Page 1       TOP OF DOC
66–075 CC






JUNE 21, 2000

Serial No. 106–55

Printed for the use of the Committee on Agriculture

 Page 2       PREV PAGE       TOP OF DOC

LARRY COMBEST, Texas, Chairman
    Vice Chairman
RICHARD W. POMBO, California
NICK SMITH, Michigan
FRANK D. LUCAS, Oklahoma
RAY LaHOOD, Illinois
JOHN R. THUNE, South Dakota
KEN CALVERT, California
BOB RILEY, Alabama
 Page 3       PREV PAGE       TOP OF DOC
DOUG OSE, California
ROBIN HAYES, North Carolina

    Ranking Minority Member
GARY A. CONDIT, California
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
MIKE McINTYRE, North Carolina
BOB ETHERIDGE, North Carolina
 Page 4       PREV PAGE       TOP OF DOC
KEN LUCAS, Kentucky
BARON P. HILL, Indiana
JOE BACA, California
——— ———
Professional Staff

WILLIAM E. O'CONNER, JR., Staff Director
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director



    Barrett, Hon. Bill, a Representative in Congress from the State of Nebraska, prepared statement
    Bishop, Hon. Sanford D., Jr., a Representative in Congress from the State of Georgia, prepared statement
    Canady, Hon. Charles T., a Representative in Congress from the State of Florida, prepared statement
    Combest, Hon. Larry, a Representative in Congress from the State of Texas, opening statement
    Smith, Hon. Nick, a Representative in Congress from the State of Michigan, prepared statement
 Page 5       PREV PAGE       TOP OF DOC
    Stabenow, Hon. Debbie Representative in Congress from the State of Michigan, prepared statement
    Stenholm, Hon. Charles W., a Representative in Congress from the State of Texas, prepared statement

    Glickman, Hon. Dan, Secretary, U.S. Department of Agriculture
Prepared statement

Submitted Material
    AgriBusiness Coalition for Foreign Market Development
    American Forest & Paper Association
    American Soybean Association
    Boyd, Hon. Allen, a Representative in Congress from the State of Florida, statement
    Coalition to Promote U.S. Agricultural Exports
    Hastings, Hon. Doc., a Representative in Congress from the State of Washington, statement
    National Cotton Council
    State of Florida, Department of Citrus
    U.S.A. Rice Federation
    U.S. Agricultural Export Development Council
    U.S. Grain Council
    U.S. Wheat Associates
 Page 6       PREV PAGE       TOP OF DOC

House of Representatives,
Committee on Agriculture,
Washington, DC.

    The committee met, pursuant to call, at 10:15 a.m., in room 1300, Longworth House Office Building, Hon. Larry Combest (chairman of the committee) presiding.
    Present: Representatives Barrett, Ewing, Smith, Lucas of Oklahoma, Moran, Thune, Cooksey, Gutknecht, Walden, Ose, Fletcher, Stenholm, Peterson, Dooley, Clayton, Minge, Hilliard, Pomeroy, Holden, Baldacci, Berry, McIntyre, Etheridge, Boswell, Phelps, Lucas of Kentucky, Thompson of California, and Baca.
    Staff present: Tom Sell, deputy staff director; Lynn Gallagher, senior professional staff; Wanda Worsham, clerk; Michael Neruda, Callista Bisek, Jason Vaillancourt, and Andy Baker.

    The CHAIRMAN. This hearing of the House Committee on Agriculture to review the USDA's Export and Market Promotion Programs will come to order.
    Mr. Secretary, we apologize for being a little late starting. There was an unanticipated vote at 10 o'clock. I want the record to show before I give an opening statement, Mr. Secretary, that we think we have swept the room of all glass bottles. I want the record to show and Members to be aware that the Chair will look very unfavorably on any comments the Members might make about the Secretary's canoeing expertise.
 Page 7       PREV PAGE       TOP OF DOC
    I do welcome you, Mr. Secretary, to the committee and thank you for agreeing to appear today to discuss USDA's Export and Market Promotion Programs. The Secretary will explain the various USDA Export and Market Promotion Programs and the extent to which they are used to assist U.S. farmers and ranchers. He will also talk about administrative or legislative improvements to the program and any new types of programs that might be used to expand export market opportunities for U.S. farmers and ranchers.
    In addition, the Secretary will compare the Export and Market Promotion Programs utilized by other countries, especially the European Union with the USDA programs. USDA estimates that U.S. agriculture exports will total $50 billion in 2000, and that the expected trade surplus will be $11 billion, the lowest level since 1986. Because of the reduced value of agriculture exports, it is important that USDA Export and Market Promotion Programs are utilized to the maximum extent.
    This hearing will provide Members an opportunity to hear USDA's explanation of the programs available to the United States and USDA's comparison to those programs to programs operated by other countries.
    As I said following the World Trade Organization Ministerial in Seattle last year, I believe the Agriculture Committee should review all of our options for all of our own programs. I want to look at everything that is available to us and to consider steps to ensure our farmers are not disadvantaged. Our farmers can compete with any farmers in the world, but cannot and should not be forced to compete with other governments.
    If there are any other statements from Members, they will be included in the record at this time.
    [The prepared statements of Members follow:]
 Page 8       PREV PAGE       TOP OF DOC
    Mr. Chairman, thank you for holding this timely hearing.
    Our Trade Representative is currently preparing for the next meeting of the WTO Agriculture Committee at the end of the month. This will be the first opportunity for WTO member countries to formally present negotiating positions under the WTO's built-in agenda.
    We were all disappointed last December in Seattle with the failure to reach a framework agreement for new negotiations on agriculture.
    Until we begin to see more meaningful progress towards the further reform promised in the Uruguay Round, we must ensure that the programs we will examine today are adequately funded and that the Secretary has the tools needed to keep our farmers and ranchers competitive.
    These programs are a great way to leverage scarce Federal resources to create or enhance overseas markets and counter the continuing negative impact of low demand overseas.
    I look forward to the discussion. Thank you, Mr. Chairman.
    Thank you, Mr. Chairman for holding this very important hearing to review the USDA's Export and Market Promotion Programs. American farmers and ranchers depend on exports to market their products.
    First, let me thank Chairman Combest for making agriculture trade a priority of the full committee during this Congress. He not only understands the importance of trade to America's farmers and ranchers, but is putting in the long hours necessary to ensure that their products get access to the markets abroad.
    Despite the fact that United States agriculture is the most productive in the world, it has been held back by indecisive administration export policies. Members of this committee continue to speak with one voice when it comes to agriculture exports—and that message is that we need to expand agricultural exports. Many of us on this committee have been strong and consistent voices for a focused administration trade policy.
 Page 9       PREV PAGE       TOP OF DOC
    Our agriculture producers feed the world but are being ''stopped at the door'' by the current administration's poor foreign and domestic policy choices. The administration continues to use agricultural policy as bargaining chips to push their own political agenda. But the only groups of people suffering under such actions are the American farmers and ranchers. Our agriculture producers should not have to assume the responsibility of enforcing domestic and foreign policy.
    As far back as the 105th Congress in 1997, we have been strongly urging the administration to support presidential fast track negotiating authority. Regrettably, our pleas have fallen on deaf ears over at the White House due to concerns from labor and environmental groups.
    However, on the positive side, I would take this opportunity to once again thank Secretary Glickman and his staff for their support during the debate on granting permanent normal trade relations with China. With the cooperation of USDA and USTR—in concert with agricultural interests Congress recently passed a bill granting China PNTR. That trade agreement should prove to be very beneficial to American farmers if enacted into law.
    Developing and sustaining a productive export market is critical because these markets provide outlets for our domestic products, while at the same time creates jobs in processing and transportation. Without question, the export market is the key to the future profitability of agriculture.
    I am particularly encouraged by the success that Nebraska's current Governor, Mike Johanns, and Director of Agriculture, Merlyn Carlson, have had with the use of MAP and FMD funding. Nebraska has been quite effective in utilizing money from these programs focused on small- to medium-sized companies, and, in Nebraska's case, actually down to the producer level.
    I commend the Foreign Agricultural Service's efforts with regard to the MAP and FMD programs. Both are excellent tools and as long as the size of the companies utilizing money from these programs is monitored, they can add considerably to our ability to market our agricultural products as attested to by states such as Nebraska.
 Page 10       PREV PAGE       TOP OF DOC
    Lastly, agriculture producers need protection in trade agreements. Of these, multilateral agreements are of the highest importance. We need WTO negotiations to focus on science based import/export requirements for our agriculture products. Our products continue to encounter other nations' sanitary and phytosanitary barriers, that have no scientific basis.
    It is now time to follow through with the promises we made to our farmers and ranchers. Let's push for the export programs that strengthen our economy and benefit the hard working American farm and ranch families.
    Thank you Mr. Chairman for holding this very important hearing. I look forward to hearing testimony from the witness panel.
    Mr. Chairman, thank you for holding this hearing and thank you Mr. Secretary for coming before the committee to present a review of the USDA's export and market promotion programs.
    American agriculture is in a very serious situation. The current problem is threefold: (1) the inability to purchase products by the Asian economies has resulted in lost sales; (2) as other countries subsidize their agriculture up to five times what the American farmer is subsidized, they sell their surplus onto our markets; and (3) concentration of firms that sell to and buy from farmers disadvantage those farmers with near monopolistic pricing.
    Michigan farmers tell me that they don't want Government subsidies; they want a fair price for the commodities they produce. One thing that means is that we have got to do a much better job writing our trade agreements than we did in the NAFTA and the last GATT round. We must expand sales to existing customers and find new customers.
    As a result of these problems, farmers have faced 2 consecutive years of seriously depressed prices and world stocks of agriculture products continue to grow. And it doesn't look promising for this year's crop. Income levels are down dramatically from 1996. Commodity prices in some cases have dropped to 40-year lows and exports are 9 percent lower than last year. Just as was the case in the 1980's, basic farm programs cannot cope with a problem of this magnitude. While the Department of Agriculture is purchasing some surplus commodities for domestic and international donation, these steps aren't enough to turn the situation around.
 Page 11       PREV PAGE       TOP OF DOC
    Mr. Chairman, through you to the Secretary; Mr. Secretary, please give this committee your suggestions of changes in Federal agriculture policy. Thank you.
    Through the Market Access Program, the Florida citrus industry has been able to dramatically expand the market for Florida citrus products around the world. The MAP has been an extremely useful tool to enhance the value of citrus exports and create new markets for agricultural products.
    The program has played an integral role in nearly the value of fresh Florida grapefruit exports since the program's origination. Furthermore, it is estimated that the return on the MAP's investment has been 7 to 1, to that is for every MAP dollar, the agricultural producer receives $7 in return.
    Florida citrus growers understand the importance of this program, and that is why today the Federal MAP dollars that assist citrus exports are matched over 100 percent by grower dollars. Furthermore, the marketing done by the Florida Department of Citrus with these Federal dollars and the grower match, is 100 percent generic there are no branded promotions of Florida citrus with Federal money. The MAP assists all citrus producers in my state, from the smallest to the largest grower. The MAP is the type of export assistance that the USDA should pursue in assisting American agriculture to compete against unfair trade barriers and maintain a positive balance of trade.
    I urge my colleagues to consider H.R. 3593, which I have cosponsored that would build on the successes of the MAP by expanding MAP funding from its current authorized level of $90 million to $200 million to allow for further exports of U.S. agricultural goods abroad.
 Page 12       PREV PAGE       TOP OF DOC
    I commend Chairman Combest and Ranking Member Stenholm for holding this hearing to review the USDA's export and market promotion programs. I look forward to the testimony of Secretary Glickman on this important area of American agriculture
    Since passage of the 1996 farm bill, U.S. farm policies have increasingly focused on global competition and the promotion of U.S. agricultural products in foreign markets. In this global food race, the Market Access Program and Foreign Market Development Cooperator Program need to operate effectively bring benefits to American food exporters and ultimately to American farmers.
    Farmers depend on exports for about 25 percent of their gross farm the same time that U.S. farm policy has forced them to become more market oriented. A primary rationale for these programs under review here today is to help develop and maintain overseas markets.
    USDA must use its export programs to address low prices and large the production sector.
    Again, I thank Mr. Combest and Mr. Stenholm for holding this hearing. I forward to working with this administration to see that our export policies are all of American agriculture.
    Mr. Chairman and Ranking Member Stenholm, I appreciate the opportunity to review the U.S. Department of Agriculture's export and market promotion programs. These programs are very important to the producers in my district and I believe we should do everything we can to promote U.S. agricultural products on the global market.
    Our Nation's agricultural trade surplus is at the lowest level since 1987. While our forecasted agricultural exports are predicted to be $50 billion for this year, it is expected that we will import $39 billion, resulting in a surplus of only $11 billion. Because of the reduced value of our agricultural exports and this low surplus, it is imperative that U.S. export and market promotion programs be used to the fullest extent. I strongly support the Export Enhancement Program, the Dairy Export Incentive Program, Export Credit Guarantees and the Market Access Program, which each provide important opportunities for U.S. agricultural products on the world market.
 Page 13       PREV PAGE       TOP OF DOC
    I would like to welcome Secretary Dan Glickman to today's hearing and I look forward to his export testimony. I understand he will provide a review of the administration's efforts to increase U.S. agricultural exports through our Nation's key export and market promotion programs.
    The CHAIRMAN. Again, thank you very much, Mr. Secretary, and I would recognize you for an opening statement.
    Secretary GLICKMAN. Thank you, Mr. Chairman. My first request is could you please ask Congressman Pomeroy to sit down at the table next to Mr. Galvin. It would be of great help to us.
    First of all, thank you for asking me. With me, of course, are Under Secretary Gus Schumacher and the Administrator of the Foreign Agricultural Service Tim Galvin. I am going to ask them to make a couple of quick remarks after I finish my statement because they will have a couple of specific things on some of the programs that we will talk about.
    First of all, if I might, as you know, the President signed the crop insurance bill yesterday. I want to thank this committee for their help. While not every part of the bill—the non-crop-insurance part, there was total unanimous agreement on. I do think that the risk management and crop insurance sections represented an excellent cooperative effort between you, Congressman Stenholm, other members of this committee in a bipartisan sense to try to work those out. Among other things, the Federal subsidy to buy up coverage will rise about a third. It will effectively reduce the cost of buy-up policies by about that amount. It will include new crops. It will deal with multiple-year losses, a lot of things that I think will be helpful and perhaps will help obviate the need for future emergency assistance based on natural disaster, and so I want to thank this committee for everything they did, and we will do our best to implement that bill as completely and as expeditiously as possible.
 Page 14       PREV PAGE       TOP OF DOC
    There are a lot of different provisions in it, as you know, beyond just the supplemental AMTA payments. So some of them are quite new. Certainly the ones that are—we have a lot of experience in a lot of the programs, and we will implement those expeditiously in compliance with the bill that was passed.
