With farm bill defeat, Americans on hook for $147M a year to Brazilian cotton farmers

(AP/Reuters)

WASHINGTON – American taxpayers remain on the hook for millions of dollars to pay off Brazilian cotton farmers -- one of the more bizarre, and costly, consequences of the House of Representatives' failure to pass a massive farm bill on Thursday.

In a surprise defeat, the House on Thursday rejected the dense, 600-plus page bill. The bulk of the bill would have funded food stamps as well as a bundle of farm aid programs. But lawmakers were also hoping to use the legislation to resolve a long-running dispute between the United States and Brazil that is draining U.S. taxpayer dollars every year.

Specifically, the U.S. is paying the South American country $147 million annually. America has shelled out more than $4 billion to date to Brazil.

“I think the average taxpayer would be astounded if they knew how much we’re paying Brazil in bribe money,” said Rep. Ron Kind, D-Wis., who is trying to end what he describes as the "blackmail payments."

The money being sent to Brazil is part of the international fallout stemming from U.S. government subsidies for domestic cotton farmers. The U.S. is one of the world's largest cotton exporters and hands out $3 billion a year in subsidies.

About a decade ago, Brazil sued the U.S. before the World Trade Organization. In its complaint, Brazil claimed the U.S. government had subsidized American cotton farmers so much it would make it impossible for other countries to compete. The WTO sided with Brazil in 2004 and said the country had a right to impose punishing trade measures against America.

Under an interim settlement, the Brazilian government agreed to withhold additional retaliatory tariffs on non-agriculture products, in exchange for the payments, until a new farm bill that contains measures to modify the country’s current cotton program is passed and enacted.

That's where Kind's amendment came into play. While the farm bill would have changed the U.S. cotton program, Kind's amendment would in turn end the payments to Brazil. But the amendment was not included, and the bill did not pass.

“We have to keep it up because of our inability to reform our own cotton subsidy program," Kind told FoxNews.com.

While dropping the interim settlement is an option, many say that the retaliation could be worse. Brazil won the right to impose more than $800 million in retaliatory import taxes against U.S. industries including financial services and automobiles.

On Thursday, House lawmakers' rejection of the farm bill in turn delayed efforts to see the cotton dispute come to a close.

For Kind -- who has publicly criticized the WTO settlement -- continuing to pay Brazil isn’t a viable option.

“This is crazy, this is nuts,” he said during a committee hearing in June, while promoting his push to "change our domestic cotton program so we do come into compliance with WTO so we can end $150 million of basically blackmail payments to Brazil so they don’t level sanctions against us because of that WTO case.”

Even if the House resurrects the farm bill, and the provision addressing the Brazil case, the entire Congress would have to pass a unified bill and have it signed into law.

The Senate side has had more success. Last week, lawmakers passed its version of the bill which would spend $955 billion over the next decade. The price tag in the House version was lower due mostly to variations in food-stamp spending.

Tamara Hinton, the communications director for the House Agriculture Committee, said that the House bill is intended to eliminate the agreement between Brazil and the U.S., and end the payments.

“Our bill was written to resolve the issue with Brazil," she told FoxNews.com.

When the House might return to the bill is anyone's guess. The last time the House approved a farm bill was back in 2008. They failed to come to an agreement on its reauthorization last year, too.

For now, lawmakers will have to either start over on the farm bill or go to conference without a bill and try to negotiate with the Senate. If Congress fails to pass any type of farm bill by the end of the year, the country would go back to when the last permanent farm bill was enacted – in 1949.

Christine Harbin, a federal policy analyst at Americans for Prosperity, faulted Congress for taking so long to address the issue. She told FoxNews.com that instead of fixing the problem, “the U.S. decided to pay off Brazil.”

“Little programs like this fly completely under the radar,” she said. “We’ve subsidized the cotton industry so much that we are become anti-competitive.”