US COTTON SUBSIDIES STILL NOT WTO-COMPLIANT: INTERIM RULING

US COTTON SUBSIDIES STILL NOT WTO-COMPLIANT: INTERIM RULING

A WTO dispute panel has in a preliminary ruling found that the US has failed to reform cotton subsidy programmes enough to comply with an earlier decision, potentially opening the door to billions of dollars worth of sanctions from Brazil.
The panel issued the confidential interim report to the two parties on 27 July. The final ruling is expected in September. It is rare, though not unprecedented, for panels to reverse their findings between the preliminary and final verdicts.
A statement from the US trade representative's office in Washington confirmed that "the Panel found that the changes made by the United States were insufficient to bring the challenged measures - certain support payments under the 2002 farm bill and export credit guarantees - into conformity with US WTO obligations. We are very disappointed with these results."
Brazilian officials welcomed the decision. Roberto Azevedo, a senior trade official in Brasilia, told Reuters that Washington had not altered some of the principal support programmes that had been found to violate WTO rules. "We expect the United States to comply fully and immediately," he said. "Brazil reserves its right to retaliate."
The earlier WTO ruling at issue dates back to 2004, when a panel found that a range of US support measures for cotton growers and exporters violated Washington's WTO obligations. That decision was confirmed by the Appellate Body in 2005 (see BRIDGES Weekly, 9 March 2005).
Washington abolished the 'step 2' programme that paid US cotton mills and exporters the difference between American cotton prices and world benchmark rates, as well as some export credit schemes. However, Brazil and the US disagreed on the latter's compliance with the overall ruling, leading to the creation of the current 'compliance panel' in autumn 2006.
Brazil has indicated that it would seek not only to impose retaliatory duties on US goods, but also to 'cross-retaliate' against services providers and intellectual property such as patents and trademarks (see BRIDGES Weekly, 12 October 2005).
The US National Cotton Council described the interim ruling as "incomprehensible," arguing that cotton acreage had declined and world cotton prices were at a three-and-a-half year high.
Many developing countries, especially four West African cotton-producing states, are pursuing deep reduction to US cotton subsidies as part of the faltering Doha Round negotiations.
ICTSD reporting; "WTO largely rules against US in cotton dispute with Brazil," ASSOCIATED PRESS, 27 July 2007; "WTO Rules Against US in Cotton Dispute with Brazil," BLOOMBERG, 27 July 2007; "Brazil issue warning to US over WTO cotton ruling," REUTERS, 27 July 2007.