Cotton Subsidies Research Articles

Global Power Shifts and the Cotton Subsidy Problem: How Emerging Powers Became the New Kings of Cotton Subsidies

Abstract Cotton is one of the most contentious issues in the global trading system. Subsidies provided by richer countries have had a devastating impact on the welfare of poor cotton farmers in the developing world. Cotton subsidies have long been seen as a symbol of the injustices of the trading system—a harm perpetrated by the rich countries of the Global North against the poor countries of the Global South. This conception of the global cotton subsidy problem is deeply entrenched and has profoundly shaped contemporary debates about power and fairness in the multilateral trading system. As this article shows, however, the prevailing view of the global cotton subsidy problem is now simply outdated and inaccurate. Today, the biggest providers of cotton subsidies are no longer the United States and EU but emerging economic powers like China and India. These major developing countries are providing large volume of subsidies, which are distorting global production and trade, and harming some of the world’s poorest and most vulnerable farmers in other developing countries. The cotton subsidy problem is no longer simply a North–South issue. Addressing the problem requires tackling all harmful subsidies, including those from large emerging economies.

Current Situation and Optimization Countermeasures of Cotton Subsidy in China Based on WTO Rules

Cotton plays an important role in China’s agricultural production structure and international trade; therefore, China has implemented a variety of cotton subsidy policies. Since China joined the WTO in 2001, WTO rules have become substantive constraints on its agricultural subsidy policy. Therefore, in order to prevent appeal cases of China’s cotton subsidy, in this article, we investigate the current situation and optimization countermeasures with respect to China’s cotton subsidies based on WTO rules. According to calculation of the level of China’s cotton subsidy support under WTO rules, it currently exceeds 8.5% of the cotton production value. Secondly, we estimate the change in cotton subsidy effect when the support level of China’s cotton subsidy policy is directly reduced to 8.5%; the results show that such a reduction would have a considerable impact on the production scale. However, due to the constraints of the political and economic goals of cotton subsidies, the Chinese government can only “box shift” subsidies by changing the subsidy method and object in order to comply with WTO rules. Finally, from the perspective of how to use cotton subsidies to improve the efficiency of production factors, the Chinese government should focus on optimizing the cotton subsidy policy according to three aspects: improving the Amber Box subsidies, expanding the Green Box subsidies and increasing the Blue Box subsidies so as to maintain the existing level of cotton subsidy support.

Heroes of the developing world? Emerging powers in WTO agriculture negotiations and dispute settlement

ABSTRACT Agriculture has been a key issue of North-South struggle at the WTO. Emerging powers like China, India and Brazil have portrayed themselves as leaders of the Global South, crusading to make the trading system fairer for developing countries. This article analyzes three cases – the cotton dispute, subsidies and public stockholding – that have been at the center of WTO negotiations and dispute settlement on agriculture since the collapse of the Doha Round. While presenting themselves as champions of the developing world, I show that the emerging powers have been advancing their own interests, often at the expense of other developing countries..

Do Campaign Contributions from Farmers Influence Agricultural Policy? Evidence from a 2008 Farm Bill Amendment Vote to Curtail Cotton Subsidies

AbstractThis article studies the political activities of individual cotton farmers and cotton political action committees (PACs) by exploiting a vote to amend the 2008 Farm Bill. Using a simultaneous model, I estimate reduced form equations for donations from cotton farmers and cotton PACs using tobit models, which instrument donations in the probit vote equation to control for the hypothesized endogeneity between campaign contributions and legislative votes. I find evidence that cotton farmers, like cotton PACs, contribute to legislators representing a median cotton farming constituency. I find no evidence that contributions from cotton farmers or cotton PACs significantly affected the vote decision.

