Remarks by Ambassador Robert Portman
United States Trade Representative
WTO Plenary
Special Session on Cotton and Bananas
Hong Kong
Wednesday, December 14, 2005

Thank you Mr. Chairman very much, Director General and to my distinguished colleagues here. I've listened very carefully this evening to all of the presentations I wanted to wait and speak at the end so I would have a chance to hear everyone.

It was interesting. No one mentioned the United States. Although I think it was on all of your minds.

And the reason is that we have programs in place, that are subsidy programs, that very much affect the discussion tonight.

But I guess I should say I appreciate your deference or respect. But we know that we have a responsibility here.

We take this very seriously and we believe that we're in the right place to deal with a major part of the problem, which is the Doha Round.

We acknowledge the July Declaration. I wasn't here, then but I understand it was negotiated very carefully. It includes these words: ambitiously, expeditiously and specifically. And then as many have acknowledged tonight, it also says that cotton would be part of the overall agriculture negotiation. And as many have said all three pillars would address the cotton issue, therefore.

As many of you know I've spent a lot of time on the cotton issue in the last few months since taking this job, including meeting with the C4 ministers in Geneva, here, and also in Burkina Faso.

In Burkina Faso, the Secretary of Agriculture Mike Johanns, who is with me here tonight, and I had the opportunity also to meet with growers and workers in a cotton gin we visited outside of Burkina Faso in the capitol of Ouagadougou.

The point I guess I would like to make tonight is really twofold.

One, to resolve this issue, and to do it in the context of the agriculture negotiations, we must move the agriculture negotiations. There are certain things that can be done in the interim. And we've already begun that process, and I can talk a bit about it and I hope I don't take too much time Mr. Chairman.

But the reality is that unless we can come up with a way to move the agriculture negotiations forward, we can't solve these problems on the subsidy side. The last speaker talked about the fact its not just cotton, and he's right. And he listed five or six products - some we'll hear about later tonight.

We must, as my friend from the European Union Marianne Fischer Boel said, I agree with her, we must put more flesh on the bones in agriculture. The agriculture negotiation is not yet ripe.

The United States has moved forward on the agriculture negotiations on our own with regard to the export subsidies, in part because of the WTO case, frankly, and in part because of our interest in working closely with the C4 and others.

We hope that these export subsidies will be reduced even this year. It may not happen. But even this week as we're talking, I'm calling back to Washington trying to see that the Step 2 program we call it which is by far our largest export subsidy program for cotton is eliminated, repealed.

We sent the legislation to our congress. It is currently being processed. It could happen this week. We hope it will. If not, we will continue to fight hard to repeal that program altogether.

The Secretary of Agriculture has already taken all of the steps he can take administratively to eliminate export credit guarantees period. This is specific to cotton.

With regard to the WTO process, as you know, we put a proposal on the table two months ago to substantially reduce trade distorting support, including the very support that cotton farmers receive in the United States.

Our proposal also includes the eventual elimination altogether of these supports. That is not easy to do politically. In fact, it cannot happen in the United States, in my view, politically unless it is joined with the other pillars; export competition, and there our proposal is elimination of all export subsidies and to do so by 2010. And we should set a date here in Hong Kong.

And finally on market access, we believe as many have said tonight that market access is part of the solution to cotton.

And we believe that market access needs to be part both for the subsidy part to go through but also to meet the promise of Doha.

So, we're acting multilaterally here. Not just with regard to cotton.

Although if we can move this negotiation forward, we then get in to the sector's specific discussion and that will happen if we can bring the agriculture negotiation together.

Many of my colleagues from Africa - and I met with the Africa group just this morning -to share our strong view on this that we must solve this agriculture issue.

Not just because of cotton, but because for so many countries in Africa, it is agriculture that is the key to development and it is the largest employment opportunity.

And particularly on market access, I know my colleagues are pushing hard and I appreciate that.

In the interim, we're also acting very specifically on cotton and very specifically in West Africa to provide assistance.

Why is that important? It is important because as was said tonight by several speakers we need to improve the efficiency and productivity of cotton production in the C4 countries.

Why is that important? That's important because cotton production is not efficient in those countries today.

Let me give you some numbers very quickly.

And I want to be very clear about this. Our belief is the subsidy program must be dealt with. There are eleven studies out there about what the impact is on cotton prices for West Africa from the subsidy program.

Eleven different studies --they range from 2% impact to 12% impact on the price of cotton. These are the facts. The IMF study is 2.8%. The UN study - UN food and agriculture organization- is 3%.

