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The Great Cotton Stitch-Up
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The West African cotton industry is blocked by a wall of free cash dished out by the United States and European Union to their farmers, robbing 10 million West African farmers of $250m as price-fixing benefits rich countries over poor nations. A report by the Fairtrade Foundation.

Fairtrade Foundation report exposes devastating effects of rich nations’ protection

15th November 2010 - The Fairtrade Foundation

Cotton: the most used natural fibre in the world should be the “white gold” that propels 10 million West African farmers out of poverty.

After all, the West African nations of Benin, Burkina Faso, Chad and Mali produce the cheapest cotton in the world.

But a major new report from the Fairtrade Foundation today reveals how the West African cotton industry is blocked by a wall of free cash dished out by the United States and European Union to their farmers.

Combined, the US and EU lavished $31.45 billion over the past nine years on their cotton farmers so dampening down global cotton prices, reducing demand for West African cotton and restricting their ability to export their way out of poverty so perpetuating reliance on aid.

The EU pays out $2.51 per pound of cotton to support its 100,000 cotton growers which are more than the market price for cotton.

It is estimated that lost income to West African cotton producing nations through the price dampening effect of subsidies totals $250m each year.

The Great Cotton Stitch Up will be published three days ahead of the European Commission’s proposals to reform the €50bn common agricultural policy through which cotton subsidies are disbursed.

It is understood the EU draft will not include reform of its $7 billion cotton subsidy regime.

The Fairtrade Foundation is launching a campaign demanding the EU scraps its trade distorting cotton subsidies in a move that would isolate the US which dishes out $24.25bn to just 3,500 farms. One farm has received $24m in handouts over the past 14 years. The report focuses on the powerful US cotton lobby which funds American politicians as well as detailing the challenges faced by the Cotton-4 which are among the least developed countries on earth.

Harriet Lamb, executive director of the Fairtrade Foundation said:

“This report reveals one of the greatest trade injustices of our time. Ten million farmers are locked into poverty while trade distorting subsidies are paid out by the EU and the US. It is incredible that EU cotton subsidies are worth more per pound than what cotton trades for on global markets. This is why we are calling on the EU to eliminate its cotton trade distorting subsidies and to include this urgently needed measure in the new Common Agricultural Policy reform process launching this week.

“In Mali, we’re working with one co-operative of 8,000 members who have been able to earn 50% more by producing and selling organic Fairtrade cotton. As a result, 95% of their children are enrolled in school compared with a national average of 43%. This is what a small uplift in farmers’ income can achieve. It is time to end the Great Cotton Stitch-up.”

Douda Samake, a farmer and member of the Mobiom Fairtrade cotton-growing co-operative in Southern Mali, said:

“Cotton is our only income. These (US subsidies) are the reason we’re not producing as much cotton. Mali cotton farmers are hardly able to cover their living costs. They’ve got a lot of debts and so people are walking away from cotton. That makes me really angry. If it was you, what would you think? The economy of the country suffers. Mali is hugely dependent on cotton. It obviously hurts the economy if there are less people producing cotton. It’s the main export for Mali and the state does not have funds to pay for healthcare and education.”

The C-4 cotton nations were seen as the quintessential example of grievous trade injustice when in 2001, world superpowers started negotiations to frame new global trade rules.

In the shadow of 9/11, the Doha Development Round was meant to help poor countries access world markets.

But as we enter the tenth year of Doha negotiations, the Great Cotton Stitch Up shows little has been achieved to help the C-4 trade their way out of poverty.

Link to original source

The Great Cotton Stitch-Up – Fairtrade Foundation lifts lid on Mali's entrenched poverty

15th November 2010 - Madeleine Bunting, The Guardian (UK)

As I travelled thousands of miles across Mali last month, I have to confess I was shocked. I've visited plenty of African countries – Uganda, Mozambique, Lesotho, Sudan, Kenya among them – and I've seen poverty, but Mali left me troubled. Town after town was no more than a huddle of low, mud-walled homes, small booths selling bottles of gasoline for the few motorbikes. There were virtually no private cars, virtually no houses of anything more permanent than mud. Every canal was used as a bath, laundry room and washing up sink; from dawn to dusk, there were groups of women and children splashing and chatting as they used the dirty water.

