Webdiary - Founded and Inspired by Margo Kingston |
 |
 |
 |
 |
 |
 |
 |
|
 |
The Tyranny of King Cotton
Joseph E Stiglitz, a Nobel laureate in economics, is Professor of Economics at Columbia University and was Chairman of the Council of Economic Advisers to President Clinton and Chief Economist and Senior Vice President at the World Bank. His most recent book is Making Globalization Work.
by Joseph E Stiglitz
Americans like to think that if poor countries simply open up their markets, greater prosperity will follow. Unfortunately, where agriculture is concerned, this is mere rhetoric. The United States pays only lip service to free market principles, favoring Washington lobbyists and campaign contributors who demand just the opposite. Indeed, it is America’s own agricultural subsidies that helped kill, at least for now, the so-called Doha Development Round of trade negotiations that were supposed to give poor countries new opportunities to enhance their growth.
Subsidies hurt developing country farmers because they lead to higher output – and lower global prices. The Bush administration – supposedly committed to free markets around the world – has actually almost doubled the level of agricultural subsidies in the US.
Cotton illustrates the problem. Without subsidies, it would not pay for Americans to produce much cotton; with them, the US is the world’s largest cotton exporter. Some 25,000 rich American cotton farmers divide $3 to $4 billion in subsidies among themselves – with most of the money going to a small fraction of the recipients. The increased supply depresses cotton prices, hurting some 10 million farmers in sub-Saharan Africa alone.
Seldom have so few done so much damage to so many. That damage is all the greater when we consider how America’s trade subsidies contributed to the demise of the Doha Round.
Rather than offering to do away with its cotton subsidies, America offered to open up American markets to cotton imports – an essentially meaningless public-relations move that quickly backfired. Owing to its huge subsidies, America exports cotton, and it would import little even if formal barriers are removed.
Thus, recent trade negotiations have a surreal air about them, because, whatever their outcome, ultimately cotton subsidies will have to go. Brazil, frustrated with America’s intransigence, brought a case against US cotton subsidies before the WTO, which ruled as almost any economist would: the subsidies distort world trade and are therefore prohibited.
Faced with the WTO order, the US will try to comply with the letter of the law and avoid its spirit, making changes in the subsidy program to ensure “technical” compliance. But these attempts will almost surely fail; in the end – though it may take years – cotton subsidies will be eliminated.
Of course, the European Union’s subsidies are far larger, but, in contrast to the US, Europe has made some effort to reduce them, especially export subsidies. While export subsidies appear more obviously “trade distorting,” America’s cotton and other subsidies are in fact almost as bad. When subsidies lead to increased production with little increase in consumption, as is typical with agricultural commodities, higher output translates directly into higher exports, which translate directly into lower prices for producers, lower incomes for farmers, and more poverty in the Third world, including millions of cotton farmers eking out subsistence incomes in semi-arid conditions.
America and other advanced countries are the real losers from the demise of the Doha Round. Had the Bush administration fulfilled its commitments, Americans taxpayers would have benefited from the elimination of huge agricultural subsidies – a real boon in this era of yawning budget deficits. Americans would have been better off as consumers, too, with increased access to a variety of low-cost goods from poor countries.
Likewise, migration pressure would have been reduced, because it is the huge disparity in incomes more than anything else that leads people to leave their homes and families to immigrate to the US. A fair trade regime would have helped reduce that disparity.
Indeed, citizens throughout the rich developed world all stand to benefit from a more prosperous globe – especially a world in which there is less poverty, with fewer people facing despair. For we all suffer from the political instability to which such despair gives rise.
But it is America that perhaps now stands to gain the most by reviving the Doha talks with a more credible and generous offer. America’s influence in the world has suffered greatly in the last few years; the Bush administration’s hypocritical use of free-market rhetoric while pursuing protectionist policies has made matters worse.
America’s national interests thus dictate a change of policy. But there is also another powerful rationale for doing so: treating fairly those who are poorer and less powerful is the morally right thing to do.
