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Cotton/WTO project: Support for the participation in the multilateral trade negotiations of the least developed countries behind the

Financed by the Danish Ministry of Foreign Affairs, the Dutch Ministry of Foreign Affairs, the French Ministry of Foreign Affairs, the German Ministry of Economic Cooperation and Development, the Swedish Ministry of Foreign Affairs, the Swiss State Secretariat for Economic Affairs (seco, www.seco-cooperation.ch) and the UK Department for International Development (DFID)

Cotton plays a crucial role in the economic development of several countries of West and Central Africa. Since the 1980s, cotton production and exports from this region have increased fourfold, accounting for about 5 to 10 percent of GDP. Close to 30 percent of total exports come from cotton sales and involve directly over 10 million people in the region. Cotton in West and Central Africa is produced by small farmers on rain fed plots living at or below the poverty level. For most of them cotton is the only product they can export on a competitive basis. The region contributes today to 15 percent of world cotton exports, second only to the US.

However, a number of exporters, in particular the United States and the EU heavily subsidize their cotton producers. In 2001, the cost of these programs was estimated around $4.9 billion, approximately half of which is provided by the United States ($2.3 billion), and the bulk of the rest by the EU and – albeit declining – China.

As a result of these distortions, the supply of cotton in international markets has been artificially inflated, which in turn has lowered its prices on the world markets. Poor exporting countries like those of Western and Central Africa have been punished the most. Estimates made by the International Cotton Consultative Committee, the IMF and the World Bank suggest that the abatement of domestic and export subsidies to the cotton sector would bring international prices back to competitive market levels, thus raising the incomes of poor cotton exporters and setting these countries on a course of sustainable growth. The World Bank estimates that the full removal of cotton subsidies and tariffs would raise the price of cotton in international markets by an average of 12.9 percent. The global economic welfare boost is estimated per year at $283 million and sub-Saharan Africa’s to $147 million. The share of the region’s cotton exports would rise from 12 to 17 percent (Anderson and Valenzuela, February 2006, WB website).

In May 2003, Benin, Burkina Faso, Chad and Mali (C4), four West and Central African Least Developed Countries (LDCs), have submitted their “Poverty reduction: Sectoral intiative in favour of cotton" at the WTO in the course of the on-going Doha Development Round. Their request was twofold:

Immediately, this initiative received broad-based support within the international community. The hope that the issue would be tackled at the September 2003 Cancun Ministerial was high. However, the Conference’s failure did not allow for any real negotiations to take place including in cotton. In fact, some analysts point to cotton as one of the cause of the breakdown. Nevertheless, at Cancun, cotton became the symbol and the litmus test of the Development Round. If such a clear-cut case could not be dealt with at the WTO, the development content of the Doha Round seemed to be a mockery.

In 2004, the cotton initiative was artificially divided in two components: the trade and the development aspects of the cotton initiative.

Following Cancun, the negotiations on cotton focused essentially on the incorporation of the topic in the overall agriculture negotiations. Even though logical – cotton is an agricultural product -, this decision was considered by the C4 as a threat to their case because it would be swamped and thus neglected. Therefore, they defended the stand-alone issue status for as long as possible. But the pressure, particularly from the United States became very strong. Intense and tough negotiations took place before and during July 2004. Eventually, the C4 were forced to accept the integration of cotton in the agricultural negotiations. In return, however, they succeeded in obtaining an “ambitious, expeditious and specific” treatment for cotton. In this perspective, the creation of a cotton subcommittee was also decided (July 2004 Framework or Decision Adoptes by the General Council on 1 August 2004, WTO document).

