18 May 1954
The Liverpool Cotton Market officially reopens
A change of government in 1951 offered hope to the Liverpool Cotton Association, as the Conservative Party was more sympathetic…
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The War sealed the Liverpool Cotton Market’s fate. U-boat attacks and the bombing of ports and cities threatened cotton supplies and resulted in drastic action. The Government took responsibility for purchase and distribution and the Liverpool Cotton Futures Market closed. After the War the Raw Cotton Commission became the sole importer and distributor of cotton. The Cotton Market reopened in 1954, but as a shadow of its former self. In 1963 the Liverpool Cotton Association successfully reinvented itself and re-energised its membership, concentrating on the provision of specialist services such as arbitration. The Association became increasingly global in its outlook and this was reflected in its name change in 2004 to the International Cotton Association.
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Whereas the Liverpool Cotton Association had been able to continue with ‘business as usual’ during the First World War, it was quickly apparent that this was not the case in 1939. The German U-boats proved to be a much greater threat to merchant ships in the Atlantic in this war and the bombing of the major ports and cities during the Blitz was unprecedented, as people were killed and injured in their thousands and buildings and warehouses were destroyed on a huge scale. Cotton supplies became increasingly precarious and desperate circumstances required drastic action.
The British Government took responsibility for the purchase and distribution of all cotton supplies and revived The Cotton Control which had operated in the previous war. Those in the cotton industry recognised that the government had been left with little choice. As a pamphlet produced by cotton representatives just after the war put it: "It is appreciated that the very special and desperate circumstances of the war afforded an excuse for unsatisfactory transactions and arrangements which in peace conditions would be unlikely to occur whatever organisation was used to supply cotton to the Lancashire spinner. The obtaining of any cotton, suitable or unsuitable, even at very great loss to the Exchequer, could no doubt be justified in the circumstances." At 12 noon on 31st March 1941, the last prices were made in the ring at the Liverpool Cotton Exchange. Everyone presumed that the market would re-open as soon as the war ended. But in reality, it was the end of an era.
A somewhat shocked Vice-President of the Liverpool Cotton Association, Walter R Brownwell, reported to the members the result of his interview with the President of the Board of Trade. The Atlee Government, elected just after the cessation of hostilities, was determined to continue to be responsible for the purchase of all raw cotton; and to achieve this, it would create a new permanent organisation, the Raw Cotton Commission, to the complete exclusion of the Liverpool Cotton Association. Cotton, it seemed, was now a party-political issue.
The Liverpool and Manchester Cotton Associations did their best to dissuade the government from its course of action. On 2nd November 1945, they produced a memorandum addressed to the Board of trade, entitled The Import of Raw Cotton into the United Kingdom. The paper included a memorandum submitted by the Federation of Master Cotton Spinners’ Associations Ltd, and a string of telegraph cables from representatives of cotton-growing countries and marketing centres from around the world all supporting the notion of a return to the situation that had prevailed before the war. Its recipient, Sir Stafford Cripps, described the memorandum as having presented "a very good case deserving of the most careful consideration".
In essence, the pamphlet made a case for a system of free enterprise to a government whose outlook favoured state control. The result was probably inevitable. On 28th March 1946, the motion "That this House regrets the decision of His Majesty’s Government not to reopen the Liverpool Cotton Market and considers that the system of bulk purchase under state control will hamper the manufacturer, increase the cost of cotton to the consumer and deprive this country of a valuable source of foreign exchange" was defeated by 337 votes to 186.
The Liverpool Cotton Association continued to press its case. Responding to a speech made on 3 May 1946 by David Marquand, the Parliamentary Secretary to the Board of Trade, the Association produced another pamphlet, this time with the more provocative title A Warning to the Taxpayer: the destruction of a national asset. Whereas the first pamphlet had been measured and rational, the desperation of the situation led to language that was somewhat more direct. The opening paragraph spelled out the position clearly:
"The importation of raw cotton is a highly scientific business and it is therefore not altogether surprising that the uninitiated should hail Mr Marquand’s speech at Blackpool on the 3rd of May as a conclusive argument that the Government’s proposed new system can successfully replace the service rendered by the Liverpool and Manchester merchants, backed by the intricate and efficient machinery of the Liverpool market. In order to refute these ill-informed statements and prejudiced opinions, a replay is made seriatim to each point of Mr Marquand’s speech which is reproduced below."
The pamphlet reproduced extracts from sections of the American press, including an article entitled The Twilight of the Free Market by the New York Times, which wrote that
"The Liverpool Cotton Market before the last war was the centre of the greatest single international market. Every drought or rain, every local rise or fall of demand, every item in the composite information of thousands of cotton specialists all over the world, registered itself hourly on the delicate seismograph known as the Liverpool Cotton Market. This wonderful mechanism is now to be thrown aside permanently so that some government official can substitute his own judgment of what British buyers should pay for cotton."
This echoed the provocative question asked elsewhere in the pamphlet: "Did the Electors give to the Government a mandate to damage our national and international interests to this extent and to compel the Taxpayer to undertake all the hazards of a risk-bearing business for the sake of trying out an ill-informed political theory?"
