Statement by Dan Glickman
Secretary of Agriculture
Before the House Committee on Agriculture
March 18, 1998
Mr. Chairman, members of the Committee, it is a pleasure to appear before you with Ambassador Peter Scher to discuss preparations for the next round of multilateral agricultural trade negotiations.
Trade Policy Successes Bring Real Opportunities
My message this morning is simple: We need to continue the work that began with the North American Free Trade Agreement (NAFTA), the Uruguay Round of Multilateral Negotiations, and other recent trade initiatives. We need to maintain the momentum and U.S. leadership of the trade reform agenda.
The Uruguay Round Agriculture Agreement and NAFTA stand as landmark achievements, creating new opportunities and setting a new path in world trade. The former marks the first major step in global agricultural trade reform; the latter, a first step toward hemispheric free trade. Both were concluded with fast track authority, and renewed fast track negotiating authority will be needed for the next major steps.
Recent trade agreements have opened new opportunities for American farm and food products around the world. They opened rice markets in Japan and Korea for farmers in Arkansas, California, Louisiana, and other rice-producing states. Beef and pork producers in states like Texas, Nebraska, Kansas, Iowa, Colorado, and a dozen others are benefiting from sharply increased access to Japan, Korea, and Mexico.
For fruit and vegetable producers in California and across the country, trade agreements have expanded access for many products going into Canada, Mexico, Japan, the Philippines, and other countries. Poultry producers in Arkansas, Georgia, North Carolina, Alabama, and other states are benefiting from freer access and increased sales to Mexico, Poland, South Korea, the Philippines, and other countries.
Just ask the Plains Cotton Cooperative Association in Lubbock, Texas, about the importance of trade agreements. Five years ago, this cooperative exported virtually no cotton to Mexico. As a result of NAFTA, Mexico lowered its cotton duties, and is improving its transportation and infrastructure to handle the increased volume of trade. Now Mexico is our largest cotton export market and Plains Cotton Cooperative Association sells about $50 million worth of cotton to Mexico -- one-third of its total exports.
Combined with an aggressive trade policy, the big agreements pave the way for smaller successes as well. The single-sector openings are important, too-- the first commercial shipment of U.S. tomatoes to Japan, gaining access for sweet cherries to Mexico, re-opening the Chilean market to U.S. wheat, implementing a new project to ship live cattle from Montana and Washington to Canada -- I could go on. Market by market, they add up, bringing real benefits to our farmers and ranchers.
Take a look at the Japanese wood products market. In 1990, the United States and Japan reached a bilateral agreement that greatly improved access for U.S. value-added wood products. In 1996, a second agreement improved the situation even further. As a result of these two agreements, U.S. producers dramatically expanded sales of certain value-added wood products to Japan. A Portland, Oregon company, Willamette Industries, now sells $14 million worth of these products to Japan -- a 600 percent increase during 1990-1997 period. Ondo and Company, another major U.S. producer based in Kirkland, Washington, increased sales to Japan 20-fold to over $14 million.
We continue to monitor closely how other countries are implementing their Uruguay Round commitments, and the United States has not been slow in using the dispute-settlement process of the World Trade Organization (WTO). Of the 35 complaints filed by the United States, just over one-third have involved agriculture. And we have scored significant victories, such as the recent decision against the European Union's (EU) hormone ban, upheld by the WTO's Appellate Body earlier this year.
The U.S. Trade Representative (USTR) and USDA have also used the WTO process to convince countries to reach favorable settlements without having to proceed all the way through the panel process, as was the case, for example, with South Korea's shelf-life restrictions on processed foods and Hungary's excessive export subsidies. Also, the United States just concluded an understanding with the Philippines under which the Philippine government agreed to reform the way it administers tariff-rate quotas that had severely restricted access for U.S. pork and poultry meat. We are currently challenging the way Canada subsidizes dairy exports and Japan's varietal testing program for horticultural products.
