U.S. Cotton Again at the Center of WTO Doha Round Talks


If the Doha Round of WTO negotiations is revived in coming weeks, U.S. cotton programs will be a critical part of the debate. WTO Director-General Pascal Lamy speaking to a United Nations Committee on Trade and Development cotton meeting on December 2nd said, “…cotton has become a litmus test of the commitment to make the WTO Doha Round of global trade negotiations a truly development round.” He further stated, “Developed countries, US and EC in particular, have to slash the trade-distorting subsidies they give to their cotton producers.”

This attention to cotton is not a surprise. The framework for talks agreed to in 2004 created a Cotton Subcommittee within the Agriculture Committee to address concerns of African cotton producing countries. Cotton was to be “addressed ambitiously, expeditiously, and specifically, within the agriculture negotiations.” The Ministerial Declaration from the WTO meeting in Hong Kong in December 2005 endorsed the 2004 agreement and mentioned specific actions including providing larger reductions in trade distorting subsidies for cotton than the general formula for agriculture with implementation over a shorter time period.

The negotiations text from Agriculture Committee Chairman Crawford Falconer released on July 10 of this year had specific language on cotton that had not yet been agreed to by the full committee. It included a formula for reducing the Aggregate Measure of Support (AMS) for cotton compared to the general AMS percentage reduction for a country. If a country’s general Amber Box cut is “Rg”, specifically 60 percent for the U.S., the percentage cut for cotton was to be equal to Rg + ((100-Rg)x100)/3xRg, 82.2 percent for the U.S. Blue Box direct support for cotton would be capped at one-third of the normal limit. The time for reducing the cotton support would be one-third of the period for the rest of the agreement, which will probably be five years. The bottom line is that U.S. trade distorting domestic cotton supports would be reduced 82.2 percent over two years.

The more aggressive domestic support reduction for cotton was promoted by four West African cotton producing countries, Benin, Chad, Mali, and Burkina Faso. The cotton industry is estimated to employee 15 million people in West Africa. Their efforts at changing U.S. cotton programs were reinforced by a 2004 ruling by a WTO dispute resolution panel in a Brazilian case that the U.S. had failed to meet its commitments on cotton support programs.

The cotton market has changed radically since the Doha talks began in November of 2001. According to data from the Foreign Agricultural Service of USDA, world cotton production in the 2001/02 marketing year was 98.7 million 480 pound bales. Production topped out at 122.0 million bales in 2006/07 and declined to 112.9 million bales in 2008/09. U.S. production was 20.3 million bales in 2001/02, increased to 23.9 million bales in 2005/06 and declined to 13.5 million bales in 2008/09. U.S. yield per acre was almost the same in 2008/09 as in 2005/06, but area harvested declined by 6.0 million acres, 44 percent, because other crops were more profitable. Chinese production went from 24.4 million bales in 2001/02 to 37.0 million bases in 2007/08 and 36.5 million bales in 2008/09. India’s production doubled from 12.3 million bales in 2001/02 to 25.0 million bales in 2008/09. India and China together now account for 54.5 percent of world cotton production, up from 37.2 percent in 2001/02. The U.S. share of production declined from 20.6 percent in 2001/02 to 12.0 percent in 2008/09. With U.S. cotton futures prices at $0.45 per pound and excess world supplies of cotton, U.S. cotton acreage is likely to be down again in 2009. Production for the cotton four from West Africa was 2.9 million bales in 2001/02, peaked at 3.3 million bales in 2004/05 and declined to 1.9 million bales in 2008/09.

U.S. cotton exports have also been transformed over the last seven years. In 2001/02 exports were 11.0 million bales. They peaked at 17.5 million bales in 2005/06 and are projected to decline to 13.0 million bales in 2008/09. During the same time the ending of the multi-fiber agreement opened the U.S. market to more cotton product imports; domestic use declined from 7.7 million bales in 2001/02 to 4.4 million bales in 2008/09. Total use of U.S. cotton declined from 18.7 million bales in 2001/02 to 17.4 million bales in 2008/09, while total world use of cotton has increased from 94.3 million bales in 2001/02 to 119.3 million bales in 2008/09. Use of U.S. cotton as a percent of total world cotton use has declined from 19.8 percent in 2001/02 to 14.6 percent in 2008/09.

Changes in production, use and exports in most of the world, including the U.S. and the cotton four countries in West Africa, have been overwhelmed by production increases in China and India. U.S. cotton programs also did not prevent Brazil from increasing production from 3.5 million bales in 2001/02 to 7.4 million bales in 2007/08, before pulling back to 6.3 million bales in 2008/09 on smaller area planted and a slight drop in yields.

Whatever the merits of Brazil’s claims against U.S. cotton programs in 2004 or the more recent claims by the West African countries, the reality is that cotton markets have been changed by cotton production increases in China and India that appear to be permanent. Ending U.S. cotton programs slowly or rapidly are not likely to improve market conditions for smaller producers around the world. If those producers are to be competitive long term they will need to focus on increasing yields, lowering production costs and transforming marketing systems to improve efficiencies of getting products to market. The U.S. and the rest of the world need to find a solution on U.S. domestic support programs that does not result in the U.S. or the cotton four countries rejecting the outcome and scuttling the entire WTO talks. This is not the time to pursue a false litmus test on economic development.

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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