Cotton: Executive brief

Summary

European cotton production is concentrated in four member states (Greece, Spain, Bulgaria and Portugal) and supported by direct aids. The reform of European cotton policy, initially applied in 2004, was cancelled by the European Court of Justice and is currently being revised. As a result of further reform introduced in 2008 the majority of subsidies have been decoupled and crop areas limited. Access to the EU market is free for cotton fibre, irrespective of the country of origin

Although 27 ACP countries produce cotton, they represent only 4.2% of world production. Only west African countries can be considered as substantial producers; they accounted for approximately 3% of world production and 7.5% of cotton exported in 2008. The ACP countries are very dependent on the world market since they export almost all their cotton-fibre production. After China and India, the USA is the third largest cotton producer in the world, but a very long way behind the leading exporters. Its cotton production is strongly supported, which tends to push world prices downwards and this issue has been at the centre of numerous discussions within the WTO. US cotton policy was ruled definitively contrary to the WTO rules in 2008 following a complaint from Brazil. Although the USA has suspended its export supports since mid-2006, the current reform of its agricultural policy is unlikely to reduce support to the cotton sector. Nevertheless, as a result of higher prices for most agricultural foodstuffs, competition has increased on land previously used for cotton growing, resulting in a foreseeable reduction in both the areas farmed and production in 2008. The price began to increase and analysts are predicting that it will continue to increase in 2009. However, price movements at the end of 2008 seem to suggest that the price will fall.

In 2004, the EU adopted an action plan comprising a series of measures for cotton in favour of producers in African countries. In the same year, an initiative for the development of fair cotton was launched. However, the cotton sector in African countries has been seriously damaged by several years of very low prices and by the disruption of production in certain countries following the privatisation of national companies with responsibility for the cotton sector.

1. The international cotton market

The fruit of the cotton plant is a seed covered with long strands. It is known as cotton-seed. Ginning in mills enables the cotton-fibre to be separated from the cotton-seed (from which oil is extracted). International trade is based on uncarded and uncombed cotton-fibre. The different processing stages produce carded and combed cotton, yarn, weaves and then textiles.

1.1 Production

In 2007/2008, world production of cotton fibre amounted to approximately 24.4 million tonnes, while amounted 26.2 million tonnes during the previous year (USDA). It is dominated by China, which represents more than a quarter of world production, and India (20% of production), followed by the US (12%), Pakistan (8%), Uzbekistan and Brazil (5% each) and the African countries of the franc zone, which together account for 3% of world production. The EU represents only 1% of production.

World cotton production more than doubled between 1960 and 2008, growing from just under 10 million tonnes to almost 25 million tonnes. Countries producing more than 100,000 tonnes of cotton represent, depending on the year, around 90% of world production. Since 1960, certain countries have been constantly in this category, such as China, the USA, India and Pakistan, which together now produce almost 70% of world cotton production. On the other hand, other major cotton-producing counties, such as Mexico and Peru, have gradually ceased production. Finally, new market entrants have emerged, such as the EU and sub-Saharan countries (Ivory Coast, Mali, Burkina, Zimbabwe).

The fall in production noted during the 2007/2008 season was due above all to competition from other crops on land dedicated to cotton, in particular in the USA where a substantial part of the land was sowed with maize, because maize prices were high in 2007 as a result of the subsidies paid for its transformation into biofuels. The other explanation for the fall in production lies in the ongoing decline in cotton prices since 2000, which has encouraged farmers to diversify their production and even to turn to other types of speculation. This phenomenon is sensitive in sub-Saharan Africa where production has declined since 2005. In total, the deficit between production and consumption is around 3 million tonnes, which has resulted in a decline in world stocks.

Countries producing more than 100,000 tonnes of cotton a year

Source: USDA

Although 27 ACP countries produce cotton (all African, except for Haiti and the Dominican Republic, whose production is very small), 12 of them represent 90% of ACP production. The WCA countries as a whole account for more than 70% of ACP production and Tanzania, Zimbabwe and Zambia 25%. In ACP countries as a whole cotton production developed strongly from the mid-1980s.

