NCC Disappointed in WTO Appellate Body Ruling

MEMPHIS - The U.S. cotton industry is disappointed that the World Trade Organization (WTO) Appellate Body failed to overturn the previous report of the Compliance Panel concerning U.S. compliance with the WTO’s rulings in the original cotton dispute brought by Brazil. 

As the National Cotton Council stated at the time the Compliance Panel report was made public, the Compliance Panel failed to consider appropriately the changes that were made to the U.S. cotton program since the original decision in 2004. The United States has already taken significant steps to comply with that original decision, including the elimination of the Step 2 program for cotton.

The decision today is far removed from the current cotton market and the current operation of the U.S. cotton program. Today’s decision was made with respect to the operation of the U.S. cotton program from 2003 to 2006. The market has changed and the U.S. cotton program has changed. Expenditures under the cotton program components examined by the Compliance Panel have fallen dramatically since that decision was made. In fact, there will be virtually no expenditures under those programs for the foreseeable future.  

World prices of cotton have strengthened significantly since the original panel ruling against U.S. cotton. It is simply not the case that world cotton prices are currently suppressed or were ever suppressed by payments made under the U.S. cotton program.

Cotton production in Brazil and in other countries like India has risen over the past four years, while cotton production in the United States has fallen significantly. 

Finally, the Brazil case is based on the cotton program under the 2002 farm bill. Under the newly enacted 2008 law, cotton was the only commodity that received a decrease in its target price. Mandatory adjustments in the operation of the cotton loan program will result in a decrease in the average marketing assistance loan available to eligible U.S. cotton producers. The new farm law also includes a dramatically modified income test which will result in some producers being ineligible for program benefits.

The WTO findings regarding the U.S. cotton program are out of date and out of touch with existing market conditions.