Thank you,
Allen, 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 some of the major developments since the Annual Meeting.
First, though, I want to say I have appreciated the opportunity to serve as Council Chairman this year. It has been very busy, but rewarding. Even though the job has demanded a lot of travel --including trips to Washington on numerous occasions, to Geneva, and to China— I have enjoyed meeting with cotton industry leaders from all areas of the Cotton Belt and all industry segments.
I want to personally thank Allen Helms for agreeing to represent the Council at several industry meetings I was not able to attend due to schedule conflicts.
Our meeting agenda this afternoon and tomorrow morning will include a number of informative reports that should provide us with the latest details of the critical issues facing the cotton industry.
Congress and the Administration will be making several important decisions in the next few weeks. It is important that we have a better understanding of the issues, how each of these issues are interrelated, and the strategies our industry is employing in addressing these. It is also noteworthy that we are not able to address these issues separately or in isolation from the others.
As I mentioned, these priorities have required numerous trips to Washington and meetings with the Administration, our friends in Congress and leaders from other agricultural groups to defend the current Farm Bill, to present our industry’s priorities in the Brazil case, and promote our interests within the agriculture negotiations of the Doha Round.
These issues have also required the Council to have a strong presence in Geneva. On two occasions this year, teams of industry leadership have met with key U.S. and WTO officials in Geneva. Our primary objective during these trips is to monitor the activities of the special cotton subcommittee and reinforce the U.S. position for a comprehensive agriculture agreement and ensure that the U.S. cotton program is not singled out.
Our meetings in Geneva also have provided us with the opportunity to review with U.S., WTO and West African officials the Council’s cooperative efforts with USDA and US-AID that are helping the West Africans to address their rural quality of life and cotton production problems.
I would note in this regard that we have a very positive story to tell. This summer, the Council is co-sponsoring with USDA and US-AID three training programs for West African cotton officials. Two of these programs, covering cotton classification and soil conservation, have already been completed. An entomology program is currently underway and there are plans to take our industry’s very successful gin school to West Africa later this year.
Contrary to the European Union’s policy shift away from a single undertaking approach in the Doha negotiations and a recent Wall Street Journal article which questioned our motives, we are convinced that the key to helping West Africa overcome its problems is a positive international agreement across all agricultural sectors that provides improved market access for all countries.
Earlier this year, another group of Council leaders went to Washington for our initial meeting with Secretary of Agriculture Mike Johanns. In what turned out to be the first of several meetings with the Secretary, we presented the cotton industry’s concerns with the Administration’s budget proposal and expressed our disappointment with the final Brazil case ruling, which had been issued only a few days before.
Even though the budget reconciliation issue is a very serious one (Maguire will cover in more detail later today), following our first meeting with the Secretary, he noted in Senate testimony his recognition of the concerns with the White House’s budget proposal and his willingness to work with Congress in other ways to meet the President’s budget goals.
Throughout the spring and leading up to the Administration’s Step 2 announcement, the Council participated in a number of meetings with USDA, USTR, Congressional leaders and other agricultural groups –on the WTO Step 2 ruling.
We are obviously very disappointed with USDA’s proposal on Step 2. Immediately after their announcement, we communicated with the both Agriculture Committee chairmen and ranking members voicing our opposition to the immediate elimination of the Step 2 program. Further, we urged Congress to consider the significant market disruption and economic losses accompanying this proposal. The Council has asked Congress to make a decision on Step 2 in the context of a new farm bill, or at the very least to consider other options rather than immediately eliminating the program.
In addition to these major issues before our industry, the Council has been very active on CAFTA and a number of issues related to China.
We are very pleased with the recent passage of CAFTA implementing legislation by the House of Representatives.
The Board is aware of the Council’s activities, coordinated with the National Council of Textile Organizations, leading up to our May conference call to review the Board’s CAFTA policy established at Annual Meeting. Immediately following the Board’s decision to support CAFTA, the Council began an extensive effort to help secure passage of this legislation.
This is because the Council believes that CAFTA is essential to preserving a viable U.S. cotton and textile industry.
In addition to the Council’s active participation in several textile and business coalitions, Council leaders promoted passage of CAFTA through Congressional testimony, personal contacts, a campaign of letters to the editor, and participation in a number of press conferences.
Not long after the Council Board adopted its CAFTA policy, Allen Helms participated in a press conference in Little Rock organized by the Arkansas Farm Bureau, which featured Secretary of Agriculture Mike Johanns and a number of agricultural and business leaders. This event provided the Council with the opportunity to publicly join with the Administration in urging Congress to adopt CAFTA. The event also provided us with the opportunity to remind the Secretary that America’s cotton producers as well as all farmers need a strong financial safety as provided in the current farm bill.
In June, former Council Chairman Bob McLendon appeared before the Senate Agriculture Committee to present the Council’s CAFTA testimony.
