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|Greene Says Trade Distortion Discussions Much Needed|
Problems affecting cotton extend far beyond the issue of subsidies, Deputy US Trade Representative (USTR) Josette Sheeran Shiner said in proposing to the World Trade Organization (WTO) Ministerial meeting in Cancun, Mexico, that the organization review the range of critical factors affecting the price of cotton.
The USTR proposal was offered as a counter to the position of 4 West Africa nations to eliminate the US cotton program and provide them with compensation, contending that support to US cotton farmers is responsible for the fall in world prices. The USTR proposed a separate, comprehensive sectoral initiative that targets distortions in the entire value chain of productions affecting cotton prices that would start with raw cotton and include man-made fiber, textiles and the clothing trade.
Shiner said such an initiative would need to address 4 major areas: government subsidies for cotton and man-made fiber; tariffs and other charges in fiber, textiles and clothing, to help boost sales of raw cotton and cotton materials; non-tariff barriers; and other barriers, such as state monopolies, special tax advantages and export requirements.
"A comprehensive initiative that tackles trade barriers and trade-distorting practices along the manufacturing chain can improve economic prospects for farmers in Africa and elsewhere by opening export opportunities and growing local and regional markets," Shiner said. "It can also encourage the development of value-added production, thereby decreasing the reliance on commodities - a critical priority for many developing countries."
NCC Chairman Robert W. Greene said the proposal "is a significant step in WTO proceedings and I am pleased that the USTR has recognized the important linkage between world fiber markets and the production and trade in textile and apparel products. The NCC’s testimony and statements on trade have continually highlighted the relationship between fiber markets and end-product manufacturing and trade. In fact, such negotiation may find that the market distortions in textile and apparel production and trade dwarf those associated with fiber production."
NCC economists estimate that 84% of all textile and apparel products sold in the US are now imported - amounting to the equivalent of more than 17 million bales. While the US has become the market of choice for most of the world’s textile producers, those same countries virtually lock out imports of textile and apparel products. They said critics of US cotton support often overlook the almost-20 million bales of subsidized cotton textile and apparel exports from China that are further aided by currency manipulations.
NCC President and CEO Dr. Mark Lange said, "Negotiations in such an arena will necessarily be comprehensive and complex. However, the opportunity to address the distortions engendered by industrial policies of many textile and apparel exporting countries is vital to obtaining a level playing field for trade."
NCC Trade Counsel William Gillon said from Cancun that several developing countries, led by Brazil, have aligned themselves in opposition to proposals made by the US and the EU. The group contends that developed countries should reduce agricultural subsidies and increase market access while developing countries do not reciprocate.
|NCC Lauds Cochran’s Declaration on WTO Ag Trade Negotiations|
A sectoral initiative, separate from the multilateral negotiations, focusing solely on global cotton subsidies and the US cotton program is too limited in scope, Senate Ag Committee Chairman Cochran (R-MS) stated in a letter to US Trade Representative Zoellick and Agriculture Secretary Veneman.
The initiative would distract from progress toward multilateral reform of agricultural trade that could lead to increased market access and further discipline of domestic support and export subsidies, the letter noted.
The letter, also signed by Sens. Lincoln (D-AR), a member of the Agriculture and Finance committees, and Chambliss (R-GA), a member of the Agriculture Committee, conveyed what the lawmakers would like to see accomplished in agricultural negotiations at the World Trade Organization’s 5th Ministerial in Cancun, Mexico. Among those accomplishments, the letter stated, would be a comprehensive and constructive discussion, which would include all programs, practices and policies that cause low fiber prices and distortions in the world textile and fiber markets.
NCC Chairman Robert W. Greene said the US cotton industry appreciates the Senators’ voice. "Senators Cochran, Lincoln and Chambliss understand US cotton’s importance," Greene said. "They know how devastating it would be to undermine the successful government-industry partnership that supports this nation’s No. 1 food and fiber crop, its vast infrastructure of jobs and its contributions to the economy."
"We are sensitive to the economic difficulties of the cotton-growing countries of Africa, but the sharp decline in cotton prices since the mid-’90s is not due to the US cotton program," the letter stated.
Eliminating US cotton subsidies, the lawmakers said, would have no long-lasting positive effect on these countries but would severely harm US producers.
|Legislation Would Impose Tariffs on All China Imports|
Amidst growing concern and frustration in Congress that China has pegged the yuan to the US dollar at a rate which is 25-40% undervalued in order to gain a competitive advantage in world trade, the House and Senate introduced legislation that would impose tariffs on all imports from China in an attempt to counteract the effects of China’s fixed exchange rate.
