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House of Representatives,
Subcommittee on Livestock, Dairy, and Poultry,
Committee on Agriculture,
Washington, DC.
  The subcommittee met, pursuant to call, at 10:00 a.m., in room 1300, Longworth House Office Building, Hon. Richard W. Pombo (chairman of the subcommittee) presiding.
  Present: Representatives Boehner, Goodlatte, Smith, Lewis, Hostettler, Pickering, Jenkins, Peterson, Holden, Johnson, Condit, Dooley, Boswell, and Stenholm [ex officio].
  Staff present: Christopher D'Arcy, John Goldberg, Mason Wiggins, Brent Gattis, Callista Bisek, Curt Mann, Andy Baker, and Wanda Worsham, clerk.

  Mr. POMBO. Good morning. Today's hearing is the second in a series of hearings planned for this subcommittee to examine trade issues affecting the commodities under our jurisdiction.
  Specifically, our purpose this morning is to inquire as to the current status and the future prospects for trade between the United States and East Asia in the area of livestock, dairy, and poultry products.
  As Members of Congress grapple with policy decisions ranging from MFN for China to so-called Fast Track authorization, to increased membership in the World Trade Organization, hearings such as this are designed to detail where we stand today and to highlight paths for progress tomorrow.
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  East Asia presents the United States with unparalleled opportunities, as well as obstacles in the arena of agricultural trade. Last year the total U.S. agricultural exports to East Asia reached a record of $24.4 billion. This figure accounts for an impressive 42 percent of all U.S. agricultural exports.
  At the same time, this country purchased $5 billion in agricultural products from East Asia, or about 15 percent of all agricultural imports. The four most important countries for U.S. farm exports are in East Asia: Japan, South Korea, Taiwan, and China.
  Perhaps even more important than those impressive statistics is that American exports to East Asia have been steadily increasing at a rapid rate, creating a healthy trade surplus for this country. America's agricultural trade surplus alone would cover every Honda, Toyota, or any other car imported to the United States from Asia last year, with an additional $7 billion to spare.
  It would be difficult to overestimate the importance of this market to America's meat and dairy producers. With a stable American population and only a modest growth projected in the domestic demand for livestock, dairy, and poultry items, the export market remains the only significant path to increasing this sector of American farm income.
  The population of East Asia, which is already large, is forecasted to continue to rise, and these people will need to be fed.
  At the same time, rising income levels in East Asia, as well as newly emerging middle class, means more money available for food and an increasing desire to Western cuisine, including an appetite for meat and dairy products.
  With meat and poultry consumption forecast to remain steady for most of the world, Asia is expected to fuel the global meat imports. With the current exception of Japan, the economies of East Asian nations are among the fastest grown in the world, and oftentimes they are some of the most protectionist.
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  There are profound cultural differences affecting American trade with East Asia, which must be clearly addressed. One of the reasons that trade in food is often so contentious is because that such issues cut to the heart of the very basic national questions, such as how a nation feeds its people.
  Some of the nations are preoccupied with self-sufficiency, a notion which can often restrain trade. In the area of agricultural trade with East Asia, some of the biggest obstacles take the form of technical barriers, including sanitary and phytosanitary measures. USDA estimates that close to half of the $5 billion lost in agricultural trade due to technical barriers last year was lost in East Asia.
  These kinds of barriers must diligently be addressed and eventually removed through the use of sound science.
  As this subcommittee works to maintain and expand our trading markets, I hope to assure that America's producers have at their disposal the tools, such as the Dairy Export Enhancement Program, the Export Enhancement Program, and the Market Access Program needed to effectively compete in the international trading arena.
  I look forward to today's testimony, and I welcome all of our witnesses at guests here.
   At this time I would like to turn to the ranking member on the committee, Mr. Peterson.

  Mr. PETERSON. Thank you, Mr. Chairman.
  Thank you for holding this hearing to review agriculture trade issues between the United States and countries of East Asia.
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  As we begin our discussion, it is imperative that we recognize that the future of U.S. livestock, dairy, and poultry products is in the East Asian market. It is a rapidly growing region with ever increasing demand for high quality U.S. agricultural products.
  Early last month this committee held a hearing to review the recently concluded veterinary agreement between the United States and the European Union, as well as the general state of the U.S.-E.U. agriculture trade relations.
  Now this committee has the same timely opportunity to examine agriculture trade relations between the United States and East Asia in the midst of what was likely the most crucial agricultural trade vote that we will be taking regarding Asia this year, the renewal of China's MFN, which I was glad to support and see that we passed with a good vote yesterday.
  Although China is not yet the United States' largest agricultural trading partner in Asia, the annual economic growth rate of over 10 percent is high even when compared to the rest of the East and Southeast Asia, whose economies are growing at 8 percent annually.
  This growth rate and the increasing affluence of Chinese society will create its own demand for U.S. products. As members of this committee, we can encourage this demand by increasing trade with China.
  I would just like to also add that I had an opportunity to travel to China last January with the CODEL, and we got to see some of the agriculture, and I visited the trade office that the U.S. dairy industry has set up in Hong Kong and Shanghai and actually got to travel out and be involved in a situation where they were trying to develop some agriculture, and I think there is real potential in China, and I think one of the most effective ways to continue this relationship was our renewal yesterday of China's MFN, which as I said I supported.
  While we look to the prosperous future of U.S. agriculture trade with East Asia, we should not ignore the issues before us which currently hinder U.S. livestock, dairy, and poultry exports to that region. Insupportable sanitary and phytosanitary barriers to U.S. exports in countries such as Korea, Taiwan, and the Philippines are rightfully a major focus of our discussions today.
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  The favorable resolution of these problems should be a priority.
  Trade figures indicate that China is a major competitor to the United States at this time. The United States estimates that China will export almost 500,000 metric tons of broiler meat in 1997, compared with 2.3 million tons exported from the United States. However, USDA estimates indicate that this situation will not last, and that China will become a net importer of poultry products in the next several years.
  Because the U.S. poultry industry will lose a $50 million market under the E.U. veterinary agreement, expansion of the Chinese market for poultry products is more important than ever.
  And finally, I would like to remind everyone that growing and profitable agricultural trade with East Asia will not only benefit the U.S. agricultural producers, but also the U.S. economy as a whole. The United States has a large agricultural trade surplus with East Asia, including China, and the surplus is growing quickly and will continue to grow larger in the future, and as we have said many times in the past, exports are the future of America, U.S. agriculture.
  I will work with this committee to press for further progress for all U.S. agricultural industries and our relationships with our major export markets in Asia. I appreciate our witnesses being here today and look forward to hearing about these issues and other important aspects of agriculture trade with Asia.
  And the one last thing I would say, Mr. Chairman, is, you know, we got past the MFN vote yesterday. Now an issue that is going to be coming before us, I think, some time in the near future here is the issue of WTO ascension for China, and there I have some real concerns. I think that we have to be careful in the agricultural community that we make sure that some of the problems that we have with China in agriculture trade are fixed before we move ahead with ascension to WTO for China or we are going to get into the same situation, I am afraid, that we got into with Canada and some of these other countries.
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  So I think we really need to watch that situation. I think there are a lot of opportunities, but we have to be careful how we get into that situation.
  So thank you for holding this hearing, and I look forward to hearing the testimony of the witnesses.
  Mr. POMBO. Thank you.
  At this time any other opening statements can be included in the record.
  [The prepared statement of Mr. Stenholm follows:]
Thank you Chairman Pombo for holding this hearing today on livestock, dairy and poultry trade opportunities in Asia.
As we enter the 21st century, American agriculture is shedding subsidies, and becoming a leaner competitor in the world market. At this time it is more essential than ever that we work to build long term, reliable markets overseas. Perhaps the greatest potential market is China, and I will focus my remarks on the next important step in building that market-WTO accession.
By voting yesterday to maintain normal trading relations with China, the House has confirmed our commitment to continue working with China towards its accession to the WTO. Now we in agriculture should turn our attention to the terms of that accession.
The rules that govern trade with China are very important to agriculture, not only as they impact U.S.-China trade, but also as a precedent for rules governing other non-market economies such as Russia. Market access will be the central focus of agricultural negotiations.
China's sanitary and phytosanitary rules and state trading enterprises are perhaps the greatest constraint on market access for U.S. agricultural products. But access is also limited by internal marketing practices or subsidies that exclude U.S. exporters.
Chinese STEs limit access to foreign currency. Chinese manufacturers who want to purchase U.S. agricultural products for further processing and sale on the domestic market are often prevented from doing so because Chinese central buying agencies will not provide the foreign currency necessary for such purchases. In some cases, STEs have changed licensing requirements or refused to authorize imports of specific products without providing a reason.
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U.S. agricultural interests must insist on accession terms that provide enforceable market access commitments from China, such as tariff rate quotas allocated on an increasing basis to private buyers in China. Before we give our support to China's accession to the WTO, China must agree to base sanitary and phytosanitary requirements on science, eliminate non-tariff barriers, submit to international dispute settlement procedures, reduce internal subsidies, and allow private enterprises to conduct business without STE interference.
Thank you Mr. Chairman, and I look forward to the testimony at today's hearing.
  Mr. POMBO. The Chair asks that the witnesses help us to meet our time constraints. Your entire written testimony will be made part of the record, and if you could keep to the 5 minutes on the oral testimony.
  I would also like to request that the witnesses remain available throughout the hearing to comment on issues that may arise later if any of the members of the committee may have a question.
  On panel No. 1, Mr. James Parker is the Deputy Administrator, Commodity and Marketing Programs, Foreign Agricultural Service, U.S. Department of Agriculture.
  Mr. Parker, you may begin your testimony.

