GENEVA — The U.S. brushed aside claims by China — the world’s biggest producer, consumer and importer of cotton — that its policies do not affect international markets, saying they do in many areas, in a critical probe at a World Trade Organization forum.
The U.S. said China’s policies, marked by massive stock buildup in recent years and huge subsidy outlays, were distorting world cotton prices and trade, and having an adverse impact on the cotton textiles sector worldwide.
In particular, the U.S. delegation argued that China’s large stockpiling of cotton has led to “an increase in the use of polyester to the detriment of all cotton-producing countries,” WTO trade officials said.
During a two-day session of the WTO’s agriculture committee that ended Friday, the U.S. highlighted that China held stocks of 11.6 million metric tons, or equivalent to about 149 percent of Chinese domestic mill use and 57 percent of global stocks, at the end of the 2013-14 season, according to estimates by the International Cotton Advisory Committee.
The U.S. also asserted that China in the same period purchased cotton that contributed to the stocks at a price of 151 cents a pound, and this marked the third year of stock buildups. Given China’s position in cotton markets, the U.S. said the buildup distorted not only domestic prices, but also international ones.
With regards to cotton subsidies, the U.S. noted that in 2013-14, China spent about $5.1 billion in direct assistance to the cotton sector.
In response to the criticism, the Chinese delegation countered that recent years have seen a strong price fluctuation in international markets, and in a veiled swipe at the U.S., added that imports of heavily subsidized cotton have affected Chinese prices. China also said that it’s a net importer of cotton and underscored that none of its cotton reserves have been exported and thus did not distort international markets.
On the multibillion-dollar subsidy outlays, China said they have been used to weaken the negative impact of heavily subsidized imported cotton and to secure small-scale farmers’ livelihoods. Concerning greater use of polyester, China responded that this comes largely from the decline of world oil prices and improvements in polyester quality, and added that as a result, demand for cotton from Chinese textile producers has declined over the past two years.
China also said that in line with its WTO obligations, it will import 894,000 tons of cotton at low tariffs.
On June 1, ICAC projected that overall Chinese cotton imports in 2014-15 will decline to 1.6 million tons. This represents a drop from about 3 million tons imported in 2013-14 and a high of 5.3 million tons in 2011-12.