[Senate Hearing 109-490]
[From the U.S. Government Publishing Office]
S. Hrg. 109-490
TO REVIEW THE STATUS OF THE WORLD TRADE ORGANIZATION NEGOTIATIONS ON
AGRICULTURE
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HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 21, 2005
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
Available via the World Wide Web: http://www.agriculture.senate.gov
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COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
SAXBY CHAMBLISS, Georgia, Chairman
RICHARD G. LUGAR, Indiana TOM HARKIN, Iowa
THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota
PAT ROBERTS, Kansas MAX BAUCUS, Montana
JAMES M. TALENT, Missouri BLANCHE L. LINCOLN, Arkansas
CRAIG THOMAS, Wyoming DEBBIE A. STABENOW, Michigan
RICK SANTORUM, Pennsylvania E. BENJAMIN NELSON, Nebraska
NORM COLEMAN, Minnesota MARK DAYTON, Minnesota
MICHEAL D. CRAPO, Idaho KEN SALAZAR, Colorado
CHARLES E. GRASSLEY, Iowa
Martha Scott Poindexter, Majority Staff Director
David L. Johnson, Majority Chief Counsel
Steven Meeks, Majority Legislative Director
Robert E. Sturm, Chief Clerk
Mark Halverson, Minority Staff Director
(ii)
C O N T E N T S
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Page
Hearing(s):
To Review the Status of the World Trade Organization Negotiations
on Agriculture................................................. 01
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Wednesday September 21, 2005
STATEMENTS PRESENTED BY SENATORS
Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman,
Committee on Agriculture, Nutrition, and Forestry.............. 01
Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member,
Committee on Agriculture, Nutrition, and Forestry.............. 13
Salazar, Hon. Ken, a U.S. Senator from Colarodo.................. 22
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WITNESSES
Panel I
Johanns, Hon. Mike, Secretary, U.S. Department of Agriculture,
Washington, DC................................................. 03
Portman, Hon. Robert, U.S. Trade Representative, Washington, DC.. 06
Panel II
Condon, Leornard W., Director, International Business Relations
Altria Corporate Services, Inc., Washington, DC................ 41
Erickson, Audrae, Co-Chairman, AgTrade, Washington, DC........... 37
Helms, Allen, Vice Chairman, National Cotton Council, Clarkedale,
Arkansas....................................................... 39
Viso, Mark, Vice President of Operations, International Program
Group World Vision, Washington , DC............................ 43
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APPENDIX
Prepared Statements:
Harkin, Hon. Tom............................................. 84
Johanns, Hon. Mike........................................... 50
Salazar, Hon. Ken............................................ 88
Condon, Leornard............................................. 105
Erickson, Audrae............................................. 90
Helms, Allen................................................. 94
Portman, Robert.............................................. 58
Viso, Mark................................................... 113
Document(s) Submitted for the Record:
Grassley, Hon. Charles....................................... 120
Leahy, Hon. Patrick.......................................... 125
Lincoln, Hon. Blanche........................................ 130
Roberts, Hon. Pat............................................ 132
Stabenow, Hon. Debbie........................................ 139
Letter from the Wheat Export Trade Education Committee, the
National Association of Wheat Growers, and the U.S. Wheat
Associates................................................. 143
Statement of the American Farm Bureau Federation (AFBF)...... 140
Statement of Constance E. Tipton, President and CEO,
International Dairy Foods Association...................... 162
Statement of the National Pork Producers Council............. 146
Statement of the Ranchers-Cattlemen Action Legal Fund -
United Stockgrowers of America (R-CALF USA)................ 155
Questions and Answers Submitted for the Record:
Harkin, Hon. Tom............................................. 166
Lincoln, Hon. Blanche........................................ 167
Salazar, Hon. Ken............................................ 174
Stabenow, Hon. Debbie........................................ 172
TO REVIEW THE STATUS OF THE WORLD TRADE ORGANIZATION NEGOTIATIONS ON
AGRICULTURE
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WEDNESDAY, SEPTEMBER 21, 2005
U.S. Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC.
The committee met, pursuant to notice, at 9:12 a.m., in
room SR-328A, Russell Senate Office Building, Hon. Saxby
Chambliss, [Chairman of the Committee], presiding.
Present or submitting a statement: Senators Chambliss,
Lugar, Roberts, Talent, Thomas, Coleman, Crapo, Grassley,
Harkin, Baucus, Lincoln, and Salazar.
STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR FROM GEORGIA,
CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
The Chairman. This hearing will come to order. I welcome
you to this hearing to review the ongoing agriculture
negotiations in the World Trade Organization. I appreciate our
witnesses and members of the public being here to review this
very important topic as well as those who are listening through
our website.
With less than 85 days until the Hong Kong Ministerial
Conference, I am eager to hear from Secretary Johanns and
Ambassador Portman on the status of negotiations and what will
need to happen in the coming days and weeks to reach a
successful outcome.
As the world's largest exporter of agricultural products,
the United States has much to gain and lose in the
negotiations. In some ways, the negotiations will define the
future of U.S. agriculture and the balance sheet for millions
of farmers and ranchers in the United States.
Most U.S. commodities and agricultural products depend on
export markets and agriculture remains one of the few sectors
in the U.S. economy that has a net trade surplus. In 2004, the
value of agricultural exports was $61 billion versus almost $54
billion of imports. In addition, exports count for one-fourth
of foreign cash receipts and more than one out of every three
acres of U.S. agriculture land is cultivated for exports.
Thirty-six percent of exports are bulk products--grains, oil
seeds, cotton, and tobacco. Sixteen percent are livestock
products, horticulture at 21 percent, and the remainder in
processed foods.
The importance of the current WTO negotiations is
heightened by the fact that 95 percent of the world's
population lives outside the United States and growth in
developing countries will increase at a higher rate than in
developed countries.
While it is important to diversify the farm economy through
new uses domestically, farmers and ranchers will be impacted by
future demand and competition from customers and competitors
abroad. Key to future success will be the extent to which
countries provide new market access by lowering tariffs,
eliminate export subsidies, and reducing barriers to trade,
namely sanitary and phytosanitary requirements.
China has 20 percent of the world's population, and
agricultural exports to that country have grown from $1.7
billion to $6.l billion since China entered the WTO. The
Department of Agriculture projects an agriculture export
surplus of $2 billion in 2005. The assumption underlying
support for the WTO negotiations is the expectation that farm
income will continue to grow as more developed and developing
countries open their doors to our high-quality food and fiber
products. In return, the United States will have to commit to
reform our domestic programs.
While the President's statement at the United Nations last
week called for the elimination of, quote, ``all tariffs,
subsidies, and other barriers to the free flow of goods and
services as other nations do the same,'' close quote, by 2010,
we must be careful to do so while also providing a stable and
secure safety net for America's farmers and ranchers.
I believe it is possible to promote trade liberalization
and reform of our domestic support programs at the same time,
but we must do so very carefully while being mindful of what
future programs will replace the ones we are eliminating. The
administration must make sure farmers and ranchers at the
grassroots support its trade agenda.
As recent trade debates have illustrated, producers are
more skeptical of the promises and predictions of future market
access than in years past. Problems with Mexico, Russia, China,
Canada, and Europe, among others, are often used by the
opponents of trade to make the case for suspending future
bilateral and multilateral negotiations. In order to quell this
sentiment, farmers and ranchers will need to se for themselves
the benefits of trade at the farm gate level. This is the
greatest challenge that confronts us.
This committee will be traveling to Hong Kong to view
firsthand the ministerial. It is my hope that the talks leading
up to Hong Kong accomplishes most of the work and the events at
the conference are ceremonial and capped by celebration. We
will be watching closely the Ambassador's trip to Paris this
week and are interested in the feedback from our witnesses
regarding the visit last week of their European counterparts.
In closing, while I believe the negotiations are extremely
important, my advice and counsel to the administration is that
the United States should not accept a deal in Hong Kong unless
it provides tangible and real rewards for our agricultural
sector. No deal is better than a bad deal.
Before we proceed, I would ask that other Senators hold
their comments until they have the opportunity to ask
questions. Senator Harkin is obviously not here at this point
in time, but when he does arrive, he will have the opportunity
to make any opening statement that he wishes to make.
And speaking of that, I have a statement from Senator
Grassley that I would ask unanimous consent be inserted into
the record.
[The prepared statement of Senator Grassley can be found in
the appendix on page 120.]
The Chairman. We have as panel one today the Honorable Mike
Johanns, Secretary of the United States Department of
Agriculture, and the Honorable Robert Portman, United States
Trade Representative.
Let me just publicly state one more time how much I
appreciate both of you gentlemen. Mr. Secretary, I now have had
the privilege, I guess, of serving under four different
Secretaries of Agriculture. No Secretary of Agriculture has
been more cooperative with members of the House and members of
the Senate than have you. You have been very open to
discussion, even on difficult and sensitive issues when we
maybe didn't always see eye to eye. You have never hesitated to
come to the Hill when we asked you and we appreciate that very
much. The way you solve problems is to face them head-on and
you have done that.
Mr. Ambassador, I would say the same thing for you.
Everybody on this committee obviously has a very good personal
relationship with you. You and I go way back to both of our
days in the House when you were such a strong leader in that
body and you have brought the same kind of leadership qualities
that you exhibited in the House to your position as Ambassador
for the United States with issues relative to trade. You have
been very open, very forthcoming, and once again, when it comes
to tough issues, you have never backed down from coming up to
visit with us and working out the differences that we have and
making sure that the answers to the United States, and in
particular farmers and ranchers, is well lookayed after.
So to both of you, I appreciate very much your great
service to our country and to farmers and ranchers all across
America.
I note, too, Mr. Ambassador, one of your staff members who
is with you today, Allen Johnson. I think it is his last week
as a member of your staff and organization. Allen, of course,
is a hold-over from the previous Ambassador and he is an
individual who has worked very hard for farmers and ranchers in
his capacity as a member of the trade staff. Allen, we just
want to tell you how much we appreciate your service to America
and we will miss you. I have an idea that we will continue to
see you from time to time. We certainly hope that is the case.
But thank you for all you have done and for all your hard work
and efforts.
Mr. Secretary, we will turn to you for any opening comments
you have to make and we lookay forward to hearing that.
STATEMENT OF HON. MIKE JOHANNS, SECRETARY, U.S. DEPARTMENT OF
AGRICULTURE, WASHINGTON, DC
Secretary Johanns. Thank you, Mr. Chairman and members of
the committee. It is a pleasure to be here today. I do
appreciate the compliment. Likewise, it has been a pleasure
working with the members of this committee, each and every one.
I am pleased to be here today along with Rob Portman to
discuss the WTO negotiations. If I might just briefly, though,
I would like to make mention of a few statistics relative to
the farm economy, mention very quickly some of the work that we
have done on Katrina, Hurricane Katrina, and then offer a
perspective on the negotiations.
It is important to recognize that net farm income has been
at record levels, actually, for the past few years and it is
expected to be at a near record this year. Our farm sector has
been robust. It has been enjoying a period of unparalleled
prosperity in recent years.
We note that commodity prices have moved lower this year
and that fuel prices and interest rates have moved higher, and,
of course, that impacts agriculture. And we have seen adverse
weather conditions affecting several areas of the country.
But cash-flow continues at record or near-record levels.
The first was set in 2003. A new record at a substantially
higher level was actually set in 2004 and we are projecting a
level close to that this year.
Similarly, our agriculture exports are at record levels.
Sales worth $62.4 billion last year were at an all-time record,
to be followed by an estimated $62 billion this year. That will
be the second-highest ever. And in 2006, we are forecasting a
new record of $63.5 billion. When we succeed at opening major
beef markets, I expect that these numbers will be even better.
The composition of our sales has evolved, as well. Consumer
food and intermediate product sales are growing steadily. These
are value added. They generate jobs and economic activity for
each dollar of product sales.
In reference to Hurricane Katrina, the destruction and the
social disruption of this hurricane, it just defies
comprehension. I am proud to say that the USDA has been playing
a major role in doing all we can to improve human conditions in
the area that was hit by the hurricane.
Prior to the hurricane's landfall, the USDA through the
Food and Nutrition Service placed food in warehouses in
Louisiana and Texas so we could move that food into the
affected areas very quickly. Since then, we have delivered over
15 million pounds of food. Working with our State partners, we
have provided food stamps to over 400,000 households totaling
more than $100 million worth of benefits. Our Rural Development
Agency has identified 30,000 housing units across the country
in the event that there is a need for this housing. The Forest
Service has been operating instant management centers and the
Farm Service Agency is providing emergency farm assistance.
Our preliminary estimates which we released this week, and
I emphasize preliminary, related to the hurricane and crop loss
are $900 million, and again, I would emphasize that is our
first lookay at that. With that said, there is a long road
ahead for producers who face infrastructure and long-term
losses not accounted for in the assessment.
On the port area, I do want to indicate to you that we have
also been working on those issues and done a number of things
to try to get grain moving again because it is such an
important thoroughfare for our grain into the export markets.
I cannot emphasize enough that the future strength of
American agriculture hinges on our success in the international
marketplace. Historically, we have been the world's largest
agriculture exporter. We derive 27 percent of gross farm
receipts from foreign customers. Large portions of our
production of many crops go into the export market. Export
markets are vital to the economic prosperity of our farmers and
ranchers.
As the chairman indicated, and we all can cite these
statistics from memory, 95 percent of our customers or
potential customers live abroad. Only 5 percent of the world's
population is in the United States. The major growth
opportunity for our farmers and ranchers is going to be urban
areas in developing countries, such as China and India, and
gaining access is the key.
This is a critical time to make progress in the WTO
negotiations. You well understand the disparities we face. The
European Union utilizes the vast majority of export subsidies.
The average world tariff is 60 percent, while the U.S. average
is 12 percent. You can see why we talk about market access all
the time when we talk about trade. The EU can use domestic
subsidies at a level four times what we are permitted, even
though our agriculture economies are roughly the same.
We face the Hong Kong Ministerial literally weeks away.
We have made it very clear that it is absolutely essential
to gain real market access for our farm products around the
world. Our objective is to achieve a balanced package, one that
levels the playing field on domestic supports and levels the
playing field for market access.
The President has challenged his counterparts to eliminate
tariffs and trade distorting subsidies. He strongly believes
that the American agriculture community can be a global
competitor if we have a fair chance to compete.
The Doha Development Agenda negotiations now provide an
opportunity to move closer to a fairer trade environment. Last
week at the United Nations, the President said, and I am
quoting, he said, world leaders, to achieve a successful Doha
Round, quote, ``will reduce and eliminate tariffs and other
barriers on farm and industrial goods that will end unfair
agricultural subsidies,'' unquote.
