US ruled to be non-compliant over cotton subsidies at the WTO

The WTO Dispute Settlement Panel issued its ruling yesterday on whether the US had complied with the previous decision against US cotton subsidies. It found that generally the US had failed to make its cotton regime consistent with its WTO obligations.

This comes as the latest episode in an ongoing dispute between Brazil and the US that was launched in 2002, when Brazil took the US to the WTO’s Dispute Settlement Body over the subsidies paid to cotton producers. These subsidies, around $3.9 billion a year, have been argued to depress world cotton prices by up to 26%, which has had a catastrophic impact on the cotton producers of West and Central Africa. The original ruling was given in 2004 and went largely in favour of Brazil. This required the US to make substantial alterations to its subsidy regime to make it consistent with WTO obligations.

Yesterday’s ruling is the follow-up report on whether the changes the US made had been sufficient to bring it into compliance with the original panel’s findings. Its key points found that:

• US marketing loans and counter-cyclical payments  continued to have a significant suppression effect on prices that was inconsistent with the Subsidies and Countervailing Measures agreement of the Uruguay Round, and the US had therefore failed “to take appropriate steps  to remove the adverse effects or … withdraw the subsidy” as was required by the original ruling against them.
• US export subsidies continue to be in excess of the commitments made in the Agreement on Agriculture. Export credit guarantees were also ruled to be inconsistent with the Subsidies and Countervailing Measures agreement.

The panel therefore ruled that the US must withdraw the prohibited subsidies without delay and bring its measures into conformity with the Agreement on Agriculture.

So what happens now? Within 30 days of the report’s publication, the US must state its intention to comply with the findings. They will then be given ‘reasonable time’ to change the measures. If it still fails to change the measures within this time, Brazil can seek compensation in the form of raising duties on US exports. These can continue until the US brings itself into compliance with the panel’s ruling. Brazil is a sufficiently large economy with sufficient trade with the US for this to be an effective measure.

For the cotton exporters of Africa things are less positive. While the ruling is clearly good news for them in that it continues the pressure on the US to remove its cotton subsidies, there will still be no quick end to US subsidies. There is a long way to go before their cotton growers will see any improvement in world prices.

UK contribution helps to give the World Bank its largest ever budget

Britain has pledged more than £2 bn ($4.2 bn) over the next three years to the World Bank, an increase in its support of 50%. This made the UK overtake the US as the biggest contributor to the Bank’s budget, despite the US also increasing its donation by 30% (to $3.7 bn).

A couple of years ago I seem to remember the UK withheld its money to the World Bank to express concern over the conditionality attached to Bank loans and the dubious track-record these policies have had in reducing poverty. Perhaps it’s just me, but I was unaware that anything had changed with respect to Bank conditionality, which makes Britain’s huge increase in support rather hard to square with their supposed concern about the Bank’s policies. Other countries continue to express concern. Norway has withheld 25% of its increase in funding in protest over conditionality.

You can read more about it at Forbes, and in the Guardian.

Social mobility in the UK: poor but not getting worse

The Sutton Trust yesterday released a report (available here) on social mobility in the UK, which concluded that the UK continues to perform poorly on measures of social mobility. Between 1958 and 1970 there was a well documented decline in social mobility. For example, as the report states, for sons in the bottom quartile the proportion remaining in the bottom quartile is 30 per cent for children born in 1958 and 38 per cent for those born in 1970. (Sons are used to remove the effect of changing levels of women’s labour market participation). Also, there was less likelihood of those born in 1970 making large movements in economic group, with the percentage rising from the bottom quintile to the top quintile at 18 per cent in 1958, declining to 11 per cent in 1970. A significant factor in explaining this fall in social mobility is the rising association between family income and accessing higher education.

Evaluations of more recent data finds that since 1970 there has been little change in intergenerational mobility. Social immobility ‘appears to have flattened out’, although it has not started to improve the report concludes. Britains comparatively high level of social immobility therefore continues. This has a major impact on the attainment different groups can expect. The report says: ‘Children in the poorest fifth of households but in the brightest group drop from the 88th percentile on cognitive tests at age three to the 65th percentile at age five’. By contrast, those from the richest households who were among the least able at three moved up from the 15th percentile to the 45th percentile by the age of five. If this trend were to continue, they would overtake the gifted children from poor backgrounds by the age of seven.

Government recommits to UK Child Poverty targets

Ed Balls gave a speech yesterday on child poverty before launching his Children’s Plan today in the Commons. He recommitted to the aim of halving child poverty in the UK by 2010 and eradicating it by 2020. Meanwhile, research by the Department for Work and Pensions has shown that 41% of the British public believe that there is ‘very little’ child poverty in Britain (approximately 3 million children are classified as being in poverty – roughly a third of the total). Around 52% think that there is quite a lot of poverty. Voters are also increasingly likely to blame the poor themselves.

