TN/AG/GEN/34/Rev.2/Add.1  
TN/AG/SCC/GEN/13/Rev.2/Add.1  
 
22 September 2015  
(15-4895)  Page: 1/6  
Committee on Agriculture 
Special Session 
Sub-Committee on Cotton    
 
 COTTON 
BACKGROUND PAPER BY THE SECRETARIAT1 
Addendum 
This document contains three additional replies from China, Israel and the United States of 
America, respectively, to the questionnaire on recent policy developments for cotton, which was circulated on 4 February 2015, and should be re ad in conjunction with Annex 4 of document 
TN/AG/GEN/34/Rev.2 –  TN/AG/SCC/GEN/13/Rev.2, which was circulated on 30 June 2015. 
                                               
1 This document has been prepared under the Secret ariat's own responsibility and is without prejudice 
to the positions of Members or to their rights and obligations under the WTO. It has been prepared for 
information only and is not intended to provide any authorit ative or official legal interpretation of the provisions 
of the WTO Agreements in genera l or in relation to any measure listed in this document. TN/AG/GEN/34/Rev.2/Add.1 • TN/AG/SCC/GEN/13/Rev.2/Add.1 
 
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  Reply from China 
General Statement on Cotton issues 
 First, China supports C-4's position and their request to solve their problem according to the 
Ministerial Decision on Cotton of December 2013 adopted at MC9. We also support the approach to 
solve the problem of cotton on the basis of the Agriculture Modalities of 2008 (TN/AG/W/4/Rev.4). 
We would continue to work together with all Members to find the solution to this issue.  
 
Second, China's cotton sector is subsistence farming.   China is among the largest cotton producers in the world. However, China's production is based on 
small-scale and subsistence farming, and the average acreage of cotton is 0.3 hectare per 
household. Moreover, China's cotton production is located remotely in the resource-poor and underdeveloped ethnic minority areas, serving as the only instrument for local livelihood security 
and poverty reduction.  
 After joining the WTO, China's cotton production has shown a declining trend; the cotton acreage 
has diminished from 4.8 million hectares in 2001 to  4.3 million hectares in 2013. The main reason 
for such a decline is the high production cost compared to the lower price of cotton caused by subsidies of the developed Members.  
Third, China's cotton subsidies are at minimal low level. 
 China's agriculture support toolbox is short supplied compared to other WTO Members. It has no 
AMS including on cotton, no development box. China is only entitled to de minimis , for which the 
level is also lower than for other developing Members (8.5% versus 10%).  
China's cotton support remains lower both in absolute terms and per capita terms. In absolute 
terms, China's cotton support is US$480 million. In per capita terms per cotton farmer, China's cotton support is only just US$16.  
Fourth, China's cotton subsidy policy is a passive response. 
 China has been the victim to the cotton subsidie s by the developed Members. Since its accession 
into the WTO, China's cotton imports surged fr om 113,000 tonnes to 4.2 million tonnes, while the 
cotton acreage actually diminished.   
China's poor subsistence cotton farmers are over 30 million in household, and they will be forced 
out of jobs if the Government does not take the necessary actions. Therefore, the Chinese 
Government has no choice but to subsidize its poor cotton famers to offset the subsidies and safeguard the livelihood of those poor famers. 
 
Fifth, China's cotton subsidy policy does not distort international trade.  
China's temporary cotton reserve policy is design ed to offset the turbulence of the volatile 
international market caused by the subsidies of developed Members. This policy does not create production distortion or trade distortion. On the production side, China's cotton production does 
not increase in a significant manner. On the import side, China's cotton import continues to 
increase from 2.8 million tonnes in 2010 to 4.2 million tonnes in 2013. If the import on cotton yarn is included, the cotton import will be increased fr om 4.1 million tonnes to 6.5 million tonnes, which 
provides strong incentives for all cotton producers and the developing ones in particular in the 
context of depressed global cotton prices. In addition, the cotton in stock is intended for domestic 
textile industry rather than for export, thus producing no distortion on international cotton market.  
In the meantime, exports of Chinese textiles are still  subject to tariff peaks, tariff escalations and 
other protectionist measures of developed Members, which the developed Members intend to ignore through the so-called recalibration exercise. 
 TN/AG/GEN/34/Rev.2/Add.1 • TN/AG/SCC/GEN/13/Rev.2/Add.1 
 
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  Sixth, China has made significant contribution to resolving the cotton issue. 
 China has been the largest cotton importer, and its share in the global cotton import has been consistently more than 50%, which creates a lot of market access for the export developing 
Members. 
 China has been extensively importing a large amount of cotton from African cotton-producing 
Members, including the C-4. During the period 2001 to 2013, China's cotton imports from Africa 
increased from 3,700 tonnes to 442,000 tonnes.  On the development assistance side, China has been committed to providing technical and 
financial assistance to the C-4 to enhance their production and export capacity. China signed 
cooperation Communiqués with the C-4 members in 2011 and 2013, respectively, which cover the 
supplies of agriculture inputs, training courses, technology transfer, etc. In addition, China has 
also been providing various cotton-related assistance to the C-4 through bilateral channels. 
 On the allocation of the cotton TRQ  
 
Regarding the allocation of TRQ of cotton, it is consistent with China's WTO commitment. Another related question is about the import exceeding the import quota. In addition to the 894,000 
tonnes, we import more than the TRQ subject to the sliding duties. 
 
