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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00586R000500600004-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: January 12, 2017
• Document Release Date: June 23, 2011
• Sequence Number: 4
• Publication Date: December 1, 1985
• Content Type: REPORT

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Directorate of
Intelligence 25X1
Shifts in the World Cotton
Market: Increasing Pressure
on US Interests
GI 85-10304
December 1985
Copy 4 0 4
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Directorate of Secret
Intelligence
on US Interests
Shifts in the World Cotton
Market: Increasing Pressure
Division, OGI
and may be directed to the Chief, Economics
This paper was prepared by I Office of
Global Issues. Comments and queries are welcome
Secret
GI 85-10304
December 1985
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Shifts in the World Cotton
Market: Increasing Pressure
on US Interests
Summary The glut in the world cotton market and changes in production and trade
Information available patterns are likely to increase pressure on US interests:
as of 18 October 1985
was used in this report.
? The glut is damaging the already shaky economies of many cotton-
exporting LDCs important to the United States. Pakistan, Sudan,
Mexico, El Salvador, Peru, and Paraguay all earn considerable foreign
exchange from cotton exports, have a myriad of economic problems, and
have experienced a marked drop in cotton export earnings.
? As additional LDCs move into textile production because of low prices
for raw cotton, the flow of textiles to the United States and other
industrialized countries will increase, adding to protectionist forces and
perhaps courting serious international disputes.
? By keeping prices depressed, the glut will also have an unfavorable
impact on US cotton exports, adding to the US trade deficit and
significantly increasing US farm support expenditures over the next few
years.
These stresses are already being felt in US trade relations. Specifically, as
the negotiations on the expiring Multifiber Arrangement unfold, the
United States faces increasing pressure from LDCs for greater access to its
textile markets in return for raw cotton sales. Burgeoning US stocks of
surplus cotton-priced too high for current world market conditions-are
attracting bids for concessional sales and grants from African and Asian
governments that need cotton as feedstocks for their textile mills.
Beyond these trade concerns, the impact of continued low world cotton
prices on export earnings will add to LDC economic and political problems
in several countries. A Pakistani foreign exchange crisis brought about
largely by lagging cotton revenues would precipitate demands on the part
of the Zia government to postpone payments due the United States on
foreign military sales loans. In Peru, economic straits caused in part by low
cotton export earnings have fostered strengthened ties between Lima and
Moscow. The economies of Sudan and El Salvador are also in poor shape to
absorb any further losses in cotton earnings.
Secret
GI 85-10304
December 1985
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Moreover, we anticipate a spillover of tensions into the politically charged
textile arena and the possible imposition of trade measures against the
United States by some LDCs. Stimulated by low world cotton prices, the
rapid development of labor-intensive textile industries in Thailand, Indone-
sia, India, and Pakistan has spurred stronger. economic growth, greater
employment, and a higher standard of living. If additional growth in textile 25X1
exports is stymied by protectionism, serious strains in East Asian-indus-
trial country relations could result.
According to Embassy reports, moreover, he and Prime Minister Prem of
Thailand have agreed to coordinate strategies for retaliation if the United
States abrogates bilateral textile trade agreements.
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Shifts in the World Cotton
Market: Increasing Pressure
on US Interests
Shifts in the global market for raw cotton have
fostered a huge stock overhang, pushing prices to
10-year lows with no relief in sight (figure 1). The
surpluses stem in part from producers' overestimation
of the growth rate of cotton mill use; since 1978 mill
use has increased by an average 2 percent a year
(table 1). Lack of investment capital and growing
resistance by labor unions, as well as misguided
government tax and trade policies, have retarded the
progress in modernization of the cotton industry in
many countries. Moreover, the governments of the
emerging Asian textile producers-India, Pakistan,
China, Thailand, and Indonesia-are emphasizing the
production of synthetics, blended fabrics, and other
natural fibers, such as ramie, in plans for expansion of
their textile sectors.'
