Sutton upbeat on WTO ruling

By LIAM DANN, primary industries editor

Trade Minister Jim Sutton says the World Trade Organisation's ruling against US cotton subsidies will help the push for trade liberalisation at upcoming Doha round trade talks.

Over the weekend the WTO ruled that $4.8 billion in US cotton subsidies violated trade rules. The ruling confirmed last April's preliminary decision in favour of Brazil.

New Zealand joined Brazil in the case as an interested party, with Australia, Argentina, India and several other nations.

Proponents of trade reform, such as Oxfam, say the ruling could pave the way for legal action to contest subsidies on other products such as dairy and beef.

"New Zealand farmers should cheer this ruling," said Oxfam New Zealand executive director Barry Coates. "It not only implies that a large portion of the US subsidies to other agricultural products, such as dairy and beef, are likely to be illegal under the WTO's rules, but it also casts doubt over the legality of many of the EU's subsidies."

But Sutton said any benefits for New Zealand farmers were a long way off.

The US was certain to appeal the decision, he said.

That meant any final ruling could be up to 18 months away.

"If the result is upheld, then the process will lead to a tightening of the rules against trade-distorting subsidies," Sutton said.

In the short term, the Government remained focused on achieving gains through the Doha round of WTO negotiations.

Talks are scheduled to resume next month.

The cotton decision would have some positive impact there because of its timing, Sutton said.

"It will be helpful in creating additional pressure on the major subsidising countries to mend their ways as part of the Doha round negotiations."

The full WTO ruling is not expected to be formally released until August.

Brazil has argued that if the US dropped its subsidies, then American cotton exports would fall 41 per cent. That would cause world prices to rise by about 12 per cent, benefiting struggling farmers in Brazil and Africa.