Question

What was the two-price cotton policy? How did this affect U.S. textile producers?

Answer 1

US Federal law established the dual price of cotton. To address the problem of production surplus and to encourage export government started to give subsidy to the foreign buyers.

As the foreign buyers got the subsidy on the principle material and with the help of cheap labour force, they started to sell it at low price in the US market for which US domestic producers started to face a tough competition.

It affected the US textile producers, but it had both positive and negative points.

Cons-

1. Prices of the cotton goods declined.

2. Production of the cotton fabrics dropped.

3. Domestic producers started to blend manmade fibres with natural cotton.

For those reasons textile producers faced loss as it affected supply of cotton or meterials made from cotton in the market.

Pros-

1. More R&D started over cotton to make it more acceptable to consumers.

2. Stated to work on design, smoothness, and elasticity to make it attractive to consumers.

3. Structural changes were made to the cotton industries, which helped them to address specific problems.