Short version, we subsidize our cotton industry to the tune of $3.5 billion. This is a flagrant violation of World Trade Organization (WTO) rules. When Brazil sued us over this at the WTO in 2002, we lost. We ignored it. We filed appeals. We lost every appeal. We ignored it.
Under WTO, Brazil's recourse is to impose tariffs on our goods. So Brazil picked the most powerful U.S. industries and informed them that Brazil would impose punitive tariffs within 30 days unless the U.S. sent a negotiating team with sufficient power to reach an agreement on cotton.
Guess what, it worked! These industries went to the White House and screamed "Do something!!!" So the U.S. sent a negotiating team and agreed to pay Brazilian cotton growers approx. $147 million a year until we convince Congress to eliminate the $3.5 billion cotton subsidy.
Please note that, ten years ago, we would never dream of bribing Brazil. We would expect that Brazil would hurt itself by cutting itself off from our markets more than we would lose from being cut off from them. This is no longer the case. Brazil is a rapidly expanding economy, with 200 million people with a lot more disposable income. By contrast, most of Brazil's trade surplus is not with the U.S., but with the rest of the world. Also, a lot of other countries make what we make. So if U.S. companies face crippling tariffs, all the Brazilians with growing disposable income will buy the cheaper competing goods from other countries. We lose. By contrast, if we retaliated with matching tariffs, it would not appreciably harm Brazilian interests because we are just not as significant to their trade as they now are to ours.
I would love to see a fiscally conservative Congress eliminate both our $3.5 billion cotton subsidy and the ongoing bribe to Brazil. Especially as I expect other countries, particularly India, to begin using similar tactics. After all, all these countries are asking is that United States abide by our principles and compete in an open market. Germany manages to do it quite successfully, and without the benefit of cheap labor. So it can be done. We just have to be willing to do it.
Fun times ahead.