Chinas cotton policy "has wreaked havoc" on US domestic producers

China's cotton policy "has wreaked havoc" on US domestic producers

The US is being urged to pursue a case against China over its cotton policy, after filing a complaint against Chinese agricultural subsidies for grain crops earlier this week.

On Tuesday (13 September), the Obama Administration launched a new trade enforcement action against China at the World Trade Organization (WTO), alleging excessive government support for production of rice, wheat, and corn.

According to the complaint, China's "market price support" for these products in 2015 is estimated to be nearly $100bn in excess of the levels China committed to when it joined the WTO.

The US Trade Representative's office said China's excessive market price support for rice, wheat and corn inflates Chinese prices above market levels, creating artificial government incentives for Chinese farmers to increase production.

Speaking at the launch of the trade enforcement action, US Secretary of Agriculture Tom Vilsack said he believed this was "just the tip of the iceberg in terms of the predatory practices going on around the world that harm our producers."

He added: "I am very hopeful…the US government will also vigorously pursue a case against China concerning its cotton policy which has wreaked havoc on our domestic producers. 

"Absent this, I fear that our domestic cotton production and all that it means to our nation's economy will be lost in much the same way we forfeited our textile industry, once the largest manufacturing sector of our economy."

Dr Gary Adams, president and CEO of the National Cotton Council, wants to take this one step further, citing the need for a broad examination of global fibre markets.

Through the semi-annual dedicated discussions established by the WTO in December 2013, cotton is the only agricultural commodity with an explicit mechanism that allows for the multilateral evaluation of domestic support, export subsidies and market access.

"These discussions provide the venue to scrutinise and question China's cotton target price programme, reserve stocks policy and import quota administration, along with support prices and fertiliser subsidies in countries such as India," Adams said.

"However, to identify and understand all of the factors affecting global cotton markets, a thorough and comprehensive examination of all policies affecting global fibre production and trade – including synthetics – is required."

According to Adams, "global synthetic fibre production capacity is three times the level of world cotton production. With US cotton area down almost one-third since 2011 and the fundamental changes in the safety net included in the 2014 farm bill, an honest critique of the global cotton market must include cotton policies in the developing world as well as subsidies provided to synthetic fibres."

He added that transparency and monitoring in "trade-related aspects of cotton" cannot be achieved without considering the impact that synthetic fibres have on global cotton production, consumption and trade.

"With world polyester producers operating at just 71% of capacity and with prices in China – the largest polyester producer – below 50 cents per pound, the detrimental impacts of synthetic fibres are felt by all participants in the global cotton market."

After US lawmakers in 2014 axed subsidies for cotton growers – called direct payments – to end a long-running trade dispute with Brazil, the US instead offers "marketing assistance" to US cotton producers to help offset the downturn in cotton prices and global oversupply.

US cotton farmers in line for $300m assistance

An article on just-style last month looked at the wider implications of excess polyester capacity in China and how it could reshape global fibres trade to 2017. 

How overcapacity in China could reshape fibre markets