Production of ACP countries (thousand tonnes)

Source: USDA

1.2 Consumption

The main cotton consumers are the main textile producers of the developing countries. China is by far the leading cotton-consuming country with consumption more than doubling between 2000 and 2008 because since the end of the Multifibre Arrangement it can export without restriction to the US and the EU. It is followed by India, Pakistan, and Turkey; the USA remains in fifth place, but with constantly declining consumption levels since 2000.

Main cotton-consuming countries (thousand tonnes)

Source: USDA

Within the ACP countries as a whole, cotton-producing and -consuming countries are not the same. In all, ACP countries consume less than a quarter of their production. The seven main cotton-consuming countries are, in descending order of consumption, Nigeria, Zimbabwe, Zambia, Mauritius, Ethiopia, Kenya and the Ivory Coast. Together they represent three-quarters of the cotton-fibre consumption of the ACP countries. Only two of them, Nigeria and the Ivory Coast appear among the leading ACP cotton producers.

1.3 Trade flows

Not surprisingly, the main cotton-importing countries are developing countries that have an important textile industry. In 2005, China, Indonesia, Pakistan and Turkey accounted for more than half of world imports. Chinese imports can vary considerably from one year to the next, depending on the country’s needs and production. However, the boom in the Chinese textile industry, driven by the dismantling of the Multifibres Agreement, on January 1st 2005, resulted in an increase in Chinese demand.

Main cotton-importing countries (thousand tonnes)

Source: USDA

The USA is by a very long way the world’s main exporter (more than one-third of world exports in 2005), followed by India and Uzbekistan. Western and central African countries together are the world’s third largest exporter.

Main world exporters (thousand tonnes)

Source: USDA

1.4 Price and quality trends

As with the prices of numerous other agricultural raw products, world cotton prices have been unstable and trending downwards up to 2007, before rising in 2008. From the second half of 2007, prices started rising, in particular as a result of the pressure of other crops (whose prices were increasing) on land dedicated to cotton.

Cotton prices are measured by the Cotlook A and B indexes. The Cotlook A index takes account of the average of the cheapest five quotations from a selection of the main upland cottons traded internationally (19 origins). The prices are cif cash against documents on arrival of a vessel at a far-east port (Thailand, Indonesia, China, etc.).

For west African producers in the CFA franc zone, it is necessary to emphasise that the impact of higher international prices between the second half of 2007 and the first half of 2008 were limited, for two reasons: first, the increase was relatively weak compared with those noted for other crops (for example cereals) and, secondly, the dollar’s weakness against the euro (and therefore against the CFA franc) more or less cancelled out the increase in cotton prices on the world market (see chart above). This depreciation of the dollar even resulted in a fall in the price paid to producers (in Burkina, from €0.32 in 2004/2005 to € 0.22 for 2007/2008, i.e. a decrease of more than 30%), whereas the price of inputs increased, alongside oil prices. As a result, producers and cotton companies find themselves in a delicate situation, whose outcome remains uncertain. Even the most sold of them, such as Sofitex in Burkina, is unable to cope with the fall in prices and the 2007-2008 campaign is likely to be very difficult. The high price levels of inputs during the 2008 campaign (linked to oil prices) considerably limited the procurement levels of national companies, as in Mali, thereby encouraging producers to turn to other crops that are less-demanding in terms of fertiliser requirement. As a result, between the 2006/2007 and 2007/2008 seasons, production in Mali fell by half, according to the FAPRI figures.

The most recent price changes show a strong fall in prices in autumn 2008. According to the USDA, international prices quoted in US dollars fell by more than 20% between September and November 2008, as a result of a strong decline in Chinese imports.