    Let me just make a couple of comments. One is that trade is not the only part of our farm safety net. It is a critical part of it, and as of in April of last year, the President announced on the area of sanctions reform sweeping sanctions reforms that are already beginning to open new foreign markets to U.S. agriculture exports. Despite continuing sanctions on most other products, American farmers and ranchers are now able to sell their commodities to Iran, Libya and Sudan. The broad easing of sanctions could bolster U.S. agriculture exports by as much as $500 million a year. Already there have been sales of 29,000 tons of Hard Red Winter wheat to Sudan, 20,000 tons of Durum to Libya, and more than 600,000 tons of corn to Iran.
    In general, commercial exports of food and other human necessities should not be used as tools of foreign policy except under the most compelling circumstances, and the administration has extended this policy to existing sanctions on a case-by-case basis. We are aware of the extent of the debate on the issue of Cuba on Capitol Hill right now. As I said, the President believes that food and medicine should not be used as a tool of foreign policy except under extraordinary circumstances, and we would like to work with you to put this policy in place in a way that does not unduly and unwisely limit the discretion of the President in national security circumstances. We want to work on those issues.
    In the area of Market Access Programs for the year 2000, USDA allocated $90 million in Market Access Program funding, which was what was provided in the appropriations bill, for export promotion activities to 65 U.S. trade organizations, State and regional groups and cooperatives. We also provided for $33 million in overseas market activities under the Foreign Market Development Program. This year USDA also initiated a Quality Samples Program that assisted U.S. exporters in introducing new products to potential buyers.
 Page 15       PREV PAGE       TOP OF DOC
    Today we are announcing actions to improve the cleanliness and competitiveness of U.S. wheat. USDA will immediately decrease the acceptable maximum dockage levels in wheat purchased for U.S. Foreign Food Assistance Programs. This will tell the world that the U.S. wheat meets the highest standard. USDA will also seek public comment very soon on whether to establish an official U.S. standard for maximum dockage levels in exported wheat, which we currently do not have right now. Cleaner exports will help create greater demand for U.S. wheat and help U.S. wheat suppliers compete internationally.
    USDA is also seriously considering using existing authorities, statutory authorities, to help exporters provide the highest quality and cleanest grain in the international marketplaces. While no final decisions have been made, we are exploring the possibility of using a small amount of export enhancement funds to provide this assistance, and we will be working on this, and we intend to keep the committee fully informed on those proposals.
    We continue to pursue our bilateral and multilateral efforts around the world to reduce trade barriers and create new export opportunities while closely monitoring compliance by other countries with Uruguay Round commitments.
    As you know, last year we helped reach two major trade agreements with China. Under the agreement on U.S.-China agriculture cooperation, China agreed to remove long-standing bans on U.S. wheat, citrus, and meat and poultry. As a result, the first direct exports of U.S. meat and the first exports of California and Florida citrus were recently shipped to China, and China purchased 50,000 metric tons of U.S. wheat from the Pacific Northwest. In addition, USDA helped negotiate the U.S.-China WTO accession agreement, which offers major benefits for U.S. agriculture. We were disappointed that the House Committee on Appropriations voted against providing the monitoring funds the President requested to help ensure that China meets its WTO obligations and to fund other trade compliance efforts.
    We also urged the Senate to take action on the China PNTR bill as quickly as possible. Yesterday the President, along with myself and Charlene Barshefsky met with a key bipartisan group of Senators to deal with this issue. I would also point out that this morning the head of the Chinese Inspection Quarantine Office is in Washington. He is in USDA headquarters, and we are working on a variety of issues, bilateral issues, that we have with China as well.
 Page 16       PREV PAGE       TOP OF DOC
    We are preparing for the new round of WTO negotiations. We have consulted with various agriculture groups as well as Congress to formulate the U.S. position and strategy for these negotiations. The U.S. will play a leadership role, as we did in the Uruguay Round, in pressing for significant trade policy reforms, including eliminating export subsidies in agriculture, reforming State trading enterprises, improving market access, tightening rules on domestic support, and facilitating trade in new technologies including biotechnology. We want to continue to work with you on these.
    Over the past 2 years, USDA has used its Export Credit Guarantee Programs to support sales of more than $7 billion in U.S. agriculture products. In fiscal 1998, during the height of the Asian financial crisis, we made $1.5 billion in credit guarantees available to exporters for sales to South Korea alone. Korean importers used more than 90 percent of that amount for commercial purchases of U.S. agriculture products.
    Over the past 2 years, exporters to South Korea and the countries of Southeast Asia have used USDA credit guarantees to sell $2.6 billion worth of American oilseeds, wheat, corn, cotton, meats and other products. As a result of these efforts and rising world demand combined, beef, pork and poultry exports are forecast to top $6.6 billion this year, up from $5.8 billion last year.
    U.S. beef is particularly benefiting from both higher prices and strong overseas demand. While pork and poultry are still recovering from losses incurred during the Asian and Russian financial crises, both are forecast to at least equal, if not exceed, last year's market share figures.
    For fiscal year 2000 to date, USDA has announced the availability of more than $5 billion in Export Credit Programs and export credit guarantees for sales to countries where lack of credit might otherwise present a barrier to sales.
    With the help of USDA's Dairy Export Incentive Program, U.S. exporters sold more than 160,000 tons of dairy products valued at $336 million in fiscal 1999. Under the DEIP Program, USDA awarded bonuses of $145 million to help U.S. dairy producers and exporters to compete in overseas markets. For fiscal year 2000 to date, nearly $69 million in bonuses have been awarded, supporting around 77,000 tons of U.S. dairy products.
 Page 17       PREV PAGE       TOP OF DOC
    We continue to support legislation we previously proposed that will authorize us to reallocate unobligated Export Enhancement Program funding in the last quarter of the fiscal year to be used for U.S. foreign food assistance activities, including Public Law 480, and Food for Progress Programs, and for purchasing commodities to replenish the Bill Emerson Humanitarian Trust.
    In the area of hunger abroad, last year USDA used its food programs to move nearly 8 million metric tons of farm surplus to help relieve hunger and suffering abroad. This was 4 times the previous year's tonnage and the largest quantity in recent memory. It included more than 5 million tons of wheat and wheat products donated under the President's Food Aid Initiative. U.S. commodities were shipped to 50 countries, from the unprecedented assistance package for Russia to food relief for Kosovo refugees, famine victims in Africa and North Korea, and hurricane victims in Central America and the Caribbean.
    Once again this year, USDA will provide significant amounts of food aid to needy countries, including about 4 million tons in 416(b) donations of wheat, rice, soybeans and soybean products, and milk powder.
    I would like to make a special point about Africa. The African Growth and Opportunity Act provides the opportunity for this country to help countries in Africa, and we at USDA are making a special effort to try to deal with sub-Saharan African problems both with respect to trade issues as well as to the serious hunger issues which exist in East Africa. We are talking now about making—I may make a trip sometime this summer to Africa to deal with both of those particular situations.
    But at the same time, our farmers and ranchers face continued challenges at home, and of course we do internationally as well. We must continue our efforts to do more with less as resources for administering our Export and Market Development Programs have not increased. In this last year we received two Hammer Awards from the Vice President for improving the efficiency of our export programs through the development of the Unified Export Strategy and a streamlined process for advancing funds to Private Voluntary Organizations for humanitarian food assistance.
 Page 18       PREV PAGE       TOP OF DOC
    However, as much as we want to make our programs work better and less expensively, this will not change the fact that our largest competitors outspend us for market development activities. I think you have perhaps the specific numbers, but the European Union outspends the United States by about $92 million for promotion activities, and the Cairns Group outspends us in promotion activities by over $300 million. If the United States is going to be competitive, especially as nations compete for access to the opening Chinese market, we will need to join with the private sector in increasing our efforts to develop markets.
    In conclusion, let me just say while our export programs will never be a sole substitute for an adequate domestic program safety net and for strong global markets themselves, we must ensure that the programs we administer are effective and efficient and allow our producers to be competitive in the world markets.
    That concludes my statement. I didn't know perhaps that Mr. Galvin may want to make a couple of comments to some of the specific programs.
    [The prepared statement of Secretary Glickman appears at the conclusion of the hearing.]
    Mr. GALVIN. Thank you, Mr. Secretary.
    Mr. Chairman, you had asked about some possible changes in the operation of our programs that could improve their efficiency and effectiveness, and, in fact, we are looking at a number of changes. Some of those would require legislation to bring them about, however. For example, under our GSM Program, we are considering allowing guarantees against financial instruments other than letters of credit. This could include, for example, warehouse receipts, bonds, and other negotiable documents. We are also looking at changing the prohibition against a single bank entity issuing a letter of credit and being the recipient bank institution.
    Under our Suppliers Credit Program, we would like to extend credit coverage from 180 to 360 days. Again, this would require legislation.
 Page 19       PREV PAGE       TOP OF DOC
    Under the Food for Progress Program, currently the effectiveness of that program, we believe, is limited by some of the legislative caps on the program, for example, the maximum tonnage of 500,000 tons; the limit of CCC finance freight cost of $30 million; and the limit of $10 million in administrative cost to cooperative sponsors.
    Under the 416 Program, we believe that program would be aided if we could cover the administrative costs of private voluntary organizations that participate under the program, and, again, that would require a legislative change.
    I might add, though, that we are taking some steps to the extent we have discretion to try to improve the operation of these programs. For example, under the Suppliers Credit Program, we have increased coverage from 50 to 65 percent of the value of the transaction, at least for the short-term financing of 180 days, and under the GSM Program, we have moved to allow regional banks to be eligible for credit guarantees when banks in the target country do not have sufficient credit limits.
    Of course, we would certainly like to work with you and the staff on some of these recommendations. Thank you.
    Secretary GLICKMAN. Thank you, Mr. Chairman.
    The CHAIRMAN. In that we have not received those, Mr. Galvin, we would appreciate it. Obviously if there are specifics, we would like to work with you on those.
    Mr. Secretary, the Export Enhancement Program is authorized through 2002, and this year the amount authorized is $579 million. Of that, less than $1 million has been used, and, in fact, less than $10 million of EEP funds have been used since 1996 while $2 billion was authorized from 1996 through 2000. What does the administration have planned for the unspent EEP funds?
    Secretary GLICKMAN. Mr. Chairman, we have the authority to reallocate those unspent EEP funds to, let's say, market promotion and food assistance both, and that is not permitted under the statutes, so those funds just basically go unspent. I have made a comment earlier that one of the things we are looking at is to use EEP as a way to provide assistance for exporters to provide cleaner wheat in the export markets by providing some upfront assistance.
 Page 20       PREV PAGE       TOP OF DOC
    We haven't used EEP very dramatically because we think that the Export Credit Program is the big kahuna when it comes to selling our commodities overseas, and we have felt that the EEP is one that actually ends up reducing the price of the commodity in the marketplace, and doesn't affect the markets in a very positive way, and makes us much more vulnerable as we try to get the Europeans to do away with their export restitution programs. But the fact is that there are a lot of EEP monies available there that could be used in food assistance and export promotion activities where we are being dramatically outspent by our competitors.
    The CHAIRMAN. Have there been specific requests made to the appropriate committees for the reallocation?
    Secretary GLICKMAN. In the budget proposal we have asked for that authority for the last 2 years.
    The CHAIRMAN. You said that the Credit Program is the big kahuna, but using EEP funds would not take away from the effectiveness of the Credit Program.
    Secretary GLICKMAN. No. The limits have been in the Market Access Program where we have been capped $90 million, where we think we can spend significantly more money, and there are some other programs along the same line.
    The CHAIRMAN. One of the reasons we are having this hearing is because we are so dramatically outspent, and I think we need to send a message that we would like to reduce that level of being outspent by seeing other countries dramatically reduce their export subsidies. But I think that it also needs to be very clear that we intend to look at every possible way we can to be competitive. If, in fact, that has to be the only option, then I do not want us to pass up the chance to utilize that.
    I understand the administration will not submit its annual report to the WTO on aggregate measures of support for the 1998 marketing year until the end of the year. When this report is submitted, will the U.S. market loss payments be placed in the amber box or the green box category of subsidies?
 Page 21       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. I would ask Mr. Galvin to respond directly.
    Mr. GALVIN. Mr. Chairman, on that point we still have not made a decision as to how those payments will be notified.
    Secretary GLICKMAN. I have delayed the making of that declaration, quite frankly. Other countries in the world are not so up to speed in time as we have been, and I have decided that there is no reason we should lead with our chin on this one either.
    The CHAIRMAN. We are concerned, obviously, how we are going to help our farmers deal with market losses if the most nontrade-distorting assistance is to be limited by our own actions. Again, I think the overall—message I would like to send, maybe not anybody else, but the message I would like to send is if we are going to get into this bidding war with other countries on agriculture exports and agriculture subsidy programs supporting our own producers, if that is the only option, then I am again personally of the opinion that I want to make sure we are substantially in that game. I do not think it is best for us. I don't think it is best for them. I don't think it is best for world trade. But it certainly is not best for our producers to continually be outspent so dramatically, and certainly in view of the fact that while discussions are ongoing, discussions have nothing to do with the actual trading, and I am concerned that we don't just continue to wait in good faith for others to make changes.
    Secretary GLICKMAN. Mr. Chairman, one, I want to make sure everybody knows that the bill that was just passed and signed into law is clearly within the limits permitted under WTO.
    The CHAIRMAN. You are speaking of the bill that was signed yesterday?
    Secretary GLICKMAN. Yes, that is correct. What I am saying is certainly nothing we have done to date that in any way abridged those limits or caps.
 Page 22       PREV PAGE       TOP OF DOC
    Two, I am extremely sensitive to what you just talked about. That is one of the reasons why I have delayed defining the colors of boxes, how many there are or where our programs will go into.
    Now, we will be shortly making some WTO proposals, and we will probably be addressing in a general way some of those issues in those proposals. We need to because we need to get—the primary utilization of these export distorting measures are done by our friends in the EU.
    The CHAIRMAN. Mr. Stenholm.
    Mr. STENHOLM. Good morning, Mr. Secretary, Mr. Galvin, Mr. Schumacher. Let me follow up a little bit on the chairman's question and make an observation. When we changed our farm program in 1996, we were changing it to a market-oriented. We have come up with market loans which theoretically say that any purchaser out in the world can now buy our—let's use wheat for an example—our wheat at the market rate. And yet we have seen—we have lost market share over the last 4 years. The United States has lost market share. By the same token, the Cairns Group has increased market share by considerable amounts, which suggests to me that there is something missing in the pricing structure, that this idea that there is a world market, that if somehow we just price our commodity at that market, we are going to sell or at least maintain market share, we haven't done that.
    Australia has increased their market share rather substantially, and on the chart we have in our material today, it shows that in 1998, for example, as you pointed out, Mr. Secretary, they outspent us about $300 million on market promotion. That suggests to me that market promotion is more important in selling commodities than price, or am I missing something?
