Cotton trade: The road not taken

Africa’s cotton producers need to re-think their approach to trade inequalities, with compensation mechanisms through the WTO – such as those offered by the US to Brazil – offering a positive route

Ten years ago, several of Africa’s leading cotton exporting countries took an historic stand against protectionism at the World Trade Organisation. Evidence had mounted that lavish cotton subsidy systems in the US and Europe were undermining the livelihoods of Africa’s cotton farmers. Leading research indicated that these subsidies had induced a global cotton supply glut. Faced with low world prices, African exporters took action.

Their strategy differed significantly from Brazil’s depression-era approach to capturing higher export prices for coffee. Cotton-dependent governments in Africa did not conspire to burn, bury or otherwise ‘disappear’ their crop. They also did not take Brazil’s contemporary approach to addressing the cotton problem. Instead of initiating a trade dispute to challenge US subsidies, Bénin, Burkina Faso, Chad and Mali – collectively known as the Cotton-Four (C4) – made a push to include cotton in the Doha Round of trade negotiations. Many NGOs that were supportive of the C4’s drive for liberalisation and compensation had advised this course of action. It was then thought that the pursuit of a trade negotiations strategy would yield an earlier harvest for Africa than a potentially protracted and expensive trade dispute.

In hindsight the benefits of this approach were oversold. The harvest has indeed been bitter since Blaise Compaoré, president of Burkina Faso, introduced the Cotton Initiative to the WTO during the second week of June 2003. The C4’s efforts to exhort wealthy nations to move beyond talking the talk of free trade through to actually walking the walk on cotton stalled as the wider trade negotiations became bogged down.

Nonetheless, the struggles of the weak to jawbone the powerful through moral suasion and public shaming have borne some fruit. The value of aid flows to Africa that target cotton today, for example, is much greater than it was in the past. Civil society activism on the topic has also raised awareness of the poverty challenge of African cotton amongst Western consumers.

Even so, these consolation prizes pale in comparison to the bountiful yields that could have resulted from the road not taken. Owing to its successful WTO action against the US, Brazil has received over $147.3m per year in compensatory technical assistance funding since 2010. To ward off the imposition of WTO-approved trade retaliation, the US has essentially contributed to funding the development of capital-intensive, high-tech cotton production in Brazil. The US has directly funded the development of Brazil’s capacity to export cotton. As stagnant trade negotiations have prevented the C4 from attaining an early ‘harvest’, Africans have been left to brace themselves for the toxic fallout from the US-Brazil agreement: the cross-border subsidisation of new export market competition.

It is consequently imperative for Roberto Azevêdo, the distinguished Brazilian diplomat and incoming WTO director-general, to demonstrate his internationalist credentials by taking leadership on the cotton file. Doha was initially launched as the WTO’s ‘development’ round. For Africa’s UN-designated Least Developed Countries to continue to buy into multilateral trade negotiations, the perception that the benefits of any deal might flow disproportionately to emerging markets must cease.

Ten years ago many developing countries walked out of a WTO meeting held at Cancún in solidarity with the C4, halting progress on Doha. In the lead up to the Bali ministerial in December Mr Azevêdo has an opportunity to ward off a recurrence. He could, for example, publicly acknowledge that the WTO has had a hand in creating the currently asymmetrical reality of cotton compensation, and spearhead a drive to resuscitate the C4’s original demands for liberalisation.

Unfortunately, the fate of millions of cotton farmers across Africa does not rest solely on Mr Azevêdo. The continent’s cotton problems go much deeper than trade liberalisation. Other drivers of price volatility that continue to work against the prospects for cotton to be Africa’s ‘white gold’ include phenomenon as banal as the weather and developments in the market for synthetic alternatives, and as lurid as the real or imagined machinations of traders aiming to manipulate the market.

As food security challenges within and beyond the C4 persist, the consequences of over-specialisation in this inedible export crop remain stark. Moreover, in the wake of the Rana Plaza disaster in Bangladesh, African leaders are aware that efforts to add more value to African cotton in Africa could be economically costly and fraught with social risk.

To begin to address the impoverishing reality of cotton in Africa the promise of Doha must be fulfilled. Moves to get cotton subsidies out of the US farm bill would be a necessary start, but not a sufficient one. Compensation must flow.

Adam Sneyd is assistant professor at the University of Guelph, Canada, and author of Governing Cotton: Globalization and Poverty in Africa