SPEAKERS CONTENTS INSERTS
Page 1 TOP OF DOCSPECIALTY CROP AGRICULTURAL ISSUES
RELATING TO THE 1999 WORLD TRADE
THURSDAY, JANUARY 22, 1998
House of Representatives,
Subcommittee on Risk Management
and Specialty Crops,
Committee on Agriculture,
West Palm Beach, FL.
The subcommittee met, pursuant to call, at 9:30 a.m. in the Palm Beach County Governmental Center, West Palm Beach, FL, Hon. Thomas W. Ewing (chairman of the subcommittee) presiding.
Present: Representative Foley
Staff present: Stacy Carey, subcommittee staff director; Ryan Weston, staff assistant; and Andrew Willis Baker, minority associate counsel.
OPENING STATEMENT OF HON. THOMAS W. EWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. EWING. Thank you all for coming, and thank you for your patience. I understand that everybody who is here today has come through a road of water, some real high water. I appreciate you coming out today. And I want to call to order the Subcommittee on Risk Management and Specialty Crops. We'll get right into the meat of our meeting here.
It is a pleasure to be here this morning in West Palm Beach to receive testimony from Florida's agricultural community.
I would like to thank my colleague Mark Foley who's a very valuable member of the Agriculture Committee. There is no one working harder on your behalf in Washington than Mark Foley.
Page 2 PREV PAGE TOP OF DOC The next round of multilateral trade negotiations is scheduled to begin in 1999. It's called for by the Uruguay Round agreement. The objective of these negotiations is to continue the process of agriculture trade reform.
The formal agenda for these negotiations is not yet formed, but issues are beginning to develop. With or without fast track negotiating authority, U.S. negotiators will be at the table.
We are here this morning to receive testimony from Florida's agriculture industry in an effort to prepare for the 1999 negotiations. We are interested to hear from you about existing barriers to trade, particularly, the Asian market.
For the most sensitive agriculture sector, many of which are fruits and vegetables, do adequate safeguard mechanisms exist? Are there unresolved Uruguay Round issues that need to be resolved before 1999 negotiations begin? How can we effectively deal with the end results, sanitary and phytosanitary issues that become technical barriers to trade? How can we assure the sound scientific evidence is a basis for these decisions?
Finally, we are interested to know if there are biotechnical issues of particular importance to Florida agriculture. I'm proud to say that many of the crops that compromise the compromised Florida diverse industry are under the specialty crop jurisdiction of this subcommittee.
My goal this morning is to hear from leaders of Florida agriculture about the issues we need to focus on as we prepare for these negotiations. We are fortunate to have the distinguished panel of witnesses with us morning.
I appreciate your taking the time from your schedules to share your views with us. The chairman of the House Agriculture Committee, the U.S. Department of Agriculture, and the office of the United States Trade Representative are all aware of our discussions here this morning.
Page 3 PREV PAGE TOP OF DOC Because this is probably the first congressional hearing on the subject, we are anxious to hear your views and we look forward to your testimony.
I would ask if my colleague Mr. Foley if he has a statement.
Mr. FOLEY. No, I don't have a long statement.
Mr. EWING. Are you saying mine was long?
Mr. FOLEY. Yours are never long. They are very, very insightful and I appreciate the compliments you paid me and I thank you for spending so much time and so much interest in the issues that affect Florida agriculture.
OPENING STATEMENT OF HON. MARK FOLEY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF FLORIDA
Mr. FOLEY. You have been a phenomenal friend and a good leader of the committee. And I want to enter into the record the regards from Senator Charlie Bronson, who is Senate Agriculture Committee Chairman in the Florida Senate. And he sends his regrets for not being able to join us today But the Senate is in the midst of committee meetings in Tallahassee this week, deeply concerned over the effects these trade negotiations have on Florida agriculture. And we'll send a complete statement to the committee by week's end.
I do want to stress, Mr. Chairman, that Florida agriculture is a major employer and an economic engine of this State.
My concerns, as I expressed to the President, to the trade officer, and to my colleagues in Washington, are of a most sincere nature.
We are not trying to impede trade. We are not trying to damage trade. We believe that trade is important to Florida, to the United States. But it seems that few people take seriously the impact that trade has had on this country, and to our growers in particular. NAFTA owners have created significant economic pressures on my community. All we ask for is a fair understanding of the conditions that make it so critical that our concerns be heard.
Page 4 PREV PAGE TOP OF DOC I'll continue as a Member of Congress and as a friend of agriculture to echo my concerns to whatever level will be interested in hearing them. And that while we do not stand in the way of trade, we do recognize that in order for our industry and the industry that is so vital to every party, not only those that work in it, but those that enjoy the value that's provided on their tables, will remain a constant source of food and hope and economic opportunities for families.
So, again, I thank you for opening up the public hearing for testimony. The people that have assembled today have firsthand knowledge of the impasse of both trade and our domestic regulations. And I'm anxious to hear their comments.
Thank you, Mr. Chairman.
Mr. EWING. Thank you Mark, and thank you and your staff for all their work in seeing that this meeting was set up today.
We normally operate under the 5-minute rule. We have just one panel today, and we're not going to use the 5-minute rule. Though, I do believe that if your testimony is 10 or 15 minutes long, you might want to summarize it. I think the discussion afterwards will be one that will probably help us all learn as much as we can.
Before we have the panel speak, I would just indicate that what Mark has said about Florida agriculture applies to some other parts of the country.
I have the opportunity to come from a State where our agriculture is very dependent on trade. So I get it from both sides. And it is an issue. It is a real opportunity, but also it holds great peril for certain parts of American agriculture.
It's good to be here today and get started in this discussion. And I'll introduce the panel.
Dr. Martha Rhodes Roberts, who is representing the Florida Department of Agriculture; Mr. Bobby McKown, executive vice president and CEO, Florida Citrus Mutual; Mr. Scottie Butler, general counsel, Florida Farm Bureau; Mr. Reginald Brown, director, marketing and membership, Florida Fruit and Vegetable Association; Mr. Tony Contreras, vice president of marketing, legislation and legislative affairs, Sugarcane Growers Cooperative of Florida; and Mr. Gary Smigiel, vice chairman, Florida Farmers & Suppliers Coalition, Inc.
Page 5 PREV PAGE TOP OF DOC Welcome. Thank you very much. Martha.
STATEMENT OF MARTHA RHODES ROBERTS, DEPUTY COMMISSIONER, FOOD SAFETY, FLORIDA DEPARTMENT OF AGRICULTURE AND CONSUMER SERVICES
Ms. RHODES ROBERTS. Thank you, Mr. Chairman, and thank you very much, Mr. Foley. We appreciate the leadership both of you have shown on this and so many other agricultural issues affecting Florida.
I appreciate the opportunity to provide these remarks on behalf of Bob Crawford, Commissioner of Agriculture of the State of Florida and for Florida agriculture. We thank you for holding this important public hearing of the Subcommittee on Risk Management and Specialty Crops in such a key U.S. agricultural county. During these winter months, Florida is the only State in which you will find commercial production of the many fresh fruits and vegetables that are so critical to the diet and health of the American public. Florida, with over $6 billion in crop receipts, is the winter food basket of the United States and any trade policies negotiated by our Nation will greatly affect the survival of this vital U.S. industry. The upcoming round of Multilateral Trade Negotiations of the World Trade Organization beginning in 1999 is extremely important to Florida agriculture. The globalization of trade has increasingly placed unacceptable pressures on Florida agriculture where inconsistent regulatory requirements, unequal subsidies and supports, non-tariff trade barriers and unsatisfactory and unworkable safeguards and dispute resolution mechanisms have been continually encountered. Aggressive and thoughtful leadership by U.S. officials involved in the upcoming negotiations will be necessary to prevent any further erosion and disappearance of Florida and U.S. food production. In any negotiations, U.S. officials must keep in mind that in comparison with most farmers in the world, U.S. growers have traditionally received little Government support. Following the Uruguay Round and then the farm bill of 1996, Government assistance to American farmers was even further reduced. As farmers in most other countries are more protected and receive higher subsidies than their counterparts in the United States, U.S. officials must be careful not to negotiate away the few protections left to American farmers nor to reduce tariffs and other protections in the United States where disparate barriers and subsidies exist for major foreign producers whether in Europe, South America or elsewhere.
Page 6 PREV PAGE TOP OF DOC The producers of Florida citrus, other fruits and vegetables are not subsidized or supported; however, the international trade of agricultural products is characterized by extensive protection and high levels of subsidies. Florida's agricultural producers, who export over $1 billion worth of goods annually, urge U.S. negotiators to work to remove barriers to Florida's major agriculture which have special needs which need to be reflected in the WTO agriculture agreement.
The United States should encourage the development of international trading rules that will address the special concerns of producers of seasonal and perishable agricultural commodities such as fruits and vegetables and orange juice. Florida has learned well that safeguards in international agreements can ultimately prove ineffective. In particular, the United States should seek workable and effective safeguards for seasonal and perishable commodities and the removal of unfounded sanitary and phytosanitary barriers to Florida agricultural exports. In addition, the United States should seek tariff equivalency on most agricultural products, the elimination of export subsidies, the establishment of meaningful international rules on state trading enterprises, and international consensus on the use of genetically modified organisms. We are also concerned about the slow pace of resolving agricultural disputes at the WTO, and believe that U.S. negotiators should attempt to find ways to expedite the dispute settlement process. The United States should encourage the development of international trading rules that will address the special concerns of producers of seasonal and perishable agricultural commodities such as fresh fruits and vegetables and orange juice.
Florida has learned well that safeguards in international agreements can ultimately prove ineffective. The poorly crafted safeguards of the North American Free Trade Agreement and their implementation in the United States have resulted in great harm to Florida's fresh winter vegetable industry. The disruption caused by the inadequacy of NAFTA's safeguard provisions could possibly be avoided in the future through the development of improved and workable safeguards in other international agreements, such as those negotiated through the WTO. The WTO Agriculture Agreement already recognizes perishable and seasonal products in its special safeguard provisions. The United States should have as a top priority gaining broader rules for these special products within the agriculture agreement. At last year's Business Forum for the Free Trade area of the Americas, the chief agriculture negotiator for the Uruguay Round agreed that in previous negotiations no specific rules or consideration of perishable products had been included. We support inclusions of some provisions that recognize the unique nature of perishable commodities in world trade.
Page 7 PREV PAGE TOP OF DOC Unfounded sanitary and phytosanitary issues prohibit market access for Florida agriculture in many nations. Florida agricultural products face many questionable SPS barriers around the world. These barriers include the continuing ban on the importation of Florida citrus into Australia due to post bloom fruit drop. There is no scientific evidence to indicate that the fungus causing this can be spread by fruit, but Australia still denies entry. As another example, Mexico prohibits the importation of Florida citrus although no documented phytosanitary threats exist. Some bilateral commitments to reform policies to remove unfounded SPS measures have been followed by attempts to renege on these agreements. For example, although Japan pledged to permit the importation of U.S. grown fresh tomatoes in May 1997, Japan shortly thereafter threatened to revoke this commitment due to new SPS claims, until we were able to actively show that the issue was unfounded. To the extent needed, the United States should clarify the SPS and TBT agreements in any subsequent round to eliminate the need for additional dispute settlement (DSU) proceedings where there are systemic issues identified.
At the same time, while we appreciate the ability of the SPS Agreement to assist in removing erroneous health and safety measures that block trade, and that are not based on sound science, we urge the United States to remain vigilant during future WTO discussions to see that any changes regarding this agreement do not lead to the lowering of food and safety standards that are based on legitimate science. In particular, we are concerned about recent food-borne illness outbreaks such as cyclospora and hepatitis caused by imported agricultural products. For example, in March of last year almost 200 children in Michigan were infected with hepatitis A after eating in school lunches frozen strawberries later found to be imported from Mexico. This incident and others have made numerous Americans ill while also damaging the sales of Florida and U.S. grown products as many consumers have incorrectly associated sanitary U.S. grown products with contaminated imports.
Furthermore, with its tropical climate and the large number of foreign tourists who visit the state, Florida is particularly susceptible to SPS threats. Last year's outbreak of the Mediterranean fruit fly in a limited area of the state demonstrated Florida's vulnerability to exotic pests. This outbreak, which was successfully eradicated after great multi-million dollar efforts by both the Federal and State Government, entailed significant expenditures and was possibly linked to products that were not declared by the persons importing the products. U.S. officials should during any future WTO negotiations ensure that the United States will be able to maintain science based SPS measures that protect it from genuine threats.
Page 8 PREV PAGE TOP OF DOC According to the U.S. Trade Representative, the average international tariff on agricultural products is 56 percent while the average U.S. tariff is only 3 percent. Clearly, American farmers, including farmers in Florida, would benefit from reductions in our trading partners' tariffs, and tariffs should be addressed in market access negotiations conducted under the auspices of the WTO.
At the same time, however, the United States should not unilaterally disarm by reducing our tariffs or expanding tariff rate quotas on highly import sensitive products. For example, in the European community sugar prices are supported at 31 cents per pound versus a U.S. support rate of 18 cents per pound. In addition, any further tariff reductions beyond that agreed to in the Uruguay Round will irreparably harm our Florida citrus industry.
During the Uruguay Round, many of our trading partners pushed for across-the-board formulas to reduce tariffs. Tariff reductions were often made without reference to the array of other barrierswhether quotas, subsidies, et ceterathat surrounded a product in major foreign markets. The result can be parity of tariff reductionsabsolutely or on a percentage basisbut a gross disparity in the total measure of protection provided. Through a request-offer strategy, the United States could negotiate to lower tariffs but only where U.S. producers are not disadvantaged on a total level of protection basis. A request-offer basis also permits the United States to reflect particular sensitivities on individual agricultural products by making no or very limited offers as well. Florida is concerned that many developing countries continue to have a range of high tariff and other barriers on agricultural trade. It is requested that the United States devote more resources in the next WTO round to ensuring equitable access to these important markets.
While efforts should be made to address high foreign tariffs, the United States must recognize that the reduction or elimination of tariffs accomplishes little if other trade-distorting measures, such as export subsidies, remain in place. We are concerned that some WTO members might not be fulfilling their current export subsidy obligations under the WTO, and we applaud the efforts of the USTR to encourage WTO members to analyze how well they have brought their export subsidy regimes into conformity with their existing Uruguay Round commitments.
Page 9 PREV PAGE TOP OF DOC We urge the United States to push for export subsidy parity on key agricultural commodities with the European Union on a per ton basis to prevent major distortions in trade flows. In doing so, the United States should address practices that in effect permit countries to avoid export subsidy commitments, such as pooling arrangements and dual pricing systems. Pooling arrangements and dual pricing systems create artificially low export prices for many foreign producers, which undercut U.S. products in the world market. Many sectors of American agriculture, such as the sugar industry, are harmed by such practices of their competitors.
The state trading enterprises of our trading partners should be addressed in future WTO agricultural negotiations. Like pooling arrangements and dual pricing systems, STEs can lead to no effective access in foreign markets and to prices which are artificially high in domestic markets, yet artificially low in the world market. Exports from the United States can be restricted to those countries with STEs, and the STEs of other countries can undercut U.S. prices in sales to third countries. For instance, Queensland Sugar Board in Australia controls all the buying and selling of sugar and contributes to the distortion of the world prices of sugar. Future negotiations should strive to make such institutions more transparent in their operations and eliminate their discriminatory pricing. Florida notes that despite the efforts to develop greater information on STEs in the Uruguay Round, there has been no substantive progress as WTO members are not even able to agree on a revised questionnaire.
U.S. negotiators should work to find international consensus on the use of genetically modified organisms. Genetically modified organisms have the potential to provide the world's growing population with abundant, inexpensive, and safe agricultural products. Despite scientific evidence proving that agricultural products derived through biotechnology are safe, many of our trading partners are considering placing limits upon, or prohibiting, the importation of U.S. produced GMOs. Restrictive practices that would require the segregation of GMO products from non-GMO products, or the labeling of biotechnology products, would be expensive, would result in discrimination against U.S. products, and thus would act as non-tariff barriers against U.S. exports. The United States must be prepared to challenge such practices at the WTO through the Sanitary and Phytosanitary and Technical Barrier to Trade Agreements.
Page 10 PREV PAGE TOP OF DOC We were pleased with the outcome of the beef hormone dispute between the United States and the European Union, which to the benefit of American agriculture, found that the European Union violated its obligations under the SPS Agreement as its ban on imported beef had no scientific basis whatsoever. Florida is somewhat disappointed by the slow pace of resolving agricultural disputes at the WTO. Florida believes that the United States should use the WTO's dispute settlement process to aggressively challenge unfounded barriers to Florida agricultural products. We hope that the United States will focus on making whatever amendments are necessary to the dispute settlement systems which will permit rapid resolution of issues and prompt implementation of solutions when appeals have been exhausted. We also encourage the United States to improve further the transparency of DSU proceedings. In far too many cases, public version of briefs from foreign governments are not made available. In Florida, we have a government and a sunshine policy that requires public disclosure and access to all information except confidential trade secrets. We support as public a process as possible in a dispute.
Regarding an ongoing dispute, we appreciate the United States pursuing discussions under the WTO's dispute settlement process against Japan for its laborious testing procedures of agricultural products. We agree that there is a need to address SPS barriers product by product and species by species. Although this is very time consuming, this is scientifically justified. We use this approach ourselves in Florida. However, we do not agree that there is scientific justification to require data on each variety of a particular product. This is a policy that Japan follows at present. It is the type of issue that can be handled through the dispute settlement process. It or similar issues could also be handled through clarification in the SPS Agreement if necessary.
Again, we appreciate the subcommittee holding this hearing in the State of Florida to hear the concerns and needs of Florida agriculture. We urge U.S. negotiators to work to remove barriers to Florida's agricultural commodities and to address the special concerns of seasonal and perishable agricultural commodities such as fresh fruits and vegetables and orange juice. Florida has learned well that we must correct the problems of the past as we move to the future, and all segments of U.S. agriculture must work together to do so. We commend you for your effort and request your active leadership with U.S. officials as we enter this critical next round of negotiations. Thank you.
Page 11 PREV PAGE TOP OF DOC [The prepared statement of Ms. Rhodes Roberts appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Martha. And now Mr. Bobby McKown.
STATEMENT OF BOBBY F. MCKOWN, EXECUTIVE VICE PRESIDENT, CEO, FLORIDA CITRUS MUTUAL
Mr. MCKOWN. Thank you, Mr. Chairman, Mr. Foley. I sincerely thank you for the opportunity to present our comments to you today and for your coming to Florida again.
Florida Citrus Mutual is a voluntary cooperative association of citrus growers, 11,700, and we produce citrus in Florida from Marion County, Ocala to the north on both coasts all the way down to Lake Okeechobee and the southern part across the State of Florida. Now we have more trees in the ground than we ever had in the history of our industry.
As Congress and the administration prepare for the commencement of the follow-up negotiations to the WTO Uruguay Round Agriculture Agreements, it is important in our opinion to acknowledge that any issues raised in this connection are equally significant in regard to the ongoing debate about renewal of the President's fast track negotiating authority. Florida Citrus Mutual and the U.S. citrus industry being California, Arizona, Louisiana, Texas and Florida jointly support the position that favorable treatment and special treatment must be addressed relative to the tariff on imported citrus products coming into these United States. In general, we believe very strongly the industry itself must be continued as we produce our products and we sell them throughout the United States and also in the world market.
Our foreign producers must not be allowed to maintain artificial advantages. Thus, we fully support efforts to enforce effectively the WTO agreement of application of sanitary and phytosanitary standards.
We were very actively involved in the development of those measures and WTO negotiations for almost 8 years. That was a key component of those negotiations. What we are finding today, there are trading partners throughout the world now utilizing those phytosanitary standards not based on sound science, but they're using those phytosanitary issues as non-tariff barriers to keep the United States out of those markets. We believe very strongly that those issues should continually be pursued in an effective manner through the WTO to bring resolution. Mr. Chairman, in addition, we believe we must strengthen the temporary safeguard measure for perishable agriculture commodities of which by definition frozen concentrated orange juice is included; to enforce more effectively the antidumping countervailing duty laws, especially where third country intervention has impacted on special U.S. programs to provide unilateral benefits to developing countries; and to continue to seek common understandings with our trading partners on domestic labor and environmental regulations which burden one country's agricultural producers to the disadvantage of others.
Page 12 PREV PAGE TOP OF DOC The most important component of our position, however, should be tariffs, acknowledged and stated in this fashion: The U.S. negotiators and Congress; any trade agreementmultilateral, bilateral or regional, whether in the 1999 discussion or under future fast track authoritywhich further reduces U.S. tariffs on orange juice and/or fresh citrus imported from Brazil, and other citrus producing countries, below the levels bound in the Uruguay Round, will not only contravene assurances made by U.S. Trade Representatives during the NAFTA negotiations, but will also spell the end of the U.S. commercial citrus industry as we know it today for processing and fresh channels of trade.
For instance, four companies in Brazil control about 85 percent of all the orange juice produced in that country. Ninety-five percent of all the orange juice produced in Brazil is exported, and the United States is a primary market. They establish the world price, the cartel price and Florida price. It is a product that basically falls under the Brazil price. For instance, over the past few weeks, we've had prices that have plummeted below cost of actual production for citrus in Florida.
The compression price in Brazil has forced that level and Florida processors have had to price their products at those levels to compete in the world market and in the U.S. market. Over the past 3 weeks, the Brazilians now have raised the price for frozen concentrated orange juice, thereby raising the price they pay to growers of fruit grown in Florida. The fundamentals have not changed. You still have a volume of juice throughout the world market. Our concern, if you look at the overlay of what happened in Brazil, I think you are going to see the same thing occur in the United States. They bid up the price of fruit. Wholesale price of juice does not move up. Then they cut the price further and drive out the small bulk operator in Florida.
That is a real threat which we currently have. I'm not opposed to these interventions and their purchaser of processors operation in Florida by Brazilians, because now they're in operation and must operate under the laws of this country. But the four major players in Brazil now own processing operations in Florida. They don't own any groves, but Cargill does own some small grove operation. They're a member as far as the processing sector.
Page 13 PREV PAGE TOP OF DOC So there is another dimension that we're dealing with now as you move orange juice solids throughout the world. We are watching that and we encourage that. We must continue to look at antidumping and countervailing duty laws, make sure that they're viable with all of our trading partners. We know, frankly, that juice has been dumped in the U.S. market over the past few months. Frankly, we can prove dumping. We could not necessarily prove injury at this stage. We continue to look at that. And there is currently a countervailing duty order outstanding against Brazil and also an antidumping order outstanding against Brazil. Those are still in place.
Mr. Chairman, members of the committee, I would say to you that the life and blood of the Florida citrus industry is found in equalizing important tariffs imposed on products in the countries which do not incur the environmental workers safety water cost, welfare tax, other costs which Florida growers must bear. I say to you we have continued to work and support in some fashion all the trade negotiations up and through this time. Beginning with the CBI, followed by the Israel Free Trade Agreement and all the agreements since that time.
But, ladies and gentlemen, at this stage we cannot make and agree to any further compromise relative to the bound citrus duties that we have in place today. They must be maintained at current levels provided for under the Uruguay Round. I would say to you that in our countervailing duty case that we won against Brazil, the ITC affirmed Brazilian subsidies. They quit subsidizing. They put an order in place.
The life of the citrus tree is 25 years. So consequently if you subsidize on the front end, you have to compete against that subsidized tree throughout the entire lifetime of that tree. So, consequently, even though they stop the subsidies, you have to continue to compete against that through the entire lifetime. That puts the United States in an economic disadvantage.
Mr. Chairman, for the record, we believe very strongly as we move forward in these negotiations, that one size does not fit all in negotiations. We believe very strongly that our country should adopt safeguards as every trading partner that we deal with in the world, that they have certain industries they are going to deal with in a protective fashion, and we think that those import-sensitive products in this country that our Government, too, should be willing to step forward and protect those industries, such as the U.S. citrus industry, with the tariff structure we currently have.
Page 14 PREV PAGE TOP OF DOC Aside from the impact and understanding of free trade relative to the citrus industry, the most likely benefit of free trade agreements of the Americas are even multilateral for tariff reduction is lower prices to consumers. That would not be realized in the case of processed citrus product. Increasingly, the price of retail juice products have not tracked a decline in wholesale prices of orange solids leading to a buildup in Florida stocks.
It is fair to assume that the eventual demise of the Florida citrus industry under the FTAA expanded benefits and WTO multilateral is not likely to yield direct price benefits to consumers but only provide cost savings to reprocessors. If anything, the Brazilian industry, which is already highly concentrated, will lose the competitive restraint on prices and the U.S. consumer will suffer the consequences.
Mr. Chairman, we have continued to negotiate while working with the Members of Congress, with the administration in addressing the fast track legislative authority. In order to make sure, just as we did in NAFTA, that the specifics are included in the legislation, it is not acceptable to have a side agreement or letters. We would not agree to that. We did not in the NAFTA. It must be a part of the legislation. And we solicit your support in moving in that regard.
I would also say to you as we move on the phytosanitary and the sanitary standards, let me give you some specifics very quickly.
While Florida Citrus Mutual supports the progress made by WTO SPS Agreement towards eliminating SPS barriers to citrus trade, we encourage greater efforts towards eliminating SPS barriers, particularly those in Australia, Korea, Mexico, Taiwan and China.
Furthermore, FCM supports the accession of China and Taiwan to the WTO. They should agree and our Government must make sure as they make that accession that they must agree on the condition that they accept the SPS agreement based on sound science and that they eliminate all SPS barriers to trade which are not justified by sound science.
Page 15 PREV PAGE TOP OF DOC Among WTO members who will be parties to 1999 talks, there is great unrealized potential for U.S. citrus in Australia, Korea and Mexico. Australia prohibits the importation of fresh Florida citrus, even though the results of their risk assessment on Florida citrus shows acceptable levels. Australia points to the canker outbreaks in Dade and Manatee Counties. We have those areas confined and are doing eradication in those areas. Yet these counties currently operate under various effective protocols that are not justified.
Outside of these areas, the WTO SPS Agreement requires that citrus exports be unencumbered. Yet this country unencumbered the entire state. We think that's a violation of the WTO agreement.
Although Korea liberalized its treatment of U.S. citrus on July 1, 1997, there have been a myriad of problems exporting to that country. Korea raised its import standards for insects, chemical residues, and quality, while rarely subjecting domestic fruit to the same standards. In addition, Korea has been known to require long tests, incubation periods which can damage or destroy fruit. That country should be required to either provide pre-clearance or develop more expeditious testing methods.
Under NAFTA, Mexico permits the entry of U.S. citrus from California, Texas and Arizona. We support that. But maintains its ban on Florida citrus. This prohibition exists despite the fact that Mexico recognizes Florida's citrus production region as free from citrus canker, and despite Mexico's assurances months ago that this prohibition would be eliminated.
Finally, participants in the 1999 talks should agree to assert whatever coordinated influence is available to gain expanded access by lowering SPS restrictions of the largest non-WTO member, which is also the largest potential future market for citrus to China.
Under a 1992 Memorandum of Understanding, China and the United States committed bilaterally to base their agriculture import standards on sound science, as required under the WTO SPS Agreement. Although that country has recently lifted its bans on Pacific Northwest apples, Washington cherries, and California table grapes, it continues to ban all imports of fresh citrus from Florida, California, Texas and Arizona based on the incorrect claim that medfly is a threat to Chinese citrus groves. Frankly, we thought we had made significant progress in the negotiations with the Chinese in May. We were in China. Then they came here in October. It's been raised to the highest level by our President talking and meeting with their premiere about market access for citrus. We thought we made progress. Now we're back talking the same issues we did in 1992.
Page 16 PREV PAGE TOP OF DOC Mr. Chairman, we need further pressure and assistance from Congress as we move forward in these negotiations, in order to make sure they adhere to these rules. I think the pressure is on for China, because I think the time frame for progress would be in October of 1998. So that means we have to push very hard over the next few weeks to help Mr. Foley and others to maintain pressure on China in order that we can bring this to a successful resolution.
In closing, let me state to you that you will never build a market in China without WTO market access. We are currently shipping some citrus from Florida into China through Hong Kong. All the parties know it's there. If we had a problem with medfly, they would already have the outbreak because the product is distributed throughout the country in an indirect fashion. What we're saying is that you can never develop a market to advertise this and promote until such time you operate under international standards.
So Mr. Chairman, I say to you in closing, we have continued to work with you and members of the Congress as we address legislation. Also the final point that I'd make is a request offer basis should be utilized in these negotiations, just as it started out in the Uruguay Trade Round and then ended up as a formula driven basis. Consequently, we believe a request offer basis is the best way to approach future trade negotiations on a multilateral basis.
Thank you very much for allowing me to participate.
Mr. EWING. Thank you, Mr. McKown.
[The prepared statement of Mr. McKown appears at the conclusion of the hearing.]
Mr. EWING. Mr. Scottie Butler.
STATEMENT OF SCOTTIE J. BUTLER, GENERAL COUNSEL, FLORIDA FARM BUREAU FEDERATION
Mr. BUTLER. Thank you, Mr. Chairman, Congressman Foley. My name is Scottie Butler. I'm general counselor and administrative assistant to the president of the Florida Federation.
Page 17 PREV PAGE TOP OF DOC I especially want to thank you, Mr. Chairman, for bringing Stacy Carey down here. All the members of this panel through the years, they worked with Stacy, and you have an exemplary staff director. I hope I'm embarrassing the hell out of her. She really is great. And hopefully you will see some Florida famous sunshine.
Mr. FOLEY. This is why you have to invoke the 5-minute rule on this one.
Mr. BUTLER. I remind you, I will move ahead with these remarks, which will be quite reminiscent to some you already heard and some you will hear.
I will say also that Deputy Commissioner Roberts and Commissioner Crawford have done a tremendous job in reaching to you negotiations and difficulties that we in Florida have had with some of the aspects.
We're a general farm organization. We operate in all counties in Florida. We represent all commodity interests. And I would like to say, these are not concerns that are limited to fruits and vegetables, per se. All of our members in this State from one end to the other are quite skeptical of the development with our recent trade negotiations, both at the WTO level and with NAFTA. And we appreciate being able to comment on the agricultural issues coming up in the 1999 WTO multitrade negotiations.
We do feel that it's very important in all commodities we trade adequately and fairly. Our members have a number of policies, just as farm members. They recognize the trade importance for all of Florida economy. We do ask for fairness, equity and understanding of some of the uniqueness of our agriculture industry.
As Mr. McKown said, one does not fit all. When it comes down to agricultural commodities, many of ours are very sensitive from a standpoint in time and market conditions. We face many cost-competing countries as yet we have not been subjected to. I think we're all familiar with our problems in Florida permitting for water, concern over pesticide availability and regulation, regulatory requirements that we must undergo on land use matters.
Page 18 PREV PAGE TOP OF DOC Our sister organization, American Farm Bureau, studies have shown the costs of regulations agriculture in this country is the second highest input cost for farmers and accounts for 16 percent of our cost of production.
We also believe from a standpoint we need to recognize that Florida has developed many agricultural markets, prepared fresh fruits and vegetables on market orders and these at market development; that through these state and marketing orders, the growers themselves finance and increase the domestic markets. And it only seems fair to the United States that others who might gain access to these markets should have responsibility to help in that market development.
We believe it's essential that people knowledgeable of Florida and industry of fresh fruits and vegetable industry be employed by our Government Department of Commerce or Trade Representative level in the senior position. This would assure the concerns not only heard but understood and addressed.
We make a very important point that in negotiating future trade authority that we have binding agreements to resolve sanitary and phytosanitary issues, that we have tariff equalization and market access by requiring U.S. trading partners to eliminate tariff barriers within specific time frames.
We would ask the changes in international agreements and U.S. law and practices that would facilitate and shorten dispute resolution procedures and processes. All commodities currently subjected to minimum tariff reductions under GATT and NAFTA should not be subject to any further tariff reductions until all trading partners have shown good faith efforts to comply. Market access commitments agreed to by any of our trading partners must be adhered to before additional negotiation commences.
The trade relief measures that are GATT legal have proven to be ineffective for fruit and vegetable producers as originally designed. A trade relief remedy should be negotiated to protect seasonal and regional producers of fresh fruits and vegetables.
Page 19 PREV PAGE TOP OF DOC Florida growers tried to utilize the existing remedies and they did not work. Even though our growers had assurances form the highest levels, these were not honored. There is now a question of trust in the people that are involved in the enforcing of these agreements.
We oppose entering into the trade agreements until the concerns and problems are resolved with the existing agreements, and we have a chance to evaluate their effectiveness. There appears to be a lack of understanding on the part of our negotiators, and in our industry and market forces involved in these type of crops.
We support strict enforcement of import restrictions for sanitary and phytosanitary reasons and enhance export support from our Government, and we support the concepts of like quality inspections for domestic and foreign products. With increased trade, we feel that Florida is vulnerable to foreign pests and disease invasions.
The U.S. Government does help the U.S. in inspection for the aid and cost share measures, I understand, which puts our State in a disadvantage. We agree that for true market access we need export support to give our growers equal footing in the international arena.
We oppose any increased imports of sugar from countries that have less stringent environmental standards or less stringent enforcement of these standards than the standards of the United States.
We recognize that trade agreements do not address environmental issues, but there should be a realization that other countries may have an environmental subsidy because of the lack of regulations or enforcement.
We support measures that would better protect producers who export vegetables to other countries, with regard to grades and standards, pesticide residue regulations and provisions for prompt payment.
We favor the development and enactment of regulations such as production, volume or price triggers which will deal with, on a rapid and timely basis, imports of perishable commodities into the United States. We believe open or consigned loads should never be allowed. Under these circumstances we urge the USDA and U.S. Customs to establish a mechanism to ensure that imported products are not repacked or relabeled as a product of the United States.
Page 20 PREV PAGE TOP OF DOC We encourage a stricter inspection system by the USDA and U.S. Customs on all products moved across the Mexican or Canadian border or other ports of entry into the United States.
In closing, I think it is accurate to say that Florida's farmers are willing to compete in the international marketplace, if that market is fair and equitable. To develop this fair trade for Florida's crops, our negotiators need to be creative and open to a new thought process that goes outside of the traditional agricultural negotiations. Our negotiators need to understand the market perishability and recognize that our domestic growers have paid to develop our domestic market.
There also needs to be a consideration of governmental monetary policy and the incentives or disincentives it might provide to growers and shippers, so as to prevent the recent result of the evaluation phase to have such a devastating impact on our domestic shipments. And I'm going to deviate a hand. You did ask for comments from a biotech nature. I do not personally have that sort of background.
I have been involved in observing Florida agriculture for 28 years. And I do commend the committee for the involvement in the biotech area. These are the types of developments that keep the United States competitive in agriculture. I read with amusement when the press makes fun of killer tomatoes. But these advances in science are what enables us to, with the duties of the people on this earth, without destroying marginal lands, which would have to be done if we drew back on the science and drew back on funding the things needed to keep the United States and this country ahead in this area.
Thank you again.
[The prepared statement of Mr. Butler appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Scottie. Mr. Reginald Brown, director of marketing membership for Florida Fruit & Vegetable Association.
Page 21 PREV PAGE TOP OF DOCSTATEMENT OF REGINALD L. BROWN, DIRECTOR, MARKETING AND MEMBERSHIP, FLORIDA FRUIT & VEGETABLE ASSOCIATION
Mr. BROWN. Good morning, Mr. Chairman and staff. We appreciate you being here on behalf of our association.
Florida Fruit and Vegetable Association is an organization comprised of growers of vegetables, citrus, sugarcane, tropical fruit and other agriculture commodities here in Florida.
Florida Fruit and Vegetable Specialty Crops have had highly unfavorable experience with previous multilateral and bilateral trade negotiations on numerous occasions, including during the recent fast-track debate.
FFVA has expressed its concerns about the inadequacies of the Uruguay Round Agreement for Florida agriculture and the need to correct, rather than compound, those inadequacies as we move forward in various trade arenas.
We appreciate the opportunity to address these concerns once again here today.
The Uruguay Round did not in all cases lead to access gains. The dirty tariffication, although in theory the Uruguay Round multilateral trade negotiations were reduced to tariffs for all agricultural products in all countries by a minimum of 15 percent or 10 percent for developing countries, this exercise did not in many key instances produce access parity for a variety of Florida Specialty Fruit and Vegetable commodities that were already subject to low tariffs.
This is because the European Union and other countries interested in protecting their domestic industries used dirty tariffication to increase, rather than decrease boarder protection. That is to say, non-tariff barriers were replaced by prohibitive tariffs that made access impossible, even with the mandated 15 percent reductions.
Page 22 PREV PAGE TOP OF DOC Many important Asian markets, especially those that were considered developing countries in the Uruguay Round, such as Thailand, now have bound tariffs of over 50 percent or higher even after Uruguay Round tariff reductions are fully taken, because the pre-Uruguay Round rates in these countries were so high and in some cases unbound, and many of those rates were increased even more through tariffication exercise.
The Uruguay Round reductions have had no effect at all on the applied rates, which remain at 30 percent or higher, which in effect are effective barriers. The administration TRQs, under the Uruguay Round commitments, access for many fruit and vegetable crops, is governed by tariff rate quotas. Many countries, including the European Union, have adopted onerous licensing requirements and other non-transparent procedures to administer their TRQs, which make access more restrictive and distortive than that which was provided by the TRQ itself. Thus, TRQs have not always been a move forward. They may simply be another form of non-tariff barrier.
The safeguard measures contemplated by the Uruguay Round have not been effective. During the Uruguay Round negotiations, FFVA argued strongly for an effective price-based safeguard measure for sensitive perishable crops. This price-based mechanism contained in the Uruguay agreement, however, covers only products that had non-tariff border measure quotas in place prior to the implementation date of the agreement.
Since no U.S. fruit and vegetable had such measures in place, Uruguay Round safeguard relief does not protect our industries. The Uruguay Round safeguard measures do, however, apply to certain fruit- and vegetable-producing competitors, particularly in the European Union. This inequity means that at key times of the year, our competitors keep U.S. fruit and vegetable exports out of their markets, but no such protection against surges of imports exists for our domestic producers.
Section 201/202 trade relief. Uruguay Round Agreements and NAFTA contemplated the existing trade remedies, such as 201 and 202, would provide temporary adjustment relief to industries like Florida's fruit and vegetable sectors that have been seriously injured by increased imports caused by the reduction and/or elimination of trade barriers. In application, however, those laws have not provided relief.
Page 23 PREV PAGE TOP OF DOC Florida's tomato and pepper industries have undertaken expensive but unsuccessful efforts to use the section 201 law to protect against import surges from Mexico. Injury proved impossible to show, since the law does not adjust for the unique seasonal and perishable nature of fruit and vegetable production.
Future multilateral trade negotiations need to strengthen existing safeguard measures such so they are meaningful to seasonal, perishable commodities.
The WTO may not have created sufficient disciplines governing sanitary and phytosanitary restrictions. The sanitary and phytosanitary agreement was touted as a significant win for U.S. agriculturethe first time countries would be required to scientifically justify their phytosanitary and sanitary import bans and other restrictions. It has yet to live up to those expectations, however. Sanitary barriers are now the barriers of the choice for many countries. Since the Uruguay Round, progress on many plant quarantine issues has been slow to nonexistent. Significant disputes remain, such as Florida citrus access to Mexico.
Following the recent appellate body decision in the United States-European Union beef hormone case, it remains highly uncertain whether the sanitary, phytosanitary agreement will be an effective tool in resolving sanitary and phytosanitary disputes.
Some believe that that decision may make it more difficult for countries to succeed in challenging sanitary measures that are stricter than international standards, since it appears to give a country broad leeway in defining the scope of the risk assessment analysis and would shift the burden of proof to the complaining country to show the standard is not significantly justified.
It remains to be seen whether key signatory countries will comply with WTO rulings. During the Uruguay Round, the United States gave up its authority to act unilaterally against unfair trading partners. That right protected section 301 in favor of a new, so-called foolproof WTO dispute settlement system. There are still questions, however, as to whether WTO rulings are in fact foolproof.
Page 24 PREV PAGE TOP OF DOC The European Union, for example, is now making it known that it may not be willing to come into full compliance with recent rulings against it. No matter how good WTO procedural and substantive disciplines may appear on paper, they have no meaning if countries refuse to abide by them.
In conclusion, because previous trade negotiations have not been favorable for Florida fruits and vegetables, there is great skepticism about the new round of multilateral negotiations would bring for our industry. It is our belief that a good number of the problems created by these negotiations can and should be created by U.S. legislative and executive branches before ambitious, new negotiations are undertaken that may compound existing trade procedures. Thank you for the opportunity for being here this morning.
Mr. EWING. Thank you, Mr. Brown.
[The prepared statement of Mr. Brown appears at the conclusion of the hearing.]
Mr. EWING. Now, Mr. Contreras, we'll hear from you.