The weakness in demand was accentuated last year-
marketing year (MY) 1984/85-when the market was
flooded with cheap cotton, largely because of Chinese
and Pakistani inability to absorb bumper crops gener-
ated by agricultural policy changes and unusually
favorable weather. According to the US Department
of Agriculture (USDA), production totaled 84 million
bales, representing a 20-percent increase over the
previous record (table 2). Shortages in MY 1983/84
encouraged increased plantings in China and in the
United States, as well as in other major exporting
countries; weather conditions were especially favor-
able for Southern Hemisphere crops. The Chinese
crop increased by a third from a large base, Pakistani
production doubled, and both the United States and
Australia registered nearly a 70-percent gain. Only
countries in political turmoil-Sudan, El Salvador,
Nicaragua-suffered setbacks.
' Ramie, a natural fiber similar to flax, hemp, and jute, is grown
and processed largely in China. Although it is valued for fiber
strength and resilience, it has not been widely used in textiles
Figure 1
Cotton Prices, 1975-85
(c.i.f. Northern Europe)
United Statesa
- World b
US cents per pound
Prices through 25X1
mid-October
a Memphis territory middling 1 3/32.
b Cotton outlook A index.
Shifting Regional Trade Patterns
The market is also experiencing significant shifts in
the patterns of trade (figure 3). Most important, the
bulk of cotton trade is moving to Asia, driven by the
massive production gains in China-China, a net
importer in 1980, now exports about 1.2 million bales
a year, or about 6 percent of total world exports-as
well as by the increasing mill use throughout South-
east Asia (table 3). Elsewhere:
? South American production is uneven and is in-
creasingly being used in growing regional textile
industries.
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Table 1
World Cotton Market Trends
Beginning
Stocks
Raw
Production
Consumption
(mill use)
Exports
1977/78
22.7
63.9
60.9
19.7
1978/79
26.2
59.6
63.3
19.8
1979/80
21.8
65.2
66.2
23.2
1980/81
21.3
64.8
65.9
19.7
1981 /82
21.5
70.8
66.1
20.2
1984/85
(preliminary)
24.8
84.4
1985/86
(estimate)
40.1
79.6
1986/87
(forecast)
47.4
? Cotton production has leveled off in Central Ameri-
ca and Africa, and trade shares are largely
declining.
? The United States, although handicapped by dis-
tance from expanding markets and high prices, has
managed to hold on to a third of global trade by
being a reliable supplier of high-quality cotton.
? The Soviet Union, the second-largest exporter, has
been unable to increase production to keep up with
increasing internal demand. The USSR has seen its
share of world exports of raw cotton whittled from
21 to 17 percent in the last four years.
prices are about 17 cents per pound higher on cotton
delivered to Europe and 18 cents per pound higher on
deliveries to Japan than offerings of similar quality
from Australia, which emerged last year as a major
exporter. US sales of high-quality cotton to the Soviet
Union are also being pressured by Australian, Paki-
stani, and Chinese exports. Some African and Latin
American producers-Egypt, Zimbabwe, Tanzania,
Paraguay, Mexico-also have captured specialty
shares of the high-quality cotton market with depend-
able and consistent quality shipments; however, limit-
ed resources, including water and arable land, will
preclude major export surges from these countries.
Submarket Shifts
Trade within the two main, highly differentiated
segments of the market also is in flux. The United
States still dominates trade in the high-quality, long-
staple cotton used for fine fabrics-usually shipping
about 3.5 million bales annually to markets in Europe
and Japan-but price competition from Australia and
Pakistan is rapidly eroding the US trade position. US
Competition is even fiercer in the market for the
short-staple cotton, which is used for heavier, coarser
textiles. This segment of trade usually accounts for
US sales of about 2 million bales annually; however,
because of foreign competition, 1985 sales probably
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Table 2
Major Cotton Producers
1983/84 1984/85 1985/86
(estimated)
will amount to no more than 1 million bales, accord-
ing to USDA estimates. Brazil is making inroads into
US, European, and African markets, and China is
selling in Hong Kong, Indonesia, Thailand, South
Korea, and Japan. Although Chinese cotton is of
inconsistent quality, it is cheap enough to tempt Asian
textile manufacturers operating at the margin.
