Joint Venture between De Beers Diamond Company and Botswana

I. Joint Venture between De Beers Diamond Company and Botswana;

You must choose between Policy Issue II (Policy Solutions to Climate Change) these are two separate articles

Article. Flush with Energy: Environmental Policy in Denmark (1 article)

Article. (1 article)

Or Choose Policy Issue III WTO and the Doha Talks on Farm Subsidies
(3 articles)

A. W.T.O. Moves to Revive talks on Farm Subsidies;
B. Brazil Puts Trade Sanctions on US;
C. Cotton subsidies squeeze Mali

1. You will write a 4-6 page paper, double spaced, which address questions I list below. YOU WILL PLACE PAGE NUMBERS ON YOUR PAPERS! PLEASE!

2. You will also include at least 2 citations from the Goldsmith book.

Textbook: Goldsmith, Arthur, Business, Government, and Society: The Global Political Economy, Thomson Custom Publishing, 2006. ISBN 0-7593-8891-1 or ISBN 1111467412 (this version has a ring binder). Editions published after 2002 are acceptable.
The issues raised by these articles are closely related to materials covered in the Goldsmith text, about how politics and markets work, the role of business and the multiple roles of government. In this paper, I would like you to cover certain issues which I list below, by topic area. Please pay attention to the specific questions for each article.
Feel free to refer to any other articles we have discussed in class. This paper does not require additional research. You should be able to write this on the basis of the text, class discussion, and materials. Please use in-text citations as follows: for the text: (Goldsmith, Ch.4, p.136) and for the articles (Joint Venture, 6/02/2004) – in this paper, the first word(s) of the title will do. If you do further research, include a bibliography section. An example of proper form for citing references can be found in the syllabus.
How to Cite Other People’s Work
Use brief (author, year) references in the body of the text, with a full citation in a reference list at the end of the paper. For example: As Levy (1997) put it, “the relationship between business and society is essentially political.” Or: mention an idea or a statistic, and then put the author and year in brackets (Levy, 1997). Examples of how books, journals and websites should be written in your reference list follow for a book, journal article, and a report downloaded from a website:
• Korten, D. C. (1995) When corporations rule the world. West Hartford, Conn.: Kumarian Press
• Levy, D. L. (1997) Business and international environmental treaties: ozone depletion and climate change. California Management Review, 39(3), 54-71. (the numbers refer to volume, issue number, and page numbers in that order).
• IPCC. (2007). Climate Change 2007 Synthesis Report. Retrieved 8 January 2008, from http://www.ipcc.ch/#

HOW TO ORGANIZE THE PAPER
Please link your analysis as concretely as possible to the text and materials we have covered in class. You can organize the paper by policy issue, moving among the articles as they make sense. Either way, make sure you draw connections among similar issues arising in the different articles.
QUESTIONS TO CONSIDER

I. Diamonds are Forever in Botswana
a. What is De Beers Company doing in Botswana? What is their relationship to the government in Botswana? What is its social role and what is its economic role? Does one support the other? Is this an example of business as good citizen?
b. What did De Beers do when it behaved as a monopoly? What was the threat of blood diamonds to monopoly?
c. Why did De Beers shift from monopoly to a joint venture? What is the advantage of forming a joint venture? Why do you think it has higher profits now?
d. What is the role of government in Botswana?
e. Feel free to look for outside news evaluations of DeBeer’s role in Botswana, but not required

II. A. Flush with Energy
a. What event propelled Denmark to craft an energy policy?
b. Describe the program – did they use regulation, subsidies, taxes? What kind? To what ends?
c. What were the economic and societal benefits?
d. How did they stimulate economic growth and new industries?
e. What kind of innovations have led to reduced emissions?
f. Who are the global competitors in wind turbines?
g. What do you think of U.S. policy on climate change?

II.B. Groups Sue After E.P.A. Fails to Shift Ozone Rules
a. Who are the interest groups and what do they fight for?
b. What are the costs and benefits of imposing a higher standard?
c. What do you think convinced Obama to continue the Bush standard – lobbyists, costs of the change, short term economic shutdown
Some thought questions:
d. What might explain why it has been easier for Denmark to create a more comprehensive environmental policy?
e. If you were the president, what would you choose to do?
f..What might the trade-offs be between the economy and the environment?

