University of Helsinki | Cotton International World Trade | International Agricultural Trade and Trade Theory [MPOL18] | | Kwen Jinhee, Hardy Thomas, and Ng Earl | 27/02/2014 |

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Table of Contents

Introduction 3 The major producers, consumers, exporters and importers in January 2014 3 Major producers 3 Major consumers 4 Major exporters 4 Major Importers 5 Statistics since 1980 6 Major Producers 1980-2013 6 Major Consumers 1980-2013 7 Exporters 8 Importers 8 Price Trend 9 Amount of land used 10 Policies endowment of cotton world trade 10 China 10 India 12 United States of America 13 Pakistan 14 Brazil 16 Conclusion 17 Appendices 18 References 20

Introduction
Cotton fiber is the most important natural fiber in the world. Cotton farming is a very old activity. Cotton is used for fabric since prehistoric times. Cotton is a plant fiber that surrounds the cotton seeds that are below to the genus Gossypium. The fiber is almost entirely constituted with cellulose. It is the most widely natural fiber used for clothing in the world. According to the United States Department of Agriculture, 2.5% of the arable lands in the world are used for the cotton production. Cotton represents one of the most important agricultural commodities on the international world trade. Almost all the production is situated in the North hemisphere. In fact, there is a few numbers of actors in the cotton trade. Therefore, most of them can influence widely the international world trade by establishing relevant trade policies. In this article, first we present the most important actors hired in the cotton trade and finally we explain the different measures taking by the actors to protect their domestic production.
The major producers, consumers, exporters and importers in January 2014
Major producers
If we consider only the five main producers of cotton, according to the January 2014 statistics of the USDA (2014), here are the major producers: China, India, United States, Pakistan and Brazil. During January 2014, China produced 7.185 10³ million tons of cotton, India produced 6,314 10³ million tons, United States produced 2.871 10³ million tons, Pakistan produced 2.112 10³ million tons and finally Brazil produced 1.611 10³ million tons of cotton. According to the world production which is 25.651 10³ million tons of cotton, China and India produced more than the half of the total production. The others produced only 1/5 of the world production. Since five years, the repartition of the cotton production and the amount produced did not significantly change. No significant increase had been made. However the cotton production varies each year in relation of the circumstances which are the climate, input prices, etc.
Let’s compare those statistics with the surface of land allocated to the cotton production. India uses 12 106 ha to produce its cotton. It’s more than double of China’s surface allocation and more than triple of the Unites-States’ surface allocation which respectively use 5.3 106 ha and 3.79 106 ha to produce cotton. The productivity and the efficiency of the harvest have to be considered. We can easily conclude that India has a poorer productivity than China and the United-States.

Figure 1: Cotton production (USDA, 2014)
Major consumers
As above, we are going to consider only the five major consumers of cotton. The five major countries are: China, India, Pakistan, Turkey and Brazil. According to the January 2014 statistics from the USDA (USDA, 2014), China consumed 7.838 10³ million tons, India consumed 5.008 10³ million tons, Pakistan consumed 2.504 10³ million tons, Turkey consumed 1.350 and finally Brazil consumed 914 10³ million tons of cotton. The total production was 23.840 10³ million tons of cotton. Once more China and India weight the half of the global production.
Major exporters
According to the USDA’s statistics of January 2014 (USDA, 2014), five countries can be considered as the major exporters: United-States, India, Australia, Uzbekistan and finally Brazil. The United-States exports 2.286 10³ million tons, India 1.163 10³ million tons, Australia 871 10³ million tons, Uzbekistan 610 10³ million tons and Brazil 544 10³ million tons of cotton. Obviously, the United-States is largely the most important exporter in the world. The world quantity of exported cotton is estimate 8.375 10³ million tons of cotton. The United-States and India alone represent almost the half of the total exported cotton. The destination of the Unites States exportation is mainly the South-East of Asia where the textile industries are implanted.