Pressed by Chinese cotton, Pakistan is cutting prices
and seeking new customers in northern Africa and
Europe. Algeria and Morocco purchased Pakistani
cotton for the first time in 1984 in response to a
government trade promotion and have sent trade
delegations to Tunisia, France, and several East Euro-
pean countries
The Role of Countertrade
Stiff trade competition and cash shortages among
cotton importers are pushing LDC exporters increas-
ingly into countertrade arrangements. For example, in
Sudan, where cotton is the principal source of reve-
nue, more than 25 percent of the 1984 crop-with a
potential value of $75 million-was shipped under
barter and debt-servicing arrangements, according to
Embassy reporting. About a sixth of 1984 Peruvian
cotton exports was shipped to the Soviet Union under
a bilateral agreement to pay for arms and other Soviet
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Table 3
Major Cotton Traders:
Regional Patterns of Trade, 1984
Amount Amount Index of Index of
Exported Imported Exports Imports
(thousand (thousand (1980=100) (1980=100)
480-lb bales) 480-lb bales)
115
119
116
103
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Table 3 (continued)
Amount Amount Index of Index of
Exported Imported Exports Imports
(thousand (thousand (1980=100) (1980=100)
480-lb bales) 480-lb bales)
ASEAN countries and the USSR)
goods. China, historically a cash-only seller, has be-
gun trading cotton for oil and exploring the possibili-
ties of expanded trade through barter with several
installing modern ginning and baling equipment,
and by expanding storage facilities. In addition,
liberalized free market opportunities now provide
incentives to Chinese farmers to produce the kind of
cotton that export markets and domestic mills will
buy.
The severity of cotton market problems is leading
cotton-exporting countries that have large surpluses in
most years-Pakistan, China, and Brazil-to adjust
their agricultural and trade policies to be able to
compete more effectively for trade shares. According
to Embassy reporting:
? Pakistan is setting up cotton sales offices in the
Middle East and Europe.
? Brazil authorized a cotton export subsidy early this
year to bring Brazilian prices in line with world
prices.
? China began to address fundamental quality prob-
lems by planting higher quality seed last spring, by
Some exporters are also modernizing and revitalizing'
their textile sectors to use their increased cotton
production to be able to compete internationally in
value-added cotton products. Both China and Paki-
stan, increasingly concerned about the rapid depletion
of foreign exchange reserves, recently announced ma-
jor policy revisions aimed at stimulating exports of
yarn, textiles, and apparel, according to Embassy
reports. In January the Chinese National Textile
Import and Export Corporation (Chinatex) was reor-
ganized to allow mills greater autonomy both in
purchasing raw cotton and in marketing textiles. At
the same time, the new Pakistani Government an-
nounced increased investment incentives for the tex-
tile export industry, including the elimination of
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import tariffs on machinery needed for modernization
of plants. The Government of Brazil is also taking
steps in this direction, exempting cotton exports from
value-added taxes and lowering export taxes on tex-
tiles from 12 to 1 percent.
LDC importers of raw cotton are counting on the
textile sector to spur economic growth, according to
Embassy reports. In June, New Delhi announced a
new textile policy designed to improve the export
potential of India's textile industry. The government
has taken measures aimed at better coordination
between cotton farmers and textile industry planners,
modernization of the textile sector, and providing
incentives to textile exports. By increasing imports of
raw cotton, both Indonesia and Thailand aim to
expand textile exports significantly within the next
few years, although their cotton production efforts
have lagged far behind mill demand. Indonesia pro-
duces only about 3 percent of domestic consumption;
the Thai harvest supplies only about a third of
domestic requirements
A turnaround in the international cotton market is
unlikely for at least four years, according to USDA
analysis. Trends in cotton mill use suggest continued
slow growth of consumption. Modernization of the
antiquated, problem-ridden textile industries of Paki-
stan, India, and China and expansion of the relatively
new industries of the ASEAN countries could be slow
in coming, particularly if export expansion is further
limited by increased textile trade barriers in devel-
oped country markets. Similarly, cotton consumption
will be held back by the growing popularity of
polyesters and blends in the developing countries.
