The damage that cotton subsidies by richer nations have caused on the economies of poor nations is one of the issues high on the World Trade Organisation Ministerial Conference agenda.
It was originally raised in the General Council and Agriculture committee by Benin, Burkina Faso, Chad and Mali, dubbed the “Cotton Four”, who wanted the conference in Cancun, Mexico, in 2003 to press developed nations to eliminate subsidies and pay compensation to cover economic losses caused by the subsidies.
In prosecuting their case, the four detailed how cotton is important to their economies and how in some years total subsidies in rich countries amount to almost as much as the value of world trade in cotton.
The C4 said they found it difficult to compete with the subsidies and described their proposal as a solution that would allow them to participate more in the international trading system and to use trade to lift themselves out of poverty.
In a nutshell, the African countries accused the EU and the US of providing trade-distorting subsides to their farmers, depressing world prices and affecting poor producers in Africa who are unable to compete with American and European money capitals.
The quartet received solid support from the then WTO director-general, Dr Supachai Panitchpakdi, who urged the assembly of ministers to consider the proposal seriously. He observed that the four were not asking for special treatment, but for a solution based on a fair multilateral trading system.
He also said the proposal underscored the need for ambitious results in the agriculture negotiations as a whole, based on the Doha Round mandate. During the discussions, the proposal received support from Canada, Australia, Argentina, Cameroon, Guinea, South Africa, Bangladesh , Senegal and India who voted either for the whole proposal or key parts such as phasing out subsidies.
But the US argued that the imbalances in cotton are not only caused by subsidies but other underlying factors such as country-specific industrial policies that support production for synthetic fibres, high tariffs on finished products and good harvests caused by favourable weather. They suggested that the distortions should be addressed through the production chain.
The EU, on the other hand, said its production and exports were too small to have an impact on world cotton prices, and that it was changing its programme for cotton producers. The EU said it supported commercial elements of the proposal and pledged to contribute to reaching agreement on a solution. No cogent decision was taken then.
The issue came up again at the Hong Kong Ministerial Conference in 2005 where the trade ministers committed to address cotton “ambitiously, expeditiously and specifically” within the agriculture negotiations, including the commitment to make large reductions in trade-distorting subsidies, to improve market access for cotton exports from least developed countries.
Out of the talks, it was agreed that export subsidies on cotton would be eliminated, and that developed countries would allow cotton from least developed countries into their markets duty-free and without quotas.
The issue again reappeared at the Bali Conference in 2013 where the members reiterated their commitment to “on-going dialogue and engagement” to make progress in the negotiations on cotton according to the 2005 objectives, which were agreed at the Hong Kong Ministerial Conference. From the many rounds of negotiations, the “Cotton Four” seems to have gained some concession.
Cotton prices have increased significantly, reducing pressure in the EU and US to provide farm payments. As a result, subsidies in the US have declined from historical highs and are projected to be lower as a result of the new US Farm Bill.
Higher prices for alternative crops, such as corn and wheat, together with declining yields and rising production costs of cotton have also provided incentives to US farmers to move away from cotton production.
At the global level, patterns of trade have shifted and new players have emerged. India has moved from a net importer to largest exporter of cotton, overtaking China in 2014.
