U.S. Cotton Groups Seek Gov't Help on Export Defaults

September 28, 2012 01:27 AM

via a special arrangement with Informa Economics, Inc.

Defaults or risk of default on cotton export contracts wroth nearly $1 billion, covering sales of more than 4 mil. bales

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

U.S. cotton industry leaders met this week with senior U.S. gov't officials from the U.S. Trade Representative's office and USDA to discuss the serious financial losses accruing in all industry segments as a result of massive defaults or at risk of default on cotton export contracts worth nearly $1 billion, covering sales of more than 4 million bales.

Cotton industry officials stressed these contract defaults would temper the growth of US exports and underscored the importance of contract sanctity and the enforcement of arbitration awards as cornerstones of international trade.

Cotton industry stakeholders include a delegation from the National Cotton Council (NCC), the American Cotton Shippers Association (ACSA), AMCOT and the National Council of Textile Organizations (NCTO). They met on September 25-26 with USDA Secretary Tom Vilsack, USTR Ron Kirk, and Assistant Secretary of State William E. Craft, Jr. The sessions followed up previous meetings with administration officials and lawmakers in August and March.

The U.S. delegation said some foreign mills have refused to honor awards and some cases, the host governments appear to be protecting the foreign mills from enforcement of awards, with some mills themselves state owned.

Corn and soybean sales next? The cotton groups also warned that unless the U.S. government took a strong stand on this issue relative to contract sanctity for cotton sales, sales of U.S.corn and soybeans and other commodities could be at similar risk.

According to the NCC, the delegation also urged U.S. officials to use the leverage of trade preference discussions to impress on foreign government officials the importance of honoring contracts. They further suggested that if U.S. government agencies are sourcing products from suppliers in default that future purchases from those sources should be terminated.

Comments: While most think trade policy is dull, they quickly perk up when it affects their bottom line --or could. This also shows that high prices followed by lower values always have some wanting to renege for whatever reasons. The best argument the stakeholders have is contract sanctity because without, trade is a tenuous proposition.

And, a U.S.-Mexico trade skirmish could have big impacts on U.S. exports. The U.S. Commerce Dept. signaled that it might be willing to end a 16-year-old agreement between the U.S. and some Mexican growers that has kept the price of Mexican tomatoes relatively low for American consumers. American tomato growers say the price has been so low that they can barely compete. Mexico immediately threatened to retaliate, claiming that the Obama administration was trying to placate farmers in an important swing state – Florida. Producers of other U.S. commodities and big retailers like Wal Mart recall the high tariffs Mexico slapped on U.S. producers of potatoes, pork and toilet paper — $2.4 billion worth of goods — during a trade fight over trucking that began in 2009 and ended last year. In the first year of the trucking fight, potato exports to Mexico fell more than 35 percent and growers lost $64 million in revenue as Mexicans shifted buying to Canada. Also, an analysis by an economist at Iowa State suggests that pork producers, who also lost money during the trucking trade fight, would lose about $14 an animal if Mexico imposed similar tariffs on pork now. "We’re already having one of the worst financial periods ever becaU.S.e of high grain prices, and if we were to lose a major market like Mexico, it would be like Armageddon," Nick Giordano, vice president at the National Pork Producers Council, told the New York Times.


NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.






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