Timothy J. Galvin
Foreign Agricultural Service
U.S. Department of Agriculture
Senate Committee on Agriculture, Nutrition, and Forestry
Subcommittee on Production and Price Competitiveness
July 18, 2000
Mr. Chairman, members of the Subcommittee, it is a pleasure to appear before you to discuss export and market development programs for U.S. agriculture.
The U.S. Department of Agriculture has been working at full throttle to build long-term trade opportunities, increase exports, help relieve hunger abroad, and help American farmers and ranchers earn an adequate income from their farms.
Building Long-Term Trade Opportunities
In April of last year, the President announced sweeping sanctions reforms that are already beginning to open new foreign markets to U.S. agricultural exports. Despite continuing sanctions on most other products, American farmers and ranchers are now able to sell their commodities to Iran, Libya, Sudan, and North Korea. The broad easing of sanctions could bolster U.S. agricultural exports by as much as $500 million a year. Already, there have been sales of 29,000 tons of hard red winter wheat to Sudan, 20,000 tons of durum to Libya, and more than 600,000 tons of corn to Iran.
In general, commercial exports of food and other human necessities should not be used as tools of foreign policy except under the most compelling circumstances, and the Administration has extended this policy to existing sanctions on a case-by-case basis. We look forward to working with the Congress to solidify this policy in a way that does not unduly limit the President’s discretion.
For 2000, USDA allocated $90 million in Market Access Program funding for export promotion activities to 65 U.S. trade organizations, state/regional groups, and cooperatives. USDA also approved plans for $33 million in overseas marketing activities under the Foreign Market Development program. This year, USDA also initiated a Quality Samples Program that assists U.S. exporters in introducing new products to potential buyers.
USDA recently announced actions to improve the cleanliness and competitiveness of U.S. wheat. USDA has lowered the acceptable maximum dockage levels in wheat purchased for U.S. foreign food assistance programs. This tells the world that U.S. wheat meets a higher standard. USDA will also seek public comment very soon on whether to establish an official U.S. standard for maximum dockage levels in exported wheat. Cleaner exports will help create greater demand for U.S. wheat and help U.S. wheat suppliers compete internationally.
USDA continues to pursue its bilateral and multilateral efforts around the world to reduce trade barriers and create new export opportunities, while closely monitoring compliance by other countries with Uruguay Round commitments.
During this past year, USDA helped reach two major trade agreements with China. Under the Agreement on U.S.-China Agricultural Cooperation, China removed longstanding bans on U.S. wheat, citrus, and meat and poultry. As a result, the first direct exports of U.S. meat and the first exports of California and Florida citrus were recently shipped to China, and China purchased 50,000 metric tons of U.S. wheat shipped through the Pacific Northwest. In addition, USDA helped negotiate the U.S.-China World Trade Organization accession agreement, which offers major, long-term benefits for U.S. agriculture. We understand that the Senate has a full agenda of legislation to consider, but we must not let this unprecedented opportunity for our farmers and ranchers slip through our fingers.
Three weeks ago, the United States presented an ambitious, comprehensive negotiating proposal for the next round of WTO agricultural talks. It moves us beyond the Uruguay Round to accelerate world agricultural reform and create a level playing field for all farmers and ranchers. It establishes a blueprint for meeting the goals we have been talking about for more than a year: eliminating export subsidies; lowering tariffs and expanding tariff-rate quotas; disciplining state trading enterprises, and facilitating trade in the products of new technologies.
This proposal was developed from the grass roots up, with input from farmers, ranchers, processors, our advisory committees and members of Congress. As a result, the proposal is supported by a broad range of the U.S. agricultural community, and enjoys bipartisan Congressional support.
I believe this plan will improve prospects for America's farmers and ranchers, who are still coping with low commodity prices, worldwide surpluses and closed markets. Agriculture is twice as dependent on exports as the rest of the U.S. economy. To thrive in the 21st century, our farmers need access to a freer and fairer global market. This proposal would give them just that.
It seeks to level the playing field by capping "trade distorting" domestic support at an equal, fixed percentage of a country's total value of agricultural production. If we have heard one thing from U.S. producers over the past several years, it is that we must avoid further across-the-board percentage cuts that leave our farmers at a disadvantage. This happened under the Uruguay Round, which mandated uniform cuts by all countries, but still allowed those who started at a higher level to retain their advantage.
The proposal simplifies the system of classifying domestic support. It would do away with the green, amber, and blue box system and replace it with two categories: exempt support, which has little or no trade-distorting impact, and non-exempt support, which distorts trade and will be capped. This innovative approach would go a long way toward leveling the playing field partly because it would change the current situation in which there are no limits on certain types of trade-distorting expenditures known as "blue box" support. The EU has exploited this loophole to the tune of roughly $25 billion per year, while the United States does not use blue box support.