    Secretary GLICKMAN. I don't think you are missing anything, but I think fundamentally the largest factor affecting our agriculture export generally the last few years has been extraordinary strength of the American dollar, which has made it very difficult on the export side anyway and has counted for major bouts of payments deficits which we have seen. Since agriculture tends to be the most export-sensitive part of the U.S. economy, that dollar valuation has been a problem. That is one of the reasons why the other collateral programs are so critical, the Credit Programs, the Market Promotion Programs, Food Aid.
 Page 23       PREV PAGE       TOP OF DOC
    Mr. STENHOLM. Let me follow that, because obviously that is a very credible answer with one exception, Mr. Secretary, and that is if the dollar is incredibly strong, then any buyer would take that into consideration and would continue to lower the price of our wheat until we stay competitive in the international marketplace. You factor that in. If the market is working or has a chance to work, then the dollar is factored in, and theoretically you would ultimately go to price our wheat at zero, give it away, because the farmer would receive a loan deficiency payment equal to that loan.
    Secretary GLICKMAN. I think there has probably been some of that, in particular the wheat markets, less in some of the other markets, the corn and the soybean markets where the competition is not quite as great as us. I also think that in this context you also have to factor in other things, the effect of State trading enterprises which has some impact on the pricing side of the picture. In the case of Australia, they have had the largest wheat crop in their history, 3 years in a row, a massive increase, which has resulted in a significant amount of wheat put out there in the marketplace.
    One of the reasons why I have wanted to push the issue of clean grain going overseas is because that is a problem for us. I would like to think chauvinistically we have the best and cleanest grain in the world, but the fact is when you go around the world, it is not always true. So we have to do what we can to try to deal with these problems.
    Mr. STENHOLM. I think we have got to keep looking at this, though, because you have seen the charts now that made create a lot of interest. You can go back 25 years, and you will show that it doesn't matter really what we do, what we price, how high we price, how low we price, we basically maintain the same market share. The rest of the world adjusts to whatever we do, and, therefore, that is an argument that many use for saying that we can increase our loans because it is really not going to make any difference. We will not price ourselves out of the market because no matter what we do—and now you have got where we have—what theoretically was advertised as a market system. We are still losing market share.
 Page 24       PREV PAGE       TOP OF DOC
    I think ultimately we have got to come up with some answers, and if market promotion—and this is the chairman's—if they and our competitors are going to keep using State trading enterprises and using what they are going to use, then we as policymakers are going to have to find which tools work better and start using those and be less dependent on things that we are now dependent on because they aren't working.
    Secretary GLICKMAN. I would say a couple of things and then Mr. Schumacher. I agree with you, and I think we underfund our Export Promotion Programs and our Market Development Programs. I don't think you can paint this all with a broad brush. Some markets we are actually doing better on. A lot of the bulk commodities we are not doing very well on, but on the value-added products, fresh fruits and vegetables, the meats, we are actually increasing market share. What we are coming down on is the bulk commodities, wheat, corn, soybeans and feed grains to some extent. It kind of depends commodity by commodity.
    Mr. STENHOLM. I readily acknowledge that. If you get into the value added, we are doing better, and that is something I think we have really got to look at and how we can build on those areas where we are doing better, and perhaps less emphasis on the bulk commodity. But by the same token, we better start looking at which tools work better for bulk commodities, too.
    Mr. BARRETT [presiding]. Thanks, Mr. Secretary, for appearing before the committee again. Good to see you back. Initially I wonder if you might like to enlighten the committee as to a certain canoe trip with a well-known singer/actress on a river. I know that the USDA is concerned about clean rivers, but would you care to share any comments with the committee?
    Secretary GLICKMAN. I would just say we ought to let her sing, and we ought to let me do my own thing.
    Mr. BARRETT. It is interesting you were able to lure her back with a striped bass.
 Page 25       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. Those weren't my words either. I want you to know that.
    Mr. BARRETT. It is always good to see you here. I was particularly pleased, too, with your announcement today improving the cleanliness and competitiveness of U.S. wheat. That is good news.
    With the passage of PNTR in the House, and hopefully the passage in the Senate, if it becomes law, will it—how will it affect our Export Programs in any way, if at all? Can you share a little with us?
    Secretary GLICKMAN. Perhaps Mr. Galvin or Mr. Schumacher may want to comment specifically.
    Mr. GALVIN. We have estimated that as a result of the agreement, we will see U.S. agriculture exports increase by $2 billion a year by the year 2005, and, of course, as the market opens, we hope that our cooperator organizations that we support will reorient their programs more and more toward China and some of the other growth markets. And indeed we are already seeing some of that reflected in the proposals that are being submitted for funding to FAS under what is called our Unified Export Strategy. Under the UES, that is where we make determinations as to how much to allocate to the different organizations, under MAP, under the Cooperator Program, that sort of thing.
    Secretary GLICKMAN. I would say this. It is kind of interesting. The EU sees this also as a major opportunity. They are probably going to be pumping in a lot of export promotion/market access funding themselves, and we just have to make sure we have the resources to be competitive there. This is a market, I think, that has great opportunity for us, but other parts of the world will also view it in the same fashion.
    Mr. BARRETT. We are not necessarily competitive now, and you are suggesting it could get worse?
 Page 26       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. I am suggesting—my judgment is I felt for some time as the Chinese economy moves more to an industrialized economy, there are enormous market opportunities there. For example, our citrus is now in China. I am told that it is the hottest item in the grocery stores where it is being sold, but my guess is that the southern European producers of citrus are going to see those markets as great opportunities for them and are going to do their best to promote that in their using all the tools that they have. The tools that we have on some of these promotion programs have not—funding hasn't been increased in many, many years.
    Mr. BARRETT. Gus, any comment?
    Mr. SCHUMACHER. Yes. Again, some years ago I used to be commissioner in a State where we were using $200 million in Market Access Programs back in the mid–1980's. Frankly, that worked very well. We really worked very hard, and that was very helpful to the export even in my small State. That was very helpful to all the major commodities. That was ratcheted down in 1992 to $90 million.
    I think, as the Secretary has indicated in his trip, we have worked very hard in China. It is not just the EU that is looking at that for value-added products, but Australia and New Zealand and our competitors in Thailand, in Malaysia are looking at that, and they are really ratcheting up. The Secretary's testimony indicated, I think, the Cairns Group was spending over $300 million in export promotion. That is a lot more than 90 million, and they are focusing a lot on Asia as Japan comes back and as China opens up.
    We have wonderful opportunities in China, but we have to put the pedal to the metal there as well.
    Mr. BARRETT. You mentioned MAP, and, of course, with the appropriations bill coming up very soon, perhaps as early as next week, MAP will be under siege again. No question about it. Can you provide the committee with information that these funds are being utilized by only small and medium-sized companies? Can you give us some specific information?
 Page 27       PREV PAGE       TOP OF DOC
    Mr. SCHUMACHER. We would be very pleased to do that.
    Mr. BARRETT. Are there any plans or intentions by the Department to penetrate any new markets through MAP?
    Mr. GALVIN. If I may, Mr. Chairman, no new markets, but, again, we are trying over time to shift resources into those growth markets which right now are basically in Latin markets and in Asia. So over time we see the dollars flowing to the markets that we think offer the highest payback.
    Mr. BARRETT. Is it not China that is the largest growth market today?
    Mr. GALVIN. I think it is, annual growth of 8 to 10 percent a year and, of course, 1.3 billion people; so considerable growth potential there.
    Secretary GLICKMAN. We have an Agriculture Trade Office in Shanghai, in Guangzhou, Hong Kong and Beijing. This is a full court press in China, and as I said, the head of the quarantine operations for the entire country is in USDA headquarters today talking about some of these issues.
    Mr. SCHUMACHER. If I may, one market that continues to get overlooked by many people and certainly very important to your State is Mexico. We are continuing to do very, very well in Mexico on basically heartland products, beef, meats, and grains, and they continue to look to the United States. We will be doing a little over $5.5 billion this year, and that is continuing to grow very rapidly, Mr. Barrett.
    Mr. BARRETT. Thank you. My time has expired. The gentleman from North Carolina Mr. Etheridge.
    Mr. ETHERIDGE. Thank you, Mr. Chairman. I appreciate your holding this hearing.
    Mr. Secretary, good to see you again today and those of you here.
 Page 28       PREV PAGE       TOP OF DOC
    Let me shuffle my papers here a minute and ask a question, if I may, and go back to the issue that the Chairman was just talking about, if I may, and talk for just a minute and get a little more explanation on the MAP Program, because you talked about how these levels have dropped and how our competitors are doing such an impressive job. I guess we might say in the full press, which I think is from what Mr. Stenholm said earlier, if you look at the numbers, I think it is having an impact.
    I guess the first question I would ask is do you feel the Department could effectively utilize some increase in these funds? Everybody has talked around the issue. Nobody has talked about it. If there was an increase in funding, and you had it, where would you utilize those resources?
    Secretary GLICKMAN. The answer is yes. I will tell you quite honestly—how do I say this without being too defensive about it—perhaps we haven't asked for enough money ourselves in the budget process as well, but there are a lot of competitive pressures there, and the budget process involves a lot of different programs. But the fact is we could use more than $90 million.
    Mr. ETHERIDGE. Let me follow that up, if I may.
    Secretary GLICKMAN. The statute does limit us to $90 billion. One of the things that we need to do is to show what an increase of funds would actually do specifically so it would give you some help in increasing those dollars.
    Mr. ETHERIDGE. That would be helpful if you could share that.
    To follow that up, may I ask how do you think our trading partners would react? And I know that is asking you to give some ground, but do you think it would require them also to focus a little bit more on reaching a new WTO agreement on agriculture?
    Secretary GLICKMAN. I am not sure that an increase of market promotion activities would be a big negotiating tool, although they would probably see the flexing of U.S. muscles as something that would be of concern to them. I think the WTO discussions are far more related to issues like export subsidies, the use of State trading enterprises, those kinds of issues, than probably this one. And, therefore, I guess my point is we could increase these funds, I think, without jeopardizing the WTO process. And they are also in Green Box Programs. Most of these programs have been perceived to be OK and not trade-distorting.
 Page 29       PREV PAGE       TOP OF DOC
    Mr. ETHERIDGE. It seems to me that is an area we ought to pay some attention to as a committee and generally working with the Department because it offers a lot of hope for new markets, development of current markets.
    Let me move very quickly before my time runs out. When you indicated that the Chinese were here today, I believe, looking at quarantine issues, and be a little more specific on some stuff that affects my State very specifically as it relates to the blue mold issue that got some attention paid to in the PNTR vote. As they negotiate these issues today, help me understand how we will deal with this issue, because this is supposed to be, on the table as we negotiate with China to get that cleared up on so that issue could be behind us.
    Secretary GLICKMAN. Actually my trade advisor Dr. Siddiqui is with Mr. Lee, who is the head of the quarantine department, and the highest item on the agenda right now is the tobacco issue. As you know, China has made the political/bureaucratic decision to lift the ban on U.S. tobacco. You have seen the letters on that, and our office and USTR worked hard to get that, but they still need to work out import procedures and draft implementing regulations, just as they did for citrus, wheat and meat. That is the purpose—one of the main purposes of these meetings is to get that done. They also know that—they have agreed to move quickly on this. We talked about the fact that the U.S. Senate still hasn't approved PNTR, and they need to move on this. Knowing your interest and others in your State and contiguous States, we are working on this.
    Mr. ETHERIDGE. Thank you, Mr. Secretary. I yield back.
    Mr. BARRETT. Mr. Smith.
    Mr. SMITH. Thank you, Mr. Chairman, Mr. Secretary, and thank you all for being here.
    There is still the feeling out in the world of American producers, farmers and ranchers that there is sort of an automatic markup profit by the exporters, the major exporters, the Cargills, whoever, the ADMs. Have we ever done any real economic analysis in your Department of the associated risk if the producers of this country are getting shortchanged by the concentration of power of the major exporters of our American-produced commodities?
 Page 30       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. I am sure there have been some economic analyses done by our Economic Research Service, but it is probably not as thorough as what you have asked for in the grain industry. I think that a lot of the analysis has been much more focused on livestock in terms of pricing, and point-of-sale pricing, and transparency of pricing, and the general findings have been over the longer term there is not the effect, but on the shorter term there might be some effect.
    Mr. SMITH. The bottom-line question is of our producers farmers and ranchers getting gypped by the way that they are forced to sell at whatever price that I assume tends to assure the major players that they are going to end up with some profit as they sell that commodity?
    Secretary GLICKMAN. I don't know if I would use the word ''gypped'' but I would say that farmers growing bulk commodities today are a little bit like Kevin Costner was in the movie Field of Dreams. If they grow it, they will buy it, and they will kind of determine the price they are going to buy it, and we don't have a lot of bargaining clout in that process. The fact of the matter is farmers, particularly growing bulk commodities, do not have very much bargaining clout; in fact, none for all practical purposes. That is one of the reasons why in the next farm bill in working on these issues we have got to figure out a way, either through better use of cooperatives, or better involvement in bargaining process, or more involvement in the niche marketing process, we give them that clout.
    One of the reasons why we have gone ahead and moved ahead with an On-Farm Storage Loan Program is that, given the current scenario, farmers are forced to sell at harvest unless they have the resources to build their own storage facilities.
    Mr. SMITH. That is what we thought back in the 1960's.
    Secretary GLICKMAN. There is no really new, absolutely new, ideas, but another way to try to give producers some additional marketing discretion.
 Page 31       PREV PAGE       TOP OF DOC
    Mr. SMITH. Let me ask you a question about the Cairns Group. As I understand it, a lot of their promotion is, look, we can sell this little higher-quality product at a lower price. As we proceed into the next WTO round, what is going to be the relationship with the Cairns Group that once—to provide for less subsidies while the United States tries to sort of take a middle ground of some protection for our export subsidies, for our farm subsidies? Are the Cairns Group countries really underselling us? Is that part of the reason why they are gaining market share?
    Mr. GALVIN. Mr. Chairman, I think that is part of the reason. It goes back to this issue of quality that the Secretary discussed earlier. I think that there is every indication that, in effect, the Canadians and the Australians are essentially giving away quality or giving away protein. By that I mean those factors are not fully reflected in the prices that those Boards charge. I think this is important because 10 years ago if you looked at the wheat trade worldwide, about 25 percent of it was done by the private sector. Today that percentage has increased to about 60 percent, and it continues to go up, and private buyers tend to be much move concerned about quality than our government buyers.
    For that reason we think we really need to focus on quality, and I also think that is part of the reason why this request for this clean wheat initiative essentially rose out of producers in the HRW area, because they saw the United States becoming a residual supplier, residual compared to the Canadians and the Australians, because this quality issue is so important.
    Mr. SMITH. Just to finish it up, Mr. Chairman, it seems—and I am not—help me, maybe you, Mr. Galvin, the Secretary, our attaches maybe don't have the support they need, or they are not making the kind of effort that I thought they used to make in terms of pushing our products, representing the American producer, and I don't know how you evaluate it. I don't know how you judge it, but in terms of the end results, it seems to be less than it used to be.
