US cotton subsidy

The World Trade Organisation (WTO) has conveyed to the USA that its subsidy to cotton growers has had an adverse impact on the international trade.
Although the details in this connection are yet to be made public by the WTO, this development was revealed by the White House spokesman at his press conference the other day. However, he asserted that no action in compliance with the WTO interim ruling was proposed by US government, which would continue to defend its agricultural interests in co-ordination with the agricultural committee of Congress.
A complaint was lodged at the WTO by Brazil in March last year pinpointing that the US government had paid $4 billion as subsidy to its cotton growers for the crop worth $3 billion only for the year ending July 2002.
It was maintained that as a result of the subsidisation of cotton crop by the US government, which artificially lowered prices in the world market, the farmers in Africa and other countries suffered colossal losses in the unhealthy competition from the US cotton dumping.
In response to this complaint, the WTO set up a panel of three judges to examine the case. The interim judgement, which remains confidential, was conveyed to both USA and Brazil recently.
The subsidy on raw cotton is undoubtedly an important issue in the context of the overall farm subsidies which continue to be a source of friction, and is likely to be addressed in the second round of the WTO negotiations. As may be noted from the comments of the White House spokesman, there appears to be little possibility of compliance of the US government with the WTO judgement.
On the contrary, he took the stand that US policy in this regard was within the framework of the WTO requirements, which implied that the US subsidy on raw cotton would remain unchanged for the time being.
It may be recalled here that the US government has been continuously supporting its cotton growers by purchasing their crop through a public sector corporation known as the Commodity Credit Corporation.
The Corporation maintained these cotton stocks which were sold to friendly governments under the PL-480 programme. The sale proceeds under this programme were recoverable from the recipient countries in local currencies.
The subsidisation of its cotton by the USA has also at times adversely affected Pakistan's cotton yarn exports that faced unfair competition in the world market from the yarn produced by countries importing the subsidised US cotton.
Similarly, Pakistan's cotton exports were at a disadvantage in competing with the low priced, subsidised US cotton. However, since Pakistan has no more surplus of cotton to export, the problem has automatically disappeared.
The subsidisation of farm products is a common practice in USA and Europe, which is followed with impunity while they preach the principle of free market mechanism to the developing countries in agriculture sector and all other spheres of economic activity.
In fact, the subsidy by the developed world has an immense damaging impact on the economic efforts of the developing world in particular. It is undoubtedly a stumbling block in the way of their rapid economic progress and hence perpetuates of poverty in a vast segment of the world population.
It is disturbing to note that the developed countries do not bother to comply with the verdict of the WTO on agricultural subsidy, although the WTO is the product of their own long-pursued negotiations with the largely unwilling developing world.
Such instances of non-co-operation with the WTO can hardly prove helpful to successful conclusion of the second round of WTO negotiations.