[Debate] African Countries Welcome Cotton Aid, But Exploring WTO Legal Options

[Riaz K Tayob]

*/Inside U/**/./**/S/**/. /**/Trade /*

*December 23, 2011 21*

* African Countries Welcome Cotton Aid, But Exploring WTO Legal Options

GENEVA --- Representatives from the "Cotton 4" group of West African 
cotton-producing nations last week welcomed

offers of new development assistance from the United States, European 
Union and China, but expressed their

continued frustration that trade negotiations on the cotton issue remain 
stalled in the World Trade Organization.

At a Dec. 16 press conference, Chadian Minister of Commerce and Industry 
Mahamat Allahou Taher said the C-

4 group prefers to secure reduced U.S. cotton subsidies through the Doha 
round, but would not rule out the possibility

of pursuing formal dispute settlement against countries such as the U.S. 
that maintain trade-distorting cotton

subsidies.

"The C-4 remains confident in the mutilateral trading system, and 
privileges above all a negotiated solution, without

all the while excluding the possibility of using the legal options it 
has available to it within the WTO, in the case where no

solution in favor of cotton is to be found," he said through a translator.

A legal solution may become more attractive given that "certain members 
may continue to send negative signals in

the negotiations at the WTO in 2012," he added, in apparent reference to 
the fact that many WTO members do not

believe that the Doha round can make any substantive progress next year.

The level of frustration among C-4 countries --- Chad, Burkina Faso, 
Benin and Mali --- has reached the point

that their ambassadors in Geneva are conducting a formal review of 
dispute settlement options and of the successful

Brazilian challenge of U.S. cotton subsidies in the WTO, according to 
Prosper Vokouma, Burkina Faso's ambassador

to the WTO.

Geneva ambassadors of the C-4 countries held three workshops this year 
on the workings of the dispute settlement

body, and are preparing a "complete file that we will transmit to our 
ministers, and we will see what path it is we will

follow," Vokouma said at the press conference, also speaking through a 
translator.

"We have examined the Brazil cotton case against the United States, 
we've studied the decision, we've asked for a

legal opinion on the decision and we have studied in detail the whole 
aspect of cotton," he said. "It is something we will

be sending on to our capitals, giving them our views on the path to follow."

Vokouma emphasized that that if the C-4 were to pursue a dispute 
settlement case, it would aim to have all 36

24 INSIDE U.S. TRADE - www.InsideTrade.com - December 23, 2011

African cotton-producing countries on board. "We would hope for it to be 
a class action suit," he said. Vokouma said the

C-4 countries did not have any specific timeline in mind for deciding 
whether to mount a legal challenge.

But one observer favoring the C-4 cause downplayed the likelihood of a 
dispute settlement case at this point, noting

that high global cotton prices over the past three years would make it 
difficult for African countries to show U.S. subsidies

had caused an adverse effect on their cotton industries.

By contrast, this source argued, the Brazil case benefited from a 
"reference period" during which world cotton prices

were lower, making it easier to show U.S. cotton subsidies had adverse 
effects on Brazilian producers. U.S. cotton policy

gives domestic producers greater subsidies when prices are lower.

At the press conference, Vokouma said the C-4 countries welcomed several 
steps on cotton announced by the

Office of the U.S. Trade Representative prior to the ministerial 
conference, which USTR Ron Kirk conveyed to them in a

Dec. 16 meeting requested by the United States. Vokouma said the U.S. 
offer represented a "change in the atmosphere in

the discussions we've had with them," but that the C-4 countries still 
wanted to know more details.

The steps announced include a new cotton-related assistance program for 
the C-4 group that will be introduced when

the existing West Africa Cotton Improvement Program (WACIP) --- a trade 
capacity building program for these countries

--- expires in April 2012.

USTR also committed to launch a review process on whether cotton fiber 
exported by least-developed countries

(LDCs) to the United States should be eligible for duty-free entry under 
the Generalized System of Preferences (GSP); to

seek legislation to allow such exports to enter independent of an 
existing U.S. cotton tariff-rate quota; and to push for

passage of legislation to extend the third-country fabric provision in 
the African Growth and Opportunity Act (AGOA) by

three years to 2015.

