TRADE
Cotton worm turns
Will the US follow WTO rulings as it urges poor countries to do?
FINGER-WAGGING Northern politicians defend the gospel of free trade whenever some Southern government is caught protecting a fledgling industry, scarce jobs or a struggling marketing board. But a March ruling by the World Trade Organization (WTO) that US subsidies to its cotton industry are illegal means that the worm can turn. The case was the first formal challenge to the massive agricultural subsidies handed out by rich nations to their farmers – a practice that critics say destroys the competitiveness of agricultural exports from the developing world. The ruling will put to the test the commitment by the Bush Administration to abide by the rules of the global trade arbiter, as it has frequently urged developing countries to do.
A petition by Brazil against several types of US agricultural support measures – which was supported by some West African cottonproducing nations – was upheld by the WTO last September. Brazil charged that subsidies paid to US farmers growing cotton from 1999 to 2002, and others mandated through to 2007, violate WTO rules: unfairly boosting US agricultural production, flooding the world market with cheaper goods and driving down prices. While Washington denies its actions distort production and trade, a report from the Institute for Agriculture and Trade Policy (IATP) in 2003 says that cotton was exported from the US at 47 per cent below its cost of production.
‘The case against US cotton dumping is overwhelming,’ said Celine Charveriat, spokeswoman for Oxfam’s Make Trade Fair campaign. ‘The debate is over. The US must now move quickly to reform its programmes and stop dumping cheap cotton on to world markets that undermines the livelihoods of poor farmers in the developing world.’
Development groups estimate that US dumping caused losses of almost $400 million between 2001 and 2003 for poor African cotton-producing countries. More than 10 million people in West Africa depend directly on their crops, which – according to Oxfam – will typically earn each small-scale West African cotton producer less than $400 per year. Two million cotton farmers in Mali were recently pressured to accept a price drop of 25 per cent, and many of them will now be unable to cover their production costs. ‘The US must become aware that small developing countries also have rights in the global trade system, otherwise they risk a new wave of resistance from African countries and farmers,’ warns Soloba Mady Keita, the president of the cotton producers’ association in Kita, western Mali.
The ruling opens a Pandora’s Box of potential WTO challenges against several other US subsidies and similar programmes in Europe and elsewhere. Thus Brazilian soybean growers are now considering pushing their government to bring another WTO challenge to US subsidies for soybeans.
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