Why is the US bribing Brazilian farmers?

The United States subsidises its country's farmers, to the tune of $250 billion since 1995. More specifically, the United States subsidises its cotton farmers, to the tune of $3.5 billion a year since 2000. Cotton subsidies have been a fact of life since the 1930s. As of now, however, the United States also subsidises Brazilian cotton farmers. This is something new, says National Journal columnist Jonathan Rauch.

In 2002, Brazil filed a complaint against U.S. cotton subsidies with the World Trade Organisation (WTO), of which the United States is a member.

Brazil argued that Washington's generous cotton program violated trade rules.

Despite some legislative and administrative efforts by the United States to tweak the subsidies, last year the WTO ruled generally in Brazil's favour.

Brazil won the right to levy retaliatory duties on more than $800 million worth of U.S. exports annually, a prospect that manufacturers here reacted to with alarm.

The Obama administration found itself in a hard spot. Substantially changing farm subsidies requires an act of Congress, but the next farm bill is not due until 2012, and trying to get lawmakers to approve a stand-alone subsidy cut seems out of the question. A trade war with Brazil, however, is the last thing that Washington needs, particularly when the United States has been found to be in the wrong, says Rauch.

Therefore, last month the administration announced a deal with the Brazilians. In due course, Congress will change the cotton program. Until that happens, the U.S. government will send Brazil an annual check for $147.3 million (a sum based on estimates of the cotton subsidies' economic cost to Brazil), which Brazil is to spend on "technical assistance and capacity building" for agribusiness. Translation: Washington is bribing Brazilian farmers to keep illegal subsidies flowing to U.S. farmers, says Rauch.

Source: Jonathan Rauch, Why You're Bribing Brazilian Farmers, Jewish World Review, June 1, 2010.

For text: ,a href=”http://www.jewishworldreview.com/jonathan/rauch060110.php3”>http://www.jewishworldreview.com/jonathan/rauch060110.php3

For more on Federal Spending & Budget Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=25

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 08 June 2010
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