Cotton's Week: May 23, 2003

Cotton's Week: May 23, 2003


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Greene Outlines Opportunities for Trade with Central, South America

NCC Chairman Bobby Greene was among witnesses who outlined views and recommendations on trade negotiations which may lead to free trade agreements (FTAs) with Central and South American countries. Green’s testimony was presented at a hearing by a Senate Foreign Relations subcommittee on Western Hemisphere, Narcotics Affairs and Peace Corps.

Greene told the subcommittee there are opportunities for the US cotton industry to increase trade with Central and South America through raw cotton exports and trade agreements that could enable the US textile industry to compete with low-cost imports from Asia. He cautioned, however, that any agreements that provide preferential access for apparel products must be carefully constructed to benefit the US and participating countries and not provide benefits to entities in 3rd party countries. Greene outlined negotiating recommendations jointly developed by cotton, yarn and fabric interests. He also cautioned that resources must be focused on enforcement of existing agreements as well as negotiating new accords.

During a question and answer period, Greene cited the importance of US officials successfully concluding discussions with China to ensure China honors market access commitments, made as part of the World Trade Organization (WTO) accession agreement. He renewed the industry’s call for a separate negotiating group on textiles to be established in the Free Trade Agreement of the Americas, explaining that a workable rule-of-origin, effective rules to protect intellectual property rights and science-based sanitary/phytosanitary rules, including trade in biotechnology, must be part of any new FTAs. Greene also joined the other agriculture interests in insisting that negotiations related to domestic agriculture support programs must be conducted in the WTO, not in FTAs.

US Trade Representative Chief Agricultural Negotiator Allen Johnson told the subcommittee the US is prepared to take actions against Mexico if a wide range of agricultural trade issues are not promptly resolved.

Monsanto representatives advised subcommittee Chairman Coleman (R-MN) that the company will take steps to enforce its patents on biotech soybeans produced in Brazil. US soybean interests complained that Brazilian growers are not paying the technology fee for use of Roundup Ready technology, which puts US growers at a significant cost disadvantage.

Greene Returns to Hill with Farm Bill, Trade Messages

NCC Chairman Bobby Greene reiterated the message that the farm bill should not be reopened and that US trade policy must include negotiating objectives and enforcement actions that recognize the important economic relationship between the cotton production sector and the textile manufacturing sector in completing a 2nd round of visits with key legislators, staff and Administration officials.

Specifically, Greene called on members of Congress to oppose any efforts to re-open the 1-year-old farm law for purposes of further limiting benefits or to alter the delicate balance between funding for commodity, conservation, nutrition, risk management and export promotion programs.

American Textile Manufacturers Institute and American Yarn Spinners Assn. leaders joined Greene in discussions with members of Congress and the Administration to convey the industry’s recommendations on future trade negotiations, as well as to urge officials to vigorously enforce existing agreements. The industry representatives reminded members of the benefits of a sound, predictable farm policy to farmers and manufacturers and expressed serious disappointment about the recent agreement with Vietnam, which the industry believes was overly generous and will cost US jobs and undermine efforts to develop effective partnerships with Central and South American countries.

Industry leaders also urged the Administration to promptly publish procedures establishing rules for special safeguard provisions of China’s accession to the World Trade Organization.

Zoellick, Veneman Review WTO Negotiations

US Trade Representative Zoellick and Agriculture Secretary Veneman presented testimony to the House Agriculture Committee on the status of World Trade Organization negotiations related to agriculture.

Committee chairman Goodlatte (R-VA) and his colleagues reminded the Administration officials that "for American farmers and ranchers, trade is an essential part of their livelihood" so it is essential that their voices are heard and that the US is a full partner in the negotiations. Rep. Stenholm (D-TX), ranking member of the committee, said for negotiations to be successful, the European Union must reform its agricultural policy.

The US proposal for comprehensive, long-term policy reform includes elimination of export subsidies, reductions in domestic supports and enhanced market access with the objective of creating a more level playing field for US agricultural products in world markets. The Doha-round, initiated in November ’01, is targeted for completion by Jan. 1, ’05. Chairman Goodlatte announced he and Rep. Stenholm will lead a delegation to the next Ministerial meeting in Cancun, Mexico, in September.

The Committee has scheduled a hearing for June 18 to hear views from organizations representing farmers and ranchers.

China Safeguard Rules Issued

The Commerce Department’s Committee for the Implementation of Textiles issued rules governing the application of a special China safeguard.

