Tuesday, August 5, 2008

10 Reasons to Stop Subsidising Cotton

  1. A Pound of Cotton can be produced for 12 pence in Burkina Faso, compared to 42 pence in the US. Subsidies are keeping inefficient, high cost American farmers in the global market.
  2. Subsidies to US, EU and Chinese cotton farmers reduces the price of cotton by 10-15%. This costs farmers in West Africa $75- $100 million a year.
  3. Removal of all cotton subsidies and import tariffs would boost economic welfare by $283million per year. The largest beneficiary would be sub Saharan Africa, which would benefit by approximately $147 million. Many of those who would benefit are poor farmers.
  4. More than 66% of people surviving on less than $1 a day are agricultural labourers or small holding farmers.
  5. Agriculture is the largest employer in low income countries. about 60% of labour force and 25% of GDP
  6. Every $1 lost in economic welfare actually costs a lot more. The lower income means lower investment as farmers struggle to get enough income to survive.
  7. Higher cotton prices and incomes would enable a boost in investment and diversification in many developing countries.
  8. Cotton exports are relatively insignificant to the US economy, but cotton farmers are a powerful political lobby politicians are reluctant to annoy. By contrast, cotton accounts for 50% of Burkina Faso's exports; the removal of cotton subsidies and tariffs would have a big impact on this developing economy.
  9. Cost to US Taxpayer of subsidising cotton.
  10. Would help general trade negotiations


Anonymous said...

Your assertion that a pound of cotton can be produced in Burkina Faso for 12 pence vs. 42 pence in the United States is completely incorrect. I have been in the cotton business all my life and have worked in West Africa as well as the US and South America.

If your incorrect production cost number were true, West African Farmers should then have benefitted greatly over the past decade due to the fact that production cost around the globe was significantly higher. Lower production cost on that scale would have allocated a significantly higher amount of cotton production to West Africa. Agricultural markets are more efficient than you think. Such a vast price differential in production cost would have allowed West African cotton to achieve a significantly higher export market share on world market.

The fact is that the procurement companies in most West African companies have been monopolies who have been setting extremely low prices to growers while on the other hand selling cotton at world market prices. The differential in profit never made it to the growers but "disappeared" in those country's budgets... and/ or was siphoned off by corrupt officials.

Please research more effectively before putting such incorrect statements into print.

Gerald Lee said...

Subsidies if continued for too long will only mean a cost to consumers and for a free economy we have to bite the bullet and do things that are not favored by some for the good of the majority.