MercoPress. South Atlantic News Agency

US Congress votes to scrap cotton subsidies

The United States Congress approved this week scrapping subsidies to the cotton industry and ending export and import subsidies which should help to normalize world cotton prices.

Last year the Bush administration agreed to implement a World Trade Organisation (WTO) ruling against the subsidies brought forward by Brazil, arguing that US help to American cotton farmers distorted the global market.

The House of Representatives passed the bill on Wednesday, following approval by the Senate late last year. The congressional vote, which came with protests from the agricultural lobby, means that U.S. exporters and manufacturers will no longer receive an incentive for buying their cotton from domestic farmers. The bill will now go to President Bush who is expected to sign it into law.

The Bush administration has already scrapped two credit programmes for the farmers, to comply with the WTO decision. US cotton subsidies have been at the centre of a global trade battle for years, with successive administrations paying billions of dollars annually to farmers in the American South, who have a powerful lobby in Washington.

The Bush administration said repeal of the program would help to address top U.S. trade priorities by eliminating both export subsidies and import substitution subsidies deemed illegal by the World Trade Organization and help in stabilizing world cotton prices.

"It implements findings in the WTO dispute brought by Brazil, and it fulfills commitments made at the recent Hong Kong ministerial to eliminate export subsidies for cotton by 2006" said Rob Portman, U.S. Trade Representative, in a statement. "These are important objectives, and I commend the Congress for working with the administration to address these critical issues."

In a landmark ruling in 2004 the WTO decided that much of the assistance given to American farmers broke its rules. In Brazil, the resolution was hailed as a victory and will be seen as vindication of the government's strategy of tough diplomacy at the WTO, in coordination with other developing nations.