Minimum Price Guarantees To Cotton Farmers Should Be Outlawed
Governments all over the world try and set the minimum price at which cotton grown in their country can be sold. Both the United States and the European Union have policies which support their cotton producers by ensuring them a particular price at which their cotton will be bought as part of their subsidy programs. Developing countries like India, China, Mali and Burkina Faso have passed legislation that attempts to do the same thing in their own countries.
In developed nations, this drive to ensure prices stems from the need to incentivize farming. In developing nations, these policies are enacted in order to stop farmers from being exploited. However, minimum price guarantees are not without risk and when enacted they often cause more harm than good, both domestically and abroad. Thus we are advocating that any government intervention that establishes a minimum price at which cotton can be bought be outlawed, both in developing and developed nations.///Opposition:Considering that ¾ of top cotton producers consist of developing countries, which are economically dependent on cotton production, eliminating MPG would result in income instability, food insecurity and indebtedness for millions of farmers. A minimum level of price stability is vital for income security in the cotton sector and to prevent further slides into poverty. MPGs are critical to producers who cannot manage the risks associated with depressed, volatile, and generally declining prices. Lack of support to cotton farmers will lead them to switch to other crops which will in turn results in underproduction of cotton in the world. The subsequent spike in cotton prices will affect the labor-intensive textile industries leaving millions of workers unemployed.
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Impact on Distortion of International Markets
When a government establishes a minimum price guarantee, it disrupts international markets by depressing world cotton prices. This occurs because when a country establishes a minimum price for cotton, cotton becomes a more attractive crop for farmers as it is now less risky to grow. Thus farmers increase their cotton output or switch from other crops. Supply increases, and demand remains stable, so the price of cotton falls in international markets. Governments then buy up the excess (at huge cost!) and dump it in international markets to try and salvage some revenue.
In 1996 the US enacted the Farm Bill which provided direct payments to compensate farmers for low market prices. This led to the overproduction of cotton from 1997 to 2002, and resulted in "the average world market price for cotton [declining] by 40%." In the same time period "US cotton went from being dumped at an average price of 17% below the cost of production to an average price of 61% below the cost of production"[[ http://bit.ly/oJPsHL%5D%5D.
This is harmful: when world cotton prices are artificially depressed, farmers in other nations are unable to compete. For instance, from 1997 to 2002 in Benin, the 40% reduction in the farm-gate price of cotton reduced the income of cotton growers by 21% and raised poverty levels from 37% to 59%.[[ http://bit.ly/oJPsHL%5D%5D 100 million rural households were involved in cotton production worldwide in 2001; cotton is an important contributor to rural livelihoods in China, India, and Pakistan. Cotton prices correlate inversely with poverty levels.[[http://bit.ly/pKpmrh]] Poor farmers internationally are seriously affected when a foreign government enacts minimum price policies, and results can be dire for the 100 million households that depend on cotton farms for subsistence -- not only do they have no other income source to turn to, minimum social security isn't guaranteed by the government as is in the EU or the US. It is an injustice to farmers worldwide.
MPGs do not affect world cotton prices
The proposition failed to provide any other examples of market distortions caused by minimum price guarantees of any countries other than the US. The abusive US cotton subsidies are indeed exceptional and goes against WTO rules. Such practices undermine the fragile national economies of countries that depend on cotton. Other countries have strongly objected to this policy, as shown by Brazil’s legal challenge against the US at the World Trade Organization (WTO), charging that Washington is in breach of a "peace clause" in the organization's Agreement on Agriculture. []
Economic benefits to poor families from cotton production in Africa and elsewhere were undermined by depressed and volatile cotton prices, partly as the result of unchecked US subsidies, and the declining commodity prices. Mali, Benin, Burkina Faso, and Chad complained at the WTO since 2003 to end trade-distorting cotton subsidies of rich countries which caused losses of $400m to these West African economies in 2001–2003 and also sought compensation.[]
Thus market distortions of the kind described by the proposition are not an inherent feature of MPG’s but are caused by aggressive protectionist policies in violation of fair trade rules. Any abuse of MPGs in violation WTO rules should be sanctioned. The use of MPGs by the more powerful economies such as the US and the EU should be closely monitored and controlled so as to ensure it does not exceed the allowable limits of subsidies under WTO arrangements thus preventing any distortion on international markets.
