SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOC64902 CC
THE ADMINISTRATION'S PROPOSAL FOR PERMANENT NORMAL TRADE RELATIONS WITH CHINA
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
MAY 17, 2000
Serial No. 10652
Printed for the use of the Committee on Agriculture
COMMITTEE ON AGRICULTURE
Page 2 PREV PAGE TOP OF DOC
LARRY COMBEST, Texas, Chairman
BILL BARRETT, Nebraska,
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
HELEN CHENOWETH-HAGE, Idaho
JOHN N. HOSTETTLER, Indiana
SAXBY CHAMBLISS, Georgia
RAY LaHOOD, Illinois
JERRY MORAN, Kansas
BOB SCHAFFER, Colorado
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
JOHN COOKSEY, Louisiana
KEN CALVERT, California
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
GREG WALDEN, Oregon
Page 3 PREV PAGE TOP OF DOCMICHAEL K. SIMPSON, Idaho
DOUG OSE, California
ROBIN HAYES, North Carolina
ERNIE FLETCHER, Kentucky
CHARLES W. STENHOLM, Texas,
Ranking Minority Member
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
MIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
CHRISTOPHER JOHN, Louisiana
LEONARD L. BOSWELL, Iowa
DAVID D. PHELPS, Illinois
Page 4 PREV PAGE TOP OF DOCKEN LUCAS, Kentucky
MIKE THOMPSON, California
BARON P. HILL, Indiana
JOE BACA, California
WILLIAM E. O'CONNER, JR., Staff Director
LANCE KOTSCHWAR, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director
C O N T E N T S
Barrett, Hon. Bill, a Representative in Congress from the State of Nebraska, opening statement
Bishop, Hon. Sanford D., Jr., a Representative in Congress from the State of Georgia, prepared statement
Combest, Hon. Larry, a Representative in Congress from the State of Texas, prepared statement
Etheridge, Hon. Bob, a Representative in Congress from the State of North Carolina, prepared statement
Page 5 PREV PAGE TOP OF DOC Stenholm, Hon. Charles W., a Representative in Congress from the State of Texas, opening statement
Barshefsky, Hon. Charlene, U.S. Trade Representative
Daley, Hon. William M., Secretary, Department of Commerce
Detrick, Terry, Ames, OK, president, National Association of Wheat Growers
Glickman, Hon. Dan, Secretary, Department of Agriculture
Hardin, John Jr., Danville, IN, past national president, National Pork Producers Council
Hauck, Dana R., Delphos, KS, Pike Trail Cattle Company, on behalf of the National Cattlemen's Beef Association
Jensen, Lynn, Lake Preston, SD, president, National Corn Growers Association
Leavens, Paul, Ventura, CA, president, Leavens Ranches
Stallman, Biob, Columbus, TX, president, American Farm Bureau Federation
Page 6 PREV PAGE TOP OF DOC Yost, Michael, Murdock, MN, chairman, American Soybean Association
Deichman, Don, statement
Myers, Gary, president, the Fertilzer Institute, statement
THE ADMINISTRATION'S PROPOSAL FOR PERMANENT NORMAL TRADE RELATIONS WITH CHINA
WEDNESDAY, MAY 17, 2000
House of Representatives,
Committee on Agriculture,
The committee met, pursuant to call, at 10:00 a.m., in room 1300 Longworth House Office Building, Hon. Bill Barrett (vice chairman of the committee) presiding.
Present: Representatives Combest, Barrett, Ewing, Canady, Smith, Terry, Lucas of Oklahoma, Chenoweth-Hage, Hostettler, Moran, Schaffer, Calvert, Gutknecht, Simpson, Hayes, Fletcher, Stenholm, Peterson, Dooley, Clayton, Pomeroy, Holden, Bishop, Berry, Etheridge, Boswell, Phelps, Lucas of Kentucky, Thompson of California, Hill, and Baca.
Staff present: Tom Sell, deputy staff director; Lynn Gallagher, senior professional staff; Jason Vaillancourt, Michael Neruda, Callista Bisek, Wanda Worsham, clerk; and Andy Baker.
OPENING STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Page 7 PREV PAGE TOP OF DOC Mr. BARRETT. The hearing on the House Committee on Agriculture to review the administration's proposal for permanent normal trade relations with China will now come to order.
Obviously, Chairman Combest is not with us. He has been detained in another meeting. He is expected momentarily; but in deference to our witnesses who do have schedules to keep, we will proceed with the hearing and other members will be joining us very shortly who are also attending a similar meeting.
And I appreciate Chairman Combest holding this very important and timely hearing to review an issue of certainly great importance to America's farmers and ranchers, the administration's proposal for permanent normal trade relations with China. I would also like to thank our distinguished cabinet officials and commodity leaders for joining us today to share their knowledge of the subject and to answer any questions which members of the committee might have.
I don't think there is any issue that is more important to the long-term health of agriculture than a vigorous and a very aggressive trade policy. Competition among suppliers for world agriculture products is increasing. For farmers and ranchers and foods processors to compete successfully, we need to have a fair trade and fair access to growing global markets. Nebraska, my home State, is one of the Nation's leading producers and exporters of agricultural products. Continued improvement of fair trade and fair market access is absolutely crucial to the well being of these producers and others across the country.
I would, at this point, ask unanimous consent to submit the remainder of my statement for the record as well as Chairman Combest's. And I would yield to the distinguished ranking member from Texas, Mr. Stenholm.
[The prepared statements of Chairman Combest and Mr. Barrett follow:]
PREPARED STATEMENT OF HON. LARRY COMBEST, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Page 8 PREV PAGE TOP OF DOC It is my pleasure to welcome three distinguished representatives of the administration to the committee. This is Secretary Daley's first official appearance before the committee. He did meet with Members on March 16 in executive session and we welcome him back. Secretary Glickman and Ambassador Barshefsky are more frequent visitors to the committee and are always welcome.
I am pleased to welcome them and our other witnesses from agricultural communities across the United States to discuss this agreement and the administration's proposal for permanent normal trade relations with China.
China represents an agriculture market that is vital to the long-term success of American farmers and ranchers. Agriculture trade with China can strengthen development of private enterprise in that country and bring China more fully into world trade membership
I am very pleased with the agreement negotiated by Ambassador Barshefsky. This agreement will benefit United States agriculture and open China's marketplace with lower tariffs and improved access. I congratulate her and Secretary Glickman for their hard work. I want to mention an additional bilateral agreement that was reached with the Chinese last month on access for U.S. fertilizer. That agreement provides for a tariff rate quota, that will grow over time, and includes provisions for trading rights for fertilizers. This is more good news for U.S. exporters.
For American farmers and ranchers, trade is an essential part of their livelihood. Currently exports account for 30 percent of U.S. farm cash receipts and nearly 40 percent of all agricultural production is exported. U.S. farmers and ranchers produce much more than is consumed in the United States, therefore exports are vital to their prosperity and success.
This agreement means that Chinese tariffs will be reduced for beef, pork, wheat and other commodities. Improved access will be provided for cotton, corn, rice and soybeans through reform of the Chinese tariff-rate quota system. China agreed to eliminate its export subsidies and to reduce trade distorting domestic subsidies, upon accession to the WTO.
Page 9 PREV PAGE TOP OF DOC More than 80 agricultural organizations representing producers, processors, and exporters support this agreement and permanent extension of normal trade relations with China. Eight former Secretaries of Agriculture support granting permanent normal trade relations for China. Former Presidents Ford, Carter, and Bush support this effort.
This agreement is good for U.S. agriculture. But in order to make sure that our farmers and ranchers benefit from the agreement we must act to provide permanent normal trade relations for China.
I intend to work for that goal and urge all of U.S. agriculture to join with us.
PREPARED STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Thank you, Mr. Chairman for holding this very important and timely hearing to review an issue of great importance to America's farmers and ranchersthe administration's proposal for permanent normal trade relations with China. I also, would like to thank our distinguished Cabinet officials and commodity leaders for joining us today to share their knowledge of the subject at hand.
There is no issue more important to the long-term health of agriculture than a vigorous and aggressive trade policy. Competition among suppliers for world agriculture products is increasing. For farmers, ranchers, and food processors to compete successfully, we need to have fair trade and fair access to growing global markets. Nebraska is one of the Nation's leading producers and exporters of agriculture products. Continued improvement of fair trade and fair market access is absolutely crucial to the well being of these Nebraska producersas it is to producers of all commodities nationwide.
According to many analysts, the agriculture sector will receive the most benefit from this trade agreement with China. China's economy is already among the world's largest and, historically, it has expanded at annual rates of nearly 10 percent. By opening trade barriers to China, American agriculture commodities will have the opportunity to penetrate those markets in the near future. Considering the 1.3 billion people currently residing in China, it is possible that we could experience far-reaching increases in exports.
Page 10 PREV PAGE TOP OF DOC By granting PNTR to China, agriculture tariffs will be cut in half. On U.S. priority agricultural products, tariffs will drop from an average of 31 percent to 14 percent by 2004. China will also expand export opportunities for bulk commodities such as wheat, soybeans, and rice.
One of the most important aspects of this agreement is that for once, China will have to abide by rules established in the trade agreement. In addition, by working with China, America will have an influence on their foreign policy when it comes to human rights, religious rights, and political rights.
One proposal that is receiving merit has been introduced by my colleague from Nebraska, Representative Doug Bereuter. The proposed legislative language would address the human rights and labor concerns involved in granting China PNTR status. This proposal would create a commission to review China's human rights performance, enhance the monitoring of China's compliance with trade pacts, and strengthen U.S. safeguards against surges of imports from China. I believe it would be very beneficial for this committee to consider adding that legislative proposal to this trade agreement.
I commend the administration for their aggressive educational work on this very important trade agreement. Without the hard work of Ambassador Barshefsky and Secretary Glickman, we would not have the opportunity to pass such important legislation during this session of Congress.
In summary, I am confident that the members of the House Committee on Agriculture will carefully examine permanent normal trade relations with China and overwhelmingly support this legislation. This committee has a strong tradition of supporting agriculture trade, and we will continue to closely monitor the administration's plans for defending our Nation's agriculture farmers and ranchers. This administration has not had the best track record in supporting legislation that benefits America's agricultural producers. I am pleased by the administration's leadership shown on PNTR passage and hope that it will continue on other trade issues as well.
Page 11 PREV PAGE TOP OF DOC Again, I want to thank Chairman Combest for holding this timely hearing to review the administration's proposal for permanent normal trade relations with China.
OPENING STATEMENT OF HON. CHARLES W. STENHOLM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS
Mr. STENHOLM. Thank you, Mr. Chairman. And I too thank the chairman for holding this hearing today, and I thank the first three witnesses, Secretary Glickman, Secretary Daley, and Ambassador Barshefsky for your being here today and for the tremendous job that you have done thus far in bringing us to this point.
It has been a long hard path. I want to respond just briefly to one of the arguments that I have heard against PNTR for China. It is 1.3 billion citizens and only 7 percent of the world's arable land doesn't need United States agricultural products. USDA's Economic Research Service, ERS, and private agriculture commodity groups believe that China will continue to be a major market for agricultural products and that China accession's to the WTO will expand that market and that really the fundamental question for us today is do we want to compete for that market.
ERS concludes that China's implementation of its WTO obligations between 2000 and 2004 could add $1.7 billion to the bottom line for U.S. farmers and ranchers by 2005. And ERS is not alone there in its view. I will not quote from the many positive statements by organizations represented here today but would reiterate that, according to World Watch's Lester Brown, China's water supplies in its grain-producing areas are falling at a high rate. Mr. Brown believes that China's water shortage will make it even more dependent on grain imports.
To put the ERS numbers on China into context, I will mention another number that is the amount farmers and ranchers lost in 1996 due to various U.S. economic sanctions placed on countries around the world and point out that these numbers also probably are greater in 1997, 1998, 1999 and in the year 2000. According to ERS we lost a half a billion dollars in 1996 due to these sanctions. But that is less than a third of the $1.7 billion ERS says we will lose in 2005 if we do not grant China permanent normal trade relations.
Page 12 PREV PAGE TOP OF DOC All six of the countries currently under sanctions, Cuba Iran, Iraq, Lybia, Sudan, and North Korea, together import only $7.7 billion in agricultural products each year. That is about half of the $14 billion worth of agriculture products China imports annually. Fortunately we are moving in the right direction in our policy on sanctions. And the administration's changes last year have allowed sales of corn to Iran and wheat to Libya. Let's move forward on China too and stop giving agricultural markets to our competitors.
Mr. BARRETT. Thank you, Mr. Stenholm. Other members of the committee are urged to submit opening statements should they so desire.
[The prepared statements of members follow:]
PREPARED STATEMENT OF HON. SANFORD D. BISHOP, JR., A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA
I thank Chairman Combest and Ranking Member Stenholm for holding this hearing today. And to Secretary Glickman, Secretary Daley and Trade Representative Barshefsky, I thank you for being here. Your executive briefings and testimony before this Committee in recent months have been helpful to me as I weigh the difficult and complex issues surrounding China's trade relations with the United States. And I welcome the panel of farmer representatives and look forward to your testimony.
American farmers are again hearing a lot of promiseslower tariffs, new markets, more exports, a car in every garage and a chicken in every pot. But past experiences make many farmers suspicious of new trade relationships and how they have in reality affected their bottom line.
Under the North American Free Trade Agreement and the earlier U.S.-Canada Free Trade Agreement, the volume of farm trade has significantly increased throughout the region. However, the net result has been a small but significant decline in the U.S. farm trade surplus with Mexico and Canada.
Page 13 PREV PAGE TOP OF DOC NAFTA has also caused a massive shift in the structure of trade and production within North America. U.S. exports of corn and other feed grains (such as sorghum) have increased, but U.S. imports of fruits, vegetables, wheat, barley, and cattle have all increased much more. For example, U.S. grain exports to Canada (primarily corn and other feed grains) increased by 127 percent between 1990 and 1998, but at the same time U.S. imports of wheat from Canada increased by 249 percent, from $79 million in 1990 to $278 million in 1998. Similarly, U.S. corn exports to Mexico increased by 47 percent during that period, while cattle and calf imports from Mexico soared by 1,280 percent.
The U.S.-China scenario is different and more ominous. China has produced a glut of agricultural goods for a generation and has huge food stockpiles. This glut could continue even with Chinese WTO membership. It could put continuous downward pressure on U.S. agricultural prices and output.
Farmers want an answer on how our forfeiture of annual review of our trade relationship with China will raise farm prices, increase net farm income and bring prosperity to their communities.
There are also concerns about trade deficit projections and its impact on agricultural workers in rural communities. A new study predicts that future trade deficits, which would pile up even with China's entry into the World Trade Organization, will cost U.S. workers more than 870,000 jobs over the next decade, including some a net loss of over 5,000 in the agricultural sector. Over 27,000 jobs in Georgia alone could be lost from huge trade deficits with China.
Therefore, I respectfully request two recent studies be included in the official record of this preceding, including: (1) The United States, China and the WTO: More False Promises, Debt and Unnecessary Instability, Chapter 4: China's Agricultural Glut'' by Charles W. McMillion (March 2000); and (2) ''China and the StatesBooming trade deficit with China will accelerate job destruction in next decade with losses in every state.'' by Robert E. Scott, (May 2000).
Page 14 PREV PAGE TOP OF DOC I look forward to hearing our witnesses today. Again, I thank Chairman Combest and Ranking Member Stenholm for holding this hearing.
PREPARED STATEMENT OF HON. BOB ETHERIDGE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NORTH CAROLINA
Thank you Mr. Chairman for holding this hearing. You and my good friend, the ranking member Mr. Stenholm, have been key leaders on the push to get PNTR for China.
Your efforts to bring the agricultural community together on this issue could make the difference on whether the Congress will open up a vast new market for U.S. farmers or lock these farmers out of China while handing the keys over to our competitors overseas.
I also want to thank you gentlemen and Madam Ambassador for coming up here, once again, to press upon us the importance of passing PNTR for China for U.S. agriculture.
I want to stress to this panel and to everyone in this room that my farmers are hurting. Between tobacco quota cuts and low commodity prices, my family farmers are struggling to stay on the farm.
I believe that trade with China can provide an incredible opportunity for North Carolina farmers and their families to find new markets for our products.
If Congress grants PNTR status to China, it could ultimately lead to large increases in exports of North Carolina cotton, pork, poultry, and tobacco.
Pork and tobacco are two very important agricultural products produced in North Carolina.
It is estimated that if our producers have full access to the Chinese market, the price of hogs would increase by $5 a head while the exports of Flue-cured tobacco would increase almost immediately by at least 10 percent.
Page 15 PREV PAGE TOP OF DOC Now, just because there are many benefits to trade with China, it does not mean there are not problems to confront as well.
Y'all should know what I am going to talk about because I have been raising this issue with you for three years. And that is, China's restrictions on U.S. tobacco.
The contention that U.S. tobacco could infect Chinese tobacco with Blue Mold has been disproved repeatedly, not only by our scientists, but also by the science community of China.
China has been using Blue Mold as a phony barrier for years, and if they are going to play in the arena of world trade, they will have to play by the rule of law and stop such tactics.
I have been working with each of you, your able staffs and my colleagues to try to resolve this matter.
I have visited China to explain our position to officials there. I have spoken with Chinese representatives in our country, most recently China's Ambassador to the United States, to find a way so U.S. tobacco can be imported into China.
Each of you, in your capacity, have been pushing this issue, and I want to thank you for your hard work. I believe our combined efforts tonight-night have paid off.
In fact, I understand, Secretary Glickman, that your office is in possession of a recent letter from the Chinese Government, which outlines an agreement on the Blue Mold issue.
Have you and your staff completed your review of its contents, and can we now say we have an understanding with the Chinese on the issue of Blue Mold?
Mr. BARRETT. I would like to introduce our witnesses today, the Honorable Dan Glickman, the Secretary of Agriculture; the Honorable William Daley, Secretary of the Department of Commerce; and the Honorable Charlene Barshefsky, U.S. Trade Representative of the USTR. Mr. Glickman you may proceed.
Page 16 PREV PAGE TOP OF DOC
STATEMENT OF HON. DAN GLICKMAN, SECRETARY OF AGRICULTURE
Secretary GLICKMAN. Thank you, Mr. Chairman. It is an honor to be back in my old stomping grounds in this distinguished committee and a pleasure to be here with my colleagues both of whom have done such a wonderful job both negotiating the bilateral agreements as well as moving this issue along.
I would like to summarize my statement by saying first of all that this is obviously a very important agreement for America's farmers and ranchers. I would like to open by looking at this month's issue of the Farm Journal. There was an article by Jeanne Bernick, and I would like to read two paragraphs of it. The title is ''Let Them Eat Meat.''
Of all developing countries, China remains the most important growth market for the United States. Nearly 70 percent of the client's diet is made up of pork and China grows 46 percent of the world's hogs. Currently the United States supplies only about 25 percent of the swine and poultry market for grains mostly because China increased its grain production in response to high domestic price supports. China now exports its corn to relieve large stocks, but experts say this is not a sustainable fix. Once livestock production picks up with meat demand, China will switch from a corn exporter to an importer by 2003 and will import 7 million metric tons by the year 2009 predicts the Food and Agricultural Policy Research Institute. However, all opportunity for the United States in China, all opportunity rests on Congress's decision on trade relations.
I point that out to you because just the World Board part of USDA last week had estimates that China's wheat production, the land under production is falling about 3 percent this year. China is changing rapidly. And it is moving to an industrialized economy. That is going to have a remarkable impact on Chinese food production.
Page 17 PREV PAGE TOP OF DOC As their incomes go up, they will have to buy in the world markets whether it is because of water needs as Congressman Stenholm said or because of the change in their diets and their increased meat consumption and because of that increased need for grains. And the question is will we in America have access to that market or it will go some place else. Because they will go out and buy the stuff. They will buy it somewhere.
They are going to need it desperately. And the question is does Europe get it? Does Australia get it? Do our other competitors get it or does the United States get it? And I think that is the thrust of this agreement. That is the thrust of the piece that I read from Farm Journal is we want to be able to compete for this. I meanand I think that is a critically important part of why this agreement is so important for agriculture.
My second point I would make is, as you know, I had the privilege of leading a delegation the President sent where we had one member of this committee, Congressman Walden from Oregon, as well as Congressman Hinojosa, Congressman Dicks, and Congressman Meeks along with Governor Schaffer. And I think Greg Walden can probably give you more information about that meeting since he is on this committee as can the other members, but I think all of us, including me and I have been to China several times, were impressed with the extraordinary change that has taken place in the last 20 years.
Change in not only the fact that there is an industrialization of remarkable movement taking place but change in life-style, change in patterns. One of the members commented to me when we were about ready to leave, he said if youin the United States you almost get the impression that people are being flogged on the streets in Beijing or Shanghai or Hong Kong. This is not to say that their human rights record has reached any level of perfection at all. We know it has not. But this is an extraordinarily complex country. It is like many Chinas are involved with this. There is massive change occurring there. And all for the better. Not to say they still aren't doing some things we don't like. But I think that the fact is I think most of us returned, regardless of what the ultimate decisions on votes on any Member, with the fact that China is changing dramatically for the better.
Page 18 PREV PAGE TOP OF DOC And in my judgment, if we want to retain our status as a world leader and to achieve the goals of human rights and civil rights and religious rights and labor rights, now is not the time to walk away. And particularly the impact on this, on the fact that Charlene Barshefsky negotiated these extraordinary, I call them stunning, agreements with China, that we don't have with virtually any other country in the world that we have with China. And they have agreed to end export subsidies for agriculture immediately, to improve market access dramatically, to apply sound science and regulatory decision making and there is an antisurge mechanism to allow us unprecedented authority to take action against any import from China that may threaten injury to a sector of the United States economy and that includes agriculture.
So the fact is that that is an agreement that is just amazing, and it would be amazing to the Chinese if we walked away from it after we negotiated something with them that is in our interests so dramatically. And I would just say that the agreement, as I have said before, could increase U.S. agricultural exports. Conservatively figure $2 billion annually by the year 2005, and a recent Harvard study has indicated that our analysis may actually be conservative.
So I am going to close just with one statement the President has made on many occasions. He says the question is that do we go into this relationship in the new world with a clenched fist or an open hand. And which will be more effective in influencing that country to improve the way it treats its people. And I agree with the President that it is an open hand that will do that. And also its impact on agriculture will be dramatic.
