MR. HELMS: Thank you, Mr. Chairman. As you have already stated I'm Allen Helms, a cotton producer from Clarksdale, Arkansas, and I am providing testimony on behalf of the National Cotton Council the central organization of the U.S. cotton industry. The Council represents all seven segments of the cotton industry from the cotton growers to the textile manufacturers. Currently, I serve on the council of the board of directors as chairman of the American Cotton Producers Council. I would like to thank each of you for providing us the opportunity to present our views on the upcoming round of WTO negotiations.

International trade and the treaties are extremely important to the U.S. cotton industry in raw cotton, cotton textiles and cotton seed and its products. In a typical year about 40 percent of U.S. cotton crop is exported. A similar percentage of cotton textile production is now exported as well due in large measure to NAFTA. However, the textile industry finds itself under siege from the flood and cheep cotton textile imports primarily from Asia due to that region's ongoing financial crisis. Whereas the Asian textile industries were only 20 percent, export-driven before the Asian 80 crisis, many are now exporting up to 80 percent of their textile production. The agreement in which the U.S. cotton industry competes is right for domestic and trade policy distortions. Many of our competitors treat cotton textile production as cornerstones of economic development and social stability. These countries often pursue grossly distorted policies designed solely to ensure the competitiveness of their cotton and textile industries totally the production in market cities.

We are supportive of U.S. efforts to enter into trade agreements that will benefit the U.S. cotton industry. However, we urge that our negotiators keep in mind the industrial nature of our product and it's close link to textile manufacturing. The environment in which the U.S. cotton competes is shaped not only by the agricultural policies of our competitors, but also their textile policies.

Some fundamental goals must be achieved to bring this new round of WTO negotiations to be of significant benefit to the U.S. cotton industry. For example, WTO disciplines must address downstream subsidization of cotton textiles, particularly by developing countries. Worldwide trade and raw cotton remain stagnant while trade in cotton products continues to grow. We see increased centralization of both raw cotton and cotton textile production in some countries. These countries often engage in significant subsidizing of their textile sectors. Subsidizing often starts at the farm level. The new round of negotiations must level the playing field and make all countries abide by the same rules with respect to subsidies and policy distortions. This is especially important with respect to economic sectors in which the particular developing countries are already highly competitive, such as cotton and textile production.

Given this economic environment, the trade distorting policies of many Asian competitors, it is imperative that the United States could obtain the bidding to enter into beneficial trade agreements. Such arrangements offer the best means for U.S. textile industries to compete with nation textiles. Science based, enforceable rules, governing trade and modify organizations and their products are an essential component of the WTO agreement.

Without meaningful rules governing trade the most fear mongers and thinly disguised protectionism is likely to take over. Our own (inaudible) battles of the European Union offer clear evidence of the inadequacy of current rules and regulations. We must ensure this technology is not satisfactory by unreasonable trade rules. We urge our negotiators to continue to push for increased market access for our products and end to nontariff trade barriers. While the Uruguay Round agreement began the process of limiting government support for agriculture, there is still much room for improvement.

The Council supports strong rules restricting the use of export subsidies and calls for more rigid application of those rules to developing countries. Our competitors should have to match the dramatic reductions the United States has made in lending governmental support to agriculture. Until such reductions are achieved, however, the United States must reserve (inaudible) in order to compete with the (inaudible) of our competitors. We urge continued support for programs, such as the Export Credit Guarantee Program and Market Access Program with help from other exports for our agricultural products. Programs such as these are not trade distorting and fully comply with WTO principles. The importance of the upcoming round of negotiations is heightened by the incomplete sessions with China. Terms of China's cessation from the WTO are critical to U.S. cotton industry given that China is both the largest producer and consumer of cotton. Furthermore, China is the primary offender of the U.S. rule of origin laws illegally transhipping vast quantities of vegetable and apparel products into the United States. Initial reaction of the cotton industry has been favorable to the report in terms of the agreement on raw cotton and cotton seed access to China, but so far we have half a deal because China has not yet agreed to a ten-year phase out United States textile import quotas consistent with the terms granted to other WTO signatories. Given the already significant tranship of Chinese textile products into the United States, it is essential U.S. textile import quotas to China have to be phased out over a ten-year period.

We are also awaiting final terms with China's domestic policy commitments. Government control and manipulation of cotton and textile production in trade is evidenced throughout the Chinese trade system. Any agreement must force China to perform it's agricultural policies and its downstream subsidizing textiles prior to the WTO session. In conclusion I would observe that although the upcoming round of WTO negotiations is very important, U.S. agriculture is facing a serious economic crisis today. Prices are at levels in relative terms that are in a four-year low and relief is not in sight.

Prices of future gains and market access and increased demands do nothing to increase the economic crisis facing U.S. agriculture today. Pressing needs for short term assistance and U.S. cotton producers in the U.S. agriculture in general is not being overstated. Though much of the U.S. economy escaped relatively unscathed by the Asian crisis and enjoys continued prosperity, U.S. agriculture is not so fortunate. The proper response with U.S. Government, our industry along with U.S. agriculture in general will be decimated as farmers in allied sectors are increasingly unable to meet financial obligations. The Council calls the government to restore funding for cotton WTO consistent step two program. Other steps are necessary to bridge the short term meltdown. U.S. agriculture must also be taken and taken quickly. Thank you for the opportunity to present these comments on behalf of the U.S. Cotton Industry. We look forward to working with the administration in the upcoming round of negotiations and we've already submitted written copies for the record. Thank you.

MR. SCHUMACHER: (inaudible) comment on the issue of no end in site. Certainly look four or five years out as someone said the long term, short term. So I think the key is working with Congress and getting additional funding beyond the budget. We will need to look to that for additional support and hopefully that, too, will be one of those.

MR. MANNING: I would like to thank all of the panelists for sticking on your subject and keeping us on schedule. According to the agenda, we have time to take a one-hour break for lunch.

To those of the media who are here, the panelists and the commissioners and those who have made presentations will be available during this lunch break and if you want to see a particular one, they will be available. We would ask you to come back in one hour.

Lunch is served out in the banquet area just outside this area. If you need help getting there or getting back, if you see anyone here on staff who has a yellow ribbon, they tied a yellow ribbon around them so they will be helpful. Thank you very much.

At this time we will stand adjourned for lunch and let's please be back at 1:55 so we can begin promptly. (Lunch break at approximately12:55 p.m.)