 Page 32       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. Mr. Schumacher.
    Mr. SCHUMACHER. Mr. Smith, I tend to visit a lot of our attaches during the summer. They work very hard. Part of the problem we have, and to be very honest, is the budget of the Foreign Agricultural Service has gone down by $5 million this year and, frankly, cut by Congress.
    We were talking earlier that we need to freshen up the Market Access Program. We also need to provide the funding for the Foreign Agricultural Service to allow those Foreign Agricultural attaches to have the resources, and to keep those offices where our competitors are going into.
    Mr. SMITH. I just wanted to ask, do we need to have some kind of a substitute for the Australian Wheat Board, the Canadian Wheat Board in terms of their effectiveness in getting their product marketed?
    Mr. GALVIN. We are proposing to go at it the other way, and that is by reforming those State trading enterprises in the next round. For example, we want to see their monopoly authority ended. We want to see their direct Government support, to the extent there is any, financing, that sort of thing, we want to see that ended. We would like to see the operations of those Boards become much more transparent. We would like to see them report weekly grain sales, just like we do here in the United States, for example, so we get a better understanding of how they operate.
    Again, I think this quality issue is real important, and that is why we need to step up our efforts there as well.
    Mr. SMITH. Thank you.
    Mr. BARRETT. Mr. Pomeroy.
    Mr. POMEROY. Welcome back, Mr. Secretary.
    Secretary GLICKMAN. It is great to see you, Earl.
 Page 33       PREV PAGE       TOP OF DOC
    Mr. POMEROY. The first question I have is a very specific one. It relates to barley. Barley is one of those bulk commodities that has had a tough time. Acreage has decreased. We continue to, however, have very low prices and lose world market share. Morocco has submitted a request for a shipment of barley using Public Law 480 authority. This request has been made within the last 2 weeks. I understand there are unallocated Public Law 480 title 1 funds. I also am aware that King Mohammed is in town this week, so I think it would be a nice thing to do for the King and for my farmers to approve a 100,000-metric-ton barley transaction. What is the thinking relative to this request?
    Secretary GLICKMAN. I think we have some progress to report. I would ask Mary Chambliss. Mary is head of Export Credits. I call her the ''export'' of the department.
    Mr. POMEROY. Including Public Law 480?
    Secretary GLICKMAN. Yes.
    Ms. CHAMBLISS. Thank you, Mr. Secretary.
    Yes, we did talk with the Moroccans that were here this week, and we are going to be working on a title 1 Public Law 480 Program with the Government of Morocco. We plan to provide 40,000 tons of barley and 40,000 tons of wheat under that program, and we will be working with them on that.
    Mr. POMEROY. Great. How does that square with their request? That is very good news. Of course, we would also like to have a bigger announcement. Relative to available Public Law 480 funds and their request, how do these figures relate?
    Ms. CHAMBLISS. It reflected really the funds that we could make available right now. It is very late, of course, as you realize, in the fiscal year for us to be doing something like this, so we did a scrubbing, if you will, of the numbers, and we could find this much money. It is about an estimated $10 million for this program.
 Page 34       PREV PAGE       TOP OF DOC
    Mr. POMEROY. Will that about wipe out the Public Law 480 account?
    Ms. CHAMBLISS. The way things look right now, yes, unless something else happens that we don't realize.
    Mr. POMEROY. Mr. Secretary, I understand you have sought in the past the authority to reallocate funds within Export Promotion Programs to deal with precisely this kind of circumstance. We could have moved more wheat had we been able to move money—for example, unallocated funds from Export Enhancement over to Public Law 480. Would you comment?
    Secretary GLICKMAN. This is the exact kind of case. I have not only had, obviously, Morocco, but we have a lot of Middle Eastern and African countries, basically everyone in the world that have asked for increased allocations or increased—allocations from title 1 and other programs. When you are out of money, you are out of money. To have the ability at least in the last quarter of the year to take on allocated monies and put it into these things would be very helpful.
    Mr. POMEROY. I think that is an excellent suggestion.
    Now on to a couple other programs. I note in the spend-down of the GSM Program, we are well below what we did in 1999. The GSM 102, $3 billion in 1999; $1.6 billion this year; GSM 103, $44 million in 1999, $14 million this year. What would be the explanation there?
    Secretary GLICKMAN. Maybe Mary would want to comment. She may have slightly different numbers than you do.
    Ms. CHAMBLISS. Thank you again. I try to—we put out on our Web site, of course, every week numbers on our GSM, and I go through them, of course, every week as soon as I get them to see who is actually using the program.
    Actually I believe the rate of use is a little higher this year than it was in 1999. So we think we will end up actually having sales registered probably higher than last year because the rate seems to be running higher, and my staff checks on that kind of thing. We would be happy to go over the numbers with you, but that was the last word. I think I looked at it probably Monday or Tuesday.
 Page 35       PREV PAGE       TOP OF DOC
    Mr. POMEROY. Excellent. I am pleased to hear that.
    Then finally the export enhancement issue. I am sure tired of hearing that Freedom to Farm is working brilliantly, and if the Secretary would only be using that little export enhancement account, we would have the prices where we want them, and all would be well. Would you explain again squarely your response to that issue? I would also like in your response to address Export Enhancement Program's use in the post-NAFTA area with the exposure to even more Canadian grain than we are already buried under.
    Secretary GLICKMAN. I would ask Mr. Galvin to take a crack at that first.
    Mr. GALVIN. Thank you, Mr. Pomeroy.
    Part of the reason that we have concluded that it would not be in our interest to use EEP is because in the current price and supply environment, basically the world is awash in wheat, and that is especially true if you look at the wheat being held by the major exporter countries. If you look at total wheat out there on a stocks-to-use-ratio basis, things appear to be tight, but actually a lot of wheat is being held by the major exporters. Therefore we believe that if we were to get into a price war, we would simply drive prices down still further.
    That could harm us in a couple of ways, primarily though in—we would see a lot of the subsidized wheat being used for feed purposes. That would displace our commercial feed grain exports, so there would be net harmful effect for U.S. producers. Also, however, to the extent the program might be somewhat successful in raising domestic prices a bit, our concern there is that it would likely lead to increased imports of Canadian wheat.
    I might say, if I could, for that reason we are looking at other perhaps targeted, more effective uses of EEP, such as the clean wheat bonus proposal that the Secretary outlined earlier.
 Page 36       PREV PAGE       TOP OF DOC
    Mr. POMEROY. Thank you.
    Mr. BARRETT. Mr. Gutknecht.
    Mr. GUTKNECHT. Thank you, Mr. Chairman.
    Let me, first of all, defend the Secretary. I don't think I ever heard you say Freedom to Farm was performing brilliantly, but I think what you have said, and I think what a lot of us have said, is we have a surplus of grain around the world that regardless what foreign policy we pursue here in the United States, we would have to press commodity prices right now.
    Let me just turn to a couple of frustrations in my area and take the first 45 seconds and just—right now, for example, gasoline, I am told, in some gas stations in Chicago yesterday topped $2.50 a gallon. That is frustrating enough for those of us in the upper Midwest. What is even worse is there are people—and I guess we shouldn't be surprised that people in the oil industry are blaming farmers and blaming ethanol, but it does bother me that there are people inside the administration who are blaming ethanol for the high price of gasoline.
    I just want to share with you, and I know you know these numbers, but we need to make certain that people inside the administration, the American people and the press in general, understands that the price of ethanol delivered to Chicago right now is 71 cents a gallon. The embedded cost of the gasoline that they blend it with is over a dollar a gallon. I am not all that good in math, but if you blend a product at 71 cents a gallon with a product that is over a dollar a gallon, it isn't the product selling for 71 cents a gallon that is driving the price up.
    I think we ought to do a better job making consumers understand that ethanol is not part of the problem. In fact, ethanol is part of the solution.
    Secretary GLICKMAN. I have to take my cues from the President. He said this weekend ethanol is not part of the problem. Ethanol is part of the solution.
 Page 37       PREV PAGE       TOP OF DOC
    Mr. GUTKNECHT. There are some people at EPA even as late as yesterday that were being quoted anonymously that they believe that ethanol is part of the problem.
    Secretary GLICKMAN. I have always been a little circumspect about these anonymous quotes with EPA or anywhere else. The only thing I can tell you is the fact is this is another reason why there must be a significant alternative energy development, particularly in transportation fuels, and in the crop insurance bill that passed yesterday, included therein is the proposal by Senator Lugar and others which created this biofuels, biomass program that hopefully will deal with this. You are preaching to the choir here.
    Mr. GUTKNECHT. I am preaching to anybody who will listen right now because once the story is out there, it is really hard to make——
    Secretary GLICKMAN. It is a worry, though, going back to the gasoline price issue, it spiked up so quickly. I am not sure how fast the impact will be on the diesel market or on fertilizer or other kinds of petroleum-based products. It hasn't hit yet, but if the price stays up for very much longer, it really is going to have a very significant negative impact.
    Mr. GUTKNECHT. You understand that farmers in terms of businesses are among the largest consumers of energy in the world, and so it is important for us for a whole lot of reasons.
    I really want to talk about another subject, and I want to get some feedback from you. The other problem we have in the upper Midwest right now are dairy prices. June is Dairy Month, but it is not a very happy month right now for most of my dairy producers. These are the folks that get up every morning at 5 o'clock to milk those cows 365 days a year. If there is anybody in America that deserves a reasonable profit, it seems to me it is the people who milk those cows every single day.
 Page 38       PREV PAGE       TOP OF DOC
    You mentioned the Dairy Export Enhancement Program. I am wondering if you can talk a little bit about what we can do both in the short and the long run either through the DEIP Program or food donations to begin to get rid of some of the surplus that some of our friends in California seem to want to produce.
    Mr. GALVIN. Thank you, Mr. Secretary.
    Actually one of the current bright spots, I think, on the export side is in the area of dairy where we have seen about a 30 percent increase in volume thus far this year, and one of the better submissions that we received from our cooperator groups under this year's MAP and cooperative program allocation was from the dairy industry. I think they are clearly focused in an aggressive way on the export market and doing all the right things. We intend to support them where we can. I don't have the figures handy in terms of dairy donations, but perhaps Mr. Fritz.
    Secretary GLICKMAN. This is Mr. Fritz, who runs our GSM programs.
    Mr. FRITZ. We have programmed nonfat dry milk into the 416 Food Assistance Programs. I can't give you an exact tonnage in that we are still negotiating a significant number of those agreements with both Governments and PVO's, but we have, along with our colleagues at the Farm Services Administration, undertaken discussions with the dairy industry on how to fortify and add other products to nonfat dry milk to make them easier to use within Food Donation Programs. So we are not talking about large volumes that will work down the excesses we see today, but we are trying to work with the industry to program additional tonnage into the Food Assistance Programs.
    Secretary GLICKMAN. Yesterday I met with the new President of the Dominican Republic, and he commented to us that he buys a significant quantity of dairy products from Europe. Why? Price. They subsidize the heck out of those dairy products. We are trying to say, well, it is one of the reasons why we are working on the WTO side. This is a small country, but still it is a fairly significant quantity, and it is one of the problems we have in the international markets dealing with the EU. The largest item of subsidy they have is dairy. I think it dwarfs almost everything else in terms of the amount of subsidy. That is one thing.
 Page 39       PREV PAGE       TOP OF DOC
    On a collateral issue, and I will mention this—I will probably get into some degree of trouble about it—but it has been disturbing to me to see—I don't know about the quantity of milk that is actually served and consumed in the School Lunch Programs, and we try to do what we can to promote it, but I can tell you that the largest increase in consumable drinks in the schools in this country are soft drinks. Without going into whether—how nutritious they are or how nutritious they aren't, because I don't want that whole industry on top of me after I leave this room, I will tell you that because of a lot of factors, we are serving a lot more soft drinks in schools, and the milk consumption is not going up as fast as it ought to be. It is something we have to work on as well.
    Mr. BARRETT. Mr. Dooley.
    Mr. DOOLEY. Thank you, Mr. Secretary, for being here. I just want to commend you on your policy of how you have managed EEP. I think you are absolutely on target when you have world supplies of this nature, a full utilization that would only put downward pressure on commodity prices that would further work against the interests of U.S. producers.
    What I would like to touch on is a little bit different issue. We talked about some of our Credit Guarantee Programs, GSM Programs, and how instrumental they are in terms of moving U.S. products. We have an issue now that has created some problems with bringing the agriculture appropriations bill to the floor relating to lifting the embargo on Cuba for food and medicines. There was some reference in the press this morning that there is a potential compromise being worked out that would lift the embargo, but it would not allow the utilization of some of our Credit Guarantee and GSM Programs. When you look at an economy such as Cuba, if you do lift the embargo, you do not allow us to use these tools, both Government and commercial. What is your expectations on whether or not we are going to be competitive or be able to move any product into that market?
 Page 40       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. I saw the same story that you did, and I saw that there was a private analysis done that said if the embargo were lifted, it would result in about $400 million worth of additional sales without the use of credit, and maybe 3 times, 3 or 4 times that amount with the use of credits. That is not a Government study. It is an independent study that is done. All I can tell you about it is my own view and the President's view is obviously that food and medicine ought not be used as a tool in foreign policy, but the President should retain those rights that he needs to retain to deal with national security and other issues, and the credit issue is probably factored into that part of it as well.
    So I don't know what will end up happening other than I think the White House is working with the appropriators and the congressional leadership to see if there is a way to resolve this.
    Mr. DOOLEY. In terms of the order of magnitude though, one study has been done would be that if we use the GSM credit, we would be shipping maybe as much as $1.2 billion versus $400 million?
    Secretary GLICKMAN. I think that was as the Cuban economy develops further. That was the Stern study that was in the paper today. It is clear that we would have—some of you have been there. I know Marion Berry and others have been there, and you might have a better idea of this.
    There is no question there is an opportunity there on export.
    Mr. DOOLEY. What do you assume would be the cost to the Federal Government if we did allow—would we assume their behavior in terms of participation and default, the economic exposure to the Cubans—I mean, in terms of utilization of the GSM Programs there? What level of exposure do you think we would have?
    Mr. SCHUMACHER. We have not done yet, Mr. Dooley, an analysis.
    Mr. DOOLEY. What is our rate of loss or exposure on countries of comparable demographics? Don't we have a loss ratio we look at there?
 Page 41       PREV PAGE       TOP OF DOC
    Mr. SCHUMACHER. Yes. Mr. Fritz has that. It is very, very low for GSM.
    Mr. FRITZ. It is an excellent question. Two things. One, over the past few years our loss rate has been rather small, to say the least, but there is a constraining factor in legislation that does not allow us to provide credit guarantees to countries that are not creditworthy, and that limits some of our availability. For example, we are not offering credits today in Nigeria or Algeria or Bangladesh.
