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July 24, 2009

African producers press rich nations on cotton subsidies

by Danielle Kurtzleben

Representatives from four major cotton-producing African countries went to Washington in late July to engage in a dialogue about what they consider to be unfair U.S. trade practices.

The trade ministers of the so-called Cotton-4 or C4 countries – Benin, Burkina Faso, Chad and Mali – spoke at a conference at the Carnegie Endowment for International Peace, as well as a press conference at the National Press Club.

Speaking on behalf of the C4 countries at the press conference was Mamadou Sanou, coordinator of the C4 countries and minister of trade, entrepreneurship, and handicraft of Burkina Faso.

"U.S. and EU cotton subsidies have a very negative impact on the cotton sector in Africa," said Sanou, speaking through an interpreter. "We came to Washington with lots of hope. The cotton sector in Africa really needs our attention today."

The C4 representatives want to reach an agreement by which the U.S. will reduce its cotton subsidies. C4 representatives pointed to a 2005 agreement by WTO members in which members committed to reduce trade-distorting subsidies in an "ambitious, specific and expeditious" way. Thus far, the C4 countries do not feel this goal has been pursued.

The U.S. is the world's leading cotton exporter and gives heavy subsidies to its farmers, making it a primary focus of the C4 leaders, who have attempted to engage the world in dialogue on the subject since the 2001 start of the Doha Round of WTO talks.

The C4 leaders say their attempts to negotiate an agreement at WTO talks have been ignored. "We have received no responses or counterproposals from the U.S.," said Sanou. "How can we have a solution if there is no dialogue? Our proposal is on the table. It has been on the table too long with no response."

The Doha Round has been notably unproductive, dragging on for nearly eight years due to delays and rifts between developed and developing nations. Talks collapsed in July 2008 for the third time in seven years. The subject of cotton was not discussed before this collapse, frustrating smaller cotton-producing nations.

For this reason, Sanou said, the C4 nations are looking toward November's WTO ministerial conference in Geneva, where they expect cotton to be addressed.

C4 countries have threatened to further delay Doha negotiations if an agreement on cotton subsidies is not reached.

"The C4 is open to negotiations. It's open to a dialogue." However, he said, "There will be no solution to the Doha cycle without a solution to cotton."

Cotton is integral to the economies of many western and central African countries, with 15 million people in the region involved in its production. Cotton production in the region has increased almost fourfold since the 1980s, and accounts for five to 10 percent of the GDPs of these nations.

The region is a crucial part of the world cotton market, contributing nearly 15 percent of world cotton exports. Taken together, the C4 countries in 2008 comprised the world's eighth-largest cotton producers and the fifth-largest cotton exporters, according to U.S. Department of Agriculture data.

Many economists agree that agricultural subsidies in large cotton-producing economies, like the U.S. and EU, have hurt the African cotton market. When governments incentivise production, excess cotton is produced, which drives down world prices and lowers the income of producers in countries without such protections.

The U.S. government gives an estimated three billion dollars in subsidies annually to U.S. cotton growers. A 2007 Oxfam study estimated that, if U.S. cotton subsidies were removed entirely, the world price of cotton would increase by six to 14 percent, with the price for West African farmers' crops increasing by five to 12 percent.

Reducing U.S. subsidies, however, has grown less feasible as the U.S. cotton market has shrunk in recent years, driven largely by the global economic crisis, decreased demand, and the increasing use of protectionist measures in China and India. As Mark Lange, the president of the National Cotton Council, told Reuters this week, "An effective response to what is going on in China and India must be found."

In the 2005-6 crop year, the U.S. produced 5.2 million metric tonnes of cotton; in 2008-9, that number dropped a staggering 46 percent to 2.8 million tonnes. U.S. cotton exports also fell by almost 25 percent over this three-year period.

When asked if this reduction in U.S. exports and increase in prices has helped his country's cotton industry, Sanou said that even today's smaller U.S. cotton output is large enough to drive down prices in other countries.

He said of the recent changes to the global cotton market, "It's not a solution; it's just a temporary fix of the situation. We are looking for a systemic solution."

That solution may come in part from consideration of oil subsidies. Steve Suppan, a senior policy analyst at the Institute for Agriculture and Trade Policy, a progressive, Minneapolis-based think tank that is generally sceptical of agribusiness, told IPS that WTO member countries would do well to take into account oil prices when discussing the global cotton market.

"The basic fact of the matter is this: cotton prices follow oil-based fiber prices, because oil is so much more heavily subsidised than cotton is," said Suppan.

Because cotton competes with oil-based fibers, oil subsidies can give oil-based fibers a competitive advantage, reducing demand for cotton.

Suppan added that, though oil prices are so influential, they are often ignored in agriculture subsidy discussions. "[The influence of oil prices] is certainly left out of WTO negotiations. Among commodity economists, it's certainly regarded as a problematic issue."

Also on the agenda for the C4 leaders this week was a Thursday meeting with Congressman Donald Payne. A planned meeting with U.S. Trade Representative Ron Kirk has been pushed to next week, when C4 representatives plan to meet with him in Nairobi.

IPS

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