The Insane Interest Group Politics That Have America Subsidizing Brazilian Cotton Farmers

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You probably know that the United States has some nutty agricultural policies. And you may also know that over the past couple of decades, the United States has increasingly used trade policy negotiations as a lever to coerce foreign countries into adopting intellectual property laws that are favorable to incumbent US producers. What you probably don’t know is that at the intersection of these policies, American taxpayers are making direct payments to Brazilian cotton farmers. Why?

Well, Emilie Kaye Peine tells the tale:

In order to understand this peculiar political move, one has to look all the way back to 2002, when Brazil filed a case in the WTO challenging U.S. cotton subsidies. In 2004, the Dispute Settlement Body of the WTO found in favor of Brazil, ruling that government subsidies afforded U.S. cotton producers an unfair advantage and suppressed the world market price, which damaged Brazil’s interests. After multiple appeals the WTO upheld the original ruling, and by 2009 the U.S. still had not reformed its cotton programs. Brazil then asked the WTO for permission to retaliate against the U.S. by imposing trade sanctions. The WTO decided that Brazil was entitled to impose 100-percent tariffs on over 100 different goods of U.S. origin. Even more importantly, however, Brazil was entitled to suspend intellectual property rights for U.S. companies, including patent protections on genetically engineered seeds.

In WTO language, Brazil was allowed to suspend its obligations to U.S. companies under the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement. This constituted a major threat to the profits of U.S. agribusiness giants Monsanto and Pioneer, since Brazil is the second largest grower of biotech crops in the world. Fifty percent of Brazil’s corn harvest is engineered to produce the pesticide Bt, and Monsanto’s YieldGard VT Pro is a popular product among Brazilian corn farmers. By targeting the profits of major U.S. corporations, the Brazilian government put the U.S. in a tough spot: either let the subsidies stand and allow Brazilian farmers to plant Monsanto and Pioneer seeds without paying royalties, or substantially reform the cotton program. In essence, Brazil was pitting the interests of Big Agribusiness against those of Big Cotton, and the U.S. government was caught in the middle.

The solution? Start giving Brazilian cotton farmers $147 million a year in subsidies to allow us to continue subsidizing US cotton farmers without imperiling the interests of US biotech firms.

In the narrowest sense, just dropping the US domestic cotton subsidy would have been the right approach. But more broadly, this is a picture of the increasingly dysfunctional international trade policy dynamic. The way these negotiations work these days is that each national government shows up at the table essentially acting as a lawyer for a favored set of domestic interest groups. When the multilateral trade process was set up in the wake of World War II the idea was to move to the bargaining framework precisely in order to circumvent and subvert bad interest groups politics around trade. And for a while it worked. But the process has run on for so long now that it’s become increasingly captured.