Cotton's Week: June 13, 2003

Officers from the 6 largest trade associations representing the US textile and fiber industry, including the NCC, met in Washington, DC, and unanimously approved a coordinated lobbying campaign designed to ensure the industry’s survival.

"The US government’s lack of follow-through on its commitments concerning textile trade policy has thrown the US textile, fiber and apparel industry and its nearly 1 million workers into a life or death struggle," said American Textile Manufacturers (ATMI) Chairman Billy Moore in a news conference following the meeting. "… (T)he industry (has) made an unwavering commitment to take any and all political steps to ensure (its) survival."

Immediate Past Chairman Kenneth Hood of Gunnison, MS, Senior Vice President for Washington Affairs John Maguire and Consultant on Trade and Farm Policy Issues Gaylon Booker represented the NCC at the meeting. Other organizations represented were the American Yarn Spinners Assn., the Northern Textile Assn., the American Manufacturing Trade Action Coalition and the American Fiber Manufacturers Assn.

The initial goal of the campaign is to persuade the government to implement the special textile China safeguard in an early and effective way to moderate the massive surge of Chinese exports. The effort also will concentrate on preventing China from unfairly taking advantage of regional free-trade agreements now being negotiated, in particular the proposed Central American agreement. The associations agreed to work against the inclusion of exceptions, called Tariff Preference Levels (TPLs), that allow Chinese and other Asian textile exports to enter the region duty-free. The inclusion of TPLs, the groups said, would undercut more than $5 billion in US textile export trade with Central America and threaten thousands of US jobs.

A report by ATMI, available at www.atmi.org, noted that from 12 months ending in March ’02 to 12 months ending in March ’03, China’s textile and apparel exports to the US surged 140%, the biggest increase in history. During the same one-year period, the US textile industry closed more than 50 plants and more than 40,000 textile workers lost their jobs.

US trade policy toward China is the most important factor leading to the bankruptcy of many of the nation’s largest textile companies, the closure of hundreds of textile and apparel plants and the loss of 267,700 textile and apparel industry jobs from January ’01 to May ’03, according to the report.

Moreover, despite pleas by the US textile industry and dozens of other manufacturing groups, the US government has refused to move against China’s illegal currency regime that gives its exports a 40% price advantage over US-manufactured goods.

Amb. Allen Johnson, the US Trade Representative’s (USTR) chief agricultural trade negotiator, stated that he is "encouraged" by progress made in talks with China regarding agriculture trade disputes and expects US exports to China to increase. Johnson spoke to reporters following meetings in China.

A top priority of Johnson’s visit was reversing China’s failure to provide market access to US cotton exports in accordance with the World Trade Organization (WTO) accession agreement. USTR Zoellick threatened to file a WTO dispute settlement case against China over the issue on May 21. Johnson reported that the US will retain all its options and will closely monitor trade levels and look for China to announce changes in its administration of Tariff Rate Quotas.

Johnson said he focused on 4 concerns the US has with China’s administration of its market access commitments: 1) reservation of a portion of imported products for companies that process and export the resultant product; 2) burdensome licensing requirements; 3) allocation of import rights in quantities that are not commercially viable; and 4) lack of transparency that makes it difficult for US exporters to know which leaders have the right to import.

The concerns mirror those raised by NCC and others in meetings with USTR and White House officials.

In its June report, USDA gauged US ’02-03 cotton production at 17.21 million bales, with projected mill use lowered 100,000 bales to 7.40 million and exports increased 400,000 bales to 11.4 million. As a result, projected total offtake increased 300,000 bales to 18.8 million. This generates an ending stock value of 5.9 million bales. The estimated ending stocks-to-use ratio is 31.4%.

For the ’03-04 crop year, USDA projected the US crop at 17.20 million bales. US mill use and exports are projected to reach 7.20 and 11.50 million bales, respectively, for total ’03-04 offtake of 18.70 million bales. Ending stocks for ’03-04 are projected at 4.5 million bales, for an ending stocks-to-use ratio of 24.1%.

USDA’s estimate for ’02-03 world production was lowered 460,000 bales to 87.45 million, with the estimate of beginning stocks increased to 46.96 million. This results in a world supply of 134.41 million bales. Estimated world mill use was raised 230,000 bales to 98.03 million. The projected world ending stock on July 31 is now pegged at 36.34 million bales. This has a corresponding stocks-to-use ratio of 37.1%.

For the ’03-04 marketing year, USDA projected world production of 95.50 million bales. World mill use was projected to reach 99.00 million bales. Consequently, world ending stocks for ’03-04 are projected to be 33.14 million bales, for a stocks-to-use ratio of 33.5%.

