Statement of A. Ellen Terpstra,
Foreign Agricultural Service
U.S. Department of Agriculture
Before the House Subcommittee on Agriculture,
Rural Development, Food and Drug Administration,
and Related Agencies
March 5, 2003
Mr. Chairman, members of the Subcommittee, I appreciate the opportunity to review the work of the Foreign Agricultural Service (FAS) and to present the President’s budget request for FAS programs for fiscal year (FY) 2004.
This year, as FAS celebrates its 50th anniversary as an agency, we have an opportunity to review our history and make sure we are prepared for tomorrow’s challenges. In 1953, Secretary of Agriculture Ezra Taft Benson issued four challenges to the new agency:
Through all the changes of the past 50 years – new nations, new technologies, new food and agricultural products, to name just a few – those activities remain the core of our agency’s work. The work we do supports the Department's strategic objectives of expanding international market opportunities and supporting international economic development and trade capacity building.
The challenges the new FAS faced in 1953 are not unlike the challenges we face today – the excess productive capacity of U.S. agriculture, continued global agricultural policy reform, weather uncertainties and competition. At the same time, the U.S. export situation is incredibly different. During the 1950s, our agricultural trade balance was awash in red ink. In 1953, for example, U.S. agricultural imports were $4.3 billion and exports were $2.8 billion, leaving a trade deficit of $1.5 billion. In sharp contrast, for fiscal 2002, U.S. agricultural exports topped $53 billion and imports were $41 billion, producing a surplus of more than $12 billion.
In the early 1950s, six of our top 10 export markets were in Western Europe. Now half are in Asia and only two are in Europe. Also, Canada and Mexico, our partners in the North American Free Trade Agreement, ranked 1 and 3 in 2002. Together, they took 29 percent of our total agricultural exports, up from 11 percent in the early 1950s when Mexico was not even in the top 10.
Bulk commodities dominated the U.S. trade picture back then. The big three at the time – wheat, cotton and tobacco leaf – accounted for up to 60 percent of total U.S. agricultural export value. A USDA report at the time boasted that our soybean exports set a record in 1953 – 42 million bushels. We now export about a billion bushels a year. In the early 1950s, meats trailed animal fats in export volume and value, and horsemeat tonnage beat poultry meat. Like meats, fruits and vegetables show huge export gains over the past 50 years. In 1952 and 1953 combined, we exported 164 million pounds of fresh apples, compared with 2.9 billion pounds in 2000-2001.
Many factors contributed to these changes. The global marketplace has grown enormously – more people, more production, higher incomes and much, much more trade. World population increased from about 2.7 billion in 1953 to a projected 6.3 billion this year. Urban populations have more than tripled.
Rising incomes have expanded trade not only by generating demand for more food, but also by helping to alter diets, sharply boosting per capita global consumption and trade in meats, cereals, fruits and vegetables, and processed grocery products. At the same time, trade liberalization, changing market structures and new technologies in processing, storage and shipping created new opportunities and new markets.
American producers, processors and exporters took advantage of these growing opportunities by increasing their productivity, improving quality and variety, and intensifying marketing efforts. And through it all, government – including FAS – and the private sector developed a strong partnership, working together on market development and promotion programs, market-opening negotiations and new trade agreements, food and technical assistance, and research and quality improvements.
While we still face many challenges, we continue to believe that world markets offer rewarding growth opportunities and play a vital role in the future strength and prosperity of American agriculture.
FAS Program Activities
Throughout our 50 years, Congress has given us many tools to help us expand export opportunities for U.S. agricultural, fish, and forest products. Last year, we continued to use our long-standing export programs vigorously and have implemented new initiatives contained in the Farm Security and Rural Investment Act of 2002.
The 2002 Farm Bill established the Technical Assistance for Specialty Crops program and authorizes $2 million in Commodity Credit Corporation funds for each fiscal year from 2002 to 2007. We moved quickly to implement the program and allocated $2 million to 18 entities for FY 2002 under this program, which is designed to address unique barriers that prohibit or threaten the export of U.S. specialty crops.
