Mr Cook,

If you indeed read these comments, I'd like you or your European counterpart to answer the following question:

With regard to West African cotton farmers, in your educated opinion, which of the following is MUCH more detrimental to their situation, a) cotton subsidies paid to farmers in the United States, or b) the monopolistic nature of the West African countries that control the price of planting seeds, chemicals, ginning, merchandising, and also distribute financial aid provided by the United States? Maybe you could also shed some light on the reasoning that countries claiming that our cotton subsidies distort world markets continue to INCREASE planted cotton acres, while the United States continues to DECREASE acres in the face of a stagnant market. Just curious to get your thoughts on these matters.

Dear Mr. Lee,

There is clear evidence that US cotton subsidies encourage overproduction of cotton that is subsequently dumped on the world market lowering prices and effectively the incomes of West African cotton producers. The majority of economic analyses show significant price depression from subsidies, averaging around 12 percent. A recent study by Sumner (2007) found that eliminating trade distorting subsidies to cotton would not just raise world prices but increase the prices directly received by producers from 5% to 8%. These numbers may look small, but what is significant, is that they a) take into account price transmission and b) could mean that more than 10 million people could afford to provide food for one to two children per household per year, or schooling costs for two to ten children per household per year or coverage of all fertilizer costs for 60 percent of cotton area per household per year. These are no small potatoes for people living on less than $1 per day.

With respect to the structure of the cotton industry in West Africa, it is misleading to lump all industries in all countries in one category. Yes, in the past all cotton industries in the West African cotton producing countries were monopolistic, but currently, each country is in a different stage of liberalization. Benin is almost completely liberalized and has been since the early 1990’s, Burkina Faso operates under a partially-liberalized model, also since the 1990’s and Mali is transitioning to full liberalization in 2008. Particularly in the case of Mali, cotton farmers are now trying to adapt to both a liberalized market structure and depressed world cotton prices. They indeed face many challenges.

But its unfair to ask which practice is worse, under the presumption that the supply-side constraints outweigh the trade challenges, thus freeing the US cotton program of any blame. No one has ever claimed that US cotton subsidies are the sole cause of poverty in West Africa, but they sure are a significant part. So if we are certain there is a price-suppressing impact that hurts the poor in developing countries, what is the rationale that we shouldn’t we change these policies? That they don’t hurt them enough?

To get to the second part of your question referring to US aid, Oxfam studies show that between 2001 an 2003, lost export earnings from cotton averaged $200 million per year. The US gives around $3 billion annually to all of Sub-Saharan Africa in Official Development Aid. That’s about the same amount of money the US cotton industry receives in one year. This means that our trade policies tend to work at cross-purposes with our aid policies. Further, according to the WTO, US cotton sector specific aid promised is just $27 million, of which $5 million was recycled. Past monies have also not been allocated because according to the Bumpers Amendment (to the US Foreign Assistance Act of 1961), it is prohibited for US development assistance to work towards enhancing competing agricultural industries. Bottom line, the US gives little direct money if any to the cotton sectors in West Africa.

Lastly, in response to your interest in the impact of subsidies on cotton acreage, US cotton acreage was on a steady climb upwards since the late 1990,’s until it declined and leveled off around 13,000 planted acres per year in since 2002. So while US cotton acreage may not have increased, US cotton production on the other hand did not decline in response to market prices. Despite cotton prices at their lowest levels in 2002 since the Depression Era, cotton production actually went up by 3 million bales.

Recent decreases in US cotton acreage were drawn down by high prices in other commodities, not by any change in policy. Cotton production has recently declined in the U.S. because of the demand for ethanol and increased corn planting in traditional cotton areas. The fact remains that the U.S. is the largest cotton exporter dumping its surplus in 2006 at less than half the cost of production. Current domestic consumption of cotton is approximately 6 million bales annually, meaning that "U.S. exports would need to be 12 to 17 million bales annually to avoid an increase in carryover stocks."

It’s also important not to lose sight of the fact that even with lower planted acres, lower projected production, and increased cotton prices, cotton is the only commodity forecasted to receive trade-distorting subsidies over the life of the next farm bill. Clearly something is amiss. I think it's high time to reform the Farm Bill, if for no other reason than it deepens poverty for the world's poorest.

Emily Alpert
Policy Advisor
Oxfam America