SPEAKERS CONTENTS INSERTS
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58–228 CC
1999
1999
ECONOMIC SANCTIONS AND THE EFFECT ON U.S. AGRICULTURE
HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
JUNE 9, 1999
Serial No. 106–26
Printed for the use of the Committee on Agriculture
COMMITTEE ON AGRICULTURE
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LARRY COMBEST, Texas, Chairman
BILL BARRETT, Nebraska,
Vice Chairman
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
SAXBY CHAMBLISS, Georgia
RAY LaHOOD, Illinois
JERRY MORAN, Kansas
BOB SCHAFFER, Colorado
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
JOHN COOKSEY, Louisiana
KEN CALVERT, California
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
GREG WALDEN, Oregon
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MICHAEL K. SIMPSON, Idaho
DOUG OSE, California
ROBIN HAYES, North Carolina
ERNIE FLETCHER, Kentucky
CHARLES W. STENHOLM, Texas,
Ranking Minority Member
GEORGE E. BROWN, Jr., California
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
VIRGIL H. GOODE, Jr., Virginia
MIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
CHRISTOPHER JOHN, Louisiana
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LEONARD L. BOSWELL, Iowa
DAVID D. PHELPS, Illinois
KEN LUCAS, Kentucky
MIKE THOMPSON, California
BARON P. HILL, Indiana
Professional Staff
WILLIAM E. O'CONNER, JR., Staff Director
LANCE KOTSCHWAR, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director
(ii)
C O N T E N T S
Barrett, Hon. Bill, a Representative in Congress from the State of Nebraska, prepared statement
Combest, Hon. Larry, a Representative in Congress from the State of Texas, opening statement
Hilliard, Hon. Earl F., a Representative in Congress from the State of Alabama, prepared statement
Stabenow, Hon. Debbie, a Representative in Congress from the State of Michigan, prepared statement
Stenholm, Hon. Charles W., a Representative in Congress from the State of Texas, opening statement
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Witnesses
Amstutz, Daniel G., president and chief executive officer, North American Grain Export Grain Association, Inc.
Prepared statement
Cleberg, Harry, president and chief executive officer, Farmland Industries, Inc.
Prepared statement
Eizenstat, Hon. Stuart, Under Secretary, Economics, Business, and Agricultural Affairs, U.S. Department of State
Prepared statement
Glickman, Hon. Dan, Secretary, U.S. Department of Agriculture
Prepared statement
Hillman, David, vice-president, Arkansas Farm Bureau Federation
Prepared statement
Nethercutt, Hon. George E. Jr., a Representative in Congress from the State of Washington
Prepared statement
Pine, Roger, president, National Corn Growers Association
Prepared statement
Sims, Wes, National Farmers Union
Prepared statement
Sneary, Loy, U.S. Rice Producers and U.S.A. Rice Federation
Prepared statement
Yost, Mike, president, American Soybean Association
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Prepared statement
Submitted Material
Cooksey, Hon. John, a Representative in Congress from the State of Louisiana, letter of July 2, 1999 to Secretary Glickman
ECONOMIC SANCTIONS AND THE EFFECT ON U.S. AGRICULTURE
WEDNESDAY, JUNE 9, 1999
House of Representatives,
Committee on Agriculture,
Washington, DC.
The committee met, pursuant to notice, at 10:01 a.m., in room 1300, Longworth House Office Building, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Barrett, Boehner, Ewing, Goodlatte, Smith, Lucas of Oklahoma, Chenoweth, Hostettler, Moran, Thune, Jenkins, Cooksey, Calvert, Gutknecht, Riley, Walden, Simpson, Ose, Stenholm, Condit, Peterson, Dooley, Clayton, Minge, Hilliard, Pomeroy, Holden, Bishop, Baldacci, Berry, Goode, McIntyre, Stabenow, Etheridge, Boswell, Phelps, Lucas of Kentucky, and Hill.
Staff present: Tom Sell, deputy staff director; Lynn Gallagher, senior professional staff; Greg Zerzan, associate counsel; Jason Vaillancourt; professional staff; Callista Bisek, scheduler/clerk; Wanda Worsham, chief clerk, and Andy Baker, minority consultant.
The CHAIRMAN. The hearing will come to order.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
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The CHAIRMAN. I appreciate everyone being here today.
I am pleased to welcome all of our committee's witnesses to this hearing on the effect of sanctions on U.S. agriculture.
Today the committee will hear from the Secretary of Agriculture, Dan Glickman, and Under Secretary of State for Economics, Business, and Agricultural Affairs, Ambassador Stuart Eizenstat.
This is Ambassador Eizenstat's first appearance before this committee. He will be moving over to the Treasury Department, subject to his confirmation by the Senate. We wish him well and hope that he will remember agriculture in his new position.
The use of economic sanctions is a subject that has captured the attention of all of us who are interested in the prosperity of our farmers and ranchers. We all can agree with the President's statement that food should not be used as a tool of foreign policy, and I especially welcome the administration's April 22 announcement regarding lifting of certain economic sanctions.
Food should not, under most circumstances, be used as a weapon. Such a policy ends up hurting our farmers and ranchers and all involved in agriculture production, processing, and distribution.
There are three things that can happen when agriculture sanctions go into effect; none of them are good. Exports go down; prices go down; and farmers and ranchers lose their share of world markets.
In 1980, the Soviet grain embargo was one example of the effects of sanctions on U.S. agriculture. Wheat sales were lost, and France, Canada, Australia, and Argentina stepped in and sold wheat to the former Soviet Union.
I believe it is time for a review of the agricultural sanctions policy of the United States. There are several bills that have been introduced regarding this subject. Mr. Ewing and Mr. Dooley are deeply involved in proposing such legislation.
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It is my judgment that, at the very least, agriculture commodities, including food, feed, and fiber, should be excluded from all future sanctions, and credit guarantees should be allowed for these commercial sales. Exceptions should be provided to the President for cases of national emergency.
The administration has addressed in some part to the six countries that are affected by U.S. trade sanctions. U.S. agricultural exports to Iran, Libya, Sudan, will be determined under the licensing system proposed on April 28. Commercial sales of food to Iraq are permitted under the UN Security Council resolution providing an exchange of oil for food. Cuba is covered by the President's January 1999 announcement regarding the sale of food and agriculture to independent, non-governmental entities. Exports of commercial goods, including food to meet basic human needs, are allowed to North Korea. In fact, the United States has promised donations of 600,000 tons of food aid to North Korea for this year.
We ought to ensure that food and agriculture are not included in any future sanctions or embargoes. I hope that Congress will act soon to reform our sanctions policies. Nevertheless, the administration has an opportunity to open markets for U.S. agriculture by quickly issuing the regulations to implement its April 28 announcement.
According to USDA, the impact of the sanctions currently in place has lost agriculture sales at least $500 million per year. I urge the administration to issue these regulations as soon as possible and in a form that can be implemented quickly by U.S. agricultural exporters.
Again, I appreciate all of our witnesses attending today, and I will recognize Mr. Stenholm for any opening comments he might make.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
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Mr. STENHOLM. Thank you, Mr. Chairman; and thank you for calling this hearing today to examine the effects of sanctions on U.S. agriculture. And I think that almost all of us here in the room today would agree that the effects have not been positive ones.
USDA's conservative estimate is that agriculture has lost $500 million in 1996 because of sanctions. That is not to say that all sanctions should be prohibited. We probably all agree that if faced with a choice between using an effective multilateral sanctions regime or using military force to accomplish our foreign policy goals, we would prefer multilateral sanctions.
The problem is that we have often been unable to agree with our allies on a multilateral sanctions regime and have instead resorted to ineffective unilateral sanctions that changed trade patterns but do not change the behavior of the targeted country.
The administration's most recent statement on sanctions policy correctly notes that food and other human necessities should not be used as tool of foreign policy, except under extraordinary circumstances. It also states that before we implement unilateral sanctions, we should ensure that they will contribute to U.S. foreign policy goals, and that the cost to U.S. interests are minimized.
I would like to focus for a moment on the cost of sanctions to U.S. agriculture. In its recent publication on sanctions, CBO downplays the costs of sanctions, stating that immediate costs to businesses and workers directly affected by sanctions appears great to them, but that benefits to other sectors of the economy will generally offset all of the loses they incur.
Applying the CBO analysis to the $500 million of lost agriculture sales in 1996 that I referenced a moment ago, it is difficult to find the benefits to other sectors referred to by CBO. This is because the $500 million is a net figure that has already taken into account any such benefits. The gross amount of the loss in 1996 was $1.3 billion. USDA reduced that amount by about two-thirds to account for the trade diversion to third-country markets. For example, if we do not sell wheat to Iran, Australia will. As a result, the amount of Australian product that goes to Iran will not be available for sale in other markets, generating an opportunity for U.S. sales in those markets. That $500 million net amount is not an offset. It is a loss to the American economy.
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CBO acknowledges in its report that there may be other cost consideration, but glosses over the issue. In agriculture, those other cost considerations are the long-term damage to our creditability and reputation. Our use of such sanctions undermines our creditability when we urge food-importing nations to rely on the marketplace to feed their people. Sanctions also undermine our reputation as a reliable supplier to our regular customers, creating opportunities for competitors such as Canada, the European Union, and Argentina to gain long-term market share. These are the other cost considerations that are not included in the $500 million that we know we lost in 1996 alone.
The CBO report also fails to address the cumulative fact of losses due to sanctions. For over 35 years, we have foregone sales of rice and pork to Cuba, once a major market for these products. This failed policy that has allowed Thailand and China to take the rice market and Denmark and the Netherlands to take the pork market in Cuba.
Today I am adding my name to the list of over 130 current cosponsors of H.R. 1644, Congressman Serrano's Cuban Food and Medicine Security Act of 1999, and I encourage my colleagues to join me in supporting this change to allow sales of food and medicine to Cuba.
Cuba is also an excellent example of why we need to enact reform legislation that improves the way we make decisions to impose unilateral economic sanctions. I believe that the Crane-Dooley sanctions reform bill will do just that, and I encourage my colleagues to join in cosponsoring that bill.
Again, thank you, Mr. Chairman, for holding this very important hearing today.
The CHAIRMAN. Thank you, Mr. Stenholm.
And as usually is the case, without objection, all statements of our colleagues on the committee will be entered into the record, as well as any additional information that witnesses wish to provide beyond their statements.
