WTO: 2013 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.

MORE:
> Cotton, including the sub-committee
> Agriculture negotiations: www.wto.org/agnegs
> Development: www.wto.org/development

 

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
> All documents: WT/CFMC... series

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The comments were made in a meeting that several delegates described as unique because it deals with a single commodity, and does so by looking at trade, development and other aspects. Although the official focus is primarily on development assistance, the meeting also receives regular updates on the negotiations on cotton and on agriculture as a whole, and on market conditions.

They heard that development assistance for cotton has increased, both in the amounts committed and the proportion that has been disbursed.

Members also appreciated the latest presentation by the International Cotton Advisory Committee (ICAC). In addition to the regular analysis of price and market trends, the presentation also looked at challenges facing sub-Saharan producers, and at how cotton trade could be streamlined by simplifying documentation and other bureaucratic procedures.

 

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Some details 

The discussions took place in consultations held regularly since 2004 under a programme formally called the WTO “Director General’s Consultative Framework Mechanism on Cotton”, currently chaired by Deputy Director-General Harsha Vardhana Singh, on behalf of Director-General Pascal Lamy — the last meeting before the new management team takes over in September and October.

These consultations are separate from the negotiations on reforming cotton trade under the Doha Round agriculture negotiations, but both are mandated under the 1 August 2004 General Council decision in the Doha Round — paragraph 1(b) — and the 2005 Hong Kong Ministerial conference.

The consultations’ main purpose is to exchange information on aid for cotton, but members are also briefed on the latest developments in the negotiations and the latest market conditions, and they comment on those and on related developments.

 

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Development assistance  

Members heard that $453.0 million in development assistance has been disbursed for cotton — $321.3m in completed projects and $131.7m in on-going activities, and an increase of $64m over the $389 million total reported in December 2012. However, the amount spent so far on current projects is 36% of the $365.6m committed. This is an improvement over the 28% reported in December, but African producers said it is still too low.

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.

For the cotton assistance projects that have been completed, disbursements were 94% of the $340.6m committed, an unchanged proportion.

A further $2.4bn — a $1bn increase since December — has been spent on completed or continuing projects for agriculture and infrastructure, which also benefits cotton, in these cotton producing countries, with a total of $6.9bn committed, a $1.9bn increase from six months ago.

 

Amounts committed and spent
Development assistance for cotton and agriculture, US$m

 

ACTIVE, ON-GOING

COMPLETED

 

Committed

Spent

Committed

Spent

Specifically for cotton

365.6

131.7

340.6

321.3

For agriculture and infrastructure, also benefiting cotton

5,436.1

1,600.0

775.1

773.1

Total

5,801.7

1,731.7

1,115.7

1,094.4

 

The information is compiled in a document that is regularly updated, an “evolving table” now in its 154th version (document WT/CFMC/6/Rev.14 of 21 May 2013).

The meeting heard reports from donors, and from some of the South-South development partners.

“South-South Cooperation constitutes a critical element of development co-operation and has emerged as a substantive component of the development dimension of the rules-based multilateral trading system embodied by the WTO,” the chairperson said. He thanked Brazil, China, India and Pakistan for their contributions.

He also repeated that he would consult delegations on how to collect and circulate information on the quality of assistance from all sources.

For the third time, in this meeting, some capital-based officials — the focal points — from the Cotton-4 proponents of cotton trade reform were present (Benin, Burkina Faso, Chad and Mali, although Benin was unable to attend this meeting). They thanked China for the financial support to attend the meeting.

 

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Trade negotiations  

Meanwhile, 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

Ambassador John Adank of New Zealand, who chairs both the agriculture negotiations and the talks’ cotton sub-committee , said the focus in agriculture has been on the topics that members have proposed so far for the Bali Ministerial Conference in December, : the G–20 proposal on tariff rate quota administration, the G–33 proposal on stockholding for food security and domestic food aid and the G-20 proposal on export subsidies and related issues grouped under the heading of “export competition” — which includes a proposal to eliminate export subsidies on cotton.

(His speaking notes, below, are a comprehensive update of the situation in the agriculture talks.)

On cotton, Ambassador Adank noted that the Cotton-4 have indicated they will submit an updated proposal for the Bali Conference, and that cotton is one of four subjects in a proposal from the least developed countries, also for Bali (document TN/C/W/63 of 31 May 2013).

