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WTO Rules against Cotton Subsidies

In a decision that should have far reaching implications for the U.S. farm program and global free trade talks, the World Trade Organization on Thursday handed the U.S. a final defeat in the case brought by Brazil against U.S. cotton subsidies.

The World Trade Organization's Appellate Body upheld core findings delivered last year by a WTO dispute panel, which ruled that U.S. subsidies to cotton farmers exceeded WTO ceilings and that some U.S. export credits amounted to illegal export subsidies.

The U.S. defeat could result in similar cases being brought against the U.S. and the European Union for other commodities including fruit, rice, cattle and milk. Brazil has already won a ruling against EU sugar export subsidies, which is under appeal and Brazilian soybean producers are working on a possible complaint.

The ruling won’t mean immediate changes to the U.S. cotton program. Thursday’s decision leaves the U.S. 15 months to bring its cotton subsidies in line with the WTO findings or face retaliatory trade measures.

But it may be impossible to win congressional approval of needed reforms unless they are part of an overall world trade deal. As a result, it could be years before any real subsidy changes occur.

Agriculture Undersecretary for Farm and Foreign Agricultural Services J.B. Penn said the decision "points to the urgent need to push forward in the Doha Development negotiations."

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.