Congress Supports Cotton Subsidies Despite WTO Issues
Amid efforts to break an impasse on global agriculture subsidies in the Doha trade talks, a Congressional committee on Wednesday was expected to pass legislation that would continue subsidy programs for U.S. cotton growers and other farmers...
WASHINGTON — Amid efforts to break an impasse on global agriculture subsidies in the Doha trade talks, a Congressional committee on Wednesday was expected to pass legislation that would continue subsidy programs for U.S. cotton growers and other farmers and reestablish some federal support for textile mills that use domestic and imported cotton.
Sen. Tom Harkin (D., Iowa), chairman of the Senate Agriculture, Nutrition and Forestry Committee, unveiled a draft farm proposal Tuesday that would reauthorize farm programs for five years. The panel was set to vote on it Wednesday night. The House passed a $292.7 billion bill in July that would pay for several U.S. farm programs, as well as food stamps and nutrition and conservation programs.
The Bush administration and Congress appear to be working at cross purposes on agriculture subsidies. The U.S. has been under pressure from the European Union and developing countries to slash domestic agriculture subsidies, particularly for cotton, in the global trade talks, which have dragged on for almost six years.
Although the U.S. has signaled it is prepared to reduce certain kinds of subsidies, negotiators have been unable to break the stalemate between rich and poor nations over the subsidies and reach a global tariff and subsidy trade accord.
The U.S. is facing pressure from Brazil, which won a World Trade Organization case against U.S. cotton subsidy programs three years ago by arguing that American cotton subsidies depressed global prices for the commodity and were illegal. Brazil said the subsidies cost its farmers more than $600 million in lost sales.
After losing the WTO case, the U.S. was forced in 2005 to scrap a key farm program, known as "Step 2," that provided $2.4 billion worth of subsidies to cotton farmers, textile mills and exporters between 1995 and 2004, according to the U.S. Department of Agriculture.
The Step 2 program provided federal support to U.S. textile mills that, under the law, had to buy higher-priced U.S. cotton unless the price reached a certain threshold over a period of four consecutive weeks. A WTO dispute panel ruled last week that the U.S. did not go far enough to comply with its earlier rulings that found U.S. cotton subsidy programs breached global trade rules. That means Brazil could have the right to retaliate, if the U.S. appeals the interim ruling and loses, for as much as $1 billion a year in sanctions until America brings the measures into full conformity.Despite the pressure from the global community, Congress is moving forward on at least maintaining current funding levels for many of the farm programs and is considering reinstating federal support U.S. textile mills lost with the Step 2 program. The estimated cost for enacting the House-passed farm bill is $292.7 billion, according to a spokeswoman with the House Agriculture Committee. By comparison, the estimated cost for the 2002 farm bill is $271.1 billion.
Textile producers have pressed for the inclusion of a provision in the farm legislation that would pay textile mills 4 cents per every pound of cotton they use. The House-passed bill contains an "economic assistance adjustment" provision providing the relief, and the Senate draft bill released Tuesday also contains the same provision.
"In a very competitive world, where major textile sectors enjoy huge subsidies from their governments, the Step 2 program made the difference between a lot of mills staying in business or closing," said Cass Johnson, president of the National Council of Textile Organizations. "We've seen major job losses since Step 2 payments were taken away."
Nate Herman, director of international trade at the American Apparel & Footwear Association, said the new provision in the House bill for textile mills looks like a "brand new subsidy."
"We just got rid of one [the Step 2 program] and now we could replace it with a new one and Brazil could easily come back to the WTO" and argue for sanctions, along with other countries, said Herman, who noted the executive and legislative branches appear to be working at cross purposes on this issue.
"If you pass a farm bill similar to what the House passed [in July] it will make it much more difficult to reach a successful conclusion in the Doha Round," said Herman. "The House-passed version of legislation is contrary to the efforts to reduce or eliminate many subsidies, which is a critical step for developing countries and critical to moving the Doha round forward."
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