He and several delegations repeated their observation that ministers agreed to include a section on cotton in the “Elements for political guidance“ issued at the Geneva Ministerial Conference in December 2011 (paragraph 4 under “Trade and Development”), the only agricultural product to be highlighted in it.

African and other countries pushing for reform are seeking a quick, ambitious and specific solution on cotton as agreed in the 2005 Hong Kong Ministerial Declaration. These included the Cotton-4 proponents of cotton trade reform (Benin, Burkina Faso, Chad and Mali — Burkina Faso speaking).

 

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Market situation, challenges and trade facilitation  

In its latest assessment of the cotton market, the International Cotton Advisory Committee (ICAC) included an analysis of the challenges facing Sub-Saharan producers and some proposals for streamlining the bureaucratic side of the cotton trade.

The situation in the world cotton market remains unusual, with stable and high prices despite a high level of production and large stocks, particularly in China, the International Cotton Advisory Committee (ICAC) told the meeting.

China’s national cotton reserve
Estimated, million tonnes


Source: ICAC

Repeating his observation in June and December about the declining price volatility, ICAC Executive Director Terry Townsend attributed this to a number of factors, including (but not only) the Chinese government’s policy of holding stocks in order to raise and stabilize domestic prices.

The higher price, ICAC said, has led to a decline in Chinese mills’ use of cotton, and an increase in other countries, which have only partly been able to fill the gap.

The gap between production and mill use
In the past surpluses and deficits have evened out. Recent production surpluses have been more persistent

Production  Mill use

Source: ICAC.

Turning to the situation in sub-Saharan African countries, the ICAC delegate observed that production has increased but in these countries’ case by increasing the cultivated area and not as a result of improved yields.

Cotton yields
Kilograms per hectare


Source: ICAC.
CFA = countries using the West African or Central African CFA franc
SSA–CFA = Sub-Saharan Africa except CFA countries

He identified five factors that contribute to yield and offered assessments in these countries, based on field surveys:

  • The technology “package” is “good” because of good research and well-educated practitioners
  • Technology “extension” (helping farmers adopt the technology) is “fair” with the farmers themselves having good existing knowledge
  • The availability of inputs such as fertilizer and pesticides is “poor”, the biggest handicap to increasing yields. This is seen in the use of nitrogen on cotton
  • The logistics of seed cotton (the raw cotton) is “good” generally
  • Incentives such as prices are “average”, no better or worse than anywhere else

Nitrogen use in cotton, 2011
Sub-Saharan countries use less than the average. Kilograms per hectare


Source: ICAC

And finally he proposed members consider introducing measures to streamline the bureaucratic side of trade — “trade facilitation”, coincidentally an issue more broadly under discussion in the preparations for the Bali Ministerial Conference in December. These measures could include:

  • Adopting a common phytosanitary (plant health) certificate such as the model of the UN Food and Agriculture Organization (FAO). At present 34 different certificates are in use around the world, all requiring the same information but in different forms
  • Using electronic documents instead of paper, without necessarily altering the documents themselves
  • Us a world numbering system for cotton bales, by adding telephone country codes in front of the present numbers used, so that the bales can be identified more quickly
  • Cease classifying cotton samples as hazardous: there are no examples of the samples catching fire, and removing the designation will help mills assess the cotton more easily before buying.

 

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Conclusion 

“The work of members and invited participants in this Director-General’s Consultative Framework Mechanism, is a part of the contributions to the overall efforts to reinforce the development dimension of the rules-based Multilateral Trading System,” said Deputy Director-General Harsha Vardhana Singh, wrapping up his last meeting as chair before leaving office at the end of September.

“Of equal importance, based on inputs from the recipients of development assistance, we shall also continue to monitor progress in the implementation of domestic cotton sector reforms,” he said.

The Secretariat will prepare a report on cotton for the Bali Ministerial Conference, he went on, taking into account that it is an integral part of the package that the least developed country group is proposing for the December meeting.

“I think that over the past eight years, we managed to move forward on the development aspects of cotton by forging a solid collaborative process,” he said.

“All parties have engaged constructively and in partnership, enhancing the dialogue, improving the exchange of information, monitoring the numerical values of assistance allocated to the cotton sector, making this process a vibrant evolving evidence of constructive engagement in the development dimension of the work in the WTO.”

