Brazilian cotton two years after WTO victory

Here’s an interesting story following up on yesteryear’s Brazilian cotton subsidy case:

The future loomed bright for Brazilian cotton growers after their government won a headline-grabbing victory at the World Trade Organization, which declared some U.S. cotton subsidies illegal… And there were predictions that Brazil’s cheaper labor and land would make it even more competitive on the world market.

It hasn’t worked out that way. Some Brazilian farmers, including former top producers, have quit cotton altogether. The WTO frowned on several U.S. cotton subsidies but singled out only “Step-Two” payments, those made to exporters and domestic mills for buying higher-priced American cotton. That represented just about 7 percent of the $3.7 billion that Washington planned to spend on cotton programs this year…

On top of the subsidy issue and the drop in Chinese purchases, Brazil also has a poor road system and high transportation costs. And India has emerged as a competitive threat, with its better transport network. India has also embraced genetically modified cotton, which requires less insecticide. Brazilian farmers will soon be able to plant genetically modified cotton, but it won’t be enough incentive for some.

Although Brazil grabbed much of the spotlight in recent years, the real competitive threat to Texas cotton producers is India, a Texas Tech University agricultural economist says. “We don’t see a big expansion for Brazilian cotton in the future,” Samerendu “Sam” Mohintu said. “It’s going to grow, but at a very slow rate. China is buying from India, which has a transportation advantage” over the United States and Brazil. India’s cotton quality “isn’t as good, but it’s cheap,” Mohintu said.

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