Economic Policy and Cotton in Uzbekistan

Uzbekistan is the seventh largest global cotton producer and third largest cotton supplier for world markets. Uzbekistan’s Government policies largely shield cotton producers from world market price signals, and cotton area has changed little over the past decade despite strong international price fluctuations. Government pricing and exchange rate policies tax cotton producers and more than offset the value of input subsidies for cotton growers. The degree of taxation declined for several years after 2000, but increased again in the late 2000s. In the 2009, cotton output dropped as Uzbekistan responded to reduced water availability and increased global food prices with higher taxes on cotton growers. With continued taxation of cotton production, Uzbekistan likely will continue to lose ground to more dynamic cotton exporters like India and Brazil. As a result, USDA’s longrun baseline projections for Central Asia show that the region’s share of world cotton production will continue to fall over the next decade