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THE ADMINISTRATION'S PREPARATIONS FOR THE 1999 WORLD TRADE ORGANIZATION MINISTERIAL
WEDNESDAY, JUNE 23, 1999
House of Representatives,
Committee on Agriculture,
Washington, DC.
The committee met, pursuant to call, at 10:05 a.m., in room 1300, Longworth House Office Building, Hon. Larry Combest (chairman of the committee) presiding.
Present: Representatives Barrett, Boehner, Ewing, Smith, Lucas of Oklahoma, Hostettler, Chambliss, Moran, Thune, Cooksey, Gutknecht, Riley, Walden, Ose, Hayes, Stenholm, Peterson, Dooley, Clayton, Minge, Hilliard, Pomeroy, Holden, Bishop, Baldacci, Berry, Goode, Stabenow, Etheridge, Boswell, Lucas of Kentucky, and Hill.
Staff present: William E. O'Conner, staff director; Lynn Gallagher, senior professional staff; Wanda Worsham, clerk, Greg Zerzan, associate counsel; Callista Bisek, Jason Vaillancourt, and Andy Baker.
OPENING STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
The CHAIRMAN. The hearing of the House Committee on Agriculture on the administration's preparations for the 1999 WTO Ministerial will come to order.
We appreciate all of those who came today. I want to quickly introduce some people who are in the audience who have a great deal of interest in this. We appreciate their attendance. Susan Combs, my commissioner of agriculture in Texas; Bill Lyons, Jr., the secretary of Food and Agriculture for the State of California; and Dr. Martha Roberts, deputy commissioner of Agriculture in the State of Florida. We welcome you to our hearing today.
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On behalf of the committee, I am pleased to welcome all of the witnesses to this hearing on the administration's preparation for the 1999 World Trade Organization Ministerial. We will hear from Secretary of Agriculture Dan Glickman and U.S. Trade Representative, the Honorable Charlene Barshefsky. While Ambassador Barshefsky has briefed Members most recently on the negotiations on accession of China to the WTO, this is her first official appearance before the committee. Madam Ambassador, you are very welcome to the committee, as is certainly our former colleague and friend who spends a great deal of time up here, the Secretary of Agriculture. It is my pleasure to welcome her to the committee. I am certain that we will see much more of Ambassador Barshefsky and Ambassador Peter Scher, who is also in attendance today, as preparations for the upcoming WTO negotiations continue.
For American farmers and ranchers, trade is an essential part of their livelihood. They produce much more than is consumed in the United States. Therefore, exports are vital to their prosperity and success.
This year, USDA estimates that agricultural exports will be $49 billion, but this figure is more than $10 billion lower than the value of U.S. agricultural exports in 1996. Our agriculture trade balance for 1999 is estimated to be $11 billion, the lowest since 1987. There are several reasons for these lower numbers: Lower commodity prices around the world, reduced volume of exports and the Asian financial crisis. For years, U.S. agriculture has provided a positive return to our balance of trade. In order to continue this positive balance, to improve upon it, markets around the world must be open to our agricultural exports. Our agricultural markets are open to imports and our tariffs are low. Agriculture tariffs worldwide average about 50 percent, while U.S. agricultural tariffs are less than 10 percent. It is to the advantage of U.S. agriculture that we continue to open markets and remove barriers to our agricultural exports. Goals for these negotiations include a decrease in agricultural tariffs, reduction of export subsidies, discipline of state trading enterprises for imports and exports, and certainly that science, not protectionism, is a basis for worldwide trade rules.
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Those of us interested in promoting U.S. agriculture around the world believe our farmers and ranchers can do better in world markets, but unless we break down barriers, expansion of U.S. agriculture trade will be slowed down even more than it has over the past 3 years.
These WTO agriculture trade negotiations should open markets around the world and create new opportunities for U.S. farmers and ranchers. Today the administration will explain its preparations to achieve these goals, and I would recognize now Mr. Stenholm for any comments that he might make.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. STENHOLM. Thank you, Mr. Chairman, and thank you for holding this hearing today to review the administration's preparation for the next round of WTO negotiations on agriculture, set to begin in about 5 months.
I was very pleased to receive the May 11 letter from the 69 member Seattle Round Agricultural Committee, which includes most of the commodity groups that will be represented at least in the audience here today. The Seattle Round Agricultural Committee identified 14 objectives to the next round, and at the top of its list is conclusion of the rounds with a single undertaking that encompasses all sectors. In other words, no early harvest.
That means that once the round has begun, we work until agreement can be reached on all sectors, rather than carving out agreements on less controversial sectors and leaving agriculture behind. One need look no further than the remarkable agreements of GATT and the WTO for trade and industrial goods to see that agriculture is not likely to be the sector that would be harvested early. Since the end of World War II, eight rounds of negotiations have reduced the average bound tariff on industrial goods from 40 percent to 4 percent. Meanwhile, bound agricultural tariffs remain an average of over 40 percent.
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The question for agriculture is, how do we catch up? What incentive do our trading partners have to complete negotiations on agriculture if we are willing to first conclude agreements in sectors that are most important to them?
In last Friday's Congress Daily, Ambassador Barshefsky was quoted as saying there was an emerging consensus for a 3-year limit on the next round, and that a single undertaking may well be appropriate, but I won't make that decision until I know what the agenda is.
I agree that 3 years should be enough time to than included the Seattle round, but I hope we will not agree to a time frame that will compromise the progress we are making in agricultural trade. When President Clinton addressed the WTO ministerial in Geneva in May of last year he proposed that even before negotiations near conclusion, WTO members should pledge to continue making annual tariff and subsidy reductions in agriculture, ensuring there is no pause in reform. If we are to gain commitments from our trading partners to reduce agricultural tariffs and subsidies before the Seattle round nears conclusion, I suggest we make it clear that agriculture is a U.S. priority that must be addressed first.
In his May 1998 WTO statement, the President also addressed the need to develop rules rooted in science that will encourage the full fruits of biotechnology. In a recent paper entitled ''Agricultural Biotechnology and the New Round of WTO Negotiations'' the Biotechnology Industry Organization, commonly known as BIO, argues that existing WTO rules, such as the SPS agreement and the agreement on technical barriers to trade, TBT, already covered the biotechnology products and these existing results could be supplemented with interpretive notes to address trade issues such as lengthy EU approval process for genetically modified organisms.
I recommend the BIO paper to my colleagues and to our friends from the administration as a good starting point in our preparation for the upcoming negotiations on biotechnology. Whether we clarify existing rules or agree to a new rule for biotech, our opponents will attempt to expand those rules to allow for measures that are not science-based. On this point we must remain united. WTO member countries must continue to base regulations on scientific principles and a science-based assessment of risk.
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Thank you, Mr. Chairman.
The CHAIRMAN. Thank you.
Any statements by Members may be included at this time.
[The prepared statements of Members follow:]
PREPARED STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Today, the members of the House Committee on Agriculture will receive testimony reviewing the administration's preparation for the new round of multilateral trade negotiations regarding agriculture, scheduled to begin in the 1999 World Trade Organization Ministerial.
I would like to thank Chairman Combest for his persistent leadership on the very important issue of world agriculture trade. I would also like to thank Members of the Full Committee for their support and patience as we address the Administration's preparation for the 1999 round of trade negotiations.
All of us should worry that the free trade argument has lost some of its luster. There are concerns that we will pass protectionist legislation for the steel industry, which can only mean retaliation on U.S. agriculture. And that is only the beginning. As we prepare for the Seattle round of the WTO, we must keep that issue in mind. After the White House failed to support passing fast track—a ''yes'' vote that was difficult for a number of members on this committee on both sides of the aisle, we now have President Clinton renewing a call for fast track authority to negotiate trade agreements. In his recent address to University of Chicago graduates, the President urged fast track negotiating authority. The President certainly talks a good game, but this is not more than lip service. Are we going to wait until the end of the session when fast track does not do any good? I certainly urge Secretary Glickman and Ambassador Barshefsky to have a better game plan for the Seattle Round of negotiations.
Article 20 of the 1994 Uruguay Round Agreement on Agriculture
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calls for the continuing improvement of world agriculture trade in 1999. It more specifically states that member countries of the World Trade Organization recognize that the long-term objective of reducing trade-distorting support and protection of agriculture. I see agriculture exports as a crucial source of income for United States Agriculture. I feel that both the House and Senate Agriculture Committees should carefully examine the present condition of agriculture trade.
In examining the condition of world agriculture trade, it is important to realize the impacts of exports on U.S. agriculture. Although the first two quarters of the 1999 agriculture trade balance reveal a net export increase of $500 million, the recent trend of decreasing U.S. agriculture exports should be of great concern.
During the 1999 World Trade Organization negotiations, several issues should be addressed to improve the condition of agriculture trade.
Mr. Chairman, I have two issues that I feel are very important. One, the age-old question of State Trading Enterprises and two, the rules for trade regarding bio-engineered products. I feel that each of these issues should be carefully considered and examined in today's hearing.
In reviewing my home State of Nebraska, competition among suppliers for world agriculture products is increasing. For our farmers, ranchers, and food processors to compete successfully, we need to have fair trade and fair access to growing global markets. As one of the Nation's leading producers and exporters of agriculture products, the continued improvement of fair trade and fair access for Nebraskan agriculturists is crucial. Improvements in trade and market access are vital for Nebraska's farmers.
It is my opinion that international markets represent a large growth point for American agriculture. By shuffling restrictions and allowing increased fair trade, we will be able to increase the income of many
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American producers.
Mr. Secretary, Ambassador Barshefsky, and Members of the Committee, we must push for the continued improvement in the Global Market. Today we should examine each of the issues I mentioned and work to improve the relations of agriculture trade.
Again, I want to thank you, Mr. Chairman, for holding this hearing on the future of world agriculture trade. I look forward to hearing testimony from each witness panel.
PREPARED STATEMENT OF HON. CHARLES T. CANADY , A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
Mr. Chairman, Ambassador Barshefsky, Mr. Secretary thank you and I appreciate the efforts of this Committee, the Office of the U.S. Trade Representative and the Department of Agriculture to focus on international trade issues as we begin preparations for the multilateral negotiations of the World Trade Organization. I would particularly like to thank Ambassador Barshefsky for holding the U.S. Trade Representative WTO Listening Session on June 4 in Lakeland, FL part of the 12th Congressional District which I represent. This was an important opportunity to hear from growers and affected members of the agricultural community whose existence, to a large degree depends on the positions taken and agreements reached by the United States in WTO negotiations. By considering the concerns of these agricultural producers, I believe that you will be better prepared for the next round of multilateral negotiations, and understand the challenges growers face competing in the world market. My comments today reflect the concerns expressed by growers at that WTO Session.
