Biotech Cotton and the Doha Round Negotiations


Cotton production and trade have garnered much attention in the ongoing WTO trade policy talks. Countries that have not adopted biotech cotton have voiced the greatest concerns about being at a competitive disadvantage because of farm policies in developed countries. A recent Policy Research Working Paper from the World Bank titled “The World Trade Organization’s Doha Cotton Initiative: A Tale of Two Issues” by bank economists Kym Anderson and Ernesto Valenzuela provides insights on the impact of trade policy reforms and the adoption of biotech cotton.

According to the World Bank analysis, China produces 24 percent of the world’s cotton output closely followed by the U.S. at 19 percent and India at 17 percent for a three country total of 60 percent. Pakistan produces 9 percent of the world total followed by Brazil at 5 percent and Uzbekistan at 4 percent for a six country total at 78 percent. The four countries in Africa that have pushed the hardest for cotton policy reforms in the WTO, Benin, Burkina Faso, Chad and Mali, together produce 3 percent of total world cotton output. Exports of cotton are led by the U.S. accounting for 38 percent of total world exports followed by Uzbekistan at 10 percent, Australia 7 percent, Brazil 5 percent and the four African countries at 10 percent. Four-fifths of U.S. cotton and two-thirds of Chinese cotton is biotech. Australia and South Africa also have over 80 percent biotech cotton. India is a more recent adopter of biotech cotton at about 15 percent of its crop. Pakistan is in its first year of commercial production. The four African countries and other developing countries have not adopted biotech cotton.

Anderson and Valenzuela analyzed three options for cotton trade policy changes. The first one was complete elimination of all cotton subsidies and import tariffs. While that is not likely to happen, it serves as a benchmark for what could be achieved. The second option was the U.S. complying with the rulings in the Brazilian WTO cotton case and no other country making changes. The third option was the changes outlined in the December 2005 Hong Kong WTO declaration.

Under the first option the world average price of cotton would increase by 12.9 percent as U.S. production declined by 25 percent and U.S. trade by 29 percent. The only other decline in production was in the EU, but they are minor producers of cotton. Global economic welfare increased by $283 million per year, with all other cotton-exporting countries benefiting while all net importers of cotton were worse off. Sub-Saharan Africa cotton producers would gain by $147 million per year with about two-fifths of that going to the four countries mentioned earlier and another one-fifth to other West African countries. Sub-Saharan African cotton output and net farm income would increase by 32 percent and 31 percent, respectively, while the value of the region’s cotton exports would increase by 55 percent.

The average price of cotton in international markets would increase under the U.S. changes-only scenario by 3.2 percent and 4.4 percent under the Doha scenario. Net farm income for Sub-Saharan cotton farmers would increase by 5.0 percent in the U.S.-only option and 8.2 percent under the Doha approach. The value of exports for the Sub-Saharan countries would increase by 8.6 percent under the U.S.-only scenario and 14.2 percent under the Doha partial reforms.

The use of biotech cotton is one option for countries like the African four to increase their competitiveness. Previous work by Anderson, Valenzuela and Jackson assumed that biotech cotton would increase total factor productivity by 5 percent in most developing countries with a 15 percent increase for India and the Sub-Saharan countries, except for South Africa. These are based on current yields, field trials and results where biotech cotton has been adopted in developing countries. The researchers analyzed two scenarios – one in which everyone but Sub-Saharan African countries adopted biotech cotton and another where all countries adopted biotech cotton.

Total world economic welfare would increase by $2.0 billion per year under the first option and by $2.3 billion under the second, with $199 million of the extra $300 million staying in the Sub-Saharan African countries. Farm income in those countries increased by 10 percent. If Sub-Saharan cotton countries do not adopt biotech cotton while the rest of the world does adopt, farm income would decline by 7 percent in those countries.

Anderson and Valenzuela explained, “The estimate of the global benefits from full GM cotton adoption by developing countries is eight times larger than the above estimate of the global gain from complete removal of all cotton subsidies and tariffs, and twelve times larger than the global gain from the Doha partial cotton reform simulation. The differences are less marked for Sub-Saharan Africa, but even so its estimated gain from adopting GM cotton varieties is well above that from full removal of all trade-distorting cotton policies and around six times that from the Doha partial reform simulation considered above.”

They noted in their conclusions, “Furthermore, our results support the notion that the gains to developing countries from reductions in trade-distorting cotton subsidies will be even greater if GM cotton is adopted first, providing yet another reason not to delay approval of this new biotechnology, especially since genetic modification of local cotton varieties and dissemination of the new technology to many small farmers will take some years.” Except for South Africa, Sub-Saharan African countries have struggled to establish government regulatory programs for the use of biotech crops. Creating a regulatory structure for biotech cotton use would help establish more competitive industries in those countries.

Ross Korves

Ross Korves

Ross Korves served Truth about Trade & Technology, before it became Global Farmer Network, from 2004 – 2015 as the Economic and Trade Policy Analyst.

Researching and analyzing economic issues important to agricultural producers, Ross provided an intimate understanding regarding the interface of economic policy analysis and the political process.

Mr. Korves served the American Farm Bureau Federation as an Economist from 1980-2004. He served as Chief Economist from April 2001 through September 2003 and held the title of Senior Economist from September 2003 through August 2004.

Born and raised on a southern Illinois hog farm and educated at Southern Illinois University, Ross holds a Masters Degree in Agribusiness Economics. His studies and research expanded internationally through his work in Germany as a 1984 McCloy Agricultural Fellow and study travel to Japan in 1982, Zambia and Kenya in 1985 and Germany in 1987.

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