    So two things. One, we would have to assess a creditworthiness of the banks within Cuba or use regional banks that may be willing to take that credit risk, but overall I think the exposure to USDA and the Treasury is quite minimal.
    Mr. DOOLEY. If I understand you correctly, if we adopt a policy that doesn't allow us to use the credit guarantees that we have, it is going to have a significant impact on the potential market opportunity that we have there. If we do allow those credit guarantees to be utilized, we will still have the due diligence proposals or policies which would require us to determine the creditworthiness before we would provide those benefits, which would also minimize whatever exposure that the U.S. Government would have. And I guess the message I am trying to deliver is that for people who are involved in these discussions, this is not an effective policy that is being floated here that would limit the ability of U.S. farmers to access this Cuban market if we do not allow them to use the tools providing credit guarantees, and I hope this is a position that the administration also embraces.
    Mr. FRITZ. If I may, I would say there is one other program that would probably be utilized first, and that is the Supplier Credit Guarantee Programs, which work off of promissory notes which are 180 days, and that does not meet or that does not have a higher bar on creditworthiness as the 102 and 103 longer-term credit guarantees. So I would see that program being used first by U.S. exporters and Cuban importers.
 Page 42       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. If I may add a point. It doesn't really relate to the Cuban issue, but last week we provided a 50,000-ton donation through the World Food Program to North Korea under 416(b), and there is some concern that the Nethercutt language in its current structure by limiting credits would also prohibit that particular program as well as it would relate to our donations into the World Food Program. So I want to make sure that the language is sensible and doesn't restrict us from what we are currently doing now.
    Mr. BARRETT. Mr. Ose.
    Mr. OSE. Thank you, Mr. Chairman. I have but two questions first as it relates to California wheat going into Mexico. As I understand, the issue is karnel bunt. There are counties in California where we have a very small influence of karnal bunt in the crop, and yet our friends in Mexico have a blanket, a prohibition for California wheat to go into Mexico. I am curious about what you can tell us about that.
    And secondarily, I am very appreciative of the administration's efforts as they relate to China in opening those markets. If you could give me some sense of the efforts we are also undertaking in India, I would appreciate that.
    Secretary GLICKMAN. On the first issue I will have to get back with you. We will get back to you this afternoon. It is changing slightly. I am not sure where the karnal bunt issue is with respect to Mexico.
    Secretary GLICKMAN. India, Gus.
    Mr. SCHUMACHER. I think we have made substantial progress in India as well. We won the WTO case, and there has been extensive progress made in a variety of products in India. We are working particularly hard on those products relative to California, particularly in the nuts area.
    What I would like to do is give you a complete list of where we are on that shortly after this hearing.
 Page 43       PREV PAGE       TOP OF DOC
    Mr. OSE. I would appreciate that. Thank you, Mr. Chairman.
    The CHAIRMAN [presiding]. Thank you.
    Mr. Thompson.
    Mr. THOMPSON of California. Thank you, Mr. Chairman.
    Thank you, Secretary Glickman, for being here. This is the first time I have had a chance to see you since all of your good work on the sharpshooter eradication out in California. I would like to take this opportunity to thank you very much. Your work has been great, and your help is very much needed.
    I would just like to mention that the Market Access Program which has been talked about a little bit this morning is incredibly important not only across the Nation, but in my State, and particularly the wine industry, and you have got a fantastic record which has been able to be accomplished. In the last decade we have increased our wine exports by over 400 percent, and I think 1998 we were exporting about $85 million worth of California wine, and today we are over $425 million worth of wine, and we can be found in 164 different countries.
    I think it is important to note that we are at an extreme disadvantage with some of our competitors. The EU spends more on marketing their wine in other countries than we spend on all of our commodities combined. So I think the remarks made earlier that we could very much use an increase are right on point, and it is probably a good prelude into pitching the Hastings bill that would increase the amount of money that could be spent, moving the cap up to $200 million from the existing $90 million. I would urge the members of this committee to sign onto that bill and help you get the money you need to be able to continue helping us do the good things we do here in the States.
    Secretary GLICKMAN. I would say, Mr. Thompson, we did complete the allocation for this year on MAP. The Wine Institute received an allocation of about $3.5 million, which, given all the other pressures there, is probably OK, but probably they could use double that as well. Again, we hope to get a larger overall allocation.
 Page 44       PREV PAGE       TOP OF DOC
    Mr. THOMPSON of California. Thank you.
    I yield back, Mr. Chairman.
    The CHAIRMAN. Mr. Cooksey.
    Mr. COOKSEY. Thank you, Mr. Chairman.
    Thank you, Mr. Secretary, for being here. I want to echo the remarks of some of my colleagues that I feel that these export programs are important because we don't really subsidize our farmers in the same degree that a lot of the European nations do, and it does put our farmers at a disadvantage, and yet this gives them somewhat of a leg up, and I think it is important to do it as best we can.
    I understand that there is probably pressure from the State Department because from their perspective it makes it more difficult to negotiate some of the issues they have to negotiate from their standpoint when we are going in and doing export programs. How much tension is there between your Department and the State Department? Is that the essence of the problem, maybe the lagging in promoting these programs? Are you getting much pressure from the State Department?
    Secretary GLICKMAN. That is a kind of common, I believe, misconception out there. Under Secretary Eizenstat is, of course, No. 2 at Treasury, was at State, and he has been at Commerce, I think, but he was at State. He was the leading reformer to try to get changes in sanctions policy.
    There is an interagency process to deal with these issues, and obviously there are national security concerns there, and we do our best to influence that process. There is really no bad guy in this process. Quite frankly, in talking about a lot of these issues, a lot of the conflict comes from this branch of Government where there are strong differences of opinion. You take the Cuba issue, for example. That is where a lot of the legislative initiative has come from, and they are very strong and well-intentioned positions held here.
 Page 45       PREV PAGE       TOP OF DOC
    I think the main point on sanctions the President has wanted to ensure is to ensure that there is enough Presidential flexibility to deal with national security issues, understanding that his basic point—he said this several times—generally speaking food and medicine ought not to be used as a weapon.
    Mr. COOKSEY. I would agree with that. As a physician I feel very strongly that we should be able to share our medical expertise and pharmaceutical products that are all developed here in the first place in this country as opposed to these other countries and be able to not only share them with the countries that need them, give them to them, but be able to sell them to the countries that don't have access to them. Everybody currently is bidding on the pharmaceutical companies, but as an ophthalmologist, there is a problem that exists in the central part of Africa called river blind. It is an American company that developed that product. There is no demand for that. I have never seen a patient have it when I was here. I have actually probably seen two patients when I used to work in Africa, but this American pharmaceutical company developed the product, did the R&D on it, and gave it to these countries because there was no market. That is sort of the good work that pharmaceuticals do.
    Secretary GLICKMAN. Wasn't the Carter Center also involved in working with—it was Merck, wasn't it?
    Mr. COOKSEY. Yes, if I am not mistaken.
    Secretary GLICKMAN. And it has had a profound impact.
    Mr. COOKSEY. It has really had a big impact, and that is good.
    I want to help these countries, and I think we have some social responsibilities. I think one of the great failures in this body and in the executive branch—I won't kick the judicial branch—there is a great human cry about the PNTR for China because people were worried about human rights abuses, but there are no human rights abuses in China or in the Balkans compared to what is going on in Sierra Leone, in Zaire, and now the Congo and Eritrea and Ethiopia, and that became an issue of the trade issue.
 Page 46       PREV PAGE       TOP OF DOC
    But anyway, I would encourage the Secretary. I have a lot of confidence in you. I think you have done a lot of good things for my farmers. My farmers are happy.
    One other thing. Before I got to this stage 4 years ago, I used to do some very serious whitewater canoeing and was not great, but I could go through the place called the Devil's Elbow, which is on the Big Piney in Arkansas, and if you should need some help canoeing sometime, I would be glad to give the Secretary some instructions. I may have to go back and practice myself, but I don't sing, and I am not an entertainer. I am not a comedian.
    Secretary GLICKMAN. If I am going to go with anybody on a canoe, I am going to go with an ophthalmologist.
    Mr. COOKSEY. Thank you, Mr. Secretary.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mrs. Clayton.
    Mrs. CLAYTON. Thank you, Mr. Chairman.
    My understanding is that the EEP has been utilized by the poultry industry, and particularly in the Middle East, and North Carolina, you know, has a lot of poultry, and we have some vested interests in seeing that that goes well. How has that worked, and has it made a difference in the utilization of it?
    Secretary GLICKMAN. I would ask Mr. Fritz to respond.
    Mr. FRITZ. Actually the utilization of the EEP for poultry has been very low, certainly not what we had hoped. There are some restrictions on the program such as you must market whole birds, and also there are some market constraints that we need to get over, but if memory serves me correctly, we are around 2,000 tons on that program. I can get you the exact figures, but it is far less than what we hoped would be used by the poultry industry.
    Secretary GLICKMAN. I would say that poultry exports, after being down for a few years largely because of Russia, have begun to come back, and they are up about 15 percent this year over last year as a whole.
 Page 47       PREV PAGE       TOP OF DOC
    Mrs. CLAYTON. Was the EEP designed to bridge the problem you had in Russia? Was it used at all?
    Secretary GLICKMAN. No.
    Mr. FRITZ. No. The EEP for poultry is targeted to the Middle East only, but we did include poultry in our food assistance package to Russia last year, and now that market is coming back on its own in an open competitive system; again, not to the levels it was 2 years ago, but it is slowly coming back for U.S. exporters.
    Mrs. CLAYTON. All of our Market Access Programs come under attack, several of them, during appropriations, so we expect there would be amendments to reduce or eliminate, because that is seen as part of a large business corporate structure, so many Members find that inconvenient to do that. I know that in the 1996 farm bill, there was some emphasis prior to giving the small business for the Market Access Program. Could you tell us what the success of that has been, how small businesses have increased and by what percentage?
    Mr. GALVIN. I don't have those exact percentage figures with me, Mrs. Clayton, but I can tell you that under the branded part of the program, that the money spent for name—company-branded promotion, all those funds today go to either small businesses or cooperatives. None of it goes to large businesses. And then the remaining portion of the funding goes simply for generic promotion, like for U.S. wheat, U.S. feed grains, that sort of thing.
    I can tell you, and again I don't have specific figures to cite, that the utilization of the program by small businesses and minority-owned businesses has increased rather significantly here just the past couple of years because of the emphasis that we have put on that part of the program, working through the various State Departments of Agriculture which help us to recruit these businesses and also through what we call the four regional organizations out there in the country that also work hand in hand with the State Departments of Agriculture to recruit and make sure that small and minority businesses have an opportunity in the export market.
 Page 48       PREV PAGE       TOP OF DOC
    Mrs. CLAYTON. Could you share with the committee some details by numbers, percentage and names of small businesses and cooperatives?
    Mr. GALVIN. Yes.
    Mrs. CLAYTON. The final question. The Secretary announced he is going back to the International Food Summit you had in Africa again and know that that area is indeed—particularly around the areas that are suffering from a variety of natural resources in terms of food and hunger and lack of production. I would be interested in the challenges and opportunities that you see as you go there that this committee and others can help in that. I have a personal interest, and I think many staff and Members of Congress have a personal interest, in seeing that we alleviate the hunger in the world, particularly in that area. I see that as not only an opportunity, but also as a way of fostering some of our relationships with technology in that area as well. So we are hopeful. We will listen for your comments, but are you going with expectations of what?
    Secretary GLICKMAN. Let me say this. Under Secretary Schumacher's leadership, we have really tried to develop a focus of sub-Saharan Africa and largely in the trade area. And in addition, I have been extremely concerned that the United States needs to, using Mr. Schumacher's words, freshen up its commitment on international food assistance as well. We haven't formalized any of this, but those would be the two focuses.
    For example, Nigeria, which is the largest country in Africa populationwise, has enormous potential in terms of trade relations with us, mutually beneficial. Then you have the incredible problems of hunger, malnutrition and AIDS in East Africa largely. So USDA is—sometimes in the foreign aid area, sometimes we don't get the attention we should get. In many places the food assistance which we provide which has been monetized is much greater than what is provided through normal foreign aid. We have a real opportunity there to provide help and assistance during extremely difficult times. So that is kind of the general focus.
 Page 49       PREV PAGE       TOP OF DOC
    Mr. Galvin.
    Mr. GALVIN. If I could jump back to my previous answer briefly, just to mention when we did our MAP allocations here a couple of weeks ago, the organization that received the biggest percentage increase was the Intertribal Agriculture Council, the group representing Native American exporters. They received about a 30 percent increase, and I think it is a real indication of the success they have had and the ingenuity they have shown in terms of the market development plans that they submitted for the coming year.
    Mrs. CLAYTON. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Thune.
    Mr. THUNE. Thank you, Mr. Chairman.
    Mr. Secretary, I appreciate your being here today, and if I am covering ground that has already been covered, I apologize. I know you shared this with this committee in the past, but could you just lay out again the reasons why the EEP is not utilized? Maybe you have answered that previously.
    Secretary GLICKMAN. I would ask quick, so I don't give a conflicting answer, ask Mr. Galvin to just quickly state what he said before.
    Mr. GALVIN. Basically it boils down to our assessment that given the current worldwide surplus in wheat, especially wheat held by the major wheat-producing and exporting countries, we believe that if we were to engage in a price where under EEP that would further drive down world wheat prices, that would cause more wheat to be utilized as feed wheat rather than for milling purposes, and to the extent that it would be consumed for feed purposes, that could potentially displace a lot of our current feed grain sales. Also to the extent that an EEP might be somewhat successful in lifting domestic prices here a bit, we think that runs the risk of pulling in still more Canadian grain imports.
    Secretary GLICKMAN. Saying that, I also said that I would like the authority—we asked in the last two budget proposals to reallocate unused EEP funds, particularly in the last quarter, for international food assistance or other—market promotion, perhaps, activities.
 Page 50       PREV PAGE       TOP OF DOC
    We talked a little bit about a food assistance package to Morocco, which we were able to perhaps glean from kind of the scraps, what are left in terms of dollars in title 1 or 416(b), but having the flexibility to use unallocated funds for that would be useful.
    In addition, I earlier mentioned that we are thinking about considering in connection with the clean grain initiative setting some dockage standards for our grain that is going overseas, maximum amounts of—some clean grain standards. As part of that, we are considering using a small portion of EEP funds to help exporters provide clean grain exports. So it is nothing that is finalized right now.
    Mr. THUNE. But the concern is in using it in sort of the traditional sense from which was proposed, that would invite problems, world market problems, retaliation and whatever.
    Secretary GLICKMAN. I think even more than that is we think it would not have a terribly positive effect in terms of our own market condition; the fear that it would interfere with the feed grain markets as well. You can't do anything without a reaction occurring.
    I would also point out we have made the decision that the Export Credit Program would be largely the program that we would use as a way to help move commodities to countries that could not otherwise buy them, and that has had a very powerful impact.