One final point I would make. If we turn this down, not only will it have, I think, consequences for China, but think about what it sends to the rest of the world in terms of American agriculture that the United States wouldn't honor one of the greatest deals it has ever negotiated in its history. How does that affect us as we sell agricultural products to other countries in the world?
Page 19 PREV PAGE TOP OF DOC This committee rightfully has pushed my Department and the administration to be tougher, to be more aggressive on trade. I mean, really everyone of you has said sell more, sell more. I mean I am looking at Marion Berry now, and I see a four letter word ''rice'' and I am thinking, I mean do all these things. If we don't do this, the impact on trade generally, not just with China but the United States as a supplier to the world, will be negatively affected. And I think that most people in this committee know that. But I think the trip to China reinforced that. Thank you, Mr. Chairman.
[The prepared statement of Mr. Glickman appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you sir.
STATEMENT OF HON. WILLIAM M. DALEY, SECRETARY OF COMMERCE
Secretary DALEY. Thank you. Mr. Chairman, Congressman Stenholm, members of the committee, it is a pleasure to be back before this committee once again. Three of us had the pleasure to visit with you all in executive session back in March. And I have had the pleasure on numerous occasions to have conversations with individual Members, and I know how seriously you have all taken this issue and the discussion of PNTR and its importance in the challenges of the relationship with China. And in, our opinion, this is obviously one of the best trade deals that America has ever negotiated. And I also give great kudos to Ambassador Barshefsky for not only for that period in November but over many years of difficult negotiations remaining strong to make sure that this deal was good for America. And the reason we are here is because we did get a very good deal.
Having broad access to a new market with 1.3 billion who today spend less than a dollar a year on U.S. agriculture products will mean vast potential opportunities for American farmers and ranchers. I have had the pleasure also of being in China last April just as the first shipments of American citrus arrived in Beijing. If their popularity is any indication, there is great potential for our exporters when this deal takes effect and China joins the WTO.
Page 20 PREV PAGE TOP OF DOC I know from numerous conversations and meetings with Members that most are convinced that this deal with China makes sense economically. Not only is it a winner for agriculture but for many of our leading industries and the industries that are leading the resurgence of the American economy from high tech to insurance, telecommunications, transportation, and energy, but a question that I have heard repeatedly is how do we know that China will comply with the agreement?
Their track record in the past quite frankly has been mixed. But, in my opinion, things are different; and they are changing dramatically. The Chinese want this deal to go through because they are in the middle of dramatic social and economic transformation. And for it to be successful for reform to work in China, China must join and be engaged in the outside world. The Chinese have told all of us countless times they want the benefits of open markets. And after 14 years of negotiation with Democratic administrations and Republican administrations, they want to join the WTO and commit to following the rules. And we have to believe them. We must engage China and hope they make the right choices and take the path towards free markets and towards a more open and democratic society.
And there are positive signs throughout China that they are making the right choices. China is in the process of changing its rules and the rule of law. They are retraining state bureaucrats and managers in the ways of open markets, and they are trying out democracy at the local level. Obviously there are no guarantees that they will honor our trade deal. To be honest, we would be foolish to think that there won't be problems, enormous problems as we go forward. After all, we have trade disputes as many of us know with many of our friends and allies and some of our closest trading partners.
The deal with China includes compliance provisions and there is a WTO mechanism for handling such disputes. And we won't hesitate, as we have done in the past, to use these tools. But we believe that more needs to be done. We need to be proactive. We at the Commerce Department have an aggressive 5-point plan to make sure China lives up to its commitments. It is already in effect and doesn't require additional resources at this time. The main goals are to work closely with U.S. companies to identify and resolve problems early before they become full-blown disputes and to help China learn to make the switch to a market-based economy.
Page 21 PREV PAGE TOP OF DOC Let me say also that our compliance package dovetails with the watchdog commission on human rights and workers' rights put forward by Representatives Levin and Bereuter. Those proposals are absolutely critical, in my opinion, for broadening the base of support for PNTR legislation which the Ways and Means Committee will be considering later this afternoon. In fact, without them, the chances of passing PNTR are slim to none.
Our commerce compliance package includes a new rapid response team on China. It will have a dozen compliance and trade specialists. We plan to have a deputy assistant secretary for China running the team which will be the highest level Commerce official ever put in charge of enforcing the trade agreement with a single nation. We are ready for the senior commercial official on the ground in Beijing. She has been there a week. She is meeting with a number of U.S. business people, and she is working with the business community on determining their needs and priorities for implementing the new trade deals. I expect to get a report back from her shortly after Memorial Day.
By next year, we want to triple our resources for compliance, increase the size of our rapid response team, and permanently station compliance experts this China. We also plan to do the same in Japan and South Korea as part of a broader effort to be beef up enforcement worldwide. We are the biggest trading nation on Earth, and we need to make sure that the trade deals we make are working as we expect them to work.
Obviously, we need Congress's help in getting additional resources for this effort. In his budget for next year, the President has requested $22 million for stepped up trade compliance not only at Commerce but at State and Agriculture and, of course, USTR. Another key point in our plan explains where the name rapid response comes from. We are putting in place tight deadlines for investigating market access and commercial problems so we can resolve conflicts quickly without getting wrapped up in a lot of bureaucratic red tape, and we will be keeping a close eye on the trade flows between China and the United States. We will have a special program to watch for surges in imports including agricultural products. And we will chart export growth in key sectors to ensure China is opening its markets as it has agreed to. We will also have special programs for antidumping and antisubsidy rule violations.
Page 22 PREV PAGE TOP OF DOC Finally, we want to help China help itself. We will share our experiences in putting WTO legislation into effect and give technical assistance which China has requested of us. Meetings on this begin this summer. And last month when I was in Beijing, we agreed to comparative law dialog to help the Chinese conform their laws to the WTO rules.
I see our compliance effort as good government. Just as businesses are hiring and expanding so they are ready one day to export to China, government must be ready also. As Congress prepares to vote next week on PNTR, we should keep in mind what we all know and that is the world economy has been good for us as a Nation. We are the biggest trading nation on Earth, our economy is the strongest with 21 million new jobs and the longest expansion in our Nation's history. Our goal in the single reason, in my opinion, to pass PNTR is because it is good for our Nation. Thank you.
[The prepared statement of Mr. Daley appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you sir.
STATEMENT OF HON. CHARLENE BARSHEFSKY, U.S. TRADE REPRESENTATIVE
Ambassador BARSHEFSKY. Thank you, Mr. Chairman. Congressman Stenholm, members of the committee, I want to thank you for this opportunity once again to testify before you and, in this case, on China succession into the WTO and permanent normal trade relations. Let me also say what a pleasure it is to be here with Secretary Glickman and Secretary Daley who have worked so hard on these negotiations and, of course, here with Members of Congress.
The agreement we reached last November will open China's markets, what may become the world's single largest market to American exports of industrial goods and agriculture and services, to a degree unprecedented in the modern era. It will strengthen our guarantees of fair trade. It will give us greater ability to enforce China's trade commitments. And it will facilitate Taiwan's entry into the WTO as Taiwan's new leadership has noted in its support for PNTR for China and for China's accession to the WTO.
Page 23 PREV PAGE TOP OF DOC My written statement discusses in detail the specific commitments China has made in all areas, manufacturing, services, farm products. These commitments are detailed, they are commercially meaningful, they are enforceable. But it is quite clear that America's farmers and ranchers will be some of the principal beneficiaries of this agreement. China's agricultural tariffs will fall from 31 percent to 14 percent for our priority items extending from meats to dairy, citrus, free nuts, seafood, wine, beer, and all other products. All cuts will occur over a maximum of 4 years and will be bound at applied rates. That means China can't raise them again.
China will liberalize its purchase of key bulk agricultural commodities: wheat, corn, cotton, rice, soybeans, and so on, through tariff rate quotas. It will eliminate agricultural export subsidies. It will cap and reduce trade-distorting domestic supports. It will apply sanitary and Federal sanitary standards on the basis of sound science. Among other things, this will give us additional means of enforcing the bilateral agreement on agricultural cooperation and China's commitment to lift their long-standing bans on America meat, citrus, fruit, and Pacific Northwest wheat. And I am pleased to say those bans have been lifted, and the trade is flowing.
These commitments in agriculture as in all other areas are enforceable. Through our trade laws, through WTO dispute settlement, through periodic multilateral review of China's adherence, through multilateral pressure from all 135 other WTO members, increased monitoring by the United States, as Secretary Daley has pointed out, and a number of other mechanisms including an anti-import surge remedy and special rules on anti dumping. Our experience shows that enforcement requires constant attention and vigilance but also that when China's commitments are specific, detailed, and bound by clear time tables, enforcement works.
By contrast, as China enters the WTO, we make no changes whatsoever in our market access policies toward China. Not a single tariff line. We don't alter a tariff, not even by a percentage point. Absolutely all of the concessions are made on China's side alone. We make no concessions. We don't change our trade laws. We don't change our market access policies to make them more liberal. We don't change our rules governing the export of sensitive technology. We don't change our export control laws. We don't change any of it. Our only obligation is to provide China, on a permanent basis, the normal trade status China has received in each and every year, year in, year out from each and every Congress and each and every president since 1969, when we normalized diplomatic relations with China.
Page 24 PREV PAGE TOP OF DOC It is making that normal trade status permanent that is our only obligation in trade policy terms. It is absolutely no change in the status quo. Regardless of the congressional debate, China will enter the WTO. And regardless of the outcome of the congressional debate, China will continue to export large volumes to the United States. The only issue before the Congress is whether, in the context of PNTR, Congress will vote to give the United States the benefit of the agreement we negotiated to give the United States the benefit of China's accession to the WTO. Without PNTR, our global competitors will reap the benefits of the agreement we negotiated and American farmers and agriculture producers, our ranchers, our industrial manufacturers, our services providers, will be left behind.
We also, let me say, have responsibilities toward human rights and the rule of law in China. Here we will not achieve our goals by sacrificing America's farm families. Rather the opposite is true. Many Chinese dissidents and Hong Kong on democratic leaders Bao Tong jailed for 7 years after Tianamen Square, Ren Wan Ding a founder of China's modern human rights movement, Chinese environmentalist Dai Qing Martin Lee, leader of the Hong Kong democratic party and one of the world's foremost advocates for democracy, all believe WTO accession and PNTR are the most significant steps toward reform in the rule of law in China in 20 years.
To reject PNTR is to turn our backs on nearly 30 years of work to support reform ever since President Nixon lifted the embargo in 1972. It would be to turn our back on improvements in the legal system. It would be to turn our back on hope for a better life to hundreds of millions of Chinese. And it is to give up the hope of contributing, in the future, to a China that is freer, more open to the world, and more responsive to the rule of law than it is today.
Looking even more broadly at our strategic interests in the Chinese leadership, we have differences, of course, on important questions. And in these, we must vigorously assert our rights and our values. But we have also found and acted upon areas of shared interest and benefit where possible, recognizing that our relationship with China is of fundamental prospects for peace and security in Asia and in the world.
Page 25 PREV PAGE TOP OF DOC WTO accession and PNTR are an example. They help us achieve a shared interest in a more reformed and open Chinese economy. And we have achieved this goal through one-way concessions made by China. For the United States to retreat at this historic moment and to reject these one-way concessions is to make a very dark statement indeed about the future possibility of any stable mutually beneficial relationship with the world's largest country.
Such a stand would threaten every single interest we have in China. It would complicate for the foreseeable future our Pacific alliances as our ASEAN friends and allies review rejection of PNTR as an unnecessary rejection of stable and constructive relations with their largest neighbor in their neighborhood.
Perhaps most important, China, seeing no economic reason for our decision, would be more likely to read hostile intent into our every move. This, in turn, would raise the prospect that our present disagreements would only escalate. That is the ultimate and most significant point at stake in the coming debate. To reject PNTR would be to severely damage American trade interests, to set back the cause of reform in China, and to risk without cause a fundamental deterioration in our relationship with the world's largest country.
But if we have a wisdom and the confidence to make the right choice, WTO accession and PNTR offer us a remarkable opportunity to advance our own trade interests, to strengthen, as a number of activists have said, prospects for long-term reform and ultimately to help build the relationship with China that strengthens the guaranty of peace and security.
That is the opportunity that is before us as the debate formally begins, and this is why it is so vital that Congress grant China PNTR on the basis of the historic agreement that the administration negotiated.
Thank you very much.
[The prepared statement of Ms. Barshefsky appears at the conclusion of the hearing.]
Page 26 PREV PAGE TOP OF DOC Mr. BARRETT. Thank you, Ambassador Barshefsky.
Thanks to the three panelists for being with us today. I want to add my kudos for the things that you folks have accomplished in the recent past. I think that there have been some extraordinary movements, particularly Ambassador Barshefsky with regard to your victories in November but even an earlier time frame in April periods. I think I have seen probably some of the best negotiating that I have seen in my tenure in the U.S. Congress from the three of you. Congratulations.
Secretary Daley, I noticed in Congress Daily, a couple of weeks ago, that you had expressed your concern that the chances of PNTR of passing were probably nil with the absence of the parallel track. And I was pleased that you really emphasized it today in your statement. You obviously feel the same today if not more so. I guess the obvious question is from the other two of you. Any disagreement, Mr. Glickman?
Secretary GLICKMAN. Anything he says I agree with. No.
Mr. BARRETT. Ambassador Barshefsky.
Ambassador BARSHEFSKY. No.
Mr. BARRETT. Total agreement. We may have the parallel track legislation. Any additional comments?
Secretary DALEY. If I could Congressman, I believe that strongly because I, as my colleagues have done, spent an enormous amount of time over the last 4 months talking to Members and hearing of their concerns. And the issues that are addressed in that proposal by Congressmen Bereuter and Levin and the work that they have done, address serious issues to the American people and the Members of Congress on human rights, religious freedom, democracy, labor rights issues.
These are real and I think the message that also would be sent if the Congress moves forward on that, the substantive message to the Chinese is that yes we do want to engage. As the President said, it is important to have this trade agreement; but there are issues in addition to the economic issues that are extremely vital to us. I think Congress's statement of that is important in addition to broadening the base. Without it I believe on the Democratic side and I am sure the Democratic members could speak better on this issue than I, I think would be a serious setback and would lose enough members that it would be impossible for the majority to make up such a number. That is just a practical sort of analysis.
Page 27 PREV PAGE TOP OF DOC Mr. BARRETT. Thank you. I appreciate that emphasis.
Secretary Glickman, you indicated in your comments considerable concern about pork and that Chairman Combest did an amazingly good job in our regional hearings around the country just completed. And from those hearings and other indications on Capitol Hill as well, pork producers are still concerned about a lot of things. What are the opportunities for pork in this Chinese agreement, specifically pork?
Secretary GLICKMAN. Well, first of all, pork is the preferred meat in China. Almost half of the world's hogs are produced in China. And my judgment is that this represents an enormous potential market for the United States, not only for hogs but also for corn and other feed grains in terms of feeding the increased number of animals that it will take to feed a Chinese population which is seeing its incomes rise.
So while I can't quantify and the pork producers are, I think they are probably here; and they areprobably will testify to that, I think almost anybody who estimates this issue, estimates dramatic increase in pork exports.
I also would point out that the tariffs on pork fall from the current level of 20 percent down to 12 percent at the end of the agreement. That was part of the agreement that was negotiated. And again, those tariffs are below what are charged us by some of the developed countries in the world.
Mr. BARRETT. Thank you. My time has expired. Mr. Chairman.
The CHAIRMAN [presiding]. I would just like to apologize to our distinguished panel for being late and appreciate Mr. Barrett's help in getting this started. Mr. Stenholm.
Mr. STENHOLM. Thank you, Mr. Chairman. The question is for Secretary Glickman. According to a report widely circulated now by Charles W. McMillan, a Harvard professor, China had an annual surplus, according to his numbers, in agricultural trade of $4 billion per year on average from 1992 to 1998.
Page 28 PREV PAGE TOP OF DOC Now my information and calculations based on numbers from the U.N. Food and Agriculture Organization indicate that China has run a deficit, that is it has imported more agricultural products than it has exported for the years 1995 and 1998; and for the 1992 to 1998 period, China's annual agriculture imports were an average of a half a billion dollars more than its exports. My question is what is the real story with China's need with agricultural imports. Whose numbers are right or whose numbers are you using? Whose numbers should we use?
Secretary GLICKMAN. The best data I can give, you haveaccording to statistics recorded by the United Nations Statistical Office, Chinese agricultural trade surplus during the years 1992 to 1998 averaged $2.9 billion. And imports averaged $7.5 billion during this period while exports averaged $10.3 billion. The only year in which China ran an agriculture trade deficit was 1995 when it logged a deficit of $800 million. And these statistics do not include Hong Kong which is accounted for separately from the rest of China.
Now, regardless of which data source is used, neither really accurately reflects the true potential of China as an agricultural importer. First of all, they have had protective tariffs, used export subsides to sell product in the world market. And in our judgment, particularly they have been using export subsides to export corn and cotton. And that is why China's WTO commitment to end export subsides is so important. The WTO accession results in a substantial opening of the Chinese market to outside suppliers like the U.S's trade barriers are reduced, and imports will grow as a result. So I frankly don't view the historical numbers all that significant because nothing has changed in the previous 8 years very much. And it will change as a result.
The other thing is that when we went to China and metvisited a Chinese supermarket kind of like a hyper-mart there in Shanghai, we saw American citrus, American beef, a lot of specialty crops from the West in particular. And talking to Chinese consumers, they said your products are such high quality that they make a dramatic difference in consumer buying patterns there. That is just started. So that is basically the best answer that I can give you.
Page 29 PREV PAGE TOP OF DOC Mr. STENHOLM. Ms. Barshefsky, most agricultural groups here understand the importance of the WTO's multilateral dispute resolution system. In fact, the National Cattlemen's Association said recently, establishing permanent normal trade relations will give the United States a powerful new tool for enforcing U.S. trade rights against China, binding WTO dispute settlement rules. If the United States wins a WTO ruling, China would have two options, comply or face WTO-approved trade sanctions.
Now, in his May 5, 2000 opinion, Colombia Professor Mark Barenburg concludes that U.S. bilateral enforcement power may well be equally affected in resolving trade disputes with China. Could you please comment on Professor Barenburg's opinion and tell us how the WTO multilateral dispute-resolution mechanism has worked to open markets to U.S. agriculture producers in other countries.
Ambassador BARSHEFSKY. Before answering the question, can I just supplement one thing that Dan Glickman said on your last question?
Import statistics into China are highly suspect because of the very substantial trade flows between Hong Kong and China and between Taiwan and China. There are substantial imports by China through Hong Kong and Taiwan which are not counted as Chinese imports. I think that is worth noting because it impacts very directly agriculture. We know, for example, for many years U.S. oranges found their way into China through Hong Kong while China still maintained a ban on imports of oranges. That is merely one example. We have seen the same pattern in computers and many other products. All of which, of course, supports USDA's view that China will be a substantial imported of agricultural products for the foreseeable future.
With respect to WTO dispute settlement, first off, we, of course, maintain all of our rights to use our current range of trade laws. Three hundred-one dumping laws, counter veiling duty laws, selling on and so forth. WTO dispute settlement, however, I think gives us the most powerful, newest weapon in our enforcement arsenal. We have brought 53 WTO cases since the system came into effect in 1995; we are the world's biggest user of the dispute settlement cases. Even of the cases that we have brought and that have been shown through either to completion or settlement, we have been successful 22 of 24 times. Undoubtedly owing to the litigious nature of American generally compared with the rest of the world.
Page 30 PREV PAGE TOP OF DOC In the case of agriculture, I would say somewhere between a quarter and a third of our cases are to enforce our rights under the WTO agricultural agreements. And we have been persistently successful. Australian Salmon, Canada dairy, EU grain and hormones, Hungary agricultural export subsides, Korea import clearance, shelf life and beef restrictions, Mexico high fructose corn syrup, the Philippines pork and poultry; and I could go on and on. These are all very notable wins. This is an important and powerful mechanism to secure our rights. I think there is no argument to be made. And I don't believe any businessman would argue that our unilateral enforcement mechanisms are any replacement for WTO-related enforcement.
The reason we have brought 53 cases is that industry and agricultural producers are coming to us to use the WTO, not to utilize unilateral sanctions because a WTO win is compatible with international rules and leaves our producers capturing the high ground.
The CHAIRMAN. Before recognizing, Mr. Schaffer, I would like to welcome our former chairman. This is the same gentleman in the picture in the back of the room, less the mustache, former chairman de la Garza.
It was a very brief tendency to want to hand the gavel to Mr. de la Garza. Mr. Schaffer.
Mr. SCHAFFER. Thank you, Mr. Chairman. I would like to ask where is China right now on its desire to enter WTO? This is a disputed question among Chinese leaders I am told. Is that the case or is there no question about their intent?
Ambassador BARSHEFSKY. There is no question about their desire and intention to join the WTO though the issue in China is not without controversy. Those who oppose WTO entry in China tend to be either a conservative element in the military or the very conservative elements in the leadership, the so-called hard liners and some of the heads of the state-owned enterprises. Those elements don't want to see WTO accession, first off, because they fear that accession will lead to a spread of Western values in China, which, in my mind, is strong endorsement of this approach. And second, the heads of state-owned enterprises fear that they will not be able to compete effectively against imports. So the issue is not free of discussion and dispute within China, but the leadership as a whole has made a decision to join.
Page 31 PREV PAGE TOP OF DOC Mr. SCHAFFER. Could you elaborate on the relationship between our bilateral agreement with China and the WTO negotiated tariffs? If the vote goes down on PNTR; and China enters WTO as you have said that you suspect they will, does not our bilateral agreement require that the lowest tariff they offer any other nation would also apply to the United States?
Ambassador BARSHEFSKY. The bilateral agreement that was put into effect in 1979 will not, will absolutely not secure the benefits of the agreement we negotiated with China for Americans if PNTR is voted. No. There is some argument that could be made although it is unenforceable, that we would still be entitled to some of the benefit of the tariff reductions.
