The Neoliberal Model has to work for all nations.


The WTO has ruled that subsidies to US cotton producers are discriminatory

The Brazilian government has announced trade sanctions against a variety of American goods in retaliation for illegal US subsidies to cotton farmers.

The World Trade Organization (WTO) approved the sanctions in a rare move.

Brazil published a list of 100 US goods that would be subject to import tariffs in 30 days, unless the two governments reached a last-minute accord.

It said it regretted the sanctions, but that eight years of litigation had failed to produce a result.
It said it would raise tariffs on $591m (£393m) worth of US products - from cars, where the tariff will increase from 35% to 50%, to milk powder, which would see a 20% increase in the levy.

US farm subsidies are condemned worldwide. This archaic practice must stop
Carlos Marcio Cozendey
Brazil's foreign ministry

Cotton and cotton products would be charged 100% import tariff, the highest on the list.
The Office of the US Trade Representative said it was "disappointed" by Brazil's decision and called for a negotiated settlement.

Critics say the US has given its cotton growers an unfair advantage by paying them billions of dollars each year.

In 2008, the WTO ruled that subsidies to US cotton producers were discriminatory.
Tall order


Government subsidies for local producers should only be allowed in response to short term need after natural disasters or periods of serious economic hardship



Carlos Marcio Cozendey, head of economic affairs at Brazil's foreign ministry, told a news conference: "The idea was to distribute the retaliation broadly in order to maximise pressure.
"US farm subsidies are condemned worldwide. This archaic practice must stop."

However some analysts say major changes to these subsidies would involve modifying agricultural legislation - a tall order for the US Congress against a difficult economic and political backdrop, says the BBC's Gary Duffy in Sao Paulo.

Our correspondent says the dispute, which began in 2002, is one of the few in which the WTO has allowed cross-retaliation, meaning the wronged party can retaliate against a sector not involved in the case.


He adds that it appears the Brazilian government has deliberately chosen a wide range of products in order to have maximum impact.

Safety net

Cotton producers in the US argue that the system of subsidies has changed since the WTO made its original ruling in 2005.

"The US has made changes in the cotton programme as well as the export guarantee programme," Gary Adams, chief economist at the National Cotton Council told the BBC, adding that US cotton production was now 40% to 45% lower.

Mr Adams said he believed that subsidies were still justified.
"We feel this is a very important financial safety net for producers," he said.
Steven Bipes of the Brazil-US Business Council urged the US to take steps to avoid what he called "damaging" retaliation by Brazil.

"The business community finds it extraordinarily important that countries, including the US, comply with its WTO obligations and otherwise negotiate to find common ground when there are

About time!
S.

Brazil, America and trade
Picking a fight
Brazil fires another salvo in its dispute with America over cotton subsidies
Mar 9th 2010 | From The Economist online


HOW serious is the decision by Brazil’s government, announced on Tuesday March 8th, to raise duties on a number of American-made imports? The increases are sizeable for goods such as cosmetics (tariffs will double, to 36%) and many household wares (tariffs will also double, to 40%). And the timing is significant: the news came as America's commerce secretary, Gary Locke, was due to arrive in Brasilia to promote an export-promotion initiative in America's 10th-largest export market.

Yet the decision is not entirely surprising, as it relates to a long-running trade dispute. Asked about the dispute at a press conference last week Hillary Clinton, the secretary of state, said “I feel like I have walked into a movie that has been going on for years”. Brazil complained to the World Trade Organisation (WTO) nearly eight years ago about America's counter-cyclical subsidies to its cotton growers, which are designed to cushion them against fluctuations in the cotton price, and a programme guaranteeing loans for international buyers of American cotton.

Just over six months ago an arbitration panel at the WTO authorised Brazil to retaliate by imposing additional duties on American goods, for America’s failure to comply with earlier rulings on the matter. The panel specified that Brazil was entitled to retaliation worth $294.7m, but that this amount would be adjusted in subsequent years to account for changes in payments to American cotton farmers. Brazil estimates that it is entitled to impose retaliatory measures worth $829m. The measures announced so far are worth $591m.

