US “no” to Cotton-Four, but China-India welcome proposal

A proposal by four cotton-producing West African countries for major cuts in cotton subsidies that are harming their domestic growers has been rebuffed by the US, which undermines prospects of an outcome at the Buenos Aires WTO meet.

by D. Ravi Kanth

GENEVA: The United States on 13 October struck a body blow to the Cotton-Four (C-4) grouping of West African cotton producers – Benin, Burkina Faso, Chad and Mali – rejecting their demand for a decision on substantial cuts in cotton subsidies at the upcoming WTO ministerial meeting in Buenos Aires, trade envoys told the South-North Development Monitor (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.

The aggressive stance adopted by the US on cotton at the small group meeting of select trade envoys on 13 October 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 programmes for food security. Australia and other members of the Cairns Group agricultural exporters demanded enhanced safeguards in such programmes without offering any concrete proposal. India and China maintained that those calling for safeguards must suggest in writing what they are seeking so that they could discuss this issue, according to the trade envoy.

On cotton, the four West African countries, which remain frustrated with the lack of progress on the cotton issue since the WTO’s fifth Ministerial Conference 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.

Comprehensive decision

In their proposal circulated on 11 October, the C-4 countries pressed for a comprehensive decision at Buenos Aires that includes all aspects in domestic support, market access and export competition in cotton.

They 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 US, the world’s largest cotton exporter as well as the largest subsidizer of cotton programmes, 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 noted that the July 2004 framework agreement was aimed at addressing “cotton ambitiously, expeditiously, and specifically.” That decision was later endorsed at the WTO’s sixth Ministerial Conference in Hong Kong in 2005. During the WTO’s tenth Ministerial Conference in Nairobi in 2015, ministers 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 C-4 countries maintained, the time has come for “reducing support and protecting cotton producers” so that they can obtain credible, concrete, substantial and measurable results in respect of domestic support.

The C-4 countries demanded that trade-distorting domestic support for cotton – which includes the Aggregate Measurement of Support (AMS), the Blue Box and de minimis – for developed countries must be reduced substantially depending on their current levels.

They proposed the following cuts:

(i) Where the final bound total AMS is greater than $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 $15 billion and less than or equal to $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 $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.”

The C-4 countries also proposed that “any direct payment made, where appropriate, under production-limiting pro-grammes 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.”

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 and the Nairobi Ministerial Decision.

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

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

Public food stocks

During the discussion on the permanent solution for public stockholding programmes 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 stressed.

At the informal ministerial meeting 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, 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.” It 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 programmes 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. (SUNS8554)                                           

Third World Economics, Issue No. 648, 1-15 September 2017, pp3-5