A bipartisan group including Sens. Schumer (D-NY), Bayh (D-IN), Bunning (D-KY), Dole (R-NC), Durbin (D-IL) and Graham (R-SC) introduced legislation (S. 1586) on Sept. 5 that would impose a 27.5% duty on all imports from China beginning 180 days after enactment until China stops using a fixed exchange rate. The legislation established the tariff at 27.5% by using economists’ average estimate of how much the Chinese currency is undervalued by being pegged at 8.28 yuan per 1 US dollar. The legislation cites the World Trade Organization (WTO) national security exception as a justification for the extra tariff.
Reps. Ballenger (R-NC), English (R-PA), Green (R-WI), Sensenbrenner (R-WI) and others introduced similar legislation that would require the Secretary of the Treasury within 60 days of enactment to determine if China is manipulating the value of its currency and if so to levy a tariff equivalent to the degree of manipulation. Sen. Lieberman (D-CT) introduced legislation (S. 1592) that would require the US to negotiate an end to China’s fixed exchange rate, and, if talks fail, the US would be required to file a case at the WTO.
The NCC will present testimony Sept. 18 outlining the steps necessary for China to fully comply with the market access provisions for cotton in the ’01 WTO accession agreement. The NCC also is an active member of a textile-fiber coalition urging the Commerce Department to initiate safeguard actions for certain textile and apparel product categories in which the rate of increased imports has disrupted US markets.
The introduction of the exchange rate legislation followed a trip to China by Treasury Secretary Snow (Sept. 2-3), during which he urged Chinese officials to allow their currency to float but received no assurance that any action would be taken on a specific timetable.
In a related development, a spokesman for the Sound Dollar Coalition, whose 85 members include NCC, indicated the group is considering filing a case under Section 301 of the ’74 Trade Act. NCC’s Board recently approved making a contribution to help finance the effort.
|Cotton LDP Approaches ‘Zero’|
If world prices do not decline during the week of Sept. 12-18, the cotton loan deficiency payment (LDP) rates could approach zero for the week of Sept. 19-25. The last time there was no LDP was the week of Dec. 22-28, ’00.
Growers are reminded that LDP rates can be locked in on modules. All LDP applications based on locked-in rates are irrevocable and cannot be cancelled, amended or withdrawn. However, as with gin-direct LDP applications, if a grower exceeds the $75,000 payment limit, LDP applications can be converted to marketing assistance loans for which certificates can be used for redemption. Applicants for module LDPs must identify the unginned cotton for which the rate is locked-in by submitting a module number to FSA.
After the cotton is ginned, bales produced from each locked-in module must be matched with corresponding module numbers. LDPs will not be paid until the cotton is ginned. If such evidence is not produced, growers are subject to liquidated damages. Applicants must have beneficial interest in the cotton when the LDP is initially requested.
Production from an individual module with a locked-in LDP rate cannot exceed 20 bales. Growers are urged to contact local Farm Service Agency offices for more information and to monitor closely Cotton Outlook prices and weekly average calculations. Daily tracking of these prices can be found on the NCC web site, www.cotton.org under the Economics and Prices/Marketing Loan Program Values section.
|USDA Estimates Crop of 16.9 Million Bales|
In its September crop report, USDA projected the ’03-04 crop to reach 16.94 million bales, down 160,000 bales from the August report. US mill use and exports are projected to reach 6.6 and 12 million bales, respectively, for total offtake of 18.6 million bales. Ending stocks for ’03-04 are a projected 3.8 million bales, for an ending stocks-to-use ratio of 20.4%.
|USDA Lowers World Production Estimate|
For the ’03-04 marketing year, USDA projected world production of 93.4 million bales, down 2 million bales from the August report. World mill use was lowered slightly from the August report to 98.9 million bales. Consequently, world ending stocks for ’03-04 are projected to be 32.2 million bales for a stocks-to-use ratio of 32.6%.
|Call for Beltwide Papers|
The Beltwide Call for Papers is open through Friday, Sept. 19. The ’04 Beltwide Cotton Conferences will be held Jan. 5-9 at the Marriott Rivercenter and Riverwalk hotels in San Antonio, TX. The research conferences will be held Thursday, Jan. 8, and Friday, Jan. 9.
|Export Sales for Week Ending Sept. 4|
Net export sales for the week ending Sept. 4 were 36,200 bales (480-lb.), resulting in total ’03-04 sales of approximately 3.5 million. Total sales at the same point in the ’02-03 marketing year were almost 4.4 million bales. Total new crop (’04-05) sales are 133,800 bales.
Shipments for the week were 125,500 bales, bringing total exports to date to 967,600 bales, ahead of the 772,700 bales at the comparable point in the ’02-03 marketing year.
|Prices Effective September 12-18, 2003|