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Subsidies are economic doping


… says African Cotton Association chairman.

The Chairman of the African Cotton Association Ibrahim Malloum has observed that the continuous subsidy provided farmers by developed countries mainly the United States and Europe will soon lead the African cotton industry to go extinct.

Speaking to the dailyEXPRESS BUSINESS on the sidelines of the 5th African Cotton Association's annual meeting in Accra, Mr. Malloum who is also the Managing Director of Cotton Chad said the current situation is compelling more and more African cotton farmers to abandon their farms in search of better fields in the agricultural sector.

The current level of cotton production on the entire African continent is estimated at between 1.7m and 1.9m metric tons annually, 90% of which is exported to the rest of the world, making the continent the second biggest exporter of cotton after the United States.

Mr. Malloum says despite the high level of export, cotton farmers on the continent get very little in terms of income because of the subsidy which he described as “economic doping.”

Subsidies offered cotton farmers in the United States, according to UK based humanitarian agency Oxfam, is around $230 or around five times the transfer for cereals.

According to Oxfam, “agricultural subsidies in the United States are at the heart of a deep crisis in world cotton markets. American cotton farmers are first among equals in the harvesting of subsidies, reaping windfall financial gains from government transfers. Rural communities in some of the world's poorest countries suffer the consequences. While the US advocates free trade and open markets in developing countries, its subsidies are destroying markets for vulnerable farmers. No region is more seriously affected by unfair competition in world cotton markets than sub-Saharan Africa.”

The report further stated that between 2001/2002 farmers reaped a bumper harvest of subsidies amounting to $3.9bn- double the level in 1992. This increase in subsidies is a breach of the 'Peace Clause' in the WTO Agreement on Agriculture, opening the door for a Brazilian complaint.

Again, Oxfam puts available statistics of subsidies received by American cotton farmers as being more than the entire GDP of Burkina Faso – a country in which more than two million people depend on cotton production. Over half of these farmers live below the poverty line. Poverty levels among recipients of cotton subsidies in the US are zero as well as three times more in subsidies than the entire USAID budget for Africa's 500 million people.

Mr. Ibrahim Malloum says most African economies depend on the production of cotton, with about 20million people in Africa essentially earning their living from the cotton industry.

“The cotton sector provides many African countries with income, jobs and foreign exchange. It also plays an essential role in the deepening of modernization of the agricultural production systems as well as professionals structuring of the rural world,” he added.

Despite the high level of quality performance of the industry in Africa, Mr. Malloum says “it should be observed that Africa's cotton industry which is largely driven by the CFA franc countries is in grave danger.”

He told dailyEXPRESS that the industry is a victim of government measures which are a hindrance to free competition.

“This is mainly due to the massive and varied subsidies that well endowed countries give to their farmers and industries,” he added.

Mr. Malloum said what African countries are calling for is a complete elimination of subsidies as well as a proper regulatory procedure from the World Trade Organisation that will make the cotton market more competitive for all farmers.

He also revealed that the current disparity between the dollar and the CFA franc rate is also posing a huge difficult for the farmers. The current Euro/Dollar or FCFA/Dollar exchange rate is a real handicap to most economies.

The situation Mr. Malloum said negatively “affects all our exports and encourages imports to the detriment of our emerging industries.”

He also said the association welcomes any intervention from their respective governments to find a lasting solution the problem.

An official from the WTO Chinedu Osakwe speaking at the official opening of the meeting said his outfit is having series of talks with agencies all over the world to have an equitable market access to all the farmers globally. He also said that the organization is working out a mechanism that will eliminate the export tariffs in the cotton industry.

This, he said, will enable the farmers to produce and export the quantity they needed quantity to the cotton market.

Estimates by the International Cotton Advisory Committee (ICAC), using its World Textile Demand Model, indicate that the withdrawal of American cotton subsidies would raise cotton prices by 11 cents per pound, or by 26 per cent.

The theme of the three day conference was 'Competitiveness and Sustainability of Cotton Production in Africa.'