  Mr. PARKER. Mr. Chairman, thank you, and committee members, good morning.
  I might mention that my most recent posting with the Foreign Agricultural Service was heading up our office in Japan for 5 1/2 years. I have been back about 2 years. So I am relatively close to the situation in East Asia, and this morning very briefly I thought I might just review global trends in livestock trade with a real emphasis on Asia, of course; some of the barriers. You have touched on some of those already, Mr. Chairman, and then maybe just touch on a bit of the competitive forces that are out there, and I think that should cover the waterfront pretty well.
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  Overall, U.S. livestock exports are doing very, very well. In fact, we have seen remarkable growth. For the products that the committee is interested in, pork, poultry, and beef, there has been a doubling of U.S. exports since 1990, and when we throw in the full range of livestock products, hides and skins, dairy products, eggs, the complete range, we are looking at $12 billion of U.S. exports of dairy, livestock, and poultry products globally, which is about a fifth of our total export profile. So it is a very significant part of the U.S. agricultural pie.
  I would just mention one thing in connection with that, Mr. Chairman. U.S. agriculture across the board is the most export dependent industry in America, and nearly a third of U.S. agriculture production is exported, and still there are tremendous growth opportunities.
  For the livestock sector, the growth opportunities are even more extensive because we are still very dependent on the domestic market for what we produce. Beef, for example, is only 7 percent export dependent, and pork 6 percent, poultry a bit more. So a quick observation up front: that we have a lot of room in the international marketplace to tap into 95 percent of the world's population and try to increase our exports.
  Why have we doubled exports since the early 1990's? A number of reasons. Market access is up. Barriers are down. Incomes are up. We are competitive. We have got some quality products at the right price, and we have a very effective market development program which incorporates some of the tools that you mentioned earlier.
  And nowhere in the world is this more evident than in Asia. I just brought one chart with me, Mr. Chairman, which shows that over 60 percent of our exports from the United States of livestock products go to the Asian markets. It is about $6 billion in total.
  Looking out to the future, what are the prospects? We are extremely bullish on the prospects of increased import demand in Asia. There are a number of reasons that many of you would be familiar with already. You have already cited one, Mr. Chairman. Just the growth rates of those markets, between 8 and 12 percent within the Pacific Rim. The populations are large and growing.
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  By the year 2015, we are looking at 17 cities in Asia with 10 million or more people. Dietary patterns are changing, Western style supermarkets and so on. The role of agriculture is also declining.
  In Japan, which is our single biggest market for agricultural imports from the United States, it takes 25 percent of everything that we ship. We estimate by the year 2010 that their agricultural production will be cut in half across the board. They are small farms, 2 1/2 acres. The farmers are old. There are no successors, and we are looking for dramatic change in production in Japan, which means a dramatic increase in imports for the sorts of products that we can export from the United States
  Next I will just run very briefly through the commodity sectors that you are interested in, beef, pork, poultry. Sixty percent of our beef exports go to Asia. That is almost $2.5 billion, and 50 percent of our beef exports go to one market alone, which is Japan. We see continued growth even despite all of the food safety concerns.
  One thing that is noticeable, I think, this year is that setting Japan and Korea aside and looking at some of the other markets in Asia, Hong Kong, South Korea, Taiwan, China, Indonesia, the Philippines. We have seen a 40 percent increase in beef exports to those markets just in the first 3 months of those years. So the demand continues to rocket along.
  The situation for pork, of course, is demonstrated by what has happened in Taiwan. A third of their hogs have been slaughtered. It is going to be 3 to 5 years before they can get back in business. We are looking at tremendous opportunity, and we are expecting about a 30 percent increase in U.S. pork exports this year primarily to Japan and also to Korea.
  I would also mention something that you might not be aware of. We are shipping a billion and a half dollars of hides and skins around the world, and most of that is going to Asia. It is a very significant part of our agriculture export picture, and one that is often overlooked.
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  Poultry, $500 million to China. The trade refers to those containers as walkie-talkies. They have got chicken feet and they have got chicken heads, coxcombs in them, and that trade is growing very rapidly. Much of it is going through Hong Kong, but obviously strong demand in China.
  And even with dairy, where we have not been particularly competitive in the past, we are seeing some real growth in Japan and Hong Kong, South Korea for ice cream and cheese, and the U.S. dairy industry is very active in those markets.
  What are the challenges? You mentioned sanitary and phytosanitary, Mr. Chairman. We have got 300 cases in 63 countries of barriers based on sanitary and phytosanitary, many of which are questionable, stopping about $5 billion of trade from the United States, and half of that roughly is in Asia.
  So the sailing is not that smooth. The challenges are out there. They are focused on food safety concerns, trade policy, and what the competition is up to.
  All of the recent food safety concerns, BSE in Europe, e. coli in Japan, anthrax in Australia, hog cholera in the Netherlands. It has just shaken the consumers, particularly in Japan, right to the core about the safety of the food products being imported by those countries, and one of the things we have got to do more of is to directly approach those consumers, get as much information as we can to them about how safe and wholesome our products are that come from the United States.
  Compliance with the Uruguay Round negotiations. The committee would be aware of some problems in the Philippines trying to get them to live up to their commitments. Chairman Smith has made a personal visit there and has helped to move that along. We will hope to see that resolved fairly soon.
  And, again, SPS, a major concern for us in 63 markets around the world.
  I will just lastly cite a few competitive forces that are out there. In Japan, for example, our biggest beef market, Australia, spends $20 million on beef promotion, which is 3 times what we are spending. In Singapore, they are spending 2 1/2 times. New Zealand is outspending us; the same in Indonesia.
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  The Canadian Beef Export Federation, which has a very small market share in Asia, hopes to increase that. They have just increased their staff by three people in Tokyo and two in Korea. They are not sitting still, and neither should we.
  Mr. Chairman, that covers very briefly some trends, clearly in the upswing, and the prospects in the future are very strong. We have got some significant barriers, and we have got a lot of competition, but we also have a very competitive product, and a wonderful arrangement here in the United States between the Government and the private sector with co-funded joint promotion programs that seem to be working very effectively.
  We are doing well in some markets. We are at the starting line in others. We are using all of our tools, and we are looking forward to a very bright outlook for the U.S. livestock sector exports.
  Thank you, sir.
  [The prepared statement of Mr. Parker appears at the conclusion of the hearing.]
  Mr. POMBO. Thank you, Mr. Parker.
  On that recent trip that we took to the Philippines and to Thailand, there were a number of issues that were outstanding, and it did appear to me that there were a number of different products that we had an opportunity to trade in, and some of the problems that exist.
  I would like to have you go a little bit more in detail, if you would, as to some of the competition that we have in dealing with some of these countries. I know that Australia and New Zealand pose a major competition in livestock products and dairy products.
  How do you foresee that working out in the near future?
  Mr. PARKER. The Aussies and the New Zealanders are very aggressive on beef; China and Thailand on poultry; Taiwan and Denmark on pork, and of course, New Zealand and the European Community on dairy, and I see the competition remaining very stiff.
  All of those countries are aware of the significance of exports to the viability of their agriculture. In Australia, for example, the prime minister chairs a committee called Supermarkets to Asia, which meets about every 2 months, and he is personally involved in working with Australian food processors and livestock product processors to move product.
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  So the competition is going to remain stiff, and we have to be mindful of that and make sure that we are using all of the tools available to us.
  Mr. POMBO. Some of the Asian countries export meat products. China and Thailand export poultry. Korea and Taiwan have exported pork. Do you foresee them being a major competitor on some meat products?
  Mr. PARKER. We are, Mr. Chairman, shipping half a billion dollars of poultry in China. At the same time, China is exporting about three quarters of a billion dollars of poultry products around Asia primarily and targeted on Japan.
  So, yes, they are a strong competitive force, and will remain so, and the Taiwanese, of course, have had this major debacle with foot and mouth disease and will be essentially very, very weakened for the next 3 to 5 years, and our industry, I think, is poised to go in. We hope to capture about 85 percent of what Taiwan used to ship to Japan, and then if we can make the case in the next 3 to 5 years that we have got a wholesome, safe product that is competitively priced, perhaps we can hang onto that.
  Mr. POMBO. And what about the U.S. beef market? Some have said that is probably our greatest export opportunity into Asia. Would you agree with that?
  Mr. PARKER. Indeed, I would. I have seen dramatic growth just during my 5 years in Japan, which takes 50 percent of our beef exports.
  I was reminded today that back in 1986 we only had one U.S. beef packer with an office in Tokyo, and now we have about 15, and the industry clearly recognizes the importance of exports. Even though beef is only 7 percent export dependent at the moment, that is where the growth is.
  I mentioned that Japan beef production, and there is a lot of it domestically, will probably be halved by the year 2010. So the demand is there. We have to stay front and center particularly on the food safety issues and reach out to consumers in Japan and convince them that our systems here in American, HACCP and otherwise, can produce the most wholesome, safest product of any supplier in the world, and I think that is one of our main challenges in the immediate future, is to address food safety concerns of Asian consumers.
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  Mr. POMBO. You have mentioned the food safety issues a few times. For the sake of the committee, can you go into a little detail about what some of those challenges that we are facing right now are?
  Mr. PARKER. It has been a bad year from a food safety perspective for consumers in Asia. They have looked at BSE cropping up in Europe. They have looked at e. coli occurring in a number of countries around the world, most notably in Japan. They have seen reports of anthrax in Australia. They are scared. Foot and mouth in Taiwan, and the perception is exactly that in their minds. It is a reality, and we are going to have to address those concerns.
  Clearly, U.S. beef exports to Japan and beef exports from other supplying countries to Japan are down. The rate of growth is down. We only had a 2 percent growth rate.
  So there are some very specific instances where outbreaks have occurred. Consumers are scared, and we are going to have to try to address those as best we can.
  Mr. POMBO. Is that currently a matter of going after those markets in consumer education in terms of U.S. exports, or are there technical barriers that currently exist?
  Mr. PARKER. I think, Mr. Chairman, it is primarily an educational challenge, and we are working very closely with the U.S. Meat Export Federation, for example. I, in fact, in March attended a major seminar that they did in Japan for the meat trade there and for food safety experts, talking about e. coli.
  It is a perception problem. It is an education challenge. There is no scientific concern. These outbreaks do occur, and what is required is safe handling and proper treatment of the product, which we are doing here in the States.
  Mr. POMBO. Thank you.
  Mr. Johnson.
  Mr. JOHNSON. Thank you, Mr. Chairman.
  I wonder when you talk about the dairy market, and I know you talked a little bit about it in your formal testimony there in terms of the powdered milk market and the fresh dairy product market. How is this developing? What are we doing to encourage it in the Pacific Rim and the Asian countries?
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  Mr. PARKER. The primary tool that we are using at the moment, Congressman, is the DEIP Program to try and make our dairy products a bit more competitive. Market forces were not particularly favorable last year. The U.S. domestic supplies were not that extensive. Overseas demand was not that great.
  We have gotten more aggressive. Some market conditions have changed, and 80 percent of our shipments under the DEIP Program have occurred just since January of this year. So the department is being more aggressive under the instruction of the Secretary, and we have now approached over 60 percent of our GATT minimum for nonfat dry milk, for example, with most of that having occurred since January.
  Bonuses have increased a little bit. We have also added butter fat, which includes butter, butter oil, and a few other items, to the list of eligible products.
  Mr. JOHNSON. Who are the major competitors in there, and what do you see as advantages, disadvantages that we need to face up to?
  Mr. PARKER. New Zealand is a major competitor and has been so for years and is extremely market oriented and is doing a wonderful job, frankly, in the Asian markets, and of course, the European Community with export subsidies is a major competitor for us.
  So those are the two big ones out there, and it is tough. I was able to observe in Japan that we are becoming very competitive without subsidies, in the case of some dairy products, such as cheese and ice cream, whey products, and we have increased exports very substantially to the Japanese market in the last couple of years. The U.S. Dairy Export Council has been extremely aggressive with industry funds and with U.S. market access promotion funds.
  So where we have a chance to compete without subsidies, we are employing other tools on the market promotion side, and we have got a very good track record, a joint Government-industry track record, of promoting sales to a few of the Asian markets, Japan, South Korea primarily, and that is looking very positive.
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  Mr. JOHNSON. We have seen in the last few years the biophobia in the European Union hurting our exports of meat products, pork, poultry; also, some talk about restricting some exports of vegetables. Are we making progress in that, and is that a danger in the Asian market?
  Mr. PARKER. In Europe we have made some progress. We recently, in, I guess, the first part of April, were able to sign an equivalence agreement with the European Community that resolved a number of issues. Poultry, of course, is still outstanding, and the Europeans are dealing with public perception and other issues, which do not seem to be closely related to science.
  It is a tough debate, and we have got a lot more progress to make with Europe, particularly on the poultry side.
  In Asia, the foods safety concerns have been out there for a long time, and it is essentially an education effort that is going to have to be undertaken by the U.S. industry using whatever help they can get from the U.S. Government funding-wise to reach out to the trade and the industry and the consumers in those Asian markets and just make the case, which we can, that we have the safest delivery system of any exporting country in the world.
  So we are dealing with a bit more complex situation in Europe, and I think in Asia it is a bit more straightforward. It is an education campaign reaching out to consumers in the industry.
  Mr. JOHNSON. Are we winning in the education campaign, making progress?
  Mr. PARKER. We, indeed, were making progress. We started a major campaign in the early 1990's, and the poll results we were getting in Asia were showing that consumer acceptance of U.S. products was on the rise, and we have, frankly, taken it in the neck a bit by association because of everything that has happened in the past year on BSE and e. coli. It just took a dip, and we are going to have to fight back, which we have started to do in spades.
  The conference in March in Japan had over 300 people in attendance from the press, the trade press, and the food safety industry.
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  Mr. JOHNSON. Thank you, Mr. Parker.
  Mr. POMBO. Thank you.
  Mr. Hostettler.
  Mr. HOSTETTLER. Thank you, Mr. Chairman.
  Mr. Parker, to what extent do you feel that we are currently able to meet the export to Asia with regard to our ability to feed those value added products, beef and pork? Do we have the acreage now available or potentially available to meet the need of feeding that product to produce that product for export to Asia?
  Mr. PARKER. I can give you one specific example, and then perhaps a broader response to that as a followup in writing, but the pork example, where we have increased our export potential this year rather dramatically because of Taiwan.
  We essentially had a 1 1/2 percent increase in national pork production, will have to meet that demand, and that has happened in response to market signals very, very effectively and very quickly. So we know we can respond, and a 1 1/2 percent jump in production in short response to a market situation, I think, speaks well of the industry and their ability to react quickly.
  But the demand is going to continue to grow dramatically, and we are looking at substantial increases for livestock products overseas, and I do not have a clear answer on how far we can go in terms of overall capacity, and we will have a look at that and get back with you.
  Mr. HOSTETTLER. I appreciate that.
  In your testimony you referred to the restriction in access to China with regard to meat exports. You point out, however, that the Chinese Government has authorized a 1-year trial period for specified quantities of meats will be permitted to be imported for sale in retail markets, but you say that that change is minimal as measured by the significant restrictions on that quantity and the origin of the plants.
  Why, in your opinion, is it virtually impossible for us to export to China? And what is the reason for these tremendous restrictions on our ability to do so?
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  Mr. PARKER. It is a regulatory mindset that we have dealt with in Asia over the decades. I mean this recent agreement only involves five plants, one importer on the Chinese side, and is nothing more than a half a toe in the front door, which it is, but it is not going to result in any significant sales achievements.
  The whole issue of import licensing, customs valuations, the whole range of issues that China is going to have to deal with in the context of WTO accession are real issues, and the regulatory mindset is one of those. It either has to be addressed in the WTO accession talks or in the GATT round because that is the old school of thinking.
  Japan now, for example, they were like that until 1988, and now their market is wide open. The Koreans as of July 1 will be liberalizing frozen pork and chicken imports. That is the wave of the future. Asia understands that that is where they need to be in terms of their own economic viability, and China, I hope, is not going to be too far behind that, but right now it is difficult negotiating.
  Mr. HOSTETTLER. But you see a potential in China following this same pattern as Japan or Korea or something?
  Mr. PARKER. China has a major stake in world trade. They are also a significant exporter of agricultural products, and it does not take long to see that it is a two-way street. So I am convinced that down the road, and the question is when, there will be some significant changes.
  Mr. HOSTETTLER. Do you have a feel of when that when will be?
  Mr. PARKER. I wish I did. I do not, sir.
  Mr. HOSTETTLER. All right. Thank you.
  Mr. PARKER. Yes, sir.
  Mr. HOSTETTLER. Thank you, Mr. Chairman.
  Mr. POMBO. Mr. Dooley.
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  Mr. DOOLEY. Thank you, Mr. Chairman.
  Mr. Parker I really appreciate all of the information you have provided on the tremendous opportunities in terms of market growth that we see in the Asian region. In terms of the tools that this Government has in order to maximize U.S. interest in capturing those markets, what should we be doing differently? What should we be increasing in terms of is it FAS offices? Is it GSM credits? Does there need to be modification in that?
  What policy changes does this committee need to consider in order that we, again, maximize our opportunities in this region?
  Mr. PARKER. Well, I think the best answer I can give you to that, Congressman Dooley, is what we have and what the competitors have and put it in perspective, and then you need to decide in the context of budget constraints what more can be done.
  But if we add up all of our market promotion programs that are made available through the U.S. Department of Agriculture and we throw in what the industry contributes, which is substantial, in the case of the Cooperator Program, for example, the industry kicks in $1.20 for every one of our dollars. We come up with a pot of money, about $250 million worth. That includes export subsidies, such as they are, from the United States available today, and that is contrasted with about $10 billion that the competition has, mostly Europe.
  So in a relative sense, we are not in a very strong position. We are going to have to rely on government-industry cooperation. We have to rely on our 70 or so USDA offices around the world, which include FAS and APHIS and, from time to time, FSIS, and just do the best we can with those resources.
  But we are up against a terrific imbalance in terms of what the competition is throwing out there to enhance their share of the world market. Australia, to mention them one more time because they are a formidable competitor, in the last 5 years has opened something like 15 new offices in Asia. They have a clear commitment to working with their industry to garner these growing markets overseas.
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  Mr. DOOLEY. Could you compare that with the U.S. presence there? Australia has got 15 new offices?
  Mr. PARKER. New offices, and I do not have the exact number, but through our strategic planning, we have clearly identified the Pacific Rim as the growth opportunity in the future, and we have shifted resources from Europe to Asia, but perhaps five or six new bodies, nothing to the extent the Australians have done.
  Mr. DOOLEY. I guess that would be with the offices that would help to coordinate the Cooperator Program, and you also mentioned the market enhancement program or whatever where we are at a severe disadvantage in terms of dollars there.
  What about in terms of some of the credit programs, the GSM programs? Are those programs working as well as they could? Does there need to be modifications with those programs? And how do they compare with some of what our competitors are doing?
  Mr. PARKER. We think that the credit programs could be modified to serve us better, and in fact, we have taken a couple of shots at that with some new ideas in the last few years, one of which is supplier credits, facility credits.
  That is still in the experimental stage, and in recent months we have seen some bites at that tool. We are trying to encourage direct credit to U.S. exporters without having to work with banks overseas and see if that does not make access a bit easier to these credit lines in the foreign customers.
  So we have come up with some new ideas. It really has not kicked into the 100 percent yet, but it is moving in the right direction.
  Other countries also offer credit guarantees from the government, from Europe right throughout Asia, including Australia. So it is a fairly common tool, and we are trying to come up with a few twists that would make it more user friendly to our individual exporters, and we are seeing some success with that.
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  Mr. DOOLEY. I do not expect you to have the answer today, but I would be interested if you can provide that. I would be interested in terms of what is the cost to open up an office and to staff it that would be commensurate with what we are seeing Australia and some of our competitors do just so that this committee and myself would have the information in terms of what would it take from a budgetary standpoint to respond to this challenge by our competitors in order that we can be positioned, again, to insure that U.S. farm interests and agriculture interests are going to be best represented and protected, just so we can look in terms of if we did have to shift dollars or make an argument for more dollars to open more offices. What does it cost to achieve that objective?
  Mr. PARKER. We can do that easily, sir. We have opened an office recently in western Japan and several trade offices in China. So we will make that information available.
  To the extent that the pot of money is unchanged, generally for market promotion there is concern among our private sector partners, our cooperators so-called, the American Soybean Association, Wheat, Feed Grains, a list of 70 of them that they also have got offices overseas, and the need to grow and shift, and to the extent the overall pot remains unchanged and FAS opens offices, that money by necessity comes out of the pocket of our private sector partners, and there is always that concern, as well.
  Mr. DOOLEY. Are we co-locating some of those like we are doing here in the country?
  Mr. PARKER. Indeed, we are. We have got 70 associations we work with between the Market Access Program and the Cooperator Program, and we are encouraging all of them to look at ways of sharing resources overseas and working jointly in markets where it makes sense to hit on the same targets and try and minimize those overheads. So we are looking at that every day.
  Mr. POMBO. Thank you.
  We have a vote going on on the floor right now, and I do not want to be unfair to the next person. So I am going to temporarily recess the hearing.
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  Mr. POMBO. We will bring the hearing back to order.
  I apologize to the witnesses for the delay. We had a series of votes over on the House floor.
  At this time I would like to turn to the ranking member for his series of questions. Mr. Peterson.
  Mr. PETERSON. Thank you, Mr. Chairman.
  Trying to seek accession to the WTO, as I mentioned earlier, by October of this year, and as I understand it, there is a pretty slow pace going on with the negotiations, and as I understand it, there are significant barriers or problems, non-tariff type barriers that are in China.
  So what are the chances that we can gain commitments from China or get it written into this agreement that we can significantly increase market access, get rid of these non-tariff barriers and allow our businesses to go in and conduct business without state trading enterprise type interference?
  I think, you know, we have gotten into some of these other trade agreements without resolving these issues ahead of time, and I think the experience is that this is the only leverage we have over them. Are we going to be able to fix this stuff before we let them in? And what is the process, and what are the prospects?
  Mr. PARKER. It is obviously an ongoing negotiation at a fairly intensified level. We have probably had three teams over there in the last 2 months.
  I cannot predict the outcome, but I can say that there is a uniform sense of commitment right throughout the administration, and I think on the part of the Hill and certainly on the part of the industry, that agriculture is an important part of this negotiation.
  State trading entities is key. The regulatory mindset is key. The sort of things we are dealing with, just trying to introduce beef into the retail sector in China, for example, and there is agreement across the board that we have got to have a strong outcome of these negotiations with specific commitments to reduce tariffs and increase market access.
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  So my best guess is that we are going to get that no matter how long it takes. There is just a lot at stake for U.S. agriculture.
  Mr. PETERSON. Is there any danger that there might be so much pressure to bring them in that we will not get it? And if it is an agreement that substantially leaves agriculture at a disadvantage, what is the process? Can we stop it? Is there some way the Congress is going to have to vote on this, or is there some way that we can stop this if they do not do the kinds of things that we feel they should be doing?
  Mr. PARKER. This question has been asked several times because there is so much concern on the part of the industry, and I think that Secretary Glickman and Ambassador Barshefski and others have just made it crystal clear that getting a good result with agriculture is a top priority, and there will be no backing down on that issue.
  I do not know exactly what the consultative process would be with the Congress on that, but the commitment from the administration is clear that agriculture is an integral component of this, and we have to have a good outcome. Otherwise the agreement overall will not be worth it to us.
  Mr. PETERSON. So has that been laid out and basically says that if agriculture is not taken care of and not happy with this, there will not be an agreement?
  Mr. PARKER. The administration has said that clearly, and in fact, it appears that progress on agriculture is even further ahead than some of the other areas. So I think we are also seeing it in practice, but the administration has been absolutely clear that without agriculture we cannot move forward with an agreement.
  Mr. PETERSON. You know, I was over there in January, and I mean I had a limited exposure, but it just seems to me that there are certain commodities that are going to be very politically sensitive, and what has happened, like what happened with the situation with Canada, we let them off the hook on dairy and poultry, which I did not think we ought to do.
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  I mean are we in danger of that kind of a situation with the politically sensitive commodities in China, like pork and, you know, some of their others?
  Mr. PARKER. Citrus, for example.
  Mr. PETERSON. Yes.
  Mr. PARKER. What makes this situation a bit different is that the demand is clearly there. The poultry, for example, very little of that is entering through Mainland China. A vast majority of it is going through Hong Kong underground into southern China, and that is the same case with citrus.
  So the Chinese know that there is strong demand for these products, and I think that differentiates that situation from the one in Canada. The product is being shipped, will continue to be shipped through Hong Kong. There is a 40-year law that after the 1st of July nothing will change, we think, with Hong Kong. So we are expecting to be able to meet that demand and continue to do so.
  Mr. PETERSON. I agree. You know, I am optimistic that nothing will change in Hong Kong, but we are not sure about that. You know, if things do change, is that going to cause us a problem?
  Mr. PARKER. We are not absolutely sure, and in fact, some in the trade are taking a wait and see attitude, but officially the Chinese have been fairly clear that the 40-year law comes into play and Hong Kong remains an independent entity, an we are certainly as an administration and other governments around the world are sending clear signals to the Chinese that they hope that is the case.
  Mr. PETERSON. Well, I am glad to hear that, and I hope that people hang tough, but I am skeptical because I have been burned more than once, or we have up in our neck of the woods.
  Lastly, I have got some questions regarding the use of DEIP in the Asian market that are kind of complicated, and I would like to submit them to you, if that is all right, Mr. Chairman, and have you answer them in writing, if that would be all right.
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  Mr. PARKER. Gladly.
  Mr. PETERSON. Thank you, Mr. Chairman.
  Mr. POMBO. Thank you.
  Mr. Pickering.
  Mr. PICKERING. Mr. Parker.
  Mr. PARKER. Yes, sir.
  Mr. PICKERING. I just wanted to ask two quick questions. Would it be fair to say that the administration's and U.S.' top priority in relation to Asian trade would be China's ascension into the WTO?
  Mr. PARKER. From an agricultural perspective, that is a big ticket item for us, yes, sir. It is a huge market. We have got a number of other issues out there, Korea, the Philippines, and frankly, all of those trade issues are on the front burner right across the board. We are pushing as had as we can on all fronts.
  Mr. PICKERING. But with the size of the Chinese market and the issues that we are dealing with, the reciprocal access, all the other issues, the significant dollar amount that we would open up for opportunity if they joined the WTO, again, would it be fair to characterize that as our top trade policy objective in Asia?
  Mr. PARKER. I think so. It is the single biggest market out there, with 1.2 billion people.
  Mr. PICKERING. Given that, please comment on the proposals by Chairman Roth on the Senate side and Congressman Bereuter, who is the chairman of the Subcommittee on Trade of the Ways and Means Committee, that would link permanent MFN status to China's accession into the WTO. Is that something that the administration would view favorably? And is that something that you believe over the next year the administration, the Department of Agriculture, would work with those members who want to see our policy focus on WTO accession and the linkage and the incentives for them to join WTO?
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  Mr. PARKER. I would like to be responsive on that, but it is not in my brief, but we will get back with you, and I know that none of the experts that I brought with me from USDA can respond to that. So we will have to get back with you on that, and we will do so.
  Mr. PICKERING. If you would, please.
  Mr. PARKER. Yes, sir.
  Mr. PICKERING. Get back and give any indication of the administration's willingness to sit down and come up with a new framework. I think most people would say that the current MFN process on an annual basis in many ways is counterproductive, and I think over the long term is not a sustainable framework or approach, and that we need to focus our policy on what our top policy objective is, which is their WTO accession under a commercially viable standard.
  Mr. PARKER. Right.
  Mr. PICKERING. Thank you.
  Mr. PARKER. Thank you.
  Mr. PICKERING. That is all. Thank you, Mr. Chairman.
  Mr. POMBO. Mr. Boswell.
  Mr. BOSWELL. No questions.
  Mr. POMBO. Mr. Goodlatte.
  Mr. GOODLATTE. Thank you, Mr. Chairman.
  Mr. Parker, I wonder if you could comment on the difficulty that the U.S. poultry industry has encountered in exporting products to China. I understand they kind of keep a tight hand on that in Beijing rather than allowing their regional offices to approve imports going into that country, and what, if anything, we can do about that.
  Mr. PARKER. It is a difficult situation. Currently most of the poultry going into China is going through Hong Kong relatively hassle-free. There is a half a billion dollars of it, but in terms of direct access to the market, we are up against some licensing requirements that we consider to be unrealistic, and those are part of the ongoing WTO accession agreement.
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  We are convinced that once those hurdles are cleared that China will become our No. 1 market for U.S. poultry, even exceeding the Soviet market. So we know that the demand is there. There is a lot at stake, and we are going to continue to push hard on that regulatory mindset because it is clearly getting in the way of doing business.
  Mr. GOODLATTE. Mr. Chairman, that is the only question I have.
  Mr. POMBO. Thank you.
  Mr. Parker, before I let you get away. There was one thing that you talked about in your opening statement and touched on in your questions, and that was the level of promotions or dollars that are spent on promotion, and one of the things you mentioned was $20 million in beef promotion and a number of other figures you went over.
  What do you think--and I think this ties it together--what do you think is one thing or a couple of things that we could do as the Federal Government in terms of increasing our competitiveness or our ability to trade with the East Asian countries? Is it programs like MAP and DEIP and EEP that will allow us to advertise and to market our products on a more competitive basis, or should that be our focus, or should our focus be the underlying trade agreements themselves?
  Mr. PARKER. Well, the first step, Mr. Chairman, as you have indicated clearly, is to gain market access, knock down the barriers, and we are in the process of doing that. We have done it successfully in some countries. In others we are literally at the starting gate. So that is clearly step 1, and that takes human resources and a knowledge base.
  In terms of the marketing programs, market access programs, those are relatively small compared to what the rest of the world is spending, and it is essentially priming the pump to get companies engaged and serious about exporting.
  One of the major challenges we face in the years ahead is on the value added processed food side. There are about 150,000 companies in America involved in taking product off the farm and doing something with it, and right now for the most part, they are just looking strictly at the domestic U.S. market, and they are not even aware that these export opportunities are out there. Only 3 1/2 percent are involved in exporting.
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  So we have got to find some way to draw the other 96 percent out and encourage them to step up to that export line, and the market access program is one program that clearly does that on a cost share basis. They have got to put their money up front, but then there is some hope of at least the initial stages being reimbursed.
  That is the major use of the program at the moment, and the other thing that we need to address, as we have discussed, is the food safety issue, which is a major constraint, and to carry a message that is believable and consistent to consumers is a pretty expensive proposition.
  I know that the Meat Export Federation is spending millions of dollars in Japan and Korea to do that.
  Mr. POMBO. One of the things that I noticed in the Philippines when we went through their tariff structure was that there were a number of products where there was a very high tariff on the bulk product, the raw product coming in, but when there was a value added product, there was a very low tariff on that.
  Does the Foreign Agricultural Service look at issues like that in terms of encouraging U.S. business to go after those specific products or that specific market?
  Mr. PARKER. We do, very much so. In many markets, Mr. Chairman, you would find that that relationship at times is reversed, where you have a lower tariff on the bulk and a higher tariff on the processed because everyone around the world realizes that that is where the money and the jobs are, is in further processing and value adding.
  So we are mindful of those tariff differentials, and each of our posts, in fact, is going through the annual exercise right now of identifying top prospects for U.S. food products, and then we are going to take it down to a very specific activity level and pursue those.
  Mr. POMBO. Thank you very much.
  I again apologize for the delay in the question period, but I appreciate you coming, and I know that you are going to have someone from your office that is going to stick around just in case we have further questions later on in the hearing, but I appreciate your testimony.
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  And if you could answer any questions that have been or will be submitted in writing in a timely manner for the committee, I would appreciate that.
  Mr. PARKER. Will do. Thank you for the opportunity.
  Mr. POMBO. Thank you.
  I would like to call up the second panel: Mr. Wiederstein, Mr. Hardin, Mr. Anthony, Mr. Lambert, Mr. Condon, and Mr. Coughlin. If you could, come up to the witness table.
  Thank you.
  To introduce our first witness, I would like to turn to Mr. Boswell.
  Mr. BOSWELL. Thank you, Mr. Chairman.
  I would like to make just a short statement, if I could, too, if that is OK.
  Mr. POMBO. As long as it is short, that is fine.

