs were carefully crafted to meet our WTO obligations. As we review the WTO report more thoroughly, we will continue to work closely with our agricultural community and Congress."

The WTO subsidy decision is expected to have a serious impact on California's agricultural sector as some 85% of all California-grown cotton is exported and the state currently ranks second in the country in terms of cotton production.

According to the California Department of Food & Agriculture in Sacramento, the state's cotton production approximates 2.0 to 2.5 million bales annually from approximately 700,000 to 850,000 acres, or about 5% to 8% of the US total plantings of cotton and about 10% to 14% of the total US yearly production.

Cotton currently represents the 2nd largest planted acreage of any crop in the state with export sales of both cotton and by-product production valued at more than $1 billion annually.

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