U.S. cotton farmers — and the industry that supports them — will continue to work for farm programs that comply with the United States' World Trade Organization obligations even if they don't agree with the latest WTO rulings.
In remarks before the House Agriculture Committee May 19, National Cotton Council Chairman Woody Anderson said the NCC would work with the committee and the administration to help produce a “rational, rules-abased international trading system” within the structure of the WTO.
Anderson was one of several commodity leaders who discussed their organizations' outlook on world trade in testimony to the committee. Other organizations included the American Soybean Association, National Corn Growers Association, USA Rice Federation and U.S. Rice Producers Association.
While pledging to work for a WTO-compliant cotton program, Anderson said the NCC disagrees with a recent WTO panel initial ruling against the U.S. cotton program and will fight the decision and its ramifications.
“The cotton industry in the United States has just been dealt a major blow by a decision we believe is incorrect,” he said. “However, we fundamentally understand the value of the WTO and the agreements that brought it to life. We will fight this decision and its ramifications, but we will also work to insure that the U.S. cotton program complies with WTO disciplines.”
He said that what concerns the NCC the most is that the U.S. cotton program in 1992 and 1994 was fully coupled to production and had a higher loan rate and target price than any cotton crop subject to the 2002 farm bill.
“We moved toward decoupling; we slightly reduced loan rates; and we reduced the target price, yet today's program somehow was ruled to support cotton at a higher level than we did in 1992. We are perplexed by that result.”
According to reports leaked to the press in late April, the three-member WTO panel has largely ruled in favor of Brazil's complaint that the U.S. cotton program injured its producers by encouraging increased production and lowering world cotton prices.
Cotton industry leaders have said U.S. producers were responding to supply and demand forces in the world market and not to the U.S. cotton program in the years cited in the Brazilian complaint.
The final ruling by the panel, which consists of a representative each from Australia, Chile and Poland, is not expected to be released until June 18.
Anderson, a cotton producer from Colorado City, Texas, said the cotton industry will continue to work with the Office of the U.S. Trade Representative, which has said it intends to appeal the final decision.
“We should not and cannot unilaterally disarm under these circumstances,” he said.
“Any one-way concessions will be at the expense of U.S. interests without achieving further international economic integration.”
Reopening farm bill?
The president of the National Corn Growers Association, meanwhile, expressed concern that Congress is considering reopening the 2002 farm bill.
Citing farm programs as a true success story and a viable safety net for farmers, Dee Vaughan said current farm policy allows farmers more predictability with their crops, better fiscal discipline and programs that limit assistance to the times when aid is most needed.
A producer from Dumas, Texas, Vaughan noted U.S. corn growers find themselves in a much more favorable commodity market as a result of established farm programs that have attributed to the growth in ethanol production, increases in exports and record production levels. Therefore, he said, “Farmers need Congress to stay the course and resist opening the farm bill.
“Recent projections for this year's corn crop indicate an increase of 800,000 acres to 71.9 million acres,” he said. “Corn utilization is expected to climb by 100 million bushels to a record level exceeding 10.5 billion bushels. The outlook for corn is certainly encouraging, but growers continue to face serious challenges.
“Midcourse changes, including proposals to further restrict farm support payments are extremely inequitable,” he said, noting that “without the Farm Security and Rural Investment Act safety net, corn growers would face serious challenges and uncertainty in the marketplace.”
More budget conscious
The rice industry also asked committee members to preserve the current farm bill's provisions.
“The farm bill is working as it should by providing an important financial safety net during periods of low prices… when prices improve, as they have in 2004, the farm bill supports are reduced automatically,” said the USA Rice Federation's Bryan Moery, who testified along with Dan Gertson, vice chairman of the U.S. Rice Producers Association.
“As a result, the 2002 farm bill has given producers hope that a strong agriculture economy may emerge that will allow producers to make long-term plans and investments with the certainty that is needed to compete in an increasingly global economy.”
Moery, a producer from Wynne, Ark., also said the new law has proven to be more budget conscious. According to figures released by the Congressional Budget Office, outlays under the 2002 farm bill are forecast to be more than $17 billion below the initial CBO estimate.
