If subsidies are eliminated, world cotton prices may increase by 10% in the next 3-4 years
US cotton growers insist that they need government subsidies, but the World Trade Organization says that US cotton subsidies have reduced world cotton prices and harmed the interests of farmers in other countries. The U.S. Senate has not yet voted on the $280 billion agriculture bill. Similar to the House of Representatives bill, the Senate will agree to continue the 2005-06 subsidy arrangement totaling $3.1 billion, but US President Bush threatened that he would veto the bill passed by the House of Representatives. American farmers say that government subsidies are very important. The World Trade Organization said that subsidies distorted world trade, lowered world prices, and hurt the interests of farmers in other countries. The United States is not the only country that provides subsidies to domestic farmers. According to the International Cotton Advisory Committee, China provides 1.4 billion U.S. dollars in subsidies every year through import quotas to keep China's prices higher than other countries and regions. China is the world's largest cotton producer. The European Union is a smaller cotton-producing region and last year provided farmers with a subsidy of 300 million U.S. dollars. Cotton subsidies encourage farmers to expand production and suppress prices. The Cotton Advisory Committee estimates that if subsidies are eliminated all over the world, world prices will increase by 10% in the next 3-4 years. President Bush is looking for ways to reduce trade frictions. He threatened to veto the bill passed by the House of Representatives, and that the House of Representatives bill will eventually be compromised with the Senate bill. African countries, including Ivory Coast, contribute about 18% of the world’s cotton exports. In West Africa alone, about 10 million people depend on cotton for their livelihoods, especially in these areas where it is difficult to grow other crops.