The Farm Bill also increased the Market Access Program to $100 million for 2002, and those funds were allocated to 65 trade organizations to promote their products overseas. The Farm Bill increased funds for the Foreign Market Development Program, and FAS approved marketing plans totaling $34.5 million for 24 trade organizations for FY 2002.
The Emerging Markets Program is authorized at $10 million each year to promote increased market access for U.S. commodities and products in emerging markets. A total of 82 projects were approved for FY 2002. The Quality Samples Program provides funds so U.S. organizations can provide commodity samples to foreign buyers to help educate them about the characteristics and qualities of U.S. agricultural products. FAS allocated $1.6 million in FY 2002 to 21 organizations under this program.
The export credit guarantee programs facilitated sales of nearly $3.4 billion in U.S. agricultural products last year. The GSM-102 program helped U.S. exporters register sales of nearly $650 million in the South America region and over $395 million to Turkey, two areas where the program is most successful. U.S. exporters continue to discover the benefits of the Supplier Credit Guarantee Program. We issued over $452 million in credit guarantees under this program in 2002, and we project continuing growth for this newer GSM program.
With the aid of the Dairy Export Incentive Program (DEIP), U.S. exporters sold more than 86,000 tons of dairy products in FY 2002. The Commodity Credit Corporation awarded over $54 million in bonuses to help U.S. dairy exporters meet prevailing world prices and develop foreign markets, primarily in Asia and Latin America.
On the trade policy front, USDA works to open, expand, and maintain markets for U.S. agriculture. FAS was a key player in the development of the comprehensive U.S. agricultural negotiation proposal for the World Trade Organization (WTO) Doha Development Agenda. The proposal calls for significant new disciplines in the areas of market access, export competition, and domestic support.
We also have actively participated in other trade negotiations including the Free Trade Area of the Americas (FTAA) and the now completed Singapore and Chile Free Trade Agreements.
While pursuing these new negotiations, we have begun to see the benefits of earlier agreements. U.S. exports of forest products, rice, cotton, citrus, and wheat to Taiwan and China have increased by over $100 million as a result of their accessions to the WTO, and U.S. soybean meal and corn exports to Jordan have nearly doubled as a result of the U.S.-Jordan Free Trade Agreement.
FAS also worked to defend U.S. access to markets. Monitoring of trade agreements is essential to ensure that the benefits gained through long, hard negotiations are realized. Our monitoring of the Uruguay Round Agreement on Agriculture and the Sanitary and Phytosanitary Agreement ensured that nearly $1.8 billion in U.S. trade was protected or expanded. Examples include the monitoring of China and Taiwan’s WTO accession commitments, Venezuela’s import licensing for numerous commodities, and Costa Rica’s rice import permits.
In addition, we worked to secure access for U.S. organic exports to Japan and Europe, averted the imposition of grain import restrictions by the European Union (EU), and helped open the Australian market to U.S. table grapes.
To support the U.S. commitment to global food aid efforts, we have used our assistance authorities to ship commodities from the United States to needy people around the world. FAS programmed more than 2.4 million metric tons of food assistance in FY 2002 under Public Law (P.L.) 480, Title I and Section 416(b) of the Agricultural Act of 1949. These products, valued at $600 million, went to more than 60 countries.
Under the pilot Global Food for Education (GFE) Initiative, which began in FY 2001, the United States has provided 800,000 tons of commodities and associated assistance valued at $300 million over a 2-year period to provide school meals for 7 million children in 38 countries.
Our emphasis on trade capacity building and our roles in international organizations continue to grow. International cooperation is the cornerstone for building bilateral and multilateral relationships that can facilitate resolution of trade differences, expand trade, and promote economic growth. For example, last year we used several international organization meetings to advance our WTO proposals. We began our efforts to communicate the important link between market access and global food security at the Food and Agriculture Organization’s Conference in Rome in November, just prior to the successful launch of the Doha Development Round. We continued our efforts at the Finance for Development Conference in Monterrey in March, the World Food Summit: Five Years Later in Rome in June, the G-8 Summit in Kananaskis, Canada, two weeks later, and finally the World Summit on Sustainable Development in Johannesburg in August.
