Cotton dispute: Africans penalised by US foot-dragging, study finds : FOR IMMEDIATE RELEASE

15 April 2010

African farmers could have gained from a 3.5 percent average increase
in world cotton prices, if the US had moved quickly to implement the
recommendations of an international trade panel, a new study finds.

The study, commissioned by ICTSD and conducted by Mario Jales of Cornell
University, suggests that cotton prices would have risen over a
1998-2007 base period if the US had cut subsidies that were deemed
unlawful by a dispute panel at the World Trade Organisation (WTO),
following complaints by Brazil.

A recently-announced deal to resolve the dispute, on the eve of
punitive retaliatory trade measures that Brazil was due to impose on
the US, could leave African countries dependent on a negotiated
settlement at the WTO. Under the bilateral accord, the US will review
its export credit programme and provide USD 150 million in
compensation to Brazilian producers - leaving cuts to the
controversial 'countercylical' payments and marketing loan payment
programmes to be discussed in subsequent talks.

The paper also finds that farmers in poor countries could have gained
from an average 6 percent increase in world cotton prices over the
same base period, if the US had accepted proposals made by African
nations to slash the lavish subsidies enjoyed by rich country
producers.

Cotton production in the US could have declined by as much as 15
percent, the study suggests, if African proposals in the draft Doha
accord were applied to historical output levels over the ten-year
period examined by the study, and production in the EU could drop by
as much as 30 percent. However, production volumes could increase by
as much as 3-3.5 percent in Brazil, Central Asia and West Africa -
with production values growing by up to 13 percent.

Similarly, if African proposals that are included in the Doha draft
were applied to trade flows over the ten-year period that the study
examines, US export volumes would have fallen by 16 percent on
average. Average export volumes would have increased dramatically for
Brazil and India (12-14 percent), and by a lower but still
substantial amount in Uzbekistan, the 'C-4' West African cotton
producing countries (Benin, Burkina Faso, Chad and Mali), and
Australia (2-2.5 percent).

"There is an urgent need to rebalance existing trade rules that
permit developed countries to highly subsidize domestic production,
depress world prices, push farmers elsewhere out of production and
impair prospects for economic advancement in the developing world",
Jales said.

"The adoption of ambitious domestic support reforms for cotton in the
Doha Round would be a significant step towards the establishment of a
fair and market-oriented trading system" added Jales.

The study is online at: http://www.ictsd.org/themes/agriculture/how-would-a-trade-deal-on-cotton-affect-importing-and-exporting-countries-draft

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Notes to editors:

The World Trade Organization (WTO) is an organisation based in
Geneva, Switzerland, which is responsible for liberalising and
regulating international trade in goods, services and other areas. It
has 153 Members.

The WTO Doha Round of trade negotiations was launched in Doha, Qatar,
in 2001. It seeks to reduce trade barriers to a variety of goods and
services, but has been plagued by repeated missed deadlines and
breakdowns. In agriculture, it aims at "substantial improvements in
market access; reductions of, with a view to phasing out, all forms
of export subsidies; and substantial reductions in trade distorting
domestic support."

The International Centre for Trade and Sustainable Development
(ICTSD) is a nongovernmental organization, based in Geneva, which -
by empowering stakeholders in trade policy through information,
networking, dialogue, well targeted research, and capacity building -
seeks to influence the international trade system such that it
advances the goal of sustainable development. http://www.ictsd.org/

The 2005 Hong Kong Ministerial Declaration of the WTO agreed that
cotton would be addressed "ambitiously, expeditiously, and
specifically". However, the US has not yet tabled a formal proposal
on how cotton should be treated in the talks.

The model used by Mario Jales assumes perfect price transmission,
which is unrepresentative of reality in African countries.