Cotton producers issue call for action
U.S. cotton producers are calling for action after government subsidies for cotton rose in India, a move that could drive down prices in an already saturated market. India's minimum support price for cotton farmers rose to 72 cents per pound for the most common cotton qualities, a marked advantage over U.S. farmers looking at 55 to 58 cents of support for the same product.
Increased rates have helped Indian farmers more than double their cotton production despite decreased demand for textile products. It's not just that they're subsidizing cotton, they're really subsidizing cotton," said Darren Hudson, head of the agriculture competitiveness program at Texas Tech. "This is just blatant trade-distorting price policy that if the U.S. were to engage in to that degree, every country in the world would file a complaint with the (World Trade Organization)."
Damage to Markets. Unlike other subsidies which assists in the production of all agriculture, Hudson said focusing specifically on cotton violates WTO rules and will draw out the slump in markets around the world. "They can cause some damage to U.S. markets, especially in the far east, just because of proximity," Hudson said.
According to reports from the National Cotton Council, Indian cotton exports have increased from 75,000 bales in 2001 to 7 million bales in 2007, second only to the United States. Gary Adams, chief economist with the cotton council, said the subsidies give Indian farmers an unfair advantage to their U.S. counterparts, creating another burden for suffering producers trying to cope with diminished demand.
Unfair Advantage. The rate also buffers India from the declining markets, not allowing global cotton markets to stabilize naturally as commodity prices attempt to level out. "If they're directly competing and getting some kind of unfair advantage from a subsidy program then it could be taking away business from an American exporter," he said.
Though steps have been taken to address the issue, Adams said it could be some time before a formal complaint could be brought before the WTO where a decision could be made. Despite the growing concerns, the competition created by foreign subsidies isn't a new issue for farmers and shouldn't create drastic changes in U.S. production, said Steve Verett, vice president of Plains Cotton Growers in Lubbock.
Domestic Subsidy. It's not anything that's going to create some new barrier that we haven't already been facing," Verett said. "It's like it's completely off the radar screen, it's not even asked about." By bringing the issue to the forefront, he said U.S. producers would at least benefit from the information as it relates to domestic subsidy programs, which have come under attack from the Obama Administration.
"When you actually document it through a reviewed study, it carries a lot of weight and it hopefully opens a lot of eyes," he said. But reviewing the programs may not be enough. Hudson said foreign trade rules typically favor developing nations like India and treat such issues with "kid gloves."
The U.S. has come under fire for its subsidy programs before, he said, and the results weren't always so favorable. "They're exacerbating the big problem," he said of India. "If I was West Africa, I would be upset to, because it's India driving down their price, not the U.S."
By Joshua Hull | Lubbock Avalanche-Journal | Thursday, May 14, 2009
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