SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOCFAST TRACK TRADE NEGOTIATING AUTHORITY
TUESDAY, SEPTEMBER 23, 1997
House of Representatives,
Subcommittee on General Farm Commodities,
Committee on Agriculture,
The committee met, pursuant to notice, at 9:35 a.m., in room 1300, Longworth House Office Building, Hon. Bill Barrett (chairman of the subcommittee) presiding.
Present: Representatives Combest, Boehner, Chambliss, Emerson, Moran, Thune, Barrett, Smith of Oregon [ex officio], Minge, John, Johnson, and Stenholm [ex officio].
Also present: Representatives Smith of Michigan, Dooley, Pomeroy, and Bishop.
Staff present: Lynn Gallagher, Mike Neruda, Stacy Carey, Brian Hard, Ryan Weston, Callista Bisek, Wanda Worsham, clerk; Andy Baker, and Chip Conley.
STATEMENT OF HON. BILL BARRETT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEBRASKA
Mr. BARRETT. The hearing of the Subcommittee on General Farm Commodities to review fast track authority will now come to order.
Today, members of the subcommittee and other Agriculture Committee members will receive some much anticipated testimony regarding the President's proposed fast track trade negotiating authority and its impact on the agricultural sector. While many aspects of our economy will be affected by fast track authority, I ask that we focus attention today on those issues over which the Agriculture Committee has jurisdiction.
Page 2 PREV PAGE TOP OF DOC I'd like to thank Chairman Smith and other members of the House Agriculture Committee for making trade a key issue for this committee to consider for the 105th Congress. I'm pleased to see that we're taking a close look at those issues that greatly affect how those in agriculture compete in the global market, and I look forward to the additional gains that could be made through fast track authority.
I'd also like to thank Mr. Pombo, the chairman of the Livestock, Dairy, and Poultry Subcommittee for agreeing to expand this hearing to include livestock and dairy interests. I know that the National Pork Producers and the National Milk Producers will provide some valuable testimony today.
I commend the administration for including a clear commitment to work towards freer agricultural trade. It's been my concern that the administration's fast track proposal would not have specific language in the bill on agricultural trade. A number of producers that I've talked to in the past couple of days in my district are very hopeful that the proposals agricultural language will be more than a facade by the administration to get support of the agricultural community. Serious attention to this language will go a long way to reassure our farmers that this administration means business when it comes to dispute resolution, state trading enterprises, restrictions affecting biotechnological, and phytosanitary restrictions.
Because U.S. agricultural production is increasing more rapidly than domestic consumption, export markets are critical to the prosperity of our farmers. U.S. efforts to open international trade markets must continue in order to sustain export growth, including the negotiation of new or enhanced trade agreements. U.S. agricultural exports increased to $60 billion in 1996, the highest number ever. Bringing this number in today's debate, for example, shows that the total agricultural trade between the United States and its NAFTA partners increased from $17.5 billion in 1993, the year prior to NAFTA, to $22.6 billion in 1996.
Fast track trade negotiating authority is very important, because it builds credibility so that transparent trade negotiations can occur, and when an agreement is made using fast track, those negotiating know that it will either be approved or disapproved but not be amended. This allows the deliberators to lay their cards on the table and work out the details.
Page 3 PREV PAGE TOP OF DOC I support in concept the renewal of fast track authority, however, like many members, I do have concerns. First, there are concerns about current trade agreements such as NAFTA negotiated under prior fast track authority. This subcommittee recently held a briefing on the issue of Canadian barley and wheat imports into the United States, especially durum wheat, and the impact on our producers along the United States-Canadian border. The U.S. trade representative, the U.S. Department of Agriculture, and congressional negotiators through diplomatic channels have so far failed to come to a mutually satisfactory resolution on the volume of Canadian grain exports to the United States acceptable to both sides.
This subcommittee also has concerns with Mexico regarding high fructose corn syrup exports to our NAFTA partners. Mexican Government sanctioned limits would promote protectionism that NAFTA sought to eliminate. I commend Trade Representative Barshefsky for announcing that the United States has requested WTO dispute resolution settlement regarding actions by Mexico on high fructose corn syrup. In addition, this subcommittee has alerted Mexican officials to our displeasure on high fructose corn syrup. I am currently in consultation with Mexican officials regarding this important issue. These two issues, among many, need to be aggressively addressed, and it's my hope that the administration continues to keep pressure on our NAFTA partners regarding both of these concerns.
However, concerns about agreements negotiated under past fast track authority should not preclude us from the big picture. Chile has figured prominently in discussions on renewing fast track authority, but we are not looking at fast track just for Chile but for expansion of free trade worldwide. In 1999, the General Agreement on Tariffs and Trade will be re-negotiated. We need fast track so that these negotiations can be conducted.
I look forward to our discussion and encourage everyone to take this opportunity to productively discuss how fast track trade negotiating authority can affect agriculture.
Page 4 PREV PAGE TOP OF DOC I'm pleased at this time to yield to the ranking member, Mr. Minge, for an opening statement.
STATEMENT OF HON. DAVID MINGE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MINNESOTA
Mr. MINGE. Thank you, Mr. Chairman. I appreciate this hearing's taking place. I look forward to the testimony. I know that last week President Clinton sent to Congress a request for authority to negotiate a multilateral and bilateral trade agreement arrangement with countries on a fast track basis, and that, of course, is not only the subject of the hearing today, but it's also the subject of a great deal of discussion in this city and around the country.
I certainly agree with you, Mr. Chairman, that opening American markets and opening markets to American industry and agriculture is increasingly important. The farmers and the ranchers of this country are becoming increasingly dependent upon foreign buyers to make up for the absence of a safety net here at home. In order to make sure that the opening of these markets does not subject agriculture to unfair competition from abroad, we must ensure that our trading partners share our commitment to environmental and conservation standards, workplace and employee protections, and consumer health and safety protection. In short, we need a commitment to a level playing field whenever we attempt to negotiate what we expect to be a free trade zone. Without such commitments, farmers in other countries will grow crops with the benefit of chemicals that are not available to our farmers. Those chemicals can be applied by workers who are not required to wear safety equipment that's standard on American farms, and they will be paid less to get their crops to market, because their trucks are not required to meet our safety standards.
The air quality standards recently promulgated by the Environmental Protection Agency are a good example of one of the extra costs placed on American farmers. Under the proposed rules, certain tillage practice available to farmers in other countries may not be available to farmers in parts of this country.
Page 5 PREV PAGE TOP OF DOC Another important cost disadvantage for American farmers is the workplace health and safety standards in food processing facilities abroad. These employee protections in our country as compared to the lack of such protection elsewhere can translate into a differential and lower cost for both bulk and high value agricultural products.
While some of these extra costs to American agriculture may be overcome by new technology and better infrastructure, our competitors are moving quickly to improve their infrastructure and their access to technology. It's these issues that concern a level playing field that I believe are of greatest to agriculture. In addition, we have a number of cats and dogs, so to speak, that are leftover from previous trade negotiations, and I believe that you've already referenced the principal ones. I know that in the northern States dairy and egg producers are concerned about access to the Canadian market. Where do we stand on that? Can we move ahead with new fast track authority if the previous authority did not resolve those issues as promised.
I look forward to the testimony today. I certainly look forward to the questions and the opportunity that we have to discuss this vital issue with not only representatives from the administration but from various sectors of the agricultural community. Thank you.
Mr. BARRETT. Thank you, Mr. Minge.
I advise the members of the committee that opening statements may be submitted for the record at your convenience.
[The prepared statement of Chairman Smith follows:]
STATEMENT OF HON. ROBERT F. (BOB) SMITH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON
Thank you Mr. Chairman for holding this hearing on subject that is very important for the future of United States agriculture. Our farmers and ranchers can prosper only where there is free and fair trade. Last year, U.S. agriculture exports totaled $60 billion and the agriculture trade surplus exceeded $26 billion. There is, nevertheless ample opportunity for expansion of agriculture trade. One of the means by which such opportunities can be secured is through trade agreements.
Page 6 PREV PAGE TOP OF DOC Last week the administration submitted its proposal to renew fast track procedures for trade agreements. The President, under that bill, is provided such negotiating authority until October 1, 2001, with the ability to extend that authority through September 30, 2005, subject to disapproval by either the House or the Senate.
While I am generally pleased with the administration's proposal, I do have reservations about the implications of the sections related to labor, the environment, and ''sustainable development'' and the effects on agriculture trade. One of the purposes of trade agreements is to eliminate barriers to trade. I am concerned that through the inclusion of extraneous measures, unrelated to trade, barriers will rise.
The overall trade objectives cited by the Administration call for a reduction in trade barriers that limit market opportunities, including those aspects of foreign government policies directly related to trade.
The proposal does incorporate references to agriculture in its principal trade negotiating objectives. It cites the following agriculture objectives:
reducing or eliminating tariffs;
reducing or eliminating subsidies that decrease market opportunities or distort markets;
addressing rules that unfairly decrease market access or distort agriculture markets thorough:
state trading enterprises
actions affecting new technology, including biotechnology
sanitary and phytosanitary restrictions
technical barriers to trade
the administration of tariff rate quotas
I believe the administration's proposal contains a comprehensive listing of the agriculture issues related to trade and should go a long way in beginning to address the issues raised by United States farmers and ranchers.
Page 7 PREV PAGE TOP OF DOC The President's proposal covers trade agreements to reduce tariff and non-tariff trade barriers and for regional or bilateral trade agreements. It also incorporates provisions to ensure consultation and oversight from Congress during negotiations and discussions of implementing legislation.
I am pleased that agriculture is so prominent in the administration's fast track proposal. I am concerned about the references to labor and the environment and the possible effects on agriculture and will seek clarification on this and other issues from the administration during the fast track process.
Again, thank you Mr. Chairman for this timely hearing. I am looking forward to hearing the views of the witnesses that are scheduled to testify before the subcommittee.
Mr. BARRETT. I'd like to recognize the first panel this morning. Our first witness is Ambassador Jeffrey Lang, Deputy U.S. Trade Representative, and we're also pleased to have with us again, Mr. Gus Schumacher, Under Secretary for Farm and Foreign Agricultural Services.
We invite you to the table. Your testimony will also become a part of the record as you both know. Ambassador Lang, you may begin when you're ready.
STATEMENT OF JEFFREY LANG, DEPUTY U.S. TRADE REPRESENTATIVE
Mr. LANG. Thank you, Mr. Chairman. It's good to be here. I know you've got a very busy schedule today. I'm going to try and briefly summarize the statement we've submitted.
I appreciate the opportunity to discuss the administration's proposal to renew the President's negotiating mandate in trade, called the Export Expansion and Reciprocal Trade Agreements Act of 1997. This bill is vital to the future of American farmers, but it's also vital to our position as a leader of the global economy. If we lead in trade negotiations, then our issues have to be taken seriously; our negotiators have a fighting chance to get our standards accepted, and our President has the clout he needs to insist on open markets abroad.
Page 8 PREV PAGE TOP OF DOC I don't need to tell you how much American agriculture depends on trade. It's 30 percent of gross cash receipts. That's nearly as much as big multinational corporations make on international trade. Each year, the combination of hard work, risk taking, and technological innovation make the American farm more productive, but the problem is this: the population of this country is almost stable in terms of growth. Ninety-six percent of the world's population lives outside the United States, and that population growth is not stable; it's growing. Those are the markets of the future, but most of them are much more highly protected than this market is. As a result, we have fought over the last several years to put agriculture on the global trade agendas and keep it there. Progress was made, as you mentioned, Mr. Chairman, in the Uruguay Round, and that has delivered some real market access for American producers as have other agreements, but much more is needed in this area.
Last December, at the meeting of the head trade negotiators from all the WTO countries, Ambassador Barshefsky fought to assure that agriculture would be on the WTO agenda this year and next in the form of the exchange of data and analysis. That's the critical first step to assuring that the WTO can take up global agricultural market access negotiations on time in 1999. To carry through on that effort, we need a trade negotiating bill enacted now, because without it, we will gradually but steadily and noticeably lose influence over the agenda, the timing, and the substance.
In this and other negotiations, we have a long list of agricultural objectives, and they are all in the President's bill. We would be instructed to attack tariff barriers, foreign subsidies, unfair activities of state trading enterprises, barriers to new technology including but not limited to biotechnological products, and restrictive administration of tariff rate quotas.
As my written testimony points out, Mr. Chairman, there are also downsides to our not achieving enactment of this legislation. Our trading partners to the south, for example, are developing an increasingly complex web of trade agreements to which we are not a party. Details and timing matter in such affairs. If these countries adjust their markets to allow increasingly open trade in the products they produce for each other without calculating our concerns in the bargain, then taking our concerns to them three years now instead of next year could harm our producers interests.
Page 9 PREV PAGE TOP OF DOC Now, obviously the President's bill is intended to give us the necessary mandate to proceed in these negotiations and in preparations for negotiations, however, the President's proposal is fully conscious of the role of Congress in such matters. Aside from the overall negotiating objectives set out in the bill, a number of subjects such as transparency, investment, and services are the subject of so-called principal negotiating objectives. As my testimony points out, agriculture is the subject of such a principal negotiating objective; the only sector that is.
We've also tried to assure full consultation with Congress from the take-off to the landing. In each negotiation we propose in the future we're prepared to and encourage stringent notification and consultation with the Congress and with the private sector. I worked on the staff of a congressional committee for a number of years in connection with trade acts including the Trade Act of 1998, and I would say the greatest difference between the President's proposal, today, and existing law, is that the President's proposal significantly enhances the consultation requirements of existing law including, even, an expedited procedure for withdrawing fast track for failure to consult with Congress.
So, in conclusion, Mr. Chairman, we need to open markets, and it will hurt us not to be in negotiations to that end. Under the President's proposal, this administration and any future administration will have to give high priority to delivering fair market access in trade negotiations in agriculture. The administration has no objection to, and, indeed, supports full private sector and congressional participation in the process of negotiating such agreements. I hope you will all be able to support the bill. Thank you, Mr. Chairman.
[The prepared statement of Mr. Lang appears at the conclusion of this hearing.]
Mr. BARRETT. Thank you, Mr. Lang. Mr. Schumacher.
STATEMENT OF AUGUST SCHUMACHER, JR., UNDER SECRETARY, FARM AND FOREIGN AGRICULTURAL SERVICES, U.S. DEPARTMENT OF AGRICULTURE
Page 10 PREV PAGE TOP OF DOC Mr. SCHUMACHER. Thank you, Mr. Chairman and Congressmen, for having Ambassador Lang and me before you this morning on this vitally important subject. Of course, with your permission, I have a statement which I'd like to submit for the record.
Ambassador Lang has articulated the principal issues in the President's submission of the fast track legislation submitted. I'd like to supplement that briefly, and very briefly, with some thoughts and brief remarks on the importance, in detail, for agriculture.
I have with me Acting Administrator Tim Galvin, who's doing a wonderful job at FAS, and with your permission, he may join me from time to time in some of the questions. But I think thisas Ambassador Lang pointed outthis proposal and this bill is a great deal more than the authority to negotiate trade agreements for America's family farmers. This is about agriculture's future.
Last week, Mr. Chairman, I was in Des Moines and visiting that wonderful State, and I met four graduate students from Iowa State; young people who are looking toward a future in agriculture. As you may be aware, enrollment in our land grant system is beginning to trend upward, all right across the country. These students and I discussed their future in agriculture for some time, and they pressed me very, very hard on trade, because they saw, as sophomores and juniors at Iowa State, that trade was going to be their future as they started families and entered agriculture both on the farm and in the expanding value-added food system. It was quite a lively discussion; a number of reporters were there as well. But I was very pleased to see the young men and women so knowledgeable about what is before us today.
As you're aware, the agriculture sector, broadly, is doingexcept for dairyis doing reasonably well. Farm income is up; exports are strong. But if we look a little bit at our exports back in the late eighties, early nineties, we were running about $40 billion in exports. This was a respectable average we were bumping along at that level, but more recently, the exports as Ambassador Lang and yourself, Mr. Chairman, have pointed out, have moved up about 50 percent to a new plateau, to the $56 billion to $60 billion range, and that looks to bewe are keeping our fingers crossedbeing sustained. The Economic Research Service has indicated that U.S. exports could go up to $80 billion by the year 2005 if we stay the course.
Page 11 PREV PAGE TOP OF DOC More importantly, is our agricultural trade surplus, according to the ERS, would widen in the next 7 or 8 years from the already strong $22 billion to $27 billion that we've been showing in recent years; a very important contribution to our trade surplus.
But, as I mentioned, nothing can be taken for granted. As Government direct support is being reduced, trade and risk management are the only real safety nets for the American family farmer and for those young people I talked to in Des Moines. We export, now, about $1 billion a week of food and fiber overseas. As Mr. Lang has pointed out, our agricultural exports are very vulnerable; 30 percent of our gross domestic product in agriculture is earned from exports, and if we look at some of the charts on the right, we see that this is basically double that of the overall manufacturing sector; about 14 percent of their GDP is exported. What's fascinating to me is that in a recent analysis of 15 different agricultural products, from wheat to oranges, nearly half dependent on foreign markets for sales amounting to at least 25 percent of U.S. production. For some commodities, as this chart points out on my right, exports account for nearly half or more of U.S. production. Last year, dollar for dollar, we exported more corn than coal, more wheat than steel, more meat than aluminum, and more fruits and vegetables than CD's, records and tapes.
That's the situation, Mr. Chairman. Our exports are becoming increasingly important, and it's very vital. Now, many farmers ask meand you are likely to ask us today as you've indicated''If we're doing so well on export markets, why is fast track authority still needed? And why do we need more negotiations if we haven't resolved many of the problems you and others have brought to our attention the last few years.'' I hear these questions here and throughout the country, and I expect we'll hear some more questions today. We look forward to answering those questions and dealing with them in the future.
But let me just, then, summarize why I think in answering those questionsbefore and in the future and herewhy what the President's put forward is so important. Fast track authority is not fast in the sense that it dictates the pace of negotiation. It sets no time limit in how long these negotiations will take. Ambassador Lang has pointed out that the legislation contains very strong language on consultation from the beginning to the end with Congress and on agriculture, particularly with this committee.
Page 12 PREV PAGE TOP OF DOC We need fast track for several purposes. We need it to go after promising opportunities in agriculture to implement and move forward on the next round of WTO negotiations which we've already started in looking at information in Geneva on state trading and TRQ administration. There are 30 trade agreements in the Western Hemisphere that impact agriculture; we are party to only one at the moment. As these preferential agreements multiply, the U.S. share of agriculture is beginning to decline in South America. We need to reverse that, Mr. Chairman.
What would happen if we didn't get fast track? And I'll just conclude on that. Just 10 years ago, our agricultural exports fell to $26 billion. I've earlier talked about the three plateaus. We mustn't go back to those very difficult times when the European Union was so aggressive with their grain subsidies on fruits and vegetables as well as on meats. We are now again the world's largest agricultural trading customer. So, who benefits? The beneficiaries will be the American farmer. So, I think that as this debate continues, and we look to the renewal of fast track authority, we need these tools to keep America on the fast track to trade growth. Those young people in Des Moines and throughout the country that are entering our land grant system must be given the opportunity to sustain their families and to move forward. With renewed negotiating authority, Ambassador Lang and I are confident that we can negotiate these tough new trade agreements to bring these global markets home to America's producers. Thank you for inviting me to participate in your hearing this morning.
[The prepared statement of Mr. Schumacher appears at the conclusion of this hearing.]
Mr. BARRETT. Thank you, Mr. Schumacher.
Mr. Lang, what is the administration's present position regarding state trading enterprises, such as the Canadian Wheat Board and so forth?
Mr. LANG. We continue to believe that these organizations have to come into compliance with article 17 of the WTO; that is the article that requires state trading enterprises to engage in commercial activities on the basis of commercial consideration. So, we have serious concerns about these state trading enterprises which we need to continue to raise with our trading partners. Our objective is to get more specific rules in the negotiation schedule to begin in 1999 on these authorities, but we have to make the case for that between now and 1999 by getting the necessary information about how these organizations operate and putting that before our trading partners so that we can develop the consensus necessary to support such an agreement.
Page 13 PREV PAGE TOP OF DOC Mr. BARRETT. Is there progress being made? This situation has not been around 24 hours; it's been with us for quite some time. Where are we going?
Mr. LANG. Well, I think we are making some progress with respect to Canada, but it is very, very slow. You may know that a few weeks ago Canada agreed to suspend application of its tariff rate quota for barley and barley products from the United States; that's some help. We need that system opened up to American competition so that we can meet them in their own backyard, and we are trying to work on that. We need the credibility of the negotiating authority; that would help.
But you're right, it has been around for some time. My impression is, it's been worse, particularly in the northern tier of States over the last several years, and that has increased our concern about this matter, but until we get some stronger agreements on these subjects, it's going to be difficult to address.
Mr. BARRETT. I think I hear you saying, you're not necessarily satisfied with the progress that's being made. Is that a fair statement?
Mr. LANG. No, no, we're not satisfied, and we continue to want to work with them. We want to press the Canadian Government on this business of wheat access to their market. There are a number of other aspects of this system that we need to subject to rules of ordinary competition on a commercial basis.
Mr. BARRETT. Mr. Schumacher, in addition to the northern States' problems with Canada, we continue to have problems with Mexico in some areas. Coming from a corn producing area, as I do, I continue to be concerned about the high fructose corn syrup, and the logical question to me, I guess, is why should we want to continue to negotiate additional trade agreements when we can't even resolve a lot of the current disputes that we have at the present time?
Mr. SCHUMACHER. That's a good question, and this is something that we've been working very hard on. If we look at our trading partners in Canada and Mexico under NAFTA, I think one of the things thatI think to come back a little bit to your first point, and then we'll answer your second questionis if we look at Mexico and how we've implemented that NAFTA agreement, we've gotten quite a lot of good access to Mexico, particularly on state trading. I used to work a lot in Mexico, and CONASUPO used to be the dominant buyer and was very restrictive in terms of how they would buy. Ambassador Lang and his colleagues negotiated a very good access agreement, and as a result now we have really increased our exportsespecially from the Midwest where we've reached record trade levels to Mexico, particularly in mainstream crops such as corn and wheat. CONASUPO has always bought over the tariff rate quota on corn, and with the current drought that we saw coming up this morning, they may be even buying more corn. But with a good negotiation to restrict the state trading, we can now sell feed directly to producers, and we have unit trains going down from farmland and other groups in Kansas City to Mexico on the new privatized rail system. So, that's working, frankly, a little bit better than our work in Canada on state trading. I'm pleased about that.
Page 14 PREV PAGE TOP OF DOC So we've been able to negotiate quite a few of these agreements and move forward on Mexico. The sugar agreement is one that Ambassador Lang and Ambassador Barshefsky are taking very, very seriously. We are very concerned about it. That, and the apple issue are ones that we are taking very strong positions on, Mr. Barrett, and we can come back to you on that later on in detail, but it's something that bothers us and Ambassador Lang and Ambassador Barshefsky very much. They have taken great leadership on this, and I'm very pleased about that.
Mr. BARRETT. Thank you. My time is about ready to expire, so I'll take you up on that suggestion; I'd like to visit.
Mr. SCHUMACHER. Could I come up and visit with you on that one?
Mr. BARRETT. Certainly, I would encourage it.
Mr. SCHUMACHER. Those are two very important issues; from the Northwest on apples and on the high fructose corn syrup when some of the things that are going on in Mexico now need to be addressed even more rigorously, because we are so concerned that we think it is in violation of NAFTA and maybe even the WTO.
Mr. BARRETT. Thank you, sir. The Chair yields to the ranking member, Mr. Minge.
Mr. MINGE. Thank you. I appreciate your opening statements, and I'd like to bring up a couple of points.
First, I understand that over the past 3 or 4 years over 200 trade agreements have been negotiated with other countries of one sort or another, and that's in a period of time when we have not had fast track authority. I'm wondering how significant is this fast track authority in view of the fact that we've been able to negotiate this significant number of agreements? And I'd, perhaps, address that to you, Ambassador Lang, because of your work with the U.S. Trade Representative.
Page 15 PREV PAGE TOP OF DOC Mr. LANG. Yes, sir. First, Congress did give us some negotiating authority that lasted after NAFTA and the Uruguay Round. For example, on subjects that had been discussed for zeroing out the tariffs, which included a number of important sectors, the Congress extended the President's authority to enter into those tariff agreements. This year, for example, we entered into an agreement concerning information technology goods which will eliminate tariffs on those products over a short period of time in about 40 countries, which is a savings of something like $5 billion to American producers of those products.
In other cases, we were negotiating on matters in which no change in U.S. law was necessary. For example, agreements to open the Chinese market or to do away with health barriers in some of the other markets. In those cases, the agreement was both relatively important to industry but would have required no change in U.S. law, and those were notwe did not need negotiating authority beyond the President's constitutional authority.
And, finally, a great deal of the agreements that we have entered into have dealt with settling cases that we brought under pre-existing agreements. There's a good example in agriculture: shortly after the Uruguay Round agreements came into effect in agriculture, the European Community put into place something they called a reference price on wheat and corn and a number of other field crops. In effect, they fixed the import price of their product in such a way as to be able to manage their tariffs, which are a percentage of the import price, in an unfavorable manner from our perspective. We immediately brought that case to the WTO without waiting for a petition from the domestic industry, and the community then proposed to settle the matter, presumably, because the new agreement's make it so certain that the panel would reach result in our favor, that they thought it was more to their interest to settle. That is treated as a trade agreement. That settlement of that grains barrier in the European Union is counted in those 200 trade agreements.
Mr. MINGE. Are there any in that number that were submitted to Congress?
Page 16 PREV PAGE TOP OF DOC Mr. LANG. Yes, sir. There was an agreement
Mr. MINGE. Approximately, how many rather than just
Mr. LANG. I only know of one.
Mr. MINGE. OK.
Mr. LANG. And we have had some difficulty in getting that agreement approved and implemented in the Congress.
Mr. MINGE. There's a great deal of frustration in the country over the balance of payments problem that we have and that balance of payments problem continues to grow. It continues to haunt us, and when our currency is stronger, it's even more aggravated. This has been a characteristic of U.S. trade even though we've had fast track authority during the last two decades and more, and I think for many of us, we're quite troubled that, despite fast track authority, we have that haunting problem, and foreign countries are closing their markets or maintaining restrictive import practices that affect our producers; our products, and that our markets have been increasingly open to foreign products, and I think for many of us it's hard to understand why fast track authority is going to improve our access to foreign markets given the experience that we've had and the relatively open markets that we have created for foreign producers. I would appreciate any comments that you could quickly make to thatI see that my time is about expired.
Mr. LANG. Well, a couple of comments, Mr. Minge. First, we're very concerned about the trade deficit and balance of payments as you said. You may have noted that Secretary Rubin is raising these matters even as we speak in Asia and with many of our trading partners on a macro-economic basis. I would point out, however, that the trade deficit as a percentage of our total trade is much less than it was even as recently as 10 years ago. When the Trade Act of 1988 passed, the trade deficit was a little lower than it is now, but it was 3 percent of GDP because our GDP was much smaller. Now the economy has grown greatly. Trade is almost 30 percent of our GDP, and the trade deficit is proportionally a little lower in absolute terms than it was before, but it is half in percentage terms what it was before. So, it is fair to say that it's a problem of profound concern. At the same time, I think it's fair to say that the trade agreement negotiating process in increasing market access has lessened the impact on American's lives somewhat.
Page 17 PREV PAGE TOP OF DOC We continue to want to work on the problem and the importance of fast track, as I pointed out in my testimony, is that if we're not part of these trade negotiations, then the rules get set by somebody else, and those rules are not going to take into account our concerns; our way of doing business; our standards; our timing; all those other things. We need to be at the table making our views known in order to have an affect on the outcome of these negotiations; that's terribly important. I realize I'm speaking from the point of view of someone who's actually at the negotiating table, but that's what I feel. If I can't be at the table, then I don't have a chance to advocate these ideas.
Mr. MINGE. Thank you. I had hoped to ask you a question, Mr. Schumacher, but I'd also like to congratulate you. I believe this is your first appearance before the subcommittee since you've been appointed Under Secretary, and we certainly welcome your being here.
Mr. SCHUMACHER. Thank you very much. I've been here before, many times, and I look forward to working with this committee, and I try and visit with you frequently and maybe even your districts, but it's athese are very important topics, and I look forward to addressing them firmly and clearly.
