My (and Your) Tax Dollars to Subsidize Brazilian Cotton Farmers Indefinitely

Great* news!  Because of an agreement reached last week between the United States and Brazil, American citizens will continue to be forced to provide hundreds of millions of tax dollars in hush money"technical assistance" to Brazilian cotton farmers!  Granted, the new agreement also delays the imposition of about $1 billion in Brazilian retaliatory sanctions against American exports due to US refusal to implement multiple adverse WTO rulings against the US cotton subsidy program.  But considering the undeniable fact that such a move was in both country's commercial interests (the sanctions would punish Brazilian consumers and American exporters alike), the big news here is the embarrassing fact that the agreement continues the aforementioned Brazilian briberycompensation.  Cato's Sallie James does a good job summing up this debacle as follows:

Notwithstanding the efforts of four brave congressmen, the belated concession to reality by House Agriculture Committee Chairman Collin Peterson, and the misgivings of trade analysts including myself, it appears that the “temporary” deal struck by Brazil and the United States in April to ward off Brazil’s retaliation for WTO-illegal U.S. cotton supports is here to stay....

You will recall that the deal includes about $147 million worth of taxpayers’ money given to Brazilian cotton farmers in the form of “technical assistance,” just so we can continue our own insane cotton support programs without fear of U.S. exporters (including holders of patents and copyrights) being hit by retaliatory trade barriers and unpunished piracy.

Brazil in some senses has the right idea, of course. They recognize, correctly, that retaliation in the form of increased tariffs on American imports only hurts their own consumers, hence their stated desire for “negotiation and reform” instead of sanctions.  But they sure do have a lot of faith in the willingness of Congress to enact reform without serious pressure from, among others, aggrieved trade partners.

I hope their faith and saint-like patience is rewarded. In the meantime, we have (at least) two more years of subsidizing Brazilan farmers in addition to our own.

What a mess.  But I would disagree with Sallie on one thing: I don't think that the trade-savvy Brazilians have any delusions about the "willingness" of Congress to enact ag subsidy reforms, with or without foreign pressure.  Instead, I think the Brazilians realize perfectly well that (a) this Congress certainly isn't going to do anything about the US cotton program, (b) a billion dollars in trade sanctions will do nothing but harm their struggling economy; and (c) their threat of sanctions loses value the longer it's dangled out there (and it's been dangling for a while now).  So they're going to keep their (remaining) powder dry until (a) the global economy improves and (b) a new Congress takes over in 2011 that will probably be more, umm, "budget-conscious" and will very, very likely be without one of "King Cotton's" biggest champions - Senate Agriculture Committee Chair Blanche Lincoln (D-AR), whose chances of getting re-elected in 2010 are currently hovering between slim and none.  So the Brazilians' move last week might not reflect pie-in-the-sky idealism, but instead some good ol' fashioned DC cynicism.

But regardless of Brazil's motivations, one thing is very clear here: the US government's unwillingness to reform its insane, illegal agricultural subsidy programs means that, for the foreseeable future, American taxpayers will be forced to not only throw billions of their hard-earned dollars at American agribusiness, but also dish out millions in bribes to Brazil's cotton farmers.

Is it any wonder why a clear majority of the American people have finally had enough?


* "Great" may or may not actually mean "crappy."

Brave Reps Fight the Congressional Ag Subsidy Machine; Machine Yawns

A couple weeks ago, I wrote about the valiant bi-partisan effort in the US House of Representatives to repeal American cotton subsidies that have been repeatedly ruled illegal under WTO rules and have caused the Obama administration to insanely subsidize Brazilian cotton farmers to the tune of $150 million in order to delay Brazil's imposition of $1 billion in sanctions on US exports pursuant to those WTO rulings.  Back then, Reps. Jeff Flake (R-AZ), Ron Kind (D-WI), Paul Ryan (R-WI), and Barney Frank (D-MA) sent a great letter to President Obama pointing out the insanity of our current farm policy and asking that the White House lead the repeal effort - a letter that apparently went straight from Capitol Hill to the Oval Office trashcan.  (Shocking, I know.)

Undaunted, these brave and lonely Congressmen gained two more colleagues, Dave Reichert (R-WA) and Earl Blumenauer (D-OR), and issued on May 4 another sternly-worded letter on the absurd American cotton subsidies and the embarrassing US-Brazil dispute.  This time, the letter went to an equally unreceptive audience, if not moreso - the Chairs and ranking members of the Senate and House Agriculture committees: Sens. Blanche Lincoln (D-AR) and Saxby Chambliss (R-GA), and Reps. Collin Peterson (D-MN) and Rep. Frank Lucas (R-OK).  The full text of the letter is printed below, and you've gotta admire the signatories' efforts - there's simply no doubt that they have a very strong argument that the current US cotton subsidy situation is obscene. 

