USTR - Opening Remarks by Deputy U.S. Trade Representative Karan Bhatia, "Cotton Day" Public Conference, Hong Kong Jockey Club
Office of the United States Trade Representative


Opening Remarks by Deputy U.S. Trade Representative Karan Bhatia, "Cotton Day" Public Conference, Hong Kong Jockey Club

Benin but also for all of the cotton producing countries, in Geneva and on issues of development. 

This is my first opportunity, actually, to have met the Ambassador because I am new to my position at the U.S. Trade Representatives Office.  I have only been there for little more than a month, but early in my tenure meeting Ambassador Amehou was recommended to me as being something that should be high on my list.  I’m delighted to have the opportunity to do so today. 

Let me also thank the NGOs (non-governmental organizations) who are organizing today’s event.  It is a very important topic, and I am delighted to be part of the discussion today.  Let me also thank the ministers who I know are going to be participating in this dialogue during the course of today.  I see that we’ve been joined by Minister Ngarmbatina from Chad, who I had the pleasure of visiting with in Burkina Faso recently, and it's a great pleasure to see her here again.  Thank you, Madam Minister. 

Finally, let me just mention that I'm accompanied today by a team from the U.S. Government from a number of different agencies including the US Agency for International Development (USAID), the U.S. State Department and other agencies.  I encourage you to interact with them after this meeting. 

Let me again reiterate how happy I am to be here today and how important I believe this topic is.  Recently, I had the opportunity to join Ambassador Portman, our U.S. Trade Representative, and our Secretary of Agriculture Mike Johanns on a trip to Burkina Faso, where we had the opportunity to meet with the representatives from all of the major West African cotton-producing countries.  We also had the opportunity while there to visit with cotton farmers and producers and to witness the ginning processes there.  It was a very, frankly, moving trip and an important trip for us.  We have been vigorously engaged in the cotton issue for some period of time, but there is no replacement to actually getting out and interacting with producers in their home country.  I thought that was a very helpful visit. 

I can tell you, both before and after that trip, the issue of cotton has not diminished from our minds in its importance.  I have had, I can tell you, a conversation or meeting with either a minister from one of the C4, or C5 if you were to include Senegal, countries. We're meeting with their ambassadors -- every day since that trip we have been speaking with them in Brussels, in Geneva, in Washington, in West Africa.  Simply said, there is no lack of recognition of the importance of the issue.  I should tell you that there are more meetings scheduled for this week, and I am optimistic that we can make some good progress in addressing the cotton issue. 

With that, let me say, Hong Kong is not Cancun.  It is not Cancun because the cotton issue is not cropping up for the first time.  We have been paying attention to this issue for a while, and frankly I think there has been significant amount of progress.  We are a lot closer than we certainly were in Cancun, which does not mean that there is not a lot of work left to be done, especially to alleviate the fundamental causes of poverty that underlie the cotton issue.  But I do think that we have made a lot of progress and that we are closer than some would think. 

Let me just briefly talk about things that the United States has done, both acting unilaterally and then acting multilaterally.  Unilaterally, we have in the past year alone undertaken a radical change -- the elimination of our Step 2 cotton subsidy program, a program that provided hundreds of millions of dollars worth of subsidies to U.S. cotton farmers.  We have moved to eliminate that program.  The elimination is being finalized in Congress as we speak. 

Secondly we have reformed our export credit guarantee programs.  These are programs that were designed to encourage exports of U.S. cotton.  Those have been substantially reformed to reduce their trade-distorting effects.  Of course, we maintain and indeed are expanding our AGOA preferences every year to encompass new African countries, which give them substantial access for most of the products to our markets.  So we continue to act unilaterally. 

We also have taken action multilaterally.  Ambassador Amehou, who referenced I think the proposal that the United States put forward on October 10th, but frankly I think this is perhaps one of the most significant proposals to be put forward for agricultural reform in the history of global trade negotiations.  Leaving aside its broader significance, it is also a proposal that I think is directly responsive to what we had understood to be the core concerns of the cotton growing economies. 

There were three core trade issues that had been specified to us, and again Ambassador Amehou did a very good job of laying this out:  The issue of market access, the issue of export subsidies, and the issue of domestic supports.  The agricultural reform proposal that we advanced addressed all three issues, and it did so dramatically.  We have proposed to eliminate export subsidies.  We propose to do it by 2010 but, as we have said, are happy to meet ambition with ambition.  We had proposed to eliminate our domestic supports in tiers, first of all to substantially reduce them and then to eliminate them.  And in the area of market access, which frankly we believe is perhaps the most critical area to development, we have proposed substantial and meaningful cuts in tariffs that would allow not only cotton producers, but producers of all agricultural products, substantially greater access, not just to developed country markets but to important developing country markets. 

We believe that our proposal meets again these core demands.  There may be issues that we have on timing.  Ambassador Amehou addressed that issue.  Those are issues that we are happy to engage our trading partners on, indeed we look forward to doing so.  It has been disappointing to us that we have not seen a more vigorous reaction back from some of our developed country partners, more ambitious reactions back.  Indeed, we think that is the key to opening the agricultural negotiations and thereby arriving at solutions that will benefit not just cotton farmers, but farmers of all products all over the world.  

