Brazil’s cotton farmers win big trade victory against U.S. subsidies

A landmark World Trade Organization ruling this week that
U.S. cotton subsidies cause artificially low international
prices is leading to predictions that cotton producers from
Brazil to Western Africa may now have an incentive to
increase production.

By Alan Clendenning / AP Business Writer

LEME, Brazil — In an annual ritual that has barely changed
since the 1930s, legions of farm workers pick cotton by hand
while creaky old flatbed trucks stuffed with the harvest
rumble to local processing plants operating round the clock.

Cotton was king in the fields surrounding this small southern
Brazilian city, turning its lush plains and rolling hills
white every April, until a decline in world cotton prices
over the last decade hit farmers hard, prompting them to
shift to sugarcane and corn. Although cotton is still
important here, the landscape is now a patchwork quilt of
different crops.

But a landmark World Trade Organization ruling this week that
U.S. cotton subsidies cause artificially low international
prices is leading to predictions that cotton producers from
Brazil to West Africa may now have an incentive to increase
production and get what they call a fair price.

’We’ve all been waiting for this,’ said Sergio Simarelli, a
third-generation cotton farmer as he worked on his broken
cotton harvesting combine, one of the few in Leme. ’If prices
rise, I could buy better machinery and improve my
production.’

The WTO decision brought a firestorm of criticism in
Washington, with U.S. Trade Representative Robert Zoellick
telling members of Congress who approved the subsidies ’you
can be 100 percent sure we are going to appeal’ if the
preliminary WTO decision sticks.

Brazilian President Luiz Inacio Lula da Silva and advocates
for poor farmers around the world hailed the move as a first
step toward the elimination of payouts for American farmers
that give them a competitive edge not only in cotton — but
also for grain and sugar produced more cheaply in developing
countries.

’This means it’s really the time now to have substantial
reform on subsidies,’ said Celine Charveriat, Oxfam’s Head of
Advocacy in Geneva.

Brazil, the world’s fifth-largest cotton producer, filed the
WTO complaint two years ago during the administration of
former President Fernando Henrique Cardoso. It alleged the
United States has kept its place as the planet’s second-
largest cotton grower and largest exporter because the
government paid $12.47 billion in subsidies to American
farmers between August 1999 and July 2003.

Cardoso’s administration, keen on increasing Brazil’s
agricultural exports, chose cotton because prices had been
declining and officials felt they could draw a direct link
between falling prices and subsidies, said Marcus Pratini de
Moraes, Brazil’s agriculture minister under Cardoso. Another
Brazilian WTO complaint against European sugar subsidies is
pending.

’Export subsidies in particular are disastrous, especially
for poor countries,’ de Moraes explained in an interview.
’They are one of the main reasons for poverty and misery for
millions of people.’

Getting rid of subsidies would allow South America’s largest
country to double its production within two years, to 2.4
million metric tons, according to the Brazilian Association
of Cotton Producers.

Leme’s cotton farmers estimate subsidies depress world cotton
prices by 5 percent to 10 percent. The international price
has dropped 21 percent over the last decade and has been so
volatile that many growers reduced their cotton acreage and
planted other crops for a more reliable source of income.

While Brazilian production has doubled since the mid-1990s,
turning the country from a cotton importer into an exporter,
most of the growth has occurred at huge plantations in the
Amazon and in the arid northeast.

Leme, a city of 95,000 two hours from Sao Paulo, Brazil’s
largest city, is home to small farms with no more than 1,230
acres, and was one of the first places in the country where
farmers planted cotton.

But a sign at the entrance to the town proclaiming it the
Cotton Capital of Brazil disappeared years ago as the local
crop of choice was overshadowed by sugarcane and corn.

’We would have a lot more land in cotton production if it
wasn’t for the subsidies,’ said Ronaldo Oliveira, a cotton
farmer and president of the Sao Paulo state cotton producers
association.

The WTO decision could reverse the trend if international
cotton prices rise and stay above what farmers get for
sugarcane and corn, said Marcos de Almeida, Leme’s top
agricultural official.

’Farmers here are going to move to what’s profitable,’ he
said. ’And they already know how to grow cotton.’

Many Leme farmers own less than 123 acres, giving them an
annual income of less than 25,000 reals, the equivalent of
$8,600. Farm families can support themselves and perhaps own
a used car, but most of the town’s small farmers struggle to
pay bills and can’t dream of sending their children to
college.

’With more money, they would have more opportunities and
income that would circulate in the community,’ de Almeida
said.

Simarelli has trouble understanding how individual American
farmers and farms can get up to $360,000 in loans and
subsidies under a $190 billion farm bill signed by President
George W. Bush in 2002.

Brazil’s government doesn’t give him anything, he says, and
interest rates of more than 20 percent annually are too high
for him to take out a loan for a new combine to replace his
1998 model.

’Right now, I’ll have to wait 10 years to buy another one,’
he said. ’If they get rid of the subsidies, I can buy it in
six years.’

http://www.detnews.com/2004/business/0405/02/business-139153.htm