Public Policy: Cotton-Pickin’ Solution

Consider the tattered state of Old King Cotton. To perpetuate 200,000 politically potent but economically inefficient small cotton farmers in the Southeast, the Government supports cotton prices at 33¢ a Ib. Since this is well above the present world price of about 23¢ a Ib., U.S. cotton exporters complain that they cannot compete in world markets. So the Government gives them an 8½¢-a-lb. export subsidy. But this distresses U.S. textile makers, who must pay 33¢ a Ib. for their cotton and howl that they are being swamped by imported textiles made from U.S. cotton that foreign producers buy at the low world price.

Hoping to win the support of Southern textile makers for his tariff-melting Trade Expansion bill. President Kennedy last winter urged the Tariff Commission to put an extra tax of 8½¢-a Ib. on imported cotton textiles (which are already saddled with a 14¢-a-lb. tariff). But last week the Tariff Commission turned Kennedy down. By a vote of 3 to 2. the commission decided that it would be a bit absurd to establish an import tax to offset an export subsidy which had been established to offset a price support.

Textile-shipping Japan and Hong Kong cheered the decision, but indignant growls rose in Congress, which is highly sensitive to the voting powers of the cotton growers and spinners. Still fearing for his Trade Expansion bill, the President declared grandly that “the inequity of the two-price system remains as a unique burden on the American textile industry, for which a solution must be found in the near future.”

The most obvious solution would be to kick out the price props, scrap the export subsidy, and forget all about special taxes on imports—all of which would save U.S. taxpayers $365 million a year. That, plus a loosening of the stiff acreage controls that favor the small Southern cotton growers, would enable the efficiently automated bigger growers in the flatlands of the West to expand, prosper and better compete in world markets. But in Washington this was the last cotton-pickin’ solution likely to be considered.