WTO: 2014 NEWS ITEMS

DEVELOPMENT: COTTON DEVELOPMENT ASSISTANCE CONSULTATIONS


NOTE:
THIS NEWS STORY is designed to help the public understand developments in the WTO. While every effort has been made to ensure the contents are accurate, it does not prejudice member governments’ positions.

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> Cotton, including the sub-committee
> Agriculture negotiations: www.wto.org/agnegs
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KEY DOCUMENTS:
> “Evolving table” on aid: WT/CFMC/6... series
> Domestic cotton sector reform: WT/CFMC/21... series
> Documents and meetings lists: WT/CFMC/W/24... series
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They were speaking in a meeting on development assistance in cotton, ahead of a separate session of the WTO agriculture negotiations focusing on cotton to be held that same afternoon.

The Cotton-4 said they appreciated development assistance they have received from various international donors, including South-South cooperation from Brazil, China and India, and they described the reforms they are undertaking together with their needs for further aid.

But they also expressed concern about the falling prices, which the International Cotton Advisory Committee (ICAC) is forecasting “optimistically” to stay at current low levels, and how to compete effectively in world markets when, according to an ICAC presentation (details below), their yields remain static while those of other countries such as India — now the world’s largest cotton producer — continue to rise.

Some other countries, such as China, Argentina, India, Nigeria and Brazil, supported their call for countries to avoid subsidizing cotton producers when prices fall, and for a quick conclusion on negotiations that aim to make steep cuts in domestic support, tariffs and export subsidies on cotton.

This meeting on development was the 22nd in a series of consultations held regularly since 2004, formally called the WTO “Director General’s Consultative Framework Mechanism on Cotton”. The chairperson is Deputy Director-General David Shark, on behalf of Director-General Roberto Azevêdo.

Although the official focus is primarily on development assistance, the meeting also receives regular updates on the separate negotiations on cotton, and the agriculture negotiations as a whole, and on world market trends.

 

Some details

 

Market situation

The fall in prices has been influenced at least partly by the recent increase in stocks “overhanging” the market and reduced demand from China, the International Cotton Advisory Committee (ICAC) said in its latest assessment of the cotton market. Cotton prices are declining from their peak of 2–3 years ago and are likely to settle at the long term average of about 70 US cents per pound — ICAC forecasts the price for the 2014/15 season to be 79 cents per pound within a range of 64–89 cents. The recent peak was over 150 cents in 2010/11.

The surplus (the difference between production and mill use) accumulated up to the 2014/15 season is about 13 million tonnes, about half of current annual production, said ICAC Executive Director José Sette.

Stocks are likely to fall only modestly and will continue to overhang the market, with world exports likely to fall to 7–8 million tonnes, he said. One of the uncertainties is what China will do with the stocks it has amassed since 2011, when its stocks were also zero. The Chinese national reserve is currently around 11 million tonnes about half of the 21 million tonnes end-of-season stocks for 2014/15.

The lower prices means producers in the Southern hemisphere are cutting back their production, Mr Sette said. It also means some recovery in consumption as cotton prices become more competitive with manmade fibres, but even so, cotton’s share of the market will continue to erode because polyester prices are also falling because of excess capacity and cheaper oil, he told the meeting.

He observed that India has now overtaken China as the world’s largest cotton producer, and that governments’ assistance (or subsidies) for their cotton farmers is a higher proportion of production — when compared to prices — than in the decade before 2009/10 (assistance tends to rise when prices are low and to fall when prices are high).

A rise in prices is unlikely in the near future, but the risk of further falls is also reduced because of government intervention , he said. However, he described ICAC’s figures as “optimistic” with some analysts predicting that China will release its stocks faster, causing prices to fall further.

Details are in ICAC’s presentation (pdf)

 

World cotton production & mill use

Million tonnes

― Production

― Mill use
▪▪▪ Accumulated surplus through 2014/15: 13.3 million tons

 

Cotton prices and production area

US cents/lbmillion hectares

― Price (Cotlook A Index, previous season)

― Area

Source: ICAC

 

Development assistance

The value of completed development assistance projects benefiting cotton — directly or through broader agricultural or infrastructure assistance — has increased slightly since the last meeting in June 2014 this time by about $16.7m. (see table below).

“I am pleased to report that the figures in the ET [evolving table] show a resumption of their positive trend,” Director-General Roberto Azevêdo said in a cover note.

“In fact, there has been a slight improvement in the ratio between commitments and disbursements in Part I, which relates to ‘Cotton Specific Development Assistance’, and a stable situation has continued in relation to that ratio in Part II, which lists ‘Agriculture and Infrastructure-Related Development Assistance’.”

On projects specifically for cotton, “the number of individual beneficiaries decreased to 27 from 28 in the previous version, whereas the total number of commitments remained stable at 37. The total value of commitments decreased by US$8.13 million, mainly due to the transfer of a suspended project to the relevant Annex, and now amounts to US$327.5 million. Disbursement flows increased by $5.5 million to reach $98 million. The ratio of total disbursements to total commitments reached 30%, compared to 28% earlier.”

Members heard that $496 million in development assistance has been disbursed specifically for cotton — $398m in completed projects and $98m in on-going activities. This is a slight increase over the $489 million total disbursement reported at the last meeting.

However, the amount spent so far on current projects that are specific to cotton is 30% of the $328m committed. Donors have in the past explained that the apparently low proportion is partly because of timing: when the commitments were made, how long the projects last, what stage they are in, and when payments are made.

