Cotton Producers Say They Will Block Hong Kong Deal Over Subsidies

13 December, 2005

Benin's ambassador to the WTO Samuel Amehou and representatives of West African cotton producers today (Dec. 14) warned that their countries will refuse to support any agreement struck in Hong Kong if developed countries do not agree to cut their cotton subsidies.

Amehou, along with the presidents of the African Cotton Association Ibrahim Malloum and African Cotton Producers Association Francois Traore, said they came to Hong Kong seeking an end to export subsidies by the end of this year and an end to domestic subsidies by 2009.

Malloum said without a solution on cotton, "we cannot join a consensus on any other areas" that are at issue in Hong Kong.

Amehou charged that consultations held so far, including meetings on Dec. 13, have shown that trading partners are not really intent on resolving the issue. According to Amehou, West Africans have made their proposals but are still waiting for a response. More discussions are planned for tonight, he said.

The U.S. position in these meetings has been that dismantling subsidies will not solve the problems of West African producers, according to Amehou. For example, the U.S. points to a host of other issues, such as poor farming practices and low yields as problems that need to be tackled with measures other than subsidy reductions.

In a related development, Deputy U.S. Trade Representative Karan Bhatia said today that the U.S. is trying to determine what can be done for West African cotton producers until the Doha round agriculture negotiations yield results in terms of subsidies reductions and market access.

One step the U.S. is considering is cutting the tariff it charges on cotton imports that enter its market above the tariff rate quota, according to informed sources. This step is controversial with U.S. cotton producers but could help U.S. textile mills get access to cheaper cotton after the elimination of the so-called Step 2 subsidies program. That program pays U.S. mills to use more expensive cotton over imports and pays U.S. producers export subsidies.

It was linked to a separate provision in the farm bill that allows U.S. mills to buy limited amounts of cheaper cotton for a limited time if U.S. prices hit a certain level. With Step 2 about to be eliminated, U.S. textile mills want to expand their ability to buy more foreign cotton, sources said.

Amehou said subsidies are the most important factor causing price depression for cotton and that additional market access would not help African producers unless subsidies were also reduced.