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73–462 DTP






MAY 23, 2001

Serial No. 107–9

Printed for the use of the Committee on Agriculture

For sale by the Superintendent of Documents, U.S. Government Printing Office
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Internet: bookstore.gpo.gov  Phone: (202) 512–1800  Fax: (202) 512–2250
Mail: Stop SSOP, Washington, DC 20402–0001
LARRY COMBEST, Texas, Chairman
    Vice Chairman
RICHARD W. POMBO, California
NICK SMITH, Michigan
FRANK D. LUCAS, Oklahoma
JOHN R. THUNE, South Dakota
BOB RILEY, Alabama
DOUG OSE, California
ROBIN HAYES, North Carolina
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SAM GRAVES, Missouri
MARK R. KENNEDY, Minnesota

    Ranking Minority Member
GARY A. CONDIT, California
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
TIM HOLDEN, Pennsylvania
MIKE McINTYRE, North Carolina
BOB ETHERIDGE, North Carolina
KEN LUCAS, Kentucky
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BARON P. HILL, Indiana
JOE BACA, California
RICK LARSEN, Washington
MIKE ROSS, Arkansas
RON KIND, Wisconsin
RONNIE SHOWS, Mississippi

Professional Staff

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



    Clayton, Hon. Eva M., a Representative in Congress from the State of North Carolina, submitted questions
    Combest, Hon. Larry, a Representative in Congress from the State of Texas, opening statement
    Putnam, Hon. Adam H., a Representative in Congress from the State of Florida, prepared statement
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    Smith, Hon. Nick, a Representative in Congress from the State of Michigan, prepared statement
    Stenholm, Hon. Charles W., a Representative in Congress from the State of Texas, opening statement
    Anderson, Tony, president, American Soybean Association
Prepared statement
    Evans, Hon. Donald, Secretary, U.S. Department of Commerce
Prepared statement
Answers to submitted questions
    Fogerty, Sarah, Grocery Manufacturers Association of America
Prepared statement
    McEvoy, Bruce, representing United Fresh Fruit and Vegetable Association
Prepared statement
    Roney, Jack, American Sugar Alliance
Prepared statement
    Shaffer, Christopher, Wheat Export Committee
Prepared statement
    Veneman, Hon. Ann M., Secretary, U.S. Department of Agriculture
Prepared statement
Answers to submitted questions
    Willey, Wythe, National Cattleman's Beef Association
Prepared statement
    Zoellick, Hon. Robert, U.S. Trade Representative
Prepared statement
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Answers to submitted questions
Submitted Material
    American Forest and Paper Association
    Agricultural Coalition on Trade, statement
    California Grape & Tree Fruit League, statement
    Coalition for Sugar Reform, statement
    Fisher, Neal, administrator, North Dakota Wheat Commission, statement
    Florida Fruit & Vegetable Association, statement
    Rural Coalition; Missouri Rural Crises Center; Federation of Southern Cooperatives/Land Assistance Fund, statement

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

    The committee met, pursuant to call, at 10:03 a.m., in room 1300 of the Longworth House Office Building, Hon. Larry Combest (chairman of the committee) presiding.
    Present: Representatives Smith, Moran, Thune, Cooksey, Gutknecht, Ose, Fletcher, Pickering, Johnson, Osborne, Pence, Rehberg, Graves, Putnam, Kennedy, Stenholm, Condit, Peterson, Dooley, Clayton, Hilliard, Holden, Baldacci, Berry, McIntyre, Etheridge, Boswell, Phelps, Lucas of Kentucky, Thompson of California, Baca, Larsen, Ross, Acevedo-Vilá, Kind, and Shows.
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    Staff present: William E. O'Conner, Jr., staff director; Tom Sell, Lynn Gallagher, Callista Gingrich, chief clerk, Jason Vaillancourt, Susanna Love, and Andy Baker.
    The CHAIRMAN. The hearing of the House Committee on Agriculture for the review of the administration's proposal for the Free Trade Area of the Americas and its impact on U.S. agriculture will come to order.
    It is my pleasure today to welcome our distinguished panel to the Committee on Agriculture for this hearing.
    Our witnesses are Secretary of Agriculture Ann Veneman, Secretary of Commerce Don Evans, and the U.S. Trade Representative, Robert Zoellick, each testifying before the committee for the first time. While most of us have had the opportunity to meet privately with these distinguished representatives of the administration, this hearing will provide the opportunity to seek answers to questions many of us have that are related to the Free Trade Area of the Americas.
    I was joined by three members of the committee, Mrs. Clayton, Mr. Putnam and Mr. Holden, as well as other Members of Congress, at the Summit of the Americas in Quebec City from April 20 to April 22. It was a worthwhile trip. We met with the President of Colombia, Argentina's Agriculture Minister and Canada's Director General for the Department of Foreign Affairs and International Trade. And of course, we met with the United States delegation and are honored to have them present as our witnesses today.
    The committee was represented at the Summit of the Americas for the purpose of discussing the impact of an FTAA on U.S. agriculture with representatives of countries participating in the FTAA negotiations. As I have said on the many past occasions, it is my intention that the committee should be present during all discussions affecting our farmers and ranchers. Issues related to international trade and new trade negotiations in this hemisphere obviously have a direct impact on U.S. agriculture.
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    Agriculture trade negotiations are important and offer a great opportunity to level the agriculture playing field, including the elimination of foreign subsidies that put U.S. farmers and ranchers at the significant disadvantage.
    I also want to mention that the President sent his 2001 International Trade Agenda to the Congress on May 10 of this year. And it included trade promotion authority, which is very important to U.S. agriculture. Access to markets around the world will remain difficult without it. U.S. agriculture markets are open to imports and our tariffs are low. Agriculture tariffs worldwide average about 62 percent, while U.S. agriculture tariffs are 12 percent. It is to the advantage of U.S. agriculture that we continue to open markets and remove barriers to our agriculture exports through negotiations.
    President Bush has said that enactment of trade promotion authority is at the top of his trade agenda and that he has committed to working with Congress on a bipartisan basis so that America can reassert its leadership in the trade arena. Agriculture is an important part of that agenda, and this committee will ensure that agriculture's voice is heard. Remember, those are the voices of farmers and ranchers across the United States.
    I would recognize Mr. Stenholm.

    Mr. STENHOLM. Thank you, Mr. Chairman. I join you in welcoming Secretaries Veneman and Evans and Ambassador Zoellick to the committee this morning. I look forward to hearing from you.
    There are many reasons for the United States to pursue better relations with our neighbors in Central and South America. In our parochial interest in improving conditions for our farmers and ranchers, may or may not be one of them. The most recent analysis of the potential effects of an FTAA on U.S. agriculture was completed 3 years ago. In it, USDA concluded that Free Trade Area for the Americas would slightly increase farm income. But the margin of that increase was so slight, I would argue it is within the margin of error.
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    Despite that, I believe that we should continue to work towards a free trade agreement with the 33 other democracies in our hemisphere in the interest of strengthening these democracies and improving cooperation on a variety of issues, including the environment and drugs. Agriculture exports to the FTAA countries, other than Canada and Mexico, were about $4.2 billion last year. We cannot afford to take any of our customers for granted. We have learned that lesson again recently with China's reluctance to follow through on commitments made in our bilateral WTO negotiations.
    I look forward to the testimony today, which I hope will give us an appreciation for the potential of a Free Trade Area of the Americas, but also a better understanding of possible problem areas for agriculture. Thank you, Mr. Chairman.
    The CHAIRMAN. And without objection, all members' statements will be included as part of the record.
    [The prepared statements follow:]
    Thank you, Mr. Chairman, for holding this hearing today to review the impacts of administration proposals on the Free Trade Area of the Americas agreement. Within many agricultural sectors, our farmers and ranchers produce some of the highest quality, lowest-priced commodities in the world. They also rely heavily on open international export markets for sale of their products. However, trade distorting subsidies and abuse of SPS and intellectual property rights laws often leave U.S. producers at a significant disadvantage. While we must work hard to open borders so we may reap the many benefits of free trade, we cannot allow loopholes and illegal activities to harm American farmers. As we progress in our negotiations on FTAA issues, I hope that the administration and Congress will make this a priority.
    Thank you, Mr. Chairman.
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    I thank the committee for calling this hearing to review the potential effects of the Free Trade Agreement of the Americas on our Nation's agricultural production and trade policy. International trade agreements have the potential to benefit the U.S. agricultural economy and our trade negotiators efforts toward that end are appreciated. However, all international trade compacts must be carefully examined to determine the implications for U.S. farmers and ranchers, for it is the American agricultural producer who will untimely gain the benefits or bear the costs of our agricultural trade policy.
    Many American farmers are faced with competition from countries that enjoy dramatically lower production costs due to lower labor and environmental standards than which our producers must comply. Due to climatic reasons, competition for the fruit and vegetable industry in the U.S. marketplace has historically come from Mexico and Latin America. An FTAA that opens U.S. domestic markets to increased competition from Brazil, Argentina, Chile and other Western Hemisphere countries, many of which can produce goods for a much lower price than domestic farmers, must be carefully considered in order to avoid significant economic pressures on American growers.
    The potential for import penetration to vulnerable fruit and vegetable growers could be more pronounced than that imposed by NAFTA, as the FTAA is a regional trade agreement covering many more countries in scope. In general, the North American Free Trade Agreement while benefiting some, has led to a significant loss of market share for many American farmers. An International Trade Commission report indicated that the balance of trade for many farms goods has declined dramatically since the inception of the NAFTA. The $18 million fruit and vegetable juice surplus in 1995 has declined to a to a $48 million deficit today and the American frozen fruit industry has gone from a $9 million surplus in 1995 to a $37 million deficit in 1999.
    Before an FTAA agreement is entered into, it must be thoroughly reviewed to ensure that import-sensitive fruit and vegetable producers do not continue to lose ground as a result of hemispheric trade initiatives. To safeguard against significant market losses, special exemptions from tariff phase-outs should be considered for the most import-sensitive U.S. agricultural products.
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    It is critical to recognize the importance of equalization tariffs for import sensitive agricultural commodities, many of which have been subject to competition from heavily subsidized or unfair trade practices in the past, and for which our trading partners enjoy lower production costs due to much less stringent labor and environmental standards than those the U.S. views as fundamental requirements. The lifeblood of the multi-billion dollar Florida horticultural industry, for instance, is founded in the equalizing import tariff imposed on many products from countries, like Brazil, whose industries continue to benefit from past dumping and receipt of subsidies, while not incurring the environmental, worker safety, water, welfare, tax, and other costs which American growers must bear.
    The specific impact of a tariff reduction on orange juice from Brazil, currently at 7.85 cents per liter, would be severe to Florida citrus growers. Domestic citrus producers have significantly higher production costs and the present tariff is basically equivalent to the difference in the cost of production in the U.S. and Brazil. Even a slight tariff cut would suppress prices to below a breakeven point for domestic growers, rendering production unprofitable, and leading many domestic growers out of business.
    Even USDA's Agricultural Outlook Report of April 2000, indicated that the FTAA would have ''. . . major implications for U.S. sugar, peanuts and orange juice. U.S. sugar prices, production, and exports would decline significantly, and imports would increase.'' The report stated, ''Removal of such tariffs would create incentive to import less expensive Brazilian orange juice, which may displace Florida orange juice.''
    While the general objectives of balance and comprehensiveness in the FTAA negotiations on agriculture are recognized, I strongly caution against the inclusion of import sensitive fruits and vegetables such as citrus in FTAA negotiations on tariff reductions or elimination. In short, any trade agreement which further reduces U.S. tariffs on products such as orange juice and/or fresh citrus imported from Brazil, beyond the levels bound in the Uruguay Round, will dramatically affect the future viability of the U.S. industry producing citrus for processing and fresh consumption.
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    The U.S. fruit and vegetable industry cannot sustain any trade negotiation which does not provide clear-cut safeguards for the highly import sensitive portions of the agricultural industry. I look forward to working with the administration as well as with our trading partners to develop sound and carefully constructed trade policy focusing on economic growth and productivity for all sectors of the U.S. agricultural economy.
     The price of Brazilian orange juice in the United States and the commodity futures price of frozen concentrated orange juice (FCOJ) (which is considered one of the most accurate indicators of the U.S. price of wholesale FCOJ) has declined dramatically during the past decade in tandem with the Brazilian expansion.
     Brazil has already been found by the United States to have engaged in both sales at less than fair value prices, and receipt of countervail able subsidies. An antidumping order remains in effect on frozen concentrated orange juice from Brazil. In response to petitioner's allegation of sales below cost of production during the 1997/98 administrative review of the antidumping order on FCOJ from Brazil, the U.S. Department of Commerce issued a substantial dumping margin for the four companies covered by the review, and for any exporters not previously reviewed. In addition, in the recent expedited 5-year (sunset) review of the antidumping order on FCOJ from Brazil, Commerce found that dumping would likely continue or recur if the dumping order were revoked, and the ITC determined that, absent the restraining effect of the antidumping duty order, the likely volume of subject imports would be significant and that these imports would have significant adverse price effects, leading to continuation or recurrence of material injury to domestic growers. Thus, the antidumping order on FCOJ remains in effect.

    The CHAIRMAN. I would invite our panel to come forward.
    The Honorable Ann Veneman, who is the Secretary of Agriculture. The Honorable Don Evans, who in full disclosure, I must say, is also from the 19th district of Texas, and is the Secretary of Commerce. The Honorable Robert Zoellick, the U.S. Trade Ambassador. Welcome to all of you. Please begin when ready and we will start with Ms. Veneman and go in order of the introductions.
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    Ms. VENEMAN. I am very pleased today to join Secretary Evans and Ambassador Zoellick to discuss negotiations toward the Free Trade Area of the Americas, or FTAA as it is commonly referred to. When it is completed in January 2005, the FTAA will be a comprehensive free-trade agreement among the 34 democracies in the Western Hemisphere, stretching from the Canadian Arctic to the Tierra del Fuego, Chile.
    The FTAA is part of a much broader initiative by leaders of this hemisphere to deal with many of the common issues that all our countries face. That initiative, known as the Summit of the Americas, was launched in Miami in 1994. While the FTAA perhaps is the most widely known component, the Summit process also includes initiatives in other important areas, such as education, justice, transportation, migration and energy, to name a few. The Summit process provides a unique mechanism for the heads of state in our hemisphere to discuss political, economic and social problems in a multilateral and comprehensive way. It brings together democratically elected leaders united in their efforts to promote democracy, human rights and free markets.
    The 1998 Summit of the Americas held in Santiago, Chile, launched the formal FTAA negotiations. At the most recent summit meeting in Quebec City last month, the heads of state agreed that the FTAA should be completed by January 2005, and enter into force by the end of that year.
    Some of the most important and difficult work is yet to be done. During the next phase of the process, the negotiators will intensify their efforts to narrow differences on a broad range of issues in preparation for the next meeting of trade ministers set for October 2002 in Ecuador.
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    From the agriculture perspective, the United States has much to gain from the FTAA and much to lose without the FTAA in light of other preferential agreements in this hemisphere. When completed in 2005, the FTAA will provide U.S. producers and exporters with much greater access to 450 million consumers outside the North American Free Trade Agreement countries, who will have $2 trillion in income. Three countries alone, Argentina, Brazil and Chile, are expected to add over 50 million middle-class consumers by 2006, which is about the population of France. These consumers with rapidly rising disposable incomes represent a strong demand for imported food products.
    The FTAA has the potential to significantly expand trade which in turn expands overall economic growth, creates jobs, and boosts consumer buying power. This benefits citizens throughout the hemisphere. And as we have seen from our experience with NAFTA, such an agreement can do much more. NAFTA also reinforced sound domestic, economic policies, increased investor confidence, spurred entrepreneurship and innovation, and encouraged efficiency and transparency in government institutions ultimately strengthening democracy in Mexico. A similar process is already underway in much of Latin America, and would only be reinforced and strengthened by the FTAA.
    I should note here that realizing these potential benefits and those from other trade initiatives will require enactment of trade promotion authority. It is for that reason that the President has placed this at the top of his trade legislative agenda.
    The agriculture sector will be important both in the development and in the potential success of the FTAA. Preliminary U.S. Department of Agriculture estimates suggest that FTAA could expand our agriculture exports to the hemisphere by over $1.5 billion annually. U.S. gains would come primarily from more open markets for our grains sector, particularly for wheat and feed grains.
    We also should see growing exports of horticulture and processed products as the FTAA contributes to greater economic growth throughout Latin America.
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    We also should recognize that we will be facing many challenges as in any negotiation of this magnitude. We know that agriculture community has some serious concerns. Some of the countries involved are already competitors. However, U.S. agriculture cannot afford to stand on the sidelines in any trade negotiation in this hemisphere or elsewhere. Our farmers are among the most efficient in the world and our agriculture sector is one of the most export-dependent sectors of the U.S. economy.
    Our producers are already missing opportunities in this hemisphere. The Mercosur Countries, that is Argentina, Brazil, Paraguay and Uruguay, Chile, Mexico and Canada have or are negotiating preferential agreements with most of the other countries in the hemisphere. Under the Canada to Chile Free-Trade Agreement, for example, Canadian wheat can enter Chile with lower tariffs than can U.S. wheat. The Andean Countries have reduced their tariffs on oilseeds and products for the Mercosur Countries causing U.S. producers to lose out on these markets. In addition, the European Union already has agriculture trade agreements with Mexico and the Caricom Countries, and now is negotiating with the Mercosur nations as well. Japan too is exploring possible agreements in our hemisphere.
    Out of the more than 30 reciprocal trade agreements in the hemisphere, the United States is participant in only one, NAFTA. And while we have had some challenges with NAFTA, it has proved very positive overall for U.S. agriculture. Canada and Mexico are now our second and third largest export markets. And we expect them to buy more than $15 billion worth of our agriculture products this year.
    The bold reality is that if all Western Hemisphere countries have preferential agreements among themselves and the United States is not a party to these agreements, U.S. exports to the hemisphere would actually decline, perhaps as much at $300 million annually. We must be a participant and a leader in these important developments in our own hemisphere.
    The agriculture negotiations within the FTAA have four basic components: Market access, export subsidies, other trade distorting policies, and sanitary and phytosanitary measures.
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    In the market access component there has been no discussion on any specific agriculture products thus far. Our efforts over the next 10 months will be devoted to establishing the methods and procedure that will be used for the product specific negotiations.
    Concerning export subsidies, participants have already agreed to their elimination within the hemisphere when the agreement is implemented. However, we still need to reach agreement on how best to deal with subsidies from non-hemispheric suppliers.
    Another important component is other trade distorting policies. These include activities related to domestic support, differential export taxes, tax rebates for exported products, State trading enterprises, and other such policies. The United States continues to believe that most of these issues should be addressed in the multilateral fora where disciplines can be imposed on all of our trading partners.
    Finally, the discussion of sanitary and phytosanitary measures will center on improving the implementation within the hemisphere of the World Trade Organization SPS agreement. The U.S. has proposed that FTAA countries agree to strengthen their collaboration in the WTO Sanitary and Phytosanitary Committee, as well as in the international standard-setting bodies. We have also proposed activities such as exchanging information on new research and risk assessment procedures, and improved coordination of technical assistance.
    As you can see, Mr. Chairman, much hard work lies ahead. We will be consulting with this committee and the Congress, as well as the agriculture community frequently as we proceed with these negotiations. We believe that the FTAA will facilitate the growth in U.S. agriculture trade and in the U.S. economy. Currently, the business of agriculture from production to processing to transportation to marketing generates about 16 percent of U.S. economic activity, and employs almost 23 million U.S. workers in all 50 States.
    Over the next decade food consumption in Latin America is expected to surge as a growing middle-class with rapidly rising disposable incomes is able to purchase more and better food. Our producers and processors should have improved access to this expanding market. U.S. agriculture can benefit from the FTAA, as can countries throughout the hemisphere. This is an exciting challenge for us. President Bush said as he was departing for the Quebec Summit last month:
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    This third Summit of the Americas will take the next steps in creating an entire hemisphere that is both prosperous and free. It is a great task and an extraordinary opportunity to make the Americas the land of opportunity.
     Mr. Chairman, I welcome your guidance and look forward to working with this committee as we move forward in the FTAA process. That completes my statement. Thank you.
    [The prepared statement of Secretary Veneman appears at the conclusion of the record.]
    Mr. COMBEST. Thank you, Secretary Veneman. Secretary Evans.
    Mr. EVANS. Thank you, Mr. Chairman. I am delighted to be here and in the company of my Congressman, Congressman Stenholm, my neighbor in west Texas. Other distinguished members of this committee, I am delighted and honored to be before you today.
    I have had the privilege of watching the leaders of this committee over the last number of decades and observing their commitment to the agriculture community, the farmers, the ranchers. In west Texas I know, not only have I seen first-hand not only their commitment, but their deep understanding of this very important issue that we are here to talk about today.
    Secretary Veneman, I give you a very sound good review of the administration's perspective of Free Trade Area of the Americas as it relates to agriculture. And I would like to just add a few comments as to the administration working with you on the important initiative of the President and trade globalization, not only here in the hemisphere but around the world. I come here today really understanding the importance of the administration working with this key committee, and all of Congress. Because I am not confused at all about what the Constitution says with respect to your congressional obligation, your Constitutional obligations when it comes to trade policy. So I will be up here on the Hill often talking to you, listening to you, want to know what is on your mind with respect to whether it is FTAA or any other trade liberalization issue that may be before us.
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    And there are a number of them, where this is primarily focused on FTAA today. But obviously, we have got other trade initiatives underway with a free trade agreement with Chile, with Singapore, with Vietnam, with Jordan. We have got a lot of issues on the table that Ambassador Zoellick is dealing with. And there will be more. Certainly at the Free Trade Area of the Americas I saw a number of countries that were interested in opening up bilateral trade negotiations. And when the opportunity presents itself, I think we ought to pursue those opportunities. Because as I look at trade liberalization over the last 50 or 60 years, I see nothing but benefits really in the whole for all Americans. I think trade liberalization has continued to improve America's quality of life.
    And so when I finally take a step back and look at expanding trade in the hemisphere as well as around the world, and I see even in the last decade it has contributed to 25 percent of our growth. It accounts today for a third of our GDP. It relates to 12 million jobs in America, 750,000 of those jobs are in the agriculture community, both on and off the farm. And so when I see the benefits of trade liberalization I get particularly enthusiastic when I see opportunities like Free Trade Area of the Americas to expand open markets to this hemisphere. I get concerned when I see the rest of the world moving forward and America standing still in this area. There are over 130 preferential trade agreements in the world today. America is a part of two of those. So when I think about what the rest of the world is doing and I look at where we are, I say, shouldn't we be moving more aggressively in the free trade arena.
    Which gets me too talking about the importance of trade promotion authority. I think it is a vital tool for the President to have as we move ahead. But we all clearly understand how, as I said at the top of my remarks, it is clear that we need to work closely, and we will work closely with Congress when it comes to trade issues.
    I was really moved at Quebec City by watching 34 leaders in the Western Hemisphere come together, all democracies. And we have one that is not a democracy now in the hemisphere. The first time in the history of the world that we could say that there are 34 democratically elected leaders in the Western Hemisphere. And I was even more moved when I looked at the disparity and size of these countries in terms of their economic power and their economic might.
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    When I thought about the moral argument for Free Trade in the Americas, I looked at these leaders of these smaller countries and understood clearly what it was they were putting their hope and faith in. And that is a free enterprise system, free trade, opening up markets. Because from my perspective, the way free enterprise system works or the genius of the free-enterprise system or opening up markets work, is that when you open up markets you unleash the genius of the individual and the individual becomes responsible for his actions, and he becomes innovative, and he becomes creative, whatever country that you are in. And when they do that, when individuals do that productivity increases, economic growth increases and you create more jobs, you increase the standard of living in your country. And then ultimately you improve the quality of life.
    Now that is what these 34 leaders in the Free Trade Area of the Americas are looking for. They are looking for improving the quality of life of their countries. And so this is something that America can clearly lead on in this very important part of the world. And that is where the President has indicated his focus on the Americas and the Western Hemisphere.
    As Secretary Veneman said, I think NAFTA is a good example of the benefits of opening up trade in this hemisphere to the agriculture community. Agriculture trade and exports to Mexico and Canada has increased a lot faster than exports to other parts of the world since NAFTA. So I think we have a living example of an opportunity of the kind of opportunities that we have in the Western Hemisphere.
    When I look at tariffs on agriculture around the world and I see we have about a 12 percent tariff. I see the EU has a 30 percent tariff. I see that countries in the WTO have a 60 percent tariff. And then when I see high tariffs throughout the Western Hemisphere. I see opportunities to knock down tariffs, lower tariffs, open up more markets to agriculture. Again specifically, in this hemisphere.
    So not only do I see a tremendous economic benefit for this country and the agriculture community to aggressively pursue the conclusion of the Free Trade Area of the Americas by 2005, I also see the opportunity to spread human freedom throughout this hemisphere. I see the opportunity to enrich the lives of those in other countries by expanding their own social freedoms and their own political freedoms, and their own liberties. I think it is a two-for-one. I think not only do you do the right thing for all Americans, by increasing the opportunities for our economy and specifically in this case, our agriculture. But I think we lead the world in the right kind of way by expanding freedom throughout this hemisphere.
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    As the President has many times, our most important export that we have is freedom. And it is through opening up markets for the agriculture community that we can expand and export that freedom.
    The Commerce Department specifically what, I think our role is, is to work very close, and we do with USTR, and the United States Department of Agriculture. We are a team here. We come to you as a team. We work closely with each other. We talk a lot about the important issues that face us. So we communicate a lot with each other. But in addition to this, as I have mentioned, we are going to talk to you a lot and we want to listen to you and respond to your concerns and your questions.
    Within the Commerce Department other than working closely as a partnership with USTR and Department of Agriculture, we have obviously specific roles we play. We have got our advocacy center that is an advocate for farmers and ranchers. And throughout the world we got our trade information center where farmers and ranchers can call in and get export assistance. It is a pretty active center. We get about 700,000 hits on our web site. We handle 80,000 telephone calls this last year. We have foreign commercial service offices throughout the Free Trade Area of the Americas. I saw a number of them in Buenos Aires. I was in Argentina not long ago with the ministerial prior to Quebec City where Ambassador Zoellick was getting together with his counterparts to prepare for Quebec City. But seeing our foreign commercial service office there and their enthusiasm for the opportunities for the American farmer and rancher throughout Latin America was inspiring to me. So our commercial offices are very important. Import administration is very important too, to make sure we are enforcing our trade agreements with other countries.
    And then finally, I would talk about quickly just our market access and compliance and other department that we have had, Administration Bureau that we have to make sure markets are opening up to us. And people are in compliance, other countries are in compliance with the trade agreements that we have with them. And they work also hand-in-hand with our Trade Development Bureau which will be and is very active throughout Latin America.
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    So anyway, Mr. Chairman, I just wanted to briefly give you my observation of how important trade liberalization is to America, how important Free Trade Area of the Americas is to pushing that agenda forward. The whole world is watching it, WTO is certainly watching it, the EU is watching it. It is important for us to show leadership in moving that along. I think Ambassador Zoellick has done a terrific job of that by setting some pretty firm time tables. And with respect to when we expect results, and when we expect to accomplish it and what along the way between now and 2005.     But I conclude my remarks when you think about Free Trade of the Area of the Americas, I am one that is certainly going to think about the 34 democratic leaders in this hemisphere that are leaders of countries of people from all walks of life. And so there is countries that have per capita incomes per year from $500 per year to America where we have $30,000 per year. And it is these leaders throughout this hemisphere that are putting their faith in a free trade, open trade, free enterprise type of relationship throughout the hemisphere to improve the quality of life for their people. Thank you, Mr. Chairman. That concludes my remarks.
    [The prepared statement of Secretary Evans appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you, Secretary Evans. Ambassador Zoellick.
    Mr. ZOELLICK. Well, I would like to thank the chairman and Mr. Stenholm, members of the committee. If I could request that my statement be entered in the record, I would just summarize a few brief points.
    The CHAIRMAN. All statements will be included in their entirety.