On China's domestic support notification  
Regarding the notification, China has just updated its domestic support notification up to 2010, 
and preparation for new notifications is underway.  
On China's cotton stock 
 Regarding China's cotton stock, the stock is real, as we have imported more cotton than our obligation. We import cotton for textile processing, but we are facing a lot of difficulties in the 
textile sector as just mentioned. The other reason for the huge stock is that the price for cotton is 
distorted by the subsidies from developed Members. TN/AG/GEN/34/Rev.2/Add.1 • TN/AG/SCC/GEN/13/Rev.2/Add.1 
 
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  Reply from Israel 
Israel's budgetary outlay for cotton in both thousand US$ and thousand tonnes (marketing year, 
1 October-30 September) for 2013 and 2014 were zero.  
In addition, market price support, non-exempt di rect payments, other product-specific support, 
product-specific EMS during 2013 and 2014 were also zero. 
 
Product-specific AMS (non-e xempt direct payments) for cotton during 2014 was US$47,000 
(de minimis ). 
 TN/AG/GEN/34/Rev.2/Add.1 • TN/AG/SCC/GEN/13/Rev.2/Add.1 
 
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  Reply from the United States of America 
Update on  US Initiative to Provide Duty-Free A ccess for Cotton Products for LDCs under 
the US GSP Program 
 
At the December 2011 WTO Ministerial, the US  committed to providing duty-free/quota-free 
access to upland cotton products for least-developed countries. Part of this commitment was fulfilled in June 2012 when President Obama made seven cotton products eligible for duty-free 
treatment for least-developed beneficiary developi ng countries (LDBDCs) of the US Generalized 
System of Preferences (GSP) program effective 1 July 2012. At that time, the five remaining HTS lines for upland cotton products were statutorily prohibited from being added to eligibility for GSP because they were for out-of-quota quantities of the subject products. 
 
The Trade Preferences Extension Act of 2015, enac ted on 29 June 2015, gave the President the 
legal authority to fully implement the US commitment. Specifically, the law (1) reauthorized the 
GSP program and (2) gave the President the authorit y to add the five out-of-quota cotton products 
to GSP for LDBDCs.  
In a 6 July 2015 Federal Register notice, USTR announced the launch of a limited GSP review that 
includes consideration of adding to GSP, for LDBD Cs only, the five tariff lines for out-of-quota 
quantities of upland cotton products. Pursuant to US regulations, the Federal Register  notice 
invited public comments and testimony at a public hearing on these possible additions to the list of 
GSP-eligible products.
2 Public comments on the proposed addition of the five cotton products were 
due on 31 July 2015; and the USTR-chaired GSP Subcommittee of the Trade Policy Staff 
Committee held the public hearing on 11 August 2015. 
 
The Trade Policy Staff Committee is expected to conclude its review in September and provide its recommendation to the US Trade Representative on whether the five cotton products should be 
added to GSP for LDBDCs. The President, drawing on  the advice of the US Trade Representative, is 
expected to make a final decision on proposed product additions prior to 1 October 2015. Any changes to GSP product eligibility would be announced in a Presidential Proclamation.  
The following products were added to the list of  products eligible for duty-free treatment for 
LDBDC under the US GSP program effective 1 July 2012.  
 
HTS 
Subheading Brief Description 
5201.00.22 Cotton, not carded or combed, staple length of 28.575 mm or more but under 
34.925 mm, described in gen. note 15 
5201.00.24 Cotton, n/carded or combed, harsh or rough, staple length 29.36875 mm or 
more but n/o 34.925 mm, white in color, quota described Ch 52 add US note 6 
5201.00.34 Cotton, not carded or combed, staple length of 28.575 mm or more but under 
34.925 mm, other, quota described in chapter 52 add'l US note 7 
5202.91.00 Cotton garneted stock 
5203.00.05 Cotton fibers, carded or combed, of cotton fiber processed but not spun, 
described in gen. note 15 
5203.00.10 Cotton fibers, carded or combed, of cotton fiber processed but not spun, quota 
described in chapter 52 add'l US note 10 
5203.00.50 Cotton carded or combed, excluding fibers of cotton processed but not spun 
 
                                               
2 Further information on this review can be found on USTR's GSP website at https://ustr.gov/issue-
areas/preference-programs/generalized-syste m-preferences-gsp/current-reviews/gsp-20142015 . TN/AG/GEN/34/Rev.2/Add.1 • TN/AG/SCC/GEN/13/Rev.2/Add.1 
 
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  The following products are now being considered for addition to the list of products eligible for 
duty-free treatment for LDBDCs  under the US GSP program. 
 
HTS 
Subheading Brief Description 
5201.00.18 Cotton, not carded or combed, having a staple length under 28.575 mm 
(1-1/8 inches), n/harsh or rough, nesoi 
5201.00.28 Cotton, not carded or combed, harsh or rough, staple length of 29.36875 mm or 
more but under 34.925 mm & white in color, nesoi 
5201.00.38 Cotton, not carded or combed, staple length of 28.575 mm or more but under 
34.925 mm, nesoi 
5202.99.30 Cotton card strips made from cotton waste having staple length under 
30.1625 mm & lap, sliver & roving waste, nesoi 
5203.00.30 Cotton fibers, carded or combed, of cotton fiber processed, but not spun, nesoi 
 
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