   Mr. BOSWELL. It will be short. You are already behind. I know that.
  I would like to thank you for this hearing, emphasizing the importance of agricultural trade with Asia and around the world.
  As you are probably aware, and I suspect that you are, Iowa exported an estimated $4.65 billion agricultural products last year, almost $612 million in livestock, and of course, much of it to Asia, and I know you are aware the United States exported over $60 billion agricultural exports, and the result is this $29 billion trade plus that we are very proud of from all of us in agriculture.
  I have been very much involved in farming myself. I have raised a lot of corn and soybeans, still have a small herd of cows, and I am very aware of the importance of exports to help insure farmers receive a good price for their product.
  We are trying to do our part in Iowa to reduce the deficit, to provide jobs, and with that in mind, I feel very privileged today to welcome Mr. Wiederstein from the Iowa Farm Bureau here, who is going to give witness today. He heads up our organization in Iowa and is doing a good job.
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  He is a hands-on farmer in western Iowa and is implementing many of the things that we are saying here and everywhere that needs to be done to keep agriculture on the forefront. So I am happy to introduce to you our Iowa Farm Bureau President and also an outstanding farmer in Iowa by his own right, Mr. Ed Wiederstein.
  Mr. POMBO. Mr. Wiederstein, you may begin.

  Mr. WIEDERSTEIN. Thank you, Mr. Chairman, and thank you, Congressman Boswell.
  Thank you, again, for this hearing and inviting the American Farm Bureau to present testimony on trade in Asia. As Congressman Boswell said, my name is Ed Wiederstein, and I am president of the Iowa Farm Bureau. My wife, Nicki, and I farm 1,200 acres in a grain and livestock farm in west central Iowa.
  This hearing is timely, following the critical vote on most favored nation status for China. Many believe China is the market with the greatest potential for U.S. agricultural exports. MFN for China is critical.
  Failing to grant MFN for China would effectively place sanctions on U.S. goods. The ramifications would be felt throughout the entire Asian region, including Hong Kong, Taiwan, Korea, and Japan.
  The disruptions that would result from the failure to grant China MFN status would be felt throughout the U.S. economy. China is nearly a $4 billion market for U.S. agriculture and responsible for approximately 200,000 export related jobs.
  The Asian market has great potential for U.S. growth, for U.S. livestock, dairy, and poultry producers. It is an area of amazing economic growth and expansion in almost every sector, in almost every Asian country.
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  China is the world's most populous country, with about 1.2 billion people, and growing at the rate of 12.5 million per year. For nearly 20 years China has had the fastest growing economy in the world. China is predicted to become the world's largest economic center by year 2020.
  Our fastest growth markets for both bulk and value added agricultural products have been in Asia. Asia is not only an arena of major growth for U.S. meat and poultry exports, but it is a region of major challenges for all products. The importance of these markets is made evident by the recent growth of U.S. pork exports to Japan.
  In addition, China is currently the United States' second largest market for poultry products, with exports that generated nearly $500 million in 1996.
  During 1996, U.S. exports of beef and beef variety meats to Hong Kong and the People's Republic of China totaled nearly $68 million. Per capita beef consumption in China during 1995 is reported by the USDA to be approximately 3 pounds per person.
  The combination of a large population base and growth in disposable income results in a huge potential for growth in meat and poultry exports to China.
  Reversing the strongly protectionist agricultural policies in many Asian countries is a challenge to continued growth in U.S. exports to Asia. The domestic policy adjustments needed to meet international trade commitments on market access and import volume are often resisted by Asian governments.
  There are strong producer pressures on many Asian governments to prevent domestic market disruptions and limit competition at home. Our trading partners and competitors in Asia have embraced the fact that they must be players in the international marketplace, and most are signatories to international trade agreements.
  The World Trade Organization has brought pressure on Asian countries to liberalize markets to foreign agricultural products. However, there are far too many circumstances where member countries are not complying with their commitments.
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  Exchange rate movements have a dramatic effect on trade volume. We are acutely aware of the effect of the peso devaluation on export sales to Mexico. The encouragement of the United States and other members of the G—7 is necessary to insure sound monetary policy around the world, since problems such as this are not directly addressed in our international trade agreements.
  Our agricultural exports to Japan are constantly challenged by the potential of major dollar fluctuations. Discussions on exchange rate stability have been part of the G—7 meetings, and they certainly should continue.
  Our trading partners have become more creative at initiating sanitary and phytosanitary non-tariff barriers. Sanitary and phytosanitary restrictions, which have no scientific basis, unfairly restrict entry to Asian markets even after tariffs have been lowered or eliminated.
  When imports are stopped, as in the case of poultry going into China, major market disruptions occur and tremendous resources are needed to resolve the issue. The Animal and Plant Health Inspection Service, which is responsible for much of this resolution, must have the resources to handle these emergencies, as well as the daily demands of global trading.
  The Farm Bureau is concerned about the dwindling level of resources that are available to the USDA to meet these needs. The 1996 farm bill significantly reduced direct farm support programs. Our farmers accepted the move to reliance on the world market because we believe we can compete.
  Resources must be available to address the governmental issues of increasing non-tariff barriers. We are very concerned that for the sake of budget, technical resources are being sacrificed instead of strengthened.
  The American Farm Bureau has called for the United States Trade Representative to establish a Deputy Ambassador for Agriculture, and I heartily applaud Ambassador Charlene Barshefski for designating an ambassador for agriculture. The Farm Bureau believes that there should be a permanent statutory position of Deputy Ambassador within the USTR.
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  A legislative position for a permanent Deputy Ambassador for Agriculture at USTR and continued close coordination with USDA is critical for successful, long-term agricultural trade. With China and Taiwan both hoping to become members of the WTO, current negotiations demand the undivided attention of a strong team at the United States Trade Representative Office, the Department of State, and USDA.
  International trade has and will continue to create significant markets for U.S. agricultural commodities. Asia holds the key to future expansion. If Asia is to live up to its potential, we must have the political infrastructure and resources to meet the demands of trading with Asia.
  As we move forward in all trade arenas, we look to you for your leadership in helping resolve some of these concerns.
  Thank you.
  [The prepared statement of Mr. Wiederstein appears at the conclusion of the hearing.]
  Mr. POMBO. Thank you.
  Mr. John Hardin, who is a member of the Agricultural Policy Advisory Council and a pork producer from Indiana.
  Mr. Hardin.

  Mr. HARDIN. It is good to be with you again, Mr. Chairman. On behalf of the NPPC, I want to thank you and the subcommittee for holding this hearing and providing our organization with an opportunity to participate.
  I want to thank you, Mr. Chairman, as well as Chairman Smith and Representative Barrett, for your efforts on behalf of the pork industry during your recent trip to the Philippines.
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  I will briefly highlight four issues. Market access for pork in the context of WTO accessions of both China and Taiwan; the Philippines' failure to abide by its Uruguay Round commitments on pork; and the operation of the pork import safeguard in Japan.
  In China, pork is by far the predominant source of meat protein consumed. China has nearly the same amount of per capita pork consumption as the United States. Indeed, China is responsible for 50 percent of the total world pork consumption.
  China has a de facto band on the importation of pork. Until recently pork imports were legally restricted to certain hotels and restaurants. As a matter of fact, little pork is imported due to high tariffs, nontransparent procedures, and the issuance of very few licenses by the Chinese.
  Recently China provided quotas to 11 establishments in Australia, Canada, and the United States as eligible to export meat and poultry to China for general consumption under a 1-year trial program. There is one U.S. plant that is approved under this program for pork.
  While in one sense this is a positive development because, as a matter of law, these imports are not limited to the hotel and restaurant sector, as a matter of fact high tariffs and other restrictive measures make it unlikely that there will be any significant level of imports.
  The U.S. pork industry urges the following conditions for Chinese accession to the World Trade Organization.
  First, the abolition of the de facto ban on pork importation.
  Second, the establishment of transparent import regulations and licensing requirements.
  Third, the repeal of discriminatory value added tax, which is applied to meat imports.
  Fourth, the reduction of meat import duties to low levels with no tariff rate quotas.
  Fifth, unrestricted entry and participation of non-Government import entities.
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  Sixth, a protocol governing sanitary issues which, among other things, recognizes the U.S. safety and inspection system as equivalent and permits the export of pork from any FSIS approved facility.
  And, seventh, the termination of subsidies to the Chinese pork industry.
  Taiwan is also a very significant pork consuming nation. Taiwan's per capita consumption pork is higher than the pork consumption in the United States and is the highest in Asia. Variety meats, which are things like stomachs, feet, and tongues, represent the largest part of Taiwan's pork consumption.
  The Government of Taiwan is wrongfully denying U.S. producers the opportunity to export significant quantities of pork to that country. Taiwan has a ban on pork variety meats and selectively restricts other cuts of pork imports.
  Taiwan's current WTO offer on pork is unacceptable because it will give us insignificant additional access for imports. In order to gain meaningful access to Taiwan's pork market, the United States must persuade Taiwan to place flat tariffs on variety meats, without tariff rate quotas, of not greater than 25 percent, and flat tariffs on muscle meats of no more than 15 percent.
  The Philippines is violating its commitment to implement its tariff rate quota, as you well know. The most significant obstacle to fair operation of the Philippine tariff rate quota on pork is the distribution by the Philippine Government of the vast majority of the quota to Philippine hog producers.
  By letters dated May 22 and May 30, Philippine officials stated that pork quota licensees would be required by June 15 to notify the Philippine Government if the licensees were not going to utilize their entire allocation.
  Apparently Philippine officials intimated that the quota unused by hog producers would be transferred to bona fide importers. However, we have subsequently learned that the reallocation procedure would not permit the transfer of quota from one type of quota holder to another, for example, from producers to processors.
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  Further, on June 5, a court in Manila issued an injunction halting the importation of pork and a number of other agricultural products. For 2 years, the Philippines have promised repeatedly to U.S. trade officials, members of Congress, and the U.S. industry representatives that fair allocation and distribution of the quotas are imminent. These promises have not materialized.
  If the Philippines does not deliver on its most recent promise to promptly amend Administrative Order No. 9 so that bona fide producers have unfettered access to imported pork through the tariff rate quota, the U.S. pork industry strongly encourages the U.S. Government to aggressively pursue this matter before the World Trade Organization through consultations and to move swiftly on the GSP front.
  Japan is the largest export market for the U.S. pork industry. As the Japanese market continues to grow, the problems associated with the Japanese import safeguard are growing rapidly. The safeguard was enacted to protect the Japanese market from import surges and associated price swings.
  Rather than insulating the Japanese market from surges, it is causing tremendous surges. The safeguard has been in operation since July 1, 1996. For part of that time, the special safeguard has also been in effect.
  On July 1, 1997, this safeguard will be lifted, and the standard import price will fall about 20 percent. Most analysts expect imports to flood Japan after July 1, resulting in the October 1 reimposition of the safeguard, as traders and importers seek to obtain much lower priced pork as possible.
  The boom and bust cycles in Japan have negatively impacted virtually every sector of the Japanese pork chain. In addition, the safeguard undercuts the ability of foreign suppliers to be reliable suppliers. Foreign suppliers need clear, definitive, stable signals in order to be stable suppliers.
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  Because of the safeguard, foreign suppliers are forced to channel very large volumes into a relatively short window of time when the safeguard is not in operation. The U.S. Government should engage Japan at the highest levels on this matter, not only to monitor the European Union's Article 22 WTO consultations, but also to work with the Japanese toward solution of problems caused by the safeguard.
  I want to conclude by saying that I think Jim Parker at FAS exemplifies what we have seen from that organization in being very aggressive on the part of increasing agricultural exports.
  Thank you.
  [The prepared statement of Mr. Hardin appears at the conclusion of the hearing.]
  Mr. POMBO. Thank you.
  To introduce our next whiteness, I would like to turn to Mr. Pickering.
  Mr. PICKERING. It is with great pleasure that I introduce a good friend and a great leader from my home State of Mississippi, Bob Anthony.
  He is a leader not only in agriculture, but in his community and his church and in Mississippi politics.
  He went to Mississippi State University, which is on the list of top 100 research institutions, and once again fielded one of the best college baseball teams in the country that made it to the College World Series.
   But I want to also just call attention. It is amazing with the collapse of communism in the former Soviet Union that in Mississippi now our largest trading partner is Russia, primarily due and probably the largest segment is to poultry, and if it had not been for Mr. Anthony's leadership in promoting that export, that segment of our economy, we would not have the lowest unemployment in Mississippi's history in the last 23 years.
  He is doing a great job promoting poultry not only in Russia, but in Asia, and I look forward to his testimony today and what he can tell us that we need to do on the Agriculture Committee to help remove the barriers and open markets across Asia.
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  Mr. Anthony, it is good to have you here.
  Mr. POMBO. Well, Mr. Anthony, I do not know how many Californians you have on your World Series baseball team, but I am sure I can find out.
  You may begin.

