Cotton industry seeks government help for defaults
The U.S. cotton industry is reached out to senior government officials regarding the increase in contract defaults, which are threatening $1 billion in sales. Cotton industry officials made the government aware that a number of contract defaults, which have spiked after prices reached record highs and then collapsed, could damage the industry for the long term.
Representatives from the National Cotton Council, the American Cotton Shippers Association, AMCOT and the National Council of Textile Organizations met Sept. 25-26 with USDA Secretary Tom Vilsack, U.S. Trade Representative Ron Kirk and Assistant Secretary of State William Craft, Jr.
The delegation explained that far too many overseas mills have been refusing to honor eventual awards despite the U.S. working with an internationally recognized arbitration system. They shared their concerns that host governments are protecting the foreign mills from enforcement, especially when the mills are state owned.
Another increasing concern is that other U.S. commodities could be impacted by what’s happening and could be at a similar risk in the future if the U.S. doesn’t take a strong stand in defending contract sanctity. The delegation stressed that not enforcing the commitments could disrupt international trading relations and undermine support for future trade agreements.
The group told Vilsack that sales of more than 4 million bales of cotton worth $1 billion are either in default or at risk of default by textile mills in Bangladesh, Indonesia, Thailand and Vietnam. Traders say contract defaults have become endemic, with counterparties quicker than ever to walk away from deals if prices shift.
It is not known if Vilsack agreed to take any action after the meeting.