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WCA countries can produce cotton cheaply, and cotton is generally far more profitable<sup>than</sup> alternative crops in many parts of the region. While farmers can shift relatively<sup>easilyfrom</sup> cotton to soybeans in the United States, Australia, or Brazil depending<sup>onrelative prices,</sup> growers in many WCA countries have much less scope for substitution. In Burkina<sup>Faso,the</sup> main choice is between the cotton/maize mix, or niebe alone. As shown in Table<sup>2,cotton</sup> production in WCA's most important competitor countries takes place under heavy subsidization. Farmers in the two main producing countries --- countries<sup>thataccountfor</sup> almost half of world production---enjoyed support as high as 20 percent of world prices in the case of China, and 50 percent in the case of the United States, while<sup>EU subsidies</sup> exceeded 100 percent. Producers in the WCA region are currently the main<sup>loserswith</sup> respect to global policies, being penalized both domestically through implicit taxation,<sup>andin</sup> international markets due to subsidies in competing countries. There is<sup>no question,</sup> therefore, that producers in WCA countries would significantly benefit from<sup>a lessdistorted</sup> international environment for cotton production.

According to estimates made using the ICAC world textile demand model,<sup>the removalof</sup> U.S. subsidies would produce a fall in U.S. production that would lead<sup>toariseinthe</sup> international price in the short run by as much as 12 cents per pound.<sup>9</sup> Such an increase in the world price of cotton would increase revenues from cotton by about<sup>$250 millionin</sup> WCA countries, which compares to the total flow of overseas development<sup>assistance (ODA)</sup> to the region of $1.8 billion in 1999, and $50 to $60 million of subsidies provided to WCA farmers in the current crop year to cushion them from the fall in prices. Elimination<sup>of</sup> government subsidies in the United States and China, by far the world's largest producers and the world's largest exporter in the case of the United States, would<sup>stimulatea</sup> reallocation of production toward lower cost producers, including those in West and Central Africa. Though the long-term price increase may be smaller than indicated by the above estimates, due to induced adjustments in production and consumption, the impact<sup>onlong-</sup> term growth and poverty reduction in Africa would be significant.<sup>Reductioninthe</sup> proportion of cotton production that is insulated from market forces as a result of government price support could also be expected to lower the volatility of the (free) world cotton price. Greater market stability would improve the environment for trade and encourage<sup>production</sup> in more competitive exporting countries such as those in the WCA region.

# D. **THE REFORM AGENDA: THE ROAD** TOwARD COMPETITIVE COTTON<sup>SECTORS</sup>

The long-term strategic objective in the cotton sector is to increase and<sup>sustainits</sup> contribution to poverty reduction through employment creation and income<sup>generationin the</sup> rural areas, and to contribute to export earnings and government revenues.<sup>Growthlinkage</sup> research in the West Africa region has shown considerable multiplier effects<sup>on employment</sup> and income in the rest of the rural economy due to the expansions in income from<sup>cash crops.</sup> The implications of sustained growth in the cotton sector or lack<sup>thereofforpoverty</sup>

**9** Becerra, 2000, op. cit. Reduction of EU subsidies could be expected to have<sup>a similar, but</sup> much smaller, effect given the significantly lower level of production that is involved.