  Mr. ANTHONY. We would welcome that, Mr. Chairman, and thank you for the privilege of being here today, and thank you, Congressman Pickering.
  The U.S. broiler producers, processors, and exporters appreciate these hearings held by this committee, and we appreciate the opportunity to share with you our thoughts this morning.
  I am chairman of American Poultry International, and I have been asked this morning to speak on behalf of not only my company, but National Broiler Council, which is here in Washington and most of you know does an excellent job in this area.
  It is my privilege to be here representing the international activities of the industry that I have spent probably 40 years in, and particularly having to do and focusing on international trade, which is 100 percent of my business today.
  American Poultry International is a Mississippi exporting company. We export frozen meats, frozen poultry being the predominant item, catfish and other frozen meat items. We are also an export management company, and by so doing, we are now under contract to manage a company called American Poultry USA, Inc., which is a conglomerate of 16 major poultry producing companies that work together under the Webb-Pomerene exporting provisions or statutes to reach world markets, and we manage that.
  Our markets are throughout the world, and all of the owners of American Poultry USA, Inc., are also members of National Broiler Council, and we speak as one.
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  The Broiler Council represents producers of 95 percent of the boilers produced in the United States, which is almost 100 percent or very close, and it is a pleasure to represent them here this morning.
  The export share has grown, and as it has grown now to 18 percent of all the broilers produced in the United States go to export, and that being the case, the Broiler Council is more and more active in international matters and will continue to be so.
  Now, to Asia and the Asian market, this area is extremely important to the industry and is expected to be even more important as years go by. Last year the United States broiler industry exported more than $825 million worth of product to Asia. Although Asia is not currently the largest market for U.S. poultry export--Russia now holds that place--it is clearly, the greatest potential or has the ability to be the greatest potential for the product produced in the United States.
  And, of course, we expect that it will grow. We fully expect that it will grow and be that No. 1 position within the next few years.
  Of course, much of that export is to the country of China, and we will talk a little more about that, but briefly let me touch some of the other major markets for U.S. product before I get on to China.
  For many years Japan has been a major market. It still is a good market for U.S. product. It has not grown like we would have liked to have seen it grown. In the last few years competition is extremely keen there, but it is a very significant market and important market, and we will continue to give it the attention that it needs, and of course, we encourage the U.S. Government and USDA to focus on that market and we believe that attention is being given.
  The Philippines is a disappointing market. The Philippines have not honored the agreement that they made under the recent Uruguay Round agreement. Chicken and other products, as you know, are subject to minimum access volume schemes, and these schemes have basically not worked.
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  The Philippines agreed under this agreement to import, as an example, about 14,000 metric tons of poultry. Last year they imported less than 600 tons, and this is an example of how that program and agreement is not being adhered to.
  And we feel very strongly that this Government should take very seriously any significant shortfall in a country that makes an agreement and then does not live up to it, when it enters the World Trade Organizations especially.
  Taiwan seeks membership in WTO, but apparently not very interested in poultry to date. Basically very little poultry is moving into that country, and before they enter into the World Trade Organization agreement and membership, it is important that they have a very concrete and absolute commitment to abide by the rules of WTO, and I think it is imperative that we see to that stipulation.
  Korea has been disappointing, but is beginning to move, and we are pleased with the movements in Korea. Time will tell just how good that market is going to be for us, but if it does, in fact, open up and become more available to us as is projected after July 1, then we will be very pleased about that, and we think it has a big potential to be a significant market for us.
  Now to China, the real prize. Obviously, China has the potential to become, as we have said already, the largest export market for in the United States in the world, and certainly the United States needs to get involved in that. Poultry exports to China, in second place now, but has the potential to go well beyond that.
  There is a tariff currently on the China market of a total, counting at of 62 percent today, which is absurd and far out of order.
  The potential is there. We need to concentrate on that, and, Mr. Chairman, I will be happy to respond to any questions. I appreciate the opportunity of being here, and we stand ready to answer and respond to any questions you have.
  [The prepared statement of Mr. Anthony appears at the conclusion of the hearing.]
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  Mr. POMBO. Thank you very much.
  Mr. Lambert, who is the chief economist with the National Cattlemen's Beef Association.
  Mr. Lambert.

  Mr. LAMBERT. Thank you, Mr. Chairman.
  On behalf of the National Cattlemen's Association, we thank you and the subcommittee for holding these hearings today.
  Among my responsibilities with NCBA, I am primarily policy staff for the International Markets Committee. Mark Armentrout, who is chairman of that committee, sends his regards and regrets that he cannot be here in person today.
  We view in the beef industry the export market as the fastest growing portion of our demand. As Mr. Parker said, we in 1996 exported more than 7 percent of our production, but this is a high value market. More than 12 percent of the wholesale value of beef produced was sold into the export market.
  As we look at the Asian market, about 75 percent of the total value of beef exports went into 5 major markets in the Asian region, and 5 of those markets are among the top 10 largest markets that we have for beef in the international market.
  During 1996, beef exports totaled more than $3 billion. We are also the world's largest beef importer, and our net trade balance was about $1.4 billion in 1996. So we view beef and the international market as very important for long-term growth of beef demand.
  If we expand beyond just beef and beef variety meats and included hides, trade in cattle and tallow, our 1996 trade figures were nearly $4.8 billion, and we generated nearly a $2 billion trade surplus.
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  In 1996, because of lower prices, the value of our exports declined by 7 percent in total, even though our volume increased by 3 percent, and as Mr. Parker said, we did have some problems with demand in Japan during the last half of the year; increased competition in the Korean market from the Australians; and from domestic production also reduced our demand there.
  But long term, we view the international market as very critical to continued growth and expansion and economic well-being in the beef industry.
  The Japanese market accounts for about 65 percent of our total beef exports. It has been the market where we have had the longest term access. That trade agreement was negotiated in 1988. We gained access in Japan in 1991 with a 70 percent tariff. Currently, we are, as of April 1, operating under a 44.5 percent tariff, and that tariff is slated to continue to decline out through the year 2000.
  And as an industry, we invested about $1 million of industry funds in programs to help boost consumer confidence not only in U.S. beef, but in beef in general. Most of that is targeted towards HACCP-like programs in the trade and in handling of beef products, and we will continue then in phase 2 to talk directly to Japanese consumers in efforts to bolster consumer confidence.
  I might add that in spite of the e. coli outbreaks in Japan, that has never been directly linked to beef consumption, and specifically it has never been linked to imported beef or meat products in general.
  The Korean market as of July 1 will be liberalized for most variety meats. There are a couple of exceptions there, and then by the year 2001, we are slated to have a complete liberalization of the Korean market. That has been a very good market for us historically, Korea being the third largest export market, and it accounted for more than $250 million of exports last year.
  With liberalization, the U.S. beef industry will have access to the domestic marketing. We will no longer have to go through a State purchasing agency. A lot of the restrictions that we have been under will be removed, and we are long term very optimistic about the Korean market.
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  Much has been said about the China market, and the combined China-Hong Kong market was the fifth largest market that we faced in 1996. We are very supportive of the vote that was taken yesterday continuing MFN status. Our long-term objective, like pork, like the rest of agriculture, I think, is to have China become a full-fledged member of the WTO, but this is not a give-me; that China should live up to the rules, abide by the rules of the WTO, and for us that includes granting access to the domestic distribution system.
  I would close just urging continued support. Much has been stated about the MAP Program. The beef industry is a very significant participant, cooperator through the Meat Export Federation. In 1996, our contributions exceeded the total amount of MAP funds that went to MEF, and then port contributed on top of that.
  So we view that as a very significant seed money program and urge its continued support.
  Again, I thank you for the opportunity to be here and welcome any questions later.
  [The prepared statement of Mr. Lambert appears at the conclusion of the hearing.]
  Mr. POMBO. Thank you.
  Our next witness is Mr. Len Condon, who is the vice president for international trade of the American Meat Institute.
  Mr. Condon.

  Mr. CONDON. Thank you, Mr. Chairman.
  I have submitted my statement for the record, and I would just like to summarize it.
  You may recall that when I last appeared before you in early May, I reported the long-term prospects for trade in livestock and poultry products between the United States and the European Union as being pretty bleak. Well, that situation has not changed.
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  In contrast, a vastly different set of economic, political, and demographic parameters in Asia Pacific suggest considerable potential for further expanding exports of U.S. red meat and poultry products to that region.
  In transmitting the report of the Commission of the United States Pacific Trade and Investment Policy to members of Congress in April 1997, Kenneth D. Brody, chairman of the commission, observed that, and I will quote:
The Asia Pacific region is the key to our international success. It is the largest producing, the biggest trading, the most populous, the fastest growing, and the most dynamic region in the world. The United States has done well in the region. Our exports have increased nearly fourfold in the last 10 years. However, we could be doing a lot better if we had the same access to Asia Pacific markets as they have to ours.

  Chairman Brody's comments echo the sentiments of the U.S. red meat and poultry industry. Grateful for the success it has had in penetrating markets in that region, excited about the opportunities for future growth, but still very frustrated by persistent difficulties encountered in gaining and maintaining access.
  The industry is committed to aggressively pursuing Asia Pacific and other overseas markets. More than ever the welfare of the American farmer and his or her family depends upon our ability to complete in the global economy.
  This Nation is blessed with a combination of natural, technological, and human resources that make the United States the largest and most competitive agricultural producing country in the world. As the economic well-being of our rural communities becomes more tightly tied to the health of the global economy, it is increasingly imperative that we secure access to markets that show strong growth potential.
  In that regard, the Asian Pacific economies are now the focal point of global economic growth. The region has averaged 6.6 percent growth annually over the last decade, and that is 9 percent if Japan is excluded.
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  The economies in Asia Pacific, which accounted for one-seventh of the global economy in 1970 will account for nearly one-third of it by the year 2000. As a result, average per capita income in the region has grown sixfold and will be $12,000 annually by the end of the decade, more than the current average per capita income of Greece or Portugal.
  In 1980, Asia Pacific bought $45 billion worth of U.S. goods and services. By 1995, the region purchased $175 billion of U.S. exports.
  A decade and a half ago, Asia Pacific was second to Europe as a customer for U.S. exports, buying 20 percent of what America sold abroad. Today the region is by far America's best customer, purchasing 30 percent of U.S. exports. United States sales to individual Asia Pacific economies have soared in recent years. Exports to Japan have tripled in 15 years, and exports to South Korea, Taiwan, Hong Kong, and Singapore have increased fivefold, at a time when total U.S. exports have only doubled.
  Exports of U.S. red meats to the Asia Pacific region have grown rapidly over the past decade, reflecting economic expansion, cultural changes, as well as the success of U.S. efforts to open the Japanese and Korean markets to meet imports.
  In 1996, the Asia Pacific countries bought over three fourths of the $3 billion worth of beef and beef variety meats that U.S. packers and processors sold to the world. Japanese importers alone spent $1.9 billion.
  Led by rapid increases in exports to Japan, the value of exports of pork and pork variety meats to the Asia Pacific region have also been climbing rapidly. Last year the United States shipped $1.1 billion worth of pork and pork variety meats to the world market. Japan bought $756 million, an increase of 26 percent from a year earlier and more than a sevenfold increase from 1987. Japan is now importing one-third of its pork needs. Within a few years, it may be importing half of its domestic consumption.
  The U.S. exports to Japan are expected to jump sharply this year, as Japanese importers seek to compensate for the loss of shipments from Taiwan, which until this year had been the dominant supplier of pork to Japan.
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  In general, substantial growth in exports of U.S. red meat exports to Asia Pacific has come in spite of significant barriers. Tariffs on meats and many other agricultural products are relatively high throughout the region. United States exporters face other constraints, like Japan's gate price and safeguard mechanisms for pork; the Philippine practice of issuing import licenses to pork producers who have no intention of importing competing product; Government restrictions or quasi-governmental agency controls on the types of meat which may be imported or the types of establishments which may import; outright import bans, such as Taiwan's ban on imports of pork variety meats; and questionable animal or public health restrictions.
  Many countries in the region have less efficient domestic animal industries and do not welcome import competition, and they use their political influence to block, stall, and undermine access concessions. Our current difficulties with the Philippines provides an excellent example of this.
  Asia Pacific markets offer enormous potential for the U.S. livestock, meat, and poultry industry, but achieving that potential will require dedication, persistence, and commitment by both the public and private sectors.
  Finally, a few words about China. Meat consumption in China is growing 10 percent per year, or a staggering 4 million tons annually. Total per capita consumption is only 12 percent of the U.S. level. China's per capita consumption of poultry meat has more than doubled in the last 5 years, but is still only about one-fifth the U.S. rate.
  Given its huge population and rapidly developing economy, China has the potential to become the world's largest market for meat and poultry. Our foreign competitors are clearly aware of China's potential and are becoming increasingly active in that market. United States producers and processors of meat and poultry deserve a chance to share in that market.
  In public and private trade policy formulation, it is important to recognize that the dynamics of meat and poultry production and marketing in the United States have changed dramatically in little more than a decade and likely will continue to change. The economic well-being of the industry is now heavily dependent on our ability to maintain and expand access to foreign markets, especially those in Asia Pacific.
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  The prospects are for continued strong economic growth in the Asia Pacific region. With further increases in income fueling demand for animal protein and the possible emergence of China as a major export market, the long-term outlook for expanding U.S. meat and poultry exports to that region is very bright.
  However, expanding and maintaining access to markets in Asia Pacific will likely continue to be a struggle. Sufficient public and private resources will need to be allocated to support those activities.
  Thank you for your attention, and I will be happy to answer any questions later on.
  [The prepared statement of Mr. Condon appears at the conclusion of the hearing.]
  Mr. POMBO. Thank you.
  The next witness is Mr. Ed Coughlin, who is representing the National Milk Producers Federation.
  Mr. Coughlin.