STATEMENT OF ANTONIO L. CONTRERAS, JR., SUGARCANE GROWERS COOPERATIVE OF FLORIDA
Mr. CONTRERAS. Mr. Chairman, how we thank you for the opportunity to provide testimony at this important hearing.
I have submitted my written testimony and ask it be included in the record. I will try to be brief in my oral statement.
My comments are consistent with the views of the entire sugar industry, as well as views of the American Sugar Alliance, the National Coalition of growers and processors of sugar beets, sugarcane, and corn sweeteners.
I would like to provide a brief background of the United States' role and standing in the world sugar economy. I will also give a brief description of the U.S. sugar industry's goals, priorities, concerns. I will finish up with our suggested strategy for the next round of World Trade Organization multilateral negotiations.
Page 25 PREV PAGE TOP OF DOC As a brief background, the United States is the world's fourth largest sugar producer, trailing only Brazil, India and China. Despite some of the world's highest government-imposed costs for labor and environmental protections, U.S. sugar producers are among the most efficient.
According to a study released in 1997 by LMC International of Oxford, England, British-based world reknown sugar economists, fully two-thirds of the world's sugar is produced at a higher cost per pound than in our country. It is for this reason that we would welcome free competition with foreign farmers in a truly free trade environment.
Unfortunately, the extreme distortion of the so-called world market makes it impossible for any such free trade competition today. Let me elaborate on what I mean. Roughly 100 countries produce sugar and the governments of all these countries intervene in their sugar markets in some way, shape or form.
The most egregious and most trade distorting example is the European Union. The Europeans are higher-cost sugar producers than we are and they enjoy price supports that are 40 percent higher than ours. High enough to generate huge surpluses of sugar that are dumped on the export sugar market for whatever price they will bring through an elaborate system of export subsidies.
World trade in sugar has always been riddled with unfair trading practices such as these. These practices have led to the distortion in the so-called world sugar market. These distortions have led to a total disconnect between what it actually costs to produce a pound of sugar and the prices in the world market. Again, more aptly called the ''dump market.''
Let me now briefly cover what the U.S. sugar industry's free trade goals are. Because of our competitiveness, with costs of production well below the world average, the U.S. sugar industry supports the goal of genuine, global free trade in sugar. We cannot compete with foreign governments, but for the reasons I stated, we're perfectly willing to compete with foreign farmers in a truly free trade environment.
Page 26 PREV PAGE TOP OF DOC However, I would like to make clear that the U.S. sugar industry does not endorse the notion of free trade at any cost. Free trade must be made deliberately and rationally to ensure fairness. To achieve a free trade transition process that is rational and fair, we'd provide the following priorities, concerns, and also a strategy that we would like to suggest. As far as priorities for the 1999 trade round, there are basically two in sugar we'd like to address.
The first one, export subsidies, these are the most distorting practices in world agriculture trade.
In the world sugar market, subsidized exports by the European Union alone, I mention, amount to as much as a fourth of all the sugar traded each year in the so-called world market.
It's no surprise this market has no relationship to what it actually costs to produce a pound of sugar.
Second, state trading enterprises, which have been mentioned already by some of my colleagues, STE's are quasi-governmental or government-tolerated organizations that support domestic producers through a variety of monopolistic buyer and seller arrangements, marketing quotas, dual-pricing arrangements, and other strategies. These practices were ignored in the Uruguay Round, but are, unfortunately, very common in the world sugar business.
Let me touch upon our concerns for the upcoming trade round. First, hugely varying levels of support.
What I mean here is that unilateral reforms to U.S. agricultural policy in the 1996 farm bill, which you are all very well aware of, far exceeded U.S. commitments made the year before the Uruguay Round.
There has been little reciprocity by other WTO member countries to our reforms and in many cases no compliance at all with their past commitments. As a result, the United States is way out in front of the rest of the world in removing its government from agriculture. This gap makes American farmers uniquely vulnerable to continued subsidies by foreign competitors.
Page 27 PREV PAGE TOP OF DOC The key element to keep in mind in this issue is other countries must reduce their support to the U.S. levels in the next trade rounds before American farmers are asked to do anything more. Also, we would suggest that no further reduction of the U.S. supports until other countries comply with the Uruguay Round committee.
Our second concern is labor and environmental standards, which have been addressed here already this morning.
The gap in government standards and resulting producer costs between developed and developing countries is well documented and immense. The wide gap in labor and environmental standards must be taken into account in the next trade round and addressed in a manner that ensures global standards to rise to developed country levels, rather than fall.
In closing, I would like to suggest the negotiating strategy for agriculture for the upcoming trade negotiations. For the many reasons I have outlined, the formula for one-size-fits-all approach for trade concessions does not work for agriculture in general, and certainly not for sugar in particular. To date we have led the world in trade barrier reduction and can only hope the rest of the world will follow our example.
We can turn our unilateral concessions we made to date to our advantage only if we follow a request/offer strategy, which has been mentioned by Mr. McKown.
Essentially, we provide the foreign countries the incentive to reduce their government programs by promising to reduce ours further when, and only when, they have reduced their programs to our level.
To conclude, Mr. Chairman, I would like to commend you for convening this timely and very important meeting.
[The prepared statement of Mr. Contreras appears at the conclusion of the hearing.]
Page 28 PREV PAGE TOP OF DOC Mr. EWING. Thank you, Mr. Contreras.
Now Mr. Smigiel.
STATEMENT OF GARY SMIGIEL, VICE CHAIRMAN, FLORIDA FARMERS & SUPPLIERS COALITION, INC.
Mr. SMIGIEL. Mr. Chairman, I'm here on behalf of the Florida Farmers & Suppliers Coalition, and as president of the Florida Tomato Exchange.
We are all winter vegetable producers. You're well aware our industry has been devastated. We lost over half our farmers in the past few years due to the foreign trade policies in effect.
As an American citizen, I fear for future of this country unless we get our trade policy under control. But this morning I'm here to talk about the effect on Florida businesses in agriculture.
I go to work on a farm every morning. I sit with the farmers as they come in and out of the fields. My office is adjacent to the packing house.
I remember 2 years ago after NAFTA had been in effect, when the first Peso evaluation hit, we left our produce to rot in the fields. This is some the most expensive produce in the world to grow under the Florida growing conditions. We're at a terrible disadvantage in competing under our trade policies with foreign growers.
Some of the things that give them cost advantages are their utilization of child labor, the unsanitary practices they're able to use in the growing and impact packing of their and produce, utilization of pesticides that have been banned for many years in this country, and of course the ability to devalue their currency, which means the dumping of produce below the cost of production in the United States.
The mechanisms to combat dumping are very, very cumbersome. With the help of Commissioner Crawford we're able to institute a dumping suit that cost millions of dollars, the settlement was forced, and there is now floor price of tomatoes during certain growing periods to keep Mexico from dumping below the cost of production.
Page 29 PREV PAGE TOP OF DOC Without the commissioner's support, the Florida tomato industry in all probability wouldn't be able to fund that effort. In order to support an increase in the continuation of our trade policies, certain things need to be considered. We need an imported produce labeling act. This is good consumer policy. Canada, Japan, Australia, European nations have it. It's not a burden on anyone. It's actually of minimal cost to the marketing produce in this country.
We also support the inclusion of the child labor elimination act in any future policies, and special tariff on Mexican imports until the Peso reaches its pre-NAFTA value. Also, we want elimination of imports of fruits and vegetables from countries using methyl bromide when we can't use it. If we don't have that, we're just going to give them the industry.
The trade policy doesn't matter. It's cut and dry. It doubles and triples our cost, whatever, more other cost advantages they had. We also need a floor price on all imported produce until there is some other way to combat the dumping. We can't stand a bad year with the high cost of winter vegetable production here. We can't stand them to dump one year, then we get relief the next year. We're going to lose a significant number of additional farmers.
The trade policy of this country is not for foreign countries, it's not for multinational companies but for citizens. It doesn't help if the Florida vegetable industry goes out of business. Our country and citizens are not going to benefit. They will be held hostage to foreign produce and increasing costs.
Mr. EWING. Thank you, Mr. Smigiel.
Mr. EWING. And thank you, Maria. Did you have trouble getting here today?
Ms. TRUNK. A little bit.
STATEMENT OF MARIA TRUNK, MANAGER, RESEARCH AND DEVELOPMENT, BROOKS TROPICALS, INC.
Page 30 PREV PAGE TOP OF DOC Ms. TRUNK. Thank you, Mr. Chairman. Thank you for the opportunity to communicate the concerns of my company and other growers of tropical fruits in Florida.
By way of background, let me explain the company I work for.
Brooks Tropical manages about 5,000 acres of limes, avocados, carambolas and mangoes in south Florida. We pack, market and ship fruit for ourselves and about 150 other local growers. We also import tropical fruits and vegetables from Latin America year-round, so we have experience in agricultural trade, both as domestic producers and also as importers of foreign products.
I am speaking today also on behalf of Tropical Fruit Growers of south Florida, an organization with over 120 commercial members dedicated to promoting the quality, growth and development of our industry.
My comments this morning are directed at only one aspect of the WTO negotiations, and that is phytosanitary regulations.
My basic message is this: Foreign diseases and insects pose a very serious threat to American agriculture, to the livelihood and long-term economic stability of American farmers. I would ask you to do everything you can to maintain and even strengthen the regulatory safeguards which currently protect the United States from the invasion by foreign pests and diseases.
Unfortunately, we have reason to believe that these safeguards are being weakened to the point where our agriculture and our environment are being exposed to serious unprecedented risk.
It appears that the drive to open trade and eliminate barriers is causing the hasty and often ill-advised removal or relaxation of regulations which were established pursuant to Federal laws and based on good principles and sound science.
Page 31 PREV PAGE TOP OF DOC I'm going to tell you why we believe this is so, using an agricultural case that we are currently struggling with as an example.
Last March the Animal and Plant Health Inspection Service, APHIS, published a proposal to allow the importation of papayas from an area of Brazil that is infested with the Mediterranean fruit fly and the South American fruit fly.
Papayas are a good host to both of these devastating pests. And medfly and South American fruit fly also attack many other crops, like citrus, tomatoes, peaches, et cetera.
Let me quote APHIS' own description of medfly. ''It is one of the world's most destructive pests of numerous fruits and vegetables. medfly can cause serious economic losses. Heavy infestations can cause complete loss of crops and losses of 25 to 50 percent are not uncommon. The short life cycle of this pest permits the rapid development of serious outbreaks.''
In spite of this, APHIS proposed to allow the papayas into the country untreated with no quarantine protection other than requiring that the fruit be no more than half ripe.
We, along with the Florida Department of Agriculture and Consumer Services, protested and APHIS in the fall put out a revised proposal which added on a hot water treatment and a field trapping requirement. Upon further investigation, however, we discovered that the treatment they had proposed was only one step of a two-step treatment developed in Hawaii which turned out not to work anyway and was rescinded by APHIS several years earlier.
Moreover, the trapping provision proved to be meaningless because they were not going to require any action to be taken until an average of seven flies in one trap, over the whole region, were detectedthat's not seven flies in one trap, but an average of seven flies in each trap placed one per hectare over the entire State of Brazil.
Page 32 PREV PAGE TOP OF DOC Here in Florida, if a single fly is caught in a single trap, a series of control measures is immediately invoked.
The contrast is even sharper when we remember that APHIS authorized the quarantine of significant portions of Florida last year to prevent the medfly from spreading to non-infested areas of the United States.
Incredibly, the proposal under consideration would allow papaya from admittedly infested areas of Brazil into the most susceptible growing area in the continental United States; that is, Florida, with only a pale shadow of the quarantine program that's in place right here.
The risk management measures required for Brazil, which is permanently medfly-infested, simply do not guarantee the same level of security that APHIS enforces during domestic temporary outbreaks.
Brooks Tropicals, the Tropical Fruit Growers of south Florida, along with the Florida Fruit and Vegetable Association, the Florida Department of Agriculture and Consumer Services, the California Department of Food and Agriculture, the Farm Bureau, the University of Florida, and many individual farmers have submitted comments on this revised proposal, all of us pointing out that the risk mitigation APHIS offers does not adequately address the real threat of importation of the extremely destructive pests, the medfly and the SAFF.
Here in the State of Florida we are just wrapping up a very costly eradication program for a medfly outbreak that occurred in the Tampa area this spring.
The most recent figure I heard pegged the total cost to taxpayers at $24 million for eradication, and this does not include the cost that quarantine caused in disruption of production and flows of goods to market. A medfly infestation affects not only agriculture, but also the environment and the populace.
The Brazil papayas would most likely enter the United States through the seaport or airport of Miami, the closest port of entry to Brazil, and also a scant 30 miles away from the fields, groves, and greenhouses of Dade County's $2 billion agriculture industry. A medfly outbreak in Dade County would result in the APHIS mandated widespread spraying of malathion or some other insecticide in the immediate vicinity of Everglades National Park, Biscayne National Park, and other sensitive wetlands outside the park's boundaries.
Page 33 PREV PAGE TOP OF DOC Such an action would harm or threaten to harm endangered species, as well as the extremely fragile environment and the quality of life in south Florida, above and beyond the disruption that quarantine measures would cause to agricultural production.
Will APHIS listen to our concerns and withdraw its Brazilian papaya proposal? I am pessimistic. In the past few years we have presented the agency with sound scientific arguments against proposals to allow importation of avocados from Mexico, carambolas from Taiwan, lychees from Taiwan, to name a few examples.
In each case APHIS brushed aside our concerns and went ahead with the rule changes. Moreover, a new proposal is being considered which would allow entry of fresh tomatoes from France, Morocco, Western Sahara and Spain, all of which are infested with medfly.
Given the situation, I would suggest the following guidelines in foreign negotiations on phytosanitary issues.
First, quarantine regulations must be based on rigorous, peer-reviewed, scientific research.
Second, risk assessment and risk mitigation measures must be quantified and compared to published standards.
Third, thresholds for risk tolerance should be determined by an environmental impact assessment of a worst case infestation scenario.
Fourth, changes to quarantine regulations should be determined by science, not business or politics.
And, finally, a serious and thorough review of APHIS policies and practices needs to be made to assure that the letter and spirit of the Plant Pest Act, the Plant Quarantine Act and other related acts are adhered to so as to prevent the introduction of destructive plant pests. Remember, my company does a good deal of business importing fresh produce. My comments are not about protectionism, but about protecting our agricultural environment-maintaining its integrity and allowing us to keep growing crops without the burden of additional pests and disruptive emergency eradication programs.
Page 34 PREV PAGE TOP OF DOC Keep in mind that if medfly does become established here in Florida, it will cause a setback for export programs to medfly-free countries like Japan, not only of Florida products, but probably those of California and other states as well.
Once again, thank you for hearing me today. If you would like any further details on any points I've made, I would invite you or your staff members to contact me. Or even better yet, come to Homestead and see what we have at stake.
[The prepared statement of Ms. Trunk appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Ms. Trunk. A couple of questions that come to mind with your testimony. Can the medfly get into the Everglades and will it live in areas
Ms. TRUNK. There is a species called the Everglades pond apple. I don't know specifically if the fruit of that plant is a host to medfly, but I would think it's highly possible that it is. That's the native species found in the Everglades.
Mr. EWING. Is there an infestation when we have a problem in those parts now or do we know?
Ms. TRUNK. Well, fortunately, we haven't had an infestation in Dade County for the past few years. And if I remember correctly, the most recent one was in an urban area. So the spray programs were limited to an urban part of Dade County.
But if it were to come out, our agricultural production area abuts Everglades National Park and Biscayne National Park. So if any spraying were to go on where we actually produce, I would assume that some spray could drift over to the borders of the park.
Mr. EWING. Do you believe that APHIS washow it was motivated in its allowing the Brazilian papayas into the United States. Do you think that was a political move?
Page 35 PREV PAGE TOP OF DOC Ms. TRUNK. We really can't understand it. It's something that's puzzled us very greatly knowing that their mission is to protect American agriculture. And we just really can't understand what their motivations are in these cases.
We don't know if they're responding to pressures from other agencies or from other people outside the country. We really don't know.
Mr. EWING. One final question. We hear a lot about, I think in Japan, of them keeping out our products because of the sanitary, phytosanitary issues. Do they do that to other countries, too?
Ms. TRUNK. I really can't speak to that one about Japan. That's kind of outside my expertise. Perhaps somebody else on the panel could answer that question.
Mr. EWING. Does anybody have a comment on it?
Mr. MCKOWN. Mr. Chairman, I would say yes, they administer their APHIS procedures pretty uniformly throughout all their trading partners. Pretty onerous sometimes.
Mr. EWING. We've had testimony here today about the problems that have arisen in trade and as a result of at least in part the Uruguay Round of trade agreements.
Are there positives for Florida agriculture from those trade agreements?
Mr. MCKOWN. Yes, Mr. Chairman. We have, as far as fresh citrus is concerned, we have opened up markets as a result of the Uruguay trade round. We are now shipping products into Thailand, Columbia, been approved for shipment into Brazil, New Zealand. New Zealand is approved.
We've never shipped anything there yet because the phytosanitary standards that they are continuing to hold Florida hostage, so to speak.
Page 36 PREV PAGE TOP OF DOC We are working on Mexico. We're still working on market access as part of NAFTA. That's 4 years running. That's strictly, in my opinion, a political issue. They made the political decision not to allow the United States to ship into that market Florida citrus.
We thought we'd really made progress. The person we've been negotiating with, very favorably inclined, he's been removed from that position. Someone else has been elevated and he's opposed. That's the issue I think we're dealing with and we continue to pursue that.
Australia, we're making some progress. And, frankly, I think we had an understanding with Australia 4 years ago that we allowwe support their entry of navels, fresh navel orange in the United States and they, in turn, ship fresh grapefruit. They're shipping fresh oranges here and we still are not shipping fresh grapefruit there.
We did some research we should not have had to do. We did that and we're still not shipping in there.
Mr. Chairman, I would point out to you a major point, and this is our position relative to these countries, in China in particular.
APHIS, frankly, is in the breach of negotiations and draft documents or working documents have been submitted back to the Chinese.
Currently if you have a medfly outbreak, you provide for a 4 1/2 mile radius around the known fly and that's your quarantine area.
It was proposed in some outlandish manner, though not talking to us or anyone else, and we're working to retrieve this and put it back, expand that to 50 kilometers, about 30 miles. That's totally unacceptable.
We're not going to agree to a new potential customer, to agree to a more extrinsic proposition of international trade standards that we currently have with our other trade departments.
Page 37 PREV PAGE TOP OF DOC So we are opposed to that and ask APHIS to withdraw that and come back to the accepted protocols under international protocols we currently operate. Poor strategy or poor negotiators. I don't know which it is.
Mr. BROWN. We have managed to get tomatoes into Japan in the last 6 months or so. And that was a fairly large task in responding to accusations the Japanese made on a phytosanitary basis, diseases does not exist to the tomato industry, period, in the country. But with some work, with our USDA and our department, with the Japanese Government, we did clear that hurdle. We are making some progress. We still have a challenge.
Mr. EWING. Yes.
Ms. RHODES ROBERTS. Mr. Chairman, I would add to that of the $6 million cash received, we export about 1.3 billion. And this is increasing. But it's fighting tooth and toenail for all the examples given to you today.
Whatever we can do to strengthen the situation like the SPS agreement or expedite dispute the resolution will increase our ability to trade.
Mr. EWING. I guess, I know we can't simplify it down to that small or that fine statement. So I'm hearing that we have serious problems, but we also have made some gains in promoting agriculture from Florida and your economy by the trade agreements.
Maybe it's more specifically problems for certain commodities over others.
Ms. RHODES ROBERTS. I would say as a whole we've been very satisfied with many of the provisions of NAFTA. I think some of the provisions dealt with in Uruguay Round have been of more benefit to the United States
We have had more problems and more damages to fresh fruits and vegetables than to other sectors. We can demonstrate very specifically major losses and individual commodities and we provided those to many of our delegations as well as USDA, IPC and others to illustrate the point as to why so many corrections could be made in the next round.
Page 38 PREV PAGE TOP OF DOC Mr. EWING. In the past round we did, I guess, broad percentage reductions and tariffs. So if you have a very high tariff, you come down a percentage and you have a low tariff and you come down to the same percent, it continues a distortion.
Do you think that we ought to look at changing that and looking at the amount of tariff and not just applying a percentage to it?
Mr. MCKOWN. Yes, sir. That's why we support the request offer basis.
Mr. Chairman, during the Uruguay Trade Round, the whole process of the United States drove off of was that of tariffication. That means you can convert all substantive, any support, you convert that to a tariff, then you begin to negotiate off of that higher tariff.
Frankly, many of those countries ended up with a 700 percent tariff, for instance, on certain items.
But as far as citrus is concerned, we weren't subsidized or price supported. We didn't have anything to tariffy. We became terrified.
All we had was just a tariff that was bound in place, and consequently a 50 percent reduction in that tariff would be tantamount to suicide. So we think the request offer is the only way to pursue this on an equitable basis.
VOICE. The next round is more terrifying.
Mr. EWING. The WTO is the request offer?
Mr. MCKOWN. Yes. We support the request offer. That means in every country, the United States is under the process now. Every country, within the WTO is developing their request offer to go forward to the WTO by June 1998. And then those country lists will be exchanged with all other trading partners. And on that basis, each country will request what they would request Country A to reduce and it will be on a commodity by commodity basis rather than saying that you have to on average reduce the tariff by 50 percent, or 36 percent with a minimum reduction of 15 percent.
Page 39 PREV PAGE TOP OF DOC In other words, you go in with a request offer for the purpose of negotiating with those countries on those particular items.
Mr. EWING. And you're strongly supporting the request offer?
Mr. MCKOWN. Yes, sir.
Mr. SMIGIEL. Mr. Chairman, I'd like to make a very valid point to point out, as I previously spoke, the European levels of support is 40 percent higher than ours. We think equalization of support rates among the countries negotiating are a must to go forward.
Mr. MCKOWN. Let me offer one other comment.
Frankly, we look on the tariff rate, tariff system as being the price admission into a market. If you have the price for admission and you still can't get in because of non-tariff barriers, it doesn't matter what the tariff is, because you don't have market access. That's the real issue at hand.
Give the United States the market access and we will deal with the tariff that and work with the process.
Ms. RHODES ROBERTS. Mr. Chairman, if I could add to Commissioner Crawford's testimony under the tariff equivalency section.
We strongly support the request offer. This is the only way which we negotiate, can negotiate and not be under a totally disadvantaged position.
Relative to your earlier comments, when you've got somebody who has got a very high level involved of tariff subsidy and we have a very low level, if you just go in and blanket the formula all the way across the board, we're severely disadvantaged and severely hurt.
Mr. EWING. Mr. Foley.
Mr. FOLEY. Thank you, Mr. Chairman.
Mr. Contreras, do you believe the DEO should perform the sugar regime?
Page 40 PREV PAGE TOP OF DOC Mr. CONTRERAS. I would like to think so, but I'm very skeptical. They have not done it in the past and some ministers made recent claims, that it's very unlikely for it to happen.
Just to elaborate, the impact of that regime alone in the sugar business, in the last Uruguay Round, as has been alluded to here, there was a 20 percent reduction on the aggregate basis.
That AMS measure supports the ones who took the sector in European business, agriculture business who took the greatest reductions, mainly grains and other commodities. The reforms did not touch sugar hardly at all.
On the other hand as well, it did not really affect their export subsidies. The bottom line impact of E.U. reforms in sugar is really very little. And I will explain very clearly what I mean by that.
In 199394, the exports from sugar from the European Union was around 6.4 million tons. This is into a world market that is only 18 to 20 million tons.
Under reforms they undertook under Uruguay Round by the year 2001 these exports are projected to drop to 6.1 million tons. So no effect whatsoever on the sugar business.
Mr. FOLEY. They're making up 30 percent. If you use your formula, 6.4 million tons and 18 million tons worldwide, you're talking roughly contributing 30 percent of the world share.
Mr. CONTRERAS. About a quarter.
Mr. FOLEY. You mentioned in your testimony the U.S. sugar industry has become more efficient; also I understand more environmentally efficient. Can you go into some more detail about those two?
Mr. CONTRERAS. We in Florida have made a continual investment year after year into improving our efficiencies, not only in the field but in the factory. And really the only way we've been able to survive in an environment of a flat market, which you are very well aware of the price. The U.S. market fluctuated for raw sugar very little over the last 10 to 15 years and we really had a loan rate that stayed at 18 cents a pound, at least for 15 years.
Page 41 PREV PAGE TOP OF DOC In the recent program we even took a loan rate cut of a penny to 17 cents.
As far as the environmental side, under the Everglades Forever Act, the farmers in Florida are contributing close to $300 million to really solve all the environmental problems which are attributed to storm water runoff from our farms.
As far as I know, we're the largest contributors to that effort and are proud of it. So we're working on both sides very diligently.
Mr. FOLEY. So the world price, again, that's subject of much debate in Washington because people try to use the world price that's published in the Wall Street Journal as some kind of a barometer by which they suggest we're over-charging for sugar.
It's my understandingI would like your elaboration on thisworld price is measured as excess capacity.
Mr. CONTRERAS. That's a very accurate way of putting it, Congressman Foley. Basically using the world price as any type of benchmark is purely fiction, because there is not one country around the world that sells all of its production, or close to a sizable percent of production at the world price.
They get the blended price, which is a combination of internal price, special trading arrangements. Whatever they have left over in their production, they dump it in the world market.
One hundred twenty-five million tons of sugar is produced annually worldwide. Of those, only 18 to 20 million are freely traded. Those are the sugars that we really don't have a home, and those are the sugars that make up the world market. And that's why it is really a dump market which has no relationship at all with even the most efficient producers around the world, what it costs for them to produce a pound of sugar.
And the proof is in the pudding, according to Landell Mills, if you take a look at their 10-year average, cost of production, average cost of production for all sugar-producing countries was roughly double the average price of the world market for that corresponding period.
Page 42 PREV PAGE TOP OF DOC So there is a total disconnect in using the world market as a rationale for that. Our opponets claim that U.S. sugar producers have to sell at the world price. It's a good soundbite, but when you look at the facts it's totally unrealistic.
Mr. FOLEY. No one in any round of negotiation should ever refer necessarily to the world price of sugar as a barometer with which to negotiate from there.
Mr. CONTRERAS. Absolutely not in our view at all.
Mr. FOLEY. Mr. McKown, what are theand I think it's important for the record to restatewhat are the countries that create or oppose the biggest obstacle for trade with your industry right now?
Mr. MCKOWN. For sure, the No. 1 competitor is the largest citrus producer in the world.
To give you a for instance, to compare size, they produced this past year 450 million boxes of oranges, 90 pounds per box, and we have produced approximately 250 million. And that is our largest competitor, Brazil.
But I think it's important, Congressmen, to take into consideration, you take the CBI, Israel Trade Agreement et cetera and NAFTA reduction, and the duty elimination has occurred with all those being duty free over time, and then the reduction as provided in the Uruguay Trade Round, the cumulative affect, is having a compression on the price of citrus in Florida. Brazil is our No. 1 entry.
Mr. FOLEY. One of the things not mentioned, I think it's something I certainly have a large concern about, is the growing crop producers in Mexico.
It's my understanding the tree acreage produces expeditiously, soon comes to market with fruit bearing. What is the total acreage now planned? Are you aware?
Mr. MCKOWN. Total acreage in Mexicowe have 850,000 acres planted in Florida. They have in excess of that amount in Mexico.
Page 43 PREV PAGE TOP OF DOC Another issue, CBI.
The spirit and intent of the CBI was to allow the industries within the CBI countries to invest in growing industries and benefit the region; but the intent was not to allow a country such as Great Britain to come in with treasuries of Great Britain, invest and own groves in that country and then they compete.
You can't compete with the domestic Costa Ricans, for instance. You cannot compete by paying 8, 9 percent commercial rate of interest when they're not paying any interest. You can't compete against the treasurer.
We believe that beneficial should not be given to Government entities who fund and own those type of industries in a CBI beneficiary country.
Mr. FOLEY. So a heavily subsidized operation should not be subsidized by the taxpayers. They're creating a marketplace. They're utilizing
Mr. MCKOWN. We agree. Costa Rican growers, they are opposed to this as well. So we will be talking more about that as we go along.
Mr. FOLEY. Brazil's sales is almost 85 percent of what we have?
Mr. MCKOWN. That's right.
Mr. FOLEY. Obviously American industry, Mexico coming on with huge volume, the only solution that clearly becomes accessible, as you clearly stated earlier.
Mr. MCKOWN. Correct.
Mr. FOLEY. Getting into other countries?
Mr. MCKOWN. For fresh in particular. On juice, there are major markets for orange juice in the United States and we export about 10 percent of our volume in juice and basically most of that goes to Canada.
So consequently we really have a domestic market that we built the United States for orange juice. That's our key component. We must maintain that. We have to compete with the world market and we will have a difficult time on juice.
Page 44 PREV PAGE TOP OF DOC Mr. FOLEY. I guess one of the last questions anybody is capable of answering, this one of the things I mentioned to the administration, Barshefsky and to the President when we were in Florida together, and to the Secretary of Commerce, was the fact in other trade areas we have durable goods that we're negotiating about, where washing machines and products that have a shelf life.
If there is an intermittent problem, they're not going to be destroyed in the dark. They can be held somewhere until we resolve the issue.
In my knowledge of NAFTA and all, there were all kinds of promises made on dumping and surging and what have you, that we would have snapback. I still don't know what that word means. Based on an action of the Federal Government to enforce any of the provisions.
What is the biggest obstacle for the fresh produce industries in resolving these issues? What is the solution by which we can enter into by law which thwarts the end of the fast-track?
They were willing to do anything for me, just tell us the language you need, as long as it's not a part of the legislation. We will do a side letter, we will do a promise.
Those side things to me indicate they're on the side. Never found once you have gotten your vote.
Mr. MCKOWN. Kind of being the preamble of the bill. Nobody looks at the preamble. You need to be in the substance of the law.
I would say as far as fresh citrus is concerned, our primary concern for export farmers is the action to put in non-tariff barriers and the phytosanitary standards using those as a debt to not allow into the market. That's our biggest problem that we have meeting those standards in all of our trading partners.
Mr. FOLEY. Anybody else on those issues?
Page 45 PREV PAGE TOP OF DOC Ms. RHODES ROBERTS. I would offer a few comments.
I fully agree with Bobby. One of the worst problems we have is market access and one of the greatest restrictionsthey are unfoundedsanitary and phytosanitary issues.
But I'd also add that every time we try to debate and find solutions, we have disagreements with our own U.S. agricultural community.
I think we have a great lack of understanding with some of the commodities that are not perishable, about exactly what you brought up, and that's the fact that you can't deal on a perishable commodity, one that's going to totally be void of any value and in a short period of time.
But yet some of the worst enemies and worst opposition that we have toward finding a solution are oftentimes some of our own U.S. agricultural commodities that fear, if anything, it is done for perishable commodities, they would have some retribution against them by a foreign country. That should not be allowed.
Mr. FOLEY. So you're saying possibly wheat, possibly beef?
Ms. RHODES ROBERTS. And pork. These can be put in the freezer and are not perishable. Like you cannot put fresh tomatoes in a freezer and wait 2 or 3 months for prices to change or policies to change. You cannot put your tropical fruits that Ms. Trunk was testifying about. You cannot put a vast majority of the products we produce.
Now, we've detailed and the commissioner has mentioned the real specific problems we've got with non-perishable commodities. We've still got major problems in the sugar trade that we've mentioned and other non-perishables.
But you do have some unique problems with perishable problems and you've got to deal with it and you have to convince these other commodities to stop proposing action.
Mr. FOLEY. Mr. Chairman, that seems to be the biggest problem I'm having, is the fact the other industries or other sectors do not recognize we have a very unique situation. And the Department of Commerce doesn't seem to get it. The trade office doesn't get it.
Page 46 PREV PAGE TOP OF DOC I told them it's either going to die on the vine or die in the box. We cannot find a solution and there should be one because we're not talking about that much product.
Wine is fine in the bottle. It's not going anywhere. In fact, it ages better. There are so many other issues with Chile and others. We think there are certain ways to solve the problem. The perishable item is the most critical. Scottie?
Mr. BUTLER. Congressmen, sometimes we feel our negotiators are well intended, as they simply don't understand how the game is.
Recognize I've serve on the NAFTA Advisory Committee for Commercial Dispute Resolutions. In this country we recognize perishability in nature and to implement trade in commerce of these types of commodities, we've got the Commodities Act. It's got theory protocols. It's got protocol. It helps facilitate commerce.
Canada has an arbitration board but nothing to do with prompt payments. One has a way to the courts up there in the different provinces to get anything.
Mexico has nothing. Mexicans, this is completely foreign to them and it is a tremendous imperilment to give U.S. domestic commodities into some provinces in Canada.
Now these things don't show up on a broad tariffication we talked about. I'm involved in these commodities. And the fact the perishable nature of the commodities, as you're saying, when you've got thousands of dollars per acre invested and you lose that market, you might not stand power to stand around the market the next season.
That perishability leads to fundamental differences in our agricultural culture. We're basically in a very quick supply and demand business because of the perishability and the nature of produce trade not being a tort reform. And that, in turn, leads to the regionalization and the seasonality of a lot of this complication that takes place, both domestically and internationally in the produce business. And that is fundamentally a problem for a lot of agencies, a lot of other commodity groups to comprehend the quickness and the severity of which the penalty is paid for problems in the marketplace. And the cost of producing these crops in today's world with our technology is extremely expensive. And the margins of the profitability are relatively small.
Page 47 PREV PAGE TOP OF DOC And when the tide goes against us in these commodities it can wipe us out almost overnight. And this is a struggle and the problem and the pain you have heard over the last few years.
Mr. MCKOWN. I would like to bring one other trade policy, I would like for the record, before you think aboutfirst of all, Congressmen Foley, as you know, as we talk about fast track, we're discussing there should be some exclusions.
Our government is taking the position there should be no exclusions. And because of the WTO it says that substantially all in a regional or bilateral agreement be bought, substantially all, meaning all items must be included, not to be excluded.
I'd point out for the record in the trade agreement our Government already made that decision, and did make an exclusion on citrus in a high tariff rate photo for citrus and juice in Israel and has not been excluded from Israel and not from the United States.
And currently the WTO appointed a committee to study the definition, what they define what substantially all means. And we've got attorneys in Geneva working on this with our attorneys.
We believe substantially all means there can be some exclusions. And I would encourage youwe need to push to make sure we agree with that position because there is going to be exclusions.
And I think our country should also recognize in negotiations of those sensitive products that there needs to be some exclusions and special remedies for those.
Mr. EWING. I want to thank each of you for your participation and I think weif you don't recognize it, I recognize it, we just kind of inoculated ourselves today, and scratched the surface on the issues out here on trade, and as they relate to the Florida agriculture.
I would hope that maybe through your department or through the other associations that there can be a bringing together, categorizing, a little more specifics.
Page 48 PREV PAGE TOP OF DOC Your comments, Martha, were excellent. But, I mean, here are some of the problems areas more specifically that could be transmitted to us, in this committee, in the agricultural committee as we pursue our trade duties in the next few months.
I think that type of information from any of your groupsand I'm sure as we analyze your statements, some of that's in there. But any bringing it together, in a more understandable presentable form that we can pass onto negotiators I think is a certainly important project and would appreciate your contact with our staff if you have some ideas on that.
I think as we move ahead, too, we need to look at ways that we can make recommendations for the sanitary and phytosanitary measures, how they can be more effective for us, as well as the ones that are used against us.
And I just returned from Australia and New Zealand, and I tell you, you won't have any more problems down there. We took care of it. But I don't know when that's going to happen. But we brought Chairman Smith, who's very forceful and he brought that up. We brought that to the table every time in a very forceful way, the very things that were mentioned here and others and their trading organizations down there.
I think your comments and further suggestions about how we deal with those is important. They're pretty well entrenched, and they have got a deep-rooted system and they won't, I don't think, disappear quickly from the scene. And maybe they weren't even addressed, as the best of my knowledge, in the last round. So they would and should be probably addressed in this round. And any comments you have as to how they can address those will be helpful.
Thank you all. If there are no other comments, Mr. Foley has a plane in a few minutes. We have some colleagues here doing some work on the Everglades and he wants to participate in that. Now, the sun has come out. It looks a little better. Thank you all very much.
Mr. BUTLER. Mr. Chairman, one last thing.
Page 49 PREV PAGE TOP OF DOC No one here this morning has mentioned the fact that Congressman Foley is the leading agriculture representative in this State.
Mr. EWING. I though everybody knew it because he just repeats it in Washington all the time. I assumed everybody in the world knew that he does a good job representing this State. And I think it is probably a fact that a lot of people who come to Florida, they don't see the agricultural part of your State; they see the tourism part.
Mr. FOLEY. That's exactly one of my concerns and I keep raising and trying to elevate the debate, because Palm Beach Countywhen people come to Palm Beach County, they instantly think of the beaches, the Breakers, the golf courses.
That is a remarkable part of our community, I agree. I don't disagree with that. Somehow all of those people who venture to Florida have to be fed.
The grocery stores don't grow any vittles, as they say. It comes out of the fields. And somebody has to produce that. It's a very difficult business today.
The concerns I've had and raised to everyone is the fact our farmers have unemployment comp., workers' comp., field safety, this, that and the other, hundreds of agencies, fishing, wildlife, South Florida Water Management, game and fish. I can go down the litany.
Our competitors have none of that. Having traveled to Mexico, I have witnessed people who I believe are younger than 14 in the packing houses, younger than 10 in the fields, picking crops and being paid $4 a day at maximum. Spraying pesticides that are banned in this country. And then somehow they get to ship over here and say it's supposed to be equitable.
Then we have an issue like setting how many boxes should come into this country. Of course, when you raise the question we think they're dumping, OK, we will deal with it. Now deal with it after the growing season is over and then another group of farmers are out of business.
So the power sometimes of the chairman, not this chairman, but the chairman of the full committee I notice has had some great weight when we had negotiations on lumber coming into this country from Canada.
Page 50 PREV PAGE TOP OF DOC I just hope that somehow I will have that same clout to be able to represent forcefully the industry that I find most under pressure in this area.
And without agriculture in Palm Beach County and the Treasure Coast and throughout Florida, I don't know what we'd do.
When we had tourism problems and the killings in Miami, we ended up having a huge dropoff of tourism.
So, once again, I thank you, Mr. Chairman.
He's done a phenomenal job for us. He's been very, very helpful to me as a member and as a friend in trying to help me navigate Washington. As many of you travel, it's not an easy situation.
I thank Commissioner Crawford and the House and Senate of the State of Florida, as well as the members here. And we will continue to fight the fight.
Mr. EWING. Thank you, Mr. Foley. The subcommittee stands adjourned.
[Whereupon, at 11:20 a.m., the subcommittee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Testimony of Bobby F. McKown
Mr. Chairman and members of the subcommittee, I am Bobby F. McKown, executive vice president/CEO of Florida Citrus Mutual. I appreciate the opportunity to testify today on issues which may arise in the 1999 WTO agricultural trade negotiations, which are critical to the future of the Florida and American citrus industry.
Florida Citrus Mutual (FCM) is a voluntary cooperative association whose membership consists of 11,668 growers of citrus fruit for processing and fresh shipments. FCM represents more than 90 percent of Florida's citrus growers, and 80 percent of the U.S. growers of citrus for processing into processed citrus products. These comments are offered on behalf of FCM and the other organizations listed in my written statement, all of whom are committed to the continuing vitality of the Florida citrus industry which generates an $8 billion economic impact on Florida's economy.
Page 51 PREV PAGE TOP OF DOC As Congress and the Administration prepare for the commencement of the follow up negotiations to the WTO Uruguay Round Agriculture Agreements, it is important to acknowledge that any issues raised in this connection are equally significant in regard to the ongoing debate about renewal of the President's fast track negotiating authority. FCM and the citrus industry have worked diligently with members of Congress and the Administration to assure that any future trade negotiating authority is clearly circumscribed, so as to guarantee the industry's ability to compete on fair terms with producers around the world. This includes provisions both to open foreign markets which are unfairly restricted and to protect domestic markets which are unfairly targeted by foreign producers who maintain artificial advantages. Thus, we fully support efforts to enforce more effectively the WTO Agreement on Application of Sanitary and Phytosanitary Measures (the SPS Agreement); to strengthen temporary safeguard measures for perishable agricultural commodities; to enforce more effectively the antidumping and countervailing duty laws, especially where third country intervention has impacted on special U.S. programs to provide unilateral benefits to developing countries; and to continue to seek common understandings with our trading partners on domestic labor and environmental regulations which burden one country's agricultural producers to the disadvantage of others.
