Geneva: The US has challenged a World Trade Organization ruling saying it hasn’t cut aid to cotton farmers enough to comply with global trade rules in a case that may lead to sanctions worth $4 billion (Rs15,880 crore) on American exports to Brazil.
In a decision made public on 18 December, WTO judges said the US ignored a 2004 ruling that found export credit guarantees and payments to farmers for falling prices unfairly prop up the country’s market share and exceed spending pledges.
The findings upheld a confidential July ruling saying the US, the world’s biggest cotton exporter, hadn’t complied with the 2004 judgement.
Brazil has threatened to retaliate against the US by suspending market access concessions for US providers of services in the business, financial, communications, transport, construction, distribution and tourism industries. Brazil has also said it may strike back by shelving intellectual property rights in the areas of copyright, trademarks and patents.
The appeals procedure can last up to 90 days.
A WTO panel first decided in September 2004 that as much as $4 billion a year in US subsidies to cotton growers violated global trade rules by encouraging excess production in the US and driving down world prices.
After that ruling, the US eliminated some export-credit guarantees and a programme that paid exporters and domestic mills to buy domestically grown cotton.
Still, the US appears determined to continue with the payments. In December, the US Senate joined the House of Representatives in approving a new $286 billion farm bill that would leave cotton programmes largely intact for the next five years.
With cotton prices up 31% in the past year, President George W. Bush has threatened to veto the legislation and is pressing lawmakers instead to cut aid to farmers.
Subsidies benefit commodity buyers such as Archer Daniels Midland Co., Bunge Ltd and ConAgra Foods Inc.; distort trade, and harm economic development in poorer nations, according to groups such as Boston-based Oxfam America and the Washington-based Environmental Working Group, which favours subsidy reductions and keeps a database of farm payments.
Brazil is the world’s fifth largest cotton producer, after China, India, the US and Pakistan. BLOOMBERG