On the day of the House vote, Southeast producer leaders Sam Spruell and Jimmy Webb traveled to Washington to participate in the press conference of five Republican Congressmen from textile districts, who announced their support of CAFTA.
The Board should be aware that the cotton industry is getting credit for delivering some key votes in several Cotton Belt states. In many of these cases, these were very tough votes and the Council has begun working closely with our leadership in these districts to thank these Congressmen for their support.
As I mentioned earlier, the Council continues to remain very active on a number of activities related to China. China has grown to become the largest importer of U.S. cotton. For the 2004 marketing year, we shipped 3.5 million bales of U.S. cotton to Chine and even more is expected for this year’s crop. However, China’s unpredictability and its unwillingness to fully comply with all of its trade obligations require the continued attention of the Council. We have worked with the Administration who has conducted numerous meetings with Chinese officials about the way China allocates their import quotas. An additional concern has arisen with the variable duty announced by China on imports in excess of their WTO commitment. This duty places the price of imported cotton above that of Chinese domestic polyester.
The Council worked closely with the U.S. textile industry and the Administration to ensure appropriate safeguards are imposed against surging China imports. In recent months, the Council has had two opportunities to provide Congressional testimony on China trade issues, with Bobby Weil’s testimony before the House Ways and Means Committee in April, and Tom Stallings appearance before the House Small Business Committee in May. In addition to the quota allocation and textile safeguard issues, the Council testified about our concerns about contract sanctity and the cooperative efforts with the Chinese government as they endeavor to reform their cotton classification system.
In June, I participated in a Cotton Council International-sponsored trip to China, where I spoke at China Cotton Association’s third international conference on the importance of global cotton promotion. My presentation also explained the advantages of U.S. cotton and fostered a better understanding of the U.S. cotton research and promotion program, as well as the need for China and other cotton-producing countries to establish similar self-help programs. Of course, CCI continues to do an outstanding job of strengthening key export markets for U.S. cotton and I look forward to hearing an activity report from CCI president Gary Taylor.
While at the China Cotton Association conference, I had the opportunity to join Jeff Coey of CCI and Jimmy Knowlton of AMS at a meeting with representatives of China’s Fiber Inspection Bureau. We learned that China intends to purchase at least 390 HVI lines in the next several years –with the goal of classing every bale of Chinese cotton. In addition, China proposes to reduce their gin numbers from 18,000 to 2,500, while establishing a 500 pound universal density bale, with permanent bale identification and approved packaging materials. This is a very ambitious set of reforms that may be difficult to meet within their timetable, but this does demonstrate China’s resolve to modernize their system.
While the Council is continuing to work with the U.S. textile industry on the filing of petitions for textile safeguards, we are very supportive of efforts to reach an agreement similar to the one between China and EU for limiting growth in China’s textile exports. Earlier this week, USTR led an interagency team that opened negotiations with China for a comprehensive textile trade agreement, in the hopes of seeking a long term solution to textile trade with China.
It is very important that the Council is properly equipped to be able to successfully address the wide array of issues before our industry. We must ensure that everyone with a stake in these issues is giving generously to the Committee for the Advancement of Cotton and is a member of the National Cotton Council.
Even though today’s agenda includes a CAC presentation from Bruce Heiden, as Council Chairman, I never miss the opportunity to express my appreciation to the supporters of that effort and remind everyone in our industry of CAC’s critical role of providing support for our friends in Congress.
Along with support for CAC, I mentioned the need for membership, so I will provide a brief update on the Council’s new finance plan. I am very pleased to report that to date over 80 percent of the Council’s current funding base has committed to the new plan. I appreciate everyone’s efforts to bring their businesses into the new plan and your leadership with other firms.
Of course, as the Board will note later today during the Program Review Committee report, there is a serious effort underway to find additional budget savings for the Council.
Let me also note that as we look ahead at future challenges, the Council is making preparations for the development of a new farm bill. Of course, USDA intends to take a very active role in this process and has begun holding listening sessions. They have conducted two meetings in the Cotton Belt thus far: a meeting in Nashville on July 7 and one in Fresno last week. Both of these meetings were attended by cotton industry leaders who voiced strong support for maintaining many of the current farm bill’s provisions. In addition, several members of Congress have been conducting forums in their districts or throughout their states. These also are being well-attended by our industry and an extensive effort has been made to deliver cotton’s message consistently. Of course, this process is just beginning and we expect that Congressional farm bill hearings will not occur until later in 2006 and on into early 2007.
In conclusion, I believe the Council has been very effective in applying its resources on the industry’s priority issues. However, as my report summarizes and many of today’s other presentations will emphasize, our industry still faces a number of serious challenges. I want to thank each of you for your past support and leadership and urge your continued commitment to the Council’s efforts.
Thank you for your attention.
