U.S. Rejects Africans' Cotton Proposal, Calls for Same 'Ambition' on

Original Publication Date: 
30 March, 2006
GENEVA -- The United States March 27 rejected a proposal from African countries calling for cuts of at least 82 percent in U.S. cotton subsidies.

The United States told a meeting of the World Trade Organization's subcommittee on cotton that the proposal from Benin, Burkina Faso, Chad, and Mali would not put the cotton talks "on the path to success," according to officials who attended the meeting.

The United States explained that the high ambition sought by the African countries on cotton subsidies contrasted with the generally low ambition for the negotiations as a whole. This would not lead to success, Washington argued, because an ambitious result in cotton can only be achieved as part of ambitious results for the agriculture negotiations as a whole.

The United States also insisted that special treatment for cotton subsidies should only be discussed after WTO members agree on "modalities" for agriculture setting out the formula and figures for cuts in farm subsidies and tariffs. Washington added that the African proposal both prejudges the outcome for farm subsidies as a whole and diverts attention from the modalities negotiations.

WTO members agreed at their Hong Kong ministerial conference last December to secure a deal on the farm modalities by the end of April.

The African proposal, a revision to an earlier initiative from the four countries, contains a formula ensuring that cotton subsidies falling under the "amber box" of trade-distorting support would be cut by at least 82 percent, regardless of the reduction figure agreed for other forms of amber box support. The formula would also ensure that the gap in reduction commitments between cotton subsidies and other forms of domestic support will shrink the more ambitious the reduction target for overall support is.

In addition, the African countries proposed that the spending cap for cotton subsidies falling under the "blue box" of domestic support be fixed at one-third the cap set for other domestic support in the blue box.

U.S. Main Target

The proposal mainly targets the United States, the largest subsidizer of cotton. According to the last subsidy notification submitted to the WTO for 2001, the United States reported $2.8 billion in cotton subsidies as amber box support. Countercyclical payments for cotton, which compensate growers when international market prices fall below a fixed price, were estimated at $1.3 billion in 2002.

The United States is expected to place most of its countercyclical payments for cotton in the blue box as a result of changes made in the definition of blue box support in August 2004.

The principle of deeper and more rapid cuts in cotton subsidies was agreed to at the Hong Kong ministerial conference. Trade ministers there agreed that developed countries would eliminate all forms of export subsidies for cotton by 2006, and that trade-distorting cotton subsidies will be reduced "more ambitiously than under whatever general formula is agreed and that it should be implemented over a shorter period of time than generally applicable."

According to the international aid agency Oxfam, African cotton growers lost more than $350 million in potential export revenue in 2004-2005 as a result of depressed world prices caused by excessive subsidization.