    Mr. ZOELLICK. I particularly appreciate the opportunity to be here with my colleagues and friends, Secretary Veneman and Secretary Evans. As Secretary Evans stated, we have known each other from the past, we have worked together as a team. And it is a delight to be here with him.
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    I also want to thank the chairman and Mr. Stenholm for the informal session that you arranged for me with this committee in March. It was an excellent way of getting an early identification of some of the issues of greatest importance to you. And I want to thank you, Mr. Chairman, and a number of the colleagues I see here who joined the President in Quebec City. I think it was a good sign of a bipartisan and executive and congressional interest in what is a very important effort for our hemisphere.
    I want to open by underscoring the President's strong interest in the farm trade. And let me say it in a way that I heard it directly. And that is, the first question that he asked me when he interviewed me for my present post related to the farm trade. And he said that it was his most important trade issue. So that certainly had an effect in my thinking. And it is one of the reasons why in my first months on the job I was able to arrange with the help of many of the leaders of the farm community here in Washington sessions with over 40 of the farm groups to try to get their views and concerns.
    I also thought it was useful to invite some of the former agriculture negotiators to get a sense from both parties going back a number of administrations to get their feel on the issues.
    And one of the things that came loud and clear to me was that while I know, and I am certain you have heard many of the concerns about farmers and ranchers about the trade issue, I also get a sense that they really recognize the critical role of it for their future. One in 3 acres in the United States are planted for export. We sold more than $50 billion of agricultural product last year. It will probably be a little higher this year, about $53 billion. And when you think bout the effect on the farm income, that totals about 25 percent of gross farm income. So it will be hard for our farmers to do very well unless we have open markets.
    The other message I got was that the farm groups recognize that the United States is a relatively mature market in agriculture. It is expansion will be largely based on consumption from added population because there is probably only so much all of us can eat. Although some of us test it every day. And so we are likely to get the consumer growth and market potential from overseas. And as the Secretaries of both said, it was a striking fact to me to see that the average tariff bindings on products under the WTO is 60 percent. And as many of you know well and have pointed out to me, the EU still spends about $5 to $6 billion a year on export subsidies. So they are not only paying people to grow it, but then they have to pay people to sell it. And that hurts our farmers and farmers from around the world.
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    Now my statement notes some of the specific areas where I have easily been able to make modest progress in the first few months. We made some openings for dried beans in Mexico. And we headed off a border crossing problem for livestock. I had the opportunity not long ago to talk to Mr. Stenholm about the question of continued use of methyl bromide in terms of quarantine and preshipment treatment. And based on that conversation, I have been able to work with my colleagues and those at EPA and OMB to develop what is now a close-to-completion of a rule to permit an open-ended use of methyl bromide, which is a topic that Mr. Stenholm raised some concern for me about.
    We have been able early on to organize the Cairns Group and other countries to be able to try to help us in the Codex process. Because all of you are increasingly aware that while part of the issue is market access, an increasingly important one is how we deal with the sanitary and phytosanitary standards. And so if we are going to be effective in dealing with some of the ideas the EU has, we have to organize others on issues like biotechnology.
    We have pressed to plan with some success on some of these SPS issues and also on safeguard matters. And as you probably know, we resolved this long-standing bananas dispute that is important to agribusiness.
    The reason I mentioned these points and the reason that I think it is important for us to hear you individually and also as a group, is that I think we all recognize that the build the support of the agriculture community for trade it is going to have to be retail, piece by piece, issue by issue, demonstrating that we can deliver on a number of these topics. Because there is a lot at stake.
    I have had chance so far to travel to both Latin America and last week to Europe. And it is clear to me that the United States is falling behind. Let me just drive that home with one statistic. The EU now has 27 free trade or special customs arrangements around the world. Twenty of which it has negotiated in the past decade. And it is negotiating 15 more. And as Secretary Evans said, that is out of a total of 130 worldwide. And we are party to two.
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    Now those numbers have real effects. Secretary Veneman mentioned one in the case of Chile. As many of you know, there was an effort by the United States in 1994 to say that we and the Mexicans and the Canadians would go ahead with free trade agreements with Chile. Well, the Canadians and the Mexicans did, we did not. And now when I was going down on my way to Santiago and I was talking to some business groups, I found out, as the Secretary said, that our wheat farmers are losing market because they have to pay an extra 8 percent that the Canadians don't. And when we talked to some of the fast-food restaurants we learned that when it comes time to potatoes for making french fries, all those now are starting to come from Canada because of the extra charge that Americans have to pay. As the Secretary also mentioned in the case of the Andean, but it is true with Chile, too, our vegetable oil producers are losing out to the Mercosur Countries. So these failures to move ahead have real effects market-by-market that affect farmers and ranchers in agribusiness.
    As my statement has mentioned and as my colleagues have said, we are trying to move ahead globally, regionally and bilaterally. We see a benefit through a competition in liberalization. And this is where the FTAA is particularly important. Number one, it will have some benefits for us in terms of opening the regional market, as Secretary Veneman mentioned and as the chairman noted in his opening comments, and Mr. Stenholm also alluded to. But frankly, it also gets the attention of others around the world. It helps give us leverage when we are trying to move forward in the Global Round. And also in the process helps us build support with some of those countries on the issues like biotechnology or export subsidies. But even within the FTAA we want to keep the pressure on. And that is one reason why we move forward quickly with the free trade agreement with Chile to rectify some of the problems we have already seen, but frankly, to send the message to Latin America as well, which is that we will move forward with those that are ready to move to liberalize. We want to bring everybody along, but we are not going to wait.
    Last week I was in Europe trying to give some new momentum to the launch of the WTO Round. I met with the EU commissioners, I met with developed countries, developing countries, had an excellent meeting with the Cairns Group trying to organize our position on some of these WTO issues. And the question that always ask me comes back to you. The question they ask is, will the Congress support the administration in having trade promotion authority so we can move ahead with these deals.
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    The key point for me is whatever we try to do in the administration, in the WTO, or the FTAA, or the bilateral agreements depends on a cooperative working relationship with you. Because as Secretary Evans said, you have got the Constitutional authority, we have got the negotiating role. So we have to work together.
    So I appreciate your support and I will do my best to earn it. Thank you.
    [The prepared statement of Ambassador Zoellick appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you, Ambassador Zoellick.
    One of the things that I never pass up the opportunity to mention, because I think it is critical, I think as a general rule the agriculture sector of the economy has probably been as supportive of trade as any other sector of the economy. But I also must mention that I think that this support is narrowing and I think it is becoming more concerning. And I think a lot of that rests on the concern that groups have about once an agreement is reached the ability to ensure that that agreement is adhered to, and the time that it takes when disputes and facts have arisen for them to be settled. That may or may not solicit comment. I just wanted to make for sure that I didn't pass up the opportunity to mention that. Because I do think it is critical to the ability for the Congress in the future to grant trade authority if one of the strongest sectors that has generally supported trade begins to weaken in its support.
    The frustrations are real and they touch a lot of different sectors of the agricultural economy. We became aware of this as we were preparing for the trip up to Quebec. But in 1998 the USDA's Economic Research Service issued a report describing the effect of the FTAA on specific commodities. They concluded that the effect on annual farm income would be very small. Gains would occur for wheat, corn, soybeans and cotton. Little change would be seen for rice, meat and dairy products. And there would be increased competition for U.S. sugar, peanuts and orange juice. What I would ask you is from the 1998 study, in your opinion, are those projections accurate and is it time in fact for that report to be updated?
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    Ms. VENEMAN. Mr. Chairman, in fact, the report is in the process of being updated by ERS. And we are looking at changing the baseline for that study. The 1998 study used 1992 as a basis for the projections. So it is time to update that report. And that is in fact being done.
    The latest work that was done by ERS was looking at percentage growth in U.S. exports to the region resulting from the FTAA. And that was a projection of 8.4 to 9.2 percent per year.
    The CHAIRMAN. When is that report due to be completed, do you know? Just approximately.
    Ms. VENEMAN. Hopefully, sometime this fall.
    The CHAIRMAN. I think that would be something we would be very interested in seeing.
    Secretary Evans, I would like to ask you, what countries in the Western Hemisphere would be opposed to negotiating with the United States if the administration does not have promotion authority?
    Mr. EVANS. Mr. Chairman, we are moving forward with one in the Western Hemisphere, which is Chile, which obviously we don't have a trade promotion authority and they are willing to move ahead. We have had others that have indicated that they would like to open up bilateral discussion with us. But I think I would just simply say that many more will be encouraged to open discussions with us with trade promotion authority. I don't have a list. Maybe the Ambassador does of countries that say that they won't open discussions with us without trade promotion authority. But I think with trade promotion authority everybody clearly understands that we could move forward on discussions with more swiftly and reach conclusions quicker then without it, because of the uncertainty that you have at the negotiating table without trade promotion authority.
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    I don't have a list of countries that would not talk to us without it, but I know that we would be safe to say that more would be anxious to talk to us with it. It is a very important tool for us to have not only maybe for bilaterals, but certainly for FTAA. I mean, as the Ambassador said, the countries in the Western Hemisphere are anxious when they look at what kind of authority we are going to have when we are sitting at the negotiating table next year faced with some of these targets that we have already set up in order to reach a 2005 agreement.
    So those are my general thoughts on it, Mr. Chairman, of my view of import of trade promotion authority.
    The CHAIRMAN. Mr. Stenholm.
    Mr. STENHOLM. Today marks the the fifth administration that I have had the privilege of sitting here and listening to. Every time we talked about trade, agriculture was always in the take-off. But many times we have not been in on the landing.
    And I appreciate very much the tone of your testimony today. I think one of the things that we have erred in the past in building too high an expectation for agriculture. And I think the facts bear out what you have stated. And I think we are on much sounder ground. I hope that we will very soon be able to give you trade promotional authority so that we might begin to negotiate away some of the things that bother many of us at this table. The only way we will correct the iniquities and be on level playing field is to negotiate. And I am a true believer that the only way we will get there is by giving you the trade promotional authority. I cannot imagine another country negotiating with us without you have that. And that is something for my colleagues to consider.
    Ambassador Zoellick, I want to thank you. You mentioned methyl bromide. We haven't solved it yet. But I very muchly appreciate the attention you have brought within the administration, to EPA, and others on this issue, and how important this issue is to much of our industry and the utilization of this product. And the facts that need to be brought out and then acted upon.
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    Secretary Veneman, you testified that we have already agreed to eliminate export subsidies within the hemisphere when the FTAA is implemented. How did the participants define export subsidies, and would they include our export credit guarantee program?
    Ms. VENEMAN. I believe export subsidies is defined as they currently are in the agreement on agriculture in the WTO. It would not, under what the current definition, include the export credit guarantee programs.
    Mr. STENHOLM. This agreement that then, what if I understood what you said, export credit guarantee programs are not considered to be export subsidies?
    Ms. VENEMAN. Some of our trading partners, I believe, do think that they should be counted as export subsidies. It is not anticipated in the definition that the United States has put forward that they would be included as export subsidies.
    As you know, in the WTO the export credit guarantees were not negotiated. They were left to be determined in another forum, the OECD. That agreement has not been reached at this point. But in the U.S. proposal export credit guarantees are not considered to be considered to be an export subsidy.
    Mr. STENHOLM. What is the status of the OECD negotiations on export credit guarantees?
    Ms. VENEMAN. At this point, there has been a paper tabled in the OECD that has not been agreed to by all participants. Specifically, the Canadians have not agreed so there is not an agreement at this point on export credit guarantees and how they will be disciplined.
    Mr. STENHOLM. Ambassador Zoellick, many of my constituents support the aggressive use of our trade laws, including safeguards to enforce our rights under trade agreements. In fact, we will hear that concern expressed in the testimony of Mr. Bruce McEvoy in the second panel today. The International Trade Commission recommends extending the wheat gluten quota for 2 years. What does the administration plan to do about the wheat gluten quota?
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    Mr. ZOELLICK. First, Mr. Stenholm, let me just add briefly to the comment on the export subsidies, because it relates to an earlier point you made. What we have agreed to since we are earlier in the process is agreement on the principal of eliminating the export subsidies. And that is, as why Secretary Veneman said, the implementation of that still has to be negotiated. But one of the most critical aspect is that it is not just related to export subsidies of countries in the region, it is to try to ban their use by third parties as well. And that brings us right back to the WTO. Because we know the primary user of these is the EU. And so I think one of the most difficult aspects of this negotiation will be how we proceed on that in a fashion where we stop the misuse of those export subsidies by third parties in our hemisphere.
    And the reason why I am emphasizing that, just as your comment suggested, is the critical aspect of this is how we try to leverage and use this negotiation in the global talks, and we need the TPA for both.
    On wheat gluten, very briefly. As you said, the ITC made a finding on a continuation of that. As you know, we lost a round in the WTO on that. We went back to the ITC to see if we could correct it. The key point here, however, will be that after 3 years that they, other countries, will have a right to retaliate. And in this case, the EU, based on the first WTO finding, has signaled that it will retaliate in the case of corn gluten.
    So what the administration is now trying to look at is a way whether we can try to offer some support to the wheat gluten industry while also being consistent with some of the concerns to avoid the problems with corn gluten problem. And that is exactly where we are at this moment.
    The CHAIRMAN. Mr. Thune.
    Mr. THUNE. Thank you, Mr. Chairman. Thank you panel for appearing before us today.
    Obviously, trade is a very important issue to agriculture. And I am very glad to hear the President and the administration and the emphasis that they are placing on agricultural trade. And I think, Secretary Evans, you mentioned some of the various tariffs we face around the world. The statistics that we have always used from USDA is that the average tariff worldwide on agricultural products is about 50 percent, and the average tariff in this country is about 6 percent. And what we have always argued is, we want to get the same access to markets around the world that other countries have to ours. And in response to that, one of the things I hear people from my State and others who are critics of trade and the impact it has on your cultural say is that we can't trade our way out of low prices. I am curious to know what your reaction is to that.
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    Ambassador Zoellick, you had mentioned that we are expecting about $50 billion worth of exports this year, and perhaps pass it at $53 billion in the current year. What is the universe, what is the potential that is out there. And if we are exporting right now about one-third of our agricultural production, what can we hope to achieve in the not-too-distant future if we are able to expand some of our market opportunities? And anybody that would feel inclined to answer that, I would appreciate a response. Do you have any feel for that?
    Ms. VENEMAN. We do export projections. But I don't know that we have current projections other than the ones we discussed in response to the chairman's earlier question about what the ERS is doing with regard to the FTAA specifically.
    Mr. THUNE. Ambassador Zoellick, any comment on what we might be looking at?
    Mr. ZOELLICK. I think the numbers for this year are about $51 billion, or for last year. And projected for $53 billion. But I think this also goes back to one of the chairman's opening questions about this study. One of the problems with all these studies is they tend to be based on a static analysis. They take the market as it exists and they tend to say, OK, if you cut tariffs or you reduce barriers how much added trade. They tend not to work any possibility for growth. And one of the points that I was trying to make in my opening statement is, is that we really want to target in particular some of the parts of the world that are growing in population faster, and those that are likely to grow in income faster. Because that is going to move you to higher value-added production, just as you have in the United States, where people move to grains, to meats, to specialty crops, to the whole series of other types of products as they get at higher parts of the income scale.
    So I think part of the challenge here will be being in on the ground floor as these countries start to develop, so you develop the marketing arrangements, the business contacts, but also the rules. Because as many of you pointed out to me, and Ann and I are seeing more and more and more, the battle on this will often be on the rules for sanitary or phytosanitary standards and how you get in. And it is absolutely critical that we do that on a basis that serves the traditions we have had here in terms of some science and reasonable analysis and risk calculation. We have been doing that for a long time, we are careful. But we also have to make sure that others don't use this for protection its purposes. So the way that I see this really are where are the growth markets in the future for agriculture.
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    Mr. THUNE. You referenced I think too, Secretary Veneman, and the whole NAFTA trade agreement. And I think arguably if you look at the numbers you would probably have to say that that has been, I think you know in your testimony, success. Although out in agriculture country it is not necessarily viewed that way. I mean, if you poled producers in my State you would probably get a very mixed bag. And we always think it is good if we are exporting to other countries. But when other countries are exporting to us we don't think it is such a good deal.
    Are there things that we would do differently in the agreement that is under discussion here from NAFTA that would help us convince producers in this country that it is a good. And I think probably one of the issues that is talked about is enforcement. Are there things that will be uniquely or distinctively from NAFTA that might make this an easier sell in parts of the agricultural world in this country and the United States. And I am thinking of my State as a case in particular, that would make it more possible for us to convince them this is a good thing for them.
    Mr. ZOELLICK. It is an excellent question. And it starts out by telling the truth about what has actually worked. People have been talking about what has work for NAFTA. I mean, some of the numbers that I put in my testimony, who would have suggested that you would have had a five times growth of agriculture trade to Canada since the Canada Free Trade Agreement. And about doubling in the case of Mexico. Or more broadly, there was some numbers done actually by the prior administration that didn't come out about you take Uruguay around and NAFTA together, and for the average family of 4, by the time you took the increase of income and the reduction of the taxes for tariffs, it was a gain of $1,300 to $2,000 a year per family. You have all been debating tax cuts here. That is a hefty set of tax cuts in income related to trade and nobody knows about it.
    Third, enforcement. And this goes back to the question that both Mr. Stenholm and the chairman mentioned. Part of this goes to anticipation. I reference real briefly the livestock issue with the Mexican border crossing. In part, because again the concern for foot-and-mouth and other issues. We got early wind that the Mexicans were doing some border crossings through their treasury ministry. And Secretary Veneman and I moved quickly to go back to their commerce and other ministries to say, no, can't do this. And so they have adjusted that policy. And so part of it will be the overall enforcement process as well.
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    My own point, and just speaking for myself and some of you referenced this, I do think we are going to have to be sensitive to the safeguard issue. And this is always going to be tough because people are going to be wanting to have one market opened and another protected.
    But I do think we have to try to be creative on how we deal with this, particularly in some of the specialty crops areas where people are starting to feel this in a different pattern. And the Secretary knows this from her California experience.
    Mr. THUNE. I see my time has expired. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Peterson.
    Mr. PETERSON. Thank you, Mr. Chairman and thank you all for your testimony.
    I appreciate the insights you have given us. I had an opportunity 3 weeks ago, to go to South America and visit Brazil and Argentina and Chile. And I have to say at least at this point, I guess it raised more questions in my mind than it solved. From what I could tell, I hadn't paid a whole lot of attention up until now, but it appears to me that Argentina and Chile are very interested in this because they are small countries and they don't have a lot of population. They have got a lot land and a lot of ability to produce. So they are interested in markets. But Brazil, I had an opportunity to visit with some of the senators and that were leaders of their parties in the Parliament. And they are not as enthusiastic about this FTAA. Because I think they are benefiting, from what I could tell, from the Mercosur. Where they are the biggest country and have the most population and want to protect it.
    So my concern and just kind of what I know about it now, is how this might play out if we actually make a deal. And what I am afraid of is if the Brazilians hold out, which they appear that they are going to, that we are going to get into a situation where we make a deal, where we lock ourselves into some bad situations, which I think we did in the GATT agreement by letting the Europeans keep their system because we wanted access into their commercial market in Europe so bad. I am particularly concerned about specific commodities like sugar that the Brazilians might want to use their holding out to force us to do something in the area of sugar that will give us even further problems beyond what has been caused by NAFTA.
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    Another thing I am concerned about, there is not much of a dairy industry down there in Chile and Argentina at this point. But I think they have part of that country that has an ability to develop a dairy industry like New Zealand has a grass-based industry that will be low cost that could significantly impact our market even beyond what is being impacted by MPC and all of those kind of things. I have found out about the soybean situation, which I know a little bit about. But there is a couple brothers down there that own 2 million acres that they have opened up in the last 10 years. And they are producing 50 bushel soybeans with no fertilizer, very little input costs. They can go over the land one time. They have got 100 feet of top soil on these. Apparently they have access to 8 million acres that are very easily opened. And from what I can tell they can produce soybeans for 3 bucks a bushel. They are paying their farm workers, the lower skilled ones, $5 a day. Their higher skilled farm workers are paying $10 a day. The land they are acquiring for $100 to $200 an acre.
    Apparently we have a tariff on soybean oil and I don't know what else. But I think that there is some potential problems for us competing with that kind of a situation. And so I don't know what my question is exactly. I don't know enough about it yet to maybe ask you. But I just am concerned that we be very careful in going ahead with this. Because I think there are a lot of potential problems that could be put upon us. From my perspective right now. I think I see more problems than I see opportunities. In my part of the world my farmers are not wild about getting into anymore trade agreements because of what happened with NAFTA and GATT.
    As I said, we have got problems with the sugar situation. We got problems with MPC now coming in around our tariffs. When they ask for something to get done about this, nothing happens. There is legislation that has been put in to solve both of those problems. But in talking to the Ways and Means Committee, I think the Europeans will probably give up their common agriculture policy before we are going to get those bills passed through the Ways and Means Committee.
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    I want to register my concerns about that we be careful about how we go about this so that we don't get into situations like we have with some of these other agreements and make the situation even worse American agriculture rather than better. So I don't know if you want to respond. My time is gone. But I didn't mean to filibuster you.
    Mr. ZOELLICK. No. The product points in particular were, I mean, extremely useful. That is what helps to get a sense. I mean, I hadn't know about the oilseed production. And so I will check into that in particular. The other ones I had known. But let me take the first part of your statement because I think it is a really important one that I think as we proceed with this I would like to have the committee have a sense of how we have been seeing it.
    You are exactly right. Brazil is very cautious. And it is in part because Brazil in some ways was like the United States. It is a big country. And it had a big internal market. And they developed it inside and they kind of got used to it that way, just as the United States did, prior to really World War II. And so right now President Cardoso has tried to move them more in the international system. But he faces opposition just like you would here. And he is going to have a presidential election next year. So that is one of the reasons why they are particularly a little sensitive to it.
    They have basically put a lot of their eggs in the basket of Mercosur. But Mercosur has also felt some strains. Because you might have also encountered when you were down there that the Brazilians devalue their currency and it has continued to slip a little bit. The Argentines have their currency linked to the dollar. So the Argentines have got hammered on this. And it is one of the reasons why the Argentines have been a little bit more interested in looking beyond. In fact, they changed their external tariff, frankly, raising some questions about the Mercosur Customs Union.
    The Chileans were looking at joining Mercosur. And said, no, we will do a free trade agreement, but we don't want to have those higher external tariffs that they had.
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    That is exactly why it is quite important that we get on the scene. Because one of the reasons the Chileans took that view is they felt they actually have an option with the United States. And I think, as I was trying to suggest, we want to try to bring all these countries along. But at the same we are trying to say, if somebody tries to lag too much we have other options.
    So rather than have a laggard have a negotiating position that drags us somewhere we don't want to go, we would rather be in a position to say, we will negotiate with those who are willing to liberalize. And if you are going to have to deal with that. And so I think that is the context in which this occurs.
    It brings back to one other earlier question, which is, I apologize forgetting who asked this about, who is concerned about trade promotion authority. Well, the Brazilians are the big guys on the block. They always say it. And they say, look, if you guys are really serious, we will start a negotiation. But if you don't have this authority when it comes time to putting the sensitive stuff on the table for you and us, why should we do it if it gets renegotiated.
    The best analogy that I can give you, because I know you get this back in your home districts, is frankly, it is often raised by union leaders. And I don't know too many union contracts that go back and allow people to do amendments on them. They vote them up or down.
    It is exactly what we are asking for here. Is to have the ability to get the guidance as we go forward, have a lot of interaction, negotiate a deal, and vote it up or down. Because otherwise, we are never going to get these countries to move to the sensitive stage that the final set of days. Because they are afraid it will be reopened.
    The CHAIRMAN. Mr. Cooksey.
    Mr. COOKSEY. Thank you, Mr. Chairman. I enjoyed your testimony. Your testimony was enlightening. Particularly yours, Miss Veneman. I made a lot of notes.
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    I have some questions related to occurrences. Last week I had occasion to meet with a French economist and an American businessman that is in France, and they were both over here. The French economist told me that in January the Euro would quite possibly collapse as a monetary unit over there. If that should happen, how would it affect our international trade agreement, the one agreement we have. How would it affect us in this hemisphere. The second question I have is that I know that a number of countries are utilizing the American dollar, the U.S. dollars, their currency. How does that, and I understand, I have often hit my head, I don't remember who they are. But there are some countries in Central and South America. How will that impact our trade within this hemisphere? And anyone can take the question.
    Mr. ZOELLICK. All of us are cautious because we have all been told in talking about currencies for the Secretary of the Treasury. So let me just talk about them in the context of trade. Sort of dodge this a little bit. First on the Euro, what is going to happen on January 1 is they are going to actually move from an accounting device to having coins in pockets and bank notes in wallets. And, frankly, I think that forecast that they gave you is a pretty far-fetched one in terms of the likelihood of any collapse.
    In fact, what you have actually seen is the Euro strengthen a little bit over sort of recent months compared to the dollar after it did decline initially. And that is because the United States has been a good place to invest, so people have put capital into dollars.
    If it did collapse, just to, I mean, answer the hypothetical, you would have the United States in a worse trading position because our goods would be more expensive than their goods. And that relates to your second question about countries moving towards the dollar. It actually helps us in the sense that we then don't run the risk of devaluations, which end up having countries make their goods more expensive—or make our goods more expensive to theirs. And so, for example, when Brazil devalued, as you would expect, its exports went up because they were cheaper relative to the rest of the world. And the imports came down. So in that sense when countries link to the dollar it is positive.
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    The other side of that though is that it all depends on how their currency policies are related to their broader or economic policies. And if their currency policy leads to slower growth, then they are going to buy less. And that is part of what you are dealing with with Argentina today.
    The third element, and this goes back to the question we just had a little bit, is what countries sometimes do in that event is they want to raise tariffs. And just again to draw back to the NAFTA example, when the peso collapsed in 1994 one of the reasons why NAFTA was so important was because the Mexicans couldn't do what they did in early eighties, which was to jack up their tariffs again. They were locked in to the tariffs. And the effect of that was quite striking in that it took us 7 years after the 1982, 1983 crisis to get our exports to Mexico back up to the level they had been. It took us 17 months after the 1994 crisis.
    And so again, when we are talking about lowering and locking in tariffs, we also have to keep in mind some of the scenarios you are talking about. When things go bad we don't want to have a repeat of a thirties logic. And that is what can happen with some of these countries.
    Mr. COOKSEY. Secretary Evans, I was struck by the numbers that you gave off the top of your head, and it is here too in your notes. That the average agriculture tariff is 12 percent the United States 30 percent, the EU 60 percent for the WTO members. Is there any likelihood that the WTO members will reduce that over a period of time?
    Mr. EVANS. Well, that is the goal, that is the objective. I know that the two areas that those in Geneva that are working very hard to on the November meeting for the potential of starting a new round in WTO believe they have made significant progress in the areas of services and agriculture. Now the specificity I am not familiar with. But I am assuming that if they are making progress that means that tariffs are coming down. Now I don't know if the Ambassador can shed any light on that or not. But that is the goal of trade liberalization, to bring down these tariffs. And I was struck by it as well to see if we are at 12 percent, I heard a Congressman say 6 percent earlier. Whatever it is, we have got the lowest tariff of anybody around the world. And there are some that are four, five, six, seven, eight, nine times our tariff.
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    So that is the goal. I know they are making progress on it in that specific area as they move forward in WTO possible launch. But I don't know. Ambassador, do you know any more specificity?
    Mr. ZOELLICK. Just briefly. The 60 percent number is what they call a bound tariff. OK. So some of these tariffs are lower. But it really goes back to your first question. Bound tariff means people could increase if they are under stress to the higher level. Their actual tariffs are often lower. But they are what they call the applied tariff. But they are still pretty darn high definitely compared to ours.
    Where we are in the process of trying to launch the Round is to try to refocus on three areas. Export subsidies, where the United States numbers are now about $150 to $160 million. The EU's are still $5 billion to $6 billion. Domestic subsidies with the various rules for those. And whether they go into the various boxes depend on whether they affect production. And market access. And that is the third area that you are talking about. And that I think is a key to moving ahead for us in the Round. We are at a stage now where we haven't launched the Round. But that is the key part of our proposal. And, frankly, this is why I mentioned working with the Cairns Group and others. Other agriculture producers, some of them develop countries like Australia. Some developing countries share that interest. So that is one of our primary goals.