Figure 2: Cotton Export (USDA, 2014)
Major Importers
According to the USDA’s statistics of January 2014 (USDA, 2014), five countries can be considered as the major importers: China, Turkey, Bangladesh, Vietnam and Indonesia. With 2.395 10³ million tons of imported cotton, China is by far the largest cotton importer in the world. China is followed by Turkey which imports 893 10³ million tons, Bangladesh imports 806 10³ million tons, Vietnam 610 10³ million tons and finally Indonesia imports 588 10³ million tons. 8.372 10³ million tons of cotton has been imported in January 2014. The major pole of exportation is localized in the South-East of Asia. There is a correlation between the major importer and the setting up of the textile factories. China and India are the two major countries where the textile industries are implanted. Respectively China and India present 36% and 14% of the total textile industries. Moreover the number of workers in the textile industries explodes since 10 years in the South-East Asian countries such as Malaysia, Bangladesh, Sri Lanka and Indonesia. The number of worker has increase respectively of 597%, 416%, 385% and 334% in those countries. This increase is a result of the poor workers incomes.

Figure 3: Cotton Import (USDA, 2014)

Statistics since 1980
Major Producers 1980-2013

Figure 4: World cotton production (million tons), by main countries (UNCTAD, 2014)

In 2006/07, the four main cotton producing countries were China, India, the USA and Pakistan, accounted for approximately three quarters of world output. If we added Uzbekistan and Brazil, six countries would account for 83% of world cotton production. This concentration in cotton production, which appears to increase for several years, has to be put into perspective by considering the impact of domestic policy reforms in the largest cotton producing countries, as well as climatic and sanitary contingencies. For example, global output increased by 30% between the seasons 1983/84 and 1984/85, rising to 19.2 million tons up from 14.5 million tons. Most of the growth came from China, where increases in production (Chinese production edged upward from 4.6 million tons in 1983/84 to 6.3 million tons in the 1984/85 season) were prompted by incentive measures taken by the Government. To stimulate production growth, the Government used price incentives (price adjustment increased from 15% to 50% according to the main commodities) and above-quota premiums in cotton procurement (in China farmers were assigned quotas for delivering cotton at administered prices). Additional policy measures were taken to stimulate cotton production in the 1993/4 season, including loans at preferential rates and advance payments to cotton producers before planting. The combined effect of these policy reforms was quite remarkable. Cotton production increased by 3.7 million tons in the 1992/93 season to 4.34 million tons in 1993/94 (a 16.1% increase). The increase in production remained around the trend in the 1995/96 season, as the Government announced that it would increase cotton procurement price by 25%. (UNCTAD, 2014)
Major Consumers 1980-2013

Figure 5: Cotton consumption (million tons), by main countries, 1980/81-2012/13 (UNCTAD, 2014) Developing countries accounted for approximately 78% of global cotton consumption between 1981and 1999; since 2000 their ratio has been above 80%; according to projections based on ICAC figures, in 2010 they would absorb almost 94% of global cotton output.
The main cotton producing economies also account for a large part of consumption. According to ICAC data, China, the United States, India, and Pakistan as a whole have accounted for approximately more than 55% of global cotton consumption over the period 1980 to 2008. Their overall consumption has risen considerably in volume (see figure 5 below). For example, consumption multiplied by 3 in China and by more than 3 in India. Pakistan has had the largest increase in volume (which multiplied by 6 between 1980 and 2008) in order to respond to export-driven demand for textiles. (UNCTAD, 2014)
Exporters
Figure 6: Exports Ranking (USDA, 2014)
Figure 6 ranks countries according to their level of cotton exports. According to the table, The United States stays on top of cotton exporter consistently. Turkmenistan, Pakistan and Syria those also had been on top rank are exporting less amount of cotton. Hence, India grew up fast from early 2000’ as one of the main exporters in cotton market and from 2009 to now it sells second most amount of cotton abroad. Brazil also had not exported that much before 2000’ as it can’t be found in list at that time, it gradually became main exporter. While in 1998 and 1999 the increase in China’s exports was extraordinarily large by historical standards – exported 367000 tons in 1999.
Importers
Figure 7: Imports Ranking (USDA, 2014) As shown above in Figure 7, in early 1990’s main cotton importers are Russia, Japan, Indonesia, Brazil, Korea, Italy and China. But from 2000 it changed that most of major importers are Asia countries; China, Turkey, Bangladesh, Vietnam and Indonesia. China is main importers for 20 years but not in 1998-2001.
Before 1993 the domestic price of China’s cotton was very low, about 32.91 US cents/pound. In 1994 the Government increased the cotton purchase price by 47 per cent, and again in 1995 by 29 per cent, which caused an enormous increase in the price of domestic cotton, going up to 76.79 US cents/pound. (UNEP, 2002)
Price Trend Figure 8: Cotlook 'A Index', Middling 1-3/32 inch staple, CFR Far Eastern ports, US cents per Pound (USDA, 2014)