Trade issues in the upcoming WTO Ministerial will have a dramatic effect on producers of specialty crops such as fruits and vegetables grown in Florida. Mr. Chairman, Florida currently ranks fifth in the Nation in crop cash receipts. While we have an unique opportunity to provide enhanced export markets for high quality fruits, vegetables, and other seasonal crops, our producers often must compete against low-priced, often subsidized products from Latin America, Europe and elsewhere. Too often free trade is not fair trade because our agricultural producer are asked to compete with countries who do not face the enormous regulatory, environmental and labor restrictions imposed on U.S. farmers.
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While we applaud the general objectives of the WTO negotiations, we must recognize that previous agreements reached under the Uruguay Round Agreement and under the North American Free Trade Agreement have lead to increased competitive pressure based largely on the this inequitable set of circumstances. Hence, Florida agricultural growers have concerns that a new round of WTO negotiations may lead to further reductions in import sensitive tariffs, and further denigration of market shares. We urge that inequities in prior agreements be addressed, and that trade dispute resolutions be enforced before new agreements are entered into. U.S. negotiators should seek to improve upon market access provisions and safeguards by pressing for WTO reforms that finally reflect import-sensitive agricultural interests.
Any agreement should be based on a ''request and offer'' approach to tariff negotiations rather than a ''formula reduction'' approach as utilized in the Uruguay Round. Formula reduction approaches, which required across the board tariff cuts of 15 percent, did not protect import -sensitive U.S. agricultural products. Specialty crops have unique considerations that should be dealt with through specific measures including workable price-based safeguards, rapid and effective dispute resolution, adherence to science-based sanitary and phytosanitary issues and equivalency requirements.
I respectfully request that U.S. negotiators carefully consider and fully acknowledge the seriousness of this issue and the great economic stakes involved for Florida, and American agricultural producers as a whole, as they enter into the WTO Ministerial trade talks. I also ask the comments expressed at the WTO Listening Session in Winter Haven be included as part of the record.
PREPARED STATEMENT OF HON. HELEN CHENOWETH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF IDAHO
Mr. Chairman, thank you for holding this hearing to review the Administration's preparation for the 1999 World Trade Organization Ministerial. This hearing is very welcomed, and I thank all the witnesses.
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A new round of multilateral trade negotiations will be launched in Seattle, Washington, when trade ministers of the WTO countries meet November 30 through December 2, 1999. It is clear that the objective of the negotiations should be to continue the process of agricultural trade reform begun in the Uruguay Round Agreement.
Continuing the process of reform must entail revisiting the issues of high tariffs, market access, export subsidies, and domestic support that were essential to the Uruguay Round. Additionally, efforts must be made to settle anti-dumping rules, sanitary and phytosanitary disputes, dispute settlement and technical barriers to trade.
Mr. Chairman, we need to compensate U.S. exporters for markets lost to unfair foreign competition. According to the Idaho Grain Producers Association, the GSM 102 and 103 credit programs have been very effective in maintaining market share in many countries around the world, especially in Asia. Without an aggressive export policy, such as the GSM 102 and 103 credit programs, the Idaho grain producers struggle to survive.
I am in favor of trade that is fair and free for all parties involved. I believe we need to reinforce the trend toward greater integration of U.S. markets into foreign markets. Facilitated trade agreements must promote investment and employment in the United States. Also, the strong export performance of United States's goods must create incentives for resources, labor and capital. The time has come to protect America's jobs and interests.
PREPARED STATEMENT OF HON. DEBBIE STABENOW, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN
I appreciate the opportunity to participate in today's hearing on the administration's preparation for the 1999 World Trade Organization Ministerial. I would like to thank Chairman Combest and Ranking Member Stenholm for convening on such an important issue for agriculture. I would like to take this opportunity to welcome all of today's witnesses; their expertise will benefit our discussion. However, I would like to extend a special welcome to Secretary Dan Glickman and to the Honorable Charlene Barshefsky, U.S. Trade Representative. Furthermore, I would to extend a warm Michigan welcome to Mr. Elwood Kirkpatrick, president of the Michigan Milk Producers Association. He will be testifying today on behalf of the National Milk Producers Association.
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The scope of today's hearing is broad. I am sure we will not cover all the important issues. I hope the agriculture committee will continue to hold hearings on this issue. I am concerned about the fate of agriculture at the WTO Ministerial and I welcome today's opportunity to raise a few issues. Only two sectors have a clear mandate to continue WTO negotiations and one of them is agriculture. Nonetheless, Director General of the WTO, Mr. Rugierro, has stated that agriculture can not be a predominant issue during the next Round. Furthermore, there is the ongoing debate regarding the scope of the next Round. Arguments have been made for both sectoral negotiations or a multisectoral negotiation. The fate of agriculture will be determined by the scope of the next Round and I would like to hear from the administration today how they intend to protect the interests of U.S. agriculture. I would like the various commodity groups represented here today to inform me on their opinion of how the scope of the next Round can impact U.S. agriculture.
A specific issue in which I am particularly interested is the treatment of bio-engineered products. As we all know, trade in bio-engineered products is the fastest-growing and most controversial, new technology in agriculture. However, there are no clear WTO rules in the current WTO accords that govern the trade of bio-engineered products. Some argue that the current WTO agreements on sanitary and phytosanitary (SPS) measures and on technical barriers to trade (TBT) should be expanded to cover bio-engineered products. I would like to hear the opinions from today's panel regarding this ongoing debate. Biotechnology is critical for the future of agriculture and I believe a viable solution to the treatment of the bio-engineered products by the WTO should be a top priority for the next Round.
Once again, I would like to thank all of today's witnesses for being here today. I look forward to their expert testimony.
The CHAIRMAN. The first panel is at the table. Again for introduction's sake, the Honorable Dan Glickman, Secretary of the U.S. Department of Agriculture, the Honorable Charlene Barshefsky, U.S. Trade Representative, the Honorable Peter Scher, Special Trade Negotiator for Agriculture, USTR. I notice that Deputy Secretary Rominger is accompanying Secretary Glickman.
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Secretary Glickman, please proceed.
STATEMENT OF HON. DAN GLICKMAN, SECRETARY, U.S. DEPARTMENT OF AGRICULTURE
Secretary GLICKMAN. Thank you very much, Mr. Chairman, Mr. Stenholm. With me of course is Deputy Secretary Rominger, Gus Shumacher, our Under Secretary for Farm and Foreign Agricultural Services, and other folks with the Department are with us.
I would first like to say that we are indeed fortunate to have the USTR team that we have. Not only is Charlene Barshefsky a tenacious advocate for ensuring fairness for American workers, but she is a tenacious advocate for ensuring fairness for American farmers, and her Ambassador for Agriculture, created for the first time in this administration, Peter Scher, has been a tireless advocate for the interests of American agriculture, and how critically important it is that someone within USTR, actually doing our negotiating, is a person whose focus is agriculture. I think it is the first time ever that has happened. It has made a big difference. We would like to think we operate in terms of, intellectually in terms of developing ideas in partnership with USTR, but they are the ones who are actually on the ground negotiating, and I think that their leadership has been critical and will remain critical as we go to the next WTO round.
I have learned in my experience in over 4 years in this job what trade means to U.S. agriculture's bottom line. Early on we had a record $60 billion of agricultural exports, in 1996, and, prices in the countryside, farm prices, reflected those higher numbers.
In the last year and a half, we have seen a steep drop in the value of agricultural exports, not so much in the volume. Although that has remained pretty constant, but the value has come down significantly. As a result of 3 years of record worldwide production, 1996, 1997, 1998, record production, in 1999 it looks like another record year in the world, coupled with the crisis in the Asian financial markets, agricultural exports plummeted and farm prosperity took a nose-dive.
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The key lesson from both the good and bad periods of the last 4 years is the critical significance of trade to our farm economy, and the corollary of that is the need for a sufficient safety net beyond just trade when times are bad. But the fact is that over the long term, trade is the linchpin of our agricultural economy. We obviously have to do other things like, have appropriate domestic policies. But the fact is that one-quarter of U.S. agriculture production is exported, and if the farmers are going to continue to prosper, we must look to the global economy to provide new markets.
That means we need a free and fair trading system and reliable markets. Just look at the facts. Since 1960, tariffs worldwide have fallen by 90 percent, while global trade has grown by 1,500 percent. World economic production has quadrupled while per capita income has more than doubled. The true test came in 1997 and 1998 when 40 percent of the world's economy stumbled badly. We are not out of the woods yet, but we are seeing positive signs in the economies of South Korea and Thailand, without any retrench into protectionism.
In his last State of the Union address, the President called on the nations of the world to tear down barriers, open markets and expand trade. He also said we must ensure that ordinary citizens in all countries actually benefit from fair trade—that includes the United States as well. Nowhere is this more important than in agriculture. That is why the United States has developed a bold agriculture agenda for the new round that includes one, the elimination of export subsidies which makes for unfair trade practices and depress world commodity prices for all producers. No. 2 we must further reduce worldwide tariffs, which average 50 percent on agricultural goods in other parts of the world. No. 3 we must expand market access by raising the ceilings on tariff rate quotas, only as an interim measure as we try to phase them out over the long run. Fourth, we must open up the operations of state trading enterprises, making them more transparent so that they face the same risk in the marketplace as private traders. This is a particular problem as we deal with the Canadian wheat board. Five is facilitating trade and new technology products, including biotech. And six is we must ensure the continued effectiveness of the rules governing sanitary and phytosanitary measures so that sound, impartial science prevails, and so nations cannot mask protectionism behind unvalidated, secretive studies.
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In my own opinion, and Charlene can perhaps give her own thoughts on this, is the last two points I mentioned. The biotech issue and the sanitary and phytosanitary issue, will become perhaps the most difficult of all stumbling blocks for agriculture in the next round.
Since I first outlined these goals to the committee 15 months ago, USDA has sought advice and ideas from all aspects of our agricultural industry as we refine our trade policy goals for the next round. For example, tomorrow representatives from USDA, USTR and the State Department will be in Indianapolis for the fourth of 12 regional WTO listening sessions scheduled to gather public comments on the upcoming trade round and goals for agriculture. We have heard from farmers and ranchers, processors, exporters and State and local Government officials. The testimony has been thoughtful and ample.
Under Secretary Shumacher told me at this upcoming listening session tomorrow, that we expect about 600 people have signed up for that meeting. The testimony we have heard so far has reflected a general support for the trade agenda but a real desire for a more level playing field in the world trading environment. This and the remaining sessions will help broaden our understanding our trade policies that must be effective in helping us increase our agricultural exports.
We will continue to work through the Agricultural Policy Advisory Committee and the five technical advisory committees on trade to gather advice on the United States' negotiating strategy. We announced the committee members earlier this month, and there will be six meetings with these committees leading to the Seattle Ministerial in November.