    Mr. COOKSEY. Good. Thank you very much. And thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Baldacci.
    Mr. BALDACCI. Thank you very much, Mr. Chairman. And I want to thank you for your comments in regard to some of the problems that we have been encountering in the agriculture area in terms of enforcement. And think that we need to make sure that these agreements, while they are great and expanding opportunities, that there is some sort of quick response in terms of these trade infractions. So I appreciate those comments.
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    I want to thank Ambassador Zoellick for his efforts in regard to the softwood lumber issue and meeting with us earlier in an informal session. And appreciate being able to work with him.
    One of the comments I want to make that is in regard to Chile, we had had an anti-dumping case in regard to Chilean salmon that had gone through the Commerce Department, oh, maybe a year or year-and-a-half ago and there was a fine for dumping that was assessed.
    And I noticed in reading the report that was put out by the Foreign Trade Barriers, they also mentioned about U.S. exports of fresh and frozen uncooked poultry are effectively blocked from the Chilean market through their inspection requirements. And it talks about the restriction on exporting of fertilized salmon eggs. So I share that with you in your negotiations in the interest of concluding those negotiations, that there is a concern about that.
    The only issue I want to ask Secretary Evans about, or whoever is an appropriate response is that in regard to an administration policy of exporting freedom, there has been an issue in the previous Congress in terms of opening up trade with Cuba and opportunities with Cuba. I know that we will probably be looking at voting on having annual trading relationship with China in recognizing that the challenges that that poses. What is the view going to be from the administration in regard to Cuba?
    Mr. EVANS. Well, I think that we have made it clear that we are not supportive of the government. We are taking actions that will support the people. There are regulations that are about to be issued with respect to trade of food to Cuba. I think those are scheduled to be released at the end of the month. And there was a question I know that is still that I have not received the answer on. And that is whether or not that includes medicine to Cuba. There was some question as to whether or not it would include both food and medicine or just food. And so I know that we are getting ready to implement the regulations that will deal with the export of food to Cuba. And maybe that will also include medicine.
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    Mr. BALDACCI. What is administration's overview or its goals in terms of being able to export freedom to Cuba or any long-term goals being established by the administration or not?
    Mr. EVANS. Well, I think again, I think that what I suggested was that they should open up markets around the world that opens up freedom. But you have to have a willing country to begin that effort. And I mentioned in my opening comments, Free Trade Area of the Americas, there were 34 democracies there. And there was one country that was not there because they are not a democracy.
    If you have to have somebody willing on the other side. I think it is a constructive step in terms of supporting the people to implement the regulations that will allow the export of at least food to Cuba. And that might also include medicine.
    Mr. BALDACCI. And just let me just share with you just maybe a Maine perspective. Maine is positioned where it gets a lot of flights overseas and for refueling and for connections. And because of the inability to be able to handle the airline destinations for Cuba or anywhere else, they end up going across the border into New Brunswick. And then getting the refueling and economic commerce from all of that. And it seems that in a lot of these areas we end up hurting ourselves. And I just share that with you as you begin those discussions and as we in Congress deal with those issues. And I see my time has run out. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Gutknecht.
    Mr. GUTKNECHT. Thank you, Mr. Chairman. I want to thank this distinguished panel for coming today. This is a very important issue for American agriculture. And I also want to say that I am one who, I do believe in trade. And if you study the history of wealthy nations, all of the wealthy nations throughout history have been traders. And we have to be part of that world market whether we want to or not.
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    But I want to come back to a couple of points that I think are important. And while I certainly want to work with the administration in terms of expanding opportunities not only for agriculture but for all industry here in the United States on a basis to basis of the entire hemisphere here. I think one of the issues was brought up by my colleague from Minnesota. I think it is important. Because as we go forward it is not just important that we negotiate new trade agreements. It is important that we enforce the ones that we have.
     There is at least a sense in agriculture, and I happen to share this, that in the last Round, the Uruguay Round, that American farmers really got the short end of the stick. Both on the tariff side as well as export enhancement programs that the European Union and other countries use against us in terms of the trade battles that go on every day. Do you share that view or are we being unreasonable? Because when you look at the tariff numbers that were cited by Secretary Evans, as well as, looking at the export enhancement that is done, subsidies if you will by the European Union, it strikes us that we are really at a very difficult competitive disadvantage in agriculture. Anybody want to tackle that? That is a tough one, I understand.
    Mr. ZOELLICK. You are exactly right. This is one of the thankless questions. But just to put a little bit of perspective on it. As you probably know, agriculture really was not very well integrated in the old GATT system. And so part of the challenge at the Uruguay Round was getting it into the system of rules. And to start to do the reductions of in the categories. Now I think the good thing from the United State's point of view was that we did focus on the three categories that I mentioned of export subsidies, market access, and domestic support. And what less that seemed to be so easy. Right now the EU is fighting real hard to change that. Because they are trying to add a bunch of other factors that you see show up in the beef hormones and other rules that sort of move it out of those categories. So the framework is one that should serve our interest if we can keep going with it.
    Second, within that structure there were key rules that tended to follow U.S. agriculture policy more than European. And one of those was, you can give payments to farmers but delinquent them from production. And I know that is an ongoing debate here that this committee and others will have. But it was particularly vital given the fact that given our general faith and the competivabilty of American farmers and most crops, the idea that, yes, sometimes you have to help farmers through different difficulties. But let us not do it in a way that opens the door for what the EU has done. Which is to pay these guys to produce a bunch of food efficiently and then have to pay them to sell it. So that was another aspect that I think has some benefits to it.
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    The structure of the SPS rules linked to this Codex system are a real winner for us if we can hold that. Because that links it to the science as opposed to some of these other ideas. Now having said that, when I looked at the AMS numbers, Aggregate Measures of Support, you are exactly right. The United States is about $19.1 billion for this yellow box. And Europe and Japan are $35 billion and $50 billion, something like that. Much higher. But, frankly, the challenge now is how do we start to get those down and try. And one of our frankly, our other key negotiating positions is that we need to move those towards more of a parody in position.
    Now this is not going to be easy to do. But, frankly, given the structure and given what we have said about American farming, I think it serves our country's interest.
    Ms. VENEMAN. If I might just add to what the Ambassador said. I think that we cannot underestimate what we got in the Uruguay Round. As he said, a framework for how we go forward in negotiations. We got the agreement to begin reducing export subsidies. And clearly, we want to see export subsidies go to zero, hopefully, in the next Round. We have disciplines on domestic support. More importantly, we got disciplines on market access so that we used a system of tariffication so that we can now bring those tariffs down over time and get more access. We never had access to the Japanese rice markets before the Uruguay Round. There are numerous other examples where we got access that was never available before.
    And as Ambassador Zoellick said, the sanitary and phytosanitary agreement is really one of the great achievements. While we continue to have a number of trade barriers and issues due to the sanitary and phytosanitary type regulations, without the agreement we would have had no way to address these in the WTO. I think it is significant that we now have at least the framework to address these kinds of issues. The rules that require that they be based on sound science.
    I just want to comment for a moment on your statement that NAFTA has been something that people have complained about as not being a success. One of the things that has happened with free trade agreements and trade agreements in general, in my view, is that if you have a trade issue with another country you tend to blame it on the trade agreement as opposed to saying, would that trade dispute exist with or without the trade agreement itself. I think we often say that we weren't the beneficiaries of something when, in fact, it would have been no different.
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    Let me give you one example. When I was out in California a few years back, the table grape producers were complaining that we lost all this market share to the Mexicans. But in fact, if NAFTA went away and it was all NAFTA's fault according to them, it would have been no different. Because the tariffs were zero before NAFTA and they were zero after NAFTA.
    So I think one of the things we have to be careful about is not every trade dispute is the result of a trade agreement. In fact, we have gained a tremendous amount from trade agreements.
    Mr. GUTKNECHT. Well, Mr. Chairman, first of all, I want to clarify, I didn't say that about NAFTA. And I do agree with your comments. But the issue though that I did want to bring up though is that we as a country and particularly, your offices, have to do a better job of enforcing the trade agreements we have currently. We have got a problem right now with Canada and dairy policy. And many times our dairy producers feel like they are out there by themselves. Thank you. I yield back.
    The CHAIRMAN. Mr. Condit.
    Mr. CONDIT. Thank you, Mr. Chairman. And thank all of you for being here today and giving us your time. And it is nice to see you again.
    I heard the testimony, and in particularly, Secretary Evans' comments about our objective in trade policies. And he sort of intertwined dialog like a social agenda, political agenda, democracies, humanitarian causes. And those are noble and lofty objectives that we all probably in some way could support. But I have, and I will read later, a list of associations and groups across the country, particularly from the west—California since they are not represented here today on any of these panels other than the Secretary of Agriculture. Many of them supported the NAFTA and fast track agreements, who now have second thoughts. Because they sort of believed they didn't really understand what the objective was in our negotiating trade policy. I direct this more to Secretary Evans, and the other two can respond as well. Is this about business or his this about a social, political agenda? I mean, all the people that are affected by trade policy stand to lose if we don't emphasize this is about business. It is nice to want to help influence social and political policy in other regions of the world. But when you start affecting people's lives and they begin to lose their jobs and their family farms because of it, it is questionable whether that is good policy or not. So guess I just want to hear from the three of you, and particularly, Secretary Evans. What is the objective here? Is this business or is it some other kind of policy?
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    Mr. EVANS. Sure, Congressman. Let me say this from the outset. I don't think that you can make any decision that does not go through the prism of is this in the best long-term interest for the general well-being of the American people. I think that is the prism. I think that is the screen every decision should go through.
    So as to negotiating trade agreements in the FTAA, every decision with respect to that trade agreement should go through that prism. And when you negotiate agreements it is typically, it is business. What you are trying to do is continue to improve the environment for the American farmer and the American rancher to improve his or her quality of life. What you are trying to do is you are trying to establish an environment where they can improve their own standard of living. And so when you think about free trade agreements, what you are trying to do is open up markets for them where you think they will be competitive, where they can export their products and their goods. And you are trying to get more market access for them. And I think as you look at trade liberalization over the years we are accomplishing that.
    I know, because I deal with them every day, there are lots of issues that get raised that are difficult issues to work through. We are working through grapes. We are working through potatoes. We are working through lumber. We are working through sugar. We are working. There are lots of issues to work through. But I think when you think about what I feel like I am doing here, is to make decisions that are in the best long-term interest for the general well-being of the American people.
    In sitting down and negotiating a trade agreement you do it in a business-like way. And what you want the outcome to be is a better environment and more market access for your farmers and for your ranchers. All I was suggesting is that results in, that results in exporting freedom. It is the result. It is not the initial objective. It is just they happen to be linked. If you have more economic development and more economic growth and more job creation, then what results is that.
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    Part of getting to there is structuring the environment to allow that to happen. And what that means is negotiating agreements that are beneficial, create a better environment for the American farmer and the American rancher in this particular case.
    The CHAIRMAN. Mr. Osborne.
    Mr. OSBORNE. Thank you, Mr. Chairman. And thank you members of the panel for being here this morning. I had to step out briefly and I hope that this is not a repetitive question.
    In view of the tariff differentials, it is my understanding that there is the possibility of carousel legislation. And yet it doesn't seem like we utilize it. European Union obviously has not taken our beef for 12 years in violation of the WTO. Some of the things going on with sugar in Mexico I think are violations of NAFTA. And so why do we just say, well, we have to keep negotiating and maybe these things will get better. Why don't we impose something that has some teeth in it and get on with our business. Anyone of you that would care to respond. Maybe that is too simple a question. It just seems like there ought to be a way to bring people to the table very quickly.
    Mr. ZOELLICK. It is an excellent question, Congressman. And the, as you know, what the carousel does is refine our ability to retaliate. So for example, in the beef case, we won a decision in the WTO and won it on appeal. So we have already retaliated. We have already taken an action. And what the carousel does is say, that we can change the list of items to try to increase the overall, set a pain threshold.
    Frankly, as I think all of us have said in various types of testimony, it is the law of the land. It is something that my own view is we ought to look at in terms of how we can use in circumstances with the objective of trying to solve the problem, not just trying to add to retaliations. Because each of those end up affecting some other business in the United States that wanted to import that. So the question is, you have to look at it case by case.
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    And in the beef case, which the main one you mentioned, is that there is no doubt that the policies of the EU not only violated the WTO, but are very dangerous for the United States. Because it is a question, as some of your colleagues were asking about, about whether they can block imports based on the idea that a hormone is unsafe without meeting the scientific standards. And the WTO said they couldn't.
    Now we have been talking with the cattlemen and the meat institute about how to move away from retaliation to some alternative. There has been some different views on that. And this gets caught into the big debate, as you are well aware of, of are you going to get the Europeans to actually change their view on hormones and other issues. Or is it better to try to do with hormone-free beef. And it is a question of how you best try to approach this in marketing.
    On top of that, we face the reality, which is that given what happened in mad cow disease and foot-and-mouth disease, the meat market has dropped like a rock in Europe. And that makes it both harder for our guys potentially to get in, and it makes it harder for them in terms of where they open up. So to bring back this to the point of carousel is, is that this is an option on the table that we believe we may under various circumstances use. But at least it is my view that you need to be able to use it as a form of leverage and try to make sure you have talked to the U.S. industry, the Europeans to see how you can try to bring this towards the deal. That is frankly what we did with bananas. I mean, in the sense we used carousel without using carousel.
    Now you should just be aware there is another side to this coin. And that is what the Europeans have said is that if we use the carousel, then in cases that they have won against us which they can come back and retaliate against us, that they will no longer hold off. And we have one lurking in the horizon here which—that we have lost once, the Congress fixed. And there is a question of a further ruling this summer dealing with the Foreign Sales Corporation. And the Foreign Sales Corporation is estimated to be about $4 billion. That is not chump change. And so just again, as we think about how we use these things, we have to also recognize how they fit in the other pattern.
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    But you are definitely right. It is a tool that we have had on the table. And I would argue we helped used to get the bananas deal done. And I can also assure you we are in contact with various aspects of the beef and meat industry to see what we can do on beef. And, in fact, I raised it with both Commissioner Fishler and Lemea last week before Fishler came here.
    Mr. OSBORNE. Well, in conclusion, what I would like to say is that if, if you have an agreement, than it is an agreement. And it seems like it is unilateral. And I don't think we should be in a position where if we are not trading in accordance with rules, then we need to make sure there our skirts are clean in this regard. And but I think if you are going to have a rule and you are going to have a trade agreement, it just seems to me that those things ought to be enforce. It sounds to me like we are doing a lot of dancing right now. The ins and outs much better than I do. But I would really like to encourage you to take some strong consistent action in this regard.
    The CHAIRMAN. Mr. Dooley.
    Mr. DOOLEY. Thank you, Mr. Chairman. And I thank all three of you for taking the time to attend this committee hearing. I think many of know that over our past efforts to pass trade legislation on the floor of the House, we really have relied on the support of a lot of our commodity groups. And maybe none more so that the National Cattlemen's Beef Association. And I don't know if you have had the chance to read their testimony, but they have some ideas here that I would just like to have your response from. And one of their statements in their testimony is that discussions continue towards an FTAA by 2005, NCBA's position is clear. We believe that agriculture issues should be addressed in the context of comprehensive, multi-lateral trade negotiations. And we do not support including agriculture as a part of a regional FTAA agreement or negotiations.
    In light of that, is the administration anticipating that you would have trade promotion authority for WTO as well as for FTAA that would be independent or do you think that we could meld those together. And what would be your response to the concern of the Cattlemen's Association that they are worried that they FTAA holds very little benefits to them and thus, unless there is progress on the WTO Round they are not really interested in being a part of that.
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    Mr. ZOELLICK. Well, Congressman, as usual I think you put your finger on the key issue here. To answer your question first, the trade promotion authority we are seeking would include the authority for the Global Round, the FTAA, as well as bilateral agreements. And it is particularly critical for agriculture for the reason that you mentioned. Most farm groups feel that the biggest bang for the buck is in the Global Round. And so they see the vital need to move forward on that front.
     A number of them recognize, and we talked about this just a little bit earlier, about how this can be related in terms of giving us leverage, bringing some of the countries of Latin America more on our side. Secretary Veneman talked about the export subsidies issues. We talked about the SPS issue. So they are clearly interrelated. And as you may already know, our agriculture positions in the FTAA reflect this. And indeed, so the time line that we are thinking about reflects the same thing. Because since we are targeting 2005, we think that is a reasonable time to also be moving along the Global Round.
    But so, for example, we have made quite clear in the FTAA that we are not touching our domestic support programs. Because we are not going to disarm those if we are not doing it globally. And so that is one way in which these are linked together. On the other hand, in export subsidies, as Secretary Veneman said, we have agreement on the principal but no export subsidies in the hemisphere. But isn't only for us. That also deals with other third parties in our hemisphere. So how we can try to develop that aspect.
    My own view, the third box, the market access works well under any conditions. And it depends, as you know by crop line, and I do think that there may be a little bit more potential in some of the beef as you talked about some of the value added as you get to higher incomes. But that is something we obviously have to talk to the Cattlemen about.
    So the key point is, our negotiating strategy and the TPA reflects this integration and how they can try to be mutually supportive.
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    Mr. DOOLEY. Thank you. One other issue in the Cattlemen's testimony I thought was interesting. And it gets to the issues that I think, Mr. Zoellick, you and others in the administration have acknowledged that we need to resolve if we are going to be able to maintain a bipartisan coalition for trade promotional authority. And that deals with how we deal with an environment issues. And in their testimony, again this is National Cattlemen's Beef Associations. They state that they would support addressing environmental issues and future negotiations if the objective is to raise environmental standards in other countries up to U.S. levels. Some type of environmental equivalency patterned after current veterinarian equivalency agreements. Monetary incentives, offsetting tariff credits in terms of more favorable terms for countries with more stringent standards or other non trade or restricting mechanisms may deserve consideration during future negotiations.
    One of the issues we have to resolve. Because it is not just the environmental community that is necessarily interested in how we can deal with these, but also an industry that is very important to our country's economy and the agricultural economy. The beef industry is interested that we are going to have to have what it appears negotiating objectives and include these environmental concerns. And also they are identifying that there is going to be need for some enforcement mechanisms there. And I don't know if you have any comment on that.
    Mr. ZOELLICK. We are trying to support that type of activity as long as it is not protectionist. And there was a phrase in that section you read that said, not trade distorting or stopping or something. And I think that is the key point. And they talked about incentives. I think there are a lot of things that we and others can do to try to improve environmental, labor conditions, other aspects that don't automatically move to stopping trade.
    And here I go to your question, Congressman, in terms of are we focusing primarily on business economic interests or a series of other things. One of the challenges if you start to add too many of these other topics, you were talking about sort of the freedom or democracy issue, is that if you start to add some of these other topics people are going to say, well, what are you going to trade form them and how is it going to interfere. So we have to be careful on how that cuts.
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    But just to give you a good example of how these can be supportive, is that we and the prior administration have both pushed of fish subsidies globally. Because that is something that is a real problem in terms of environmental concerns. But also leads to better policies in terms of agriculture. It is one of the reasons we have gone after some of the policies in terms of the EU in terms of their, frankly, over growing with their subsidies. There was a question here about softwood lumber that Secretary Evans has been working on. A number of the environmental groups are concerned about the cutting patterns in Canada because of their whole stompage practices.
    So I do believe there are a number of win-win interactions here. And, frankly, what we need your help on is kind of broaden the terms of this so that it isn't automatically seen as, if they don't do what we want in environment and labor, we are going to cut off trade.
    Because I will tell you, having been in a number of these countries and having the full face of this again last week, that is a killer. We are not going to be successful with that. We have got to figure out some ways to do a win-win solution.
    Mr. DOOLEY. Thank you.
    The CHAIRMAN. Mr. Rehberg.
    Mr. REHBERG. Thank you, Mr. Chairman. And thank you all for being here as well. I appreciate that.
     Mr. Zoellick, I heard you mention on a number of occasions reality. And I appreciate that recognition. I am struck by oftentimes you will here from a statistician that if your head is in the oven and your feet are in the refrigerator, on average you feel pretty good.
    The reality of it is, let us use Montana as an example. Over the years within my own industry I am told that the impact of Canadian import on average is about 2 percent influence on our markets. The problem is on Montana it is 10 to 15 percent. The reality is, our pocketbook, our inability of our producers to withstand that kind of a hit in an industry where your margin is so slim. In the cases that we know where cheating occurs or that there are imbalances, have you spent much time thinking of some realistic penalties that will go back to the pockets of the producers that are losing. And by of example, I am always intrigued by a labor strike. Because for the greater good of the cause, the employees go out on strike.
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    But it seems like they never get a pay raise in proportion to the cost of the strike. And so the trade, the imbalances that exist and the unfairness and the financial cost to the producer, the penalties never seem to go back in proportion to the person that lost. And so I don't, as a Congressman, perhaps look at the greater good of the Nation and its trade position worldwide. I have to look at my individual district, which happens to be the State of Montana. And the individuals who are losing money in trying to figure out not to exacerbate their already unstable financial position.
    Have you thought beyond just wanting the esoteric international trade to the point of trying to figure out how to help those individuals that are being financially impacted?
    Mr. ZOELLICK. Congressman, one of the challenging things about this job is it gets down really focused on individual problems and in sectors. So, I mean, as I mentioned when I talked with Mr. Stenholm early on about methyl bromide, we are trying to move a solution on that.
    You talked—and I know this is one issue of concern in Montana. And particularly, others have mentioned it, the softwood lumber issue, that the Commerce Department is worried about. As you know, we have supported the anti-dumping, countervailing duty actions, which would go to the heart of trying to stop those practices and put additional penalties on those practices.
    Now as you may also know, there is an amendment that Senator Byrd passed last year that would have some of the revenues for those practices go back to the parties that were hurt. It is a controversial issue because as you think about it, as you try to figure out how those revenues get distributed, it starts to become an administrative issue. It is the law of the land, as I told the Senator. And so it is on our books for those who would try to pursue it.
    But more specifically, I think you are exactly right. And what we are trying to do is find each of these problems and try to work on them. Whether it be the issue of potatoes or softwood lumber. Or in the case of wheat. We have an investigation to the Canadian Wheat Board which is very important for your State given how their pricing practices work. I forgot whether you also I think were in the lamming and sheep. That is an issue where we got a tough issue. And there is put in a 201 action, it is ruled against us. We now have to try to figure out how we are going to try to deal with that industry. We talked about wheat gluten and about how it could come back to corn gluten.
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    So a lot of the work of for myself and the 200 people in my office is highly sector-related. And that is actually one of the reasons why it is good to have the three of us together, is that we need to draw on the specialized resources of the Commerce Department and the Agriculture Department, as well, frankly, as people in these industries.
    Mr. REHBERG. Thank you.
    Mr. EVANS. May I add to that just one comment, Mr. Chairman. Your specific State and I—because he is right. I mean, it really does get down to a specific industry or specific person. Because you are worried about the individuals. And you are worried about, your concern is you should be about the individuals in your own State. Softwood lumber. When we first took that on, I was asking the question, when are we going to have information as to the ongoing import of softwood lumber from Canada. Because the agreement was coming to an end at the end of March. And so they indicated to me, well, we would have information by mid-June. And I said, that is not acceptable. What are we going to do between April 1 and mid-June. So what we did was implement a monitoring system at the border where we get daily information. I get daily information as to softwood lumber activity coming into the United States. The comment was made earlier about, we need to take action and be swift and respond. And so that is what we are doing. I think getting current information as to this particular issue.
    Are there other steps we can take? Maybe so. But I do want to make the comment that we are taking whatever steps we can to deal with these issues as quickly and swiftly as we possibly can, including implementing a new style daily record of softwood lumber that is coming into America. And as a result it has given me opportunity to talk to my counterpart up there on a number of occasions, including this morning at 8:30 about this specific issue. Thank you, Congressman.
    Mr. REHBERG. And your decision was met with great hardy applause at the log hole in Eureka last week. And I thank you for that. Thank you, Mr. Chairman.
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    The CHAIRMAN. Mrs. Clayton.
    Mrs. CLAYTON. I am also interested in the softwood lumber process and your work and your interest in that because our farmers and producers, forest products is a substantial part of it. And our labor are trading opportunity to Canada certainly is enhanced, if that can be resolved.
    It is good to see all three of you again. I was with the members of the Agriculture Committee that went to Quebec and got to interact with you. And to get sense of both the promise and the problems that you perceive. But as we began to look at trading or developing a trade agreement with FTAA, I am struck by the fact that many of our farmers still with the conflict between—not necessarily a conflict, but more of a priority if they are going to have a trade with the WTO. They want to get that right. And they want to make sure that that is being enforced for their benefit before they are more willing to now go into another agreement. I am also struck with we are going to be writing a farm bill very soon. And the last farm bill we wrote we also placed a large emphasis on the importance on trade, as we should.
    But in doing that I think there was an over-selling or reliance on how good that was going to be. And the facts are indeed that about one-third of the agriculture acreage goes into trades. But that increase in trade has not necessarily result in increase in income of our farmers. It is has been a kind of dichotomy with an increase of trade in some instances, with a decrease in commodity prices. Therefore, a decrease in the quality and the income for farm families.
    In fact, farmers now are having very, very difficult times. Because of the ride to reason, not just because of trade. Some of the price of the dollar, some terms of the economy and the countries we are dealing with, and some from the lack of enforcement of the agreements we already have. Rather it is the anti-dumping or rather it is an issue of a sanitary rules be disobeyed in those areas.
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    Now I am not anti-trade. I want to find a way of how we make this promise a reality. And I think it had so much promise, but the promise had not been the result for farmers that is. In terms of my community, again, we have to be parochial in this because we are representatives. That gives us an obligation to care about those people who we represent.
    One of the concerns that you have answered already. But let me just ask the question again. Secretary Veneman, you did answer. I gather that you are now studying with the Economic Research Service, in trying to get an assessment what the potential of the FTAA cost would be. Is that right?
    Ms. VENEMAN. That is correct. We are in the process of redoing the ERS study that was done in 1998 to obviously update it because it was based on 1992 figures. So we want to make sure that we have estimates that are based on the most up-to-date information that we possibly can.
    But as Ambassador Zoellick said, there is a lot of variables when you make these kinds of predictions. And so I think we need to look at the overall numbers and the potential. I think one of the things that we all talked about in our testimony that is important to re-emphasize is that we stand to lose and our farmers stand to lose if free trade is negotiated, continues to be negotiated all around us and we are losing preferential access to markets as a result. And I think we have certainly laid out some of the examples here today. And that it is important that the United States not be left behind when there are130 free trade agreements around the world and we are only party to two of them. That means we don't have this preferential access and our farmers lose out in terms of opportunity.
    Mrs. CLAYTON. One of the trade agreements we do have is WTO, which is a very ambitious one and has great promise. And the question is, how we can enforce that and fairly so that both the rules were to both the countries are developing the trade agreement with. But also to our farmers. And those are issues.
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    Mr. Chairman, I need to ask if I can submit additional questions since I won't be able to submit all my questions.
    The CHAIRMAN. Certainly.
    Mrs. CLAYTON. But may I just ask this question. In terms of the WTO, there is a provision that in our sanitary, phytosanitary standards should be based on scientific evidence. You noted that the European countries have insist on the having new biotech standards with that. In fact, what they are doing right now is saying that our grain and our corn, that generically modified or our beef that it is fed with these grains being, are unacceptable. Do you believe the international standards can actually be used to mitigate these and what are you doing now to make sure that that is the case.
    Ms. VENEMAN. We are working with the European Union now. They are trying to find mechanisms to open up their approval system for biotechnology products. Again, it has been a very difficult issue with the Europeans. But I think an action under the SPS agreement is an option if we don't get results that are acceptable over time. And working with them on their system and hopefully getting access for biotechnology products again. Because that is a very difficult issue right now and we are working and negotiating with them on how to reopen that approval process and, therefore, access.
    One of the issues that we have talked with them about is that even if they open up their approval process again, if it doesn't result in increased trade it does not achieve the objective of moving product again, which is what we want to do.
