US Cotton Group: Brazil Broke Rules

By Scott C. Lucas|17 August 2007

Said NCC consultant Bill Gillon, Brazilian officials were in Geneva arguing against US subsidies while depressing world cotton prices by selling government-held cotton stocks on the Brazilian market to lower domestic cotton prices, according to US Department of Agriculture (USDA) reports.

"The actions of Brazil’s own government in April and May of 2007, when it sold nearly two-thirds of its government-held cotton stocks to drive down prices, are clearly incompatible with Brazil’s contemporaneous arguments that the United States was suppressing world cotton prices," Gillon said. He added that "Since the United States eliminated its Step 2 program, US cotton exports declined significantly, US acreage dropped 28%, and production is expected to decline by 20% or more for 2007," proving that the country has done enough to ensure it is not distorting prices.

"The measure of this type of proceeding is not whether the US changed all of its programs, but whether the changes it did make were enough to ensure the program was not causing significant price suppression in world markets. Clearly, with US production down and the rest of the world producing at a record pace, the US program is not causing anyone injury,” Gillon said.

Gillon also described Brazil’s cotton programs, which he argued work as an export subsidy. "The PEPRO program operated by Brazil essentially insures that domestic guaranteed prices for cotton in Brazil will not unduly harm the competitiveness of Brazilian cotton, either in domestic or international markets," he said.