3 January 2009
USA: USDA Initiates Program to Aid Domestic Textile Manufacturers.
Under terms of the 2008 farm bill, U.S. textile manufacturers can now sign up for the Economic Adjustment Assistance Program. This legislation makes payments to eligible cotton-consuming participants at the rate of $0.04 per pound over the next three and a half years. The act is designed to provide assistance to textile manufacturers that invest an equivalent amount of funds in capital improvements by acquiring, constructing, installing, modernizing, developing, converting or expanding land, plant, buildings, equipment, facilities or machinery. These expenditures must be directly attributable to the purpose of domestically manufacturing upland cotton into cotton textiles and apparel. The USDA stipulates that agreements for eligible matching funds must be made by January 30, 2009 in order to be retroactive to the start of the 2008/09 marketing year. All other agreements are effective on the date of acceptance by the Commodity Credit Corporation. With domestic mill demand estimated at 4.3 million bales, this could amount to as much as $82.6 million dollars payable to U.S. textile mills through the 2011/12 marketing year.
This program replaces the old STEP TWO program which compensated U.S. mills for having to pay higher than world prices for U.S. cotton (Under U.S. law, U.S. textile mills can only buy U.S. cotton, we cannot use imported cotton). The old Step 2 program had WTO problems because of how it was structured – the new program resolves those issues and gives back the extra payment U.S. mills make for U.S. cotton in the form of payments (4cents per lb of cotton) to the mills that must be used for new equipment and investment.