The World Trade Organization accession agreement that set the rules for China’s entry included authorization for the US and other signatories to employ a special safeguard if imports of textile and apparel products, on which quotas have been eliminated, increased at a rate that is "threatening to impede the orderly development of trade in these products." Under the provision, the US may request consultations with China, and, upon receipt of the request, China would limit shipments to no more than 107.5% of the level entered in the previous 12-14 months.

The Notice of Procedures published in the May 21 Federal Register defines an eligible party; specifies a time limit for action on a request by an eligible party; establishes requirements for filing a request; and establishes the procedure for implementing any limits on imports under the safeguard provision.

Almost 9 months ago, the American Textile Manufacturers Institute (ATMI) petitioned the Administration to utilize the safeguard in response to unprecedented growth in imports of several products for which quotas were removed 17 months ago. Since the quotas were removed, ATMI statistics indicate imports from China have increased by 165%, of which 96% is in products that would be subject to potential safeguard action.

ATA Meeting Centers on Broader Support of Trade Provisions

The American Textile Alliance (ATA), chaired by NCC Consultant Gaylon Booker, met in Washington, DC, with a major focus on broadening support for common trade policy provisions. ATA is a coalition of US fiber and textile organizations representing cotton, man-made fiber and wool producers and shippers; yarn and fabric mills; textile machinery manufacturers; and distributors and manufacturers of decorative fabrics, home furnishings and industrial textile products.

Aside from discussions about provisions of the forthcoming Central American Free Trade Agreement and the Free Trade Agreement of the Americas, the agenda included status reports on the recently concluded trade agreement with Vietnam and implementation of safeguard provisions to address the flood of textile imports from China.

"There is an extremely high level of frustration throughout the textile industry about the inexplicably large quotas awarded to Vietnam and about the government’s failure to implement timely safeguard provisions to curb imports – a frustration that is increasingly shared by members of Congress," Booker said.

Hearings Focus on Financial Status of Crop Insurance Industry

Congressman Jerry Moran (R-KS), Chairman of the House Subcommittee on General Farm Commodities and Risk Management, began a series of hearings focused on the financial status of the crop insurance industry. USDA’s Chief Economist, Keith Collins, and Ross Davidson, Administrator of the Risk Management Agency, testified before the subcommittee.

Some members of the subcommittee questioned the financial stability of the industry after paying approximately $4 billion in indemnities last year and having one company enter into bankruptcy. Davidson assured the Congressmen that, while the agency is being very cautious, RMA is monitoring closely the stability of the companies. Both Collins and Davidson indicated their belief that crop insurance indemnities would continue in the $4 billion range due to increased participation and higher levels of coverage.

Davidson also encouraged farmers who may be in a prevented-planting situation to document their decisions and utilize independent sources of information, and RMA would work to ensure that loss adjusters are reasonable.

Panelists Appointed to Hear Brazil’s WTO Complaint

The World Trade Organization (WTO) announced the appointment of the panel that will hear the Brazil complaint against the US cotton program. The panelists are Darlusz Rosati, an economist from Poland and an experienced WTO panelist; Mario Matus from Chile, an attorney with little experience as a panelist; and Daniel Moulis from Australia, also an attorney.

An organizational meeting with the panel is expected in a very short time, during which working procedures and a timetable will be developed. Brazil has indicated it wants to submit its first brief quickly.

Export Sales Surpass ’02 Marketing Year

Net export sales for the week ending May 15 were 182,300 bales (480-lb.), resulting in total ’02-03 sales of almost 12.4 million bales. Total sales at the same point in the ’01-02 marketing year were approximately 12.2 million bales. Total new crop (’03-04) sales are 1.2 million bales (480-lb.).

Shipments for the week were 291,100 bales, bringing total exports to date to 9 million bales, approximately equal to exports at the comparable point in the ’01-02 marketing year. At the current pace, exports for the marketing year would reach USDA’s projection of 11.0 million bales.

Prices Effective May 23-29, 2003

Adjusted World Price, SLM 1 1/16

47.15 cents


Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

4.85 cents

Marketing Loan Gain Value

4.85 cents

Import Quotas Open


Step 3 Quotas as of 4/24 (480-lb. bales)


*No Adjustment Made Under Step I
Five-Day Average
Blended 3135 c.i.f. Northern Europe

60.24 cents

Current 3135 c.i.f. Northern Europe

58.05 cents

Forward 3135 c.i.f. Northern Europe

61.34 cents

Coarse Count c.i.f. Northern Europe

58.59 cents

Current US c.i.f. Northern Europe

62.90 cents

Forward US c.i.f. Northern Europe

64.70 cents

Weighted Marketing-Year Average Farm Price  
Year-to-Date (August-February)

42.47  cents


**August-July average price used in determination of counter-cyclical payment