The dispute started when Brazil, the world’s fifth largest cotton producer, claimed the United States, the world’s third largest cotton producer, is able to control global cotton prices and stay at or near the top of production through its agricultural subsidies, and for the past seven years the WTO has agreed. The 2009 WTO ruling in favor of Brazil allowed Brazil to impose sanctions on $829 million on U.S. goods which would have come into effect a day before the deal was reached with U.S. negotiators. Beyond the nearly $150 million American taxpayers will now be sending to Brazilian cotton farmers, the U.S. also agreed to slightly open up the U.S. market to Brazilian beef, as well as make “tweaks” to export credit guarantees.
The United States pays farmers roughly $3 billion annually to grow and market cotton. American farmers are helped, but only at the expense of the rest of the American population, as the government must tax its citizens more in order to subsidize U.S. farmers. With this deal, not only are taxpayers forced to foot the bill for an industry not willing to compete in the market, now they are also stuck with a payoff to appease Brazil. This cotton baron welfare program has additional implications beyond the Brazil dispute; artificially boosting the cotton supply, driving down the price and forcing cotton farmers in developing nations, especially African nations, out of business.
Rather than enacting an easy short term fix, the Obama Administration should scrap the costly and illegal cotton subsidy program. Its these types of trade barriers that lead to higher prices which hurt the average consumer in both the short and long runs.