By Catherine
Kent
In 2002, Brazil
received a favorable judgment before the World Trade Organization on the claim
that the United States’s cotton subsidies violate WTO principles of fair trade
by placing downward pressure on the world price. Brazil resolved to waive sanctions
on the U.S. and instead receive yearly payments. The U.S. has responded by continuing
its violations, and to use even more U.S. taxpayer money to do so. So what’s the
problem? Aside from these harmful international effects, the cotton subsidies
are part of a farm bill that take up a large amount of U.S. taxpayer dollars
that could arguably be used more effectively elsewhere; the temporary deal that
President Obama struck with Brazil in the beginning of October cost $300
million. Rather than reform the practice of subsidizing cotton farmers that
benefits so few at the expense of so many, the U.S. would sooner pay MORE to
continue this practice.
U.S. cotton subsidies, created
as part of a temporary form of relief for farmers during the Great Depression, have
far surpassed their intended function. It has essentially become a permanent law,
and the well-meaning subsidies that once made sense as necessary aid have morphed
into a massive spending bill that drains billions of taxpayer dollars into the
farming industry. Since the 1930’s, cotton subsidies have been steadily increasing as part of the farm
bill, in the form of federally subsidized farmers’ insurance to protect farmers
against the loss of crop or income. These subsidies have allowed the U.S.
cotton market to distort the international cotton trade and
harm the naturally alive cotton industries of other
nations.
Notwithstanding the
blatant inequity of cotton subsidies, the protection that these subsidies
themselves provide is overly superfluous in light of the deep history of
advantages for U.S. cotton farmers. Thanks to the abundance of free (slave)
labor, the industry had an artificial jump-start. This was accompanied by the
creation of the cotton gin in the 1790s, and later on the
U.S. farmers’ ability to stay one step ahead of the international cotton game
with farming machinery and pesticide development (think Monsanto and DuPont ). Third world nations
who are arguably better suited in terms of natural resources and labor
available never stood a chance, as they cannot even begin to compete with the deeply
planted seeds (pun intended) of the U.S. cotton industry, topped with the Miracle
Grow (a steady stream of subsidies) fed over the years by the U.S. Government.
For some reason, it
took other nations’ complaints and appeals to the World Trade Organization to
shed light on this huge market inefficiency. The recent $300 million payment to Brazil combined
with the $90 billion subsidies for crop insurance to
cover farmers from FY 2014 to FY 2023 will alert the United States to the
ridiculous be protections granted to cotton farmers.
The WTO gave its blessing to Brazil to
sanction the U.S. in the amount of $830 million because of the trade
distortion. Brazil and the U.S. reached a settlement in the beginning of this
October for $300 million to be paid to Brazil in exchange for Brazil not
bringing any more WTO actions for 5 years. Aside from this pay-off having an
expiration date, there are additional consequences: if the U.S. may reach a
settlement that ends sanctions rather than stop the practice that inspired
them, are allowed to do this, other violators (ahem, China), are likely to be emboldened
to do the same. In the simplest terms, the ultimate purpose of deterring
countries from violating fair trade practices is undermined by the WTO when it allows
countries to pay violation fees that allow them to continue violating. Not only
is this bad for the international community, but it is bad for U.S. taxpayers,
who will continue to feed this artificially successful cotton industry.
The answer is reform,
not a Band-Aid. With trade globalization and a universal commitment to helping
third world countries’ development being well-established concepts, it is hard
to argue that the U.S. should not unplug the domestic cotton industry – allow
it to die, move on to more self-sustaining industries, and allow the
international cotton price to reflect its true market value. Sure, ripping off
the Band-Aid hurts a little, but the sting is temporary and necessary to allow
taxpayer dollars to be used in a way that provides more benefit to more people
domestically, and fosters an even-playing field internationally.
Image source: http://www.landscapehdwalls.com/cotton-field-989/
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