Mr. BARRETT. Thank you, Mr. Minge. The gentleman from Texas, Mr. Combest.
Mr. COMBEST. Thank you, Mr. Chairman. I want to commend whoever put together the information that we have. I don't know if it was one of you or staff or who. Most of the documentation has come from USDA, but it's a great packet of information that shows, very broadly, the State-by-Statethe impact that trade has on agriculture, and looking at that, it's difficult to understand how someone who supports agricultural exports could be opposed to furthering our opportunities for trade expansion, because it is vital to agriculture, and that is very helpful, and I do appreciate whoever did that.
Page 18 PREV PAGE TOP OF DOC We're somewhat in a dilemma in that, basically, the only bite we have at this apple is fast track. We recognize that once fast track authority is granted, then the only other option that Congress has, eventually, will be an up or down vote on an agreement, and while I recognize there isand I assume it extremely sincerethe discussion about the involvement of Congress, many of us have been here for long enough to go through fast track and trade agreements in the past, and I can't speak for others, but I haven't found those terribly satisfactory in terms of being able to actually have afrom my perspectivepositive impact on the agreement prior to the time that it comes up. Then you weigh the agreement in the end, and all of those things that still bother you are there, but you look at it overall, and it makes it difficult to vote against; the good outweighs the bad. So, I'm not holding out false hope that we're going to have a great deal to do about what the eventual agreement may be, and it will debated on a much bigger scope, so I don't expect to have a great deal to, realistically, to be able to impact that. But the fast track authority gives us an opportunity to at least have you here, and have a discussion about the overall trade picture.
My basic comment to you would just be as it is in everything that we all deal with, it is not those things that are happening that are positive that we seem to focus on, it is those areas that are negative or that are problem areas, and I would just encourage you, not only in future negotiations and whatever agreements they may be, but, probably, more importantly, passed negotiations and agreements that are in place, to be extremely tenacious in your efforts to try to make for certain that in the areas where we do have disagreements and in the areas. Particularly, where there are violations, that we are rapid to respond to those, because it is the problems that exist that continue to exist over long periods of time that give our constituents who are dealing in the areas of trade the most heartburn.
And many times they see a strong willingness and a big effort and big push to come to Congress and ask for authorities to establish agreements, and, yet, once those agreements are in place, they don't seem to see nearly the interest in trying to make for certain that they are adhered to, and I think if we do have an agreement, the only sanctity of that agreement is to make for certain that it is adhered to. And the perception is many times that other countries are much more tenacious in their effort against U.S. imports than we are against foreign imports, and I would hope that we would be equally as tenacious in making for certain those agreements are adhered to and that we take steps necessary to deal with those other countries in areas that they seem to be violations. And I have no questions other than just that statement, and I appreciate your testimony.
Page 19 PREV PAGE TOP OF DOC Mr. BARRETT. Thank you, Mr. Combest. The gentleman from Wisconsin, Mr. Johnson.
Mr. JOHNSON Thank you, Mr. Chairman. First of all, I'd like to thank the Under Secretary Schumacher and Ambassador Lang for testifying.
As a representative from Wisconsin, I understand the value of expanding the agricultural products beyond our border and across the globe. It's a $45 billion business. In Wisconsin, agriculture is as diverse from cranberries to tobacco, timber to cherries. The industry, of course, we're identified with is the dairy industry. We're the dairy State. Questions that I hear from farmers in rural Wisconsin, and you mentioned their trade troubles that we have now. What can I tell the farmers in rural Wisconsin that prior trade agreements have done for them? What's the biggest current trade barrier they face now, and how do you suggest that the fast track authority will change that?
Mr. SCHUMACHER. Congressman Johnson, as I indicated in my opening oral statement, I think, especially since we talked to younger people coming in, that they look to good solid markets overseas. I think one of the issues that we need to addressAmbassador Lang and I will be working on very hardif you were to grant fast track authority, one of the great benefits, and one of the key issues in Wisconsin and your younger farmers and your existing farmers, is improving access to the Canadian market. I think this is a very important issue. Not only in the Wisconsin, but also a little further West in terms of getting access to the infrastructure on grain, but equally importantly, in terms of equal access, for example, on potatoes.
But most importantly, we need to resolve that difficult issue on dairy with Canada. We, unfortunately, lost that case. We have to be honest about that. But if we don't get fast track authority, we will not be able to negotiate those 300 percent tariffs down further and further, so that farmers in your State, Vermont, New York, and other great dairy States have access to a very significant market. It's unconscionable that those consumers are paying so much for their dairy products. We see it at the border when they load up the trunks with your products, the dairy products, then the Canadians try and count that against their tariff rate quota. I mean, that's rather bizarre, but the Canadian consumers are voting with their Canadian dollars to buy American dairy products. They're loading up their trunks with those wonderful products. We need to get those tariffs down. We can't do it without fast track.
Page 20 PREV PAGE TOP OF DOC Mr. JOHNSON And a question about that. Without fast track, you suggest you won't be able to negotiate at all. We face the high tariff, I think 300 percent, with Canada. You won't be able to negotiate at all, or it's just your limited authority, but you won't be able to be at the table at all is what your suggesting?
Mr. SCHUMACHER. I think, Jeff, you wanted to comment, but I think there's a legal issue, but I think fast track authority will give us the opportunity, because under NAFTA, we can't. That's settled under the current NAFTA agreement, under that dispute mechanismI'm being very honest with you. But if we get fast trackand, Jeff, you can correct methat will enable us to bring this back to the table with Canada, and get those tariffs and open that market.
Mr. LANG. About the issue of being at the table, there's no question that the largest exporting and importing country in the world probably gets to be at the table, if it's willing to be there, but foreigners know a lot more about how our political system works than we tend to know about how their's works, and they know that no executive branch agency can proceed very far without the consent of Congress. It's particularly true of a small agency like USTR, 150 people. We basically can't go anywhere without the consent of Congress. So, they're very aware of that, and I think it's a matter of degree and persuasive power to the extent we all appear to be pretty much on the same page about encouraging these agricultural export negotiations. Countries take the negotiators who sit at the table much more seriously, and I think that's mainly what this is about.
Mr. JOHNSON A question about some of the statistics: One, you pointed out the United States has, on average, the lowest tariffs in the world, 3 percent. The world average is 56 percent. Do you have statistics, and has that changed since GATT and NAFTA in that period of time? Was it higher than that? Has it gone down? Can you tell us statistics on that?
Page 21 PREV PAGE TOP OF DOC Mr. LANG. I can get the detailed information sent up to you, but it has gone down. Those are overall averages, not just agriculture, but industrial and agriculture together. Those averages have gone down as a result of the Uruguay Round and they've gone down even further as a result of NAFTA as between us and our NAFTA partners.
The most important thing you will see when we send the information up is that we started out with relatively low rates of duty at the beginning of the Uruguay Round, whereas, most of our trading partners had much higher relative rates of duty. So, as the staging moves down, most of them are cutting their duties by larger amounts than we are.
There are exceptions, and they're of great concern to us, particularly, in a place like Europe, an industrialized market of more than 300 million people. Their rates of duty and their agriculture import protection is still much too high for a country at their stage of development, and they did not come down to as a low a level as we did which would have been the fair outcome.
But in other cases, particularly in developing countries where the populations are growing fast, incomes are growing fast, and, therefore, people are able to choose a more varied diet, the rates of duty and the other barriers have been coming down faster than here, although, they're still relatively higher than our rates of duty, and that's why we need to keep working on this problem. It's not anywhere near where it needs to be to give us the real opportunities our farmers deserve.
Mr. JOHNSON Thank you, Ambassador Lang, Under Secretary Schumacher.
Mr. BARRETT. The distinguished conference chairman, Mr. Boehner.
Mr. BOEHNER. Mr. Chairman, thank you, and gentleman, welcome to the committee.
Page 22 PREV PAGE TOP OF DOC As someone who has spent a great deal of time on this committee and elsewhere in the Congress supporting free trade, NAFTA, GATT; as someone who believes that the key to a more world trade is to reduce trade barriers, because it's good for our consumers; it's good for consumers around the world, and I think that given our agriculture policy that was put in place several years ago, our job for American farmers is to ensure that they have fair access to world markets.
But having said all of that, our opponents when it comes to these trade issues, and our opponents in this debate over NAFTA, are going to focus in on some of the inadequacies and some of the softer spots in these previous agreements. I think several of my colleagues on both sides of the aisle, today, have pointed out some of those. I think the issue of having more specific agreed schedules for tariff reductions is something that our members and our opponents are certainly going to talk about. I think the issue of countries that continue to use sanitary and photosanitary non-tariff measures to keep our products up are going to continue to exist.
And I guess the question that I have for the two of you is just how preparedas we enter this debate and we begin to look at future negotiationshow prepared are we to get far more serious than we have been in the past about bringing these issues to some resolution?
Mr. LANG. Well, I think we are as serious as we can be. I don't quite know how to measure that except to say that over a period like 10 years or 15 years, if you compare the attitudes of both democratic and republican administrations, I think the effect of congressionalincreasingly congressional involvement in trade is very obvious.
Take, for example, disputes. Under the old GATT system, probably, around fewer than 70 or 75 disputes were brought over a period of nearly 45 years. Since congressional involvement began to increase radically in 1988, the number of disputes, both executive branch agencies, Republican and Democratic, have increased, and since the WTO went into effect, which is the first really reliable dispute settlement system we've ever had, the United States, alone, has filed 30 cases as a plaintiff. That indicates that, to mewhile it is hard to measure what you're talking about, Mr. Boehnerthat indicates to me that the executive branch is much more aggressive, in effect, taking countries to court when they violate those rules.
Page 23 PREV PAGE TOP OF DOC And I would add one more thing. I would bet that if we survey those cases, the majority of them are in agriculture. They're in Korean rice; they're in grains in Europe; they're SPS problems, like the beef hormone case that we've won recently. So, particularly, in this area of agriculture, I think there is some measurable impact from congressional involvement in this matter.
Mr. SCHUMACHER. Let me just supplement. I think one of the indications, Congressman, that we are very, very serious in the administration on particularly these issues you've cited, is that we've put in specific language in the bill on state trading; on reduction of duties; on subsidies, and especially on the difficult issues that are more and more, as the Secretary called, phony science on SPS; we have a very strong team in USDA working with interagency contacts and the Department on those issues and Ambassador Lang has mentioned, we did have a big win with the beef hormone. We continue to press very hard and do well, reasonably well, on the biotech issue, and that is in there. So, I think I'm quite pleased a very aggressive language on exactly the topics that you've raised before us this morning.
Mr. BOEHNER. Since the passage of NAFTA, there's been an erosion of public support for NAFTA, and at a time when the President is seeking fast track authority to expand NAFTA, expand these discussions, just how prepared are you, and how prepared is this administration to lead the effort for successful completion of fast track?
Mr. LANG. I see that both the President and the Vice President as well as a number of cabinet members, all the economic cabinet, have been out speaking about this issue; have been up here on the Hill talking about it. Many of you may have been visited by Ambassador Barshefsky and others. As far as I can tell, Mr. Boehner, there's complete commitment to moving the bill forward quickly this fall.
Mr. BOEHNER. Yes, but the point here is that I think, from where I sit, if we're going to have a successful debate and passage of fast track, it's going to take presidential leadership beyond Members of Congress and taking this case to the public, because until the American people are supportive, the Congress will be hard pressed to reflect that support here in a vote.
Page 24 PREV PAGE TOP OF DOC Mr. LANG. I'll certainly take the message back.
Mr. BOEHNER. Thank you, Mr. Chairman.
Mr. BARRETT. A member of the subcommittee, Mr. John.
Mr. JOHN. Thank you, Mr. Chairman. I also want to thank Ambassador Lang and Under Secretary for coming and sharing some of these important points with us today, because it is, indeed, very important as the trade relations in the global sense as it relates to agriculture.
I've got a couple of questions, and both of them are very specific as far as something that I'm interested my district being the third largest producer of rice, southwest Louisiana, which is arguably the rice capital of the world. It's an industry that's very, very important to the economy and the economic base of my district. We sit right on the Gulf of Mexico so exports are also very, very important.
So, I keep up with it, and I read everything I can about it, and I received a report from the Secretary Glickman's report to Congress on the effects of NAFTA on agricultural and the rural economy, and I'm going to paraphrase some of it, because it specifically talks about the impacts of NAFTA on the U.S. rice exports. And, basically, it says, ''NAFTA's impacts on U.S. rice exports to Mexico has only very minor positive impacts, 1 percent or less,'' and it goes on to say that ''NAFTA's impact on China's rice export is also small, probably less than 1 percent.'' And I have that document here, and as I read some of the information that you sent to us todayand by the way, thanks. It's very educational. It somewhat contradicts that, and it says that the rice exports went from $38 million to $95 million with Mexico. I'd like some comment on that if you don't mind about the two documents or maybe if you hadn't seen this document, why would there be such a big difference in the two statements?
Mr. SCHUMACHER. Let me come back to that, but I think we are doing quite well on rice exports, especially in Mexico. We have done very well in Mexico because of strong emphasis by your industry, Congressman. They have looked at Mexico. The Mexicans are eating more and more rice, and I think it's working quite well.
Page 25 PREV PAGE TOP OF DOC I'm going to come back to you on the difference in those 2, because I don't recall the first letter, and I want to refresh myself on that, and come back and visit with you on that one.
Mr. JOHN. Sure, I would like to, because it's very important.
Mr. SCHUMACHER. Thank you for bringing that to my attention.
Mr. JOHN. I think that the quality of rice is an issue also. I think that America, specifically Louisiana, rice has gotis a very high quality rice, and I think we can build upon that, and that'sherein, is my concern about the new trade agreements that we're going to be initiating that we're talking about today.
Have they talked about, specifically, rice, with the fast track authority which obviously is very focused on South America, Chile and Argentina? What can I look for in that, and is there or are there any assurances of how rice is going to play in these new agreements?
Mr. LANG. Well, first, while I know there is a lot of talk about Latin America, the President's proposal is global in scope.
Mr. JOHN. And I understand that very clearly, but, specifically, we've been focusing in on South America, and if that is not the case, then I really want to know how the rice industry is going to play and where he's going with this proposal.
Mr. LANG. Well, on a global scale, market access for riceGus will know more of the details of the markets than I willbut the potential for rice are enormous. They've centered in Asia where it's a traditional food, and all we have now as a result of the Uruguay Round are minimum access commitments. We used to have zero; now we have, basically, 3 percent of the market open to imports. That was a major achievement, but it's small by comparison to the potential. In Latin America, I'm less familiar with the eating habits, Gus, and maybe you can help me a little bit.
Page 26 PREV PAGE TOP OF DOC Mr. SCHUMACHER. I think as Ambassador Lang and Congressman stated, I think there were two key areas that we'll be looking at and working with you, because this bill does call for strong consultation, and we've already talked, of course, in your office about these issues on rice. But one is, the continued strong growth for rice in Mexico and Central America; we are doing very well, especially, in the rice growing areas, but more equally importantly is if we don't get fast track, we cannot continue to break down the barriers that the Koreans and Japanese have set up for our rice exports.
Ambassador Lang and his colleagues did a wonderful job in the Uruguay Round in getting us good, strong access to those two markets. We have some work to do to maintain our market share, but we need to get fast track in order to continue to get further access to those Asian markets that have been somewhat restrictive to us in the past. We've done well in the Uruguay Round; we're going to do better if you would grant us fast track authority on rice.
Mr. JOHN. Well, I would like to be included in some of those conversations, because that's very important.
One final point. Are you familiar with, and maybe if you can comment, there seems to be a growing problem with the exportation of rough rice, rice that is not milled, down to South America and, specifically Mexico, and we've had at least one rice mill close, and others are having financial difficulties, and that's a very big problem that we have today. Is that a part of this or can we even talk about those two problems at once?
Mr. SCHUMACHER. I think that's a separate issue. I'm aware of that problem. We're actually working very closely with a number of your rice constituents and millers, and they have brought that to my attention several times; it's something we're looking at. As they try and do more milling in Central American and Mexico, they're demanding more rough rice. We're looking at that very carefully. I'd like to come back and discuss that with you in more detail. It is an issue where there's a lot of passion as well, so we'll come back and visit with you on that, sir. It's a difficult one though, and that's one we would take into account as we move forward in the next couple of years.
Page 27 PREV PAGE TOP OF DOC Mr. JOHN. Thank you very much. That's all I have, Mr. Chairman.
Mr. BARRETT. The Chair is pleased to note that we've been joined by the chairman of the Agriculture Committee, Mr. Smith and also by the distinguished ranking member, Mr. Stenholm. The Chair would yield to Chairman Smith, if you would care to make a statement or ask a question.
The CHAIRMAN. I thank you, Mr. Chairman. I think it's most important that while we're still drafting language, basically, on fast track, that these two gentleman are here. Congratulations, Mr. Schumacher and Mr. Ambassador. It is important that you're here listening to concerns of agriculture from across this country, because we're still fashioning the fast track language. The success of a fast track proposal will be impacted by these people. I appreciate you being here for that purpose.
Fast track, generally, is held in disrepute because of the lack of success of some of our trade initiatives such as NAFTA and the World Trade Organizations, and I wanted to make sure that both of you carry back a very important message, and that is simply that we haven't won the hormone issue. We haven't won the banana issue. We have the World Trade Organization that has indicated that the European Union is not complying with the rules of the WTO, but we haven't won them. I would hope that both of you, and through your organizations, demand that the World Trade Organization enforce its decisions. Are they going to react and punish the European Union when it doesn't comply? Are Nations that are members of the WTO merely to walk away from the World Trade Organization that you so carefully crafted and many of us supported?
So, it seems to me the success of the WTO is still before us. I'd like hear your comments, because I think it's very important for us, especially before the 1999 agriculture negotiations, that we not go back and rehash these issues. If we do, that's all we'll do. We will not forge ahead. So, it's very important, I think, for this country and for you folks who are in direct contact with these people to make sure that the World Trade Organization is a success. The only way it will be a success is to make sure that there's some finality in the hormone case and in the banana case that are immediately before us. Your comment.
Page 28 PREV PAGE TOP OF DOC Mr. LANG. Thank you, Mr. Chairman. We're intensely aware that these cases are not over yet. We have favorable rulings, but like a lawyer with a judgment, we need to execute on the judgment, and we are engaged in those discussions with the European Union, virtually, constantly. Ambassador Barshefsky's meeting with Britain today on these matters. I will say that there are cases in which the system has already delivered even though it's only about 2 1/2 years old.
I mentioned before you came in, the cases we brought of when the community put into place reference prices on field crops: rice, grains, that kind of thing. The system was certain enough of result in that case that the community settled on a favorable basis before the matter ever went to a panel. I think that these cases involving health issues have received a lot of political pressure in Europe. Now, that doesn't change our view of the matter. We've proceeded with them on the merits, and that is how we would like the European Union to proceed. In the end, obviously, we will have to turn to our ultimate remedies under the system if the European Union can't find a way to bring itself into compliance with its obligations, but I will certainly take back your message, and I can tell you that at USTR we're intensely aware of the fact that we have to deliver on these judgments not just get a string of victories.
The CHAIRMAN. Thank you.
Mr. BARRETT. Thank you, Mr. Chairman. Mr. Stenholm, would you care to make a statement or ask a question?
Mr. STENHOLM. Thank you, Mr. Chairman. I commend you for holding these hearings. I would associate myself with the remarks of the chairman. Clearly, it is in agriculture and all America's best interest to negotiate freer and fairer trading rules and regulations and the elimination of tariffs all across the spectrum, and, therefore, these hearings are a necessary and very important aspect of airing it all out and getting on with the negotiations to do what is clearly in the best interest, certainly, of agriculture. I commend you for holding these hearings.
Page 29 PREV PAGE TOP OF DOC Mr. BARRETT. Thank you, sir. The Chair recognizes a member of the subcommittee, Mr. Thune, from South Dakota.
Mr. THUNE. Thank you, Mr. Chairman. I, too, want to commend you for holding these hearings and thank our panelists today for appearing and for providing the background information. It is very helpful, and as I paged through to find your assessment of South Dakotaand I don't think anybody in South Dakota would argue that agriculture is going to be very dependent in the future our State's agricultural economy, upon our ability to export and to open up new markets for our products including value-added type alternatives. The one thingand it seems to me, at least, that we're losing a little bit of the education war out there, because I can tell you that my first hand experience in talking to producers in our State, both ranchers and farmers, is that they aren't very convinced about the benefits of NAFTA. Some previous trade agreements, and some of the concerns that have been raised earlier by Mr. Boehner regarding inspection standards, sanitary-phytosanitary standards and whether or not those types of things are being enforced, specifically, as it pertains to beef coming into the country which is something that we probably hear more about than anything else.
But, just a couple of questions, if I might, and I might say, too, I think that I understand the importance that we don't want to have trade agreements negotiated without us being at the table, and fast track puts us at a table. I think we all realize that we have to be on the train or be left at the station, and I think we want to be a part of an expanded global marketplace that enables our producers who are the most efficient producers in the world to market their products in a way that will enhance profitability for agriculture in this country.
But, a couple of questions. Ambassador Lang, since Congress is not being asked, currently, to vote on any new trade accord, and it doesn't sound like will be for at least a couple of years, why is it imperative that we have fast track authority renewed at this point in time?
Page 30 PREV PAGE TOP OF DOC Mr. LANG. Because the work is going on now to prepare for those negotiations. Now, in some cases, for example, the only negotiation the President is committed to at this point, the negotiation with Chile, in all likelihood that bilateral agreement could begin immediately. We also have identified some 60 sectors including agricultural sectors on which we might be able to reach further agreement in the APEC context, the Asia-Pacific context, and we have a meeting of leaders in Vancouver, including the President, in late November of this year when the question of whether to proceed on any of those sectors will be discussed at that very high level.
But, in these larger global and regional issues, an enormous amount of preparation is necessary in order to push our trading partners, particularly those with agricultural trade barriers, into moving forward with negotiations. In the WTO, for example, negotiations are scheduled to begin in 1999, we are pushing now for the exchange of data and analysis that is necessary to support that negotiation. We'll be talking about subsidy levels, export subsidies, all the details of these kinds of things, and we have to get that information out on the table so that our trading partners, basically, have nowhere to hide from that negotiation. That will take us probably a year or a year and a half, so getting the negotiation authority now means that we'll be ready to be in the starting blocks on January 1, 1999.
Mr. THUNE. One other followup to some of the discussion that's been held earlier, but I think the administration probably would have more credibility out there withyou know a lot of people in this country for new fast track authority if some of the current trade disputes had been taken as seriously previously as they are being taken now, and you mention some recent victories which I think are significant, but the concern out there, at least, the one that I hear a lot is that the agreements that we enter into are not being enforced, and that we aren't doing an adequate job of seeing that other countries that are erecting non-tariff barriers to our goods and, sort of, altering the level playing field there, but those types of issues are not being sufficiently or quickly enough, in a timely way, addressed, and I guess I'd be curiousyou've touched on that to some extent already, but any comment you might have about what we can do to improve in that area.
Page 31 PREV PAGE TOP OF DOC Mr. LANG. Well, I think, Mr. Thune, it is partly a matter of our educating our constituencies and yours. Take, for example, grains in your State. The European communities reference price system, which I mentioned a few minutes ago, came into effect on July 1, 1995. We started the lawsuit in the WTO against that on, I believe, July 10 or 11, and settled before a panel was appointed, sometime in the fall. We then had the European community not living up to that agreement. We restarted the case, and entered into a new settlement agreement, which I think industry is happier with than the first one, and we didn't ask industry to file a 301 petition or sue us or any of the kinds of things that used to happen in these cases, so I think our record is maybe better than we've advertised, and we haven't spent enough time talking about what we've done on these matters, but in any event, if there are issues we need to be addressing or addressing more aggressively, just give me a call; drag me up here, and tell me what I need to do, and we'll get started.
Mr. THUNE. We'll be happy to do that. Thank you, and thank you, Mr. Chairman.
Mr. BARRETT. Although the gentleman from South Dakota is not a member of the subcommittee, we are happy that you've joined us at the outset. Would you care to make a statement or ask a question?
Mr. POMEROY. Well, Mr. Thune and I both take umbrage that you
Mr. BARRETT. North Dakota, my apologies. [Laughter.]
Mr. POMEROY. Mr. Chairman, I thank you. As a former member of this subcommittee, I am extremely interested in the important hearing you've called this morning and appreciate the opportunity to ask some questions.
They relate to the frustration we are experiencing in the Northern Plains from prior trade agreements, the Canadian Free Trade Agreement and the reiteration of that agreement as part of the NAFTA agreement. We continue to have a difficult time relative to the flood of Canadian grain imports. The administration was supportive in attempting to get this brought under control previously with the, first of all, an international trade complaint against Canada resulting in an agreement, a 1-year agreement, admittedly, but at one point, 5 million metric tons, one that held for 2 years, from 1994it was a 1994 agreement. It held the subsequent 2 years, and this year has been shredded as another flood of Canadian grain has come south.
Page 32 PREV PAGE TOP OF DOC The problems that the farmers I represent have is, how can you do a new trade agreement before you fix the problems with the last trade agreement? I'd like you to address that specifically. It was mentioned by the chairman earlier, and I haven't really heard a satisfactory answer from you on that question, plus, it would seem to me as though you're almost eluding to the fact that, ''Well, we've got some troubles out there, and we need fast track authority before we can fix the troubles.'' I don't understand that analysis either.
Mr. LANG. Well, on this problem with Canadian wheat and barley, we have been trying to address the problem under the existing agreements after the Canadian agreement expired. As I said earlier, in barley, we have gotten Canada to agree to suspend its tariff rate quota, both for the barley and for barley products.
Mr. POMEROY. So, the subsequent effect of that, though, isyou'll acknowledge, Mr. Ambassadoris the de minimus relative to barley and not consequential relative to the overall issue of Canada and grains. I mean, it reallythat isI view that as a token gesture substantively. Can you dispute that in terms of its impact?
Mr. LANG. Well, I think it is definitely only a first step.
Mr. POMEROY. An itty, bitty baby step.
Mr. LANG. On wheat, we are pressing to increase their market access for wheat. We have to remember that durum wheat exports are very substantial to other markets. North Dakota's exports of wheat, I think, are on the order of $1 billion last year, but we agree that the problem has to be addressed. There is no obligation on Canada to limit its wheat exports to the United States, because the authority we use to limit those exports in the past no longer exists.
The CHAIRMAN. Will the gentleman yield on that point?
Mr. POMEROY. Yes.
The CHAIRMAN. That may be true that there's no agreement, but when we were in Canada this spring, the Canadians promised us that even though the 1 1/2 million metric ton limit was not still in force, they would broadly comply with the 1 1/2 million metric ton limit. So, either they've gone back on their word or now they say they can't control their exports. They have a wheat board; everybody knows they control everything in Canada. Now, have they violated the 1 1/2 million metric ton limit?
Page 33 PREV PAGE TOP OF DOC Mr. LANG. Well, the agreement isI don't know what the flows are. Do you have them?
Mr. SCHUMACHER. Yes, I think thatI'm going to very careful, Mr. Smith. The last time you and I discussed Canadian wheat
The CHAIRMAN. You were there.
Mr. SCHUMACHER. I was here, and you were there, and we agreed on what we thought we heard, and there were parliamentary questions, and you and I created quite a littleas we say in New Englanda ''gofuffle,'' but I think we
The CHAIRMAN. Well, we're going to create another, Mr. Schumacher because they either tell the truth or they don't. They guaranteed me that they were going to broadly follow the 1 1/2 million metric ton limit. Have they done it?
Mr. SCHUMACHER. It was actually 1,050,000 tons is what they were talking about for spring wheat and then 300,000 tons for durum. In the figures that we have currently before us, is they're about 60,000 tons over on their durum for thisthe appropriate year, and about 400,00 tons overwell, 350,000 tons over on spring wheat. So, they have exceeded the two levels that were in the previous MOU under the TRQ.
The CHAIRMAN. Well, then they violated their word. Thank you.
Mr. POMEROY. Which is part of our problem again. I want to vote for extending fast track authority to this administration, but I am completely undecided in terms of how I'm going to vote. There is a very substantial amount of discontent relative to prior trade agreements and the seeming inability of this country to respond to Canadian grain export practices.
I'm pleased that the chairman was able to elicit representations from Canada, albeit empty, because they have eviscerated those representations with their export practices that for North Dakota we simply have seen a very, I would call it a belligerent export posture from Canada; and it makes it very difficult to consider new trade agreements when we are absolutely powerless to deal with this situation under prior trade agreements.
