Fair Trade and Cotton
Whether farmers can make a living from their cotton is determined by the price they can achieve for their produce on the world market. Restrictions on which countries will import from them, subsidies in developed nations and other unfair trading practices all have an impact. Read on to discover why and what effects this has on marginalized farmers.
Fair Trade and Cotton

To understand fair trade it's important to understand some of the ways in which trade with developing nations can be unfair.

World Cotton Pricing
The price farmers are able to sell their cotton for depends on the world market. If there are limited stocks of cotton available, or the demand is especially high, then the price will go up. However, if there is plenty of supply or low demand then the price will fall. It is difficult for farmers in developing nations to predict either of these factors. They are subject to changes in the market without protection from price changes.

In the 1990s and the last decade, there has been excess supply, especially in China and the United States. Cotton demand during this period has not kept pace with the increased supply, which has led to downward pressure on prices, making cotton cheaper to buy, but less profitable for farmers to sell. The oversupply in the US was stimulated by government incentives provided to their own cotton farmers. In 2001/2 for example, the prices paid to US cotton farmers were 90% higher than the world prices because of top up subsidies available. This made it a more attractive crop for the US farmers to grow than the natural price in the world market.

These subsidies were ruled to be unlawful in 2004 by the World Trade Organisation (WTO), but the practice continued. In June this year, the WTO has again ruled the subsidies unlawful. The regulations which the US has broken are the same regulations that prevent developing nations from paying subsidies to their own farmers to protect them from the market distortions created by this practice.

A History of Unfair Trading
Restrictive trading by the developed nations is not new. India had a thriving cotton industry in the 17th century, exporting highly sought-after fabrics to the UK. The diarist Samuel Pepys recorded buying an Indian cotton dress for his wife in 1663 and the famous Levens Hall quilt, the earliest quilt still in existence, contains imported Indian chintzes. However, European linen and wool manufacturers felt threatened by the imports and campaigned for a ban, which was imposed by many countries including the UK in the late 17th and early 18th centuries. Restrictions on imports remained in place until 1774, damaging the Indian textile industry.

More recently, the Multifibre Agreement restricted the amounts of textiles developing nations were able to export to the developed world, through a system of quotas. This agreement was in place between 1974 and 1994 and was in direct contravention of the General Agreement on Tariffs and Trade (GATT) because it did not treat all trading partners equally. There were different quotas for different nations, discriminating against the developing nations who were able to produce cotton goods more cheaply.

Today these exclusive trading practices take the form of less discriminatory import tariffs, which nonetheless impede imports to developed countries. China imposes a 1% tariff on the first 4 million bales, after which a tariff of 5% to 40% is applied. The US allows a small amount of cotton at low duties and then applies a 20% on the remainder. These tariffs are an additional barrier to trade over and above the US market subsidies described above.

Increased Costs of Production
As well as the lower prices available for selling cotton, there are also potential increases in the cost of growing cotton. Poor farmers often get into debt through trying to grow new genetically modified seeds, or buying expensive pesticides and fertilizers to make sure that they can grow enough to live on. 25% of the world's insecticide is sprayed on cotton, which takes up just 4% of the worlds agricultural land.

Impact on Farmers
The end result of reduced selling prices and increased costs of production is misery for poor farmers and their families.

Suicides among Indian farmers have been on the rise for the past decade. The government estimates that 25,000 farmers have committed suicide since 1997. Cotton farmers have been hit the hardest, but spice, potato and onion growers among others have also been affected. An ongoing study into cotton farmer suicides in Vidarbha has been carried out by Kishor Tiwari, a campaigner in this area. He counted over 500 cotton farmer suicides, or an average of three suicides a day in the first six months of 2007.

Fair Trade in Practice
Fair trade offers a new and more equal way to trade with poor producers. The price is guaranteed and help is offered to find new ways to maximise yields and reduce dependency on costly and harmful pesticides and fertilizers. In addition, investments are made into the local community and the rights of women and children are safeguarded.

Although fair trade still represents a tiny portion of total world trade, it is growing and accelerating. In Britain, sales of goods certified by the Fairtrade Foundation increased in value by 460% from 1998 to 2003. In the words of Mark Curtis, then Head of Policy at Christian Aid, 'Trade can and must make a more positive difference to the rooting-out of poverty and to the improvement of the lives and life-chances of the world's poorest people.