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Cotton subsidies, the WTO, and the'cotton problem'

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  • Baffes, John

Abstract

Following an 8-year long dispute over cotton subsidies, Brazil and the United States signed a Memorandum of Understanding on April 21, 2010, effectively paving the way for settling the dispute. This paper argues that cotton subsidies are just the tip of the iceberg while a number of other, perhaps more important, issues requireattention and, indeed, political will. Chief among them is the persistent divergence between cotton prices and the prices of other agricultural commodities, which reflects, for the most part, the large supply response by China and India, a direct consequence of con-version to biotech cotton varieties in these (and other) countries. Such response -- which kept cotton prices low, compared with other commodities -- imposes a competitive disadvantage to non-users of biotech cotton. The paper also highlights two additional constraints faced by the cotton producing countries of West and Central Africa, namely, the structural inefficiencies of their primary processing industries (also known as ginning) and the appreciation of the CFA franc against the US dollar. Without downplaying the importance of subsidy elimination, the paper concludes that these impediments should receive high priority in the policy agenda.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5663.

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Date of creation: 01 May 2011
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Handle: RePEc:wbk:wbrwps:5663

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Keywords: Economic Theory&Research; Crops&Crop Management Systems; Emerging Markets; Livestock&Animal Husbandry; Agricultural Industry;

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  1. Anderson, Kym & Masters, William A., 2007. "Distortions to Agricultural Incentives in Africa," Agricultural Distortions Working Paper, World Bank 48554, World Bank.
  2. Anderson, Kym & Martin, Will, 2005. "Agricultural trade reform and the Doha development agenda," Policy Research Working Paper Series 3607, The World Bank.
  3. David Tschirley & Colin Poulton & Patrick Labaste, 2009. "Organization and Performance of Cotton Sectors in Africa : Learning from Reform Experience," World Bank Publications, The World Bank, number 2604, August.
  4. M. Ataman Aksoy & John C. Beghin, 2005. "Global Agricultural Trade and Developing Countries," World Bank Publications, The World Bank, number 7464, August.
  5. Anderson, Kym & Martin, William J., 2007. "Distortions to Agricultural Incentives in Asia," Agricultural Distortions Working Paper, World Bank 48557, World Bank.
  6. John Baffes, 2005. "The "Cotton Problem"," World Bank Research Observer, World Bank Group, World Bank Group, vol. 20(1), pages 109-144.
  7. Aaditya Mattoo & Arvind Subramanian, 2004. "The WTO and the Poorest Countries," IMF Working Papers 04/81, International Monetary Fund.
  8. Falck-Zepeda, Jose & Horna, Daniela & Smale, Melinda, 2007. "The economic impact and the distribution of benefits and risk from the adoption of insect resistant (Bt) cotton in West Africa:," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 718, International Food Policy Research Institute (IFPRI).
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Cited by:
  1. Nazif Durmaz, 2014. "Inventories of Asian Textile Producers, US Cotton Exports, and the Exchange Rate," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(4), pages 397-413, September.

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