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President International Cotton Association (ICA)
What kind of dispute is most likely to occur in the global cotton trade? Can you give some examples?
The reasons why disputes occur are numerous and complex: price volatility, government export bans, floods, droughts, speculators, liquidity, quality of cotton, late opening of a letter of credit, late shipment, etc.
There are also many reasons why contracts are defaulted on. Cotton has a significant volatility in terms of price, which saw a significant increase in the number of defaults in the world-wide market in previous years.
What are the major risks involved in cotton trade? Can you elaborate?
As with any commodity, there are risks involved in the trade. For cotton I would say that the main ones are price risk, counterparty risk - the reliability and credibility of your trading partners, currency and financial risk, government risk - export bans or taxes, competing crops and competing fibres - both natural and synthetic.
How can not trading with defaulters create a safe trading environment?
Trading with defaulters is a high risk strategy for any business. We believe that trading with defaulters, even if it is by association, compromises contract sanctity and creates incomprehensible injustice. There should be no room or tolerance towards anyone who trades with a defaulter. This is paramount to me, and it should always remain in the forefront within our industry circles in order to maintain cotton's global prominence. It will create the safe trading environment that the industry is seeking.
How can one know of the companies associated with defaulters?
We have been able to expose the firms involved in dishonourable trading practices and reveal their links with defaulters through the introduction of our business intelligence team. The team uses a wide variety of resources to verify the links and then shares that information with our members so that they can make 'safer' trading choices.
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