Cotton dispute shows trade frailties

The global importance of cotton trade has been underlined by a subsidies spat between the US and Brazil today (9 March).

The South American country is placing tariffs on a host of US exports in retaliation for Washington’s domestic subsidies for cotton growers.

With the Brazilian government reportedly lining up tariffs on food, cars and cotton itself, a recovering US economy could be facing an substantial – albeit not life-threatening – hit.

The question of protectionism was raised last month when the EU extended anti-dumping duties on Chinese footwear exporters, and the US will doubtless face similar suspicions now.

Although claims that the country is paying some US$3bn to American farmers each year do not bode well, much like European footwear producers, US cotton growers will argue that their survival is at stake.

Brazilian cotton growers, meanwhile, have a similar concern, and will hope the country’s trade dispute with the important US market end well.

While Brazil’s proposed action has the backing of the World Trade Organisation (WTO), the US National Cotton Council (NCC) would prefer negotiation to retaliation.

As global economies get back on their feet, further disputes could be just around the corner, and mean a busy year for the WTO.