International Trade Negotiations
and Poverty Reduction:
The White Paper on Cotton
International Trade Negotiations
and Poverty Reduction:
The White Paper on Cotton
The President of the Republic of Mali
Amadou Toumani TOURE
Enda Prospectives Dialogues Politiques
Occasional Papers, n° 249
enda editions, Dakar, 2005
Enda Prospectives Dialogues Politiques
Rue 15x Corniche, Immeuble El Hadj Elimane NDOUR
PO Box 7329 Dakar – Soumbedioune Senegal
Tel: +221 823 53 47. Fax: +221 823 67 13
4 african environment
This publication is the fruit of a collective effort. Many people have contributed to
its production, and to them all we extend our heartfelt thanks. We would like to thank
in particular His Excellency, the President of the Republic of Mali, Amadou Toumani
TOURE for his invaluable support.
Our gratitude also goes to all those who have assisted us over the past four years in
this effort, particularly our partners who have supported this project and without whom
this book could not have been produced: Oxfam America and the Department of
Overseas Development and Cultural Activities of the French Embassy of Dakar.
We also express our deep thanks to the African Cotton Association (ACA), the
Association of African Cotton Producers (AProCA) and the International Centre for
Trade and Sustainable Development (ICTSD) for their tireless commitment in time
and effort, which has made this project possible.
A special mention goes to Sally Baden, researcher and policy advisor on cotton for
Oxfam International, who has shown deep commitment over a number of years and
who has worked to create a close and productive partnership between our respective
organisations. We also extend our acknowledgements to François TRAORE, whose
integrity and vision have given us direction.
Finally, we would like to express our appreciation to all our colleagues and partners
who have read the papers and who have offered their constructive criticism at the
different stages of this project, particularly Alexis ANOUAN, Romain BENICCHIO,
El Hadji DIOUF, Bachir DIOP, Noma CAMARA, Jean-René CUZON, Gawain KRIPKE,
Moussa MBAYE and Kimberly PFEIFER.
This book is dedicated to all the producers, both in the South and the North, who are
suffering as a result of agricultural subsidies and unfair trade.
ISBN 92 9130 058 2
@enda tiers monde, Dakar, 2005
PO Box 3370 Dakar Senegal.
Tel: +221 823 63 91/822 98 90
Fax: +221 823 51 57/822 26 95. E-mail: email@example.com
President of the Republic of Mali
Mr Amadou Toumani TOURE
After Cancùn in September 2003, the world now has its sights fixed on Hong Kong,
which will host the sixth World Trade Organisation (WTO) Ministerial Conference in
December 2005. This meeting has been eagerly awaited by all African countries, but
it has particular significance for those among them that are cotton producers.
Cotton is by no means the only issue at stake in the agricultural sector in the Doha
Round negotiations. But it must be recognised that, between Cancùn and Hong Kong,
cotton has become the symbol of the African fight for fair and equitable trade, a fight
that is supported by various international non-government organisations.
A few years ago, cotton was a source of wealth for us. Now it has become a burden,
and a factor in increasing poverty. This trend has become worse over the past few
years, which have been marked by a major fall in global prices.
Although a number of factors have led to this situation, agricultural subsidies are
the main cause of market disruption, which has serious consequences for our
In addition to the macroeconomic impact of losses in government revenue, due to
subsidies paid by developed countries to their producers, 15 million people in West
and Central Africa, of whom over three million are farmers, depend directly on cotton
for their livelihoods. These people are suffering the socio-economic costs.
The current situation generates poverty in the rural areas of Africa, and particularly
in the cotton-growing regions. This poverty in turn is causing an exodus of people
from the rural areas. The paradox of the situation is that, while African cotton is the
most competitive in the world, African farmers can no longer manage to survive by
In a context marked by the double handicap of basic technology and a precarious
climatic environment, African cotton farmers have risen to the challenge to produce
in both quantity and quality, but this has been at a huge cost.
6 african environment
The crisis in the cotton industry eloquently demonstrates that it is not enough for
our countries to produce efficiently in order to hope for fair recompense for the efforts
of our farmers.
Rich country subsidies for production and exports deprive our States of the necessary
resources to build schools and health centres, and add to the increasing poverty
amongst the poorest of our people, especially in the rural areas.
The Sectorial Initiative in Favour of Cotton, proposed at the WTO by African
producer countries, aims to avert the threat that hangs over our cotton industries
and our economies. Recourse to the WTO is in itself an expression of the trust our
countries place in the regulation and dispute systems that govern international trade.
The failure of negotiations in Cancùn came close to undermining our hopes, but the
extraordinary mobilisation of certain of our partners, non-government organisations
and civil society associations has meant that cotton has remained on the international
I would like to salute all the men and women who, through their efforts and the
strength of their lobbying, have succeeded in raising awareness of, and awakening
consciences to, the injustice done to cotton and to African cotton farmers.
All those involved today in the debate on cotton, and fair trade in general, are clearly
in agreement on the analysis of the problems; we now simply need to have the courage
to adopt the appropriate solutions. In Hong Kong, it will not be too late to do so….
At the dawn of the 21st century and after more than a decade of reforms, often with
high social costs, the cotton industries of West and Central Africa (WCA) have become
the most competitive in the world,1 with production costs far below those of the
cotton farmers of the United States of America, the world’s second largest producer of
cotton and its primary exporter, and those of the European Union. In a rare agricultural
and industrial success story, cotton exports from producing countries in West and
Central Africa in 2001 represented 17 per cent of global exports. In an era of poverty
eradication policies, the competitiveness of African cotton, and its high quality,
provide a livelihood for between 10 and 15 million people in West and Central Africa
and for close to 20 million in the 33 African cotton-producing countries.
However, despite this success, the acknowledged comparative advantage enjoyed
by African cotton farmers is no longer sufficient to compensate the fruits of their labour.
The subsidy policies of Northern countries combine to depress international cotton
prices, and the main consequence of this is a major deterioration in living conditions
for African cotton farmers and their families. The subsidies paid by Northern countries
risk excluding the most competitive producers from the global market, in favour of their
American and, to a lesser degree, their European counterparts, who are not as competitive
but who are highly subsidised. Though unaccustomed to moving in international circles
or to the debates surrounding unfair trade policies, African farmers, in conjunction
with industrialists, their governments, certain development partners and civil society
organisations, have nevertheless brought their problem of survival to the arena where
it counts most: that of international trade negotiations.
* Eric HAZARD is an agroeconomist by training and holds a doctorate in development economics.
He is currently responsible for programmes on the sustainability of trade policies in West Africa on behalf
of the Prospectives Dialogues Politiques team, part of the NGO Enda Tiers Monde.
1 In 2001, the WCA cotton industries were the most competitive in the world, with an average production
cost of around 42 cents per pound of cotton. Since then, because of financial problems following the
decline in international prices, it has been difficult for these industries to renew industrial equipment,
maintain rural roads and develop appropriate research. The price falls are thus beginning to undermine
their international competitiveness, but it nevertheless remains greatly superior to those of the USA
and the EU.
8 african environment
In April 2003, four African countries, amongst the poorest on the planet, used
the forum of the World Trade Organisation (WTO) in Geneva to seek a solution to the
problem posed by the subsidy policies of Northern cotton-producing countries.
Beyond all expectations, the ‘cotton case’ has become the focus of extensive media
coverage and has garnered much support, to the point of becoming one of the leading
topics of discussion at the Ministerial meeting in Cancùn. The WTO was faced with a
textbook case of how globalisation can have damaging effects and of the difficulties
faced by countries of the South in extracting any substantial gains from the process.
The interest of Southern countries in continuing to pursue WTO negotiations, which
have yet to yield positive results, is in large part dependent on the capacity, or otherwise,
of the WTO to respond to the expectations of African cotton farmers.
The future of millions of small family farms and jobs in rural areas throughout the
African continent now rides on what for the uninitiated are the hostile and uncharted
waters of the WTO negotiation process, which is characterised by arcane technical
complexities as well as hard political bargaining. At each step of the way, there are
new twists in the winding road to Geneva, sometimes creating diversions, sometimes
shedding light on fundamental questions of interest, not only for the future of African
cotton farmers, but also more generally of all farmers in the South and their governments.
Despite inadequate representation in Geneva and the limited means at their disposal,
African countries, though unfamiliar with the internal workings of the WTO, have
demonstrated an unusual degree of political tenacity in supporting their farmers and
industries against the biggest global power, the USA, and Africa’s main economic
partner, the EU. The strategies adopted and the somewhat fragile alliances that have
been built around this case have, at times, given rise to tensions and questions regarding
its implications for the farmers of the South.
In spite of what some consider to be the failure of Cancùn, the subsidies paid to US
cotton farmers have been condemned by the WTO. But, with the development of a
new Farm Bill2 that is contrary to commitments made to the international community
to reduce subsidies, US agriculture policy is still out of kilter with the liberal discourse
employed at the WTO. Worse, the USA continues to do exactly the opposite of
what is implied in its catchphrase “Trade not aid”. In 2005, 40 per cent of global
subsidies to cotton continued to sustain some 25,000 US producers, with disastrous
consequences for millions of small farmers in the South due to the consequent fall
in international prices.
2 The Farm Bill is a US agriculture act which set the American Senate against the House of Representatives
in May 2002. This law, which received the support of President Bush, massively increases US state
subsidies and brings the total of federal aid to agriculture to US$175 billion over ten years, which is an
increase of US$73.5 billion on the programme it replaces. This is a major about-turn on the previous
“freedom to farm” law, which had been voted into law in 1992 in an effort to rationalise agricultural
On the eve of the sixth WTO Ministerial Conference, it is important to note that
the failure to resolve the cotton issue constitutes a major barrier to the development
of many Southern countries. Underlying this, however, are also broader concerns,
namely the sustainability of policies at national and international levels, coherence
between the trade and development policies of numerous Northern countries, and even
the imbalance in power relations that enables rich countries to use international law for
their own ends, and which prolongs the scandal of poverty. This situation demands a
rigorous and objective analysis, free of dogmatism and rooted in the reality of rural
This publication is neither an essay nor a work of literature, and even less a piece
of academic research. Its contents derive from a workshop organised by Enda Tiers
Monde, the African Cotton Association (ACA) and the Association of African Cotton
Producers (AProCA), which was held in Saly, Senegal, on 6–7 May 2005, with a view
to reviewing the progress of the cotton issue at the WTO and related developments.
The authors have substantially revised the papers that were presented at this workshop
in the light of the debates that took place there. Other writers with different geographical
horizons – from Europe, the USA and Africa – have also been invited to contribute to
this publication, in order to expand its coverage of the varied and complementary
questions raised by the Sectorial Initiative in Favour of Cotton.
Following a review of the history of the Cotton Initiative in part one, the second
part of the book re-examines the power relations and alliances that have formed around
this case. The third section highlights the varied forms of resistance to change, but also
the room for manoeuvre that actually exists around the issue, on the eve of the sixth
WTO Ministerial Conference. Before concluding, the fourth part widens the debate
beyond the Sectorial Initiative itself, to explore key questions affecting farmers. These
are indissoluble in the long term from the questions raised in Geneva, particularly that
of how to reduce the impact of volatility in international prices.
This publication will have met its principal objective if it succeeds in creating, in
the context of Hong Kong, new opportunities for dialogue and reflection on some of
the issues cited above, as well as on the sustainable development of African cotton
industries and Southern agriculture in general. Enda and its partners will also have
moved towards their objectives if it helps to clarify some key structural issues for the
future of Southern countries.
Genesis of the Cotton Case at the WTO
The cotton farmers’ road to Hong Kong: Initiatives by
producer organisations and an assessment of the debate
Interview with François TRAORE*
Various conflicting figures have been circulated on the number of people who make
their living from cotton in West and Central Africa. What is the correct figure,
according to you?
The contradictions in figures will continue. You know, every day there are people
changing over to cotton. There are newcomers, particularly due to the fact that the
number of inhabitants in cotton-producing countries is increasing. For example, in
Burkina Faso, which has gone from producing 116,000 tonnes of cotton a year in the
1990s to 630,000 tonnes currently, the number of people involved has obviously
increased. But if I had to estimate the number of people who make their living from
cotton in West and Central Africa, I would say it is around 15 million.
In how many countries?
Throughout Africa, 33 countries produce cotton. Right now, the number of individuals
is increasing. The 15 million people I mentioned are only in West and Central Africa.
What exactly does it mean to “make one’s living from cotton”?
Let me use my own example to explain that to you. I started growing cotton in 1979.
In the area where I went to farm, I arrived with nothing more than a horse, a plough and
just a little to eat. A few years later, I was still growing cotton, but I had started to raise
livestock and, on the side, I managed to grow some cereal crops. Today, thanks to the
income from cotton, I have been able to buy equipment and, as well as raising cattle,
I have become a major cereal producer. The crop rotation system, in addition to cotton,
allows me to grow cereals.
Today, I am one of the biggest cereal producers in Burkina Faso, but that does not stop
me from sending my children to school. Currently, I pay more than one and a half
million CFA francs (FCFA 1,500,000)1 a year in tuition fees for one of my children
who is at university. And I have five others in secondary school. Of course, they all
had to go to primary school first. Thanks to cotton, we also manage to build primary
schools in the villages, using our own means. Imagine what that means to us. In Burkina
Faso, we call cotton “the driving force of agriculture”.
* François TRAORE is a cotton farmer from Burkina Faso. He is also the President of the Association of
African Cotton Farmers (AProCA) and President of the National Union of Cotton Producers of Burkina
1 Equivalent to approximately €2,280: €1 = F.CFA 655,957.
14 african environment
So, in other words, cotton farmers are the leaders of the country’s economy?
Yes. For example, in 2005 cotton brought FCFA 130 billion2 into the rural areas.
I am really talking about the rural areas. You often hear them talking about billions
on the television or on the radio, but most often it is not in the rural areas. Cotton
revenues go to the rural areas. That does not take into account the revenue that the
government takes in from the industry, nor does it include the “spill-over effects” that
I mentioned on cereal production. Two years ago, Burkina Faso produced a million
tonnes of cereals a year. And 80 per cent of the harvest came from cotton producers.
Imagine the financial value of that amount of cereals!
The way you describe the situation, one might wonder what is behind all the
current debates about cotton and why so much fuss is being made about it.
Ah, but imagine what I have said and what the cotton farmers are getting. Before
the development of cotton, the people of Burkina Faso used to leave the country.
They went to Côte d’Ivoire, Benin and Ghana. Everyone aged between 15 and 30
used to move away and just leave the old people behind. Today, cotton means that
able-bodied workers can stay in their villages. And if you take into account everything
that I’ve told you, what cotton can do for people, then you can understand why the
people who depend on it have to take action. That is why the African response on this
issue has come from the farmers. The first appeal was launched in 2001, through my
organisation, the Union Nationale des Producteurs de Coton du Burkina Faso
(National Union of Cotton Producers of Burkina Faso), by my spokesman and myself.
We realised that global overproduction was due to the subsidies that powerful countries
give their producers. But these subsidies do not take into account the cost of marketing.
Let me give you an example: American producers receive 72 cents a pound, before
they even grow their cotton, but the market price rarely reaches 70 cents, even when it
is high. So that means that they can do whatever they like. It does not matter to them if
the market is high or low. So there you have it! When someone who has proper equipment
does not have to worry about the market, you inevitably get overproduction. And when
that happens, supply outstrips demand. So, at a certain point, if supply is greater than
demand, the price goes down. And when prices go down, who suffers the most?
Unsubsidised farmers and their families. In this country, most of the work is done
by hand. You have the young people who need income to go to school, to buy clothes.
The families react, and you have to react, too. And because you are not alone, and there
are several million other people who make their living from cotton, inevitably the
reaction is heard everywhere.
2 Equivalent to around €200 million.
The cotton farmers’ road to Hong Kong: Initiatives by producer organisations 15
So, when we reacted and spoke out against the reason behind the drop in cotton
prices, all the producers who lived in other countries also responded and supported
the appeal, throughout Africa. And that made the authorities react. Because when the
people take action, they cannot remain indifferent, especially since the government is
also earning income from cotton. And if we are taking action, that means production
could be held up. In that case, although it might hurt us, the governments will be
hurting even more. All the traders, all those who depend indirectly on cotton for their
livelihoods, will also feel it. That is what brought about the response on cotton.
On the other side of the Atlantic, both in America and Europe, governments subsidise
producers in response to their civil society and to their producers, whom they fear as
voters. That is why the USA and the European Union implement policies contrary to
the laws of international trade. We are talking about the interests of two very different
societies: ours is poor, very poor, barely able to survive. On the other hand, they are
very well off, and want to remain so at any price, even if the industry is no longer
profitable for them. Their governments have the means to maintain them, even if that
could lead to cotton disappearing in Africa.
Countries that do the work by hand are competitive in the market, particularly in
terms of quality. We cultivate by hand while they harvest their cotton mechanically,
which means there are a lot of undesirable elements in their cotton that affect its quality.
African cotton is in direct competition with cotton from those countries. If they can
undermine African cotton and make it lose market share to American producers, then
they have to do so. That is why, on both sides of the Atlantic, in the USA and in
Europe, there has been movement. They are under pressure from their producers. But
we cannot give in either, because what we receive to support our troubled industries,
the donations we receive, do not fill the gap. Moreover, donations and assistance never
go into the pockets of the heads of households, to help them support their families.
In fact, that is not what they are meant for – development is not like that. Development
is achieved through the sweat of its stakeholders.
Is that why you decided to take the matter to the WTO?
We raised the issue by launching an appeal in 2001, which you can find on the website
of one of our partners, Father Maurice Oudet.3 In 2002 we launched a second appeal,
supported by various other producers. Even Brazil reacted after we did. But our
governments decided to deal with it in their own way and decided that it was not
appropriate to lodge a complaint. Otherwise, we would have lodged our complaint a
good while before Brazil. Still, we did take action. And four countries – Burkina Faso,
Mali, Chad and Benin – made an application to the World Trade Organisation saying
that, “We are LDCs (Least Developed Countries). At Doha, you made the commitment
to make the WTO a development tool, and cotton is a development tool for us. What
you are doing through the trade policies of the most powerful countries is destroying
our economy.” That is what happened to push things forward in Geneva, and that led
16 environnement africain
I was in Cancùn, and I can assure you that on the first day neither the WTO Director
General, the World Bank representative, nor the Mexican representative said more than
five words without mentioning the African cotton issue and the need for a solution. We
thought that our appeal had been heard. Unfortunately, at the end of the conference,
there was still no solution. At that point, I said to myself, “What motivated the big people
of this world? Nobody can possibly think that they were bribed to say those things that
they said on the first day. There must have been some realistic reason for them to speak
like that.” We had gone beyond the stage of games and appearances; they did not use
such language just to keep their producers happy. It was more than that. Their level
of responsibility had gone beyond that. Even though in the end there was no solution,
I had a hard time understanding their position, related to their commitments and their
And then we told ourselves that the WTO needs to change its face, otherwise it
cannot really call itself a global trade structure. Not only would it not really be a global
structure, it would also run the risk of failing to meet the commitments it made at
the development round in Doha. We gave them an opportunity to respond to the issue
at Doha. But they either did not know how to, or could not, or would not answer.
That is the question.
But the Cotton Initiative is still ongoing, nevertheless?
Of course it is ongoing, since we the stakeholders are depending on it. We are still
here and we continue to keep an eye on it, together with our partners, the NGOs,4 and
even with our governments. Our trade ministers, our agriculture ministers, our heads
of state continue to fight for a solution to this problem.
Following the failure of Cancùn, what strategy do you intend to put in place for
I wouldn’t say it was a failure. We did not get what we wanted, but on the other hand
we were able to block the decisions that the USA and the EU wanted to push through.
That was a change from previous meetings, where the poor countries signed up to the
consensus without getting anything positive for our own states, our own governments,
our own countries. Consensus used to be reached against the interests of the majority and
against the interests of African civil society. But this time we said “no” to the proposal
because it did not solve our problem, although the rich countries had proposals for
their own problems. The fact that we said “no” in Cancùn meant that solutions were
not found to other topics of debate.
4 Non-government organisations.
The cotton farmers’ road to Hong Kong: Initiatives by producer organisations 17
All right, we African producers did not achieve what we wanted. As a leading
producer, I had nothing concrete to show the members of my organisation. But it was,
and indeed it still is, recognised that the cotton issue has changed the face of the WTO
and opened up a new debate between the West and Africa. Now we can see what
has actually been done for Africa: they talk about development for Africa, when in fact
the opposite is true. When we went to Shanghai for a meeting, the Ugandan President
said that Africa was the real donor. Raw materials come from Africa and create
employment in the West. People think they are helping us, when it is our raw materials
that allow them to have employment in their countries.
As stakeholders in civil society, we feel we have the right to tell our decision-makers
what we want. That is what already happens over there in the West. Their political
leaders do not go and negotiate what they want. They negotiate for what their civil
society stakeholders want. Cancùn taught that to African civil society. That is to say,
you have to tell your politicians what they need to take into account. And you have to
follow up. And continue to follow up!
And what you want is to see an end to subsidies?
And in the meantime, what are you doing?
Firstly, Europe is starting to make a bit of progress, even if we cannot see any
concrete results yet. Furthermore, we have changed the terms of the debate. We are no
longer just yes-men. The debate now is that Africans are reclaiming their rightful place
in trade. Recently, I had a visit from an adviser to the United States Department of
Commerce. The Americans are also telling us that they are thinking about what can be
done. We know that this is something new. They are having trouble adapting to African
demands that are shared not only by the decision-makers but also by civil society. That
is really a problem for them. So we will continue to tell them that the days when you
could phone up a head of state or politician and tell him what to do and how to do it
are over. We keep on telling them that. But I must say they have difficulty taking it in.
And things cannot go on this way.
Today, China is making the USA and Europe suffer. Africa thought it could just
behave like a model child: “Never do any harm, and let civil society just cope.” That
is just not possible! Civil society did not know that it needed to stand up for itself, but
now there are examples that prove that it has to react, on every front. Africa has to
wake up. I think that the cotton issue has allowed other issues to be raised, and that
civil society will continue to fight for those issues. I can assure you that if there is a
solution one day, they will call it something else. They will arrange things so that it
will never be said that Africa was right.
18 african environment
Peter MANDELSON, the European Commissioner, said in Mali that Europe was
willing to abolish all internal support mechanisms for its cotton producers, and the
Americans for their part have said that they are ready to eliminate certain forms of
support and that everyone should undertake to make the same efforts. When you
listen to Western negotiators, don’t you feel like you are watching a game of ping-pong?
That is just what I was saying. They are surprised at a reaction of this magnitude
from Africa. Their ping-pong game does not make us forget that there are times when
they do talk to each other. Our awakening has surprised them, but they have said to
themselves, “Let’s play the game a bit so that the Africans don’t realise that they can
upset the applecart.” So they are going to tell the Africans that they understand what
they are saying, in the hope that this will appease them, and then continue to lob the
ball back and forth in an attempt to stall our momentum.
You can bet that the USA and Europe are still trying to find the best way of dealing
with this problem. We are aware that a solution will not come quickly. But I read the
following anecdote somewhere: a European minister said to the Chinese authorities,
“Your textile industry is bothering us in the West.” And they replied, “How many
metres of textiles do we need to buy an Airbus?” The debate ended there. It is a
matter of interests. If they want the Chinese to buy their planes, they have to let
Chinese products into their markets. Africa believed that, as an act of charity, the West
would one day give it development. It doesn’t work like that, and that should be a
lesson for all of Africa and not only for producers. They have to understand that it is
not charity, but a debate among equals. I call this “peaceful combat” by civil society.
It is only through this means that we have a chance of making our living from the
sweat of our brows. And time is of the essence, because our raw materials are running
out and that will force us to ask the question of where development will ever come
You recently met with Paul WOLFOWITZ, the new President of the World Bank,
when he visited Burkina Faso. It seems that when he came out of his interview
with you he admitted that he was ashamed to be an American. What did you say
to him that made him so ashamed?
Quite simply, we showed him that we are ordinary farmers who work by the sweat
of our brows, and that we want to be able to earn a living that way. We even told him
that we have no arms, just little hoes to scratch out our living from the earth. And that
the policy of a powerful country such as his is making us even poorer. So if, as the
head of the World Bank and as an American citizen, you are coming to talk to us again
about development, what is going to happen? That is what we told him. And, as an
American and the head of the World Bank, he felt, to use his own words, that is was
The cotton farmers’ road to Hong Kong: Initiatives by producer organisations 19
And what did he promise you?
Oh! There were promises. We will help you, we will fight to stop those subsidies…
But even before he became head of the World Bank, I wrote to him when we heard he
had been nominated. I said, “If you, the General of Iraq, become the head of the World
Bank, then don’t choose the wrong sort of tools for development. You were an expert
on tanks in the Iraq war. But what we need are machines that can build dams and
public utilities, roads and tracks.” I warned him so that he would not bring us tanks.
So he had to talk to us about development.
However, I would like to add that our leaders need to understand that civil society
is not their enemy: it serves as a guide and it suggests ideas. This is what it wants to
do and it should be encouraged and allowed to do so. There should be partnerships
between civil society and decision-makers to discuss civil society proposals and
how to put them into action. We need to understand that we are not against each other.
That is how we can make progress. The problem is not the power of the West, but rather
our own power.
You have, however, pointed out that Western countries are also under pressure
from their own producers…
That is nothing! Westerners have a peculiar way of adapting. Very often, they ask us
to adapt. We try, but they have only 2–3 per cent of producers and a lot of mechanical
equipment. How can they have problems adjusting in order to let Africans live? If they
cannot make that effort, then they have to acknowledge the inconsistencies in what
they say when they talk about support and aid for development. Today, we tend to put
humanity at the service of capital, when in fact capital should be used to serve
mankind. I have seen in America what capital means today. African slaves contributed
to the development of that country. That is where American capital came from, and
now American capital opposes the development of their grandsons in Africa.
What kind of strategy can be developed now?
The most important thing is to create alliances between the different components
of civil society. I know that in the West, both in Europe and in the USA, civil society
is beginning to awaken. Dialogue is possible, so that we can understand that we are
not necessarily against one another. With their standard of living, letting us have the
basic minimum would not stop them from living their lives.
I had a talk with José BOVE of the Peasant Confederation of France. I explained
to him that I agreed with him on some points, but that I was faced with realities
that he knew nothing about, and because of that, things could not be the same for us.
His producers have running water in their houses, paved roads running past their
fields; they have telephones and can watch television. But more than half of our
farmers drink from waterholes. I have seen animals walk into the waterholes to drink.
20 african environment
When they came out, the women go in to get drinking water. I told those French
people, “Even I who stand before you have drunk from waterholes.” When you are at
that level and the other farmer is on another level, you need to explain things. You have
to tell him, “I am not against you, but I just want the basics. Can it create a problem
if I drink clean water? For me to eat my fill and send my children to school, is that
a problem?” There are people who have no idea how we live, who we are, or how we
got into this situation.
Is there a possibility, then, of an alliance between civil societies in different
It is already happening, in fact. But we have to be careful. There is a lot of interference
in those kinds of relationships. You have to be sure that you are talking to the right
people, and that they say what they think. Another thing for Africans is that there has
to be a certain level of organisation. The thing that helped the cotton sector’s demands
get a certain amount of support was that in all the countries the civil society stakeholders,
beginning with the producers, were organised.
That also applies to the United States. The USA has only 25,000 cotton producers,
but they are so highly organised that they can shake a country that big. Organisation
is not about raising a ruckus, but about knowing that you have a real impact on the
economy, an impact that can influence the decision-makers. For example, you asked
what the State had to gain from this business. It is the same thing as groundnuts for the
Senegalese economy. If the people involved are very well organised and each time
they shake the tree the whole country jumps, then everyone is obliged to listen to them.
If problems are dealt with on an individual basis, nobody will listen to you.
How is this organisation reflected in the cotton sector?
The message has got through in all the countries, even to people working in the
informal sector. When we spoke out, people immediately followed suit of their
own will. We achieved this through the Internet. Everyone declared support on a
website. We did not send a delegation around telling everyone to do this or do that.
That demonstrates the level of organisation in the sector.
Then the NGOs joined us, followed by the governments. But primarily, the producers
learned to work together across borders. In each cotton-producing country, there
are national associations for cotton producers. But their impact at the regional or
international level was limited. Even though dialogue has existed in the past, this time
the meetings were systematic, so that things progressed at an international level.
Producers from West and Central Africa understood that unity was power. This led
to the founding of the Association of African Cotton Producers (AProCA), of which
I am the president.
The cotton farmers’ road to Hong Kong: Initiatives by producer organisations 21
Nevertheless, one gets the impression that producers of other products are feeling
a bit left out by the prominence of the cotton case in international negotiations.
I think it is all a matter of interest. The problems in the cotton sector forced members
to be together more often and to be better organised. An organisation that is not
based on defending the interests of each of its members cannot work. And this kind of
organisation is not necessarily what our partners in the West are looking for, especially
if you realise that, to begin with, the majority of our associations are supported
by funds from those same partners. So you have to be very careful to ensure that
organisations are genuinely based on the interests of the stakeholders, before you tell
governments to support them and to do exactly what their members want.
When one finds an interest in something, one hangs on to it. I personally grow
cotton, but also cereals. I am a member of a cereal marketing organisation and the
president of the peasant confederation of Burkina Faso, which includes cotton producers,
livestock farmers, market gardeners and fruit farmers. It is true that we have not all
reached the same level of organisation, but what Africans need to understand is that
the cotton case is not only about cotton. It highlights the problems in Africa and for
African farmers. If we win, then the whole of Africa will benefit in international trade
negotiations, and not just cotton producers.
The cotton producers’ struggle goes on. What is the final word from François
We cannot understand the fact that 80 per cent of African people are farmers and
that they cannot support themselves from their livelihood. We cannot accept that more
than 60 per cent of the poor in Africa are from rural areas, which is not the case in the
West. We have to work to change that situation. Stakeholders need to organise, to make
decision-makers understand that the days of glossing over their reports are over.
The time for making people believe that everything is fine, when nothing is going
right, is done with. It has to stop.
I was asked my opinion when NEPAD was created, and I replied that I did not
believe in it. Because it is still the same people. They are not going to convince us that
they have changed their management habits. If they have not taken stock of the way
they have done things over the past 40 years, changing the name of the organisation
is not going to make them change their ways. So, once again, I am calling for
civil society to organise, so that in all its diversity it can challenge the politicians.
Decision-makers need to listen to us and understand that it is in everyone’s best
interests for producers to be able to live off their labour. That is real patriotism.
Interviewed in Dakar by
Economics Desk of the newspaper Le Quotidien
Consequences and challenges of the July Framework
agreement for the cotton case
In the past few years, the World Trade Organisation (WTO) trade negotiations have
rekindled public interest due to the publicity surrounding the agriculture problem, with
particular emphasis on the issue of agricultural subsidies, allocated mainly to cotton
producers in the USA and Europe. The cotton industry occupies an important place
in the economies of several African countries and it is easy to understand the disaster that
the slump in international cotton prices has brought in its wake. The ruling by the WTO
on Brazil’s complaint against the United States serves to confirm that this subsidy surplus
creates distortions, leading to falls in international cotton prices. This represents a
major victory and is the culmination of several years of socio-political mobilisation. It is
essential to capitalise on this interim victory, but the fact remains that the problems
facing cotton farmers can only be resolved by attaining two objectives.
First, it is important to keep international public opinion focused on a problem that is
of crucial interest to our countries, in the sense that the survival of our national economies
and that of millions of people, already living below the poverty line, depend on its
resolution. Second, it is important to engage in constructive, forward-looking reflection
and to discuss strategies for overcoming the crisis in the African cotton industry,
associated with the slump in international prices.
In order to do this, it is useful to review the different stages in the trade negotiations
since the failure of Cancùn, what they have achieved and the actions taken, and to put
them into perspective. This exercise can be centred around three main areas.
First, a review1 summarising previous developments, in order to better understand
the current position of the Sectorial Initiative in Favour of Cotton in the context of the
Doha Round of trade negotiations.
This will be followed by a brief recapitulation of the actions carried out since the
decision of the General Council, detailing the commitments made in Geneva, in the
July 2004 Framework Agreement to include cotton in the agricultural negotiations
dossier. We will also look at the consequences of this decision, as well as the possible
opportunities and risks associated with it in the context of the current negotiations.
* Samuel AMEHOU is Ambassador of the Republic of Benin to the World Trade Organisation in Geneva.
1 The timescale covered here runs from May 2003, the submission date of the Sectorial Initiative, up
tothe WTO General Council Session in July 2004 and the subsequent decision taken (WT/L/579 of
2 August 2004).
24 african environment
Finally, there will be an assessment of the next steps and key moments and the
strategy to be adopted in monitoring the cotton case in the lead-up to the Sixth WTO
Ministerial Conference, scheduled to take place in December 2005 in Hong Kong.
The submission of the Sectorial Initiative in Favour of Cotton and the evolution
of trade negotiations
Cotton production is an agricultural activity carried out in over half of all African
states. This activity is vital to the economic and social life of these countries: in West
and Central African countries, for example, it contributes around 12 per cent of GDP,
40 per cent of total export revenue and 70 per cent of agricultural revenue, and
employs 15 million people. Today 33 countries grow cotton, 13 of which are in West
and Central Africa: Benin, Burkina Faso, Côte d’Ivoire, Cameroon, Central African
Republic, Ghana, Guinea, Niger, Nigeria, Mali, Senegal, Chad and Togo.
The cotton produced in West and Central Africa remains among the most competitive
in the world: its current cost of production (around 42 cents a pound) is lower than the
estimated production costs in some developed countries. In the USA, for example,
where the cost of production is estimated at around 75 cents a pound.2
However, despite this undeniable competitive edge, the production and export of
African cotton is subject to fierce competition from developed countries, such as the
USA and, within the EU, Greece and Spain. This unfair competition is made possible
through the proven abuse by developed countries of domestic supports to producers
and export subsidies levied on the international trade of cotton. The main effect of
these excesses in support and subsidies is lower cotton prices on the international market.
Lower prices have severe repercussions for producing nations in Africa, which face
large budget deficits when they attempt to sell their cotton.
