Cotton's Week: October 24, 2003

Cotton's Week: October 24, 2003

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Wide Range of Cotton Issues Reviewed in USDA, USTR Meetings

NCC staff met with USDA Under Secretary Penn and key personnel from the Farm Service Agency and Foreign Agricultural Service to review the status of a number of cotton issues. The meeting included discussions on the ELS cotton competitiveness program, the interim regulation authorizing outside storage of ELS cotton pledged as loan collateral, the advance ’03 crop counter-cyclical payment, China’s administration of ’04 cotton Tariff Rate Quotas (TRQ), Brazil’s World Trade Organization (WTO) challenges to the US cotton program and the so-called African cotton initiative in the WTO Doha round.

Following the meeting with USDA, NCC staff met with the Office of the US Trade Representative’s (USTR) Agricultural Trade Negotiator Johnson to discuss China TRQs, Brazil and Africa. Appreciation was conveyed for the excellent work done by numerous USDA and USTR officials in preparing and presenting the US rebuttal to Brazil’s challenge. Staff also conveyed appreciation for USDA and USTR’s strong stance in resisting Africa’s call to segregate cotton from agricultural negotiations and for payments for alleged damage to the African industry. Both USDA and USTR reiterated their intention to continue to resist efforts to single out cotton if WTO negotiations are restarted. Officials also were thanked for their efforts to ensure that China administers TRQs in a manner consistent with its WTO accession agreement. China recently published regulations and allocations for ’04, and USDA and USTR officials committed to work with the industry to determine if they are compliant with the accession agreement.



Next-to-Last Round of CAFTA Negotiations Completed

Just one more round of Central America Free Trade Agreement (CAFTA) negotiations is scheduled before the December targeted completion date. This week’s textile discussions in Houston reportedly focused primarily on rule-of-origin, customs enforcement and safeguard provisions.

US negotiators report that the rule-of-origin discussions relate primarily to exceptions sought by the Central Americans and by certain US interests to the primary yarn-forward rule that remains under consideration. With respect to customs enforcement, all interests want the difficult combination of better enforcement through a less complex, time-consuming procedure.

Among the important outstanding issues to be resolved in the final negotiating session left is the continuing call by Central American and US retailer/importer interests for “sourcing flexibility.” While calls for Tariff Preference Levels (TPL) and accumulation have become less overt and strident, Central American and certain US interests continue to insist on some kind of sourcing flexibility provisions. The NCC, American Textile Manufacturers Institute (ATMI) and American Yarn Spinners Assn. (AYSA) staff and industry leaders continue to maintain that the needed flexibility can be provided through a well-designed short-supply mechanism.

Avondale Mills CEO and NCC Vice President Stephen Felker joined the NCC’s Gaylon Booker, ATMI’s Cass Johnson and AYSA’s Mike Hubbard in the Houston discussions this week. Booker said, “Stephen Felker’s participation in the informal discussions was very helpful. Stephen made it clear that the US textile and fiber sectors were unwavering in their opposition to TPLs and accumulation, and he was able to brainstorm with the Central Americans about short-supply options that seemed commercially feasible.” Felker said, “I think it will be important for US textile leaders to quickly focus on short-supply provisions and be prepared to offer suggestions to our US negotiators. Time is slipping away, and our input on short-supply provisions will be essential to achieving a workable CAFTA.”



China Safeguard Pushed by Congressional Members
 

The united textile/fiber industry coalition and several Congressional members, including Reps. Coble (R-NC), Spratt (D-SC), Goode (R-VA) and Pascrell (D-NJ), will hold a news conference Oct. 29 in Washington to release letters sent by Congressional members to President Bush in support of invoking the special China textile safeguard.

CEOs, trade association executives and union officials will be on hand to discuss their grassroots lobbying and voter registration activities in support of the China safeguard and other measures designed to help the US textile, fiber and apparel industries. The textile/fiber coalition filed China safeguard petitions on knit fabric, brassieres and dressing gowns on July 24. The US government has until Nov. 17 to approve or deny the petitions.



NCC Responds to NY Times Editorial

NCC President/CEO Mark Lange responded to another New York Times editorial critical of the US cotton program and its effect on some African cotton farmers. The response (limited to 150 words by the newspaper and accessible at www.cotton.org) points out the Oct. 19 editorial’s failure to mention the global pervasiveness of agricultural support and the fact that African farmers mentioned deal with a state-granted monopoly to purchase inputs and sell cotton and are paid only one-half of the world-market value of their cotton.

“The editorial again inappropriately blames US cotton for the plight of developing countries’ farmers,” NCC’s response said. “Its distorted view is based on pre-conceived biases, oversimplification and failure to mention that agricultural support is the rule, not the exception, around the globe. US agricultural programs cover a range of commodities designed to balance production agriculture with conservation practices. Spending on all commodity programs is less than 1% of the federal budget.”

Lange’s response also pointed out that the US approached the current round of trade talks with a sweeping initiative addressing distortions in all fiber markets, as well as textiles and clothing, but “the African countries walked away from a chance at broad-based reform.”