The quality criteria for cotton fibres are generally based on the criteria used in the USA, namely the colour (from white to yellowish), purity (absence of visible waste, such as leaves) and length of the fibre (length, uniformity and resistance).

African cotton tends to be considered as good quality, regular cotton, in particular thanks to the length of the cotton fibre. However, it has been criticised in recent years for colour defects.

2. The EU’s cotton policy

2.1 Production support

From 1981 to 2003

The EU cotton regime was put in place in 1981 when Greece joined the European Economic Community. The accession of Spain and Portugal in 1986, and of Bulgaria in 2007 enlarged the number of countries covered by the WTO agreement on cotton.

Aid was paid to cotton ginners on condition that cotton producers benefited from a minimum price per tonne of cotton seeds. This system made it possible to protect producers from variations in world prices while enabling companies to sell cotton fibre at the international price. The aid per tonne of cotton seeds was equal to the difference between the guide price (fixed every year) and the world market price. The payment of aid was limited to a maximum guaranteed quantity (MGQ) set annually. If the MGQ was exceeded, the guide price fell (by 1% per tranche of 15,000 tonnes of MGQ over-run). The Community MGQ was increased at the time of the accession of Spain and Portugal to 752,000 tonnes (compared with 567,000 tonnes previously). The MGQ was systematically exceeded between 1986 and 1991 (up to 1,200,000 tonnes produced in the EU).

From 1987, a guide price cut-off system was introduced to protect growers from the risk of very big falls in the minimum price. The original cut-off was 15% but this was increased over time to 25%. However, all in all MGQ over-runs led to reductions in the price paid to growers of up to 25%.

In 1992, the EU cotton regime was modified: the annual fixing of the MGQ was abandoned, the method used for calculating the guide-price reduction was modified, which did not prevent regular MGQ over-runs. From 1995, the EU MGQ was increased to 1,031,000 tonnes and the guide and minimum prices were reduced. The guide price was set at €1,063 per tonne for cotton seeds and the minimum price at €1,009.90 per tonne. In addition, the MGQ was divided between cotton-producing countries to make each member state aware of its responsibilities.

As production continued to increase, while the world price was falling, budget expenditure exceeded the ceiling. With effect from 2001, the mechanisms for reducing prices paid to growers were made more stringent. In addition, member states were given the possibility to introduce agri-environmental criteria to limit the areas eligible for cotton aid. However, such systems did not achieve the desired effect of controlling cotton production.

The abortive 2004 reform

The EU cotton policy was reformed in 2004, on the basis of the general reform of the common agricultural policy, adopted in June 2003. On April 22nd 2004, CAP reform was extended to the cotton sector, so as to combine aids that did not distort trade (‘green box’) with those with minimally trade-distorting effects (‘blue box’). The reform came into force on January 1st 2005.*

This 2004 reform was challenged by the Spanish government and cancelled by the Court of Justice of the European Communities in September 2006. The Court did not call into question the approach followed by the reform (modification of the aid regime), but considered that the Commission should have carried out an impact study including labour costs in the calculation of production costs and assessed the effects of the reform on local ginners. It therefore called for a new regulation to be prepared and adopted within a reasonable period of time.

The EC launched a public consultation on the EU’s cotton policy which resulted in a reform of the sector in 2008. This reform provides for the decoupling of 65% of aids to producers, the remainder continuing to be linked to production, and fixes a ceiling per country for areas eligible for aids (370,000 ha for Greece, 48,000 ha for Spain). In addition, it includes a €10 million restructuring plan for the cotton sector to finance investments and the dismantling of ginning installations, as well as quality measures.

2.2 The EU trade regime

Cotton fibre (HS 5201, 5202 and 5203 codes) enters the EU free of duty, irrespective of the country of origin. Neither the ACP nor LDC countries benefit from preferential conditions from the EU.