We want fair trade. If others would join us and make
proportional cuts in domestic supports and harmonize and
substantially reduce tariffs, we are prepared to do as well.
We are ready to negotiate a strong, balanced package. Let
me reiterate our objectives. Export competition--we want to see
the end, and very soon, of export subsidies. Market access--we
must have significant reductions in barriers to our products.
In domestic support, we have said all along that we are
amenable to significant reductions if others do likewise.
Ambassador Portman will address the specifics of
negotiations in his remarks. He and I are doing our utmost to
move these talks forward and we have an excellent working
relationship. We did meet last week with our counterparts from
the European Commission and we are leaving later today to
continue those talks.
This is an opportunity we cannot bypass. We need to reach
agreement on agricultural reform. President Bush reiterated our
ambition last week with a vision that will provide greater
opportunities for our farmers and our ranchers to prosper in
the global marketplace. We will now work tirelessly in the time
until Hong Kong to achieve that goal.
Thank you, Mr. Chairman and members of the committee.
The Chairman Thank you, Mr. Secretary.
[The prepared statement of Secretary Johanns can be found
in the appendix on page 50.]
The Chairman. Ambassador Portman?
STATEMENT OF HON. ROBERT PORTMAN, U.S. TRADE REPRESENTATIVE,
WASHINGTON, DC
Ambassador Portman. Thank you, Mr. Chairman. I am pleased
to be here with Mike Johanns, and Secretary Johanns has just
laid out much of the presentation on the general situation in
agriculture and then touched on the trade issues. I will try to
get a little deeper into the trade issues.
I would like to have my written statement be accepted into
the record, and then instead have a more informal dialog based
on the handout that I have provided.
The Chairman. Certainly. Without objection, it will be
included.
Ambassador Portman. It is supposed to be a Power Point
presentation, but we don't have a Power Point, so we will just
walk through it, if that is okay.
I want to start by thanking you for your earlier comments
and telling you that in my four and a half months here at USTR,
I have thoroughly enjoyed working with you, Mr. Chairman and
other members of this committee. It has been a great working
relationship and I appreciate the fact that we are able to have
the kind of candid and constructive relationship that we have
had so far. I know that will continue.
You mentioned the fact that Al Johnson has joined me today.
When I first was going through the confirmation process,
Ambassador Johnson told me after four and a half years at USTR,
he was ready to move to the private sector. I have been trying
to twist his arm ever since to get him to change his mind. We
have held him on this long and he has worked his heart out for
America's farmers and ranchers and I want to add to the
chairman's comments about him. His public service has been
extraordinary. He has also been a great friend of this
committee. I know that, as the chairman said, we are going to
continue to hear from Al. I certainly expect to continue to get
his advice and counsel, so I thank him for his service and for
being here today. I am also joined by Jason Hafemeister. Some
of you know Jason already, but Jason is our WTO negotiator who
is also behind me.
This presentation is an opportunity for us to get into some
of the trade issues, not just Doha, but what this committee is
interested in in terms of expanding markets. I divide it into
three areas: First is our bilateral and regional agreements,
second is the global trade talks, and third is enforcement and
compliance.
With regard to the bilateral agreements, we won't spend any
time on CAFTA-DR, just to say there are some very specific
benefits for agriculture here and I am eager to get that
agreement in place. We hope to do so at the first of the year
for the six countries that have already ratified it. We expect
one more will before the first of the year, and then I think we
should go ahead and have that put in place because it really
does help our agriculture exports.
We are also lookaying at a number of other free trade
agreements. I would love to get more advice and counsel from
you all as we move forward on these, but each of them has some
benefits for agriculture. In Panama, the average allowed tariff
now is 27 percent, for instance, and we have the opportunity
here to expand the same kind of exports that we saw with regard
to the other Central American countries--corn, soybeans, and so
on. This is an agreement where I think we can perhaps work more
on a bipartisan basis in the House and Senate to get it done.
Oman, the same thing, average allowed tariff of 35 percent
there, Mr. Chairman, so we have an opportunity here to expand
our exports. We are hoping that we can move those two
agreements, Oman and Panama, fairly soon, and I will talk about
Bahrain in a second.
There are others that we are lookaying for in 2006,
Thailand, the Andean countries, United Arab Emirates. We can
talk more about those if you have some interest, but again, in
every one of these countries, we have relatively high tariffs
now. As an example, in the Andean countries, the Colombian
allowed tariff is 93 percent, Peru, 31, and Ecuador, 25
percent.
Bahrain will be the next agreement that we hope to bring up
to the Hill and this agreement was actually signed about a year
ago. It is important for foreign policy, as I say. The 9/11
Report actually talks about this idea of the Middle East Free
Trade Agreement. This would be another one of hopefully several
agreements we can do in that part of the world to help with our
foreign policy goals as well as our commercial interests.
Eighty-one percent of agriculture exports to Bahrain would be
immediately duty-free, for example, and would help, again, to
increase some of those export opportunities that Secretary
Johanns talked about.
We also have some interesting potential new partners. For
some of these, you may be seeing these countries for the first
time. They have all come to us, expressed interest in joining
with us in a Free Trade Agreement. I think when a country does
that, particularly of the size of some of these economies, like
South Korea, we should lookay at it very seriously.
We have had serious talks with them. We have not launched a
Free Trade Agreement yet. We have not launched those talks yet
because, frankly, we are going through the process of letting
them know what we require in our Free Trade Agreements, which
is extensive. As you know, we have the most comprehensive Free
Trade Agreement requirements in the world. We particularly
focus on market access and we need to be sure that these
partners know what they are getting into if they want to
negotiate with us.
But South Korea, as an example, is our fifth-largest
agriculture market. This would be the largest Free Trade
Agreement we would have done in over a decade, so this could be
a substantial benefit to U.S. agriculture. We had a $2.3
billion agriculture surplus with Korea last year.
Egypt, again, interesting from a lot of different
perspectives, including foreign policy, but also on the
commercial side. As you can see, it is a big agriculture market
for us already, could be much bigger. We had a $900 million
agriculture surplus in 2004 with Egypt.
Malaysia and Switzerland are also interesting opportunities
for us. In both those cases, we have a deficit right now in
agriculture, but I think you have the opportunity to do much
more in terms of exports. In Malaysia, the deficit is now
around $200 million. Switzerland, as you know, is one of the
more closed markets to agriculture right now. Getting into a
Free Trade Agreement with us is not something I thought they
would be interested in for that reason, but they are, so we are
talking. There, we have a deficit of around $77 million.
On the global side, the global trade talks have already
been addressed briefly by the chairman and then by the
Secretary There is a great opportunity here, obviously, for
agriculture, for us to do what we can only do in a global trade
talk, which is have an impact in every country in the world in
terms of our market access.
The timing here has been the end of 2006, but this has been
going on for 4 years and, frankly, for the last year and a
half, the talks haven't made much progress. So we are stalled,
in a sense, and we are really stalled going into this Hong Kong
Ministerial which is coming up at the end of this year and we
need to figure out a way to break the deadlock and move the
talks forward because it is going to be great for farmers and
ranchers if we can get a good deal.
The three main pillars of this Doha Round are manufactured
goods, services, and agriculture. I won't go into any detail,
but just briefly, on the next chart, you can see why the
manufactured goods area is important to us. On the left, you
see America's tariffs for manufactured goods in red, all goods
in blue. Anything that reduces barriers to trade in
manufactured products is going to be good for us. We are still
the world's largest exporter of manufactured products, and
frankly, we are relatively open here, so this could be very
beneficial to our workers and to our economy.
On services, same story. We have a comparative advantage in
services. We actually have a surplus of about $48 billion in
services in 2004. Our services are expanding dramatically, but
we do have still a lot of very high barriers to our global
trade in services, and in the interest of the United States,
but also in the interest of the world economy, it would be very
beneficial for us to make progress in the services front.
So these are two important areas that, frankly, are being
held back at this point because of the focus on agriculture.
This round, as you recall, was to be the development round and
agriculture was to be a centerpiece and it really is, in a
sense, the engine that drives the round.
With regard to agriculture, I won't go over all these
figures because the chairman has done a good job of that, as
has Secretary Johanns, but I like what the chairman pointed out
early on in his statement, saying we are the world's largest
exporter. We have a lot to gain from knocking down barriers to
our trade, as we will see in a second on our charts. Currently,
one out of every three acres planted in Ohio, where I am from,
and around the country are planted for export. So our
agriculture economy, as the Secretary has outlined well, is
dependent at this point on us providing that additional market
access.
Where are we on negotiations? We are building on the July
2004 framework. About a year ago, we set out a framework.
Again, we haven't made a whole lot of progress on it since, but
it has three basic elements. One is to expand market access.
For us, that is particularly important in some of these larger
developed countries, like the EU and Japan, but also the
emerging developing countries, and I would identify Brazil,
some of the ASEAN countries where there are huge opportunities
and, frankly, very large tariffs in place right now.
Second was to eliminate all export subsidies. We can talk
about that in a second, but this was an agreement that was made
a year ago and the question is, can we get a date certain and
move forward on that?
And third is to substantially reduce trade distorting
agriculture subsidies around the world. As the Secretary has
said, that would be only done in concert with these other
important elements, including market access.
I throw in this next slide because you hear a lot of talk,
and some of you have been very involved in this over the years,
others have not been as involved, about what does the WTO
framework lookay like for agriculture. The WTO puts all subsidy
programs into one of three boxes, the amber box, the blue box,
and the green box, and you hear these words kicked around.
What they mean, basically, the amber box is the highly
trade distorting subsidy programs, something that would
encourage production or depress prices. Our commodity loan
program, market loan program, would be an example of that.
Second is the blue box, and this is something that would be
less trade distorting. Right now, there are no limits on that.
The set-aside programs would be an example there. We think our
countercyclical programs could fit well into the blue box,
although at this point, it is defined in a way that may make
that difficult, so we are working on that.
And then third is the green box, and the green box is
unlimited at this point and these would be minimal or non-trade
distorting payments, for instance, our food stamp program or
research or direct payments, environmental programs.
The idea is, of course, with the amber box programs, you
are more concerned about their distorting impact on trade, so
you have reductions there that would be more than in the blue
box, and then in the green box, there would not be limits. So
that is just generally how the WTO takes agriculture programs
all around the world and puts them into categories.
With regard to agriculture, you have seen these charts
before, and before Senator Conrad has a chance to do it, I
thought I would put them up here. But this gets into--since he
is not here, I can say that, I guess.
[Laughter.]
Ambassador Portman. This gets into what we all know, and
the reason these talks could be so good for us. I mean, first,
on market access, lookay at that top bar. The U.S. average
allowed agriculture tariff is 12 percent, and we just about use
that. The EU is 31 percent. So it is not just the SPS issues,
which I would like to talk to you about, but it is also
tariffs. They have higher tariffs than we do and they use them.
Now, some of these countries, like India don't use the full 114
percent, but it is allowed. Their tariffs may be more in the
area of 30, 40 percent, but we will always benefit when we are
talking about reducing tariffs because ours are relatively low.
Second are these export subsidies I talked about, and
again, the 2004 framework said these export subsidies are to be
eliminated, not just reduced, but eliminated, and there, you
see the EU has about 90 percent of them, 87 percent. So that is
in our interest. We need to get a time certain for that.
And the third area is domestic support. Here, I have put
into red what is allowed and yellow what is actually used, and
as you can see, the EU is allowed to use about four, four-and-
a-half times what we are allowed to use under the current WTO
rules, and they use about three times what we do. Japan, with
much smaller production, also has a larger allowance than we
do. So it is in our interest, again, to deal with this issue in
the way of reducing those who have higher subsidies more
through harmonization.
The next chart is important because it is kind of the
reality of where we are in terms of the reduction of these
trade distorting supports, and the reason the Europeans and
others say, gee, it is time for the U.S. to take a step
forward. The fact is that since the Uruguay Round, they have
made progress and we have to acknowledge that. Under the CAP
reforms, as you can see by the black bars there, European trade
distorting support has gone down since 1995. What they are
allowed is that top black line that runs across the chart, so
they are well below what they are allowed. The next line down
is the Japanese limit, and Japan is in red. You can see what
the Japanese have done since 1995. They have reduced their
trade distorting supports. The yellow is us, and the final line
is us, so we are pushing up close to our limit, and since 1995,
we have seen an increase in our support.
So this is where, again, Mr. Chairman, you talk about the
fact that we make sure this negotiation is fair and that
nothing we agree to is anything other than a good deal for our
farmers and ranchers. ``Needs to have tangible results for
America's farmers and ranchers'', was your exact statement. I
couldn't agree with you more and we need to be darn sure that
we get the market access, the export competition, and other
things for our farmers and ranchers, and that with regard to
subsidies, those who subsidize more reduce more. But this is
just the situation that we face currently in Doha.
The next page, I mention briefly where we are in terms of
the negotiations themselves. We are stalled, as I said, on
these agriculture subsidies and tariff issues. We are actively
consulting with the Hill and key farm groups here, as we are
doing today. We are coalition building with other countries,
frankly, to put pressure on those key developing markets. We
have got to have more access and we are getting a lot of
support, actually, in the other 147 members of the WTO. But, as
I said, other countries are lookaying for moves on our part in
terms of the trade distorting subsidies per that 2004 framework
that I talked about.
So what is the dynamic now? We are building on the
framework. There is no final deal that is going to be reached
at Hong Kong in December, although I do think we can and should
make progress leading up to that ministerial to be able to
reach some agreement for Doha that avoids some of the problems
some of us saw when we were in Seattle, or we saw in Cancun. We
need to be sure that the meeting is successful in Hong Kong.
I know a number of you are planning to come to Hong Kong. I
want to be sure that you are getting the briefings you need
moving up to that date and also in Hong Kong, that you are part
of the process. I think one thing that has not been done
adequately in the past is to use members of Congress more
effectively on behalf of U.S. interests. I plan to do that,--so
be expected to be put to work. I am going to need you.
We are making progress in all areas of Doha, I believe it
is fair to say, not just in services and manufactured products,
as I talked about earlier, but also in agriculture. We had good
meetings as the chairman alluded to last week with the EU in
the sense that they were very candid. We were starting to put
our cards on the table for the first time, as I say, in quite a
while and getting closer to figuring out how to make Hong Kong
a success.
The critical path issues are pretty straightforward. In
market access, we need to know what the shape of the tariff
formula might be to begin to reduce these tariffs, as I talked
about earlier, what is the depth of the cut, how are we going
to deal with sensitive products, special products and
safeguards. With export subsidies, again, we need a time
certain. And on domestic support, we need to work within this
context of the blue box, what is the depth of the cut in the
AMS, or the amber box, and what is the overall subsidy cut.
