Cotton: What’s on the table for Bali and after Bali?

15 November 2013

Cotton production, trade and support have changed dramatically since the issue was first introduced into trade talks and the WTO's Bali Ministerial may present an opportunity to lock-in some gains.

The context that prevailed for cotton when ministers first put the issue on the agenda at the WTO's Cancun Ministerial in 2003 has fundamentally changed: cotton prices have increased dramatically, patterns of trade have shifted and new subsidizers have emerged. India has moved from a net importer to the second largest exporter of cotton. China is now the largest producer, importer and consumer of cotton worldwide. Moreover, given the very high level of stocks China holds, it has an hand on world market prices. On the other hand, the market share of major subsidizers, such as the US and EU, has decreased and will probably continue to do so. Since world cotton prices have increased substantially, the pressure of subsidies on African cotton producing countries has diminished. The Bali Ministerial is poised at a critical juncture to adapt cotton negotiations to these new realities.

Long awaited C-4 text submitted in late October

In late October, the C-4, the West and Central African group of cotton producing countries submitted a proposal for Bali (TN/AG/GEN/33). The new text neither introduces radical new elements nor offers solutions to the current deadlock. It has (i) reiterated the need for Duty-Free Quota-Free access on cotton (ii) called for the removal of all export subsidies from developed countries and (iii) asked for reforms of domestic support programmes.

The group has also requested the WTO secretariat to provide studies on cotton support and market- access measures and called for negotiations based on existing proposals to conclude the subject by fixed dates. Accordingly, export subsidies ought to be eliminated at the end of year and broader negotiations concluded by the end of 2014. Finally, the C-4 calls for a clear link between "the development aspect of cotton" and the aid for trade initiative. This proposal - which gives clearer indications on the work to be done - should at least ensure that the Bali package includes some language on cotton. In addition, a credible work plan will be essential to save the post-Bali cotton negotiation.

Taking advantage of the current situation?

Subsidies are far different today than they were in 2003.  Payments in the US have declined from historical heights and are projected to be lower in the future and the EU has changed its support system by eliminating the worst sorts of subsidies. On the other hand, some developing countries, China and turkey in particular, are now among the leading subsidizers.

The current situation of the cotton environment offers a good window of opportunity to make reforms as cutting subsidies that are currently not activated is easier for policy- makers. However, the C-4 proposal remains too ambitious and binding to have a chance to be accepted in Bali. Some negotiating partners may be tempted to "peck" in the text and discuss only elements of interest to them. There is a danger that some developed countries may consider domestic reforms already undertaken as sufficient to fulfil the Hong Kong mandate (as they might consider that the treat cotton ambitiously and specifically) and may no further discuss while new issues raised by the changes in emerging countries' practices remain not addressed.

Thanks to this proposal, the cotton issue has at least a chance to remain on the post-Bali agenda. In the very short term, a more consensual text could potentially come from the LDC facilitator.

Authors: Anne Sophie Nivet is Project Manager at IDEAS Centre and Ammad Bahalim is Programme Officer at ICTSD.

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