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The problem of Chinese cotton subsidies

China’s subsidies in cotton and manmade fiber have created havoc. Chinese subsidies in 2018 represented nearly 72 per cent of all subsidies provided to cotton farmers worldwide. Overproduction in China forced Turkey to spend badly needed funds to support cotton growers. Even the African Franc Zone which is poverty stricken had to spend an estimated $81 million to promote cotton production.

Twenty-five million bales or more of cotton are produced annually because of the Chinese subsidies and if these subsidies did not exist global prices would have advanced and cotton prices would have been able to benefit from expanding cotton use as emerging market economies expand.

Instead growers outside of China suffered as China caused havoc with global supply and demand. The US has failed to challenge China at the WTO on its cotton subsidy level. This appears tied to China’s role as one of the largest cotton importers.

China is re-emerging as a major consumer of US cotton after years of stockpiling the fiber. The world’s most populous nation has purchased futures contracts covering more than 3,61,000 bales of US cotton for 2020. That is enough to make 400 million T-shirts. China has never booked this much cotton so far in advance at this time of the year since 1998.

 
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