Here is a little time frame in terms of where we are.
Again, the framework was a year or so ago. We have got Hong
Kong coming up. And then by the end of 2006, we would hope to
complete this. Why? Because in mid-2007, the Trade Promotion
Authority expires, and we also have a little something called a
farm bill apparently that comes up for renewal in 2007.
So we have got some dates we are pushing up against, and
particularly the TPA extension. Last time, it tookay us nine
years to renew TPA. I will say I was pleased a couple months
ago when we renewed it for another 2 years, until July, but we
all know in July 2007, that is going to be tough. So my goal is
to be sure that by the beginning of 2007, we can send up a
package to the Hill that really makes sense, that is a good
deal for America's farmers and ranchers, and we can get that
moving within the context of TPA.
The final part I want to just touch on, and my time is
about expired here, but I just want to touch on the issue of
enforcement and compliance because I think this is one area
where we don't spend enough time and effort. Is my time already
up?
The Chairman. You are doing just fine, Mr. Ambassador.
Ambassador Portman. I will try not to filibuster, though.
The Chairman. If you were still a House member, you would
have been called a long time ago.
Ambassador Portman. Yes, all right.
[Laughter.]
The Chairman. Now that you have ascended----
Ambassador Portman. Let me just leave this, then, for the
questions, but just to say that we have made progress on the
enforcement side. Even this summer, there are a number of
cases. Some of you have been very involved in these--the high-
fructose corn syrup case, the Japan apples case, even on beef
hormones. We have made some progress.
My goal in this job is to focus more on enforcement and
compliance and follow-up, even on these FTAs. When we make a
commitment, we have got to be sure that we have the kinds of
enforcement and follow-up that is expected by our farmers and
ranchers to be sure they do get a good deal.
So thank you, Mr. Chairman. I appreciate the opportunity to
present where we are in terms of these trade negotiations and
lookay forward to your questions.
The Chairman. Thank you, Mr.
Ambassador.
[The prepared statement of Ambassador Portman can be found
in the appendix on page 58.]
The Chairman. That is an excellent primer for those of us
going to Hong Kong. A very good presentation by both of you.
Mr. Ambassador, before we get into questions relative to
this, today is the day in which we are supposed to correct the
serious prejudice charge in the WTO patent case. Since there
will be questions asked about that, maybe statements in the
press, I want to give you an opportunity to make any comments
you wanted to make initially in reference to that case.
Ambassador Portman. Well, thank you, Mr. Chairman. It is
timely that we are meeting today because tomorrow is the date
that we set for implementation of the recommendations of that
WTO case.
As you know, and you have worked with us, we have taken
significant steps to implement the decision, both with respect
to the findings regarding the prohibited subsidies, but also
regarding the subsidies found to be causing serious prejudice.
On July 5, we proposed legislation that would repeal the Step 2
program. This would be an important development with respect to
both sets of those findings. We think the repeal of Step 2
significantly reduces any price effects these programs might
have. Separately, reductions in payments under other domestic
support programs, including those that were discussed in the
case, are being considered as part of the deficit reduction
efforts by the administration.
Although the legislative process has been delayed, in part
because of the crisis with Hurricane Katrina, we are continuing
to work actively with Congress on this issue. We have been able
to work well with Brazil so far to manage this dispute
settlement process and we plan to continue that dialog with
Brazil in our upcoming meetings. I am meeting with the trade
minister of Brazil tomorrow in Europe, in fact, on this very
issue, as well as WTO issues.
But we are committed to abiding by our WTO obligations by
implementing the cotton decision. We stress that we believe
negotiation, not litigation, is the way to go. We think that is
the key to a meaningful reform and we believe it is in the
mutual interests of the United States and Brazil to focus our
reform efforts on the Doha negotiating process.
So, Mr. Chairman, I thank you for giving me the opportunity
to address this issue and I hope the constructive relationship
we have had with Brazil so far can help us both in future
discussions and negotiations. We need to continue the dialog.
The Chairman. Thank you very much.
We are now joined by Senator Harkin. We welcome any
comment, Senator you wish to make at this time.
STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA, RANKING
MEMBER, COMMITTEE ON AGRICULTURE, NUTRITION , AND FORESTRY
Senator Harkin. Well, thank you very much, Mr. Chairman.
First, I apologize to you and members of the committee for
being a little late, and also to you, Mr.
Secretary I am sorry I missed your statement, but I just
wanted to compliment Ambassador Portman on an excellent
statement and to thank him for his great leadership in this
area, and to also thank you for always being open and willing
to meet with us and discuss with us these issues of trade. So
again, that was a great primer, as you said, Mr. Chairman, on
just where we kind of find ourselves right now.
Just a couple things I just want to say before we get into
questions, and that is that, first, I am on record as
supporting our objectives in the Doha Round. I think it would
be better for everyone concerned if we could agree
multilaterally to open markets more broadly and eliminate
export subsidies and reduce the use of trade distorting support
for farmers. So I am committed to that and hopefully we can
move this ahead. I am a little disappointed that in the last
year, not much has happened and we have reached some stalemates
in that regard.
There are a couple of issues that I will go over with you
in questions. I met with Fischer Boel, the new EU Commissioner.
I think some of the rest of you probably met with her last week
when she was here regarding the issue of our Food for Peace
Program, and to the extent that the European Union is going to
push to convert that from food to cash is going to be a sore
point, I think, for many of us on this committee and for a lot
of us perhaps even not on the committee. I think in both the
Senate and the House and I think bipartisanly, this has been a
wonderful program for 51 or more years. It has done a lot of
good in feeding the world's poor.
In my discussions with Fischer Boel, they want us to
convert it all to cash and I said, we have got reams and stacks
of reports and investigations about how some of the money that
goes to countries for food always gets siphoned off for
something else. Most of these underdeveloped countries have
dictatorships or whatever. The money very rarely gets down to
help people. But when it goes to NGO's and other organizations
like that and it is food, nine times out of ten, the food
actually gets to people and helps them. So I let her know that
that was going to be a big sticking point if they were going to
fight for that, and I am going to be asking you, Mr. Portman,
about your views on that.
Last, while we all support--well, I don't know if we all,
but at least I know I can speak for myself--support the Doha
Round and the goals of it and where we want to get, it is clear
that in doing so, we are going to have to pretty drastically
change our support system under the amber box, maybe somewhat
under the blue box, too. That is why I fought so hard in the
last farm bill for what is known as the Conservation
SecurityProgram, to begin to shift payments to farmers that
would come under the green box that would be non-trade
distorting, that would be acceptable by the WTO. In traveling
around Europe, I had seen how they had done that and I thought,
well, maybe that is how we have got to be lookaying at it, too.
It is much to my dismay that in the last couple of years,
that in our appropriations bills that have passed the House and
the Senate, this program has been severely curtailed and
distorted in a way that was not intended under the farm bill.
Now, when we passed the farm bill here, you know, there are a
lot of different streams that come together and a lot of
agreements are made and maybe some of the things that were in
the farm bill that some people didn't like, and some were there
that some people liked, but we hammer it out, and that is what
we hammered out in this farm bill.
We made agreements on a variety of different things, and
one of those was to have a conservation program like the
Conservation Security Program that did not take land out of
production, that paid framers not so much on how much they grew
but on how they grew it. That would be green box and that would
be treated--conservation would be treated like a commodity,
that once you were in the program, once you met the
requirements, you got compensation or you got paid.
Now again, I am not saying about the Department, but I am
just saying that it is to my great dismay that in the last
couple of years, this Congress has distorted the program and
put caps on it and severely curtailed it, and to my fellow
members of the committee, I just say, you know, we are going
into the next farm bill and that is cutting our baseline down.
So whatever we might want to do in the green box in the next
farm bill is going to be severely curtailed unless we lift the
caps that were put on that program.
Now, I say that because I believe that in thisWTO, if we
are successful in the Doha Round, which I hope we are, Mr.
Secretary and Mr. Ambassador, we are going to have to make some
pretty severe changes, and that is going to have to be in the
next farm bill. If it is in the next farm bill, we are going to
need the baseline in order to do that. That baseline was set in
the last farm bill with the Conservation Security Program and
it is being curtailed. We may find ourselves in a very bad
situation, Mr. Chairman, coming up if, in fact, we succeed in
the Doha Round and we have the farm bill coming up in 2007, and
how we are going to support our farmers and ranchers in the
future without it being put in the amber or blue box.
Having said that, I thank you, Mr. Chairman, for giving me
this time. Again, I want to thank the Secretary and especially
Ambassador Portman for his great leadership in this area.
Senator Baucus. Mr. Chairman, I am low man on the totem
pole here, so I won't take time, but I would like to submit a
statement for the record, please.
The Chairman. Without objection.
Senator Baucus. I would just say to the Ambassador, I
appreciate what you are doing, but my main point is just
consult with us earlier and more aggressively on all this than
your predecessors have so that you avoid Doha problems, get TPA
extended, and for all the reasons we have discussed. You have
got to go the extra mile in working with us. I know you will, I
know you want to, but I am urging you to go even farther.
The Chairman. SenatorBaucus, I would say that that same
sentiment has been expressed by a number of us to theAmbassador
and he understands that fully and that is one of the reasons he
has been back and forth to the Hill as often as he has since he
came to his new position.
Senator Baucus. Allen, I wish you the very best. Thanks.
The Chairman. Mr. Secretary, there is something else I just
need to say. It is not a question because it doesn't have
reference to this, but we have another very critical issue that
I know your office is considering and it is going to have a
direct effect on everybody on this committee, and with you
leaving town today, we won't have an opportunity to discuss it
with you in the short term, but there has already been some
publicity out there about the FSA Tomorrow Program and Under
Secretary Penn was gracious enough to come over and have a
discussion with me and I know some other folks in the last
several days and we lookay forward to working with you on this.
But I will have to tell you that I have not had a chance to
discuss this with the members of this committee and my
intention is that once we get all of the information,
particularly relative to the criteria that is going to be
determinative of which FSA offices stay open and which close,
that we will dialog with your office to make sure that we both
have a thorough understanding about the direction in which you
wish to proceed. I hope we can do that in the short term. I
think the goal is a very admirable goal, to provide better
service to our farmers and ranchers all across America through
the FSA, which is so critically important.
But I want to make sure that your office understands that
we have not--Tom and I have not even had a chance to talk about
this, much less with members of the committee, but we will be
doing so in the short term.
Gentlemen, last week, President Bush stated at the United
Nations that the United States is ready to eliminate all
tariffs, subsidies, and other barriers to the free flow of
goods and services as other nations do the same. While this has
been a longstanding United States policy and repeated by
previous administrations, in 2002, theUnited States Trade
Representative presented a proposal to our negotiating partners
that would reduce trade distorting support of 5 percent of a
country's total value of agriculture production over a 5-year
period. That is commonly referred to as the 5 percent rule.
Subsequent discussions among the various actors in the
agriculture negotiating groups have discussed reducing trade
distorting domestic support by levels up to 50 percent. The
President's statements admittedly are ambitious, and while I
hope we can achieve the success in the outcome of those
negotiations, I am concerned that statements do not reflect
what is necessarily possible, both domestically as well as in
the current round.
Mr. Ambassador, do you believe the current state of
negotiations can produce equally ambitious proposals on market
access from theEuropean Union and the G-20 group of developing
countries?
Ambassador Portman. Mr. Chairman I do, and I agree with
you, the President's statements set out a vision that is bold
and, I think, one that is very constructive toward us making
progress. However, the negotiations inGeneva are focused on
simply reduction of these trade distorting supports in exchange
for real market access gains.
You talked about tangible gains, and I believe there is an
opportunity to do that if we work together. We have to make it
clear that we are not going to move unilaterally on anything.
We will work with the European Union and the other 147 members
of the WTO on coming up with something that is consistent with
the 2004 framework, consistent with what has been expressed by
this committee, which is real market access gains for our
farmers and ranchers, which is an elimination altogether of the
export competition we talked about earlier and which gets at
reforming trade distorting subsidies. But we need to move
together, in parallel.
My frustration, I have only been on the job four and a half
months, but is we are just now getting around to talking about
these issues in real ways. We had a good meeting last week, as
I said. We are continuing to talk to trading partners, not just
in Europe, but around the world, and to answer your question, I
am hopeful that we can still come together, not with a final
product in Hong Kong--that will not happen and we ought not to
have those expectations--but with the kind of formulas and the
kind of modalities, as they way in the WTO, that enable us to
make progress in 2006.
The Chairman. Mr. Secretary, the President's statements
were made while the Department is hosting a series of listening
sessions on the current farm bill, and for that, I particularly
commend you for traveling to all parts of the country to listen
to farmers and ranchers. Feedback from those events conveys
that, generally, producers are favorable and happy with the
2002 legislation. In fact, Congress Daily reported yesterday
that farmers in nearly every region of the country want the
2002 law extended and are disappointed with recent trade
agreements.
Do you believe the administration has sufficient grassroots
support to radically transform current farm safety nets?
Secretary Johanns. Let me offer a thought first on
theCongress Daily article. I could not disagree more, to just
be very blunt and direct about it. In fact, we pulled out from
our farm bill listening session quote after quote after quote
from producers, from farmers, and I have now done, I think, 15
of these--14 or 15--in the Department, that that 14 or 15 is
now over 20--where farmers are expressing concern about the
2002 farm bill. Every place we go, we hear about the
capitalization of farm payments and higher land costs, higher
cash rent costs, the inability of young people to get into
farming, and I could go on and on. Like I said, we pulled those
criticisms and comments and we have provided them to
CongressDaily and hopefully, they will offer the thoughts of
many farmers across the country in terms of their concern about
the farm bill.
But in reference to your question, the other part of your
question, I really appreciate the comments of Senator Harkin in
how we approach farm policy as we think about 2007, and that is
the whole idea of the listening sessions. We want to get around
and hear what is on the mind of the producers.
If there were two points I would make today in reference to
the President's comments, it would be this. The 2007 farm bill
can find approaches, I think very positive, forward-leaning
approaches to supporting agriculture. Our bill is to build good
farm policy. That is where we are starting. Our goal is to
identify the best farm policy for the United States, not only
for today but for the future, and that is where we are headed
with this. Now, we also recognize that 27 percent of the gross
receipts do come from the export market. We need to be mindful
about that.
The other thing I would mention in reference to the
President's comments is that I worry that the status quo is
very high risk for American farmers. Why do I say that? You
know what we are dealing with with the cotton case. It is
there, and we have got the WTO ruling. As you know, we are
trying to work with Congress to get through that.
