Transcript The Technical Centre for Agricultural and Rural

On formulating resolutions to the problem
facing the African producers on the world
cotton market
Presentation by the Director CTA to the
EU-African Cotton Forum
July 5-6, 2004
Introduction
The statement of the issue so eloquently outlined by previous speakers is an
important one in that:
It brings us back to an old issue in ACP EU relations – the importance and
impact of trade in agricultural commodities to ACP economic & social wellbeing
It is doubly important because, what we may call today ‘the cotton subsidies
case’ provides a concrete example of inequity in circumstances where the
masters of the system, the OECD states, have already benefited
disproportionately from the first phase of the accelerated liberalisation
reforms they sold to the world under the UR. This fact alongside apparent
double standards on subsidies, has in the eyes of many informed observers
helped to bring into question the legitimacy of the governance of the global
trading arrangements.
So, although the EU is not the only player in town, walking away form the
problem would not be costless, politically.
At the same time the issue raises many questions for the ACP states who in
seeking redress will at some point find themselves pitted against the rich as
well as the poor. It is also a challenge to their inertia, weak economic and
development policies and inadequate collaboration and alliance building.
ACP EU Cooperation, Agriculture & Lomé
IACP-EU relations have always been informed by the explicit
recognition of the link between international agricultural
trade and ACP development and more importantly, had
sought to attenuate the adverse consequences of low &
unstable commodity prices on investment and ACP welfare.
Hence, the special characteristic of the Lomé Convention
and the tools employed to address these particular
problems; :

non-reciprocity &

stabex in particular
Today with different concerns driving global trade rules and
the need to negotiate a Cotonou trade regime to supercede
Lomé we are faced with the question of how to deal with
the extreme vulnerability which still characterizes the
structure of ACP trade.
African Agriculture & Development
 In SSA economies, industrial growth is increasingly
dependent on agricultural growth either thru:
 backward linkages or
 on demand originating from rural population
(because of de-industrialisation which seems in
many African states seems largely associated with
trade liberalisation and privatisation)
 But agriculture is in a parlous condition in many
states and as a consequence growth in many states
has been negative (UNCTAD, 2001 p27, 34)
VULNERABILITY DUE TO:
Extreme:
Trade dependence
Market dependence and
Commodity dependence
Not to mention asymmetrical application of international trade
rules
An indication of the commodity dependence: may be had from
the a look at the 1999 figures:
True, the worst case was GB 94% of who’s foreign exchange
earnings were attributable to coffee but cotton gave rise to
only slightly less distressing cases:
Mali – 46%
Chad - 42%
BF
39%
Benin - 38%
The passage of time has not attenuated this fact, in 2001 the
figures were 42, 34, 45, 65%, respectively.

African Agriculture & Development
 When an economy is so dependent on a single
commodity it has nowhere to turn when the terms of
trade deteriorate, as occurred in the period since
1995. (if cotton sneezes…)
 Among the main economies whose commodity dollar
was buying less tractors and equipment from the EU
were:

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Years – 1998 1999 2000
Mali
– 11 -23 -28
Chad
-6 -15 -20
B.Faso
-4 -16 -25
Benin
-7 -14 -16
The state of African agriculture



Deteriorating terms of trade has been the result of relatively sharp declines in world
agricultural prices – in 2000 non-oil commodity prices were between 1/3 and 2/3 lower than
prices three decades earlier (UNCTAD, 2001, p 37/8)
Prices have also been volatile – prices of African coffee, cocoa, cotton and copper exports
exhibited wider fluctuations than those for manufactures and other commodities & overall
terms of trade – between the trough & peak of the price cycle in the 1990s real prices for
these products rose by 128, 116, 28 30 & 49%, respectively (P37 &40). Between their peaks
and 1999 they declined by 35, 15, 28, 70 and 13 % and continue to date. This has
predictable consequences for macro-economic management and discouragement of
investment.
IBRD “ it can be estimated that for each dollar of net capital inflow to SSA from the ROW,
some 25 cents went back as net interest payments and profit remittances abroad, more than
30 cents leaked into capital outflows and reserve build-up, while 51 cents made up for terms
of trade losses. These figs indeed imply a net transfer of real resources from SSA to the
ROW” (UNCTAD, 2001, p 36).
COTTON & POVERTY ALLEVIATION
The economic & social significance of the crop cannot be
exaggerated for SSA:
2-3mn farmers are employed in the sector
Some 15 mn persons, most of whom are very poor & many of
whom reside in marginal/disadvantaged geographical areas, are
directly dependent on the operations of the sector
Production is labour intensive which means that incremental
increases in output have direct and positive impacts on
employment and, not merely on income levels, but on income
distribution – a matter of no little significance to the
international community if poverty alleviation and food security
are their goals
It is also a major source of fiscal incomes – govt revenues/taxes
the instability of which contribute in no small measure to the
growth of ‘failed states’ among LDCs which has characterised
the post-1980s era.
THREATS TO AFRICAN COTTOM
These are many:
In spite of the high quality of African cotton there is competition
from synthetic products and from GM cotton. In the latter
regard cotton is one of the 4 commodities, the production of
which, most closely associated with the GMO debate. In terms
of acreage these are:
 1. Soya
 2. Maize
 3. Canola (HY rape)
 4. Cotton
 Because the industry is under-capitalised it is especially
susceptible to external shocks
 NO I HAVE NOT FORGOTTEN THE CASE OF SUBSIDIES – I
believe that that aspect has been already well aired. So suffice it
for me to mention it at this point.
RESOLUTIONS & REMEDIES


