Cotton in the Doha Round - A Lost Opportunity?
Making progress in multilateral trade negotiations involving more than 150 countries is very difficult. Negotiations require exchanges - offering something for what you want. Given the widely discrepant wealth of developed and developing countries, the poorest countries must, in relative terms, offer a great deal more. Negotiations can advance because the internal interests of the countries are not homogeneous. Societies are divided and a trade negotiator, who must represent the interest of the country, is subject to pressure from more than one group. It is sometimes necessary to mobilize interest groups across countries.
This requires a sound communication strategy. When we started the development of the cotton dispute against the US and sugar against the European Union (EU) in 2001, an important objective was to demonstrate to the world the unfairness of international agricultural trade. The litigation should not only seek a favorable WTO ruling, but also help communicate the implicit unfairness of US and EU countries' policies vis-a-vis developing ones. Even in case of an unfavorable WTO ruling, the communication objective of seeking litigation would still have been valid. The decision taken to litigate provided a great communication opportunity. The international media sided with Brazil. Large sectors of society, possibly the majority, in the US and EU supported Brazil in the need for change. The first result of the arbitration panel concerning the cotton litigation occurred in June 2004. We scored more victories than anybody had foreseen. The US appealed, using all possible delay tactics. We continued to win.
This groundbreaking case certainly helped to establish Brazil as a global agricultural leader. But still, the Brazilian government neglected an important communication aspect of this WTO case. The panels were administered discreetly in Geneva - too discreetly. The Brazilian government did not sufficiently use the cotton case to create alliances for greater progress in the Doha Round. Even worse, Brazil reached an informal agreement with the US, and accepted the US argument that the Doha Round would lead to a cut in US cotton subsidies. What Brazil should have done was to use the panel finding to press more forcefully for progress in the Doha Round. They did not use the result of the dispute in the WTO ministerial meeting in Hong Kong, in 2005. Cotton was not even on the Brazilian agenda. The African countries, with whom an alliance was never sought by Brazil, and which had opted for a political route to solve the issue of cotton subsidies, were abandoned.
Again, in the recent failed mini-ministerial meeting in Geneva, Brazil did not make cotton a priority. In short, the tremendous leverage the WTO ruling on US cotton subsidies could have had on the Doha Round was wasted on several occasions. It is not a question of singling out a product for special treatment, but rather of understanding that it can serve as an important communication tool on unfair subsidy practices. Greater progress in subsidies would have translated into greater progress on market access. The cotton case ruling €“ which is arguably of greater political than economic significance - should have been used by Brazil to push for a better outcome in Geneva. With the breakdown, or delay, of the Doha negotiations, the Brazilian government is now boasting that it will retaliate against the US for noncompliance with the panel decision. WTO rules allow such retaliation when compliance with a WTO ruling is not forthcoming. Retaliation requires authorization from the WTO, and could take the form of increased import duties on products imported from the US.
Such an increase in tariffs will hurt US exporters as well as Brazilian consumers, since US imports will become more expensive. Retaliation may also take the form of ending payments of intellectual property royalties. These types of retaliation are warranted and unfortunately, necessary. In the strong rules-based system we all desire, the rules that take so many years of negotiation must be followed. Retaliation can also create the political momentum to finally push the decision to lower cotton subsidies, which is a step in the right direction to correct unfair practices in international agricultural trade.
Pedro de Camargo Neto is a member of the International Food & Agricultural Trade Policy Council, president of ABIPECS Brazilian Association of Pork Producers and Exporters, and an agricultural trade policy consultant. He was the Secretary of Production and Trade in the Brazilian Ministry of Agriculture from 2000-2002. A joint initiative of The German Marshall Fund of the United States (GMF) and the International Food & Agriculture Trade Policy Council (IPC), this blog collaboration aims to provide insight on concluding the Doha Round and pursuing trade liberalization in the future.
The views expressed in GMF publications and commentary are the views of the author alone.