Until the trade dispute between the United States and China is resolved, US cotton imports to China continue to be subject to the additional 25% tariff imposed in July 2018. The United States is expected to remain the world’s largest cotton exporter with a projected 3.3 million tonnes to be exported in 2018/19, while China is expected to remain the the world’s largest cotton consumer at an estimated 8.45 million tonnes in 2018/19. China is expected to produce 6 million tonnes of cotton this season, import an additional 2 million tonnes and use reserve quantities to meet consumption demand. As land rent and labour costs have continued to rise in China, growth in cotton production is restricted, and thus the import volume of cotton has continued to increase over the last several season. Total cotton imports in China are expected to increase 47 % from 1.3 million in 2017/18 to near 2 million tonnes in 2018/19. Longer term growth projections are limited for cotton production in China and consumption while projected to slowly decline would still require a high volume of imports.
From August 2017 to March 2018, China had imported approximately 60 % of the total 560000 tonnes of US cotton imported over the entire 2017/18 season. From August 2018 to March 2019, China has imported only 180000 tonnes of US cotton, on pace for a possible total near 250000 tonnes from the United States for the 2018/19 season. Other major exporting countries have increased quantities to China with Australia exporting through March 2019 440000 tonnes, exceeding already the 280000 tonnes of the 2017/18 season total. Brazil has exported 380000 tonnes through March 2019, exceeding the 82000 tonnes of the 2017/18 season total. Imports to China have increased from almost all other countries including India, Benin, Sudan, Greece, Cameroon, Burkina Faso and Mali.
As required by the WTO, China administers a tariff rate quota of 894000 tonnes per year subject to a 1 % tariff. Earlier this month, on April 12, the National Development and Reform Commission of China approved a cotton sliding tariff import quota of 800000 tonnes for 2019. The quotas for additional import quantities of cotton will be distributed by the NRDC through an application process. Subsequently, China also announced that the reserve auction will begin on May 5 and run through September 30 with reserves being offered in 10,000 tonne quantities each day while in previous seasons 300000 tonnes have been offered per day. While reserves may release additional quantities of cotton to the market, the quality of the cotton being offered will need to be considered as the auction may serve to rebalance and refresh the state reserve.