Cotton, other subsidies holding back developing producers

GENEVA (AP)--World Trade Organization chief, Pascal Lamy said Oct. 6 further liberalization of the global trade in cotton was needed and that the United States' failure to comply with a recent ruling was "part of the problem" in improving trading conditions for developing countries.

A day after Brazil said it would seek final WTO permission to retaliate for illegal U.S. cotton subsidies, Lamy told a session of the U.N. Conference on Trade and Development that cotton was "of particular concern" for developing countries.

He said WTO members, and specifically the United States, would have to work toward finding ways to eliminate export subsidies and slash trade-distorting farm support.

"Part of the (cotton) problem lies in the WTO and will be addressed as part of the agriculture negotiations," Lamy said. "Another part relates to the implementation of the recent panel decision by the U.S."

On Oct. 5, Brazil said it would request authority from the 148-member WTO to impose trade sanctions on the United States for the Bush administration's failure to act on a March ruling that U.S. aid to cotton farmers violated global trade rules.

Cotton, Lamy said, is "an issue of particular importance to developing countries." He did not comment further on the panel report.

In March, the WTO upheld a ruling condemning government help for cotton producers in the United States, saying that many U.S. programs include illegal export subsidies or domestic payments that are higher than the body's rules allow.

Brazil reserved the right in July to impose $3 billion annually in increased duties on certain U.S. goods to penalize the United States for failing to sufficiently change its export programs if the two sides failed to reach a negotiated settlement.

Brazil said it also would consider penalizing Washington under provisions in the global commerce body's intellectual property and services agreements. Such measures could include targeting U.S. trademarks, patents and commercial services.

The United States lost its appeal of the ruling after insisting that its payments to farmers were within permitted levels and claiming many were not subsidized as defined by the WTO.

U.S. Trade Representative Rob Portman said last month that the U.S. had taken significant steps toward complying with the WTO cotton ruling. The reforms have been sent to Congress, but the legislation has not passed, in part because of the crisis brought on by Hurricane Katrina.

Under an accord last summer, WTO members set up a special committee to deal with cotton within the global body's broader agriculture negotiations. The committee is meant to consider a proposal from West Africa for the elimination of export and domestic subsidies by rich producers.

Poor nations say subsidies in rich nations cause artificially low international prices and hurt farmers in developing countries because rich country producers are able to "dump" their cheap cotton on the world market.