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Why Trade Matters for U.S. Cotton
U.S. cotton exports were valued at nearly $2.6 billion in 1998, an increase of more than 65 percent since 1993. Export volume reached more than 7.5 million 480-pound bales, up more than 40 percent since 1993.
Over that period, U.S. cotton exports to Mexico alone more than doubled. During 1998, Mexico accounted for nearly $616 million of U.S. cotton exports, a $426 million increase over 1993 levels.
However, the following market year proved to be an anomaly. Production of 13.9 million 480-pound bales in 1998/99 represented a 26 percent drop from1997/98. Currently, exports are projected to climb back to 6.2 million in 1999/2000 and comprise 37 percent of U.S. production.
U.S. cotton producers increasingly look to foreign markets to bolster sales, farm prices, and income. In marketing year 1998/99, exports will account for an estimated 30 percent of U.S. cotton production, up from 15 percent in marketing year 1985/86.
Expanding Market Opportunities
Trade agreements have opened markets, reduced unfair competition, brought some discipline to sanitary-phytosanitary barriers, and introduced more effective dispute-settlement procedures in global trade.
These agreements have helped to expand export opportunities for U.S. cotton in a number of ways.
Under the Uruguay Round, cotton utilization was encouraged through a mechanism called "binding to zero" or low duties by important customers. For example:
Hong Kong bound its tariff for cotton at zero. Since 1993, the value of U.S. cotton exports to Hong Kong rose more than threefold, reaching $91 million in 1998.
Malaysia bound its tariff for cotton at zero. Since 1993, the value of U.S. cotton exports to Malaysia doubled, accounting for $13.5 million in 1998.
Why Further Trade Negotiations Are Needed
Despite the progress already achieved, trade liberalization is
far from complete. U.S. cotton producers continue to face an
array of tariff and non-tariff barriers, unfair trading
practices, and preferential trading arrangements in key markets
around the world. A few examples follow:
Through Mercosur, cotton producers in Argentina and Paraguay have preferential access to Brazil, the world's fifth largest cotton importer. The proposed expansion of this trade agreement to include Andean Pact countries could result in reduced U.S. raw and value-added cotton exports to South America.
Furthermore, the development of a South American trade pact will likely stimulate investment in production of both raw cotton and textiles in that region and establish trading patterns that could reduce export potential and increase export competition for U.S. raw and value-added cotton.
Turkey, a net importer of cotton, is an important U.S. cotton market with imports totaling $171.8 million in 1998, and is expected to be a top market in the near future. However, the Turkey-EU bilateral trade agreement is encouraging Turkey to expand its cotton textile production for the EU market and to expand its raw cotton production to fill its increasing domestic demand.
U.S. cotton exports have been dependent on markets for which the United States has no secure market access commitment. For example, China was the leading U.S. cotton market, accounting for $729 million of U.S. cotton exports in 1996. However, exports decreased to $578 million in 1997 and to $126 million in 1998 largely due to state trading.
Further worldwide liberalization of trade is necessary to broaden the U.S. export prospects to include major consuming countries that have remained highly protected markets for raw and value-added cotton.
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