The World Trade Organization has set sanctions at $295 million annually on American goods as a result of the United States' failure to eliminate illegal subsidies to U.S. cotton growers. Brazil had sought to target American goods and drug patents for $2.5 billion worth of economic retaliation. The world body said U.S. payments would have to increase significantly for Brazil to be allowed to punish American drug patents.
Carol Guthrie, spokeswoman for U.S. Trade Representative Ron Kirk, said that while disappointed with the outcome of this dispute, the U.S. is pleased that the arbitrators awarded Brazil far below the amount of countermeasures it asked for. The National Cotton Council agrees. NCC Chairman Jon Hardwich says the panel provided no award with respect to the Step 2 cotton program and Brazil is not authorized to cross-retaliate at this time.
This award, however, is based almost exclusively on 2005, the peak of U.S. cotton production, and doesn't consider any U.S. policy changes made in the 2008 farm bill. The U.S. cotton program and export credit guarantee programs have changed considerably since 2005, with U.S. cotton production down 45% and the export credit guarantee program operating at no net cost. Hardwich believes today's programs cannot possibly be determined to be causing injury in the world market.
"This decision obviously sets up a new challenge for the United States in carrying out our farm programs," said Senate Ag Committee Chairman Tom Harkin, D-Iowa. "The WTO continued certain errors in interpreting the U.S. cotton program and world cotton markets. Still, the decision is final and we must now find a practical way to deal with it."
According to Harkin, it would have been preferable to settle these trade disputes through careful negotiations rather than WTO litigation.
Senator Saxby Chambliss, R-Ga., the Ranking Republican Member on the Senate Agriculture Committee, agreed saying the panel report may make it harder to reach an amicable resolution with Brazil in this case and because of the complexity of the Arbitration panel's decision will certainly complicate negotiations in the Doha Round.
In a simple statement the American Farm Bureau Federation said it is disappointed. "Based on the findings in the original case and the United States' actions to adjust its cotton and export credit programs," said AFBF President Bob Stallman, "We maintain that the U.S. has complied and retaliation is not justified."