Challenging US cotton subsidies : What can explain the change in US policy vis-à-vis Brazil in the WTO case on cotton subsidies?

Abstract

This thesis aims to explain the outcome of the WTO dispute on cotton subsidies between Brazil and US by analysing possible factors for the change in US policy vis-à-vis Brazil in the case. Brazil challenged US cotton subsidies through WTO dispute settlement in 2002, and the process has been running since, with a preliminary stop in June 2010. The WTO dispute settlement body issued two sets of recommendations in the case: One in 2005, after the first treatment of the case, and one in 2008 after the second. This essay attempts to explain why US changed their policy from after the first to after the second report. The essay concludes that the Brazilian threat of cross-retaliation was necessary for the change of US policy. However, more factors contributed to the outcome. The situation of the US economy, particularly in the aftermath of the financial crisis, enhanced the effect of the sanctions significantly. The cross-retaliation threat thus opened up a window of opportunity. The changed bilateral power relationship between US and Brazil was an important factor, as Brazil became a relatively more powerful actor. The role of the domestic ratification procedures in US played in, particularly in explaining why Brazil accepted the lack of full US compliance. Also, the relative strength of different US lobbies changed the US domestic coalition after the Brazilian cross-retaliation threat, weakening the US bargaining position.