22^nd DEDICATED DISCUSSION OF THE RELEVANT
TRADE-RELATED DEVELOPMENTS FOR COTTON

29 November 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 22^nd Dedicated Discussion of the Relevant Trade-Related Developments for Cotton (the Dedicated Discussion) took place on 29 November 2024. The Dedicated Discussion was held after the 42^nd Round of the Director‑General's Consultative Framework Mechanism on Cotton (DGCFMC) dealing with the development assistance aspects of cotton.

2.   In the absence of the Chairperson of the Committee on Agriculture in Special Session (CoA-SS), the meeting was exceptionally chaired on his behalf and at his request by Mr. Edwini Kessie, Director of the Agriculture and Commodities Division of the WTO.

3.  Under the first item of the agenda, the Chairperson reported on the state of play in the negotiations, starting with the Cotton Quad Plus meeting convened on 24 October. The C-4+ members had emphasized on this occasion the critical importance of cotton for their economies. The group also expressed disappointment following the lack of progress in the negotiations on cotton trade issues, which, they said, should be distinct from the overall negotiations on agriculture. Other Members expressed sympathy for the C-4+ concerns but noted the difficulties Members had encountered so far when trying to explore new options to move the negotiations forward. One Member raised the idea of individual commitments by Member, while others stressed the importance of developing domestic value-added processing in Africa. Some Members also highlighted the need to consider the conditions granted to cotton imports from least-developed countries. While there was readiness to address cotton through a specific track, Members emphasized the need to align this with the broader agricultural negotiations, particularly on domestic support and market access.

4.  The report on the broader agricultural negotiations outlined the recent steps following the 18 September CoA-SS meeting, including the formal and informal Trade Negotiations Committee meetings held on 10 and 21 October to discuss the possible inception of a topic-by-topic facilitators' led process and the subsequent written communication circulated on 22 October providing responses to questions raised by Members and inviting Members to nominate facilitators, including two facilitators to address Public Stockholding for Food Security Purposes (PSH), the Special Safeguard Mechanism (SSM) and Cotton. The CoA-SS Chairperson had received expressions of interest from some Members, but concerns were again raised by some Members, including India, Sri Lanka, and Pakistan in their communication _JOB/AG/263. The next meeting of the CoA-SS was planned on 4 and 6 December.

5.  Under the agenda item "General Statements by Members", Australia expressed concern on behalf of the Cairns Group over the lack of process in agriculture, highlighting the disappointment of the Group resulting from the lack of agreement on both the Chair's and the Director-General's proposed ways forward. Australia had initiated discussions with Members to explore the possibility of reviving talks and finding a way forward that would reflect the progress made under the Director-General's leadership and the interests of all Members, including India, Sri Lanka, and Pakistan.

6.  In response, India noted that it was awaiting Australia's submission and stressed its position which had been submitted along with Sri Lanka and Pakistan in document _JOB/AG/263. Priority should be given to the mandated PSH, SSM and cotton issues, while other modalities could be discussed in the facilitator-led process.

7.  The International Cotton Advisory Committee (ICAC)[4] provided an in-depth overview of the global cotton market for the 2024-25 season, highlighting a projected 4.7% increase in world cotton production, to reach an overall production estimated at around 25.3 million tons. Among the largest cotton-producing nations, China, the United States and Brazil would increase their production, while India's production is, on the contrary, expected to decline. ICAC highlighted the stagnation of world average cotton yields over the past two decades, a trend that is concerning for the sustainability of the cotton industry, as yields have not kept pace with growing demand. Brazil and China constitute notable exceptions with significant increases of cotton yields. Addressing the global consumption outlook, ICAC forecasted a modest 1.7% increase in mill use to reach 25.4 million tonnes, which remains significantly below the peak level reached in 2007-2008 at 26.7 million tonnes. Cotton exports were expected to decline slightly, with the United States and Brazil remaining the two major exporters. Francophone Africa's cotton exports were expected to confirm their recovery from the low point reached in 2022/23.

8.  ICAC also noted that cotton prices had decreased less than other agricultural commodities such as maize, wheat, and soybeans, when comparing year on year the January to October period. In the long term, cotton price had remained significantly stable since 2007, with just two significant peaks characterized by high volatility in 2010/11 and 2021/22.

