28th July 2008

Cotton program nears reckoning in WTO talks

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Reuters

Mon Jul 28, 2008 6:05am EDT

By Doug Palmer

WASHINGTON (Reuters) - The U.S. cotton subsidy program neared its day of reckoning in world trade talks on Sunday, as negotiators struggled to reach a breakthrough agreement in agriculture and manufactured goods trade.

“We expect that this issue will be confronted and dealt with in the next 24 hours,” World Trade Organization spokesman Keith Rockwell told reporters after ministers finished a seventh day of intense Doha round talks.

West African countries, with the support of development groups such as Oxfam International, have targeted the U.S. cotton program for deep subsidy cuts in the round, which was launched nearly seven years ago with the aim of helping poor countries prosper through trade.

They say generous subsidies encourage overproduction in the United States, stealing export markets from millions of West African farmers in Benin, Burkina Faso, Mali and Chad and driving many of them out of business.

The United States, the world’s largest cotton exporter, agreed earlier in the Doha round to make deeper and faster cuts in U.S. cotton subsidies than for other commodity programs.

West African countries have proposed cutting the spending ceiling for rich country cotton programs by 82 percent, and have not received a counterproposal from the United States.

That would reduce U.S. cotton outlays to about $143 million annually, from the billions of dollars spent earlier this decade, the International Center for Trade and Sustainable Development has estimated.

European Agriculture Commissioner Mariann Fischer Boel told reporters that cotton must be resolved soon for the delicately balanced agriculture and manufacturing trade deal now being negotiated to win support of the entire WTO membership.

“I think this is one of the most important issues” left for ministers to decide, Fischer Boel said.

The outcome is expected to also affect EU cotton subsidy payments to farmers in Greece and Spain, although the EU has already made some cotton program reforms.

U.S. Trade Representative Susan Schwab met with C4 trade ministers on Sunday and told them a crucial part of any deal was an agreement by China, the world’s largest importer, to slash its tariffs.

That would create new markets for West African farmers, as well as the United States, U.S. trade officials said.

China, a clothing and textile manufacturing powerhouse, consumes nearly 12 million tonnes of cotton per year — or about 12 times as much as the United States.

China imports nearly 3 million tonnes per year, but has sizable tariffs that encourage domestic production and discourage even more imports, the United States argues.

U.S. cotton producers feel they have been unfairly singled out in the talks. With support from powerful cotton state lawmakers, they have pushed U.S. trade officials to save as much of the cotton program as they can.

Meanwhile, U.S. cotton production has fallen to estimated 3.0 million tonnes this year, from 5.2 million in the 2005 crop year, as skyrocketing prices for rice, wheat, corn and soybeans have encouraged more planting of those crops.

But world cotton prices have also risen in recent years in the face of booming demand.

The International Cotton Advisory Committee, which monitors the world cotton market, estimates prices this year at 83 cents per pound compared to 59 cents two years ago.

(Editing by Dominic Evans)