Government first determines the volume of cotton production and based on that figure determines the level of subsidies required to cover it. MPG’s do not lead to overproduction because careful preliminary planning is conducted when determining the price of cotton.
Government Reliance and Tokenism
Minimum price controls' main long term harms are prolonged government reliance and tokenism. A minimum price control is simply a policy that requires cotton to be bought at a certain price. Policy is prompted by political will, and if at any time the government changes its priorities, this policy could easily be recalled, leaving the farmers exactly where they were before government intervention. Moreover, new governments can be voted in that seek to remove support for agriculture and instead prop up industry or services – political back-and-forth is normal. The government should aim to invest in longer term policies that retain impact even after it is long gone rather than rely on policy that is easily recalled.
In addition, the band-aid of price control is tokenistic and reduces incentives for more permanent changes in farming methods. Governments are able to point to price controls as tokens of support for farmers, and often do nothing to increase the capacity of farmers long term by improving technology, services, education, and creating cooperatives, since these policies actually require cash investment. India, for example, noted increased subsidies (which performed the same function as price floors) correlated strongly with low public investment in agriculture.[[http://bit.ly/pvDndX]]
The opportunity cost of not pursuing long-term policy is high. Longer term policies invest in farmers. They also involve other sectors of the economy; technological improvements require more sophisticated industries, services, and human resources. For example, introducing tractors not only generates industrial economic activity, but also forces investment in improvements to roads and infrastructure. Improving education, awareness, and local collaboration amongst farmers advances general welfare. Longer term reforms bring spillover development in other sectors because of the broader approach to development, and this opportunity is lost with price floors.
Cotton production is a critical development strategy for poor countries, especially those in West and Central Africa, where governments and populations have little access to development resources. Cotton is recognized by the World Bank and other donors as a strategic commodity for poverty eradication and is included in Poverty Reduction Strategies and heavily indebted poor countries (HIPC) programmes of debt reduction.
The majority of top cotton producers consists of developing countries undergoing major structural economic reforms such as privatization. These reforms create enormous risks for cotton farmers and make the task of growing and marketing their product in the highly volatile world cotton market even harder. Without government support farmers will not engage in cotton production leaving millions of families without main source of revenue consequently leading to increased poverty.
For example, Mali has been under pressure from the World Bank and the IMF to implement policies since the late 1990s of promoting cotton-sector reform through privatization, inter alia, by creating an independent the new price-setting mechanism agreed in January 2005. However, this particular mechanism jeopardizes the livelihoods of millions of farmers who depend on cotton as their own source of revenue. When faced with a similar challenge of privatisation in the late 1990s Burkina Faso responded by designing support programs for cotton farmers to sustain their livelihoods while also dealing with the decline in prices.
In cases such as these minimum price guarantees to cotton farmers are critical in slowing or preventing increasing rural poverty. While economic reforms in the sector are needed they create great uncertainty. Government support underpinning minimum prices is essential for preventing increased poverty as cotton farmers are least capable of managing these risks. The farmers, ginning companies and exporters should share responsibility for price risks with gover
Longer Term Solutions Work Better
Minimum price controls are often used as a means to stop exploitation in nations like India, Benin, and Mali where poor farmers are limited by lack of technology (e.g. bullock carts instead of tractors), insufficient irrigation, and inefficient fertilizers. The result is higher input costs and lower returns on investment. Lowering input costs in the long term requires investment in technology, better farming methods, and surplus cash, which many poor farmers cannot afford. To try and aid farmers, governments set minimum price controls to ensure that they can sell at prices that give them a steady income.
