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LAWS: Taking another shot at cotton subsidies

The governments of four African countries and several international organizations are calling on the WTO cotton subcommittee to move more aggressively in abolishing subsidies by industrialized nations.

In a policy declaration following a conference in Benin, the countries said the elimination of cotton subsidies and other “price-distorting factors would lead to higher cotton prices in the short run and spur production in non-subsidizing countries.”

That leaders from the four African countries — Benin, Burkina Faso, Chad and Mali — would make such a statement is not surprising. They’ve been making such claims since a Wall Street Journal reporter gave them a world platform.

What is is that representatives from France, Japan and the United States, the European Community, World Bank, World Trade Organization and the International Monetary Fund would join in supporting allegations that have little basis in fact.

The declaration from the Benin Cotton Conference spreads the blame for declining cotton prices: euro-dollar exchange rate movements (accounting for a 20 percent drop in local cotton prices); distortions in global agricultural trade; and a surge in output from other developing countries including China, Brazil, India and Pakistan. But the continued focus on industrial country subsidies and the WTO cotton subcommittee is troubling.

Since the subcommittee was established in the July 2004 Framework Agreement of the WTO’s Doha Round, U.S. cotton industry leaders have argued that the panel’s activities should be limited to an advisory role.

The four African countries and the representatives of France, Japan, the United States, the WTO, the World Bank, the IMF and other international organizations attending the conference obviously view the subcommittee’s role differently.

Calling for separate treatment for cotton subsidies in the Doha Round negotiations would be a serious mistake, according to Mark Lange, National Cotton Council president and CEO.

“The proposal is based on a faulty assumption that their current economic troubles are due to the presence of the U.S. cotton program even though a number of independent analyses have attributed only marginal price impacts of 2 percent or less to the U.S. program,” said Lange.

“The proposal does nothing to address serious distortions that exist in international trade in textiles and apparel which are at the center of low prices faced by world cotton producers. There is no meaningful textile proposal in the document.”

Lange said the proposal would actually introduce more subsidies — a new internationally funded subsidy program to be provided only to certain African countries and administered by the WTO.

“The U.S. cotton program is not the source of economic hardship for farmers in African countries; rather their continued reliance on a monopolistic, parastatal ginning and marketing system,” Lange says.

“African farmers need assistance in improving agronomic practices, establishing a reliable classing system, improving infrastructure and ginning, privatization of marketing and distribution and assistance in building expanded markets.”

He could have added that some realistic advice — and better economic analyses — from international banking organizations and foreign governments might help, too.


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