    Mr. THUNE. On the sheet that you handed out, I am just curious in talking about domestic spending relative to other countries and in particular relative to the EU, the number we use, $6.2 billion, and this is a 1997 number actually, what exactly does that consist of? Is that the amber box? Our domestic spending is higher. It is a sheet like that.
    Mr. GALVIN. I believe that is 1996 or 1997. That, of course, was back when our domestic foreign program outlays were much lower. They were essentially the original AMTA payments, and that was most of it. Obviously those levels have increased the past couple of years.
 Page 51       PREV PAGE       TOP OF DOC
    Mr. THUNE. So probably what we are talking about here is not LDP or other primarily AMTA. The number that is used for the EU—the reason I ask is I use this when I am out talking to producers and other groups—is that it is about a 9 to 1 EU domestic support level versus U.S. But the number that we use here, 6.2, I was wondering——
    Secretary GLICKMAN. It is not 9 to 1 this year because our numbers have come up so significantly. It is still probably 2 or 3 to 1. It is not 9 to 1.
    Mr. THUNE. Do you have any ideas off the top of your head what we are looking at with that number, say, this year or even more recent year, in 1999 possibly, how that number would be updated?
    Secretary GLICKMAN. We are expecting for the fiscal year calendar year number to be in excess of $30 billion this year out of the CCC. That involves 2 fiscal years' worth of some programs. Last year it was slightly in excess of $20 billion.
    Mr. THUNE. That number is significantly different from where it was.
    Secretary GLICKMAN. That includes LDPs, AMTAs, supplemental AMTAs, CRP. There are a lot of things in that CCC factor that are not necessarily traditional farm program payments, although it is mostly farm-related, but it is not all classic farm program payments. A lot of that is in the green box, you know, CRP-related stuff.
    Mr. THUNE. I just have one other question on CRP, and I notice Parks is here, too, maybe can answer this question. I think we have something from you. Recently there was a proposal by the farm groups and environmental groups and wildlife groups on the continuous sign-up program with respect to filter strips and buffer zones around wetlands, making them eligible essentially for the continuous sign-up. Where we are on that and how soon you all might have a decision, because it is something, strangely enough, where we saw incredibly broad support across all those different organizations in favor of that.
 Page 52       PREV PAGE       TOP OF DOC
    Mr. SHACKELFORD. Congressman, we are continuing to look at that proposal. One of the concerns is that there are approximately—at least 7 million acres of wetlands that would be eligible to be enrolled under that, and if we made them automatically eligible to be enrolled, the concern is the impact that would have. Currently the limit of an enrollment in CRP is about 36.4 million acres. We are reserving an amount of that acreage for the other continuous sign-up, the small-acreage, high-priority practices that we already have. If we make a very large amount of acreage in addition to that eligible, with the current ceiling on CRP, there is not room, so there will have to be some kind of decision made either on perhaps increasing the CRP cap or some way to reconcile that problem.
    Mr. THUNE. I would support increasing the cap. I think the reason this made a lot of sense is because we weren't using the continuous sign-up program. There was excess allocation available of acreage. Now obviously what could automatically be enrolled exceeds what is available, but it seems like there could be some way we could use that.
    Mr. SHACKELFORD. We had just come out with a new initiative just a few months ago to make the continuous sign-up considerably more attractive to producers with additional signing bonuses, additional cost-sharing incentive payments, and a lot of things that should make a major increase in the enrollment under the continuous sign-up.
    Mr. THUNE. How soon will you have a determination on this, would you say?
    Mr. SHACKELFORD. It depends on which answer you want. I assume within the next month that could be answered.
    Mr. THUNE. Thank you.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Phelps.
    Mr. PHELPS. I don't have any questions other than thanking the Secretary for his leadership and for the first term recognizing the valuable input you have given me. I know we don't agree on everything. You are probably happy to hear I will be supporting the WTO inclusion.
 Page 53       PREV PAGE       TOP OF DOC
    The CHAIRMAN. Mr. Moran.
    Mr. MORAN. Mr. Chairman, thank you.
    Mr. Secretary, nice to see you again. A follow-up to Mr. Thune's question about EEP, and you mentioned the concern about wheat EEP. What has become of the story of a flour EEP? Throughout the last 2 or 3 years every once in a while there appears—this isn't a question I intended to ask, but throughout the last 2 or 3 years, every time the concept of EEP is revived, there seems to be an indication that we won't use an EEP for wheat, but we are pursuing a flour EEP.
    Mr. SCHUMACHER. I think the answer is we actually did seriously consider that. Your push and others, a couple of things have happened. One is there has been a lot more flour food aid shipments than there ever has been historically, and so a lot of the focus on flour has been food assistance side of the picture. And the other thing is I am aware that I think EU flour exports are considerably down. I am not exactly sure why, but I think that has been part of the factor of not needing to consider it right now.
    Mr. MORAN. Are there any commodities that are under serious consideration for using EEP currently?
    Secretary GLICKMAN. The only thing I think, quite frankly, we have under serious review, as I mentioned, we are looking at using EEP in a clean wheat initiative where we provide—consider providing some payments to exporters, and there is some poultry under—it is fairly small.
    Mr. MORAN. I also was interested in Mr. Thune's conversation about the total amount of spending in farm programs in comparison to the European community to the United States, and I think ever since the chart came out, I have had it hanging on my wall in my office with the major gap 8 or 9 to 1. What was the conclusion of that discussion? That we are spending about $30 billion?
 Page 54       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. I think there is $30 million out of the Commodity Credit Corporation we expect in this calendar year, but that covers some green box items, CRP items. It covers, obviously, AMTA, supplemental AMTA, LDP. I am not sure what else is in there, but the numbers are up considerably for the United States. They are probably at a 2 or 3 to 1 edge now.
    Mr. MORAN. Are the European numbers stable, constant?
    Secretary GLICKMAN. I think they are actually going up, too, but not at the same rate.
    Mr. SCHUMACHER. The EU is much wider. We basically focus on program costs, but Tim and his staff are pointing out the amount of subsidy, of course, for dairy is huge in EU for their meats and for things like zucchini—they call them courgettes—and tomatoes, peaches and wine, much wider approach in the way they run their divisions, the operations there. That is kind of what we want to get at when we go to Geneva next week and in the next negotiation to get that down as well and trying to compress those domestic distorting trade deals.
    Mr. MORAN. It is certainly useful for me as a Member of Congress to have that kind of statistic, and it matters in our negotiating position for me to visualize what our goal is and what the problems are. Those kind of numbers matter to me. In my conversations with constituents and even in a farm district, a district that is as agriculturally-oriented as the one I represent, you have to be able to justify why as a Member of Congress I am willing to spend money on farm programs. And clearly one of the explanations, one of the reasons that I can justify that is the nature of the world in which we operate and what the competition is doing. So if you can update those numbers and that information, that is useful.
    Secretary GLICKMAN. We will do that. I have a 1996 Fiscal Government Support of the Horticulture Sector in the EU. Their support for tomatoes is about $5 billion. That is a lot of pasta. I don't know what else goes into that. But it just kind of gives you an idea. Cucumbers, almost $500 million worth of direct government support. It is just a different perspective in how they deal with their agriculture.
 Page 55       PREV PAGE       TOP OF DOC
    Mr. MORAN. I am also interested in the trend and suggestion by Mr. Galvin that it is increasing, because we keep hearing the European community will meet at the point at which it can no longer afford with the additional countries in the——
    Secretary GLICKMAN. The OECD has come out with a study which indicates that basically after years of seeing agriculture payments reduced, now it is increasing across the board in almost every part of the world, including the United States and Europe and everyplace else.
    Mr. MORAN. My time has expired. I am pleased to read about your—although in your answer to Mr. Thune's question, Mr. Secretary, I have always admired your political skills, your statement was you were thinking about considering, which is a good one I may borrow from time to time.
    Secretary GLICKMAN. That is stronger than I came in here with.
    Mr. MORAN. The issue of clean grain, and I am interested in knowing the details.
    Secretary GLICKMAN. Actually I want to say this is a very important issue for us. Quite frankly, the impetus from this came just as much out of the Kansas Wheat Commission as anyplace else, and Mr. Galvin and his team have tried to move this issue along, and we have announced a couple of things today. Those are going to be announced in terms of docket standards for international food assistance programs. We are going to probably—we are going to go out and ask for input how we would establish dockage standards for commercial sales because we have got to get some input from the industry on that, and then this other issue of how to help people comply with that. That is the one we have absolutely made a final decision on, but it is probably appropriate to look at the EEP as a source of funds.
    Mr. MORAN. I would be interested in additional information as you develop the plan in this regard.
 Page 56       PREV PAGE       TOP OF DOC
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Stenholm.
    Mr. STENHOLM. Mr. Secretary, if Congress gave you an increase of 10 percent in your budget for FAS, how would you spend it?
    Secretary GLICKMAN. I would ask the FAS people.
    Mr. SCHUMACHER. We would very much welcome it, but I would defer to Tim in how to spend it.
    Mr. STENHOLM. That is not what I asked, Mr. Schumacher.
    Mr. GALVIN. Mr. Stenholm, I guess I would see two areas that cry out for additional support. The first is on market promotion, and we have talked about that here today, the fact that we could responsibly spend additional money under MAP and under the cooperator program. I think we need to do that, especially in the growth markets, and especially if we want to stay current with the competition.
    I think another part of that I would use internally in FAS, because as Mr. Schumacher indicated, we have essentially been under a budget freeze now for the last 3 years. That has resulted in a shortfall at FAS this year of about $5.5 million. We have had to take a number of unfortunate steps in order to close that gap, including closing or phasing down about half a dozen of our offices overseas, including our agriculture trade office in Singapore. We have closed our agriculture trade office in Milan, Italy. We have cut back in Germany, Japan, and in other critical markets.
    I think we really need to deploy more resources not only in the field, but also to keep current with our near record amounts of food aid that we are putting out here as well as gearing up for the next WTO round and all the resources that that requires if we are going to do a good job.
    Secretary GLICKMAN. One thing, Mr. Stenholm, I don't know what the Foreign Commercial Service spends. They have similar functions to the Foreign Agricultural Service run out of the Commerce Department. You might want to look to see how they have done and what they have gotten and how they have used their resources. I am told in some parts of the world they have actually done quite well in recent years.
 Page 57       PREV PAGE       TOP OF DOC
    Mr. STENHOLM. I think it is rather ironic as we are holding this hearing, we have a resolution on the floor of the House that would take us out of the WTO, and we have many Members of Congress arguing very sincerely that the answer to trade is for us to get out of the World Trade Organization, and somehow that will improve our opportunities to increase our exports in this case of our agriculture. I also think it is something that the Congress needs to look at.
    It wasn't just a facetious question I was asking you a moment ago. With the increased pressures that we are going to face regarding China and European Union expansion and all of the—as you point out how everyone now is increasing their subsidies for a very real reason, no farmers in the world can survive at current prices, and therefore, every Government is having to make these changes. I think it is something that the Congress is going to have to take a good, hard look at working with you as to how we can meet some of these challenges where others apparently are spending their money a little bit differently and in some cases successfully, and in other cases, as we look at pork, for example, we have a pretty good success right now going there and in beef and other areas.
    As you mentioned a moment ago, we have to continue to look at all of these areas, and that includes making sure that those responsible for putting the United States' best foot forward have the necessary resources to do it, rather than just sitting back and being critical as some are from time to time, as many are on the floor of the House right now.
    Mr. Gutknecht asked this question. Again, I sent you a few questions down to FAS early this week regarding the canceled tonnage problem with EEP and dairy. It is my understanding there may be 40,000 tons of cancelled tonnage, and we may be losing about 10 percent of the potential of DEIP. The dairy industry believes there is some potential of working with you and somehow reprogram that cancelled tonnage.
    I would like to reiterate my request to you to continue to work with industry to see if we can make it work, because we have seen some very good success stories in the nonfat dry milk in the utilization of DEIP, and apparently that is one area—I would hate to see us lose some resources in areas in which we clearly are having to compete with other Governments in that area.
 Page 58       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. As you know, historically we have done some rollover or reprogramming of unused DEIP allocations. General counsel is looking at this.
    I don't know, Tim, whether you have any additional thoughts on this other than there may be some statutory problems here.
    Mr. STENHOLM. We would be very interested in working with you. I did not expect an answer at this moment from either of you, but just to show our interest and to point out that this is perhaps an area in which we can do some positive work regarding some problems with agriculture in the dairy sector.
    The Chairman and I sent a letter to you regarding the inclusion of rough unmilled rice in the Public Law 480 Title 1 Program for Jamaica. In your response you lay out the reasons for not including unmilled rice in the program for Jamaica. In general what is USDA's policy regarding the inclusion of unmilled rice in the Food Aid and Export Promotion Program?
    Mr. GALVIN. Mr. Stenholm, our basic policy is simply to maximize U.S. sales, and if we believe that a sale is going to occur commercially without our direct intervention, then we want to let that happen. We also want, to the extent we can, try to encourage the export of value-added products because that tends to create more jobs and income here at home.
    I think in the case of the potential sale to Jamaica, I think we made the right decision in not including rough rice because that rice was eventually sold commercially, and that is just the way I think it should have worked. When we programmed rough rice into Jamaica a year ago, we did it as part of an incentive to get the Government to remove their current duty of about 25 percent on rough rice. They did that. They made it effective for a number of years, and we believe that under those terms, rough rice ought to be very competitive commercially without any additional assist from the United States in terms of programming under one of our authorities. As I said that, that sale did occur then.
 Page 59       PREV PAGE       TOP OF DOC
    Mr. STENHOLM. Mr. Chairman, if I might ask one additional question here. In recent years, FAS has initiated several new programs, including the Supplier Credit Guarantee Program, the Facilities Guarantee Program and the Quality Samples Program. How much interest has there been in these programs so far?
    Mr. FRITZ. Let me take each in turn, if I may. With regard to the Supplier Credit Guarantee Program, we altered that program just recently by increasing coverage from 50 to 65 percent, and as of mid-June we have—that program has—well, almost tripled in usage since last year. So it is education plus changes we have made, I think, are making it more effective for U.S. exporters. So I am very pleased at that increase and will continue to try and tweak the program to make it better able to be utilized.
    With the Facilities Credit Guarantee Program, this has been much slower. We have only signed one agreement so far that was signed several months ago to improve pork facilities overseas.
    Mr. STENHOLM. Where?
    Mr. FRITZ. In Mexico. We feel that it is probably too early to talk about changes in that program. We want to really educate people how to use it and get more applications in under the program.
    With regard to the Quality Samples Program, this current fiscal year is the first year of operation. We were allocated $1.25 million for that program. We have allocated that money to each of the high-priority best applications that were received. Those are just beginning to take place, and there is a requirement that they report back to us on the effectiveness of that program. We have had discussions with OMB on continuing that program next year, and I think we are excited about the opportunities that that provides.
    Mr. STENHOLM. You mentioned that dreaded three-letter word of OMB. What has been their reaction?