9.  Members expressed their appreciation for the presentation and raised several questions. Brazil inquired about possible tariff escalation in the cotton value chain and wondered whether the lower reduction of cotton price compared to other commodities in the last year could not be explained by the peaks reached by the prices of these other commodities in the previous period. Burkina Faso asked about the impact of cotton market access conditions on the competitiveness of cotton producing countries, particularly African countries. Mali sought clarification on the role of climate change in stagnating cotton yields and ICAC's views on future cotton price compared to crops like soybeans and maize. Chad also highlighted the devastating effects of climate change, particularly floods in countries like Chad and Cameroon, which had significantly impacted cotton yields and planted areas, and asked ICAC about any plans to develop mechanisms to address these challenges.

10.  ICAC clarified that it had no report of significant increase in tariffs affecting the cotton industry but could not prejudge how protection would evolve over time. ICAC also noted that cotton price stability was also explained by the good adequation between supply and demand in the last years. In response to Burkina Faso, ICAC acknowledged the need to develop tools, such as the partnership with FIFA and UNIDO, to help African countries increase their competitiveness by transforming cotton into more processed higher value products. The development of the cotton milling industry took 50 years in Asia but could be faster in Africa.

11.  ICAC acknowledged the impact of climate change on cotton production, particularly in terms of reduced yields and planting areas. ICAC has developed several programmes to address this challenge, notably through training on how to improve soil health and regenerative agriculture.

12.  The International Trade Centre (ITC) presented[5] an update on the Cotton Portal jointly launched in 2017 with the WTO to improve the accessibility and transparency of cotton trade information. The platform consolidates data from various institutions, including the WTO, ITC, and ICAC, to provide comprehensive cotton trade intelligence. Key features include statistics on production, consumption, and market access conditions, with a focus on promoting accessibility for policymakers, exporters, and sector associations.

13.  ITC outlined three main sections of the Cotton Portal: cotton statistics, market access information (including tariffs and non-tax measures) and learning corner including WTO-related resources and various news. Over the last year, 3,500 users connected to the portal, mainly from India, China, and the United States. ITC regretted the low usage in Africa and reaffirmed its commitment to pursue efforts aimed at promoting the portal in the continent, including through webinars and local outreach in collaboration with the C-4 countries.

14.  Members thanked the ITC for the presentation, as well as French and English joint ITC-WTO webinars held in November 2023 and May 2024. Burkina Faso and Chad inquired about the consistency of data provided by various organizations such as the ITC, ICAC, the World Bank or UNCTAD, and the nature of the cooperation with national authorities to collect data. Mali and Burkina Faso also called for new initiatives to increase the visibility of the portal and improve its use rate in Africa.

15.  ITC explained that data on production, including yields and areas and consumption available on the portal, were provided by ICAC and therefore fully consistent. Trade data were provided and verified by the national customs authorities. ITC was cooperating with the national customs authorities to improve the accuracy and timeliness of these data. ITC also outlined the work undertaken by the African Trade Observatory to ensure real time transmission of the data collected by the customs authorities. Regarding the promotion of the portal, ITC stressed the importance of the partnership with the domestic authorities to identify interested local stakeholders. The WTO Secretariat supported the point.

16.  The WTO Secretariat 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.

17.  Members praised the Background Paper's informative value. Mali expressed concern about the decreasing number of notifications. The Chairperson urged Members, particularly those involved in the cotton sector, to provide relevant information as it becomes available.

18.  Under the agenda item "Exchange of views and Submissions from Members", Côte d'Ivoire, on behalf of the C-4 plus Côte d'Ivoire and the other cotton-producing African countries, noted that the efforts made in reducing domestic support measures in the last five years, and reflected in the WTO Secretariat Background Paper, had not translated into concrete results on the cotton market or on the cotton farmers situations, notably due to the persisting high level of support provided by some major subsidizing Members. The decrease in the LDC market share of world cotton exports from around 10% in 2013 to 7% in 2020-23, as well as the low share of imports from LDCs in big subsidizing countries, could be considered as providing in this context some indications on the possible impact of such subsidies. The C-4 called for a faster reduction of trade-distorting support and ensure transparency through regular and timely notifications.

19.  The C-4 also praised the efforts and leadership demonstrated by the CoA-SS Chair and noted that his suggested process was in line with the suggestions made by the C-4 including the creation of a specific working group on cotton. The C-4 Ministers had emphasized in their January Koudougou Ministerial Declaration the need to explore all the options to address the vital concerns of millions of cotton producers, related to cotton domestic support. The C-4 remained committed to engage in any negotiation process provided it would: preserve the specificity of cotton; prioritize mandated issues including cotton; not alter past mandates and decisions on cotton; ensure inclusiveness and transparency and be Member-led. It was time to quickly switch from discussions on the negotiation process to negotiations on substance and the C-4 again urged Members to demonstrate the political will and to redouble efforts with a view to concluding the negotiations on cotton in an ambitious, expeditious and specific manner.

