China cotton firms plunge into losses after US ban, India scores

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India seems to be benefitting from the US-China cotton trade war. Estimates say that Indian cotton exports have shown a rise in the last four months and the year may end with a jump of approximately 40 per cent over the previous year. </p>
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In December 2020, the US had decided to ban cotton imports from Xinjiang Production and Construction Corps (XPCC), a military-industrial organisation over the forced use of labour in Xinjiang—a homeland of the persecuted Chinese Muslims.</p>
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The ban came as a setback for XPCC, which produces almost one-third of all of China's cotton, but it also hit the global cotton supply chain led by noted fashion and apparel companies.</p>
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Once again, in January 2021 the Trump administration again decided to reinforce the ban by importing cotton as well as tomatoes from China's Xinjiang region. This time the reason was human rights violations of the Uighur Muslim minority. The US notification said the ban was applicable to not just direct imports but also those routed through third countries.</p>
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<strong>US Administration comes down on China cotton again</strong></p>
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The US Customs and Border Protection (CBP) reportedly told The Washington Post: "Companies can no longer claim ignorance as an excuse. CBP's message to the trade community is clear: Know your supply chains."</p>
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<a href="https://www.nytimes.com/2021/01/13/business/economy/xinjiang-cotton-tomato-ban.html">The New York Times</a> reported recently: "Some textile and apparel companies that used cotton or yarn from Xinjiang have announced that they are severing ties, including Patagonia, Marks and Spencer and H&M. But many firms have found it difficult to trace the origins of all the products used by their Chinese suppliers, especially given the lack of access for independent auditors to facilities in Xinjiang."</p>
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Chinese cotton yarn maker, Huafu Fashion disclosed earlier this week before the Shenzhen stock exchange that US brands are beginning to cancel orders. It added that it has lost US $54.3 million in 2020 as compared to a net profit of US $62.5 million in 2019.</p>
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American measures against Chinese cotton has set off an avalanche across the world. The ban is bearing results in unprecedented ways.</p>
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Under pressure from the administration, US garment retailers are investigating their supply chains and have begun to weed them out. American companies are sending communication to their suppliers about the origin of cotton. US companies told Taiwanese textile manufacturers that they no longer wanted Chinese cotton, not just cotton from Xinjiang.</p>
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<strong>International brands go for alternatives</strong></p>
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Global brands like Patagonia, Gap, Ikea and H&M have confirmed that they are no longer procuring cotton from China. Moreover, these companies have reinforced the administration's orders to their suppliers that neither cotton nor any other product should be sourced from Xinjiang.</p>
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An offshoot of the cotton scare is that companies are resorting to tracing the source of cotton through chemical-tracing technologies. A firm Oritain, which calls itself a tracing company, has jumped into the fray to help brands determine their supply chain and delink it from Xinjiang cotton.</p>
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Tracing the roots of the cotton is becoming important as the Xinjiang cotton is used extensively in the garment industry in countries like Vietnam, Bangladesh and many others. Interestingly, to ensure that their supply is not found contaminated with Xinjiang cotton, the manufacturers have in fact told their suppliers to completely keep off all cotton from China.</p>
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<strong>Global cotton market is facing an upheaval</strong></p>
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US apparel companies are beginning to procure American cotton. Similarly, the Indian Cotton Association estimates that <a href="https://krishijagran.com/agriculture-world/lower-costs-spurs-cotton-exporters-deliver-almost-60-of-season-s-planned-shipments-within-4-months/">cotton exports from India</a> are expected to touch 65 lakh bales this year as opposed to the earlier estimate of 40 lakh bales—showing a jump of nearly 63 per cent. Conservative estimates, however show that the growth could be around 40 per cent.</p>
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The spread of coronavirus from China, coupled with PLA’s aggression against its southern and eastern neighbours has led to a global pushback against the communist giant, led mainly by the US, and followed by many other countries.</p>
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The boycott of Chinese cotton is one of the numerous actions to punish China for violating the human rights of its ethnic minorities like the Tibetan, Uighyurs and Hong Kongers. In a larger context it is a retaliation for China's territorial infringements against India, Taiwan, Vietnam, Japan and other neighbours.</p>