Are Some Bribes Acceptable?

The news is full of articles about corporations in trouble for violating the Foreign Corrupt Practices Act (FCPA), yet the U.S. openly approves of certain bribes when made by the government. Is this another “do as I say and not as I do” situation?

All parts of the cotton plant serve a useful function, from the fiber used to make cloth to the cottonseed used for oil in cooking oil and salad dressing. Cotton is the backbone of American exports and as such, cotton farmers have as been subsidized by the government for decades. In addition to the U.S. subsidies, the U.S. also subsidizes Brazilian cotton farmers.

If you are scratching your head and wondering why we would do such a thing, let’s look at the history that brings us to the present day subsidy.

In 2002, Brazil filed a complaint against U.S. cotton subsidies with the World Trade Organization. While subsidizing farms is allowable, it is limited and Brazil argued that the U.S. subsidies violated the trade rules. The WTO agreed and gave Brazil permission to impose retaliatory duties on U.S. exports to Brazil.

Faced with obtaining approval from Congress or a trade war with Brazil, the government was caught in a difficult situation, so the U.S. came up with a plan to send money to Brazil until Congress had a chance to change the cotton program. Now, what should we call these payments? Brazil has the right to impose retaliatory duties on U.S. exports, but the U.S. agrees to send Brazil a check until we get our act together to reduce our own subsidies. Some might call these payments a bribe. Indeed, if a U.S. corporation made the same type of payments to the Brazilian government, they might well find themselves in the middle of an FCPA investigation.

So, with these payments in place, will the U.S. government work to fix the U.S. subsidies to farmers or will they keep on paying Brazil in hopes that they will be happy and not rock the boat?