Deliver on “cotton issue”, WTO told

Four cotton-producing West African countries have urged a solution in the WTO to the longstanding problem of subsidies which are distorting trade in the crop.

by D. Ravi Kanth

GENEVA: The “Cotton Four” (C-4) group of countries – Benin, Burkina Faso, Chad and Mali – have reminded the United States, the European Union and other countries at the WTO to deliver on the much-delayed outcome on cotton for tackling the rising levels of domestic subsidies on cotton that are impoverishing millions of their poor farmers.

The four West African countries have reminded the majors and others to deliver on the cotton issue as part of the WTO’s post-Nairobi work programme, before launching any negotiations on a multilateral sectoral initiative on electronic commerce/digital trade, several trade negotiators told the South-North Development Monitor (SUNS).

At a time when the US and the EU along with their usual allies are making war-like efforts to launch negotiations on e-commerce/digital trade at the WTO, the C-4 have issued a reminder about the cotton issue, which has been under negotiation for the past 15 years, said an African trade negotiator who asked not to be quoted.

“The WTO does not serve the poor countries like us because we waited for 15 years to have commitments to reduce trade-distorting domestic subsidies for cotton provided by the US and the EU that are causing large-scale poverty and misery to our farmers,” the negotiator said.

Cotton sectoral initiative

On 28 June, the negotiator said, the four West African countries presented what is called “the sectoral initiative in favour of cotton”, in which they laid out their case on the domestic cotton subsidies issue that must be resolved by the eleventh WTO Ministerial Conference in December 2017.

The two-page restricted proposal on the sectoral initiative for cotton expressed grave concern at “the continuation of domestic support practices and measures that have a distorting effect on the production and marketing of cotton.”

It is public knowledge that the US farm bill which was passed in 2014 has continued with billions of dollars of domestic subsidies for cotton. The EU too provides a range of subsidies, including Blue Box payments, for cotton.

For “several African cotton-producing countries”, the four countries argued, “cotton plays a significant role in economic and social development, accounts for a large share of the trade balance, and occupies a strategic position in the implementation of economic and social development policies.”

Cotton, for example, “accounts for almost 70% of the agricultural export earnings of these [four] countries, whereas no more than 2% of their output and 12% of their international exports are processed locally.”

The C-4 maintained that the only “acquis” to date is the Ministerial Decision secured at the WTO’s Hong Kong Ministerial Conference in December 2005 to address the cotton issue “ambitiously, expeditiously and specifically.”

Paragraph 11 of the Hong Kong Ministerial Declaration says: “We recall the mandate given by the Members in the Decision adopted by the General Council on 1 August 2004 to address cotton ambitiously, expeditiously and specifically, within the agriculture negotiations in relation to all trade-distorting policies affecting the sector in all three pillars of market access, domestic support and export competition, as specified in the Doha text and the July 2004 Framework text.”

Significantly, the Declaration mandated members to eliminate export subsidies in 2006, to provide duty-free and quota-free market access for cotton exports from the least-developed countries, and to reduce trade-distorting domestic cotton subsidies “more ambitiously.”

Yet, “none of the major Ministerial meetings (Cancun, Hong Kong, Bali, Nairobi) has produced any substantial means of addressing the cotton issue,” the four countries lamented.

“Consequently, millions of people are forced to live in poverty in rural areas, or to risk their lives as they leave their countries in search of better living conditions elsewhere,” the C-4 countries maintained.

Lack of significant progress

Despite modest improvements on market access, export competition and the development component at the Nairobi Ministerial Conference, the C-4 countries deplored “the lack of any significant progress on domestic support, which remains the greatest source of pressure on world cotton prices.”

The Nairobi outcomes on cotton have no material effect unless the major cotton subsidizers – the US and the EU – substantially reduce their trade-distorting domestic subsidies with a view to fully eliminating them.

The C-4 countries maintained that there is “still significant amount of domestic support [by these two trans-Atlantic trade subsidizers] that continues to distort international trade in cotton.”

For achieving satisfactory outcomes at the eleventh Ministerial Conference next year, the C-4 countries posed three issues to WTO members to address in the coming months:

(a)   How do members intend to implement the provisions set out in the Nairobi Ministerial Decision on Cotton under the three pillars of market access, domestic support and export competition?

(b)   What are the measures adopted or envisaged by members that grant cotton export subsidies in order to fulfil the obligation to eliminate these subsidies?

(c)   How are members that grant domestic support for their cotton sector planning to substantially reduce and eliminate such support, and what would be the timeframe envisaged?

As a first step in the negotiating process, the C-4 said, all members must provide clear answers so as to arrive at a multilateral solution. “The cotton negotiations have already taken close to 15 years, at a huge cost to the C-4 countries,” the four West African countries maintained.

They drove home a strong message that “many small producers in our countries depend on this for their very survival.”

And more important, “the credibility of the WTO” is at stake, the four West African countries said.

But the trans-Atlantic trade majors, particularly the US, have turned a deaf ear to the C-4 call for addressing trade-distorting domestic subsidies at this juncture.

After Brazil’s then ambassador to the WTO Roberto Azevedo negotiated the controversial cotton deal with the US over four years ago, the prospects for any multilateral disciplines to reduce cotton subsidies have remained bleak.

[Brazil had raised and won a dispute in the WTO over US cotton subsidies, with the WTO’s Appellate Body ruling that the US domestic subsidies resulted in subsidized exports and were thus illegal. However, Brazil failed to get the US to give effect to the ruling after the expiry of the “reasonable period of time” for implementation, and obtained the approval of the WTO Dispute Settlement Body to retaliate. After this sanction, Brazil (with Azevedo as its ambassador) negotiated with the US for compensation, and the compromise involved what was seen as the US enabling Brazil to in turn offer subsidies to its own cotton exporters! – SUNS]

After thus “buying off” Brazil, Washington’s farm bill, said a trade negotiator familiar with the cotton issue, doesn’t allow any room to reduce the current level of US cotton subsidies. Cotton, the negotiator said, will continue to be a heavily subsidized crop regardless of demands made at the WTO.

The C-4 said that it “fails to comprehend the lack of political will on the part of certain WTO members [the US and the EU] to negotiate a solution to the crucial issue of cotton.”

Also, the trade majors have no time for cotton, in contrast to their push for ambitious disciplines on e-commerce/digital trade, which is “the new milking cow” for their advanced services industries in the 21st century – as against the cotton issue that has led to the immiseration of African countries since the 18th century – the negotiator commented. (SUNS8278)                                  

Third World Economics, Issue No. 619/620, 16 June – 15 July 2016, pp8-9