    Mrs. CLAYTON. Thank you very much.
    The CHAIRMAN. Mr. Putnam.
    Mr. PUTNAM. Thank you, Mr. Chairman. I thank the Secretaries and the Ambassador for being here. And I thank you, Mr. Chairman, for having the patience of herding cats to get everybody here at the same time and bring us together.
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    When I talked to the citrus and strawberry and beef cattle folks in my district, I am reminded of what that great American, Jerry Reed, said that they got the gold mine and I got the shaft. The NAFTA agreement was a good, solid kick in the teeth to tomato growers. It has dramatic implications for the citrus industry. And the FTAA has even greater implications for the citrus industry. And coming at this as somebody who is new to the Congress and new to the process, and just a citrus and cattle farmer from Bartow, FL, it seems like whenever we get to the negotiating table the first agricultural commodities that are traded away are the ones that cost the American taxpayer the least amount of money. The free market crops, produce, fruits and vegetables, are the ones who don't have the protection of a traditional program and a long history with the Department to the point where our trade ambassador would make a statement, like we are not going to touch the domestic programs. So that is the problem that we face.
    On the other hand, we also, like many other commodities, have our own share of trade hypocrisy. And there is lots of markets that we would like open. We are very supportive of opening up Asia. We worked very hard to open up China. So in Mr. Osborne's words, our skirts aren't clean and pure.
    But, Madam Secretary, I know that you are in the process of updating the report. But the report that we have to go by says that the American's region is substantially more important as a source of imports than as a destination for exports. Roughly, 55 percent of all agriculture imports come from the America's nations, while 36 percent of exports go to the Americas. According to the study, the dichotomy between imports and exports is most striking in Central American and the Caribbean, which together take 5 percent of our exports but account for 20 percent of our imports.
    Now in 1995 we had a surplus in fruits and vegetable juices. Today we have a $48 million trade deficit. In frozen fruit we went from a $9 million surplus in 1994 to a nearly $40 million deficit. Now with all of that in mind, how is the Free Trade Area of the Americas a good deal for fruits and vegetables and produce growers around the United States?
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    Ms. VENEMAN. Let me just make a couple of comments and then Ambassador Zoellick may want to comment as well.
    First of all, when we look at some of the import numbers from Central America and some of the Americas, we have to keep in mind a big chunk of the agriculture imports are products that we don't grow in any substantial portion or amount at all. And that is coffee and bananas are included in those numbers. So we have to keep that in mind when we are looking at those numbers.
    We know that a number of the high value crops are import sensitive, things that you grow in Florida, whether it is orange juice or, as you mentioned, similarly of the other crops. There has been no agreement yet in terms of market access and the amount of time that would be taken to reduce tariffs.
    As you know, on some of the import sensitive crops under the NAFTA, those crops had a longer period of time for phase down of the tariffs giving the industries a greater amount of time to adjust. So I think as the negotiations go forward, we are certainly going to want to understand which are the most import sensitive crops and to make sure that those are taken into account as we negotiate time periods and other safeguards for the tariff reductions.
    Mr. ZOELLICK. I would only add one thing that I will just endorse was Secretary Veneman said. That we think we are pretty alert to the sensitive sectors, but it is dialogs like this that help us make sure that we are in terms of handling those.
    But as you mentioned, Central America and the Caribbean, one of the challenges we face is because of the number of laws the Congress has passed. For example, the Caribbean Basin Initiative, which also includes Central America, which was enhanced last year. Many of those countries now have little or no barrier coming in the United States. So we face a somewhat asymmetrical situation. And with a number of these countries. This is true with a number of the products with the Andean country, too. Our barriers to their products are here, ours are up here. And so the question is, how can we equalize those which is what a free trade agreement is about. That is just like Secretary Veneman's earlier example about grapes when she said the tariff was already zero.
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    So that is not a complete answer to your question, Congress, because part of it relates to some of the sensitive sectors. And part of it also though relates, some that you mentioned, for example in the case of Florida where there have been export markets abroad for a number of those goods as well. It depends somewhat again on how you segment the market and whether you do try to do a premium product or whether you try to get growth in some of these areas. As I mentioned, higher value added as people start toe at more beef.
    One of the things I have actually been encouraged about and we would be pleased to work with you about is that there is some others that I know have been in the agribusiness in Florida in particular, who have seen that some of these interconnections that helped actually promote and save their business. Including some actually pretty big in the cattle and the citrus industry, I know. So I realize the way you are coming at it, as many of your colleagues are, is the core issue. You got to be able to sell this at home. And part of our job is to be able to help you do that.
    Mr. PUTNAM. Thank you. Mr. Chairman, if I may just ask one more——
    The CHAIRMAN. The gentleman's time has expired on this round. Mr. Etheridge.
    Mr. ETHERIDGE. Thank you, Mr. Chairman. And let me thank you and the ranking member for this meeting and having this distinguished panel here this morning. I appreciate you being here. And let me share a few facts. Because I think as we get to this we sort of like to talk about what is happening in our own backyard. And it affects the national area. North Carolina commodities earned about $6.7 billion in cash receipts last year. And we rank 12th in the Nation as a State and roughly 20 percent of that went into the export market in this country. Tobacco, not surprising, was the largest agricultural export with $521 million. North Carolina ranks third in poultry exported. We rank sixth in cotton export. So a lot of our agricultural commodities go into that market. And I am confident that other members on this panel could do the same thing as they go through one of the reason that we are here in. Exports, we know, help our farmers throughout and proper. and national statistics you have already indicated and some of those have had a real impact.
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     I am very pleased to hear the administration's willingness to fight to open markets for our products. Because I think it is important. I do not hope that willingness though extends to all products, to include tobacco leaf.
    Currently there are several restrictions placed upon the administration regarding what action can be taken in prohibition of the leaf as it relates to their ability to have access to foreign markets. And I think this is absolutely wrong. If we are going to have market access funding for products, every product ought to be able to participate in. And I think they ought to be treated appropriately. Because they pay tax dollars just like everyone else as other commodities received.
     I have introduce legislation to provide all growers with the opportunity to have access to an important program, the market access program. And I know you probably haven't had a chance to look to that. But I would ask you to look at. We would like to know your position on it. I would like for you, Secretary Veneman, if possible if you haven't had a chance to look at I hope you will look at it as it relates to market access programs. And I would like to know whether the administration will take a position on that issue at some point.
    If you aren't prepared to speak to it today, I hope each one of you will look at it and response back I writing, if necessary, if you aren't prepared to respond today. So that we will know whether or not there will be a willingness to participate on that. As it relates to trade negotiations as well. Anyone want to comment or would you prefer to get back in writing on that?
    Mr. ZOELLICK. Well, Congressman, you and I talked about this a little bit before. And as I mentioned to you, we have a more basic challenge which frankly, I need the help of the Congress as a whole. I have an appropriations writer that says I am violating the law if I do certain things for tobacco. And so I am really in a bind on this one. I will tell you where it is coming home right now, it is coming home in Korea. Because Korea is doing some changes in its tobacco policies. We certainly accept as the law states about in terms of not trying to promote tobacco, not trying to have anything that threatens public health. But there are even questions now I am told about whether we can defend the United States against discriminatory treatment.
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    It would be immensely helpful if this body, which after all, is the authorizing body and passes the laws that I have to obey. And give me some sense on that. Because we have agreements with Korea dating back to 1988. We have warned the Koreans in this case about the violation of these agreements. I have to tell you in all honestly, I go to other hearings and people tell me that I am in risk of violating the law, which I can't do. So this is something where Congress as a whole has to help us.
    Mr. ETHERIDGE. I appreciate that. Because what we are talking about, and I think the piece you are talking about is all inclusive. And here we are only talking about the part that helps the farmer the least, not on the unfinished product. And I think that the issue that is in question here And I think it is blatantly unfair for the farmer to be pushed out of this country. And other farmers around the world have access to those markets. it is not a matter of developing the market, it is a matter of keeping the ones we now have. Thank you. And thank you, Mr. Chairman. And if you would, I would like to have a written response on that. Thank you.
    The CHAIRMAN. The committee will take a 5-minute break to give our guests a moment to stretch their legs. Mr. Kennedy will be next.
    The CHAIRMAN. Most of the time administration witnesses are not able to stay with us this long. We appreciate your indulgence. Mr. Kennedy.
    Mr. KENNEDY. Well, thank you again, Mr. Chairman, for having this hearing. And thank you for your good testimony so far. I found in the past that coalition that we need a bill to have trade agreements really includes the necessity to have legs behind the trade agreements. And that is why I am concerned about a number of the things I am hearing today. Part of it deals with, how do we make sure we are applying sound science to new technologies. Our industry has succeeded worldwide because we have incorporated technology in being competitive. Our agriculture is trying to do the same. The things that Congressman Osborne talked about with the hormones in beef, the things that Congresswoman Clayton talked about with biotech crops. The confidence that American farmers have in whether these trade agreements are going to do any good for them is dependent on our making progress in these issues. So I know there is the question whether we push hormones as a function of whether they are going to come back and push the foreign sale corporations or things like that. But we are not going to really be able to build that coalition without making significant progress on our developing the faith that they can do this.
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    There was also mentioned with chemicals. For example, we restrict what our farmers can put on for chemicals on their crops, and yet we import other crops that apply those same chemicals on them without putting those same restrictions on them. So we maybe have sound science on our side and we are not applying it in the other direction, even though we are victims of science that isn't sound.
    And this whole other atmosphere not directly related to trade though, but this feeling developing in rural America that we also get on the short stick on sound science and on environmental issues is for better or for worse the oxygen requirement in California which they are looking to be as a big issue. and I am sure will have a big impact in terms of the atmosphere in rural America versus the administration. So I will just reiterate again that that is an important issue. And ask you to comment. How do we make progress in developing the competence amongst agriculture America with ability to impose sound science rules?
    Mr. ZOELLICK. Just to make sure that I didn't mistake anything. We are going to push the beef hormones case very hard. What I was talking about with Congressman Osborne was the mechanism by which you do so. But just so you know, and I mentioned to him in the break, just last week I was having conversations with people and we were having conversations in our industry about how to try to reach a solution on this. And the reason I want to stress that point is that I am in full agreement with out about the whole approach of genetically enhanced materials and the potential that they have to offer.
    Now I think as we all now, it would have probably been better off if some of the companies had started with some that would have made even a stronger case. I guess people know the ability to, that call it golden rice, with the vitamin A that can help deal with blindness around the world. So as we then make our case with the Europeans in particular, we can get the developing world to show a lot of the benefits of this. When I am in Europe I say, look, Mendel was doing this with peas hundreds of years ago. It is a form of cross-breeding and people allow it in wines and so how come you can't allow it here?
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    Having said that, I think as we are all aware, it is a big issue of fear. And it is caught in Europe into a bigger problem, which is their whole anxiety with the public health system after having problems with their blood stocks as well as the mad cow disease and others. And so that brings us back to the core point which is that we have to have our flag firmly planted in the notion of science and careful risk assessment, not prejudiced by political calculations.
    As I mentioned to Congresswoman Clayton in between, on of the things that Secretary Veneman and I did early, she knew it from her prior experience and I had it brought home from the agriculture communities that I met with, was the idea of really making sure we are mobilized for these Codex meetings, which we were this time. And on a series of issues related to biotechnology and labeling we are able to preserve both the scientific principal and the consensus principle so that sort of couldn't move beyond that.
    So this is going to have to be a multi-front battle or war, if you will, in terms of moving ahead and demonstrating the qualities that these products bring, making sure at our domestic level we have got the regulation properly. For example, the StarLink issue hurts us, right. I mean, and the StarLink issue was in part a question that the FDA used to have a split approval system, some for feed, some for human. Well, now they no longer have that. And, frankly, it would have been better off if they would have had that from the start so it didn't raise the question.
    Now if I hasten to add, as you know with StarLink, it hasn't had any demonstrated human effect. But it is the fears that it creates. So we got to do it on the domestic front, we got to do it with other countries, we got to do it particularly with Europe. And we got t work with the companies to help be able to market this. Because as your question suggests, I think this has unbelievable potential for the world. Not just in terms of growth, but in terms of some of the other concerns that people have had about health. And we can't let people go back to the Dark Ages on this topic.
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    Ms. VENEMAN. If might just add one thing to what I think Ambassador Zoellick articulately stated, and that is, as we look to opportunities within the hemisphere, I think there is great opportunity to cooperation on issues like biotechnology. When I was in Quebec City I had a bilateral meeting with the new Minister of Agriculture from Argentina who happens to be—have been in that position previously as well. But he feels very strongly about biotechnology and the opportunity to cooperate on issues related to biotechnology and biotechnology trade around the world.
     I think that one of the opportunities that we have in this hemispheric cooperation is to cooperate on things like biotechnology acceptance rules, guidelines and so forth as well as issues like common positions as we go to the Codex that we can cooperate within the hemisphere on those issues.
    The CHAIRMAN. Thank you. Mr. Larsen.
    Mr. LARSEN. Thank you, Mr. Chairman. I want to start off with a comment to Mr. Zoellick. And on April 2 a Washington State colleague, Brian Beard, and I sent a letter to you about raspberry imports from Chile. And you got back to us on May 8 and showed concerned about difficulties being encountered by the folks that we represent in Washington State. And I just wanted to say, thank you very much for your prompt response and I know folks from Washington State appreciate that and are working on a petition.
    I also want to ask a question of you having to do with resolving trade disputes. I hear a lot from the same raspberry producers, as well as potato producers and other folks in the State, both groups frustrated by the time and the cost of resolving trade disputes. And I was wondering, is there any effort in FTAA to streamline a process to resolve trade disputes and how.
    Mr. ZOELLICK. It is an excellent point. And just on the first one, I want to thank you and your colleague for bringing it to my attention. And I am glad that you are proceeding with the petition. So the thanks is to you.
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    On the FTAA, we are early in the process. We have just launched the negotiation. And that goes to the whole dispute resolution mechanism. And, frankly, I am torn on this one in the sense that in many cases, and I know, Don and I have talked about this in terms of domestic laws with anti-dumping and countervailing duty that justice denied or justice delayed is often justice denied.
    In the international system it bites two ways. This goes to the question of whether sometimes we want to have a little freedom of maneuver when it comes back and hits us, like we were talking about the case of lamb and 201 actions and things. And it also goes in the sense to an issue that is very sensitive here, appropriately so, which is a sense of sovereignty. And so how to you have a mechanism that works but allows some room for negotiation and being able to deal with some issues on the homefront. And so, frankly, we welcome to discuss that further with you as we go along. I definitely feel on the domestic side, as Secretary Evans, does, we got make sure those work properly. On the international system you can see both sides.
    Mr. LARSEN. I have a very cheap presentation to provide to you to make a point. This little red piece of paper imagine is a raspberry, all right. And imagine my cup being a bushel of wheat. Which one would you pay more attention to? I ask that rhetorically because I want to make the same analogy when it comes to agriculture versus manufacturing or new economy issues. And perhaps for Secretary Evans and Secretary Veneman, I think it is important that I communicate to you what I am hearing from people is that agriculture seems to get short-shift in trade discussions and in trade negotiations. And we have talked about that earlier. How do the departments propose resolving what might be an internal dispute about what gets the most attention in future trade negotiations, agriculture versus manufacturing versus some of the technology issues?
    Mr. EVANS. Well, I would just say to you, they are all important. I am not sure that, I know in our department I am not trying to emphasis on one more than the other. I understand the agriculture economy is one-third of our economy. I mean, that is a huge part of our economy. And so I am not one that is trapped in this idea that the new economy is the future and industrial economy, the agriculture economy is not important to the future. They are all important to the future. My only response is they are all important, every last day, every last enterprise, every last industry, every last sector of this economy is vitally important. And we don't have a ranking system around the Department of Commerce that says one is more important than the other.
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    Mr. LARSEN. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Moran.
    Mr. MORAN. Mr. Chairman, thank you. I thank the panel. It is nice to have the Ambassador and Secretary Veneman back. I welcome the opportunity to meet the Secretary of Commerce. I appreciate your written statement. And it has accentuated agriculture very nicely, very kindly. And I appreciate having that attitude at the Department of Agriculture, but now as well at the Department of Commerce. So thank you Mr. Evans.
    A couple of, I hope, kind of specific questions and then a couple of broad ones that we may have to answer in writing. What do we anticipate doing to avoid the beef hormone problem that we have had with Europe as we negotiate FTAA. Is there things that we can clear up in advance so that we don't go through this again?
    Ms. VENEMAN. Well, I think it is important to understand about the beef hormone dispute with Europe, that that dispute actually predates the Uruguay Round. It predates having a sanitary and phytosanitary agreement. And in fact, it is the sanitary and phytosanitary agreement that was negotiated in the Uruguay Round that gave us the ability to take that dispute to the WTO and win it. Now has Europe corrected the situation? No. But the fact of the matter is we now have a trade situation that at least we know that there is going to have to be some kind of compensation paid. Not that it helps the beef producers. And that is obviously one of the great concerns is how do you work out an agreement that helps the affected parties.
    I think it is important to note that having the sanitary and phytosanitary agreement that was negotiated in the Uruguay Round that is part of the WTO now, gives us the ability to take these kinds of disputes to a dispute settlement panel. We have a system that requires that any kind of regulation, sanitary or phytosanitary, be based on sound science. What we would hope to do in the FTAA is obviously incorporate again the WTO SPS agreement. But also strengthen the working relationship among the various countries on these issues. Strengthen our ability to work together in standard setting, in looking at sanitary and phytosanitary systems, and assisting to evaluate what is good and sound science as countries have these kind of requirements.
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    One of the things we did in the United States-Canada Free Trade Agreement that was extended under the NAFTA was working groups on various issues related to regulation. In other words, getting the regulators to talk to each other in the various countries. And hopefully that kind of system can spread more consistently throughout the hemisphere as a result of the FTAA discussions.
    Mr. MORAN. I appreciate your answer. And just would point, it is important for the agriculture sector to know the rules before the trade agreement is concluded, And that they don't change after we think we know what those rules are.
    Let me mention gluten, which Mr. Stenholm mentioned earlier. The importance of the ITC ruling, last week the gluten plant in Russell, KS, home of Bob Dole, closed. Fifty-three jobs lost, 4 million bushels of wheat purchased annually. That is the wheat production of one county in Kansas. And I hope we address the issue that the Europeans have presented to us in a very aggressive and smart way.
    And then finally, as far as a specific issue, Cuba, I was interested in Secretary Evans' response. The amendment that was adopted by Congress last year includes food, agriculture commodities, and medicine. And I hope that Department of Commerce and the Department of Treasury in these rules that you are indicating will be perhaps known at the end of the month, from my perspective, interpret those in a way that are broad. I have great concern that the end result is we have rules and regulations that require a license for every transaction. And that we will go out of our way to make credit as difficult as possible.
    I think contrary to—I appreciate, Mr. Secretary, your comments about freedom. I believe that in Cuba, as well as I do in the other countries in our hemisphere. And I hope that we have the opportunity to test that theory by the rules and regulations that your department and the Department of Treasury soon will announce. And again, I have concern about what those will be and hope that they are interpreted in a way that 301 Members of Congress indicated that trade with Cuba at least in those three areas was something we should do.
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    And before my times expires totally, I would have two broad questions that perhaps you could answer in writing. I would like to know the approach of this administration toward trade as compared to the Clinton administration. What have you reviewed that the Clinton administration did or didn't do that will be guidelines for you to do things in the same way or differently. And second, I would like to have a better answer to my constituent's questions about how do we address the imbalance that occurs because of the value of the dollar. I struggle with that issue myself. We are at a competitive disadvantage when the dollar's value is strong. And it seems to me that we ought to be developing policies in this country and within this Congress that allow us to overcome the disparity, the natural disadvantage that occurs when the dollar value is high compared to other currencies. Thank you, Mr. Chairman.
    The CHAIRMAN. Mr. Berry.
    Mr. BERRY. Thank you, Mr. Chairman. I would like to thank all of you for being here and staying so long. This is almost unprecedented and we appreciate you all willing to take the time to spend with us.
    I would also re-enforce the whole enforcement issue that has been talked about by nearly everyone that has been here this morning. I think that is the greatest threat to us being able to pass these trade agreements and the fast track authority that we so desperately need to do in my opinion is the fact that we have not enforce our own trade laws. The previous administration didn't do a very good job enforcing those trade laws either. Ambassador Zoellick, you are the third USTR ambassador that I have dealt with. Interestingly enough, each one of them, when I went to them with a problem, always explained to me that I didn't understand the big picture. And they, as always, you don't understand, were always the first three words that I heard.
    It has always been a puzzle to me why my particular problem never was one that I understood. It seems like agriculture always ends up on the short end of understanding there. And I would just encourage you to do your best. I don't know of an industry that has contributed more to the success of this nation and is in any more desperate need right now some help from almost any sector. And I would encourage you to do everything you can to deal with that.
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    I would also associate myself with the remarks that Mr. Moran just made about Cuba. I think that it is almost absurd that we are not trading with that country. And using as an excuse they are not a democracy or they are a communist country or whatever excuse we come up with. The fact is, that this Congress or the last Congress voted overwhelmingly to trade with them. They certainly are willing partners. I have been down there. I spent an entire night with the President. There is no question, they are willing and ready to go. Even to the point of presenting us with contracts that they were ready to sign. And for us to continue to deny particularly mid-south—that market is patently unfair for political reasons. So I would encourage all of you. And certainly I think that would be the greatest example of what trade can do to help freedom that we could possibly be engaged in. I would encourage you to do that.
    I would just ask you the point blank question, do you support trading with Cuba?
    Mr. EVANS. The administration's position is we support the current embargo without democracy there. And we will, as I mentioned already, move forward with rules to trade food and medicine to Cuba. But that is the administration's position.
    Mr. BERRY. Are we going to apply those same standards to China?
    Mr. EVANS. I think that, you know, we obviously have or do trading more with China than we are with Cuba right now.
    Mr. BERRY. And last, I would certainly hope that as we work through this beef hormone problem that the Congress and the producers would be consulted before we come to a final agreement. Thank you all very much. I know you got a very difficult issue to deal with. I don't know of a more complex, even health care I don't think approaches the complexity of international trades. So we appreciate what you do very much.
    Mr. EVANS. Thank you, Congressman. I would respond to your earlier, your earliest comment about what we understand and don't understand. And the one thing I understand and am not confused about at all is level playing field and compliance. And I don't think that there is anything that dispirits the attitude of the American farmer, American rancher, or American worker, the American businessman quicker than to think that he is not playing on a level playing field. And so I know this good Congress passed a bill this last year that was Trade Compliance Act that provides us more resources to enforce agreements. We are putting additional resources in place now to have stronger, quicker, swifter compliance of these trade agreements. But I know how important that issue is. Because we are not going to move forward with these trade agreements very far if the American people feel like we are not on a level playing field. It is that simple.
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    Mr. ZOELLICK. Congressman, just so you can say you got one of us in line, I understand that you understand.
    Mr. BERRY. I reserve the right to be a poor dirt farmer from eastern Arkansas.
    The CHAIRMAN. I have been given a note that Ambassador Zoellick needed to depart. Ambassador, I would try to be courteous to——
    Mr. ZOELLICK. Yes. I have an appointment on the—but if you are about done.
    The CHAIRMAN. Yes, I think we have got a couple members that haven't asked questions. If you can bear with us and give them an opportunity. Mr. Smith.
    Mr. SMITH. Thank you, Mr. Chairman. I will try to be somewhat brief. And maybe, Mr. Zoellick, before you go I see Allen Johnson has come in. I hope we can move ahead very aggressively with that confirmation process. It shouldn't be a problem. I think Peter Scher as a first-run individual trying to represent agriculture in trade did a commendable job. I hope you will give the kind of credibility to a more specific interest that I suspect that Mr. Johnson is going to pursue in looking out for agricultural interests. And your comments in the last two meetings before this committee would indicate that you would.
    Mr. ZOELLICK. Well, indeed, Congressman, I would be absolutely delighted if the Senate would exercise its prerogatives and be able to confirm Mr. Johnson because I need him on board. And I also agree with your comments about Ambassador Scher who I have known over the years. And as I mentioned in my opening comments, I tried to bring together a lot of the people that have done a lot of the agriculture negotiations over the course of different administrations. Because, the differences among them were pretty small. Regardless of party, they were interested in trying to move the agricultural agenda.
    Mr. SMITH. Huge challenge for agriculture. Secretary Veneman, something I remembered. When we were meeting on policy issues with Congressman Chris Cox, we talked about the Argentina and Uruguay beef. And you were going to get back to me what happens to the sale of beef in those two countries with what appears to be some reluctance to have total herd disposal as far as the foot-and-mouth. And so if you would proceed with that I would appreciate it.
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     I would like to just make a quick comment on biotech. I seems to me that any kind of trade agreement has to impose some responsibility with a particular country for government to have a responsibility to get the scientific information out. As I have met with the EEU and the trade people, as the International Relations Committee has met with these people, I have brought up this issue. And they say, well, this is the market place economy. But if the government is reluctant to bring out the scientific information in terms of the safety of genetically modified products wit the new biotechnology, then that is as much of a trade barrier as putting some kind of an import tariff. So it seems to me that that might be one recourse is the requirement that those governments get out that scientific information to inform the public. Whereas the green element, if you will, has been given free reign. And because of the political pressure we have seen those governments succumb and let that information go forth like it is actual and scientific. So I throw that out.
    Here is the question. And I don't know exactly how to deal with it. But do you think that our trade policy should continue to promote agriculture commodity trade with selling these United States commodities below the cost of production? That is what we are doing now pretty much across the board. Soybeans, rice, corn, wheat. We are exporting them below the cost of production. And how in the short-term maybe, but for a long-term policy give me your opinion.
    Ms. VENEMAN. Well, I think that it is difficult to say. Because I was just reading a study yesterday on how the cost of production has to be estimated based upon different farmers' costs of production. So I think we don't have a unified cost of production. The important thing is that we remain competitive in the world market place. We have very innovative farmers, as you say.
    Mr. SMITH. Even if we sell below the cost of production.
    Ms. VENEMAN. Well, again, it is a question of what is——
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    Mr. SMITH. We are selling below everybody's cost of production on corn, for example.
    Ms. VENEMAN. Well, again we need to be competitive in the global market place. And it is difficult to say whether or not we are selling it below the cost of production. But I think that again, we need to be competitive, we need to have open markets, we need outlets for our products both at home and abroad. And I think with regard to corn, we are certainly looking at not only export markets but additional opportunities for alternative uses, alternative uses such as fuels and so forth.
    Mr. SMITH. Mr. Zoellick, any quick feeling?
    Mr. ZOELLICK. Well, it is hard for me to think that people stay in business long if you are selling below the cost of production.
    Mr. SMITH. Government sends them a check and so they stay there.
    Mr. ZOELLICK. Well, and so then the question, as Secretary Veneman says and as it would be in any business, whether some are more efficient than others and some are going to stay in business. That I think the heart of at least what has been the past efforts of agriculture policy reform. But this is really Secretary Veneman's area, is that for those that aren't the efficient producers, if Congress decides it wants to support them, make sure that it is not in a way that has additional production. Delinquent the income support from the production support. But that really is more the Agriculture Department's fault.
    Mr. SMITH. I mean, it is a huge question that we have got to face up to. Mr. Chairman, thank you. And I also encourage the administration not to play games with a decision that Congress made in terms of encouraging food trade with Cuba.
    The CHAIRMAN. Mr. Boswell.
    Mr. BOSWELL. Thank you, Mr. Chairman.
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    Mr. Chairman, I have been studying people for quite a while. You probably can tell by just looking at me, I have been around a little while. And I am hearing today, I had some acquaintance with Secretary Veneman before. But Mr. Evans and Mr. Zoellick, that they are listening. I appreciate it. I appreciate to have had this time together. You have got a big challenge, but I think you are up to it. And I think that you will find this committee will do their best to work with you. That is what they are here to. I want to associate myself with a number of things that have been said here today, Mr. Osborne, Mr. Moran and Smith. I guess about everybody.