This situation is also fraught with social repercussions for farming communities,
who face enormous problems, including dire difficulties in meeting health costs and
school fees for children, paying for food and housing, etc. These consequences are
even more severe for the four countries of West and Central Africa that are producers
and exporters of cotton (Benin, Burkina Faso, Mali and Chad). Cotton represents an
important source of revenue and foreign currency for their economies, and a vital
source of income for the bulk of the population, who depend directly on cotton-related
activities for their livelihoods.
For these four Least Developed Countries (LDCs), faced with mounting difficulties,
the situation had become untenable. For this reason they decided, on 16 May 2003, to
submit a “Sectorial Initiative in Favour of Cotton” to the relevant authorities at the
WTO.3 By doing this, they aimed to seek, within the framework of the Doha Round
of multilateral trade negotiations, sustainable solutions to the grave problems faced by
their cotton industries, due to distortions in international trade.
2 According to statistics supplied by Oxfam International.
3 Initiative submitted to the WTO under the reference NT/AG/GEN/4.
Consequences and challenges of the July Framework agreement for the cotton case 25
In their submission, the four countries that co-authored the Sectorial Initiative
• In Cancùn, the establishment of a mechanism to phase out support for cotton
production, with a view to its total elimination “early harvest”;
• Transitional measures in the form of financial compensation for cotton-producing
LDCs to offset their losses of revenue, until support for cotton production has
been completely phased out.
The four countries also submitted to the members of the WTO their proposed
modalities for the assessment of criteria and evaluation of levels of compensation.4
The huge support garnered for the Sectorial Initiative, both among WTO members
and in international public opinion, coupled with the pressure brought to bear by
negotiators from the countries involved, led to the inclusion of an item on the cotton
issue on the agenda at the Cancùn conference in September 2003. Unfortunately, with
the failure of this conference, no tangible results were achieved within the framework
of the initiative.
In the weeks that followed the breakdown of the Cancùn conference, a number of
attempts were made by certain members of the WTO to bog down the negotiations
on cotton that were taking place in Geneva. But the Geneva delegations of the four
co-author countries remained adamant, and mobilised themselves and other delegations
from African countries, who shared the same ambitions on the cotton issue. These
efforts led to the WTO regional workshop on cotton for the benefit of African countries,
held in Cotonou (Benin) on 23–24 March 2004.
At the Cotonou workshop, important clarifications were made on developments
in the cotton case and two distinct, yet strongly complementary and inseparable
components, were identified:
• the trade aspects, which should be dealt with strictly within the framework of
trade negotiations in Geneva; and
• the aspects linked to development, an area in which the WTO Secretariat has
been invited to play a proactive role, by facilitating a meeting of interested parties
from the spheres of trade and development, in order to study the aspects of the
initiative as it relates to development aid.
It should nevertheless be emphasised that one important question is yet to be
resolved: the framework for trade negotiations on cotton. In view of the urgency
and specificity of this issue, the co-author countries, as well as several other member
states, argued that it should be dealt with separately. Others, however, were of the view
that it could only be addressed within the global framework of agriculture negotiations.
4 Document WT/GC/W/511 of 22 August 2003.
26 african environment
The decision of the WTO General Council at the end of July 2004 and the status
of cotton negotiations
Following the deadlock at Cancùn, the Cotonou workshop and the resumption of
work in Geneva, WTO members finally decided, at the end of July 2004, to discuss
four specific objectives.
These were, first, to consider the cotton issue within the global agricultural framework
in “an ambitious, expeditious and specific manner” and, second, to respect the link
between the trade and development aspects of cotton. Thirdly, they agreed to take into
account the importance of cotton production and exports for certain African countries,
particularly the LDCs and, finally, they agreed to set up a cotton sub-committee.
The development aspect of cotton
The development aspect of cotton involves the mobilisation of the financial and
technical assistance that is needed to promote the cotton industry in Africa. It was
decided at the March 2004 WTO conference in Cotonou to disassociate trade issues
from those linked to development. During this meeting, the developed countries
of the WTO offered technical and financial assistance to the sponsor countries of the
Initiative. This support would be enough to deal with the problems encountered by
African cotton farmers and, in return, development issues would cease to be dealt with
at the WTO.
Offers of technical and financial assistance were made at two levels. The multilateral
intergovernmental organisations identified useful financing programmes and promised
to lend additional technical and financial support in their respective fields of expertise.
In addition, bilateral donors proposed to strengthen their support programmes.
Once the key areas had been identified,5 the EU supplied further details on its
initiative for African cotton, while the USA did the same with regard to the
Millennium Change Account (MCA). At the same time, Japan detailed the advantages
to be gained from its TICAD programme, while Canada and China reiterated their
commitment to supplying increased technical and financial assistance.
Reviewing now the promises made, it is clear that only the EU has started to
implement its pledge of direct budget support to African cotton producers. Even
though this aid is starting to have an effect, there is little information available as to
its amount, the modalities governing its utilisation or the share allocated to cotton
farmers. The USA, for its part, has chosen to tie its assistance to the implementation
of its MCA programme, which unfortunately is subject to numerous conditions. The
implementation of development tools has therefore fallen far short of the commitments
made and the hopes raised at the Cotonou conference.
5 Reform of national industries, improving methods of growing African cotton, promotion of exports,
promotion of policies for agricultural diversification, the creation of research programmes co-ordinated
by regional organisations, the rehabilitation of textile industries, etc. were among the possibilities that
Consequences and challenges of the July Framework agreement for the cotton case 27
This is even more disappointing since the WTO, represented at Cotonou by its
highest-ranking decision-makers, promised to spearhead a thorough analysis of the
development issues, within a separate framework from that of trade issues. Furthermore,
in formulating the Framework Agreement at the end of July 2004, the General Council
gave “instructions to the Secretariat to continue to work with the development
community and to make periodic reports to the Council of all new pertinent findings.”
It also instructed the Director General “to hold consultations with relevant
International Organisations, including the Bretton Woods Institutions, the United
Nations Food and Agriculture Organisation and the International Trade Centre, to direct
existing programmes in an effective manner and to direct all additional resources
towards development of the economies in which cotton assumes vital importance.”
The WTO Secretariat has indeed reported periodically to its members at the General
Council sessions6 on the technical and financial assistance provided by bilateral and
multilateral partners. The WTO Director General has also drawn up his first report7
on the development dimension of the Sectorial Initiative in Favour of Cotton, and this
was presented to the members of the WTO on 13 December 2004. More recently, the
new Director General of the WTO, Pascal Lamy, has asked that an update be prepared
on how far the commitments made by the developed countries have been implemented.
However, is it possible, despite all these efforts, that the opportunity to deal separately
with development issues has been misconstrued?
The solution proposed at Cotonou, to deal exclusively with development issues,
seems to have been adopted in a bid to “refrain from breaking up the WTO system”.
In that case, the formulation in the Initiative of a request for compensation is certainly
original, but it is not catered for within the trade system. As it stands, the WTO does not
seem to be in a position to entertain this proposal, without running the risk of “creating
a precedent”. And should this precedent become common practice, the whole WTO
system would be compromised. In light of this, it should be understood that the
Cotonou agenda was a unilateral step taken by the WTO secretariat.
For their part, the African countries have come to the conclusion “that something
had to be accepted to stop the industry from dying off” and that WTO members must
“remain true to the urgent nature of the problem evoked in the Initiative”. The separation
of the trade aspect from the development aspect of the dossier has therefore been
validated by the African countries. The separation is presented as an element of a
strategy, albeit “a makeshift measure that offers some respite to small farmers”. It also
recognises the fact that the trade dimension will be taken up should the international
context prove to be more conducive at a time in the future.
6 In total, three meetings dealing with the development aspects of cotton have been organised in Geneva,
on 25 August 2004, 22 October 2004 and 18 November 2004.
7 The report on the development aspect was presented in the documents WT/GC/83 and Add.1 on
3 December 2004.
28 african environment
The trade aspect of cotton
The July Framework Agreement stipulates in paragraph 4 of Annex A, that:
• negotiations will be carried out on all three pillars on which the international cotton
trade rests, i.e. market access, domestic support and export competition;
• ambitious, expeditious and specific results should be obtained, given the vital
importance of the cotton sector for some countries that produce and export cotton,
• coherence between trade and development aspects will be observed.
A sub-committee was created following a decision adopted by the Agricultural
Committee at its extraordinary session of 19 November 2004, with a mandate to treat
cotton in an “ambitious, expeditious and specific manner” within the framework of
the agriculture negotiations. It was agreed that “work shall encompass all trade-
distorting policies affecting the sector in all three pillars of market access, domestic
support and export competition, as specified in the Doha text and this Framework
text”.8 The foundations have thus been laid for a thorough examination of the issue, now
that the Cotton Sub-Committee9 mandate is clearly defined, together with its proposed
On 21 April 2005, the WTO African Group, on the basis of the proposals made by
the four co-author countries of the Sectorial Initiative in Favour of cotton, circulated a
document outlining the proposed working methods for negotiation on cotton. This
document, published by the WTO,11 recalls in its first part the historic circumstances
surrounding the submission of the Sectorial Initiative by Benin, Burkina Faso, Mali and
Chad. It then follows the progress of the dossier, from its submission to the reactions
of WTO members within the framework of the decisions adopted by the General
Council at the end of July 2004.
Concrete working methods were proposed and submitted for approval by members on
the basis of these General Council decisions, taking particular account of the adoption
by the WTO Dispute Settlement Body, at its 21 March 2005 meeting, of the report by
the Appeals Body on the Upland cotton case, as well as the panel report, as modified
by the Appeals Body. The proposed methods centred on the three following pillars:
• Market access: a marked improvement in the degree of access to cotton markets
is required, in the form of free access, on a consolidated basis and without restrictions
for cotton and its derivatives, for cotton producers and exporters from LDCs.
8 Document TN/AG/13.
9 Document TN/AG/13 of 26 November 2004.
10 Document TN/AG/SCC/1 of 29 March 2005.
11 Publication of the working methods in TN/AG/SCC/GEN/2 of 22 April 2005.
Consequences and challenges of the July Framework agreement for the cotton case 29
• Domestic support: the domestic support measures creating trade distortions in the
international cotton trade should be eliminated by 21 September 2005 at the
latest. Specific disciplinary measures should be put in place to avoid the transfer
of domestic supports from one WTO-designated “box” to another. Furthermore,
ambitious and specific criteria for cotton are envisaged for authorised measures
governing the Green and Blue boxes.
• Export competition: all forms of export subsidies for cotton should be eliminated
by 1 July 2005 at the latest.
This proposal by the African Group also emphasises the necessary balance to be
observed between trade negotiations and measures to be taken on the development
front. Among other measures to be adopted, the paper reiterated one of the African
Group’s main concerns, the setting up of an Emergency Support Fund for cotton
production. The main concern is to put in place a safety net of measures that have the
potential to ensure the survival of the cotton sector, pending the elimination of the
anomalies in the multilateral trade system that so seriously compromise the business
of cotton production.
The resources allocated to this fund would correspond to 20 per cent of the value of
the cotton produced in the best of the previous three years, for each country concerned.
It would be managed by a tripartite commission made up of representatives from
donors, producers and governments, and its resources would be reduced in tandem
with the level of elimination of developed countries’ domestic support measures and
From the perspective of the African negotiators, the response to this proposal has been
far from satisfactory. During the most recent meeting of the Cotton Sub-Committee on
18 July 2005, Benin, supported by Mali, Chad, Zimbabwe and Côte d’Ivoire, deplored
the lack of progress in the discussions and the absence of written responses from other
members to their proposal. The EU representatives pointed out that they had responded
during previous meetings and proposed to frontload responses to the sections of the
agriculture agreement concerning cotton. As for the US negotiators, they simply gave
an account of proposed measures for the elimination of subsidies that the WTO
deemed illegal in its ruling on the USA-Brazil cotton dispute.
With international cotton prices facing a new slump, the African countries stressed
their displeasure at the fact that progress on the cotton case has been tied to progress
in the wider agriculture negotiations. The African delegations to the WTO believe that
they are justified in expecting tangible progress that goes well beyond that agreed on
in the July Package.
A few weeks before the next Ministerial conference in Hong Kong, discussions
on the mandate of the sub-committee are immaterial. It has been clearly decided that
not only will its decisions be used to encourage members to act, but that it has a more
urgent responsibility to examine substantial issues than to dally over questions of
procedure. Nonetheless, it is still the case that the sub-committee remains under the
wing of the agriculture committee.
30 african environment
Finally, even though concerns remain over the inclusion of cotton in the agriculture
negotiations – the driving force in the current round of talks – it should be remembered
that any progress will also benefit cotton. The “specific” and particularly “expeditious
and ambitious” nature of the results should not be overshadowed.
The unfolding struggle, termed in certain quarters “the cotton war”, calls for
general mobilisation and a synergy of all our actions in support of our common cause.
We must propose a strategy geared towards the success of our approach.
The lead-up to the Sixth WTO Ministerial Conference: strategies and perspectives
for the resolution of the cotton case
In December 2005, WTO member states will come together in Hong Kong for the sixth
Ministerial Conference. The July 2005 meeting of the General Council summed up the
different positions that will be discussed in Hong Kong. The upcoming negotiations
are very important, and require special groundwork. In this context, the activities of
the countries that co-initiated the Sectorial Initiative in Favour of Cotton should be
deployed in two main areas:
• the technical defence of the Sectorial Initiative in Favour of cotton case;
• strategic lobbying aimed at stakeholders likely to contribute to the rapid resolution
of the cotton case.
Technical defence of the cotton case
The countries that co-authored the Sectorial Initiative need to make use of all available
support in terms of expertise at this stage of the negotiations, as they become more
focused and more technical. All the partners involved (research institutes, civil society
organisations, think tanks, etc.) should be approached and their intellectual resources
should be used to the full. The main task will involve consolidating the arguments to
be used in defending the cotton case, to support the working methods proposed by the
African Group in its document of 21 April 2005.12
This is justified by the fact that the more technical the cotton case negotiations
become, the more necessary it becomes to back up the technical work with political
measures, at all levels of the decision-making process. This lobbying should be carried
out at different levels.
It should be done in Geneva, by sustaining the support garnered for the Sectorial
Initiative from certain groups of countries – the African Group, the ACP Group and
the LDCs. The support of certain strategic partners should also be strengthened
(e.g. Brazil, Paraguay, Pakistan, India, the G20). Furthermore, the Permanent Missions
of the co-sponsor countries of the Sectorial Initiative (now all represented in Geneva)
should continue to co-ordinate their actions, and strengthen these actions as much as
they can. The necessary human resources, materials and financial means should be put
at their disposal.
12 Contained in the document TN/AG/SCC/GEN/2.
Consequences and challenges of the July Framework agreement for the cotton case 31
In the capitals of the four co-author countries, the relevant national authorities
should keep in close contact with the local diplomatic representations of development
partners (both countries and international organisations). Furthermore, all four countries
should be represented at all major international meetings, at the highest level possible,
in order to lend support to the initiative, Ministers of the four countries should be
systematically and continually in contact with the major finance ministries, particularly
those of European capitals and in North America. Sympathy garnered from ministerial
departments of developed countries responsible for co-operation and development
should be extensively exploited.
Finally, an effective media campaign should be mounted with the aid of civil society
organisations, in order to maintain the mobilisation of international public opinion and
sympathy for the cotton cause.
These are the key elements of the strategy that needs to be put in place to buttress
the cotton case in the run-up to Hong Kong. While this strategy is not etched in stone, it
is desirable that all those who have shown unflinching commitment, co-operation and
mobilisation for this common cause do not falter, and it is essential that they make
their own contribution.
Cotton is produced in more than half of all African countries and is the economic
mainstay for some of them. Today, the crop is subject to strong – and unfair – competition.
This gives rise to serious budget deficits for the African economies dependent on
cotton and to abject poverty amongst rural populations.
The Sectorial Initiative in Favour of Cotton presented by Benin, Burkina Faso, Mali
and Chad has met with mixed reactions from the different delegations and negotiating
groups at the WTO, but it has garnered tremendous support from African delegations,
LDCs, the ACP group and Brazil. Other stakeholders have also espoused the cause,
seeing the resolution of this crisis within the framework of a “single undertaking”.
This is notably the case for certain members of the European Union, the United States
The proposed emergency support fund for cotton production and the deadline for
the elimination of agricultural subsidies, however, have not enjoyed the same success.
The idea of a support fund has been greeted with reticence while the timetable for the
elimination of subsidies has been deemed utopian.
Nevertheless, during a further meeting held on 18 May 2005 in Cotonou, the
International Monetary Fund (IMF) and other participants arrived at a consensus
regarding four points essential for Africa: the preservation of macroeconomic stability;
the use of development programmes to increase production and competitiveness;
the elimination of subsidies that have a distorting effect on trade and are prejudicial to
developing countries; and the protection of the poor during periods of adjustment.
32 african environment
The announcement that has recently been made regarding the cancellation of debt
for the poorest nations in the world, many of them in Africa, certainly has a direct
correlation with the solutions sought in the development aspects of the cotton case.
In other words, even though important concessions appear to have been made by the
Northern countries of the WTO, the success of the dossier should be measured in wider
Another positive aspect is that the participation of the smaller countries of the WTO
has been dramatically brought into perspective. It is no exaggeration to say that if the
thorny question of subsidies has found a privileged place in the July Package, with
firm commitments to reduce and even eliminate them, it is due in part to the pressure
brought to bear on the USA and the EU through the Sectorial Initiative.
Even if there is no guaranteed success in the short term, the Initiative is in itself a
success, for it has meant that numerous barriers have been broken down that would
otherwise have remained intact .
Last but not least, even though the timescales proposed in the 21 April 2005
document – for the elimination of domestic supports and export subsidies and the
creation of an emergency fund – are now obsolete, the claims remain topical and will
remain on the agenda.
As we approach the Ministerial Conference in Hong Kong, it is essential that we
are mobilised and that we act in order to put an end to the universally acknowledged
situation of unfair competition. The political support and declared will to resolve this
problem, as quickly as possible, and in a way that satisfies all parties must be translated
into concrete action. This is certainly one of the major issues at stake in Hong
Kong – not only for African cotton farmers but also, especially, for the credibility of
the WTO and the current trade negotiations.
The WTO ruling on the Brazil-US cotton dispute:
Implications for African countries and agriculture
Between 1999 and 2003, some 25,000 American cotton producers received a total
of US$12.47 billion in cotton subsidies. At the same time, more than 10 million
producers in West and Central Africa (WCA) faced a drop in their incomes following
the biggest collapse in world prices, in terms of constant price,1 since 1793.2
If the question of cotton subsidies occupies a special place today on the World
Trade Organisation (WTO)’s agenda, it is there because of a combination of factors
that have made it an example of the issues at stake in the current round of negotiations.
The case of cotton demonstrates the existing problem with trade rules and agriculture:
that some agricultural support programmes in the West have an adverse impact on the
trade in agricultural products on which farmers in developing countries depend.
Even though other agricultural products are affected, the case of cotton is one of
the most striking. The sums of money paid for the benefit of a minority of American
producers are incredible, and their impact on the price of international trading has been
recognised by the Dispute Settlement Body (DSB) of the WTO. It is essential to
remember that the countries that would benefit from fairer regulation of the cotton
market are amongst the Least Developed Countries (LDCs).
The fight over cotton is distinctive in that it is being carried out in parallel by Brazil
and by a group of West and Central African countries. While Brazil opted for the legal
route by filing a complaint with the WTO, the African countries adopted a political
approach by imposing the cotton issue on the agenda of the current round of WTO
negotiations. These two approaches in fact complement each other, by ensuring that
constant political pressure is maintained on the USA. Thus, it seems unlikely that an
agreement is possible at the WTO Ministerial Conference in Hong Kong in December,
unless the cotton issue is first resolved.
* Romain BENICCHIO is an economist and a political adviser on trade for Oxfam International, based
in Geneva, Switzerland.
1 “La compétitivité du coton de la zone franc dans le marché mondial”, Gérald ESTUR, Statistician
for the International Cotton Advisory Committee, speech made at the Ministerial meeting for regional
co-operation on the cotton industry in the WAEMU zone, 18 June 2003 in Ouagadougou, Burkina Faso.
2 Date of the invention of the cotton gin.
34 african environment
The Brazilian complaint and the DSB decision
In September 2002, Brazil filed a consultation request regarding cotton subsidies
paid to American producers: this is the first step in the dispute settlement system of the
WTO on the way to a formal complaint. On 21 March 2005, after a long and difficult
process, the reports by the panel and the Appellate Body of the WTO were adopted
by the organisation’s members, thus confirming the illegality of US cotton subsidies.
This date marks a milestone for two reasons:
• It is the first time that an international tribunal has proved that the agricultural
subsidies of developed countries have a negative impact on producers in developing
• By adopting these reports, WTO members legally confirmed the claims presented
in the Sectorial Initiative in Favour of cotton,3 submitted to the WTO in June 2003
by Benin, Burkina Faso, Mali and Chad.
The elements of the Brazilian complaint were multiple, but were based around two
major components. First, Brazil called into question the implementation by the USA
of the Uruguay Round Agreement signed in 1994. More particularly, Brazil considered
that the notification of the various US subsidy programmes was not in accordance with
the classification system in force under the WTO’s Agreement on Agriculture.
According to the Brazilian submission, the USA did not respect its commitments, and
several of its support programmes for cotton production should be considered illegal
Furthermore, the Brazilian complaint contended that US cotton subsidies were
creating serious prejudice for other cotton producers by “depressing prices to a significant
degree or preventing price increases, which otherwise would have occurred, to a
significant degree”, as stipulated in Article 6.3 of the Agreement on Subsidies.
By completely isolating US producers from market signals and by allowing them to
artificially increase their levels of production and exports, US subsidies have also had
the effect of pushing down global prices. Nevertheless, before it could consider the
substance of the Brazilian case on serious prejudice, the panel had to first consider
whether the complaint passed the peace clause test.
Economic impact or serious prejudice
Article 13 of the Agreement on Agriculture, better known as “the peace clause”,
is a measure which protected the majority of agricultural subsidies from complaint
under the Agreement on Subsidies, for a period of nine years.4 Even though this clause
has now expired, it was incumbent on the suing party to demonstrate that the level of
subsidies in question was higher than those observed in the reference year (1992).
3 TN/AG/GEN/4, http://docsonline.wto.org
4 The deadline for the peace clause was 31 December 2003.
The WTO ruling on the Brazil-US cotton dispute: What implications? 35
In the case of cotton, the WTO panel noted that the levels of US subsidies during
four consecutive years (1999–2002) were higher than those of the benchmark year, and
that the Brazilian complaint was therefore allowable. It was then possible to consider
the substance of Brazil’s case on serious prejudice.
Brazil’s claim in this context relates to the impact of US subsidies on international
trade. The correlation between US subsidies and the fall in cotton prices is at the core
of its complaint. According to the documents submitted by Brazil, US cotton subsidies
artificially raise the level of cotton production in the USA and artificially stimulate
exports. By extension, they lead to a reduction in global prices and a loss in market
share for other producers. Between 1998 and 2003, the USA’s share of global cotton
exports increased from 17 per cent to 42 per cent. This commercial success, however,
owed more to the generosity of the US government than to the competitiveness of
Indeed, in addition to the export subsidies highlighted by Brazil, US producers
have access to a whole series of domestic support programmes:
• Marketing loans, which are a short-term financing tool that allocates funds to
producers to help them meet their costs, while storing their harvest as security.
This programme guarantees an income of 52 cents per pound of cotton produced.
If world prices are lower than this level, the American government covers the
• Counter-cyclical payments, which are made on the basis of an indicative price of
72 cents per pound. These payments allow levels of production to be maintained
independent of the level of world prices.6
• Finally, the US government also offers subsidised insurance programmes to
cotton producers (against poor weather conditions, disease or price falls).7
The WTO panel ruled that three US programmes – counter-cyclical payments,
marketing loans and Step 2 payments (essentially an export subsidy scheme – see below),
which between them represented a total of $2.6 billion dollars in 2002/03 – caused
serious prejudice to other cotton exporting countries by “preventing a significant rise
in world prices”.8 The Appellate Body confirmed its findings.
Neither the panel nor the Appellate Body set a specific deadline for the elimination
of the negative effects of these subsidies. Nevertheless, Article 7.9 of the Agreement
on Subsidies stipulates that the party concerned has a deadline of six months from the
date on which the DSB adopts the report of the Appellate Body, to take appropriate
measures to eliminate the negative effects of subsidies or to eliminate the subsidies
themselves. The DSB adopted the reports on US cotton subsidies by the panel and the
Appellate Body on 21 March 2005: therefore the USA should have taken the necessary
measures before 21 September 2005.
5 US$ 898 million was spent under this programme in 2002/03.
6 US$ 1.309 billion was spent under this programme in 2002/03.
7 For a total of US$194.1 million in 2002/03.
8 WT/DS267/R, p.411, http://docsonline.wto.org,
36 african environment
Export credit guarantee programmes, for cotton and for the majority of other
agricultural products (e.g. rice, maize, soya) have been called into question by Brazil in
the context of the cotton case. These programmes, which guarantee the reimbursement of
dollar loans contracted by importers of US agricultural products, covered US$1.6 billion
of cotton exports over the four years being considered by the panel. The relative costs
of these programmes were not covered by the amounts invoiced to the importers, so
the panel classified them as export subsidies.
The “Step 2” programme, designed specifically for American cotton exporters,
aims to maintain export prices at the same level as those of competitors with the lowest
production costs. It allows the difference between the higher price of cotton from the
USA and world prices to be covered, thus guaranteeing the relative competitiveness
of US exports of cotton. In 2002/03, US$415 million was paid out under the Step 2
programme. The panel has demonstrated that this programme should be classified as
an export subsidy and should not be placed in the Amber Box category.
Since the USA did not reserve the right to use export subsidies for cotton under the
Agreement on Agriculture, the panel declared that these programmes were prohibited
subsidies under the Agreement on Subsidies and should consequently be abolished.
In accordance with Article 4.7 of the Agreement on Subsidies, the implementation
deadline set by the panel, and confirmed by the Appellate Body, for the withdrawal of
these measures was 1 July 2005.9
Direct payments and the Green Box
The Brazilian case also called into question direct payments. These are paid to
producers on the basis of historic acreage and yields recorded between 1998 and 2001.
They are independent of world prices and the beneficiaries do not even have to
continue to produce cotton, or any other agricultural product, to receive them. Direct
payments represent around 6 cents per pound of US cotton production, which in
2002/03 equated to a total of US$617 million.
The current WTO rules do not limit the capacity of WTO members to have recourse
to subsidies that have minimal trade-distorting effects – for example, subsidies that
finance agricultural research or preserve the environment. Such payments, which are
not subject to reduction commitments, are notified to the WTO by member countries
as being part of the Green Box. The WTO panel has, however, recognised that these
direct payments do not meet all of the criteria for the Green Box, and more particularly
paragraphs 6(a) and 6(b) of Annex 2 of the Agreement on Agriculture. Specifically, it
highlights direct payments that limit the flexibility of cultivation, i.e. a ban on cultivating
fruits, vegetables and wild rice, on land that benefits from such payments.
9 WT/DS267/R, http://docsonline.wto.org
The WTO ruling on the Brazil-US cotton dispute: What implications? 37
This decision by the panel has two important implications. First, it means that
the USA will have to reclassify these programmes into the Amber Box, and thus
risk exceeding the authorised limits for this category. Second, it implies that direct
payments have been included in the peace clause deliberations.
The implementation of the ruling and the limitations of third party status
Once the principle has been recognised that US cotton subsidies are illegal, it
remains to be determined what the impact of abolishing these programmes will be.
Even though the exact consequences of such a move vary according to the different
modelling exercises employed, most of them nevertheless agree that the impact on
world prices, as well as on US exports, would be significant.
The estimates presented to the panel by Brazil emphasised that in the absence of
subsidies over the period 1999–2002, US cotton production would have been reduced,
on average, by around 29 per cent, while exports would have decreased by about
41 per cent. During the same period, world cotton prices would, on average, have
increased by around 12.6 per cent.10 While Brazil estimates that is suffered losses of
up to US$478 million as a result of US subsidies over the period 1999–2002, African
cotton-producing countries remain the worst affected. In West Africa alone, 10 million
people depend on cotton for their livelihoods. Oxfam has estimated that Africa as
a whole is losing more than US$400 million a year due to distortions in the cotton
Similarly, the elimination of US cotton subsides for the period 2003–07 would
have allowed an increase in global prices of around 10.8 per cent.12 The same study
demonstrates that the programmes that have the greatest impact on world prices
are marketing loans, counter-cyclical payments and Step 2. Over this same period,
US exports would have fallen by about 44 per cent, thus creating new opportunities in
terms of market share for African producers.
Even though these figures illustrate the need for large-scale reforms in the USA,
and although the WTO decision offers an opportunity for the US administration to
revise its cotton support programmes, implementation of this decision involves a
legislative process that risks postponing the elimination of the programmes. It should
also be pointed out that, even if some African countries have participated in the
Brazilian complaint as third parties, they would not be involved in the implementation
phase of the decision. This underlines the limitations of third party status.
10 Statistics from the Brazilian submission:
11 “Who will be left to cheer the end of illegal US subsidies?”, Oxfam International briefing note, 3 March 2005.
12 Sumner Daniel, “A quantitative simulation analysis of the impact of U.S. cotton subsidies on cotton prices
and quantities”, presentation to the WTO cotton panel.
38 african environment
Third party status
While the decision of Benin and Chad to participate in the Brazilian complaint as
third parties should be put into the wider context of their strategy on cotton, it also
illustrates the limitations of the WTO dispute settlement system in its current format.
Even though the question of African countries participating alongside Brazil as
complainants was first raised in 2002, the technical, financial and especially political
obstacles inherent in the legal process have clearly acted as barriers for countries in
West and Central Africa.
The WTO celebrated its tenth year of existence in 2005 and is regularly championed
as a major step forward in the multilateral trade system, but it is important to remember
that no LDC has yet taken part in a case as a complainant. Virtually the same is true
of the participation of LDCs as third parties: there has been only one single instance
between 1995 and 2003.13 Even though these statistics raise questions about the dispute
settlement system in its current form, they also emphasise the importance of Benin and
Chad participating as third parties in the Brazilian complaint.
The participation of WCA countries was essential in allowing the panel to consider
the impact of US cotton subsidies on countries beyond Brazil. The Understanding on
Rules and Procedures Governing the Settlement of Disputes14 defines in its Article 10
the status of “third party”. It stipulates that: “Any Member having a substantial interest
in a matter before a panel […] shall have an opportunity to be heard by the panel and
to make written submissions to the panel. These submissions shall also be given to the
parties to the dispute and shall be reflected in the panel report.”
The panel and the appeal body of the WTO thus heard evidence provided by Benin
and Chad regarding the effects of US cotton subsidies. This evidence complemented
the arguments supplied by Brazil and emphasised the fact that the negative impact of
cotton subsidies are not confined to one single country. Similarly, the submissions of
Benin and Chad15 to the panel allowed some of the essential points contained in the
Sectorial Initiative in Favour of Cotton to be brought out.
Both countries highlighted the importance of cotton to their economies (it accounts
for 75 per cent of exports in Benin and 25 per cent in Chad), before presenting
various studies demonstrating the difficulties encountered by African producers as a
result of US cotton subsidies. Benin also stated in its submission that it “did not seek to
obtain special and differential treatment in the context of this present dispute”. It simply
asked the panel to ensure that the “relevant measures of the WTO Agreements […]
should be interpreted in the spirit in which they had been negotiated.” 16
13 Towards A Development-Supportive Dispute Settlement System in the WTO, ICSTD, 2003.
14 Annex 2 of the Uruguay Round of Agreements. http://www.wto.org/english/docs_e/legal_e/28-dsu.pdf
15 Annexes B36, C7, E17, F19, J3 and J14 of the panel report (WT/DS267/R).
16 WT/DS267/R/Add.1, p. C16.
The WTO ruling on the Brazil-US cotton dispute: What implications? 39
However, even though the participation of Chad and Benin meant they were able
to provide evidence to the panel, this status does not provide the same rights as those
of the party bringing the complaint. Thus, in the event that the decision adopted by the
DSB is not implemented, the imposition of retaliatory measures is not a possibility
offered to third parties. This underlines the limitations of third party status and shows
that the African countries are now dependent on an implementation of the DSB decision
in good faith by the USA or, if this fails, on the political pressure that Brazil is able
to exert on the USA to withdraw its illegal programmes through the imposition of
Implementation of the decision
Even though a rapid implementation of the WTO decision would have a significant
positive impact on other producing countries as a result of increasing global prices and
opportunities in market share, the intentions of the US government and Congress as
yet remain unclear. In accordance with the dates fixed by the panel and confirmed by
the Appellate Body for the elimination of illegal subsidies, the Bush administration has
already introduced an administrative reform of the export credit guarantee programme,
on 30 June 2005.17
Nevertheless, this reform is insufficient as far as these guarantee programmes are
concerned and, furthermore, has not addressed the Step 2 programme, which should also
have been eliminated by this date. On 5 July 2005, the US authorities finally presented
a second proposal, which should allow the USA to respect the DSB’s decision on illegal
subsidies, notably by proposing an elimination of Step 2.18 However, this proposal has
first to be introduced to Congress, and then voted on. It is difficult at the moment
to predict the outcome of the issue, let alone to be able to set a precise timeline for
the adoption of any new measures. This means that the elimination of cotton export
subsidies currently remains more of a possibility than a certainty.
Faced with the US government’s inability to eliminate its illegal programmes by
1 July 2005, Brazil requested authorisation to take retaliatory measures against the USA
during the DSB’s meeting on 15 July 2005.19 However, Brazil recognised that the US
administration had made a first step by submitting its reform proposal to Congress and
so signed a bilateral accord with the US side, which led to the arbitration procedure
being suspended in order to give the USA more time to follow through the legislative
process for eliminating the subsidies.20 It is important to note that this bilateral agreement
guarantees Brazil’s rights to take appropriate measures in the case of unsatisfactory
implementation. Brazil also made clear at the DSB meeting in July that the agreement
applied only to the finding on prohibited subsidies, and did not excuse the USA from
taking the necessary measures on subsidy programmes causing serious prejudice
between then and 21 September 2005.
