The Rupp Report: News From The Cotton Front

By Jürg Rupp, Executive Editor

The 66th Plenary Meeting of the International Cotton Advisory Committee (ICAC) took place in Izmir, Turkey, Oct. 22-26, 2007. According to local officials, Turkey is among the major cotton players in the world, as the second-largest importer, fourth-largest consumer and seventh-largest producer. In the apparel sector, Turkey ranks fourth in international exports. Turkish textile exports rely heavily on the cotton sector.

Record Harvest
The ICAC Secretariat estimates world cotton mill use has increased for the ninth consecutive season to a record 27 million tons. World cotton consumption is estimated to be greater than production this season, while world production is estimated lower than last season, at 26 million tons. Cotton prices are expected to be higher than in recent seasons, but the world price is expected to remain lower than the long-term average. Many countries report that cost pressures remain significant.

Disappointing Doha Round
Terry Townsend, ICAC executive director, addressed World Trade Organization (WTO) negotiations in his report. Despite concrete steps — in particular, towards the elimination of export subsidies by developed countries in 2008 — it is recognized that progress in the Doha Round so far has been disappointing. Eight countries provided an estimated $4 billion in direct support to the agricultural segments of their cotton economies during the 2006-07 season. The value of world cotton production at international prices was approximately $35 billion during the same time period. Thus, government measures represented 11 percent of the value of world production. During the 2005-06 season, government measures totaled $6 billion and represented 19 percent of the value of world production.

Townsend also mentioned anxiety about production difficulties in some countries, particularly in the Currency of Francophone Africa (CFA) zone, as well as concerns about declining mill use in almost all countries outside Asia. Cotton production in the CFA zone rose to a record 1.1 million tons during 2004-05 but fell to 800,000 tons last season, a 25-percent drop in just two seasons. Mill use in industrial countries fell from 4.4 million tons to 1.7 million tons in just over a decade, a decline of some 60 percent. Regions other than the CFA zone and countries other than industrial countries are experiencing declines in production and consumption, but these two examples typify the intense competitive pressures existing in the cotton production and processing pipeline.

ICAC acknowledged an initiative on cotton from the four African countries of Benin, Burkina Faso, Chad and Mali, which is supported by the African Union (AU); the African, Caribbean and Pacific countries (ACP); and the least-developed countries. ICAC noted the importance of the initiative in contributing to solutions to problems involving cotton production. ICAC strongly supported the mandate for the trade and development aspects of the WTO Initiative on Cotton, and noted that substantive progress on both is imperative in order to ensure coherent policy treatment, as mandated by WTO Members.

Urgent Completion Needed
Member governments reaffirmed that subsidies, tariffs and quotas that distort production and trade reduce cotton prices and lead to negative impacts on cotton farmers and the economies of developing and least-developed countries. The successive decreases in international prices have reduced profitability in recent years and caused a decrease in production in some countries. ICAC called on the WTO and its members to urgently complete the Doha Round of multilateral trade negotiations. A balanced, ambitious and timely conclusion of the Doha Round would contribute to prosperity in the global economy, poverty reduction, and strengthen the rules-based multilateral trading system. ICAC understands that there cannot be an outcome in the Doha Round without an outcome on cotton, and there cannot be an outcome on cotton without a conclusion of the Doha Round.

Strategies For Competitiveness
ICAC recognized that competitiveness is market-driven. The development of human resources, improvements in quality throughout the value chain from fiber to apparel, strong research and development efforts, and creative marketing strategies are required for competitiveness. Governments can enhance competitiveness in both cotton and textile and apparel production through social standards and intellectual property rights; the development of a strong investment climate to encourage private initiative and investments in storage, transportation, and communication infrastructure; and through support for research and development. The elimination of subsidies would contribute to international competitiveness. Cotton production can be enhanced with regulations that provide non-distorting incentives for investment in production inputs and with mechanisms for price risk management.

Source: Bremen Cotton Report

November 13, 2007