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Fri January 17, 2014

Why U.S. Taxpayers Started — And Stopped — Paying Brazilian Cotton Farmers

Originally published on Fri January 17, 2014 5:20 pm

Note: This is an update to a story we initially published in 2010.

In 2002, Pedro Camargo had a job in Brazil's Ministry of Agriculture. He was annoyed by the subsidies the U.S. government payed to U.S. cotton farmers.

"We want to compete farmer against farmer, and not Brazilian farmer and American farmer with the help of the US government," he told me. "Not only is that not fair; it's not following the rules."

When he says "the rules," he means the rules of the World Trade Organization, which govern global trade. Back in 2002, Camargo went to the WTO with his complaint, arguing that the U.S. was illegally subsidizing its cotton farmers. He won. The U.S. appealed the decision, and lost again.

As the fight went on, Brazil threatened to retaliate with trade sanctions if the U.S. didn't stop subsidizing cotton.

And finally, in 2010, U.S. representatives made Brazil an unusual offer. They said: The subsidies to U.S. cotton farmers are part of U.S. law, and will continue for as long as the current Farm Bill is in place. So, the negotiators said, until the next Farm Bill passes, the U.S. will pay Brazilian cotton farmers $147 million a year.

"For Brazilian farmers, it's a lot of money," Camargo says. The Brazilians took the deal. And, every month, the U.S. sent over $12 million to Haroldo Cunha, president of the Brazilian Cotton Institute.

But then, last October, the money didn't show up. "Nobody called," Cunha said. "We just looked at the bank account and we realized no payment was done." No money came in November or December either, Cunha said.

Tom Vilsack, the U.S. Secretary of Agriculture, says he did warn the Brazilians last summer that the payments were about to stop. That's because the U.S. promised to make the payments until the next farm bill passed — and Congress planned to pass a farm bill last year.

But Congress did not pass a Farm Bill last year. Still, a Farm Bill will pass eventually. And many of the Brazilian trade representatives who have looked at current versions of the bill say the cotton subsidies are still in there, just in a different form.

If that's still the case when the bill passes, the Brazilians will take the whole thing back to the WTO and tart the whole process all over again.

Copyright 2014 NPR. To see more, visit http://www.npr.org/.

Transcript

MELISSA BLOCK, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

AUDIE CORNISH, HOST:

And I'm Audie Cornish.

The U.S. spends billions of dollars each year subsidizing American farmers. But did you know the federal government also subsidizes farmers in another country? The U.S. sends cotton producers in Brazil $150 million a year.

Chana Joffe-Walt of our Planet Money team reports on the fight that led to this strange deal and explains why those payments to Brazil just stopped.

CHANA JOFFE-WALT, BYLINE: The whole thing started with an energetic Brazilian with a bushy black mustache named Pedro Camargo. In 2002, Pedro had a job with the ministry of agriculture. And like any project you or I take on at work one day, Pedro did not know this was the one that would end up sticking to him, haunting him, defining his career. Back then, it was just something that annoyed him.

The United States, depending on the year, pays half a billion to $4 billion to American cotton farmers. Brazil, Pedro notes, also has cotton farmers and they like to make money, too.

PEDRO CAMARGO: We want to compete farmer against farmer, and not Brazilian farmer and the American farmer with the help of the United States government. That's not only is not fair, it's not following the rules.

JOFFE-WALT: The World Trade Organization rules, a set of agreements that govern global trade. Back in 2002, Pedro went to the WTO with his complaint, argued the U.S. was illegally subsidizing cotton and Pedro won. But the U.S. appealed the decision, the U.S. lost, appealed again, lost again.

CAMARGO: We win appeal and we win appeal. And it's - and the United States would ignore, completely ignore.

JOFFE-WALT: Brazil threatened to retaliate with trade sanctions if the U.S. didn't stop subsidizing cotton. And finally, in 2010, U.S. representatives made Brazil an unusual offer. They said, look, it's up to Congress to get rid of subsidies. And at the moment, that's not going to happen, maybe in the next Farm Bill. How about until then, until the next Farm Bill passes, we pay you guys, give you some money.

CAMARGO: And I said, well, I don't want the - how do you say? I don't want a tip. No tips, I want the solution.

JOFFE-WALT: But then the Americans offered a number: $147 million a year. And this changed things for Pedro.

CAMARGO: $150 million is not a tip. Maybe it's a bribe. But it's not a tip. It's a lot of money. For Brazilian farmers, it's a lot of money.

JOFFE-WALT: Pedro wanted the cotton subsidies gone. But back in 2010, he was sounding pretty upbeat.

CAMARGO: Oh, we didn't win but we got compensated to wait because we still expect to win. I think maybe we'll win. And waiting with $150 million in the pocket helps.

JOFFE-WALT: OK. Just to review up to this point, the U.S. was found to be illegally subsidizing U.S. cotton farmers. The U.S. is still subsidizing American cotton farmers. In addition, for more than three years, the U.S. has also been subsidizing Brazilian cotton farmers. Every month, at the end of the month, the U.S. sends money to a man named Haroldo Cunha, president of the now-3-year-old Brazilian Cotton Institute.

HAROLDO CUNHA: Yes. Every month, it was normal. The amount transferred was $12,275,000.

JOFFE-WALT: But then, last October...

CUNHA: Nobody called. We just looked at the bank account and then we realized that no payment was done.

JOFFE-WALT: Zero.

CUNHA: This October, zero, yes. October, November, December, we are already three months with no transfers.

SECRETARY TOM VILSACK: Well, that's not quite accurate.

JOFFE-WALT: That is U.S. Secretary of Agriculture Tom Vilsack, the man who, for the last three years, has overseen the transfer of nearly half a billion dollars to the Brazilian Cotton Institute. And Vilsack says he did warn the Brazilians last summer that come fall, he would no longer have funds to send every month.

VILSACK: Basically what happened was it was previously included in president's budgets for a couple of years. It wasn't included in this president's budget because Congress had indicated a desire and belief that they were going to get a Farm Bill passed.

JOFFE-WALT: But Congress did not get a Farm Bill passed in October or November or December. And unfortunately for the Brazilians, people in the United States who want the Farm Bill to pass find it helpful to have a bunch of angry Brazilians threatening trade retaliation unless Congress gets the Farm Bill passed.

For Pedro Camargo, this is no longer his battle but he can't stop checking the news on his computer.

CAMARGO: Why are we still talking about cotton? It's a long time, 11 years. I have five grandchildren. I don't want to talk about cotton anymore. It's just too much time.

JOFFE-WALT: Eventually, a Farm Bill will pass. The Brazilians were paid to wait for the Farm Bill with the promise that it would finally deal with their complaint and U.S. cotton subsidies. But actually, a lot of Brazilian trade representatives who have looked at current versions of the bill say the subsidies are still in there, just disguised under a different name. If they still feel that way when the bill passes, they're going to take the whole thing back to the WTO, start the entire process all over again. Chana Joffe-Walt, NPR News. Transcript provided by NPR, Copyright NPR.