Thank you, Woods, for that introduction, and on behalf of the Board, allow me to express our appreciation to you for your service to the industry this year as the Council’s Vice Chairman.
It is a privilege to address this Board as your Chairman and I am pleased to have this opportunity to report on developments since the Board convened last February.
The Council’s efforts in these months since Annual Meeting have largely been devoted to addressing the priorities identified by our delegate body.
Chief among these have been the defense of the U.S. farm program and influencing the outcome of trade negotiations.
Farm Bill Defense
The Council continues to work closely with other commodity and farm groups to effectively defend key provisions of the farm law. That has been the primary focus during my trips to Washington and in meetings there with our friends in Congress and the Administration. During the Council’s testimony before the House Agriculture Committee in May, I used that opportunity to commend them for developing balanced and effective legislation and remind them of the need to keep the farm law intact for the remainder of its term. I also had the chance to meet with key USDA officials, including Secretary Veneman, to discuss a range of issues and to express the industry’s appreciation for the way the farm bill has been implemented.
Just last week during House Agriculture Committee Chairman Goodlatte’s swing through West Texas, I had the opportunity to emphasize that the cotton program is still important to each and every U.S. cotton producer and that the current farm bill is vital to the entire existing structure of U.S. agriculture.
As John Maguire’s Washington report later today will explain, the budget and appropriations measures are being crafted in a very partisan environment, with election politics dominating every issue. There is serious concern that any budget reconciliation process during 2005 will adversely impact agriculture, and we could face efforts to change payment limitation rules during those budget reconciliation discussions.
WTO, Brazil and Trade
It is very appropriate that several presentations during today and tomorrow’s sessions of the Board will have a primary focus on trade initiatives and trade disputes.
Essentially, our concerns can be summarized as:
- The Council believes that a good CAFTA is essential to preserving a viable U.S. cotton and textile industry. Despite the Council’s best efforts, the CAFTA agreement that will be presented to Congress contains several provisions granting benefits to non-signatory countries. While the Council’s Board adopted policy that opposes the CAFTA in its current form, we must continue to look for opportunities to negotiate improved textile provisions in any Central American agreement.
- As a new Hemispheric trade development, John Maguire will be reporting on a Haiti bill known as HERO, which if passed, would provide duty and quota-free entry for all products originating in Haiti—without any rule of origin.
- In addition to the serious threats we face in the budget reconciliation process, we also must address the WTO decision in the Brazil dispute. This process, which involves an appeal and a reasonable timeframe for conforming programs to a final ruling, has been aptly characterized as a marathon. This is an effort where the Council will do its part, working with Congress and the Administration, to put forth an aggressive appeal—while maintaining an effective cotton program that complies with WTO rules.
- The final WTO framework agreement, while improved from earlier drafts, is still troublesome because of its specific references to cotton. I was pleased to hear Ambassador Allen Johnson report to the American Cotton Producers that the agreement contains sufficient structural flexibility to maintain an effective farm program. However, our negotiators must ensure that any domestic support reductions beyond the initial year continue to move global subsidies toward harmonization and are not unfair to U.S. agriculture.
- In addition to the Brazil challenge and the WTO framework agreement, the Council will continue to remain closely involved with our government on a number of issues related to China. While China is a very important export customer for our raw cotton, its textile imports into the U.S. are undermining our domestic manufacturers and now damaging Western Hemisphere trading partners. We have worked with the U.S. textile industry to ensure appropriate textile safeguards are imposed against surging China imports. The U.S. textile industry must be allowed to adjust to this destructive force in the U.S. textile market. Cass Johnson will be reporting today on efforts underway by the new National Council of Textile Organizations to combat Chinese trade practices.
An integral part of assuring the Council’s success with our Washington activities is the presence of a strong political action committee. I am looking forward to CAC Chairman Heiden’s report on the strong efforts that are underway to build on last year’s record contributions.
Another special political fundraising effort was successfully completed earlier this summer. I am pleased to report that the Empower Cotton campaign --which was initiated to generate cotton industry contributions that were delivered by Senator Cochran to the National Republican Senatorial Committee and the Bush-Cheney ’04 Campaign-- far exceeded our goals. Our success in this effort is the result of the hard work by the campaign’s captains and the generous contributions from cotton industry participants. I would like to commend the efforts of all who participated, and I especially want to thank the Mississippi leadership for their work in greatly exceeding their goal.
Cotton Research and Promotion
The Cotton Research and Promotion program is also crucial to cotton’s future. In response to current legal challenges, I am pleased that the industry is taking a direct role in its defense. I serve on the board of the Cotton Research and Promotion Defense Council that is overseeing the defense efforts. It will be a difficult case, given recent court decisions.
We know the value of the research and promotion program. As a direct result of our efforts, the U.S. leads the world in per capita consumption of cotton products. We are the cotton market of the world, and our annual consumption of cotton textile and apparel products exceeds our own level of cotton production. This program is crucial to maintaining growth in cotton demand.
