House Approves Special Import Quotas And Payments For Cotton Textile Manufacturers

Farm legislation approved by the
House of Representatives on July 27 contains a provision designed to replace the cotton textile
competitiveness program outlawed in 2005 by the World Trade Organization (WTO) and also permits US
mills to import raw cotton under certain circumstances. The competitiveness program is designed to
assist US mills that are prohibited by law from importing more than roughly one day’s consumption
of raw cotton. As a result, the mills are at a competitive disadvantage when the price they pay for
domestic cotton exceeds the world price.

The legislation, which runs through July 31, 2013, extends a special import quota when the
price for US cotton in a four-week period exceeds the Far East price. It permits importation of one
week’s consumption above the mandatory quota level.

The new system of payments to mills when the domestic price is higher than the world price
provides payments of 4 cents per pound in cash or certificates, but it has a provision that the
funds must be used for “acquisition, construction, or expansion of land, plants, buildings,
equipment, facilities or machinery.” Industry officials believe this approach would not violate WTO

For further information, mill and merchants may contact Gary Adams, vice president of
economics and policy analysis, at the National Cotton Council (901) 274-9030.

July 31, 2007