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U.S. Pays Off Brazilian Cotton Farmers to Prop Up U.S. Cotton Industry

May 03, 2012 J

By Christine Harbin

Like many other agricultural industries, the U.S. cotton industry gets a lot of financial help from the government. The federal government gives cotton farmers $3 billion in subsidies each year, typically in the form of direct payments and crop insurance premium assistance. Unfortunately for American taxpayers, these lavish handouts aren’t limited to cotton farmers here in the U.S.—the federal government uses our taxpayer dollars to pay off cotton farmers in Brazil as well.

Why is the government subsidizing cotton both at home and abroad? It all started when Brazilian cotton farmers found they couldn’t compete in the international marketplace because the U.S. subsidy was so high. Brazil filed a case against the United States at the World Trade Organization in 2004,saying that American cotton subsidies violated international trade rules. Even though Brazil won the case, the U.S. did not stop subsidizing cotton. Brazil threatened to retaliate—it warned that it would impose steep tariffs on U.S. products coming into Brazil unless the U.S. cut back its cotton subsidies.

The business community was rightly worried that this would hurt their export activity, so they put pressure on Congress and the Obama administration to negotiate a solution with Brazil. The U.S. and Brazil settled on an agreement: Brazil would not levy tariffs on U.S. goods coming into Brazil, and the U.S. government would cut a big check to the Brazilian cotton industry. This is how the Brazilian Cotton Institute came into being. The U.S. paid $34.3 million up front to the cotton producers, and it continues to pay $147.3 million to the Brazilian Cotton Institute each year.

Fortunately, U.S. Rep. Ron Kind (D-WI), Rep. Jeff Flake (R-AZ), and Rep. Earl Blumenauer (D-OR) introduced legislation that would stop these absurd payments to the Brazilian Cotton Institute. The legislation also encourages the House and Senate Agriculture Committees to bring U.S. agricultural policies into compliance with the World Trade Organization. This bill is a step in the right direction on reforming U.S. agricultural policy.

“Brazil successfully challenged our program in the U.S.,” U.S. Rep. Ron Kind (D-WI) told NPR in an interview. “You would think our normal, reasonable response would be to fix our [subsidy] programs. Instead, a new program was created to buy off Brazilian cotton farmers.”

Subsidizing cotton producers is not an anomaly in U.S. agricultural policy; it highlights the federal government’s bad habit of picking winners and losers. Indeed, the Farm Bill, a legislative effort to reauthorize various USDA programs every five years, is a grab bag of hand-outs to big agri-business and special interests. The last farm bill from 2008, for example, included $170 million in grants for the salmon industry and $93 million in tax breaks for horse breeders.

As debate over the next Farm Bill heats up on Capitol Hill this summer, we need to start thinking of ways to cut wasteful subsidies. The United States needs a better agricultural policy than writing big checks to foreign producers and paying farmers to not farm. The federal government is wasting hundreds of millions of taxpayer dollars through this arrangement, and it’s getting in the way of free trade with other countries. American taxpayers deserve an agricultural policy that puts their interests first.

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