EU Puts New Traceability, Labeling Laws on Books

The European Union (EU) final rule on the traceability and labeling (T&L) of agriculture biotech food and feed was published in the Official Journal of the European Union on Oct. 18 (www.europa.eu.int). Registration is effective 20 days following publication of the rule, and the law will be phased in over a period of 270 days.

The traceability aspect of the law becomes effective 90 days after registration, with labeling effective 180 days after registration. Highly refined oils (e.g., cottonseed oil), food additives (e.g., food thickeners made from linters) and feed (e.g., cottonseed meal) produced from biotech crops would fall under this new legislation since it requires any product, regardless of whether a biotech event can be detected, to be labeled with the statement: “This product contains genetically modified ingredients.”

Cotton products, including textile and apparel, that are not used as food or feed are not covered by the law. Since about 75% of US upland cotton is transgenic cotton, essentially all food and feed products from US cotton would be covered.

European officials claim traceability and labeling are necessary to end the de facto moratorium on approvals of new varieties of biotech foods and crops. The moratorium for more than 5-years has effectively blocked registration of new biotech products in the EU. Many in agriculture feel the new legislation could be more restrictive than the moratorium, resulting in food companies seeking alternative sources of oils and additives for their processed foods. The burdens of segregating conventional and biotech crops for processing and the accompanying documentation would increase the cost to the agriculture industry.

While the EU requires documentation only from the exporter, US exporters can be expected to require documentation from farther down the chain to help avoid liability in the event of the sale of an improperly-labeled biotech crop, thus resulting in actions such as food recalls.

The NCC, along with other food associations and an international biotech consultant, has worked to establish science-based, international regulations that will ensure accurate, non-misleading labeling whether or not those products contain biotech ingredients. The industry has not ruled out the possibility of requesting consultations at the World Trade Organization (WTO) through the Office of the US Trade Representative, saying the new regulations violate Sanitary and Phytosanitary standards and Technical Barriers to Trade provisions under WTO agreements. NCC is participating in these discussions via various industry coalitions and will continue to work to help remove unreasonable and unfair regulations from governing the sale of biotech products and will provide more details on traceability and labeling before the rules go into effect.



Thomas Plans Replacement Legislation for FSC, ETI

House Ways and Means Committee Chairman Thomas (R-CA) announced his intention to mark up legislation phasing out the Foreign Sales Corp. (FSC) and its successor, the Extraterritorial Income (ETI) Act, over 3 years. The legislation would replace the FSC and ETI, which have been ruled in violation of the World Trade Organization (WTO), with a variety of tax benefits targeted to industries that have benefited from the ETI.

The tax package, estimated to “cost” $60 billion, includes a reduction in the corporate tax rate from 35% to 32% in 2 steps and a change in the tax rate for small and medium-sized businesses by phasing in the top rate of 32% for businesses with less than $1 million in taxable income beginning in ’07. The legislative proposal also expands the size of companies exempt from the Alternative Minimum Tax.

The committee may consider the legislation the week of Oct. 26. Thomas apparently has modified his earlier proposal in a manner that will ensure that House Republican leaders and Rep. Crane (R-IL), author of an alternative bill, will support the new version. The legislation is necessary to prevent the European Union from imposing increased tariffs on a wide range of products as allowed since the ETI was ruled an illegal subsidy under the WTO.



Deadline Extended for Beltwide Early Hotel Reservations

Strong demand by NCC and Cotton Foundation members and Cotton Interest Organizations resulted in an extension of the deadline for early hotel reservations for the ’04 Beltwide Cotton Conferences by one week to Oct. 29. As a reminder, the online request form available from the NCC web site, www.cotton.org, is available for credit card payments only.

The conferences are scheduled Jan. 5-9 at the Marriott Rivercenter in San Antonio.



Export Sales Boosted by China Purchase

China’s purchase of 500,000 bales pushed US cotton’s net export sales for the week ending Oct. 16 to 671,300 bales (480-lb.), resulting in total ’03-04 sales of almost 4.9 million bales. Total sales at the same point in the ’02-03 marketing year were approximately 5.1 million bales. Total new crop (’04-05) sales are 141,100 bales (480-lb.).

Shipments for the week were 100,600 bales, bringing total exports to date to 1.6 million bales, ahead of the 1.4 million bales at the comparable point in the ’02-03 marketing year.



Prices Effective October 24-30, 2003

Adjusted World Price, SLM 1 1/16

61.01 cents

*

Coarse Count Adjustment

0.00 cents

Current Step 2 Certificate Value

4.59 cents

Marketing Loan Gain Value

0.00 cents

Import Quotas Open

 1

Step 3 Quotas (480-lb. bales)

 128,590

ELS Payment Rate

7.85 cents

*No Adjustment Made Under Step I
 
Five-Day Average
 
Current 3135 c.i.f. Northern Europe

74.41 cents

Forward 3135 c.i.f. Northern Europe

No Quote

Coarse Count c.i.f. Northern Europe

73.10 cents

Current US c.i.f. Northern Europe

79.00 cents

Forward US c.i.f. Northern Europe

No Quote

 
Weighted Marketing-Year Average Farm Price  
 
Year-to-Date (August)

46.30 cents

**

**August-July average price used in determination of counter-cyclical payment

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