How U.S. farm policy is crafted in the coming years could dictate the very survival of the U.S. cotton industry, according to Kenneth Hood, outgoing chairman of the National Cotton Council.
Hood, addressing delegates of the NCC annual meeting in Tampa, said, “Over the last few years, the cotton industry has shifted from a market primarily devoted to the domestic industry to one that is increasingly focused on the world market. International trade policy has already dramatically affected the members of the National Cotton Council.”
Hood said the Bush administration's efforts “to fully harmonize agricultural subsidies will essentially create a world trade framework and closer head-to-head competition than there has been since World War I.
“The U.S. cotton and textile industries must find or confirm common ground in core farm and trade policies to broaden our coalition as much as possible. I believe our very survival depends on it.”
Hood said that the Uruguay Round of multilateral trade negotiations resulted in the two most significant events to occur in the industry since the inception of the marketing loan program.
“There are now international rules designed to limit domestic agricultural subsidies and there is an agreement to end textile import quotas by 2005. We are really starting to feel the impact of these two agreements.
“The Bush administration has also been given fast-track negotiation authority, meaning that new trade agreements will be brought to Congress for an up or down vote, without the opportunity for amendments. Not only will new WTO proposals be considered under this fast-track protocol, but also numerous bilateral and regional agreements are likely to be concluded.
“All these agreements will have major implications on the economic viability of our industry.”
Hood noted that the U.S. raw cotton and textile industries must deliver a three-part message to U.S. policymakers. “The first is to not take down our subsidies until other countries bring their subsidies down to our levels. It is not equitable for the EU, Japan and Canada to spend $67 billion, $31 billion and $23 billion, respectively, for trade-distorting subsidies, while the United States spending is capped by the farm bill at $19 billion.
“Second, don't further reduce our tariffs until other countries bring their tariffs down to our level. It is not equitable for foreign producers to be able to sell their agricultural products in the U.S. market and pay an average tariff of only 12 percent while U.S. farmers are paying an average of 62 percent to sell their products to foreign markets.
“Third, don't increase access to the U.S. market until other countries provide equitable access for our products. It is not equitable for foreign textile product manufacturers to pay a tariff of less than 9 percent to sell their products in the U.S. market, when the U.S. textile manufacturers must pay tariffs that typically range from 20 percent to 300 percent to sell their products in foreign markets.
“At the same time, we must be diligent in protecting the benefits of the new farm bill. Sen. Grassley has made his intentions known to introduce an amendment to further restrict program benefits. He has encouraged the Environmental Working Group to renew its efforts to incite opposition to the cotton provisions.”
Hood noted the United States must fend off foreign attacks on U.S. farm policy as well.
“In November, the Brazilian government requested consultation with the United States concerning virtually all aspects of the U.S. cotton program. In February, the United States was formally notified by the WTO that Brazil has requested the formation of a dispute settlement panel.
“Meanwhile, China is not living up to its agreement to open an import quota of 3.7 million bales of cotton, of which two-thirds — 2.5 million bales — should be open access. China has allocated only 225,000 bales open access.”
Hood noted that the U.S. government has put a strong team together to counter the assertions by Brazil. As to China, “Council representatives were meeting in Washington as part of an effort to formally seek consultation under the dispute settlement provisions of the WTO. “If these consultations fail to resolve the matter, then USTR should request that a WTO dispute settlement panel be convened.
“China's behavior serves as a reminder that we must urge Congress to insist that the administration make full use of the tools available to leverage compliance with existing agreements before ratifying any new agreement.
“In addition to a new WTO agreement, Congress will ask in the months ahead to approve bilateral agreements with Chile, Singapore and Australia as well as regional agreements with Central America.
Another important challenge “will be to insure that farm policy and trade policy are compatible. This compatibility objective has to be viewed in a global context and has to reflect what every member of this audience recognizes full well — good farm policy and good trade policy must take into account the needs of both the U.S. raw cotton and the U.S. textile industries.
“Both industries must deliver a firm and consistent message to U.S. policymakers.”