King Cotton, Developing Countries and the ‘Peace Clause’: The WTO’s US Cotton Subsidies Decision

Abstract

Although the World Trade Organization (WTO) is a powerful vehicle for promoting economic development, the Uruguay Round has been perceived by developing country WTO members as an unequal bargain. Especially with respect to agriculture, the Uruguay Round yielded only limited concessions. In September 2003, Doha Round efforts stalled at Cancun when developing countries coalesced to oppose a proposal that insufficiently liberalized trade in agriculture. In March 2005, the Dispute Settlement Body adopted a panel decision upholding Brazil's legal challenge of US subsidies to cotton producers. The US Cotton Subsidies decision represents a dramatic victory for Brazil and other developing country WTO members. The timing of the decision, coinciding with ongoing Doha Round agriculture negotiations, ensures that it will influence any outcome of the Round. This article examines the US Cotton Subsidies decision, describes the subsidy programs at issue in the dispute, reviews applicable WTO rules, and outlines the major findings of the panel and Appellate Body. The article concludes that Brazil's victory in US Cotton Subsidies may represent a broader shift within the WTO away from a system dominated by the US and EC toward a system that increasingly is influenced by emerging market economies. Copyright 2006, Oxford University Press.