WTO members discuss cotton development assistance, impact of COVID-19 on Cotton Trade

At a meeting of the Director-General’s Consultative Framework Mechanism on Cotton on July 30, 2020, the chair Deputy Director-General Alan Wm. Wolff reiterated the forum’s mandate to ensure transparency of development assistance programmes for cotton and to improve the effectiveness of cotton projects. The WTO Secretariat presented a report and video on the launch of World Cotton Day at the WTO on October 7, 2019.

At separate sessions, also held on July 30, members discussed the state of play in cotton negotiations and the impact of COVID-19 on cotton trade.

Cotton-related development assistance activities

The Cotton-4 (Benin, Burkina Faso, Chad and Mali) noted the importance of supporting cotton development assistance projects designed  locally, including the “Cotton Roadmap Project”, which seeks to promote the cotton sector by improving local processing capacity and developing cotton-to-textile value chains at the regional level. They welcomed the fact that the cotton by-products component of the project, whereby cotton producers seek to unlock further benefits from cotton production, was already being successfully implemented by the WTO, the United Nations Conference on Trade and Development and the International Trade Centre.  

The International Cotton Advisory Committee (ICAC) presented recent developments in global cotton markets, highlighting that average regional yields for sub-Saharan Africa are around 370 kg/ha, compared with a global average of 800 kg/ha.

ICAC’s Executive Director presented new digital training tools developed with funds from Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). The tools aim to help farmers in developing countries tackle pests and follow good agriculture practices through the use of virtual reality and an interactive app. The Cotton-4 and other developing countries pointed out the hurdles that small-scale famers face in purchasing smartphones and accessing reliable internet connection. They drew attention to the risk of an increasing digital divide for cotton producers in least-developed countries.

The latest revision of the Evolving Table (WT/CFMC/6/Rev.28), the WTO’s core document on cotton development assistance, includes updates on cotton-specific projects submitted by Australia, Brazil, the European Union, France and the Enhanced Integrated Framework (EIF). France notified the WTO about the conclusion of five cotton programmes while the United States provided information about the conclusion of one programme.

Regarding agriculture and infrastructure projects where cotton is a component, Japan notified the WTO about 24 new projects with a total commitment of over USD 688 million benefiting eight African countries. Japan also notified the WTO of the completion of six projects accounting for a disbursed amount of over USD 95 million benefiting four African countries.

The United States notified about the completion of nine projects with a disbursed amount of over USD 447 million.

In terms of commitments to active projects, the latest revision of the table shows a downward trend for both cotton-specific and agriculture and infrastructure programmes, which declined by 9 per cent and 38 per cent respectively since the previous reporting period.

All presentations are available here.

Presentations prepared for the meeting by the United Nations Industrial Development Organisation, Better Cotton Initiative and Gherzi Textile Organisation Zurich on cotton production, transformation and sustainability can be found here.

World Cotton Day

The WTO Secretariat presented a report (TN/AG/SCC/W/33, WT/CFMC/61) on the launch of World Cotton Day at the WTO on 7 October 2019 and a highlights video of the event. Burkina Faso, speaking on behalf of the Cotton-4 and the 36 African cotton-producing countries, noted the importance of recognising World Cotton Day at the forthcoming September session of the United Nations General Assembly. It said it was looking for members’ support for the Cotton-4 draft resolution to proclaim 7 October as World Cotton Day.

Trade negotiations and transparency

Ambassador Gloria Abraham Peralta of Costa Rica chaired the 13th Dedicated Discussion on Cotton on 30 July 2020, her first meeting since being elected chair of the special session of the Committee on Agriculture.  On the state of play in the agriculture and cotton negotiations at the WTO, Amb. Peralta acknowledged that “cotton is a topic of key interest” and encouraged members to engage constructively in discussions on the global cotton market and factors affecting its efficiency.

Amb. Peralta flagged her intention to convene informal meetings around mid-September to map out the way forward in the run-up to the 12th Ministerial Conference.  She would also convene meetings of the Quad+ (a group of 13 members) to allow members to exchange views on the cotton negotiations, she said. She highlighted the importance of the Joint Statement on the Cotton Negotiations (TN/AG/SCC/GEN/21), where co-signatories committed to “intensify” discussions on negative factors affecting cotton trade and markets, with the aim of enhancing transparency, and called on members to operationalize this commitment.