You have been reading the articles, as I have, that some
other countries are now lookaying at the rice program. Up in
Canada, they just opened up a study or investigation, whatever
you call it, relative to the corn program. These things are
there and they are real, and again, 27 percent of our
marketplace is in that foreign market.
But our goal is going to be to work with the House and the
Senate through the farm bill listening sessions, through the
input that we get from farmers and ranchers and agriculture
groups to try to develop farm policy that recognizes we can be
supportive of America's farmers and ranchers. We need to be
forward-thinking about that and forward-leaning, but I believe
we can do it.
Here are some of the ideas that have been mentioned.
Working lands conservation--I have heard about it in just about
every farm bill. We have had people say, Senator, exactly what
you said. It would be nice if we could figure out a way to
build that into the next farm bill.
Crop insurance--disaster brings out discussion about crop
insurance, but we have heard an idea that has been here before
about maybe a more revenue-based approach to this.
Direct payments--we know that you can make direct payments
without running afoul of any trade rules or WTO rules.
Risk management tools--you know, we had a young guy in
Kansas get up and his testimony was fairly straightforward. He
said, ``I worry I will probably make every farmer in the room
mad at me, but,'' he said, ``there is a way to work with risk
management tools that are available.''
Here is my thought just to sum up my response. This farm
bill dates back--this farm bill--this approach to farm policy,
by and large, dates back 70 years to the time of the Depression
and the need to try to figure out how to save agriculture in
the United States, and some of the same tools that we used 70
years ago, we are trying to fit into today's world and it is a
different world today.
But again, if there are two points I would make, we can
support American agriculture, but we need to be creative in how
we approach that and we can do that.
And the second point I would make is that the status quo,
just saying, lookay, I am happy with everything, has real risk
to it and we may not like that result, either. So I think we
have to put everything in the mix, work together to try to
figure out how this develops good farm policy for 2007.
The Chairman. Thank you.
Senator Harkin?
Senator Harkin. Thank you, Mr. Chairman.
Ambassador Portman, again, let me just focus on the
question, the issue that I raised in kind of my opening
statement that I had raised with Fischer Boel last week. The
European Union is after us to cut back on our Food for Peace
Program, convert the food to cash. They did that themselves a
few years ago, but if you track what they did, they converted
it to cash, then they cut it down. I am really concerned that
the EU is pushing this. I told her so.
I guess my question to you is, is there any way we can get
a lot of the other countries in the developing world where they
have really benefited from our Food for Peace Program to
support us in this effort, and where do you see this headed?
Ambassador Portman. Well, first of all, I couldn't agree
more with what you were saying earlier about the importance of
the program and why we need to fight for it. I will also tell
you it is not just the EU, as you know. There are others who
are also after our food aid program.
Senator Harkin. Who is that, beside the EU?
Ambassador Portman. Well, Switzerland, Brazil, Australia,
pretty much anybody who is in the export business and some of
those who, as you say, have converted to cash only.
But what I have found is in talking to some of the African
nations, some of their leadership, in talking to some other
trade ministers from countries that understand the importance
of food aid, that we can counter this with a coalition of our
own and we are working hard at that. We are also working with
the NGO's. As you know, the NGO's are----
Senator Harkin. I am sorry, Rob. Did you say we can or we
can't?
Ambassador Portman. We can.
Senator Harkin. We can?
Ambassador Portman. I believe we can, Senator. I just--
getting back to your comments about the fact that this money
sometimes gets siphoned off, I think there is plenty of
evidence of that and there is still a significant concern on
our part of corruption and the need to get this food to people
who need it quickly.
You know, one of my points that I made with the Europeans
last week is that there is not enough food aid out there right
now and the last thing we want to do is to cut back on
emergency food aid as it is needed. There has been, as you
know, by the Europeans and others, a reasonable concern, in my
view, raised, and that is that we not displace commercial
sales. In my view, we do not and we do not intend to do that.
In fact, our same exporters who are providing food aid would
object to us displacing their commercial sales.
So I think we can address that concern, Senator, in a way--
since we share that concern--in a way that continues to give
people the comfort to know that our food aid is not wasted
shipments that aren't needed, they are desperately needed, and
that we are not asking our exporters to compete with food aid
programs. We need to oppose the European position strongly. We
need to be sure that the most vulnerable people who are short
of food aid right now, when global food aid shipments are not
even meeting current requests, are getting what they need.
So I agree with you, it is important for us to build a
coalition of other countries, also to work with NGO's, some of
whom, as you know, are very supportive of our food aid program.
Others have some questions and I think we can address some of
those questions in terms of, as I said earlier, the commercial
displacement issue.
Senator Harkin. Thank you very much.
Ambassador Portman. I lookay forward to working with you on
it.
Senator Harkin. Thank you, Ambassador. I appreciate that
and----
Ambassador Portman. Thank you for raising it with her.
Senator Harkin.
Whatever we can do to be helpful, let us know, and I am
sure----
Ambassador Portman. You were helpful. I spokaye to her
after your meeting and I appreciate your raising it.
Senator Harkin. Thank you. Mr. Secretary, just my final
question, and I thank you for your observations and all the
hearing posts, listening things that you did around. I thought
they were very good, that you did that to get that input, and I
lookay forward to working with you on some of those things in
terms of the non-trade distorting aspects of support.
This question I have has to do with the WTO and with our
moving ahead on the Doha Round. The essence of the U.S.
agricultural proposal is that the U.S. is willing to reduce its
use of trade distorting domestic support in exchange for
significant reforms by other countries in their use of export
subsidies and tariffs so as to provide our farmers with greater
export opportunities in foreign markets.
Now, I am not going to get into the whole thing between
applied and bound tariffs, but the issue is in having a good
analysis done as to what the net benefits to us, our farmers
and our exports would be, depending upon what they are doing
with their bound and their applied tariffs. And so the question
is this. Will USDA be able to provide U.S. negotiators, and
hopefully us, also, with rapid quantitative analysis of the
implications of proposed deals so that they and we will know
before the agreements are made if the deals are likely to
generate a net benefit for U.S. agriculture? It is my
understanding that such a capacity was in place during the
Uruguay Round and I think it is important that our negotiators
and those of us here in the Congress have such analysis at our
disposal in the Doha Round.
In other words, getting a quick quantitative analysis right
away--when they come up with a proposal, that your people are
in place, maybe under your shop, too, I don't know, Rob, but
that we get a quick quantitative analysis done right away so
that when we go to Hong Kong, we will have that analysis at our
fingertips.
Secretary Johanns. We will. We will work with you to make
sure that you are comfortable with the information that we are
lookaying at, and I suspect, Senator, that you will probably
have some of our agriculture groups out there that will be
pretty geared up to offer their thoughts, too, and their
analysis. But from USDA's standpoint, we will, and we will
endeavor to work with you folks to make sure that you get what
you need and also that the Ambassador has at his disposal what
he needs to make the negotiation successful.
In this area, I will tell you, just to summarize, the
working relationship between the USDA and USTR is completely
seamless. Our staff works with USTR as if there is no
boundaries between our Departments.
Senator Harkin. Thank you, Mr. Chairman.
Ambassador Portman. Senator, may I just add to that
quickly, the partnership we have, I think, is unprecedented.
Certainly, I appreciate the fact thatSecretary Johanns has an
interest in this area and I am fully utilizing him and his
incredible resources. As you say, they can come up with data
very quickly. They have a much larger staff than we do.
In the negotiations, we have a USDA official that Secretary
Johanns has kindly lent us at the table, literally there,
hearing everything and providing the data. I have even dragged
Secretary Johanns to some trade meetings that he might
otherwise not have chosen to be at, including this week in
Europe. He is going over, canceling some other important
meetings, because it is critical that we work seamlessly. We
have, and this partnership has been terrific.
I appreciate the committee supporting USDA to be able to do
that, because frankly, we need that support. These are going to
be delicate, tough negotiations. We are going to have to work
seamlessly not just with USDA, but with you all to be sure that
we are giving you the full brief, you know exactly what we are
doing, and at the end of the day, as SenatorBaucus said, we
have an agreement that people can support.
Senator Harkin. Thank you very much. Thank you, Mr.
Chairman.
The Chairman. As I turn to Senator Crapo, Mr. Ambassador,
let me say, as you know, Senator Crapo has been a leader on
this issue relative to the Canadian softwood lumber issue and
he is leading a delegation of us to an interparliamentary group
meeting next weekend. I want to thank you for your strong
support of the lumber industry in our country and these
negotiations, which have been very difficult. Senator Crapo has
done a good job, but you have also done a very good job.
Senator Crapo?
Senator Crapo. Thank you very much, Mr. Chairman. I
appreciate you bringing up the softwood lumber. Although I
won't raise that as one of my questions, the Ambassador and I
have talked about that. I, too, want to express my appreciation
for the support that we have in this effort.
Ambassador, given the significant challenges that face
American agriculture and manufacturing today, I think it is
critical that we have the maximum effectiveness for our trade
remedy laws, and I think you probably didn't get a chance to go
into that as much as you might have liked in your presentation.
It seems to me that the United States should not sign an
agreement that would lessen in any way the ability of the
United States to enforce its trade laws and to decrease the
effectiveness of the domestic international disciplines on
unfair trade or safeguard provisions. In fact, one of the
concerns that we are seeing in a number of arenas is that many
of us perceive that we don't now have the ability to
effectively pursue trade remedies. Could you give me your
thoughts on this?
Ambassador Portman. Yes, and I appreciate your raising it.
As you indicate, at the end of the presentation, I was hoping
to talk a little more about enforcement, including our trade
remedies. The countervailing and antidumping laws, as you know,
are administered by theDepartment of Commerce, not by USTR, but
I think they are an incredibly important part of our arsenal
and we use them and we use them appropriately.
We are a relatively free and open country to trade. Our
trade deficit numbers indicate that, as do our low tariffs, as
do our low non-tariff barriers. Yet we want to be sure trade is
fair and we do this through our trade remedy laws that are
transparent, and that provide due process. We are under some
pressure, as you know, around the world on this issue and I
think, frankly, we haven't made our case as well as we could
have.
So we are undertaking to do that and also build some
coalitions. SenatorHarkin talked about building coalitions on
food aid. We also need to build coalitions around the world to
understand what our trade remedy laws actually do and don't do,
and lookay at other countries that are using trade remedy laws
aggressively and be sure that they understand that their
potential use of those could also be at risk if the WTO goes
the wrong way.
I will say that we believe there could be some improvement
globally in trade remedy laws, particularly in the area of
transparency, as I mentioned, and due process. So I think we
have nothing to be ashamed of. In fact, we have laws that are
working and that do provide the kind of rights to both the
petitioners, but also the importers and we will vigorously
defend those.
Senator Crapo. Well, thank you. Because of the brief time
that we have, I am going to move on to another topic, but I
want to say to you that I think this is an incredibly important
arena in the entire negotiation process and I hope that the
United States can work aggressively, not only to enforce and to
be effective at enforcement under our current system, but to
help improve it, because a lot of us are concerned about
whether there truly is fairness in the process.
The other area that I wanted to go into is geographic
indications, and I would like to discuss the current effort of
the EuropeanUnion in the Doha Round negotiations to extend to
foods the geographic indication protections that were
established for wines and spirits in the Uruguay Round
agreement. This issue is of importance to producers and
processors in Idaho, and I am sure you are aware of the
competing interests on this issue. What is the view of the
administration on extension of geographic indications to food?
Ambassador Portman. Well, again, as you know, this is an
issue where we differ from our trading partners in the EU and
also some other countries that are not part of the EU, but have
a similar concern. We will continue to strongly promote the
enforcement of intellectual property laws, including patents,
trademarks, copyrights, and in the area of agriculture
products, we think that is the appropriate course to take.
This is an issue that has come up in every one of my
meetings with the EU and in some of the mini-ministerial
meetings, and the U.S. position is clear. I think, again, this
is an issue where we need to perhaps explain our position a
little more forthrightly and perhaps work with other countries
who would share our concern. Australia has been a real leader
on this, for example. They understand the consequences. But we
will continue to hold firm to our position.
Senator Crapo. All right. I appreciate that very much. And
again, let me say to both of you, we thank you very much for
the ability that you have shown to work closely together and
your commitment to work closely with us. I lookay forward to
working with you. Thanks.
[The prepared statement of Senator Harkin can be found in
the appendix on page 84.]
The Chairman. Senator Salazar?
STATEMENT OF HON. KEN SALAZAR, A U.S. SENATOR FROM COLORADO
Senator Salazar. Thank you very much, Chairman Chambliss
and SenatorHarkin, for scheduling these very important
hearings, and to you, Secretary Johanns andAmbassador Portman,
thank you for the service to our country and thank you, as
well, for your advocacy for agriculture.
Mr. Chairman, I have a longer statement for the record and
I would ask unanimous consent that that be included in the
record.
The Chairman. Without objection.
[The prepared statement of Senator Salazar can be found in
the appendix on page 88.]
Senator Salazar. Let me just say that from my point of
view, these are very important negotiations and deadlines that
are not too far off in our future, and I, from my point of
view, believe that a successfully negotiatedDoha Round could
level the playing field for U.S. producers and provide
incredible market access for U.S. products, as you have said in
your testimony today. So it is the right thing that you are
doing, Ambassador Portman and Secretary Johanns, and I just
want to encourage you to continue to be great advocates for
agriculture, as you have said in your comments.
At the same time, I just want to let you know that I had a
very moving meeting with Catholic bishops from all across the
hemisphere in Latin America and it included some bishops from
the UnitedStates, such as Cardinal McCarrick from here in
Washington. It included Cardinal Rodriguez from Washington,
D.C. Many of these people were leaders in my church or people
who are not protectionists. They understand the importance of
the global economy and the importance of what we are doing with
respect to trade.
But they obviously are also leaders in what is probably one
of the oldest multinational institutions that we know, and one
of the concerns that they expressed to me in terms of the trade
negotiations that are underway is that there are always winners
and there are losers. One of the major concerns that they have
with respect to CentralAmerica and Latin America as we move
forward with some of these trade agreements is what happens
with respect to some of the small farmers and ranchers that are
displaced economically within a system that has been around for
centuries and how we are dealing with that particular issue.
So I would like you just to comment briefly on that concern
that the Catholic bishops have raised with me.
And then second, with respect to the listening conferences
that you are having around the country, Secretary Johanns,
could you explain a little more in detail about what it is that
you are doing to try to get the input from the family farmer
and the family rancher? At the end of the day in Hong Kong,
when you are there in December, the farmers and ranchers from
my State more than likely are not going to be able to be there.
