NCC Disagrees With Brazil/U.S. Dispute Panel’s Decision

NCC Chairman Woody Anderson said the NCC's initial review of the just-released decision in the Brazil/U.S. WTO cotton dispute indicates that the Panel made some surprising assumptions and reached conclusions the NCC believes are not supportable.

September 8, 2004
Contact: Marjory Walker
(901) 274-9030

MEMPHIS - NCC Chairman Woody Anderson stated today that the organization's initial review of the just-released decision in the Brazil/U.S. World Trade Organization (WTO) cotton dispute indicates that the Panel "made some surprising assumptions and reached conclusions we believe are not supportable.”

“The National Cotton Council disagrees with the Panel decision,” Anderson said. “We do not believe the United States – or, for that matter, any WTO member - intended that the WTO Agreements would be interpreted as this Panel has done. Now that the report has been publicly released, we are even more convinced that neither the facts, the economics nor the agreements support the Panel's primary decisions. We look forward to a resolute appeal."

Since 1992, Anderson noted, the U.S. cotton program has moved toward decoupling payments from production, has a lower loan rate for cotton and a lower target price. He pointed out that these changes show that the 2004 cotton program does not support cotton at a higher level than in 1992.

Anderson said, "The Panel's finding of serious prejudice seems contrary to 33 years of stability in the share of the world market held by United States cotton and, indeed, a loss of market share in 2002. The decision also runs counter to recent findings by an independent Texas Tech study that showed estimated price impacts from the U.S. cotton program ranging from less than 1/2 of a percent to just over 2 percent. That's about a quarter of a cent to 1.2 cents per pound. It does not seem possible that these insignificant price impacts could be said to cause any country serious prejudice."

Dr. Mark Lange, National Cotton Council chief executive officer, contrasted the independent Texas Tech analysis to that conducted by Professor Dan Sumner for Brazil in the dispute.

"Although we strongly disagree with the Panel's final decision, we do note that the Panel dismissed the outlandish economic model results offered by Brazil's economic expert,” Lange said. “With good reason: the soundness of Brazil's evidence has been severely undermined by the Texas Tech study and a recent study conducted by the Food and Agriculture Organization, which also found minimal price impacts from the U.S. cotton program. In fact, the FAO study also explicitly questioned and rejected many of the assumptions used by Brazil's economic expert.

"The economic analysis rejected by the Panel is very similar to the reports constructed by OxFam International that have been picked up by the media and trumpeted as fact. The Council is glad that the Panel at least saw through this aspect of the economic double-speak offered by Brazil." 

Dr. Gary Adams, NCC vice president for economic and policy analysis, noted that, "the Panel’s report will probably intensify the focus on the U.S. cotton program even during the appeal. This is unfortunate. While Brazil points an accusing finger at the United States, we are seeing record cotton production throughout the world in 2004 led by dramatic increases in Brazil and China.”

Adams said an eight percent increase in acreage outside the United States together with good weather in virtually every growing region will result in an unusually large crop. For example, combined, Brazil and China are expected to increase cotton production in 2004 by 8.1 million bales over their 2001 production - an increase that is almost twice the size of the 4 million bale annual cotton crop in West Africa.

Anderson stated that "a more decoupled U.S. cotton program, a lower loan rate, a lower target price, a stable world market share, an unbiased economic study showing minimal price impacts and Brazil's own dramatic increase in cotton production all point to a U.S. cotton program that is not causing serious prejudice to Brazil, or any other country in the world."

Lange added, "Their charges focus on one thing - increased U.S. expenditures under the cotton program. Without a doubt, the U.S. program is costing more than we would like, but these costs are a result of low world prices - not a cause of increased U.S. production."

William Gillon, NCC international trade counsel, stated that the U.S. "has several strong avenues in which to pursue its appeal and the NCC will work closely with U.S. attorneys involved in the case. We expect no immediate changes to the U.S. cotton program. The appeal process will take several more months and even then, parties are given a reasonable amount of time in which to comply with any WTO rulings upheld on appeal. It is not appropriate to speculate on possible program changes at this time. We remain hopeful that the initial ruling will be substantially revised by the WTO appellate body."