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Africa's 'Cotton Four' Countries Celebrate Latest Easing of Trade Barriers for Cotton

July 7, 2016

Africa's major cotton producing countries are already seeing positive results from World Trade Organization member decisions to ease trade restrictions, decisions that took effect on July 1. More still needs to be done to improve market access and eliminate export subsidies from government programs, however.

Speaking for the “cotton four” (C4) countries — Burkina Faso, Benin, Chad and Mali — whose economies largely rely on cotton exports, Ambassador Thiam Diallo of Mali said the domestic support programs of major producers were continuing to put downward pressure on global prices to cotton, to the detriment of C4 farmers.  This in turn is having “dramatic consequences” on rural African communities and forcing thousands of young people to turn to migration in order to earn a living.  The statement was supported by the Group of Least-developed countries (LDCs).

 The remarks were made at the WTO’s latest consultations on cotton, which included the fifth dedicated discussion on trade-related developments for cotton as well as Director General’s Consultative Framework Mechanism on Cotton.   The discussions were the first  since WTO members adopted a decision on cotton (WT/MIN(15)/46) at their 10th Ministerial Conference in Nairobi last December.

The decision requires developed countries to eliminate export subsidies for cotton immediately and for developing countries to do so by 1 January 2017.   Developed country members, and developing country members declaring themselves in a position to do so, shall also grant, to the extent provided for in their respective preferential trade arrangements in favour of LDCs, duty‑free and quota‑free market access for cotton produced and exported by LDCs as from 1 January 2016.

The domestic support part of the Nairobi decision acknowledges members’ reforms in their domestic cotton policies — which may help to reduce trade distorting domestic subsidies for cotton production - and stresses that more efforts remain to be made.

  Update on negotiations, concern on notifications delay

The Chair of the agriculture negotiations and of the Sub-Committee on  Cotton, Ambassador Vangelis Vitalis of New Zealand, updated members on the state of play in the negotiations. His readout largely followed the assessment he delivered at the last informal meeting on the agriculture negotiations which took place on 9 May. The next round of talks will take place in Geneva the week of 18 July.

On cotton specifically, the Chair noted the submission by the C4 on 27 June of a document with a series of questions to members related to cotton.  The C4 has asked members to explain how they intend to implement the Nairobi decision on cotton under the three pillars of export competition, market access and domestic support; what measures those members still granting export subsidies for cotton intend to adopt to meet their Nairobi obligation to eliminate such subsidies; and how members granting domestic support for cotton intend to substantially reduce such support for their elimination, and in what time-frame.

Members were also presented with a new Secretariat background paper on cotton. The paper includes a revised compilation of factual information and data available from members’ notifications and other submissions, received up to 25 may 2016, on market access, domestic support and export competition in relation to cotton. The Secretariat paper also includes for the first time market access data for the cotton-related products listed in the annex to the Nairobi Decision on Cotton.  It also includes responses to the questionnaire on cotton policy developments circulated on 22 February 2016 by the Secretariat, as well as the most recent relevant Trade Policy Review reports available.

The Chair once again underlined concern with the lack of notifications from members regarding their domestic support for cotton.  Among the 32 Members that were identified as potential markets of interest for LDCs in the background paper, only five members1 can be considered as being up-to-date in their notifications, i.e. that the latest notification covers at a minimum the year 2014.

“Put simply, to have 27 Members out of 32 not up to date, including some of the major players in the cotton market, is embarrassing and troubling,” Amb. Vitalis declared.  “This could seriously affect our negotiations on cotton.”

The Executive Director of the International Cotton Advisory Committee (ICAC), José Sette, presented  ICAC’s latest market assessment on cotton.  Mr Sette said current cotton prices remained around their historic long term average of about US$0.70 per pound, but that this was no reason for rejoicing, as cotton prices are under huge price pressure from competing man-made fibres such as polyester.

The market was still faced with a significant surplus of some 13.6 million tons in stock (more than half held by China) it was trying to work off, Mr. Sette said.  Most cotton produced is consumed on the home market; the biggest cotton producing countries are India, China, and the United States, in that order, while the biggest exporters are the United States, India and francophone Africa.  While imports of cotton continue to fall steadily overall, several countries in Asia, most notably Vietnam and Bangladesh, were importing more due to shifts in cotton processing patterns.

Increase in development assistance welcomed

Earlier 1 July, C4 and other members welcomed the growing number of projects and availability of resources being made available for cotton development assistance.  The update on assistance was provided during the 25th round of theDirector General’s Consultative Framework Mechanism on Cotton, which was chaired by Deputy Director-General David Shark on behalf of Director-General Roberto Azevêdo.

In its latest version of the Evolving Table (ET) on Cotton Development Assistance (WT/CFMC/6/Rev.20), the WTO secretariat noted that the total value of commitments for cotton specific development assistance in Part I increased from US$226.4 million in the previous version issued last October to US$294.8 million. The disbursement flows also increased by US$13.3 million to reach US$115.6 million.

DDG Shark noted the “positive dynamics at play” on cotton development assistance, particularly regarding the submission of new projects in Part I of the ET and the “substantial improvement” in the completion rate of commitments in Part II. 

Speaking for the C4, Mali said the latest figures were good news and that donors were becoming more mobilized.  Benin also noted progressive trends on disbursements but said that new commitments remain marginal.  China said it planned to sponsor four training programs on cotton in Chad and other African cotton-producing countries and that the restoration of a highway it was funding would soon be completed, allowing for improved transport of cotton within Benin to the port of Cotonou.

Background

Work on cotton in the WTO follows a two-track approach: discussions on trade-related aspects of cotton are part of the agriculture negotiations while development assistance is discussed separately. Discussion on the trade-related aspects are specifically mandated under a decision taken at the 2013 Bali Ministerial Conference and reaffirmed at the 2015 Nairobi Ministerial Conference to hold “dedicated discussions” twice a year to “enhance transparency and monitoring” of cotton trade policy and to “monitor implementation”.

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