III. WTO Trade Negotiations over Farm Subsidies

A.W.T.O. Moves to Revive talks on Farm Subsidies;
B. Brazil Puts Trade Sanctions on US;
C. Cotton subsidies squeeze Mali

a. Background of GATT and WTO
b. Why has it been so difficult for WTO Rounds, like the Uruguay Round and now Doha to succeed? Why is it hard to agree to tariff levels?
c. What is the issue for Developing Countries? What do they Want?
d. What is the Issue for Developed Countries? What do they Want?
e. Which countries are the lead negotiators for each group – the developed and developing nations?
f. What is the amount of subsidy each year to US farmers? How many US cotton farmers receive this subsidy?
g. How do US subsidies distort the world price of cotton?
h. I have read that technology is also replacing workers in cotton farming in the US. What do you think will happen to US cotton if the US reduces subsidies to farmers?
i. How many cotton farmers are in West and Central Africa? Is cotton important to their economy?
j. What is the situation in Mali?
k. The US reduced subsidies to cotton farmers, but the WTO ruled that this was not reduced enough. The WTO has ruled that Brazil may retaliate against the United States. What is Brazil threatening to do?

Policy Issue I
August 9, 2008
TALKING BUSINESS
Diamonds Are Forever in Botswana
By JOE NOCERA
In 1967, the year after Botswana gained its independence from Britain, a huge diamond mine was discovered in a remote area called Orapa, about 250 miles from the capital city of Gaborone. The company that found the mine was De Beers, which was then — as it is now — the dominant seller of “rough stones” in the world. Four years and $33 million later, the mine was ready for production.
The country’s president, Seretse Khama, officiated at the opening.
In the early years of its nationhood, Botswana was one of the poorest countries in the world, with a per capita income of about $80 a year. Today, it is among the most prosperous countries in Africa, with a real middle class, and a per capita income approaching $6,000 a year. By contrast, the average citizen in Angola earns about $2,500 a year, while in the Democratic Republic of the Congo, it’s a little more than $1,500, according to the World Bank.
There is no question that the discovery of diamonds was the most important catalyst in Botswana’s economic growth. Prior to the discovery, Botswana had an agricultural economy. By the early 1980s, however, Edward Jay Epstein could report in his book, “The Rise and Fall of Diamonds,” that diamond, manganese and copper mines controlled by De Beers accounted for fully 50 percent of the country’s gross domestic product. Though the Botswana economy has since diversified somewhat, the operations of De Beers still account for around a third of the country’s gross domestic product.
There is also no question, though, that Botswana was greatly aided by something else: De Beers’s own sense of — to use the current term of art — corporate social responsibility. Unlike most big companies that have exploited Africa’s resources over the course of its tragic history — indeed, unlike most Chinese companies operating in Africa today — De Beers did not simply plunder Botswana. Practically from the start, it entered into a 50-50 joint venture with the government; about a decade ago, it also sold the government a 15 percent stake in the company. (De Beers has only two other shareholders: the South African-based Oppenheimer family, which has controlled the company for over 100 years, and the publicly traded Anglo-American Corporation.)
It has also built roads, hospitals and schools in Botswana; worked to help the country deal with H.I.V. and AIDS; and been involved in and paid for a hundred other things that have helped make Botswana an African success story. Most of the executives in the government-company joint venture are black Africans who have been trained by De Beers. In March, the company closed its diamond sorting facility in London, and opened the largest, most technologically advanced diamond sorting complex in the world in Gaborone. It employs 600 people and is also part of the company’s 50-50 joint venture with the government.
“We think our approach is a competitive advantage,” said Gareth Penny, the cherubic 45-year-old South African who has been the company’s chief executive since 2006. It’s hard to disagree. Botswana’s citizens need roads — but so does De Beers, to transport its diamonds. De Beers needs a healthy work force, so its emphasis on H.I.V. awareness and treatment is clearly in its self interest. Indeed, a more prosperous Botswana helps De Beers in every way imaginable, not least by providing a stable environment in which it can do business. “The country can now attract banks and service industries — and avoid the natural resource curse,” Mr. Penny told me.
In the two years he’s been the chief executive, Mr. Penny has become a proselytizer for what he likes to call “beneficiation” — which is a fancy word for doing well while doing good. I heard him make a speech in Washington a few months ago, in which he repeatedly used the Botswana example and to a less extent Namibia, where De Beers has a number of similar programs, to show what socially responsible companies can accomplish in Africa. He went on to say that every company doing business in Africa needed to practice this kind of enlightened stewardship if it hoped to succeed over the long haul.
So why don’t they?
