WASHINGTON — The Bush administration vowed Tuesday to appeal a World Trade Organization preliminary ruling challenging its cotton subsidy program, and U.S. cotton producers who benefit from the subsidies denounced the decision that may force them to be lowered or eliminated.
The WTO late Monday upheld a Brazilian complaint that the U.S. cotton subsidy program violates international trade rules by distorting and depressing world cotton prices, putting poor countries at a severe competitive disadvantage.
A final ruling, which might not come for months, may eventually undercut the 2002 U.S. farm bill, which designated as much as $3 billion a year in subsidies to 25,000 cotton farmers who control 40 percent of global cotton exports.
U.S. cotton farmers wouldn’t be affected during an appeals process, though the ruling could influence global trade negotiations in which agricultural subsidies in the U.S. are attacked by poor nations.
Allen Johnson, chief agricultural negotiator for the U.S., said during a press conference call Tuesday that the U.S. would file an appeal with the WTO if the panel’s final decision is unchanged. He did not discuss details of the organization’s findings.
“There will be no immediate impact on our farm programs,” Johnson said. “Of course, this case may have some implications on how we move forward and work with members of Congress and the agriculture community” in the context of the global trade talks in the WTO.
“It is not completely clear as to what the implications are in terms of what the real costs are,” Johnson said. “Since we think a number of directions the panel is going in are wrong, obviously we will be challenging them in any appeal.”
Johnson said the WTO ruling would not affect the U.S. and European Union plan to eliminate agricultural export subsidies and domestic trade-distorting subsidies. The proposal was made during global trade talks that collapsed last September in Cancún after the anger of developing nations over the subsidies prompted many negotiators to walk out. The talks have since been revived.
The WTO’s preliminary cotton subsidy decision raises questions, including whether poor countries will file complaints or whether they will cooperate with the U.S. in the WTO talks. Johnson said the U.S. would pursue moving the negotiations forward and stand by its proposals to eliminate agricultural subsidies.
Cotton trade associations, which have not seen the 350-page WTO interim findings, were anxious about its implications.
“If the published reports are accurate, the decision is unfortunate and, we believe, incorrect,” Woody Anderson, chairman of the National Cotton Council, said in a statement. “This dispute highlights the difficulty associated with any nation designing farm policy to serve domestic goals while meeting international trade commitments.”
He said the current farm program provides a safety net for the farm economy, while complying with WTO obligations.
Any changes to the U.S. farm program would require Congressional action, and many U.S. lawmakers with agricultural constituencies would fight reducing or eliminating subsidies for cotton farmers.
“This is a preliminary report, subject to appeal, so the die is certainly not cast on these issues,” Sen. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee, said in a statement. “But in the end, we need to keep the big picture in mind and that is to create a more level playing field in the international market for U.S. farmers through the successful conclusion of the WTO agricultural talks.”
Brazilian officials said the WTO ruled in favor of the majority of its arguments.
“U.S. production prices were more than twice the international price and there is no reason for producing crops at a loss without subsidies,’’ said a Brazilian embassy official in Washington, who asked not to be identified. “That is our main complaint — the distortion these subsidies brought. It brought the market down for everybody and those who do not have subsidies, like sub-Saharan Africa who cannot be shielded from this, were suffering.”
The embassy official said he wasn’t certain if the ruling would undermine the WTO trade talks.
“It’s certainly a very strong indication these subsidies have caused havoc around the world,” he said.
In its complaint, Brazil said seven types of cotton subsidies in the U.S. caused “serious prejudice” in the form of significant price suppression, while the U.S. increased its world market share of cotton and also held an inequitable share of world trade in cotton.
Brazil, citing U.S. Department of Agriculture figures, said U.S. cotton producers received $12.47 billion in subsidies between August 1999 and July 2003, while the value of the U.S. cotton crop produced during the same four-year period was $13.94 billion.
— With contributions from Joanna Ramey