GENEVA — Brazil lodged a complaint with the World Trade Organization on Friday against U.S. cotton subsidies to producers and exporters, which it asserts break global trade norms.
The Brazilian government said in a statement that cotton subsidies “have a significant negative impact on the production and commercialization of cotton in Brazil and worldwide.”
A spokesman for U.S. Trade Representative Robert Zoellick said: “We believe that they’re mistaken and we’ll be holding discussions on this further with them.”
The Brazilian consultations with the U.S., the first step in the WTO dispute settlement process, will cover a broad range of measures, including “subsidies provided to U.S. producers, users and/or exporters of upland cotton.” U.S. export credits, grants and a long list of other support measures that assist growers and exporters are also targeted by the Brazilian complaint.
Under the WTO’s dispute mechanism, if the two sides cannot resolve their differences within 60 days, the next step is for Brazil to file a request for a dispute panel to examine its complaint. Brazil would need to prove that the level of subsidies allocated by the U.S. exceed the maximum bound levels it’s allowed under WTO accords.
Moreover, Brazil must also show that the U.S. cotton subsidies caused the suppression of world prices and hurt its exports.
Kenneth B. Hood, chairman of the National Cotton Council of America, in a Sept. 18 letter to the U.S. Secretary of Agriculture Ann Veneman, said: “U.S. domestic and international prices for upland cotton remain mired by historically low levels. U.S. producers are facing a fourth consecutive year with market prices well below the average cost of production.”
Hood stressed that U.S. producers have also reduced acreage in response to low prices. The U.S., the world’s second largest producer of cotton after China, is the leading exporter with a 37 percent share of world cotton trade, according to recent U.S. Department of Agriculture data.
A report by the humanitarian aid group Oxfam published Friday backs the Brazilian claims. The report, “Cultivating Poverty: The Impact of U.S. Cotton Subsidies on Africa,” charges that U.S. cotton subsidies are contributing to mass poverty in some of the world’s poorest countries.
The report stated that U.S. support to the 25,000 cotton producers totaled about $3.9 billion last year, while the value of U.S. cotton production amounted to $3 billion at world market prices.