Good News! U.S. Can Keep Sending $147m (per annum) to Brazilian Cotton Farmers after All

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Phew. That was close.

Earlier this month, Secretary of Agriculture Tom Vilsack said that without a new farm bill to replace the 2008 farm bill, the USDA would not have the authority or the funds to continue paying the $147m per year bribe we had settled with Brazil in 2010 as part of a trade deal. (The fulsome details are available in this blog post, written at the time of the deal, and more about the underlying trade dispute is available in this 2005 policy analysis by Cato Adjunct Scholar Dan Sumner). And without those bribes, Brazil would likely suspend the ceasefire deal and retaliate against U.S. export interests by raising import taxes and suspending its obligations to protect Americans’ intellectual property. So, Mr. Vilsack implied, Congress needs to pass a farm bill now, and include changes to the cotton program that would satisfy the Brazilians and prevent a trade war. 

Well stand down, America, because according to some unnamed trade experts quoted by Inside U.S. Trade today [$], Mr. Vilsack’s analysis is not exactly correct. He may even be lying:

Agriculture Secretary Tom Vilsack misconstrued the facts, or was at least misleading, when he claimed last week that the U.S. government will lose the authority on Oct. 1 to continue paying Brazil $147 million annually under a temporary settlement to a World Trade Organization dispute, according to four non-government experts.

The statement, these experts agreed, was clearly aimed at pressuring Congress to pass a new farm bill and thereby resolve the longstanding fight with Brazil over agricultural subsidies…

But a decision on whether to end that authority is clearly within the purview of the administration – not Congress, these experts said. In other words, if the authority is expiring this fall, it is only because the administration has determined internally that it wants it to expire and does not want to continue making the payments, they said…

“In my opinion, if the farm bill were extended again for one year and the Brazilians were OK with another year’s worth of payments and there was an agreement from both sides, Vilsack would have the authority to continue payments,” one Senate aide said. “He and the [administration] just don’t want to and they are using this as leverage” to try and secure passage of a new farm bill, the aide added.

Numerous other sources also pointed out that the administration did not gain new authority from Congress when it instituted the payments in 2010, and said there is no reason to believe it would need such an act of Congress now in order to maintain its current ability to pay Brazilian cotton growers. No appropriations legislation has been passed in several years, and this has not affected the payments at all…

Another agriculture industry source also said the secretary’s implication that passage of the farm bill would fix the dispute with Brazil was also misleading. Brazil has continuously criticized the pending farm bill proposals for potentially increasing the level of government support for cotton farmers compared with current levels, and for not making any changes to a WTO-faulted export credit guarantee program also operated by the CCC.

Vilsack also said last week that, due to sequestration, the administration would not be able to pay the full amount to Brazil this year either (Inside U.S. Trade, Aug. 9). Observers also said it was unclear to them whether this was really the case, or if this was an elected choice by the administration designed to increase pressure on Congress. [all emphases added]

So it looks like the mad panic to pass a farm bill is unjustified, at least as far as the Brazil cotton dispute is concerned. Mr. Vilsack, whose agency clearly has a vested interest in the farm bill’s passage given that it justifies the USDA’s very existence, may have been stretching the truth in pursuit of his goal. The USDA can keep paying the bribes whatever happens, and the farm bill proposals under consideration are unlikely to satisfy the Brazilians anyway.

The ideal solution, of course, would be to do away with U.S. cotton supports (and all other agricultural programs) altogether. We could save taxpayers and consumers billions of dollars, and put that $147m to better use. That would be a farm bill worth passing immediately.