National Cotton Council leaders are urging Congress not to overlook the need for effective U.S. export enhancement programs as it begins the arduous task of crafting a new farm bill.
While much of the debate has focused on counter-cyclical income support payments and — now that Iowa's Tom Harkins will become chairman of the Senate Agriculture Committee — conservation payments, export programs will be critically important if farmers are to escape the current economic morass.
“The U.S. cotton industry is facing some of the stiffest international and domestic competition I can remember,” said council chairman James Echols, speaking at its spring board meeting in Washington.
“Compared to other agricultural products, the U.S. cotton industry is uniquely vulnerable to the effects of the appreciating dollar. The latter has significantly lowered the price of foreign-produced textiles and apparel in the U.S. market, increasing the competitive advantage of foreign textile firms.”
Numbers provided by the council's economic staff illustrated just how much of an impact a strong dollar is having. Between 1998 and 2000, the U.S. retail cotton market grew by 2.2 million bales. Unfortunately, imported textiles and apparel from foreign cotton increased by the same amount.
From 1999 to 2000, imports grew at 11.67 percent and from 2000 to 2001, at 16.65 percent. As a result, U.S. mill use for 2000/01 is projected at 9.2 million bales, down from 11.3 million in 1997 and 10.2 million in 2000. The continued declines — and the failure of Chinese imports of U.S. cotton to materialize — are among the chief reasons July cotton futures have been trading near 40 cents per pound.
USDA forecasts exports will rise from 2000/01's 6.4 million bales to 9 million bales in 2001/02. “The 9-million-bale estimate implies a 32 percent U.S. market share,” they said. “That market share is something we only recently experienced in 1994 when exports reached 9.4 million bales.”
In earlier testimony to the Senate Agriculture Committee, Echols asked Congress to take a number of actions, including maintaining cotton's competitiveness provisions and effective export assistance programs.
“We also expressed concern about the potential loss of a viable U.S. export credit guarantee program that is a mainstay of U.S. agricultural export assistance activities,” he noted, referring to proposals that would significantly reduce the program in World Trade Organization talks.
The United States must also ensure that the U.S.-China trade agreement under the WTO is not undermined by China's attempt to claim developing country status, Echols told the council board.
“China is very competitive in international markets in cotton and textiles and should conform to trade disciplines that adhered to by the United States,” he noted.
He also outlined cotton's priorities for the ongoing WTO negotiations, including improving market access for U.S. cotton and textiles, improving rules restricting the use of downstream export subsidies, limiting exemptions for countries that are competitive in cotton and textile products and ensuring other countries do not erect non-tariff trade barriers against agricultural biotechnology products.
“We need trade policy that ensures our raw product is competitive, that opens markets for both raw cotton and U.S. produced cotton textiles and that ensures the terms of competition are fair.”