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In view of this variety of causes, the solutions would of necessity be multifaceted, if they are to be effective.
Those remedies would depend on our goals which should be the achievement of
reasonable and stable incomes as well as relatively remunerative prices for
producers, This means that one has to look beyond subsidies
Achievement of higher incomes would in turn require the exploration of:




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Diversifying output into products with more bouyant demand & more flexible
supply response capabilities Exploiting the value chain by local processing of
output in recognition of the historical fact that in almost every developed state
cotton and textiles provided a large part of the the base for economic
transformation & industrial take-off.
Market diversification via product differentiation e.g - careful market analysis to
identify & take advantage of niches & demand for biological cotton e.g., and fair
trade preference etc
Capitalisation & the application of improved techniques of production – to
improve productivity & to maintain and increase competitiveness
Addressing the international trade environment including the application of rules
It would also require attention be paid to institutional issues such as
strengthening and clearly defining the roles of the various actors in the sector –
state vs. farmers vs policy -makers in decision-making, industrial vs agricultural,
foreign vs local, investors vs speculators etc
INSTITUTIONAL STRENGTHENING &
TECHNICAL ASSISTANCE: ROLE
PLAYING
 In the light of this multitude of tasks the question of
technical assistance would arise and in particular the
role of the international community – the EU has
prominent place
 The actors will themselves need to determine their
role especially as regards goal definition, regional
cooperation and the tasks associated with fighting
their case in the international trade arena.
 The CTA can play a role in so far as the importance
of ICM is recognised. I should add that the cotton
states have made much more of the range of our
skills than have other sectors in the ACP. This is not
the time to expand on that theme but can have an
idea from the literature available to the meeting
CTA: SUPPORTING ACP TRADE
NEGOTIATIONS
 Improving the content, coverage & delivery of targeted information –

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thru AGRITRADE PORTAL in particular
Strengthening ACP negotiating capacity thru support for info exchange
– via strategic conferences & specific technical workshops - &
employing conventional & modern tools such as ‘e-discussion which
preceded this conference.
Improving the dialogue at national & regional levels – consultative
workshops
Promoting standing dialogue via appropriate IC tools – using electronic
fora, CD-ROMS, briefing notes etc
Responding to requests to help devise & implement lobbying strategies
– cotton, SPS, fisheries (draft model agreements)
Commissioning technical studies – subsidies in fisheries, SPS, sugar,
cotton, bananas
ICM support – Cancun assistance (cotton); disseminating rum
experience
CONCLUSION
 Special feature of this exercise on which the
producers and EU have embarked is the search for
remedies – a search beyond the shouting
 There is clear recognition of inequity of the current
situation & a growing realisation on the ACP part that
in what are clearly dynamic circumstances no single
step will constitutes permanent remedy/silver bullet
 Also imperative that, in taking this small step, we try
to show the world what lies behind the unique
platform of cooperation & what can be achieved with
goodwill, good intentions and good sense! We need it
to succeed.
CTA OBJECTIVES
Objective 1
Objective 2
Improved availability of and access to appropriate (relevant,
adequate, accurate, timely and well adapted) information for
ACP agricultural and rural development
Improved information and
communication management
capacity of ACP agricultural
and rural development
organisations
Programme 1
Programme 2
Programme 3
Information products and
services
Communication channels and
services
ICM skills and systems
Increased availability of
information
Supporting an integrated use of
communication channels
Increased human capacity to
generate and manage
agricultural information
Increased awareness of
information sources
Intensifying contacts and
information exchange
Increased capacity to formulate
and develop ICM strategies and
models
CTA OBJECTIVES
Objective 1
Objective 2
Improved availability of and access to appropriate (relevant,
adequate, accurate, timely and well adapted) information for
ACP agricultural and rural development
Improved information and
communication management
capacity of ACP agricultural
and rural development
organisations
Programme 1
Programme 2
Programme 3
Information products and
services
Communication channels and
services
ICM skills and systems
Increased availability of
information
Supporting an integrated use of
communication channels
Increased human capacity to
generate and manage
agricultural information
Increased awareness of
information sources
Intensifying contacts and
information exchange
Increased capacity to formulate
and develop ICM strategies and
models