Brazil Warns U.S. on Farm Subsidies

Brazil Letter: Farm Subsidies Could Bring WTO Challenge

In a move that is liable to ruffle a few feathers in Washington, Brazil's government has sent letters to the agricultural committees of both the U.S. Senate and House of Representatives, reminding them that leading proposals for a new farm bill will increase subsidies and therefore could break World Trade Organization rules.

Cotton subsidies are still an issue between Brazil and the U.S., and Brazil is cautioning that the next farm bill may raise other subsidy issues. (Photo by Arthur C. Smith III/Grant Heilman Photography)

The message is clear: Brazil is willing to challenge the U.S. in Geneva if the new legislation increases market-distorting subsidies, just as it successfully did in the case of cotton subsidies seven years ago.

Back in October, Roberto Azevedo, Brazil's ambassador to the U.S., visited Washington and met with Sen. Debbie Stabenow, chairwoman of the Senate Agriculture Committee, D-Mich., and Rep. Frank Lucas, chairman of the House Agriculture Committee, R-Okla., where he first voiced Brazil's concerns. They also talked about how the new bill could settle Brazil's claim over cotton subsidies -- the U.S. pays $147 million a year to Brazilian cotton farmers as a means of avoiding wider trade retaliation.

The unusual measure of communicating directly with a foreign legislature was taken after analysis of three farm bill proposals, from the National Cotton Council (NCC), from the American Farm Bureau Federation and from four senators, all of which increased market distortions, said Azevedo.

Among the issues raised was that government-subsidized crop insurance could also be considered market distorting under WTO rules and that none of the proposals significantly altered the GSM-102 export credit guarantee program, which the WTO has also condemned.

Brazil sees itself taking over the U.S.' mantle as the farmer of the world and has been a vocal critic of farm subsidies in the past decade. Its success in persuading the WTO to condemn U.S. cotton subsidies was a great fillip for that campaign.

Alastair Stewart can be reached at alastair.stewart@telventdtn.com