Reference Documents Regarding Restoration Of Upland Cotton Provisions of S.3240

Sec. 1207 Special Marketing Loan Provisions for Upland Cotton

Issue:

Restore the upland cotton provisions of Section 1207 of the Senate's 2012 Farm Bill S.3240

Background:

Senate Farm Bill S.10 – the Agriculture Reform, Food, and Jobs Act of 2013 – as introduced in the Senate on January 22, 2013, does not contain the section Special Marketing Loan Provisions for Upland Cotton, which was section 1207 of the Senate's 2012 farm bill S.3240.

The original section 1207 was dropped from the legislation in late 2012 when the Senate was considering sending their version of the farm bill to the U.S. House for consideration. In late 2012, the House Ways and Means Committee objected to the Senate-passed version S.3240 because that legislation included provisions for the special import quotas for upland cotton. The Ways and Means Committee argued that by including import quota provisions, the Senate legislation affected tariff collections and thus affected revenue. Under that ruling, the House would have sent the original Senate bill back to the Senate with a so-called "blue slip."

In order to avoid the blue slip, the Senate dropped all of section 1207. While that version was ultimately not considered by the House, the current Senate bill S.10 also does not include the upland cotton provisions of section 1207.

Importance of the Provisions:

Since the 1970's, upland cotton has maintained provisions that will allow additional market access to foreign cotton under certain market conditions. Annually, cotton has a WTO quota of 150,000 bales that is charged a minimal import tariff. However, the U.S. textile industry was concerned that in the event of a short U.S. cotton crop and uncompetitive market prices, the WTO quota would be inadequate to meet their needs. As a result, rules for special import quotas have been in place for several farm bills, and those import quotas trigger based on specific market conditions and provide the textile industry with the necessary market access to allow them to remain competitive.

The special import quota provisions of section 1207 of Senate bill S.3240 must be restored for the following reasons:

1.The earlier decision by the House Ways and Means Committee to blue-slip based on the import quotas was a change in the way that blue-slip rules have been applied in the past.

2.The import quota provisions of S.3240 are identical to the provisions of the 2008 farm bill and have no effect on baseline revenue. It should not be a blue-slip issue.

3.By eliminating the special import provisions, the new farm bill would represent a step backward in market access relative to the 2008 farm bill.

Economic Adjustment Assistance Program Boosting U.S. Textiles
National Cotton Council

The Economic Adjustment Assistance Program (EAAP), authorized in the 2008 Farm Bill, is revitalizing the US textile manufacturing sector. The program provides a payment to US textile manufacturers for all upland cotton consumed, whether US-grown or imported. The payment rate from August 1, '08 through July 31, '12, was 4 cents per pound of cotton used, and was reduced to 3 cents per pound beginning on August 1, '12.

To be eligible, manufacturer recipients must agree to invest the proceeds in equipment and manufacturing plants, including construction of new facilities as well as modernization and expansion of existing facilities. USDA reviews and approves the plans before payments are issued to a manufacturer. The assistance program, which is consistent with World Trade Organization commitments, is modeled after trade adjustment assistance programs and is not designed to affect the price or competitiveness of raw cotton.

The EAAP has saved jobs and increased cotton consumption by US textile mills.

·Between 1997 and 2008, US mill use of cotton steadily declined due a rapid rise in low-cost imported apparel as trade agreements liberalized textile imports.

·In the first quarter of 2013, cotton consumed by US textile mills averaged 11% higher than the comparable period in '09. On an annualized basis, that represents an additional 360,000 bales.

·The decade-long trend of losing 20,000 textile jobs annually has been halted since implementation of the EAAP. Since 2009, employment numbers have stabilized, and for many companies, increased.

·Since 2009, BLS data indicate that average weekly hours per worker are up 9%, and average weekly wages are up 16%.

·Based on a survey of EAAP recipients, 70% of respondents cited increases in the number of employees while the remaining 30% noted that labor requirements had either stabilized or more hours were required of existing employees.

The EAAP has allowed investments in new equipment and new technology.

·Survey responses indicated that companies had constructed new buildings, made improvements to existing buildings, and invested in new spinning equipment and new technology for the purpose of expanding capacity and adding new product lines.

The EAAP has allowed companies to reduce costs, increase efficiency and become more competitive.

·US textile companies cited an increased ability to be more competitive against foreign competition and opportunities to reclaim market share from Asian competitors were noted by survey respondents.

·Other benefits include lower energy costs, greater efficiency in style changes gives ability to adapt to market conditions, improved quality control, increased capacity, reduced water use and more flexibility to meet customers' needs.

Future investments funded by the EAAP will allow further recovery by the US textile industry.

·Companies have expressed their intent to build new plants, add additional spinning and weaving technology, and replace existing equipment with more efficient machinery.