Trade, policy challenge U.S. cotton

EDITOR'S NOTE — The following presentation was made prior to the completion of the Hong Kong Ministerial Meeting of the Doha Round of the WTO negotiations.

The National Cotton Council (NCC) is addressing the next farm bill by first trying to ensure that the current one stays intact, says Craig Brown, vice president for producer affairs for the Council.

“Most of our focus on the next farm bill is building off this one,” said Brown at the recent Georgia Cotton Production Workshop held in Tifton. “It's important for the production sector that we have the stability and the knowledge of what to expect for the term of this farm bill.

The NCC, he says, is focusing on two major policy areas — trade and farm policy. “We've been putting the focus most recently on trade policy, and it's probably the more confusing of the two areas. It's hard to get your arms around trade policy because it involves so many aspects of the economy, and it's on an international scale,” he says.

“We have to spend a lot of time on trade because cotton has received so much of the focus in the international policy arena. The biggest issue currently is the Hong Kong Ministerial Meeting which is the next phase of the Doha Round of the World trade negotiations. The Doha Round is the next version of a world trade agreement — we're currently operating under the Uruguay Round, which includes the trade rules under which approximately 160 countries operate,” says Brown.

There were big expectations going into the Doha Round, he adds, but those expectations have been dampened by the reluctance of some of the major agricultural trading partners to reach agreement on aggressive changes in the areas of domestic support, market access and export subsidies.

“The United States has offered a very aggressive proposal to try and get these talks jump started, but it hasn't been met with a reciprocal proposal, particularly from the European Community, and particularly in the area of market access. That's probably the key sticking point.

“We also are having trouble with the Least Developed Countries. You've probably read about the criticism leveled by West African countries against the United States, and particularly against the cotton program. They've been very critical of the U.S. cotton program, and they, along with some parts of the European Community, have called on the WTO to deal with cotton separately.

“You may have heard the term ‘early harvest.’ They want to early harvest the cotton discussion. Most cotton farmers view the term early harvest as a good thing. But in WTO talks, being early harvested is not a good thing. It means being singled out and treated separately, and that's exactly the worst place to be when you're talking about a comprehensive round of trade discussions.”

The NCC, says Brown, has been very concerned about cotton being treated differently in the current round of trade negotiations. A priority has been placed on working with members of Congress and with the Administration through the U.S. Trade Representative's office and the USDA to ensure the U.S. cotton program is not singled out and dealt with separately. “If you're dealt with separately, that doesn't mean you'll be dealt with more easily. It'll be very disadvantageous to the United States,” he says.

Despite the negative press about the U.S. cotton program and about U.S. agricultural programs in general, the hope is that all U.S. programs will be dealt with in agricultural negotiations, whether it be in the area of domestic support, market access or export subsidies, says Brown. The NCC has received assurances from U.S. Trade Representative Portman and Secretary of Agriculture Johanns that the United States will not allow cotton to be singled out, he says.

“Another important trade matter is that about two and a half years ago, Brazil filed a complaint in the WTO process arguing that the U.S. cotton program had caused serious prejudice against the Brazilian cotton industry, from 1998 to 2002. The United States vigorously argued against that complaint, but nevertheless the decision went against the United States.”

The United States has said it will comply with that ruling, says Brown, and that has complicated the discussion during the Doha Round. “On one hand, you have a separate legal case brought before the WTO by a specific country. On the other hand, you have multi-lateral trade negotiations taking place with all countries. What happens with one will impact the other.

“The strange thing about these WTO cases is that while they may have ruled that Brazil has a case, they did not rule what you have to do to comply with that ruling. It's up to the defending country to come up with a compliance that is necessary to deal with the ruling. We think the United States has done what it needs to do to comply with the Brazil cotton case.”

The NCC, says Brown, thought “long and hard” about the recommendations it should make to the U.S. government on complying with the Brazil case. “It was a delicate balance to get into compliance with the Brazil case and keep WTO negotiations going at the same time. They didn't want to overly reward Brazil for litigation, but they wanted to keep them at the bargaining table.”

In the budget reconciliation, he explains, the U.S. cotton industry recommended to the House and Senate agriculture committees the early termination of the Step 2 program, ending it by Aug. 1, 2006, which coincides with the end of the 2005 crop marketing year. “Not having Step 2 is going to make it more difficult to trade U.S. cotton in the world, and it likely will have an impact on grower prices, depending on the supply and demand situation. It will make it more difficult to sell cotton, particularly in the export market, which we're heavily dependent upon. The NCC wasn't happy about it, and we didn't think the case was made legitimately.”

In the area of farm policy, the NCC is a strong supporter of the current farm bill, says Brown. “We think it has worked. The structure of this program and the delivery mechanisms are critical components of farm policy. But there may be circumstances when we write the next farm bill that won't allow us to keep the program as it is. One of the factors that may affect the next farm bill is what happens in the Doha Round. If it's successful, it could reshape the type of program we could have and the spending levels we could have in the different categories.

“Probably the biggest factor impacting the next farm bill will be what kind of spending authority we receive — how much money Congress will provide to fill in the blanks on these various provisions. There are philosophical differences, and there are new commodities that want to be part of the next farm bill, such as the specialty crops. We'll also hear the continuing debate between the nutrition program, the commodity programs, and the conservation programs on how to split the pie. It's probably safe to say we won't have a budget surplus when we write the next farm bill, so spending authority will be very important.”

If you asked the cotton industry today what farm program they would like to have, assuming there would be enough money for all parts of the program, it would be very close to what we now have, says Brown.

“The way we're addressing the next farm bill is by trying to insure that we hold onto the current one, intact. That challenge is before us in the budget.”

Congress decided after the election that it would tackle the budget deficit, he says, and the budget resolution called for agriculture to contribute towards reconciliation savings, approximately $3 billion over five years.

“The reductions that have been made do not go in and structurally change the program components of the farm bill. And they don't change the eligibility requirements to participate in the program. There will be reductions in farm programs, but there won't be changes in these important areas. Once you change program benefits, not only will it have an impact on the benefits that are due from this bill, but it makes it more difficult to maintain those benefits in the next farm bill.”

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.