In order to protect its textile industries, the EU uses tariff escalation. Whereas raw materials entering Europe are exempt from customs duties, the greater the degree of transformation the higher the customs duties. Thus, textiles are taxed at an average rate of 6.5% when entering the territory and clothes are taxed at 11.5% (WTO, World Tariff Profiles, 2008). The tariff escalation applied by the EU helps to maintain the situation whereby countries of the South are exporters of raw materials and prevents the development of transformation activities in the place of production.

3. African cotton production in the face of the support programmes of developed countries

Cotton plays an essential role in certain African economies, in particular in west Africa for Benin, Burkina Faso and Mali.

Share of cotton in exports from African countries (as a % of the value of total exports)

* Between 2001 and 2005, Chad’s total exports by value increased 16-fold, linked with the start of oil drilling in 2003, while the value of cotton exports was more or less unchanged.

Source: FAOSTAT, 2008

As the vast majority of their production is exported (percentage of exports reaching for some countries more than 60% of national exports), these economies are particularly vulnerable to variations in international prices.

However, in the cotton sector, direct income aids and price-support systems represent approximately 1% of the support provided to agriculture in the OECD countries.

It is difficult to measure the impact of this production support on international prices. Certainly world cotton product would be located differently without such support. Production costs are around US$0.35 in Benin, US$0.45 in Pakistan, US$0.50 in Brazil, US$0.80 in the USA and more than US$1.00 in the EU (Source: ICAC). As the EU is only a minor player as regards world production of cotton fibre, the effect of its production support, the largest per tonne of cotton produced, remains fairy negligible.

Numerous studies have been carried out to measure the effect on the international price of the elimination of all support for cotton producers. It is fairly difficult to compare the results, given the different methodologies used, and the results vary considerably. An FAO document (2004) listing these studies shows that the projected price increase varies from 2.3% to 29.7% depending on the authors.

Would this increase in prices benefit all producing countries? According to an ODI study (2004) that is far from being the case. The world cotton market is in fact segmented, since the quality of the fibres depends on the cotton’s origin. Buyers would therefore be more likely, at least in the short term, to remain loyal to their suppliers. In addition, in the event of an increase in the world price and the probable fall in production levels in the countries which support their cotton production, it is not certain that the other countries are capable of increasing their production to meet demand. Although a higher price could encourage cotton growers to increase their production, other limiting factors should not be under-estimated: available land, falls in yield following soil exhaustion, access to inputs, access to water for the countries that irrigate cotton, the functioning of cotton sectors in a liberalisation context. The ODI considers that western and central African countries have a fairly good capacity to respond to an increase in prices and cotton-related income could grow in those countries by between 14% and 37%.

Other studies stress that an increase in the world cotton price would not necessarily benefit African growers (Fok, 2005). Even if the quality of African cotton is recognised, it does not benefit from the price level that it could expect, in particular because this quality is not widely promoted.

4. Cotton and the WTO

Cotton fibre (raw cotton, cotton trash, carded and combed cotton) is considered as an agricultural product and therefore covered by the WTO agreement on agriculture. All other cotton-based products, such as yarn, weaves and other textile products were subject, until January 2005 to the Multifibres Agreement. That agreement which came into force in 1974 was intended to protect the textile industries of developed countries from the growing exports of developing countries by way of a system of quotas. The liberalisation of the textile sector has not benefited all developing countries: if China is the big winner, the ACP textile-exporting countries (as Maurice), which had special access to the EU market, have lost their trade preferences.

4.1 The Brazilian complaint

Cotton became part of the agricultural discussions at the WTO in September 2002, when Brazil, with the support of C4 (Group regrouping four west African countries -Mali, Burkina Faso, Chad et Benin- cotton producers) filed a complaint with the WTO dispute-settlement body against the support given by the USA to its cotton producers. Brazil considered that the USA had not respected the WTO agreement on agriculture and as a result had helped to depress world prices and damage the interests of Brazilian cotton growers.