The most important component of our position, however, can be easily summarized and must be fully acknowledged at this stage by U.S. negotiators and Congress; any trade agreementmultilateral, bilateral or regional, whether in the 1999 discussions or under future fast track authoritywhich further reduces U.S. tariffs on orange juice and/or fresh citrus imported from Brazil, and other citrus producing countries, below the levels bound in the Uruguay Round, will not only contravene assurances made by the U.S. Trade Representative during the NAFTA negotiations, but will also spell the end of the U.S. industry producing citrus for processing and fresh channels of trade. The Brazilian Government and citrus oligopoly are certainly well aware of this fact since the Brazilian citrus industry is the world's largest by a significant margin and has made no secret of its need to expand market share in the world's most lucrative marketthe United Statesin order to provide an outlet for the over-planting and over-production which characterized much of the past two decades. While the U.S. industry has offered its share of compromises in the past on numerous trade liberalizing measures affecting citrusthe Caribbean Basin Initiative, the U.S.-Israel Free Trade Agreement, and even NAFTAdeference in this instance to the clear expansionist Brazilian priorities would be tantamount to suicide. The U.S. citrus industry cannot offer unconditional support for any trade liberalizing negotiation which does not provide clear-cut protection for highly import sensitive industries like citrusfresh and processed juices.
Page 52 PREV PAGE TOP OF DOC The Citrus Industry Would Be Irreparably Harmed By Any Further Tariff Reductions.
Ultimately, the lifeblood of the multi-billion dollar Florida horticultural industry (citrus, vegetables, tomatoes) is found in the equalizing import tariff imposed on products from countries which do not incur the environmental, worker safety, water, welfare, tax, and other costs which Florida growers must bear. Furthermore, that tariff alone does not account for unfair advantages enjoyed by some foreign producers who have engaged in dumping or received subsidies in past years that put Florida at a disadvantage for many years into the future. In an ideal free market world economy, natural advantages would outweigh arguments for tariff protection, but the Florida agricultural sector in general, and citrus in particular, cannot defer to that assumption, nor close our eyes to the reality that eventual elimination of the tariff on South American citrus and others would be a death sentence for the citrus industry and devastating to the economy of Florida.
Recent developments in world citrus markets illustrate the challenges posed to U.S. citrus growers by the dominant Brazilian citrus industry. Global wholesale prices for citrus have dropped dramatically in the last year. The nearby futures price for frozen concentrated orange juice for manufacturing in 199697 was less than half its value in 198990, and the prices of Florida processing oranges have fallen as a result, to 65 to 70 cents per pound of orange solids. Despite high yields and successes in reducing grove costs, the low processing orange prices have reduced Florida growers' net on-tree returns to the point where, in marketing year 199697, returns were less than half of their 199091 value. If orange yields and grove costs remain constant during 199798, and orange prices fall to the extent predicted by the Florida Agriculture Statistics Service, net returns to growers will plummet to disastrous levelswell below break-even for many growers.
Brazil is and has been, for several years, the world's largest producer of citrus and has been found to have engaged in both sales at less than fair value prices, and receipt of countervailable subsidies. An antidumping order remains in effect on frozen concentrated orange juice from Brazil. The number of bearing trees in the Sao Paolo production region continues to expand at a rate of 56 percent annually. Unlike annual crops, a citrus tree has a productive life of approximately 25 years, with the grower's investment, depreciation, and financing decisions made accordingly. For both the Brazilian and Florida growers, the commencement of citrus production is not a decision which can be reversed or modified easily. These planting decisions are reflected in the continuing growth of Brazilian bearing and non-bearing acreage. The latter reveals that new plantings continue, despite the obvious impact on world supplies and prices. The immediate results are shown in the continuing upward expansion of Brazilian orange production, exports, and ending stocks.
Page 53 PREV PAGE TOP OF DOC Aside from the impact of unrestrained free trade on the U.S. citrus industry, the most highly touted benefit of free trade agreements (or even multilateral tariff reductions)lower prices to consumerswould not be realized in the case of processed citrus products. Increasingly, the price of retail juice products has not tracked the decline in the wholesale price of orange solids, leading to a build up in Florida stocks. It is fair to assume that the eventual demise of the Florida industry under FTAA or expanded benefits in WTO follow-up negotiations is not likely to yield direct price benefits to consumers, but only cost savings to re-processors. If anything, the Brazilian industry, which is already highly concentrated (80 percent of production is held by four companies), will lose the competitive restraint on prices and the U.S. consumer will suffer the consequences.
Florida Citrus Mutual submits, therefore, that in any future negotiations, the Administration should be required to follow the negotiating approach established at the outset of the Uruguay Round tariff talks (but effectively abandoned before the end of the round): that is, negotiations should be on a request-offer basis, rather than pursuant to formula cuts. This at least gives citrus and other highly import-sensitive Florida commodities a chance to be treated appropriately in the negotiations. Furthermore, we strongly believe that, while free trade negotiations may cover all trade among the member countries, citrus products should be exempt from further tariff cuts, due to their proven import sensitivity. The U.S. citrus growers cannot be expected to support unconditionally a free trade agreement with the largest producer in the world, when their unique conditions of tradeand indeed, their very continued existencenecessitate concessions in order to maintain the continued viability of this vital sector of the economy.
Improvement in Application of the Sanitary and Phytosanitary Measures Agreement is Necessary to Facilitate U.S. Participation in Foreign Markets.
While FCM supports the progress made by the WTO SPS Agreement towards eliminating unjustified SPS barriers to citrus trade, we encourage greater efforts towards eliminating remaining SPS barriers, particularly those in Australia, Korea, and Mexico. Furthermore, FCM supports the accession of China and Taiwan to the WTO SPS Agreement on the condition that they eliminate all SPS barriers to trade which are not justified by sound, scientific evidence.
Page 54 PREV PAGE TOP OF DOC Among WTO members who will be parties to the 1999 talks, there is great unrealized potential for U.S. citrus in Australia, Korea, and Mexico. Australia prohibits the importation of fresh Florida citrus even though the results of their risk assessment on Florida citrus show acceptable levels. Australia points to the canker outbreaks in Dade and Manatee counties, yet these counties currently operate under very effective protocols of canker eradication. Outside of these areas, the WTO SPS Agreement requires that citrus exports be unencumbered.
Although Korea liberalized its treatment of imports of U.S. citrus on July 1, 1997, there have been a myriad of problems exporting to that country. Korea continually raises its import standards for insects, chemical residues, and quality, while rarely subjecting domestic fruit to the same standards. In addition, Korea has been known to require long testing incubation periods which can damage or destroy fruit. That country should be required to either provide pre-clearance or develop more expeditious testing methods.
Under NAFTA, Mexico permits the entry of U.S. citrus from California, Texas, and Arizona, but maintains its ban on Florida citrus. This prohibition exists despite the fact that Mexico recognizes Florida's citrus production region as free from citrus canker, and despite Mexico's assurances months ago that this prohibition would be eliminated.
Finally, the participants in the 1999 talks should agree to assert whatever coordinated influence is available to gain expanded access by lowering SPS restrictions of the largest non-WTO member, which is also the largest potential future market for citrus: China. Under a 1992 Memorandum of Understanding, China and the United States committed bilaterally to base their agricultural import standards on sound science, as required under the WTO SPS Agreement. Although that country has recently lifted its bans on Pacific Northwest apples, Washington cherries, and California table grapes, it continues to ban all imports of fresh citrus from Florida, California, Texas, and Arizona based on the incorrect claim that Medfly is a threat to Chinese citrus groves. Despite sending teams of scientists in 1995 to inspect citrus regions in all four states, China has not yet submitted to the United States any proof of the pest risk allegedly presented by U.S. citrus. At the same time, internal inspection of citrus transported between provinces in which citrus canker, green leaf virus, tristeza, and oriental fruit fly infestation are known to exist, has been either lax or non-existent. Therefore, foreign citrus is clearly the subject of discriminatory treatment. The 1992 agreement seems to be unenforceable in the absence of collective WTO member action to press China towards accession to the WTO and full acceptance of the SPS and other agreements.
Page 55 PREV PAGE TOP OF DOC Therefore, FCM urges the Administration to take advantage of the WTO talks both to expand access among current members, and commit joint efforts to bring China and Taiwan under the same disciplines.
Testimony of Scottie J. Butler
I am Scottie J. Butler, general counsel and assistant to the president for the Florida Farm Bureau Federation. I also serve on the NAFTA Advisory Committee on Private Commercial Disputes Regarding Agricultural Goods.
Florida Farm Bureau is a general farm organization with members in every county in Florida representing over 200 commodities.
Florida Farm Bureau appreciates this opportunity to offer comments regarding agricultural issues in the upcoming 1999 World Trade Organization Multilateral Trade negotiations. In any legislation that authorizes these negotiations, and in subsequent resulting negotiations, we ask that our concerns expressed here be taken into account. Furthermore, as a general farm organization, Florida Farm Bureau's approval of the negotiations is conditioned on producers of all commodities being treated equitably and fairly in those negotiations.
Our members have debated and adopted a variety of policies regarding trade negotiations. They recognize that trade is important and necessary for not only our agricultural economy, but also for all of Florida's economy. Our members basically ask for three things; fairness, equity and an understanding of Florida's unique agriculture industry. Our output does not fit a cookie cutter mold for crops that can be stored and shipped over great distances. While free markets reflect the need to be least cost producers many of our costs are forced on our producers by the local, state and Federal Government. An example of this is the cost of permitting for water, loss of pesticides such as methyl bromide, and regulatory requirements for land use. An American Farm Bureau study shows that the costs of regulation nationally is the second highest agricultural cost input and accounts for 16 percent cost of production.
Page 56 PREV PAGE TOP OF DOC From a fairness perspective, many of Florida's agricultural markets have been developed because of grower-funded marketing orders aimed at market development. Through our state and Federal marketing orders, growers have chosen to develop and increase the domestic market (which has included Canada) rather than restrict product going to that market. It seems only fair that others who gain access to that market should also have responsibility to help in that market development.
To aid in the issues of fairness, equity and understanding of the Florida industry, we believe it is essential for someone with Florida knowledge and experience be employed in either the U.S. Department of Commerce or the U.S. Trade Representative's office at a senior level. This would assure that our concerns would be not only heard, but understood and addressed.
Any support for fast track trade negotiating authority for the President of the United States must, at a minimum, address:
A. Binding agreements to resolve sanitary and phytosanitary issues on the basis of sound scientific principles in accordance with the Uruguay Round Agreement on agriculture;
B. Tariff equalization and increasing market access by requiring U.S. trading partners to eliminate tariff barriers within specified time frames;
C. Changes in international agreements and U.S. law and practices that would facilitate and shorten dispute resolution procedures and processes;
D. That all commodities currently subject to minimum tariff reductions under both GATT and NAFTA should be not subject to any further tariff reductions until all trading partners have shown good faith efforts to comply; and
E. Market access commitments agreed to by any trading partners under the Uruguay Trade Round must be adhered to before any additional negotiation commences.
The trade relief measures that are GATT legal have proven ineffective for fruit and vegetable producers as originally designed. A trade relief remedy should be negotiated to protect and seasonal regional producers of fresh fruits and vegetables. Florida growers tried to utilize the existing remedies and they did not work. Even though our growers had assurances from the highest levels, those assurances were not honored. There is now a question of trust in the representatives of our government.
Page 57 PREV PAGE TOP OF DOC We oppose entering into any new trade agreements with foreign countries until the concerns/problems are resolved with existing agreements, and we can evaluate their effectiveness. Our experience has caused a loss of confidence in the negotiators that represent us. There appears to be a lack of understanding of our industry and the market forces involved in these crops.
We support strict enforcement of import restrictions for sanitary and phytosanitary reasons and enhanced export support from our government, and we support the concepts of like quality inspections for domestic and foreign products. With increased trade, we feel that Florida is vulnerable to foreign pests and disease invasions. In those cases, USDA comes in as a partner with a 5050 cost share. Unfortunately, this still puts Florida in a budget disadvantage. We agree that for true market access, we must have export support that gives our growers equal footing in the international arena.
We oppose any increased imports of sugar from countries that have less stringent environmental standards or less stringent enforcement of these standards than the standards of the United States. We recognize that trade agreements do not address environmental issues, but there should be a realization that other countries may have an environmental ''subsidy'' because of the lack of regulations or enforcement.
We support measures that would better protect producers who export vegetables to other countries, with regard to grades and standards, pesticide residue regulations and provisions for prompt payment.
We favor the development and enactment of regulations such as production, volume or price triggers which would deal with, on a rapid and timely basis, imports of perishable commodities into the United States. Open or consigned loads should not be allowed.
We urge USDA and U.S. Customs to establish a mechanism to insure that imported products are not repacked or relabeled as a product of the United States.
Page 58 PREV PAGE TOP OF DOC We encourage a stricter inspection system by the USDA and U.S. Customs on all products moved across the Mexican or Canadian border or other ports of entry into the United States.
In closing, I think it is accurate to say that Florida's farmers are willing to compete in the international market place, if that market is fair and equitable. To develop this fair trade for Florida's crops, our negotiators need to be creative and open to new thought processes that go outside of the traditional agricultural negotiations. Our negotiators need to understand the market of perishability and recognize that our domestic growers have paid to develop our domestic market. There also needs to be a consideration of governmental monetary policy and the incentives or disincentives it might provide to growers and shippers.
Thank you for this opportunity to present Florida Farm Bureau's views on trade policy, I will be happy to answer your questions.
Testimony of Reginald L. Brown
Mr. Chairman, members of the subcommittee, my name is Reggie Brown. I am director of Marketing and Membership for the Florida Fruit & Vegetable Association. FFVA is an organization comprised of growers of vegetables, citrus, sugarcane, tropical fruit and other agricultural commodities in Florida. I am here today to review agricultural issues relating to the 1999 World Trade Organization Multilateral Trade Negotiations.
Florida's fruit and vegetable specialty crops have had a highly unfavorable experience with previous multilateral and bilateral trade negotiations. On numerous occasions, including during the recent fast-track debate, FFVA has expressed its concerns about the inadequacies of the Uruguay Round Agreement for Florida agriculture and the need to correct, rather than compound, those inadequacies as we move forward in the various trade arenas. We appreciate the opportunity to address these concerns once again today.
Page 59 PREV PAGE TOP OF DOC I The Uruguay Round did Not in all Cases Lead to Access Gains.
A. Dirty Tariffication.
Although in theory the Uruguay Round multilateral trade negotiations were to reduce tariffs for all agricultural products in all countries by a minimum of 15 percent (10 percent for developing countries), this exercise did not in many key instances produce access parity for a variety of Florida specialty fruit and vegetable commodities that were already subject to low tariffs. This is because the E.U. and other countries interested in protecting their domestic industries used dirty tariffication to increase, rather than decrease border protection. That is to say, non-tariff barriers were replaced with prohibitive tariffs that made access impossible, even with the mandated 15 percent reductions.
B. Barriers in Asian Countries
Many important Asian markets, especially those that were considered developing countries in the Uruguay Round (i.e., Thailand), now have bound tariffs of 50 percent or higher even after Uruguay Round tariff reductions are fully taken. Because the pre-Uruguay Round rates in these countries were so high and in some cases unbound, and many of those rates were increased even more through the tariffication exercise, the Uruguay Round reductions have had no effect at all on the applied rates, which remain at 30 percent and higher.
C. Administration of TRQs
Under the Uruguay Round commitments, access for many specialty fruit and vegetable crops is governed by tariff rate quotas. Many countries, including the EU, have adopted onerous licensing requirements and other non-transparent procedures to administer their TRQs, which make access more restrictive and distortive than that which is provided by the TRQ itself. Thus, TRQs have not always been a move forward. They may simply be another form of non-tariff barrier.
II. The Safeguard Measures Contemplated by the Uruguay Round Have Not Been Effective.
Page 60 PREV PAGE TOP OF DOC A. Uruguay Round Safeguard Provisions
During the Uruguay Round negotiations, FFVA argued strongly for an effective price-based safeguard measure for sensitive, perishable crops. The priced-based mechanism contained in the Uruguay Round agreement, however, covers only products that had non-tariff border measures (quotas, etc.) in place prior to the implementation date of the agreement. Since no U.S. fruit and vegetable had such measures in place, Uruguay Round safeguard relief does not protect our industries. The Uruguay Round safeguard measures do, however, apply to certain fruit-and vegetable-producing competitors, particularly in the EU. This inequity means that, at key times of the year, our competitors can keep U.S. fruit and vegetable exports out of their markets, but no such protection against surges of imports exists for our domestic producers.
B. Section 201/202 Trade Relief
The Uruguay Round Agreements (and NAFTA) contemplated that existing trade remedies, such as Section 201/202, would provide temporary adjustment relief to industries like Florida's fruit and vegetable sectors that have been seriously injured by increased imports caused by the reduction and/or elimination of trade barriers. In application, however, those laws have not provided needed relief. Florida's tomato and pepper industries (with the encouragement of USTR) have undertaken expensive, but unsuccessful, efforts to use the Section 201 law to protect against import surges from Mexico. Injury proved impossible to show, since the law does not adjust for the unique seasonal and perishable nature of fruit and vegetable production. Future multilateral trade negotiations need to strengthen existing safeguard measures so they are meaningful to seasonal, perishable commodities.
III. The WTO May Not Have Created Sufficient Disciplines Governing Sanitary and Phytosanitary Restrictions.
Page 61 PREV PAGE TOP OF DOC The SPS agreement was touted as a significant win for U.S. agriculturethe first time countries would be required to scientifically justify their phytosanitary and sanitary import bans and other restrictions. It has yet to live up to those expectations, however.
SPS barriers are now the barriers of choice for many countries.
Since the Uruguay Round, progress on many plant quarantine issues has been slow to non-existent. Significant disputes remainsuch as Florida citrus access to Mexico.
Following the recent Appellate Body decision in the U.S.-EU beef hormone case, it remains highly uncertain whether the SPS agreement will be an effective tool in resolving sanitary and phytosanitary disputes. Some believe that that decision may make it more difficult for countries to succeed in challenging sanitary measures that are stricter than international standards, since it appears to give a country broad leeway in defining the scope of a risk assessment analysis and would shift the burden of proof to the complaining country to show that the standard is not scientifically justified.
IV. It Remains to be Seen Whether Key Signatory Countries will Comply with WTO Rulings.
During the Uruguay Round, the United States gave up its authority to act unilaterally against unfair trading partners (i.e., Section 301) in favor of a new, so-called full-proof WTO dispute settlement system. There are still questions, however, as to whether WTO rulings are in fact full-proof. The EU, for example, is now making it known that it may not be willing to come into full compliance with recent rulings against it. No matter how good WTO procedural and substantive disciplines may look on paper, they have no meaning if countries refuse to abide by them.
Page 62 PREV PAGE TOP OF DOC Because previous trade negotiations have not been favorable for Florida fruits and vegetables, there is great skepticism about what a new round of multilateral negotiations would bring for our sector.
It is our belief that a good number of the problems created by these negotiations can and should be corrected by the U.S. legislative and executive branches before ambitious new negotiations are undertaken that may compound existing trade pressures.
Testimony of Antonio L. Contreras, Jr.
Thank you, Mr. Chairman, for the opportunity to provide testimony at this important hearing. I am Tony Contreras, vice president marketing/legislative affairs, for Sugarcane Growers Cooperative of Florida. Our company is owned by 56 sugarcane farmers. Our members grow sugarcane on approximately 65,000 acres of land and produce 2.6 million tons of cane. This cane supply yields approximately 300,000 tons of raw sugar and 15 million gallons of blackstrap molasses annually.
My comments are consistent with the views of the entire Florida sugar industry. Florida plays a key role in the American sugar industry, accounting for about half of U.S. cane sugar production and about a quarter of all U.S. sugar production.
I am pleased to say that the views I express today are consistent with the views of the American Sugar Alliance, the national coalition of growers and processors of sugarbeets, sugarcane, and corn sweeteners. Sugar is grown and processed in 17 states and 420,000 American jobs, in 40 states, are dependent, directly or indirectly, on the production of sugar.
I would like to provide some background on the United States' role and standing in the world sugar economy and discuss the U.S. sugar industry's goals, priorities, concerns, and suggested strategy for the next round of World Trade Organization multilateral negotiations.
Page 63 PREV PAGE TOP OF DOC Background
The United States is the world's fourth largest sugar producer, trailing only Brazil, India, and China. The European Union (EU), taken collectively, is by far the world's largest producing region. It benefits from a massive production and export subsidy program.
Despite some of the world's highest government-imposed costs for labor and environmental protections, U.S. sugar producers are among the world's most efficient. According to a study released in 1997 by LMC International, of Oxford, England, American sugar producers rank 19th lowest in cost among 96 producing countries, most of which are developing countries. According to LMC, fully two-thirds of the world's sugar is produced at a higher cost per pound than in the United States.
Because of our efficiency, American sugar farmers would welcome the opportunity to compete against foreign farmers on a level playing field, free of government subsidies. Unfortunately, the extreme distortion of the world sugar market makes any such free trade competition impossible today.
Roughly 100 countries produce sugar and the governments of all these countries intervene in their sugar markets in some way. The most egregious, and most trade distorting, example is the EU. The Europeans are higher cost sugar producers than we are and they enjoy price supports that are 40 percent higherhigh enough to generate huge surpluses that are dumped on the export sugar marketfor whatever price they will bringthrough an elaborate system of export subsidies.
World trade in sugar has always been riddled with unfair trading practices. These practices have led to the distortion in the so-called world sugar market. These distortions have led to a disconnect between the cost of production and prices on the world sugar market, more aptly called a dump market.
As long as foreign subsidies drive prices on the world market well below the cost of production, the United States must retain some border control. The reformed sugar policy of the 1996 farm bill does retain the Secretary of Agriculture's ability to limit imports, and also provides a price support mechanism, though only when imports exceed 1.5 million short tons.
Page 64 PREV PAGE TOP OF DOC U.S. Sugar Industry's Free Trade Goal
Because of our competitiveness, with costs of production well below the world average, the U.S. sugar industry supports the goal of genuine, global free trade of sugar. We cannot compete with foreign governments, but we are perfectly willing to compete with foreign farmers in a truly free trade environment.
We were the first U.S. commodity group to endorse the goal of completely eliminating government barriers to trade at the outset of the Uruguay Round, in 1986. I understand we are the first group to endorse this same goal prior to the start of the 1999 multilateral trade round. We described our goals and concerns to the Administration in a letter last May to Trade Representative Barchefsky and Agriculture Secretary Glickman. A copy of that letter is attached to this testimony.
The U.S. sugar industry does not endorse the notion of free trade at any cost. The movement toward free trade must be made deliberately and rationally, to ensure fairness. To achieve a free trade transition process that is rational and fair, we provide the following priorities, concerns, and suggested strategy.
Priorities the 1999 Trade Round
Export Subsidies. The most distorting practice in world agricultural trade is export subsidies. In the world sugar market, subsidized exports by the E.U. alone amount to as much as a fourth of all the sugar traded each year.
Export subsidies provide countries the mechanism to dispose of surpluses generated by high internal production subsidies. In the absence of export subsidies, as a surplus-removal vehicle, countries would have to reduce their production supports.
State Trading Enterprises (STE's). STE's are quasi-governmental, or government-tolerated organizations that support domestic producers through a variety of monopolistic buyer or seller arrangements, marketing quotas, dual-pricing arrangements, and other strategies. These practices were ignored in the Uruguay Round, but are, unfortunately, common in the world sugar industry.
Page 65 PREV PAGE TOP OF DOC Major producers such as Australia, Brazil, Cuba, and China have sugar STE's, but were not required to make any changes in the Uruguay Round. These practices must be addressed in the next trade round.
Concerns Regarding the 1999 Trade Round
Hugely Varying Levels of Support. Unilateral reforms to U.S. agriculture policy in the 1996 farm bill far exceeded U.S. commitments made the year before in the Uruguay Round. Furthermore, developing countries, which dominate world agricultural trade and particularly sugar trade, were subject to a slower pace of reductions, if any.
As a result, the United States is way out in front of the rest of the world in removing its government from agriculture and has placed its farmers in a domestic free market situation. This gap makes American farmers uniquely vulnerable to continued subsidies by foreign competitors.
In sugar, two examples come to mind: 1) The E.U. sugar support price is approximately 40 percent higher than the stand-by U.S. support price. The Uruguay Round's formula-driven percentage reductions in support levels do not reduce the gap between the E.U. and the U.S. at all. 2) Actual U.S. sugar imports the past two years have been nearly double the 1.26-million-ton minimum import commitment made in the Uruguay Round.
It is key that American farmers not be penalized for attempting to lead the rest of the world
toward free agricultural trade. American farmers must be given credit for the reforms they have endured.
Other countries must reduce their supports to U.S. levels in the next trade round before American farmers are asked to do anything more.
Compliance with Past Agreements. While the United States has far surpassed its Uruguay Round commitments, many other countries have yet to even minimally comply. Numerous examples exist where export subsidies, internal supports, and import tariffs for many crops are not in compliance with GATT. A key example in sugar is the Philippines' failure to lower its import tariffs.
Page 66 PREV PAGE TOP OF DOC In the NAFTA, Mexican sugar producers are casting doubts on the validity of the sugar provisions, three years after the agreement's inception, and have slammed the door on imports of U.S. corn sweeteners with duties as high as 100 percent .
The United States should not reduce its supports any further until other countries have, at least, complied with their Uruguay Round commitments.
Labor and Environmental Standards. The gap in government standardsand resulting producer costsbetween developed and developing countries is well documented and immense. In sugar, the gap is particularly pronounced because, while the E.U. and the U.S. are major players, production and exports are highly dominated by developing-countries, especially in the cane sector.
For example, the LMC International survey of global production costs revealed labor costsper worker, per dayin Malawi, ostensibly one of the world's lowest cost producers, to be a mere one-hundredth of the average wages paid to sugarcane workers in Hawaii.
Sugar producers in Florida, and every sugar-producing state in America, comply with the world's highest standards for environmental protectionat a price. For example, the Everglades Forever Act (EFA) mandates that Florida farmers pay at least $232 million in taxes for Everglades restoration activities. This is on top of the many costs borne by the farmers to implement advanced Best Management Practices (BMPs) and conduct monitoring at the farm level. In many developing countries, by contrast, sugar mills face no restrictions, or no enforcement of restrictions, on the quality of water or air emissions.
We are proud to raise our sugar with the highest possible regard for our workers and the environment. But we should not be penalized in multilateral trade negotiations for providing these costly protections. And foreign countries that do not provide such protections should not be rewarded.
Page 67 PREV PAGE TOP OF DOC The wide gap in labor and environmental standards between developed and developing countries must be taken into account in the next trade round, and addressed in a manner that ensures global standards rise to developed-country levels, rather than fall to developing-country levels.
Negotiating Strategy for Agriculture in the 1999 Trade Round
For the many reasons I have outlined, the formula-driven, or one-size-fits-all, approach for trade concessions does not work for agriculture in general, or for sugar in particular. Pursuing this approach would again give developing countries a free ride, and would further diminish our negotiating leverage, which was severely reduced through our unilateral concessions in the 1996 farm bill. To date, we have led the world in trade barrier reductions and we can only hope the rest of the world will follow our example.
We can turn our unilateral concessions to our advantage only if we follow a request/offer strategy. Essentially, we provide foreign countries the incentive to reduce their government programs by promising to reduce ours further when, and only when, they have reduced their export subsidies, internal support, import tariffs, and STE or similar practices to our levels.
In conclusion, Mr. Chairman, I would like to commend you for convening this timely and important hearing. U.S. agriculture is extremely vulnerable as we approach the next trade round. If we negotiate carefully and rationally, however, there is enormous potential for responsible producers such as ourselves to compete and prosper in a genuine free trade environment, free from the need for government intervention.
Thank you again, Mr. Chairman, for the opportunity to participate.
Testimony of Martha Rhodes Roberts on behalf of Bob Crawford
Page 68 PREV PAGE TOP OF DOC Mr. Chairman, members of the committee, I am Martha Roberts, Deputy Commissioner, Florida Department of Agriculture and Consumer Services. I appreciate the opportunity to provide these remarks on behalf of Bob Crawford, Commissioner of Agriculture of the State of Florida and for Florida agriculture. We thank you for holding this important public hearing of the Subcommittee on Risk Management and Specialty Crops in such a key U.S. agricultural county. During these winter months, Florida is the only state in which you will find commercial production of the many fresh fruits and vegetables that are so critical to the diet and health of the American public. Florida, with over $6 billion in crop receipts, is the winter food basket of the United States and any trade policies negotiated by our nation will greatly affect the survival of this vital U.S. industry.
The upcoming Round of Multilateral Trade Negotiations of the World Trade Organization beginning in 1999 is extremely important to Florida agriculture. The globalization of trade has increasingly placed unacceptable pressures on Florida agriculture where inconsistent regulatory requirements, unequal subsidies and supports, non-tariff trade barriers and unsatisfactory and unworkable safeguards and dispute resolution mechanisms have been continually encountered. Aggressive and thoughtful leadership by U.S. officials involved in the upcoming negotiations will be necessary to prevent any further erosion and disappearance of Florida and U.S. food production.
In any negotiations, U.S. officials must keep in mind that in comparison with most farmers in the world, U.S. growers have traditionally received little government support. Following the Uruguay Round and then the farm bill of 1996, government assistance to American farmers was even further reduced. As farmers in most other countries are more protected and receive higher subsidies than their counterparts in the United States, U.S. officials must be careful not to negotiate away the few protections left to American farmers nor to reduce tariffs and other protections in the U.S. where disparate barriers and subsidies exist for major foreign producers whether in Europe, South America or elsewhere. The producers of Florida citrus, other fruits and vegetables are not subsidized or supported; however, the international trade of agricultural products is characterized by extensive protection and high levels of subsidies.
Page 69 PREV PAGE TOP OF DOC Florida's agricultural producers, who export over $1 billion worth of goods annually, urge U.S. negotiators to work to remove barriers to Florida's major agricultural commodities while taking into account those sectors of Florida agriculture which have special needs which need be reflected in the WTO agriculture agreement.
The United States should encourage the development of international trading rules that will address the special concerns of producers of seasonal and perishable agricultural commodities such as fresh fruits and vegetables and orange juice. Florida has learned well that safeguards in international agreements can ultimately prove ineffective. In particular, the United States should seek workable and effective safeguards for seasonal and perishable commodities and the removal of unfounded sanitary and phytosanitary (SPS) barriers to Florida agricultural exports. In addition, the U.S. should seek tariff equivalency on most agricultural products, the elimination of export subsidies, the establishment of meaningful international rules on state trading enterprises, and international consensus on the use of genetically modified organisms.
We are also concerned about the slow pace of resolving agricultural disputes at the WTO, and believe that U.S. negotiators should attempt to find ways to expedite the dispute settlement process.
Seasonal and Perishable Commodities
The United States should encourage the development of international trading rules that will address the special concerns of producers of seasonal and perishable agricultural commodities such as fresh fruits and vegetables and orange juice. Florida has learned well that safeguards in international agreements can ultimately prove ineffective. The poorly crafted safeguards of the North American Free Trade Agreement (NAFTA) and their implementation in the U.S. have resulted in great harm to Florida's fresh winter vegetable industry. The disruption caused by the inadequacy of NAFTA's safeguard provisions could possibly be avoided in the future through the development of improved and workable safeguards in other international agreements, such as those negotiated through the WTO. The WTO Agriculture Agreement already recognizes perishable and seasonal products in its special safeguard provisions. The U.S. should have as a top priority gaining broader rules for these special products within the Agriculture Agreement.
Page 70 PREV PAGE TOP OF DOC At last year's Business Forum for the Free Trade Area of the America's, the chief agriculture negotiator for the Uruguay Round agreed that in previous negotiations no specific rules or consideration of perishable products had been included. We support inclusions of some provisions that recognize the unique nature of perishable commodities in world trade.
Sanitary and Phytosanitary (SPS) Measures
Unfounded sanitary and phytosanitary issues prohibit market access for Florida agriculture in many nations. Florida agricultural products face many questionable SPS barriers around the world. These barriers include the continuing ban on the importation of Florida citrus into Australia due to post bloom fruit drop. There is no scientific evidence to indicate that the fungus causing this can be spread by fruit, but Australia still denies entry. As another example, Mexico prohibits the importation of Florida citrus although no documented phytosanitary threats exist. Some bilateral commitments to reform policies to remove unfounded SPS measures have been followed by attempts to renege on these agreements. For example, although Japan pledged to permit the importation of U.S. grown fresh tomatoes in May 1997, Japan shortly thereafter threatened to revoke this commitment due to new SPS claims, until we were able to actively show that the issue was unfounded. To the extent needed, the U.S. should clarify the SPS and TBT agreements in any subsequent round to eliminate the need for additional dispute settlement (DSU) proceedings where there are systemic issues identified.
At the same time, while we appreciate the ability of the SPS Agreement to assist in removing erroneous health and safety measures that block trade, and that are not based on sound science; we urge the U.S. to remain vigilant during future WTO discussions to see that any changes regarding this agreement do not lead to the lowering of food and safety standards that are based on legitimate science. In particular, we are concerned about recent foodborne illness outbreaks such as cyclospora and hepatitis caused by imported agricultural products. For example, in March of last year almost 200 children in Michigan were infected with hepatitis A after eating in school lunches frozen strawberries later found to be imported from Mexico. This incident and others have made numerous Americans ill while also damaging the sales of Florida and U.S. grown products as many consumers have incorrectly associated sanitary U.S. grown products with contaminated imports.
Page 71 PREV PAGE TOP OF DOC Furthermore, with its tropical climate and the large number of foreign tourists who visit the state, Florida is particularly susceptible to SPS threats. Last year's outbreak of the Mediterranean fruit fly (Medfly) in a limited area of the state demonstrated Florida's vulnerability to exotic pests. This outbreak, which was successfully eradicated after great multimillion dollar efforts by both the Federal and state government, entailed significant expenditures and was possibly linked to products that were not declared by the persons importing the products. U.S. officials should during any future WTO negotiations ensure that the United States will be able to maintain science based SPS measures that protect it from genuine threats.
According to the U.S. Trade Representative, the average international tariff on agricultural products is 56 percent while the average U.S. tariff is only 3 percent. Clearly, American farmers, including farmers in Florida, would benefit from reductions in our trading partners' tariffs, and tariffs should be addressed in market access negotiations conducted under the auspices of the WTO. At the same time, however, the United States should not unilaterally disarm by reducing our tariffs or expanding tariff rate quotas on highly import sensitive products. For example, in the European community sugar prices are supported at 31 cents per pound versus a U.S. support rate of 18 cents per pound. In addition, any further tariff reductions beyond that agreed to in the Uruguay Round will irreparably harm our Florida citrus industry.
The United States should adopt a ''request-offer'' approach in future WTO negotiations on tariff reductions. During the Uruguay Round, many of our trading partners pushed for across-the-board formulas to reduce tariffs. Tariff reductions were often made without reference to the array of other barriers (whether quotas, subsidies, etc.) that surrounded a product in major foreign markets. The result can be parity of tariff reductions (absolutely or on a percentage basis) but a gross disparity in the total measure of protection provided. Through a request-offer strategy, the United States could negotiate to lower tariffs but only where U.S. producers are not disadvantaged on a total level of protection basis. A request-offer basis also permits the United States to reflect particular sensitivities on individual agricultural products by making no or very limited offers as well. Florida is concerned that many developing countries continue to have a range of high tariff and other barriers on agricultural trade. It is requested that the U.S. devote more resources in the next WTO round to ensuring equitable access to these important markets.
Page 72 PREV PAGE TOP OF DOC Export and Other Subsidies
While efforts should be made to address high foreign tariffs, the United States must recognize that the reduction or elimination of tariffs accomplishes little if other trade-distorting measures, such as export subsidies, remain in place. We are concerned that some WTO members might not be fulfilling their current export subsidy obligations under the WTO, and we applaud the efforts of the USTR to encourage WTO members to analyze how well they have brought their export subsidy regimes into conformity with their existing Uruguay Round commitments.
We urge the U.S. to push for export subsidy parity on key agricultural commodities with the E.U. on a per ton basis to prevent major distortions in trade flows. In doing so, the United States should address practices that in effect permit countries to avoid export subsidy commitments, such as pooling arrangements and dual pricing systems. Pooling arrangements and dual pricing systems create artificially low export prices for many foreign producers, which undercut U.S. products in the world market. Many sectors of American agriculture, such as the sugar industry, are harmed by such practices of their competitors.
State Trading Enterprises
The state trading enterprises (STEs) of our trading partners should be addressed in future WTO agricultural negotiations. Like pooling arrangements and dual pricing systems, STEs can lead to no effective access in foreign markets and to prices which are artificially high in domestic markets, yet artificially low in the world market. US exports can be restricted to those countries
with STEs, and the STEs of other countries can undercut U.S. prices in sales to third countries. For instance, Queensland Sugar Board in Australia controls all the buying and selling of sugar and contributes to the distortion of the world price of sugar. Future negotiations should strive to make such institutions more transparent in their operations and eliminate their discriminatory pricing. Florida notes that despite the efforts to develop greater information on STEs in the Uruguay Round, there has been no substantive progress as WTO members are not even able to agree on a revised questionnaire.
Page 73 PREV PAGE TOP OF DOC Genetically Modified Organisms
U.S. negotiators should work to find international consensus on the use of genetically modified organisms (GMOs). Genetically modified organisms have the potential to provide the world's growing population with abundant, inexpensive, and safe agricultural products. Despite scientific evidence proving that agricultural products derived through biotechnology are safe, many of our trading partners are considering placing limits upon, or prohibiting, the importation of U.S. produced GMOs. Restrictive practices that would require the segregation of GMO products from non-GMO products, or the labeling of biotechnology products, would be expensive, would result in discrimination against U.S. products, and thus would act as non-tariff barriers against U.S. exports. The United States must be prepared to challenge such practices at the WTO through the Sanitary and Phytosanitary (SPS) and Technical Barrier to Trade (TBT) Agreements.
We were pleased with the outcome of the beef hormone dispute between the United States and the European Union (EU), which to the benefit of American agriculture, found that the E.U. violated its obligations under the SPS Agreement as its ban on imported beef had no scientific basis whatsoever. Florida is somewhat disappointed by the slow pace of resolving agricultural disputes at the WTO. Florida believes that the United States should use the WTO's dispute settlement process to aggressively challenge unfounded barriers to Florida agricultural products. We hope that the U.S. will focus on making whatever amendments are necessary to the dispute settlement system which will permit rapid resolution of issues and prompt implementation of solutions when appeals have been exhausted. We also encourage the U.S. to improve further the transparency of DSU proceedings. In far too many cases, public version of briefs from foreign governments are not made available. In Florida, we have a Government in the Sunshine policy that requires public disclosure and access to all information except confidential trade secrets. We support as public a process as possible in any dispute.
Page 74 PREV PAGE TOP OF DOC Regarding an ongoing dispute, we appreciate the US pursuing discussions under the WTO's dispute settlement process against Japan for its laborious testing procedures of agricultural products. We agree that there is a need to address SPS barriers product by product, and species by species; although this is very time consuming, this is scientifically justified. We use this approach ourselves in Florida. However, we do not agree that there is scientific justification to require data on each variety of a particular product. This is a policy that Japan follows at present. It is the type of issue that can be handled through the dispute settlement process. It or similar issues could also be handled through clarifications in the SPS Agreement if necessary.
Again, we appreciate the subcommittee holding this hearing in the state of Florida to hear the concerns and needs of Florida agriculture. We urge U.S. negotiators to work to remove barriers to Florida's agricultural commodities and to address the special concerns of seasonal and perishable agricultural commodities such as fresh fruits and vegetables and orange juice. Florida has learned well that we must correct the problems of the past as we move to the future, and all segments of U.S. agriculture must work together to do so. We commend you for your effort and request your active leadership with U.S. officials as we enter this critical next round of negotiations.
"The Official Committee record contains additional material here."
SPECIALTY CROP AGRICULTURAL ISSUES
RELATING TO THE 1999 WORLD TRADE
TUESDAY, FEBRUARY 17, 1998,
Page 75 PREV PAGE TOP OF DOCHouse of Representatives,
Subcommittee on Risk Management
and Specialty Crops,
Committee on Agriculture
The subcommittee met pursuant to call, at 9:07 a.m., Riverside Convention Center, Riverside, CA, Hon. Thomas W. Ewing (chairman of the subcommittee) presiding.
Present: Representative Calvert
Staff present: Stacey Carey, subcommittee staff director,
and Ryan Weston, staff assistant, and John Riley, minority consultant.
Mr. EWING. Ladies and gentlemen, the meeting of the Subcommittee on Risk Management and Specialty Crops to review agricultural issues relating to the 1999 World Trade Organization Multilateral Trade Negotiations will come to order.
OPENING STATEMENT OF HON. THOMAS W. EWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. EWING. I'm very pleased to be here in Riverside to receive testimony today from California's agricultural community. I want to thank my colleague, Ken Calvert here who is always a very outspoken advocate for California agriculture. We consider him to be an ex officio member of our Agriculture Committee because of his interest and because of the importance of agriculture in his home state and in his district and thank you, Ken, for all that you've done to help us with this meeting today.