    I would like just to briefly say to Secretary Veneman that I want to thank you for coming out and visiting the National Disease Control Center. We talked, the reception in this room early on and agree that it is terribly important to our well-being and our economy as well as ranchers and farmers and producers. It is terribly important, with the threat that we have just had, it hasn't entirely gone away. But it is as important to us I think as well as the research is in Atlanta. So thank you for coming out there and seeing first-hand. And anything I can do to help you, I stand ready.
    And I also want to compliment you. I haven't talked to you. But I talked to your folks down at the Department on this hoof and mouth hit and the concerns that I ran into with producers as well as travelers. And the response was absolutely immediate and professional. I couldn't have asked for more. So you didn't hear from me. Your team was right on the ball. And I want to thank you for that and I appreciate it.
    But those of us in the feed grain area and the value added for livestock, Iowa, Nebraska, Kansas, all across the Midwest where we kind of see ourselves as the belt buckle of feeds. This is very important to us. And it is important to our Nation. And I am satisfied you know that.
    Ambassador Zoellick, I appreciate the comments you have made this morning. A lot of us here support trade and we would like to get on with it. I share a little testimony with you. A few years ago in my previous position in our legislature I had a, when I was president of our senate. And our trade people came to me that was thinking about going to Vietnam but they were afraid I would object to it as a Vietnam veteran. I said, no. I don't object to it. I encouraged them to go and helped them to get resources to go. So I associate myself with Senators McCain and Carrie Senator Grassley. I hope you move on that. And I understand that you have got to work things. I do understand that. But if this is ready to go, let us go with it. And then come back to us to help you on the other things. But we ought to move on that. And I think a lot of time has been delayed already. So if it I ready I encourage you to move with it as quick as you can. Because I think we can pass it. So I would just like to say that.
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    And I don't have any questions, Mr. Chairman. Because I understand that the time has been long. But we don't coordinate meetings around here as committees. So I have got to go to another one shortly. But I am going to ask you, Mr. Chairman, to the next panel comes on to be especially kind to Mr. Willey. He is my representative of the National Cattlemen. And since I am a cattlemen, why I want you to be good to him. So I am just going to trust you will do that.
    The CHAIRMAN. Well, let the record show the chair is kind to everyone.
    Mr. BOSWELL. Kinder to some.
    The CHAIRMAN. I would agree with that. But thank you for coming, to the panel. I feel like I know you better. And I feel encouraged. And we want to move trade. We want to address these sensitive issues as I have suggested. And I believe we can get there if we work together. So I am looking forward to continuing to work with you, all of you. Thank you. The Chair would quit while we are ahead. I appreciate very much you time. There may additional questions members might have. But in my 17 years I do not remember three cabinet officials of any administration spending this much time with this committee.
    It does not go unnoticed, and it is very much appreciated. And I think this has been a great dialog. I appreciate very much your being here and I am sure we will be able to continue this discussion as we move forward. Thank you all very much.
     Being extra special kind to Mr. Wythe Willey, National Cattlemen's Beef Association; Mr. Bruce McEvoy, United Fresh Fruit and Vegetable Association; Mr. Christopher Shaffer, Wheat Export Trade Education Committee; Mr. Tony Anderson, American Soybean Association; Mr. Jack Roney and Mr. Jackie Theriot, American Sugar Alliance; Ms. Sarah Fogarty, Grocery Manufacturers of America.
    The panel's testimony and the manner of introduction, I appreciate very much you all being here and your patience. I am sure you recognize the interest in this issue because of the amount of time spent with the administration witnesses. Mr. Willey, please proceed.
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    Mr. WILLEY. I am Wythe Willey and I appreciate Congressman Boswell's comments. But you can ask me any question you want. You don't necessarily have to be kind to me.
    We very much appreciate the chance to talk about trade. That is a big issue for the cattlemen. And the National Cattlemen fully understand the importance of maintaining equitable trade agreements before of our industry's unique position as both the world's largest exporter and importer and of beef products. During 2000 we imported a little 1 million metric tons of product value that had $2.5 billion, while exporting 1.25 million metric tons worth $3.6 billion, for a trade surplus of more than $1.1 billion.
    Before I address the specific issue of an FTAA, I would like to raise two issues that Congressman Dooley talked about that will likely be a part of trade policy to be. Whether it is regarding FTAA, trade promotion authority, or World Trade Organization negotiations. And that is the environment and U.S. trade law. The beef industry continually faces the challenge of increasing costs of complying with a host environment regulations. Cattlemen support maintaining a wholesome environment. After all, we are talking about the place where our families live. But those are Government and environmental standards and regulations that producers and other major beef producing countries to not have. Our organization would support addressing environmental issues in future negotiations, if the objective is to raise environmental countries up to the standard in our country.
    Labor issues are often mentioned in the same time. National Cattlemen does not have a big dog in that fight. We do feel, however, that No. 1, these issues should not be used a political cover by some who would like to kill or prevent future trade negotiations.
    And second, any remedies to address labor issues should not restrict trade. We support maintaining equitable beef quotas and tariffs. Maintaining strong trade laws is like supporting motherhood and apple pie. And no one supports weakening existing trade laws.
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    We do, however, have some concerns about statements that sensitive issues should not even be discussed in the context of comprehensive multi-lateral trade negotiations. If we start telling our negotiators what they can and cannot discuss, other countries will quickly respond in kind and future talks will unravel into a Seattle-like stalemate. We cannot take all the face cards out of the deck and expect our negotiators to deal us a winning hand. Congress will ultimately have the authority to accept or reject the final product of negotiations. In that context, we strongly question calls for prohibiting discussion of trade remedy laws in upcoming negotiations before those talks have even began.
    The U.S. beef industry has witnessed first-hand the value of marketing open agreements. As a direct result of NAFTA and related political reforms, Mexico has become the second largest U.S. beef export market. Last year we sold nearly $600 million of beef and beef variety meats as Mexico's economy continued to grow and disposal income increased among our expanding middle-class.
    Having recognized that all the beef industry feels we have much more to give than gain from a Free Trade Agreement of the Americas, South America has cattle, labor and soybeans, all cheap. Argentina and Brazil combined have twice as many cattle as the United States and are potential major exporters to the United States are competitors with the beef industry in other international markets. Uruguay is also a significant beef producer in South America. Given the foreign animal disease outbreaks in Europe and South American countries, and the heighten focus on animal health and food safety, those issues cannot be over-emphasized in the overall great global trade setting.
    Our organization has become increasingly concerned that the expansion of trade with many countries increasing the risk of reintroduction to the United States of foreign animal disease such as foot-and-mouth disease.
    As discussions continue toward a FTAA by 2005, our position is clear. We believe that agriculture issues should be addressed in the context of comprehensive, multi-lateral trade negotiations. And we do not support including agriculture as part of a regional FTAA agreement. While we support the broad, long-term philosophical objectives of trade liberalization, we would not unilaterally increase access to U.S. beef markets without comparable increases in other markets for U.S. beef. Access to the U.S. beef market is already relatively unrestricted, as your chairman mentioned in his opening comments. After all, we are the world's largest meat importer, beef importer. And there is a perception throughout the U.S. industry that we have granted more access than we gained through past negotiations. U.S. negotiators must stand a strong, clear and irrevocable message to the Cairns Group and FTAA trading partners who are major current and potential beef supplies.
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    We will not support increased access to our market until meaningful access and tariff reduction is achieved in other major importing companies. Because many FTAA countries are major exporters, and are major beef importers are in Asia and Europe, that objective can only be achieved through multi-lateral world trade organization negotiations, not regional discussions.
    Our message to those countries is pure and simple. They need to clean up their act. They need to adopt an inclusive hemispheric program and eradicate disease throughout South America. Become part of the world community of responsible producers of healthy animals. Join us in negotiating access in Europe and tariff reduction in Asia and access to the U.S. market that you have long sought will be forthcoming. Continue on the current path of marginal herd health and negotiated side deals with the economic union and we are indefinitely ambivalent or negative as to granting increased access to our market.
    I will shorten my comments because I know you are running behind and we are available to answer any questions you might have. There was a most astute comment one of your members, Mr. Putnam, I believe this morning, that said, it is interesting that the first thing we trade away are the ones that cost taxpayers the least. And there is a reason for that. And I would urge you to keep that in mind in your considerations. Thank you for your time. And I will be here to answer any questions you might have.
    [The prepared statement of Mr. Willey appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you very much. Mr. McEvoy.
    Mr. MCEVOY. Good morning, Mr. Chairman and members of the committee. My name is Bruce McEvoy and I currently serve as CEO of Seald-Sweet Growers. We are the oldest grower-owned citrus marketing cooperative in Florida with our headquarters in Vero Beach. Our 600 grower/shareholders farm 100,000 acres and operate 12 packing houses. As a current member and past chairman of the board of the directors of United Fresh Fruit and Vegetable Association, I appreciate the opportunity to testify on behalf of United before the Committee on Free Trade Area of Americas.
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    The produce industry has gone through tremendous change in an effort to satisfy consumer demands, to conform to new technologies, to compete in an increasingly global market place, and to try to remain profitable. The perishable nature of our products present unique marketing challenges. But we have not relied on traditional farm programs to sustain the industry. Rather we have relied upon the economics of supply and demand and the global market place in particular to sustain our industry. Given the importance of exports to the fresh fruit and vegetable industry has long supported efforts to expand fair and free trade in order to compete in a dynamic global market place. The industry's past export efforts have made important contributions to maintaining a positive agricultural trade surplus, and in helping to offset the persistent trade deficit in non-agricultural U.S. trade merchandise.
    However, recently this positive trade surplus has been dramatically reduced from a high of $27.4 billion in 1996 to a low of $13 billion last year. As the United States moves forward to further liberalizing trade in agriculture, the administration and Congress must examine the impact of trade barriers, subsidies, and retaliatory measures that are making it increasingly difficult for the U.S. produce industry, as well as other agricultural commodities to compete fairly in the global market.
    Let me address the produce industry dynamics and global opportunities. With regard to the impact of further trade liberalization with the Western Hemisphere. Congress and the administration should also recognize the influence of domestic international trade factors on U.S. produce industry. U.S. fresh food and vegetable industry is focused on adding value and decreasing cost by streamlining distribution and responding to individual consumer needs. The dynamic system has evolved towards predominately direct sales from shippers to retail and food service distribution centers. The make-up of the industry is also changing as more produce companies introduce value added products such as fresh cut produce, which are designed to respond to the growing demands for consumer convenience. The ability to access new international markets for these products has become vital to both the industry's growth and economic viability. In turn, as low prices and increased imports place increasing economic strains on the industry, the future efforts to increase exports will be critical.
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    In addition, our trading partners target U.S. markets which are more open than at any time in history. Adherence to an enforcement of our fair trade laws and anti-dumping and countervailing duty provisions are essential to our ability to remain competitive in both domestic and international markets.
    At Seald-Sweet we are now 35 percent export dependent. And our Indian River grapefruit growers rely on exports for 60 percent of their volume. In order to facilitate trade flows we restructured our cooperative with the formation of a limited liability company involving an infusion of foreign capital. In order to serve the emerging global retailers we have to provide global sourcing of citrus and other commodities. We have invested in the Argentine citrus and Peruvian onion production. And last month we invested in South Africa and in citrus farming organization. These new business venture need unencumbered and reciprocal trade flows to be truly effective.
    As the administration moves forward with the negotiation of FTAA and Congress considers granting fast track negotiating authority for this and other free trade agreements, trade issues that have prevented U.S. fruit and vegetable producers from equally benefiting from trade liberalization must be addressed. The industry applauds recent letters sent by Congressman Condit and Pombo, and others, to President Bush in which they have touched on the implications of the North American Free Trade Agreement on the produce industry and the need to improve results of NAFTA for U.S. agriculture and FTAA. These trade implications must be appropriately analyzed and addressed by the U.S. trade negotiators along with the impact of the World Trade Organization agreements under the Uruguay Round.
    Unfortunately, since the adoption of these agreements, we have witnessed a decline in agricultural exports of nearly 50 percent, while imports have increased 60 percent. In the case of NAFTA, Florida as well as other States, have witnessed a significant decline in domestic sales in favor of Mexico. Also, the global market access gains under the Uruguay Round have been minimal offering little offsetting relief for our domestic industry. Without a stronger agricultural trade agreements, the effectively addressed tariff and non-tariff barriers through trade on an equal basis, the U.S. produce industry will continue to lose market share.
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    Finally, the issues that are critical and must be carefully addressed by the U.S. negotiators include the unjustifiably high tariffs and domestic subsidies both direct and indirect, retaliatory use of sanitary and phytosanitary restrictions, adequate safeguards for highly sensitive domestic import sectors, including the impact of international currency devaluation, effective dispute resolution mechanisms, and the present and adequacy of the U.S. trade promotion programs.
    These will continue to prohibit free trade from equally flowing both ways to the benefit of all agricultural producing countries under they are appropriately addressed in the final FTAA. Thank you for the opportunity to address the committee. I would be welcome to answer any questions later.
    [The prepared statement of Mr. McEvoy appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you very much. Mr. Shaffer.

    Mr. SHAFFER. Thank you, Chairman Combest for this opportunity. My name is Christopher Shaffer. I am a wheat producer, or as Mr. Larsen indicated earlier, a big cup buy, from Walla Walla, Washington.
    Let me begin by highlighting two points that wheat producers in the United States take into account when looking at the world market. First, 96 percent of the world's consumers live beyond our border. Second, we consistently export nearly 50 percent of our total production. As you can imagine, our success or failure hinges on the ability of U.S. wheat to be exported around the world. Trade is a vital component for insuring the financial viability of U.S. wheat farmers and the Western Hemisphere offers outstanding potential. The U.S. wheat industry strongly supports moving forward aggressively in both the World Trade Organization and FTAA negotiations. The WTO process is important for liberalizing world wheat trade. And the U.S. wheat industry is clearly focused on achieving our goals in this round of negotiations.
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    However, the FTAA negotiations have the potential to extend beyond the level of liberalization achieved in the WTO. And the United States must be prepared to take full advantage of this opportunity. The benefit of opening markets to free trade can clearly be seen in dramatic increase in wheat exports following NAFTA. U.S. wheat exports to Mexico and Central America have double over the past 10 years, and we average a market share of about 55 percent. Imports into the region total 7.5 million metric tons and are valued at $1.1 billion. with imports from the United States accounting for 4 million metric tons or $6.3 million. While Mexico and Central American region is marked by success, the South American region is marked by struggle for market access and market share.
    U.S. wheat exports to South America have been about 2 million metric tons for the past 10 years. Conversely, Argentina's exports to the regions have gone from 1.6 million metric tons to 8.2 million metric tons. The total value of exports to the region is $1.6 billion, with the total value of U.S. exports managing to just $2.2 million. This region is also anticipating a 5 percent growth rate in wheat imports. Brazil alone imports 7.9 million metric tons of wheat. Despite a U.S. logistic advantage to Northern Brazil, Argentina dominates the lucrative market. This pattern repeats for most of the South American region. The FTAA must be negotiated so that we have duty-free access to Brazil along with all other markets in Latin America. Brazil may be the largest wheat importer in the world this year, but we face a tariff differential versus Mercosur Member Argentina.
    That puts U.S. wheat at an unfair disadvantage. Just as NAFTA has allowed us to double our wheat exports to Mexico, FTAA will give us access on par with Argentina and Canada to the entire hemisphere and growing economies of 800 million people. U.S. wheat producers agree that the U.S. FTAA negotiating positions that tariff methods and modalities agreed to must be fair and reasonable to ensure the benefits of free trade are broadly distributed.
    However, it must be taken into account that the average U.S. tariff on agriculture imports is about 5 percent while in the rest of the world it exceeds 50 percent. Reducing high tariffs must be a priority in FTAA.
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    U.S. wheat industry agrees with the U.S. position that calls for the elimination of all trade distorting export subsidies within the hemisphere and the establishment of a mechanism that would prohibit agricultural producers from being exported to FTAA and non-FTAA countries with the aid of export subsidies. In addition to export subsidies, the U.S. wheat industry was very encouraged by the U.S. position on State trading enterprises within the hemisphere. The Canadian Wheat Board operates a State-mandated export monopoly for western grown Canadian wheat. I am proud to acknowledge that the U.S. wheat industry has been at the forefront of every major trade debate facing U.S. agriculture.
    Farmers must remain deeply involved in development and implementation of U.S. trade police. We see trade and trade negotiations as dynamic elements of U.S. farm policy. However, it is imperative that we revisit and correct the inequities of the Canadian-U.S. free trade agreement and the NAFTA regarding the Canadian Wheat Board as we compete or complete the negotiations for the FTAA and move onto the next round of multi-lateral negotiations in Geneva.
    We believe that the inequities made in the Canadian-U.S. free trade agreement have resulted in the injurious surge of wheat exports from Canada to the United States. Over the last decade this issue has been one of the single biggest sources of contention along the U.S-Canadian border and one that continues today.
    The U.S. industry has made specific realistic suggestions for addressing the underlying problems with the CWB. Our particular focus has been ending the State-mandated monopoly and subjecting the CWT to market discipline. Section 301 case is intended to work in conjunction with multi-lateral negotiations over export State trading entities. A solution through the section 301 process could be used as a model for disciplining these entities and these negotiations.
    In conclusion, we basically believe that we have one opportunity in FTAA to get it right. And if we can't get it right as we negotiate this, I think as we have all heard earlier today from different Congressmen through their questions and from different statements by different panels, it is going to be extremely difficult for agriculture in the United States, commercial agriculture specifically in the United States to exist as a profitable entity as we take a look at getting back to the cost of product that was so much talked about here towards the end of the first panel.
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    We encourage the FTAA and negotiations to continue and to move forward rapidly. However, at the same token we feel that we need to learn from some our past mistakes in and a few of the agreements that we have signed so that we can put together a very positive agreement for the United States as we take a look at the Western Hemisphere. Thank you very much and I will be available for questions.
    [The prepared statement of Mr. Shaffer appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you. Mr. Anderson.
    Mr. ANDERSON. Yes, sir. Good afternoon, Mr. Chairman and members of the committee. I am Tony Anderson, a soybean and corn farmer producer from Mt. Sterling, Ohio. I currently serve as president of the American Soybean Association. Today getting to represent 26,000 producer members on national issues of importance to all U.S. soybean farmers.
    The American Soybean Association would like to commend you, Mr. Chairman, for holding this hearing of the proposed Free Trade of the Americas. Exports of soybeans, soybean meal and soybean oil are a leading earner for foreign exchange totaling $6.7 billion in the calendar year 2000. Of this amount, exports to FTAA countries total $1.5 billion. The soybean industry has already experienced how regional trade agreements can impact our exports and prices. Under NAFTA, the U.S. soybean exports to Mexico have doubled. Under the Andean Community pack between key South American soybean producers and importers, U.S. soybean products exports have declined by 70 percent. What happens in the FTAA negotiations will have a critical impact on the future competitiveness of U.S. soybean farmers and our industry in Latin American farms.
    American Soybean Association has participated actively in the effort to establish trade negotiating priorities for the FTAA. We fully support the general principles and objectives spelled out in the San Jose declaration and in the U.S. negotiating groups position on agriculture. In obtaining these objectives, ASA believes the first goal would be to eliminate all tariff and non-tariff barriers to full market access.
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    Second, intellectual property rights, SPS procedures, and the approval process for biotechnology products must be harmonized and enforced.
    Third, the United States should press for elimination of differential export taxes that effectively subsidize exports of processed soybean products by our South American competitors. U.S. access to important markets in Latin America is currently restricted by the preferential tariffs and terms granted under the customs union of Mercosur and the Andean trade pact. U.S. soybean meal exports to Colombia, Ecuador, Peru and Venezuela have declined from 985,000 metric tons in the 1997–98 marketing year, to only 98,000 metric tons in the first 7 months of the current marketing year because of preferences these countries have given our South American competitors. The loss of the Andean market has been a major factor behind the closure of several U.S. soybean processing plants this year. The Andean region represents a major potential market of $630 million. And while only an 8-day voyage from the Gulf compared to 14 days from Brazil, the United States has only 11 percent of these markets.
    The term spaghetti bowl has been used to describe the criss-crossing web of preferential trade concession that have developed under various regional trading systems in Latin America. Member countries have erected common external tariffs and set up price bands and referenced pricing mechanisms that have complicated regional trade and have the potential to exceed WTO bound duties. For example, Venezuela's tariff on imports of U.S. soybean oil is 20 times higher than the tariff on soybean oil imports from Paraguay. ASA believes the FTAA should eliminate price band import protection and other trade distorting practices.
    In addition to the negative consequences of market access barriers, U.S. soybean farmers must compete against inconsistent enforcement of intellectual property rights and non-harmonized regulations applied to biotech products. U.S. soybean producers are paying a license fee of $6.50 per bag of biotech planting seed, while Argentine farmers are not.
    In addition, Argentine law does not recognize the patents on biotech products that are registered in the United States. As a result of these inequities soybean producers in Argentina are using biotech varieties and half the cost of U.S. producers. FTAA negotiations offer an excellent opportunity to pursue harmonization of biotech regulations with the Latin American countries. Harmonization would secure our ability to trade within a region by eliminating current and potential technical barriers to trade end products derived from biotechnology.
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    It would also set a regulatory example for countries outside the region as opposed to following the EU model. Given these potential benefits, harmonization of biotech approval regulations should be a key priority in the FTAA agenda.
    Elimination of differential export taxes should be another major of the FTAA. Brazil eliminated its use of DET's in 1996. But there are reports that governors of some the major soybean producing States are pressing to reinstate them.
    Argentina continues to tax exports of oilseeds at 3.5 percent while providing tax rebates of between 1.4 and 3.2 percent for exports of soybean oil. This practice should be targeted for elimination in both the FTAA and the next round of the WTO negotiations.
    ASA has carefully studied the potential impact of an FTAA on a competitiveness of the U.S. soybean industry. We believe the net impact of an FTAA that meets the goals that we have identified will benefit the American soybean farmer and industry. Before closing, Mr. Chairman, I would like to add that ASA supports including Chile in the NAFTA. We also hope Congress will act quickly to provide the President with trade promotion authority to allow these various negotiations to go forward. Thank you, Mr. Chairman for the opportunity to be here today. And I appreciate the opportunity to testify and will be available for questions. Thank you.
    The CHAIRMAN. Thank you very much. Mr. Roney.
    Mr. RONEY. Thank you, Mr. Chairman. I am Jack Roney, staff economist for the American Sugar Alliance, the other ASA. I am accompanied by Jackie Theriot, president of the American Sugar Cane League based in Louisiana. Mr. Theriot has considerable experience in developing country agriculture. And has traveled extensively in Latin America, including Brazil.
    The United States is both the world's fourth largest producer and importer of sugar, making ours one of the world's largest and most open sugar markets. U.S. sugar producers are among the most efficient despite some of the world's highest government imposed costs for labor and environmental protection. More than half the world's sugar is produced at a higher cost per pound that in the United States.
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    Unfortunately, so many governments intervene so intrusively in their own markets that the so-called world market price for sugar is merely a dump price that reflects their resulting over-production. As a result, prices on the world dump market are half the world average cost of producing sugar, and are no reflection of the fair and open competition we all seek through trade agreements.
    Because of our competitiveness, the U.S. industry endorses the goal of genuine multi-lateral free trade in sugar. We have endorsed this goal since the onset of the Uruguay Round of the GATT in 1986. We are ready, willing and able to compete with foreign farmers on a level playing field. We cannot endorse free trade at any cost, nor do we endorse unilateral disarmament of U.S. agricultural policies.
    Progress toward free trade must be made on a fair, genuine and comprehensive basis. Only a comprehensive approach will restore the world's sugar price to a level that reflects the actual cost of producing sugar. And that means addressing the rampant market distortions governments employ in the only comprehensive forum available today, the WTO agricultural negotiations underway in Geneva. We heard Secretary Veneman and Ambassador Zoellick today talk about the importance of reserving domestic supports and other areas from the FTAA for the WTO, saying that these have to be addressed in a comprehensive way to prevent us from having a disadvantage to countries outside the FTAA.
     There are five concrete reasons the U.S. sugar industry recommends that within the framework of the FTAA sugar be reserved for the much needed and for more reaching disciplines in the multi-lateral WTO context. The five reasons are as follows: Number 1, FTAA countries already dominate U.S. sugar imports. With regard to customs duties, they have already been removed for FTAA countries. Twenty-two of the 41 countries that share the U.S. sugar import quota are FTAA countries. They enjoy essentially duty-free access at the U.S. preferential price. Including Mexico's full NAFTA allowance, the FTAA country share of U.S. sugar imports is 80 percent.
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    Number 2, sugar industries and the FTAA countries are likely to be overrun with subsidized Brazilian sugar. Brazil has quintupled its sugarcane production since 1975, and recently became the world's leading sugar producer and exporter. Brazil has done so with the aid of an estimated $3 billion per year in ethanol subsidies, strategic currency devaluations, debt reduction programs, low environmental and labor standards, including the wide-spread and deplorable use of child labor, and still other subsidies. Other governments in the Americas know that without removing the Brazilian subsidies Brazilian sugar will simply swamp the U.S. and other FTAA markets.
    Number 3, sugar is not included in most bilateral and regional agreements. Because of the uniquely distorted nature of domestic and export markets for sugar, and because of a wide range of border control issues, sugar has overwhelmingly been excluded from bilateral and regional trade agreements. We heard today that there are 130 regional trade agreements world-wide. I can tell you that virtually all of them exclude sugar. The Mercosur Agreement excludes sugar. We heard today about the EU's 27 trade agreements. All of them exclude sugar and most of them exclude most of agriculture.
    Number 4, there would be increased potential for import quota circumvention. Bilateral and regional trade agreements have tended to foster the creation of blending platforms. In these evasive schemes, countries within the free trade area import dump market sugar, blend it with products that are not subject to import quotas, and ship these concoctions throughout the free trade area.
    Number 5, the U.S. sugar market is already over supplied with subsidized sugar. The U.S. sugar market does not require additional foreign sugar through the FTAA. Our market is over supplied and producer prices have been running at or near 22 year lows. The industry is in severe financial crisis. Additional foreign sugar import requirements would further depress the U.S. price and deepen the industry's financial crisis.
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    In conclusion, Mr. Chairman, as one of the world's largest importers of sugar, from a highly subsidized and distorted world market, the United States must be careful in approaching the sugar trade negotiations. We must ensure that commitments in one region to not make achieving results in the other regions difficult or impossible. This is not an issue when dealing with trade distortions in a comprehensive basis in the WTO. To reiterate, the U.S. sugar industry strongly recommends that within the framework of the FTAA, sugar be reserved for the much needed and far more reaching disciplines in the multi-lateral WTO context. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Roney appears at the conclusion of the hearing.]
    The CHAIRMAN. Thank you. Miss Fogarty.

    Ms. FOGARTY. Good morning, Mr. Chairman and members of the committee. My name is Sarah Fogarty and I am the director for international trade at the Grocery Manufacturers of America. GMA is the world's largest association of food, beverage and consumer product companies. it is a pleasure to be here today to offer our views in the Free Trade Area of the Americas. GMA strongly supports the FTAA and has been an active participant in the last two business forums. As time is limited this morning, I would like to focus on three key points. First, the negotiations in agriculture should place significant emphasis on eliminating trade barriers for processed food and beverage products because of their extraordinary export potential and the cost saving trade liberalization will provide to consumers.
    Second, the agreement must include rapid elimination of the high tariffs that characterize our sector. Finally, we believe that the success of the FTAA is dependent on the launch of the new round of trade negotiations and the WTO, and passage of trade promotion authority by Congress.
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    Let me elaborate on these three points. As the charge to test to our longer testimony indicate of the last decade exports of processed food products to the Western Hemisphere have increased dramatically. In fact, exports of processed food products now represent 40 percent of all U.S. exports to the region.
    Let me give you some specific examples. Exports of snack foods to Latin America have grown 70 percent since 1976. And pet food exports have grown a remarkable 110 percent. So the prospects of increased trade as the result of the FTAA look good. And if we rely on our experience with the NAFTA as a benchmark, GMA fully expects we will see significant benefits as a result of the agreement. Under NAFTA exports of processed food products have nearly doubled, growing from roughly $3.6 billion to over $6 billion last year. In order for the benefits of the agreement to be realized, however, certain issues my be addressed in the context of the negotiations.