These actions are part of our continuing effort to make sure countries live up to their Uruguay Round obligations. We also insist that countries wanting to enter the WTO first undertake a serious commitment to trade reform -- just as we did rather successfully with Taiwan. Just last month, the United States and Taiwan signed a bilateral agreement in which Taiwan committed to opening its market at significantly reduced tariff rates to a broad range of U.S. products upon accession to the WTO. The agreement on rice will, for the first time, provide real access to Taiwan's consumer market. Taiwan also agreed to immediate market access for a number of U.S. products, including lifting its import bans on several beef, pork, and chicken products.
Slowly but persistently, these efforts have been stripping away many of the trade barriers to U.S. products and challenging the unfair trade practices that exist. The benefits are evident in export numbers that are running about 40 percent higher than they were at the start of the 1990's -- and that's despite the current Asian situation and despite the stronger U.S. dollar.
However, the hard work is not done. We are going to continue to pursue an active, aggressive, ambitious trade policy agenda.
WTO 1999: Next Steps in Global Agricultural Trade Reform
One of the most important initiatives of the Administration's trade agenda is continuing the global reform process begun in the Uruguay Round. Just two weeks ago, I met with agriculture ministers of the Organization for Economic Cooperation and Development. At the conclusion of the meeting, the ministers pledged to pursue further substantial, progressive reductions in farm subsidies and import protections. The ministers are committed to further farm trade reform, but achieving that commitment is a long-term process, and difficult negotiations lie ahead.
Here in the United States, planning is already underway for the next round of multilateral agricultural trade negotiations, set to begin late next year. For more than a year now, USDA, working in partnership with USTR, has been laying the groundwork for success in the difficult negotiations that will take place. On the policy level, I have met several times with the USDA subcabinet to discuss our objectives. As I will discuss in a moment, we are placing special emphasis on technical and regulatory trade restrictions.
In addition, a great deal of analysis and preparation is underway. Within USDA, I have charged the Foreign Agricultural Service (FAS) with taking the lead in preparing for these negotiations. We have engaged other resources from within USDA as well, including economists from the Office of the Chief Economist and the Economic Research Service (ERS), the legal team from the Office of the General Counsel (OGC), and the technical expertise of our research and inspection agencies, including the Animal and Plant Health Inspection Service (APHIS), the Agricultural Research Service (ARS), and the Food Safety and Inspection Service (FSIS).
The Department, in coordination with other agencies, will be consulting with Congress, with members of the Agricultural Policy Advisory Committee for Trade, the five Agricultural Technical Advisory Committees for Trade, and with others in agriculture on specific negotiating priorities. Generally we will be seeking substantial improvements in the trading environment for U.S. farm products. These negotiations will provide us with a significant opportunity to reduce further tariffs, open new markets, and address unfair trade practices on a global scale.
Several key issues stand out:
We need to make substantial further reductions in tariffs. Agricultural tariffs worldwide still average about 56 percent, while our own tariffs are about 5 percent on average. High tariffs raise the price for U.S. commodities and can shut them out of markets.
We believe that tariff-rate quotas (TRQs) should be increased substantially or effectively eliminated by cutting the level of the out-of-quota duty. Small TRQ quantities and high out-of-quota duties curtail exports, and restrictive methods of administering TRQs also impede trade.
Exporting countries should further cut or eliminate export subsidies. The EU, for example, carries out an extensive subsidy program -- the EU budgeted $6.1 billion for export subsidies in 1997. This level of EU subsidization makes a very strong case for further negotiations.
The next agreement should impose rigorous discipline on state trading enterprises (STE). We have been seeking greater transparency in the operation of these entities -- both import and export monopolies -- through the WTO Working Party on State Trading Enterprises. We believe this effort will help identify practices that may need to be disciplined in the upcoming negotiations. We can then move beyond the transparency issue and curb trade distorting practices employed by STEs.
The negotiations should impose tighter disciplines to prevent countries from circumventing their trade commitments through disguised subsidies, non-tariff measures, or technical measures, such as unnecessarily rigid labeling requirements.
The parties should reaffirm and where necessary more clearly define and tighten rules on sanitary and phytosanitary measures to ensure fair competition. While maintaining the rights of countries to use legitimate measures to protect health and safety, we want to make sure that science, not internal politics or protectionism, is the basis for public, animal and plant health rules.