But what good is that if you can't distribute your product? If you can't advertise your product? If you can't service your product? If you can't get financing for your product? There is not even a tenuous argument that any of that would be available to U.S. producers if this vote goes down. We would have to access to China's services markets on the basis of all of our other competitors, no access to dispute settlement, and no ability to have special rules like anti-import surge and anti-dumping. Without PNTR, we have no legal right to the agreement we negotiated but the rest of the world does.
Mr. SCHAFFER. Secretary Daley, could you comment on the competitive nature of Chinese-owned businesses of state-owned businesses in China, how competitive you believe they will be?
Secretary DALEY. When I was in Beijing in April for the Joint Commission on Commerce and Trade which was established 13, 14 years ago, I had the pleasure of meeting with a number of the heads of the state-owned enterprises which are going through this transition. No question about it, as one would expect, if you were the head of a monopoly, you don't want competition.
On the other hand, one of the leaders was commenting, I think he had a million people working for his company, knowing that that is just not realistic in this real world. So there is great concern and fear about how quick this change will come. But I think though also understand that without it, the bottom line of the leadership as the Ambassador said is, they know they can't bring the economic benefits to the majority of the people in China and begin to change what is basically a very, very poor country that has been out of the mainstream of the rest of the world.
Page 32 PREV PAGE TOP OF DOC So on the one hand I think they are going through the changes. The government leadership has stated and have enforced getting out of a whole host of state-owned businesses and enterprises and shutting them down and privatizing them. Those that will remain have got to change and become moreget active or else they are just in deep trouble. And they acknowledge that openly.
Secretary GLICKMAN. Could I just respond for one second if I might? I took this trip. Greg Walden and a few others were on the trip, and we met with lots of Chinese workers. I can't extrapolate from meeting with necessarily 50 or a hundred workers, but I recall both with the high tech companies working for American companies one of them in fact when we sat down asked what was wrong with the NASDAQ. And I said why are you asking me this?
And he said, because as a worker for the American company, I get the benefits as my American counterparts get. All of a sudden I am getting stock, and it has gone down. What is the reason for that?
I, of course, wouldn't answer the question because I didn't know. But the other thing is that a meeting with some of the lower level workers for American companies, one in particular for Armstrong Tilon company says that he had gone to work there because the working conditions, the pay was significantly higher than working for Chinese companies.
Now, the other thing about this, kind of indirectly gets to your question is that the more American investment that there is in China, or the investment that has been there has had an impact on working conditions, wages, salaries for those workers working there which has got to have an impact on their wages for their state-owned companies to the extent they continue to exist.
The CHAIRMAN. Mr. Bishop.
Mr. BISHOP. Thank you, Mr. Chairman, and let me ask a few questions. According to the latest China grain and feed annual report from USDA Foreign Agricultural Service based in Beijing, China has a glut of grains with stockpiles overflowing and many of the farmers are not able to find buyers for their grain. Why should we think that the type of vast improvements in China's grain storage and distribution system that is envisioned by the WTO bilateral, that that will allow more U.S. grain to be sold in China rather than on the other hand allowing China to sharply lower the cost and increase the quantity of their grain on world markets and thereby be able to more aptly manipulate the world market prices of the grain?
Page 33 PREV PAGE TOP OF DOC Secretary GLICKMAN. Could I ask Mr. Galvin, head of our Foreign Agricultural Service to respond to that Mr. Chairman?
Mr. GALVIN. Thank you, Mr. Chairman. Mr. Bishop, a couple of things. First thing, the agreement itself would force China to rationalize its agricultural policies internally. In other words, they would have to reduce their domestic support and abolish export subsidies, and that would make them much less competitive.
Mr. BISHOP. But with their low labor cost, with their lack of regulation such that our farmers have, that cost of production will still be vastly lower; and with the system that we are about to put in place, would give them greater control of the world market supply which would then put them in a position to manipulate the price, significantly put them in a better competitive position than we enjoy now. Is that not true?
Mr. GALVIN. They have other constraints. Mr. Stenholm indicated their problem with water, for example. And even though they may have low labor costs, the fact is their agriculture is just very inefficient. So they would have a very difficult time, I think, producing the sort of yields and other
Mr. BISHOP. Not to interrupt you, but aren't we in the process of exporting our agricultural technology. And aren't we in the process of assisting them in building one of the greatest dams in the history of mankind for production of their water?
Secretary GLICKMAN. If I may respond. We in the United States are not helping finance that dam.
Mr. BISHOP. But that dam is under construction.
Secretary GLICKMAN. But it is also going to flood and destroy immense quantities of arable land in China. Let me just say they have got about 7 percent of the arable land in the world and about 20 percent of the world's population. The bottom line is they are rapidly moving from an agrarian society to basically an industrial society.
Page 34 PREV PAGE TOP OF DOC It means millions of people are going to be moving from agriculture to doing other kinds of work in a modern industrial society. That is the risk the leaders in China are taking. They are making a tremendous political risk because they know that as the incomes go up and as people begin moving to some degree from being peasant farmers, it will have a dramatic social change out there in the countryside.
And that is one of the reasons why it is so difficult for them to manage this type of effort. But the fact is as their incomes go up, their eating patterns change dramatically. They no longer will produce the same kinds of foods they did before. They are the largest producers of pork in the world right now. But those patterns will change. And almost every economist says as their incomes go up they will need more meat, more oilseeds, dramatically more. And it will haveand they got to get it from somewhere. They can't produce it internally.
Mr. BISHOP. Isn't it true that we are teaching them how to produce it, that we are exporting the bulls and their meat production will increase and we are now selling them extra grain so that they now have more grain to feed their livestock and as a result, they are exporting more of the livestock elsewhere to the world than they have in the past? As a result of their capacity to store grain and their over capacity of grain, they are feeding their livestock and therefore exporting more of their meat?
Mr. GALVIN. Again, if I may, they have built this current system on an extensive program of wasteful and costly subsides. And that is the reason they have surplus to export. And it is those sorts of expenditures that would be limited under this WTO agreement. That it would eliminatethey would be required to eliminate export subsides on the day they become WTO members, and they would, for the first time, have a limit on their domestic agricultural support.
Secretary GLICKMAN. If I may.
Page 35 PREV PAGE TOP OF DOC Mr. BISHOP. May I move to another issue?
The CHAIRMAN. The gentleman's time has expired for the first round. I am sure we will be having a second round.
Mr. BISHOP. All right. Thank you.
The CHAIRMAN. Mr. Smith.
Mr. SMITH. Mr. Chairman, thank you.
Why do you feel the majority of Democrats are opposing this permanent normal trade relations? Start with you, Secretary Daley.
Secretary DALEY. I think there are a host of reasons, many of which are shared by members of the majority. The concerns with labor issues are serious to Democrats. And the difficulties in China foron working conditions. I think the human rights religious freedom, political lack of freedoms historically are all issues that I have heard repeatedly from Members.
Some believe that the trade deficit alone between China and the United States should be changed before we move forward with this. There is a whole host of reasons, many of which obviously we strongly disagree with, but many of which are shared by the American people. And are seriously expressed to the Members when they are back home.
Mr. SMITH. Any additions, Ambassador or Secretary Glickman?
What I am told, that the average wage for per populace in China is $180 a year. Do you have any different figures?
Secretary DALEY. To be honest with you, Congressman, I don't have a figure; and I don't know if anyone with me has it. I just don't know the answer. I will get it for you and get it to you.
Mr. SMITH. But in that, is the right neighborhood $180 a year? It is going to mean a long period of economic development, it seems to me, before they are able to afford the kind of protein that we are anticipating that we might have significantly expanding our markets. And also, at $180 a year it means that where labor-intensive production is a significant part of total production costs, that that would give that kind of country a significant advantage. Any comments?
Page 36 PREV PAGE TOP OF DOC Secretary GLICKMAN. If I may just comment again, from my trip to China that I took a few weeks ago, we met with a whole bunch of high tech workers who worked for American high tech companies, Chinese workers, on the average, made about $30,000 a year.
Now again, I can't extrapolate that to the world, but there is an enormous growing high tech market in China. And you have got about 300 million people who are estimating over the next decade or two are going to be moving into middle class.
The $180 figure may be correct, but the population of 1.3 billion peoplethere is enormous amount moving up, up that ladder who are significantly above that level. And so I mean, I think that the impact may be shorter term than what you might imply in your question.
Mr. SMITH. I am assuming, if you are saying that some of these Chinese are making $30,000 a year, I am assuming all of those who were trained in the United States; is that correct?
Secretary GLICKMAN. No they were not. They were trained in China for the most part by the American companies. In fact, sometimes I wonder if the American companies do as good a job domestically at training their work force as they did in China.
Mr. SMITH. I am told we have 25,000 Chinese in the United States going through our university system. So I am assuming that kind of wage if the national wage is 180.
Secretary GLICKMAN. It may be. These particular workers, most of them, were trained in China.
Mr. SMITH. I am told that approximately 80 percent of the total manufacturing industrial production other than the coast is owned by the Red Army and government. And if that is true, then should it make us nervous with that kind of control with government owning 100 percent of the farm land should that make us nervous in terms of how obedient even China might be to provisions of this trade agreement?
Page 37 PREV PAGE TOP OF DOC Secretary DALEY. I don't have the figure, to be honest with you, Congressman, in the one that you quoted. And I can't confirm that that is it. There is no question that the PLA has been involved in all sorts of businesses historically.
And for those China experts who comment and write, it has been noted that they have been more of businesses than they have been a real army. The leadership have stated that they want to get the army out of running businesses and running these state-owned enterprises and changing the nature of their military and to become more like everyone else's military as opposed to beingthey may have a million people working for a company that the quote PLA owns but are they really soldiers or are they workers on plant floors.
They are probably more analogous to our workers than our military surely. So I think there has been strong statements by the leadership they want to change, that they want to get the military out of businesses and into more of an honest sort of military like most developed nations have.
And that change will be traumatic though. And there is no question the changes that are going on will have a major impact. As I mentioned earlier, one of the heads of the state-owned enterprises which, in the process of having to deal with competition, they are going to be laying off millions and millions of people from the state-owned enterprises. That will have a social impact. That is one of the reasons, as the Secretary commented, the speed at which they want to see change isin order to maintain economic progress and avoid social problems, they have got to move quickly on this economic change and see economic growth or else these millions of people that will be laid off by the changes that are going on will have the potential of causing enormous problems.
Mr. SMITH. Thank you, Mr. Chairman.
The CHAIRMAN. Mr. Dooley.
Mr. DOOLEY. Thank you, Mr. Chairman. When we passed this legislation, a lot of the credit is going to go to the administration and certainly the three of you who have worked tirelessly to secure the votes that we need. A lot of that has built upon the foundation of what, I think, is just a terrific agreement. And, Ambassador Barshefsky, what you have been able to negotiate on behalf of agriculture is just a tremendous opportunity for us today and for the future.
Page 38 PREV PAGE TOP OF DOC One provision though I would like you just to touch on a little bit because I don't think it is as well understood in terms of the potential benefits and that is the additional import surge protection. And we have had some challenges in agriculture particularly with apple juice concentrate as well as dehydrated garlic coming in from China which we don't have that import surge protection currently. Is this something that would give those commodities another alternative to demonstrate that there could be significant economic harm domestically if we pass this agreement?
Ambassador BARSHEFSKY. Yes. Right now there is no U.S. law and there is no international practice that allows us to take action against surges in imports from any country in the world.
In this agreement, we have negotiated a special anti-import surge remedy which will only be effective upon China's accession and the granting of PNTR. And under this remedy, to the extent imports from China in any areacould be apple juice, it could be cell phonesin any area surge into the United States and disrupt the U.S. market, then the United States can take action for a 2- to 3-year period to temporarily halt that surge by increasing duties, by imposing quotas, any one of a number of remedies.
This is a remedy that is unavailable now. There is no provision in law for it but would be available if PNTR were granted. And it would have significantly assisted the apple juice folks here, dehydrated garlic folks, our steel folks and any sector you can think of where imports have surged.
Mr. DOOLEY. Thank you. And thank you for your explanation. I will yield back. I yield to Mr. Bishop.
Mr. BISHOP. Could you explain to me why it is that we could not do that now?
Ambassador BARSHEFSKY. Because under international rules, taking action against surges from any one individual country is prohibited. One could take action against a surge if the surge is from the world at large but international rules, the legal standard that is applied is very, very tough to meet. This has a lower legal and evidentiary threshold and would direct our import relief remedy to China specifically.
Page 39 PREV PAGE TOP OF DOC Mr. BISHOP. So you are saying that we cannot unilaterally decide that we have too many of certain kinds of products coming in from a certain country and therefore limit it.
Ambassador BARSHEFSKY. We cannot unilaterally decide that. An aggrieved producer in this country could file a dumping case or antisubsidy case. Those are very lengthy proceedings and are very costly.
Mr. BISHOP. That is what I thought. For all practical purposes it means we have no remedy.
Ambassador BARSHEFSKY. We would have a remedy against China if PNTR were granted.
Mr. DOOLEY. Just to clarify, is that the provisions on this import surge that was negotiated also allow for this resolution, I think, to be concluded within 150 days.
Ambassador BARSHEFSKY. Very short.
Mr. DOOLEY. Which is a very short period of time. When we have had some evidence of commodities that have adversely been impacted by an import surge, such as in the apple juice concentrates is a good example, dehydrated garlic is another example, from China is that we do not have the ability to have the effective recourse today because it is a single country.
After we pass the PNTR for China, these farmers and producers of these specific commodities and any other commodity will have resource in an expedited fashion that will provide tremendous benefits to workers as well as the farmers or producers of these particular products.
The CHAIRMAN. Mr. Fletcher.
Mr. FLETCHER. Thank you, Mr. Chairman. Certainly appreciate, sorry I missed all of the testimony, but thank you for coming today. Let me focus very quickly on two issues.
Page 40 PREV PAGE TOP OF DOC Our tobacco farmers have had a 65 percent reduction in quota over the last 2 years. Hurting severely. This PNTR agreement certainly opens up, reduces at least, Burley leaf tariffs from 40 percent to 10 percent, a substantial decrease.
Two concerns that I have though, one is the fact that it excludes tobacco from the monopoly of the China National Tobacco Corporation. Of all the other products and things, tobacco is excluded from that. And the ambassador mentioned that if you can decrease tariffs, but if you can't distribute and advertise, then it is unlikely that you will have an impact of increasing imports.
So what is being done about that, about their monopoly on that which would allow us to import and compete against that national company?
And second, to phytosanitary regarding blue mold, what is being worked out? Clearly studies have showed thatshown that it is not a problem from a scientific standpoint but it does appear to be another protectionist measure on their part. So let me ask the ambassador and Secretary Glickman if you would address those two concerns.
Ambassador BARSHEFSKY. With respect to blue mold you are right, there is no scientific concern. There has been a review of the situation with the Chinese by USDA experts. China and USDA have now terminated that review. What that means in practical effect is that the Chinese recognize there is not a science-based problem.
Mr. FLETCHER. Does that mean that they are going to prohibit our import because of blue mold?
Ambassador BARSHEFSKY. That is our next step. That is to say, we have cured the scientific question and now Secretary Glickman and I are pressing the Chinese to make clear imports will now be allowed. And I think that Secretary Glickman had a conversation this morning
Secretary GLICKMAN. I spoke with the Chinese Ambassador to the United States this morning because they had written back to USDA basically saying they had suspended this joint research agreement forquite frankly that was good news because there is no reason to conduct it any longer because there is no scientific evidence. The Ambassador said thatI told him, I said this was an important issue, and we would like to get it resolved as quickly as possible.
Page 41 PREV PAGE TOP OF DOC He said it would be resolved by July. I said I would like to see if they could get it resolved earlier. But the clear impression from him, again without an absolute commitment is that it would be resolved in our favor. But I don't have anything hard for you right now on this. I can tell you this is a matter that we are pressing very hard.
Mr. FLETCHER. I would like to certainly urge your continued pressing on that. Second, the tobacco being excluded and it says that China has agreed that any entity would be able to import most products excluding tobacco into any part of China. We have increased our imports. And this administration with their policy on tobacco has hurt our farmers tremendously. I can understand if he says, well we don't want to protect the imported tobacco of China the way we do other commodities. But at the same time we have increased our imports here tremendously of foreign tobacco.
So I think to be consistent, it needs to provide our farmers the same protection that he is apparently going to provide the China National Tobacco Company. So what can you do, and what can we do as this thing proceeds to try to open up that market. Because it is very, very important for my folks back home.
Ambassador BARSHEFSKY. China would not agree to liberalize trading rights or distribution services for tobacco particularly cigarettes because there is the government's number one source of revenue. They took a similar position with respect to salt actually which islots of historic reasons for that in the case of salt. There may be other countries who are asking China to liberalize in these areas further. To the extent they are successful, we would get the benefits of that because under WTO rules, we get the best of what anyone else gets from China by way of concessions. But our bilateral negotiation with China is complete, and it will not be reopened at this juncture.
Mr. FLETCHER. Is there anything that we can do in regard ofand I don't know if there is any oversight or anything that can be done from your stand point as Ambassador and Trade Representative and maybe from Secretary Glickman and even the Secretary Daley as far as establishing something that could oversee the trade that we have with the tobacco and the imports that are going. Because I am very concerned and have been supportive of PNTR first from the human rights standpoint. I think it is going to be significant of changing them from the grass-roots level up. But we have got to do something to continue to open this up if our farmers are going to benefit at all back home.
Page 42 PREV PAGE TOP OF DOC Secretary GLICKMAN. I would just say, as you are probably aware, by law we are prohibited from promoting the export of tobacco overseas. We can't use our cooperator funds or market access.
Mr. FLETCHER. That was another concern I had too.
Secretary GLICKMAN. That is a statutory requirement. But I will have to tell you this: This is kind of a side answer to your question. My impression was from the Members of Congress who went with me on this trip to China is that it is very important for you and others who feel this way to go there after this agreement is passed and talk to them about this issue. Because I think that I can't promise how receptive they will be, but they need the contact.
Mr. FLETCHER. Thank you.
The CHAIRMAN. Mr. Etheridge.
Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me thank you for your leadership in holding this hearing, and for Mr. Stenholm, both of you, for your leadership in helping pull the agriculture community together, I think, on an issue that is, I think, important to agriculture, and, I think, important to the country. And also to thank our analysts who are here today because as others have said, they have done an excellent job.
Let me express to the panel as Mr. Fletcher has just done how our farmers really are hurting. All across the country but certainly those in some of the Southeast where we grow a lot of pork and cotton and poultry and substantial amount of tobacco, all those are under pressure right now. Those who grow tobacco, certainly in my State, they have lost half their allotment in the last 3 years, and the other commodities find themselves under a great deal of pressure. We hope this will provide benefits to them as well as our business community. Because there have been productions that we can see, hogs increase by $5 a head and tobacco production could increase if we could open that market by as much as 10 percent.
Page 43 PREV PAGE TOP OF DOC With that being said, let me raise the question a little bit differently than Mr. Fletcher did as it related to the Chinese market having kept us shut out as it relates to the issue on blue mold. I believe you indicated in your answer that there have been some response and that the hope is that that response indicates that as a result of the suspension of the testing, that was a good sign. Let me go a step further. If you feel comfortable on commenting on this because I think it is critical. I think that from my standpoint, I would like to have you comment ongiven the suspension of the testing, seems to me it is imperative now that they make the statement that therethey will no longer prohibit the market from being involved in shipment because just suspension of the testing it, they don't go to the next step. What is there to require them to go to the next step to allow that to be open, that market to be opened?
Secretary GLICKMAN. Let me say that I took it as actually positive news that they had communicated to APHIS.
Mr. ETHERIDGE. And so do I.
Secretary GLICKMAN. The impression is that this will be resolved this summer. And when I talked to the Ambassador this morning, he said there was going to be a resolution in some form by July. Now he didn't tell me in what form, and I don't think he really knows for sure. But this is one of these issues kind of like we had remember with the TCK issue; and through persistence, we were able to get it resolved. My judgment is this one will also get resolved, and we are pushing as hard as we can to get it resolved as quickly as possible.
Mr. ETHERIDGE. Mr. Secretary, to all three of you, I would encourage what we convey to the Ambassador and others sooner rather than later. The vote is next week not in July. And there are a lot of people would like to have it resolved before the vote.
Secretary GLICKMAN. We communicated that this morning.
Mr. ETHERIDGE. Thank you. Mr. Secretary, if you would, Secretary Daley on one other issue, I was in China in January and visited. I hope you will comment, if you can, very briefly on the amount of privatization that is taking place. Originally, if you wanted to do business this China, you had to have a joint venture. My understanding, that is changing. Now for a lot of companies who want to come in, it is no longer a requirement for a joint venture, you can actually go in and set up business.
Page 44 PREV PAGE TOP OF DOC Secretary DALEY. It is changing dramatically and quickly, Congressman. One of the things of this deal is the fact that the technology transfers that were required will no longer be required. Obviously, if companies want to do that on a contractual basis, they can do that. But that was one of the minimum complaints of the American companies for a very long time, and the commitment of the Chinese to stop that practice is extremely important for U.S. companies.
Ambassador BARSHEFSKY. If I might add just one moment to that. In addition, of course, to the extent U.S. business invests in China, and we did not negotiate any relaxation in China's investment rules since we want to focus on exports from the United States to China, but to the extent a company does invest in China, also prohibited will be export performance requirements as well as local content requirements. And what that means is a company that invested in China could import its imports from anywhere it wished. It wouldn't have to use Chinese imports. And it would not have to reexport its products back to the United States.
The CHAIRMAN. Mr. Ewing.
Mr. EWING. Thank you, Mr. Chairman. And to both Mr. Secretaries and to Madam Ambassador. Thank you for being here. I think you all know that I am a strong proponent of PNTR and have been working in that regard. But I have a couple of issues I wish that you would address for me and maybe for others who might be concerned. What is the projection of, if any, of any change in the balance of payment deficit if an agreement were to be improved? Change either up or down? Hopefully it would go down.
Ambassador BARSHEFSKY. Of course the aggregate imbalance is very, very large; and it would take quite a bit to shift it any appreciable extent. The Congressional Research Service has estimated that within 5 years, our exports to China under the agreement could well double. That would be a very significant increase in our export performance. I can't give you an estimate on their imports because, of course, the trade imbalance is exports versus imports, except to say that we don't make any market access concessions here. So we have no reason to expect any substantial increases in Chinese imports at all.
