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Africa: Cotton Update

AfricaFocus Bulletin
May 14, 2004 (040514)
(Reposted from sources cited below)

Editor's Note

"This system [of U.S. cotton subsidies] pits a typical Malian producer, farming two hectares of cotton, who is lucky to gross $400 a year, against US farms which receive a subsidy of $250 per hectare." - Oxfam. The World Trade Organization (WTO) will soon issue a formal ruling, in response to a Brazilian and African challenge, declaring these U.S. subsidies in violation of international trade rules. This changes the climate for international trade talks, but no policy shifts that could directly affect African farmers are yet imminent.

Rich countries are pushing to regain momentum in international trade talks, and both Europe and the U.S. have recently offered to be more forthcoming on this issue of agricultural subsidies that was key to the collapse of talks in Cancun last fall. But there is still little sign of openness to African demands for separate and urgent resolution of the cotton issue in particular, The U.S. will appeal the WTO decision, and further consideration of the issue will likely be postponed at least until after the U.S. election.

This AfricaFocus Bulletin contains a press release from Oxfam commenting on the WTO ruling and a summary of an Oxfam report on cotton released in March. The bulletin also contains the sections on agriculture and cotton from the Dakar Declaration passed by trade ministers of Least Developed Countries, meeting in Dakar on May 4 and 5.

Another AfricaFocus Bulletin sent out today contains excerpts, also focusing on trade, from an overview of the Economic Commission for Africa's Economic Report for 2004.

Meanwhile, passage is still delayed for U.S. legislation to extend exemptions that have permitted expansion of African textile exports to the U.S. under the Africa and Growth Opportunity Growth beyond September (see report on congressional hearings
at, and a report on factories closing in Swaziland at

++++++++++++++++++++++end editor's note+++++++++++++++++++++++

Oxfam Press Release - 27 April 2004

Oxfam welcomes news of WTO ruling on cotton, US will have to reform its subsidy program

International agency Oxfam has welcomed news reports today that Brazil has won a landmark trade battle at the WTO on cotton subsidies against the United States.

Oxfam's Make Trade Fair campaign has strongly condemned rich country subsidy regimes that help distort global trade, leading to the dumping of below-cost produce and worsening poverty. Oxfam has been especially vocal against the US, which gave nearly $4 billion in subsidies to its cotton farmers in 2001-2.

The Brazilian case against the US sought to answer a vital question: Did these subsidies artificially raise cotton production in the US, stimulate exports and therefore help depress world prices?

"According to reports in Brazilian press, the WTO has judged that these subsidies did depress world prices and violated WTO rules. If the report is upheld in appeal, the US would have to significantly reform its cotton subsidy program," said Oxfam spokesperson Celine Charveriat.

According to the same source, the panel gave six months to the US government to reform its subsidy program.

West African countries would also be vindicated: they had argued in Cancun that US cotton subsidies were hurting their farmers and needed drastic reform as part of the Doha Development Agenda negotiations.

"This would be a huge victory, not just for Brazil but particularly for tens of millions of poor African farmers whose livelihoods have been crippled by unfair competition with highly-subsidised US cotton," Ms Charveriat said.

Brazil and the US will have a chance to comment on the interim ruling before it is finalized on June 18th, after which time it can also be appealed.

White Gold' Turns to Dust
Which Way Forward for Cotton in West Africa?

March 2004

West African farmers continue to face severe deprivation because of depressed cotton prices. One factor is the dumping of exports from the USA, where overproduction is the result of government handouts worth $2.3bn. The US government shamefully disregarded the Africans when they took their complaint to the WTO, but the issue remains high on the agenda and is now the critical test of whether the Doha Round can deliver on development. Aid for West Africa is currently under discussion, but it must not divert attention from the scandal of US subsidies.


