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U.S. cotton faces dilemma in China trade dispute

An Alabama cotton merchant says U.S. exports to China could increase significantly in coming years if the U.S. government and the People's Republic can resolve differences in their trading systems.

But such gains must be “taken in context with the demise of the U.S. textile industry,” said Robert Weil II, a National Cotton Council vice president and Montgomery, Ala., merchant, in testimony before the House Ways and Means Committee.

“I am convinced we will sell more cotton to China in the years ahead,” said Weil, who noted that China is expected to import up to 8 million bales in the 2004-05 marketing year and up to 14.5 million bales in 2005-06 as it continues to expand its textile manufacturing sector.

“At the same time, our long-standing customer, the U.S. textile industry, continues to erode financially in the face of competition from textile imports — and there is no more competitive textile and apparel manufacturer in the world than China. With its rate of increase in cotton production, cotton mill use and cotton purchasing, China is the dominant force in world cotton.”

Weil said China thus far in the 2004 marketing year has about 2 million bales in commitments from the United States and is expected to import up to 8 million bales from all sources.

China also produced a record 29 million bales of cotton in calendar year 2004 and exported almost $55 billion of textile and apparel products, a 50 percent increase since 2002. USDA is projecting imports of 14.5 million bales by China in 2005-06.

China reneges on open markets

Although China agreed to open its markets to more U.S. exports when it joined the World Trade Organization in 2001, the road to reaching that goal has been filled with pot holes.

Before China increased its imports of U.S. cotton following a 2003's short crop, U.S. cotton leaders complained that China was not filling the tariff rate quota purchases it promised to make in its WTO accession agreement.

China countered with complaints about the quality of U.S. cotton shipments, and, last summer, its textile mills began defaulting on purchases of U.S. cotton after it became apparent 2004 production would be sharply higher than 2003's 21 million bales.

Weil said some of the difficulties have been due to a lack of understanding of the world cotton trading system by the Chinese.

The Cotton Council recently played host to an intern from the China Cotton Association to help assist Chinese mill buyers in their understanding of U.S. cotton industry business systems and trade terms and plans to send an intern to China this year to work with the CCA, he said.

Weil's testimony revealed something of the dilemma the cotton industry faces in trying to “cultivate China as a good customer,” as Weil put it, while working to salvage what's left of the U.S. textile industry.

Since it joined the WTO, China has steadily increased its shipments of textile and apparel products to the United States while U.S. manufacturers have closed plants and laid off 381,000 workers. With the expiration of all textile imports quotas last Jan. 1, Chinese textile and apparel shipments to the United States have jumped several hundred percent.

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