Cotton subsidies, not Peace Clause, may be game spoiler at WTO meet

While the hullabaloo around the ‘Peace Clause’ under the agriculture agreement is gradually gaining momentum, it seems the decade-old problem around reduction of subsidies on cotton is going to be the game spoiler during the ninth World Trade Organization (WTO) ministerial conference in Bali, scheduled from December 3 to 6. This is one of the major demands of leading cotton producing countries, including India.

The commitment on cotton subsidies reduction was taken during the run-up to the Cancun meet in 2003 after which it was formally accepted for discussion in the Hong Kong ministerial in 2005. However, despite severe push from the African countries, the US has not committed anything on its part.

“There is lack of commitment from the US on cotton subsidies ... It is crucial for India as well as it will help increase exports of cotton since it is also a major producer of the commodity. Besides, India has been helping the cotton-growing countries of Africa in technological development. Thus, India has been always supportive of the Cotton-4,” a senior official involved in the talks told Business Standard.

LOW SPIRITS ON SUBSIDY

• Reduction of subsidies on cotton is one of the major demands by the leading cotton producing African countries and India
• Despite severe push from the African countries on subsidies reduction, the US has not committed anything on its part
• The Cotton-4 countries represented by Benin, Burkina Faso, Chad and Mali have been pressing the US and the European Union for the last five years to take up the issue formally and reach an agreement
• The Cotton-4 countries have threatened to stall the negotiations in Bali as it is alleged that attempts to negotiate an agreement at WTO talks have been ignored

The Cotton-4 or C4 countries represented by Benin, Burkina Faso, Chad and Mali had been hard pressing US and the European Union (EU) for last five years to take up the issue formally and reach an agreement soon to reduce its subsidies.  The official said since India is now a leading exporter of cotton, a massive reduction in subsidies by the US will give it a boost. But, since the Hong Kong ministerial, nothing has moved on the issue, the official said.

“In Bali, the US might once again give it a lip-service. This has remained under the carpet for quite a long time and might explode any moment,” the official said.  During the last ministerial in Geneva in 2011, the US was unable to do a deal due to Cotton-4 and not because of China or India, unlike widespread perception.

Now, the C4 countries have again alleged that attempts to negotiate an agreement at WTO talks have been ignored, mainly by US. As a result, they have once again threatened to stall the negotiations in Bali as a mark of protest.

During the 2005 Hong Kong ministerial, WTO members committed to reduce trade-distorting subsidies in an “ambitious, specific and expeditious way”.  

The US provides around $3 billion in subsidies annually to its cotton growers. If the US cotton subsidies were removed entirely, the world price of cotton would increase by six to 14 per cent, with the price for West African farmers' crops increasing by five to 12 per cent, according to a Oxfam study.