Cotton aid sparks global ire

Farm bill fix could end subsidy

FIREBAUGH, CALIF. -- Growing cotton has rarely been a riskier proposition than it is now, which is precisely why cotton farmer Frank Williams is planning to sow his fields with wheat.

Across the country, farmers are plowing under cotton -- once the king of U.S. agriculture -- to seed crops that make more money.

Cotton also has lost ground for another reason that became apparent last week as the Senate debated the 2007 farm bill: The U.S.'s cotton subsidy program is enmeshed in a global trade battle.

Last month, the World Trade Organization ruled subsidies handed out to American cotton farmers broke international trade laws, opening the door for foreign countries to levy billions of dollars in penalties against the U.S.

The bill on the Senate floor leaves those programs virtually intact, despite the threat of further legal complaints and concerns that international sanctions ultimately could cause layoffs and patchy unemployment. The Bush administration has threatened to veto the multibillion-dollar farm package, saying the Senate bill would hurt WTO negotiations.

For Williams, that risk, coupled with predicted water shortages, is too much to bear.

"We can probably do just as well growing grain with just the same amount of water or less," said Williams, 56, who will uproot the downy Upland cotton he grows in Firebaugh, about 160 miles southeast of San Francisco, and leave in only a lucrative, organic variety of the crop. "It's just not worth it."

Acres decrease

This year, cotton acreage nationwide dropped 28 percent, hitting an 18-year low at 11.1 million acres, according to the U.S. Department of Agriculture. Acreage dropped by about 22 percent in Texas, the national leader.

The sharpest declines were in the Southeast and Mississippi Delta regions, where drought has parched fields.

As textile mills moved offshore over the past decade to operate where labor costs are cheaper, the market for U.S. cotton also shifted abroad. Producers now ship 70 percent of their bales to foreign markets, often to mills and spinners in India, Pakistan and China.

That means domestic subsidy programs are increasingly prone to international scrutiny.

In 2003, the Brazilian government took its case against American cotton to global trade court, claiming U.S. farm subsidies were driving down the worldwide price of cotton and harming Brazilian farmers. Two years later, the WTO sided with Brazil, an emerging cotton heavyweight, and forced the U.S. to eliminate a particular cotton payment.

Last month, a WTO compliance panel said the U.S. had failed to scrap another series of illegal subsidies paid to U.S. cotton growers.

Heading off sanctions

The panel won't make a final decision until mid-December, and U.S. cotton industry officials said they were hoping that the WTO would reverse course by then.

"U.S. cotton production and U.S. acres are all down, and world cotton prices are at some of the highest levels they've been at in the last five years," said Gary Adams, chief economist with the National Cotton Council. "I question how they could make a claim as to the U.S. program having any detrimental impact on any other producers."

Still, the threat of billions of dollars in sanctions helped motivate Sens. Richard Lugar, R-Ind., and Frank Lautenberg, D-N.J., to write an amendment they plan to introduce this week to eliminate subsidies for cotton and all other commodities and replace them with an insurance-type program for all farmers.

Brazilian diplomats said they weren't optimistic that would be enough to satisfy their farmers.

"This farm bill will continue the practice of giving subsidies to U.S. producers," said Emerson Kloss, second secretary for agriculture and biofuels at the Brazilian Embassy in Washington. "I can tell you that will be a problem for us."