The world cotton price has fluctuated between about 50 -100 US cents per pound except 2011. In 2011 it surge beyond $2, the highest level they’ve ever hit. It is now up 170% since a year ago and more than 40% since the beginning of 2011.
Demand for textiles, especially from China, rebounded sharply from lows set in the global financial crisis. Meanwhile, floods in major cotton producing areas in Australia, Pakistan and China have hurt supply. Besides, India, the world’s second largest cotton exporter, imposed export restrictions to help its domestic textiles industry. That had led to severe shortages elsewhere, with everybody turning to the U.S., the biggest – and currently most reliable – cotton exporter for help. (D’AltorioTony, 2011)
Amount of land used

Figure 9: Arable land used in World cotton prducing (ShuiShangnan, 2007)
With significant technology breakthrough since mid-1990s, it was witnessed a significant increase in cultivation of new genetically engineered or transgenic cotton varieties. These new varieties were breed for insect resistance, herbicide tolerance, improved yield, virus resistance and higher quality of cotton, which contributed to cost reduction and yield improvement.
Policies endowment of cotton world trade
China
As the world’s largest cotton producer with nearly 7 million metric tons produced every year (USDA 2014). China’s domestic and international policies towards cotton production and management can have a huge effect on the international cotton market.
One of the largest concerns that the international market has towards China’s cotton policy is their long standing program of supporting domestic cotton prices for local producers by instigating a domestic buying policy that purchases domestically produced cotton at above market prices (Adams, Boyd and Huffman 2013). It has even been reported that the People’s Republic of China (PRC) has bought equal to about 85% of all cotton that is domestically produced (McFerron, Javier and Perez 2013). The policy works in a way wherein the PRC purchases cotton somewhere between 40-50 cents above the world price, and this purchased cotton is then stored in national reserves (Adams, Boyd and Huffman 2013).
The direct purchasing policy of the PRC has raised several issues that could adversely affect the international cotton industry, (1) the purchasing program is no longer economically feasible. And (2) the PRC can cause huge shockwaves in the cotton market.
The continued feasibility of this purchasing plan is now in question because of the sheer size of the PRC’s national cotton reserves. Some have postulated that China holds at least half the world’s cotton stockpile in any given year (Homby and Meyer 2013), with an excess of approximately 10 million tons (Russell 2014). But also other critics of China’s cotton purchasing program have also cited that this program is no longer an effective tool for supporting domestic producers and that its costs now outweigh its benefits, especially since there are other more effective policy tools that could be used to achieve the same objective (McFerron, Javier and Perez 2013). Critics also argue that China should at least attempt to reduce its national reserves since the cotton stored is so large that “it serves no good purpose” (McFerron, Javier and Perez 2013). It could be understood that the marginal additions to the cotton reserve serve no additional marginal utility since the absolute amount of reserves already on hand should be more than sufficient to handle any negative reasonably predictable market shortages.
The second issue with China’s large cotton stockpiles, and certainly the more serious and looming issue is the effect that such a reserve could have on the international market for cotton if these large amounts of cotton would be suddenly made available to the market. The PRC, by buying up the domestically produced cotton and adding it to the national reserve (even at above market prices) serves two main purposes. The first purpose is that of course by buying cotton at higher prices, the government is able to support the price of cotton which benefits the local producers. The second purpose is of course to take this amount of cotton out of the market so that excess supplies don’t push the price of cotton too far down. So when the PRC buys up cotton it is in fact taking large quantities of cotton out of the market thus limiting the supply of cotton and inflating the price. There are of course also some other repercussions of such a program, since the domestic market supply of cotton is now limited the textile industry is now put in a position where it must import cotton from foreign producers. So even though China is the largest producer of cotton in the world, it is also a net importer of cotton (Homby and Meyer 2013).
