*EPF318 09/10/2003
Fact Sheet: USTR Calls Current World Cotton Trade Policies Distorting
(Says governments should reduce cotton, man-made fiber subsidies) (610)

The Office of the U.S. Trade Representative has issued a fact sheet in which the U.S. calls for a reduction in world subsidies of cotton and man-made fibers.

Following is the text of the fact sheet:

(begin fact sheet)

Trade Facts: Trade in Cotton, Man-Made Fibers, Textiles and Clothing

World trade in cotton, textiles, and clothing suffers from trade-distorting policies which adversely affect the production chain from the farm gate to the finished product.

Government intervention distorts production and trade of cotton.

The global average allowed tariff for cotton under WTO [World Trade Organization] rules is 56 percent, and high tariffs (some exceeding 100 percent) and other market access barriers restrict access to some of the world(s largest producing and exporting countries.

-- Trade-distorting domestic support, as permitted under current WTO rules, is applied by a number of cotton-producing countries, including the United States, the European Union, China and some developing countries.

-- Some practices by cotton exporters, including state ownership and government monopolization, special tax advantages and export requirements, distort world markets.

-- Distortions in the cotton and man-made fiber sector also affect textiles and clothing trade, which is characterized by serious market intervention through a range of government actions.

-- Under WTO rules, the global average allowed tariff for textiles and clothing is 38 percent.

-- Frequent and often overlapping non-tariff barriers affect the sector. These include lengthy and non-transparent customs procedures, reference pricing schemes, difficult and costly marking/labeling requirements, and burdensome testing methods.

-- Industrial policies, particularly those related to the development of synthetic fibers, can distort the market and displace sales of cotton and cotton products.

-- The United States is the largest cotton textile and clothing importer in the world.

-- The U.S. in-quota duty on cotton is less than 3 percent, and the out-of-quota duty is 17 percent. When Uruguay Round tariff commitments are fully implemented in 2004, the average U.S. tariff on cotton textiles will be less than 10 percent, and all quotas will be eliminated by 2005.

-- 84 percent of cotton products sold in the United States are imported. U.S. consumers account for 22 percent of all cotton textile purchases worldwide. U.S. consumption of cotton rose 70 percent between 1990 and 2002, while during much of this period demand was declining in the rest of the world. Without U.S. expansion in demand, various estimates say that cotton prices would be depressed by 11 to 17 percent of the long-term average price (8 to 12 cents per pound).

-- Because the market for cotton and cotton-related products is integrated, a comprehensive approach is necessary to achieve meaningful reform.

-- The United States has already proposed ambitious liberalization for agricultural tariffs and trade-distorting subsidies in the WTO agriculture negotiations. In the WTO non-agricultural market access negotiations the United States has proposed harmonization and elimination of textile and clothing tariffs along with an ambitious initiative to reform non-tariff measures. Finally, in the rules negotiations the United States has proposed stronger disciplines generally on trade-distorting subsidies.

To ensure the sector is comprehensively reformed, the following areas would need to be addressed:

-- Reductions in government subsidies for cotton and man-made fiber, to address incentives that distort trade

-- Cuts in tariffs and other charges in fiber and textiles and clothing, to expand sales of raw cotton and cotton materials

-- Disciplines on non-tariff barriers, to reform disguised restrictions on trade

-- Reforms of other practices that distort trade, such as state monopolies, special tax advantages and export requirements

September 2003

(end fact sheet)

(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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