The farmers ruined by subsidy

From The Times
April 9, 2007
The farmers ruined by subsidy

Lucy Bannerman in Ouagadougou, Burkina Faso

Karim Ouattara should be a happy man. His cotton fields have just produced a bumper crop of the “white gold” upon which millions of West Africans depend. Six tonnes of picked and priced cotton lie heaped on his farm, ready to be sold.

But this Burkina Faso farmer — who for 20 years has made a living on the plantations of the region’s biggest cotton producer — has yet to see his cheque. His workers remain unpaid, and for the first time he has been advised to build a barn to store his crop until the processing plants can afford to buy it.

After four consecutive years of plummeting prices on the world market, the industry that provides the backbone to West African economies is now on the brink of collapse.

The cotton market, which provides nearly 70 per cent of impoverished Burkina Faso’s cash exports and income for more than a quarter of its 13 million people, has been brought to breaking point by factors known locally as “the monster with three heads”: a weak dollar, low world prices and US cotton subsidies.
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This year will be crucial for the futures of 10 million West African farmers as the US rene-gotiates its Farm Bill, which has attracted international condemnation.

America’s 25,000 cotton farmers receive subsidies totalling some $4bn, allowing them to undercut their developing competitors. The subsidies were ruled illegal by the World Trade Organisation three years ago, yet only 10 per cent have been dropped so far, and Washington still pays many times more in subsidies to these farmers than it gives in aid to Africa each year. As a result, world cotton prices are now at the lowest since the Great Depression of the 1930s.

Global trade talks have also stalled since West Africa’s four main cotton-producers — Burkina Faso, Mali, Chad and Benin — demanded fair trading conditions for farmers who earn barely enough to cover production costs.

In Burkina Faso, where the last buds of a record 800,000-tonne harvest are being picked, about of quarter of farmers have not been paid by the cotton processing firms, which are themselves struggling to break even.

In an unprecedented move, Sofitex, the largest of Burkina Faso’s three cotton companies, has advised farmers to build a storage shed for every 50 tonnes of the latest harvest, amid fears that much of this year’s crop will end up in mountains rather than marketplaces.

Mr Outtara is in despair, saying: “Cotton production is meant to be a way out of poverty, not a means of keeping us there.”

When he finally sells his crop and repays his loans, Mr Outtara expects to make a profit of just 25,000 CFA (West African francs). That is £25.

He can no longer afford to pay university fees for Mariam, his 23-year-old daughter, who has dropped out of her accounting course. “I just have to hope the price will pick up. If it doesn’t, it will be a catastrophe,” he said.

It is a word increasingly heard around the scrubland of the Sahel region. “The situation is criminal,” François Traoré, president of the Association of African Cotton Producers, said of the American subsidies.“Families who don’t even know where America is are being punished by their policies. We are not their enemies. Why are they destroying us with their riches? One day, when we face the same God, how will they explain them-selves?”

The Bush Administration has said it will consider increasing aid to boost African farmers’ productivity, but that has been dismissed by developing nations, which would rather have a “fair playing field”.

Mr Traoré urged the architects of the new US Farm Bill to eliminate the subsidy programme. He said: “I do not like to go back over history, but I cannot help but remember that bad relations began with America when they came to Africa to take slaves for their own cotton plantations. This is an opportunity to improve that negative image, and alleviate the suffering of millions.”

With many farmers running at a loss, most are reducing production or switching crops. For Amadou Traoré (no relation to François), this harvest will be his last. He is turning to maize, which now sells for a third of the price of cotton. “It may not sell as well, but at least you know you can feed your family,” he said.

Asked whether cotton would regain its reputation as “l’or blanc”, he pauses, then replies: “I suppose it’s still white.” The gold, he adds, has long since lost its shine.

Against the odds

— 20 million farmers in 33 African states rely on cotton production for their living

— The price of West African cotton has fallen every year since 2003, plummeting from 21p to 16p per kg

— Every acre of cotton farmland in the US attracts a subsidy of $230. Economists estimate US farmers would make a loss without the subsidy.

— In 2004/2005, the amount paid out to American cotton farmers came to a total of $4.2 billion dollars. The same year, farmers in Burkina Faso produced a bumper crop of cotton more efficiently, and yet made a loss of $81 million

Source: Times research
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Have your say

Did the 3 previous posters (from the US) miss the part in the article that mentioned the subsidies to the US farmers had been declared illegal by the WTO? The real problem is that the Americans believe in fair trade, as long as they benefit. They will use the WTO, NAFTA, GATT rules ruthlessly to open markets to their producers. But woe to those foreign producers who can undercut an important US voting bloc (such as cotton farms or loggers). Ask Canadian softwood producers. They invested heavily in modern effecient operations. They could outsell their American counterparts still using old plants. The US imposed massive illegal tariffs (under WTO and NAFTA rules) on softwood imports. Despite decades of the US losing at every arbitration and dispute resolution process under the WTO and NAFTA- mantained the tariffs until Canada was forced to sign a new treaty last year to the benefit of the US. Which the US has now decided is not good enough (for them) and want to reopen.

Setti, Vancouver, BC, Canada
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I'm not an economist, but I'm smart enough to know that subsidies and tariffs can not be so simplistically summed up in a brief anti American (typical) article.
And to the people who claim Americans' need to take back their Country from Bush/Cheney; things are NOT that black & white and in general terms, Democrats are more "protectionist".

To Moshe Haviv who says America expects the World to open their markets but does not open her own; is that why another record trade deficit was set in 2006 at 763.3 billion?

MCD, Elmhurst, USA
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I think it is nice that Europeans publish complaints about US subsidies when most of Europe is run on subsidies. The French are especially famous for this and now most of the other EU contries are fixing prices and undercutting world prices by subsidies. Not to mention China's fixing the valueof their currency to keep a lock on prices. The world trade organization is wothless because it ignores European, Russian and Chinese price fixing while it attacks select items. The Airbus is a prime example of price fixing and who is omplaining about that?? Wake up nationalism always trumps fairness.

doc, pottsville, Pa., USA