One area where we need to work together closely is domestic support. We need to reduce trade distorting subsidies and the United States has led the way in creating policies that minimize effects on world markets. But we also have more work to do in creating a safety net of farm support that helps our farmers weather the cycles of agriculture. Matching these two goals, which is minimizing market distortion while supporting the rural sector, will require creativity and sound tactical planning—since we are likely to have to deal with writing a new farm bill before the results of the upcoming negotiations are implemented.
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I might add parenthetically, we also have to deal with one of the most difficult principals we face from the EU, that has been continually, which is dealing with the issue they call multifunctionality. It basically means that rural and farm programs serve many functions and one of them is to preserve people on the land, notwithstanding what its effects may be on trade or market distortions. We believe that that policy is wrong, but we also recognize that it is appropriate for every country to have policies that protect and promote their rural and farm sectors, but do it in a non-trade distorting way.
As we plan our negotiating strategy, we are consulting with other countries. While we have many allies in our quest for freer and fairer world agricultural trade, there is, of course, considerable opposition. There are powerful forces who see agricultural trade not as a win-win situation, but as a zero sum game where the exporter wins and the importer loses. Many nations protect their domestic producers by blocking access to their markets with tariff and non-tariff barriers. So that is obviously another key point.
Let me just talk quickly about China. Charlene Barshefsky, Peter Scher and their team deserves particular praise for what they did during the recent negotiations on sanitary and phytosanitary measures with China. They are the ones that got that done. China's accession to the WTO would hasten its integration into the world economy and complement our efforts to maintain stability in the Pacific by linking China's economy more closely with the rest of the world.
We believe that China's accession to the WTO would be a win for everyone. For the United States, the benefit is obvious; a more level playing field in the world's largest market and greater consistency in a market that has been fairly erratic. A sound agreement with China will open Chinese agricultural markets to U.S. exporters, strengthen the world trading system and give farmers and agricultural interests in this country stronger protection against unfair trade practices and import surges. The principles of the WTO, which are transparency, fair trade practices, peaceful settlement of disputes and the rule of law, are those we hope to advance in China and worldwide.
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Since one in five people in this world live in China, our trade relationship with the Chinese people becomes very important. With rising incomes, China will be a growing customer for agricultural products for years to come, and notwithstanding their desire to be self-sufficient, the fact of the matter is they cannot be self-sufficient for everything in the years to come, particularly as they move to a more industrialized society.
Last year China was the fourth largest market for U.S. agriculture products, buying more than $3.3 billion worth of soybean, soybean oil, cotton, hides and skins, and a variety of other U.S. products. We believe this trade can and will expand significantly if we reduce trade barriers between China and the United States.
China is also one of our most able competitors and a net agricultural exporter, with steady record increases in grain production, plentiful grain stocks, and ample opportunity to further increase yields. As the world's largest producers of farm products, the United States and China need to work together to promote an open and fair world trading system. The U.S. will work with China to build a strong trading partnership, but the timing of China's accession is up to China.
Mr. Chairman, everyone in this room knows the importance of trade to U.S. agriculture. In the past year we have been sobered by a global financial crisis that devastated many of the emerging Asian economies and softened demand in Russia, one of the world's most important markets for meat. Up until last year, and for the past few years, the largest export item of the United States to Russia was chickens. Roughly 35 percent of all our exports to Russia was in poultry—making that market an example of one that has taken an enormous hit because of their economic problems. While we are seeing some strengthening in the Asian economies, we continue to face global oversupply of many commodities—which sent prices plunging to their lowest levels in years. We have learned that our farmers cannot rely exclusively on trade as their only safety net, but we must continue our efforts to reform world agricultural trade so they have more new open markets as well.
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As the President said earlier this month in Chicago, ''We ought to continue to expand trade, we ought to enforce our agreements more vigorously, but I do not believe a country with 4.5 percent of the world's people can maintain its standard of living if we don't have more customers.''
To realize the potential of the global marketplace we have a lot of work ahead of us. We must construct a world trading system where every producer gets a fair shake, and where all products, goods and services, are traded freely across oceans and continents. The next round of the WTO negotiations will be a turning point and we will be working hard to help American agriculture realize that potential.
Just to add two points. In mid-July I will go to Vancouver to meet with my Quint partners. This is an agriculture meeting of the United States, Canada, Australia, New Zealand and the EU, to talk about ways that we can deal with agricultural strategy in the next round of the WTO. Early next week, Ambassador Scher and I are going to Paris to have quiet, bilateral meetings with French agricultural leadership on issues of follow-up to the G–8 meeting. In particular as they relate to WTO concerns and relate to biotechnology and sanitary and phytosanitary measures. So we intend to take an active, aggressive role in dealing with these issues the best we can before the next round of the WTO.
Let me finally just say again, I don't think there has ever been a USTR that has been more engaged in opening up world markets for agriculture and other products than the team we have got here. In the dictionary you look up the world tenacious, Charlene's picture is there. The point of all of this, while these are complicated issues and we are dealing with political theory somehow based on the economic rationalization of how everybody's own country is doing economically, Charlene, Peter and others have and continue to fight the good fight to break down unfair trade barriers.
Thank you very much, Mr. Chairman.
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[The prepared statement of Secretary Glickman appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Mr. Secretary. The tenacious Ambassador Barshefsky.
STATEMENT OF HON. CHARLENE BARSHEFSKY, U.S.TRADE REPRESENTATIVE
Ms. BARSHEFSKY. Thank you very much, Mr. Chairman, Mr. Stenholm, members. Let me say it is a great pleasure to appear before you. With me, of course, is Ambassador Scher and his entire team at USTR. Let me also, if I might, return the compliment to Dan Glickman, to Gus Shumacher, Rich Rominger and their entire team.
We have never had as cooperative and as close a day-to-day working relationship with USDA as has been forged these last several years. We are very grateful for it, and very, very grateful for Dan Glickman's leadership.
This is a very timely hearing. A new round of global trade negotiations is set to begin this winter when the United States hosts and chairs the WTO Third Ministerial Conference in Seattle. Agriculture, and I want to assure you, Mr. Chairman and Mr. Stenholm and the committee, agriculture is at the heart of this agenda. We are now developing negotiating objectives in consultation with Congress and other interested parties. My testimony will review our broad goals, place the round in the context of our work over the past 6 years, and outline the process by which we are developing detailed objectives.
American farmers are the most competitive and technically advanced in the world, producing far more than we can ever eat. We have an opportunity, indeed we must, export to the 96 percent of humanity that lives beyond our borders, and with one in three farm acres now producing for foreign markets, we must export to remain profitable at home.
These realities are the foundation of our agricultural trade policy. Under the President and the Vice President and Secretary Glickman, our work has covered five broad areas. We have sought to, first, reduce tariffs and other barriers to trade; second, ensure that sanitary and phytosanitary standards are based on science; third, reduce foreign export subsidies and trade distorting domestic supports; fourth, show greater transparency and fairness in state trading, and last, help guarantee that farmers and ranchers can use safe modern technology, in particular biotechnology, without fear of trade discrimination.
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The foundation of this work is its direct benefit to our agricultural producers, but each item on this agenda is also rooted in a broader humanitarian vision. More open markets give customers more diverse supplies of food, help guarantee food security, and prevent famine during natural disaster. Ending export subsidies will ensure fairness for American farmers, but also for farmers in developing countries whose governments lack the resources to fight back. As we ensure respect for science in food safety and biotechnology, we protect public health and reduce the pressure on land, water and wildlife habitat.
In cooperation and consultation with the committee and many Members of Congress, we have come a long way toward these goals. With the passage of NAFTA in 1994, we won preferential access to our immediate neighbors. As a result, our agricultural exports to Mexico have increased 70 percent. Our exports to Canada are up sharply as well. Together, these two countries, with a total population of 120 million people, now buy over one-quarter of all of our agricultural exports and provide American farmers with at least a partial shield against overseas economic crisis.
We have also negotiated bilateral agreements worldwide in a very large range of commodities, from beef in Korea, apples and cherries in China, tomatoes and apples in Japan, almonds in Israel, a veterinary equivalence agreement with the EU, citrus and other fruits in Brazil, Chile, Mexico and elsewhere, and a broad agricultural agreement with Canada concluded just last December. And with the completion of the Uruguay Round in 1995, after 47 years of developing the trade
system, we began to bring agricultural trade under fair and internationally accepted rules.
In that agreement, we lowered tariffs and are on track to eliminate most quantitative restrictions. We reduced trade distorting subsidies. We ensured that all WTO members, 110 at the time, but 134 now, would use sanitary and phytosanitary standards to protect human, animal and plant health, rather than to bar imports. We won consensus on a built-in agenda that ensured further market openings in agriculture and services negotiations to begin at the end of this year. At the same time, USDA and FDA are intensifying food inspection at the border here to not only maintain but improve our own food safety standards. This is especially important as imports have risen in recent years to ensure that the American public will have the world's safest food supply as we get the benefits of open trade.
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With all of these agreements complete, we have followed up through vigorous monitoring and enforcement of commitments, including 13 separate WTO cases on dispute settlement in agriculture and retaliation against the European Union when it failed to comply on bananas, and we will retaliate at the end of July if they do not comply with their obligations on beef. When WTO members refuse to play by the rules, and thus far only the European Union, and only agriculture has refused to play by the rules, they will pay a heavy price.
Today American farm and ranch families face a far more open and fair international market than they did 6 years ago, but the situation, as you know, is still very, very serious with respect to market access. As we look ahead, therefore, to a new round, broadly speaking, our goals will include reducing tariffs, improving the administration of tariff rate quotas, eliminating entirely export subsidies, reducing trade distorting domestic supports, stronger disciplines in the activities of state trading enterprises, and guarantees that decisions on new technologies, including biotech, will be made on scientific grounds through transparent non-politicized regulatory processes.
We are now developing specific objectives through consultations with Congress, agricultural producers and commodity groups and other interested parties. We have published a number of Federal Register notices seeking comments on the full range of the agenda for the next round. We are conducting hearings all around the country under the trade policy staff committee rubric. We are also getting out of Washington as well to hold, with USDA in the lead, a series of listening sessions in which senior USTR and agriculture officials will hear directly from farmers, ranchers and others. We have already held meetings in Florida, Minnesota and Tennessee, and another session in Indianapolis, as Dan Glickman has said, and then we will go to Texas, California, Washington, Delaware, Vermont, Iowa, Nebraska, and Montana. Our specific negotiating objectives will flow from these consultations and consultations with you, Mr. Chairman and members. But let me just mention two key areas the round will have to address in some detail.
