The aim of this term paper is to examine the magnitude of cotton subsidies in developed countries and their impact on developing and least-developed countries as well as to inquire the effectiveness of the WTO in promoting free trade among its member states, especially with regards to the cotton sector. The WTO does currently not have a specific definition or certain criteria that classify a country as ‘developed’ or ‘developing’; WTO members rather decide it for themselves. This classification can, however, be challenged by other members. Concerning a definition for least-developed countries, the WTO employs the classification of the United Nations. According to the UN, LDCs are countries that “are deemed highly disadvantaged in their development process, for structural, historical and also geographical reasons” (UNCTAD, 2017). There are currently 48 countries classified as an LDC, 36 of which are WTO members. Due to the scale of the paper, only subsidies in the USA and the European Union and their economic and social consequences for the Cotton-4 will be considered.
Table of Contents
1 Introduction
2 International Trade
2.1 Globalisation and Trade Liberalisation
2.2 The Role of the World Trade Organization
3 Development of International Agricultural Trade
3.1 Agricultural Protectionism in Developed Countries
3.2 Trade Liberalisation Efforts
4 Africa’s “White Gold” and the Cotton-4
4.1 Current Cotton Production and Trade
4.2 The Role of the Cotton-4
5 Problems Faced by African Cotton Farmers
5.1 Cotton Subsidies in the US and the EU
5.2 Implications on the Cotton-4
5.2.1 Economic Implications
5.2.2 Social Implications
5.3 WTO Agricultural Negotiations and their Outcomes
6 Conclusion
Objectives and Topics
This term paper examines the economic and social consequences of agricultural subsidies in the US and the EU on the Cotton-4 countries (Benin, Burkina Faso, Chad, and Mali). It specifically addresses how protectionist policies in developed nations contribute to global market distortions and affect the livelihoods of cotton farmers in developing countries.
- The impact of agricultural subsidies on global cotton prices.
- The role and effectiveness of the WTO in regulating trade distortions.
- The economic and social vulnerability of the Cotton-4 countries to fluctuations in cotton prices.
- The power dynamics between developed economies and least-developed countries in international trade negotiations.
Excerpt from the Book
5.2.2 Social Implications
Although the increase in cotton cultivation in the C-4 after the end of colonialism was accompanied by serious social and environmental problems, this expansion contributed to the decline in poverty and improved several health indicators (Watkins, 2002). Cotton production also accounts for a large share of rural employment and generates a large portion of government revenues (Heinisch, 2006).
For most households in the Cotton-4 countries, cotton is the main cash crop and a low cotton price does not only affect the income of farmers but also the wages of farm labourers which are mainly women (Watkins, 2002). Whereas cotton farmers were able to afford goods and services from cotton sales in the 1990s, they had to “buy on credit against next year’s harvest” (Masagazi, 2005, p.57) in the early 2000s. If a year’s harvest did not generate enough revenue to pay back their debts and cover their costs, farmers were trapped in a cycle of poverty.
Low cotton prices also have a devastating impact on the progress made to decrease poverty in countries like the C-4 where an estimated two-thirds of the population live below the poverty line. It has been widely recognised that an increase in income from exporting cash crops is one of the most effective measures to decrease poverty, especially in the rural areas of low income economies such as the Cotton-4 (Gillson, et al., 2004). Moreover, other poor households that are not directly involved in the cotton production would also benefit due to a multiplier effect when cotton farmers spend their surplus income on local products and services. Since cotton is a labour intensive crop, additional employment would further be generated through higher prices and expanded production. By forcing cotton prices to fall through large subsidy programmes, the US and the EU are directly responsible for the lack of progress made in decreasing poverty levels in Africa.
Chapter Summary
1 Introduction: Provides an overview of the role of agriculture in global trade and introduces the specific case of cotton and the Cotton-4 countries' dispute at the WTO.
2 International Trade: Discusses the theoretical foundations of trade, globalization, and the history and role of the WTO in promoting trade liberalization.
3 Development of International Agricultural Trade: Examines the slower growth of agricultural trade compared to other sectors and analyzes the motivations behind agricultural protectionism in developed economies.
4 Africa’s “White Gold” and the Cotton-4: Analyzes the historical and economic significance of cotton for African nations, specifically the Cotton-4, and their current position in global production.
5 Problems Faced by African Cotton Farmers: Explores the impact of US and EU subsidies on global prices and details the economic and social repercussions for Cotton-4 farmers, including the failed negotiations within the WTO.
6 Conclusion: Summarizes the key findings regarding the detrimental effects of subsidies on poverty reduction in sub-Saharan Africa and the need for more equitable trade rules.
Keywords
Cotton, Subsidies, Cotton-4, WTO, International Trade, Agriculture, Protectionism, Poverty, Market Distortion, Developing Countries, Least-developed countries, Export Revenues, Economic Implications, Social Implications, Trade Liberalization.
Frequently Asked Questions
What is the primary subject of this term paper?
The paper examines the negative impact of agricultural cotton subsidies implemented by the US and the EU on the economies and societies of the Cotton-4 countries in Africa.
What are the central thematic fields addressed in the work?
The work focuses on international agricultural trade, the history of trade liberalization, the mechanics of market-distorting subsidies, and the socio-economic impact on developing nations.
What is the primary research goal of the paper?
The aim is to evaluate the magnitude of cotton subsidies in developed countries and assess the effectiveness of the WTO in promoting fair trade practices within the cotton sector.
Which scientific method is used to support the author's findings?
The paper utilizes a literature review of empirical economic studies, descriptive analysis of global trade statistics, and qualitative evaluation of WTO negotiation documents.
What is covered in the main body of the work?
The main body covers the development of agricultural trade, the historical significance of cotton in Africa, a comparative analysis of subsidies in the US and EU, and a detailed look at the WTO's failure to resolve the cotton dispute.
Which keywords best characterize this study?
Key terms include cotton subsidies, Cotton-4, WTO, market distortion, agricultural policy, trade liberalization, and poverty in sub-Saharan Africa.
Why does the paper focus specifically on the early 2000s?
The early 2000s are highlighted because this period saw the emergence of the cotton dispute, record-low cotton prices, and the implementation of significant, highly distortionary US subsidy programs.
How do US cotton subsidies specifically affect African farmers?
By over-subsidizing domestic cotton, the US lowers global market prices, which leads to reduced export revenues for African countries that are heavily dependent on cotton, causing increased rural poverty.
Why are the Cotton-4 at a disadvantage in WTO dispute settlement?
LDCs like the Cotton-4 lack the financial resources for litigation and fear political or economic reprisals from powerful nations that provide them with foreign aid.
- Citar trabajo
- Laura Schmiedl (Autor), 2017, Agricultural Subsidies in Industrialised Countries, Múnich, GRIN Verlag, https://www.grin.com/document/956855
