Political pressure to resolve the ongoing WTO dispute is intensifying as the clock ticks on two separate retaliation efforts announced by Brazil. The Brazil Trade Action Coalition (BRAZTAC), whose membership includes business, manufacturing, pharmaceutical and technology interests, as well as specific wheat and dairy groups, remain active on Capitol Hill calling for a resolution of the dispute.
As previously reported (see 03/12 and 03/19 issues of Cotton’s Week), Brazil published a list of 102 products that would be subject to higher tariffs applied on imports from the United States. The retaliation measures, valued by Brazil at $591 million, are scheduled to take effect on April 7. On March 15, Brazil published 21 categories that are under consideration for suspension of patent and intellectual property rights. The list reflects a broad range of products, including agricultural chemicals and biotechnology products, veterinary medicines, software, books, music and films. Sanctions in the area of intellectual property rights are referred to as cross-retaliation. Brazil indicates that it will seek cross-retaliation totaling $238 million. The March 15 publication of the cross-retaliation categories commenced a 20-day period of public comments in Brazil.
The potential for cross-retaliation has heightened the political pressure surrounding the case, in part due to the broad range of products covered by the 21 categories, as well as the uncertainty regarding the specific implementation of the cross-retaliation. At this stage of the dispute, bi-lateral negotiations between the United States and Brazil are seen as the most likely path that could avoid or delay the imposition of the retaliatory measures. However, negotiations should give appropriate recognition to today’s cotton market and the previous changes in US programs. NCC staff remains active in discussions with the US Trade Representative, USDA, and key Congressional offices.
Brazil’s total retaliation of $829 million is based on methodologies specified in the August ’09 arbitration decision.
Brazil initiated the arbitration process after a WTO compliance panel ruled that the United States had failed to make sufficient changes to the upland cotton counter-cyclical payment program and marketing loan program, as well as the export credit guarantee programs for virtually all commodities. Under the panel’s methodology, the US cotton program’s share of the current $829 million in retaliation claimed by Brazil is relatively small and fixed at $147 million. The remaining damages of $682 million are associated with the export credit guarantee program.
The panel also defined a methodology to determine a threshold value that allows cross-retaliation into intellectual property rights if total damages exceed the threshold. Under the current calculations, the threshold value is $591 million.
NCC Chairman Meets with Vilsack, Jackson
In an unprecedented event, NCC Chairman Eddie Smith met with Agriculture Secretary Vilsack and EPA Administrator Jackson at EPA headquarters in Washington, DC. The chairmen of the American Soybean Assoc., National Corn Growers Assoc., National Assoc. of Wheat Growers, USA Rice Federation, and National Grain Sorghum Producers also attended. The meeting was the result of discussions which occurred at the Commodity Classic earlier this month.
The meeting was unusually casual with no set agenda. After introductions and opening comments by Vilsack and Jackson, the organizations’ chairmen brought up issues of concern including the proposed spray drift language, atrazine and the regulatory slow-down for biotech trait approvals.
Chairman Smith raised the issue of the Sixth Circuit decision, saying that, because judicial options have been exhausted, the NCC and other agricultural groups would like to work with EPA as it develops the general permits. Jackson stated on this issue that the Agency is taking a narrow interpretation of the court’s decision and the permits only will involve pesticide application to, over, or near waters. Spray drift would not be included.
Chairman Smith concluded the meeting by asking the administration officials for further similar meetings. Secretary Vilsack suggested that such high level discussions should occur in the future as schedules permit but, in the meantime, working groups should be established with representatives of the commodities, USDA and EPA to discuss issues that affect US agriculture.
Senate Panel Approves Nutrition Bill
The Senate Agriculture, Nutrition & Forestry Committee unanimously approved the Healthy, Hunger-Free Kids Act of 2010, introduced by Chairman Lincoln (D-AR), which would authorize $4.5 billion in new child nutrition program funding over the next 10 years.
In order to comply with pay-as-you-go requirements, there would be a reduction in the growth rate of the Environmental Quality Incentives Program (EQIP). EQIP was funded at $1.18 billion for FY10, and the administration has proposed $1.21 billion in FY11. Both of these levels are well below the funding authorized in the ’08 farm law.
The cap in the nutrition bill reported by the Senate Agriculture, Nutrition & Forestry Committee would lower the annual spending cap on EQIP to $1.447 billion from $1.588 billion. Because Congress and the administration have been unwilling to appropriate funds for that program at its fully authorized level, the reduction in the cap still will allow actual funding of EQIP to grow, according to a Committee spokesperson.
During the mark-up, an amendment offered by Sen. Chambliss (R-GA) and others to reduce funding for the Conservation Security Program (CSP) rather than EQIP was narrowly rejected on a 10-11 vote.
Environmental activist groups strongly objected to the use of EQIP as an offset. If the legislation moves to the Senate floor, it is likely that the off-set/pay-for will be revisited because many are concerned EQIP is a popular program that is oversubscribed whereas the CSP program is still in its initial implementation stages.
Protecting America’s Workers Act Hearing Held
On March 16, the Subcommittee on Workforce Protections of the House Committee on Education and Labor held a hearing on the Protecting America’s Workers Act (PAWA) (HR 2067; S 1580).
David Michaels, assistant secretary of OSHA, was the key witness for the Obama Administration. In his statement, Michaels said, “PAWA included critical provisions that deal with significant weaknesses in the current law and more adequately ensure the safety and health of America’s workers.”
The bill’s key issue, according to Michaels, is enhanced penalties for occupational safety and health violations. The median initial penalty proposed for all investigations in cases of worker fatality conducted in FY07 was $5,900.
