U.S. Trade Representative Susan C. Schwab issued the following statement to mark the repeal of the "Step 2" cotton support program.

"I am pleased to recognize the repeal of the ‛Step 2’ cotton program. This action demonstrates the strong U.S. commitment to abiding by its WTO obligations and reflects U.S. support for the rules-based trading system. I appreciate that the Administration and Congress could work together to address this issue."

BACKGROUND

The Deficit Reduction Omnibus Reconciliation Act of 2005, S. 1932, which President Bush signed in February, repealed the Step 2 program effective August 1, 2006 and implements recommendations and rulings of the WTO in the dispute brought by Brazil against certain U.S. agricultural programs, principally related to cotton.

Repeal of the Step 2 program terminates export subsidies and import substitution subsidies cited by the WTO. The repeal also addresses a WTO finding regarding suppression of world cotton prices. The repeal of the Step 2 program builds on the significant implementation efforts first undertaken by the Administration in July 2005, when it took administrative action to eliminate the WTO-inconsistent aspects of export credit guarantees.