The transformation of De Beers over the past decade or so is a remarkable, little-known story. For decades, the company had been an unapologetic monopolist, working to keep diamond prices high by controlling supply. It had offices all over Africa — indeed, all over the world — that bought up the vast majority of rough stones as they were mined. It held onto the excess supply, and sold to diamond merchants and traders only enough product to meet demand. Its business model created the perception of scarcity — a necessity in no small part because diamonds are not, in fact, scarce.
(De Beers was also one of the world’s great marketing organizations, whose founder, Cecil Rhodes, invented from whole cloth the idea that an expensive diamond was a symbol of love and devotion; decades later, De Beers’s marketers came up with the slogan “Diamonds Are Forever.” But that’s a story for another day.)
In the late 1990s, De Beers’s business model began to founder. Whenever demand dropped, De Beers would have to stockpile diamonds — at one point, it had a staggering $5 billion worth of inventory. In addition, diamonds were being discovered that De Beers could not control. Canada, it turns out, is a country full of high quality diamonds — and it refused to be part of the De Beers cartel. More menacingly, rebels in strife-torn African countries would force people to mine diamonds and then sell them to raise money to buy arms. These so-called blood diamonds were beginning to give diamonds a reputation in the West akin to fur.
Mr. Penny was among a group of Young Turks at De Beers who conducted a strategic review that helped persuade management that the company had to change. It stopped buying third-party diamonds, and focused instead on selling its own diamonds — though to only around 100 dealers who agreed to play by its rules. (It didn’t give up control entirely.) And it became a company that focused on increasing demand rather than controlling supply. Today, De Beers has about 40 percent of the diamond market — but it is far more profitable than under the old regime, when it controlled 80 percent of the market.
The blood diamond issue largely went away when De Beers, at the urging of the N.G.O. community, helped devise something called the Kimberley Process, which effectively created a way to ensure that buyers were getting only diamonds that had been mined legally. Besides being the right thing to do, this also had a business rationale: it restored the reputation diamonds had long enjoyed, while eliminating a source of excess supply.
As for its emphasis on corporate social responsibility, you may be surprised to learn that this was probably the least revolutionary part of the De Beers transformation. Partly this is because it is an African company — its roots have always been in South Africa — and has always had a huge interest in African economic success. And it has long built roads and hospitals in the countries where it did business.
But it was also because the Oppenheimers were, by the standards of the day, enlightened corporate leaders. They gave scholarships to promising young students. They believed in philanthropy. And Harry Oppenheimer, the father of the current chairman, Nicky Oppenheimer, made no secret of his opposition to apartheid. “They were good guys,” said Mr. Epstein, the author.
Mr. Penny has continued that tradition of enlightened leadership; indeed, he can sometimes sound more passionate about the importance of helping Africa than about the importance of making money. “We are making a contribution by helping to build a more civil society,” he told me with no small pride. “We are part of the solution.”
True enough — but only, it would seem, in a small handful of places like Botswana. And hence the real dilemma. Companies can have all the good intentions in the world — as De Beers clearly does — but it only works if the countries will let it work. Angola and the Democratic Republic of the Congo both have unexploited diamond deposits that could help those countries prosper. But they are too unstable — and too corrupt — for De Beers to do business there. It takes two to tango.
Thus, what’s really unique about the De Beers-Botswana relationship isn’t so much De Beers’s good intentions — it’s Botswana’s as well. The country has been democratic since it gained independence; it has had intelligent, honest leadership; it has avoided civil strife — and it has understood the power of economic growth to improve the lives of its citizens. All the good that De Beers has done has come about with the government’s encouragement and support.
That’s something you can’t say about much of the rest of Africa. A few months ago, Fast Company magazine published a powerful account of China’s invasion of Africa, a story that showed in gruesome detail how Chinese companies are extracting resources, paying off governments, and doing exactly what Mr. Penny says won’t work: pillaging the continent with not even a nod toward “beneficiation.” It would be nice, certainly, if Chinese companies had a greater sense of responsibility — but ultimately it is up to governments to make companies act on behalf of its citizens. “It’s the real lesson here: the importance of decent governments,” said Sonia Marciano, a professor at New York University Stern School of Business, who has written several case studies about De Beers.
Which is why, although Mr. Penny professes to be an optimist about Africa’s economic future, I find it a little hard to share his optimism. So much of Africa is still governed so poorly — Zimbabwe, anyone? — with problems that seem so intractable. And there isn’t a thing De Beers can do about them. What De Beers ultimately illustrates isn’t just the good that corporate social responsibility can do, but its limits as well.

