Speech by Commissioner Lamy on the 'Cotton Initiative' at the 5th WTO Ministerial Conference (Cancun)
Summary: September 10, 2003: Speech by Pascal Lamy, EU Trade Commissioner on the "Cotton Initiative" at the 5th WTO Ministerial Conference in Cancun (Mexico)
The EC shares the concerns of the West and Central African countries regarding the extremely low world market prices for cotton, and the role that subsidies in the main producing and exporting countries have in this context. With negative results for the revenues of countries which are largely dependent on this product as well as for their populations. This is the message that President Prodi passed to President Kéréku of Benin when they met yesterday in Brussels.
The EC is the largest importer of cotton in the world. For the West and Central African ACP countries, the EC represents the main market for their cotton exports, which moreover enter the EC market at zero duty. In addition, exports of cotton from the EC are limited and no subsidies are granted on exports.
Surprisingly this initiative does not have a market access component. It is not sufficient to address only the production side of cotton trade, without also looking at access to markets for cotton products. This is particularly important for the least developed countries, which include the sponsors of this initiative. The EC has adopted a policy ensuring duty and quota-free imports from the LDCs for all goods, including cotton and all processed cotton products.
It is true that the EC does grant aids to domestic cotton production, as this activity plays an important socio-economic role in certain areas of the Community. But overall cotton production in the EC is only a small fraction of world cotton production (around 2%). The Community aid scheme does not therefore have any significant impact on the trend in world prices. I note in passing that the European Commission is on the point of presenting proposals to our Council of Ministers and to the
European Parliament to substantially reform its cotton support system, largely by breaking the link between production and support.
World cotton prices are determined by the largest world producing and exporting countries and, for some of them, by their support system. At the same time, it must be recognised that in addition to production-linked subsidies in the major exporting countries, factors such as the price of oil (which influences the competitiveness of synthetics) or the level of border protection of other exporters all play an important role in this context.
In any event, the EC is fully committed to substantially reducing trade distorting domestic support including deficiency payment type subsidies, within the context of the Doha negotiations. We also propose a series of market access measures in favour of developing countries. These include a proposal that no less than 50% of developing country agricultural exports should be at zero duty. The EU continues to call on other partners to adopt, as it has done, an import regime of duty and
quota-free imports from the LDCs for all goods, including cotton and cotton products (textiles and clothing).
This is a timely and important initiative. The Community is prepared to lend its support to achieving the trade-related objectives of this initiative in the context of the DDA negotiations. We call on all other members, including in particular other developed countries, to agree to negotiate appropriate disciplines in the framework of the future Agreement on Agriculture. A successful outcome in the agricultural negotiations would indeed address most of the issues raised in this
initiative.
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