EU, Oxfam, WTO panel said hurting trade talks

Instead of working to improve worldwide trade, recent actions by the European Union and Oxfam, (classified as a “development, relief and campaigning organization, which works to find lasting solutions to poverty and suffering around the world”) likely will have the opposite effect, says the attorney for the National Cotton Council.

Bill Gillon, international trade counsel to the NCC, recently addressed the annual meeting of the Texas Cotton Association in Austin and pointed to increased opposition to the U.S. cotton program.

“The tactics of Oxfam, fomenting certain African countries to call for an end to the U.S. cotton program while ignoring the need for dramatic internal changes in those countries' production systems, and the decision by the EU to use cotton as a decoy, make it difficult for the U.S. cotton industry to continue to be supportive of the Doha Round or the WTO in general,” Gillon says.

“The outlandish tactics threaten the overall pace of reform and could grind the Doha agricultural negotiations to a halt. If the EU and Oxfam and others really want a new agreement, they will stop posturing and finish this round in December. They have a chance to do it. At this point, they are the only ones blocking progress.”

Gillon says the EU's recent support of African countries' previous recommendation that cotton be pulled out of regular agricultural trade negotiations and considered separately creates a dangerous precedent. By negotiating commodities singly, trade representatives have little incentive to bargain fairly after they get what they want on specific issues.

Naïve, crippling

“The idea of changing the terms and conditions affecting one agricultural sector while leaving other crops unchanged is naïve at best and crippling to other commodities at worst,” Gillon says.

“Farmers do not operate in a vacuum. If only cotton rules are changed, farmers will shift production to other crops — immediately creating new distortions. The EU approach is foolhardy, and I hope EU wheat and grain producers take a close look at the short-sighted trade remedies being urged by their leaders.”

Gillon says the EU had ulterior motives for reversing its position and announcing its support for the African position on cotton negotiations.

The EU announcement on cotton came a day or two before the EU “backed out of an agreement on tariff valuations it had just reached in Geneva, throwing a monkey-wrench into the overall agricultural negotiations. It is clear that by singling out cotton early in the week the EU was trying to deflect attention from its decision to renege on a very important tariff deal.”

Gillon says the tactics the EU and Oxfam employ, which he believes were coordinated, “will either backfire or will take the WTO into a tailspin as an institution.”

He says both Oxfam and the African countries that initially recommended negotiations to single out cotton for special consideration apparently want the WTO to be something it was never intended to be, judge and enforcer.

“The WTO is not an arbiter of what is legal or illegal,” he says. “It enforces no laws; it has no laws to enforce; it cannot make the United States or any other country change their policies.”

He explained that the WTO is an agreement among members on trade rules and also empowers the body to determine if members live up to those rules. If a country does not “hold up its end of the bargain, other countries can retaliate by withdrawing any trade concessions they made. That's it.”

More ineffectual

He says the more Oxfam tries to turn the WTO into a court that doles out justice the more ineffectual the organization will become. “The WTO was designed and conceived as an economic institution — not a court of social justice.

“And the EU, not to be outdone by a non-profit organization, steps up and acts like the great reformer in agriculture. The EU, the largest subsidizer of agriculture in the world and the entity that provides a support price for cotton that is far higher than support levels in every other country in the world, attacks U.S. cotton and calls for it to be treated separately and immediately.”

He says the EU minister's remarks in Africa “drew up a perfect prescription for the collapse of the Doha negotiations.”

Gillon also discussed the WTO's Brazil decision, which found certain U.S. programs to be “prohibited subsidies” and also found “serious prejudice” in the U.S. cotton program. The ruling considers export credit guarantees and cotton's Step 2 program to be prohibited export subsidies.

The United States has until July 1, 2005, to “withdraw the prohibited subsidies.”

The WTO panel determined the deadline, Gillon says. “It will take some time for the U.S. government to decide what, if any, changes it will recommend. Once that determination is made, it will not be a simple process to make substantive change in U.S. farm policy.”

He also says that the Step 2 program will remain in effect until Congress changes it, as it was mandated by law.

Found harmful

Under its findings on serious prejudice, the WTO Panel hearing the case determined that the marketing loan, counter cyclical payment, and the Step 2 programs caused “significant price suppression and serious prejudice to Brazil's interests.”

Gillon says the panel's serious prejudice analysis was “fuzzy, hazy and lacked precise quantification” of subsidies that benefited upland cotton.

He says that recommendations for complying with the Brazil decision are ongoing and being considered in conjunction with the budget and other WTO negotiations.

“The National Cotton Council is discussing the case with the U.S. Trade Representative and USDA in hopes that we can work with them in developing a response to the decision.”

He says the decision has short-term implications for cotton but also poses a threat to other program crops.

“The NCC intends to be a participant in this process,” Gillon says, “working with the government to ensure that this decision does not harm U.S. cotton and does not harm U.S. international trade efforts, either generally or in the Doha round.”

This decision will not just “go away. The cotton industry must be pro-actively involved.” He says the U.S. cotton industry has been a strong advocate for world reform in trade and favors more open markets in agriculture around the world. The industry also hopes to see other governments stop “raising frivolous barriers against biotech agriculture products, stop using health and safety rules as trade barriers, stop using differential export taxes and tax refunds as hidden export subsidies, and quit leveraging agricultural input companies in order to gain price advantages.

“We would like other countries to reduce tariffs in a meaningful way and we would like to end the monopolies held by state-trading enterprises. An effective WTO makes these things possible. The National Cotton Council believes that a rules-based trading system leads to more trade, and that benefits U.S. cotton.”

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