However, you've also gotta chuckle at the idea of this letter landing on the desks of proven cotton-benefactors Lincoln and Chambliss, of "Wheat Leader" Peterson, and of farm subsidy "champion" Lucas (whose district, by the way, has received almost 3.4 billion in farm subsidies since he took office).  Yeah, I'm sure that these subsidy-loving pols are going to get right on this matter.  You know, right after they finish keynoting the next annual meeting of the National Cotton Council.

But hey, at least these guys are trying.  That's a helluva a lot more than we can say about Lincoln, Chambliss, Peterson or Lucas.  Or President Obama for that matter.

------

The Honorable Blanche Lincoln
Chairman
Senate Committee on Agriculture, Forestry and Nutrition
328 Russell Senate Office Building
Washington, DC 20510-6200

The Honorable Collin Peterson
Chairman
House Committee on Agriculture
1301 Longworth House Office Building
Washington, DC 20515

The Honorable Saxby Chambliss
Ranking Member
Senate Committee on Agriculture, Forestry and Nutrition
416 Russell Senate Office Building
Washington, DC 20510-6200

The Honorable Frank Lucas
Ranking Member
House Committee on Agriculture
1305 Longworth House Office Building Washington, DC 20515


Dear Senators Lincoln and Chambliss and Congressmen Peterson and Lucas,

With the April 6, 2010 announcement by U.S. Trade Representative Kirk and Secretary of Agriculture Vilsack of an agreement between the U.S. and Brazil over the cotton dispute, the need to overhaul our domestic commodity support programs is more apparent than ever. Among other commitments, the Administration has agreed to begin paying Brazil $147.3 million annually for “technical assistance and capacity building” to head off the threat of retaliatory tariffs on exports costing U.S. industry $560 million and unprecedented sanctions against U.S. intellectual property rights costing $260 million. We will subsidize both U.S. cotton farmers as well as Brazilian agribusiness until the issue is resolved or until the passage of the next farm bill, while Brazil retains its right to move forward with its countermeasures.

It is clear that the necessary authority to resolve this issue rests with Congress and we write to respectfully inquire about respective committee plans moving forward. Between the threat to American innovation from cross retaliation against intellectual property rights of U.S. companies and budgetary pressures that make the payments to Brazil all the more disconcerting, there is a growing need to make fundamental changes in the U.S. farm policy. Passage of the next farm bill is years away at best and at worst there is no guarantee that it will include sufficient reforms to prevent Brazil from putting into place the tariffs and sanctions they have deferred for now. We believe it is imperative that the Committees address this issue and request that your Committees consider legislation that would resolve the cotton issue in advance of the coming farm bill reauthorization. Alternatively, if the farm bill is deemed to be the appropriate process to address this issue, we urge the Committees to rank the cotton issue among your top farm bill priorities and ask that you commit to ensuring the inclusion of sufficient legislative reforms to put this matter to rest.

While the U.S. cotton program has undergone revision by both Congress and the Administration, these changes were insufficient to resolve the cotton issue. Now the stakes have been raised with a wide array of American businesses being used as a lever against the U.S. in Brazil’s authorized retaliation. It is clear that our agricultural subsidies are outdated and are quickly becoming a liability for future trade growth. We understand these matters are complex. However, without such a commitment or plans to deal with the issue in advance of the farm bill, it would unfortunately appear that the Administration’s actions will have only delayed the inevitable retaliation against American businesses and workers at the cost of $143.7 million per year.

We look forward to working with you to address the pressing need to reform the agricultural subsidy programs, and in particular the cotton programs, so that they will help rather than hinder international trade.


Sincerely,


JEFF FLAKE
RON KIND
PAUL RYAN
BARNEY FRANK
DAVID REICHERT
EARL BLUMENAUER

US Bribes, Delays Its Way Out of Cotton Retaliation; American Taxpayers, African Farmers Foot the Bill

There was some big news earlier this week re: the US-Brazil dispute over WTO-illegal American cotton subsidies.  Let's have Reuters explain:

The United States on Tuesday headed off a move by Brazil to impose penalties on a wide range of U.S. goods by offering concessions on a export loan guarantee program and said it would try to negotiate an end to a long-standing trade spat over cotton.

The last-minute proposal came as Brazil was set to impose tariffs and lift protections on $829 million in U.S. goods, which would have been its right after a 2009 World Trade Organization ruling against U.S. cotton subsidies....

