Abstract
For several years, cotton prices have been experiencing a sustained decline on the world market. For cotton-producing developing countries, this low price is the result of subsidies granted by developed countries, particularly the United States and the European Union to their producers. As a result, these developing countries expect substantial gains in trade and economic development once the subsidies are ended. This article aims to analyze the effect of U.S. and European subsidies on the production of Burkina Faso, one of Africa’s leading cotton exporters whose cotton sector is currently experiencing serious difficulties. The data used in this thesis are secondary data, drawn from existing databases or specialized journals and using an econometric model, the Vector Auto Regressive (VAR) model, the analysis shows that a negative and significant impact of subsidies on cotton production in Burkina Faso is highlighted. The consequences of the end of subsidies on the Burkinabe economy should be positive. Analysis by the VAR model through impulse response functions shows that U.S. and European subsidies negatively affect Burkina Faso’s cotton production and that these impacts do not occur directly but through the world price of cotton. Therefore, the State, cotton companies and producers, the three main actors in the sector, should see their situation improve simultaneously in the event of subsidy removal.
Highlights
The data used in this thesis are secondary data, drawn from existing databases or specialized journals and using an econometric model, the Vector Auto Regressive (VAR) model, the analysis shows that a negative and significant impact of subsidies on cotton production in Burkina Faso is highlighted
World Cotton Price (WCP): is the world cotton price approximated by Cotlook’s A-index.10. This index expressed in US cents per pound11 is the average of the five lowest quotations among a set of representative quotations of very diversified origins, reported at the CAF North-Europe stage. This variable is important because the distortions in the cotton market refer mainly to the fall in world cotton prices. - U.S subsidies to cotton producers (AUSA): U.S subsidies, expressed in millions of dollars, are approximated by direct government payments of cotton as shown in the U.S and States Farm Income Data. - European aid to cotton producers (AUE): European subsidies are approached by the aid for cotton production
Like other poor countries in West Africa, Burkina Faso must work towards sustainable development and is counting on a cash crop: cotton
Summary
The effect of the agricultural policies of Northern countries on the world prices. A. The four main producing countries namely China, India, the United States and Pakistan account for nearly three-quarters of global volumes This market concentration, which has strengthened in recent years, must be put into perspective by considering the impact of agricultural policies implemented by the main producing countries as well as climatic or health hazards and their influence at the global level. Subsidies to productions in western countries constitute a distorting factor They resulted in placing on the world market of subsidized surpluses at low prices, entering into direct competition with agricultural exports from. Before presenting the results of the econometric estimation, we will first review the studies devoted to the impact of American and European aid on the international cotton market These studies can be classified into two groups according to the type of model used: partial equilibrium models (static and dynamic) with one or more products and general equilibrium models. These studies can be classified into two groups depending on the type of model used: partial equilibrium models (static and dynamic) with one or more products and general equilibrium models
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