21^ST DEDICATED DISCUSSION OF THE RELEVANT
TRADE-RELATED DEVELOPMENTS FOR COTTON

7 May 2024

Report[1] by the Chairperson

1.  Pursuant to the Bali Ministerial Decision on Cotton of 7 December 2013[2] and the Nairobi Ministerial Decision on Cotton of 19 December 2015[3], the 21^st Dedicated Discussion of the Relevant Trade-Related Developments for Cotton (the Dedicated Discussion) took place on 7 May 2024. The Dedicated Discussion was held back-to-back with the 41^st Round of the Director-General's Consultative Framework Mechanism on Cotton (DGCFMC) dealing with the development assistance aspects of cotton.

2.  I reflected in my introductory remarks the collective disappointment following the absence of an outcome on agriculture, including cotton, at MC13. While Members appeared to be in a position to agree on a section on cotton, thanks to their intensive engagement and spirit of compromise, they were unable to reach a consensus on an agricultural outcome due to persisting divergences on other topics.

3.  Members had stressed the need to rebuild trust and reengage quickly in text-based discussions at the CoA Special Session meeting held on 16 April 2024. I also noted that Brazil had submitted a draft General Council decision on agriculture, including provisions on cotton, to be first reviewed at the General Council meeting of 21-22 May. Therefore, I had decided to defer open-ended meetings until after the General Council has considered this proposal.

4.   I emphasized that I was continuing in the meantime my consultations in Geneva on how work could be resumed to make progress in the negotiations. We had a solid foundation for progress on cotton, and our goal should be to engage as quickly as possible into results-oriented intensive discussions aimed at achieving substantive outcomes at MC14, considering the unique situation of cotton.

5.  Under the agenda item "General Statements by Members", Members did not report any developments in consultations relative to cotton.

6.  The International Cotton Advisory Committee (ICAC)[4] updated Members on the trends in world cotton production, consumption, and trade as well as government assistance to cotton production. Cotton production is expected to increase by around 1% in 2023/24 to reach 24.6 million tonnes. While the cotton area had decreased in the United States in the last 20 years, down from around 5 Mha to 2.9 Mha in 2023, it had increased during the same period in Brazil, from 1 to 1.9 Mha. World cotton mill use was expected to rise by 4.1%, aligning closely to production at 24.7 million tonnes. Taken together, China and India represented 45% and 55% respectively of the world production and consumption. Cotton trade was also expected to rise during the upcoming 2024/25 season up to 9.9 million tonnes, with main exporters being the United States (30%) and Brazil (26%), followed by West Africa (12%) and Australia (10%). ICAC also confirmed in its presentation the inverse correlation between cotton prices and cotton subsidies. Finally, ICAC announced the next world cotton research conference on 7-11 October 2024 in Tashkent (Uzbekistan). ICAC also mentioned its ongoing cross-country survey in collaboration with FAO on the gender dynamics in the cotton sector.

7.  Members welcomed ICAC's presentation. Mali inquired about the relationship between subsidy trends and production. Burkina Faso sought further details on the gender dynamics survey as well as on the world cotton research conference, noting that the date coincided with the 2024 World Cotton Day celebration planned in Benin.

8.  In response, ICAC noted that subsidies were provided by many countries to support inputs and seeds, including in Africa, or through insurance schemes. Global production was mainly affected by competition with food crops and price fluctuations, with farmers shifting away from unprofitable cotton production. The dates of the world cotton research conference were coinciding with the World Cotton Day official celebration in Benin, as part of the call for all countries to organize cotton-related events for World Cotton Day.

9.  Regarding the gender dynamic studies, ICAC collaborates with the FAO to highlight women's roles at various stages of the cotton value chain and develop policies for greater female participation. Results are expected to be presented during World Cotton Day in Benin.

10.  The International Trade Centre (ITC) delivered a presentation[5] on the Cotton Portal, launched at the 2017 Buenos Aires Ministerial Conference. The Portal has been regularly updated to improve the transparency and accessibility of trade-related information for cotton products. ITC summarized the main features of the Portal including some new functionalities. ITC also noted that while the Cotton Portal is used in many parts of the world, the user outreach can be improved, particularly in Africa. ITC also reminded participants about the English-speaking webinar scheduled on 8 May 2024.