The main issue that many are fearful of is what would happen to the market when China “offloads” its reserves into the open market (Cotton Incorporated 2013). With the sudden inflow of 10 million tons of cotton into the international market (50% of the world’s yearly production) this would cause a serious price fall in cotton, creating major shocks in the market and adversely hurting cotton producers around the world. There is also however the risk that once the PRC stops its purchasing program, Chinese textile companies would then stop importing cotton due to the burst in domestic supply. This reduction in demand for cotton imports from Chinese firms could cause significant market shocks (Patton and Niu 2013).
The PRC however has taken note of the potential problems that could occur with this purchasing program, and has stated, following the Third Plenum of 2013, that it is interested in pursuing different policies to support local producers of cotton, using tools other than the purchasing program, while at the same time taking care to make the transition gradual so that no sudden and huge market shocks occur. And that it will also be more willing to let market forces determine commodity prices (Obel 2013). The current direct that the PRC seems to be heading in is the introduction of a “direct subsidy” plan which would replace the purchasing program. Farmers have been receiving subsidies for using high-quality seeds, transportation, as well as for cultivating fields in remote western provinces, and this looks to be increasing as the PRC looks to use more subsidies to support local producers (Obel 2013).
As was mentioned in Patton and Niu 2013, “Subsidizing farmers directly instead of purchasing at a high minimum price would allow domestic cotton prices to fall close to the current international level.” The move towards using direct subsidies as a means of supporting local producers would suggest that the PRC is now reacting more to the needs of the textile producers in China. It has already been suggested that due to the inflated price of cotton that has resulted from the purchasing program by the national government, some textile producers are moving from using expensive cotton, to the cheaper polyester (Adams, Boyd and Huffman 2013). The imposition of a direct subsidies program would lower the cost of cotton for textile producers, but at the same time support local cotton producers.
As a “large country”, China has a significant impact on the international cotton industry; one of the main areas of concern for the cotton industry in China is the regulation for the importation of cotton. As we have already previously discussed due to the purchasing program initiated by the Chinese government, China is a net importer of cotton. The PRC uses a variety of tools to protect its local cotton market, there are three main channels that importers may bring cotton into China: 1. World Trade Organization (WTO)-related: China’s accession to the World trade Organization (WTO) in 2001, required that 894,000 tons (4.1 million bales) with a low one percent tariff rate be allowed into the country every year. 2. Sliding-Scale: Discretionary quota issued by the government is subjected to what is known as the “sliding-scale tariff.” As the name implies, the sliding-scale tariff fluctuates, with the value of imported cotton determining the precise rate. 3. Forty-percent tariff: Chinese government rules indicate that it is possible to bring cotton into the country without quota, if a flat 40% tariff is paid.
- (Cotton Incorporated 2013)
India
The Indian government has utilized various tools in order to support domestic cotton producers. One of the most commonly used is the “minimum support price” for cotton, which the Indian government uses to establish a “floor” for cotton prices to ensure the revenue of domestic cotton producers (Adams, Boyd and Huffman 2013). The government supports this minimum support price through various government agencies like “Cotton Corporation for India” and “Maharashtra State Co-operative Cotton Growers’ Marketing Federation” (The Indian Textile Journal 2010).
Currently the Indian government’s main concern seems to revolve around the price of cotton, particularly in the area of excess inventory. India, like China is also considered to be a “large country”, meaning that it has the potential to create market shockwaves in the cotton industry if its cotton production were to vary greatly from what has become the norm. So a larger than usual production of cotton in a given year could dramatically increase the supply and lower cotton prices, which in the long-run could hurt cotton producers. And this was the problem that the Indian government is very wary of. If cotton prices were to drop due to excess inventory or excess production then this could hurt cotton producers (Afonso 2013), which is why the Indian government has made attempts to ensure a minimum price for cotton producers.
United States of America
The United States of America is also a substantial player in the international cotton market. The US is ranked as the 3rd highest in production, but it is the largest exporter of cotton in the world (USDA 2014). Therefore any policy that the US has on its cotton production/prices is very significant to the entire international cotton market.