Instead of pursuing this short term 'band-aid' policy, governments should seek to implement long term reforms that empower farmers. Improved access to education and the internet will ensure farmers are aware of international prices. Creation of official farmer cooperatives will allow farmers to negotiate as a group instead of being exploited as individual small farm owners. Investment in technology by governments can substantially reduce input costs. They can increase on-farm productive efficiency in a number of ways – e.g. by adapting genetically modified seed technology (which in the US generated $215 billion in benefits between 1996-1998 [[http://bit.ly/pKpmrh]]), or improving the provision of agricultural extension services, technical support, and phytosanitary controls (Bangladesh’s Integrated Pest Management Program, implemented 1988-95, won awards for increasing crop yields, reducing purchase of chemical pesticides, and educating farmers. [[http://bit.ly/roefWI]]) These are examples of measures that are longer term, do not harm international markets or foreign farmers (who are more reliant on agriculture), or lead to increased reliance on governments, while sacrificing economic growth potential. As stated earlier, once a government uses a price floor, it usually cannot and does not pursue longer term policy effectively.
MPGs contribute to long term solutions
Cotton production and industries associated with it such as textiles are highly labor-intensive and provide employment to major portion of population in developing countries. Stable revenue generated from cotton production ensure that governments have funds to invest and develop other sectors of the economy. MPGs do not prevent governments from engaging in economic modernization efforts, e.g. by making its regulatory regime favourable for foreign investors, franchising, leasing etc. MPGs provide the safety net for cotton farmers and their numerous households helping them overcome problems associated with such structural reforms and changes.
Unlike what the proposition suggest the labor costs which are the major part of input costs are minimal in most cotton growing countries. Certain technologies will may make cotton production more efficient but actually leave many workers unemployed, which will create an enormous burden on the state budget to sustain them.
Secondly, most technologies are too expensive to afford and mainly they are supplied by foreign states under high interest rates. Employment of these technologies may lead to higher revenues but result in capital being eventually diverted outside the country.
MPG's Always Lead to Overproduction
Opposition (opp) would allow ‘good’ MPG’s and strictly regulate ‘bad’ (protectionist) MPGs in the WTO. We don’t believe in the distinction: MPGs inherently distort international markets by making cotton the least risky crop, thus generating excess supply which governments buy up and dump on international markets, creating low prices. Opp provided no examples of ‘good’ MPGs that do not distort prices, because there can be no such thing!
Price distortions after the US’ 1997-2002 policies were caused by subsidies that ensure an MPG of 52 cents/pound for farmers. [[http://bit.ly/ozowSq]] Removing US MPGs alone would have raised world cotton prices by 11 cents/pound in 2001-2002, which would have provided West and Central African farmers revenue gains of $250 million a year.[[http://bit.ly/ohk4Bl]] Subsidies (which opp is against) and MPG’s are complementary; they perform the same function by compensating farmers for price volatility and causing overproduction and dumping. We are against both. More examples: in cases in India, Brazil, and China (all developing nations), implementation of MPG’s result in depressed international prices and harmed cotton farmers worldwide.[[http://bit.ly/ohk4Bl]]
Opp's best response MPGs' market distortions is careful planning. However, it is very difficult to plan production and price accurately due to the variety of factors involved. Also, even with planning, MPGs will by definition create overproduction since farmers will invest more in what is less risky.
Opp also cites the negative influence of privatization/structural reform on farming and income security. However, we are not advocating for privatization. Governments should support agriculture, but emphasize capacity building, because long term income security is more important than short term payouts. Opp finally states MPG’s create a regulatory framework that attracts FDI, and this is unsubstantiated (FDI usually goes to those who embrace free markets).