In spite of sluggish growth in demand and low world
prices, the global crop currently being harvested will
be reduced by only about 6 percent from last year's
record, according to USDA estimates; and no signifi-
cant declines seem likely in MY 1986/87. Although
China has lowered procurement targets and the level
of guaranteed purchases for cotton, cotton production
is still substantially more lucrative than other crops,
according to Embassy reports; and we believe cotton
acreage probably will increase. China can earn almost
double the amount of foreign exchange from a hectare
of land sown to cotton than from wheat-a positive
inducement for the government to increase output and
exports of cotton at the expense of wheat.
Pakistan plans to cut back
its 1986 crop, government agricultural policies now
being formulated suggest continued support to cotton
production, according to Embassy reporting.
As a result of increased production, most governments
will intensify their efforts to gain increased shares of
the cotton export market, largely by improving prod-
uct quality. In view of Chinese, Pakistani, and Aus-
tralian moves to develop new varieties of cotton that
produce better quality lint, to modernize ginning and
port facilities, and to renew marketing campaigns, we
expect the share of fine staples in overall cotton
production to increase and the international competi-
tion in high-quality cotton to intensify.
Australia hopes to double such exports
next year, and India has a large exportable surplus of
long-staple cotton. The Soviet Union is also concen-
trating on quality improvements, which could eventu-
ally lead to a larger volume of high-quality cotton for
export.
The Cotton Exporters
The depressed cotton market is presenting an econom-
ic challenge to a number of countries important to the
United States. The flexibility of government policy
will determine how key exporters weather the slump
(figure 2). Brazil has been able to adjust to low prices
with increased exports. According to Embassy re-
ports, however, other big cotton producers, including
key debtor countries, are faltering:
? Because of declining prices, Mexico has been forced
to cut back production by a third and has seen its
earnings decline sharply.
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Figure 2
Selected LDCs: Cotton Export Earnings
_a The increase in 1984 export earnings reflects sharply increased export
volume that more than compensated for reduced prices.
0 1980-83 1984 0 1980-83
(average) (average)
0 1980-83 1984 0 1980-83 1984
(average) (average)
? The Paraguayan economy, which had begun to
recover from two years of steep recession, has been
reeling since mid-1984 from the deterioration in the
country's terms of trade in cotton.
? The new Peruvian Government has not yet an-
nounced plans for developing export markets for
Peruvian cotton under current market conditions.
According to Embassy reports, excessive stocks of
unsold cotton are beginning to accumulate.
? Sudan, with 1 million bales of unsold cotton in
deteriorating condition in warehouses and about a
million bales currently being harvested, has so far
failed to develop a feasible cotton marketing
strategy.
about largely by lagging cotton revenues.
? Pakistan has sought additional financial assistance
from the United States and the International Mone-
tary Fund to avoid a foreign exchange crisis brought
The Textile Exporters
In sharp contrast, some Asian governments-in Thai-
land, India, Indonesia, China-are attempting to turn
the crisis in the cotton market to advantage in value-
added exports. Although the modernization of textile
export industries is being hampered by a range of
constraints, including capital stock and investment
shortfalls, bureaucratic corruption and inefficiency,
and power shortages, significant political and econom-
ic forces should assure the continued dynamism of the
sector:
? In Thailand, prominent political and military lead-
ers have direct business connections in the textile
industry. According to Embassy reports, these links,
in addition to the industry's potential as an employ-
er and foreign exchange earner, point to continued
government advocacy of the sector's interests.
