Do U.S. Cotton Subsidies Affect Competing Exporters? An Analysis of Import Demand in China

Abstract

We estimate the demand for imported cotton in China and assess the competitiveness of cotton-exporting countries. Given the assertion that developing countries are negatively affected by U.S. cotton subsidies, our focus is the price competition between the United States and competing exporters (Benin, Burkina Faso, Chad, Mali, India, and Uzbekistan). We further project how U.S. programs affect China's imports by country. Results indicate that if U.S. subsidies make other exporting countries worse off, this effect is lessened when global prices respond accordingly. If subsidies are eliminated, China's cotton imports may not fully recover from the temporary spike in global prices.