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[The prepared statements of Messrs. Barrett, Hilliard, and Ms. Stabenow follow:]
PREPARED STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Today, the members of the Committee on Agriculture will receive testimony regarding economic sanctions and the effect on U.S. Agriculture. I want to thank Chairman Combest for his continued leadership in this very important issue that faces our Nation's producers. It is very important that we strive to promote agriculture trade and strengthen the American family farm and ranch. As always, I would like to welcome Secretary Glickman to our committee. Mr. Secretary, it is a pleasure to have you here today.
The current stresses on our agricultural sector are affecting the financial situation of our farmers and ranchers today more than ever. Commodity prices are reaching record lows, especially corn, wheat, cotton, and soybeans. As we have painfully re-learned again in the past 18 months, our commodity prices are directly affected by supply/demand conditions. Specifically, the Asian financial crisis and the limitations on exports due to U.S. Government sanctions on a number of countries are having adverse effects on U.S. agricultural exports.
I am especially concerned about the effect of sanctions on U.S. agricultural trade. If we are in the business of selling our agricultural products to the world, why are we telling approximately two-thirds of our potential customers to go somewhere else? Trade sanctions are ineffective and only hurt American farmers and ranchers.
I commend the administration with its recent action that lifted sanctions on Libya, Sudan, and Iran. However, it is critical that the administration be more aggressive in helping U.S. farmers develop and maintain markets.
Congress' intent with the passage of the Freedom to Farm bill was USDA's full utilization of all tools available to enhance sales and discourage unfair competition. In order for the current farm bill to be successful, farmers must have a highly aggressive and focused export policy.
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As a committee, our members have expressed concern with trade sanctions in the past. Increasingly, more and more Members of the House of Representatives have come to realize the financial downside to economic sanctions. It is especially evident in agriculture that we must continue to open markets for our agriculture commodities.
It is important that we continue to review this very important issue as our producers face extremely low commodity prices. I look forward to hearing testimony from each witness present today.
PREPARED STATEMENT OF HON. EARL F. HILLIARD, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA
Thank you Mr. Chairman. I want to commend you on calling this important hearing today.
The policy of this country has been to impose unilateral sanctions against countries with which we have differences, these sanctions for the most part have been a complete, across the board, ban on trade or exchange in all areas.
I have seen first-hand that the practice of imposing unilateral sanctions, in the hope of crippling the leadership of a country failed. In most instances, those very leaders are the last to feel the impact of sanctions. Due to the enormous amount of power amassed by the heads of enemy states, the sanctions have a debilitating effect, not on the leadership, but on the citizens.
I have observed during my participation on several congressional delegations that sanctions have truly hurt the country itself, and not the leadership.
In the context of this hearing today, Mr. Chairman, the U.S. policy of sanctions has had a devastating effect on the agriculture community. in conversations with the representatives from the farming community in my district, as well as farm groups around the country, I have been told in no uncertain terms that sanctions are hurting America's farmers.
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I visited Cuba early this year, and that country is dying to buy wheat and other agriculture products from this country. I think that you will find a similar urgency to purchase agricultural staples from American farms in most nations that are currently under U.S. sanctions.
In addition to the economic impact on America's farmers. The policy of denying food, and medicine to a country we have political disputes with is harming innocent people. many of the citizens of the countries under sanctions are suffering from malnutrition and poor health because of unilateral sanctions.
Mr. Chairman, I can agree with suspending arms sales to countries that we have sanctions against; however, I am completely against using agricultural products as tools of sanctions. At a time when American farmers struggling to make ends meet, limiting their ability to sell products to countries in need only increase their financial problems.
PREPARED STATEMENT OF HON. DEBBIE STABENOW, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
Mr. Chairman, I am pleased to have the opportunity to participate in today's Agriculture Committee hearing that will review the effect of economic sanctions on U.S. Agriculture. This is an issue of great concern to me. The future of our Nation's agricultural economy will rely on global trade. Recent sanctions, that are politically important and necessary, nonetheless have closed markets for U.S. agriculture and hurt our farmers and ranchers.
Today's witness list is impressive. Representative George Nethercutt will testify in the first panel. Secretary Glickman, I appreciate you coming to today's hearing to discuss such an important issue. I also welcome Under Secretary Stuart E. Eizenstat. Several commodity groups that have been hurt by recent sanctions are here to present their concerns, which I am eager to hear. I am also looking forward to hearing testimony from the Farm Bureau and the National Farmer's Union. These groups will provide this committee with a perspective from the field.
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I am encouraged that all of these groups have been brought together to find a solution to this problem. Economic sanctions are an important foreign policy tool, however, as a Nation we must remember the impact this tool has on our domestic economy, particularly on agriculture. My priority as a member of this committee is to be the guardian of our Nation's farmers. I am hopeful that today's hearing will keep our farmers' and ranchers' welfare as a priority as we analyze the impact of economic sanctions.
The CHAIRMAN. At this time, I'd like to introduce and invite our first witness, our colleague from the fifth district of Washington, the Honorable George Nethercutt.
I welcome you, and proceed, please.
STATEMENT OF HON. GEORGE R. NETHERCUTT, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON
Mr. NETHERCUTT. Thank you very much, Mr. Chairman, and members of the committee. I appreciate very much the opportunity to appear here today to testify in support of a very clear review of the American sanctions policy that has existed in this country from many years.
I am very familiar with each and every member who is seated here today, and I know that each of you care deeply about American agriculture and what happens to American agriculture.
And I am grateful to you, Mr. Chairman, and certainly to Mr. Stenholm and every member here for holding this hearing, and addressing this very critical issue.
I am a member of the Appropriations Committee and and I proudly serve on the Agriculture Subcommittee.
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Yesterday we had the agriculture appropriations bill on the floor of the House, and we had an interesting debate, not only yesterday on the floor, but also in the full committee a couple of weeks ago, talking about an amendment that I introduced that mirrors H.R. 212. It is a bill that I have introduced that will allow sanctions to be removed on all countries on which they currently exist, in the areas of food and medicine.
We had an interesting debate in the full committee, as I said, a couple of weeks ago on an amendment which would have been included in the agriculture appropriations bill, which would have done that—just that—lifted unilateral agricultural sanctions on all countries. Sanctions would be subject to reimposition in the event that the President, felt that lifting those sanctions would pose a national security risk for the United States.
H.R. 212 deals only with lifting sanctions on food and medicine. It doesn't provide any Government guarantees or any other credit programs that are currently available to other nonsanctioned countries, but it would allow direct sales. And I think it is a bill that is worthy of this committee's careful analysis. I know many of you are already cosponsors on H.R. 212.
And Mr. Serrano and I had a good debate about this bill on the floor yesterday. We think alike on this issue, as this agriculture appropriations bill came to the floor. And I respect his position and his outlook on this issue which I think is critically important to American agriculture.
Mr. Chairman, I do have a statement that I have prepared and presented to the committee. I would hope that it would be made a part of the record. And I just want to make a few comments before answering any questions the committee may have.
I think we are missing a huge opportunity for those States that produce agriculture and produce agriculture for export. And I have a self-serving interest in this case because Washington State exports about 90 percent of the wheat that we produce. We have the potential to have a pea market for peas and lentils in Cuba which Mr. Stenholm mentioned. We used to have a great relationship with Iran as a purchaser of our wheat. We don't have that now because of the imposition of the unilateral sanction.
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It is not only beneficial to the American agriculture economy in my part of the country, but it is humane that we not use food as a weapon. We should allow medicine to be transported into these countries. These states may have dictators and people with whom we disagree violently on the issue of public policy, as they relate their policies to their own people. But using food and agriculture and medicine as a weapon is not the right policy.
We have about a $6 billion opportunity if we lift sanctions on these countries on which we currently have sanctions.
When the 1994 Arms Export Control Act required that Congress impose sanctions on Pakistan and India when they conducted nuclear testing, what that meant to my State was a $40 million loss of the sale of wheat. I offered an amendment that lifted those sanctions. We did it through the appropriations process, and then it was completed through the other options, through other opportunities in the legislative process, and those sanctions were lifted. I talked to the Ambassador to Pakistan the next day, and the Ambassador said, ''Instead of tendering 300,000 metric tons, 200,000 to the United States and 100,000 to Australia, we are going to add another 100,000 metric tons and we are going to have a 300,000-metric-ton sale that goes to the United States.'' And my State benefited about $40 million in connection with the lifting of those sanctions. The market is about a $6 billion market for our country in agriculture.
But second of all, we lessen competition through sanctions and that is what it really does to our farmers. In the single purchaser desks in Australia and Canada, they can go to a country that is sanctioned and charge a higher commodity price because they don't have any competition from American farmers. And so, since we can't compete in that market—in those markets in which we compete with Canada and Australia, for example—they, then, have the opportunity to undercut us because they have been able to charge higher prices in those sanctioned countries as they trade with them, and we can't trade with them. So it is a distinct disadvantage to our farmers.
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Another point I want to make to the committee is this: We are always under pressure, as people who care about agriculture or taxpayer dollars that go to farmers. I hear it among my urban friends in the Congress. ''You are giving more money? You want to give more money to the farmers?'' Well, lifting sanctions is a free market way that we don't have to come to the Congress and say, ''Because of depressed markets, because of depressed competition, we need to assist our farmers. Because of disasters, we need to assist our farmers through Federal taxpayer assistance.'' So lifting sanctions is clearing consistent with a free-market approach—to a freer market approach to American agriculture. And yet, we presently shut off markets that our farmers are really very anxious to deal in.
So H.R. 212 is called the Freedom to Market Act, and I am here pitching it to you because I think it makes good sense. It lifts sanctions; it opens markets; but it still protects the national security interests of the country, to the extent that the President feels it is necessary to reimpose a waiver—or as I should say, exercise a waiver and reimpose the sanctions for national security purposes.
But I am hard-pressed to conclude that any country—whether it is Iran, Iraq, or any other terrorist regime—is going to shoot grain back at Americans; they are not going to do it. Nor will they punish us with medicine.
But if we deal with these countries in an open fashion, export our agriculture commodities to them, the American farmer benefits, and the people of these countries benefit as well.
So I thank you for having this hearing. I hope you will consider very seriously reporting out a bill that lifts sanctions. Our Congress, our country, needs to have this very serious debate. And I am delighted the President has taken steps, and this administration—Secretary Glickman, Mr. Eizenstat, and others—who see the wisdom of lifting sanctions. And, frankly, I think the President's proposal is a good first start, but we need to codify this so that it is not going to be frustrated by the bureaucracy of government. On a case-by-case basis, the lifting of sanctions to the Sudan and Libya and Iran is a good step, but it is going to take some bureaucratic determinations that slow down the relationship between the farmer and the purchaser. So I applaud the administration, but I also think that the Congress needs to act to pass legislation that changes the sanctions policy for our country forever, to the better, to the assistance of agriculture and to the assistance of the agriculture economy.
