India seeks inclusion in cotton subsidy talks between the US and the Cotton-4

Indian Commerce Secretary says India cannot be kept out of Doha talks on reducing cotton subsidies. The Economic Times reports:

India has said it should be included in the exclusive meetings which the US has been holding with West African cotton producing countries on subsidy cuts as part of the on-going Doha round of multilateral trade talks at the World Trade Organization (WTO). As India is the second largest cotton producing country in the world, it said that it should be made part of all discussions on reduction of the high US subsidies on cotton.

Addressing a seminar on threat to multilateralism in the evolving global scenario organised by Ficci on Friday, commerce additional secretary R Gopalan said that India wants to be part of the discussions taking place between the cotton four countries (which includes Benin, Chad, Burkina Faso and Mali) and the US on subsidy reductions in cotton. “We, too, want to be part of the discussions as we too are a major cotton producing country. We cannot be kept out of the talks,” he said.

Well this is interesting. India ought to worry about a special deal on subsidy cuts being offered by the United States to the Cotton four (all least developed countries) as part of WTO special or differential treatment or as what it is more fashionably called these days, –“variable geometry”.

It also shows how despite India becoming a part of the so-called “core group” in Doha round talks, it can still be excluded from talks on issues that directly affect it and where its stance is likely to be viewed as hindering a deal. Of course these are bilateral talks between the United States and the Cotton 4, yet once a deal is reached there and with Brazil the other main stakeholder in this issue, India might get sidelined and be confronted with a deal that it will find difficult to renegotiate.

Joseph Stiglitz in his film ‘The World According to Stiglitz’, draws a direct connection between such subsidies and the drop in cotton prices in India which led to thousands of poor farmers committing suicide last year. See here

Meanwhile Brazil has reportedly asked the United States for $2.5 billion in sanctions for losses caused to Brazilian cotton producers on account of illegal US cotton subsidies between 1998 and 2000. The report:

GENEVA: Brazil is asking the World Trade Organisation to approve $2.5 billion (1.97 billion euros) in sanctions against the United States in a dispute over US cotton subsidies, the Brazilian ambassador said Monday. Roberto Azevedo said the request was lodged at a meeting of the WTO’s Dispute Settlement Body in Geneva. “We have asked the WTO to ensure that Brazil is compensated $2.5 billion for the prejudice … suffered by our cotton producers between 1998 and 2000,” Azevedo, Brazil’s ambassador to the WTO, said after the meeting. “If the big countries are not sanctioned for violations of WTO rules, that would affect the credibility of the organisation,” he added. Last June, a WTO panel upheld a Brazilian complaint that the United States had breached trade rules over its subsidies for cotton farmers. Brazil first brought the case to the trade bloc in 2002. It estimates that total US cotton subsidies were worth 12 billion dollars between 1999 and 2002. Compared with the value of cotton produced, which reached $13.9 billion during the period, it means that subsidies came to about 89.5 percent. After the WTO ruled in its favour, Brazil had said it could seek more than $1 billion in retaliatory sanctions. The subsidies paid by Washington to US cotton farmers have been criticised by non-governmental groups, who say they depress world cotton prices, thereby penalizing producers from poorer countries, particularly in Africa. The C4 group of West African cotton-producers — Benin, Burkina Faso, Chad and Mali — has since 2003 been fighting for the cotton issue to be included in the Doha Round of negotiations for a global free trade pact.

So is this as compensation or retaliation? Also, if granted, will such sanctions apply on an MFN basis to benefit cotton farmers in third countries like India?