World Trade Organization (WTO)
The NCC urged Congress to adopt new farm legislation that contains cotton provisions that would resolve the Brazil WTO case and eliminate Brazil's retaliation threat.
NCC Chairman Jimmy Dodson met with the U.S. Trade Representative's (USTR) office, USDA and House/Senate leaders to advise that the U.S. and Brazilian grower organizations had agreed to recommend settlement of the case provided the new farm bill includes STAX without a reference price and a further modification of the marketing loan. The agreement also 1) included a statement of support for continuation of the transfer of funds to the Brazilian Cotton Institute for 18 months following enactment of new farm legislation and 2) established a protocol for future cooperation between the U.S. and Brazilian industries on promotion, insect eradication efforts, sustainability and classing.
The U.S. and Brazilian governments held a videoconference meeting mid-year to review the GSM program modifications and U.S. proposal to resolve the dispute relative to GSM. In early August, a delegation including Secretary Tom Vilsack and Senators Debbie Stabenow (D-MI), Roy Blunt (R-MO) and Heidi Heitkamp (D-ND) visited Brazil. During the meetings with Brazilian agriculture and trade ministers, Secretary Vilsack advised them that the September transfer to the Brazilian Cotton Institute would be reduced by $7 million to comply with sequestration and that he did not have authority to make payments beyond September 2013. Technically, the failure to enact a new farm bill and the termination of the transfer payments meant the United States had terminated the Framework Agreement and Brazil would be authorized to retaliate within 21 days of the formal termination.
During a December meeting of the Brazilian government agency, CAMEX, it was announced that it will postpone until February 28 a decision on whether to initiate retaliation against U.S. exports.
Regarding the Doha Round of WTO negotiations, NCC staff continued to work with the USTR and the U.S. agriculture counselor and trade representative in Geneva to make certain cotton did not become a candidate for an "early harvest" agreement. During a Ministerial held in Indonesia late in 2013, a small package of trade concessions was approved that included a trade facilitation agreement. The agreement would make it easier and cheaper to move goods around the world by cutting red tape and improving customs procedures.The Ministers also approved a document concerning cotton policies and objectives of future discussions. Among a number of other points, the document reaffirmed the 2005 Hong Kong Ministerial declaration on cotton and stressed the importance of cotton to a number of developing country economies. In addition, the cotton document emphasized that future discussions will consider export subsidies, domestic support, tariff measures and non-tariff measures by all countries.
A NCC delegation to Geneva, including Chairman Jimmy Dodson and President/CEO Mark Lange, met with trade ambassadors from China, Brazil and West Africa in Geneva as well as with Dave Shark, chargé d'affaires, U.S. Mission to the WTO, and WTO Deputy Directors Harsha Singh and Rufus Yerxa. The trip was timed to coincide with the WTO Cotton Development assessment in June, and the meetings provided the NCC delegation the opportunity to highlight the drastic changes in the world cotton market over the past five years.
In a meeting with John Adank, chairman of the WTO Special Session on Agriculture, Dodson and Lange underscored the importance of the proposed changes to U.S. cotton policy supported by U.S. and Brazilian cotton growers. Also discussed were the possible outcomes of the upcoming WTO Ministerial Council scheduled for December 2013 in Indonesia. The NCC representatives emphasized that the reduction in support in the proposed U.S. cotton policy should be recognized in the WTO.
The NCC conveyed to WTO representatives that cotton’s loss of market share in the world fiber market was a cause for concern for all cotton growers.
Chairman Dodson informed the WTO representatives that cotton's loss of market share in the world fiber market was a cause for concern for all cotton growers. He noted that this adds to the difficult circumstances faced by West African cotton producers with declining yields and rising costs. He also noted that the NCC has sought continued funding for the West African Cotton Improvement Program and has supported the travel of Cochran Fellows from the West African countries as part of its continued outreach.
The NCC delegation also met with the trade ministers and representatives of Burkina Faso and the other West African cotton producing countries. These officials noted that the presence and concern of U.S. cotton leaders for the WTO Cotton Day brought needed attention to West African growers' plight.
