Bridges Weekly Trade News Digest • Volume 6 • Number 33 • 2nd October 2002
Dispute Settlement I: Brazil - Sugar & Cotton
At a 27 September meeting of the Dispute Settlement Body (DSB), Brazil announced its intention (together with Australia) to begin consultations with the EC over sugar subsidies and with the US over cotton subsidies. In the latter instance, Brazil’s case has been bolstered by a recent Oxfam report on the destructive impact of developed country cotton support on Africa, as well as potential support from West African countries.
Brazil-EC sugar
On 27 September, Brazil and Australia commenced consultations in the DSB against the European Union over its sugar subsidies (see related paragraphs in Agriculture story, this issue). The two countries say that the EU subsidies are trade distortive and fall afoul of WTO rules. For its part, Brazil has targeted exports of the so-called "C" sugar quota, and export subsidies exceeding the EU reduction commitments. The EU’s C sugar quota covers sugar produced above domestic production quotas and which cannot be sold internally during the year it is produced. Due to export subsidies, this sugar is sold on the global market at what Brazil says is below the cost of production. In its request for talks with the EU, Australia said the EU’s sugar regime violates numerous provisions of the WTO’s Agreement on Agriculture, the Agreement on Subsidies and Countervailing Measures and the GATT.
Brazil-US cotton
Also at the 27 September DSB meeting, Brazil requested consultations over cotton subsidies imposed by the US. Brazil contends that the subsidies granted by the government of the US to its cotton farmers, such as marketing loans, export credits, commodity certificates and direct payments, are depressing world prices and are injurious to Brazilian cotton growers. Brazil claims that the cotton subsidies are exempted from the normal immunity granted under the so-called "peace clause" of the WTO’s Agreement on Agriculture (AoA), which protects countries using subsidies which comply with the Agreement from being challenged under other WTO agreements. Article 13 of the AoA exempts domestic support measures that comply with the peace clause from being challenged as illegal subsidies or as nullifying or impairing benefits normally accruing to a WTO Member through dispute settlement proceedings. This immunity, however, only applies as long as the level of domestic support for a commodity remains at or below 1992 levels. Brazil maintains that since 1992, the US has doubled the level of support to its farmers through subsidies programs.
Cotton’s impact on Africa highlighted
In news relating to the cotton dispute, on 30 September, Oxfam International published a report entitled "Cultivating Poverty: The Impact of US Cotton Subsidies on Africa". The report details how subsidies given to American cotton farmers encourage over-production and export dumping. According to the report, this has led to artificially low world cotton prices, thereby devastating African cotton farmers, who find it impossible to compete. According to the report, "while America’s cotton barons get rich, African farmers suffer the consequences." Sources indicate that the Oxfam report could significantly embolden African countries seeking to challenge US cotton subsidies, and at the minimum raise awareness within civil society and governments about the extent of the crisis faced by cotton farmers in Africa.
Sources indicate that a WTO challenge to US cotton subsidies could also be forthcoming from members of the West African Economic and Monetary Union (UEMOA) (Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo). These countries are reportedly exploring options to challenge cotton subsidies in developed countries to counter the current cotton market crisis and to expand their market access opportunities. Previously, on 24 June 2002, the Ministers of Agriculture of the UEMOA met in Abidjan (Côte d’Ivoire) to search for a common strategy to meet the market crisis on cotton products.
In both the cotton and sugar disputes, sources indicate that it is unlikely the consultations will result in mutually agreeable settlements. If no agreement is reached via consultations, the disputes will likely reach the panel stage within the next 60 days.
"Brazil - Cotton and Sugar Subsidies" WTO Reporter, 6 October 2002; "UEMOA - Cotton Subsidies" Afrol News 15 July 2002; Oxfam Report, Cultivating Poverty: The Impact of US Cotton Subsidies on Africa.