Four Congressmen Urge Ag Reform, Not Cotton Payments to Brazil
Four members of the House of Representatives1 have sent a letter to President Obama urging him to utilize all available resources to reform U.S. agricultural subsidy programs, in particular cotton, instead of moving forward with the measures the U.S. recently agreed to as a temporary solution to the upland cotton dispute with Brazil.
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U.S. Agreed to Fund Brazilian Cotton Programs, Modify GSM-102 Program, Etc
The letter responds to a recent U.S.-Brazil Memorandum of Understanding in which Brazil agreed to temporarily delay imposition of its WTO-authorized additional duties of 12-100% on numerous U.S. products, and the U.S. agreed to establish a fund to support Brazilian cotton programs, modify its GSM-102 program2, etc. In the meantime, the two sides agreed to work toward resolution of the dispute. (See ITT’s Online Archives or 04/21/10 news, (Ref: 10042110), for most recent BP summary.)
Reform Needed, Many U.S. Products Affected by Retaliation
According to the letter, the World Trade Organization’s rulings in the upland cotton dispute and the subsequent negotiations with Brazil make the need to overhaul the U.S. cotton program more apparent than ever.
Because Congress chose not to reform or repeal U.S. cotton subsidies during the reauthorization of the Farm Bill in 2007-2008, a wide array of U.S. businesses are now caught up in Brazil’s authorized retaliation. This is because the WTO authorized Brazil to impose retaliatory sanctions in the form of both higher tariffs on goods imported from the U.S. and the suspension of U.S. intellectual property rights. (See ITT’s Online Archives or 03/09/10 and 03/19/10 news, (Ref: 10030910) and (Ref: 10031915), for BP summaries of the list of U.S. products which were set for retaliation by Brazil and its proposed list of IPR retaliation, both of which are extensive.)
Current Deal Is Fiscally Irresponsible and Distorting
The letter states that instead of effectively reforming its subsidy programs, the U.S. is electing to pay $147.3 million annually to Brazilian agribusiness so that we can continue to pay around $3 billion a year to large U.S. agribusiness. It describes this policy as fiscally irresponsible and a market distortion.
Waiting Until 2012 Farm Bill to Fix Cotton Is Too Costly
The letter points out that if the U.S. waits to reform its cotton program until the 2012 Farm Bill, the U.S. will have spent close to a half a billion dollars in “technical assistance” to Brazilian agribusiness. Considering the current fiscal environment, the group of Representatives is urging reform now.
Eliminating Cotton Subsidies Would Save $1.8 Billion Annually
According to the letter, eliminating cotton subsidies wholesale or at least lowering cotton program price triggers to levels more reflective of market conditions would mitigate market distortions and save an average of $1.8 billion per year in federal program costs, at a minimum. In addition, making further needed reforms to the GSM-102 program could save approximately $300 million per year.
1The letter is from Representatives Flake (R), Ryan (R), Kind (D), and Frank (D).
2The GSM-102 program helps to ensure that credit is available to finance commercial exports of U.S. agricultural products on competitive credit terms. By allowing assignment of the guarantee by the U.S. exporter to an approved U.S. financial institution, the program guarantees credit extended by the approved U.S. financial institution to approved foreign banks.
Letter (dated 04/22/10) available at http://flake.house.gov/UploadedFiles/Brazil_Cotton_Subsidy_PresObama_4.22.10.pdf
Rep. Frank press release (dated 04/23/10) available at http://www.house.gov/frank/pressreleases/2010/04-23-10-cotton-subsidies.html
Rep. Flake press release (dated 04/23/10) available at http://flake.house.gov/News/DocumentSingle.aspx?DocumentID=182316