CVD Investigation and Trade Negotiations
After a Peruvian government agency initiated a preliminary investigation into whether U.S. cotton subsidies resulted in financial injury to the Peruvian cotton industry, the NCC stayed in constant communication with all relevant U.S. agencies as well as U.S. merchants and marketing cooperatives. NCC staff briefed the Peruvian Ambassador to the United States and Congressional staff to apprise them of the risks this countervailing duty (CVD) case posed to continued trade between the United States and Peru.
Early in 2013, the NCC submitted additional comments to the National Institute for the Defense of Competition and the Protection of Intellectual Property (INDECOPI) reinforcing the NCC's original analysis and signaling the NCC's continued engagement. House Agriculture Committee Chairman Frank Lucas (R-OK) and Ranking Member Collin Peterson (D-MN) sent a letter to the USTR's office pressing them to vigorously defend U.S. cotton interests in the investigation.
An "Essential Facts" document -- on which a final decision regarding the CVD investigation was to be made -- was released in mid-year. The NCC then submitted comments to INDECOPI and NCC staff/counsel travelled to Lima a second time to participate in the final hearing and provide further comments to INDECOPI.
Late in the year, INDECOPI announced that it chose not to impose a CVD saying it found no causal link between the imports of U.S. cotton fiber and Peruvian cotton farmers' economic situation. The NCC welcomed the decision and in a statement said that as agreed to in the U.S.-Peru Free Trade Agreement, "trade in cotton and textile products between the United States and Peru may again proceed without the threat of a CVD." Following the required waiting period after the decision, it was announced that there were no appeals and the investigation is officially closed.
Regarding the Trans-Pacific Partnership (TPP) negotiations, the NCC strongly supported the domestic textile industry's position insisting that the TPP include a rule of origin that is the same as the rule in existing free trade agreements (yarn forward) so that the substantial volume of trade built between the United States and the Western Hemisphere is not severely reduced.
Given the critical importance of the rule of origin being included in any eventual TPP agreement, the NCC supported the National Council of Textile Organizations' (NCTO) effort to have 125 Congressional signatures on a letter to the Administration urging support for a yarn forward rule in the final TPP. The letter from the Representatives to Acting USTR Demetrios Marantis expressed specific concern with the Vietnamese government's position regarding the textile negotiations and the impact this could have on the U.S. textile industry's suppliers/export partners.
Ahead of mid-July TPP negotiations in Kuala Lumpur, a letter co-signed by 167 House Members from 34 states was sent to the USTR Ambassador Michael Froman urging inclusion of strong rules of origin for textile and apparel products in the TPP trade agreement. The letter noted that, "The yarn forward rule has been a success because it ensures that only textile and apparel manufacturers within a particular free trade region, such as the proposed TPP, gets the benefits from the agreement. Vietnam is seeking to replace this proven rule with a new one that would allow its state-owned industry to flood the U.S. market using subsidized Chinese inputs."
Following the Brunei round of negotiations in August, the NCC reiterated its support of the U.S. textile industry's efforts, including generating signatures on a letter sent from the House urging the USTR to insist that a yarn forward rule of origin be required for products to be granted preferential access to the U.S. market.
The NCC organized meetings with USTR, USDA, the State Department and key Cotton Belt Congressional staff where representatives from the American Cotton Shippers Association (ACSA) and AMCOT presented data concerning massive defaults on contracts for U.S. cotton by mills in 19 countries. As a result, U.S. embassies in selected countries received instructions to convey the concerns of the U.S. government to relevant foreign agencies and organizations. The NCC also organized meetings with USTR Ron Kirk, USDA Secretary Vilsack and Department of State Under Secretary Robert Hormats to request that they convey their concerns to their colleagues from countries with mills in default. The NCC urged the U.S. government to consider withholding trade preferences for countries that have mills in default.
