The relationship between the US and China in the cotton trade is undergoing a significant shift due to various factors, including the ban on imports from China's main cotton-growing region and the impact of forced labor allegations.

Shifting Balance in US-China Cotton Trade

The decline in cotton imports from China has affected US cotton farmers who were already struggling with lower prices and drought.

Impact on US Cotton Farmers

China, as the world's largest grower and processor of cotton, plays a crucial role in the global cotton supply chain. However, other countries like Vietnam, Pakistan, and Bangladesh have been increasingly importing raw cotton and sending it to China for processing.

China's Role in the Cotton Supply Chain

Tracing the origin of cotton becomes challenging as it goes through a complex supply chain. Companies are using various methods like chemical analysis and DNA testing to determine the source of cotton, especially to avoid using cotton from Xinjiang.

Challenges in Tracing the Origin of Cotton

The use of forced labor in China and the import of goods made from such labor have had a severe economic impact on the US domestic textile industry. Enforcement of the ban on such goods has been insufficient, leading to concerns about unfair competition.

Impact on US Domestic Textile Industry

There are loopholes in the enforcement of the ban on goods containing banned cotton from China. The de minimis rule allows shipments worth under $800 to enter the US without tariffs or extensive paperwork, providing an opportunity for banned cotton to enter the country.

Loopholes and Challenges in Enforcement

While the ban on imports from China's main cotton-growing region has had some positive impact on US cotton prices and export demand, it has not been enough to offset the long-term decline of the US cotton industry.

Long-Term Decline of US Cotton Industry

- The US and China are major cotton producers and have a strong trade relationship in cotton.
- The US banned imports of cotton from China's Xinjiang region due to human rights concerns.
- This ban has had a significant impact on the cotton market, causing US cotton prices to surge and leading to a decline in Chinese imports of American cotton.
- China remains a key player in the cotton supply chain, but other countries like Vietnam, Pakistan, and Bangladesh have been importing raw cotton and sending it to China for processing.
- It is difficult to trace the origin of cotton throughout the supply chain, making it easier for companies to bypass import restrictions.
- China is also a leading producer of finished cotton goods, while the US imports a majority of its cotton textiles and apparel.
- The ban on Chinese cotton has had an economic impact on the US textile industry, as American businesses struggle to compete with goods made by forced labor in China.
- Enforcement of the ban has been insufficient, with only a few dozen shipments stopped per month.
- Some companies use chemical and DNA testing to trace the origin of cotton, but it is a complex process.
- Retailers like L.L. Bean and Mango have cut out China from their supply chains, but many goods may still be processed or made in China and exported through another country.
- A loophole in trade data allows China to ship goods containing banned cotton into the US through a rule called de minimis.
- Some lawmakers are seeking to modify this rule to protect US cotton growers and address the decline in the US cotton industry.

The U.S. and China are two of the world’s biggest cotton producers. In 2021, President Biden signed a law banning many cotton imports from China out of concerns that most of the crop is grown and harvested by forced labor in Xinjiang. But industry experts say much of that cotton is still entering the U.S. as the chemical component and DNA of the cotton is being tested to validate supply chains.

WSJ explains how the U.S.’s effort to stamp out forced labor has affected the cotton market and unpacks the complexity of the supply chain to explain why the U.S. is struggling so hard to compete against Beijing. 

0:00 The cotton situation
1:21 Cotton processing
2:42 Finished goods
4:31 Verification
7:12 What’s next?

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The US and China are 2 of the world's biggest cotton producers.

The US exports most of its cotton and its biggest customer is China, which bought nearly $3 billion of American cotton last year.

At the same time, China exports the largest share of its finished textiles to the U.S.

But the balance of that relationship is shifting.

In 2021, President Joe Biden signed a law banning imports from China's main cotton-growing region, Xinjiang, home of millions of Uyghurs and other ethnic minorities.

Human rights groups have accused China of detaining as many as 1 million people and forcing them into labor, which China has repeatedly denied.

