The US Subsidizes Brazilian Cotton Farmers

In our chapters on bureaucracy, interest groups, and economic policy, we discuss how interest-group demands add to the federal deficit. Jonathan Rauch notes one example:

In 2002, Brazil filed a complaint against U.S. cotton subsidies with the World Trade Organization, of which the United States is a member. The international trade treaty allows signatories to subsidize farmers, and, in fact, they all do. The assistance, however, is supposed to be limited, and trade-distorting subsidies -- ones that either subsidize exports or encourage overproduction -- are subject to particularly tight limits.

Brazil argued that Washington's generous cotton program violated the trade rules. Despite some legislative and administrative efforts by the U.S. to tweak the subsidies, last year the WTO ruled generally in Brazil's favor. Brazil won the right to levy retaliatory duties on more than $800 million worth of U.S. exports annually, a prospect that manufacturers here reacted to with alarm.

The Obama administration found itself in a hard spot. Substantially changing farm subsidies requires an act of Congress, but the next farm bill is not due until 2012, and trying to get lawmakers to approve a stand-alone subsidy cut seems out of the question. A trade war with Brazil, however, is the last thing that Washington needs, particularly when the U.S. has been found to be in the wrong.

So last month the administration announced a deal with the Brazilians. In due course, Congress will change the cotton program. Until that happens, the U.S. government will send Brazil an annual check for $147.3 million (a sum based on estimates of the cotton subsidies' economic cost to Brazil), which Brazil is to spend on "technical assistance and capacity-building" for agribusiness. Translation: Washington is bribing Brazilian farmers to keep illegal subsidies flowing to U.S. farmers.

Rauch quotes Representative Ron Kind (D-WI):

"If the average person at home realized what's happening with the cotton program, there would be outrage in the streets."

And he explains the moral of the story:

In real life, there is no such thing as Big Government; there are only government programs. Each program has beneficiaries and defenders who care much more about retaining it than anyone else cares about getting rid of it -- which is why the average person at home has no idea what the cotton program is up to, and never will. "The agriculture interests are well entrenched," Kind says, and "it's tough to make this a real election-year issue that motivates people to go to the polls."