Perspectives on Cotton Global Trade Reforms

World cotton prices fell to nearly unprecedented levels during the 2001/02 marketing year, causing distress to cotton producers and exporters worldwide. In a number of developing countries highly dependent on cotton for export earnings or where cotton is the primary cash crop, this distress was particularly acute. Global trade barriers to cotton are widespread, leading to some concern about the relationship between these trade barriers and global welfare. In particular, with the Doha Development Agenda’s negotiations underway, discussion about the impact of trade barriers on the cotton sectors of developing countries has become more intense. A static computable general equilibrium (CGE) model finds that removing cotton tariffs and other trade barriers to cotton by all countries increases global welfare but only slightly. Global welfare improves with liberalization, and the welfare of developing countries in aggregate also improves. However, while some developing countries demonstrably benefit, not all developing countries see welfare gains. In addition to welfare, removing all global cotton trade barriers increases world trade in cotton.