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In Africa, where cotton and textiles are a key element
in economic planning, cotton production is losing out
to food crops in the competition for resources. Despite
government attempts to increase exportable surpluses
in the past few seasons by ratcheting farm prices up,
disincentives such as poor farm-to-mill transport,
higher prices for food and feed commodities, and
increased domestic mill consumption are reinforcing
a downward trend in exports. Although West African
and Tanzanian cotton have been gaining popularity in
Europe because of their fiber strength characteristics
and Egypt, Sudan, and Zimbabwe have assured
markets in East Asia and Europe for their premium-
priced, extra-long-staple cotton, export supplies and
shipping capabilities are extremely limited through-
out the region.
The slippage in African cotton production is retarding
growth of the region's textile and clothing industries.
This sector has been given economic priority because
of the high employment potential of the cloth indus-
try and the. relatively small scale at which efficiency
can be achieved. However, the spinning, weaving, and
apparel manufacturing industries of western and
southern Africa, as well as of Egypt, Sudan, and
Tanzania, operate at no more than 80 percent of
capacity as a result of unpredictable raw material
availability and prices,
Addressing these problems and recognizing the poten-
tial of cotton in value-added foreign currency earn-
ings and import substitution, some governments have
been diverting export supplies into domestic mills.
Others have struck barter deals, such as the agree-
ment Ghana signed with Mali in July involving the
exchange of textiles for cotton.
? In India, the Gandhi government has not yet clari-
fied the specifics of its new textile policy or worked
out the financial implications. We believe New
Delhi's handling of the implementation will be an
important test of commitment to economic liberal-
ization. Powerful interest groups-cotton farmers
and textile labor unions that see the new policies
resulting in raw cotton price cuts and loss of jobs-
began protesting in October with a major public
demonstration, and farm leaders are continuing to
campaign with labor union and opposition party
support.
? Embassy reports indicate that Chinatex is moving
quickly to strengthen links with textile mills, and
the Chinese Government
has been selling surplus cotton to domestic mills at
greatly reduced prices.
? In Indonesia, Embassy reporting indicates the Min-
istry of Trade is systematically and consistently
pushing both the government bureaucracy and the
private sector in the textile export drive.
Although the textile manufacturing sectors in these
Asian countries have the potential to increase the rate
of growth of export earnings as well as to provide
more jobs, government leaders recognize that a slump
in the industry could spark a political tinderbox. In
Thailand, where a recent US embargo on 1985 Thai
apparel imports could cost 50,000 workers their jobs,
according to Embassy reports, Prime Minister Prem
and his advisers consider the country's economic
difficulties the most urgent problem facing the gov-
ernment. In our view, a cutback in textile industry
earnings and jobs would bring considerable pressure
for change from prominent bankers, opposition politi-
cal leaders with business interests in the sector, critics
of government economic policy, and labor groups. In
India, unemployment in the textile industry touched
off riots last spring, and the labor situation in the
mills remains volatile, according to Embassy reports.
Implications for the United States
Current trends and trade shifts in the global cotton
and textile markets are creating serious economic and
political worries for the United States by reducing US
cotton export sales, increasing pressures for US textile
import constraints, and contributing to economic and
political problems in countries important to US inter-
ests.
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Reduced Cotton Exports
Prices well above Asian levels for comparable quality
cotton will cut the United States out of a significant
amount of trade in MY 1985/86, eroding the US
market share from a third to about one-fifth, accord-
ing to USDA estimates. Customers in the Far East
and Europe, in particular, are taking increased advan-
tage of lower cotton prices in nearby markets; and the
governments of many developing country importers
are finding the countertrade arrangements offered by
China, Pakistan, and Brazil attractive in view of
foreign exchange shortages. Brazil's recent cotton-for-
oil deal with Nigeria and an Indonesian barter deal
with China last summer exchanging cotton for man-
made fiber are likely to cut US sales to those markets
in half during the current marketing year, according
to USDA.
Rapid quality advances on the part of competing
suppliers could permanently truncate US export sales.