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First, reform of the European Union's common agricultural policy. The Common Agricultural Policy, the CAP, includes $60 billion in trade distorting subsidies and 85 percent of the world's agriculture export subsidies. That is to say, 85 percent of all agricultural export subsidies notified to the WTO are European agriculture subsidies. The comparable figure for the United States is 2 percent.
Reform of this extraordinarily distortive policy on agriculture is a very high priority. We are working with our trading partners around the world, not only the CAIRNS group, but our Latin American trading partners and our African trading partners, for the elimination of export subsidize and a particular targeting of European export subsidies.
Export subsidies, as you know, in particular place an immense and unfair burden on farmers all around the world, but particularly in developing countries that cannot possibly compete with these kinds of financial incentives. The round offers an opportunity for significant change, including the reduction of border trade barriers, domestic supports linked to production, and, again, the elimination of export subsidies.
A second focus though will be new technology, such as biotechnology. These can develop strains of plants resistant to drought and disease, improve yield and thus reduce world hunger while easing the pressure on land, water and wildlife. American farmers must not suffer trade discrimination as a result of adopting scientifically proven techniques with these benefits. But we recognize that biotechnology raises some concerns about potential unintended effects. This is especially true in Europe where a highly politicized, non-transparent regulatory process governs decisions on biotechnology. This has led to a serious lack of confidence in European food safety by European consumers, with, of course, the collateral damage to United States agricultural exports.
These are fears which we must address squarely through the adoption of transparent, scientifically based, fully accessible regulatory procedures.
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Finally, let me say a word about WTO accession and regional trade initiatives. These have been a very significant part of our trade policy, as you know, with substantial benefits, helping us to set precedents and develop consensus on major issues for the round.
With respect to accessions to the WTO, 30 economies are now applying to enter the WTO, including many of the world's transitional economies; that is, the former Soviet republics as well as Indochina, and large countries, such as China. In each case, we require full acceptance of the sanitary and phytosanitary agreement, the complete renunciation of export subsidies, improved transparency in any existing state trading arrangements, and significant market opening through, for example, the reduction of tariffs and other barriers.
Our regional initiatives, the Free Trade Area of the Americas talks, the Transatlantic Economic Partnership with Europe, APEC in Asia, and the President's Economic Partnership with Africa, all offer similar opportunities to build consensus on goals and eliminate disputes early.
In the Transatlantic Economic Partnership, for example, we just agreed yesterday in Bonn to open a pilot project on biotechnology with Europe in order to enhance transparency and the accessibility to Europe's regulatory process under which we will try to establish common data requirements for biotech approval, and parallel procedures for the acceptance of biotech products.
In the Free Trade Area of the Americas, we have already won an understanding on the abolition of export subsidies and we are holding similar discussions on export subsidies with our African and Asian partners.
In summary, in the past 6 years, our bipartisan agricultural trade policy has created markets for American farmers and ranchers, reduced abuse of subsidies and helped promote the use of science to ensure food safety, consumer protection and fair trade. But the next round offers us a chance to go much, much further and we need to go much further. In the months ahead, we will consult closely with you as we develop the detailed objectives that best serve our Nation's agricultural interests, the world's prospects for food security and the future of our farmers and our ranch families.
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Thank you very much.
[The prepared statement of Ms. Barshefsky appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you, Ambassador. I want to join with the Secretary in his note of admiration for you. I think you have set the standard by which all trade ambassadors will be judged. You have done a remarkable job. I appreciate very much your office's inclusion of this committee as your work continues in a lot of areas. I have said for some time I think one of the most challenging and probably threatening problems in our trade policies is the lack of adherence in the past in many areas to trade agreements once they have been reached. If that continues to be the case, those people who are in fact so strongly supportive of trade will lose confidence in an agreement that has been reached. I know how tenacious you have been in your efforts in regard to bananas and to the beef question, and, again, I admire you for doing that. I totally support you for doing that, and we will stand, certainly I will, very strongly in support of those activities in the future because I think they are critical to future trade opportunities.
The work you have done with China up to this point with the briefings we have received has been phenomenal. I also want to make for certain that we don't go without highly recommending Ambassador Scher's work. It has been fabulous as well. I think we have a wonderful team, Mr. Secretary. I will just say the safety net is on its way. We are moving in that direction.
Let me go to a question first, Mr. Secretary, relative to the scoring of AMTA payments, and particularly the advanced or supplementary AMTA payments which we made in the last year.
In the Uruguay Round, domestic support or assistance to farmers was disciplined. Spending in countries was placed in three boxes. The green box was minimally trade distorting programs; the blue box was supply/control programs, and the amber box was the trade distorting programs. Programs in the amber box must be below specific levels, and the programs in the other boxes were not limited. It has consistently been the case, the negotiating policy, that while we want to see an end to domestic subsidies that distort world markets, countries have the right to support and assist their farmers in ways that do not distort trade. This important principle has guided U.S. agricultural policy throughout the nineties. Briefings by USDA personnel seem to indicate that there is a departure from that long held position. Now USDA is saying that you intend to place the AMTA supplemental payments in that amber box, despite the fact that they were made after the production year, could have no effect on producer's planning decisions, and that the original AMTA payments were not in the amber box. How do you square that?
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Secretary GLICKMAN. I would ask Joe Glauber with our Chief Economist's office. But let me say this initially, one is that our internal support ceiling for 1998 was approximately $21 billion. Even with increased LDPs and market loss payments, our notification will likely total $10 to $12 billion, which is far under our ceiling.
The CHAIRMAN. Our ceiling for this year is $19 billion, and we are already at $12 billion.
Secretary GLICKMAN. Your specific question is despite the fact that the AMTA payments are considered green, the market loss payments provided last year do not meet the rather narrow criteria laid out for agriculture. Perhaps Mr. Glauber can address that specifically.
Mr. GLAUBER. First let me say the regular AMTA payments, because they are based on fixed production without regard to price or income, they are definitely under the narrow criteria laid out by the WTO considered green and we declared them green from 1996 on. Now, we are currently submitting our 1997 notification, that is payments that we made in 1997. We will do 1998 about this time next year.
What the WTO requires us to do, within 30 days or so of a new program, if it is a new green box program, is to declar it to the WTO. At the time last fall when the supplemental bill came through, we looked at the language in the act for the AMTA supplementals, and it was a very close call we felt. I mean, they were definitely based on fixed production and fixed yields, fixed area, but the fact that they were tied to market loss, lower prices and lower incomes, they fall out of the narrow criteria that is in the annex 2.
Now, because they are based on fixed production, there is still a question of whether or not they qualify for a blue box treatment, which again would be exempt from the AMS. That we don't have to do until next year when we notify. But we felt they fell out just on the margin of the narrow green box criteria.
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You might add the reason we did that, as much as anything else, is the sort of precedent that that sort of action could have perhaps created. If after the fact the United States went forward and said those are green box, the fear is that any other country could start dumping a lot of income support to farmers whenever prices were low, and declare those as green.
Effectively, what happens is it is done in an ad hoc manner. That has no effect on production decisions that had already been made. But if that is done in a fairly systematic way, and farmers can come to assume that they will get large income support payments whenever prices are large, it does have a production supporting effect.
We were worried that this would cause a dangerous precedent for some of our competitors and then the fact that this thing fell out of the narrow criteria of the green box, we felt it was best not to declare them green box, particularly since we are well within our ceilings.
The CHAIRMAN. I think the precedent which is established in this is a decision of the Congress in the future of a way to deliver assistance funds during depressed pricing or disaster areas. Obviously it could be impacted. But I understand what you have said. I don't necessarily agree that that should have been the decision, but it was strictly based on all of the criteria that had been established in the past for the AMTA payments, and nothing changed. All of the payments made in that one supplemental again, in order to provide some disaster assistance, was done specifically based on the normal course of AMTA payments. It was just a change, as you know, in that percentage.
But as well, let me go to the GSM 102. Has the administration altered its determination that credit guarantee programs, such as GSM 102, are not considered subsidies? Earlier this month during the committee hearing on sanctions you made it clear that GSM 102 was not considered a subsidized program. However, USDA has described this program as one that may be considered by some countries as an export subsidy.
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Secretary GLICKMAN. We do not consider this a subsidy. There is no change in commercial credit.
The CHAIRMAN. In the fact that we are looking at another year where more than likely we are going to have to provide some assistance, and, again, my understanding is you mentioned a $21 billion ceiling last year, we are at a $19 billion now, $12 billion of that is used, that leaves $7 billion. There are some people already talking in terms of excess of that amount for some kind of assistance. I would just caution as we go down that track, because that makes the challenge of balancing the method by which we provide assistance. I mean, there are some very significant and very obvious ways that that can be approached that would be a violation or have to be considered. But in the fact that, again, it had absolutely nothing to do with price, it had absolutely nothing to do with the amount that a farmer would plant, other than speculation for the future, I would like to be on record in the fact that I am concerned about the precedent that that may set for the future as we begin to try to look at ways we might be able to assist farmers.
Secretary GLICKMAN. I think that is a fair point, and we will need to work with you under the presumption there will be additional assistance this year. I will have to go back to the EU situation in terms of their CAP reform efforts. I was recently in Ireland where I spoke with some folks about how we really don't want to cap these things as blue box. We really want to count them as amber or green. We face the situation where the EU is prone to put things into categories which ought not to be there. So this is, in a sense, a competitive problem as well. You are right, we have to work together on how these programs are defined to make sure they are permissible.
The CHAIRMAN. Ambassador Barshefsky, will the administration submit fast-track legislation to Congress this year?
Ms. BARSHEFSKY. Mr. Chairman, we have been working closely with the Senate Finance Committee at this point, which has been looking in a serious fashion at a more comprehensive trade bill to include fast track as well as other pieces of legislation. We think that that is the most productive basis on which to proceed, and we will continue to work with the Senate Finance Committee.
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The CHAIRMAN. Your answer, I want to make sure my assumption is correct, the administration would support a bigger package? I do know that discussion has been ongoing.
Ms. BARSHEFSKY. Certainly.
The CHAIRMAN. It will have a number of trade items in it?
Ms. BARSHEFSKY. Certainly, yes.
The CHAIRMAN. Do you see a magic time frame for this?
Ms. BARSHEFSKY. Certainly action by the Senate Finance Committee sooner rather than later would be desirable. We had some early hope that it might act as early as very early this spring. That time period lapsed, but Senator Roth has indicated that they would like to move forward, and we are urging them to do so.
The CHAIRMAN. Thank you very much, Ambassador.
Mr. Stenholm.
Mr. STENHOLM. Building on that last question, I join in the accolades of the Ambassador and Secretary Glickman and all of your teams and the job that you have been attempting to do on behalf, and have done, on behalf of American agriculture.
