World Bank group review of cotton-sector reform and subsidies
MetadataShow full item record
CTA. 2004. World Bank group review of cotton-sector reform and subsidies. Agritrade, January 2004. CTA, Wageningen, The Netherlands.
Permanent link to this item: http://hdl.handle.net/10568/52886
The World Bank Group working paper on ‘Reforming the cotton sector in...
The World Bank Group working paper on ‘Reforming the cotton sector in sub-Saharan Africa' notes that sub-Saharan African countries ‘have a strong comparative advantage in cotton production' and that their share of world production has risen in the past decade from 3% to 5%. It review the reforms which have been undertaken in the cotton sectors of six sub-Saharan African countries and seeks to draw lessons form this experience. Four main critical areas were identified: the need for an efficient credit system for small farmers to enable them to acquire quality inputs in a timely manner; the importance of giving more power to cotton growers in the management of the sector; the need for private-sector inputs into research and extension service provision; investigating how seed-cotton marketing is best undertaken in a regulated framework agreed upon by inter-professional organisations. The report notes that in recent years the economics of world cotton production and trade have been ‘strongly distorted by the heavy subsidies paid by OECD countries ( USA and EU) to their cotton farmers'. These subsidies ‘have pernicious economic effects, since they promote production in countries with high production costs at the expense of countries with lower production costs' and describes the negative effects of these subsidies on poverty as ‘quite dramatic … by increasing artificially production and exports and depressing world prices, the subsidies reduce the export earnings of African countries, thus curtailing the revenues of several millions of Africans living on under one dollar a day'. Comment: It should be noted that at the December EU Agricultural Council meeting Commissioner Fischler insisted that the proposals to keep 40% of aid payments in the cotton sector coupled to production would ensure that there was no land abandonment although it would also prevent any significant expansion of European cotton production. The question arises: to what extent will this freeze in place past distortions in the cotton sector? Since 1994/95 world cotton prices have been falling (a decline of 54% by 2001/2002), yet for the bulk of this period since 1994 EU cotton production has expanded, reaching a peak of 1.76 million tonne in 2000/95, an increase of 63% over 1994 levels. Since 2000 however EU cotton production has begun to decline as the area under cotton in Greece has fallen back to levels only slightly higher than those prevailing in 1994. It remains to be seen whether under the new reformed cotton regime the area under cotton will stabilise at these new lower levels, or return to the peaks reached in 2000.