WTO Rejects Cotton Subsidies

The World Trade Organization ruled Friday that $3 billion in U.S. cotton subsidies violated trade rules, upholding a preliminary decision in favor of Brazil from earlier this year, both governments said.

The Bush team said it planned to appeal the ruling in the first-ever trade case targeting domestic farm payments.

“U.S. farm programs were designed to be and are fully consistent with WTO rules,” said Richard Mills, a spokesman for the U.S. trade representative. “This litigation will take many months and maybe years to resolve. The best way to address any distortions is through the WTO agriculture negotiations.”

The ruling could increase pressure on the U.S., Japan, other rich nations and the European Union to cut back on the $97 billion a year they spend subsidizing their farmers. The World Bank and other advocates for poor nations say those payments depress global prices, making it harder for farmers in countries such as Guatemala and Bangladesh to compete with their counterparts in rich nations.

“Brazil showed there’s a limit to domestic subsidies,” said Roberto Azevedo, a general coordinator for trade disputes at Brazil’s Foreign Affairs Ministry. “It’s valid for cotton and other commodities as well.”

The ruling, if upheld on appeal, would force the U.S. to reopen its farm payment legislation, said Dale Hathaway, a former U.S. agriculture official.

Without the subsidies, U.S. cotton production would have shrunk by nearly 30%, according to the research done on behalf of the Brazilian government by Daniel Sumner, a UC Davis economist.