Deputy Director-General Jean-Marie Paugam chaired the meeting on the development dimension on 3 November, under the auspices of the Director-General's Consultative Framework Mechanism on Cotton, while Ambassador Abraham Peralta facilitated the discussion on 4 November addressing the trade aspects of cotton.
New WTO study: Cotton is “key” to LDCs
At the 4 November meeting, the WTO's Agriculture and Commodities Division presented the main findings of a forthcoming new study on the impact of COVID-19 on cotton-producing LDCs. The study benefitted from cooperation with the International Cotton Advisory Committee (ICAC) and other partners.
While cotton trade is key to economic development, rural livelihoods and the food security of millions of people in Africa, it has been hit hard by the pandemic, the study says.
Cotton export revenues contribute up to 10% of total agricultural value addition in some LDCs, it finds.
However, it also shows that export revenues in 2020 decreased by 34% in the ten cotton-producing LDCs that are the focus of this study, a fall of over USD 500 million in export value compared to the previous year.
The study shows that cotton output and trade have rebounded in many countries since the initial COVID-19 outbreak, a finding also confirmed in data presented by ICAC during the meeting.
It concludes that African cotton has a key role to play in building resilience to future shocks, including those related to climate change.
Partners' Conference at MC12
The study, prepared at the request of WTO members at the last dedicated discussion in May, is intended to inform discussions at an upcoming “Partners' Conference” in support of cotton-producing LDCs, to be held on 30 November, in the margins of MC12. This conference is aimed at garnering financial and technical support from development partners to help cotton-producing LDCs recover from the pandemic.
Speaking for the Cotton-4 Group (Benin, Burkina Faso, Chad and Mali) and other cotton-producing countries in Africa, Burkina Faso welcomed the study. It said the study showed how the COVID-19 crisis has significantly affected both the welfare and trade of the ten LDCs in the analysis. It further called on partners to support the recovery of the C-4 countries and other LDCs, and to find “enduring, structural solutions” to the challenges faced by the cotton sector.
Ambassador Abraham Peralta agreed that the study provides a “good basis” for understanding how the pandemic has affected cotton in LDCs. She also said the Partners' Conference would help LDCs mobilise technical and financial resources.
Trade negotiations: Gaps remain
The Cotton-4 invited other members to explore ways to find a compromise, taking into account the recent proposal by the group, which calls for cuts to trade-distorting support for cotton. Some members consider that progress on this issue needs to be linked to progress in the overall agriculture negotiations, and therefore consider the draft negotiating text in JOB/AG/215 as a good basis for future work on both trade-distorting domestic support and transparency enhancement.
Ambassador Abraham Peralta reminded members that she had reported on progress on cotton at a negotiating session with ambassadors and other delegation heads on 28 October. (Her report is available online here.)
With less than one month until MC12, she told participants that she was now considering what kind of document could be presented for trade ministers to consider. WTO members therefore need now to continue engaging constructively with one another in order to narrow the gaps and identify potential “landing zones” in the negotiations that are both realistic and credible, she said.
Cotton subsidy trends
Presenting analysis on cotton production and trade trends, ICAC's Executive Director, Kai Hughes, told the meeting that support to cotton had declined, but remained high.
Mr Hughes said that the ICAC Secretariat estimates subsidies to the cotton sector reached USD 6.95 billion in 2020-21, representing “a 18% decrease from the USD 8.51 billion in 2019-20”. In his analysis, subsidies on cotton include border protection and transportation subsidies as well as direct support, minimum support prices, input subsidies and crop insurance subsidies.
He pointed out that there was “a strong negative correlation between subsidies and cotton prices, with subsidies declining when cotton prices are high, and rising when cotton prices decrease”.
The ICAC analysis also indicates that in the 2019-20 marketing year, cotton consumption globally declined by almost 13% compared to the previous year, followed by a rebound of a similar scale between 2019-20 and 2020-21. Similarly, global cotton production fell by 7% between 2019-20 and 2020-21, although ICAC projections indicate output is set to grow by 6% between 2020-21 and 2021-22.
The WTO Secretariat presented a revised “background paper” (TN/AG/GEN/34/Rev.15 and two addenda) compiling up-to-date information on cotton policies in the areas of domestic support, market access and export competition.
Development assistance falling
At the 3 November meeting, the WTO Secretariat presented figures showing a freeze in disbursements of development assistance for cotton, drawing on the data included in the “Evolving Table on Cotton Development Assistance”.
Development partners provided just under USD 200 million in active cotton-specific development assistance, according to figures presented by the WTO Secretariat. This figure is around two-thirds of the assistance provided at its peak five years previously.
The data also showed that total active agriculture and infrastructure-related development assistance amounted to more than USD 2 billion — or around half the level it had reached five years ago.
The Secretariat also reported that Benin and Burundi had presented two new requests for cotton-specific development assistance projects, seeking both technical and financial support. These projects are included in the latest revision of the Evolving Table.
World Cotton Day
The WTO Secretariat reported on the activities organised on World Cotton Day on 7 October — the first one that has been held since the United Nations General Assembly officially recognised the day and proclaimed it would be held as an annual event.
DDG Paugam said he was convinced that the UN resolution on World Cotton Day would lead to concrete results that improve people's well-being and move towards a sustainable future.
“The UN's official recognition of an international day for cotton is primarily a recognition of all the men and women who derive their livelihoods from cotton production, processing, transformation and commercialization,” he added.
The next “Cotton Days” at the WTO are scheduled for May 2022.