WTO members questioned each other about the trade policies that they believe could be affecting falling prices, slack trade and shifting market shares, when they met on 28 November 2014 for the second dedicated discussion on cotton under the agriculture negotiations.

Several key delegations signalled the importance they attach to this discussion by sending their ambassadors to the meeting. They had before them the latest Secretariat document (download below) updating information on cotton subsidies and other policies, based on information that members had notified. They also heard the latest market assessment by the International Cotton Advisory Committee (ICAC).

A number of them called for additional information either from each other or via a proposed Secretariat questionnaire that members would reply to voluntarily. This was partly because for some major producing and trading nations, the latest notified information dates back several years. It was also because delegations felt that the notified information did not provide enough detail to explain policy trends and shifts in the market.

“This process provides a unique opportunity to get the facts right about members’ cotton trade-related policies from a WTO perspective and to have a constructive exchange around these facts and relevant related developments,” said chairperson John Adank, who is New Zealand’s ambassador.

“As such, these dedicated discussions on relevant trade-related developments for cotton are complementary to the negotiation track per se.”

Meanwhile, the US and Brazil reported on the agreement they had reached to settle their dispute over US cotton subsidies and on some of the details relating to the technical assistance part of the deal. This includes a $300m payment by the US to the Brazilian Cotton Institute to be spent on aid for the cotton sector in Brazil and in Sub-Saharan Africa, Mercosur and its associate members, Haiti or elsewhere. Some delegations said they wanted to know more about the implications of the deal.

This was the latest in a series of meetings kicked off by the decision on cotton agreed at the Bali Ministerial Conference in December 2013. In the decision, members said they would hold “dedicated discussions” twice a year to “enhance transparency and monitoring” of cotton trade policy, within the agriculture negotiations. Members said the discussion was boosted by the decisions taken in the General Council the previous day that broke the deadlock over post-Bali work.

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Market situation

ICAC’s assessment of the latest market situation was similar to its report in the morning session on the development aspects of cotton, but with additional information on exports and trade. Among the points in ICAC’s presentation were:

• the US and India are the two largest cotton exporters with market shares of 31% and 16%, and India is also expected to overtake China as the world’s largest producer in 2014/15

• China, Pakistan and Turkey, all large producers, are also importers although Chinese imports are declining following a policy change and will play an important role in changes in the market

• Cotton is considered more of a valued product in developed countries than developing countries. In developed countries, which account for 40% of world fibre consumption, cotton’s market share is stable at around 43%. But in developing countries, with 60% of fibre consumption, cotton’s market share has fallen over the past decade from about 40% to 26% because of the switch to cheaper manmade fibres.

More details in ICAC’s presentation here (pdf).

Trade policies

Following up on the information provided by the Secretariat and ICAC, the US noted a significant increase in India’s cotton exports in recent years and the recent evolution of cotton support policies in China. The Cotton-4 – Benin, Burkina Faso, Chad and Mali – and the EU asked China to comment on recent announcements on limiting the level of cotton imports in 2015.

China noted that in recent years it has been the world’s largest cotton producer, consumer and importer. It justified the decision to limit imports – while conforming with China’s WTO commitments – by the high level of accumulated stocks. China also said that developed countries’ restrictions on textile imports impeded cotton processing and observed that its cotton producers are usually small scale farmers.

As part of his report on the broader agriculture negotiations Chairperson Adank said that he plans to convene a negotiating meeting on 4 December, to follow up on the last meeting in July.

“My intention will be to suggest that we restart the discussion process where we left it before the summer break, ie, more or less where we were at the 23 July informal meeting of the Special Session of the Committee on Agriculture,” he said.

“The idea will be to build upon the various discussions and ideas exchanged in the first half of 2014 rather than starting from scratch as we resume our discussions. We will also have to prepare for the dedicated sessions on the public stockholding issue.

“Cotton will be an important element of this reflection on the way forward for our unfinished business, and I will continue to reach out to concerned members to see how best to ensure substantive consideration of outstanding issues and to deliver on the cotton mandate within the framework of the agricultural negotiations, in the context of the post-Bali work programme,” Ambassador Adank said.

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Sudan has circulated a document on the situation of cotton in the country and the reforms it is undertaking. Sudan is an observer still negotiating WTO membership and circulating a document outside its membership talks is an unusual step for an observer.

Sudan thanked the WTO Secretariat’s Development Division and Burkina Faso, one of the “Cotton-4”, for help in preparing the paper.

The next meeting will be before the 2015 summer break, date to be announced.