18 US Department of Agriculture, press release No. 0242.05, 5 July 2005.
19 WT/DS267/21, http://docsonline.wto.org
20 WT/DS267/22, http://docsonline.wto.org
40 african environment
Finally, it should not be forgotten that the two subsidy programmes declared illegal
by the DSB were apparently the least sensitive ones politically. The principle of a
reform of the export credit guarantee programmes had already been accepted in the
context of the current WTO negotiations on export subsidies. Moreover, the fact that
the Step 2 programme applies only to cotton, unlike other support programmes called
into question by this case, ought to make its elimination politically easier.
The stumbling blocks encountered at this stage in the implementation process are
therefore bad omens for the future. Indeed, the USA must still eliminate or drastically
reform its counter-cyclical payments and marketing loans. Given that these two
programmes represent more than 60 per cent of all subsidies paid to US cotton producers
in 2002/03, the Bush administration will have to show a real political commitment to
obtain their elimination.
The good news is that Brazil appears determined to make full use of its rights.
It has already announced that it plans to suspend some of its obligations under the
Treaty on Trade-Related Aspects of Intellectual Property Rights,21 if the USA does not
respect its obligations.
The imposition of retaliatory measures could have two objectives: to obtain financial
compensation, or to exercise political pressure through targeted measures in order to
obtain implementation of the DSB’s decision. In the present case, it is likely that Brazil
is seeking to obtain an elimination of cotton subsidies that have been judged illegal.
It would indeed be difficult for the US administration to defend subsidies paid to a
minority of cotton producers, if Brazil suspended its obligations to open its market to
services and other US industries saw their access to Brazilian markets reduced.
Implications for the Sectoral Initiative in Favour of Cotton and the Doha
Since Cancùn, the Sectoral Initiative in Favour of Cotton has remained one of the
key issues on the WTO’s agenda, together with agricultural negotiations, industrial
tariffs and services. The recent ministerial meetings of the LDCs and the African
Union have reaffirmed the support of developing countries for the cotton issue.
Nevertheless, even though the Framework Agreement adopted by the WTO General
Council on 1 August 2004 includes a commitment to deal with cotton in an “ambitious,
expeditious and specific manner” 22 within the agriculture negotiations, hardly any
progress has been made since that date. Several meetings of the Cotton Sub Committee
have been held during 2005, but no negotiations have taken place on the core issues.
It has been suggested that the lack of progress on the agriculture dossier as a whole
is holding back any solution on cotton, thus linking any specific progress on cotton to
a wider consensus on agriculture. There are two objections to this: first, this approach
goes completely against the July Framework Agreement and, second, it does not take
21 WT/DS267/21, http://docsonline.wto.org
22 WT/L/579, http://docsonline.wto.org
The WTO ruling on the Brazil-US cotton dispute: What implications? 41
into account the fact that the programmes called into question by the Sectorial
Initiative have been declared illegal by the DSB. Furthermore, despite the fact that
African countries have been flexible on procedural issues, accepting that the issue
be transferred to the agriculture negotiations last July, they are unlikely to sign any
possible agreement in the Doha Round that does not respond to their legitimate
The very relative progress that has been seen, both in the negotiations and in
the implementation of the DSB decision, strengthens the links between the objectives
of the Brazilian complaint and the African Sectorial Initiative in Favour of Cotton.
Thus co-ordination between the various stakeholders is essential in the context of
a substantive solution on cotton, either through the implementation of the DSB’s
decision, or in the framework of an agreement at the next Ministerial meeting of the
The latest “Proposed Elements of Modalities in Connection with the Sectorial
Initiative in Favour of Cotton”, presented by the African group in April 2005, is a perfect
example of this.23. The implementation dates proposed for the elimination of export
subsidies and other internal support measures that have a distorting impact on trade
are coherent with the dates fixed by the panel and the Appellate Body. Similarly,
Brazil and its partners in the G20 support without reserve the African position in the
meetings of the Cotton Sub-Committee. Nevertheless, it should be noted that the USA
has still made no written response to the new African proposal, corroborating doubts
over its willingness to make commitments within the sub-committee.
The USA has every interest in replying to the demands of these countries and
reforming its cotton production support programmes before the end of the year.
Otherwise, the risk of seeing the Hong Kong conference stumbling over cotton is very
real. In addition to bearing the responsibility for this failure, the USA would also have
to face the imposition of counter-measures by Brazil.
Cotton in perspective: what are the implications for the Doha Round?
The Brazilian complaint on cotton is part of a wider strategy by that country regarding
the WTO, as it aims to attack dumping created by the agricultural support policies of
the USA and the European Union. In parallel with its cotton complaint, Brazil has also
filed a complaint against the EU’s sugar policy. Furthermore, Brazil is now a major
player in negotiations on agriculture, through its involvement in the G20. This group,
active since the summer of 2003, has presented proposals on the three pillars
of agriculture negotiations and constitutes a counterweight to the USA and the EU,
particularly on issues of export subsidies and domestic supports.
23 TN/AG/SCC/GEN/2, http://docsonline.wto.org
42 african environment
The decision of the WTO on cotton reinforces politically the claims put forward by
Brazil and other developing countries against certain agricultural subsidies. The fact
that it has been proved that the USA (in the cotton dispute) and the EU (in the sugar
dispute) are contravening WTO regulations seriously weakens their political positions
during negotiations. Consequently, is there any reason that developing countries
should continue to make concessions during the Doha Round, if it is obvious that the
WTO members maintaining the biggest subsidies have not respected the relatively
modest commitments that they subscribed to in the Uruguay Round?
As regards domestic support measures, the decision of the WTO panel clearly
demonstrates that the subsidy programmes currently used by the USA have disastrous
consequences for world markets. This strengthens the position of those who are
demanding large-scale reductions in all forms of domestic support in the current round
of negotiations. More specifically, the decision on cotton shows that latitude in the
definition of the Blue Box, allowing for a reclassification of US counter-cyclical
payments, would go against the objectives of the Doha Round. In addition, on the
basis of the Framework Agreement of July 2004, such a redefinition would allow
the United States to increase its agricultural subsidies at the end of the current round
Similarly, one of the key demands of developing countries is to obtain a more
restrictive redefinition of the criteria for subsidies placed in the Green Box category.
The cotton panel’s report supports these countries by showing that certain payments
currently classified in the Green Box have an influence on levels of production
and have a trade-distorting impact. This certainly calls for an in-depth re-examination
of all payments currently classed as Green Box, in order to ensure that they really
measure up to the objectives of rural development, protection of small farmers or
protection of the environment, which payments in this category are supposed to
Beyond its impact on the agricultural negotiations, the DSB’s decision on cotton
subsidies has given an undeniable legal base to the Sectorial Initiative in Favour of
Cotton. Nevertheless, the delays inherent in the WTO process, whether in negotiations
or in the dispute settlement system, make it an inadequate mechanism for a response
to the urgent situation of African producers. The credibility of the multilateral trade
system depends on the ability of the WTO to respond to the demands of all its
members, and within reasonable time limits. It is therefore imperative that the
demands of African countries with regard to cotton find a Favourable outcome before
the Ministerial meeting in Hong Kong. A solution on cotton is now a prerequisite
to an agreement in the Doha Round.
24 cf. “A Round for free, how rich countries are getting a free ride on agricultural subsidies at the WTO”,
Oxfam Briefing Paper No.76, juin 2005.
Actors, Strategies and Alliances
The African cotton set in Cancùn: a look back at the
beginning of negotiations*
and Kako NUBUKPO**
In late April 2003, Benin, Burkina Faso, Mali and Chad submitted a negotiating
proposal to the WTO entitled “Poverty Reduction: Sectoral Initiative in Favour of
Cotton”. In September 2003, at the Cancùn WTO Ministerial Conference, Africa took
centre stage in the discussions on cotton. As the standard-bearers of West and Central
Africa (WCA), the four co-sponsors of the initiative symbolise the contradictions
inherent in the current conditions for cotton production throughout the world and, by
extension, the parameters for the integration of African countries into a globalised
World cotton production stands at around 20 million tonnes of cotton fibre annually.
The main producing countries are China, the United States, India, Pakistan and, to a
lesser extent, Uzbekistan and Turkey. Asia is the focal point for cotton
production and industrial consumption. The European Union and the non-producing
countries of Southeast Asia are the traditional importers of cotton, and they have
recently been joined by the major Asian producing countries (China, India and Pakistan),
whose consumption is outstripping production. The main exporting countries for
cotton fibre are the USA, significantly the largest with close to 40 per cent of the world
market, followed by francophone Africa (around 15 per cent), Uzbekistan (13 per cent)
and Australia (10 per cent).
The basic facts of the problem present a polarised situation. On the one hand, cotton
constitutes 30–40 per cent of export earnings for the four WCA countries that proposed
the Sectoral Initiative. Their production stood at around 1 million tonnes in 2002, or
17 per cent of the global market, as opposed to 4 per cent in 1980. Cotton is a source
of livelihood for 10 million people in these countries and can be considered one of the
rare African success stories. On the other hand, the two economic superpowers, the
USA and the EU, are disrupting the global market by subsidising their cotton producers.
*This article reviews and brings up to date issues initially examined in issue 28 of the journal “Politique
Africaine”, October 2004.
** Denis PESCHE is a sociologist and Kako NUBUKPO is an economist. Both are part of the ARENA
Collective Action, Policies and Markets research unit of the Centre for Cooperation in International
Research for Agricultural Development (CIRAD), based in Montpellier, France.They would like to thank
Maurice Oudet (ABC Burkina Faso) and Eric Hazard (ENDA Diapol) for all their information and
comments, without which this article would certainly have lacked a certain zest.
46 environnement africain
The USA accounts for 40 per cent of global cotton trading and allocates 68 per cent of
global subsidies to its 25,000 producers.1 Even though it does not export any cotton,
the EU, with its mere 2.5 per cent production level, still provides 18 per cent of the
global subsidies granted for the crop. Other countries too subsidise cotton production
(e.g. China, Turkey), but in a much less obvious way and their action does not, a priori,
appear to disrupt the global market.
According to analysts, the 2001 downturn in cotton prices is largely to be attributed
to the US policy of subsidies for its cotton producers. Comparisons of the relevant
figures, exposing the disproportions and blatant inequity involved, won widespread
sympathy and much support for the African initiative at the Cancùn Conference.
The main stumbling block at Cancùn was the refusal of developing countries to debate
the “Singapore issues”, such as competition, investment, facilitation of trade and
transparency of public markets, which were a crucial sticking point between them and
the the EU. However, it was the disagreements over agricultural issues in general,
and on cotton in particular, that shaped the course of debate during the conference.
For the first time, international trade negotiations faltered over an African claim,
which was deemed legitimate by the majority of countries.
This unprecedented situation raises many questions. How did we get here, and
with the ongoing cotton debate, has Africa reached a new stage in its development,
with new capacities that would carry weight in international negotiations? What were
the motives of the stakeholders who took the lead in preparations for the Cancùn
conference? What was the starting point of this process? Have Africans allowed
themselves to be dragged into a liberal crusade against agricultural subsidies? And
now, two years after Cancùn, what prospects are in store for African countries and for
their cotton farmers, in concrete terms? What lessons can be learnt from analysing the
various gameplans that exist in the realm of international negotiations?
First, this article will briefly examine the relative significance of the “instrumentalisation
theory” in order to understand what appears to have happened at Cancùn. This will be
followed by an examination of the origins of the conference and the creation of the
“cotton case”. This will allow a closer analysis of the motives and show the chain of
events that culminated in the dossier. Initially set in motion by farmers’ representatives,
the dossier was introduced into the arena of trade negotiations with the support of
international NGOs, cotton companies and liberal agro-exporting countries. Finally, a
few lessons will be drawn on how to analyse the process of building alliances and
1 According to Oxfam International, US subsidies topped US$3.9 billion in 2001/02, double the 1992
level. This figure is higher than the GDP of Burkina Faso, and higher than the production value of the
25,000 American cotton producers. Three-quarters of these subsidies benefit just 10 per cent of the biggest
American planters. Oxfam International (2002), “Cultivating Poverty: The Impact of US Cotton Subsidies
on Africa”, OI briefing paper no.30, p.37.
The African cotton set in Cancùn: a look back at the beginning of negotiations 47
Is the cotton case just a decoy?
In order to analyse what has happened, one should bear in mind that lurking
behind the perceived strength of the African position is the alternative theory of
instrumentalisation, aimed beyond Africa and cotton at other goals.
In certain respects, the cotton question might appear to be a Trojan horse for
wider or different conflicts. On the one hand, several countries, well-known for their
liberal position, were quick to support the Africans on their position, especially on the
abolition of agricultural subsidies (this is true, for example, of Canada, Australia and
Argentina, who are active members of the Cairns Group). This looming threat could
explain a certain reticence on the part of the EU to make a firm commitment to
supporting the cotton case at Cancùn, fearing harsh criticism of the reform process
for its own Common Agricultural Policy (CAP). On the other hand, civil society
organisations also quickly seized on the cotton case, recognising it as a classic
textbook case that highlighted the inconsistencies between the trade policies and the
overseas development policies of the EU and the USA. For a number of NGOs,
cotton is also an ideal communications medium to challenge the legitimacy of the
international institutions that regulate trade and economic development.
For African states, the cotton case offered a good opportunity to boost their profile.
The WCA governments and their representatives appeared on the international stage
as heroes of the fight against poverty and champions of their people, despite the fact
that examples abound of their failings in the areas of economic and social development
within their own countries.
A scrutiny of the origins of the cotton case illustrates that African society is
veering more and more towards the informal sector. Farmers’ associations, NGOs and
cotton companies are coming together to make their legitimate demands heard, even
though by their very nature they tend to compromise the credibility of the African state
from within. The denunciation of an external enemy and the identification of a simple
target (US subsidies) allow African states to gloss over any analysis of their own
responsibilities regarding the difficulties facing their cotton industries. Finally, by
belatedly seizing on a cause initially brought up by cotton farmers’ organisations,
the African states demonstrated their ability to find a place in the general context of
privatisation. However, they also displayed the difficulty they faced in being proactive
and proposing their own agenda and vision of development.
Even though it would probably be over-simplistic to advance the theory that Africa
was instrumentalised at Cancùn, one must not lose sight of the fact that African countries,
undermined by 25 years of structural adjustment, are the underdogs when it comes
to international trade negotiations, not only vis à vis the major powers, but also
the emerging ones (grouped together at Cancùn in the G202). These countries have the
productive base and the capacity to react to global market indicators that surpass by
far the meagre assets of the African economies, at least in the short term.
2 The G20 groups together Argentina, Bolivia, Brazil, Chile, China, Cuba, Egypt, Guatemala, India,
Indonesia, Mexico, Nigeria, Pakistan, Paraguay, the Philippines, South Africa, Tanzania, Thailand,
Uruguay, Venezuela and Zimbabwe.
48 african environment
Thus, caught between different trading powers looking to increase their global
market shares, and with governments seeking legitimacy, the African cotton farmers
appear at first glance to have set in motion a process that they do not necessarily control.
However, it helps to put the facts of the theory of instrumentalisation into perspective,
and to be wary of appearances. Indeed, an in-depth analysis of the process leading
up to Cancùn shows the intricate interplay of interests amongst those involved and
compels us to look at the evolution of relationships between governments and civil
societies in Africa3 and, equally, at the relationships between Southern countries and
those from the North. Thus, to bestow overriding importance on the instrumentalisation
games that took place could overshadow recognition of the fact that committed African
stakeholders were strengthened in the process that contributed to the failure of the
Cancùn conference, and would be to disregard the learning curves that arose from
confrontation between the various stakeholders.
The evolution of the cotton case
In November 2001, African cotton producers were the first to step forward on the
international stage with a declaration denouncing the negative effects of US and
European subsidies on cotton prices. Under the leadership of the national union of
cotton farmers of Burkina Faso (UNPCB), four other farmers’ organisations
(from Benin, Mali and Cameroon, followed by Madagascar at the beginning of 2002)
committed themselves internationally and challenged their respective governments on
the issue. The declaration emphasised the contradictions that existed between trade
policies and development policies. “As soon as it came to fighting poverty, West
African cotton farmers immediately understood that it would only be through their
own efforts that they could change their lot in life. They set to work and no sooner had
they managed to top their production figures than the world cotton prices suddenly
crashed. We have to ask ourselves if there is a real will amongst the rich countries to
reduce poverty amongst poor countries.”4
At about the same time, in February 2002, a study carried out by two NGOs5 on
the sustainability of cotton industries in Africa brought together cotton farmers’
representatives in Dakar. During this meeting, contacts were forged between the
producer organisations (POs) and the NGOs; their objective was to be more visible
at international meetings on cotton and to make known the position of the producers.
The POs and the NGOs were invited to a meeting on the future of the cotton industry
organised in Lomé, Togo by the West African Development Bank, although of the
180 participants, only three were producers.
3 This is the theory put forward by Eric Hazard, in Hazard E, (2004), De Bobo à Cancun, deux ans de
campagne sur le coton: bilan et perspectives avant Genève, ENDA Diapol, Dakar, p.13.
4 See the declaration on the website http://www.abcburkina.net/coton.htm. This website, managed
by Maurice Oudet in Burkina Faso, has played an important role in making the African cotton producers’
initiative known and in garnering support for it.
5 ENDA Prospectives Dialogues Politiques (Senegal) and Oxfam UK. This work culminated in a study
(of which 2,500 copies were published) entitled “Production cotonnière et conditions de vie en milieu
rural en Afrique de l’Ouest” by Peter Ton, Etudes et Recherches, n°219, 2001, Enda, Dakar, p.87.
The African cotton set in Cancùn: a look back at the beginning of negotiations 49
This scenario puts into question the mechanisms in place for representing African
producers through the auspices of their organisations. Briefly, tensions can be identified
within the West African farmers’ movement between a vertical logic, which concentrates
on defending specific interests, often structured around a single product and based on
an economic (or industrial) logic, and a horizontal or cross-cutting thinking, aimed at
defending and promoting an agricultural model based on the family concern (the vision
defended by ROPPA6). These two ways of thinking are inherent in the creation of most
of the producers’ organisations. The word “tension” should be understood in the sense
of a dynamic of creation and not as a binary opposition between two ways of thinking,
embodied by the organisations or by specific individuals.
The Conference of West and Central African Ministers of Agriculture (CMA/CWA)
organised a meeting in June 2002 in Abidjan, where the cotton case started to take
shape, along with the involvement of producers’ representatives, backed by NGOs.
At the time, the demands of African producers were not taken seriously at an international
level and African governments were divided in their approach towards rich countries.
Some advocated attacking the EU and the USA at the WTO by complaining to the DSB
(Dispute Settlement Body) and running the risk of reprisals, while others counselled
seeking to negotiate directly. In the end it was decided that the second option should
be adopted. At the end of June 2002 in Abidjan, CMA/CWA was mandated to analyse
the impact of subsidies on cotton industries and to negotiate with the USA and the EU.
Following the Abidjan meeting, the African Cotton Association (ACA) was created,
bringing together the main cotton groups of the sub-region. The formulation of a clear
agenda on the international front (i.e. abolishing subsidies linked to cotton) facilitated
new alliances between cotton companies and representatives of West African producers
who were members of national platforms affiliated to ROPPA.
The process gained momentum in September 2002, with the complaint lodged at the
WTO by Brazil against the USA on cotton subsidies, and the publication of a damning
report prepared by Oxfam International.7 In addition to the findings of CMA/CWA,
WAEMU (the West African Economic and Monetary Union) and ECOWAS (the
Economic Community of West African States) published similar studies, detailing the
impact of subsidies on African cotton production. Ablasse Ouedraogo of Burkina Faso,
who finished his tour of duty as assistant director-general of the WTO in November
2002, offered his services to WAEMU. A Geneva-based office, IDEAS, headed by
Arthur Dunkel (former director-general of GATT (General Agreement on Tariffs and
Trade)), lent its expertise to the African negotiators in Geneva. The outcome of all this
was the submission of the Cotton Initiative to the WTO by the four African countries
on 30 April 2003, initially with the support of ECOWAS and then, later, of WAEMU.
6 Réseau des organisations paysannes et de producteurs agricoles d’Afrique de l’Ouest (ROPPA),
a network of West African farmers’ organisations and agricultural producers, was created in July 2000
and brought together farmers’ organisations from ten West African countries. Its general mandate is to
represent its members at both regional and international levels (see www.roppa-ao.org).
7 Oxfam International (2002), Cultivating Poverty: The Impact of US Cotton Subsidies on Africa, Oxfam
Briefing Paper no. 30, p.37.
50 african environment
Another Geneva institution, ICTSD (International Centre for Trade and Sustainable
Development), also played a pivotal role in supporting the process, underlining the
growing influence of NGOs on international trade negotiations.
The tardy commitment of African governments could be interpreted as the result
of growing pressure from cotton producers, supported by the NGOs and the media, who
used African sub-regional forums to disseminate their messages. Farmers’ representatives
and NGOs8 succeeded in building up a network of support, bringing together diverse
expertise centred on Geneva-based offices that specialised in supporting developing
countries in international trade negotiations (“the Geneva Group”). In this way, a link
was made between African negotiators and WTO headquarters. Despite the enthusiasm
of African representatives to the WTO, the mechanisms in place were quite fragile,
since only two of the four countries involved had a permanent ambassador to Geneva:
Benin, which oversees co-ordination between the four countries, and Mali. In addition,
Burkina Faso charged its permanent ambassador to Brussels to deal with this issue.
The need for these ambassadors to refer to their capitals to consult on political
decisions further complicated their work, whilst limiting their capacity to react in a
However, African unity behind the cotton case did little to hide the rivalries that
escalated in the run-up to the conference. In June 2003, the release of the WAEMU
study gave rise to heated debate amongst experts on the approach to be adopted in the
two months leading up to Cancùn. At stake was control over the expertise to the
African negotiators on the cotton case. Rivalries were also stoked by appreciable divi-
sions in international outlooks, with a range of positions running from liberal options
to an extreme of anti-globalisation, with more pragmatic attitudes in the middle. A
final preparatory meeting was organised in Saly, Senegal, and involved all the African
stakeholders, with a view to building a coherent strategy to defend the cotton case in
Cancùn. Tension was also perceptible between ECOWAS and WAEMU: the plethora
of sub-regional forums and their rivalries doubtless helped to open up gaps for the
producers and the NGOs, who were adept at using the regional organisations to
increase pressure on their governments and to consolidate their positions.
Despite these divisions and the heightened tension a few months before the meeting,
Africa and cotton were at the centre of the agenda at the Cancùn conference. Just before
the conference began, a “cotton tour” was organised in France, Belgium, Holland and
then the USA, involving representatives from the WCA countries. These meetings ensured
that the main points of the cotton case were transmitted to the general public and that
dialogue was initiated with political representatives. A petition from 250,000 African
producers was submitted to the African trade ministers going to Cancùn, maintaining
pressure on them to defend the cotton case.
8 Mainly Oxfam and ENDA Diapol, which built alliances with Geneva-based organisations e.g. ICTSD,
ACICI. Other NGOs and civil society organisations were involved, though less directly, prior to Cancun.
The African cotton set in Cancùn: a look back at the beginning of negotiations 51
The failure of Cancùn
Two days prior to the opening of the conference, a “cotton day” was organised
under the auspices of the German Overseas Ministry, which allowed delegates to test
their arguments and to begin wooing the media.9 At the opening of the conference,
the four ministers from the African countries submitted the cotton text to the WTO.
The EU delegation sought to shirk its responsibilities by arguing that its members were
not cotton-exporting countries and did not have support mechanisms for exports. The
USA, the main target of the cotton case’s demands, rejected any idea of concessions
on subsidies and proposed a wider approach encompassing cotton and textiles.
The importance given to the dossier was undeniable: the director-general of the WTO
was invited by the chairman of the conference – the Mexican Foreign Affairs Minister,
Luis Ernesto Derbez – to personally conduct consultations on it with all the countries
involved. Press conferences and a number of bilateral meetings punctuated the few
days of the conference. However, the revised draft of the ministerial declaration
practically repeated the proposals made by the US delegation, whereas the African
partners had in fact rejected this in its entirety.
The first problem confronting the conference chairman was the choice of a suitable
text for discussion. A dispute over agricultural issues had set several developing
countries on a collision course with the EU and the USA over a draft text published by
the WTO on 24 August, which was intended to serve as a basis for negotiations in
Cancùn. In order to break the deadlock, a group of countries – the G20, which included
Brazil, China and India – submitted a new text, followed by another drawn up by
the African countries. A solution was proposed by the chairman, but this turned out
be fraught with pitfalls. The idea was to break up the discussions into five distinct
working groups: agriculture, development, non-agricultural products market access,
the “Singapore issues”, and other questions. The facilitators designated to preside over
each working group were tasked with the responsibility of drawing up draft projects,
based on the deliberations within their respective groups. The result of this system was
a total breakdown in the negotiations.
The centre of activities quickly moved from the negotiating rooms to places were
informal contacts could be made. The concrete outcome of the situation was the
creation of a new alliance, the G90, which brought together Least Developed
Countries (LDCs), countries of the African Union (AU) and countries from the
African, Caribbean and Pacific states (ACP). It also led to the formation of an
EU/USA coalition that insisted on discussions on the so-called “Singapore issues” as
a prerequisite for any possible concessions on other subjects, notably in agriculture.
9 Information regarding the Cancun conference was taken from Hazard E., (2004), De Bobo à Cancun,
deux ans de campagne sur le coton: bilan et perspectives avant Genève, ENDA Diapol, Dakar, p.13; from
an interview with the author; and from several interviews carried out by the cotton observatory with
African agricultural leaders present at the conference (for a presentation on the cotton observatory see
52 african environment
With the intransigence of the different groups of stakeholders and the limited
timeframe of the conference (10–14 September 2003), the meeting ended in deadlock.
This fittingly summed up the declared objectives, hidden hopes and perhaps the ulterior
motives of the various stakeholders.
What are the stakes post-Cancùn?
Not long after Cancùn, cotton was adopted as one of the four priority issues to be dealt
with by the WTO. Two contradictory arguments were at play. First, there was
disagreement over the proposal to include cotton within the larger context of agricultural
negotiations. The USA and the EU10 were in favour of this option, while African countries
opposed it, fearing that cotton would lose its specific status and that this would delay
the adoption of concrete decisions. However, it was the option to include cotton
issues in the wider agricultural dossier that gained the upper hand after the July 2004
negotiations. Second, international discussions as a rule distinguish between questions
of trade and questions of development. Thus the unity of the African initiative
in favour of cotton found itself torn between the trade aspect (subsidies) and the
development aspect (financial commitments in favour of cotton industries). African
countries sought to oppose this division, while international organisations advocated
for a separation of the two issues, while highlighting the links between them.
Paradoxically, having referred the questions of development back to the Bretton
Woods institutions, in March 2004 the WTO took the initiative, holding a meeting on
the cotton industry in Cotonou. Does this about-turn illustrate the institution’s unease,
and its desire to cover up the lack of progress on trade questions?
Since Cancùn, cotton has continued to mobilise stakeholders, albeit as an item on the
“development” agenda. France, then the EU, sought the support of the donor community
to consider actions aimed at strengthening the African cotton industries. The EU
forum, “Africa on Cotton”, which was held in Paris at the beginning of July 2004,
focused almost exclusively on issues related to the development of the cotton industries,
despite the insistence of African states on the need to find possible solutions for trade
questions. While African representatives waited for clear signs of a European commitment
on the trade aspect, the European leaders and donors urged them to use the financial
means to which they already had access, through state development aid, to support the
industries. Nevertheless, this forum presented an opportunity for debate on important
questions surrounding the future competitiveness of the industries, especially possible
mechanisms for regulating cotton prices and also biotechnology (i.e. genetically
10 It should be noted that there are differences in attitude, partly linked to differences in position, between
the USA and the EU, regarding relationships with African stakeholders on the cotton case. While the
American attitude since Cancùn has been closed to any thought of trade concessions on the cotton case,
the EU appears more receptive and seeks to support the African cotton industries
The African cotton set in Cancùn: a look back at the beginning of negotiations 53
In Geneva, at the end of July 2004, an agreement of intent was signed between the
USA and the African countries co-sponsoring the cotton case. This accord put an end
to the “cotton exception” by reintegrating cotton into the more general international
negotiations on agriculture. Contrary to the proposals put forward by Benin, it did not
specify target numbers or deadlines, but simply stipulated that cotton would be treated
in an “ambitious, expeditious and specific” manner and that a cotton sub-committee
would meet regularly to discuss the issue. The African initiative at Cancùn seemed
a distant memory and it seemed as though everyone had gone back to their own
concerns, guided by specific agendas: the US elections, international agricultural
negotiations, the change of leadership at the European Commission, and so on.
Had the cotton case only been a flash in the pan? The answer in the short term is
probably “yes”, bearing in mind the results anticipated from the African countries’
Sectoral Initiative in Favour of Cotton. Nevertheless, the hypothesis can be put
forward that the incursion of the cotton case into the international public arena has
promoted the idea that the agricultural sector needs regulation that the mechanisms of
an international, liberalised market alone cannot provide. The African producers have
understood this: during a ROPPA meeting in Cotonou in May 2004, they highlighted
the importance of ensuring the development of the cotton industry in the wider framework
of improving and safeguarding producers’ incomes, by reducing the industry’s dependence
on international markets, in favour of regional markets. African producers also emphasised
the importance of an approach centred on family agricultural concerns, whose potential
for production must be maintained, whilst protecting the environment.11 These decisions
demonstrate, despite obvious tensions, a stage in the construction of a movement of
African peasant farmers, a budding link between the representation of specific interests
in a single product and the more global defence of a vision of the future of family
agriculture in West Africa. Nevertheless, the tensions remain. The creation in
December 2004 of the association for African cotton producers (AProCA), has added
an important piece to the already complex institutional chequerboard of African
Above and beyond cotton, the real challenge is without doubt that African countries
(and, more broadly, developing countries in general) have to arm themselves with
agricultural policies that will allow them to guarantee an adequate income to their
farmers, while still contributing to the economic development of their countries.
11 ROPPA, 2004b, “Plan d’actions du ROPPA et des OPPA pour le développement durable des filières
africaines de coton”, ROPPA, Cotonou, “By carrying out advocacy and lobbying activities on the cotton
industry, ROPPA is in fact defending all agricultural products affected by international trade: cereals,
oil-producing products, coffee, cocoa, livestock, meat, milk… Thus the first challenge for ROPPA is to
establish a defence strategy of all speculations and major agricultural products from family farming
concerns.” ROPPA, 2004a, “Initiative paysanne en faveur du développement de la filière coton en
Afrique: contribution provisoire pour discussion et débat”, ROPPA, Ouagadougou, p.6.
54 african environment
What lessons can be learned?
In conclusion, this experience is a good illustration of the limitations inherent in
interpretations that take into account only stakeholders on a national or international
scale: for example, the African states or the European Union. Numerous examples
demonstrate the limitations of this kind of analysis, which often remains superficial
in relation to the real gameplans of players in the debate. A few serve to illustrate
the point. A number of European countries (France, Holland and Germany) played
an active role in trying to encourage a positive outcome for the cotton case in Cancùn.
As one observer stated: “The EU had a strong willingness within itself to make
concrete proposals, but this constructive approach remained frustrated to the end of the
conference.”12 France’s position on the cotton case is often presented as being
favourable to the African demands: its benevolent attitude, however, should not
be allowed to obscure the French Agriculture Minister’s reluctance to support any
position that implied the abolition of agricultural subsidies. The commitment of
African states to the cotton case was, throughout most of 2002, one of the main focuses
of pressure by cotton producers and NGOs. These same states, which stand in the
frontline of the international fight for African cotton industries, are no less ambiguous in
their behaviour towards their own national industries.13 In these examples, it is clear
that “macro stakeholders” do exist, but that they can themselves be considered the fruit
of internal balances. On the evidence of visible and official positions (stated through
declarations or communiqués), it is interesting to consider them also as a challenge
unto themselves, and to decipher the influence brought to bear by interested parties.
The analysis of the cotton case also illustrates the importance of the different
geopolitical interests involved. For example, the plethora of actors in the African
sub-regional area (WAEMU, ECOWAS, CMA/CWA, etc.) has been extensively used
by cotton producers and NGOs to progressively persuade African states to commit
themselves to the cotton case. France is seeking to convince Europe of the
importance of assuming an open-handed position and to bring the debate around to
development issues, in view of the impossibility of progressing on trade issues.
It could be said that certain stakeholders can be considered key actors in this dossier
(producers’ organisations, NGOs, etc.), while others are more “relay actors” or “target
actors”, who need to be persuaded to reach an expected position.
12 Hazard E., (2004), De Bobo à Cancun, deux ans de campagne sur le coton: bilan et perspectives avant
Genève, ENDA Diapol, Dakar, p.13.
13 Benin, the co-ordinating country for the cotton process, does not necessarily exemplify a state that
impartially guarantees the decisions or respects the commitments made by the professional management
of the cotton industry.
The African cotton set in Cancùn: a look back at the beginning of negotiations 55
Finally, analysis of negotiations primarily assumes that alliances and longer-term
gameplans are taken into account at a given moment. Many analyses concentrate on the
jockeying for position among stakeholders, without always considering the historical
dimension of alliance-building or the initiations into different ways of thinking
between actors during discussions and negotiations. The analysis of negotiations as
a process allows an understanding of the origins of different standpoints and the
evolution of alliances, and underlines the fact that all these processes also constitute
a time for learning and training for everyone involved. One result of this is that we
can probably no longer talk of “cotton producers or of other stakeholders (e.g. cotton
companies, African states) in the same way in 2005 as we could in 2001
Sectorial initiative on cotton: a balancing act of alliances
in Africa and at the WTO
El Hadji DIOUF
and Eric HAZARD*
The GATT Rounds and the World Trade Organisation (WTO) have never been the
preferred arenas for African countries to make themselves heard. Indeed, it has been
difficult to find any evidence of African initiatives either in GATT/WTO negotiations
or in contentious proceedings. The link that has finally been proved between US
subsidies and deteriorating living conditions for cotton farmers on the continent has
shed a new light on the WTO for African Least Developed Countries (LDCs), who
now view it as a potential framework for solving their problems.