A further $4.9bn — an $84m increase since June — has been spent on completed or continuing projects for agriculture and infrastructure, which also benefits cotton, in these cotton producing countries.

For these programmes, “the number of individual beneficiaries increased to 28 from 27, while the total number of commitments increased to 60 from 55 previously. The total value of these commitments increased to $4.85 billion and the disbursement flows also increased by $62 million to reach $2.68 billion. The ratio of total disbursements to total commitments stayed put at 55%.”

Amounts committed and spent

Development assistance for cotton and agriculture, US$m

 

ACTIVE, ON-GOING

COMPLETED

 

Committed

Spent

Committed

Spent

Specifically for cotton

327.5

98.0

428.4

398.0

For agriculture and infrastructure, also benefiting cotton

4,858.4

2,686.6

1,869.9

1,838.3

Total

5,185.9

2,784.6

2,298.3

2,236.3

The information is compiled in a document that is regularly updated, an “evolving table” now in its 18th version (document WT/CFMC/6/Rev.17 of 26 May 2014, with this cover note).

 

Trade negotiations

Meanwhile, Ambassador John Adank of New Zealand, the chairperson of the negotiations on agriculture and cotton reported on consultations he has been holding on a number of issues in the agriculture negotiations before specifically addressing cotton. These are his speaking notes:

 

 
As is customary, I will start with a brief state of play in agriculture in general before some more specific comments in relation to cotton.

As you all know, Members adopted yesterday three very important decisions at the special meeting of the General Council:

  • A first one on the protocol of amendment to insert the Trade Facilitation Agreement into Annex 1A of the WTO Agreement (document WT/L/940);
  • A second one on Public Stockholding for food security purposes (document WT/L/939); and
  • A third one on post Bali work (document WT/L/941).

The Decision on Post-Bali work states that:

“Work shall resume immediately and all Members shall engage constructively on the implementation of all the Bali Ministerial Decisions in the relevant WTO bodies, including on the preparation of a clearly defined work program on the remaining DDA issues as mandated in paragraph 1.11 of the Bali Declaration.”

The Decision also notes that

“The deadline for agreeing on the work program mandated in the Bali Declaration shall be July 2015”.

The adoption of this set of Decisions is an extremely important and very welcomed development. It puts an end to the impasse we were in since the end of July with the blockage related to the Public Stockholding for food security purposes and the Trade Facilitation Agreement.

Based on the decision adopted yesterday on the post-Bali work programme, I have decided to convene a meeting of the Special Session of the Committee on Agriculture on 4 December, in order to re-engage with members on the work of the special session.

This meeting of the Special Session meeting will give us the opportunity to discuss how to organize our work forward, taking into account the Decisions adopted yesterday.

My intention will be to suggest that we restart the discussion process where we left it before the summer break, i.e. more or less where we were at the 23 July informal meeting of the Special Session of the Committee on Agriculture in relation to the work programme. The idea will be to build upon the various discussions and ideas exchanged in the first half of 2014 rather than starting from scratch as we resume our discussions. We will also have to prepare for the dedicated sessions on the public stockholding issue, now that it’s been clarified that this work will be dealt with in the special session.

Let me now turn specifically to cotton.

In the Bali Ministerial Decision on Cotton (WT/MIN/(13)/41 and WT/L/316 refers), Ministers reaffirmed their commitment to address cotton “ambitiously, expeditiously and specifically” within the agriculture negotiations and to increase Members’ work towards reform as per the August 2004 Decision, the 2005 Hong Kong Ministerial Declaration and the 2011 Ministerial Conference.

In Bali, while Ministers regretted the failure so far to reach an agreement on a final outcome, they remain committed to further work and progress in cotton, based on the above-mentioned frameworks, with the 2008 revised draft agriculture modalities providing a reference point for that work.

Cotton will therefore remain an important element of this reflection on the way forward for the work programme related to our unfinished business, and I will continue to reach out to concerned Members to see how best to ensure substantive consideration of outstanding issues in order to deliver on the cotton mandate within the framework of the agricultural negotiations.

In parallel to this negotiation track, Ministers also agreed to enhance transparency and monitoring in relation to the trade-related aspects of cotton.

To this end, Ministers agreed to hold dedicated discussions on a bi-annual basis to examine relevant trade-related developments across the three pillars of Market Access, Domestic Support and Export Competition in relation to cotton, with a specific focus on measures applied to cotton exports from LDCs in markets of interest to them.

We held our first such dedicated discussion on 20 June and my report can be found in document TN/AG/28 and TN/AG/SCC/2 dated 17 July 2014.

The second dedicated discussion is scheduled for this afternoon. The proposed agenda is as follows: (i) Introductory Remarks by the Chairman; (ii) General Statements from Members; (iii) Discussion of Trade-related Developments in Market Access, Domestic Support and Export Competition for cotton (Background Paper by the Secretariat and Information and Submissions from Members); and (iv) Any Other Business.

The revised Secretariat background paper prepared to inform this discussion was circulated to all Members in the 3 working languages on 7 November (TN/AG/GEN/34/Rev.1 and TN/AG/SCC/GEN/13/Rev.1).

I thank you for your attention and look forward to seeing members and observers governments this afternoon for our Second Dedicated Discussion of the relevant trade-related developments for Cotton.

Chairperson: Deputy Director-General David Shark, on behalf of Director-General Roberto Azevêdo.

Next meeting

Mid-2015, date to be announced

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