    First of all, tariffs for food and agriculture products in the region are so high they force the price of our products out of the reach of the average consumer. A recent ERS report found that the average tariffs in Latin America ranged from 39 to 54 percent. And those in the Caribbean are even higher at 86 percent on average. We, therefore, recommend an approach to tariff elimination that will reduce high tariffs faster than low ends in a reasonable time frame. GMA also recommends that all commodities, even sensitive commodities remain on the table throughout the negotiations.
    Let me reiterate. There should be no product or policy exceptions in the negotiations. Pulling sectors off the table, especially ones that are essential to the export competitiveness of many Latin American countries, would seriously undercut the United States ability to open markets for all other agriculture and food products. We also believe that there should be a limited use of tariff rate quotas for sensitive commodities.
    With respect to export subsidies, we support the recommendations calling for hemisphere-wide export subsidy-free zone. We also believe that the SPS disciplines in the FTAA should be fully consistent with the WTO SPS agreement.
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    Let me finally turn to our views and our prospects for the FTAA by 2005. Agriculture has emerged as one of the most contemptuous sectors in the FTAA negotiations. Issues such as disciplines and domestic support and the definition of expert subsidies are so complex that there are unlikely to resolve in the FTAA context. Rather, they must be addressed in a multi-lateral context to achieve similar commitments from all trading partners. Put simply, it is unlikely there will be an FTAA agreement without agriculture. And extremely to achieve any results in the agriculture negotiating group in the FTAA without a new round of negotiations in the WTO.
    That is not to say that the FTAA negotiations should be put on hold until a new round is launched. On the contrary, GMA believes that it is imperative to move forward expeditiously on the FTAA while at the same pursing WTO negotiations.
    Let me give you an example of why. One of our member companies, Proctor & Gamble, manufactures Pringles potato chips in only two plants around the world. One is in Tennessee and the other is in Belgium. The tariff is 21 percent for both countries. Let us say we don't get an FTAA and the EU successfully completes their negotiations with Mercosur and gets zero duties for their products. Under this scenario it is highly likely that P&G will ship from Europe since they would land their products at a lower cost despite higher transportation costs. This is far from hypothetical. The EU has been negotiating circles around us for the last ten years to the detriment of U.S. manufacturers. Thank you for the opportunity to present our views before the committee. I would be happy to answer any questions.
    The CHAIRMAN. Thank you very much. Mr. Condit.
    Mr. CONDIT. Thank you, Mr. Chairman. And I would like to thank the panel for their testimony. It has been very helpful and very thoughtful. I appreciate your patience.
    I would like to ask each of you to give me a quick answer starting with Mr. Willey on, did you support NAFTA.
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    Mr. WILLEY. Yes.
    Mr. MCEVOY. Yes, our industry did.
    Mr. SHAFFER. We did.
    Mr. ANDERSON. Yes, sir.
    Mr. RONEY. We did and I am sorry we did.
    Mr. FOGARTY. We did and we are glad we did.
    Mr. CONDIT. OK. I would like to submit for the record, it is in the testimony, but I do want to recognize for the record, I have sort of a California perspective on specialty crops that have not enjoyed the promise or the benefits of free trade which some of them supported now have second thoughts. And I am just going to read them off. The Apricot Producers of California, the California Clean Peach Board, the California Dried Plum Board, the Agriculture Coalition of Trade, the American Dehydrated Onion and Garlic Association, the California Grape and Tree Fruit League, Sunkist, California Avocado Commission, California Kiwi Fruit Commission, and the California Cut Flower Commission. All provided statements with some regret that they supported the NAFTA agreement.
    {The statements are on filw with the committee.]
    Mr. CONDIT. In keeping with Mr. Boswell's admonition to us to be kind to you, Mr. Willey, I am going to ask you this question only for clarification. You support a free trade agreement as long as it doesn't include some standards in environmental or labor or otherwise. And I also understand you support it as long as it doesn't include your industry. Did I misunderstand what you had to say?
    Mr. WILLEY. Well, we are talking bout the Free Trade Agreement of the Americas. What we are pointing out is that those countries, particularly, Brazil, Argentina, Uruguay, that are most apt to get into that agreement with us, are ones that export and have access to our market. And we are saying that the beef market in particular should be addressed on a world basis, on a global basis through the World Trade Organization.
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    Mr. CONDIT. And so why should the beef market be given that consideration and not specialty crops or some of the other sectors in agriculture?
    Mr. WILLEY. We are not saying they shouldn't be. You may deal with them on an individual basis. I can only speak for cattle.
    Mr. CONDIT. What if they include cattle in the negotiations, the agreement, will you still support the free trade agreement?
    Mr. WILLEY. With the conditions we have talked about.
    Mr. CONDIT. And those are?
    Mr. WILLEY. Well, that first of all, that those countries in South America that wish to have access to our market have to meet the health and sanitary and other requirements that our people do.
    Second, we don't want to be a committed disadvantage. Third, we don't want to give them, and this in an important point, we don't want to give them complete open access to our market so that we import their product while in turn they have an opportunity to cut a side deal with the European community or the Asian markets.
    Mr. CONDIT. That sounds like every complaint that every one of these people at the table have, same deal. So I mean, it seems to me, your position is you want to be left out or have these standards, but you are OK if everybody else is thrown in. I just find that to be sort of unusual.
    Mr. WILLEY. Let me clarify it. I don't speak for the other commodities in that respect.
    I mean, if they want to be left out they have to make that decision. Certainly, we recognize overall the advantage of free trade,for all the right reasons. But trade that allows open access to our markets, particularly within the health problems and disease problems of South America, we have some real concern about it.
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    Mr. CONDIT. Right, correct. So you support standards in your field but maybe not standards in other people's fields?
    Mr. WILLEY. I would support standards in all fields that would be equal.
    Mr. CONDIT. Environmental labor?
    Mr. WILLEY. When I talked about environmental labor standards, I am talking about those standards that affect our cost to production. While our competitors have cost to production that is lower because they don't have environmental standards.
    You also note that I said that I wouldn't tell our negotiators not to be able to talk about any issue. We think we need to let them have complete ability to go to the table.
    Mr. CONDIT. Let me go back to my script before Mr. Boswell shows up.
    U.S. importing business's benefit by bringing in sheep and foreign agricultural commodities to compete American producers in the U.S. markets where domestic prices reflect environmental labor and high input costs. Under current conditions these two sections of the American agriculture industry seem to be in competition if not in direct conflict. Can we help one without hurting the other? And anyone who wants to respond to that.
    Mr. RONEY. If I could venture a comment, Mr. Condit. I think one of the concerns that is particularly pronounced in the FTAA for us, more so than even in the WTO, is that we are the only developed country in the FTAA, with the exception of Canada. And the gap in labor environmental standards is particularly large. It would seem to me that all of U.S. agriculture is vulnerable to producers in developing countries that have far lower standards than we do. The sugar industry is very supportive of this issue and the way it was phrased by the Cattlemen's. A way can and must be found to encourage these other countries to raise their standards to our levels rather than our lowering our standards to theirs.
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    Mr. SHAFFER. I think additionally, we talked earlier about cost to production. And to go along with what was just said is that our cost to production on a lot of items in this country are higher because we are a developed country that basically enjoys a higher standard of living. And because of that higher standard of living our society is asking a lot of things in its agriculture production that other countries producers are not asked to do. And I think that, and I will speak for all of us. They can shoot me here when we go out the door. But I think we all understand that we have to export and we all want to export. And we all understand that we have developed an agriculture in this country who is founded on exporting. And we have done a lot of that through technology. But at this point I think there is a lot of question in agriculture on where that technology is in relation to what the cost is and what kind of a competitive advantage we have in the rest of the world. And it is very difficult as we look to South America and look at some of the potential in that area for agriculture growth in order to figure out how we are going to stay in business and compete. And I think that question goes through all of agriculture's mind. It is not that we are anti, it is just we got to figure the thing out and we have got to do it right or we change dramatically here.
    Mr. CONDIT. Would you answer yes or no or if you feel like after a library fine. Do those of you at the table you all are aware of the attempts to have a labeling country of origins. Do you support that and should it be a part of the negotiations?
    Mr. WILLEY. We support a voluntary country or origin labeling which we have, program which we presented to the Department of Agriculture on a voluntary basis.
    Mr. MCEVOY. I would say the same thing. And I think it also should be related to what the consumer wants an what needs in terms of information.
    Mr. SHAFFER. We are not really on record of having a decision on that. But we know that it is an area that if it is helpful and we can export, than obviously we have to take a long look at that.
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    Mr. ANDERSON. I believe our position has been rather consistent on the nature of voluntary labeling with science based background to it. That labels should be of value to the consumer, to the purchaser of the product. And that labels should recognize the difference in compositional makeup, safety or alergenicity. If they don't meet that we believe that a poorly written non science based label would be detrimental to the consumer.
    Mr. THERIOT. We would support that, Congressman. The one thing that really ticks me off is that about 20 years ago DDT and chlordane were eliminated from our country. And I consult and visit a lot of these countries. And today they are still using DDT and chlordane. And we would love to see a labeling where we could designate where that sugar is coming from. Because once the sugar comes into this country it becomes refined and just disperses into the consumers.
    Ms. FOGARTY. I think on labeling, and we have some experience with this, you have to very careful in what you are trying to convey. And in order to ensure that those labels are not used for protectionists means. We generally support voluntary claims. I know the time has expired, but if I may on the labor and environmental issue, I don't mean to be the contraious, but maybe that is the role on this panel, my role on this panel. And that is that we talk about the cost to production and the standards in this country. But I think we need to also look at the fact that we have an incredible infrastructure, access to capital, highly educated work force, things like that that offset the natural comparative advantage. We have a competitive advantage.
    Mr. CONDIT. Well, my time has expired. I thank you for your patience and your participation. It has been very helpful. Thank you.
    The CHAIRMAN. Mr. Osborne.
    Mr. OSBORNE. OK. I have got three questions. And just like they will have to pretty short answers I think. Mr. Willey, country of origin labeling we just talked about, you said voluntary. Some of the folks that I deal with I think would like mandatory country of origin labeling in the livestock industry. And could you differentiate your position as opposed to theirs. And let me give you the other two questions so you can think about them and give them a quick end. Mr. Anderson, do you think that we can lower all the trade barriers, can we be competitive with Brazil and soybean production? In other words, can we be the lost cost producer? And then, Mr. Roney, I just had a question about NAFTA on that scope particularly, sugar problems. What specifically do you feel needs to be addressed to prevent the imbalance and the dumping that we are currently experiencing. So I said, those are three questions. They may require fairly quick answers so.
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    Mr. WILLEY. Let me talk about, we have presented a proposal to the Department of Agriculture for approval on a voluntary country of original labeling. We do have some disagreement among our membership. Some are very much in favor of mandatory systems. But our voluntary system also allows for the labeling as produced and processed in the United States animals that have been here 100 days or more. So that is not an absolute. And we have some members that would very much like an absolute system. But we are trying make it do it voluntarily if possible. And kind of a middle-of-the-road approach.
    Mr. ANDERSON. Sir, thank you giving me the chance to mention this. We have seen, I have seen specifically presentations brought to my attention that would suggest that in many areas we are much more competitive in a world market than are the Brazilians and South American competitors. And we talked about a standard of accounting, I have a personal relationships with people that have properties in South America and are producing soybeans down there. Now they are not the million-acre guys, they are not the 500,000 fellows. But when we talk about environmental degradation, when we talk about access to capital, when we talk about access to parts on my farm, the standards that I live up to, that my brother and I live up to in our farm there, the quality product that we produce. But when we talk about competition, when we talk about the Brazilian folks down there that are truly competitors, I chose not to call them anything else. But they have no access to parts. And when I have a $50,000 or $100,000 piece of equipment that goes down and I can't run it, that is truly an expense. Now I don't know exactly what they do with that expense when they bring their bushel or metric ton of soybeans to the pork. We can talk about the infrastructures brought up earlier. As they go merrily about their way clearing out whatever obstacles are in the way of the rivers down there, that is a cost to somebody. Apparently the folks here in the United States believe it is quite a cost. Because we can't seem to get anything up and down the Mississippi River. I just choose to go to a zone that suggests when we are going to talk competitive in nature let us talk about the overall competitiveness in a world market.
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    Mr. RONEY. Mr. Osborne, thank you for your question about sugar and the NAFTA. It is an enormous stumbling block in the minds of our sugar producers to move forward with further free trade agreements when Mexico has, in a very basic way, not complied with the original NAFTA provisions. Nonetheless, we are optimistic that we can work out through negotiation with Mexico, an agreement that recognizes, for example, that Mexico's producers are highly subsidized but that they are no more efficient than our producers. And that both countries have oversupplies of sugar. And I am optimistic that we can work out some type of market balancing approach in both countries that will restore some stability to both sugar markets.
    Mr. OSBORNE. OK. Thank you very much. That concludes my questioning, Mr. Chairman. Thank you.
    The CHAIRMAN. Mr. Rehberg.
    Mr. REHBERG. Thank you, Mr. Chairman. To a person you are very good at explaining the problems with the current trading practicing within your own individual arenas. And I think you said it best, Miss Fogarty, about the fact that perhaps the EU has been trading circles around us. So we are only as good as the people at the table. Unfortunately, I think the things that you mentioned, a lot of them we are not going to have time to address before we have to make the determination from our own individual district's perspectives whether or not we support fast track legislation. And so understanding the trading players at the table and the decision that has to be made pretty soon, I think quite a bit of my constituency is represented at the table or the organizations that are at the table. Would you very quickly give me, if you were in my position would you support or oppose fast track legislation?
    Mr. WILLEY. We support it.
    Mr. MCEVOY. Our industry has supported it in the past. And I think we would look at this time to make sure that agriculture is appropriately represented. That is the key.
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    Mr. SHAFFER. We support fast track.
    Mr. ANDERSON. We would greatly promote fast track. And to the comment about only as good as the people we send to the table, the people need to know that they have the the complete backing of the administration from the highest levels. Again, we commend the chairman and the committee for having as many questions as they have at the fine folks that are here this morning. Give the people at table the information they need and the authority to make the deals.
    Mr. RONEY. Mr. Rehberg, we would recommend that you look at the fast track legislation very carefully. There are any number of ways that it could be written. And that is what our industry is doing. We are going to look at it with a positive sense, but also with a very careful sense of scrutiny to see that it is written in such a way that it would ensure that we could have reasonable and fair and comprehensive negotiations.     Ms. FOGARTY. As I said in my testimony, we strongly support fast track or trade promotion authority.
    Mr. REHBERG. Thank you. And, Mr. Chairman, I would like to add my voice to the thanks that the panel has given you as well for giving us this opportunity to meet with the prior panel and this panel. It goes a long way towards giving me the confidence to vote for the legislation where I didn't have it before. I want international trade in the worst way. Sometimes I think we get it in the worst way. And this has been very helpful to me. And thank you for putting this meeting together today.
    The CHAIRMAN. Mr. Stenholm.
    Mr. STENHOLM. Mr. McEvoy, you mentioned the need to increase market promotion. When you look at what happened with the Cairns Group between 1995 and 1997, increased their market promotion effort on behalf of their producers, and their market share went up. So I am very interested in that. I would like to hear from you what specific market promotion efforts that you might be referring to. And if anyone else at the panel would have some suggestions as to how we might go about assisting our effort to export by using the same tools that others used successfully.
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    Mr. MCEVOY. I was referring specifically to the funding by the Foreign Agricultural Service which is declined over the last 4 or 5 years from over $200 million to $90 million. And these were very effective programs that we have used globally. We are currently using them in China. And our plea is that we would like to see those maintained because in the global context we are against the European Union where there is substantial promotion funding and other forms of subsidies on their agricultural commodities. So it was really a message that the programs that have been effective. It has helped us move into markets like Taiwan, Korea. And we are currently working towards China.
    Mr. STENHOLM. Do you have a specific example of what the Cairns Group has done that has been successful that we might look at?
    Mr. MCEVOY. Who is Cairn? I am not familiar with what you are referring to.
    Mr. STENHOLM. The Cairns Group—Australia, New Zealand, Canada.
    Mr. MCEVOY. I couldn't give you a quick response.
    Mr. STENHOLM. Anyone else have a suggestion on this area or agreement or disagreement that this is an area that this committee and the agriculture appropriations bill ought to be functioning and taking a look at?
    Mr. SHAFFER. From the wheat industry standpoint, we are very involved in international marketing and promotion. I have served as past chairman now of the U.S. Wheat Associates. We have 15 overseas offices. And their job basically is to sell U.S. wheat. And those overseas offices are funded do a great extent through, you know, FMD funding. And it correlates directly what that funding is to the amount of programs that we can effectively go out and go head-to-head competition against the Australian Wheat Board against the Canadian Wheat Board against Argentina against the EU. And their sales mechanisms, I mean, those overseas offices are basically where the competition is and where you have to meet that competition. We have been in a time of cut-backs. And obviously we are feeling the pinches in those overseas offices. We are not able to offer the programs, do the amount of trade servicing, do the amount of things that we used to do that was very beneficial in making sure that the customers understood our product and how to use our product. So I think we have been for years and obviously still very much in the wheat industry are on record of increased funding for market development and sales promotion.
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    Mr. WILLEY. Congressman Stenholm, the Meat Export F/-ederation is the leader in getting our product over there. In fact, Australia and New Zealand to a great extent have formed their own meat export federation type organizations and followed our lead. We would recommend specifically that you increase appropriation to the group for continued exploration. That is true value added and not only helps beef and other meat products but also the United States grains because it is a value added matter.
    Mr. ANDERSON. Sir, I would strongly urge fully funding the MFD and MAP areas back to the levels where they are at. We have used up the 20 percent surpluses that were there and we now down to the areas where we are really making some serious cuts in foreign market offices. The American Soybean Association is a large cooperator with the FMD program. And it helps us operate—well, we are now down to 13 foreign markets and servicing 80 countries. And the opportunity, as I address earlier, to get vital information into those markets that talk about the product that we sell into those areas. And we can talk directly to the user over there. We have been very involved in that and greatly need those funds back to allow us to continue that market access.
    Mr. RONEY. Mr. Stenholm, we don't export but we are hurt by foreign export subsidies. And we have long supported the total elimination of foreign export subsidies on sugar.
    Mr. STENHOLM. No further questions but just a comment. Increased market fund promotion funds will come from discretionary spending which are going to be under terrific pressure as a result of the budget that has passed and the tax cut that will pass today or tomorrow. So do not be greatly disappointed when out find that we will not be able to increase but that there will have to be cuts in spending in some of the programs that you are recommending. Because it is going to happen.
    The CHAIRMAN. Mr. Moran.
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    Mr. MORAN. Mr. Chairman, thank you. What role does the value of the U.S. currency, the dollar in comparison to other currencies play in our trading ability, our trading relationship with other countries? Is that a significant difficulty?
    Mr. SHAFFER. For the wheat industry, yes. I mean, as you take a look at the difference in value between the American dollar and the Australian dollar. I mean, they already have a competitive advantage. I know that in our industry we have talked a lot at how we can come up with a program somewhat as you mentioned earlier in order to address that on our exports in order to not give away that immediate advantage.
    Mr. MORAN. That really is my question. Does anyone have a suggestion if it is a problem, and assuming that is, does anyone have a suggestion as to what kind of program or plan would address trying to reduce the role it plays?
    Mr. ANDERSON. Well, we have in our farm bill testimony we tried to address world adjusted prices. And it becomes very, very complicated. I am sure you well know. Some of the economists I have visited with would suggest that in order for us to come to a baseline number we are going to have to back before the first embargo in the early 1970's to try to figure out where everybody was at and what everybody was really doing. And then try to rebuild that history back up to this point in time. And it is a very, very complicated long-term process to do that. But we continue to look at it in some small areas.
    Mr. MORAN. Thank you. Yes, sir.
    Mr. RONEY. We heard the panel today, preceding us, almost unwilling to address this issue, Mr. Moran. It is a critical one. But the difficulty of addressing those currency devaluations and manipulations is so high that perhaps the only thing that we can do, if we are unable to address them directly, is to make sure that we have got agricultural safeguards in place, which the Uruguay Round provided. I would argue not quite adequate ones. But I think it is very important that we maintain those as we move into future trade rounds so that we can, to some extent, defend ourselves against currency devaluations so over which we have no control.
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    Mr. MORAN. Mr. Roney, your testimony earlier about opposition to export subsidies, is this not a reason, a validation for why export subsidies are required?
    Mr. RONEY. Yes. I believe that that is true. And other countries have used that to our detriment.
    Mr. THERIOT. Mr. Moran, you asked for an answer as to what might be the solution to this. And when we look at this hemisphere we see that El Salvador has gone to the dollar, Argentina has gone to the dollar. I think dollarization, which Brazil will never accept, will be one way of leveling the playing field.
    Mr. MORAN. Thank you all very much. Mr. Shaffer, I was going to give you the change to suggest that the wheat industry might also argue that sometimes we are traded away in trade agreements, and it is not just the non program crops that are traded away.
    Mr. SHAFFER. Well, I think there is some sentiment to that. But at that same token we like to keep a positive attitude. And I made some comments earlier about looking at some of our past mistakes. And we take a look at going into FTAA as there is downside risk, maybe more so if we don't do anything than if we do do something. But on the same token, we do have some problems. As we take a look at the Canadian Wheat Board and what is going on with Canada under NAFTA. We have some real problems there that need to be addressed. And we are hoping that with your support we can address those and use that as a model as we move into the wider WTO Round and as we move into this FTAA Round. We are trying to look at it positive and hope we can all work together and address it.
    Mr. MORAN. I indicated to Mr. Putnam earlier that I appreciated his remarks and see validity in what he had to say. Although the scapegoat is always in the eye of the beholder. And I appreciate the chairman's indulgence and appreciate the committee hearing.
    The CHAIRMAN. In an anticipation of a series of votes that are about to occur, I will release this panel rather than holding you around for, I don't know how long. Thank you very much. And we may have additional information. You may have additional comments. We would certainly solicit and appreciate those. And without objection, the record of today's hearing would remain open for 10 days to receive additional material and any supplementary written responses from witnesses to any questions posed by a member of the panel. This hearing is adjourned.
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    [Whereupon, at 2 p.m., the committee was adjourned, subject to the call of the Chair.]
    [Material submitted for inclusion in the record follows:]
Statement of Tony Anderson
    Good morning, Mr. Chairman, and members of the committee. I am Tony Anderson, a soybean and corn farmer from Mt. Sterling, Ohio. I currently serve as President of the American Soybean Association, which represents 26,000 producer members on national issues of importance to all U.S. soybean farmers.
    ASA would like to commend you, Mr. Chairman, for holding this hearing on the proposed Free Trade Area of the Americas. Soybeans are the second most valuable crop grown in the U.S., and exports of soybeans, soybean meal, and soybean oil are our leading earner of foreign exchange. Exports of soybeans and products in calendar year 2000 were valued at $6.7 billion. Of this amount, exports to FTAA countries totaled $1.75 billion, despite restrictions on access to 30 percent of markets in the region.
    Access to international markets has always been important to U.S. soybean producers. Under the FTAA, it will be essential. The soybean industry has already experienced how regional trade agreements can impact our exports and prices. Under NAFTA, U.S. soybean exports to Mexico have doubled. Under the Andean Community pact between key South American soybean producers and importers, U.S. soybean product exports have declined by 70 percent. We also are experiencing adverse trade effects from Mercosur and the European Union trading blocs. What happens in the FTAA negotiations will have a critical impact on the future competitiveness of U.S. soybean farmers and our industry in Latin American markets.
    FTAA Goals. Negotiation of a FTAA can be an important opportunity to expand market access for U.S. soybeans and soybean products. During the Uruguay Round negotiations, the U.S. and other major oilseed producing and exporting countries supported establishing a Level Playing Field (LPF) for oilseed trade. Under an LPF, all tariffs on oilseeds and oilseed products would be eliminated, as would export subsidies and other government-sponsored export incentives. The U.S. should work with other LPF supporters including Canada, Brazil, and Argentina—to achieve these goals in the FTAA. We must ensure, however, that such an achievement does not open Western Hemisphere markets to the European Union until the EU agrees to similar reforms in the new round of WTO negotiations.
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    ASA has participated actively in the effort to establish trade negotiating priorities for the FTAA. We fully support the General Principles and Objectives spelled out in the San Jose Declaration, and in the U.S. Negotiating Group's Position on Agriculture. In attaining these objectives, ASA believes the first goal should be to eliminate all tariff and non-tariff barriers to full market access. Secondly, intellectual property rights, SPS procedures, and the approval process for biotechnology products must be harmonized and enforced. Third, the U.S. should press for elimination of Differential Export Taxes that effectively subsidize exports of processed soybean products by our South American competitors.
    Market Access. U.S. access to important markets in Latin America is currently restricted by the preferential tariffs and terms granted under preferential trade agreements between Mercosur countries and those that comprise the Andean Community. U.S soybean meal exports to Colombia, Ecuador, Peru and Venezuela have declined from 984,600 mt in the 1997/98 marketing year to only 98,400 mt in the first 7 months of the current marketing year because of preferences these countries have given our South American competitors. The loss of the Andean soymeal market has been a major factor behind the closure of several U.S. soybean processing plants this year. The Andean region represents a major potential market of $630 million. And while only an eight-day voyage from the Gulf compared to 14 days from Brazil, the U.S. has only 11 percent of these markets.
    The term ''spaghetti bowl'' is used to describe the crisscrossing web of preferential trade concessions that have developed under the various regional trading systems in Latin America. Member countries have erected common external tariffs and set up price bands and reference pricing mechanisms that have complicated regional trade and have the potential to exceed WTO-bound duties. For example, Argentina recently decided to stop applying high price band duties to oilseed and oilseed product imports if importers agree to buy domestic products. This so-called absorption agreement is not WTO-consistent. ASA believes the FTAA should eliminate price band import protection and other trade distorting practices. Venezuela's tariff on imports of U.S. soybean oil is 20 times higher than its tariff on soybean oil imports from Paraguay.
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    We even have lost sales to markets as close by as the Dominican Republic. The Dominican Republic is a seven-day voyage from the U.S. Gulf and 18 days from Argentina. However, the U.S. share of the $38 million Dominican soybean oil market is only 12 percent. This is particularly disturbing considering that the U.S. Congress last year approved legislation granting duty-free access to the U.S. market for practically all of the Dominican Republic's exports.
    Harmonization of IPR and SPS Regulations on Biotech Products. In addition to the negative consequences of market access barriers, U.S. soybean farmers must compete against inconsistent enforcement of intellectual property rights and non-harmonized regulations applied to biotech products. U.S. soybean producers are paying a licensing fee of $6.00 per bag of biotech planting seed, while Argentine farmers are not. In addition, Argentine law does not recognize the patents on biotech products that are registered in the U.S. As a result of these inequities, soybean producers in Argentina are using biotech varieties at one-half the cost of U.S. producers.
    In response to this situation, the Biotechnology Industry Organization (BIO) has written the Section 301 Committee of the Office of the U.S. Trade Representative urging that Argentina be placed on the Priority Watch List of countries that deny adequate protection of intellectual property in plant varieties and plant biotechnology. A copy of BIO's letter to USTR is attached to this statement.
    The FTAA negotiations offer an excellent opportunity to pursue harmonization of biotech regulations with Latin American countries. Harmonization would secure our ability to trade within the region by eliminating current and potential technical barriers to trade in products derived from biotechnology. It would also set a regulatory example for countries outside the region, as opposed to following the EU model. Given these potential benefits, harmonization of biotech approval regulations should be a key priority on the FTAA agenda.
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    Differential Export Taxes. Elimination of Differential Export Taxes (DETs) should be another major objective of the FTAA negotiations. Countries that use DETs place higher taxes on bulk commodity exports in order to encourage domestic processing and export of higher-value products. Brazil eliminated its use of DETs in 1996, but there are reports that the governors of some major soybean producing states are pressing to reinstate them. Argentina continues to tax exports of oilseeds at 3.5 percent while providing tax rebates of between 1.4 and 3.2 percent for exports of soybean oil. Although this practice is not identified as an export subsidy in the Uruguay Round Agreement, it clearly should be targeted for elimination in both the FTAA and the next round of WTO negotiations.
