US reform could bring $114 boost per Africa family

By Missy Ryan

WASHINGTON, June 21 (Reuters) - Eliminating cotton subsidies in the United States, which accounts for about 40 percent of world cotton exports, would increase poor African families' incomes by up to 6 percent, a new study said.

"What the U.S. Congress elects to do in farm policy (affects) the ability of poor farmers to feed themselves, to secure a living and to feed their families," said Jim Lyons, aid group Oxfam America's vice president for policy.

Doing away with all subsidies for U.S. farmers would push up global prices by between 6 and 14 percent, Dan Sumner, a University of California-Davis professor who was one of the Oxfam study's authors, said on Wednesday ahead of its release.

Much of that price increase will be passed on to growers in West Africa, Oxfam said in the report, increasing the price they receive by up to 12 percent and boosting some families' total income by between 2 percent and 6 percent.

For an average family, that extra income worth up to $114 could pay for annual school fees for 10 children, buy food for one or two children for a year, or provide money needed to fertilize 60 percent of the family's cotton crop.

"It's not very much money to us -- it's a lot of money to them," Sumner said.

Oxfam is hoping the message will be taken to heart on Capitol Hill as lawmakers shape the future of crop subsidies in the farm bill, a five-year farm law up for renewal in 2007.

So far, there are few signs it will. Just this week, a House subcommittee passed a plan to give the U.S. textile industry rewards for using cotton similar to incentives eliminated in 2006 after Brazil won a landmark World Trade Organization case against subsidies favoring U.S. cotton.

While Oxfam slammed the move this week as a step away from WTO compliance, the industry contends the rewards aren't discriminatory because they apply to cotton of any origin.

It does acknowledge that U.S. cotton imports are minimal, just 30,000 bales in 2005/06 compared with domestic output of 24 million bales. And imports are capped at 150,000 bales a year.

The WTO is due to decide this summer whether the United States has done enough to comply with the Brazil ruling.

Cotton subsidies totaled $4.23 billion in fiscal year 2005, according to the Department of Agriculture.

"Keeping these subsidies in place also sends the signal that markets are not the way we want to go ... that the U.S. is not serious about the WTO," said Sumner, who has also served as a consultant for Brazil in its WTO case.

BALEFUL REPUTATION

Rich countries' cotton subsidies have become an emblem for poor nations' ambitions in the Doha round, the WTO talks that negotiators hope to conclude this year.

Burkina Faso, Mali, Benin and Chad, which rely on cotton for up to 7 percent of their income, call this "an issue of survival." They want Washington to help compensate for what they see as millions of dollars in losses due to lower prices.

The Bush administration maintains subsidies here don't have a big effect on world prices, and says it is already helping Africa with trade and development assistance.

"Eliminating U.S. cotton subsidies will not provide a solution for the economic plight of West African cotton producers," National Cotton Council CEO Mark Lange told U.S. Trade Representative Susan Schwab in a letter this week.

He said the Doha negotiations were heading in a worrying direction, and warned the African cotton producers might block an overall Doha deal if cotton doesn't get a special break.

The prospect of big subsidy cuts is obviously an disagreeable idea for 10,000 U.S. commercial cotton farmers in states including Texas, Arkansas and Mississippi.

The Agriculture Department has pegged U.S. cotton production in 2007/08 at 18.8 million bales, and exports at 17.5 million bales, keeping the United States in its lead export role. China is by far the world's biggest importer.