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Commissioner Mandelson on 'Cotton and the WTO' in Mali

Summary: April 19, 2005: Speech by Peter Mandelson, European Commissioner for Trade, on "Cotton and the WTO". Meeting with West African Cotton Producers (Bamako, Mali)

EU calls for fast-tracked WTO action for West African Cotton Farmers

In this speech delivered to Cotton producers in Mali on April 19 2005 EU Trade Commissioner Peter Mandelson sets out a strong new EU commitment to concrete measures to assist cotton-producers in West Africa. In this speech, Peter Mandelson:

Many thanks for inviting me to participate in today's exchange, on what I know is a topic of crucial importance for your economy and for your people, as it is in Benin, Chad and Burkina Faso.

Mali, I am told, has a long history of commerce from the times when it was a key trading route across the Sahara for goods such as gold and salt. It is therefore appropriate that today we are discussing the modern equivalent, the trade of "white gold", right here in Bamako, on the edge of the Sahara.

Well before I became Trade Commissioner I had read stories about the plight of the West Africa cotton grower. I had learnt of the scale of the subsidies that the rich nations of the developed world, Europe and the United States included, have historically poured into cotton production. I had understood the cold logic that these actions have had in depressing the prices that your producers can command in world markets. And I suppose I had some inkling of the direct and personal impact these policies have had on the living standards of cotton growers in West Africa and their families.

We know most of the facts. The United States, and to a lesser extent the EU and China, provide direct government assistance to their cotton producers. The World Bank estimates that these cotton support policies reduce world prices by some 10 to 15%. And that at present, we are probably witnessing the sharpest drop in these prices in absolute terms since 1985.

My pledge to you is to offer you my support. I want us to work together to resolve this crisis. Also I want to work with the other developed nations that are contributing to your problems, principally the United States, in a spirit of common sense and harmony, to find solutions that are in the best interests of all.

However strong the sense of grievance, however righteous the feeling of injustice, we achieve nothing in this world by making enemies of our fellow global citizens. The problems you have are not the result of deliberate malice. They are the unintended consequence of governments in richer parts of the world acting to defend what they believe are the legitimate interests of their people. They may be wrong, but they are not wilful acts of injustice. It is only through the power of logical argument and the dignity of peaceful persuasion that you and I can make the progress your people so desperately need.

It is almost entirely thanks to your persistence and to the determination of African countries that the world's attention has been drawn to a crisis affecting many millions of people in rural areas whose livelihoods depend on cotton production.

Two to three million producers and roughly 15 million people in Africa depend, directly or indirectly, on cotton for their living. It accounts for between 30 and 40 per cent of export earnings in Benin, Burkina Faso, Chad and Mali. Behind the figures lie the lives of men and women whose existence and well-being are dependent, either directly or indirectly, on cotton. In present market conditions, such dependence is a recipe for precariousness and poverty for families as well as for whole communities.

Improving conditions for cotton growers may not be, indeed is not, a solution to the complex problems of the vast continent of Africa and no one should give the impression otherwise. But it is crucial to this corner of the Continent. And it is an issue where action by the West to correct trade distortions would have a measurable positive impact on ordinary people's lives.

But time is not on our side. Collapsing prices today threaten the future of your industry tomorrow. So you cannot afford to wait while talks in Geneva move slowly towards a conclusion. You should not be held hostage to the resolution of other issues and problems in the world trade round. It is vital to address this matter today.

My remarks fall into three parts. First a few words on our policy towards cotton production within the EU itself. Europe cannot call for action on cotton by the rest of the world if Europe itself has failed to put its own house in order. Second, from today, in every global forum that meets to take forward negotiations on Doha Round, Europe will press for multilateral action to build a rules-based and fair system that injects more equity and predictability into the cotton market. In particular I will argue for a plan that ensures the cotton sector can benefit immediately from the signature of the Single Undertaking that will conclude the Doha Round, rather than wait for years of slow implementation. Third, I will explain, on behalf of my colleague, Louis Michel, a new EU policy to expand development assistance for the cotton sector.

1. European cotton policy

The EU does produce cotton but as you know, we are a relatively minor actor in the international cotton markets. Our production represents a marginal two per cent of world production. This relatively small production ensures we are not a price setter in global markets. The EU does not dump cotton on world markets as a result of export price support because we do not provide any export support.

The EU cotton market is already very open: we are net importers and buy a large part of West African cotton production as well as importing from Central Asia (Uzbekistan) and South America (Brazil).

Our policies do not distort international markets and the duty-free market access you enjoy as a result of EU preferences and the Everything But Arms initiative, provides an important outlet for your trade.

Among the richer nations, the EU has led the way in reducing trade distortion. Last year, European Ministers agreed to a fundamental reform of our internal cotton regime which significantly reduces trade-distorting subsidies. Starting next year in 2006, sixty-five per cent (65%) of EU subsidies to cotton growers will no longer be related to how much they produce. EU farmers will grow less cotton as a result. The opportunity for West Africa to sell more cotton in Europe will increase.

2. The Multilateral Agenda

The future of cotton is now firmly on the agenda of the world's Trade Ministers.

I shall give credit where credit is due. It was the result of the cotton initiative presented by Benin, Chad, Burkina Faso and Mali to the WTO. This shows that developing countries, whatever their economic weight, can have a significant voice in WTO negotiations. By sticking to your guns, you have become central actors in the debate. Due to your perseverance and determination, the issue of cotton could not be left out of last year's 1st August Framework Agreement.

Let me remind you of what the world committed itself to last year. "Work shall encompass all trade distorting policies affecting the sector in all three pillars...." and that the problem of cotton "will be addressed ambitiously, expeditiously and specifically".

