Role of trade and investment in the development gap case study: Cotton

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  • Role of trade and investment in the development gap case study: Cotton
    • Mali cotton
      • Background information
        • 10 million small-scale cotton growers suffering form falling prices
        • Small scale farmers can earn up to $1000/year
        • 3 million Malians rely on cotton to survive
        • 2001 US aid= $37.7 m
        • 2001= Mali lost $343 million due to American subsidises = 6% of GDP
      • Impact of cotton
        • Breathing problems die to cotton fibres
        • Farming cotton gives a farmer 3X the average annual income
        • Plans to privatised the cotton industry
        • 4% of population driven into poverty
      • Link to the development gap
        • subsidies lead to over production of cotton- forces cotton prices down- Mali cotton farmers earn less- Declide in living standards
        • If cotton subsidies to USA farmers were scrapped prices would have risen for African farmers by 3.5%
    • USA Cotton
      • Background information
        • 25,000 cotton producers receive $4 billion/year in cotton subsidies
        • up to 20% of cotton farmer's income comes from subsidies
        • USA spends 3x as much on subsidies for cotton then it does on aid for whole of Africa
        • The US is the second larges producer for more than 50% of the worlds exported cotton
      • Impact of cotton
        • Large scale production e.g. 1 16,000 acre farm makes enough cotton for 200,000 t-shirts
        • The slack in world production of clothing has been taken up by China and pakistan
        • In countries that subsidies their farming, only 5 % of the population are farmers
      • Link to the development gap
        • Reduces cotton prices by 15%
        • Law passed banning export subsidies on cotton
        • WTO ruled in March 2007 that cotton subsidies were unfair

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