Low prices on world cotton markets are driving ten million Africans deeper into poverty. The crop is typically grown on small family farms in West and Central Africa (WCA), for whom it provides essential cash income for basic needs such as medicines, school textbooks, and tools. In Benin, Mali, Burkina Faso, Chad, and Togo, which are among the poorest countries in the world, cotton accounts for 37 to 71 per cent of agricultural export earnings.

There are several initiatives to mobilise the international community to provide economic assistance to WCA, such as the WTO-sponsored meeting in Cotonou which starts on 23 March 2004, and a mid-year donor meeting in Paris. It is vital that these events generate significant resources which reach down to small-scale producers. However, Oxfam and its partners in the region are deeply concerned that the promise of financial aid will be used by Washington to avoid dealing with the heart of the matter, which is the damage caused in these impoverished regions by massive subsidies to US domestic cotton producers.

In the past, West Africans described cotton as 'white gold'; but the worth of this asset began to decline when prices started sliding in the mid-1990s, reaching an all-time low by October 2001 and generating both hardship and unprecedented political mobilisation among producers. Prices have risen recently, but are expected to fall again once China has recovered from poor harvests. One major factor in the slump is overproduction and the dumping of exports by the United States, made possible by handouts to agribusiness which totalled $2.3 billion in the 2001-2002 season. Last year, 68 per cent of US cotton was exported, at prices substantially below true production costs. This avalanche of cotton, produced by a mere 25,000 US plantations, deprives the highly competitve African smallholders of markets and pushes down world prices. Greek and Spanish production, although much less than that of the USA, has risen sharply as a result of $700 million in annual CAP subsidies, making it harder for Africa to compete in Europe, its principal market. Direct losses to West Africa as a result of US and EU subsidies are estimated at $250 million per annum.

This system pits a typical Malian producer, farming two hectares of cotton, who is lucky to gross $400 a year, against US farms which receive a subsidy of $250 per hectare. The ten largest producers in the USA, whose government regularly preaches the virtues of free trade to developing countries, together pocket annual subsidy cheques for up to $17 million.

The West Africa governments of Benin, Chad, Mali, and Burkina Faso, supported by active producer associations, have been in the forefront of efforts to persuade the industrialised countries, above all the United States, to reduce cotton subsidies and to provide interim compensation for the damage that their economies are enduring. They managed to place the issue squarely on the WTO agenda at the Cancun ministerial conference in September 2003, but the USA refused to change its policies, proposing instead that these countries should diversify their farm production away from cotton. This reaction offended the developing countries and added to the acrimony of the talks. There has since been no significant progress on the issue at the WTO, which is only now emerging from its post-Cancun coma.

The failure of the US government to respond to one of the starkest examples of rigged trade rules, combined with its willingness to jeopardise the multilateral system over the issue of cotton, is disturbing. It demonstrates that US trade policy is vulnerable to small but powerful domestic lobbies with friends in high places, and is shockingly indifferent to poverty in Africa. The Europeans are more prepared to countenance reform of their subsidy regime for cotton, although their current proposals might not in practice have a significant impact on production levels. It is vital that they do scale back production, not least in order to maintain political pressure on the USA. Both the EU and the USA, regrettably, have rejected the notion of compensation, no doubt fearing that it would set a dangerous precedent.

The forthcoming international meetings on WCA's cotton crisis are both an opportunity and a threat. They could mobilise external resources to partially alleviate the suffering of rural producers and repair some of the damage caused to local economies and the balance of payments. And funds are needed for investment in longer-term development of WCA cotton sectors, promoting improved production, local processing and marketing, including exploration of niche markets such as organic or GM-free cotton. The meetings should also review the very mixed experience of liberalising domestic cotton sectors, for example abolishing State marketing boards, which has often been done at the instigation of the international financial institutions. But there should be no illusions: aid will not bring about poverty reduction of the scale and durability that could be achieved by ending artificial overproduction and dumping by the USA.

