NCC Challenges Brazil Economic Information

LUBBOCK, TX – In an address to the Plains Cotton Growers Association Board of Directors here today, National Cotton Council Chairman Woody Anderson directly challenged the economic information widely distributed by Brazil in their World Trade Organization (WTO) dispute with the U.S. cotton program.

The Colorado City, TX, cotton producer said, “I cannot imagine how the dispute settlement Panel could agree with the arguments advanced by Brazil concerning decoupled programs. Brazil's analysis concerning the impact of decoupled programs runs contrary to almost every economic analysis performed prior to the beginning of the Brazil case.

"The U.S. cotton program was fully coupled to production in 1992 and 1994. Since that time, many of our payments have been decoupled, loan rates reduced and target prices lowered. How can decoupled payments be inherently trade distorting? These are not the actions of a country that is increasing its support to cotton. The 2004 cotton program does not support cotton at a higher level than we did in 1992.”

In dismissing the arguments advanced by Brazil during the Panel’s deliberation, Anderson said that Brazil claimed the entire decline in cotton prices from 1999 to 2001 was due to the presence of the U.S. cotton program.

“I find it incredulous that the soaring value of the dollar, a 25 percent increase in Asian polyester production and a record cotton crop in China with ensuing exports could be ignored during this period,” Anderson stated.

Brazil hired Dr. Dan Sumner to conduct an economic analysis of the world cotton market to assess the impact of the U.S. cotton program. Dr. Sumner’s paid analysis asserted that elimination of the U.S. cotton program would reduce U.S. cotton exports by 40 percent and increase world cotton prices by 12 percent.

During his presentation today, Anderson pointed to a comprehensive study recently released by agricultural economists at Texas Tech University.

“These results directly contradict Brazil’s assertions,” Anderson said. “The Texas Tech study indicates that program elimination might reduce U.S. cotton exports by four percent to five percent and cotton prices would increase by one half to two percent. To put this in perspective, we could get that much price movement from a big hailstorm in Gaines County. The results offered by Brazil and adopted by the mainstream press are unsupportable.

"The magnitude of price impacts found by Texas Tech independent researchers is insignificant in world markets and cannot, under any stretch of the imagination, be said to cause any country serious prejudice. I think it is interesting that while Brazil is alleging serious prejudice in the WTO, it is expected to increase cotton production in 2004 by 85 percent over its 2001 production. While U.S. production will decline in 2004, Brazil and China are expected to increase production by 7.6 million bales over 2001 - an amount that is almost twice the size of the 4 million bale annual cotton crop in West Africa."

Anderson said the Texas Tech study shows results not dissimilar to other empirical research, including a report by the International Monetary Fund and the Australian Cotton Research and Development Corporation - both of which showed price impacts from the U.S. cotton program of about 2 percent.

"The U.S. share of the world cotton market is virtually unchanged over the past 30 years, hovering around 20 percent, Anderson said. “Meanwhile, the combined market share of Brazil and China is expected to climb by 6 percentage points to 34.5 percent in 2004 as compared to 2001. The rhetoric blaming the United States for oversupply and overproduction of cotton are simply and clearly inaccurate."