 

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Background 

Cotton has been a key issue in the agriculture negotiations and in development issues related to the WTO since 10 June 2003 when it was raised by Burkina Faso President Blaise Compaoré on behalf of the Cotton-4 (Benin, Burkina Faso, Chad and Mali) in a meeting of the Trade Negotiations Committee, which oversees the Doha Round negotiations.

The dual tracks of development (aid) and trade (negotiations) are mandated under the 1 August 2004 General Council decision in the Doha Round — paragraph 1(b) — and the 2005 Hong Kong Ministerial conference.

The first meeting on development assistance for cotton was in October 2004.

Meanwhile, successive chairs of the agriculture negotiations have said repeatedly that there will be no deal in agriculture if there is no deal in cotton.

The Cotton-4 (C-4) are supported by other African producers and the G-20 alliance of developing countries in the agriculture negotiations.

Chairperson: Deputy Director-General Harsha Vardhana Singh, on behalf of Director-General Pascal Lamy

 

Next meeting

November 2013

 

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SPEAKING POINTS
Ambassador John Adank’s report on trade policy aspects
agriculture and cotton negotiations

State of play in the agriculture negotiations

Since we last met in December 2012, I have chaired four meetings of the special session of the Committee on Agriculture on 18 January, 15 February, 27 March and 23 May, and I have also held several consultations in between. Those consultations have focused around the three proposals tabled so far on agriculture in preparation for Bali.

These three proposals are: (i) a G-20 non paper (JOB/AG/20) which proposes an understanding on tariff rate quota administration provisions; (ii) a G-33 proposal (JOB/AG/22) on some elements of the draft modalities text on agriculture (TN/AG/W/4/Rev.4) for early agreement to address food security issues; and (iii) another G-20 non paper (JOB/AG/24) proposing a Ministerial Decision on Export Competition.

I should also note that the G-20 tabled a non-paper (JOB/AG/21) proposing that the Secretariat circulates updated information on both tariff rate quota (TRQ) administration as well as export competition. Based on those requests, the Secretariat has circulated studies on TRQ administration (TN/AG/S/26 and Rev.1), on export competition (TN/AG/S/27 and Rev.1) and on export restrictions (TN/AG/S/28).

As I have stated before, the tabling of these three negotiating proposals demonstrate the willingness of members to look for possible venues for progress, consistent with the guidance given by ministers at the 8th WTO Ministerial Conference.

A variety of consultations have been convened in recent months aimed at identifying where consensus may lie in any of these proposals.

On the G-20 proposal for an understanding on TRQ administration, I was encouraged by Members’ willingness to engage in the consultations. As members may be aware, while there have been no further wider consultations specifically on that proposal, I have continued to listen to delegations’ views on it. Members continue to see this as a useful proposal to explore for possible decision in Bali, even though there are some sensitivities about some aspects of the proposal that members do not yet seem in a position to settle. It has been agreed to keep this proposal under review and determine, in consultation with delegations, when it would be useful to resume discussions on it.

On the G-33 proposal on Food Security, on 15 February I launched the technical process related to the G-33 proposal and subsequently asked Mr Jonas Skei (Norway) to lead the process. The technical process was successful in delivering an active participation of members and a constructive atmosphere. This technical process included nine technical meetings, presentations and detailed questions and answers exercises. The process itself was based on the replies received to the questionnaire on public stockholding for food security purposes and food aid programmes I sent out on 20 December 2012.

Building on the knowledge acquired from the technical meetings, I have held a number of informal consultations over the last months to seek further feedback from delegations on the proposal itself. The main objective of these consultations has been to explore whether we can identify — on an incremental basis — elements of possible convergence in regard to the proposal. 

In order to further facilitate the search for convergence, my consultations since May have been based on four questions that were circulated to delegations on 1 May.

These questions served to encourage active and engaged debate. Members expressed their willingness to work on language for a possible Bali outcome document that would reflect the importance of ensuring that the Green Box was seen to encompass a range of “General Services” programmes of particular interest to developing countries that were additional to those specifically listed in the Agreement’s illustrative list — paragraph 2, Annex 2 to the Agreement on Agriculture (AoA)refers.

Discussions also demonstrated some readiness to work on a political message recognizing the role played by public stockholding in some developing countries.

On amendment or interpretation of existing agriculture disciplines, the views on this issue span a range of different options, none of which is the subject of any consensus at this stage. The main concerns expressed regarding an amendment or interpretation have been: (i) the unfeasibility of the “one-solution-fits-all” approach given the differences in the situations the proponents find themselves in and (ii) the complexity of the issue which many see as only resolvable as part of a much broader agricultural negotiation, which cannot happen in the short time left before Bali. Followers of the cotton dossier will be familiar with this sentiment as well.

