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COTTON
The Uruguay Round agriculture agreement will establish disciplines in the areas of market access, export subsidies, internal support, and sanitary and phytosanitary measures. In addition, countries have made a number of commitments that will benefit U.S. agricultural exports. The principal source of Uruguay Round effects on cotton is higher world incomes which will increase world consumption of cotton textiles and apparel. Liberalization of textile and apparel trade eventually will further increase world cotton demand. Applied tariffs in cotton-importing countries are already generally very low, export subsidies are not important in world cotton trade, and support for cotton production is limited among GATT member countries. Highlights for the U.S. cotton industry, whose 1992 exports totaled $2.2 billion and accounted for 37% of total domestic production, include the following:
Key Developments for U.S. Exports:
Korea Binds Tariff at 2%: Korea will reduce its tariff binding to 2%, the currently applied rate, from its GATT-bound level of 10%.
Hong Kong Binds Tariff at Zero: Hong Kong will bind (as a formal GATT commitment) its tariff for cotton at zero, the currently applied rate.
Malaysia Binds Cotton Tariff at Zero: Malaysia currently has no duties on cotton and will permanently bind (as a formal GATT commitment) its tariff at zero.
U.S. Commitments:
Market Access: The United States will replace its Section 22 quota with tariff equivalents equal to 36.9 cents/kg for cotton and 9.2 cents/kg for cotton waste. These tariffs will be reduced by the minimum required 15% in equal annual installments over 6 years beginning in 1995, to 31.4 cents/kg and 7.8 cents/kg, respectively. The United States will establish a tariff-rate quota for cotton of 51,927 tons, growing to 86,545 tons at the end of 6 years. This new quantity will be allocated proportionally to the existing cotton quotas. 10,000 tons of the tariff- rate quota is reserved for Mexico in accordance with the NAFTA agreement. The in-quota tariff will be the same as for the current quotas, which generally have been unfilled.
(Note: This fact sheet is a summary of Uruguay Round highlights; it does not reflect all results.)
June 1994
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