Congress Votes to Preserve US Subsidies for Brazilian Cotton Farmers

24 February 2011

A proposal in the US Congress to end annual payments of $147 million to Brazilian cotton farmers, an obligation arising from a WTO dispute, was shot down in the House of Representatives last Friday, after Republicans voted against it by more than a two-to-one margin.

The amendment, proposed by Representative Ron Kind (Democrat-Wisconsin), was a part of a series of amendments to the government-wide spending bill voted on by members of the powerful House Appropriations Committee, the committee tasked with setting expenditures for the federal government.

Kind's amendment would have eliminated payments resulting from a ‘framework agreement' struck in 2010 as Washington sought to stave off $830 million in WTO-authorised "cross retaliation" by Brazil against US goods, pharmaceuticals, and software. The threatened retaliation was the result of the US's failure to bring its cotton subsidies in line with WTO Appellate Body rulings following its loss in a long-running trade dispute with Brazil.

The framework agreement established the US-based Commodity Conservation Corporation (CCC), which was to make annual payments of $147 million to the newly created Brazilian Cotton Institute. Payments were to continue at least until the US could reform its cotton subsidy programmes under the 2012 farm bill, the omnibus legislation that governs the shape and value of subsidies for US farmers.  The money goes to Brazilian cotton farmers in the form of a "technical assistance fund" - Washington effectively agreed to subsidise Brazilian cotton farmers in order to keep subsidising its own.

In the meantime, the US remains in breach of its WTO obligations while it maintains its illegal cotton subsidies, and the framework agreement is all that keeps Brazil from retaliating against US goods. Voiding the payments to Brazil would have reopened the door to retaliatory sanctions, which would have increased pressure in the US for cotton subsidy reform.

"It speaks to the lunacy of our current farm programs," Kind told National Public Radio about the framework agreement. "Brazil successfully challenged our program in the US. You would think our normal, reasonable response would be to fix our programs. Instead, a new program was created to buy off Brazilian cotton farmers."

Representative Mike Conway, a Republican whose Texan district is home to many cotton producers, argued that Kind's proposal amounted to "a vote to institute a trade war with Brazil," and would jeopardize the intellectual property rights of American companies.

Kind, a long-time proponent of farm subsidy reform, noted that with cotton prices "at an all-time high in the market place," farmers hardly need lavish government support. "And there is still the built up resistance in [Congress] to get to the hard work of reforming these farm subsidy programs."

ICTSD reporting: "GOP tensions flare over how deep to cut," PITTSBURGH POST GAZZETTE, 19 February 2011; "US subsidies for Brazilian farmers," NATIONAL PUBLIC RADIO, 18 February 2011; "House defeat of Kind supports US govt agreement with Brazil," FIBER2FASHION.COM, 21 February 2011.

This article is published under
24 February 2011
India and Malaysia last week concluded a free-trade agreement cutting tariffs on about 90 percent of bilateral goods trade and removing several barriers to services and investment flows. Indian...
24 February 2011
Doha Round proposals for expedited liberalisation for trade in environmental goods risk destroying infant green technology industries in developing countries without benefiting the environment,...