World Trade Organization

• Author: International Law Group

On September 8, 2004, a Dispute Settlement Panel (DSP) of the World Trade Organization (WTO) issued its 351-page report in the matter of Brazil's complaint against U.S. subsidies on upland cotton. The U.S. support mechanisms for the cotton industry, include direct payments, export-credit guarantees, production-flexibility contract payments, crop-insurance payments, marketing loans, market loss assistance, and so-called Step 2 payments.

Brazil mainly contended that (1) U.S. domestic subsidies for cotton cause serious prejudice by depressing or suppressing world cotton prices, and (2) U.S. export credit guarantees for all commodities constitute export subsidies.

According to the press release of the U.S. Trade Representative, "the panel agreed with the United States that income support provided to U.S. cotton farmers and others that is fully decoupled from production and prices - that is, a recipient does not have to produce cotton to get the payment and can choose to produce nothing at all - has not suppressed or depressed world cotton prices." The...