 Page 60       PREV PAGE       TOP OF DOC
    Mr. FRITZ. Well, we have been working closely with them. Both OMB and ourselves have met on numerous occasions on this, and we do believe there needs to be some improvement in program operations and allocations, but in general they have been very supportive in seeing this as an effective program in increasing our export opportunities.
    The CHAIRMAN. Mr. Ewing.
    Mr. EWING. Thank you, Mr. Chairman, for holding this meeting, and excuse my tardiness. I think the subject matter is very important.
    Mr. Secretary, thank you for being here. Mr. Galvin, Mr. Schumacher.
    I want to tell you the bean checks got to Illinois farmers, and it was nice being home last weekend.
    Mr. Secretary, in your testimony you stated that the EU outspends the United States on market development activities by $92 million. Does this take into account the amount of money that individual countries spend in market development?
    Secretary GLICKMAN. It does.
    Mr. EWING. Do we take into account what the different States of our country may spend on market development?
    Secretary GLICKMAN. Mr. Galvin?
    Mr. GALVIN. Yes, Mr. Ewing. We do attempt to total up U.S. Government expenditures, State government expenditures and private industry expenditures in making these comparisons.
    Mr. EWING. The Cairns countries, what do they spend most of their money on?
    Mr. GALVIN. I don't know offhand. I don't have it broken down by commodity. I can tell you, though, that each year we put together this rather thick report on the competition and how much they spend and what they spend it on, so we do collect a fair amount of detailed information on that point. I just couldn't tell you offhand which specific commodities.
 Page 61       PREV PAGE       TOP OF DOC
    Mr. EWING. But it is in that report?
    Mr. GALVIN. Yes, it is.
    Mr. EWING. Thank you.
    Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Baldacci.
    Mr. BALDACCI. Thank you very much, Mr. Chairman.
    Mr. Secretary, under the export programs, do we have a program under the export programs that pays agriculture producers directly for exporting products?
    Secretary GLICKMAN. I don't think we have one that pays producers directly. Where we have used the EEP, like we use it a little bit in poultry now, there are direct payments that basically go if you export a product, but that would be about it.
    Mr. BALDACCI. We ran into an issue about that in regard to a particular chicken farmer and poultry farmer in terms of being fined by OSHA and other Federal agencies to the tune of several million dollars.
    Secretary GLICKMAN. You are talking about the labor violations.
    Mr. BALDACCI. Labor violations, health and safety violations.
    Secretary GLICKMAN. But our promotion exports on poultry are minuscule. This was done in the last year or two.
    Mr. BALDACCI. First of all, I think if you don't, you should have a policy to make sure that the right hand knows what the left hand is doing so we don't have one agency of the Federal Government giving several million dollars to one poultry producer, and then that person using that money to pay the other arm of the Federal Government is being fined and penalized for the treatment and health and safety conditions.
    Mr. Chairman, the other issue I would like to ask the Secretary about was during the oil crisis when we were estimating the losses to agriculture, initially the figure was that agriculture was losing about a billion dollars, but it was interesting because in the discussion, they told me that in raising the interest rates actually hurt the agriculture community $2 billion, almost double what the oil and petroleum product increases had caused.
 Page 62       PREV PAGE       TOP OF DOC
    I noticed in the CRS report that it says that the USDA's exports will be about $50 billion, while imports will rise to $39 billion, and one of the main reasons is because of the continued—of the continued low exports are the slow economic recovery in the east and Southeast Asia and the strength of the dollar.
    What we are we doing at the Federal level to make sure that the Fed doesn't strengthen our economy to the point that we cannot export as much as these figures indicate, and if they have concerns about speculators in the marketplace, that they take care of it, but that they don't have a broad brush across the entire spectrum of the economy?
    Secretary GLICKMAN. I have talked to the Chairman of the Federal Reserve about the issue of our strength of our dollar. Actually he has a background in agriculture earlier in his career. There is no question that the strength of the dollar has affected agriculture exports around the world. It is one of the factors. That is one of the reasons why we have been so aggressive in recent years in using our Credit Programs, our GSM Programs, is to try and find kind of an antidote to that to develop markets so that people would develop long-term relationships with us.
    I can't tell you that USDA has a particular strategy to deal with the Fed's response other than to let them know the impact on agriculture. Of course, you talk about the energy side of the picture. We are engaged with the Department of Energy right now on the issue of high energy prices because the fact is that agriculture is the most energy-intensive part of the U.S. economy, and trying to deal with the issue of whether the high spike in prices will affect diesel, will affect fertilizer, and will affect those things that have a dramatic impact on the farm economy.
    Mr. BALDACCI. Is there any possibility of a proposal by the administration to help the agriculture community out with those transportation and energy costs that have skyrocketed?
 Page 63       PREV PAGE       TOP OF DOC
    Secretary GLICKMAN. I am not aware of anything right now, but I know this is a matter that is being engaged as we speak at the White House.
    Mr. BALDACCI. Mr. Secretary, I have been at several meetings where you have been here, the Secretary of Treasury has been here, and the Chairman of the Fed has been here, and I think that with the impact on the agriculture economy of what the Fed has been doing, and it is indicated here in the figures in the strength of our economy and the weakness of other economies, and the actions that they have been taking, I don't think they are going to lessen that. So somebody should send a very strong message to the Fed that they are causing damage within the agriculture community in terms of being able to compete on the worldwide level.
    Secretary GLICKMAN. The only think I would say, while there may be some truth to what you are saying, I don't think you can blame the entire strength of the economy on the Fed. Part of it has to do with the natural strength of the American economy, not agriculture, but overall.
    Mr. BALDACCI. There are some people in Congress that don't want to give credit to the administration for the overall strength of the economy and pursue it at the Federal Reserve level, and all I am suggesting is that maybe if we had some actions at the Fed, it would certainly have a larger help to agriculture on world trade. And I just think that those factors are going to do a lot more, because if we spend all this money on credit programs and export programs, it is not going to amount to a very big impact compared to what the Fed does.
    Secretary GLICKMAN. Actually it is kind of interesting. We have an Agriculture Policy Advisory Committee set up under statute. They have indicated some of your same concerns in recent weeks to not only us, but the Department of Treasury officials.
    Mr. BALDACCI. I would like to work with you on that or your people on that because I think a lot can be said in regards to that issue.
    Thank you, Mr. Secretary.
 Page 64       PREV PAGE       TOP OF DOC
    Thank you, Mr. Chairman.
    The CHAIRMAN. In order to try to accommodate the Secretary's other engagement, we will say we appreciate your coming. We look forward to seeing you again.
    Secretary GLICKMAN. Thank you for the nice, quiet hearing, Mr. Chairman.
    The CHAIRMAN. One occasionally is OK.
    With unanimous consent, the hearing record will remain open for additional comments and/or questions from the administration.
     The committee is adjourned.
    [Whereupon, at 12:12 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 to discuss export and market development programs for U.S. agriculture.
    The U.S. Department of Agriculture has been working at full throttle to build long-term trade opportunities, increase exports, help relieve hunger abroad, and help American farmers and ranchers earn an adequate income from their farms.
    In April of last year, the President announced sweeping sanctions reforms that are already beginning to open new foreign markets to U.S. agricultural exports. Despite continuing sanctions on most other products, American farmers and ranchers are now able to sell their commodities to Iran, Libya, and Sudan. The broad easing of sanctions could bolster U.S. agricultural exports by as much as $500 million a year. Already, there have been sales of 29,000 tons of hard red winter wheat to Sudan, 20,000 tons of durum to Libya, and more than 600,000 tons of corn to Iran.
 Page 65       PREV PAGE       TOP OF DOC
    In general, commercial exports of food and other human necessities should not be used as tools of foreign policy except under the most compelling circumstances, and the administration has extended this policy to existing sanctions on a case-by-case basis. We look forward to working with the Congress to solidify this policy in a way that does not unduly limit the President's discretion.
    For 2000, USDA allocated $90 million in Market Access Program funding for export promotion activities to 65 U.S. trade organizations, state/regional groups, and cooperatives. USDA also approved plans for $33 million in overseas marketing activities under the Foreign Market Development program. This year, USDA also initiated a Quality Samples Program that assists U.S. exporters in introducing new products to potential buyers.
    USDA is announcing today actions to improve the cleanliness and competitiveness of U.S. wheat. USDA will immediately decrease the acceptable maximum dockage levels in wheat purchased for U.S. foreign food assistance programs. This will tell the world that U.S. wheat meets a higher standard. USDA will also seek public comment very soon on whether to establish an official U.S. standard for maximum dockage levels in exported wheat. Cleaner exports will help create greater demand for U.S. wheat and help U.S. wheat suppliers compete internationally.
    USDA continues to pursue its bilateral and multilateral efforts around the world to reduce trade barriers and create new export opportunities, while closely monitoring compliance by other countries with Uruguay Round commitments.
    During this past year, USDA helped reach two major trade agreements with China. Under the Agreement on U.S.-China Agricultural Cooperation, China agreed to remove longstanding bans on U.S. wheat, citrus, and meat and poultry. As a result, the first direct exports of U.S. meat and the first exports of California and Florida citrus were recently shipped to China, and China purchased 50,000 metric tons of U.S. wheat shipped through the Pacific Northwest. In addition, USDA helped negotiate the U.S.-China World Trade Organization accession agreement, which offers major, long-term benefits for U.S. agriculture. We were disappointed that the House Committee on Appropriations voted against providing the monitoring funds the President requested to help ensure that China meets its WTO obligations and to fund other trade compliance efforts.
 Page 66       PREV PAGE       TOP OF DOC
    In preparing for the new round of WTO agriculture negotiations, USDA, the Department of State, and the U.S. Trade Representative's office have consulted with various agriculture groups, as well as Congress, to formulate the U.S. position and strategy for these negotiations. The U.S. will play a leadership role, as we did in the Uruguay Round, in pressing for significant trade policy reforms, including eliminating export subsidies in agriculture, reforming state trading enterprises, improving market access, tightening rules on domestic support, and facilitating trade in new technologies, including biotechnology. We will intensify our work with developing countries to build alliances based on common interests in trade reform.
    Over the past 2 years, USDA has used its export credit guarantee programs to support sales of more than $7 billion in U.S. agricultural products. In fiscal 1998, during the height of the Asian financial crisis, USDA made $1.5 billion in credit guarantees available to exporters for sales to South Korea alone, and Korean importers used more than 90 percent of that amount for commercial purchases of U.S. agricultural products. Over the past 2 years, exporters to South Korea and the countries of Southeast Asia have used USDA credit guarantees to sell $2.6 billion worth of American oilseeds, wheat, corn, cotton, meats, and other products. As a result of these efforts and rising world demand, combined beef, pork, and poultry prices are forecast to top $6.6 billion this fiscal year, up from $5.8 billion a year earlier. U.S. beef especially is benefitting from both higher prices and strong overseas demand. While pork and poultry are still recovering from losses incurred during the Asian and Russian financial crises, both are forecast at least to equal, if not exceed last year's market share figures.
    For fiscal 2000 to date, USDA has announced the availability of more than $5 billion in export credit guarantees for sales to countries where lack of credit might otherwise present a barrier to sales.
    With the help of USDA's Dairy Export Incentive Program, U.S. exporters sold more than 136,000 tons of dairy products valued at $337 million in fiscal 1999. Under DEIP, USDA awarded bonuses of $145 million to help U.S. dairy producers and exporters compete in overseas markets. For fiscal 2000 to date, nearly $69 million in bonuses have been awarded, supporting sales of around 77,000 tons of U.S. dairy products.
 Page 67       PREV PAGE       TOP OF DOC
    We continue to support legislation we previously proposed that will authorize the Secretary of Agriculture to reallocate unobligated Export Enhancement Program funding in the last quarter of the fiscal year to be used for U.S. foreign food assistance activities, including P.L. 480 and Food for Progress programs, and for purchasing commodities to replenish the Bill Emerson Humanitarian Trust.
    Last year, USDA used its food aid programs to move nearly 8 million metric tons of farm surpluses to help relieve hunger and suffering abroad. This was four times the previous year's tonnage and the largest quantity in recent memory. It included more than 5 million tons of wheat and wheat products donated under the President's Food Aid Initiative. U.S. commodities were shipped to 50 countries, from the unprecedented assistance package for Russia to food relief for Kosovo refugees, famine victims in Africa and North Korea, and hurricane victims in Central America and the Caribbean.
    Once again, this year, USDA will provide significant amounts of food aid to needy countries, including about 4 million tons in Section 416(b) donations of wheat, rice, soybeans and soybean products, and milk powder.
    As USDA moves ahead with these efforts, we face many challenges both domestically and internationally. USDA must continue its efforts to do more with less, as resources for administering our export and market development programs have not increased. In 1999, USDA received two Hammer Awards from the Vice President for improving the efficiency of its export programs through the development of a ''Unified Export Strategy'' and a streamlined process for advancing funds to Private Voluntary Organizations for humanitarian food assistance. However, as much as USDA works to operate its programs more efficiently and less expensively, this will not change the fact that our largest competitors outspend us for market development activities. The European Union outspends the United States by about $92 million, and the Cairns Group outspends us by about $306 million. If the United States is going to be competitive, especially as nations compete for access to the opening Chinese market, we will need to join with the private sector in increasing our efforts to develop markets.
 Page 68       PREV PAGE       TOP OF DOC
    Mr. Chairman, the export decline of the past several years has been sobering for America's farmers and ranchers, as well as for policy makers trying to address their concerns. While our export programs will never be a substitute for strong global markets and an adequate safety net, we must ensure that the programs we administer are effective and efficient. I look forward to discussing with you the best way to achieve this goal.
    This concludes my statement. I will be glad to answer any questions.
Statement by AgriBusiness Coalition for Foreign Market Development
    The AgriBusiness Coalition for Foreign Market Development is a coalition of 12 agribusinesses and trade associations that lobby on behalf of the Cooperator Program. This program has been an effective tool to develop and service overseas markets for agricultural exports.
    The Foreign Market Development Program began in 1955 when the Foreign Agricultural Service (FAS) of the U.S. Department of Agriculture signed an agreement with Cotton Council International to conduct foreign market development on behalf of the U.S. cotton industry. The program grew and now includes 70 cooperators working in over 140 countries. What is unique about this program is that financing comes from U.S. producers and agri-businesses, the private sector and governments in many of the foreign countries in which the program operates, and by government funding from the Commodity Credit Corporation (CCC).
    As the need for funding for various agriculture programs increases and the funding to meet these needs decreases, demand is growing for public/private partnerships. The Cooperator Program is one of the first and most successful of these partnerships. As a matter of fact, in 1998, for every Federal dollar directed to the Cooperator Program, there was a match from farmer check-off programs and other sources of $1.67.
