Trade

nternational trade policy is as important as domestic farm policy in determining the profitability of the U.S. cotton industry. Since 1997, an avalanche of textile imports has caused consumption of cotton by U.S. mills to drop by 4 million bales, forcing the industry to look to exports to make up the difference in demand. However, the domestic market loss has not been completely offset by increased raw cotton exports, and the effect on prices has been both severe and chronic.

The Bush administration has pushed a trade liberalizing agenda, concluding two new free trade agreements, starting numerous other free trade negotiations and moving forward on a new set of multilateral agreements in the Doha Round of negotiations under the World Trade Organization. Enactment of trade promotion authority in the Trade Act of 2002 sparked the Administration’s efforts and paved the way for more agreements.

The omnibus Trade Act of 2002 also included international trade negotiation objectives, changes in trade preferences for the Caribbean Basin and sub-Saharan Africa and new trade preferences for the Andean region of South America. This bill and the trade negotiations being conducted under its authority promise additional minefields for the U.S. textile industry.

With so much at stake, the NCC worked with textile interests to meld divergent views relating primarily to regional fabric quotas for the Caribbean, Andean and African regional preferences into workable, consensus policy. An important consensus was forged but came only two weeks before the bill was brought to a vote. While consensus among the American Textile Manufacturers Institute (ATMI), the American Yarn Spinners Association (AYSA) and the NCC was welcomed, its timing hampered efforts to get it adopted. Ultimately, the Act provided for regional fabric quotas generally larger than those supported by the industry. In addition, textile negotiating objectives for the World Trade Organization (WTO) negotiations were more general than the industry recommendations.

The NCC worked through the American Textile Alliance (ATA) to craft broader textile coalition support for international trade initiatives. NCC President and CEO Gaylon Booker chaired this Alliance of 17 fiber, textile and textile machinery organizations.The NCC, either through the ATA or independently, provided input concerning damaging, textile-related concessions proposed for Pakistan, international trade negotiating objectives, the Doha Round negotiations, rules of origin for textile trade agreements, enforcement of Customs laws, currency exchange rates, support for tax policies that enhance U.S. manufacturing, solutions to export financing issues and the troubling industrial tariff reduction plan U.S. negotiators tabled in Geneva.

NCC’s concerns about China’s proposed testing requirements for neps and short fibers were brought to the attention of a delegation of senior officials from China’s Fiber Inspection Bureau during a Memphis meeting.

After the NCC conducted significant fact-finding in China, Chairman Hood took the message to the U.S. Trade Representative’s office that China was not meeting its WTO accession commitments for cotton. China’s implementation of tariff rate quotas would further increase its cotton textile exports to the U.S. while shielding its own industry from competition. The NCC worked with Senators Thad Cochran (R-MS), Blanche Lincoln (D-AR) and Trent Lott (R-MS) as they urged the Administration to act on this crucial trade matter. CCI President William B. Dunavant, III, CALCOT CEO Tom Smith and NCC staff met with USDA and USTR officials to stress the importance of the Chinese market.

NCC also raised concerns about China’s proposed testing requirements for neps and short fibers, and brought this to the attention of a delegation of senior officials from China’s Fiber Inspection Bureau at a Memphis meeting. The industry demonstrated that no reliable test methods exist.

By year’s end, the NCC had requested the U.S. government to begin consultations with China in the WTO over these issues and, if necessary, to institute dispute settlement proceedings. The NCC's position on requesting formal consultations with China about its TRQ for cotton fiber imports attracted Congressional support late in 2002 as 11 Senators signed a letter to U.S. Trade Representative Robert Zoellick. The House Agriculture Committee chairman and ranking member filed a joint letter of support and several members of the Senate and House individually sent similar letters.

While the NCC challenged China’s trade policies, Brazil launched a broad attack on U.S. cotton policy – asking for formal consultations under the dispute settlement provisions of the WTO. Brazil charged that the U.S. cotton program was not in compliance with WTO provisions and constituted damaging subsidies. Initial consultations with Brazil were held in early December.

The NCC is devoting significant resources to help USDA and USTR officials defend this challenge to the domestic cotton program, step 2 and the export credit guarantee program. The outcome of Brazil’s petition is not expected before late summer of 2003.

NCC and Cotton Council International (CCI) staff teamed with USDA’s Animal & Plant Health Inspection Service (APHIS) to get Peru to lift its mandatory fumigation requirements for boll weevils. The Pakistani government also ended its policy requiring fumigation of cotton fiber at U.S. ports prior to export. These decisions were the result of a two-year effort by CCI, U.S. exporters and USDA.

A proposed European Union labeling regulation could apply to thousands of U.S. bio-engineered products that contain refined oils, including cottonseed oil.

In what could end up as a major trade dispute between the U.S. and the European Union (EU) in the WTO, the EU’s Council of Ministers approved a bill that will require products containing all but minute traces of bio-engineered genes to be labeled. As a result of this strict labeling regulation, to which the U.S. has strongly objected, U.S. farmers most likely will have to separate bio-engineered crops from traditional crops if they want to export their products to the EU. This also will apply to thousands of products that contain refined soy, cotton and maize oil. Later, the EU approved two oils from transgenic cotton for the market despite a pledge by many EU states to block their markets to new biotech foods.

The challenge posed by international trade issues seems to escalate each year. The NCC, along with CCI and the American Cotton Shippers Association, is able to field a team with exceptional knowledge in the areas of cotton trade, phytosanitary issues, economic analysis, international legal rules and organizations, and international trade policy in general. In 2003, this team will endeavor to open markets around the world while protecting the U.S. industry’s important agricultural programs.