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With that, Mr. Chairman, I will stop and answer any questions that you may have.
[The prepared statement of Mr. Nethercutt appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Nethercutt.
Are there questions of our colleague from any of the members of the committee?
Mr. Pomeroy.
Mr. POMEROY. Mr. Chairman, Mr. Nethercutt, I want to thank you for your leadership on these issues. It has been consistent, and we have appreciated it. I think it serves some value.
I am very troubled with the debate on agriculture issues that occurs within our respective caucuses. Goodness knows, we have them in the Democratic caucus, and we see them in the majority conference. Yesterday, as the agriculture appropriations bill, for example, was considered, we have seen you and the other agriculture appropriators so diligently fight the many amendments to cut that budget. And then we hear about a big conference where this matter is all discussed, and then see agriculture members, authorizers, agriculture appropriators vote to reduce the spending on agriculture by $102 million. Deeply distressing to me at a time when agriculture is in such hurt.
We see this bill of yours—which I really like and intend to support—and at the same time, the chairman of the International Relations Committee has a bill, H.R. 1835, that would virtually make it impossible to ship any food to North Korea. So we have, again, a dispute within the conference.
And what I want your thought on, Mr. Nethercutt, is how do you see that dispute unfolding?
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I think that the trouble with sanction reform, generally, is that we can all agree sanctions are bad and you shouldn't use food as a weapon. And then you get to dealing with a particularly unsavory potential customer like North Korea—and they are unsavory; they are unstable; they are a sick country, badly led—and at that point in time, the tendency to move a bill like Chairman Gilman's becomes greater. In other words, the general gives way to the particular, and you still have the sanction in place.
Do you see the Republican conference, the majority conference, reaching a position on North Korea food aid and one that would bind all members, like apparently they were bound on the appropriations vote?
Mr. NETHERCUTT. Well, Mr. Pomeroy, thanks for the question. And I appreciate your commitment in agriculture. I mean there is nobody—you and I have worked together, and there is nobody that I have greater respect for in terms of the commitment to agriculture, and so the question is a fair one.
I will just say, as a member of the Agriculture Appropriations Subcommittee, I will be on the conference committee that deals with agriculture spending, and so I am pleased to have a chair at the table. And I think that our conference will be supportive of agriculture, as will the Democrats on the subcommittee as well.
So I think we will get to the issue that we had to deal with yesterday, I think in a balanced budget environment, we have to be careful how we spend money, and we can't afford to waste any. And so I think that is the attempt that our conference was expressing yesterday, is to make sure that we don't waste money, that we don't overspend on the agriculture budget.
With respect to coordination and determination of the issue of international relations versus agriculture, that is a very difficult one. I have fought that in the Agriculture Appropriations Subcommittee in terms of this particular sanctions relief amendment. There was objection raised that it is authorizing on an appropriations bills as begrudgingly, I admit. But on the other hand, we have to force this issue. And I think if there are enough of us, Democrats and Republicans, who care deeply about a policy that says sanctions are wrong, as it relates to food and medicine, then I think we will eventually prevail.
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I was in South Korea a month or so ago, and you are right; North Korea is a terrorist regime. But we are giving them food right now. We are giving them food; the taxpayers are paying to send food aid to North Korea, in connection with other issues that relate to nuclear development.
So my argument is, let's let them purchase our food. We are going to give it to them anyway—the taxpayers are. Isn't it better to have us get that food as directly as we can to the people of North Korea?
It is a difficult solution to try to ponder and figure out. And my sense is, and I am probably going to get some people mad at me on the international side, but I think it is terribly complicated that whole international relations arena. I guess I am more simple focused—or simple minded. I think we ought to have an agriculture policy that is clear, and have to get the food where it ought to be. And we have to just keep pushing the Democrats and Republicans, alike.
Mr. POMEROY. I appreciate the gentleman's response. And I think that if agriculture members, Republican and Democrats, stand together and fight this bill, H.R. 1835, which I expect is going to be marked up in the International Relations Committee within the next few weeks. This isn't a hypothetical concern; it is coming down the track fast. If we can stand together, I am pretty sure we can beat that bill. If we don't stand together, I am pretty sure it could go.
I thank the gentleman.
Mr. NETHERCUTT. Thank you.
The CHAIRMAN. Do any other members have any questions for our colleague?
Mr. Nethercutt, thank you very much for attending, and we appreciate it.
Mr. Gutknecht.
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Mr. GUTKNECHT. Mr. Chairman, I don't have a question so much, but I do want to thank Congressman Nethercutt for his leadership on this.
And some of us—and I think, Mr. Pomeroy, you were there as well—yesterday, we were invited to a breakfast of the Farm Cooperative Group, and perhaps, Mr. Pomeroy, you missed the first comment, but—and I hope I am quoting accurately. I know I am quoting, but I want to make sure that I am as accurate as I can. But one of the people who introduced the discussion yesterday started with a conversation that: We cannot print enough money to solve all of the problem of agriculture. So as you go forward on the conference committee, we all recognize in a balanced budget environment it is going to be very, very difficult to meet all of the legitimate needs of the American people and American farmers. But the unvarnished truth about our agricultural economy is we cannot eat all that we can grow. And we have to export, and we have to look for those market opportunities, and that clearly is a legitimate responsibility of this Government and this Congress.
I will tell you that I have been working, and my staff has been working, and I would like to encourage other members on this committee to work with the administration on what I describe as a world food treaty. I believe that we ought to be working with our counterparts in other parliaments and in other governments around the world to make it clear that food should never be used as a political weapon. I think there is something fundamentally immoral to saying to a country, ''We will not even sell you food at any price.''
And so I think this is a small step in the right direction. And I can report that we have had members of the Canadian Parliament as well as members of the German Bundestag who are aware of the efforts to try and create some kind of world food treaty. Last year, for example, a number of people were promoting the idea of a world treaty as it relates to land mines, and perhaps there is some reason to do that, but it seems to me, particularly this committee and this Congress, could help provide some leadership beyond what you are doing. And I really do you applaud what you are doing, George, and I want to do everything I can to help this bill ultimately pass and become part of public policy.
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But I think the next step ought to be, we ought to be promoting, here in the United States and around the world, the basic notion that food should never be used as a political weapon. And I would hope that we can all work together on that, on a bipartisan basis, because I think poor people win, hungry people win, and American farmers win if we begin to recognize that we can't eat all that we can grow, and we should never deny people the ability to buy the product that we can grow so abundantly here in the United States.
Mr. POMEROY. Will the gentleman yield?
Mr. GUTKNECHT. Yes.
Mr. POMEROY. I think the gentleman's comments about food as a weapon are absolutely on point. It is very well stated.
To address, though, as a committee, the problems facing U.S. agriculture, I am very pleased to see the unity on sanctions. I just think we have to keep it in perspective. We are talking about being shut out of six countries; we are partially in three of those. The total purchasing power of those potential markets is less than 2 percent of world agriculture markets—greater for wheat, which is very important to me, potentially 10 percent; so it is significant.
We need to take action in these areas, but sanctions, alone, is not going to be restore health to agriculture. Sanctions, alone, far from restoring health, is not going to preserve some of the family farmers we care about trying to make it to another crop year. That is going to take dollars.
The potential market of the agricultural exports that we are talking about by the Foreign Agricultural Service estimates is $500 million in 1996. Now we cut $100 million in direct spending on agriculture on the floor of the House last night—one step forward, two steps back. I think that much of the—there is no question about the sponsors seriousness of purpose and genuine concern about sanctions as a policy issue. He has been a real leader, second to none in the Congress. On the other hand, some—and I am not saying anyone on this committee—but some glom onto the sanctions issue as an excuse for not devoting adequate resources to agriculture. And, basically, it is kind of a bait and switch; they say, ''Well, forget about farm spending; we are going to talk about sanctions. Everything is going to get well.'' It isn't; 2 percent of the world's potential food imports, potential $500 million market impact in 1996, that is not enough. We are going to have to, also, dig into the very tight budget, but make sure agriculture gets its fair share.
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I yield back.
Mr. GUTKNECHT. Reclaiming my time, if I could just, Mr. Chairman, and members.
I think the issue is not just about the 2 percent that we are talking about that we are currently—that may be ineligible to buy American-grown food and fiber. I think it sends a very bad signal to the rest of our potential trading partners, that we may ultimately say to them, ''We won't buy and sell to you, based on whatever political things may happen in your particular sovereign, territory.'' And so, I mean it may seem like a relatively small section, but it seems to me if you compare us to grocery store—if we say to certain customers, ''We are not going to sell to you''—what kind of a message does that send to the rest of our potential customers?
So I think while this may not involve that many countries and that much trade today, I think by the symbolism of this act, I think takes us a long ways down the road.
Mr. NETHERCUTT. May I just take 30 seconds, Mr. Chairman, just to respond? It is a great debate. I have enjoyed listening to it.
The $500 million, in terms of loss, I think is way understated, because the agriculture economy is more than just dollars in the farmers' pocket. The farmer, then, buys from the implement store and buys seed and the groceries, and the rural America, then, prospers.
I also know that when cut off a market, as we did in 1980 with the Soviet Union, you pay a lot of time and effort to get it back again. So this is—lifting sanctions is only a first step. We need to get to earn those markets back, and that takes time. So, long term, in my judgment, it has got to be a good solution, but it is a good signal to the farmer that we care deeply about opening more markets to them to sell to.
The CHAIRMAN. The gentleman's time has expired.
Mr. Smith.
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Mr. SMITH. I am going to try to do this in 60 seconds, because I think it is important we get our witnesses and get their ideas and thoughts.
But, George, first, congratulations.
Mr. Pomeroy, I hope we don't stay too long on the $100 million reduction in the agriculture budget, agriculture appropriations bill yesterday. A couple of things: One is the appropriations bill yesterday is $150 million more than it was a year ago when we passed it. Second, we put $600 billion in the budget. The challenge is going to be what is the best way to spend that over the next several years to make sure that we don't lose our agriculture industry.
On this subject and on this issue, it seems tremendously important that it is—sanctions do not accomplish what many people in the past thought they accomplished. Canada is filling the gap to Cuba. When we cut off food, there are countries that continually do an end run; in fact, some of our food ends up in those countries that we have sanctions on. It is an ineffective policy decision that ends up hurting our economy, hurting our farmers.
And I yield back the balance of my time.
The CHAIRMAN. The Chair appreciates all comments.
