NCC Concerned About GSM Modifications

August 23, 2000

The National Cotton Countil is concerned that USDA is ready to adjust the repayment limit on an export credit guarantee program. In letter to USDA officials, NCC expressed concern over the course of multilateral negotiations concerning limitations on the export credit guarantee program. NCC says reports indicate the United States is willing to phase down length of GSM loan repayments from three years to 18 months over two years.

NCC is asking for meeting with the officials in charge of the program to discuss ways to mitigate the impact of such changes on US cotton exports.

Among other proposals, NCC is recommending that net cotton fiber importing countries (any country that imports on net basis more than 100,000 bales of raw cotton per year) should qualify for a nine-month extension of GSM; that GSM be modified to allow repayments in local currency; that freight charges be included in the amount guaranteed, and an increase to 80% the amount of a loan under the Supplier Credit Program that is subject to the guarantee; and that USDA review documentation requirements to enhance GSM shipments to Mexico.

The letter also suggested that limitations on GSM should not begin until other participating countries provide full reports of their credit programs and the United States determines that such programs do not warrant additional disciplines.

Finally, the letter expressed concern that U.S. cotton exporters are unsure what GSM terms will be available for rest of 2000 marketing year. NCC said the GSM program remains a priority for cotton industry because of its impetus to export demand and revenue.

NCC believes the value of World Trade Organization (WTO) negotiations will be reduced if the United States agrees to limits on the GSM program that undermine its effectiveness for the U.S. cotton industry.