And there lies the threat. The promise of aid, combined with strong diplomatic pressure, could be a way to push WCA governments to drop their demands for urgent reform of agricultural subsidies. This would help the USA to keep its subsidies untouched, and allow the WTO to kick an awkward and apparently intractable issue into the very long grass of the agriculture negotiations. Even if the industrialised countries were to deliver an aid package of appropriate quality, the structural problem would persist, and eventual losses for WCA would far outweigh the immediate benefits. One might in any case ask whether international donors should use taxpayers' money to foot the bill for US economic vandalism. At a political level, a retreat on subsidies would weaken the broad coalition of developing countries that supports WCA on cotton and calls for deeper and faster reform of world farm trade. It is therefore essential that aid to WCA or any US or EU offer to pay compensation for damages, should not be conditioned on such a retreat and considered transitional. The more enlightened industrialised countries have a vital role to play in ensuring that this does not happen.

Unfortunately, the agenda of the WTO meeting to be held in Cotonou between 23 and 25 March 2004 focuses on development aid and marginalises the issue of subsidies and compensation. In addition, participation is restricted to selected governments and international organisations. Oddly, for an event purporting to address financing and technical assistance, key stakeholders such as producer organisations and processing companies are not invited; nor are key development ministries such as the UK government's Department for International Development, nor any national and international NGOs. This raises the suspicion that it may be an ill-designed exercise in buck-passing, or worse, an effort to put pressure on WCA countries to moderate their demands. If, indeed, there are aid proposals forthcoming, it is essential that producer groups should be invited to comment and later participate in the transparent management of resources.

Conclusion and recommendations

Oxfam believes that West and Central African countries have a powerful moral and economic case for their demands for reform of the cotton subsidy system and payment of interim compensation, especially by the USA. The challenge is to build a coalition of developing countries, civil-society organisations, and enlightened industrialised countries to put effective pressure on the USA and EU to change their policies. The success of this alliance would deliver enormous benefits to millions of Africans living in poverty in rural areas and, at the same time, bring a much-needed sense of progress and legitimacy to the world trade talks. Oxfam makes the following recommendations:

  • The USA should eliminate all cotton subsidies that affect international trade, as a matter of urgency. This will include most domestic subsidies, including those officially classified as minimally trade-distorting ('green box').
  • The aim of EU subsidy reform should be to increase West Africa's share of the European market, while protecting the livelihoods of small European producers. The EU should urgently review its current proposals to ensure that this goal is met.
  • As a transitional measure, the USA and EU should agree to compensate WCA producers for losses caused by subsidies.
  • Cotton should continue as a separate issue in WTO negotiations. If it is merged into the broader agriculture talks, it should be fast-tracked with an early deadline for deciding commitments on substantial subsidy reform and rapid implementation.
  • Financial and technical assistance should be given to WCA for short-term needs created by the cotton crisis and for longer-term development of the sector. This aid should not be conditional on African governments changing their position on subsidies, should not add to their debt burdens, and should involve full participation by all stakeholders.
  • Aid could usefully be targeted to establish mechanisms for stabilising incomes and prices at local and national levels, improving the quality and grading of cotton, developing 'fair trade' and organic production, and supporting initiatives to add value. The experience of domestic liberalisation promoted by the World Bank should be critically examined.

Dakar Declaration of Third Least Developed Countries Trade Ministers' Meeting

Dakar, Senegal, 4 - 5 May, 2004

[excerpts on agriculture and cotton only. For full text of declaration see]

We, the Ministers responsible for trade of the Least Developed Countries, meeting in Dakar, Senegal, from 4 to 5 May, 2004, to take stock, review progress and exchange views on developments in the WTO negotiations after the 5th WTO Ministerial Conference which took place in Cancun, Mexico from 10 to 14 September, 2003,


5. Call upon the Members of the WTO to fully take into account the interests and development needs reflected in the LDCs Dhaka Declaration, and urge Members to take into account the realities of LDCs and agree on the following:


