Brazil Cotton Farmers Win Trade Victory

[AP / ALAN CLENDENNING, AP Business Writer]

LEME, Brazil (AP) -- In an annual ritual that has barely
changed since the 1930s, legions of farm workers pick cotton by hand
while creaky old flatbed trucks stuffed with the harvest rumble to
local processing plants operating round the clock.
Cotton was king in the fields surrounding this small
southern Brazilian city, turning its lush plains and rolling hills
white every April, until a decline in world cotton prices over the
last decade hit farmers hard, prompting them to shift to sugarcane
and corn. Although cotton is still important here, the landscape is
now a patchwork quilt of different crops.
But a landmark World Trade Organization ruling this week
that U.S. cotton subsidies cause artificially low international
prices is leading to predictions that cotton producers from Brazil
to West Africa may now have an incentive to increase production and
get what they call a fair price.
"We've all been waiting for this," said Sergio Simarelli, a
third-generation cotton farmer as he worked on his broken cotton
harvesting combine, one of the few in Leme. "If prices rise, I could
buy better machinery and improve my production."
The WTO decision brought a firestorm of criticism in
Washington, with U.S. Trade Representative Robert Zoellick telling
members of Congress who approved the subsidies "you can be 100
percent sure we are going to appeal" if the preliminary WTO decision
sticks.
Brazilian President Luiz Inacio Lula da Silva and advocates
for poor farmers around the world hailed the move as a first step
toward the elimination of payouts for American farmers that give
them a competitive edge not only in cotton -- but also for grain and
sugar produced more cheaply in developing countries.
"This means it's really the time now to have substantial
reform on subsidies," said Celine Charveriat, Oxfam's Head of
Advocacy in Geneva.
Brazil, the world's fifth-largest cotton producer, filed the
WTO complaint two years ago during the administration of former
President Fernando Henrique Cardoso. It alleged the United States
has kept its place as the planet's second-largest cotton grower and
largest exporter because the government paid $12.47 billion in
subsidies to American farmers between August 1999 and July 2003.
Cardoso's administration, keen on increasing Brazil's
agricultural exports, chose cotton because prices had been declining
and officials felt they could draw a direct link between falling
prices and subsidies, said Marcus Pratini de Moraes, Brazil's
agriculture minister under Cardoso. Another Brazilian WTO complaint
against European sugar subsidies is pending.
"Export subsidies in particular are disastrous, especially
for poor countries," de Moraes explained in an interview. "They are
one of the main reasons for poverty and misery for millions of
people."
Getting rid of subsidies would allow South America's largest
country to double its production within two years, to 2.4 million
metric tons, according to the Brazilian Association of Cotton
Producers.
Leme's cotton farmers estimate subsidies depress world
cotton prices by 5 percent to 10 percent. The international price
has dropped 21 percent over the last decade and has been so volatile
that many growers reduced their cotton acreage and planted other
crops for a more reliable source of income.
While Brazilian production has doubled since the mid-1990s,
turning the country from a cotton importer into an exporter, most of
the growth has occurred at huge plantations in the Amazon and in the
arid northeast.
Leme, a city of 95,000 two hours from Sao Paulo, Brazil's
largest city, is home to small farms with no more than 1,230 acres,
and was one of the first places in the country where farmers planted
cotton.
But a sign at the entrance to the town proclaiming it the
Cotton Capital of Brazil disappeared years ago as the local crop of
choice was overshadowed by sugarcane and corn.
"We would have a lot more land in cotton production if it
wasn't for the subsidies," said Ronaldo Oliveira, a cotton farmer
and president of the Sao Paulo state cotton producers association.
The WTO decision could reverse the trend if international
cotton prices rise and stay above what farmers get for sugarcane and
corn, said Marcos de Almeida, Leme's top agricultural official.
"Farmers here are going to move to what's profitable," he
said. "And they already know how to grow cotton."
Many Leme farmers own less than 123 acres, giving them an
annual income of less than 25,000 reals ($8,600). Farm families can
support themselves and perhaps own a used car, but most of the
town's small farmers struggle to pay bills and can't dream of
sending their children to college.
"With more money, they would have more opportunities and
income that would circulate in the community," de Almeida said.
Simarelli has trouble understanding how individual American
farmers and farms can get up to $360,000 in loans and subsidies
under a $190 billion farm bill signed by President George W. Bush in
2002.
Brazil's government doesn't give him anything, he says, and
interest rates of more than 20 percent annually are too high for him
to take out a loan for a new combine to replace his 1998 model.
"Right now, I'll have to wait 10 years to buy another one,"
he said. "If they get rid of the subsidies, I can buy it in six
years."