The biggest issue regarding the US of late has been their recently passed “farm bill”. Dubbed as the “Agricultural Act of 2014”, this piece of legislation seeks to end direct government payments to farmers and instead replaces it with an “insurance system” (The Associated Press 2014). This act was recently signed into law by Pres. Barack Obama (Hennessy 2014). The pressure for the US to enact a new farm bill came off of the results of a WTO inquiry following the complaint launched by Brazil. The conclusion of which was that the US direct subsidy scheme was prohibited under various WTO articles and that Brazil and the US would create a “Framework for a Mutually Agreed Solution to the Cotton Dispute” as a means of introducing a new farm bill which would be in accordance with WTO rules and regulations (World Trade Organization 2012). The general agreement of this framework for cooperation was that (1) until a new farm bill is passed the US government agrees to make an annual payment of US$ 147.3 million to the Brazilian government (Fibre2fashion News Desk-India 2014), (2) once a new farm bill is passed, the Brazilian government reserves to the right to be able to analyze the new bill to see if it is successful in meeting all the required obligations that the WTO has ruled the US to uphold (Brazil - U.S. Business Council 2014), and finally (3) if the US fails to comply to the Brazilian demands, the Brazilian government is allowed to impose trade sanctions on US exports to Brazil (Reuters 2014).
Some of the changes that the new farm bill will usher in will be the end of the heavily contested direct subsidy system. Much of the debate regarding the previous farm bill of the US has been on the issue of the direct subsidy payments that the US government issues to producers. The old system worked in a way wherein producers would receive direct dollar payments per acre, regardless of what they did with the land (Karnowski and Jalonick 2014). So a producer could in fact leave vase amounts of their land fallow, and they would still receive payments from the US government. This plan was seen by many critics to be expensive and ineffective as they cost the US government US$ 4.5 billion per year (The Associated Press 2014), and as we have already previously seen, forbidden by the WTO (2012).
The new farm bill of 2014 seeks to change that. One of the major changes that the new farm bill will introduce will be to replace the direct subsidy scheme with an “insurance” type mechanism to support local producers (Whiteman 2014). This new insurance mechanism will work in such a way that farmers are only going to be receiving payments from the US government if one of two possible situations occurs, if (1) in the case of “shallow losses”, which is revenue loss before farmers’ paid crop insurance starts or (2) in the case of a sudden drop in crop prices, which may hurt producer’s revenue (The Associated Press 2014). The new bill has also put a cap on the total amount of payments that any individual farmer can receive from the government at US$ 125,000 annually (Karnowski and Jalonick 2014).
However it is also worth noting that as of right now, there is still some level of uncertainty in the US cotton industry as Brazilian officials still analyze the new farm bill to see if it is in accordance with their framework of understanding following the WTO ruling (Fibre2fashion News Desk-India 2014).
The bill aims to “reduce the injury to domestic manufacturers resulting from tariffs on cotton fabric that are higher than tariffs on certain apparel articles made of cotton fabric.” (Barrie 2014). The bill is also designed to help support the development and cultivation of higher quality cotton, since approximately 25% of the fund will be going to national associations that help promote the use of prime cotton (Barrie 2014).
The introduction of new ways to help support the production of cotton is imperative for the development of the American cotton industry. There have been reports of farmers shifting their production from cotton into other commodities, mainly due to the cost of producing cotton, but also in the more attractive prices of other commodities.
Pakistan
As a developing country Pakistan has shown great potential to be a key player in the international cotton market. It has been suggest that Pakistan has the potential to “double its textile exports to US$ 26 billion over the next five years, if the government implements [the] necessary policies” (Fibre2fashion News Desk 2014). The Pakistani government hopes to further develop its domestic economy through further developing its cotton industry. However in order to do so, they will have to overcome certain obstacles such as energy problems, investment and high markups (Fibre2fashion News Desk 2014), it has to be able to access greater international markets for its cotton. As well as overcome the inefficiencies found in its cotton production (Pakistan Observer 2014).