I was speaking with others in the audience here who represent farmers of cocoa, of palm oil, of other commodities.  We need to remember the importance of those farmers as well.  But let us, at the end of the day, have no doubt on one key fact that is critical, I think, to this discussion.  The Ambassador laid out that we need to eliminate subsidies.  We agree.  And this is alone, I think, perhaps the most significant change from Cancun.  We do not disagree on that point.  We want to eliminate them.  We agree that it is the right thing for us and the right thing for global development.  We stand and await a bold proposal from some of our developed partners that would enable us to get to that conclusion. 

There is some level of frustration over pace -- I recognize that – at the speed at which we are moving.  No one is more frustrated than we are on that.  It would be our deepest desire that at Cancun we be able to close the modalities for an agricultural round that would enable us to quickly move to resolution, to undertake the kinds of reforms that we are talking about.  We do need to move faster.  Again, we hope that there will be sufficient forward progress in those negotiations this week that will allow us to do that.  In the interim, of course, we remain in ready dialogue, in constant dialogue, with our C4 partners.

Let me pause for a moment though to talk now about not just trade, because trade – while important – is not the whole story here.  But to talk also about aid and assistance and development.  Subsidies that we have talked about are important, but they are not the only answer.  We could get rid of subsidies today, and it would not raise the cotton farmers out of poverty.  The impact that has been assessed in terms of if you got rid of subsidies, what would the impact be on global cotton markets, has ranged – the IMF has estimated it to be 2-3%, the FAO is in the same area.  Regardless, even if those were taken out and we had the reduction, the increase in global prices and the improvement in productivity – our concern is that it will not alleviate the poverty of the West African cotton farmer, and that must be our goal.

It is in that regard that we focused our attention vigorously over the past several years on trying to promote more effective production of cotton and more effective distribution and marketing of cotton.  To that end, there have been a number of initiatives that I will point out briefly.  We can talk in greater detail about them.  The first is our African Global Competitiveness Initiative, which is devoting $1 billion [correction: the AGCI commitment is $200 million over five years, not $200m annually over five years] to the creation of trading hubs in Africa designed to improve export performance of agricultural products including the cotton sector.

There is the Comprehensive Africa Agricultural Development Program that we launched just two months ago, which is an additional $1 billion over a five-year period to implement agricultural reform programs.  There is a West African cotton improvement program that we have just created and we are looking to expand that is targeted particularly to the needs of the West African cotton farmer, including in such key areas as improving crop performance, pest resistance, irrigation practices.  My colleagues from USDA can describe them in greater detail.

Our goal here is to address the question of why is it that the West African cotton farmer is only getting a yield that is approximately 50% of what the developed country cotton farmer is getting.  That has to be our priority.  We must make our West African cotton farmers more productive and more efficient.  That will be a key goal for us.

Then there is – as many of you may have heard – the President's major initiative in what is called the Millennium Challenge Account.  This is a new way of conceiving of aid and assistance designed to foster growth in eligible countries targeted in ways that they themselves design.  I'm delighted to tell you that four of the C5 countries are now eligible for MCA funding.  One, Benin, is on the verge of completing its compact, which will result in hundreds of millions of dollars flowing to Benin for purposes of port improvement, infrastructure improvement, rural diversification.  The other countries we anticipate coming on-line soon. 

This is critically important.  This is going to be what we believe not only helps the cotton sector by improving their access to markets, but indeed by helping the rest of the economy develop as well.

This will remain a key focus of ours.  We are committed to engaging in further discussions with respect to aid and assistance to see what we can do to assist in this area, just as we are committed to continuing a vigorous dialogue on trade.  That dialogue is going to continue this week.  This is the beginning of that dialogue.  Tomorrow we are scheduled to meet with the ministers from the C4 countries.  I believe Senegal will be there as well.  We are looking to have vigorous discussion there and to continue this week with building a common understanding of problems and to obtaining a resolution that will be mutually satisfactory.

Let me finally finish my remarks by pointing out that we must, as we move forward on cotton, not forget the other sectors of agriculture, which are not only important to the economies represented here, but indeed to LDCs generally.  Sixty percent of the world's population is engaged in agriculture.  It has been estimated that an overwhelming percentage of the benefits to be gained from the Doha Round will be from agriculture.  The bulk of that gain is going to be from greater market access.  It's going to be from allowing African cotton producers, African producers of other products, to be able to access other markets, both in the developed world and also in the developing world.  It will allow the diversification of the economies so that West African producers are no longer just growing, say, cocoa, but are able to process that into semi-processed cocoa or even chocolate that will enable the standard of living to go up and investment flows in.  These for us are core agenda items.  They are core imperatives, frankly, this week.

A final word.  I am delighted that we are engaging in this dialogue.  I think it is critically important during this week in Hong Kong that we maintain this spirit of dialogue.  This is a problem and an opportunity, frankly, that we all share together.  We see the C5 countries as being our partners in this effort.  We see them as being critically important to attaining ultimately a successful Doha Round.  So I look forward to sharing many more discussion with Ambassador Amehou, with Minister Ngarmbatina, and with many others in this room as we move forward. 

Thank you.

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