As the most export-dependent U.S. program crop, cotton facesunique challenges in the 21st century. Global textile trade reform has alteredpatterns 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 domesticlandscape 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 othercountries are rising strongly as well, a sure sign of future competition for anexport oriented U.S. cotton sector.
With the decade-long phase out of the Multifibre Arrangements(MFA) global textile quotas, high-income countries have seen a sharp drop inindustrial fiber demand. The loss of import protection provided by the MFA hasled to significant declines in textile production and lower demand for rawcotton 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 tariffsand other trade barriers. An ongoing World Trade Organization (WTO) disputeconcerning U.S. cotton programs further highlights the risks facing the U.S. cotton sector as it transitions from domestic to export markets. Responding to acomplaint 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 withits obligations as a WTO member.
U.S. cotton producers are likely to face increasedcompetition 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 itscotton area and achieve significant growth in yields. Production rose 70percent in 5 years, and India, once one of the worlds largest importers ofcotton, 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 togovernment programs to supplement their incomes. The WTO dispute has alreadyresulted in some program changes for cotton, and the next round of domesticfarm legislation likely will be decided in the context of the resolution of theWTO 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, available at:
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