Page 45 PREV PAGE TOP OF DOC Some, the International Trade Commission believes our global trade deficit will go down but that our deficit with China might increase slightly as Taiwan, Hong Kong, Thailand investors shift a bit to China. But the difference is not very appreciable if it were to occur at all.
Mr. EWING. The situation, I think, is different with the North American Free Trade Agreement and what has happened with Mexico where our deficit has increased considerably, even though our exports have also increased. Was that because of the fact that we did have tariffs that kept out some of the Mexican products which were lowered in that agreement, but as you said we have already lowered them with China and they have been lower for some time?
Ambassador BARSHEFSKY. There are a variety of reasons why we have a trade imbalance with Mexico. Mostly it is macro-economic in nature having to do with exchange rates more than anything else. On the other hand, as you point out, our exports to Mexico have increased exponentially under the NAFTA. But it is also true to say that in the case of NAFTA, there were barriers to Mexican imports which we reduced and in many cases eliminated in order to achieve concessions on the part of Mexico to eliminate its barriers to U.S. goods going into Mexico. In the case of China, the situation is radically different. We don't lower any barriers of any type for any reason at all. All of the concessions are made by China.
Mr. EWING. A last question, and if this were to fail, what are the laws under whichI think if it failed and we did nothing, it is a worse situation for all of us. But say America wanted to be more protectionist, we wanted to raise some of our tariffs to the Chinese. What are the rules and the laws under which we trade in this world and could that be done?
Ambassador BARSHEFSKY. No, not without yet further substantial cost to the U.S. economy. Because under international rules, we, as well as our trading partners, do not have a right to increase tariffs. Part of the reason for that is the experience in both depression and war, during the 1930's and 1940's. One of the great exacerbating causes of the Depression in the United States was the enactment of the Smoot-Hawley tariff, which did exactly as you are suggesting, increased tariffs substantially. The net result of which, along with similar action by Europe, was to reduce global trade by 70 percent in the course of 3 years and to throw the United States and much of the rest of the world into depression. Raising tariffs is certainly not a sensible option or alternative for the United States whether against China or any other country. It is clearly not in our own economic interest to do so.
Page 46 PREV PAGE TOP OF DOC Mr. EWING. Madam Ambassador, I wasn't suggesting that.
I was asking the question regarding it.
The CHAIRMAN. The gentleman's time has expired.
Mr. BOSWELL. Thank you, Mr. Chairman. I could, I guess, yield to you a minute if you need it, Tom.
Mr. EWING. Thank you. I think she covered it. She smiled, and she said she knew.
Ambassador BARSHEFSKY. I indeed know.
Mr. BOSWELL. I just want you to note my willingness to do that. Based on our previous question not from you, but I could ask the question. How come the Republicans have less than half the people sponsoring this, but I am not going to ask that question. I don't really need to know to the panel. I don't need to know that.
I want to thank the chairman and ranking member for their hard work in this area and the encouragement that I have gotten to continue to both the panel and the leadership to press on. Because my State is very much in need of this. As you know very well, that nearly a third of our agriculture product is exported just about like it is the national level. And we want to continue down this route. We don't want to let this window of opportunity pass us by. And I think that it clearly could.
Just a comment. I have asked you all three different times what we do to assist in the process, and you have been very helpful. Ambassador, I would like to thank you. Just this week, I had a company that has a lot of product they can sell and are selling in China to thank us, but basically it comes back to you for your good negotiations last November that they can continue to stay in Iowa and Illinois and continue to purchase their product and stay competitive.
Page 47 PREV PAGE TOP OF DOC Otherwise they are going to be faced with dilemma of what to do because they couldn't pass up that market. And now they feel very good because of the negotiation that you did that they can stay at home and continue their manufacturing and sell their product. And I would guess there is a lot of little stories that could be told. As I asked committees folks, I said, I wish you would have come forth sooner. I would like to have known about that early on that this was something that was really worrying you. So we appreciate that very, very much. And continue to appreciate the hard work that goes on.
I thank both Secretaries for giving me a late opportunity to go with you on the tour. I want to go some time. But I, due to schedule, could not; and will continue to look forward to that opportunity. Appreciate your sincere, hard work. And thank you, Mr. Chairman, for what you are doing to promote this; and I hope that we can bring this to a successful resolution on the date that has been set. Thank you.
Secretary DALEY. If I could make a comment about what the Congressman said about his intent to go. I would strongly reiterate what Secretary Glickman has said, I think it is vitally important for this long-term relationship and for the implementation of this agreement, if it is to pass, that the Members of Congress go to China, engage the leadership, very frank discussions as you will do. I know, that as you go around the world, about the difficulties and how we view this relationship and the needs to implement this agreement if it is to pass.
The CHAIRMAN. Mr. Gutknecht.
Mr. GUTKNECHT. Thank you, Mr. Chairman. First a question. Who ultimately is responsible for corralling and counting the votes?
Secretary DALEY. It is a combination, quite frankly, of all of us. And, of course, the main function will fall to theon the Republican side to the leadership and on the Democratic side to the number of Members including the Congressman Stenholm and Congressman Matsui, a whole group of supporters, who are doing a whip operation.
Page 48 PREV PAGE TOP OF DOC Mr. GUTKNECHT. But is anyone in the administration responsible? I mean if no one is responsibleif everybody is responsible, no one is responsible. It seems to me that if this is what Mr. Podesta that described to us a few weeks ago as a single most important vote of the second Clinton administration, second term, then someone ought to be responsible. Who is that.
Secretary DALEY. The President asked myself and Steve Ricchetti, the deputy chief of staff, to coordinate this administration effort. So I would say that the two of us are responsible.
Mr. GUTKNECHT. OK. My impression is and I think speaking to this committee, I think I am accurate, the overwhelming majority of members on which committee are ultimately going to vote for this. And the reason has been pretty well articulated. In fact, I think back home there are really only two groups who seem to care much about this issue at all and that is unfortunately and it happens to be the farmers and many business people.
They understand how important this is. But the general public, I must tell you, at least based on our phone calls and our letters and discussions and town hall meetings, really doesn't care much about it. They don't care much before it. They are not really wired into this debate.
I just have a suggestion, I have made this before and I hadreally think, in fact, it is almost too late now. My concern is that we are going tothis thing could go the same way that fast track did. The reason I believe that could happen is because I see the same kind of strategy sort of unraveling. And that is that there is an attempt here to get this thing passed on the cheap. And I really think that is a disservice to you, because I think all three of you have done a marvelous job. But I think at some point this issue has to be taken to the American people.
And I really would love to see the President give an Oval Office speech to the American people and explain and frame this debate the way I think it should be framed. Because you know all of the arguments against, and there are a lot of legitimate arguments about human rights, about what they do to religious leaders, what is happening with the Communist Army over there, a lot of things. And most of that is accurate. And I wouldn't dispute that. But at the end of the day, this is really a debate between those who believe that America can compete in a world marketplace and those who believe we cannot.
Page 49 PREV PAGE TOP OF DOC And I think the President ought to say that he is not prepared to give up on American workers, American entrepreneurs, American farmers because ultimately we won't win every fight. But we will compete anywhere in the world. And unfortunately, to this point no one has made that argument to the American people. I think it is great that you come up to Capitol Hill. I think it is wonderful that the President has now started to travel around the country.
But still no one has framed this debate. I think the logic of this argument, when you talk about debates, there is logos, ethos, pathos, all those things work together. I think the logic and the facts clearly support us passing this overwhelmingly. This thing should pass by 350 votes.
But, unless the debate is framed properly and it is done by the President and the Vice President, I think we are in danger of this going the same way that fast track went. Where currently the published reports are there are something like 90 Republicans who have committed for it, 37 or 39 Democrats. And I think if the strategy is to pass this thing with 218 votes, I think that is a very dangerous strategy. If you want to comment on that, you can. But please take that back to the folks down at the other end of Pennsylvania Avenue.
Secretary DALEY. If I could respond. First of all, your suggestion on a Presidential address has been made by others; and it is something that we are seriously considering. There is no one, no one, and I have spent a substantial amount of time since the President asked myself and Mr. Riccheti to help coordinate this. No one has spent more time on an issue, there has been no issue the President, in my opinion, in the 3 years I have been here, spent more time on an issue as he has spent on this, speeches, events around the country, in the White House, the President, the former Presidents and all the former Secretaries last week. He has traveled to Northern Virginia, he has gone to Ohio, he has gone to Minnesota, he is spoken about the need to pass PNTR in Davos, he has tried all sorts of ways. Part of the problem is the Americanthe media oftentimes does not sent the message out around the country as clearly and as consistently.
Page 50 PREV PAGE TOP OF DOC And there is ait has been very frustrating to be frank with you. Until the last couple of days or last week or two since the politics of this fight have become dominant, the focus hasn't been on this issue. And it also dovetailsyour comments dovetail in many of the things that we have been concerned about and that is the lack of engagement by politicians and businesses with their employees, with their communities about the positives and negatives of trade and the challenges of globalization that are going on today.
But the President believe me, has spent an incredible, no one, not one single person on either side in this political game has spent more time on an issue than President Clinton has. And the advice of yours to possibly do a radio address we hopewe want to see more Members back in their districts engaging this, fighting for this, raising the profile of it back home, not necessarily in this town. Thank you.
The CHAIRMAN. Mr. Phelps.
Mr. PHELPS. Thank you, Mr. Chairman. I want to compliment you and the Congressman Stenholm for your leadership and providing this opportunity to meet with three outstanding people that I have been so impressed with presentation. As a new Member, quite frankly, I know that your sincerity is in this and made it so much more difficult for me to reach my negative decision. On your behalf, I am sure you are disappointed. I, quite frankly, wanted to take the role of not being challenging and adversarial because of the delicate matter that this holds and the context of which my district splits pretty close down the middle with this. It is very tough.
Let me ask this question and maybe Charlie Stenholm's remarks, maybe I am unclear, do we consider, and I think this reflects a question in the general public's mind, that I have been able to pick up, do we consider ourselves a sanction country against China right now with trade?
When we say we are moving to sanctions, want to from Cuba, do we consider it the same posture with China as we do with Cuba right now? We don't have sanctions against China.
Page 51 PREV PAGE TOP OF DOC Ambassador BARSHEFSKY. No, we have no sanctions against China.
Mr. PHELPS. Now see the general public, that is one thing we are dealing with here. Because everybody is framing the same argument is that we ought to remove sanctions from Cuba. I am a co-sponsor, I want to. All the other sanctions. So they get that confused. They think that we are lifting sanctions, which could be a good argument for what you are trying to accomplish, but I am just telling you what the confusion is out there in people that don't follow all the intricate detail.
Secretary GLICKMAN. The only thing is while we don't technically sanction, we grant PNTR to virtually every country in the world except those that are on our sanction list. I believe I am correct.
Mr. PHELPS. But it has not been a matter of congressional vote.
Ambassador BARSHEFSKY. No.
Mr. PHELPS. The other thing is would you, in your opinion, say since we have been dealing with human rights and trade policies with China that evidently you have an optimistic view that we have gained strides in winning them to our way of life is that. What I understand?
Secretary DALEY. I would say, Congressman, that there have been changes in China which are positive. Here's an example. President Carter, last week in the White House, spoke of a project that the Carter Center is doing in China. They have allowed, at the local level there, to be elections. And the Carter Center is working with a number of local government entities in China to establish elections. So there is progress going on. No question about it. We are very vigilant. As Secretary Albright did in Geneva earlier in the spring when we condemned China for human rights violations, we will continue to do that. But there is progress. Those who follow China who have traveled to China for 10, 15 years are the most adamant and, I not being one, are the most who are most adamant about the changes they see in the daily lives of the average Chinese.
Page 52 PREV PAGE TOP OF DOC Mr. PHELPS. So that is under our present engagement with China that this is taking place even though we
[11:40 a.m. disturbance in the audience.]
The CHAIRMAN. The sitting of the committee will resume.
And our next panel of witnesses has taken the table: Mr. Bob Stallman, Columbus, TX, president of American Farm Bureau Federation; Mr. Dana Hauck, Delphos, KS, Pike Trail Cattle Company on behalf of the National Cattlemen's Beef Association; Mr. Terry Detrick, Ames, OK, who is president of the National Association of Wheat Growers; Mr. Paul Leavens from Ventura, CA, president of Leavens Ranches; Mr. Michael Yost, Murdock, MN, chairman of American Soybean Association; Mr. Lynn Jensen, Lake Preston, SD, president of the National Corn Growers Association; and Mr. John Hardin, Jr., from Danville, IN, who is past national president of the National Pork Producers Council.
Mr. Stallman, we will start with you and then take the testimony in the order of introduction. Thank you.
STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU FEDERATION, COLUMBUS, TX
Mr. STALLMAN. Thank you, Mr. Chairman, and good afternoon, members of the committee. It is a pleasure to be here this afternoon, a little more so than it was right before lunch.
I am president of the American Farm Bureau Federation. I am also a rice farmer and cattle rancher in southeast Texas. AFBF represents more than 4.9 million member families in all 50 States and Puerto Rico. Our members produce every type of farm commodity grown in America and depend on access to customers around the world for the sale of over one-third of our production.
Page 53 PREV PAGE TOP OF DOC I do appreciate the opportunity to speak before you today on the important subject of the completed U.S.-China bilateral trade agreement and China's accession into the World Trade Organization. Farm Bureau has long supported China's entry into the WTO on a commercially meaningful basis, and that time has arrived.
This agreement is good for the American people. Having China, the largest emerging economy in the world, in the WTO will expand trade among all members, leading to increased global economic prosperity. Having China in the WTO will advance the rule of law within China and, more importantly, will bind China to the rules of commercial law represented by the WTO.
For China, this agreement will undoubtedly lead to increased economic and political freedoms.
We urge Congress to grant permanent normal trading relations for China when those votes come up next week. There a host of reasons to do so, but none better than improving the daily lives of the American and Chinese people.
This agreement is good for American farmers and ranchers. China is broadly recognized as the most important growth market for U.S. agricultural exports. The Department of Agriculture estimates that China's admission to the WTO could lead to an increase of $1.7 billion in sales of agricultural products within 1 year, just about doubling our current exports to that large country. In addition, U.S. exports to the Asian region as a whole are expected to increase in the next few years as a result of China's accession to the WTO. This is likely to occur as Chinese consumption levels increase, domestic production patterns skew more to global prices, China ceases to employ export subsidies, and there is a commensurate decline in Chinese agricultural exports to the Asian region. This agreement may be with China, but it will have impacts far beyond the Chinese borders.
China has agreed to several major concessions regarding agriculture. Many of the commitments go beyond what is currently mandated by the WTO. One, China will begin to reduce tariffs immediately upon accession from an average of over 31 percent to an average of 15 percent. All tariff reductions are bound and will be fully implemented by 2004.
Page 54 PREV PAGE TOP OF DOC Two, China has agreed to establish sizable tariff rate quotas for bulk commodities such as wheat, corn, rice and cotton.
Three, China has agreed that sanitary and phytosanitary disputes should and will be settled on a scientific basis.
Four, China has committed to eliminate use of export subsidies. This will be especially beneficial to U.S. producers as we export to third-country markets.
Five, China has agreed to increase trading rights for the private sector and will phase out the State trading of soy oil.
Even the more conservative estimates point to these commitments as placing China in the top five of U.S. agricultural export markets by the close of the decade.
I would like to also mention the commitments that the United States has retained or strengthened as a result of this agreement to protect the U.S. market from unfair dumping of products by the Chinese. This agreement ensures that American farmers and ranchers will have strong protections against unfair trading practices, including dumping. This agreement also ensures that American farmers and ranchers will have substantial protection against import surges of Chinese products. This mechanism, labeled the Product-Specific Safeguard, will address increased imports that cause or threaten to cause market disruption to any U.S. industry or sector.
The Chinese have offered American agriculture an historic opportunity which could greatly enhance our export potential at a time when it is drastically needed out in the countryside. It can positively impact farm income in the United States when the agreement goes into effect. China has also offered the equivalent of this bilateral negotiation to many of our competitors. China will join the WTO, and our competitors will have the market to themselves unless Congress acts quickly to grant China permanent normal trading relations.
The vote for permanent normal trade relations is about trade. It is a vote for continuing the U.S. economic expansion and hopefully having that expansion flow into the U.S. agricultural sector. Farmers and ranchers are already hampered in developing export markets by our own unilateral sanctions and the unfair trading practices of other competing nations. We must ensure that we do not unilaterally disengage from this historic opportunity for American farmers and ranchers. We need to pass PNTR for China.
Page 55 PREV PAGE TOP OF DOC I will stand for questions Mr. Chairman.
[The prepared statement of Mr. Stallman appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you.
STATEMENT OF DANA R. HAUCK, PIKE TRAIL CATTLE COMPANY, NATIONAL CATTLEMEN'S BEEF ASSOCIATION, DELPHOS, KS
Mr. HAUCK. Thank you, Mr. Chairman. I would also like to thank Mr. Stenholm and other members of the committee for holding this hearing to discuss permanent normal trade relations with China.
Approval of PNTR, I believe, will be one of the benchmark trade and international relations votes of our generation. On behalf of the 250,000 cattlemen and women that NCBA represents, I commend your leadership and continuing efforts to provide new marketing opportunities for American agricultural producers as well as our industry partners.
I am currently chairman of NCBA International Markets Committee and a stocker operator from Delphos, Kansas.
In late 1999, cattle producers received encouraging signs that for the first time in 2 decades, U.S. beef demand has increased. Beef exports now account for more than 12 percent of the value of wholesale beef sales and 10 percent on a tonnage basis.
As an industry we have worked to expand exports of beef and beef variety meets from approximately $500 million 20 years ago to approximately $3.2 billion today. More than a six-fold increase. While this is encouraging, this progress merely highlights the importance of taking advantage of every opportunity to move beef into international trade. Implementation of the agreement that has been negotiated with China is critical to that end.
Page 56 PREV PAGE TOP OF DOC Despite the overwhelming evidence that the international market must be the focal point for market growth and economic vitality, there is an increased questioning at State and local levels about the impacts of trade on individual agricultural producers and increased skepticism about the willingness of Federal officials to aggressively negotiate agreements favoring U.S. interests.
This is why we particularly want to thank you and commend you and the committee for the leadership and hard work that resulted in the carousel strategy being included in legislation that recently passed the House and Senate and is to be signed tomorrow. This kind of win helps address the concerns that are fueling the protectionist feelings in the countryside.
We firmly and strongly believe that approval of PNTR for China will even more dramatically demonstrate that Congress and the administration are moving toward unity and cooperation in dealing with international trade to the benefit of U.S. producers.
With a population of 1.2 billion and nearly 200 million consumers with middle-class incomes, China is a consumer market with enormous potential. For comparison, the North American Free Trade Agreement impacted the populations of Canada, Mexico and the United States with a combined population of approximately 400 million. The primary benefit of NAFTA for the U.S. beef industry was elimination of tariffs in the Mexican market. Mexico has a population of just less than 100 million, and U.S. beef sales to Mexico during 1999 totaled nearly $513 million.
Sales of U.S. beef and beef variety meat to the People's Republic of China and Hong Kong during 1999 totaled $60.7 million, with $9.1 million directly sold to China. By comparison, 1999 sales to other primary Asian markets included nearly $1 3/4 billion to Japan and $345 1/2 million to Korea.
Based on the U.S. success in expanding beef demand in other Asian markets, the long-term potential for increased sales of U.S. beef to China is excellent. Last April China agreed to recognize USDA Food Safety Inspection Service inspection of meat exported to China. FSIS began issuing export certificates in early December following final signature of the China SPS agreement as a side deal in Seattle, and China has lived up to this agreement, and U.S. beef and pork have been shipped to China using these certificates, demonstrating that the new system is now operational.
Page 57 PREV PAGE TOP OF DOC It is critical for Congress to now vote aye on PNTR and grant U.S. agriculture access to the vast potential of this huge international market. While the Seattle agreement provides improved access, tariff reductions and elimination of State trading entities, we understand that China has conditional implementation of this agreement with them on approval of PNTR. If China joins the WTO, and PNTR is not approved, the rest of the world will gain access to the Chinese market under the same conditions that are available to U.S. producers in this agreement, but U.S. producers will not be able to participate.
Congress has approved annual renewal of PNTR and formerly most favored nation every year since 1979, and in recent years with increasingly wider margins. It is now critical that Congress do the right thing for the country and cast a favorable vote for PNTR. The United States must reestablish its commitment to opening international markets soon or risk allowing protectionist elements to set the agenda by default.
NCBA appreciates the initiatives that have been undertaken to gain access to a level playing field in international markets and to resolve lingering issues that restrict the ability of the U.S. beef industry to offer its products to international consumers. We look forward to a successful vote granting PNTR for China and accession to China into the WTO. And I would like to thank you again for the opportunity to present this information.
[The prepared statement of Mr. Hauck appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Detrick.
STATEMENT OF TERRY DETRICK, PRESIDENT, NATIONAL ASSOCIATION OF WHEAT GROWERS, AMES, OK
Mr. DETRICK. Thank you, Chairman Combest, and we first of all would like to thank you for all of your efforts and thank this committee for the hearings and the opportunity that you have provided us to come before you and present this information.
Page 58 PREV PAGE TOP OF DOC I am Terry Detrick, and I am a wheat producer from Oklahoma and president of the National Association of Wheat Growers. I thank you for your efforts on behalf of American agriculture, and I am extremely pleased to be invited to speak today on behalf of the United States wheat producers in a united effort. I speak on behalf of the National Association of Wheat Growers, the U.S. Wheat Associates, and the Wheat Export Trade Education Committee. By speaking for a unified industry, I hope to impress upon this committee right at the beginning how importing granting PNTR is to the entire United States wheat industry and the U.S. economy.
We producers across the United States strongly support China's entry into the World Trade Organization and the immediate approval of permanent normal trade relation status for China. Farmers and ranchers representing almost every State and every sector of U.S. agriculture have parked their tractors and have come to town this week during one of the busiest seasons of the year to impress upon Congress the importance of this issue for American agriculture.
One of the most recent obvious advantages to passage of PNTR and WTO accession for China has been demonstrated by resolving the TCK issue regarding wheat out of the PNW. The United States and China together agree to let science rather than political or other considerations determine the terms of trade between our two countries.