The team that has been talked about is extremely important, but it is also important that the congressional team be on board and supportive of you. I understand your reluctance to directly answer the chairman's question, and I think that that is something that the administration is going to have to face up to, because I know it has to be embarrassing for you, Mrs. Barshefsky, to be entering the Seattle Round on behalf of the most populous Nation on Earth, and one of our future is dependent upon much of the outcome of these negotiations, for you not to have the negotiating authority that fast track would give you has got to be embarrassing. You didn't say that. I am saying that for you, because I see it. I think a lot of Members of Congress have got to start facing up to that.
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I hope that we can find a way to bring fast track authority so that you will have it going into this year's negotiation. I hope we do not succumb to those that say we have to wait until the 2000 elections and the new administration. If we do that, then I think the Congress has to take the responsibility for that and the outcome that goes with this.
What are some of the other things that Congress, this committee, which I think we are ready to stand shoulder to shoulder with you on some of these tough issues, what are some of the other things that you would perhaps like to suggest to us for including on the agenda?
Ms. BARSHEFSKY. I think, Mr. Stenholm, that it will be very important for us to work very closely with the committee. Once our listening sessions are complete and our hearings are complete around the country and we have a very detailed, in-depth sense of not only the major topic headings for negotiation, but all of the various concerns, we would want to very much come back to the committee, perhaps executive session might be most appropriate initially, and literally bring, if you will, an outline of what we think each specific objective should be in each area, and then make sure that the committee feels comfortable with that approach, make sure that the committee feels we are on the right track, because the first rule of negotiation is you have to know what you want and we need to know very specifically what it is we want and what we think will produce the best results for more open agricultural markets around the world.
I think this committee's support of a detailed agenda will be very important. I don't expect you to sign on to an agenda before we come back to you with very specific goals and objectives. Then I think we would very much like to engage the committee, frankly, in a tactical discussion of how best to achieve those goals and objectives.
The issue of single undertaking plays into this tactical objective in the following respect: Before we will agree to the notion of a single undertaking, I think it is very important we know what the full scope of the negotiating agendas. We want to always be sure that there is enough play on the table at any given point in time so as to maximize our progress in agriculture. That is absolutely a goal.
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But consider for a moment the example of the Uruguay Round where almost 8 years elapsed from beginning to end, during which there was no global agricultural liberalization because every single issue, however minor and untradeable for agriculture, had to be resolved before agriculture could be announced.
I don't think we want to get in that situation again. So I think once we know our agenda in agriculture and the full scope of what we think will be on the table, we will want to also engage the committee in a tactical discussion on the question of single undertaking and how best to achieve our goals in agriculture.
We keep an open mind on the question of single undertaking, but I don't want to commit to a process before I know what the full agenda is.
Mr. STENHOLM. I can't argue with that. One of the things that I hope we can avoid this time, and that we can't avoid after the last negotiations, and this is speaking from a congressional standpoint, the 1995–96 farm bill was passed without giving any serious thought to the boxes, to what others are doing, to any of these things. As we all know, it was for a 20 seconds review of history, this committee didn't write that farm bill either. It was written on philosophical grounds that ignored these boxes and the questions that the chairman asked today, which I think are very relevant and need to be considered, and the Congress needs to consider the answer to that question as we decide what to do to continue to help our farmers work our way through the disaster that we now find ourselves in. We have got to look not only at the current problem, but we have to look at how it fits with the negotiating strategy we are going to be taking, which you have in fact very eloquently pointed out something of which I believe I speak for every man and woman on this committee, that we will stand ready to work shoulder to shoulder with you in Wisconsin in which we have never done in the past, because we have not been allowed to. That is I guess the final point, why you do get the accolades from this committee, why you did get from this committee the team that I am talking to now, when you brought the accession agreement for China. We all, bipartisanly, kept looking for the hook as to what is wrong with this. We haven't found it yet. But we have got to find ways to work ourselves through some of these difficult exterior problems that we have got, and the best way to do that is to keep the team that you have assembled, that you have working with each of you here today, and to find ways to work with this committee in a bipartisan way.
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I know without even having to be said, this committee is going to be extremely interested in working with you every step of the way in sending the right message to those you are negotiating with that this round is going to be different.
Again, just for rhetorical comment, I would point out to my colleagues that unless we can find a way, working with the administration, to give you the negotiating authority, it will be very difficult to achieve in 3 years that which you have set out to do. It will be very difficult. And if that is true, it is going to have some very negative effects on American agriculture. Therefore, it is up to us to find ways to do this, and we look forward to working with you.
Thank you all for being here this morning.
Mr. BARRETT [presiding]. Chairman Combest has advised we will try to keep the hearing going rather than break at this point. So those of you that are still here need to be advised that the vote is on the rule on the Transportation appropriations bill.
Madam Ambassador, I also want to add my compliments to those that have been already expressed. I think you, along with Peter Scher, have done an amazing job, an extraordinary job. I recall, Mr. Stenholm referred to the briefing and Mr. Combest referred to several briefings. I recall the briefing that you provided the committee on the China accession to the WTO. If you recall specifically one of the questions that was asked, what did you have to give up, what did we give up, for you to negotiate to this agreement? And your answer was absolutely nothing, zero, which made an enormous impression on a lot of people. So thank you very much for what you folks have done and what you will continue to do.
Ms. BARSHEFSKY. You are very kind to say it, but I want to underscore, I think probably the most important point is that the China agriculture negotiation was absolutely a 100 percent team effort between USDA and USTR. Our teams, Peter, Gus, Rich, everybody, Isi , were living in China a lot more than they were living here. We took not a single step without USDA, and vice versa. This has been a totally coordinated effort. Dan and I spent many, many, many hours on the phone on this to make sure we were always on the right track, double-checking, rechecking, because we have to do this accession right. It is too big, it is too important, it will set precedents for other countries like Russia, Ukraine, other countries whose accessions are also pending. We have to know it lays a solid foundation for the next round.
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So we have worked very, very hard, both Dan and I, to make sure there is no daylight between USTR and USDA on this issue.
I think that that kind of activity really does produce results. So I just wanted to be sure that you and the committee were fully aware of this.
Mr. BARRETT. The speed of the leader is the speed of the gang. It is too bad it couldn't have been concluded at that point.
Ms. BARSHEFSKY. I think in the not too distant future, I hope.
Mr. BARRETT. I must run, but, Mr. Secretary, I am concerned about genetically modified foods. Did you see the current copy of The Economist? Great front page.
Secretary GLICKMAN. Both the editorial and the article are quite comprehensive, and some of the best analysis I have read in a long time on this.
Mr. BARRETT. I am concerned about what is happening in Britain and now spreading into Europe. I believe that the Department'S Biotechnology Advisory Board is going to be composed of 25 individuals.
Secretary GLICKMAN. At least 26 I think. That is in the process of going through review right now. That will also include government representatives like USTR.
Mr. BARRETT. I am concerned it not be filled up with some of the sustainable agriculturists, the environmentalists, Greenpeace, et cetera. Can you give me some assurance you are going to have some scientifically-based individuals?
Secretary GLICKMAN. If the committee is not viewed as fair and impartial, then it will have no value. So it is our goal to make sure that the composition of scientists, of people in agri-business, farmers and ranchers, have a heavy component in this process. You do need to have people involved in other perspectives, whether they come from the social science perspective or other areas as well. But our goal is to make it fair and balanced.
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Mr. BARRETT. Have you considered bringing on someone from the National Institutes of Health?
Secretary GLICKMAN. It is possible. I don't know. OSTP will be there from the White House, Office of Science and Technology Policy.
Mr. BARRETT. Thank you, Dan. Thank you, Mr. Secretary.
The CHAIRMAN. Mr. Minge.
Mr. MINGE. Thank you, Mr. Chairman. I would like to add my comments to those of Chairman Combest in terms of the work that you have done, all four of you, and certainly on behalf of American agriculture, you are owed a deep debt of gratitude. I would like to thank at least two of the members there for coming and dancing with Lina and Tina and participating in some of the activities in southwestern Minnesota that have brought your work right out into the countryside and let people know the caliber of individuals that are representing us in the world marketplace.
Secretary GLICKMAN. I hope for the full record you will let people know who Lina and Tina are.
Mr. MINGE. They have some photographs with you that I know they are very proud of. I am not sure if you are.
I would like to turn to another dimension of this, and that is the problem of currency fluctuations. We have seen here in the last several years a strong American dollar that has emerged, and it is almost like placing a discount on the prices that American farmers hope they would receive in the international marketplace because relative to the other major exporting countries, for the commodities that are important for much of the Midwest, we are 10, 15, 20, maybe even 30 percent above them in our relative currency values compared to where we may have been a decade or more ago.
That is not to say that this will always be a strong dollar and a weak rial or Canadian dollar, whatever it might be, but I certainly think it is something that haunts us today.
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I would like to ask first, is there anything that you see that we can add to our agenda that would address the currency problem? And if we can't add it on the international agenda, how can we work together to make sure on the domestic side we recognize that problem?
The second thing I would like to bring up is this question of surpluses that we have internationally relative to demand. I certainly agree that we have excellent, tremendous in fact, export opportunities, and that we are a very low cost producer. But at the same time, I see that when demand slips or when additional production is brought on line elsewhere in the world, the price is highly volatile and we seem to have a high elasticity of price and the consequences that our farmers may be selling more, but if they are not making a profit on what they are selling, it is sort of a hollow victory. It is almost as it if they would be better off if they are losing something on every bushel they sell.
As much as trade is our objective, it is not our sole objective. I would say our bottom line objective is being able to support ourselves on the farms so as we enjoy these trade opportunities, we also enjoy a reasonable standard of living. So it is these two questions about currency and in dealing with the problems of surplus and volatility.
I would ask both you, Mr. Secretary, and you, Ms. Barshefsky, if you could comment on that.
Ms. BARSHEFSKY. If I might just start by passing the buck a tiny bit on the issue of currency fluctuation. It has been administration policy from day one that issues with respect to currency fluctuation and exchange rates not be addressed by other agencies, apart from the Treasury Department or the President, and that position has been rigorously enforced, if you will, and appreciated by those of us in the Cabinet, because even offhand comments can move markets and create situations that one might wish to avoid.
Certainly I think that the currency fluctuation problem is one that has been brought to our attention and to the Treasury Department's attention by a number of Members of Congress, both in the House and in the Senate, because of concerns that fluctuations can, for example, erode the value of tariff concessions previously made, and the example often used is the case of Canada, where the situation has from time to time been acute.
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But I believe it is accurate to say it has been the policies expressed by Secretary Rubin that currency fluctuations are a function of the market, and that intervention in that area would probably produce more harm than good. But I would be pleased to pass your remarks on to the Secretary of the Treasury. I don't believe that I am comfortable in going further than what I just said on that issue.