One of the main opportunities that the government hopes to take advantage of is the Generalized Scheme of Preference Plus (GSP+) granted to Pakistan by the European Union (EU) (Imaduddin 2014). The GSP+ scheme is a recently introduced program that allows developing countries like Pakistan to be able to export certain products to EU countries with no tariffs at all, on the condition that they “ratify and implement international conventions relating to human and labor rights, environment and good governance” (European Comission 2014). The introduction of the GSP+ program for Pakistan essentially means that Pakistan’s cotton exports to the EU will not be hindered by any form of tariffs or quotas when they enter the EU, allowing Pakistani cotton to be competitive in the EU market. The major goal of the Pakistani government right now is to ensure that their production methods for cotton allows domestically produced cotton to be competitive in the EU, both in price and in quality. If the Pakistani government is successful in accomplishing this goal, then they will be able to cultivate a larger market in the form of the EU. Initial reports do suggest that EU customers are eager to access Pakistani cotton as this GSP+ program is initiated (Waleed 2014).
However it does seem that improving domestic cotton production will be an uphill battle for the government and that it should definitely take priority. It has been reported that the national economy is losing billions of dollars every year due to stagnant cotton production, despite its potential (Pakistan Observer 2014). One of the major obstacles it seems is that cotton farmers are having trouble getting access to high quality seeds, supporting technology, modern farming techniques, as well as knowledge on the proper usage of pesticides (Imaduddin 2014 & Pakistan Observer 2014). Other possible explanations for Pakistan’s inability to reach its full potential in cotton production is that most farmers are choosing not to cultivate cotton due to the low market price that they can get or that they are having trouble in getting access to water for irrigation, or that floods cause crop damage (Bhutta 2013).
The fact that it is increasingly challenging for farmers to cultivate cotton, due to the problems that we have elaborated above is very concerning for the Pakistani government. Especially since cotton seems to be the main form of livelihood for most Pakistanis (Williams 2011).
Some of the initiatives that the Pakistani government has used to improve the production of cotton is “The Better Cotton Initiative” (BCI). They hope to be able to help improve the quality of cotton being produced by further educating farmers on the best practice. They hope to help them reduce the wasteful usage of pesticides, incorporate greener techniques, improved irrigation methods, access to better seeds, better cotton picking methods, as well as various other cost saving measures that don’t compromise the quality of the cotton (Williams 2011 & Imaduddin 2014). By doing this the government hopes that it can start to put Pakistani producers and textile companies in a position where they are able to add more value and command a higher price, which will also help them fulfill their potential in cotton production.
Another opportunity that the Pakistani government hopes to take advantage of is increased trade relations with China (Williams 2011). Although as we have already seen this plan may fall short of expectations as the PRC looks to offload their purchasing program and introduce their stockpiled cotton to the open market, possibly making China an exporter of cotton rather than an importer. However the Pakistani government is also looking to attract Foreign Direct Investment (FDI) from China, particularly in its textile industry. Recently the Chinese firm “Shandon Ruyi Technology Group Co Ltd.” has announced that it will invest US$ 2 billion into the energy and textile industries of Pakistan (Venture Capital Post 2014). Such forms of cooperation between Pakistan and China are surely what the Pakistani government seeks to cultivate, as such forms of FDI can help improve the value chain of cotton in Pakistan as well as provide further employment to its population.
Brazil
There has been significant discussion as to the potential that Brazil has for increased cotton production. The Brazilian Textile and Garment Association (ABIT), an alliance of companies within the textile industry, have continually called for further promotion in Brazil’s domestic cotton production. The ABIT is trying to encourage domestic production as a means of reducing the amount of cotton that is being imported from China (Pasquinelli 2012), however recent observations has indicated that further improving the amount of domestically produced cotton in Brazil could prove to be very challenging.
One of the most cited challenges that growers face in increasing domestic production I the high price of labor, as well as the bureaucratic system within Brazil that impedes development (Pasquinelli 2012). Other challenges have also been the lack of trade partners. As well as the recent dispute that Brazil current has with the USA in regards to cotton trade.
