U.S. cotton, ‘actively engaged’ and trade issues

U.S. cotton, ‘actively engaged’ and trade issues

Where does "actively engaged" rule stand? Trade, Turkish anti-dumping cotton case updates.    

As required in the farm bill, the USDA is continuing efforts to craft a rule regarding those “actively engaged” in a farming operation. This is important because without such a designation the producer isn’t eligible for farm programs.

“The proposed rule came out in March with a 60-day comment period,” said Reece Langley, National Cotton Council vice president, Washington Operations, at the mid-August ACP-Cotton Foundation joint meeting in New Orleans. “We worked closely with a group of attorneys that helped us to put together joint comments on behalf cotton, peanuts, rice, farm managers, rural appraisers and American Farm Bureau. Those were extensive comments with a number of groups signing on.”

One comment came in from the USDA’s own Office of Inspector General, reported Langley. “The issue they raised — and it’ll be interesting to see how this is addressed in the final rule — is the farm bill says the ‘actively engaged’ regulation must contain a mechanism for how USDA will monitor the status of compliance reviews.

“That’s where they go in and review whether farming operations are actually meeting the ‘actively engaged’ test. The Office of Inspector General point was they didn’t think the proposed regulation addressed that issue. They asked USDA how they intended to implement and do what the farm bill requires. That’s a new wrinkle and something we hadn’t picked up on in the proposed rule.”

At this point, FSA has told Langley and colleagues the final rule is “essentially written and going through the clearance process at USDA. Their intention is to get the final rule issues by October. If they do that, it would most likely apply for the 2016 crop year. If they miss the October timeframe, it’s possible these changes to ‘actively engaged’ won’t go into effect until the 2017 crop year.”

Langley reminded attendees that for 2015, any counties with cotton base where STAX wasn’t available are eligible for one more year for a reduced Cotton Transition Assistance payment. “That’s about 124 counties but doesn’t represent a lot of cotton acreage.”

Trade

“Congress spent a lot of time earlier this year trying to move Trade Promotion Authority and other trade provisions to President Obama’s desk. Ultimately, they did get TPA approved in June. That was seen by the Obama administration as necessary to try and conclude the Trans-Pacific Partnership (TPP).

“Within the TPP, the U.S. cotton and textile industries are focused on maintaining and having included a ‘yarn forward’ rule of origin for textiles. That’s essentially been in most free-trade agreements the United States has negotiated.”

The most recent round of TPP talks took place in late July in Hawaii. “A lot of textile issues were concluded during those discussions although there are few outstanding issues. It looks like things are close to wrapping up on the textile side.

“That being said, there are still a number of issues lingering with regard to ag market access with things like sugar, rice and other commodities. There are also issues outside agriculture altogether that are holding things up.”

At this point, the next discussions for TPP hasn’t been set. Langley believes those will happen sometime this fall. However, “it’s looking less and less likely that a final TPP agreement can be reached before the end of 2015. If it gets pushed into 2016 before Congress even considers it — and the closer we get to the elections in November — the more Congress won’t want to take on the challenge of passing TPP before elections. So, there’s potential for this to be pushed well into the future.

Turkish anti-dumping case

Another thing on the trade front is the lingering Turkish anti-dumping case.

“It looks like the next step will be some site visits by Turkish officials to four of the U.S. exporters part of the investigation. There are 22 entities that are participating, that have been shipping cotton to Turkey during the time of this investigation. … The visits could occur in the next month, or two. Those four represent a bit over 50 percent of the U.S. cotton shipped into the Turkish market.”

Langley said the NCC is also working with other parties to develop and submit a “supplemental injury” argument. That will occur over the next few weeks.

“Part of what’s complicating this is the political unrest and instability in Turkey. They had elections in June, but there’s no coalition in place, no party has a ruling majority and they’ve been unable to reach consensus. Because of that, all the government decisions have been put on hold and are being delayed. That’s partly what’s drawing out this case, as well.

“Also, the U.S. Commerce Department still continues to be aggressive with imports coming in from Turkey. So, our U.S. steel manufacturers are asking for trade cases to be filed against this Turkish steel coming in. That continues to incite the Turkish officials and there’s a back-and-forth between two different commodities.”

There is a chance that in the next couple of months, “we’ll see a report come out the Turkish Ministry of Economy, who is doing the investigation. But, again, depending on how the government unrest plays out, that could be delayed.”

As for the WTO, the next ministerial is scheduled for December in Nairobi, Kenya. Langley said there’s unfortunately been no let up on foreign focus on U.S. cotton and cotton policy.

“Here are a couple of quotes that have come out to help illustrate how we continue to be under the microscope. The first is from the current chair of the WTO agriculture committee: ‘Members may be able to include new disciplines regarding export competition and cotton at the Nairobi ministerial.’ The same chairman, more recently, said, ‘There should be no doubt that if there’s any outcome from Nairobi, cotton will be a part of that.’

“Several weeks ago, a group of about 90 African, Caribbean and Pacific countries urged members ‘to agree to new disciplines regarding the trade in cotton.’”

Additionally, West African C-4 countries said they may release some additional comments or a paper regarding cotton in the next few weeks.

Push back

“So, there are a lot of things building up to this December meeting. We’ve had a chance to speak with the officials in the (Obama) administration about the serious concerns we have given this ongoing focus on cotton policy by the WTO. Clearly, our message is there’s no basis for this continued scrutiny.

“The broader negotiations on agriculture issues within the WTO have seen no progress. If that’s the case, then there’s no reason cotton should be singled out for more aggressive treatment versus other commodities. Not to mention that the U.S. has taken much action to address the previous WTO case.”

On top of that, there’s the fact that countries like China and India “haven’t lived up to their commitments when it comes to notifying the WTO about their support program and levels. They aren’t transparent at all in how those programs are being operated.

“I think between now and December, we’ll have to make a strong push to ensure our negotiators at USTR and USDA stand firm and don’t give in to anything more with regard to U.S. cotton as part of those negotiations.”

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