There may be a few that actually go, but they will be
participating in those world trade negotiations through your
voice and through your mind as well as Ambassador Portman's,
and so I am wondering if you could give us a little more
explanation with respect to what you are doing on outreach
efforts to get their input.
Ambassador Portman. Just briefly, Senator, first of all, I
agree with you about the level playing field, that Doha offers
an opportunity that we should not miss, which is to help level
that playing field, because we are relatively open here and our
tariffs are relatively low and our subsidies are relatively
low. So this is an opportunity for us and our farmers and
ranchers need to be sure that we have not squandered it.
With regard to the statement from the bishops or your
meeting with them, we certainly understand that concern. With
regard to the DohaRound, as you know, there is an opportunity
here to really assist on development around the world that is,
again, unprecedented and one we should not miss. The World Bank
studies show that if you were to reduce all the barriers to
trade, which is the ultimate goal, you could pull 300 million
people out of poverty. There is a recent study here by an
institute, the NationalInstitute of Economics, saying 500
million people would be lifted out of poverty by reduction of
barriers. So there are tremendous opportunities here.
In the case of CentralAmerica and Latin America, as you
know, in the CAFTA context, we did things that were
unprecedented in terms of trade aid, in other words, capacity
building to be sure that these countries can take advantage of
the new trade agreements. That includes infrastructure, that
includes being sure that the rural communities are assisted to
be able to handle the new trade agreements in beneficial ways.
Trade is a matter of some displacement, but huge net
benefit, and I think we have shown some sensitivity to that and
will continue to. Part of this round, the Doha Development
Agenda, as it is called, is to be sure that we are providing
trade capacity building at the same time that we are reducing
these barriers to trade that ultimately hurt the poor and hurt
the developing world. But I appreciate your comments on it and
lookay forward to working with you on that, both in the
bilateral context but also with regard toDoha.
Senator Salazar. Thank you, Ambassador.
Secretary Johanns. In reference to your question about the
farm bill forums, Senator Roberts was with me in Kansas, so he
can kind of give you an idea of what we do in these, as was
Congressman Moran. But that has not been an unusual phenomena.
We have actually had participation from university people,
government people at the State level, people in the House and
in the Senate.
What we always do is we work with broadcasters, some farm
broadcasters, but broadcasters in general, too, and they
promote the forum. We have tried to adopt a model of joining
the forum with an agriculture event. It might be a State fair,
as it was in Kansas. It was a State fair in Kansas. It was
HuskerHarvest Days in Nebraska a few days after that, because
you have kind of a ready-made crowd of producers.
We identified six questions that we wanted their thoughts
on, everything from how do we develop policy that allows for
young people to be involved in agriculture in the future to do
you think the distribution of the farm program benefits is a
fair distribution. We ask a question about, are we getting the
job done from an environmental standpoint, conservation
programs? Are we getting the job done in our rural development
programs?
But having said that, it is pretty much an open mike. We
encourage people, if they have a specific problem--my loan
application is not getting processed--to come and see us. We
are very interested in solving that problem, but we are there
more to address the policy issues of the next farm bill, the
2007 farm bill.
And it has been a wide-ranging discussion. It has been for
me very, very helpful just in terms of thinking about farm
policy. We get everything from very specific suggestions about
what people would like to see in farm bill policy to just more
global thinking about what farm policy has done, and we have
had arguments all over the spectrum.
I could show you a quote from one gentleman who said,
``Throw it out and start over,'' to others who say this has
worked pretty well and I hope you keep that in mind as you
think about 2007, and everything in between.
If I might just offer one other quick thought on the
question you asked of theAmbassador, I had the opportunity to
go to AGOA this year, the AGOA forum in Senegal. African
nations were there. I had a number of bilateral meetings. But
one agriculture minister came to me in a bilateral meeting and
he sat down and he said, ``Mr. Secretary, I am here today not
to ask you for more aid, although we appreciate the aid.'' He
said, ``I am here to ask you for opportunities for trade.''
They just overwhelmingly, the people at that forum, which
by and large was African nations, were saying to us, we need
help here, and the reasons, I think, are obvious. We come from
a very, very progressive nation when it comes to agriculture,
very progressive. Our farmers and ranchers produce at
remarkable levels. That isn't the case all over the world. And
so we had conversations about how do we get fertilizer? How do
we get seeds? How do we literally lay the platform for our
agriculture to be successful?
You see, I believe it is good to raise the standard of
living and create consumers around the world for our products.
I just think that is where we should be headed. That is what we
should be thinking about. But other nations just are not as
fortunate, and if we can reform agriculture in a way that is a
good deal for American farmers and ranchers but also provides
the world access for agriculture products, I think that is very
definitely what they were reflecting to me in their statements
when I was at the AGOA forum.
Senator Salazar. I appreciate the comments very much,
andSecretary Johanns, I am sure that probably every member of
this committee is going to make a request of you to do this,
but I very much would love to have you, as well as
AmbassadorPortman, come to Colorado and engage in one of these
forums with agriculture in our State. We would make sure that
it was a bipartisan forum that was widely attended by the
people in myState. The eyes of the world are on you, and
Colorado is a part of that world, so I hope you can come to
Colorado.
The Chairman. Senator, the longer you serve here, the more
you will realize agriculture has always been bipartisan. It has
to be.
Senator Thomas?
Senator Thomas. Thank you, Mr. Chairman. Thank you,
gentlemen, for being here. I had an opportunity to work you
quite a little bit in the previous year, as I recall.
I am, of course, very much interested in agriculture. I am
also, as you know, chairman of the Subcommittee on Trade and
Finance, so I am lookaying at it also from a broader
standpoint.
I do want to strengthen the notion, and you have already
committed to do that, is to have a little more conversations
with theSenators prior to bringing up the treaties, and I think
we can have more input and I appreciate both of you doing some
of that.
I also just want to suggest that we were down in Cancun,
and I must confess that I didn't think there was much talk
about trade there. All we talked about was other countries'
needs and these kinds of things. These are supposed to be trade
agreements, andI think we ought to be willing to pursue trade
and we ought to do that, and quite frankly, I think we have a
large deficit in trade. We are buying more than anyone else and
we ought to utilize that strength a little bit to be able to
strengthen our processes, particularly in agriculture, and I
hope we do that.
With regard to this--I guess I was, frankly, concerned that
sometimes there is more interest in foreign policy development
than there is in trade, and I realize the two go together to
some extent, but these are trade agreements, not foreign policy
relationships, and so I hope that we emphasize that.
With respect to what is coming up, of course, no question
that the beef industry has been hurt a lot by global bans on
U.S. beef and so on. These were put in place when the bans were
first enacted. Where are we today with regard to beef trade and
the various bans, health bans and so on around the world, from
either or both of you?
Secretary Johanns. Your observation is correct. The
industry was hurt significantly by the bans relative toBSE and
we have diligently worked country-by-country to reopen markets.
We can give you the exact statistics on where we are at, but we
have recaptured a fair amount of that market. What is left, the
majority of what is left by a lot is Japan and Korea, and, of
course, we have been engaged with Japan for many, many months
now, and we are also engaged with Korea. China has committed to
sending a technical team to our country in October, and so we
are also working with China. That was one of the things we were
able to accomplish when we were last there.
Here is an observation I will offer relative to Japan. I
visited with Senator Nelson about the amendment that he
proposed yesterday, and as you know, it did get a lot of
support in the Senate. Just speaking candidly, I warned Japan
this was coming. I said to them over and over again, there is a
point at which folks on the Hill are just going to lose
patience with this very, very slow process. There is no
scientific or world justification for the continued closure of
this border to our beef.
I will be very honest. I am not excited about the action
yesterday, butI understand it. I understand the frustration. My
hope is that we can continue to move forward to get this border
reopened.
I do believe--I sat down with the new agriculture minister.
They have a new minister over there, and we literally went
through their chart of the process to reopen the border, and
quite simply, they are running out of process. I mean, they are
at the end of the process chart here. So it appears to me that
the end is in sight, but it has been so painfully slow and so
painfully deliberate.
We aren't going to give up. We are going to continue our
efforts to get those markets open.
Senator Thomas. Ambassador, are there things in the trade
agreement that we can do to avoid having these subsequent kinds
of enforcements that really weren't part of the trade
agreement?
Ambassador Portman. Well, there are, and that is to be sure
that we have a good sanitary and phytosanitary agreement as
part of the WTO, that we protect what we got in Uruguay and
that we build on it. You and I have talked about this a lot in
terms of these trade agreements, focusing on market access and
not getting sidetracked on other issues, like the foreign
policy issues you talked about. We have also talked about not
just BSE, but other access issues that are SPS issues, such as
beef hormones in Europe, poultry processing, the issue of
biotech, and all these issues, I just want you to know that we
are raising them.
I met with the trade minister of Japan last week and the
trade minister of Korea this week and, of course, this issue is
at the top of my agenda, as well. Mike Johanns and I are
working in concert on this.
I do think that Secretary Johanns is right. As we push them
on process and walk through all the science-based reasoning on
our side, I think we are lookaying at the end of a process
rather than their ability to continue to delay. I do think it
is helpful, Chairman Thomas, that we have got some positive
signs from other countries that have smaller markets. As you
know, the President met with the Prime Minister of Thailand
this week and had some good conversations about this, a small
market, but you begin to get a little domino effect. Taiwan is
another one we would like to see reopened. We have a strong
trading relationship there with that economy.
So we have the opportunity here, I hope, before getting
into Hong Kong, to make some progress on this, but we need to
see more, particularly with regard to SPS issues and
theEuropean Union.
Senator Thomas. I appreciate what both of you are doing. I
just think we ought to utilize the strength we have on some of
these things.
Thank you, Mr. Chairman
The Chairman. Thank you.
Mr. Secretary, let me say that with reference to that vote
yesterday, you are exactly right. It was frustration. It has
been 6 months ago that 20 members of the Senate sat around this
table with the Japanese Ambassador and discussed this issue and
we walked away with the feeling that we were probably very
close to getting this issue resolved and nothing has happened.
It is very frustrating to us and we hope you will be able to
use that to exhibit the frustration here in your future
discussions with the Japanese.
Senator Roberts?
Senator Roberts. Thank you, Mr. Chairman. Thank you for
holding the hearing. I would suggest we need a bigger room and
maybe another hearing. There are a lot of people in the hall
that are interested in this.
I am going to start off to thank the Secretary
andAmbassador for coming. I want to thank the Secretary for
coming to Kansas. Has Ken left? I was going to tell him that I
think the opportunity for Secretary Johanns to come to Colorado
really depends a lot on the Colorado-Nebraska football game,
but I will let that go.
[Laughter.]
Secretary Johanns. You figured me out.
[Laughter.]
Senator Roberts. The Secretary came to Kansas, there must
have been 250 farmers in the room. He sat on the wagon tongue
and he listened to them all and he tookay copious notes. I left
to go watch a ballgame about halfway through, but--no, I had a
plane to catch, and I do thank you for coming.
I just would say that there is a yellow light warning not
only on the time that I talk, but in farm country, and I think
we are suffering from trade fatigue. That is to say that many
times, I think we oversell and overestimate the goals of the
trade agreements. I understand that. Many times, certainly we
over-criticize them, but that is on the tube and in the media
and all of the detractors. I know all of that. As a result, I
think in farm country, they are a little weary, a little
suspect of this animal we call free trade.
Sitting behind the Secretary is his Chief ofStaff, Dale
Moore, who is an old rodeo rider, and so at the Doha rodeo, I
am concerned when chute No. 1 opens up and the WTO critter
comes out of the chute. I hope agriculture is on board and it
just isn't a bucking bull out there.
You can see that with the Nelson amendment. You can see the
frustration, and the Allard amendment prior to the Nelson
amendment in terms of a strong message.
So I hope, Mr. Secretary, that you will be able to continue
your work. You have gone to 15 counties now, and I am keeping
score because I suggested that originally when you came in in
regards to you confirmation, that would be my best advice, is
to go out to farm country and to listen.
But in your role as Secretary of Agriculture, you are the
voice of all farmers and ranchers. I hope that we can get some
support and some real cooperation between the various farm
groups and commodity groups in trying to work toward increased
market access as opposed to demanding special treatment. That
is going to be a tough thing to do.
My question really is to Rob Portman, who is a good friend
and a former colleague and I am delighted. He is the right man
in the right time in the right place. So Mr. Ambassador, I met
with the EU Agriculture Commissioner Mariann Fischer Boel as
of, what was it, last week, and she has met with you and with
the Secretary and with other members of this committee and the
distinguished chairman. She was wanting to know what was going
on in Kansas, how did I feel in regards to the WTO round, and I
told her that basically in Kansas, our farmers were sitting
down and writing checks, $50 and $100 to Katrina victims, and
then turning around and wondering how on earth we are going to
survive because of the increased gasoline, diesel, access to
fertilizer, so on and so forth, and that right now, the WTO was
not on their minds, although they knew it was coming and they
knew that it was a threat, and I will use that word, to our
farm programs as we see them. So I think that is where we are.
The one question I want to askRob is that I am concerned
about your comments not only with our farm programs and the
case by Brazil, and I don't have any illusions about that, more
especially with the cotton program, but our food aid programs.
Now, Senator Frank Carlson and Cliff Holt from Kansas started
thePL-480 program and I am concerned with the perception,
including the EU, that we use our food aid programs as a
haphazard tool for simply distributing our excess commodities,
sort of a dumping ground.
Now, this is not the case. This food is often the
difference between somebody going to an extremist military
wahabi school and then sitting on the top of a building with an
AK-47 in an area that we do not want this young man to sit in
and an education. It is the difference between a young woman
having access to school in many countries and the empowerment
of women, which I think is one of the things that we can use,
and I am speaking as the Chairman of the Intelligence
Committee, as one of the best anti-terrorism tools that we
have.
So I would like to ask you, how would you characterize
these negotiations in regard to food aid? I know they would
rather go to cash as opposed to commodities. We are not going
down that road and we are not going to lessen our food aid
programs in the war on terror, more especially with the world
food program and other programs like that. I know they are also
after the export programs. I don't know what we would have done
during the 1980's and the very tough times without the 416
program so we could move our product. So I have a lot of
concern about that, if you could respond more especially in
regards to the food aid programs and where we are.
Ambassador Portman. Well, thank you, Chairman Roberts. I
had an opportunity to talk about this a little bit with Senator
Harkin, so I won't repeat myself too much, but I will say that
it is very important to me that you had that meeting with her
and that you made the statement today. I know you will continue
because in your heart, you understand that this is about
providing emergency aid to people who need it and there is not
enough out there. The idea that we would go to cash and that
some of that food, therefore, would not make its way to the
people who need it is outrageous. Why would we do that?