Without China in the WTO, we will have no formal way for resolving future trade disputes. Our agreement with China also includes important safeguards such as an antisurge protection clause, which we do not have with any other country.
In accordance with this agreement, China will liberalize its purchase of agriculture commodities. We expect China to once again become a major importer of U.S. wheat. We base our expectations on economic developments and production constraints in China. China has a huge and growing population, burgeoning coastal cities, growing demand, declining stocks, stagnant acreage and reduced domestic price supports. The import demand is projected to focus on wheat with qualities needed to blend their poorer quality wheat to make for better consumer products for the Chinese market. We anticipate that over a period of a few years, increased China trade will have a significant impact on the world's supply and demand situation that would be positive for prices.
Page 59 PREV PAGE TOP OF DOC To put it plainly, nothing else on the horizon could have such a big impact for the short term on U.S. wheat exports and the economic stability of wheat producers or hold such potential for expanded growth in the future.
Various people, including Ambassador Barshefsky, have stated that it would indeed be ironic if the United States, after over 14 years of negotiations to include China in a rules-based world trading system, would decide not to grant them PNTR. By doing so, it would be allowing our competitors to have the benefits of China opening its markets, the most dynamic and rapidly growing in the world. The U.S. leverage and any means of influencing China under the WTO rules system would be lost, and the United States would again lose more of its leadership in the trade arena. This would amount to another self-imposed unilateral sanction, cutting the agriculture community out of another major world market to the benefit of our competitors.
By granting PNTR, Congress will be giving nothing away to China. At the same time Congress will be fulfilling one of the unmet promises of the 1996 freedom to farm bill, that of continuing to provide export markets for U.S. farmers and ranchers.
Our trade deficit with China has ballooned, as reported by the U.S. Department of Commerce. Agriculture is generally counted on to contribute positively towards the trade deficit; however, exports have been reduced from $61.8 billion in 1998 to $57.5 billion in 1999. The only way to counter this trend is to open markets throughout the world and facilitate the exportation of U.S. products. Bulk commodities such as wheat can have a substantial positive impact on the trade balance as demand for high-quality foods continues to rise. The Chinese economy is poised to reach new heights, and as their middle class swells, it is imperative for U.S. producers to have fair and unfettered access to this market.
My hope here today is that by being able to speak for a unified industry, I have impressed upon this committee how important granting PNTR is to the entire U.S. wheat industry and the U.S. economy. This is an opportunity that we cannot afford to let slip away. Thank you again for the chance to appear here today.
Page 60 PREV PAGE TOP OF DOC [The prepared statement of Mr. Detrick appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Leavens.
STATEMENT OF PAUL LEAVENS, PRESIDENT, LEAVENS RANCHES, VENTURA, CA
Mr. LEAVENS. Chairman Combest, members of the committee, I am Paul Leavens. My family and I operate citrus ranches in Ventura and Monterey Counties in California. These ranches, some of them have been in our family since 1910. We produce lemons, oranges, grapefruits and avocados. We market our fresh citrus fruit both domestically and in export markets through our marketing cooperative, Sunkist Growers, and our avocados through Calavo.
I would like to thank the committee for holding this truly exciting meeting this morning, and it was very enlightening. The hearing on the subject of agriculture trade between the United States and the Peoples Republic of China, I think, was also very interesting. I am sorry the rest of your committee was scared away.
Market access for our citrus fruit exports to the huge and potentially profitable consumer markets of China has long been a goal for both our industry and our Government. Last spring those efforts finally reached a successful conclusion with the achievement of a citrus market access agreement including acceptance by China of specific science-based work plans and phytosanitary protocols for each of the four production States, Arizona, California, Florida, and Texas.
The phytosanitary agreement and the implementing work plans and protocols are a model for commodity trade agreements.
Page 61 PREV PAGE TOP OF DOC In keeping with the obligation of that agreement, Chinese phytosanitary inspectors conducted an inspection tour of U.S. citrus production, packing and shipping facilities in California, Arizona, Florida and Texas, and concluded that all the phytosanitary requirements needed for U.S. producers to export to China indeed have been met. In fact, they were very impressed with our clean orchards and our sanitary packing houses when they were here when we visited with them.
On March 22, China officially opened its markets to U.S. citrus fruit exports. Through our marketing cooperative, Sunkist Growers, we began shipping fruit directly to China 2 days later. This marked the first direct shipment to China since before World War II.
We know fresh citrus fruit is very popular with consumers in China. Our cooperative annually exports upwards of 7 million 40-pound cartons of fruit to Hong Kong with an approximate sales value of $83 million. I know that is not much here in Congress, but it is a lot to us.
This export market opportunity is enhanced by the terms of the United States-China trade agreement related to China's accession to the WTO. The benefits of that agreement accrue exclusively to U.S. interests, including the interests of the U.S. citrus industry. For example, China has agreed to dramatically reduce its tariff on citrus imports from the United States from 40 percent down to 12 percent in the next 4 years. No quota or volume limits were imposed, and we will be able to export as much fruit as the market will accommodate. However, for us to be able to benefit from these hard-fought trade concessions, Congress must extend permanent normal trade relations to China, and China must successfully gain membership in the WTO. If that is denied, all bets are off.
We have already lost Europe's export market due to extremely high tariffs, and we are just frozen out there because of that. In my view, it is not an overstatement to say China has potential to become the single most important U.S. agricultural export market.
Page 62 PREV PAGE TOP OF DOC Today China has a consumer market with disposable income of over 200 million people and a middle class projected to grow by an additional 170 million over the next 5 years. But those opportunities and all the advantages to U.S. interests achieved in recent trade negotiations will be denied American exporters if China is denied permanent NTR in its trading relationship with the United States. Furthermore, PNTR maximizes the opportunity for expanding commercial and cultural relationships between America and the PRC.
I urge Congress to extend China the same normal trade relations policy granted on a permanent basis to 133 WTO country trading partners. To our advantage, WTO membership will, furthermore, obligate China to adhere to the same rules-based system of international trade and commerce demanded of all WTO member countries including the United States.
Thank you for this opportunity to address this matter of great importance and concern to me and my fellow 6,500 citrus farmer members of our cooperative in Arizona, California, as well as those in the other States that grow citrus.
[The prepared statement of Mr. Leavens appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Yost.
STATEMENT OF MICHAEL YOST, CHAIRMAN, AMERICAN SOYBEAN ASSOCIATION, MURDOCK, MN
Mr. YOST. Mr. Chairman, members of the committee, I am a soybean and corn producer from Murdock, Minnesota. I currently serve as chairman of the American Soybean Association. I am also testifying today as chairman of the American Oilseed Coalition, or the ALC, an industry group that represents the National Cottonseed Products Association, the National Oilseed Processors Association, the National Sunflower Association and the U.S. Canola Association. I want to thank you on behalf of all these groups for holding this very important hearing.
Page 63 PREV PAGE TOP OF DOC The potential impact of increased Chinese imports of U.S. oilseeds and their products on producer income has been clearly demonstrated in recent years. In 1996 and 1997, China's purchases of U.S. soybeans, soybean meal and soybean oil more than tripled from $244 million in 1995 to an average of $939 million. The average price received by U.S. soybean farmers rose to $7.40 per bushel for the 1996 crop and $6.35 per bushel for the 1997 crop.
In 1998 and 1999, when economic problems around the world stymied demand, and as global output of oilseeds increased, it was continued exports to China that helped temper the price fall in the current marketing year. China is expected to pass Japan as the largest importer of U.S. soybeans with total purchases of 140 million bushels. In fact, oilseeds and oilseed products are now the largest U.S. agricultural export to China.
Even more impressive than current imports, however, is China's potential for increased imports of U.S. oilseeds, oilseed products and livestock products. Per capita Chinese oil consumption is only 19.4 pounds, compared to 66 pounds in Hong Kong. Doubling this level would increase world trade in vegetable oils by 11.4 million metric tons, or 35 percent. Similarly, China's per capita consumption of soybean meal is only 17.8 pounds annually, compared to 174 pounds in Taiwan. If consumption rose to one-half of Taiwan's level, China would require soybean meal or its equivalent to 1.85 billion bushels of soybeans, about two-thirds of the annual U.S. production.
With U.S. oilseed prices and producer income so closely tied to China's import policies, negotiation of advantageous terms for trade and oilseeds and oilseed products as a condition of China's accession to the WTO has been a critical goal for our industry. In 1994, ASA conditioned its support for the Uruguay Round Agreement on the commitment from the administration that oilseeds and oilseed products would be a key priority in these negotiations.
Let me briefly review the terms of the accession agreement negotiated by the administration. China has agreed to bind its currently applied duties on soybeans and soybean meal at 3 and 5 percent respectively. For soybean oil the in-quota tariff will be reduced to 9 percent from 13 percent, and the TRQ increased from 1.7 million metric tons in 2001 to 3.2 million tons in 2005.
Page 64 PREV PAGE TOP OF DOC The present monopoly on the imports of soybean oil controlled by State trading enterprises would also be eliminated by 2006. In addition, soybeans are assured the tariff levels will not exceed those of competitor oilseed crops.
By reducing and binding tariff levels, these terms ensure that the U.S. producers and processors will have access to the Chinese market on a predictable basis. This will prevent any arbitrary decision to suddenly raise duties or impose quotas, which could and does happen on the present regime. In addition, these terms represent the ''going-in'' position for the next round of the WTO negotiations. We may find China to be a key ally in the WTO on issues such as export subsidies, reform of state trading enterprises and protecting trade in the products of agricultural biotechnology.
Beyond these industry-specific terms, China has agreed to conform its trading system to WTO policies requiring greater transparency, to broaden the application of its value-added tax regime to domestic as well as imported product, and to abstain from subsidization of agriculture exports. We consider this overall package to be very beneficial to our industry.
Failure to act positively on PNTR would cause irreparable harm to U.S. oilseed producers and processors by turning the most promising market for oilseeds and oilseed products in the 21st century over to our competitors in the European Union, Canada, South America and Southeast Asia. U.S. producers and processors would lose out while our competitors would not hesitate to seize the trade advantage, regardless of China's domestic policies or international behavior.
There is no question that China's record on labor standards and human rights, its foreign policy affecting Taiwan and sales of military equipment must continue to be a U.S. concern. There is also no question that denying PNTR will not address any of these concerns and could even harden these policies. It also would lock in the inequitable status quo on America's overall trade balance with China, lock U.S. agriculture out of the expanded market access negotiated by our Government, and hurt millions of U.S. farmers and workers.
Page 65 PREV PAGE TOP OF DOC I cannot state strongly enough the consequences of a negative vote of PNTR. Congress would send an unredeemable message to U.S. agriculture and to our foreign customers and competitors that we will not compete abroad, that we will not look to the marketplaces as an answer to low prices, and that we will increasingly be dependent upon the Federal Government to support farmers and ranchers in the future. This is not a future any of us want. Thank you, Mr. Chairman.
[The prepared statement of Mr. Yost appears at the conclusion of the hearing.]
The CHAIRMAN. Mr. Jensen.
STATEMENT OF LYNN JENSEN, PRESIDENT, NATIONAL CORN GROWERS ASSOCIATION, LAKE PRESTON, SD
Mr. JENSEN. Mr. Chairman and members of the committee, my name is Lynn Jensen. I farm near Lake Preston, South Dakota, and I have a grain and livestock operation, and I currently serve as president of the National Corn Growers Association.
I am happy to be here today to discuss the tremendous potential of the emerging Chinese market. The People's Republic of China, with a population estimated more than 1.3 billion, is considered the most important growth market for U.S. agriculture in the 21st century. Economic expansion in China will contribute to increased consumption of food and fiber. It also creates export opportunities for U.S. farmers, but only if Congress eliminates the sanctions that treat China differently than other trading partners.
Last November, China and the United States completed bilateral negotiations for China's admission into the WTO. China agreed to one-way trade concessions, creating new market opportunities for corn exports. In return, the United States agreed to grant China permanent normal trade relations. As a farmer from the Midwest, it is really difficult to see how Congress can say no to a deal like this.
Page 66 PREV PAGE TOP OF DOC The agreement with China was significantly reduce the border restrictions that have kept U.S. farmers from fully benefiting from our comparative advantage in agriculture production. China agreed to cut tariffs by more than half on priority agriculture products and to end both a system of discriminatory licensing and its import bans for bulk commodities.
As a corn and soybean farmer, I expect to benefit from the entire trade agreement. Increasing exports of meat, poultry and dairy products will translate into increased domestic demand for grain and oilseeds.
China is the second largest corn producer in the world; the second, I am proud to say, to the United States. Last year Chinese farmers produced more than 5 billion bushels of corn of which they will export approximately 350 million bushels. Five years ago China imported 130 million bushels of U.S. corn. What happened in China is an example of how a WTO member can modify its domestic farm policy in ways that affect producers around the world.
In late 1994, China instituted a policy designed to boost grain production to assure food self-sufficiency. The policy generated a surplus of corn, wheat and rice, as well as unexpected Government expenses. The state-run grain trading enterprises closely controls the trade and marketing of this grain. In an attempt to reduce storage costs, China has aggressively exported surplus corn at prices below the price paid to Chinese farmers. These subsidized grain exports have displaced U.S. exports.
The agreement negotiated last year requires China to cap and reduce trade-distorting domestic subsidies. Further, China is committed to establish a tariff rate quota, or a TRQ, for corn. Imports within the quota will be subject to a minimal 1 percent duty. In the first year the TRQ will apply to 177 million bushels of corn, or approximately 5 percent of China's annual corn consumption. By the fourth year, China has agreed to allow imports of 283 million bushels of corn at the nominal tariff. That is equal to roughly two-thirds of my entire State's total corn production. If U.S. farmers capture a significant share of the corn TRQ, we can easily exceed the export levels of 5 years ago.
Page 67 PREV PAGE TOP OF DOC To assure the quota is used, a portion will be available to the private sector. In the first year of the agreement, the private sector share will be approximately 25 percent of the corn TRQ. This share will increase to 40 percent by the fourth year of the agreement. Additionally, any quota not used by the end of October will be released for use by the private sector. The introduction of private trade will ensure increased opportunities for U.S. corn exports.
Perhaps the most exciting provision for U.S. corn farmers is China's commitment to eliminate export subsidies. As discussed above, subsidized Chinese corn exports have displaced U.S. corn exports. When China eliminates export subsidies, U.S. corn can and will be very competitive in markets that have been buying subsidized Chinese corn.
Quite simply, this is a great one-way deal for U.S. agriculture. We gain access to the largest market in the world. We give up nothing in return. We may not know the magnitude of this marketing-opening opportunity for several years, but what is abundantly clear is that U.S. farmers will only benefit from this trade agreement if Congress approves permanent normal trade relations with China. As a very wise legislator once said, a vote against PNTR is a vote against agriculture.
I appreciate the opportunity to present the views of the National Corn Growers Association. Thank you.
[The prepared statement of Mr. Jensen appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you. I believe, Mr. Hardin, we can get your testimony in before we have to go cast a vote.
Mr. HARDIN. With your approval I will submit my statement for the record and make summary comments.
The CHAIRMAN. All statements will be accepted for the record.
Page 68 PREV PAGE TOP OF DOC
STATEMENT OF JOHN HARDIN, JR., PAST NATIONAL PRESIDENT, NATIONAL PORK PRODUCERS COUNCIL, DANVILLE, INDIANA
Mr. HARDIN. Thank you very much for the opportunity, and I appreciate the members of the committee staying with us through this difficult day.
Passage of permanent normal trade relations with China is vitally important to U.S. pork producers. As co-chair of the Agriculture Coalition for U.S.-China Trade, we are working together with over 80 organizations that represent farmers and ranchers, food and agricultural companies, and producers of the tools of agricultural production from all 50 States.
Most sectors of U.S. agriculture have suffered from very low prices during the last few years. Pork producers just came through a period with the lowest hog prices ever in real terms. As President Clinton, Secretary Glickman and members of this committee have pointed out, U.S. agriculture is missing out on the longest period of economic growth and prosperity in our Nation's history.
For U.S. agriculture, the importance of getting China quickly into the WTO cannot be overstated. With respect to pork, the package negotiated by the United States with China has the potential, if fully and fairly implemented, to transform China into the single greatest export opportunity for U.S. pork producers. Under the terms of the United States-China WTO agreement, China will, upon WTO accession, phase out its restrictive import and distribution procedures, lower tariffs on pork, and cut subsidies. Under the terms of a separate bilateral sanitary agreement negotiated with the United States, China agreed to accept pork from any USDA-approved packing plant.
China has a very high per capita consumption of pork, given its level of personal income. Simply put, people in China love to eat pork. One of the most striking things about the Chinese consumption habits is that the parts of the animal least favored by U.S. consumers are those which are most in demand by the Chinese. The internal and reproductive organs of pigs, what we refer to as offals or variety meats, sell for more than loin and ham. This is why most of the pork imports smuggled into China today are feet, stomach, kidneys, heart, tongues, and ears and the like.
Page 69 PREV PAGE TOP OF DOC The important point here is that the United States can add value to the existing animal carcass without increasing muscle meat prices for U.S. consumers.
According to Professor Dermot Hayes, an Iowa State economist, the Chinese market, if fully opened to U.S. pork variety meats, would add about $5 a head to each of the 100 million hogs we slaughter each year. And, Mr. Chairman, that doesn't require an offset to get this money in pork producers' pockets.
Above all, this agreement is comprehensive, it is enforceable, and it leaves the playing field in our favor. If the United States fails to provide permanent normal trade status to China, China would have the right to withhold the benefits of key WTO commitments from the United States. In such case, the United States will be greatly disadvantaged as our trading partners enjoy the benefits of China's entry into the WTO, while we are left at the outside looking in.
Since President Nixon opened the lines of communication between the United States and China, there have been a lot of positive changes there. Pork producers don't deny that there remain serious problems. There are some very serious problems. However, we believe that continued engagements with China through trade will help spread American values and build democracy. We won the Cold War. There is no Warsaw Pact or COMECOM for China to join. China seeks to join a post-World War II international system that was largely designed and is still dominated by the United States. Either we engage them and continue to act as a positive agent for change, or we slam the door on them because their metamorphosis is not yet complete.
If Congress votes no on PNTR, it undermines Premier Zhu Rongji and the reformers. It invites the hard-liners to take action which could undermine the economic and national security interests of the United States. I implore you to vote yes on PNTR for China. It is best for U.S. agriculture, it is best for the national security of our country, and it is best for the citizens of China. Thank you, Mr. Chairman.
Page 70 PREV PAGE TOP OF DOC [The prepared statement of Mr. Hardin appears at the conclusion of the hearing.]
The CHAIRMAN. Thank you.
We still have a few minutes. The next questioner just before our scheduled recess was the gentlewoman from Idaho. Would you care to go now, or would you rather come back?
Mrs. CHENOWETH-HAGE. Mr. Chairman, what is the desire of the Chair? Would you prefer that we recess now? I would be happy to go either way. I would be happy to come back.
The CHAIRMAN. We might do that. I think this is only going to be one vote. The committee will stand in brief recess while we vote and come back, if you don't mind. Make yourselves at home. [Recess.]
[Editor's note: Due to a series of votes, at 2:55 p.m. the committee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows.]
Statement of Dan Glickman
Mr. Chairman, members of the committee, it is a pleasure to appear before you once again to discuss permanent normal trade relations (PNTR) for China.
This is my third appearance before the committee on this topic in recent weeks, which I think rightly reflects the committee's recognition that this is a watershed issue for our farmers and ranchers. I agree that this is a defining moment on which we as a nation are likely to be judged for years to come.
As many of you know, recently I had the privilege of leading a Presidential Mission to China to assess the likely impact of that country joining the World Trade Organization (WTO). I was very pleased to have four members of the House of Representatives accompany me, including Congressmen Dicks, Meeks, and Hinojosa, and Congressman Walden, a member of this committee. North Dakota Governor Ed Shafer also accompanied us, representing the 47 Governors who have announced their support for PNTR for China.
Page 71 PREV PAGE TOP OF DOC I left on that trip believing strongly that PNTR was the right thing to do. After a week in China, meeting with Chinese workers, religious leaders, human rights advocates, government officials, and U.S. business interests, I returned with the conviction that extending PNTR to China was emphatically in the best interests of the United States and the people of China. If the United States' status as a world leader is to remain undiminished; if we are to achieve the goals we seek in human rights, freedom of religion, and Pacific security; and if the average person in China is to enjoy greater freedoms in the years ahead, then the U.S. must fully engage China, and approving PNTR is an essential course of action.
We have heard a lot of debate over the past few months, but in my mind the issue comes down to a few fundamental points.
First, this is a one-way trade agreement. Unlike conventional trade agreements, in which we offer concessions in order to gain benefits, in the case of China's WTO accession agreement, we gave up nothing. All the concessions were made by China, and those concessions are substantial. They have agreed to end export subsidies for agriculture immediately, to improve market access dramatically, to apply sound science in regulatory decision-making, andunder an anti-surge mechanismto allow us unprecedented authority to take action against any import from China that may threaten injury to a sector of the U.S. economy.
A one-sided agreement of this magnitude does not come along very often. The question is, are we going to seize it?
Second, as WTO Director General Moore has stated, China will become a member of the WTO regardless of the outcome on PNTR. However, if the Congress rejects PNTR, then our farmers and ranchers will not get the full benefits of this historic agreement. Perhaps more to the point, if we reject PNTR, not only will we deny benefits to our producers, we will actually hand the China market to our competitors in Canada, Australia, the European Union, and elsewhere. In other words, we negotiated the agreement, we did all the heavy lifting, but if we do not approve PNTR, then we will be standing on the sidelines while our competitors rush in to reap all the benefits.
Page 72 PREV PAGE TOP OF DOC I am not surprised then, when people sometimes ask me, in an incredulous tone, why would we even consider turning down an agreement that is all to our benefit and that, if rejected, would land in the lap of our competitors.
In my more than 5 years as Secretary, and in my previous 18 years as a member of this committee, I have heard it said time and time again that the United States. must be more aggressive on trade, that we need to stand up for U.S. producers when it comes to trade negotiations. I would suggest that here we have delivered a trade agreement that is unprecedented in its scope and its tilt toward American producers. Yet it seems that this trade agreement is being judged like the trade agreements of old, when in fact it is a watershed achievement in the history of U.S. trade negotiations.
