I S S U E P A P E R N u m b er 1 1 , N o v e m b er 2 0 1 0

Cotton: What could a Doha

deal mean for trade?

1. Introduction

Cuts to developed country cotton subsidies could increase world

prices, boosting production and exports in a number of developing
countries including some of the poorest producers in Africa. This
information note examines how different countries could be
affected by greater or smaller reductions in subsidies as part
of the WTO’s Doha Round, in addition to looking at what would
happen if countries cut subsidies that were deemed unlawful by
the WTO’s dispute settlement panel.

2. Cotton: a pivotal trade conflict

Developed country subsidies for cotton, which depress world

prices, have kept trade negotiators and lawyers busy from
Bamako to Brasilia since the start of the Doha Round in 2001.
Lower costs of production in some countries have frustrated the
efforts of cash poor governments seeking a fairer trading system.
Given the Doha Round’s mandate, many WTO members believe
that any deal must address the development concerns embodied
in domestic support for cotton.

Brazil recently received a final ruling in its eight year old row with
the United States from the WTO Dispute Settlement Body (DSB).
The US, a major subsidizer of cotton, had failed to comply with
rulings of the DSB in the Upland Cotton case. An arbitration ruling,
valued at approximately US$830 million, allows Brazil to retaliate
at its borders against US imports with higher duties and a waiver
of intellectual property restrictions on certain goods.1 A later
Memorandum of Understanding between the US and Brazil proposed
that a US$147 million fund be created to compensate Brazilian
cotton farmers affected by artificially low prices. In order to avoid
an interruption in the flow of goods and services with its sixth largest
trading partner, the US has tentatively agreed to compensate losses
suffered by Brazilian farmers by allowing some previously prohibited
Brazilian meat into its borders and to reform the offending farm
legislation on subsidies after its expiration in 2012.
ICTSD A finalized settlement between the US and Brazil would still leave
the needs of cotton dependent economies unaddressed. Cotton is

1
Brazil, US Strike Framework Deal in Cotton Dispute. Bridges Weekly Trade News Digest.
Vol. 14. No. 23. http://ictsd.org/i/news/bridgesweekly/78816/
 the most important source of agricultural export
earnings for LDCs as a group, as shown in Figure 1
and Figure 2. Benin, Burkina Faso, Chad and
Mali, West African cotton exporters known as
the Cotton Four, proposed in 2006 that domestic
support for cotton be cut more deeply and at a
faster rate than spending on other goods. 2 Wholly
supported at its outset by the African Group and
well received by other WTO members, such as
the EU and Brazil, the proposal has failed to
garner a response from the largest subsidizers in
intervening years. 3

Box 1: US-Brazil Upland Cotton Dispute

Concern over cotton subsidies and an explosion in US exports led Brazil to take the issue to
the WTO’s Dispute Settlement Body (DSB) in 2002. Focusing on six specific claims relating to
US payment programmes, Brazil argued that the US had failed to abide by its commitments
in the Uruguay Round Agreement on Agriculture (AoA) and the Agreement on Subsidies and
Countervailing Measures (SCM).

The dispute dragged on for nearly eight years, with the WTO DSB ultimately ruling in Brazil’s favor
on nearly all claims. The case weighed in on export subsidies, classification of domestic spending
in WTO terms and even the peace clause. The DSB and subsequent appeals to the Appellate Body
(AB) found that US spending on cotton, nearly US$3 billion in 2005, exceeded the limit set under
the SCM’s peace clause which allowed signatories to continue paying their farmers until domestic
policies could be reformed. The DSB and AB also clarified that US government loans that offered
favorable terms to cotton exporters were an export subsidy violating previous agreements.
Moreover, the dispute process revealed that some US cotton support that was notified under
WTO ‘Green Box’ spending was incompatible with those rules. If the US abides by the DSB’s
ruling, such spending may be reclassified under other areas with limits on support under WTO
rules, changed or other WTO members may choose to seek clarification.

