Cotton's Week: December 3, 2004

NCC Chairman Woody Anderson discussed the recent formation of the special subcommittee on cotton in the context of the overall agricultural negotiations with Linnet Deily, the US ambassador to the WTO. Joining Anderson were NCC CEO Mark Lange and Senior Vice President John Maguire.

Ambassador Deily reviewed the subcommittee’s charge and the expected timetable for further WTO talks. Chairman Anderson registered the NCC’s disappointment with recent statements by Benin’s Ambassador to the WTO and stressed the importance that the cotton subcommittee monitor the negotiations and not become an alternative negotiating forum on cotton. He also reminded Ambassador Deily that the industry supports a sectoral negotiation if it is comprehensive with respect to of a review of the entire fiber/textile complex. He reiterated the need for equitable treatment in the ag negotiations to maintain continued support. Ambassador Deily assured Anderson the US will not agree to negotiate cotton separately and in advance of the comprehensive agreements. She cautioned the cotton issue will continue to be raised and invited the industry to work closely with USTR as the negotiations move forward.

The NCC delegation also met with US Chief Agricultural Negotiator Allen Johnson regarding the travel of several delegations to West Africa in the coming weeks. The NCC has learned that OXFAM is sponsoring travel for a delegation of congressional staff to West Africa to focus on cotton during the week of Dec. 6. US Trade Ambassador Robert Zoellick also will be traveling in parts of West Africa that same week. A cotton conference currently is scheduled for Dec. 15-16 in Bamako, Mali, with presentations by USDA Under Secretary Dr. J.B. Penn and American Cotton Producers Chairman John Pucheu of Tranquility, CA. This conference is a follow-up to the West African agriculture/trade minister US visit in July. ’02.

President Bush nominated Nebraska Governor Mike Johanns - chief executive of the fourth largest agricultural exporting state - as the new US Secretary of Agriculture.

During his introduction of Governor Johanns, President Bush reiterated his commitment to US agriculture, saying, “In a new term, we'll continue policies that are pro-growth, pro-jobs, and pro-farmer. We'll keep working to open new markets to American grain and beef and cotton and corn.”

In accepting his nomination, Johanns, a native of Iowa, remarked, "After growing up on a dairy farm, the son of John and Adeline Johanns, everything in life has seemed easy after that." 

NCC Chairman Woody Anderson said the nomination should prove positive for US production agriculture.

“Governor Johanns knows the challenges facing US agriculture, and is keenly aware of the importance of trade to our nation’s food and fiber producers,” Anderson noted. “Farm and trade policy stand shoulder to shoulder for agriculture's economic stability, particularly cotton. Johanns' experience in leading trade delegations will be important to production agriculture as those areas intersect in the future. The US cotton industry looks forward to working with this well-qualified candidate and strengthening its partnership with the US government.”

US Importers Association filed suit in the US Court of International Trade alleging that the Committee for the Implementation of Textile Agreements (CITA) did not have authority to impose safeguards on textile imports from China based on a "threat" of market disruption. The suit seeks to stop CITA from investigating several petitions recently filed by the National Council of Textile Organizations and other US textile associations requesting safeguards on certain categories of textile and apparel imports from China. The suit will be defended by the US Justice Department.

Congress overwhelmingly approved (344-51 and 65-30) a 9-bill FY05 omnibus appropriations package (HR 4818), but the measure will not be signed until the House acts Dec. 6 to delete a controversial rider added without leaders’ approval during the last hectic days of negotiations on the measure. Until the corrective legislation is approved, clearing the way for the President to sign the omnibus legislation into law, the government will be funded by a Continuing Resolution providing funds at FY04 levels.

During final negotiations on the omnibus, Congress and the Administration agreed to reductions in spending to fit $388.4 billion in domestic discretionary spending into the $821 billion budget framework set by the President. Appropriators met the discretionary spending target by applying an across-the-board cut of .83% to most domestic programs.

A number of legislative riders were dropped during the negotiations while others sought by the White House were added. The provisions dropped included a House-backed proposal to change country of origin labeling for meat products from mandatory to voluntary; a provision to ease travel restrictions to Cuba; a provision that would have prohibited enforcement of new overtime regulation; and, a provision to prohibit private firms from being used by the IRS for tax collection. The omnibus package includes several legislative riders including an increase in the cap of L-1 and H1B visas.

Agriculture programs are funded at $83.3 billion in the omnibus package. That does not include the .83% across the board cuts to most discretionary programs – as a family hunger program administered by the Food and Nutrition Service was exempted from the cut. Of the $83.3 billion, $66.3 billion is in mandatory spending for commodity, nutrition and conservation programs while $16.9 billion is included for discretionary programs. Discretionary spending for FY05 is about $1.5 billion below FY04 levels.

