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<DIV><FONT face=Arial size=2><FONT face="Times New Roman" size=3>W.T.O. Rules
Against U.S. on Cotton Subsidies<BR><BR>April 27, 2004<BR> By ELIZABETH
BECKER<BR><BR><BR><BR><BR><BR>WASHINGTON, April 26 - Brazil won a preliminary
ruling at<BR>the World Trade Organization on Monday night that could<BR>force
the United States to lower the subsidies it pays<BR>farmers to grow cotton and,
eventually, most subsidized<BR>crops.<BR><BR>The decision supports Brazil's
contention that the<BR>subsidies paid to American cotton farmers
violate<BR>international trade rules. A final ruling against the<BR>United
States could lead to stiff penalties if it fails to<BR>change its practices. In
another recent case involving<BR>steel, President Bush chose to remove subsidies
and<BR>therefore did not have to face the penalties.<BR><BR>The ruling also puts
the Bush administration in a tight<BR>bind in an election year, when Republicans
are counting on<BR>support from the Farm Belt. The largest American
farmers<BR>have grown dependent on the $19 billion they receive in<BR>annual
subsidies.<BR><BR>If the final decision in June goes against the
United<BR>States, the administration is expected to appeal, if for no<BR>other
reason than to delay action until after the election.<BR>Nearly all preliminary
opinions are eventually upheld by<BR>the W.T.O.<BR><BR>As the first successful
challenge of a wealthy nation's<BR>domestic agricultural subsidies, the
Brazilian case could<BR>also force the United States, the countries of Europe
and<BR>other well-to-do nations to act this summer and offer new<BR>compromises
at global trade talks that have been blocked<BR>over this agriculture issue for
more than a year.<BR><BR>The $300 billion in annual farm subsidies and supports
paid<BR>by the world's wealthiest nations have been the bane of<BR>Third World
farmers. The United Nations, the World Bank and<BR>charities like Oxfam have
said their elimination or<BR>reduction would provide the single biggest possible
benefit<BR>for the economies of poor countries with many
subsistence<BR>farmers.<BR><BR>Brazilian officials said they brought the case
against the<BR>United States out of frustration, saying that all attempts<BR>by
poorer nations to negotiate a reduction of the subsidies<BR>had
failed.<BR><BR>The ruling Monday night was not publicly disclosed, and
the<BR>United States and Brazil have agreed not to discuss the<BR>findings in
detail until the final decision is made in<BR>June. At a news conference in
Brasília, however, top<BR>government officials said they were pleased and
gratified<BR>with the ruling.<BR><BR>"This is a precedent; this is a war that
must continue,"<BR>said Roberto Azevedo, the top legal adviser to
Brazil's<BR>Foreign Ministry.<BR><BR>The Brazilians accused the United States of
breaking trade<BR>rules that limit to $1.6 billion the amount of subsidies
it<BR>can pay American cotton growers every year. The United<BR>States defended
the additional financing as domestic<BR>subsidies that do no harm to global
markets.<BR><BR>But using data from the United States Department
of<BR>Agriculture, Brazil argued that the programs led to<BR>increased American
cotton production that destroyed<BR>Brazil's export markets and undermined the
livelihoods of<BR>its farmers.<BR><BR>Without the subsidies, Brazil estimated
that United States<BR>cotton production would have fallen 29 percent and
that<BR>American cotton exports would have dropped 41 percent. That<BR>would
have led to a rise in international cotton prices of<BR>12.6 percent, which
would have helped Brazil's cotton<BR>farmers.<BR><BR>Brazil also said that the
United States was providing<BR>illegal export subsidies to American
agribusinesses and<BR>manufacturers, who were given $1.7 billion to buy
American<BR>cotton.<BR><BR>Ken Cook, the president of the Environmental Working
Group,<BR>a nonprofit organization that posted a database of<BR>subsidies on its
Web site that was used by Brazil, said<BR>that the ruling was putting into
question how the<BR>government would pay subsidies in the future.<BR><BR>"This
could mean problems for all domestic subsidy<BR>programs, for corn, wheat, rice,
everything that receives<BR>big direct payments from the United States
Treasury," he<BR>said.<BR><BR>A United States trade official said Monday night
that the<BR>administration would appeal the decision if the final<BR>report
remained unchanged.<BR><BR>"United States farm programs were designed to be and
are<BR>fully consistent with our W.T.O. obligations," said the<BR>official, who
spoke on condition of anonymity because of<BR>the confidential nature of the
ruling. "We have serious<BR>concerns with aspects of the panel
report."<BR><BR>American farmers have benefited handsomely from the<BR>expansion
in world trade, and their exports have exploded<BR>over the last years. One out
of every three acres in the<BR>United States are now planted for
exports.<BR><BR>The cotton subsidies have helped make the United States
the<BR>world's top cotton exporter, with more than 40 percent of<BR>the world
market.<BR><BR>Poor nations have long contended that this expansion is<BR>based
unfairly on subsidies that fuel overproduction and<BR>drive down world prices.
Those prices do not harm the big<BR>farmers in the United States because they
are subsidized by<BR>American taxpayers.<BR><BR>The United States argued in its
submission that its<BR>subsidies were not linked directly to the production
of<BR>cotton and, therefore, did not distort trade. But the<BR>Monday night
ruling threw that argument into doubt, thereby<BR>calling into question the
basis of much of the domestic<BR>agricultural subsidy system.<BR><BR>In its
complaint, Brazil also accused the United States of<BR>additional unfair
subsidies - including the federal farm<BR>program that pays American
agribusinesses and manufacturers<BR>$1.7 billion to buy the American cotton that
is already<BR>subsidized.<BR><BR>Brazil was joined in the W.T.O. case as third
parties by<BR>Argentina, Australia, Benin, Canada, Chad, China, the<BR>European
Community, India, New Zealand, Pakistan, Paraguay,<BR>Taiwan and
Venezuela.<BR><BR>The existing subsidies for American cotton farmers -
$10<BR>billion over seven years - were partly responsible for the<BR>breakdown
in global trade talks in Cancún, Mexico, in<BR>September.<BR><BR>West African
countries, some of the poorest in the world,<BR>made cotton a test case of the
W.T.O.'s commitment to<BR>remove barriers to poor nations' ability to trade
their<BR>agricultural products. But the United States offered,<BR>instead, to
study the cotton issue and consider reducing<BR>subsidies as well as removing
nontariff and other trading<BR>barriers on cotton, synthetic fibers, textiles
and<BR>clothing.<BR><BR>With the United States and Europe vowing to revive
those<BR>stalled trade talks over the summer, the question of<BR>agricultural
subsidies and supports, especially now for<BR>cotton, will be back on the
agenda. A compromise reached in<BR>trade talks could be less painful than
penalties from the<BR>cotton case.<BR><BR></FONT><A
href="http://www.nytimes.com/2004/04/27/business/worldbusiness/27COTT.html?ex=1084"><FONT
face="Times New Roman"
size=3>http://www.nytimes.com/2004/04/27/business/worldbusiness/27COTT.html?ex=1084</FONT></A><BR><FONT
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