The meetings provided opportunities for outreach on our WTO proposal and biotechnology as key to addressing the problem of food security. Our efforts were carefully crafted to specific audiences. For example, at the World Food Summit: Five Years Later, Secretary Veneman identified three U.S. priorities for reducing hunger, with specific initiatives to boost agricultural productivity in the developing world, end famine, and alleviate severe vitamin and mineral deficiencies. She invited other countries to join us in these efforts. The Secretary announced a USDA-sponsored ministerial-level on agricultural science and technology designed to assist developing countries in increasing productivity. We sponsored a well-attended event on biotechnology that included Nobel Peace Prize winning scientist Dr. Norman Borlaug, bringing greater credibility to the scientific support behind the technology. Finally, the Secretary met with Latin American ministers of agriculture in their capacity as members of the Inter-American Institute for Cooperation on Agriculture. The result of that meeting was consensus among members on trade capacity building priorities for IICA, including sanitary and phytosanitary issues and biotechnology.
It is these relationships and the training we provide that will help us resolve trade disputes in the future, as well as prepare developing countries for global trade. Our longstanding training program, the Cochran Fellowship Program was used to introduce 972 Cochran Fellows from 78 countries to U.S. products and policies in 2002 -- the largest number of participants in the program’s history. These Fellows met with U.S. agribusiness; attended trade shows, policy and food safety seminars; and received technical training related to market development. The Cochran Fellowship Program provides USDA with a unique opportunity to educate foreign government and private sector representatives not only about U.S. products, but also about U.S. regulations and policies on critical issues such as food safety and biotechnology.
We also collaborated with a diverse group of U.S. institutions in research partnerships with 53 countries. These research and exchange activities promoted the safe and appropriate development and application of products from biotechnology, as well as other areas such as food safety, improved nutritive value of crops, environmental sustainability, and pest and disease resistance of crops and livestock.
In the end, the technical assistance that we provide, both our own and through international organizations, will help build the institutions needed for developing countries to attract investment and grow their economies. If our efforts are successful, our food and agricultural producers will benefit by access to more and better markets.
Faced with continued growth in our agricultural productivity, intense competition, and continued aggressive spending on market promotion by our competitors, we must redouble our efforts to improve the outlook for U.S. agricultural exports. I would like to discuss our top priorities for the year.
Continuing Trade Liberalization for Agriculture
At the top of our list is moving forward in the multilateral trade negotiations on agriculture under the WTO. The United States was the first WTO member to put forward a comprehensive and specific agriculture proposal, which has gained support from many WTO members. As the negotiations progress, it has become clear that two camps have developed: one that wants to address the inequities of the Uruguay Round consistent with the Doha mandate and one that does not. The EU and Japan are in the latter group. Both have indicated resistance to moving beyond the limited Uruguay Round framework. We are at a critical stage in the WTO agriculture negotiations. On February 12th, Chairman Harbison released his draft modalities - the formula for reducing protection and subsidies - that should enable us to meet the crucial deadline of March 31 for establishing reduction commitments in export competition, market access, and domestic support.
Along with our comprehensive tariff reduction formula, the United States has proposed that WTO members engage in negotiations on a sector-specific basis on further reform commitments that go beyond the basic reductions that will apply to all products. These would include deeper tariff reductions, product-specific limits on trade-distorting domestic support, and other commitments to more effectively address the trade-distorting practices in the affected commodity sectors. This is an area where we need support and involvement from our food and agriculture industry, and we will be seeking their guidance throughout the negotiations.
Overall, the passage of Trade Promotion Authority (TPA) was great news for America’s farmers, ranchers, and food industry. The United States can now move forward on its ambitious trade agenda of opening markets multilaterally in the WTO, regionally, and bilaterally. This Administration is pressing ahead in its effort to create the largest, most comprehensive free trade area encompassing 34 democracies in the Western Hemisphere—a Free Trade Area of the Americas (FTAA). Despite economic turmoil in Latin America, the negotiations remain on schedule.
