EU and Brazil oppose end to Green Box cotton payments

A proposal by four African cotton-producing countries to slash trade-distorting subsidies on the crop has met with opposition from the likes of the EU, Brazil and the US at the WTO.

by D. Ravi Kanth

GENEVA: The European Union and Brazil have opposed the elimination of a range of Green Box direct payments for cotton as demanded by the Cotton-4 (C-4) countries – Benin, Burkina Faso, Chad and Mali – in the unresolved Doha agriculture negotiations at the WTO.

The EU-Brazilian opposition would ensure that Green Box subsidies will not be touched despite their trade-distorting effect, trade envoys told the South-North Development Monitor (SUNS).

In their sustained efforts to secure a meaningful outcome on cotton subsidies at the WTO’s eleventh Ministerial Conference, which is to take place in Buenos Aires this December, the four West African cotton-dependent countries have put forward for the first time a range of proposals on cotton subsidies in the Doha agriculture negotiations.

They proposed that both Green Box direct payments on cotton as well as trade-distorting Amber Box (Aggregate Measurement of Support, AMS) subsidies must be tackled in one go.

At a meeting of trade envoys of select countries convened by the chair of the Doha agriculture negotiations, Ambassador Stephen Karau of Kenya, on 30 June, the C-4 countries circulated a proposal demanding the elimination of Green Box payments, which run into over $10 billion, along with steep reduction commitments in the most trade-distorting Amber Box subsidies, based on the formula approach of the Doha revised draft agriculture modalities text of December 2008.

Though the proposal has not been circulated officially, participants who took part in the meeting said the C-4 countries had made these two proposals.

Firstly, the C-4 said, the developed countries must eliminate the Green Box payments. And secondly, those WTO members – both developed and developing – which undertook AMS commitments in the Uruguay Round must agree to steep reduction commitments as per the formula approach in the revised draft modalities of December 2008.

The four West African countries also proposed that the developing countries without AMS commitments must agree to a 10% overall limit on their cotton support programmes in line with the de minimis disciplines.

China, according to the C-4 proposal, can only spend up to 8.5% of its de minimis support as per the commitments that China undertook in its 2001 protocol of accession to the WTO.

Opposition

Surprisingly, the proposal on the elimination of Green Box measures for cotton faced fierce opposition from the EU and Brazil.

Incidentally, Brazil – which had championed the cause of agriculture reform by forming the G20 group of developing countries on the eve of the WTO’s Cancun Ministerial Conference in 2003 (as a counter to the EU and US closing ranks to ignore their own agricultural subsidies and try to pry open developing-country markets for their subsidized farm exports) – has now joined hands with the EU to draft a proposal on how to reduce domestic support subsidies.

At the 30 June meeting, the EU and Brazil opposed elimination of Green Box payments on the ground that reduction commitments involved only trade-distorting domestic support or AMS payments in the unfinished Doha agriculture negotiations.

The EU and Brazil, however, said they will support steep cuts in the AMS in line with what will be agreed for reducing the overall trade-distorting domestic support.

The United States opposed the proposal from the C-4 countries on the ground that India and China are exempt from any cuts.

The US said it will not accept the C-4 proposal that will allow the developing countries which did not undertake AMS commitments to continue with their subsidies under the de minimis track, said a trade envoy who asked not to be quoted.

Brazil and Colombia said the C-4 proposal cannot be supported, arguing that it made a distinction between the developing countries with AMS commitments and those without AMS commitments.

The C-4 countries are now expected to come up with a revised proposal, the trade envoy said.

In their Cotonou Ministerial Declaration on Cotton issued on 5 May, trade ministers of the four West African countries had emphasized that the subsidy payments – Green and Amber Box measures – are distorting “prices on the world cotton market, thereby contributing to the impoverishment of millions of people in the cotton producing and exporting African and least-developed countries” (LDCs).

The trade ministers stressed “the crucial role of the cotton sector in achieving the Sustainable Development Goals (SDGs), notably as regards the fight against poverty and the contribution to food security in the cotton producing and exporting African countries and LDCs.”

They said: “Trade Ministers gave a clear and specific mandate for addressing the cotton issue at the WTO in the Ministerial Decision on Cotton adopted on 1 August 2004 in Geneva and on 22 December 2005 in Hong Kong, calling for the cotton issue to be addressed ‘ambitiously, expeditiously and specifically’.”

The trade ministers urged “WTO members granting domestic support that distorts the international market to strive for further progress in the work on cotton, with a view to achieving the objectives established for this vital issue.”

The four trade ministers said they were “deeply concerned with the international context, characterized by the resurgence of protectionism and the uncertainty surrounding the WTO ministerial trade negotiations in the lead up to the Eleventh WTO Ministerial meeting.”

However, the prospects for an outcome on cotton at Buenos Aires remain bleak unless the four countries wage a grim fight on a make-or-break footing at Buenos Aires, said several trade envoys. (SUNS8496)                                         

Third World Economics, Issue No. 642, 1-15 June 2017, p11