The whole world delighted in the incursion by the poorest countries into the heart
of the trade system, demanding that the Northern countries open their markets wider.
Beyond the natural sympathy aroused by its content, the Initiative has been a dazzling
success in the media, attracting the attention of international public opinion to the great
injustice arising from the rules that govern international commercial trade.
Nevertheless, whatever the impact the publicity has had on international trade
negotiations, it is not in the media that WTO negotiations are held. In order to ensure
that issues are addressed, it is not enough to place them in the public eye; they must
also be backed up by technical arguments proving that the positions put forward are in
accordance with the aims of the WTO. The African states were quick to understand
that, beyond the original consensus on the legitimacy of their case, they also had to
deal with the subtle and interminable work of weighing up different (but inextricably
The process of drawing up the Initiative was punctuated with productive dialogues
on directions to be taken, strategies to be adopted, alliances to be nurtured, pitfalls to
be avoided, and improvement work to be done. The prolonged lack of use of the WTO
mechanisms by the countries involved did not favour the adoption of cut-and-dried,
immovable positions. Consequently, certain points of tension arose that were difficult
to resolve. These crystallised around the credible alternatives to the procedural
approach. The available options all possessed a logic and a credibility that could have
given rise to a positive result, although some were more easily dismissed than others.
* El Hadji DIOUF is a lawyer by training, and head of African business programmes for the International
Centre for Trade and Sustainable Development (ICTSD).
58 african environment
Should classic poverty-reduction methods be used on an international scale, or should
countries position themselves as fully-fledged actors within the trade system and reap
the ensuing benefits? Should co-operation be favoured over a contentious approach?
Should the cotton issue be separated from the overall negotiation strategies of African
countries at the WTO?
Much later, when the Initiative had finally established its legitimacy, problems were
posed as to its implementation. Its presumed success raised the stakes. The original
stakeholders were joined by a number of beneficiaries, all equally motivated. Legitimate
questions started to be asked with regard to the definition of criteria for determining
potential beneficiaries. Nevertheless, the players involved did not lose sight of the
capital importance of their technical arguments, nor of the fact that the status of their
financial, administrative and human capacities did not guarantee immediate success.
It has since emerged that stakeholders in the Initiative glossed over divisions and
points of tension that were sometimes quite serious. On each decision, it proved necessary
to go through a difficult process of arbitration over conflicting strategies – particularly
during the design phase (see section I below), although the implementation phase also
required careful balancing acts (see section II). Without prejudging the effect of the
choices made on the outcome of the Initiative, the points of analysis that follow try to
shed a clear light on the management of what remains to this day the strongest case
made by Africa to the WTO.
Difficult arbitration regarding conflicting strategies at the design phase of the
Upon close inspection, the development of the Initiative resulted from a series
of attempts to balance divergent, even irreconcilable, stances and from a rapid
apprenticeship in the working mechanisms of realpolitik. The points of friction were
numerous on the ideological direction and even the systemic orientation that the
proposals formulated in the Initiative should take. Principally, they concerned conflicts
between trade and development issues; the delicate choice to be made between
negotiation and legal proceedings; and the more general strategy of integration into
the trade system for African countries, either through differentiated treatment or
unrestricted acceptance of the rules of liberalisation.
Trade and development in the Sectoral Initiative: examining WTO priorities
Is the WTO an appropriate forum for dealing with development or poverty reduction
issues? The question was raised during the drafting of the Sectoral Initiative and
constituted one of the main sources of tension regarding the systemic direction to be
given to the African submission.
The problem posed by the cotton initiative is multifaceted. While it is social and
economic in origin, its international manifestation involves a perception of unfairness
arising from the disregard of a certain number of international trade rules. Although
apparently straightforward, it took almost three years of analysis and sparring to reach
Sectorial initiative on cotton: a balancing act of alliances 59
a consensus on the diagnosis. Even now, the remedies to be applied still need to be
defined, and this despite the ruling of the Dispute Settlement Body (DSB) in favour
of Brazil, and thus of Africa. The difficulty assuredly arose from the need to strike a
balance between the nature of the problems raised, the means available for a possible
solution and the judicious choice of forum for the complaint. Consequently, there was
good reason to review what should be negotiated, where it should be negotiated, and
with what tools.
In its heading, the Initiative calls for poverty reduction. This struggle is closely
linked to that of development, and it is in this sense that the WTO committed itself
during the Doha Round. This round of international negotiations, whose completion
was initially scheduled for December 2005, proposed to establish the conditions and
rules necessary for the development of the majority of WTO member states. And yet,
in the area of trade, this participation in the development effort still often takes the
form of unilateral offers of trade concessions, such as the General Preference System.
Furthermore, the workings of the international system (World Bank, IMF, etc.) are so
complex that, historically, forums have been organised with the aim of harmonising
mechanisms for bilateral and multilateral economic intervention. However, it has
proved very difficult to achieve the coherence sought between the different institutions.
This certainly explains the creation of a Policy Coherence Unit within the OECD,
and is also the reason why this question is the focus of increasing debate in various
In the case of cotton, diagnosis of the precariousness of African farmers’ living
conditions indicates that these are partly the result of the depreciation in cotton
prices – which is not due to an invisible regulatory hand in the market, but rather to
state policies that overprotect a handful of powerfully organised producers. In this
instance, the Uruguay Round produced a framework for the regulation of agricultural
issues, particularly that of subsidies. While commitments remain minimal and their
impact on the level of subsidies almost non-existent, the framework states that
any infringement that could be prejudicial to any member may be submitted to the
international trade authorities, with a view to obtaining the application of the law and
determining effective means of guaranteeing undistorted trade.
Consequently, while the issue of poverty reduction remains relevant to the objectives
of the Doha Round, as does coherence between the trade policies and development
policies of the Northern partners and international multilateral institutions, there is reason
to question the focus on that issue by an institution whose mandate is to deal exclusively
with matters of trade. Withdrawal of these subsidies would allow African cotton to gain
market share and would have a direct influence on poverty reduction. Moreover, the
fact remains that this goal is not a unilateral concession based on moral considerations,
but is based rather on the principle of non-infringement of common commitments,
taken independently of any party’s level of development. By focusing the Initiative on
poverty reduction, Africa may give the impression that it is asking for a favour, when
in fact it is merely asserting its rights. And in negotiations as heated as those currently
under way at the WTO, this loophole has been extensively used, firstly by the infringing
parties involved, and secondly by the WTO itself.
60 african environment
Has the request been properly understood, however? Could what has been
construed as a weakness in the case actually be a strength? Basically, the major
strength of the Initiative has always been exactly the fact that it is in perfect accord
with the stated aim of the WTO, which is the elimination of obstacles to trade in a
multilateral framework. After all, the Initiative proposes the elimination of subsidies
that distort trade. Development and poverty reduction are secondary aspects, aimed
at highlighting the urgency of the situation and the need for rapid action. Evoking
poverty reduction has also given more weight to the Initiative by attracting the
attention of the media and the public. In the end, no-one – except for the USA – has
ever questioned the fact that the African demands regarding cotton subsidies are
justified. This partly explains the undertaking by the WTO Secretariat in support of the
C4 (Benin, Chad, Burkina Faso and Mali) countries before Cancun.
The media aspect may certainly have seemed excessive, compared with the technical
means mobilised to defend the case. But perhaps this imbalance simply reflects the
historical difficulties that Southern countries, and particularly the C4, have in investing
a portion of their limited means in the type of expertise whose potential benefits may
only be seen in the long term. This “under-investment” can also be explained by the
painful lessons learned by the C4 members in the art of WTO negotiations, although
that does not justify the desperate lack of qualified people working full-time on
the case. This issue is vital, and involves African states, sub-regional and continental
institutions and even the African Union.
More specifically, two essential elements of the Initiative have been put forward in
this case: the claim for compensation and the desire to place cotton in the “special
products” category. In both regards, the reference to development and poverty reduction
has sometimes been used against the interests of African countries.
The compensation claim aimed to introduce a new practice into the WTO, though
one that the WTO itself did not wish to integrate beyond the mechanisms already set
out in the framework of the DSB. In a show of good will, or an in attempt to distance
itself from development issues, the WTO offered its services to help seek solutions to
these questions, which were outside its own area of operation. The outcome of this was
the Cotonou Conference, which gave the then director general of the WTO, Supachai
Panitchpakdi, the opportunity to state that, for the most part, debate would deal with
the “aid element” of the cotton initiative. From there, it was easy to stress the unusual
participation of the WTO, followed by institutions such as the World Bank, the IMF
and the OECD, in a forum for co-operation and negotiation on development policy,
even though the underlying causes of the complaint were trade issues. Whilst it is easy
to recognise today that the issue of compensation was, and still is, problematic in the
framework of existing WTO tools, the commitment of the WTO Secretariat to the
development aspect tends to validate, after the fact, the African argument, which stated
that as long as subsidies continued, some form of compensation was necessary.
The form taken by the compensation is of secondary importance. Further down the
line, we can also point to a pre-supposed link between trade and development.
Sectorial initiative on cotton: a balancing act of alliances 61
With regard to the proposal made to include cotton in the special products category,
the African countries may have appeared to be going against the grain of the
trade-oriented and liberal focus of their case. In the framework of the WTO, special
products apply to defensive interests that involve the protection of a leading sector,
for reasons other than trade. A special product is therefore, by definition, subject to
special and differential treatment. This is confirmed by its use in the Harbinson Draft
and later in the July Package. Special product status can only be claimed when the
product in question is not inherently competitive on the international market. This does
not apply to African cotton, whose problems arise from the distortion of the rules of
the trade system caused by subsidies. The intrinsic value of African cotton guarantees
a competitiveness that Africans producers are the first to pride themselves on.
Seen from this angle, cotton cannot be considered a special product, even though the
underlying arguments are not of a trade nature. The Initiative tried to extend the
concept of special products to offensive use. However, the African negotiators
soon realised the limitations of their argument, and the Initiative was refined over
time. The concept of an offensive special product was subsequently dropped by the
C4. Similarly, the elimination of all forms of support for cotton was changed to
the elimination of subsidies having an impact on trade.
In the end, the request for compensation did not raise the subsidiary debates that
might have been expected, such as the effectiveness of the DSB for Southern countries.
Furthermore, the trade-related nature of the request was not given the necessary
attention in terms of the means made available by the countries involved.
Consequently, it sometimes gave the impression of fading into the background and
lacking a certain freshness at various stages of the negotiations. While there is no
doubt that the cotton case surfed on the media wave and the sympathy expressed by
various member states, it will now be difficult for it to gain new impetus within the
WTO and to reach a favourable outcome for producers, unless it has additional
resources in keeping with the importance of the issues raised by the African countries.
This issue is a particularly serious one, as it calls into question the importance
accorded by African governments to international trade negotiations, at the WTO and
elsewhere, and the resources they marshal when they enter into them. Only by providing
appropriate resources can they have any hope of obtaining suitable outcomes.
Negotiations or lawsuits: which option for which result?
Although the cotton case has proved to be a learning experience for African countries
in terms of the operating methods of the WTO, the continent’s low level of involvement
in the various rounds of negotiation and participation in legal procedures within the
institution have confirmed its passive role in the decision-making process. It is no
exaggeration to say that any benefit African countries have derived from the trade
system has been more the result of a unilateral resolve or a desire for balance on the part
of the other members than of a resolute, argued claim by themselves. Consequently,
the Initiative involved a sally into the inner circles of the WTO, which raised the question
of the method that should be adopted. Negotiation or legal proceedings: which way to
62 african environment
The decision was not easy, partly due to a lack of knowledge about the workings of
the WTO, but more particularly because of the calibre of the protagonists in the opposing
camp. The African countries had both the USA and the EU in their sights. Consequently,
any African option would have to go beyond the traditional instruments for measuring
objectives and take account of political considerations.
According to the advocates of trade negotiations, the USA is an economic and
political ogre that the LDCs of the continent should avoid confronting. Any initiative
that might upset this ogre could have economic repercussions that go well beyond the
damage presently being caused by the subsidy policy. In such a context, the most direct
approach would be to negotiate for an effective reduction of support for agriculture,
within the framework of the ongoing agriculture talks at the WTO. This multilateral
strategy has the advantage of allowing African cotton producers to seek out alliances
with other developing countries and thus increase their weight in negotiations. It is not
the only option, however. The possibility also exists of exploring avenues of bilateral
negotiation, notably within the framework of the Cotonou negotiations with the EU
or the African Growth Opportunity Act1 (AGOA) with the USA.
Seizing the AGOA opportunity would mean expanding American trade preferences,
which have proposed to grant a prominent place to African textiles, in order to arrive
at common agreements on the intertwined interests of the two parties. One might well
ask what sort of logic the Americans could use to justify the obvious contradiction
between the unilateral promotion of the African textile trade and the serious threat
against it posed by US agricultural policy. Facilitating access to US markets for
LDCs is part of an overall trade policy that supposedly takes into account the lack
of competitiveness of small economies and their difficulties in adapting to today’s
competitive trade framework. Through AGOA, despite the fact that the conditions for
eligibility were debatable, the USA initiated a preferential trade system for Africa.
However, while the success of AGOA has been quantified in terms of the number of
African countries that have access to it, it is important to note that it has not really been
a success overall. This was confirmed by the recent sacking of its representative, with
a view to relaunching negotiations with African countries. Events seem to have proved
the African countries right when they quickly understood that it was not in their interest
to pursue this line of negotiations.
The other option to be explored was that offered by the Cotonou negotiations on the
Economic Partnership Agreements (EPAs) between the EU and the Economic Community
of West African States (ECOWAS), which began in September 2002. These negotiations
include both a trade dimension – which naturally includes agriculture – and an aid
dimension. Beyond the fact that they do not cover all of Central Africa (notably Chad),
negotiations on the lines of AGOA or EPAs can only offer supplementary aid or
preferential access, which has doubtful real trade benefits, particularly if the fact is
taken into account that the original rules in force under AGOA stipulated that all
textiles exported to the USA had to contain US cotton. The approach to the problem
1 Legislation passed by the US Congress to promote African exports to the United States.
Sectorial initiative on cotton: a balancing act of alliances 63
with regard to the EU should therefore focus on co-operation, which could translate
into EU support for the African cotton industry. This assistance could take the form of
aid to the cotton industry in its regional dimension, for example by seeking to reduce
production costs. These discussions appear to be the most advanced, in the form of an
EU-Africa “road map”, on which progress is starting to be made.
This new stance of “friendly confrontation”, as it was so aptly dubbed at its inception,
reflects a totally new approach. In the first place, the LDCs actively participated in
international negotiations. But more importantly, they took positions that ruffled the
feathers of their traditional partners, with whom they often have friendly relations.
While it is both fair and relevant, this approach has brought out into the open serious
differences between political and technical partners with regard to development issues
and the reality of trade partnerships. In so doing, it has brought to light tensions
between African countries and also between different stakeholders within the various
The option of contentious action had been held out ever since the harmful effects of
US subsidies on African cotton were proven and following the Farm Bill of May 2002.
In view of the reluctance on the part of the countries concerned to start legal proceedings
at the WTO, a class action was considered. Unfortunately, only individual members of
the WTO can apply to a panel. While the Conference of West and Central African
Ministers of Agriculture (CMA/CWA) is recognised as a political organisation or interest
group, it does not have the necessary status to start legal proceedings. This is also true
of ECOWAS and WAEMU. Although an overall group strategy can be adopted, the
application must be individual. At best, to avoid the pitfall of an individual complaint
from one country that does not satisfy the others, it is possible for each cotton-exporting
country to lodge its own complaint or to join the dispute as a third party, as authorised
by Article 10 of the Memorandum of Understanding.
In addition, a number of preliminary questions linked to the dispute were put forward,
making recourse to the DSB too risky for the African countries. Indeed, they needed
to demonstrate that the peace clause, which is contained in Article 13 of the Agreement
on Agriculture and which ruled out all disputes in this area for nine years, was void,
due to the volume of US subsidies compared with the reference year of 1992. Then, an
argument needed to be built on the level of the USA’s commitments; were its subsidies
above or below the level to which it had committed itself? The uncertainties surrounding
these issues and the lack of internal expertise were put forward as impediments to a
credible dispute procedure involving the DSB.
In the end, the arguments in favour of a complaint rested essentially on the need for
the African countries to demand their rightful dues via legal paths, and on their desire
to test the mechanisms of the WTO system. This path was not chosen, perhaps due to
a lack of knowledge, and undoubtedly due to a lack of means and expertise. However,
the major political issues raised by the dossier played a decisive role. The separate
decisions of Benin and Chad to become third parties to Brazil’s complaint to the WTO
showed, on their part, a sovereign analysis of the situation beyond any participatory
process. The Sectoral Initiative was launched by four brave countries, which were only
later joined by other African states and the sub-regional or continental institutions of
which they are members.
64 african environment
Global negotiations and sectoral strategies: liberalisation and/or Special and
Today, the problem of the integration of African countries into the multilateral trade
system hinges on the recognition of the need for a special status, which entails rights
and obligations different from those pertaining under common law. The special and
differential treatment that they are seeking to obtain could allow them to protect certain
sectors of local production in order to ensure a minimal level of competitiveness; it would
also guarantee them access to markets in the North. Whether defensive or offensive,
these interests share a common foundation: adjusting the speed of liberalisation to the
economic situation in poor countries.
With regard to the Sectoral Initiative, a new and fairer discourse is emerging, but it
constitutes a special case and one that is totally at odds, by necessity, with the classic
model of differentiation due to necessity. For once, the rules of the system seem to be
tailored to the interests of African countries, which are calling out for liberalisation.
They are advocating open markets and denouncing state interference in the workings
of the economy, in the form of subsidies. Citing the competitiveness of their product,
they are waiving any kind of weighting of the rules of the system, in the form of special
or differential treatment. They are demanding equal treatment, which entails a strict
application of market rules and the disqualification of measures that have a distorting
effect on trade. Some African countries are encouraging market liberalisation and even
seem to be enjoying it.
This way of thinking is sometimes tempered by various stakeholders in the
Initiative, who feel that the issue lies not so much in opposing the principle of subsidies
as in condemning support policies concentrated on a minority, which constitute both
incomes and real trade weapons for producer countries. Nevertheless, it should be
stressed that the “liberal” standpoint that has sometimes appeared in the dossier could
create a problem of overall consistency with the differential strategies on principle that
prevail in the rest of the negotiations. Does not the existence of competitive niches
on the continent undermine the idea of introducing special and differential treatment,
not as a set of exemptions, but as an unconditional reality of the system? Does the
existence of an SDT based on situational considerations, linked to the competitiveness
of the sectors, leave any credit for a structural regime of discrimination? Is it possible
to build an offensive argument in support of cotton around the virtues of free trade, and
still continue to lead a struggle against the principle of neo-liberal globalisation?
In truth, the stance stakeholders have adopted gives rise to an ideological muddle,
wherein they focus strictly on their own best interests. Well, good for Africa! For this
means the dawn of an era when the development of trade negotiation agendas and
public policies is no longer structured around ideological cliques, but rather around
the concerns of the people and those of African people in particular.
Sectorial initiative on cotton: a balancing act of alliances 65
A subtle balancing of the divergent interests in the implementation phase
In addition to the substantive issues mentioned above, there are other issues that are
apparently less significant, but which have nevertheless played an important role in
the building of alliances around the cotton case. They include the issue of compensation,
linguistic and historical issues, and capacity issues.
Compensation: The question of beneficiary criteria
In addition to calling for far-reaching trade reforms, the Initiative proposed by the
four LDCs also called for pecuniary damages. This innovative claim sometimes gave
rise to counterproductive tensions with regard to two recurrent aspects: the target
group and access to resources.
Some developing African countries that produce cotton soon felt that they were
being excluded from the claim in terms of benefiting from possible dividends. During
the EU-Africa forum, some highlighted their concerns about being able to profit from
possible benefits that the development partners might grant them.
More recently, during the African Union Conference of Ministers of Trade in Cairo,
the financial issue raised by the application was once again the centre of debate and a
source of tension. Convinced that the C4 countries had received cash payouts, some
representatives of developing countries, particularly from Central Africa, once again
opposed the final resolution of the conference on grounds that it only referred to the
cotton-producing LDCs. Many long hours of talks and several “green rooms” were
needed to sway the reticent countries. During the Livingstone Conference in Zambia,
a similar round of backroom meetings and diplomacy was necessary to avoid the cotton
case spoiling the meeting and holding up the final declaration. Once again, some
delegations wanted to expand the definition of the beneficiary countries of the Initiative,
to make certain they would have access to any benefits it brought.
While it is obvious that, in terms of strategy, a claim involving all the developing
countries or LDCs that produce cotton has no chance of succeeding, some questions
still remain unanswered. What is at stake in this dossier is definitely more than
damages that would scarcely cover the African countries’ losses. The real point is to
establish trade regulations that are fairer and that would enable African producers and
states to live by their labours and to reap the benefits of globalisation, without being
stuck in the position of an eternal adjustment variable.
Apart from tensions between potential beneficiary states, emerging frictions at the
national level have been avoided, perhaps because the damages have never been
enforced. As soon as the claim was formulated, questions were raised regarding
the role and place of the different protagonists in the management of the case: does
the supremacy of the state over the producers mean that the state should be the only
interlocutor? What role should be devolved to cotton marketing companies, according
to whether they face competition or have a monopoly? What action should the producers
take? The implied dominance of the state in the process raised other types of questions
66 african environment
from producers regarding the distribution of indemnities: who are the victims of
the subsidies? How can the impact of damages be determined? What are the criteria
for allocation? Should the state and marketing companies have a role in technical
assistance and mediation? What would be the basis of such a mandate? Answering
these broad questions could help anticipate potential tug-o’wars, in the event that the
commitments made by international economic institutions and developed countries to
address the development issues in the dossier actually take shape.
Linguistic and communication divisions: a delicate balance of alliances
Although less sensitive than money allocation issues, other questions linked to the
history of the continent have nevertheless frustrated developments, to the detriment of
producers. The cotton industry has developed along different lines in different countries,
be they English-, French- or Portuguese-speaking, in line with the legacies of the
colonial era. While cotton has been a genuine success story in the French-speaking
states, the hasty liberalisation process carried out in English- and Portuguese-speaking
countries has greatly destabilised the industries there. This means that there is no valid
basis for comparison of their respective shares in macroeconomic terms, and so it appears
that the African cotton industries hardest hit by the unfairness of the US subsidy
programmes are those of French-speaking West and Central Africa.
It was only in June 2005, under the impetus of certain NGOs, that representatives
of southern African countries, such as Mozambique and Zimbabwe, appear to have
truly measured the impact of cotton subsidies on their economies (in terms of rural
development in particular) and the need to involve themselves more seriously in the
defence of the Initiative.
This reaction, which was delayed to say the least, is very surprising. The representatives
of 33 African cotton-producing countries have been watching the different stages of
the negotiations since 2003: first in Geneva and then in Cancùn. The WTO African
Group holds weekly meetings with a view to finding consensus and pushing forward
the different dossiers that concern it. A “cotton group” has been created and remains
open to all African countries that wish to join it. Under these circumstances, it is not
easy to understand the tardy mobilisation of governments of certain countries whose
producers, to varying degrees, also suffer from the negative impact of US subsidies.
Communication problems between countries with dissimilar histories may explain
these problems in part. A work overload certainly prevents the different ambassadors
present in Geneva from following every single proceeding and reporting on them to
their governments. Still, this is not enough to explain the difficulties that continue
to be met by the initiators of the Initiative and the sometimes unpredictable support
provided by their African counterparts.
The hesitation of some countries to commit themselves is undoubtedly a response
to deeper issues, linked for example to the preservation of international relationships.
This seems to be the case for Senegal, which, according to the state of its relations
with the US, has sometimes demonstrated reserved support and sometimes more open
support, but never steady support. Thus, the C4 has regularly become the C5, only to
return subsequently to its smaller format based on four countries.
Sectorial initiative on cotton: a balancing act of alliances 67
However, it is also important to focus attention on certain limitations inherent in the
C4 itself. Although determined, the C4 approach can appear very compartmentalised
at times. It undoubtedly promotes frustration and is a source of tensions. For instance,
while respect for form remains important, care should be taken that it does not stall
the process of discussion and dialogue. As a case in point, the late arrival of the C4
spokesperson at the Cairo conference greatly delayed and disrupted the proceedings on
cotton. Indeed, due to his status as the institutional memory of the cotton case, no one
has been found thus far who can ably replace the representative from Benin.
Consequently, the various representatives of the C4 in Cairo preferred to delay
the start of the proceedings on cotton in order to let their spokesperson defend the
dossier and ensure that the commonly agreed-upon viewpoints would be defended.
Was it a matter of form? Or rather a hesitation in taking on negotiations with members
other than the C4? Whatever the reason and whatever the contradictions with the
commitments made in Geneva, the reluctance to negotiate in the absence of certain
key people can be construed as a lack of willingness amongst partners in the Initiative
to advance their case and to extend it to all African countries. Above all, it raises the
question of the resources available to the negotiating teams in terms of support from
Technical arguments on a complex issue: the problem of capacity
Unaccustomed until recently to the inner workings of the WTO, the WCA countries
have patchy knowledge of the issues involved and have few specialists at hand who
are able to enlighten them in that respect. The small number of African countries present
in Marrakech in 1994, or more recently in Seattle, bears witness to the low priority
they have granted to technical negotiations, which are costly and whose content is in
any case more or less sewn up in advance between the EU and the USA. Apart from
the real difficulties some LDC countries have in paying for their delegations to attend
such meetings, the lack of expertise continues to crop up as one of the main problems
to be overcome. By way of illustration, in Cancùn, the ministerial delegations of the
WCA countries that are members of the C4 numbered on average fifteen people while
the US delegation, with which they had to negotiate on the cotton case, comprised
several hundred experts.
Whatever the availability and the good will of institutions specialising in trade
issues, or of NGOs who support the LDCs present in Geneva, the support afforded
them remains insufficient to make them fully-fledged citizens of the WTO. Thus,
while the technical expertise that has been mobilised has often demonstrated solid
negotiating skills, the fact remains that it is sometimes hard to compete on a level playing
field, when the available means are so disproportionate.
In contrast with some emerging countries such as Brazil, the countries submitting
the Initiative have very limited internal financial capacities, either private or public.
Suffering from the drop in world prices, the cotton industries, as well as the producers,
are in no position to support their governments, whose economies are also weak.
68 african environment
On the eve of the WTO conference in Hong Kong, the mobilisation of additional
resources to strengthen expertise, from sub-regional or pan-African bodies that support
the dossier, still remains theoretical, or else subject to complex and inappropriate
procedures. This calls into question the effectiveness of these political structures,
which propose eventually to negotiate on behalf of their member countries.
Until recently, some countries present at Cancùn had no representative in Geneva.
The ambassadors to the EU in Brussels were most often called upon to follow the
some 3,000 annual meetings that take place in the WTO on topics as diverse as they
are technical, and this with a severely limited staff. Above all, the plenipotentiary
ambassadors in Geneva have a mandate that allows them to attend ongoing negotiations
and to represent their countries. Most of the progress and the complex technical issues
discussed at the WTO require the endorsement of the Ministers of Trade responsible
for the dossier. The current nature of procedures between the ambassadors and their
capital unfortunately does not seem to be suited either to the pace of the negotiations
or to the rapid decision-making process that prevails at the WTO.
Whatever the apparent tensions surrounding the strategies deployed, the African
countries that submitted the Initiative have succeeded in putting the expectations of
their cotton producers onto the international trade negotiation agenda. In so doing,
they have had the merit of not only surprising a number of WTO member states but
also, and above all, responding to the aspirations of their people, by redefining the role
and place of the states in the negotiations.
The cotton case illustrates fully the need for African and Southern countries to take
an active role in negotiations that have long been controlled by the USA and the EU.
It has also brought to light some of the inherent weaknesses in the international trade
system in its current format. Above all, by refusing to put their signatures to
the established consensus on the Singapore questions, the African countries have
developed unaccustomed offensive strategies, by using the formal tools available to
them at the WTO.
Since Cancùn, the cotton case has made little progress – though, if we compare
these delays with the blockages in the negotiations on agriculture, we can put them
into perspective. Still, the Hong Kong meeting cannot afford to reach a consensus that
is not based on concrete action on a dossier in which the responsibilities have been
clearly set out by the WTO itself.
By continuing to play on the complementary aspects of the dossier rather than on
divergences, the countries putting forward the Initiative have been able to rally states
that sometimes have conflicting interests around a single common denominator:
that of the place of Southern countries in globalisation. In the run-up to Hong Kong,
Africa has managed to consolidate its unity, both on the substantive issues and on the
form of the dossier. The unity and commitment of African countries will undoubtedly
be grounded in their capacity to accept or reject an instrument that establishes specific
undertakings on cotton.
Sectorial initiative on cotton: a balancing act of alliances 69
Innumerable topics and positions can be used by the African countries to obtain
concrete results on the dossier. Issues of policy coherence, the limitations of the
dispute process for Southern countries, the inappropriate length of the negotiation
rounds (several years of negotiation, followed by ten years of implementation), the
urgency of economic, social and to a lesser extent political expectations: all these
issues have still to be addressed or refined. They reflect, however, the importance for
African states of investment and involvement in the different international negotiation
agendas, in order to assert their rights and make their expectations heard.
There is no doubt that many steps still remain to be taken, particularly in terms
of building up the available human resources. But the first stone has been carefully
laid by a small group of bold and determined countries. The biggest issue remains
to provide this initiative with resources equal to its symbolic status as a comeback
for Africa in the place where it was least expected: the inner sanctum of international
Resistances and potential for reform
King Cotton: abdicate or subjugate? The political economy
of US cotton and prospects for a pro-development policy
When Brazil and four West African cotton-producing countries challenged the
United States to reduce the trade distortions caused by US government subsidies, they
could hardly have expected the massive media and political attention that followed.
In launching a dispute under WTO legal rules, Brazil essentially charged the USA
with cheating on international commitments. In submitting a negotiating position as
part of the Doha Round, Benin, Burkina Faso, Chad and Mali (collectively known as
the “cotton four”, or C4), made a powerful moral argument and enlightened the world
as to the poverty impacts of US farm subsidies.
However, in taking on cotton, Brazil and the C4 have chosen one of the most
politically powerful adversaries in the USA. Few industries are as well organised, as
influential, or as entrenched as cotton is in the United States. It is, perhaps, instructive
to remember that cotton played a large role in the deepest political crisis of US history:
the American Civil War (1861-65). While the war was fought over slavery, slavery
itself was largely a function of the cotton economy in southern American states.
The plantation aristocracy responded to the economic challenge of the anti-slavery
movement with war.
At the time of the American Civil War, the interests of the cotton farmers were
separated from the interests of cotton mills and the textile industry, both politically
and geographically. Cotton was grown in southern states, but milled and woven
in northern states and in the UK. Since then, however, these interests have combined
into an integrated political association called the National Cotton Council. Wars are
no longer fought over cotton in the USA, but cotton still has a deep and sometimes
emotional influence on US politics.
This influence is manifested in many ways, most notably in the massive subsidies
that are paid to the 25,000 US cotton producers. The influence also can be observed
in large subsidies for cotton processors and exporters. In addition, the US cotton
industry wields a heavy influence on the country’s trade policy, enforcing a highly
protectionist tariff and rules of origin regime that is designed to benefit US textile
* Gawain KRIPKE, a graduate of Harvard College, is Senior Policy Advisor for Oxfam America, based
in Washington, DC.
74 environnement africain
producers and to encourage consumption of US cotton. For example, to qualify for
favourable tariff treatment, a common US rule of origin is that textiles or garments
must contain US-produced yarn. As Brazil and the C4 have now demonstrated,
subsidising US cotton in this way is causing poverty around the world and creating
political frictions for the USA itself. The status quo is not sustainable. There are signs
that the Bush administration is responding to global as well as internal pressures for
reform: however, whether a real reform is possible, or only a “whitewash” which
leaves intact the existing inequities, is very much undecided.
A picture of US cotton: harvesting subsidies
The USA is the second largest world cotton producer after China. It produces
approximately 15 million bales, or just over seven billion pounds, of cotton per year
(1 bale = 480lb). This is approximately 20 per cent of global production. The total
value of the US cotton crop is approximately US$4.6 billion, while export sales
averaged US$2.1 billion from 1997 to 2002.
US farmers have increased cotton production due to the unattractivenessof other
competing crops thanks to slumping prices, as well as the attractiveness of cotton, due
to the benefits of cotton subsidies. The acreage planted to cotton has increased and
productivity per acre has also risen, as a result of technological advances, including
new seed varieties, fertilisers, pesticides and machinery.
The vast majority of cotton is produced in five areas in the “Cotton Belt” that runs
across the southern part of the United States. These clusters include the Texas High
Plains, the Mississippi, Arkansas and Louisiana Delta, the San Joaquin Valley in
California, Central Arizona and Southern Georgia. Texas has the most cotton farms
(11,237 or 32 per cent of all US cotton farms), as well the largest share of cotton
production (4.5 million bales or about one-third of all cotton). Mississippi is the
second largest producer, with Georgia and California close behind.
While the USA produces
a lot of cotton, there are
relatively few farmers
involved. In 2002, fewer
than 25,000 farms produced
cotton. The number of
cotton farms has steadily
declined over the past
30 years, and the average
farm size has doubled since
King Cotton: abdicate or subjugate? 75
While the USA is number two in world cotton production, it is number one in
cotton exports, accounting for 40 per cent of the global total. Since 2001, an average
of 56 per cent of US cotton production has been exported each year. The proportion of
cotton exported has grown in recent years as the US cotton processing industry
(including milling and textile production) declines. In all, 30 per cent of the world’s
consumption of cotton fibre crosses international borders before processing, a larger
share than for wheat, corn, soybeans or rice.
US cotton exports are dominated by a few private trading companies: Allenberg
Cotton, Cargill Cotton and Dunavant Enterprises between them claim 85-90 per cent
of the international cotton trade. Cottonseed milling is dominated by the Anderson
Clayton Company, while cottonseed sales are dominated by Monsanto, which has
87 per cent of the US market.
Figure 2: US cotton production, use and exports
Congressional Research Service.