In December, the United States, at the Free Trade Area of the Americas (FTAA) Ministerial in Quito, Ecuador, pushed negotiations forward to complete the FTAA by January 2005. The ministers energized market access negotiations and agreed that the United States and Brazil will co-chair the FTAA process through the conclusion of negotiations. The next meeting will be in Miami late this year, with another meeting set for Brazil in 2004.
When completed, the FTAA will provide U.S. producers and exporters with much greater access to 450 million consumers outside the NAFTA countries, who will have $2 trillion in income. USDA estimates suggest that the FTAA could expand U.S. agricultural exports to the hemisphere by more than $1.5 billion annually.
While we recognize that many challenges lie ahead and that the U.S. agricultural community has some concerns about the FTAA, we cannot afford to stand on the sidelines while other countries take away our potential markets. The reality is that if all Western Hemisphere countries have preferential agreements among themselves and the United States is not a party to these agreements, U.S. exports to the hemisphere would actually decline, perhaps as much as $300 million annually. So we must be a participant and a leader in these important negotiations.
In the year ahead, we will also be working on agreements with Australia, Morocco, five countries in Central America, and the Southern African Customs Union. As you see, we will be working on many fronts to continue to improve export opportunities for the American food and agriculture sector.
We also are actively participating in the Asia Pacific Economic Cooperation (APEC) forum. We expect APEC to serve a key role in promoting continued trade liberalization within the region and in the WTO, and we will be working through the APEC food system to realize this goal.
We will continue to work with the countries that would like to join the WTO, such as Russia and Saudi Arabia. Although increasing the number of members in the WTO is a high priority, we will continue to insist that these accessions be made on commercially viable terms that provide trade and investment opportunities for U.S. agriculture. And when membership in the WTO is achieved, we must continue to monitor aggressively those countries’ compliance with their commitments. We must ensure that acceding countries implement trade policies and regulations that are fully consistent with WTO rules and obligations.
Building Trade Capacity
Hand-in-hand with our negotiating efforts are our efforts to help developing countries participate more fully in the trade arena. Our trade capacity building efforts are aimed at helping countries take part in negotiations, implement agreements, and connect trade liberalization to a program for reform and growth. We will work closely with the U.S. Trade Representative and the U.S. Agency for International Development in this effort.
If we are to achieve success in the negotiating process, we must engage the developing world in the creation and implementation of appropriate trading rules and guidelines. This will take time, but it will be worth the investment. These countries represent our future growth markets. Throughout the year, we will use all of our available tools – the Cochran Fellowship Program, the Emerging Markets Program, and our involvement in international organizations such as the Inter-American Institute for Cooperation on Agriculture (IICA) – to aid in this important effort.
Addressing Biotechnology Issues
Another priority is how we deal with the issues surrounding products produced through biotechnology. The increasing number of countries around the world that are issuing regulations relating to products of biotechnology present a particular challenge, both for our infrastructure and for our food and agricultural exports. We are using every available fora to ensure countries adopt science-based policies in this area.
For example, last year we participated in the first APEC policy dialogue on biotechnology, where the 21 APEC member countries reached a consensus that biotechnology is an important tool with great potential for food security and the environment. In an effort to foster closer cooperation, the North American Biotechnology Initiative identified science, marketing, and regulatory issues as priorities for the three NAFTA partners. The Philippines enacted well-crafted biotech commercialization guidelines after three years of sustained FAS interaction through educational events and Cochran Fellowship training programs. FAS worked closely with third countries and allies within the EU to counter misinformation and to highlight the practical implications of EU legislation on biotech food and feed products.
Biotech issues will continue to be important for U.S. agriculture in the immediate years ahead, whether in the WTO or in our bilateral relationships with customer and competitor nations alike. We continue to insist that biotech approval regimes, wherever they exist, must be transparent, timely, predictable, and science-based.