Policy Issue II A
August 10, 2008
OP-ED COLUMNIST
Flush With Energy
By THOMAS L. FRIEDMAN
Copenhagen
The Arctic Hotel in Ilulissat, Greenland, is a charming little place on the West Coast, but no one would ever confuse it for a Four Seasons — maybe a One Seasons. But when my wife and I walked back to our room after dinner the other night and turned down our dim hallway, the hall light went on. It was triggered by an energy-saving motion detector. Our toilet even had two different flushing powers depending on — how do I say this delicately — what exactly you’re flushing. A two-gear toilet! I’ve never found any of this at an American hotel. Oh, if only we could be as energy efficient as Greenland!
A day later, I flew back to Denmark. After appointments here in Copenhagen, I was riding in a car back to my hotel at the 6 p.m. rush hour. And boy, you knew it was rush hour because 50 percent of the traffic in every intersection was bicycles. That is roughly the percentage of Danes who use two-wheelers to go to and from work or school every day here. If I lived in a city that had dedicated bike lanes everywhere, including one to the airport, I’d go to work that way, too. It means less traffic, less pollution and less obesity.
What was most impressive about this day, though, was that it was raining. No matter. The Danes simply donned rain jackets and pants for biking. If only we could be as energy smart as Denmark!
Unlike America, Denmark, which was so badly hammered by the 1973 Arab oil embargo that it banned all Sunday driving for a while, responded to that crisis in such a sustained, focused and systematic way that today it is energy independent. (And it didn’t happen by Danish politicians making their people stupid by telling them the solution was simply more offshore drilling.)
What was the trick? To be sure, Denmark is much smaller than us and was lucky to discover some oil in the North Sea. But despite that, Danes imposed on themselves a set of gasoline taxes, CO2 taxes and building-and-appliance efficiency standards that allowed them to grow their economy — while barely growing their energy consumption — and gave birth to a Danish clean-power industry that is one of the most competitive in the world today. Denmark today gets nearly 20 percent of its electricity from wind. America? About 1 percent.
And did Danes suffer from their government shaping the market with energy taxes to stimulate innovations in clean power? In one word, said Connie Hedegaard, Denmark’s minister of climate and energy: “No.” It just forced them to innovate more — like the way Danes recycle waste heat from their coal-fired power plants and use it for home heating and hot water, or the way they incinerate their trash in central stations to provide home heating. (There are virtually no landfills here.)
There is little whining here about Denmark having $10-a-gallon gasoline because of high energy taxes. The shaping of the market with high energy standards and taxes on fossil fuels by the Danish government has actually had “a positive impact on job creation,” added Hedegaard. “For example, the wind industry — it was nothing in the 1970s. Today, one-third of all terrestrial wind turbines in the world come from Denmark.” In the last 10 years, Denmark’s exports of energy efficiency products have tripled. Energy technology exports rose 8 percent in 2007 to more than $10.5 billion in 2006, compared with a 2 percent rise in 2007 for Danish exports as a whole.
“It is one of our fastest-growing export areas,” said Hedegaard. It is one reason that unemployment in Denmark today is 1.6 percent. In 1973, said Hedegaard, “we got 99 percent of our energy from the Middle East. Today it is zero.”
Frankly, when you compare how America has responded to the 1973 oil shock and how Denmark has responded, we look pathetic.
“I have observed that in all other countries, including in America, people are complaining about how prices of [gasoline] are going up,” Denmark’s prime minister, Anders Fogh Rasmussen, told me. “The cure is not to reduce the price, but, on the contrary, to raise it even higher to break our addiction to oil. We are going to introduce a new tax reform in the direction of even higher taxation on energy and the revenue generated on that will be used to cut taxes on personal income — so we will improve incentives to work and improve incentives to save energy and develop renewable energy.”
Because it was smart taxes and incentives that spurred Danish energy companies to innovate, Ditlev Engel, the president of Vestas — Denmark’s and the world’s biggest wind turbine company — told me that he simply can’t understand how the U.S. Congress could have just failed to extend the production tax credits for wind development in America.
Why should you care?
“We’ve had 35 new competitors coming out of China in the last 18 months,” said Engel, “and not one out of the U.S.”

