Double Subsidies: 10 Companies get 45% of the Loot
November 4, 2003
U.S. Subsidizes Companies to Buy Subsidized Cotton
By ELIZABETH BECKER
nytimes.com
WASHINGTON, Nov. 3 - Hidden in plain sight, a federal farm subsidy program is paying nearly $1.7 billion to American agribusiness and manufacturers to buy American cotton that is already one of the most highly subsidized crops in the world, according to figures compiled by the program's critics.
The plan, which is the equivalent of paying Kellogg's to buy American corn, is known as the upland cotton marketing certificate program, and was started in 1990 when American cotton was selling at a much higher price than foreign cotton. Under it, American cotton is, in essence, subsidized twice, with payments going to companies that buy the cotton from farmers. The farmers themselves also receive subsidies for growing the cotton. The program is drawing increased criticism from foreign cotton producers.
A senior agricultural official said that the program was intended to make up temporarily for the difference between high American prices and world cotton prices. But, he said, the cotton industry has fought to keep the program in place because it "hasn't wanted to adjust to the world market; it would be too painful for them."
Some of the largest recipients of these subsidies over the last seven years include the Allenberg Cotton Company of Cordova, Tenn., which received $106.9 million; Dunavant Enterprises of Fresno, Calif., and Memphis, which received $102 million; and Cargill Cotton, also of Cordova, Tenn., $87 million.
These companies declined requests to comment on the subsidies they received.
The Environmental Working Group, a nonprofit research organization that has been critical of United States farm subsidies, obtained the data on the cotton program through requests under the Freedom of Information Act and assembled a database that will be available on its Web site (www.ewg.org) on Tuesday.
Ken Cook, president of the group, said that after reviewing the information "there is very good reason to think that the U.S. cotton subsidy system is badly broken."
"The question is, Why do these big corporations need this money?" Mr. Cook said. The existing subsidies for American cotton farmers - $10 billion over seven years - were partly responsible for the breakdown of global trade talks in Cancún, Mexico, in September. West African countries, some of the poorest in the world, made cotton a test case of the World Trade Organization's commitment to remove barriers to poor nations' ability to trade their agricultural products. The United States offered, instead, to study cotton and suggested that the African farmers consider growing other crops.
Those subsidies were criticized for giving American farmers an unfair trade advantage but there was little discussion about the cotton marketing certificate program.
Brazil is challenging this and other American cotton subsidies in a case pending before the World Trade Organization and officials said it would be raised in talks this week about expanding the North American Free Trade Agreement throughout the Western Hemisphere. The complaint specifically charges that the upland cotton program is an unfair trading practice.
Joining Brazil in the W.T.O. case as third parties are Argentina, Australia, Benin, Canada, Chad, China, the European Communities, India, New Zealand, Pakistan, Paraguay, Taipei and Venezuela.
Rubens Barboza, the Brazilian ambassador to the United States, said the cotton subsidies had a "negative effect on our exports to the United States, on third markets and on the price in international markets."
Richard Mills, spokesman for the United States trade representative, said that this and other programs complied with current global trade rules.
"For us, this is not about just one commodity,'' he said. "We have been pushing for broad agriculture reform, and we wish we had had more support in Cancún.''
The Agriculture Department declined to comment on the program.
It is difficult to find many members of Congress who understood the program much less remembered voting to continue it in the 2002 farm bill.
A senior Congressional aide who helped put together the legislation said that very few lawmakers who voted for the 2002 farm bill understood most of the programs, including this subsidy for American manufacturers.
It was considered critical by lawmakers from the cotton states, including Texas, California and Alabama.
But among those who follow agricultural policy there is a deep divide.
Representative Charles W. Stenholm, a Democrat of Texas and the ranking minority member on the House Agriculture Committee, represents cotton farmers and is a strong supporter of the program. These subsidies, he said, allow American cotton farmers to compete against foreign countries that subsidize their cotton and the manufacture of synthetic fibers.
"I would be willing to eliminate cotton subsidies tomorrow if all the other countries would eliminate their subsidies for fibers, but we're not going to unilaterally disarm our farmers in that world market," Mr. Stenholm said in an interview.
Senator Charles E. Grassley, Republican of Iowa and chairman of the Senate Finance Committee, disagreed and said that "cotton interests have successfully pushed for unlimited and artificial price supports."
"As the public gets familiar with these programs, which don't correspond to prices for cotton in the world market, you see growing skepticism about whether or not it's the right thing to do with taxpayer dollars," he said.
A relatively small number of companies receive the vast majority of the money from this program. Out of 290 exporters, millers and manufacturers, the 10 top companies received 45 percent of the money, or about $761 million.
They include Parkdale Mills of Gastonia, N.C.; Calcot Ltd. of Bakersfield, Calif., Avondale Mills of Sylacauga, Ala.; National Textiles of Winston-Salem, N.C.; Union Underwear of Bowling Green, Ky.; WestPoint Stevens of Atlanta; and Paul Reinhart of Richardson, Tex.
Even the Texas Department of Criminal Justice's textile mill received $302,905 from the program.
The corporations receiving the money make diverse products including towels and sheets, clothing, yarn and fabric, according to their Web sites. Their products are sold in stores in the United States and overseas. Several of the largest merchants own milling and ginning operations around the world.
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