Maintaining Market Access
Inherent in the FAS mission is the need to anticipate and prevent disruptions to trade imposed by new market barriers. Perhaps no other task that we carry out is as important, yet less visible. It is a measure of our success that so many issues are resolved so quickly, with so little public awareness. Virtually every day, our overseas and domestic staff work as a team on a variety of concerns -- first to prevent crises from developing and then to resolve thorny issues should they arise. They coordinate efforts with a number of USDA agencies, as well as with private sector companies and associations.
Every year, these activities preserve millions of dollars in trade that could have potentially been lost by countries imposing new barriers. Some problems may be resolved quickly with a phone call or a meeting; others are more complex, and involve multiple U.S. agencies. Our priorities include resolving poultry trade issues with Russia, poultry and other issues with Mexico, and tariff-rate quota and biotech issues with China.
Ensuring World Food Security
We recognize that significant emergency food needs continue to haunt many in the world and we are working to help address them. Today the most severe needs are in Mauritania, Sudan, Angola, North Korea, Afghanistan, southern Africa, and the Horn of Africa. The United States has delivered or pledged more than 500,000 tons (valued at $266 million) to southern Africa since the beginning of 2002, making us the largest donor to the World Food Program’s (WFP) operations there. The United States is also providing food aid to Ethiopia, Eritrea, Sudan, Angola, North Korea, Afghanistan, and many other countries.
However, U.S. food aid donations are determined by the availability of commodities, budget resources and commodity and transport prices. We have reduced our reliance on that part of the Section 416(b) program that depended on the availability of surplus U.S. commodities and have increased funding under the more traditional P.L. 480 and Food for Progress authorities. We hope that this change will allow other governments, private voluntary organizations (PVOs), and the World Food Program to have a much more reliable picture of how much food aid will be available from the United States each year.
We also will be implementing the new McGovern-Dole International Food for Education and Child Nutrition Program. This new program, established in the 2002 Farm Bill, builds on the pilot Global Food for Education Initiative that I mentioned earlier. We will be working closely with the World Food Program and our PVO partners to ensure that this program gets off to a good start and builds on the success achieved by the Global Food for Education Initiative.
In addition, FAS continues to assist USAID in its Famine Early Warning System (FEWS) by providing satellite and crop data. We will soon launch our effort to track global water resources that will allow us to measure critical water reservoirs in developing countries.
But despite all our efforts, estimated food aid needs continue to be high. That is why we continue to press other major donors to increase their contributions. The United States is working with the G-8 to make this effort multilateral. In addition, we are especially supportive of the efforts of the WFP’s new director to widen the spectrum of support from private sector organizations.
But we know food aid is not the only tool to achieve world food security. That is why Secretary Veneman will host a Ministerial Conference and Expo on Agricultural Science and Technology June 23-25 in Sacramento, Calif. Ministers are being invited from over 180 nations. The conference, also sponsored by the U.S. Agency for International Development and the Department of State, will focus on the critical role science and technology can play in raising sustainable agricultural productivity in developing countries, with the goal of boosting food availability and access and improving nutrition.
Implementing Program Changes
Our top program priority is developing and implementing the Trade Adjustment Assistance Program for Farmers, a new program established by the Trade Act of 2002. Under the program, USDA is authorized to make payments to eligible producer groups when the current year’s price of an agricultural commodity is less than 80 percent of the national average price for a previous 5-year marketing period, and the Secretary determines that imports have contributed importantly to the decline in price. FAS is currently coordinating efforts with other USDA agencies to establish the new program. Program rule-making and start-up activities are actively underway, with implementation anticipated later this year.
Another priority is expanding our eGov capability. EGovernment is a multi-faceted initiative that will change the way we in FAS communicate with each other, with the rest of government, and most importantly, with the customers we serve around the world. For FAS, eGov means making more information and services available online, while organizing and presenting all of this data in a logical, accessible and useful way.