  Mr. COUGHLIN. Thank you, Mr. Chairman and Mr. Smith and Mr. Pickering. It is pleasure to be here.
  National Milk Producers Federation appreciates this opportunity to share our views with you on dairy trade with Asia.
  The dairy industry has never been very trade oriented or export oriented. The dairy industry always tried to keep foreign imports out of this country and was not to be interested in exporting products.
  That is changing. The farm bill is changing that. The absence of a price support program in the year 2000 dictates that we really move in that direction.
  There is a U.S. dairy industry effort to embark on a long-term effort to develop export markets. This export marketing is being conducted by the U.S. Dairy Export Council, an organization that was formed in 1995.
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  USDEC, as they are called, has a budget of about $8.5 million this year, and that is all being spent to assist U.S. dairy exporters increase their sales overseas.
  About $5.4 million of the USDEC budget is funded by dairy producers through the National Dairy Promotion Board, and over $2 million is funded under the Market Access Program operated by USDA's Foreign Agricultural Service.
  As we look down the road, USDEC plans call for the budget to increase to about $12 million by the year 2000.
  USDEC is committed to building durable commercial relationships with overseas customers. They offer some unique services to the exporter in this country, and to importers overseas. They coordinate both the private development efforts by individuals or businesses in this country with the U.S. Government export promotion funding and the export funding done by dairy producers.
  So we think it is a good program. It is a good way to get started. It enhances the efforts of market development activities.
   USDEC has an international office network that includes Asian offices in Bangkok, Hong Kong, Shanghai, Seoul, and Tokyo.
  On China, since China has the potential to become a very significant market for U.S. dairy products, USDEC has invested there. As I mentioned, they have two offices there. I think it was Mr. Peterson this morning that mentioned that he had an opportunity to visit one of those offices. We are very pleased, since the dairy industry is making an investment there, and we are looking for a return on that investment with the House action yesterday to continued the most favored nation status for China.
   Now, looking at what is happening in the marketplace, in 1996, the U.S. dairy exports were about 3.5 billion pounds of milk equivalent. We produce over 150 billion pounds. So that is about 2.5 percent of the total supply in the United States was exported.
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  The exports to Asia in 1996 were about 854 million pounds on a milk equivalent basis. USDEC has projected that the total U.S. dairy exports would rise to about 8.8 billion pounds of milk equivalent by the year 2000. That would include about 2.2 billion pounds of milk equivalent being exported to Asia.
  The Asian markets have a tremendous growth potential for the U.S. dairy exports. The population is large and increasing. Incomes are rising, and there is an appreciation in the Asian markets for products that are produced in the United States. That helps us get a niche market.
  Oftentimes U.S. products are not the lowest price, but it does help you get a niche market when the consumers in the Asian markets recognize the American labels that are appearing on their products.
  Currently the Southeast Asia region produces less than 50 percent of its milk needs. Consumption is growing faster than the production in that area, and so we look forward to the import demand growing, and opening the door even wider to U.S. exporters.
  Now, Mr. Parker mentioned the Dairy Export Incentive Program this morning. That is a valuable tool for the U.S. dairy industry, an element of developing a long-term market, particularly for bulk dairy products.
  Although volumes will decline annually to conform to Uruguay Round commitments, the DEIP is helping transition to a more market based and potentially unconstrained export capability.
  As you know, the 1996 farm bill requires the Secretary of Agriculture to use the DEIP to the maximum allowable level. Mr. Parker mentioned this morning that 80 percent of the DEIP sales have occurred in the last 6 months. We would like to see 100 percent of the DEIP allocations sold, but in fact, we do not have 100 percent.
  In total the DEIP sales--we are going to end the DEIP year on June 30, 6 days from now--only half the quantity allocated has been awarded. So we are well behind. Next year we would hope that DEIP exports occur in the beginning of the program, particularly since the dairy prices are at a relatively low level now.
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  So when we start July 1 with a new year, we hope USDA makes every effort to move products quickly so that when we come to the end of the year we are not faced with the situation where the USDA has not lived up to their commitments under the law.
  Any discussion about dairy exports is not complete unless you talk about export subsidies. These are trade distorting export subsidies. The European Union is a relatively high cost milk production area, and they have long used export subsidies to compete in world markets.
  They make restitution payments on exported dairy products based upon the difference between their higher internal price and the lowest price offered by competing exporters.
  The historic government generosity of the European Union has enabled them to attain a commanding position in world dairy markets. The European Union utilized its export subsidy program to capture over 50 percent of the total world dairy trade in butter, nonfat dry milk, and cheese.
  Now, under the WTO agreement on agriculture, that is gradually being wound down. Nevertheless, the European Union can continue to massively subsidize dairy product exports. By the year 2000 when the current WTO export subsidy reduction phase-in is completed, the European Union will still be able to subsidize export sales equivalent to about 12 percent of its milk production.
  Incidentally, in the case of the United States, the export subsidies that we can provide are limited to about 1 1/2 percent of U.S. milk production. The United States, we believe, could successfully compete in an unsubsidized world market, but the major obstacle that prevents that is European subsidies.
  Last year my organization, the National Milk Producers Federation and the U.S. Dairy Export Council estimated what would happen if the E.U. subsidies could be eliminated. We found that the European Union share of the Asian market would fall by about 50 percent, and the United States would be the likely beneficiary with dairy exports rising as much as $1.5 billion annually.
   However, the European Union was very reluctant to withdraw from its commanding position in the world market. What we see happening now in world dairy markets is efforts being made in Europe and Canada and elsewhere to circumvent the subsidy limits. In Europe this involves what is called a B quota program.
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  This appears to circumvent to us what is the European Union's world subsidy reduction commitments. If the European Union goes on and establishes this proposed B quota system, it would almost certainly result in world dairy prices remaining below U.S. prices.
  Similar systems would likely be implemented in other exporting nations, as Canada has already done. I think there is evidence already that the Canadians are increasing their exports. Canada has dairy prices that are higher than the United States, but they are increasing their exports as a result of what we call a Canadian pooling system, and we are very concerned about the impact has on the U.S. dairy industry.
  Now, as we look down the road, we talk about negotiations for further agricultural trade liberalization. The next comprehensive world trade negotiations are scheduled to begin in 1999. Despite the many existing trade problems and the opportunities inherent to expand trade, there is a lack of enthusiasm, as you can understand, in Europe for another round of trade talks in agriculture.
  There is much background work that remains to be done with respect to that agreement. Potential exists, we think, for the scheduled agricultural talks to produce little or nothing of any substance. We see further delays in reducing export subsidies. We see other trade distorting measures with people wanting to leave them in place.
  The U.S. dairy industry will benefit most by continuing to urge trade negotiations that will hasten the elimination of trade distorting subsidies, and we urge the Congress to help in that regard.
  Thank you for the opportunity to present these views.
  [The prepared statement of Mr. Coughlin appears at the conclusion of the hearing.]
  Mr. POMBO. Thank you.
  Mr. Coughlin, when I was recently in the Philippines and in Thailand, we had the opportunity to go in a grocery store and look at what products they had for sale there. In terms of dairy products, there was very little in the way of U.S. produced dairy products. There was some cheese, a very limited amount, but there was some cheese there that was U.S. produced.
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  And yet both countries have a relatively low tariff on dairy products compared to some of the other products. How could we increase the amount of product that is going into those markets? What kind of things does the dairy industry need to make it work where we could increase what we are sending over there?
  Mr. COUGHLIN. I think the single biggest barrier to U.S. getting additional products in these markets is price. The world market price is distorted by export subsidies, particularly the European subsidies.
  We are ready to compete with New Zealand, Australia, who basically are not subsidizing nations, but the European Union has this extensive system of subsidies.
  They subsidize 12 percent of all of their production or will be able to by the year 2000, there are very, very significant distortions to market prices. The U.S. domestic price is above the world price level. Consequently, if we are going to move product, we are going to have to move it now to these niche markets where people are willing to buy the prestige, if you will, of a U.S. label on the product.
  Mr. POMBO. A lot of the product was produced in either New Zealand or Australia. That was the bulk of the product. Do you think that through programs like the Market Access Program that that is the key?
  Mr. COUGHLIN. That certainly is a help. I mean, in Thailand, the U.S. dairy industry now has a person there who is working with the people there, who is working with the exporters here to try to export our products.
  You know, whey is a product that moves in international trade. Whey is not a price supported product. Whey is a byproduct of cheese, and the U.S. is price competitive worldwide. The United States has a significant share of the worldwide whey market, and that is because we produce a lot of cheese, and it is the byproduct of that, and our prices on whey are competitive.
  So I think the Market Access Program does a good job, supplemented by the National Dairy Promotion Board funds. You know, as it presently stands now the National Dairy Promotion Board is providing more than $2 for every $1 of market access funds.
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  The U.S. Dairy Export Council has arranged for groups from Asia to come to this country to look at our suppliers, to establish relationships. Right now the issue of price is one where on a commodity basis we cannot compete. On a value added product basis, we are beginning to compete.
  Mr. POMBO. Mr. Hardin, in your testimony you covered the issue with the Philippines, and I had the opportunity to sit in those negotiations, to sit through several meetings that we had with different people, and it was my understanding when we left there that if the Government of the Philippines was not notified that the quota would be filled by the person holding that quota, most of which is currently held by a producer in that country, that a large percent of that would be reassigned to someone who would actually use it to import pork.
  In your testimony, you say that you have found that not to be true and that they cannot trade the quota from one class of holder to another. Could you go into that just a little bit more so I can understand exactly what you have found to be true?
  Mr. HARDIN. And I want to emphasize, first of all, that we have checked by e-mail again just in the last 24 hours that our information is correct, and again, what I am told is that without a major change to Administrative Order No. 9, and that has to precede any change where they can change the groups, the class of groups would be the right term, to get away from going to the agricultural producers.
  But, again, all I can say is we have attempted to verify this by people in Manila and who are actively involved in these negotiations, and that is the latest information we have.
  Mr. POMBO. Well, we will have an opportunity to get into this a little bit more in the future, and I am sure that Chairman Smith and Mr. Barrett will be very interested in the outcome of this because we did spend a considerable amount of time on this issue, because I believe that it is kind of a belle weather issue in terms of export of U.S. produced products, particularly in the red meat and poultry industry, because they are treated very similarly by a number of these countries in terms of their efforts to control imports, and we felt this was an extremely important issue.
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  We were very happy with the progress that we made while we were there, and I can guarantee you that we will continue to follow up on this issue.
  Mr. HARDIN. I thank you for that very much. Given the generalized system of preferences, we believe that we should have an answer fairly soon, some time in July, as to whether or not the Philippines is going to move forward and accommodate us, and if not, given that there are significant products imported from the Philippines into this country, that avenue needs to be there and will be there and will be supported vigorously if the Philippines do not live up to the commitments that were made to you and Chairman Smith.
  Mr. POMBO. Well, we received assurances from a number of people that we would begin to make progress on this issue, and I certainly intend on holding them to that, and I am sure that Chairman Smith intends on the same.
  So this is an issue that we will continue to work on, and hopefully we can knock this down so that some of the other products can follow suit.
  Mr. HARDIN. Thank you very much. You and the chairman have a very good grasp of these issues.
  Mr. POMBO. Well, thank you.
  Mr. Pickering.
  Mr. PICKERING. I just wanted to follow up on some questions, primarily the same direction that I asked Mr. Parker earlier and to take a quote from Mr. Anthony that China, since it does represent the most significant and largest opportunity for us in Asia, if we focus on the prize, and that is opening the China market, would you also agree, as Mr. Parker stated, that it is fair to characterize that our top trade policy objective in Asia should be China's accession to the WTO under the appropriate standards?
  Mr. Anthony, would you say that should be our top policy objective? And if the rest of the panel could comment as well.
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  Mr. ANTHONY. Mr. Pickering, I do believe that should be the objective. The prize is so great that we should pay attention so strongly that we move in the direction of getting that situation worked out so it will not be a continuous recurring and a matter that continues to create doubt as to where we are going and what we can expect out of that tremendous market.
  Mr. PICKERING. Would the rest of the panel also share that view?
  Mr. LAMBERT. From the beef industry standpoint, per capita consumption of beef in China is something on the order of 3 pounds. So it is a very small consumption. So we view that as a dramatically potential growth market on a percentage growth basis standpoint.
  Also, then from a standpoint of protectionist issues, because there is not a well established commercial beef industry in China, if you will, protectionist issues may be less than they might be with some of the other species.
  So we view China and accession to the WTO as a very key issue, with 1.2 billion people and the market potential there is great.
  By the same token, we have some issues with Europe, completion of the veterinarian agreement, the SPS agreement, resolve the E.U. hormone ban, which we feel will establish precedents in other markets around the world, are also very critical.
  So I do not want to set China as the prize, but it is very definitely among the top two or three issues that we have to resolve internationally.
  Mr. PICKERING. But as our trade policy relates to China, should WTO accession be our top objective in relation to China?
  Mr. LAMBERT. While we maintain normal trading relationships working towards accession, yes, should be the primary objective.
  Mr. WIEDERSTEIN. From the American Farm Bureau standpoint, yes, definitely. When you talk just about China, and they want to be accepted into the WTO, there are issues that we need to deal with as far as them coming into the WTO, but I think we need to be sure we have the right resources and we give, like the ambassador to the U.S. trade; they have a person now dedicated to agriculture, and in combination with the USDA, they need to have the right resources, and I guess that is somewhat your responsibility, that they have the resources to deal with those issues.
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  And, yeah, it is definitely important when China comes into the WTO that it be based on a level playing field that we can compete. We can compete with anybody, but it has to be on a playing field that we can compete with them.
  Mr. PICKERING. Yes, Mr. Hardin.
  Mr. HARDIN. Our organization has been supportive of the legislation that you queried Mr. Parker about this morning. As a logical series of steps to bring discipline to this discussion about how we deal with the Chinese, I think we remain very concerned about any special exceptions that might be granted as China is accepted into the WTO, and that those precedents can harm our trade for years to come.
  So that we would encourage a very strong negotiating stance and move forward as best we can, but again, I think Jackson-Vanik is a relic of a time past, and we need to focus on how we bring this forward in a more orderly fashion.
  Mr. CONDON. Mr. Pickering, I think bringing China into the WTO is extremely important, but the terms of its accession to the WTO is the critical thing, the terms. We have got to make sure the terms are right because this is the best and maybe the only opportunity to get those terms straight when they come in.
  Mr. PICKERING. And just to followup, there are several proposals. Again, the chairman of the Senate Finance Committee, Chairman Roth, has indicated his desire to link permanent MFN to WTO accession. Subcommittee Chairman Bereuter, as well.
  I am looking at a legislative proposal that I may draw up in the near future that would have the same goal, to give all incentives, both positive incentives and other incentives that would give us the leverage to negotiate the best terms possible to get them into the WTO, and I would ask each of you all if you all could to support those types of efforts of coming up with a new framework so that we could withdraw from, I think, a counterproductive process of annual MFN process, to encourage them to join the WTO under the terms that are favorable to our Nation's interest, but would give us the reciprocal open access in both markets.
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  And so I look forward to working with each of you and all the members that you represent that as we go into the next China MFN debate, that we can have a better framework and one that makes sense, one that is focused on WTO accession, and one that would give the proper incentives to get the best terms possible.
  I appreciate all of your all's comments.
  Mr. Anthony?
  Mr. ANTHONY. I just wanted to add I certainly support and you have our commitment to support that legislation as you move. It is the right approach.
  I have one concern that I want to express to the committee concerning the World Trade Organization, and that is that we assure to the best of our ability that it has the power to enforce its own rules. For someone, China or anyone else, to be a member and to sign that agreement and then not comply with it is worse than no agreement at all, and I think we need to be extremely cautious that it is the best we can hope for, but we need to be cautious.
  Mr. PICKERING. And I just want to agree with you. It is extremely important that we maintain the credibility not only of our country, but of the WTO.
  One reason I think that is so important is that we now only have a bilateral mechanism. When we look at where China can go if they feel that the United States is not treating them properly, the only way we can have an effective trade policy is that it is with the international community, with an international alliance that will require the principle of reciprocal access and the rule of law.
  And for that reason I want to focus on the WTO.
  Thank you, Mr. Chairman.
  Mr. POMBO. Mr. Smith.
  Mr. SMITH. Who are the companies that trade in export trade in the different commodities? Maybe in the areas of dairy, pork, beef, and poultry you could tell me who the two major exporters are of that product and what the two major export products that they send out.
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  Whoever wants to start, I mean are we talking about pork bellies to Taiwan or are we talking about powdered milk? Who are the two main exporters? Are there two large companies that are doing most of the exporting, if you are familiar with it?
  Start with Mr. Coughlin on dairy.
  Mr. COUGHLIN. Mr. Smith, much of the exporting has been done under the Dairy Export Incentive Program. Most of it has been done by brokers. There is an international network of brokers, and the principal product that moves out of the United States is whey, the byproduct of cheese. That is the principal product that is moving to Asia.
  Mr. SMITH. OK. So brokers?
  Mr. COUGHLIN. So cheese manufacturers. It would start with the cheese manufacturer. It could be a Kraft. It could be a Leprino Foods. It could be another manufacturer, but then the deals are usually cut. In the case of dairy, there are more specialized deals that the broker puts together, the financing and has the contacts in country, whereas the actual manufacturers of the product in this country do not. So most of the deals are done through brokers.
  Mr. SMITH. So you are saying what, 60 percent, 70 percent are broker put together?
  Mr. COUGHLIN. I think practically all of the dairy trade is done through brokers.
  Mr. SMITH. Rather than the majors, Kraft or any of the major manufacturers?
  Mr. COUGHLIN. There is not much of it that is done direct.
  Mr. SMITH. Whey is No. 1, and what is the Nos. 2 and 3 products in dairy? Dried powdered milk, I suspect.
  Mr. COUGHLIN. Dry powdered milk is probably behind it. I could look, but I am not positive off the top of my head.
  Mr. SMITH. How about pork?
  Mr. HARDIN. There is a lot of competition in that industry. IBP and the Excel Division of Cargill would probably be No. 1 and No. 2. ConAgra does a lot through its Swift line. Seaboard Farms is growing very rapidly and displacing a lot of business in Japan, and Smithfield Foods is also pursuing a strategy which is based in Virginia and North Carolina, a strategy going after the high end of the Japanese market, in particular.
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  Mr. SMITH. And I appreciate the products are all over the board, but what would be the major export demand products?
  Mr. HARDIN. Well, in Japan, the No. 1 item is the loin, which is manufactured into a number of things, and we are having rapid growth in fresh meat, which the Danes cannot compete with us on.
  From the time it leaves the plant in America, it can be landed in Tokyo in 11, 12 days with a 40-day shelf life.
  After that, in Japan a number of shoulder and manufacturing products. Korea, which is our sixth market, you will see some belly business, a lot of rib business for Korean barbecue, and shoulder meat products.
  Mr. SMITH. OK. How about beef?
  Mr. HARDIN. Chuck?
  Mr. LAMBERT. I would think the major exporters would be about the same companies that are involved on the pork side, but we have a lot of small and mid-sized packers that are very aggressive in the export market. Farmland Cooperative is a major participant. Taylor Packing has a very good, grass fed product. So there is a fairly broad diversification of participation in the program.
  Japan has largely been a high quality beef market, middle meats, steaks, and ribs and loins. Short loins in Korea, and then beyond that it is probably a more diversified market with variety meats, specialty items be----
  Mr. SMITH. Is value added growing or detracting? Are we shipping more sides of beef or is there an expansion of the value added over there?
  Mr. LAMBERT. The move is to more further processed, closer to case ready, and in some instances I would say case ready product.
  And, Len, China?
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  Mr. CONDON. You know, we are selling many, many products in many, many markets, and as in the dairy industry, it is not always the packer that is selling. We have processors who do not slaughter and in some cases brokers. So it is very diversified trade.
  Mr. SMITH. Since the yellow light is on, I am going to bypass poultry and ask about dairy. Our dairy market is not expanding. Why aren't we taking greater advantage of the potential for exports?
  Some of these countries have their lowest tariffs on dairy products, and yet we are seeing probably dairy--at this table we see dairy having less gains maybe than any of the other products.
  Mr. COUGHLIN. The price is not right. We have a price support program in this country, and the price support return is greater than the export market return.
  Mr. SMITH. What is happening to this mega co-op in dairy, and what is happening to whatever the name is for the dairy export push group that has been developed?
  Mr. COUGHLIN. That is the U.S. Dairy Export Council, is the dairy push group. To start off with the mega merger, four members of ours have announced the intention to go through what is called a due diligence study to look at whether or not they might merge. They are in the process of doing that now. They hope maybe by the end of the year to know whether the Department of Justice, for example, would agree that they could merge.
  If that group does merge, they would have approximately 25 percent of the total U.S. milk supply. In your area, the closest that they would come is one of the Ohio cooperatives, Milk Marketing, Inc. The others that are participating in that are Mid-America Dairymen, which is the largest dairy cooperative in the country; Associated Milk Producers, which is the second largest; Milk Marketing, Inc., in Ohio; and Western Dairymen based in Colorado and Utah.
  Mr. SMITH. So with the combined co-op processing facilities that will be owned by that co-op, will such a mega co-op be active in their own right in exporting their own powder or dry milk powder, or what will they do?
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  Mr. COUGHLIN. Again, it depends upon the return. Right now I can sell the Government, and there have been some recent sales of nonfat dry milk to the Government. The dairy price support currently is $1.04 a pound.
  On the international market if I was to try to sell that same product, I am probably talking a return of 90 cents a pound. So you are not going to be able to sell in the international market unless you have the subsidy under the Dairy Export Incentive Program.
  Mr. SMITH. Are there other competitors in the world market that are making greater headway in export sales than the United States?
  Mr. COUGHLIN. Well, Australia and New Zealand are the two. New Zealand, for example, has to export 85 percent of all of the milk that is produced in New Zealand, and they do a good job of the export marketing. They have been in it for a long time.
  The Australians do the same job, and the Europeans through their subsidies are exporting about 10 percent of their production, and they are able to export with subsidies and be price competitive because of the Government provided subsidies.
  Mr. SMITH. I will yield back, Mr. Chairman. I never did ask about poultry.
  Mr. POMBO. Well, I thank the gentleman for filling in.
  We do have a vote going on on the floor. I appreciate all of the testimony that was given today. For the members of this witness panel, if there are questions that are presented to you in writing, if you could answer those in a timely manner, it would be appreciated. I know that there are other members that did have questions that they wanted to ask. So hopefully they will have that opportunity to present those to you.
  Thank you all for your testimony very much.
  The hearing is adjourned.
  [Whereupon, at 1:05 p.m., the subcommittee was adjourned, subject to the call of the Chair.]
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  [Material submitted for inclusion in the record follows:]
Mr. Chairman, members of the subcommittee, I am pleased to come before you today to discuss the status of livestock products trade with Asia.
Asian Markets Driving Growth for Livestock Products Exports
When Special Trade Advisor Paul Drazek addressed this subcommittee in April, he discussed the export performance of livestock products in great detail. Today, I will devote my time to examining exports, market opportunities and trade policy issues with countries in Asia. But before I begin, let me summarize by saying that overall poultry and livestock exports continue to show remarkable growth. Last year, the value of poultry, pork, beef and variety meat exports increased 8 percent to $6.6 billion--twice the 1990 level. If you include hides and skins and rendered products, that total rises to $8.5 billion.
These figures illustrate a real reversal of fortune for the U.S. meat and poultry industry. In this decade, we've seen a $4 billion shift in our animal products trade balance. In 1990, the United States imported nearly $279 million more meat and poultry than we exported. Today, those numbers are dramatically reversed--with exports exceeding imports by $3.8 billion.
These record exports did not just happen by accident. We believe that market development is a long-term activity. True, sometimes success can happen overnight, and products may have their 15 minutes of fame. But real long-term market success is built through a series of steps with a long-term commitment to market development. This is the kind of commitment that the livestock industry has made in Asia.