    The Cooperator Program is more critical than ever to building and maintaining market access for American farmers. With new biotech crops, the United States has a significant advantage in the production of specialized crops, however, trade barriers continue to hinder market access especially for soybeans and corn. Two years ago, the United States lost a $200 million sale to Spain and Portugal because European Union barriers to Bt corn. The Cooperator Program is needed now more than ever to market the U.S. advantage in the quality of the crop produced and the specialized uses for crops like identify preserved corn. The United States is the leader in the agriculture marketplace but we are also seeing increased competition and trade barriers which limit our access to foreign customers.
 Page 69       PREV PAGE       TOP OF DOC
    The Cooperator Program is currently funded out of the Commodity Credit Corporation. The program was moved from FAS to CCC in fiscal year 2000 and no longer has a reliable source of Federal funding. With a CCC baseline of $27 million and with some carryover funding from FAS, the Cooperator Program will continue to be funded at the current marketing plan level of $32 million. However, in a couple of years, unless the Committee on Agriculture acts, this funding will be cut to $27 million which is the current CCC baseline. In the 2002 farm bill, the Cooperator Program needs to obtain an earmark of $32 million, the current funding level, to maintain the program stability needed to maintain and develop overseas markets.
    The AgriBusiness Coalition works closely with cooperators and commodity organizations to maintain funding for the Cooperator Program. We look forward to working with members of the committee during the next farm bill debate to ensure that American farmers have the necessary tools like the Cooperator Program to export their products.
Statment of Hon. Allen Boyd, a Representative in Congress From the State of Florida
    The test of any farm policy is how it performs in a depressed market and, unfortunately, the 1996 Farm Bill has failed to sufficiently protect our nation's farmers. While the nation's economy as a whole is booming, rural America is suffering a severe economic depression. Markets are crumbling, prices are continuing to drop and America's family farmers are struggling.
    I believe the role of the Federal Government in American agriculture is to enhance the quality of life for our citizens, support production of agriculture and provide economic opportunities for farm and rural residents to ensure we do not become dependent on foreign governments for our food supply. In order to ensure a safe, affordable, nutritious and accessible food supply, Federal farm programs should enhance the economic safety net for farmers and ranchers and help open, expand and maintain global market opportunities for agriculture producers.
 Page 70       PREV PAGE       TOP OF DOC
    In the midst of periodic global economic turmoil and trade wars, one such common sense program is working -and working well -to develop foreign markets for US agricultural goods. The Market Access Program (MAP) successfully helps our farmers export their products globally.. MAP partners with our agricultural producers to develop foreign markets by assisting them in promoting their products abroad through consumer promotions, market research and technical assistance. Participants in the program are required to provide matching funds of up to 50 percent of the program costs.
    All regions of the country benefit from the program's employment and economic effects through expanded agricultural export markets. In 1998, agricultural exports totaled $53.6 billion, generating 814,720 full-time American jobs, including 513,274 off-farm sector jobs. Agricultural exports have fallen dramatically in recent years and while some progress has been made through trade agreements, there is still much to be done to open foreign markets to American agricultural products. While the Uruguay Round Agreement on Agriculture requires cuts in direct export subsidies, no reductions are required in green-box market promotion programs such as MAP.
    Congressman Doc Hastings and myself have introduced legislation, H. R. 593 'The Agricultural Market Access and Development Act,'' to restore the amount of funding available for MAP to its original authorization level.
    Specifically, the bill would authorize the Secretary of Agriculture to spend up to $200 million on MAP, but not less than the current $90 million, to help small businesses, cooperatives and organizations that represent U.S. agriculture producers promote their products overseas. Likewise, this legislation would also set a minimum of $35 million to be spent on the promotion of U.S. bulk commodities overseas through the Foreign Market Development Program (FMDP). Finally, H. R. 3593 permits the use of Export Enhancement Program Funds (EEP)for the MAP or FMDP. EEP funds could be used to subsidize U.S. exports to make them more competitive, but unfortunately were subject to discipline in the Uruguay Round and slated for reduction. These unused funds usually amount up to $500 million a year.
 Page 71       PREV PAGE       TOP OF DOC
    Right now, foreign countries directly subsidize their agricultural exports and spend far more than the US each year promoting their products abroad. MAP and FMDP are the only programs available to us that give our farmers the chance to compete on a level playing field in the global marketplace. MAP is a good program—and one that is critical if our farmers want to gain access to new markets. It is time to expand this program so more American farmers and ranchers can benefit from it and be successful in promoting their products abroad. I strongly urge your support for H. R. 3593.
    I thank the committee for its time and consideration.
Statement of the USA Rice Federation
    The USA Rice Federation appreciates the opportunity to submit a statement to the Committee on Agriculture concerning USDA's export and market promotion programs. These programs—primarily the Foreign Market Development (FMD) and Market Access Programs (MAP)—have been critical to establishing and maintaining overseas markets for U.S. rice.
    Trade policy successes like the NAFTA and the Uruguay Round Agreement make headlines, but USDA's export programs lock-in the market access gains of trade agreements for U.S. agriculture. Successful trade agreements are only the beginning of competition for market share and exports between the United States and our competitors. The FMD and MAP provide needed medium and long term assistance to U.S. exporters to establish market presence and support ongoing trade servicing and marketing.
    The U.S. rice industry has been an active partner in USDA's market development programs, including the MAP and the FMD Program, for decades. These programs have assisted the American rice farmer in the expansion of sales to new markets and the improvement of product value in traditional markets. Not only has the American rice farmer benefited from growth in export trade, but exports are equally important for the off-farm U.S. jobs created in allied industries of processing, handling, shipping and finance.
 Page 72       PREV PAGE       TOP OF DOC
    Nearly half of America's rice production is exported each year and today we are the world's third largest exporter of rice. USDA 's programs enable the entire U.S. rice industry to work together to promote U.S. rice in more than 60 markets. Without these programs, such promotions simply would not occur. It is estimated that more than 85 percent of future food consumption growth will be outside the United States. Meeting the needs of foreign buyers will be critical if American rice farmers are to compete in a global economy. Competition for the expanding markets overseas is increasing.
    Whereas 15 years ago only a few foreign competitors offered export expansion assistance to agriculture, today dozens of exporting countries support their agricultural producers in marketing food products overseas. Whether it is European exports of rice to Turkey, or Argentine exports of rice to Mexico, the U.S. rice industry faces overseas competitors who receive assistance in marketing their rice products.
    American farmers benefit from USDA's marketing programs. Industrywide organizations like the USA Rice Federation use USDA's programs to foster trade promotion partnerships with foreign buyers on behalf of the entire industry. For example, the largest rice importer in Turkey wrote the USA Rice Federation in June stating, ''. . . thank you for your continuous and effective job in promoting U.S. A. rice in Turkey. It is obvious that these activities increase product awareness and consumption, strengthen trade ties with wholesalers and distributors, and improve product value, thus encouraging packers to identify (U.S. rice)in the market.''
    USA Rice conducts critical promotions using USDA and industry funds in Japan, the highest value export destination for U.S. rice ($141 million in 1999). For years, we have been working with U.S. trade negotiators to gain meaningful access to Japan's quality conscious consumers. While Japan is a very important market, we strongly believe there is a much larger potential for U.S. rice in that market, if consumers had the opportunity to taste and buy U.S. rice at a reasonable price. Today, because of import restrictions, less than one-half of one percent of U.S. rice exported to Japan reaches consumers labeled as such. There is little opportunity for a Japanese housewife to find a 5 kilogram bag of 100 percent U.S. rice in her local grocery store. Through promotions run under these USDA programs, we are working to change this.
 Page 73       PREV PAGE       TOP OF DOC
    In order to increase the opportunity for these consumers to try U.S. rice and be convinced of its high quality, we undertake a number of promotions in Japan, using USDA funds in conjunction with industry's. In order to familiarize the importers, wholesalers, and retailers in Japan with our products, we conduct seminars on the qualities of U.S. rice and have taste-tests of popular dishes. As a result:
     Earlier this year, about 150 rice trade professionals in the Osaka region learned for the first time about the qualities of six different U.S. rice varieties and tasted various dishes at the seminar.
     Over 5,000 housewives asked to participate in a consumer taste-testing we conducted, ten times the number we could accommodate.
     Our 1999 trade seminar event in Tokyo attracted more than 350 food industry professionals who heard from credible Japanese experts that the many U.S. rice varieties grown specifically for the Japanese market are very comparable to Japanese varieties.
     At the annual Japanese trade show for foodservice and food processing professionals this year in Tokyo, USA Rice served over 36,000 samples of various U.S. rice varieties.
     For the first time this past year, we launched a promotion of U.S. rice on television. TV ads ran in one of the larger market areas for a period of 5 months, reaching approximately 14,700,000 households with positive messages on the quality of U.S. short grain rice. Throughout the live months, some twenty Japanese companies (our tie-in partners)sold identified U.S. rice in their supermarkets, convenience stores and department stores and the ads featured tags indicating where and when the consumer can buy U.S. rice. These promotions lay a strong foundation for the development of even more substantial U.S. rice sales to Japan.
    The USA Rice Federation is also using USDA promotion assistance to build new ties with Mexico's food service industry, another substantial market with great potential in an expanding market segment. U.S. rough and milled rice will soon have duty-free access to Mexico under the NAFTA, and USA Rice's ongoing efforts to integrate promotion and trade servicing activities in Mexico will build on very favorable market access to strengthen commercial relationships and encourage sales.
 Page 74       PREV PAGE       TOP OF DOC
    Building markets through trade servicing and product relations campaigns has proven benefits for rice producers, but requires significant financial commitment. The USA Rice Federation is committed to increasing its share of contributions to program activities to reinforce the cooperative nature of these programs. With less than $5 million of USDA market promotion funds the US. rice industry sells $1 billion of rice around the world. This is a remarkable return to the U.S. economy for a relatively small investment.
    The USA Rice Federation is also committed to working with the Committee and USDA to strengthen USDA's export promotion programs so that maximum value accrues to U.S. agriculture and the U.S. economy.
    The USA Rice Federation represents all segments of the U.S. rice industry. USA Rice members are active in all seven major rice-producing states: Arkansas, California, Florida, Louisiana, Mississippi, Missouri, and Texas. USA Rice members grow 80 percent of the rice produced in the United States. USA Rice members handle virtually all of the U.S. rough rice exported and all of the rice milled in the United States. USA Rice also represents shippers, handlers, and other allied industries of the rice trade. The U.S. Rice Producers' Group, USA Rice Council, and the Rice Millers' Association are the charter members of the USA Rice Federation.
The Market Access Program: Helping American Food Exporters Succeed in the Global Marketplace
    The United States has a proven comparative advantage as an exporter of food, fiber, and forest products. However, the American exporter faces tough competition abroad-much of it sponsored by foreign governments. The future well-being of our farmers and ranchers is increasingly dependent on our success in the global marketplace.
    The Market Access Program (MAP), whose primary objective is to create, maintain, and expand commercial export markets, plays a critical role in helping U.S. producers and exporters combat tough competition and increase sales of U.S. agricultural products overseas. The MAP has assisted farmers and exporters in every region of the country and contributes to our nation's economy through enhanced farm prices, higher income, and increased employment opportunities.
 Page 75       PREV PAGE       TOP OF DOC
    The MAP is authorized at $90 million annually through fiscal year 2002. The MAP is a cost-share program that uses finds from the U.S. Department of Agriculture's Commodity Credit Corporation to help finance overseas promotional activities for U.S. agricultural products. In fiscal year 2000, USDA allocated $90 million to 65 trade organizations. Approximately 75 percent of MAP funding is used to conduct generic promotions for commodities such as corn, soybeans, and cotton and the remaining 25 percent is used by small businesses and agricultural cooperatives to promote brand-name items. In 1998, USDA
eliminated funding for large businesses and multinational corporations.
    To qualify for MAP assistance, a prospective applicant must submit a detailed strategic marketing plan to USDA. USDA applies a competitive, performance-based formula to allocate funds. The formula consists of four weighted criteria: private sector contributions, historic export
performance, projected export goals, and accuracy of past export performance.
    USDA's Foreign Agricultural Service has forged an effective partnership with the four State Regional Trade Groups (SRTG) to identify small and minority businesses and to foster their participation in the MAP. Of the $90 million that was allocated this year, $15 million was awarded to the SRTG's. Most of that will be used to help small and new-to-export companies promote their products in foreign markets.
    Deloitte and Touche, a well-known firm hired by the NationaI Association of State Departments of Agriculture, on behalf of all MAP participants, to evaluate the effectiveness of the program, recently reported that ''. . .. MAP is a significant source of support for new companies and new products entering foreign markets. MAP support is also beneficial to small firms as they begin to export. Our cases suggest that without MAP support, many small firms would not be capable of carrying out standard marketing programs in key foreign markets.''
 Page 76       PREV PAGE       TOP OF DOC
    The Deloitte and Touche study also found additional benefits associated with MAP, including: increased private investment in export promotion; better marketing strategies; and helped U.S. producers in overcoming marketing challenges particular to agriculture.
    For U.S. companies, the program is paying off. For example:
    Thanks to MAP, Egg Farm Dairy, a producer of neo-traditional cheeses has found success in Europe. Jonathan White's production facility in Peeskill, NY, received European Union approval just two years ago, and today, European shipments now account for over 50 percent of the company's total sales.
    Annie's Naturals, a small Vermont family-owned company that produces natural, organic salad dressings, recently added three new UK distributors after attending the Natural Products 2000 trade show, The company credits MAP support as a catalyst for the company's export success, noting that its salad dressing sales to the UK more than doubled in 2000.
    Wizard's Cauldron, a small natural food company in North Carolina, exhibited at BioFach '99 in Germany, the world's largest organic trade show to sell its certified organic salad dressing and sauces and is now finding success in the export market thanks to MAP.
    FAS and New York State Department of Agriculture officials worked together to bring a Japanese importer to the Kosherfest '98 trade show. The importer discovered bialys (bagels without holes) made by a small Brooklyn bakery, Bagels by Bell. This culminated in pioneering export sales of a container of bialys to Japan.
    Global Export Marketing Company, a small enterprise in New York, exports a tine of processed food products. Through trade show exhibits, and other marketing initiatives, the company substantially increased sales of branded food products by more than 500 percent to over $6 million in 1999—the company credits MAP for its export success.
    With the assistance of the MAP, Changing World Foods, a small Illinois-based company, is making significant inroads into the Czech Republic's microwave popcorn market.
 Page 77       PREV PAGE       TOP OF DOC
    Sioux Honey Association is a Sioux City, Iowa-based agricultural producer cooperative with over 400 member bee keepers. The Iowa-based agricultural producer cooperative is using the cost-share finding program to help them cultivate new markets. Export sales in the last year have doubled to Pakistan, and increased approximately 20 percent to South Korea.
    Thanks to MAP, Northland Forest Products, Inc., which produces ash logs and lumber, was able to significantly increase its shipments to the Japanese market and re-employ logger and mil1 workers who were idle by earlier downturn in demand for ash.
    "The Official Committee record contains additional material here."