Specifically for FAS, this means changing our processes for producing data and information in ways that make it easier to categorize, publish and present online. FAS has committed to being an early adapter in the content management initiative of eGov. Within the next year, FAS will make most information-collecting forms such as grant applications and reporting documents interactive and available online. And in the long term, we will analyze every function and activity throughout the agency to develop ways to leverage our information technologies to complete our agency activities faster, smarter and better.
Mr. Chairman, our fiscal year 2004 budget proposes a funding level of $145.2 million for FAS and 1,005 staff years. The request includes a number of important trade related activities and non-discretionary administrative increases.
First, an additional 20 staff years are proposed to facilitate the agency’s active involvement in ongoing multilateral, regional, and bilateral trade negotiations and to bolster its efforts to address rapidly growing market access constraints related to biotechnology, and sanitary and phytosanitary measures. These will be funded from a centralized fund to be established in the Office of the Secretary to support cross-cutting USDA trade-related and biotechnology activities.
Additionally, the budget proposes an increase of $500,000 to support a series of regionally based seminars on the specifics of the Biosafety Protocol. Representatives from 170 countries are currently negotiating international provisions governing the shipment and use of products from biotechnology under the Cartagena Protocol on Biosafety. Parameters set under this agreement are intended to provide uniform international requirements for ensuring the safe transport and use of these products.
The Biosafety Protocol can offer a framework to guide countries that currently lack national regulatory systems for products of biotechnology. However, if member countries misinterpret the Protocol, it can seriously impede international trade, product development, technology transfer, and scientific research. Through a series of regional seminars, FAS will work to ensure that the implementation of these standards under the Biosafety Protocol are science-based, transparent, and non-discriminatory. These seminars will be coordinated in conjunction with other USDA agencies such as the Animal and Plant Health Inspection Service (APHIS), industry representatives, academia, the non-governmental organization community, and international regulatory agencies.
The budget also requests $5 million for a USDA contribution to the Montreal Protocol Multilateral Fund (MPMF). The MPMF was created in 1991 to help developing countries switch from ozone depleting substances to safer alternatives. Developing countries' commitment to comply with the Protocol's strict requirements is contingent on developed countries providing help through the MPMF. Historically, the Department of State (DOS) and the Environmental Protection Agency have provided nearly all U.S. payments to the MPMF. This has funded projects that are leading to the phase out of the production and use by developing countries of industrial chemicals that deplete the ozone layer, such as chlorofluorocarbons and halons. In the future, there will be an increasing focus on reducing the use of methyl bromide. In recognition of the growing importance of agricultural issues in the Montreal Protocol process, USDA is requesting a $5 million contribution to the MPMF.The budget includes an increase of $4,220,000 for non-discretionary administrative requirements including:
Mr. Chairman, the fiscal year 2004 budget proposes $6.2 billion for programs to promote U.S. agricultural exports, develop long-term markets overseas, and foster economic growth in developing countries. The 2002 Farm Bill increased funding for several of these programs in order to bolster our trade expansion efforts that are reflected in the President's fiscal year 2004 budget.
Export Credit Guarantee Programs
The budget includes a projected overall program level of $4.155 billion for export credit guarantees in fiscal year 2004.
Under these programs, the Commodity Credit Corporation (CCC) provides payment guarantees for the commercial financing of U.S. agricultural exports. As in previous years, the budget estimates reflect actual levels of sales expected to be registered under the programs and include:
Market Development Programs
Funded by CCC, FAS administers a number of programs to promote the development, maintenance, and expansion of commercial export markets for U.S. agricultural commodities and products. For fiscal year 2004, the CCC estimates include a total of $164 million for market development programs that includes:
International Food Assistance
The fiscal year 2004 budget continues the worldwide leadership of the United States in providing international food aid. In this regard, the fiscal year 2004 proposals total $1.6 billion which include:
Export Subsidy Programs
FAS administers two export subsidy programs through which payments are made to exporters of U.S. agricultural commodities to enable them to be price competitive in overseas markets where competitor countries are subsidizing sales. These include:
This concludes my statement, Mr. Chairman. I will
be glad to answer any questions.
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