I think probably everyone in this room is aware that the Multilateral Trade Negotiations for agriculture is scheduled to begin in 1999. That was called for in the Uruguay Round Agreement. The objective of this and of these negotiations is to continue the process of agriculture trade reform. A formal agenda for these negotiations hasn't been agreed upon yet, but that is actually what the work is starting on right as we speak. Without fast track negotiations, the United States will be a major negotiator even without this authority given to the President.
Page 76 PREV PAGE TOP OF DOC I am proud to say that many of the crops that comprise California's diverse agricultural industry come under the auspices of the specialty crop jurisdiction of the subcommittee which I have the opportunity to chair.
Our goal this morning then is to hear from leaders and just ordinary people involved in California's agricultural community about the issues that we need to focus on as we prepare for these negotiations.
As the Nation's leader in agricultural exports, I think around $24 billion, your industry has a great deal at stake as we move into even wider global markets. In 1995, the State of California alone exported $11.7 billion worth of agricultural merchandise overseas. This went mostly to Japan, the European Union, Korea and Hong Kong. The Asian markets hold significant promise for U.S. agriculture.
By the year 2000 the Asian population is estimated to grow to 2 billion people. Exports to this region are expected to increase by $14 billion compared to the $7 billion for the rest of the world.
Some of the issues that I am interested in hearing your comments on today, some of the issues deal with existing barriers to trade, particularly in Asia: What are we doing about the most sensitive agricultural sector, many of which, the fruits and the vegetables, do adequate safeguard mechanisms exist today in those businesses and in those areas?
Are there unresolved Uruguay Round issues that need to be resolved before the 1999 negotiations begin?
How can we effectively deal with and resolve the sanitary and phytosanitary issues that become technical barriers to trade?
How can we assure that sound, scientific evidence is the basis for all of the decisions that we make?
Finally, we're interested to know if there are biotechnical, logical issues of particular importance to California's agriculture.
Page 77 PREV PAGE TOP OF DOC Now that's a wide variety of issues and I know that you won't have all the answers, but these are the important issues that we need to be talking about as we take your testimony as we move around the country. We are fortunate today to have a distinguished panel of experts to start with. We're going to follow that with an open panel for growers and anyone who would want to take part. If you do want to take part, you want to be sure that the staff has a card that they'll hand out that you can fill out before we call you up to the table.
The Chairman of the House Agriculture Committee, the U.S. Department of Agriculture, and the Office of the U.S. Trade Representative will be informed of the testimony that comes out of this hearing here today. So while they may not be at the table, they certainly are going to be involved as part of what we're doing here.
Mr. EWING. With that, I would like to call on my colleague, Mr. Calvert, and see if he has any opening remarks.
OPENING STATEMENT OF HON. KEN CALVERT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. CALVERT. Thank you, Mr. Chairman, for presiding over this field hearing.
I'm certainly honored that you're here in Riverside, the 43d Congressional District. As you pointed out, as you drove down the freeway, you didn't see a lot of open space in the west end of Riverside County, but let me assure you that agriculture is still alive and well, even in the west end of Riverside County, though predominantly certainly in the desert areas of our area.
One of the priorities we were focused on besides the farm bill, when I was on the Agriculture Committee and thank you for saying as an ex officio Agriculture Committee member representing Southern California farm interests, was the promotion of an open and fair trade agreement in the agricultural industry. It is important that our farmers and businesses have the best chance possible of selling their products and the only way we can accomplish this is by having open markets throughout the world, especially in Asia.
Page 78 PREV PAGE TOP OF DOC One point I'd like to make about Riverside County, you may not have known, if Riverside County was a State, it would rank 40th in the total economy as far as a State would be concerned, and agriculture accounts for a considerable amount of production for our county.
In 1996, we had a total gross valuation of over $1.1 billion in agriculture. In 1995, we ranked seventh among all California counties in value of agricultural production. And I would point out that not only is the citrus industry very important in our county, certainly the City of Riverside is known for its wonderful citrus, but we have a very strong dairy industry, as you well know, Mr. Chairman, from our last farm bill. And certainly the grape industry is very strong in Riverside County. The egg industry and many of these products are exports. So very interested in what the witnesses have to say today.
Thank you, Mr. Chairman.
Mr. EWING. A little bit about procedure. We oftentimes go with the green light, yellow light, red light, which is on a 5-minute timer and I know that most of you in your testimony would consume more than 5 minutes. What we ask of each of the members of the panel to do as best they can is to shoot for 5-minute summary of your testimony. If your testimony was in on a timely fashion, we have had an opportunity to read and to review that testimony and then after everyone has given me and Mr. Calvert a review of their testimony, we'll get to the questions and answers which oftentimes has a lot of very helpful material.
I want to introduce the people on the panel and I don't know if they're sitting in the order in which I have them on my list, but we'll go down that list and maybe for those in the back, just raise your hand when I call out your name. Mr. Calvin Kaminskas, assistant agriculture commissioner from Riverside County; Mr. Bob Vice, past president, California Farm Bureau Federation; Mr. A.G. Kawamura, board member, Western Growers Association; Mr. William K. Quarles, vice president, corporate relations and counsel, Sunkist Growers; Mr. Steve Easter, vice president, Blue Diamond Growers; Mr. Tim Ernst, member, Trade Policy Task Force, California Cling Peach Growers Advisory Board; Mr. Mike Bozick, president, California Desert Grape Growers League; Dr. Joe Morse, professor with the College of Natural and Agricultural Sciences, University of California Riverside.
Page 79 PREV PAGE TOP OF DOC Welcome and thank you all very much for being here and Mr. Kaminskas, we'll start with you.
STATEMENT OF CALVIN KAMINSKAS, ASSISTANT AGRICULTURE COMMISSIONER, RIVERSIDE COUNTY, CA
Mr. KAMINSKAS. Thank you, good morning, Mr. Chairman, Mr. Calvert. I'd like to first off thank you very much for coming to Riverside County. As the assistant agricultural commissioner, we're always very pleased to have people come and let us show and talk about some of the things that are important to us.
I might add to Mr. Calvert's opening statement, the fact that a lot of people don't really realize that Riverside County in regard to the United States counties, out of the top 10 that are listed in the United States, Riverside County ranks as No. 8, and of course, out of those top 10 there's approximately seven of those are California counties. So you can see the magnitude as to why we feel that agriculture is so important to us.
The issues that I want to bring up and I believe that, I'm sure that other panel members will probably have much more comment on it, but just to briefly describe a couple of our issues, the first issue has to do with what we call pest prevention and this has to do with our hope that the subcommittee during these negotiations will understand the importance of pest prevention and how the United States and ultimately California are totally affected by this.
Now the pest prevention area has three particular areas. We have the pest detection program which is actually trapping programs and surveys. This aids in the early detection of agricultural pests not known to occur in California.
Secondary would be pest exclusive which is the inspection or certification of in-coming and out- going plant shipments with respect to plant quarantine laws and regulations.
Finally, the eradication of these pests. Unfortunately, lack of funding in California has caused a lot of downsizing in departments, such as our department, the Agriculture Commissioner's Office which really is at the grass roots level of local enforcement.
Page 80 PREV PAGE TOP OF DOC And so a lot of the things we used to do years ago we don't do any more. We don't have some of the same capabilities or personnel to really do the kind of work that needs to be done.
The second issue involves the Phytosanitary Certification Program. This, I have personal experience about recently because a number of Chinese delegations, in particular, that do seek us out as local government officials to explain to them and assure them of our phytosanitary certification programs.
Now for international trade it's obvious that a lot of people are aware it needs to go with it and the phytosanitary certificate is really a health statement, so to speak of the product, whether it be a processed food or a fresh food. And this statement really is helping the foreign importer to understand and know that that product is free of pests and diseases and they've got to be assured of this, of course.
Within that phytosanitary program, there are two major activities: negotiations of phytosanitary requirements with other states and counties as carried on by the USDA. The second part is the performance of inspections and issuance of phytosanitary certificates for agricultural commodities. These can include a variety of different post-harvest inspections and packing sheds. And other things that people don't realize is different types of field inspections that we may have to make, for nursery stock and fruit and vegetable stock. There's also laboratory analysis that sometimes is necessary.
I just want to add that we hope that the subcommittee can recommend to the USDA cooperation with CDFA and the California Agricultural Commissioner's Association of California that they work to increase the general awareness of California's ability to produce and certify agricultural commodities as meeting the plant quarantine requirements of other states and countries. Thank you.
[The prepared statement of Mr. Kaminskas appears at the conclusion of the hearing.]
Page 81 PREV PAGE TOP OF DOC Mr. EWING. Thank you very much. Mr. Vice.
STATEMENT OF BOB VICE, PAST PRESIDENT, CALIFORNIA FARM BUREAU FEDERATION
Mr. VICE. Thank you, Mr. Chairman, and Congressman Calvert for having this hearing here in Riverside to give us an opportunity to give some testimony.
My name is Bob Vice. I'm the immediate past president of the California Farm Bureau. The Farm Bureau is the largest general farm organization in the State. We have Farm Bureaus in 53 counties, representing 75,000 member families.
This opportunity to review the importance of the 1990 World Trade Organization's negotiations and market opportunities will be denied if every means is not utilized to allow the United States to fully participate in this very important negotiations.
Failure to grant the administration's fast track negotiating authority, in our opinion, has allowed our competitors to move forward while we watch market shares disappear and see our leadership role in shaping trade diminish.
American agriculture cannot afford to wait for this authority in 1999 when the next round of agriculture talks and WTO are due to begin. We believe that the European Union has a number of issues that they wish to move forward that they know that we will not support. The same is true of Canada and a number of our other trading partners in the World Trade Organization. We are currently losing market share in Latin America because our negotiators do not have fast track authority.
We currently face an 11 percent disadvantage with Canada in the Chilean market. California agriculture has much interest in future free trade. In 1997, $23 billion was added to the State's economy from agriculture in California. With more than $7 billion, that's raw farm gate value originating from exports.
Production from more than 2 million California farm acres are destined for the foreign market. More than 70 percent of all California almonds, 40 percent of California citrus and cotton production has been exported in recent years. Export of other commodities such as rice and grapes and vegetables have increased reflecting greater dependence on international markets. Our producers' incomes are directly linked to these sales.
Page 82 PREV PAGE TOP OF DOC California agriculture exports represent more than 20 percent of the total U.S. agricultural exports. Twenty percent of the Nation's exports come from California.
Six of the State's top products in terms of production are also on the top list of exported products. California leads the Nation in exports of fruits, vegetables and nuts. California agriculture has much to gain from expanded trade since other countries already enjoy a relatively free market in the United States. However, the pursuit of future trade agreements will involve new challenges. The use of technical barriers to trade such as sanitary and phytosanitary regulations, food safety standards, restrictive label practices and environmental regulations has increased the traditional trade restrictions and they have been lowered and in some cases eliminated.
The Uruguay Round of GATT went a long way toward providing rules that are science-based concerning trade. The 1990 round will also progress even further. These rules need to be followed precisely and cannot be used as new technical barriers. The consequences of unexpected micro-economic and political events in the U.S. and other countries become more and more important factors affecting the well being of U.S. agriculture than any time in recent history. In many cases, these unanticipated forces may particularly partially offset or completely negate the extended trade effects from agreements. The Mexican peso devaluation in 1995 and the current crisis in Asia are two very good examples.
The Farm Bureau believes that future negotiating authority must include the following: Binding agreements to resolve sanitary and phytosanitary issues on the basis of sound science principles in accordance with the Uruguay Round Agreement on agriculture. We have those agreements in place. We need to follow them.
Tariff equalization and increased market access by requiring U.S. trading partners to eliminate tariff barriers within specific time frames, this is a problem that we had continually, getting a time frame by which they agreed to drop those barriers.
Page 83 PREV PAGE TOP OF DOC In changes in international agreements and U.S. law and practices that would facilitate and shorten the dispute resolution procedure and process. We get hung up long-term and it sometimes takes forever to eliminate some of these problems. We need a fast track kind of resolution process.
The Farm Bureau also recognizes that our past trade agreements are not perfect. Industry confidence and future trade agreements is tied closely to the satisfactory implementation of past agreements and to a commitment to rectify the resulting inequities. Our negotiators must have fast track authority to clear up past obstacles to trade and to prepare us for future opportunities in the global market. The stakes are too high to allow inaction. It is extremely important to California agriculture, the Nation's largest agricultural economy that you do the right thing and pass fast track authority in this session of Congress and to give agriculture the opportunity to be represented in 1999 Agriculture Liberalization Round of WTO. California Farm Bureau stands ready to help. Thank you.
[The prepared statement of Mr. Vice appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Mr. Vice and we could use some help. Maybe you can twist a few more arms that Ken and I didn't get done on the last vote, but it is a very serious matter.
Mr. Kawamura, you're next. Welcome.
STATEMENT OF A.G. KAWAMURA, BOARD MEMBER, WESTERN GROWERS ASSOCIATION
Mr. KAWAMURA. Thank you, Mr. Chairman, and thank you Congressman Calvert for having us here today. My name is A.G. Kawamura, it stands for Arthur. A.G. sounds like an ''Ag'', a natural name, butand I'm appearing before this committee in my capacity as member of the board of directors for Western Growers Association. Western Growers Association is a 3,300 member agricultural trade association, organized in 1926. The association's members grow, pack and ship more than half of the Nation's fresh fruits and vegetables and nuts.
Page 84 PREV PAGE TOP OF DOC WGA represents over 90 percent of the fresh vegetables and about 60 percent of the fresh fruit and nuts grown in Arizona and California. As requested, I'll limit my comments and try to do that to five minutes and would appreciate your making the WGA written statement part of the official hearing record.
I am a small family farmer, third generation grower out of Orange County. We produce celery, strawberries, and greenbeans. We used to produce delicious sweet white corn, cabbage and lettuce. Those last three crops we've stopped producing as a result of market pressures and market costs, production costs that are too high to sell them in our local market and around the Nation. When someone is making a dollar, we're losing a dollar on many occasions.
The cost of production throughout the country varies by both water availability, labor, wage rates, regulatory pressures and what we find ourselves, Orange County, of course being one of the few counties named after a commodity that I know of, even in Orange County, we can barely produce oranges. In fact, most of the oranges are no longer produced there because we can't compete, not only with our own State and with our own country, Florida and Arizona and some other areas, but Mexico, Brazil and other citrus growing regions of the world are vast becoming too competitive for us to ship our oranges out of Orange County. We have a little bit of local marketing, of course, but as a viable industry it's not even on the top 10 list of products coming out of our county.
What does this mean for agriculture, what does it mean for our agriculture, our sustainability in our area is that we've gone from farmers and growers and shippers that used to grow our products, produce them, and hope we could sell them. We've changed that strategy where we now definitely know we have to market them and then produce what we know we can market. That's a big change in the way many of us in the country are growing our crops these days, especially the so-called specialty minor crops and I would like to remind your panel that specialty crops are basically every fruit and vegetable and nut in the grocery section. Major crops, of course, you're very familiar with. We shouldn't forget that specialty crops, minor crops really represent a huge amount of what the consumers eat every day.
Page 85 PREV PAGE TOP OF DOC I'm a current member of the ATAC Committee out of USDA and USTR for fruits and vegetables. I've been there for a couple of years now and we've watched a lot of these different treaties being passed through and again, I'd like to voice over what Bob has mentioned about fast track authority. As we start these processes, if we can't comply and can't enforce the rules that we've already made, how can we go on along thinking that we're going to deal with other countries when we have a lot of business to take care of what needs to be done.
As I look through this synopsis and we send our products all over the world from Brazil to Hong Kong, European markets as well. We actually sent some strawberries to Russia this year. All we ask as growers and shippers is a level playing field, Mr. Chairman. Practical experience will tell you that I'm sure many of you have grown a crop before or raised an animal. That might make you think you know something about agriculture, but until you've lost a crop to a disease or lost an animal to a disease or a pest infestation or lost a crop because you didn't have enough water or just walked away from a crop because the market didn't warrant harvesting it, until you understand something like that you don't understand agriculture and what we're dealing with perishable crops. Not to say that you gentlemen don't, but again, it's something that this country doesn't seem to recognize. It's something that we certainly have to do a better job of educating them about because as we look for again this level playing field and our ability to compete on a world level, we must, must recognize how vital this industry is to the United States, let alone to the global community. It's one thing to make a dime, make a dollar selling these products, but it's a much greater responsibility we have in feeding this world at a price that people can afford to eat. We're still living in a world that if you don't have enough money, you don't get enough to eat. It will be interesting to see how that transpires in the next century as we go into this next 100 years on how agriculture steps up to the plate to deal with 6 billion people in a world that's growing fast and not doing a great job of dealing with our infrastructure help as far as water goes, but without water we don't have food. Without food, we obviously have a lot of problems.
Page 86 PREV PAGE TOP OF DOC To come to a quick conclusion here, whether you're talking about domestic food security, global food security, the job that you have to do is recognize that major crops are a great part of how we feed the world, but the minor crops, the specialty crops are equally as important, but they're very different in how we go about producing them and the risk that we have to face. And so when you're dealing with our fast track needs, they are specific. They're site specific, geographically specific and just a blanket plan may not help all of us. And if we want domestic agriculture in our backyard, we have a lot of work to do and a lot of education to spread. Thank you.
[The prepared statement of Mr. Kawamura appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Mr. Mr. Kawamura. Mr. Quarles with Sunkist Growers.
STATEMENT OF WILLIAM K. QUARLES, VICE PRESIDENT, CORPORATE RELATIONS, AND COUNSEL, SUNKIST GROWERS
Mr. QUARLES. Thank you, Mr. Chairman, Mr. Calvert. We commend you for conducting this hearing in California to solicit our views in anticipation of the very important international agricultural trade negotiation scheduled to begin next year. In the interest of the subcommittee's time constraints, I will, with your permission, present an abbreviated version of my testimony, but ask that my statement be submitted for the record in its entirety.
Mr. EWING. All statements will be in the record in their complete form.
Mr. QUARLES. Sunkist is a non-profit, farmer-owned marketing cooperative serving 6,500 citrus farmers in California and Arizona. For 105 years, Sunkist has successfully marked citrus fruit grown by its farmer-members, today, producing about 65 percent of the citrus fruit, primarily oranges, lemons and grapefruit grown in California and Arizona.
Page 87 PREV PAGE TOP OF DOC I might digress for a moment. Mr. Kawamura is absolutely correct that oranges are gradually disappearing from Orange County. However, they are moving to other parts of the State, of the two States, and I'd like to point out that we are, the California-Arizona citrus industry at peak production right now. We're into record production and that production is increasing.
Much of the new plantings are done with an eye for potential export opportunity. Our cooperative enjoys a long history of developing and expanding markets around the world with citrus grown and fresh citrus fruit. Over 33 percent of our fresh fruit is marketed in foreign countries, accounting for 45 percent of our farmers' fresh fruit revenue.
While progress in international agricultural trade was indeed made in the Uruguay Round, much remains to be accomplished. Tariff rates in many markets remain unjustifiably high imposing tremendous economic anti-competitive burdens on both the producer and the consumer. Earlier Uruguay Round negotiations led to a reduction or potential reduction or elimination of some tariff and non-tariff barriers. As a result, those still intent upon maintaining protectionist barriers against fair competition will be resorting to the use of sanitary and phytosanitary claims to prevent importation of agricultural products.
The Uruguay Round sanitary and phytosanitary package with its requirement that sound science be the foundation of all sanitary phytosanitary standards for agricultural trade between nations at last has potentially created order out of chaos.
The sanitary and phytosanitary package is a significant achievement that should be further strengthened and expanded to compel all countries engaged in agricultural trade to adhere to the internationally accepted sanitary and phytosanitary standards, norms and practices based upon sound science. Only by adopting and implementing science based policies can subjective unpredictable and arbitrary requirements that constitute unjustified barriers to trade be successfully overcome.
Page 88 PREV PAGE TOP OF DOC As traditional non-tariff barriers are eliminated and tariffs are reduced, the sanitary and phytosanitary issues will increasingly determine the course of international trade in agricultural products. Sanitary and phytosanitary concerns including pest quarantines have, with growing regularity, become the linchpin of trade negotiations seeking market access for fresh produce. For example, our efforts to gain market access to the huge and potentially profitable consumer market in China has for years been stymied by protracted technical discussions and scientific exchanges between technical experts and scientists from United States Department of Agriculture and their counterparts in the Chinese Ministry of Agriculture. Along with other sanitary and phytosanitary issues, we have responded to China's expressed concern about periodic outbreaks of the Mediterranean fruit fly in California and Florida. Only when such phytosanitary and sanitary issues are resolved will market opening talks yield results. Given this relatively new aspect of trade negotiations, manpower and resources of USDA agencies like APHIS and the Agricultural Research Service whose technical roles have become pivotal to success, are now spread dangerously thin.
Concerns about proper sanitary and phytosanitary management of production areas, assurance of swift eradication of destructive pests and diseases and mandatory certification that the fruit exported is pest free have become critical components of international trade. The discovery of a destructive pest like Medfly in production areas is the surest way for us to lose export markets. That's why the work of USDA's Agricultural Quarantine and Inspection Service which seeks by vigilant inspection to prevent exotic pests and diseases from entering the United States from abroad is vitally important to the health of consumers and to our industry.
As I noted earlier, tariff rates in many foreign markets remain unjustifiably high, suffocating our competitive efforts. These tariffs need to be reduced and harmonized with our own. Even if we overcome the sanitary and phytosanitary issues and gain market access to China, the United States citrus exporters still face a stiff tariff rate of 40 percent and an additional 17 percent value-added tax on our shipments.
Page 89 PREV PAGE TOP OF DOC In Korea, we face a tariff rate import quota system which limits our orange imports. Tariffs on imports within the quota is 50 percent. Tariffs on imported oranges outside the quota is a stifling 89 percent. Furthermore, Korea has granted the license to import its entire citrus quota volume to the control of Korean citrus growers, our local competitor. The Korean citrus industry, albeit small and not an objective party, controls all within quota imports. This is clearly a conflict of interest and one not likely to be favorably disposed to our exports to Korea. There is a need to open up at least part of the quota volume to other importers.
Japan, our second largest foreign market, imposes a duty of nearly 40 percent on our winter oranges and nearly 20 percent on our summer oranges. Our California-Arizona orange shippers must pay Japan upwards of $38 million in tariff duties annually just to be able to compete in that market. We seek relief through harmonization of tariff rates as soon as possible.
My submitted testimony describes similar trade disadvantages we face with India, Europe, Thailand, Australia, Taiwan and the Philippines. Sunkist appreciates the opportunity to bring these matters to the attention of the subcommittee in the hope that the agricultural trade policy agenda pursued by our government in 1999 or sooner, will address these inequities important to our farmers and the entire American citrus industry.
It is also for these reasons we urge the Congress to grant the administration traditional negotiating authority to remedy these problems. Thank you.
[The prepared statement of Mr. Quarles appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Mr. Quarles. Mr. Easter, Blue Diamond Growers.
STATEMENT OF STEVEN W. EASTER, VICE PRESIDENT, BLUE DIAMOND GROWERS
Page 90 PREV PAGE TOP OF DOC Mr. EASTER. Thank you, Mr. Chairman, and good morning. Good morning, Mr. Calvert. Thank you for the opportunity to appear before the committee here in California. It certainly is very much appreciated.
I am, as I have been introduced to you, Steven Easter, vice president-secretary of Blue Diamond growers. Blue Diamond is an almond processing and marketing cooperative that is owned by approximately 4,000 almond growers in California and we market world-wide for them to some 90 different countries.
Almonds are a major California crop. They're only produced commercially in California in the United States and we produce about 75 percent of the world's production of almonds. It's also a major export, as has been noted earlier in testimony. The almond industry relies on export for more than 70 percent of its business, making it the U.S.'s largest percentage export of any agricultural commodity for several years now.
In addition to that, it's the No. 1 horticultural export from the United States with an annual value of somewhere in the neighborhood of $1 billion a year.
We are the No. 1 agricultural export to Germany, the No. 1 agricultural export to India, and we're the No. 6 food export from the United States. So as you can see, we are very much committed to exports.
Some of my colleagues sort of likened it to the ham and egg breakfast. A chicken is involved and a pig is committed. We're really very much committed to the export industry and we look to it for our future. The almond growers of California are busy planting additional acreage. We estimate that over the next five years or so we'll see a 25 percent increase in production. Much of this will have to go into the export market.
Really, there are two key issues for almond growers as we look at the WTO. Number one, we think that it's vital that the President be given fast track authority by Congress. We think it's necessary to effective negotiation of trade agreements in the future. We think it's a way to address past difficulties and we believe it's vital that that be accomplished.
Page 91 PREV PAGE TOP OF DOC The other issue that's of primary concern to almond growers that we think can be resolved by trade negotiations and the WTO is the very high tariff on inshell almonds entering India. India is a major market currently, even with this high duty. It's a market that has grown gradually over the years, but we do face duty that while it's a fixed duty it equates to approximately 60 percent of the at ad valoram value. Even with that, exports this year will probably approach $50 million to that country.
We believe that with the substantial elimination of this duty that those exports could immediately double and over the long term add another $100 million to U.S. earnings in export.
We think that it's vital that the administration have the authority to negotiate a change in duties such as I've expressed in India. Now we understand that the government can't do all of this for us. That's why I use India as an example. You go back to 1970's, we were prohibited from exporting almonds to India. But by working with government, through an industry-government combination effort, we were able to open that market gradually to the point where it has become a substantial market for almonds.
We're prepared to develop the market to expand the market if we have the ability to do so with the reduction in tariffs and we look forward to working with the Government in this effort.
In terms of the WTO, I saw firsthand at the Singapore Ministerial the importance of the pressure from U.S. agriculture to keep that on track and I urge the committee and all involved to continue that pressure, to continue the interest that you've shown here today in what's happening in the WTO. We think it's really very vital that this continue at all levels and that it be accomplished through not only congressional interest, but by strong negotiating position by the administration which can be garnered by them having a fast track authority. But we think this is essential.
Page 92 PREV PAGE TOP OF DOC It's not in my original testimony, but I did want to comment briefly on the Asian markets because of your introduction to this hearing. I think that there's still a great deal of opportunity in the Asian markets, even with some of the difficulties we're going through now. I would urge the committee to work with the administration to see if some of the duties generally in Asia cannot be reduced. In many cases, they have already been agreed to under GATT, under the WTO arrangements, but they're scheduled to be phased in. I think an immediate reduction of duties to a negotiated level could help a lot in terms of the trade in those countries. And so I think it would also help see a recovery in some of the trade of U.S. commodities. That would be a suggestion of an approach that could be used in some of those Asian countries, because they will continue to be very important to us and to all of our markets.
Thank you again for the opportunity to present this information to you and I look forward to working with the committee in the future on similar issues. Thank you.
[The prepared statement of Mr. Easter appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Mr. Easter. Mr. Ernst, with the Cling Peach Growers. I'm just a corn and soybean farmer, so what's the difference between a cling peach and a peach we grow in Illinois?
Mr. ERNST. The peaches you grow in Illinois are probably free stone peaches. Cling peaches are used for processing, for canning. Free stone peaches, you usually use those fresh. Cling peaches tend to be a little bit hardier, better able to undergo the processing that you need to in putting them in a can.
Mr. EWING. Thank you. You can always learn something and I was trying to make the clinging have something to do with hanging on the tree, but that isn't it.
Mr. ERNST. That's not it.
Mr. EWING. All right. Thank you.
Page 93 PREV PAGE TOP OF DOCSTATEMENT OF TIM ERNST, MEMBER, TRADE POLICY TASK FORCE, CALIFORNIA CLING PEACH GROWERS ADVISORY BOARD
Mr. ERNST. Thank you for holding this hearing this morning. It's nice to have the opportunity to present our testimony to you.
My name is Tim Ernst. I'm here on behalf of the California Cling Peach Growers Advisory Board and the industry's Trade Policy Task Force. We'd like to share with you this morning our industry's concerns as we move forward to the next round at WTO multilateral trade negotiations in agriculture.
The Board represents all California growers and processors of cling peaches.
Our industry has the unfortunate distinction of having the longest-standing section 301 case now pending before the U.S. Government. The case concerns illegal European Union canned peach subsidies. Despite many, many yearsnearly two decadesof seeking relief from this irrational European Union subsidy regime in both formal and informal trade settings, our industry has yet to receive relief. So while we are here today to talk about a new round of multilateral trade negotiations in agriculture, we are concerned especially before we jump into this new round to take the opportunity to look at existing agreements and take the steps necessary to enforce the agreements as currently written. If we enter a new round of trade negotiations without resolving outstanding disputes, we're going to find ourselves in a situation of negotiating away U.S. tariffs in exchange for solutions to disputes and our trading partners were obliged to resolve many many years ago.
Seventeen years ago, the California canned peach producers and the U.S. Government sought to stop the European Union from disrupting the world market for canned peaches by challenging European Union subsidy practices in GATT trade dispute settlement. We won that case back in 1984 and in 1985, negotiated a bilateral canned fruit accord. That's why we believed that the trade disruption would cease. However, this is far from what happened.
Page 94 PREV PAGE TOP OF DOC Today, Europe continues to subsidize its canned peach producers with nearly $200 million annually. That's twice the farm-gate value of California's cling peach crop. We have data, compiled with the assistance of USDA, showing that not only is the bilateral accord not working, but it has served as a cover for additional illegal subsidies to be provided by the European Union. Copies of this data are attached to my written testimony. This data shows that the European Union canned peach production and exports are way up and the world market share of Greece and other European Union canned peach producing countries is also way up. Canned peach production in Greece, the largest beneficiary of these illegal subsidies has nearly doubled in the last 10 years from 198,000 metric tons in 1987 to 378,000 metric tons in 1996. Greek canned peach exports have sharply increased. Today, the European Union accounts for 70 percent of total world canned peach exports. Greek growers now have so many peaches growing that they are dumping peaches in pits the size of football fields and are being paid handsomely by the European Union to do so. With aid levels this high and chronic overproduction, the Greeks have been able to undercut California canned peach prices in all world markets by margins of 50 percent or more. As a result, California canned peaches have lost market share in countries such as Japan, Canada and the United States. We have been completely displaced in the European Union which was formerly our industry's largest export outlet.
California growers and processors are not the only world producers being harmed. Every other canned peach producing country has been affected by these illegal subsidies and have taken action to address this problem.
What our industry needs and has waited too long to receive is a commitment from our government to a positive strategy to resolve these outstanding issues. Over the last year and a half we have worked hard to make our case to the USTR and others in the administration that the European regime is irrational and in violation of our bilateral agreement. Ambassador Barshefsky has personally acknowledged that the European regime is an inequity.
Page 95 PREV PAGE TOP OF DOC The USTR has pledged to our industry and to many in Congress that they will work hard to fix the problem. We are counting on that commitment to find a solution. We have explored WTO dispute settlement, section 301, and other remedial measures, including other WTO venues before which to take our concerns. USDA has recently committed to pursue in combination with other non-European Union peach producing countries a protest of the European Union canned fruit regime using special procedures under the WTO Committee on Agriculture.
The direction this dispute takes has important implications for agriculture well beyond the specifics of this case. Not only is the United States-European Union canned fruit dispute instructive on how the multilateral trading system and our own U.S. trade laws have been unable to correct inequities of our trading partners, but also on how the European Union, the U.S. Government's most frequent adversary on agricultural issues, actively continues to protect its domestic industries despite Uruguay Round reform. If the United States cannot secure relief for an aggrieved U.S. industry under our compelling circumstances, how can we have confidence that the present system will deliver relief for any sector of American agriculture? If the present system does not work, refinements to that system will be of questionable value.
In short, we are seeking evidence that existing agreements work before we venture forward to seek new agreements for agriculture. As our case vividly illustrates, it does not matter whether new agreements may be possible in the area of agriculture if existing agreements are not being honored.
We therefore ask the subcommittee for its help in sending this message and in urging that a positive U.S. strategy be developed to reverse the ongoing harm being caused to our industry before leaping forward into a new multilateral round. Thank you.
[The prepared statement of Mr. Ernst appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Mr. Ernst. Mr. Bozick, California Desert Grape Growers.
Page 96 PREV PAGE TOP OF DOCSTATEMENT OF MIKE BOZICK, PRESIDENT, CALIFORNIA DESERT GRAPE GROWERS LEAGUE
Mr. BOZICK. Thank you, Mr. Chairman, for the opportunity to testify before you and Mr. Calvert to relate the concerns of the Desert Grape Growers League. I've submitted a written statement for the record.
I will briefly summarize that statement. First, I'll tell you about the concerns our growers have regarding our Nation's trade policy, then I will describe how Congress had assisted the Coachella Valley table grape farmers.
Our table grape industry has been in Riverside County since the late 1920s. At the present time there are about 80 table grape growers, all family farms, all family corporations with the exception of one company. Our family farm grows not only table grapes, but citrus.
Our predecessors and the current growers have made necessary competitive adjustments needed to successfully remain in business producing high quality table grapes over the years. Over and during the past decade U.S. trade policy has led to challenges that seriously is testing our resolve.
I'll describe some of those to you. I'm aware that members of the House Agriculture Committee visited Chile about a year ago and learned that in two decades the Chileans had shipped to this country 500 million boxes of fresh fruit, 80 percent of which was table grapes with a value of $5 billion. Over that time, Riverside County grapes are still not permitted to be shipped into Chile because of unwarranted phytosanitary barriers.
Moreover, it's noteworthy to point out that poor quality Chilean grapes flood our market prior to the marketing of our table grapes in the early part of May. It hurts our market. They still face zero tariff coming into this country. In addition to that, we have a tariff of 11 percent if we want to ship grapes into Chile.
Page 97 PREV PAGE TOP OF DOC We have great difficulty understanding how this unequal situation can be reconciled with the supposed Chilean reputation of free trade. We also have serious concerns regarding the trade situation of Mexico. Mexican growers have enjoyed a very healthy table grape market in this country for years. Prior to NAFTA Mexican grapes entered the United States with zero tariff while we faced a 20 percent tariff in exports into Mexico. After 10 years, the Mexican tariff has been reduced, but it still remains at 10 percent. Immediately after the implementation of NAFTA, Mexican imports in this country increased by almost 100 percent and they still pay zero tariff.
Let's look at what has happened since NAFTA that is significant to our table grape farmers. Mexican grape imports have almost doubled. Peso conversion went from 3 pesos to 8. The Food Quality Protection Act was enacted which is not applicable to Mexican growers. The minimum wage was raised in 1996 and they're thinking about doing it again in 1998 which, of course, will not affect them. Use of methyl bromide for fumigation in this country is trying to be phased out which will not affectthey'll be able to use it regardless of what happens here. Each of these issues poses a significant challenge to us as growers in Coachella Valley. We need to remain competitive with these people and it's difficult to do it under this situation.
Taken together all these items with increased imports from South Africa, possibly imports from Argentina in table grapes, we face a formidable challenge in our business.
Perception by our growers of U.S. trade policy favors imports over exports. The trade policy in Washington is being dominated by imports. I provide this information to you to demonstrate the apparent inability of our government to provide fairness to our table grape farmers. The inequities of our Nation's trade policy must take into consideration that imports do result in serious economic implications for domestic industries.
Remember, in addition to problems related to trade, we face all these other problems that farmers normally do, pest related, business problems to solve, bureaucracy problems and also the water issue in California very shortly is going to be a major issue in our area.
Page 98 PREV PAGE TOP OF DOC One of the major steps that Congress could take which would address the concern, some of the concerns of Coachella Valley growers is to pass H.R. 1232, Congressman Sonny Bono's country of origin labeling legislation. This legislation builds on existing law in order to insure retailers take reasonable measures to inform the consumer of the country of origin of the fresh produce. In addition, consumer packages will be required to be conspicuously labeled with the country of origin. For example, at the present time bags of grapes are required to have the country of origin labeled which is conspicuous. A lot of the fellows down there put that down at the bottom of the bag or else they put it at the top of the bag so when you fold it, you can't see it if it's on the shelf.
When our industry and other growers requested passage of Congressman Bono's country of origin labeling bill during the last Congress, it did not receive a hearing. However, when our growers travel off-shore and we go to export U.S. table grapes, we face country of origin labeling in retail stores all over the world. This government requirement exists in Japan, Canada, European Union, Switzerland. And why? Because the consumers in those countries demand that information. Yet, in the United States consumers are being denied the ability to know the origin of fresh fruits and vegetables.
We did a study a couple of years ago to show that 87 percent of the American people would like to see labeling on packages to identify where it came from. The country of origin labeling is necessary because it permits our growers to survive when foreign produce is ordered off the market by the U.S. Food and Drug Administration due to some safety concern. When Chile suffered the cyanide problem several years ago, we suffered also because consumers couldn't differentiate between what grapes were what. Guatemala raspberry cyclospore incident and the lower Rio Grande cantaloupe salmonella food problems and other examples have had a tremendous impact to U.S. growers.
Fresh produce, the growers of fresh produce have an extremely short time in which to harvest and market fresh crops, thus if there is a food safety problem, we can lose revenue for an entire year. Coachella Valley growers urge Congress to approve H.R. 1232 and to address these concerns. Thank you very much.
Page 99 PREV PAGE TOP OF DOC [The prepared statement of Mr. Bozick appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Mr. Bozick. Dr. Morse, University of California, Riverside.
STATEMENT OF JOSEPH G. MORSE, PROFESSOR, COLLEGE OF NATURAL AND AGRICULTURAL SCIENCES, UNIVERSITY OF CALIFORNIA, RIVERSIDE
Mr. MORSE. Thank you, Mr. Chairman. My name is Joseph Morse. I'm a professor of entomology at the University of California, Riverside and since July 1996 I have served as director of the University of California Systemwide Center for Exotic Pest Research. Our center was established in September 1994, mainly in response to the threat that the Mediterranean fruit fly posed to California. Although the Medfly remains a primary focus of the Center, our mission has expanded to address issues related to past or future introductions of exotic pests of all types as they affect the State of California.
Exotic pests are pest species, including insects, mites, nematodes, plant pathogens, and weeds which are non-native to California, that is, they have an origin outside of the State and have or could be introduced into the State. Exotic pests have been extremely costly to California. In my testimony, I list several examples of these. Some of the highlights, of course, would be Russian wheat aphid in 1985, honey bee varroa mite in 1989; Formosan subterranean termite in 1992; 1994, Africanized honey bee in 1995; Karnal bunt in 1995; and avocado thrips in 1996.
Movement of non-indigenous pest species throughout the world is massive and will be accelerated by increasing air transport and by new free trade agreements such as NAFTA and GATT. These have been stated by USDA/APHISAPHIS, of course, being the Animal and Plant Health Inspection Serviceto demand a revision of strategic direction from emphasis on protectionist or quarantine activities to trade-focused (export and import) activities. This strategy has been characterized by the ''Golden Rule of Trade'', APHIS Deputy Administrator Husnik at a presentation to the National Plant Board in August of 1995 in San Diego stated, ''If it works for exports it works for imports.'' California, with the largest agricultural industry, the greatest crop diversity, the largest population and the most extensive tourism industry has more at risk than any other State in the United States.
Page 100 PREV PAGE TOP OF DOC The impact of new free trade agreements on the movement of exotic pest species is specifically what I would like to address in my comments today. There are many benefits which will accrue from free trade agreements such as NAFTA and GATT. One problem, however, is that increased levels of trades and shipment of produce into the United States will accelerate the movement of exotic pest species which could be extremely damaging to U.S. agriculture. What is even more disturbing is that the primary Federal agency charged with protecting U.S. agriculture and the general public from exotic pest species, i.e., USDA-APHIS has recently been charged with an added mission of facilitating international trade.
In my opinion and the opinion of my colleagues at the Exotic Pest Center, there is a basic conflict of interest between APHIS' new mandate to facilitate international trade specifically import trade, and APHIS' historical mandate to prevent the introduction and establishment of exotic pests. We strongly suggest that this is an irreconcilable conflict of interest and is inappropriate. We suggest that APHIS should remain as the primary agency charged with protecting our borders from the invasion of exotic pest species, but that it not be given the conflicting mission of facilitating international trade, especially import trade. This mission is more reasonably transferred to some other agency within the government.
I personally became involved in an example of this conflict of interest when several researchers and I were asked to review APHIS' proposed rule allowing importation of fresh Mexican avocados into the United States. Overturning a longstanding precedent of not allowing fresh avocados into the United States, this rule, which was later adopted and resulted in shipments of avocados into the United States late last year, proposed a systems approach to provide security against the importation of exotic pests. Summarizing several lengthy reports which we prepared on this subject, I can say that it was our opinion that the rule was developed and adopted with undue haste and a lack of strong scientific data which would provide a reasonable sense of security to U.S. agricultural producers.