Mr. MINGE. I would just like to reemphasize that and point out from the reading that I have done in agricultural literature, it appears that Brazil can now hope to show a profit or can produce soybeans at $4 a bushel, and they are considering bringing hundreds of thousands of additional acres of land into production, and what does this do to our opportunities where we believe ourselves to be the lowest cost producer, and especially if they are using chemicals or if they don't have to observe some environmental and conservation practices that we think are important to protect the quality of water in our country.
Secretary GLICKMAN. I would say several things. One, that is the reason we have had counter cyclical farm bills in the past. You try to provide some cushion when things get tough. In fact, I think Congress has recognized that. Even in the 1996 farm bill, you provided a counter cyclical cushion in disaster assistance last October, not part of the farm bill. It was separately provided, and Mr. Combest said you may be considering something else this year to deal with that. But that is one way of dealing with that issue.
We no longer as part of domestic farm policy have supply management. It is hard to do anyway with the world being such a massive place. You would have to get everybody cooperating with you to have a market impact. That used to be a tool available to us, but in a globalized economy where other people are producing, it is very difficult to do.
I do agree that in a globalized economy with fewer trade barriers there are great opportunities, but it also creates opportunities in more volatile markets too. Volatility can be a curse as well as an opportunity. If you are not very well capitalized, volatility is sometimes not an appreciated situation—whereas stability is more appreciated. Of course, our previous farm bills were based upon stability and certainty rather than volatility.
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But I would have to say this, we have used our GSM programs to record levels. We are at record levels of world food aid, 10 million metric tons this year versus 3 million metric tons last year. We still have some tools available and we are going to use all we can.
Mr. MINGE. I appreciate that, and I would close by saying the impact on the beginning farmers, the younger farmers, is the most dramatic, because their capitalization does not give them the strengths typically to withstand the volatility that we have experienced here in the last 3 or 4 years.
Ms. BARSHEFSKY. If I might, with the chairman's permission, just respond for one moment on your question of surplus, just in the following sense. One of the reasons we are focusing very heavily on the elimination of export subsidies is that export subsidies, as you know, increase production when otherwise production would have been non-economic, and, because of that, exerts a price depressant effect on every ton sold in global markets, particularly with respect to commodity products and fungible goods. So the elimination of export subsidies, elimination of trade distorting domestic supports where supports are tied specifically to production, I think will help, if not eliminate, at least mitigate the question of overcapacity that exists right now, that, coupled with increased market access opportunities, whether in China or elsewhere, we hope will help to begin to alleviate the problem of surplus capacity.
The CHAIRMAN. The gentleman's time has expired. Mr. Ewing.
Mr. EWING. Thank you, Mr. Chairman, for holding this hearing, and to Secretary Glickman and Ambassador Barshefsky, I add my praise for your attentiveness to this committee and to us as members, whichever side of the aisle we are on, on important issues that are important to America.
Mr. Secretary, you have spoken out publicly many times. I would certainly appreciate your comments in regard to the set-asides, if you could make that point out there in rural America, because many of our constituents think that is a real easy answer, and I don't think it is an easy answer. I agree with you in this world it will not work probably again. The more you get that message out, the easier it will be for us to discuss other opportunities.
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Secretary GLICKMAN. The only way set-asides work in a globalized world is if everybody participates, and we know——
Mr. EWING. We are pretty sure that will not happen.
Secretary GLICKMAN. That is pretty sure not to happen.
Mr. EWING. Ambassador Barshefsky, you are familiar with the 70 different agricultural organizations that are part of the Seattle Round Agricultural Committee. What is your feeling about their suggestions for that round?
Ms. BARSHEFSKY. I think they have made a number of very good and very thoughtful suggestions. Indeed we have a meeting with their representatives this afternoon to go through some of the papers that they have provided and some of the ideas that they have provided. I think by and large, their suggestions are very much in line with our own thinking, and we think it is extremely important that the agricultural groups, the various commodity groups and so on, try and formulate a common position. This has also, as you know, not always been the case, leading to negotiators that are seeking goals, not necessarily full in tune with what farmers and ranchers believe would be in their best interests.
So we think this is a very positive development, and, as I say, we happen to be meeting with them this afternoon.
Mr. EWING. I am prepared to introduce a resolution codifying, it is not of course binding, what they are suggesting, and would appreciate any input you could have after your meeting to see that maybe we are all on the same page.
Ms. BARSHEFSKY. We would be delighted.
Mr. EWING. In an effort to move that forward.
Ms. BARSHEFSKY. We would be delighted to work with you.
Mr. EWING. Thank you. Do you think China is using some of the conflicts between us, the bombing and of course the espionage and the problems, to back away from the commitments they made here in Washington?
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Ms. BARSHEFSKY. No. I think it is too early to say that China is backing away to any extent with respect to those commitments. I think certainly the political atmosphere between the two countries remains strained, although I do think it was quite significant that China did publish large parts of the Pickering Commission's statement with respect to the accidental bombing of the Chinese embassy in Belgrade. I think it is significant they also provided an oral summary of the Pickering explanation, which was quite thorough and quite accurate. While China has not fully accepted the explanation, it has also indicated that it wishes to continue talking.
So I think we have seen some improvement in the rhetoric, some improvement in attitude. I do believe that at some point China will reengage. With respect to WTO those talks, as you know, stopped when the unfortunate incident happened. I do think they will reengage.
I don't think it will be too far away, although I can't say when that might be. I do think they have their own internal coordination yet to do with respect to the bombing incident, as well as with respect to other issues. Once we have reengaged with them, I think we will know the extent to which they are firmly adhering to the April agreement reached when premier Zhu Rongji was here. They certainly know we will not tolerate backsliding on the part of China. We wish, of course, to resolve the remaining issues that are outstanding. I don't think those will be too difficult to resolve, although I don't want to understate their complexity. They are still very complex. Then I think we will be able to move forward.
Mr. EWING. That is good news. I would say to you there are many of us in the Congress who support strongly bringing China into the WTO. If we can be a resource to help you in your job, you should be in touch with us. You should ask us to do what we can, and we will certainly pick up that load and do it.
Ms. BARSHEFSKY. I appreciate that.
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Mr. EWING. There has been some talk that some of the food importing countries have suggested that sanctions should be on the table in the next round. What is your position on that and what to you think the administration's view would be if that were the case?
Ms. BARSHEFSKY. The issue arises as follows: There has been some discussion about whether greater discipline can be imposed with respect to sanctions, that is, unilateral sanctions, for reasons unrelated to trade on agricultural exports, for example. I think this is an issue we want to discuss first with the committee before we embarked on any generalized discussion with our trading partners.
I do think that the sanctions review generally the administration has had in place has been a very important point of administration policy. That is, I think it is very important that we not embark on policies that are effectively ''stop or I will shoot myself'' policies. You think we have to be very, very careful that when we take action, it is because of an extraordinary overriding national interest, which are not routine events, as you can imagine, or because we believe that those sanctions will produce the intended effect on the partner against which the sanctions are imposed.
But to sanction foreign countries for some temporary cathartic benefit, but for no real alteration in behavior, seems to us generally to be a counterproductive policy.
Mr. EWING. Thank you very much. My time has expired.
The CHAIRMAN. Mr. Pomeroy.
Mr. POMEROY. Mr. Chairman, thank you. I want to pursue your excellent question relative to the amber box treatment of the disaster bill passed last fall.
It seems to me as though we chase a very flawed policy when we embrace some kind of unilateral good conduct approach to trade, hoping others will follow. As the Ambassador notes, our support is 2 percent in terms of export support for agriculture, compared to 85 percent of the export subsidies nationwide; 2 percent U.S. subsidizing agriculture, 85 percent of the export subsidies backstopping the agricultural exports of our competitors.
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Under these circumstances to have an after the fact disaster measure passed to help our farmers deemed to be some kind of price subsidy, export subsidy, because potentially over the long haul, this could be interpreted as support for farmers so maybe they will plant more wheat because they all know they will get bailed out in the fall. That is wrong. That is flawed logic. It is terrible. What is more, it has put us in a more difficult position, I believe, to move that kind of support in place in the future and have it treated differently, to have it treated green box treatment. What is more is we try to drive Europe into changing their export structure so that it is income support for people living on the farm as opposed to price subsidies which hammer our exports. This is precisely the way we want to drive them, and we have just deemed it to be amber, therefore, something that would be a problem.
I would urge the Department to work with USTR in revisiting that call. It strikes me as awful. I am very surprised by it.
Secretary GLICKMAN. The deputy and I were just talking about this issue, and we need to—perhaps Joe might talk about it, but I want to look at it a little more in the decision-making process within the Department itself as to this nature. I agree with you, I think USTR should be involved in this effort as well, however they are not in the business of developing farm programs. This is every bit as much a key in terms of how they negotiate agriculture policy as anything else. The decision was sound practice and based upon the annex requirements of WTO, but I do think it is worth looking into it.
Mr. POMEROY. The mission of the Department was it was a close call. Let me tell you, in this day and age, the close call does not benefit the U.S. farmer.
Secretary GLICKMAN. Again, I think the decision was made on good policy, but I think it is a subject that needs to have a very thorough review at all levels within USDA and USTR.
Mr. POMEROY. There are several areas to cover. First, I have the greatest respect for Ambassador Barshefsky, Ambassador Scher, Secretary Glickman. Clearly, I think your negotiating style is manifested in the terms of the China accession to the WTO. Quite frankly, the thing that it has given North Dakota agriculture such heartache is the terms of the Canadian Free Trade Agreement embodied in the North American Free Trade Agreement, which you basically inherited, you didn't negotiate. I think that the stark difference between the two shows that you all have done the job for U.S. agriculture. On the other hand, we still have a trade policy that embraces those earlier flawed agreements and is giving us all kinds of problems.
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Mr. Secretary, you indicate that irrespective of what happens on trade, we need some kind of safety net for farmers. I would like you to quickly respond to Chairman Lugar's suggestion that crop insurance reform be basically funneled into additional AMTA support. Forget about structural improvements to crop improvements.
Secretary GLICKMAN. I haven't seen the details of his particular proposal, so I don't want to characterize it with a broad brush. I don't think his proposal represents the fundamental structural change to farmers and ranchers' problems that are needed. It may address one issue of trying to improve the crop insurance program, but I don't think it is a fundamental answer.
Mr. POMEROY. Actually, I think it isn't even an attempt to address crop insurance, just more income support out there for a brief period of time.
Secretary GLICKMAN. It is trying to address risk management, and encouraging farmers to take advantage of risk management tools. But it is an incremental solution.
Mr. POMEROY. The Department is four square behind additional improvements to crop insurance?