The dispute is related to cotton, so it is unsurprising that Brazil has reserved the stiffest tariff rises for cotton products, lifting them to 100% from current rates of 6%-35%. But a decision to lift duties on cars—a sensitive product in America—from 35% to 50% suggests that Brazil is doing what most countries authorised to retaliate against trade partners do, which is to seek to inflict most pain on industries with a strong political voice.

Brazil has another card to play, which software, pharmaceutical and other big American industries may worry about. The Latin American country may, under the terms of the WTO ruling, “suspend certain obligations” to honour intellectual property rights (such as patents) if the amount of retaliation that it is entitled to is so high that it could not reasonably hope to exhaust it by targeting goods alone. Brazil’s government says that it intends to do this with measures later this month, to the value of $238m—the “remaining annual amount of retaliation to which Brazil is entitled”—which will be applied to intellectual property and services. The WTO has previously allowed such retaliation, although nobody has ever followed through with such steps. Brazil, if it threats are to be believed, would be the first to do so.

The American response has been by the book. A spokeswoman for the office of the US Trade Representative said it was “disappointed”, adding that it hopes to solve the trade spat through negotiation. The Brazilians say they ready for talks, too. The statement by the Brazilian government emphasised that “trade retaliation does not constitute the most appropriate means” to a fairer basis for international trade.

That sounds conciliatory, but the Brazilians are still emphasising that negotiations would have to focus on cotton subsidies. The strength of the farm lobby in Congress makes this an area difficult to reform. But changing Congress's mind may be exactly what the Brazilians intend: Gary Hufbauer, a trade economist at the Peterson Institute for International Economics in Washington, DC, says that “Brazil has decided that the only way to shift congressional opinion is through retaliation”. The two countries now have a month to negotiate a settlement before the proposed tariff increases go into effect.

And so it begins....

A few days back we had a comedic article where the WTO chief was crying to have global free trade talks started again. You don't need to be a fortune-teller to read the tea leaves and see the exact opposite is beginning to happen. I don't think anyone in Washington would want to burn political energy right now on overturning these cotton subsidies. Having just done so much to save the banks how could any politician sell that? Protectionism is coming back, and we can only hope leaders around the world are moderate and temperate about it so that disputes don't become trade wars and potentially worse.

Soon to come is the trade war around China and their undervalued currency.

Let's hope you aren't right because a Trade War will make us all poorer. As for Brazil's attempt to push the envelop of the USA Trade hypocrisy-the huge subsidies given to farmers and giant food conglomerates-I see plenty good to cheer about. If ever there was a valid case against U.S. subsidies this is it. What is laughable, is the age-old claim by American farmers that they are the "most efficient in the world"! With subsidies ANYONE can make that claim.

The LDP (Loan Deficiency Payment), which essentially sets a floor price for a commodity by offering a payment to farmers if the commodity is sold below that price, making up the difference. The target price moves slightly from year to year to address long term trends in the commodities pricing. This type of subsidy is not designed to “encourage farmers to plant crops that are unprofitable”, but rather allows them to cope with a market that is often very volatile.

This type of subsidy should be faded out. Its replacement should be a tax incentive to purchase Crop Insurance, which can insure against both calamitous weather and untypically low prices. This type of aid has passed WTO standards in the past. The USDA budget was $134b in FY 2010. 67% of that budget is food stamps. Only $23b is appropriated for commodity programs.

There are some agricultural industries that are totally sustained by federal and trade policy. The peanut and sugar beat industry would collapse in the US if imports were not subjects to heavy duties.
Those protectionist policies differ in character from programs that are designed to kick in only when prices are unusually low. An industry should not be destroyed simply because 1 year's weather has produced an extraordinary surplus in supply.