Finally, some Members have indicated an openness to consider a mechanism/process that might provide for some additional flexibility for specific members facing difficulty in terms of their AoA commitments in meeting their food security needs through a public stockholding programme. If flexibility is to be accorded here, members have emphasised the importance of ensuring that it still respects the fundamental green box criterion of minimal or no trade or production distortions. Some members have also emphasised that such flexibility should not be at the expense of economic reforms and transparency — notably through timely notifications. Some members have also stressed that whatever the temporary solution, it should be an operational one and should not be a substitute for a broader solution.

So, on the key outstanding issues raised by the proposal we have made progress towards framing the debate appropriately. This is just at conceptual stage and let me stress that obviously none of this is agreed or even accepted as the possible avenue to solve this matter. So you can see on this point, what is needed is to explore further a possible landing strip before working out the specifics. This will be the focus of my continuing “without prejudice” consultations on the G-33 proposal.

The G-20 proposal on export competition was circulated on 21 May 2013 (JOB/AG/24). The preliminary reactions to this proposal have indicated significant divergences and the need for further consultations to identify a way forward.

So, to sum up, following on from recent in house discussions on the state of Bali preparations, including at the informal Trade Negotiations Committee (TNC) meeting of 3 June 2013, the period up to the end of July has been recognised as an important window of opportunity to intensify discussions on outstanding issues across all three key Bali components, with a view to narrowing differences and identifying potential landing zone options.

With regard to agriculture, I will accordingly continue informal consultations in a variety of configurations in regard to the three proposals I have mentioned. This included, and will continue to include, a further series of consultations on the G33 food security proposal (JOB/AG/22), on the G20 export competition proposal (JOB/AG/24), and the eventual resumption of consultations on the G20 proposal for an Understanding on TRQ Administration (JOB/AG/20).

 

State of play in the cotton negotiations

Turning now specifically to cotton, we should recall the terms of the July 2004 Framework and at the 2005 Hong Kong Ministerial, where WTO Members have affirmed their commitment to treat cotton “ambitiously, expeditiously and specifically” within the Agriculture Negotiations.

In the same manner, the Draft Agriculture Modalities text (TN/AG/W4/Rev.4) has specific language on cotton although as you will appreciate that document has not been adopted given the impasse in arriving at an overall conclusion to the Doha Round.

Moreover, as you will remember, Ministers agreed at MC-8 (the Eighth WTO Ministerial Conference, 2011) on specific elements of political guidance on cotton. They confirmed their commitment to on-going dialogue and engagement to progress the mandate in paragraph 11 of the Hong Kong Ministerial Declaration to address cotton “ambitiously, expeditiously and specifically”, within the Agriculture negotiations.

Ministers also highlighted the value of on-going reporting on cotton, including by the Director-General, and commended the work undertaken within the Director-General’s Consultative Process to advance the development assistance aspects of cotton.

Thus, while there was no agreement on a substantive step forward or standstill on cotton subsidies as advocated in the Cotton Four (C-4) proposal for MC-8, cotton was the only agricultural product specifically mentioned in the concluding ministerial statement.

In terms of next steps and recent developments, we have heard earlier from Ambassador Vokouma (of Burkina Faso) that the C-4 plan to proceed to present a further submission on cotton for consideration in the context of the Bali ministerial preparations.

In conclusion, as confirmed at MC-8, despite the impasse facing an overall conclusion of the Doha round the mandate for an ambitious, expeditious and specific treatment of cotton in the agriculture negotiations has not changed and there is a need for on-going dialogue and engagement in this area.

We await further details of the C-4 proposal and I think we all should recognise the need to encourage dialogue and engagement on this in keeping with the guidance from MC-8,

Before giving you back the floor Harsha, allow me to take this opportunity to thank you and DG Lamy for the commitment you have made to making this Consultative Framework deliver concrete results. While it is clear that the trade disciplines aspects of cotton remain challenging, this forum remains important for the information it provides on up to date trade trends and development that provide the context for our discussions in the WTO on solutions to cotton issues. And it is clear that significant progress has been made on the development assistance aspects of cotton in the years following the establishment of this Framework. This work must be further advanced in future.

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