Mr. Nethercutt, thank you very much for moving this issue forward. You have been a leader in it; thank you for that, your help to this committee, on the Agriculture Appropriations Subcommittee, and we appreciate your attendance this morning.
Mr. NETHERCUTT. Thank you, sir.
The CHAIRMAN. The Chair would like to now invite our first panel of witnesses to come to the table. The Honorable Dan Glickman, Secretary of the Department of Agriculture, and the Honorable Stuart Eizenstat, the Under Secretary of State for Economics, Business, and Agricultural Affairs at the U.S. Department of State.
Secretary Glickman, please proceed at will.
STATEMENT OF HON. DAN GLICKMAN, SECRETARY, U.S. DEPARTMENT OF AGRICULTURE
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Secretary GLICKMAN. Thank you; thank you very much, Mr. Chairman. It is always a joy to come back to the place I have sat for 18 years and see a lot of my friends.
I am also honored to be here with Under Secretary Eizenstat. I would like to note for the record, as you know, Mr. Eizenstat has been nominated to be the Deputy Secretary of the Treasury. And this morning we gave him a Secretarial Friend of Agriculture Award for his advocacy on behalf of America's farmers and ranchers while ambassador to the EU, while at the State Department and—actually it is a little bit of a downpayment on getting the Treasury Department to be cooperative with the Agriculture Department when he is over there as well. [Laughter.]
He has been a very strong advocate for American agriculture, and we know that that will continue, and we wanted to note for the record what he has done for it.
The CHAIRMAN. Mr. Secretary, if you would just indulge me because you were unfortunately not here for my opening statement which I will be glad to give you a copy. But I had made mention of the fact that we knew that Under Secretary Eizenstat was moving on to other things and mentioned the fact that we were certainly glad that he would be remembering agriculture in his new position.
Secretary GLICKMAN. Well, now he will have it on his wall to remember. [Laughter.]
First of all, let me just make a couple of quick comments. Several weeks ago, the President announced that the United States will exempt commercial sales of agricultural commodities and products, medicine, and medical equipment from future unilateral economic sanctions, unless he finds that it is in the national interest to include such items due to compelling circumstances.
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This is a significant change in U.S. unilateral economic sanctions policy, and it has important implications for American agriculture. While the policy does not mean automatic approval of agricultural sales, it does place the presumption on the side of approval, and it gives U.S. producers and exporters an opportunity to compete in more markets.
The new policy will permit licensing of commercial sales for exports to countries where unilateral economic sanctions are now in effect. And this change would largely affect the countries of Iran, Libya, and Sudan because sales of certain items are already conditionally licensable for Iraq, North Korea, and Cuba.
We are working to implement these changes as quickly as possible. In conjunction with the Treasury Department, we are developing licensing criteria consistent with standard industry practice to guide this review. And I am sure Mr. Eizenstat will be talking about the specifics of the policy. We are working with the Departments of State, Commerce, and Treasury to develop precise definitions of the products to be covered. The policy changes will cover agricultural commodities and products, medicine, and medical equipment.
This important step toward sanctions should help boost U.S. agricultural exports of largely bulk commodities such as wheat, corn, rice, and vegetable oil. We estimate that our producers may sell an additional 500,000 to 1 million tons in exports of both wheat and corn as a result of this change in policy. In addition, some of these countries were once major markets to U.S. rice, and we hope our rice producers will recapture some of these lost sales.
For example, Iran, a nation of 60 to 70 million people, represents around a $3 billion food market. Two decades ago, with only about half of its current population, Iran was the largest customer for American rice and one of the biggest for American wheat. Now our producers will have the opportunity to recapture that share of this particular market.
I am not—given the fact that there are votes—I am not going to finish the rest of the statement on sanctions because I think that it can appear in the record. But I think it is important, as was talked about before, with farm prices still low and global demands still soft, this new sanctions policy could not have come at a better time for our farmers and ranchers, and that we are removing one of the impediments and the handicaps from potentially lucrative markets.
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If I might mention just quickly, Mr. Chairman, a couple of related issues. One is that agricultural exports are down sharply in value the last 3 years. We estimate that this year, they are in the neighborhood of about $49 billion, as you know. In fact, while the value is down on a volume basis, they are, in fact, up a little bit over a year ago, and this is largely due to price. We do believe, however, that this has bottomed out, and there will be some modest recovery of exports in the next fiscal year. There has been a recovery in Korea and Indonesia—we made our first commercial sales this past year. And so we are very hopeful on the export side of the picture.
In the area of food aid, we are providing 10 million metric tons of food aid this year, three times what we had done last year, and three times the average of the last 5 years. That includes 5 million metric tons of wheat under the President's Wheat Initiative 3 million metric tons of wheat to Russia. And this is going smoothly, those particular transfers. And, with respect to North Korea, we have provided 400,000 tons of food through the World Food Program.
Just two other quick items, since I don't get before this committee all that often. I thought I would mention to you, Mr. Chairman, that you have had great interest in the Disaster Program payments. Yesterday, I went to the Kansas City office which distributes the Crop Loss Assistance Programs; about 75 percent of the Program payments have gone out as of last night—about $1.5 billion out of $1.9 billion. The people in Kansas City have done an outstanding job, along with all the county and State offices. And we know we have had some discussions about the difficulty getting these payments out. There are three quarters of it out, and they are moving. And so I am comfortable with the pace now of the process and how it is moving. And on Monday, USDA will begin sending dairy payments out under the $200 million provision of the Emergency Aid Program.
As you may know, we were sued in the State of New Mexico by some dairies who say that our programs were targeted toward small- and medium-sized producers. These were larger operations who said that was unfair, discriminating, and perhaps unconstitutional because we provided payments on the first 26,000 pounds of milk that were produced. We have not been enjoined from getting those payments out. We intend to start those payments out on Monday as well.
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So I thought I would mention those other things as well, since I have had the opportunity to come before this committee.
And I thank you very much.
[The prepared statement of Secretary Glickman appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Secretary.
And I will say, from the report back from the field, and at the percentage of the payments was substantially higher than most people had anticipated. I will assure you was very welcome news with the farmers that I have spoke with.
Mr. Under Secretary, we have probably about 5 minutes before we would have to go vote. Would you prefer that we go do that now or take your statement? What would be your preference, sir?
Mr. EIZENSTAT. I think I could give the bulk of my statement in 5 minutes, but I don't want to pressure on the votes, so I would leave it to your discretion, Mr. Chairman.
The CHAIRMAN. Thank you.
In order to make sure we have ample time without feeling like you are rushed, the Chair would announce a brief recess. We will vote as quickly as possible and return.
Thank you very much.
[Recess.]
The CHAIRMAN. I reconvene the hearing.
Mr. Eizenstat, please feel free to proceed.
STATEMENT OF STUART E. EIZENSTAT, UNDER SECRETARY FOR ECONOMICS, BUSINESS, AND AGRICULTURAL AFFAIRS, U.S. DEPARTMENT OF STATE
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Mr. EIZENSTAT. Thank you, Mr. Chairman.
Let me start on a personal note. My first involvement with this series of issues came during my time in the Carter White House when, in 1979–1980, we were involved in the grain embargo on the Soviet Union for its invasion of Afghanistan. That experience has had a lasting impact on my thinking, as I remember watching Argentina and other countries fill the gap left by our embargo.
For 2 years now, this administration has been working to improve the way we use sanctions as a foreign policy tool. We want to ensure that when we do use them, sanctions are carefully targeted to advance our policy goals, while minimizing the burdens they impose on other U.S. interests. Last July, the President stated that food should not be used as a tool of foreign policy, except under the most compelling circumstances. And then we follow that up with this statement last month announcing that the administration will generally exempt commercial sales of agricultural commodities and products, medicines and medical equipment from future unilateral sanctions where we have the discretion to do so. This can potentially mean improvement of some $500 million in bulk commodity sales.
It has been implemented, Mr. Chairman, and, members of the committee, as part of our overall approach to sanctions reform and not directed at any specific country. In fact, the national security and foreign policy concerns that originally led to the imposition of comprehensive sanctions on the countries involved still pertain.
What has changed is our calculation of the impact of including food and medicine in unilateral on our overall policy objectives. Sales of these products generally, Mr. Chairman, and, members of the committee, do not enhance a country's military capacity or their support for terrorism. On the contrary, funds, for example, spent on food and medicine are, therefore, not available for other less desirable uses. Our purpose in applying sanctions is to influence the behavior of regimes, not to deny people basic human needs.
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The change approved by the President, as Secretary Glickman indicated, does not provide for the automatic approval of agricultural and medical sales. Instead, it shifts the presumption and favor of such sales, and contracts will still have to pay us through a policy filter. There will be no U.S. Government funding, financing, guarantees, or other support of these sales, because we believe it would be inappropriate for these countries, in light of their continuing conduct, to benefit from such taxpayer-financed programs. We will continue, of course, to monitor that to see the impact.
As the President noted, there are circumstances under which we will not allow commercial sales of food, medicine, and medical equipment. These circumstances, for example, might include where we have armed conflict with the particular country, or where the regime would seek to use food and medical items as a tool of internal policy, or whether the regime would derive an unjustifiable economic benefit.
The House is currently considering several pieces of legislation dealing with the use of agriculture as a tool of sanctions. Our view on these is clear; in general, food, medicine, and medical equipment should not be used as a tool of foreign policy, absent compelling circumstances. Because there are clearly some circumstances under which some exports would be inappropriate, however, the President must have sufficient flexibility to tailor our response to the specific situation in which we must deal. This flexibility should also include the ability to impose a licensing regime on sales where such a requirement is appropriate.
In our proposal for broader sanctions reform, we have stressed that this sort of flexibility should be provided through the inclusion of national interest waiver authority. While we don't believe that legislation is necessary to put these principles in effect, as the President's own decision of April 28 indicates, the Agricultural Trade Act of 1999, introduced by Senator Lugar on the Senate side as S. 566, seems to have made a good faith effort to meet these standards.
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These and other bills in both the House and the Senate, including legislation introduced by Representatives Nethercutt, Ewing, Paul, Rangel, Serrano, deal with the more narrow issue of agricultural sanctions reform. Other legislation, notably that were introduced in the House by Representatives Crane and Dooley and in the Senate by Senator Lugar, deal with the broader issue of overall sanctions reform. We do not believe that the narrower agricultural bills, even if they meet our general criteria, should be seen as a substitute for broader sanctions reform.
Mr. Chairman, we have suggested an approach to the broader issue of sanctions reform that we believe would be both productive and acceptable and achieve the essential objective of providing discipline on the use of sanctions by both the Congress and the executive branch. While many of our ideas are similar to those in the Crane and Lugar bills, we have emphasized two main points.
