Cotton prices vary for all sorts of reasons including seasonal conditions in major producing countries, exchange rate changes, world economic conditions and of course government subsidies and market distortions. To progress trade reforms it is important to show how Government policies and subsidies adversely impact on world prices and prices in individual countries. What then needs to be achieved is an understanding of the influence of price reductions caused by Government induced market distortions on producers and cotton producing regions as well as consumers. No useful conclusions can be drawn if the focus is on the effects of low prices per se.

Low prices in the international marketplace for cotton will affect producers in a similar way to low prices in most sectors.

That is lower prices potentially cause lower returns to producers who will feed those returns through to any of reduced employment and production or reduced investment in infrastructure. This will lead further to changes in government and economy wide income and have effects on revenues, employment and output industries that are part of the sector's value chain. These price effects would not be unique to the cotton industry.The ICAC approach of gathering data is important in quantifying impacts on domestic economies. However, mand of itself, the information is not valuable in achieving anything to alleviate the effects. The working group information needs to be utilised to establish the 'cause' of the lower prices and, in particular, the extent to which world cottonprices are reduced because of government induced market distortions. This analysis can then be taken a step further to identify the implications of market distortions for producers incomes, and for the economies of cotton producing regions.