Recent news reports indicate that the U.S. has lost before the compliance panel in the Cotton dispute. I always found the planting restrictions on fruits and vegetables that became an issue in the case very confusing from a policy perspective (why are we discouraging fruits and vegetables?), but this blog post provides some excellent background:
From a nutrition perspective, the most blatantly counter-productive U.S. farm subsidy policy may be the prohibition against growing fruits and vegetables on land that is eligible for direct subsidy payments.
This is a bit complicated, so bear with me.
Farm subsidies used to be criticized for encouraging overproduction of major row crops, such as corn, wheat, soybeans, and cotton, because farmers could earn more subsidies by growing more of the crop. The overproduction harmed the environment and immiserated poor farmers in developing countries by suppressing world prices for these crops. To partly -- and only partly -- remedy these problems, beginning in the 1996 and 2002 farm bills, a portion of the subsidies were converted to "direct payments," which were based on a farmer's historical production rather than current production. These direct payments were supposed to solve the problem of encouraging overproduction, because farmers could earn billions of dollars of these welfare-style payments even without growing the crop.
However, fruit and vegetable lobbyists were concerned that corn, soybean, wheat, and cotton farmers would begin growing fruits and vegetables while collecting direct payments. This would increase the supply of fruits and vegetables and suppress their prices.
From a nutrition perspective, that would be great! But, the fruit and vegetable industries are more powerful than the nutrition lobby, so they convinced Congress to prohibit farmers from growing fruits and vegetables on land that qualified for direct subsidy payments.
