Why U.S. Taxpayers Started — And Stopped — Paying Brazilian Cotton Farmers

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Note: This is an update to a story we initially published in 2010.

In 2002, Pedro Camargo had a job in Brazil's Ministry of Agriculture. He was annoyed by the subsidies the U.S. government payed to U.S. cotton farmers.

"We want to compete farmer against farmer, and not Brazilian farmer and American farmer with the help of the US government," he told me. "Not only is that not fair; it's not following the rules."

When he says "the rules," he means the rules of the World Trade Organization, which govern global trade. Back in 2002, Camargo went to the WTO with his complaint, arguing that the U.S. was illegally subsidizing its cotton farmers. He won. The U.S. appealed the decision, and lost again.

As the fight went on, Brazil threatened to retaliate with trade sanctions if the U.S. didn't stop subsidizing cotton.

And finally, in 2010, U.S. representatives made Brazil an unusual offer. They said: The subsidies to U.S. cotton farmers are part of U.S. law, and will continue for as long as the current Farm Bill is in place. So, the negotiators said, until the next Farm Bill passes, the U.S. will pay Brazilian cotton farmers $147 million a year.

"For Brazilian farmers, it's a lot of money," Camargo says. The Brazilians took the deal. And, every month, the U.S. sent over $12 million to Haroldo Cunha, president of the Brazilian Cotton Institute.

But then, last October, the money didn't show up. "Nobody called," Cunha said. "We just looked at the bank account and we realized no payment was done." No money came in November or December either, Cunha said.

Tom Vilsack, the U.S. Secretary of Agriculture, says he did warn the Brazilians last summer that the payments were about to stop. That's because the U.S. promised to make the payments until the next farm bill passed — and Congress planned to pass a farm bill last year.

But Congress did not pass a Farm Bill last year. Still, a Farm Bill will pass eventually. And many of the Brazilian trade representatives who have looked at current versions of the bill say the cotton subsidies are still in there, just in a different form.

If that's still the case when the bill passes, the Brazilians will take the whole thing back to the WTO and tart the whole process all over again.

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