The US attempted to reform domestic legislation to bring its cotton support in line with WTO
rules and Brazil’s complaint during the dispute settlement process. Since the WTO arbitration
authorized retaliatory measures in 2009, Brazil and the US have attempted to reach a settlement
that would satisfy the domestic constituencies most affected.

The Cotton Four (C-4) proposal called for Amber
Box spending on cotton, considered to directly
distort trade and production, to be cut by a
third of the percentage difference between the
agreed overall cut and the complete elimination
of support entirely. This would ensure that cotton
gets the deepest cuts in support while favoring
a large cut in overall subsidies. Seeking swift
results, the group anticipated that the cuts would
be phased over one third of the time allotted
to other goods. The C-4 also called for Blue Box
spending on cotton, often viewed as less trade and
production distorting than Amber Box support,
to be capped at a third of the final ceiling for
such subsidies. In the absence of any alternative
proposals, the most recent blueprint for a final
agreement on agriculture, the Revised Draft
Modalities for Agriculture, simply includes the
C-4 proposal verbatim. 4 Officials from countries
expected to offer counter proposals have insisted
on the need to finalize negotiations in other areas
before making a commitment on cotton.
Trade negotiators at the WTO have thus far failed
to respect trade ministers’ 2005 injunction that
cotton be addressed “ambitiously, expeditiously and
specifically” within the agriculture negotiations.
Moreover, major subsidisers have demonstrated
a poor record of reforming their policies without
an external stimulus. The 2003-04 reform of the
EU Common Agricultural Policy (CAP) and the
2008 US Farm Bill did little to cut the level of

2
Proposed Modalties for Cotton Under the mandate of the Hong Kong Ministerial Decision, TN/AG/SCC/GEN/4 , 1 March 2006
3
Members React To Cotton Four Domestic Support Proposal. Bridges Weekly Trade News Digest. Vol. 10. No. 12. http://ictsd.org/i/
news/bridgesweekly/7387/
4
WTO Revised Draft Modalities for Agriculture, TN/AG/W/4/Rev.4, 6 December 2008

2 Cotton: What could a Doha deal mean for trade? November 2010
support provided. A Doha Round conclusion and a between developed and developing countries on
change in domestic support policies hinge in many cotton. The analysis found below explores the
ways on resolving the differences that remain available options.

Table 1: Cotton Specific Language in WTO texts

Market Access Domestic Support Export Competition

Doha Ministerial
- - -
2001
Hong Kong Provide Duty Free and Reduced at a greater and faster Export subsidies eliminated
Ministerial 2005 Quota Free access to rate than overall cut in 2006
LDCs from start of
Doha implementation
period
Cotton Four 2006 - Amber Box: Cut by 1/3 of -
percentage difference between
the agreed overall cut and a
complete elimination of support
entirely.
Blue Box: Capped at a third of the
of the final overall ceiling.
All cuts phased over one third of
the time allotted to other goods.
Upland Cotton - Eliminate prohibited subsidies U.S. export credit guarantees
DSU Case 2002- under AoA and SCM rules. found to be a prohibited
2009 export subsidy.
Programmes affected:
• User Marketing Payments (Step 2) Programme affected:
• Supplier Credit Guarantee • Intermediate Export Credit
Programme (SCGP) Guarantee Programme
• Marketing loan programme (GSM 103)
payments (MLP)
• Market Loss Assistance Payments
(MLA) and
• Counter-Cyclical Payments (CCP)

Figure 1: Shares of LDC combined Agricultural Export Receipts, 2004-07 (by Product)

20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
Cotton Coffe Tobacco Sesame Beans Sugar Tea Cashew Cocoa
seed nut

Source: Jales M (2010). How would a WTO Agreement on Cotton Affect Importing and Exporting Countries? ICTSD Programme on Agricultural
Trade and Sustainable Development Issue Paper No.26. International Center for Trade and Sustainable Development. Geneva. Switzerland.
Based on FAO data.