In June 2004, the dispute-settlement body upheld the Brazilian complaint, and the ruling was confirmed on appeal in March 2005. It took the view that the US support should be reclassified, either as export subsidies, or from the ‘green box’ to the ‘amber box’ (the most distorting aids, which are capped) for domestic support.

The cotton panel’s decisions

Source: Oxfam, 2004

These data have not changed significantly since 2004 (except for Step 2 subsidies) despite complaints to the DSB, as the USA has dragged out proceedings by filing several appeals. The amount of the subsidies changes according to the level of international prices (counter-cyclical payments.). Thus, the amounts paid are substantial when prices are low and, conversely, subsidies are reduced when prices are high. Although counter-cyclical subsidies are not linked to the quantity produced, the DSB acknowledges that they lead to serious trade distortions since they disconnect producers from market signals. On average, the volume of subsidies is around the same level as the value of production (US$4.7 and US$3.9 billion respectively in 2005-2006).

On August 1st 2006, the USA announced that it was eliminating Step 2 type subsidies; however, the other subsidies are still in place. The new Farm Bill adopted in 2008 does not change the amount of subsidies granted to the cotton sector for the next five years.

On June 2nd 2008, on appeal, the WTO ruled against American cotton subsidies after a six-year legal saga. The appeals panel confirmed the ruling against American subsidies to cotton producers pronounced in December 2007, finally putting an end to the dispute between Brazil and the USA which had lasted since 2003. Once again it was noted that the USA acts ‘in a way incompatible’ with the WTO rules and ‘has not complied’ with the previous recommendations and decisions of the DSB. According to the report of the WTO judges, the subsidies paid to American farmers by way of marketing loans and the counter-cyclical payments ‘have the effect of preventing a notable increase in prices’, ‘causing a serious prejudice to Brazil’s interests’. As the USA has exhausted all possibilities of appeal, the way is now open for a possible request for trade sanctions by Brazil via the application of retaliatory measures, which could reach a level of US$1 billion (IDEAS, briefing note No. 80, 2008).

4.2 The cotton initiative

In May 2003, Benin, Burkina Faso, Mali and Chad submitted to the WTO Secretariat a ‘Sectoral initiative on cotton’ (OMC, 2003). In response to the losses suffered by their farmers following the fall in world prices, they called for the elimination of support granted by developed countries to their cotton production. Their demands also included, pending such a decision, the payment of financial compensation. They called for separate negotiations to be conducted for the cotton sector, outside the agricultural negotiations. LDCs, the African group and the ACP countries have given their support to this initiative.

The lack of any response to these demands was one of the causes of the failure of the WTO Ministerial in Cancun in September 2003. The framework agreement of July 2004 decided on the creation of a cotton sub-committee and specified that cotton would be treated in an ‘ambitious, rapid and specific way’ in the framework of the negotiations on agriculture. Cotton was one of the items at the heart of the agriculture discussions at the Hong King Ministerial, but the results were negligible.

The only concrete progress achieved in Hong Kong was agreement on the elimination of American cotton-export subsidies by the end of 2006. The WTO members committed themselves to ensuring that the reduction in domestic-support programmes should be more rapid and important for cotton than for other products. The resolution of the cotton issue has however now become completely linked to progress achieved in other agricultural products, which will no doubt undermine the planned ‘ambitious and rapid’ treatment of cotton.

Better access to the markets of rich countries has been negotiated for African cotton. However, it is very unlikely that such a commitment by the USA will have any significant impact for African cotton-exporting countries. To date, cotton imports by the USA have remained well below the tariff quota of 5% of domestic consumption that it grants (lowly-taxed quota, from 0 to 4.4 cents/kg within the quota compared with 31.4 cent/kg outside the quota). Thus, from 2000 to 2004, American cotton imports were only 8,367 tonnes on average, for a current tariff quota of 68,670 tonnes. Faced with the competition of the Chinese textile sector, the USA has relocated its textile industries, in particular to Mexico and Honduras. Domestic cotton consumption by textile industries in the USA therefore fell from 2,485 million tonnes in 1997/98 to less than one million tonnes in 2008. The USA therefore needs rather to find an outlet on export markets for its own cotton production than to import cotton.

