A friend asked a question about the WTO negotiations the other day. “If cotton producers export 70 percent of their crop,” he said, “why aren't they more excited about the prospects for trade liberalization in the Doha Round?”
That's a logical question for someone who spends more time following grains and soybeans than cotton. Grain and soybean groups are pushing hard for a new WTO agreement because they want increased market access in Europe and Japan.
Cotton is different. Except for China, the U.S. cotton industry has complete access to the majority of the countries that buy cotton. And the tariff issues with China aren't likely to be solved in the Doha Round.
So cotton producers, who have learned to quickly turn the page when they see a newspaper headline with the words WTO or Doha Round, don't look at the negotiations the way grain and soybean growers do.
Some are beginning to question whether anyone will still be singing the Doha Round's praises if WTO members should reach an agreement before year's end. They believe the benefits of trade liberalization are exaggerated.
University of Tennessee Professor Daryll E. Ray says supporters keep giving out various numbers for the new agreement's impact on the world economy by 2015: $832 billion, $520 billion, $287 billion and $96 billion. Even a non-economist like me knows all four can't be right.
Ray cites two reasons for the incongruity. One, the database used to develop the models has changed; two, some analyses include gains from tariff reductions in the 20-year-old Uruguay Round and the Multi-Fiber Arrangement that ended textile quotas last January.
“Another lapse is the failure to recognize that some developing countries are the beneficiaries of previously negotiated trade preferences with specific countries,” he said. “These already enjoyed preferences are counted as gains in the older models.”
Using the new database with what it considers the most likely trade liberalization scenario for Doha, the World Bank projects benefits of $32 billion for developing countries and $64 billion for developed countries.
Under the proposal tabled by U.S. Trade Representative Rob Portman at the WTO last October, the United States would reduce its farm subsidies by 60 percent or, in the case of the amber box ceiling (marketing loan gains and counter-cyclical payments), from $19.1 billion to $7.6 billion. Dairy and sugar programs alone take $5.5 billion, so little would be left for cotton farmers unless drastic program changes were made.
At that rate, the U.S. government could just transfer farm payments to the developing countries over the next nine years and save everyone a lot of trouble.
This could all be moot, of course. WTO Director-General Pascal Lamy said on May 15 that negotiators need a “second wind” amid increasingly pessimistic reports on the talks' progress. Cotton farmers could hope they run out of gas.