3
 Figure 2: Share of Cotton in Total Agricultural Export Receipts 2004-07 Average
(by country)

Turkmenistan
Burkina Faso
Uzbekistan
Mali
Tajikistan
Benin
Chad
Central African R.
Togo
Kyrgyzstan
Zambia
Zimbabwe
Egypt
Cameroon
Sudan
Tanzania
Kazakhstan
Mozambique
Senegal
Azebaijan
Greece
Syria
India
Uganda
Pakistan

0% 20% 40% 60% 80% 100%

Source: Ibid

Figure 3: Shares of World Export Quantities, By Product and Country Category, 2003-07
(1995-1007 averages by source of elasticities)

COTTON PEANUTS SUGAR CORN

SORGHUM RICE PADDY WHEAT SOYBEANS

Other Developing Countries Other Developed Countries LDCs

Source: Ibid

4 Cotton: What could a Doha deal mean for trade? November 2010
Figure 4: US Trade Distorting Support* as a Share of Production Value, 1998-2007

COTTON RICE
104% 125% 106%
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

PEANUTS CORN
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

WHEAT SOYBEANS
100% 100%
90% 90%
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

* Trade Distorting Support: Notified AMS or de minimis plus Market Loss Assistance (MLA) payments and Counter-cyclical Payments (CCP).
Source: Ibid. Based on WTO Notifications and USDA.

Figure 5: Composition of World Cotton Exports, 1998-2007

10
Other Developed
Countries
8
Million metric tonnes

US
6 Other Developing
Countries
4
India

2 Central Asia

0 West Africa
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Ibid.

5
 Figure 6: Composition of World Cotton Production, 1998-2007

30
Other Developed
Countries
25
Million metric tonnes

US
20
Other Developing
15 Countries

10 Brazil

5 India

0 China
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Ibid.

Figure 7: Share of World Cotton Production, 1995-98 and 2004-07 averages

35%

30%

25%

20%

15%

10%

5%

0%
China India US Pakistan Brazil Uzbekistan West Africa Turkey EU Australia

1995-98 average 2004-07 average

Source: Ibid.

3. Understanding possible trade B. Draft Doha deal, but without special treatment
outcomes for cotton

Five policy reform scenarios can provide a yardstick
for measuring negotiating outcomes.6 Two of these
scenarios are variations of reform packages in the
Doha Round and the following three are based on
domestic policy reforms with which the potential
outcomes of Doha can be contrasted:
C. Effect of the US implementing the WTO DSB
findings
D. Effect of the more modest measures the US
actually implemented in response to the DSB
findings

A. Draft Doha deal – incorporating the C4 countries’ E. Internal policy reforms in the US and EU
cotton proposal

6
The analysis in this information note is based on an ICTSD study by Mario Jales, “How Would A Trade Deal On Cotton Affect Exporting And
Importing Countries?” The study is online at http://ictsd.org/i/publications/77906/

6 Cotton: What could a Doha deal mean for trade? November 2010
Box 2: Methodology

The model used by Mario Jales estimates prices and quantities for each scenario that would have
been obtained in a given base year, had the policy reforms been implemented at that time. The
results of this model help demonstrate how each scenario could affect the world price of cotton,
the volume and value of cotton production, and cotton trade between countries.

The years between 1998 and 2007 are used as a base period. Using this range helps illustrate
the cyclical nature of the cotton industry and gives a clearer understanding of each scenario’s
possible implications over time.

The five scenarios examined were analysed with two different sets of supply elasticities – i.e. the
responsiveness of supply to price changes – which yield results of different magnitudes for these
scenarios and showed the same relative trends.

Scenario A: December 2008 Revised Draft Modalities examines the effect of a trade deal
based on the C4 West African countries’ cotton proposal – currently the basis of the draft Doha
deal prepared by the chair of the agriculture negotiations, the December 2008 revised draft
agricultural modalities text. The draft modalities aim to reflect possible areas of agreement
among WTO members: in the absence of any counter-proposal from the US, the C4 countries’
proposal has for the moment been replicated directly in the chair’s draft. This contains a number
of provisions specific to the cotton sector which are more stringent than those reforms applied
to the agricultural sector as a whole.