In the USA, cotton has gained the nickname ‘poverty weed’ as a consequence of its
high cost of production and its low market price.1 As the prices of fertilisers, chemicals
and recently, energy, have increased, the costs of producing cotton have risen across
the USA, throughout the 1990s and into the early 2000s. Cash receipts for cotton have
failed to keep pace with the cost of production, with the exception of good years in
1994 and 1997. Government payments make up the difference. Some economists now
believe that cotton farmers are likely to become increasingly dependent on government
payments in the future (Richardson et al. 2001).
1 Source: “Cotton Production in Mississippi’s Delta, the Texas High Plains and the Central Valley of
California”, report for Oxfam America, US Program, by Rachel Slocum, 20 July 2004 (unpublished).
76 african environment
The lack of good returns relative to total costs means that most cotton farms in
the USA are economically marginal. Research by economists at Texas A&M finds
the position of Texas cotton farms poor: “Eight of the nine cotton farms are projected
to have greater than a 50 per cent chance of cash flow deficits in 2001-05. Seven of
the nine will face high probabilities of losing real net worth. Seven of the nine cotton
farms will be in poor financial condition by 2005 – two are marginal and none are in
good financial condition.”2 Even the largest farms with the highest rates of return are
marginal. The conventional wisdom is that a US cotton farm must be 500 acres at a
minimum to be economically viable, to give the economies of scale needed to justify
the high capital costs and investment in machinery involved in the US production
Economic viability for US cotton producers, processors and exporters is dependent
on government subsidies. Production and export subsidies provide comprehensive
support for producers. US farmers who have produced cotton in the past are eligible
for both direct and counter-cyclical payments. On their actual production, farmers may
utilise marketing loans and loan deficiency payments. Protection against low yields is
available through subsidised crop insurance, and in some years the US Congress has
approved additional disaster payments. When US market prices rise, and there is a risk
that competitors might capture more of the world export market and even sell to US
yarn and fabric mills, so-called Step 2 user payments are made to US cotton exporters
and to mills if they purchase US cotton.
For producers, the core support comes from three subsidy programmes: direct
payments, counter-cyclical payments and marketing assistance loans. Direct
payments are “decoupled”3 from production and based on historical payments.
Counter-cyclical payments are also based on historic production (rather than current
production), and are made to producers if the price of cotton falls below 72 cents per
pound. Marketing assistance loans are essentially price guarantees (of 52 cents per
pound) made to producers, under which the government agrees to pay a determined
price if producers are unable to find buyers for their cotton. These programmes reflect
contradictory intentions from the 1996 and 2002 Farm Bills, These, in turn, reflect
the fact that commodity prices – including that of cotton – were much lower in 2002
than in 1996. All of the subsidy programmes have the effect of reducing risk to cotton
farmers, and, generally, of increasing US cotton production.
2 Blair Fannin, “A&M Study: More Problems in Farm Country” on Texas Agriculture website:
http://www.txfb.org/TexasAgriculture/2001/040601ATM.htm, 6 April 2001.
3 However, in a recent WTO dispute, Brazil successfully argued that direct payments are not fully
decoupled and will need reform to qualify as decoupled payments.
King Cotton: abdicate or subjugate? 77
Table 1. U.S. Upland Cotton Program Outlays, Fiscal 1991-2004
Fiscal year Total Outlays ($ millions)
Average : 1991-2001 1,678
Source: USDA, Farm Service Agency, Budget Division, History of Budgetary Expenditures of
the Commodity Credit Corporation, Books 3 (April 9, 2001) and 4 (July 15, 2003), available at
Congressional Research Service.4
For US cotton processors and exporters, other government subsidies provide
assistance. The Step 2 programme makes payments to exporters and to US mills to
compensate them for purchasing higher-priced US cotton. The export credit guarantee
programme supports exports of US cotton by providing favourable credit terms to
From 1991 to 2003, farm subsidies for cotton production cost US$1.76 billion per year,
on average. This is the annual equivalent of 21 cents per pound of US production.
When the 21 cents per pound average farm subsidy is added to the 57 cents per pound
average market price, US producers made an average of 78 cents per pound of cotton
from 1991 to 2003. This level of revenue is more than enough to cover average
variable costs of 50 cents/lb, and just enough to cover the average total economic cost
of 78 cents/lb. Variable costs in some of the competing cotton-exporting nations are
about half those of the USA.
4 In some US regions, including California, Arizona and Texas, irrigated water is provided at subsidised
rates and, in effect, is a large production subsidy for many cotton producers. However, water subsidies are
not discussed in detail here.
78 african environment
While US cotton production is large by global standards, by the USA’s own
economic standards cotton is a modest player. In 2003, cash receipts for cotton lint and
seed were estimated at US$5.5 billion, from a total planted area of 14 million acres.
This accounted for 5.1 per cent of estimated total receipts from all US crops
(US$106.7 billion) and 2.5 per cent of total crop and livestock receipts (US$212.4
Table 2: Acreage and cash receipts for major US crops, 2003
Crop Areas Cashreceipts
(million acres) (US$ billion)
Cotton lint and cotton seed 14 5.5
Corn 71.1 18.7
Soybeans 72.3 15.7
Wheat 52.8 8.0
Rice 3.0 1.1
Source: US Department of Agriculture (USDA)
More broadly, agricultural production itself is only marginally important to the
US economy, constituting about 2 per cent of the economy and 2 per cent of the
workforce. However agriculture, and cotton in particular, have a disproportionate level
of influence on US politics. This is partly an historical legacy, but also reflects the
political realities of regional representation in Congress.
King Cotton: abdicate or subjugate? 79
Figure 3: US cotton-producing regions
Source: NOAA/USDA. Joint Agricultural Weather Facility (NOAA/USDA).
A casual observation of the cotton map and a map representing the affiliations of
the US Congress will demonstrate why cotton wields undue power. In 2005, five of the
18 most powerful Congressional leaders come from cotton-growing regions or states.5
While still a powerful lobby, this is actually a significant reduction since 2003, when
eight of the 18 came from cotton districts. Nonetheless, representatives of southern
cotton-growing states such as Texas, Georgia and Tennessee hold disproportionate
power in Congress. It is also notable that President Bush comes from Texas, the largest
cotton-producing state. The strong political representation for cotton regions,
combined with a powerful and well-organised lobby, explains the large subsidies for
5 House and Senate leadership, Chair and ranking for Ways and Means, Finance, Appropriations and
80 african environment
Figure 4: Election map of the USA, 2004. Grey = Bush, black = Kerry
Source : “ Wikipédia” Free encyclopedia online.
The main lobby representing the US cotton industry is the National Cotton Council
(NCC), a private organisation that advocates on behalf of the entire cotton industry,
including producers, ginners, storage suppliers, merchants, cottonseed co-operatives
and manufacturers. In addition, the NCC is affiliated with separate organisations
that promote increased cotton consumption through advertising and public relations
programmes. The organisation is also affiliated with the Cotton Council International,
which promotes the consumption of US cotton by foreign buyers.
The NCC seeks to mediate the diverse interests of cotton-related industries and
to settle disagreements internally, rather than expose political leaders or the public
to any conflict. The ability to resolve and unify diverse interests makes the NCC more
influential, because it represents a broader and more powerful set of economic interests
than simply those of cotton producers. It testifies frequently before Congressional
committees, and closely consults with US government agencies – particularly with
the US Trade Representatives (USTR) office in relation to the WTO cotton dispute and
the C4 negotiations. The NCC also sponsors academic research to rebut critics and to
support the rationale for continued cotton subsidies.
King Cotton: abdicate or subjugate? 81
On the C4 negotiations, the NCC has recognised that there is a political problem in the
WTO, and has sought to assist the USTR in negotiations. For example, it has promoted
several efforts to exchange information with producers and officials in West Africa.
In July 2004, it hosted agriculture and commerce ministers from Benin, Burkina Faso,
Chad and Mali on a week-long tour of US cotton production, processing, marketing
and research facilities. In addition, NCC officials have travelled to West Africa several
times. The NCC is proud of its efforts:
“African farmers need assistance in improving agronomic practices, establishing
a reliable classing system, improving infrastructure and ginning, privatisation of
marketing and distribution, and assistance in building expanded markets in order to
improve farm income. The US cotton industry, working co-operatively with USDA and
USAID, has initiated several development programmes designed to assist African
farmers in achieving these results.”6
On the other hand, the NCC adamantly opposes any cotton-specific trade negotiations:
“…Singling out cotton as a separate issue is both unfair and inappropriate.
Unfortunately, this initiative has been influenced by poor economic analysis.
Particular emphasis on US cotton is unjustified and unwarranted – the world cotton
market is much more than the United States. The US has not increased cotton production,
but we have seen a surge in foreign production, particularly in China and Brazil.”7
US negotiating positions at the WTO and its legal strategy closely mirror the positions
of the NCC.
Prospects for reform
The Bush administration’s approach to cotton subsidies is contradictory. On the
one hand, the USTR is aggressively resisting reform at the WTO. On the other, the
administration has proposed cuts to agricultural subsidies. In February 2005, President
Bush proposed a 5 per cent overall cut in commodity payments. He also proposed to
limit farm payments to a maximum of US$250,000 per farm. Such a limit would cut
cotton payments disproportionately more than other commodities.
The USTR has strongly resisted the Brazilian complaint against US cotton subsidies,
using the dispute settlement mechanism of the WTO. However, now that Brazil has
prevailed in the case, the Bush administration has moved quickly to comply with
the decision. In July, the US Department of Agriculture proposed legislation to bring
the USA into compliance with the decision, by eliminating the Step 2 cotton export
subsidy programme and reforming the USA’s export credit guarantee programme.
6 “EU Abandons Single Undertaking, Jeopardizing Doha Round”, press release of the National Cotton
Council, 20 April 2005, http://www.cotton.org/news/releases/2005/euresponse.cfm.
7 “NCC Has Concerns with WTO Framework Text”, press release of the National Cotton Council,
2 August 2004, http://www.cotton.org/news/releases/2004/WTORESPONSE.cfm
82 african environment
In negotiations to produce the 2004 July Framework for the Doha Round, the USA
agreed to the creation of a cotton sub-committee under the aegis of the agriculture
negotiating committee. Since then, however, US negotiators have sought to minimise
the scope and function of this sub-committee. First, the USTR opposes any form of
compensation fund, arguing that there is no precedent or modality for this concept as
part of the WTO negotiations. Nonetheless, the USA expresses non-specific support
for “development” assistance for the African cotton sector.
Second, the USTR advocates the position that the job of the cotton sub-committee
is not to negotiate, but rather to monitor progress of the broader Doha Round. In effect,
the USTR argues that the negotiations of the cotton sub-committee are not part of the
“single undertaking” of the Doha Round. The USA has not formally responded to
specific negotiating texts offered by the African group, nor to more general inquiries
about the US position. Little progress can be expected until the Hong Kong Ministerial
conference in December 2005.
At the time of writing, the US Congress had yet to act on proposals by the Bush
administration to reform farm subsidies to comply with the WTO ruling. At present,
there is no way to predict whether these subsidy cuts will be enacted, or whether the
USA will fully comply with the WTO decision on cotton subsidies.
What is slowly becoming clear, however, is that there is an internal conflict within
the USA about farm subsidies, and about cotton in particular. Many politicians and
experts believe that US farm subsidies are excessive, and recognise that they create trade
distortions. There is strong support for reform among newspapers and economists,
think tanks and religious organisations. There is even a growing internal demand for
reform among farmers, based on the domestic inequity of farm programmes: most US
farmers get no payments at all, and the vast majority of those who do receive payments
get only small amounts.While the Bush administration has resisted reform in the
Doha negotiations and in WTO disputes, it has also sought to reform farm subsidies in
budget legislation and to comply with WTO dispute rulings. In the US Congress,
representatives and senators from agricultural regions – particularly cotton-growing
regions – fiercely oppose reform and pressure the administration to resist at the WTO.
However, a large majority in Congress also supports the WTO system and compliance
with international obligations. Pressure coming from the WTO, and in particular from
Brazil and African countries around cotton, is helping to shift the internal balance in
the USA on the issue of farm subsidies.
Cut subsidies, beware diversionary tactics and don’t
miss the Hong Kong window of opportunity
African cotton producers went to Cancùn in 2003 with a strong case for reducing
cotton subsidies in industrialised countries. But the Cancùn conference of the World
Trade Organisation (WTO) ended in failure, and very limited progress has been
achieved in the two years since then. On the eve of the WTO conference that will open
in Hong Kong on 13 December 2005, the pressure for reducing cotton subsidies has to
be stepped up.
The first part of this paper summarises the arguments for cutting subsidies. Doing
so would reduce poverty for 10 million Africans, at no cost to the European Union or
the United States. It would be a win-win situation for everyone. In high-income
countries, only a tiny fraction of the population would lose out, and most of the losers
would be those who today benefit from income acquired through skilful lobbying.
The second part of the paper deals with the responses made to the African request.
The claim of African countries for compensation has been rejected, but the need to
reduce subsidies has been recognised. For public relations purposes, a series of
proposals has been made: some are useful, others are not, and these should be treated
as diversionary tactics.
The final part shows that African countries today stand to benefit from a combination
of favourable circumstances. Hong Kong provides a window of opportunity not to be
missed, because such a favourable set of circumstances may not arise again for several
Why should subsidies be reduced?
The Sectoral Initiative in Favour of Cotton submitted by four Least Developed
Countries (LDCs) to the WTO in May 2003 contained a powerful message: “Eliminate
cotton subsidies in the USA and the EU. This will alleviate poverty for 10 million
Africans living on less than one dollar a day; and it will cost you nothing, since the losses
of your producers will be more than compensated by the gains to your taxpayers”.
Two years later, this message needs to be reiterated more loudly.
* Louis GOREUX is a statistical engineer and holds a PhD in economy, agronomy and law. He was
previously IMF Deputy Director for Africa, and is now an international consultant.
84 african environment
The elimination of subsidies will alleviate the poverty for 10 million Africans
It is widely recognised that the expansion of cotton growing has contributed to
reducing poverty in the Sahel region of Africa. Following the WTO resolution of the
dispute between Brazil and the USA, it is now recognised that US cotton subsidies
cause prejudice to other cotton exporters by depressing the world cotton price. Since
the world price is affected by a number of factors, the specific effect of subsidies has
to be isolated from the effects of all the other factors in order to assess the prejudice
they cause. For this purpose, an econometric model has to be constructed, with and
This is what the author of this article did to arrive at the loss of US$250 million
quoted in the Initiative by the four African LDCs.1 A similar approach was followed
by Daniel Summer, who found that US cotton subsidies had the effect of reducing
world cotton prices by 11.6 per cent; this was the critical finding for establishing that
US subsidies caused prejudice to Brazil.2 Adding the effect of EU subsidies to that of
US subsidies leads to a 15 per cent reduction in world cotton prices and, in turn, to the
prejudice of US$250 million quoted in the Initiative. The credibility of the message of
the four LDCs has therefore been reinforced by the WTO judgement published in
The world price measured by Index A (see Figure 1 below) is the price paid
for African cotton delivered to the port of the importer. However, almost half of
the costs incurred by African countries in growing seed cotton, for processing it into
fibre and for shipping the fibre are not affected by variables in Index A; these include
transportation costs, input costs, fixed costs and financial fees. Consequently, a 15 per
cent increase in prices could result in a 30 per cent increase in the net income of
African cotton farmers. The elimination of cotton subsidies would therefore be an
effective way of reducing poverty for 10 million Africans living on less than one
dollar a day. Furthermore, the elimination of subsidies would conform with the free
trade philosophy of the WTO and the Bretton Woods institutions.
This first message has already been heard. It needs to be repeated, or it will not lead
to major advances. The second message states that the elimination of cotton subsidies
is in the interests of both the EU and the USA. The taxpayers of these countries have
not been well informed, and this second message should be widely disseminated in
order to reach them.
1 “Prejudice Caused by Industrialised Countries to Cotton Sectors in Western and Central Africa”, Louis
Goreux, June 2003, pp.26-34.
2 Technical report by Daniel Summer submitted on 09/0/03 to the Dispute Settlement Body of the WTO,
in support of the Brazilian claim against the USA.
Cut subsidies, beware diversionary tactics 85
The elimination of subsidies is in the interests of the European Union
The problem of cotton subsidies did not exist when the EU was limited to nine
countries, since none of the original nine grew cotton. The problem arose in 1981
when Greece joined the EU. Cotton was grown in one of the poorest parts of Greece
and cotton subsidies were established to reduce poverty in a disadvantaged area, which
was a generous idea. These subsidies should have induced a progressive shift from
an unprofitable activity towards activities with positive value added; unfortunately,
they instead led to the rapid expansion of the unprofitable activity. Subsidies to cotton
farmers and subsidies for the establishment of new ginning factories were so generous
that cotton acreage tripled over the 13 years following Greece’s accession. At that
point, the European Commission (EC) took measures to avoid further increases in
cotton production. Nonetheless, the EU guaranteed price still remains the highest in
the world: it was fixed in 2001 at €1.063 (700 CFA francs) per kilo of cottonseed,
which is three-and-a-half times the price paid to African farmers, for cotton with a
lower fibre content than that grown in Europe. When Spain joined the EU, cotton
farmers in Andalusia also benefited from the special treatment granted to their Greek
The EU spent almost US$1 billion on cotton subsidies in 2001/02 and will spend
more than that amount in 2004/05. The cotton produced in Greece and Spain could
have been imported for a third of the cost of producing it locally. If Turkey had been
part of the EU in 2004/05, the cost would have risen to US$3 billion. The Commission
will have to solve the cotton issue before negotiating the conditions under which
Turkey could join the EU.
On the eve of the Cancùn conference, the EC announced that it would progressively
replace coupled subsidies with decoupled ones (i.e. subsidies that are not linked to
current production); from 2007, 65 per cent of EU cotton subsidies will be decoupled.
The EC made a further positive step with the speech made by Peter Mandelson in
Bamako on 13 April 2005 – a speech that was sufficiently favourable to African farmers
to provoke the anger of the USA’s National Cotton Council. Europe could be amenable
on cotton, but it accounts for only 2 per cent of world cotton production. The key is
held by the USA, which accounts for almost 40 per cent of cotton exports globally.
The elimination of subsidies is in the interests of the USA
Cotton is part of US folklore. For the past two centuries, the USA has been by far
the leading cotton exporter. Over the past decade, US cotton production has remained
broadly unchanged because it has been subsidised; however, the use of cotton by the
US textile industry has fallen and will fall further, due to the abolition of import
quotas on textiles. As a result, US exports have increased from 38 per cent of US
cotton production in the 1990s to 64 per cent during the past four years. Subsidising
cotton production to the tune of US$3 billion a year, while exporting two-thirds of it
at a loss cannot be in the interests of the USA. However, it is in the interests of a small
number of major cotton producers and these are very influential in the National Cotton
Council (NCC), which is probably the most powerful farm lobby in America.
86 environnement africain
The 255 cotton farms in the USA that are larger than 3,000 acres received subsidies
averaging US$1.2 million per farm in 2002/03 and US$1.8 million in 2004/05.3
Large cotton farms are more profitable than small ones for two reasons: they have
lower production costs per bushel due to economies of scale and they receive larger
subsidies per acre because their yields are higher. As a result, large farms have been
able to buy up small farms, which has led to a dramatic process of concentration: the
total number of cotton farms in the USA fell from 1.1 million in 1949 to fewer than
25,000 in 2002.
The US administration knows that the bulk of cotton subsidies go to big farmers,
and it submitted a draft budget to Congress in which cotton subsidies would have
been substantially reduced and subsidies would have been limited to US$250,000 per
beneficiary. The NCC reacted violently and asked congressmen and senators to exert
pressure on the administration to withdraw the proposed ceiling. By fighting this
proposal, the NCC showed that it was defending the privileges of a small group of
well-to-do farmers receiving large subsidies paid by taxpayers – who, for the most
part, were a lot poorer than those benefiting from the subsidies.
Why has the African request not yet received a satisfactory response?
The rejection of financial compensation
In their Initiative of May 2003, the four African countries demanded the swift
elimination of cotton subsidies that caused prejudice to LDCs and, pending their
elimination, financial compensation for the prejudice suffered. Compensation during a
transitional period did not appear unreasonable, but the idea was not well received.
The four LDCs reformulated their request by replacing the idea of a compensation
mechanism with that of a support fund, but this idea was no better welcomed than the
previous mechanism. This negative reaction can be explained by various reasons.
Providing financial compensation to African cotton exporters when prices fall due
to excess world supply would have the same effect as giving them a subsidy; this
would stimulate world production at times when it should be reduced. Moreover, since
this compensation would account for only 5 per cent of the global cost of subsidies,
it would not be large enough to induce the EU or US authorities to reduce their own
Assessing the degree of prejudice and the compensation required would raise
a series of technical issues: for example, the choice of elasticity co-efficients of
supply and demand, and the differential treatment applicable to subsidies, depending
on whether they fell into the Green, Blue or Orange boxes. Moreover, since the
classification of subsidies by box takes three years to take effect, the compensation
would be received too late to stabilise the incomes of African cotton farmers.
3 According to the 2002 agricultural census, 255 cotton farms exceeded 3,000 acres (equivalent to
Cut subsidies, beware diversionary tactics 87
These technical arguments aside, a number of partners are not prepared even
to recognise the harmful effects of subsidies. Last but not least, it could be argued
that awarding compensation for cotton subsidies would open a Pandora’s Box that
would lead to compensation requests for many other commodities – a situation that
industrialised countries want to avoid.
The WTO stated that it did not have the power to determine levels of financial
compensation and that it was not equipped to manage a fund. In order to express its
understanding of the LDC cause, the WTO organised a development workshop in
Cotonou in March 2004 – but this was in fact a way of passing the buck to development
institutions. The EU made it known in diplomatic terms that it was not interested in a
compensation mechanism, when it organised the Paris Forum in July 2004. African
countries were invited to present a development framework for their cotton sectors, in
order to allow their partners to harmonise their assistance programmes. A follow-up
meeting to this forum was held at the OECD in January 2005. Here African countries
proposed the creation of a support fund for the cotton sector, but there was no support
for this proposal, nor for the one presented in April 2005.
The World Bank did not want to manage a support fund for cotton, either. The IMF
could not manage a fund dealing with a particular sector, though it can compensate
countries for temporary shortfalls in export earnings when the country has a balance
of payments need. The compensatory financing facility (CFF) was widely used
between 1976 and 1980, but it has been seldom used over the past 20 years.4 In the
mid-1980s, subsidised interest rates were made available to LDCs under a number of
facilities other than the CFF. The creation of a “shock facility” offering subsidised
interest rates has been recommended by the monetary and finance committee of the
IMF, which met on 24 September 2005 in Washington. An African country that has
suffered an exogenous shock due to a fall in cotton prices and an increase in the cost
of energy and nitrate fertilisers could make use of this facility, provided it had a
balance of payments need. This facility was expected to become operational by the end
of 2005, though it does not apply specifically to cotton.
In summary, the various partners with an interest recognise that the survival of
the cotton industry is an essential factor in the fight against poverty, but they are not
prepared to establish a compensation mechanism as set out in the Initiative, nor a
modified version of the mechanism. Since the cotton initiative has had an impact on
public opinion, a series of workshops has been organised in an attempt to respond.
Of the various proposals made, some are promising and should be put into practice i.e.
improving productivity and securing the future of the cotton sector. Others should be
seen as diversionary tactics i.e. accelerating liberalisation of the sector and processing
4 “Compensatory Financing Facility”, by Louis M. Goreux. Pamphlet Series, No 34, IMF 1980, pp.2-3:
“From January 1976 through March 1980, there were 107 drawings totalling SDR 4.0 billion under the
facility; these accounted for 31 per cent of the total credit extended by the Fund to all its members, and
45 per cent of the total if the United Kingdom is excluded, during this period…. The compensatory
financing facility has, therefore, become a major facility for providing payments assistance to member
countries, especially those heavily dependent on commodity exports.”
88 african environment
Increasing productivity in the cotton sector
The growth of cotton production in the CFA franc zone has been remarkable.
However, this has been due to an increase in the acreage under cultivation and, over
the past decade, yields have been steady or declining. With declining world prices
(see Figure 1 and Table 1), improvements in revenues per acre require higher yields.
On this essential point, African farmers and their partners are in full agreement.
Figure 1: World cotton prices, Index A in CFA francs per kg,
January 1994 – August 2005
(Former Index A north Europe delivery)
Source : Louis GOREUX
Cut subsidies, beware diversionary tactics 89
Table 1: Price cycles for cotton: peaks and troughs
Trough in % From Number of
Cents/lb CFAF/ CFAF/kg Peak Trough Peak to Peak Trough to
Jan-94 69,2 592,8 904,4
Mar -95 110,5 514,4 1253,1
Aug 96 76,3 500,3 842,0 67 29
Aug 97 81,2 628,2 1124,1 40
Dec-99 44,2 648,8 632,2 56 75 39
Nov-00 64,0 767,1 1082,4 22
Oct 01 37,2 725 594,6 55 94 36
Nov 03 76,8 560,8 949,6 38
Dec 04 48,6 496 531,4 56 89
Aug-05 54,0 534 636,2
Sources: First column: Cotlook Liverpool Index A monthly average (delivery to ports in northern Europe).
Second column: exchange rate monthly average from IFS, published by IMF.
Measures aiming at increasing cotton production should go hand-in-hand with
those aiming at reducing subsidies, if African countries are to benefit from lower
subsidies in the medium term. Otherwise, reduced production by the EU and the USA
will be quickly offset by an increase in production by countries such as Brazil and
Australia, where the price elasticity of supply is high. Africa could meet the challenge,
since West Africa’s share of world cotton production has increased rapidly and could
increase still further. In Burkina Faso, for example, cotton production has quadrupled
over the past nine years.5
Securing the cotton sector
The rapid growth of cotton production in the CFA franc zone is partly due to the
minimum guaranteed price, which has generally been announced just before the crop
is planted. This practice, however, to which farmers seem much attached, raises two
problems. One is linked to price fluctuations during the cotton year, and the other to
price fluctuations from year to year.
5 Production increased from 64,000 tonnes of fibre in 1995/96 to 260,000 tonnes in 2004/05.
90 african environment
By fixing the minimum producer price a whole year before delivering the fibre to
the importer, the cotton ginner takes a risk against which he should protect himself.
The method most often used to reduce this risk is to sell part of the expected production
on a forward basis. By selling half of the crop before announcing the floor price in
April, the ginner cuts his risk by half and he can deposit his forward contracts with the
banks, which have to provide crop credits starting in October.
There are other techniques for risk management, such as the purchase of put options
or contracts on the futures market. However, a study looking at the past 17 years has
shown that forward sales would have been the most profitable technique. The other
options (in so far as they would have been available at reasonable rates) would have
been easier to manage than contracts on the futures market, but they would have been
the most onerous solution.6 Cotton ginners could use a mix of instruments, depending
on market conditions.
Forward selling reduces the price risk encountered by the cotton ginner within a
particular year, but it does not reduce the price risk encountered by producers, since
price fluctuations from year to year are not reduced. In the absence of any stabilisation
mechanism, if Index A falls by 22 per cent from one year to the next – which is not
abnormal (see Figure 1 and Table 1) – producers’ net income would fall by half
(Table 2).7 This could have dramatic consequences for households depending on
cotton for most of their monetary income and would be inconsistent with the fight
against poverty. According to a survey conducted in Mali at the beginning of 2005,
farmers planted cotton because it provided them with an assured monetary income and
a source of credit.8 To eliminate the floor price would plunge millions of Africans
into a precarious situation.
6 Paper delivered by Gérald Estur at the annual meeting of the International Task Force on Commodity
Risk Management, Interlaken, Switzerland, 19-20 May 2005.
7 This estimate is based on data provided by SOFITEX covering the five years ending 2004/05. As the
cost of going from FOB to CIF is roughly equal to the proceeds of cottonseed, it is assumed that the sector
would break even when the FOB cost was equal to Index A. For simplicity’s sake, Index A and cost at the
FOB level are both taken as 100 at the break-even point (Table 2). Producers receive 60, of which 20 is
spent on inputs; the producers’ net revenue is therefore 40. From collecting cottonseed at the village gate
to delivering fibre at the FOB level, the cotton company receives 40, of which 25 covers costs that cannot
be adjusted with regard to fluctuations in Index A, and 15 covers costs that can be partially adjusted. When
Index A falls by 22 per cent from 100 to 78, the 20 for inputs and the 25 for fixed costs remain unchanged;
if partially adjustable costs were reduced, from 15 to 13, producers’ net income would fall from 40 to 20.
8 Paper by Kako Nubukpo and Manda Sadio Keita: “Reform of the price mechanism used to determine the
price paid to cotton growers in Mali and consequences in the context of falling world prices”, July 2005.
Cut subsidies, beware diversionary tactics 91
Table 2: Effect of a 22% fall in world prices on net income of producers
FOB Cost = FOB Price 22% fall in
Cost FOB 100 78
Company costs 40 38
Non-adjustable costs 26 26
Fixed costs 11 11
Interest 4 4
Cost from factory to FOB 10 10
Partially adjustable costs 14 12
Producers’ gross income 60 40
Cost of inputs 20 20
Producers’ net income 40 20
Source: the costs shown as percentages in the first column have been calculated by the author from the
accounts provided by SOFITEX; they correspond to the five-year averages from 1995/96 to 2004/05 and
are rounded up to the nearest whole number. In the second column, the FOB price is assumed to fall by
22 per cent. Non-adjustable costs remain unchanged and the company costs that are partially adjustable
are reduced by 14 per cent. The producers’ net income is calculated as residual.
Yearly price fluctuations can be reduced by contributing to a fund when Index A is
high, and drawing from the fund when Index A is low. However, a fund of this sort
cannot change the medium-term trend. When Index A follows a downward trend,
producers’ prices have to be adjusted accordingly, which means that production costs
have to be reduced if the sector is to remain competitive. Reducing fluctuations
from year to year is not easy, but it can be done. In Burkina Faso and Cameroon, for
example, support funds have been reasonably well managed. These funds should
not be eliminated, but their management could and should be improved.
In its submission to the Paris forum in June 2004, Burkina Faso stated that it
needed €10 million for its support fund, but it did not receive any offers of assistance.
By contrast, it received numerous unsolicited offers to help it improve its risk management
through the use of put options and various types of insurance. The negative response
to the support fund idea may be due to the fact that, in some quarters, the stabilisation
scheme used by Burkina Faso is not considered consistent with the free market model.
Liberalizing the cotton sector
Experience has shown that liberalisation generally leads to increases in production
and reductions in costs. Some observers have concluded that greater liberalisation of
the cotton sector is the solution. If prices fall, the pace of reform has to be accelerated
and there has to be free access at all levels of the supply chain in order to intensify
competition. However, liberalisation of the cotton sector has not been without
92 african environment
its problems, as shown by a comparative study of six African countries carried out in
2003.9 Production has increased most quickly in the CFA zone, where liberalisation
was less advanced (in particular, in Burkina Faso and Mali) than in the rest of Africa,
where the reforms were more advanced (particularly in Ghana and Tanzania). The
monopoly enjoyed by SONAPRA in Benin was abolished in 1995 and the country saw
the arrival of private cotton ginners, but production did not increase from 1995/96 to
2004/05, while in Burkina Faso it quadrupled over the same period. It is necessary to
liberalise the sector, but reforms have to be conducted with care; the market must be
privatised, but also regulated.
It is worth noting that cotton growing is far from liberalised in the USA and the EU.
In the 2002 US Farm Bill, the target price was set at 72.4 cents per pound. The actual
price did not fall below this target in any of the four years in which the law was in
operation, although the target exceeded the world price by 40 per cent on average. In
the EU, the difference between guaranteed price and world price was even greater; the
Doha Round negotiations have shown the difficulties encountered by industrialised
countries in reducing cotton subsidies.
Processing fibre locally
Another solution proposed to the African producers was for them to process their
cotton locally into textile products. By exporting finished products instead of raw
fibre, African producers would no longer be penalised by the subsidies granted to US
farmers, runs the argument. However, this has been tried before. Textile industries
have been set up in West Africa over the past 50 years, but the results have been
disappointing. Twenty years ago, Benin, Burkina Faso, Côte d’Ivoire and Mali
processed 22 per cent of their fibre production locally; today they process hardly 5 per cent.
The Sahel region has a comparative advantage in the production of cotton fibre,
since cotton is cultivated manually in an area where the cost of family labour is very
low. But the region does not have any comparative advantage in processing the fibre
into yarn, as this process requires little unskilled labour and a large amount of electricity,
which is very expensive here. With the recent increase in energy prices, the problem
has only been exacerbated.
A study presented in June 2003 in Ouagadougou considered that, in order to attract
investors, it would be necessary to guarantee them a 30 per cent subsidy on their
purchases of cotton fibre, for a period of at least 15 years.10 It would be dangerous to
follow such a path when textile mills are closing in industrialised countries, after the
abolition of import quotas on textile products. This does not mean that countries in the
Sahel should not process a greater proportion of their cotton into textile products
for export. However, this will be a lengthy process and farmers cannot be expected to
heavily subsidise textile mills for 15 years.
9 “Reforming the Cotton Sector in Sub-Saharan Africa”, by Louis M. Goreux. Second edition. Africa
Region Working Paper Series, No 62, November 2003.
10 “Etude d'identification et de promotion d'unités industrielles régionales dans la filière coton de
l'UEMOA, March 2003, p.65”
Cut subsidies, beware diversionary tactics 93
A window of opportunity not to be missed
African countries should not expect to be compensated financially for the prejudice
caused by the subsidies granted by industrialised countries to their cotton farmers.
However, they may obtain external assistance to improve the productivity of their own
cotton sectors. They were invited to present a development framework for their cotton
sectors at the Paris forum, held in July 2004. They did so, but to date this has not
led to much additional assistance. African countries must follow up by designing
programmes and projects that are financially viable, and they must exert pressure to
obtain the additional resources that have been promised. The main objective should
remain the elimination of subsidies that cause prejudice to African cotton producers.
On the eve of the Hong Kong WTO conference, the time has come to intensify
the pressure. The timing is right, at the end of the 2004/05 cotton year, since cotton
subsidies in the EU and the USA have never been so high.
