Some [sic!] gossyp about cotton

The world economy around cotton is a modern fairy tale with many wolves and few Red Ridinghoods. In case you think I am making this up, check the online article for sources. Some of the following bits which seem most like a conspiracy theory are from a World Bank policy research paper.

Cotton (gossypium) is a crop with a long history. It is water intensive, sensitive to pests and labour intensive because picking is best done by hand. Without it we wouldn’t have shirts, pants – or the blues. In the USA, the history of cotton is largely the history of slavery.

The biggest grower of cotton today is China, followed by India, both of them having overtaken the USA due to introducing GM cotton crops and having copied the use of USA’s strongest agricultural ‘muti’: subsidies. Between 2002 and 2007 China increased its cotton output by 55% (from 5.2 to 8.1 million tons) and India increased its output by 125% (from 2.3 to 5.2 million tons). ^source

While there is an ongoing argument over whether GM cotton is good for farmers or not, it seems to have increased yields. However, farmers have to buy new seeds every growing season from, eg, Monsanto.

Although cotton only contributes 0.4% to the US’ merchandise exports, which means it’s ‘not important to the United States,’ the US used to subsidise its cotton farming to the tune of 4 billion dollars per year, a figure that has recently come down to a ‘mere’ US$2 billion. This had serious effects on the global price of cotton as US cotton comprises 33% of cotton exported worldwide.^source

Being a huge subsidiser itself didn’t stop the US from complaining that India had increased its cotton subsidies. The Indian government bought Indian cotton at 30 US cents more per kilo than what was being paid on the international market and then sold the bales in the international market at discount prices.^source In China, cotton subsidies increased from US$1 billion to US$2 billion per annum.^source

The fact that they were hugely subsidising their own cotton crops didn’t prevent India and China from responding with threats to boycott the global trade deal in 2010 if the US didn’t commit to reducing its cotton subsidies.

The US was not persuaded by those threats nor by the WTO complaint lodged by four West African countries against the trade distortion caused by the subsidies. What initiated change was a WTO Appellate Body ruling brought on application by Brazil. This ruling allowed Brazil ‘to impose countermeasures, including sectors outside merchandize trade such as intellectual property and services.’ Only then did the US commit to revisiting cotton subsidies and to assisting Brazil and other cotton growing countries to build capacity in their cotton sectors. Why? Because Brazil was suddenly empowered by the WTO to impose duties on, eg, US computers, software, and heavy machinery and

‘if and when those duties are imposed, it won’t be just critics of government waste that will be alarmed over the cotton program. It’ll be Caterpillar, Intel, Microsoft, and scores of other companies that, generally speaking, don’t get a dime of direct subsidies and are far bigger players in the U.S. economy.’^source

It is doubtful that this method of taking on the US would have worked for a smaller economy than Brazil, which is part of the BRICS countries. South Africa doesn’t have comparable economic clout. It’s also an open question if the WTO complaint would work against the other cotton producers using subsidies, namely the I and C of BRICS (India and China).

Cotton in India versus cotton in South Africa

While India is the second largest cotton producer in the world with almost 14,000,000 tons of cotton produced annually, South Africa’s expected cotton crop for the 2011/2012 growing season was 14,025 tons. We are beating India in one way only – with the percentage of GM cotton we are growing: South Africa’s cotton crop is 95% genetically modified compared to 80% of India’s cotton crop.

India is using its subsidies cleverly, subsidising farmers directly as well as the cotton value chain, including mills and spinners. In comparison, the number of South African cotton gins is decreasing all the time. India also has the advantage of growing its water-thirsty cotton in monsoon country with water-retaining soil and thus only has to irrigate 35% of its cotton acreage. South Africa grows 76% of its cotton under irrigation.

While its intensive water requirements and its pest-sensitivity make cotton far from the ideal crop, the reduced reliance on external pesticides, the labour intensity of its harvesting and the fact that South Africa imports large amounts of cotton has made government believe that this might be a growth area for jobs and the GDP. Government’s 2001 Cotton Sector Strategy Plan (part of the Agriculture Plan) foresaw that RSA could produce ‘a stable 370,000 lint bales [per annum] by 2007.’ It further thought that it would ‘enable emerging farmers to contribute on average 25% of the national cotton crop by 2007 and 35% by 2014.’

And there was some encouraging news: In 2004, Da Gama was involved in a R150 million project to start farming cotton in the Eastern Cape creating 6,000 seasonal jobs and producing 12,000 bales of cotton per year. Another R1 million and technical assistance were committed in 2008 for a project to grow organic cotton in the Eastern Cape and Limpopo. Woolworths promised to buy the organic cotton with a view to empowering previously disadvantaged small-scale farmers and facilitating ‘in due course, (for them to) have access and opportunity to supply organic cotton at a global level.’ This was meant to yield 150 bales in the first 5 months of the project.

However, according to the Cotton SA yield forecast there is currently no cotton grown in the Eastern Cape.

In fact what happened is that the acreage of cotton planted in South Africa has decreased overall from 18,539 ha in 2001 to 11,201 ha at present. The current predicted yield is 70,125 lint bales, just a fifth of the production expected by the strategy plan.

What happened?

1. According to Cotton SA ‘the decrease in the current crop is mainly due to lower cotton prices and the more favourable prices of other competing summer crops such as maize.’^source

2. There was a drought in the Eastern Cape in 2008/2009 that could have damaged the new cotton production.

3. Clearly start-up capital of R151 million over 4 years cannot compete with a US$ 2 billion injection per year. Scrapping cotton subsidies worldwide might help make cotton crops more attractive to farmers as it would increase cotton prices by an estimated 6 to 14%. But South Africa can’t wait for this to happen.

So why India?

Is it cheaper for retailers to have cotton clothing for the RSA market produced in India? Doubtless, as Indian cotton is plentiful and subsidised.

Is it easier for retailers to have cotton clothing produced in India? Yes, very likely, because there is a value chain in place from sourcing the yarn/fabric to having the final products sown.

Is it greener? Possibly. It’s GM cotton here or there, so that evens out, presumably also for pesticides. I am not aware that the GM cotton uses less water, though. If you take into account that local cotton needs to be irrigated, it might be more sustainable to use cotton grown in India.

Is it a question of quality? Unlikely. The garments I looked at were the same quality.

Will imports of cotton products by retailers further drive down the local textile industry? Yes, because it needs to be predictable and profitable to grow and process cotton in South Africa, otherwise no farmer and no miller/spinner can afford to do so.