U.S.-Brazil Cotton Agreement Unlikely to Benefit African Producers

U.S. implementation of a World Trade Organization ruling backing a Brazilian complaint against U.S. subsidies for cotton would likely have a marginal effect on boosting cotton prices for growers in developing countries, according to a report issued by the InternationalCenter for Trade and Sustainable Development.

U.S. implementation of a World Trade Organization ruling backing a Brazilian complaint against U.S. subsidies for cotton would likely have a marginal effect on boosting cotton prices for growers in developing countries, according to a report issued by the International Center for Trade and Sustainable Development.

The report concludes that the only outcome likely to have an effect on boosting global prices for cotton is the acceptance of a proposal from four African cotton-growing countries (Benin, Burkina Faso, Chad and Mali) calling for an 82 percent cut in trade-distorting subsidies for the sector as part of a final Doha Round deal. The African proposal has been incorporated into the draft negotiating text for the Doha farm trade talks.

The report argues that even if the United States had implemented the WTO ruling by withdrawing export credit guarantees for cotton removing the adverse effects on trade caused by U.S. countercyclical payments and marketing loan payments, U.S. cotton production would have dropped by 7 percent and global prices for cotton would have increased by 3.5 percent over the 1998-2007 period.

The limited actions already taken by the United States to comply with the WTO ruling — eliminating the Step 2 program and GSM 103 export credit guarantee payments, as well as amending the fee schedules under the supplier credit guarantee program — would have had a negligible effect on cotton production increased world prices for cotton by only 0.7 percent over the same reference period.

However, the report concludes, the sharp cuts under the African proposal would have reduced U.S. cotton production by 9 percent and increased global prices for cotton by an average of 6 percent over the reference period.

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