On April 2, 2008, the WTO’s appellate body convicted the US regarding its cotton subsidies, which had been challenged for several years, particularly by Brazil. Indeed, the South-American nation considers that the subsidies granted to American cotton producers––in the amount of $2.5 billon in 2007––undercut Brazilian cotton producers.
According to WTO, the United States’ actions “are in violation of the agricultural agreement by granting export subsidies that sidestep its commitments.” Following the ruling, Roberto Carvalho de Azevado, Director of the Economic Department at the Brazilian Ministry of Foreign Affairs, stated that Brazil would demand “compensations in the fields of goods and intellectual property.”
This decision also concerns ten million African cotton producers who are heavily penalized by the subsidies, since they cannot compete against North-American cotton producers. In fact, for many African nations––such as Burkina-Faso, Mali, Benin or Chad––cotton production is a critical activity as it provides income to many rural households and represents a significant share of exports.
In spite of this ruling, the United States could abstain from substantially modifying its cotton policy in view of the American Congress recent Farm Bill, which does not set any limit to this type of national support. However, African and Brazilian producers may be reassured as Susan Schwab, the United States Trade Representative, recently stated that this new Farm Bill did not represent “the American supply” in the framework of the Doha Round…