Industry Opposes Change In Competitiveness Program

Cotton textile manufacturers, farmers and merchants are strongly opposed to the Bush
administration’s plans immediately to eliminate subsidy payments that have been a key element in
the US governments cotton competitiveness program. Under that program’s so-called step two, textile
mills and merchants are paid the difference between the domestic price for cotton and the world
price when the world price is lower than the domestic price. By law, US textile manufacturers are
virtually prohibited from importing cotton under a long-standing program designed to help support a
domestic cotton industry.

The Bush administration announced last week it needs to eliminate the subsidy in order to
comply with a World Trade Organization (WTO) ruling that the subsidies are illegal.

US Agriculture Secretary Mike Johanns said implementing the proposed changes will make the
United States in compliance with WTO trade rules, something he said is essential to a successful
Doha Round of trade liberalization negotiations.

The US cotton industry from farmers to textile mills are opposed to the immediate
implementation of the changes and will seek modification of the proposal when it is considered by
Congress. National Cotton Council Chairman Woods Eastland said the approach being suggested by the
administration would change the terms and conditions of the cotton program in the middle of the
marketing season. The administration’s approach would alter a fundamental piece of the sales and
marketing structure for cotton in the United States in mid-stream, harming many US cotton merchants
and textile manufacturers, he said.

Conceding that the elimination of the payments likely is a done deal, W. Duke Kimbrell, whose
Parkdale Mills is the nation’s largest spinner of cotton yarn, said the action will make US textile
manufacturers even less competitive and likely result in further job losses and mill closings.
While emphasizing the immediate elimination of the subsidies would be extremely harmful, he
expressed the hope they could be continued until 2006 when the current farm bill expires.

Legislation eliminating the subsidies must be approved by Congress, and the mills and cotton
growers and merchants will be seeking what they say will be a fair and appropriate response to the
WTO decision.

July 2005