Policy Issue II B
October 11, 2011
Groups Sue After E.P.A. Fails to Shift Ozone Rules
By JOHN M. BRODER
WASHINGTON — Five health and environmental groups sued the Obama administration on Tuesday over its rejection of a proposed stricter new standard for ozone pollution, saying the decision was driven by politics and ignored public health concerns.
The groups said that President Obama’s refusal to adopt the new standard was illegal and left in place an inadequate air quality rule from the Bush administration. Near the end of his presidency, George W. Bush overruled the Environmental Protection Agency’s scientific advisory panel and set the permissible ozone exposure at 75 parts per billion.
The current E.P.A. administrator, Lisa P. Jackson, wanted to set the standard at 70 parts per billion, near the maximum level recommended by the advisory panel. But President Obama rejected that proposal on Sept. 2, saying that compliance would be too costly and create too much regulatory uncertainty for industry. He ordered the E.P.A. to conduct further scientific studies and come up with a new proposal in 2013.
The decision infuriated environmental groups, who called it a betrayal, but cheered business leaders, who said that the ozone rule was one of the most onerous of the administration’s proposed environmental regulations.
The E.P.A. said last month that it would adopt the Bush-era standard and work toward tightening it in the future. The five groups that sued — Earthjustice, the American Lung Association, the Natural Resources Defense Council, the Appalachian Mountain Club and the Environmental Defense Fund — said that was not adequate and asked a federal court in Washington to review the administration’s action.
“The rejection of stronger standards was illegal and irresponsible, in our view,” said David Baron, a lawyer for Earthjustice. “Instead of protecting people’s lungs as the law requires, this administration based its decision on politics, leaving tens of thousands of Americans at risk of sickness and suffering.”
The same groups had sued the Bush administration over its ozone policy, but agreed to suspend the suit when the Obama administration came to office and promised to reconsider the Bush standard. That reconsideration was delayed several times before finally being killed by the president last month.
Ground-level ozone is the main ingredient in smog, which is linked to premature deaths, heart attacks and lung ailments, including childhood asthma.
The standard rejected by Mr. Obama would have thrown hundreds of counties out of compliance with air quality regulations and imposed costs of $19 billion to $25 billion, according to E.P.A. estimates. But the resulting health benefits would have been $13 billion to $37 billion, the agency calculated.

Policy Issue III
June 2, 2004
W.T.O. Moves to Revive Talks on Farm Subsidies
By ELIZABETH BECKER
With little fanfare, trade ministers and diplomats have revived the global trade talks that fell apart in Cancún last year, hoping to salvage a framework agreement by the end of July.
This week, at a World Trade Organization session in Geneva, diplomats will debate a proposal from developing nations to reduce or eliminate tariffs on agriculture — the central issue dividing rich countries and poor countries in the negotiations.
The goal is to make up for the time lost by the failure of the Cancún talks. If successful, this week’s round of discussions will lead to meetings of trade ministers and senior diplomats set to take place at the end of July at the W.T.O. in Geneva.
The so-called Doha round of talks, named for the city in Qatar where the round was opened in 2001 and dedicated to helping the developing world, has been revived since the United States and the European Union offered new compromises on the issue of farm subsidies.
”There are very good atmospherics,” said Keith Rockwell, spokesman for the World Trade Organization. ”The longstanding problems of agricultural subsidies are slowly but surely lurching towards a solution.”
A breakthrough has been slow in coming, building over the last five months. Encouraged by support from Robert B. Zoellick, the United States trade representative, Pascal Lamy, the European Union’s top trade minister, offered last month to end Europe’s direct agriculture export subsidies despite grumbling by French farm interests.
But any breakthrough on agriculture must be matched with serious proposals on industrial tariffs, services and other issues before a framework can be reached.
Farmers in the United States, Europe, Japan and other wealthy nations have fought against most attempts to cut back the estimated $300 billion in annual subsidies and supports they receive, giving the world’s poorer countries little reason to open their markets further to products and services from the rich nations.
In the United States, November’s presidential election looms large in part because the states most dependent on farm subsidies are also those that have regularly voted Republican in recent elections.
Mr. Zoellick has expressed a willingness, however, to reduce American export subsidies in line with the European offer if that will get the trade talks going again.
Adding to the momentum, Brazil has successfully sued the United States at the W.T.O. over its subsidies for cotton, giving further weight to the arguments in favor of reducing or eliminating many of the agriculture supports.
Led by Brazil, India and South Africa, a new group of 20 developing countries has put forward a proposal that would call on all but the poorest nations to move quickly to reduce protections for their farm sectors. Wealthy nations would be allowed to maintain higher tariffs for some of their most sensitive products, as Japan does with rice.
The United States welcomed the proposal but officials said much more needed to be done.
”It’s very general,” said Richard Mills, a spokesman for Mr. Zoellick. ”What we need to do is translate general principles into specific formulas for cuts in tariffs so the Doha development agenda can open agriculture markets.”
There is little time for reaching a compromise.
European officials said they were willing to end their export subsidies as long as the United States offered similarly tough compromises.
”Frankly,” Arancha Gonzales, Mr. Lamy’s spokeswoman, said, ”we want to buy reform of the U.S. farm bill with our concessions on export subsidies and lock in these reforms.”
United States officials said they had sounded out various possibilities with Brazil and India but had received no hints that those countries would scale back their own trade barriers.
“Large economies like Brazil and India should not stand in the way of progress for smaller, poor developing nations, but that appears to be what happened in Germany this week,” said Tony Fratto, a White House spokesman.
Kamal Nath, the Indian trade minister, said the United States had offered to cap its domestic agricultural subsidies at $17 billion, considerably lower than the $22 billion it had offered before, but still well above the $11 billion that American farmers are now receiving. Mr. Nath said that offer had “no logic or equity,” a point his Brazilian counterpart, Celso Amorim, echoed.
“It was useless to continue the discussion on the basis of the numbers put on the table,” Mr. Amorim said.

