Pak raises cotton subsidies issue by big cotton growing countries at WTO

Problems of farmers in Pakistan and other developing countries cannot be resolved as long as the farmers are made to compete with heavily subsidized cotton from major players. Pakistan’s Ambassador to the global trade body Dr Tauqir Shah while addressing the special session on cotton at World Trade Organization (WTO) in Geneva said that they call for a swift and speedy action which allows their cotton growers along with textile industry to fairly compete into the world market.

At the WTO, Pakistan has effectively raised the issue of cotton subsidies by big cotton growing countries, particularly the United States and India.

As cotton is the lifeline of Pakistan’s economy; they are fourth largest producer after China, India and US, and have third largest spinning capacity in Asia after China and India. Cotton and its value added products contribute approximately 57% of Pakistan’s annual exports earnings. Cotton provides livelihood to 1.5 million farming families and jobs to 40% of countries industrial labour force, and considerable number of them being women, Dr.Tauqir said according to a message received from Geneva.

The ambassador contended that cotton producing areas are among the poorest in Pakistan; most of cotton growers are small farmers; Pakistan’s average farm size is 2.6 hectors, and 96 % of its farms are less than 10 hectors.

After struggling for many years with adverse terms of trade and declining cotton prices, the life of cotton farmers has been further complicated by climate change and extreme weather conditions, floods, heavy rains and droughts in some areas, he said adding that this has resulted in 34% reduction in cotton production. A direct effect is the negative growth in agriculture and they missed their GDP growth target by 0.5 % due to cotton crises.

While citing that International Cotton Advisory Committee data, Dr Tauqir Shah argued that domestic subsidies in cotton production in major cotton producing countries is a critical issue, resulting in an uneven level playing field for cotton producers worldwide. What is more worrying is that proportion of cotton produced through government assistance has increased in recent years.

The International Cotton Advisory Committee (ICAC) data shows that globally total subsidies to the cotton sector are estimated at a record $10.4 billion in 2014-15, up from a record of $6.5 billion in 2013-14. Furthermore, 76% of world production is under assistance. Pakistani farmers growing without such subsidized assistance are facing income losses. These un-capped sky rocketing subsidies by major producers have loaded the dice against poor farmers from Pakistan and other developing countries.

The ambassador highlighted that Pakistan has prime interest in formulation of disciplines regarding subsidies on cotton production and trade.

Pakistan introduced massive reforms in the cotton sector during last two decades. All government interventions in the form of price mechanisms and State intervention in form of Cotton Export Corporation has been done away with. Members in WTO have been promising reform and level playing field to resource poor farmers for decades, but unfortunately international community have failed their poor farmers, who grow sliver fiber and get nothing in return.

Cotton production in Pakistan has declined by one third and more alarming is that the area under cotton cultivation is declining, and farmers are cultivating other crops. This has serious implications for Pakistan’s economy.

As a result Pakistan are forced to import 3 million bales of cotton; it is a manifestation of unfair market conditions that cotton country like Pakistan has to resort to imports. They are importing from countries which are major subsidizers; and cotton imports from India have increased many fold. Hence, Pakistani farmers can no longer compete with surplus supply of heavily subsidized cotton from big producers.