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Cotton Subsidies, the WTO, and the ‘Cotton Problem’

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  • John Baffes

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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  • John Baffes, 2011. "Cotton Subsidies, the WTO, and the ‘Cotton Problem’," The World Economy, Wiley Blackwell, vol. 34(9), pages 1534-1556, September.
  • Handle: RePEc:bla:worlde:v:34:y:2011:i:9:p:1534-1556 DOI: j.1467-9701.2011.01396.x
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    References listed on IDEAS

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    1. Mattoo, Aaditya & Subramanian, Arvind, 2004. "The WTO and the poorest countries: the stark reality," World Trade Review, Cambridge University Press, vol. 3(03), pages 385-407, November.
    2. M. Ataman Aksoy & John C. Beghin, 2005. "Global Agricultural Trade and Developing Countries," World Bank Publications, The World Bank, number 7464.
    3. 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 718, International Food Policy Research Institute (IFPRI).
    4. Will Martin & Kym Anderson, 2006. "Agricultural Trade Reform and the Doha Development Agenda," World Bank Publications, The World Bank, number 6889.
    5. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications, The World Bank, number 2611.
    6. Kym Anderson & William A. Masters, 2009. "Distortions to Agricultural Incentives in Africa," World Bank Publications, The World Bank, number 2607.
    7. John Baffes, 2005. "The "Cotton Problem"," World Bank Research Observer, World Bank Group, vol. 20(1), pages 109-144.
    8. Zilberman, David & Hochman, Gal & Kaplan, Scott & Kim, Eunice, 2014. "Political Economy of Biofuel," Choices, Agricultural and Applied Economics Association, vol. 29(1).
    9. 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.
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    Cited by:

    1. Delpeuch, Claire & Vandeplas, Anneleen, 2013. "Revisiting the “Cotton Problem”—A Comparative Analysis of Cotton Reforms in Sub-Saharan Africa," World Development, Elsevier, vol. 42(C), pages 209-221.
    2. Nazif Durmaz, 2014. "Inventories of Asian Textile Producers, US Cotton Exports, and the Exchange Rate," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 61(4), pages 397-413, September.
    3. Bassett, Thomas J., 2014. "Capturing the Margins: World Market Prices and Cotton Farmer Incomes in West Africa," World Development, Elsevier, vol. 59(C), pages 408-421.

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