The current deal at the World Trade Organisation to cut cotton subsidies offers little hope to African countries as it ignores most trade-distorting supports, a senior African agricultural economist said yesterday.
Abdoulaye Zonon of Burkina Faso’s Centre d’Analyse des Politiques Economiques et Sociales (CAPES) told Reuters that cotton subsidies notified to the WTO by the United States which form the basis for any cuts amount to only a fraction of actual payments.
WTO members have agreed to give cotton special treatment within agricultural negotiations under the long-running Doha round to free up world trade. Some 10 million people in central and western Africa depend on the crop for their livelihood.
A deal slashing rich-country subsidies that depress world prices, keeping cotton farmers in African and other developing regions in poverty, is seen as a litmus test of the world community’s ability to produce a fair farm trade agreement.
Zonon’s findings are all the more sensitive ahead of a visit to Washington next week by trade ministers of four cotton-producing African states.
Lobbying congress
African diplomats said the ministers of the Cotton-4 countries Burkina Faso, Benin, Chad and Mali would lobby the US Congress from July 20 to 22, but were unlikely to meet US Trade Representative Ron Kirk.
Under draft agriculture proposals for a WTO Doha deal, using a formula drawn up by the Cotton-4, the US would cut its cotton subsidies by 82 % from the average annual level it has notified to the WTO for 1995-2000.
Zonon told a conference on the Doha agricultural negotiations organised by the International Centre for Trade and Sustainable Development (ICTSD) that US notified cotton subsidies averaged $623 million (R5056 million) in the base period.
The proposed formula would cut these US subsidies by about $510 million (R4139 million) to $113 million (R917 million), he said.
But the notified figures exclude many US cotton supports, including those ruled illegal by the WTO’s dispute settlement body in a case brought by Brazil which is now entitled to seek $4 billion (R32 billion) in compensation from the US, he said.
“The question is whether the basis for subsidies is going to be recalculated to reflect the findings of the dispute body,” Zonon said.
He estimated actual US cotton subsidies in 1995-2000 amounted to $1.74 billion (R13 billion) instead of the notified $623 million (R5056 million).
David Blandford, professor of agricultural economics at Pennsylvania State University, told the ICTSD conference that there was a big difference between subsidies as understood by economists and subsidies defined under WTO agreements.
And furthermore WTO members have plenty of scope to reclassify subsidies in order to comply with WTO limits.
“In the cotton case it is undoubtedly true that certain subsidies are not included,” he said.
What is clear is that cotton subsidies by the US, EU and China are pushing down world prices.
Zonon cited 9 studies that estimated that world cotton prices would be between 2 and 28 % higher without the state supports.
The depressed world prices have contributed to a halving of cotton production in Burkina Faso to 360 000 tonnes in 2007-2008 from 750 000 tonnes in 2005.
The crop accounts for 60% of export revenues.
Leaders of the G8 countries called last week for a conclusion of the Doha round in 2010, and trade diplomats said a revision of the draft proposals was possible later this year.