We estimate that this agreement could increase U.S. agricultural exports nearly $2 billion annually by the year 2005, and a recent Harvard study has indicated that our analysis may actually be conservative. But this agreement is about much more than economic benefits to U.S. agriculture. It is fundamentally about the United States' leadership role in world affairs. To maintain that leadership, the U.S. simply must remain engaged with China on a wide range of economic and social issues in a way that will promote human rights, freedom of religion, fair labor standards, the advancement of democracy, and a reduction in tensions along the Strait of Taiwan.
We believe we can best achieve these goals and influence Chinese behavior by engaging rather than isolating them, and by bringing them into a rules-based global community, into a WTO system that is based on transparency, fair trade practices, the application of sound science, peaceful settlement of disputes and, most importantly, the rule of law. I think these are among the reasons why Taiwan has also made clear that it supports China's entry into the WTO and that it supports the U.S. extending PNTR to China.
I know that some have concerns about China's adherence to past agreements. This agreement provides clear enforcement authority in the form of dispute resolution procedures and the right to impose sanctions against countries that ignore WTO rulings. In addition, Secretary Daley has laid out a three-part plan to monitor China's implementation of this agreement.
Page 73 PREV PAGE TOP OF DOC Finally, this agreement offers strong evidence of China's desire to moveat some risk internallybeyond the stagnant, protectionist policies of the past and embrace economic and trade principles that will have a ripple effect on their economic, social and political institutions. The reformers in China understand that they must pursue this course if they want their people to advance, and they chose this path despite opposition from those who favor the status quo in China, including those few who benefit from inefficient and corrupt state-owned monopolies and certain elements of the military. In short, we promote reform in China by approving PNTR, and we would reward the status quo if PNTR is defeated. We all agree that we must promote to the path to reform.
Mr. Chairman, that completes my statement. I would be happy to answer any questions that members of the committee may have.
Testimony of William M. Daley
Mr. Chairman, Congressman Stenholm, members of the committee, thank you for the opportunity to testify today on the benefits to America of China's accession to the World Trade Organization (WTO). It is my pleasure to appear here today with my colleagues, Agriculture Secretary Dan Glickman and United States Trade Representative Ambassador Charlene Barshefsky, to discuss this important initiative. Ambassador Barshefsky's testimony places WTO accession and the grant of Permanent Normal Trade Relations into the broader trade perspective as well as outlines the details of the November U.S.-China accession agreement itself. Secretary-Glickman will discuss the benefits of China's WTO accession for American farmers. I will focus in my testimony on our efforts to ensure that China provides us the market access that we have negotiated.
I recently returned from a trip to Beijing where I co-chaired the 13th Session of the U.S.-China Joint Commission on Commerce and Trade (JCCT). The JCCT is a government-to-government forum developed to promote U.S.-China commercial cooperation. We met to discuss China's ongoing reform efforts and ways to enhance China's transition to a rules-based global trading system. Obviously a lot of the discussion centered on China's pending application to join the WTO and on our process for deciding whether to grant Permanent Normal Trade Relations (PNTR).
Page 74 PREV PAGE TOP OF DOC This was my fourth visit to China during my tenure as Secretary of Commerce. Much has changed even in the few years that I have been traveling there. The signs of a nascent transition to a market-based economy are evident everywhere in increased private ownership of businesses, and more freedom for the Chinese to choose their own places of employment. Over 20 years of domestic reforms have enabled China to lift more than 200 million people out of absolute poverty. Wireless communications has put cell phones in the hands of 40 million Chinese (only a fraction of the potential market) and given them access to a world of ideas and influences.
But many problems exist. High unemployment, inefficient state-run enterprises and corruption continue to plague the Chinese economy. As a result, economic growth has slowed.
The Chinese leadership has recognized the need to open its market to global competition in order to be able to build a modern, successful economy. One of the best indicators of the commitment of the Chinese leadership to a more open economy is its desire to take on the challenges and obligations of WTO membership. I am here today to discuss with you how supporting PNTR status for China can move China toward a more open economy.
Last November, after 13 years of negotiations, the United States and China reached a bilateral agreement on the terms and conditions of China's entry into the WTO. China made significant and far-reaching market access and trade concessions that will benefit American exporters and import sensitive industries across a broad range of industrial goods, services and agriculture. It contains strong enforcement mechanisms and strong protections against unfair trade. American exporters stand to benefit immediately upon China's accession to the WTO. China has agreed to begin opening its markets in virtually every sector immediately upon accession. The phase-in of further concessions will be limited to 5 years in almost all cases, and in many cases only 1 to 3 years.
Page 75 PREV PAGE TOP OF DOC In contrast to China's historic set of commitments, with this agreement we have only one obligation, and that is to maintain the market access policies we already apply to China by granting it Permanent Normal Trade Relations status. We are appearing here today to seek your support for the President's legislative proposal to grant China PNTR.
Now, let me highlight some of the terms of our bilateral agreement on China's accession to the WTO. Attached to my testimony is a more detailed summary of the terms of the agreement. In addition, over 45 industry specific fact sheets, 50 state-specific reports, and other detailed information are available on our Web site at www.chinapntr.gov.
China has agreed to cut tariffs from an average of 24.6 percent to an average of 9.4 percent overall and 7.1 percent on U.S. priority products. China will make substantial cuts immediately with further cuts phased in, most within 5 years. These cuts will benefit a wide range of U.S. products from automobiles, to chemicals to wood products. China will also eliminate all import quotas and non-automatic licensing requirements for industrial goods. For example, China will participate in the Information Technology Agreement, eliminating tariffs and quotas on information technology products such as semiconductors, telecommunications equipment, computers and computer equipment and other items by 2003, in most cases, and 2005 in a few others. Last week, nearly 200 high tech industry CEOs wrote to Members of Congress urging support for PNTR for China and identifying it as ''an absolute priority for high-tech companies . . . '' and the ''. . . most critical vote you will make in support of our high technology industries this year.''
This agreement does more than lower tariffs substantially. Equally important to U.S. industry is the agreement by China to allow U.S. firms to engage in trade (importing and exporting) and the full range of distribution services including wholesale, retail, repair and transport, for their products in China. At present, China prohibits foreign firms from distributing imported products or providing after-sale services such as repair and maintenance, unless they have invested in China.
Page 76 PREV PAGE TOP OF DOC China has made significant commitments to phase out most restrictions in a broad range of service sectors in addition to distribution, including banking, insurance and telecommunications. Also liberalized are professional services such as accountancy and legal consulting, business and computer-related services, motion pictures and video and sound recording services. China will also take on the obligations contained in the Basic Telecommunications and Financial Services Agreements.
The WTO accession bilateral agreement provides increased access for U.S. agricultural exports across a broad range of commodities and eliminates non-tariff barriers that have kept U.S. farmers out of this huge market. On U.S. priority agricultural products, tariffs will drop from an average of 31-percent to 14 percent by January 2004, with even sharper drops for beef, poultry, pork, cheese and other commodities. China will also create new tariff rate quotas that will significantly expand export opportunities for U.S. wheat, corn, rice and other bulk commodities farmers. U.S. exporters will also gain the right to sell virtually all products freely inside China without going through state trading enterprises or other middlemen. Right now, the average man, woman, and child in China consumes less than a dollar's worth of American agricultural goods a year. Looking to the future, China may account for up to 40 percent of the growth of U.S. agricultural exports.
In addition to the benefits of WTO accession, we will have substantial export opportunities through the 1999 U.S.-China Agreement on Agricultural Cooperation. This Agreement provides the terms for the removal of scientifically unjustified restrictions on importation of U.S. wheat and other grains, citrus, and meat. Already, we have seen China make historic purchases of all three commodities in the last few months as a result of this Cooperation Agreement. Complementing this Agreement are Chinese WTO commitments to permit trading and distribution rights.
Page 77 PREV PAGE TOP OF DOC There is no doubt that this agreement is a great opportunity for American businesses, workers and farmers. It will provide unprecedented access to a largely untapped market of over 1 billion consumers. The benefits for the United States are widespread, including significant opportunities for small and medium size businesses. SMEs are responsible for a growing share of U.S. exports to China.
Recently 47 Governors sent a letter to Senators and Members of the House expressing how important they believe passage of China PNTR is to maintaining the economic growth and prosperity of families in their states and territories. These Governors know this is a good economic deal for America. They do not want America to be left behind.
Yet this agreement goes beyond economics. As President Clinton has said, this represents the most significant opportunity that the United States has had to create positive change in China since President Nixon's visit there in the early 1970's. As a world leader we have an obligation to foster further reform in China. Encouraging China to join the rules-based world trading system gives it a greater stake in the stability and prosperity of its regional neighbors and the rest of the world. It will create a better, more stable, safer world.
SAFEGUARDS, COMPLIANCE AND ENFORCEMENT
In addition to unprecedented access to the vast Chinese market, we negotiated additional terms to ensure that we gain the full benefits of our agreement and that China lives up to its commitments. China has agreed to a number of provisions that go to the core of the closed Chinese economy and that will result in real and effective market access. These special provisions address issues raised by the high degree of government involvement in the Chinese economy and by industrial policy measures, such as local content, offsets, export performance, and forced technology transfer requirements. These provisions were sought to address the legitimate concerns raised by industries and Members of Congress, Democratic and Republican alike.
Page 78 PREV PAGE TOP OF DOC The agreed provisions include special protections to guard against import surges from China. China has agreed to a 12-year product-specific safeguard provision which ensures that the United States can take effective action in case of increased exports from China which cause market disruption in the United States. This applies to all industries, permits us to act on a lower showing of injury to domestic industry than under existing safeguard law and allows us to act specifically against imports from China. This safeguard provision is in addition to existing safeguard actions authorized under section 201.
We have also ensured that American firms and workers will have strong protection against unfair trade practices, including dumping. China has agreed to guarantee our right to continue using our current methodology (treating China as a non-market economy) in antidumping cases for 15 years after China's accession to the WTO.
We also have retained the right to use the full range of existing United States trade laws, including special 301 (intellectual property rights protection), section 301 (foreign trade barriers), and, of course, our antidumping laws. It also is important to emphasize that nothing in this agreement undermines our ability to continue to block imports of goods made with prison labor, to maintain our export control policies, or to withdraw trade benefits, including NTR itself, in case of a national security emergency.
The agreement will also require China to reform a number of internal policies which force foreign companies to locate operations in China and give up valuable intellectual property rights as conditions of doing business. The agreement will eliminate unfair practices such as mandated offsets, local content and various investment performance requirements. China will take on the obligations of the WTO Agreement on Trade-Related Investment Measures. This will make it easier for U.S. companies to export to China from home rather than forcing companies to set up in China in order to sell their products there. Forced technology transfers will also be eliminated as a condition of investment, better enabling U.S. companies to protect their investment in R&D. China has agreed to stop enforcement of such practices in existing contracts immediately upon accession.
Page 79 PREV PAGE TOP OF DOC The agreement contains additional effective enforcement tools to ensure China meets its obligations. For the first time, China's trade commitments will be enforceable through binding WTO dispute settlement, subjecting its actions to impartial review, and ultimately sanctions if necessary. The multilateral nature of the WTO also strengthens our enforcement capabilities. And the significance for China is greatits economic decisions will be subject to multilateral trade review, which will provide us additional leverage in resolving future trade disagreements with China.
Our bilateral agreement with China is highly specific with clear timetables for implementation and firm end dates for full compliance. When copies of the agreement were handed out to Members of Congress, some Members commented that the text looked more like a spread sheet with its defined tariff rates, dates certain and concrete obligations. This was intentional and reflects past experience in enforcing trade agreements with China. The specificity of China's commitments in this bilateral agreement will strengthen our ability to monitor and demand compliance.
The administration intends to vigorously monitor and aggressively enforce the terms of this agreement. Our commitment to do so is reflected in the President's budget request for a $22-million increase in new compliance and enforcement resources for Commerce, USTR, USDA and the State Department.
In addition, I recently announced a five-point plan for monitoring China's compliance with its commitments and making sure that we get the full benefits of the WTO from our bilateral agreements. This is Commerce's part of an interagency effort to ensure China's compliance with the WTO. Most elements of Commerce's plan will be put in place immediately.
Rapid Response Compliance Team. I am creating a Deputy Assistant Secretary for China focusing on compliance. This will be the highest level Commerce official we have devoted to a single country's compliance with a trade agreement. Working with the DAS will be a rapid response team of at least 12 compliance and trade specialists in Washington and China, most of whom are already on the payroll. As part of the President's $22 million Trade Compliance Initiative in the 2001 budget request, we will station compliance officers permanently in China. These officers will be exclusively devoted to compliance matters, not trade promotion and not economic analysis. The State Department also plans to place additional compliance officers in China, and is currently developing a specialized training course to equip new officers from all agencies with a deeper understanding of our international agreements to ensure compliance.
Page 80 PREV PAGE TOP OF DOC Prompt addressing of market access problems. I am putting in place tight deadlines for investigating market access and commercial problems in China. Within strict deadlines, the rapid response team will engage appropriate officials in China to address the problem. If resolution is not reached within 90 days, we will work with other agencies to determine if further action is required. The goal of this procedure will be to encourage resolution of issues without resorting to WTO dispute settlement. To make this procedure more user-friendly, I will launch a China compliance website.
Statistical monitoring of Chinese trade flows and special trade law enforcement program. I am putting together a special team to monitor both imports from China and exports to China in critical sectors. This will be modeled on the import surge monitoring program we established for steel, which has been so effective in helping to combat last year's steel crisis. To ensure strict enforcement, I am creating a China-specific dumping anticircumvention program. In addition, I am creating a China-specific subsidies enforcement team to ensure that China abides by its subsidy commitments.
Comparative law dialogue and technical assistance. I know many of you are concerned about China bringing its laws into conformity with the WTO. We share your concerns. So when I was in China last month, I obtained agreement to set up a comparative law dialogue. We will keep a close watch as China amends its laws and regulations, share our experience with implementing WTO rules, and provide technical assistance and advice.
China-specific WTO training and export promotion program. Finally, we are setting up an unprecedented WTO training and trade promotion strategy to ensure that our exporters take advantage of all the opportunities presented by China's new commitments. This will include a trade opportunities service similar to what we did for Eastern Europe after the fall of the Berlin wall and for the Middle East after the Gulf War.
COMMUNITY ECONOMIC ADJUSTMENT INITIATIVE
Page 81 PREV PAGE TOP OF DOC In addition to compliance, let me highlight another administration effort that addresses a concern of many Members: the impact of trade on U.S. workers and communities. President Clinton has requested in the fiscal year 2001 budget a substantial increase to help U.S. workers and communities succeed in the global economy. The package includes a Community Economic Adjustment Initiative modeled on the Department of Defense's program to help communities slated for military base closures. This program, based at Commerce's Economic Development Administration, would coordinate administration-wide responses for regions adversely affected by trade or other problems.
The package would also consolidate and reform the Department of Labor's two trade adjustment assistance programs for workers who lose their jobs due to imports or shifts in production, capturing the best features of each. It also would greatly expand the President's New Market Initiative by providing investment incentives to spur economic activity in distressed urban and rural areas.
A MORE OPEN CHINA
The President has made clear that supporting China's accession into the WTO does not mean a tacit endorsement of China's human rights policies. We will continue to denounce China's persecution of its citizens for their political or religious beliefs. In March, Secretary of State Albright demonstrated this commitment when she personally presented a resolution condemning China's human rights record to the United Nations' Human Rights Commission in Geneva. We will not hesitate to use our authority to sanction China under the International Religious Freedom Act as we did last year. We will also continue to pursue our foreign policy goals with China in a number of important areas such as non-proliferation and global climate change. We remain committed to a peaceful resolution of issues between China and Taiwan.
It is significant that many of those most supportive of a more open, democratic China support its membership in the WTO. The newly elected leader of Taiwan, Chen Shui-bian, supports normalizing trade relations between the United States and China. Martin Lee, the leader of Hong Kong's Democracy Party, recently said ''The participation of China in the WTO would not only have economic and political benefits, but it would serve to bolster those in China who understand that the country must embrace the rule of law.'' A longtime Chinese dissident leader, Ren Wanding, declared in support of the China's WTO membership ''Before the sky was black, now it is light. This can be a new beginning.''
Page 82 PREV PAGE TOP OF DOC By seeking to join the WTO, China has undertaken to deepen its market reforms and open its economy to the rest of the world. It has agreed to adhere to international trade rules and subject its actions to WTO dispute settlement. It is clear that this has not been an easy choice for its leaders. They understand that opening their borders to foreign goods, services and investors opens the door wide to new ideas and ideals they can not control. They have made the decision to take this risk. We should encourage China to choose the path of reform and involvement with the rest of the world. Bringing China into the WTO will make a significant difference.
The possibility of positive change is illustrated by the great potential of the telecommunications market in China. Some analysts predict that China will become the world's second largest personal computer market by the end of this year and the third largest semiconductor market by 2001. It is already the world's fasted growing telecommunications market. In 1999 alone, the number of Chinese Internet users quadrupled, jumping from 2 million at the beginning of the year to 9 million. Growth predictions put Internet users at over 20 million by the end of 2000. Not only will this technology explosion benefit U.S. information technology industry, which is the best and most competitive in the world, but it will also give the Chinese people unfettered access to outside influences and ideas through satellites and the Internet. This cannot help but promote greater economic and political reform in China.
Of course, the trade agreement with China will not, by itself, resolve serious human rights issues in China. At the same time, I believe that WTO membership will bring fundamental changes to China that will advance our goals in this area.
THE VOTE ON PNTR
A few months ago when the President asked me to lead the administration's efforts to seek Congressional approval of PNTR, I discovered that there was a lot of misunderstanding about what the vote on PNTR means. Let me explain. Normal trade relations, formerly called most-favored-nation or MFN treatment, is the same trading status we extend to the rest of the world, with very few exceptions. The legislation would remove China from the annual NTR renewal process under Jackson-Vanik, under which we have extended NTR to China since 1980.
Page 83 PREV PAGE TOP OF DOC PNTR is required to meet our obligation to treat all WTO members the same. WTO members are required to grant each other ''any advantage, favor, privilege or immunity'' provided to other countries ''immediately and unconditionally.'' The United States currently extends PNTR to all countries with whom we share and enjoy the benefits of the WTO, without the condition of annual review. Not surprisingly, China seeks identical treatment upon its accessionand WTO rules require it to be provided.
It is worth emphasizing that this will not be a vote on whether China will join the WTO. Once China completes its accession negotiations with other countries, its application to join the WTO will move forward, with or without PNTR. However, Congress' upcoming vote on PNTR will determine whether the United States will enjoy the full economic benefits created by China's WTO membership. A vote against PNTR will mean ceding our share of this newly opened market to our economic competitors in Europe, Asia and elsewhere. As President-Clinton has stated, ''We must understand the consequences of saying no. If we don't sell our products to China, someone else will step into the breach, and we will spend the next 20 years wondering why in the wide world we handed over the benefits we negotiated to other people.''
The vote on PNTR also will not affect whether the Chinese will have access to the American market and consumers. They already do. The United States has the most open market in the world. A vote for PNTR will give us access to the previously closed Chinese market and level the playing field in a dramatic way.
When President Nixon first went to China, more people saw the pictures and heard his words than on any occasion in the history of the world. During that visit he paraphrased Abraham Lincoln, saying ''what we say here would not be long remembered. What we do here can change the world.'' Thirty years later, we now face another history-making foreign policy choice, identified by President Clinton as his top remaining foreign policy goal. After all the speeches, after all the arguments, after all the voices on both sides of the debate, what we say is not as important as what we do. And on this occasion we should act to promote further reform and the rule of law in China and to integrate China into the world economy. It is in our economic, strategic and national security interests to do so.
Page 84 PREV PAGE TOP OF DOC I appreciate the thoughtfulness and consideration Members have brought to the debate. I am optimistic that once all the pros and cons have been weighed the Congress will vote its support for PNTR.
Thank you, Mr. Chairman, that concludes my statement. I will now be happy to answer any questions you may have.
Statement of Lynn Jensen
Mr. Chairman and members of the committee, my name is Lynn Jensen. I raise corn, soybeans, and livestock on my farm near Lake Preston, South Dakota. I serve as president of the National Corn Growers Association. I am happy to be here today to discuss the tremendous potential of the emerging Chinese market.
The Peoples Republic of China, with a population estimated at more than 1.25 billion, is considered the most important growth market for U.S. agriculture in the 21st century. Although it has more than 20 percent of the world's population, China has only 7 percent of the arable land. Over the next 10 years, per capita gross domestic product is expected to continue to grow. This economic expansion will contribute to increased consumption of food and fiber. It will also create export opportunities for U.S. farmers, if, when China completes negotiations to join the World Trade Organization, Congress has eliminated the sanctions that treat China differently than other trading partners.
Last November, China and the United States completed bilateral negotiations for China's admission to the World Trade Organization. China agreed to one-way trade concessionsincluding new market opportunities for corn exports. In return, the United States agreed to exempt China from restrictions that limit our trade relations with communist countries. As a farmer from the Midwest, it is hard for me to see how Congress can say no to a deal like this.
Page 85 PREV PAGE TOP OF DOC Under current law, goods from China can only receive normal trade status by presidential waiver. The law provides for an annual extension unless a joint resolution denying the waiver is enacted into law within 60 days after expiration of the previous waiver authority.
Since 1980, China and the United States have treated imports from the other country to the same tariffs and border measures which apply to goods from the rest of the world. But, because China limits market access for most products, this trade relationship has greatly benefited China, which has consistently exported more goods to the United States than it has imported from us.
The WTO agreement with China will significantly reduce the border restrictions that have kept U.S. farmers from fully benefiting from our comparative advantage in agricultural production. China agreed to cut tariffs by more than half on priority agricultural products and to end both its system of discriminatory licensing and its import bans for bulk commodities. The commitment to rely on imports for a small portion of the country's food security signals real reform in the Chinese grain sector.
As a corn and soybean farmer, I expect to benefit from the entire trade agreementincreased exports of meat, poultry, and dairy products will translate into increased domestic demand for grains and oilseeds. Since other witnesses can better describe the opportunities for their sectors, I will focus on the direct implications for corn.
