Contrary to the recent farm policy criticisms by Brazil, the NCC says its Stacked Income Protection Plan (STAX) represents a positive step forward in efforts to resolve the longstanding trade dispute between the two countries.
In a statement, the NCC points out that in 2005, a World Trade Organization (WTO) panel concluded that the combination of the marketing loan, target price and former Step 2 provision of the marketing loan combined to cause significant price suppression and serious prejudice to Brazil’s cotton industry.
The upland cotton marketing loan’s Step 2 provision was eliminated in 2006.
In the current farm program’s context, the only remaining provisions relevant to the Brazil dispute are the marketing loan and the target price.
By calling into question any program other than the marketing loan or the target price, Brazil has attempted to extend the trade dispute’s scope to programs that are not part of the case’s current retaliation phase.
In an effort to meet current budget pressures and address the WTO case, the NCC proposes to eliminate the target price for upland cotton and introduce a formula that would lower the marketing loan in times of low prices.
Also, after assuming a 30 percent reduction in available support, the NCC proposal redirects remaining baseline funding for the target price-based counter-cyclical payment program and direct payment into an area-wide insurance program.
Moving upland cotton’s support into an insurance program is entirely consistent with the WTO panel’s findings regarding trade and market distortions.
Brazil challenged all crop insurance programs for upland cotton as part of the original dispute, but ultimately, the WTO panel did not assign any economic damages to Brazil based on the presence of insurance programs.
“While the United States is seeking lower overall support,” the statement noted, “it is unfortunate that Brazil seeks to criticize the progress of writing new U.S. farm policy while Brazil simultaneously maintains a minimum support price for cotton higher than current U.S. support levels.”
The full statement is on the NCC’s website at www.cotton.org/issues/2012/brazilrebutt.cfm.