Understanding the impact of Cotton Subsidies on developing countries

Abstract

Models developed to investigate the impact of cotton subsidies have found that US support, by virtue of its absolute magnitude, is particularly damaging and responsible for most of the reduction in cotton-earning potential in developing countries. This has been used as an argument for reducing or postponing cuts in subsidies to European farmers, as these appear to have less impact on developing countries. Our results, through a careful examination of the nature of the cotton market, agree but suggest that under certain assumptions subsidies by smaller subsidisers (such as the EU) may be disproportionately harmful to some suppliers, notably to West and Central African countries. This is especially damaging to them since they have the potential to increase supply.Cotton, Subsidies, Development