Storytelling In The News: #132

The story of cotton subsidies: WTO rules against the US

April 27, 2004

The top business story in the New York Times and the Financial Times this morning is the preliminary decision of the World Trade Organization (WTO) in favor of Brazil and against the US on cotton subsidies. The decision accepts Brazil's story 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. 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. But nearly all preliminary opinions are eventually upheld by the W.T.O.

Elizabeth Becker points out in the NYT that the WTO's decision could have wide implications:

* It could force the United States to lower the $10 billion subsidies that it pays farmers to grow cotton.

* It could eventually affect the subsidies on most subsidized crops, including corn, wheat, and rice.

* The ruling could have political repercussions in the US in an election year in which 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.

* It will further aggravate the anger of US farmers over the fact that Brazil used data from the United States Department of Agriculture to substantiate its story that the subsidy programs led to increased American cotton production that destroyed Brazil's export markets and undermined the livelihoods of its farmers.

* As the first successful challenge of a wealthy nation's $300 billion in domestic agricultural subsidies, it could 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.

* If subsidies are removed, it would according to the United Nations, the World Bank and charities like Oxfam provide the single biggest possible benefit for the economies of poor countries with hundreds of millions of subsistence farmers.

Bottom line

What has happened here? In the battle of competing stories, the WTO has done no more than issue a piece of paper accepting the story of Brazil and rejecting the story of the US. The financial implications of the storytelling could however run into hundreds of billions of dollars and affect the lives of hundreds of millions of people in most countries on the planet. The impact of narrative is likely to be massive.

Read the New York Times

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