4.3 Recent developments

On July 17th 2007, the Chair of the agriculture negotiations, Crawford Falconer, drafted some operational modalities from the Doha Ministerial Declaration in Hong Kong containing significant advances on cotton.

The key development concerned the reduction in domestic support granted by the EU to its cotton producers. The draft ‘modalities’ paper suggests a formula for reduction in ‘amber box’ support for cotton. Moreover, it specifies that the expenses cap granted to cotton in ‘blue box’ support will be stricter than for other products (at one-third of the cap for ‘normal’ products). The implementation of the reduction in domestic support will occur more quickly than for other products, in one-third of the time. In addition, it is expected that duty-free, quota-free access to the markets of developed countries and of those developing countries which feel able to cope with it, will be granted to cotton coming from LDCs, and full elimination of export subsidies will be implemented at once.

Since 2007, the question of cotton seems to have declined in importance in the Doha negotiations at the WTO. For example, the discussions that resulted in the July 2008 text at no time addressed directly the question of cotton, which is treated as peripheral. The fact that the sub-committee on cotton has not met since July 2007 illustrates this lack of interest.

4.4 Opposing positions, preventing any global agreement

The ministerial negotiations of July 2008 enabled the member states to reconcile their positions on strategic issues (tariff reductions, cuts in subsidies). During the week of negotiations between G7 ministers (a group formed to accelerate the negotiations at the ministerial meeting at the end of July and composed of the main trading powers: Australia, Brazil, China, the USA, India, Japan and the EU), the talks collapsed as a result of differences between India and the USA on the question of the special safeguard mechanism (SSM). However, certain observers consider that the reason why the talks broke down was the determination of the USA not to address cotton on the list of subjects for discussion (the question of cotton was placed last on a list of 20 items to be discussed during the ministerial negotiations).

According to observers, the USA, which had accepted a 70% general reduction in its trade-distorting subsidies, apparently was unable to make an extra effort on its subsidies to the cotton sector, as required by the mandate on this product (the WTO mandate on cotton requires States that subsidise their cotton producers to implement a more substantial and quicker reduction in subsidies than for other sectors). In fact, the Farm Bill adopted in 2008 provides for subsidies to cotton producers to be maintained if not increased (Martin Khor, SUNS, August 4th 2008).

5. The cotton action plan

In February 2004 the EU adopted an action plan to help developing countries dependent on basic products. Three main areas of action for cotton were identified immediately:

• Obtaining fairer trade conditions on international cotton markets;
• Helping African countries to consolidate the competitiveness of their cotton sectors;
• Measures to mitigate the impact of price fluctuations.

This plan was discussed and adopted on July 5th-6th 2004 at the EU-Africa Forum on cotton, at the end of which a steering and monitoring committee (COS cotton) was set up. The financial support received by the committee for operating purposes from August 2007 was ended in September 2008. This will be replaced for the next two years by funding under the AAACP (All ACP agricultural commodities programme) of €400,000. The plan, which is part of the ‘EU-Africa cotton partnership’, is structured around the following themes:

International trade

This involves supporting the African cotton initiative (see above, cotton and the WTO) at the level of negotiations and by enhancing the capacities of cotton producers and negotiators so that they are better able to defend their interests.

National and regional strategies

Cotton-producing countries are drawing up national cotton strategies, which will be the framework for financial support for the cotton sector. At regional level, this involves coordinating national strategies and linking them with the EPAs.

Politics and institutions

This involves improving the legal and regulatory environment in order to protect the interests of growers and cotton merchants, strengthening and improving institutions in the cotton sector (growers and merchants).