So I agree with you. This is one where I think there is
also, as I said earlier, some misunderstanding about commercial
displacement. As I said earlier, the very exporters who are
sending food aid out through what Senator Harkin called the
Food for Peace Program are people who also export on a
commercial basis. They don't want commercial displacement
either, and we don't believe that is occurring.
So it is a little strange to me that this has become such a
big issue. I think we need to better explain what we do, why we
do it. I think we need to get more of these governments that
are sometimes, unfortunately, dependent on emergency food aid
to stand up and be counted. I think we need to have some of
these nongovernmental organizations, as you talked about,
including the United Nations, to understand what is at stake
here. We are making some progress in that regard by being able
to build this coalition a little bit and communicate better
what we do and why it is so important.
So thank you for standing up for it. I do think that the
kind of radical rules changes that the European Union and
others are talking about would be not just damaging to our
farmers and ranchers, but would be terribly detrimental to the
developing world.
Senator Thomas. Thank you for your response. Thank you, Mr.
Chairman.
The Chairman. SenatorLincoln?
Senator Lincoln. I guess I am the last man standing over
here. Mr. Chairman, I just want to thank you for your
tremendous leadership on what I think is such an incredibly
important issue and I appreciate you holding the hearing today
and your steadfast involvement and interest in this.
Welcome, Secretary Johanns. We are delighted to have you
back with the committee. You have definitely been very busy
over these past 6 months and I want to tell you how grateful we
are that you visited Arkansas.
Secretary Johanns. Thank you.
Senator Lincoln. I think, without a doubt, you saw that we
in Arkansas take our agriculture very passionately. We had a
tremendous turnout and a lot of very passionate feelings at
that meeting and I am grateful to you for coming.
We want to welcome Ambassador Portman to the Agriculture
Committee. We have worked closely in the Finance Committee and
I know that you certainly understand the importance of our
trade policies to our American farm families. With that in
mind, I hope you feel as comfortable talking about trade here
in the Agriculture Committee as I do, because it is absolutely
a critical issue for agriculture.
There is--certainly, agriculture is one of the nearest and
dearest issues to my heart, as a farmer's daughter, and
certainly it is one of the things I take the greatest pride in
in terms of advocating on behalf of Arkansas farm families.
They are hardworking people who do something pretty incredible
absolutely every day. Against all odds, they provide us with
the safest, most abundant, and affordable food supply in the
world, and they do so against tremendous odds.
One of those odds is an increasingly competitive world
market that is not always free and not always fair. Our U.S.
farmers survey the world and what they see, and what I think
contributes to some of the frustration that the chairman
mentioned and others, is that an average bound tariff of 62
percent against their products compared to 12 percent that our
foreign competition sees when they want to send something to
our borders. I think that is why our negotiators' work in
Geneva and ultimately in Hong Kong this December is so vital.
It is of vital importance to the future of U.S. agriculture and
it is something that is very important and it is truly on the
minds of producers all across this country.
Our farmers recognize the importance of trade, but they are
becoming increasingly frustrated with the actions of the WTO
members who have chosen to litigate rather than negotiate and
who have focused their attacks on our U.S. commodity support
programs. And while the Doha talks drag on and the WTO
continues to rule against our commodity support programs,
programs that under the Uruguay agreement were considered fully
compliant with WTO principles.
Our farmers want to meet our WTO obligations. They
definitely know how important it is to be good neighbors, to
negotiate and come up with good agreements, but they also need
the assurance that the U.S. Government is going to stand by
programs contemplated and authorized in an upcoming multi-year
farm bill. To be undercut by policies from our own government
when they see the, I guess the fragile nature of the
international marketplace is just absolutely not just
frustrating, but disappointing, I think, to American farmers.
Farmers have been frustrated--well, they are always
frustrated, I suppose. It is either too hot or too cold, too
wet or too dry. I certainly experienced that growing up. But
continued demands by the Europeans that we unilaterally accept
the drastic cuts in our farm programs without their expressed
commitment to provide meaningful market access to our producers
in return. That is all they are lookaying for.
I grew up on a farm. I grew up with a farmer as a father
and in a community that recognized that fairness is important,
being a good neighbor is important. All of those things are
critical, but it is a two-way street and that is very important
to them.
We know that you all were able to meet with European
officials in Washington earlier this month and we lookay
forward certainly to continuing the dialog of what your
assessment and any progress both here today in the committee
and also coming forward.
Just a couple of questions. Ambassador Portman, we are just
hoping, I think, here today and in the days moving forward you
can provide assurances to us and to our constituency that
moving forward in the WTO will not require the U.S. to trade
away the farm. I mean, that is it. Our farmers are meeting
tremendous obligations with the price of fertilizer, the price
of fuel, the kind of drought that we are seeing. Just the
assurance that those who remain in production agriculture, who
really are the most efficient and effective in today's world
under our circumstances in the U.S., that we won't trade away
that farm, and the specific steps that the administration will
take to ensure that the market access benefits will be achieved
that are at least equal to the cuts in the trade distorting
domestic supports that our negotiators have already agreed to.
So I hope that in the days to come, you will share that
with us, you will be very vocal and encouraging to our
constituency in what you will be doing, what you can do. I know
that some of the reports that you have discussed scenarios or
tradeoffs with theEuropeans in terms of domestic support and
market access. I hope that you will elaborate on some of those
with us so that we will have a clear view of what it is that
you are lookaying to do and how you intend to achieve that.
Our USTR continually assures our Arkansas rice producers
that trade agreements will result in higher sales and prices,
and ours is an export-oriented industry. Arkansas rice
producers and millers have joined with their colleagues in the
South and California in strong support of trade agreements like
NAFTA, the UruguayRound, most recently CAFTA. I have been
there. I have worked with my producers. They want to be
supportive. But these promises that they continually get are
quickly tarnished when our trading partners fail to live up to
their obligations.
Our rice industry has spent close to three-quarters of a
million dollars to defend against anti-dumping charges by
Mexico, some of which were completely unwarranted. Access for
U.S. brown rice in the EU was reduced when the EU withdrew the
margin of preference concession last year, and I also
understand that Korea has yet to implement its commitment to
increased market access for rice, while at the same timeKorea
is asking for free trade agreement with the U.S.
I think that what our producers want to see is not only
that we know how to be good neighbors, but that we also
understand that it requires demanding respect. When agreements
are made and that we are willing to meet our end of those
agreements, we want to make sure that our neighbors and our
trading partners are willing to do that, as well.
So I hope that we can see some reassurances from you and
from the administration to ensure compliance and enforcement
and hope that you will share with us how that can be achieved,
particularly with the Doha Round agreement.
I know that you have mentioned transparency and I am
pleased, and I hope that there will be further opportunities to
talk about expediting some of the rules that we do have. Our
trade laws are important to us, but if we can't use them and we
don't have the time, if it drags on too long, it does us no
good. I testified before the ITC just last Friday on a steel
issue. They are great to talk about, but unless we make them
usable and something enforceable, they really don't help us.
So I hope that you can share any or all of that with us.
Certainly, the trade safeguards, any progress being made by our
U.S. Government tradeofficials in the WTO rules and
negotiations, specifically what actions are going to be taken
to ensure that we can vigorously enforce our trade laws, I
think that is going to be important, as you well know, and I
hope at some point I get an opportunity to visit with you about
some of the efforts that we have been trying to make here to
expedite some of those trade rules in order to be able to do
that.
So those are a lot of things. I would also be remiss if I
did not just take the opportunity to shift gears and--because I
am not sure when I will ever have the opportunity again, but to
express my disappointment with the administration moving
forward to support Saudi Arabia's accession to the WTO. I
guess, again, so much of what I do goes back to many of the
other hats I wear in my life, and it is really hard to imagine
that we really do want to enforce poor behavior, bad behavior.
I know that Senator Thomas brought up the issue of not
wanting to include some of those types of issues, that these
are trade agreements and that we have to be careful about that,
and I don't think people mind that if it is consistent. But we
know that there are many countries out there that we continue
to trade with and we continue to ask enormous requirements of,
former Communist countries and others, in order to be able to
have the kind of free trade and open trade. But to see the kind
of record on human rights, women's rights, religious freedoms,
I know there have been some advancements on the boycott issue,
but quite frankly, our hope is that we could use those
opportunities to really encourage a nation likeSaudi Arabia to
move further in a direction that is so important to many of us.
Thank you both for your hard work and I lookay forward to
working with you as we move forward. I appreciate the
leadership of our chairman here and hope there will be
opportunities where I can help and work with you.
Thank you, Mr. Chairman.
The Chairman. SenatorTalent?
Senator Talent. Thank you, Mr. Chairman. I appreciate your
holding the hearing, too. I know a lot of the issues that I was
concerned about have been raised. I may have some questions for
the record for you all.
Let me just ask a general question and then I, too, want to
switch subjects and bring up another issue to get your comment,
Mr. Secretary, on something you and I discussed.
I know these negotiations are always very complicated, and
at the same time, there are basic principles that apply to any
negotiations. I remember an old State Senator friend of mine
said to me about 20 years ago, he said, ``If you want to get
somebody to do what you want, find out what they want and find
out how bad they want it.''
Talk a little bit about what our trading partners want and
how bad they want it, and maybe what they don't want and how
bad they don't want it. I am not asking you to give away your
negotiation strategy, but I am presuming you are thinking going
in, and maybe, Mr. Ambassador, you could do the same, what are
some of the leverage points we have got? I know a lot of the
frustration our people feel is that we go into these
negotiations and we are committed to this both in terms of our
economy, but also in terms of our principles, and sometimes I
am concerned other people feel like, well, they want this so
bad that we can play that game with them. So discuss that
general subject, the leverage points.
And then the second point, Mr. Secretary, and it is a
different subject, although it certainly relates to trade, I
indicated to you before the hearing my concern about what is
happening with the river and the fact that we have a lot of our
product, particularly our corn, tied up in elevators and on
barges upstream and we are unable to offload it and we have got
the soybean harvest coming. Discuss some of the things you are
doing, if you would, and if you have any suggestions about what
we might do to help you with that, I would appreciate it,
because that is an immediate concern I have.
Secretary Johanns. Yes, it is a very important concern, and
maybe I will jump in here ahead of the Ambassador and the
Ambassador can handle the trade question that you posed.
As I indicated to you before the hearing started, we have
been working on this transportation of grain issue literally
from the moment Katrina struck and the aftermath. The USDA is
assisting the movement of barges of damaged corn from New
Orleans. USDA is providing incentives for alternative grain
storage. We are encouraging alternative shipping patterns to
help relieve some of the pressure. We are allowing producers to
storeUSDA-owned corn on the farm with the option to purchase.
USDA is providing a temporary incentive to assist immediate
movement of some 140 barges of damaged corn, and that would be
about seven million bushels, out of New Orleans to up-river
locations. Once unloaded, the empty barges will continue up the
river, then, to begin moving the new crop commodities, the 2005
commodities. USDA will pay incentives for alternative storage
up to 50 million bushels of grain. We think all of these
actions will help to relieve the pressure.
To reduce stress on theCentral Gulf transportation and
handling system, USDA will provide a transportation
differential to cover the costs of moving grain to other river
transportation modes and handling locations. And to further
alleviate grain movement into the Mississippi River, USDA will
allow producers forfeiting commodities to USDA actually the
opportunity to buy back the grain when the farm stored loan
matures in September and October.
So we have done a lot of things that we had the power to
do. Fortunately, the House and the Senate has given the USDA
very broad power to deal with emergencies and we have just
encouraged everybody at the USDA to be as creative as they
possibly can in dealing with this. We will be happy to offer a
briefing to your or your staff or to anyone else. It is a
significant issue. I have said publicly, if there was one of
the good news pieces of the recovery relative to Katrina, it is
how aggressively everybody worked on the port issues, the
Mississippi River issues. The Corps of Engineers has been
great. The shippers have really gone overtime to try to deal
with this issue.
If anyone ever doubts the importance of exports, boy,
lookay at this circumstance, because really all we did was
stall exports for a while and it just backs up right into the
middle of the country immediately.
Senator Talent. That is exactly right, and so are you
satisfied, then, that this has a high enough priority within
the administration's overall efforts. I mean, I know you are
paying a lot of attention to it, which that is very
appropriate, but are those outside of the Department within the
administration's efforts aware of this? Is it a priority with
them, as well?
Secretary Johanns. Absolutely. It is a priority not only
for me, but it is a priority for the President and the folks in
the White House. We have engaged them in our thinking on this
and in where we are headed. So we understand the problem and
the issue and we are going to do everything we can to
facilitate moving this product, because really what happened
here is it just backed up. There was all of a sudden a glut in
the system because the system was not operating for a while,
and now that it has come back up, it is operating, I think, 12
hours a day. So those people are working very hard to get this
system operating around the clock, but we have to deal with a
glut of grain that was out there. We are going to be just as
aggressive as we can in trying to help with that.
So it is very much a priority issue for us. I have probably
spent as much time on this issue as any other issue relative to
Katrina recovery.
Senator Talent. Thank you.
Ambassador Portman. Just one further comment with regard to
Katrina. I was able to go down to the region on Friday, and I
went down specifically because of the export and import
interest, the trade interest. Sixty-two percent of our
agricultural exports, as you know, and the Secretary knows
well, goes out of those ports, primarily the Port of South
Louisiana, and I was able to tour the Port of New Orleans and
also get a briefing on that port, South Louisiana and Baton
Rouge.
The traffic is moving, more slowly than we would like, but
it is moving and all I can say is my sense is this is not just
a very high priority of the administration, and certainly it is
of mine from a trade perspective and the Secretary's, as you
heard, but we are also relatively fortunate. With all the
devastation ofKatrina and all the human tragedy involved, it is
amazing these ports weren't more damaged.
Most of the wharfs are in good shape. As you know,
electricity is back, I think, to all but one terminal now. We
have the ability to be able to move barges up and down the
river. There was a lot of concern about silt early on. The
soundings were taken. That has not been a problem. There were,
I think, 200 ships or boats that were potentially in the
channel at one point. We have been assured that that is not an
issue.
So compared to what it could have been, we are relatively
lucky, but boy, this is critical to our exports and imports
as----
Senator Talent. Is the key remaining issue personnel,
getting enough people there?
Ambassador Portman. That is what I was going to mention. I
think one of the challenges that the administration has focused
on particularly in the last week is temporary housing for the
ports themselves. You know, these three ports, we are told,
support about 100,000 people, so it is critical to the economic
development and the maritime services in that area are critical
to the economic development of that region and bringing it
back. But you have got to have workers to move this product,
soMerit has provided some ships, as you know, and they have
provided some housing, but it is focusing on some of this
temporary housing, and I know the Secretary has been involved
in that. The Secretary of HUD, Alfonso Jackson, and I have
talked about it. He was actually in the region with me.
