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U.S. Proposal for WTO Hong Kong Ministerial Conference: What's at Stake for Cotton Producers?

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Listed:
  • Fadiga, Mohamadou L.
  • Mohanty, Samarendu
  • Pan, Suwen
  • Welch, Mark

Abstract

This study analyzed the cost to U.S. cotton producers of two policy alternatives under which the U.S. seeks to cut its total AMS payments for cotton by 60%. We considered two scenarios; the U.S. decides to act unilaterally versus conducting the policy initiative along with multilateral tariff and subsidy eliminations from the Rest of the World. The study found a 12% cut in target price and 8% cut in loan rate are necessary to reach the 60% AMS targeted reduction under the unilateral scenario. In that regards, U.S. net farm income decreases considerably despite an appreciation of U.S. farm price. Under a multilateral trade liberalization from the Rest of the World, a 9% cut in the loan rate and 4% in loan rate are enough to reach the AMS reduction threshold. The study found there is 20% chance that net farm income would appreciate and 80% chance that it would decline. However, the decline is less severe compared to the situation where the U.S. acts alone. Overall, the sole beneficiaries in both policies are mainly the major exporters such as Brazil, Australia, West Africa, and Uzbekistan.

Suggested Citation

  • Fadiga, Mohamadou L. & Mohanty, Samarendu & Pan, Suwen & Welch, Mark, 2006. "U.S. Proposal for WTO Hong Kong Ministerial Conference: What's at Stake for Cotton Producers?," 2006 Annual meeting, July 23-26, Long Beach, CA 21273, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea06:21273
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    File URL: http://purl.umn.edu/21273
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    References listed on IDEAS

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    1. Richardson, James W. & Klose, Steven L. & Gray, Allan W., 2000. "An Applied Procedure For Estimating And Simulating Multivariate Empirical (Mve) Probability Distributions In Farm-Level Risk Assessment And Policy Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(02), August.
    2. John C. Beghin & Barbara El Osta & Jay R. Cherlow & Samarendu Mohanty, 2001. "Cost of the U.S. Sugar Program Revisited, The," Food and Agricultural Policy Research Institute (FAPRI) Publications 01-wp273, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    3. Gardner, Bruce L., 2003. "U.S. Agricultural Policies, Since 1995, with a Focus on Market Effects in Grains and Oilseeds," Working Papers 28553, University of Maryland, Department of Agricultural and Resource Economics.
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    More about this item

    Keywords

    United States; Hong Kong; Cotton subsidies; tariff; net farm income; International Relations/Trade; Q11; Q17;

    JEL classification:

    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade

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