TWN Info Service on WTO and Trade Issues (Oct17/16)
20 October 2017
Third World Network
US NO to Cotton-four, but China-India welcome proposal
Published in SUNS #8554 dated 17 October 2017

Geneva, 16 Oct (D. Ravi Kanth) - The United States on Friday struck a body blow to the four poorest countries (C-4) - Benin, Burkina Faso, Mali, and Chad - in West Africa, rejecting their demand for a decision on substantial cuts in cotton subsidies by 70 per cent, at the upcoming World Trade Organization's eleventh ministerial meeting (MC11) in Buenos Aires, trade envoys told SUNS.

China and India, however, welcomed the C-4 proposal for a comprehensive reform of cotton subsidies. The two largest developing countries signalled their intention to arrive at a decision based on the C-4 proposal.

At a small group meeting of select trade envoys on Friday, the aggressive stance adopted by the US on cotton has put paid to any decision on cotton at Buenos Aires, said a trade envoy who asked not to be quoted.

The small group of trade envoys also discussed the permanent solution for public stockholding programs for food security.

Australia and other Cairns Group members demanded enhanced safeguards without offering any concrete proposal.

India and China maintained that those who are calling for safeguards must suggest in writing what they are seeking so that they could discuss this issue, the trade envoy suggested.

On cotton, the four West African countries, who remain frustrated with lack of progress on the cotton issue since the WTO's fifth ministerial meeting in Cancun (2003), will need to decide what they will do at Buenos Aires, now that the US has said categorically that it will not accept any outcome on cotton based on the C-4 proposal, the source said.

In their restricted proposal, Job/GC/130, circulated on 11 October, the C-4 countries pressed for a comprehensive decision that includes all aspects in domestic support, market access, and export competition in cotton at the Buenos Aires meeting beginning on 10 December.

The C-4 countries expressed sharp concern over "the lack of progress in the negotiations due to the absence of political will and genuine commitment on the part of certain players."

Without naming the United States, the world's largest cotton exporter as well as the largest subsidizer of cotton programs, the C-4 said: "since 2003, when the Sectoral Initiative in Favour of Cotton was submitted to the World Trade Organization, there has been no progress."

The C-4 said the July 2004 framework agreement (WT/L/579 of 2 August 2004) was aimed at addressing "cotton ambitiously, expeditiously, and specifically."

That decision was later endorsed at the WTO's sixth ministerial meeting in Hong Kong (China).

During the WTO's tenth ministerial conference in Nairobi in December 2015, ministers had agreed that all efforts will be made by Members in order to achieve the objectives of eventual total elimination of all forms of support for cotton with market-distorting effects.

Therefore, the time has come for "reducing support and protecting cotton producers" so that they could obtain credible, concrete, substantial and measurable results in respect of domestic support, the C-4 countries maintained.

As part of the trade component in their proposal, the C-4 countries demanded that trade-distorting domestic support for cotton - which includes AMS [aggregate measurement of support], Blue Box, and de minimis - for developed countries must be reduced substantially depending on their current levels.

The C-4 countries proposed the following cuts:

i. Where the final bound total Aggregate Measurement of Support (AMS) is greater than US$40 billion, or the equivalent in the monetary terms in which the binding is expressed, the reduction shall be 90%;

ii. Where the final bound total AMS is greater than US$15 billion and less than or equal to US$40 billion, or the equivalent in the monetary terms in which the binding is expressed, the reduction shall be 80%;

iii. Where the final bound total AMS is less than or equal to US$15 billion, or the equivalent in the monetary terms in which the binding is expressed, the rate of reduction shall be 70%.

As regards the developing countries, the C-4 countries said the reduction in "AMS support for cotton applicable to developing country Members with final bound total AMS commitments shall be two thirds (2/3) of the reduction applicable for developed country Members."

The four West African countries maintained that the reduction percentages must be applied to the base value of support calculated as the arithmetic average of the amounts notified by Members for cotton from 2009 to 2013.

Further, the C-4 countries maintained that "developed country Members and developing country Members shall refrain from granting cotton producers a cumulative amount of AMS support and support falling within the scope of Article 6.5 of the Agreement on Agriculture that exceeds the monetary limit that would result from the application of the de minimis entitlements under Article 6.4 of the Agreement on Agriculture."

More important, the C-4 countries said "any direct payment made, where appropriate, under production-limiting programmes in favour of cotton producers, shall be included in the limit for cotton."

Another important element of the C-4 proposal is on the need for enhanced transparency criteria for the green box direct payments.

It suggested that "the AMS and de minimis commitments and those relating to Blue Box and Green Box support for cotton referred to in the preceding paragraphs form an integral part of the GATT 1994."

Concerning the implementation period, the C-4 countries said "commitments undertaken with regard to AMS, de minimis and Blue Box support for cotton shall apply at the date of adoption of this Decision for developed country Members and within five (5) years from the date of adoption of this Decision for developing country Members."

For commitments undertaken with regard to Green Box support, the C-4 countries provided a flexibility "for two years from the date of adoption of this Decision for developed country Members and within a period of five (5) years from the date of adoption of this Decision for developing country Members."

The C-4 demandeurs suggested an exhaustive transparency criteria for green box support as per the Agreement on Agriculture.

On market access, the C-4 countries urged the US, the EU, and developing countries to adopt a decision in conformity with the Hong Kong Ministerial Declaration (WT/MIN(05)/DEC) and the Nairobi Ministerial Decision (WT/MIN(15)/46-WT/L/981).

Commenting on export competition, the C-4 countries said the Hong Kong Ministerial Declaration of 2005 remains as the basis.

The four West African countries also suggested a development component which they did not elaborate.

It remains to be seen whether the World Trade Organization director-general Roberto Azevedo, who is meeting the US Trade Representative Ambassador Robert Lighthizer on Monday (16 October) in Washington DC, will discuss the life-and-death problem of the four West African countries which are also experiencing terrorist movements because of lack of jobs and worsening economic conditions.

During the discussion on the permanent solution for public stockholding programs for food security, India and China told their counterparts that they are ready to discuss safeguards, provided the latter tabled proposals.

Those who are insisting on safeguards must come out in writing about their proposals, the two Asian countries told their counterparts.

At the just-concluded informal ministerial summit in Marrakesh on 10 October, Indonesia, on behalf of the G-33 group, had said it "could not over-emphasize the hundreds of millions of farmers, most of whom are poor and small-scale, in the 47 developing country members across continents that the G-33 represents, [are] seeking for concrete and operational outcomes on Public Stockholding for Food Security Purposes (PSH) and Special Safeguard Mechanism (SSM) in MC11."

"As the Nairobi priorities, establishment of a permanent solution on PSH for all developing Members and accessible, simple and effective SSM, both price and volume based, ought to be part of any Buenos Aires outcomes," Indonesia had said.

The G-33 urged members "to engage constructively and in good faith to deliver these priorities." The G-33 also rejected any attempts to link the permanent solution for PSH with cuts in domestic support.

In conclusion, it appears that major industrialized countries have not changed their stonewalling tactics either on the permanent solution for public stockholding programs for food security, or on cotton. If anything, the industrialized countries, particularly the US, are in no mood to offer any outcome on these two issues, trade envoys said.