Market realities show otherwise
Low cotton prices are hardly something the world economy should avoid. As A.Smith postulated & D. Ricardo later affirmed “each nation should specialize in producing those goods that it could produce most efficiently with less expense than another country” with this concept of comparative advantage now used as basis of WTO regulations.[[ http://bit.ly/pg5jyV%5D%5D
Low commodity prices mean increased efficiency for the global economy. As cotton is a strategic input in many industries, price reductions will lead to lower production costs of many products resulting in affordable consumption most beneficial to the poor.
Economic efficiency is what all nations strive to achieve to reduce poverty & improve living standards. Despite possible adverse effects on farmers’ income free market forces will leave market with the most efficient cotton producers.
Strong examples of beneficial use of MPGs include Uzbekistan, Tajikistan, & Turkmenistan. The successful use of MPGs put them among world’s major cotton exporters. [[http://bit.ly/q73DDC]]
Stating that “MPGs will by definition create overproduction” exhibits ignorance of market realities. Firstly, MPGs are a controlling mechanism used to increase or decrease production by inducing desired production levels. Because 3/4 of all cotton is consumed domestically states are able to plan future yields quite accurately & precisely [[Ibid]]. Overproduction claim is factually false as world cotton statistics show production levels being lower than consumption since 2007. The attendant decline of the cotton stocks confirms the shortage of cotton supply in the market.[[http://bit.ly/qjxio2]]
Secondly, overproduction does not automatically lead to cotton being dumped in market (as prop state). Because of cotton’s strategic nature states keep any surpluses in stock for future use. Speculative actions in market can cause price distortions but those violate trade rules with no relevance to MPG
Longer Term Solutions Solve Opp's Problems
Opp uses MPGs to create farmer safety nets, reduce poverty, and incentivize cotton farming in developing nations. First, it's not as though farmers won't grow cotton without governments. They have limited options, most survive on farming, and incentivizing a non-subsistence crop is unnecessary. Second, safety nets only push farmers barely above poverty lines. Governments should instead focus on capacity building that makes farmers self-reliant. There will be short term uncertainty/unemployment, but in the long run the economy develops, diversifies (because of new employment opportunities or spillover to other sectors) and reduces cotton reliance. Also, opp only asserts that capital flight will occur; there is no reason why investment in technology or education at home won’t lead to local employment, even if international firms are involved.
The volatility that opp attempts to protect farmers from is partly caused by MPGs – the market would be reliable and fair if not for MPG distortions. Government support for cotton (MPG’s, subsidies, insurance, etc) dropped from $3.2 billion to $1.3 billion worldwide in 2009-2011 (lowest level in a decade), and it's no coincidence that it correlated with record price volatility.[[ http://bit.ly/n72HiX%5D%5D Relying on government policy is a mistake. Sub-Saharan African nations and C4 nations were found to have competitive prices compared to other producers assuming subsidies are removed[[http://goo.gl/R63nU]] and outlawing MPGs actually serves to prop up cotton industries (as opp points out, this can bring development). It ensures farmers sustainable incomes at global cotton prices that are not artificially depressed, and removes the need for the safety net altogether. Investment in education and better farming methods reduces costs of farming in developing nations, which lets them compete fairly in international markets and renders safety nets obsolete. The textile industry can and should adapt to fair market prices.
No effect on volatility
That MPGs cause cotton price volatility and removal thereof alone would lead to price stability in the free market is totally misconceived. A study by Hudson & Cobble (1999) investigated the determinants of cotton price volatility focusing on impact of changing agricultural policies. That study could not find any effect of changes in agricultural policies, such as the US 1996 Farm Bill, on volatility.[[bit.ly/rowlln]]
Many factors affect volatility, e.g. weather conditions, political instability, and global and regional economic situation. [[bit.ly/qZzYwu]] The strongest price volatilities recently were due to abnormal weather events such as 2010 flood in Pakistan, draught in China & unseasonal rains in India. Clearly this volatility was unrelated to MPGs. [[bit.ly/9ADGTN]]
The case of US excessive subsidies disadvantaging other cotton producers supports our claim that MPGs be implemented in strict compliance with WTO rules following consultations with all relevant stakeholders. After all, WTO and other multilateral trade bodies are there to monitor and mitigate possible adverse effects of trade policies of various states.