Secretary GLICKMAN. We are.
Mr. POMEROY. Moving on, you indicate full use of food aid programs. I would suggest that as we look at the awful horrors in Kosovo with literally an entire growing season blown away by Milosevic, there will be substantial food aid, and Congressman Moran and I, and Smith and others, would be very interested in dry edible bean assistance into Kosovo.
Secretary GLICKMAN. I would say that we have actively engaged—that we are providing about 15,000 tons a month into the region, and we will increase that if the logistics are there to do it and we are working with AID. Gus Schumacher has been actively engaged in the interagency effort. We have the food.
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Now that the war is over, it may provide us greater opportunities to provide aid in the place that we couldn't provide beforehand. So we will continue to push that forward.
Mr. POMEROY. My time is rapidly running out.
I would just note, and you don't need to respond, U.S. barley looks like planting is going to be down about 25 percent at least; this raises the prospect we are going to have subsidized European barley imports into this country at a time when our markets are so closed and their subsidies so pervasive, supporting their export product, that really is an intolerable condition and one that I hope you would respond to.
Ms. BARSHEFSKY. If I might just say, you will recall that we had a barley shipment problem to California.
Mr. POMEROY. Yes, ma'am.
Ms. BARSHEFSKY. And we and USDA got on it right away. Europe stopped. We are watching this very closely because we are concerned that Europe not begin to redirect barley here.
Mr. POMEROY. Great.
The final comment I would have involves the agreement that the administration was able to extract from Canada regarding stated intentions on their wheat exports into our country. As the marketing year comes to a close, it appears as though they have blown right through what they projected as export limits, exceeding in fact, in the case of wheat, by 25 percent, exceeding the durum projection about 40 percent, this wheat pouring into our country at a time when our farmers can't haul wheat to the elevator and get their price of production.
So I think it clearly raises the prospect that there is something funny going on within the Canadian Wheat Board and raises to an urgent imperative this effort to get transparency in terms of how they are pricing.
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Ms. BARSHEFSKY. If I might just take one moment to respond if I could.
Mr. POMEROY. That is fine.
Ms. BARSHEFSKY. I do think actually the pace of other spring wheat imports continues to be within the projections. Barley continues to be within the projections. Our problem is on durum. Durum looks to us to be certainly ahead of the projections.
Now, the Canadians told us they were going to reduce their acreage devoted to durum production by 30 percent in the coming marketing year. Of course, the marketing year ends in July in the coming marketing year, and we are going to watch that closely. I did just recently see the Canadian trade minister; we went over the numbers indicating that we were very, very concerned about the durum situation.
In addition, USDA and Customs are now, as you know, finalizing the computer programming that will allow Customs to provide both value and pricing data on individual shipments of Canadian wheat to the United States. And I mean, for the first time, once that computer reprogramming has been done, we will be able to more closely analyze on a transaction-by-transaction basis the pricing practices of the Canadian Wheat Board.
And I think with those data, we will be able to move forward on the problem more vigorously.
Mr. POMEROY. I think that is very, very important. On the other hand, I hope there is a very vigorous discussion because of the way they blew through the projection.
The. CHAIRMAN. The gentleman's time has expired.
Mr. Smith.
Mr. SMITH. Mr. Chairman. Thank you for holding the meeting. Witnesses, thank you for being here.
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Following up on Mr. Pomeroy's dry edible beans, the problem with the auctioning in Mexico, and especially on black navy beans, and to date the delay of the auction has cost over $2 million. Are you doing something about it?
Secretary GLICKMAN. I think Gus is aware of this.
Mr. SCHUMACHER. I have been working on this—if I may, Mr. Secretary, I have been working with him; we discussed this with you directly. We went down to Mexico; the deputy and I raised it. I called him yesterday. I think there is going to be some movement. I am going to call them back and hope to get movement on Friday. I will call you back right after that, Mr. Smith, and other Congressmen and Senators interested in that important TR concern.
Mr. SMITH. Sort of another parochial question that affects a lot of us is lamb—Australian, New Zealand, it was about 9 months ago that the 201 investigation was filed. Is the administration going to do something, and if so, when?
Ms. BARSHEFSKY. The administration is looking at a variety of remedy options, as you know. Although the International Trade Commission ruled unanimously there was a threat of future injury, their remedy recommendations split with three commissioners on one remedy proposal, two on another, a third on yet another.
So the administration has been looking at that range of options, looking at additional options, and I would expect the President to make a decision shortly.
Mr. SMITH. Shortly, as in the next couple of weeks, you think?
Ms. BARSHEFSKY. Oh, yes, certainly.
Mr. SMITH. Let me move into the retaliation. In terms of maybe our most-looked-at experience with bananas, the retaliation of those limiting products that come in, have we traced how effective that retaliation is in terms of other countries' selling the same or substitute products and then they just import it from the offending countries?
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Have we looked at the increased price that our consumers pay because of this retaliation? It seems to me that we need to consider other avenues, other areas to enforce WTO agreements.
Ms. BARSHEFSKY. Let me say first off that, as you know, we tried for 20 months to engage the European Commission in a negotiated resolution of bananas. We were urging the negotiated solution despite the fact——
Mr. SMITH. And we don't even grow many bananas in this country, so how much does it impose on our consumers, has the export of those products that we have embargoed really reduced their total exports?
Ms. BARSHEFSKY. Let me say, in any event, we have tried to negotiate a solution. When we put together the retaliation list, we made sure of two things, first off, that there would be adequately available domestic and other imported sources for any product put on the retaliation list so that, for example, if Europe was the sole supplier of——
Mr. SMITH. I hate to interrupt, because I appreciate what you are saying, but has it increased the price to our consumers of those products? Do we know that or not?
Ms. BARSHEFSKY. I don't believe we know that, but certainly not that we have heard by way of letter, for example.
Mr. SMITH. Do we know whether or not the exporting countries have reduced their exports of that list product?
Ms. BARSHEFSKY. Yes, absolutely. Because the duties imposed are 100 percent, I think further proof of the fact that the retaliation has bitten, is that for the first time the European Commission has actually put forward proposals to us as a basis for resolving the banana dispute. They had previously refused for over 20 months to do that. So plainly the retaliation is having some bite. And we will be discussing the European's proposals with them shortly.
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Mr. SMITH. I see Elwood Kirkpatrick, a friend of the Michigan dairy farmers, and he is going to be on the next panel to testify. But export subsidies are very common in the dairy trade and the current WTO agreement permits almost 60 percent of the dairy world trade to be subsidized on a milk equivalent basis. The EU accounts for 72 percent of the subsidies; we account for about 3 percent.
Are the dairy and the dairy subsidies going to be a significant part of the next round?
Ms. BARSHESKY. Absolutely, yes.
Mr. SMITH. Let me ask a question that I think I might have a different view than some of the members that have spoken on the committee, and, that is, individual subsidies by a government to their farmers to make sure their farmers stay in business. Which, to me, ultimately puts our farmers at a competitive disadvantage if we don't do the same, or some substitute subsidy to farmers; namely, if a country gives those farmers free land so that they don't have to pay off the principal and interest, so that they don't have to pay property taxes, it allows that farmer in that country to produce and sell his products at a lesser cost simply because of the input.
If another country has an AMTA agreement that they totally pay their farmers AMTA-type payments, and it is more than ours, then eventually we are going to have to protest, because these kinds of subsidies are ultimately export subsidies.
And as we review Europe and the history of Europe and their determined effort to keep their agriculture producing in their countries, it is obvious already they are going to do everything they can from end runs to anything else. But if we discount and don't take into consideration direct subsidies of free land, free fuel, whatever, big rebates on their taxes, it seems to me that ultimately we are leaving the gate open for these other countries to subsidize their farmers in a way that ultimately is going to be a competitive disadvantage for our farmers.
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Secretary GLICKMAN. I don't think any country in the world is going to get out of the business of providing help to their farmers.
Mr. SMITH. Right, and no country is not going to subsidize, but should we consider them in our evaluation of export subsidies?
Secretary GLICKMAN. Here is the problem. If you look at the panoply of ways we have to help our own farmers, we have a myriad of things that we do that theoretically somebody could make a tangential argument that relates to our total production and, therefore, our ability to export. So, if a farmer has clean air, he may be able to produce better yield; and therefore, if we have better clean air policies, is that a subsidy? It gets to the point of ridiculousness.
So what you have to do is focus on those things that directly affect the ability to export overseas at reduced prices so that you compete directly and unfairly in that process. And I mean, this is something that we and Charlene are going to work on as we go to the next round. You can go so far that nobody would ever agree to restricting the sovereign right of a country.
Mr. SMITH. Right. But, Mr. Secretary, still, Europe artificially setting high prices that are paid to the farmers, using tax dollars and then having export subsidies is not significantly different than having that low price and adding a supplemental payment to that farmer.
Secretary GLICKMAN. I think it is significantly different, Mr. Smith.
Mr. SMITH. It still is going to be the same effect as the exports.
Secretary GLICKMAN. I would disagree with you there.
Mr. SMITH. All right.
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Thanks, Mr. Chairman.
The CHAIRMAN. Mrs. Clayton.
Mrs. CLAYTON. Well, I want to add my compliments and appreciation for both of the teams, not only their scope and their compliments, but their style as well. I was privileged, when our ambassador for trade was in China, to get an appreciation for her intensity and her involvement in making sure that issues there were negotiated.
If I understand, agriculture indeed is one of the three agenda items we know will be there, but it is not yet determined what, how comprehensive we may be in agriculture or if we may indeed add other sectors to that. Those are still open questions, I gather; is that correct?
Ms. BARSHEFSKY. Certainly, the close of the Uruguay Round mandated that agriculture and services negotiations would resume at the end of this year.
Mrs. CLAYTON. Okay.
Ms. BARSHEFSKY. We are looking with other trading partners to see what else might be added to round out that agenda more fully. Some have suggested industrial tariff reductions overall; some have suggested nontariff barriers. There are range of issues that are looked at, some of which may be fully ripe for negotiation, to throw into the pot with agriculture and services, some of which may just require a forward work plan and negotiation at some future date. And all of that is in the process of being sorted out now.
Mrs. CLAYTON. Well, I guess I wanted you to comment perhaps on vulnerability of having several sectors to go to at the same time. If there needs to be, you know, winners and losers or trading between sectors, what is your preference in that?
Ms. BARSHEFSKY. Well, in any negotiation, you always have to have enough on the table to trade. And certainly, that will be acutely the case for agriculture, which is a difficult sector. Many countries, not just Europe but I am thinking also Japan, Korea, are very resistant to change in agricultural trade policy; and so there does need to be enough on the table in other areas as well to allow governments to move forward and make necessary changes in agriculture.