China is the second largest corn producer in the worldsecond, I am proud to say, to the United States. Last year, Chinese farmers produced more than 5 billion bushels of corn, of which they will export approximately 350 million bushels. Five years ago, China imported 130 million bushels of U.S. corn. What happened in China is an example of how a non-WTO member can modify domestic farm policy in ways that affect producers around the world.
In late 1994, China instituted a policy designed to boost grain production to assure food self-sufficiency. This policy transferred some of the grain production responsibility to the provinces and was referred to as the Governor's Grain Bag System. The policy generated surpluses of corn, wheat and rice, as well as unexpected government expenses. The state-run China National Cereals, Oils, and Foodstuffs Import and Export Corporation (COFCO) closely controls the trade and marketing of this grain. In an attempt to reduce storage costs, COFCO has aggressively exported surplus corn at prices below the price paid to Chinese farmers. These subsidized corn exports have displaced U.S. corn exports.
Page 86 PREV PAGE TOP OF DOC The agreement negotiated last year requires China to cap and reduce trade-distorting domestic subsidies. Although the specific commitments have yet to be negotiated, China will provide greater transparency to make domestic support more predictable. Under the WTO accession agreement, China has committed to establish a tariff rate quota (TRQ) for corn. Imports within the quota will be subject to a minimal 1 percent duty. In the first year, the TRQ will apply to 4.5 million metric tons (177 million bushels) of corn. By the fourth year, China has agreed to allow imports of 7.2 million metric tons (283 million bushels) of corn at the nominal tariffthat's equal to roughly two-thirds of my state's total corn production. If U.S. farmers capture a significant share of the corn TRQ, we can easily exceed the export levels of 5 years ago.
To assure that the quota is used, a portion will be available to the private sector. In the first year of the agreement, the private sector share will equal 25 percent of the corn TRQ. This share will increase to 40 percent by the fourth year of the agreement. Additionally, any quota not used by the end of October will be released for use by the private sector. The introduction of private trade will ensure increased opportunities for U.S. corn exports.
China has agreed to lift the ban on imports of wheat from the Pacific Northwest and to allow grain shipments from all U.S. locations, provided the presence of TCK spores are below agreed levels. This provision will enable corn exports to move through the Pacific Northwest when that is the most competitive export location.
Perhaps the most important and exciting provision for U.S. corn farmers is China's commitment to eliminate export subsidies. As discussed above, subsidized Chinese corn exports have displaced U.S. corn exports. When China eliminates export subsidies, U.S. corn will be very competitive in markets that have been buying subsidized Chinese corn.
Quite simply this is a great one-way deal for U.S. agriculture. We gain access to the largest market in the world, and we give up nothing in return. We may not know the magnitude of this market-opening opportunity for several years, but what is abundantly clear is that U.S. farmers will only benefit from this trade agreement, if Congress approves Permanent Normal Trade Relations for China.
Page 87 PREV PAGE TOP OF DOC I appreciate the opportunity to present the views of the National Corn Growers Association.
Statement of Terry Detrick
Good morning Chairman Combest, Congressman Stenholm, and members of the committee. My name is Terry Detrick. I am a wheat producer from Ames, OK and president of the National Association of Wheat Growers. I am extremely pleased to be invited to speak today on behalf of a unified United States wheat industry by representing the U.S. Wheat Associates, the National Association of Wheat Growers and the Wheat Export Trade Education Committee. By speaking for a unified industry, I hope to impress upon you right at the beginning how important the Chinese market is not only to me personally but to the entire U.S. wheat industry.
Wheat producers across the United States strongly support China's entry into the World Trade Organization (WTO) and the immediate approval of permanent normal trade relations (PNTR) status for China.
I came to Washington this week to participate in events with farmers and ranchers representing almost every state and every sector of U.S. agriculture. I hope through our visits here this week, taking away from one of the busiest times on the farm, we have impressed upon you just how important this issue is for American agriculture. The Chinese market holds great potential for my home state of Oklahoma and all U.S. wheat producers. We have transportation, quality and variety advantages over many of our foreign competitors.
However, I do not expect to be able to see a long term advantage in this market unless China is granted PNTR status by the United States as it comes under the WTO rules based system.
As you are aware, China is potentially the world's largest wheat market. Unfortunately, it has maintained a non-tariff trade barrier on U.S. wheat exported from Pacific Northwest ports since 1972, and from Gulf ports since June 1996, due to the perceived threat of Tilletia Controvera Kuhn (TCK), a wheat fungus known as TCK smut. This barrier to the Chinese market has had a very negative economic impact on all U.S. wheat producers.
Page 88 PREV PAGE TOP OF DOC In April of 1999, Prime Minister Zhu Rongji announced China's intention to lift its long-standing restrictions on the export of U.S. wheat from areas where TCK is known to occur. This agreement allows U.S. wheat to be exported from any state or any U.S. port to any Chinese port as long as these imports do not exceed a tolerance level of 30,000 TCK spores per 50-gram sample. This level can easily be met by U.S. wheat exporters while acknowledging China's concerns about this disease.
While the market access agreement is not tied to China's entry into the World Trade Organization, the Chinese unilaterally decided to link it to U.S. support for their WTO entry that has now been agreed upon. We had expected China to implement the TCK agreement immediately upon signing.
Through the encouragement of the Congress, the administration and the U.S. wheat industry, the Chinese have now fully implemented this agreement, which represents a sign of good faith towards their WTO commitments. As a further sign of China's willingness to resolve any concerns over their desire to implement the agreements a purchase of 50,000 tons of U.S. wheat comprising of several different wheat classes is scheduled to be shipped from the Pacific Northwest this month.
The TCK announcement followed more than 20 years of extensiveat times frustratingdiscussions between the U.S. and China to resolve this issue. TCK restrictions were instituted due to China's concerns that its own wheat crop could become infected with TCK. It is significant that this longstanding dispute over TCK smut was resolved based on a framework that is consistent with the objectives of the Uruguay Round Agreement on Sanitary/Phytosanitary Measures (SPS). The SPS agreement is the heart of settling disputes of this type in the WTO, as it requires that sound science, not political or other issues, determine whether products are safe to trade. Together, the U.S. and China agreed to let science, rather than political or other considerations, determine
Page 89 PREV PAGE TOP OF DOCthe terms of trade between our two countries.
Likewise in November of 1999, the U.S. and China completed negotiations on China's entry into the WTO. The WTO commitment agreement was formalized when the Chinese language version of the agreement was signed in Seattle last December. Without China in the WTO we will have no formal way for resolving future phytosanitary disputes.
In accordance with this agreement, China will liberalize its purchase of bulk agricultural commodities like wheat, corn, soybeans, rice and cotton. China will adopt tariff-rate quotasthat is, very low tariffs on a set volume of these bulk commodities. The wheat TRQ, for example, begins at 7.3 million tons and rises to 9.3 million tons by 2004. (Present import levels are below 2 million metric tons.) Out of tariff quotas will be reduced from 114 percent to 65 percent. In all commodity TRQs, private traders will be guaranteed a share of the TRQ and a right to import using the portions of the share given to state trading companies that are not used by the state agencies. This will help establish legitimate private-sector trade in China. Taken together, the TCK resolution and the U.S.-Chinese trade agreement, represent an important new commercial opportunity for U.S. wheat producers at a critical time in the economic health of the industry.
China is the world's largest wheat producing and largest wheat consuming nation. The U.S. is the world's largest wheat exporter. U.S. wheat exports to China have varied over the years, contingent upon Chinese wheat production levels and those of other wheat suppliers. Throughout the early 1990's, China imported from million metric tons to 5.6 million metric tons of U.S. wheat each year. In recent marketing years, Chinese imports of U.S. wheat have declined significantly due to major increases in China's own production and the stringent enforcement of the TCK zero tolerance restriction.
Nevertheless, we expect China to once again become a major importer of U.S. wheat. We base our expectations on economic developments and production constraints in China. China has a huge and growing population, burgeoning coastal cities, growing demand, declining stocks, stagnant acreage and reduced domestic price supports. We anticipate that over a period of a few years, increased China trade would have a significant impact on the world supply and demand situation that should be positive for prices.
Page 90 PREV PAGE TOP OF DOC To put it plainly, nothing else on the horizon could have such a big impact in the short term on U.S. wheat exports and the economic stability of wheat producers or hold such potential for expanded growth in the future.
USDA's baseline projection puts China's wheat imports at 4.2 mmt in 5 years. By U.S. Wheat Associates estimates, the U.S. market share could be one third to one half of total Chinese imports.
The U.S. now holds very high market shares in a number of neighboring countries and we believe that our market share with China has greater potential than most estimates. This is based on work by U.S. Wheat Associates personnel located in China who believes that China's wheat imports have focused on the need for quality wheat. The import demand is projected to focus on wheat with qualities needed for better consumer products that are not produced in large quantities in China.
In order for U.S. wheat producers to realize the full potential of the Chinese market, it is absolutely critical that Congress approves legislation to grant China PNTR as soon as possible.
As Ambassador Barshefsky said in her testimony before the House Ways and Means Committee there is ''no option'' to addressing PNTR now. There is no option for U.S. wheat producers but to have the opportunity to participate in the Chinese market. If we are to achieve the benefits of this long sought agreement and give producers the opportunity to market into this huge economy, China must be brought under the rules based system of the WTO. We have that opportunity with the agreements delivered in April.
By granting PNTR, Congress will be giving nothing away to Chinaour market is already open. However, you will be fulfilling one of the ''unmet promises'' of the 1996 Freedom to Farm bill, that of continuing to provide export markets for U.S. farmers and ranchers. I believe that every farmer would rather have open fair markets than receive payments from the government. Farmers want to add to the balance of payments by exporting our products.
Page 91 PREV PAGE TOP OF DOC This point is especially timely and crucial as the U.S. trade deficit reaches its all-time high. Our trade deficit with China has ballooned to $68.67 billion in 1999 as reported by the U.S. Department of Commerce. For agricultural, fish and forestry products 1999 began an alarming turnaround that appears to be worsening in 2000. In 1999, for the first time historical memory imports of these products outpaced exports by nearly $3.5 billion. Agriculture, generally counted on to contribute positively towards the trade deficit, reduced exports in 1999 from $61.8 billion in 1998 to $57.5 billion in 1999, and for the first time in our history agriculture experienced a negative trade balance. The only way to counter this trend is to open markets throughout the world and facilitate the exportation of U.S. products. Bulk commodities such as wheat can have a substantial positive impact on the trade balance as demand for high quality foods continues to rise. The Chinese economy is poised to reach new heights and as their middle class swells it is imperative for U.S. producers to have fair and unfettered access to this market.
Various people, including Ambassador Barshefsky, have stated that it would indeed be ironic if the United States after over 14 years of negotiations to include China in a rules based world trading system would decide not to grant them PNTR. By doing so we would be allowing our competitors to have the benefits of China opening its market-the most dynamic and rapidly growing in the world. The U.S. leverage and any means of influencing China under the WTO rules system would be lost and the United States would yield its leadership in the trade arena. This would amount to another self-imposed unilateral sanction, cutting the agriculture community out of another major world market to the benefit of our competitors.
I believe I can speak for the entire U.S. wheat industry in saying we look forward to working with you and others in the Congress to make permanent normal trade relations for China happen this year. The wheat industry has worked tirelessly to mobilize grassroots support, and we very much appreciate the work done by our supporters in Congress, but it is necessary for proponents in Congress and the administration to exhibit strong leadership and cooperation in order to deliver a positive vote for America's farmers, laborers and industries. This is an opportunity that we can not afford to let slip away.
Page 92 PREV PAGE TOP OF DOC Thank you again for the chance to appear today. I look forward to responding to your questions at the appropriate time.
Statement of Paul J. Leavens
Chairman Combest, Congressman Stenholm, members of the committee, I am Paul Leavens. My family and I operate citrus ranches in Ventura and Monterey counties California. This has been our family business since 1910. We produce lemons, grapefruit and avocados. We market our fresh citrus fruit both domestically and in export markets through our marketing cooperative, Sunkist Growers, and our avocados through Calavo.
I'd like to thank the committee for holding this hearing on the subject of agricultural trade between the United States and the People's Republic of China and examining whether that trading relationship will be enhanced by proposed passage of Permanent Normal Trade Relations legislation and implementation of the related U.S.-China Trade Agreement. Obviously this is a matter much in the news these days and the subject of a lot of misinformation.
Market access for our citrus fruit exports to the huge and potentially profitable consumer markets of China has long been a goal for both our industry and our government. Last spring, those efforts finally reached a successful conclusion with the achievement of a citrus market access agreement including acceptance by China of specific, science-based work plans and phytosanitary protocols for each of the four U.S. citrus production States, Arizona, California, Florida and Texas.
The phytosanitary agreement and the implementing work plans and protocols are a model for commodity trade agreements. They were negotiated by USDA and USTR in close coordination with the U.S. citrus industry. By accepting these terms, China has joined with the U.S. in adhering to sound science in its application of trade policy. China has committed to fully abide by the terms of the WTO Agreement on SPS measures which requires that all animal, plant and human health import requirements be based on sound science, not political or protectionist concerns.
Page 93 PREV PAGE TOP OF DOC In keeping with the obligations of that agreement, Chinese phytosanitary inspectors conducted an inspection tour of U.S. citrus production, packing and shipping facilities in California, Arizona, Florida and Texas and concluded that all phytosanitary requirements needed for U.S. producers to export to China indeed have been met. On March 22, China officially opened its markets to U.S. citrus fruit exports. Through our marketing cooperative, Sunkist Growers, we began shipping fruit directly to China 2 days later. This marked our first direct shipment to China since before World War II.
We know fresh citrus fruit is very popular with consumers in China. Our cooperative annually exports upwards of 7 million 40-pound cartons of fruit to Hong Kong with an approximate sales value of $83 million. Much of that fruit is, in turn, shipped by local brokers to markets in the PRC. Now, direct market access provides us with an even greater sales opportunity. Our industry projects an aggregate export sales increase of $500 million over the next 5 years for the China market.
This export market opportunity is enhanced by the terms of the U.S.-China Trade Agreement related to China's accession to the WTO. The benefits of that agreement accrue exclusively to U.S. interest, including the interests of the U.S. citrus industry. China has agreed to dramatically reduce its tariff on citrus imports from the U.S. from the current 40 percent to 12 percent by 2004. No quota or volume limits were imposed by China and we will be able to export as much fruit as the market will accommodate. This will further improve the competitiveness and affordability of our exports to the China market.
However, for us to be able to benefit from these hard fought trade concessions, Congress must extend permanent normal trade relations (PNTR) to China and China must successfully gain membership in the WTO. If that is denied, all bets are off.
When the tariff reductions to 12 percent are realized, the total burden of the import duty and the VAT (13 percent) on citrus imports into China will be less than the duty currently imposed on American citrus exports into Japan, now our largest and oldest market in Asia.
Page 94 PREV PAGE TOP OF DOC In my view, it is not an overstatement to say China has the potential in the course of the next several years to become the single most important U.S. agricultural export market. Today China has a consumer market with disposable income of over 200 million people, and a middle class projected to grow by an additional 170 million over the next 5 years. But those opportunities and all the advantages to U.S. interest achieved in recent trade negotiations will be denied U.S. exporters if China is denied permanent NTR in its trading relationship with the United States. Furthermore, the establishment of permanent normal trade relations with China maximizes the opportunity for expanding commercial and cultural relationships between America and the PRC. The dramatic changes witnessed in China over the past 20 years demonstrate how this approach optimizes progressive western influence over China's evolving public policies and political character. We need to maximize our presence in China if we hope to influence their evolution as a modern society.
I urge Congress to extend to China the same normal trade relations policy granted on a permanent basis to 133 WTO country trading partners. To our advantage, WTO membership will, furthermore, obligate China to adhere to the same rules-based system of international trade and commerce demanded of all WTO member countries, including the United States.
Thank you for the opportunity to address this matter of great importance and concern to me and the other 6,500 citrus farmers-members of Sunkist Growers in Arizona and California as well as others in our industry in all four production States.
Statement of Dana Hauck
Thank you Chairman Combest, Ranking Member Stenholm and members of the committee for holding this hearing to discuss Permanent Normal Trading Relations (PNTR) with China. Approval of PNTR will be one of the benchmark trade and international relations votes of our generation. On behalf of the 250,000 cattlemen and women that NCBA represents, I commend your leadership and continuing efforts to provide new marketing opportunities for American agricultural producers and our industry partners. I am Dana Hauck, chairman of the NCBA International Markets Committee, and a stocker operator from Delphos, Kansas.
Page 95 PREV PAGE TOP OF DOC This hearing also highlights the committee's ongoing efforts to encourage open and honest discussion of all issues facing the cattle industry, a process NCBA believes is vital to the democratic policy development processboth within NCBA and to the Nation at large. NCBA has long supported a ''free but equitable'' trade philosophy and the opening of two-way international beef markets. We thank you for the opportunity to submit our views.
Importance of Trade: Livestock producers are constantly competing for a larger share of the domestic market. In late 1999, cattle producers received encouraging signs that for the first time in two decades U.S. beef demand has increased. However, since our ''home'' market contains only about 4 percent of the world's population, our greatest potential for expanding market share is in international trade. As the beef industry continues to improve its efficiency and productivity, as well as the quality of our commodity, we are becoming increasingly dependent on increased world demand for our products to ensure economic growth.
The U.S. beef industry has worked hard to promote beef exports, which now account for more than 12 percent of the value of wholesale beef sales. On a tonnage basis, we export nearly 10 percent of what we produce. As our reliance on international markets has grown, the effects of political and economic conditions in key export markets has a more profound impact on U.S. cattle and beef prices.
The 1998 calendar yeara year of recession in most Asian marketswas the first time that more than 1 million metric tons of U.S. beef and beef variety meats have been exported. This record volume was exceeded again in 1999. Compared to 1998, exports of beef and beef variety meats during 1999 increased 8.9 percent on a volume basis and 14.3 percent on a value basis. Recovery in Asian economies (especially Korea), continued economic prosperity in Mexico and increasing global consumer confidence that U.S. beef is the safest and most wholesome in the world are significant contributing factors to improved international demand for American beef and beef products.
Page 96 PREV PAGE TOP OF DOC Beef imports also increased 8.2 percent in volume and nearly 16.5 percent in value during 1999, the result of increasing U.S. beef prices and improving demand. Devaluation of currencies in Australia, Brazil and other Latin American countries and increased beef production in some beef exporting countries also contributed to the difference in 1999 versus 1998.
As an industry, we have worked to expand exports of beef and beef variety meats from approximately $500 million 20 years ago to approximately $3.2 billion todaymore than a six-fold increase. The 2.45 billion pounds of U.S. beef and beef variety meats exported during 1999 was valued at more than $3.2 billion. This progress is encouraging, but also highlights the importance of taking advantage of every opportunity to move beef into international trade. Implementation of the agreement that has been negotiated with China is critical to that end.
Currently, the United States is the least restricted and largest beef import market in the world purchasing 15 percent more beef than the second largest importer, Japan. The United States is also the second largest beef exporter. Beef markets in other developed countries remain virtually closed to U.S. beef, such as in the European Union (EU), or protected by relatively high tariffs as is the case in Japan and Korea.
The United States must enter all beef trade negotiations with access being a top priority. A strong, clear and irrevocable message must be sent by U.S. negotiators to Cairns Group and Mercosur beef exporting countriesmajor exporters of beef to the United Statesthat no increased access to the U.S. beef market will be forthcoming until meaningful access and tariff reduction is achieved in other major beef importing countries.
Political Climate and Industry Concerns: International trade rules must also be equitable. Past trade agreements have not always worked to the competitive advantage of America's beef cattle producers. There is a perception among many in agriculture that past GATT and WTO rounds often traded U.S. agricultural priorities away. As a result, U.S. crop and livestock producers were left facing high tariffs and a host of non-tariff trade barriers in foreign markets while domestic agricultural markets were liberally opened to imports. Our most vivid example (and most constant irritant) of how the WTO process fails to work is the continued failure of the EU to live up to its obligations and lift the ban on U.S. beef.
Page 97 PREV PAGE TOP OF DOC One of the underlying premises of the 1996 Freedom to Farm bill was that aggressive pursuit of growing export markets would be a critical strategy in replacing the safety net of traditional farm programs. NCBA firmly believes this to be true: Eliminating trade barriers is critical to the success of any international trade negotiations.
Despite the overwhelming evidence that the international market must be the focal point for market growth and economic vitality, there is a growing protectionist sentiment at the grassroots level. This sentiment is the result of increased questioning at state and local levels about the impacts of trade on individual agricultural producers and increased skepticism about the willingness of Federal officials to aggressively negotiate agreements favoring U.S. interests.
In addition, there is a growing lack of confidence even among ''free'' traders that our trading partners will live up to their obligations under negotiated agreements. Simply put, U.S. producers are tired of facing their international competition on a persistently tilted playing field. There also is a somewhat accurate perception that U.S. negotiators and regulatory agencies are more focused on developing protocols and modifying regulations to address concerns of countries seeking access to U.S. markets rather than on identifying and addressing the regulations of importing countries that limit access of U.S. products.
It is clear that Congress and the administration have not had an over-arching, unified strategy to systematically attack the trade problems of U.S. agriculture. The inability to secure approval of ''fast track'' continued negotiating authority prior to the Seattle Ministerial meeting is testimony to this void. The breakdown of the Seattle talks and attempts to patronize varied non-trade related special interests has further contributed to concerns about whether agriculture's interests will once again be traded away for political expediency. We also have been frustrated by the reluctance of the administration to utilize the most hard-hitting retaliation strategies, including the so-called carousel approach, against the EU in the beef and banana cases. In short, the process has often seemed more interested in forcing the ''opposition'' into a difficult vote/position and then playing the ''blame game'' for political gain rather than in cooperative efforts to pass meaningful trade legislation that will benefit agriculture and other business sectors.
Page 98 PREV PAGE TOP OF DOC This is why we particularly want to thank and commend you and the committee for the leadership and hard work that resulted in the ''carousel strategy'' being included in legislation that recently passed the House and is pending in the Senate. This kind of ''win'' helps address the concerns that are fueling the protectionist feelings in the country side.
