ROBERT SIEGEL, host:
From NPR News, this is ALL THINGS CONSIDERED. Im Robert Siegel.
We are in the market for cotton - four bales worth. We, in this case, means our Planet Money team. Last week, Planet Money began its latest series, a project to learn the global process by which clothing ends up on our backs. And to do that, Planet Money is making a T-shirt and reporting about what that entails. For example, how do you choose a design, a fabric mill, or a country to do the labor?
And in our story today, how do you buy four bales of cotton in a global economy? That search led our reporter, Chana Joffe-Walt, right into the middle of an international trade war.
CHANA JOFFE-WALT: The first thing I did was go to the Americans. You can buy cotton from Uzbekistan, Australia, Mali. But the U.S. is the world's largest cotton exporter.
Mr. DAHLIN HANCOCK (Cotton Farmer): Well, it's kind of far as the eye can see. I mean thats the - I guess the easiest way, I would say, to describe it.
JOFFE-WALT: This is Dahlin Hancock. He's a fourth generation cotton farmer and he shows me cotton seeds, cotton bolls, cotton fields. And at first, it was going pretty well. We talked about the cotton business, and then Dahlin starts hammering on two points: How we should buy our cotton from him, not too surprising; and how we should definitely not buy from Brazil, a country I never asked about.
Mr. HANCOCK: And the only reason Im bringing them up is just because they lash out at us a lot of times about how we do things, and very negative about the U.S. They keep coming to the table, kind of to the court, and always griping and always complaining. You know, I mean, we dont.
JOFFE-WALT: Dahlin Hancock did not bring up Brazil three times for no reason. There's a back-story.
The United States and Brazil are in the middle of a war over cotton. It's an emotional and quiet war, complete with an underdog named Pedro, global retaliation and a $147 million bribe.
So, let's start with Pedro. That is, after all, where this whole thing started, thousands of miles away from New Home, Texas.
Pedro Camargo is a Brazilian cattle farmer, with huge glasses and a gray bushy mustache. And he says, simply put: The U.S. is cheating. U.S. cotton farmers, Pedro says, get help from the U.S. government - cotton subsidies. Subsidies that, depending on the year, add up to somewhere between 1.5 and $4 billion.
Mr. PEDRO CAMARGO (Farmer): Yes, they win with the help of the U.S. government, with the Treasury. And we win, as a farmer. We want to compete farmer against farmer, and not Brazilian farmer and the American farmer with the help of the United States government. Thats - not only its not fair, it's not following the rules.
JOFFE-WALT: Ah, the rules. The rules of global trade set by the World Trade Organization agreements. WTO rules that, in 1994, the U.S. and Brazil and 151 other countries said they would follow. Rules that do allow some subsidies, but Pedro was sure not the ones the U.S. was paying cotton farmers.
Pedro had been complaining about this for years. And in 2000, he made his way to a position where he could do something about it. He became secretary of trade in the Brazilian Agriculture Department, and he didnt waste any time.
Mr. CAMARGO: Thats right, now Im going to do it, huh? Now I have the pen. Yeah, the power to sign things, you know?
(Soundbite of laughter)
Mr. CAMARGO: Now, I had the pen, you know. So I have the pen, Im going to do it.
JOFFE-WALT: In 2002, Brazil filed the case at the WTO against the world's larges super power. In 2004, Brazil won that case. It was a huge story in the country. Pedro was a hero. Brazil's image globally had changed.
There's one thing that didnt change though - anything else. The U.S. kept subsidies in place almost exactly as they had been - kept paying cotton farmers. And the U.S. appealed. The U.S. lost. There were more rounds at the WTO, more back and forth. This went on for seven years.
Mr. CAMARGO: And we would win appeal, win, appeal and the United States would ignore, would completely ignore.
Mr. JAMES BAUCUS (Former Judge, World Trade Organization): The WTO has no legal authority to make any sovereign country do anything. It has no police force. It has no black helicopters.
