. /.  WORLD TRADE  
ORGANIZATION   
WT/CFMC/W/54 
8 November 2011  
 
(11-5705) 
 Original:   English 
  
 
DIRECTOR-GENERAL'S CONSULTATIVE FRAMEWORK 
MECHANISM ON COTTON 
 
Communication from China 
  
 The following communication, dated 3 November 2011, is being circulated at the request of the Delegation of China.  
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 1. China noticed that for two consecutive years,  in 2010 and 2011, the Secretariat of the 
International Cotton Advisory Co mmittee (ICAC) is sued two reports entitled "Production and Trade 
Policies Affecting the Cotton Industry", describin g government support to the cotton industry in 
several countries, including China.  China is not a member of the ICAC.  It has no further comments 
on the contents of the reports, except for those concerning China's domestic support to cotton 
production.   China's comments are the following: 
2. In the report of 2011 there is an exaggerati on that is misleading when calculating cotton 
subsidies granted by China.  For instance, the repor t counts import tariffs (border trade measures) as 
government subsidies to cotton production, which by  no means is in accordance with the WTO rules' 
definition.  Only by this miscalculation, ICAC  deliberately increases China's cotton subsidies by 
US$ 1.6 to US$ 1.7 billion.  We understand that IC AC may have its own de finitions on government 
support and may not accept WTO rules in defining and calculating domestic support for cotton, but China does.  On the other hand, when calculating cotton subsidies by the US, ICAC takes "direct 
payments" out of the support programmes, thus excluding the amount of "direct payments", which is the real subsidy to cotton production.  By this mi scalculation, ICAC reduces US cotton subsidies in 
2011 by US$ 558 million.  An incorrect increase in China's cotton subsidies on the one hand, and a 
deliberate decrease in US cotton subsidies on the ot her hand, China is made the biggest supplier of 
subsidies to cotton production.  Th is is not true according to WTO rules.  It is clear that the 
methodology used in calculating cotton subsidies by  China is not in accordance with WTO rules. 
3. China has strictly followed the WTO Agreem ent on Agriculture and the commitments made 
in acceding to the WTO, when giving support to its cotton production.  China has notified the WTO 
of the agriculture domestic support for the years 2005 to 2008.  According to the notification, China's 
cotton subsidies in the Amber Box amounted to RMB 1.1 billion (US$ 160 million) in 2005; RMB 880 million (US$ 130 million)  in 2006;  RMB 4.1 billion (US$ 600 million) in 2007, and 
RMB 2.77 billion (US$ 400 million) in 2008, accoun ting for only 1.25%, 0.87%, 3.29% and 2.51% of 
the cotton Value of Product (VoP) in these four  years, respectively, far less than the de minimis  
commitment which is 8.5% of VoP in the case of China.  China's support to cotton includes subsidies 
for improved cotton seeds, subsidies for reserve costs,  and subsidies for the cost of transporting cotton 
out of the Xinjiang Autonomous Region.  China does not give any price support subsidies to cotton.  ICAC's reports exaggerate and overestimate China's s ubsidies to cotton.  What  has been described in WT/CFMC/W/54 
Page 2  
 
  ICAC's report is not the real situation in China, nor is in accordance with WTO rules and its definition 
of subsidies. 
4. The cotton price in China's domestic market regi stered a high volatility in recent years.  The 
increase of China's imports of cotton in recent year s, due to lower international cotton prices than 
domestic cotton prices, has resulted in a big decr ease of cotton production and planting area in China 
for years.  For instance, China imported 2.74 million tons of cotton in 2007.  Imports increased to 
3.13 million tons in 2010, with an increase rate of 14%.  Affected by lower international cotton prices, 
China's cotton planting area and cotton production decreased greatly in recent years.  In 2007 China's cotton planting area was 5.93 million hectares and production was 7.53 million tons.  But in 2010, the planting area totalled 4.85 million hectares and pr oduction was only 5.96 m illion tons, a decrease of 
18% and 22%, respectively.  Due to a big incr ease of cotton imports into China and increased 
uncertainty in international markets, cotton produc tion and trade in China are running higher risks, 
and the volatility in the cotton price continues.  For instance, during seven years in the period 1999-
2009, the fluctuation rate of the cotton price at fa rm gate was more than 20%.  In the remaining 
three years of the referred period, the fluctuation was more than 30%.  Therefore, to state that China's 
domestic cotton prices remained stable and not very mu ch affected by fluctuations in the international 
market is not objectively true. 
 
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