US cotton industry feels weight of WTO case

US cotton industry feels weight of WTO case

The U.S. cotton industry has a lot at stake in the debate over writing a new farm bill, but producers have more to lose than other U.S. commodity groups if Congress fails to address one overriding issue.

The U.S. cotton industry has a lot at stake in the debate over writing a new farm bill, but U.S. cotton producers have more to lose than other U.S. commodity groups if Congress fails to address one overriding issue.

That was the message Jimmy Dodson, a Robstown, Texas, cotton producer and the new chairman of the National Cotton Council, delivered to attendees at the Mid-South Farm and Gin Show in Memphis, Tenn., March 1.

Besides providing a much-needed safety net for an industry that is reeling from a greater-than-50-percent reduction in cotton prices over the last two years, policymakers also face the challenge of ultimately settling the WTO case filed by the government of Brazil nearly a decade ago.

“All of us are frustrated with this ongoing challenge,” Dodson told farmers. “However, it is critical that we reach a settlement of this case during this farm bill debate. A separate challenge by Brazil after this farm bill is concluded would be disastrous for U.S. cotton policy.”

Dodson, who became the Council’s chairman during its recent annual meeting in Memphis, said the NCC believes the STAX program and the changes it has proposed to the marking loan and GSM credit programs will provide a path to a settlement of the longstanding issues with Brazil.

In 2004, a World Trade Organization dispute panel agreed with Brazil’s claims that certain features of the U.S. cotton program were market distorting. The ruling allowed Brazil to retaliate against the U.S. by raising tariffs on up to $800 million of U.S. exports to Brazil.

During the ongoing debate over the farm bill, Brazil has agreed to delay imposing those measures, a decision that was helped by an annual appropriation of $147.3 million for an educational program for Brazil’s cotton farmers to improve production. Some cotton industry leaders worry that Brazil’s patience is wearing thin because of the protracted farm bill debate.

“Needless to say, 2013 is a critical year for farm policy,” said Dodson. “We must be vigilant as Congress addresses large macro-economic issues and be ready to act on a multi-year farm bill to provide stability of decision-making for producers and our industry and finally put the Brazil case behind us.”

Farm bill markups

As of March 1, the House and Senate agriculture committees are expected to begin farm bill markups in April or May after Congress completes the budget debate involving sequestration and raising the debt ceiling.

“It is believed that the starting point in each committee will be the 2012 versions of their respective bills,” Dodson said. “We expect these markups to address some significant issues.  The biggest factor obviously is what budget savings will the agriculture committees be expected to achieve.”

Other areas of debate will include the issue of producer-choice or revenue-only commodity provisions, dairy policy and the level of nutrition program savings.

“Crop insurance provisions will command considerable attention. This is of particular interest to our industry as this is where STAX will be debated along with other significant insurance programs.”

Dodson said the budget debates will provide opportunities for Congress to address the budget deficit and could define the level of budget cuts that are to be incorporated into a multi-year farm bill.

“I would also note that the Boll Weevil program is at critical stages of completion. Thanks to a very successful federal-producer partnership, we have driven the boll weevil to the Texas-Mexico border. However, this last zone is proving to be the most difficult eradication effort due to climatic conditions and the influx of weevils from Mexico.”

The Council’s Boll Weevil Action Committee, chaired by Charles Parker, will again be seeking federal funding for fighting the boll weevil in the Lower Rio Grande Valley, he noted. “In addition, the committee is recommending the creation of a National Boll Weevil Protection Fund with supplemental support from boll weevil foundations across the Cotton Belt to continue eradication efforts along the border and prevent re-infestation of eradicated zones.”

The Council will also be focused on its efforts to deal with international contract defaults and the Peruvian countervailing duty case. “The Council devoted significant resources to both of these issues in 2012 and will again this year,” Dodson noted. “Of course, the Council also will be monitoring efforts to revive WTO Doha negotiations and possible proposals for U.S. cotton policy modifications as an “early harvest.”

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