The United States has appealed the latest ruling in Brazil's long-running World Trade Organisation challenge of US cotton subsidies, a case that has exposed vulnerabilities in US farm supports.
US officials are contesting last year's WTO compliance panel ruling that the United States was still violating world trade rules despite steps to remove some cotton supports, Gretchen Hamel, a spokeswoman for US Trade Representative Susan Schwab, said on Wednesday. The Bush administration's appeal will challenge the finding that government marketing loan and counter-cyclical payments, a staple of crop supports, have led to an increase in cotton output and exports, which then suppressed world prices.
An appeal could last 90 to 120 days, according to industry sources. If Brazil prevails after an appeal, it will likely seek to use trade retaliation against US products.
The case, which Brazil launched in 2002, forced the United States in 2006 to dismantle part of its multibillion-dollar support system for farmers. Other countries stepped forward to challenge US farm subsidies, complaining they deepen poverty for hapless competitors in the developing world and bring the spectre of trade retaliation.
The United States is the world's leading exporter of cotton, corn and other crops. The National Cotton Council, which represents US industry, welcomed the decision to appeal, but sought to highlight changing price and production conditions it hopes will turn the case in its favour. "It is difficult to understand how the United States could be deemed to be depressing world prices of cotton when world prices are rising, US production is declining and expenditures under the cotton loan program have fallen to zero for 2007," said Larry McClendon, chairman of the National Cotton Council.
Cotton subsidies, which had averaged billions of dollars a year, have declined as cotton prices climbed in step with a boom in grain and oilseed prices. Price-linked US subsidy outlays fell sharply in 2007, and are expected to be only several hundred million dollars in 2008, with prices comfortably above the trigger of 52 cents/lb.
The coming cotton crop is expected to be the smallest in 10 years at 15.4 million bales. But it is unclear how changing crop conditions could prompt a reversal of the WTO panel's decision, which looked at the historical impact of US subsidies.