The Cotton-4 echoed the chair’s call and urged members to fully implement the Cotton Nairobi Ministerial Decision, eliminate cotton export subsidies and grant duty-free quota-free access for cotton exports from least-developed countries.

The International Cotton Advisory Committee (ICAC) indicated the strong negative correlation between subsidies and cotton prices. Considering the exceptional measures adopted in response to the COVID-19 pandemic, the Cotton-4 called on members to lift all trade-restrictive measures to facilitate the supply and exports of essential medical goods and agricultural commodities, in particular cotton products.

The European Union underscored the importance of transparency in the negotiations and urged members to step up efforts to comply with notification obligations and provide voluntary replies to the questionnaire about cotton policies. Pakistan called for a speedy outcome in the negotiations on cotton, especially in the wake of the COVID-19 pandemic. Brazil noted that tackling cotton domestic support remained a priority. China stressed that the elimination of all product-specific support and non-product-specific support beyond a minor percentage of support allowed on an annual basis (de minimis) should be a first step in the negotiations.

Due to time constraints, the chair noted that the WTO Secretariat’s presentation on the revised “background paper” (TN/AG/GEN/34/Rev.12 and two addendums) would be posted online. The document compiles up-to-date information on cotton policies in the three pillars of domestic support, market access and export competition.

The chair noted the decline in the responses to the Secretariat’s questionnaire about cotton policies, possibly as a result of the pandemic, and encouraged members to continue engaging in the exercise.  

The agenda of the meeting is available here

Information session on COVID-19: “From facts to solutions”

At the request of the Cotton-4, the WTO Secretariat organized an information session on the impact of COVID-19 on cotton trade back to back with the 13th Dedicated Discussion on Cotton. The purpose of the session was to ensure a common understanding of the facts and figures about the impact of the COVID-19 pandemic on cotton value chains and to initiate a dialogue on possible solutions.

DDG Wolff, who chaired the session, highlighted the importance of turning the quest for immediate solutions to the short-term impacts of the pandemic into an opportunity for long-term improvements which would be to the benefit of the whole cotton industry, particularly the most vulnerable cotton-producing countries.

A presentation by Mr Kai Hughes of ICAC opened the discussion, providing global figures on cotton trade and the impact of COVID-19, noting that the downward pressure on international prices caused by the fall in demand for cotton would have lasting effects. A joint presentation by Dr Heike Ostermann (GIZ) and Belinda Edmonds (African Cotton Foundation) focused on the issues faced by small-holders and the solutions offered by intra-African cooperation, value addition activities and trade preferences included in legislation such as the African Growth and Opportunity Act, which seeks to assist the economies of sub-Saharan Africa and to improve economic relations between the United States and the region.

The session closed with interventions by Professor Idrissa Ouedraogo (FORGE-Afrique), Mr Marco Mtunga (President of the African Cotton Association) and Mr Charles Jannet (Head of Cotton Trade, Ecom Agroindustrial Corporation Ltd and Vice-President of Afcot), who respectively provided information specific to West Africa, Eastern and Southern Africa and private sector buyers with integrated operations in West Africa.

Professor Ouedraogo highlighted the negative impacts experienced in West Africa, taking Mali as an example, where only 20 per cent of the cotton harvest had been sold by mid-June 2020. Mr Mutunga stressed the need to improve extension services, which provide guidance to cotton farmers about best practice, throughout Africa.

Mr Jannet noted that an increase in cotton demand from Bangladesh represented an opportunity for African cotton exports although the price remained low. Even though purchases were affected by COVID-19, the certified supply chain allowed companies to respect purchase commitments.

Participants, both in the meeting room and those connected remotely, highlighted specific hurdles faced by cotton businesses, particularly in Africa. These hurdles include the urgency of honouring contracts and finding solutions to save the African cotton lint production for the 2019-2020 season, which was stuck in ports and transport hubs and which represented 70 % of total production. They stressed that, in the absence of support and long-term strategies to revive cotton value chain operations in Africa in a comprehensive manner, millions of people across Africa would fall below the poverty line.

The programme and presentations are available here