Treatment that is worse than the disease
Wednesday, April 7, 2010
The U.S. Trade Representative claims to have resolved the long-running trade dispute with Brazil over U.S. cotton subsidies by making the problem even worse: instead of doing everyone a favour and removing the hugely damaging U.S. subsidies it will go even further and subsidise Brazilian cotton farmers.
This “solution” removes the risk that Brazil will retaliate by implementing up to $1bn in trade barriers against U.S. exports, but this puts the U.S. taxpayer further in the hole and only exacerbates the global imbalances in the cotton market. Pulling out all the stops for the Big Cotton lobby in Washington scores political points for President Obama but is economic insanity for everyone else.