Subsidies to Greek and Spanish cotton farmers constitute only a small element of the
Common Agricultural Policy (CAP), which has long been considered an unshakeable
pillar of the European structure. In July 2005, British Prime Minister Tony Blair asked
EU members to tear up the old CAP and to start again from scratch, something his
French counterpart Jacques Chirac could not accept; this disagreement prevented the
new European budget from being adopted. This episode shows that a fundamental
revision of the European agricultural subsidy policy is no longer unthinkable.
In the USA, the proposal to reduce cotton subsides and to limit them to US$250,000
per beneficiary came from the White House. The proposal was made by President Bush
at the beginning of his second term, which is traditionally the best time for pushing
difficult measures. It should have been considered by Congress in mid-September, on
the eve of the new budget year beginning 1 October. However, with a big increase in
federal spending resulting from the damage caused by Hurricane Katrina, the adoption
of the new budget was postponed.
There are good arguments for reducing cotton subsidies. Granting large subsidies
to producers to grow cotton, and exporting two-thirds of their production at a loss,
cannot be in the interests of the USA. This anomaly persists because it is defended by
a powerful lobby protecting the interests of big cotton farms, which for the most part
could be profitable without subsidies. For large-scale farmers, subsidies are the icing
on the cake, allowing them to buy up small farms and to further increase their profits
due to economies of scale. The ultimate anomaly is that the subsidies received by big
farmers are financed by taxpayers, who for the most part are a lot poorer than the
farmers themselves. Reducing cotton subsidies could be politically appealing, at a time
when the growing budget deficit is a subject of controversy both within the USA and
Circumstances are at present favourable because the new heads of the IMF, the
World Bank and the WTO are well informed on the cotton issue. On 15 May 2005,
Rodrigo de Rato (Director General of the IMF) held constructive talks in Cotonou on
the cotton problem with representatives of the four LDCs who submitted the Initiative.
94 african environment
On 14 June 2005, Paul Wolfowitz (the new President of the World Bank) visited
Bobo Dioulasso, the cotton centre of Burkina Faso, where he severely criticised
the subsidies awarded to US cotton farmers. On 25 September 2005, Pascal Lamy
(the new Director General of the WTO) brought up the cotton issue in his address to
the Development Committee.
Big farmers will fight to safeguard their privileges for as long as possible.
According to the National Cotton Council in the USA, it would be unreasonable to
change the rules of the game before the 2002 Farm Bill expires. It is too late to modify
the rules for the 2005/06 cotton year, since the cotton is already partly harvested.
Amendments could only be made for the 2006/07 season, which is the last year
covered by the current farm law. It would be unwise to modify some aspects of the law
without taking into consideration all the interactions involved, and this could only be
done when the next agricultural law is designed.11 If the next law were to be approved
by Congress six years after the previous one, the vote would take place in May 2008,
six months before that year’s presidential elections, which would not be a propitious
time to undertake serious reforms. It might therefore be necessary to wait for the Farm
Bill after that, which could be approved in May 2014.
To conclude, African cotton producers have a strong case and Hong Kong presents
a window of opportunity that should not be missed. However, Africans will not be able
to take full advantage of lower subsidies without improving productivity in their own
11 In an attempt to delay reforms, it has been proposed to extend the 2002 Farm Bill by four years.
If such a proposal were accepted, the USA's margin of negotiation in Hong Kong would be severely
Beyond the sectoral initiative:
Towards coherence in trade and development
policies on cotton
Between a rock and a hard place: the case for support
to Africa’s cotton sectors
Introduction: from compensation to support funds
The original version of the Sectoral Initiative in Favour of Cotton, submitted to the
WTO in May 2003, was centred on two key demands: the elimination of cotton subsidies
and a transitional compensation mechanism to offset the damages caused by subsidies
to Least Developed Country (LDC) cotton exporters, pending their elimination.1
While proposals for cotton subsidy reform remain squarely on the agenda, despite the
lack of progress, the idea of transitional measures in the form of financial compensation
for cotton-producing LDCs to offset their loss of revenue was greeted with outright
rejection by WTO member states in Cancùn, notably because the proposal did not fall
under the existing prerogatives of the WTO.2 Subsequently, the request of the “Cotton
Four” (C4) for compensation has been repackaged in the form of a “cotton sector support
fund”, but this too has met with a consistently negative response, in spite of attempts
to make it more palatable to the donor community.3
Fuelled by the renewed price crisis in 2004, and by their determination to seek a
global solution to the cotton problem, the C4 countries have nevertheless continued to push
forward on this demand.4 The proposal for modalities on cotton put forward by the
Africa Group in April 2005 proposes an emergency support fund for cotton production,5
with a level of funding of 20 per cent of the value of production in the countries
concerned. This would decrease in proportion to the “pace of elimination of the domestic
support measures and subsidies at issue.” Multilateral and bilateral development partners
have been given a deadline of December 2005 to develop, approve and finance this
fund to support the cotton sectors of all African cotton-producing and net exporting
* Sally Baden is Cotton Research and Policy Adviser for Oxfam International, West Africa. This article
is an individual contribution and does not represent the position of Oxfam.
1 World Trade Organisation, Committee on Agriculture Special Session, 2003, WTO negotiations on
agriculture. “Poverty Reduction: Sectoral Initiative in Favour Of Cotton,” Joint Proposal by Benin,
Burkina Faso, Chad and Mali, TN/AG/GEN/4, 16 May 2003 (03-2613).
2 No mechanism exists for financial compensation for damages in the WTO. Countries experiencing
damages due to the actions of other members can take their case to the Dispute Settlement Body which,
if it rules in their favour, can authorise the use of retaliatory trade measures.
3 See Goreux, this volume.
4 See e.g. “Bamako Declaration” of January 2005, signed by ministers of the C4 countries; OECD-DAC,
2005, “DAC Briefing: The Development Dimensions of African Cotton: A contribution to the follow-up
of the WTO Regional Workshop on Cotton held in Cotonou 23-24 March 2004”, OECD-DAC/Club de
Sahel, DAC Chairman’s Statement, January 2005.
5 African Group (WTO), “Proposed Elements of Modalities in Connection with the Sectoral Initiative in
Favour of Cotton: Communication from the African Group,” TN/AG/SCC/GEN/2, WTO, 22 April 2005.
98 african environment
Parallel to the WTO stalemate on the support fund question is a similar blockage
in dialogue between African cotton stakeholders and donors around the role of
national-level support funds – formerly referred to as stabilisation funds – in providing
protection from price risk and volatility for small farmers in Africa. One of the major
consequences of the repeated price crises that have occurred since 20016 is the
depletion of remaining reserves available nationally for stabilising producer prices in
West and Central Africa. Farmers’ organisations, governments and other stakeholders
in African cotton sectors have been attempting to negotiate with development partners
on the replenishment, or establishment, of cotton support funds at a national level, but
so far to no avail.
No-one is suggesting a return to old-style stabilisation funds, and no doubt there
are hard lessons to be learned from previous experiences. Existing initiatives also
need to be adapted to a changing institutional environment. Rather than throwing the
baby out with the bathwater, however, it is urgent to examine the different concerns
and positions regarding support funds, and to investigate whether there are realistic
alternatives to help secure the livelihoods of small farmers in the short to medium term.
This article first looks at the rationale for support funds at the national level, then
reviews some prevailing donor positions on this question, as well as alternatives
currently being proposed. Finally, it makes a case for rehabilitating support funds
nationally, to secure the cotton sectors and the livelihoods of farmers, to ensure coherence
between “trade” and “development” questions, as undertaken in the July Framework,
as well as to move forward a negotiating process that is at risk of becoming bogged
The basic idea of support funds at a national level is that they provide a minimum
guaranteed price to small farmers, and reduce the risk of price fluctuations in commodity
markets at the farmer level. They go hand-in-hand with existing systems in West and
Central Africa (WCA), where prices are set in advance of the growing season, to give
a clear signal to farmers of what price they might expect for their crop. This system
transfers the risk of cotton sales on the world market from the farmer to the cotton
company which, via use of forward sales and other methods, is better placed to manage
the risk. In cases where world prices are unfavourable, the funds are used to offset the
gap between the price for cottonseed announced at the beginning of the season and the
final price at which the cotton fibre is sold on world markets, minus the various
charges and fixed costs that companies bear in transformation, transport and other
essential functions. In periods of favourable world prices, reserves can be accumulated
and bonuses distributed to farmers.
6 Following the severe crash in world cotton prices in 2001, there was a recovery in 2003, only for
prices to fall steeply again in the second half of 2004.
Between a rock and a hard place: the case for support to Africa’s cotton sectors 99
In the WCA region, and indeed in most of Africa, small farmers – for whom
minimising risk may be more important than maximising revenue – are the main cotton
producers. A number of different accounts stress the value that farmers place on the
guaranteed price system.7 It is also true that few other markets for agricultural
products offer any such certainty. While it may be true that producers have sacrificed
higher prices for price stability, this may be regarded as a positive trade-off.
Given current price trends on world markets, the rationale for funds of this nature
is stronger than ever. Not only have prices been in decline by an average of 2 per cent
annually over the past decade, but price volatility has also been increasing, in part due
to exchange rate factors.8 Exposing small farmers directly to these fluctuations, in such
unfavourable circumstances, could have a disastrous effect on their revenues and on
poverty levels. The impact that volatile prices for cotton fibre have on the price of
cottonseed is also magnified because of the inflexible fixed charges involved in
processing, transportation and so on. This means that the “variable of adjustment”
becomes the farm household itself and, in particular, the associated labour.9 In other
words, the direct impact of such volatility on poor people is extremely high.
Not only will poverty increase, but the viability of the cotton production system in
West and Central Africa risks being undermined if mechanisms to provide a minimum
of stability in prices and internal markets cease to function or are withdrawn. Farmers
may accumulate debts or be pushed out of cotton production, but without any obvious
alternative to assure either access to inputs for food production or cash incomes.
Declining producer incomes and, potentially, production levels would also have an
impact on government revenues, on the efficiency of the sector overall and potentially
on overall demand and economic growth.
The trouble with cotton support funds
Support funds are currently characterised by some donor agencies as unwarranted
subsidies to cotton farmers in Africa, which drain government (and donor) resources
away from poverty reduction priorities. Overall, both multilateral and bilateral
agencies – though with some notable exceptions10 – are unfavourable to the idea of
support funds linked to minimum or target cotton prices in the African context.
Within the development debate around cotton, this issue has surfaced repeatedly.
At the EU-Africa Cotton Forum in Paris in July 2004, both the Malian and Burkina
Faso delegations put forward requests concerned with setting up or replenishing support
7 Goreux, 2003; USAID, 2005; Keita and Nubupko, 2005 (this volume).
8 Gergely, 2005. While subsidies have been linked to price suppression in world markets (e.g. Sumner
2003), their impact on price volatility has not been analysed.
9 Goreux, 2005a.
10 See Gergely, this volume.
11 Republic of Mali, 2004, ‘Le programme de reforme du secteur coton au Mali: Mesures et état
d’execution,’ communication of the Malian delegation to the EU-Africa Cotton Forum, July 2004;
Republic of Burkina Faso, 2004, ‘Cadre stratégique pour le développement de la filière coton au Burkina
Faso,’ Ouagadougou, 18 June 2004.
100 african environment
The Agence Française de Développement (French Development Agency) also presented
a proposal for a three-tier “insurance” mechanism for the West African cotton sector
which, while distinct from existing systems, would be based on similar principles.
A major innovation of the French proposal was the creation of a regional fund that
could be drawn on by national cotton sectors in the case of exceptional difficulties, and
which would initially be funded by donor agencies.
However, it soon became clear that there was little enthusiasm among other donors
for funding these proposals. EU officials have made their opposition clear; the emphasis
in the EU commodities action plan is squarely on the use of market-based mechanisms,
with short-term recourse to the FLEX mechanism[explain FLEX?] and budget support
to shore up deficits.12 This emphasis was reinforced in the January 2005 update on the
EU-Africa cotton partnership, which stated that “reserve funds do not suffice any more
to manage the effects of the price risks… hedging price risks should be considered.”
While it may be true that the existing funds are exhausted, due to the recent price
crises, this does not mean that the function they served is no longer valid.
In Mali, while reform of the price mechanism was finalised in January 2005 to
reduce pressure on government budgets, this mechanism still effectively relies on
deficit financing to uphold the price floor agreed with farmers (i.e. FCFA 160, 24 per
cent less than the price of FCFA 210 in 2004/05).13 Cotton stakeholders in Mali clearly
favour the idea of the support fund, and the Mission de Restructuration du Secteur
Coton has launched a feasibility study to look into it.14 However, there is still no
indication that there is any external engagement to provide resources for this initiative.
Similarly, a request by Burkina Faso in advance of the EU-Africa Forum for donor
support to replenish its existing, but depleted, support fund fell on deaf ears.15
The problem is not one of availability of donor funds. Bilateral and multilateral
agencies, though reluctant to give explicit support to the cotton sector, are nevertheless
underwriting implicit subsidies through budgetary support.16 Equally, donors appear
willing to consider funding a whole raft of initiatives to increase productivity, quality,
value added and co-ordination in African cotton sectors or, in the case of the IMF, to
provide additional financing to cotton-dependent countries.17 Some of these are no
doubt important initiatives,18 but they do not directly address the issue of how to provide
a minimum of livelihood security to small farmers, faced with further price declines
and volatility in world markets.
12 “EU Action Plan on Agricultural Commodities, Dependence and Poverty and a Specific Action Plan
for Cotton”, DG Development, European Commission, May 2004, p.8.
13 See Keita and Nupubko, this volume.
14 The terms of reference for this study were drafted in June 2005 and the study is under way, with funding
from the French Development Agency.
15 Goreux, this volume.
16 In Mali, for example, the EU is providing up to €15 million in budgetary support on cotton.
17 European Union, “Road Map to Implementing EU-Africa Cotton Partnership”, 6 July 2004; USAID,
“Summary and Findings of the West Africa Cotton Assessment, 25 September-14 October 2004”, USAID,
Washington DC, 12 January 2005.
18 Goreux, this volume, indicates which are helpful and which are distractions from the main issues.
Between a rock and a hard place: the case for support to Africa’s cotton sectors 101
USAID, in its 2005 review of the problems of the C4 cotton sectors,19 provides a
useful analysis of the complexity of the issues surrounding support funds. It nevertheless
concludes that such funds, and the associated practice of setting minimum prices
pre-season, create the wrong incentives. This could be viewed as a case of policy
incoherence, or of blatant double standards, given the level of incentives provided to
US farmers to produce cotton, regardless of world market conditions.
In May 2005 the IMF engaged publicly in the cotton debate in West Africa,
when Director General Rodrigo de Rato visited the region and a conference was
held in Cotonou. The declaration of the meeting20 stressed the need for continued
market-based reform, pricing mechanisms based on the world price at the country
level, and increased intra-regional integration of the different cotton sectors. While
the IMF, alongside the World Bank, reiterated its strong support for subsidy reform,
the idea of an emergency fund received no backing.
Similarly, the declaration stated: “The potential adverse impact of the decline in
prices on poverty should be addressed by well-targeted and temporary measures to
protect the poor, rather than price supports.” More development resources were
recommended “to help the most vulnerable segments of the population cope with the
impact of exceptional price volatility”, as well as for supply-side measures to increase
productivity. The IMF also announced possible additional financing for C4 cotton
countries. However, this raises the question of whether creating new debt to cushion
commodity market shocks is a viable strategy.
The ideal of the liberalised and privatised cotton network is very strong in the
donor community, despite its mixed record on the ground,21 and support funds are
considered incompatible with this model. Even proponents recognise, however, that
cotton sector reforms do not solve the fundamental problem of the lack of functioning
rural credit and input markets, which explains why small farmers often produce cotton
even at loss, as is currently happening in Mali.
To the extent that price support mechanisms are funded through government budget
allocations, with or without donor support, this clearly constitutes a subsidy to small
farmers.22 The principle, though, is not one of systematic, institutionalised subsidy,
but rather one of support funds that are “internal” to the sector, i.e. fed by surpluses
when prices are higher and providing a floor price when world markets dip. This is
a qualitative difference from the EU and US subsidy regimes. In fact the support fund
in Burkina Faso, which is largely internally generated, successfully cushioned the
country’s farmers from the shock of one of the worst price crises in recent years.
19 In spite of the focus on the C4, the one problem not mentioned in this review is US subsidies. Ministers
of the C4 took the opportunity to remind the US visitors diplomatically of their two key priorities –
ending subsidies and setting up the support fund (Bamako Declaration, January 2004).
20 International Monetary Fund, 2005, “Declaration by Participants at the Benin Cotton Conference”,
Press Release No. 05/121, Washington, 23 May 2005.
21 Goreux, 2003.
22 In 2001/02, when prices reached an all-time low, government support was provided to hold up producer
prices in Benin (FCFA 45) and in Côte d’Ivoire (FCFA 15). Goreux, 2003 p.6.
102 african environment
Equally, the floor price may be fixed for shorter or longer periods (e.g. three years
in the case of Burkina Faso) but it can be adjusted periodically to ensure that it does
not become unsustainable against long-term price declines. Meanwhile, it is worth
noting that the level of price support enjoyed by US and EU farmers now far exceeds
global price trends, as average prices have declined by 2 per cent a year in the past
10 years. Downward adjustment in price supports to US farmers has not yet occurred,
while African countries have accepted lower prices to reflect global trends or have
ceased the practice of paying bonuses to farmers.23
To the extent that resources from within the cotton sector are insufficient to provide
protection against price fluctuations, and that companies and producers are able to
push for government support, there is an opportunity cost in terms of government –
and indirectly donor – resources. These are resources which, it is sometimes argued,
could be better used for poverty reduction – through investing in social sectors, for
example. There are complex questions of distribution here, but it is not an either/or
situation. In the context of West Africa, where coverage of basic services is extremely
weak, the cash incomes of small farmers themselves contribute directly to poverty
reduction, through both household expenditure on social services and investment in
community facilities by farmer associations. Moreover, the current request of West
Africans for a support fund in the WTO context underlines that it is not the intention
of governments to divert resources from other priorities: rather, they are seeking
Another criticism levelled at support funds is that they enable corruption and
rent-seeking behaviour. With the old-style stabilisation funds, there were undoubtedly
cases of serious mismanagement by cotton companies. These funds were often drawn
on for other purposes, so that resources were not available when they were really
needed.24 But times have changed. Producer organisations are better structured, more
professional and more prominent in the management of the sector than was previously
the case. The relatively good management of funds by producers in Burkina Faso and
Cameroon, for example, testifies that the problem is not the fund per se, but rather the
institutional and organisational context around it and the way it is managed.
What are the alternatives?
Favoured “alternatives” for mitigating price risk that are currently in vogue are
mainly market-based risk management mechanisms such as put options. The World
Bank and other donors, via the International Task Force (ITF) on Commodity Risk
Management for developing countries – notably the Dutch government and its associated
22 In 2001/02, when prices reached an all-time low, government support was provided to hold up producer
prices in Benin (FCFA 45) and in Côte d’Ivoire (FCFA 15). Goreux, 2003 p.6.
23 Keita and Nubupko, this volume.
24 The Compagnie Malienne de Développement des Textiles, (CMDT, the Malian Company for the
Development of Textiles) is a case in point, and one over which producers still have a grievance.
Between a rock and a hard place: the case for support to Africa’s cotton sectors 103
private sector partner, Rabobank – have promoted these mechanisms heavily in the six
years since the ITF was established.25 However these instruments, like forward sales,
are most relevant to management of global market price volatility and risk within the
annual production cycle by cotton companies or by financial institutions. Support
funds, on the other hand, are about smoother and more predictable national prices for
farmers over a period of many years.
A recent analysis26 underlines the fact that the existing practice of forward sales has
been, in most cases, a more reliable price risk management mechanism than put
options or futures, the main market-based instruments that are being proposed.
Forward sales enable protection against short-term price risks, help to plan sales,
establish a minimum price and facilitate access to credit. However they are costly, and
they do not reduce price uncertainty beyond a single season. While cotton companies
could benefit from selective and better use of these instruments, ginning companies
currently have little experience or skill in applying them and it may take some years
to develop their capacity. In addition, market providers are not always willing to
extend such facilities to new clients, without credit guarantees or collateral.27
Alternatives clearly do need to be considered to optimise prices and to reduce the risk
faced by African cotton companies. However, there is a range of considerations at
stake here, including marketing strategies and access to market information, not just
hedging. Given the institutional constraints, it is also unlikely that the use of market-
based mechanisms will become widespread sufficiently rapidly to provide an alternative
in the near future.
It is recognised that while producers are hurt by world price fluctuations, smaller
farmers in particular are hurt in the liberalisation process and that there is a need
to limit their vulnerability. Rather than provide price support, an idea being proposed
by the IMF and others is that these impacts on livelihoods and poverty levels could be
offset by targeted exceptional aid – through the provision of basic services in cotton-
producing countries, diversification and “safeguarding producers from excessive
external price shocks”.28
Specifics are lacking on how this might work, in terms of the criteria and duration
of “exceptional” aid, how targeting of poor farmers would be made operational and
how cost-effective such a scheme might be. One is tempted to venture that putting cash
directly into the hands of farmers might be a far swifter, less administratively complex
and less costly route to welfare outcomes than safety net programmes of this nature.
26 Estur, G., “Role of Price Risk Management in Cotton Sectors”, presentation to the annual meeting of
the ITF, Interlaken, Switzerland, 19 May 2005, ICAC.
27 Bryla, 2003.
28 “Statement of the EU Dutch presidency on behalf of the EU cotton partner countries concerning
partnership in the EU Africa cotton partnership.”
104 african environment
Diversification is regularly invoked as a solution to the cotton problem. Reduced
dependence on cotton is clearly essential in the medium to long term, both for farmers
and for African economies. But the question remains, diversification into what? Food
crops are an integral part of the existing cotton farming system, but it is the cotton
that provides cash incomes. In the absence of reliable or remunerative markets for
other crops, the idea that farmers can quickly diversify out of cotton into other crops
is simplistic, especially as cotton provides access to the inputs needed for the whole
Rehabilitating support funds
A clear advantage of support funds is that they have been around for a while, which
means that there is significant experience to build on – positive as well as negative –
and that in at least some cases, the institutional framework exists, although it lacks
resources at this point.
Nevertheless, there is clearly a need for some rethinking and reform of existing or
earlier mechanisms. Issues that need to be addressed include: who should manage the
funds and how this can be made transparent; how to ensure that the benefits of good
years are well used to prevent future deficits and, similarly, that producers get some
benefit from price hikes as well as protection from price falls; how to ensure overall
that the system builds in incentives for improving performance and productivity in
cotton companies as well as among farmers, to offset long-term price declines; and
how to ensure that such systems do not create a tendency towards systematic subsidies
that will be unsustainable.
Both past experience and changes in the policy environment mean that direct
management of such funds by cotton companies is not an appropriate option, especially
where there is, or is likely to be, more than one such company. Depending on the type
of fund, and the existing environment, producer organisations or the inter-professional
bodies that exist or are being set up in cotton sectors may have a role to play.
Where producers manage funds to limit the impacts of price volatility, they have the
responsibility to ensure that they provide adequate protection against bad years,
although if prices continue to slide, clearly there will have to be external support.
Another issue is the way in which bonus payments (called “ristournes” in WCA)
have historically been calculated and paid out – i.e. based on a share of cotton company
profits and distributed during the following season. This is problematic as it creates
incentives for cotton companies to hide their profits. Another issue is that the payment
of bonuses with a built-in delay can create perverse effects, particularly by tying
farmers into the following year’s production and rewarding those who produce more
in the current year.
Between a rock and a hard place: the case for support to Africa’s cotton sectors 105
Answers are now being found to some of the questions. Possible solutions include
a two-step payment system with a minimum floor price and the setting up a regional
insurance fund that would provide additional financing to national support funds in
cases of successive price falls, under specific conditions.29 The calculation of profit or
loss to the sector – and hence bonuses to farmers – needs to be based on objective
criteria, not on information supplied by companies (which in any case may become
less accessible with privatisation). There needs to be benchmarking of the relevant
costs, which would also serve to encourage improved performance by the companies.
Moving beyond the current deadlock means engaging in this debate. For their part,
producer organisations have a particular role and responsibility in ensuring that
proposals are developed that serve their interests as well as the interests of long-term
Conclusion: towards coherence?
The negative impact on African countries of trade-distorting subsidies is by now
well documented and widely accepted, but to date the WTO framework has not proved
adaptable to the demands for redress of poor, cotton-dependent countries. Large
economies such as Brazil can effectively retaliate against violations of trade rules with
trade measures, as Brazil is now planning to do following the March 2005 panel decision
of the Dispute Settlement Body on US cotton subsidies. Small African economies do
not have this leverage, and there is no existing mechanism or precedent for financial
redress for damages caused by the violation of trade rules. It is in this context that
the C4 countries are pressing for a support fund via the WTO.
There can be no doubt that world markets for cotton, in part due to subsidies, are
in long-term decline and are increasingly volatile, particularly for countries in the CFA
zone, which currently have to deal also with unfavourable exchange rate fluctuations.
There is no doubt either that falls in the cotton price to farmers lead to increases in
poverty.30 Rather than support funds draining money away from poverty reduction,
they should be seen as a means to limit the impact of commodity crises on levels of
poverty. While some price adjustment may have to occur, to ensure the sustainability
of the sector, this does not need to be brutal or chaotic. Overly sharp reductions in
prices to farmers will have knock-on effects in the wider economy, which would multiply
and deepen poverty and make recovery slower. A pragmatic approach concerned at
least in part with protecting the incomes of poor farmers requires further exploration
of this option in the medium term.
29 Goreux, 2003; Goreux, 2005; Gergely, 2005; Gergely, this volume.
30 See e.g. Minot and Daniels, 2002.
106 african environment
In the July 2004 framework, the trade and development questions of the cotton
issue are explicitly linked, and in reality the discussions are increasingly parallel.
Since the idea of compensation has been whittled out of the Sectoral Initiative on
cotton and the development debate has been widened to cover a multitude of questions
– from biotechnology to classification systems – there is no longer any organic link
between the negotiations on trade and those covering development issues. Indeed, the
development agenda is increasingly diluting discussions on the trade dossier. In a
communication to the WTO cotton sub-committee in April 2005, the Burkina Faso
delegation stated: “While these conferences provide diagnoses and devise strategies
and action plans, millions of African cotton producers continue to wait, in extreme
poverty and with less than one dollar a day, for concrete action in their favour.”31
One way forward would be to seek greater coherence between the proposal for a cotton
sector support fund, as envisaged by the C4 proposal, and pro-development actions at
the national level, starting with the establishment or replenishment of national-level
support funds in the C4 countries or the WCA region.
31 Sub-Committee on Cotton (WTO), “Ouagadougou Declaration on the Cotton Situation since
the Adoption of the July 2004 Package”, Communication from Burkina Faso TN/AG/SCC/GEN/1,
7 April 2005 (05-1452).
Between a rock and a hard place: the case for support to Africa’s cotton sectors 107
African Group (WTO), “Proposed Elements of Modalities in Connection with the Sectoral Initiative
in Favour of Cotton: Communication from the African Group”, TN/AG/SCC/GEN/2, WTO,
22 April 2005.
Bryla, Erin G. (2003), “Making volatility work for small farmers: mitigating inter-season price
volatility”, International Task Force on Commodity Risk Management for Developing Countries,
http://www.itf-commrisk.org/documents/interseason.pdf, 5 April 2003.
Cotton Steering Committee of the EU-Africa Cotton partnership (2005), “Update on the EU-Africa
Cotton Partnership (July 2004-January 2005)”, January 2005.
Estur, Gerald (2005a), “Role of price risk management in cotton sectors”, presentation to the annual
meeting of the ITF, Interlaken, Switzerland, ICAC, 19 May 2005.
Estur, Gerald (2005b), “Commercialisation et gestion des risques de prix du coton. Seminaire
introductif”, ICAC, Cotonou, 12 April 2005.
Estur, Gerald (2004), “Commodity risk management approaches for cotton in West Africa”, ICAC,
Washington, June 2004.
European Commission (2004) “New EU Action Plan on Agricultural Commodities, Dependence
and Poverty and a Specific Action for Cotton”,
Directorate General for Development, Brussels, May 2004.
European Union (2004) “Road Map to Implementing EU-Africa Cotton Partnership”, 6 July 2004,
Gergely, N. (2005), “Proposition pour le mise en place d’un mécanisme d’atténuation de la volatilité
des cours du coton’’May 2005.
Goreux, Louis (2003) “Reforming the Cotton Sector in Sub-Saharan Africa”, Africa Region Working
Paper series No. 62, Second Edition, The World Bank, November 2003.
Goreux, Louis (2005a), “Modèle Regionale”, paper for Association Cotonnière Africaine (ACA)
Annual Meeting, Ouagadougou, 15 March 2005.
Goreux, Louis (2005b), “Réduire les subventions et combattre les mesures de diversion: Hong Kong,
l’occasion à ne pas manquer”,
Governments of Benin, Burkina Faso, Chad and Mali, “Bamako Declaration on the Development of
the Cotton Industry in West And Central Africa”, Bamako, 13 January 2005.
International Monetary Fund (2005) “Declaration by Participants at the Benin Cotton Conference”,
Press Release No. 05/121, 23 May 2005, Washington.
Keita, Sadio and Kako Nubupko (2005). “Réforme du mécanisme de fixation du prix d’achat du coton
au producteur malien et conséquences dans un contexte de chute des cours mondiaux’’
108 african environment
Minot, N. and L. Daniels (2002) “Impact of Global Cotton Markets on Rural Poverty in Benin”,
IFPRI Discussion paper no. 48, November 2002, IFPRI, Washington DC.
OECD-DAC (2005) DAC Briefing: The Development Dimensions of African Cotton: A contribution
to the follow-up of the WTO Regional Workshop on Cotton held in Cotonou 23-24 March 2004”,
OECD-DAC/Club de Sahel, DAC Chairman’s Statement, January 2005
Oxfam International (2004) “White Gold Turns to Dust: The Way Forward for the African Cotton
Sector”, Oxfam International Briefing Paper No. 58, Oxford, March 2004.
République du Burkina Faso (2004) ‘‘Cadre stratégique pour le développement de la filière coton
au Burkina Faso’’, Ouagadougou, 18 June 2004.
République du Mali (2004), ‘‘Le programme de reforme du secteur coton au Mali: Mesures et
état d’exécution’’. Communication of the Malian delegation to the EU-Africa Forum on Cotton, Paris,
Sub-Committee on Cotton, WTO (2005), “Ouagadougou Declaration on the Cotton Situation since
the Adoption of the July 2004 Package”, Communication from Burkina Faso TN/AG/SCC/GEN/1,
7 April 2005 (05-1452).
USAID (2005) “Summary and Findings of the West Africa Cotton Assessment”, 25 September-
14 October 2004, USAID, Washington DC, 12 January 2005.
Reform of the fixing mechanism for the purchase price
for Malian cotton farmers and its consequences in the
context of falling world prices1
and Manda Sadio KEITA*
Faced with unfair competition internationally from massively subsidised production
and dumping originating in Northern countries, notably the USA and the European
Union, the African countries that instigated the Sectoral Initiative in Favour of Cotton,
accompanied by others, have vigorously denounced these trade-distorting practices,
which are at odds with the neo-liberal discourse of the offending governments.2
Cotton is amongst the few products for which African countries in the CFA franc
zone have seen an increase in their share of export markets. However, the mechanisms
for determining the purchase price for the producers of this cotton are far from
transparent: the price is defined in relation to other prices that are invisible to most
agents, including the anticipated price on the international markets, and costs and
margins for marketing and processing by cotton companies.3 Moreover, in a context of
the liberalisation of cotton industries, both the price level and the method for determining
the producer price are increasingly transferring uncertainty and risk in the cotton
sector onto the farmer, thus increasing his vulnerability.4 Furthermore, the strong
dependency of West African economies on cotton means that shocks affecting the cotton
industry are immediately transmitted to the economy as a whole, via transmission
channels well known to economic theory.5
* Kako NUBUKPO is an economist for CIRAD, Department of Policy and Market Research, based with
the Cotton Programme of the IER in Bamako, Mali. Manda Sadio KEITA is an economist for the IER,
Network Economy Programme, Bamako, Mali.
1 This article arises from a study financed by the NGO Oxfam Great Britain (Oxfam GB), West Africa
Regional Management Centre, and carried out by the authors. As well as the remarks made by participants
at a workshop held on 5 July 2005 in Bamako, the authors have also benefited from written remarks by
Sally Baden, Eric Hazard, Louis Goreux and Tom Bassett, to whom they extend their thanks. The authors
of course remain solely responsible for the opinions expressed, as well as for any errors or omissions that
may remain in this article.
2 Nubukpo, 2004; Pesche and Nubukpo, 2004.
3 Araujo-Bonjean and Brun, 2001.
4 Araujo-Bonjean and Boussard, 1999; Nubukpo, 2000.
5 Abbott and McCalla, 2002; Timmer, 2002.
110 environnement africain
For cotton industries, this state of affairs is particularly worrying due to the
considerable instability of the global cotton price (Cotlook Index A). Subject on the
one hand to volatility resulting from the imbalances of supply and demand in the
global market and, on the other, to the instability arising from fluctuations in exchange
rates between the US dollar and the CFA franc, cotton prices have become increasingly
unpredictable since the beginning of the 1970s. Some writers have observed that
“major changes in price tend to be followed by other large-scale changes; in other
words the volatility of prices is serially correlated”, while there is also a widening of
the range over which prices fluctuate.6 And these writers conclude that “liberalisation
of the cotton industries in the CFA franc zone of Africa is taking place in a particularly
unfavourable context: the expected returns from exports are relatively low compared
[with] the 1960s, but the risks involved are more and more substantial.”