Page 34 PREV PAGE TOP OF DOC Mr. BARRETT. The gentleman's time has expired. The gentleman from Georgia, Mr. Chambliss.
Mr. CHAMBLISS. Thank you, Mr. Chairman. I share some of the concerns that my friend from North Dakota does. I want to give the President this authority because I think in the long-term it stands to certainly benefit the agriculture community. But I'm concerned about a couple of issues.
I look at the chart that you have there, and you talk about exports being vital to American farmers, and I cannot agree more. I think that is where the future of profit in agriculture lies. But there are two crops that are noticeably absent on the list that you have there on the board, and that's pecans and peaches. When we went to Mexico this spring, we talked to the Mexican authorities about the phytosanitary conditions that they had objections to, and they gave us assurances that they were willing to move in our direction; but as of yet, we have seen no indication from the Mexican Government to allow the import of pecans and peaches into Mexico. Now, I know we had the trial period of the 10 percent peaches from California this year, and very honestly I don't know how that worked. I hope maybe you can shed some light on that.
But, if we're not seeing any movement by the authorities in Mexico, why in the world should we give authority to this administration to negotiate with other countries when we can't even deal with the ones that we are dealing with now?
Mr. LANG. Well, I'll let Gus speak to the specifics of where we are with peaches, but on these sanitary and phytosanitary issues, everybody in the world is getting very concerned about them. And, the good thing about these agreements is that they did anticipate this problem. The basic rule for these agreements is: that any country can choose any risk level that is scientifically supportable that it wants. If it wants zero risk of cancer it can choose that, or whatever. But, it has to be scientifically supportable, and the trade measure that they take have to be scientifically connected to the risk they are trying to prevent.
Page 35 PREV PAGE TOP OF DOC Now, with respect to Mexico, they are obviously concerned about a lot of our agriculture exports, and USDA has been working with them very closely to make sure that our producers can meet their standards, because, or course, we want to be able to apply our health standards to imports of agriculture products.
Now, I know we have been successful in some of these crops, Gus. I don't know where we are on the Georgia peaches, but in many cases we have been ablein Arizona, for exampleto get crops accepted into Mexico on the basis of their health standards.
Mr. SCHUMACHER. Yes, Congressman, this is something we are working on very hard. We have made some success in California, as you correctly pointed out, on peaches. Commissioner Irvin in Georgia is a close friend of mine. He's pressing me, as you are, very hard on this issueas has Commissioner Graham in North Carolina. We're doing about $4 to $5 million now with this new system we put in place on fumigation for the three affected pests that they're most concerned about: oriental fruit moth, apple maggot, and plum caculio. These are expensive to put together. And, we are trying to work with your growers, and the growers in the southeastgreat peach-growing Statesto develop these systems to export peaches to Mexico. It's expensive. We need to work more closely with your growers. We're working with the two commissioners in the southeast; they're helping us with this. We hope to get it done. We need to work a bit more in terms of these fumigation standards that we've adopted in California to get these products in there to avoid the transmittal of any of these pests that they say we have.
Mr. CHAMBLISS. Well, you stated one of my problems that I have with the negotiations that are going on, because you allude to the fact that one of the pests that they complain about is the plum caculio; that doesn't even exist in peachessoutheast peaches. The plum caculio is not an inhabitant.
And, you know, I just, I have a real problem with the speed with which we're moving on these particular issues. It really does give me great concern as to giving the administration to go to other countries where we're going to run into, I assume, similar problems. Because, I agree, we ought to do to them as they do to us, type thing, where we're not, in my mind, doing that right now.
Page 36 PREV PAGE TOP OF DOC But, I have a real problem with the way the negotiations have gone to this point and why we should give this administration authority to go to other countries to allow the barriers for them to come into this country to be dropped, but at the same time we're not getting reciprocal treatment on the other side.
Thank you, Mr. Chairman.
Mr. BARRETT. I'm also pleased to welcome another visitor to the hearing, Mr. Bishop. Would you care to make a statement or ask a question?
Mr. BISHOP. Thank you very much Mr. Chairman, I want to associate myself with the remarks of my colleague from Georgia, Mr. Chambliss. I'm not on this subcommittee, but I'm on two other subcommittees of the Agriculture Committee, and I represent a district that's adjacent to that of Mr. Chambliss and I have the same peaches and pecan concerns, and we raised those issues when we were in Mexico.
But, I also have some other concerns. I want to say at the outset: the future of American agriculture certainly is tied to the export market. But, we also have to be realistic and recognize that when we lower the barriers for export purposes we have to also lower them for import purposes. And, I have some serious reservation in giving fast track authority without, somehow, having the ability to ensureand have the administration ensure, which has not been done in past agreementsthat the imports that come in will comply with the agreement.
The monitoring mechanisms are very, very weakalmost unenforceable. We don't have enough customs agents to ensure that the trans-shipment issues are adequately dealt with. When you look at the small sampling of products that come into the border that is made by customs agents, we just have no way of really enforcing it because we don't have the personnel, nor the resources, nor the laboratories available to do what has to be done to assure that we don't have the trans-shipments.
Page 37 PREV PAGE TOP OF DOC I'm just very, very concerned that if we give up this fast track authority as you wantas the chairman has indicatedto other countries, when we're not adequately monitoring the commodities and the goods that are coming into this country under the existing agreements, particularly NAFTA which is right in our own hemisphere, that we may be just really opening the door to all concerns for the American consumer, for health, safety, phytosanitary concerns, as well as disadvantaging American producers because of trans-shipments under the guise of the new trade agreements.
We have some serious concerns about that and are looking for some assurances before we can even think about supporting more fast track authority; which, in essence, is giving up our right as Members of Congress to ensure that there will be some protections in this regard.
Can you comment on that?
Mr. LANG. Well, let me say a couple of things. Gus may have more to say about the food safety area specifically.
First, the customs service has been in close cooperation with us specifically on the trans-shipment issue that you mentioned. I'm not sure what product you're talking about, but they have completely reorganized the service over the last five years to put more officers on the line.
Mr. BISHOP. Yes, they have, but they don't have adequate personnel to do it; and they will tell you that they have been given a bigger job but they have not been given more resources and personnel to do the job with.
Mr. LANG. Well, we're all trying to function under the limits of the budget, and there are limits on what they can do, I suppose. But, they have been enormously successful on trans-shipments in some kinds of products like, for example; textiles and apparel. In some cases, they have been able to clamp down on trans-shipments so that significantly fewer imports are coming from some of the largest origins of the last 10 years; like China, for example, where imports are down some 30 percent or something like that. So there are ways to deal with these problems even with stretched resources. And, I would be glad to meet with you and try and identify where the trans-shipment problems are and see if we can work with Customs to get a hand on those.
Page 38 PREV PAGE TOP OF DOC Mr. BISHOP. The problem is that we can't establish where and to what extent there are trans-shipment problems because Customs does not have adequate personnel nor resources nor laboratory locations to accomplish that. We can talk about it, but we'll be doing the same as we were doing with NAFTA. And, when it comes down to it, if we ever do discover some trans-shipments, the monitoring and sanction provisions are so vague and evasive that it will be several years before it ever gets to any kind of hearing. The only opportunity that I have as Member of Congress to raise these issues is when it's being discussed and debated in the Congress. If I give up that opportunity and that bully pulpit, if you will, to the executive branch, I will have given up the only opportunity that I have to protect my producers where I come from; and more importantly, to protect the American consumers who are entitled to the highest quality and safest products that come into this country.
This trade business is a two-way street. We get barriers lowered so we can export, but we're also allowing imports to come in; and unless we can make sure those imports are up to the quality and safety and also comply with the trans-shipment requirements that the agreements say, you know, we're just in a sense giving a blank check and taking a pig-in-a-poke, as some of the old folks would say.
Mr. LANG. Well, I only meant, Mr. Bishop, that I need to know what the product is that we are talking about, and then I can try and work with the Customs Service to get the necessary monitoring in place. It can emphasize by product these problems and be fairly effective, I think. I think there is some point in talking about it.
Mr. BARRETT. The gentleman's time has expired. A member of the subcommittee, Mr. Moran, of Kansas.
Mr. MORAN. Mr. Chairman, thank you. I'm reluctant to engage in the discussion at the moment, having just arrived and not heard the testimony of these gentleman. But this is a topic in which I am very interested.
Page 39 PREV PAGE TOP OF DOC I apologize that trying to get from Hayes, KS to Washington, DC in a short amount of time is difficult. I'm just able to arrive; so, I'm here for the balance of the hearing, and I appreciate you raising this issue to the extent that you have by these hearings. I think, perhaps in agriculture, through the remainder of the Congressional session, we have no more important issue before us.
Thank you, Mr. Chairman.
Mr. BARRETT. Thank you. The Chair also recognizes Mr. Smith, the gentleman from Michigan. Would you care to make a statement or ask a question?
Mr. SMITH. I'm a member of this subcommittee, Mr. Chairman? Is that right?
Mr. BARRETT. That's incorrect.
Mr. SMITH. I am not. Well, thank you for the opportunity.
Mr. Secretary, good to see you again, welcome; Mr. Ambassador.
I have some problems with Congress being essentially left out of major trade negotiations since the 1974 act. At least a majority of your pre-counseling with Congress has been very selective. And, it seems to me that Congress does have a lot to add, especially because perception is so important in the kind of public support that we get for any kind of trade agreements.
So, what does this particular fast track do in terms of years? Does this take us to 2005?
Mr. LANG. Yes.
Mr. SMITH. Maybe I would like to consider a shorter time period to keep this administration, or any administration, more dedicated to counseling with the appropriate committees and Members of Congress of what's in these agreements and how it's going to affect particular parts of the country. I think, Members of Congress are much closer to some of the negative impacts, for example, of NAFTA; are much closer, for example, to some of the safe food concerns as far as what future contracts might offer.
Page 40 PREV PAGE TOP OF DOC Can somebody tell me when the last major trade contract that didn't have fast track went through and what happened? Was that catastrophic? What year was it and what contract was it?
Mr. LANG. The only trade agreement in probably the last 60 or 65 years to be donemajor agreement, without thiswas the U.S.-Canada Auto Pact in the mid1960's.
Since 1934, Congress has been granting some kind of trade negotiating authority to the President over relatively short periods of time: 3 to 5 or 8 years.
Mr. SMITH. Let me interrupt you.
Mr. LANG. I'm sorry, I was just going to say, on your point about consultation, I believe you are absolutely right. We need to make sure that every member of this committee is in on these agreements from the very beginning, and we know what their objectives are, and what their standards for success are. And we're prepared to emblazon that on the law. We've put a lot of provisions in the President's bill to that end, including the provision which I mentioned in my testimony that allows Congress to turn off the fast track if we're not consulting adequately. But, if there is more we need to do, we're very open to discussion about that.
Mr. SMITH. But you mentioned, Mr. Ambassador, that you're already underway in developing the preliminaries for these negotiations. Has any of these preliminaries been shared? Or aren't they that far along? Or, what are the preliminary efforts that you've already started structuring for the negotiations that you're going to do in 1 1/2 to 2 1/2 years from now?
Mr. LANG. Well, these preparations began basically with the decision in December of last year at the WTO to undertake preparations for global negotiations over 1997 and 1998. We briefed staffs as best we could, but if we've missed people, I will personally come up and talk with each of you at every stage of this, if that's what we need to do to make sure that we're getting
Page 41 PREV PAGE TOP OF DOC Mr. SMITH. What countries? It's my understanding that this fast track gives the administration carte blanche to make an agreement with any country or any group of countries any place in the world and then it would come back to Congress for and up or down vote, essentially. What countries are you looking at first in terms of the trade agreements you are going to pursue?
Mr. LANG. I would say first, that the President already has the Constitutional authority to negotiate. The reason we need to work together is because we can't negotiate successfully without the support of the Congress. So the executive branch is going to need your support to be successful.
Now the President's proposal is not limited to any one region or country. It's multilateral negotiations, regional negotiations, and bilateral. We need to consult about what the first priority is. The only commitment the President has, which has been a commitment of the last two presidents as well, is to negotiate a bilateral agreement with Chile.
Mr. SMITH. I want to ask one quick question to Under Secretary Schumacher. Mr. Secretary, I'm concerned in our efforts to reduce trade tariffs, that what has grown in addition to such thingsthe make-up, such as the phytosanitary and other excuses to keep our imports outis the fact that they have started, in some of these countries, subsidizing their farmers in other ways: through reduced property tax; through subsidized costs of fuel and fertilizer. So there's other ways to subsidize their farmers than have been previously written in. Does this also concern you, and what do we do about it?
Mr. SCHUMACHER. That's a very good question. One of the things, for example, in Canada, they were looking at very closelywe have some very fine people in Canada working on this, exactly that question. Are there, for example on sugar in Saskatchewan or some of the issues on potatoes, are they coming at it in a different way; especially on poultry, and especially dairy, where we are finding some interesting developments in Canada on dairy, where they seem to be exporting some dairy products. How that happens with 300 percent tariffs is not what I learned in economics, so I'm going to come back to you on that one. It is something we are looking at very closely, and I thank you for that question. Could I visit with you on that one?
Page 42 PREV PAGE TOP OF DOC Mr. SMITH. Please do.
Mr. SCHUMACHER. That's a very good issue. We're looking at it, and even our own dairy people are beginning to look at that very, very seriously in terms of looking at WTO and bilateral discussions with Canada.
Mr. SMITH. Gentlemen, thank you.
Mr. BARRETT. The gentleman's time has expired.
We're also pleased to have in attendance this morning at the hearing, the gentleman from California, Mr. Dooley.
Mr. DOOLEY. Thank you, Mr. Chairman. Following up on Mr. Smith's comment there, Ambassador Lang, if there is in fact subsidization of fuel and of fertilizer, under the auspices of WTO, don't we have every right to file a claim, because we signed the Uruguay Round of GATT?
Mr. LANG. Yes. If we can prove that it is a subsidy of wheat, we should proceed with it. I'm not familiar with the particulars of the case, and obviously, I'd have to look at the merits, but that's the way the rules work.
Mr. DOOLEY. I mean, let's just take this back maybe even before we had the Uruguay Round of GATT that we signed; would we have had any forum in which to challenged an unfair subsidy of this?
Mr. LANG. Before the Uruguay Round, the rules on agriculture subsidies were very difficult to enforce. It was much more difficult to bring these cases. Today, we're in a considerably stronger position to deal with subsidies because of the Uruguay Round. Would you agree?
Mr. SCHUMACHER. Yes, its been one thing, Congressman Dooley, that before the Uruguay Round, for example, there was no, for example, tariff bindings. There were really no bindings on agriculture. But following the good work that the STR has done, we now have bindings that are disciplined into our agreements. That's a great benefit. We need to bring those bindings further down once, hopefully, you'll grant us fast track. That's a very important issue.
Page 43 PREV PAGE TOP OF DOC Mr. DOOLEY. Well, I think that's the thing that has been a little bit frustrating in listening to some of the comments here is that some people have lost sight of what the world was prior to Uruguay Round of GATT. We finally now have a forum in which we can take on some of these unfair trade barriers, unfair tariffs, and address some of the phytosanitary and sanitary barriers and impediments to trade under a set of rules. I mean, when we're talking about not liking some of the trade barriers we're facing today, I mean that's precisely what we're trying to address by giving the President the authority to engage in negotiations with some of these people who are perpetuating some of these unfair barriers and unfair tariffs, and this is the only way we can get them to the table to address them.
I guess, I had the opportunity to read the testimony that is going to be delivered by the American Farm Bureau in the next panel, and I was very pleased with the efforts of USTR and USDA to put in the negotiating points language which I thought fully addressed the concerns of most of the folks in the agriculture community. And, basically committing the administration and future administrations to try and move forward, ensuring that we will not have unjustified restrictions on sanitary and phytosanitary issues, biological materials, and different components.
The Farm Bureauand I don't know if this is just an issue of just semantics or whatbut they say ''unjustified'' is too vague and unfocused. I guess, if its not unjustified, does this encompass all, you know, would you feel that this would encompass anything that wasn't based on science?
Mr. LANG. Yes. There are contexts in which the word unjustified has a specific meaning. I'd have to look at thein this context, though, where it's a negotiating objective. We don't intend to let some kind of unfair SPS problem escape from the scope of this negotiating authority. And, if there is a better way to do the language, we're prepared to work with you, Mr. Dooley, to find what that language is.
Page 44 PREV PAGE TOP OF DOC Mr. DOOLEY. But they also, on another one where you identified you are committed to reducing or eliminating tariffs; or reducing or eliminating subsidies; developing, strengthening, clarifying rules that address practices that unfairly decrease U.S. market access, they were concerned that we did not include that: ''tariffs would be eliminated within a specific time frame.'' I was wondering if you can comment whether or not that the inclusion of a specific time frame really has, you know, does it change what the administration's or what USTR's intent was in terms of the negotiating points that were included in section 6.
Mr. LANG. I think this was just a drafting problem. The authority only lasts so long; and when the authority expires, that has tendency to dry up all negotiations in the world because we are such an important player. So, to put it in two places would mean you would have to put it in 50 places in the bill. So there is a time limit on the President's mandate overall under the bill and that's the time limit on everything else.
Now, maybe what you're talking about is the time at which the tariff cut itself would take place. And that, obviously, is the subject of negotiation. If Congress wants to mandate that the tariff reaches a certain level by certain time, and that's our target, I don't know that we would have an objection to the target. It just has to be understood that we might not meet the target because in the give-and-take of negotiations we might have to give up a year to get something, to get a deeper cut, or something like that.
Mr. DOOLEY. All right, thank you.
Mr. BARRETT. Thank you.
And, I thank you, Mr. Ambassador and Mr. Secretary, for your comments and answers to some good questions and, I think, some pretty good answers, as evidenced by the fact that this panel has gone nearly 2 hours. Thank you very, very much. We appreciate your testimony.
Page 45 PREV PAGE TOP OF DOC Mr. LANG. Thank you, sir. We look forward to working with all of you.
Mr. BARRETT. We now invite the second panel to the table. Joining us today will be Mr. Bryce Neidig, who is president of the Nebraska Farm Bureau. He is a most aggressive, most popular, most competent representative of the Farm Bureau. Today he is representing the American Farm Bureau Federation.
And, I would invite the gentleman from North Dakota to also say some kind words about the other witness who is representing the National Farmers Union. The Chair recognizes Mr. Pomeroy.
Mr. POMEROY. Thank you, Mr. Chairman. I'm not sure I can keep up with your eloquence relative to the superior witnesses we have from our jurisdictions this morning. But I do want you to know that Richard Schlosser is vice president of North Dakota Farmers Union. He has served in a variety of leadership positions with the local farmers union. The farmers union in North Dakota has over 41,000 members. But beyond farmers union, Mr. Schlosser represents a kind of family farmer that really represents the heart and soul of our districts. He's a leader with the rural electric co-op; he's a part of the county's agriculture improvement association; he's active in his church; they have six children; and this is precisely the kind of individual that has been the hallmark of North Dakota farming, and will continue to be. And, that's why we have to make certain these trade agreements are done in a way that promotes family farming.
Thank you, Mr. Chairman.
Mr. BARRETT. Thank you, sir. It's nice to know that we have two such distinguished witnesses heading up our second panel.
Mr. Neidig, you may proceed when you are ready.
STATEMENT OF BRYCE NEIDIG, PRESIDENT, NEBRASKA FARM BUREAU
Page 46 PREV PAGE TOP OF DOC
Mr. NEIDIG. Mr. Chairman, first, thank you for those kind remarks.
Members of the committee, I am Bryce Neidig, president of the Nebraska Farm Bureau. I am here today representing the American Farm Bureau Federation, as well as the Nebraska Farm Bureau. I want to thank you for this opportunity to testify concerning fast track and its impact on agriculture.
The American Farm Bureau represents 4.7 million member families in the United States and Puerto Rico. Our members produce every type of farm commodity grown in America and depend on upon export markets for over one-third of our production.
Higher living standards around the world depend upon mutually beneficial trade among nations. As living standards rise, the demand for our high-quality products grows. The transition to higher living standards depends on trade agreements that protect each nation's ability to exchange goods and services freely in an open market atmosphere with minimum disruption. Our members agree that free trade is the ultimate goal. However, there are disputes with many of our trading partners that must be addressed as the administration moves forward in negotiating new treaties to further expand market access.
Farm Bureau is pleased that President Clinton has proposed the Export Expansion and Reciprocal Trade Agreement Act of 1997, especially with the specific language for agriculture.
We must keep in mind that the President's proposal is not a treaty or trade agreement, but an authorizing document. This legislation enables this administration, and the next, to negotiate trade agreements in consultation with Congress.
The administration's ability to negotiate good agreements is critical to opening doors for U.S. trade. Of the 30 regional and bilateral agreements completed over the past 4 years, the United States is signatory to only one. Other countries are forging ahead while the administration has not had the authority to negotiate new, or renegotiate existing trade agreements.
Page 47 PREV PAGE TOP OF DOC Farm Bureau urged the administration to include three issues in its proposal, and we are pleased that each of these has been addressed. However, the language does not fully encompass the concerns we expressed and we urge your support in broadening and further defining these points.
Our first concern was addressed with the following language: The principal negotiating objectives of the United States regarding trade barriers and other trade distortions are to expand competitive market opportunities for United States exports and obtain fairer and more open conditions of trade by reducing or eliminating tariff and non-tariff barriers and policies and practices of foreign governments directly related to trade that decrease market opportunities for United States exports or distort United States trade.
We strongly support this language as well as the similar language under the section on agriculture.
However, we believe that this should go one step further by including that tariffs would be eliminated within a ''specified time frame.'' We must put our trading partners on notice, at the time this bill is passed by Congress, the the United States is serious about reaching zero tariffs. This language would provide assurance to agriculture that the administration is serious about negotiating away tariffs and tariff inequities such as those currently imposed on U.S. dairy and poultry products by Canada.
Farm Bureau's second concern is that all future negotiations bind our trading partners to resolving sanitary and phytosanitary issues on the basis of sound science, or by using recognized scientific principles as laid our in the Uruguay Round agreement. We are concerned that the term ''unjustified'' is too vague and unfocused.
With the removal of tariff barriers, we have experienced growing market disruptions based on health and safety claims that cannot be justified on scientific principles. The Europeans, China, Russia, and many other countries are expert at this. We need to be blunt with our trading partners. All sanitary and phytosanitary barriers to trade must be based on sound scientific principles, and our trading partners should expect that we will respond immediately when barriers are raised.
Page 48 PREV PAGE TOP OF DOC The third issue is directly related to this and was addressed in the overall negotiating objectives with the following language: ''To further strengthen the system of international trading disciplines and procedures, including dispute settlement.''
Now that several major cases have gone through both the North American Free Trade Agreement and the General Agreement on Tariffs and Trade dispute settlement processes, we know the basic dispute resolution systems are much better but are not perfect.
We market many perishable products that encompass a broad range of growing and harvesting seasons and processing methods. The dispute settlement system is basically well designed but must be made more efficient and time sensitive to meet the needs of perishable commodities.
We are delighted that other issues such as intellectual property rights and transparency have been addressed as well as the broad range of agricultural issues.
Farm Bureau is very concerned with the extent of labor and environmental issues included in this trade proposal. We believe these issues are best addressed in their respective international bodies and not through the World Trade Organization. The WTO was not designed to address these issues nor does it have the resources to do so. The Office of the United States Trade Representative was not created to resolve labor and environmental debates. The USTR's resources are needed to address the growing number of trade issues facing industries around the world.
Mr. Chairman, the U.S. market is already open. Others are not. The United States is the most open major market in the world. We must work toward opening up our competitors' markets. We must have the strongest trade agreements possible. Agreements must not jeopardize our industry for social issues but must move us forward in the global marketplace. The administration must have the authority, guided by sound trade objectives and principles, to negotiate and bring to Congress trade agreements that will benefit agriculture and the Nation.
Page 49 PREV PAGE TOP OF DOC International trade can create significant markets for U.S. agricultural commodities. Agreements must ensure that trade remains both free and fair for all products. We need to continue to monitor and enforce these accords to make sure the benefits promised to farmers and ranchers are fully realized and move forward in creating new and stronger markets for all U.S. industries.
Mr. Chairman, our current trade agreements have been basically good for agriculture, but adjustments are needed for some sectors. Negotiating and modifying existing trade agreements and establishing new agreements is critical to the competitiveness of U.S. agriculture. In order to do this the President must have the authority to go forward and negotiate with our trading partners. Without this authority, our trading partners will not take our negotiators seriously and America's leadership role in the international trade arena will be greatly diminished.
Thank you for holding this hearing, Mr. Chairman, and we look forward to working with you on this important issue.
[The prepared statement of Mr. Neidig appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you, sir. Mr. Schlosser.
STATEMENT OF RICHARD SCHLOSSER, VICE PRESIDENT, NORTH DAKOTA FARMERS UNION
Mr. SCHLOSSER. Chairman Barrett, and Members of Congress, thank you, Mr. Pomeroy, for those kind remarks.
On behalf of the 300,000 farm and ranch families of the National Farmers Union, I want to express my appreciation for having the opportunity to testify before this committee.
Page 50 PREV PAGE TOP OF DOC Prior to the ratification of the Canadian-United States Free Trade Agreement, the North American Free Trade Agreement, and the General Agreement on Tariffs and Trade, we, as well as many Members of Congress, observed severe inadequacies in these agreements. Many have yet to be addressed to this day. We believe a large reason behind the passage of these agreements, despite the serious concerns of Members of Congress and the public raised during the debate, was due to the fact that fast track rules were in effect.
National Framers Union is opposed to fast track legislation because of these inadequacies; as Congressman Pomeroy pointed out earlier in his remarks. It also prevents Congress from having enough direct involvement in the negotiation of trade agreements, as was pointed out by Congressman Smith of Michigan.
However, we are encouraged that the Clinton administration chose to address agricultural priorities as a distinct and separate issue to work to correct unfair trade practices in the agricultural sector. The primary agricultural goal of the United States in trade negotiations has long been to reduce agricultural import tariffs and export subsidies around the world.
National Farmers Union has long held that internal economic, social, and political imperatives will result in other nations pursuing ways to protect their agricultural producers and other basic industries. We believe the United States should do the same.
The President's bill calls for reform of the state trading enterprises, such as the Canadian Wheat Board, which have not previously been a major focus in international trade negotiations. It is evident that the CWB is able to provide a fair return for its producers. While state trading enterprises should be monitored to ensure that they are trading fairly, we urge lawmakers to realize the benefit that this type of structure could provide to U.S. farmers. National Farmers Union supports the creation of an American Marketing Board which producers throughout the country could use to enhance their marketing power.
Page 51 PREV PAGE TOP OF DOC Therefore, we would like to bring you attention to five of the major issues that we have urged Congress in the past to look into.
In the past we have urged Congress to pass ''country of origin labeling'' legislation; and address dispute resolution, currency fluctuations, reporting, and inspection issues.
No. 1: Country of origin labeling. Public awareness of country of origin issue has been greatly increased since E. coli contaminated beef was found in Colorado, and strawberries which caused hepatitis-A were discovered in Michigan. Regardless of whether the contamination occurred in the United States or abroad, the public is beginning to ask where food sold in the United States originates.
Dispute resolution: Chairman Barrett's and Congressman Minge's opening remarks referred to this; and the past trade agreements have indeed increased trade. But the enormous influxes of agricultural products into the United States at times have had a devastating impact on our U.S. producers and have proven market disruption. U.S. Trade Representative Charlene Barshefsky visited North Dakota last spring and assured us that she would work for a resolution, and she continues to debate Canadian Agriculture Minister, Ralph Goodale, over whether Canada should limit the amount of wheat and barley it exports to the United States. One-way trade of Canadian grain exports of wheat, durum, and barley to the United States has filled U.S. grain elevators and disrupted U.S. markets and marketing channels; not to mention the problems it has caused with the structure of roadsthe trucks are causing increased damage to our roadsrail-car shortages where our own producers can't even haul to the elevators. Canada has flatly maintained it will not limit the amount it exports, yet the dispute continues to the great detriment of U.S. farmers. While lawmakers engage in debates over trade flows, U.S. farmers watch as their prices decline for grains, livestock, produce and other agricultural products.
