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TRADE-BRAZIL: Cotton Ruling Strengthens the G20

Mario Osava

RIO DE JANEIRO, Apr 29 2004 (IPS) - The World Trade Organisation ruling against U.S. cotton subsidies strengthens Brazil’s leadership of the Group of 20 (G20), a bloc of developing countries, at a key moment in several trade negotiation processes.

The ruling, whose final details are to be released on Jun. 18, was announced Monday. The United States is expected to file an appeal.

The concrete effects of the decision by a WTO dispute settlement panel in favour of exports from cotton-producing countries could take a while to be seen in the cotton sector, but the impact on trade talks will be immediate.

Brazil brought the case in 2002, and the WTO set up a three-member panel to study the complaint in March 2003.

This is a first breach opened up in the U.S., European Union and Japanese defence of the subsidies they shell out to their farmers. Such supports are the main obstacle to the current multilateral trade talks known as the Doha Round, which have made very little progress towards meeting the 2005 deadline for completion.

The G20, with Brazil, India and South Africa at the forefront, emerged prior to the WTO’s ministerial conference in Cancún, Mexico, last year, focused on ensuring that the United States and EU’s agricultural subsidies would be on the negotiating table.


Brazil’s triumph this week encourages other sectors of the farm industry and other countries to ”lose their fear” of using the WTO to question agricultural protectionism, says Helio Tollini, executive director of the Brazilian Association of Cotton Producers, ABRAPA.

Other business associations are turning to ABRAPA, seeking ways to follow the path created by the cotton growers, Tollini told IPS. Wealthy countries that subsidise their farm sector will now have to open their agricultural markets or face new legal actions at the WTO, he predicted.

That “fear” should also be eradicated amongst the governments of developing countries. The Brazilian government “was very resistant” to pressure from the private sector for presenting a claim to the WTO, said Antonio Donizetti, head of foreign trade issues for the Brazilian Confederation of Agriculture and Livestock, CNA.

In 2002, at the insistence of then-secretary of production and commercialisation at the Ministry of Agriculture, Pedro Camargo Neto, Brazil’s Foreign Ministry agreed to go ahead with the challenge against U.S. cotton subsidies.

Brazil also filed a claim with the WTO dispute settlement body against the EU’s subsidies for sugar exports, another battle that could have major repercussions for global trade.

And Argentina is considering a challenge against the U.S. subsidies for its dairy producers, an initiative that has gathered strength now as a result of the cotton ruling.

Meat and oil-producing crops are other products that receive heavy supports in several countries and could be targeted for claims at the WTO, Donizetti told IPS.

If the United States, which dominates international cotton trade with a 40 percent share, were to agree to eliminate subsidies, Brazil could more than double its cotton exports, forecast to reach 500 million tonnes this year, according to ABRAPA.

But that increase in exports will not be possible in the short term, given the likely U.S. appeal of the WTO ruling. And there is no assurance that Washington would change its policy of supporting the 25,000 cotton growers in the United States, because the WTO decision is not binding, but is instead a “moral condemnation”, says Donizetti.

If the United States does not comply, the WTO could authorise Brazil to implement trade reprisals, but that is a step that the country is surely not interested in, he said.

However, the dispute settlement body’s decision undermines the position of the rich countries in the global trade negotiations, and gives the G20 a boost in its fight against domestic supports for agriculture in wealthy nations, said Donizetti.

And Brazil’s perseverance is helping to consolidate its leadership of the group, he added.

This shift in the balance of forces not only affects the Doha Round, but could also influence the talks for setting up the Free Trade Area of the Americas (FTAA), the hemisphere-wide treaty in which the United States refuses to discuss farm subsidies.

It could also have an effect on the negotiations for a free trade agreement between the EU and the Southern Common Market (Mercosur, comprising Argentina, Brazil, Paraguay and Uruguay), which have made progress in the past few months and are expected to wrap up by the end of this year.

If Washington ends its cotton subsidies, the ones who stand to benefit most are the farmers of western Africa, where cotton is of great economic and social importance as the source of income – though paltry currently – for millions of people.

In Benin, for example, cotton represents 40 percent of the country’s export revenues, said Tollini.

 
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