So the administration is very focused on this, Jim, as a
way to be sure we are both dealing with the economic
dislocation in that area, but also with regard to the
importance of trade, and the message to our trading partners
needs to be the harvest is moving. We will be able to provide
your needs and we will do everything in our power to be sure
these exports go out.
Secretary Johanns. If I could underscore that point, our
international friends have been great in responding to this
emergency in a lot of different ways. It is just very, very
important that I assure them when it comes to the shipment of
products they need, we are going to do that. Everybody is
absolutely focused on responding to the purchases and needs of
the international marketplace. It has just been a great effort
by everybody involved to accomplish that.
And then the last thing I failed to mention that Dale
reminded me of is that navigation on theMississippi is done
with navigational aids. They literally site these aids in the
river. Some of those aids were pushed aside by the storm or
pushed up onshore, whatever, and that is kind of the last piece
here to get this system back to 24 hours.
But my last briefing with the Corps ofEngineers, which was
just within the last few days, is that everybody is working
diligently to get that accomplished. Once those aids are back
in place, then you will see the system come back up online
around the clock and that will be yet another positive step to
move that grain harvest that has already started in the
Southern corn belt. I mean, we are seeing that harvest already
and it will definitely be in full swing across the corn belt
here pretty quickly. States like Illinois that had drought,
their corn is going to cure fast, as will the soybeans. So it
would not surprise me if you are seeing combines out in the
field already in those areas.
Senator Talent. Do you have comments on my broad----
Ambassador Portman. Well, I thought your question was very
astute and I also thought that Senator Lincoln's analysis was
right on in terms of what we face. I mean, it is a challenge to
determine how you can better understand the other person's
point of view in any negotiation. In this one, the importance
to the farm community, as we have talked about all during this
hearing, cannot be overstated. We absolutely depend on exports
in our farm economy. My whole job in this negotiation as I see
it is to make sure those Arkansas families that you talked
about have a better situation as a result of this agreement.
So Missouri farmers and Arkansas farmers should know that
we are doing our best to determine what is not just in the
interests of other parties, therefore, getting them to agree
with negotiation that is sensible for our farmers, but we are
also working very hard with some allies who are exporters, as
we are. This would include some of the countries even in the G-
20 which we mentioned earlier, some of the developing countries
that have an export interest, certainly the Australias
andCanadas and New Zealands of the world who share a lot of our
interests.
As I said earlier, I am hopeful that we will have a result
that provides meaningful market access, that eliminates export
subsidies altogether, where about 87 percent of that use is
currently by the EU, and where we have in the trade distorting
domestic support a situation where those who have higher
supports, and this chart we pulled out earlier, that those
countries reduce more. That is what the framework provides for.
And if we end up with an agreement along those lines, it will
be very beneficial to our exporters, manufacturers, service
providers, but also to our farmers.
So that is the goal of these negotiations. It is sometimes
difficult to know, Senator Talent, in response to your specific
question, what other people really care about as compared to
maybe what they are saying publicly----
Senator Talent. Perhaps I shouldn't ask you to muse on
that, because you maybe give away the game, but maybe we can
talk a little bit later, because my sense of it is they do a
pretty good job of acting like, well, you know, if this thing
busts up and we don't get an agreement, that is okay with us,
and to the extent that they are putting that idea across, it
seems to me they have more leverage at the table. Maybe we will
talk later about how you counter that with them.
I think I am sharing some of the frustrations Senator
Lincoln mentioned. They act like, well, we will disrupt the
system and you guys will be disadvantaged and that is okay with
us, whereas we always come back and everybody knows we are
committed to it. I just wonder whether that puts us sort of
behind the eight-ball going in.
Ambassador Portman. We are committed to a good agreement
and only a good agreement.
Senator Talent. okay. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Talent.
Mr. Chairman, I am going to do a floor statement a little
later on today where we talk about some of the successes ofNew
Orleans after Katrina and the thing I am going to highlight, a
situation relative to the port. That is a classic example of
how the private sector and the public sector working together
can get something positive done in a hurry. USDA, the Corps of
Engineers, as well as the lessees from the port authority, like
Cargill and ADM, have really worked very closely together to
make sure that farmers are well served by getting that port
reopened.
It is kind of interesting that the major issue we have,
Senator Lincoln, is getting enough workers back and being able
to house those workers so that they can go to work and start
getting paychecks again.
Senator Lincoln. We have got about 60,000 evacuees in
Arkansas, so we are well aware of the need to get people back
home.
The Chairman. Gentlemen, thank you very much for taking the
time to be with us today. I think this has been an extremely
informative hearing. We lookay forward to continuing to dialog
with you as we move toward Hong Kong. Obviously, we send our
best wishes with you as you leave today to go to Paris. We
lookay forward to visiting with both of you when you return to
see the results of what I know will be a very productive
meeting, so thank you very much.
The Chairman. We will now call our second panel. Our second
panel today consists of Ms. Audrae Erickson, who is President
of the National Corn Refiners. She is here today in her
capacity as Co-Chair of AgTrade, based here in Washington. We
also have Mr. Allen Helms, theVice Chairman of the National
Cotton Council from Clarkedale, Arkansas; Mr. Leonard Condon,
Director, International Business Relations, Altria Corporate
Services based here in Washington; and Mr. Mark Viso, Vice
President of Operations, International Program Group, World
Vision, based here in Washington.
Welcome to each of you. We are very pleased to have you
here. We lookay forward to your testimony, and Ms. Erickson, we
will start with you.
Senator Lincoln. Mr. Chairman, may I just add a welcome to
one of my constituents, Mr. Helms, who is testifying today on
behalf of the National Cotton Council. He is a cotton producer,
as you mentioned, from Clarkedale, Arkansas, and a member of
the Arkansas Agriculture AdvisoryCouncil, but he is also a
great friend of Southern agriculture and I just want to commend
Allen's leadership and all of the hard work. I appreciate you
taking the time to offer your insight in the direction of our
trade negotiations. I know I hear it at home. I am glad to hear
it up here.
Thanks, The Chairman.
The Chairman. I met Mr. Helms previously and any cotton
farmer has got to be a great American, the way I figure it.
Again, I thank all of you for being here. Ms. Erickson, we
will start with you. We lookay forward to your comments.
STATEMENT OF AUDRAE ERICKSON, CO-CHAIR, AGTRADE COALITION,
WASHINGTON, DC
Ms. Erickson. Thank you, Mr. Chairman, SenatorLincoln.
Thank you for this opportunity to testify today on behalf of
the AgTrade Coalition, which is a coalition that was formed in
1999 and has over 100 organizations, associations, and firms in
it that supports further trade liberalization in agriculture. I
am interested in submitting a copy for the record of the
principles that our coalition has recently revised for the WTO
negotiations.
The Chairman. Sure.
Ms. Erickson. I should note that each member of theAgTrade
Coalition has its own set of negotiating priorities, and in
some cases, those priorities may be even more ambitious than
what I will present today, and some may be noted as we begin.
The WTO negotiations represent the most important element
of the trade agenda from the President for our coalition, and
key among that, really, is substantial improvement in market
access. An ambitious market access package must include a
harmonizing formula that reduces the high tariffs more than the
low ones and results in substantial and commercially
meaningful--and that is important--market access in all
products to all markets.
All tariffs should be capped and complex tariffs, of which
there are many, as you know, must be converted to ad valorem or
specific tariffs.
Only a limited number of sensitive products ought to be
allowed, and for those, market access should still be improved
through reductions in tariffs or expansion of tariff rate
quotas.
Regarding tariff rate quotas, all end duties, end quota
duties for TRQs ought to be eliminated, and the administration
of those TRQs should be improved.
Sectorial negotiations should be pursued for those
commodities and food products that are seeking a more ambitious
market access outcome.
And balance in the level of the ambition in all three
pillars is a central objective of the AgTrade Coalition.
Reductions in total trade distorting domestic support and other
U.S. concessions must be balanced with our goals for what we
hope to achieve in market access and export competition.
On domestic supports, a formula that harmonizes total
levels of trade distorting support is needed.
On the blue box, our coalition continues to support the
July 2004 framework agreement. On the green box, there should
be no caps on or excessively restrictive criteria defining
eligibility for non-trade distorting domestic support.
Now, for the export competition pillar, the elimination of
export subsidies by a date certain is key and must remain.
Export subsidy rules should be tightened and should be applied
equally to developed and developing countries.
The monopoly powers of state trading enterprises, they must
be eliminated, as should the government subsidies, the
financing, the underwriting of losses on their export
activities. STE disciplines should result in transparency and
the end of discriminatory pricing practices.
Regarding export credits, a topic that the coalition and
even the Export Credit Working Group here in the United States
has worked diligently on, official export credit and credit-
related programs should be applied to allWTO member countries,
and reductions in the subsidy component of existing programs
that do not comply with any disciplines that are established
should be implemented in a parallel manner with the phase-out
of export subsidies and the elimination of monopoly powers of
state trading enterprises.
And there are many programs throughout the world, as you
can imagine, that assist exports. Disciplines should be
developed on other export measures that have equivalent trade
distorting effects, including the elimination of differential
export taxes.
On food aid, I will touch on it briefly. I know it is a
topic that will be discussed in more detail. Disciplines on
food aid should be imposed only to the extent necessary to
prevent such aid from distorting commercial markets. Our
coalition opposes prohibitions on government-to-government food
aid or any requirement that food aid be in the form of cash
only.
The WTO negotiations on agriculture must be concluded as a
single undertaking that encompasses all sectors. Cotton is as
part of the coalition, as well.
Regarding developing countries, certain more advanced
developing countries, particularly exporting developing
countries, must assume obligations similar to developed
countries in all three pillars, and WTO rules for developing
countries to graduate them to the developed country status
ought to be developed using objective economic criteria.
Geographical indications is an important topic that will be
touched on momentarily, but we oppose any extension of
geographical indications beyond wines and spirits.
And finally, ensuring market access for products of
biotechnology and that the regulation of those products is
based solely on science is an important principle that must be
upheld.
Mr. Chairman Senator Lincoln, thank you for this
opportunity to testify. We lookay forward to working with you
to ensure that the final deal represents a balanced approach
and one that will ensure the future viability of America's
farmers and ranchers, processors, and agribusinesses. Thank
you.
The Chairman. Thank you.
[The prepared statement of Ms. Erickson can be found in the
appendix on page 90.]
The Chairman. Mr. Helms?
STATEMENT OF ALLEN HELMS, VICE CHAIRMAN, NATIONAL COTTON
COUNCIL, CLARKEDALE, ARKANSAS
Mr. Helms. Mr. Chairman and members of the committee, I am
Allen Helms, a cotton producer fromClarkedale, Arkansas. I
currently serve as Vice Chairman of the National Cotton
Council. Thank you for the opportunity to present the views of
the cotton industry concerning the WTO issues confronting
cotton.
The U.S. cotton industry believes that a beneficial
agricultural agreement in the Doha Round negotiations must
provide meaningful benefits to farmers and agribusinesses in
return for any concessions. While significant attention is
rightly paid to theEU, we believe China, India, and Pakistan
must also be full participants in these negotiations.
We also firmly believe that agriculture negotiations must
be part of a single undertaking, comprehensive negotiation.
Efforts to single cotton out for special treatment have been
misguided, have undermined support by cotton farmers, and
threatened the overall DohaRound.
In order to facilitate development of a framework
agreement, the cotton industry did not object to the
establishment of a special Cotton Committee. We were assured
that the subcommittee would not become another forum for
negotiations. Unfortunately, many participants in that
committee ignored its original mandate, which was to monitor
and coordinate developmental efforts with the trade policy
negotiations.
In his outgoing assessment of the agricultural
negotiations, former Chairman Grosser made it clear that the
progress of cotton trade issues was fully dependent on overall
progress within the agricultural negotiations.
The U.S. cotton industry is fully prepared to work toward
the beneficial agricultural agreement. We are prepared to make
an equitable contribution toward that positive result, but we
will oppose any agreement that singles out cotton for unfair
treatment.
Much of the call for special treatment for cotton has come
from several African countries that depend on cotton for a
significant portion of their export earnings. Since early 2004,
the National Cotton Council has engaged in a number of outreach
activities with the West Africans. These efforts are detailed
in my written testimony. They underscore the commitment of the
U.S. cotton industry and the U.S. Government, but I must add
that the U.S. cotton industry cannot correct the legacy of
European colonialism. African leaders must take the initiative
to privatize their industry and join the world's mainstream
cotton trade.
Mr. Chairman, the National Cotton Council's specific
priorities for the DohaRound are also detailed in my written
testimony. I would like to make a few additional points.
First, it is critical that we obtain real increases in
market access in the Doha negotiations. For example, China is
applying a new sliding-scale tariff to imports of cotton. It is
designed to favor domestically produced cotton and synthetic
fibers. It limits our ability to sell product there and
encourages the use of manmade fibers by textile mills.
Second, we believe that special and differential treatment
must be provided to truly less developed countries. Under
current practice, Brazil can insist on the same benefits as
Mali.
Third, our experience in theBrazil case proved to us that
we must do a better job of ensuring the language in the final
agreement accurately reflects the intent of the parties. The
United States never agreed that theExport Credit Guarantee
Program was an export subsidy, but the dispute settlement panel
read the Uruguay Round agricultural agreement differently. We
cannot be blindsided again.
Fourth, WTO agreements can have significant impact on our
ability to construct effective domestic agricultural policy. As
a result of the panel decision in the cotton case, the
administration has recommended that a 15-year-old component of
the cotton program be eliminated in the middle of a marketing
year. I doubt a mandate to change loan rates or direct payment
rates in the middle of a marketing year would be favorably
received. This committee would probably find a less disruptive
means to achieve this objective.
Finally, the DohaRound agreement must appropriate protect
countries that comply with the agricultural agreement from
unexpected challenges under the subsidies code. Domestic farm
programs that are structured to comply with a new agricultural
agreement should not be undermined by subsidies code challenges
that cannot be anticipated by Congress.
Mr. Chairman, the cotton industry is committed to continue
to work with Congress and the administration to find solutions
and to support agreements that are balanced and fair for U.S.
agriculture. This concludes my testimony. I will be happy to
take any questions.
The Chairman. Thank you.
[The prepared statement of Mr. Helms can be found in the
appendix on page 94.]
The Chairman. Mr. Condon?
