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TRADE: Hong Kong Hangs on a (Cotton) Thread

Gustavo Capdevila

GENEVA, Nov 29 2005 (IPS) - Cotton could be the main catalyst for failure at the Dec. 13-18 sixth World Trade Organisation (WTO) ministerial conference in Hong Kong if the demands of African countries are not addressed.

If the stand-off between African cotton producing nations on one hand and the United States and European Union (EU) on the other is not resolved, “we are not going to be part of the consensus,” warned Samuel Amehou, Benin’s ambassador to the WTO, which adopts nearly all of its decisions by consensus.

In April 2003, Benin, Burkina Faso, Chad and Mali appealed to the WTO to come up with a solution for the severe problems created for them by the subsidies shelled out to cotton producers in industrialised nations, especially the United States and EU member countries.

The dispute heated up in the following months and was one of the causes of the fiasco of the fifth WTO ministerial conference, held in September 2003 in Cancun, Mexico.

The four west and central African nations produce nearly one million tons of cotton a year, accounting for 17 percent of global output in 2002, compared to just four percent in 1980. Between 10 and 15 million people in those four countries depend on cotton for a living today.

But the effects of the protectionist policies followed by industrialised nations hurt all 33 African cotton producing nations, almost all of which fall into the Least Developed Country (LDC) category.

The WTO finally agreed to grant cotton special treatment within agriculture, which is being negotiated in the Doha Round of multilateral trade talks along with issues like services, industrial tariffs and intellectual property.

The WTO decided to give cotton “ambitious and expeditious” treatment, setting up a subcommittee to look at all of the trade-distorting policies affecting the crop.

The United States accounts for the lion’s share of cotton subsidies, which amounted to 18 billion dollars between August 1999 and July 2005, noted Céline Charveriat, the head of Oxfam International’s Make Trade Fair campaign.

Farmers in the U.S. produced nearly 23.4 billion dollars of cotton in that same period, which meant the subsidies were equivalent to 86 percent of the total value.

In other words, for each dollar received by cotton farmers for their exports, 86 cents came from the U.S. government coffers in the form of subsidies, Charveriat underlined.

Eric Hazard, with the non-governmental organisation Enda Third World in Senegal, told IPS that most of the U.S. subsidies went to a small number of cotton producers.

The agricultural economist said the 25,000 cotton farmers in the United States receive 40 percent of the world’s total cotton subsidies. But of all U.S. cotton subsidies, 80 percent – representing 32 percent of the global total – go to just 2,700 cotton farmers.

Some U.S. producers receive up to 17 million dollars a year, Hazard added.

The U.S. trade negotiators want the reforms of the cotton regime to keep pace with the reforms being discussed to phase out subsidies and tariffs on other agricultural products.

The EU, whose protectionist policies in cotton are less pronounced than those of the U.S., has tried to present itself as a generous reformer, proposing to put subsidy cutbacks into effect the very first day that any eventual Doha agreement begins to be implemented.

The main focus of the Hong Kong conference will be to kickstart the Doha Round of talks, which were launched in the Qatari capital in late 2001 and have been held up largely by the apparently insuperable conflicts of interests in the question of agriculture.

But the African nations have not been daunted by the climate of tension and discrepancies, and are pressing for a decision in Hong Kong that would eliminate all cotton export subsidies by the end of this year.

Regarding the controversial domestic supports received by cotton farmers in the U.S., Benin, Burkina Faso, Chad and Mali are demanding an 80 percent reduction by late 2006, 10 percent by late 2007, and complete elimination as of Jan. 1, 2009.

With respect to market access, the four African nations are demanding substantial reductions in cotton import tariffs, and a complete elimination of import duties and quotas for the LDCs.

They also proposed the creation of an emergency fund to help cotton farmers face drops in international prices, as well as a financial aid system for cotton farmers in Africa.

The proposal set forth by the four west and central African nations was approved last week by the conference of African Union trade ministers meeting in Tanzania, who stressed the importance of cotton for Africa as well as the urgent need for concrete results in Hong Kong.

To pressure the EU to reduce its protectionism in agriculture as a whole, the United States has insisted that the cotton question be addressed within the WTO agriculture talks.

U.S. Agriculture Secretary Mike Johanns and U.S. Trade Representative Rob Portman, meanwhile, announced on a recent visit to Africa a seven million dollar West Africa cotton improvement programme.

But Oxfam noted that the sum was “dwarfed” by the losses caused in the five beneficiary countries by U.S. cotton subsidies.

Charveriat said “Ambassador Portman’s offer will not address the damaging effects of U.S. cotton subsidies. West African countries lose as much as 250 million dollars in revenue each year because of U.S. cotton dumping. They need genuine trade reform.”

“We are disappointed,” she added. “Cotton improvement efforts may help some farmers in the region but will not give them the level playing field they are looking for.”

Furthermore, the U.S. proposal covers only five of the 33 countries that grow cotton and are affected by U.S. subsidies and dumping.