TRADE: Promises Go One Way, Subsidies Another

By IPS Correspondents Reprint | | Print |

Ravi Kanth Devarakonda

GENEVA, Mar 14 2007 (IPS) - Africa’s leading cotton producing countries – Benin, Burkina Faso, Mali and Chad – are upset over Washington’s continued failure to implement the commitments it undertook at the World Trade Organisation’s Hong Kong ministerial Meeting in 2005 to address the distortions caused by the U.S. subsidies in the global cotton trade.

As the WTO hosts a “high-level” session on cotton Mar. 15-16 “to seek coherence on developmental aspects and trade policy issues of cotton,” the four West African countries are expected to issue a strong message that they want an immediate solution to all trade- related aspects such as the elimination of all forms of export subsidies for cotton in the United States.

“The U.S. must implement its commitment to eliminate export subsidies for cotton that was agreed in the Hong Kong ministerial meeting,” Ambassador Samuel Amehou, Benin’s trade envoy to the WTO, told IPS.

Ahead of the high-level meeting, he said “we want to push them to honour their commitments, including the implementation of the WTO’s dispute settlement body recommendations that comprehensively condemned the U.S. cotton subsidies.” He said “this is the minimum that Washington can do to alleviate the worsening conditions of the cotton farmers in Africa.”

The U.S. had agreed at the Hong Kong ministerial meeting to eliminate all export subsidies for cotton as well as expeditiously reduce its trade-distorting domestic subsidies amounting to a couple of billions of dollars. Washington had also agreed to provide duty- free and quota-free market access to all least developed countries in 2006.

But with the failure of Doha trade negotiations in last July, many of these promises remained only on the paper while the conditions of farmers in the four countries rapidly worsened due to falling international prices.

During an informal ministerial meeting in Davos in January this year, Benin’s trade minister Issifou Soumanou Moudjaidou told his counterparts from over two dozen countries that he is “wearing black as a protest for doing nothing to address the continuing cotton subsidies provided by the U.S. government that are claiming hundreds of deaths of poor farmers in my country.”

The United States, on the other hand, maintained that it is ready to provide enhanced developmental assistance to the C4 countries, as Benin, Burkina Faso, Mali and Chad are called in trade jargon. U.S. Trade Representative Ambassador Susan Schwab told representatives of the four countries during her visit to Geneva early this month that addressing the developmental aspects of the C4 countries is as important as dealing with the trade-related aspects of the problem.

But Benin and other African cotton producers are not convinced by the U.S. reasoning that developmental assistance take priority over trade-related aspects. Ambassador Amehou said the WTO meeting will address both issues – developmental assistance as well as trade-policy aspects – but what is important at this juncture is that the United States should address its subsidies as they are at the core of the current impasse in the Doha trade negotiations.

In 2005, the WTO’s highest legal limb – the Appellate Body – had ruled unambiguously that a combination of domestic and export subsidies provided by the United States in cotton have contributed to major distortions in the global trade. It had asked the United States to remove these subsidies in order to comply with its WTO commitments.

The U.S. Congress had removed some export-related programmes for cotton but retained other domestic subsidies for the same product.

Brazil which won the dispute against the United States on cotton subsidies recently challenged Washington to prove that it had fully implemented the recommendations of the dispute settlement body. Brazil’s latest challenge is being current adjudicated by a specially convened compliance panel at the WTO.

In the Doha trade negotiations, which are unable to make quick progress, the United States had adopted a hard line stance on its domestic subsidies. President George Bush told journalists at a press conference in Sao Paulo in Brazil last week that the United States is committed to reducing its subsidies but in return, other members must open their markets for U.S. farm products.

The United States had announced that it would bring down its overall subsidies provided the European Union, Japan, Switzerland and other countries in the industrialised world, and China, India and Indonesia in the developing world reduce barriers for U.S. farm products.

After ten years of reduction commitments, the United States wants its key partners to agree to more than 22 billion dollars for it to spend on its farm subsidies – notwithstanding the fact that its farm payments last year were little over 11 billion dollars because of high international prices (except in cotton).

In fact, the United States has not complied with its obligations to the WTO that require a member to inform year after year how much it had spent on different subsidy programmes. Since 2001, the United States has not complied with this requirement, which speaks volumes about the “transparent” record of the U.S. positions, said a trade diplomat.

At present, hectic efforts are under way among what are called the G4 – the United States, the European Union, Brazil and India – to address contentious issues in the Doha agriculture package so as to arrive at a landing zone in the Doha trade talks.

The talks which are held in a “merry-go round” bilateral format are focused on what ought to be the figure that the United States must agree for its overall trade-distorting support as well as the accompanying disciplines to ensure that subsidy programmes are not shuffled from one product to the other.

Although the four sides have not reached any agreement, it is becoming likely that the United States might agree to around 15 billion dollars farm subsidies with more focused disciplines unlike in the past, said a farm trade negotiator who took part in the parleys. Following the meetings in London and Geneva over the last fortnight, the four countries made “progress” but they are nowhere near a breakthrough, he said.

Under the Doha mandate, which was further amplified by the July 2004 framework agreement and the Hong Kong ministerial declaration in 2005, all major farm subsidising industrialised countries such as the European Union, Japan, the United States, Norway and Switzerland are required to drastically cut down their farm subsidies.

“The first major effort to address farm subsidies was undertaken during the previous Uruguay Round of negotiations that led to the establishment of the WTO, but industrialised countries especially the United States and the European Union ensured that their core farm subsidy programmes were retained through exceptions,” Sam Laird, former head of the trade analysis division at UNCTAD told IPS.

“All efforts must be made to ensure that there is significant reduction in farm subsidies as well as stringent disciplines to ensure that there is no box-shifting and product-shifting in the Doha Round,” he said.