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WTO award no win, but no loss

The World Trade Organization arbitration report on the infamous Brazilian cotton case says the U.S. will have to forfeit $300 million in export trade to the South American country.

Jordan Lea, South Carolina cotton merchant and first vice president of the American Cotton Shippers Association, told cotton merchants and growers that the award may not have been a victory, but “I can’t really say that we lost.”

Lea reminded the annual meeting of the Western Cotton Shippers Association that Brazil had requested $3 billion in retaliatory authority for alleged damage to its own cotton economy from the U.S. federal cotton program yet came away with only $300 million.

Oddly enough, it was a California entertainment group, Motion Picture Association of America (MPAA) headed by a former secretary of agriculture Dan Glickman, which may have played the biggest lobbying role in reducing the award.

The “real threat” from the WTO case was to U.S. intellectual property. “Had the amount been equal or more than what Brazil requested, the country could have copied films, CDs or even violated pharmaceutical property rights” for compensation in winning its WTO case.

Lea expects the money award to be appealed “without approaching the legal issues.” Nevertheless, the arbitration decision, according to Lea, puts the U.S. cotton industry in a “manageable situation.” However, it has been costly reaching this point.

The case was filed four years ago when the U.S. produced 23 million bales. Since then it has dropped by 45 percent while combined production in Brazil, India and China – where cotton production, textile industries and exports are subsidized – is up 20 percent.

“It is hard to imagine that U.S. cotton is depressing prices now,” he chided.

While the award may have been whittled down, the U.S. cotton and textile industries have suffered mightily from the Brazil WTO action.

“This attack on our cotton program was the death of Step 2 for upland cotton. I was wrong about Step 2 at the time. We needed it (then) and we could probably use it now,” Lea commented.

While things like cap and trade and getting rid of Step 2 seem like good ideas in Washington, “they are only good ideas if the entire world plays by the rules.

“We are currently trading away the edge and quality of life we worked hard to create.

“We cannot continue to shut down or give away the most productive parts of our economy until the world shares our sense of urgency and will operate under the same guidelines,” he said.

The WTO ruling was the one of a one-two punch the cotton industry has had to endure recently.

Unregulated speculation in the cotton futures market about a year ago wreaked havoc on not only the U.S., but world cotton traders.

“While we are not an industry on the ropes, we are dramatically changed and likely not entirely for the better,” Lea remarked.

“Speculative binge and unregulated investment vehicles” literally destroyed the cotton merchandising industry overnight and hurt players in every segment of the industry.”

He expects legislation to be introduced soon to give additional oversight from the Security and Exchange Commission and the Commodities Futures Trading Commission to regulate unregulated derivatives and OTC markets.

Lea has good news for the California cotton industry in the form of praise for Minnesota Congressman Collin Peterson, chairman of the House Ag Committee and new chairman of the Senate Ag Committee, Arkansas Sen. Blanche Lincoln. He specifically cited Peterson for moving the climate change bill to the Senate where “it will almost certainly die as it is currently written or at the very least be put off for now.”

“Cotton could very well have one of its strongest voices at the helm of the Senate ag committee” as Lincoln takes the chair post Lea says.

Lincoln ascended to the seat through the shifting of committee chairs caused by the death of Sen. Edward Kennedy.


TAGS: Cotton
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