Cotton in a Free Trade World

By Pan, Suwen; Fadiga, Mohamadou et al. | Economic Inquiry, January 2007 | Go to article overview

Cotton in a Free Trade World


Pan, Suwen, Fadiga, Mohamadou, Mohanty, Samarendu, Welch, Mark, Economic Inquiry


I. INTRODUCTION

Cotton has been at the center of much of the controversy surrounding the inability of the World Trade Organization (WTO) membership to reach consensus regarding significant agricultural trade reform. In 2003, four African countries (Benin, Burkina Faso, Chad, and Mali) circulated a proposal presented as their negotiating position for the Cancun Ministerial conference (WTO, 2003). This proposal called for the elimination of cotton subsidies worldwide due to its status as a "special product"--essential for agricultural and economic development in many less developed countries (LDC). Support for this proposal solidified among other developing countries (referred to as the Group of 21 [G-21]), with a leading role played by the nation of Brazil, which had filed its own grievance against U.S. cotton programs in 2003. Failure on the part of developed countries to meet the demands of the G-21 resulted in a collapse of the Cancun meetings.

At the recently concluded Hong Kong Ministerial Declaration, language was included in the Ministerial Declaration that reaffirms the intent of the WTO (2005) to specifically reform the global trading rules for cotton. While the text of this intent appears in brackets, indicating that it does not represent complete consensus on the issue by all negotiating parties, it is consistent with the wording of the July Agreement and the Cotton Initiative's call for an "early harvest" of cotton, as noted by WTO (2004).

Cotton has been described as the "litmus test" (SEATINI 2004) for the ideals of the Doha Development Agenda to deliver on its commitments to "... correct and prevent restrictions and distortions in world agricultural markets" (WTO 2001). Agreement on meaningful reform of the cotton trade might break the impasse that currently exists in agriculture negotiations. Failure to do so may threaten gains made in the Doha Round itself, as noted by Andrews (2005).

While the commodity-support programs of developed countries in general have been criticized in global trade talks, only recently has the legality of U.S. commodity programs been directly and specifically challenged, with a particular emphasis on cotton. Attention on cotton is predicated by the fact that in 2002/2003, the United States accounted for 40% of world cotton exports and 63% of world cotton subsidies, as noted in Goreaux (2004). But cotton production is subsidized in other countries as well. In the European Union (EU), Greece and Spain produce 2.5% of the world's cotton, yet receive 18.5% of the world's cotton subsidies, as observed by Goreaux (2004). As shown in Table 1, subsidies to EU cotton growers are approximately $1 per pound of lint compared to 20 cents per pound in the United States. In China, the world's largest cotton producer, the estimate of per pound assistance for cotton growers is 8 cents. Other per pound subsidies offered to cotton producers include Egypt at 14 cents, Mexico at 8 cents, and 6 cents in Turkey.

In addition to the trade-distorting effect of domestic support offered to producers, many importing countries have been using tariffs to restrict imports. China, the world's largest importer of raw cotton, has, as WTO mandated, two-tier tariff structure on cotton imports (known as a tariff rate quota [TRQ]). The in-quota tariff rate for cotton to China is 1%, while the out-of-quota tariff rate is 40% for any imports above 890,000 metric tons (about 4 million bales). (1) Other import tariffs rates by major cotton importers include India at 10%, Mexico at 9.7% (excluding tariff-free imports from the United States as part of the North American Free Trade Agreement), and Pakistan at 5%. Table 1 also provides a comparison of these cotton import tariff rates across importing countries.

As noted by the Overseas Development Institute (ODI) (2004), many studies have attempted to quantify the impacts of both United States and other countries' subsidies on world cotton prices and production.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Cotton in a Free Trade World
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.