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The Fight Over Cotton: Q&A with Pedro de Camargo Neto

Posted by Yvonne Siu on March 1st, 2007

In 2002, Brazil initiated a WTO dispute settlement case against the US, claiming that its subsidies for upland cotton were illegal under WTO rules, and unfairly hurt cotton farmers in developing countries. The WTO ruled in favor of Brazil, which was seen as a symbolic victory for developing countries. It remains unclear, however, whether the US has taken sufficient steps necessary to reform its farm programs to bring itself into compliance with international trade rules. In light of an upcoming WTO compliance panel ruling expected at the end of March 2007, IPC Member Pedro de Camargo Neto has shared the following insight with what the panel ruling means for rich and poor countries, and the legitimacy of the WTO itself. Mr. Camargo Neto is the former Secretary of Production and Trade for the Brazilian Ministry of Agriculture.

Q: If the compliance panel finds the US to not be in compliance with the 2005 ruling, do you think this will embolden other developing countries to pursue similar legal cases against US agricultural subsidies?

A: I am not sure. The cotton decision should have been enough. It took years to see Canada move on corn. Fortunately. Finally.

Litigation will never substitute for negotiation. Litigation occurs in the absence of negotiation. The sugar case reflects the miniscule amount of progress in sugar trade as a result of the Uruguay Round. The cotton case reflects the wrong route US domestic agricultural policy has taken in recent years.

The delay in the Doha Round was really the factor that necessitated litigation. Without active negotiations taking place, the only alternative for dispute resolution is through litigation.

Q: The dispute settlement process seems complex and burdensome, especially to less developed countries that might not have large legal staffs, and resources to devote to bringing successful cases before the WTO. How could the WTO’s dispute settlement process be changed to give developing countries a better chance of participating?

A: Considering political sensitivities, it is not easy to start a WTO dispute. So, the political decision to challenge a member country is actually more difficult than the legal and technical aspects of litigation. We also should keep in mind that a successful challenge does not necessarily correct what the dispute system has deemed to be wrong, and that retaliation is never a sound solution, particularly for developing countries. Unfortunately, if we believe in a rules-based system, we are obliged to follow its rules. After negotiating for years on these rules, every country should follow them.

The WTO, an institution created to establish collective trade rules, can and should do more. The Secretariat is nearly absent. For example, in the cotton case, the Step 2 program was clearly illegal and in existence for years, yet the WTO Trade Policy Review Mechanism did not identify this illegality. Can the Secretariat follow the agreements more closely? It certainly could, if countries decide to financially and politically support this effort. What to do after identifying irregularities is another story. But the Secretariat could strengthen its capacity for identification. Developing countries need this assistance.

Q: In your opinion, what would the ruling mean for domestic subsidy reform in the US, especially in light of the current farm bill debate?

A: The cotton case has had an important influence in the farm bill debate. The US needs legislation that cannot be challenged. The panel results showed numerous points that will need alteration. Unfortunately, groups in the US are still resisting the WTO’s decision.

In Europe, things unfolded quite differently. The Community used the sugar panel result to promote essential changes in the European sugar regime. The WTO was used as a political force, and not the opposite. The compliance panel is a reflection of the flawed policies pursued by the US, Congress, USTR, and farm groups. Can anyone believe that countercyclical and marketing loan programs, with the volumes of cash they provided, are correct and allowable under the Uruguay Round Agreement? Why not promote change? Fortunately, the renewable energy and agriculture developments will help us all, and the US should have a better farm program by the end of the year.

Q: Why should the US comply fully with the 2005 ruling? What does compliance mean for the WTO system, developing countries, and US participation in the system?

A: Countries should comply if they want to strengthen the rules-based system. If developed countries want others to follow international law, they should follow international agreements, and lead by example. What the US has done by not complying with the cotton ruling is wrong. The WTO dispute system is not better today than it was yesterday. An opportunity to strengthen the rules-based trading system was lost.



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