What is in this article?:
- U.S. cotton industry meets with Vilsack on defaults
- Severe economic losses
• U.S. cotton industry leaders have met with senior U.S. government officials to discuss serious financial losses accruing in all industry segments as a result of massive defaults on cotton export contracts.
• Contracts worth nearly $1 billion, covering sales of more than 4 million bales, are either in default or are at risk of default with little sign of resolution, according to the National Cotton Council.
Severe economic losses
ACSA Chairman Ricky Clarke, a merchant with Cargill Cotton, in Cordova, Tenn., said textile mills in several countries, including Bangladesh, Indonesia, Thailand and Vietnam, have defaulted on millions of dollars of raw cotton contracts that resulted in severe economic losses for U.S. cotton merchants and marketing cooperatives.
“Contract sanctity is a fundamental building block of trade relations and widespread disregard of the principle should sound a loud warning to the extension of trade preferences,” Clarke said. “The U.S. government should carefully consider a foreign government’s record of enforcing commercial commitments when granting eligibility to a U.S. trade preference program.”
NCC Vice-Chairman Jimmy Dodson, a Robstown, Tex., cotton producer, said, “The defaults are threatening the ability and the willingness of cooperatives and merchants to enter into forward contracts with producers, thereby reducing competition for cotton fiber and resulting in lower prices for farmers.”
AMCOT’s Mike Quinn, president of Carolinas Cotton Growers Cooperative in Garner, N.C., agreed saying, “Contract defaults ultimately mean lower prices and reduced returns for producers. In addition, merchant and cooperative losses jeopardize U.S. jobs and threaten the fragile commodity banking system.”
NCTO’s Dan Nation, division president of Parkdale Mills in Gastonia, N.C., noted, “U.S. textile mills honor their commitments or face quick legal action in U.S. courts. International mills operate under fewer judicial constraints and gain a competitive advantage by their ability to default without penalty, reducing their relative raw material prices and allowing them to undercut prices for yarn, fabrics, and garments offered by non-defaulting mills.”
Industry leaders emphasized the threat these contract defaults posed to the growth of U.S. exports and underscored the crucial importance of contract sanctity and the enforcement of arbitration awards as cornerstones of international trade.
The sessions followed up previous meetings with administration officials and leading members of Congress in August and March.