JOFFE-WALT: This is James Baucus. He was a WTO judge for many years, who explained this crazy thing to me about the WTO.
Countries bring major international disputes to its doors. There are fancy lawyers and judges. The WTO comes out with the ruling and then, thats it -nothing. If everyone wants to obey the ruling, thats cool. If not, thats okay too.
Mr. BAUCUS: There is nothing called the WTO that can make anyone in the world do anything.
JOFFE-WALT: So if you're Brazil, there is only one option left: Retaliation. And if you want to understand the bizarre state of global trade, just watch what happens next.
Retaliation in a WTO context means the winning country, in this case Brazil, is allowed by the WTO to tax the losing country's stuff. Brazil can tax U.S. products coming into Brazil.
Mr. RENATO AMORIM (Special Advisor, Foreign Trade Ministry): So the first challenge was, what products do we put on this list?
JOFFE-WALT: This is Renato Amorim, special advisor to the Foreign Trade Ministry - or retaliation master. To Renato, the taxes are just a tool to achieve the real goal: to get the U.S. to stop subsidizing cotton. If he threatens to tax the most powerful American industries, maybe he can recruit them into his battle against American cotton.
So, Renato Amorim blasts off a list of 102 American products Brazil plans to tax: luxury cars, shoes, wheat. And he sends that list to as many powerful American business groups as he can think of, with the following instructions.
Mr. AMORIM: We will apply this within 30 days.
JOFFE-WALT: So basically you have 30 days to act.
Mr. AMORIM: Yes. So, hello, Washington, please send a team to Brasilia to negotiate. And thats what the American government did.
JOFFE-WALT: It worked.
Mr. AMORIM: It really worked.
JOFFE-WALT: It worked because of people like Steven Bibes who work at the Brazil-U.S. Business Council, an organization specifically set up to promote U.S. business in Brazil, on behalf of his members - his very powerful members.
Mr. STEVEN BIBES (Executive Director, U.S. Section, Brazil-U.S. Business Council): We have ourselves. We have the National Association of Manufacturers, the Recording Industry Association of America, the Chamber of Commerce, U.S. Wheat and Associates, the Telecommunications Industry Association, the American Apparel and Footwear Association, the Intellectual Property Owners Association, the Personal Care Products Council.
JOFFE-WALT: A long list of powerful industries who were all wondering the same thing: What's some cotton dispute have to do with them? And they were telling Steven, fix it.
Mr. BIBES: The feeling after some thought and consideration shifted from the raw reaction why is Brazil doing this, just to why do we have these policies? It was these farm programs.
And I'd like to take the opportunity to laud the leadership the Obama administration and Secretary of State Clinton, and then through the additional leadership of Ambassador Ron Kirk, the U.S. Trade representative and Secretary of Agriculture Vilsack.
JOFFE-WALT: Wait, what are you doing right there? You're shouting out all the people who listened to you when you lobbied and sent them letters?
Mr. BIBES: Among many others, correct. We asked all the parties - the Congress, the administration - to be creative to find a solution to avoid retaliation, because it would hurt the business community, it would hurt jobs. In other words...
JOFFE-WALT: But Brazil knew you were going to do that. Thats why Brazil put you on that list. Brazil targeted you guys because they knew that you would then go to all those people that you just listed and lobby them to get it changed.
Mr. BIBES: Exactly. And our community isnt reacting in response to what the Brazilian government wants. It's whats in our own best interest.
JOFFE-WALT: Can we just pause here to admire the elegance of what just happened? Brazil's retaliation master basically created a situation in which very powerful interests, who normally dont care what he wants, all of a sudden American shoe manufacturers and wheat growers are his best allies.
Days after the retaliation master sent out his list, the U.S. sent a delegation to Brazil to negotiate. And here is where our story takes its last and final twist.
The American negotiators sat down in Brazil and immediately declared it impossible to get rid of cotton subsidies right away. But the two sides came to an agreement. If Brazil agreed to drop retaliation against the United States, the United States would pay them money literally, write them a check every month to stop what they're doing. It would be called the Brazilian Cotton Farmers Fund.
