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Maintaining NAFTA Benefits

Gary Adams

Gary Adams

The National Cotton Council believes maintaining the benefits of the North American Free Trade Agreement with Canada and Mexico is crucial to the U.S. cotton industry’s long-term survival.

How important are exports?
The U.S. cotton industry is heavily dependent on access to export markets. On average, about 75 percent of cotton production in the United States is sold to foreign buyers as raw cotton fiber, while another 20-25 percent is exported as textile products in the form of yarn, thread or fabric.

U.S. cotton exporters face competition from growths originating from countries/regions such as Australia, Brazil, West Africa and Central Asia. The U.S. cotton textile industry has faced a surge of competition from textile industries in Vietnam, Bangladesh and Indonesia. China and India, the world’s two largest producers and spinners of raw cotton, can be wildcards in the global market. China also is the largest producer and processor of man-made textile fibers, principally polyester, that are substitutable for cotton fiber.

nafta cotton exports

NAFTA is an important trade pact for U.S. cotton as about 75 percent of the industry’s raw fiber is now being sold to foreign buyers.

What are NAFTA’s benefits?
In comments submitted to the “Fed-eral Register” in June regarding the Administration’s NAFTA negotiating objectives, the NCC emphasized that this trade pact has been a stabilizing influence and source of strength for the U.S. cotton industry, in large part due to the duty-free trade in raw cotton and cotton textile products. Mexico is buying 9 percent of our raw cotton exports (almost 1 million bales) and 15 percent of our cotton textile and apparel exports. Canada purchases 6 percent of our cotton textile and apparel exports. Overall, the North American market accounted for more than $2 billion in annual U.S. exports of raw cotton fiber and cotton textile products from 2014-2016.

How can NAFTA be modernized?
In its comments, the NCC said U.S. negotiators’ objectives should be to preserve NAFTA’s current benefits while encouraging further regional integration of the cotton and textile supply chain. This could be achieved through improvements to measures affecting trade in textiles and apparel, particularly the textile rules of origin. The purpose is to ensure an agreement’s benefits accrue to its parties.

For textile and apparel products, NAFTA uses a yarn-forward rule of origin that has boosted growth in regional trade and facilitated regional integration to our benefit. Unfortunately, NAFTA also includes exceptions that weaken the yarn-forward rule of origin’s effectiveness. Among those we would like to see eliminated are tariff-preference levels that allow certain fabrics and yarns to enter a NAFTA country from a third country, be processed into a finished textile product, and still receive duty-free treatment under the agreement.

Among other modernizations the NCC is seeking are 1) strengthening provisions covering a statute that requires the U.S. Department of Homeland Security to purchase only textile products with 100 percent U.S. content, with limited exceptions and 2) establishing a customs enforcement task force to combat duty evasion and other forms of textile-related customs fraud.

Gary Adams is president/chief executive officer of the National Cotton Council of America. He and other NCC leaders contribute columns on this Cotton Farming magazine page.