Cotton, once known as ‘white gold’, has lost its glitter. The slide in global cotton prices is driving ten million farmers in West and Central Africa (WCA) deeper into poverty. Inequalities in the international trading regime are responsible for such distortions. But how can these inequalities be eliminated and the livelihoods of African producers protected?

Since the mid-1990s, cotton prices have declined, with 2001 prices reaching the lowest in 30 years. The crisis is the result of an unequal application of trade liberalisation. While developing countries have been forced to cut support to their small-scale cotton farmers under International Monetary Fund and World Bank liberalisation programmes, developed countries such as the US and the European Union (EU) continue to provide their producers with extensive subsidies (the US provided $US 2.3 billion in 2001/2002). Subsidies lead to overproduction, which contributes to a drop in global cotton prices, with devastating effects for governments and rural farmers in the developing world.

A report from Oxfam International in the UK reviews the effect of such subsidies on the cotton-producing countries of WCA in terms of increased levels of poverty, and the responses of those involved. West African states such as Benin, Chad, Mali and Burkina Faso led an initiative at the World Trade Organization (WTO) talks at Cancun in 2003 to force the US and EU to reduce their subsidies. This initiative failed because the US and EU refused to change their policies or to discuss compensation.

The report then considers how international meetings on the cotton crisis are both an opportunity and a threat for WCA cotton producers:

• External resources could be mobilised to compensate rural producers and governments for their losses, and to invest in WCA cotton sectors.
• The mixed experience of liberalising domestic cotton sectors could be reviewed.
• If developed countries were to offer WCA cotton producers an appropriate aid package, the structural problems created by subsidies would persist. Long-term losses for WCA would far outweigh the immediate benefits of aid.
• The promise of aid combined with strong diplomatic pressure could be a way for developed countries to push WCA governments to drop their demands for urgent reform of agricultural subsidies.
• A retreat on subsidies would weaken the broad coalition of developing countries that supports WCA on cotton and call for deeper and faster reform of world farm trade.

The report recommends the following:

• The US should abolish all cotton subsidies affecting international trade. EU subsidy reform should increase WCA access to the European cotton market and protect the livelihoods of small-scale European producers.
• The US and EU should compensate WCA cotton producers for the losses caused by subsidies.
• Cotton should continue to be treated as a separate, priority issue in WTO negotiations.
• Unconditional financial and technical assistance should be given to WCA cotton producers for short-term needs created by the cotton crisis and for longer-term development of the sector.
• Development aid to cotton-producing countries should aim to stabilise cotton prices and incomes, improve cotton quality, and encourage fair trade and organic production.

Source(s):
‘White Gold’ Turns to Dust: Which Way Forward for Cotton in West Africa?’ Oxfam Briefing Paper no 58, March 2004 Full document.

id21 Research Highlight: 11 April 2005

Further Information:
Sally Baden
Cotton policy and research adviser
Oxfam International
West Africa Regional Office
Oxfam America
BP 7200 Dakar
Senegal

Tel: + 221 869 0299
Fax: + 221 824 2955
Contact the contributor: SBaden@oxfamamerica.org

Oxfam International

Other related links:
'US producers reap cotton subsidies and destroy African livelihoods'

'How fair is ethical trade? A look at Uganda’s organic cotton sector'

'GM crops and the politics of international trade'

Make Trade Fair - Oxfam campaign

European Fair Trade Association