These last two goals should lower some of the more elusive trade barriers that range from unnecessary red tape to regulatory practices that erect unjustified sanitary and phytosanitary barriers. For example, the major trade disputes causing tension in the U.S.-EU relationship -- the EU hormone ban, specified risk materials, and EU approvals for new biotech products -- all demonstrate the need for greater international harmonization on the basis of more clearly defined rules on technical barriers.
Some countries would like to justify continuing border protection or subsidies for various social objectives. This was discussed at both the OECD Ministerial and the Quint--the meeting of agriculture ministers from the United States, EU, Australia, Canada and Japan--last week in Paris. While no one disagreed with the important role agriculture plays in all societies, it was also agreed that measures to help farmers in one country should not distort trade or adversely affect farmers in other countries. This is a fundamental concept that must continue to form the basis of international efforts to reform agricultural policies in the future.
When we enter this new round of agricultural talks, the process of global trade reform must not come to a halt. However, this could happen if negotiations on new actions and larger tariff cuts are not completed by 2001, when most Uruguay Round commitments will be fully implemented by the developed countries.
We are beginning to explore with our WTO trading partners ways to continue implementing tariff and export subsidy cuts and other measures, even as we work on new disciplines that will need to be negotiated. The Uruguay Round commitments were just the first step in agricultural trade reform and we still have a long way to go. So, any pause in reform would be unfortunate. In the Uruguay Round, countries agreed to continue the reform process beyond the year 2000, and we will work with our trading partners to see that this commitment is met without a pause. Our initiative is simple -- No stopping and waiting for a new agreement to emerge -- no pause.
If the President is not granted fast track authority as the WTO agriculture negotiations approach, it would put the United States in a much weaker position in those talks. Without this authority, the United States will lack credibility at the negotiating table. Other countries can delay the negotiations because they will see no consensus between the President and the Congress. Lack of fast track authority plays into the hands of those countries that have very different ideas about the goals and directions of these negotiations -- countries that prefer not to compete with U.S. agriculture on fair and equal terms.
U.S. Leadership Must Continue
Here, some want to derail the effort as well. As we saw in last year's fast track debate, trade agreements have come under attack from various quarters. Trade agreements often get little credit for the benefits they bring, and they seem to get blamed for just about everything else.
NAFTA, especially, has been a lightening rod for all sorts of concerns. Not surprisingly, some people judge the agreement only in terms of individual grievances or concerns. It is true that NAFTA has not settled every issue, lifted every barrier, or satisfied every sector. But look how far we have come.
In four years under NAFTA, our agricultural exports to Canada and Mexico together have set new records every year, climbing from $8.9 billion in fiscal year 1993, the year before NAFTA, to $11.7 billion in 1997. The latest USDA forecast suggests these exports may reach a record $12.7 billion this year -- 23 percent of our total agricultural exports worldwide. Despite some ongoing concerns, we have seen enough progress to say that the promise of NAFTA is being fulfilled for agriculture.
And our two NAFTA markets can continue to grow -- Mexico, especially, offers much promise in the future, and there are many other promising markets in this hemisphere. The European Union and others recognize these opportunities and are pursuing these markets. Just two weeks ago, the European Commission announced plans for a free trade agreement with Mexico.
Much of the world still looks to us for leadership, but countries will not sit around waiting. Our neighbors in this hemisphere are signing new trade agreements among themselves, often leaving U.S. producers at a disadvantage. We need to move forward with ongoing initiatives and with new global, regional, and bilateral initiatives. We need to stay out front, where we can continue to play a leadership role in setting the agenda and writing the future rules for trade.
We have a lot of work to do -- globally, regionally, and bilaterally -- in enforcing existing agreements, opening new markets, and leveling the playing field. That is why we need to maintain the momentum and U.S. leadership of the trade reform agenda.
The trade policy successes of the past few years have brought new opportunities to agriculture -- opportunities measured the only way that counts, in dollars coming home to American producers. We must continue to build on those successes, and I am committed to that task.
Mr. Chairman, that completes my statement. I would be happy to answer any questions.