Trade Policy Note Final-rev08 - Development

Box 16: Legal and Political Initiatives - Example of Cotton
Trade negotiations are not the only way of addressing the export interests of the poor in
international trade. The WTO dispute settlement mechanism enables developing countries to
challenge measures that are inconsistent with multilateral obligations. One example is the
successful case launched by Brazil, with the support of numerous developing countries,
against many elements of the United States subsidy schemes on cotton. The United States was
found to have subsidized exports of cotton at a level exceeding its WTO commitments and in
breach of other provisions of the Agreements on Agriculture and on Subsid ies and
Countervailing Measures (such as favouring the use of domestic over imported cotton). 41
In parallel to this case, four poor African countries - Benin, Burkina Faso, Chad and Mali,
introduced a “Sectoral Initiative in Favour of Cotton” 42 which described the damage caused to
their poor cotton producers by the lavish subsidies offered to rich cotton producers in
developed countries. The objective was to shame the major trading countries into taking
action to eliminate these subsidies.
The initiative by Brazil was instrumental in dealing with United States export subsidies. As
LDCs, these four countries should benefit from duty free treatment into all developed
markets, however, the major issue of achieving the accelerated reduction of domestic
production subsidies on cotton is still being pursued in the resumed Doha Round.Disputes
against subsidies in the agricultural sector will likely proliferate with the expiry of the “peace
clause”. 43
Further Agricultural Liberalization
The logic of the Uruguay Round was to ensure minimum access to markets, while
placing ceilings on protection and subsidization, as a starting point for further
agricultural liberalization in future multilateral rounds. For developing countries,
however, this process, served to “lock in” World Bank structural adjustment
programmes, resulting in an asymmetrical system that penalized developing
countries, as they were not permitted to increase their existing levels of subsidies and
tariff protection. Countries acceding to the WTO found themselves obliged to accept
even more stringent conditions. Developing countries found themselves in a situation
in which their markets became relatively open to imports (all agricultural tariffs were
bound), even when such imports benefited from export subsidies in OECD countries,
while their exports were restricted by restrictive tariff quotas and met subsidized
competition from developed country competitors in third country markets. Overall,
developing countries, once net exporters of agricultural products, have become net
importers wit h a deficit of $11 billion in 2001. The major subsidizing developed
countries, the EU and the United States , have gained at the expense of most
41 See “United States – Upland Cotton”, WTO Dispute DS267, Appellate Body Report, circulated 3
March 2005 http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds267_e.htm
42 See WTO document , Committee on Agriculture - Special Session -WTO Negotiations on
Agriculture, “Poverty Reduction: Sectoral Initiative in Favour of Cotton ” - Joint Proposal Benin,
Burkina Faso, Chad and Mali, TN/AG/GEN/4, 16 May 2003 www.wto.org.
43 Article 13 of the WTO Agreement on Agriculture. For an up-to-date analysis of current issues in the
multilateral negotiations on agriculture at the time of their suspension see Blandford, David and Tim
Josling, “Options for the WTO Modalities for Agriculture”, International Food and Agricultural Trade
Policy Council, May 2006,
http://www.agritrade.org/Publications/DiscussionPapers/WTO%20Modalities.pdf
34