Page 101 PREV PAGE TOP OF DOC Let me summarize by saying that we predict that exotic pests will become an increasingly damaging problem as trade tarriers are reduced. Additional research support is needed to address the exotic pest issue by both reducing the likelihood of damaging importations and by dealing with such introductions when they occur. In addition, we think it would be wise to eliminate facilitation of international trade from APHIS' basic mission. Thank you.
[The prepared statement of Mr. Morse appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Dr. Morse.
We have just one party who wants to take part in the open panel and so with your permission, I'm going to ask Marco A. Di Mare to come to the table and we'll just include with this panel and then we'll do all the questioning together.
STATEMENT OF MARCO A. DI MARE, ASSISTANT SECRETARY, THE DI MARE COMPANY
Mr. DI MARE. Mr. Chairman and Mr. Calvert, thank you for the opportunity to testify here today. My name is Marco Di Mare. I'm with the Di Mare Company. We are a family run business that operates in five States across the United States.
My interest here is probably similar to many of these gentlemen, is a comment on the issue of free trade, particularly about establishing a level playing field for U.S. producers.
In the United States we are, particularly in California, we're facing increased regulation, increased costs such as the increase in the minimum wage. This is creating an inability for us to compete not only domestically, but internationally.
In the United States, we're facing a shrinking channel of distribution through increased consolidation on the retail level. Although we're faced with these problems, it is creating certain benefits for us and for the U.S. consumer and that is increased food safety. And because of this increased food safety, I encourage and for the reason of this increased food safety, I encourage Country of Origin labeling. This will allow us and the American consumer to determine the kinds of products that they want.
Page 102 PREV PAGE TOP OF DOC Being faced with increased regulatory issues on pesticides and food handling, these costs like I said earlier makes it more difficult for us to compete whereas when we compete against countries like Mexico, for example, where they do not have these regulations, or these regulations are not strictly enforced, it just is very difficult.
I would also like to comment on some of the gains that we have received from market promotion and development. These are issues that are often addressed in international trade agreements. I'd like to compliment the staff of the USDA in the fine job that they have done, particularly in the success that we've had in the Japanese market. The opening of this market to U.S. tomatoes as of June of last year has been a great success, but it has not been a complete success. Part of the reason being continuing phytosanitary constraints, limited availability of varieties in which to ship into that market. Although this has been a good thing for the U.S producer or the California producer of fresh market tomatoes, we don't feel that we can produce or compete effectively within the Japanese market because of this continued restraint in terms of varieties. This is not just limited to tomatoes or limited to several commodities across the board. And it's these sort of issues that need to continue to be addressed and as the United States has to take an active role in pursuing when going into trade negotiations.
There was some comment made earlier in terms of phytosanitary issues and I addressed some of the restraints we face going into Japan on tomatoes. Vice versa, coming into the United States it seems as if APHIS turns a blind eye at times. A couple of years back tomatoes started coming into the United States on the vine from Holland. At that time, they were not permitted to come on the vine. They were permitted to come in without any plant material attached. At a trade show during that year with some APHIS personnel at that trade show this product was first displayed in the United States. This product was basically imported illegally into the United States and this was brought to the attention of the APHIS officials. But no action was taken to pull that product from the displays at this convention and that product continues to flow into the United States. Subsequently, APHIS has permitted that product to come into the United States under new regulations.
Page 103 PREV PAGE TOP OF DOC What we are asking for is equitable treatment by the U.S. Government in terms of consistency in pursuing not only phytosanitary issues, but trade issues. Be conscious of the fact that we're U.S. producers and that we basically pay your salaries and that we want you to pursue our interests as vigorously as the interests of other countries are pursued by their governments.
Over the last 2 years I've traveled extensively throughout Asia attending several trade shows from Shanghai to Hong Kong. It's been very interesting to see that yes, while the United States does have a strong presence at those shows, the Europeans are even morehave an even stronger presence, a greater presence. It was alarming to find out the amount of funding they received for these shows and although this is not a direct subsidy, it is an indirect subsidy and makes their product more competitive in an international global market.
With recent cutbacks in MPP or market promotion funding, it concerns me and my family that although we preach free trade as a country, our ability to go out and promote our products in the international arena become more and more limited every year because of lack of government support.
Also, in regard to Mexico in terms of free trade and NAFTA, we've suffered substantially from NAFTA, both California and Florida being a major tomato producer in the States, and yes, we are strong proponents of free trade because we export citrus into the East, into Europe and the Far East. We kind of question at times what is the level playing field. It's often been pointed out, not only in congressional hearings, but in the media, that child labor laws are not enforced in Mexico. Phytosanitary issues are not necessarily enforced or overly and stringently enforced with product going into Mexico. So its safety laws are not enforced for a product coming out of Mexico.
Recently it came to my attention that a major producer in Mexico who is on the verge of bankruptcy was given a loan by the Mexican Government for $10 million to construct a new packing facility. This is one of our major competitors. And the laws of market economies dictate that the more efficient producers should stay in business. But they were on the verge of bankruptcy and they received a $10 million loan from the Mexican Government. Now I don't know the details of this loan, but it's somewhat insulting when you find that the Mexican Government is basically financing one of your major competitors and it was 2 years ago the United States offered $21 billion to the Mexican Government after the peso devaluation to bail out that government. This could quite possibly be U.S. funds financing a Mexican producer that we're competing against.
Page 104 PREV PAGE TOP OF DOC So all we ask is for a level playing field and that a blind eye not be turned to the American producer or the American grower. I just want to close because I'd like to comment on the Country of Origin labeling.
I think one of the nicest things about Country of Origin labeling from the American grower and producer allows us to tout that this is something that we're proud of. This is something that we sweated hard to produce. We spent many hours in the field, many hours in the packing house, lots of hours toiling over this crop.
Sometimes we lose that crop. Sometimes we bring that crop to the market. But the American consumer should have the ability to choose do they want something that's produced in the United States under the guidelines set forth by USDA and the FDA or do they want a product that's produced overseas in a foreign country where there might be regulation, but very seldom is it enforced.
I'd like to thank you for the opportunity to comment.
Mr. EWING. Thank you, Mr. Di Mare and you raise some very good issues.
I think probably listening to the testimony here from people who have a lot in common as far as the agricultural industry, you can see that there is indeed some diversity as to how we should proceed to enhance the ability to compete around the world right here at this table. And I think too, I'm not going lecture anybody today on their history, but we must remember where we've come from in this century when we were and have for a long time been the market of choice of countries around the world who were struggling to stay afloat. It was to our national interest to try and bring stability in the world arena and we have indeed, I think, come into negotiations.
The GATT and NAFTA negotiations not from a point where we had strongly laws keeping out other peoples, but we have very low tariffs compared to many of the people we trade with and we didn't jack them up to bring them back down, so we started with less to give in the trade negotiations than probably many of our trading partners around the world. And it doesn't put us necessarily at a good point to begin those negotiations.
Page 105 PREV PAGE TOP OF DOC Two things come across clearly to me in all the testimony is concern about trade barriers of how we approach the next round of negotiations and regulatory requirements that we have in this country that other countries may not impose in the things that they cause or lack of competitiveness that they put many of the growers and farmers in.
Let me ask a question about trade powers. Are there any on the panel who would admit that they are reluctant to see the President or any administration have additional fast track powers?
Mr. BOZICK. I don't think he should at all.
Mr. EWING. Mr. Bozick is in a businessI had a hearing like this in the South, in Georgia, Alabama, Florida, and I will tell you the majority at the table who said they're not interested in see fast track, so it is a regional thing and it is an issue that cuts across agricultural lines.
Mr. Ernst, you made a comment about the peaches. Do you think that we came out of the GATT negotiations with the situation that has benefitted your industry?
Mr. ERNST. I think the agreements we came out with were fine, given what they were, but I think they did not cover everything that should be covered and I think we have to continue to focus on what's happening and respond to new developments, as they develop.
Mr. EWING. I didn't mean to cut you off, Mr. Bozick.
Mr. BOZICK. No, no, that's all right. I think that one of the problems I have with the fast track, just like any business transaction, my problem with that is the deal is made and Congress can't do anything about it. They can't change anything. One of the other problems I have is I don't think, I don't think that anybody can change 200 years of culture with an agreement and let me give you a very good example. Mexicans are very tough competitors. They're intelligent people, good businessmen. They're not the guy in a sombrero sleeping under the cactus as a lot of people envision. That's a different ball game in Mexico. I have a lot of good friends down there who are competitors. I've known them for years.
Page 106 PREV PAGE TOP OF DOC Let me give you one very good example. When I say you can't change culture just by what goes on in an agreement. The Chileans had flooded the Mexican national market in Mexico City and Guadalajara with Chilean fruit a couple of years back. It was so bad that those growers in Armacio and Cavorca in the State of Sonorro couldn't ship fruit into Mexico City because the market was flooded.
I had the occasion a year later to have dinner with a very substantial individual who is not only in the grape business, but in the supermarket business and I said to him, ''Roberto, how are you going to take care of that problem?'' He said, ''Mike, very simple. We're going to find a bug next time.'' In the fruit and they're going to stop them cold.
That's the thing that we can't deal with in anything we do. And these people in these other countries can do those things, but we can't. We're the most highly regulated in California. Cal Kaminskas, the agriculture commissioner on pesticidesnobody in the world has these regulations and yet other people that we compete against have a free hand in what they do. Competitive wise, it's tough. We survive by, I guess you might call it, hard work or something.
Mr. EWING. Are there others at the table following up on that who may think that these regulations are excessive or they're just about right or whatever, you think, but how many of you believe that the U.S. Government can impose them on other sovereign nations?
Mr. DI MARE. I don't think that U.S. Government has a right to impose them on sovereign countries, but that product that falls across U.S. borders we have a right to test that product. We have a right to test that product for chemicals that are banned in this country. And I mean DDT is a prime example. I was in Hong Kong and I was talking to some people in the market in Hong Kong and this is exclusive of what goes on in the United States, but the Chinese use DDT to bring better color to vegetables that go into the Hong Kong market.
Page 107 PREV PAGE TOP OF DOC Now being a global marketplace, we're competing in that Hong Kong market against Chinese producers and I'm not saying we want to go back to using DDT, but there are certain economic benefits to certain chemicals that we aren't able to use. So in terms of our own market, we need to protect what we do here and we do have the right to test product that comes across the border and we need to be diligent in doing it.
There's a thousand loads, 2,000 loans that go through New Gallos every day. How often is that product tested? Very seldom. Yes, it becomes very difficult and very costly to do it, but at the same time we run into the same problems when we go into Mexico.
To sort of followup what Mr. Bozick said, right after NAFTA when the market was open to Mexican tomatoes coming into the United States, we were shipping tomatoes into Mexico. Two years after that it was a banner year for California for shipments to Mexico. As the volume increased, going into Mexico, the number of inspections that they had on U.S. tomatoes also increased and they went to a zero tolerance on any plant material which effectively shut the border.
Mr. EWING. Mr. Kaminskas, that comes under your area of the testing or the inspection at the border?
Mr. KAMINSKAS. No sir. This would be done by the USDA.
Mr. EWING. OK, but does the State of California engage in that at all? You mentioned the money, so it's Federal money to the Federal inspectors, not State inspectors?
Mr. KAMINSKAS. Yes, the Department of Pesticide Regulations in California does routinely sample produce off of shelves irrespective of whether it's foreign produce or American produce.
Mr. EWING. And what do you do with the results of those inspections? What if you find produce that has some chemical on it that's not allowed in California?
Page 108 PREV PAGE TOP OF DOC Mr. KAMINSKAS. The typical thing would be to immediately pull it off sale and of course what the Department of Pesticide Regulations would do is followup and try to find as many sources of that produce and try to stop everything that's in commerce at that time.
Mr. EWING. Do you work closely with the Federal inspectors, or do you have much contact at all with them?
Mr. KAMINSKAS. No sir, we don't.
Mr. EWING. This is to anyone on the panel.
Do you believe that the agreement, the Uruguay Round that was entered into in 1995 has benefitted California agriculture in balancing the pluses and minuses more than it's been a negative?
Mr. VICE. I don't think there's any question that it's been an overall winner. I think what you've heard here today though there have been some commodities, some sectors that have not enjoyed the same amount of access as others. There have been several of us that have stated the fact today that quite frankly the agreement is enforced with some commodities and with some regions at a different level than at other levels.
We have seen and again I think a lot of the animosity that you hear toward future trade agreements is the frustration over the lack of enforcement of existing agreements we had. The wine industry in California has a tremendous story to tell about what they were told was in the agreement and what was agreed to and yet what has happened? I think you hear some of that as it relates to table grapes, certainly with tomatoes and the fresh fruit market in Florida and I'm sure you've heard that in your hearings down there.
There seems to be a different level of enforcement by region, by commodity and that's one of the things cling peaches, I said in my testimony, we need some way to not have something in the system trying to be resolved for two decades. That's ridiculous. Should be able to have a system by which disputes are settled quickly.
Page 109 PREV PAGE TOP OF DOC Mr. EWING. Anyone else? Yes?
Mr. KAWAMURA. There were provisions in all of these agreements for a snap back reaction to individual commodity groups that found themselves damaged. The saddest thing about that you have to prove you lost tremendous amounts of money.
Mr. EWING. You've got to be out of business before it snaps back.
Mr. KAWAMURA. It's that consequence. Now if we were truly bargaining on behalf of the American farmer, we could back those provisions very, very strongly to make sure our partners comply to keep ourselves in business.
Mr. EWING. Yes, Mr. Easter.
Mr. EASTER. I just wanted to comment that certainly I'm aware of what we heard today, but of other similar concerns about international trade and I think they're very warranted.
I wanted to make a general comment, however, about the progress of trade, not only the Uruguay Round, GATT, but previous rounds that we've been involved in. I think the one reoccurring theme is that over the last 25 years that I'm aware of that we've seen a continual expansion of trade, particularly in agricultural trade. It may be somewhat unequal in terms of the beneficiaries, but I don't think that's a reason to say we ought never have another trade agreement.
I think what we need to do is sort of renew our efforts, increase our resources that go into international trade from the standpoint of supervising agreements, some of the inspections, particularly in the sanitary and phytosanitary science that we need to advance so that that information can be dealt with promptly.
But I think we have to continue to progress because the fact 96 percent of the world's population is outside the United States and if we're going to continue to have a vibrant agriculture in the United States, we're going to have to access that market and I think it just means that we have to work harder. We have to do a better job of accessing that market.
Page 110 PREV PAGE TOP OF DOC We've had a lot of success and I think we ought not to forget the success. While we also try to use the authority that we have and redress some of these problems we have. I very much agree with that, but at the same time I think there's some opportunities that we can open up by additional negotiating authority.
Mr. EWING. Mr. Quarles.
Mr. QUARLES. Yes, I think it's important to keep this matter in some perspective that we and the whole world is moving toward freer trade. We have the APEC, the Asia Pacific Economic Council that's moving toward a free trade agreement with all the nations in the Pacific Rim.
We have the initiative of the Americas that the President just signed off on and basically supported by presidents of both parties in very recent years to extend NAFTA from the Arctic to the Antarctic. The European Union and Mexico are going to enter into negotiations shortly leading to a free trade agreement between those two bodies. So I think it's important to realize where the world is going. I'd like toin that perspective direct my comments to one single impact of that and that is that there is going to be a great deal of agricultural products flowing across many borders. There are going to be a lot of imports of agricultural commodities into the United States. I'm very worried. There's a great deal of concern that as we downsize government, it's very important to keep in mind and USDA is going to be downsized, I think, we all recognize that, but if our capability, APHIS and ARS, for example, if we downsize proportionately as bureaucrats tend to do, APHIS and ARS can become so small that they can't do their job. I think it's critical that we have the capability at our borders to take a look at these agricultural products as they come across to make sure that they comply with all the phytosanitary and sanitary laws. Just for example, if we get a Medfly in the wrong place in any of our production areas, the California-Arizona citrus industry is going to be out of business with regard to our international markets and that means we're generally out of business. It's absolutely crucial that we focus on perhaps giving APHIS and ARS increased funding and an increased ability to do the job that's going to be necessary because as pointed out, it's questionable whetherwell, I think it's quite clear they're not keeping these pests now. We've had major Medfly infestation in California and in Florida this past year. That shows that they're not keeping Medfly out of the country. So I think it's important to focus on beefing those sections of USDA up so that they can do the job that they need to do.
Page 111 PREV PAGE TOP OF DOC Mr. EWING. That's an excellent point.
Mr. CALVERT. I'd just like to ask for comment from Mr. Quarles on Dr. Morse's statement that he believed that APHIS may have a conflict of interest and in particular, as an example, the issue regarding avocados and the importation of avocados from Mexico. The science, as you know, is somewhat controversial, that there are many people, including the University of California Riverside and I read your report, believe that the Medfly is endemic in those states in Mexico and that by the importation of avocados, even with the rules of moving those avocados in various areas where supposedly the Medfly would not be a problem, it was a believe, at least by the University of California that it would be and that APHIS made a decision some believe because primarily USDA was anxious to enter into an agreement with Mexico to allow importation of avocados to relieve other pressures to export other agricultural products.
Do you think that there is a conflict there? Is there any comment about that?
Mr. QUARLES. Well, I can't comment on the avocado situation because I'm not that familiar with it, but just in general, the thought of taking APHIS out of the loop of determining what a foreign country is going to have to establish prior to shipping in here, I think it could be probably argued that if they're going to establish, work towards establishing the processes for determining whether or not the avocado seed weevil, for example, exists in Mexico, that could be coordinated with their job of actually keeping it out and inspecting it at the border and knowing what should be coming across or not, but I just believe fundamentally that our whole APHIS and ARS program needs to be upgraded and funded to the point where they can really do the job that we expect them to do and I'm not satisfied that we're there right now.
Mr. EWING. Thank you. Mr. Vice.
Mr. VICE. I'd like to make a comment as it relates to the APHIS and what Dr. Morse said as well, as what Bill has just alluded to. We have a tremendous problem, I believe, with the conflict of interest. When you're on one hand working toward those to facilitate a country's import into this country, the same time responsible for detecting what are the barriers for our trade in that same country, I don't think there's a question that you can have some real conflict of interest.
Page 112 PREV PAGE TOP OF DOC I was in Argentina this last October in a meeting with their Secretary of Agriculture. We had APHIS people with us and I was complaining about the stone fruit barriers we were having getting stone fruit in California into Argentina when the Secretary of Agriculture said well that issue has been resolved. And I said that's news to me. They said we okayed the inspection on those over two months ago and wrote a letter. The market was open. Our APHIS people were caught with a lot of egg on their face. They didn't even know it. The excuse was that they had only three people in the office. They had a tremendous amount of applications and it must be somewhere in that pile. I said our growers in California don't want to hear that APHIS doesn't have the time to cause us to have missed a season in Argentina because they didn't have the time to process the paperwork.
I think we have a potential for a lot of problems as we downsize government. As Bill was saying, we don't have enough staffing right now. One of the things we need to do as we move forward with these agreements, we need to be staffing up in some of those areas, not staffing down because that's one of the problems, quite frankly, that we have, is we don't have the personnel and they seem to be bent much more heavily on accommodating our trading partners, such as the avocado industry. I don't think there's any question. They were going to find a way to bring those avocados in here one way or the other, whether the science was good or not.
I think that's a problem that we have that needs to be rectified as we move forward in trade.
Mr. EWING. Mr. Bozick.
Mr. BOZICK. Yes, I'd like to go back a little bit about what Marco said on the DDT in Hong Kong. It was public in the Wall Street Journal, L.A. Times, and Mexico last year banned DDT finally. They're going to phase it out in 10 years. I go back to what he said several years ago, the Chileans brought in table grapes. They had a chemical on them that was not registered for table grapes. It was registered for lettuce. The FDA went out and found the World Health Organization, had a tolerance for this chemical on table grapes. They adopted that chemical and allowed that fruit to come into the country.
Page 113 PREV PAGE TOP OF DOC One of the problems I have is if I'm going to be regulated by Cal Kaminskas in the State of California relative to what I do and how I spray and what I do, I think my competitors should have to do that.
Let me go back and tell you, and Cal, correct me if I'm wrong. When a product comes across the border and checked for chemical or pesticide residues, there are three screens they use: organophosphate screens, organochloride screens and a carbonate screen. If they're looking for something and it's not listed, there's about 100 chemicals in the screens, if it's not on there, they're not going to find it. That's one of the problems I had. In the past, we've asked people to look for certain chemicals. They said hey, we don't have the money nor the time. I think we need to address that.
Mr. CALVERT. Mr. Chairman, if you'll indulge me for a moment. I'd like to talk about the bill that Mr. Bozick brought up and the bill that Mr. Di Mare brought up, H.R. 1232. As you know, Mr. McCandless, a former Member of Congress first brought that legislation to the House and certainly Sonny continued that. I want you to know I've been supportive of that and I'm hoping that we can pursue that legislation. We've had some problems with the food market industry, as you know, in saying that it would increase their costs substantially and their operations.
Mr. EWING. Mr. Calvert, though, just to clear up one matter. No request has ever been given our committee for a hearing.
Mr. CALVERT. I'd like to make a request right now.
Mr. EWING. That's a very simple matter, but there has been requests come since Sonny's death, but there was never a request and we don't call a bill up unless the sponsor requests it.
Mr. CALVERT. I suspect because of Sonny's tragic death that much of the legislation that he was working on is going to see certainly a quicker way to success here. Hopefully, we can get to a hearing on this and a markup and maybe move this bill to the floor this year.
Page 114 PREV PAGE TOP OF DOC Mr. BOZICK. Mr. Calvert, I have a suggestion, you said FMI hasn't followed that and I understand they do. Why don't we take the bill and let Customs enforce it as this produce comes across the border to start out and see how that works. Then move from there. Pass the bill, eliminate the chain store from putting it on, making sure it happens. Let Customs have the burden, the responsibility. A load of grapes comes across, a load of tomatoes. See how that works Because FMI is a formidable opponent as you know well better than I.
Mr. CALVERT. If I still have time, Mr. Chairman, to bring that issue. As you know, we're increasing primarily our problem, as you probably would agree are in the Southwest United States in bringing fruits and vegetables in from South America through Central America. And we have a considerable problem in the Southwest border areas now, as you know, especially Laredo, but certainly here in California. And we have passed legislation, both Mr. Ewing and I both supported to increase the amount of border inspectors at the border and to pay for, to facilitate additional equipments and whatever is necessary to expedite some of this traffic, and to do a better job of inspecting and to get involved with this. Hopefully, it would involve some kind of identification of where these fruits and vegetables are coming from. I think you're right, the consumer should have the opportunities to pick American produce if they so choose to buy it.
On the fast track, I'd like to get back to that. Obviously that's a big controversy in this country. It's not just with agriculture, although people forget that agriculture is still the No. 1 industry here in California, but the entertainment industry certainly is very much involved in the fast track process. Certainly, computers and software industry is very much involved; aerospace, Boeing's concern with Airbus, goes on and on. Certainly, the wine industry which feels they've been given short thrift in some of these negotiations in the past are very concerned. The issue of brandy in Mexico and we can get the specifics of all that, but it's been a very difficult process seeing that.
Page 115 PREV PAGE TOP OF DOC If Congress does not give the President the authority to negotiate fast track and the President has to call that vote here probably in the next few months and it's not really up to him, and this agreement, proposed agreement is not negotiated and we're left out of the negotiating process, what effect do you think that that could have on American exports?
Mr. VICE. Well, as I indicated I think one of the problems we have right now with the dairy industry, of course, now in California has become the No. 1 dairy state in the United States, so we have always had a great stake in it. We have a greater stake now.
One of the problems we have with Canada is their supply management system that is a problem for us exporting into Canada and a problem for them exporting here. They are already talking about implementing their supply management in WTO. If we're not there to object and we're not part of the negotiating power, you can bet that their chances of supply management concepts from Canada are going to have a much higher probability of being a part of the trading agreement.
We have the same problem in Europe. The Europeans would very much like to include what they call their environmental equivalence which is another way of saying environmental payments as part of a subsidy. They want very much to have that included in the next round of the WTO negotiations. It would put our people at a tremendous disadvantage. If we're not there as part of the pact to negotiate and we can't be taken seriously if the President doesn't have the authority because no one wants to negotiate someone that goes back and has 435 Members of Congress second guessing, so without that ability, there may be agreements agreed to that our producers would have a very tough time living with. So it's very critical that we be a part of that, if we're going to continue as an industry to grow and to prosper and part of that is certainly exports.
Mr. EWING. Any other comments? Yes.
Page 116 PREV PAGE TOP OF DOC Mr. VICE. Sir, I'd like to remind everybody in the political realm that even if agriculture is not the No. 1 commodity or the No. 1 business in California, you can't put it on the same level as entertainment or cars or those others. It's a different kind of industry, has a different meaning, has a different importance to the country, to the world, to the state. It should be thought of, I truly believe, not in the context of just business as usual. You have to look at what it is, what it does and what it means. We really can't afford to be messing around with taking it lightly like it's just like another business. As important as those industries are, I think we have to put it into size.
Could I just give you a figure?
We're talking about the motion picture industry and that's come up two or three times today and with all the talk about the Academy Awards coming up and Titanic breaking all these records, I ran across a figure the other day that kind of brings it home. The value, the farm gate value of California agriculture in one year is five times the world's box office receipts for the entire movie industry, worldwide. Five times. And so we're talking about a tremendous industry here and in comparison with the movie industry is one I think is significant.
Mr. CALVERT. I just have one question, Mr. Chairman.
Mr. EWING. Before you do that, couldon the fast track issue though, you're talking to a couple of the choir boys on fast track. And somebody mentioned food marketing is a powerful force. You have to look at the whole political system. Organized labor is a very powerful force in America. Would dwarf the food marketing people and they're opposed to it. So there are forces that other members feel, represent their constituents and I think it's a very serious problem that the administration has and it's really their problem because they need to have at least some votes on their side of the aisle if this is ever to pass. That's just the bottom line. It can't be passed by one party regardless of which party it is. And there aren't many of us who come from agricultural regions. Most people come from urban regions where there's a lot of political muscle put behind not supporting the fast track.
Page 117 PREV PAGE TOP OF DOC It's a very deep, divided issue in America. It's not just you guys go back to Washington and do what's right. It isn't that simple. Far from being that simple.
Mr. CALVERT. I'd like to talk about one issue I think we can all agree on is pest prevention. Obviously, we want to eradicate any pests that are here. We'd like to see that none get in here in the first place and I think as Dr. Morse pointed out, as trade increases, we export hopefully more and we import from all over the world the probability of pests entering the United States increases. And as we move away from farm subsidies over the next few years and our hopes to eradicate those programs, over a long period of time, more dollars, I think, could be saved, should be dedicated to science and to detecting and toand safe and effective ways of eradicating pests. And as we have a shrinking budget and as we cut back on various programs, that's certainly one thing that we shouldn't do and I agree with you, Mr. Quarles, that as you know we've been very supportive of trying to keep APHIS funded. You pay a lot of fees and taxes that's supposed to go into those types of programs and sometimes it's diverted.
So I think Mr. Chairman here listened to that and we're certainly hopeful we can get the funding to increase that and I think the chairman has been very supportive of that in the past and we look forward to doing that.
Just as a note here, we have a GAO report that states that there's a lack of coordination among Federal agencies for those very issues I'm just talking about, sanitary and phytosanitary issues. Do you believe maybe this is a question for Dr. Morse and any other comments, do you believe APHIS should be the lead agency on this?
Mr. MORSE. Certainly I would think that it makes sense that APHIS is going to be doing the inspections at the border and should be coordinating that activity. I would think that they would becertainly play a role in that. Whether there would be other agencies involved, I don't really know, but certainly putting all of these methods of security together to try to reduce the rate at which pests are introduced and then to deal with them when they are introduced should be a role of APHIS. They should play a role, yes.
Page 118 PREV PAGE TOP OF DOC Mr. CALVERT. Following on to that, what roles should USTR and FDA or FAS have in addressing sanitary and phytosanitary issues?
Mr. MORSE. I suppose it depends a lot on which of these types of regulations you're talking about. Now the one specifically that would deal with movement of produce and introduction of pest species, I think that would be logically involve APHIS. Certainly, other source of security to the public, FDA would be involved and other agencies, sure.
Mr. CALVERT. Any other comments? Yes, Mr. Quarles.
Mr. QUARLES. I'd like to just make a comment, but I'm reminded that one of the components of the phytosanitary and sanitary package of the Uruguay Round requires the United States, among other developed countries, to help lesser developed countries with their phytosanitary and sanitary issues and help them solve their pest problems so that they can put their agricultural products on the international marketplace. That was a part of the Uruguay Round for the phytosanitary and sanitary package. That responsibility for the United States has rightly or wrongly been assigned to APHIS.
That's where most of the technical expertise in this particular area resides in the Department of Agriculture, but I suppose that some thought ought to be given to whether or not there is a clash between responsibilities when it comes to that.
But I think just the key factor and I'm probably preaching to the choir here as well, the key factor is that no matter what APHIS has to be given the necessary funding to get their job done. Right now, it's not happening.
Mr. CALVERT. Any other comments on that? It's just an interesting dilemma we have here is that otherI believe the United States more than any other country acts in a responsible way on trade. Obviously, we have a lower tariff level than any other country that I can think of off the top of my head and one of the problems we have on the issue of pests is that even though, for instance, in Corona, my home town, we had a problem with the Mediterranean fruit fly a few years ago. China still uses that as an excuse to exclude all California produce from coming into China, and say well, we have a Medfly epidemic here in the State of California which we all know is not true. That was eradicated very rapidly and taken care of. And so though we do know that there is a problem in Mexico and it's a real problem and that's why I think that we need to stay informed of this and to encourage these countries not to use this as a barrier which is not intended to be, that all of these things need to be based on good science that's impartial, not based on what they're trying to do, as Mr. Bozick pointed out to use that as a barrier to trade, to stop us from entering those market places. Yes, Dr. Morse.
Page 119 PREV PAGE TOP OF DOC Mr. MORSE. Can I just make a comment? I think we all realize that there have to be negotiations done to balance imports versus exports when negotiating with certain countries. There have to be negotiations, there have to be compromises reached. But I guess my major concern is that whatever agency is going to protect U.S. agriculture from potential damage, from the introduction of exotic species, do so based on good science. Perhaps APHIS' budget needs to be increased so that they can do their job a little bit better. They have to focus on how they can most efficiently protect U.S. agriculture and I guess my statements are there has to be some sort of negotiation done, of course, but let's separate those two things so that we don't get confused between what is good science and what are necessary compromises and negotiations that have to be reached. Those two things are different issues. And what unfortunately happened with the situation with the Mexican avocadosby the way, it's Mexican fruit fly that we're talking about in Mexico, not Mediterranean fruit fly. These things got completely confused. The science was compromised. Reports that were produced were really not legitimate reports because there was a directive sent that we have to facilitate avocados coming into the United States. Fine, that's a political decision. I don't have any problem with that. But let's separate the science from the negotiations that have to go forward.
Mr. CALVERT. Thank you. Dr. Morse, I think you hit on that you anticipated there will be more pests coming into this country as we import more fruits and vegetables and other commodities. What about methyl bromide? We're going to phrase that. I talked about it and I hear about it a lot. Everybody kind of wrings their hands and says we don't have anything to replace it. What are we going to do? What do you know from a scientific standpoint as far as a sound replacement and do you think something will come along or what should we be doing in that regard?
Mr. MORSE. I'm not an expert in that field. I think others could give you a better answer, but hearing my colleagues talk about this a lot, I think definitely there needs to be some research into alternatives. When methyl bromide is phased out is one issue and negotiations have to go forward and perhaps the dates are not yet set on that. There are some alternatives that look good for some situations. For other situations there are not good alternatives to methyl bromide. So this is a very difficult issue. It's not simple to resolve. I think that definitely we should be putting a lot of effort into research and developing alternatives and perhaps trying to save methyl bromides for some of the very special uses where good alternatives are not available. So some sort of compromise is what I would hope would be developed.
Page 120 PREV PAGE TOP OF DOC Mr. EWING. Anybody else? Yes.
Mr. BOZICK. It would be interesting to me to see what happens if and when methyl bromide is banned, relative to Chilean grapes or any other fruit that is fumigated with methyl bromide to kill those pests that we don't want to come into the country. Are they going to say, Chile, no more methyl bromide? I'm very, very anxious to see the decision that is going to be made.
Mr. EWING. Mr. Quarles.
Mr. QUARLES. In that particular regard, it just seems that the United States is on a faster track to eliminate the use of methyl bromides than some of our competitors around the world. Mr. Bozick points out that we have in the grape industry and certainly it's not limited to that, very, very capable competitors around the world. It's extremely important, I think, that if methyl bromide is going to be a national policy to phase it out, it ought to be done with an eye toward the global marketplace and all of our various international competitors and not place our farmers at a disadvantage to their international competitors. We ought to be on the exact same track as other countries.
Mr. EWING. Yes.
Mr. KAWAMURA. With regard to methyl bromide as an organo phosphates and many other chemicals, medicines, if you will, are tools that we have to use in a crop, as those tools become eliminated many of us don't need to reach for them all of the time, but it's very, very nice, comforting knowing again to go back to that reference. If you've ever lost a crop to disease or if you've ever lost a crop to an insect attack, knowing that we can reach the medicine cabinet and pull out what you need to save your crop, it's a very, very important aspect of what these chemicals are. To have a blanket elimination of whole groupings of chemicals or medicines, if you will, or in the case where there's clearly people saying, hey, it's going to mess up my production, given certain circumstances. I'm not even talking about the import/export reports. It's a very, very complicated thing, but it's not so complicated that with good science we can understand that in a few more years, as science develops, we'll use something different when it comes about. There's no doubt. We've done it with all these other chemicals. Give us, let us help make that decision instead of fear driving those decisions.
Page 121 PREV PAGE TOP OF DOC Mr. EWING. The sanitary and phytosanitary issues we talked a lot about, the WTO allowed members to adopt appropriate measures to protect human life and animal and plant life, as long as they weren't applied as a barrier to trade. Didn't just implement them for that.
The question that we had written out here, do you think that that measure has been applied fairly in our trade or do you think that we're actually getting a lot more of it as a trade barrier than as a real help and sanitary issue?
Mr. QUARLES. I think it's definitely in the realm of a trade issue more than a safety to the public. It's always recognized that if a dose is a danger, we have a tremendous amount of science telling us how to utilize the tools that we have, the chemicals, the medicines that we have and use them properly. I've got to underline that. Use them properly and good science is saying that these materials work very well for us on the production side.
Down the road, science will point to an explosion on what to use in the field and it's evolving. We're not going backwards, as a matter of fact. So letting these things become trade tools to stop trade will impact the ability for us to trade.
Mr. EWING. Do you think that the phytosanitary issues have been used by our country?
Mr. QUARLES. Certain ones, no. I think using thetalking about water, for example, especially with this bacterial microbial contamination in the water systems that we have. This is a big problem that we're all going to have to deal with again in talking about developing water systems in the other countries that are producing products that are coming across. I don't know if I'm answering your question, but phytosanitary, it's such a huge broad subject, but if you're just talking about microbial content contamination, this country has gone steps above everybody and this State particularly has gone far above every other State to make sure that we deal with that small area of phytosanitary safety.
Page 122 PREV PAGE TOP OF DOC Mr. EWING. I guess the question, not to stop you on that, is in any of your areas, do you feel that we use the phytosanitary issues as a little bit of a trade barrier, or do you think we're applying them fairly because of health reasons, while we have that accusation against many of our trading partners, that they are indeed being used as really a trade barrier?
Mr. QUARLES. I think that probably there has been some specific uses where we've used them. I don't think anybody is pure, but I think that we've demonstrated that this country has been a lot more forthcoming with open markets based on phytosanitary rules than any of our trading partners. But I don't think there's any question that there probably have been times when we've required things that maybe weren'tbut I was encouraged over the ruling that finally came back from WTO on the hormone beef situation in Europe where they said the Europeans cannot use scare tactics and the voodoo science that said that hormone fed beef was unsafe beef. And that ruling went against the European Community and went in our favor. I was encouraged by that. But the Europeans right now are trying to figure out ways to force this next round into accepting what they call consumer concerns. It has nothing to do with science. But if your consumers are concerned, then that's legitimate enough to stop some of the things coming in like this hormone fed beef. That's the reason we've got to be at the table to make sure those kind of things don't find the way in to trade negotiations.
Mr. EWING. You mentioned and I'll come back to you, Mr. Easter, you mentioned in your testimony about changes in international agreements in regard to practices to facilitate shortening the dispute resolution. Do you have some specific recommendations on that?
Mr. VICE. Yes, I think the way that the system has worked up to this point has been that each side has their experts. You submit your findings to the International Trade Commission and it works something like a court. The problem as Tim indicated, when you get one of these cases tied up in a quasi-court system, it can drag on for years and years. I think there has to be an arbitration kind of system where the information is submitted from both sides and someone, maybe it's a disinterested third party, made up by other partners of the WTO that is set as a panel of arbitrators that make the decision. Now you may get some decisions you don't like, but I think a mechanism where everybody submits all the information they have and some decision is made in a timely manner is going to be better for us as a country than dragging this thing along for decades and getting no decision at all because in most of those cases we're at the short end of the stick. We're not the ones that are trying to hold out products. We're trying to get our products in other countries.
Page 123 PREV PAGE TOP OF DOC Mr. EWING. Mr. Easter.
Mr. EASTER. I just wanted to comment that I think the achievement of this sanitary and phytosanitary agreement under the last Round was a major accomplishment, but on the other hand it shouldn't be looked at as the end-all, be-all. In other words, it's a beginning and I think we have to all be vigilant in terms of insuring that science rules in that arena and that we get away from the use of sanitary and phytosanitary as trade barriers. But it's going to take some time and I think that's what we've tried to say here today in different ways and take time and resources and we have to keep concentrating on it and keep trying to improve the agreement so that it leads us in that direction. I think that's true of all of our trading agreements and that there's room for improvement. We just have to have the ability to undertake negotiations to improve them and to go forward with the idea that we're going to expand international trade.
Mr. EWING. I think there is probably a lot of agreement on the panel that we need toon those sanitary issues, we need to improve our monitoring efforts and we need to find better mechanisms to enforce the findings once we have them with the WTO and probably shorten the time in which it takes to solve all those problems, would everybody agree there is work to be done to improve that system.
Many of you remember back when we didn't have that system. I mean I don't. I'm not familiar with it. Is this a big improvement over what we had?
Mr. BOZICK. I think people are becoming more and more aware of it. I don't know about improvement with all of the agreements. They're more aware of the possibility or of the actual happening.
Mr. EWING. Yes, Mr. Quarles.
Mr. QUARLES. Yes, I think it's been a major improvement for specialty crop agriculture. I think the phytosanitary and sanitary package was probably the most important part of the Uruguay Round. Just very recently as an example, within the past several months Korea rejected U.S. citrus fruit, California citrus fruit because of it violated Korea's pesticide residue standards for a couple of materials that our industry uses. The fruit was packed and processed well within international standards. The pesticide residues met international standards established by the Uruguay Round, but not Korea's. When that was pointed out to them, the United States filed avery promptly filed a protest with the government of Korea and Korea now is bringing their pesticide residue laws into compliance with the international standards. So I think that's just one particular example of how that has had a major positive impact.
Page 124 PREV PAGE TOP OF DOC Mr. EWING. Do you believe we ought to be able to resolve these problems in a month, 6 months, a year? How long should it take?
Mr. QUARLES. This is with regard to dispute settlement?
Mr. EWING. Yes. We were talking about the sanitary.
Mr. QUARLES. Phytosanitary and sanitary. The problem when it come to phytosanitary and sanitary issues, you can define a tariff and you know whether that's right. You can define a non-tariff barrier, the traditional non-tariff barrier, a quota or an embargo and you know whether or not that's right. The problem with phytosanitary and sanitary issues is that it deals with safety and nobody can define safety. Everything requires some element of risk. What the phytosanitary and sanitary package says is that we're going to strike a line and we're going to call it international standards, international community recognizes a certain level as being safe. And I think that what that has given us is the opportunity to get to a definition of whether or not a certain export package meets international standards or not. It gets us to the place we need to be where we can resolve it as fast as possible.
Mr. CALVERT. I just have one last question. Congress probably will be debating probably sometime in the spring on this issue of IMF and I know Asia is a growing export market, especially here in Riverside County where we export large amounts to Asia. If, in fact, there is an agreement struck and the Congress goes along with this which is a long ways from being decided, is there a concern on the farmers as we should probably be concerned by anyone who exports to Asia that a way in which they may pay some of their debt down were to increase their tariffs. Has there been any thought to that?
Any comment about it?
