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US Cotton Subsidies Declared Illegal by WTO, Again

By Oxfam

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Geneva, March 3, 2005—International agency Oxfam calls on the US to implement swiftly today's final World Trade Organization (WTO) ruling against its illegal cotton payment programs and agree to new global trade rules that would stop the dumping of cheap commodities.

Eliminating cotton subsidies is necessary to fulfill WTO obligations and bring relief to the millions of struggling farmers in poor countries. It is crucial that the US signals its readiness to reform its farm subsidies within current WTO negotiations to successfully negotiate a new global trade agreement.

"The case against US cotton dumping is overwhelming and now confirmed yet again by the WTO," said Celine Charveriat, spokesperson for Oxfam's Make Trade Fair campaign. "The debate is over. The US must now move quickly to reform its programs and stop dumping cheap cotton onto world markets that undermines the livelihoods of poor farmers in the developing world."

In September 2004, a WTO dispute panel found that $3.2 billion in annual cotton subsidies and $1.6 billion in export credits paid by the US in cotton and other commodities were illegal under WTO rules. The case, brought by Brazil and supported by some West African cotton-producing countries (Benin and Chad), was appealed by the US in October. Today's appeal decision is final and the US has until July 1 this year to comply or face possible trade sanctions by Brazil.

"The US must become aware that small developing countries also have rights in the global trade system, otherwise they risk a new wave of resistance from African countries and farmers," said Soloba Mady Keita, president of the cotton producers association in Kita, Western Mali.

Oxfam estimates that US dumping caused losses of almost $400 million between 2001 and 2003 for poor African cotton-producing countries, where more than 10 million people depend directly on the crop. A typical small-scale West African cotton producer makes less than $400 a year on his crop. Two million cotton farmers in Mali were recently pressured to accept a further price drop of 25%—many of them will not now be able to cover their production costs.

The majority (78%) of US cotton subsidies benefit the largest 10% of cotton producers. Loopholes in the subsidy rules allow industrial-sized farms to collect payments in excess of $1 million, while smaller farmers in the U.S. and abroad are driven out of farming by low commodity prices and high land costs.

The case has implications beyond cotton. "This case raises deep questions about the entire US subsidy system. US subsidies have distorted global markets, failed to save small US farmers, and promoted environmental damage. The US should see this ruling as an opportunity for reform," Charveriat said.

"If the US fails to implement this WTO decision, the prospects for a new global trade deal on agriculture will be severely damaged," said Charveriat. "If recent calls by the US to conclude the negotiation round by the end of 2006 are to be taken seriously, cotton subsidies need to be reformed before the next WTO Ministerial in Hong Kong."

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