From Cotton Grower Magazine – February 2017
Cotton is a great industry employing hundreds of millions around the world and providing products touched by almost every person on the planet every day. In any industry this large and important, governments will be involved in a multiplicity of ways, from approving seed varieties, to funding research, to regulating labor standards. Most of these interventions are both necessary and positive. We all realize that chemicals need to be regulated, that workers need to be protected, that research must be funded, that markets need to be transparent.
However, while governments always mean well, they do not always do well, and some forms of government intervention have highly deleterious effects.
In particular, government industrial policies that subsidize the production and use of synthetic fibers, and government agencies whose publications and programs disseminate falsehoods or enable others to disseminate falsehoods about cotton production practices, are doing great disservice to consumers and great harm to producers around the world.
Has Peak Cotton Passed?
In the Age of Sail, all lines and sails on ships were made of natural fibers, mostly hemp and sisal for ropes, and linen for sails, and millions of tons of each fiber were produced each year. Today, with the exception of museums, all ships’ lines and sails are made of nylon, polypropylene or polyester, and world production of natural fibers used in lines and sails has fallen to just a few hundred thousand tons.
Prior to the advent of “fast fashion” and “casual Fridays,” wool was a major apparel fiber. In the 1960s, wool accounted for 10% of world apparel fiber use. Today, wool accounts for 1% of world fiber use.
In the 1800s and early 1900s, cotton probably accounted for 75% of world fiber use, and in the 1960s, cotton still accounted for two-thirds of all fiber use. By the 1980s, cotton’s share had fallen to half, and today, cotton’s share of world fiber consumption is less than 30%, and falling.
The world economy is highly competitive, and all industries face strategic threats. However, natural fibers, more than most other agricultural commodities, face competition from manmade alternatives.
As of 2016, cotton appears to be an industry in decline, trapped between low prices for polyester and huge stocks of cotton, and under attack from government agencies that wish to limit cotton production because of perceived environmental and social harm. The governments of countries concerned about the health of the cotton economy must unite to confront these threats.
The underlying story about world cotton consumption can only be understood in the context of polyester production in China. As China started to industrialize in the early 1980s, textile production was a leading area of investment. In 1990, polyester fiber production in China was about 1 million tons, but by 2015, polyester production in China had grown to approximately 35 million tons, equal to 70% of the world total. The 35-fold increase in polyester production in China in 25 years is the single biggest factor reducing world demand for cotton today.
There are no comprehensive statistics on the number of polyester fiber production plants in China, their ownership, sources of financing or operating costs. However, the growth in polyester production in China has been so rapid, so enormous and so incongruous with investment patterns in other countries in Asia, that it is impossible to believe that industry expansion is a result of competitive, private sector investment.
The cost of construction of a polyester plant with a capacity of 250,000 tons per year is estimated at about $150 million. It has been widely reported that the national, provincial and local governments in China encourage industrial expansion through loans that are never repaid made by government-owned banks.
Given the emphasis by all levels of government in China on textile production since 1990, it is highly likely that much of the expansion of polyester production capacity occurred with the help of loans that have become grants. It would be naïve to think that the expansion in polyester production in China occurred because Chinese consumers were demanding more polyester or that other market forces encouraged such growth. The expansion resulted from the industrial policies of the Government of China.
The loss of market share for cotton has been largely the result of policies of the Government of China following China’s accession to the World Trade Organization (WTO) in 2001 and the end of the Multifiber Arrangement (MFA) in January 2005.
Time to Act
Unless governments with an interest in the health of the world cotton industry unite in the WTO to oppose China’s subsidization of polyester production, in the same way that governments have waged a campaign in the WTO to reduce direct government measures that distort cotton production and trade, cotton’s loss of market share will continue, and the livelihoods of cotton producers will be further compromised.
To combat these threats, the cotton industry, and governments of countries with an interest in cotton, must unite and advocate for government policies that, “first, do no harm.” Governments must oppose subsidies to polyester production just as vehemently as they have campaigned against subsidies in the cotton sector. Governments must also premise policies and programs on sound science so as to enable cotton producers to innovate, adopt and implement the latest technologies that produce increased yields at lower costs so as to provide fiber to textile mills at prices competitive with polyester.
Terry Townsend delivered this presentation at the 75th Plenary Meeting of the ICAC in 2016. He credits Dr. Dean Etheridge of Texas Tech University’s Fiber and Biopolymer Research Institute for contributing to his findings. Townsend retired from his position as ICAC executive director in 2013. He can be reached at Terry@CottonAnalytics.com.