Bridges Weekly Trade News Digest • Volume 10 • Number 8 • 8th March 2006
Proponents Of Cotton Proposal Clarify Call For Ambitious Cuts In Cotton Subsidies
At the WTO Cotton Sub-Committee meeting held on 2 March, Benin, Burkina Faso, Chad, and Mali expanded on an earlier proposal for cutting trade-distorting subsidies for cotton more deeply and quickly than those for other commodities in the agriculture negotiations, as stipulated in the Hong Kong Ministerial Declaration (see BRIDGES Weekly, 29 June 2005). They also proposed a timeline for the development of a support mechanism to help African cotton farmers cope with the effects of cotton subsidies before reforms take effect.
Propose specific methodology for cotton subsidy cuts
The paper (TN/AG/SCC/GEN/4) spells out a formula that would ensure that cotton subsidies would be cut steeply even if the overall reduction to trade-distorting ‘amber box’ support were quite modest. Over and above the standard reduction, the proposal specifies that cotton subsidies would be cut by an additional component equal to a third of the percentage difference between the agreed overall cut and the complete elimination of such support. The size of the supplemental cut for cotton subsidies would thus decrease if the general cut were more ambitious. In effect, if amber box support were slashed by 60 percent, the approach would see cotton subsidies cut by 82.2 percent. However, the latter would only rise to 84.3 percent for an overall cut of 70 percent, and to 93.7 percent for a cut of 90 percent. Furthermore, these cuts would be undertaken over a period amounting to one third of the implementation period for cutting amber box support to other agricultural products.
The so-called ‘Cotton Four’ countries, the proponents of the WTO work programme on cotton, put forward 31 March as a deadline for a decision on the proposed formula for cutting cotton subsidies. They also called for capping ‘blue box’ subsidies, which are partially decoupled from production and less trade-distorting than amber box payments, at a level that corresponds to a third of the general ceiling for the blue box.
Citing World Bank data suggesting that the West African countries would draw the maximum benefit from cotton market liberalisation if all support programmes were eliminated, the submission calls on WTO Members to agree, in April, to eliminate all trade-distorting domestic support by a to-be-determined date. This date would subsequently be determined before the end of the Doha Round.
Proposes calls for support mechanism
The Cotton Four also addressed the mandate contained in the Hong Kong Declaration that urges the WTO Director-General "to further intensify his consultative efforts with bilateral donors and with multilateral and regional institutions… and to explore the possibility of establishing through such institutions a mechanism to deal with income declines in the cotton sector until the end of subsidies."
The paper points to "the need to set up a safety net for cotton producers in the least-developed countries enabling them to survive until such time as internal and external reforms bear fruit," and set out some parameters for what such a support mechanism should look like. They stress that support must be time-limited, determined in relation to the effect of subsidies on prices, and distributed directly to producers. They ask Members to agree in principle to creating a safety net in April, and to create a task force to come up with a proposal for a mechanism by July, so that the programme can ultimately be included in an eventual Doha Round single undertaking.
These dates correspond to the end-April target set out in the Hong Kong Declaration for a comprehensive agreement on farm subsidy and tariff cuts, and the July date for a report from Director-General Pascal Lamy’s Aid For Trade Task Force.
While a number of countries supported the proposal (including China, Brazil and New Zealand), some noted that they needed more time to examine it. Others, including the US, requested an English version of the paper, which was available in French only at the meeting. Sources reported that the US said that it could not engage in a substantive discussion on the proposal until developments in the agriculture negotiations as a whole became clearer. According to the US, a substantial result on domestic support for cotton would require a substantial result in all three pillars in agriculture (export subsidies, domestic support and market access).
Regarding the development aspects of cotton, the WTO Secretariat reported on the assistance some Members are offering to a number of African countries. The next meeting of the Sub-Committee is tentatively scheduled for 27 March.
ICTSD reporting.