Despite a preference for US cotton, major customers,
such as Japan and Taiwan, have adjusted to buying
cotton from China, Pakistan, and Australia and are
likely to find increasing amounts of consistently good
quality, long-staple cotton available from these suppli-
ers. sales of very-
high-grade Texas-Oklahoma cotton (harvested in the
summer, well ahead of the rest of the world fall crop)
were cut in half this year largely as a result of the
increased availability of the cheaper but similar quali-
ty Australian cotton (harvested in the Northern
Hemisphere spring). In addition, the USSR-a major
buyer of US long-staple cotton-will, in our estima-
tion, soon begin to buy from nearby sellers, such as
China and Australia, as the quality of long-sta le
cotton now offered becomes more consistent.
As a result of these shifts, the United States is likely
to be burdened with a large cotton surplus when the
current marketing year ends next July. With a fall
1985 harvest only slightly smaller than in 1984 and
export sales limited to no more than 4 million bales,
according to USDA estimates, about 9 million bales
of unsold US cotton will accumulate at a cost of $2
billion-nearly as great as the cost of the US wheat
surplus. As US cotton surpluses mount, pressure for
increased concessions on cotton sales and grants will
come, in our estimation, both from governments-the
Multifiber Arrangement Renewal
Negotiations on the renewal of the Multifiber Ar-
rangement (MFA), which sets guidelines under the
auspices of the General Agreement on Trade and
Tariff (GATT) for bilateral textile and clothing
trade, have begun and will continue at least until
June 1986, when the current pact expires. Although
MFA renewal talks will not be directly linked to a
new GATT round, developing country members of
GATT are already placing liberalization of world
textile trade high on their list of objectives. Knowl-
edge that textiles and clothing could be a significant
part of a new round'sfnal package may prompt MFA
participants to extend the MFA only until the end of
the GATT round. 25X1 25X1
Most exporter countries have opposed renewal in
public statements, because the MFA allows importer
countries significant latitude in limiting trade-a
departure from GATT rules. The MFA permits
importers to impose quotas without having to demon-
strate injury to domestic producers, apply the quotas
on a nondiscriminatory basis, or choose between
compensating the restricted country or facing retalia- 25X1
tion. However, most exporters-including the large
ones: Hong Kong, South Korea, Taiwan, and China-
fearing protectionism in the absence of any guide-
lines, already seem inclined to accept renewal while
continuing to work for gradual phaseout and return
to GATT rules. Many small- and medium-sized
exporters-Thailand, Indonesia, Pakistan, for exam-
ple-find MFA quotas helpful because they guaran-
tee shares of industrial country markets and protect
them against major exporters.a
Philippines, Bangladesh, and Egypt-already receiv-
ing substantial amounts of US aid and from African
countries-Nigeria, Zaire, Kenya, Ghana-that do
not produce enough cotton for domestic mills and lack
foreign exchange reserves to import.
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Even US concessional sales may be hard to come by,
however. Although US cotton aid in the form of credit
or credit guarantees has already been granted to
several low-income, textile-producing countries, local
sales have gone slowly as a result of the substantial
price difference between US and Asian supplies. For
example, according to Embassy reports, buyers in
Zaire, under government pressure to participate in the
recently initiated US PL-480 program, complained of
a price differential of 40 percent between US and
locally grown cotton and an even greater gap between
US and Asian cotton. As compensation, they demand-
ed further price discounts. Similarly, cotton millers
and traders in the Philippines, although concerned
about the quality of lower priced Chinese and Paki-
stani cotton, evinced little interest in buying US
cotton under a proposed 1985 credit guarantee pro-
gram because Australia, Pakistan, and China were
offering cotton of the specified quality at prices 20 to
25 percent lower, according to Embassy reporting.
Increased Pressure for Access to Markets
The indirect fallout from the use of low-priced cotton
as feedstocks in growing Third World textile indus-
tries will be the intensified pressure from LDC gov-
ernments for greater access to US textile markets.