The impact of banning this cotton in China can't be overstated.

Cotton prices surged after many American companies scrambled for new cotton sources.

China even started importing more American cotton since lots of its domestic supply couldn't be used for goods sent to the U.S.

But now those imports have been declining.

Cotton farmers were already struggling due to lower prices and drought.

And because China is so enmeshed in the cotton supply chain, plenty of Xinjiang cotton is still making it into the U.S., according to companies that do forensic testing of cotton apparel.

Effort to stamp out forced labor has impacted the cotton market in both countries.

Grows about 12 percent of the world's cotton.

China grows more than double that, about 26 percent.

And China isn't just the world's biggest grower of cotton.

The garment processing, textile processing industry really isn't based that much in the United States anymore.

China is a big destination, but then you also have Bangladesh, Vietnam, Sri Lanka.

According to estimates from December 2022, China milled about 35.5 million bales of cotton last year.

China has remained a key player in the cotton supply chain, but its role has been shifting.

More and more, other countries like Vietnam, Pakistan and Bangladesh have been importing raw cotton, milling it into yarn and then sending the yarn to China.

It is kind of tough to know where exactly your cotton is coming from.

I think the way that a lot of these facilities work, it's really tough to audit whether or not a Chinese mill, for example, is using cotton that's come from Xinjiang or from elsewhere in the world.

As cotton gets cleaned, purified and finished via a complicated supply chain, it becomes harder and harder to know where the original cotton came from, which makes it easier for companies to dodge import restrictions.

Then there's the final stage of the process, using yarn or fabric to make the finished goods.

Imports of cotton products from China have decreased over the last decade, though the country is still the biggest source of U.S.

The U.S., meanwhile, makes few of its own finished goods.

1 trade group found less than 3 percent of apparel sold in the U.S.

Last year was produced domestically, though those figures weren't specific to cotton.

We live in a hyper globally competitive marketplace.

You've seen a decimation of critical aspects of our industry.

Kim Gloss is the president and CEO of the National Council of Textile Organizations, which represents domestic manufacturers.

She says goods made by forced labor in China make it impossible for American businesses to compete.

In the cotton supply chain, it's pennies that moves and shifts production globally from 1 country to another.

And particularly on the areas of Xinjiang and forced labor associated with those cotton supply chains, that has had a severe economic impact on the U.S.

Importers have to document the products they're bringing into the U.S.

But this doesn't always tell the whole story.

Customs and Border Protection detains some goods that its risk assessment tools flag as potentially illegal.

And importers are required to present additional documentation to get them released.

But some, like Glass, say enforcement of the ban has been insufficient.

The numbers are completely underwhelming on enforcement activities.

We're talking about thousands and millions of packages coming in that contain apparel items.

We should be seeing stopped shipments off the port of LA every day.

The clearest way to know where an item comes from is to test its chemical components and DNA.

Customs test some imports, but many companies also do their own to validate their supply chains.

Cotton is a plant and it has to, just like you and I, take in nutrients.

So you can analyze those nutrients to get an idea of where the plant was grown.

Applied DNA Sciences is a biotech company based on Long Island.

It specializes in supply chain tracing, as well as genetic testing and therapeutics.

have 2 different colors of the same shirt submitted by the same client.

1 of them tested clearly as being from Brazil, and it matched with our library Brazilian samples, while the other 1 matched with Xinjiang.

And there would be no way on a rack to tell.

They would be right next to each other, a black and a white shirt.

They also do DNA tagging, spraying a molecular tag onto raw fibers at the cotton gin, so companies can track their raw cotton through the supply chain.

About 14 or 15 percent of the finished goods we test show evidence of Xinjiang cotton.

We tell the people who have asked us to test that product and then they have to push harder on their supply chain.

Given the complexity of ensuring goods from China don't contain Xinjiang cotton, retailers like L.L.

Bean and Mango have cut out China completely.

