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Statement of August Schumacher,
Jr.
Under Secretary of Farm and Foreign Agricultural Services
Before the Senate Committee on Finance
Subcommittee on International Trade
Washington, D.C.
October 7, 1999
Mr. Chairman, members of the Committee, I am pleased to appear before the Subcommittee with Ambassador Scher and Under Secretary Aaron to discuss the new round of multilateral trade negotiations on agriculture under the World Trade Organization (WTO).
Importance of Trade to U.S. Agriculture:
These are very difficult times for our farmers and ranchers. Nearly four straight years of record production worldwide, which has not happened since World War II; financial problems in Asia, Russia and elsewhere contributed to depressed commodity prices. In some cases, prices have fallen to 30-year lows. The anguish and doubt among farmers in the United States is as great as I have seen during my time as Under Secretary. I know each of you faces similar problems with your own farmers and ranchers.
The key lesson from the last four years is the critical significance of trade to our farm economy. Although boosting exports will not happen overnight and we cannot export our way out of today’s crisis, we must look to overseas markets for the long term. Agriculture is already more reliant on exports than other sectors of the economy as a whole. This reliance is projected to grow.
Accordingly, we need an open and fair trading system and reliable markets. Do not take my word for it, look at the facts. The true test came in late 1997 and 1998 when 40 percent of the economies in the rest of the world stumbled badly. We are not out of the woods yet, but we are seeing positive signs in Japan, South Korea, and Southeast Asia. As a result, the Department of Agriculture (USDA) is forecasting a slight increase in U.S. agricultural exports in fiscal year 2000 – to $50 billion. Although prices and export value are lower than the past few years, volume level have increased significantly during that same time – by at least 12 percent – and are forecast to increase by half that amount in fiscal year 2000.
U.S. Goals for Agriculture:
In his last State of the Union address, President Clinton called on all the nations of the world to tear down barriers, open markets, and expand trade; he said "we must ensure that ordinary citizens in all countries actually benefit from trade."
Nowhere is this more important than in agriculture. That is why the United States has developed a bold agricultural agenda for the next round of WTO negotiations that includes:
Since we first outlined these goals, we at USDA have sought advice and ideas from all segments of our agricultural industry through 12 listening sessions as we develop our U.S. agricultural trade policy goals for the next round. During those sessions more than 400 farmers and ranchers submitted testimony, and about 2,000 citizens attended. We came away from those meetings with a strong sense of commitment from the U.S. agricultural community to move forward toward a more open and fair trading environment.
USTR and USDA continue to work through the Agricultural Policy Advisory Committee and the five Agricultural Technical Advisory Committees for Trade to gather advice on the U.S. negotiating strategy. We will continue to meet in Washington, DC with all six committees leading into the Seattle ministerial in November. I am pleased to report that we are engaged in a full interagency effort – Commerce, State, Labor, Treasury, and other cabinet agencies are well steeped in the efforts to pursue America’s agricultural agenda.
As we plan our negotiating strategy, we also are consulting with other countries. In August, the Secretary traveled to Argentina to attend the Cairns Group meetings in Buenos Aires. Earlier this week, the Secretary and others from USDA met with the agricultural ministers of Canada, the European Union (EU), Australia, and Japan as part of the Quint Group in Montreal,
Canada, to exchange ideas and their perspectives on the next round. While we have many allies in our quest for freer and fairer world agricultural trade, there is, of course, considerable opposition. There are powerful voices who see agricultural trade not as a win-win situation, but as a zero-sum game where the exporter wins and the importer loses.
Both the U.S. and Chinese economies will benefit if the most populous country in the world participates in the new round. China’s accession to the WTO would hasten its integration into the world economy and complement our efforts to maintain stability in the Pacific by linking China’s economy more closely with the rest of the world’s.
A sound agreement with China will open Chinese agricultural markets to U.S. exporters, strengthen the world trading system, and give U.S. farmers and other agricultural interests stronger protection against unfair trade practices and import surges. The principles of the WTO – transparency, fair trade practices, peaceful settlement of disputes, the rule of law – are those we hope to advance in China and worldwide.
Our trade relationship with the EU illustrates the need for the agricultural reforms that I mentioned before. Earlier this year, in its Agenda 2000 proposal, the EU retreated from fundamental reform of its domestic agricultural policies. These polices have invariably led to the continued use of export subsidies and domestic support programs that distort world prices and agricultural trade. Other countries have also called on the EU to restructure its farm policies – in particular to eliminate EU export subsidies. The Cairns Group has joined us in calling for the elimination of export subsidies.
The EU has yet to comply with WTO rulings on lifting the ban on imports of U.S. beef from hormone-treated cattle and on its banana import regime. It is important for the integrity of the system that all WTO members, including the EU, honor their international obligations.
In biotechnology, the EU’s slow pace, indecision, and failure to develop a consistent, science-based approval process have disrupted trade and threaten to constrain innovation in one of the most promising new technologies for ensuring future global food security. Under the rule-based system of the relevant WTO agreements, countries must base their policies on science. To do otherwise will lead to trade chaos and thwart progress for agricultural issues in the next round.
Conclusion:
Mr. Chairman, everyone in this room knows the importance of trade to U.S. agriculture. In the recent past, we've been sobered by a global financial crisis that has devastated many of the emerging Asian economies, as well as impacted Japan, and softened demand in Russia. While we are seeing some strengthening in the Asian economies, we continue to face global oversupply of many commodities that has sent prices plunging to their lowest levels in years. We have learned that our farmers cannot rely entirely on trade as their only safety net, but we must continue our efforts to reform world agricultural trade so they have new, more open markets and a level playing field.
As President Clinton said earlier this year in Chicago:
"We ought to continue to expand trade. We ought to enforce our agreements more vigorously. But I do not believe that a country with 4.5 percent of the world’s people can maintain its standard of living if we don’t have more customers."
To realize the potential of the global marketplace, we have a lot of work ahead of us. We must construct a world trading system where every producer gets a fair shake and where all products, goods and services are traded freely across oceans and continents.
In the next round of WTO negotiations agricultural trade will be the focal point, and we will be working hard to help American agriculture maintain and expand our export markets overseas.
Mr. Chairman, that concludes my statement. I would be happy to answer any questions the committee may have.
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