However it does seem that Brazilian growers and players in the textile industry are trying their best to overcome these hurdles. The ABIT has recently introduced a new “seal” that indicates the quality of cotton that is being produced. They have introduced their new “Qual Seal” program, which is a “voluntary and self-regulated certificate for the clothing industry.” (Pasquinelli, 2012). The Qual Seal program incorporates three ascending tiers for quality assurance, Bronze, Silver and Gold. Each layer has its own level of qualifications, and different levels of quality assurance (Brazilian Fashion Industry, 2014). The incorporation of this Qual Seal is still on a voluntary basis however, and some major players may choose to not disclose their production methods to be scrutinized for quality control. However, as more and more producers adopt this program, major players may be forced to adopt is as the Qual Seal assurance becomes more and more sought after by the end consumer. The popular incorporation of the Qual Seal program would then lead towards the improved quality of cotton being produced in Brazil.
Another major issue that many have cited as a potential game changer in the Brazilian cotton industry is Brazil’s victory against the US in a WTO verdict, citing the US as having used some unfair trade practices (World Trade Organization, 2012). And as we have already discussed earlier with regards to this issue in the US section, Brazilian policy makers are keen to identify whether the new farm bill passed in the US is sufficient or not (Fibre2fashion News Desk-India, 2014). If the farm bill proves to be unsatisfactory, Brazil is authorized by the WTO to launch retaliatory measures (Fibre2fashion News Desk-India 2014). Ultimately whether or not the Brazilian government sees this farm bill as sufficient or not, may help determine the future of the world cotton industry.
Conclusion
As said above, the cotton world trade is covered by only few actors giving them a large influence on the world trade. Most of them have established a trade policy in order to protect their domestic production. Beside these policies, the world economic situation and the climate may impact the cotton world trade respectively by increasing or decreasing the cotton production price and by affecting the cotton production. For example, in 2011, the cotton world price has increase dramatically of 170%. This is a result of floods occurred in China, Australia and Pakistan but also due to the rebound of the textile demand after the economic crisis of 2008. We can easily conclude that the cotton trade has a high volatibility. Let’s resume the important point of the domestic protection policies established by the major actors. China bases its protection on a domestic buying policy. This policy raises concern because of its high cost and above all the impact that may have the availability of the Chinese cotton reserve in the world market. The availability will hurt all the cotton producers in the world by decreasing sharply the cotton world price. India, in turn, bases its policy on a minimum support price to ensure a minimum cotton price and to protect the producers’ revenues. United States is the largest cotton exporter. Its policy is based on a direct payment to producers but following the Brazil contestation to the WTO, United States has to change its policy. According to this, United States has established the new Farm Bill based on an “insurance system” in order to protect the local producers. Pakistan is a developing country with high potential. Pakistan develops its domestic economy through developing its cotton industry. In order to this, Pakistan used the Generalized Scheme of Preference Plus (GSP+) from the EU. The GSP+ scheme allows Pakistan to export cotton product into the European market without charge making the Pakistan cotton trade competitive. Finally, Brazil tries to encourage their domestic production by decreasing the imports China. However, the major challenge is to increase the domestic production. It proves to be very challenging because of the labor cost and also due to the lack of trade partners (cf. dispute with USA). The cotton world market is influenced by a large diversity of policies. Besides this, some developing countries such as African countries are trying to take a place into the cotton world market and the growing organic cotton concern may lead to changes into the cotton world market. Some changes are therefore expected in the near future.

Appendices

Table 1 Data table coming from World Market and Trade, United States Department of Agriculture, Foreign Agricultural Service, Circular Series, January 2014 (USDA, 2014). Data expressed is in 1,000 million tons

Table 2 Data table coming from World Market and Trade, United States Department of Agriculture, Foreign Agricultural Service, Circular Series, January 2014 (USDA, 2014).

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