International Trade Policy A Major Influence On The Economic Viability Of The U.S. Cotton Industry A Major Influence On The Economic Viability Of The U.S.

International Trade PolicyInternational Trade Policy

A Major Influence On

The Economic Viability Of

The U.S. Cotton Industry

A Major Influence On

The Economic Viability Of

The U.S. Cotton Industry

Trade Liberalization: InevitableTrade Liberalization: Inevitable

• Proliferation of Trade Agreements: Administration’s highest priorities

– Multilateral WTO (Doha Round)

– Bilateral

– Regional

• TPA (Fast Track) authority will facilitate agreements

• Proliferation of Trade Agreements: Administration’s highest priorities

– Multilateral WTO (Doha Round)

– Bilateral

– Regional

• TPA (Fast Track) authority will facilitate agreements

Omnibus Trade BillOmnibus Trade Bill

• Trade Promotion Authority (TPA)• Caribbean Basin Trade Promotion

Act (CBTPA)• Andean Trade Preference and Drug

Eradication Act (ATPDEA)• African Growth and Opportunity Act

(AGOA)• Trade Adjustment Assistance (TAA)

• Trade Promotion Authority (TPA)• Caribbean Basin Trade Promotion

Act (CBTPA)• Andean Trade Preference and Drug

Eradication Act (ATPDEA)• African Growth and Opportunity Act

(AGOA)• Trade Adjustment Assistance (TAA)

Effective Tariff Rates for TextilesEffective Tariff Rates for Textiles

• US < 9%

• Argentina 40% to 50%

• Brazil 40% to 70%

• China 20% to 36%

• India 50% to 70%

• Pakistan 40% to 60%

• Bangladesh 60% to 300%

• US < 9%

• Argentina 40% to 50%

• Brazil 40% to 70%

• China 20% to 36%

• India 50% to 70%

• Pakistan 40% to 60%

• Bangladesh 60% to 300%

Average Maximum Allowed Agricultural Tariffs Under Current WTO

Average Maximum Allowed Agricultural Tariffs Under Current WTO

0

20

40

60

80

100

120

US EU Japan Korea India World0

20

40

60

80

100

120

US EU Japan Korea India World

Core Problems in Ag Trade

Average allowed WTO tariff on agriculture is 62 percent with many exceeding 100 percent. The U.S. average tariff is 12 percent.

EU spends $2 - $5 billion a year on export subsidies, compared with about $20 million the US spends

Core Problems in Ag Trade

WTO allowable trade distorting subsidiesEU $60 billion a year

Japan $30 billion a year

Canada $23 billion a year

U.S. $19.1 billion a year

Farm Policy & International Trade Policy Must be Compatible & Fair Farm Policy & International Trade Policy Must be Compatible & Fair

• Farm policy and trade policy are interdependent especially for the U.S. cotton industry

• Farm policy and trade policy must take into account the interests of the US textile industry

• Farm policy and trade policy are interdependent especially for the U.S. cotton industry

• Farm policy and trade policy must take into account the interests of the US textile industry

Farm Policy & International Trade Policy Must be Compatible & Fair Farm Policy & International Trade Policy Must be Compatible & Fair

• Economic viability hinges on:

– Agreement on core issues

– Broadening our coalition

– Aggressively pursuing our goals

• Economic viability hinges on:

– Agreement on core issues

– Broadening our coalition

– Aggressively pursuing our goals

Reconciling Global Farm and Trade PolicyReconciling Global Farm and Trade Policy

• US farm programs cannot be unilaterally reduced

• US agricultural and textile tariffs cannot be further reduced until other nations reduce their tariffs to US levels

• Market access must be reciprocal

• US farm programs cannot be unilaterally reduced

• US agricultural and textile tariffs cannot be further reduced until other nations reduce their tariffs to US levels

• Market access must be reciprocal

Reconciling Global Farm and Trade PolicyReconciling Global Farm and Trade Policy

• Non-tariff barriers must be eliminated

• Export subsidies must be eliminated, or reduced to US levels

• Improvements must be made in international trading disciplines and dispute settlement procedures

• Non-tariff barriers must be eliminated

• Export subsidies must be eliminated, or reduced to US levels

• Improvements must be made in international trading disciplines and dispute settlement procedures

US Proposal: Doha DeclarationUS Proposal: Doha Declaration

Substantial improvements in market access

Reductions of, with a view to phasing out, all forms of export subsidies

Substantial reductions in trade-distorting domestic support

Substantial improvements in market access

Reductions of, with a view to phasing out, all forms of export subsidies

Substantial reductions in trade-distorting domestic support

Average of Maximum Allowed Tariffs

0

20

40

60

80

100

120Percent

Swiss Formula Tariff ReductionsSwiss Formula Tariff Reductions

IndiaIndia

EUEU

U.S.U.S.