You see brands moving their operations to get around China in general because they don't want to run into a situation where they can't sell in the U.S.

You see them moving, these companies moving their supply chains out of China to places like Vietnam or Bangladesh, Sri Lanka, you know, all the names that you see when you look at the back of your shirt.

But this is missing a major part of the story.

According to experts, many of these goods may have been processed or even made in China, but are being exported to the U.S.

Another thing trade data misses is a loophole that many industry experts say allows China to ship goods containing banned cotton into the U.S.

A huge number of shipments from China arrive through a rule called de minimis, which allows shipments worth under $800 to come into the U.S.

Without incurring tariffs or requiring as much paperwork.

This is significantly higher than the de minimis limit for imports to China, which is just 50 yuan, less than $7.

Some lawmakers are trying to modify this rule to keep banned Chinese cotton out and level the playing field for U.S.

Cotton growers, who have already been dealing with decreasing prices and drought.

The Uyghur Forced Labor Protection Act is ultimately designed to clamp down on forced labor, but it also has major bearings on the U.S.

Theoretically, when the ban first came into place, U.S.

Cotton growers were really hoping that that would give cotton prices in general a boost, would give export demand a boost, which it has to some extent.

But ultimately, it hasn't been enough, at least so far, to offset the long-term decline of the U.S.


Speaker 0: The US and China are 2 of the world's biggest cotton producers. The US exports most of its cotton and its biggest customer is China, which bought nearly $3 billion of American cotton last year. At the same time, China exports the largest share of its finished textiles to the U.S. But the balance of that relationship is shifting. In 2021, President Joe Biden signed a law banning imports from China's main cotton-growing region, Xinjiang, home of millions of Uyghurs and other ethnic minorities.

Human rights groups have accused China of detaining as many as 1 million people and forcing them into labor, which China has repeatedly denied.

Speaker 1: The impact of banning this cotton in China can't be overstated.

Speaker 0: U.S. Cotton prices surged after many American companies scrambled for new cotton sources. China even started importing more American cotton since lots of its domestic supply couldn't be used for goods sent to the U.S. But now those imports have been declining. This comes at a time when U.S.

Cotton farmers were already struggling due to lower prices and drought. And because China is so enmeshed in the cotton supply chain, plenty of Xinjiang cotton is still making it into the U.S., according to companies that do forensic testing of cotton apparel. Here's how the U.S. Effort to stamp out forced labor has impacted the cotton market in both countries. The U.S.

Grows about 12 percent of the world's cotton. China grows more than double that, about 26 percent. And China isn't just the world's biggest grower of cotton. It's a key processor of it, too.

Speaker 1: The garment processing, textile processing industry really isn't based that much in the United States anymore. So it goes overseas. China is a big destination, but then you also have Bangladesh, Vietnam, Sri Lanka.

Speaker 0: According to estimates from December 2022, China milled about 35.5 million bales of cotton last year. The U.S. Milled about 2.3 million bales. China has remained a key player in the cotton supply chain, but its role has been shifting. More and more, other countries like Vietnam, Pakistan and Bangladesh have been importing raw cotton, milling it into yarn and then sending the yarn to China.

Speaker 1: It is kind of tough to know where exactly your cotton is coming from. I think the way that a lot of these facilities work, it's really tough to audit whether or not a Chinese mill, for example, is using cotton that's come from Xinjiang or from elsewhere in the world.

Speaker 0: As cotton gets cleaned, purified and finished via a complicated supply chain, it becomes harder and harder to know where the original cotton came from, which makes it easier for companies to dodge import restrictions. Then there's the final stage of the process, using yarn or fabric to make the finished goods. China also leads here. U.S. Trade statistics suggest U.S.

Imports of cotton products from China have decreased over the last decade, though the country is still the biggest source of U.S. Cotton textiles and apparel. The U.S., meanwhile, makes few of its own finished goods. 1 trade group found less than 3 percent of apparel sold in the U.S. Last year was produced domestically, though those figures weren't specific to cotton.