Brazil puts trade sanctions on US
The Brazilian government has announced trade sanctions against a variety of American goods in retaliation for illegal US subsidies to cotton farmers.
The World Trade Organization (WTO) approved the sanctions in a rare move.
Brazil published a list of 100 US goods that would be subject to import tariffs in 30 days, unless the two governments reached a last-minute accord.
It said it regretted the sanctions, but that eight years of litigation had failed to produce a result.
It said it would raise tariffs on $591m (£393m) worth of US products – from cars, where the tariff will increase from 35% to 50%, to milk powder, which would see a 20% increase in the levy.
“ US farm subsidies are condemned worldwide. This archaic practice must stop ”
Carlos Marcio Cozendey Brazil’s foreign ministry
Cotton and cotton products would be charged 100% import tariff, the highest on the list.
The Office of the US Trade Representative said it was “disappointed” by Brazil’s decision and called for a negotiated settlement.
Critics say the US has given its cotton growers an unfair advantage by paying them billions of dollars each year.
In 2008, the WTO ruled that subsidies to US cotton producers were discriminatory.
Tall order HAVE YOUR SAY Government subsidies for local producers should only be allowed in response to short term need after natural disasters or periods of serious economic hardship Peter Galbavy
Carlos Marcio Cozendey, head of economic affairs at Brazil’s foreign ministry, told a news conference: “The idea was to distribute the retaliation broadly in order to maximise pressure.
“US farm subsidies are condemned worldwide. This archaic practice must stop.”
However some analysts say major changes to these subsidies would involve modifying agricultural legislation – a tall order for the US Congress against a difficult economic and political backdrop, says the BBC’s Gary Duffy in Sao Paulo.
Our correspondent says the dispute, which began in 2002, is one of the few in which the WTO has allowed cross-retaliation, meaning the wronged party can retaliate against a sector not involved in the case.
He adds that it appears the Brazilian government has deliberately chosen a wide range of products in order to have maximum impact.
Safety net
Cotton producers in the US argue that the system of subsidies has changed since the WTO made its original ruling in 2005.
“The US has made changes in the cotton programme as well as the export guarantee programme,” Gary Adams, chief economist at the National Cotton Council told the BBC, adding that US cotton production was now 40% to 45% lower.
Mr Adams said he believed that subsidies were still justified.
“We feel this is a very important financial safety net for producers,” he said.
Steven Bipes of the Brazil-US Business Council urged the US to take steps to avoid what he called “damaging” retaliation by Brazil.
“The business community finds it extraordinarily important that countries, including the US, comply with its WTO obligations and otherwise negotiate to find common ground when there are disputes,” he told the BBC.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/americas/8556920.stm

