WTO cotton deal will do little for Africa - expert

by Jonathan Lynn

The current deal at the World Trade Organisation to cut cotton subsidies offers little hope to African countries as it ignores most trade-distorting supports, a senior African agricultural economist has said.

Abdoulaye Zonon of Burkina Faso's Centre d'Analyse des Politiques Economiques et Sociales (CAPES) said that cotton subsidies notified to the WTO by the United States -- which form the basis for any cuts -- amount to only a fraction of actual payments.

WTO members have agreed to give cotton special treatment within agricultural negotiations under the long-running Doha round to free up world trade. Some 10 million people in central and western Africa depend on the crop for their livelihood.

A deal slashing rich-country subsidies that depress world prices, keeping cotton farmers in African and other developing regions in poverty, is seen as a litmus test of the world community's ability to produce a fair farm trade agreement.

Zonon's findings are all the more sensitive ahead of a visit to Washington next week by trade ministers of four cotton-producing African states.

African diplomats said the ministers of the Cotton-4 countries -- Burkina Faso, Benin, Chad and Mali -- would lobby the U.S. Congress from July 20 to 22, but were unlikely to meet U.S. Trade Representative Ron Kirk.

Under draft agriculture proposals for a WTO Doha deal, using a formula drawn up by the Cotton-4, the United States would cut its cotton subsidies by 82 percent from the average annual level it has notified to the WTO for 1995-2000.

Zonon told a conference on the Doha agricultural negotiations organised by the International Centre for Trade and Sustainable Develoment (ICTSD) that U.S. notified cotton subsidies averaged $623 million in the base period.

The proposed formula would cut these U.S. subsidies by about $510 million to $113 million, he said.

But the notified figures exclude many U.S. cotton supports, including those ruled illegal by the WTO's dispute settlement body in a case brought by Brazil which is now entitled to seek $4 billion in compensation from the United States, he said.

"The question is whether the basis for subsidies is going to be recalculated to reflect the findings of the dispute body," Zonon said.

He estimated actual U.S. cotton subsidies in 1995-2000 amounted to $1.74 billion instead of the notified $623 million.

David Blandford, professor of agricultural economics at Pennsylvania State University, told the ICTSD conference that there was a big difference between subsidies as understood by economists and subsidies defined under WTO agreements.

And furthermore WTO members have plenty of scope to reclassify subsidies in order to comply with WTO limits.

"In the cotton case...it is undoubtedly true that certain subsidies are not included," he said.

What is clear is that cotton subsidies by the United States, European Union and China are pushing down world prices.

Zonon cited 9 studies that estimated that world cotton prices would be between 2 and 28 percent higher without the state supports.

The depressed world prices have contributed to a halving of cotton production in Burkina Faso to 360,000 tonnes in 2007-2008 from 750,000 tonnes in 2005. The crop accounts for 60 percent of export revenues.

Leaders of the G8 countries called last week for a conclusion of the Doha round in 2010, and trade diplomats said a revision of the draft proposals was possible later this year.

Reuters

Kenyan textile exports decline under AGOA initiative

Kenyan manufacturers have lamented the decline in their export volumes to the US since the introduction of trade rules that do not offer exclusive access to textile products to the American market.

The Apparel Sector chairman of the Kenyan Association of Manufacturers (KAM), Jaswinder Bedi, said Kenya's exports to US under the US African Growth and Opportunities Act (AGOA) had continued to decline over the last six years.

Kenya's textile sales to US had been declining since a high of US$ 272 million in 2003, to an estimated US$ 180 million in 2009, based on the figures for the first four months of 2009 when the country had sales of US$ 60 million.

Bedi noted that the decline was because producers had reduced operations following the end of the multi-fibre agreement in 2005, which allowed states to import textile products from other countries and use it for the local production of textiles for export. There was also a reduction of buyers targeting Kenya as a source.

KAM Chief Executive Betty Maina urged Kenyan businesses to take advantage of other products that are eligible under AGOA, including tea, coffee and horticultural products, instead of focusing only on textiles and apparels.

Kenya is to host the eighth AGOA forum.

KAM is asking the government to give incentives to the country’s apparels and textiles sector in order to prevent job losses and capital flight.

Bedi said the sector, with great potential in Kenya’s economy, had been on the decline over the years as a result of the high cost of doing business in the country.

Kenya’s textile sector has been declining over the years from a high of 40 firms in 2003 to only 20 at the end of April this year.

Bedi attributed the decline to uncompetitiveness of the sector, which had been occasioned by high production costs, including cost of electricity.

Bedi, who was speaking during a media briefing on the upcoming AGOA forum scheduled for 4-6 August, said the textile sector could contribute greatly to the government’s ambition to create 500,000 jobs annually.

“The textile sector is capable of creating thousands of jobs annually, thereby making a major contribution to job creation in Kenya,” Bedi said.

Maina said the AGOA forum presented a major opportunity for the country because various stakeholders would be able to showcase and even sell their products and services both during the forum and the exhibition that would run concurrently with the meeting.

AGOA provides duty-free and quota-free treatment for eligible apparel articles made in qualifying sub-Saharan African countries through 2015.

Qualifying articles include: apparels made of US yarns and fabrics; apparels mad e of African (regional) yarns and fabrics until 2015, subject to a cap; apparel made in a designated lesser-developed country of third-country yarns and fabrics until 2012, subject to a cap; apparels made of yarns and fabrics not produced in commercial quantities in US.

Others are textiles originating entirely in one or more lesser-developed beneficiary sub-Saharan African countries; certain cashmere and merino wool sweaters; and eligible hand-loomed, handmade, folklore articles and ethnic printed fabrics.

Bedi expressed regret that over the years, sub-Saharan countries had not taken a dvantage of AGOA and currently account for the less than one per cent of the total trade volume.

Afriquejet