KoreaKoreaJapanJapan

EU87.0%

Norway3.0%

Switzerland6.0%

U.S.1.0%

Rest of World3.0%

Export SubsidiesExport Subsidies

Domestic Support ProposalDomestic Support Proposal

Reduce non-exempt domestic support to 5 percent of total value of agricultural production over a 5-year period

Establishes the same standard for computing allowable trade-distorting domestic subsides for all countries

Eliminates the blue box loophole

No limits on exempt (green box) support

67.2

56.3

45.3

34.4

23.4

12.519.1 17.3 15.5 13.6 11.8 10

0

10

20

30

40

50

60

70

80

2000 2006 2007 2008 2009 2010

$Billion

EU US

Leveling the Playing FieldLeveling the Playing Field

5%

Proposal vs. AgreementProposal vs. Agreement

• US proposal is long way from agreement

• EU will resist

• Discussions will continue for several years

• US proposal is long way from agreement

• EU will resist

• Discussions will continue for several years

Proposal vs. AgreementProposal vs. Agreement

• US timing goals:– Modalities by March 31, 2003

– Agreements by January 1, 2005

• US cotton/textile industries must guard against concessions by US negotiators that would perpetuate existing disadvantages

• US timing goals:– Modalities by March 31, 2003

– Agreements by January 1, 2005

• US cotton/textile industries must guard against concessions by US negotiators that would perpetuate existing disadvantages

Agreement vs. ComplianceAgreement vs. Compliance

• Good agreements are worthless in the absence of compliance

• New agreements must have strong dispute settlement provisions

• Good agreements are worthless in the absence of compliance

• New agreements must have strong dispute settlement provisions

Agreement vs. ComplianceAgreement vs. Compliance

• Congress must insist that USTR be tough on non-compliance … should refuse to ratify additional agreements until USTR demonstrates a will to resolve existing non-compliance problems

• Congress must insist that USTR be tough on non-compliance … should refuse to ratify additional agreements until USTR demonstrates a will to resolve existing non-compliance problems

China’s Tariff Rate Quota Agreement 3.75 Million Bales

China’s Tariff Rate Quota Agreement 3.75 Million Bales

For Re-Export61%

For Re-Export61%

State Owned33%

State Owned33%

Private6%

Private6%

Imports From ChinaEight Categories of Quota Removal

591% Increase

Imports From ChinaEight Categories of Quota Removal

71% Price Reduction

Trade Agreements on the HorizonTrade Agreements on the Horizon

• Chile

• Singapore

• Australia

• Free Trade Area of the Americas

• Continuation of WTO Doha Round

• Chile

• Singapore

• Australia

• Free Trade Area of the Americas

• Continuation of WTO Doha Round

Trade Agreements on the HorizonTrade Agreements on the Horizon

• Central America

– Costa Rica

– El Salvador

– Guatemala

– Honduras

– Nicaragua

• Central America

– Costa Rica

– El Salvador

– Guatemala

– Honduras

– Nicaragua

Farm Policy & International Trade Policy Must be Compatible & Fair Farm Policy & International Trade Policy Must be Compatible & Fair

• Farm policy and trade policy are interdependent especially for the U.S. cotton industry

• Farm policy and trade policy must take into account the interests of the US textile industry

• Farm policy and trade policy are interdependent especially for the U.S. cotton industry

• Farm policy and trade policy must take into account the interests of the US textile industry

Farm Policy & International Trade Policy Must be Compatible & Fair Farm Policy & International Trade Policy Must be Compatible & Fair

• Economic viability hinges on:

– Agreement on core issues

– Broadening our coalition

– Aggressively pursuing our goals

• Economic viability hinges on:

– Agreement on core issues

– Broadening our coalition

– Aggressively pursuing our goals

House Vote On TPAHouse Vote On TPA Yea Nay

NC 4 8

SC 2 4

GA 7 4

AL 5 2

TOTAL 18 18

Yea Nay

NC 4 8

SC 2 4

GA 7 4

AL 5 2

TOTAL 18 18

Administration won votes by making concessions on TAA. Several textile area “holdouts” for a coalition proposal could have won its acceptance and mitigated damage to the US cotton and textile industries.

Regional Fabric & T-Shirt QuotasCBTPA / ATPDEA / AGOA

Regional Fabric & T-Shirt QuotasCBTPA / ATPDEA / AGOA

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Mill

ion

SME

2002 2003 2004 2005 2006

FY Beginning Oct 1

Conference Report Coalition Old Quotas

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Mill

ion

SME

2002 2003 2004 2005 2006

FY Beginning Oct 1

Conference Report Coalition Old Quotas

MerchantsMerchantsGinnersGinners CrushersCrushers

ProducersProducers

CooperativesCooperatives

WarehousesWarehousesManufacturersManufacturers