Scenario B: Cotton treated as a standard product, while based on the same modalities draft, does
not have cotton-specific provisions, instead subjecting cotton to the same rules as the rest of the
agricultural sector. Doha Round reforms are likely to be more ambitious than this scenario.

Scenario C: Hypothetical full implementation of DSB recommendations models what might

have occurred had the US actually implemented the DSB recommendations that came from the
US Upland Cotton dispute. These recommendations included the US withdrawing prohibited
subsidies and removing the adverse effects of marketing loan programme payments (MLP) and
countercyclical payments (CCP).

Scenario D: Actual insufficient implementation of DSB recommendations models the effects of

the measures that the US actually did take in response to the DSB recommendations, which were
far less stringent than what the DSB had asked of them. The US partially withdrew the prohibited
subsidies, and did nothing about the latter recommendation.

Scenario E: Recent internal reforms in the US and EU focuses primarily on internal policy reforms
in the US and EU – specifically, the effects of the 2008 US Farm Bill, when applied retroactively,
and the effects of the 2003-04 EU CAP reform.

4. Analysis as many cotton subsidies are counter-cyclical: they

Price Impact
Scenario A showed the largest increases in world
prices, followed by Scenarios B and C, with
negligible price effects for D and E. The results
show substantial variation on a year-by-year basis,
increase when prices are low, and fall again when
prices are high. Figure 8 illustrates these results
over the range of the years studied (1998-2007).
Implementing the draft Doha agriculture deal with
the special cotton provisions had the greatest
effect on increasing world price, in individual years
and when measuring the average across all years.

7
 Figure 8: Estimated Impact of Alternative Scenarios on the Cotton World Price, 1998-
2007 (percentage increase)

10%

8%

6%

4%

2%

0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Scenario A Scenario B Scenario C1 Scenario C2 Scenario D Scenario E

Source: Ibid.

Production Impact compensated by production increases elsewhere,

The results showed production impacts to be
greatest in Scenario A, with smaller effects in
Scenarios B and C, and negligible effects in the
last two scenarios. However, changes in production
volumes and production values varied depending on
the country involved and the world price of cotton
in any given year.
For instance, in Scenario A, US and EU cotton
production would have fallen by 9 and 24 percent,
respectively – yet this drop would be almost fully
such as in Australia, Brazil, and the C-4 countries.
US production decreased the most under Scenario A,
and also fell under Scenarios B and C – although
by smaller amounts. Production in other countries
increased under Scenarios B and C, but only by a
limited amount. The impacts on production volumes
in Scenarios D and E were again negligible, with the
exception of the EU in Scenario E – where output
would have dropped by 20 percent. The 2008 Farm
Bill had no noticeable impact. Figure 9 illustrates the
production impacts described above by scenario.

Figure 9: Estimated Impact of Alternative Scenarios on Cotton Production Quantities

(1998-2007 averages and ranges)

Scenario A
4% 30%

3% 24%
18%
2%
12%
1% 6%
EU

US

0% 0%
-6%
-1%
an
sia

W
a

ke

-12%
a

ist
lia

lA

di

RO
in
4

r
k

-2%
C-

In
ra

ra

Ch

Tu
Pa
il

-18%
st

nt
az
Au

Ce
Br

-3% -24%
-4% -30%

Scenario B
3%
18%

2%
12%

1%
EU

6%
US

0% 0%

-6%
an

8
sia
ia

Cotton:
-1%
What could a Doha deal mean for trade? November 2010
4

W
a
al

C-

ke
a

ist
lA

di

RO
in
tr

r
k
In
ra

Ch

Tu
s

Pa

-12%
Au

nt

-2%
Ce
il
az
Br

-18%
 -3%
-2%
-1%
0%
1%
2%
3%
-3%
-2%
-1%
0%
1%
2%
3%
-3%
-2%
-1%
0%

-1%
0%
1%
-2%
-1%
0%
1%
2%
-3%
-2%
-1%
0%
1%
2%
3%
Figure

Au Au Au Au Au Au
st st st st st st
ra ra ra ral r al r al
lia lia lia ia ia ia

Br Br Br Br Br Br
az az az az az az
il il il i l il il
-4% 9: Continued

C- C- C- C- C- C-
4 4 4 4 4 4

Ce Ce Ce Ce Ce Ce
nt nt nt nt n tr n tr
ra ra ra ra al al
lA lA lA lA A A
sia sia sia sia sia sia

