At the World Trade Organization (WTO), a divide is emerging over how to address the persistent issue of cotton subsidies, with India advocating for a standalone agreement while the United States and the European Union are pushing for broader reforms within the organization. This difference in approach highlights the complexities and challenges in achieving consensus on agricultural trade issues at the global level.
India's Stance: A Targeted Cotton Deal
India is championing a dedicated agreement focused specifically on cotton. This strategy aligns with India's historical concerns regarding the significant trade-distorting subsidies provided by developed countries to their cotton farmers. These subsidies, particularly in the United States, have been a long-standing grievance, as they depress international cotton prices and put cotton producers in developing countries at a disadvantage. According to the International Cotton Advisory Committee (ICAC), India provided roughly USD 2 billion in support to its cotton sector in 2023-24, primarily through fertilizer subsidies. While this figure is substantial, India has often argued that the subsidies provided by the US are significantly higher on a per-farmer basis and have a more distorting effect on global trade.
The US and EU Push for Comprehensive Reform
In contrast to India's targeted approach, the United States and the European Union are advocating for a more comprehensive reform agenda within the WTO. This approach aims to address a range of issues, including subsidies, state-owned enterprises, and transparency, across various sectors, not just cotton. The US and EU argue that a piecemeal approach focusing solely on cotton would not address the systemic issues that plague the WTO and distort global trade. The EU is a key supporter of the multilateral trading system and seeks to address the challenges that the WTO faces by proposing a set of concrete reform proposals, in particular on rules for subsidies and state aid.
WTO reform is a hardy perennial, [and] will be on the agenda at the 14th Ministerial Conference (MC14) of the World Trade Organization (WTO), in Yaoundé, the capital of Cameroon in March.
Challenges and the Way Forward
The differing approaches between India, the US, and the EU underscore the difficulties in achieving consensus on agricultural trade reform at the WTO. Reaching a middle ground that addresses the specific concerns related to cotton while also advancing broader systemic reforms will be crucial. Failure to do so risks perpetuating the imbalances in the global cotton market and further eroding trust in the WTO's ability to address trade-distorting practices.
Several factors contribute to the complexity of the negotiations. Developed countries can generally offer support within a threshold of 5% of their overall value of cotton production, while the majority of developing countries can offer support generally within a threshold of 10%. The highly subsidised cotton profoundly impacts the global prices and has repercussions on some of the African economies.
The upcoming WTO Ministerial Conference in Yaoundé presents an opportunity for members to bridge their differences and find a path forward on cotton and broader agricultural trade reform. Whether the members can seize this opportunity remains to be seen, but the stakes are high for cotton producers in developing countries and the credibility of the WTO itself.