Speaker 2: We live in a hyper globally competitive marketplace. You've seen a decimation of critical aspects of our industry.

Speaker 0: Kim Gloss is the president and CEO of the National Council of Textile Organizations, which represents domestic manufacturers. She says goods made by forced labor in China make it impossible for American businesses to compete.

Speaker 2: In the cotton supply chain, it's pennies that moves and shifts production globally from 1 country to another. And particularly on the areas of Xinjiang and forced labor associated with those cotton supply chains, that has had a severe economic impact on the U.S. Domestic textile industry.

Speaker 0: Importers have to document the products they're bringing into the U.S. But this doesn't always tell the whole story. U.S. Customs and Border Protection detains some goods that its risk assessment tools flag as potentially illegal. And importers are required to present additional documentation to get them released.

But some, like Glass, say enforcement of the ban has been insufficient.

Speaker 2: The numbers are completely underwhelming on enforcement activities. A few dozen shipments stopped per month. We're talking about thousands and millions of packages coming in that contain apparel items. We should be seeing stopped shipments off the port of LA every day.

Speaker 0: The clearest way to know where an item comes from is to test its chemical components and DNA. Customs test some imports, but many companies also do their own to validate their supply chains.

Speaker 3: Cotton is a plant and it has to, just like you and I, take in nutrients. So you can analyze those nutrients to get an idea of where the plant was grown.

Speaker 0: Applied DNA Sciences is a biotech company based on Long Island. It specializes in supply chain tracing, as well as genetic testing and therapeutics. We

Speaker 4: have 2 different colors of the same shirt submitted by the same client. Both claim to be from Brazil. 1 of them tested clearly as being from Brazil, and it matched with our library Brazilian samples, while the other 1 matched with Xinjiang. And there would be no way on a rack to tell. They would be right next to each other, a black and a white shirt.

Speaker 0: They also do DNA tagging, spraying a molecular tag onto raw fibers at the cotton gin, so companies can track their raw cotton through the supply chain.

Speaker 3: About 14 or 15 percent of the finished goods we test show evidence of Xinjiang cotton. We tell the people who have asked us to test that product and then they have to push harder on their supply chain.

Speaker 0: Given the complexity of ensuring goods from China don't contain Xinjiang cotton, retailers like L.L. Bean and Mango have cut out China completely.

Speaker 1: You see brands moving their operations to get around China in general because they don't want to run into a situation where they can't sell in the U.S. You see them moving, these companies moving their supply chains out of China to places like Vietnam or Bangladesh, Sri Lanka, you know, all the names that you see when you look at the back of your shirt.

Speaker 0: But this is missing a major part of the story. According to experts, many of these goods may have been processed or even made in China, but are being exported to the U.S. Via another country. Another thing trade data misses is a loophole that many industry experts say allows China to ship goods containing banned cotton into the U.S. A huge number of shipments from China arrive through a rule called de minimis, which allows shipments worth under $800 to come into the U.S.

Without incurring tariffs or requiring as much paperwork. This is significantly higher than the de minimis limit for imports to China, which is just 50 yuan, less than $7. Some lawmakers are trying to modify this rule to keep banned Chinese cotton out and level the playing field for U.S. Cotton growers, who have already been dealing with decreasing prices and drought. The Uyghur Forced Labor Protection Act is ultimately designed to clamp down on forced labor, but it also has major bearings on the U.S.

Cotton industry.

Speaker 1: Theoretically, when the ban first came into place, U.S. Cotton growers were really hoping that that would give cotton prices in general a boost, would give export demand a boost, which it has to some extent.

Speaker 0: But ultimately, it hasn't been enough, at least so far, to offset the long-term decline of the U.S. Cotton industry.

Speaker 3: You

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How Banning Most Chinese Cotton Has Shifted Global Supply Chains | WSJ U.S. vs. China