Competitiveness of Indian Agriculture Sector: A Case Study of Cotton Crop

This study has critically examined the issue of Cotton subsidies in USA as well made a comparative analysis of cotton sector between USA and India in the background of USA claim that African cotton producers’ plight was not due to the trade-distorting subsidies of USA but was on account of upward trend in cotton production in India and China in defiance of market signals. This study also estimated the comparative advantage in cotton production and cotton export diversification by calculation various indicators. Result shows that India has comparative advantage in production and export of cotton in recent years. This study highlights that USA has 14 percent share in world production, however, its share in world export is 38 percent. USA exports 86 percent of cotton production to other countries. The cost of producing cotton is highest in USA, which is 4.5 to 6 times higher than India. During 1995-2010, USA has given about $37 billion to cotton producers though various programmes like counter-cyclical payments, decoupled income, commodity certificates etc. Despite high cost of cotton production, USA is enjoying artificial comparative advantage in cotton market due to high level of domestic support given to farmers and big corporation in USA.

The Bali Agreement: Implications for Development and the WTO

At the most recent World Trade Organisation (WTO) ministerial conference, in December 2013, in Bali, Indonesia, ministers from 160 countries concluded the first multilateral agreement ever negotiated under the auspices of the WTO. After five years of impasse in the moribund Doha Round of trade negotiations, the so-called “Bali package” was enthusiastically welcomed by the world’s governments and international press alike as a critical step towards restoring the credibility of the WTO as a negotiating forum. The centrepiece of the package is without doubt a new agreement on trade facilitation aimed at reducing red tape, and facilitating customs procedures in an effort to cut down the cost of doing business. Other — less far reaching — aspects of the deal focused on food security and a set of issues of particular interest to least developed countries including trade preferences or cotton subsidies. As the dust from the heated Bali negotiations settles, the main challenge for the WTO will now consist in building on this success to re-energise multilateral negotiations and ultimately close the Doha Round. In a world increasingly dominated by regional and bilateral free-trade agreements, members will have to confront the core issues that have divided them for nearly 15 years and find creative solutions to rehabilitate the WTO’s centrality in global trade governance.

Dispute Settlement at the WTO: Impacts of a No Deal in the US‐Brazil Cotton Dispute

AbstractOn the day before Brazil was to start imposing retaliatory sanctions against the United States in the WTO dispute settlement case regarding unfair domestic and export upland cotton subsidies, the parties have reached a preliminary concession aimed at settling this eight‐year‐long trade dispute. In this paper, we explore the economywide impacts of a no deal with specific emphasis on intellectual property retaliation in a computable general equilibrium framework. As awarded by a WTO dispute settlement panel, Brazil would have been entitled to $591 million in retaliatory sanctions in goods sectors and $238 million in intellectual property sanctions. We find that retaliation by Brazil would have led to welfare gains for all countries except the United States. Most importantly, however, had Brazil not been allowed to retaliate in the form of suspension of intellectual property rights, the impact of trade retaliation alone would have been negative for both Brazil and the United States, a case of shooting oneself in the foot to shoot at the other person's foot.

The feasibility of replacing the sliding scale duty with cotton subsidies in China

PurposeThis paper aims to determine whether domestic cotton support permitted by the current or potential World Trade Organization (WTO) rules would be sufficient to compensate the cost to China's cotton farmers if the sliding scale duty (SSD) on cotton imports is removed.Design/methodology/approachThe simulation was conducted using a static spatial equilibrium model (SEM) of the world cotton market. First, a base model was specified to provide a good representation of the world cotton market's conditions. Second, simulations were conducted to evaluate the effects of replacing the SSD and subsidizing cotton producers pursuant to the current or potential WTO rules on domestic cotton support.FindingsThe results of the simulations suggest that China's cotton farmers are bound to incur losses. In either case, cotton subsidies permitted by the current or potential WTO rules are not sufficient to compensate for the cost to China's cotton producers if the SSD is eliminated.Research limitations/implicationsIt should be pointed out that these findings could suffer from a bias, primarily because the authors assumed that the WTO's blue box subsidies have no incentives for farmers to produce, and no substitution between cotton and alternative products. Thus, additional work is needed to reflect a more realistic situation in future studies.Originality/valueThe simulation estimation contributes to a better understanding of the issue of whether China should replace the current SSD with cotton subsidies to protect cotton producers.

