India to be answerable for cotton export restrictions to US

Category: WTO Sub-category: International Sanctions
Document type: news

5-Jul-2011 | 15:06 IST | Edited by: Vishal Bagaria

It has been alleged by the United States that restrictions imposed by India on cotton export has led to global price volatility and its suitability should be discussed at the World Trade Organization. However it is upheld that the limitations lie beyond the purview of the multilateral trade organization.

At a meeting of the WTO's commission on agriculture, the US stated that the limitations on cotton exports imposed by India since 2010 had an impact on the international cotton market, causing redundant price instability and affecting all cotton producers, and thus would be apposite for dialogue in the committee.

Similar concerns have been put forth by Pakistan and Canada. Pakistan obtains cotton from India for its textile industry and has been affected by the ceiling, and Canada too expressed concerns about the export restrictions.

India has justified the export restrictions on cotton by claiming it to come under the GATT Article XI, and not under the agricultural committee.

The Indian government had barred export of cotton in April 2010, subsequent to the spiraling of domestic prices taking a toll on cotton textile producers. It determined in September 2010 to allow exports of 5.5 million bales following robust production estimates.

With cotton prices lessening by more than 30% from Rs. 62,500 per candy (356 kg) in Marchend this year to Rs. 45,000 per candy in June, the limit on exports was elevated by an added 1 million bales.

The textile industry, especially in the southern belt, has cautioned against further exports because they opine that a number of textile mills will be strained to close down as cotton prices go up.
The US cannot confront India's cotton export boundaries as there has been no infringement of any clause of the WTO agreement, however.

External Links:

Cotton - International Trade: The largest producers of cotton, currently (2009), are China and India, with annual production of about 34 million bales and 24 million bales, respectively; most of this production is consumed by their respective textile industries.