11.  Members thanked ITC for the presentation as well as for the French webinar organized back-to-back with the November 2023 dedicated discussion. Burkina Faso enquired about the users' profile. Mali questioned private sector access and data reliability.

12.  In response, the ITC noted that, while technically possible, collecting users' profiles might not be fully accurate, due to limited and potentially outdated data. ITC confirmed that data provided on the Portal as on other ITC tools were the result of a robust collection and verification process enhanced over the years, and therefore fully reliable. ITC data were regularly used by reputable organizations such as the WTO. The Cotton Portal offers free and open access to all users with the same access as other ITC tools (trade map, market access map …). The ITC also welcomes collaboration with stakeholders, including sectoral associations to better reach the private sector.

13.  The WTO Secretariat briefly introduced the updates contained in the Revised background paper^[6] and addenda.^[7] The background paper compiles up-to-date information and data from Members' notifications and other submissions on export subsidies, domestic support, and market access, including both tariff and non-tariff measures. The background paper also captures Members' latest responses to the questionnaire on cotton policy developments, as well as relevant information on cotton markets and policies included in Trade Policy Review reports.

14.  Members praised the background document's informative value. Mali underscored the importance of trade policy transparency, expressed concern over missing notifications and suggested a WTO dedicated session on the topic.

15.  I emphasized that transparency both on trade evolution and trade policies was key to ensure a well-functioning market and to usefully inform the negotiations on cotton. The background document including Members' responses to the cotton questionnaire, ICAC reports, and the Cotton Portal contributed to this objective.

16.  Under the following agenda item "Exchange of views and Submissions from Members", Côte d'Ivoire, on behalf of the C-4, Côte d'Ivoire and the other cotton-producing African countries appreciated efforts on transparency undertaken by the WTO and the other international organizations. The group strongly regretted the absence of an outcome on cotton at MC13. It emphasized the spirit of compromise demonstrated by the group following the January 2024 Koudougou Ministerial declaration[8] with a view to reaching an agreement on a post MC13 roadmap on cotton based on the draft Chair's text.

17.  The absence of progress seriously threatened African cotton industries which were already fragilized by multiform crises, said the C-4. The negotiations on cotton as part of the overall agriculture negotiations had not proven to be successful, and the C-4 believed that specific and expeditious tracks should now be considered.

18.  The C-4 urged Members to show stronger political will for an effective implementation of the cotton-related Ministerial Decisions and a meaningful outcome at MC14 in Cameroon.

19.  Australia shared the C-4's disappointment on the absence of a cotton outcome at MC13 and reiterated its support for reducing trade-distorting domestic support to cotton. A past Cairns Group communication on the product-specific concentration in Amber and Blue boxes[9] showed that cotton received the second highest proportion of trade-distorting domestic support (after rice) calculated as share of the total value of production. The total trade-distorting support, including AMS, de minimis and Blue Box was estimated at around USD 5 billion, with 95% of it granted by four Members only. Australia was a minor cotton exporter and provided support only to cotton research and development. Australia emphasized the Cairns Group's willingness to continue engaging with the C‑4 to build a common approach. The recent proposal by the group[10], while addressing domestic support globally, would effectively limit product-specific concentration, including for cotton, while providing new flexibilities to smaller producers and exporters.

20.  The EU also regretted the absence of an outcome on agriculture and cotton but saw the draft text on agriculture circulated during MC13 as a solid foundation to pave the way for future work on the reform process in agriculture in general and cotton in particular. The negotiations should focus on the reduction of amber trade-distorting domestic support for cotton, as well as duty-free quota-free access for cotton products originating from LDCs, as this latter topic remained an unfinished business. The EU also emphasized transparency, including through timely and accurate notifications and responses to the questionnaire.

