Apparel Sourcing Intelligence - Worldwide

Cotton: China “now biggest subsidiser”. And India’s catching up

China is now spending nearly four times as much subsidising its cotton farmers as the US – and damaging the economies of the world’s poorest countries, says the influential International Centre for Trade and Sustainable Development (ICTSD) And India’s spending on cotton production subsidies has grown tenfold over the past three years

The ICTSD’s Cotton Trends in Global Production publication estimates China spent around $3 bn subsidising its cotton producers in 2011/12: the US around $800 mn. But US subsidies are always cited as the major obstacle to poor cotton producers, especially Mali, Burkina Faso, Chad and Benin (the African “Cotton 4” group) being able to command adequate prices. Some activist groups – like our neighbours Oxfam – claim outright that the US is the only reason poorer countries receive low  incomes from cotton

Now India, says the Financial Times,  “has implemented 15 trade-distorting cotton interventions since 2008, far ahead of the nearest other emerging market offenders China (3) and Brazil (2), according to Global Trade Alert, the database provider. India’s trade measures have primarily been aimed at boosting cotton exports, and its subsidies grew markedly between 2011 and 2013, while China’s have been to restrict African cotton exports to its markets, according to Simon Evenett, professor of international trade and economic development at the Swiss Institute for International Economics.”

A 2005 WTO agreement for the world’s poorest countries to have universal duty-free, quota-free access for thgeir cotton exports, and for other countries to phase out subsidies, has still not been implemented – and the Cotton 4 now blame China and India, as well as the US. The group have asked the early December WTO meeting in Bali to address this – but their request, the WTO has argued, arrived so late accommodating it looks unlikely.

Besides, argues the FT, a significant part of the problem for the African Cotton 4 Group is their low yield per hectare cultivated. It argues this reflects poor infrastructure. But it may reflect rather better the bizarre monopoly some governments give trading intermediaries . Earlier in 2013, the SOCOMA company, which has the exclusive right to buy cotton from farmers in Burkina Faso, reduced its price to CFA 235/kg – or $0.22 per pound. About a quarter of the global spot price.

Oxfam might be more successful in its anti-poverty campaigns if it attacked the real problems, and stopped inventing Ugly American bogeymen.