KARACHI: United States’ sensitive subsidies are an unfair international trade practice and squeezes potential of cotton growers and exporters while export potential and cost effectiveness of Pakistan’s traders remained under pressure that almost keep them out of international market.
“Around $755 billion are allocated for subsidies for agriculture mostly of the amount for cotton growers in US, senior member Pakistan Yarn Merchant Association, Ghulam Rabbani said.
The United States was committed to a deal on cotton in long-running Doha trade talks, but has not yet reached an agreement, he opined.
Rabbani said major cotton producers were facing hardship due to USA’s stubborn attitude towards not cutting subsidies rather demand world to end subsidies on agriculture.
“This is unfair practice and Pakistan is among the cotton producing countries where growers are facing high cost and inputs cost besides high bank rates”, he added.
Textile and spinning sector has imported around 1.6 million bales this domestic crop season to meet shortfall and keep wheel of the industry moving.
He said the drop was related to higher production costs and an uncertain economic environment.
World Trade Organisation members agreed in Hong Kong in 2005 to cut subsidies on cotton faster and more deeply than supports on other agricultural goods. But that cotton deal is dependent on a broader agreement on agriculture.
According to Cotlook estimates, 2017-18 world cotton production remained at 27,900,000 tonnes verses 24,396,000 in 2016-17.
“There was no settlement in cotton, our intention that US of fully meet commitments under December 2005 Hong Kong ministerial declaration with respect to cotton”, but all went unmet, he added.
Rana Abdul Sattar, senior executive of Pakistan Cotton Ginners Association said cotton had been one of the most difficult issues in the Doha talks, launched in late 2001.
Low prices, high production costs and falling demand because of the global economic crisis forced an increase in US cotton subsidies under current programmes, although many farmers are switching to other crops.
By piling hundreds of billions of dollars into commodity markets they tripled and quadrupled open interest and eventually forced prices to explode to the upside, often in the face of fundamental reasoning.
US government has started attempt to provide more subsidies to cotton farmers in a bill designed to provide disaster relief to Florida, Texas and Puerto Rico.
Around $81 billion disaster relief bill would make seed cotton eligible for commodity subsidies linked to crop prices.
Published in Daily Times, May 20th 2018.