Ch Ch Ch Ch Ch Ch
in in in i na i na i na
a a a
Scenario B

Scenario E
Scenario D
Scenario C1

Scenario C2
In In In In In In
di di di d ia d ia d ia
a a a

Pa Pa Pa Pa Pa Pa
k ist k ist k ist
ki
st
ki
st
ki
st
an an an an an an

Tu Tu Tu Tu Tu Tu
r ke r ke r ke r ke r ke r ke
y y y y y y

RO RO RO RO RO RO
W W W W W W

EU EU EU EU EU

US US US US US
0%
6%
0%
6%
0%

0%
6%
0%
6%
0%
6%
-6%
-6%
-6%

12%
12%
18%

-6%
-6%
-6%

12%
18%
24%
30%
12%
-12%
-18%
-12%
-30%
-24%
-18%
-12%

-30%
-24%
-18%
-12%
-12%

9
 Trade Impact
In each scenario, export volumes would have fallen
in the US, while increasing elsewhere (Australia,
Brazil, the C-4 countries, Central Asia and India) –
again, shifting the overall balance from developed
countries to developing countries. This result,
coupled with the increase in world prices, would
have led to a rise in the value of exports for all
net exporters, with the exception of the US. The
magnitude of this change would have been largest
in Scenario A, moderate in Scenarios B and C,
and small or negligible in Scenarios D and E. In
addition, countries with large textile manufacturing
sectors, such as India and Brazil, would have
experienced a relatively greater expansion in their
cotton exports.
These five scenarios would also have an impact on
world cotton imports. Figures 10 and 11 illustrate
the historical composition of world imports, showing
how China has grown to be the world’s largest cotton
importer, while the EU has experienced a significant
decrease in its share of world imports.

Figure 10: Composition of World Cotton Imports, 1998-2007

10
Other Developed
Countries
8
Million metric tonnes

EU
6
Non-Asian
Developing
4 countries

Other Asian
2 Developing
countries
0
China
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Source: Ibid.

Figure 11: Share of World Cotton Imports, 1995-98 and 2004-07 averages

35%

30%

25%

20%

15%

10%

5%

0%
China Turkey Bangla- Pakistan EU Indonesia Thailand Mexico Taiwan South
desh Korea

1995-98 average 2004-07 average

Source: Ibid.

10 Cotton: What could a Doha deal mean for trade? November 2010
The analysis shows that cotton imports would
decline in major net cotton importers, such
as Bangladesh, China, Indonesia, Pakistan and
Turkey, as these countries become able to increase
their domestic output and also experience a
drop in domestic demand. Given that decreases
in import quantities help determine world price
increases, the estimated costs of these imports
would also have fallen – another benefit of
these reforms.
The magnitude of these import changes mirrors
those seen with exports. EU import quantities and
costs would have increased in the scenarios where
EU production fell (A and E), and remained mostly
unchanged otherwise.
Figures 12 and 13 show these predicted changes, for
exports and imports, with both the actual volume
of cotton being traded (Figure 12), and the actual
value of that cotton (Figure 13).

Figure 12: Estimated Impact of Alternative Scenarios on Cotton Net Trade Volumes
(percentage change) (1998-2007 averages)
Scenario A
20% Change in Net Exports Change in Net Imports

15%

10%

tan

ey
5%

in a
kis

k
Tur
Ch
US

Pa
0%
tan
zil

ia

a
C-4

a
esh

EU
-5%
ali

esi
Ind
Bra

kis

lad
str

on
be

Au

Ind
-10%

ng
Uz

Ba
-15%

-20%

Scenario B
20%

15%

10%

5%
US

0%
tan
zil

ia

a
C-4

a
esh

EU

-5%
ali

esi
Ind
Bra

ey
kis

ina

lad
str

on
a

k
be

ist
Au

Tur
Ch

Ind

-10%
ng
Uz

Ba
Pa

-15%

-20%

Scenario C1
20%

15%

10%

5%
US

0%
tan
zil

ia

a
C-4

a
esh

EU

-5%
ali

esi
Ind
Bra

kis

lad
str

on
ke
ina
be

Au

Ind

-10%
n

ng
Tur
a
Uz

Ch
ist

Ba
k

-15%
Pa

-20%

Source: Ibid.