The U.S. proposal articulates a vision for the organization of agricultural policies for the new century. We believe that real reform is necessary to put our agricultural economy on a sound footing, and is in the best interests of all WTO members. The U.S. approach recognizes the rights of countries to support farmers and rural communities, but countries also have the responsibility to shoulder the costs themselves rather than imposing them on other countries, especially developing countries.
Several other countries submitted negotiating proposals in Geneva -- Canada, the Cairns Group, the European Union, and a group of developing countries. However, the United States was the only country that submitted a comprehensive proposal. This clearly puts us in a leadership position for these negotiations.
Where do we go from here? Last March, countries agreed to an end-of-the-year deadline for submitting initial negotiating proposals, with the ability to amplify or modify proposals through the first quarter of 2001. In the months ahead, we will continue to work closely with our farmers, ranchers, processors, Congress, and our advisory committees to refine our negotiating proposal. The United States has proposed concluding the agricultural negotiations by the end of 2002, and reaching agreement on the fundamentals of further reform by the midterm of the negotiations.
Over the past 2 years, USDA has used its export credit guarantee programs to support sales of more than $7 billion in U.S. agricultural products. In fiscal 1998, during the height of the Asian financial crisis, USDA made $1.5 billion in credit guarantees available to exporters for sales to South Korea alone, and Korean importers used more than 90 percent of that amount for commercial purchases of U.S. agricultural products. Over the past 2 years, exporters to South Korea and the countries of Southeast Asia have used USDA credit guarantees to sell $2.6 billion worth of American oilseeds, wheat, corn, cotton, meats, and other products. As a result of these efforts and rising world demand, combined beef, pork, and poultry exports are forecast to top $6.6 billion this fiscal year, up from $5.8 billion a year earlier. U.S. beef especially is benefitting from both higher prices and strong overseas demand. While pork and poultry are still recovering from losses incurred during the Asian and Russian financial crises, both are forecast at least to equal, if not exceed last year’s market share figures.
For fiscal 2000 to date, USDA has announced the availability of more than $5 billion in export credit guarantees for sales to countries where lack of credit might otherwise present a barrier to sales.
With the help of USDA’s Dairy Export Incentive Program, U.S. exporters sold more than 136,000 tons of dairy products valued at $337 million in fiscal 1999. Under DEIP, USDA awarded bonuses of $145 million to help U.S. dairy producers and exporters compete in overseas markets. For fiscal 2000 to date, nearly $76 million in bonuses have been awarded, supporting sales of around 93,000 tons of U.S. dairy products.
We continue to support legislation we previously proposed that will authorize the Secretary of Agriculture to reallocate unobligated Export Enhancement Program funding in the last quarter of the fiscal year to be used for U.S. foreign food assistance activities, including P.L. 480 and Food for Progress programs, and for purchasing commodities to replenish the Bill Emerson Humanitarian Trust.
Helping Relieve Hunger AbroadLast year, USDA used its food aid programs to move nearly 8 million metric tons of farm surpluses to help relieve hunger and suffering abroad. This was four times the previous year’s tonnage and the largest quantity in recent memory. It included more than 5 million tons of wheat and wheat products donated under the President’s Food Aid Initiative. U.S. commodities were shipped to 50 countries, from the unprecedented assistance package for Russia to food relief for Kosovo refugees, famine victims in Africa and North Korea, and hurricane victims in Central America and the Caribbean.
Once again, this year, USDA will provide significant amounts of food aid to needy countries, including about 5.4 million tons in Section 416(b) donations of wheat, rice, soybeans and soybean products, and milk powder.
As USDA moves ahead with these efforts, we face many challenges both domestically and internationally. USDA must continue its efforts to do more with less, as resources for administering our export and market development programs have not increased. In 1999, the Foreign Agricultural Service received two Hammer Awards from the Vice President for improving the efficiency of its export programs through the development of a "Unified Export Strategy" and a streamlined process for advancing funds to Private Voluntary Organizations for humanitarian food assistance. However, as much as FAS works to operate its programs more efficiently and less expensively, this will not change the fact that our largest competitors outspend us for market development activities. The European Union outspends the U.S. by about $92 million, and the Cairns Group outspends us by about $306 million. If the U.S. is going to be competitive, especially as nations compete for access to the opening Chinese market, we will need to join with the private sector in increasing our efforts to develop markets.
Mr. Chairman, the export decline of the past several years has been sobering for America’s farmers and ranchers, as well as for policy makers trying to address their concerns. While our export programs will never be a substitute for strong global markets and an adequate safety net, we must ensure that the programs we administer are effective and efficient. I look forward to discussing with you the best way to achieve this goal.
This concludes my statement. I will be glad to answer any questions.