WTO Cotton Talks Grind On

While much attention is given to the failure of the Doha Round of WTO trade policy talks to meet an end of April deadline for progress, talks continue on many issues. One of those is the Cotton Subcommittee of the Agriculture Committee considering trade policy proposals from four African countries – Benin, ቡርክናፋሶ, Chad and Mali. These talks are symptomatic of how difficult it is for multilateral negotiations to address narrow industry issues.

The framework agreement reached by the General Council of the WTO in July 2004 included the creation of the Cotton Subcommittee to address concerns of the African cotton producing countries within the context of the overall negotiations in the Agriculture Committee. Cotton was to be “addressed ambitiously, expeditiously, and specifically, within the agriculture negotiations.” These words have come to mean with a higher percentage reduction in domestic support and in a shorter implementation period than the rest of agriculture covered in a new agreement. The framework agreement also called for the Director General of the WTO to consult with relevant international organizations “to direct effectively existing programs and any additional resources towards development of the economies where cotton has vital importance.”

The Ministerial Declaration from the WTO meeting in Hong Kong in December 2005 endorsed the agreement of July 2004 and mentioned specific actions on cotton to: eliminate developed country export subsidies by the end of 2006, provide duty and quota free access to developed country markets for cotton exports from least-developed countries (LDCs) from the start of the implementation period of a new agreement, and provide larger reductions in trade distorting domestic subsidies for cotton than the general formula for agriculture and implemented over a shorter period of time. The Hong Kong declaration also urged the WTO Director General to explore the possibility of establishing a mechanism to support incomes until the ending of cotton subsidies in developed countries.

The cotton subcommittee has continued to meet since the Hong Kong ministerial meeting. On March 1 the African countries submitted another proposal for consideration at the March 2nd meeting of the subcommittee. The proposal was further discussed at subcommittee meetings on March 27 and April 28. The next subcommittee meeting is tentatively set for June 8.

መጋቢት 1 proposal provided specifics for how the cotton provisions would relate to the overall agricultural agreement. A formula was proposed that would reduce domestic support for cotton by 82.2 percent if overall domestic supports for agriculture were reduced by 60 percent as proposed by the U.S. using 1995-2000 as the base period. Domestic support includes amber box programs, the de minimis programs and the blue box programs, with the blue box spending ceiling at one-third of the level for the blue box in the overall agricultural agreement. The proposal recommends that the reduction period for cotton domestic supports be one-third of the time period for other commodities covered in the agreement.

For a support mechanism for incomes until the domestic subsidies are eliminated the proposal suggests that the support be tied to estimates of the international impacts of domestic support programs. The payments would be distributed directly to producers by an independent body, time limited and tied to programs to improve productivity and efficiencies. The World Bank would take the lead in working out a framework for the program and how it would be financed.

To no ones surprise the other countries in Africa are supporting the programs advanced by the four countries as are other developing countries like Brazil, ቻይና, Paraguay and Columbia. The EU has been generally supportive with some reservations about the blue box provisions. አሜሪካ. objected to the formula that makes relatively larger reductions in cotton domestic supports if the overall agriculture agreement has smaller reductions and would not commit to a program on cotton until reaching an overall agreement on agriculture.

The cotton policy discussions have diverged greatly from past approaches to trade policy discussions. A basic feature of past WTO negotiations has been the balancing of policy changes among nations without targeting a particular country or industry for change.

The WTO has also not been involved in supporting economic development efforts and transferring money to specific countries, much less trying to estimate the level of transfers based on economic policy models. While economic development efforts can help countries to achieve gains from more open trade, tying development programs to trade negotiations may have stretched the WTO mission further than it can effectively go.

While other agricultural commodities produced in the U.S. do not have the same combination of less developed country competitors, it is hard to imagine that the cotton debate will not rub off on policies for other commodities. That may make U.S. commodity groups less likely to endorse a final agreement containing cotton policies similar to those proposed.

Even if the overall WTO negotiations find new life in the months ahead, the current state of the cotton subcommittee talks may not add to the momentum for an agreement. Any final agreement will be a grand bargain across many industries and can afford only a limited number of thorns in its side. If the cotton policies in the final agreement end up being a thorn, it could hurt the developing countries that the effort was supposed to help.