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Issue #583 | Forest Products

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2014 Media Kit
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Africa left in cold by US-Brazil cotton deal

By: | at 08:00 PM | Channel(s): International Trade  

A deal between Brazil and the United States to sort out their dispute over cotton leaves African producers in the cold, and their best hope is a global trade agreement in the stalled Doha round, according to a study.

The study assesses the gains that African cotton farmers would receive under current proposals in the Doha talks, as well as by the implementation by the United States of rulings by the World Trade Organization condemning its cotton programs.

Cotton farmers in developing countries suffer from depressed prices for their produce because rich exporters like the United States and European Union subsidize cotton heavily.

“There is an urgent need to rebalance existing trade rules that permit developed countries to highly subsidise domestic production, depress world prices, push farmers elsewhere out of production and impair prospects for economic advancement in the developing world,” Brazilian trade economist Mario Jales of Cornell University in the study.

“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,” Jales said in the study issued by the International Centre for Trade and Sustainable Development (ICTSD).

The WTO ruled that U.S. subsidies on cotton were illegal after a challenge brought by Brazil, and authorized Brazil to retaliate against the United States when the U.S. refused to remove the supports.

However, Brazil delayed slapping import duties of $829 million on U.S. goods for two weeks after receiving proposals from Washington to settle the dispute.

Under the deal the United States will tweak its condemned export credit program and pay $147.3 million a year in damages to Brazil as technical assistance to a Brazilian cotton industry fund, and also review barriers to imports of Brazilian meat.

The deal, which also removed the threat Brazil would suspend protection of U.S. intellectual property rights on drugs, software and entertainment, buys Washington time to resolve the subsidies dispute permanently in the next U.S. Farm Bill.

The ICTSD study concludes that African farmers would have benefited from a 3.5 percent average increase in world cotton prices over a 1998-2007 base period if the United States had implemented the WTO ruling.

But the biggest gains would come from a comprehensive deal in the Doha round, it said.

Under proposals by four African cotton-producing countries—Benin, Burkina Faso, Chad and Mali—cotton prices would rise an average 6 percent from the same base period, it said.

The United States has not accepted the proposals, but has not submitted counter-proposals.

The study said that U.S. cotton production could fall by 15 percent while EU output could fall 30 percent as a result of the African proposals.

The study argues that the key to greater prosperity for poor cotton producers is the removal of rich countries’ subsidies rather than improved market access, as urged by some U.S. officials and lobbyists. (Reuters)