U.S. Farm Subsidies...for Brazil

April 25, 2011

A lot of Americans are aware that their tax dollars subsidize cotton farmers. However, it’s unlikely that many Americans are aware that their tax dollars are now supporting cotton farmers in Brazil. Congressman Barney Frank (D-MA) calls it “the single stupidest public policy I have ever encountered.”

As the Wall Street Journal explains, the story is classic Washington policymaking:

Brazil took the U.S. to international trade court in 2003 over its cotton-subsidy programs, claiming the U.S. unfairly bolstered its cotton exports and put Brazilian shippers at a disadvantage. Brazil won and even defeated a U.S. appeal by 2005, but the legal wrangling continued over whether the U.S. was complying with the World Trade Organization ruling and abolishing its cotton-subsidy programs.

In June 2010, the U.S. struck a deal with Brazil to make monthly payments of $12.275 million on top of two one-time payments of $30 million and $4.3 million. Total U.S. payments to Brazil should reach $157 million by the end of this month.

Brazil, under the agreement, is responsible for making sure the money is spent only on improving the country’s cotton sector.

Meanwhile, the U.S. Department of Agriculture continues to pay subsidies to U.S. cotton farmers. In 2003, the year Brazil requested a WTO dispute panel, the USDA paid out $2.9 billion to cotton farmers, according to government data. The yearly amount has varied sharply though, reaching $4.2 billion in 2005 and just $872 million last year.

Regardless of how one feels about the World Trade Organization, subsidies for domestic cotton farmers are indefensible. But instead of using the WTO ruling as an excuse to rein in the subsidies, policymakers simply decided to start sending taxpayer checks to Brazil. The old adage that “two wrong don’t make a right” apparently doesn’t apply in our nation’s capital.

See this Cato essay for more on farm subsidies and this essay on agricultural regulations and trade barriers.


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