WASHINGTON — Domestic cotton and wool apparel manufacturers and textile producers stand to gain significant aid from the federal government, according to details released Tuesday on the farm bill that is set for a House vote today.
This story first appeared in the January 29, 2014 issue of WWD. Subscribe Today.
U.S. cotton and wool apparel producers and cotton yarn spinners have faced higher costs since one government trust fund expired five years ago and another fell short of its funding capabilities.
The massive compromise farm bill now before Congress, which provides billions of dollars in funding to broadly implement farm safety-net policies and conservation and food stamp programs over five years, would restore funding for the cotton and wool funds, and provide new monies for research and development. However, it must first pass the House and then the Senate, where broad-based opposition exists over the size of the food stamp program and some agriculture subsidies.
The measure establishes the Pima Agriculture Cotton Trust Fund, which would run through 2018 and provide $16 million in funding annually. It essentially restores the Cotton Trust Fund, which expired in 2009 and suspended duties on imported cotton shirt fabric, and provided grants to cotton shirt manufacturers and yarn spinners in the U.S. It was created to offset an inverted tariff — the U.S. duty on imported finished cotton shirts was lower than the tariff on cotton shirt fabrics, which impacted the competitiveness of U.S.-based cotton shirt makers.
Half of the fund will be paid to manufacturers who cut and sew cotton shirts in the U.S. that certify they used imported cotton fabric. Twenty-five percent of the fund will be paid to ringspun cotton yarn spinners that use pima cotton, grown in Texas and Southern California, and the remaining 25 percent would be dedicated to restoring the pima cotton promotion program.
The farm bill will also restore funding to the Wool Trust Fund under a new name. The fund makes payments to U.S. wool fabric and yarn producers, as well as sheep growers, to encourage more production of wool fabrics. But the tariff revenues collected on wool yarn and fabric imports fell sharply in 2009 and 2010, leaving the trust fund unable to make payments.
The new Agriculture Wool Apparel Manufacturers Trust Fund would provide retroactive payments dating back to 2010 and run through 2019. It provides up to $30 million in annual funding. The farm bill also seeks to create a new wool research and promotion fund, allocating $2.25 million annually from 2015 through 2019.
Textile producers also stand to gain from a new Economic Assistance Adjustment program that would give U.S. textile mills 3 cents a pound on domestic or imported upland cotton they use, as long as the money is invested in acquiring, modernizing or expanding land, plants, buildings or equipment.
The legislation also seeks to resolve a long-standing cotton subsidy dispute with Brazil and bring U.S. cotton programs into line with World Trade Organization requirements by eliminating direct payments of about $580 million a year to cotton farmers, ending countercyclical payments and modifying the export guarantee program.