Optimal Choice of Cotton Subsidy Mode in China—Empirical Study Based on Principal Component Regression

Adopt principal component regression for researching the optimal subsidy mode of cotton production in China. The result indicates that, from the perspective of economic stimulatory effect, the optimal cotton subsidy in China is farm chemical subsidy rather than seed subsidy. The reason is that there are frequent pest disasters in cotton producing areas in China. So farm chemical subsidy is the most important factor ensuring cotton production. Meanwhile, cotton varieties must be optimized and improved to increase the ability to resist pests and diseases, and the forecasting for pests and diseases in cotton production areas must be enhanced, early warning mechanism and monitoring must be built, and in addition, it is strongly recommended that if financial resources allow, subsidies like seed subsidy, fertilizer subsidy, machinery subsidy and irrigation subsidy could also put into effect in China.

Cotton-4 and the Cotton Subsidies Issue: A Litmus Test for the WTO’s Benefits to Least-Developed Countries

The World Trade Organization’s primary purpose is to promote trade liberalization for the benefit of all its members. Being a self-enforcing trading system, the Dispute Settlement Mechanism (DSM) is its central pillar. Despite critics praising the DSM for its efficiency, the aim of this article is to demonstrate that litigation is not always an option for the WTO’s least-developed members. Through a case study of the cotton issue this article will analyze the efficiency of the WTO for its least-developed members. Part I of the article will set out why the issue of cotton is the perfect paradigm to examine how the WTO’s agriculture trade liberalization can benefit its least-developed members. Part II will examine the Brazil-US Upland Cotton Dispute and shed light on its repercussions on a group called Cotton-4. Part III will discuss how Cotton-4 has tried to resolve the cotton issue through negotiations. Finally, part IV will provide least-developed members, such as Cotton-4, with ways around the power inequalities that limit them from fully benefiting from the WTO’s agriculture trade liberalization.

Analysis of the Brazil‐USA cotton dispute

PurposeThe purpose of this paper is to explain and conceptually analyse the origins and outcomes of the Brazil‐USA cotton dispute.Design/methodology/approachThe analysis is conducted using a conceptual framework to show the effects of US policies on Brazil and the world cotton market. The historical context of the conflict is presented, to explain the motivations of both countries and the background of the dispute.FindingsUS cotton subsidies and related policies have the effect of harming international producers, including Brazil. This analysis, along with an explanation of Brazil's role in world cotton production, explains why Brazil had cause to complain to the WTO and why the WTO ruled in its favor.Practical implicationsThe implications of these rulings are that the international dispute and its unique resolution could foreshadow similar conflicts in the future between different parties over different commodities, and the analysis presented in this paper will serve to explain them.Originality/valueThis is the only paper to present a complete history of the Brazil‐USA conflict, along with a conceptual analysis of the targeted US policies.

Do U.S. Cotton Subsidies Affect Competing Exporters? An Analysis of Import Demand in China

We estimate the demand for imported cotton in China and assess the competitiveness of cotton-exporting countries. Given the assertion that developing countries are negatively affected by U.S. cotton subsidies, our focus is the price competition between the United States and competing exporters (Benin, Burkina Faso, Chad, Mali, India, and Uzbekistan). We further project how U.S. programs affect China's imports by country. Results indicate that if U.S. subsidies make other exporting countries worse off, this effect is lessened when global prices respond accordingly. If subsidies are eliminated, China's cotton imports may not fully recover from the temporary spike in global prices.