Cotton Council International
Likewise, the Council’s export promotion arm, Cotton Council International, plays a major role in strengthening key markets in Europe, Asia, Latin America, the Middle East and Africa. With 65 percent or more of U.S. cotton fiber moving through export channels, I look forward to CCI President Bob Norris’ presentation later today—highlighting the many activities of the Cotton USA program.
Likewise, Cotton Foundation President Allen Helms joins us on today’s agenda to review that program’s vital mission of encouraging, facilitating and conducting cotton research and education. The payoff is new products, systems, techniques, and services that help the Council carry out its mission of providing the U.S. cotton industry with a world marketplace advantage.
Quality and Quality Task Force
Through the efforts of the Council’s Quality Task Force, critical quality issues –ranging from short fiber content to moisture management—are being addressed. (A particularly critical area)-- the Task Force’s bale moisture recommendation –adopted by Council delegates and if implemented by gins—will assure the fiber’s color and other quality characteristics will not degrade from excess bale moisture.
Recently, the Council agreed to provide leadership and oversight for the development of a comprehensive plan to address quality problems occurring in Georgia and other parts of the Southeast. At a meeting held earlier this month in Atlanta, which was coordinated by the Council and Cotton Incorporated, the primary quality issues were identified and a coordinated research plan was established.
New Finance Plan
Tomorrow, this Board will be considering recommendations for a New Finance Plan. This proposal comes on the heels of the excellent work of the Council’s Study Committee, which –over a period of two years--identified the essential Council programs that should remain intact and found necessary savings that reduced Council expenditures by 20 percent. Acting on the latest Study Committee recommendation, a New Finance Plan Steering Committee was formed and met twice earlier this year. Prior to the Board meeting, the Steering Committee presented its proposal to the Finance Committee, which will make a report during tomorrow’s executive session.
Whole Cottonseed Dues and Representation
An important part of the Council’s new finance plan has been an effort to bring the whole cottonseed interest into the Council. A special cottonseed study committee, chaired by Kenneth Hood, met twice this year, worked through a number of issues and found agreement in many areas. They will be making a recommendation to the Board for a new dues structure and Council representation for the entire cottonseed industry.
And finally, the Council has been actively involved in a series of activities closely linked to the Brazil case and the WTO framework agreement.
Throughout most of 2004, the U.S. cotton industry has actively sought opportunities to establish a close working relationship with the cotton producing countries of West Africa. We embarked on this endeavor with the belief that there are many common issues and concerns between us, and that there was a great opportunity before us. We also believed there were real solutions to be realized through mutual dialogue and cooperative efforts, rather those being proposed to the WTO.
The dialogue between the U.S. cotton industry and the West African countries was initiated early this year, when a delegation from Mali met with National Cotton Council leaders during the Council’s annual convention in New Orleans. We had a cordial and wide-ranging discussion about matters of mutual interest including trade, investment and capacity building.
In June, I was honored to participate in the Ministerial Conference on Agricultural Technology in Burkina Faso and to travel in that country to a number of cotton growing areas as part of a larger U.S. delegation.
Late last month, the U.S. cotton industry served as a co-host to a West African delegation to show examples of U.S. cotton research, promotion and marketing. During the tour, we discussed advances in cotton production, ginning and fiber processing; and how West African countries can benefit from participation in our industry’s technical conferences. We also explored the potential linkages between their cotton industry and U.S. research, production and marketing specialists, and demonstrated the great benefits associated with the adoption of biotechnology.
The ministers in the delegation were provided with sound economic and marketing analysis showing the dramatic cotton production increases in Brazil and China since 2001. In addition, we clearly showed the returns that accompany the adoption of biotechnology – which greatly exceed the 2 percent price change that recent studies by Texas Tech and FAO estimate would result from the elimination of the U.S. cotton program.
We also had the opportunity to hear reports from delegation members on the status of the cotton industry in each of these countries—which helped foster a better understanding on our part.
As the U.S. cotton industry makes plans to continue cooperative efforts, there is the possibility of a return visit to West Africa – including the opportunity to participate with technical specialists from USDA and US-AID in fact finding missions for two weeks in September. In December, plans call for a high-level delegation to return to West Africa to meet and establish priorities from the earlier findings of the technical teams.
We believe that these outreach efforts will pay positive dividends to both U.S. cotton and our West African counterparts as we enter the next round of WTO agricultural negotiations.
In conclusion, I believe the Council has effectively focused its resources on the priorities established during our Annual Meeting. However, as my report highlights and many of the other reports today will emphasize, there are serious challenges ahead. With your continued leadership and support – along with the diligent efforts of a dedicated staff team – I am convinced that we will be successful in meeting each of these.
Thank you for your attention.