Cotton bales being loaded at a farm in the US. Large-scale farmers and corporations garner most of the cotton subsidies provided by the US government
COTTON SUBSIDIES have remained a contentious issue in international trade and negotiations at the World Trade Organization (WTO). Farmers of developing and least developed countries (ldcs) complain that the massive support provided by developed countries, especially the US, has rendered cotton production uncompetitive in the Global South, leading to a disastrous impact on agricultural growth, export earnings, and farmers’ welfare. The impact is particularly palpable in countries like India, where the crop plays a crucial role in livelihood, poverty reduction, and agriculture development. Hence, the implications of the US’ massive support to its cotton farmers and the failure of WTO rules in disciplining cotton subsidies merit a discussion.
Let’s compare the US and India. The US has some 8,100 cotton farmers with an average farm size of 624 hectares (ha). By comparison, India has 9 million cotton farmers with an average farm size of 1.2 ha. Despite the prevalence of small and fragmented landholdings, the cost of cultivation here is less than that of the US. Yet, the US is a significant player in global cotton production and exports. In 2020, its share in global production was 14.5 percent; with 85 percent of output exported, the US’ share in global exports was even higher—35 percent.
The artificial comparative advantage the US enjoys can be gauged from the fact that its performer cotton support is a massive $1,17,494 compared to India’s $27 (see “Cotton shocks”, p56).
American cotton producers have, in fact, received substantial support through several programs under 18 farm laws since 1933. The first, the Agricultural Adjustment Act, 1933, was enacted in response to the low prices and farm income during the Great Depression of the 1930s and provided price support to cotton farmers. Gradually, support grew through market loans, deficiency payments, direct payments, insurance subsidies, and budgetary support, among others.
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