Technological innovation

This involves improving soil fertility, supplies of seeds and farming practices in general. It also involves capacity strengthening to facilitate decisions concerning genetically modified cotton, and finally putting in place in African countries an automatic cotton-classification system.

Risk management and finance

To mitigate the effects of price fluctuations, the action plan provides for the increased use of market-based price-risk-management mechanisms, improving self-insurance systems, integrating cotton-risk management into national strategies, and studying the feasibility of a regional cotton stock exchange.

Integration of the cotton chain

In order to raise added value, the aim is to improve and develop the textile sector (from spinning to the clothing industry), including craft industries, develop the processing of the co-products, develop the organic cotton and fair-traded cotton sectors, and stabilise markets by combating fraud.

Recent and current activities under the action plan

The following activities have recently being implemented at international, regional and national levels in the framework of the action plan:

• the organisation of regional workshops (west Africa, central Africa and south and east Africa) between May and June 2008 in order to promote exchanges between stakeholders and determine support priorities for the sector;
• the organisation of an international conference in Montpellier in May 2008 on changes in cotton policies;
• the organisation of an international conference in Ouagadougou in September 2008 on the challenges of genetically modified cotton in Africa;
• the mid-term evaluation of the EU-Africa cotton partnership, which is due to be completed at the beginning of 2009;
• a ‘Cotton made in Africa’ public-private partnership programme to promote the sustainable production of African cotton in three African countries (Burkina Faso, Benin and Zambia);
• a project to support the development of the production of ‘fair trade’ and ‘organic fair trade’ cotton in west and central Africa via subsidies to l’AProCA (association of African cotton producers);
• several national programmes to support the sector or producers have been put in place in various countries: Burkina Faso, Benin, Côte d’Ivoire, Mali, Senegal, Mozambique, Chad and Togo.

As at March 31st 2008, the amount of financial assistance provided to African states (EU-Africa cotton partnership) was €315 million, composed of €147 million committed by the EU in the form of subsidies and €168 million by European states in the form of loans and subsidies. The cotton action plan represents approximately 5% of this budget, i.e. €15 million.

The work of the steering and monitoring committee (COS) on updating the action plan establishes not only the progress of programmes put in place but also the difficulty in achieving concrete results rapidly in the various areas covered by the plan. The emphasis is on regional integration and the implementation of joint strategies.

6. Cotton and the EPA negotiations

As access to the EU market is free for cotton-fibre, irrespective of its origin, cotton is not a trade issue in the EPA negotiations. However, for transformed cotton-based products, the signing of an EPA could help to improve access to the EU market, for textile-producing countries, such as Mauritius.

Concerning the opening of the ACP markets, the issues of competition from European imports are also very small, if not zero, since the EU does not export cotton fibre to the ACP countries. However, it is to be noted that the list of sensitive products defined in the west Africa region includes all cotton-sector products, including cotton fibre.

On the other hand, the development aspect of the EPA could allow specific support for this sector, in particular for the processing sector. The main obstacles to the development of a textile industry in African are investment and access to energy. The west Africa region initiated in 2008 an EPA-development programme (PAPED) with the aim of making the EPA a development tool. National studies are currently being carried out in order, in particular, to identify relevant priority programmes and projects with regard to the main lines established for the PAPED. In Mali, for example, improving the performance of cotton exports would appear to be one of the key challenges to be met, and one which could benefit from support measures in the framework of the EPA.

7. Fair trade, a system for the future?

The African cotton sector has certain advantages when it comes to satisfying ‘fair trade’ criteria. It is based on small, essentially family farms, practising mixed farming/stock farming, with production methods based on limited use of inputs and economical levels of water and energy consumption (therefore consuming less carbon than American or Chinese producers). In addition, the organisation of the sector around state or semi-state bodies makes it easier to monitor farmers and their compliance with standards. The development of ‘fair trade’ could make it easier to capitalise on these advantages among groups sensitive to ‘fair trade’ principles.

