Report Criticizes Cotton Subsidies

Fairtrade group says government subsidies hurt African nations.

GENEVA — The U.S., China, European Union and India have provided $47.6 billion in cotton subsidies since 2001, which has devastated 10 million poor West African producers, a report by the U.K.-based Fairtrade Foundation said.

This story first appeared in the November 23, 2010 issue of WWD.  Subscribe Today.

The study reveals “one of the greatest trade injustices of our time,” said Harriet Lamb, executive director of the Fairtrade Foundation, an independent certification body that licenses its mark to products that meet certain criteria for ethical manufacturing.

The U.S. has spent $24.4 billion subsidizing its estimated 25,000 cotton farmers, China earmarked $15.4 billion to its 100 million cotton farmers and the EU gave almost $7 billion to support its 100,000 cotton farmers in Greece and Spain, according to the study, titled “The Great Cotton Stitch-up.”

The direct losses to West Africa’s Cotton 4 — Benin, Burkina Faso, Chad and Mali — which combine for 4 percent of world cotton exports as a result of the U.S. and EU subsidies, are estimated at about $250 million a year. Last year, the study said China overtook the U.S. to become the biggest subsidizer of cotton, with producers receiving $1.96 billion. The Fairtrade Foundation also provides a minimum price to poor cotton farmer organizations that covers the cost of production and demands environmental standards that restrict the use of agrochemicals and genetically modified seeds.

Cotton is cheaper to produce in West Africa than anywhere else, but subsidies from industrial powers stop African farmers from getting a fair price, said Michael Nkonu, director for Fairtrade Africa. The study said the support measures create a “global price dampening effect.”

“Even today, despite a recent cotton price spike, cotton lost more than half of its value compared with 1975 once the price is adjusted for inflation,” the report said.

It also states that global cotton production has more than doubled to almost 27.6 million tons in 2010 from about 11 million tons in 1960, and adds that China is the world’s biggest producer with 32.5 percent share of global supply. But China uses most of what it produces to supply its apparel sector and has become a net importer, while the U.S., the third biggest producer after India, is by a wide margin the biggest exporter of cotton, with a 34 percent share of global exports, followed by India with an 18 percent share.

Fueled by export restriction in India, U.S. cotton exports are projected to increase to a five-year high of 3.86 million tons in 2011, pushing its global share to 42 percent, the study said. The report also documents that in recent years Fairtrade certified cotton textile and apparel products from West African countries and other poor nations have made inroads in some markets such as the U.K., where in 2008 they more than doubled from the year before to reach 77.9 million pounds, or $124 million.