Associated Press: Cotton Subsidies In 2007 Farm Bill Prompt Global Trade Concerns

Associated Press , Garance Burke
Published November 9, 2007

FIREBAUGH, Calif.—Growing cotton has rarely been a more risky proposition than it is now, which is precisely why cotton farmer Frank Williams is planning to sow his fields with wheat. From Williams' California fields to the Texas plains, farmers are plowing under cotton—once the king of U.S. agriculture—to seed crops that make more money. Cotton also has lost ground for another reason that became apparent this week as the Senate debated the 2007 farm bill: the United States' cotton subsidy program is enmeshed in a global trade battle. Last month, the World Trade Organization ruled subsidies handed out to American cotton farmers broke international trade laws, opening the door for foreign countries to levy billions of dollars in penalties against the U.S. The current bill on the Senate floor leaves those programs virtually intact, despite the threat of further legal complaints and concerns that international sanctions ultimately could raise the price of consumer goods. Monday, the Bush administration threatened to veto the multibillion-dollar farm package wholesale, saying the Senate bill would impair negotiations with the WTO. For Williams, that risk, coupled with predicted water shortages, is too much to bear. "We can probably do just as well growing grain with just the same amount of water or less," said Williams, 56, who grows downy Pima and upland varieties in Firebaugh, along the Central Valley's western edge. "It's just not worth it." This year, cotton acreage nationwide dropped 28 percent, hitting an 18-year low at 11.1 million acres, according to the U.S. Department of Agriculture. Acreage dropped by about 22 percent in Texas, the national leader, and by nearly 20 percent in California, which ranks seventh in domestic production. The sharpest declines were in the Southeast and Mississippi Delta regions, where drought has parched fields that grew the crop since before the Civil War. In Central California, where farmers rely on irrigation pumps to water their furrows, a recent court ruling limiting water pumping to protect a threatened fish species could cut water supplies by as much as two-thirds next planting season. "There's a lot of worry in the California cotton industry generally, and any assault like this comes at a very difficult time," said Jack King, national public affairs manager for the California Farm Bureau Federation. As textile mills moved offshore over the last decade to set up shop where labor costs are cheaper, the market for U.S. cotton also shifted abroad. Producers now ship 70 percent of their bales to foreign markets, often to mills and spinners in India, Pakistan and China. That means domestic subsidy programs are increasingly prone to international scrutiny. In 2003, bitter arguments over U.S. farm support programs, including cotton subsidies, contributed to the collapse of world trade talks in Cancun, Mexico. In 2003, the Brazilian government took its case against American cotton to global trade court, claiming a U.S. farm subsidy was driving down the worldwide price of cotton and harming Brazilian farmers. Two years later, the WTO sided with Brazil, an emerging cotton heavyweight, and forced the U.S. to eliminate that particular cotton support payment. Last month, a WTO compliance panel went a step further, saying the U.S. had failed to scrap another series of illegal subsidies paid to American cotton growers. Those very programs have been left almost intact in the bill currently under debate, prompting outcry from reformists who want farm policy to support a more diverse produce basket. "We're telling farmers to go ahead and grow conventional cotton for a market that has come under a WTO cloud," said Ken Cook, president of the Environmental Working Group, a nonprofit organization that advocates for farm policy reform. "All that does is get us into trouble with our trading partners." The panel won't make a final decision until mid-December, and American cotton industry officials said they were hoping by that time the WTO would reverse course. "U.S. cotton production and U.S. acres are all down, and world cotton prices are at some of the highest levels they've been at in the last five years," said Gary Adams, chief economist with the National Cotton Council. "I question how they could make a claim as to the U.S. program having any detrimental impact on any other producers." Still, the threat of billions of dollars in sanctions helped motivate Sens. Richard Lugar, R-Ind., and Frank Lautenberg, D-N.J., to write an amendment they plan to introduce on the Senate floor next week to eliminate subsidies for cotton and other commodities and replace them with an insurance-type program that all farmers could participate in. Brazilian diplomats said they weren't optimistic that would be enough to satisfy their farmers. "This farm bill will continue the practice of giving subsidies to U.S. producers," said Emerson Kloss, second secretary for agriculture and biofuels at the Brazilian Embassy in Washington. "I can tell you that will be a problem for us."