WTO Members discuss potential outcome onm Cotton MC 12, World Cotton Day

At the WTO’s Cotton Days meetings on 11-12 May, 2022, the Cotton-4 (Benin, Burkina Faso, Chad and Mali) and other cotton-producing developing countries repeated the call for cotton trade reforms and an outcome on cotton at the 12th Ministerial Conference (MC12), scheduled for 12-15 June. WTO members were also updated on preparations for World Cotton Day 2022 and a Partners’ Conference in July. An information session shed light on supply chain disruptions and ways to build a more resilient cotton industry post-pandemic.

Deputy Director-General Jean-Marie Paugam, acting on behalf of Director-General Ngozi Okonjo- Iweala, chaired the meeting on the development dimension of cotton on 11 May while Ambassador Gloria Abraham Peralta (Costa Rica), the cotton negotiations chair, facilitated the discussion on 12 May addressing the trade aspects of cotton.

Chair: Cotton is an important element of MC12 outcome

Ambassador Abraham Peralta noted the new submission by the LDCs (JOB/AG/277), which proposes further negotiations on reducing trade-distorting domestic support for cotton, with a view to agreeing on ways of achieving this by MC13. It also calls for a freeze on members’ domestic support for cotton at current levels while negotiations continue.

With only one month before MC12, the chair said members need to discuss how to achieve a “meaningful and realistic outcome” at MC12 which will address immediate food security challenges and agree on a robust framework for continuation of the negotiations after MC12. Cotton is “an important element for a comprehensive food security strategy in the most vulnerable cotton-producing countries,” she said.

The Cotton-4 asked for the chair’s draft negotiations text to take on board the positions outlined by the Cotton-4, the African Group and the LDCs Group in their respective submissions. They reiterated the need to clamp down on subsidies in the cotton sector and called for more transparency, proper monitoring of members’ commitments on market access and the lifting of trade-restrictive measures.

Some members stressed that little time is left before MC12 and that a realistic outcome would be to focus on ways to enhance transparency about members’ trade measures. Some members said that the sections on cotton contained in the chair’s text (TN/AG/50) constituted a good basis for an outcome.

The Cotton-4 said it remained committed to working with members to search for a balanced and mutually beneficial outcome.

Supply chain disruptions and impact on cotton in LDCs

An information session on 11 May addressed COVID-19’s disruptive impact on cotton supply chains and its repercussions on the livelihood of millions of small cotton producers and supply chain operators in LDCs.

Trade officials, experts and business representatives outlined the major bottlenecks in the cotton supply chain, including logjams in ports, surging freight rates, container shortage and increasing storage costs. These factors have led to a sharp rise in transportation costs, which have reportedly jumped 20-30% in some African countries. The disruptions have had a negative impact on cotton exports by LDCs and are putting at risk the current planting season in West Africa.

Some members also said that the Russia-Ukraine conflict is worsening the situation and exacerbating the plight of small cotton farmers in Africa who must cope with a looming food crisis and rising prices for key agricultural inputs, such as fertilizer, that have tripled in some instances.

Participants shared views on short- and long-term solutions in response to the disruptions in the cotton-textile supply chain and highlighted the importance of collective actions. The proposed solutions included investing in local cotton transformation and value addition (i.e. moving from producing raw material to creating textile), enhancing the use of cotton by-products such as cottonseed oil and cake, moving from containerized to bulk shipments for cotton fibre, and substituting chemical fertilizers with biological varieties. The Cotton-4 also stressed the need for broader technology transfer and more financial assistance from partners.

Some members said the timely discussion supplemented the information contained in the WTO’s study on the impacts of the COVID-19 pandemic on cotton-producing LDCs, which was issued in November 2021.

DDG Paugam welcomed the exchange of views and encouraged members to deliberate further on the topics that emerged from the discussion.

Global cotton production and trade trends

Matthew Looney of the International Cotton Advisory Committee (ICAC) told members that global cotton production and consumption are bouncing back in 2021-22 according to ICAC’s projection as COVID-19 starts to subside, and cotton production in Western Africa shows good signs of recovery.

On cotton trade, while both world imports and exports are down from the previous season, Mr Looney said they are still doing well historically.

Despite complications from the COVID-19 pandemic, West Africa’s exports have been increasing progressively since the 2008-09 season. Exports for 2021-22 are currently estimated at 1.2 million tonnes, the highest level recorded by ICAC.

Mr Looney said that while high cotton prices incentivised farmers to plant more, extreme weather conditions and the rocketing cost of inputs will temper expectations for 2022-23.

The WTO Secretariat introduced its revised “background paper” (TN/AG/GEN/34/Rev.16 and two addenda) compiling up-to-date information on cotton policies in domestic support, market access and export competition.

Development assistance

According to the “Evolving Table on Cotton Development Assistance” prepared by the WTO Secretariat, the disbursements of development assistance for cotton have increased by around USD 3 million.

Development partners have committed close to USD 199 million in 26 cotton-specific development assistance projects, with a 34% disbursement rate. Cotton producers are also benefiting from agriculture and infrastructure-related development assistance, with 42 projects having been reported by members and partner organizations, totalling close to USD 2.12 billion — an increase compared to the previous report.

Benin presented a new request for a cotton-specific development assistance project, citing the urgent need to tackle phytosanitary issues in its cotton production.

The UN Conference on Trade and Development (UNCTAD) reported on its joint initiative with the WTO and International Trade Centre (ITC) on cotton by-products, in particular the conclusion of two feasibility studies in Malawi and Togo.

The Better Cotton Initiative presented its 2030 strategy while the Brazilian Cooperation Agency showcased two publications (An overview of the cotton sector in Africa and Brazil and Cotton varieties grown in Africa and Brazil) and the results of a project on African integration into the sustainable genetic improvement of cotton farming. ICAC announced the launch of a new Private Sector Advisory Council to foster communication and information sharing between companies, associations and governments.

Several developing members also reported on their cotton initiatives in Africa in an effort to boost South-South cooperation.

Upcoming events

DDG Paugam announced that the WTO, ITC and UNCTAD secretariats are currently preparing for the second Partners’ Conference, which is tentatively scheduled for 27 July, during the WTO Aid for Trade Global Review. He said this event will help the Cotton-4 and other cotton-producing LDCs create new partnerships and leverage resources and technical expertise, enabling the implementation of cotton projects at the national, sub-regional and continental level.

The first Partners’ Conference was held as a special event during the 2019 WTO launch of World Cotton Day.

The UN Food and Agriculture Organization (FAO) announced its plans to host and organize the 2022 World Cotton Day. The WTO Secretariat, who has hosted World Cotton Day celebrations for the past three years, expressed its full support to FAO for delivering a successful event. In 2021, the United Nations General Assembly officially recognised 7 October as World Cotton Day and proclaimed it would be held as an annual event.

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