RS21712 -- The African Cotton Initiative and WTO Agriculture Negotiations
January 16, 2004

	The African Cotton Initiative

Four cotton producing African countries -- Benin, Burkina Faso, Chad, and Mali -- have proposed in WTO agriculture negotiationsthe complete elimination of trade-distorting domestic support and export subsidies for cotton. The World Bank reports that over 2 million farmers in the region produce cotton. Implications for U.S. Cotton Programs

Adoption of a stand-alone sectoral initiative, as proposed by the African countries, could mean that cotton producers would, after fouryears, no longer be receiving payments under 2002 farm bill programs that are linked to production, namelymarketing loan assistanceand loan deficiency payments. (18) Direct payments in FY2003 are estimated to be $428 million. (19)
Adoption of the U.S. proposal to reduce cotton subsidies as part of a comprehensive approach to reducing trade-distorting domesticsupport, also could have substantial, if less drastic, consequences for cotton. The United States, on the other hand, continues to insiston including cottonsubsidies in a broader negotiating approach.
In World Trade Organization (WTO) Negotiations on agriculture, a group of Africancountries have proposed that all subsidies for cotton be eliminated by the end of four years. The proposal alsoadvocatescompensating African cotton producing countries for revenues estimated to be lost due to cotton subsidies. TheUnited States, whichprovides substantial production-related subsidies to cotton producers, agrees that cotton subsidies distort trade, butmaintains that theissue should be negotiated in a comprehensive manner. Disagreement over the African cotton initiative has blockedprogress on anagreement on agriculture in the current round of multilateral trade negotiations known as the Doha DevelopmentAgenda (DDA). How to tackle the question of cotton subsidies -- either as a stand-alone initiative or as part of a broader agreementto reducetrade-distorting farm subsidies -- will be on the agenda as DDA negotiations continue in 2004. If the initiative wereagreed to asproposed, U.S. cotton producers would no longer be receiving 2002 farm bill marketing loan, loan deficiency, orcounter-cyclicalpayments after four years. Under a U.S. alternative proposal for reduction in trade distorting subsidies, cottonproducers could stillreceive payments under those programs but in reduced amounts. This report will be updated.