“Pants to poverty!” - All of the cotton in Pants to Poverty is provided by Agrocel Pure and Fair Cotton Growers´ Association. An organisation literally nurturing the roots of the industry, they co-ordinate organic and fairtrade certified fibre cultivation with a group of cotton farmers from the Mandvi area of Kutch, Gujarat in Western India. Due to salinity of the soil, cotton is one of the only cash crops that farmers can grow here, yet for years they were unable to get a stable price for their crops. Now though, with Fairtrade cotton their futures are safe!
100 million rural households are involved in cotton production — 10 million in India alone.
30 years ago, cotton farming provided farmers in Mali with enough to cover the costs of their farming and feed themselves and their families. Today, this is no longer the case. Cotton prices have fallen massively over the past 30 years; to the extent that in 2005 cotton farmers in Mali couldn´t earn a sustainable living from selling cotton
Why are prices so low?
Cotton prices have been in decline for the last 40 years. In 2001/2 they reached their lowest level in 30 years, and for the last ten years they have remained consistently low. The long-term decline in prices is partly explained by technological progress making production cheaper, and competition from other fibres. However, the collapse in prices sustained over the last decade is a direct result of the subsidies provided by rich cotton producing countries.
Rich country subsidies
SUBSIDY: A grant given by governments to producers to help them with the costs of production and selling.
The US government gives cotton farmers in the country a total of $4.2 billion in subsidies each year. The EU gives out £1bn a year in cotton subsidies; EU farmers produce 2.5% of the world´s cotton and receive 17% of the world´s cotton subsidies.
Cotton farming in the EU and the US is relatively inefficient. Cotton can be produed more cheaply in other parts of the world.
However, the support given by rich countries in subsidies means that their goods can be sold for less than the cost of production (known as ‘dumping’). This means they can undercut more efficient producers in developing countries. Subsidies also encourage the overproduction of cotton. While world prices declined in the last decade, US cotton production and export increased; in 2003/4 76% of US cotton was exported. Increases in global supply cause prices to plummet even further.
The cost of production for US cotton is three times as much than in Burkina Faso, a country in which more than two million people depend on cotton production. Over half of these farmers live below the poverty line. The value of subsidies granted to US cotton producers is greater than the total national income of Burkina Faso.
Poor farmers are driven further into poverty; many lose their livelihoods altogether.
The International Cotton Advisory Committee estimates that if it weren’t for rich country subsidies, world cotton prices would be 15% higher. US subsidies alone depress prices by 4 pence per pound of cotton. This could be the difference between a sustainable and an unsustainable living for a producer in the global south.
Who’s benefiting?
Cotton subsidies cause enormous damage in desperately poor parts of the world such as Mali. Rich countries usually justify these subsidies in terms of protecting their own rural communities and struggling farmers. Yet this is grossly exaggerated, with most of the benefits going to big landowners, and huge agribusiness. 61% of the cotton subsidies in the US go to the 10 largest recipients.
The WTO´s unfair trade rules
The World Trade Organisation (WTO) is the organisation that decides the rules of world trade, and also acts as a referee. The WTO’s main aim is to ensure that world trade is ‘free’. ‘Free trade’ means that there should be a free flow of goods and services between countries and that national governments should not be able to implement policies which interfere with this. Subsidies like those in place in the EU and the US distort world trade and so are strictly against WTO rules.
On this basis, Brazil challenged the US subsidy system in the WTO, and won. In March 2005 the WTO Dispute Settlement Body decreed that US cotton subsidies distorted world trade and that the system needed to be changed. Yet the US has still not implemented any effective changes to its subsidy system. Rich countries have a large amount of power and influence and can get away with breaking the rules. Poor countries can´t.
Why don’t poor countries increase the support they provide for their farmers?
Even if they could afford to, world trade rules won’t let them. The WTO was born out of a round of international talks known as the Uruguay Round. One of the agreements negotiated here, the Agreement on Agriculture, is a prime example of the double standards found in international trade rules. The Agreement froze subsidies at existing levels - which in rich countries were very high but in poor countries very low. Poor countries are therefore prevented from using subsidies effectively to protect farmers while rich countries are able to continue subsidising theirs.
How Fairtrade makes a difference
- Producers of Fairtrade cotton are guaranteed to receive a fair and stable price for their goods — based on the actual costs of sustainable production, ensuring they can meet their basic needs. If the local market price is higher than this minimum price, then the market price applies.
- In addition farmers receive an additional Fairtrade premium — a payment to be invested in their communities or businesses. Farmers’ groups decide democratically where they will invest the payment. Producers in Mali are planning to use their premium to dig a well, and build a school and health centre.
- Fairtrade assists producers in diversifying, to decrease their dependence on just one crop. In Mali for example, Fairtrade is enabling the cotton producers to increase their maize production in order to ensure self-sufficiency and expand sales to local markets
- Fairtrade helps farmers organise — for example by working together in co-operatives — giving them more power in the marketplace.
- Fairtrade helps farmers become more environmentally sustainable. Fairtrade supports farmers in reducing their use of pesiticdes and managing their use of water - important as conventional cotton production uses more pesticides than any other crop — 10% of the world’s pesticides. Cotton is also a major consumer of freshwater.
- Although Fairtrade certification applies only to the manufacture of the cotton itself, for all companies licensed to use the Mark on finished goods the cotton must come through a registered transparent supply chain. Companies must submit independent verification regarding their compliance with recognised labour standards at all sites.
Read more:
Oxfam’s 2004 report ‘Trading Away our Rights: Women working in global supply chains’ examines how corporate rights are becoming ever stronger, while poor people´s rights and protections at work are being weakened, and women are paying the social costs. “In China´s Guangdong province, one of the world´s fastest growing industrial areas, young women face 150 hours of overtime each month in the garment factories — but 60 per cent have no written contract and 90 per cent have no access to social insurance.”
While subsidies drive down world prices, input costs are going up. ActionAid’s Power Hungry report (2005) looks at how corporate concentration is driving up the prices of agricultural inputs - squeezing poor farmers even further.
Labour Behind the Label, A campaign that supports garment workers’ efforts worldwide to improve their working conditions, the UK platform of the international Clean Clothes Campaign
No Sweat is a UK-based activist organisation, campaigning against sweatshops.