With no money to fight U.S., 4 took cotton case to WTO

— In 2002, Brazil took the United States to international trade court, using its muscle as a large trading partner to force U.S. concessions.

The South American country, a large producer of cotton, argued before the World Trade Organization that certain U.S. farm subsidies lowered the international price of cotton, injuring Brazilian producers.

In 2010, the United States agreed to settle the case by making an annual payment of $147 million to Brazil. But if those U.S. subsidies remain in place this spring, the U.S. will have to make another payment.

Meanwhile, four African nations collectively known as the Cotton 4 tried a different route in fighting the subsidies. Rather than taking their dispute to Geneva at the World Trade Organization’s Dispute Settlement Body, the four cotton-producing nations - Benin, Burkina Faso, Chad and Mali - attempted to negotiate changes in American farm policy during international talks held over several years.

But, those talks - known as the Doha Round - have stalled. Brazil has received its first payment, and the Cotton 4 nations are still waiting for changes.

Ambassador Samuel Amehou, who represented Benin at the Doha Round negotiations, said the African nations chose to negotiate rather than litigate for a simple reason.

“The C-4 didn’t have the money to hire a good lawyer,” Amehou said.

The Brazil-U.S. cotton dispute began in 2002 when Brazil raised allegations that U.S. counter cyclical payments to American farmers, marketing loans and export credit guarantees were inconsistent with WTO agreements.

Over the next seven years, the case went before the WTO Dispute Settlement Panel and then in 2005 before a WTO Appellate Body. The Appellate Body laid out ways that the United States could get into compliance. A WTO Compliance Panel found in 2007 that the U.S. was out of compliance - its findings were backed up the next year in another appellate ruling.

The WTO findings were not binding. But the international trade body said that if Brazil and the U.S. did not reach an agreement, Brazil would be able to impose about $820 million a year in retaliatory tariffs on a range of U.S. exports, including cars, pharmaceutical drugs, electronics and agricultural commodities.

With only $267,000 in exports to the U.S., Benin relies on millions of dollars each year in American aid.

“We took the path of negotiation because even if we won a WTO settlement, the U.S. is not obliged to comply,” Amehou said. “We have no power to retaliate.”

Florizelle Liser, the assistant U.S. trade representative for Africa, was a key member in the Doha Round negotiations and met with Amehou when trade ministers held talks in Hong Kong in 2005.

She said the fact that Benin didn’t seek U.S. aid for its cotton sector as it was applying for a large grant did not play well at the negotiating table.

At that time, the U.S. was finalizing Millennium Challenge Corp. compacts with Benin and other underdeveloped countries. The countries negotiated with Millennium Challenge Corp. - a U.S. foreign-aid agency - to complete different projects aimed at developing their infrastructures, professionalizing judicial and political systems, and reducing poverty.

Benin used $307 million to overhaul its main port, modernize its judiciary and improve the way it keeps land-ownership records.

She said that as part of the Millennium Challenge Corp. negotiations, the U.S. asked Benin and the other Cotton 4 nations what they wanted, and they indicated that they “didn’t want a dime for cotton.”

Liser said she told them, “You’re going to have a hard time making the case that your cotton sector is in dire need of assistance, that you’ve got millions of farmers who are, quote, unquote starving.”

Liser said that response was not going to serve the Cotton 4 well in the Doha Round negotiations.

“I said, ‘This is going to bounce back.’” Liser said that while the Cotton 4 nations negotiated earnestly during the Doha Round, their expectation was that the United States would “just write a check” later on and help fund their struggling cotton industry.

She doubts whether eliminating farm subsidies would really help Benin.

“The major beneficiaries of a global trading system in which there are no domestic supports for cotton will not go to Africans who produce cotton,” she said. “The major beneficiaries of that will be countries who farm cotton in a very different way than the Africans.”

She said Brazil and Kazakhstan, where cotton is grown in large plots and genetically-modified pest-resistant seeds are more widely used, would be able to compete better than the smaller Cotton 4 nations, which are just beginning to experiment with the modified seeds.

Front Section, Pages 4 on 04/16/2012

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