Cotton

Overview

  • An estimated 100 million households are involved in cotton production in 70 countries around the world. 1
  • The four main producing countries are China, India, the US and Pakistan, which account for approximately 75% of world output.2
  • The revenue from cotton production is essential to the economies of developing countries, particularly Western and Central Africa, where an estimated 10 million people depend on cotton for their livelihoods.3
  • The most important agricultural cotton species is Gossypium hirsutum (also known as ‘New World’ species), and make up more than 90% of world fiber production.4

Government Subsidies

  • The price of cotton is kept artificially low by subsidies and trade protections maintained by large economies, such as the United States, the European Union, and China. 5
  • These depressed world cotton prices damage the economies of developing countries that rely heavily on cotton exports for foreign exchange earnings.6
  • The US government subsidies of American cotton farmers (which number only 25,000) have played a dominant role in recent World Trade Organization (WTO) negotiations as they affect the export position of many developing countries.7
  • The US advocates free trade and open markets in developing countries, however, the reality of U.S. cotton subsidies results in a negative impact on world markets for cotton farmers from these countries, especially in Central and West Africa.8
  • The Central and West African region is among the lowest-cost producers of cotton, according to the World Bank. This comparative advantage should make the region competitive in world markets. But due to U.S. cotton subsidies, more efficient producers lose out and suffer from rising poverty.9

WTO Trade Disputes

  • In 2002, Brazil and what is known as the C-4 (African producer nations of Benin, Burkina Faso, Chad and Mali) argued before the WTO that cotton subsidies caused world cotton prices to decline and reduced their export revenue, raising issues of trade fairness and negative impacts on development.10
  • The subsidies affected many cotton-producing countries, but only Brazil and the C-4 decided to proceed with cases before the WTO. Brazil chose the traditional dispute settlement route.11
  • The C-4 did not join Brazil of addressing the cotton subsidies within usual WTO channels. Instead, they made the unprecedented decision of demanding financial compensation. In 2003, they launched the ‘Sectoral Initiative in Favour of Cotton’ demanding that countries discontinue cotton subsidies and directly compensate nonsubsidizing nations.12
  • The rationale behind C-4’s demand for financial compensation reflected (most likely) the fact that even a favorable WTO ruling allowing them to impose countermeasures would not have been of much help because of their limited trade with the United States and hence incapacity to pose a credible threat of retaliation.13
  • On June 17, 2010, U.S. and Brazilian trade negotiators reached a “Framework agreement” for moving forward in the WTO cotton subsidies settlement case. The Framework agreement represents a path forward toward the ultimate goal of reaching a negotiated solution to the dispute, while avoiding WTO-sanctioned trade retaliation by Brazil against the U.S. It includes quarterly discussions on potential limits to trade-distorting U.S. cotton subsidies.14
  • The elimination of cotton subsidies towards the advancement of trade and development is important, however, there are also many other challenges African cotton growers face. Other issues that affect the global market are biotech cotton varieties, structural inefficiencies of the West and Central African cotton ginning industry, and the appreciation of the West and Central African currency against the US dollar.15

Chemicals

  • Conventionally grown cotton uses more insecticides than any other single crop. Each year cotton producers around the world use nearly $2.6 billion worth of pesticides -- more than 10% of the world's pesticides and nearly 25% of the world's insecticides [although exact percentages differ according to varying sources, the range is from 10-16% of pesticides, and 16-25% of insecticides - ed].16
  • Cotton growers typically use many of the most hazardous pesticides on the market including aldicarb, phorate, methamidophos and endosulfan. Cotton pesticides are often broad spectrum organophosphates--pesticides originally developed as toxic nerve agents during World War II--and carbamate pesticides.17
  • Aldicarb is a nerve agent that is the 2nd most used pesticide in cotton production worldwide. In the US, aldicarb is the most widely used insecticide. In 2003, almost 1 million kilograms of aldicarb was used on American cotton production. Aldicarb use has led to contamination of groundwater in 16 states.18
  • 99% of the world’s cotton farmers are from developing countries where lower levels of safety, lack of access to safety equipment, illiteracy, poor labelling of pesticides, and poverty all exacerbate the damage caused by cotton pesticides to vulnerable communities.19
  • Between 1 and 3% of agricultural workers worldwide (which equate to between 25 million and 77 million workers) suffer from acute pesticide poisoning, according to a report prepared jointly for the FAO, UNEP and WHO.20

Why Fair Trade?21

Economic empowerment

  • Since the introduction of the first Fairtrade Minimum Prices for cotton in 2004, Fairtrade has demonstrated it can substantially improve the lives of cotton producing communities.
  • By selling to the Fair Trade market, cotton farmers have the security that they will receive a Minimum Price which aims to cover their average costs of sustainable production.

Economic stability

  • The Fair Trade Minimum Prices for cotton are set at different levels depending on the producing region. The Minimum Prices always cover the costs of sustainable production.  Furthermore, if the market price is higher than the Fair Trade Minimum Price, the market price applies.
  • Fair Trade Minimum Prices for organic cotton are set 20 percent higher than the Fair Trade conventional Minimum Prices.
  • Pre-export lines of credit are given to the producer organizations if requested, of up to 60 % of the purchase price.