Senate Agriculture Committee Chairman Cochran (R-MS) convened a hearing to review implementation of the Agriculture Risk Protection Act of ’00, receiving testimony from USDA Chief Economist Collins; USDA Under Secretary Penn; and Risk Management Agency Administrator Davidson. The majority of the hearing centered on solvency of the industry; however, more detailed questions will be posed to USDA by committee members in writing.

Prior to the hearing, the NCC and other commodity groups briefed Senate staff members on areas they believe could be changed and improved. The American Cotton Producers’ Crop Insurance Working Group and producer interest organizations met earlier in the week via conference call to discuss topics for this briefing.

The issues presented to the Senate staff included questions about quality loss provisions, prevented planting, elimination of the 8-day deferred appraisal period and finding ways to reduce the disparity of the price election between crop revenue coverage and multi-peril strike prices.

On another note, Sen. Chambliss (R-GA) asked Undersecretary Penn for an update on implementation of the disaster legislation. Penn indicated that sign-up had begun and USDA should be able to send checks to producers in a matter of days after their paperwork is completed.

African countries submitted a joint proposal to the World Trade Organization (WTO) negotiating group on agriculture April 30 calling for establishment of a mechanism to phase out and eliminate support for cotton production. President Blaise Compaore, speaking on behalf of Burkina Faso, Benin, Chad and Mali, said subsidies provided by "rich" countries to their cotton producers "have caused economic and social crisis in African cotton-producing countries" by depressing export prices.

Compaore also called for financial compensation for producers in less-developed countries during the phase-out period to offset lost income due to subsidized competition. Compaore and others frequently referenced International Cotton Advisory Committee (ICAC) documents that suggest US subsidies drove down world prices by 26% in ’01. Compaore said the African-countries favored negotiations rather than confrontation at this time, but indicated that if the WTO Ministerial meeting scheduled to be held in Cancun, Mexico, in September does not result in action on the African proposal the countries would consider filing a WTO dispute resolution request.

According to media reports, the presence of the African president, who became the first head of state ever to address a Trade Negotiating Committee meeting, highlighted a growing public relations campaign by non-government organizations against cotton subsidies. The campaign is being supported by Oxfam International and IDEAS Centre, a Geneva-based advisory group headed by former General Agriculture Trade Tariffs Director-General Arthur Dunkel. Oxfam distributed envelopes to diplomats arriving at the meeting of the negotiating group that contained 17 fake notes with the face of President Bush and the phrase "cotton subsidy payments – 1 million" representing what Oxfam said was $17 million in subsidies paid to the 10 largest US "producers" in ’01.

Argentina, Bangladesh, India, Pakistan, Cote d’Ivoire, Paraguay and China expressed support for the African proposal. US Ambassador Deily said the US would study the specifics, but he noted the US is pursuing the phase out of all trade-distorting domestic support in the WTO’s Doha Round.

NCC Chairman Bobby Greene, Courtland, AL, ginner, said, "This action by African nations is disappointing. The NCC has shown repeatedly that the plight of African farmers is much more related to policies of their own governments than to US farm policy."

The White House has narrowed its search to 3 candidates to head EPA, according to a wire story citing Congressional and industry sources.

The short list includes Idaho's Republican Gov. Dirk Kempthorne, Midwest EPA Administrator Tom Skinner and Linda Fisher, a deputy EPA director and former Monsanto executive who will temporarily replace current EPA Administrator Whitman after her scheduled departure on June 27.

Members of the ’02-03 Cotton Leadership Class were in Washington for the government orientation portion of their program that included meetings with Agriculture Secretary Veneman and Under Secretary Penn. Other USDA meetings were held with top officials from the Farm Service Agency, Foreign Agriculture Service, Agriculture Marketing Service and Natural Resources Conservation Service.

At the Office of the US Trade Representative (USTR), the class met with Chief Textile Negotiator Spooner and Sharon Sydow, a member of USTR’s agriculture negotiating team. The class also visited the Department of State, the Commodity Futures Trading Commission and the International Trade Commission.

During visits to Capitol Hill, the class met with key Congressional staff and heard comments from Senate Agriculture Committee Chairman Cochran (R-MS); Sen. Edwards (D-NC); Rep. Moran (R-KS), Chairman of the House Agriculture Committee’s General Farm Commodities and Risk Management Subcommittee; House Agriculture Committee Ranking Member Stenholm (D-TX); and Rep. Alexander (D-LA).

During the meetings, class members received an orientation the role of agencies and legislators in the development and implementation of farm, trade and environmental policy. They conveyed the importance of maintaining the new farm law and expressed serious concerns about surging textile and apparel imports on the domestic textile industry.