US Cotton Subsidies Current policy implications and recommendations TO: Ron Kirk From: Agricultural Policy Analysts from DOC
Problem <ul><li>Definition of the Problem </li></ul><ul><ul><li>U.S. is the second largest cotton producer in the world </...
Problem (Continued) <ul><li>Those negatively affected by U.S. domestic subsidies </li></ul><ul><ul><li>&quot;Some years ag...
Background <ul><li>The international community’s approach to U.S. agricultural subsidies: </li></ul><ul><li>Developing Cou...
The Doha Round <ul><li>The Doha Development Round: Agricultural Negotiations   </li></ul><ul><li>Main Themes: </li></ul><u...
WTO Evaluation <ul><li>WTO and Domestic Allocation </li></ul><ul><ul><li>Domestic support categories </li></ul></ul><ul><u...
US Policy <ul><ul><li>History of Cotton Case </li></ul></ul><ul><ul><ul><li>Bush Administration eliminations </li></ul></u...
Criteria <ul><li>Political Feasibility:  </li></ul><ul><ul><li>measured by the degree of acceptance by in the US congress....
Alternatives <ul><li>Alternative 1: </li></ul><ul><ul><li>Follow the recommendations of the African Sectoral Initiative – ...
Alternatives <ul><li>Alternative 2: </li></ul><ul><ul><li>Follow the current USTR recommendation to include its cotton pro...
Alternatives <ul><li>Alternative 3:  </li></ul><ul><ul><li>Adjust US cotton program to remove “amber” box measures and onl...
Criteria Scoring Political Feasibility Equity Affordability Total #1 1 4 2 7 #2 4 1 3 8 #3 2 4 3 9
Final Recommendation <ul><li>Alternative 3:  </li></ul><ul><ul><li>Adjust US cotton program to remove “amber” box measures...
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US Agriculture Subsidies

