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Cotton Industry Expects More WTO Pressure

NCC President blasts WTO Hong Kong action, citing hypocrisy.

Published on: Jan 5, 2006

Expect intense pressure over the next four months to extract even more concessions from the U.S. and its cotton industry in trade talks with the World Trade Organization.

That's the assessment from Mark Lange, president and CEO of the National Cotton Council, who minced few words Thursday in his report on the recent WTO action in Hong Kong singling out cotton - particularly U.S. cotton - for reduced domestic and export support. 

Lange, spoke to the general session of the 2006 Beltwide Cotton Conferences in San Antonio, where more than 3,500 members of the U.S. cotton industry have gathered for talks on production, marketing, research and policy. 

Mark Lange, president and CEO of the National Cotton Council says the U.S. cotton program is being punished for all of the world's economic ills by WTO action in Hong Kong.

Lange, an economist, blasted the WTO for failing to address all agricultural trade as a single issue in favor of holding cotton supports up as what he called "the root of all evil." He also unveiled a number of scenarios in which China has operated with impunity to WTO rules and regulations and has received no censure from the world body.

"It's easy to find annual U.S. spending figures of $2- to $3-billion for the cotton program—particularly from a year with low market prices—and wave it as prima facia evidence of damage..." to developing countries "and then blame the overbearing, culturally bereft Americans for all of the world's ills," Lange charged.

He then asked, "How much was spent in China alone annually between 1998 and 2005 to add 25 million bale equivalents of polyester production, and 22 million bales of spinning capacity? That infrastructure investment (by China's government) is staggering in size—easily exceeding $2- to $3-billion annually," he charged. "Much of that was done with non-producing loans, still, WTO turns a blind eye to this development."

Additionally, Lange notes China, India and Pakistan have moved from spinning 44.6 million bales of cotton five years ago to spinning 72 million bales per year today. "That accounts for 63% of the world's spinning," he explains. "And that was done as China was paying record high prices for cotton on the world market!

"In 2004, Chinese mills paid about 74 cents per pound for cotton while the world's 'A' index was 62 cents. How do they pay an average of 18% more for their cotton than the rest of the world and take business from everyone else?," he asked.

In addition, Lange says China's expansion in textile capacity comes at the expense not only of the EU and the U.S., but of the lesser developed countries that are complaining the loudest about U.S. price supports. "The non-government agencies advocating for these nations and the WTO seem to turn a deaf ear to these developments," he adds.

The Hong Kong Agreement

 WTO talks in Hong Kong recently concluded:

  • All forms of export subsidies for cotton will be eliminated by developed countries in 2006.
  • Developed countries will give duty free and quota free access for cotton exports from least-developed countries from the beginning of the implementation period.
  • And, that cotton subsidies will be reduced "more ambitiously" than whatever the general formula of the final agreement sets forth.

Lange says this "defies logic."

First, he explains, it says we'll [the U.S.] drop all subsidies before we develop an agreement.

Second, he notes, the duty free and quota free access to EU and U.S. markets frees up only 8% of the spinning capacity, but doesn't include China. "China is a self declared developing country," Lange notes, adding, "but they have nuclear arms and a space program."

Third, he says the U.S. cotton Industry is deeply concerned about being singled out, but adds the situation is an ominous warning to other commodities. How does a single commodity stand up to the world organization•how can bananas, corn or wheat stand up to the world's economy?

Between now and April 30, negotiators will continue working as WTO polishes its work in Hong Kong with specific figures, Lange explains. During that time he said NCC will work with U.S. trade representative and USDA to counter efforts to further isolate and "discipline" cotton.

Still, he says, despite the U.S. eliminating Step 2 cotton payments and the subsidies under the GSM payments, WTO representatives and NGO's representing lesser-developed nations will continue to ask for more—regardless of concessions already made and U.S. development activities underway in Africa.