Cotton's Week: July 1, 2005

The Senate approved legislation (54-45) to implement provisions of the Dominican Republic – Central American Free Trade Agreement (DR-CAFTA).

On the same day the Senate acted, and 2 days after the Finance Committee’s approval, the House Ways and Means Committee approved the legislation by a 25-16 vote. Under Trade Promotion authority rules, the legislation now must be considered by the House within 15 legislative days and cannot be amended.

In days leading up to the vote, the Administration and Congress reportedly reached agreements that would ensure that as a result of the DR-CAFTA, sugar imports don’t exceed the level established in the current farm bill. This would be achieved by compensating importers with stocks from the Commodity Credit Corp. (CCC) and by creating a pilot program to convert sugar to ethanol. The Administration also pledged funds to help CAFTA countries enforce labor laws and assist small farmers affected by increased imports of US agricultural products. Earlier, the Administration committed to a number of actions to address US textile industry concerns.

Even with these concessions, Senate approval was narrower than previous agreements and the outcome in the House still is uncertain.

Ways and Means Committee Chairman Thomas (R-CA) indicated he may move a legislative package addressing trade problems with China ahead of the CAFTA vote.

The NCC joined representatives of wheat, sugar, soybeans, oilseed processors, flour processors and state agriculture depts. in Geneva meetings. That group met with representatives from 9 countries along with US delegation members and WTO Secretariat officials.

With the Doha Round heading into an intense period of negotiations, the group was briefed on the status of the negotiations and expected progress by December. Agricultural negotiations’ progress has been slow due to unanticipated complications surrounding technical aspects of market access negotiations. As a result, delegations are uncertain whether enough progress can be made in the agricultural sector between July and September for an agreement outline to materialize before the December meeting in Hong Kong.

The Agricultural Negotiating Group chairman distributed a paper outlining several significant negotiating topics on which he believed progress must be made if a December meeting is to be successful. If the chairman achieves focus and progress in the areas he outlined, he believes he will set the agricultural negotiations up for significant progress in Hong Kong. The chairman made specific references to the Cotton Subcommittee, essentially stating that progress on market access, export subsidies and domestic support must be made prior to December if there is to be any opportunity to “fulfill the specific mandate for the work of Cotton Subcommittee.”

Another campaign led by Oxfam America to end the US cotton program was initiated as it seeks to influence African government delegations by applying additional external pressure. The new campaign seeks to organize non-governmental organizations in Africa around the cotton issue, reportedly with the goal of having these representatives join formal governmental delegations at the Hong Kong ministerial in December.

“If this new campaign is as reported, it signifies that Oxfam America will go to great lengths to attack the U.S. cotton program,” NCC President/CEO Mark Lange stated. “This tactic is a continuation of that employed at previous WTO meetings, namely, bring as much confusion to the meeting as possible and provide non-stop pressure through the press. It is unfortunate that this organization has chosen this course.”

To begin initial compliance with the July 1 deadline set by a World Trade Organization (WTO) dispute settlement panel, USDA announced administrative changes to the export credit guarantee program.

In a news release, USDA stated it would begin to use a risk-based fee structure for the GSM-102 and supplier credit guarantee programs. Fees will be based on the country specific risk the CCC is undertaking in making the loan guarantee as well as the loan length and payment schedule. USDA also announced it would no longer accept applications under the longer-term GSM-103 program, with existing allocations for GSM-103 to be reallocated to the shorter-term GSM-102 program.

Agriculture Secretary Mike Johanns stated that, “The export credit guarantee programs are one part of the WTO case. The Administration continues to evaluate other steps that could be taken to respond to the WTO cotton decision.”

According to reports, Brazil is expected to file a request by July 5 with the WTO for retaliation rights against the United States.

The US Court of Appeals for the Federal Circuit ruled that the Court of International Trade “abused its discretion” in granting preliminary injunctions stopping the Committee for the Implementation of Textile Agreements from investigating 12 threat-based textile safeguard cases filed before the end of ’04.

In overturning the lower court’s actions (the Court of Appeals previously had stayed the preliminary injunction), the Court stated that the Importers Assoc. had “failed to show even a fair chance of success on the merits” and that some of its arguments were almost “frivolous.”

The Court of Appeals rejected virtually every argument that had been raised by the petitioners and upheld by the trial court, stating also its disagreement with “the trial court’s wholesale rejection of the harms claimed by the government.” The Court stated that the “trial court erred in its legal analysis and clearly erred in its fact finding” and “abused its discretion in granting the Association’s motion for a preliminary injunction.”

Senators agreed to delay vote on legislation that would impose trade sanctions on China if its fails to allow its currency to float.

Sens. Graham (R-SC) and Schumer (D-NY) made the announcement following a meeting with Treasury Secretary Snow and Federal Reserve Board chairman Alan Greenspan during which they reportedly were assured that China will take steps towards a flexible exchange rate system within a few months.

The Senate, under a previous agreement, was scheduled to vote on legislation that would impose a 27.5% tariff on Chinese products imported into the US if China didn’t move to float its currency within a year of enactment.

In its June acreage report, USDA estimated ’05 US cotton plantings at 14.03 million acres, up 2.7% from the previous year. Upland planted area is estimated to have increased 2.6% to 13.76 million acres and estimated ELS area is up 6.6% to 266,000 acres.

Net export sales for the week ending June 23 were 325,900 bales (480-lb). This brings total ’04-05 sales to about 15.4 million. Total sales at the same point in the ’03-04 marketing year were about 14.4 million bales. Total new crop (’05-06) sales are 1.3 million.

Shipments for the week were 315,900 bales, bringing total exports to date to 11.6 million bales, compared with the 12.3 million at the comparable point in the ’03-04 marketing year.

The Senate approved an amendment to the ’06 EPA and Interior appropriations bill that would prevent EPA from considering data from human studies when establishing pesticide tolerances. The amendment, offered by Sen. Boxer (D-CA) and approved 60-37, also prevents the agency from conducting human studies.

The NCC joined with other commodity and farm organizations and crop protection product manufacturers and their organizations in urging the Senate to reject the amendment.

During the Senate debate, Sen. Burns (R-MT) introduced an alternative amendment, supported by the agriculture community, that was adopted 57-40. That amendment would require EPA to study whether the benefits of ethically conducted human studies outweigh risks to volunteers.

NCC representatives offered comments on the Conservation Reserve Program’s (CRP) future at a public meeting in Riverdale, MD. USDA was seeking additional advice on how to re-enroll and extend CRP contracts that expire between ’07 and ’10 on some 28 million acres of environmentally sensitive land.

NCC reminded USDA that substantial investment has been made on this land. In addition, staggering re-enrollments through extensions, early re-enrollments and voluntary, automatic re-enrollment could alleviate manpower issues for USDA and ensure avoiding a situation where this many acres are expiring at once.

Should USDA opt for a more traditional review process, NCC suggested that producers with expiring contracts should: 1) have a reasonable expectation of being re-enrolled into the program and 2) be given the opportunity to expand conservation efforts, if necessary, to further address wildlife habitat or water quality issues.