First, those bills need fewer procedural hurdles. Legislation which would impose inflexible procedural hurdles on the President undercut sanctions reform; and, second, and of even greater importance, is the need for broad national interest waiver authority. Our experiences with Helms-Burton, the Iran-Libya Sanctions Act, and the Glenn amendment only served to underscore the need for this waiver authority.
We are committed to continuing to work with the Congress, with you, Mr. Chairman, and your committee, to craft an approach to sanctions reform that can be supported by both the executive and legislative branch. We would like to see acceptable legislation pass this Congress.
Thank you very much.
[The prepared statement of Mr. Eizenstat appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Secretary—both Mr. Secretaries.
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I would ask this to either or both, whoever would seem might be the most informed or capable of answering.
When will the regulations be issued that would be governing the criteria which was announced on the 28th?
Mr. EIZENSTAT. Yes, sir; we have been hard at work on that, and we expect by the end of this month, by the end of June, that they will be completed. They are in their final form now and just making the last rounds.
The CHAIRMAN. How will the regulations define an ''agricultural commodity''?
Mr. EIZENSTAT. That is one of the issues that we are looking at, the question of whether certain products should be included or excluded, whether they are commodities, whether are considered a food for ingestion. There are a variety of issues, and that, as well as the issue of how we can make the actual licensing procedures as non-bureaucratic and as efficient as possible, are the two remaining issues. And, again, we hope to conclude that by the end of this month.
The CHAIRMAN. Are you considering the 1978 Agriculture Trade Act, which has a definition, as the basis for defining an agriculture commodity?
Mr. EIZENSTAT. Well, as recently as this morning, Secretary Glickman and I met to discuss this issue. And if I may say, it is an enormous privilege for me to be sitting next to someone that I have respected for over 20 years in Washington and has been a great Secretary of Agriculture. But we talked about that very issue. We are looking at a variety of definitions—what the Department of Agriculture considers a ''bulk commodity'' and how different statutes view ''bulk commodities.''
The President's basic position was that starvation should not be a matter of foreign policy, but we also have to look at how that fits into particular bulk commodities, some of which may not actually be ingested as a food.
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The CHAIRMAN. In regard to the credit issue which you had mentioned, that the U.S. Government will not fund or subsidize credit for any commercial sale but that a private bank could extend a letter of credit, but not a Government entity. Under USDA Credit Guarantee Program, private banks do extend letters of credit. Will USDA Credit Guarantee Programs be allowed?
Mr. EIZENSTAT. Well, when the U.S. Government issues a credit guarantee for a commercial sale of food or anything else to a foreign buyer and that buyer defaults, the U.S. taxpayer is then stuck with the bill. If that foreign buyer is in an embargoed country, Mr. Chairman, or even part of a government of an embargoed country, then, U.S. taxpayer money would potentially be at stake.
At the same time, we are going to continue to monitor the situation that you raised, to see what happens with respect to our competitors, and determine what we should do in the future. But our current position is that anything that issues a credit guarantee would be considered a U.S. assistance and be currently inappropriate under our policy.
But, again, this is something we will continue to monitor.
Secretary GLICKMAN. Mr. Chairman, if I could make a comment. We have talked about this. We have indicated that the guarantees under the GSM Program are not subsidies; they are market rate programs that have are made on a commercially available basis. The U.S. Government, of course, does provide a full-faith credit of our country behind these programs, but they are done at market rates, so there is no subsidy involved in the credit programs.
And we have also indicated that we want to work with Treasury and State, in terms of making judgments as to whether the sales can go forward to meet the competitive threats that other countries will come in without the use of these credits, and we have just agreed that we would continue to monitor this issue, as time goes forward.
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The CHAIRMAN. Not trying, obviously, to pin you down on this, but it would be my interpretation, Secretary Glickman, that under the definition of ''subsidy'' then, GSM funds would be allowed?
Secretary GLICKMAN. Well, I was going to say we don't consider it a subsidy from the standpoint of trade policy of the World Trade Organization. But the fact is that, obviously, the Government is involved, in terms of essentially backing the loans. So I can't tell you from a legal definition whether there is subsidy or not. I am just saying from a trade purpose, we don't consider it a——
The CHAIRMAN. I think it would have to be very well defined, obviously, in the regulations so that there is not that ambiguity of what is or is not a subsidy, or how it might or might not be able to be used.
Mr. EIZENSTAT. If I may just respond in addition, Mr. Chairman.
The CHAIRMAN. Please.
Mr. EIZENSTAT. We have taken the position in a variety of fora that GSM is not a subsidy in certain contexts. But the President's statement was that there would be no U.S. Government funding, financing, guarantees, or other support. So even though it might be considered a subsidy, there is still an issue of whether it would fit into that broader proscription.
And, again, we will continue to monitor the situation.
The CHAIRMAN. And would you expect that that would be clearly defined at such time toward the end of June when those regulations were issued?
Mr. EIZENSTAT. Well, I am not sure if that particular issue will be defined, but it is something that we will continue to monitor.
The CHAIRMAN. Mr. Stenholm.
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Thank you both very much.
Mr. STENHOLM. Mr. Eizenstat, the administration has indicated that there are statutory impediments blocking any further subsidy changes in the current policy towards Cuba. Would you be in favor of legislation that would remove these statutory barriers?
Mr. EIZENSTAT. No, sir. We have taken a position that, on January 5, the President decided to relax the standards for the sale of food to Cuba, such that they could be provided to private entities. We believe that that can be done within the terms of the embargo on Cuba, which has been in existence since the early–1960's, without violating any of the statutory requirements of either the Helms-Burton Act or the Cuban Democracy Act of 1992.
And we would like to see what impact the President's January 5 change will make. We have just issued regulations in the middle of May to effectuate those. We hope that that will provide the ability to help the Cuban people obtain food and to help our farmers at the same time. But at this point, that is as far as we are prepared to go.
Mr. STENHOLM. Secretary Glickman, in response to the licensing in which, as I understand it, that under the new licensing program to Cuba, U.S. farmers must sell to an independent entity, what are these independent entities? How many are there? And, how many sales do you anticipate occurring under the licensing system that has been described?
Secretary GLICKMAN. There are small stores, small independent operators, small businesses in Cuba. Anything else would be government-controlled.
How many there are, I am not sure. It is a small opening; it is not going to be a material opportunity at this stage, but it does open the door and allows the ability of the U.S. agriculture products to begin coming in, but it is small.
Mr. STENHOLM. It sounds like it will be very small. [Laughter.]
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Let me make an observation here now in regard to this whole question of sanctioning. And I commend the administration for making the moves that you have made. In my opinion, you are moving in the right direction.
When we get into the subsidy question, though, and whether or not a GSM Lending Program is a subsidy, et cetera, and then we get into some of the previous comments regarding budget, we run right smack-dab into the problem of us selling anything in the world market when we are competing with other countries who are subsidizing their agriculture to the extend that they are.
And this makes it very difficult for us, if we are going to interpret sanctions relief as that we are going to sell. But if we will not allow our producers to use the same tools that are available to others, then it is going to be very difficult for us to sell to anybody.
We had a little of this discussion yesterday, also, on the floor. There was an attempt to eliminate the Market Access Program funds. It didn't do very well, fortunately, which showed the overwhelming majority of Congress felt that that was a very poor effort. But it needs to be acknowledged, as we talk about this subject, for all, particularly those, Secretary Eizenstat, those of you at State, to understand that we are talking about some very serious competition from other countries.
As the last information I have, 1997, other countries, government spending was about $300 million. We were proposing $90 million yesterday. Industry funding, which is sort of a black mark on our own industry—industry funding in foreign countries is about $600 billion to our about $175 million—I said billion. Then, when you get into export subsidies, the European's, alone, spend $7 billion a year making sure that their farm commodities get sold. And at some point in time, that has to change, or otherwise the farm bill that we are operating under, the so-called ''Freedom to Farm'' in the international marketplace, it becomes rather a joke. And it is a very serious joke to our producers because it is very difficult. I don't care whether you are building widgets or raising wheat, if you are competing with others who are able to use those tools, then it is going to be very difficult for you to sell your widgets.
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And I think as we progress in this, working with the administration, it is going to be extremely important that we continue to educate the general population that we have serious subsidy competition. And whether it is on sanctions and sanctions relief, if we are going to sell, then I think we are going to have to give a lot of thought to exactly under what policies will we be allowed to sell. Or, otherwise, we are not going to make any sales.
Mr. EIZENSTAT. Mr. Stenholm, I, first, want to assure you that we at the State Department are just as aware as our friends at the Agriculture Department of the ferocious competition for agricultural markets and the level of subsidies. I was ambassador to the EU for 2 1/2 years and I know the tremendous amount of export subsidies they provide. Indeed, half the whole EU budget is for agricultural price and export supports.
Second, as the Departments of Agriculture and State and the rest of the administration is preparing for the Seattle WTO Ministerial, literally one of our very, very top goals overall is to eliminate export subsidies and to dramatically reduce internal subsidies, because we feel that we are at a competitive disadvantage.
We were disappointed that the European Union and their so-called Agenda 2000 Budget Exercise a couple of months ago didn't go further. They have made some modest changes which were welcomed, but not nearly far enough.
And so we have really made this one of our very top priorities for the next WTO round.
Mr. STENHOLM. I am very glad to hear that, and I mean no disparagement to you or any current occupant of the State Department. I just make an observation. I have been here around this dais for 20 years; I have heard that same statement made by previous State Departments in previous administrations. And when the plane finally lands, we have always found that there are other interests, particularly at State, that supersede the interest of doing what you have just stated. I believe you that this year, and I believe—and I have noticed with the work of Charlene Barshevsky and Secretary Glickman that I believe things are different now. And I certainly—it goes without saying that every member of this committee, both sides of the aisle, want to stand shoulder to shoulder with you in seeing that that be accomplished.
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The CHAIRMAN. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you.
Under Secretary Eizenstat, I am very interested in what Mr. Stenholm had to say concerning the European Community and their subsidization. Your indication that combatting that circumstance is a top priority, what is it that the U.S. Government, the Department of Agriculture, the Department of State, what is it that you do to win this battle with the European Community?
Mr. EIZENSTAT. Well, a number of things: First of all, on a bilateral basis, we are constantly working with those members of the European Union, for example, the UK and others, the Dutch, who are strongly opposed to the high level of subsidies that the EU provides, largely because of the French and a couple of other countries. So we try to work bilaterally to encourage those countries that are already favoring a similar attitude to make their position known.