Mr. QUARLES. I don't want to dominate this, but very recently I think we've seen Indonesia with the International Monetary Fund support. Indonesia has dropped its citrus tariff from something in the order of 50 percent down to about 5 percent right now. Granted, that tariff is not bound, but at least its movement and the movement was based upon leverage
Page 125 PREV PAGE TOP OF DOC Mr. CALVERT. Are you saying it would have an opposite effect, that if the United States imposes its will upon these countries to change their practices, that they may, in fact, lower their tariffs?
Mr. QUARLES. In this particular case, that's happened.
Mr. CALVERT. Yes, Mr. Easter.
Mr. EASTER. I think that some of the early publicity in terms of IMF coming in and helping these countries, that should be one of the factors. In other words, that they lower the trade barriers, they open up their trading systems, not just for agricultural commodities, but for other commodities and I think it should be part of it, that if there's going to be assistance in that area, that it should lead to a more open trading relationship for those countries.
Mr. BOZICK. Did it work when we gave the $50 billion to Mexico? That's the question.
Mr. CALVERT. It's a good question. I think from my perspective, free trade and IMF are two different questions, totally. One really has nothing to do with the other. Maybe in some respects, but primarily one is to help bail out problems that they've had in their own economies and currencies, but one has to do with something else.
Mr. BOZICK. I have no problem with that, but every time something happens they come to us and there is nothing in return.
Mr. EWING. Mr. Bozick, I was an opponent of the funding to Mexico. But in retrospect, that money has been repaid and Mexico is more stable than it was. We had an interesting briefing and I don't want to leave any impression I'm trying to tell you I know about the Asian crisis. I don't know. I'm trying to learn like many of us are, but Alan Greenspan, Secretary Rubin, Secretary Glickman came and talked just like we're talking across the table with members of the Agriculture Committee the other day. Something that I came away from that with, we're talking about whether we should put $18 billion more in this savings account that is in the International Monetary Fund for use around the world if the crisis tends to come back. That isn't a bailout. Can't be a bailout of countries that have lost hundreds of billions of dollars in asset values. I mean the two don't match up. I asked the question and I didn't really get an answer as how does this little pot of money, $18 billion make such a difference in economies that have lost hundreds of billions of dollars in asset value. They say it does. At that point, at this point in time I just kind of have to say well, these are pretty bright guys and they really know what they're talking about. As to how it stabilizes, how you use that small amount to stabilize such enormous losses in those economies.
Page 126 PREV PAGE TOP OF DOC Yes, Mr. Di Mare.
Mr. DI MARE. It's not necessarily duties as a means to pay back International Monetary Funding, but what happened after the devaluation for the Mexican peso and how it pertains to NAFTA and this needs to be looked at for future trade agreements is that on a seasonal basis the Mexican peso began to drop as Mexican agricultural production increased during the winter months, just after the Mexican devaluation of the peso. That needs to be examined, how playing with a country's own currency can make their products more desirable in international market. Consequently, with the Mexican situation, those products were more marketable in the United States market because of that increased devaluation of the peso prior to the major producing period for the Mexican growers. That, I think, is an issue that needs to be addressed in future trade agreements.
What does happen? Not necessarily in the Asia crisis right now because we're not seeing them as major competitors on the global market, but let's say in Chile, where South America was going to have the same sort of problem that exists in Asia right now. All those currencies were devalued heavily. How does that affect existing trade agreements or future trade agreements because automatically those products are far more affordable in the global market than what we would have here to offer domestically.
Mr. EWING. Well, I think the point you make is excellent and if Secretary Rubin or Alan Greenspan were sitting here they'd say that is the bottom line. That is the reason. That is why we have to be involved because the Asian flu could spread to Chile or Argentina or Brazil or the European Community or to this country and it's something that they're trying to stop and hold in the area in which it's happened. And they handed me some other import, some other literature here that shows that we have tried, our government through the national monetary fund to get some real reforms and some concessions on trade for these countries that we've been assisting.
Page 127 PREV PAGE TOP OF DOC Mr. CALVERT. Mr. Vice.
Mr. VICE. I think you have to take a long term view of these kind of problems. You can't look at them in a vacuum. I don't think there's any question. Indonesia, the most populated country in the world, over time is going to be a tremendous opportunity for us as a country to export into. Are they going to be a better customer if they're strong and viable? Are they going to be a better customer if they're weak and destitute? I don't think there's any question that those kind of investments pay long term dividends and you get to look at them over the long term. SoI think that probably you would find that if the people that you just mentioned are involved in this, you'll find that by lowering tariffs is how you get the bets return as you open up the economy in a country like Indonesia and that certainly ought to be part of the agreements of the International Monetary Fund, to look at this thing long term, what's good for the country in terms of those tariffs.
Mr. CALVERT. And I share your point of view. I just am as concerned. As Mr. Bozick pointed out, if the countries agree to lower their tariffs, we move ahead, put $18 billion in this account and then they change their policy on tariffs and raise those tariffs in order to get the revenue to pay back down those loans because there's, as you know, there's a lot of conditions imposed, including other taxes and so forth that they may impose upon their population. But it's going to be a debate for the next few months and so it's something that I think we're all going to be involved in.
Mr. EWING. Are there any other comments? Do you have any other questions? No other questions?
Mr. KAMINSKAS. I have a comment I'd like to make. It hasn't been discussed today, but it pretty much covers, I guess a number of different lines whether it be economic, the country of origin, labeling, but the idea is that I think with a lot of these countries as we begin to increase our imports as time goes on, we're going to also see problems with quality of the produce and I know this hasn't been mentioned, but we have a perfect example of what's going on right now and probably just as we are here today. In our county we have what is called the inspection station. California, CDFA runs inspection stations and Riverside County supplies those personnel. There's approximately nine people in the State of California doing this. Right now, ships come into the L.A. harbor from Chile. They carry stone fruits and they carry predominantly grapes and the early season shipments have approximately one fourth, one third of those grapes not meeting California
Page 128 PREV PAGE TOP OF DOCstandards. Now what I'm talking about are minimum maturity standards. Now these grapes are rejected by our personnel and they're not allowed to stay in California because California does have minimum standards for their grapes. They are shipped to other parts of the country and with that we find that the grapes going to other areas of the country are going to in essence, if they don't have maturity and it's a substandard grape, along comes Coachella Valley in a couple of months and you're going into a market of people that are turned off by the produce. This is happening across the lines. It's happening with the Mexican melons. The same thing. You have the same situation here in California. We find that our growers are really up against some very stringent problematic economics when they find that their buyers have been turned off by
Mr. CALVERT. You think labeling fruits and vegetables as being American vegetables would be a step in the right direction on that?
Mr. KAMINSKAS. I think it's one of the areas and I think it's going to be become more and more of a problem as we progress along.
Mr. BOZICK. You know, we have a marketing order in Coachella Valley, 925. There's also a provision in that marketing order under section 608(e) which means that produce coming in, table grapes coming into the country must meet the same standards that we imposed on ourselves, meaning the maturity of the grape. This is what he's talking about. We have that standard imposed on April 20. If there's anything that comes in from Chile or Mexico after that date has to meet the same standards that we impose upon ourself.
What the Chileans do, Chileans bring in as much as they can before April 20. They put it in storage. And onceafter April 20, without being inspected and after April 20 when we started marketing the first week in May, then they bring it out.
In Mexico, the same rules apply there. They bring grapes to the border. They're rejected for maturity. They don't send them back to Mexico. They put them in a truck and they send them to Canada because Canada will accept a lower maturity. That's how they get around it. What he says is a very real problem, by the way.
Page 129 PREV PAGE TOP OF DOC Mr. EWING. Mr. Di Mare.
Mr. DI MARE. Just one last comment and I want to get back to what Mr. Morse said I believe what Mr. Bozick alludes to in his apparent statement. And that is the nature of our industry. We're all in the agricultural industry. My family happens to be in the tomato industry. But it's unfortunate that industries are defined in these agreements. When the Florida tomato industry, for example, was suing the Mexican producers for damages, they weren't able to demonstrate that they had been injured because they were looking at the national tomato industry, not the Florida tomato industry. I think it's important to realize that it needs to be incorporated into any agreements that agriculture is a regional business. It's not a national industry. It's the California tomato industry. It's the Florida tomato industry. It's the California citrus industry. It's the Florida citrus industry. Yes,we do have some common goals and common objectives, but our personal objectives are distinctly different. Our cost structures are distinctly different. Our environmental conditions are distinctly different. And that is the nature of agriculture. That's the thing that Mr. Tom Morse sort of alludes to, that intangible essence that is agriculture. That's why we're in agriculture is because of the difference that it brings to us. But that needs to be incorporated in that when we go in front of the WTO and we say we're suffering damages and then the U.S. Government comes back to us and says the tomato industry in the United States doesn't seem to be suffering too bad, yet in Florida you have 30 percent of the industry has gone out of business over the last three years. Yes,we're continuing to produce in California, but nationally it's doing so so. On a regional basis certain areas are doing far worse than others and it's a technical issue, but it's an issue that needs to be addressed in trade agreements.
Mr. EWING. Anyone else? Well, I did want to announce that the California Citrus Mutual, the Apricot Producers of California, the California Association of Wine Grape Growers and the Olive Growers Council will submit written testimony to be placed in the record. So we will be hearing from those sections of your industry also.
Page 130 PREV PAGE TOP OF DOC I also want to thank Marilyn MacCormick and the Riverside Convention Center for helping with the arrangements today.
Ken, your staff, Katherine Johnson, Kathy Bressner and Linda Fisher have done a great job and our staff from Washington for this subcommittee headed up by Stacy Carey, John Riley and Ryan Weston have also worked hard and I want to thank them for putting this all together. Yes, Mr. Kawamura.
Mr. KAWAMURA. It's very often tough to get Congressmen and Senators and people in the political world to come to California to an area like Riverside. It's very important to have this kind of a dialog, not monologue, but a dialog with you people out there, when you're out there. Our ATAC meetings have been cancelled over the last several months or postponed. Communication is critical in these matters. That would be an important note to make about that.
Mr. EWING. Thank you. Ken has asked if there are any questions in the audience? I think, Ken, they had the opportunity to come up, but only Mr. Di Mare chose to. Anyone who has a question certainly can submit it and we'll keep our record open on this hearing for a period of 10 days and again, thank you, Ken, for hosting this and thank you all for being very patient.
Mr. CALVERT. Thank you, Mr. Chairman. I appreciate you doing this.
Mr. EWING. Thank you. The subcommittee is adjourned.
[Whereupon, at 11:38 a.m., the subcommittee was adjourned, subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Statement of Calvin Kaminskas
Page 131 PREV PAGE TOP OF DOC I sincerely appreciate the opportunity to comment on two extremely important issues affecting the United States and California agriculture.
The first issue involves the need to support the protection of United States and California agriculture from foreign insect and disease pests through pest prevention programs. The California Department of Food and Agriculture (CDFA) and county Agricultural Commissioner's Offices, in California, are responsible for preventing the spread of pests and diseases on incoming and locally grown plant materials, in conformance with county, state, and Federal quarantine regulations. Currently, the most important area involves exotic fruit fly pests imported from foreign countries.
The invaluable and cost efficient program of pest prevention is accomplished through:
Pest detection programs (trapping programs, surveys) which aid in the early detection of agricultural pests not known to occur, or of limited distribution in the state;
Pest exclusion which is the inspection or certification of incoming and outgoing plant shipments and restricted articles for compliance with plant quarantine laws and regulations; and,
The eradication of dangerous pests that are new, or of limited distribution, in accordance with Federal, state, or county programs.
Unfortunately, the lack of adequate funding has downsized California's pest prevention programs to such low levels that they balance precariously between success and economic disaster. And, as we all know, what affects California agriculture, also affects the entire nation.
The second issue involves the Phytosanitary Certification Program (PCP). Phytosanitary certification is a service provided to the agricultural industry to help it meet the plant quarantine requirements of another county, state, or country when shipping agricultural products (processed or unprocessed). The U.S. Department of Agriculture (USDA) is the Federal agency responsible for the overall nationwide implementation of the PCP for international trade. Within California, the Division of Plant Industry administers both this Federal program (in partnership with the USDA and California County Agricultural Commissioners) and the state's PCP for domestic trade.
Page 132 PREV PAGE TOP OF DOC The Phytosanitary Certification Program is comprised of two major activities:
The negotiation of phytosanitary (quarantine) requirements with other states and countries. The negotiations involve cooperatively working with the affected industries, agricultural commissioners, other states' regulatory agencies, the USDA, and foreign governments' regulatory agencies; and,
The performance of inspections and issuance of phytosanitary certificates for agricultural commodities. Phytosanitary inspections may include post-harvest inspections of commodities at packing sheds or terminal inspection points, and/or growing season inspections of seed fields, nursery stock, fruit and vegetable stock, and/or laboratory analysis.
The importance of this program to the United States and California's agricultural industry cannot be overstated!
In conclusion, I respectfully ask your subcommittee to recommend that the USDA, in cooperation with CDFA and the Agricultural Commissioner's Association of California, work to increase the general awareness of California's ability to produce and certify agricultural commodities as meeting the plant quarantine requirements of other states and countries.
Statement of Bob Vice
Mr. Chairman, I am Bob L. Vice, past president of the California Farm Bureau Federation (CFBF). The California Farm Bureau is the state's largest general farm organization with member county Farm Bureaus in 53 counties, representing more than 75,000 member families.
Our members produce virtually every agricultural commodity produced commercially in the United States.
Among other purposes, Farm Bureau was organized to assist our members in attaining economic opportunities through domestic and international markets.
Page 133 PREV PAGE TOP OF DOC I thank you for holding this hearing and providing the opportunity to review the importance of the 1999 WTO negotiations and the market opportunities we will be denied if every means is not utilized to allow the United States to fully participate in this important round of trade negotiations.
Our producers are the most productive and efficient in the world. What they cannot do is break down barriers created by other governments. That must be done in government-to-government negotiations with our negotiators maintaining the leadership role. But what we as producers hope that we can do is have a positive impact on removing barriers that are created here at home.
We have created our own barriers to trade.
The United States continues to put economic sanctions on our trading partners which only have the effect of cutting ourselves out of their markets. History has shown us that economic sanctions are an ineffective means of resolving political differences.
Shortsighted reductions in market development and promotion programs, reduced resources for research, which has been the backbone of our industry, and cutting back on human resources in our overseas posts only reduce our ability to compete. The expertise that USDA has in its offices overseas provides the eyes and ears to market opportunities and helps resolve trade irritants before they become barriers.
Failing to grant the administration fast track negotiating authority has allowed our competitors to move forward while we watch market share disappear and see our leadership role in shaping trade diminish.
With the strongest economy and lowest unemployment in memory, it makes no sense to back away from the very tools that made these possible.
We would not have the agreements that have made the United States a leader in international trade without the fast track negotiating authority of the past.
Page 134 PREV PAGE TOP OF DOC At the beginning of the Tokyo Round, there was no fast track authority. That round did not get started until our leaders came to the table with the authority to negotiate. The same happened in the Uruguay Round. The world waited for two years to begin the negotiations. Some say the next round will not happen until our negotiators have fast track authority.
American agriculture cannot afford to wait for this authority in 1999 when the next round of agricultural talks are due to begin in the World Trade Organization.
When the next round of talks begin, we must have all sectors at the table.
We would be concerned if the administration negotiated trade deals without agriculture as part of the package. These deals would greatly disadvantage agriculture's efforts to improve market access in the future. We strongly oppose any agreements or negotiations that exclude agriculture.
Our trading partners are not going to wait for us. We believe that the European Union has a number of issues they wish to move forward that they know we will not support. The same is true of Canada and a number of our other trading partners in the World Trade Organization.
We are currently losing market share in Latin America because our negotiators do not have fast track authority. We currently face an 11 percent disadvantage with Canada in the Chilean market.
More than 20 new agreements have been completed in our hemispherethe United States is only part of one of these, the North American Free Trade Agreement.
These issues are important to American farmers and ranchers.
Trade is our future and we should not reverse our course. Let me give you a few figures on imports and exports.
Importance of Exports
Page 135 PREV PAGE TOP OF DOC In 1997, $23 billion was added to state's economy from agriculture, with more than $7 billion originating from exports. Production from more than 2 million California farm acres is destined for foreign markets.
More than 70 percent of all California almonds and 40 percent of California citrus and cotton production has been exported in recent years. Exports of other commodities such as rice, grapes, and vegetables have increased reflecting greater dependence on international markets. Our producers' incomes are directly linked to these sales.
California's agricultural exports represent more than 20 percent of total U.S. agricultural exports. Six of the state's top 10 products in terms of production are also on the list of top 10 export products. California leads the Nation in exports of fruits, vegetables and nuts. Exports of these commodities have been on the upward trend, showing a 12 percent increase since 1992.
Seven of our top 10 markets are Asian countries, with Japan leading the list, buying more than 25 percent of the total value of California farm exports in 1995. Together, the Pacific Rim countries account for nearly 60 percent of our total farm exports.
Asia has been the area of greatest growth, 16 percent from 1992 to 1995. Impressive gains have been made during this period to China, Singapore, Indonesia, Korea, and Hong Kong.
Emerging markets exist in several areas for California farm exports. They include Mexico, Brazil, Indonesia, the Philippines, Malaysia, and the coastal corridor of China. The door to many of these markets was virtually closed to foreign trade until the beginning of this decade, but it has opened now that many are making progress to integrate into the global economy.
Developing countries especially in Asia and the Pacific Rim, are more important now than at any previous time. We are greatly concerned about these economies and their currency devaluations over the past six months. Such devaluations are harmful and will tend to slow imports from the United States.
Page 136 PREV PAGE TOP OF DOC Importance of Imports
U.S. agricultural imports are also growing in importance. Broccoli imports now account for 75 percent of U.S. domestic consumption, compared to 20 percent in 1985. A growing share of U.S. consumption of fresh fruits and vegetables, fish, beef, lamb, and vegetables for processing is being supplied by imported products.
U.S. agricultural imports have expanded 50 percent from $20 billion in 1985, to $30 billion at present. More open U.S. markets, along with relatively strong economic growth, have been contributing factors which led to higher imports. Even so, U.S. agriculture consistently exports more than it imports. Since 1990, the value of the agricultural trade surplus has grown from $17 billion to a peak of about $30 billion in 1996.
The importance of future trade agreements is proven by the success of the past agreements.
The importance of the General Agreement on Tariffs and Trade (GATT):
The Uruguay Round Agreement of GATT became effective on January 1, 1995 and required member countries of the World Trade Organization (WTO) to comply with agreed upon provisions. Among the most important provisions affecting agriculture are:
(1) Creation of the WTO, including an internal Dispute Resolution Body.
(2) Conversion of non-tariff barriers to their tariff equivalent based on the difference between average internal prices and world market prices.
(3) Establishment of the sanitary - phytosanitary agreements binding our trading partners to base constraints to trade on sound science.
(4) The binding of tariffsmeaning that tariffs can be lowered, but not raised without consultation by affected countries and compensation to countries adversely affected by higher tariffs.
(5) The reduction of tariffs over 6 years for developed countries and 10 years for developing countries by up to 36 percent on average. Each tariff line must be reduced by a minimum of 10 percent. Less developed countries are exempt from reduction commitments related to tariffs.
Page 137 PREV PAGE TOP OF DOC (6) Commodities under tariffication are subject to a minimum access requirement which allows imports to increase from base levels of 198688 from 3 percent of domestic consumption to 5 percent over 6 to 10 years.
(7) Special safeguards in the form of tariffs can be used to protect producers by raising domestic prices and limiting import competition and surges in imported goods.
(8) Reduce export subsidies by up to 21 percent in tonnage and 36 percent in value of government expenditures over 6 years for developed countries and for developing countries over 10 years.
The Future of Trade
California agriculture has much to gain from expanded trade since countries already have relatively low duty access to the U.S. market. Over the long run, trade agreements are an important market-opening tool.
However, the pursuit of future trade agreements will involve new challenges.
(1) The use of technical barriers to trade, such as sanitary and phytosanitary regulations, food safety standards, restrictive labeling practices, and environmental regulations, has increased as the traditional tariff restrictions have been lowered and in some cases eliminated.
The Uruguay Round of GATT went a long way toward providing rules that are science based concerning trade. These rules need to be followed precisely and not used as new technical barriers.
(2) The consequences of unexpected macroeconomic and political events in the United States and other countries will become more important factors affecting the well being of U.S. agriculture than at any time in recent history. In many cases, these unanticipated forces may partially offset or completely negate the intended effects of trade agreements.
Page 138 PREV PAGE TOP OF DOC The Mexican peso devaluation of 1995 and the current crisis in Asia are two good examples.
Farm Bureau believes that future negotiating authority must include the following:
(1) Binding agreements to resolve sanitary and phytosanitary issues on the basis of sound scientific principles in accordance with the Uruguay Round Agreement on agriculture.
(2) Tariff equalization and increasing market access by requiring U.S. trading partners to eliminate tariff barriers within specified time frames; and
(3) Changes in international agreements and U.S. law and practices that would facilitate and shorten dispute resolution procedures and processes.
There is a potential trade dispute or barrier for every product we have in the market place. The list would go from unfair tariffs and phytosanitary barriers in Mexico and Japan on apples to wheat and pork into China. There is no product not affected by trade barriers somewhere in the world. We believe that on the whole our trade agreements have worked well for agriculture.
However, our trade agreements are not perfect. Industry confidence in future trade agreements is tied closely to the satisfactory implementation of past agreements and to a commitment to rectify resulting inequities. Our negotiators must have fast track authority to clear up the past obstacles to trade and prepare us for future opportunities in the global market.
We must look to expand existing market access and open new markets. Our negotiators must have fast track negotiating authority to do this.
The stakes are too high to allow inaction.
Tremendous resources and effort have been expended to create the current markets for U.S. agricultural products whose sales support millions of U.S. workers.
Page 139 PREV PAGE TOP OF DOC The United States's ability to gain and maintain market share is based on many factors, including strong trade agreements, the administration's ability to negotiate freer and fairer market access with fast track authority, and the ability to work within a global organization such as the WTO.
It is extremely important to California agriculture, the Nation's largest agriculture economy, that you do the right thing and pass fast track early in this session of Congress and give agriculture the opportunity to be represented at the 1999 Agriculture liberalization round of the WTO.
I urge you to take the steps necessary to prevent us from creating our own trade barriers by moving as quickly as possible to provide the administration fast track negotiating authority to continue to open markets for all sectors.
The California Farm Bureau Federation stands ready to work with you.
Statement of William K. Quarles
Chairman Ewing, Congressman Condit, members of the subcommittee, I commend you for conducting this hearing in California in anticipation of the next critical round of agricultural trade negotiations scheduled to begin next year as required by the Uruguay Round agreement. These talks will be of great importance to American agriculture, including Sunkist Growers.
As you may be aware, Sunkist Growers is a non-profit, farmer-owned marketing cooperative serving 6,500 citrus farmers in California and Arizona. For nearly 105 years, Sunkist has successfully marketed fresh citrus fruit grown by its farmer-members. Today, Sunkist Growers produce approximately 65 percent of the oranges, lemons and grapefruit grown in Arizona and California. Our cooperative enjoys a long history of dedicated effort to develop and expand markets around the world for our U.S.-grown fresh citrus fruit. Upwards of 33 percent of our fresh fruit is marketed in foreign country markets accounting for nearly 45 percent of our farmers' fresh fruit revenue.
Page 140 PREV PAGE TOP OF DOC While progress in international agricultural trade policy was made in the Uruguay Round, much remains to be accomplished to further improve agricultural trade around the world. Tariff rates in many markets remain unjustifiably high imposing a tremendous economic burden both on the producer and the consumer. With the degree of success enjoyed by the Uruguay Round negotiators in affecting remedies to some tariff and non-tariff trade obstacles, those intent upon maintaining protectionist barriers have more often resorted to sanitary and phytosanitary claims and allegations to thwart the successful importation of agricultural products like U.S. grown citrus fruit.
The Uruguay Round Sanitary and Phytosanitary (SPS) Agreement with its requirement that sound science be the foundation for all SPS standards for agricultural trade between nations has at last created order out of chaos. This provision should be hailed as a significant achievement which should be further strengthened and expanded to compel all countries engaged in trade in agricultural commodities to adhere to internationally accepted SPS standards and practices based upon sound science. Only by adopting and implementing science based policies can subjective, unpredictable and arbitrary requirements that constitute unjustified barriers to trade be successfully overcome.
Sanitary and phytosanitary issues have become increasingly significant in determining the course of international trade in agricultural products. SPS issues, including pest quarantines, have with growing regularity become the linchpin of trade negotiations in determining market access for fresh produce. For example, the U.S. citrus industry's efforts to gain market access to the huge and potentially profitable consumer market in China has for years been stymied by protracted technical discussions and scientific exchanges between technical experts from the U.S. Department of Agriculture, Animal Plant Health Inspection Service (APHIS) and their counterparts in the Chinese Ministry of Agriculture (CAPQ) to address China's expressed concerns about periodic outbreaks of Mediterranean Fruit Fly in California and Florida. Only when these SPS issues are resolved are trade negotiators even able to undertake market opening talks. Given this relatively new aspect of trade negotiations, manpower and resources of agencies like APHIS and ARS, whose roles have become pivotal to success, are now spread dangerously thin.
Page 141 PREV PAGE TOP OF DOC Concerns about proper SPS management of production areas, assurance of swift eradication of destructive pests and diseases and mandatory certification that the fruit exported is pest free have become critical components of international trade. It is likewise our experience that despite success in tariff reductions, effective marketing programs, etc., the surest way for American agriculture to have a foreign market slam shut its door to our products is the detection of an exotic pest like Mediterranean fruit fly in or near our production areas. This is why programs like USDA's Agricultural Quarantine and Inspection Service which seeks by vigilant inspection to prevent exotic pests and diseases from entering the United States from abroad are vitally important to the health and well being of our industry. Similarly it is imperative that we continue to have available to us tools like aerial application of malathion pesticide to combat exotic pests brought illegally into the United States. When our Government is unable to prevent importation of destructive pests and diseases, then we need to have the tools to eradicate them once detected. Otherwise we will have no export markets available to us and no pest free fruit to export.
Sunkist Growers offers for the subcommittee's consideration the following description of country-by-country difficulties confronting the marketing of our American-origin citrus fruit seeking to compete under fair and equitable conditions in key markets around the world. These descriptions identify from our viewpoint an unfinished agenda that needs to be addressed in the 1999 agricultural negotiations or sooner.
People's Republic of China
The People's Republic of China has imposed and maintained an embargo on fresh oranges, lemons and grapefruit from California and Arizona due to the Mediterranean fruit fly infestation, which has been eradicated since its outbreak in the early 1980s. Maintaining this quarantine on a now non-existent infestation is discriminatory and burdens and restricts U.S. commerce in fresh citrus fruit. Furthermore, it is inconsistent with the principles and rules of the WTO and other international organizations, which have found the United States quarantine program adequate to mitigate the risk of transferring pests in international commerce if a temporary infestation should ever occur. Temporary infestations of the Mediterranean fruit fly do not provide the basis for an embargo such as China maintains.
Page 142 PREV PAGE TOP OF DOC Although a 1992 Bilateral Memorandum of Understanding between the United States and China concerning market access would appear to provide the vehicle for resolving the issue, it has not been resolved at this time. China and the United States have met on a number of occasions in an attempt to resolve this outstanding trade issue. There has been only very limited progress. At present, China continues to insist that California and Arizona are not free of Mediterranean fruit fly even though none exists there in the context of permanent habitation. Incidents of periodic detections of Mediterranean fruit fly illegally imported into the country are no basis for quarantine outside the U.S. quarantine area. Nevertheless, because of the PRC's quarantine, there are no legal exports directly to the mainland of the People's Republic of China.
Efforts should also be undertaken by the U.S. Government to negotiate reductions in the now very high duty rates on imported citrus fruit into China, presently 40 percent and the added burden of a value added tax (VAT) presently set at 17 percent. The combination of these added costs of marketing fresh citrus fruit in the PRC substantially reduce our pricing attractiveness to the Chinese consumer.
It is estimated that the removal of all barriers on the export of fresh citrus fruit to the People's Republic of China would result in export sales of 300 million dollars in the first five years. This estimate is based upon our intuitive experience with markets in Asia at a comparable stage of development with similar levels of consumer income.
Republic of Korea
Based upon its commitments in the Uruguay Round, Korea instituted a tariff-rate quota import system for fresh oranges on July 1, 1997. Last year the quota for oranges was 25,000 MT. Duty for oranges within the quota was 50 percent; imports outside the quota permitted after July 1, face an onerous 89 percent duty. That 89 percent duty is currently scheduled to be relaxed to a still very high 50 percent by the year 2004.
Page 143 PREV PAGE TOP OF DOC Korea, unfortunately, has granted the license to import its entire citrus quota volume to the control of Korean growers, who produce no fresh sweet oranges and whose tangerines are seasonal. Nevertheless, this means their Korean citrus industry, not an objective party, controls all citrus imports. This has restricted imports of U.S. oranges. Korea, with its price-based import quota, imports low-priced oranges and then complains the imports are undercutting their domestic prices. They also complain the imported oranges are low quality. This is all apparently done to discourage imports. Additionally, Korea also uses slow harbor and customs clearance as a means to retard imports. Fresh produce in general has experienced problems with customs inspection and clearance prompting the U.S. Government to initiate WTO action.
Korea has raised, without foundation in sound science, certain phytosanitary arguments that have become impediments to trade. Late last year, local government inspectors in Korea rejected orange imports from California because of traces of methidathion or carbaryl (pre-harvest pesticides) at tolerance levels well below both the U.S. and CODEX thresholds. The Korean citrus industry began a publicity campaign to raise doubts among Korean consumers about the health and safety values of imported U.S. citrus fruit. This publicity effort has negatively impacted our citrus sales in Korea during the period we are eligible to bring fruit to market outside the quota restrictions. These are the kinds of SPS policy actions taken by some governments to thwart successful importation of U.S. agricultural products. Foreign governments must be reminded of their obligations under the terms and conditions of the SPS Agreement and of international standards and practices when their policies are contrary to the international norm.
If all of the impediments and barriers to import were removed, California and Arizona would export over $100 million in fresh citrus fruit to the Korean market. This calculation is based upon our experience with similar Asian markets at equivalent stage of development with comparable consumer populations in terms of dietary preferences and income levels.
Page 144 PREV PAGE TOP OF DOC Japan
Despite our expressed national concern about the long-standing, massive trade deficit suffered by the United States with Japanupwards of $40 billion in 1997harmonization of tariff rates is still an elusive objective. The duty imposed on fresh oranges into Japan is nearly 40 percent in the winter months and 20 percent in the summer months. While these rates are slowly being reduced by Uruguay Round tariff reduction agreement, they nevertheless remain very high. This is an excessive duty when recognizing that Japan does not produce fresh oranges but only tangerines. The impact of this duty can be quantified by noting that California and Arizona orange shippers pay Japan some $38 million in tariff fees annually.
The duty reduction achieved in the Uruguay Round, while helpful, does not solve the problem. After the transition period, the duty will still be excessive, with a consequence of repressed sales in the market. American and Japanese orange import tariffs must be harmonized as soon as possible. Such a harmonization with the U.S. duty on fresh oranges would result in American exports upwards of $150 million in the first year. The gain would be greater in subsequent years and accelerated by duty elimination.
India potentially offers a large market for fresh oranges, lemons and grapefruit. The upper 20 percent income level of the populationsome 200300 million consumerscan afford fresh oranges, lemons and grapefruit. This represents a consumer population equivalent to Germany. Fresh oranges, lemons and grapefruit are widely used in India and pose a major export market of opportunity for the United States. At present, however, India maintains an absolute embargo on fresh oranges, lemons and grapefruit except for the hotel trade. Additionally, India maintains very high duties and a licensing system wherein no licenses are granted. There exists an urgent need to reform standards to avoid unjustified use of balance-of-payments economic defense for denial of market access for certain imported products, like fresh citrus fruit. Phasing out of these restrictions and gaining market access should be a priority for our Government negotiators. Additionally, excessive duties, currently set at 42 percent on fresh citrus fruit, need to be substantially reduced.
Page 145 PREV PAGE TOP OF DOC Based upon our experience with new and emerging markets in Southeast Asia, with similar dietary habits, consumer population with disposable income as that segment of the Indian population, we estimate sales of fresh oranges, lemons and grapefruit to India could approach $100 million in five years provided market access and reduced tariff rates are achieved.
Continuation by the European Union (EU) of discriminatory tariff preference scheme under which the EU gives preferred Mediterranean basin countries, notably Morocco and Algeria, up to an 80 percent discount from the common external tariff applied to citrus fruit, charging them 4 percent , meanwhile imposing up to a 20 percent duty on American oranges. This discriminatory policy has a particularly adverse effect on our summer and winter oranges. Previous efforts by the U.S. Government to remedy this unfair trade practice failed despite a favorable opinion rendered by the GATT-Dispute Resolution entity. These conditions have effectively removed us from competition in Europe. Expansion of the EU to include Sweden, Norway, Finland, Austria et al. has extended the damage and consequent competitive difficulties confronting U.S. citrus fruit in these markets as well.
It is estimated that if the United States could obtain equal treatment for fresh orange, lemon and grapefruit exports to the European Union, exports would increase by $5 million to $25 million in the first 2 years.
While Thailand has allowed fresh oranges to be imported from California, it has yet to approve importation of fresh citrus fruit from Arizona because of phytosanitary concerns. However, based upon a successful inspection tour of Arizona citrus production areas in August of this year by Thai Department of Agriculture officials and scientists, we expect this quarantine barrier to Arizona citrus fruit to be removed shortly.
Page 146 PREV PAGE TOP OF DOC However, even when phytosanitary barriers are successfully removed, U.S. fresh citrus fruit still faces extremely onerous duty rates in Thailand. The duty for U.S. origin oranges is 51 percent , for lemons and grapefruit it is 56 percent .
Based upon our intuitive marketing experience in Southeast Asia with emerging and developing markets of comparable consumer populations, similar in dietary preferences and income levels, we would anticipate export volumes of fresh citrus fruit from California and Arizona to Thailand would annually be at least $25 million within five years. This trade volume would result provided an end to the phytosanitary quarantine and a reduction in tariff rates to a more competitive level.
Taiwan continues to maintain high seasonal tariffs on fresh and processed citrus fruit. These tariffs have been reduced over the years, but from very high levels. Their present rates are in the 4042 per cent range, which are excessive insofar as Taiwan does not produce fresh oranges, lemons grapefruit or orange juice. Taiwan does grow some tangerines.
It is estimated that a substantial duty reduction on the importation of fresh citrus and processed orange juice would result in increased sales in the $25 to $50 million range within the first three years.
The Philippines maintain excessive tariffs on fresh citrus fruit including oranges, lemons and grapefruit. The 50 percent ad valorem duty on all three varieties of fresh citrus is excessive and imposes a significant barrier to competitive trade for U.S. citrus fruit.
It is calculated that a substantial reduction in the tariff rate would result in increased sales of fresh citrus to the Philippines in the range of $5 to $25 million in the first 5 years.
Page 147 PREV PAGE TOP OF DOC Australia is often problematic as an export market for our fresh citrus fruit. Shipments of U.S. agricultural products experience slow handling, inspection and customs processing upon arrival at Australian docks. This combination of slow import processing and Australia's extensive use of methyl bromide fumigation for many inbound fresh fruit shipments creates conditions for high incidence of spoilage and deterioration of the fruit. Our refunds for fruit damage for shipments to Australia are .80 cents per carton versus .03 cents per carton for all other export markets.
Australia's expansive and restrictive pest quarantine buffer policy on citrus imports from California because of concern about periodic Mediterranean fruit fly outbreaks in the state far exceed standards dictated by sound science. Australia and New Zealand disallow citrus fruit imports if grown and or packed within 80 kilometers (50 miles) of an exotic fruit fly quarantine area. This contrasts dramatically with the 4.5 mile buffer accepted by the Animal Plant Health Inspection Service (APHIS) of USDA. APHIS' standard is derived from the convention wisdom of science panels which have, over time, concluded that the range of the Mediterranean fruit fly does not exceed 0.8 miles. As a precaution, however, APHIS adds an additional 2.5 miles to the quarantine buffer to further reduce any likelihood the pest will of its own ability travel beyond the quarantine area. This has become the de facto international, science-based norm or practice for the establishment of quarantine areas from which no fruit may be transported. Recognized by Japan, Thailand, Korea, Vietnam, major trading partners in Latin America, and others, many of whom are also citrus producers, this science-based standard conversely defines pest free areas from which fresh fruit may be exported into domestic and international markets. The validity of this science based quarantine policy has been proven over two decades without evidence of ever exporting a single pest in the millions of cartons of citrus fruit we have delivered around the world.
Australia and New Zealand should be pressed to accept this same standard for Medfly quarantine exclusion.
Page 148 PREV PAGE TOP OF DOC Sunkist Growers appreciates the opportunity to bring these international trade matters to the attention of the subcommittee in the hope that the agricultural trade policy agenda pursued by our Government in 1999 or sooner will address these inequities important to our farmers and the U.S. citrus industry.
Statement of Steven W. Easter
Mr. Chairman and members of this committee, I am Steven W. Easter, vice president-secretary of Blue Diamond growers, and am representing our 4,000 Blue Diamond Growers who make up approximately 60 percent of the almond growers in California.
California produces all of the commercial almond supply in the United States and 75 percent of the world's supply of almonds. This product is the leading tree crop in California by acres planted and income and leads all California crops in percent exported.
In recent years California almond growers have exported over 70 percent of the crop. Almonds are the leading horticultural export from the United States and the number one agricultural export to Germany and to India. Overall they are the sixth largest U.S. food export. Almond acreage continues to expand in California to meet the export demand with over 20 percent of total acreage not yet bearing. This acreage will begin to produce in the next three years and be fully productive in 6 to 8 years. It is estimated that this new young acreage will enable California to produce a billion pounds of almonds in the near future. An increase of 25 percent from current levels.
Much of this product will need to find a home in the export market. The industry is working diligently to expand markets. We are undertaking domestic and international marketing programs to promote our product and expand the worldwide demand. The Market Access Program has been of great assistance in this effort. Our industry marketing order board has used funding to develop new market opportunities in China where few almonds were sold in the past. Blue Diamond is promoting almonds in markets like Japan and India and have been able to provide matching funds of $1.5 million to double the promotional programs. We must continue to find ways that the U.S. Government can assist growers to promote products overseas. Expanding MAP is a start, but as our grower members strive to expand exports, the involvement of the U.S. Government will be critical.
Page 149 PREV PAGE TOP OF DOC An essential element will be the administration's ability to negotiate trade agreements to reduce barriers and allow expanded international trade. Granting the President Fast Track authority is central to these efforts. Much of the opposition to Fast Track seems to be based on concern over past trade agreements. While Blue Diamond has no such concerns, we understand they exist. It is our position that the only way to address problems in trade agreements is for the President to have Fast Track authority. Armed with this authority, he can negotiate new trade access for U.S. products and work to address problems in current agreements.
It was my privilege to attend the WTO Ministerial in Singapore a little over a year ago. I participated as a member of Horticultural and Tropical Products Trade Advisory Committee. At that meeting U.S. agriculture interests presented a united front demanding that the scheduled negotiations on agriculture go ahead as planned. As a result, negotiations in agriculture are scheduled to resume in 1999. The President must have fast track authority for the United States to successfully participate in these negotiations.
If exports were not vital to almonds and to Blue Diamond, I would not be here today. Even though we export to 90 different countries, our number one concern is the need to lower inshell almond tariffs entering India. They are the highest of any major almond importer and must be reduced to stimulate sales in that country. With low duties on inshell almonds, India can be one of the largest buyers and users of California almonds in the world and growers need this market for the expanding production.
I have been active in international trade issues for over 25 years. When I started, there was limited interest in the negotiations and sporadic success by U.S. agricultural interests in exporting products. Since that time, trade barriers and trade issues have taken increasing importance in the attention of U.S. agricultural interest. In recent years, we are hearing from virtually all U.S. commodity interests about obstacles to trade. A major reason for this interest is increased participation in international trade and new successes being achieved.
Page 150 PREV PAGE TOP OF DOC As more commodities enter the export market and find success, they also see new opportunities that require lifting trade barriers. Of course these are brought to the attention of the U.S. Government, often times starting with House and Senate members. The more successful we are in exporting, the more opportunities we find and the more complaints are heard about trade barriers.
From the standpoint of those of you receiving the complaints, it must be troubling. It is important to remember that U.S. agriculture is exporting more than ever in history. The problems you hear about result from this expanded role. A good example is in the almond industry. When we were exporting less than 10 percent of the crop, there was no contact with the Foreign Agricultural Service or the U.S. Trade Representative. Now we are in contact with these offices on a daily basis.
It is important to understand that with this increased emphasis on exports and closer working relationships with the Government, we must play a major role in solving our own trade problems. Government alone can not solve all the trade problems. Each industry is in the best position to determine the optimum solution to its own problem, and then together with Government solve the problem. Private industry must lead the way because it identifies and develops the markets and makes the sales. In this respect, government needs to follow the advise of the private sector, not the other way around.
