What you need to know:
Easy entry. The deal will help Africa access non-producing foreign markets
African countries can now export their cotton to developed countries duty-and quota-free as from January 2016 following a global deal sealed in Nairobi at the World Trade Organisation (WTO) ministerial conference.
The ministers agreed on a deal that will allow the Least Developed Countries (LDCs) to export more cotton to developed countries.
This will help the LDCs, mainly those in sub-Saharan Africa, to gain greater access to non-producing foreign markets because of the suppressed customs and taxes.
The agreement includes three key elements — on market access, domestic support and export competition.
The deal comes into effect from January 1, 2016 and cotton-producing countries in Africa, mainly Burkina Faso, Benin, Chad and Mali, and other developing countries, can begin to export cotton duty-free.
The agreement also mandates developed countries to prohibit cotton export subsidies immediately and for developing countries to do so at a later date.
According to the Nairobi WTO declaration signed by all the 162 trade ministers, all cotton subsidies to the developed and developing countries are to be stopped in 2017.
Elimination of subsidies
The decision on cotton export subsidies was part of an overall agricultural commitment to eliminate subsidies for farm exports.
WTO director-general Roberto Azevedo described the agreement as the most significant outcome in agriculture in WTO’s 20-year history.
“Extensive cotton subsidies in rich countries, especially the US — where subsidies given to American cotton producers are 60 per cent more than the total GDP of Burkina Faso, for example, have led to an artificial increase of supplies in international markets and a fall in export prices,” said Mr Peter Kiguta, the director-general of customs and trade at the East African Community, adding, “Any special treatment given to African cotton would also benefit potentially competing cotton exporters such as Brazil.”
However, Mr Joshua Setipa, the Trade and Industry minister of Lesotho and moderator of the WTO cotton negotiations in Nairobi, said that members did not agree on early harvest demands or on a demand by African countries for the concept of special products under WTO to be extended to cotton as it applied to products that were not competitive in the international market.
Benin, Burkina Faso, Mali and Chad — the main cotton exporters in Africa — have been at the forefront of pushing for the removal of subsidies and domestic support, which have a distorting effect on the international cotton market.
The US Congress is also still considering a new Farm Bill that would leave farm subsidies largely unchanged.
“This would be tragic for the millions of people in developing countries whose livelihoods are threatened on a daily basis because of US agricultural subsidies,” said Mr Kiguta.
The WTO’s 10th ministerial conference was held in Nairobi, Kenya, from December 15 to 19, the first such meeting hosted by an African nation.
At the meeting, the ministers also adopted a ministerial decision on Public Stockholding for Food Security Purposes. The decision commits members to engage constructively in finding a permanent solution to this issue.
Under the Bali Ministerial Decision of 2013, developing countries are allowed to continue food stockpile programmes, which are otherwise at risk of breaching the WTO’s domestic subsidy cap, until a permanent solution is found by the 11th Ministerial Conference in 2017.
In their Nairobi Declaration, ministers cited the “pre-eminence of the WTO as the global forum for trade rules setting and governance” and recognised the contribution the rules-based multilateral trading system has made to the strength and stability of the global economy.
“We reaffirm the need to ensure that Regional Trade Agreements (RTAs) remain complementary to, not a substitute for, the multilateral trading system,” ministers declared, adding that the WTO’s Committee on Regional Trade Agreements would discuss the systemic implications of RTAs for the multilateral trading system and their relationship with WTO rules.
The ministers acknowledged that members “have different views” on how to address the future of the Doha Round negotiations but noted the “strong commitment of all members to advance negotiations on the remaining Doha issues.”
“This work shall maintain development at its centre and we reaffirm that provisions for special and differential treatment shall remain integral,” the ministers declared.
The ministers also stated that, while negotiators should prioritise work where results have not yet been achieved, “some wish to identify and discuss other issues for negotiation; while others do not. Any decision to launch negotiations multilaterally on such issues would need to be agreed by all members.”
Developed countries like the US have opted for domestic support and subsidisation policies in the cotton sector.
The subsidies drive down prices, making it hard for small farmers in poor countries to compete in international markets.
The US has retained its place as the world’s second-largest cotton grower after China by paying out $12.5 billion in government subsidies to its farmers between August 1999 and July 2003.
China is the largest exporter of cotton, while Brazil is fifth.
The Doha rounds focuses on the concerns of the developing countries like Uganda and rotates around agricultural reforms, particularly reductions in subsidies, issues of non-agricultural market access, special treatment of poor countries and matters of trade facilitation.
Agricultural subsidies has remained a contentious issue in WTO talks since the Doha Round One kicked off in Qatar nearly 15 years ago, with Least Developed Countries (LDCs) claiming that developed countries offering domestic support to their farmers as subsidies, it damages Africa’s agriculture and industry.
LDCs have advocated for the lifting of the agricultural subsidies by the West to create a level trading field, but up to date no outcome of commercial value on the matter has been achieved.
ISMAIL MUSA LADU