Increased market access, reduced trade barriers, rising world incomes, population growth, high-quality U.S. products, and our market development activities are some of the factors fueling this growth. Nowhere is this more true than Asia. Asian markets account for 61 percent of our animal product exports (see Chart 3). No other market even comes close.
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We are extremely bullish on U.S. agriculture's future in Asia. Why?
World's fastest economic growth
Large and growing populations
Changing dietary patterns
Growth in Western-style supermarkets
Trade liberalization
Declining role of agriculture in most of Asia
Rapidly increasing urbanization
Improvements in transportation and port facilities
Growth in Asian food processing industries
In 1995, 15 cities worldwide had populations of 10 million people or more; nine of those were in Asia. By the year 2015, 27 cities with have populations of 10 million plus; 17 will be in Asia.
In addition, if you look at real gross domestic product/gross national product growth forecasts for 1998, developing countries in Asia lead the pack. Nine of the top 10 are in Asia--Vietnam, China, Malaysia, Indonesia, Singapore, Thailand, Korea, Philippines, and Taiwan.
Three Case Studies
To illustrate how USDA and the livestock industry have worked together to develop these markets, I'd like to spend a few moments highlighting the activities and success in three key Asian markets--Japan, Korea, and China. These three countries are at different stages of market development. In Japan, the U.S. beef industry has been at work for 30 years, with visible success. In Korea, trade restrictions have limited the market potential, but 10 years of market development work are beginning to bear fruit. China, a market of enormous potential, remains an unknown, with numerous political and economic issues still to be resolved.
For nearly 30 years, USDA has worked with the U.S. beef industry to open the Japanese market. We have used our commodity analysis, trade policy, and export program tools to identify the potential of the Japanese market, negotiate access, and fund promotions to develop consumer demand for U.S. red meat. The United States now exports about $2 billion worth of red meat annually to Japan.
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In the late 1960's, the Foreign Agricultural Service (FAS) of USDA emphasized to the U.S. red meat industry to the market potential in Japan. In the early 1970's, the National Cattlemen's Association sent a delegation to visit with FAS staff in Japan. The delegation concluded that the rapidly growing Japanese economy and rising living standards warranted a concerted effort by the U.S. meat industry to take advantage of what was believed then to be a $100 million opportunity. In 1973, as a result of the combined efforts of the National Cattlemen's Association, the American Meat Institute, and the National Pork Producers Council, with strong support from FAS, the U.S. Meat Export Federation (USMEF) was formed and joined the FAS Foreign Market Development (Cooperator) Program.
Through years of activity, USMEF was successful in generating interest in U.S. beef in Japan. However, it faced enormous import restrictions, including quotas, tariffs, and non-tariff barriers. To protect domestic beef producers, the Japanese government restricted imports, which generally kept domestic beef prices at 2 to 5 times the world price.
The 1988 U.S./Japan Beef and Citrus Agreement was instrumental in increasing market access for U.S. high-quality beef. Following that agreement, FAS and USMEF worked hand-in-hand to increase U.S. beef exports, with the U.S. government taking the lead in negotiating improved market access, and USMEF conducting promotional efforts to take advantage of market liberalization as it occurred using FAS market development program resources. Today, the United States supplies nearly half of all the beef imported by Japan, and Japan accounts for over half of all U.S. beef exports.
The U.S. meat industry faced enormous import restrictions in Korea in 1988 when USMEF began to target the market with limited trade activities funded by the Targeted Export Program and Foreign Market Development Programs. Prior to 1987, U.S. beef exports to Korea were minimal, limited by the Korean government's efforts to protect domestic beef producers by severely restricting imports. In 1988, FAS and USMEF began to work to increase market access for U.S. beef. FAS took the lead in government-to-government negotiations, while the private sector, funded by the FAS market development programs, began to educate the trade about the benefits of market liberalization, and served as technical advisors to the negotiations.
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The first breakthrough came in 1989, when a panel under the General Agreement on Tariffs and Trade (GATT) required that Korea liberalize its beef market by July 1997. An initial U.S.-Korea beef agreement for 1990-92 established minimum access quotas to begin the liberalization process. These quotas resulted in government tenders, but did not allow the Korean private sector to import.
Further negotiations in 1992 resulted in a second interim agreement for 1993-95 that secured a small but growing share of increasing quotas for the Korean private sector. Under Uruguay Round commitments reached in 1993, major beef supplying countries agreed to delay full liberalization, and to accept a higher tariff rate. In return, South Korea agreed to allow a larger portion of the quota to be sold directly by foreign suppliers to private sector end users through the Simultaneous-Buy-Sell system (SBS), and to substantially expand import quotas each year through the year 2000, after which they are to be eliminated entirely. Full liberalization of the Korean beef market is scheduled for 2001. Until then, imports are possible under government tenders, controlled by Korean government specifications and, increasingly, under the SBS system. The 1997 quota is 167,000 metric tons, of which 50 percent is scheduled to be purchased under SBS.
Despite various agreements governing access to the Korean market, a number of Korean practices, such as arbitrary, government-mandated shelf-life limits, have continued to impede U.S. meat imports. In the spring of 1995, the United States initiated consultations under the World Trade Organization (WTO) dispute settlement process regarding these barriers. As a result, Korea agreed to phase-out its non-scientific, government-imposed shelf life limits by July 1996, and to allow manufacturers to set their own ''use-by'' dates.
Since 1993, the U.S. beef industry has contributed over $1.6 million to USMEF efforts to promote red meats in Korea. U.S. companies have designed packaging, portions and products to meet Korean needs. As a result of these efforts, Korea is the fourth largest export market for U.S. beef, trailing only Japan, Canada, and Mexico. Over 8 percent of U.S. beef and beef variety meat exports with a wholesale value of $254 million were shipped to Korea in 1996. This is an increase of over 40 times the value, and 65 times the volume of 1985 export levels.
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China's future role in the world marketplace will be the key factor in the outlook for global trade in many agricultural commodities, including livestock and meat products. Specifically, the outlook for meat trade to China depends on broadening market access for meats. The future growth in import demand for meats by China centers on the status of China's accession to the WTO and prospects for institutionalizing market access commitment and lower tariffs. The potential importance of China to the U.S. meat industry can be illustrated by the resounding success experienced by the U.S. poultry industry in that market.
Over the past decade China's rapid economic growth, commitment to economic reforms, and market development activities by the USA Poultry and Egg Export Council (USAPEEC) have rapidly propelled China into one of the fastest growing markets for poultry meat with U.S. exports in 1996 valued at nearly $500 million. China's massive population base, economic growth, and market liberalization are likely to extend the favorable market prospects beyond poultry meat to encompass both beef and pork. In addition to the activities of USAPEEC, USMEF opened an office in Shanghai this year to expand trade servicing efforts.
One of the barriers facing U.S. meat product exports to China has been having access limited to hotel and restaurant markets. Just last month, however, the Chinese government authorized a 1-year trial period during which specified quantities of meat will be permitted to be imported for sale in retail markets. The overall impact of this policy change is minimal as measured by the significant restrictions on quantity and plant origin. Only products imported through one company and produced in five specific U.S. plants are eligible to move into Chinese retail markets. While this slow and cautious approach to opening market access is frustrating to the U.S. industry, it paves the way for discussions on more technical issues, such as plant approval inspection process and other quarantine issues. As long as China remains outside the world trading system, such ad hoc arrangements will likely characterize trade negotiations. The United States is committed to adoption of the FSIS system approach and will continue to urge China to embrace this approach.
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The United States has recently intensified discussions over China's accession to the WTO. While recognizing that the WTO is an important tool to reinforce past steps taken by the Chinese government to liberalize its economy and support further economic reforms, it is critical that China's commitment to negotiate be combined with meaningful concessions. Key agricultural issues presently being discussed include:
disciplining state trading enterprises, so that market forces, rather than just government decisions, play a role in determining import levels;
removing unjustified sanitary and phytosanitary measures;
reducing tariffs;
commitments on domestic and export subsidies; and
subscribing to the rest of the WTO trade rules, such as removal of non-automatic licensing requirements, instituting proper customs valuation, and generally increasing the transparency and predictability of the Chinese import system.
China's accession to the WTO depends upon it accepting WTO rules and providing improved access to its market. It is critical that China subscribe to the same rules as other countries who are in the WTO and open its market.
While meat imports, specifically poultry meat, are expected to maintain a steady growth in the future, Chinese accession to the WTO holds the potential for lower tariffs and increased market access for all meat imports. A more transparent import regime will provide for more price stability and less risk for both exporters and importers, portending more trade.
Market Opportunities by Product
Let me now provide a brief overview of the market potential of the specific products of interest to the Committee.
Total U.S. beef exports for 1997 are projected to increase 2 percent to about 624,000 tons. About 60 percent of these exports go to Asia, with over 50 percent to Japan alone. Beef consumption in Japan has slowed over the past year because of food safety concerns including the recent outbreaks of E.coli. However, the United States continues to maintain the majority share in this market, with exports in the first three months of 1997 mirroring 1996 levels. In 1997, the United States is expected to show significant gains in other Asian markets, including Hong Kong, South Korea, and Taiwan. First quarter exports to these countries are already up, 60 percent, 32 percent, and 3 percent, respectively. Increasing U.S. share relative to those of our competitors is the main reason for the gains.
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Albeit small export markets for U.S. beef relative to the countries mentioned above, U.S. beef exports are increasing to China, Indonesia, the Philippines and Thailand. Exports so far in 1997 have increased in these four countries by 181 percent. Strong economic growth and increased beef consumption can explain most of the gains realized by the United States in these countries. Overall, U.S. exports to Asia, less Japan and South Korea, are up 41 percent over the 1996 January-March period.
Allaying consumer concerns over food safety issues is critical to increasing foreign beef consumption. USMEF has played a critical role in informing the Japanese of the safety of U.S. meat and products and on the U.S. inspection system, Hazard Analysis and Critical Control Points (HACCP). This assurance will also be crucial to increased consumption in our other major Asian markets, Korea, Hong Kong and Taiwan.
The March 20 outbreak of foot-and-mouth disease (FMD) in Taiwan has introduced a great deal of uncertainty into the pork trade picture. For Taiwan, the impact has been devastating. In order to control the spread of the disease, all hogs in herds that have been affected are being destroyed. As of May 29, this amounts to 4.7 million head, over one-third of the entire herd prior to the outbreak.
As a result, U.S. export prospects for pork to Japan, already bright, received a substantial boost. Prior to the FMD outbreak, Taiwan was the single largest supplier of pork to Japan, exporting almost 266,000 metric tons of pork, roughly 41 percent of Japan's total imports for the year. And although Japanese pork consumption is expected to decline slightly as a result of consumer concerns, most of Taiwan's share of the Japanese market is forecast to be divided between Taiwan's two largest competitors, the United States and Denmark.
The Japanese pork market is divided into two distinct segments: high-value fresh/chilled pork, which accounts for about 1/3 of total imports, and lower value frozen pork, which constitutes about 2/3 of imports. The United States is forecast to gain up to 85 percent of Taiwan's share of the fresh/chilled market, since it is the only country in a position to supply such large quantities of fresh pork. (Denmark is only able to supply frozen pork, due to the shipping times involved). Canada and Korea are also expected to make substantial gains, but are unable to expand production to fill more than a small share of the total demand. In the frozen market, the United States is expected to face fierce competition from Denmark, which is in a stronger position to provide the specific cuts the Japanese demand. As a result, the United States is forecast to take a smaller share of the frozen pork market than Denmark, while Canada and Korea are also likely to benefit.
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Increased U.S. exports of fresh/chilled pork have already begun, while exports of frozen pork have continued to lag. This is due to the large stocks of frozen pork accumulated by Japan during late 1996. These stocks will allow Japanese importers to avoid increasing their purchases until after the gate price is reduced on July 1. Once the gate price is reduced, low-priced frozen pork will be able to move more freely into Japan, and U.S. exports should begin to rise.
The overall impact of the FMD crisis on U.S. exports to Japan can be seen in the U.S. export forecast for pork. Prior to the outbreak, USDA forecast total exports for 1997 at 493,000 tons--a gain of 14.4 percent over 1996. Since then, the export forecast has been revised up 567,000 tons--a gain of nearly 32 percent over 1996.
A second factor boosting the export outlook is the July 1, 1997, liberalization of Korea's import market for frozen pork. As a result of these events, U.S. exports are improved substantially over last year, when the United States lost market share to Denmark and Canada. In anticipation of increased trade opportunities, U.S. producers have begun making the adaptations required to supply the cuts desired in these markets. This bodes particularly well for sales to Korea, where demand is focused on single-rib bellies. As a result of liberalization alone, Korean imports of pork are forecast to jump by 48 percent in 1997. During the first quarter U.S. exports of pork to Korea have jumped from 637 tons in 1996 to 3,358 tons in 1997.
The FMD outbreak is also playing a role in the outlook for U.S. exports to Korea. For the long term, the FMD outbreak could result in a substantial shift in Taiwan's production, and in U.S. export prospects to Taiwan. Over the past two years, the United States has gained increased access for pork exports to Taiwan, rising from 162 tons in 1994 to 9,824 tons in 1996. However, the FMD outbreak has lent strength to a movement favoring reduction of Taiwan's industry to a level sufficient to supply only domestic needs. If this does take place, the U.S. pork industry will continue to benefit from the reduced competition in the Japanese market. At the same time however, Taiwan is likely to become more aggressive in protecting its domestic market, and the recent gains made by the U.S. industry may be lost.
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Hides and Skins
Asia continues to be the largest market for U.S. bovine hides and skins, accounting for approximately three quarters of all hide exports. Korea absorbs almost 40 percent of U.S. exports, Taiwan approximately 13 percent, and Japan follows with about 10 percent. Hong Kong and China combined, accounted for another 13 percent. In 1996, total bovine hides and skins exports amounted to about $1.3 billion. This year, sales are expected to reach $1.5 billion as prices are running notably higher than a year ago and export volume remains strong.
U.S. hide exports benefit from the growing demand for leather apparel and furniture from a burgeoning middle class in Thailand, Korea, Indonesia, India, and China. None of these countries has the cattle industry to supply this demand for hides and must thus rely on imports. In addition, approximately 40 percent of the exported hides is used for automobile upholstery. This market keeps growing as auto makers include leather upholstery in medium priced vehicles as well as in luxury cars.
The outlook for exports of hides and skins to Asia looks very bright. More tanneries are establishing operations in Asia to take advantage of the region's relatively skilled, low cost labor. Tanning capacity is shifting from Korea to China, but remains in Asia.
China offers the greatest opportunity for future growth. China's domestic market and leather export industry are expected to expand and become one of the largest importers of U.S. hides and skins in the near future. In the past five years, U.S. hides exports to China have averaged 70 percent growth per year.
China continues to dominate the stage as one of the fastest growing markets for U.S. poultry, with U.S. exports in 1996 valued at nearly $500 million. The U.S. industry has benefitted from China's preferences for many products not appreciated by U.S. consumers--chicken leg quarters, paws, backs, and wing tips. Opportunities for future growth are bright as a result of China's large population and forecasts of strong economic growth.
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Some of the other best opportunities for growth in poultry exports are also to be found in Asia. As a result of the Uruguay Round Agreement, the Korean government began allowing frozen chicken imports in 1995 under a quota system. On July 1, 1997, all quotas on frozen chicken imports are to be removed. In addition to improved market access, Korea's rapidly expanding economy is expected to generate rising demand for U.S. poultry meat. Frozen turkey parts, used to make sausages and further-processed poultry products, are currently the most heavily demanded U.S. poultry product in Korea.
Although Indonesia's per capita poultry consumption is relatively low for the region, it is growing by 8 to 10 percent a year. Demand for processed poultry products, including deli meats and all kinds of turkey, exceeds supply.
In Malaysia, Halal slaughter issues presently constrain U.S. exports of frozen chicken, but imports of U.S. turkey and duck have proven competitive in terms of price and quality against products from Thailand, Brazil and the European Union (EU).
For the U.S. poultry industry, Asian countries also provide some of the fiercest competition. Not only is China a large market for U.S. poultry, it is also the fastest-growing poultry meat exporter as well. Since 1992, the total export volume of China's poultry meat has more than tripled, reaching about 450,000 tons in 1996, valued at $730 million.
The destination of this unprecedented export growth is mainly Asia, specifically Japan, as China moves into position as Japan's largest broiler-meat supplier. Thailand is also another major competitor of the United States and supplier to Japan. While Thai exports are forecast to drop slightly in 1997, the domestic industry continues to expand to meet rising consumption at home. In addition, continuing a decade-long trend of foreign investment overseas by Asian poultry industries, the Thais are building a large broiler complex in eastern Alabama. When complete, this $88-million complex will process more than one million birds per week at two processing plants. One of the plants will be dedicated to producing product for export.
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Dairy Products
For U.S. dairy products, the Asian markets as a group look especially promising. Consumers in countries such as Japan, Taiwan, Hong Kong, and South Korea are rapidly developing a taste for a variety of dairy products. In Asian markets, U.S. products face stiff competition from New Zealand, Australia, and the EU.
The Dairy Export Incentive Program (DEIP) is a useful tool to help the U.S. dairy industry to introduce quality U.S. dairy products to Asian consumers. As of mid-June, 1997, total DEIP awards were made involving nearly 80,000 tons of dairy products. Over 80 percent of this total has been awarded since January. Asian markets have become increasingly important buyers of nonfat dry milk under this year's DEIP. Together, Indonesia, the Philippines, Singapore, Thailand, and Vietnam have purchased nearly 30 percent of our nonfat dry milk awards under this year's program.
In addition to the DEIP, the U.S. Dairy Export Council has active market development efforts underway in Japan and Korea. In Japan, the Council is working to increase the awareness of Japanese consumers of U.S. ice cream and cheese. South Korea has begun to liberalize its market for dairy products as required under the Uruguay Round Agreements. It has quickly become an important overseas market for U.S. cheeses and a rapidly growing market for whey.
Barriers To Growth
Despite the remarkable success of our livestock industry in Asia, barriers continue to hinder these industries from reaching their full export potential. These barriers include food safety concerns, trade policy issues, and the competition.
Food Safety Concerns
Concerns about bovine spongiform encephalopathy (BSE) and reports of its possible link to a newly identified variant of Creuzfeldt-Jakob disease loom over world beef markets. When BSE became a household word in early 1996, Japanese beef consumption reversed its more than decade-long trend upward and fell 5 percent. Since then, E.coli outbreaks in Japan and Hong Kong, and incidents of animal diseases have persuaded consumers to avoid eating meat.
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Allaying consumer concerns over food safety issues is critical to increasing foreign consumption. The U.S. government must constantly emphasize the importance that we in the United States place in providing a safe food supply for all consumers--whether U.S. or foreign. We have long been a leader in government food safety programs and our new inspection program, HACCP, once again puts us firmly in a leadership position, along with New Zealand. The U.S. government, most especially USDA overseas staff, is actively working with the livestock industry to inform foreign consumers and buyers about the safety of U.S. products. USMEF is playing a critical role in Japan in this effort, and this assurance will also be crucial to increased consumption in our other major Asian markets, Korea, Hong Kong, and Taiwan.
Trade Policy Issues
Since the conclusion of the Uruguay Round negotiations, our primary trade policy focus has been on ensuring compliance with the terms of the agreement by our trading partners. We believe monitoring other countries' compliance with this and other agreements is vital if the United States is to realize the full benefits of these agreements.
For example, access to the Philippines market is very important to the U.S. pork and poultry industries. After two years of unsatisfactory implementation of WTO obligations, the Philippine government finally appears to be taking steps towards opening the market. Specifically, a review is being conducted of the present system of administering tariff-rate quotas (TRQs) that at present is not in WTO compliance and minimizes market access opportunities for U.S. exporters. Although skeptical, the U.S. Administration, in conjunction with the U.S. pork and poultry industries, will continue to monitor this carefully.
A recent visit led by Agriculture Committee Chairman Smith was instrumental in prompting the Philippine government to announce the 1997 pork allocation, which included 10,000 tons to processors. Furthermore, the government included a cover letter requiring license holders to declare their intent to use import allocations by June 15 with penalties for failure, and initiated a review of the administrative order that governs the licensing system for quotas.
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We continue to press the Philippines to conform with its Uruguay Round commitments. The U.S. Trade Representative's Office has initiated a review of the Philippines Generalized System of Preferences (GSP) eligibility, and in parallel, we have also held dispute settlement consultations with the Philippines in the WTO to resolve our concerns about their pork commitments. We are optimistic that the Philippines will abide by its Uruguay Round commitments.
We also have placed special emphasis on monitoring and aggressively challenging other countries' use of non-scientifically based sanitary and phytosanitary (SPS) standards that unfairly restrict U.S. access to foreign markets. I'm sure you all recall China's suspension of imports of poultry products from the United States because of the alleged presence of the avian influenza virus.
Through the efforts of our scientists and trade negotiators, we were able to keep our poultry exports to China moving. We will continue to bring to bear the full weight and resources of USDA to resolve SPS trade barriers.
Just as we have targeted Asia for export growth, so have our competitors. And the competition is fierce. Let me cite just a few examples.
In Japan, our most important market for beef, Australia spends $20 million on beef promotion, more than three times our combined budgets to promote beef and pork in Japan.
In Singapore, Australia spends 2 1/2 times what the United States does to promote beef, and New Zealand out spends us nearly 1 1/2 times. In aggregate, our competitors spend more than five times our budget in Singapore.
In Indonesia, Australia out spends the United States three to one in promoting livestock and genetics.
The Canadian Beef Export Federation, which has a 1 percent market share in Asia, is rapidly increasing its overseas staff with three in Tokyo, two in Seoul and two in Hong Kong.
USDA and the livestock industry will continue our aggressive efforts to expand our livestock exports to Asia despite our well-financed competition.
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Mr. Chairman, as you can see, the livestock industry and USDA have worked hard to develop export markets in Asia. We have succeeded greatly in some sectors and countries, and in others we are just approaching the starting line. We are using all of our available tools--market intelligence, market development programs, and trade negotiations--at our disposal, and will work relentlessly to ensure the continued opportunities for growth for the American livestock sector.
Thank you, Mr. Chairman. I am Leonard Condon, vice president for international trade, the American Meat Institute (AMI). AMI is a national trade association representing the packers and processors of 70 percent of the Nation's beef, pork, lamb, veal and turkey production, and their suppliers across America.
We appreciate the fact that you are holding this hearing to focus on the current status of, and future prospects for, trade in livestock, dairy, and poultry products between the United States and Asia--the most dynamic and promising markets in the world today. We are grateful for the opportunity to share our observations.
We commend you and the chairman of the full committee for identifying trade as a priority issue for the committee. Continued growth in exports of U.S. livestock and poultry products is absolutely critical to maintaining the economic viability of the industry.
U.S. shippers continue to face major challenges in gaining and maintaining full access to Asian markets. Nevertheless, we are encouraged by the rapid expansion in U.S. red meat and poultry exports to that region in recent years.
You may recall, Mr. Chairman, that when I last appeared before you in early may, I reported that long-term prospects for trade in livestock and poultry products between the U.S. and the European Union are bleak. The outlook for trade with europe has not changed. In contrast, a vastly different set of economic, political, and demographic parameters in asia-pacific suggest considerable potential for further expanding exports of U.S. red meat and poultry products to that region.
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In transmitting the report of the commission on United States-Pacific Trade and investment policy to members of congress in april 1997, Kenneth D. Brody, chairman of the commission (and former chairman and president of the Export-Import Bank of the United States), observed that ''The Asia pacific region is the key to our international success. It is the largest producing, the biggest trading, the most populous, the fastest growing and the most dynamic region in the world. The united states has done well in the region, our exports have increased nearly fourfold in the last 10 years. However, we could be doing a lot better if we had the same access to Asia pacific markets as they have to ours.'' Chairman Brody's comments echo the sentiments of the U.S. red meat and poultry industry--grateful for the success its had in penetrating markets in that region, excited about the opportunities for future growth, but still very frustrated by persistent difficulties encountered in gaining and maintaining access.
The industry is committed to aggressively pursuing Asia pacific and other overseas markets. More than ever, the welfare of the American farmer and his/her family depends upon our ability to compete in the global economy. We are blessed with a combination of natural, technological, and human resources that make the United States the largest and most competitive agricultural producing country in the world.
As the economic well-being of our rural communities becomes more tightly tied to the health of the global economy, it is increasingly imperative that we secure access to markets that show strong growth potential. In that regard, the Asia pacific economies are now the focal point of global economic growth. The region has averaged 6.6 percent growth annually over the last decade (9 percent if Japan is excluded).