Cotton subsidies squeeze Mali
By Joan Baxter
BBC, Kongseguila, southern Mali

African cotton producers are joining Brazil in their official complaint to the World Trade Organization about subsidies paid to their counterparts in the United States and Europe.
In the US, for example, some 25,000 cotton producers receive almost $4bn a year in subsidies.
According to the World Bank, this has had a substantial influence on the world price for cotton, which has been hovering at all-time lows in the past two years.
At least 10 million small-scale cotton growers in West and Central Africa are suffering dramatically from the plummeting prices.
In a good year, in the village of Konseguila, southern Mali, small-scale farmers can earn about up to a $1,000 a year by growing cotton.
That is about three times the average annual income in this impoverished country in West Africa.
Hunger reigns
But this is not a good year.
Restaurant owner Alima Kone says the cotton crisis is slicing into the bone of an already skeletal local economy.
She says people rarely come to eat at her establishment any more as they have no money. Hunger is everywhere and the next harvest is several months away.
Cheik Kone, who has been growing cotton for three decades says he has never suffered like this before.
He says this year he lost. He did not get back the money he put into his nine hectares of cotton – the seed, pesticides and fertiliser and that is not counting the back-breaking months of sweat and toil he and his family put into the fields they work entirely by hand.

Cotton economy
Now he is not just poor – he is also indebted.
“Everything is linked to cotton here, we pay for everything with money that grows on the cotton vine – our clothing, building our homes, everything.”
“The problem is the world price, we Malian cotton growers have no subsidies. But the developed countries, the United States, subsidise their cotton producers so when the cotton price falls, they have no problem.”
The shockwaves of the plummeting cotton prices are felt throughout Mali.
More than three million Malians – a third of the population – depend on cotton not just to live but to survive.
The British charity Oxfam says the rock-bottom cotton price can be blamed directly on enormous subsidies paid to US cotton farmers, while African farmers have lost $300m.
“For the 25,000 cotton farmers in America, each of them has benefited $230 per acre,” said Mohamed Ould Mahmoud director for Oxfam in Mali.
“In Mali, in 2001 they got from USAID $37.7m, and they lost $43m because of American subsidies on cotton. So you ask yourself sometimes, who is helping whom?”
Pollution problem
In Koutiala, southern Mali, cotton fibers that escape from the packing plant choke the air, causing breathing problems.
> The reek of pesticides used to grow cotton is everywhere and the bubbling brook that once ran through the town, is now a stinking bed of black and green sludge – the residue from the cotton oil extraction plant.
The people of Koutiala pay a high price for the cotton they grow and export.
Until now, it was a price Malians were willing to pay. But now the people in the village cannot afford to pay for their children’s healthcare or send them to school.
But Abdoullaye Abbas Sylla who heads the union of cotton workers says between 30 and 40% of the population rely on cotton and any drop in world prices, affects them directly.
On a recent visit to Mali, World Bank Vice President, Callisto Madavo, also spoke out against the enormous subsidies paid to cotton farmers in America and Europe.
The World Bank has advocated strongly on behalf of the farmers of West and Central Africa, that subsidies should be removed.
The influence of these subsidies on prices in the world market is substantial.
And it is not just the impact on the Malian economy, it is that we are talking about a crop that is being grown by some of the poorest farmers, so the impact in terms of poverty is severe.
Fighting subsidies
Mali’s Finance Minister Bassary Toure goes even further in his criticism of European and American governments.
“The money that those countries put into agricultural subsidies is five time what they give as development assistance. And we’ve always said to those rich countries, “you’re hypocrites”. You tell us to play the rules of the open market at the same time as you subsidise your farmers.”
“How can they twist the arms of our impoverished farmers, when they’re using extraordinary amounts of money to subsidise farmers in America and Europe?”
Mali has now linked up with Benin, Burkina Faso and Chad, to fight along with Brazil the US and European cotton subsidies at the World Trade Organization.
But back in Konseguila, all this talk does nothing to ease the immediate suffering and mayor Tiecoura Kone, says the famine is serious. He has a message for western governments.
“If the West is going to continue to subsidise its farmers the people in the impoverished country of Mali will continue to harvest the costs.”
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/africa/3027079.stm

Published: 2003/05/19 08:47:21 GMT

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