Second, during the German presidency of the EU, which is going on until the end of this month, we work very directly with them to encourage them and other like-minded countries to try to cut back on the level of export subsidies and internal price support for farmers.
Now we did that for a couple of reasons. First, because if they don't reign in their own spending, then the enlargement of the EU which we so strongly favor to include central and eastern European countries like Poland and the Czech Republic and Hungary will be delayed because the cost of including them, under the current agriculture budget, is unsustainable, and the EU knows that.
We also work with them in trying to shape what the agenda will be for the new WTO round, the broad-based round that we will commence in November. Ambassador Barshefsky, Secretary Glickman, and our department are trying to work to fashion an agenda item that will make sure that this issue of agricultural export subsidies is on the agenda as one of the issues that needs to be dealt with.
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And then last, as a followup to the Uruguay Round, there is a requirement that this year, 1999, the issue of agriculture should be negotiated even in advance of the commencement of a new round. And that is a recognition that while we made a beginning of it when we had the Uruguay Round and I was in Brussels as ambassador to the EU at the time of the end game when Micky Kantor helped negotiate that. It was the first time that we brought agricultural subsidies inside the WTO, literally the first time. Industrial tariffs have been on the ticket going back to the Tokyo Round, but not agricultural issues. So we have now got it firmly in the WTO; we are rallying other countries around the world. We are saying to developing countries of the so-called G–77 that ''If the EU continues to have these high subsidies, that you will be disadvantaged in your capacity to export because you will have to raise your budgets.'' So we are literally going on a worldwide effort to try to deal with this.
And my last point—I think at the end of the day, the thing that will be most effective is not only this sort of coordinated strategy we are doing around the world, but that the EU simply can't afford to continue the level of subsidies that they have. Again, it is literally half of their overall some $80 to $100 billion budget. And that is unsustainable, and particularly unsustainable as they try to expand to include agricultural countries like Poland which have a very heavy agricultural sector.
Mr. MORAN. I have had this discussion with USDA officials, and what I think we need to do is hasten the day in which they no longer can afford. And I think the question I have raised with Secretary Glickman, generally around the use of the Export Enhancement Program, is, what do we do to hasten the day that economically, the European Community can no longer afford to subsidize to the degree that they do?
I am all in favor of the jawboning of highlighting the issue of bringing the rest of world community to bear, but I am hopeful that there will be some economic incentive for the European Community sooner, rather than later, to end the trade practices that they have.
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Secretary GLICKMAN. If I just may mention, the numbers. Europeans are responsible, according to us and the OECD in Europe, for 83.5 percent of all export subsidies. The United States is responsible, according to this chart, for 1.4 percent of the export subsidies. Now we do try to match them in terms of the GSM Program, which is not counted as a subsidy because they are at market rates.
And I have said before that I will use that program to the maximum that we are able to use it. And there really are no practicable limits other than the CCC borrowing authority, because that is what we have as our, so-to-speak, ''weapon'' to be competitive with the EU in world markets. And that is something that we should use to the fullest extent that we can.
Mr. MORAN. Mr. Secretary Glickman, are you satisfied with the U.S. response on the beef hormone issue? The $203 million and how it is targeted? Has it been targeted?
Secretary GLICKMAN. We haven't released it yet—we haven't put a final group of sanctioned items yet on the list, but I am satisfied with the way it is going, and I am satisfied with how the WTO process is working. And we have won that race, and it has been affirmed three times. And we cannot let this issue go without exercising our full rights under that decision.
Mr. MORAN. And we have established the right amount? The $203, and we will——
Secretary GLICKMAN. I think we have said about $202 million.
Mr. MORAN. My final question, Mr. Chairman.
I was pleased to have the administration announce the lifting of sanctions against the four countries, particularly Iran—4 million metric tons of wheat imported. That is 40 percent of our Kansas wheat harvest if we were successful in obtaining that business.
What has been the response from those countries? What has happened since the administration announced that? And I missed part of Chairman Combest's dialog on assistance—export assistance—and whether we are going to be able to utilize various programs to sell. And I heard the discussion about the importance that we don't sell unless we do. Where are we? What was their response? And what happens next?
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Mr. EIZENSTAT. Congressman Moran, Iran's response was not negative per se in any way. What they said is, ''Well, we shouldn't only be in the position of buying U.S. products. There should be reciprocity. And if the U.S. expects us, Iran, to buy U.S. goods, then they should be buying ours as well.''
There is now a formal application that has been made to OFAC and Treasury for a license, and that is by a U.S. entity for the sale of commodities, and that is being reviewed at this time.
Mr. MORAN. Mr. Secretary, I would be delighted to have a copy of your pie chart. It would replace my bar graph in my office that shows what the European Community does versus what we do, that in many ways to me justifies what we do for agriculture in our country. So if I could have a copy, I will get it blown it up, and we will hang it on the wall as well.
Secretary GLICKMAN. We will blow it up for you. [Laughter.]
Mr. MORAN. Thank you, Mr. Secretary. Thank you, Mr. Chairman. [Laughter.]
The CHAIRMAN. In recognizing Mr. Pomeroy, Mr. Secretary, I would say that I certainly commend the way the Department has used the GSM Program. I think you have been very aggressive in it. I think there have been some very positive actions taken.
Mr. POMEROY. Thank you, Mr. Chairman.
I am delighted to have this particular panel. These two individuals have provided wonderful public service to this country, and it is an honor to have you here.
Secretary Eizenstat, you haven't had the chance to be in this committee room nearly as often as Secretary Glickman. You remind me of the utility ballplayer that plays any position on the field and keeps winning the golden glove. It is amazing, your record. In particular, I will just cite the Holocaust victims recovery that you have played such a integral role in achieving, relative to Swiss bank accounts—an amazing outcome for a very thorny assignment.
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We look forward to your new leadership at the Treasury.
Mr. EIZENSTAT. Thank you.
Mr. POMEROY. In that regard, the administration's announcement offers hope of new markets. But if the implementation is not correctly done, it will only be a press release and nothing real. The competitive arena for international sales is intense.
As Mr. Stenholm has noted, we are dealing with heavily subsidizing competitors, and either a bureaucratic process in the approval of particular certifications or other rigmarole that ultimately attended to the implementation of this program will basically not make those markets available, in effect, even though they might, theoretically.
Would you comment on activity you might take that will make sure it is, in fact, competitive? That it will work?
Mr. EIZENSTAT. Yes, but first, I appreciate very much your thoughtful comments at the beginning and had hoped, actually, you might end at that point but I will be glad to respond to the rest of your point. [Laughter.]
We literally, within the next few days, will be looking at the kind of licensing regime for this policy. And we are very cognizant—and, chairman, you raised this point in one of your questions as well. We are very cognizant of the fact that if we tie this process up in too much red tape, in terms of the licensing process, that it can undercut the very purposes of this. So we are trying to make this as, I would say, efficient, non-bureaucratic, streamlined, and effective as possible.
We are working with the Department of Agriculture, with OFAC at Treasury, and, of course, at the State Department to come up with a process that while, in fact, met those criteria. And I hope that you will be pleased with what will come out very shortly.
Mr. POMEROY. Do you have an evaluation of whether or not sales will be possible without credit guarantees underlying those transactions?
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And either Secretary might speak to this.
Mr. EIZENSTAT. We certainly hope that they will. We think we have a very efficient and effective agricultural sector. But, again, this is the issue that we will continue to monitor.
Secretary GLICKMAN. The pending application is not one that gives them credits. But I think we have to be honest and recognize that given the competitive world out there, and many places can't sell to without the credits. But I don't think that all sales have to be with credits either.
Mr. POMEROY. I just look at the experience we had with South Korea in the dip of their financial crisis. We wouldn't have made the sales without the GSM financing credits, credits that ultimately won't cost the Treasury.
If you compare that economy to the North Korean economy, if South Korea has trouble getting credit under PIN grain transactions, North Korea is a basket case. And they clearly will have even a greater difficulty, I believe, without financing, that a prospect of financing, we are going to have some trouble.
Secretary GLICKMAN. If I could say, a country like North Korea, it will be many, many, many years before they will ever be able to pay under any circumstances for what they are getting from us, that is why the assistance to date has been through the World Food Program and the Public Law 480 and the like. But I think you have to divide the world between those countries who are clearly not creditworthy at all and won't be able to buy anything from us for a long time, and I expect North Korea is in that category——
Mr. POMEROY. My time is running out, and on this.
Mr. EIZENSTAT. May I just respond to that?
Mr. POMEROY. Sure.
Mr. EIZENSTAT. First, with respect to North Korea, actually going back to 1996, we have licensed a number of sales and donations to North Korea. And the Secretary is quite right; their capacity to purchase is severely limited, but we have been able to license a number of donations, and we have been able to get food there.
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Also, we have spoken, prior to the President's announcement of April 28, with both the rice and wheat associations, and they believe they can be competitive with traditional letters of credit from commercial banks. But, again, as Secretary Glickman and I have both said, this is something that we will continue to monitor.
Mr. POMEROY. My time is up, Mr. Chairman. I do have a final question right on this point, and it ought to be able to be answered quickly.
The CHAIRMAN. The gentleman is recognized.
Mr. POMEROY. Thank you.
It relates to the implementation of sanctions automatically imposed under the Arms Export Control Act to India and Pakistan for their nuclear testing last summer. We did a 1-year waiver that allowed a GSM Program to be used to make a critically important wheat sale to Pakistan last year.
Mr. Secretary Glickman, do you have an evaluation, in terms of when Congress needs to pass something again this year, so that the transactions to Pakistan might not be interrupted?
I guess either one of you can speak to it, who has knowledge on the topic.
Mr. EIZENSTAT. Thank you, with the Secretary's permission—what is now called ''Brownback II'' was added last evening to the DOD appropriations bill in the Senate, unlike Brownback I, which was a 1-year authority, this would, in effect, suspend and lift sanctions for a 5-year period, with respect to India and Pakistan.
In addition, the House International Relations Committee has approved legislation to extend the original Brownback amendment by 1-year.
We do have some concerns, and we oppose the total lifting and the Brownback II amendment, as it was introduced, because of its broader implications, in terms of proliferation policy. What we do favor is having waiver authority, full and permanent waiver authority, for all of the Glenn sanctions, with respect to India and Pakistan. And, in addition, we need to address the underlying Pressler and Symmington amendments sanctions on Pakistan.
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We would be pleased to work with the Congress on the best and most appropriate ways to do this, but we favor the type of position that is closer to the House International Relations Committee, and that would give us the waiver authority for all of the Glenn sanctions, which we do not have in the new Brownback amendment, and Brownback II.
