It has been an eventful three months since our last meeting. As usual, the Council has been active in a number of areas, including farm bill defense and implementation, the appropriations process, trade issues and in many other areas.
At recent meetings of our Interest organizations, I have characterized our current situation as one marked by significant accomplishments and serious challenges.
As I reported to you in June, the Council?s chief accomplishment this year, the signing of the farm bill on May 13, was actually the culmination of almost three years of work by industry and Congressional leaders.
Our primary challenge since the farm bill signing has been maintaining this policy in the face of a constant flow of negative publicity.
Unfortunately, many of the bill?s critics, both in Congress and from the media, have used every available opportunity to attack the bill. And several competing countries are asserting that the bill is not WTO-compliant.
Congressional proponents of more severe payment limits are working to find a legislative vehicle to amend those provisions. The media continue to fire one article and editorial after another that characterize the bill as government largess and worse.
The flow of negative publicity has been both constant and unfair in its characterization of the program. While there is little new in the criticism, it is more intense than ever before, and it is being fed by the damaging misinformation circulated by Ken Cook?s Environmental Working Group.
Because the criticism is both constant and unfair in its characterization of the programs, and because the cotton industry is more often than not the focal point for the criticism, some believe the Council is not doing enough to counter these criticisms.
Obviously, all of us would like to see public attitudes become more farmer and farm program friendly. By any reasonable assessment, though, the task of changing public perceptions is monumental - both in terms of expense and time. It is a result that we all want, but the cotton industry cannot achieve this result by itself, nor can we achieve it quickly, even with the combined resources of all agricultural organizations.
At our June meeting, we convened a group of industry leaders to discuss the media situation and consider our options for addressing it. A media consultant joined us and he confirmed that changing public attitudes is a long-term commitment requiring substantial resources. He noted that the plastics industry spent more than $20 million a year over a span of five to six years to influence public attitudes. The consultant then outlined a more narrowly focused approach for short-term results that would need to be funded at about half million dollars per year.
Of course, a half million dollar annual outlay would be a real challenge for the Council in view of our efforts to trim $2.5 million from our budget to balance spending with expected income. It would be much less of a reach if we could enlist a broad spectrum of commodity and general farm organizations to join with us in the effort.
With this possibility in mind, I tested the idea with the Commodity Roundtable, which the Council hosted in a Washington meeting on June 12. Essentially what I got was shared concerned about the bad publicity but no commitment of resources to fund the kind of project our consultant outlined. Instead, the group agreed that we should coordinate our efforts to develop rebuttals for the numerous program attacks .
That is not to say the sixteen organizations in the Commodity Roundtable are not strongly committed to this farm bill. They are. When we convened our initial meeting, they signed a resolution supporting the Farm Security and Rural Investment Act as is and joined in opposition to any changes.
In July, the Council pursued the plan agreed to by the Roundtable to step up public relations efforts and, as an agricultural delegation, call on individual members of Congress to secure their support for the farm bill in its current structure.
So, how should the Council respond to those who say not enough is being done on the payment limit issue?
First of all, it took some pretty heavy lifting to get the payment provisions in new farm law that are attracting all of the media attention. Quite frankly, I would rather be defending the Council for not successfully quelling the criticism than have to defend the Council for not getting the provisions that are prompting the criticism.
We were successful in getting enough votes to pass the farm bill in spite of public opinion that was poisoned by EWG website data and the bad publicity it spawned. Now we have to find the votes to fight off payment limit amendments that would absolutely gut the program for the cotton industry. Even if we had the resources to alter public opinion, we do not have the time to do it before the next payment limit crisis has to be averted in the appropriations process. If we survive this near-term crisis, the next one will be right around the corner? and they will continue as long as we prevail.
Bear this in mind about farm program attitudes and what is being done to deal with them. The next payment limit fight we have to win is just ahead and in the United States House and Senate. The attitudes we must deal with are those that will cast votes for or against amendments to Fiscal Year 2003 appropriations bills. If we change public attitudes, it will be over the longer term and with the help of other agricultural organizations.
Trade issues have become about as important to the economic health of our industry as farm policy.
The Council?s recent actions on trade issues have centered on a new round of WTO talks and legislation granting Trade Promotion Authority to the President. The bill granting TPA was, in fact, an omnibus trade bill that also:
- amended existing legislation for the Caribbean and sub-Saharan Africa regions,
- renewed and expanded trade legislation for the Andean region to include textile products, and
- included trade adjustment assistance for workers displaced by new trade agreements.
The Council was authorized to support passage of the omnibus bill granting TPA authority, provided that specific textile negotiating objectives were included and provided that reasonable quotas could be established for the Caribbean, Andean and African regions. The Board instructed staff to continue its efforts to find a consensus among the raw cotton and textile segments of our industry on these pivotal issues.
After several meetings, a consensus position was finally reached and staff began to conveying this to Textile Caucus members.
Unfortunately, the House/Senate Conference got underway on a expeditied schedule and completed their work before the industry?s position was established with Textile Caucus and Cotton Belt members. There is little doubt they could have delivered the necessary votes in exchange for more favorable textile negotiating language and regional fabric quotas.
In tomorrow?s executive session, Gaylon Booker will provide more detail on the trade bill?s final provisions.
