I have just started my International Economics course at school and our focus this semester will be on trade and finance.
Our professor got things off to an interesting start by recounting a disturbing tale involving U.S. Cotton subsidies, the WTO and Brazil.
You won't believe what happened.
The U.S. heavily subsidizes domestic cotton production even when other crops could be grown more sustainably without subsidies. N.P.R. reports that these subsidies amount to between 1.5 and 4 billion dollars annually.
TIME magazine's Michael Grunwald had this to say:
"I've previously written that federal farm subsidies are bad fiscal, environmental and agricultural policy; bad water, energy and health policy; and bad foreign policy, to boot. Cotton subsidies are a particularly egregious form of corporate welfare, funneling about $3 billion a year to fewer than 20,000 planters who tend to use inordinate amounts of water, energy and pesticides. But the World Trade Organization (WTO) doesn't prohibit dumb subsidies. It only prohibits subsidies that distort trade and hurt farmers in other countries."
The U.S. dumps this cheap cotton into the market and drives down its price making it difficult for subsistence farmers in places Mali, Benin, Chad and Burkina Faso to enter the market competitively and pull themselves out of poverty.
Back in 2002, Pedro Camargo, Brazil's Secretary of Trade in the Agriculture Department, decided to file a complaint against the U.S. with the World Trade Organization on grounds that it was distorting trade.
The WTO sided with Brazil.
Always being one to set the example in global leadership, America ignored the ruling.
Former Florida Congressmen and retired WTO judge Jim Bacchus made this erudite statement: "The WTO has no legal authority to make any sovereign country do anything. It has no police force; it has no black helicopters."
In other words, the U.S. will go on being a petulant child and denying the legitimacy of international organizations that try to curb its power. (See also the "International Criminal Court" and "United Nations.")
But Brazil wasn't done with us yet. The WTO allows the winning party to tax imports from the offending country and that's exactly what was threatened.
Brazil contacted powerful businesses in the U.S. and warned them that heavy import taxes would go into effect within a month. Lobbyist for the businesses went into overdrive and the U.S. capitulated in the end.
According to NPR:
"The American negotiators sat down in Brazil and immediately declared it impossible to get rid of the cotton subsidies right away. But the two sides came to an agreement. The U.S. would pay Brazilian cotton farmers $147 million a year, and Brazil would drop the threat of retaliation."
From where I'm standing this looks a hell of a lot like a bribe.
"Maybe it's a bribe," Pedro Camargo told the reporter from NPR. "For Brazilian farmers, its' a lot of money."
So to sum up, we are still spending billions on domestic cotton subsidies, we pay millions to Brazil annually so it will keep its trap shut and farmers in West Africa are still struggling with poverty.
Hurrah for free trade, globalism, rational actors in the market, etc.
Our professor got things off to an interesting start by recounting a disturbing tale involving U.S. Cotton subsidies, the WTO and Brazil.
You won't believe what happened.
The U.S. heavily subsidizes domestic cotton production even when other crops could be grown more sustainably without subsidies. N.P.R. reports that these subsidies amount to between 1.5 and 4 billion dollars annually.
TIME magazine's Michael Grunwald had this to say:
"I've previously written that federal farm subsidies are bad fiscal, environmental and agricultural policy; bad water, energy and health policy; and bad foreign policy, to boot. Cotton subsidies are a particularly egregious form of corporate welfare, funneling about $3 billion a year to fewer than 20,000 planters who tend to use inordinate amounts of water, energy and pesticides. But the World Trade Organization (WTO) doesn't prohibit dumb subsidies. It only prohibits subsidies that distort trade and hurt farmers in other countries."
The U.S. dumps this cheap cotton into the market and drives down its price making it difficult for subsistence farmers in places Mali, Benin, Chad and Burkina Faso to enter the market competitively and pull themselves out of poverty.
Back in 2002, Pedro Camargo, Brazil's Secretary of Trade in the Agriculture Department, decided to file a complaint against the U.S. with the World Trade Organization on grounds that it was distorting trade.
The WTO sided with Brazil.
Always being one to set the example in global leadership, America ignored the ruling.
Former Florida Congressmen and retired WTO judge Jim Bacchus made this erudite statement: "The WTO has no legal authority to make any sovereign country do anything. It has no police force; it has no black helicopters."
In other words, the U.S. will go on being a petulant child and denying the legitimacy of international organizations that try to curb its power. (See also the "International Criminal Court" and "United Nations.")
But Brazil wasn't done with us yet. The WTO allows the winning party to tax imports from the offending country and that's exactly what was threatened.
Brazil contacted powerful businesses in the U.S. and warned them that heavy import taxes would go into effect within a month. Lobbyist for the businesses went into overdrive and the U.S. capitulated in the end.
According to NPR:
"The American negotiators sat down in Brazil and immediately declared it impossible to get rid of the cotton subsidies right away. But the two sides came to an agreement. The U.S. would pay Brazilian cotton farmers $147 million a year, and Brazil would drop the threat of retaliation."
From where I'm standing this looks a hell of a lot like a bribe.
"Maybe it's a bribe," Pedro Camargo told the reporter from NPR. "For Brazilian farmers, its' a lot of money."
So to sum up, we are still spending billions on domestic cotton subsidies, we pay millions to Brazil annually so it will keep its trap shut and farmers in West Africa are still struggling with poverty.
Hurrah for free trade, globalism, rational actors in the market, etc.
No comments:
Post a Comment