No. 3: Currency fluctuations. We've addressed this issue previously. Until there is the establishment of a common measure of currency to prevent unstable, dramatic fluctuations of currencywhether natural or manipulated by central bankswe will never have fair trade agreements.
Page 52 PREV PAGE TOP OF DOC No. 4: Reporting. In order to be efficient managers and marketers, and in order to survive in an ever-deregulated business environment, U.S. producers need the latest and most accurate information available. However, the accuracy of our reporting system is rightly called into question because much of the food and foodstuffs crossing our borders are not adequately monitored or inspected.
The issue of food safety and inspections standardsa recent General Accounting Office report concluded that fewer than one 1 percent of every 3.3 million trucks entering the United States are inspected. Food and other raw commodities now travel across our borders largely unchecked. In another report, GAO focused on USDA's Animal and Plant Health Inspection Service, the Federal agency mainly responsible for preventing infestation by harmful foreign pests and diseases, protecting U.S. agriculture, and preserving the marketability of agricultural products in the United States and abroad.
The GAO report found that due to staffing shortages, APHIS ''does not conduct any inspections at 46 northern and 6 southern ports of entry,'' and at many other ports, there are no inspectors on duty for many hours of day or night. Even high-risk cargo is not properly inspected, according to the report.
When pests and diseases spread to the United States by the exchange of infested agricultural commodities, other countries will undoubtedly demonstrate a reluctance to buy U.S. agriculture products. When pests and disease are present within our shores, regardless of where they come from and how they are spread, it is the American farmer's reputation that is called to question. We receive the blame and we suffer the consequences because the demand for American agricultural products declines sharply. And we experience this in North Dakota immensely because 50 to 60 percent of our hard-red spring wheat has to go to export channels.
To illustrate personally what has happened in North DakotaNorth Dakota is the No. 1 producer of barley, durum, and hard-red spring wheat. With the signing of past trade agreements, durum imports have risen from in 1980 to 1986 levels of about 100 thousand bushels to a high of 17.6 million bushels in the 19931994 marketing year; hard-red spring wheat during that same time frame from 4.7 million bushels to 64.8 million bushels in 19931994, which coincidently was the enactment of NAFTA. Barley imports for the same timeframe: 10 million bushels pre-NAFTA, to about 70 million bushels after NAFTA, and of course, as we mentioned before by Ambassador Lang, those PRQ issues have been resolved a little bit as, Congressman Pomeroy pointed out, a baby step to about 40 million bushels.
Page 53 PREV PAGE TOP OF DOC And, according to Dr. Wang Ku, an agricultural economist from North Dakota State University, North Dakota barley producers experienced at that time a $23.8 million per year reduction in gross farm income. Nationally, that's about $70 million per year reduction because of these imports.
During the period from 1990 to 1996, U.S.-Canada trade of all agricultural grain and oil seed products increased 74 percent. During that same period, the imports of Canadian agricultural grain products have grown 190 percent. Just in the last marketing year, 199697, Canadian durum exports to the United States are up 68 percent, and Canadian wheat exports to the United States are up 51 percent.
In conclusion, we must remind ourselves that fast track has been used just five times: the Tokyo Round of GATT, the United States-Canadian Free Trade Agreement, the United States-Israel Free Trade Agreement, the North American Free Trade Agreement, and the Uruguay Round of GATT establishing the World Trade Organization.
Many supporters of fast track contend that it must be passed now or else the United States will be prevented from entering into any new trade negotiations. However, during the last two years since fast track expired, many trade agreements have been completed without fast track authority.
Farmers have felt the impact of in a variety of ways since it began. When foods enter the United States from countries where labor, environmental, and health and safety standard are different from those we have in the United States, the American farmer is affected. We understand that risk is inherent in farming. Unless some safeguards are put in place to ensure that farmers receive a fair price for their product, regardless of the political, environmental, economic or any other conditions in other countries, we will continue to see the number of farmers in this country decrease because the risk is simply too great.
Thank you, Mr. Chairman, for the opportunity to express our concerns to this committee today.
Page 54 PREV PAGE TOP OF DOC [The prepared statement of Mr. Schlosser appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you, sir.
Perhaps a question to both of youBryce, we'll start with you. How will or will not the labor and environmental issues, those side issues, affect your producers, if at all? Any thoughts?
Mr. NEIDIG. Yes, Mr. Chairman, it will effectand particularly as far as my organization is concernedit will make a difference on how we approach support or the level of support for the fast track legislation.
While not being directly involved, any time that you interject some of these side issues, if you will, they affect overall tradability of the United States. And, if I might interject also, Mr. Chairman, as you know how important it is to the State that you and I are from; Nebraska is second in the United States in dollar value per capita exports of agricultural products. It makes a difference whether I stay in business or not. And, the other issues, we think some of these other issue, can be addressed outside of fast track legislation. We say first and foremost, we need the ability to work with agreements.
One of the most recent things that happened was Canada's agreement with Chile. They got an 11 percent that we have to deal with that makes the United States 11 percent on the downside. We're being affected by that. And if I notexcuse me, I'll stop right there, Mr. Chairman.
Mr. BARRETT. Would you think that these two issues could impact whether or not your association supported or did not support fast track?
Mr. NEIDIG. Yes, it could impact.
Mr. BARRETT. It could very well impact.
Mr. NEIDIG. I'm not making a statement, I wouldn't make a hard, fast statement whether or not, but at this point, yes, it could have an impact.
Page 55 PREV PAGE TOP OF DOC Mr. BARRETT. I understand.
Mr. Schlosser, would you speak to that question?
Mr. SCHLOSSER. Yes, thank you, Mr. Chairman.
National Farmers Union has been a long-time supporter of inclusion of the labor and environmental issues in fast track or any trade agreements, essentially, because we have been supporters of the labor and environmental movement, and also, to make the playing field more level with respect to sanitary, phytosanitary issues and, of course, the cost of labor production in those countries as compared to our country.
Mr. BARRETT. You would feel then that how these two issues are handled might very well impact the support of your organization?
Mr. SCHLOSSER. Yes, we do.
Mr. BARRETT. Thank you.
Mr. Neidig, you talked about one of your concerns which was that tariffs would be ''eliminated within a specified timeframe.'' That's a direct quote out of your testimony.
Mr. NEIDIG. Yes.
Mr. BARRETT. But you didn't describe what a specified timeframe might be. Do you have any thoughts?
Mr. NEIDIG. No.
Mr. BARRETT. Any suggestions?
Mr. NEIDIG. Mr. Chairman, we don't have a time and I think it relatively makes little difference whether it's 1 year, 2 years. But, we need a specified timea time certainand our trading partners need to understand that we are serious about thatthat we have a deadline, rather than going on forever. So I'm not prepared to offer a suggestion, or suggest a particular time, except it must be, we say ''a specified, definite time,'' by which this must reach conclusion.
Page 56 PREV PAGE TOP OF DOC Mr. BARRETT. Time certain. Thank you.
You also talked at length about the many trade disputes between the United States and its partners. Have you specific recommendations as to what would be the most beneficial to our producers? Any thoughts, specific thoughts, in that regard?
Mr. NEIDIG. Well, if I might address, related to this, in June of this year a number of leaders of the American Farm Bureau throughout the country visited Canada and met with the Canadian Wheat Board people and the Prairie Foods people, and so forth; talking about these trade issues between Canada and the United States. We reciprocated with that meeting, last week in Chicago, when those same people came there. We have now embarked upon a position whereby outside of the Government, those people involved and those groups involved in the grain trade, particularly wheat and barley and durum, are talking about the things that we view as irritants and the things that we need to do. Hopefully, we will be able to make, come forth with some recommendations to make to Government, as to how to best resolve the issues that we are talking about: the movement of Canadian grain into the United States, and what we are asking for is reciprocal ability to go into Canada.
We find that it is much easier to talk face to face with a producer at my level to another producer on how to resolve these issues, and I am very optimistic that we can resolve some of these things. That's outside of Government involvement or trade issues, but it relates to the trade issue and refers directly to what you are asking, Mr. Chairman.
Mr. BARRETT. At the table.
Mr. Schlosser, do you believe that free trade benefits U.S. agriculture?
Mr. SCHLOSSER. Yes, and as I said, I live in a State which we have to export approximately 50 or 60 percent of our hard-red spring wheat. What's at issue here is that we areI hope we're not characterized as protectionistswe are essentially in favor of free trade, but free trade that is fair trade and has a level playing field. We have not experienced this with the Canadian grain issue in the past. And, even in the dispute resolution process, has at best been lacking.
Page 57 PREV PAGE TOP OF DOC Mr. BARRETT. You would be speaking for your association?
Mr. SCHLOSSER. Yes, I would.
Mr. BARRETT. Yes. Thank you very much.
Mr. SCHLOSSER. Particularly pertinent to the grain dispute with Canada that I am familiar with in my home State.
Mr. BARRETT. Yes, I've had a subcommittee hearing up along the border a couple of years ago. I'm very much aware of what your talking about.
Mr. MINGE. Thank you. I would like to express my appreciation that both of you are here and that American Farm Bureau and the National Farmers Union are able to provide us with this assistance in evaluating the fast track proposal.
As I have listened to the testimony this morning, it struck me that perhaps the critical question is: To what extent should Congress delegate to the executive branch and the U.S. Trade Representative, authority to negotiate agreements and then bring them back for up or down approval.
And, we're not looking at just the garden-variety trade agreement, instead, we are looking at corner-stone trade agreementsones that set the standard for international trade, often for decades to come.
When we look at the votes that we've had here in the last 5 years, we've had two basic agreements: one is the Uruguay Round, and the second is NAFTA. The NAFTA agreement I would characterize as establishing a free-trade zone in North America, which, if carried to its logical conclusion, would be some type of economic union. Whenever we establish a free-trade zone, I submit that all producers and processors within that zone ought to be on a level playing field, just as we expect that to exist within the United States of America.
Currently, we are debating in Washington, Environmental Protection Agency standards with respect to clean air; and both of your organizations have come out in opposition to the new standards. Both of your organizations have expressed the opinion that these standards will cost American agriculture far more than the benefits that are expected to accrue. Yet the administration is persevering in urging that these standards be implemented and threatening to veto anything that comes from Congress that would change or delay or repeal those standards.
Page 58 PREV PAGE TOP OF DOC Now, I submit that those standards do not exist in Canada, certainly they do not exist in Mexico, and I expect that they will not exist in any country that we will be negotiating fast track authority with pursuant to the request for fast track authority that's currently under consideration.
And, my request of you is that you would each comment on how you feel we can achieve a level playing field if something as fundamental as clean-air standards are basically different between the United States and the country, or collection of countries, with whom we are trying to negotiate an agreement; and how we should, as Members of Congress, address this problem? Should we simply give the administration authority to negotiate this as sort of a blank check and then bring it back for an up or down vote, or should we say that there are certain standards that we expect the administration to follow in undertaking such negotiations?
So, Mr. Schlosser, I know that you have already taken a position on this in your statement, so that I would ask that you lead off and expand on that and Mr. Neidig, if you could then further the discussion.
Mr. SCHLOSSER. Thank you, Congressman Minge. That is exactly to the point of why we opposeor one of the points of why we opposefast track legislation: the environmental issue, and the level playing field issue. If those environmental issues are within the standards of the same as on this side of the border as that side of the border, I guess we have a level playing field. And, that is a major concern of ours.
And, taking that one step farther, the phytosanitary issues that have directly affected us back in North Dakota, has been the karnal bunt issue in Arizona. Where did those spores come from? Was it in the cargo? Was it in cargo in transportation through imports into this country? That spore, that carnal bunt, would be devastating to about a billion dollar industry in North Dakotawheat, which is king in North Dakota. So those environmental issues and those concernsissues in other countriesare of great concern to us.
Page 59 PREV PAGE TOP OF DOC Mr. MINGE. Thank you.
Mr. NEIDIG. I think, Congressman, your last statement that you made: ''would we expect the President to keep these issues in mind and deal with them as he works with the trade agreements?'' We'd say, yes. However, I think we need to be realistic and if we expect that the rest of the world is going toor we abide by their rules, or they abide by us completelyI don't think that's realistic to expect it to happen and that relates to the clean air issue that you're talking about. In one sense of the word, I would view that as a separate issue other than trade, even though it has impact on trade. But certainly, and that's why my State and the American Farm Bureau has opposed the inclusion of some of the clean air requirementswhether it be global warming or whether it be clean air or clean watersome of those things that are unrealistic to expect producers to be able to abide by. If that is tied to trade; then we'd no longer have trade, and we simply can't survive without that.
Mr. BARRETT. Thank you. Mr. Moran.
Mr. MORAN. Mr. Chairman, thank you. Gentlemen, thank you for being here. Mr. Neidig, good to see you again. You were in Kansas earlierI guess last yearand we met.
Both of your groups I know are very interested in agriculture and in improving the economy for our farmers and ranchers, and yet, you reach different conclusions in regard to the value of fast track legislation. Could you just outline for me, in your opinion, why it is that two farm groups, both interested in the same goal I assume, both reach a different conclusion on this topic?
Mr. NEIDIG. Well, I think there is a basic difference in philosophy, with all due respect to my friend with the Farmers Union. The philosophy on the freedom to participate in what happens is different. And where I, and where we come from, we want to be a participant in this trade without excess Government involvement. And that's why I say I'm so pleased at what I've been involved in with the Canadian Grain Board and so forth to work out some agreements that are outside of Government.
Page 60 PREV PAGE TOP OF DOC And, that's another reason, if I can digress just a bit, that we are concerned about fast track, and the basic reason, supporting the ability of the President to sign an agreement, go to Congress and have it voted up and down and then you tie that with a time certain. With all due respect to Congress, I'm not sure that Congress will ever reach a conclusion when they include all the details.
Mr. MORAN. Thank you. Mr. Schlosser?
Mr. SCHLOSSER. Congressman, I'm not a trade expert, and I don't want to pretend to be, but I would venture to say that if I took you out to North Dakota, if you would oblige me, and visit with the farmers there in the coffee shops and the elevators in the morning over a cup of coffee, I'd venture to say that most of them understand the fact that we do need good trade policy. The fact of the matter is, that we have some problems with past trade agreements, and basic in those we see the dispute resolution problems that we have, particularly with the Canadian grain imports. And, as a result, we haven't seen in North Dakota a fair return on our investment, particularly in our number one produced crops of barley, durum, and hard-red spring wheat.
As a matter of fact, this might be in my mind the result of a lot of acres being signed up in CRP. We have 3.4 million acres in CRP in North Dakota. If these crops don't dollar out, a lot of farmers have told me already that this next sign up there is going to be more acres put into CRP. And I think that's what's at the fundamental crux of this issue: is that there is a fair return on our investment.
Mr. MORAN. If we're to solve trade problems that we have currently today, where would the priorities be if you were instructing this administration to solve problems? Obviously with you Mr. Schlosser, it's the Canadian wheat market. Mr. Neidig, is there a different focus from your point of view if we are going to go down the list and try to solve the problems that we see in trade and agriculture today.
Page 61 PREV PAGE TOP OF DOC Mr. NEIDIG. I think first would be the Canadian, whether it be, if you will, the phoney trade barriers on dairy and some of those things, or the real issue on Canadian Wheat Board and wheat, and durum, and barley. That would be number one.
And, then of course, there are the other issues that you go to NAFTA; on the southern border with Mexico there are some issue there. But, clearly, our direction right now is toward our northern border, and then the ability to create other agreements with other countries whether they be Chile or whatever, because we see them happening bilaterally with other nations that we're not part of.
Mr. MORAN. And in that regard, if the President is given fast track authority, where ought we be negotiating?
What would be our priorities? Chile?
Mr. NEIDIG. Well, Chile is obvious, and I'm not sure that that is the one that it ought to be but that is the one that is in the front burner right now. I think, you know, it's wide open; it could be anywhere.
Mr. MORAN. Mr. Schlosser, you have thoughts of where we ought to be directing our attentions in the world?
Mr. SCHLOSSER. Yes, and as I said before, I think why we oppose this unequivocally is that the past trade agreements that we have entered into there are issues there that we need to corrected, because of the impact on our family farms and our organization on the national level. We can't wait for those international markets to come to where we are going to recover our cost of production. I don't think, and in a lot of our areas in North Dakota, Montana, Minnesota, and South Dakota, because of decreased grain production, because of the weather, because of the lower prices, that a lot of our farmers have a whole lot of time in recovering their cost of production and, therefore
Mr. MORAN. Your point is: solve the problems we have today before looking for additional markets.
Page 62 PREV PAGE TOP OF DOC Mr. SCHLOSSER. Yes.
Mr. MORAN. And, Mr. Neidig, I appreciate the letter I received from the Farm Bureau with the three issues you would like addressed. Were those presented to the administration, and were theyI read your testimony and heard your testimonywere they considered, rejected?
Mr. NEIDIG. They have been presented, yes.
Mr. MORAN. And, so the administration considered them, and in many instances you don't think they quite satisfied what you would like?
Mr. NEIDIG. That's right.
Mr. MORAN. But they did consider it?
Mr. NEIDIG. Yes.
Mr. MORAN. Thank you, Sir. Thank you Mr. Chairman.
Mr. BARRETT. Thank you. Mr. Dooley.
Mr. DOOLEY. Thank you, Mr. Chairman. I find it somewhat interesting that we've got two farmers' organizations here and when they look at the environmental issues and labor you both have trouble but for entirely different reasons, in fact, opposite reasons. I guess, I am frustrated by both of you on that account.
What I would say, Mr. Schlosser, you made a statement that you felt that the environmental standards were important, and I think you said something that we need to have the environmental standards on one side of the border or the other be the same in order that it creates a level playing field. Is thatI think that's what you said?
Mr. SCHLOSSER. Yes.
Mr. DOOLEY. Well, I guess my concern on that is is there not some danger to you as agriculture if you go down that path and if we are imposing environmental standards that we accept in this country, are we not setting a precedent for another country to put up a non-tariff barrier for U.S. agriculture products by them domestically endorsing and adopting an environmental standard? And, I'll use a specific example.
Page 63 PREV PAGE TOP OF DOCIf we allowed the European Union to set their own standards that might not be entirely based on science, such as they have done with the beef hormone, would we not be basically opening up the door for them to take precisely that action which would eliminate access to U.S. agriculture products?
Mr. SCHLOSSER. Well, in answer to your question, I think what we needand specific to that issue and extending that to issues such as phytosanitary issues that I'm familiar with in North Dakota, and as I said, I'm not familiar with BST or the growth hormone issue
Mr. DOOLEY. Let's use that BT-inoculated, genetically-modified corn or wheat that we can do now, which would be something that you should familiar with, I think.
Mr. SCHLOSSER. Yes, and, on my farm I'm not particularly familiar with that because I haven't grown those products, it's not available in our area. But, to be competitive, and if this gives our producers an edge, I guess I would, personally, I would have to agree with that; that we be able to use those and they enter into the exports markets. Because I don't know how we could segregate those grains in our elevators. That would be a whole other issue.
Mr. DOOLEY. That's where I think we are treading down a very perilous path here. If we think that a country that we're trying to negotiate with or trade with that we can impose standards as they might relate to labor and environment that might embody ours; and yet, we're going to expect them not to impose standards that would preclude access to our products going there. I mean, I think, that's where U.S. agriculture has to be very careful, you know, on how far they go in this direction.
Mr. Neidig, I see where you are a corn grower and a soybean grower. I'm pleased that we're going to have testimony from both the soybean growers and corn growers that are basically endorsing giving the President the fast track authority. I guess they made that determination on what they thought was in the interest of the producers. You know, they made one determination, yet the American Farm Bureau has been hesitant to come out in total support of this fast track authorization. I guess, you have the opportunity here, Ambassador Lang as well as Under Secretary Schumacher.
Page 64 PREV PAGE TOP OF DOC You know, I'm a farmer myself, and when I read some of the concerns that the Farm Bureau is putting up now, like the rhetoric and semantics versus unjustified and specific time frame, you know, this sounds like a lot of lawyer talk. From my opinion, it looks like the intent, which was certainly presented to the administration to be embodied in the negotiating points; do you disagree that that's not a part of what, you know, what they put into the fast track authorityor the negotiating points?
Mr. NEIDIG. No, I don't disagree, Congressman, Mr. Dooley. Your statements are very well taken that, I think, it does have an element of danger for agriculture when we say there are things that we expect and don't expect others to do the same to us. I think you have, and you have already identified some of thatthe biotechnology thing, whether it be round-up ready soybeans that the Europeans are objecting to that you can't tell the difference about some of those things. Nonetheless, we think that all of these things must beand that's what American Farm Bureau saidbased upon real science. And, we would expect that that would be part of the negotiating process as the President works our trade agreements; that those things be based upon real science.
Mr. DOOLEY. And, I guess that's whereyou know, what I'm concerned with isbecause you made, I think, a very compelling argument on why we ought to move forward with the fast track authority. You used the example of Mercecer and Chile join as an associate member they got a common external tariff of 11 percent which is creating a significant disadvantage to U.S. producers. My concern is that American Farm Bureau is refusing to endorse this fast track authority which would give us the potential to have a seat at the table to eliminate this 11 percent tariff disadvantage we have because they have some disagreement, whether or not unjustified, goes far enough in terms of identifying the commitment to deal with phytosanitary and non-phytosanitary issues. The American Farm Bureau is going to preclude this; right now is advocating a position that they were not willing to support this fast track authorization because the negotiating points don't include language that says that we are going beyond what it reads here: ''Reducing and eliminating tariffs,'' which it states, ''reducing or eliminating subsidies,'' which it states in it; because it doesn't say, ''in a specific timeframe.'' You know, that's what's going to be in the negotiations. I mean, that is what we are negotiating; is a timeframe. And, I guess, I don't get it. What is it going to take to have the American Farm Bureau stand up and do what you clearly identify is in the best interest of U.S. agriculture: that we need to find a way to make sure we can reduce these tariffs that are causing us to lose markets?
Page 65 PREV PAGE TOP OF DOC Mr. NEIDIG. I don't disagree with you, Mr. Dooley. The only thing I do disagree with, we have not made a hard fast determination that we flat-out won't support this, we are saying that this will make a difference on what we do, but we reserve the right to examine this as it goes along, hopefully reaching the same conclusion your reaching that that's what ought to be done.
Mr. DOOLEY. Well, what I've got to tell you is that the clock is ticking really quick here, and as a farmer I'd like to see the American Farm Bureau, the most influential group that I'm a part of, step up to the plate and provide some leadership.
Mr. BARRETT. The gentleman's time has expired. Mr. Pomeroy.
Mr. POMEROY. Each of you represent very important farm organizations and you have represented them very well. This has been an excellent panel. I commend you for your presentations this morning.
Mr. Neidig, did I understand you to say that something has been worked on with Canada in a non-governmental realm relative to wheat?
Mr. NEIDIG. Well, that's reallyand maybe it was out of place saying thisnot been worked out. It's an ad hoc group that put themselves together, if you will, Mr. Pomeroy. And, I was one of those members of the American Farm Bureau delegation that met with Canadian Grain Board and Prairie Pools and some of those grain trading organizations in Canada on a non-governmental level. We are asking then that there be a committeewe're going to form a committee of producers and marketers and the Canadian Grain Boardand offer suggestions to governments on both sides as to how we can work out theseand they may be more than that, but what we often times refer to as irritantsthe Canadian grain trucks coming across the border into North Dakota and Montana. And, so that's what I was referring to, Mr. Pomeroy. It's not an official; it's not Government; it's not Government-related; it's not Government-funded, nor do we expect it to be because we think often times we can have more impact and achieve more of our goals if its not Government.
Page 66 PREV PAGE TOP OF DOC Mr. DOOLEY. I hope your are ultimately available to achieve some relief in terms of the amount of the imports coming across.
Mr. NEIDIG. That is a bottom line, yes, sir.
Mr. POMEROY. My point of contention with you and your statements this morning, is that you condition, ultimately, you raise the prospect that Farm Bureau would condition their support for fast track, depending upon whether the labor and environment language might be removed. I want to read it to you, and ask where in language is the threat so significant to the agriculture interests represented by Farm Bureau.
Under this section,
The principal negotiating objectives of the United States representative regarding worker rights and protection of the environment are through the World Trade Organization: (A) to promote respect for internationally recognized worker rights, including with regard to child labor; (B) to secure review of the relationship of international recognized worker rights to the provisions, objectives, and instruments of the World Trade Organization, with a view to ensuring that the benefits of the trading system are available to all workers; (C) to adopt as a principle of the World Trade Organization that the denial of internationally recognized worker rights should not be a means for a country or its industries to gain competitive advantage in international trade; (D) to promote sustainable development; and (E) to seek to ensure that trade and environmental protection are mutually supportive, including through further clarification of the relationship between them.
That's the relevant language. I believe it's pretty tepid stuff. I certainly don't see it as impacting the interests that ought to be at the forefront one way or another, much less so substantial to the organization from an analysis of agriculture that it would condition its support.
Mr. NEIDIG. I might go back to some other things that I've been involved with. No. 1 we recognize that these are real concerns, we don't think they often times go far enough. But I recall on two different occasions on trade missions in various parts of the world listening to U.S. Ambassador Stapelton Roy, when he made this hard fast statement that we often times get involved too much in issues other than those real agriculture issues, whether they be human rights issues, or child labor or whatever, and thereby have a negative impact on the trading partmy business as an agricultural producer. That's what we're referring to. You're not totally wrong, however, I think that the objectives are right. We just think often times they just don't go far enough or in some cases may go too far.
Page 67 PREV PAGE TOP OF DOC Mr. POMEROY. I would suggestpolitely suggestthat in this instance, I think maybe the Farm Bureau is interjecting philosophy into the focus on the agricultural dimension of fast track.
Mr. Schlosser, your testimony has five issues: country of origin labeling, dispute resolution, currency fluctuations, reporting, and food safety inspection standards. If progress was made on these issues during the congressional consideration of this measure, do you believe your organization could get to the point of supporting it, or at least have its objections diminished?
Mr. SCHLOSSER. The questionI would say, probably diminishedthe question in our mind is that we have been promised a lot of these things in the past and we see, I guess we see, no improvement or no movement in particular of dispute resolution issue. We even had Trade Ambassador Charlene Barshefsky in North Dakota, and she assured us that her staff would be working on this issue and we see as of this time no resolution on that particular issue.
So we are reluctant, at best, to support fast track, even with those assurances, Congressman.
Mr. POMEROY. I am in discussions with the ambassador and believe that the Minot meeting made a distinct impression on her and that she is trying to find areas to do as she represented on that day.
Mr. Chairman, thank you again for allowing my participation this morning.
Mr. BARRETT. Thank you. Gentlemen, we thank you for your participation, for your input today. We're grateful to you.
And, we would now welcome the third panel to the table.
Joining us today are Mr. Jim Czub, the chairman of the New York Corn Growers; Mr. Phil McLain, president of the National Association of Wheat Growers; Mr. Marc Curtis, who is on the board of directors for the American Soybean Association; and Mr. Jack Pettus, with the National Barley Growers Association.
Page 68 PREV PAGE TOP OF DOC I would think that perhaps many of the issues that are of interest to you folks have been touched on up to this point. If you would care to summarize your statements, why feel free, because as I said earlier, your full statement will become a part of the record.
Mr. Czub, we'll start with you, please.
STATEMENT OF JIM CZUB, CHAIRMAN, NEW YORK CORN GROWERS ASSOCIATION, REPRESENTING THE NATIONAL CORN GROWERS ASSOCIATION
Mr. CZUB. Thank you, Chairman Barrett. My name is Jim Czub and I farm in the great corn State of New York in a town called Schaghticoke where I raise 1,600 acres of corn, 350 acres of soybeans. Next month, I will begin my term as chairman of the Government Relations Committee of the National Corn Growers Association. The NCGA represents 30,000 members in 48 States. It is the NCGA's mission to create and increase opportunities for corn growers in a changing world and to enhance corn utilization and profitability. We have a goal: 2002 to have a $40 billion farm gate value for corn products. We especially appreciate the opportunity to testify today because we believe that fast track negotiating authority is the first step to enhanced corn demand through increased exports of corn and value-added corn products, including meat, dairy and poultry.
The National Corn Growers Association enthusiastically supports the Export Expansion and Reciprocal Trade Act Agreements of 1997. This fast track legislation provides the opportunity for the administration to negotiate trade agreements that will be considered by Congress without amendment. Congress remains directly involved in the process through ongoing consultations with the ultimate power to reject a trade agreement that is not in the best interest of the United States. This arrangement assures trading partners that the final agreement will not be renegotiated with Congress, while retaining congressional input and authority to approve or disapprove trade agreements.