Mr. POMEROY. Thank you.
The CHAIRMAN. Mr. Smith.
Mr. SMITH. Thank you, Mr. Chairman.
One question that I wonder, in terms of the whole effort on licensing. And the requirement, as I understand it, the administration announced that it be private recipients and not simply go to Government. On some of these countries involved, are we familiar with the structure of whether it is State trading organizations or whether it is the State receiving those shipments, or whether these countries are going to be able to comply with that requirement?
Secretary GLICKMAN. Let me say that they can go to state trading enterprises, as long as I think the languages are not coercive or they are not involved in human rights abuses. And I think we can identify who those are.
Mr. EIZENSTAT. Yes, sir; the Secretary is quite right. They can go to peristylar organizations, as long as they are not associated with the cohesive organizations of the State, and we believe that in many of the countries there are such institutions to whom sales can be made.
Mr. SMITH. Now am I incorrect here? That one criterion that will be used to decide whether or not to approve an export license under the changed policy is that sales must be made to non-government entities? And so, specifically, whether it is Iran, or Libya, or Sudan——
Mr. EIZENSTAT. No, sir; that is with respect to Cuba. That is the January 5 announcement with respect to Cuba.
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This is a broader announcement, and the April 28 does permit sales, both to private entities and to State entities, so long as the State entities aren't associated with the cohesive organizations of the State—for example, an arm of the police.
Mr. SMITH. How is the U.S. Government involved in extending food aid to Sudan and North Korea? Which programs or resources of the Department and the U.S. Agency for International Development are used or tapped for this?
Secretary GLICKMAN. Sir, for North Korea, we provide food assistance through the World Food Program, a large effort that we are involved with, as are a lot of other countries, and that is done through our 416(b) of Public Law 480 program. To date, we have donated this year roughly 400,000 tons of food to North Korea through that program.
Mr. EIZENSTAT. We also do provide food—we have gotten food into Sudan through A.I.D. programs and agricultural programs. We are supplying, in certain areas of the Sudan, food to the people of that country.
Mr. SMITH. So, Mr. Eizenstat, and, Mr. Glickman—Mr. Eizenstat, I think you heard you say that you are reevaluating the licensing procedure to try to speed it up, to try to assure that it doesn't inhibit sales. Are you considering the possibility of doing something other than a case-by-case? Is it possible to have the kind of criteria available that these exporters can meet? I mean, with the change in price so fluctuating, it seems to me that we are going to put our exporters at a disadvantage if there is any significant delay in allowing that export, or at least contracting for that export.
Mr. EIZENSTAT. Two things, Congressman Smith; first, just to give you the actual figures on Sudan. Last year, we donated $380 million of U.S. food to Sudan, which is a substantial amount. So that both helped the people and our farm community here.
With respect to your specific question, we are trying to find the most effective, most efficient licensing process consistent with our overall sanctions policy. We are looking for ways to be non-bureaucratic, to make it easier for exporters to involve themselves in this process without having to constantly come back on a license-by-license basis. But we need to balance that off against some of our foreign policy interests, and that is one of the things that we are looking at now.
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I do hope and do believe that we will have a process that our farm community and our agricultural exporters will view as non-bureaucratic and efficient.
Mr. SMITH. Have you analyzed or estimated? Or do you have targets in terms of a 3-day turnaround time or a 6- or 7-day turnaround? Have you analyzed what is necessary in order to allow our exporters to compete and make timely contracts? Do you have a target?
Mr. EIZENSTAT. We don't necessarily have a target for a number of days, but we have met with agricultural groups to ask them what they need to be competitive. What type of a licensing regime they feel would be most effective and would allow them to be competitive. And that will certainly be given a great deal of weight.
Mr. SMITH. But isn't timeliness the overwhelming key to the success of whether or not this is going to work or not?
Mr. EIZENSTAT. Absolutely. We will put a process in that will be very timely and that will not lead to lengthy delays.
Mr. SMITH. Is this less than a week or more than a week?
Mr. EIZENSTAT. I don't want to put a timeframe on it at this point. But, again, I am hopeful that the process we come up with will be one that you and the agriculture community—with whom, again, we are very closely working with on this—will feel that meets all their needs.
Mr. SMITH. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you.
Mr. Dooley.
Mr. DOOLEY. Thank you, Mr. Chairman.
And I just thank the ranking member, too, Mr. Stenholm, for suggesting that any member of this committee ought to be a cosponsor of the Crane-Dooley broader sanctions reform bill that Mr. Eizenstat has referred to. And so all of you that are still here today, I would encourage you to take a look at that.
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Mr. Eizenstat, I appreciate all the work that you have done and the administration has done, in terms of moving us forward on a better sanctions of policy.
But I would like to focus a little bit on some of the outstanding concerns that we have yet to be able to resolve, because I really think that we are so close, we ought to be able to get the administration on board and consistent with the legislation that we have introduced in the House, as well as Senator Lugar in the Senate.
And I guess my concern is on—a couple of questions is, I think I understand a little bit of the issue around national emergency versus national interests. But I would also be interested in knowing, of any of the sanctions that we have imposed during the Clinton administration, what of those would not have been covered under a national emergency waiver authority that we would have granted the President?
Mr. EIZENSTAT. OK. Let me explain to you the concerns we have with the bill that you are the coauthor of.
First, let me say that there are many elements in it, as in the Lugar bill in the Senate, with which we agree the general thrust of bringing some rationality to sanctions, to sort of look before you leap, to try to put things through a filter and look at costs and gains, to review on an annual basis whether a particular sanction is still effective, the whole issue of contract sanctity. Many of the things that you have are very much worthwhile.
I would like to make three points, and I will be very clear and very direct, because I think we are at an advance stage and we don't need to foxtrot.
The first is we want to make sure there is an appropriate balance between what Congress does in legislating for its own constraints and what it does with respect to the executive branch. You are, by definition, a legislative body, and so when you try to restrain your own sanctions actions, that can be superseded either by a rules change or by the next bill—it could be on child labor abuses; it could be on trafficking and women—and simply say, ''Notwithstanding any other act of Congress, the following sanction will go into effect.'' And there is nothing to bar that at all.
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Mr. DOOLEY. Just——
Mr. EIZENSTAT. Excuse me, if I may. It is useful; I am not suggesting at all that it is not useful for Congress to speak. I am simply saying it is an absolute constraint. Likewise, therefore, the constraints on the President should be symmetrical. That is to say the President should have—it is one thing to say to the President, ''We hope you will do the following.'' It is another one to be as the legislation is, completely prescriptive. We don't have the capacity, as not being a legislative branch, to ignore that if the national interests requires.
Second, there are in the bill a whole host of procedural barriers to the President acting on any sanction. For example, you have to provide 45 days' notice in advance of any sanction. Well, just imagine if you are trying to freeze an asset of a country—Serbia or Iran or any other rogue nation that suddenly does something we don't like—and one of the weapons we want to have is freezing their assets in the United States. We have used that time and time and time again. If you have to give 45 days' public notice in The Federal Register, obviously, that country will be able to rearrange its affairs to make it difficult for us to do that. Now, yes, there is a national security waiver, but you have got so many procedural hurdles with so many requirements for the President to act, that it really is a tremendous constraint. So if you can make those procedural hurdles less onerous.
And, third, and most important—and I must say, this is one thing I have said to Senator Lugar time and again. [Laughter.]
If you can build into your bill a stand-alone national interest waiver section so that the President, if he finds it in the national interest can give you reasons why he would waive the particular sanctions, that would go a very long way to ease our concerns. Now this is not novel.
Section 3 of Helms-Burton has national interest waiver authority. Sections 9(c) and 4(c) of the Iran Libya Sanctions Act have them, and we have used 9(c) in a recent case to leverage action by the EU and Russia on tightening their exports controls. We used title 3 waiver authority of Helms-Burton to get the Europeans to take a tougher position on the democratization in Cuba and to say that they will not increase their trade and political relations with Cuba unless there are concrete changes in human rights and democracy.
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That provision is the single-most important thing that can be done to make this bill much more compatible. It is not difficult, and you don't even have in your bill national security authority. You only have it with respect to the procedural barriers.
What we are saying is, as in Helms-Burton, as in ILSA, and what wasn't in the Glenn amendment, is for, goodness sakes, give the President the discretion to have the authority to waive these sanctions if he feels it is in the national interest to do so.
Mr. DOOLEY. On the 45-day advance notice as it pertains to the freezing of assets, we have a specific clause which gives the President the ability to waive that 45-day reporting requirement as it deals with that asset forfeiture and freezing of assets. I guess I am unclear on why that doesn't address your concerns.
Mr. EIZENSTAT. First of all, in your bill and in the Lugar bill, there are about three different standards used for the procedural hurdles. For contract sanctity, there is one; for the notice provision, there is another; for the sunset, there is a third. So there is a lack of symmetry.
Second, national security authority we think is a very high standard. It is a very—we have always considered that to mean——
Mr. DOOLEY. The authority in the bill is national interest, as it states.
Mr. EIZENSTAT. In some of the provisions and not in others.
Mr. DOOLEY. Well, on the asset forfeiture, it is national interest.
Mr. EIZENSTAT. And with respect to that, again, the more times you make the President have to issue particular waiver authorities, the more difficult.
But, again, let me come back—so we don't lose our sense of priorities on this—we would like to have as few procedural hurdles as possible. If there are procedural hurdles, certainly national interest is a better test than national security.
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But the overriding concern is to put in a stand-alone provision on this, with an opt-out by Congress under conditions which we have suggested. And in the introduction to your bill, it says, ''Congress should * * *.'' in future legislation, put in this kind of national interest waiver. So you have already recognized the need; what we are saying is, make that ''Congress shall do so * * *,'' with the right, obviously. Since you are a legislative body, if you would have to opt-out, there are certain ways to do it.
Mr. DOOLEY. I will wait.
The CHAIRMAN. Thank you very much.
Mr. Cooksey.
Mr. COOKSEY. Thank you, Mr. Chairman.
Mr. Eizenstat, a crystal ball question: When will the realities of globalization and the information age overcome even—and, indeed, overwhelm—Europe and now the EU's tradition of their continued political decision to provide 84 percent of the subsidies, as Secretary Glickman stated?
Mr. EIZENSTAT. First of all, I think that that reality has begun to dawn on them, and I will say two examples, both of which I will want to say are inadequate, but they are at least the beginning. First, that in 1993, they agreed to any restriction on export subsidies and internal supports, which they did in the Uruguay Round negotiations.