There are a couple of articles in the Guardian about it, one on Ed Ball’s speech here, and a comment by Polly Toynbee here.

China in Angola

This week’s Crossing Continents on BBC Radio 4 is an interesting examination of China’s much discussed relationship with Africa using China’s investment in and aid to Angola as a casestudy. It will be available online here until only Thursday the 13th for download or podcast, so if you’re interested get in there soon.

Mia Farrow on Darfur

The American actress and human rights campaigner, Mia Farrow, has an excellent site (here) — with a journal of her travels across Drafur (Sudan) and Chad. Plus some heart-breaking photos, taken by Mia herself.

Should I stay or Should I Go ? (Mugabe in Lisbon)

The Clash’s “If I go there will be trouble, If I stay it will be double….should I stay or should I go?”, is unlikely to be on the playlists of either Robert Mugabe or Gordon Brown. But it sums up the EU-Africa summit in Lisbon (8-9 December). Mugabe basks in the publicity alongside his fellow African leaders. British PM Gordon Brown has stayed away—rightly, in our humble opinion.

Zimbabwe is now mired in poverty, and a good deal of it can be laid at the president’s door (see our recent post). Its become so bad that even Ian Smith got half-decent obituaries last week (see the Economist for instance).

Today’s Guardian editorial argues that the British Prime Minister should have gone. The Guardian is wrong. Strong messages have to be delivered to Mugabe. Staying away sent the UK message. Angela Merkel went, but castigated Mugabe behind closed doors (see the Deutsche Welle and BBC reports here and here). Going or staying away is irrelevant: Europe’s leaders have to tell Robert Mugabe that what he is doing to Zimbabwe is wrong. Full stop. You can do that either with words (Merkel) or actions (Brown). Arguing that there are other African leaders (you know who you are) at the summit as bad as Mugabe is equally irrelevant. Arguing that Europe has a terrible history in Africa (we agree) is equally irrelevant. Mugabe has driven Zimbabwe into the ground: the land grab is not about Zimbabwe’s poor—its about elite greed. And Africa’s leaders have to step up and say this as well. Unlikely in South Africa’s case (ahead of the elections) but one can only hope.

Fuel Poverty in the UK—Its Getting Worse

Fuel prices are outstripping the incomes of Britain’s poor according to energywatch, the independent gas and electricity watchdog—it’s a ‘wrecking ball’ that is destroying Government attempts to meet its poverty targets.

Many poor households (especially the elderly) use prepayment meters. An energywatch report reckons that they are paying an average of £195 (about $400) extra each year for their gas and electricity compared to the best available deals.

My rough calculation is that this is equivalent to one month’s food bill for someone subsisting on the state pension. In the worst case the gap between prepayment customers and internet customers in some UK regions is £304 (about $600). The poor pay one third more for the same energy. Around 4 million UK households live in fuel poverty. With winter now underway many will be wondering how to keep warm until spring.

Poverty in Zimbabwe

I’m sure that everyone is well aware of the problems Zimbabwe is facing but I thought this report from Harare by Martin Fletcher of the Times was worth a quick read if you want to remind yourself of the dreadful situation faced by people there.

Social Protection Can Raise Agricultural Growth

Social protection is now a fast-moving story (see our recent post on Brazil’s Bolsa Família). The rural poor are especially vulnerable to income-shortfalls — reflecting their shortage of assets, dependence on rain-fed agriculture, and a lack of insurance mechanisms. Farm workers with nothing but their wage (in cash and kind) are at high risk, making them often chronically poor (see the Chronic Poverty Report). By reducing risk, well-designed cash transfer programmes can encourage poor people to venture into new (and better) livelihoods. Injecting cash into the local economy also stimulates demand, much of which is spent on local goods and services. The multiplier effects then further encourage the growth of output and employment. A recent ODI briefing paper on ‘Linking Social Protection and the Productive Sectors’ from their social protection team argues that agricultural policy is in disarray in many countries and that a revitalized agriculture needs new approaches; social protection and its ability to reduce vulnerability and promote growth should be a major part of any new national policy. At the same time, some social protection programmes are better than others. The Chars Livelihoods Programme in Bangladesh gets high marks from the ODI briefing paper as does Mexico’s Oportunidades but India’s National Rural Employment Guarantee Act (NREGA) suffers from not providing enough skill enhancement (thereby diminishing its potential growth-enhancing effects) and some dishonest local practices.