Page 69 PREV PAGE TOP OF DOC Without fast track, corn farmers will not have the opportunity to achieve long-term profitability that can come from consistent expanding export markets. Because of our climate, infrastructure and technical know-how, the United States enjoys a tremendous advantage in corn production. Farmers have embraced biotechnology that allows us to produce crops using fewer insecticides and safer herbicides. Three Federal agencies have approved new technology as safe for producers, consumers, and the environment. Producers must have assurances that products of biotechnology will be subjected to unjustified restrictions. Speaking from personal experience, we have been testing biotechnology crops on our farm and we have seen significant increases in plant health and yield; and we're just very happy with these products.
The U.S. corn crop is the largest crop in the world. Typically, the United States produces 40 percent of all corn grown in the world, and 70 percent of the world corn trade originates in the United States. Nonetheless, U.S. corn exports enter a very competitive global market. We exported 2.5 billion bushels of corn in 198033 percent more corn than the 1.8 billion we exported, year ending August 31, 1997.
In many foreign markets the United States serves as a residual supplierwhen stocks are depleted those countries import corn. At other times, trade barriers prevent long-term of the demand of corn and corn products. Mexico is an example of a country that had stymied expansion through trade restrictions. Now, the market is more open because of the commitments Mexico made in the North American Free Trade Agreement. Prior to NAFTA, U.S. corn exports to Mexico were limited by an importing license system designed to protect Mexico's domestic corn industry. High price supports encouraged domestic production. When Mexican production met demand, imports were severely curtailed.
NAFTA changed that by converting the import licensing system to a tariff-rate quota. Mexico granted tariff-free access to almost 100 million bushels of U.S. corn the first year of the trade agreement. The quota increases 3 percent per year during a 15-year transition period. Now it is realistic to invest in new feed and corn processing facilities in Mexico. With imports and domestic production, the available supply of corn will continue to expand to benefit the Mexican consumers who will enjoy improved diets. This is exactly the type of benefit that we should expect from more open trade.
Page 70 PREV PAGE TOP OF DOC Unfortunately, we have to acknowledge a serious trade dispute in the export of high fructose corn syrup to Mexico. Earlier this year, Mexico's National Sugar Chamber, the umbrella organization for the country's sugar mills, brought an anti-dumping case against high fructose corn syrup. On June 24, the Mexican Commerce Secretariat imposed provisional tariffs, as high as $175 a ton, effectively stopping U.S. high fructose corn syrup exports. On September 4, the United States requested a dispute settlement consultations through the World Trade Organization. The United States questions whether the Mexican sugar industry had standing to challenge fructose imports. The United States also contends that Mexico failed to provide proper notification to the United States and failed to provide the U.S. industry timely access to the relevant information needed to present the case.
Opponents of trade may consider this dispute evidence that NAFTA does not work. They might cite this case as a reason to oppose fast track. We view the situation differently. Historically, countries have restricted trade in agricultural commodities to protect their domestic producers. It will take both patience and persistence to achieve lasting reform. We cannot improve trading opportunities around the world unless the United States is fully engaged in trade negotiations. Without the authority to negotiate, the United States will be unable to provide leadership needed for real progress.
Ten years ago, the target price of corn was $3.03 a bushel, but producers had to idle 20 percent of their corn base to participate in the program. Today, producers receive a market transition payment and are able to use their land to the greatest agronomic and economic advantage. As corn farmers, we are in a very different production and marketing environment. The NCGA has embraced this change, but with the expectation that Congress would support our efforts to develop global markets.
The United States has reformed farm policy and now it is time to substantially reform trade and agricultural products. We must end protectionism that denies U.S. producers access to new and emerging markets and the first step towards this lies with fast track.
Page 71 PREV PAGE TOP OF DOC Thank you.
[The prepared statement of Mr. Czub appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you. Mr. McLain.
STATEMENT OF PHIL MCLAIN, PRESIDENT, NATIONAL ASSOCIATION OF WHEAT GROWERS
Mr. MCLAIN. Thank you, Mr. Chairman, for the opportunity to appear today regarding the foremost issue confronting U.S. wheat producers: trade. My name is Phil McLain, and I am a producer with a diversified farming operation in Statesville, NC. Among that I grow 1,000 acres of wheat. I'm also president of the National Association of Wheat Growers.
In general, U.S. wheat producers are supportive of initiatives to expand trade. We have to be. Wheat is an export-dependent commodity. Each year at least 50 percent of U.S. production is exported to over 130 countries around the world. Unfortunately, since 1994 or 1995 year, and despite the progress of liberalization of trade in the world, the U.S. share of the world wheat market has experienced a steady decline. We are stunned by this development which is contrary to the prospects pointed to during the passage of our Uruguay Round Agreement as well as deliberations over the 1996 farm bill. Our frustration is exacerbated by the under-utilization of our export tools, like the Export Enhancement Program, the export credit guarantees programs, and Public Law 480. If these programs do not meet present needs, then we would like to work with the Congress and the Department of Agriculture to modify them to reverse the course of our exports as quickly as possible.
On September 17, 1997, the President submitted to Congress trade legislation to secure fast track trade negotiation authority. We are heartened by the inclusion of provisions establishing agricultural negotiating objectives. In particular, language to address the unfair or trade-distorting activities of state trading enterprises, unjustified restrictions or commercial requirements affecting new technologieslike biotechnologyand unjustified sanitary and phytosanitary restrictions.
Page 72 PREV PAGE TOP OF DOC But we are reserving final judgment on the bill until the Congress completes its consideration of the legislation. We believe that more can be done to improve the agricultural provisions of the bill to direct benefit of our Nation's wheat producers. As we understand the President's proposal, the Export Expansion and Reciprocal trade Agreements Act of 1997, if passed, the administration will have authority to negotiate trade agreements under fast track until October 1, 2001. These include negotiations with the Government of Chile on a comprehensive trade agreement and further negotiations under the World Trade Organization.
We believe that it is critical for the United States to endeavor to establish fair trading mechanisms within the context of the Chile negotiations. Attached to our testimony are our negotiating objectives for the Chilean talks. Our priority is to secure price transparency in the Western Hemisphere. Since 1989, U.S. wheat producers have been disadvantaged in marketing their product domestically because of discriminatory pricing practices of the Canadian Wheat Board which were permitted to remain in the Canada-United States Free Trade Agreement or CUSTA. The failure of U.S. negotiators to address the conditions of competition that exist in a so-called free trade area is unacceptable. Yet, the situation was made worse when the United States negotiated the North American Free Trade Agreement, again failing to address the Canadian Wheat Board pricing activities in the United States and Mexico.
The upcoming negotiations between the United States and Chile represent a perfect opportunity to finally attain a free trade regime in the Western Hemisphere that exposes United States and Canadian producers and exporters to the same requirements on pricing. Our members will base their support on the establishment of a price discovery mechanism among the trading partners in the hemisphere. Such a mechanism would assure that the free trade commitments made by parties to the agreement were adhered to. Moreover, it would reverse the current trend that allows certain parties, namely the State-supported monopoly marketing board, the Canadian Wheat Board, to be exempted from free trade principles and practices.
Page 73 PREV PAGE TOP OF DOC We further believe that a good negotiation with Chile on wheat will lay the foundation for a more productive round of negotiations with Europe, Canada, and Australia on export subsidies and anti-competitive behavior when we begin a review of the Uruguay Round Agreement on Agriculture in 1999.
Thank you again, Mr. Chairman, for the time to express our view today. We look forward to an ongoing and constructive discussion on these issues with you and your colleagues in the coming weeks and years. Our members livelihoods are at stake on these negotiations and we take these matters very seriously and appreciate the committees attention.
Thank you. I'll be pleased to take questions when the time is appropriate.
[The prepared statement of Mr. McLain appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you, sir. Mr. Curtis.
STATEMENT OF MARC CURTIS, BOARD OF DIRECTORS, AMERICAN SOYBEAN ASSOCIATION
Mr. CURTIS. Good afternoon, Mr. Chairman. I'm Marc Curtis, a soybean, rice, and corn producer from Leland, MS and I currently serve on the executive committee of the American Soybean Association's Board of Directors. ASA represents over 31,000 producer members in 26 States on issues of importance to all U.S. soybean farmers. We commend you for holding this hearing and very much appreciate the opportunity to appear before you today.
One of ASA's top priorities is to gain greater access to foreign markets. Fully 50 percent of every soybean crop produced in this country is exported, either as whole soybeans, as meal and vegetable oil, or in a form of poultry and pork products. As world food needs double over the next 30 years, U.S. soybean producers are ready and able to respond; but we must have greater access to these growing markets. We must have assurances that crops and products which are genetically enhanced through modern biotechnologywhich is vital to keeping pace with the global demandwill be accepted in international trade. This access and these assurances can only be achieved through new trade negotiations. For this reason, U.S. soybean producers strongly support unconditional renewal of fast track authority before Congress adjourns this fall.
Page 74 PREV PAGE TOP OF DOC I won't spend much time recounting specific benefits and limitations of past trade agreements. NAFTA has been an unqualified success for U.S. soybean producers. Mexico's imports of soybeans and soybean meal have nearly doubled since 1994. So have imports of U.S. porkfed with U.S. soybean meal. We would like to see an expanded NAFTA prohibit the use of differential export taxes for oilseed and oilseed product exports from Brazil and Argentina; but we would not endanger passage of fast track authority by conditioning our support on obtaining such a commitment.
In our view, the Uruguay Round Agreement did not go far enough in reducing tariffs and disciplining export practices. It still allows U.S. competitors to indirectly subsidize vegetable oil and soybean meal exports and it has not adequately reduced import tariffs in countries with major market potential.
As a member of the American Oilseed Coalition, ASA has endorsed total elimination of all tariffs and export incentives for oilseeds and oilseed products to create a level playing field in the oilseed sector. We are actively working with administration trade officials to lay the groundwork for this initiative in the current APEC negotiations. We believe strongly this goal can and should be achieved in the next round of negotiations under the WTO. But we, again, we would not endanger fast track by conditioning our support on obtaining such a commitment.
In the past 2 years, U.S. farmers have become both aware of the benefits of crops enhanced through biotechnology and the challenges these crops face in gaining approval in some countries. Releasing the potential of biotechnology to increase productivity and diversify our markets will require increased efforts by both Government and industry to resolve these challenges. It will also require the development and acceptance of global standards for trade and biotech products in the next round of WTO negotiations. But, again, we would not endanger fast track by conditioning our support on obtaining such a commitment.
Page 75 PREV PAGE TOP OF DOC Those in the U.S. agriculture community who would trade their support for fast track for some specific commitment are confusing negotiating authority with the agreements to be negotiated. We cannot burden our negotiators and force them to achieve specific objectives. We can only get them out on the playing field and work closely with them over the next several years. If our individual goals are well considered and important to our industries, our negotiators will certainly work hard to obtain them. But considering the vital importance of trade to U.S. agriculture and the role of past trade agreements in unlocking the phenomenal growth of U.S. agricultural exports over the past several decades, no commitment is so important that it should be allowed to jeopardize passage of fast track authority.
As far as I know, Mr. Chairman, no foreign country is walking the halls urging Congress to renew U.S. fast track authority. All of our foreign customers and competitors are out there negotiating bilateral and regional trade agreements with each other. Some of these countries may be just as happy that we're here rather than out there. Failure to renew fast track this year would probably make their day.
The only condition ASA would place on renewal of fast track authority has already been met. The administration has made clear that agriculture will be a top priority for U.S. negotiators. Beyond this, the administration should have the broadest possible authority and greatest possible flexibility to negotiate the best possible agreements.
Thank you, Mr. Chairman, and I will be glad to answer any questions.
[The prepared statement of Mr. Curtis appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you, sir. Mr. Pettus.
STATEMENT OF JACK PETTUS, WASHINGTON DC REPRESENTATIVE, NATIONAL BARLEY GROWERS ASSOCIATION
Mr. PETTUS. Thank you, Mr. Chairman. Good afternoon. My name is Jack Pettus, a consultant for the National Barley Growers Association. On behalf of the U.S. barley producers, we appreciate this opportunity to discuss fast track authority with you today.
Page 76 PREV PAGE TOP OF DOC First of all, I guess we have to address the TRQ issue since it's been brought up on a number of occasions today. We appreciate the efforts of the administration leading to the Canadian decision to suspend application of the TRQ; but, let's be realistic, this is a minimum access quota that we have never been able to fill because of the other structural barriers to getting into their market. Frankly, we don't have the leverage under NAFTA to do a whole lot more along this issue until we can get into the WTO negotiations, which I will get into a little bit later on.
NBGA supports extension of fast track authority for continued WTO negotiations, only if those negotiations include developing market disciplines on state trading enterprises, creation of a tough, enforceable dispute settlement mechanism for sanitary, phytosanitary disputes; and a commitment to ensure that decisions regarding the trading of gene-modified organisms is based on science-based standards. Further, we support absolute linkage of WTO membership for China with significant reforms to its agricultural sector, including: A commitment to market access standards, transparency, import quotas, import licensing, and minimum access standards agreed to by other developed nations in the WTO.
U.S. barley producers also believe that a thorough review of the Canadian system is needed prior to the 1999 resumption of agriculture negotiations in Geneva. Such a review could focus on the ways that the marketing, transportation and social systems in operation in Canada undervalue barley within the system, making nearby U.S. markets look attractive even when predatory marketing activities of the Canadian Wheat Board are distorting prices within the U.S. marketing system. Quantifying the trade distorting effects of these systems would be useful to our trade negotiators.
We believe it would be a terrible mistake to use fast track authority to pursue an enlargement of NAFTA. The underlying Canada-United States Free Trade Agreement, CUSTA, may have been a good deal for some; but, for U.S. barley producers CUSTA was a one-way liberalization of trade that failed to take into account many aspects of the Canadian social safety net and state-trading monolith that undervalue barley within their system and make our markets even more attractive to Canadian imports. In addition, many of these same factors distort competition in other export markets and also prevent U.S. barley producers from marketing into and through the Canadian system.
Page 77 PREV PAGE TOP OF DOC Was CUSTA a one-way liberalization of the continental barley market? According to USDA, Canadian agriculture exports to the United States grew between 1993 and 1996 at a 13.7 percent rate to $6.8 billion. U.S. Census data for that period suggests that barley imports represent nearly $520 million of that $6.8 billion total. While we don't have an official value estimate of U.S. exports of barley to Canada, we do know that only 1,000 tons has been shipped north since 1988. For the sake of comparison, we estimate the value of those exports at less than $150,000.
When the United States, Canada, and Mexico sought to expand CUSTA to a North American Free Trade Agreement, Canada successfully fought to ensure that agriculture provisions of CUSTA were left untouched by NAFTA negotiators. Instead of a trilateral agreement on agriculture, we're forced to settle for a series of bilateral agreements. While the U.S. barley growers are supportive of the bilateral agreement with Mexico and appreciative of the new trade opportunities we've developed there, the failure to forge the trilateral agreement on agriculture continues to impair our faith in NAFTA as a framework for further expansion of trade. It seems to us that using NAFTA as a blueprint for expanding trade opportunities in Latin America and elsewhere would only encourage others to insist on exempting certain sectors from negotiations. Moving forward on its own, the United States could engage in trade negotiations with Chile and others that are in the best interest of U.S. producers, rather than carrying the albatross of NAFTA's defects.
Despite the problems of the past, U.S. barley producers have faith that U.S. trade negotiators, unencumbered by the baggage of CUSTA, can open trade doors to further expand our marketing opportunities in Latin America and the Pacific Rim. Should they be as successful as we believe they are capable, the bilateral agreements forged in these areas could become the framework for the Free Trade Area of the Americas and could help convince our northern neighbor to join our efforts, allowing for a fresh look at United States-Canada issues.
Page 78 PREV PAGE TOP OF DOC Thus, U.S. barley producers believe that language must be included in the fast track legislation explicitly restricting the use of the negotiating authority to pursue NAFTA enlargement unless we have a bilateral agreement to enter into negotiations to resolve the United States-Canada cross border trade disputes.
In closing, U.S. trade officials need the tools to open markets for U.S. agriculture. The emerging economies of Latin America and Pacific Rim are our markets of tomorrow. Our competitors are winning greater access and setting crucial precedents. U.S. barley growers hope we can be of assistance in the process of renewing U.S. leadership in trade liberalization talks.
[The prepared statement of Mr. Pettus appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you, Mr. Pettus. It occurs to me that your offering qualified support for fast track.
Mr. PETTUS. We want to support fast track, but we really believe that we have no leverage under NAFTA, there is no need to expand NAFTA. I think the administration's legislation that they sent up reflects a little bit of that concern. There's a lot ofwell, NAFTA is a lightning rod. I think the fact that they did not include specific mention of NAFTA in their legislation is important, but we need to go ahead and nail that down.
Mr. BARRETT. I think you also said that it includes some promising language?
Mr. PETTUS. Oh yes, in the agriculture provisions.
Mr. BARRETT. Could you be more specific?
Mr. PETTUS. Well, I mean, I think covering the need to focus on state trading enterprises, sanitary/phytosanitary standards being science specs.
Page 79 PREV PAGE TOP OF DOC Mr. BARRETT. I see. OK, thank you.
Mr. Czub, I'm glad to know that you plant a little corn in New York State.
Mr. CZUB. Well, we have a joke that the corn we plant is between the cracks of the concrete; but, we actually produce about 1.3 million acres of corn in New York.
Mr. BARRETT. Well, I was interested to know that your corn growers association enthusiastically supports NAFTA, or the fast track authority. How do you think that fast track would benefit all segments of agriculture, or are you speaking only of your own parochial interests?
Mr. CZUB. Well, as you know, all of the livestock industry uses corn. In fact, over 70 percent of the corn in the United States is indirectly used in the livestock industry and so I guess I was speaking parochially, but it does impact the corn industry significantly and our position is, basically, if we can increase trade, that's our goal; and not just for us, but for anybody associated with us.
Mr. BARRETT. Thank you.
Mr. McLain, I appreciated your testimony. I thought it was very good testimony.
Mr. MCLAIN. Thank you, sir.
Mr. BARRETT. Rather succinct and to the point; and I share some of your concerns, coming from a district that also raises a lot of wheat. We have some similar concerns and I've already alluded to the fact that I have problems with trading enterprises, Canadian border issues, and a few of those things. In your testimony your reserving final judgment on fast track, I believe, until Congress completes its consideration of this legislation. Is that not correct?
Page 80 PREV PAGE TOP OF DOC Mr. MCLAIN. That's correct.
Mr. BARRETT. Can you tell me what your association feels is the greatest single impediment? What problems do you have specifically; yours, a little bit general?
Mr. MCLAIN. Well, we're going on the track record of previous agreements. We were not treated fairly. We feel that, in the CUSTA and the NAFTA agreements earlier, especially with the state trading enterprises. We want price transparency; we talked about level playing field I think in some discussions earlier, and to be able to establish that we need to go ahead and make sure that governments aren't unfairly subsidizing, whether it would be through transportation or whatever methods, and I think that's what we're looking for. So we are hoping that our negotiators will remember these things and, at least before we accept fast track as it is, we need to know where we are going and we just need to make sure that we know what we're going to do.
Mr. BARRETT. Do you have any sense that with the advent of NAFTA we're perhaps losing a public relations battle? Are the negatives beginning to occur now when were talking about fast track? Are you feeling that only negatives are being publicized?
Mr. MCLAIN. Well, it depends on what group of people your talking about. In my group of people, we don't feel that way. We feel that some tradeoffs had to be made in the past and we were one of the tradeoffs, and now we feel like we have the opportunity to address that. I also grow corn and soybeans and cotton and barley, so I'm considering a lot of commodities here with what I grow, and wheat's not the largest crop that I grow. But, in all fairness to farmers across the boardand I would have liked to have answered his question earlierbecause I think we have to be fair to all of agriculture, and not just because we're happy in one commodity we're not happy in the other. I think we all need to stick together on this.
Page 81 PREV PAGE TOP OF DOC Mr. BARRETT. I agree, thank you.
Mr. Curtis, in your testimony you state that, and I think I'm quoting here, ''Those in U.S. agriculture community who would trade their support for fast track or some specific commitment are confusing negotiating authority with the agreements to be negotiated.'' I'm not sure that I'm following you. Can you expound a bit on that statement?
Mr. CURTIS. Yes, sir. What we're saying is that if you precondition your negotiators by sending them out and saying we must have this, this, this; then you are actually limiting their ability to negotiate. We're saying that, let's go negotiate, I can pledge that ASA will be there at the table in the hallways with the negotiators when the deals are being put together and let's talk about what's best; let's have the give and take at that time. Let's not go out and say if you can't get this, this, and this, then we're through with you, we don't want anymore of that. We're saying let's put it out on the table and get the best deal we can.
Mr. BARRETT. I understand, that helps. Thank you, very much.
Mr. MINGE. Thank you. I appreciate all of your being here this morning and this afternoon. As I've listened to the testimony, it strikes me that the areas of discussion and contention between different presentations and questions and comments has not been over whether or not we should expand trade opportunities and negotiate trade agreements, but instead the question is how do we go about doing that.
The fast track process has no doubt left many sectors of the economy unhappy, but my feeling with trade issues has been focused largely on agriculture. I certainly have heard from agriculture that we're unhappy about a number of things and we have yet to hear from dairy, which I know is unhappy, but, wheat producers, barley, soybeans, I have heard from your organizations over the last several years about things that were not done in GATT or deficiencies in our relationship with other countries. I've not heard so much from corn growers that you've had problems of this type, but I expect there are some problems with corn, as well.
Page 82 PREV PAGE TOP OF DOC The question I'd like to pose to you is this: If we are negotiating an agreement and it covers the U.S. economythe international trade with all items in our economyincluding services, and we all want to be at the table, we know that table isn't big enough; and those of us that are not at the table would like to be in the hallway, and we know the hallway isn't big enough, it'd have to accommodate hundreds and hundreds of people. Apparently, in the past, we have hardly even been in the hallway; we've perhaps been out in the garden or at some other more remote location, and as a consequence, what I commonly hear is: The Trade Representatives office didn't understand the situation in this commodity area or that. They made a mistake. They cut a deal at the last minute and this whole package was brought back and under fast track we didn't have a chance to correct it, it had to be handled in a side agreement.
So, if that's the situation, are we better off with or without fast track? Could we correct some of these deficiencies and oversights more easily if we were simply able to call the U.S. trade representative up and say, ''Look, you know you're bringing this thing back to Congress, but this thing has got holes in it. We had somebody who was a sharper negotiator from another country that took us to the cleaners, with respect to soybeans or whatever it might be; and this has to be cleaned up now before it goes for ultimate approval in Congress.'' What response or what comment do you have on that situation, that sort of observation. I just invite each of you to make whatever brief comments you feel would be appropriate.
Start with you, Mr.Czub.
Mr. CZUB. Obviously, it is each of our association's responsibilities to pay attention to what's going on and hopefully, with communicating properly with the trade organizations or other agriculture organizations, we can ferret out any problems that are going on in that process. Again, that's our responsibility and as long as we have good line of communications between everybody, I don't see it as a problem.
Mr. MCLAIN. I agree, also, that we need to have input and one of the things that we were hoping would happen would be that we as producers in the industry and also the Congress, would be able to have input with negotiators as we're negotiating these positions. One thing that I might add that disappointed us in the past in the NAFTA agreement, we had learned from our mistakes in the CUSTA, so in NAFTA we tried to take care of the problem with the state trading enterprises, but we, you know at the time, we had input with negotiators, and we were promised that they would look into these issues, so we felt pretty good about it. Then, the next thing we knew, they said Canadians didn't want to talk about it, so we didn't get anything. So, I guess we feel that we've been misled a little bit on that. So, that's why we feel like we need some assurances this time, we need to know what the issues are and then we need to let those people know, well, let them know what the issues are, and hopefully get some assurances that they will at least have a discussion about it.
Page 83 PREV PAGE TOP OF DOC Mr. MINGE. So, a shorter rope? Not quite as long a rope as we had with NAFTA?
Mr. MCLAIN. That's probably right.
Mr. MINGE. Mr. Curtis?
Mr. CURTIS. Yes, sir. My observation on your comments would be to that side agreements are effective when it comes to a small number of participants, but there are some bigger issues that weren't on the table that are out there todaybiotechnology being one of themand that there's no way we can solve our biotech issues through side agreements, it's got to include everyone.
Mr. MINGE. Thank you. Mr. Pettus?
Mr. PETTUS. Well, clearly, in the past, in CUSTA, our trade officials did not have enough understanding of the social and marketing systems that they were dealing with in Canada. That's one of the reasons that we are pushing that we need to do our homework now for 1999 in the WTO. With regard to fast track, though, it seems clear to me from what I've read that other nations have a problem negotiating with the United States when they can take something and come back here and have it all cut to pieces, when they're trying to negotiate in good faith. It does create a problem, not to suggest that Congress doesn't have a role in that, we're very pleased with Congress's role in that; but, we do need to do our education early, we need to study the systems that we're trying to reform. I mean, that would be my comments on your query.
Mr. MINGE. Thank you.
Mr. BARRETT. Thank you very much. Again, we appreciate your testimony and your presence today. We hope you'll be able to come back again another day.
Our final panel. We have joining us Mr. Karl Johnson, with the National Pork Producers Council; and Mr. Ed Coughlin, with the National Milk Producers Federation.
Page 84 PREV PAGE TOP OF DOC Mr. Johnson, you can go ahead when your ready.
STATEMENT OF KARL JOHNSON, PAST PRESIDENT, NATIONAL PORK PRODUCERS COUNCIL
Mr. JOHNSON. Thank you, Mr. Chairman, Congressman Minge. I'll try to be as brief as possible.
My name is Karl Johnson, I'm a Mankato, MN based pork producer, with a 1,800 sow farrow-to-finish operation, raising hogs, corns, and soybeans on my family farm. I'm a former president of the National Pork Producers Council. I serve as chairman of the National Pork Producers Council Trade Committee and as secretary-treasurer of the U.S. Meat Export Federation. Again, I thank you for the opportunity to be here and express the opinions of the pork producers today on our views of the importance of renewing fast track trade negotiating authority.
Renewal of fast track is critical to the pork industry. Pork producers realize that their future is based on their ability to export. Therefore, the renewal of fast track trade authority is of a paramount importance to producers.
The U.S. pork industry has reaped tremendous benefits from recent trade agreements. Since 1995, when the Uruguay Round went into effect, U.S. pork exports to the world have increased by about 45 percent in volume terms and 75 percent in value terms from 1994 levels. The U.S. pork industry exported over $1 billion of pork for the first time in 1996. We anticipate the explosive growth to continue in 1997.
Like other American pork producers, my family has benefitted from these trade agreements through strong and growing exports. The boost in exports over the past several years has been fundamental to the economic health of our business. The recent expansion of our production up to 1,800 sows is largely based on the success of exports. Last year global trade boosted the bottom line for pork producers: It's estimated to be about $10 per head on a cash basis.
Page 85 PREV PAGE TOP OF DOC Many problems in international trade pre-date both Uruguay Round and NAFTA. These problems must not undermine agriculture's support for fast track, but compel us to support it as a means of finding effective solutions.
Removing tariff and non-tariff barriers to trade, opening new markets and gaining increased access to existing markets is critical for U.S. pork producers. If the United States is not leading the charge in 1999, at best, nothing will happen, which means that U.S. agriculture will lose billions of dollars in potential sales. At worst, the European Union and other countries will build momentum for initiative hostile to U.S. agriculture, such as weakening the sanitary and phytosanitary agreement.
Renewing fast track authority will facilitate further multilateral, regional and bilateral trade agreements and spur the exports to keep U.S. agriculture healthy and profitable. I urge you to support fast track.
Thank you very much.
[The prepared statement of Mr. Johnson appears at the conclusion of the hearing.]
Mr. BARRETT. Thank you, sir. Mr. Coughlin.
STATEMENT OF EDWARD COUGHLIN, ACTING CHIEF EXECUTIVE OFFICER, NATIONAL MILK PRODUCERS FEDERATION
Mr. COUGHLIN. Thank you, Mr. Chairman. It's my pleasure to be here this morning on behalf of the National Milk Producers Federation. Listening to the testimony here, I think we could all probably sum it up, most agricultural organizations support international trade agreements that increase net exports of products. On the other hand, the organizations feel that there hasn't been aggressive actions by the administration to get the benefits that are promised when the trade agreements are negotiated. That certainly is the position of the National Milk Producers today.
