National Cotton Council leaders say they are reviewing a World Trade Organization appeals panel decision upholding a ruling against several provisions of the U.S. cotton program.

The decision, issued in Geneva, said last September's ruling in a complaint brought by the Government of Brazil against cotton's Step 2, export credit guarantee and direct payments programs, was substantially correct.

“The National Cotton Council is disappointed with the ruling by the appellate body of the World Trade Organization,” the NCC said. “As we have stated before, we believe several aspects of the Panel's findings are inconsistent with the intent of the Agriculture Agreement and are inconsistent with long-standing interpretations of that agreement.

A spokesman for the U.S. Trade Representative's office, which filed the appeal of the ruling and argued the case for the U.S. cotton program last December, said it was also reviewing the report.

“We will study the report carefully and work closely with Congress and our farm community on the next steps,” said Richard Mills, spokesman for the U.S. Trade Representative's office.

USDA leaders also expressed chagrin that U.S. farm programs were found to violate WTO rules.

Ruling disappoints

“We are disappointed in today's decision because U.S. farm programs were carefully crafted to meet our WTO obligations,” said Undersecretary of Agriculture J.B. Penn. “As we review the WTO report more thoroughly, we will continue to work closely with our agricultural community and Congress.

“I know that America's farmers and ranchers can compete as long as there is a level playing field, and we intend to work tirelessly to achieve that goal,” said Penn, undersecretary for farm and foreign agricultural services.

Sen. Saxby Chambliss, chairman of the Senate Agriculture Committee also issued a statement, saying he was “disappointed” with the decision.

The Cotton Council said its initial review of the findings indicate the appeals panel upheld the dispute panel decision “in most respects,” including its determinations concerning the export credit guarantee program, cotton's Step 2 program, classification of direct payments, and serious prejudice.

“While the appellate body did modify somewhat the panel's decision regarding aspects of the Peace Clause analysis, those modifications did not alter the final result that the Peace Clause did not shield the U.S. cotton program from Brazil's allegations,” the council said in a statement.

“The National Cotton Council will be closely reviewing the Appellate Body's analysis over the next few days and will consult with the Bush administration and Congress on this decision,” it noted. “There will be no immediate changes in the U.S. cotton program. We will, however, work with Congress and the administration to formulate an appropriate response to this decision.”

“While we are disappointed by the result, we will carefully review the decision in the days to come,” said Chambliss, a Georgia Republican. “Nothing in the ruling requires immediate action. Although we still believe the cotton program and the farm bill conform to our WTO commitments, I will work closely with my colleagues in the Congress and within the administration to engage the issues raised in the appellate panel.”

Brazil brought its complaint to the WTO in 2003, claiming that U.S. price supports for cotton were responsible for lower world cotton prices and reduced export sales for other Brazil's farmers. It said the U.S. cotton program “created serious prejudice” for growers in Brazil.

Last summer, a three-member dispute panel from the WTO agreed with Brazil's claim that the subsidies were inconsistent with trade rules and said the United States should dismantle its cotton program within six months.

USTR officials, consulting with the National Cotton Council and other industry groups, filed an appeal of the ruling and argued that the United States program was not in violation of WTO rules in a hearing in Geneva in December.

In its March 3 ruling, the appeals panel said the WTO should “request the United States to bring its measures, found in this report … to be inconsistent with the agreement on agriculture and the SCM (subsidies) agreement, into conformity with its obligations under those agreements.”

The full text of the appellate finding on the U.S. cotton program can be found at http://www.wto.org/.

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