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U.S. Proposal for WTO Hong Kong Ministerial Conference: What's at Stake for Cotton Producers?

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  • Fadiga, Mohamadou L.
  • Mohanty, Samarendu
  • Pan, Suwen
  • Welch, Mark

Abstract

This study analyzed the cost to U.S. cotton producers of two policy alternatives under which the U.S. seeks to cut its total AMS payments for cotton by 60%. We considered two scenarios; the U.S. decides to act unilaterally versus conducting the policy initiative along with multilateral tariff and subsidy eliminations from the Rest of the World. The study found a 12% cut in target price and 8% cut in loan rate are necessary to reach the 60% AMS targeted reduction under the unilateral scenario. In that regards, U.S. net farm income decreases considerably despite an appreciation of U.S. farm price. Under a multilateral trade liberalization from the Rest of the World, a 9% cut in the loan rate and 4% in loan rate are enough to reach the AMS reduction threshold. The study found there is 20% chance that net farm income would appreciate and 80% chance that it would decline. However, the decline is less severe compared to the situation where the U.S. acts alone. Overall, the sole beneficiaries in both policies are mainly the major exporters such as Brazil, Australia, West Africa, and Uzbekistan.

Suggested Citation

  • Fadiga, Mohamadou L. & Mohanty, Samarendu & Pan, Suwen & Welch, Mark, 2006. "U.S. Proposal for WTO Hong Kong Ministerial Conference: What's at Stake for Cotton Producers?," 2006 Annual meeting, July 23-26, Long Beach, CA 21273, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea06:21273
    DOI: 10.22004/ag.econ.21273
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    References listed on IDEAS

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    1. John C. Beghin & Barbara El Osta & Jay R. Cherlow & Samarendu Mohanty, 2003. "The Cost Of The U.S. Sugar Program Revisited," Contemporary Economic Policy, Western Economic Association International, vol. 21(1), pages 106-116, January.
    2. Gardner, Bruce L., 2003. "U.S. Agricultural Policies, Since 1995, with a Focus on Market Effects in Grains and Oilseeds," Working Papers 28553, University of Maryland, Department of Agricultural and Resource Economics.
    3. Daniel A. Sumner, 2003. "Implications of the US Farm Bill of 2002 for agricultural trade and trade negotiations," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 47(1), pages 99-122, March.
    4. Fadiga, Mohamadou L. & Mohanty, Samarendu & Pan, Suwen, 2005. "The Impacts of U.S. Cotton Programs on the West and Central African Countries Cotton Export Earnings," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 6(2), pages 1-11.
    5. Richardson, James W. & Klose, Steven L. & Gray, Allan W., 2000. "An Applied Procedure For Estimating And Simulating Multivariate Empirical (Mve) Probability Distributions In Farm-Level Risk Assessment And Policy Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 32(2), pages 1-17, August.
    6. Pan, Suwen & Welch, Mark & Mohanty, Samarendu & Fadiga, Mohamadou L. & Ethridge, Don E., 2005. "Chinese Tariff Rate Quota v.s. U.S. Subsidies: What Affects the World Cotton Market More?," 2005 Annual meeting, July 24-27, Providence, RI 19111, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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