A New World for U.S. Cotton Producers
Stephen
MacDonald and Leslie A. Meyer
As the most export-dependent U.S.
program crop, cotton faces unique challenges in
the 21st century. Global textile trade reform has
altered patterns of world cotton consumption and
trade. The proportion of U.S. cotton that is exported
is now at its highest level since the 1850s. The
domestic landscape is also undergoing a transformation,
with U.S. cotton production increasingly concentrated
on larger farms and new technology driving U.S.
cotton yields higher. However, technology knows
no borders, and yields in other countries are rising
strongly as well, a sure sign of future competition
for an export-oriented U.S. cotton sector.
With the decade-long phaseout
of the Multifibre Arrangement’s (MFA) global
textile quotas, high-income countries have seen
a sharp drop in industrial fiber demand. The loss
of import protection provided by the MFA has led
to significant declines in textile production and
lower demand for raw cotton in the United States,
the European Union, and Japan. Now, U.S. cotton
growers find their customers primarily overseas,
with China by far the leading importer. But they
also face new risks as trade shifts to countries
with higher tariffs and other trade barriers. An
ongoing World Trade Organization (WTO) dispute concerning
U.S. cotton programs further highlights the risks
facing the U.S. cotton sector as it transitions
from domestic to export markets. Responding to a
complaint brought by Brazil, the WTO determined
that U.S. cotton programs had reduced world prices
and that changes were necessary to bring the U.S.
in line with its obligations as a WTO member.
U.S. cotton producers are likely
to face increased competition in future years as
technologies first adopted in the U.S.—genetically
engineered (GE) cotton and other agricultural technologies—spread
to other countries. India, for example, has adopted
GE cotton and managed to expand its cotton area
and achieve significant growth in yields. Production
rose 70 percent in 5 years, and India, once one
of the world’s largest importers of cotton,
is now one of the largest U.S. competitors.
While technology has also significantly
raised U.S. cotton yields and helped to reduce per
acre costs, U.S. cotton farmers continue to look
to government programs to supplement their incomes.
The WTO dispute has already resulted in some program
changes for cotton, and the next round of domestic
farm legislation likely will be decided in the context
of the resolution of the WTO dispute, Federal budgetary
concerns, and continuing trade talks.
This
finding is drawn from . . . |
| Cotton
Backgrounder, by Leslie Meyer, Stephen
MacDonald, and Linda Foreman, CWS-07b-01,
USDA, Economic Research Service, March 2007.
|
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