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Our only concern is that the overall negotiating agenda not be so enormous, so huge, involving every WTO agreement negotiated previously, that we end up with another 10-year round or 8-year round. Our farmers can't afford to have no progress on market access in the intervening years. We need a round that is shorter in time, that is manageable in scope, but still allows us to create an environment in which maximum movement can be made by all countries on agriculture.
Mrs. CLAYTON. I just want to make a comment about domestic support, and I am evolving, as I understand it, but I certainly have an appreciation of the impact that trade has on our farmers' ability to be profitable and to grow. Indeed, one-fourth of your potential of farming is your market outside the United States, obviously that is enormous. But nevertheless, there is a relationship between your domestic policies and your opportunity not only in subsidy, but into the profitability.
And part of the current policy impact is that we are indeed reducing a lot of our commodities. We are growing from pillar to pillar and post to post, as they say, and as a result, our farmers are not intentionally encouraging them to overproduce, but they have enormous inventory; and at the same time, they have a price suppression nationwide in The Economist in the other countries, so they are not able to buy them.
So help me understand how in that kind of scenario where either by a lack of initiative or anticipation of the markets in economy—we are now stuck with large volumes of inventory that me must give away, the Government must buy and give away; and I encourage that because I want my farmers to be profitable. But as you begin to think about public policy, they have to work hand in hand.
Trade gives us the opportunity and farmers are looking forward to that; and we want them to have all of the market we can. But at the same time, if that new stage where they are playing is not fully understood, and we as a government are not able to support them in that transition, and if we support them too much, it is counted as a subsidy—no one thought that the—I am not even sure the AMTA payments were ever thought to be a subsidy; they were thought to be a transitional payment until people got into the free market, because this worldwide economy was now the place where farmers could grow and prosper. But in the interim, we have this world situation that we have to adjust.
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So what should we be doing as policymakers to make that balance as we go, because I don't see any way out other than to give more—we can call it whatever we want, ''disaster payments,'' whatever. We are paying more now through the Government than we have ever paid in agriculture, and yet agriculture, the Government is supposed to be out of agriculture. Hey, look at the monies we are paying, and yet our farmers are suffering. So it can't just be money. There must be some structural relationship that we must anticipate and work hand in hand; and I would—either one of you, I would appreciate an answer.
Secretary GLICKMAN. This is a very good question. It is a very deep question, and it relates to the structure of agriculture over the last few decades. It also relates to trade and some structural questions of productivity and technology, which have allowed people to produce a lot more things with a lot less input. It has created more production, there is a limit to what the world can absorb. In some sense, we have been hoisted on our own petard by our productivity both here and around the world.
It does lead one to believe that you have a pretty significant domestic safety net to cope with when times in the world aren't cooperative. That is one of the things that we continually work together on.
The other thing it shows is that farmers and ranchers must be dealing more than just the production of bulk commodities, because there is just not enough income alone in the production of the raw commodities. They must be participating in the value adding up of those commodities, because that is where the profit is to be made in this changed world. And that is one of the reasons why we have to have open trade, to be able to get these processed and value-added commodities into world markets.
Mrs. CLAYTON. Ambassador.
Ms. BARSHEFSKY. I don't think I have much to add, except to say that I do think reform of the agricultural policies of the countries that tend to contribute most heavily to overproduction—Europe and to some extent in Asia, Korea, for example—would be a helpful addition to what Dan Glickman has just indicated.
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The CHAIRMAN. Mr. Dooley.
Mr. DOOLEY. Thank you, Mr. Chairman. And I too want to join my colleagues in commending both the USDA and certainly USTR and Ambassador Barshefsky and Mr. Scher for the great work you have done, not only on behalf of all of agriculture, but particularly in California agriculture.
Ms. Barshefsky, I would be interested, in light of the President's comments when he was in Europe in the last couple of days, where he alluded to a process where we would try to engage in some talks prior to a WTO decision in order to try to depoliticize some of the issues and—particularly related to the beef hormone and the bananas is what he alluded to.
But I am a little bit unclear in terms of what should we expect as we encounter additional problems related primarily to biotechnology and GMO product acceptance there. Is that—a lot that is involved, embracing the WTO process and the negotiations, is to ensure that these issues would be resolved around scientific grounds. And should we be concerned that what the President's committing to could actually interject a greater degree of politics that could be of some concern to U.S. agriculture?
Ms. BARSHEFSKY. I actually think just the opposite, Mr. Dooley.
What the President was making clear is that the depoliticalization that has to occur must occur on the European side. You have on the biotech side in Europe an approval process that is completely nonfunctional. It has broken down, almost irreparably so. It is highly politicized, nontransparent, inaccessible. Even basics like data requirements are not clear and are not fully spelled out at the beginning of the process. No time limit set by Europe's own regulations has ever been met in consideration of biotechnology products. Decisions slated for 90 days are now taking 18 months.
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So the President's comments, most particularly, were geared toward letting Europe know that consumer confidence, credibility of the food supply and food safety will never come about in Europe without an approval process that is nonpolitical, science-based, fully transparent; and that is not the system that currently exists in Europe.
One of the reasons we were very insistent that biotechnology be in the trans-Atlantic economic partnership was to begin to get a grip on the politicized nature of Europe's process and to try and turn that around through various means. I think it will take some time, but I think the President is most deeply concerned that science be the basis for decisionmaking, and in that way, regaining of consumer confidence in the safety of European food supply.
Mr. DOOLEY. Did you, Dan, want to answer?
Secretary GLICKMAN. No.
Mr. DOOLEY. Just on a more parochial issue, some of the fresh fruit growers in the Central Valley had been following with interest some of the issues related to going to the CODEX standard on harmonization, and especially with respect specifically in Taiwan, there was an understanding that we were going to be implementing that at the end of this year. And we have heard that Taiwan has made a unilateral decision to implement this maybe as early as July 1 of this year, which poses some potential vulnerability to U.S. producers that might have been using some products that might not have been covered under the CODEX standards in this production year.
Obviously, their interests would be that we would be consistent with the end of this year original agreement there, and I was interested if you have been involved in that.
Ms. BARSHEFSKY. Yes, we have. We and USDA have worked quite closely together on this issue, as well as with the Taiwanese, so that U.S. exports of food and vegetables will not be affected. And USDA just returned from meetings in Taiwan; I think some progress was made there. They—the Taiwans have agreed to accept exports that meet the CODEX standards, where Taiwan doesn't have the standard.
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Now, that is OK as far as it goes, but it doesn't go far enough. I think USDA has now proposed that Taiwan accept products that meet U.S. standards in cases where neither a Taiwan nor CODEX standard exists. That issue will be discussed further.
Some of our people and USDA folks will be seeing the Taiwanese at the APEC meetings next week, and this will be discussed further.
Mr. DOOLEY. Just—and this is more of a general comment than specific, and it is probably not necessarily consistent with the majority of the members of the committee, but Mr. Smith mentioned the issue of the lamb imports; and I appreciated your comments in terms that there were different remedies that were being considered.
My interest is—when we have, as we move into this next round of WTO, and we have some countries which are clearly allies of ours in the United States in terms of reducing the level of export subsidies—that we sometimes seem to challenge some of our friends almost as aggressively, if not more so, than some of the folks that are most difficult. And in case of lamb, I have been made aware of a proposal that I think New Zealand and Australia are floating, that rather than placing quotas on their importation of product in the United States is there an alternative that they can invest significant sums of money to on a promotional program to increase the consumption of lamb in the United States, which would have maybe a similar financial benefit to U.S. producers and at the same time, you know, maintain a relationship with a very strong ally of the United States as we move into this WTO agreement. I am interested if USDA or USTR was giving serious consideration to this type of approach.
Ms. BARSHEFSKY. Well, I think that it is fair to say that we have been giving consideration and are still giving consideration to a wide range of approaches, but I would make one general comment.
We have a situation here where private parties utilized U.S. trade laws, brought their case, and in a situation rather unusual for the International Trade Commission, received a unanimous determination in the affirmative with respect to the threat of future injury should lamb imports continue on their present trajectory.
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And then, also, in an unusual situation, while the relief may have differed commissioner by commissioner, all six commissioners proposed that, in fact, relief be granted.
So on the one hand, there is no question that Australia and New Zealand are critical allies of the United States. And there is no question that the United States policy these past 6 1/2 years has been one substantially favoring free trade over any form of import protection.
But in this case, where domestic industry has decisively won the case that it brought, a case brought in an independent agency, not politicized, then I think it is incumbent on the administration to think carefully through the remedy options and to look out for the interests of American producers, particularly inasmuch as our trade laws don't contemplate public interest or national security waivers, but instead, are concerned about the health and vitality of our domestic industries.
Having said that, we have been taking quite some time on this decision which, as you may know, is long overdue now, because we were weighing what we believed the most appropriate and least trade restricting remedy would be.
Mr. DOOLEY. Just from a public policy standpoint, I just question whether or not we adopt a policy which will continue a trend and that doesn't result in increased consumption of a product, which we might embrace if we do embark on a quota-based approach to this.
The CHAIRMAN. Mr. Etheridge.
Mr. ETHERIDGE. Thank you, Mr. Chairman. And let me associate myself with those who have already said thank you for holding these hearings and thanks to the Secretary and the Ambassadors for their jobs and the tremendous team they have put together.
Let me also commend the administration for making what I think are some very inroads into this whole area of biotechnology and agriculture and making that an important focus during these negotiations. I think biotechnology holds—certainly bioengineered crops hold some tremendous potential for our farmers where they are disease, drought, cold and pest resistant. But they also hold some tremendous challenges as we look to the future of agriculture in this country and certainly around the world as we move to feed the world population.
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But as you have already indicated, we have to change the attitude among some of our trading partners about these important advances in agriculture if we are going to crack those markets.
But let me take just a moment, if I may, and be a little more specific about the farmers in my State and in my district, because the Secretary has visited my district on a number of occasions—to thank you for that. It has very important to them. You met with the farmers.
And let me say that North Carolina is one of the most diversified agriculture States in the country. It ranks in the top five. And as you met with them, Mr. Secretary, I want to talk about one commodity for 1 minute, tobacco, because tobacco farmers and growers—you made a good-faith effort as you met with them to let them know you wanted to help them, and I thank you for that.
But with that said, there is some irrefutable evidence that the administration's tobacco policies have absolutely hurt our farmers and their communities, and tobacco farmers and quota holders have loss more than 35 percent of their income in the past 2 years just in that commodity.
There was a report put out in North Carolina in the last 2 weeks that the farmers' income in North Carolina is down $1 billion in the last year, and that is not all tobacco, it is pork, it is beef and the other commodities that we have talked about this morning. And the administration has said their fight is