Cotton exports have US textile industry seeing red

There is a storm rising over Red threads. The Soviet Union and the United States will clash this week on the cotton fields.

The Soviets are shipping cotton fabric to US importers at prices that the US industry terms ``dumping levels.'' The importers sell the bolts, which are unfinished, to converters who dye and finish them to popular colors before shipping them to apparel manufacturers. For the most part, the Soviet threads are used in women's sports clothes.

The prospect of Americans walking around in Soviet cloth has galvanized some powerful legislators. Sen. Strom Thurmond (R) of South Carolina calls it ``a shocking development.''

He has written US Trade Representative Clayton Yeutter demanding ``prompt and decisive action to ensure this development does not jeopardize our domestic market.''

The superpower textile flap comes at a bad time. Protectionist textile legislation, which the administration opposes, is working its way through Congress. Last week a House trade subcommittee passed it.

The Soviet move will not help the Reagan administration, which the industry claims has dragged its feet since being notified in May. According to the American Textile Manufacturers Institute (AMTI), the Soviets are selling their goods at 31 cents per square yard compared with the 71 cents per square yard that US companies receive.

``The Russians are the cheapest supplier,'' says Charles Bremer, an ATMI official.

This week administration sources say they will make a decision on whether to ban Soviet cloth, or continue the negotiations that took place two weeks ago. Those talks ended without any agreement.

``We can wait and negotiate with them and then take action,'' one administration official says.

According to one person present at the negotiations, ``It was right out of central casting: They [the Soviets] were the most dour people you have ever seen,'' he says.

The Soviet invasion is upsetting the US trade bureaucracy. The US has textile quotas for major importers such as Taiwan, Japan, and Hong Kong. There are quotas for Hungary, Poland, Bulgaria, and most of the other East-bloc countries. The People's Republic of China is part of the quota system.

But there are no quotas for the Soviets, who generally buy textiles from the US. Last year the US had a $640 million trade surplus with the Soviets, including a textile surplus.

According to administration sources, who preferred not to be identified, the Soviets have hinted that they may have to cancel their purchase of US grains if they can't ship cotton fabric here.

``It wouldn't surprise me,'' says Joe Halow, executive director of the North American Grain Export Association. He notes that the US export subsidy program of $1.5 billion is almost totally used up anyway.

Without the subsidy, the Soviets will find US grains too expensive to buy, making the threat partly an empty one.

The ATMI is afraid that the administration is linking the trade dispute with larger global issues, such as arms control.

``How else could we let the Russians run roughshod over us?'' asks Mr. Bremer.

The Soviets have been attracted to the US market because cotton prices in the past year have more than doubled.

The rise followed a complete collapse in prices after the US ended its support program in August 1986, dropping the price US cotton farmers received to the world level. With prices low, buying was brisk.

At the same time, the People's Republic of China consumed 6 million bales of cotton that the markets had expected the country to export. Thus, says Dean Ethridge, director of economic services for the National Cotton Council, ``cotton prices are hitting a crest at this time.'' Last Thursday cotton reached 73.47 cents per pound on the spot market.

The high prices are attracting imports from such nontraditional sources as Nigeria, Zimbabwe, the Ivory Coast, and Lesotho.

But it is the Soviet shipments that have received the most attention from government trade officials. US officials estimate the Soviets shipped about 7 million square yards of cloth through May. But there is a lag in customs reporting, so the actual amount may be between 14 million and 15 million square yards. In June, the ATMI estimates 4 million square yards piled in.

Some of this fabric, which has a tariff rate double that of countries that enjoy most-favored-nation status, was mislabeled and is now being held by customs until it is properly tagged.

Although this is small in a market of 1.5 billion square yards, one US official says, ``You have to consider what might come and how that will affect the situation here.''