STATEMENT OF LEONARD W. CONDON, DIRECTOR, INTERNATIONAL
BUSINESS RELATIONS, ALTRIA CORPORATE SERVICES, INC.,
WASHINGTON, DC, ON BEHALF OF THE GROCERY MANUFACTURERS
ASSOCIATION
Mr. Condon. Thank you, Mr. Chairman and Mrs. Lincoln. I
appreciate the opportunity to share the views of the Grocery
ManufacturersAssociation on the status of the WTO negotiations.
GMA strongly supports the talks. We believe the Doha
Development Agenda offers huge potential for expanding U.S.
processed food exports.
Processed food remains a significant and increasingly
important component of U.S. agriculture. Global processed food
sales now total $3.2 trillion, about three-fourths of total
world food sales. Annual U.S. processed food exports exceed $19
billion and now account for one-third of total U.S.
agricultural exports.
With 95 percent of the world's consumers living outside the
U.S., future growth of the U.S. food and agriculture complex
will be closely tied to our ability to expand exports. Emerging
markets offer enormous potential. The annual growth rate for
processed food sales in developing countries range from 7
percent in upper-middle-income countries to 28 percent in
lower-middle-income countries, versus a two- to three-percent
growth for developed countries.
Processed foods provide an important export gateway for
many bulk commodities. My company, Kraft Foods, for example,
purchased $3.6 billion worth of farm commodities for use in our
U.S. processing plants last year. This included $1.3 billion
worth of dairy products, nearly half-a-billion dollars worth of
pork, and almost a quarter-of-a-billion dollars worth of sugar.
Worldwide, Kraft buys $7 billion worth of farm commodities
annually.
U.S. processed food exports grew rapidly in the 1970's and
1980's. By the 1990's, processed foods represented a greater
share of agricultural exports than bulk commodities. Since the
late 1990's, however, growth in exports has leveled off.
Despite progress in the Uruguay Round, significant trade
barriers remain.
Tariffs on agriculture products are excessive, 62 percent
compared with a global average of only 4 percent for industrial
products. Tariffs on processed products tend to be even higher
than the average. The UruguayRound also created tariff rate
quotas for sensitive products, like sugar and dairy, that are
key ingredients in many processed food products. U.S. TRQs
restrict access to key commodity markets and keep our raw
material prices higher than they would be otherwise. This
impairs our ability to be globally competitive. Unjustifiable
labeling requirements, burdensome certification rules, and
unique packaging standards also restrict processed food
exports.
In the ongoingWTO agriculture negotiations, GMA wants to
achieve new commercially meaningful access for food products.
We are pleased that negotiators have agreed in principle to a
formula that will cut high tariffs more than low ones. We urge
as ambitious a formula as possible to reduce tariff peaks,
address tariff escalation, and most importantly, achieve
substantial reductions in both bound and applied tariff rates.
The concept of, quote, ``substantial improvements in market
access,'' should be applied to all products, even those
considered sensitive. The U.S. has far more to gain by pursuing
an ambitious tariff-cutting formula for all products than an
agenda centered on protecting our sensitive commodities.
We also support a tariff cap in order to allow meaningful
market access for all products. Increased market access for
sensitive products must come from tariff cuts, substantial
increases in TRQs, or a combination of the two.
On domestic support, amber box payments must be reduced and
capped on a product-specific basis to achieve equitable
reductions. To ensure that domestic support policies are
minimally trade distorting, new disciplines should be developed
for the expanded blue box and there should be a commitment to
reduce blue box support over time.
Agricultural export subsidies are reprehensible trade
policy instruments. They should be terminated within 5 years.
GMA remains extremely concerned about the EU's aggressive
push for new protections for geographical indications,
especially its proposal to claw back rights to names that the
U.S. considers generic, like parmesan and feta. In many cases,
Kraft and other U.S. companies have built brands around these
generic names. The EU demands to rescind the rights to these
and other names should be flatly rejected.
Finally, trade is the engine of global economic growth. A
successful conclusion to the Doha Development Agenda will boost
world economic activity, lift millions of suffering people out
of poverty, resolve a number of festering trade frictions, and
restore confidence in the global trading system. However, a
deal is not possible without an acceptable outcome on
agriculture. With our abundant natural resources, highly
efficient agriculture production system, and superior marketing
capabilities, we are convinced that U.S. food and agriculture
producers can only gain from new WTO rules that will role back
government intervention in the agriculture production and
trading system.
Thank you very much.
The Chairman. Thank you.
[The prepared statement of Mr. Condon can be found in the
appendix on page 105.]
The Chairman. Mr. Viso, I understand I mispronounced your
name earlier. For that, I apologize. We lookay forward to your
comments.
STATEMENT OF MARK VISO, VICE PRESIDENT OF OPERATIONS,
INTERNATIONAL PROGRAM GROUP, WORLD VISION, WASHINGTON, DC
Mr. Viso. Thank you. Mr. Chairman, good morning and thank
you for inviting World Vision to testify today.
World Vision recognizes the staunch support this committee
has shown over past decades for ensuring that hungry people
around the world are fed and provided a helping hand. Your
track record reflects a genuine concern and empathy for the
world' spoor. I am sure this will continue and we thank you.
We would also like to recognize and thank Senator Johanns
and Ambassador Portman for their support of food aid as well as
thank Senators Harkin and Roberts for their comments here
today.
My testimony will focus on food aid in the WTO Doha Round
trade negotiations. It reflects the views of the 16 American
private voluntary organizations and cooperatives, jointly
called PVO's, that are members of the Coalition for Food Aid.
In partnership with the communities we serve, we use food aid
to improve the well-being and food security of poor and
vulnerable people.
Coalition members have a long history with Food for Peace
and USDA, providing food to millions of hungry men, women, and
children who are in desperate need of assistance. Rather than
just providing a meal today, we link food aid to long-term
development programs so people can build a better tomorrow.
Today, however, the future availability of food aid is in
jeopardy due to proposals made during the Doha Round
negotiations. At the USDA Kansas City Food Aid Conference in
May of this year, Agriculture Secretary Mike Johanns outlined
three critical issues that we believe could form a solid basis
for a U.S. position in the DohaRound.
First, the Secretary stated, we understand the important,
often lifesaving role of food aid. Unfortunately, others in
some countries take a dim view of the way in which U.S. food
aid is delivered, characterizing it as a subsidy for our
producers. We hear, no, this is not the case.
Mr. Chairman, we agree. Food aid is humanitarian in essence
and nature and should not be treated as an agricultural subsidy
program. The driving force behind U.S. food aid is not
negotiational subsidies to producers, but rather the assessed
humanitarian needs in recipient countries. As recipient
countries themselves have commented during the Doha
negotiations, the needs of recipients should come first and
food aid must remain available for both chronic and emergency
needs.
Second, Secretary Johanns said, what the world needs is
more food aid commodities, more cash, and more donors, not new
and impractical rules that require everyone to contribute in
exactly the same way. We agree. What we absolutely concur is
that more food aid and cash is indeed needed, as important a
point as the need to maintain the various ways food aid is
contributed.
Several exporting countries claim that in-kind food aid
creates unfair competition for their commercial agricultural
exports and have put forth proposals to restrict or eliminate
food aid. The most extreme suggestion is to phaseout in-kind
food aid, defined as food procured in the donor country, and
then only permit food in times of crisis.
Based on our decades of work in partnership with those who
receive aid, we believe that a variety of options for providing
food aid are needed, including in-kind commodities for targeted
distribution as well as cash available for local purchase and
program support so that a program can be tailored to meet the
specific context and needs of the recipients.
Other proposals would require all food aid to go through
international organizations and would eliminate non-emergency
food aid. This would, for example, no longer allow World Vision
and other U.S. PVO's to directly partner with the U.S.
Government to provide food aid for mother-child health care,
food for education, and other agricultural development
projects. We urge the committee to work to maintain a variety
of food aid delivery options as well as the role of American
PVO's in food aid programming.
Third, Secretary Johanns said we also believe that any new
disciplines applied to food aid should be discussed by
international food aid experts, not just trade experts
negotiating the trade agreement. We agree with Secretary
Johanns once again. TheWTO's objective is to provide ground
rules for international commercial trade, not international
aid. While only governments participate in negotiations, much
of the expertise in food aid lies with PVO's and other
organizations that implement programs in recipient countries.
These groups approach food aid as a humanitarian program rather
an agricultural trade program and work in partnership with
local communities to save lives.
What is not discussed enough at the Doha negotiations by
those who would criticize U.S. food aid programs are the many
benefits these programs provide. Millions are benefiting as
food aid provides the nutrition needed to complement the use of
anti-retroviral drugs in HIV-AIDS programs. Food for Work
supports the construction of sanitation and clean water
infrastructure in poor communities. And school meals and
maternal-child health programs care for hungry children and
improve their chances for a healthy, productive, enriching
life.
We urge you to continue keeping the poor and hungry at the
center of decisions regarding the Doha discussions on food aid.
If we don't make the right decisions at Doha today, the plight
of the world's poor will be alarmingly worse tomorrow. We ask
that the world's poor do not become the unfortunate and
unintended victims of negotiations of international trade
agreements.
Mr. Chairman, thank you again. I would be happy to try and
answer any questions you have if time permits.
The Chairman. Thank you very much.
[The prepared statement of Mr. Viso can be found in the
appendix on page 113.]
The Chairman. Ms. Erickson, in your testimony, you note
that the best means for ensuring the continued positive impact
of our sector on the U.S. economy is to achieve commercial and
meaningful results in the WTO negotiations on agriculture. In
your opinion, what is the most important objective that must be
maintained in order to conclude the WTO negotiations on
agriculture and what political hurdles need to be overcome in
order to reach the critical mass for a consensus to be
developed?
Ms. Erickson. Well, the balance amongst the pillars is
truly one of the more important ones, and clearly, the United
States is willing to show its flexibility, but what we are
seeing is that other countries, developing countries and
clearly the European Union, are perhaps not as interested in
the true market access improvements that are going to be needed
to create the delicate balance and the political sign-on around
the world.
And when it comes to market access, the cuts, as you know,
are being taken from the bound rates, and if they are not
significant enough, substantial enough, they may end up being
above the applied rates today. So we need to see that when each
of the members of the AgTrade Coalition hit the ``total''
button on the calculator, once they see what the deal lookays
like, it has got to result in a net improvement in their
economic situation.
The Chairman. Mr. Helms, like you, I am concerned about the
relative impact regarding proposals to significantly reduce
domestic support levels. Even if the United States agrees to
more reasonable proposals offered in the agriculture
negotiations, Congress will not be able to model the next farm
bill after the 2002 legislation. Your testimony highlights the
impacts of the various proposals. What would be the likely
impacts at the farm gate level, and how many farmers would we
lose and what would be the impact on per capita farm income in
the cotton belt?
Mr. Helms. I think some of the proposed models that would
advocate as much as a 50 percent cut in our aggregate
measurement, and that would probably equate to about a five to
ten percent cut in our loan levels, which to the average cotton
farmer could mean as much as a five percent--five cent
reduction in his loan. The average cotton farmer probably would
be a 1,000-acre farmer, so you are talking $50,000, probably
average per producer. That is a good number, I think, for us to
use for an example. Of course, this would equate, then, into, I
think a half-billion dollars over the entire cotton industry
within the United States. There would definitely be a lot of
producers who couldn't stand to have those type of reductions
in their income. We have not developed any numbers yet as to
how many we think there would be, but we know it is
significant.
The Chairman. Mr. Condon, you state the emerging economies
hold the most potential for increased exports of processed food
products. To which countries in particular are you most
interested in securing additional market access and what would
the cost be to the food industry of the EU's proposals on
geographical indications?
Mr. Condon. With respect to the emerging economies, the
ones we are most interested in are the ones with large
populations and rising incomes and they would be countries like
China, of course, India, Brazil, Russia. Most of those
countries--three of those countries are currently members of
the WTO. Russia is in the process of acceding to the WTO. All
of them have relatively high tariffs. To the extent we can get
those tariffs down and get more processed foods into those
countries, that is a big gain for the processed food industry
and for the bulk commodities that supply us.
With regard to your question on geographic indications, the
real answer there is we don't know what it will cost us, but it
is likely to cost us a lot, and I will use, for example, our
green can of parmesan cheese that Kraft sells. We are one of
the biggest manufacturers of parmesan cheese in the world. We
can't sell parmesan cheese under that name in the EU. In the
EU, we sell it as parmacello, because we can't use the name
parmesan.
In the U.S. market, for example, if we had to repackage our
product, relabel our product, there would be considerable costs
involved in doing that, but the big problem for us would be
then convincing the consumers that it is the same product, it
just has to have a different name. We just don't know what it
would cost us to conduct a new marketing campaign to maintain
confidence in our product, but there would be considerable cost
to us and considerable cost to other members of the U.S. food
processing industry.
The Chairman. Mr. Viso, you mentioned in your testimony
that proposals to eliminate the direct role of private
voluntary organizations to eliminate developmental food aid, to
eliminate monetization, and to move to a cash-only system were
problematic, and I think that was highlighted in Senator
Harkin's comments. Would you briefly explain from your position
why each of these four proposals would be problematic?
Mr. Viso. Yes. Thank you for the question. I will try and
go over as many as I can. We consider these proposals
problematic and perhaps even dangerous for several reasons.
One, it would eliminate the ability for the U.S. Government
to partner directly with American private voluntary
organizations and we would think that that adds another layer
of bureaucracy and cost and reduces the level of accountability
and transparency vis-a-vis the U.S. Government's programming
and policy intentions, for one.
We think that the proposals would eliminate our ability to
choose the most appropriate food aid delivery mechanism, cash
or in-kind or monetization, and allow us to make the best
possible program to fit the context and needs of the foreign
hungry recipients.
Third, it would eliminate our ability to address non-
emergency situations, longstanding chronically poor,
chronically food deficit situations like much of Africa is
facing today.
So those are just, very briefly, three main reasons why we
think the current proposals are ill advised.
The Chairman. Let me thank each one of you for taking time
to be here today. Let me also say that your full statements
will be entered into the record, as well as full statements of
Secretary Johanns andAmbassador Portman. We will leave the
record open until Friday of this week for any member wishing to
submit a statement for the record.
Again, as we move toward WTO, we are going to be calling on
you folks to use you as resources to make sure that we are
negotiating the right kind of agreements for farmers, ranchers,
and the American public, and we thank you for your continued
willingness to work with us.
With that, this hearing will be concluded.
[Whereupon, at 11:42 a.m., the committee was adjourned.]
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A P P E N D I X
September 21, 2005
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DOCUMENTS SUBMITTED FOR THE RECORD
September 21, 2005
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QUESTIONS AND ANSWERS
September 21, 2005
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