But these programs that kick in should be offered to poor African farmers who cannot get loans to tide them over.
Of course you are wrong as usual a Trade war makes some poorer and some richer.
A bid from Europe for tankers for the US air force won.
Under the currnent trade war and political pressure the tender was cancelled and a new tender put out.
The terms were such that Europe bids were unlikely.
The Europe people are poorer , US richer.
http://www.timeslive.co.za/sundaytimes/article264101.ece
Of course EADS is the biggest manufacturer of civil jets worlwide.
S.


S.

But these programs that kick in should be offered to poor African farmers who cannot get loans to tide them over.
Of course you are wrong as usual a Trade war makes some poorer and some richer.
A bid from Europe for tankers for the US air force won.
Under the currnent trade war and political pressure the tender was cancelled and a new tender put out.
The terms were such that Europe bids were unlikely.
The Europe people are poorer , US richer.
http://www.timeslive.co.za/sundaytimes/article264101.ece
Of course EADS is the biggest manufacturer of civil jets worlwide.
S.


S.

[QUOTE=abc200]
[QUOTE=Atabey]
[QUOTE=Manhattanite]
And so it begins....

A few days back we had a comedic article where the WTO chief was crying to have global free trade talks started again. You don't need to be a fortune-teller to read the tea leaves and see the exact opposite is beginning to happen. I don't think anyone in Washington would want to burn political energy right now on overturning these cotton subsidies. Having just done so much to save the banks how could any politician sell that? Protectionism is coming back, and we can only hope leaders around the world are moderate and temperate about it so that disputes don't become trade wars and potentially worse.

Soon to come is the trade war around China and their undervalued currency.
[/QUOTE]



Let's hope you aren't right because a Trade War will make us all poorer. As for Brazil's attempt to push the envelop of the USA Trade hypocrisy-the huge subsidies given to farmers and giant food conglomerates-I see plenty good to cheer about. If ever there was a valid case against U.S. subsidies this is it. What is laughable, is the age-old claim by American farmers that they are the "most efficient in the world"! With subsidies ANYONE can make that claim.

The LDP (Loan Deficiency Payment), which essentially sets a floor price for a commodity by offering a payment to farmers if the commodity is sold below that price, making up the difference. The target price moves slightly from year to year to address long term trends in the commodities pricing. This type of subsidy is not designed to “encourage farmers to plant crops that are unprofitable”, but rather allows them to cope with a market that is often very volatile.

This type of subsidy should be faded out. Its replacement should be a tax incentive to purchase Crop Insurance, which can insure against both calamitous weather and untypically low prices. This type of aid has passed WTO standards in the past. The USDA budget was $134b in FY 2010. 67% of that budget is food stamps. Only $23b is appropriated for commodity programs.

There are some agricultural industries that are totally sustained by federal and trade policy. The peanut and sugar beat industry would collapse in the US if imports were not subjects to heavy duties.
Those protectionist policies differ in character from programs that are designed to kick in only when prices are unusually low. An industry should not be destroyed simply because 1 year's weather has produced an extraordinary surplus in supply.

[/QUOTE]
But these programs that kick in should be offered to poor African farmers who cannot get loans to tide them over.
Of course you are wrong as usual a Trade war makes some poorer and some richer.
A bid from Europe for tankers for the US air force won.
Under the currnent trade war and political pressure the tender was cancelled and a new tender put out.
The terms were such that Europe bids were unlikely.
The Europe people are poorer , US richer.
http://www.timeslive.co.za/sundaytimes/article264101.ece
Of course EADS is the biggest manufacturer of civil jets worlwide.
S.

"The Europe people are poorer , US richer."

[B]What don't you understand about we are all the poorer if a Trade War develops? The "we" stands for all of us, Americans and Brazilians, but also the rest of the world because market distorting policies make us all poorer. In a Global Market policies that distort impact negatively, however slightly, all markets.