The following months did not witness much progress neither in the overall negotiations nor in cotton. However, after the summer 2005, WTO members issued concrete proposals and real negotiations started with the perspective of the December 2005 Hong-Kong Ministerial. Regarding cotton, the weeks preceding the Ministerial were intense. Meetings with the C4 counterparts’, in particular the United States, took place in Ouagadougou or Geneva. Also, the C4 participated in smaller-scale discussions (such as “green rooms” or mini-ministerial meetings). Again, negotiations in Hong-Kong were tough. The outcome for cotton confirmed the July 2004 Framework that cotton should be treated “ambitiously, expeditiously and specifically”. The Hong-Kong Ministerial Declaration treats cotton specifically under the three pillars of the agriculture negotiations, market access, export subsidies and domestic support: (i) “All forms of export subsidies for cotton will be eliminated by developed countries in 2006” (Hong-Kong Ministerial Declaration, 18th December 2005, WTO document symbol: WT/MIN(05)/DEC) ; (ii) “On market access developed countries will give duty and quota free access for cotton exports from least-developed countries (LDCs) from the commencement of the implementation period”; (iii) For domestic support (by the far the highest concern for the C4 countries), the Hong-Kong Declaration adds that the reduction for cotton should be more ambitious than for agriculture and implemented over a shorter period. Also, priority in the negotiations has to be given to cotton.

At the end of June 2006, the EC also submitted a proposal (WTO document JOB(06)/198, 19 June 2006).

The negotiations get stalled at the end of July and until January 2007, when they officially resumed at the Davos mini-ministerial Conference. Since April-May, multilateral talks in Geneva as well as G4 (US, EU, India and Brazil) meetings have intensified. In order to intensify discussions between WTO members, Chair Falconer provided at this period two “challenge papers” which presented the key questions for Agriculture negotiations.

In 2004, the WTO organized in Cotonou a seminar on the development aspect of the cotton initiative. This event confirmed the separation of the issue between trade and development. Many meetings and seminars followed the Cotonou event with presentation of donors and multilateral agencies’ efforts in mid-term and long-term aid to cotton producing LDCs. For example, the EU launched the “EU-Africa partnership on cotton” and the USA made proposals to the C4 countries.

These efforts are of course most welcomed and needed by the C4. However, their immediate preoccupation lies in short-term aid: the necessity of a safety net for the cotton producers until the trade-distorting subsidies are removed, as was initially proposed in their 2003 initiative. This idea has been difficult to accept for the donor countries and agencies. However, the Hong-Kong Declaration introduces formally for the first time the idea of a compensation mechanism to be explored by the Director-General of the WTO.

In their determination to concretize the Hong-Kong Declaration, the C4 submitted a tangible proposal in their latest submission on modalities. In terms of development, they suggested the setting-up of a “mechanism to deal with income declines in the cotton sector until the end of subsidies” in the form of short-term producer safety nets tied to the commitment to long term sector reform; to be agreed as part of and within the Single Undertaking.

Discussions on aid remain difficult as the donor community is opposed to short term aid support. A High level session meeting on cotton took place in March 2007 at the WTO. Short,mid and long term aid were addressed but no concrete decisions have come out yet. Market mechanisms and smoothing and risk management instruments are currently being studied by the donor community.

The initial mandate – given by the Swiss government to IDEAS Centre – consisted of assisting West African countries to participate in the Doha Development Round. In view of the direct interest of cotton for the region, it was decided to concentrate on this issue and to assist those countries to present and defend their offensive interests in cotton.

Therefore, the cotton/WTO project aims at assisting four cotton producing countries in Africa (Benin, Burkina Faso, Chad and Mali) in their request to the international community – WTO Members – to apply to their cotton producers the same market principles those countries have imposed on their African producers. Those countries ask the international community to apply the principles of the free market by allowing the market to honor their competitive advantage in cotton production. Thus, the recognition of the basic free trade principles of WTO are requested.

IDEAS Centre provides policy advice to the C4 countries, both at the mission and capital levels for the defense of their cotton initiative at the WTO. This support includes assistance in the drafting of negotiating positions, analyses or submissions and preparation of meetings such as the sub-committee meeting or agricultural weeks. Negotiating strategies and tactics are also discussed.

IDEAS Centre also supports the organization and participates in coordination meetings of the C4 both in Geneva and in the capitals.

IDEAS Centre usually prepares position papers in close collaboration with the C4 mission and the trainees (see below) for any important meeting, such as mini-ministerial, ministerial, bilateral or plurilateral meeting.