Both of them say the U.S. subsidy program -- both of them say the U.S. subsidy program is 2%. I'm just telling you what the studies say. That's 2%.

I've heard $460 million thrown around tonight. I've heard that figure a lot. I can't find that figure in the studies. 2% is about $20 million dollars a year.

Again, I'm not saying we shouldn't deal with the subsidy issue. It is our proposal that deals with it, and we're willing to deal with it and this is unprecedented. We haven't been able to do this before to put something forward like this.

But it would be irresponsible to the cotton farmers, some of whom are here tonight, some of whom I've met with in Burkina Faso and I again met with them here. It would be very, very irresponsible to them to tell them that subsidies are going to solve their problem.

I heard a lot tonight from my friends from Africa and they are our friends. And we're meeting with them. We met with them again today. We're meeting with them tomorrow. Mr. Director General, I'd like you to know that we're making progress and we hope to be able to resolve the issues this week.

And I understand the passion. And I've seen it having been to Africa. But I also must tell you personally, I am concerned that somehow we are saying the problem is all the subsidies when in fact the problem is much bigger

Example: The yields in Africa are one half, one half the yields in the rest of the world for cotton. Less than that if compared to U.S. yields where we have very efficient production, not as efficient as Australia or Brazil or others who spoke tonight, by the way.

It's half. The yields are half. These farmers, if they had the same yields as the rest of the world, the impact of that would be over twenty times the impact of subsidies -- over twenty times -- assuming you believe the UN figures and the IMF figures. Let's even use the other figures - the highest figures, still the efficiency of production would make much more difference than the subsidies. I challenge people to look at these numbers. We have the data. You have the studies. The studies are available in French and in English.

So the aid program that we have already begun, the Cotton Improvement Initiative in West Africa to which we've already given $7 million and we're prepared to give a lot more, are very important. And I urge my colleagues in the WTO who've come up tonight and spoken about this:

Number one. For those who are blocking progress on the agriculture negotiations. If you really want to help, come up with proposals in market access that really do provide substantial improvements in market access. That is the Doha requirement - not the U.S. requirement. That enables us to get to the subsidy issue.

For those who have expertise, and a number of countries spoke tonight who have expertise in cotton. Help us help our neighbors and friends in Africa to make their production more efficient.

Marketing. A cotton farmer in the United States gets about 80 cents for every dollar of cotton he sells. 80 cents back. And that's roughly the same world wide. What is it in West Africa? 50 cents.

And again there are studies out there you can look at. But it is not just the production. And the money that we're sending is going for the soil, the seeds, the planting, the production, but also for more efficient marketing.

Why? Because the farmers aren't getting what they deserve.

I will just tell you I believe we can deal with the subsidy issue. But because I've spent a lot of time looking at this over the last few months and taking it seriously, the more I learn, the more I'm concerned and confused. Why are we ignoring the other parts of the problem?

And people have criticized the United States for putting an assistance program out there because it doesn't solve the problem. I can tell you it will have more of an impact if we're successful.

I'm not saying you can snap your fingers or wave a wand to change the production or the marketing practices of the parastatles. But unless we do that, it would be unfair to the cotton farmer in West Africa to say it is all about subsidies.

Five years from now, if we do what the United States would like to do, and we deal with these subsidies, we will still have a problem in West Africa and throughout the continent, unless we deal with some of these underlying issues.

I'm sorry to take so much time, Mr. Chairman. We had effective meetings with our colleagues of the C4 plus. We expect to continue those meetings tomorrow. We very much want to resolve this issue. We believe it can be resolved through the WTO, we think that this is appropriate on the trade side. We believe that includes all three pillars.

Incidentally to those countries who spoke tonight who buy a lot of cotton and some did. They have tariffs and those tariffs are at least 10%. We heard tonight about the 10% [inaudible] Think about that the 10% versus the 2% to 12% we talked about.

Does market access matter? Yes it matters

Do tariffs matter? Yes they matter.

This is a big potential gain from Doha, is to reduce the tariffs which are in some cases as high as 50% for African cotton.

So the United States is willing to do more on all these pillars. We're willing to do more ourselves. We take on the responsibility. We do not shirk it. But we want your help to get us to the point where we can have an agriculture negotiation that is successful. To get it to the point where we can provide assistance to these countries and farmers who need it the most.

We feel our C4 colleagues are working in very good faith. And Mr. Chairman, we hope to have resolution to this issue this week.

And I thank you for listening.

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