Page 86 PREV PAGE TOP OF DOC We don't feel that the trade agreements to date have delivered the expanded market opportunities that U.S. dairy producers expected. We've seen some tariff reductions, but we've also seen some new programs come into play. For example in Canada, where the Canadians came up with a new subsidy scheme, which had the same net effect in terms of the values that producers receive for milk in Canada. As we look down the road, the dairy industry is on the verge of no more dairy price support program, that's only 27 months away; the prices that the U.S. dairy farmers are going to receive will be impacted by world prices. World prices for would return $2.40 a hundredweight less to U.S. dairy producers than the present price that we get in the United States.
The U.S. dairy industry's needs to expand markets. You go back and you look at what does the U.S. dairy industry does. Every year we producewith the same herd we had last yearabout 2 1/2 percent more milk than we did the year before. Domestically, we sell about 1 percent more milk. So, we have an imbalance. If we're going to keep a healthy dairy producer sector in this country, keep the existing producers on the farm, we're going to need to find new markets for dairy products. That's where foreign market development comes in.
The U.S. dairy industry has done some work in that area. We admit we're a late comer in terms of getting into the international market but it is imperative that the U.S. dairy industry become a player in international markets.
Three U.S. dairy industry groups recently filed a section 301 petition with the U.S. Trade Representative, the organizations are National Milk Producers; U.S. Dairy Export Council which is the organization funded mostly by producers to build export markets for dairy products; and the International Dairy Foods Organization which represents most U.S. dairy processors. We filed this petition challenging certain Canadian practices. One practice that we're challenging is the practice that Canada establishes prices for milk that goes in export markets which are lower than the prices of milk in the domestic market, and that's a subsidy. It's a circumvention of what Canada agreed to do as part of the Uruguay Round commitments. Our asks the U.S. Trade Representative to lodge a complaint with the World Trade Organization. We haven't had an official response to that yet, but we're optimistic that the U.S. Trade Representative's office will be submitting our complaint to the WTO for resolution.
Page 87 PREV PAGE TOP OF DOC We met last Friday and took up the issue of fast track, and here's what we decided. The National Milk Producers Federation conditionally supports fast track authority for negotiating trade agreements. Before we could offer our unconditional support for fast track authority, we want the administration to take aggressive actions, using the tools already at its disposal to attack market access and other trade distorting foreign practices that prohibit U.S. dairy product exports growth. Such action should: One, include accepting the petition we filed against the Canadian dairy practices; two, initiating a timely WTO dispute settlement action against, what's called European Union's inward processing system for cheese, unless as a result of negotiations, the European Union immediately discontinues the practice; and three, adopting as part of their strategy, trade negotiating objections to reduce tariffs by U.S. dairy trading competition and to eliminate all export subsidies over a period of time, and to require traders to base sanitary standards on sound science. Some of the same things you've heard from other groups here.
In listening to administration, we're confident that the administration will take the aggressive actions that National Milk Producers is seeking, and we expect to be able to unconditionally endorse fast track authority.
I appreciate this opportunity to bring our views to you today.
Mr. BARRETT. Thank you, sir. You've indicated that the dairy industry is, I believe, becoming increasingly more focused on export sales, and I think your conditional support would indicate such.
Mr. COUGHLIN. That's correct.
Mr. BARRETT. But you have another reason, it occurred to me, that foreign market development is important, and you indicated that world prices will directly affect prices received by milk producers in the United States after 1999 when the supports are eliminated. Correct?
Page 88 PREV PAGE TOP OF DOC Mr. COUGHLIN. That is also correct, and if you remember, I stated that the present price of nonfat dry milk on the world marketand that's a heavily subsidized pricewould return to producers in this country about $2.40 a hundredweight less than what they presently receive.
Mr. BARRETT. Do you think fast track will help alleviate some of the pressures that this will cause on the dairy industry?
Mr. COUGHLIN. Well, I think we have no choice. I mean, remember, as part of public policy, the price support program is going away in the year 2000. We're talking 27 months away. The U.S. dairy industry now has the Commodity Credit Corporation to buy the nonfat dry milk that doesn't clear the market. Where's that going to go in the year 2000? It's going to go on the world market. So the quicker we can get a world market that is not heavily distorted by subsidies, the better off the U.S. dairy industry will be.
Mr. BARRETT. Absolutely. Mr. Johnson, one of the goals of fast track authority is to broaden our current agreement, or our agreement with Chile and other Latin American countries, and so on and so forth. Maybe a question to both of you: Are there some concerns or practices that these countries are engaged in now that would be particularly detrimental to your concerns, your industries? Can you highlight anything that jumps out at you?
Mr. JOHNSON. Mr. Chairman, I don't know of any conditions that would be detrimental, but I do feel that probably one of the major countries or the major area that can be a challenge to U.S. pork producers in the world, is South America, specifically Brazil, that they have the potential to take over world markets if we don't become more and more involved in that; but, I don't see any particular areas of concern otherwise.
Mr. BARRETT. Mr. Coughlin, any comment?
Mr. COUGHLIN. I think, like Mr. Johnson, I think that South America is a big giant out there in terms of the future and their ability to produce products. I think they would have a significant ability to produce dairy products; but, we're willing at this point in time to say if we can get an agreement to reduce subsidies, U.S. dairy industry is willing to compete in that environment.
Page 89 PREV PAGE TOP OF DOC Mr. BARRETT. Thank you. Mr. Minge.
Mr. MINGE. Well, again, I'd like to welcome you and particularly Karl Johnson, coming from southwest Minnesota. It's nice to have a familiar face here in the hearing room.
In looking at the two areas that you represent, I'm struck by some different considerations, and Mr. Johnson, may I start with you?
When I look at the opportunities for pork products, it appears that it's Pacific Rim countriesChina, Japan, so onwhere the growing population and growing income in Vietnam and Malaysia, countries like that. Also, when I look at the problems that we've had with exporting pork products to those countries, it's my impression that we have proceeded largely on a bilateral basis and often taken advantage of unique situations like Taiwan's pork production being compromised because of disease and the question really is: Where are we most effective in promoting pork exports, is it nimbleness in dealing with these bilateral situations and opportunities or have we seen the greatest market opportunity result from GATT or NAFTA, programs like that?
Mr. JOHNSON. Well, Congressman, I think that two things: First of all, we have, because of NAFTA, have proceeded to dominate the Mexican market. We now have 95 percent share in the Mexican export market. So, locally we're doing very well. We've grown tremendously in the Canadian market; our exports to Canada are up substantially. However, I think your correct in your assessment that we are very, very potential huge market for us is the Orient. Vietnam by the way is a pretty good producer, so we probably won't get too much into there, but China, Japan obviously is our largest market.
I think the stage has been set by the overall World Trade Organization or the GATT agreement, however. We know that we in the United States are very efficient pork producers, but we have to have access. We also know that the agreements that were reached in GATT were not perfect; we've had problems, but we don't think that there's any other way to resolve these problems than to go back to the negotiating table and open it back up. So I think that to just go to bilateral agreements and not through the World Trade Organization would be a mistake. We think it is very important that we have an overall agreement.
Page 90 PREV PAGE TOP OF DOC Mr. MINGE. And when you say to the World Trade Organization, you mean another round of GATT talks?
Mr. JOHNSON. Correct, another round of GATT talks.
Mr. MINGE. With respect to dairy, I note that we have been an importer of dairy products and the export is really inconsequential, if any. I'm wondering what opportunity we see in the world market for dairy products and if a greater concern in the dairy industry might not be New Zealand and other low production areas coming into our market and taking some market share that would create some disruption for our dairy farmers?
Mr. COUGHLIN. Certainly we do have imports, but in recent years imports and exports have been about the same in terms of total dairy products. The amount we import and the amount we exportyou look like you might have some figures there that would dispute that.
Mr. MINGE. OK, well the figures that I have do not disclose any exports at all.
Mr. COUGHLIN. OK. We do export dairy products. There are significant exports, back in 1989we exported considerable quantities of nonfat dry milk in the neighborhood of 300 million pounds and up until last year, 1989 was the year with the highest price we'd ever achieved for dairy farmers. It doesn't take much in that dairy balance to move a quantity of product out of the United States. So there have been exports of dairy products and they have done improved U.S. milk proces. But the world price, because of subsidies, has been below ours.
Mr. MINGE. Well, would that be exports above and beyond through the Government programs which purchase surplus supply and through DEIP.
Mr. COUGHLIN. Right. You have the Dairy Exports Incentive Program which is a declining, it's a declining quantity that you can export with a subsidy and that's where we have our problem with Canada. Instead of them declining like they're supposed to, they've been growing by circumventing the obligations that they agreed to. The U.S. Dairy Export Council, for example, is an organization funded by a dairy farmer money through the promotion program. At roughly $5 million there; there's also some Government matching funds through the Government matching funds program and then there's some direct membership, like Dean Foods or Kraft or others, and they've got about $8 million that they are spending annually. They have offices in FIVE Asian cities, they've got two offices in China, Shanghai, Hong Kong, they've got Tokyo, Seoul, and Bangkok. They've got Mexico City and Paris, as well. I think Mr. Johnson said he was affiliated with U.S. Meat Export Federation, we're beginning to try to copy, if you will, some of what they have done, to build the markets for dairy products overseas. Generally, the consumers particularly in Asia, have some money to spend; they're per capita consumption of dairy products is quite low; so, it's a good market to grow.
Page 91 PREV PAGE TOP OF DOC Mr. MINGE. Thank you.
Mr. BARRETT. Thank you very much, gentlemen. That will conclude today's hearing. We appreciate your attendance as well as your excellent input.
The Chair would seek unanimous consent to allow the record of today's hearing to remain open for 10 days to receive additional material and any supplemental responses from witnesses to any questions that were posed by any member of the panel. Without objection, it is so ordered.
This hearing is adjourned.
[Whereupon, at 1:07 p.m., the subcommittee adjourned subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
STATEMENT OF AUGUST SCHUMACHER, JR., UNDER SECRETARY, FARM AND FOREIGN AGRICULTURAL SERVICES, U.S. DEPARTMENT OF AGRICULTURE
Mr. Chairman, members of the subcommittee, I am pleased to appear before you today with Deputy U.S. Trade Representative Jeffrey Lang, to discuss the administration's proposal to renew fast track authority, ''Export Expansion and Reciprocal Trade Agreements Act of 1997,'' and how we plan to use that authority to advance the interests of U.S. agriculture.
Future growth in farm incomeand growth in income and jobs from handling farm productsis going to come from trade. This is why the debate over renewal of fast track authority is the most critical trade policy debate now underway.
Why Trade Matters to U.S. Agriculture. All of us recognize that agriculture's future is tied to trade. U.S. agricultural exports climbed to $60 billion in 1996, the highest ever. This year's figure will be the second highest on record. Between 1990 and 1996, the value of U.S. agricultural exports has increased by $20 billion, or nearly 50 percent. Each week, on average, American producers and processors are exporting $1.1 billion in farm and food products to foreign markets.
Page 92 PREV PAGE TOP OF DOC American agriculture is more than twice as reliant on foreign trade as the U.S. economy as a whole, with exports currently accounting for an estimated 30 percent of agriculture's cash receipts. Production from up to a third of U.S. cropland is exported.
According to a recent analysis, the share of U.S. agricultural production that is exported averages about 26 percent for coarse grains, 49 percent for rice, 54 percent for wheat, 36 percent for soybeans, 45 percent for cotton, and 57 percent for hides and skins. Exports are agriculture's source of future growth in sales and income. The domestic U.S. market is relatively mature and slow growing, while global demand is expanding rapidly. More than 95 percent of the world's consumers live outside U.S. borders.
Of course, agricultural trade is also important to the overall U.S. economy. USDA estimates indicate that U.S. agricultural exports support nearly a million jobs, more than 60 percent of those jobs being off the farm in the areas of processing, handling, transportation, and trade. Export-related jobs pay higher than average wages, providing good-paying jobs for American workers in rural and urban areas throughout the nation.
In addition, agriculture is one of the few U.S. industries that consistently runs a trade surplus. In fact, among industry sectors, agriculture was the leading positive contributor to the U.S. trade balance in 1996not chemicals, industrial machinery, or computers, but agriculture. Our agricultural trade surplus in fiscal 1996 topped $27 billion, the largest farm trade surplus in our history, and enough to pay for virtually all the cars imported last year from Japan and Germany combined.
How Trade Agreements Have Expanded Export Opportunities for U.S. Products. Today, the United States is the world's largest exporter of food and farm products, commanding around a 22-percent share of global agricultural trade. If it were not for past trade agreements, I very much doubt that we could make this claim.
While we still have many trade issues and inequities to resolve, trade agreements have helped expand export opportunities. These agreements have opened markets, reduced the unfair competition, brought some discipline to sanitary and phytosanitary barriers, and introduced more effective dispute-settlement procedures in global trade.
Page 93 PREV PAGE TOP OF DOC For example, as a result of the Uruguay Round:
Japan had to open its market to imported rice. Japan's minimum rice imports will grow from 550,000 tons in 1995 to 758,000 tons by 2001.
U.S. corn exports to the Philippines set a record of approximately 400,000 metric tons in 1996/97 following the tariffication of that country's corn import ban.
Under the World Trade Organization (WTO) Sanitary-Phytosanitary Agreement, the United States has won major victories against unfair trade barriers that were not scientifically justifiable. The United States won a WTO case against the European Union's (EU) ban on imports of red meat from animals treated with growth-promoting hormones. The WTO panel found that the EU ban was unjustified and unfairly restricted U.S. exports.
The EU agreed to reductions in both the quantity and budgetary outlay for export subsidies for wheat and flour. The Uruguay Round provides assurance that the EU will not return to the extremely high, distortive subsidy levels of the past.
The Philippines reduced tariffs on soybeans and soybean meal. The resulting lower prices for soybean meal, coupled with increased market access, led to increased imports by the Philippines. The United States accounted for all of the Philippines' soybean imports and half of its soybean meal imports in 1996.
Hong Kong bound its cotton tariff at zero. Since 1993, the value of U.S. cotton exports to Hong Kong has risen more than 55 percent to $42 million in 1996.
Japan will reduce its beef tariff from 50 percent to 38.5 percent. Tariff reductions already implemented have contributed to a 74-percent increase in U.S. beef export volume since 1990, helping to make the United States the No. 1 supplier of beef to Japan.
Japan agreed to lower incrementally its minimum import price for pork by 29 percent. Since 1994, U.S. pork exports to Japan have more than doubled, reaching $750 million last year.
Page 94 PREV PAGE TOP OF DOC Korea has opened its market to poultry imports, which it banned completely until 1994.
South Korea established a quota for oranges of 15,000 tons in 1995, 20,000 tons in 1996, and 25,000 tons in 1997. The quota will be expanded thereafter by 12.5 percent annually. Today, Korea is the fourth largest market for U.S. oranges, with exports in 1996 valued at $14 million, compared to $2 million in 1994. Moreover, the United States supplies about 95 percent of the Korean orange market.
Under the North American Free Trade Agreement (NAFTA), we can also point to trade success for U.S. agriculture:
U.S. corn exports to Mexico reached a record 6.3 million tons in 1996, more than twice the amount required under Mexico's tariff-rate quota.
Mexico eliminated its import licensing for wheat and agreed to phase out tariffs over a 10-year period. Since NAFTA went into effect, U.S. wheat exports to Mexico have averaged nearly a million metric tons a year, with 1996 exports totaling more than 1.5 million tons valued at $325 million.
Tariff preferences for U.S. rice helped increase the U.S. market share in Mexico from 40 percent in 1992 to 98 percent last year.
Mexico is scheduled to eliminate tariffs on soybean meal and crude and refined soybean oil over a 10-year period. Since 1990, exports of soybeans and products have tripled to nearly 3 million tons, valued at $869 million.
Mexico will phase its cotton tariff down from 10 percent to zero over 10 years. Last year, Mexico imported $257 million of U.S. raw cotton, a $68-million increase over the 1993 level.
Under the U.S.-Canada Free Trade Agreement (FTA) and NAFTA, U.S. beef is exempt from Canadian duties and quantitative restrictions. The resulting improvement in the competitive position of U.S. beef led to an increase in U.S. market share to 57 percent in 1996 from 9 percent in 1988.
Page 95 PREV PAGE TOP OF DOC Duty-free treatment for U.S. pork into Canada and Mexico, as a result of the U.S.-Canada FTA and NAFTA, has allowed the United States to capture more than 90 percent of the import market in both these countries.
Duty-free access to the Mexican poultry market has propelled Mexico into the third largest market for U.S. poultry exports. In 1996, Mexico imported nearly 5 percent of U.S. broiler meat exports and 41 percent of turkey meat exports.
Why Further Trade Negotiations Are Needed
Despite past progress, trade liberalization is far from complete. U.S. producers continue to face an array of tariff and nontariff barriers, unfair trading practices, and preferential trading arrangements in key markets around the world.
For example, preferential trading arrangements in South America are expanding. Without similar access for U.S. products, we stand to forfeit much of the growth in these key markets. Argentina is expanding its preferential trading arrangements to encompass most of South America's corn importers. Other MERCOSUR members (Brazil, Paraguay, Uruguay) can buy Argentine corn duty free, while U.S. corn continues to face import duties. Similarly, membership in MERCOSUR gives Argentine wheat preferential access to Brazil and Chile. Preferential tariffs for MERCOSUR partners Argentina and Uruguay make U.S. rice less competitive in Brazil, one of the world's largest markets. And through MERCOSUR, cotton producers in Argentina and Paraguay have preferential access to Brazil, the world's second largest cotton importer.
The recent Canada-Chile free trade agreement provides duty-free access for Canadian durum wheat shipped between April 15 and November 15, with duties for the remainder of the year being phased out over five years. This same agreement allows Canadian producers to ship 4,000 tons of their beef and 3,000 tons of their pork to Chile duty free (and these numbers expand over time), while U.S. beef and pork face 11-percent duties.
Phytosanitary restrictions are increasingly being used as barriers to trade, pointing out the need for further negotiations to improve and extend current disciplines requiring transparent and scientifically justifiable Sanitary and Phytosanitary (SPS) rules. For example, unjustified phytosanitary restrictions are keeping U.S. wheat out of both Brazil (TCK) and Chile (Karnal bunt). The elimination of phytosanitary barriers in countries like Japan, Chile, Argentina, China, and India could boost our fresh and processed fruit exports by more than $200 million.
Page 96 PREV PAGE TOP OF DOC U.S. grain producers and exporters must compete with government-supported state trading enterprises such as the Canadian Wheat Board. For rice, state trading enterprises in some of the world's largest importing countries, such as Indonesia and the Philippines, restrict the access of U.S. exporters. Fast track is our opportunity to put our best stance forward in upcoming comprehensive negotiations to impose some real discipline on these practices.
Let me give you just three examples of how other countries' preferential trade agreements are hurting U.S. companies.
Reilly Dairy and Food Company of Tampa, Fla., has been working to develop markets for U.S. dairy products, especially in Latin America where U.S. value-added dairy products are desired. But the company faces tough competition from MERCOSUR dairy producers who benefit from preferential duties, and the highly subsidized products of the European Union. In addition, the New Zealand Dairy Board has purchased a cheese plant in Mexico and a milk powder plant in Venezuela to gain access to MERCOSUR and other pact countries and avoid import duties.
Russell Stover Candies of Kansas City, Mo., has identified South America as a key market for its confectionery and candy products. However, Russell Stover has to pay high duties to sell its products in South American markets while its competitors in MERCOSUR countries are able to sell their products at much lower prices.
Crystal International Corporation of New Orleans, La., can not compete in Caribbean and South American markets because members of the Caribbean common market and MERCOSUR grant each other duty preferences. The company, which manufactures value-added products like sauces and powdered drinks, can't be price competitive in these lucrative markets.
Despite the ground-breaking progress made in past agreements, agriculture remains one of the most protected and subsidized sectors of the world economy. Because U.S. agriculture is the most competitive in the world, the trade distortions in agriculture are a particular problem for the United States. As U.S. agriculture increasingly turns to world markets to increase sales, trade agreements that open markets and reduce unfair competition are critical for protecting and improving the health of the U.S. agricultural sector. Free and fair trade allows one of our nation's greatest assetsthe competitive strength of American agricultureto work to full advantage.
Page 97 PREV PAGE TOP OF DOCAnd we need fast track to get there.
How Fast Track Will Be Used
The administration is seeking broad fast-track authority that can be used where needed, where appropriate, and where it is in U.S. interests. This would provide the negotiating flexibility to move forward on multilateral, regional, and bilateral initiatives that present opportunities to advance U.S. economic and agricultural interests.
We are already planning for the next phase of multilateral trade negotiations on agriculture under the WTO, scheduled to begin in a little more than two years. Clearly, further work in the WTO is a high priority. The WTO is the only way for us to address comprehensively the high tariffs or trade-distorting subsidy policies still maintained by many countries around the world. The U.S. role will determine whether world agricultural trade liberalization continues or not.
Several key issues stand out:
Substantial further reductions in tariffs are needed. High tariffs in other countries raise costs for our exporters, and many tariffs are high enough to shut us out of markets.
Tariff-rate quotas (TRQ's) should be substantially increased or effectively eliminated by cutting the out-of-quota duty. Small TRQ quantities and high out-of-quota duties cap U.S. exports. Restrictive methods of administering TRQ's also impede trade.
Export subsidies should be further cut or eliminated. Our producers don't need export subsidies to compete as long as other countries are not driving them out of markets with subsidized products.
Rigorous disciplines should be imposed on the activities of state trading enterprises. In today's economy, there is no justification for monopoly importers or single-desk exporters unless a country is trying to disguise protection or support.
Page 98 PREV PAGE TOP OF DOC Improved disciplines are called for in order to prevent countries from circumventing their trade commitments through disguised subsidies and unjustified nontariff measures. Implementation of Uruguay Round commitments has generally been good, but we are uncovering some practices that appear inconsistent with the spirit, and possibly the letter, of WTO rules.
Rules on sanitary and phytosanitary measures should be appropriately strong so countries cannot disguise protectionist intentions or promote unfounded concerns regarding public health. We want to ensure that other countries establish measures for biotechnology and food safety on the basis of sound science, and we will oppose any efforts to water down current rules.
It is also time to resume negotiations on a comprehensive free-trade agreement with Chile. Our two NAFTA partners already have free trade agreements with Chile. Opportunities are developing here in the Americas that we do not want to miss. We want to push our trading partners to move ahead on the Free Trade Agreement of the Americas (FTAA) agenda for free trade in this hemisphere and on the longer term Asia Pacific Economic Cooperation (APEC) forum commitment to freer trade in the Asia-Pacific region. In addition, new agreements in such areas as Africa may, in time, offer promise for the United States to open up export markets and ensure growth opportunities for years ahead.
But let me make one thing clear. Fast track is not a back door or a blank check to new trade agreements. Congress and the private sector will be involved from the very beginning and through every step of any future negotiations. The fast track process requires extensive consultations, as well as final review and approval of any agreement by a majority vote in both Houses of Congress. Fast track simply sets a timetable for congressional deliberations and requires that Congress vote to approve or reject the final agreement as negotiated, without further amendment.
Page 99 PREV PAGE TOP OF DOC Despite its name, fast track does not set the negotiating pace. U.S. negotiators face no time limit. As the Uruguay Round demonstrated, they are free to continue negotiating for as long as it takes to achieve an agreement meeting U.S. requirements.
U.S. Agriculture Will Pay a Price If Fast Track Is Not Granted
With fast track, we can continue to push the trade liberalization agenda forward. We can continue to lead. Without it, other nations will not take the U.S. commitment seriously.
Without past fast track authority and strong U.S. leadership in the Uruguay Round, the EU would not have committed to permanent reductions in its large, trade-distorting export subsidies on grains and many other products and Japan would not have removed its import ban on rice.
Without renewed fast track authority and continued U.S. leadership of the trade liberalization agenda, other countries may write the future rules of trade. U.S. agriculture will continue to face highand often impenetrableforeign trade barriers, and our competitors and trading partners will forge new trade bonds while the United States sits on the sidelines. Today, all of our major competitorsthe EU, Canada, Australia, Brazil, Argentinaare moving aggressively to secure market access and obtain preferential tariff treatment through regional or bilateral trade agreements
In this hemisphere, most U.S. trading partners are already active in forging closer ties in an effort to provide for economic growth and export opportunities for their agricultural producers. I have already mentioned the MERCOSUR common market, where Argentina, Brazil, Paraguay, and Uruguay provide significant trade preferences to each other in this rapidly expanding region. Chile, one of the best economic performers in Latin America, has been particularly aggressive, signing trade agreements with Bolivia, Colombia, Ecuador, Mexico, Venezuela, MERCOSUR, and most recently Canada.
Many bilateral and regional trade agreements are already operating here in the Western Hemisphere, and the United States is party to only oneNAFTA. While these trade agreements multiply, the U.S. share of the region's total agricultural imports is declining.
Page 100 PREV PAGE TOP OF DOCIn Europe, the EU is already the world's largest trading bloc and is poised for major expansion in the next few years. Through its ''association agreements,'' the EU has already secured for its exporters a significant advantage in the emerging markets of Central and Eastern Europe. In addition, the EU is reaching out to other countries, including those in Latin America, to explore preferential trade agreements. The only way to limit the effects of these agreements and of EU expansion, particularly in agriculture, is by negotiating further multilateral liberalization in the next round of WTO talks.
I can tell you from experience that we won't be able to make any progress in the WTO as long as the United States lacks fast track authority. Without a negotiating mandate, the United States will not have the credibility to push for significant new concessions.
Turning to Asia, we can see that the United Statesas a low-cost, high-quality supplieris well positioned to benefit substantially from trade liberalization among the 18-member APEC group. Reducing tariffs in the fast-growing countries of the Pacific Rim could provide a dramatic boost to U.S. exports. But without fast track, the U.S. commitment to economic development and future trade growth in the region will not be taken seriously.
As I said at the start, the fast track debate is about future profits and income for U.S. farmers and commodity handlers. It is about our ability to conduct a global trade policy and to advance U.S. trade interests. It is about maintaining U.S. leadership of the trade liberalization agenda so that we can ensure that new trade agreements provide fair and increased access for U.S. agriculture.
The absence of fast trackthe procedural authority to implement comprehensive trade agreements is the single most telling limitation on our capacity to open new markets and expand U.S. trade opportunities in the new global economy. This authority is the prerequisite to U.S. negotiating credibility and success on major trade fronts.
Without fast track, we could find ourselves in the marketplace of the 21st century playing by Latin American, European, or Asian rules, and it is very unlikely that these rules will be written to create market access opportunities for U.S. agriculture.
Page 101 PREV PAGE TOP OF DOC In the Uruguay Round and in NAFTA negotiations, we fought long and hard to incorporate the principle of comprehensiveness, so that other countries would not be able to exclude agriculture, as it had so often been excluded in previous agreements. Many of the new trade agreements we are seeing today are being written with large areas of exclusions, particularly in agriculture. If some of our trading partners prevail and new free-trade agreements are written to exempt major segments of agriculture, then the trade opportunities we are looking for will be lost.
With renewal of fast track authority, we can continue to open new opportunities for agriculture; without it, those opportunities may not be there. With fast track, we can maintain U.S. leadership role in initiating and writing new agreements; without it, others will write these rules. With fast track, we can continue to play a major role in determining the future of trade here in our own hemisphere and worldwide. Without it, we'll be on the outside looking in as our competitors and customers sign new agreements.
U.S. leadership in the Uruguay Round and NAFTA negotiations gave us the opportunity not just to participate, but to play a major role in writing the rules of the game. If the rules for new agreements are written by others, we may have to adapt later or be left out. This could put U.S. producers, processors, and exporters at a substantial disadvantage in the competitive marketplace of the 21st century.
STATEMENT OF BRYCE NEIDIG, PRESIDENT, NEBRASKA FARM BUREAU
Mr. Chairman and members of the committee, I am Bryce Neidig, president of the Nebraska Farm Bureau. I am here today representing the American Farm Bureau Federation as well as the Nebraska Farm Bureau. I want to thank you for this opportunity to testify concerning fast-track and its impact on agriculture. The American Farm Bureau represents 4.7 million member families in the United States and Puerto Rico. Our members produce every type of farm commodity grown in America and depend upon export markets for over one-third of our production.