11
 12
Source: Ibid.
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
-5%
0%
5%
-10%
-5%
0%
5%
10%

Bra Bra Bra

zil zil zil

Ind Ind Ind

ia ia ia
Figure 12: Continued

Uz Uz Uz
be be be
kis kis kis
tan tan tan

C-4 C-4 C-4

Change in Net Exports

Au Au Au
str str str
a lia ali ali
a a

US US US

Scenario E
Scenario D
Scenario C2

Pa Pa
k ist k ist Pa
kis
a n an tan

Ch Ch Ch
ina ina in a

Tur Tur
ke k ey
Tur
k
y ey

Cotton: What could a Doha deal mean for trade?

Ba Ba
ng Ba ng
lad ng lad
esh lad e sh
esh
Change in Net Imports

Ind Ind
on Ind on
esi esi
a on
esi a
a

EU EU EU

November 2010
Figure 13: Estimated Impact of Alternative Scenarios on Cotton Net Trade Values
(percentage change) (1998-2007 averages)

Scenario A
20% Change in Net Exports Change in Net Imports

15%

10%

tan

ey
5%

in a
kis

k
Tur
Ch
US

Pa
0%
tan
zil

ia

a
C-4

a
sh

EU
-5%

ali

esi
Ind
Bra

e
kis

lad
str

on
be

Au

Ind
-10%

ng
Uz

Ba
-15%

-20%

Scenario B
10%

5%
US

0%
tan
zil

ia

a
C-4

a
esh

EU
ali

esi
Ind
Bra

ey
kis

lad
str

on
k
be

ina

-5%
Au

Tur

Ind
ng
an
Uz

Ch

Ba
ist
k
Pa

-10%

Scenario C1
15%

10%

5%
US

0%
tan
zil

ia

lia
C-4

a
esh

EU

-5%
esi
Ind
Bra

a
kis

ey

lad
str

on
ina
be

k
Au

Ind
tan

ng
Tur
Uz

Ch

Ba
kis

-10%
Pa

-15%

Source: Ibid.

13
 Figure 13: Continued

Scenario C2
10% Change in Net Exports Change in Net Imports

5%

tan

ey
in a
kis

k
Tur
Ch
US

Pa
0%

tan
zil

ia

a
C-4

a
sh

EU
ali

esi
Ind
Bra

e
kis

lad
str

on
be
-5%

Au

Ind
ng
Uz

Ba
-10%

Scenario D
5%

0%

EU
tan
zil

ia

a
C-4

a
esh
ali

esi
Ind
Bra

ey
kis

ina

lad
str

on
an

k
be

Tur
Ch
Au

Ind
ng
ist
Uz

US

Ba
k
Pa

-5%

Scenario E 26%
20%

15%

10%

5%

0%
ey
tan
zil

ia

lia
C-4

a
esh
ina

EU
US

-5%
tan

esi
Ind

k
Bra

a
kis

Tur
Ch

lad
str

on
kis
be

Au

Ind

-10%
ng
Pa
Uz

Ba

-15%

-20%
Source: Ibid.

