Statement of Ann M. Veneman
U.S. Secretary of Agriculture
Before the House Agriculture Committee
May 23, 2001
Mr. Chairman, members of the Committee, I am pleased to join Secretary Evans and Ambassador Zoellick to discuss negotiations toward the Free Trade Area of the Americas (FTAA).
When it is completed in January 2005, the FTAA will be a comprehensive free trade agreement among the 34 democracies in the Western Hemisphere, stretching from the Canadian Arctic to Tierra del Fuego, Chile.
The FTAA is part of a much broader initiative by leaders of this hemisphere to deal with many of the common issues that all our countries face. That initiative, known as the Summit of the Americas, was launched in Miami in 1994. While the FTAA perhaps is the most widely known component, the Summit process also includes initiatives in other important areas, such as education, justice, transportation, migration, and energy, to name a few. The Summit process provides a unique mechanism for the heads of state in our hemisphere to discuss political, economic, and social problems in a multilateral and comprehensive way. It brings together democratically elected leaders united in their efforts to promote democracy, human rights, and free markets.
The 1998 Summit of the Americas, held in Santiago, Chile, launched the formal FTAA negotiations. At the most recent Summit meeting in Quebec City last month, the heads of state agreed that the FTAA should be completed by January 2005, and seek its entry into force by the end of that year.
Some of the most important and difficult work is yet to be done. During the next phase of the process, the negotiators will intensify their efforts to narrow differences on a broad range of issues in preparation for the next meeting of trade ministers set for October 2002 in Ecuador.
From the agricultural perspective, the United States has much to gain from the FTAA and much to lose without the FTAA in light of other preferential agreements in this hemisphere. When completed in 2005, the FTAA will provide U.S. producers and exporters with much greater access to 450 million consumers outside the North American Free Trade Agreement (NAFTA) countries, who will have $2 trillion in income. Three countries alone - Argentina, Brazil, and Chile - are expected to add over 50 million middle class consumers by 2006 -- about the population of France. These consumers, with rapidly rising disposable incomes, represent a strong demand for imported food products.
The FTAA has the potential to significantly expand trade which in turn expands overall economic growth, creates jobs, and boosts consumer buying power. This benefits citizens throughout the hemisphere. And, as we have seen from our experience with the NAFTA, such an agreement can do much more. NAFTA also reinforced sound domestic economic policies, increased investor confidence, spurred entrepreneurship and innovation, and encouraged efficiency and transparency in government institutions, ultimately strengthening democracy in Mexico. A similar process is already underway in much of Latin America and would only be reinforced and strengthened by the FTAA.
I should note here that realizing these potential benefits, and those from other trade initiatives, will require enactment of trade promotion authority. It is for this reason that the President has placed this at the top of his trade legislative agenda.
U.S. Agricultural Impacts
The agriculture sector will be important both in the development and potential success of the FTAA. Preliminary U.S. Department of Agriculture (USDA) estimates suggest that the FTAA could expand our agricultural exports to the hemisphere by over $1.5 billion annually. U.S. gains would come primarily from more open markets for our grains sector, particularly for wheat and feed grains. We also should see growing exports of horticultural and processed products as the FTAA contributes to greater economic growth throughout Latin America.
We also should recognize that we will be facing many challenges, as in any negotiation of this magnitude. We know that the agricultural community has some serious concerns. Some of the countries involved are already competitors. However, U.S. agriculture cannot afford to stand on the sidelines in any trade negotiation in this hemisphere or elsewhere. Our farmers are among the most efficient in the world and our agricultural sector is one of the most export dependent sectors of the U.S. economy.
Our producers are already missing opportunities in this hemisphere. The Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay), Chile, Mexico, and Canada have or are negotiating preferential agreements with most of the other countries in the hemisphere. Under the Canada-Chile Free Trade Agreement, for example, Canadian wheat can enter Chile with lower tariffs than can U.S. wheat. The Andean countries have reduced their tariffs on oilseeds and products from the Mercosur countries, causing U.S. producers to lose out in these markets. In addition, the European Union already has agricultural trade agreements with Mexico and the Caricom countries and now is negotiating with the Mercosur nations, as well. Japan, too, is exploring possible agreements in our hemisphere.
Out of the more than 30 reciprocal trade agreements in the hemisphere, the United States is a participant in only one--NAFTA. And, while we have had some challenges with NAFTA, it has proved very positive overall for U.S. agriculture. Canada and Mexico are now our second and third largest export markets, and we expect them to buy more than $15 billion worth of our agricultural products this year.
The bold reality is that if all Western Hemisphere countries have preferential agreements among themselves and the United States is not a party to these agreement, U.S. exports to the hemisphere would actually decline, perhaps by as much as $300 million annually. We must be a participant and a leader in these important developments in our own hemisphere.
The agriculture negotiations within the FTAA have four basic components: market access, export subsidies, other trade distorting policies, and sanitary and phytosanitary measures.
In the market access component, there has been no discussion on any specific agricultural products thus far. Our efforts over the next ten months will be devoted to establishing the methods and procedures that will be used for the product-specific negotiations.
Concerning export subsidies, participants have already agreed to their elimination within the hemisphere when the agreement is implemented. However, we still need to reach agreement on how best to deal with subsidies from non-hemispheric suppliers.
Another important component is other trade distorting policies. These include activities related to domestic support, differential export taxes, tax rebates for exported products, state trading enterprises, and other such policies. The United States continues to believe that most of these issues should be addressed in multilateral fora where disciplines can be imposed on all of our trading partners.
Finally, the discussion on sanitary and phytosanitary measures will center on improving the implementation within the hemisphere of the World Trade Organization (WTO) SPS agreement. The U.S. has proposed that FTAA countries agree to strengthen their collaboration in the WTO Sanitary and Phytosanitary (SPS) committee, as well as in the international standard-setting bodies. We have also proposed activities such as exchanging information on new research and risk assessment procedures, and improved coordination of technical assistance.
As you can see, Mr. Chairman, much hard work lies ahead. We will be consulting with this Committee and the Congress as well as the agricultural community frequently as we proceed with these negotiations. We believe that the FTAA will facilitate the growth in U.S. agricultural trade and in the U.S. economy. Currently, the business of agriculture, from production to processing to transportation to marketing, generates about 16 percent of U.S. economic activity and employs almost 23 million U.S. workers in all 50 states.
Over the next decade, food consumption in Latin America is expected to surge, as a growing middle class, with rapidly rising disposable incomes, is able to purchase more and better food. Our producers and processors should have improved access to this expanding market. U.S. agriculture can benefit from the FTAA, as can countries throughout this hemisphere. This is an exciting challenge for us. President Bush said as he was departing for the Quebec Summit last month, "This third Summit of the Americas will take the next steps in creating an entire hemisphere that is both prosperous and free. It's a great task and an extraordinary opportunity to make the Americas the land of opportunity."
Mr. Chairman, I welcome your guidance and I look forward to working with this Committee as we move forward in the FTAA process. That completes my statement, Mr. Chairman. I would be pleased to answer any questions you may have.