Page 102 PREV PAGE TOP OF DOC Higher living standards around the world depend upon mutually beneficial trade among nations. As living standards rise, the demand for our high quality products grows. The transition to higher living standards depends on trade agreements that protect each nation's ability to exchange goods and services freely in an open market atmosphere with minimum disruption. Our members agree that free trade is the ultimate goal. However, there are disputes with many of our trading partners that must be addressed as the administration moves forward in negotiating new treaties to further expand market access.
Farm Bureau is pleased that President Clinton has proposed the Export Expansion and Reciprocal Trade Agreement Act of 1997, especially with the specific language for agriculture.
We must keep in mind that the President's proposal is not a treaty or trade agreement but an authorizing document. This legislation enables this administration and the next to negotiate trade agreements in consultation with Congress.
The administration's ability to negotiate good agreements is critical to opening doors for U.S. trade. Of the 30 regional and bilateral agreements completed over the past four years, the United States is only a signatory to one. Other countries are forging ahead while the administration has not had the authority to negotiate new or renegotiate existing trade agreements.
Farm Bureau urged the administration to include three issues in its proposal and we are pleased that each of these has been addressed. However, the language does not fully encompass the concerns we expressed and we urge your support in broadening and further defining these points.
Our first concern was addressed with the following language: ''The principal negotiating objectives of the United States regarding trade barriers and other trade distortions are to expand competitive market opportunities for United States exports and obtain fairer and more open conditions of trade by reducing or eliminating tariff and non-tariff barriers and policies and practices of foreign governments directly related to trade that decrease market opportunities for United States exports or distort United States trade.'' We strongly support this language as well as the similar language under the section on agriculture.
Page 103 PREV PAGE TOP OF DOC However, we believe that this should go one step further by including that tariffs would be eliminated within a ''specified time frame.'' We must put our trading partners on notice, at the time this bill is passed by Congress, that the United States is serious about reaching zero tariffs. This language would provide assurance to agriculture that the administration is serious about negotiating away tariffs and tariff inequities such as those currently imposed on U.S. dairy and poultry products by Canada.
Farm Bureau's second concern is that all future negotiations bind our trading partners to resolving sanitary and phytosanitary issues on the basis of sound science, or by using recognized scientific principles as laid out in the Uruguay Round agreement. We are concerned that the term ''unjustified'' is too vague and unfocused.
With the removal of tariff barriers we have experienced growing market disruptions based on health and safety claims that cannot be justified on scientific principles. The Europeans, China, Russia and many other countries are expert at this. We need to be blunt with our trading partners. All sanitary and phytosanitary barriers to trade must be based on sound scientific principles, and our trading partners should expect that we will respond immediately when barriers are raised.
The third issue is directly related to this and was addressed in the overall negotiating objectives with the following language: ''To further strengthen the system of international trading disciplines and procedures including dispute settlement.''
Now that several major cases have gone through both the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) dispute settlement processes, we know the basic dispute resolution systems are much better but are not perfect.
We market many perishable products that encompass a broad range of growing and harvesting seasons and processing methods. The dispute settlement system is basically well designed but must be made more efficient and time sensitive to meet the needs of perishable commodities.
Page 104 PREV PAGE TOP OF DOC We are delighted that other issues such as intellectual property rights and transparency have been addressed as well as the broad range of agricultural issues.
Farm Bureau is very concerned with the extent of labor and environmental issues included in this trade proposal. We believe these issues are best addressed in their respective international bodies and not through the World Trade Organization. The WTO was not designed to address these issues nor does it have the resources to do so. The Office of the United States Trade Representative was not created to resolve labor and environmental debates. USTR's resources are needed to address the growing number of trade issues facing U.S. industries around the world.
Mr. Chairman, the U.S. market is already open. Others are not. The United States is the most open major market in the world. We must work toward opening up our competitors' markets. We must have the strongest trade agreements possible. Agreements must not jeopardize our industry for social issues but must move us forward in the global marketplace. The administration must have the authority guided by sound trade objectives and principles to negotiate and bring to Congress trade agreements that will benefit agriculture and the nation.
International trade can create significant markets for U.S. agricultural commodities. Agreements must ensure that trade remains both free and fair for all products. We need to continue to monitor and enforce these accords to make sure the benefits promised to farmers and ranchers are fully realized and move forward in creating new and stronger markets for all U.S. industries. (Attachment)
Mr. Chairman, our current trade agreements have been basically good for agriculture but adjustments are needed for some sectors. Negotiating and modifying existing trade agreements and establishing new agreements is critical to the competitiveness of U.S. agriculture. In order to do this the President must have the authority to go forward and negotiate with our trading partners. Without this authority our trading partners will not take our negotiators seriously and America's leadership role in the international trade arena will be greatly diminished.
Page 105 PREV PAGE TOP OF DOC Thank you for holding this hearing and we look forward to working with you on this important issue.
The ability to expand existing markets and open new markets will dictate the future of our industry and the well-being of the nation. I have included some points why trade and good trade agreements are critical to agriculture.
The well-being of US agriculture is tied to competitiveness in global markets. U.S. agricultural exports have more than doubled from $29 billion in 1984 to $60 billion in 1996. Much of this growth has been attributed to efforts to open markets through trade agreements and multilateral trade negotiations, increasing per capita income in the rest of the world, production shortfalls in key regions, a weaker U.S. dollar and greater exports of value-added products. To guarantee the continuation of this trend, market expansion must be allowed to continue.
Good trade agreements are critical to opening markets. The rapidly expanding global economy presents enormous opportunities for farm families and agribusinesses. In a world where over 95 percent of the world's consumers live outside of the United States, and where U.S. agriculture already depends on exports for one third of all sales, we must have new and expanded markets.
Commercial competitiveness is critical to our position of global leadership. Europe, Canada, China, Japan and others are forging preferential commercial alliances with emerging markets, which put American exports at a disadvantage. Those trade alliances also play a vital role in defining strategic relationships between countries and regions.
Exports create American jobs. Today, more than 11 million American jobs are supported by exports, including one in every five manufacturing jobs - good jobs, paying 1316 percent more than non-trade related jobs. Over the last four years, one quarter of our economic growth came from tradeexports created 1.4 million new jobs. Agriculture depends on exports for one-third of all sales. If we are to raise our standard of living, we must continue creating jobs through exports.
Page 106 PREV PAGE TOP OF DOC Agriculture: The next round of talks in the World Trade Organization are to begin in 1999. American agriculture must be in position to lead the renegotiation of the Uruguay Round General Agreement on Tariffs and Trade for agriculture. Some issues of importance in this round include: increased market access; resolution of state trading issues; greater transparency between trading partners; greater adherence to sound science in resolving sanitary and phytosanitary issues; rules of origin; export subsidies; internal support schemes disguised as environmental payments; clearly defined trade in genetically modified organisms and an overall trade in products of biotechnology based on sound science. Negotiations to cut trade barriers in the $526 billion global agriculture market will define the structure of American agriculture for the next decade.
Global negotiations will address other key areas such as intellectual property rights, customs and government procurement rules which will not only affect agriculture, but also the overall soundness of our economy.
Sectoral Agreements: Negotiating authority would be used to negotiate industry sectors where the U.S. is most competitive. Barriers must be reduced in areas like environmental technology, biotechnology, medical equipment and computer software, areas where America leads the world.
Regional Trade Agreements: Continuing regional initiatives presents vast opportunities, and keeps the U.S. on a competitive basis with our neighbors and trading partners who, in some cases, have moved forward with agreements that would be disadvantageous to the U.S.
Latin America and the Caribbean: This area was the fastest growing market for U.S. exports in 1996. If trends continue, Latin America and the Caribbean will exceed the EU as a destination for U.S. exports by 2000 and exceed Japan and the EU combined by 2010.
Asia: Contains the fastest growing economies in the world, with nearly 3 billion people. Independent forecasters put 1996 GDP for the region at $2.8 trillion and expect real growth of 6 to 7 percent annually for the next 15 years.
Page 107 PREV PAGE TOP OF DOC Other countries are breaking down barriers for their producers. Since 1992, our competitors have negotiated 30 regional trade pacts without us. In every region of the world, this process continues. MERCOSUR is a developing customs union with ambitions to expand to all of South America; the EU has begun a process to reach free trade with MERCOSUR; China's ''strategic priorities'' include Mexico, Argentina, Brazil, Chile, and Venezuela; Japan has undertaken high-level efforts in Asia and Latin America. Canada has reached a trade agreement with Chile that will provide an 11 percent tariff reduction on Canadian products. Every time an American company competes to sell to Chile, it will face an immediate 11 percent disadvantage. Canada also negotiated to exempt its supply managed dairy and poultry sectors from the agreement, allowing it to at any time in the future impose tariffs similar to those keeping U.S. dairy and poultry products out. This sets a very bad precedent for Canada to use during the 1999 WTO negotiations for exempting sectors of the industry.
TESTIMONY OF RICHARD SCHLOSSER, FARMER AND VICE PRESIDENT, NORTH DAKOTA FARMERS UNION
Mr. Chairman. On behalf of the 300,000 farm and ranch family members of the National Farmers Union (NFU), I want to express my appreciation for having the opportunity to testify before this committee. We are pleased that your committee is holding a hearing on fast-track negotiating authority because this process has profoundly and directly affected our nation's farmers, ranchers and rural communities.
The Canadian-U.S. Free Trade Agreement (Canada-U.S. FTA), the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) were all passed in Congress according to fast-track procedures. All three agreements directly affected not only American farmers, but U.S. health, safety, domestic investment, environmental, labor and consumer standards and laws. Future agreements are expected to affect U.S. citizens in much the same way. Prior to the ratification of these agreements, we, as well as many members of Congress, observed severe inadequacies in these agreements; many have yet to be addressed to this day. We believe a large reason behind the passage of these agreements, despite the serious concern members of Congress and the public raised during the debate, was due to the fact that fast-track rules were in effect.
Page 108 PREV PAGE TOP OF DOC National Farmers Union is opposed to fast-track legislation because it prevents Congress from having enough direct involvement in the negotiation of trade agreements. NFU believes the U.S. Congress should be a full partner in any international trade agreement because of the direct, domestic impact trade agreements have on all U.S. citizens. Under the Constitution, Congress has exclusive authority to regulate foreign commerce. We do not believe it should delegate this important responsibility to the executive branch under the restrictive fast-track rules.
Fast-track Authority is Too Broad
The bill put forward by President Clinton titled, the ''Export Expansion and Reciprocal Trade Agreements Act of 1997,'' would enable the ongoing negotiations to bring Chile and other Latin American countries into the NAFTA, create a Free Trade Area of the Americas (FTAA) by 2005, sign an Asia Pacific Economic Cooperation agreement to achieve free trade by 2010/2020, a second agreement to eliminate import tariffs on information technologies and the World Trade Organization negotiations scheduled for 1999 to further open up agriculture markets.
One of the most far reaching impacts of fast-track has received the least attention. The sweeping Multilateral Agreement on Investment (MAI) which greatly expands the rights of private investors at the expense of governments and municipalities in international trade agreements could be considered by Congress under fast-track rules. Only a limited number of officials from the U.S. State Department and the U.S. Trade Representative office, and others representing private interests were allowed to participate in the 2-year negotiations on behalf of the United States.
With respect to the overall trade-negotiating objectives set forth in the President's bill, Farmers Union was encouraged to see that agriculture, labor and environment were included as separate provisions in the document. The U.S. government should adhere to certain principles when it enters into trade agreements with other countries that do not have the same standards and laws as we do in this country. Throughout its history, NFU has focused on international development programs in impoverished countries. For this reason, we urge that environmental and labor issues be addressed in the core text of trade agreements to ensure people in these countries receive a fair wage for their labor in a safe working environment, natural resources are protected and no exploitation of these growing countries occurs. Properly crafted trade agreements could work to achieve those goals.
Page 109 PREV PAGE TOP OF DOC However, the language in the President's bill limits labor and the environment negotiations to those that are ''directly related'' to trade. We object to this language because it is actually more restrictive than the fast-track legislation that was used to negotiate and pass the Canada-U.S. FTA, NAFTA and GATT. As the world leader, the U.S. can play a crucial role in setting the parameters for international trade agreements. Trade agreements have far reaching implications on U.S. health, safety, labor, environmental and other laws that we believe must be fully considered, individually and directly.
We were encouraged that the Clinton administration chose to address agricultural priorities as a distinct and separate issue to work to correct unfair trade practices in the agriculture sector. The primary agricultural goal of the U.S. in trade negotiations has long been to reduce agricultural import tariffs and export subsidies around the world. National Farmers Union has long held that internal economic, social and political imperatives will result in other nations pursuing ways to protect their agricultural producers and other basic industries. We believe the United States should do the same.
The president's bill calls for the reform of ''state trading enterprises,'' such as the Canadian Wheat Board (CWB), which have not previously been a major focus in international trade negotiations. It is evident that the CWB is able to provide a fair return for producers. While state trading enterprises should be monitored to ensure they are trading fairly, we urge lawmakers to realize the benefit that this type of structure could provide to U.S. farmers. National Farmers Union supports the creation of an American Marketing Board (AMB) which producers throughout the country could use to enhance their marketing power.
Five Concerns That Must Be Addressed
Since the North American Free Trade Agreement was enacted, National Farmers Union has urged members of Congress and the Clinton administration to make improvements on the agreement due to the problems it created. NAFTA should be improved in four categories, which affect our members not only as family farmers, but as consumers and taxpayers as well. Farmers Union urges Congress to renegotiate NAFTA because the agreement does not adequately address country of origin labeling, dispute resolution, currency fluctuations, proper reporting of agricultural imports and exports, and food safety standards. We urged members of this committee to act to correct these problems when we testified here in April.
Page 110 PREV PAGE TOP OF DOC (1) Country of Origin Labeling. All imported foods, feeds, and fibers should be labeled to disclose country of origin, actual contents, and additives. Public awareness of the country of origin issue has been greatly increased since E. coli contaminated beef was found in Colorado and strawberries which caused Hepatitis-A where discovered in Michigan. Regardless of whether the contamination occurred in the U.S. or abroad, the public is beginning to ask where food sold in the U.S. originates. Many countries already require country of origin labeling for U.S. products. If the goal is to create a truly level playing field, all products should be labeled to indicate their country of origin.
(2) Dispute Resolution. Canada-U.S. FTA, NAFTA, and GATT have indeed increased trade, but the enormous influxes of agricultural products into the U.S. at times have had a devastating impact on U.S. producers. Last year, when there was a surge in Mexican tomato and pepper imports, the U.S. winter vegetable industry was injured irreparably when produce was imported at far below U.S. production costs, which forced market prices down and left U.S. growers unable to compete. When this occurred, many U.S. farmers quickly went out of business. The tomato farmers filed a Section 201 petition with the U.S. International Trade Commission (USITC), to stem the flow of produce into U.S. markets; however, months later the commission failed to find sufficient evidence of injury and did not rule in favor of the U.S. industry. The damage to the U.S. tomato industry by that time was irreparable.
U.S. Trade Representative Charlene Barshefksy continues to debate Canadian Agriculture Minister Ralph Goodale over whether Canada should limit the amount of wheat and barley it exports to the U.S. One-way trade of Canadian grain exports of wheat, durum wheat and barley to the U.S. has filled U.S. grain elevators and disrupted U.S. markets and marketing channels. Canada has flatly maintained it will not limit the amount of grain it exports, yet the dispute continues to the great detriment of U.S. farmers. While lawmakers engage in debates over trade flows, U.S. farmers watch as their prices decline for grains, livestock, produce and other agricultural products.
Page 111 PREV PAGE TOP OF DOC (3) Currency Fluctuations. We are very proud that the bail-out of the Mexican financial infrastructure was a success and that the funds, with interest, were returned the U.S. ahead of schedule. Had NAFTA included a provision to address currency fluctuations, we would have avoided the entire escapade. Until there is the establishment of a common measure of currency, to prevent unstable, dramatic fluctuations of currency, whether natural or manipulated by central banks, we will never have fair trade agreements. This is true with our GATT trading partners as well. We must address fluctuating currency exchange rates in the Canada-U.S. FTA, NAFTA, GATT or any existing or future trade agreements.
(4) Reporting. Many changes over the past decade, including the new farm law and reform of the crop insurance/disaster programs, have saddled U.S. producers with an ever-growing burden of risk management. In order to be efficient managers and marketers, and in order to survive in an ever- deregulated business environment, U.S. producers need the latest, most accurate information available. Information is the lifeblood of risk management and includes data on weather, consumer trends, markets and other key facts. Import and export numbers are an indispensable part of the information our producers require.
However, the accuracy of our reporting system is rightly called into question because much of the food and foodstuffs crossing our borders are not adequately monitored or inspected.
(5) Food Safety and Inspection Standards
A recent General Accounting Office report concluded that fewer than 1 percent of every 3.3 million trucks entering the U.S. are inspected. Food and other raw commodities now travel across our borders largely unchecked. When NAFTA was being considered, Farmers Union urged Congress to increase the amount of food inspection at the border, yet much of the food that enters our borders is never inspected. We were promised that all foods would meet U.S. food safety standards, which would be enforced vigorously by the U.S. at the border. Yet with less 1 percent or less of our food being inspected at the border, our government literally has no way to determine whether the food is safe or not.
Page 112 PREV PAGE TOP OF DOC Because so few agricultural commodities are inspected, certain animal and plant diseases have been introduced into the U.S. since Canada-U.S. FTA, NAFTA and GATT went into effect. The inspection and reporting systems for foods and agricultural products entering this country simply cannot keep up with the sharp increase in trade flows. Due to the lack of inspection of agricultural products, pests and diseases have been introduced into this country at great cost to the U.S. farmer and taxpayer.
In the report, ''Improvements Needed to Minimize Threat of Foreign Pests and Diseases,'' the General Accounting Office (GAO) found that Federal inspectors, seeking procedural shortcuts, allowed brokers themselves to choose the samples for inspection. In the report GAO focused on the U.S. Department of Agriculture's Animal Plant Health Inspection Service (APHIS), the Federal agency mainly responsible for preventing infestation by harmful foreign pests and diseases, protecting U.S. agriculture and preserving the marketability of agricultural products in the United States and abroad.
To allow those who buy and sell imported agricultural products to pick and choose which ones are inspected clearly illustrates how fundamentally flawed this system currently is. The GAO report found that due to staffing shortages, APHIS ''does not conduct any inspections at 46 northern and six southern ports of entry,'' and at many other ports there are no inspectors on duty for many hours of the day or night. Even high-risk cargo is not properly inspected, according to the report.
Despite the fact that U.S. border inspection has been crippled due to the massive influx of imports, free-trade proponents are urging inspectors to speed up the flow of goods across U.S. borders. Such a policy threatens not only the health and safety of our domestic crops and livestock, but more importantly this nation's food supply. U.S. taxpayers will pay for the problems when they are forced to pay to eliminate pests and diseases. Just over a year ago in a congressional appropriations hearing on Capitol Hill, a U.S. Department of Agriculture official admitted that karnal bunt, a wheat disease, had ''crept over the border'' after the NAFTA went into effect. This is just one example of the diseases that have been introduced into the U.S. The U.S. farmer understands the true costs that pests and diseases bring. Farmers many times have to eliminate whole herds and slash and burn whole fields to eradicate pests and diseases.
Page 113 PREV PAGE TOP OF DOC When pests and diseases spread to the U.S. by the exchange of infested agricultural commodities, other countries will undoubtedly demonstrate a reluctance to buy U.S. agricultural goods. When pests and diseases are present within our shores, regardless of where they came from or how they are spread, it is the American farmer's reputation that is called into question. We receive the blame and we suffer the consequences because demand for American agricultural products declines sharply. Regardless of how vigorously we negotiate trade agreements and urge other countries to buy U.S. agricultural products, once it is found that pests and diseases reside here, other countries will simply buy elsewhere to protect their own agricultural industry from these problems. Many times it is difficult if not impossible to prove to other countries that we are rid of harmful pests and diseases after they have been discovered here in the U.S. For this reason we urge that all food and agricultural commodities be labeled to indicate country of origin and inspection at the border be substantially increased.
The country of origin labeling, dispute resolution, currency fluctuation, reporting and food safety, concerns Farmers Union has urged members of the Clinton administration and Congress to correct have been addressed to date, yet the Clinton administration and some members of Congress want to move forward to expand NAFTA to Chile and other countries. We believe the flaws in existing agreements, that Farmers Union and other organizations have urged members of Congress to correct, will surely grow in their seriousness and enormity if trade is expanded in the manner the Clinton administration and some members of Congress are proposing.
We must remind ourselves that fast-track been used just five times: the Tokyo Round of GATT (1975), the U.S.-Canada Free Trade Agreement (1988), the U.S.-Israel Free Trade Agreement (1989), the North American Free Trade Agreement (1993) and the Uruguay Round of GATT establishing the World Trade Organization. Many supporters of fast-track contend that it must be passed now or else the U.S. will be prevented from entering into any new trade negotiations. However, during the past 2 years since fast-track has expired, more than 200 trade agreements have been completed without fast-track authority.
Page 114 PREV PAGE TOP OF DOC When fast-track was initially proposed, trade agreements dealt mainly with changes in tariffs structures. Today, U.S. trade and investment policy carries direct, domestic implications for U.S. laws. U.S. negotiators do not necessarily represent the full range of U.S. interests at the negotiating table. Private corporations and interests have far too great a presence and influence as members of the trade advisory committees institutionalized in fast-track.
Farmers have felt the impact of NAFTA in a variety of ways since it began. When foods enter the U.S. from countries where labor, environmental and health and safety standards are different than those we have in the U.S., the American farmer is affected. These imported foods are many times sold at a price below that which we can produce it in this country because of the high standards we have adopted, which leads to an influx of grains, cattle, produce or other commodities and lowers the price U.S. farmers receive. Canada-U.S. FTA, NAFTA and GATT have fundamentally redefined what we as farmers think of when we face price instability. We understand that risk is inherent in farming. Unless some safeguards are put in place to ensure farmers receive a fair price for their product, regardless of the political, environmental, economic or any other conditions in other countries, we will continue to see the number of farmers in this country decrease because the risk is simply too great. While farmers must have access to global markets, the major thrust of every nation's agricultural production should be domestic food security. Domestic food production must be priced at a parity level that assures profitability for a producer practicing average-or-better efficiency.
TESTIMONY OF JACK PETTUS, NATIONAL BARLEY GROWERS ASSOCIATION
My name is Jack Pettus. I am a consultant for the National Barley Growers Association. On behalf of the barley farmers of the US, I'd like to thank you for holding this timely review of fast-track authority to engage in international trade negotiations.
Page 115 PREV PAGE TOP OF DOC BACKGROUND. It is not my intention to spend your valuable time grousing over the problems of past trade agreements but some background is important in defining the position of the barley growers on fast-track. The Canada-United States Free Trade Agreement (CUSTA) may have been a good deal for some, but it was an abysmal deal for U.S. barley producers. From our perspective, CUSTA was a one-way liberalization of trade that failed to take into account many aspects of the Canadian social safety net and state trading monolith (encompassing the Canadian Wheat Board, Canada Grains Commission and AgCanada) that undervalue Canadian barley within their system and make our markets even more attractive to Canadian imports. In addition, many of these same factors distort competition in other export markets and also prevent U.S. barley producers from marketing into and through the Canadian system.
The NBGA has previously provided this subcommittee with a preliminary analysis of aspects of the Canadian system in need of reform and we offer it again today (Attachment A). We believe that a thorough review of the Canadian system is needed prior to the 1999 resumption of WTO agricultural negotiations. Such a review could focus on the ways that the marketing, transportation and social systems in operation in Canada undervalue barley within the system, making nearby U.S. markets look attractive even when predatory marketing activities of the Canadian Wheat Board are distorting prices within the U.S. marketing system.
Following implementation of CUSTA, imports of Canadian barley spiraled to a high of 1.54 million metric tons (approximately 71 million bushels) in the 1993/94 marketing year before subsiding to levels in the neighborhood of 800,200 metric tons in the most recent marketing year. This lower level of imports is still well above the 5-year average, prior to 1993, of 300,000 metric tons. During this period of ''liberalized trade,'' U.S. barley remained essentially shut out of the Canadian barley market despite the tremendous growth of cattle feeding operations just a few miles across the border in southern Alberta. U.S. malting barley, which is priced at a premium to feed barley, is also effectively shut out of the Canadian malting system by non-tariff trade barriers such as varietal controls, licensing requirements and identity-preservation requirements. Further, it is our contention that the Canadian Wheat Board's absolute control of Canadian malting supplies serves as an effective hammer hanging over the heads of Canadian maltsters, discouraging them from moving U.S. barley into Canadian malting facilities even when price and quality concerns might normally favor U.S. barley.
Page 116 PREV PAGE TOP OF DOC Because of the lack of price transparency in the Canadian system, it is difficult to determine the degree to which Canadian barley is undervalued in their domestic market, but the net result is that the Canadian system and its undervaluing of Canadian barley damages U.S. marketing efforts in other export markets while simultaneously distorting prices within our own marketing system. With U.S. barley exports showing renewed growth, accumulated exports for the current marketing year (June-May) are already at 505,000 tons compared to 162,000 during the same period last year and total 95/96 exports of 675,000 tons, we feel that it is absolutely essential to address the price distorting marketing practices of the CWB to ensure that the long-term U.S. barley export outlook remains positive.
According to USDA, from 1993 through 1996, Canadian agricultural exports to the United States grew at a 13.7 percent rate to $6.8 billion. 19931996 data from the U.S. Department of Commerce suggests that barley imports represent nearly $520 million of that $6.8 billion total. While we don't have an official value estimate of U.S. exports of barley to Canada, we do know that only 1,000 tons have been shipped north since 1988, all within the past marketing year. For the sake of comparison, we estimate the value of those exports at less than $150,000.
When the United States, Canada and Mexico sought to expand CUSTA to a North American Free Trade Agreement (NAFTA), Canada successfully fought to ensure that the agriculture provisions of CUSTA were left untouched by the NAFTA negotiators. While the U.S. barley growers are supportive of the bilateral agreement with Mexico and appreciative of the new trade opportunities we have developed there, the failure to forge a trilateral agreement on agriculture continues to impair our faith in NAFTA as a framework for further expansion of trade. Instead of a trilateral agreement on agriculture, we were forced to settle for a series of bilateral agreements between the United States and Mexico, Canada and Mexico, and the United States and Canada (CUSTA). Thus, it is a misnomer to refer to NAFTA as a multilateral agreement, at least where agriculture is concerned. Similarly, Canada and Mexico have reached bilateral agreements with Chile that perpetuate the firewalls that prevent the United States from re-engaging Canadian officials on aspects of the CUSTA pact.
Page 117 PREV PAGE TOP OF DOC In short, CUSTA failed to include the necessary disciplines in the Canadian marketing system to level the playing field in the continental barley market, while NAFTA negotiators perpetuated the original problem by agreeing to Canada's demand that agricultural talks remain bilateral, with CUSTA left unchanged.
Moving to the broader multilateral trade negotiations culminating in the Uruguay Round Agreement, the United States initially entered into negotiations with several goals, including: elimination of other non-tariff barriers to trade through tariffication; dramatic reduction of import tariffs; reforming the activities of state trading enterprises (STE's); and reduction or elimination of export subsidies in agriculture. During the course of negotiations, the United States joined with the Cairns Group of exporting nations to pressure the European Union to drastically reduce export subsidies. The United States effectively put aside its STE efforts as a trade-off to focus attention on the import tariff and export subsidy objectives. Unfortunately, from the U.S. perspective, the efforts of the US-Cairns Group coalition were not as successful as the participants would have hoped, leaving the EU with a tremendous advantage in export subsidization flexibility and with the state trading enterprises untouched. In the process, both systems emerged with an assumed stamp of approval from the WTO.
NEED TO MOVE FORWARD. Many trade objectives have yet to be accomplished and efforts to address problems with old agreements will continue. However, if we agree to further expansion of NAFTA without addressing these disputes, we erode our chances of resolving many of the cross-border conflicts that undermine current efforts to convince U.S. agricultural producers to carry the free-trade banner into Latin America and the Pacific Rim.
