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Sat, Mar 05, 2005 - Page 12 News List

Brazil defeats US in dispute over cotton subsidies


The US suffered a final defeat on Thursday in its dispute with Brazil over cotton subsidies at the WTO.

The organization's appellate body upheld a ruling last year by trade judges who said US subsidies to cotton farmers broke international trade rules by depressing world prices and harming cotton farmers in Brazil and elsewhere.

The decision could force the US to lower the subsidies it pays farmers to grow cotton and, eventually, other crops.

Republican Representative Clay Shaw, who heads the trade subcommittee of the House Ways and Means Committee, said: "If we want to keep exporting American cotton, we're going to have to abide by the WTO ruling. It certainly gives you cover to make some of the corrections needed."

The administration was more cautious. Richard Mills, the spokesman for the US trade representative, said that "we will study the report carefully and work closely with Congress and our farm community on our next steps."

Brazil declared victory for itself and poor African nations that have complained about the subsidies.

Roberto Azevedo, the official who heads trade disputes at Brazil's Foreign Ministry, said on Thursday that "this decision ratifies what is just and what is legal."

As the first successful challenge of a wealthy nation's domestic agricultural subsidies, the cotton case could propel Europe and other industrialized nations to offer new compromises at global trade talks that are centered on this agriculture issue.

Brazilian officials used information from the US Department of Agriculture to argue that the US broke trade rules that limit to US$1.6 billion the subsidies it can pay cotton growers every year. The US defended the additional financing as domestic subsidies that do no harm to global markets.

But Brazil said the subsidies increased US cotton production, which, in turn, helped destroy Brazil's export markets and undermined the livelihood of its farmers. Argentina, Australia, Benin, Canada, Chad, China, the EU, India, New Zealand, Pakistan, Paraguay, Taiwan and Venezuela joined Brazil in the case.

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