It is clear that we should not and do not expect government to solve all of our trade problems. However, there is a vital role for government to play in negotiating trade issues and developing markets that can be done hand in hand with industry. We understand that much of the success of this approach depends on the private sector's willingness to take the lead in trade issues.
Almonds are the United States's largest agricultural export to India even with a duty that exceeds 60 percent of the landed value. With significant reduction in duty levies, India can easily double its imports, bringing millions of dollars of new export earnings to the United States. The President must have authority to negotiate for lower trade barriers to make this increased trade a reality.
Page 151 PREV PAGE TOP OF DOC
Statement of Chiquita Brands International
The following comments are submitted on behalf of Chiquita Brands International for inclusion in the written record of the subcommittee's February 17, 1998, field hearing on the 1999 World Trade Organization (WTO) Multilateral Trade Negotiations in agriculture. The comments give emphasis to the experiences of Chiquita with the WTO system, particularly in connection with the WTO dispute settlement case against the EU's banana regime. The lessons derived from the WTO Banana Case are important to understanding the nature of agricultural trade barriers that still exist post-Uruguay Round, the shortcomings of the WTO dispute settlement process, and the types of systemic improvements that will need to be sought in the next round of WTO negotiations scheduled to begin in 1999.
I. The WTO Banana Case Has Contributed Significantly to Our Understanding of the WTO System and How it Relates to Agriculture.
There is no agricultural policy anywhere in the globe that has been more heavily litigated in GATT and WTO dispute settlement than the E.U.'s import regime on bananas. It has been exhaustively reviewed and condemned by two GATT panels, one WTO panel, and the new WTO Appellate Body. The legal violations found, numbering close to twenty, are more numerous than those found in any other GATT/WTO case in the 50-year history of the GATT/WTO. The rulings cover a wide spectrum of GATT and GATTS disciplines and establish landmark principles in the area of agriculture and services.
Hence, while bananas may not represent a substantial U.S. farm sector, the WTO Banana Case has significantly contributed to the United States' understanding of the WTO system, including as it relates to agriculture. The case is instructive not only as to the nature of agricultural restrictions now being practiced in Europe and condemned under the WTO, but also as to EU conduct in the dispute settlement system, and to the efficacy and timeliness of that system for reducing barriers to trade in agriculture. Because of its broad coverage, the case offers an important perspective on the WTO system and the reforms the U.S. Government should seek in the 1999 exercise to improve upon existing remedial protections for U.S. agricultural interests.
Page 152 PREV PAGE TOP OF DOC II. As the Banana Case Demonstrates, the Uruguay Round Did Not in All Cases Lead to Market Access Gains for Agriculture.
The EU banana policy itself is a lesson on, among other things, the imperfections of Uruguay Round agricultural tariffication. Although tariffication was intended to reduce the historic protectionist border measures of WTO member countries, tariffication reform has far from guaranteed transparency or market expansion. To the contrary, in the case of bananas, it led to a licensing and quota regime considerably more discriminatory and non-transparent than many of the non-tariff barriers prohibited by the Uruguay Round. Even gauged against historical EU restrictions, the illegalities of the present banana policy go far beyond traditional EU protection for farmers to include protection as well for EU middlemen throughout the distribution chain.
The EU banana policy is, thus, highly visible proof (within a growing body of evidence) that EU protectionism post-Uruguay Round has not shrunk, but rather broadened into new areas of illegal activity. Because it remains to be seen whether the WTO system will have the requisite resolve to condemn and remove these new forms of agricultural restrictions, understanding the nature and implications of these new trade barriers is central to setting goals and identifying areas of improvement for the next round of WTO negotiations in agriculture.
III. The Banana Case is Evidence that the WTO Dispute Settlement System Has Significant Shortcomings In Need of Improvement.
The Banana Case perhaps most importantly has helped to identify two principle shortcomings in the WTO dispute settlement system. The first shortcoming in need of immediate attention relates to the EU's questionable commitment to the dispute settlement system. A second shortcoming, which should be a primary focus of the 1999 exercise, concerns the dispute settlement system's less-than-prompt timetable and structure for relief.
A. It Remains to Be Seen Whether Key Countries Like the EU Will Comply With WTO Rulings.
Page 153 PREV PAGE TOP OF DOC During the Uruguay Round, the United States gave up its authority to act unilaterally against unfair trading practices under Section 301 in favor of a new, so-called fool-proof WTO dispute settlement system. The test of whether the new dispute settlement system will live up to this claim lies in the extent to which WTO member countries are willing to implement fully and on a timely basis the WTO rulings rendered against them. No matter how far-reaching WTO procedural and substantive disciplines may appear on paper, they have no meaning if countries, like the EU, refuse to abide by them.
The Banana Case is the first successful WTO legal challenge against EU agricultural policy and, as such, will be the first decisive test of EU willingness to abide by its WTO obligations in the area of agriculture. Early indications out of Europe on this issue are far from promising.
Until recently, the United States and other complaining parties were hopeful that promises from European officials to abide by their WTO obligations in the Banana Case meant that the EU would adopt a WTO-consistent regime. If there were ever an easy agricultural case in which the EU could come into WTO compliance, it would be this one. A substantial majority of EU member states, including Germany, Denmark and Belgium, favor banana reform. To USTR's great credit, all of the many WTO rulings rendered against the banana regime are clear and comprehensive. There are more WTO rulings against this policy than ever before rendered in the history of the GATT and WTO. Virtually all of the rulings have been thoroughly litigated, including before the Appellate Body, leaving no room for misinterpretation. Moreover, there are five other WTO Members besides the United States pushing for reform, many of them with special considerations as developing countries. It is reasonable to assume that under these favorable circumstances, the EU would feel bound to proceed in good faith to implement its WTO obligations. This is particularly so since the Banana Case represents the first instance in which the EU is being called upon to come into compliance with a WTO panel ruling.
Page 154 PREV PAGE TOP OF DOC The EU's recent conduct suggests that its intentions are otherwise. The EU Commission has responded to the WTO banana ruling by issuing a reform proposal that promises to increase discrimination and protectionism in the sector, not decrease it. Under the new proposal every one of the many measures condemned by the WTO would be maintained and even expanded under the name of WTO reform. The complaining parties have outlined and objected to the many illegalities of the reform proposal in a G6 Views paper. The Commission has ignored this and is actively recruiting the Latin American complaining countries to acquiesce to the proposed illegalities.
This kind of EU response is reminiscent of the bad old days under the old GATT system, when the EU routinely ignored panel rulings in the area of agriculture, rendering the dispute settlement system ineffective. It was that obstructionist EU behavior that first led to the push for Uruguay Round reform and a promise at the conclusion of that Round that the problem of blocking panel reports would be cured. Today, as the EU Commission shows its old colors by working to obstruct the Banana Case, all of the old pre-WTO concerns regarding EU bad faith and inadequate multilateral commitment to panel rulings resurface. As the Journal of Commerce recently noted,
''The United States-European Union spat over preferential banana imports to Europe has gone beyond a mere flagrant violation of international trading rules. The EU's refusal to obey a World Trade Organization order to scrap the banana policy is putting the entire trading system in peril.''
Perhaps more than with any other issue, the question of whether rulings will be properly implemented by our key trading partners, in particular the EU, is central to an assessment of whether WTO will be effective in reducing barriers to trade in agriculture and key to determining what changes must be sought in future trade negotiations. As we learned in the GATT days, it matters little how specific and comprehensive the WTO substantive disciplines are in the area of agriculture if our principal trading partners do not have the requisite resolve in the first instance to abide by those disciplines. Thus, before we can turn to the visionary task of defining new substantive agricultural areas for negotiation in 1999, our most immediate priority must be to reassure ourselves through actual dispute settlement successes that the EU and our other major agricultural partners have a present intention to fully honor existing WTO obligations.
Page 155 PREV PAGE TOP OF DOC Because the EU Commission's defiance in the area of bananas shows no intention on the part of the EU to honor its WTO obligations, one of two things must happen to gain comfort that the system works. Either the EU Member States must overturn the proposal and replace it with one that ensures strict WTO-consistency, or the EU will need to be forced into full compliance through recourse to established WTO procedures. Based on EU conduct to date, the latter appears to be the likeliest scenario and almost certainly will need to include not only compliance arbitration, but also the exercise of WTO-authorized retaliation. These procedures have never before been invoked under the WTO. As has been the case so often in the past with EU agricultural disputes, it may well be in this and other WTO cases that the EU's unwieldy system of government and unfailing inclination toward agricultural protectionism are only surmountable through recourse to sanctions or at least the threat of retaliation.
That being the case, decisive WTO sanctions must be taken, not just for the sake of the Banana Case, but for the entire system. If the United States and other complaining parties relent in this first case in which EU resolve is being tested, it will pave the way for EU non-compliance in all other cases down the line, once again threatening to destroy the entire system.
USTR well recognizes the larger systemic implications of the Banana Case and is actively taking steps to convey an appropriately serious message throughout Europe. The subcommittee is encouraged to lend its strongest possible support to these efforts. Until the U.S. Government can show a well-established track record of WTO dispute settlement successes against our most frequent adversary in the area of agriculture, the EU, the U.S. agricultural community is not likely to view the WTO system as a viable, effective tool for removing barriers to trade. Wide-spread cynicism respecting the WTO system will almost certainly mean diminished support for the 1999 exercise.
B.The Dispute Settlement System With Its Long Timetable and Tolerance for Delays, Favors The Offending Parties, Not The Injured Parties.
Page 156 PREV PAGE TOP OF DOC If the dispute settlement system proves capable of ensuring WTO-member compliance with panel and Appellate Body rulings, the system must still be fixed to hasten the process of relief. In key ways, the process of relief now functions to the advantage of the offending parties, not the injured ones.
The Banana Case is again illustrative. WTO consultations in that case began in October of 1995. Dispute settlement procedures have actively been underway since then. Even with aggressive litigation on the part of USTR and the other complainant governments, full WTO compliance, assuming it occurs, will not be in place until January of 1999more than three years after the dispute settlement proceedings first began. If retaliation procedures are necessary, that timetable may require further extensions, at a minimum by several months.
Throughout this several-year dispute settlement period, damages to U.S. commercial interests have greatly compounded. Conversely, unfair commercial advantages for EU multinational banana firms have skyrocketed. Both the injuries suffered and advantages gained are irreversible. If WTO-compliance is achieved after several years of litigation, it will deliver relief solely on a going-forward basis. The system does not make allowances for restitution or back damages. The injured parties are never made whole. Hence, irrespective of how healthy those injured parties might be at the outset, once a foreign government subjects them to substantial market losses, and corrective action is not forthcoming for multiple years (such that all losses in the interim must be absorbed), those injured parties in virtually all instances will find it hard to survive.
Unfortunately, certain offending parties (and in particular the EU) know well that by forcing the procedures into the slowest possible timetable (in our case, over three years), they will suffer no adverse multilateral or commercial consequences. To the contrary, they properly figure that their domestic interests will enjoy nothing but up-side commercial gains as the WTO timetable drags on. Thus, in our case, the EU knew that even if it lost on appeal, EU commercial interests would ultimately be served by the time delays associated with appealing 19 findings of law, most of which appellate claims were frivolous and contrary to well-established GATT and WTO rulings. Whatever the legal costs to the EU of that and other delays associated with resisting compliance, those costs have been dwarfed by the multi-millions of dollars in additional unfair commercial benefits irreversibly accruing to EU interests. Although the WTO dispute settlement timetable was intended to quicken relief for aggrieved parties relative to prior GATT procedures by establishing definite time limits, in practice, the system has proven to be far less wedded to the promise of assuring aggrieved parties timely relief.
Page 157 PREV PAGE TOP OF DOC The timetable and relief structure, if left unaltered, will prove to be not just a systemic inequity. It will be a disincentive for American agriculture, most of which is comprised of relatively small sectors, to activate dispute settlement relief.
One partial solution well-suited for discussion in the 1999 exercise may be to shorten the dispute settlement timetable, particularly as it relates to the recommended 15-month reasonable period of time for implementing panel and Appellate Body rulings. When you string end-to-end the stages involved in the new dispute settlement procedures, the process is substantially longer than most sectors understood would be the case. While three or more years may not be the norm in dispute settlement, it is nevertheless a timetable that falls within WTO rules and one that is entirely too long for U.S. farm sectors or others in need of timely corrective action.
The other component of the solution, requiring more in the way of innovative thought, would be to insert into the process improved disincentives for delay and obstruction. One option might be to impose additional relief obligations for undue delays associated with coming into compliance. Another option might be to clarify that retaliation can be taken on the basis of aggregate injury suffered from the moment the offending policy goes into effect, an approach that may improve the system's incentive to come into early compliance. Unless corrective measures of this or some other sort are taken to shorten the process and better encourage prompt compliance, agricultural sectors and firms suffering dire injury from unlawful foreign barriers may not survive long enough to receive the relief finally granted. Given this dubious outlook, it is critical that reforms to shorten the compliance time frame and increase pressures for quick compliance be seriously considered during the upcoming round of multilateral negotiations to begin next year in 1999.
With the effective loss of section 301, WTO dispute settlement is essentially the only remedial tool available to American agriculture (and other U.S. sectors of trade) for reducing foreign barriers to trade. The U.S. Government and U.S. agricultural sectors have no choice but to make the system work. By establishing a highly visible model for strict WTO-compliance in the Banana Case, and by insisting on that same standard in the Beef Hormones Case and other key agricultural cases to come, we will be giving the system the broad-based credibility it needs as we move into the 1999 next round exercise. If rules to accelerate the dispute settlement timetable for securing compliance can be negotiated, the system can be made more effective and accessible for all U.S. farm sectors, large and small, in need of trade remedy assistance.
Page 158 PREV PAGE TOP OF DOC Chiquita looks forward to working closely with the subcommittee and the administration to ensure that the Banana Case is concluded in a way that delivers meaningful, WTO-consistent relief and validates the WTO dispute settlement system.
"The Official Committee record contains additional material here."
SPECIALTY CROP AGRICULTURAL ISSUES
RELATING TO THE 1999 WORLD TRADE
APRIL 1, 1998
House of Representatives,
Subcommittee on Risk Management
and Specialty Crops,
Committee on Agriculture,
The subcommittee met, pursuant to notice, at 9:26 a.m., in room 1300, Longworth House Office Building, Hon. Thomas W. Ewing (chairman of the subcommittee) presiding.
Present: Representatives Baldacci, Etheridge, and Boswell.
Staff present: Lynn Gallagher, senior professional staff; Stacy Carey, subcommittee staff director; Ryan Weston, Callista Bisek, Wanda Worsham, clerk; Andrew Baker, minority associate counsel; and John Riley, minority staff consultant.
OPENING STATEMENT OF HON. THOMAS W. EWING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Page 159 PREV PAGE TOP OF DOC Mr. EWING. The Subcommittee on Risk Management and Specialty Crops will come to order.
I am pleased to welcome you to the subcommittee's third hearing regarding specialty crop issues as they are related to the 1999 World Trade Organization Multilateral Trade Negotiations. The Subcommittee on Risk Management and Specialty Crops conducted hearings on important issues in both Florida and California.
Because the subcommittee's jurisdiction encompasses such a large variety of crops, we have taken prudent efforts to hear from as many of those interested parties as possible and hope today's hearing provides a forum in which to express the views of the horticulture, nursery, potato, cherry, pear, and other important industry segments.
The Uruguay Round was an important step towards free trade. Agriculture, and especially specialty crops under this subcommittee's jurisdiction, must take steps to ensure that U.S. agricultural interest are addressed in the next round of these trade negotiations. Even though these negotiations do not have a formal agenda, their objective is to continue the process of agricultural trade reform, set the stage for an open and relevant discussion to prudent preparation for those negotiations.
We're interested to hear from you today about existing barriers to trade, particularly in the Asian markets. We believe that the Asian market holds significant promise for U.S. agricultural exports. By the year 2000, the Asian population is estimated to grow to 2 billion people. Exports in this region are expected to increase by $14 billion compared to only $7 billion for the rest of the world.
For most sensitive agricultural sectors, many of which includes products such as fruits and vegetables, do we really have adequate safeguard mechanisms? Now, that's one of the questions I hope to get to today.
Another is, are there Uruguay Round issues that need to be resolved before the 1999 negotiations begin? How can we effectively deal and resolve sanitary and phytosanitary issues that become technical barriers to trade? How can we assure that sound scientific evidence is the basis for these decisions? And, finally, we are interested to know if there are any biotechnology issues of particular importance to agriculture, and the agriculture that you represent?
Page 160 PREV PAGE TOP OF DOC In closing, let me say we are fortunate to have a distinguished panel with us this morning. I appreciate your taking your time from your schedules to be here and share your views with us. The chairman of the House Agriculture Committee, Bob Smith; the U.S. Department of Agriculture, the Office of the Trade Representative, are all aware of our hearing today and will be kept apprised of the information that comes out in today's hearing. Unfortunately, there are party caucuses going on at this time and members will probably be coming in and out as we proceed with our hearing. We're anxious to hear your views and look forward to your testimony.
The first and only panel today are the three gentlemen seated at the witness table, Mr. Christian Schlect, president of the Northwest Horticultural Council; Mr. Mark Dunn, director of governmental affairs, J.R. Simplot Co., representing the American Potato Trade Alliance; and, Mr. James C. Christie, Bryant Christie, Inc., representing the California Pear Advisory Board, the California Cherry Advisory Board, and the U.S. Hop Industry Plant Protection Committee. Welcome, all of you, to today's hearing and we'll start with you, Christian.
STATEMENT OF CHRISTIAN SCHLECT, PRESIDENT, NORTHWEST HORTICULTURAL COUNCIL
Mr. SCHLECT. Thank you, Mr. Chairman. I know the time is brief and you have a busy day today, so, I have a prepared text I believe, is in the record, and then I also have an editorial from Wall Street Journal that, I believe, you have available, and if it's appropriate, it might be included in the record, with your permission.
The Northwest Horticultural Council represents the apple, pear and cherry industries of Idaho, Oregon, and Washington. We export to our growers and shippers quite a bit of the production of apples, pears, and cherries from the United States because of the production amounts in that area. We are focused on Asia and, that is a major market, and I'll get into some of the problems there a little bit later. To answer one of your questions real quickly, biotechnology is not a big issue for our specific industries, so I'll leave that to others to inform the committee about.
Page 161 PREV PAGE TOP OF DOC There are a couple of things I wanted to go through quickly and then take any questions or pass it along to other panel members. First, I think it's important that Congress give the administration fast track authority for trade negotiations. I think that the United States has been a leader since World War II on trade liberalization and, to keep that leadership, we need to have that authority plan to the President. I don't think that it serves our national interest not to have fast track trade authority given or withheld.
One of the items that does involve Asia, primarily, is on the accession talks with several countries in Asia to the World Trade Organization. I think that the Congress and the administration, especially the administration, which is negotiating the accession talks for Taiwan, Peoples Republic of China, and Russiathose talks should be kept up, and are being kept up. It's critical that tariff reductions be obtained in those talks.
Russia, you may not think of it for those who don't trade in our product, but Russia is a major potential market and some of our product does get into Russia, mainly into Siberia, and through Vladivostok and other ports of Russia. So, we have big markets on Asia and Russia, potentially, and again, in the Peoples Republic of China. The Hong Kong situation is a concern, although it seems that the takeover of political authority by China has not disrupted the market there. And, again, Taiwan's accession, with may be paired with China's tariff rates, are at 40 to 50 percent on some of our products. So, those being lowered as they enter the WTO would be very beneficial.
On the sanitary and private phytosanitary section, I was a participant as a private sector advisor to the talks that led to the World Trade Organization Agreement. I was in Geneva at the ministerial meeting that concluded the Uruguay Round, and at several other meetings on the way, and this was an area that I personally took a lot of time and attention on because our industry is basically affected by it more than many of the other sections of the WTO Agreement.
Page 162 PREV PAGE TOP OF DOC I believe under the S&P section, the Congress and the administration should work during these upcoming talks to strengthen the international bodies that set the standards that the S&P section refers to. The sanitary and phytosanitary section tried to encourage world trade especially in countries that don't have developed systems, like Germany and the United Statestechnical systems like our EPA, and encourages them to adopt standards like the Codes Alimentarius for chemical residue limits. I think that's good, I think it's useful for trade, I think it's good for the consuming public to have higher standards. I think our government needs to support the administration officials who attend those meeting at their various agencies and we need to strengthen that international rule-setting system.
In that regard, it is useful, for those purposes, for the United States to fully fund organizations that are the standard setters, and, in this case, the Food and Agricultural Organization of the United Nations, which supports the work of Codex. So, while paying your dues to the U.N. isn't a big, popular thing in my neck of the woods, in terms of agricultural trade, it's an important thing if we are to have a good international system that the WTO reflects.
Within the U.S. Government, I think Congress might look at some of the cross-authority problems within the Department of Agriculture, and some of the other agencies on how these technical issues are worked through to conclusion. In APHIS, FAS, one of our cultural service in the Animal and Plant Health Inspection Service, where their lines of authority cross on trade negotiations on these technical issues and where they interact with Food and Drug administration and EPA, and others, I think it's important for Congress to look at.
The one final thing that is, maybe, a little bit unusual today that I would like to stress and bring up because it's recent to our industry, is the position I've taken in the testimony that we would hope that the U.S. Government and Congress, as a part of that Government, takes a serious look at antidumping laws, and I know that, in your conversation or your introduction, you indicated that you wanted to know if the safeguard provisions were adequate. I would reverse that somewhat and ask the Congress to consider whatever the United States does towards foreign governments and foreign producers, you can expect that to be turned around against us in world trade, and, in fact, it has been in our industry.
Page 163 PREV PAGE TOP OF DOC Recently, we were in a position where it was felt necessary to settle an antidumping case against U.S. apples in Mexico. Mexico used an antidumping law that had been, basically, modeled on the U.S. system. It used cases that the United States had brought against Mexican produce, and essentially we were out of the market for 5 months with a 100 percent punitive tariff and a settlement to end that case was last week or 10 day ago.
The Wall Street Journal article that the chairman included in my testimony Monday, I think, reflects an accurate statement that these laws can be turned around and, especially, in third world countries or developing countries where legal systems aren't the same as the United States, antidumping laws are licenses to shut off trade, and we can do all we can through the WTO and through other trade negotiation forums, but if a country can shut us off as easily as Mexico did our fruit, I think, it's not a good situation.
In terms of money to private industry, we're in the process of settling up this issue, but it looks like it'll be in excess of $500,000 in direct legal fees and accounting fees that we have had to expend just to try to keep some access to our major market in Mexico. That's a big problem, and we would hope that the Congress would look at either eliminating agriculture from the scope of antidumping laws or, at least, carve out an exception that cost of production type cases not be brought and only the dumping of the nature of where price into the foreign market is less than price in the domestic market. Maybe that's still a legitimate concept, but antidumping laws really need to be taken a look at and to see if they are in our national interest. We do not think they are. So, with that I conclude my testimony, Mr. Chairman.
[The prepared statement of Mr. Schlect appears at the conclusion of the hearing.]
Mr. EWING. Thank you very much. Mr. Dunn.
STATEMENT OF MARK DUNN, DIRECTOR, GOVERNMENTAL AFFAIRS, J.R. SIMPLOT COMPANY
Page 164 PREV PAGE TOP OF DOC Mr. DUNN. Thank you, Mr. Chairman. My name is Mark Dunn, and I am director of governmental affairs for the J.R. Simplot Company. The Simplot Company is a privately-held agribusiness and potato processing company with headquarters in Boise, ID. We actually have operations in 23 States, however.
I'm here today representing the American Potato Trade Alliance or APTA. APTA is a coalition of the three main segments of the U.S. potato industry which includes U.S. potato growers. They're represented by the National Potato Council.
We also have in our group a number of State grower organization, as well as major U.S. potato processing companies, and those include J.R. Simplot, Lamb-Weston, and McCain Foods. And, obviously, these companies process and export frozen french fries and other potato products throughout the world.
We also have U.S. Quick Service Restaurants, chains such as McDonalds and Tricon, formerly PepsiCo, and obviously, these chains are major purchasers of frozen french fries, domestically as well as in export markets.
APTA was created in June 1977 as a cooperative effort among these U.S. potato industry sectors in an attempt to address market access issues affecting exports of frozen french fries. By combining the potato value chain, as we like to call it, we felt we could be more effective. Initially we have three goals, and they are, first of all, achieving more immediate reductions in trade barriers for U.S. french fries and other processed potato exports.
Second, encouraging the improvement of foreign infrastructure as it relates to sales of potato products. And, thirdly, impacting legislation and trade policy issues that affect U.S. potato products.
As an immediate goal, APTA members are seeking reductions in tariffs and other market access barriers in the important Asian-Pacific markets of China, Indonesia, the Philippines and Thailand, we well as in Mexico and India. We've chosen these markets because they're considered to be some of our industry's most promising growth markets for potato exports and, except for India, are members of APEC.
Page 165 PREV PAGE TOP OF DOC Although the focus of my prepared text or my comments today is on APTA's goal of achieving tariff reductions in the Asian-Pacific countries, the U.S. potato industry's interest in multilateral reform expand goes well beyond that. Two other issues, which you obviously know about, are transparency and other problems with the Uruguay Round Sanitary and Phytosanitary Agreement and our industry's longstanding concerns over market access, constraints, as well as subsidies.
In the area of SPS issues, we've seen that countries like Mexico are moving very slowly to undertake required risk assessments and pest risk analyses to justify their SPS constraint measures and that these countries are very reluctant, in the interim, to adopt internationally recognized standards that would open the market for trade. We're very hopeful that greater transparency and clarity in defining a country's obligations to support their SPS measures with science can be achieved in the 1999 round.
For APTA, the 1999 round of multilateral trade negotiations in agriculture is only one step in a series of trade negotiating opportunities that together, we hope, an achieve the tariff reductions and market liberalization that we're seeking. We caution the administration not to wait for the 1999 exercise, but to pursue, aggressively, ongoing market liberalization opportunities wherever possible.
In APEC, we urge the U.S. Government to vigorously support processed foods as a sector for early voluntary tariff elimination among the APEC countries and to include processed potato products in any U.S. Government-backed proposal.
APEC countries, last year, produced nearly 80 percent of all U.S. frozen, processed potatoes, which accounted for 1.3 billion pounds of potatoes grown by U.S. farmers, or an estimated 10 percent of a U.S. crop. Most APEC countries, including the priority economies of China, Indonesia, Thailand, the Philippines, and Mexico continue to have high tariffs. And, that, particularly, prejudices our high quality premium priced U.S. potato product. Reduction of these tariffs would significantly increase U.S. exports to the benefit of U.S. farmers, processors, and quick service restaurants that continue to expand in Asia.
Page 166 PREV PAGE TOP OF DOC WTO accession negotiations with China, and dispute settlement procedures against India's balance of payment restrictions, offer two other opportunities, prior to 1999, to achieve tariff liberalization on two of APTA's priority countries, China and India.
APTA has made the representations to USTR and USDA requesting that frozen potato products be considered priority items for tariff reductions in the context of China's WTO accession. China's 25 percent tariff on frozen potato products and 17 percent value added tax, which is applied twice on frozen potato imports, are significant barriers of trade in China. We're very anxious to learn what China's next tariff offer on potato products will be, and we urge the U.S. Government to stand strong in its commitment to achieve a reduction to 10 percent or below.
The WTO dispute settlement case against India's balance of payment, import, licensing restriction, may offer an opportunity, not only to achieve elimination of India's restrictive import licenses, but also to negotiate tariff reductions. And, we've made this point to USTR and USDA.
In short, without progress on these regional and bilateral settings, we are skeptical that any real progress in tariff reductions, market access, and phytosanitary and sanitary areas can be achieved through the 1999 multilateral negotiating process. If the Uruguay Round is any indication of the resistance we face, it's clear that sectoral and smaller bilateral and regional agreements will be needed to establish a core of support before WTO member countries, and developing countries, in particular agree to further liberalization in the area of agriculture.
Accordingly, we ask this subcommittee for its help in urging USTR and USDA to aggressively use these upcoming forums, leading up to the 1999 exercise, to achieve tariff reductions and market access liberalization for potato products in our priority market.
The committee members, I believe, Mr. Chairman, have additional information on APTA contained in this packet that looks like a french fry menu. I would like to thank you, as chairman of this subcommittee, and the other members, for your focus on these important issues, and I would especially like to thank full committee Chairman Smith for his outstanding leadership regarding trade issues and expanding market opportunities. He's obviously made that a priority for the committee and we would hope that that's a legacy that continues well into the future.
Page 167 PREV PAGE TOP OF DOC [The prepared statement of Mr. Dunn appears at the conclusion of the hearing.]
Mr. EWING. Thank you, Mr. Dunn. The only thing that would have been better than the brochure would have been some actual potatoes up here for all of us to nibble on.
Mr. DUNN. Well, Mr. Chairman, based on your ethics rules, I
Mr. EWING. Oh, no. I think that's insignificant. We could have gotten by with it. [Laughter.] Mr. Christie.
STATEMENT OF JAMES C. CHRISTIE, MANAGING DIRECTOR OF BRYANT CHRISTIE, INC.
Mr. CHRISTIE. Good morning, Mr. Chairman. Again, my name is James Christie, and I am managing director of Bryant Christie, Inc., a firm that helps exporters reduce trade barriers. I am here today on behalf of the California Pear and Cherry Advisory Boards and the U.S. Hop Industry Plant Protection Committee. On behalf of these organization, I would like to thank the committee for the opportunity to outline some priority issues for consideration during the 1999 World Trade Organization Multilateral Trade Negotiations.
In brief, I offer three issues for your consideration today. They are: No. 1: strengthening the Sanitary and Phytosanitary Agreement; number two, increasing the emphasis on deferring to international chemical residue tolerances; and, number three, reducing tariff levels and eliminating the European Union's entry price system. In the limited time we have this morning, I would like to expand briefly on each of these three points.
First, an initiative that could significantly increase trade and fresh fruits and vegetable products, would be one that strengthen the Sanitary and Phytosanitary Agreement. In particularly, three changes should be considered. The first would require members to standardize methods for quantifying the risks presented by the importation of commercially-packed products. Members should be required to take into account actual commercial conditions rather than academic worst-case scenarios when determining risks. In many cases, when one quantifies the actual risk presented by importing commercially grown and packed products, that risk is negligible.
Page 168 PREV PAGE TOP OF DOC Second, a common definition of reasonable risk is needed in the Agreement. While it is understood that each member may set its own level of acceptable risk, some level of risk must be acceptable to all signatories. If, for example, it could be scientifically shown that the likelihood of a disease being transmitted on a commodity is one outbreak in 38,000-and-some odd years, it should be universally acceptable that that risk is negligible or an acceptable level of risk should be considered and established. It would help if the SPS Agreement provided some guidelines on what would be considered a reasonable level of risk.
Finally, within the SPS Agreement, it would be useful if the SPS Committee could provide members with guidelines regarding under what conditions it is acceptable to require the placement of one member's quarantine inspectors in another member country at the exporting country's or industry's expense.
It is understood there may be times when an exporting industry might want to invite foreign inspectors to pre-clear products in order to minimize rejections upon a product's arrival abroad. However, when such a presence is required by the importing country, it can add considerable expense for the exported product and result in increased product cost and reduced competitiveness. It would be useful to have some guidelines regarding the justification and cost of such procedures.
I would suggest that some of the existing inspection programs currently in place by WTO members may be in violation of the GATT 1947 Article VIII, which states that ''All fees and charges of whatever character shall not represent an indirect protection to domestic products or taxation of imports or exports for fiscal purposes.'' This should be addressed through the strengthening of the SPS Agreement.
No. 2: the second area that should be addressed is the deference to Codex Alimentarius chemical residue standards. I'm sure we can all agree that each nation must be able to exercise its right to protect the health of its people. However, if trade is being inhibited, not because of a health concern, but simply because a national standard has not been set, then importing countries should be obliged to defer to the international standard.
Page 169 PREV PAGE TOP OF DOC This issue is of particular concern to the U.S. Hop industry. Almost every year, the German hop growers have to petition EPA for import tolerances on chemicals that are used in Germany, but not in the United States, and U.S. hop growers have to petition the German Government for import tolerances on products used here, but not in Germany. A great deal of industry and public resources are spent reviewing these annual petitions. In some cases, reviews are not concluded in time, and the disparity in standards can inhibit trade.
In the absence of a national standard, when no negative action has been taken on a chemical and when the chemical has bene positively reviewed and approved for use by the Codex Alimentarius, importing countries should be encouraged to defer to the international standard.
My third issue today is tariff reduction. With the exception of a few sensitive commodities that each country, for political reasons, might need to exclude, significant and swift tariff production should be encouraged.
In addition to the general tariff reduction, the U.S. should press for the elimination of Europe's entry price system. While E.U. tariffs were to have been cut in the Uruguay Round, the duties being collected on some U.S. products, such as cherries, have more than doubled. On paper, it looks like the E.U. has reduced its tariff, but in practice they have increased. The E.U.'s manipulation of the value assessment needs to be addressed, so that reductions are not seen only on paper, but are experienced commercially, as well.
Mr. Chairman, many of these recommendations are specific, technical, and detail-oriented, but it is precisely in these technical details that new trade barriers are found. It is hoped that in this next round of talks we can establish disciplines that will eliminate many technical barriers, and will prevent the creation of new barriers to trade. Thank you very much.
[The prepared statement of Mr. Christie appears at the conclusion of the hearing.]
Page 170 PREV PAGE TOP OF DOC Mr. EWING. Thank you, Mr. Christie. We're just going to now, I hope, engage in a little easy discussion of the issues, and I will direct some questions to the different members of the panel, but, because of the limited number of people here, and the fact that we just have three members on the panel, I think it's good if any of you want to add something, you just feel free to jump into that discussion.
First of all, Mr. Schlect, you had an editorial that was in the Wall Street Journal. Would you want to share what the basic idea of that editorial was, and what they were saying to us, and what your thought on that is?
Mr. SCHLECT. Well, the editorial, essentially, was a free trade orientated editorial that criticized the settlement of an apple dispute we had with Mexico and with our organization that led the U.S. response to Mexico. We settledas an industrychose to settle a case, and establish a minimum pricing standard for our apples going into Mexico. The Wall Street Journal was pointing out that these kinds of agreements subvert the intent of free trade, that the governments involved don't take into account the concerns of citizens, and in this case Mexico.
What we're concerned about is not being able to supply that market fully and freely. We're further concerned about the fact that, not only doesthat a ceiling, orsometimes, as you all know, in commercial life, if you can fix a price, that's a good thing if you can get away with it. These are legal ways to fix prices.
The trouble with that, from our point of view is that it fixes a price intended to protect Mexican apple growers and underneath that price, apples are a world commodity. There are many nations around the world that produce apples, ship apples, and Chile, France, Canada, all these supplying nations can come in and capture market share from that marketfrom the United Statesbecause we have this artificial restriction based on antidumping laws. The antidumping laws, as the Wall Street Journal noted in a previous article last week, had been amended in the 1970's, I think, at the request of the steel industry to make them easier to bring against foreign suppliers and that gets into the test of this cost production, which is a very tough test to meet in an industry like perishable agriculture where prices go up and down.
Page 171 PREV PAGE TOP OF DOC So, anyway, the Wall Street Journal was saying, the U.S. Government use these laws against Florida tomato industry, now Mexico's using it against the apple industry in the United States. Where is the free trade aspect to all this?
Mr. EWING. So, actually, my next question was, is that what we did in the dispute between United States and Mexico over tomatoes? Is there a distinguishing difference outside of we're on one side on tomatoes and on the other side on apples?
Mr. SCHLECT. I have a lot of friends in the Florida fruit and vegetable industry, and they took the opportunity to use the law that was on the books at that time, and still remains on the bookthe antidumping law. There were a number of things done, at least from afar, that had political involvement that were noted by the Mexican officials, and when we went down to Mexico, or when our industry did, the Florida tomato settlement, and the provisions of it, and how it was done all was very clear that they were using that as a model towards settlement of our case. And, what we thought was unreasonable, it was quickly pointed out that this was demanded by the United States in this other case. I don't know the merits of the Florida tomato case, and I'll stay out of that food fight, but I do know that we were directly impacted by the operation of U.S. law.
During NAFTA, as you may recall, Mr. Chairman, Mexico and Canada did not want antidumping laws to be allowed under the NAFTA. It was the United States that requested and required that antidumping laws be maintained. So, the high moral ground was not on our side to fight this, and the idea of taking it to the World Trade Organization, we had to settle if we were to gain some access to the market and not go bankrupt with attorney fees and other costs.
Mr. EWING. Do you have an idea of how much money the U.S. apple industry lost during the 5 months it was out of the market due to the Mexican situation?
Mr. SCHLECT. We don't have a precise figure, but we were out of the market for 5 months. We normally shipin the previous year, had shipped 6 million cartons42-pound cartons, which somewhere between $10 to $20that's $50 to $100 million worth of trade.
Page 172 PREV PAGE TOP OF DOC The trouble in terms of just the displacement of the least 5 months of that flow of productthere wouldn't have been, maybe, the flow in September and October because of another problem, which Mexico has got an extensive phytosanitary regime required on the U.S. industry with inspectors, and restrictions on shipments; that's another story, but, the actual shipment loss went down to about zero until just this last week. We still don't know how soon trade will really bounce back.
The other factor in these kinds of cases is it's not just the lost market in Mexico. This season should have been a good season for our growers given overall supplies and markets, but when you carve out the No. 1export market and that has to be displacedthose shipments to domestic and other foreign marketsit lead to a lot of loss throughout the United States apple industry, not just the State of Washington.
Mr. EWING. To all of you, this question. The Uruguay Round Agreement on agriculture was entered into in, I believe, 1995. Do you believe that this agreement has, overall, been beneficial to agriculture and to your potential segments of agriculture, and, I think it probably goes without saying, you all would agree that further liberalization of these trade laws, with our trading partners, would be beneficial. I guess the basis of that question is, and I have a hard time in my own mind relating back to, prior to the GATT Agreement, but I wonder if, in fact, we have a lot of talk about the problems that we have but are generally things better in our trade with agricultural products?
Mr. SCHLECT. I would say yes. I was involved before the Uruguay Round concluded, and we, as you know, have had trade international agreements since post-World War II. These are processes of improvement. You don't get, and haven't reach the ideal yet, on those improvements, but when you look back, at least under the Uruguay Round, there are disciplines, there is a call for international standards, and the S&P section is particularly beneficial, and that was not a given in the last round that we could achieve that. There were people that were critical that, within our own country, and other countries, that somehow that would dummy down the system of food safety, and it has not done that.
Page 173 PREV PAGE TOP OF DOC I think there is great hope that as we get into, especially the Codex and the international chemical residue setting, there are a lot of things in terms of efficiencies and overall consumer safety that can be achieved through these international bodies and, I think there is a collectivebetter situation for trade and there are some mechanisms to bring trade disputes that weren't there in the past.
In one of the cases we're involved with, as the industry of the United States has taken a varietal case to the WTO Dispute Resolution Panel involving Japan and its failure to allow test results for one variety of an apple to be used for another variety of an apple. So, those processes weren't in place 5 or 10 years ago, and now they are. They're being tested and we just need to make it work. But, it isn't a perfect world now, but it wasn't a perfect world 10 years ago, and I think it is better now, in my opinion.
Mr. DUNN. Mr. Chairman, I think, I would agree with those comments. I have not been as personally involved in the past with some of these trade negotiations as I have been in the last year or so. We feel that some of these discussions in the past, while they've been productive, have left out some major segments of agriculture and certainly not gone as far as we would have liked. The primary reason for APTA's formation was to focus on potatoes and all future trade negotiations and, hopefully, make those issues as they impact potatoes a priority item in all future negotiations.
Mr. CHRISTIE. Mr. Chairman, I would concur with Mr. Schlect's comments, as well as with Mr. Dunn. I think that we certainly havethere are improvements to be made and we do focus on the problems in many cases, but, in general, it's important that we continue these talks. In general, most of the people that I represent, or the industries that I represent, are in favor of continuing or extending fast track authority for the purpose of getting back to the table and improving upon some of the issues that are still outstanding.
Mr. EWING. There have been some indications that the U.S. and the E.U. were considering pursuing trade liberalization initiatives prior to the WTO negotiations. A concern that was brought up here at a trade hearing with Secretary Glickman just a week or two ago was that reports that agriculture might not be part of that trade negotiation. I would assume that you all would believe that to enter into those negotiations and not have agriculture as part of it would be very damaging?
Page 174 PREV PAGE TOP OF DOC Mr. SCHLECT. Excuse me, Mr. Chairman, those negotiations with the European Union for a free-trade zone with the United States, is that what you're referring to?
