US–Brazilian Cotton Policies

15 Pages Posted: 30 Sep 2020

See all articles by Stephen Devadoss

Stephen Devadoss

University of Idaho - Department of Agricultural Economics

Jeff Luckstead

University of Arkansas

Date Written: August 1, 2020

Abstract

Brazil filed a lawsuit with the WTO against the United States for providing cotton production and export subsidies, and the WTO ruled in favour of Brazil. Brazil threatened to impose retaliatory tariffs if the United States does not comply with the WTO rulings. After a prolonged litigation stretching from 2002 to 2010, both countries agreed to a negotiated settlement wherein the United States paid Brazilian cotton producers to compensate for any adverse effects. This study develops a political economic model to theoretically analyse US cotton policies, Brazil's threat of retaliatory tariffs and the negotiated settlement between the two countries. The theoretical results show that the volume of cotton output, supply price response, politicians' apathy for the public welfare, elasticities of excess supply/demand and the magnitude of US transfers play a crucial role in determining US policies. This study contributes to the literature by being the first to model political economic aspects of the complex system of trade and domestic policies in the cotton industry using a three‐country framework, tariff retaliation and transfers between the countries.

Keywords: Brazil, cotton dispute, interest‐group models, political economy, United States

Suggested Citation

Devadoss, Stephen and Luckstead, Jeff, US–Brazilian Cotton Policies (August 1, 2020). The World Economy, Vol. 43, Issue 8, pp. 2222-2236, 2020, Available at SSRN: https://ssrn.com/abstract=3700069 or http://dx.doi.org/10.1111/twec.12941

Stephen Devadoss (Contact Author)

University of Idaho - Department of Agricultural Economics ( email )

Box 442334
Moscow, ID 83844-2334
United States
208-885-6806 (Phone)
208-885-5759 (Fax)

Jeff Luckstead

University of Arkansas

Fayetteville, AR 72701
United States

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