In June 1946, Walter Brownwell, now President of the Liverpool Cotton Association, wrote directly to the Prime Minister, Clement Atlee to present his case. In addition to arguing on economic grounds, he also appealed to Atlee to consider the effect the decision to set up the Raw Cotton Commission would have on the employment prospects for the members of the cotton trade. He pointed out that
"In your recent speech to the Labour Party Conference at Bournemouth, you mentioned ‘Justice for All’ as one of your party’s principles. I ask you to live up to it." In his reply, Atlee acknowledged "that centralised purchase and the disappearance of the futures market will mean a reduction of the numbers employed in the cotton market. I regret that any cases of hardship should arise, but…the government feel that their decision is one which should be made in the broader interests of the cotton market and the nation."
A change of government in 1951 offered hope to the Liverpool Cotton Association, as the Conservative Party was more sympathetic to the idea of free enterprise than the previous government. The Cotton Bill of 1953 incorporated within it the reopening of the Liverpool Cotton Market and the bill received its Royal assent on 17th April the following year. The market was officially reopened on 18th May by the Earl of Derby, witnessed by over 1,500 members, staff and guests, including over 400 leaders of the cotton trade from thirty countries from around the world.
Although trade increased quite considerably, the trading conditions were very different from those prevailing before 1939. Subsidies, duties and currency imbalances became increasingly common and meant that, effectively, there was no longer a world price for cotton, as cottons of equal value in quality could command widely differing prices according to their country of origin and destination. This resulted in a sharp decline in the Futures Market, which meant a contraction of the merchant element in the cotton market. Firms merged, as indeed did those in the milling industry, which reduced the number of buying and selling brokers. In short, the industry contracted, with serious consequences for the Liverpool Cotton Association.
The Association found itself faced with a reduction in income and a smaller number of members available to carry out those services carried out on its behalf – arbitration, appeals, value quotation committees. In 1961, a Reorganisation Committee reviewed the situation and concluded that the heart of the problem lay in the structure of the membership, which was too rigid. It was a Limited Liability Company with two types of members – Full and Restricted – with shares and votes restricted to full members. An increasing proportion of members held that status somewhat reluctantly – there was no share dividend, the shares’ value had depreciated and holding them made members liable to an annual membership subscription. A new type of membership was required if the Association was to survive.
As a result, the constitution was amended accordingly and on 27th February the Liverpool Cotton Association became incorporated as a company limited by guarantee. Restricted membership was discontinued and full membership was made available "to individuals or companies…who are resident…in the United Kingdom and engaged as principals in the raw cotton trade." Associate membership was available to individuals or companies, whether resident in the UK or elsewhere and engaged in any form of cotton or textile trading. An annual subscription replaced share-holding, which helped to ensure that the membership would be an active one.
It was recognised that the Futures Markets were unlikely to return to their former importance and that the role of the new Association would be centred around the provision of expert services that Liverpool had built up over many years of experience. The Liverpool Cotton Association Rules had been developed and maintained over a very long period and were the most comprehensive code of trading rules in the cotton world. The name of the organisation remained the Liverpool Cotton Association, but its outlook was international. In 1976, the LCA President, in an address to the American Cotton Co-operative Association, noted that the Association
"has become increasingly international in its interests and objectives and membership. It is estimated that 70% of the world exports of raw cotton, to a value of approximately $3,700 million, is today sold under ‘Liverpool Arbitration’ or ‘LCA Rules’. About 20% is traded through the Liverpool Market, and 80% of the amount so traded ($650 million) is for shipment to destinations outside the UK."
On 23 September 2004, Liverpool Cotton Association's members approved the resolution to change the Association's name to the International Cotton Association Ltd. The following month, on 8 October, at the Association's annual trade dinner, in the magnificent surroundings of Liverpool's historic St George's Hall, to an audience of more than 830 international cotton industry guests, the Liverpool Cotton Association's President, Mr Andrew Macdonald OBE, made the following announcement during his after dinner speech:
"We wasted no time... in analysing the advantages and disadvantages of altering our name from the traditional Liverpool Cotton Association to the International Cotton Association. We sought guidance from our American colleagues, we consulted with the trade leaders here in Liverpool, we consulted with anybody we met from other countries and we were impressed with the support and encouragement that we received...so much so that we came to the conclusion that we should take the step sooner rather than later. The sanctity of our contracts and the enforcement of arbitration awards must be foremost in our minds. We are convinced that by creating the possibility of enlarging our Association's presence and therefore its influence throughout the world is the way forward. The change will allow other associations to join with us in using harmonised rules and this will ensure a world standard. By using similar international rules, with a strong international arbitration system, will give us a better umbrella of protection to ensure correct completion of contracts. We open the door to new members; we have a new platform to attract smaller organisations; we can attract more international spinner members; and we open the door for additional international Board Members to assist in the governing of the Association. By altering our name we are making a statement to the world. We are the internationally recognised arbitral body for cotton and by increasing the membership we shall increase the strength of our Association."
It was agreed that the ICA would represent the identical vales of the Liverpool Cotton Association; the Rules and Bylaws would not be changed, but continue to be based on traditional English Law and the Arbitration Act of 1996; the headquarters would remain in Liverpool.
On 9 December 2004, at the Association's Annual General Meeting, the International Cotton Association's (ICA) new name became effective