[/QUOTE][/B]

ABC200
[/QUOTE]
But these programs that kick in should be offered to poor African farmers who cannot get loans to tide them over.
Of course you are wrong as usual a Trade war makes some poorer and some richer.
A bid from Europe for tankers for the US air force won.
Under the currnent trade war and political pressure the tender was cancelled and a new tender put out.
The terms were such that Europe bids were unlikely.
The Europe people are poorer , US richer.
http://www.timeslive.co.za/sundaytimes/article264101.ece
Of course EADS is the biggest manufacturer of civil jets worlwide.
S.


S.

[/QUOTE]

The World from Berlin 03/10/2010

[B]'Europeans Shouldn't Be Pointing Their Fingers at Washington'




Europe's EADS and its American partner Northrop Grumman have abandoned their bid to build tanker jets for the US military.
EADS and its American partner Northrop Grumman have abandoned their joint bid for a $35 billion contract to build tanker jets for the US military, citing unfair competition as their reason for withdrawing. German commentators on Wednesday sense more than a whiff of hypocrisy from European governments.

Politicians in Berlin and elsewhere in Europe are accusing Washington of protectionism over the collapse of a deal for the construction of 179 refueling tanker planes that pitted European aerospace giant EADS and its Airbus subsidiary against Boeing. Berlin is claiming the bidding process conducted by the US Department of Defense was so custom-tailored to Boeing that EADS' American partner company, Northrop Grumman, had virtually no chance of scoring the lucrative $35 billion contract.

On Tuesday, German Economics Minister Rainer Brüderle expressed his disappointment over the Defense Department's behavior in the deal, which led to a decision by Northrop Grumman on Monday to withdraw completely from the bidding process. "Free competition cannot be unilaterally limited in the procurement of defense goods," the politician, a member of the business-friendly Free Democratic Party, told reporters. "Right now, in the midst of the current crisis, even hints of protectionism can be damaging."
The heads of economics issues in the parliamentary groups of Germany's three largest political parties in the Bundestag were even sharper in their criticism. Joachim Pfeiffer of the Christian Social Union, the Bavarian sister party to Chancellor Angela Merkel's conservative Christian Democrats, told reporters: "This is a scandalous, unacceptable act. This needs to become a political issue with the USA."

'You Can't Change the Rules Just Because You Don't Like the Winner'

"The government has to push the United States to cease its protectionist tendencies," the FDP's Paul Friedhoff told the Ruhr Nachrichten newspaper. Meanwhile, Garrelt Duin of the center-left Social Democratic Party, told the tabloid Bild: "This is a sleight of hand on the part of the Yanks. … The Americans only talk about free competition when it is to their advantage. You can't simply change the rules of the game just because you don't like the winner."

On Tuesday, an Airbus spokesman told SPIEGEL ONLINE: "During the first bidding process two years ago, the best aircraft was sought." But this time around, the criteria had allegedly been specifically tailored to the Boeing 767. The Americans sought a "small aircraft whose only purpose was refuelling," the spokesman said. But the only aim was to "shut us out." By doing so, he argued, the Americans "would for the first time in their history have worse equipment than the Brits or the Australians."

In Germany, analysts attributed the collapse of the deal to the strength of Boeing's lobby in Washington. "Boeing is one of the biggest US companies," said Stefan Schöppner, an analyst at Germany's Commerzbank. "In the current economic environment, lobbyists are putting the US government under massive pressure in bidding processes like these." Schnöpper said there are still opportunities for EADS to land smaller contracts in the US, "but not for a fat project like tanker jets."

In Brussels, the European Union's trade commissioner, Karel De Gucht, described the development as "regrettable." "It is highly regrettable that a major potential supplier would feel unable to bid for a contact of this type," he said. "Open procurement markets guarantee better competition and better value for money for the taxpayer." He said the European Commission would be "extremely concerned" if it were to turn out that Washington had created terms that inhibited Northrop Grumman from securing the contract. "The Commission will be following further developments in this case very closely."

