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WTO Cotton Fight Could Shape Farm Aid

Environmentalists and Midwestern lawmakers who have long called for the government to alter the way it doles out agricultural subsidies may have been given a boost from a recent World Trade Organization ruling on cotton price supports.

Just as last year’s fight over restructuring tax breaks to U.S. manufacturers was prompted by a trade dispute with the European Union, Brazil’s recent victory at the WTO over U.S. cotton subsidies is reinvigorating the debate over whether to shift from payments to agribusiness and individual farmers toward programs that reward environmental conservation.

The United States has until July 1 to comply. If it doesn’t, Brazil and other affected countries will be able to retaliate against U.S. exported goods, according to the March WTO ruling.

“It gives us completely new leverage for opening the debate on another front to say why these programs don’t work,” said Ken Cook, president of the Environmental Working Group, an activist group that has long campaigned against farm subsidies.

In fact, data compiled by EWG was instrumental in convincing the WTO that American cotton subsidies were contributing to a surplus of cotton production in the United States. That, in turn, was driving down the world market price of cotton in general, Cook said.

Though the United States spent nearly $2 billion in 2003 on agricultural conservation and environmental programs, direct subsidies to producers and buyers of cotton, corn, rice, wheat and other commodities far outpaced those payments. Cotton alone accounted for $2.6 billion in subsidies, according to data collected by EWG.

Though lawmakers often set aside robust sums for conservation programs in authorization bills, appropriators have tended to shrink those sums, Cook said.

“They run out of money,” he added. “Where does the money go? It goes to the subsidies.”

Cook said EWG has been active in making sure that lawmakers see the positive benefits for international trade and the environment if they support more funding for conservation programs that pay farmers to protect wildlife habitat, reduce soil erosion, conserve water resources and cut back on water pollution from livestock waste, to name a few.

And they’ve had a good deal of success so far. A coalition of Midwestern lawmakers has been pushing to expand the federal government’s farm conservation programs.

When asked about what Congress needs to do to resolve the trade dispute with Brazil, Senate Finance Chairman Chuck Grassley (R-Iowa) said that conservation would be a key component, along with continued trade negotiations.

“We’ve got to turn our support for farmers to conservation,” he said.

Rep. Ron Kind (D-Wis.) agreed. “We need to try to diversify the farm bill so that it benefits more individuals while being in compliance with the trade deals.”

Indeed, European countries, which have long paid more in agricultural subsidies to their farmers and agribusinesses than the United States has, have largely shifted their subsidy programs into conservation programs that in some cases pay even more than traditional price supports, noted Sen. Kent Conrad (D-N.D.).

By doing so, European payments to farmers are no longer considered unfair trade practices by the WTO.

Conrad said he is planning on convening a town hall-style meeting in North Dakota this fall on how to comply with changing trade laws while keeping payments to farmers flowing. Shifting to more conservation programs, he said, is one of the best ways to do that.

“We’ve got to get serious about rethinking America’s agricultural future,” he said.

The Bush administration could end up being a key ally given their recent push to restructure farm subsidies.

USTR spokesman Richard Mills said, “We are consulting with Congress about how to move forward. … There are various ways to come into compliance.” Still, he acknowledged that the Bush administration sees the solution to the WTO’s cotton ruling as part of “the ongoing effort led by the United States for global reform of agriculture.”

President Bush has pushed for caps on farm subsidies as well as for new ways of complying with free trade agreements. But so far, Bush’s efforts, particularly on subsidy caps, have been rebuffed by powerful Members, including Senate Agriculture Chairman Saxby Chambliss (R-Ga.).

For years, Southern lawmakers in particular have resisted efforts to increase funding for conservation programs and opposed tighter caps on subsidies, largely because cotton- and rice growers in their states tend to receive higher individual subsidy payments from the government.

Sen. Pat Roberts (R-Kan.), a former House Agriculture Committee chairman, said that Brazil’s complaint on cotton “is a dagger right at the heart of our farm programs. … This is a very, very serious matter. It will be very contentious.”

Roberts said farm lobbyists not connected to cotton had not yet begun to realize that the WTO cotton ruling has implications for all farm programs, because other crop subsidies are structured similar to cotton price supports.

However, Chambliss, along with farm lobby groups, appear to be looking for a short-term fix to the cotton subsidy trade dispute.

Chambliss acknowledged that “we’ve got to get in compliance with the WTO,” but he added that it needed to be done without creating “any major disruption” to cotton producers and buyers. He also indicated that his committee would not act until after the July 1 deadline, though any legislation will likely be retroactively effective starting on that date.

Chambliss noted that the Agriculture Department is expected to send up legislative language on its proposed remedy in the next few weeks.

Burton Eller, spokesman for the USDA’s Farm Service Agency, said Friday that the bill is still being drafted, but that it will be presented to Congress before July 1.

Eller indicated that the bill would not address conservation programs or other broader issues within the debate over farm subsidies, largely because the WTO is not mandating that at this time.

“To go broader would probably not be appropriate at this time, and probably would not be well-received on the Hill at this time,” he said.

Representatives of the National Cotton Council of America did not return calls seeking comment as of press time.

One farm industry lobbyist said farm groups are looking for a short-term change this year and don’t want to deal with conservation issues until the next rewrite of the farm bill in two years.

“I don’t think you’re talking about wholesale change,” said the lobbyist, who acknowledged that, “There are some who say this really means we need to totally change everything.”

The lobbyist said farm groups are hoping to resolve many of the cotton subsidy issues through more trade negations with Brazil and the WTO.

Sen. Thad Cochran (R-Miss.), who has also served as Senate Agriculture Chairman, said the United States already spends enough money on agricultural conservation programs and indicated that he would prefer for international trade negotiations to continue.

“I’m not giving up on the idea that we can’t win the debate in the world community on this subject,” said Cochran. “We shouldn’t act as if we’ve lost the argument.”

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