THE UNITED STATES SUBSIDY DILEMA

By Gabriella Bishop

Catlin Gabel School, Catlin Speak

With the new Agricultural Act of 2014, more commonly known as the farm bill, one would suspect that legislators would have made some improvements on the country’s agricultural system. Unfortunately, the government is not off the hook with Brazil, the country that originally brought the U.S. before the World Trade Organization (WTO) with accusations of illegal subsidies, and if a solution is not found quickly, then the problem will only worsen.

The conflict started in 2002, when Brazil accused the U.S. of paying WTO-prohibited subsidies to American cotton farmers. Throughout the 1990s, cotton prices were falling, and farmers in Brazil and other countries were suffering, while U.S. farmers rested comfortably on federal subsidies.

Pedro Camargo, a Brazilian cotton farmer, told the NPR radio show “Planet Money” that, “We want to compete farmer against farmer, not Brazilian farmer and the American farmer with the help of the US government. That’s not only not fair, it’s not following the rules.”

“There were times when U.S. cotton growers were getting more than half their revenue from the U.S. government,” said agricultural economist David Sumner to Voice of America. Indeed, the U.S. has spent many taxpayers’ dollars to protect the country’s agriculture: According to the Environmental Working Group Farm Subsidy Database, cotton farmers in Texas alone have received over $10.8 billion in subsidies since 1995.

The WTO heard Brazil’s concerns. Brazil won the lawsuit, and after the U.S. appealed twice and lost, Brazil was allowed by the WTO to enforce trade sanctions. Brazil tried to introduce high tariffs on U.S. goods, but after the U.S. wouldn’t comply, Brazil decided to suspend royalties owed from U.S. intellectual property rights, a sum that totaled to hundreds of millions of dollars.

In 2010, the two countries finally came to an agreement: The U.S. would pay Brazilian farmers $147 million per year until the next farm bill was passed. All was well, Brazil receiving payments every month from the U.S. government – until they stopped. Last fall, the U.S. ran out of funds because they had expected to pass a new farm bill by that time.

Until now, Brazil and its farmers had been waiting for the new farm bill – and when they saw the Agricultural Act of 2014, they were sorely disappointed.

The new act repeals the direct payments (to American farmers) of the previous farm bill, yet states that the government will provide “transition assistance to upland cotton farmers in light of the repeal of section 1103 of the Food, Conservation, and Energy Act of 2008” (section 1103 outlined direct subsidies). The act also strengthened crop insurance, and introduced a stacked income protection plan for upland cotton farmers, giving financial coverage of revenue loss.

In a statement, ABRAPA (Associação Brasileira dos Produtores de Algodão, Brazil’s cotton producers association) said, “More than not paying what [they] owe to Brazilian producers for subsidies deemed illegal by WTO judges, the United States passed a new farm bill that is likely to cause major distortions in international cotton prices.” The association also commented that the new farm bill resolved none of the problems that Brazil pointed out back in 2002.

Is there an easier solution? An interesting topic to examine is how the U.S. and Brazil’s cotton industries are connected. Both countries rank in the top five cotton producers in the world, and the majority of each country’s cotton crop is genetically modified (GM).

According to the USDA, in 2013 GM cotton accounted for 90 percent of all cotton planted in America. Brazilian agribusiness analysis consultancy Celeres expected that in the 2012-13 planting year, GM cotton would account for 50.1 percent of all Brazilian cotton.

Interestingly enough, three of the four currently approved GM cotton varieties in Brazil – Monsanto’s pest-resistant Bollgard 531, Monsanto’s Roundup Ready MON 1445, and Dow’s Wide Strike – are produced by American corporations.

It seems that the U.S. would benefit from the success of Brazilian cotton, and also from the success of any other country that plants Monsanto or Dow seeds, since the American companies collect royalties from their patented products.

Ultimately, for the agricultural market to survive – and for U.S. farmers to be weaned off direct payments – GM seeds and crops could not be patented. Despite the promises of greater yields, the endless cycle of extra payments associated with the usage of GM seeds (due to their classification as intellectual property) hinders the success and growth of agriculture in any country.

Changing the nature of intellectual property in this manner would be a difficult process, and though desired by many, will probably not happen in the near future. For now, according to Voice of America, Brazil plans to reopen the original case with the WTO.

About Grace Masback

Grace Masback, 17, aspires to give voice to the voiceless and holds the modest ambition of becoming the voice of Gen Z. Frustrated by the dearth of impactful platforms for teen journalists, she founded WANT, a news, sports, and entertainment website that aggregates the best in high school journalism from school newspapers and teen bloggers around the world (www.wantnewsforteens.com).

Leave a Reply