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US Agriculture Subsidies

  1. 1. US Cotton Subsidies Current policy implications and recommendations TO: Ron Kirk From: Agricultural Policy Analysts from DOC
  2. 2. Problem <ul><li>Definition of the Problem </li></ul><ul><ul><li>U.S. is the second largest cotton producer in the world </li></ul></ul><ul><ul><li>U.S. government pays $3B annually to domestic cotton producers </li></ul></ul><ul><ul><li>Creates a trade imbalance and international economic inequity </li></ul></ul><ul><ul><li>Policy is illegal under international regulations (WTO) </li></ul></ul><ul><ul><li>Brazil recently rewarded $300 million annually </li></ul></ul>
  3. 3. Problem (Continued) <ul><li>Those negatively affected by U.S. domestic subsidies </li></ul><ul><ul><li>&quot;Some years ago, cotton was a source of wealth for us.               But these days it has become our burden, a cause of               poverty.&quot; - President of Mali </li></ul></ul><ul><ul><li>&quot;White gold&quot; is a main source of sustenance for 20 million people in Africa, mostly West Africa- Benin, Cameroon, Mali, Niger, Nigeria, Mali, Guinea, Ghana, Cote d'Ivoire, Chad, Central African Republic,             Senegal, Togo, Burkina Faso, and other regions in the world </li></ul></ul>
  4. 4. Background <ul><li>The international community’s approach to U.S. agricultural subsidies: </li></ul><ul><li>Developing Countries: </li></ul><ul><ul><li>The Brazil cotton case </li></ul></ul><ul><ul><li>The African Sectoral Initiative </li></ul></ul><ul><ul><li>The role of NGOs and IGOs: Oxfam and ICAC </li></ul></ul><ul><li>Developed countries: </li></ul><ul><ul><li>Disagreements between the EU and the U.S. </li></ul></ul><ul><ul><li>“ Arms’ race”: No country wants to reduce their subsidies first </li></ul></ul><ul><li>World Trade Organization: </li></ul><ul><ul><li>The Doha Development Round </li></ul></ul>
  5. 5. The Doha Round <ul><li>The Doha Development Round: Agricultural Negotiations   </li></ul><ul><li>Main Themes: </li></ul><ul><ul><li>Market Access </li></ul></ul><ul><ul><li>Domestic Support </li></ul></ul><ul><ul><li>Export Competition </li></ul></ul><ul><ul><li>Development Issues </li></ul></ul><ul><li>Main Parties: </li></ul><ul><ul><li>G20, Cairns Group, G10, the E.U. and the U.S. </li></ul></ul><ul><li>Repeated failures to reach agreement on agricultural issues </li></ul>
  6. 6. WTO Evaluation <ul><li>WTO and Domestic Allocation </li></ul><ul><ul><li>Domestic support categories </li></ul></ul><ul><ul><ul><li>Green Box, Blue Box, and Amber Box </li></ul></ul></ul><ul><ul><li>Indirect export subsidies </li></ul></ul><ul><ul><ul><li>US export credit guarantees </li></ul></ul></ul><ul><li>Retaliation </li></ul><ul><ul><ul><li>Trade wars </li></ul></ul></ul><ul><ul><ul><li>Small economies </li></ul></ul></ul><ul><li>Time Issue </li></ul>
  7. 7. US Policy <ul><ul><li>History of Cotton Case </li></ul></ul><ul><ul><ul><li>Bush Administration eliminations </li></ul></ul></ul><ul><ul><ul><li>Panel reconvened </li></ul></ul></ul><ul><ul><ul><li>Brazil Retaliation </li></ul></ul></ul><ul><ul><li>Issues </li></ul></ul><ul><ul><ul><li>WTO integrity </li></ul></ul></ul><ul><ul><ul><li>Loss of income </li></ul></ul></ul><ul><ul><ul><li>Possible spillover affects </li></ul></ul></ul><ul><ul><ul><li>Possible further retaliation </li></ul></ul></ul>
  8. 8. Criteria <ul><li>Political Feasibility: </li></ul><ul><ul><li>measured by the degree of acceptance by in the US congress. </li></ul></ul><ul><ul><li>willingness to accept and implement </li></ul></ul><ul><li>Equity : </li></ul><ul><ul><li>How fair is the alternative, in relation to WTO challenges. </li></ul></ul><ul><ul><li>Measures the ability of producers to compete in the market. </li></ul></ul><ul><ul><li>is this a free market economy? </li></ul></ul><ul><ul><li>the foundation of the WTO is based on Neoliberal economics </li></ul></ul><ul><ul><li>To liberalize trade means to reduce trade distorting mechanisms </li></ul></ul><ul><li>Affordability: </li></ul><ul><ul><li>What costs do cotton producers face depending on the alternative </li></ul></ul><ul><ul><li>Cost of possible retaliation will be calculated as well </li></ul></ul><ul><ul><li>Can they afford to do it? </li></ul></ul>
  9. 9. Alternatives <ul><li>Alternative 1: </li></ul><ul><ul><li>Follow the recommendations of the African Sectoral Initiative – The proposal calls for an end to all cotton export subsidies and domestic support programs within 4 years, as well as establish a transitional financial compensation mechanism in favor of cotton-exporting developing countries affected by the subsidies. </li></ul></ul>Political Feasibility Equity Affordability Total Alternative 1 1 4 2 7
  10. 10. Alternatives <ul><li>Alternative 2: </li></ul><ul><ul><li>Follow the current USTR recommendation to include its cotton program under a comprehensive negotiation regarding export subsidies and domestic support negotiated in the Doha Round. </li></ul></ul>Political Feasibility Equity Affordability Total Alternative 2 4 1 3 8
  11. 11. Alternatives <ul><li>Alternative 3: </li></ul><ul><ul><li>Adjust US cotton program to remove “amber” box measures and only include “blue” and “green” box domestic support program with parameters set by ICAC. </li></ul></ul>Political Feasibility Equity Affordability Total Alternative 3 2 4 3 9
  12. 12. Criteria Scoring Political Feasibility Equity Affordability Total #1 1 4 2 7 #2 4 1 3 8 #3 2 4 3 9
  13. 13. Final Recommendation <ul><li>Alternative 3: </li></ul><ul><ul><li>Adjust US cotton program to remove “amber” box measures and only include “blue” and “green” box domestic support program with parameters set by ICAC. </li></ul></ul>

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