Allgeier: Cotton Decision Should Be Part Of WTO Talks

p>Acting U.S. Trade Representative Peter Allgeier today said the United States wants to comply with a World Trade Organization appeals panel ruling against U.S. cotton subsidies through negotiations in the Doha Round of trade talks rather than through a separate settlement with Brazil. The WTO panel Thursday announced its decision to reject a U.S. appeal of an earlier decision that its domestic and export subsidies on cotton harmed farmers in Brazil and other countries. The ruling is likely to affect other farm programs because it says the production flexibility contracts created by the 1996 "Freedom to Farm" law could not be classified by the WTO as nondistorting subsidies because that law prohibits farmers from planting fruits and vegetables on their land. Under WTO rules, a subsidy qualifies as nondistorting only when there are no restrictions on what farmers plant. According to the rules, the United States and Brazil are supposed to negotiate a settlement within 15 months. If no agreement is reached, Brazil can then ask to impose retaliatory measures against the United States. But the section of the WTO ruling that says export credit guarantee programs and Step2 payments -- made when U.S. prices for cotton fall below northern European prices -- also are prohibited subsidies may mean those programs are supposed to be withdrawn by July 1, 2005.

"Our position on domestic support remains the same. There needs to be harmonizing cuts in support. If you are looking for a really permanent solution, the best way is to do it in a negotiation ... We think the best way is to complete the round by the end of 2006," said Allgeier, who spoke to reporters by conference call from Mombasa, Kenya, where he was attending a meeting of about 30 trade ministers. Allgeier also said the European Union should agree to bigger cuts in its subsidies during those negotiations because its subsidies are larger than those of the United States. "Our Congress rightly is insisting if we are going to cut domestic support, those with even higher domestic support should be doing the same," said Allgeier.

Both Senate Finance Chairman Grassley and ranking member Max Baucus, D-Mont., urged the cotton decision be addressed in the Doha Round negotiations as well. Grassley added that those countries supporting the WTO ruling should open up their markets to imports. "Those nations that are pursuing reduction of agricultural subsidies by developed nations through litigation need to realize that without increased access to agricultural markets in developed and developing countries alike, economic prosperity will elude them," Grassley said. Baucus also criticized the WTO decision as "overly broad, reaching into elements of U.S. farm policy that should have been beyond the scope of its review."

Not all members of Congress were critical of the WTO decision. Rep. Jeff Flake, R-Ariz., Thursday praised it by saying "the WTO's decision tells us what we should have already known: U.S. agriculture subsidies are too high. Unfortunately, the last farm bill Congress passed reversed a trend of weaning agricultural growers off the federal dole. This decision is an opportunity for Congress to go back and fix our mistake." While Arizona is a major cotton-growing state, Flake's district is in Phoenix.