US: New farm bill to benefit cotton and wool apparel
A new five-year farm bill is set to benefit domestic cotton and wool apparel manufacturers and textile producers - but could also leave open the possibility of retaliation on cotton subsidies.
The Agricultural Act of 2014 was passed by the US House of Representatives on Wednesday (29 January). It will now make its way to the Senate, where a vote could come as early as next week, after which it is expected to be signed by President Barack Obama.
Included in the legislation are plans to end subsidies called direct payments, which have been the subject of a long-running dispute with Brazil, which successfully challenged US cotton subsidies at the World Trade Organization (WTO).
However, the bill instead offers a new $16m a year, five-year 'Pima Agriculture Cotton Trust Fund' that is "intended to reduce the injury to domestic manufacturers resulting from tariffs on cotton fabric that are higher than tariffs on certain apparel articles made of cotton fabric."
Annual payments will be made from 2014 to 2018, with 25% of the fund going to national associations that promote the use of pima cotton in textile and apparel goods.
A further 25% will be paid to yarn spinners of pima cotton that produce ring spun cotton yarns in the US, and the remaining 50% will go to manufacturers who cut and sew cotton shirts in the US and certify that they used imported cotton fabric during calendar year 2013.
The National Cotton Council (NCC) says represent a significant concession and departure from previous programmes, and believes it is an "important step in achieving a final resolution of the long-standing Brazil WTO case."
After the WTO ruled in 2009 that the US cotton subsidies were illegal, Brazil was eligible to impose US$830m in retaliatory tariffs on US goods. But it delayed the move, partly as a result of a $147.3m annual payment from the US to Brazilian farmers, which ended last year, but also on the expectation that the new farm law would eliminate the long-standing subsidies.
It remains to be seen whether the bill will address Brazil's concerns.
Wool apparel and textile manufacturers are also due to benefit from the Agricultural Act of 2014, with a new 'Agriculture Wool Apparel Manufacturers Trust Fund' of up to $30m set up to "reduce injury to domestic manufacturers resulting from tariffs on wool fabric that are higher than tariffs on certain apparel articles made of wool fabric."
Another $2.25m per year is available through 2019 for wool research and promotion.
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