Trade: Stitched up

Date: 26/07/03

African irritation at rich countries' cotton subsidies

THIS September's trade negotiations in Cancun, Mexico, are supposed to be part of a “development round” of world trade talks. What can small, poor countries do to turn rhetoric into reality? Speaking with one voice, recruiting help from western activists and pointing out the faults of rich countries is a good start. This is the strategy of west and central African countries: ministers, experts, producers and activists met on July 20th near Dakar, Senegal, to agree a common position on agriculture, especially cotton.

The world's biggest cotton producers are China, with 25% of the market, followed by the United States (21%) and India (12%). West and central Africa's share is only 5%, but production has risen steadily in the past two decades to more than 1m tonnes a year, and the region now exports one-eighth of the world total. Burkina Faso and Mali rely on cotton for about one-third of their export earnings, and Chad about one-quarter. In several countries, these earnings are worth 5% or more of GDP. Some 10m people in the region make their living from the crop.

Given a chance, they argue, competitive and efficient African producers would undercut and outsell their rivals. A study by a consultant, Louis Goreux, that was cited at the Dakar meeting, says that American cotton costs 50% more to produce than African. So expanding output in Africa should be profitable. Given that the continent's cotton is cultivated labour-intensively by many small farmers in poor countries, it should also cut poverty.

The International Monetary Fund, African officials, growers and negotiators, and international campaigners all say that rich countries and China should cut subsidies to their cotton-farmers. Last year governments around the world gave support for almost three-quarters of all cotton produced, up from half five years ago. Oxfam, a charity, says each acre (0.4 hectares) of American cotton is treated to $230 in subsidies. Last month's proposed reform of the European Union's agricultural policy did not touch the $700m support for Spanish and Greek cotton-growers. Even China dishes out $1.2 billion a year.

Rising subsidies and falling world prices in the past couple of years have made it hard for the Africans, who are mostly unsupported by their governments, to compete. Mr Goreux's study suggests that the subsidies, by exacerbating price falls, cost Africa $250m in export earnings last year. Add in knock-on effects on the economy, grumble African officials, and the loss is more like $1 billion.

Whatever the figures, it is high time that the subsidies stopped. Meanwhile, the African governments would like rich countries to compensate them in cash - and at a punitive rate, to encourage the swift dismantling of support. There is, alas, little chance of that in September.

Article looks at the irritation felt by west and central African countries at rich countries' cotton subsidies.