The good news is there will be a greater commitment to reaching a more timely consensus as we continue our efforts to build unity on trade issues that will be very important to the cotton and textile industries in the months and years ahead.
This is important because trade WILL be liberalized, starting immediately. We are going to be increasingly dependent on exports to maintain a healthy U.S. cotton and textile industry. To compete aggressively in the international marketplace, we MUST find a way to take advantage of lower cost labor in this hemisphere.
The Council has also been very active in working with USDA and USTR officials to help shape the U.S. negotiating position on agricultural trade under the new WTO round. Bill Gillon and I serve on the cotton ATAC. Gaylon Booker serves on the broader Agricultural Policy Committee on Trade that encompasses all agricultural commodities. So the Council is well represented on these important committees.
The "going in" position of U.S. negotiators is a good one. Their objective is to eliminate all export subsidies and to generally harmonize domestic subsidies and tariff rates. Here is why these objectives are so important::
- The EU spends $2 billion to $5 billion a year on export subsidies, whereas the US spends only about $20 million;
- The maximum allowable domestic subsidy in the United States is $19.1 billion -- for the EU it is $60 billion ? Japan spends about $30 billion and Canada about $23 billion.
- The average tariff rate for bringing agricultural products into the United States is 12%; the average rate we have to pay to get U.S. agricultural products into markets abroad is 62%, and for many countries the rate exceeds 100%.
If U.S. negotiators are successful in this WTO round, foreign markets will be much more accessible to U.S. agricultural products and assistance to farmers abroad will be very close to the support level received by U.S. farmers. This means we may be moving to an international trade arena that has U.S. farmers and farmers abroad competing much more on a head-to-head basis. We need to prepare for it.
(I am especially pleased that following this report, we will hear a presentation from USDA Undersecretary J.B. Penn, who, in addition to making other observations, will share his perspective on trade.)
The Council has also taken a more active role in pursuing WTO compliance by competing nations. In line with this Board?s agreement on strategy, we have been to Washington twice in recent weeks to convey our concerns to Congress and the Administration about China?s failure to implement their WTO commitments for providing market access. In an effort to impress upon USDA and USTR the seriousness of this situation during our initial visit, Bill Dunavant III and Tom Smith participated in our meetings. We explained that China has allocated cotton Tariff Rate Quotas in a manner that actually restricts access for U.S. cotton and clearly violates provisions of the WTO by requiring their mills who process imported cotton to certify that the resulting product has been re-exported. Our most recent trip focused on the development of a coordinated response with USDA to China?s WTO notification that their cotton standards have been modified to require nep and short fiber content measurements.
(John Maguire?s Washington report will include additional details on the China TRQ and cotton standards issues.)
Increased support for foreign market development continues to be a companion effort to the Council?s work on favorable trade policy. We are pleased that the Farm Bill provides additional support for CCI and similar organizations. The funding increases will provide a boost to export promotion programs for U.S. fiber and manufactured goods, as long as the industry?s seed money is maintained at a level that enables us to compete aggressively for the public funds.
(CCI?s Cotton USA Advantage Program continues to take on increased importance with our industry?s reliance on exports. In that regard, I look forward to hearing the report on CCI?s many market-building programs later in this afternoon?s program.)
Council delegates also have identified a number of other priorities that we will be addressing for the remainder of the year:
- We are continuing to provide USDA with input and represent our members? needs during the farm bill implementation process. [John Maguire?s Board report]
- The Council is working with NRCS and Congress to ensure the new farm bill?s conservation programs are more accessible to production agriculture.
- The Quality Task Force will add to their priorities the Council Board resolution calling for expedited research to determine optimum moisture levels in baled lint that preserves quality and enhances spinnability.
- Council staff is developing options for consideration by the special Bale Packaging subcommittee, which has called for implementation of re-approval provisions for packaging materials, periodic review of specifications, and changes in the Bale Packaging Committee?s structure and operation.
- In line with the recommendations of the future role committee, we are seeking funding assistance from several Cotton Foundation members to help underwrite a number of important Council programs.
Another near-term activity will be the work of a special study committee to address the issue of lightweight bales. The committee will be jointly appointed by the Council and Memphis Cotton Exchange, with a co-chairman for each group. I personally appreciate the leadership of Memphis Cotton Exchange who --in bringing this to the Council forum for resolution -- have suspended their new bale weight penalties while restoring the previous penalties -- until the completion of the committee?s work and their report at Annual Meeting.
And rounding off today?s agenda, I encourage the Board and our guests to take action on Bruce Heiden?s CAC report and do your part to keep cotton?s PAC well funded.
In closing, I would remind this group that as we covened here one year ago, we were stunned and greatly saddened by the tragic events of September 11. In light of the new political and economic realities brought about by these events, we were unsure whether new farm legislation could be secured in such an environment. Chairman Echols urged us to press forward with our agenda and remind our nation?s policy-makers that the economic viability of the U.S. cotton and textile industries is essential to our country?s national security.
Today, as our industry joins the rest of the nation in remembering those tragic events of a year ago, we are also reminded of what it took to pass a farm bill against almost insurmountable odds. The challenges ahead that are being discussed today may be somewhat more predictable than a year ago, but are certainly no less formidable. To address them, we must call on the same unity, resolve and determination that helped guide our industry to achieve our earlier goals. Thank you.
