USTR - Congress Approves Legislation Repealing Cotton Subsidy Program
Office of the United States Trade Representative

 

Congress Approves Legislation Repealing Cotton Subsidy Program
Step 2 Repeal Addresses Important Trade Priorities 02/01/2006

WASHINGTON – Today, the U.S. House of Representatives approved legislation that will repeal a support program for cotton known as "Step 2." The next step is for the President to sign the measure into law.

"Repeal of this program addresses two important trade priorities. It implements findings in the WTO dispute brought by Brazil, and it fulfills commitments made at the recent Hong Kong Ministerial to eliminate export subsidies for cotton by 2006," Portman said. "These are important objectives, and I commend the Congress for working with the Administration to address these critical issues."

BACKGROUND

The Deficit Reduction Omnibus Reconciliation Act of 2005, S. 1932, repeals 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. It also addresses a WTO finding regarding suppression of world cotton prices.

This legislative action adds to the significant implementation efforts that the Administration undertook in July 2005, when it put in place administrative measures to implement the findings in the Cotton dispute with respect to export credit guarantees.

Repeal of the Step 2 program is also consistent with the development goals of the Doha Development agenda, which calls for developed countries to eliminate all forms of export subsidies for cotton in 2006. It responds to concerns raised by African and other trading partners and fulfills the commitments made at the Hong Kong Ministerial in December 2005.

The U.S. Senate approved identical legislation at the end of 2005. The next step is for the President to sign the bill into law.

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