Prop also accepts that cotton is a strategic crop for households in many developing nations often with few other crop options available. MPGs are necessary to ensure stable cotton production and revenue for farmers. Using MPGs as in the example of Mali above would help sustain livelihoods of farmers during turbulent economic reforms in the economy.
The repeated claim that MPGs cause overproduction leading to price distortion is unreasonable. World cotton statistics show that overproduction is not an inherent feature of MPGs with production and stock levels steadily declining in the past 4 years. [[http://bit.ly/qjxio2]] Many fear shortage of cotton causing higher prices. [[bit.ly/mf5Pz1]] Cotton production should thus be further incentivized through government support including MPGs where necessary.
USA2 (Proposition) Summary
Both sides of this debate seek farmer welfare, development of developing nations, and sustainable production of cotton. The scope of the debate was both developed and developing nations, and we prove that in both cases on all these issues, removal of MPGs is beneficial.
On farmer welfare, we stated that although governments mean well in attempting to correct volatility and provide stability, they don't aid farmers. In developing nations, MPGs only barely push farmers above poverty lines with the added opportunity cost of not spending as much on longer term reform and capacity building (due to limited resources). The short term solution is tempting, but not viable. Also, protection from volatility would not be necessary if the volatility occurred at 40% higher prices. In developed nations, farmer welfare is not the concern; rather, it is a reluctance to accept that because production costs are lower internationally, they may have to import. Farmers here can switch to other crops or professions without significant harm. Meanwhile, 'abusive US subsidies' harm farmers all over the world by increasing supply, dumping in international markets, and depressing international prices, rendering farmers unable to compete. ($400m of losses, as opp points out!). MPGs are inherently a harmful market distortion, and opp has not responded to this issue - they declare underproduction: a one-time drop between 2007-10 (their source shows hikes later); cotton shortages; and a weak link between subsidies and dumping. 1) Their source declares in the introduction that subsidies generate overproduction which depress prices![[http://bit.ly/q73DDC]]. 2)If prices go up, production will to match; and 3) The largest subsidizers (USA, China, EU) are also the largest exporters.[[ibid]] Dumping is natural; they subsidize to export.
The second point of contention is development. Low international prices harm vulnerable farmers in C4 nations causing loss of livelihood. They claim low prices indicate market efficiency, but that is only true if prices are not artificial! Instead, MPGs reduce resources available for vital longer term reform and increase government reliance locally. Opp claims cotton is a development strategy; we agree, but not through tokenistic MPGs. Cotton can be supported in the C4 through government extension services and technology which, in an international environment that does not have artificially reduced prices, will give farmers the competitive advantage and sustainable income they deserve.
Farmer welfare and development are the issues on which the debate should we weighed. However, opp also declares harms to the industry as a whole. The industry will not suffer due to higher prices; nor will employment reduce as demand still exists. The market aligns itself at higher prices. The removal of MPGs will aid development, and create a sustainable cotton industry that produces as much as is demanded and adopts new technology to increase production.
Ensuring employment in several industries
With cotton as the major input for many industries turbulence in supply and demand would result in major instabilities in these industries leaving millions of workers unprotected. Thus MPGs ensuring stable supply of cotton for such labor-intensive industries as textiles and clothing can be useful. The textile industry is the most labor intensive industry in India employing some 35mln people,[[http://bit.ly/qUSton]] whereas in Bangladesh 10-12 mln households depends on textile industry with 90 % of textile workers being women.[[http://bit.ly/oTQ0wl]] This chain from cotton production to manufacturing of ready-made products involve a large number of sectors, such as ginning, textile and clothing manufacturing industries accounting for major portions of employment in developing countries.