Caught in the squeeze between overproduction on one
hand and growing textile protectionism on the other,
governments such as Brazil, Pakistan, India, and
China will continue to push for larger quotas in
bilateral negotiations. Although generally pleased
with the market-share protection available under ex-
isting trade arrangements, these governments can be
expected in the long run to press for a freeing of
textile trade as they gain confidence in their ability to
compete.
In our judgment, emerging textile traders, such as
India, the Philippines, Thailand, and Indonesia, will
attempt to trade concessions on US textile import
quotas for purchases of raw cotton from the United
States. A recent comment in the Thai press, for
example, has suggested retaliation on US cotton
imports in response to any US protectionist moves on
textiles.' Similarly, Indonesia, which usually buys
most of its cotton from the United States, recently
signed letters of intent with China to purchase about
half of its 1985 needs-partly in reaction to US
textile policy, according to Embassy reports. As the
marketing year progresses and textile talks enter full
swing, the United States is likely to experience inten-
sified strains on relations. According to Embassy
reports, President Soeharto and Prime Minister Prem
of Thailand have agreed to coordinate strategies for
retaliation in the event of US abrogation of bilateral
textile agreements
LDC Political Fallout
The developed country response to LDC demands for
market access could affect the future of Asian govern-
ments-India, Thailand, Indonesia-that have high
political and economic stakes riding on the textile
industry. Consequently, a failure to keep US markets
open could strain relations with these governments.
considerable
apprehension on the part of President Soeharto of
Indonesia about the outcome of current debates on
textile protection legislation in the United States.
Although the Prem government in Thailand has
demonstrated an ability to survive political difficul-
ties, we believe that a sharp cutback in Thai textile
exports would dramatically increase the chances for a
second coup attempt. If disruption of the textile
industry were to result in public disorder, a possible
scenario might see some elements of the military
intervening to oust Prem.
Although the impact of textile industry problems on
political stability in these countries is hard to predict,
it could be considerable because they all have large
investments in textiles. According to Embassy reports:
? Textile manufacturing, India's largest and oldest
industry, generated 15 to 20 percent of industrial
' According to Embassy reports, US agricultural exports to Thai-
land were particularly hard hit by government tariff increases in
October 1984 that increased duties on US cotton by 300 percent.
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jobs and accounted for more than 20 percent of
manufacturing production, as well as 12 percent of
exports in the period 1983-84.
? Cotton textile manufacturing is Pakistan's most
important industry, accounting for about 40 percent
of industrial employment and 35 percent of manu-
factured exports.
? The Indonesian textile industry employs 3 percent
of the total work force, or 27 percent of all workers
engaged in manufacturing. Textile and garment
exports amounted to 9 percent of nonoil exports in
1984.
? Textile manufacture is by far the leading industrial
employer in Thailand. The textile and apparel
industry accounted for 25 percent of total Thai
value-added manufacturing in 1984
Apart from repercussions in countries with heavily
politicized textile industries, continued depression in
international cotton trade could have serious implica-
tions for the economies of Nicaragua, El Salvador,
and Sudan-countries where cotton is a leading ex-
port earner and where diversification into value-added
cotton industries or into other crops is not possible in
the short term. For example, we estimate Nicaragua's
revenues from cotton may amount to as little as $20
million in 1985, down from more than $100 million
last year. Sudanese officials estimate that cotton
revenues, which provide about half of all export
earnings, may fall by as much as one-third in 1985.
Finally, weak export prices for cotton will further
undermine the slow progress of economic recovery
in El Salvador, where the Duarte government has
publicly acknowledged the importance of the cotton
sector to stability.
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Figure 3
Major Cotton-Growing Countries and Their Export Trading Patterns, 1984
El Salvador, Mexico, and Nicaragua
... 6% of world cotton exports
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Argentina, Brazil, Colombia, Paraguay, and Peru
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... 6% of world cotton exports ~- `
Egypt and Sudan
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. . JIV VI VVVII J VVLIV/I cAN J1I ~ ? r
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