What is the intention of the United States to ban cotton products from Xinjiang?

On January 14, the US Customs and Border Protection said the US would ban imports of all cotton and tomato products from China's Xinjiang region. The ban applies to cotton yarn, clothing and textiles made from cotton grown in the region. The ban, known as a "release moratorium", also applies to products processed or manufactured in a third country. The ban announced after the domestic cotton prices were suppressed, Zheng cotton 2105 main contract fell 2.51% on the day, closing price lost 15000 yuan/ton integer mark.

Xinjiang cotton accounted for a great, textile raw materials are difficult to avoid

It is understood that this is not the first time the United States has imposed a ban on Chinese cotton. On December 2, 2020, the Bureau of Customs and Border Protection of the US Department of Homeland Security announced a withholding order on cotton and cotton products produced by the Xinjiang Production and Construction Corps and its affiliated entities, banning them from entering the United States, citing "forced labor" by the Corps. Compared with the previous ban, the ban this time from the Corps cotton expanded to Xinjiang cotton, the scope of the attack expanded. According to the survey data of China Cotton Information Network, in 2020/2021, Xinjiang's total cotton output was 5.35 million tons, an increase of 180,000 tons or 3.5% year on year, and the national total output was 5.892 million tons, an increase of 2.6% year on year. The cotton in Xinjiang accounted for 90.80% of China's cotton output in that year, and the proportion showed an upward trend in recent years. For the vast majority of domestic cotton spinning enterprises, Xinjiang cotton is an essential raw material, with only a few enterprises being the exception: one is the inland small textile mills that mainly use local cotton as raw material; Two is the pure use of printed cotton, cotton, Australian cotton as raw materials, or pure use of imported yarn enterprises. In a way, the ban is almost tantamount to an American rejection of Chinese cotton textiles.

With the dual limitations of technical power, it is almost impossible to implement the ban

On closer inspection, however, the odds of the ban being enforced are slim. The first is the technical challenge. After inquiry and investigation, the source country of cotton is relatively easy to judge. There are some differences in cotton length, impurity, consistency and other indicators among different countries. However, it is extremely difficult to judge the source of some fibers after cotton textile products, such as garments, are made. Some agencies have not yet been asked to do so, and even with such technology, the cost is expected to be extremely high. Regardless of whether the United States has such technical conditions and whether the technology is universal in the customs, only considering the current epidemic background, customs of all countries are strictly checking whether imported articles carry novel coronavirus, such behavior already seems inconceivable. Instead of prioritising the outbreak and political turmoil at home, and spending money on relief for people and businesses in dire need, it seems a dry sense of humor that the United States should focus on testing imported cotton products for Xinjiang cotton at great cost. Moreover, the current imports from China have the advantages of high quality and low price, high safety and low risk of default, so we do not think the United States has the confidence to reject Chinese cotton textile products completely.

On paper, what does the United States want?

In the absence of practical significance, the United States prohibition declaration may serve several purposes:

First, we should impose further sanctions on institutions and enterprises in Xinjiang to disrupt China's internal affairs. Previous measures included, but were not limited to, the inclusion of the Xinjiang Production and Construction Corps on the SDN list and the ban on imports of cotton, clothing and other products from six Chinese enterprises or institutions.

Second, reduce the proportion of Chinese textile and garment imports to the United States. This operation is not the first time in history: the fifties and sixties, the Japanese cotton textile import market in the United States the proportion increase from 17.4% before 1951 to 60% in 1956 to more than, cheap imports down the textile industry in the United States, half a century of japan-us textile war begins, and finally to the Japanese government and the textile industry "voluntary export restraints (VER) and alleviate the day beauty of cotton goods agreement. In 2015, the US imported US $8.146 billion worth of textiles and clothing, of which US $3 billion was imported from China, accounting for 36.82% of the total US import. The U.S. Commerce Department intends to control the share of imports from China, which will be reduced to 33.41 percent in 2019. From January to November of 2020, the United States imported US $82.285 billion worth of textiles and clothing, down 20.32 percent year on year. Among them, imports from China amounted to US $23.175 billion, down 32.35%; $12.463 billion from Vietnam, down 6.64%; Imports from India were $6.194 billion, down 17.26%, with part of China's orders shifting to India and Vietnam. Such restrictions and transfers continue to occur in recent years, Xinjiang cotton after the full implementation of the ban may accelerate the transfer.

Third, use external conflicts to shift the focus of domestic contradictions, making it more difficult for Biden to take office. It is a common practice of many countries in history to transfer domestic contradictions to international ones and relieve the pressure on the domestic ruling party. By imposing sanctions on Xinjiang cotton at this time, the Trump administration can also shift the counterattack pressure of subsequent Chinese governments to the new Biden administration after January 20, thus killing two birds with one stone. But it could also be a bargaining chip for the Biden administration to thaw relations with China.

So how much is the ban on cotton from Xinjiang likely to reduce cotton consumption? A rough calculation provides a reference: China's domestic demand for cotton consumption and foreign trade account for 50% respectively. Assuming that the proportion of foreign trade increases to 55% during the epidemic period, the proportion of textile and garment exports to the United States will account for 16.98% of China's exports in 2019, which will further decrease during the epidemic period. Suppose America expects China's share to fall from 30% to 20%(it has fallen by less than 1% a year on average in the past). That would cut its imports by a third. Given China's annual consumption of 8 million to 9 million tons, such an adjustment would reduce cotton consumption by about 220, 000 to 247,500 tons, and is unlikely to be completed within a year.

If China continues to buy cotton from the United States and drives ICE cotton prices up, while domestic cotton stabilizes or even falls around 15,000 yuan/ton, the difference between domestic and foreign cotton prices is expected to shrink to less than 800 yuan/ton, thus opening the window of buying and storing. In addition, according to the announcement of the National Food and Physical Reserves Administration, the purchase and storage target for this year is around 500,000 tons.