But what has made Mali so poor? Unlike Sudan, it has been relatively politically stable, unlike Lesotho, the land in the southern half of the country along the banks of the Niger has considerable fertility. Part of the answer lies in the heaving metropolis of Bamako, where the traffic jams of smart cars and new housing developments show that much of the country's wealth doesn't trickle beyond the capital.

But another part of the answer lies in the Fairtrade Foundation's shocking report, the Great Cotton Stitch-Up, today. Some 40% of rural households in Mali, or 2.5 million people, depend on cotton, which is the country's largest export earner. But prices for cotton have been driven down over the last 40 years – losing half of its value when adjusted for inflation. Huge subsidies to EU and American farmers have ensured that Mali doesn't get a fair price for cotton.

The figures are truly staggering: the US has spent $24.5bn subsidising 25,000 cotton farmers in the last nine years. Since 2001 a total of $47.68bn has been poured into subsidies in the EU, US, China and India, according to the Great Cotton Stitch-Up. The worst offender is the US; one cotton farmer in Arizona pulled in $24m of subsidies over the last 14 years. Eliminating these subsidies would boost west African cotton prices by 12.9% - and that translates into an annual loss of $250m a year to farmers in Mali, Benin, Burkina Faso and Chad.

This is a significant sum to some of the poorest countries in the world.

These west African nations grow cotton more cheaply than anywhere else in the world, yet they can't find a decent price for the crop and production in Africa has halved since 2005. Free trade, so much trumpeted by the Washington Consensus, is supposed to give a competitive advantage to the cheapest producer, but not with cotton. It's one of the most shocking examples of a global trading system built on rules which benefit the developed world.

Such gross trade injustices make a mockery of aid. As I travelled around Mali, we would glimpse the noticeboards advertising an aid project funded by the EU or USAID. For example, the only internet link I could find in the sizeable town of Niono was plastered with USAID stickers, indicating that the computers, the air conditioning and the building were all the product of US aid. But Mali has become cynical of this kind of western intervention and its motivations when it is coupled with such naked and brutal self-interest as cotton subsidies.

There may come a time when the west begins to realise the mistake of such double standards. Already, China is investing significantly in Mali and garnering considerable goodwill – in particular it is building a third, much-needed bridge over the river Niger in Bamako. Malians argued to me that at least China is straightforward about its own long-term interests, and what it wants from Mali; in comparison, the west has talked a lot of fine words about aid, but has played a direct causal role in its continued poverty.

Link to original source

Main Findings of the Great Cotton Stitch-Up

- Since 2001 when the Doha Trade Round was launched in an attempt to create new global trade rules that would help poor countries, $47.68 billion (£29.31 billion) has been doled out to cotton farmers in the United States, the EU, China and India.

- Of that, the US and the EU has combined spent $31.45 billion (£19.34 billion) subsidising its cotton farmers or 66%.

- The US on its own has spent $24.45 billion subsidising its estimated 25,000 cotton farmers. In the past nine years, no country has subsidised its cotton farmers more than the US.

- One US cotton farmer in Arizona has raked in $24m worth of subsidies over the past 14 years.

- European Union average support for its 100,000 cotton farmers (90% in Greece, 10% in Spain) totals $2.51 per pound compared to $0.14 in the US.

- There are 10 million West African cotton farmers. They produce cotton cheaper than any other nation.

- The four West Africa cotton producing nations are among the very least developed nations on earth with an average GDP of $30 billion compared with the United States’ $14 trillion.

- In Mali, just 43% of children go to school and 77% of the 12.7 million population live on below $2 a day.

- Cotton in Benin, Burkina Faso, Chad and Mali accounts for between 5% and 10% of GDP.

- In Mali, 40% of rural households or 2.5 million people depend on cotton for their livelihood. In Mali, cotton is the largest export earner.

- In Benin and Burkina Faso; cotton accounts for more than 60% of foreign exchange earnings.

- Combined the so-called West African Cotton-4 account for more than 4% of global cotton exports.

- Cotton has lost half of its value in 40 years if the price is adjusted for inflation even despite current price hikes.

- Increases in global production thanks to technology advances and nations enjoying subsidies has driven down prices further.

Link to original source