But editorialists at most German newspapers on Wednesday, regardless where they fall on the political spectrum, called the politicians' bluff. When it comes to defense contracts, they write, Europe is every bit as bad as the US in terms of serving its own interests.

The center-right Frankfurter Allgemeine Zeitung writes:

"Of course European politicians have the same right as executives at EADS and Northrop Grumman to accuse politicians in Washington of an unfair bidding process. Some countries have, in fact, shown a preference for the EADS/Northrop aircraft over Boeing's model. But Boeing's tanker isn't so bad that its purchase would weaken the American military. The aircraft may even have other advantages -- like its modern cockpit and the ability to conduct tanking in an entirely manual manner, which could be advantageous in a combat situation. The EADS tanker can hold more fuel, more cargo and more passengers. But the same is true of the American C-17A transport plane and the Russian Antonov An-70. Europe could have purchased those aircraft, but instead decided to develop its own expensive and complex military transport plane. The original plan was also to use American Pratt & Whitney engines on the A400M -- in the end, owing to political considerations, they had to be developed in Europe."

"The defense industry is far from being a normal business … but that should change. Today's practices cost taxpayers a lot of money and also lead to a situation in which armies seldom get the best products for their money -- up to and including toilet paper. But for Europeans to insinuate that everything about the Americans' defense bidding processes is particularly terrible, is hypocritical and nothing more than a political ritual."

The Financial Times Deutschland concurs that Europe is equally guilty of protecting its defense industries, writing:

"The Europeans shouldn't be pointing their fingers at Washington. Instead they should be asking all participants what kind of economic and political damage their protectionist games are causing. … Paradoxically, the loss of the US contract could be good news for Airbus investors. A fixed fee had been set for each aircraft and, as the cost overruns with the European A400M military transport aircraft have shown, fixed pricing can present a huge risk. Besides, EADS already has enough major risks on its hands. There are still production problems with the A380 jumbo jet. And the company still needs to develop its A350 widebody model. Finally, the A400M disaster has blown a huge hole in the company's budget. EADS and Airbus have both shown in recent years that the companies have trouble completing major projects. Instead of jumping into a new adventure, the company should get a handle on its existing problems."

The conservative Die Welt writes:
"Defense is not a normal industry because it produces strategic goods. Every country seeks to protect its domestic weapons industry so that its military know-how stays in the country and its own defense capabilities are protected. On the European market, EADS and others profit from this protected status, and they also count on countries to act 'patriotically' when they place orders. In America, Boeing has now exploited its home team advantage. It's not very nice and it's also ineffective. As a rule, it makes defense projects more expensive for taxpayers and soldiers often get equipment that is second-best. In Germany, for example, the military is still waiting for (EADS-built) combat helicopters that are capable of deployment in Afghanistan."

"It would be desirable if open competition could, at the very least, be opened up between NATO members. But it would also mean that Europe would have to stop its common practice of senselessly developing some of its own products when it could just buy them from America."[/B]

Atabey I would hope I am wrong also, but I'm not sure how another path can be navigated. I'm with you that the subsidies as currently structured should go if the US wants to live up to its own stated principles about trade. However I believe neither political party in the USA will take on these kinds of agricultural subsidies in the current environment. It would be political suicide. In fact I recall a headline recently that there are already congressmen trying to start up anti-NAFTA legislation. As I said in my first comment we can only hope cooler heads prevail and that these initial warning shots don't spiral out of control.

As for making us all poorer, abc has a point. Just like free trade efforts have made some richer and some poorer, a return of protectionism will make some richer and some poorer. In the long run over a few decades a world market over-burdened with barriers is bad for everyone in terms of wealth generation and innovation. However in the short and medium terms there is no question many could benefit from the looming return of protectionism.