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C4 countries table ‘standstill principle’ proposal in WTO

07 January 2012

On 11 November 2011, a West African proposal to the WTO that ‘the US and EU should freeze trade-distorting support for cotton at current historically low levels’ was discussed at the WTO in Geneva. Low levels of cotton sector payments have been triggered by high cotton prices, according to ICTSD. The governments of Benin, Burkina Faso, Chad and Mali, which make up the C4 group of cotton-exporting countries, argue that ‘a “standstill principle” should apply to these subsidies while a negotiated solution is being reached.’

While the C4 group was hoping to secure ministerial endorsement for this proposal at the 8th WTO ministerial conference scheduled for 15-17 December, subsequent comments from the Chair of the agriculture talks indicated in mid November that there was not yet consensus.

The C4 submission also reiterated its long-standing demands first endorsed in the WTO through the Hong Kong Ministerial Declaration. This includes the call for a prioritisation of more ambitious subsidy cuts in the cotton sector ‘than for other products under the “general formula” for subsidy reductions’. The US and EU have yet to respond to the C4 proposal. Unofficially, a view has been expressed that in view of wider debates in the US on deficit reduction, some progress may be possible.  Others, however, take the view that ‘the political landscape had not substantially changed since cotton was discussed’ in June 2011 as part of the discussions on an LDC package. Here the US officials linked any US action to ‘other issues also forming part of the package’, including Chinese and Indian cotton subsidies. C4 officials, however, take the view that this is simply ‘a way to avoid providing a response’.

Editorial comment

In the EU, it is unclear what the economic difficulties in Greece will mean for the debate on cotton subsidies. EC proposals to strengthen the ‘safety net’ aspects of the CAP, coupled with proposals to extend the possibility for member states to retain decoupled support in some sensitive areas, mean that even if standstill provisions on aid to the cotton sector are agreed in principle, the right to extend exceptional support in the event of unusual market developments is likely to be retained.

With the overall pattern of EU agricultural assistance programmes likely to become less commodity specific (sector impacts becoming more difficult to assess), it is unclear just how such a standstill principle would be applied in practice.

In the United States, the budgetary pressure could have a favourable effect on cotton subsidies. Negotiations have started on the US 2012 Farm Bill, which sets out agricultural priorities and measures for the next 4 years. Given the need for US budget cuts, the provisional budget for 2012–2016, at US$265 billion, is likely to be US$23 billion lower than the 2008–2012 figure. The cuts are likely to be in support for agricultural products and in support payments to farmers. A 10% reduction in support staff is also expected.

The National Cotton Council of America (NCC), conscious of a future drop in funds allocated to cotton growers and to farmers in general, is proposing that within the restructuring process efforts should be aimed at a more efficient safety net, with particular emphasis on risk management and strengthening of harvest insurance. The NCC is also advocating that a solution be found to the dispute with Brazil, which was initially resolved by financial compensation and a framework for consultation, but does not exclude sanctions in due course against US products. After the 2012 Farm Bill is promulgated, it has been agreed that Brazil and the US will reassess whether a solution to the dispute has been found. The dispute therefore remains unresolved at the present time.

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