Second, they exercised that they have just gone through, only 6 or 8 weeks ago—they have called it ''Agenda 2000.'' It is how they prepare their budget for the enlargement that the EU will have over the next 5 years for central European countries, many of whom are large agricultural countries. Now the Germans, to their credit—and the Dutch and the British and many other countries; I would say, frankly, if there were majority voting, a majority wanted very deep cuts in those subsidies, because they recognize that, (a) they can't afford them internally as part of their own budget, and (b) that it will delay the time when they can incorporate it and enlarge it to include these central European countries if they have to come under the common agricultural policy. I mean the cost will be astronomical. It can double the budget.
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So they made modest changes. And, again, the French, in particular, objected to the deep cuts that the Germans and others wanted to make.
I believe that the enlargement process will be one thing that will bring reality home. I believe that that will be case. I also hope that our WTO process, where, again, we are making this one of our very top priorities, to achieve an elimination of export subsidies worldwide, will do so.
And, third, I am hopeful that our diplomatic efforts to get developing countries, as well as countries like Australia and New Zealand who are suffering because of these subsidies—it is not only ourselves; it is other major agricultural exporters. But if we can get the developing countries to recognize that the EU subsidies directly implicate their capacity they export, then we will have a very, very strong group of countries as we go into the WTO process for this round.
Mr. COOKSEY. Let me ask this same question: When will these same realities of globalization and the information age make U.S. agricultural sanctions on rogue nations meaningless?
Mr. EIZENSTAT. Well, I will take a stab at that, and then I will let Secretary Glickman do it.
I think that what the President did on April 28 is a recognition that what globalization means is substitution. Globalization means we don't have a monopoly on wheat; we don't have a monopoly on corn; we don't have a monopoly on basic commodities—rice and other products—that they can be substituted. And that is one of the fundamental reasons why the President made this announcement on April 28.
Secretary GLICKMAN. Two things—one, I am going to go back to your other question.
The Europeans have a little bit of an advantage in the trade world because they have colonial relationships with 30 or 40 countries, or possibly 50 countries—Africa, Asia, and Latin America—and so they are able to, in a sense, develop relationships historically that we have not been able to.
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We are making a conscience, deliberate effort, especially in Africa and Latin America, to develop these relationships and so that they understand that these European subsidies reduce their income, because they compete with them at lower prices than they should, and that in turn hurts them. In fact, they hurt them more than they hurt us, but they hurt us as well. And those ties, those relationships, are critically important, in terms of the next round at WTO and other trade negotiations, where they will be used to keep these ties pretty historical around the world. And I think that we are beginning to have an impact on that as well.
I also—just to answer the last question, recall a former Member of Congress, a famous Member from Mr. Gutknecht's State, Senator Hubert Humphrey, once said, ''We should sell anything to anybody that they can't shoot back at us.'' And I think the President believes that as well.
Mr. COOKSEY. Sure, and I think that is a good policy.
Mr. EIZENSTAT. But may I make two other points?
Mr. COOKSEY. Sure.
Mr. EIZENSTAT. Because I think this European issue is really worth looking at, and we can all take tough positions on it, but we have to face a couple of realities which I learned when I was over there.
The first is, just politically, the percentage of farmers in some of the key countries is a much larger percentage of their population than it is of ours. It is up to 10 percent in some countries.
Second, some of the countries, including France, look at their farm policy as not only an economic and political, but as a social policy. That is, there is a conscience effort to try to keep people on the farm and to avoid an exodus of people from the farm into urban areas. And so they are willing to pay a very stiff price.
Now one of the points that we have made, however, is it is one thing for them to pay that stiff price internally. If they want to price their own food out of competitiveness, that is one thing. But it is quite another to do it on exports and, in effect, distort the world market for agriculture and force our taxpayers and the taxpayers of other countries to have to pay for that social policy.
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Mr. COOKSEY. And could I ask one other question, Mr. Chairman?
And I would almost prefer, Mr. Secretary, a written response. I hope that my first two questions were enlightened in the context of the economy we are in today, and this seems like it is going in the other direction.
But I have a lot of meetings with farmers. A lot of my farmers and their spokesmen in my district would like to return to parity supports, and some want to return to price supports with target prices for cotton, for example. In fact, the Louisiana legislature last week passed a resolution which asked President Clinton to support a return to parity supports. That is 1911 and 1915.
What is this administration's position on parity supports, commodity price supports, income supports? Will the administration support a return to parity supports or commodity supports? If so, why? If not, why not?
Secretary GLICKMAN. OK; it is a very complicated question, but—and I will try to give you a greater response in writing—but, I do think that there are gaps in the 1996 farm bill that need to be filled. Loan rates were capped, and I, frankly, think that they need to be uncapped and float with some historical average. I think that would help our producers. And there are other things in that bill that I would like to see.
But we made a decision back in the mid–1980's that we were going to move towards allowing commodities to float with world prices, and then we would provide some additional help from the Government on top of that. Only as long as the Government would get out of the business of micro-managing agriculture.
What your problem is, is that if you support commodities at too high of a level, you must come in and restrict supply, as it is happened to Europeans. They support prices that are very high eye level, but they don't necessarily restrict supply. They have to subsidize their exports in order to move their commodities, which hurts other people in the world.
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We used to have the ability to restrict supply, through our supply managing programs, but now, we are just doing that in wheat. We produce maybe 10 or 11 percent of the world's wheat. It is hard to do it on your own. You shoot yourself in the foot if you restrict it here and nowhere else. But to go back to the old days of agriculture means a much more Government interventionist force in agriculture, where you are telling farmers what, when, how, and where to produce their commodities. And that is a different direction than we have been doing. Given the nature of the world, I don't think we can ever go back. Saying that, I do think we can make some improvements in the safety net under the existing programs.
Mr. COOKSEY. Do you think there is anyone in Washington that is smart enough to go back to those days? Or do you think there is anyone in Washington that thinks they are smart enough to go back?
The CHAIRMAN. While the Chair would allow the gentleman to answer the question, time has expired.
Mr. COOKSEY. Thank you.
Secretary GLICKMAN. I don't know if I am smart enough——
[Laughter.]
The CHAIRMAN. I want to hear the answer to this. [Laughter.]
Secretary GLICKMAN. Collectively, we are smart enough to work on these problems together. [Laughter.]
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. Mr. Chairman, I have no questions; thank you.
The CHAIRMAN. Thank you.
Mr. Ewing.
Mr. EWING. Thank you, Mr. Chairman, and thank you for holding this hearing.
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Secretary Glickman, good to see you again.
A quick question. Have we determined what the policy on loan deficiency payments are going to be? And when could we expect that announcement?
Secretary GLICKMAN. There will be announcement in the next few days. And let me just say, because I expected this question to be asked, let me make a couple of comments here.
One, I have received dozens of letters and calls from Members of Congress saying the current system is unfair and inequitable. You have differences in the loan deficiency payments between counties, between States, that people are trucking grain across State lines, crossing bridges, just to get a higher price in other parts of the country. And it is true. Part of it is we never expected to have 2 million LDP payments when we passed the 1996 farm bill. Fortunately, Stu, you don't have to worry about this particular problem, which is a serious and a difficult one. So we do need to make changes.
However, to make the changes that are needed to make the program more equitable will mean some people will win, and some people will probably lose. And in order to minimize large numbers of people losing, you can—and I think we have done already internally—constructed a program where there are way more winners than loser in that process. And when I say ''winners'' and ''losers,'' I mean people who do not suffer as a result of reduction of their LDP. There is a significant fiscal cost. My guess is upwards of $400 million to do that, which indicates to you that this would probably result in a rather generous addition to, overall, to farm income, as a result of making these changes. And we are now working to see whether those dollars are available, because I do not want to make the change if it is going to result in large numbers of people being hurt in that particular process.
The third thing we have to figure about is timing and the scope of what we are talking about. We are already harvesting wheat, and, on the other hand, we are not going to be harvesting our corn, soybeans, until much later in the year. And we have got to figure out whatever we do on timing, it has got to make sense in order to give people adequate notice.
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There has also been concern about the need to have some sort of public comment in this process. Our lawyers tell me that we don't have to have public comment because it is not a formal rulemaking procedure, and these are operational decisions of the Commodity Credit Corporation, but it is a fairly significant modification of the program. As long as commodity prices remain at certain levels, these operational problems are going to be very serious, indeed. The complexity of it has taken me longer than I would like to have it, but in the next few days we will decide which road we think we are going to go down and we will notify you immediately.
Mr. EWING. Well, Mr. Secretary, I know it is a difficult problem, and it is the basic safety net that we have out there right now for grains, particularly. And I would hope that before it is set in concrete, that the leadership here in the Congress, on the agricultural side, will have some opportunity to review what is happening and at least comment, even if it is not required.
Mr. Eizenstat, I am pleased with your comments that increasing exports and reducing export subsidies is a policy that we think means a lot to American farmers. I think many farmers in my State would a lot rather sell it than get Government payments, though they certainly are not opposed to Government payments, particularly if they can't sell it. And then the President's announcement on April 28 and his release, dealing with review of the sanctions and lifting of sanctions. And those please me very much.
In your testimony, though, you made some comments about a couple of pieces of legislation. One, H.R. 17, which seemed to be a little out of sync with our policy of less sanctions, a little more consultation with the Congress on sanctions, and creating a policy that makes more sense to American farmers.
And I just wondered if you would comment on that.
Mr. EIZENSTAT. Yes, sir; thank you.
And I appreciate very much the spirit in which you have authored H.R. 17. But we do have some very real concerns about them. And I mentioned earlier that S. 566 on the Senate side is more in the spirit of some of the principles that we have. If I may just mention a few concerns we have with H.R. 17.
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First, that it requires a presidential report to Congress on any selective embargo of agricultural products. Second, it establishes procedures that would require congressional approval, or potentially disapproval, of the reported embargo. It is unclear, as well, as what happens if Congress doesn't act at all. Does the sanction stay in effect? Does it not stay in effect? And, in addition, it requires that the sanctions terminate on a date certain, regardless of the changes in the behavior or policies of the sanctioned country. And we have always felt that, in terms of the end date for sanctions, they ought to be performance-based, rather than terminate on a particular time. And if I may say, in terms of Congressman Dooley's legislation, what we favor instead of a sunset saying, for example, a sanction will end 1 year or 2 years after the date, is to require the President—and we are perfectly willing to do this to annually review outstanding sanctions and report to the Congress on whether that particular sanction still has any import, whether it is doing the job effectively, and if not, then the President should, in effect, not pursue it. That, to us, is more performance-based rather than time-based.
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