U.S. Cotton Needs Viable Government Partnership to Meet Stiff International Trade Competition

WASHINGTON, DC – For the U.S. cotton industry to meet some of the stiffest competition it has ever faced, it needs a U.S. government partnership for help in securing markets against sometimes unfair international competitors, a National Cotton Council official said here today.

Robert Weil, II, chairman of the NCC’s International Trade Policy Committee, told the House Subcommittee on Specialty Crops and Foreign Agriculture Programs that the upcoming farm bill provides that panel "the opportunity to reassert itself and fill an ever-widening void being created as the U.S. government appears to retreat in the face of international competition and the self-serving demands of our competitors."

The Montgomery, AL, cotton merchant said U.S. cotton needs to export more than 50 percent of the 2001 crop to prevent the industry from slipping even further into serious economic depression. He said domestic mill use of cotton is expected to fall 3 million bales from the 1997 level while the U.S. crop likely will be similar to the past two years, "meaning we will have to find a home in foreign markets for an additional 2 to 3 million bales of cotton or see our carryover levels soar."

"Congress has provided many tools to assist agricultural exports," Weil testified. "However, the viability of these programs is being threatened and their potential is not being fully realized."

As examples, Weil noted that Foreign Market Development program funding has failed to keep pace with inflation; Market Access Program funding has fallen by 55 percent since 1992 despite its clear positive impact; the export credit guarantee program – the most cost-effective – has been offered up by U.S. trade negotiators in return for no significant concessions by any competitors; and the Administration has chosen to classify supplemental market loss assistance payments as subject to World Trade Organization (WTO) limits.

Weil said one of the most significant influences on the U.S. cotton market is cotton textile imports, which have taken half of the U.S. cotton textile retail market and are rising.

"The most surprising fact in this sad story is that recent productivity gains in the U.S. textile industry have been surpassed only by the U.S. electronics and computer industries – yet the bankruptcies are accelerating," he said.

Regarding exchange rates, Weil told the panel that: 1) the U.S. dollar’s strengthening – almost 34 percent relative to the currencies of primary export market competitors – has put U.S. cotton producers at a severe disadvantage, 2) the U.S. cotton industry – compared to other agricultural products – is uniquely vulnerable to the effects of an appreciating dollar through its impact on imports of cotton textile and apparel products and 3) the dollar’s strong appreciation 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.

In his testimony, Weil also discussed the NCC’s trade policy priorities: 1) maintaining cotton’s competitiveness provisions included in U.S. farm law and continuing farm policy that enables the industry to produce a competitively-priced product; 2) maintaining and strengthening effective export assistance programs; 3) effective implementation of existing regional trade arrangements to enhance the overall competitiveness of the U.S. textile sector; (4) working to monitor China’s compliance with the WTO agreement with the U.S.; (5) ensuring that regional trade arrangements currently being negotiated are favorable to U.S. cotton and cotton textiles; and (6) working for a new agreement in the WTO that improves the competitive position of the U.S. cotton and textile industries.

"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," Weil said.

The Memphis-based National Cotton Council of America’s (NCC) mission is to ensure the ability of all U.S. cotton industry segments to compete effectively and profitably in the raw cotton, oilseed and manufactured product markets at home and abroad.