This dependence of employment and income on cotton is actually one of the reasons for governments’ use of MPGs. MPGs incentivize farmers to produce cotton in required amounts ensuring sufficient supply and timely delivery for textile industries thus ensuring constant employment of population and stable development of the nation.
To counter any critcism of dependence of economies on cotton production, including for employment, we'd like to remind that cotton is not the only commodity for which MPGs are used. So to say that MPGs make cotton the safest and least risky crop to produce leaving other agricultural sectors undeveloped is misleading. For example, the EU uses significant price support for a number of agricultural commodities other than cotton , most notably sugar and so do a number of other countries, e.g. China [[bit.ly/rmvped]]. Thus, farmers may choose among several crops covered by minimum price support schemes and are not limited to cotton.
It's true that cotton is a major part of some developing nations’ economies and employs many. However, opp claims that because of volatile prices, governments should artificially stabilize prices in order to protect farmers, and incentivize production further to ensure industry stability.
The reason a cotton market exists is because there is a demand for cotton which triggers supply. If governments did not provide MPGs, farmers would still produce cotton since there is profit in producing goods for which there is demand. Opp failed to show why further incentives are needed to grow cotton. Without MPGs, it is true that prices would be volatile due to weather conditions etc. (but less volatile than in situations where different governments constantly changed MPG policy, or where placing MPGs creates demand shocks). However, prices would also be higher, because supply would not be excessive/dumped due to government-guaranteed prices. As for the idea that MPGs will be used for many crops and will not lead to increased production, it is obvious that governments cannot guarantee all crops, so farmers will move to crops that are guaranteed (cotton/corn/sugar) to increase supply. Volatility in markets is normal, but becomes a problem when prices are artificially depressed because of dumping, and the fluctuation occurs at prices too low for sustainable incomes.
Finally, opp seems to be concerned about employment and income. Consider that nations that spend the most on price floors are developed economies.[[http://bit.ly/pjSFHJ]] Cotton is one of the few areas where developing nations have a competitive advantage in a free market. MPGs used in the USA render farmers in developing nations unable to compete, thus throwing off cotton production and farmer income in more vulnerable nations. Lower international prices mean developing nations that cannot afford subsidies are forced to import, reducing economic self sufficiency and discouraging long term growth.
Ensuring stable development
Cotton sector as the main income-generator in many countries reduces poverty and thus should be protected. Contributions of cotton to overall exports in Uzbekistan and Tajikistan account for 45% and 20% of total merchandise exports respectively. [[http://bit.ly/q73DDC]] MPGs used to control levels of production ensure sustainable development of transitional economies increasing efficiency of cotton production and making consumption affordable. Removing MPGs would expose farmers to economic risks they are unable to manage and decrease production. State revenues would erode pushing fragile economies into further poverty.
Removal of MPGs will not solve problems in developing cotton economies. Too much focus on US subsidies ignores real reasons why poor cotton-producing economies are not competitive. The real challenge for Africa is not subsidies but reforming its cotton sector to make cotton farmers more competitive and creating a policy environment promoting new technologies. [[http://bit.ly/pdofPo]]
Prop concedes capacity building and technology transfer are priorities for cotton producers. Notably, these problems plague cotton producers in non-subsidizing developing countries, esp. in West and Central Africa. Use of cotton farming innovation is largely credited to some form of government support incl. MPGs. With MPGs cotton farmers can apparently use part of cotton revenue to improve efficiency by introducing cost-saving methods.
Heavily subsidized cotton countries are leaders in using technology to reduce production costs. US, by far the largest cotton exporter, is the largest GM cotton producer with 80% of its area under GM cotton. Other GM cotton producers with cotton subsidies are China (60%), India (10%), and Mexico (40%) with Burkina Faso, Pakistan, and Turkey joining too. [[http://bit.ly/otwqm1]] MPGs do not exclude efficiency-raising and capacity. US and Bangladesh cited as best practices in cotton farming technology use subsidies including MPGs.
