New World Blogger

Brazil has won a contention in the WTO that could force the US to remove or lower its subsidies on products like cotton.

"Brazil won a preliminary ruling at the World Trade Organization on Monday night that could force the United States to lower the subsidies it pays farmers to grow cotton and, eventually, most subsidized crops.

The decision supports Brazil's contention that the subsidies paid to American cotton farmers violate international trade rules. A final ruling against the United States could lead to stiff penalties if it fails to change its practices. In another recent case involving steel, President Bush chose to remove subsidies and therefore did not have to face the penalties.

The ruling also puts the Bush administration in a tight bind in an election year, when Republicans are counting on support from the Farm Belt. The largest American farmers have grown dependent on the $19 billion they receive in annual subsidies.

If the final decision in June goes against the United States, the administration is expected to appeal, if for no other reason than to delay action until after the election. Nearly all preliminary opinions are eventually upheld by the W.T.O.

As the first successful challenge of a wealthy nation's domestic agricultural subsidies, the Brazilian case could also force the United States, the countries of Europe and other well-to-do nations to act this summer and offer new compromises at global trade talks that have been blocked over this agriculture issue for more than a year."
(Story from the New York Times via the Financial Times)

Perhaps the most important effect of this ruling is that it is a first step against the unfair demands made by many first world nations in trading with the third world. Often the first wolrd nations demand that third world nations eradicate all subsidies, only to continue subsidizing their own products. As a result, third world producers are left unprotected and cannot stay adequately competitive in a market where only first world produces are "allowed" (behind the scenes) to subsidize.

Part of the problem originates with lending institutions like the International Monetary Fund. It is no secret that the IMF, guided by the Washington Consensus forces third world countries to comply with harsh free market rules that not even their first world proponents are willing to live by. This has generated much of the anti-FTAA and anti-globalization movements, in criticism of unfair, "un-free" trade that masks itself as pure market competition when it actually favours only first world nations.

But the decision made by the WTO shows that change is possible. In a landmark case, Brazil -- the third world nation behind much of the anti-globalization movement seen in Cancun in September 2003 during the WTO talks involving over 145 countries -- has won a case against a first world nation that subsidizes while advocating against government subsidies. The US is not the only first world nation guilty of this, but this decision may prove to be a first step towards more equal trading rules.