Subsidies versus tariffs
Virtually all of the benefits for cotton in the Doha
Round will result from the reduction of subsidies.
The other areas of the Doha agriculture negotiations
– market access and export competition – will play
marginal roles.
In the case of market access, the cotton sector
already has exceptionally low tariff levels, leaving
little room for change. Only Two WTO members –
the US and Oman – would lower their applied tariffs
if the draft Doha accord was agreed upon. All
other countries either (i) already provide duty-free
access, (ii) have significant “overhang” between
their maximum permitted ‘bound’ tariffs and actual
applied tariff levels, or (iii) qualify for exemptions
for tariff cuts for one reason or another.
If developed countries were to extend duty-free
access for cotton exports from LDCs, this would have
little to no impact on market access opportunities
for these countries. Most developed countries
already provide duty-free access for cotton exports

14 Cotton: What could a Doha deal mean for trade? November 2010
from other WTO members, with the exception of
the US However, in recent years, the US share of
world cotton imports has dropped to 0.05 percent
due to a decrease in cotton consumption: expanded
access to the US market is therefore unlikely to
have a significant impact on LDC exporters. In
addition, US cotton quotas are consistently under-
filled, despite low in-quota tariffs of between zero
and 3 percent.
Developing countries make up nearly 95 percent of
world cotton imports, as shown in Figures 10 and
11. Of the top fifteen developing country importers,
only China does not provide duty-free MFN access to
cotton. Beijing is expected to slate cotton for lesser
Figure 14: Share of World Cotton Exports, 1995-98 and 2004-07 averages
40%
35%
30%
25%
20%
15%
10%
5%
0%
US Uzbekistan West India Australia
Africa
1995-98 average
Source: Ibid.
5. Conclusion
The results of this study illustrate that the potential
gains from a positive result on cotton in the Doha
Round are substantial. The negotiations may help
increase world prices, decrease production in
countries that are major subsidisers, and increase
cotton production’s overall value.
Significantly, data from the 1998-2007 period
suggests that farmers around the world would
have benefited from an average increase of 3.5
percent in cotton prices if the US had implemented
the recommendations of the WTO’s Dispute
Settlement Panel and cut those subsidies that were
deemed to be unlawful. Farmers in some of the
poorest countries in the world would have been
amongst these.
tariff cuts by designating it as a ‘special product’ in
the WTO Doha Round, an option open to developing
countries wishing to exclude some products from
liberalisation commitments on the basis of food
security, livelihood security and rural development
grounds. If China does not do so, however, its large
tariff overhang for cotton would still prevent any
meaningful cut in the applied tariff.
Several important cotton exporters are not WTO
members, and are therefore not subject to its
rules. In 2004-08, these non-members accounted
for 20 percent of world cotton exports, and four
of them were in the top ten of the world’s largest
cotton exporters – as shown in Figure 14.
Brazil EU East Kazakh- Turkmeni-
Africa stan stan
2004-07 average
Farmers in poor countries could also have gained
from an average 6 percent increase in world
cotton prices over the same base period, if the
US had accepted the proposals on subsidy cuts
that have been made by African countries in the
WTO Doha Round. Although price transmission is
smoother in East and Southern Africa than it is
in West and Central Africa, many of the world’s
poorest farmers would have benefitted from cuts
of this sort.
Cotton production in the US would have declined
by as much as 15 percent if African proposals in
the draft Doha accord were applied to historical
output levels over the ten-year period examined,
and production in the EU could drop by as much as
30 percent. However, production volumes could
15
 increase by as much as 3-3.5 percent in Brazil,
Central Asia and West Africa – with production
values growing by up to 13 percent.
Similarly, if African proposals that are included in
the Doha draft were applied to trade flows over
the ten-year period that the study examines, US
export volumes would have fallen by 16 percent
on average. Average export volumes would have
increased dramatically for Brazil and India (12-14
percent), and by a lower but still substantial
amount in Uzbekistan, the ‘C-4’ West African
cotton producing countries (Benin, Burkina Faso,
Chad and Mali), and Australia (2-2.5 percent).

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organisation based in Geneva. Established in 1996, ICTSD’s mission is to advance the goal of sustainable development by empowering
stakeholders to influence trade policy-making through information, networking, dialogue, well-targeted research and capacity-
building. This Information Note is produced as part of ICTSD’s Programme on Agricultural Trade and Sustainable Development. More
information about ICTSD activities in this area can be found on: www.ictsd.org

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