Under the plan, the United States pledged to make some short-term tweaks to its export credit guarantees and give Brazil about $147.3 million per year in damages for a "technical assistance" fund.

Brazil will give the U.S. Congress more time to figure out a longer-term solution to programs ruled illegal by the WTO.

The U.S. plan prompted Brazil to delay its planned moves, pending further bilateral talks, which Washington hopes will be complete by June....

Brazil recognized that it was impossible for the Obama administration to make major changes to farm programs without changes in legislation in Congress -- difficult to accomplish quickly in a sharply partisan environment, [former USTR official Jon] Huenemann said.

"The notion of breaking off something for just cotton outside of the Farm Bill process is an extremely tall order, and the Brazilians knew that," he said.

The plan buys Congress time to deal with cotton in its five-year Farm Bill law, due for renewal in 2012....

Blanche Lincoln, chairman of the Senate Agriculture Committee, and her Republican counterpart, Saxby Chambliss, said they were open to looking at changes for the Farm Bill.

"Ultimately, Congress, and the Senate and House Agriculture Committees in particular, are responsible for crafting changes to these programs," the senators noted.

The U.S. National Cotton Council, which represents farmers, also said it was pleased that the negotiations on long-term changes will be handled by Congress in the Farm Bill process.

The USDA announced on Tuesday it would cancel unused export credit guarantees by April 9, and would offer any remaining credits under new rates, with details still to be announced.

The news did not immediately affect cotton futures prices. One trader said the market would watch for further details.

USDA also said it would work to find ways to allow imports of fresh beef from Brazil.

So basically, the deal is as follows: Brazil won't impose almost $900m in retaliatory sanctions on US goods, and in return, the US will give Brazilian cotton almost $150m per year in "technical assistance" money, will slightly expand the US market to Brazilian beef, and will "tweak" its export credit guarantee program.  Meanwhile, US cotton subsidies - which the WTO has repeatedly found are illegal under WTO rules and distort global cotton markets to the detriment of Brazilian and poor African cotton producers - will remain untouched and the dispute will drag on.  And over time, Tom Vilsack, Blanche Lincoln (D-AR) and Saxby Chambliss (R-GA) will  help craft a long-term fix to US cotton subsidies through the 2012 Farm Bill.

What a total crock.

Now, don't get me wrong, the US-Brazil deal is not all bad.  Indeed, I see two good results: (1) it helps US exporters and Brazilian consumers by delaying the imposition of hundreds of millions of dollars in sanctions on US exports to Brazil; and (2) it helps solidify one of my 2010 trade predictions (i.e., "There will be no change to US farm... subsidy policies").

Of course "good" (and I obviously use that term loosely) thing number (2) leads us to the bad things about this deal, and boy are they bad.  First and foremost, the deal does nothing to end WTO-illegal US cotton subsidies that cost American taxpayers $2.8 billion dollars per year, distort global cotton markets, and harm poor cotton producers across the globe, especially in Africa.  Second, it puts US taxpayers on the hook for another $150 million in bribessubsidies - to Brazilian farmers!  Deus meu!  Third, it delays ultimate resolution of an onerous WTO dispute that's been tarnishing the United States' international reputation for years.  And fourth, the deal puts the cotton dispute's long-term fate in the hands of Tom "Subsidy Recipient" Vilsack and two of Congress' biggest cotton subsidizers - Sens. Blanche Lincoln and Saxby Chambliss.

No wonder that the National Cotton Council was "pleased that the negotiations on long-term changes will be handled by Congress in the Farm Bill process."  They're keeping all of their taxpayer cheese, and their top two wolves are guarding the Farm Bill hen house!

Unbelievable.

Oh, who am I kidding, this whole "deal" is totally believable.  Despite loud pleas from free market advocates and Republican leaders (which Huenemann forgot to mention to Reuters, by the way) to really resolve the US-Brazil cotton dispute by - crazy, I know - actually terminating the WTO-illegal, trade distorting American cotton subsidies, the Obama administration has taken the easy way out.  Of course, only this administration would think that $2.8 billion plus another $150 million in US taxpayer money (that we, of course, have to borrow because we're broke) would be "easy," but hey, that's how this White House rolls, baby.  I mean why tick off agribusiness and its big supporters on Capitol Hill (from both parties) during an election year when you can just stick it to US taxpayers and poor African farmers (or consumers or exporters or...)?

I don't know about you, but I just can't wait to see what June's big bilateral deal will be.  I mean, if this initial fix is any indication, taxpayers are really going to get screwed then.

But hey, at least US cotton farmers are happy.  Ugh.