Copyright: Project Syndicate, 2006.
www.project-syndicate.org
 |
 |
 |
| © 2006 - 2008, Webdiary Pty Ltd |
| Disclaimer: | This site is home to many debates, and the views expressed on this site are not necessarily those of the site editors. Contributors submit comments on their own responsibility: if you believe that a comment is incorrect or offensive in any way, please submit a comment to that effect and we will make corrections or deletions as necessary. |
Wool and water
Cotton vs Wool ?
I'd like to pose a question.
Out of wool and cotton, the production of which clothing material has the least impact on the environment? Considering all factors like water use, land use, energy consumption and so on. Does anyone know if there is a clear winner?
Wool and cotton
Gareth: They are so different in terms of the resources needed to produce them both it would be difficult to come up with an answer to that. But some interesting conclusions are reached in the Bryan and Marvanech Report (CSIRO) Quantifying and valuing land use for the Integrated Catchment Management Evaluation in the Murray Darling Basin 1996/7 and 2000/01. Some of the points made in that report were::
1. While 95% of the Basin is still dryland with sheep and cattle, there was a 36% overall expansion in area under cotton alone, with a commensurate increase in water requirement from 729GL to 2856GL. Sheep pasture activity decreased in response to that increase, so clearly where some farmers saw cotton as an option, ie had access to water, they opted out of sheep. Gross revenue in the Basin increased by 2 billion as a result of irrigation expansion.
2. Cotton ranks second to dairy in land use and water consumption in the MDB. And there was an increase of 19% in irrigated dairy land use in that period.
3. The highest returns from irrigation are from the cut flower, fruit, nut, grape and dairy industries with cotton coming in second followed by cereals and rice.
However since 2001 it has been all downhill in terms of water availability so this year alone there will be an expected decline of close to 40% in cotton production in the Basin. Depressed prices have also played a part but water is clearly the big factor.
Just in passing I note that 8-10 bales of cotton per hectare (a standard bale weighs 220kgs) is considered a reasonable average. With $350 per bale said to be the cut even price, one can get a line on the cost of production. So a cut even return is around $3 000 per Ha. At the better price of $700 per bale good profits are made.
Wool prices have lifted recently with average price per bale around $800-1000 depending on the type. A standard wool bale weighs around 190 kgs. A Merino sheep cuts on average 4 kgs, so you need around 45-50 sheep for every bale of wool. On a property in the traditional Monaro fine wool country, (and in a normal seasonal year), you would run say 6 sheep to the hectare. So about 50 sheep, 10 hectares and you have a bale of wool worth around a grand.
It is easy to see why the returns from pasture grazing sheep, and cattle too, give the lowest return per hectare. Water consumption by sheep averages 3-4 litres a day in summer, more if saltbush is being grazed. But of course there is the rain needed to grow the pastures, and an average fall of 500 to 600 milliltres would be essential on any property to maintain year round pasture.
When you consider the land area required to produce the wool, the salinity problems that have arisen from overclearing, and the way in which sheep denude the vegetation cover in drought with the loss of topsoil, it is hard to come down on the side of the sheep in terms of their impact on the environment.
While irrigation causes salinity problems, the amount of land that can be brought into production will always be limited by the availability of water, so the industry can expand just so far, and even goes into periods of major retraction due to lack of water.
Now, that I know does not answer your question. You would need an agricultural economist to work it all out. But I would not put my money on the sheep.
A good question
Gareth: I can't say I know. It would take some research to establish, I suspect. I know that cotton requires a lot of water and is prone to disease and that means more chemicals are used in its production although organic cotton is produced, at a much higher cost.
Then again, sheep are hooved animals and therefore harder on the Australian environment.
It would be interesting to know if there is a clear winner. If I had to bet I would bet on wool, taking into account where the wool is grown. I suppose you would have to compare apples with apples and compare cotton grown in its most favourable environment and wool produced in its most favourable environment.
Jenny: Thanks
Jenny: Thanks for an interesting post on cotton. I have often wondered why the cotton market stays so strong given the preponderance of synthetic in the modern world.
