The World Trade Organisation’s (WTO) proposed compromise texts on agriculture are good news for the cotton industry. A specific treatment for cotton under all three pillars of the agriculture negotiations, namely tariffs, domestic subsidies and export support, has been proposed in which more than 80% of cotton subsidies would be slashed to a third of the normal implementation period.
H ennie Bruwer, CEO of Cotton SA, said he was pleased with this development. “This will most certainly stimulate cotton prices,” Bruwer said, adding that prices have already started recovering on New York futures in the past month. He said it was also positive that the 80% reduction will take place more quickly. The WTO compromise texts will mainly affect the US and countries in Europe and China. Bruwer explained that although China does not directly subsidise its farmers, indirectly it subsidises certain input costs such as transport. The Chinese government also subsidises 50% of the power usage of ginners, which helps to make cotton businesses more competitive. It would be interesting to see how countries such as the US react to such measures, said Bruwer. “Those farmers will go bankrupt without subsidies,” he said, adding that it is possible that the US no longer sees cotton as a strategic crop. They are already planting 20% fewer hectares. “Maybe they want to use this land for maize for the biofuel industry,” he said. The WTO proposed compromise texts on agriculture and industrial goods in a bid to put faltering multilateral trade talks back on track. For the first time ever, strict maximum spending caps have been introduced so that the overall trade-distorting support is not concentrated on individual commodities. Currently no spending caps exist, allowing countries to concentrate subsidies on a handful of commodities. US crops such as maize, soya, rice, wheat and cotton have accounted for 93% of all subsidy payments in recent years. – Wilma den Hartigh
