SAO PAULO, Brazil - In a decision that could have far-reaching repercussions for the American farmer, the World Trade Organization has ruled that U.S. cotton subsidies are unfair to farmers in developing nations.
Siding with a complaint from Brazil, the WTO said the subsidies boost U.S. production and exports while lowering world cotton prices.
The ruling is the first time a country has been challenged over its domestic agricultural subsidies, and the first case that looks at the effect of export subsidies on crops.
Monday's decision came in a long-awaited report by three WTO experts. A trade official in Washington, who declined to be named, said the United States plans to appeal.
We believe U.S. farm programs were designed to be
and are fully consistent with our WTO obligations the official said. We have serious concerns with aspects of the panel report.
If allowed to stand, the decision could bode ill for all U.S. farmers who receive government support. Curbing these subsidies means support for other U.S. crops could be vulnerable to challenges.
It could also expose other industrialized nations to similar complaints.
Brazil, the world's fifth-largest cotton producer, says the United States has managed to keep its spot at the planet's second-largest producer only because the U.S. government paid $12.47 billion in subsidies to farmers between August 1999 and July 2003.
Details of the report were not made public but Clodoaldo Hugueney, a top economic official with Brazil's Foreign Ministry, said it showed that the 147-nation WTO agrees with some of Brazil's key arguments.
We're satisfied with the conclusion
he said.
Farm support payments have long been a source of contention in trade negotiations between wealthy and developing nations. The disagreement contributed to the collapse of world trade talks last year in Cancun, Mexico.
Brazil alleged cotton prices in the four-year period from 1999 to 2003 received by U.S. cotton producers were on average 77 percent below production costs. But U.S. production continued to rise.
The United States insists that its payments to farmers are within permitted levels, claiming many are not subsidies as defined by the WTO and should not be included.
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