WTO Ruling On Subsidies Could Hurt U.S.

Brazilian farmers view the recent decision as a victory to help increase fairness in world trade. John Otte

Published on: Jul 1, 2004

NOTE: Economics Editor John Otte of Farm Progress Publications filed the following report from Brazil.

Cotton subsidies paid to U.S. farmers are unfair to producers in Brazil, the World Trade Organization (WTO) says. The June 19 decision announced by the WTO could prompt developing countries or poorer "Third World" nations to file trade cases against subsidies for other crops—such as corn, soybeans and wheat.

The WTO's final report on the trade case upheld a preliminary ruling made earlier this year that U.S. cotton subsidies cause artificially low international prices and are hurting Brazilian farmers.

Brazilian farmers and farm organizations see the WTO decision as a victory in their efforts to "level the playing field" in world trade.

Brazil wants to be a bigger ag exporter

Brazil has big plans to become a truly major player in international markets, particularly in producing and exporting more agricultural commodities.

In early June, Brazil's president Luiz Inacio Lula da Silva went on a world trade mission to China. China is the 900-pound gorilla in world cotton consumption and is a buyer of U.S. cotton. Brazil is also targeting export markets in India and Thailand, laying the groundwork to sell those nations large amounts of cotton and other agricultural products.

An appeal of the June 19 WTO ruling is expected to be made soon by the United States. Critics of U.S. cotton subsidies predict that if this ruling is upheld, the case will give cotton producers from Brazil to West Africa an incentive to increase production and get what they call a fair price.

Celine Charveriat of Oxfarm International, said "This WTO ruling is a wake-up call for all rich countries to change the way they've mismanaged and manipulated world trade rules for years."

Put food on trade negotiating table?

In other news on the export front, a story appeared in a Brazilian newspaper last week that the European Union wants to put food on the table in world trade talks. European officials contend food aid should be restricted to money, not in bulk commodities that could be distributed to manipulate supplies.

U.S. Sen. Charles Grassley, R-Iowa, was recently quoted as saying the issue may need to be addressed at world trade negotiation levels--but only if other countries also are willing to make like concessions.

Grassley points out that commodity distribution is often a better alternative than cash for those in immediate need, particularly if you can't trust the government you are donating the food to. "You give them money and the political leaders might send it to a Swiss bank account. You can't put corn or wheat in a bank account," he notes.