Geneva (June 18, 2004) – International agency Oxfam said that last night's ruling at the WTO against the US cotton subsidy regime vindicates the claims by Brazil and West African countries that US subsidies depress cotton prices and harm cotton farmers around the world. Today's WTO ruling confirms the preliminary ruling last month in favour of Brazil against the $3.2 billion US cotton program. Brazil's claim was supported by four West African countries.
"This is, above all, a victory for the 15 million people in West Africa who depend on cotton for their livelihoods. They can now have hope that the US government will stop destroying their livelihoods through politically motivated subsidies. The challenge for the international community, including the New Zealand government, is to put pressure on the US to ensure that the trade distorting subsidies end.
"This ruling attacks the multi-billion-dollar corporate welfare at the heart of global trade," said Barry Coates. "It is a wake-up call for the US, EU and other rich countries to change the way they've mismanaged and manipulated world trade rules for years in their own interests."
The WTO has found that US cotton subsidies violate global trade rules. The case challenged US use of export credits and other hidden subsidies to dodge promises it had made to reduce dumping. The panel also found that the US misreported other domestic farm programmes as "non-trade distorting" when in fact they are.
The finding will have profound implications on current trade negotiations. It will create huge pressure on the US and other developed countries to reform their agriculture policies. The ruling effectively calls for the dismantlement of close to 50% of export credits used by the US, and puts pressure on the EU is to eliminate export subsidies.
But the ruling goes beyond the category of export subsidies. In recent years, the US has made reforms to its farm programmes to continue massive subsidies to farmers, while complying with WTO rules. However, the ruling states that these programmes fail to comply with WTO requirements that limit trade distorting farm subsidies.
Although this case applies principally to cotton dumping, the same principles will apply on other highly subsidized commodities such as rice, soybeans, dairy and meat. The ruling will strengthen those who call for sharp reductions in subsidies on all major products because current subsidies lead to dumping.
Coates said, "New Zealand farmers should cheer this ruling. It not only implies that a large portion of the US subsidies to other agricultural products, such as dairy and beef are likely to be illegal under the WTO's rules, but it also casts doubt over the legality of many of the EU's subsidies. This signals an end to the creative accounting that has hidden trade distorting subsidies in loopholes that the US, the EU and other rich nations created for themselves during the WTO Uruguay Round.
"The New Zealand government should be more strongly supporting the developing countries that have taken the leadership in the WTO in bringing this case. It is time we declared our support for them.
"Most immediately, this WTO ruling puts cotton back on the centre-stage in world trade negotiations," said Coates. "The bargaining momentum is now firmly behind calls from the West African countries and Brazil for reform of US cotton subsidies."