Analysis of the Brazil‐USA cotton dispute

• DOI: https://doi.org/10.1108/14770021211239668
• Published date: 15 June 2012
• Date: 15 June 2012
• Pages: 148-162
• Author: William Ridley,Stephen Devadoss
• Subject Matter: Economics

Analysis of the Brazil-USA

cotton dispute

William Ridley and Stephen Devadoss

Department of Agricultural Economics and Rural Sociology,

University of Idaho, Moscow, Idaho, USA

Abstract

Purpose – The purpose of this paper is to explain and conceptually analyse the origins and outcomes

of the Brazil-USA cotton dispute.

Design/methodology/approach – The analysis is conducted using a conceptual framework to

show the effects of US policies on Brazil and the world cotton market. The historical context of the

conf‌lict is presented, to explain the motivations of both countries and the background of the dispute.

Findings – US cotton subsidies and related policies have the effect of harming international producers,

including Brazil. This analysis, along with an explanation of Brazil’s role in world cotton production,

explains why Brazil had cause to complain to the WTO and why the WTO ruled in its favor.

Practical implications – The implications of these rulings are that the international dispute and its

unique resolution could foreshadow similar conf‌licts in the future between different parties over

different commodities, and the analysis presented in this paper will serve to explain them.

Originality/value – This is the only paper to present a complete history of the Brazil-USA conf‌lict,

along with a conceptual analysis of the targeted US policies.

Keywords United Statesof America, Brazil, Internationaltrade, Cotton, Subsidies, Disputes,

World Trade Organization

Paper type Research paper

I. Introduction

While a variety of agricultural commodities are the recipients of subsidies and supports

from the US Government, the status of cotton is unique. American cotton producers

receivea higher levelof subsidy than producers of most other commodities.The subsidies

have taken multipleforms over past decades, but manyof these subsidies still continueto

be paid to cotton producers. The cotton policies ranged from direct payments to

producers, includingStep 2[1] and countercyclicalpayments, to export credit guarantees,

to marketing assistanceloans and loan def‌iciency programsfor the ostensible purpose of

reducing the impacts on producers stemming from low cotton prices.

In 2002, subsequent to the US 1996 Federal Agriculture Improvement and Reform

Act and 2002 Farm Security and Rural Investment Act, Brazil requested consultations

with the USA, accusing the USA of overly trade-distorting policies, citing subsidies and

other farm supports to American cotton producers. Brazil, supported by a contingent of

major cotton exporters, including Australia and several African states, complained to

the WTO that the policies carried out under the 1996 and 2002 Farm Bills distorted the

world cotton market in favour of US cotton producers to the detriment of international

cotton producers, a violation of the articles of the WTO Agreement on Agriculture and

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1477-0024.htm

The authors thank the two anonymous reviewers for their helpful suggestions and appreciate

Suwen Pan’s help in providing the relevant literature for this study, also the editorial help of

Catherine Ridley, James Ridley and Tim Nadreau.

JITLP

11,2

148

Journal of International Trade Law

and Policy

Vol. 11 No. 2, 2012

pp. 148-162

qEmerald Group Publishing Limited

1477-0024

DOI 10.1108/14770021211239668