WTO Public Symposium 2003: Session XIII -- The case of West African Cotton

Session organized by OXFAM, International Centre for Trade and Sustainable Development and Ideas Centre

Panelists and Viewpoints

Panel Moderator: Christophe Bellmann, Director, Policy Dialogues & Partnerships

Cotton crystallizes all of the contradictions maintained in world trade after the Uruguay Round. The purpose of this dialogue is to better articulate coherent and inclusive national and regional strategies on cotton, with attention to how they can be advanced at the multilateral level. See a joint statement by ICTSD, Oxfam and IDEAS Centre on the background and objectives for this session.

Kevin Watkins, Head of Research, Oxfam International

Cotton is a commodity critical to 10-11 million people in West and Central Africa alone; and, unlike the dairy sub-sector for the EU governments, the problem is not simply a matter of budget. With convenient interpretations of the term "free markets," rich countries can act on a fairly hypocritical basis in organizations like the WTO. We will focus on the United States during this discussion, because when it comes to cotton, the US is the chief culprit. The US is not the world's biggest producer, but it is the biggest exporter. Defying the laws of supply and demand by means of enormous subsidies, the US has been expanding both amount of acreage planted and total production despite a protracted price depression. US cotton farmers receive more subsidies per capita and per acre than any other producer group in the country. What matters is not just the overall level, but the structure of subsidization. US farmers receive subsidies though (1) "decoupled" direct payments, whose amount is based on a previous production period; (2) counter-cyclical payments, which are exempted from Amber-box status since they are valued at under 5% of output; (3) a market price support instrument, whereby government purchase is guaranteed at a floor price; and (4) Step 2 payments, provided both to exporters of US cotton and to domestic mills using US cotton in order to keep US export prices in line with low-cost competitors. The US defends this support program with absurd definitions of the Green Box and the re-categorization of veritable export subsidies.

Though the US maintains an export price of 35-50 cents per pound, its average cost of production is about 80 cents per pound-- this difference is evidence of systematic dumping. In an open market, one without subsidies, the US would be losing market share to West and Central Africa. The cotton interests of the US, however, are represented to the government by the National Cotton Council of America, arguably one of the most skilled and formidable lobbying groups in the world. What needs to be done about the situation in the cotton trade? The African governments' proposal in the WTO is very sensible. These cotton subsidies have to go, but what must come out of Cancun is a full elimination of both direct and indirect subsidies across agriculture.

Eloi Laourou, Permanent Mission of Benin, Geneva

Many people in West and Central African countries rely upon cotton as their single source of income, as well as the main revenue supply for government services such as health and education. Because agriculture is the backbone of our countries, we want to see a trade regime emerge from Doha that is equitable and balanced. In April 2003, four countries submitted a sectoral initiative on cotton, and in May 2003, a meeting of the African Cotton Producers group called for the elimination of cotton subsidies by Cancun. President Compaore of Burkina Faso brought this message to Geneva on June 10, 2003. The Committee on Agriculture and the Committee on Trade Negotiations have been made aware of the cotton issue and initiative. Paragraphs 4 and 13 of the Doha Declaration should now be moving us toward the complete elimination of export subsidies, domestic supports and unfair border measures.

Celso Tarso, Brazil

Brazil shares most of the concerns regarding cotton held by West and Central Africa. Most developing countries have been forced to open up in sectors like TRIPS, industry, etc; but when it comes to products where we do have a comparative advantage, we have been told to wait. This has been going on for 50 years.

Beginning with the airplane case against Canada, Brazil has been a frequent user of the WTO dispute settlement mechanism. WTO matters make headlines in our popular newspapers every day, with agriculture and trade disputes regularly on the front page. We know that this will be a long and difficult battle in the dispute resolution panel phase, which will require a lot of resources. It all boils down, however, to the implementation phase. The WTO's Dispute Settlement Body agreed on March 18, 2003 to establish a panel to rule on Brazil's claim against US cotton subsidies, but we are currently involved in an application dispute about Annex 5 and in dealing with the applicability of the Peace Clause. Brazil will continue to focus its efforts against the prohibition of (1) export subsidies like Step 2 payments and export credit guarantees; (2) actionable subsidies such as marketing loans and loan deficiency, direct and counter-cyclical payments; and (3) local content subsidies.

Nadine Keim, IDEAS Centre, Switzerland

The mandate of the IDEAS Centre is to help least developed countries defend their interests in the WTO. Because of the proposal put forward by the West and Central African countries, negotiations and not just disputes are at hand. The negotiations angle introduces political arguments to the otherwise mostly legal issues of a dispute debate. The two paths are complementary, with Benin and Chad being both signatories to the negotiations initiative and third parties to the US-Brazil panel. Given the commitments that have been made for the Doha Round, the members of the WTO can no longer allow such distortions to be maintained in trade. The very credibility of the organization is as stake. In order to succeed at Cancun, we must secure the active support of a greater number of countries. We should not only welcome the courage of delegations coming to Geneva, but also provide them real support in agenda setting for formal and informal meetings, as well as in keeping close ties between Geneva and their capitals.

Links

The Survival of African Cotton Between Negotiation and Dispute at the WTO, ICTSD

Cultivating Poverty: The Impact of US Cotton Subsidies on Africa, Oxfam