The Fabric of Their Lives

U.S. cotton subsidies make the poor poorer

During a cross-country drive in July 1989, my car broke down in the Arizona desert sometime around noon. My cat, Miles, who had long, black fur, was not pleased. I managed to find a phone and call a tow truck, and during the long, slow, non-air-conditioned ride to the nearest service station, with Miles panting at my side, I had plenty of time to take in the scenery: row after row of cotton.

Since cotton is a water-intensive crop, the middle of a desert seemed a strange place to grow it. Similar oddities can be observed in other arid areas of the country where the federal government provides farmers with irrigation water at prices far below the cost of supplying it.

But the taxpayer-subsidized water is just the beginning. U.S. cotton farmers also receive crop-specific payments that encourage them to grow more than they could sell if, like most business people, they had to recoup their production costs. According to a 2002 report from Oxfam International, these subsidies amount to nearly $4 billion year, or $230 an acre.

By comparison, the market value of America's cotton crop in 2001 was about $3 billion. "In an economic arrangement bizarrely reminiscent of Soviet state planning principles," Oxfam noted, "the value of subsidies provided by American taxpayers to the cotton barons of Texas and elsewhere in 2001 exceeded the market value of output by around 30 percent."

Even with all this help, U.S. cotton farmers insist they cannot make a go of it unless the government also pays companies to buy their crop. Based on numbers obtained under the Freedom of Information Act, the Environmental Working Group recently posted a database on its Web site listing the payments received by companies that export American cotton or use it to make yarn, fabric, sheets, towels, or clothing.

This arrangment, known as Step 2 of the "cotton competitiveness program," has cost taxpayers $1.7 billion during the last eight years. The payments have included $107 million to the Allenberg Cotton Co. of Cordova, Tennessee; $102 million to Dunavent Enterprises of Fresno, California, and Memphis, Tennessee; and $87 million to Cargill Cotton of Cordova, Tennessee.

You begin to see how Tennessee gets back $1.26 in spending for every dollar it sends to Washington. And these textile companies already benefit from trade barriers that restrict foreign competition, at the expense of American consumers and producers in other countries who do not have the same clout on Capitol Hill.

Speaking of foreign competition, the cotton subsidies are shameful not only because U.S. farmers should have to play by the rules of the market but because this welfare program for the well-to-do has a ruinous impact on poor farmers in other countries who do not enjoy such largess. By artificially boosting the cotton supply, subsidies depress world prices, driving farmers in countries such as Mali, Benin, and Burkina Faso out of business. Oxfam estimates that U.S. subsidies cost cotton-growing African countries $300 million a year.

For American cotton farmers (whose average net worth is about $800,000) the subsidies may be the difference between growing cotton and growing something else, or between farming and pursuing a different line of work, assuming they can't compete without the government's support. For African farmers who earn something like $800 a year, the subsidies can be the difference between eating and starving.

Given this reality, the anger of African leaders is perfectly understandable. Referring to U.S. and European subsidies, Mali's finance minister told the BBC: "The money that those countries put into agricultural subsidies is five times what they give as development assistance. And we've always said to those rich countries, 'You're hypocrites. You tell us to play [by] the rules of the open market at the same time as you subsidize your farmers.'"

The U.S. refusal to reconsider its cotton subsidies was one of the main reasons for the collapse of the World Trade Organization talks in Cancun. Brazil, joined by several other countries, has filed a WTO complaint challenging both the direct farm subsidies and the Step 2 payments to cotton buyers as unfair trading practices.

The National Cotton Council, which says the Step 2 program is "vital to U.S. cotton's competitiveness," complains "there is nothing new" in the Environmental Working Group's report on the program. The same could be said for the pathetic excuses offered by those who profit at the expense of others instead of making an honest living.