“The current penalties do not provide an adequate deterrent,” Michaels claims.
PAWA would increase both civil and criminal penalties for every type of OSHA Act violation and would increase penalties for willful or repeat violations that involve a fatality to as much as $250,000.
The bill also would change the burden of proof from “willfully” to “knowingly” -- which will ease the burden of proof currently required for criminal penalties because it is easier to prove a knowing violation than to establish willfulness.
PAWA also would expand criminal liability to any responsible corporate officer or director, expand whistleblower protections, require abatements of serious hazards during a contest period, and would cover the more than 10 million public employees.
Jonathan Snare, an attorney representing the US Chamber of Commerce, countered Michaels’ support for the bill saying that, “the best way to achieve continuous improvements in workplace safety and health is to utilize a proactive approach with enforcement when appropriate.”
Penalties do not prevent workplace fatalities and injuries; they are imposed after the accidents have occurred. A proactive approach offers outreach, training and compliance assistance in order to prevent the occurrence of injuries.
HR 2067 was introduced by Rep. Woolsey (D-CA) on April 23, ’09 and currently has 62 cosponsors. S 1580 was introduced by the late Sen. Kennedy (D-MA) on Aug. 5, ’09 and currently has 21 cosponsors. This subcommittee hearing is the only Congressional action taken on either bill to date.
Use of Shipping Order Feature Encouraged
The NCC is continuing to encourage merchants to utilize the EWR, Inc. “Update Shipping Order” feature. This enhancement to the EWR, Inc. electronic warehouse receipt process now allows both “Shipping Order (EWR Batch 21 type)” and “Early Shipping Order (EWR Batch 31 type)” transactions to take advantage of the “Update Shipping Order (Batch Type 23)” feature.
Some of the benefits for merchants and warehouses using the update shipping order feature include reducing bottlenecks, increasing efficiency and a streamlined process that reduces “phone tag” while improving communication.
Additional industry benefits include: 1) a verifiable process for capturing requested/scheduled load dates and the ability for merchants to request/monitor load dates; 2) the ability for warehouses to confirm a scheduled date or counter with an alternate date; and 3) the storage of an electronic audit log for future reference.
Memphis-based EWR Inc., in cooperation with the NCC’s Cotton Flow Committee, introduced the enhancement to its electronic receipt process with the aim of promoting a more streamlined, accurate and cost effective process for establishing bale shipping order load dates.
Nine US textile mills were showcased as part of the COTTON USA Sourcing Program during the Apparel Sourcing Show 2010 in Guatemala City. They included Antex Knitting Mills, Buhler Quality Yarns Corp.; Carolina Cotton Works, Inc.; Contempora Fabrics; Frontier Spinning Mills, Inc.; Hamrick Mills, Inc.; Parkdale; Tuscarora Yarns, Inc.; and Zagis USA.
The US mills, which took part in the COTTON USA Pavilion, were featured in the show’s directory, displayed throughout the show and on bags given to each attendee. CCI presented five fashion shows at its stand featuring garments from regional manufacturers that source their yarns and fabrics from the United States.
Two private events took place. The first was with Korean textile and garment makers in an effort to strengthen the relationships between US mills and the important Korean business community in Central America. The second event included several key Central American companies.
Mill Cotton Use Steady
According to the Commerce Dept., February (four-week month) total cotton consumption in domestic mills was 133.0 million pounds for a seasonally adjusted annualized rate of 3.60 million bales (480-lb). Last year’s February annualized rate was 3.09 million bales.
The January (four-week month) estimate of domestic mill use of cotton was raised by 681,000 pounds to 132.9 million pounds. The revised seasonally adjusted annualized rate of consumption for January is 3.66 million bales. This is lower than last year’s January annualized rate of 3.67 million bales.
Based on Commerce estimates from August 2, ’09 - Feb. 27, ’10, projected total pounds consumed during crop year ’09-10 would be 1.6 billion pounds or 3.38 million bales. USDA’s latest estimate of ’09-10 crop year mill use is 3.50 million bales.
Preliminary March domestic mill use of cotton and revised February figures will be released by Commerce on April 22.
Sales Slip, Shipments Strong
Net export sales for the week ending March 18 were 98,300 bales (480-lb). This brings total ’09-10 sales to approximately 10.0 million bales. Total sales at the same point in the ’08-09 marketing year were approximately 11.4 million bales. Total new crop (’10-11) sales are 528,400 bales.
Shipments for the week were 318,000 bales, bringing total exports to date to 6.4 million bales, compared with the 7.3 million bales at the comparable point in the ’08-09 marketing year.
Effective March 26-April 1, ’10
Adjusted World Price, SLM 11/16
69.14 cents
*
Fine Count Adjustment ('08 Crop)
0.79 cents
Fine Count Adjustment ('09 Crop)
0.59 cents
Coarse Count Adjustment
0.00 cents
Marketing Loan Gain Value
0.00 cents
Import Quotas Open
13
Special Import Quota (480-lb bales)
867,373
ELS Payment Rate
0.00 cents
*No Adjustment Made Under Step I
Five-Day Average
Current 5 Lowest 3135 CFR Far East
85.51 cents
Forward 5 Lowest 3135 CFR Far East
80.74 cents
Coarse Count CFR Far East
NA
Current US CFR Far East
88.80 cents
Forward US CFR Far East
NA
'09-10 Weighted Marketing-Year Average Farm Price
Year-to-Date (August-January)
60.52 cents
**
**August-July average price used in determination of counter-cyclical payment
