NCC: Trade Policy Should Keep U.S. Cotton Competitive Worldwide

WASHINGTON, DC, - National Cotton Council Chairman James Echols told a Senate panel here today that the U.S. cotton industry was dealing with the dual pressures of stiff international competition and a strong dollar and urged them not to abandon effective U.S. export programs.

"The U.S. cotton industry faces competition for export markets and stiff competition in our domestic market from imported products," Echols said. "We need trade policy that ensures our raw product is competitive, that opens markets for both raw cotton and U.S. produced cotton textiles, and that ensures the terms of competition are fair."

In testimony before the Senate Committee on Agriculture, Nutrition and Forestry regarding the agricultural trade title in any new farm bill, Echols outlined polices designed to strengthen the position of cotton in domestic and international markets. He called upon Congress to: 1) maintain cotton's competitiveness provisions included in U.S. farm law; 2) ensure that existing regional trade agreements are effectively implemented; 3) maintain effective export promotion programs; 4) ensure the U.S.-China trade agreement is not detrimentally changed and monitor China's compliance; 5) ensure that new trade agreements are favorable to U.S. cotton; and 6) work for a new World Trade Organization (WTO) agreement that improves U.S. cotton's competitive position.

"The U.S. cotton industry is facing some of the stiffest international and domestic competition I can remember," Echols said. "Compared to other agricultural products, the U.S. cotton industry is uniquely vulnerable to the effects of an appreciating dollar. The strong appreciation of the dollar has significantly lowered the price of foreign produced textiles and apparel in the U.S. market, increasing the competitive advantage of foreign textile firms at the expense of U.S. spinning mills and textile enterprises."

The Memphis merchant testified that in 2000 the U.S. imported more cotton in the form of textiles than U.S. mills consumed. He said that level of competition will intensify as textile quotas are phased out.

Echols stated that cotton's marketing loan and three-step competitiveness provisions form the "cornerstone" of an effective U.S. cotton program and are central to U.S. cotton's long-term competitiveness.

He also stressed the importance of opportunities to increase demand for U.S. cotton and called on Congress to prompt the Administration to issue final rules implementing trade preferences enacted for the Caribbean region.

Echols cited cotton concerns with international negotiations concerning the U.S. export credit guarantee program (GSM-102), which Echols called "a mainstay of U.S. agricultural export assistance activities." He said the most recent proposals would undermine the GSM-102 program "while providing no corresponding reductions in subsidy programs operated by our competitors." He said the proposal in the Organization for Economic Cooperation and Development would "place the United States at a disadvantage entering another round of multilateral agricultural trade negotiations. Instead of moving to cripple this important program, we should be attempting to improve its effectiveness."

He noted that the NCC has estimated that an ineffective GSM-102 program could reduce annual U.S. cotton exports around 500,000 bales and have as much as a 3-cent per pound impact on U.S. cotton prices.

Echols also urged additional support for market promotion programs such as the Market Access Program (MAP) and Foreign Market Development Program (FMD). Noting that funding under these programs had not kept pace the past two years, he encouraged the Committee to provide funding for the FMD program of $35 million per year and to restore overall support for the MAP program to its 1992 level of $200 million.

Echols told the Senate panel that U.S. trade officials need to ensure that the U.S.-China trade agreement under the World Trade Organization (WTO) is not undermined by China's attempt to claim developing country status.

"China is very competitive in international markets with respect to cotton and textiles and should be made to conform to trade disciplines that are equivalent to those adhered to by the United States," he testified.

Echols told the panel the NCC supports the concept of fast-track negotiating authority, provided it contains provisions requiring consultation with Congress and the private sector and negotiating objectives that will encourage trade agreements that will benefit U.S. cotton. He indicated, however, that each new trade agreement must be evaluated on its own merits as to whether it is beneficial to the U.S. cotton industry.

Echols also outlined a set of priorities for the ongoing WTO negotiations, including improving market access for cotton and textiles, improving rules restricting the use of downstream export subsidies, limiting exemptions for countries that are competitive in cotton and textile products, and ensuring countries do not erect non-tariff trade barriers against agricultural biotechnology products.