Opp repeats that cotton is important; we agree. However, it only needs to be 'protected' because the volatility occurs at subsidy-induced, artificially lowered prices. If prices were higher, developing nations could actually compete in the world market despite volatility. MPGs do not ensure 'sustainable development'; they only spend billions placing farmers barely above poverty lines. Instead, this money should be used in long term capacity building. Removal of the MPGs would shift the focus appropriately, examining root causes in Africa in more detail. Finally, a decrease in production is warranted when it brings supply levels back to those that match demand; and cotton is not an essential good, so consumption prices should not be weighed over vulnerable farmers' incomes.
Obviously, capacity building is an issue regardless of subsidies, but subsidies are an inefficient use of resources; the billions spent on MPGs internationally would be better used in long term, capacity building reform. Even if farmers can use some of their profits to improve efficiency on a micro level, a centralized approach would be cheaper and more effective. Moreover, some infrastructure projects or agricultural extension services can only be built at state level.
MPG-using nations are often wealthier nations, so naturally they tend to make efficient use of technology. MPGs do not cause GM crop; the use of technology such as GM is incentivized regardless of subsidy because it increases output and profit. The nations where subsidization or MPGs are exclusive of capacity building reforms is where resources are scarce -- West African countries, for example, where money that goes into supporting farmers to fight the US's $1 billion a day subsidy can be used towards longer term reform. Moreover, technology will increase production but not aid development if the produce cannot be sold at sustainable prices, defeating the investment because of MPGs.
Both developed and developing nations have resorted to MPGs to incentivize cotton production and protect their farmers from volatile and declining cotton prices. Just because some developed economies especially the US have abused government support schemes to disadvantage cotton producers in developing countries does not mean MPGs cannot be used to benefit the sustainable development of emerging economies faced with the challenge of feeding their rapidly growing populations. MPGs used by developing nations such as China, India and Pakistan provide subsistence to millions of farmers and their families as well as millions of workers employed in cotton-dependent industries. Proper use of MPGs is an effective mechanism for poverty reduction. Prop failed to show how removing MPGs would solve problems in the cotton sector and provided no alternatives for sound development of cotton-dependent economies. Prop failed to show reasons for outlawing MPGs as follows:
1 Overproduction: prop provided no causal link between overproduction and MPGs instead drawing incorrect inferences from the case of excessive US cotton subsidies and ignoring the actual data. Statistics show shortages of cotton since 2007, thinning cotton stocks and growing consumption. MPGs is a good mechanism for incentivizing the required levels of cotton production.
2 Price distortion: Prop falsely assumes that overproduction would lead to cotton being dumped in excess of consumption causing prices to fall but ignores the fact that states keep cotton stocks for future use. Dumping is not related to MPGs.
3 Volatility: That removing MPGs would result in “free market” price stability and eliminate volatility is false because factors affecting volatility are numerous and state agricultural policy has no proven effect on volatility.
4 Limits on state support: Prop supports our claim that use of cotton subsidies be kept within allowable limits. The successful legal challenge against US cotton subsidies showed that monitoring and regulation by WTO is needed and works well.
5 No alternatives to MPGs: Capacity building & self-reliance are possible only in stable economies, not in stagnant or declining economy conditions. MPGs provide the safety net necessary to protect against risks of global markets and much-needed reforms of cotton sectors taking economies to the next level. Cotton is a strategic crop in many countries often with few other crop options. Prop also agree that MPGs protect farmers from volatility & failed to show how Burkina Faso and Mali’s sectoral reforms jeopardizing livelihoods of poor farmers could be tempered without state support such as MPGs.
Thus no compelling reasons for outlawing MPGs were adduced by prop with no sound alternatives for ensuring stable cotton production in the face of possible shortages and reducing poverty. A simple analogy suffices; outlawing MPGs is as unreasonable as abolishing bank loans as a result of the global financial crisis.
What do you think?