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Scrapping Export Subsidies Would Cut Poverty, Lamy Says

March 18 (Bloomberg) -- Eliminating subsidies on exports of commodities such as cotton would contribute to a fairer international trading system, boost economic growth and reduce poverty, said World Trade Organization chief Pascal Lamy.

Export subsidies, “the most egregious form of trade support,” keep prices artificially low, hurting the world’s poorest countries, Lamy said today in a speech at the Global Commodities Forum in Geneva. While trade is not a “magic bullet,” it is “one necessary part of a comprehensive policy package” to help fight poverty, he said.

Food-security concerns haven’t eased even as prices of agricultural commodities have gained and are forecast to climb in the coming decade. Wheat and corn prices climbed over the past year on drought from the U.S. to Russia, while lean hogs gained on higher feed costs.

Domestic support for cotton producers is a case in point, Lamy said. The May contract for cotton futures fell 1.8 percent today on ICE Futures U.S. in New York, heading for the biggest drop in seven weeks.

“A number of poor countries are dependent on cotton exports,” Lamy said. “However, the cotton sector remains highly subsidized, especially in some developed countries, and these subsidies depress prices and increase the difficulties faced by countries such as Benin, Burkina Faso, Mali, Chad.”

While some progress has been made, “obviously more remains to be done, in particular to address the trade-distorting subsidies that remain,” Lamy said.

Brazil has threatened to retaliate with sanctions against the U.S. over subsidies to American cotton farmers. The WTO said in 2010 that U.S. aid to farmers are so “considerable” they can affect market prices and distort commerce.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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