NCPA - National Center for Policy Analysis


June 4, 2008

The Bush Administration's four-year effort to defend the indefensible U.S. cotton program has finally hit the wall.  On Monday a World Trade Organization (WTO) appellate panel issued a final ruling in favor of Brazil, which first brought the case in 2004 against U.S. cotton subsidies as an unfair trade practice, says the Wall Street Journal.

The upshot:

  • U.S. handouts to cotton growers violate WTO rules and must be eliminated.
  • If the United States refuses to act, Brazil now has the right to retaliate against U.S. products to the tune of $4 billion.
  • That price will be paid by U.S. exporters in fewer sales, and by the American workers who make those exports, or perhaps in seized intellectual property.
  • In other words, the cost of subsidizing wealthy U.S. cotton growers - which was $3.3 billion in 2005 - just about doubled.

The still-higher cost is lost American credibility on trade, says the Journal.  The White House has been trying to recover its credibility ever since its too-clever-by-half steel tariff play in 2001.  Those tariffs and the 2002 farm bill went a long way toward undermining the WTO's Doha Round of trade liberalization, as countries like Brazil and India complain of U.S. hypocrisy on farm subsidies, as well as America's 54-cent a gallon tariff on sugar ethanol.

What developing country wants to negotiate with the Americans when Washington can't even keep its commitments under existing WTO rules?  If the Bush Administration and Congress want to understand why Doha is close to collapsing, look no further than the U.S. cotton program, says the Journal.

Source: Editorial, "Cotton Clubbed," Wall Street Journal, June 4, 2008.

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