The NCC also encouraged inclusion of a reference to the importance of contract sanctity in any legislation that provides Trade Promotion Authority. The Senate's FY14 State, Foreign Operations Appropriations bill included the following report language added by Senator Thad Cochran (R-MS): "The Committee notes that the drop in the world cotton price resulted in default, or risk of default, for some U.S. cotton contracts, and that in some countries legal redress may be lacking. Therefore, the Committee requests the Secretary of State to report on the extent of such risks on a regional basis, and including actions taken by the governments of Vietnam, Bangladesh, and Thailand to address such defaults, and an assessment of respective judicial systems to resolve cases in a fair and impartial manner."
Representatives of ACSA, AMCOT and the NCC later met with USTR Michael Froman, who succeeded Kirk. They thanked him for the support the U.S. government given to the issue and urged him to raise the issue during the forthcoming TPP negotiations as Vietnamese mills had defaulted on significant volume of contracts.
A COTTON USA Executive Delegation, led by CCI President John Burch (front row third from right), briefed Thai textile industry members on cotton production, trade and policy developments.
CCI's 2013 COTTON USA Executive Delegation updated 34 members of the Thai textile industry on the latest developments related to cotton production, trade and policy. The delegation, comprised of nine experts representing the U.S. cotton industry's seven segments, conducted a seminar that offered insights on U.S. and world cotton supply and demand, contract sanctity, risk management, current U.S. farming practices and international trade policy issues. Delegation members included: CCI President John Burch, American Cotton Shippers Association (ACSA) Chairman Eduardo Esteve; ACSA First Vice Chairman Anthony Tancredi; American Cotton Producers (ACP) Chairman Clyde Sharp; ACP Co-Chairman for TX Craig Heinrich; AMCOT representative Hank Reichle and Marc Lewkowitz, Supima.
NCC President/CEO Mark Lange presented testimony on cotton trade with China and the impacts of China's cotton policies before the U.S.-China Economic and Security Review Commission at a hearing in Iowa. He stressed the importance to U.S. cotton of open and transparent market access, noting that China stands in stark contrast to other cotton-importing countries by closely controlling their imports. He also testified that while China's build-up of government stocks has provided some short-term support to world prices, the longer-term implications of the policies are very concerning. Lange and Chairman Dodson's trip to Geneva afforded the opportunity to discuss China's policy structure with U.S. and WTO officials.
Late in the year, a NCC senior executive group was dispatched to the U.S.-China Cotton Policy Forum in Beijing. The team included: Mark Lange, president/CEO; Gary Adams, vice president, Economics & Policy Analysis; Kevin Latner, vice president, Foreign Operations/executive director, CCI; and Karin Malmstrom, CCI China Director. The event, organized by the China Cotton Association, fostered the sharing of historical U.S. cotton policies and experiences in solving relevant problems associated with the U.S. cotton industry.
A NCC senior executive group at the U.S.-China Cotton Policy Forum in Beijing included: Mark Lange, president/CEO; Gary Adams, vice president, Economics & Policy Analysis; Kevin Latner, vice president, Foreign Operations/executive director, CCI; and Karin Malmstrom, CCI China Director.
In other trade activities, the NCC:
Joined onto a multi-industry group letter to the heads of the International Longshoremen's Association (ILA) and United States Maritime Alliance, Ltd. (USMX) commending them for extending the current contract and urging both parties to make every effort possible at reaching an agreement on a new contract.
Conveyed its appreciation to USTR Ron Kirk after he announced he would depart that post in February 2013. In noting Kirk's accomplishments, Lange pointed to pro U.S. cotton efforts, including Kirk's:strong stance in the WTO Doha negotiations against efforts to single out cotton for concessions outside of or in advance of a comprehensive agreement; negotiation of the framework agreement with Brazil, which postponed retaliatory actions against U.S. commercial interests; and steadfast defense of the yarn forward rule-of-origin in any trade agreement.
Met with USTR Michael Froman and Agricultural Trade Ambassador Isi Siddiqui. In the session, which included leaders of 15 major agricultural groups, Lange reviewed the U.S. cotton industry's trade policy priorities -- including efforts to secure a successful outcome in the Peru countervailing investigation
Joined with AMCOT, ASCA and 18 other agriculture and financial trade associations in sending a letter to Commodity Futures Trading Commission Chairman Gary Gensler expressing concern over proposed customer protection rules affecting participants in the futures markets.