The U.S. will have to export more than half of this year's cotton crop “to prevent the industry from slipping even further into serious economic depression,” a National Cotton Council leader told a congressional hearing.
Further, said Robert Weil II, chairman of the council's International Trade Policy Committee and a Montgomery, Ala., cotton merchant, if the U.S. is going to meet “some of the stiffest competition it has ever faced,” it will need “a government partnership for help in securing markets against sometimes unfair international competition.”
To make matters worse, he said, cotton textile imports — which have taken away half of the U.S. cotton textile retail market — continue rising, and a stronger dollar has put cotton producers “at a severe disadvantage” in key markets.
And while the overall U.S. economy has experienced major growth in recent years, some 319,000 American textile and apparel workers lost their jobs from 1997 through 2000, with another 28,000 laid off in the first quarter of 2001.
Weil told the House Agriculture Committee's Subcommittee on Specialty Crops and Foreign Agriculture Programs that the upcoming new farm bill will offer Congress the opportunity to “reassert itself and fill an ever-widening void being created as the U.S. government appears to retreat in the face of international competition and the self-serving demands of our competitors.”
U.S. mill use is expected to drop 3 million bales from the 1997 level, Weil said, but the 2001 crop is expected to be similar to the past two years, “meaning we will have to find a home in foreign markets for an additional 2 million to 3 million bales of cotton, or else see our carryover levels soar.”
While Congress has provided many tools to assist agricultural exports, “the viability of these programs is being threatened and their potential is not being fully realized,” he said. As examples:
Government funding for the Foreign Market Development Program has failed to keep pace with inflation.
Market Access Program funding has fallen by 55 percent since 1992, “despite its clearly positive impact.”
The Export Credit Guarantee Program, “the most cost-effective program, has been offered up by U.S. trade negotiators in return for no significant concessions by any competitors.”
The administration “has chosen to classify supplemental market loss assistance payments as subject to World Trade Organization limits.”
The most surprising aspect of “this sad story,” Weil said, is that the U.S. textile industry's gains in recent years rank third in the entire economy, behind only the electronics and computer sectors, “yet textile industry bankruptcies are accelerating.”
The U.S. dollar has strengthened by almost 34 percent relative to the currencies of primary export market competitors, he said, and the American cotton industry, compared to other agricultural sectors, “is uniquely vulnerable to the effects of an appreciating dollar's impact on imports of cotton textile and apparel products.”
It has resulted, Weil said, in a significant lowering of the price of foreign-produced textiles and apparel in the U.S., increasing the competitive advantage of foreign textile firms at the expense of U.S. spinning mills and textile enterprises.
Among the National Cotton Council trade policy priorities, Weil told the subcommittee are:
Maintaining cotton's competitiveness provisions in U.S. farm law and continuing a farm policy that enables the industry to produce a competitively priced product.
Maintaining and strengthening effective export assistance programs.
Effective implementation of existing regional trade arrangements to enhance the overall competitiveness of the U.S. textile sector.
Working to monitor China's compliance with the World Trade Organization agreement with the U.S.
Insuring that regional trade arrangements currently being negotiated are favorable to U.S. cotton and textile industries.
Working of a new agreement in the WTO that will improve the competitive position of U.S. cotton and textile industries.
“We need trade policy that insures our raw cotton is competitive, that opens markets for both raw cotton and U.S.-produced cotton textiles, and that insures the terms of competition are fair,” Weil said.
He said while the council supports “free trade arrangements that will benefit our industry, we have some concerns about arrangements that further open our markets to some of our most difficult competitors…particularly with textiles, where all quota restrictions are due to be phased out in four years.”
If the U.S. further eliminates import duties “from some of the world's most prolific textile-producing countries, the U.S. textile industry will not be able to recover.
“Our industry generally sees opportunity in liberalized trade in this hemisphere — but I caution that the Free Trade Agreement (FTAA) for the Americas is not without risk to the U.S. cotton and textile sectors. We see less opportunity in free trade arrangements with textile-producing countries in Asia, and we are opposed to such arrangements with Singapore.”
The FTAA negotiations, Weil said, “coincide with a period of serious economic distress in the U.S. fiber, textile, and apparel sectors. The FTAA will have a much broader and more unpredictable impact on these industries than the North American Free Trade Agreement. It's important that the U.S. consider carefully, and separately, the impact of the FTAA on our textile and apparel sectors.”