Tuesday, June 28, 2005

WTO Watch: U.S. Cotton Farmers Brace for WTO-Mandated Subsidy Cuts

This very interesting piece from the St. Louis Post Dispatch notes that the U.S. is obligated to announce its measures for implementation of a March WTO decision requiring cotton subsidy cuts by Friday (July 1) and that many cotton farmers are understandably nervous about the expected cuts.

This may make the WTO seem fairly powerful, but in reality, the U.S. could ignore this WTO ruling. It won't because, among other things, Brazil's Congress is poised to pass retaliatory legislation if the U.S. doesn't comply to the extent Brazil believes is required. And because it is a policy commitment of the U.S. that international trade, even as interpreted by the WTO, is better than the alternative. After all, the U.S. wins as much as it loses, as it did yesterday in its apple claim against Japan and in its defense of chip duties against S. Korea.

To be sure, this policy commitment is beginning to falter, and surely there will be payback against the White House and the Congress if they do cut the farmers' subsidies. And maybe a future U.S. government will give it up and say the WTO isn't worth it anymore. But because that is always an option, it is important to remember that in the end cuts will ultimately be the responsibility of the WH and Congress, not the WTO.


Anonymous geoff manne said...

I would quibble with one of your claims in this post. You argue that following the ruling would not mean that the WTO is powerful. You say that "the U.S. could ignore this WTO ruling. It won't because, among other things, Brazil's Congress is poised to pass retaliatory legislation if the U.S. doesn't comply to the extent Brazil believes is required."

While Brazil could, in theory, retaliate in the absence of the WTO, I think it is fair to say that the existence of the WTO makes retaliation more likely, and, thus, that US adherence to the ruling, if it comes in response to anticipated Brazilian retaliaiton, is in an important way a consequence of the WTO itself. In this way the WTO does have power.

Now I'm as much a realist as the next guy. I understand your point. But the reality is that the existence of the WTO changes the calculus for Brazil and thus for the US. Not, of course, because the WTO itself has enforcement power, but because the existence of the institution provides rhetorical and normative levers that shift the political consequences for its members.

In the final analysis, your second point holds: "it is a policy commitment of the U.S. that international trade, even as interpreted by the WTO, is better than the alternative." And this explains why, at the margin, the WTO has no power -- it exists and operates at the pleasure of the US. But within the significant middle space created by the US's overall commitment to trade, the rule of law and thus the WTO, the WTO does exert significant control. Had its ruling been different, I'm quite sure the consequences for US cotton subsidies would be different, as well.

6/28/2005 2:33 PM  
Blogger Julian Ku said...

Hi Geoff,

Point well taken. And thanks for commenting on one of my WTO posts (I always wonder whether anyone reads them).

I don't think we really disagree. Perhaps I understate how the WTO has really shifted U.S. approach to international trade. Thus, instead of saying: "we need free trade", politicians can say "we need the WTO." I suppose they do that to some degree. And in this way, the WTO exerts some independent normative pull separate from the policy commitment to international trade.

the question is: how much of a pull is this? I agree the WTO makes a difference, but how much of a difference? My guess is that the difference is somewhat overstated. What really is driving this whole dynamic is (or in my view, should be) a commitment to free trade and not a commitment to comply with the judgment of seven randomly appointed trade lawyers.

thanks again for sharing your comments!

6/28/2005 3:51 PM  
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