Mr. EWING. Yes.
Mr. SCHLECT. I would certainly say that those talks should include agriculture. Agriculture needs to be included in all these talks, whether bilateral, multilateral, like the free trade agreement with the Americas, or any new free trade zone that might be contemplated by our U.S. Government.
As you well know, this country is a huge, agricultural producer, and competitive on the world market, and most of our sectors of agriculture, especially, our crops, and to exclude agriculture where we have a competitive advantage, and allow the Europeans where they don't have a competitive advantage in agriculture to exclude that sector from the give and take in negotiations is just, I think, misplaced confidence in the system. I think we need to be in there and agriculture should be included.
Mr. DUNN. No question. I would agree with that and probably, you know, the potato industry needs to take part of the blame for not having been included in some of these negotiations in the past. I can tell you that that's something that we hope to rectify and we'll be doing everything we can to make certain that we are included in the future.
Mr. CHRISTIE. I would concur and just add that I think it's especially important in any agreements or negotiations with the European Union that agriculture be included because they produce so many of the same products we do and we feel we can compete with them on a level playing field.
Mr. EWING. Well, I brought that question up to Secretary Glickman when he was here, and to Trade Ambassador Peter Scher, and we were given assurances that we would not be left out of any negotiations like that. I think it's probably to all of our benefits to be sure that, if those negotiations go forward, that we are indeed a part of that.
Page 175 PREV PAGE TOP OF DOC I will travel with Chairman Smith, and others, to Europe tomorrow, and we're going to be meeting with E.U. officials on trade issues thatwe'll concentrate on trade issues, and we'll be in Germany, France, and Brussels, Belgium. You probably have covered it in your testimony, what would youwhat advice would you give to me, and then I can pass it on to Chairman Smith, are the most important issues that you would think we should talk to the Europeans about?
Mr. SCHLECT. Well, from my perspective in Europe, I think one is a commitment to make the WTO process work and it will require the Europeans cooperation and full faith to make it work as these negotiations go forward. To underscore the fact that in any trade negotiationgeneral trade negotiationsagriculture does have to be a component of that and the Europeans need to meet their commitments under the previous agreement, and I'm not an expert on all that they agreed to, but, I think, there are things that are still left unsettled after the last negotiations, and their commitments need to be kept.
And, then, further, some of the technical items, such as Mr. Christie raised on entry price systems for fresh fruit. There is a canned pear case, canned peach case, canned fruit case that the Europeans on subsidies is kicking out there that needs to be resolved and, again, I'm not the expert on that, but those kinds of specific issues, at least within our industry, are important. And, again, I think the leadership of the Europeans is going to be just critical to the success of the World Trade Organization and they need to know that we will be watching their follow through on their commitments of the agriculture text and seek their support for things like the sanitary and phytosanitary agreement.
Mr. DUNN. Mr. Chairman, it would probably be presumptuous of me to give you and Chairman Smith any advice on what to do in your negotiations over there. I would point out, however, that the priority countries for potato products we've identified are in the Pacific Rim area because we see that as the greatest growth potential in terms of the fast food chains' growth in the number of stores they're intending to build over the next 10 years. So, our priority would be Pacific Rim countries as opposed to Europe.
Page 176 PREV PAGE TOP OF DOC Mr. CHRISTIE. And, as I noted in my prepared statement, I think that the entry price system that Europe is currently using should be explored. I think that, possibly, they're manipulating it to they're advantage and it's not always as transparent as it, maybe, should be. And, also, the deference to international standards on chemical residues.
Mr. EWING. Mr. Christie, regarding Europe's entry price system, could you explain how you feel the E.U. manipulates the value assessment and how can this be corrected?
Mr. CHRISTIE. Well, to summarize, the way it used to operate is that every two weeks the Europeans would establish a reference price for the world, based on all imports, and being that the U.S. generally had a higher priced product, we actually had an advantage in that system as the price was lower or the reference price that the tariff wasor the duties were collected on, was lower than our average price going in. As it is now, using CIF values, which is not ayou can either use a CIF value or you do a daily averageor daily reference price from the product or the country of origin. That's where it gets a little tricky. But, in general, what they did was they reduced the tariff, but because they're using a new system of valuationnot using the world average price, but using the actual U.S. pricethe duties collected on our products have gone up. So, I think the way to correct that would be to lower the tariff further so it gets us, at least, equal to where we were prior to the Uruguay Round.
Mr. EWING. Is there a reluctance, do you believe, in Germany, to defer to international standards on chemical tolerances?
Mr. CHRISTIE. I would not say that it is, perhaps, much more difficult than it is in the United States. I think it's a bilateral issue and some of it is due to our own political systems and the systems in place for addressing chemical residue tolerances. And, actually, we're exploring a mutual recognition agreement with the Europeans so that they might accept our system and we might accept theirs. So, I think there is room for, and there is opportunity to correct the situation. We just have to formalize it.
Page 177 PREV PAGE TOP OF DOC Mr. EWING. When you say you are working with the Europeans, is that in your particular segment of the agricultural trade industry?
Mr. SCHLECT. Yes, that would be specifically for the U.S. hop industry in this case.
Mr. EWING. Do you think that some of those negotiations and, hopefully, agreements could be applied to other segments?
Mr. CHRISTIE. I would certainly hope so. Yes.
Mr. EWING. And, what, that's being done at a private level between industry and industry?
Mr. CHRISTIE. Yes. It's a bit exploratory, Mr. Chairman, at this point, but, so far, the feedback that we've received from Europe has been positive, and from the EPA, as well.
Mr. EWING. Does anybody else want to comment on that? The sanitary and the phytosanitary issues, they seem to loom very large in almost every segment of agriculture. Based on your experience, do you believe that what's in place, in the WTO policies, that countries are applying these things in a pretty fair manner or have they been kind of arbitrary and beneficially applied by the different trading partners?
Mr. SCHLECT. Well, in our experience, it's varied country to country. There are some countries, obviously, that are fully complying with the text and the spirit of the WTO, but there are many countries in South America, Asia, a lot of areas of the world, that are big markets where these are extraordinarily susceptible to manipulation and theywhen you lower tariffs and you eliminate quotas, which is what the thrust of the rounds from the Dillon Round on have been, to get those tariffs down, and the thrust of the Uruguay Round was to move towards zero tariffs, domestic agriculture, no matter if its this country or another country, will look for ways to creatively halt competitive imports, and these are very effective ways to do it when you get into pests and disease and improbabilities.
Page 178 PREV PAGE TOP OF DOC One other example of this that the committee ought to be concerned about that we haven't talked about is the food safety initiative of the administration. There is a good example of where we may be creating a whole new set of these technical issues by requiring foreign governments to meet some kind of equivalent U.S. standard of food safety. That presents a whole new area where countries might come up, and say, in order to ship product into our country, we need to send inspectors to your country, we need to evaluate your systems; all these things have a very corrosive impact on the movement of trade, especially imperishable products.
For example, we had this shipment down in Venezuela last winter held up at the dock because of a dispute over a particular pest that wasn't notified or put on the paper that had the companythe lode from APHIS, the Animal and Plant Health Inspection Service. If it was steel or if it was a bolt commodity that, and it could be on the dock at 100 degree weather for a week while you sought these things out, that's one thing. If it's in a tropical country, and it's a perishable apple, or peach, or pear, or whatever it is, you have to make decisions in within 12 to 24 hours and thatknowing the countries have to ability to hold up trade because of these technical issues is very difficult for our kind of business.
And, the more that can be done to strengthen the WTO S&P Agreement the better. But, as long as countries don't have the spirit of free trade, and have less than ideal political legal systems, we're going to be battling this, which gets back to some of my written testimony, we need, as a Government, I think, or as a people, to support the activities of the USTR and USDA in this area and recognize that it is going to take more people and time than the old days when you were just talking about tariffs. I mean, people have to be ready and get on planes and go to Caracas, Venezuela, and say, we're the U.S. Government and this is right or this is wrong, and that costs money and it costsit needs manpower. So, it is not an ideal world, in my opinion.
Mr. EWING. Just to follow-up to your response there, back in the old days when we had tariffs, are you indicating that the phytosanitary issues weren't as important because, I mean, it would have seemed to me that they were important, regardless of what level the tariff was?
Page 179 PREV PAGE TOP OF DOC Mr. SCHLECT. Right. There were cases in the old days, and I'm not that old, but going back around twenty years, there have always been cases where you have a legitimate pest or disease problem, in cattlehoof and mouth disease or, in our case, codling moth insect. There are legitimate situations where a country might want to quarantine product from a country that has the pest or the disease and those always took place. Those were a given. And, how to solve the practical issue of those quarantines was handled in the old days.
What is different now is that those countries that really didn't have a problemlike Brazil has hada better example, Yemen, which is notdoesn't leap to mind is a major apple producer, and it doesn't leap to mind where it is on the globe, but it's on the Saudi peninsula, is required to bring an inspector over to the United States apple industry, to Yakima, WA, before they will allow shipments of apples from the United States to go to Yemen because of alleged concerns on phytosanitary reasons. They want to be convinced of the U.S. system, and they want to be convinced that our apples are not going to be a problem to their country.
Those kinds of issues, I don't think, would have really happened in the past because Yemen probably would have had 100 percent duty and just said, no, we don't want your product, period. Now, they're choosing a different way to do it, and it may delay things, but we're working on it through the plenary cultural service. But, at least now, there's a vehicle to bring them to the table to discuss why they're doing this. But, it's a long, drawn-out process and it's not ideal. But, countries like that and other countries are moving toward these technical barriers.
Mr. CHRISTIE. I would add that I spend probablyour company spends the majority of our time on phytosanitary issues, in particular, and that if you read the language in the agreement, the Uruguay Round Agreement, I think there have been major improvements in that language. However, the way that they're implied orappliedis still problematic.
Page 180 PREV PAGE TOP OF DOC Mr. EWING. Do you think that we have effective enough ways to address the issues of the phytosanitary if they are being used improperly as barriers? Do you thinkdo we have the mechanism in place? Is the WTO and other mechanisms moving fast enough to solve problems out in commerce as it's moving if these issues are used as a barrier? Mr. Christie.
Mr. CHRISTIE. I would just say that one of thewhat I think one of the problems is, isn't the timing of the issue. We have better dispute settlement procedures and, but, as the nature with anyperhaps any issue of this typethe time, the duration, and the human resources that need to go into resolving one of these cases can really be prohibitive. We saw that with U.S. cherries to Mexico, where we took it to the SPS committee under the NAFTA agreement, and the process took 2 1/2 years, and that's just too long. People are not going to use the process if it can't be used efficiently.
Mr. SCHLECT. I think the WTO is kind of like the Supreme Court in our country. I mean, it's a mechanismit's a law, and then it's an appellate mechanism, and it is never going to be in a situation where it may decide something and a problem arises and then it resolves it within 30 days or 60 days, which is what we want. I think what it is there, though, is for a systematic abuses by member countries of the provisions of the text and some of those will take some time, but the United States has to be aggressive about taking those forward because, often times, these cases come up and then it's bilateral negotiations; it's our country with the other country, and our country threatening to take it to the WTO, which ought to have some kind of moral impact on that other country, and it often does, like Japan. There is a reluctance to be viewed as a bad trading partner.
But, the WTO, itself, I don't see how it can be made over into something that decides these issues on a weekly or monthly basis. The trick is to have good bilateral negotiators in our country, have a clean and clear system of negotiating authority, and put as maximum pressure on the other country as possible to get a quick result. But, that's how I see it.
Page 181 PREV PAGE TOP OF DOC Mr. EWING. When you're out there in the business of trading, do you believe that it's pretty obvious, at least, let's say, from our standpoint, that they're being used as a trade barrier at times and not at other times? Is it pretty clearly evident, do you think, to American shippers?
Mr. DUNN. Mr. Chairman, as I mentioned in my prepared testimony, we certainly believe that's the case in Mexico, for example. At the present time, we can see no justification for what they're doing based on any sort of sound science. And, as has been mentioned, you know, until they decide to really negotiate in full and good faith and live up to the spirit of the agreement, these sorts of things can be used in kind of an arbitrary manner.
Mr. SCHLECT. From our perspective, of course, they're instances that just are blatantly protectionist. There are also, to keep in mindand Mexico's a prime example of a country that plays the role of saying, well, we can't get product X into your country, and we've been told that these are the restrictions for product X, and until we get product X in, your product that you want to export into Mexico, is just going to be on a shelf because we aren't going to move until this parallel item is resolved.
So, you get intoand, what I'm concerned about is, again, the technical negotiations are imperative, but there has to be a reality check here that politics are involved, and, I think, like within USDA, they're still struggling with how to handle these issues.
But, I think that at some point, you need to have political trade involvement, either FAS or USTR making some of the decisions that we are going to aggressively pursue this case or that case and not let it be bound up by the technical people at whatever agency, either the Mexican Government or our own, where they go back and forth saying, gee, you won't let our product in without a cold treatment of 40 days, or you won't move quickly on this product; until you move quickly on that we're not going to address this problem. So, those kind of talks are very common and in theory of trade, WTO, they shouldn't occur, but they do.
Page 182 PREV PAGE TOP OF DOC And, furthermore, in other countries, it's just hard for our people to believe that we have to have an inspection program where we pay Mexican government officials to look at our fruit, or Japanese officials to look at our cherries. Japanese have been in our area for 20 years with inspectors, and never found the pest that they're concerned about in commercial shipments, and yet, every year that cost is added on to our product going into that foreign market. So, it's a reality.
Mr. EWING. Do you think the lines of authority within the U.S. Governmentwhich agency should take the lead on technical issues regarding the sanitary and the phytosanitary disputes, do you think that's clear enough, or do your companies have trouble when you just kind of run up against our own bureaucracy?
Mr. CHRISTIE. I'd say, I think it's fairly clear. Sometimes, I think there could be better coordination between FAS and APHIS and, perhaps, USTR; but, otherwise, I think it's fairly clear.
Mr. SCHLECT. I would disagree slightly. It may be clear to somebody who's worked on this issue for 20 years, but I bet you your average person on the street, or grower, that's trying to export understands who they need to go to achieve that result. I think that the problem I see is that you almost have to get to the Secretary's office before you get to a natural decision point if there is a dispute between the technical side of the agency or the political trade side. And, I think, that's too high a hurdle for most people and creates too much confusion in terms of settling these negotiations. I think it ought to be clearly stated at some place below the Secretarial level that decisions can be made on negotiations that involve technical issues without going all the way to the Secretary's office.
Mr. EWING. Congressman Boswell has joined us. You can jump in here any time.
Mr. BOSWELL. Thank you, Mr. Chairman. I feel free to do that and I appreciate it, but I'm not going to be able to stay long, but I want to kind of get an idea for what the tone is here, and I appreciate what you're doing.
Page 183 PREV PAGE TOP OF DOC Mr. EWING. Thank you. You feel free to ask questions or just jump in anytime.
Mr. BOSWELL. I will.
Mr. EWING. Another area that I kind of wanted to get into, and we've touched on it, is the administration's proposed new import food safety initiative, and maybe go over that a little more. I think a couple of you mentioned it in your remarks. But, FDA would be given the authority to halt imports of fruits and vegetables from foreign countries whose food safety systems do not meet U.S. standards. FDA is able to halt import if a foreign country refuses to allow FDA inspection. What's this going to mean? Do you think we're prepared to make this work? Do you believe the initiative could cause some unwarranted trade interruptions or even retaliations from our trading partners?
Mr. CHRISTIE. From a trade standpoint, I think that the U.S. Government should proceed with extreme caution on this issue because I definitely see it being problematic. As Mr. Schlect stated earlier, we always have to be conscious of the fact that when the U.S. begins developing and implementing new regulations, those, more times than not, come back to us. And, reciprocity is a big issue in trade these days, and, I think, if we're not very careful, this is going to become the next major forum for technical barriers to trade.
Mr. EWING. Do you think the new regulationsthe initiative is necessary or partly necessary?
Mr. SCHLECT. Mr. Chairman, I've worked on this issue for our industry since it came about or was publicized. I don't personally think it is necessary. I think, on a couple of levels: one, as a domestic producer organization, what we worry about is if rules and regulations are going to be implemented by FDA on U.S. domestic agriculture just in order to have those same set of regulations imposed on foreign agriculture, number one, we have a problem with the Federal Government coming onto our orchards and telling our orchardists how to grow an apple; that's one level.
Page 184 PREV PAGE TOP OF DOC But, the second, on the trade level, there is a problem with our Government going aggressively overseas, where they're not invited, I don't think it's necessary. I think the commercial market will dictate the result. I think in the case of Guatemalan raspberries, no domestic supplier of fruit and produce in the United States would take that product until it was deemed to be safe. And, the market will work and avoid safety issues or prevent them much more effectively than the Government.
I personally don't see how you can have enough FDA inspectors go worldwide, especially production field production. It's highly unlike meatpacking and other items where there's a concentrated choke point of inspection. So, I see a lot of difficulty in this area.
Mr. EWING. Anybody else?
Mr. DUNN. We would agree with that.
Mr. EWING. We also have the, and I guess the two aren't necessarily related, but the changes in the chemicals that are going to be allowed to be used in your industries, and, how do you think that's going to impact your ability to ship, overseas, methyl bromide?
Mr. SCHLECT. Yes. Methyl bromide isthere's a couple of things there, Mr. Chairman, at least from my perspective. Methyl bromide is essential to our shipment of cherries to Japan and some other of our products to other countries. But, if methyl bromide is taken off of the market in the year 2001 because of the operation of the Montreal Protocol, that would have a devastating effect and I would urge this committee to work on the legislation, I think that's been introduced and support the use of methyl bromidethe continued use of methyl bromidefor agricultural uses, especially for post-harvest fumigation purposes where we can be in compliance with the Montreal Protocol, but have to amend the Clean Air Act.
Page 185 PREV PAGE TOP OF DOC Methyl bromide is essential, and a lot of these countries, I don't think, will accept and alternative and the alternative, irradiation, is not an alternative when you're talking about shipping to Japan. So that's a big issue. The other thing is on just the implementation of Food Quality Protection Act. We are going to lose, I think, some very valuable chemicals in that process and the impact there may not be as much on domesticit will give an advantage to foreign producers in a lot of cases because they will have access to tools that are otherwise deemed to be safe internationally, but our own country takes them off the market for use on a particular crop because of the risk calculation.
So, our apple growers may not have a chemical that is widely used, and is accepted as safe, in Chile and other competing nations, and, I think that is a competitive threat that Congress needs to think through in terms of the implementation of the Food Quality Protection Act.
Mr. CHRISTIE. Yes, and I would just add that methyl bromide is essential to the continued export of California cherries to Japan. The industry currently ships between $40 and $50 million of products there each year, and that occurs over about a 6-week period, and it's, by far, the largest, single export market for the California cherry industry, and, while I'm not directly involved in the efforts to maintain that product, the industry certainly is through various coalitions and, I know, thatas well as the Northwest Horticultural Council.
Mr. EWING. Do you know if is work on a substitute?
Mr. SCHLECT. There is, Mr. Chairman. The Agricultural Research Service has been charged by Congress to look at this, now the Secretary, especially Mr. Rominger, at the Department. There has been a lot of activity in seeking substitutes because we do know there's a public concern, whether rightly placed or wrongly placed, and if we can find another way to protect post-harvest fumigation, or, I don't represent the strawberry industry of California or Florida, but I do know that in those areas the soil fumigation aspects of this are critical and, there, it is a competitive thing if Mexico and other countries can still use methyl bromide. It's a huge problem for them, competitively, in the world market. But, alternatives are being sought out and, at least to date though, in the area I'm aware of, in post-harvest, there hasn't been a alternative that's shown to be effective and efficient and available.
Page 186 PREV PAGE TOP OF DOC Mr. EWING. Mr. Dunn, you mentioned your request to the USTR that frozen potato products be considered a priority item for tariff reduction with China in the WTO accession negotiations. Was the USTR responsive to this request?
Mr. DUNN. Mr. Chairman, we feel they were. We have met with them actually a couple of times and discussed these issues. They said they were impressed by the fact that we have the entire potato value chain represented and in discussions with them subsequent to that, they seemed to indicate that they've taken our concerns seriously, and are attempting to do whatever they can to further our goals.
Mr. EWING. What is the potential market in China, do you think, for frozen potatoes?
Mr. DUNN. Mr Chairman, we think that, long term, the market is tremendous. When we formed APTA, it appeared to us that, over the course of the next 5 to 8 years, the market for frozen french fries in Pacific Rim countries, including China, would double. And, based on their economic problems, that's been delayed somewhat. But, we still anticipate that happening within the next 10 to 12 years.
Mr. EWING. Does India also, I assume by sheer numbers, give the opportunity for a major market?
Mr. DUNN. We certainly hope so. As you know, we've pretty much been shut out of that market to date. But, as you indicate, because of the numbers, we think that there's a tremendous potential in India, as well.
Mr. EWING. Seven of the top 10 export markets for California and the Pacific Rimthis is, of course, clearly a vital market for the State of Californiawould you want to say what you think is the most effective means to maintain and expand our market access in the Pacific Rim areas.
Mr. CHRISTIE. Access has been, depending on the country, not the biggest problem to date. Our major market's in Japanlet me rephrase that. It depends, specifically, on the individual market. I would think that the biggest threat right now is the currency crisis in that area of the world and that will have a major impact on similar exports until that can be corrected.
Page 187 PREV PAGE TOP OF DOC Mr. EWING. I certainly meant to include the Northwest, too, with California and the west coast.
Mr. SCHLECT. That's alright to keep it separate, Mr. Chairman. [Laughter.]
Mr. EWING. Well, we have northern California and southern California now, don't we? [Laughter.]
Mr. SCHLECT. And they're a great State. One thing I would add to that is, and it may not be within the purview of this subcommittee, but it is timely: the Market Access Program, which has been very valuable in our trade in Asia especially, is under some severe attack and the budgetary process, I think for reasons other than the merits of the program, and I just urge the committee to recognize that trade promotion is a component to market access work because if you get access to market and don't market the crop, promote it properly, the access is not useful. So, all the work we go into: trade negotiations, opening up markets, that program really helps. And, there are a lot of us that represent crops where we don't have a dominant, you know, large company that can go in and have their own brand name, like Coca Cola or Pepsi Cola, so this is a good program, I think, for all of U.S. agriculture, but especially crops in Asia. So, Market Access Program is something that the committee ought toand I know that's been supported in the past, but it's at a critical juncture.
Mr. EWING. We achieved a major concession in the Uruguay Round about the elimination of the veto right over disputed decision, what further reforms, do you think, would be helpful in dispute resolution as we move into further negotiations?
Mr. SCHLECT. Well, I'm not sure, and I would trust the judgment of our negotiators at the Foreign Agricultural Service and USTR; they are more directly involved. I think, though, it's almost, well it is, 1998; the agreement is, I think you noted, was 1995, signed. So, 2 or 3 years of implementation really haven't provided a full test of the system. We're just now getting cases to the WTO and giving to panels and getting decisions, and, I think, that was a good reform.
Page 188 PREV PAGE TOP OF DOC As you know, I think in a European case on genetics, there was a case that came down in the United States' favor that would never haveit would have been blocked by the Europeans in the past, and, I think, we need to support that and recognize that we're going to lose some of those cases, and everytime we lose one, we can't say, let's drop the system because we've got to improve this system, and I would trust our negotiators to come forward to the committee and explain what they thought could be improved because it's just too early in the process of our cases to say whether they really are working or not. They're just moving through the system.
But, certainly, more resources, I think, at APTA and USDA to make sure these cases do move so that weit is going to be more costly, as the U.S. Government, to move these case, but they do need lawyers, they do need negotiators, and we can't have a bottleneck where only 1 or 2 or 3 cases can be handled by the system. The system's got to move itself to accommodate more cases, I think, as they come up.
Mr. EWING. Anyone else?
Mr. CHRISTIE. I'd just add that I think that it was improved significant during the Uruguay Round and that on paper the dispute process looks pretty good, but, I think, in practice, we still have to work through some of the issues and, perhaps, add some level of discipline to adhering to those standards.
Mr. EWING. I think that gets to the next point that I was kind of leading to. We have the dispute resolution process but then do we have the enforcement to see that a country changes the practice that has beenthere's been a ruling on, or do they find other ways to circumvent it? What do you think the experience has been out there?
Mr. CHRISTIE. I, personally, have not been involved in a case where we've had that problems, but it is my understanding that there are certain guidelines available to take alternative action in those cases, and I just have not been involved in pushing one of those forward.
Page 189 PREV PAGE TOP OF DOC Mr. EWING. Anybody?
Mr. SCHLECT. I have not been directly involved in one that's ruled in our favor and yet not been implemented. I think other people have had that problem in agriculture and it needs to be addressed, but I'm not aware of those circumstances.
Mr. EWING. We talk a lot hereI don't know if you do out in the real worldabout judging these things with good scientific evidence, and you'd better have sound science behind the decisions. Do you think it's possible to establish rules thatwhere we can really define what is good science to making these decisions on the phytosanitary issues?
Mr. CHRISTIE. I think we have to because the language sounds great. These rulings, these disputes should be settled based on sound science. However, in practice, if you put two scientists in a roomI'd better be careful here, they can argue for many hours over how to resolve and mitigate a certain level of risk or a certain problem, and that's why, as I said in my prepared comments, there needs to be some standardization of this process and quantification of risk, and there should be an effort to find what is an acceptable level of risk because otherwise it's being used as a trade barrier.
Mr. SCHLECT. I think as the system evolves over time you'll get to a stage, and, I hope, we do move this to a stage, where there are certain items that can be accepted internationally and protocols reached that can be applied uniformly on chemicals, not chemicals, but on certain pests and disease so that we don't have to negotiate these bilaterally with 150 countries around the world. For example, you might find fire blight, which is a disease that's particularly prone to pear trees.
There may be a way that scientifically there is a universal agreement or near universal agreement that commercial shipments can occur if treatment acts is applied, and if they can come to that kind of agreement at the international level, then it would be up to a specific country to say why their country doesn't accept that treatment that's universally accepted. And, I think, that's one way the international body might move and, over time, kind of address these particularly different problems.
Page 190 PREV PAGE TOP OF DOC Mr. EWING. Gentlemen, you've been very patient and very responsive, and I would just ask if there's anything else that you'd like to have in the record or any subject matter that we haven't covered that we should maybe talk about before we wrap up this segment of the hearing?
Mr. DUNN. Mr. Chairman, we'd just like to, again, thank you for focusing on these issues and for including potatoes in this panel. We think it's very important for agriculture in America and it's a very worthwhile, productive thing to do and we appreciate your help.
Mr. EWING. Thank you. Anyone else?
Mr. CHRISTIE. Mr. Chairman, I would just add that I think that I would be remiss if I didn't express my client's support for the Market Access Program in Asia. When you asked that question I was thinking, specifically, of technical barriers, but the Market Access Program is essential to the continued development of export markets around the world for certainly the California Cherry and California Pear Advisory Boards. And, thank you very much for the opportunity today.
Mr. SCHLECT. Thank you, Mr. Chairman.
Mr. EWING. Well, with that, I will excuse the panel and I do have a statement from Chairman Smith, which he's asked to have included in the record, and if there are no objections, it will be included in the record. The record of this hearing will be kept open for a reasonable period of time if anyone chooses to submit anything else for the record. We are pleased that you could be here and if there are no further questions, we will adjourn this hearing and thank you again for your participation. We adjourn.
[Whereupon, at 10:47 a.m., the subcommittee adjourned subject to the call of the Chair.]
[Material submitted for inclusion in the record follows:]
Page 191 PREV PAGE TOP OF DOCStatement of Christian Schlect
Thank you for your invitation to appear before the Subcommittee on Risk Management and Specialty Crops at a public hearing scheduled for Wednesday, April 1 on the subject of agricultural issues related to the 1999 World Trade Organization (WTO) Multilateral Trade Negotiations. I look forward to this opportunity.
Recognizing your desire to keep the hearing as concise and interactive as possible, I am submitting the following in support of the five minutes allocated to me for oral testimony.
I have served as the president of the Northwest Horticultural Council (NHC) since 1980. This trade organization represents growers and shippers of deciduous tree fruits in Idaho, Oregon and Washington. A large part of the NHC's work over its 50 year term of existence has been on international trade policy issues affecting apple, pear and cherry exports.
Our sales are world wide. Over the years, we have encountered many difficult problems in achieving fair access to the international market place. Some we have overcome, some we are still fighting. Technical barriers are easily erected by a foreign government intent on protecting its domestic agriculture from competition. These walls against trade can be extremely difficult to remove.
In terms of the 1999 WTO negotiations, I believe the U.S. Government should be working now to identify ways to strengthen the accord reached at the conclusion of the Uruguay Round. To assist, I believe Congress, as soon as possible, should grant the Administration fast track trade negotiating authority thereby fully allowing the U.S. Government to aggressively act as the primary world leader in market opening efforts.
With or without fast track, the Administration should be working toward a position of improving the text and operations of the WTO as it relates to agriculture. Our industry's experience indicates that the Sanitary and Phytosanitary Agreement is extremely helpful but needs additional resources and refinements. As the WTO system begins to work in terms of technical issues, more and more of these thorny problems will find their way via Washington, D.C. to Geneva. Our Government needs to develop clear lines of authority between its separate departments and agencies on how these issues should be handled and decide on funding mechanisms and amounts necessary for the technical support required for successful presentation of cases.
Page 192 PREV PAGE TOP OF DOC Another aspect of WTO negotiations we are concerned about are the accession talks involving such major economies as mainland China, Taiwan and Russia. All are important potential or current markets for U.S. agricultural goods and every effort should be made, as these countries join the WTO, to force reductions in existing high tariffs to reasonable levels if not zero.
On yet another front, the NHC believes the U.S. Government should take the lead in removing agricultural trade from the permissible scope of national antidumping laws. These laws are the last refuge for those countries seeking protection for uncompetitive domestic agricultural sectors after U.S. trade officials have gained hard fought for real reductions in tariffs or quotas at the end of bi- or multi-laterial trade negotiations. Antidumping cases brought by foreign producers in countries with less than model legal systems can be quick and effective barriers to trade that are all but impervious to attack. These cases are becoming more frequent and are extremely costly to the U.S. crops that have been targeted.
I believe the U.S. Government has a good system for agricultural trade negotiations in place through the joint cooperation of the Foreign Agricultural Service at the Department of Agriculture and the Office of U.S. Trade Representative. These two agencies may need additional resources in terms of personnel as 1999 negotiations draw closer. I would also like to point out the importance to our industry of the work performed by USDA's Agricultural Research Service (ARS) and its Animal and Plant Health Inspection Service (APHIS). Both APHIS and ARS have essential roles to play when our domestic agricultural interests are trying to achieve foreign market access in situations where pests or diseases are cited as the reason for exclusion.
In the spirit of brevity, I will conclude at this point and look forward to answering any questions that might be raised by these general comments.
The requested information on my own background is enclosed with this letter. The NHC has not received any Federal contract or grant within the last two fiscal years.
Page 193 PREV PAGE TOP OF DOC
Statement of Mark Dunn
Good morning Mr. Chairman and members of the Subcommittee. My name is Mark Dunn. I am the Director of Governmental Affairs for J.R. Simplot Company, a potato processing company in Boise, Idaho. I am here today representing the American Potato Trade Alliance or APTA.
APTA is a coalition of the three main sectors of the U.S. potato industry including: (1) U.S. potato growers represented by the National Potato Council and several state grower and industry commissions; (2) major U.S. potato processor companies, including J.R. Simplot, Lamb-Weston and McCain Foods, which companies process and export frozen french fries and other processed potato products; and (3) U.S. Quick Service Restaurant chains, such as McDonalds and Tricon, which restaurant chains are major purchasers of U.S. frozen fries domestically and in export markets.
APTA was created in June 1997 as a cooperative effort among these U.S. potato industry sectors to address market access issues affecting U.S. exports of frozen french fries and other processed potato products. Through this effort of combining resources and competitive pressures, APTA could be more effective than the individual sectors in:
(1) Achieving more immediate reductions in trade barriers for U.S. french fries and other processed potato exports;
(2) Encouraging the improvement of foreign infrastructure affecting sales of U.S potato products; and
(3) Impacting legislation and trade policy issues that affect U.S. processed potato products.
As an immediate goal, APTA members are seeking reductions in tariffs and other market access barriers in the important Asian Pacific markets of China, Indonesia, the Philippines and Thailand, and in Mexico and India. These markets are considered some of our industry's most promising growth markets for U.S. frozen potato exports, and except for India, are members of the Asian-Pacific Economic Cooperation or APEC group.
Page 194 PREV PAGE TOP OF DOC Although the focus of my comments today is on APTA's goal of achieving tariff reductions in the Asia-Pacific countries through the APEC tariff liberalization initiative, through the 1999 multilateral agricultural negotiations, and through other available forums, the U.S. potato industry's interests in multilateral reform expand well beyond this. Two other issues are transparency and other problems with the Uruguay Round sanitary and phytosanitary agreement and our industry's long-standing concerns over market access constraints and subsidies
In the area of sanitary and phytosanitary (SPS) issues, we have seen that countries like Mexico are moving all too slowly to undertake required risk assessments and pest risk analyses to justify their SPS constraint measures and that such countries are reluctant in the interim to adopt internationally recognized standards that would open the market for trade. We are hopeful that greater transparency and clarity in defining a country's obligations to support their SPS measures with science can be achieved in the 1999 round.
For APTA, the 1999 round of multilateral trade negotiations in agriculture is only one step in a series of trade negotiating opportunities that together can achieve the tariff reductions and market liberalization we are seeking in key Asian Pacific countries and in India. We caution the Administration not to wait for the 1999 exercise, but to pursue aggressively ongoing market liberalization opportunities for frozen potato products through APEC tariff liberalization, through WTO accession negotiations with China, and through WTO dispute settlement with India over balance of payment restrictions.
In APEC, we urge the U.S. Government to vigorously support processed foods as a sector for early voluntary tariff elimination among the APEC countries and to include processed potato products in any U.S. Government-backed proposal. APEC countries last year purchased nearly 80 percent of all U.S. frozen processed potatoes, which accounted for 1.3 billion pounds of potatoes grown by U.S. farmers or an estimated 10 percent of the U.S. crop. Most APEC countries (( including the priority economies of China, Indonesia, Thailand, the Philippines and Mexico (( continue to have high tariffs, which particularly prejudice our high-quality, premium-priced U.S. potato products. Reduction of these tariffs would significantly increase U.S. exports to the benefit of U.S. farmers, processors and Quick Service Restaurants that continue to expand in Asia. While we understand that any tariff reductions undertaken by the APEC countries outside the multilateral forum will have to be done on a most-favored-nation basis and offered to all WTO members, even those outside APEC, we believe that the volume of U.S. exports to these markets is so substantial that even with ''free riders'' U.S. french fry exports will benefit. However, while we vigorously support ''early'' (that is before 1999) APEC tariff liberalization, we also realize the benefit of an APEC agreement as the basis for a larger multilateral tariff agreement undertaken and completed as part of the 1999 exercise.
Page 195 PREV PAGE TOP OF DOC WTO accession negotiations with China, and dispute settlement procedures against India's balance of payment restrictions, offer two other opportunities prior to 1999 to achieve tariff liberalization in two of APTA's priority countriesChina and India. On multiple occasions, APTA and other U.S. potato industry groups have made representations to USTR and USDA requesting that frozen potato products be considered priority items for tariff reductions in the context of China's WTO accession. China's 25 percent tariff on frozen potato products and 17 percent value-added tax, which tax is applied twice on frozen potato imports, are significant barriers to trade in China. We are anxious to learn what China's next tariff offer on potato products will be, and we urge the U.S. Government to stand strong in its commitment to achieve a reduction to 10 percent or below.
The WTO dispute settlement case against India's balance of payment (BOP) import licensing restrictions may offer an opportunity not only to achieve elimination of India's restrictive import licenses, but also to negotiate tariff reductions. We have made this point to USTR and USDA. If tariff concessions are negotiated with India as part of or following the dispute settlement case, we urge that frozen processed potato products be included.
In short, without progress in these regional and bilateral settings, we are skeptical that any real progress in tariff reductions, market access, and phytosanitary and sanitary areas can be achieved through the 1999 multilateral negotiating process. If the Uruguay Round is any indication of the resistance we face, it is clear that sectoral and smaller bilateral and regional agreements will be needed to establish a core of support before WTO member countries, and developing countries in particular, agree to further liberalization in the area of agriculture. Accordingly, we ask this Subcommittee for its help in urging USTR and USDA to aggressively use these upcoming forums leading up to the 1999 exercise to achieve tariff reductions and market access liberalization for potato products in our priority markets.
Page 196 PREV PAGE TOP OF DOCStatement of James C. Christie
Good Morning Mr. Chairman, members of the committee, my name is James Christie and I am managing director of Bryant Christie Inc., a firm that helps exporters eliminate trade barriers. I am here on behalf of the California Pear and Cherry Advisory Boards, and the U.S. Hop Industry Plant Protection Committee. On behalf of these organizations, I would like to thank the Committee for the opportunity to outline some priority issues for consideration during the 1999 World Trade Organization Multilateral Trade Negotiations.
In brief, I offer three issues for consideration.
They are: strengthening the Sanitary and Phytosanitary (SPS) Agreement; increasing the emphasis on deferring to international (Codex) chemical residue tolerances; reducing tariff levels and eliminating the European Union's entry price system.
In the limited time we have this morning, I would like to expand briefly on each of these three points.
First, an initiative that could significantly increase trade in fresh fruits and vegetable products would be one that strengthened the Sanitary and Phytosanitary (SPS) Agreement.
In particular three changes should be considered.
The first change would require members to standardize methods for quantifying the risk presented by the importation of commercially packed product.
Members need to be required to take into account actual commercial conditions rather than academic worst case scenarios when determining risk. In many cases when one quantifies the actual risk presented by importing commercially grown and packed products, that risk is negligible.
Second, a common definition of reasonable risk is needed.
While it is understood that each member may set its own level of acceptable risk, some level of risk must be acceptable to all signatories. If, for example, it can be scientifically shown that the likelihood of a disease being transmitted on a commodity is one outbreak in 38,462 years, it should be universally accepted that the risk is negligible or an acceptable level should be established. It would help if the SPS Agreement provided some guidelines on what would be considered a reasonable level of risk.
Page 197 PREV PAGE TOP OF DOC Finally, it would be useful if the SPS Committee could provide members with guidelines regarding under what conditions it is acceptable to require the placement of one member's quarantine inspectors in another member country at the exporting country's or industry's expense.
It is understood there may be times when an exporting industry might want to invite foreign inspectors to pre-clear products in order to minimize rejections upon a product's arrival abroad. However, when such a presence is required by the importing country, it can add considerable expense to the exported product and result in increased product cost and reduced competitiveness. It would be useful to have some guidelines regarding the justification and cost of such procedures. I would suggest that some of the existing inspection programs currently in place by WTO members may be in violation of GATT 47 Article VIII, which states that ''all fees and charges of whatever character] shall not represent an indirect protection to domestic products or taxation of imports or exports for fiscal purposes.'' This should be addressed through the strengthening of the SPS Agreement in the WTO.
The second area that should be addressed is the deference to Codex Alimentarius chemical residue standards.
I am sure we can all agree that each nation must be able to exercise its right to protect the health if its people. However, if trade is being inhibited not because of a health concern, but simply because a national standard has not been set, then importing countries should be obliged to defer to the international standard.
This issue is of particular concern to the U.S. hop industry. Almost every year, the German hop growers have to petition EPA for import tolerances on chemicals that are used in Germany but not the United States, and U.S. hop growers have to petition the German Government for import tolerances on products used here, but not in Germany. A great deal of industry and public resources are spent reviewing these annual petitions. In some cases, reviews are not concluded in time, and the disparity in standards can inhibit trade.
Page 198 PREV PAGE TOP OF DOC In the absence of a national standard, when no negative action has been taken on a chemical and when the chemical has been positively reviewed and approved for use by the Codex Alimentarius, importing countries should be encouraged to defer to the international standard.
The third is tariff reduction
With the exception of a few sensitive commodities that each country, for political reasons, might need to exclude, significant and swift tariff reduction should be encouraged.
In addition to general tariff reduction, the United States should press for elimination of Europe's entry price system. While E.U. tariffs were to have been cut in the Uruguay Round, the duties being collected on some U.S. products, such as cherries, have more than doubled. On paper it looks like the E.U. has reduced its tariffs, but in practice they have increased.
The E.U.'s manipulation of the value assessment needs to be addressed, so that reductions are not seen only on paper, but are experienced commercially as well.
Mr. Chairman, many of these recommendations are specific, technical, and detail oriented, but it is precisely in these technical details that the new trade barriers are found. It is hoped that in this next round of talks we can establish disciplines that will eliminate many technical barriers, and that will prevent new types of technical barriers from being created.
"The Official Committee record contains additional material here."