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U.S. highlights – textile industry expresses concern over phaseout of Multi-Fiber Arrangement under current GATT proposal

U.S. highlights – textile industry expresses concern over phaseout of Multi-Fiber Arrangement under current GATT proposal – U.S. Dept. of Agriculture, Economic Research Service report

U.S. textile industry representatives were united in their criticism of the current General Agreement on Tariffs and Trade (GATT) proposal, which was released by GATT Director General Dunkel on December 20, 1991. The American Textile Manufacturers Institute (ATMI) and the U.S. textile industry, expressed concern over several sections of the proposal, including the proposal’s 10-year phase-out of the Multi-Fiber Arrangement (MFA). (One of the eventual goals of the current Uruguay Round negotiations is to phase-out the MFA and place textile trade under the auspices of the GATT.) U.S. textile manufacturers encouraged GATT negotiators to adopt a 15-year phase-out of the MFA, which would allow more time for the industry to adjust to the withdrawal of MFA textile and apparel quotas. According to ATMI, a 10-year phase-out of the MFA would result in significant job losses throughout the U.S. textile industry. Also, U.S. textile interests are also concerned about the status of non-signatories, such as China. (See the Western European Update on page 14 for an EC view of the GATT proposal.) U.S. cotton producer groups also expressed concern about the current GATT proposal, although for different reasons. Of primary concern for cotton producers is the proposed tariffication of Section 22 quotas that currently limit imports of foreign cotton to about 1 day’s mill use. According to the U.S. Department of Commerce, cotton consumption by mills in the United States declined slightly in the fourth quarter of 1991. Daily average consumption fell to 33,324 bales, just 232 bales per day less than the 33,556 daily average reached during the third quarter of 1991. Although daily consumption declined from third quarter levels, this is the highest fourth quarter consumption level in more than 20 years, and well above 1990’s fourth quarter consumption. The steady flow of orders for cotton shipments by domestic mills supports USDA’s current consumption estimate for MY 1991/92 at 9.1 million bales, 600,000 bales more than in MY 1990/91. USDA will re-evaluate its MY 1991/92 cotton consumption estimate following U.S. Department of Commerce’s monthly consumption estimate for January which will be released on February 26. (The U.S. Department of Commerce will resume a monthly cotton consumption reporting schedule this year.) The Secretary of Agriculture reduced the Adjusted World Price (AWP), which determines producer loan repayment rates, in four out of five weeks in January. Adjustments to the AWP are permitted when the AWP is less than 115 percent of the base loan rate, and when U.S. cotton price quotes are higher than an index of international cotton price quotes. Below are the relevant calculations in cents per pound:

Calculated Actual Maximum Actual

AWP AWP Adjustment Adjustment

January 2 45.44 45.23 2.23 1.37

9 45.23 44.07 2.59 1.16

16 44.10 42.45 1.65 1.65

23 43.28 42.45 1.63 0.83

30 42.15 42.15 2.12 0.00

Source: Agricultural Stabilization and Conservation Service (ASCS). February 1992 Due to the narrowing gap between U.S. and international cotton prices, “Step 2” certificate values declined steeply between January 9 and January 23. The certificates–payable to both U.S. merchants and domestic mills–are determined by the difference between the northern Europe price and the U.S. northern Europe price minus 1.25 cents per pound. (The U.S. northern Europe price is the 5-day average of the lowest U.S. quote for Memphis 1-3/32 inch cotton, c.i.f. northern Europe. The Northern European price is the 5-day average of the five lowest quotes for Middling 1-3/32 inch cotton c.i.f. northern Europe.) Below are the relevant calculations in cents per pound:

U.S. North North Certificate Values

Europe Price Europe Price for the week

January 1 63.44 61.21 0.98

9 63.50 60.91 1.34

16 61.35 59.70 0.40

23 60.40 58.77 0.38

30 59.65 57.53 0.87

Source: Agricultural Stabilization and Conservation Service (ASCS). February 1992 On February 5, USDA announced final deficiency payments for the 1991 upland cotton corp. Eligible upland cotton producers will receive approximately $320 million in final deficiency payments for the 1991 crop of upland cotton. Final payments will be made in cash through county offices of USDA’s Agricultural Stabilization and Conservation Service. Deficiency payments are required when the national average market price received by producers during the calendar year, which includes the first 5 months of the marketing year, is below the established target price. The payment rate is based on the difference between the target price and the higher of the calendar year national average market price or the base quality loan rate. Since the 1991 calendar year national average market price was above the loan rate, the deficiency payment rate for the 1991 crop is 10.1 cents per pound–the difference between the target price of 72.9 cents per pound and the calendar year national average market price of 62.8 cents per pound. An advance payment of 4 cents per pound was made earlier to eligible producers requesting an advance. The final payment for producers who received an advance payment will be 6.1 cents per pound.

COPYRIGHT 1992 U.S. Department of Agriculture

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