Brazil–United States cotton dispute

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Brazil v. United States
Court WTO Appellate Body
Full case name United States — Subsidies on Upland Cotton
Argued March 18 2003
Decided March 3, 2005
Citation(s) DS267
U.S. support for its cotton industry was inconsistent with its obligations under the SCM Agreement.
Laws applied
SCM Agreement

The Brazil–United States cotton dispute was a World Trade Organization dispute settlement case (DS267) on the issue of unfair subsidies on cotton. In 2002, Brazil—a major cotton export competitor—expressed its growing concerns about United States cotton subsidies by initiating a WTO dispute settlement case (DS267) against certain features of the U.S. cotton program. Focusing on six specific claims relating to US payment programmes, Brazil argued that the US had failed to abide by its commitments in the Uruguay Round Agreement on Agriculture (AoA) and the Agreement on Subsidies and Countervailing Measures (SCM).[1] On September 8, 2004, a WTO dispute settlement (DS) panel ruled against the United States on several key issues in case.[2]

The United States is the second-largest producer and world’s largest exporter of cotton. In recent years, the United States has been exporting an increasing share of its annual production, due in large part to a decline in domestic mill use.[2]

On August 31, 2009, after a series of recourses by both United States and Brazil, WTO issued a decision on the dispute DS267.[3][4]

The implications of the ruling are that it shows that the US and European Union have used loopholes and creative accounting to continue dumping products on developing markets, hurting impoverished developing country farmers. The WTO dispute settlement panel also found that the USA misreported certain programmes as ‘non trade-distorting’, when in fact they were trade-distorting.[5]

In October 2014, a mutually acceptable solution to the cotton dispute was reached. Under the terms of the agreement, the US granted a one-off payment of US$300 million to the Brazilian Cotton Institute. [6]

Implications for African countries[edit]

A study, commissioned by ICTSD and conducted by Mario Jales of Cornell University, suggests that cotton prices would have risen over a 1998-2007 base period if the US had cut subsidies that were deemed unlawful by a dispute panel at the World Trade Organisation (WTO), following complaints by Brazil.[7]

Farmers in poor countries could have gained from an average 6 percent increase in world cotton prices over the same base period, if the US had accepted proposals made by African nations to slash the lavish subsidies enjoyed by rich country producers.[1][7]

Cotton production in the US could have declined by as much as 15 percent, the study suggests, if African proposals in the draft Doha accord were applied to historical output levels over the ten-year period examined by the study, and production in the EU could drop by as much as 30 percent. However, production volumes could increase by as much as 3-3.5 percent in Brazil, Central Asia and West Africa - with production values growing by up to 13 percent.[7]

Similarly, if African proposals that are included in the Doha draft were applied to trade flows over the ten-year period that the study examines, US export volumes would have fallen by 16 percent on average. Average export volumes would have increased dramatically for Brazil and India (12-14 percent), and by a lower but still substantial amount in Uzbekistan, the ‘C-4′ West African cotton producing countries (Benin, Burkina Faso, Chad and Mali), and Australia (2-2.5 percent).[7]


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