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Senate Passes Farm Bill

Measure contains key provisions on cotton.

WASHINGTON — The Senate passed a comprehensive farm, nutrition and conservation bill on Monday, containing several provisions that would impact many areas of the fashion industry.

The legislation, which passed 66 to 27 in the Senate Monday night, is projected to amount to $955 billion in direct spending over 10 years, according to the Congressional Budget Office.

The bill, which would broadly implement farm safety-net policies, and conservation and food stamp programs, over the next five years, would continue federal funding for a program supporting U.S. textile mills that use domestic cotton. It 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.

Under the “Economic Assistance Adjustment” program, the government gives U.S. textile mills 3 cents a pound of domestic or imported upland cotton they use, as long as the money is invested in acquiring, modernizing or expanding land, plants, buildings or equipment.

“This allows U.S. producers to make investments in equipment upgrades and technology improvements that otherwise might not be possible, which has also led to the creation of thousands of textile jobs since the program was established in 2008,” said Sarah Pierce, senior vice president at the National Council of Textile Organizations.

A crucial aspect of the legislation is whether it brings into compliance federal cotton subsidy programs that were found to violate WTO rules in a case brought by Brazil dating back to 2002. Brazil has maintained that U.S. cotton subsidies depress global cotton prices. The WTO sided with Brazil and issued a series of findings between 2005 and 2008.

The U.S. and Brazil reached an agreement in 2011 that averted $800 million in sanctions. The U.S. agreed to make some changes in its cotton export and credit guarantee program, and to work with Brazil to establish a $147.3 million fund to provide technical assistance and capacity building for the Brazilian cotton industry. Brazil has identified a list of U.S. exports it would sanction, including raw cotton, woven fabric, cotton pants and shorts, and some jewelry and beauty products.

Terry Townsend, executive director of the International Cotton Advisory Committee, said the Senate bill seeks to establish a new insurance program for cotton farmers, with the federal government covering a percentage of a policy’s premium, eliminate direct payments of about $580 million a year to cotton farmers, end countercyclical payments and modify the export credit guarantee program through a reduction in guarantees to $4.5 billion from $5.5 billion.

“As was the case with the farm bill last year, the 2013 bill will implement STAX — the stacked income insurance program advocated by the National Cotton Council to provide shallow-loss protection to cotton farmers,” Townsend said. “If enacted into law, STAX will protect farmers against declines in cotton income of between 10 percent and 30 percent, while traditional crop insurance already in place will provide protection against losses greater than 30 percent.”

Townsend said that “any insurance scheme carries potential pitfalls.”

NCC chairman Jimmy Dodson, a south Texas cotton producer, said in mid-May after passage in a key Senate committee that the legislation includes provisions “to provide cotton farmers long-term certainty and vital economic assistance to the U.S. textile industry.”

NCC also said the legislation includes “significant policy reforms and cotton provisions that should resolve the long-standing Brazil World Trade Organization case.” An official at the Brazilian embassy did not respond to an e-mail or calls regarding Brazil’s position on the legislation.

The sweeping legislation also covers food stamp programs, international food aid and conservation programs protecting environmentally sensitive land. The House is expected to take up its version of the bill this month.