Under the Uruguay Round Agreement, WTO negotiators are to return to the table in 1999 to renew agricultural trade negotiations. Leading up to those negotiations, the Cairns Group and the United States appear to be pressing for further reduction or elimination of export subsidies. Many Cairns Group members (including Canada and Australia) are pushing for reforms to importing STE's. At the same time, it is in the best interests of the United States and EU to require that STE reform talks include exporting STE's as well as importing monopolies.
Page 118 PREV PAGE TOP OF DOC In general terms, the National Barley Growers Association believes that it is absolutely essential that broad fast-track authority be approved so that our trade officials have the authority to engage in the WTO negotiations. Our Board supports extension of fast-track authority for continued WTO negotiations only if negotiations include developing market disciplines on state trading enterprises, creation of a tough and enforceable dispute settlement mechanism for sanitary/phytosanitary disputes, and a commitment to ensure that decisions regarding the trading of gene-modified organisms is based on science-based standards. Further we support absolute linkage of WTO membership for China with significant reforms to its agricultural sector, including: a commitment to market access standards, transparency, import quotas, import licensing and minimum access standards agreed to by other developed nations in the WTO.
Barley growers strongly believe it would be a terrible mistake to use fast-track authority to pursue an enlargement of NAFTA. As stated earlier, NAFTA is a series of bilateral agreements in agriculture, rather than a multilateral agreement, a structure that would not serve U.S. interests as a blueprint for FTAA. Using NAFTA as a framework for expanding trade opportunities in Latin America and elsewhere would only encourage others to insist on exempting certain sectors from trade. Moving forward on its own, the United States could engage in trade negotiations with Chile and others that are in the best interests of U.S. producers, rather than carrying the albatross of NAFTA's defects.
Despite the problems of the past, the U.S. barley producers have faith that U.S. trade negotiators, unencumbered by the baggage of CUSTA, can open trade doors to further expand our marketing opportunities in Latin America and the Pacific Rim. Should they be as successful as we believe they are capable, the bilateral agreements forged in these areas could become the framework for the FTAA. Perhaps our success will help convince our northern neighbor to join our efforts, allowing for a fresh look at US-Canada issues. Outside of WTO negotiations, which will be more difficult because of the larger number of participants, this appears to be the best chance that we will have to finally resolve the cross-border agricultural tensions that have plagued our relationship with Canada since CUSTA was implemented.
Page 119 PREV PAGE TOP OF DOC INITIAL COMMENTS ON DRAFT LEGISLATION. The draft legislation sent to Congress last week, the Export Expansion and Reciprocal Trade Agreements Act of 1997, includes promising language covering negotiating objectives in the agricultural sector, though it will take some time to properly analyze the bill. In our initial review of the draft legislation, we were pleased to see that no reference was made to NAFTA expansion. It is unclear whether this was an oversight or a signal that the administration does not intend to use this new authority to expand NAFTA. In our judgment, it is important to clarify that intent during this legislative process.
Based on the NBGA's general policy supporting fast-track authority but opposing NAFTA enlargement, I would hate to recommend support for this legislation only to see the new authority used to enlarge that agreement. Similarly, I'm sure there are Members here today who would like to vote on the side of opening up markets for U.S. agricultural commodities and products but would not be supportive of expanding NAFTA until and unless agricultural negotiations are renewed to address flaws in the agreement. It would seem prudent to include explicit language in the legislation to ensure that this authority is not used to expand NAFTA in its present form, i.e. without a bilateral agreement to enter into new negotiations on CUSTA's agricultural provisions.
In closing, U.S. trade officials need the tools to open markets for U.S. agriculture. The emerging economies of Latin America and the Pacific Rim are our markets of tomorrow. Our competitors are winning greater access and setting crucial precedents. U.S. barley growers hope we can be of assistance in the process of renewing U.S. leadership in trade liberalization talks.
A Preliminary Analysis Of US/Canada Barley Issues
I. LESS MARKET CERTAINTY A. Ending Supply Management Programs Moves Focus To The Market
Page 120 PREV PAGE TOP OF DOC
Prior to passage of the FAIR Act of 1996, barley production had been in a period of decline directly linked to U.S. supply management programs that inadvertently created a bias against barley production, as seen in the use of the 0/85 program utilized in some regions to put relatively large amounts of barley acreage out of production. [As a rule of thumb, the ratio of corn acreage to barley acreage in the United States is approximately 7:1 while the ratio in terms of 0/85 participation was 1:1. This heavy utilization of the 0/85 setaside program by barley producers reflected the conventional wisdom in wheat/barley regions that, if acreage needed to be idled, barley acres returned less profit than other alternatives and should be idled first.]
FAIR's decoupled payment and the elimination of annual setaside programs (ARP's, 0/85, et al) leaves the marketplace as the key component of planting decisions. This market-based focus increases the importance of market premiums for certain grains, such as malting barley, while exposing the producers to greater risk from outside factors beyond his control. These outside factors include the vagaries of nature (drought, flooding, disease, pestilence, etc.) as well as the marketing activities of less ''free trade'' oriented systems like the marketing monopolies employed by many of our trading partners and competitors.
A monopoly such as the Canadian Wheat Board, utilizing total control over all malting barley marketing (domestic and export) and all export marketing of feed barley, can exert a tremendous amount of influence on the market signals received by U.S. producers with little or no concern for the consequences to the producer or to prices.
B. FAIR Muddles Signals To Canada. The CWB's marketing strategy in the United States is equally muddled by the loss of such ''signals'' as acreage setaside programs, target prices and similar supply management data traditionally provided by USDA in its various planting and production reports. Prior to adoption of the FAIR Act in the US, the Board could easily predict U.S. production/supply patterns for the short (crop acreage basis minus any announced annual setaside acreage i.e. ARP, 0/85) and long-term (CRP), thanks to the data published by our own department of agriculture.
Page 121 PREV PAGE TOP OF DOC The supply/demand information provided by USDA, in the hands of a neighboring marketing monopoly with the ability to forward contract into our markets without fear of profit loss (see Profit/Loss comments below), encouraged the CWB to develop a comprehensive marketing plan to capture a significant share of the U.S. feed and malting barley markets. This led to a steadily increasing flow of imports from the north in the late eighties and early nineties that culminated in the record importing year of 1.539 million metric tons (MMT) in 1993/94. To be fair, however, the 1993/94 import market was an anomaly that should also be considered within the context of the flooding in the U.S. Midwest and its impact on U.S. feed grain production. While imports have since dropped below this highwater mark, they remain nearly 4 times as high as the average import levels for the previous 10 years.
C. Profit/Loss Signals Muted In Canadian System. Example: Let's take a snapshot of global trading practices to provide an admittedly simplified example of the Canadian system's impact on U.S. exporters. In our example, Singapore is seeking 100K tons of barley. A U.S. exporter on the PNW would price the barley on the U.S. cash market to determine the initial cost to him/her, add in the freight from the market to the coast and the ocean freight to arrive at a 'total cost' number. The exporter would, of course, add in a certain profit margin to determine a value at which he/she can sell U.S. barley to Singapore.
Now, in the same example, the Canadian exporter (CWB) can simply seek to find out what price level would be needed to make the sale. Then, CWB subtracts the ocean freight from Singapore to Vancouver. Here, the trail gets much harder to follow. While the transportation pooling system in Canada has been reformed somewhat as a result of the Uruguay Round agreement, dramatically reducing one level of distortion in the Canadian marketing system, the transportation costs of individual shipments of grain are still based on various pooling points scattered throughout the prairies and, more importantly, the CWB continues to maintain control over railcar allocation. In addition, the government continues to provide an indirect subsidy on rail transportation by capping freight costs at a level well below market value.
Page 122 PREV PAGE TOP OF DOC Finally, the final price paid to the producer of the barley shipped to Singapore is again subject to pooling, meaning that there is absolutely no way for that producer to know how much his barley is worth at the point when possession passes to the Board, or what its value was at the destination. The ability of U.S. farmers to 'wait out the market' to get the best price for their grain is unavailable to Canadian farmers, while the CWB's ability to undercut competitors without a concern for profit or loss, as evidenced in this example, leaves inefficiencies in its wake, inefficiencies that effectively undervalues Canadian barley grown near the U.S. border (where higher priced, cash markets are only a short truck ride away). Given this undervaluing and the close proximity to U.S. handling and processing facilities, it is little wonder that the past decade has seen an exponential growth in cattle-feeding operations in southern Alberta as cattle feeders take advantage of this distortion.
The lack of price arbitrage and the inability to factor in the timing of sales in Canada makes the U.S. market look incredibly attractive to Canadian producers, many of whom have had a taste of private sector marketing due to the advent of canola production (among others).
What does the Board supply the farmers? Clearly, those farmers farthest removed from the Pacific Coast and/or the U.S. transportation system are supportive of the Board's continuation, since the CWB's control over grain transportation and its pricing mechanisms at least partially offset their clear marketing disadvantage. Certainly, the horror stories of the older generation of Canadian prairie farmers (who were pretty much at the mercy of one or two buyers) remains on the minds of many farmers today. Thus, the security provided by the single-desk system should, thus, not be understated. Additionally, the pricing flexibility of a single desk seller (with no profit/loss risk) allows it to aggressively respond to the export subsidies used in selected markets by other countries, countering diminished export opportunities which would otherwise result.
Page 123 PREV PAGE TOP OF DOC Canadian barley farmers were recently asked to vote on whether to remove the Board entirely from barley marketing. While this vote was supportive of the CWB's continued monopoly (based on the all-or-nothing question posed by the government), a constitutional court challenge by the Alberta government may yet force the Board to give up its marketing monopoly over feed barley (while presumably maintaining its control over all malting barley marketing). These potential changes raise concerns in U.S. barley-producing regions re the potential for another import flood like that experienced in 1993.
It is difficult to predict with any confidence what would result from an open border for barley. Clearly, in the initial stage of opening the border, farmers are almost certain to move their barley south to test the U.S. market. On the other hand, many of the grain companies operating in the U.S. are also involved in Canadian operations, so it would not be at all surprising to see these companies pick up the slack once the Board is removed from the equation, moving the barley to its natural destination and beginning the process of developing a price arbitrage system to ''discover'' the continental price of barley.
Should this happen, there may be a chance that some sort of price equilibrium will be found fairly efficiently, meaning that there could be less of a distortion in the U.S. market as Canadian barley finds its proper price and destination. Further, some analysts predict that such a move would eventually lead to a dramatic reduction in Canadian barley production in less-competitive northern regions, presumably mirrored by an increase in production along the border to fill malting and feed needs in both countries.
Butand this is a big butthe United States and its trade officials must watch this process closely to ensure that an ''open'' barley marketing system in Canada is not shackled by the CWB. In particular, ending the CWB's participation in barley marketing will be a hollow victory for Canadian farmers (and for U.S. producers wishing to market to and/or through Canada) unless the infrastructure stranglehold of the CWB is also addressed. Specifically, U.S. officials must continue to focus on such distorting mechanisms within the Canadian system as: the capping of freight rates below market value; the CWB's control over rail car distribution; determination of elevation charges by non-economic forces; varietal licencing and distribution systems; variable grain grading regulations; and predatory use of differential pricing practices between U.S. and other export markets. For good measure, the various intra- and inter-provincial rules, regulations and subsidy schemes should also be closely monitored.
Page 124 PREV PAGE TOP OF DOC If a continental barley market ever becomes a reality and the Board is allowed to continue its control of export terminals, railcar allocations, etc, the entire price arbitrage process will take place in U.S. markets, rather than allowing U.S. producers an opportunity to participate in Canadian markets (or export via Canadian export channels). Given that the Board has no plans to give up the much larger wheat monopoly, it is doubtful that Agriculture Minister Ralph Goodale has given any thought to the need to reforming the transportation, handling and grading systems as well. Thus, the ''opening'' of the barley market is likely to result in a one-way flow of barley into the US, exacerbating trade tensions that have continued unabated since the Canada-US Trade Agreement (CUSTA) was implemented.
II. MARKETING DISCIPLINES
A. CUSTA/NAFTA Problems Remain. Underlying problems with CUSTA remained unchanged in NAFTA.
Canada refused to open up CUSTA when expanding the FTA to include Mexico. In the grains sector, CUSTA was a joining together of 2 marketing systems with 2 conflicting methods for attaching value to a commodity. As Canadian Agriculture Minister Ralph Goodale noted last year in defending the CWB from 'open market' reformers (a micro view), a marketing board working side-by-side with a private marketing system will inevitably lead to distortions. Not surprisingly, meshing those conflicting systems in continental (macro) trading terms has resulted in a whole range of market distortions not envisioned by the drafters of the original CUSTA agreement, including one-way access for Canadian barley into the United States due to CWB's virtual stranglehold on the infrastructure and exclusionary grading practices that block U.S. varieties of grains from moving into or through Canada.
Example: The Board has recently engaged in a predatory marketing scheme whereby a U.S. malting variety is grown in Canada for the express purpose of moving malting barley into the U.S. market in competition with U.S. growers, while preventing the malting barley from being marketed within its own system (whether produced domestically or in the US). Canadian grading practices have classified a limited number of malting varieties of barley as ''malting varieties,'' while other malting varieties (such as Robust, Excel, Foster, Stander and others grown in the US) are technically relegated to feed barley channels. Canadian farmers are now contracting with grain companies to produce these US-developed malting varieties that are not certified by the Canadian Grain Commission as a ''malting variety.'' This production is excluded from Canadian malting or non-US export channels for malting barley due to this lack of certification.
Page 125 PREV PAGE TOP OF DOC Under this scheme, the CWB assigns a company as an ''agent'' to market the U.S. malting variety. The farmer buys the seeds from the company and delivers 100 percent of the production to the company (utilizing a ''buyback'' provision of the CWB contract with the producer), which is given the authority to sell the production to a U.S. firm (maltster) as a malting variety. This system is a boon to the Canadian farmers in that it provides higher returns through the U.S. pricing system. It's also a boon to the CWB because it pads its sales receipts figures while insulating the domestic malting marketing activities of the Board from U.S. competition.
B. New Problems Developed With NAFTA/WTO Interpretations. In last-gasp attempts to preserve the vestiges of its archaic supply management systems, Canada used the WTO's tariffication process to erect tariffs to protect its domestic dairy, poultry and barley producers. In the case of barley, a new tariff-rate quota was erected in direct conflict with the CUSTA/NAFTA commitment to not create new tariffs on commodities/products that had no prior tariffs. It is true that the United States has not even filled the quota implemented by Canada, a point the Canadian officials love to bring up when the TRQ is mentioned, but this is due mainly to the CWB's control of the infrastructure, as previously mentioned.
The incredible loss of the NAFTA dispute panel case on dairy/poultry/barley does nothing to improve the efforts to gain fasttrack authority to expand NAFTA and re-convene agricultural negotiators under the WTO auspices in 1999. Expanding NAFTA would seem to decrease the already limited leverage that the United States might have to convince Canada to go back to the CUSTA negotiating table. On the other hand, bilateral negotiations with Chile and others might help create new incentive for Canada to get involved in these expanded trading opportunities, opening the door to redressing CUSTA problems.
In addition, the underlying problems with Canada's Wheat Board may best be dealt with under the WTO umbrella. Thus, the NBGA has positioned itself in opposition to NAFTA expansion but in support of fasttrack authority to engage in bilateral and further WTO talks. Further, U.S. barley growers continue to seek assistance from the administration in implementing a quantifiable import monitoring mechanism to gauge the impact of barley imports on U.S. markets.
Page 126 PREV PAGE TOP OF DOC C. WTO Agriculture Negotiations In 1999. The Uruguay Round (UR) agreement failed to institute disciplines on the marketing and financing activities of state trading enterprises operating in export and domestic venues. With the UR's focus on reducing direct governmental subsidies, the next negotiations must include a focus on components of exporting STE activities, with specific emphasis on: developing pricing disciplines (basing pricing on full acquisition or replacement costs); freight pooling (market pricing undermined by failure to include full freight costs in pricing commodities to specific markets); grade pricing (ignores higher value of high bulk/low value commodities subjected to cleaning or blending processes in order to meet buyer specifications); and carrying charges/price pooling (hides producer-financed subsidy equivalents by ignoring: the ''time'' value of money, i.e. interest and carrying charges saved; the risk inherent if forward pricing when in competition with bid/offer sellers; and the premiums associated with options purchased commercially).
Issues to be addressed regarding the activities of STE's with import/domestic monopolies would include import licensing and identity preservation requirements, along with discriminatory market access problems arising from the STE's de facto control of the domestic infrastructure, i.e. storage facilities and transportation.
STATEMENT OF KARL JOHNSON, PAST PRESIDENT, NATIONAL PORK PRODUCERS COUNCIL
I am Karl Johnson, a Mankato, MN based pork producer of a 1,800 sow farrow-to-finish operation. I have been raising hogs on my family farm since 1969. I also farm corn and soybeans. My family has held our farm since 1912. I am a former president of the National Pork Producers Council (NPPC). I currently serve as Chairman of NPPC's Trade Committee and as Secretary-Treasurer for the U.S. Meat Export Federation. I appreciate the opportunity to appear on behalf of U.S. pork producers to express our views on the importance of renewing fast-track trade negotiating authority.
The National Pork Producers Council is a national association representing 44 affiliated states who annually generate approximately $11 billion in farm gate sales. According to a recent Iowa State study conducted by Otto and Lawrence, the U.S. pork industry supports an estimated 600,000 domestic jobs and generates more than $64 billion annually in total economic activity.
Page 127 PREV PAGE TOP OF DOC With 10,988,850 litters being fed out annually, 1.065 billion bushels of corn valued at $2.558 billion are consumed by U.S. pork producers. Feed supplements and additives represent another $2.522 billion of purchased inputs from U.S. suppliers which help support U.S. soybean prices, the U.S. soybean processing industry, local elevators and transportation services based in rural areas.
Pork is the world's meat of choice. Pork represents 44 percent of daily meat protein intake in the world. Even though there's been a huge global market for pork and pork products, efficient U.S. producers were precluded from exporting significant volumes of pork in the pre-Uruguay Round Agreement, pre-NAFTA era. A combination of foreign market trade barriers and highly subsidized competitors kept a lid on U.S. pork exports.
Renewal of Fast-Track is Critical. Pork producers realize that their future is based on their ability to export. Therefore, the renewal of fast-track trade negotiating authority is of paramount importance to producers. As you may know, pork producers were one of the first groups to express strong public support for the renewal of fast-track trade negotiating authority. Indeed, our Washington office has been coordinating the efforts of the Agriculture Coalition for Fast-Track. As of September 19 there are 41 agricultural organizations in support of fast-track. A list of these organizations is attached to my statement. In addition, many of these organizations have prepared one-page statements in support of fast-track. These statements have been compiled and have been made available to the committee.
The U.S. pork industry has reaped tremendous benefits from recent trade agreements. Since 1995, when the Uruguay Round Agreement went into effect, U.S. pork exports to the world have increased by approximately 45 percent in volume terms and 75 percent in value terms from 1994 levels. The U.S. pork industry exported over one billion dollars of pork for the first time in 1996. We anticipate explosive export growth to continue in 1997.
U.S. pork exports to Mexico sky-rocketed in 1994 when NAFTA went into effect. Even with the devaluation of the peso, U.S. pork increased market share in Mexico. This would not have happened without NAFTA. U.S. pork now has over 95% of the Mexican pork import market and in 1996 Mexico was the pork industry's second most important market behind Japan in terms of value.
Page 128 PREV PAGE TOP OF DOC Like other American pork producers, my family has benefitted from these trade agreements through strong and growing exports. I ship my hogs to the Swift-Monfort plant in Worthington, Minnesota and the Hormel plant in Austin, Minnesota; both of which export a significant part of their production. The boost in exports over the past several years has been fundamental to the economic health of our business. The recent expansion of our production up to 1800 sows is largely based on the success of exports. Moreover, my niece and her husband as well as a number of other relatives recently joined the family business, again in large part due to burgeoning pork exports. Last year global trade boosted the bottom line for all pork producers as exports added an estimated $10 per head to cash hog prices.
My family's positive experience with international trade agreements is shared by many others in American agriculture. Research conducted by the Economic Research Service (ERS) of USDA indicates that for each dollar of value-added agricultural exports such as pork, $1.63 in additional U.S. economic activity is generated. The total contribution to U.S. economic activity from agricultural exports in 1996 is estimated to be $140 billion by ERS. Moreover, ERS calculates that every billion dollars in pork exports creates an additional 23,000 new jobs in the U.S. economy. ERS data indicate that U.S. agricultural exports support nearly a million jobs with more than 60 percent of those jobs off the farm in processing, transportation, and trade. Export-related jobs pay higher than average wages, providing good-paying jobs for American workers in rural and urban areas throughout the nation.
I recognize that while the U.S. agricultural export performance has been good, foreign trade barriers and other factors continue to prevent us from realizing our potential in international markets. Based upon the annual foreign market barrier reports prepared by the office of the U.S. Trade Representative, it appears that about half of all foreign trade barriers are in the agricultural sector. The Foreign Agricultural Service estimates that agricultural exports are reduced by $4.7 billion annually by unjustifiable sanitary and phytosanitary measures alone.
Page 129 PREV PAGE TOP OF DOC Given that the Uruguay Round was the first major trade round that included agriculture, these problems should not be surprising. Global agriculture is an extremely protected sector. Most of these problems pre-date both the Uruguay Round and the NAFTA. These problems must not undermine agriculture's support for fast-track. Indeed, I believe these issues compel us to support fast-track so that we can find effective remedies to these outstanding problems.
Secretary Glickman has said ''either we export or we die.'' I couldn't agree more with him. In the U.S. economy at large, agriculture was the number one positive contributor to the U.S. trade balance in 1996. American agriculture is more than twice as reliant on foreign trade as the U.S. economy as a whole, with exports currently accounting for an estimated 30 percent of agriculture's cash receipts. We have a mature market for pork and other agricultural products in the United States. However, the other 96% of the world, which lives outside our borders, is experiencing rapid economic growth. The first thing that people do when they move up from poverty is upgrade their diets. Simply put, if we don't get fast-track renewed, U.S. agriculture will lose billions of dollars in the short term and in the long run we risk losing our comparative advantage.
The next round of global agricultural trade negotiations is scheduled to begin in late 1999. Removing tariff and non-tariff barriers to trade helping to open new markets and gain increased access to existing marketsis critical for U.S. pork producers. If the United States is not leading the charge in 1999, at best, nothing will happen which means that U.S. agriculture will lose billions of dollars of potential sales. At worst, the EU and other countries will build momentum for initiatives hostile to U.S. agriculture such as weakening the Sanitary and Phytosanitary Agreement. Adequate preparation for and participation in these negotiations require the renewal of fast-track authority now.
Fast-track authority is also needed so that the U.S. can pursue trade liberalization with our western hemisphere neighbors and the 18 member countries of the Asia Pacific Economic Cooperation forum (APEC). The U.S. pork industry is disadvantaged by the failure of the United States to keep up with the pace of trade agreements in the western hemisphere. The rapidly expanding Brazilian pork industrya key competitor to the U.S. industrynow has preferential access into many markets to the detriment of U.S. producers. Canada, another significant competitor, has gained preferential access into Chile through a free trade agreement. With respect to the APEC nations, these countries will experience the majority of the world's population and income growth in the next 8 to 10 years, passing through the middle ranges of per capita income where the shift in dietary patterns is particularly pronounced. Yet, it is precisely these same countries which lack surplus food producing resources. The Food and Agricultural Policy Research Institute (FAPRI) projects that Chinese pork consumption will increase by over 23 percent, approximately 8 million metric tons, in the next ten years. Pork consumption is forecast to increase rapidly in many of the other APEC nations but, like China, most of these countries place significant restrictions on pork imports.
Page 130 PREV PAGE TOP OF DOC The world will not wait for the United States. We are only four percent of the world's population. While we sit back idly, our trading partners are out negotiating trade agreements at record pace. The European Union, Mexico, Canada, Chile, Brazil, are making news almost every day with their various trade negotiations. In our hemisphere alone, more than 30 bilateral and regional trade agreements are in effect and the United States is party to only one, NAFTA.
The renewal of fast-track authority will facilitate further multilateral, regional, and bilateral trade agreements which will spur exports and keep U.S. agriculture healthy and profitable. I implore you to support fast-track.
STATMENT OF EDWARD T. COUGHLIN, ACTING CHIEF EXECUTIVE OFFICER OF THE NATIONAL MILK PRODUCERS FEDERATION
I am Edward T. Coughlin, acting chief executive officer of the National Milk Producers Federation (NMPF). The Federation is a trade association representing approximately 70 percent of American dairy producers and the 31 cooperative marketing associations that they own and operate throughout the United States. I appreciate the opportunity to testify today before the House Subcommittee on General Farm Commodities on ''fast track'' trade authority and its impact on agriculture.
To maintain the United States as a world leader in dairy production, the U.S. dairy industry is becoming increasingly focused on export sales. Increasing dairy exports will translate into a strong American dairy industry farmers. World markets have greater growth potential for the U.S. dairy industry than the domestic market. Populations are growing rapidly in certain countries where dairy production and consumption are low, especially in Asia. Those forces, combined with expanding economics, create very attractive market opportunities for developing dairy product markets, especially in Asia and South America.
Page 131 PREV PAGE TOP OF DOC Foreign market development is vitally important for the dairy industry for another reason: world prices will directly affect prices received by milk producers in the United States after 1999 in about 27 monthswhen dairy price supports are eliminated.
Actions by other nations to block U.S. dairy exports while subsidizing their own dairy exports hurt the U.S. dairy industry, which is one of the most cost efficient in the world. Subsidies paid by foreign governments to promote dairy exports depress world dairy prices and hurt U.S. commercial export prospects.
NMPF supports international trade agreements that will increase net exports of U.S. milk and dairy products. The Federation has urged the administration to take aggressive action to insure that all countries that are parties to trade agreements comply fully with market access, subsidy reduction and all other obligations under such agreements.
Trade agreements to date have not delivered the expanded market opportunities U.S. dairy producers expected. Despite tariff reductions negotiated in the Uruguay Round of the GATT, tariffs on dairy products remain high in many countries and are not anticipated to be lowered until another trade negotiation is completed. Dairy subsidies paid by the European Union enable the EU to maintain unacceptably high levels of subsidizationas much as 20 times the quantities that the U.S. can subsidize for some products.
NAFTA has been good for U.S. agriculture overall. But the growth rate of U.S. agricultural exports is correctly attributed to other factors as well, including an improving global trade policy and the U.S. domestic agricultural policy changes.
More specifically, with regard to trade in North America, NAFTA has generated mixed results. U.S. dairy exports to Mexico increased. However, U.S. dairy products still face prohibitively high Canadian tariffs and Canada is circumventing its international obligations to limit subsidized exports of dairy products.
The U.S. dairy industry believes this Canadian export subsidy system violates Canada's WTO commitments. As a result, a section 301 petition was filed with the USTR by the National Milk Producers Federation, U.S. Dairy Export Council, and International Dairy Foods Association about three weeks ago.
Page 132 PREV PAGE TOP OF DOC One Canadian practice we are challenging is a special milk price pooling arrangement to circumvent export subsidy reductions that Canada agreed to make. Canada adopted this export subsidy system in 1995. We note that Canada's dairy trade balance went from a deficit of $19 million (Canadian dollars) in 1993 to a surplus of $68 million (Canadian dollars) in 1996. These exports are made at the same time that the Canadian market remains closed to imports of dairy products.
Clearly additional international negotiations must take place to address these issues as well as expand dairy export opportunities. Last Friday, September 19, the Federation's Board of Directors addressed the need for moving forward.
The National Milk Producers Federation conditionally supports fast track authority for negotiating and approving trade agreements when the administration takes aggressive action, using the tools already at its disposal, to attack market barriers and other foreign trade-distorting practices that prohibit growth of U.S. dairy exports. Such actions should include:
(1) accepting the dairy industry Section 301 petition against Canadian dairy trade practices;
(2) initiating timely WTO dispute settlement action against the European Union's inward processing system for processed cheese if the EU does not immediately discontinue the practice; and
(3) adopting trade negotiating objectives to achieve reduction and equalization of tariffs by U.S. dairy trading partners, reduction and elimination of all export subsidies and to require trade partners to base sanitary standards on sound science.
We are confident that the administration will take the aggressive actions that NMPF is seeking, and we expect to unconditionally endorse extending fast track authority.
I appreciate the opportunity to bring the views of NMPF members to the Committee. The Federation and its members look forward to working with Congress and the administration to build a better future for dairy producers.
Page 133 PREV PAGE TOP OF DOC