Community building

  • In addition to the Fair Trade price, the buyers must pay a Fair Trade Premium of US$ 5 cents per kilo of Fair Trade seed cotton. This is used by the producer organizations for social and economic investments such as education and health services, processing equipment and loans to members.
  • Environmental sustainability
  • Environmental standards restrict the use of agrochemicals and encourage sustainability

Case Studies – Examples of Fairtrade Premium Use 

Agrocel Pure & Fair Cotton Growers’ Association: Gujarat India22

  • short-term loan plan for farmers to finance agricultural improvements
  • relief fund to pay medical costs of poor farmers
  • installation of on-farm drip irrigation & construction of village ponds to conserve rainwater
  • construction of a kitchen and provision of clean running water for a village school
  • provision of schoolbooks and clothes for children of poor farmers and villagers
  • rehabilitation of degraded farm land
  • farmer education and training programmes

UC-CPC de Djidian ‘Danaya Ton'23

  • In Dougourakoroni, one of the first projects was the construction in 2005 of a block of two classrooms. The following year, the Committee decided to invest in a further two classrooms and was able to use this to persuade the government to pay for four more.
  • In Batimakana, another member co-operative of UC-CPC de Djidian, few of the women went to school, but 27 are now taking literacy classes. Women could only start to grow cotton because of the introduction of Fairtrade and previously were not invited to meetings, whereas now they speak up and their opinions are heard.
  • Each co-operative has a trained Environmental Monitoring Committee to support the implementation of FLO environmental standards. The farmers are now spreading manure and organic kitchen waste on the fields to reduce the need for chemicals, minimising the practice of burning large areas of land and planting hedges to reduce erosion.
  • According to the United Nations Conference on Trade and Development, “The first conclusions drawn in Mali after two years of fair trade cotton presence are positive. Indeed, in the Djidjan region, the extra income enabled farmers among others to buy new new agricultural material, enroll children to school and pay teachers’ wage.” 24

Further Information

Websites

Books/Literature

  • The International Cotton Trade, by Julian Roche, 1994, Woodhead Publishing Ltd.
  • Hanging by a Thread: Cotton, Globalization, and Poverty in Africa, Edited by William Mosley and Leslie Gray, 2008, Ohio University Press
  • The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade, by Pietra Rivoli, 2009, Wiley
  • Cotton: The Biography of a Revolutionary Fiber, Stephen Yafa, 2006, Penguin
  • Big Cotton: How A Humble Fiber Created Fortunes, Wrecked Civilizations, and Put America on the Map, Stephen Yafa, 2004, Viking Adult

Movies and Video

Meet the Farmer/Producer

Sources

1 “Cotton” Fair Trade International. n.d. Retrieved from: http://www.fairtrade.net/cotton.html
2 “Cotton: Market” United Nations Conference on Trade and Development (UNCTAD) (2009). Retrieved from: http://www.unctad.org/infocomm/anglais/cotton/market.htm
3 “Cotton: Characteristics” United Nations Conference on Trade and Development (UNCTAD) (2009). Retrieved from:
http://www.unctad.org/infocomm/anglais/cotton/characteristics.htm
4  “Cotton: Characteristics” United Nations Conference on Trade and Development (UNCTAD) (2009).
5 Center for Strategic and International Studies. “Fair Trade Cotton: Will It Make a Difference?” Global Envision (2007) Retrieved from: http://globalenvision.org/library/15/1426
6  “Cotton: Economic Policies” United Nations Conference on Trade and Development (UNCTAD) (2009). Retrieved from:
http://www.unctad.org/infocomm/anglais/cotton/ecopolicies.htm
7 Kooistra, K. and Termorshuizen, A. “The Sustainability of Cotton: Consequences for Man and Environment” Biological Farming Systems, Wageningen University (2006) p. 29. Retrieved from:
http://documents.plant.wur.nl/wewi/223.pdf
8 Watkins, K. “Cultivating Poverty: The Impact of US Cotton Subsidies on Africa” Oxfam International (2002) p. 1. Retrieved from:
http://documents.plant.wur.nl/wewi/223.pdf
9 Watkins, K. “Cultivating Poverty: The Impact of US Cotton Subsidies on Africa” Oxfam International (2002) p. 2.
10  Baffes, J. “Cotton Subsidies, the WTO, and the ‘Cotton Problem’” World Bank (2011) pp. 3-4. Retrieved from:
http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2011/05/18...
11  Baffes, J. (2011) p. 4.
12  Baffes, J. (2011) p. 4.
13  Baffes, J. (2011) p. 4.
14  Schnepf, R. “Brazil’s WTO Case Against the U.S. Cotton Program” Congressional Research Service (2010) p. 27. Retrieved from:
  http://www.nationalaglawcenter.org/assets/crs/RL32571.pdf
15 Baffes, J. (2011) p. 8.
16  “Problems with Conventional Cotton Production” Pesticide Action Network North America n.d. Retrieved from: http://www.panna.org/resources/cotton
17  “Problems with Conventional Cotton Production” Pesticide Action Network North America n.d.
18 Environmental Justice Foundation & Pesticide Action Network UK. “The Deadly Chemicals in Cotton” Environmental Justice Foundation (2007) p. 32. Retrieved from:  http://www.ejfoundation.org/pdf/the_deadly_chemicals_in_cotton.pdf
19 Environmental Justice Foundation & Pesticide Action Network UK. (2007) p. 3.
20 Environmental Justice Foundation & Pesticide Action Network UK. (2007) p. 12. 
21 “Cotton” Fair Trade International. n.d. Retrieved from:
http://www.fairtrade.net/cotton.0.html
22 “Agrocel Pure & Fair Cotton Growers’ Association, Gujarat, India” The Fair Trade Foundation (2010). Retrieved from:
http://www.fairtrade.org.uk/producers/cotton/agrocel_pure_and_fair_cotto...
23 “UC-CPC de Djidian ‘Danaya Ton’” The Fair Trade Foundation (2010). Retrieved from:
http://www.fairtrade.org.uk/producers/cotton/uccpc_de_djidian/default.aspx
24 “Cotton: Market” United Nations Conference on Trade and Development (UNCTAD) (2009).

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