As expected, food safety agencies were the only departments that received funding increases compared to FY04. Conservation programs will be funded at $999 million, slightly below FY04 levels, but more than requested by the Administration. The measure does not include $92 million requested for a technical assistance (TA) account, so NRCS will have to continue to use funds from certain conservation programs to cover the cost of TA.

The measure provides $1 billion for EQIP (17% below farm bill levels for ’05); the Conservation Security Program (CSP) is capped at $202 million for FY05 (CSP was authorized as an entitlement in the farm bill); and enrollment in the Wetlands Reserve Program is limited to 159,200 acres (the farm bill authorized the program for 250,000 acres/year).

Export promotion programs - Foreign Market Development and Market Access Program - are funded at previous year levels of $34.5 million and the farm bill authorized level of $140 million, respectively.

The comment period for the Conservation Reserve Program (CRP) ends Dec. 8, ’04. A request for public comment on CRP, published in the Federal Register on Aug. 10, is available along with instructions on submitting comments at the Farm Service Agency’s (FSA) web site, http://www.fsa.usda.gov. Beginning in ’07, 16 million acres under CRP contract will expire. Another 6 million acres will follow in ’08, 4 million in ’09 and 2 million in ’10. More CRP information is available at local FSA offices and http://www.fsa.usda.gov/dafp/cepd/crpinfo.htm.

Legislation to grant special access to apparel products assembled in Haiti failed to win approval during the lame-duck session. Despite a last minute push by Sens. Graham (D-FL) and DeWine (R-OH) and introduction of a revised bill in the House, Congress did not approve legislation granting Haitian apparel products preferential access to US markets.

The Senate approved the Haiti Economic Recovery Act (S. 2261) by unanimous consent on July 16, ’04. The legislation originally was introduced by Sens. DeWine, Graham and others in ’03.  Similar legislation was introduced in the House by Rep. Shaw (R-FL) and a number of cosponsors. The legislation, patterned after the African Growth and Opportunity Act, would provide duty-free entry to the US for a substantial quantity of apparel products assembled in Haiti regardless of the source of origin of the components.

The NCC consistently has argued since ’03 that the legislation would benefit third party countries at the expense of US and Caribbean manufacturers. NCC Vice President Stephen Felker testified before the Ways and Means trade subcommittee on Sept. 22 and explained the US industry’s concerns with the proposed legislation. He also outlined an export credit program which would benefit Haiti, Caribbean and US manufacturers.

Immediately prior to the recess, Chairman Thomas (R-CA) introduced modified legislation but it would provide preferential access for a limited volume of products assembled using components manufactured in third countries. The NCC joined NCTO and AMTAC in urging Congressional leaders not to bring the legislation to the floor during a lame-duck session. As the Senate was wrapping up its work, Sens. DeWine and Graham took the floor to express disappointment that the Haiti preference bill was not approved.

The NCC will continue to work with textile, labor and fiber interests in an effort to discourage passage of legislation that would jeopardize US and Caribbean manufacturers and their employees by changing the established rule of origin for Haitian products thereby adversely impacting trade and partnerships with other Caribbean countries.

Net export sales for the week ending Nov. 25, ’04 were 227,200 bales (480-lb.), resulting in total ’04-05 sales of slightly more than 7.5 million bales. Total sales at the same point in the ’03-04 marketing year were about 8.5 million bales. Total new crop (’05-06) sales are 224,900 bales.

Shipments for the week were 174,300 bales, bringing total exports to date to 2.3 million bales, below the 2.7 million at the comparable point in the ’03-04 marketing year.

House Ways and Means Committee Chairman Thomas (R-CA), in outlining the trade agenda for the new Congress, indicated his intention to bring the Central American Free Trade Agreement (CAFTA) to the House for approval in the spring. He also indicated the Administration will have to decide whether to drop the Dominican Republic from the enabling legislation if a dispute over a newly imposed tax on soft drinks containing high fructose corn syrup (HFCS) is not resolved.

Finance Committee Chairman Grassley (R-IA) recently announced that the Administration has decided to exclude the Dominican Republic from the agreements to be submitted to Congress. In a letter to Sen. Grassley, US Trade Representative Zoellick indicated USTR is prepared to transmit a CAFTA to Congress excluding the Dominican Republic unless the HFCS matter can be successfully resolved.

According to the Commerce Department, October (4-week month) total cotton consumption in domestic mills was 242.7 million pounds for a seasonally adjusted annualized rate of 6.42 million bales (480-lb). Last year’s October annualized rate was 6.20 million bales.

The September (5-week month) estimate of domestic mill use of cotton was lowered by 812,000 pounds to 301.4 million. The revised seasonally adjusted annualized rate of consumption for September is 6.42 million bales. This is higher than last year’s September annualized rate of 6.25 million bales. Preliminary November domestic mill use of cotton and revised October figures will be released by Commerce on Dec. 23, ’04.