“Recent events make it very clear that trade policy is becoming as important as farm policy in determining the profitability of our industry,” says Robert “Bobby” Greene, the new chairman of the National Cotton Council.
“Since 1997, consumption of cotton by U.S. mills has dropped by 4 million bales, primarily as a result of greatly increased textile imports. The loss we have suffered in domestic off-take has not been completely offset by increased exports, which has had a negative impact on prices.
Speaking at the Mid-South Farm and Gin Show in Memphis, Tenn., Greene said U.S. cotton producers more and more are having to fight their battles in the global arena, in part because of the Bush administration’s goal of breaking down trade barriers.
“Trade liberalization is a major goal of the Bush Administration,” said the producer and ginner from Courtland, Ala. “The U.S. market was further opened last year with the passage of an omnibus trade bill that not only granted the president with fast-track authority, but also expanded textile quotas –or opened new ones—for the Caribbean, Andean and African regions.”
The administration is pursuing other trade agreements as well, including the approval of their agricultural proposal in the new Doha round of WTO negotiations, named for the city in Qatar where the round started in 2001.
Greene said one of the more troubling arenas on the new trade front is that of the People’s Republic of China.
“As widely predicted, China is not living up to its WTO accession agreement,” he said. “The agreement calls for China to open an import quota for 3.75 million bales of cotton, of which two-thirds – or 2.5 million bales – should be open access, but China has allocated only 225,000 bales open access.
“Despite requests from U.S. Trade Representative to change the implementation practices, China has announced its intention to administer the Tariff Rate Quota in the very same manner in 2003.”
Bill Dunavant III of Memphis-based Dunavant Enterprises and Tom Smith of Calcot Ltd., and members of the Cotton Council’s Washington staff met with Ambassador Robert Zoellick recently to discuss a letter requesting that USTR formally seek consultations 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,” said Greene. “Our team reports that their message to Ambassador Zoellick was well received. We have since learned that Ambassador Zoellick did press our case with Chinese leadership during his recent trip to Beijing. However, there has been no formal announcement by China of any change in the TRQ allocation.”
In November, the Brazilian government requested consultations with the United States concerning virtually all aspects of the U.S. cotton program, said Greene. Last month, the WTO formally notified the U.S. government that Brazil has requested the formation of a dispute settlement panel.
“The Brazilian complaint against the U.S. cotton program is broad and far-reaching,” he noted. “It subjects the export credit guarantee program and the Step 2 competitiveness provision to significant changes.” (All told, Brazil reportedly is claiming damages of more than $600 million to its cotton industry.)
“The USTR has put a strong team together to counter the assertions by Brazil and that team is consulting with Council staff. Needless to say, it is very important that we successfully defend our program against this challenge.”
Talking with reporters after his speech, Greene said the USTR expects the WTO will hold a hearing on Brazil’s complaint in Geneva in August or September.
“The cotton industry will not be allowed to speak, but we expect to have representatives in Geneva,” he noted. “We think we’re on firm ground, but if we lose we will appeal the decision.”
On the China front, Greene said China has not had sufficient time to respond to Ambassador Zoellick’s discussions with its representatives of its government near the end of February.
“We believe that China is adopting these limited quotas so they can use that as a barrier when they don’t need the cotton,” he said. “Right now, as Billy Dunavant said this morning, they are not even a consideration because China is importing cotton.”