In 2004, the ‘fair trade’ association, Max Havelaar France, launched a ‘fair-traded cotton’ initiative, in partnership with the Geocoton group (former Dagris), which participates in numerous cotton networks in western and central Africa.

7.1 The general principles of fair trade

Four essential points distinguish fair trade from traditional trade:

• The purchase of products from poor farmers in developing countries: small farmers and their cooperatives, plantation workers, micro-enterprises, workshops;
• The payment of a fair price, allowing a fair remuneration for producers and their employees;
• A stable long-term trade relationship, with actions to support and assist farmers (technical support, support to obtain input supplies, export assistance, etc.);
• The sale of products to consumers in industrialised countries, with actions to raise awareness regarding international trade issues.

Producer groupings are certified by an international certification body. In west Africa, Max Havelaar is the main certification body; certification is organised at the level of producer organisations.

7.2 ‘Fair trade’ cotton

‘Fair trade’ cotton was first marketed in Europe, in France and Switzerland in 2005, based on exports from four African countries (Senegal, Mali, Burkina Faso and Cameroon). In 2006, the UK, via DfID, launched a ‘fair trade’ cotton sector in India.

Thanks to the projects implemented by the French and Swiss cooperation services some 30,000 producers were certified for the 2007/2008 campaign in Mali, Burkina Faso, Senegal, Cameroon and Benin, representing the equivalent of 1% of the volumes produced in the region.

As for all ‘fair trade’ products, the price paid to the producer is determined in advance, and is sufficient to cover the production costs and remunerate the producer’s work. For the 2007/2008 season, the price paid to producers in west Africa (234 FCFA per kg of seed cotton) was particularly attractive in a context of contractually low cotton prices (160 FCFA per kg in Mali and 145 FCFA per kg in Burkina Faso) (AFD-FARM, 2008).

In addition to this price, a community-development premium is paid, with the aim of financing collective investment in the framework of producer groupings (34 FCFA per kilo of seed cotton for the 2007/2008 season).

An additional premium encourages producers to develop ‘organic fair trade’ products. In west Africa, ‘organic fair trade’ represents 10% of volumes of ‘fair trade’ cotton.

The question of ‘organic’ cotton in its own right, separately from ‘fair trade cotton’, is also relevant. This sector has existed for several years and the production volumes reached are considerably higher than those of ‘fair trade’ cotton. While world demand for ‘organic’ cotton is to a large extent unsatisfied because of inappropriate farming practices in exporting countries (USA, India), African production systems would appear to be more rapidly convertible to ‘organic’ farming methods (AFD-FARM, 2008).

7.3 The limits of fair trade cotton

Fair trade cotton is a fairly recent initiative, but a certain number of limits are already apparent. First of all, the number of farmers concerned is very small in relation to the number of African cotton farmers.

Cotton is a product which, unlike other fair trade products such as coffee, is subject to numerous processing operations involving several operators between the producer and the end consumer. However, although for the time being the fair trade certification applies to cotton production, it does not apply to the following stages: ginning, transport to factories, spinning, the clothing industry, etc. In principle there are checks to ensure that the companies concerned apply strictly international agreements on the rights of workers (according to the ILO convention). However, will the employees of these companies working in developing countries also benefit from better wages and better working conditions thanks to fair-traded cotton? There are no guarantees on this point. The same applies for ‘organic’ cotton which guarantees only farming practices.

The high certification costs (carried out at the level of producer organisations) may eventually, when the sector’s development is no longer supported by development aid, weigh on the remuneration of producers or on the competitiveness of ‘organic’ cotton.

The certification body and textile operators do not guarantee purchases of ‘organic’ cotton from one season to the next, unlike traditional national cotton companies. Demand may fluctuate considerably depending on the habits of consumers in the North (fair trade ‘going out of fashion’).