21.  China acknowledged the complexity of the cotton issue and expressed its support to the C-4's approach for a step-by-step reduction of the AMS beyond de minimis. China added that the support provided under Blue and Green Boxes had little trade-distorting effects and covered useful tools to move towards greener agricultural production and narrow the income gaps between rural and urban areas. While also regretting the absence of an outcome on agriculture and cotton at MC13, China supported the ongoing efforts by Brazil for the adoption of a General Council decision on the way forward in the agriculture negotiations based on the draft proposal circulated in Abu Dhabi by the Minister Facilitator. China was ready to exchange with other Members to explore new approaches in the negotiations provided those would not have negative impacts on the food security and livelihood of farmers in developing countries, including cotton farmers in the C-4 and in other developing countries.

22.  The US underscored the importance of better market access for cotton and other agricultural products to improve food security and farmers livelihood. Low tariffs on large markets would create predictable sources of revenues for cotton exporters and incentivize investment and adoption of new technologies especially in least-developed countries. The US acknowledged the importance of cotton for the C-4 and other cotton-producing LDCs. The US was ready to engage towards a balanced outcome on cotton addressing both domestic support and market access.

23.  New Zealand also backed the C-4 and cited a study showing that removing trade-distorting support could increase Sub-Saharan African cotton exports by 25%. New Zealand also underscored that the Cairns Group proposal on domestic support aligned with C-4 goals.

24.  Brazil emphasized that its submission to the General Council on the way forward in the agriculture negotiations covered both the trade and development tracks of cotton, based on the draft text initially circulated by the Chair before MC13. The earlier presentations had showcased Brazil's success in cotton development through increased productivity and liberalization. Brazil was willing to work with other Members to both fulfil the mandate on cotton in the WTO and to continue sharing its experience through technical assistance.

25.  India emphasized its support to the C-4 to address cotton specifically, expeditiously, and ambitiously. Cotton was also grown in India by small and marginal farmers, and this matter was very important and sensitive. India was granting duty-free quota-free access to imports from LDCs to 98.2% of its tariff lines, with applicable duties set at zero for all cotton tariff lines. India was also providing technical assistance programmes to C-4 countries to improve productivity throughout the cotton value chain. For India, the priority in the negotiations was to remove the final bound total AMS allowance beyond de minimis, starting with cotton and subsequently extending to other products, as it represented a major asymmetry between developed and developing countries.

26.  Chad concluded the exchange by expressing some optimism, after hearing other Members' willingness to re-engage. The cotton file was not so complicated, and it was possible to make progress with a view to negotiating realistic modalities at MC14. Chad, as other C-4 members, remained constructive, and the group was open to negotiating cotton as part of a comprehensive outcome on agriculture but would seek a specific approach if the comprehensive one did not yield progress.

27.  Under the "COVID-19 and Cotton" agenda item, Côte d'Ivoire, on behalf of the C-4, noted the usefulness of this agenda item that had provided an opportunity to examine the COVID-19 pandemic impact on the cotton sector in the world, and in the C-4 and Côte d'Ivoire. The discussions highlighted the pandemic's negative effects on the cotton sector, whether direct or indirect, including reduced labour mobility, ports congestion, rising logistical and storage costs and delays in export, resulting in revenue losses for both producers and Governments. The Secretariat's 2021 study had shown an 18% cotton production decline and a 10% price drop.

28.  But the COVID-19 pandemic also exposed the cotton sector's vulnerability to other crises, like climate change and other environmental threats, conflicts, energy crises or food and fertilizers price volatility. The losses resulting from the Jassid pest in 2022-23 season were another example.

29.  Côte d'Ivoire therefore advocated for a broader discussion beyond COVID-19, proposing a new agenda item on the impact of crises on the cotton sector, permitting to follow a comprehensive global perspective.

30.  Chad fully endorsed the suggestion to create such a new standing item and emphasized the importance of considering future crises beyond the pandemic, as listed by Côte d'Ivoire. Chad believed that adopting a forward-looking perspective would provide a more comprehensive understanding of the sector's challenges.

31.  Mali echoed Chad's support for the proposed agenda item as a way to acknowledge the evolving nature of crises affecting the cotton sector.

32.  I recognized the merit of the suggestion by the C-4 to expand the agenda item to encompass all crises affecting the cotton industry. I noted that it would be a useful complement to the exchanges under the development track in the DGCFMC chaired by DDG Paugam. I therefore proposed, without any objection from the floor, to change the title of the agenda item to "Information by Members on Crises Affecting the Cotton Industry" for the next meeting.

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