    Competitive Impact of an FTAA. ASA has carefully studied the potential impact of an FTAA on the competitiveness of the U.S. soybean industry. A study by the United Soybean Board indicates a possible rise in both market share and U.S. soybean prices. The USDA's Economic Research Service also has completed an extensive report that indicates the U.S. soybean industry can expect gains in soybean exports. While the U.S. might also lose market share to Mercosur in Mexico due to seasonal competitive advantage, we believe the net impact of a FTAA that meets the goals we have identified will benefit American soybean farmers and the U.S. soybean industry.
    Before closing, Mr. Chairman, I would like to add that ASA supports including Chile in NAFTA. We also hope Congress will act quickly to provide the President with Trade Promotion Authority to allow these various negotiations to go forward.
    Thank you, Mr. Chairman, for the opportunity to appear before you today. I will be happy to respond to any question you or other members of the committee may have.
Statement of Michael J. Stuart
     The Florida Fruit & Vegetable Association (FFVA) submits the following statement to be included in the record of the May 23, 2001, hearing held by the House Agriculture Committee regarding the proposed Free Trade Area of the Americas (FTAA) and other Bush administration trade initiatives, including a U.S.-Chile Free Trade Agreement (FTA). The comments address specific objectives for both the FTAA and the U.S.-Chile FTA to help ensure fair treatment for Florida's import-sensitive fruit and vegetable sectors.
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     FFVA is an organization comprised of growers of vegetables, citrus, sugarcane, tropical fruit and other agricultural commodities in Florida. Florida's unique geographical location in the United States affords growers an opportunity to provide American consumers and export markets with fruits, vegetables and seasonal crops during the months of the year when other domestic producers cannot grow and harvest these crops. Historically, competition for Florida's fruit and vegetable industry in the U.S. marketplace has come from Mexico, other areas that have farmland suitable for winter production in the northern hemisphere, and from Latin America. In export markets, Florida's crops compete against low-cost, often subsidized producers from Latin America, Europe, and elsewhere.
     Although both of the two Western Hemispheric free trade initiatives currently being pursued by the United States—the FTAA and the U.S.-Chile FTA—are of serious concern to FFVA, the former is of greatest concern because it encompasses such a large number of countries in Latin and Central America that are competitive with Florida's fruit and vegetable industries. FFVA's principal objection with both initiatives is that they could lead to further reductions in import-sensitive U.S. tariffs in favor of competitive exports in Chile, Brazil, Argentina and other western hemispheric countries, creating greater competition in the U.S. market for Florida's fruit and vegetable growers. Accordingly, FFVA's priority objective in both negotiations is to ensure that the tariff methodology adopted to eliminate agricultural tariffs allows for exceptions from tariff elimination for Florida's most import-sensitive fruit and vegetable products.
     Florida's growers are skeptical about these two initiatives in part because both the North American Free Trade Agreement (NAFTA) and the Uruguay Round Agreement in the World Trade Organization (WTO) have failed to protect Florida's import-sensitive products from increased competition in the U.S. market.
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     Since the NAFTA Agreement took effect, Florida fruit and vegetable growers have lost significant domestic sales to Mexico of tomatoes, bell peppers, cucumbers and other crops. NAFTA encouraged this increased competition in two ways: first, by reducing U.S. tariffs, making already low-priced Mexican products more competitive; and, second, by encouraging investment in Mexico's agricultural industries from non-traditional sources. The increased investment has substantially advanced Mexico's technology, increased Mexico's production in competitive crops, and reduced per-unit costs of those commodities. These advantages, along with the cost savings derived from the devaluation of the peso shortly after the NAFTA took effect, have significantly increased Mexico's export competitiveness relative to Florida.
     Likewise, the Uruguay Round ''reforms,'' which reduced U.S. tariffs across the board, including tariffs on import-sensitive products, have left Florida's fruit and vegetable sectors more vulnerable to imports. While the Uruguay Round has contributed to limited progress in opening foreign markets for Florida tomato and citrus products, losses in the U.S. market have on balance outpaced gains in export markets. Florida's fruit and vegetable exports continue today to face tariff rate quotas and unjustified phytosanitary restrictions.
     With competition in the U.S. market increasing, many of Florida's producers have been forced to curtail their operations. Others have closed down altogether. Even import relief actions have not stopped the harm.
     A hemispheric-wide free trade agreement will compound this adversity. Chile, Brazil and Argentina are competitive producers and exporters of fruit and vegetables that are also grown in Florida. Imports of these products at duty-free or preferential duty rates pose an immediate threat for Florida's growers.
     FFVA therefore requests that high priority be given to the following comments respecting FTAA tariff elimination, safeguard measures, currency devaluation, and sanitary and phytosanitary disciplines. The same objectives and concerns apply to a bilateral U.S.-Chile Free Trade Agreement, since Chile is a competitive producer of many of the fruit and vegetable products grown in Florida and the U.S.-Chile FTA may be used as a model for the larger FTAA agreement.
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     In NAFTA, despite the extreme import sensitivity of Florida's fruit and vegetable products, only frozen concentrated orange juice (FCOJ) and, for part of the year, cucumbers received the maximum tariff phase-out period of 15 years provided for under the NAFTA agreement. In many sectors like tomatoes, peppers, and cucumbers, ten-year phase-out periods have proven insufficient to protect against increased imports from Mexico. Consequently, U.S. growers have been forced to spend precious industry dollars to fight back unfair competition from Mexico through antidumping procedures and other trade remedy laws.
     The FTAA is a regional trade agreement covering many more countries than NAFTA—including Brazil, Argentina and Chile, all countries that are highly competitive with Florida's fruit and vegetable sector. These countries currently export melons, lettuce, onions, tangerines/mandarins, and frozen concentrated orange juice to the U.S. market, products that compete directly with Florida production. To ensure that the FTAA negotiations do not lead to increased U.S. imports from these countries of principal fruit and vegetable products, FFVA is asking that a request-offer approach be pursued that explicitly authorizes exemption from tariff phase-out for FFVA's most highly import-sensitive fruit and vegetable products. Although exemptions from tariff phase-out were not granted under NAFTA, there is no WTO requirement that this be the standard for an FTAA, nor is there a policy justification for such an approach, given the greater competitive threat presented by the larger trade agreement. Moreover, FTAA countries like Chile, Argentina, and others are themselves interested in product exemptions for import-sensitive agricultural sectors.
     A complete list is attached of FFVA's most important fruit and vegetable products for which special tariff exemptions are requested. Even where Generalized System of Preferences (GSP) benefits are currently being conferred on these products, FFVA considers these GSP exemptions to be temporary and the Latin American countries competitive producers of many of these products. Accordingly, Florida's growers and processors oppose granting permanent duty-free access for these products under the FTAA.
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     A major problem with both the NAFTA and Uruguay Round Agreement for Florida's import-sensitive fruit and vegetable products is the inadequate safeguard mechanisms included in those agreements. These measures have been ineffective in curbing increased imports resulting from the preferential tariff access.
     NAFTA contains a special agricultural safeguard that is a volume-based tariff-rate quota (TRQ) mechanism that restores the pre-NAFTA tariff on a limited number of products if certain volume targets are met. These safeguards have been ineffective for two reasons. First, they are limited to only a few commodities, leaving many of Florida's import-sensitive products uncovered. Second, the volume ceiling that triggers the safeguard measure is met only at the very end of the season when the extra volumes in the markets have already depressed prices and injured U.S. growers. Although the Uruguay Round contains a priced-based mechanism, the safeguard does not apply to Florida's fruit and vegetable crops, since none of these were subject to non-tariff barrier measures prior to the Uruguay Round negotiations.
     Because an FTAA will stimulate imports of perishable, sensitive agricultural products even if they are exempted from tariff reduction, any agreement should include a special safeguard mechanism for agriculture that is (1) broader in product coverage than the NAFTA mechanism (i.e., one that covers all import-sensitive agricultural products); and (2) triggered automatically based on price, not year-end volumes of imports. A price-based mechanism is preferred, since it reacts to import volumes throughout the season whenever they increase because of unfairly low prices and can be activated before irreparable injury has occurred to the U.S. industry. The duration of the safeguard should also be sufficiently long to allow the U.S. industry to adjust to the import surges and the injury caused by the increased imports. Finally, the safeguard mechanism should be structured to include effective relief once the trigger price or volumes are reached. Under NAFTA, the relief was to ''snap back'' to the bound or applied pre-NAFTA tariff rate. A more effective mechanism might be to allow, at least in defined circumstances, a breach of binding to a higher tariff level if necessary to protect the injured U.S. industry.
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     The U.S. proposal for the FTAA Group on Agriculture does not include a special agricultural safeguard measure. Under the general market access text, the U.S. proposes a hemispheric safeguard measure that would allow tariff increases, but no TRQs. The text reserves the right ''to propose at a later date provisions on dispute settlement panel review specific to hemispheric safeguard measures, and sector-specific safeguard regimes.'' Under this reservation, FFVA urges the U.S. government to explore the inclusion of a special agricultural safeguard to protect import-sensitive U.S. agricultural sectors. Given the great number of countries involved in the FTAA, the competitiveness of many of these countries in the fruit and vegetable sectors, and the attractiveness of the U.S. market, adequate safeguard measures are imperative to protect import-sensitive U.S. fruit and vegetable products.
     NAFTA did not include provisions to address currency devaluation. As a result, when Mexico's peso dramatically devalued shortly after the NAFTA agreement took effect, Mexico's exports to the U.S. market instantly became much cheaper and increased significantly, while U.S. exports to Mexico became more expensive and declined. Many of Florida's fruit and vegetable industries experienced this rapid shift in import /export flows and incurred significant losses.
     Several of the Latin American currencies not currently pegged to the U.S. dollar are also susceptible to rapid devaluation. To protect against the potentially negative impact of that devaluation, U.S. negotiators should consider ways in which the FTAA could incorporate appropriate safeguards that would counter increased exports that occur when a country's currency unexpectedly devalues.
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     Despite the disciplines included in the WTO Agreement on Sanitary and Phytosanitary Measures, access for Florida's fruit and vegetable crops in many export markets continues to be limited by sanitary and phytosanitary restrictions and regulations. Chile and Argentina are two Latin American countries that have limited and delayed access for Florida citrus under the guise of sanitary and phytosanitary concerns.
     The U.S. is proposing that FTAA countries collaborate in the WTO to strengthen international standards and to coordinate on data exchange, research and technical assistance. FFVA supports that proposal, but further urges the U.S. government to include disciplines in the FTAA itself that will better ensure that FTAA countries do not use unjustified plant quarantine issues to prohibit or stall access for U.S. agricultural products. Another area of cooperation that should be explored in the FTAA is harmonization of pesticide regulations among the FTAA countries.
    VI. Conclusion
     The above objectives, especially those addressing tariffs and safeguard measures, are necessary to ensure that U.S. import-sensitive agricultural products from Florida and other U.S. states are not put at risk by either a FTAA or a bilateral U.S.-Chile FTA. FFVA looks forward to working with the Agriculture Committee and Congress generally to ensure that these goals are achieved.
Statement of Wythe Willey
     Chairman Combest, Ranking Member Stenholm and the members of the House Agriculture Committee,
    The National Cattlemen's Beef Association appreciates the opportunity to present to you and the House Agriculture Committee our views on the Free Trade Agreement of the Americas (FTAA). I am Wythe Willey president elect of the NCBA. I am a rancher and resident of Cedar Rapids, Iowa.
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     Beef producers are constantly competing for a larger share of the domestic market. Moreover, our ''home'' market contains less than five percent of the world's population and we are becoming increasingly dependent on the rest of the world to buy our products and ensure economic growth. The U.S. beef industry has worked hard to promote beef exports which now account for more than 12 percent of the value of wholesale beef sales. On a tonnage basis, we export nearly 10 percent of what we produce.
    NCBA fully understands the importance of maintaining equitable trade agreements because of our industry's unique position as an importer as well as an exporter. As an industry, we have worked to expand exports of beef and beef variety meats from approximately $500 million dollars 20 years ago to $3.6 billion today—more than a seven-fold increase. During 2000, the United States became the world's largest beef exporter as U.S. exports of beef and beef variety meats established new records of 1.244 million metric tons valued at $3.6 billion. Compared to 1999, exports of beef and beef variety meats during 2000 increased of 7.7 percent on a volume basis and 10.6 percent on a value basis.
    The U.S. is also the world's largest beef importer of beef and beef variety meats. During 2000, we imported 1.025 million metric tons valued at nearly $2.49 billion for a trade surplus of more than $1.1 billion..
    I11NCBA and the beef industry understand the importance of trade in the overall context of foreign policy. We fully agree with the three principal reasons articulated in Ambassador Zoellick's Overview statement on the 2001 trade agenda as to why further trade liberalization is important to the American people:
     Expanded trade—imports as well as exports—improves the well-being of Americans.
     Economic freedom creates habits of liberty that in turn create expectations of democracy.
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     Expanded trade affects our nation's security.
    The U.S. beef industry has witnessed firsthand the value of market-opening trade agreements. As a direct result of NAFTA and related political reforms, Mexico's economy has grown and disposable income has increased among an expanding middle-class. U.S. beef exports to Mexico have increased five-fold from $116.3 million in 1993 when NAFTA was approved to $596.2 million in 2000.
    This growth in North American trade has resulted in lingering irritants, however. There has been an ongoing series of border inspection issues, most recently legislation in Mexico that would require re-inspection of U.S. beef in facilities on the Mexican side of the border. These issues provide examples that anti-trade forces can point to when opposing additional trade agreements.
Issues with our NAFTA trading partners have not been limited to the Southern border. T
he Canadian government has made progress in opening the border to U.S. feeder cattle and a record 209,480 U.S. cattle were exported to Canada during the October 1, 2000 through March 31, 2001 marketing year. Relations between the U.S. and Canada are much improved compared to the border blockades and protests of a couple of years ago. But there is still room for improvement. The Canadian government should increase the number of states eligible to ship cattle using the new protocol and grant year-round access from states that are eligible to participate.
    Environmental Regulations and Dumping Definition: The U.S. beef industry continually faces the challenge of increasing costs of complying with a host of environmental regulations. Cattlemen support maintaining a wholesome environment—after all we are talking about the environment where we and our families live. However, U.S. cattlemen face ever-tightening government environmental standards and regulations that producers in other major beef producing countries do not face. NCBA would support addressing environmental issues in future negotiations if the objective is to raise environmental standards in other countries up to U.S. levels—some type of environmental equivalency patterned after current veterinary equivalency agreements. Monetary incentives, off-setting tariff credits in terms of more favorable terms for countries with more stringent standards or other non-trade restricting mechanisms may deserve consideration during future negotiations.
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    As long as other countries maintain production subsidies, export subsidies and tariffs at levels higher than those in the US, NCBA will support maintaining equitable beef quotas and tariffs. Maintaining strong trade laws is like supporting motherhood and apple pie and no one supports weakening existing trade laws. We do however have concerns about some statements that sensitive issues should not even be discussed in the context of comprehensive multilateral trade negotiations. Any trade agreement that might include changes in current trade laws will still have to be considered on the merits of the overall package. Congress will ultimately have authority to accept or reject the final product of negotiations. In that context we strongly question calls for prohibiting discussion of trade remedy laws in upcoming trade negotiations before those negotiations even begin. We will work to develop alternative definitions during future negotiations to define ''dumping'' more consistent with the practical realities of a cyclical, perishable, agricultural commodity.
    FTAA: NCBA has been reluctant to support expanded FTAA negotiations in light of the above political and industry climate. We have felt all along that problems with NAFTA should be resolved and markets should be allowed to come into equilibrium before additional countries were added to the mix. As discussions continue towards an FTAA by 2005, NCBA's position is clear. We believe that agricultural issues should be addressed in the context of comprehensive multi-lateral trade negotiations and we do not support including agriculture as a part of a regional FTAA agreement. Our position is further refined for the following reasons.
    The United States is currently the least restricted and largest beef import market in the world purchasing 15 percent more beef than the second largest importer, Japan. The United States also became the largest beef exporter during 2000, but we could export much more if other countries played by the same rules as the U.S. and barriers to access were eliminated. Beef markets in other developed countries remain virtually closed to U.S. beef (EU) or protected by relatively high tariffs (Japan and Korea).
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    NCBA and the U.S. beef industry support the broad long-term philosophical objectives of trade liberalization. We will not, however, unilaterally increase access to the U.S. beef market without comparable increases in other markets for U.S. beef. Access to the U.S. beef market is already relatively unrestricted and there is a perception throughout the U.S. industry that we have granted more access than we have gained during past negotiations. U.S. negotiators must send a strong, clear and irrevocable message to Cairns Group and FTAA trading partners—who are major current and potential U.S. beef suppliers. NCBA will not support increased access to the U.S. beef market until meaningful access and tariff reduction is achieved in other major beef importing countries. Because many FTAA countries are major beef exporters and many major beef importers are in Asia and Europe, this objective can only be achieved through comprehensive multi-lateral WTO negotiations—not regional FTAA negotiations.
    We expect FTAA and Cairns trading partners to stand shoulder to shoulder with the U.S. when we negotiate future multi-lateral agreements for access in Europe and tariff reduction in Asia. Too often in the past the U.S. has expanded access to beef from Cairns and FTAA countries only to watch our interests be undermined in subsequent negotiations as these same countries cut side deals to gain access for their beef while the U.S. was left with restricted access. No more!
    Science-Based Regulations to Protect U.S. Herd Health: We must ensure that science remains the only basis for resolving sanitary and phytosanitary issues. Given the foreign animal disease outbreaks in Europe and South American countries and the heightened focus on animal health and food safety , these issues can not be over-emphasized in the current global trade setting.
    NCBA has become increasingly concerned that the expansion of trade with many countries is increasing the risk of reintroduction into the United States of foreign animal diseases like Foot and Mouth Disease (FMD). FMD is a deadly virus, not only of beef cattle but many other animals and wildlife. It spreads rapidly. A case of the disease in the United States would eliminate many U.S. export markets in the short term and cost livestock producers and the government literally billions of dollars to control and eradicate. Extreme care must be taken to prevent the introduction of FMD into the United States either from the importation of livestock, or meat and meat products from countries that have the disease or who are in the process of eradicating it.
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    FMD has been eradicated from North America, including all Central American countries and an animal-free zone (the Darien Gap) is maintained at the southern tip of Panama to ensure that FMD is not transmitted from South American countries. Other than one imported animal in Canada, no cases of BSE have been identified in the Western Hemisphere and all Western Hemisphere and Cairns countries have implemented restrictions on imports of meat and animals and the feeding of animal-based proteins comparable to or stricter than the US.
    From mid–1997 until mid–2000 Argentina and Uruguay were rated FMD-free. However, both countries have since began vaccinating livestock because of reoccurring FMD outbreaks and both countries have voluntarily suspended shipments of fresh and frozen beef to the U.S. and Canada. Officials from Argentina were less than forthcoming about new cases of FMD during late 2000 through March 2001. In fact, some would say that during that time they outright deceived USDA officials about the herd-health status in Argentina.
    Brazil and Venezuela have vaccination programs in place but continue to have cases of FMD and several other South American countries such as Bolivia, Columbia and Paraguay continue to have major outbreaks of FMD. Cross-border disease exposure continues to be a problem in South America and FMD cases will likely continue to occur until a comprehensive hemispheric program is adopted and the disease is eradicated from the continent.
    In spite of the questionable and ever-changing status of herd health in South America, many major beef producing and potential exporting countries there continue to press for expanded access to the U.S. beef market. Argentina has at times requested an increase to 100,000 metric tons from the current 20,000 metric ton quota for fresh and frozen beef. In spite of science-based indications that such access would be contrary to U.S. herd-health, Brazil has at times attempted to use political leverage to negotiate assess to the U.S. market for fresh and frozen beef.
    NCBA's message to these countries is pure and simple:
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Clean up your act. Adopt an inclusive hemispheric program and eradicate FMD throughout South America. Become part of the world community of responsible producers of healthy animals. Join us in negotiating access in Europe and tariff reduction in Asia and the access to the U.S. market that you have so long sought will be forthcoming. Continue on the current path of marginal herd health and negotiated side deals with the EU and we are indefinitely ambivalent as to granting you increased access to our market.
    NCBA and the U.S. beef industry have witnessed the huge economic and social costs as FMD and BSE have devastated the European beef industry. We are determined that the North American industry will not be exposed to the same fate. Before any FTAA is approved, NCBA and the U.S. beef industry must be assured that APHIS will have in place and in use a set of measures to ensure that FMD will not be introduced into the United States. USDA must also have in place a clearly documented emergency response plan in the event such an introduction should occur.
    Mr. Chairman, as listed in our attached comments, there are other FTAA beef trade issues including tariffs, minimal production and export subsidies and technical barriers to trade (grading and inspection issues) that could be resolved during FTAA negotiations. These issues are relatively secondary to the primary issues of protecting the U.S. herd health and increasing access to Asian and European beef markets that can only be achieved through multi-lateral negotiations. We look forward to working with your committee and providing further input as FTAA negotiations progress to assure that dual objectives of maintaining scientific based U.S. herd health protection and increased opportunity for international trade are achieved.
     Mr. Chairman, I would like to also submit for the record a copy NCBA's February 7, 2000 comments regarding an FTAA. Those comments spell out many of the regional issues of concern including tariff levels, production subsidies and grading requirements that must be addressed during FTAA negotiations. Thank you again and I look forward to continuing this dialogue as the process unfolds. I would be happy to answer any questions.
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    February 7, 2000
    Gloria Blue, Executive Secretary,
    Trade Policy Staff Committee,
    Office of the U.S. Trade Representative,
    Washington, DC 20508.
    RE: USTR Request for Public Comment Regarding Negotiations Toward a Free Trade Area of the Americas (FTAA)
    Dear Ms. Blue:
    Initiated in 1898, the National Cattlemen's Beef Association (NCBA) is the marketing organization and trade association for America's one million cattle farmers and ranchers. With offices in Denver, Chicago and Washington D.C., NCBA is a consumer-focused, producer-directed organization representing the largest segment of the nation's food and fiber industry.
    NCBA appreciates the opportunity to submit comments to the interagency Trade Policy Staff Committee (TPSC), which is seeking public comment with respect to all aspects of negotiations as part of its efforts to develop proposals and positions concerning toward the FTAA.
    Importance of Trade: Livestock producers are constantly competing for a larger share of the domestic market. Moreover, our ''home'' market contains less than five percent of the world's population and our greatest potential for expanding market share is in international trade. As the beef industry continues to improve its efficiency, productivity and quality of its commodity, we are becoming increasingly dependent on the rest of the world to buy our products and ensure economic growth. The U.S. beef industry, has worked hard to promote beef exports which now account for more than 12 percent of the value of wholesale beef sales. On a tonnage basis, we export nearly 10 percent of what we produce.
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    As this reliance on international markets has grown, the effects of political and economic strife in our key export markets have contributed to volatility of U.S. cattle prices. The 1998 calendar year—a year of recession in most Asian markets—was the first time that more than one million metric tons of U.S. beef and beef variety meats have been exported. Compared to 1997, exports of beef and beef variety meats during 1998 increased of 4.75 percent on a volume basis but declined 5.44 percent on a value basis as U.S. beef prices declined and international customers shifted to a lower-price mix of beef products.
    As an industry, we have worked to expand exports of beef and beef variety meats from approximately $500 million dollars twenty years ago to approximately $3 billion today—a six-fold increase. During the first eleven months of 1999, beef exports increased 8.1 percent on a volume basis and nearly 13.5 percent on a value basis compared to the same time in 1998. The value of U.S. beef and beef variety meats exported during the first eleven months of 1999 totaled more than $2.914 billion. This progress is encouraging, but also highlights the importance of taking advantage of every opportunity to move beef into international trade.
    Political Climate and Industry Concerns: There is a perception among many in agriculture that past GATT and WTO rounds often traded U.S. agricultural priorities away and left U.S. crop and livestock producers facing high tariffs and a host of non-tariff trade barriers in foreign markets while U.S. agricultural markets were liberally opened to imports. Continued failure of the EU to live up to its obligations as a full WTO member and lift the ban on U.S. beef is often cited as an example of how the WTO process fails to work.
    One of the underlying premises of the 1996 Freedom to Farm bill was that aggressive pursuit of growing export markets would be a critical strategy to replace the safety net of traditional farm programs. NCBA firmly believes this to be true. Eliminating trade barriers is critical to the success of any international trade negotiations.
    Despite the overwhelming evidence that the international market must be the focal point for market growth and economic vitality, there is a growing protectionist sentiment at the grassroots level. This sentiment is the result of increased questioning at state and local levels about the impacts of trade on individual agricultural producers and increased skepticism about the willingness of Federal officials to aggressively negotiate agreements favoring U.S. interests.
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    In addition, there is a growing lack of confidence even among ''free'' traders that our trading partners will live up to their obligations under negotiated agreements. Simply put, U.S. producers are tired of facing their international competition on a persistently tilted playing field. There also is a somewhat accurate perception that U.S. negotiators and regulatory agencies are more focused on developing protocols and modifying regulations to address concerns of countries seeking access to U.S. markets rather than on identifying and addressing regulations in importing countries that limit access of U.S. products.
    It is clear that Congress and the administration have not had a unified strategy to systematically attack the trade problems of U.S. agriculture as part of the upcoming negotiations. The inability to secure approval of ''fast track'' continued negotiating authority prior to the Seattle Ministerial meeting is testimony to this void. Congressional leaders have often seemed more interested in forcing the opposition into a difficult vote and then playing the ''blame game'' for political gain than in cooperating with the Administration to pass meaningful trade legislation that will benefit agriculture.
    There is plenty of fault to go around. Breakdown of the Seattle talks and attempts to patronize varied non-trade related special interests has further contributed to concerns about whether agriculture's interests will be traded away for political expediency. And finally, reluctance of the administration to utilize the most hard-hitting retaliation strategies, including the so-called carousel approach, against the European Union in the beef and banana cases just compounds the concerns that U.S. negotiators are more concerned about political pressures than the interests of traditionally pro-trade injured parties.
    Agricultural producers are justifiably concerned about sending a team to the negotiating table that has a more consistent track record of in-fighting among Congressional and Administrative ranks than engaging the opposition for meaningful trade liberalization. Failure of the Seattle Round means that the U.S. must soon take the high road to expanded exports and free trade. We need a meaningful ''win'' on the trade front soon or the anti-trade activists will take us down the road to protectionism—if not isolationism—resulting in trade wars and a return to costly government supply management and price support farm programs.
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    NAFTA has frequently been criticized by some in the beef industry for contributing to lower U.S. cattle prices due to increased cattle imports from Canada and Mexico. The fact is that NAFTA eliminated tariffs (15–25 percent, depending on the product) on U.S. beef exports to Mexico. NAFTA was approved in December 1993. During 1994—the first year of NAFTA—exports of beef and variety meats to Mexico increased nearly 47 percent in tonnage and 71.5 percent in value.
    Beef exports declined during 1995 due to peso devaluation, but increased by more than 70 percent during 1996. Exports of U.S. beef and beef variety meat to Mexico during 1998 increased 28.3 percent in tonnage and nearly 31 percent in value compared to 1997. Beef exports to Mexico have continued to increase this year, and at the current pace, $500 million of U.S. beef and beef variety meats will be exported to Mexico during 1999.
    This growth in North American trade has not come without controversy, however. A dumping case was filed by the Mexican cattle industry against U.S. cattle and beef. U.S. beef exports are currently subjected to a schedule of preliminary dumping duties ranging from zero to 275 percent depending on the product category and the individual company. The final ruling on this case is expected March 2, 2000, and NCBA is optimistic that this case will ultimately result in a ruling of no injury. In the interim, the case has resulted in unnecessary expenditure of industry resources to maintain market access and trade distortions among exporting companies. In addition there has been an ongoing series of border inspection issues, and more recently, temporary de-listing of 17 U.S. meat and poultry processing plants. These issues have ultimately been resolved favorably for the U.S. industry, but they provide examples that anti-trade forces can point to when opposing additional trade agreements.
