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By
Reuters
Published
Jul 20, 2009
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WTO cotton deal will do little for Africa

By
Reuters
Published
Jul 20, 2009

GENEVA, July 15 (Reuters) - The current deal at the World Trade Organisation to cut cotton subsidies offers little hope to African countries as it ignores most trade-distorting supports, a senior African agricultural economist said on Wednesday 15 July.



Abdoulaye Zonon of Burkina Faso's Centre d'Analyse des Politiques Economiques et Sociales (CAPES) told Reuters that cotton subsidies notified to the WTO by the United States -- which form the basis for any cuts -- amount to only a fraction of actual payments.

WTO members have agreed to give cotton special treatment within agricultural negotiations under the long-running Doha round to free up world trade. Some 10 million people in central and western Africa depend on the crop for their livelihood.

A deal slashing rich-country subsidies that depress world prices, keeping cotton farmers in African and other developing regions in poverty, is seen as a litmus test of the world community's ability to produce a fair farm trade agreement.

Zonon's findings are all the more sensitive ahead of a visit to Washington next week by trade ministers of four cotton-producing African states.



LOBBYING CONGRESS

African diplomats said the ministers of the Cotton-4 countries -- Burkina Faso, Benin, Chad and Mali -- would lobby the U.S. Congress from July 20 to 22, but were unlikely to meet U.S. Trade Representative Ron Kirk.

Under draft agriculture proposals for a WTO Doha deal, using a formula drawn up by the Cotton-4, the United States would cut its cotton subsidies by 82 percent from the average annual level it has notified to the WTO for 1995-2000.

Zonon told a conference on the Doha agricultural negotiations organised by the International Centre for Trade and Sustainable Develoment (ICTSD) that U.S. notified cotton subsidies averaged $623 million in the base period.

The proposed formula would cut these U.S. subsidies by about $510 million to $113 million, he said.

But the notified figures exclude many U.S. cotton supports, including those ruled illegal by the WTO's dispute settlement body in a case brought by Brazil which is now entitled to seek $4 billion in compensation from the United States, he said.

"The question is whether the basis for subsidies is going to be recalculated to reflect the findings of the dispute body," Zonon said.

He estimated actual U.S. cotton subsidies in 1995-2000 amounted to $1.74 billion instead of the notified $623 million.

David Blandford, professor of agricultural economics at Pennsylvania State University, told the ICTSD conference that there was a big difference between subsidies as understood by economists and subsidies defined under WTO agreements.

And furthermore WTO members have plenty of scope to reclassify subsidies in order to comply with WTO limits.

"In the cotton case...it is undoubtedly true that certain subsidies are not included," he said.

What is clear is that cotton subsidies by the United States, European Union and China are pushing down world prices.

Zonon cited 9 studies that estimated that world cotton prices would be between 2 and 28 percent higher without the state supports.

The depressed world prices have contributed to a halving of cotton production in Burkina Faso to 360,000 tonnes in 2007-2008 from 750,000 tonnes in 2005. The crop accounts for 60 percent of export revenues.

Leaders of the G8 countries called last week for a conclusion of the Doha round in 2010, and trade diplomats said a revision of the draft proposals was possible later this year.

By Jonathan Lynn

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