You mention the need for cotton in hot climates but during my time in India and three African countries it became clear that cotton is very hard to find and that people wear synthetics most of the time. And plastic shoes which are terribly uncomfortable. It of course comes down to cost. they are poor and synthetics are cheaper. Sadly some of these countries produce cotton but never get to benefit from it.
When I was living in Lusaka in Zambia I went hunting for cotton blankets and could only find synthetic..... the sort of polar fleece which one needs living in the Arctic but is hardly suitable for Africa. And yet that was the only thing on sale. I did finally get a cotton blanket..... handwoven by Zambians and sold of course for a price which was way beyond anything they could afford.
Sadly, not much of the world's cotton ever gets to the poor even when they live in places which demand it.
Cotton demand and supply
Roslyn: Maybe times are changing, at least in India and China. I notice too one can at last find a wide range of 100% cotton blouses in many shops here, after a long period of having those polyester mix things the only choice. Many are Australian made and are not cheap so clearly while demand exceeds world supply the Australian industry will continue to expand, despite the high cost, and unreliability of water. and the potential for US subsidies to depress the market in the future. But I do not myself think cotton production is sustainable in the long term in this country, though large amounts of capital continue to be invested in the industry. Water will the obvious continuing big issue.
I agree, the third world countries especially in Africa will not benefit till the US and the EU really gets serious about free trade. MInd you, they are not the only countries with subsidies on rural production and the EU far outstrips even the US on grain subsidies.
Cotton on the move but short on water
A supplement to The Land this month provides some interesting facts about the cotton industry in New South Wales. Titled Cotton: Crop Pushes South, it details the expansion of the industry from northern NSW into the Murrumbidgee and Lachlan river systems over the past decade. This has been enabled by development of new varieties suited to the cooler climates with narrower windows for sowing and harvesting.
New growers are reportedly lining up to trial cotton in the south, the only restraint being the current lack of water in those river systems and the cost of pumping of bore water. Hence sown areas have almost halved during the current drought with some established cotton growers diversifying into other crops such as almonds. However, the traditional maize crop, and in some cases even rice, is said to be being abandoned in favour of the higher returns per hectare and megalitre that cotton promises. With potential yields of from 7-11 bales per hectare at average prices of $400/450 a bale, one can see the attraction over the more traditional crops.
The statements regarding the use of bore water for cotton production are illuminating. With the drought reducing irrigation water availability in the Lachlan, greater reliance was placed on bores in the past four years. One Hillston farmer is reported as saying that this means "instead of costing $100 to $120/ha in pumping costs it is up around $700". He goes on to say that the cost of diesel as against electricity-driven bore pumps is double, and hence he has plans to replace the diesel-driven pumps with electricity. One wonders if he has noted the report today of possible future electricity shortages in this State.
With cotton prices at present flat, due no doubt to the heavy subsidisation of the industry in the US, it is hard to see where the industry has a future in Australia without the availability of the much cheaper river water. Hence the conflicting reports of farmers wanting in, while others are wanting out.
Some interesting statistics are provided in brief in the article as follows:
1. World cotton production is expected to be 25 million tonnes in 2006/7
2. China, India and Pakistan are expected to produce 13 million tonnes but will consume up to 65% of world production, up from 50%.
3. World cotton stocks are projected to fall, for the second consecutive year, to 11.6 m tonnes.
I believe cotton demand will continue to grow with any increase in temperatures from global warming. Anyone who lives in a hot zone knows that any clothing that is not 100% cotton makes life unbearable. Cotton demand could see a commensurate decline in the synthetic fabrics such as polyester and nylon. However, the increased cotton consumption may be due to no more than increased affluence in the major consumer countries, India and China. Overall, cotton consumption is reported to have declined in the developed countries but the increase in Asia has seen it "maintain its 40% share of textile fibre production".
I cannot see any mention of production in the poorer countries in the third world. And that speaks for itself.
Facts from Australian Cotton Outlook, October 2006, in supplement to The Land. Various articles pages 2-12.