King Cotton's Ransom

President Kennedy has been fighting conspicuously for lower tariffs. But to win Southern congressional votes for his trade program as a whole, the President is reverting to unabashed protectionism for the tattered textile industry. Last week, amid howls of protest from textile-shipping Japan and Hong Kong, the U.S. Tariff Commission was considering Kennedy's call for an 8 1/2-c--per-lb. tariff on imported cotton textiles. Simultaneously, the Administration was pressing 19 textile-producing foreign nations to sign a five-year gentleman's agreement that in effect would freeze foreign exports of cotton textiles to the U.S. at roughly 1961 levels. The White House is also considering a plan to slap similar restrictions on foreign wool, silk and synthetics.

Blaming the Foreigners. U.S. textilemen, so fiercely independent by nature that they seldom agree on anything, are virtually unanimous in their cry for Government help. A clutter of hundreds of savagely competing firms, the textile industry is dogged by the fact that since World War II, Americans have steadily reduced the percentage of their income they spend on clothes. As a result, U.S. production of cotton goods has fallen 2% since 1947, prices have shrunk 3%, and textile jobs have declined from 1,325,000 to 840,000. For the industry as a whole, profits run less than 2-c- on the dollar, which is one reason why textile stocks are selling below their book values and why textile wages are 20% below the U.S. manufacturing average of $2.10 an hour. With foreign textile wages lower yet, U.S. textilemen complain that they are now being overwhelmed by imports and want to suppress them. But, since imports have only 5% of the U.S. market, a few industry leaders are coming to realize that the anti-import argument does not wash too well.

"Many of our problems are of our own making," admits articulate James Robison, 46, president of Indian Head Mills. Partly because most textile firms are too small and partly out of shortsightedness, the industry spends only one-tenth of 1% of its sales on research. By contrast, the enterprising chemical makers invest 6% of their sales on research--and have reaped billion-dollar dividends with the synthetics and plastics that are rapidly slicing away textile markets.

Clobbering the Taxpayers. But the biggest single cause of the textilemen's woes is the Government support programs for cotton (which still accounts for two-thirds of all the fiber used in the U.S.).

To perpetuate the unproductive but politically potent cotton farmers of the Southeast--and the thousands of small Southern businessmen who live off them --the U.S. props cotton prices at 33-c- a lb. v. the comparable world price of 24 1/2-c-.

This artificially high U.S. price, coupled with severe limitations on imports of raw cotton, saddles the U.S. textile industry with $250 million a year in extra costs. At the same time, because foreigners refuse to pay the U.S. price, Washington subsidizes cotton exports to the tune of 8^ per Ib.--which makes it possible for foreign textile makers to buy U.S. cotton at the low world price, then ship it back to the U.S. as cheap finished goods.

The cotton handout, which costs U.S.

taxpayers $365 million a year, has failed to stall the inexorable decline of the 200,000 marginal Southeastern cotton farmers, who cannot compete in world markets because they are growing the wrong crop in the wrong place. It has gravely penalized the 35,000 bigger U.S. cotton growers, who could compete against any cotton growers anywhere if only given the freedom to do so. These efficiently automated farmers--mostly in the flat and well irrigated Mississippi Delta, the Texas plains and California's San Joaquin Valley--can work only a fraction of their productive lands because of acreage controls deliberately designed to favor small (less than 15 acres) and high-cost growers.

"The whole Government cotton program is an abomination," snorts Indian Head's Robison. "It is completely ineffective and outrageously expensive. It is a deterrent to economic growth and an obstacle in reaching the goal of increased productivity of the nation." It has also cost the U.S. its leadership in world cotton. Since rigid controls began in 1933, U.S. output has remained fairly stable at 14 million bales, while foreign production has grown from 14 million bales to 30 million. Textile makers also complain that the quality of U.S. cotton has deteriorated because the U.S. stands ready to buy whatever its farmers produce.

Avoiding the Obvious. In his drive to alleviate the textile maker's troubles, President Kennedy has promised some sensible measures, including bigger depreciation allowances on textile machinery and a Government-aided research program. But by piling on trade barriers to offset export subsidies to offset price supports, the net effect of his textile program will surely be to remove the industry farther than ever from the conditions of free competition. As for the strong medicine that would help the most--ending the whole costly absurdity of cotton props-- that is a remedy that no Administration has dared hint at.

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