Cotton Belt

Trouble for farm subsidies.

Ken Cook, president of the Environmental Working Group, is happy. Bryan Edwardson, director of public policy at the agricultural giant Cargill, is worried. But both agree that a World Trade Organization (WTO) ruling against government aid to cotton farmers could be the beginning of the end for a wide range of agricultural subsidies.

Farmers in developing countries have long blamed U.S. cotton subsidies for encouraging overproduction and driving down world prices. In a report that at press time was expected to be finalized in June, a panel of three trade experts conclude that the subsidies violate WTO rules. The decision, which responds to a complaint filed by Brazil, the European Community, and a dozen other countries, rejects the U.S. claim that its subsidies are legitimate because they're not directly tied to production.

"This could mean problems for all domestic subsidy programs," Cook told The New York Times, "for corn, wheat, rice, everything that receives big direct payments from the United States Treasury." Edwardson likewise told the Minneapolis Star Tribune, "We think that this is a significant decision that may have repercussions in a lot of different areas with respect to domestic farm policy as well as the ongoing WTO negotiations." Farm subsidies in developed countries total about $300 billion annually, of which American farmers receive some $19 billion.

The U.S. government plans to appeal the cotton ruling, and it could be years before any penalties kick in. But the decision is expected to encourage further WTO challenges of farm subsidies and to strengthen the negotiating position of developing countries that are asking the U.S. to abide by its avowed free trade principles.