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Cotton subsidies, the WTO, and the'cotton problem'

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  • Baffes, John
Abstract
Following an 8-year long dispute over cotton subsidies, Brazil and the United States signed a Memorandum of Understanding on April 21, 2010, effectively paving the way for settling the dispute. This paper argues that cotton subsidies are just the tip of the iceberg while a number of other, perhaps more important, issues requireattention and, indeed, political will. Chief among them is the persistent divergence between cotton prices and the prices of other agricultural commodities, which reflects, for the most part, the large supply response by China and India, a direct consequence of con-version to biotech cotton varieties in these (and other) countries. Such response -- which kept cotton prices low, compared with other commodities -- imposes a competitive disadvantage to non-users of biotech cotton. The paper also highlights two additional constraints faced by the cotton producing countries of West and Central Africa, namely, the structural inefficiencies of their primary processing industries (also known as ginning) and the appreciation of the CFA franc against the US dollar. Without downplaying the importance of subsidy elimination, the paper concludes that these impediments should receive high priority in the policy agenda.

Suggested Citation

  • Baffes, John, 2011. "Cotton subsidies, the WTO, and the'cotton problem'," Policy Research Working Paper Series 5663, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5663
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    References listed on IDEAS

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    1. M. Ataman Aksoy & John C. Beghin, 2005. "Global Agricultural Trade and Developing Countries," World Bank Publications - Books, The World Bank Group, number 7464.
    2. Falck-Zepeda, José B. & Horna, Daniela & Smale, Melinda, 2007. "The economic impact and the distribution of benefits and risk from the adoption of insect resistant (Bt) cotton in West Africa," IFPRI discussion papers 718, International Food Policy Research Institute (IFPRI).
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    5. Davies, Arwel, 2006. "Reviewing dispute settlement at the World Trade Organization: a time to reconsider the role/s of compensation?," World Trade Review, Cambridge University Press, vol. 5(1), pages 31-67, March.
    6. Kym Anderson, 2009. "Distortions to Agricultural Incentives : A Global Perspective, 1955-2007," World Bank Publications - Books, The World Bank Group, number 9436.
    7. Zilberman, David & Hochman, Gal & Kaplan, Scott & Kim, Eunice, 2014. "Political Economy of Biofuel," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 29(01), pages 1-6.
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    12. David Tschirley & Colin Poulton & Patrick Labaste, 2009. "Organization and Performance of Cotton Sectors in Africa : Learning from Reform Experience," World Bank Publications - Books, The World Bank Group, number 2604.
    13. World Bank, 2009. "Global Economic Prospects 2009 : Commodities at the Crossroads," World Bank Publications - Books, The World Bank Group, number 2581.
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    15. Arjunan Subramanian & Matin Qaim, 2010. "The Impact of Bt Cotton on Poor Households in Rural India," Journal of Development Studies, Taylor & Francis Journals, vol. 46(2), pages 295-311.
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    Cited by:

    1. Delpeuch, Claire & Vandeplas, Anneleen, 2013. "Revisiting the “Cotton Problem”—A Comparative Analysis of Cotton Reforms in Sub-Saharan Africa," World Development, Elsevier, vol. 42(C), pages 209-221.
    2. Bassett, Thomas J., 2014. "Capturing the Margins: World Market Prices and Cotton Farmer Incomes in West Africa," World Development, Elsevier, vol. 59(C), pages 408-421.
    3. Nonelelo Vuba & Thobekile Qabhobho, 2024. "The Risk Transfer among Exchange Rates, Energy Commodities, and Agricultural Commodity Prices in SADC Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 14(2), pages 287-298, March.
    4. Neha Bhardwaj Upadhayay, 2020. "Uncovering the proliferation of contingent protection through channels of retaliation, gender and development assistance," Erudite Ph.D Dissertations, Erudite, number ph20-02 edited by Julie Lochard & Catherine Bros.
    5. Nazif Durmaz, 2014. "Inventories of Asian Textile Producers, US Cotton Exports, and the Exchange Rate," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(4), pages 397-413, September.

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    Keywords

    Economic Theory&Research; Crops&Crop Management Systems; Emerging Markets; Livestock&Animal Husbandry; Agricultural Industry;
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