We firmly and strongly believe that approval of PNTR for China represents will even more dramatically demonstrate that the Congress and the administration is moving toward unity and cooperation in dealing with international trade to benefit U.S. producers.
The China Agreement: With a population of 1.2 billion and nearly 200 million consumers with middle-class incomes, China is a consumer market with enormous potential. Any market potential and any trade agreement that involves 1 out of every 5 inhabitants on planet Earth is impossible to ignore. For comparison, the North American Free Trade Agreement (NAFTA) impacted the populations of Canada, Mexico and the United Statesa combined population of approximately 400 million. China's population is three times that of the combined NAFTA countries.
The primary benefit of NAFTA for the U.S. beef industry was elimination of tariffs in the Mexican market. Mexico has a population of just less than 100 million and U.S. beef sales to Mexico during 1999 totaled nearly $513 million. China's middle-class population is more than twice the entire population of Mexico. Another example: according to USDA data from 1995 through 1997 per capita beef consumption in China increased by 2.2 pounds per capita. This small increase in beef consumption per person totals to 2.64 billion pounds when multiplied across a population of 1.2 billionmore than the total 1999 U.S. beef exports.
Sales of U.S. beef and beef variety meats to the Peoples Republic of China and Hong Kong during 1999 totaled $60.7 million, with $9.1 million sold directly to China. By comparison, 1999 sales to other primary Asian markets included nearly $1.726 billion to Japan and $343.5 million to Korea. Per capita beef consumption in China during 1998 was projected at slightly more than 10 pounds compared to 20 pounds in Korea and 26 pounds in Japan. Based on the United States' success in expanding beef demand in other Asian markets, the long-term potential for increased sales of U.S. beef to China is excellent.
Page 99 PREV PAGE TOP OF DOC The agricultural agreement signed by the United States and China last April pertains to Sanitary/Phytosanitary issues. In laymen's terms specific to meat, China agreed to recognize USDA Food Safety Inspection Service (FSIS) inspection of meat exported to China. In the past, a representative from China would inspect U.S. packing plants and very few plants were approved. Under the new agreement, any FSIS-approved plant is eligible to export to China. Chinese officials visited the United States five times between 1996 and mid1999 to review the U.S. inspection system and an additional special session was held for Chinese officials during June 1999 in China. After these reassurances, China has implemented this SPS system.
FSIS began issuing export certificates in early December following final signature of the China SPS agreement (as a side deal) in Seattle. China has lived up to this agreement and U.S. beef and pork have been shipped to China using these certificates, demonstrating that the new system is now operational. Concerns expressed by some members of Congress have not been realized and the Chinese have lived up to conditions of the SPS agreement. U.S. beef pork, citrus and wheat have been shipped under the provisions of this agreement. It now remains to be seen if Congressional members will be equally willing to live up to their commitments as expressed in the 1996 farm bill legislationthe promise that U.S. agriculture would gain access to the growing international market in exchange for reduced government intervention in the marketplace.
The U.S. beef industry (and the rest of agriculture) has the potential for huge gains in the broader trade package that was finalized with China prior to the WTO meetings in Seattle. Specific to the beef industry, tariffs on some major beef categories would decline by 7 percentage points annually from a current rate of 45 percent to 12 percent in 2004. For example, tariffs on frozen bone-in and boneless beef would decline to 38 percent in 2000, 31 percent in 2001, et cetera. For many beef variety meats tariffs would decline in equal increments over 5 years from a current level of 23 percent to 12 percent in 2004.
Page 100 PREV PAGE TOP OF DOC The overall China trade package also includes elimination of state trading entities (STEs) that currently purchase most products imported by China. If the broader agreement is signed, STEs will no longer have a monopoly on agricultural commodities because private trade for all commodities, except tobacco, will be permitted. Distribution and trading rights for meat and poultry will be completely phased in by the end of 3 years. For the beef industry, this means that U.S. exporters will be able to sell directly to buyers (retail, food service, hotels, et cetera.) in China. The U.S. Meat Export Federation has training facilities in place for Chinese retailers and chefs.
Request for Action: We understand that China has condition implementation of any trade agreement with them on approval of PNTR by the U.S. government. For the agreement to be completed, Congress must separate the importance of trade and access to emerging markets for U.S. agricultural products from other political concerns and approve PNTR for China. If China joins the WTO and PNTR is not approved, the rest of the world will gain access to the Chinese market under the same conditions that are available to U.S. producers in this agreementbut U.S. producers will not be able to participate. In effect sanctions will be placed on U.S. agricultural products that could be sold into the Chinese market while the rest of global agriculture once again gains access at our expense.
Congress has approved annual renewal of NTR (and its predecessor, Most Favored Nation (MFN)) every year in recent years with increasingly wider margins. It is now critical that Congress do the right thing for the country and cast a favorable vote for PNTR.
NCBA is aware of the pressure being placed on some members by those opposed to this legislation. We can appreciate the concerns regarding human rights and slow progress of democratic reform in China. But we also believe that by pulling China into a rules-based system of trade, we can not only improve our trade opportunities, we can help encourage China to address these other important issues. The fact remains that Some agricultural commodities are selling at 30-year low prices. Failure to cast a favorable vote for trade expansion with China now could have implications on the U.S. economy comparable the impact of protectionist provisions of Smoot-Hawley.
Page 101 PREV PAGE TOP OF DOC The U.S. must re-establish its commitment to opening international markets soon or risk allowing protectionist elements to set the agenda by default. NCBA appreciates the initiatives that have been undertaken to gain access to ''level playing field'' international markets and to resolve lingering issues that restrict the ability of the U.S. beef industry to offer its products to international consumers.
Again, we appreciate this opportunity to participate in the process of resolving critical trade issues within the beef industry and look forward to a successful vote granting PNTR for China and accession of China to the WTO. We stand ready to provide additional input on this and other trade issues, such as those involving the EU and approving legislation to provide trade negotiating authority. Thank you for the opportunity to present this information.
Statement of Mike Yost
Good morning, Mr. Chairman, and members of the committee. I am Mike Yost, a soybean and corn producer from Murdock, Minnesota. I currently serve as Chairman of the American Soybean Association, which represents 30,000 producer members on national issues of importance to all U.S. soybean farmers. I also am testifying today as Chairman of the American Oilseed Coalition, or AOC, an industry group that represents the National Cottonseed Products Association, the National Oilseed Processors Association, the National Sunflower Association, and the U.S. Canola Association, as well as ASA, on issues of importance to both U.S. oilseed producers and processors. On behalf of these organizations, I commend you for holding this important hearing, and thank you for inviting us to participate.
The potential impact of increased Chinese imports of U.S. oilseeds and oilseed products on farm prices and producer income has been clearly demonstrated in recent years. In 1996 and 1997, China's purchases of U.S. soybeans, soybean meal, and soybean oil more than tripled, from $244 million in 1995 to an average of $939 million. The average price received by U.S. soybean farmers rose to $7.40 per bushel for the 1996 crop and $6.35 per bushel for 1997. Prices for sunflowerseed and canola increased proportionately. In 1998 and 1999 when economic problems in Asia, Russia, Eastern Europe, and Latin America stymied demand, and as global output of all oilseeds increased, it was continued exports to China that helped temper the price fall. In the current marketing year, China is expected to pass Japan as the largest importer of U.S. soybeans, with total purchases of four million metric tons (140 million bushels). In fact, oilseeds and oilseed products are now the largest U.S. agricultural export to China.
Page 102 PREV PAGE TOP OF DOC Even more impressive than current imports, however, is China's potential for increased imports of U.S. oilseeds, oilseed products, and livestock products. Its population of over 1.2 billion is becoming increasingly urban, and demand is rising for a diet higher in vegetable oil and protein. Per capita Chinese oil consumption is only 19.4 pounds compared to 66 pounds in Hong Kong. Doubling this level would increase world trade in vegetable oils by 11.4 million metric tons, or 35 percent, which is equivalent to 119 percent of total annual oil consumption in the U.S. Similarly, China's per capita consumption of soybean meal is only 17.8 pounds annually compared to 174 pounds in Taiwan. If consumption rose to one-half of Taiwan's level, China would require soybean meal imports equivalent to 1.85 billion bushels of soybeans, about two-thirds of annual U.S. production.
With U.S. oilseed prices and producer income so closely tied to China's import policies, negotiation of advantageous terms for trade in oilseeds and oilseed products as a condition of China's accession to the WTO has been a critical goal for our industry. In 1994, ASA conditioned its support for the Uruguay Round Agreement on a commitment from the administration that oilseeds and oilseed products would be a key priority in these negotiations. Oilseed processors and producers have worked closely with the U.S. negotiating team during the past 5 years to ensure that accession will provide a significant increase in access to the Chinese market. And in testimony before Congress, we have repeatedly placed China WTO accession at the top of our list of actions needed to make the current market-oriented domestic farm program viable.
Let me now briefly review the terms of the accession agreement negotiated by the administration. China has agreed to bind its currently applied duties on soybeans and soybean meal at 3 percent and 5 percent, respectively. For soybean oil, the in-quota tariff will be reduced to 9 percent from 13 percent, and the TRQ increased from 1.7 million metric tons in 2001 to 3.2 million tons in 2005. During this period, the over-quota tariff on soybean oil will be reduced from 85 percent to 9 percent, effectively eliminating the TRQ by 2006. The present monopoly on imports of soybean oil controlled by state trading enterprises will also be eliminated by 2006. In addition, soybeans are assured that tariff levels will not exceed those of competitor oilseed crops.
Page 103 PREV PAGE TOP OF DOC By reducing and binding tariff levels, these terms ensure that U.S. producers and processors will have access to the Chinese market on a predictable basis. This will prevent any arbitrary decision to suddenly raise duties or impose quotas, which could and does happen under the present regime. In addition, these terms represent the ''going-in'' position for the next round of WTO negotiations. The AOC will work with U.S. negotiators to improve on them in coming years. In addition, we may find China to be a key ally in the WTO on issues such as export subsidies, reform of State Trading Enterprises, and protecting trade in the products of agricultural biotechnology.
Beyond these industry-specific terms, China has agreed to conform its trading system to WTO policies requiring greater transparency, to broaden application of its Value Added Tax regime to domestic as well as imported products, and to abstain from subsidization of agricultural exports. We consider the overall package to be very beneficial to our industry. And we will look forward to working with the administration and Congress to improve on these terms in the next round of negotiations.
As we are all aware, Mr. Chairman, U.S. oilseed producers and industry members will not be able to benefit from this agreement when China joins the WTO unless Congress grants Permanent Normal Trade Relations. Failure to act positively on PNTR would cause perhaps irreparable harm to U.S. oilseed producers and processors by turning the most promising market for oilseeds and oilseed products in the 21st century over to our competitors in the European Union, Canada, South America, and Southeast Asia. U.S. producers and processors would lose out, while our competitors would not hesitate to seize the trade advantage, regardless of China's domestic policies or international behavior.
There is no question that China's record on labor standards and human rights, its foreign policy affecting Taiwan, and its sales of military equipment, must continue to be U.S. concerns. There is also no question, however, that denying PNTR to China will not address any of these concerns, and could even harden these policies. It would also lock in the inequitable status quo in America's overall trade imbalance with China, lock U.S. agriculture out of the expanded market access negotiated by our own government, and hurt millions of U.S. farmers and workers.
Page 104 PREV PAGE TOP OF DOC I cannot state strongly enough the consequences of a negative vote on PNTR. Congress would send an unredeemable message to U.S. agriculture, and to our foreign customers and competitors, that we will not compete abroad, that we will not look to the marketplace as an answer to low prices, and that we will increasingly depend on the Federal Government to support farmers and ranchers in the future. This is not a future any of us want.
Our industry is doing everything it can to ensure a yes vote on PNTR this month. We appreciate the support of this committee on this vital issue, and pledge our continued efforts.
Thank you, Mr. Chairman. I will be glad to respond to any questions.
Statement of Bob Stallman
Good morning, Mr. Chairman. I am Bob Stallman, president of the American Farm Bureau Federation and I am also a rice farmer and cattle rancher in southeast Texas. AFF3F represents more than 4.9 million member families in all 50 States and Puerto Rico. Our members produce every type of farm commodity grown in America and depend on access to customers around the world for the sale of over one-third of our production.
I appreciate the opportunity to speak before you today on the important subject of the completed United States-China bilateral trade agreement and China's accession into the World Trade Organization (WTO). Farm Bureau has long supported China's entry into the WTO on a commercially meaningful basis. Since we now have an accession package which is indeed commercially meaningful for both the U.S. and Chinese economies, we should accelerate this accession protocol.
This agreement is good for the American people. Having Chinathe largest emerging economy in the worldin the WTO will expand trade among all members leading to increased global economic prosperity, the very foundation of trade liberalization efforts. Having China in the WTO will advance the rule of law within China, and more importantly, will bind China to the rules of commercial law represented by the WTO. For China, this agreement will undoubtedly lead to increased economic and political freedoms. The promise, and premise, of trade liberalization is more than just that. It is the exchange of ideas and values that can lead to more fulfilling civic institutions and citizens.
Page 105 PREV PAGE TOP OF DOC We urge the House to grant permanent normal trading relations for China when that vote comes up next week. There are a host of reasons to do so, but none better than improving the daily lives of the American and Chinese people.
This agreement is good for American farmers and ranchers. China is broadly recognized as the most important growth market for U.S. agricultural exports. The Department of Agriculture estimates that China's admission into the WTO could lead to an increase of $1.7 billion in sales of agricultural products within one year, nearly doubling our current exports to China.
In addition, U.S. exports to the Asian region as a whole are expected to increase in the next few years as a result of China's accession into the WTO. This is likely to occur as Chinese consumption levels increase, domestic production patterns skew more to global prices, China ceases to employ export subsidies, and there is a commensurate decline in Chinese agricultural exports to the Asian region. This agreement may be with China, but it will have impacts far beyond Chinese borders.
China has agreed to several major concessions regarding agriculture. Many of the commitments go beyond what is currently mandated by the WTO.
(1) China will begin to reduce tariffs immediately (upon accession), from an average of over 31 percent to an average of 14 percent. All tariff reductions are bound and will be fully implemented by 2004.
(2) China has agreed to establish sizeable tariff rate quotas for bulk commodities such as wheat, corn, rice and cotton, which will give U.S. producers a chance to compete for that market, without import licensing schemes or quantitative restrictions.
(3) China has agreed that sanitary and phytosanitary disputes should, and will, be settled on a scientific basis.
U.S. citrus exports to China will be phased in over a period of two years. After that, citrus exports would be permitted based on U.S. export standards.
Page 106 PREV PAGE TOP OF DOC China will lift the ban on wheat and other grain exports from the northwestern U.S. by raising the tolerance level on TCK smut in bulk shipments.
China has agreed to recognize the U.S. certification system for meat and poultry which will allow these products access to all segments of Chinese markets.
(4) China has committed to eliminate use of export subsidies. This will be especially beneficial to U.S. producers as we export to third-country markets.
(5) China has agreed to increase trading rights for the private sector and will phase out the state trading of soy oil. The right for importers to act on their own, without going through a state agent or middleman, could lead to a sizeable increase in imports.
China has signed a bilateral agreement in which they have agreed to solid market access commitments for American food and fiber products. In some instances, they have gone beyond what their minimum commitments would be under current WTO rules. Even the more conservatives estimates point to these commitments as placing China in the ''top five'' of U.S. agricultural export markets by the close of the decade.
I'd like to also mention the commitments that the U.S. has retained, or strengthened, as a result of this agreement to protect the U.S. market from unfair dumping of products by the Chinese.
This agreement ensures that American farmers and ranchers will have strong protections against unfair trading practices, including dumping. The U.S. will retain our current antidumping methodology, which treats China as a ''non-market economy'' in the future, without the risk of a WTO challenge. This provision will remain in force for 15 years after China's accession into the WTO. Its important that we were able to retain this provision given the production characteristics of an economy dominated by state or quasi-state run operations.
This agreement also ensures that American farmers and ranchers will have substantial protection against import surges of Chinese products. This mechanism, labeled the Product-Specific Safeguard, will address increased imports that cause, or threaten, to cause market disruption to any U.S. industry or sector. China is an agricultural exporter, and we have had instances of Chinese agricultural exports disrupting the U.S. internal market (e.g. apple juice concentrate, crawfish). While the United States has had success through its own domestic dumping laws in the past to address these issues, this new provision will accelerate the review and adjudication process. This Product-Specific Safeguard provision can be applied unilaterally by the U.S. under legal standards that are lower than those of the WTO. However, having a tool and using a tool are two different matters. We urge the Administration to continue to use all tools available to combat the results of unfair production, marketing, and trade practices used by any exporting country.
Page 107 PREV PAGE TOP OF DOC The Chinese have offered American agriculture an historic opportunity which could greatly enhance our export potential at a time when it is drastically needed. It can positively impact farm income in the U.S. when the agreement goes into effect.
China has also offered the equivalent of this bilateral negotiation to many of our competitors. China will join the WTO, and our competitors will have the market to themselves unless Congress grants China permanent normal trading relations. Over the past few weeks, eight former Secretaries of Agriculture declared that ''rejecting PNTR would amount to unilateral economic disarmament and would be an abdication of American global leadership.'' 149 respected economists (including 13 Nobel Prize winners) have declared that ''China's entry into the WTO will help sustain the process of market-oriented reform that began there two decades ago.''
The vote for permanent normal trade relations is about trade. It's a vote for continuing the U.S. economic expansion and hopefully having that expansion flow into the U.S. agricultural sector. Farmers and ranchers are already hampered in developing export markets by our own unilateral sanctions and the unfair trading practices of other competing nations. We must ensure that we do not unilaterally disengage from this historic opportunity for American farmers and ranchers.
Statement of the Fertilizer Institute
The Fertilizer Institute and its 150 member companies thank you for the opportunity to summit this letter of strong support of permanent normal trade relations for China for today's hearing record.
As you may know, in 1999 U.S. manufactured commercial fertilizer was the largest U.S. agriculture commodity exported to China and the fourth largest item in dollar value exported to that nation after air and space equipment, power generation equipment and electrical equipment. As demonstrated by the attached U.S. International Trade Commission table, U.S. commercial fertilizer exports to China equal nearly $1 billion annually.
Page 108 PREV PAGE TOP OF DOC PNTR for China will allow the more than 8,000 workers employed by the U.S. commercial fertilizer industry and the more than 2 million farmer/food producer customers they serve to benefit from the market growth expected and needed to meet the needs of China's 1.3 billion consumers. Furthermore, PNTR is new leverage to ensure fair trade practices with China in the years and decades to come.
The companies, retailers and farmer cooperatives of the U.S. fertilizer industry ask for and urge that all members of the House Agriculture Committee vote for passage of China PNTR legislation. An affirmative vote for PNTR for China will help create expanded market access in China for U.S. fertilizer products and assure that agricultural tariffs are cut in half for U.S. farm products such as wheat, corn, citrus, soybeans, rice, apples, beef, poultry, pork, and many more. Many other unfair export barriers will be removed as well.
Furthermore, on April 28, U.S. negotiators completed important fertilizer market access negotiations in Beijing and returned with a signed agreement between the two great nations. The agreement will provide effective access to the Chinese market for U.S. produced commercial fertilizers. The agreement will be included as an addendum to the Agreement on Market Access between China and the United States of November 19, 1999. TFI and its membership are extremely pleased with the signed fertilizer market access agreement and grateful to all the Members of Congress that signed important letters of support on our behalf.
TFI and its member companies would especially like to recognize and relay for the record our appreciation of United States Trade Representative Ambassador Charlene Barshefsky, and her assistants Don Phillips and Bob Novick for their personal commitment, collective dedication, skills and leadership in achieving this critical agreement. Further comments regarding the agreement are attached.
However, this hard won agreement will not be effective if Congress does not approve PNTR for China. Again, TFI and its 150 member companies and nearly 8,000 industry employees relay our strong support for PNTR for China and urge Congress' affirmative vote for the critically important legislation for our industry, for U.S. agriculture and for our Nation's economic growth and security. If I can be of any assistance to you regarding this critical issue, please do not hesitate to contact me.
Page 109 PREV PAGE TOP OF DOC
Statement of Don Deichman
AMERICAN AGRICULTURE MOVEMENT OPPOSES CHINA PNTR
A letter to Congress from AAM national officers says corporate lobbies are using the farm export issue to distract Congress from the real questions. Citing one industry that has already been hard hit, the letter says clothing made from Chinese grown cotton is sewn by slave-wage labor with no environmental protection.
In the 1950's and 1960's, when U.S. agriculture was embarking on a global markets path, my parents' 4H and university extension involvement broadened my world view. Students from India, Japan and Sweden came to our Missouri farm for week long stays. In the 1970's, I was in Colombia with the Peace Corps for 2 years, and in Peru 1 year on a Fulbright grant for economics research.
A vivid memory from my living in a Colombian land reform agency compound is of the anxious moments when a night watchman, shotgun in hand, searched a grain storage area for a man who'd broken in. I wondered if the man had hungry children, and was glad he was ousted without incident. And I wondered more about complaints by agency agronomists and farmers that, right at sorghum harvest, imports of U.S. sorghum would surge, making their prices tumble. Our ''export oriented'' pricing policy comes from a world view that is narrowly competitive. Economic cooperation key to F.D.R.'s New Deal employed ''supply management'' to avoid market gluts and let farm prices be put in balance (parity) with other prices. But in the 1950's and 1960's, we were told we must feed an ''interdependent world.'' Interdependence within nations (an essential element of democracy) was not addressed. Nor is it now, as regards China. Journalist and historian William J. Gill, in his book, ''Trade Wars Against America,'' reminds readers that our Revolutionary War was about economic independence. A sense of community was put ahead of the global competitiveness that England wished upon us. Indeed, Gill documents that before the Civil War, Southerners sought free trade and an end to tariffs protecting our industrial base, which was in the North. They lacked the wisdom of Abraham Lincoln who, when advised to buy low-priced railway rails from foundries in England, said: ''If we buy our rails from England, we will have the rails, and England will have the money; but if we make the rails here, we'll have both the rails and the money.'' Lincoln's wisdom is an example for democracy. China PNTR is not.
Page 110 PREV PAGE TOP OF DOC
"The Official Committee record contains additional material here."
New camera copy provided, begin folio count at 27, page nos. 8895