NCC Defending Effective Cotton Program on Multiple Fronts

West Texas cotton producers were reassured today that the U.S. cotton industry is clearly communicating to lawmakers that the new farm law does not need to be re-opened for budget savings.

April 3, 2009
Contact: Marjory Walker
(901) 274-9030

LUBBOCK – West Texas cotton producers were reassured today that the U.S. cotton industry is clearly communicating to lawmakers that the new farm law does not need to be re-opened for budget savings.

In a report to Plains Cotton Growers Association’s annual meeting here, John Maguire, the National Cotton Council’s senior vice president of Washington Operations, also reminded attendees that the NCC is aggressively emphasizing to USDA that the agency should implement that law fairly and according to Congressional intent.

Maguire said the NCC has worked diligently in preparation for the upcoming budget debate to convey opposition to farm program cuts included in President Obama’s budget proposal and any efforts to re-open the 2008 farm law.

“We have received exceptional support in these efforts from several key Cotton Belt Senators and Representatives,” he said. Those efforts include the Roberts-Lincoln and Berry-Conaway letters to the Senate and House Budget Committee chairmen, as well as the Chambliss-Lincoln and McIntyre-Lucas letters to Secretary of Agriculture Vilsack regarding farm bill implementation.

Maguire told the group that after a lengthy and arduous debate, the current farm law introduced significant commodity program changes while maintaining an important safety net for production agriculture along with enhanced conservation and nutrition programs.

“In addition, the 2008 farm law includes the most comprehensive and far-reaching reform to payment limitations since 1987,” he said. “The new farm law -- which as of March 2009 still is being implemented -- eliminates the 3-entity rule and requires direct attribution for all payments.”

Maguire said cotton producers received some good news this week in USDA’s announcement that it extended this year’s sign-up deadline from June 1 to August 14 for the Direct and Counter-Cyclical Program (DCP) and the new Average Crop Revenue Election (ACRE) Program.

“This 10-week extension gives producers additional time to decide whether to participate in ACRE or remain in the DCP,” Maguire said. “This will help ensure that America’s farmers can make informed decisions about program participation.”

In addition, Maguire reminded attendees that the cotton program will receive additional attention with the expected conclusion of the arbitration phase of the Brazil-U.S. dispute in the World Trade Organization (WTO).

In early March 2009, U.S. and Brazilian government representatives appeared before a WTO Arbitration Panel in Geneva to contest the size of countermeasures sought by Brazil due to the alleged U.S. failure to comply with a previous WTO Dispute Settlement Panel. That Arbitration Panel should deliver its findings in four to six weeks.

Maguire said the U.S. cotton industry believes that Brazil’s damage claims are overstated in its WTO challenge of the U.S. Export Credit Guarantee (GSM) program and certain aspects of the U.S. cotton program.

Brazil is claiming damages of $1.3 billion for the GSM program operating as a prohibited subsidy; $350 million in one-time damages from Step 2 as a prohibited subsidy; and “serious prejudice” damages from the upland cotton marketing loan and counter-cyclical programs of $1 billion. These claims come despite the fact that the Step 2 program ended almost three years ago and export credit programs have been altered or discontinued. In addition, claims of injury due to the cotton program are unreasonable given the realities of the world fiber market and recent declines in U.S. cotton production.

A frustrating aspect of the case, Maguire noted, is the WTO’s use of the 1999-2005 period for analysis.

“Unfortunately, changes in the world and U.S. cotton market and programs since 2005 are not fully appreciated in the current dispute deliberations,” he said. “More recent data will be extremely important when the U.S. seeks a compliance panel to demonstrate the response to the Brazil dispute panel findings.”

Maguire explained to the group that the size of potential damages will be important in determining the scope and type of countermeasures Brazil will be allowed to use. He also noted that it is possible that any retaliation by Brazil could look beyond agriculture.