6. Agriculture is the backbone of the LDCs economies. This sector provides employment and a livelihood for over 60 percent of the labour force, and for some LDCs, agricultural products constitute more than 70 per cent of exports. LDCs consider that, in view of the current situation of negotiations, their concerns as expressed in the Dhaka Declaration are still topical and relevant. Whereas the Derbez Text takes on board the LDCs concern regarding the exemption from reduction commitments, we furthermore, submit the following proposals:

(a) Export subsidies that are provided by developed countries to products of export interest to LDCs shall be phased out on a fast-track basis;

(b) Members shall exercise restraint in applying TBT (technical barriers to trade) and SPS (sanitary and phytosanitary) measures to products from LDCs. Technical and financial assistance shall be provided to LDCs for improving agricultural infrastructure, productivity and diversification for development of facilities and systems for compliance with the SPS and TBTs requirements for exporting agricultural commodities;

(c) The consolidation of market access in total duty exemption for LDCs will be considered;

(d) Developed countries shall provide bound duty-free and quota-free market access for all products originating from LDCs. Furthermore developing countries are also urged to extend such facilities to products from LDCs;

(e) Erosion of preference margins due to MFN tariff reductions shall be offset by establishing compensatory and other appropriate mechanisms, including measures that promote exports from LDCs;

(f) The fast and substantial reduction of domestic support measures which impede the exports of LDCs, shall be achieved through the establishment of accurate criteria and a ceiling of the green box as well as phasing out the blue box and the amber box;

(g) Food aid provided by Members to meet emergency situations, and humanitarian and development objectives, and to address the chronic food deficit situation in LDCs shall be allowed.


7. Cognisant of the role of cotton as a critical industry within the agriculture sector in the economy of LDCs, particularly those in the West, East and Central regions of Africa where it contributes substantially to the GDP, total export earnings as well as in promoting rural development, employment and poverty reduction,

8. Deeply concerned about the adverse effects of domestic support and subsidies granted to the production and export of cotton by some developed countries that cause distortions in the international trade of this product and undermine trade opportunities and worsen economic and social situation of LDCs that are cotton producers and exporters.

9. We urge Members of the WTO to expeditiously consider adopting the proposals submitted to WTO by the proponents of the Sectoral Initiative on Cotton as contained in Document WT/GC/W/516 of the 7th of October 2003. These proposals stress the following:

  1. The complete elimination of export subsidies over a period of three years and the elimination of production-related domestic support over a period of four years, in each case as from 1st January 2005.
  2. The setting up of a cotton sector support fund.
  3. We welcome the results of the WTO Regional Workshop held in Cotonou from the 23 to 24 of March 2004 and recommend that the conclusions of this meeting concerning the development aspect of the Sectoral Initiative on Cotton be implemented expeditiously so that the cotton sector is reinforced within all cotton producing LDCs.
  4. We also strongly believe that the global and effective response to the request contained in the Sectoral Initiative on Cotton must also take into account the trade aspects through the adoption by the WTO of a decision aiming at the elimination of domestic support and subsidies granted to the production and export of cotton.
  5. We remain open and flexible to ways and approaches likely to resolve the various aspects of this issue and we expect, from the concerned countries, concrete proposals to resolve urgently the problems raised in the sectoral Cotton initiative.


Additional Links on Related Issues

Bridges Weekly Trade News Digest, from the International Centre for Trade and Sustainable Development, provides regular updates on this and other trade issues.

For earlier references on cotton and other agricultural trade subsidies, see

Africa: Commodity Trap

Africa: Agriculture Strategic, Neglected

Africa: After Cancun

Africa: Cancun, Agriculture

US/Africa: Trade Wars, 1

US/Africa: Trade Wars, 2

Africa: Crops and Trade, 1

Africa: Crops and Trade, 2

AfricaFocus Bulletin is an independent electronic publication providing reposted commentary and analysis on African issues, with a particular focus on U.S. and international policies. AfricaFocus Bulletin is edited by William Minter.

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