NCPA - National Center for Policy Analysis

AMERICAN COTTON SUBSIDIES UNRAVEL AFRICAN EXPORTS

March 24, 2006

Every dollar, yen or euro poured into the agriculture sectors of rich nations makes developing countries' farm sectors that much less competitive. The "dumping" of agricultural commodities at prices lower than the cost of production is devastating to developing countries, since most depend almost entirely on only one or a few products. Every year, farm subsidies cost developing countries about $24 billion in lost agricultural income, say Max Borders, adjunct scholar, and H. Sterling Burnett, senior fellow, of the National Center for Policy Analysis.

Cotton is an excellent example:

  • World cotton prices have fallen by half since the mid-1990s and, adjusted for inflation, are now lower than at any time since the Great Depression of the 1930s.
  • Despite the plunge in prices, cotton production in the United States grew 42 percent between 1998 and 2001.

American cotton subsidies cost sub-Saharan Africa $302 million in 2001-2002 alone, according to Oxfam International, an antipoverty organization.

The International Cotton Advisory Committee (ICAC) estimates that ending U.S. cotton subsidies would raise world prices by 26 percent, or 11 cents per pound. The results for African countries dependent on cotton exports would be substantial:

  • Burkina Faso would gain $28 million in export revenues;
  • Benin would gain $33 million in export revenues;
  • Mali would gain $43 million in export revenues.

These additional revenues would help stabilize developing economies, fuel development, reduce dependence on foreign aid and significantly improve the lives of millions of people, say Borders and Burnett.

Source: Max Borders and H. Sterling Burnett, "Farm Subsidies: Devastating the World's Poor and the Environment," National Center for Policy Analysis, Brief Analysis No. 547, March 24, 2006.

For text:

http://www.ncpa.org/pub/ba547

 

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