Page last updated at 08:18 GMT, Thursday, 2 February 2006

US Congress scraps cotton subsidy

Cotton stripper in Texas
Texas cotton farmers will lose their large subsidies from Washington

The US Congress has approved the scrapping of major subsidies to the cotton industry, in a move that could help producers in the developing world.

The administration agreed in December to implement a World Trade Organisation (WTO) ruling against the subsidies, but it needed congressional authorisation.

Brazil, which brought the case, said government help for American cotton farmers distorted the global market.

The subsidies included incentives to buy cotton from domestic farmers.

Aid agencies said the system was particularly damaging to cotton-producing nations in West Africa which, they say, did not get a fair price for their crops.

Powerful lobby

The House of Representatives passed the bill on Wednesday, following approval by the Senate late last year.

The congressional vote, which came with protests from the agricultural lobby, means that US exporters and manufacturers will no longer receive an incentive for buying their cotton from domestic farmers.

The Bush administration has already scrapped two credit programmes for the farmers, to comply with the WTO decision.

BBC Americas editor Simon Watts says US cotton subsidies have been at the centre of a global trade battle for years, with successive administrations paying billions of dollars annually to farmers in the American South, who have a powerful lobby in Washington.

US trade officials believed the subsidies were legal, but in a landmark ruling in 2004 the WTO decided that much of the assistance broke its rules.

In Brazil, the resolution will be seen as vindication of the government's strategy of tough diplomacy at the WTO, in coordination with other developing nations, our correspondent says.

At one stage, Brazil even threatened trade sanctions if the US did not implement the ruling.

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