    Issues with our NAFTA trading partners have not been limited to the Southern border. A minority group of U.S. cattlemen filed antidumping and countervailing duty cases against cattle imports from Canada as well as an antidumping case against cattle from Mexico. These cases ultimately resulted in rulings of no injury, but in the interim resulted in strained relations within the U.S. beef industry and with our trading partners. Beef imports from Canada have continued to increase, although cattle imports declined during 1999. The Canadian government has made progress in opening the border to U.S. feeder cattle with implementation and continued improvement of the Northwest project. Relations between the U.S. and Canada are improving compared to the border blockades and protests of a couple of years ago.
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    FTAA: The United States is currently the least restricted and largest beef import market in the world purchasing 15 percent more beef than the second largest importer, Japan. The United States is also the second largest beef exporter. Beef markets in other developed countries remain virtually closed to U.S. beef (EU) or protected by relatively high tariffs (Japan and Korea). A strong, clear and irrevocable message must be sent by U.S. negotiators to Cairns Group and Mercosur beef exporting counties—major U.S. beef suppliers—that no increased access to the U.S. beef market will be forthcoming until meaningful access and tariff reduction is achieved in other major beef importing countries.
    NCBA has been reluctant to support expanded FTAA negotiations in light of the above political and industry climate. Our position to date has been that problems with NAFTA should be resolved and markets should be allowed to come into equilibrium before additional countries were added to the mix. If the decision is made to continue negotiations toward an FTAA issues critical to the U.S. beef industry must be addressed as follows:
    Use Sound Science and Protect U.S. Herd Health: Ensure that science remains the only basis for resolving sanitary and phytosanitary issues.
     The U.S. beef industry does not support opening the Sanitary/Phytosanitary (SPS) and Technical Barriers to Trade (TBT) Agreements for further negotiation.
     The U.S. beef industry supports the Precautionary Approach as embodied in the Rio Declaration.
     Food safety issues are fully covered by the Agreements on the Application of Sanitary and Phytosanitary Measures and as such the safety of agricultural products is covered within the existing rules of the SPS and TBT agreements.
    Two states in the southern region of Brazil, Rio Grande do Sul and Santa Catarina, are in the final stages of eradicating Foot and Mouth Disease. On this basis, Brazil has petitioned USDA for eligibility to ship fresh and frozen boneless beef to the U.S. from these regions. USDA has committed to conducting a comprehensive risk assessment before a proposed rule regarding the importation of fresh beef from Brazil is developed for publication. It is imperative that USDA continues to protect the health of the U.S. beef herd. USDA must assure that all conditions are met and that the necessary controls are in place so U.S. herd health is not put at risk. Indications are that this has not always been the case in other recently approved formerly FMD countries.
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    Fresh, chilled or frozen beef exported from Brazil Argentina and Uruguay to the United States must continue to be certified as meeting the following specifications:
     Has not been in contact with meat from a region with greater disease risk;
     Originates from premises where neither FMD nor rinderpest have been present during the life of any ruminants or swine slaughtered for export;
     Originates from premises on which ruminants or swine have not been vaccinated with modified or attenuated live viruses for FMD during the lifetime of any animals slaughtered for export;
     Must be from animals not vaccinated for other specific diseases;
     Must be from carcasses that have been allowed to mature at 40 to 50 degrees Farenheit for a minimum of 36 hours after slaughter and have dropped to at least a pH of 5.6 or below in the loin muscle at the end of maturation;
     Must be free of all bone, blood clots and lymphoid tissue.
    NCBA has become increasingly concerned that the expansion of trade with many countries is increasing the risk reintroduction into the United States of foreign animal diseases such as Foot and Mouth Disease (FMD). FMD is a deadly pathogen, not only of beef cattle but many other animals and wildlife. It spreads rapidly. A case of the disease in the United States would eliminate many U.S. export markets in the short term and cost livestock producers and the government literally billions of dollars to control and eradicate. Extreme care must be taken to prevent the introduction of FMD into the United States either from the importation of cattle, beef or beef products from countries that have the disease or who are in the process of eradicating it.
    Before any FTAA is approved, NCBA and the U.S. beef industry must be assured that APHIS will have in place and in use a set of measures to ensure that FMD will not be introduced into the United States. NCBA must be assured that APHIS has in place and is verifying utilization of efforts to prevent introduction—and that APHIS is not just reviewing paperwork. Last but not least, USDA must have in place a clearly documented emergency response plan in the event such an introduction should occur.
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    Tariff Reduction: Establish tariffs near single digit levels at the end of the next scheduled reduction and establish a target date for all tariffs to be set at zero.
     The agreement with China establishes an aggressive target for beef tariffs at 12 percent by 2004. If China can reduce tariffs to 12 percent so can the EU, Japan and Korea.
     The U.S. industry will accept tariff reduction equivalent to reductions in all other countries, including the other primary beef importing countries.
     Eliminate all in-quota beef tariffs.
     Brazil—current rate for beef: 13 percent
     Chile—current rate for beef: 11 percent
     Columbia—cattlemen in Columbia are supporting variable import duties for beef through the Andean Price Band system to restrict beef imports.
    Meaningful Minimum Access: Expand existing quotas and tariff rate quotas (TRQs).
     Any increases in U.S. beef TRQs for FTAA trading partners must be accompanied by equivalent U.S. minimum access in the EU quota for high quality beef.
    Export Subsidies: Eliminate all export subsidies.
     The U.S. beef industry supports a zero-for-zero proposal to eliminate export credit programs and export subsidies.
     Export market development programs (as funded with MAP and matching industry funds) are not to be considered as having a subsidy component.
     International food aid disciplines referred to in Article 10.4 of the Agreement on Agriculture shall be preserved.
     Argentina provides an export credit to beef and other products through a tax rebate scheme allowing exporters to receive a refund of between 2.5 and 8 percent of taxes paid depending on the product category.
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     Brazil offers tax and tariff incentives to promote exports through exemptions of withholding taxes and other tax exemptions.
    Production Subsidies: Eliminate domestic production-distorting subsidies.
     The U.S. beef industry supports comparable restrictions on U.S. agricultural subsidies.
     Argentina pays 25 percent of the interest rate charged for credit used for cattle production.
    Import Licensing Schemes: Eliminate restrictive import licensing schemes.
     Brazil imposes licensing and other bureaucratic requirements including import financing rules to importers that limit import volumes.
    Grading Requirements: Eliminate requirements in some countries that all beef sold through commercial channels carry a domestic grade.
     Chile requires that all beef sold through commercial channels carry a Chilean grade. Talks between USDA and Chile have failed to reach agreement that Chile will recognize USDA grades as equivalent to Chilean grades.
    The U.S. must hold its trading partners to commitments agreed to in previous trade agreements or risk losing public support for additional trade negotiation authority. NCBA appreciates the initiatives that have been undertaken to gain access to international markets and to resolve lingering issues that restrict the ability of the U.S. beef industry to offer its products to international consumers. We expect equal consideration to be given to industry concerns about an inequitable playing field and exposure of the U.S. herd to international health risks.
    The National Cattlemen's Beef Association is prepared to participate in the process of evaluating critical trade issues within the beef industry. NCBA looks forward to providing additional input as the U.S. addresses other trade issues, including PNTR for China and accession of China to the WTO, resolving a growing list of access issues with the European Union and approving legislation to provide continuing authority for negotiating additional trade agreements.     Thank you for the opportunity to present this information.
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    Dana Hauck, chairman
    NCBA International Markets Committee and Agricultural Trade Advisory Committee Member
Statement of Rural Coalition; Missouri Rural Crisis Center; Federation of Southern Cooperatives/Land Assistance Fund
    I, John Zippert, chairperson of the Rural Coalition and am the program director the Federation of Southern Cooperatives/Land Assistance Fund, present this statement on behalf of the partners in the Campaign for Food n Justice. Our partners include the Rural Coalition/Coalicin Rural, an alliance of nearly 90 community based organizational members representing people of color and other low income farmers, farm workers and their rural communities; the Missouri Rural Crisis Center representing 5,500 farm families from throughout the state of Missouri; and the Federation of Southern Cooperative/Land Assistance Fund, which has for more than 30 years represented over 25,000 African American farmers and their communities organized into dozens of cooperatives and credit unions.
    The organizations I represent have long worked for justice and equity for all of our members, including those in Mexico. We do not oppose trade, but we believe that any trade agreement should ensure mutual benefit to and protect the rights of all citizens, especially poor people, in all participating nations.
    Consideration of any trade agreement, including the emerging proposal on the Free Trade Area of the Americas (FTAA), must be open to Congressional debate in order to ensure democratic participation by all parties who will be affected. The Trade Promotion Authority, or Fast Track Authority, sought by the President merits strong opposition. Without full Congressional consideration of trade pacts, participation by concerned American citizens in a democratic process is not possible.
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    II. Analysis. The expansion of NAFTA would only proliferate the multitude of problems that already have been experienced by the citizens of NAFTA member nations. Far from creating prosperity in rural communities, NAFTA has accelerated the loss of small and family farms in all three participating nations.
    Impact of NAFTA in the US and Mexico. The evidence indicates that NAFTA is costing jobs, hurting the environment and lowering the standard of living for the people of North America. While NAFTA has been very good for the bottom lines of large transnational corporations, it has been a disaster for working people in the United States, Canada and Mexico.
    The impact of NAFTA on the United States since the agreement was put into place in 1994 is that: The overall agricultural trade surplus has declined from $22.5 billion per year to $12 billion in 2000, a 47 percent decrease.
    Corn exports have decreased 11 percent, and corn prices have decreased 20 percent.
    Wheat exports have decreased 8 percent, and wheat prices have decreased 28 percent.
    Cotton exports have decreased 28 percent, and cotton prices have decreased 38 percent.
    Soybean exports have increased 16 percent, but the price has fallen by 15 percent creating a net loss of 2 percent in the value of our soybean export market.
    The $416 million dairy deficit has climbed to $796 million.
A $21 million beef surplus has declined to a $152 million beef deficit.
    U.S. workers lost 766,000 manufacturing jobs. Typically workers who lose these jobs find new work that pays only 70 percent of their former salary.
    Far from being an engine for economic growth, treaties like NAFTA and the proposed FTAA work to hold down wages for farmers and working people. In the United States, even in the midst of an ''economic boom,'' the standard of living of the poorest half of the population declined. The FTAA, like NAFTA, will be a detriment to family farmers, rural communities, and working people throughout the United States.
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    In the case of Mexico, NAFTA has resulted in a net loss of jobs, as farmers and small businesses can't compete with transnational corporations. Since 1994,
    the purchasing power of the poorest two-thirds of the Mexican population has decreased by an astounding 30 percent,
more than half of the population is unemployed, employed part time or working in the ''informal sector'' (i.e., selling gum on street corners).
    Even the workers that have obtained jobs due to NAFTA are worse off than before the trade agreement. Corporations often find it ''cost-effective'' to move their operations to Mexico, where more the 2,700 maquiladores (assembly sweatshops producing for export) have been established since 1994, with the following results:
    Over 1.3 million Mexican workers, mostly young women, toil in these maquiladores for wages that average 50 cents an hour. Without representation by democratic unions, these workers have no job security or benefits, and are often subject to sexual harassment and unsafe working conditions.
    In addition, a vast majority of the migrant and temporary work force in the United States in agriculture and domestic work comes from Mexico. Before NAFTA, workers from Mexico came to the United States for temporary work in order to support their families and farms in Mexico. Due to NAFTA related changes in land tenure, these families are now being displaced from their land and their homes in Mexico and are being forced for their economic survival to depend entirely on the temporary work they can find in the United States.
    NAFTA has resulted in a race to the bottom, where workers in both countries are suffering from depressed wages, worsening conditions and lack of job security. This is the real meaning of corporate-centered globalization.
    Alternate and Mutually Beneficial People-to-People Trade
    Our small farm and farm worker members on both sides of the border have realized that trade among communities could be mutually beneficial. The seasonal availability of farm products across geographic zones establishes conditions that may be more conducive to cooperation than competition.
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    For example, our African American farmer members in Mississippi produce chili peppers, as do our Mexican farm members in the state of Chihuahua. Both could obtain more lucrative and stable sales contracts if they worked together. Cooperation among the groups would extend the volume of product and lengthen the season of availability by nine weeks. Better and more stable contracts would mutually benefit both communities. In addition, if a year-round supply of peppers could be found, the community in Mississippi has expressed interest in opening a processing facility for hot sauce.
    For the very small and poor rural communities who have largely been bypassed by farm and rural programs for the past decade, cooperation may be mutually beneficial. For example, with a grant from the Department of Commerce Technology Opportunities Program we have helped groups of small farmers in 15 community-based organizations to strengthen their cooperatives and establish a retail website. The groups have learned computer, internet and marketing skills that will benefit their communities for years to come. In addition, they have together been able to offer an array of products that none of them alone could sell. This collaborative marketing approach helps small communities establish the volume and array of products vital to success in the market place.
    During the past decade, we have worked with our members on both sides of the border to establish mutually beneficial economic relationships. We believe the website we have developed is ready for translation and use in Mexico to reach a growing middle class of consumers there.
    As small rural cooperatives, our members are not ready to extend the resources to develop their own distribution network in Mexico. However, with our counterparts in Mexico handling distribution there, our members in the United States would be able to reach and develop a market relationship with consumers in Mexico.
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    While Congress has poured huge resources into export subsidies for emerging markets, existing programs seem to overlook two important new prospects: the growing middle class market in Mexico, and the internet.
    The experience of the Rural Coalition with the Foreign Agriculture Service is a case in point. While FAS has made some priority of reaching small farmers and assuring their services are benefiting that sector, we have thus far been unsuccessful in accessing funded FAS programs. A part of the reason for this lack of funding is our desire to implement projects that are mutually beneficial to our members on both sides of the border. Although the argument in support of these trade agreements is made under the auspice of mutual benefit to all participating countries, our experience demonstrates that US programs support a model of competition more than mutually beneficial collaboration.
    Last year, the Rural Coalition applied to the Farm and Foreign Agriculture Service to support our program of ''Export Readiness Training for Small Farmers.'' We sought to translate our website and begin marketing US products in Mexico, using our members there to handle distribution. Our application was rejected, based both on the assessment that our skills were inadequate for the program, but also that our members in Mexico would benefit from the program. The rejection letter stated that the participation of our members in Mexico ''may provide advantages to Mexican producers by funding the feasibility study needed to establish a fresh cut vegetable processing facility in Mexico which could increase Mexican competition with the United States.''
    The letter failed to note that the collaboration with our members in Mexico would open up new opportunities for the wide and diverse network of cooperatives in poor communities in the United States while at the same time providing them with a gradual and relatively low risk experience in accessing foreign markets.
    Why should we expect any nation to sign a trade agreement that does not supply mutual benefit? While large corporations who have the resources to establish their own entities in other nations have been able to take advantage of trade agreements in order to achieve these types of international connections, small farmers have been denied the same benefits. We cannot see the reason to deny applications that may supply mutual benefit to producers on both sides of the border. Such cooperation may make foreign trade more feasible and make the programs of FAS more beneficial and accessible to low income and minority producers in this country who often have the cultural and language skills that would favor their success in global market place.
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    President Bush's request to Congress to grant him ''fast track'' authority in order to negotiate and sign the FTAA will allow him to rapidly expand NAFTA without the input and influence from Congress and the American people. The FTAA would be much more than just a free trade agreement.
    Like NAFTA, the FTAA will likely give multinational corporations new legal rights which will restrict the ability of governments to regulate in the public interest, establish new rules for investment, trade in services, and public procurement. In short, it will include all of the interest of big business while the interests of working people, environmentalists, women, small business owners—the rest of us—will likely not be addressed in any significant way.
    An agriculture policy which drives down prices and puts farmers in the US and Mexico out of business is shortsighted. We were distressed to learn that shortly after Mexican President Vicente Fox met with President George Bush, he returned to Mexico to veto the Rural Development Law- Mexico's equivalent of a farm bill.
    More stable and just prices for commodities would benefit not only farmers and rural communities on both sides of the border. It would also favor balanced rural development in communities in both nations and would serve in the long term to foster, not damage, trade. Balanced development in Mexico that would allow more families to secure basic sustenance and enter the middle class would be beneficial for the US as well. Mexico is the closest of all possible emerging markets, and is one that deserves nurturing and attention.
    We support all efforts that serve to stabilize the rural economy in Mexico and allow our counterparts to earn a living from the land. We look forward to developing people-to-people trade relationships that benefit small farmers on both sides of the border. We seek justice in immigration policy and dignity and fairness for all workers in agriculture. Trade agreements should uphold and make these goals more, not less possible.
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    Given the broad range of domestic issues like food safety that now are affected through ''trade'' talks, Congress and the public must be involved in shaping trade policy to ensure that future trade agreements contain terms beneficial to most Americans. Our experience with NAFTA should serve as an example for why we should not take a ''fast track'' into future trade agreements.
    We recommend the following to Congress:
    The internet is also an emerging market, and deserves to be recognized as such. Programs such as the Department of Commerce's Technology Opportunities Program deserve full and continued support and funding to help assure that poor communities and people in the U.S. cross the digital divide and have access to this and other opportunities.
    Foreign Agriculture [sic] Service Programs should be constructed to allow and encourage mutually beneficial trade and the participation of minority and other low-income producers and communities in this trade.
    The restoration of non-recourse loans and price supports that provide farmers a just price in the market place is essential to balanced rural development across the North American continent, and to keeping rural people on the land.
    Just wages and working conditions for farm workers must be secured, and additional unjust agriculture guestworker proposals opposed.
    While Congress has established grant programs to foster foreign trade participation by US companies, it has done little to invest in market participation and access to the domestic US market, which remains for small farmers the most viable in the world. We commend to Congress the following proposal for small Farms of the New Millennium to assist lower income farmers to improve market access, income, and improved economic development in their own communities.
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    Small Farms of the New Millennium
    In an era when so much attention is provided to the lure of export markets which have often failed to deliver real benefits to US producers, we believe this program could help small farmers focus more attention on developing the potential of the US domestic market. Our recent research and experience suggests that the U.S. market remains the best in the world and is under-utilized for the type of high quality, value added products we hope to help our small farm members produce and supply to U.S. consumers.
    GOAL: Establish a new 'small Farms of the New Millennium Program which provides direct payments to small farmers to diversify and upgrade their operation, utilize new technological tools such as the internet, operate efficiently, sustainably, and flexibly, and develop new access to markets, thereby allowing them to contribute to the food security and economic base of their communities and the overall society.
    Market Access and Food Security Purposes: Recent USDA reports on Civil Rights and Small Farms have documented that minority and other small farmers, particularly those who produce non-program crops, lack real access to USDA programs and services. Recent Farm bills have redirected resources to larger farmers.
    However, the Small and Minority Farm Sector has held on through many adversities and appears to be resilient and with appropriate investment, ripe for expansion. Development of a special program for small farmers would help correct deficiencies in current programs, while at the same time providing a new source of investment, economic development and food and resource security in many poor rural communities around the nation. The 'small Farms of the New Millennium program would offer these producers support and some of the flexibility sought in 1996.
    Participation: Minority and other small farmers have voiced their unqualified support for a program to directly supply assistance to the Small Farm Sector.
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    The program would direct resources and technical assistance to help address critical issues such as financial and risk management, marketing, and diversification which are essential elements of successful and viable small farm enterprises in all regions of the nation. It would allow farmers to improve biodiversity and care for their land and resource base. It would provide the resources necessary to assist small farmers to build skills and results in management, production, conservation, and marketing, including cooperative development.
    Small Farmers would receive a subsidy ranging between $5000 and $10,000 per year through one of the USDA farm, conservation or rural business program agencies.
    Small farmer means any farmer who has gross sales of not more than $100,000; and whose family income from all sources which does not exceed $35,000 for maximum payment or $55,000 for minimum payment; and meets the following additional requirements: 1) the family manages the day to day operation of the farm, 2) the family supplies the majority of labor for the farm, and 3) the family owns or as a beginning farmer, seeks to own some of the productive assets of the farm.
    Payments cannot be used to repay debts to the government. All offsets would be waived.
    Farmers would develop a plan to increase the viability and sustainability of their farm, including modernizing management, diversification, conservation and resource protection and marketing. Payments could be used for production, improvements in conservation, marketing or financial management, computer acquisition and training, facilities and irrigation construction, family needs such as health insurance, or other expenditures to help support the family and the farm operation.
    The program is primarily designed for farmers who produce non-program crops or who wish to diversify their operation from program crops.
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    Farmers would be eligible for and encouraged to receive outreach and technical assistance from qualified community based groups and others who are experienced in serving small and minority farmers.
    Emphasis would also be placed on developing a farm plan and identifying the full range of programs for which the producer could become eligible.
    The Department should share success stories and strategies through its Small Farms Programs.
    Eligibility ends as producer improves income enough in the marketplace to achieve viability without the support.
    Such a payment will help small farmers manage resources and risk and gain some income stability and security. It would also serve to provide an incentive for small farmers who have not participated in agriculture programs to reengage in programs to enhance the viability of their farm operations, and contribute to the food and resource security of their community.
    Funding: We urge Congress to support this program as part of a comprehensive farm and food policy which includes non-recourse loans and supply management in commodity programs. Price support levels should be adequate to allow program crop farmers to earn their income from the market place, without deficiency payments from the government.
    The funding saved would be redirected to the Small Farms of the New Millennium Program as a long-overdue investment in the sector of small farmers who have largely not been served by farm programs.
    As farmers become more successful in managing their operations and in cooperative and other marketing strategies, they will earn they way out of the program.
    Need for the Program: The current structure of agriculture programs strongly favors large producers over small. Recent increases in the payment limitation and return to annual and untargeted disaster relief subsidies, while politically feasibly as emergency response, have enlarged and redirected farm support payments to ever-larger farmers.
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    These policy changes have resulted in a continually declining proportion of agriculture spending supporting the small farm sector. In addition, many minority and other small producers who do not produce program crops have not participated in agriculture programs at all.
    These farmers are dependent upon declining sources and access to Federal credit programs, leaving their families in a continuing cycle of debt without any real access to markets. Farms are managed for survival rather than sustainability or viability, and for many of these producers, crop insurance is unaffordable, inaccessible and does not serve the needs of farmers in non-program or diversified operations.
    At the same time, minority and other small farmers remain also on the wrong side of the digital divide, lacking access to computers and training to keep records and manage finances and gain access to information and e commerce opportunities. In addition, Federal programs provide few resources to assist farmers who seek to improve their marketing methods.
    We believe this program would help reverse inequities that now exist. We urge Congress to consider it and our other recommendations.
    We thank you for your consideration of our input.Appendix A
    Rural Coalition/Coalicin Rural
    The Rural Coalition is an alliance of regionally and culturally diverse organizations working to build a more just and sustainable food system. We join together to work for a system that brings fair returns to minority farmers, small farmers and rural communities, provides just and fair working conditions for farmworkers, protects the environment, and offers safe and healthy food to consumers. The Rural Coalition's advocates for national policies that support these goals and initiate economic development efforts to bridge the digital divide and help our diverse members market the products of their small farms.
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    Federation of Southern Cooperatives/Land Assistance Fund
    The Federation of Southern Cooperatives/Land Assistance Fund is a resource and advocacy association involving 25,000 low-income rural families, organized into over 100 cooperatives, credit unions and community-based economic development groups across the South. Organized in 1967, the Federation has a quarter century of direct, cutting edge experience providing outreach and technical assistance to under-served farmers throughout the southeast. Since the mid–1980's, the Federation has worked in coalition with other progressive farm groups for better prices, more accessible credit and special rights for farmers of color to compensate for decades of discrimination and neglect by USDA and other government agencies.
    Missouri Rural Crisis Center
    The Missouri Rural Crisis Center is a progressive, nonprofit organization with more than 5,500 member families from all over Missouri. The Center works to preserve family farms, promote stewardship of the land and environmental integrity, and strive for economic and social justice by building unity and mutual understanding among diverse groups, both rural and urban. Missouri Rural Crisis Center members work toward equitable farm and food policies that pay farmers a fair price for their livestock and crops while providing high-quality food at affordable prices to consumers.
     1. The Agriculture Committee wrote the last farm bill with great promises to our farmers about the golden age of agriculture that would be ushered in with the advent of open borders and markets. I don't need to tell you that, given the current state of the farm economy, many farm groups have a much deeper skepticism than ever before. In fact, many do not list the FTAA talks as a trade priority for the Administration to pursue. Given the current status of the US agricultural sector and the inability of the United States to truly open up foreign markets to ag trade, why would we have confidence that the upcoming 5 years will be any different than the previous? Do you anticipate continued depressed commodity prices until we are able to participate more equally in foreign markets that are currently heavily subsidized?
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     2. Your testimony states that ''Trade agreements help create fairer rules and provide mechanisms to enforce those rules.'' However, your testimony does not go into great depth on the issue of labor and environmental standards. What reassurances can you give the Agriculture Committee that labor and environmental standards will be an integral part of trade negotiations. Additionally, if we grant the President fast-track authority, what reassurances can you give to Congress that he will actively move forward with labor and environmental standards within the statute of future trade negotiations?
     3. At what point in time do you expect negotiators to settle once and for all FTAA provisions on agricultural export subsidies and other trade-distorting mechanisms? Have trade ministers set a target date for concluding this part of the FTAA Agriculture Agreement comparable to what has been set for initiating detailed Market Access bargaining?
     4. You mention the need to ensure that Sanitary/Phytosanitary standards be based upon scientific evidence. I am concerned that because the United States already has fairly strict environmental standards, that Codex rulings and standards may actually come in below the public health standard that we in the United States have accepted as a bare minimum. As you well know, in such instances the US can actually be taken to court for punitive damages for this on the grounds that our safety standards are trade distorting. I am concerned that the US will have to unfairly pay damages simply on the ground that we have instituted health and safety standards that reflect a deep commitment to the American populace. What steps will you take to ensure that the final FTAA agreement does not threaten domestic health and safety standards and regulatory frameworks?
     5. You point out that the amount of goods and trade to Mexico and Canada have increased a great deal since the implementation of NAFTA. However, your statement also notes that, amidst the celebration over the successes of NAFTA, the rather startling fact remains that from 1996 to today our agricultural trade surplus has been reduced from $27.4 billion to $13 billion. What are the reasons behind this rapid decrease in the trade surplus and, given that the surplus has gone down so quickly, why should we further be negotiating trade agreements?
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     6. You note that progress has been made in launching a new WTO round. Some would argue that little progress has been made at all, one of the reasons being the recalcitrance of many developing countries to accept an additional round because they believe that they haven't felt any benefits from the previous round. Clearly many developing countries do not feel that they are benefitting under current circumstances? What can we do to ensure that developing countries see real benefits from another round of WTO talks and increased foreign trade more generally?
     7. Many claim that it is absolutely critical for Congress to grant the President fast-track authority if we are to move forward with trade agreements. However, if I understand correctly, the President did have fast-track negotiating authority for most of the GATT round yet almost every agricultural group with whom I speak points to the failure of the GATT round on agricultural matters. What gives you confidence that fast-track will enable our current President to be any more successful in a new round than we were in the previous round?
     8. What are your thoughts on what should be included in the Administration's Trade Promotion Authority legislation so that Congress can garner a large amount of support from the agriculture community? Do you have any suggestions as to how the administration and Congress might work together to craft a Congressional consultative process that allows the President sufficient authority while providing members of Congress reassurance that they will be consulted for input? What is your position on the inclusion of Congressional ''checkpoints'' in fast-track authority and how do you suggest that such checkpoints might be structured?
     9. In an era of open markets, the risk of infectious diseases that threaten agriculture increased greatly. Recent and ongoing concerns about Foot and Mouth Disease and BSE illustrate this clearly. As you are well aware, livestock is a very important industry to my home state of North Carolina and the presence of diseases such as Foot and Mouth pose a grave risk not only to our livestock industry, but to the entire state economy. Do you have any suggestions as to how countries might work together to initiate multi-lateral food safety and inspection agencies? It seems to me that in an era of multilateral trade agreements, the approach of simply guarding ones border is shortsighted. How might countries coordinate to eliminate the spread of diseases such as FMD rather than just locking the door and closing the shutters?
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