But C-4 officials made clear during their meeting with Kirk that they 
want the United States to move not only on the

technical assistance front, but also on removing the cotton subsidies 
that have been at the heart of stalled Doha round

negotiations on cotton.

"So we greeted the offer that they made to us, and we reminded to them 
that we hope that with the review of the U.S.

farm bill" the United States would change its cotton subsidies to comply 
with WTO rules and the mandate on cotton

agreed to by WTO members at the Hong Kong ministerial, Vokouma said.

That included a pledge to ambitiously reduce trade-distorting domestic 
subsidies for cotton beyond what is agreed to

for agricultural products in general and in a shorter period of time 
than generally applicable, and to offer duty-free, quotafree

market access to least-developed countries (LDCs).

Vokouma said C-4 countries would have to look more closely at the 
proposed market access concessions offered by

the United States in order to determine whether they would provide a 
substantial benefit. He noted that Burkina Faso

currently exports about 90 percent of its cotton to Asia and only 2 
percent to the United States, signaling that an ultimate

U.S. decision to offer duty-free quota-free access for LDCs would have 
little impact unless C-4 countries drastically

reoriented their trade flows.

"It may represent an important possibility to us," he said. "We could 
ask our ministers to reorient our trade circuits,"

he added, but first the C-4 countries would want to know whether the 
proposed market access will only impact raw cotton

or whether it would more broadly cover cotton fabric, woven cotton and 
textiles.

If that were the case, these countries could potentially change their 
cotton sectors to focus on more value-added

products, as opposed to relying mainly on raw cotton exports as they 
currently do, Vokouma said.

During Kirk's Dec. 16 meeting with C-4 officials, Taher thanked the 
United States for its ongoing cotton assistance

and also for the new initiatives, which the Chadian minister said would 
have a very important impact on African farmers

once implemented, according to USTR.

Kirk and C-4 officials "reaffirmed their mutual commitment to working 
for positive outcomes on cotton at the WTO,

and noted recent successful collaboration" on cotton language included 
in the consensus statement issued as part of the

ministerial conference, USTR said in a Dec. 17 statement.

In that language, WTO ministers confirmed their commitment to addressing 
the mandate of the Hong Kong Ministerial

Declaration to address cotton "ambitiously, expeditiously and 
specifically" within the agriculture negotiations. They

also highlighted the value of ongoing steps being taken by the WTO 
Director-General to advance "developmental

assistance aspects of cotton."

During the ministerial, China presented C-4 countries with a three-year 
technical assistance package covering areas

such as production, capacity building, technology transfer and supply of 
inputs including pesticides and farming equipment,

according to Vokouma. The EU also offered a new technical assistance 
package during the ministerial, an EU

source said.

In a Dec. 16 statement, C-4 countries thanked the donor community for 
its engagement on the development assistance

aspects of the cotton issue, but asked that "the gap between the 
commitments made to date and actual disbursements

be closed as soon as possible."

The C-4 statement also called for immediate resumption of cotton 
negotiations in the WTO in the wake of the

ministerial conference, and warned that the recent decline in world 
cotton prices could prompt "rich countries" to again

resort to subsidizing their cotton producers.

Finally, the C-4 countries called on the United States and EU to consult 
with WTO members on what their governments

are recommending to legislators regarding cotton subsidies as they craft 
the new U.S. farm bill and the reformed

EU Common Agriculture Policy.

The USTR steps on cotton fall far short of an LDC package that WTO 
Director-General Pascal Lamy sought

to develop for the ministerial earlier this year. That package would 
have included early implementation of a long-standing

commitment to provide duty-free quota-free access for 97 percent of LDC 
exports or a "step forward" on reducing U.S.

cotton subsidies (Inside U.S. Trade, July 29).

In the press conference, Taher said the U.S. was the only country that 
opposed a C-4 proposal tabled in November

for a ministerial conference outcome on cotton. Among other things, the 
C-4 proposal called for ministers to agree to

freeze at current levels their countries' domestic support for cotton, 
but members were not able to reach consensus on this

issue.*

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