Participants at a 15-16 March WTO conference on cotton indicated that the meeting had been constructive and that a positive atmosphere had prevailed. However, they also emphasised that many of the cotton-producing countries had low expectations for the 'high-level session', and had not anticipated that it would produce any significant new developments on the crucial issue of US subsidies.

In 2003, low prices linked to the extensive subsidies provided to US cotton producers prompted four African countries -- Benin, Burkina Faso, Chad and Mali -- to introduce a "sectoral initiative on cotton" in the Doha Round negotiations. They sought the ultimate elimination of cotton subsidies along with compensation to be paid in the interim. In the July 2004 Framework, Members agreed to address cotton "ambitiously, expeditiously, and specifically" in the agriculture talks, as well as work to promote associated development assistance efforts. Since then, however, the 'cotton four' group's proposals for deeper-than-standard subsidy cuts have languished alongside the overall negotiations (see BRIDGES Weekly, 8 March 2006).

The recent meeting aimed "to take stock of initiatives and action in the implementation of the mandates on the development assistance and trade policy aspects of the cotton issue." This included the July Framework's instruction to the WTO Director-General to consult with relevant international organisations "to direct effectively existing programmes and any additional resources towards development of the economies where cotton has vital importance."

Participants included ministers from several cotton-producing developing countries, as well as representatives from bilateral and multilateral donors, in addition to international organisations such as the IMF, the World Bank and the UN Conference on Trade and Development (UNCTAD). Some participants noted that while several African countries sent ministers to attend the meeting, others, including the US, were represented by Geneva-based ambassadors.

Discussions focused on the development assistance and trade aspects of the cotton issue. Sources indicated that the US was initially reluctant even to place the latter on the agenda.

During the meeting, participants pointed to the need for the US to implement a March 2005 WTO dispute ruling against several of its cotton subsidy and export credit payments. In that case, Brazil successfully argued that certain payments that Washington had notified as 'green box' measures were in fact distorting trade and production, violating the US' own WTO commitments in addition to being prejudicial to Brazil's trade interests. The two countries now disagree over whether the US has brought its cotton support programmes into accordance with the ruling. A separate panel is currently determining whether the US is indeed in compliance (see BRIDGES Weekly, 4 October 2006).

"Litmus test" for development in the round

WTO Director-General Pascal Lamy told the meeting that cotton remained one of the "litmus tests" of the development content of the Doha Round, and that there would be "no round without cotton being on board." He reiterated the mandate for an ambitious, expeditious, and specific outcome on cotton across all three pillars of the agriculture negotiations (export competition, domestic support, and market access).

Earlier, while briefing participants on the state of the talks, agriculture negotiations Chair Ambassador Crawford Falconer (New Zealand) said that "if we do not have an outcome on cotton, there'll be no outcome for the Doha Round."

Cotton-producing African countries indicated that this recognition of the centrality of cotton to the overall negotiations was one of the main achievements of the conference, along with the reiteration of the cotton-specific mandate. Developing countries in general were united in support of the mandate and the need for rapid action, trade sources said.

Compensation fund

Speaking at the end of the conference, Lamy also noted that consensus existed "neither on the idea of a 'compensation fund', nor on who should fund it." However, participants did express interest in various approaches for dealing with income decline and price volatility, such as the "smoothing mechanisms" or 'fonds de lissage' presented by the French development agency AFD at the meeting. Delegates saw this option as a potential compromise that merits further exploration.

These funds typically include market-based mechanisms (such as insurance taken by producers), as well as a safety net to address cases of market failure. Cotton producing developing countries welcomed the fact that Lamy had urged the donor community to follow up on this interest.

Sources noted that the World Bank claimed at the meeting that, even if cotton subsidies were in fact eliminated, many African countries would have difficulty competing with more competitive producers in countries like Brazil. However, African cotton producers rejected this assessment. In total, 36 African countries produce and trade cotton, along with other developing countries, such as Brazil and India.

Secretariat table of development assistance

The WTO Secretariat was asked to make a number of improvements to a 'working table' it had prepared to track cotton-related development assistance. In particular, the revised version should distinguish between money specifically related to cotton and other funds that were not; it should distinguish between development funds, which are in principle 'available', those that donors have already 'committed', and those which have been 'disbursed'. It should also differentiate between completed and ongoing projects.

Lamy nonetheless noted that the gap between 'available' and 'disbursed' funds remains too wide, and must be narrowed through further dialogue between donors and recipient countries.

Campaigners disappointed

Development campaigners voiced disappointment at the lack of results from the conference. Celine Charveriat, head of Oxfam International's Make Trade Fair campaign, said "the high level session on cotton at the WTO failed to produce concrete results. It seems donors did not commit additional funds to support a safety net for African producers, and the problem of US subsidies was hardly discussed."

Pointing to the implications of the slow progress for farmers in poor countries, she added that "there is still a long way to go before African producers benefit from international trade negotiations and in the meantime, the burden of low cotton prices will continue to be borne by producers in Africa."

WTO competence on development issues

One observer pointed to a significant shift in the WTO's position over the last three years: at a March 2004 conference on the cotton initiative in Cotonou, the WTO Secretariat argued that development assistance fell outside the organisation's competence, whereas the recent meeting explicitly addressed both development assistance and the trade dimensions of the issue.

In private remarks, delegates from cotton-producing developing countries suggested that progress in the overall Doha Round now depended on shifting the focus of the negotiations away from informal talks amongst the major trading powers, and back to the multilateral setting in Geneva.

The next meeting of the agriculture negotiating committee has been scheduled for 23 March.

ICTSD reporting.