20.  The European Union (EU) expressed disappointment over the lack of outcome on food security and agriculture at MC13, and more specifically on cotton. It reiterated the urgent need to reform trade-distorting domestic support, taking into account broader food security and sustainability aspects, and called for further efforts to remove cotton Amber Box support that remained the main problem. The EU also considered that duty-free, quota-free access for cotton products from LDCs remained an unfinished business and reaffirmed its commitment to advancing cotton negotiations ahead of MC14.

21.  Australia considered that the imperative for cotton reform was stronger now than ever, as cotton was vital for income, livelihood and development goals for West Africa and other parts of the world. Australia thanked the C-4 for its leadership in the negotiations and referenced the recent Cairns Group analysis showing cotton's heavy subsidy burden, urging further reduction of trade-distorting domestic support to cotton. Australia reiterated its commitment to advancing the negotiations on agriculture including cotton, with a view to developing draft modalities in the lead-up to MC14. The Cairns Group and the African Group would provide, during the upcoming CoA-SS meeting, an update on their joint work to develop modalities, focusing on domestic support including cotton.

22.  The United States acknowledged the importance of cotton for the livelihoods and food security of farmers in Africa and the developing world. The cotton sector was impacted by climate change and extreme weather conditions such as floods and droughts, but also by continued and persistent supply chain disruptions. The United States called for new prospectives and conversations on the way forward in the agricultural negotiations, including the cotton trade-related aspects. They finally expressed their willingness to collaborate with the C-4 and all other Members to explore creative options and more productive ways to make progress.

23.  China highlighted the reduction of the cotton area in China compensated by the increase of cotton yield. China mainly relied on small-scale cotton producers which faced similar challenges as C-4 producers, and supported the efforts made towards the reduction of the most trade-distorting domestic form of support, namely the Aggregate Measurement of Support (AMS) beyond de minimis. China also acknowledged the divergent perspectives on cotton issues within the Membership and encouraged pragmatic discussions such as the formation of study groups to engage in conversations with the support of external experts aimed at exploring potential outcomes by MC14.

24.  India reaffirmed its support to the Hong Kong Ministerial commitment to address cotton ambitiously, expeditiously and specifically. India commended the efforts made by the C-4 and stressed the similar importance of cotton for India, as it was also produced by small and marginal farmers. India advocated for the reduction of the AMS beyond de minimis for cotton first and subsequently for other agricultural products, with a view to address current imbalances in the Agreement on Agriculture.

25.  Under the "Information by Members on Crises Affecting the Cotton Industry" agenda item, Chad, representing the C-4 plus Côte d'Ivoire, welcomed the inclusion of this important agenda item permitting to discuss the socio-economic consequences of multiple crises on the cotton sector, in a context of geopolitical tensions, price volatility, and climate change particularly in C-4 countries plus Côte d'Ivoire.

26.  While sharp falls in cotton price could trigger crises resulting from financial losses for producers, other causes could hurt the cotton value chain, as illustrated by the COVID-19 pandemic, and its cascading effects including reduced mobility, port congestion, and rising logistics costs. These challenges have led to income losses for producers and reduced state revenues.

27.  Chad noted that the COVID-19 pandemic had revealed the growing vulnerability of the cotton sector to overlapping crises including climate change, other environmental threats, conflicts, energy crises and input prices volatility, as well as pest infestations. The predictions for the current harvest remained bleak due to frequent flooding and rising temperatures. A lot of work remained to be done to improve the situation of the cotton-producing smallholders. The C-4 urged for the development of new and pragmatic approaches in the negotiations and explore efficient solutions to strengthen the resilience of the cotton sector, including through a diversification of the cotton products, such as soap made from cotton waste which provides economic benefits for local communities.

28.  Burkina Faso emphasized the significant impact of rising input costs and insecurity on cotton production in the country. Burkina Faso reported a drastic reduction of around 110,000 hectares in cultivable land, with a reduction of the area reaching up to around 90% in some regions. Climate change and pest infestations, particularly the Jasside pest, were other factors impacting the domestic production. The Government had successfully implemented a strategy to control such pest-related risks, but they nevertheless remained real.

29.  The Chairperson brought the meeting to its end by noting he would convey to the CoA-SS Chairperson the messages passed on during the meeting.

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