WTO agrees on tax subsidy for emerging countries

By

Matthieu Guinebault

Published
Jan 5, 2016

Having gathered together in Kenya, the 162 Trade Ministers of the World Trade Organisation's (WTO) its member states could only reach an agreement on a limited number of issues. They did, however, vote in favour of a tax subsidy on cotton produced by emerging countries.
 

This decision will chiefly apply to countries in sub-Saharan Africa, which will be able to export their cotton and cotton-based products on a duty-free basis. Also, they will not have to bow to export quotas towards developed nations, or those emerging countries which do not produce cotton. However, the ministers have agreed on ending cotton subsidies for developed and emerging countries from 2017.
 
The announcement came at a time when world cotton imports are expected to fall by 3%, reaching 7.4 billion tons in the 2015-16 season. The forecast was made by the International Cotton Advisory Committee (ICAC), based on a new downturn in consumption. A decline which will not fail to have an effect on world production, which is expected to drop by 12%, to 23.1 million tons, in 2015.

The problem is that this amount will fall below demand, estimated to be 1.3 million tons higher. The decline will affect all the major producers, from India (-4%) to China (-19%), the USA (-18%), Pakistan and Brazil. A price increase is therefore expected in the course of the season.