Cotton Subsidies, the WTO, and the ‘Cotton Problem’

AbstractFollowing an 8‐year‐long dispute over cotton subsidies, Brazil and the US signed a Memorandum of Understanding on 21 April 2010, effectively paving the way for settling the dispute. This paper argues that cotton subsidies are just the tip of the iceberg while a number of other, perhaps more important, issues require attention and, indeed, political will. Chief among them is the persistent divergence between cotton prices and the prices of other agricultural commodities which reflects, for the most part, the large supply response by China and India, a direct consequence of conversion to biotech cotton varieties in these (and other) countries. Such a response – which kept cotton prices low, compared to other commodities – imposes a competitive disadvantage to nonusers of biotech cotton. The paper also highlights two additional constraints faced by the cotton‐producing countries of West and Central Africa, namely the structural inefficiencies of their primary processing industries (also known as ginning) and the appreciation of the CFAf against the US dollar. Without downplaying the importance of subsidy elimination, this paper concludes that these impediments should receive high priority in the policy agenda.

Preventing Opportunistic Uncompliance by WTO Members

The World Trade Organization's (WTO) Dispute Settlement Understanding is silent on the consequences for members if they comply with trade obligations, but later uncomply, resulting in similar violations as those giving rise to the original dispute. This article shows that WTO members can uncomply without facing economic consequences because the arbitrators that authorize the suspension of WTO concessions have a limited jurisdiction relative to compliance panels and because the DSU does not provide sanctions for past (in contrast to ongoing) violations. Members may thus delay compliance until immediately before panels assess their compliance record and then may uncomply because arbitrators cannot authorize the suspension of concessions for the measure to uncomply. Cases of uncompliance allow members to commit repeated violations with impunity. This contrasts with cases of non-compliance, where trade disputes eventually result in implementation of recommendations, compensation to the aggrieved member, or the suspension of concessions against the violating member. We identify the ongoing US -- Upland Cotton dispute as a potential case of uncompliance. WTO members have an opportunity to protect themselves from delayed compliance and uncompliance by seeking authorization to suspend concessions where the violating member has not taken measures within the timeframe given to comply. We show that because Brazil forfeited its rights to do so in the US -- Upland Cotton dispute through a sequencing agreement, the United States may have uncomplied without facing a countermeasure for certain cotton subsidies. Oxford University Press 2011, all rights reserved, Oxford University Press.

Increasing incomes of Malian cotton farmers: Is elimination of US subsidies the only solution?

In a WTO battle and the press the argument is often made that eliminating US cotton subsidies would have a large effect on the incomes and competitive position of farmers in developing countries. In Francophone West Africa cotton productivity has stagnated after rapid gains in the first two decades following independence (1960–1980). A farm model was constructed based on farmers’ definition of their decision-making framework which they use to respond to income and weather risks. With this model the effects on farmers of eliminating US subsidies are compared with various productivity increasing measures for cotton and sorghum in Dioila, Mali. Dioila is located in a representative cotton region producing 16% of the cotton in Mali. We include sorghum due to its importance for consumption and the observation of Malian farmers substituting cereals (sorghum and maize) for cotton as the returns to cotton have fallen in the 21st Century. In the farm model, the elasticity of transmission of a change in the world cotton price to the farm gate price is taken into account. The gains from eliminating US subsides are small. In contrast, the various technological alternatives including Bt cotton introduction, the use of higher fertilization levels for cotton, and the introduction of improved sorghum cultivars and moderate fertilization along with a marketing package all have substantially higher returns Even with substantial improvement in the mechanisms enabling farmers to benefit from the higher prices resulting from elimination of US subsidies, there are still much higher returns resulting from the various types of productivity increases.

The Cotton Influence Index: An Examination of U.S. Cotton Subsidies

AbstractGiven the lack of a bill or amendment specific to cotton, we introduce a Cotton Influence Index to capture legislators’ influence in championing the cause of the cotton growers during the hearings of the Farm Security and Rural Investment Act of 2002. Regression analyses reveal a relationship between Cotton Influence Index and campaign contributions, cotton farmland, party affiliation, and ideology. Tobit analysis indicates a significant relationship between different “actions and participations” by representatives to advance the interest of cotton—that is, components of this index and their future cotton political action committees’ (PACs) contributions to them.