The subsidies allocated by Northern countries (essentially the EU and the USA) to
their farmers are one factor that is regularly cited to explain the persistent decline in
world cotton prices. In the specific case of Mali, a study by Adjovi, Wetta and Sanogo
(2004) reveals the negative impact of EU and US subsidies on the Malian economy for
the year 2001.7 In the opinion of these authors, “it appears that world cotton prices
determine at once the level of cotton production in Mali, the price for the producer and
agricultural income. However, the impact of world prices is much less significant on
the generation of value added by the farm enterprise.” Northern country subsidies
exert an impact on the Malian economy on at least two levels:
• Via the classic channel of reducing world cotton prices and, consequently, the
export receipts for Mali, which is a “price taker” on the international market;
• Via the modification of the rules by which the cotton purchase price for the
producer is determined, which in turn affects the distribution within the sector of
the value added generated.
This article aims to analyse in greater detail the second channel, which to date has
received less attention than the first, but which is likely to have a considerable impact
on the living conditions of cotton producers.
The Malian example is particularly significant in that, following the fall in international
cotton prices, and taking into account the large deficit of the CMDT (Compagnie
Malienne de Développement des Fibres Textiles, which has a monopoly on the purchase
of cottonseed), a new mechanism for determining the purchase price of cottonseed
from the producer was adopted in January 2005. The adoption of this mechanism led
to a lowering of the minimum guaranteed price, from FCFA 210 per kilo of “top grade”
cotton in 2004/05, to a price range of between FCFA 160 and FCFA 175 per kilo,
starting from the 2005/06 growing season. It also led to the effective end of the guaranteed
minimum price system.
6 Araujo-Bonjean and Brun, 2001.
7 From a correlation matrix and elasticity calculations, the authors have obtained the following results:
a direct fall in receipts of 1.6 per cent for the public treasury, a decrease by 1.8 per cent in global revenue,
an elasticity of 0.3 between poverty indicators and world prices; an elasticity of 0.87 between cotton
revenue and poverty indicators.
Reform of the fixing mechanism for the purchase price for Malian 111
The lower end of this price range is, according to the available data, lower than the
average cost of production per kilo of cottonseed, and thus raises the issue of what
adjustments will be made by farmers, and by the Malian cotton industry as a whole, to
ensure the viability of production in the short and medium terms.
The aim of this article is to analyse the expected impact on the Malian cotton industry
and economy of the implementation of the new fixing mechanism for the price paid
to Malian cotton farmers, taking into account production costs and also the ongoing
institutional changes within the industry (i.e. planned privatisation of the CMDT and
the transfer of new responsibilities to farmers’ organisations). This work is based on
surveys done in the cotton-growing zones of Mali and the creation and use of a social
accounting matrix for the country as a whole.
The first section of the article presents the new purchase price mechanism for
cottonseed for the producer (section 1), before analysing its microeconomic impacts
(section 2) and macroeconomic impacts (section 3), and finally drawing some
conclusions and making some recommendations.
The new price mechanism for purchasing cottonseed from the farmer
In January 2005, the Malian government, the state cotton company CMDT and the
cotton farmers’ unions signed a protocol on a new mechanism for fixing the purchase
price of cottonseed. This new agreement brings about a radical change in the base price
of Malian cotton, which will henceforth be directly linked to the international price
(Cotlook Index A), rather than being derived essentially from production costs. This
change comes at a time when the industry is facing major difficulties in terms of
CMDT’s financial balance. At the same time, input costs are increasing and yields
are declining in many cotton-growing areas, while the support funds to underwrite the
new price mechanism do not yet exist.
The old mechanism
The mechanism applied in Mali for determining the purchase price per kilo of
cottonseed before the January 2005 reform was based on bipartite negotiations
between the CMDT and representatives of producer organisations. This mechanism
suffered from the practical difficulty of differentiating the minimum guaranteed price
from the initial price offered to farmers. However, in practice, its implementation
allowed producers to obtain an initial price of FCFA 200 per kilo and a definitive campaign
price of FCFA 210 per kilo for “top grade” cottonseed in 2004/05. Moreover, the
old mechanism implicitly recognised that the initial price would be higher than the
minimum price and, in turn, that the definitive price would be higher than the initial
price. However, the Malian government, under pressure from the donor community
and fearing for the long-term sustainability of supporting the cotton industry deficit
and the repercussions of the CMDT’s financial problems, accepted demands to re-open
negotiations on the mechanism for determining the cottonseed purchase price.
112 african environment
The new mechanism
The Malian government opted for a new mechanism to determine the purchase
price of cottonseed for the producer, which resulted in a drastic revision downwards
of the guaranteed minimum price. It fell from FCFA 210 per kilo to FCFA 160-175 per
kilo from the start of the 2005/06 season. Furthermore, two articles in the protocol
signed by the Malian government, the CMDT and the producers (represented by the
GSCVM8) seem particularly important, as they introduce new elements into the
process for determining the price paid to producers.
In this protocol, which was initiated by the World Bank in a Memorandum dated
14 November 2004 (Technical Monitoring Mission for the SAC IV Program) and
subsequently adopted by the Malian government, a specific innovation is Article
8, which states that in case of force majeure, the signatories to the protocol can decide
on a reduction in the purchase price of cotton, which could therefore fall below the
lower limit of the agreed price range, i.e. below FCFA 160/kg. This article assumes
a particular significance when read in conjunction with Article 2, which states that
the new pricing mechanism “must be implemented whether the support fund be
subscribed to or not” i.e. that the support fund intended as a guarantee to the effective
functioning of the new price mechanism is in no way a prerequisite to its application.
Currently, the creation of a support fund is under study and a consultant’s report
commissioned by the MRSC9 is expected. The protocol also states that, every three years,
the price range is to be revised in agreement by the various parties. Finally, Articles
4 and 5 set out, respectively, the ways of dividing the industry’s revenues between
the CMDT and farmers, and the methods for determining the final remuneration paid
to cotton farmers.
In the context of this balance of power, which is unfavourable to cotton farmers, an
objective evaluation is needed of the likely micro- and macroeconomic consequences
of the application of the new cotton price mechanism, taking into account underlying
trends in cotton production costs.
Macroeconomic impacts (impacts microéconomiques)
Production costs in the cotton-growing zone of Mali
The farms that were the subject of the study were classified according to the typology
described below (A, B, C and D) and used by CMDT in the cotton-growing zone of Mali:
• A farm of type A is one that is equipped with at least two pairs of ploughing oxen,
a plough, a multi-cultivator, a seed drill, a cart (either donkey- or ox-cart) and a
herd of at least six head of cattle over and above the working oxen. These farms
have at least two ploughing units (two pairs of working oxen and two ploughs
‘‘Groupement des syndicats cotonniers et vivriers du Mali’’ (Group of Cotton and Food-Producing
Unions of Mali).
‘‘Mission de Restructuration du Secteur Coton’’ (Cotton Sector Restructuring Mission).
Reform of the fixing mechanism for the purchase price for Malian 113
• A type B farm has one ploughing unit at its disposal;
• A type C farm has one incomplete ploughing unit, but has experience of plough
• A type D farm is one that has no equipment and where all the work is done manually..
Table 1 shows the distribution of the different types of agricultural production unit
(APU) in the study zone:
Table 1: Distribution of farms by type
Type A 34,9
Type B 46,3
Type C 10,3
Type D 8,5
Source: CAMFPGP,10 growing season 2003/04
Table 2 gives an overview of cotton production costs per hectare, according to the
The main difficulty in determining cottonseed production costs lies in fixing
the cost of daily farm labourers’ wages. The daily wage rate used in this study is
FCFA 750, which corresponds to the estimates of researchers from ESPGRN/IER11
in Sikasso, following group discussions with producers in November 2004, and is in
line with current practice in the cotton-growing areas of Mali.12
10 ‘‘Commission d’Application du Mécanisme de Fixation du Prix du Coton Graine aux Producteurs’’
(Commission for the Application of the Cottonseed Price Fixing Mechanism for Producers).
11 Keïta et al., 2004.
12 This daily wage is also the one used by the HORUS-SERNES study, 2002.
114 african environment
Table 2: Overview of cotton production costs per hectare, according to APU
type (all costs in CFAF)
Rubrique/Type UPA Type A Type B Type C Type D Average
Average area (hectares) 5,41 3,16 0,73 0,48 2,45
Allowance for depreciation (1) 25764 25955 17664 8544 19482
Salaried labour 6750 3750 6750 0 4313
Family labour 71250 75000 59250 75750 70313
Total 119997 103674 72999 35362 83008
yield per ha (kg) 1127,35 1108,86 859,31 621,33 929,21
yield per ha (kg) 473,49 465,72 360,91 260,96 390,27
Cost per kilogram
of cotton (2) 106,44 93,50 84,95 56,91 85,45
Cost per kilogram
of cotton (3) 169,64 161,13 153,90 178,83 165,88
(1) Annual payment per hectare calculated according to a linear depreciation of material and
equipment, converted into per hectare terms.
(2) Cost without family labour.
(3) Cost with family labour.
Source: estimations by the authors based on SEP/ESPGRN/IER Sikasso data and monitoring
by CMDT. It should be noted that these results only cover the 2003/04 season.
Farms of type C and type D, which cultivate less than one hectare of cotton on average,
tend to specialise in cereal production (with more than three hectares of cultivated area
on average). They grow cotton only in order to take advantage of cotton inputs from
the CMDT, which are then used for their cereal crops. Furthermore, they have yields
that are markedly lower than those of farm types A and B. This is due to the fact that,
being unequipped or poorly equipped, they begin production later, in order to make
use of equipment and labour once the type A and type B farms have finished their
operations. This means that the dates for ploughing and hoeing recommended by
agricultural extension services are not respected. Moreover, farmers on type C and
type D farms perform paid services for farmers of type A and type B when the latter
are carrying out their ploughing and hoeing. All this has a negative effect on yields on
farms of types C and D.
Bearing in mind these production costs and the decreasing yields in Mali’s cotton-
growing zone,13 the reduction of cottonseed prices for the producer from FCFA 210/kg
to FCFA 160-175/kg raises some questions, specifically:
- Will the new price range allow producers, on average, to make a profit?
- How will farmers respond to the adverse price trend?
13 Nubukpo and Keita, 2005.
Reform of the fixing mechanism for the purchase price for Malian 115
The new price fixing mechanism and the profitability of cotton growing
Calculations of production costs for Malian cotton converge around a range of
FCFA 154 to FCFA 179 per kilo of top-grade cotton, with an average of FCFA 166/kg.
Thus, the application of the range defined by the new price mechanism runs the risk
that farmers will be operating at a zero or negative margin because the purchase price
will be, for the most part, lower than the production costs. The general situation of the
industry tends to reinforce this forecast. The Malian cotton sector is suffering from a
weakening of support to farmers by the CMDT,14 a rapid rise in prices of cotton inputs
(a consequence of the reduction in subsidies granted by the CMDT) and falling cotton
yields. In this regard, the only conceivable rationalisation of production costs lies in a
reduction of returns to the labour force. This is worrying, given official commitments
to poverty reduction.
The real problem in evaluating production costs lies in the estimation of family
labour costs. This has long been the major point of disagreement between producers
and the CMDT in fixing prices for producers, even under the old mechanism. In Mali,
production is centred essentially on family labour, which in turn is at the root of the
fragmentation of farms in the cotton zone. While the majority of farms use paid labour
(see Table 3), this labour is mainly hired on a casual, task-specific basis..
Table 3: Percentage of cotton farms using paid labour
Use of paid labour Percentage
Source: CAMFPGP, growing season 2003/04
Paid labour is hired mainly during hoeing (up to 26 per cent) and during the cotton
harvest (60 per cent). Thus, a potential decrease in farmers’ incomes would have a
negative impact on both operations. Hoeing is essential to ensure a good yield, while
extra labour at harvest-time guarantees a better quality of cottonseed (by preventing
last-minute pest attacks).
14 The current trend is for a “re-centring” of the CMDT’s management solely on activities linked to
116 african environment
Response of Malian cotton farmers to falling prices
Within the framework of the January 2005 IER/CMDT study group, which looked
at the reasons behind declining yields in the cotton-growing zones of Mali, the
sub-group on socio-economic aspects identified some foreseeable elements of the
impact on producers of a decrease in the price of cotton, through interviews carried out
with a sample of farmers in the cotton-growing areas. Farmers’ motivations for
continuing to produce cotton and their likely responses to decreasing prices, confirmed
during interviews carried out in the framework of the Oxfam study, are particularly
Four main reasons were put forward by producers to explain their interest in
continuing in cotton production, despite the difficulties encountered:
• The benefits of monetary income in the context of a minimum guaranteed purchasing
price for cottonseed;
• Access to different kinds of credit, which are generally granted on the basis of
guarantees linked to cotton production;
• The positive knock-on effects of growing cotton in year ‘N’ on the yields of cereal
crops in year ‘N+1’;
• The great instability in prices of cereals, giving rise to uncertainty in incomes
derived from cereal production.
Regarding the first motive, the producers clearly indicated their interest in the
security offered by cotton-growing in terms of income stability, due to the guaranteed
purchase price system for cottonseed, the guaranteed market for cotton and the relative
rapidity in payment to growers by the CMDT.
Furthermore, cotton production provides indispensable collateral for access to credit
in the CMDT zone, for inputs and equipment or for consumption, in terms of BNDA
(Banque Nationale de Développement Agricole) loans or simply in terms of micro credit.
The second reason for persevering with cotton production seems a determinant factor
in understanding the rationale for farming practices in the cotton zone. For example, the
input credits given for cotton can also be used for cereal production. Farmers are wholly
dependent on the cotton industry for access to credit and this engenders perverse
effects, as some farmers admit. Performance in terms of improved cotton yields is not
always the primary objective of the farmers, notably the less well-equipped ones;
rather, what keeps them in cotton production are the benefits from their membership
of the “cotton club”, particularly access to credit which allows them to produce cereals,
thus ensuring food self-sufficiency.
The pertinence of this reasoning is underlined by the third motive – the knock-on
effects of cotton production on cereal yields. Indeed, the use of chemical or organic
inputs and the preparation and rigorous maintenance of the soil that is required by
cotton production give rise, during crop rotation, to soils with higher fertility, which in
turn means good cereal yields.
Reform of the fixing mechanism for the purchase price for Malian 117
The final motive put forward by producers is the instability of cereal prices.
Ironically, the better the harvest and the higher the volume of cereals marketed, the
lower the prices become. The producers are wary of this cereal price instability, and it
seems that cereal production serves less to generate monetary income than to ensure
food self-sufficiency for rural households.
Overall, cotton producers are obviously unhappy about the fall in the initial price
for cottonseed. However, for the most part, they have restated their intention to grow
cotton, despite the decrease announced in the price, and to adapt themselves to this
One of the responses envisaged by producers is a future reduction in cotton acreage.15
This response seems logical since, in addition, the costs of inputs, particularly those of
fertilisers and phytosanitary products, have been continuously rising. This perspective
is not, however, unanimously shared. Recent decisions by the competent authorities
suggest that farmers can count on a fall of 6 per cent in the cost of inputs, following
decisions taken in this regard by the relevant authorities. In view of this, in some
villages the trend seems to be rather to move towards an increase in land planted to
cotton. This willingness of producers to increase their production acreage nevertheless
runs up against the problem of land pressure, as well as that of a lack of family
labour and/or the cost of external labour. They have minimal room for manoeuvre on
remuneration for labour. For these reasons, some cotton producers do not rule out
being forced to sell some of their livestock to meet repayments of input credits, if
the current trend should continue. Similarly, an extension of the acreage planted to
cereals has been envisaged by some producers as a possible response to the fall in
cotton prices, due to the amount of work that cotton-growing demands.
To conclude, the price level seems less important than the minimum guaranteed
price as a factor in whether or not producers decide to grow cotton. The price level has
a greater impact on decisions regarding the acreage sown respectively with cotton and
However, it should be stressed that too wide a gap between the initial price and the
final price paid to producers would be likely to undermine farmers’ decisions, in so far
as the initial price is announced in April of year N, before planting, while the final
price is paid in July of year N+1, a good while after the harvest. One current argument
that is employed in defence of the mechanism for determining the purchase price of
cottonseed is that the initial price is much less relevant to the farmer than the higher
final price. While this protects the CMDT in the case of a reversal in world markets,
it underestimates the income shortfall in terms of lost cotton production (and export
receipts) for Mali, which might arise from the announcement of a price that acts
as a disincentive for the producers. It would be preferable to minimise the gap between
the initial price and the final price, in order to optimise cotton production levels and
thereby facilitate forecasts that are both viable and stable for the producers.
15 This option has also been accepted in the conclusions of the DNSI study (2003), which estimated
a reduction in acreage of between 10 per cent and 25 per cent and a decrease in cotton production of
25 per cent for a fixed purchase price of FCFA 160 per kilo of cotton.
118 african environment
To estimate the macroeconomic impacts of the decrease in cottonseed prices, several
scenarios have been tested, on the basis of data extracted from a social accounting matrix.
The different scenarios are based on hypotheses of the prices for producers and the price
elasticity of supply.
Scenarios of decrease in price for the cotton producer, and their impacts
Scenario 1: Impacts of applying a price for the producer of FCFA 160/kg, with no
change in the volume of production
By doing a simulation of the effects of fixing the price of cotton for the producer at
CFCA 160/kg i.e. a 24 per cent reduction in the price for the growing season 2004/05,
the following results were obtained from a social accounting matrix.
In terms of effects, all else being equal, the loss of revenue for producers would be
in the range of FCFA 29.5 billion.16 Supposing that this reduction results in a decrease
in consumer spending by households, the secondary effects on the Malian economy
would be the following:
• A decrease in income for other households (non-cotton growing) of FCFA 18 billion;
• A decrease in imports of FCFA 4.8 billion, leading to a decrease in the state’s
receipts, in terms of various taxes, of around FCFA 3.3 billion;
• A loss of revenue for industry of FCFA 11.3 billion.
For the Malian economy as a whole, the probable loss suffered following a
fixing of the purchasing price for cottonseed at FCFA 160/kg is estimated at FCFA
62.32 billion, which is the equivalent of a reduction in GDP of 1.86 per cent.
Scenario 2: Impacts of a reduction in cotton production of 25 per cent, following
the application of a price to the producer of FCFA 160/kg
Supposing that, following a decrease in the price for the producer of FCFA 50/kg,
producers respond by reducing cotton production by 25 per cent (hypothesis put
forward by DNSI, 2003), total receipts from exports would diminish by FCFA
53 billion. This result is reached by supposing that the fibre is sold, at minimum, at the
CIF cost price of FCFA 858.48/kg.17
The secondary effects for the Malian economy of this downturn in cotton production
would be the following:
• The producers’ income would decrease by FCFA 36.8 billion, all other things being
• The income of other households (non-cotton growing) would decrease by FCFA
• Imports would go down to the tune of FCFA 5.9 billion;
16 The annual production of cotton seed in Mali for the growing season 2004/05 being 589,562 tonnes
(source: CMDT/DPA, July 2005).
17 Cf. report by A. Wadell, 2005, Plan de sortie de crise.
Reform of the fixing mechanism for the purchase price for Malian 119
• Following this decrease in imports, government fiscal receipts would decrease by
FCFA 4 billion;
• There would be a loss of revenue to industry of FCFA 14 billion.
Overall, in this scenario, the total losses for the Malian economy can be estimated
at FCFA 136.5 billion, i.e. a reduction in GDP of 3.9 per cent.
Scenario 3: Impacts of applying a price for the producer of FCFA 175/kg
If the price for the producer is fixed at FCFA 175/kg, without a downward adjustment
in production, the following repercussions can be expected for the Malian economy:
• A lowering in producer income of FCFA 20.6 billion;
• A loss in income for other households of FCFA 12.7 billion;
• A reduction in imports of FCFA 3.3 billion, leading to a loss of receipts for the state
in terms of port duties of FCFA 2.3 billion;
• A loss of revenue for businesses of FCFA 7.9 billion.
The total loss anticipated for the Malian economy as a result of fixing the price to
the producer at FCFA 175/kg would be in the region of FCFA 43.6 billion, i.e. a reduction
in GDP of 1.3 per cent.
Summarising the different scenarios tested, it is obvious that fixing the price for the
Malian cotton producer at FCFA 160/kg is likely to provoke negative repercussions that
are more than proportional for the Malian economy as a whole. These consequences
would be further aggravated if this price reduction were accompanied by a reduction
in cotton production, as a reaction from the producers. The loss of export receipts from
cotton are estimated at a minimum of FCFA 53 billion, for a price to the producer fixed
at FCFA 160/kg and a downward adjustment of 25 per cent in production.
Indeed, the most recent official study available of the impact on the economy of a
price reduction for cotton18 estimates “the reduction in acreage as being between 10
and 25 per cent, and as 25 per cent the loss of cotton production for a purchase price
fixed at FCFA 160 per kilo of cotton”. It also estimates that “a reduction in prices by
10 per cent would bring about a decrease in cottonseed production of 5 per cent and
that would lead to a shortfall of FCFA 17.7 billion for the national economy. In the
instance where the loss of production reaches 50 per cent, as was the case in 2000/01,
the losses for the economy would rise to FCFA 113 billion”.
The negative impacts on the Malian economy are significantly reduced if producer
prices are maintained at a higher level. Indeed, with a price for the producer in the
region of FCFA 195/kg, the consequences for the national economy would be reduced
to a total loss of around FCFA 18.7 billion, which is almost the same as the deficit that
18 DNSI, 2003
120 african environment
the cotton industry recorded in November 2004. In other words, in attempting to
absorb the industry deficit of FCFA 18 billion by reducing the price to the producer to
a level below FCFA 195/kg, the losses generated for the economy as a whole risk being
greater than the initial deficit. It would seem clear therefore that, even though the need
for the Malian cotton industry to tackle the question of the world market price appears
justified in terms of the accumulated deficits of the industry, the fact remains that the
interests of the industry and of the economy as a whole seem to lie in supporting the
price to producers at a reasonable level.
Methods for further analysis of macroeconomic impacts
The use of a social accounting matrix for Mali permits an overall evaluation of the
probable impacts on the economy of a reduction in the purchase price of cottonseed.
However, to better understand this impact evaluation, it is necessary to have access
to an econometric or calculable general equilibrium model that allows examination of
the channels by which this reduction could affect the four indicators traditionally used
by the International Monetary Fund in its performance reviews of macroeconomic
policies: i.e. real sector, table of government finance statistics (GFS), balance of
payments and monetary situation.
The effects at the real sector level are discussed above. Regarding the impact on
the GFS table, the consequences of the decision to reduce the producer price can
be grasped through its implications for the budget of the Malian government. Initially,
the budget will react positively to a reduction in the direct or indirect subsidies
usually allocated in order to reduce the industry deficit. However, in the medium term,
a reduction of revenue from the industry could give rise to a loss in fiscal revenues.
Furthermore, a sustained rural exodus cannot be discounted, with the likely demands
that this will place on government social expenditures in urban areas.
Equally, Mali’s trade balance could suffer from a reduction in the price to cotton
producers, due to the loss in production volume that could ensue. In all likelihood,
cotton production levels should not significantly change for the 2005/06 growing
season. However, as of the 2006/07 season, it is highly probable that the price elasticity
of supply will change, with the consequences that Scenario 2 has tried to quantify.
As regards the monetary situation, which is directly linked to the balance of payments,
if there is a decrease in cotton export receipts, this could translate into a decrease in
foreign exchange and therefore in currency reserves for the BCEAO (Central Bank
of West African States) and WAEMU. A reduction in net external asset holdings, being
a component of the counterpart of money supply, could translate into a loss in the
coverage rate of monetary emission, in the context where three of the eight WAEMU
countries (Benin, Burkina Faso and Mali) derive the majority of their foreign exchange
earnings from cotton exports.
Reform of the fixing mechanism for the purchase price for Malian 121
The analysis of the transmission effects of a reduction in the cotton purchasing
price on the Malian economy as a whole has been possible through the construction
of a social accounting matrix. It is clear that the attempt to reduce the deficit in the
cotton industry through a drastic cut in the price paid to the producer risks having
depressive effects on the Malian economy, the sum of which could prove to be higher
than the budgetary savings envisaged in the first instance, as has been shown in the
different scenarios envisaged.
Indeed, the justifications given for introducing the new price mechanism – on the
one hand, the need to link Malian cotton producers to the world market and, on the
other, the projection of a rapid reduction in the dual deficits of the CMDT and the
Malian government – seem to have overlooked the potentially negative effects linked
to the application of this mechanism.
Furthermore, the method of calculation for the range adopted needs to be clarified,
with particular regard to the commonly held rules for fixing prices. Even if we accept
that the new mechanism effectively aims to link the producer price to the global price,
thus sanctioning the liberalisation process of the industry, the fact that the world price
itself results from an imperfect and unfair working of the international cotton market
puts this liberal argument into perspective. On the contrary, the introduction of such a
mechanism, supported by the World Bank and validated by the Malian authorities,
could exacerbate the existence a dual power imbalance: in the first place, between the
cotton-growing countries of Africa, which are price takers on the global market, and
other countries that subsidise their producers (the EU, the USA, China, etc.); and,
in the second, between Malian cotton growers and other stakeholders in the industry
(the CMDT, the state).
In addition, the perspective of reducing the dual CMDT/government deficit is a
short-term one, based strictly on accounting preoccupations. This is in contradiction
with a closed economy approach, based on recognition of the multiplier effect of
cotton.19 It goes without saying that the scale of this multiplier effect depends on the
possibilities available for financing the industry deficit. This means that the risk
cannot be ignored of an “eviction effect” caused by the transfer of resources to cotton
from other sectors, particularly in a context where some donors increasingly favour
budget support, to the detriment of targeted aid to specific sectors.
Finally, due to the loss of income for cotton farmers and therefore for rural
populations as a whole, the new pricing mechanism will probably contribute to a rise
in poverty levels in the cotton-growing areas of Mali. Such an observation is worrying
in view of the objectives that are officially sought by both the Malian authorities and
the Bretton Woods institutions – though both have nevertheless validated this new
mechanism. The search for greater coherence between, on the one hand, the desired
effects of policies and the decisions actually taken and, on the other, the various
policies of the government (macroeconomic, sectoral, etc.) is essential if poverty is to
be reduced in Mali.
19 Hugon 2005
122 african environment
The results obtained lead to the following recommendations:
• The range determined for the purchase price for cottonseed from the growers needs
to be revised. In particular, the lower limit should be increased, with the two-fold
concern of: a) taking into account the adverse effects on the whole of the Malian
economy due to the setting of an initial purchase price that does not take into
production costs, and b) reducing the gap between the initial price and the final
price, thus guaranteeing a greater stability for producers and relative accuracy in
the drawing up of their production forecasts.
• Article 8 in the text of the new mechanism, regarding the possibility of reducing
the initial price during the growing season, should be withdrawn. Removing the
minimum guaranteed price is likely to cause cotton to lose its stabilising role in an
environment that is otherwise full of risks, with potentially negative consequences
for the sustainability of the whole cotton production system.
• A support fund should be created that could guarantee a purchase price for
cottonseed for producers. This fund is particularly justified as it minimises the
adverse effects of a price to the producer that is too low and, in particular, too
unstable. It could be financed, over and above possible margins from the cotton
industry, by a national solidarity tax, since cotton is so important for Mali, or by
funds coming from international aid and, possibly, from emergency aid funds
to the cotton industry, in line with the claims made at the WTO in the framework
of the Sectoral Initiative in Favour of Cotton.
Reform of the fixing mechanism for the purchase price for Malian 123
Abbott P. and A. McCalla (2002) “Agriculture in the Macroeconomy: Theory and
Measurement”, Handbook of Agricultural Economics, Gardner, B. and G. Rausser, eds.,
Elsevier Science, Vol. 2, 2002.
Adjovi E., C. Wetta and O. Sanogo (2004) “Cotons d’Afrique face aux subventions
mondiales: Bénin, Burkina et Mali”, Réseau d’expertise des politiques agricoles (REPA),
Araujo-Bonjean, C. and J.-F. Brun (2001) “Les politiques de stabilisation des prix du
coton en Afrique de la zone franc sont-elles condamnées?” Economie Rurale, N°266,
November-December 2001, pp. 80-90.
Araujo-Bonjean, C. and J.-M. Boussard (1999) ‘‘La stabilisation des prix aux produc-
teurs de produits agricoles: approches micro-économiques’’ Revue Tiers-Monde, Paris,
1999, T. XL, N°160, pp.901-928.
Commission d’Application du Mécanisme de Fixation du Prix du Coton Graine aux
Producteurs, Campagne 2003/04, ‘‘Les coûts de production du coton: Détermination du
taux de rémunération de la main d’œuvre salariée en zone CMDT et OHVN’’, Ministère
de l’Agriculture, de l’Elevage et de la Pêche, 2004.
Direction Nationale de la Statistique et de l’Informatique (DNSI) 2003 ‘‘Impact de la
baisse du prix du coton sur la croissance de l’économie malienne’’ , Etude commanditée
par le Ministère de l’Economie et des Finances, Bamako, Février 2003.
Horus Entreprises/SERNES (2002) ‘‘Etude d’un mécanisme de détermination du
prix du coton graine au producteur’’, Mission de Restructuration du Secteur du
Coton/Primature, Final report, February 2002.
Hugon, P. (2005) ‘‘Les filières cotonnières africaines au regard de l’économie du
développement’’, Communication aux Journées de l’AFSE, Clermont-Ferrand, May
Keita, M.S., Nubukpo, K., Traoré, A. (2004), ‘‘Etude sur les coûts de production du
coton au Mali’’, IER, Bamako, Novembre 2004.
Nubukpo, K. (2000) “L’insécurité alimentaire en Afrique Subsaharienne: le rôle des
incertitudes”, L’Harmattan, Paris, 2000.
Nubukpo, K. (2004) ‘‘L’avenir des filières cotonnières ouest africaines: quelles
perspectives après Cancun?’’ Communication à la Commission Economique de la
Francophonie, Paris, 7 April 2004 (available on the cotton forum of the OCDE website:
Nubukpo, K., and M.S. Keita (2005) ‘‘L’impact sur l’économie malienne du nouveau
mécanisme de fixation du prix du coton graine’’, Report of a study commissioned by
Oxfam International, Bamako, August 2005.
Pesche D. and K. Nubukpo (2004) ‘‘L’Afrique du coton à Cancun: les acteurs d’une
négociation’’, Politique Africaine, N° 95, Octobre 2004.
Timmer, C.P. (2002) “Agriculture and Economic Development”, Handbook of
Agricultural Economics, Gardner, B. and G. Rausser, eds., Elsevier Science, Vol. 2, 2002.
World Bank (2004) ‘‘Mise en œuvre du mécanisme de détermination du prix du
coton-graine au producteur’’, Technical monitoring system for the SAC IV programme,
Bamako, 11 November 2004.
A proposal for the implementation of a mechanism for
mitigating volatility in cotton prices*.
A containment mechanism is essential
A survey of price trends for cotton over a long period reveals a structural downward
trend of about 0.2 per cent annually over the past 40 years.1 This appears to have been
more pronounced over the past decade, when the fall reached 2 per cent annually.
The pace of decline has been faster in the case of cotton than of any other agricultural
commodity, and this has compelled producers to constantly increase their productivity.
At the same time, the volatility of cotton prices appears to have increased over the
past few years, notably under the influence of market distortions combined, in the case
of the CFA zone countries, with fluctuations in the euro/dollar exchange rate. This
volatility is deeply destabilising for African cotton industries and for producers in rural
areas. Short periods of prosperity are too uncertain for producers to be able to invest
long-term in their farms. When the effects of falling prices are passed on to producers,
they translate into rural poverty and a dramatic drop in production, which further
destabilises the industry. When the effects of lower prices are borne by the state or
by public cotton companies, it often results in severe cash shortages, which have a
dramatic impact on the operation of cotton industries.
As demonstrated by the crisis experienced in the early years of this decade, the
sustainability of African cotton industries therefore requires the establishment of a
mechanism designed to cushion the impacts of price volatility. At the same time,
continuing efforts should be made to enhance competitiveness. Government intervention
to stabilise the sector has been widely practised over recent decades but has proved to
be largely inefficient; it can therefore be excluded right away.
*This paper was presented at the EU/Africa Forum held on 5-6 July 2004 in Paris, where it represented
the position of the French Development Agency. A Cotton Working Group within the Agency is investi-
gating the applicability of these proposals which, despite having being enhanced over time, have
remained broadly consistent in their principles and philosophy.
** Nicolas Gergeley is an economist. He is an HEC graduate and an associate consultant with the GLG
1 “Relevance of Risk Management Instruments for the Cotton Sector in West and Central Africa”,
Gabriele Baecker, 2004
126 african environment
Graph 1: Evolution of the COTLOOK Index A
Another mechanism that has been proposed is an insurance system based on futures
market instruments. However, preliminary studies on such a system are far from being
conclusive, due particularly to its exorbitant cost when it comes to guaranteeing a
significant minimum price over a number of years. This paper therefore examines an
alternative mechanism: that of a self-insurance system managed by the industries
themselves. This option appears to be the most promising, in light of embryonic
systems already tested in some countries (Burkina Faso and Cameroon).
Desirable objectives and characteristics of the proposed mechanism
The problem of containing price volatility is closely linked to the mechanisms used
to determine prices and margins, as well as to the management structures of the
global industry. It is therefore in this global context that the mechanism should be
The main objective of such a mechanism must be to cushion the impact of price
volatility on the producer, while also pushing for a maximisation of the producer price.
It is out of the question, however, to artificially maintain a fixed price for the producer
that is disconnected from market trends. This would be financially unsustainable,
because it provides producers with little incentive to achieve much-needed increases
in productivity, and also because it generates additional distortions in a market that is
already badly destabilised by the subsidy regimes of certain producing countries.
A proposal for the implementation of a mechanism for mitigating volatility in cotton prices 127
The mechanism must also contribute to the attainment of the overall objective,
which is to enhance competitiveness. This means that it must encourage each actor
involved in the industry to maximise their performance in terms of cost, while at the
same time guaranteeing the funds for certain critical functions (research, agricultural
guidance, road maintenance in cotton-producing areas, and so on). This critical
requirement pleads for a mechanism based on standard fixed costs, rather than on
the costs posted by cotton companies (which in any case will be increasingly difficult
to monitor, given the widespread inclination to privatise companies). It also pleads
for a clear distinction to be made between the costs posted by cotton companies that
correspond strictly to their commercial and industrial activity and those costs of
critical functions that may, under inter-professional agreements, be borne by the state
or by the industry as a whole.