“The 2002 farm bill is a vital safety net to rice farmers and our industry appreciates the commitment Congress has made to insure a sustained domestic food supply. We also urge Congress to avoid future cuts to the support levels embodied in the legislation.”
Gertson, a farmer from Lissie, Texas, urged the committee to “use its influence and expertise to help insure that WTO agricultural negotiations deliver on the promise of real and broad-based market access that has eluded U.S. agriculture for over a decade — without sacrificing the safety net provided by U.S. farm programs.”
The U.S. rice industry is a strong supporter of agricultural trade liberalization, he said. “Frankly, we have no choice. The United States has one of the most open rice markets in the world. Nearly one-half of U.S. rice production is exported. Imports account for 12 percent of domestic U.S. rice consumption, which reflects, in large part, our extremely low import duties.
“In contrast to the open U.S. market, U.S. rice — whether rough or milled — faces high tariffs, unfair trade practices or discriminatory treatment in nearly every major export market.”
U.S. rice producers have also born the brunt of unilateral trade sanctions imposed by the U.S. government that eliminated flourishing markets in countries like Cuba and Iran. “We now find ourselves playing a form of catch-up in appearing before the committee,” he said.
“The rice industry is urging a full-blown effort by the U.S. government to open foreign markets while we labor to rebuild markets that were denied us through unilateral U.S. trade sanctions.”
Setting same standards
American Soybean Association President Bart Ruth also urged the House ag committee to help make sure that developed and developing countries meet the same standards on farm programs, subsidies and tariffs that the United States and its farmers must meet.
“With 96 percent of the world's population living outside our borders, and most of its growth in countries with low per capita consumption of soy products, our foreign markets will only continue to expand,” Ruth said. “U.S. farmers need to compete for these expanding markets, and to do so, we need to bring down tariffs on soy-related products in importing countries, and prevent their replacement with non-tariff barriers.”
Since the 1970s, he said, the United States has exported one-half of each year's soybean crop, either as whole soybeans, soybean meal and oil, or in the form of livestock products. Soybean and soy product exports alone are currently valued at $8 billion to $10 billion, making the U.S. soybean industry the largest positive contributor to the national trade balance.
“We must require both developing as well as developed country competitors to comply with the same disciplines on production and trade-distorting farm support programs that we must meet,” he said. “And we must eliminate the distorting effects of our own domestic farm policies in discouraging soybean plantings when market signals indicate otherwise.”
Ruth, a farmer from Rising City, Neb., said each of these goals will be addressed during the ongoing Doha Round negotiations the agriculture community faces over the next three to four years.
“Current talks to reach agreement on a framework for agriculture as part of the Doha Development Agenda will reach a critical point at the mini-Ministerial in late June,” he noted. “Even if a framework is reached, actual commitments will need to be negotiated, and the time frame for completion will be uncertain.”
Reaching out to Africa
For its part, the cotton industry is continuing to try to repair the image that has been hammered by ongoing media reports that U.S. cotton farmers are responsible for poverty in Africa's cotton-producing countries.
The NCC's Anderson told the panel that since the collapse of the Doha Round negotiations of the WTO in Cancun, “the U.S. cotton industry has been working to open a dialogue with several African countries to better understand the central forces driving investment in cotton and cotton textile production, and we are participating in information exchanges.
“These are small steps, but are reflective of our belief that there is more than enough room in the world cotton market for African production.”
On other trade-related concerns, Anderson told the Committee:
- The United States must remain vigilant and continue to push for China — now the largest importer of U.S. cotton — to reform its tariff rate quota system as required by the U.S.-China WTO accession agreement.
- Preferential trade arrangements and free trade agreements are having a greater impact on U.S. cotton's trade situation than ever before. While agreements awaiting congressional consideration are generally acceptable from a cotton fiber perspective, many recent agreements have contained rule-of-origin exceptions that will damage U.S. textiles.
“When the outstanding agreements are added, the United States has agreed to allow third-country fabric to qualify as originating goods in an amount equal to 18 percent of total U.S. apparel production,” Anderson said.
“This is 18 percent of an industry that seems to decline every year. This free ride is being granted to fabric made in countries that are not even parties to the agreement. It is detrimental to the U.S. cotton and textile industry and discourages the development of spinning and weaving capabilities in the participating countries.”