WTO Members Adopt Cotton Work Program, Widen Scope To All Trade-Distorting Policies

Original Publication Date: 
22 March, 2005
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WTO Members Adopt Cotton Work Program, Widen Scope to All Trade-Distorting Policies
By Daniel Pruzin
International Trade Daily
23 March 2005

GENEVA--Members of the World Trade Organization March 22 formally adopted a work program for the new WTO subcommittee on cotton, ending a month of wrangling between the United States and African cotton producers over the scope of the committee's discussions.

The subcommittee was established as part of the Aug. 1 framework package for advancing the Doha talks in response to African cotton producers' call for action to address what they claim are the negative economic effects of massive subsidization of cotton producers in major producer nations, in particular the United States.

The first meeting of the subcommittee was suspended Feb. 16 after African countries refused to accept a work program proposed by the chairman of the talks, New Zealand's WTO ambassador Tim Groser (39 ITD, 03/1/05) .

The African countries said they wanted the committee to negotiate specific "modalities" for addressing trade-distorting support in the cotton sector, similar to the modalities on market access, domestic support, and export competition being negotiated in the Doha Round talks on agriculture. The United States complained that the proposal went beyond the mandate of the committee, which was never intended to be a negotiating body.

African countries for their part rejected a U.S. proposal that the subcommittee broaden the discussions to cover nonsubsidy issues that were affecting trade in cotton, including tariff and nontariff barriers and trade remedies, as well as the development activities of other international bodies such as the World Bank and International Monetary Fund. Other countries, including the Group of 20 developing country alliance on agriculture, argued that the discussions should focus squarely on export subsidies and domestic support.

Work on All Trade-Distorting Policies

Groser had proposed that the subcommittee's discussions focus on three
issues: assessing progress in the WTO's negotiating group on agriculture; ensuring coherence between trade and development aspects of the cotton issue; and addressing other issues with direct implications for cotton, such as the Doha Round talks on nonagricultural market access (NAMA) and trade facilitation.

In the end, WTO members agreed to drop the third issue. They also agreed that the subcommittee would "work in depth on all trade-distorting policies affecting the sector in all three pillars of market access, domestic support and export competition."

The latter language draws directly from the mandate set out under the agriculture annex of the Aug. 1 framework package.

WTO members also agreed that work on assessing progress in the agriculture negotiations and ensuring coherence between trade and development aspects would be based on technical papers and submissions from interested parties as well as factual information and data prepared by the WTO secretariat.

Success of Doha Needs Cotton Reforms

Groser later told the subcommittee meeting that it was "inconceivable" that a successful outcome in the Doha agriculture talks can be achieved without serious reform in domestic support and cotton, according to officials in attendance. He also predicted that the work of the subcommittee and the WTO's negotiating group on agriculture (which he also chairs) would eventually be brought together.

In a report presented to the subcommittee, Chiedu Osakwe, adviser to the WTO director-general on development matters, noted that the global cotton market continues to be marked by price instability, with cotton prices now at a six-year low of 47 cents per pound. He added, however, that "potentially significant results" could be achieved by accelerating efforts to establish regional or national commodity price risk management instruments. Options suggested include hedging schemes, agricultural price risk insurance, and self-insurance schemes.

Demands for urgent reform of the cotton sector have increased in the wake of a WTO ruling which found that the $12.9 billion in subsidies provided to U.S. cotton producers between 1999-2002 had depressed global prices for cotton (42 ITD, 03/4/05) . The WTO also concluded that several U.S. programs for cotton producers constituted prohibited subsidies and should be withdrawn without delay.

In a statement issued March 6, the four countries behind the WTO cotton initiative--Bénin, Burkina Faso, Chad, and Mali--said the WTO ruling "confirmed the validity" of their demands for the total elimination of cotton subsidies as part of a future WTO deal on agriculture trade. The four countries also called on the United States to comply with the WTO ruling by the time of the organization's Hong Kong ministerial conference in December.