The mechanism must also be consistent and coherent with industry privatisation.
Primarily this implies specific rules – for example, when determining prices, to avoid
recourse to lengthy negotiations that might lead to political interference and economic
instability. Secondly, it implies that cotton companies should invest, securing their
results up to a minimum level in order to reduce their risk premium. Lastly, for the
mechanism to win the confidence of the various actors involved, it must be collectively
managed within the industry by an inter-professional authority, free of state intervention.
Principles underlying the proposed system
The proposed mechanism is inspired by the best practices observed in existing price
setting systems, notably in Burkina Faso and Cameroon. It meets the requirements
described in the previous section, and is based on three levels of intervention:
A price smoothing mechanism (Level 1), managed by the producers themselves
through their professional organisations. Operation of this first-level mechanism
would, like the one in Cameroon, be ensured by the producer payment system. The initial
harvesting price would be determined by cotton companies (CC), based on their own
perceptions of market trends and existing sales. At the end of the harvesting period, the
final price would be determined by a formula based on the real cotton prices over the
period. The difference between the final price and the initial price which, if positive,
constitutes the make-up price, is paid to producer organisations (POs) by the cotton
company, and not directly to the producer. The payment is deposited in an account that
can be used by the POs to finance a premium that is added to the initial price paid to
producers by the cotton company during the next harvest. The price actually received
by the producer is therefore equal to the initial harvest price plus, as applicable, a
premium decided by the PO and financed from the make-up prices it received during
128 african environment
As demonstrated by an analysis of the Cameroonian industry, this system allows a
smoothing of the producer price, since the strategy of having the premium set by the
PO tends, depending on the liquidity of the PO, to compensate for a possible decline
in the initial price set by the cotton company. It offers the great advantage of making
producer organisations really participate in the price setting process. Furthermore,
it can be managed at a very affordable cost. Paying the premium, like the initial price,
on delivery of cottonseed avoids having to pay an individual make-up price at the
end of the harvest. Such payments can be very high in countries where this system is
On the other hand, the cotton company bears the risk of a negative difference
between the final price and the initial price, a condition that would force it to set the
initial price at a cautious level.
A self-insurance mechanism (Level 2) managed by the inter-professional authority.
Such a mechanism must be capable of covering a moderate risk of falling prices.
It would involve setting a minimum producer price corresponding to the minimum level
at which production is viable, combined with a mechanism that, beyond that level,
would trigger levies payable into a self-insurance fund. The fund would be managed
by the inter-professional authority and would pay compensation when prices fell
below that level. This minimum price should presumably be the same for all countries
of the region, with possible variations depending on the geographical location of a
country in order to take account of differentials in input costs.2 The minimum price
would be set initially through a survey of production costs and comparative incomes
in the cotton-growing areas, and would be adjusted every four or five years. In order
to avoid any disconnection from market trends, the minimum price should also
be adjusted downward in the event of persistently falling prices – for instance, by
automatically applying a slight reduction after each harvest, thus activating self-insurance
payments, but cancelling this after two profitable harvesting periods (based on various
simulations, the reduction might be in the range of CFAF5 per kg).
A reinsurance mechanism (Level 3) managed with the assistance of donors. Such a
mechanism could be resorted to in the event of an exceptional fall in prices, and would
be accessible to industries that follow rules ensuring sound management of the internal
self-insurance system. It would thus constitute a powerful incentive for the actors
involved to improve industry management and to establish efficient mechanisms for
determining prices and margins.
2 According to a rapid calculation, this differential might be in the range of 10 per cent for the extreme
cases of a coastal country such as Benin and a completely landlocked country such as Chad.
A proposal for the implementation of a mechanism for mitigating volatility in cotton prices 129
Related terms and conditions for determination of prices and margins
Gross profit would be defined at the end of the harvest by the FOB average price
(monthly average of Cotlook Indexes minus a CIF fixed sum), net of the following costs:
• the negotiated inter-professional unit cost of critical functions (road maintenance,
research, supply of seeds, etc) paid to cotton companies, producers’ organisations or
private service providers, as applicable;
• the fixed intervention cost of the cotton company (from collection of cottonseed to
sale of fibre and seeds); this cost in turn comprises two sub-sets:
- generic costs, which should tend to be fixed on the same unitary basis for all
cotton companies in the region (industrial costs net of seed sales, overheads,
harvesting period financing costs, etc.);
- costs specific to the local context (mainly costs of fibre collection and carriage
to port of loading, which depend on crop density and geographical location),
which should be subject to a specific fixed cost based on each area-specific
• a minimum remuneration for cotton companies, calculated such that they can
remunerate their capital investment at the market rate;3
• the minimum producer price.
The gross profit (calculated at the end of each harvest) would then be distributed in
four directions, based on percentages pre-determined by contract:
• taxes levied on the industry by the government;
• additional resources for the self-insurance fund;
• the cotton company’s share of profits;
• producers’ share of profits. This would be added to the minimum price to form
the final price for the harvest. Should it be higher than the initial price, it would result
in the payment by the cotton company of an additional amount to the producers’
In the event that the harvest produces no profits, after all the elements described
above have been taken into account, the deficit is borne by the self-insurance fund,
which allows the cotton company to break even on its costs (though without any profit),
on the basis of the minimum producer price.
These calculating mechanisms are illustrated in the charts below, based on:
• the estimated price for the 2003/04 harvest;
• the average costs observed in Burkina Faso, Cameroon and Mali over the past three
• the following hypothetical parameters: an initial harvest price of CFAF185 per kg
from the cotton company; a minimum price of CFAF175 per kg from the cotton com-
pany; a self-insurance premium representing 30 per cent of gross profits of the har-
vest; a tax rate representing 13 per cent of profits; 10 per cent of the profits going to
the cotton company.
3 This remuneration might be fixed as a unitary amount based on the net average fixed assets of the cot-
ton companies in the region.
130 african environment
Based on these hypotheses, the self-insurance system will be triggered when the
FOB average price is lower than CFAF697 per kg for lint (which corresponds to a CIF
price of about CFAF737 or €1.12 per kg); beyond this ceiling, the industry would
show profits, which would generate a reserve for the self-insurance fund..
Diagram 1: Calculation and distribution of the profit from the season (in the
event of an excess)4
A proposal for the implementation of a mechanism for mitigating volatility in cotton prices 131
If the reported FOB average price at the end of the harvesting period is insufficient
to cover all the fixed costs and the minimum price, the self-insurance fund will pay the
difference to the cotton company, as indicated in the previous chart. In the chart below,
the average price is assumed to be CFAF660 per kg of lint, as fixed costs and the min-
imum price are the same as in the previous example.
Diagram 2: Calculation of the contribution to the self-insurance fund (in the
event of a deficit)
Simulations of the mechanism in operation
Price trend scenarios
To test the mechanism, simulations were carried out using data from the past ten years,
according to various different scenarios of cotton price trends:
• Scenario A, corresponding to a repeat of the past ten-year cycle. In this scenario,
the CIF average price for the next ten-year period will be CFAF870 per kg;
• Scenario B, more pessimistic, corresponding also to the past ten-year cycle but
with a continuing downward trend of 2 per cent annually. In this scenario, the
average price for the period is CFAF798 per kg;
• Lastly, Scenario C, corresponding to an inverted cyclical trend of scenario B. In
this scenario, the average price is still CFAF798.
132 african environment
In all three cases, FOB prices are calculated by applying a CFAF40 per kg rebate
on CIF prices.
The three scenarios are illustrated in the following graph:
Graph 2: Illustrations of price trend scenarios
Source: Nicolas GERGELY
Cost hypotheses and parameterisation
This simulation was based on:
• the average price paid by the cotton companies of Burkina Faso, Mali and
Cameroon over the past three years (CFAF240 per kg, excluding interest charges
on borrowings, of which 30 per cent are for critical functions);
• a fixed rate of return on capital investments by cotton companies, on the basis of
a net investment of CFAF300 per kg of lint (average for Sofitex and CMDT) and
an interest rate of 10 per cent, giving a rate of return of CFAF30 per kg;
• a tax rate representing 13 per cent of the profits achieved by the industry (to
which is possibly added a tax on cotton company profits);
• 10 per cent of industry profits going to cotton companies.
A proposal for the implementation of a mechanism for mitigating volatility in cotton prices 133
• Thirty per cent of industry profits were retained as the rate of contribution to the
self-insurance fund; as simulations progressed, this appeared to be the maximum
level at which sufficient reserves could be formed without excessively squeezing
the producer price.
• The cotton companies’ initial price for the first harvest was set at CFA185 per kg;
for subsequent harvests, it was assumed that, as cotton companies would be
responsible for setting this price, they would take a cautious decision, based on
the final price during the previous harvest and on price trends (the initial price
can, however, not be lower than the minimum price).
• The mimum price payable by the cotton companies is CFA175 per kg; by
agreement, this is lowered by CFA5 after each intervention by the self-insurance
fund and returns to its initial level after two profitable seasons, tracking market
• Production is assumed to be 100,000 tons of cotton lint (although only for the
purposes of calculating in absolute terms the value of the various margins
Trends in producer price, minimum price and self-insurance fund
Trends in the producer price, the minimum price and the self-insurance fund have
been summarised for the three scenarios in the following table and graphs:
model Price trand hypothesis FOB Minimum Average cumulative
average price producer self-
price by 2013 price over insurance
for period period funds
A Same cycle 870 170 197 36 814
B Same cycle-2%/an 799 165 192 -1 391
C Same as B; inverted cycle 799 170 187 4 297
It appears that in Scenario A (repeat of the past ten-year cycle), the mechanism
allows a relatively stable average producer price of CFAF197 per kg, which is more
favourable than the prices actually seen in the past ten years. The minimum price
drops slightly to CFAF170 per kg by the end of the period. The self-insurance fund is
largely in surplus over the period, thus making it possible to prepare for any future
deterioration in prices.
134 african environment
Figure 3: Scenario A, trend in producer price
Source : Nicolas Gergely
Under Scenario B ( repeated cycle, but with an aggravated annual falling trend of
2 per cent), the mechanism is still able to ensure a relatively stable average producer
price (though with a slight decline) of CFAF192 per kg, with a minimum price
maintained at CFAF165 per kg. The self-insurance fund also succeeds in maintaining
its position, despite a slight deficit by the end of the period.
A proposal for the implementation of a mechanism for mitigating volatility in cotton prices 135
Figure 4: Scenario B, trend in producer price
Source : Nicolas Gergely
Scenario C (same trend as B, but with an inverted cycle) features specificity when
compared with previous scenarios by starting with years in which prices are
unfavourable. In this context, the mechanism also allows a relatively stable producer
price and a minimum price to be maintained of around CFAF187 per kg and
CFAF165-170 per kg on average, depending on the year. The self-insurance fund,
however, shows a deficit by mid-term (a deficit of CFAF12 million in the sixth year),
though it regains equilibrium by the end of the period. This scenario points to a need
to combine the mechanism with a Level 3 mechanism that would provide additional
resources to the self-insurance fund.
136 african environment
Graph 5: Scenario C, cumulative balance of self-insurance fund
Source : Nicolas Gergely
These three scenarios show that the mechanism works, provided it is backed up by
a reinsurance mechanism, even in a relatively unfavourable economic context such as
the one experienced in the previous decade.
A simulation based on an annual falling trend of 3 per cent, on the other hand,
reveals the limits of the mechanism in the event of a persistent catastrophic situation.
To maintain the balance of the self-insurance fund, it would then be necessary to
reduce the minimum price so far that the mechanism could not ensure the survival of
A proposal for the implementation of a mechanism for mitigating volatility in cotton prices 137
Impact of geographical location on the operation of the mechanism
These simulations were carried out for production areas in average geographical
locations. In reality, costs for cotton companies will be higher in landlocked areas
as a result of differentials in transport costs and, therefore, prices for producers and
contributions to the self-insurance fund will be lower, as shown in the graphs below.5
It must be concluded that it is more difficult to achieve a balance in the self-insurance
fund in isolated areas and that such areas, therefore, would have to resort more often
to the Level 3 mechanism in order to maintain their self-insurance capacity
Graph 6: Scenario B, comparative trends in self-insurance fund according to
degree of area isolation
Source : Nicolas Gergely
5 This assumes, in landlocked areas, fixed costs for cotton companies of CFAF260/kg (instead of
CFAF240/kg) and, in non-landlocked areas, costs of CFAF220/kg.
138 african environment
Appeal of proposed mechanism to the various actors involved in the industry
The mechanism allows cotton companies to secure a minimum rate of return on their
capital investment (committed fixed costs), whatever the price fluctuations may be.
This should encourage companies to invest in industrial infrastructure and to moderate
their expectations in terms of profits, in anticipation of future hardship. Company profits
will therefore depend on the cotton price and on the company’s own sales and
management performance, in relation to the fixed prices used as the basis for calculating
the theoretical result of the harvest and the volume of production that is processed (in
other words, it will depend indirectly on its capacity to promote cotton-growing in its
area). This is therefore a system that greatly encourages improvements in performance.
Simulations show average annual profits (after tax) that range from CFAF 2.8 billion
to CFAF3.1 billion, depending on different scenarios and assuming of course that costs
and sales performance equal the fixed prices.6
At best, the mechanism has the advantages of setting price parameters that are
known in advance and of minimising the need for negotiation within the industry,
potentially avoiding uncertainty, conflict and political pressure.
Individual producers should be interested in such a mechanism, as it allows price
regulation at a relatively high level and relative price security (especially through the
Level 3 fund), while none of the existing mechanisms can do so.
The mechanism protects producers from a long-term decline in cotton prices, at a
time when there continues to be strong downward pressure on them. This is a situation
that can only be addressed by a permanent search for increases in productivity across
the industry and a diversification of activities that reduce cotton growers’ vulnerability
to the economics of cotton. Should productivity gains turn out to be insufficient to
maintain prices beyond the level of minimum viability, the mechanism would
inevitably tend to concentrate cotton production in areas that have a better comparative
advantage. This is indicative of an economic logic that should be accompanied by
specific measures designed to support conversion. However, the mechanism would
offer the advantage, in this pessimistic scenario, of attenuating the severity of the crisis.
The purpose of the mechanism is also to strengthen producers’ organisations that:
• participate in determining producer prices, thus acquiring greater legitimacy
vis-à-vis their members and greater power across the industry;
• receive, thanks to the make-up price paid to them, additional income, which they
can decide to assign either to the payment of premiums for future harvests or to
other actions of common interest.7
6 These results are of course adjustable according to the rules adopted for sharing profits from the
harvest, without affecting the operating principle of the mechanism.
7 For instance, the simulations indicate by the end of period a surplus balance in the accounts of POs
of CFAF12 billion in Scenario A, CFAF1.8 billion in Scenario B, and CFAF6 billion in Scenario C.
139 A proposal for the implementation of a mechanism for mitigating volatility in cotton prices
Obviously, producers will be all the more interested in the mechanism if it is ade-
quately backed by donors in order to ensure its sustainability.
States would levy taxes under the proposed mechanism at two levels: on the result
of the harvest and on the net profits of the cotton companies. The share of industry
income retained by the state in the form of tax obviously depends on the tax rate
on which the hypothesis is based. In any case, the mechanism offers the advantage of
providing the state with a minimum income based on profits made by the cotton
company. Beyond this minimum, the total amount of tax revenue depends on price
levels, according to the tax rate applicable to the result of the harvest.8
The need for an additional fund
Simulations show that it would be impossible to maintain equilibrium in the
self-insurance fund account throughout the period should the range of price fluctuations
be notably worse than in the previous decade, or should the cycle start with several
successive years of deficit (prior to the formation of the fund). A Level 3 reinsurance
fund therefore appears to be necessary to stabilise the mechanism.
The purpose of this fund would be to cover price risks of a catastrophic and
exceptional nature and not an aggravated falling trend, which can only translate into a
corresponding decline in producer prices. The definition of the characteristics and
desirable mode of operation of this fund calls for thorough reflection. However, the
following are some of the avenues to be explored:
• the fund should be established outside the industry and might be managed either by
a group of participating donors or by an international financial institution;
• it would come into play when there is a dramatic fall in prices, which has a
macroeconomic impact on the countries concerned;
• it would be accessible to the industries subject to strict and adequate implementation
of the self-insurance mechanism;
• its mode of intervention might consist of advances made to the industry on
concessionary terms and repayable over a maximum period of three to five years,
to allow a rapid replenishment of the fund following a disaster.
As for the amounts to be provided, a very brief preliminary risk analysis leads to
the conclusion that, to be efficient, the fund should be able to mobilise about €0.1 per
kg of lint produced by the participating industries (in order to offset a fall of €0.1 from
the intervention ceiling). This represents about €100 million in total if all regional
producers participate (with a production of 1 million tonnes), or €70 million for the
three largest producers (with a production of 700,000 tonnes).
8 In the simulations, the share of the state amounted to CFAF2.5 billion annually on average in Scenario
B (the most unfavourable) and CFAF3.1 billion in Scenario A (the most favourable).
140 african environment
The rules that govern drawing on the fund should also be studied in detail. Special
drawing rights might be considered for each participating industry as a function of the
volumes exported during previous harvests (each industry having, in this case, the
right to equal support for each kilogram exported). A formula of this sort would favour
the most vulnerable and geographically isolated industries. The amount granted per
industry might also be tied to the average balance of the self-insurance fund over
previous years, which should encourage industries to maximise such funds. The rules
of intervention should also be conceived so as to allow the possibility of interventions
during two successive harvesting periods – for example, by setting the maximum
intervention in the first year at 70 per cent of the fund’s available resources.
The appeal launched by African cotton farmers in November 2001 marked the
beginning of a mobilisation that has led to a renewal of African political engagement
in international forums. Contradicting the common pessimism on Africa, a coalition
of actors from different socio-professional backgrounds has, with conviction and
determination, succeeded in putting onto the international agenda issues of direct
relevance to rural Africa, where the future of farmers is threatened by unfair trade
policies. Although considered newcomers to the debate, the cotton-producing countries
of West and Central Africa have nevertheless contributed to a major shift in the evolution
of the WTO negotiation process, the pace of which was, until recently, determined by
proposals from the USA and Europe.
Though not without its limits, the Sectoral Initiative in Favour of Cotton draws
attention to the incoherence between the trade and development policies of many
Northern countries. It points out the limits of globalisation, the alleged positive effects
of which are yet to be realised for many Southern countries. However, above all, it
demonstrates the need for African farmers to incorporate sub-regional and international
issues into their vision and to be engage in order to secure and develop the sustainability
of their industries. While subsidies remain one of the main challenges to be resolved
if African cotton is to survive, other issues such as the volatility of international prices
and the need for African cotton industries to maintain their competitiveness are
also imperative. These questions need to be answered if African cotton sectors are to
Contrary to some accepted ideas, the Cotton Initiative does not so much oppose
agricultural subsidies in principle as shed light on and challenge the unfair nature of
current support policies, whereby individual farmers in the USA receive in many cases
more than US$1 million a year. It questions the astronomic benefits this system gives
to a minority of farmers to the detriment of the majority, contrary to commitments
negotiated jointly in international circles. Thus, the African approach highlights
the aggressive and commercial nature of subsidies that are claimed to support the
development of agriculture.
More than any development programme or project, this process has been a real-life,
hands-on learning experience for those involved in the defence of African cotton.
African governments have enthusiastically engaged in unlikely alliances with industry
representatives, farmer organisations and even NGOs. By promoting policy dialogue
with these actors, they have effectively mobilised the complementary capacities of the
different stakeholders and demonstrated the “win-win” scenario that can result.
Finally, this collective process has massively strengthened the capacities not only
of producer organisations, business people and NGOs but also those of representatives
of African governments. The establishment of the African Cotton Association (ACA),
142 environnement africain
the creation of the Association of African Cotton Producers (AProCA) as well as the
opening of new African missions at the WTO in Geneva are concrete examples of this.
However, since Cancùn, the WTO negotiations have scarcely progressed. With the
sixth Ministerial conference fast approaching, the new Secretary General of the WTO
appears determined to relaunch the overall negotiations and specifically those on
agriculture, which have garnered much attention since Doha and which are the focus
for the majority of tensions. The Americans and the Europeans have finally woken up
to this by formulating, for the first time, concrete proposals backed up with figures,
both on scenarios for market access and for the reduction of trade-distorting domestic
support. These two issues have long been considered the major blockages to be
overcome in order to arrive at an agreement in the negotiations on agriculture.
While remaining circumspect on the real, as opposed to the political, impact
of these latest announcements, it is important to ask why it has been so difficult
to obtain similarly concrete undertakings for the Cotton Initiative. Despite the
engagement in July 2004 to achieve “ambitious, expeditious and specific” results
for cotton, in exchange for the reintegration of cotton into the overall agriculture
negotiations, the WTO members directly implicated have to date refused to formulate
specific proposals to the countries submitting the Initiative. In addition, the recent
relaunch of negotiations is mainly being driven by the powerful players at the WTO,
in a manner that is not fully transparent and which equally does not take account of the
limited capacities of the Least Developed Countries represented in Geneva.
Nevertheless, a number of factors, including the decision of the Dispute Settlement
Body (DSB) in favour of Brazil, growing public opinion in the USA against the
huge subsidies allocated to a tiny minority of cotton producers, the possibility of the
introduction of a legislative proposal to the US Congress to limit subsidy payments to
individual farmers, as well as the new proposal on modalities for cotton put forward
by the African group in Geneva, are achievements that indicate a favourable shift in the
international context, and which should encourage the WTO member states to move
forward constructively on the cotton case.
The delay in adequate treatment of the cotton case is in stark contrast with the
claimed priority accorded to the Millennium Development Goals, the recent G8
declarations on strategies for poverty reduction in Africa and, especially, with the
spirit of the Doha Round, also known as the Development Round, whose conclusion
is scheduled for Hong Kong. Tens of thousands of small African farmers are struggling
to eke out a decent living from their labour and are sinking daily a little deeper
into poverty, in spite of their professionalism and the quality of their production.
At the same time, industrial employment in numerous provincial towns and the
economies of whole regions dominated by the cotton trade are seriously under threat.
The very existence of the African cotton sectors is endangered.
Despite the flagrant injustices revealed by the Sectoral Initiative and the apparent
willingness of various countries to find appropriate solutions to the issue, the urgency
of which is no longer in doubt, the latest African proposal still awaits a specific
response. This is what is at stake in Hong Kong. If this proposal does not find a
satisfactory response, we, the actors concerned, would have every right to question the
interests of African countries in signing a consensus agreement that ignores the stated
ambitions of the WTO in Cancùn, reaffirmed in July 2004. The risk of a repeat of the
Mexican scenario cannot be discounted; indeed, it is “cotton: make or break”, as one
African WTO negotiator so aptly put it during the LDC Conference in Livingstone.
During the LDC Trade Ministers' meeting in Dakar, in May 2004, the then
European Union Trade Commissioner, Pascal Lamy, asked the representatives of
African countries to reintegrate cotton into agricultural talks in order to “take the train
of negotiations and not be left behind on the platform”. Today, in his new role as
Director General of the WTO, Mr. Lamy is well positioned to ensure that cotton is not
relegated to a second-class seat, while the overall negotiations continue in first class.
Otherwise, the Development Round in its entirety and the whole raison d'être of the
WTO risk being seriously called into question.
ACRONYMS AND ABBREVIATIONS
ACA African Cotton Association
ACP African, Caribbean and Pacific states
AGOA African Growth Opportunity Act
AProCA Association of African Cotton Producers
APU Agricultural production unit
AU African Union
BCEAO Central Bank of West African States (CBWAS)
BNDA National Bank for Agricultural Development of Mali
C4 “Cotton 4” committee of four African Least Developed Countries,
which presented the Sectoral Initiative in Favour of Cotton to theWTO
CAMFPGP Committee for Applying the Mechanism of Cottonseed Pricing
CAP Common Agricultural Policy
CC Cotton company
CFAF CFA franc (Franc of African Financial Community)
CIF Cost insurance freight
CIRAD Centre for Cooperation in International Research for Agricultural
CMA/CWA Conference of West and Central African Ministers of Agriculture
CMDT Malian Company for Textile Development
DNSI National Direction of Statistics and Computer Science
DSB Dispute Settlement Body of the WTO
DTS Special drawing right (SDR)
ECOWAS Economic Community of West African States
ENDA Diapol Environment and Development of the Third World,
‘‘Prospectives Dialogues Politiques’’
EPA Economic Partnership Agreement
ESPERN/IER Natural Resources Management and Production Systems Team
EU European Union
Farm Bill US agricultural law
FOB Free on board
GATT General Agreement on Tariffs and Trade
GDP Gross domestic product
GFS Government Finance Statistics
GSCVM Group of Cotton- and Food-Producing Unions of Mali
ICAC International Cotton Advisory Committee
ICTSD International Centre for Trade and Sustainable Development
IER Farming Management Institute (FMI)
IFS International Financial Statistics
IMF International Monetary Fund
146 environnement africain
ITF International Task Force
LDC Least Developed Country
MCA Millennium Challenge Account
MRSC Cotton Sector Restructuring Mission
NCC National Cotton Council (USA)
NEPAD New Partnership for African Development
NGO Non-government organisation
OECD Organisation for Economic Co-Operation and Development
PO Producers’ organisation
REPA A network of expertises on agricultural policies
ROPPA A network of West African farmers’ organisations and agricultural
SCAC Overseas Development and Cultural Action Department
of the French Embassy in Senegal
SDT Special and Differential Treatment
SODEFITEX Senegalese Development Company and Textiles fibres
SONAPRA National Company for Agricultural Promotion of Benin
TICAD Tokyo International Conference on African Development
UNPCB National Union of Cotton Producers of Burkina Faso
USAID United States Agency for International Development
USDA United States Department of Agriculture
USTR United States Trade Representative
WAEMU West African Economic and Monetary Union
WB World Bank
WCA West and Central Africa
WTO World Trade Organisation
MAPS, GRAPHS AND TABLES
1 US cotton-producing regions 79
2 Election map of USA: grey = Bush, black = Kerry 80
FIGURES & CHARTS
1 Concentration of US cotton farming, 1964-1997 74
2 US cotton production, use and exports, 1992-2002 75
3 World cotton prices, Index A in CFA francs per kg,
January 1994 – August 2005 88
4 Trends in Cotlook Index A 126
5 Calculation and distribution of profit from the harvest
(if results show a surplus) 130
6 Calculation of contribution by self-insurance fund
(if results show a deficit) 131
7 Illustrations of price trend scenarios 132
8 Scenario A, trend in producer price 134
8a Scenario A, cumulative balance of self-insurance fund 134
9 Scenario B, trend in producer price 135
9a Scenario B, cumulative balance of self-insurance fund 135
10 Scenario C, trend in producer price 136
10a Scenario C, cumulative balance of self-insurance fund 136
11 Scenario B, comparative trends in producer prices according
to degree of area isolation 137
11a Scenario B, comparative trends in self-insurance
fund according to degree of area isolation 137
1 US upland cotton programme outlays, fiscal 1991-2004 77
2 Acreage and cash receipts for major US crops, 2003 78
3 Price cycles for cotton: peaks and troughs 89
4 Effect of a 22% fall in prices on net income of producers 91
4 Distribution of farms by type 113
5 Overview of cotton production costs per hectare, according to APU type 114
6 Percentage of cotton farms using paid labour 115
7 Trends in the producer price, the minimum price and the self-insurance fund 133
ENDA TM: Prospectives Dialogues Politiques
Enda is both the international organisation Environment and Development
of the Third World and a programme common to several organisations.
The Prospectives Dialogues Politiques section of Enda Tiers-Monde was
conceived as a place for promoting frameworks for dialogue to create policies that take
into account the interests of all individuals concerned, from the grassroots upwards. In
order that these negotiations be held in a balanced manner, particular attention is paid
to re-appropriation, through grassroots actors, of knowledge and control of their social,
cultural, political, economic and physical environment. Finally, specific attention is
given to places of social interaction, where social, economic and political practices are
reinvented from real social dynamics that go beyond the ill-adapted models imposed
from the outside.
The activities carried out by Prospectives Dialogues Politiques in the framework of
trade and the environment aim predominantly to take into account the interactions
between political, commercial, social and environmental stakes in the fishing and
cotton sectors in West Africa. They do this by, among other things, strengthening
social dialogue and consultation between all the actors and sectors involved.
Oxfam America is an international development and humanitarian
assistance organisation dedicated to developing sustainable solutions to
hunger, poverty and social injustice throughout the world.
Oxfam supports initiatives in development and social justice by organisations through
financial, technical and partnership support. Oxfam also does advocacy work to
national and international decision-makers, for the formulation of humane policies that
attack structural obstacles preventing the eradication of poverty and hunger. Oxfam
America is affiliated to Oxfam International.
150 african environment
French Embassy to Senegal
Overseas Development and Cultural Action Department
The Overseas Development and Cultural Action Department of the
French Embassy in Senegal is responsible for the development and
implementation of Franco-Senegalese programmes in development, culture, educa-
tion, science and technology. Franco-Senegalese co-operation is built on a historic and
dynamic partnership that places France at the forefront of bilateral donors to Senegal.
During the 12th Franco-Senegalese Commission, which was held in Dakar in 2002,
the strategic lines of this co-operation for the following five years were marked out:
• Evaluation of human resources, with particular attention to education, health and
• Promotion of good governance, especially in the fields of justice, public finances, the
environment and the consequences of administrative reforms;
• Improvement of economic competitiveness and support for civil society organisations;
• Development of local public services.
Association Cotonnière Africaine
The African Cotton Association (ACA) was officially created on
19 September 2002 in Cotonou, Benin. Its mission is to organise
and defend African cotton industries threatened by anti-competitive
trade practices, production and export subsidies. The ACA also aims to be a framework
for exchanging ideas and experiences between African cotton industries in the fields
of agriculture, industry and trade.
Since 2002, it has used all the platforms available at national, regional and international
levels, to carry out advocacy and lobbying in favour of African cotton industries,
particularly at the WTO. Every year, the ACA organises, as part of its dinner debate,
a technical seminar that brings together professionals from the cotton industries,
including producers, traders and industrialists.
The ACA is presided over by Mr Ibrahima Malloum, Director General of Coton Tchad.
Mr Ahmed Bachir Diop, Director General of Sodefitex of Senegal is the First Vice
President in charge of communication, and Mr Célestin T. Tiendrebeogo of Sofitex of
Burkina Faso is Second Vice President in charge of establishing the ACA in Africa.
Présentation des partenaires
Association des Producteurs de Coton Africains (AProCa)
The Association of African Cotton Producers was created on 22
December 2004 in Cotonou, Benin. Faced with the crisis in the cotton
industry, affecting more than 10 million people in West and Central
Africa, cotton producers from six countries in the region (Burkina
Faso, Togo, Mali, Benin, Cameroon and Senegal) met on 21-22
December 2004 to analyse the crisis and, together, to define mobilising strategies and
actions that would allow them to defend their interests.
This meeting of producers aimed to exchange ideas on the international situation
in order to place the problem of cotton in a more global context, then analyse the
situation in each country. This led to the creation of AProCa which took on the
mission of defending the interests of African producers in a dialogue framework at a
continental level. It pursues the following objectives:
- bringing together all cotton producer organisations active on the African continent;
- promoting solidarity between member organisations;
- encouraging dialogue and co-operation between members to deal with issues of
- collecting, processing and circulating to members any information related to cotton;
- defending cotton producers faced with distortions on the global cotton market;
- exchanging experiences amongst member organisations.
Mr François Traoré of Burkina Faso has been President of AProCa since its inception
and Mr. Moussa Sabaly of Senegal is Vice-President.
The International Centre for Trade and Sustainable Development
(ICTSD) was established in Geneva in September 1996 to contribute
to a better understanding of development and environmental
concerns in the context of international trade.
As an independent non-profit and non-governmental organisation, ICTSD engages a
broad range of actors in ongoing dialogue about trade and sustainable development.
With a wide network of governmental, non-governmental and inter-governmental
partners, ICTSD plays a unique systemic role as a provider of original, non-partisan
reporting and facilitation services at the intersection of international trade and sustainable
ICTSD facilitates interaction between policy-makers and those outside the system to
help trade policy become more supportive of sustainable development. By helping parties
to increase capacity and become better informed about each other, ICTSD builds bridges
between groups with seemingly disparate agendas. It seeks to enable these actors to
discover the many places where their interests and priorities coincide, for ultimately
sustainable development is their common objective.
ICTSD’s Director is Ricardo Melendez Ortìz.
Table of contents
His Excellency President of the Republic of Mali, Amadou Toumani TOURE 05
PART I: GENESIS OF THE COTTON CASE AT THE WTO 11
The cotton farmers’ road to Hong Kong:
initiatives by producer organisations and an assessment of the debate 13
Interview with François TRAORE
Consequences and challenges of the July Framework agreement
for the cotton case 23
The WTO ruling on the Brazil-US cotton dispute:
implications for African countries and agriculture negotiations 33
PART II: ACTORS, STRATEGIES AND ALLIANCES 43
The African cotton set in Cancùn:
a look back at the beginning of negotiations 45
Denis PESCHE and Kako NUBUKPO
Sectoral initiative on cotton: a balancing act of alliances in Africa
and at the WTO 57
El Hadji DIOUF and Eric HAZARD
PART III: RESISTANCES AND POTENTIAL FOR REFORM 71
King Cotton: abdicate or subjugate? The political economy
of US cotton and prospects for a pro-development policy reform 73
Cut subsidies, beware diversionary tactics and don’t miss the Hong Kong
window of opportunity 83
154 environnement africain
PART IV: BEYOND THE SECTORAL INITIATIVE:
TOWARDS COHERENCE IN TRADE AND DEVELOPMENT
POLICIES ON COTTON 95
Between a rock and a hard place:
the case for support to Africa’s cotton sectors 97
Reform of the fixing mechanism for the purchase price for Malian cotton
farmers and its implications in the context of falling world prices 109
Kako NUBUKPO and Manda Sadio KEITA
A proposal for the implementation of a mechanism for mitigating
volatility in cotton prices 125
Acronyms and abbreviations 145
Maps, graphs and tables 147
Partner organisations 149
Table of contents 153
sur les presses de
IMPRIMERIES MIDI OCCIDENT