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U.S. House of Reps Passes Agricultural Act; Big Boon to Wool and Cotton

On January 29, The U.S. House of Representatives passed the Agricultural Act of 2014 (AA), by a vote of 251 to 166. Now the bill is scheduled to undergo review from the Senate. Intended as a substitution for the Food, Conservation and Energy Act of 2008, the bill has already won praise from President Obama, who has indicated that he would sign it in its present form.

The centerpiece of the AA is the cessation of direct payments to producers, also called subsidies, that have been in place for eighteen years. The original intent of that legislation was to slowly wean producers from income protection subsidies but became a permanent fixture of government agricultural policy long after many considered them defensible, especially given rising farm profits and a straitened federal budget. The AA has become a pressing matter ever since Brazil disputed U.S. cotton subsidies to WTO authorities.

The apparel industry, in particular, is scrutinizing the AA for its effects on the price of cotton and wool. First, the AA establishes an “Agriculture Wool Apparel Manufacturers Fund” that could reach as much as $30 million in reserves. The stated purpose of the fund is to “reduce injury to domestic manufacturers resulting from tariffs on wool fabric that are higher than tariffs on certain apparel articles made of wool fabric.” A separate line of funding for research and marketing related to wool will also be available, capable of dispensing as much as $2.25 million per year.

The AA also provides a new ‘Pima Cotton Agricultural Trust Fund,” that is “intended to reduce the injury to domestic manufacturers resulting from tariffs on cotton fabric that are higher than tariffs on certain apparel articles made of cotton fabric.” The fund will disburse $16 million per year for five years.

Of that $16 million, 25 percent is slated to producers of pima cotton that make spun cotton yarns within the U.S., 25 percent to national associations that promote the use of pima cotton and the remaining 50 percent will go to manufacturers who cut and sew cotton shirts within the U.S.

After the WTO ruled in favor of Brazil in 2009, The U.S. was compelled to pay $147.3 million to Brazilian farmers in order to avoid incurring $830 million in retaliatory tariffs from Brazil.

The AA has been a subject of great controversy, often opposed by farmers due to massive cuts in agricultural and nutrition spending over ten years totaling $23 billion. The bill also either repeals or consolidates more than 100 programs currently in operation under the regulation of the U.S. Department of Agriculture.