The economies of Asia pacific (Brunei, China, Hong Kong, Indonesia, Japan, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand), which accounted for one-seventh of the global economy in 1970, will account for nearly one-third of by the year 2000. As a result, average per capita income in the region has grown six-fold and will be $12,000 by the end of the decade, more than the current average per capita income of Greece or Portugal. Trade has fueled this economic miracle. From 1985 to 1995, merchandise exports from Asia pacific grew 250 percent. In 1995, trade accounted for about 29 percent of the Asia Pacific economy, up from 15 percent in 1986.
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In 1980, Asia pacific bought $45 billion worth of U.S. goods and services, by 1995, the region purchased $175 billion of U.S. exports. A decade and a half ago, Asia pacific was second to Europe as a customer for U.S. exports, buying 20 percent of what America sold abroad. Today, the region is by far America's best customer, purchasing 30 percent of U.S. exports. U.S. sales to individual Asia Pacific economies have soared in recent years. Exports to Japan have tripled in 15 years and exports to south Korea, Taiwan, Hong Kong, and Singapore have increased five fold at a time when total U.S. Exports have only doubled.
Exports of U.S. Red meats to the Asia Pacific region have grown rapidly over the past decade--reflecting economic expansion, and cultural changes as well as the success of U.S. Efforts to open the Japanese and Korean markets to meat imports. In 1996, the Asia pacific countries bought over three-fourths of the $3.0 billion worth of beef and beef variety meats that U.S. packers and processors sold to the world. Japanese importers alone spent $1.9 billion (nearly two-thirds of the total), down from $2.1 billion in 1995 and the first decline in Japanese spending on U.S. beef and beef variety meats since 1990. Between 1987 and 1995, the value of U.S. exports of beef and beef variety meats to Japan tripled.
Exports of beef and beef variety meats to Korea, our third largest market (Canada is second), grew from only $2 million in 1987 to $333 million in 1995, before dipping to $254 million last year. The value of exports to Hong Kong, fifth largest market in 1996, climbed to $64, up from only $12 million nine years earlier.
Led by rapid increases in exports to Japan, the value of exports of pork and pork variety meats to the Asia pacific region have also been climbing rapidly. Last year, the U.S. shipped $1.1 billion worth of pork and pork variety meats to world markets. Japan bought $756 million, an increase of 26 percent from a year earlier and more than a seven-fold increase from 1987. Japan is now importing one third of its pork needs. Within a few years, it may be importing half of its domestic consumption.
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Taiwan is an important producer of hogs, and in recent years the island nation has been the dominant pork supplier to the Japanese market and a major competitor for U.S. exporters. However, a serious outbreak of foot and mouth disease (FMD) struck the island earlier this year, crippling its export trade. U.S. pork exporters are expected to gain from Taiwan's misfortune. According to USDA, the imposition of bans on Taiwanese pork resulting from the FMD outbreak has left a gap of approximately 705 million pounds in japanese pork imports. Expectations are that the U.S. will gain up to 90 percent of the post-FMD 1997 fresh pork market in Japan, or up to 557 million pounds and about 2o percent of the frozen market, or about 241 million pounds. Taiwan is expected to be out of the export market for the next 2 to 3 years. Taiwan's absence from the export market is likely to have a major impact on trade flows during that period.
In general, substantial growth in exports of U.S. Red meat exports to Asia Pacific has come in spite of significant barriers. Tariffs on meats, and many other agricultural products, are relatively high throughout the region. U.S. exporters face other constraints, like Japan's gate price and safeguard mechanisms for pork, the Philippine practice of issuing import licenses to pork producers who have no intention of importing competing product, government restrictions or quasi-governmental agency controls on the types of meat which may be imported or the types of establishments which may import, and questionable animal or public health restrictions. Many countries in the region have less efficient domestic animal industries that do not welcome import competition and use their political influence to stall or undermine concessions. Our current difficulties with the Philippines provides an excellent example. Asia Pacific markets offer enormous potential but will require long-term dedication and persistent effort.
Finally, Mr. Chairman, a few words about China. I understand that the House will be voting later today on a resolution of disapproval to stop the president from extending most-favored-nation (MFN) treatment to China for another year.
AMI strongly supports MFN tariff treatment for China. We believe that MFN treatment is the foundation for continued dialogue between the U.S. and China on such vital issues as security, human rights, Hong Kong's transition and the terms of China's accession to the world trade organization. Denial of MFN would erode progress made on these issues and further complicate efforts to integrate China more fully into the world community.
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Meat consumption in China is growing 10 percent per year, or a staggering 4 million tons annually. Total per capita consumption is only 12 percent of the U.S. Level. China's per capita consumption of poultry meat has more than doubled in the last five years, but is still only about one-fifth the U.S. rate.
Given its huge population and rapidly developing economy, China has the potential to become the world's largest market for meat and poultry. Our foreign competitors are clearly aware of China's potential and are becoming increasingly active in that market. U.S. producers and processors of meat and poultry deserve a chance to share in that market. We hope the house will vote to continue to extend MFN treatment to China.
In conclusion, it is clear that exports are becoming more and more important to the U.S. livestock, meat and poultry industry. And large and growing share of our exports are being absorbed by the Asia pacific market. Virtually all projections indicate that U.S. Exports to the region will continue to grow at a rapid pace.
I am Bob Anthony, chairman of American Poultry International, Ltd. I have been asked to speak on behalf of my company and the National Broiler Council. It is my privilege to be here today to represent a part of agribusiness that has been my career for almost 40 years and much of that time international marketing has been the focus of my work responsibilities.
American Poultry International, Ltd., is a Mississippi exporting company, exporting frozen meats, predominantly frozen poultry and some catfish. Further, API is an export management company, now under contract to manage the business of American Poultry U.S.A. Inc. (APUSA), a Webb-Pomerene exporting association. APUSA is owned by 16 major broiler and turkey producing companies throughout the Southeastern United States. Our markets are throughout the world, including the Asian countries. All of the owners of APUSA are also members of the National Broiler Council.
The National Broiler Council represents companies that produce and process about 95 percent of the broilers in the United States. As the export market share has grown, now at 18 percent of total broiler marketings, the National Broiler Council has become more active in international trade issues. So, we are especially pleased to provide our input today.
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Asia is of tremendous importance to U.S. poultry exporters and should become even more important in the future. Last year the United States exported poultry valued at more than $825 million to Asia. Although Asia is not currently the largest market for U.S. poultry exports, it clearly has the greatest potential to become the largest. With the loss of the European Union market to U.S. poultry exporters, it is doubly important that other markets, such as in Asia, expand as fully as possible.
Much of this export potential is with China. However, before I discuss the situation and outlook for U.S. poultry trade with China, I will briefly note the opportunities and challenges in certain other Asia markets.
For many, many years, Japan was the top U.S. broiler export market. While the sales volume to Japan continues to remain good, exports of U.S. broilers to Japan in recent years have not grown as we would prefer. It is important that both our poultry exporters and the U.S. government continue to fully service our strong traditional customers, such as Japan, so as to better assure that increasingly-tough world competition does not displace us in these markets.
The Philippines have not honored their commitment for poultry that was established by the Uruguay Round Agreement. Chicken and certain other products are subjected to a minimum access volume scheme that does not work. The Philippines agreed to an import level of about 14,000 metric tons of poultry. In 1996, they imported 561 tons of broilers. U.S. government negotiators are working with the Philippines to correct this situation. We must take seriously any significant shortfall in a country's obligation established under an agreement of the WTO.
Taiwan seeks membership in the World Trade Organization. But, apparently, at least for poultry, Taiwan does not wish to provide for the opportunity for poultry imports. WTO has established certain market access requirements for its members. It is important that Taiwan understand that WTO membership means not only opportunities but also responsibilities. I understand progress is being made on the poultry import issue, but a concrete commitment must be gained prior to WTO membership by Taiwan.
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Korea is moving toward freer trade of poultry. It is my expectation that Korea will, in fact, become a better market for U.S. poultry as this market more fully opens next month. U.S. broiler exporters encourage USDA and the U.S. Trade Representatives Office to continue their good efforts that have focused on opening and building the market for U.S. agricultural products in Korea.
China has the potential to become the largest export market for U.S. broilers, even though it is the second largest broiler producer in the world. With 1.2 billion consumers, the mathematics for the consumption of any food is staggering. For example, if each person in China consumed one more chicken per year and the United States supplied that chicken, we would have to step up production by almost 25 percent.
U.S. poultry exports to China last year, 1996, generated $480 million. This sales volume was second only to cotton. The U.S. trade deficit with China reached $40 billion in 1996. I am not here today to suggest that chicken exports can close that gap, but I am suggesting that fairer trade arrangements by China would certainly facilitate the growth in poultry exports to China. Perhaps, if given a better chance we could do our small part to begin to balance the trade flows.
Permit me to briefly outline a few important notes about the situation and outlook for poultry in China. This year, 1997, China is expected to import 900,000 metric tons of poultry while exporting 600,000 tons. Last year, 1996, China exported 450,000 tons. Poultry meat consumption has grown in China at an average annual rate of 18 percent since the mid-'80's. With continued strong economic gains, poultry meat consumption should also continue its double-digit increases. Further, poultry's share of total meat consumption in China is about 20 percent, compared with 30 to 40 percent in certain other countries. Fastfood stores and supermarkets have good footholds and will undoubtedly add to the demand for chicken.
China imports some poultry for further processing and re-exports it to markets where they benefit from reduced tariff rates. China also imports parts that are not highly preferred by U.S. consumers. Parts, such as feet/paws, wing tips, mid-joint wing sections, and certain poultry offal, find a ready and expanding market in China.
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Chinese government policies favor poultry production over other meats. Such encouragement in the form of lower-cost credit may not be having a negative impact on imports, at least in the short-term. That is, as domestic poultry production increases in China, the demand base for poultry may also be rising. Imports should help meet that burgeoning demand. Longer-term, however, subsidized credit to produce poultry will work against poultry imports.
With that quick overview, permit me to move to the bottom line. U.S. broiler companies and exporters favor most favored nation (MFN) status for China and we are supportive of China's efforts to gain World Trade Organization membership. China's access to WTO has been pending for some time.
Before finally permitting China to join the WTO, it would be appropriate, we believe, to secure certain assurances from China regarding poultry trade. We would like to see a much more transparent import program for poultry so that we, as exporters, can better gauge our risks and market potential. Too often rules change in mid-stream and change somewhat capriciously.
China imposes a 45 percent import duty on poultry, plus an additional 17 percent value-added tax. Gizzards pay a 55 percent duty plus the VAT. Foreign countries are not allowed to set-up trading companies nor wholesale operations.
As I mentioned, there is great potential for expanding U.S. poultry exports to China. We must, however, successfully address certain tariff and non-tariff trade barriers that are not compatible and consistent with the rules of WTO. At the same time, we must remember that China is a very competitive poultry exporter. Its cost of production may be one of the lowest in the world, if not the lowest depending on feedgrain costs. Countries that compete with China's poultry exports must be assured that these export sales are conducted in a fair way and fully compatible with WTO laws and international trade agreements.
Mr. Chairman, I appreciate the opportunity to share my thoughts and recommendations with you and your committee. I look forward to working with you and other government officials to help make Asia not only the largest market for U.S. poultry, but also the market that is built on stable relationships founded on consistent, fair rules of trade.
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I am, Chuck Lambert, chief economist for the National Cattlemen's Beef Association and staff for the NCBA International Markets Committee. I have been employed by NCBA for nearly 10 years and was a cattleman in western Kansas for nearly 10 years prior to continuing my education and employment with NCBA. My brothers continue to operate the family operation and my experience in production agriculture is maintained vicariously through them.
On behalf of NCBA, we commend Congressman Pombo and this subcommittee for holding hearings to address the status of beef trade and projections for trade and trade issues with Asia. The international market is the future growth market for U.S. agricultural products, including beef. During 1996, beef exports accounted for approximately 8 percent of total U.S. production and more than 12 percent of beef's wholesale value.
Only 4 percent of the world's population lives within U.S. borders. Population demographics indicate that the U.S. generally, and agriculture specifically, will increasingly market products in countries having younger, faster growing populations with increasing disposable incomes. Many Asian markets qualify for that definition. During 1996 beef and beef variety meat exports totaled $3.05 billion. Five of the ten largest export markets for beef and beef variety meats during 1996 were located in Asia. Collectively these markets totaled nearly $2.31 billion--nearly 76 percent of the total value of U.S. beef exports during 1996.
Trade is not only positive for agriculture, it is positive for the rest of the U.S. economy. Currently every one billion dollars in U.S. agricultural exports creates as many as 17,000 new jobs--in production, processing, marketing and shipping, as well as in other industries that supply goods and services related to agriculture. Agricultural exports support more than one million jobs in the U.S.--jobs that pay an average 15 percent more than the hourly wage in the rest of the economy. Current U.S. unemployment is the lowest in 23 years and the economy is enjoying the longest sustained period of non-inflationary growth since World War II. These favorable economic conditions are due, in part, to increased access to international markets. Trade has resulted in market diversification, and the growth in the U.S. economy is no longer so dependent on the domestic U.S. market.
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Gaining and maintaining access to international markets is key to sustaining export market growth. The U.S. government must continue to be aggressive in holding its trading partners to commitments under trade agreements. NCBA appreciates the initiatives USDA and USTR have taken to gain access to international markets and to resolve lingering issues that restrict the ability of the U.S. beef industry to offer its product to international consumers. NCBA commends Ambassador Barshefsky, Secretary Glickman and their respective staffs of dedicated professionals for persevering during some very contentious negotiations. The major Asian markets for U.S. beef include:
Japan: Japan is the single largest export market for U.S. beef and beef variety meats, that purchased $1.93 billion or 63.3 percent of the total value of beef and beef variety meats exported during 1996. Following bi-lateral U.S./Japan negotiations, the Japanese government opened its beef market in 1991 and imposed a tariff of 70 percent. The tariff declined to 46.2 percent during 1996—1997, but the provisions contained an emergency measure that allowed Japan to raise the tariff (back to 50 percent) when beef imports in any quarter of the year increase by more than 17 percent compared to the same quarter a year earlier. Japan increased the import tariff for beef from 46.2 percent to 50 percent from August 1, 1996 through March 31, 1997 under this provision. The tariff increase compounded problems with beef demand in the Japanese market.
Consumers' confidence about beef declined during the last half of 1996 in Japan because of an outbreak of e. coli from unidentified sources (never associated with U.S. beef) and BSE in Europe. Weak demand and higher tariffs resulted in smaller beef exports to Japan during the last half of 1996 and a smaller annual increase in total tonnage exported. Lower average price per pound resulted in fewer dollars generated from a small increase in tonnage exported. The combination of reduced tonnage during the last half of 1996 and lower beef prices resulted in a 9 percent reduction in the value of beef exports to Japan from a record $2.12 billion in 1995.
The beef industry invested additional resources to train people in the Japanese trade and distribution channels on the principals of HACCP and to encourage broad application of HACCP principles. These education programs are a long-term investment to restore consumer confidence for all beef and increase the demand for U.S. beef in Japan. The Japanese tariff for imported beef declined to 44.3 percent effective April 1, 1997 and an outbreak of foot-and-mouth disease (FMD) in Taiwan reduced pork exports to Japan at about the same time. Prior to the FMD outbreak, 30 percent of Taiwan's pigs were raised for export, nearly all to Japan. Consequently, pork prices in Japan increased. Although it is too soon for improvement to be reflected in USDA trade data, antidotal evidence from conversations with packers and exporters indicate that U.S. beef exports to Japan began to increase during the second quarter of 1997. The tariff is scheduled to continue incremental reductions to 38.5 percent by 2000, pork prices are projected to remain relatively high through at least the remainder of 1997, and U.S. exports of beef and beef variety meats are projected to continue expansion.
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Korea: Korea was the third largest market for U.S. beef and beef variety meats on a value basis during 1996 and totaled nearly $254.3 million. Increased domestic production and increased competition from Australia and other exporting countries reduced tonnage of U.S. beef and beef variety meats exported to Korea during 1996 by 22 percent while the value declined 24 percent. Still, Korea purchased nearly 8.4 percent of all U.S. beef and beef variety meats exported during 1996.
U.S. beef exports to Korea are projected to increase during 1997, however. On July 1, 1997 exports of most beef variety meats are scheduled to be liberalized (frozen tongues and livers are excluded). Trade in newly liberalized items is expected to increase as government specifications, shelf-life requirements and packaging restrictions are eliminated. Complete liberalization of Korea's beef import market is scheduled for 2001 and U.S. beef exports are projected to continue to increase.
China/Hong Kong: After unification, China will be the fifth largest market for U.S. beef and beef variety meats. During 1996 U.S. exports of beef and beef variety meats to Hong Kong and the Peoples Republic of China totaled nearly $68 million. In addition China's Administration of Animal and Plant Quarantine (CAPQ) has recently approved a limited number of U.S. beef plants for direct export to China's private sector. This action is viewed as the first step towards two long-term objectives: (1) U.S. access to the general distribution system in China i.e., commercial distribution of imported products will not be controlled by state trading entities or otherwise limited to international hotels in China and (2) China's acceptance of USDA export certificates as full evidence that all import requirements have been met for beef and beef products.
NCBA strongly endorses continued normal trading relations with China through Most Favored Nation (MFN) renewal. Extending the policy which has been in force since 1980 will maintain the existing ''normal'' trading relationship, encourage further growth in US-China trade, avoid trade disruptions, protect American jobs and enhance the climate for continuing negotiations aimed at bringing China under the disciplines of the World Trade Organization.
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Hong Kong is the gateway of trade between the U.S. and China. Revocation of MFN would seriously weaken the people of Hong Kong just when they need to assert their strength and autonomy. The Hong Kong Government estimates that revocation would: slash trade by $20 to $30 billion, eliminate 60,000 to 85,000 jobs, cut economic growth by well over 50 percent and reduce income by $4 billion. That's why Hong Kong leaders across the political spectrum, including Democratic Party Hong Kong leader Martin Lee and Governor Pattern favor renewal of MFN. NCBA strongly supports continued free access to the Hong Kong market for the U.S. beef industry .
China is the world's most populous country with an estimated 1.2 billion inhabitants--and increasing at the rate of 12.5 million people a year. For almost 20 years China has had the fastest growing economy in the world. With total domestic output of $691 billion in 1995 and double-digit annual growth rates, China is predicted to become the world's largest economy by the year 2020.
Per capita beef consumption in China during 1995 is reported by USDA to be approximately three pounds per person. Unlike pork and poultry there is no well-established domestic beef industry in China which should minimize protectionist issues with respect to beef. The combination of a large population base, growth in disposable income and small consumption base results in a huge potential for growth in beef and beef product exports to China. NCBA strongly supports continued trade through approval of MFN status for China while negotiations to eliminate barriers to entry and reduced tariffs continue.
U.S. trade policy must reflect a firm commitment to expanding world markets as government policy reduces Federal support for agriculture. The policies include efforts to increase global market access as government export assistance programs are phased down under the Uruguay Round Agreement. NCBA believes that any change in trade policy that would endanger U.S. agricultural exports to a key market such as China would violate a fundamental commitment to our industry.
NCBA believes that the proper means to improving relations with the Chinese and increasing market access is through constructive engagement based on clearly defined objectives. The Administration is pursuing this course by supporting continued MFN status as integral to current negotiations on China's accession to the World Trade Organization. Continuing current trading relations with China will enable this positive approach to improving relations and trade to go forward. We urge you to support MFN status for China.
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Taiwan: Taiwan purchased more than $46.3 million of U.S. beef and beef variety meats during 1996 (more than 1.5 percent of the total) and was the seventh largest market for U.S. beef and beef variety meats. As noted earlier an outbreak of FMD was reported in Taiwan earlier this year. It is estimated that 4.2 million of Taiwan's pig population will be eradicated to control the disease and that Taiwan's total market hog population will decline by 36 percent during the last three quarters of 1997. Mandatory hog slaughter has reduced supplies, and pork prices have increased.
The U.S. has been unsuccessful in negotiating a halt to the ban on imports of pork bellies and pork offal and increases in quotas for other pork products to Taiwan. The U.S. is also negotiating for lower tariffs on all pork products from the current 15 percent to 7.5 percent within 6 years of Taiwan's pending accession to the WTO. To date the negotiations have been unsuccessful, but Taiwan pork prices are predicted to increase as supplies decline. Rising pork prices are positive for beef exports. U.S. beef may substitute for high-priced pork in Taiwan or if U.S. pork exports increase to fill the demand in Taiwan, U.S. pork prices will increase, resulting in increased U.S. beef demand.
Indonesia: Indonesia was the ninth largest market for U.S. beef and beef variety meats during 1996 at more than $13.5 million. NCBA will continue to develop this and other emerging beef markets in Asia as opportunities arise. Continuing, possibly even expanding Market Access Program funding (MAP) funding will be increasingly important as trade barriers are resolved and increased access to international markets is achieved in Asia and around the world. The EU, even under the Uruguay Round Agreement, maintains a ten-to-one advantage over the U.S. in the use of export subsidies. During 1995, the E.U. allocated more than $9 billion to subsidize agriculture exports, and during 1994—95, the E.U. and other foreign competitors also devoted more than $600 million for market development and related activities. Maintaining MAP funding at $90 million during the FY 1998 appropriations process is critical to maintaining U.S. competitiveness in the expanding global market.
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MAP is a cost-share program that helps American farmers promote their products overseas and compete with foreign subsidized commodities. It is an essential element of the nation's overall agricultural trade policy. During 1996, farm exports reached a record $60 billion, resulted in a U.S. net trade surplus of nearly $30 billion in agriculture, and accounted for approximately one-third of domestic production. Exports generate billions of dollars in additional tax revenues, as a result of the direct and indirect economic activity, and provide needed jobs throughout the economy.
The ''corporate welfare'' tag attached by some to the MAP program is a bum rap. The MAP program has been reformed and is specifically targeted towards small businesses, farmer cooperatives and trade associations. MAP is administered on a cost-share basis, with American farmers, ranchers and other participants required to contribute up to 50 percent towards the program's cost. During 1997 the beef industry contributed nearly $9 million in producer funds to develop international markets, including nearly $1 million dollars to improve consumer confidence for U.S. beef products in Japan. The beef industry dollars invested in international markets alone exceeded MAP expenditures for international meat market development. NCBA urges continued funding for the MAP program at $90 million or more.
The National Cattlemen's Beef Association is prepared to participate in the process of evaluating critical trade issues within the beef industry. NCBA looks forward to providing additional input as the U.S. addresses other trade issues, including accession of China to the WTO and potential ''Fast Track'' legislation to negotiate with Chile, and possibly other trading partners. Thank you for the opportunity to present these thoughts. I will be glad to address any questions now or at the end of formal presentations.
Mr. Chairman and subcommittee members, I am Edward Coughlin, acting chief executive officer, National Milk Producers Federation. I appreciate the opportunity to testify before the Subcommittee on Livestock, Dairy, and Poultry on the current status and future prospects for trade in dairy products with Asia. The National Milk Producers Federation (NMPF) is the trade association that represents dairy farmers and the cooperative milk marketing associations they own and operate throughout the United States.
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The U.S. dairy industry has embarked on a long-term effort to develop export markets for dairy products. This effort is being conducted by the U.S. Dairy Export Council (USDEC), an organization formed in 1995. USDEC's has budgeted almost $8.5 million in 1997 to assist U.S. dairy exporters increase the volume and value of dairy exports. Over $5.4 million of the USDEC budget is funded by dairy producers through the National Dairy Board and over $2 million is funded under the Market Access Program operated by USDA's Foreign Agriculture Service. Plans call for the USDEC budget to increase to over $12 million by 2000.
USDEC is committed to building durable commercial relationships with overseas customers. Using USDEC's unique export marketing assistance capabilities in all export development activities increases U.S. dairy product exports. Through coordinating private market development efforts, U.S. government export promotion funding and export related expenditures by dairy producer funded promotion programs, USDEC enhances the effectiveness of different export market development activities. USDEC operates an international office network that includes offices in the following Asian cities: Bangkok, Hong Kong, Shanghai, Seoul and Tokyo.

