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Tuesday, 20 April 2010

World cotton market and alternative policy reforms

The WTO Doha Round could have a significant positive impact on world cotton prices and contribute to the expansion of cotton production and exports in developing countries. However, the likelihood of such an outcome is highly dependent on the depth of the subsidy reductions adopted by WTO members. The poor record of internal policy reforms in key subsidizing countries and the failure of the US to comply with recommendations from the WTO Dispute Settlement Body (DSB) highlight the importance of multilateral trade negotiations in addressing the profound distortions that characterize the world cotton market. Meanwhile, unilateral domestic policy reforms in the EU and US have had limited if any impact on world cotton markets. The 2003-04 reform of the EU Common Agricultural Policy (CAP) changed the guaranteed minimum price for cotton to a mix of coupled and allegedly decoupled payments. In the US, the 2008 Farm Bill kept cotton subsidies largely unchanged, indicating an unwillingness to comply with the DSB panel rulings or the mandates from the Hong Kong Ministerial Declaration.

Source: International Centre for Trade and Sustainable Development