international trade policy a major influence on the economic viability of the u.s. cotton industry a...
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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
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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
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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)
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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%
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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
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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
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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
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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
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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
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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
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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
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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
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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
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EU87.0%
Norway3.0%
Switzerland6.0%
U.S.1.0%
Rest of World3.0%
Export SubsidiesExport Subsidies
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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
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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%
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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
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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
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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
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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
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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%
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Imports From ChinaEight Categories of Quota Removal
591% Increase
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Imports From ChinaEight Categories of Quota Removal
71% Price Reduction
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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
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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
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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
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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
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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.
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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
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MerchantsMerchantsGinnersGinners CrushersCrushers
ProducersProducers
CooperativesCooperatives
WarehousesWarehousesManufacturersManufacturers