Economic Integration

As a follow-on to the December 2011 announcement from the US Trade Representative’s Office that the West African Cotton Improvement Program (WACIP) would be funded for an additional four years, the National Cotton Council of America (NCC) last week hosted a meeting of US cotton industry officials and government officials from Chad, Benin and Burkina Faso.

The Council described the Washington DC meeting with West and Central African countries as an effort to build a foundation for better communication and establish the necessary groundwork for cooperation on issues of mutual interest.

NCC Chairman Chuck Coley mentioned recent changes in US farm law and asked the delegation to focus on areas of common interest, instead of a cotton policy that many in Africa believe puts the continent’s farmers at a disadvantage.

"I think we agree that promoting the increased consumption of cotton by the world's consumers is our top priority," said Mr. Coley. He said that US cotton farmers have contributed substantial financial support to promotion programs designed "to ensure that cotton is competitive in all end use markets and is the first choice of consumers." 

He noted cotton’s research and promotion program, which has been supported by US cotton producers with a per bale assessment since 1960.  Moreover, producer check-off dollars have been used to conduct highly successful generic cotton promotion programs throughout the world, he said.

The NCC chairman said the industry is proud of the outreach program initiated by the US industry that served as the predecessor and basis for the West African Cotton Improvement Program.  After initially funding the program at $27 million for seven years that ended in April 2012, the US Trade Representative's Office has added another $16 million to take the program into 2016.

"Now we want to work with you and your farmers to identify ways to improve the program to ensure it yields the maximum possible benefits for your farmers and industries,” said Mr. Coley. “We need feedback to know which activities have generated the best results and what programs should be initiated in the future."

Coley said the NCC supports the extension of duty-free, quota-free access to US markets for raw upland cotton produced in the countries designated as least developed by the United Nations.

"We support the commitment made by US officials last year at the WTO ministerial," he said.  

Coley told the group that the NCC has conveyed its support for prompt enactment of legislation to extend the eligibility of products containing third-party fabrics before it expires later this year, recognizing its importance to employment in Africa. He also said the NCC shares concerns that extending duty-free, quota-free access to textile products from Vietnam and Bangladesh could seriously erode the benefits of African Growth and Opportunity Act (AGOA) for the African countries.

The National Cotton Council is addressing three core issues -- market access, export subsidies and domestic support – about which the West Africans are concerned, Mr. Coley told the delegation.

"We eliminated an export subsidy and our export credit programs are being substantially modified," he noted. "We have supported enhanced market access by supporting duty-free, quota-free access for your fiber and by the extension of the important textile market access provisions in AGOA. We also have addressed your concern about our domestic supports by proposing significant reforms to the US cotton program for inclusion in the new farm law."

In closing, Mr. Coley stressed the issues that US and West African growers have in common.

"We look forward to engaging in a dialogue with your industry representatives and we will look forward to your responses about how WACIP can be improved," he said. "Your producers will benefit when yields are enhanced, when they receive a larger share of the world price and when there is true competition for their business. We believe enhanced communications, as well as programs like WACIP and others, can advance those objectives."

Questions:  Which issues (US and African) are most critical and should be addressed most immediately?

Are most recent changes in US cotton policy pertaining to producer supports, export subsidies and credit programs enough to allay the concerns of African growers?

What sort of investment (time, money, education, etc) should be expected from African countries participating in the West African Cotton Improvement Program to ensure its success?

A stable cotton area, a more competitive ginning and spinning infrastructure and improved cotton quality are among China’s long-term goals, according to government officials speaking at the Zhengzhou Agricultural Futures (cotton) Forum in Zhengzhou.  

In its September 17th weekly issue, Liverpool-based Cotton Outlook reported that more than 700 delegates from the cotton and textile industry attended the meeting that started on September 10.  Central and provincial government officials, as well as representatives from other sectors were among the speakers.

Cotton Outlook reported:

“Mr. Liu Xiaonan, Deputy Director of the NDRC’s Economic Trade Department gave a speech on the subject of establishing a long-term mechanism for the cotton industry. He pointed out that China’s cotton output has remained at around, or over, seven million tonnes in recent years but that cotton consumption has continued to rise, thanks to the rapid development of the textile industry. Currently, he stated, China has a total of 110 million spindles. The speaker alluded to the prospect of an increasing shortage of cotton supply in the coming years, a gap that will have to be met from the international market.

He highlighted challenges facing the industry. Firstly, to maintain stable cotton area and output will be quite difficult. Despite prices having moved to historically high levels, this year’s cotton area has remained similar to last year, owing to competition from other crops, especially grains, which generate better returns. Cotton cultivation requires more labour and, in the absence of sufficient mechanisation, production costs are high. Secondly, the competitiveness of smaller ginners and mills requires strengthening; they still lack knowledge regarding risk management. Thirdly, certain issues related to cotton fibre quality have not been resolved and may increase in a tightened supply situation. Fourthly, industry statistics require improvement; otherwise, formulation of a long- term government policy that protects farmers’ interests will prove difficult.

Mr Liu noted that grains remain China’s most important crops. The place of cotton should be clarified within the wider commodity market, and the relationship between cotton and other crops, as well as that of cotton and the downstream industry should be balanced. Furthermore, the relationship between domestic cotton and imported cotton should be addressed appropriately. Therefore, the government should make more effort to set up a long-term development mechanism for the cotton sector. Macro- control policies (imports and state reserves), the speaker stated, are also necessary, within a free and open market. In addition, cotton quality needs to be improved further.

Mrs Ma Zhuping, deputy Director of the Planting Department, in the Ministry of Agriculture (MOA), predicted a level of cotton output in 2010/11 similar to that of last season. The speaker said cotton area was around 74 million mu (15 mu = 1 hectare), according to MOA data. Cultivated area rose moderately in the Yangtze valley, decreased in the Huanghe valley and remained fairly stable in the northwest region. A good harvest could be in prospect, depending on the weather during September and October.

According to Mrs. Ma, the long-term target for the cotton industry is to keep cotton area at 80 million mu, and output at over seven million tonnes, which should meet 70 percent of total demand. Cotton cultivation should be shifted more to central and western regions, especially Xinjiang. Grains remain the most important crops, and the potential to increase cotton area in the Yangtze and Huanghe valleys is limited. Furthermore, labour costs in eastern regions are continually rising. In consequence, Xinjiang’s share of national output might be greater in future.”

Questions:  In view of its rising population, steady movement from rural to urban areas and the government’s concerted focus on grain production, is holding the overall national cotton area steady a realistic goal?

How can the competitiveness of the ginning and spinning industries be strengthened?