The World Trade Organization (WTO) appeals body on Monday sided with Brazil in its long-running complaint against the U.S. cotton program. And one ag policy expert believes the decision paves the way for future successful WTO challenges against other key aspects of the U.S. farm safety net.

The latest WTO ruling found the U.S. has not fully complied with a decision against the U.S cotton program in March of 2006, even though the U.S. immediately dismantled the Step 2 cotton export program and modified other export loan guarantee programs in response. But Dr. Brad Lubben, University of Nebraska Extension Public Policy Specialist, told Brownfield the U.S. ignored other important aspects of the WTO decision which found cotton marketing loans and counter-cyclical payments to be illegal.

"We didn't address any of the key findings against the U.S. cotton support program - production support program," Lubben said.

Nevertheless, Sean Spicer, spokesman for the office of the U.S. Trade Representative, told Brownfield the U.S. government strongly disagrees with the most recent WTO decision. Spicer emphasized current global cotton market conditions have rendered the basis for Brazil's original 2002 complaint irrelevant.

"One of the concerns that we have right now with the ruling is that the period that was looked at by the WTO, cotton prices since then have risen substantially and are expected to remain high," Spicer said.

But Lubben disagrees with that reasoning. And he suggested the argument probably won’t cut much ice with international trade lawyers, either.

"It certainly won't hold the test of a court case," said Lubben. "Situational compliance is what I've called it - we're compliant only as long as prices stay high."

The latest WTO ruling paves the way for Brazil to impose up to a billion dollars a year in punitive trade sanctions against the U.S. But according to Spicer, that won't happen immediately.

"There are some additional steps that must be taken in terms of going through both the dispute body in Geneva and then going to arbitration," Spicer said. "So, we've got a ways to go."

Spicer added the most recent WTO ruling has no bearing on a similar WTO complaint against U.S. farm programs brought by Canada last year over corn. Lubben, in contrast, believes U.S. farm programs are vulnerable to further WTO challenges like that brought by Canada, and have been, if anything, made even more vulnerable as constituted in the 2008 farm law.

"Congress has not thrown out a new farm bill that looks like reform to the WTO," Lubben said.

But Lubben also pointed out that a successful case in the WTO only entitles a complainant to impose countervailing duties. He noted that the European Union continues to block U.S. hormone-treated beef despite two separate WTO rulings against the EU ban.

"None of this promises we'll change policy," said Lubben. "It only promises we'll have more complaints and more dispute settlement to go through."

Tuesday, June 3, 2008, 3:47 PM

by Peter Shinn

Source: www.brownfieldnetwork.com