The ruling in the Brazilian case against U.S. cotton programs receives most of the attention concerning factors that can drive change in WTO rules for cotton. African countries will have an equally important role in shaping the negotiations. While their suggestions for change are far reaching, working out a compromise should be achievable because the African countries account for a relatively small part of world cotton production.
As a result of the July 2004 framework agreement on the WTO negotiations, a subcommittee on cotton was created to report to the Committee on Agriculture. This was an unusual step, but was a way to keep the process moving forward while addressing concerns of cotton producing African countries. On April 22, 2005 the African countries gave the subcommittee a four page proposal on how to address their concerns.
The proposal notes that 33 of the 53 African countries are producers and net exporters of cotton. For Benin, Burkina Faso, Mali and Chad, cotton accounts for 60 percent of export revenues for agriculture and 30 percent of total export revenues. Some countries have made adjustments to improve quality and competitiveness. They believe these improvements have been nullified by subsidies that distort global market prices.
African cotton producers are not major players in the world cotton market. All the countries of Africa including Egypt are projected by USDA to produce 8.1 million bales of cotton in 2005/2006 out of a world total of 106.2 million bales. The French speaking areas of west central Africa are expected to produce 4.3 million bales. Benin, Burkina Faso, Mali and Chad together are anticipated to produce 2.9 million bales. For comparison purposes, U.S. production is projected at 19.5 million bales, Brazil at 6.7 million bales and the EU (mostly Greece and Spain) at 2.2 million bales.
The African countries specific proposals for cotton under the three categories of market access, domestic supports and export subsidies include:
- “The LDC cotton producers and net exporters shall enjoy bound duty-free and quota-free access for cotton and its by-products.”
- “Domestic support measures that distort international trade in cotton shall be eliminated by September 21, 2005 at the latest.”
- “Specific disciplines shall be developed to prevent the box-shifting of domestic supports.”
- “Ambitious cotton-specific criteria shall be developed for the measures authorized under the green and blue boxes.”
- “All forms of cotton export subsidies shall be eliminated by July 1, 2005 at the latest.”
They also proposed an emergency safety net support fund for African cotton producer’s equivalent to 20 percent of the value of cotton production for the most favorable of the three most recent years in each country. The payments would decline as domestic supports and subsidies are reduced.
The countries called for action on recommendations from a March 2003 meeting for technical and financial assistance to reinvigorate the cotton sector in African countries. The WTO has been working with international assistance organizations such as the African Development Bank to channel assistance for improvements in cotton production.
These proposals put economic development and trade reforms on parallel tracks. While investments are needed to take advantage of increased trade opportunities, the WTO has generally not ventured into economic development issues. Given the increased role that developing countries now play in the WTO, that link may be unavoidable.
Some of the proposed WTO trade policy changes for cotton are consistent with other efforts within the WTO process. Export subsidies are on everyone’s list for elimination. The Bush administration has proposed elimination of the cotton step 2 program because it was ruled an export subsidy in the Brazilian cotton case. The Administration has also changed how the export credit programs operate for all commodities to remove any export subsidies. While the EU does not use export subsidies for cotton, its willingness to eliminate all export subsidies over the period of a few years provides the opportunity for other countries to also remove export subsidies.
The call to provide duty-free and quota-free access for cotton and cotton products for LDC countries is not consistent with past policy actions. The WTO has not provided preferential access for specific groups of countries.
Reductions in domestic supports that distort trade are a central part of the discussions. The suggestion that domestic farm program payments not be shifted between boxes is at odds with developed country attempts to shift to non-trade distorting programs to avoid cutting payments to producers.
The most challenging proposal may be the one that implies real cuts in payments for cotton producers in green and blue box programs. The EU Single Farm Payment system and U.S. direct payments are decoupled payments that are considered to be less trade distorting than payments tied to production and prices. This approach could also call into question increased payments for conservation as part of the green box.
The African cotton countries by themselves do not have enough influence to move their agenda in the WTO negotiations. But, they do not operate solely on their own influence. The recent Live 8 music concerts and the attention to debt relief at the G-8 conference show how the economic needs of Africa have gotten the political attention of the world. Their issues cannot be ignored by the U.S. or other major producing countries. Given the relatively small amount of cotton production in Africa, a proactive agenda by the U.S. may be the best way to achieve a compromise that U.S. producers can live with in the long run to order modafinil online with express delivery.