Only the naive do the mistake of overlooking the laws and legislature of the countries that they do business with. Today business is not confined to a country, but it has crossed borders like never before. The decisions of government in the United States of America affect every other country that it does trade with. The recent U.S. farm bill has thus attracted both, bouquets and brickbats. The U.S. Farm Bill is an inclusive part of legislation that includes most federal government policies related to agriculture in the United States.


This bill will definitely influence the textile sector and the business of the U.S.A. with other countries. The farm bill has a lot to offer to the cotton growers, which will be a deciding factor on cotton apparels as well. It provides for a $16 million five-year trust fund for pima cotton annually. The purpose behind this is to reduce the damage that the domestic manufacturers have to bear following the tariffs and duties on cotton fabric that are way higher than the tariffs on certain apparel articles made from the cotton fabric. The distribution of funds will be as follows 25 percent to one or more nationally recognised associations established for the promotion of pima cotton for use in textile and apparel goods, one-fourth of the total amount is allotted to yarn spinners of pima cotton that manufacture ring spun cotton yarns in the U.S.A., and half of the amount i.e. 50 percent is assigned to manufacturers who cut and sew cotton shirts in the U.S.A., these manufacturers have to verify that they used imported cotton fabric for the cotton shirts during the year 2013.


Under the new bill agricultural wool apparel trust fund has also been formed. This fund is meant to lessen the damage caused to domestic manufacturers resulting from tax and duties on wool fabric, as the taxes are sometimes in excess of tariffs on certain apparel articles made of wool fabric. Funds involving an amount of not more than $ 30 million will be distributed to suitable manufacturers and successors-in-interest annually through 2019. As per the farm bill, in any year that the suspension of duty on wool fabrics provided for under Harmonized Tariff Schedule US is not in effect, the amount of any trust fund payment will be increased by an amount that United States Department of Agriculture (USDA) determines is equal to the amount the manufacturer or successor-in-interest would have saved during the calendar year of the payment if the duty suspension were in effect. Finally, the bill provides $2.25 million per year through 2019 for wool research and promotion.


These factors will certainly prove beneficial for the cotton and wool apparel manufacturers. However, the U.S. farm bill has not gone down too well with some countries. Brazil is among the countries that might challenge the bill as Brazil feels that the bill has violated international trade rules. The U.S. farm bill promises protection to the farmers in the U.S.A., following which, farmers in other countries will suffer. The subsidies under the bill have created products that according to some experts do not make economic sense in the rest of the world. As per the World Trade Organisations rules in order to keep cotton subsidies in place the American government needs to pay $147 million a year to compensate farmers in Brazil.

 

The alterations that the new farm bill has offered also change the subsidies. As per the provisions in earlier bill, whenever the market prices of cotton reached below a certain level, the farmers were given compensation of an amount that was decided in advance. Under the new law, the farmers are required to buy insurance that will cover and protect most of their income if crops fail or the market goes down. U.S.A. taxpayers cover most of the cost of the insurance policies. However, the U.S.A. stopped its payments to Brazil following the new farm bill.


There is a good chance that with Brazil taking the matters to WTO other cotton producing African nations dealing with the U.S.A. might follow the suit. Nations like Burkina Faso, Benin, Mali and Chad along with Brazil have been pressurising the U.S.A. to ensure that the farmers from other countries do not suffer following the farm bill. Nevertheless, other cotton-producing countries in the global south would gain from the changes. Still, some economists have described the new farm bill as a step backward, which has the potential of destructing the farmers of developing countries. The U.S. farm bill presents a bad, if not worse, picture. The new programmes are relatively more trade-distorting than what they replace.


Today it is a myth that countries, developed or developing, can survive without support from each other. The problems that cotton producing countries can create for the U.S.A. in future subsequent to the farm bill are capable enough to generate grave problems for the U.S.A. Having considered this, another pertinent point is that the U.S.A. cotton producers are among the worlds strongest lobby, as they account for most of the world's cotton exports. It would be a huge risk for the textile raw material manufacturers of any country to tarnish the trade ties with the U.S.A. Among all this, one thing that is sure to happen is that the global textile industry is about to witness a trade war involving the U.S.A. and some other nations.


References:


1. Snaptohealth.org

2) Economist.com

3) Edition.cnn.com