The Rupp Report: Cotton News

Recently, the Standing Committee of the International Cotton Advisory Committee (ICAC) was informed
about current World Trade Organization (WTO) negotiations —more specifically, those dealing with
aspects of cotton trade. At the WTO, the cotton issue is handled according to a two-track approach
in reference to trade and development, the two major components of the Sectoral Initiative tabled
by the “Cotton-Four” — Benin, Burkina Faso, Chad and Mali. Trade is covered by the agriculture
negotiations on market access, domestic support and export subsidies. Development covers various
aspects of helping the less-developed cotton producers face market conditions and other needs.

Agriculture Negotiations

WTO members agreed in the July 2004 Framework and in the Hong Kong Ministerial Declaration to
address the trade-related aspects of the Cotton Initiative within the framework of the agriculture
negotiations, in all three pillars — market access, domestic support and export competition. Hence,
cotton is addressed within the purview of the negotiations on agriculture conducted in the Special
Session of the Committee on Agriculture, chaired by Ambassador Crawford Falconer of New Zealand,
who also is chair of the Cotton Subcommittee.

On July 17, the chair of the WTO agriculture negotiations tabled a Revised Draft Modalities
for Agriculture paper, the so-called “agriculture text.” This text attempts to narrow the
differences in discussions on farm subsidies and tariff cuts. The text identifies possible areas of
convergence and areas where gaps still need to be bridged in order to reach the consensus needed
for a deal. The agriculture text is meant to serve as a working document that members can,
hopefully, work from and refine. Initial reactions by WTO members to the agriculture text have been

A new round of intensive negotiations has started in Geneva to discuss the agriculture text.
There are several features of the work and discussions in the trade aspects of cotton. The progress
achieved on cotton during the Hong Kong Ministerial Meeting in December 2005 represents an
important step forward on this issue says Marième Fall of the WTO Sub-Committee on Cotton.

Elimination Of Export Subsidies

The agreement on the elimination of export subsidies by developed countries in 2006, and on
duty- and quota-free access for cotton exports from least developed countries (LDCs) from the
beginning of the implementation period, were valuable and first steps. There also was an agreement
on the objective that trade-distorting domestic subsidies for cotton production be reduced more,
and that this commitment should be implemented over a shorter period of time than is generally
applicable. The current prospects for cotton are linked to an ambitious outcome on all pillars of
the agriculture negotiations.

Not Easy To Handle

In particular, members need to find a way to handle the distinct mandate on cotton within the
context of the cuts and disciplines being pursued under the domestic support pillar on the level of
ambition for overall trade-distorting domestic support, and in relation to commodity-specific
commitments. The four proponents of the Sectoral Initiative on Cotton have underlined the necessity
for urgency and speed in addressing the trade distortions in the sector because of the continuing
deterioration and volatility of global cotton prices and the risk this situation bears for the “
disappearance of the cotton sector in West and Central Africa.”

SEEP Expert Panel Meeting

The Expert Panel on Social, Environmental and Economical Performance (SEEP) of Cotton also
recently got together. The panel was founded by the ICAC. Members of the panel are representatives
from organizations in Australia, Brazil, Burkina Faso, France, Germany, India, Switzerland, Taiwan
and the United States.

The 14 members will investigate the economical, social and environmental behavior of cotton
production over the next two years. Because of 25 million metric tons of cotton produced in more
than 80 countries, as well as a variety of factors in the environment, economic and social sectors
that have to be taken into consideration, the task force tried to identify the most relevant
factors in its first meeting. The lack of basic information on cotton production that would allow
an ecological, economical and social evaluation of the sector had been the reason for establishing
this task force. First results will be presented during the 29th International Cotton Conference in
Bremen, Germany, in April 2008.

Source: Bremen Cotton Exchange

October 2, 2007