The National Cotton Council created a stir last December when it released a series of articles examining the latest proposal for restarting the Doha Round of World Trade Organization negotiations.
While the articles may have ruffled some feathers among free trade proponents, Council officials felt they had little choice considering the damage the proposal offered by WTO Director-General Pascal Lamy could have done to U.S. cotton.
“If we had dropped down to the levels of support in the Lamy text, the practical effect is that we would not have a cotton program,” said NCC Chairman Larry McClendon. “It would dismantle cotton, and it would dismantle most of agriculture as far as the support levels the commodities have.”
McClendon’s comments came at a press briefing on the status of the WTO negotiations at the NCC’s Beltwide Cotton Conferences in San Antonio. The talks have been at a standstill since the United States and the European Union refused to agree to language providing increased tariff protection for China and India last July.
The WTO’s Lamy tried to schedule a meeting of trade ministers in Geneva in December, ostensibly to try to work out a new agreement before the Bush administration left office. Some observers say they believe the Obama administration will be less willing to compromise on trade issues.
McClendon, a producer and ginner from Marianna, Ark., acknowledged the U.S. cotton industry has been roundly criticized for its unwillingness to give more ground on government support for U.S. cotton producers.
Oxfam International, a British and U.S.-based charity organization, has waged a public relations campaign to lay the blame for the impoverishment of cotton farmers in the African C-4 countries — Benin, Burkina Faso, Chad and Mali — at the feet of U.S. cotton producers.
“The reality is that the U.S. cotton industry has already agreed to give up some of its support,” said McClendon. “We operated for many years with a cap on support of $48 billion. Under the 2005 proposal offered by the United States, we carried that down to $22 billion. We were asked to go to $14 billion in the most recent discussions, which we never agreed to.”
Cotton industry leaders have been asked why they wouldn’t agree to a lower cap since the United States has not been spending all of the money it could. The answer is in the arcane rules that govern the WTO.
“The government may not be writing checks for that much, but we also receive support that has an assigned value to it, such as market or import restrictions,” he said. “But there’s a lot of soft support, too, such as the cost of running a Farm Service Agency office or the cost of putting cotton in the marketing loan that counts against the spending cap.”
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When U.S. Trade Representative Susan Schwab attended the WTO negotiations in Geneva last summer, she said that U.S. farm program support had exceeded target levels six out of the past 10 years.
“This is something that is very important that we all need to understand,” he said. “We’ve made concessions, but we are utilizing all the support that’s being offered to us in six out of the past 10 years. We don’t believe we should give up anymore.”
The U.S. cotton industry has already felt the negative effects of trade agreements that were developed and ratified with the best of intentions. He cited the textile agreements the United States has signed with China, Vietnam and other countries in Southeast Asia.
“One of the unintended consequences of those agreements is that over the past 10 years we have lost 60 percent of the U.S. textile industry,” he said. “That was the U.S. market; that’s where our growers sold their crop. It was our bread and butter, and we exported the difference.
“This has all flip-flopped now, and 70 percent of our production has to go to the world market. The leverage you have in the world market is cheap prices. Other issues come up such as quality or phytosanitary issues, but really it comes down to who is the cheapest guy out there.”
McClendon said the Cotton Council agreed to support the 2005 U.S. proposal to reduce the so-called aggregate measures of support or AMS because its leaders were told it was needed to persuade other countries to provide increased market access for U.S. products, including agricultural commodities.
During last summer’s negotiations in Geneva, however, China, India and other developing countries tabled proposals that would have allowed developing countries, which China and India continue to declare themselves to be, to exempt up to 5 percent of their tariff lines from increased market access.
“What happens is that agricultural products make up a large portion of the exemption,” said McClendon. “So we saw zero evidence of increased market access. We’re sitting here ratcheting down our support and getting nothing in return.”
Lamy announced in mid-December that the ministerial meeting would not be held and that the Doha Round negotiations would remain suspended after members of Congress said they would not support an agreement based on the Lamy text.
Cotton Council leaders, while pleased with the announcement, are not breathing a sigh of relief. “The Doha Round may be in a coma, but it will be resuscitated,” said McClendon. “Believe me, it will be back, and the Lamy text will probably be at the top of the list.”