We now owe it to you and your governments to define what that means. We should do this within the broader context of the agricultural negotiation, as agreed. The special sub-committee on cotton that has been set up in Geneva must now deliver results.

Up to now, because Europe has been seeking a comprehensive, all embracing deal in agriculture as well as other sectors, our stance has been to refuse to enter into specific sectoral commitments in the agriculture negotiations.

However, I am today announcing a significant policy change. In the face of the hardship experienced by African cotton producing countries, the EU now stands ready to make an exception for these vulnerable countries in this particular sector.

Our starting point must be that the cotton sector in Africa is going through a deep crisis. This crisis impacts countries among the poorest in the world.

To this end, the EU today calls for the WTO membership to fast track cotton in each of the so-called three pillars of the agriculture negotiation: the elimination of all forms of export subsidy; progress towards making agricultural imports duty and quota-free except for developing countries where special and differential treatment is justified; and the reduction of trade-distorting domestic support.

In each of these three pillars, the EU today calls for the world to live up to the level of ambition it pledged last August and agree that these commitments should take immediate effect from day one of the entry into force of the signing of the Single Undertaking.

I am a great believer in the concept of the Single Undertaking which has historically been the mechanism for progress in multilateral trade talks. The bigger the package we can construct, the greater the chance that all will benefit. Where countries lose advantage in one area or sector, they can have a greater hope of gaining it in others. But the Single Undertaking will contain commitments to tackle different issues at different speeds. Cotton should be first in the queue.

Is it too much to hope that the leaders of the world's richest countries could commit to this, when they meet in the G8 at Gleneagles in July? All I can promise is that you will have Europe's full political support and commitment to fighting for that in the WTO.

3. Development assistance

Of course, the better opportunity to trade will not in itself solve your problems. Free trade is not a panacea or a magic wand. You need help on the supply side as well.

I hope you agree that the EU has started to build a Partnership for long term development of your cotton sector. The EU-Africa Cotton Forum in Paris, last July, led to a joint action plan, which covers specific development-related issues and the need for national commitment on your countries' part, to address competitiveness and vulnerability in the cotton sectors.

The implementation of this Cotton Action Plan is well underway, and on behalf of my colleague Louis Michel, I want to report progress.

Since the Cotton Forum meeting last year, the EU has made an additional € 310 million available for development programming to your four member countries of the "cotton initiative".

The EC has also agreed to provide significant direct government budget support, in addition to pre-existing development assistance. But this is only at the level of each of your four countries.

We want to support regional integration to benefit the sector. The EC regional programme for West Africa includes a major trade facilitation component (customs), as well as specific cotton-related activities, such as support for cotton instrument classing, which will directly contribute to the recognition of the quality of African cotton.

And, beyond the region, we will set up an international capacity building programme for agricultural commodities, with a budget of € 45 million, of which € 15 million is set aside specifically for the benefit of the cotton sector.

The development issues facing the sector here are both immediate and structural.

The "FLEX" instrument, established under the Cotonou Agreement, is essential for dealing with short-term crises. The criteria for eligibility were broadened in 2004. Countries should now be able to benefit from swifter access. If the criteria are met, we will make sure, at the political level, that the tools are activated without delay.

Beyond FLEX, the EU is considering a broader strategy to address the severe economic shocks that face your countries today. The Commission is proposing, as part of our contribution to meeting the Millennium Development Goals, to support developing countries that face different types of outside shock, including trade shocks, both at producer and government level. Again we look to others to make parallel commitments at this year's G8 and in New York in September when the UN meets to consider progress - and I hope act.

We are paying special attention to the risk management schemes which have been developed at the international level, as they offer innovative and efficient means for countries and producers faced with yield or price fluctuations to stabilise their incomes. The EC will therefore contribute € 25 million to a new Global Index Insurance Facility under preparation by the World Bank, with more contributions to be expected by others.

Finally, in order for the cotton sector to thrive there must be broad based development across the region. Targeting the cotton sector alone will not be enough and investment is needed in infrastructure and other drivers of competitiveness.

In recognition of this, the Commission is proposing a very significant overall increase in development assistance to meet the Millennium Development Goals in Africa. This includes proposals for a new facility for Africa on infrastructure and trade, which will be available to increase the competitiveness of the cotton sector.

But infrastructure and other physical investment needs functioning markets to deliver growth - markets with coherent customs measures and no barriers to the movement of supplies and products. Regional integration will help build these markets where economies of scale, returns on investment, and enhanced domestic competition become real.

We are ready to propose increased resources to support the Economic Partnership Agreements we are negotiating with you to help deepen this integration. If we can work together in this way, I have no doubt that EPAs will not only serve the cotton sector well but will be a major contribution to our overriding goal of reducing poverty.

Conclusion

Honourable Ministers, Ladies and Gentlemen, I am well aware - and even more so after this morning - that times are hard for many cotton producers and their families. I hope the actions I have announced today offer some hope of a better future for the many livelihoods tied to this sector, who now face unacceptable deprivation.

This year, more than most, offers the chance to get something done. We have an Africa focused G8 in July. We have the UN Conference on the Millennium Development Goals in September. And we have the Hong Kong Ministerial on the Doha Round in December. Out of this I hope for real progress.

Increased development assistance can be leveraged to even greater effect if we collaborate in the multilateral trade arena to drive through a reform strategy which controls and reduces global trade distortions in cotton. Let us use the DDA together to answer your pressing and legitimate concerns, and build a trading system that meets the minimum requirements of fairness.


  • Ref: SP05-251EN
  • EU source: European Commission
  • UN forum: 
  • Date: 19/4/2005


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