MFN China

Since China has the potential to become a very significant market for U.S. dairy products, USDEC has invested there by opening office in two cities. USDEC's investment in China will be for naught unless Congress reject efforts to end most-favored-nation (MFN) status for China. The National Milk Producers Federation strongly supports maintaining China's MFN status. Terminating trade with China would have a severe impact on U.S. dairy producers and the Chinese people.
Asian Market

In 1996, U.S. dairy exports totaled almost 3.9 billion pounds milk equivalent, or about 2.5 percent of total U.S. milk production. Exports to Asia in 1996 were 854 million pounds milk equivalent. USDEC has projected that total U.S. dairy exports would rise to 8.8 billion pounds milk equivalent by 2000 including 2.2 billion pounds milk equivalent exported to Asia.
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Asian markets have a tremendous growth potential for U.S. dairy exports. The population is large and increasing, incomes are rising and there is an appreciation for U.S. products. This appreciation for U.S. products is important because it gives the U.S. a ''niche'' to help offset a cost disadvantage that the U.S. has relative to Australia and New Zealand.
Dairy Export Incentive Program
The Dairy Export Incentive Program (DEIP) is a valuable element in a long term effort to develop overseas markets for bulk dairy products. Although volumes will decline annually to conform to Uruguay Round commitments, the DEIP could help the transition to a more market-based and potentially unconstrained export capability.
The 1996 farm bill requires the Secretary of Agriculture to use the DEIP to the maximum allowable level. However, with the current DEIP allocation year ending next week (6/30/97), USDA has awarded bids for only half the maximum quantity. We urge the committee to closely monitor USDA's progress on awarding DEIP bids during the next allocation year, July 1, 1997 to June 30, 1998.
Current DEIP allocations include region/country destination limits. We recommend that the annual allocations be made without any region/country limits. Eliminating regional limits will facilitate dairy export market development efforts.
Export Subsidies

Any discussion about dairy trade would not be complete without covering trade distorting export subsidies. The European Union (EU), a relatively high cost milk production area, has long used export subsidies to compete in world markets. The E.U. makes restitution payments on exported dairy products based on the difference between its high internal prices and the lowest price offered by competing exporters. This historic government generosity enabled the E.U. dairy industry to develop a commanding position in world dairy markets. The E.U. utilized its export subsidy program to capture over 50 percent of total world trade in butter, nonfat dry milk and cheese.
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The WTO agreement on agriculture has begun the gradual process of winding down the EU's extensive subsidized dairy exports. Nevertheless, the E.U. can continue to massively subsidize dairy product exports. By 2000, when the current WTO export subsidy reduction phase-in is complete, the E.U. will still be able to subsidize export sales equivalent to about 12 percent of its milk production.
The U.S. industry could successfully compete in an unsubsidized world market. The major obstacle that prevents this from occurring is export subsidies, primarily by the EU. E.U. export subsidies distort world dairy product markets, to the detriment of efficient suppliers such as the United States, New Zealand, and Australia.
Last year, National Milk Producers Federation and the U.S. Dairy Export Council estimated what would happen if E.U. subsidies could be eliminated. We found that the E.U. share of the Asian market would fall by 50 percent. The U.S. would be the likely beneficiary with dairy exports rising as much as $1.5 billion annually.
However, the E.U. dairy industry is very reluctant to withdraw from the commanding position it built in world markets through export subsidies and is pressuring the European Commission to allow it to bend the rules for complying with its export subsidy reduction commitments. This is manifesting itself in two specific proposals, one involving new arrangements for processed cheese and a second involving the so-called ''B Quota.'' Both proposals appear to us to circumvent the EU's WTO export subsidy reduction commitments.
If E.U. is allowed to establish the proposed ''B Quota'' system, it would almost certainly result in world dairy prices remaining below U.S. prices. Similar systems would likely be implemented in other exporting nations, as Canada has already done, and U.S. dairy export market development prospects would be greatly diminished.
Negotiations for Further Agricultural Trade Liberalization
Another comprehensive world trade negotiation is scheduled to begin in 1999. Despite the many existing trade problems and the opportunities inherent to expanded trade, the lack of any apparent enthusiasm in Europe for another round of trade talks in agriculture could become a matter of concern. Much background work and preliminary negotiations will be necessary for any progress to occur and, unlike the Uruguay Round, no obvious non-agricultural trade agenda is currently proposed to ''pull along'' agricultural trade negotiations. Therefore, potential exists for the scheduled agriculture talks to produce little or to delay further reductions in export subsidies and other measures that distort farm trade. The U.S. dairy industry will benefit most by continuing to urge trade negotiations that hasten the elimination of trade distorting subsidy schemes, and we urge Congress to help in that regard.
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Thank you for this opportunity to place the National Milk Producers Federation's views on the record.
The National Turkey Federation represents all segments of the turkey industry, including processors, growers, breeders, hatchery owners and allied industry. NTF members are responsible for 96 percent of all the turkey produced in the United States, and NTF is the only national trade association representing the turkey industry exclusively. We are pleased to have the opportunity to submit this statement for the record of the Subcommittee on Livestock, Dairy and Poultry's June 25, 1997, hearing on agricultural trade with Asia.
Turkey Exports and the Asian Market
The importance of exports to the U.S. turkey industry has grown significantly during the last decade. In 1986, American turkey processors exported just 26.6 million pounds of turkey meat. Turkey exports accounted for less than 1 percent of all turkey meat produced that year. By 1996, the picture had changed dramatically, as the turkey industry exported 437.8 million pounds of turkey meat, and exports accounted for 8 percent of all turkey meat production. The value of turkey exports has climbed from $14.6 million in 1986 to $254.6 million last year.
Asia during the last ten years has grown to become the third-largest export market (behind Mexico and Russia/Eastern Europe) for American turkey products. Asian nations, primarily South Korea, Hong Kong and Taiwan, imported 55.6 million pounds of turkey in 1996 valued at about $31 million. In 1986, these same nations imported less than two million pounds of U.S. turkey meat.
Uncertain Market Access
As valuable as the Asian markets have been for U.S. turkey producers, growth in those markets has not been achieved easily, nor can all of the markets be considered 100-percent reliable. For example, South Korean purchases of turkey have fluctuated significantly in recent years, increasing by 43 percent in 1995 and then decreasing by 35 percent in 1996. While there were no other fluctuations quite as dramatic during the last decade, there also have been times when market growth would suddenly drop from steady increases to only a token jump in purchases. The industry has not experienced similar problems with Hong Kong sales, fortunately, and exports to the former British colony in fact have increased significantly during the last two years.
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U.S. turkey processors face two major challenges as they attempt to build the Asian market into a major, long-term destination for American turkey exports. One is non-tariff trade barriers, and the other is subsidized foreign competition.
NTF Statement on Turkey Exports to Asia
The problem of non-tariff barriers is not unique to Asia, but there have been several significant instances in recent years where a customer on the Pacific Rim will erect these barriers to protect its domestic livestock and poultry industry. The industry went through some especially sensitive negotiations with South Korea during the early 1990's to eliminate proposed non-tariff barriers. Non-tariff barriers to this day prevent us from selling product to the Philippines. The turkey industry's problem with its Asian trading partners is unique in that we seldom are shut out because of complaints from domestic turkey producers. Most Asian nations have no domestic turkey industry of note. Our problem stems from the fact that we export a lot of meat to Asian customers that is used as a substitute for certain red meats in further-processed items like sausage. Resistance to turkey exports in many Asian countries, then, comes from Asian beef and pork producers.
Subsidized foreign competition has been a significant problem in the Korean market. In the early 1990's, American processors went from being the sole supplier of turkey meat to South Korea to supplying less than half of the turkey purchased in that country. A thorough investigation by NTF of the situation revealed that the E.U. was subsidizing the sale of French turkeys to Korea. We presented our evidence to USDA in hopes the department would approve Export Enhancement Program (EEP) funds to help us match the French prices, but USDA ''despite our documented evidence'' denied the request. By 1995, U.S. turkey processors had managed to recapture their place as the primary turkey supplier to South Korea, but it still was disappointing that USDA failed to stand behind the industry in the face of unfair, subsidized foreign competition.
Recipes for Future Success in Asia
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NTF believes three things are necessary for continued growth in the Asian turkey export market: a positive overall trading atmosphere between the United States and its Asian partners; swift government response to trade barriers; and optimum government use of available trade programs.
The recent vote to renew Most Favored Nation (MFN) trade status for China is an important step toward accomplishing the first of those items. China has not been a significant purchaser of U.S. turkey to date, but the repatriation of Hong Kong creates new opportunities for the industry in China. No such opportunities would exist without MFN renewal.
Accomplishing the second two goals may prove somewhat more difficult. USDA officials generally have been supportive when crises over non-tariff trade barriers erupt, and not every barrier can be erased easily. NTF appreciates USDA's past support in this area, and we simply would encourage the department to continue its vigilance against such barriers and to strive even harder to anticipate some of these trade problems before they reach the crisis point. As for full use of export programs, we are not advocating the creation of new programs or dramatic funding increases for existing ones. We simply are suggesting that USDA make better use of the resources it has available at any given time. There was no excuse for not utilizing EEP in response to the subsidized French turkey sales to Korea. The problem that could have been remedied more quickly had USDA acted decisively. EEP may not be the solution for future problems that may arise in Asia, but inaction is never acceptable. American turkey processors are fighting hard to build export markets; they need to know their government will support them when other exporting nations refuse to compete fairly.
Again, NTF thanks the subcommittee for the opportunity to submit comments for the record. Please do not hesitate to contact us if you have additional questions on this or any other matter.
  "The Official Committee record contains additional material here."