News of the fund came out the morning of April 6th, 2010. And initially, Pedro Camargo was skeptical. Thinking the fund would just be show, he kept calling it a tip, like you give a waiter, until he found out just how much the United States was offering: $147 million a year.
Mr. CAMARGO: A hundred and fifty million dollars is not a tip. Maybe it's a bribe, huh? But it's not a tip. It's a lot of money. For Brazilian farmers, it's a lot of money.
JOFFE-WALT: To review: The United States was found to be illegally subsidizing U.S. cotton farmers. We are still paying U.S. cotton farmers. Instead of getting rid of the subsidies, we are now also paying Brazilian cotton farmers, too.
And Pedro, who spent 10 years complaining about the subsidies and then nearly 10 more taking the case through the WTO, seems cool with the whole thing.
Mr. CAMARGO: Well, I think at that moment it's hard to be against $150 million, you know. It's a lot of money, huh. And everybody is happy. I decided I would be happy also.
(Soundbite of laughter)
JOFFE-WALT: So did you win?
Mr. CAMARGO: No, no, we didn't win, but we got compensated to wait because we still expect to win. I think maybe we'll win, and we're waiting with $150 million in the pocket, it helps.
JOFFE-WALT: And that is pretty much where things stand today. The formal WTO process has ended. The Brazilian Cotton Farmer Association has set up an institute to receive monthly payments of $12.25 million. So far, they've gotten around 70 million.
SIEGEL: That's NPR's Chana Joffe-Walt, and Chana, let's talk a little bit about that $70 million. That is U.S. taxpayer money. Is this a typical resolution of a U.S. trade conflict?
JOFFE-WALT: No. So remember that former WTO judge that you heard from in the piece, James Baucus? I asked him that.
Mr. BAUCUS: To my knowledge, no country has ever proposed to write another country a check to make them go away in order to resolve a trade dispute.
JOFFE-WALT: But Robert, I should say, Baucus also says this arrangement is completely legal under the WTO. If, you know, the United States offered to give Brazil balloons and flowers, and Brazil was happy about that, that would be a perfectly decent resolution, as well, as long as both parties are satisfied.
SIEGEL: Well, the Brazilians in your story sounded satisfied. Can we really say that the Americans are satisfied with this?
JOFFE-WALT: I don't know. I mean, I'm going to go out on limb here and guess that most Americans likely don't know that we have a cotton industry here in the U.S. or, you know, maybe don't know that our tax dollars are subsidizing that industry and definitely don't know that we are now also subsidizing the Brazilian cotton industry, as well.
SIEGEL: So for how long will the U.S. taxpayer be paying Brazilian cotton farmers $147 million a year?
JOFFE-WALT: It's a little bit unclear. The agreement was based on the idea that Congress will take a look at the cotton subsidies again in 2012, when they look at the next farm bill. And both sides say that if the U.S. changes cotton subsidies significantly, you know, enough to the point that the Brazilians are satisfied, the fund will go away. But if they don't, there will probably be many more years of wrangling and negotiations.
SIEGEL: Okay, now back to what got you involved in this, the T-shirts. You still need four bales of cotton. Where are you going to get your cotton?
JOFFE-WALT: Yes, we still need our cotton, and in the meantime, we've set up this excellent mill in North Carolina that is going to turn our cotton into fabric.
But we've learned since then that American mills, thanks to different American trade policies, mostly only buy U.S. cotton. So in the end, like a lot of apparel businesses in America, the choice has sort of already been made for us.
SIEGEL: So because of the mill, you can put a label in your T-shirt: Made in America.
JOFFE-WALT: We can, and in some ways, we can think about it like we've already sort of pre-paid for our cotton with our tax dollars.
SIEGEL: Okay, thanks a lot, Chana. And you can find out more about Planet Money's T-shirt project at npr.org/money.