Nothing ventured, nothing gained? A case study of Africa's participation in WTO dispute settlement

The thrust of this research centres on the inadequate participation of African countries in the WTO dispute settlement mechanism. Using the US upland cotton dispute initiated by Brazil as a case study, the author investigates four leading West African cotton exporters – Benin, Burkina Faso, Chad and Mali – the 'Cotton 4'. While Benin and Chad participated in the dispute as third parties, Burkina Faso and Mali were noticeably absent, despite their joint criticism of cotton subsidies in the sectoral initiatives on cotton delivered by the group at two WTO ministerial meetings. The author attempts to ascertain the rationale for African countries' decisions to participate in disputes or to 'free ride' within the international trade arena, arguing that the incentives or disincentives affecting these decisions stem from the inability to retaliate against developed countries under the WTO dispute settlement understanding (DSU); financial and technical limitations in accessing the DSU; disproportionately heavy reliance on principal trading relationships; and other socio-political and economic considerations.

Prospective Benefits from Cotton Subsidy Cuts and New Technologies

No AccessAgricultureOct 2008Prospective Benefits from Cotton Subsidy Cuts and New TechnologiesAuthors/Editors: Kym Anderson, Ernesto ValenzuelaKym AndersonSearch for more papers by this author, Ernesto ValenzuelaSearch for more papers by this authorhttps://doi.org/10.1596/1020-797X-10_3_35SectionsAboutPDF (0.3 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In While waiting for the removal of cotton subsidies, farmers can benefit from the adoption of GM cotton varieties currently available to them, as the experiences of China and India indicate. Previous articleNext article FiguresreferencesRecommendeddetails View Volume 10Issue 3October 2008Page: 35-37ISSN: 1020-797X Copyright & Permissions Related RegionsAfricaRelated CountriesBurkina FasoKuwaitQatarRelated TopicsAgricultureIndustryMacroeconomics and Economic GrowthPrivate Sector DevelopmentRural Development KeywordsBIOTECHNOLOGYCOTTONCOTTON BOLLSCOTTON PRODUCTIONCROPFARMFARM INCOMEFARMERSSEEDSYIELDS PDF DownloadLoading ...

Recent and Prospective Adoption of Genetically Modified Cotton: A Global Computable General Equilibrium Analysis of Economic Impacts

Abstract This article provides estimates of the economic impact of initial adoption of genetically modified (GM) cotton and of its potential impacts beyond the few countries where it is currently common. Use is made of the latest version of the GTAP database and model. Our results suggest that if other developing countries—especially in sub‐Saharan Africa—were to follow the lead of China, South Africa, and most recently India, adoption of GM cotton varieties could provide even larger proportionate gains to farmer and national welfare than in those early‐adopting countries. Furthermore, those estimated gains are shown to exceed—and reinforce—those from a successful campaign under the WTO’s Doha Development Agenda to reduce/remove cotton subsidies and import tariffs globally.

The World Trade Organisation's Doha Cotton Initiative: A Tale of Two Issues

Four West African nations have demanded that the WTO's Doha Development Agenda include a Cotton Initiative that involves two issues: cutting cotton subsidies and tariffs, and assisting farm productivity growth in Africa. This paper provides estimates of the potential economic impacts of (a) complete or partial removal of cotton subsidies and import tariffs globally and (b) cotton productivity growth through the adoption of genetically modified (GM) cotton varieties. Use is made of the GTAP database and global economic model to address both these issues. On Doha, our results confirm that for cotton – unlike for other agricultural subsidies and tariffs – it is subsidy reductions rather than tariff cuts that would make by far the largest impact. For Sub‐Saharan Africa the potential gains are huge relative to the effects on that region of reforming other merchandise trade policies. And they could be more than doubled if that reform provided the cash for farmers to take advantage of the biotechnology revolution and adopt GM cotton varieties. But those potential gains, and the affordability of switching to costly GM seed, depend crucially on the extent to which high‐income countries are willing to lower domestic support to their cotton farmers.