National Cotton Council Responds to Recent WTO Interim Panel Ruling

News Date August 01, 2007

Due to the confidential nature of the World Trade Organization (WTO) panel interim ruling, the National Cotton Council (NCC) has not seen the reported WTO decision. Initial press reports indicate that the panel largely sided with Brazil. If the panel ruled for Brazil on its serious prejudice claims, though, "we believe that it would be contrary to the facts in the world cotton market" according to the National Cotton Council in a news release issued last week.

U.S. actions already taken to comply with the first WTO Panel ruling have had a significant impact on U.S. cotton and U.S. cotton producers. Since the U.S. eliminated cotton's Step 2 program, U.S. cotton acreage is down 28% for 2007, U.S. exports have declined significantly and U.S. production is predicted to be only around 17 million bales in 2007, the lowest since 2002. It cannot be credibly argued that any payments under domestic support programs are causing any country serious prejudice in 2007--the first year of their operation without the Step 2 program.

In the NCC news release the organization expressed that it is incomprehensible that a WTO panel could make a finding of serious prejudice against the U.S. when the international cotton market is strong, offtake will exceed production, world prices are up and acreage is up almost everywhere in the world except the United States. Cotton production outside the U.S. mushroomed and is estimated to be a record high of 97.1 million bales. India is expected to harvest an all-time record crop and has supplanted the U.S. as the world's largest exporter to China; world prices are up; and payments under the marketing loan program have decreased to zero. In the face of these facts, the U.S. cotton industry is left to puzzle the basis of such a decision.

In addition to these changes, the farm bill passed by the U.S. House of Representatives contains a significant reduction in countercyclical program payments applied to cotton base acres. Further, Brazil is currently harvesting a cotton crop that is 38% above last year's production and actually sold government cotton stocks during 2007 in an attempt to depress cotton prices. The full text of the news release can be located at http://www.cotton.org/news/releases/2007/brazilstmt.cfm.