Besides the current support and collaboration with the Geneva-based missions and the capitals, IDEAS Centre held several specific activities in the framework of its capacity-building and policy advice mandate. In 2003 and 2004, among other actions, IDEAS Centre assisted the C4 countries in the preparation of the cotton initiative as well as its defense at the WTO by the Burkina Faso President Blaise Compaoré in June 2003.IDEAS Centre also assisted the C4 in the preparation of the Cancun Ministerial meeting and took part in it. Besides, it supported and took part in several C4 Ministerial coordination meetings in Geneva and Ouagadougou. IDEAS Centre also assisted the C4 in the phase up to the July 2004 Framework. In addition, analysis and discussions on the Brazil-USA cotton dispute have also been led (cotton update - Brazil’s Retaliation in Upland Cotton is off the Table ). In 2005, among others activities, IDEAS Centre assisted the C4 countries in the preparation of the OECD meeting on aid held in January in Paris. It also contributed to two C4 Ministerial coordination meetings in Ouagadougou and N’Djamena. IDEAS Centre supported the delegations and the C4 Ministers in their participation in Geneva-based meetings (WTO General Councils in October 2005 and green room in November 2005). It participated in the Hong-Kong Ministerial meeting to support the C4 delegations. In 2006, the participation of the Benin Minister of Trade the Davos mini-ministerial at the Davos WEF was prepared in close collaboration with the cotton trainees and the missions. The work preceding the release of the latest cotton submission on modalities was done in close collaboration between the C4 missions, the capitals, the cotton trainees and IDEAS Centre.

The training program was launched in 2003 in the emergency multi-donor project (or first phase of this multi-donor cotton project) as a pilot test. Three “cotton collaborators” or trainees (from Burkina Faso, Chad and Mali) participated in a three-month course at IDEAS Centre. In view of the positive experience, it was decided to integrate it fully to the new cotton project as a capacity-building effort.

This program aims at providing a practical training to civil servants from the C4 countries (usually from the Ministry of Trade). Based at IDEAS, they are under the responsibility of their mission. They follow the negotiations at the WTO and take part in bilateral, plurilateral or coordination meetings as well as relevant seminars. They participate in the elaboration of draft proposals, analysis and research papers with the C4 missions and IDEAS Centre. Also, they meet with other Geneva-based organizations active in trade and development.

The objective of the training is to provide a practical view of the WTO negotiations as well as an understanding of the concrete work necessary to defend their countries’ interest in Geneva. As a result, the trainees will be able to follow the negotiations from the capitals and contribute to the enhancement of the capital’s input, commitment and participation in the negotiations.

In 2007, 16 cotton collaborators from Benin, Burkina Faso, Chad and Mali have participated in the programme so far. Four other are currently completing their training..

IDEAS Centre provides regular newsletter on the state of the cotton negotiations at the WTO. Also, IDEAS Centre is in touch with relevant actors in Geneva (NGOs, press, officials) to exchange information, coordinate with them and promote the cotton issue.

The press’s and the civil society’s role was and still is essential to the success of the cotton initiative. Their pressure can have considerable impact on the negotiations. Therefore, the information flow is important to keep the interested and active actors aware of the progress in the negotiations. Besides the distribution of an information note on cotton, the activities of IDEAS Centre were as follow: the organization of press conferences on cotton, the participation and the collaboration in the elaboration of a documentary on cotton, the participation in panels or seminars to speak about cotton (CASIN seminars on Fostering Entrepreneurship in 2005, Helvetas seminar on Bio-cotton, AITIC seminar on cotton in February 2006, etc.)

Besides these activities, IDEAS Centre has organized public events at the Cancun and Hong-Kong Ministerial Conferences. In Cancun, a panel on cotton comprising the Minister of Cooperation of Germany, senior representatives from Sweden and the UK as well as the C4 Trade Ministers was held. In Hong-Kong, a public ministerial panel on cotton with the C4 Ministers of Trade and the Ministers of Cooperation of Germany, Denmark, the UK as well as the French Minister of Trade. For both these events, a brochure on cotton at the WTO has been released and distributed as well as a press Conference with the C4 Ministers. In October 2006, IDEAS Centre co-organised a Conference on cotton in Washington (read below).