Now from the Pennsylvania Farm Bureau, Mr. Guy Donaldson.

MR. DONALDSON: Distinguished Panel, my name is Guy Donaldson. I'm President of the Pennsylvania Farm Bureau and I'd like to recognize the Secretary of Agriculture of the state of Delaware. I came to know Jack Tarburton in another life when he was President of the Delaware Farm Bureau. Jack, it's good to see you again.

SECRETARY TARBURTON: It's good to see you.

MR. DONALDSON: The Pennsylvania Farm Bureau represents 27,000 member families in Pennsylvania. Our members produce a great diversity of agricultural commodities from dairy, poultry and livestock, to fruits and vegetables. I was interested in the Secretary's comments and I'm going to get into that Chinese situation.

These exports help boost farm prices and income while supporting over 11,000 jobs from farm to processing, transportation and manufacturing of agriculture products. And the value of those products was $542 million in 1997. Exports make up about 13 percent of the farm cash receipts in the state.

I'd like to talk about two of our products, one being dairy and the other one being fruit. Our nation's dairy industry continues to compete with the highly subsidized milk-pricing systems in the European Union and in Canada that provide competitively high prices for their producers domestically while providing competitively low-priced dairy products for export. The European Union accounts for 85 percent of the government subsidization of dairy products in the world market. Dairy is our state's number one agricultural industry and we are the fourth leading dairy-producing state in the nation.

In 1997, Pennsylvania exported Dole $47 million worth of dairy products. We recognize that about 50 percent of our dairy exports nationally are a result of some sort of government subsidization. While we recognize the need for more open dairy export market opportunities, we also cannot afford to unilaterally expose our producers to the concept of a free world market that doesn't exist. The Farm Bureau continues to support utilization of the Dairy Export Incentive Program to the full extent legal under our trade agreements.

Closer to home, the United States has recently won the WTO dispute settlement over Canada's importation quotas used to protect their domestic milk pricing system. We now anxiously await the implementation of the settlement. It's these types of barriers that cloud the world market picture for U.S. dairy export opportunities. While it remains unclear just how promising the world market is for U.S. dairy producers, we do know that a growing export market for dairy products creates additional competition for existing milk supplies. Increased competition ultimately results in a larger more efficient dairy industry that enjoys market-clearing prices that are higher than what would prevail in a market without exports.

Now, as I said before, I'm an apple grower and I come from Adams County, a little place call Gettysburg. I don't know if you've ever heard of that before or not. My industry's export opportunities continue to be disadvantaged by countries such as Mexico and Japan who create phytosanitary barriers by requiring imported apples to be certified by our own inspectors at the expense of U.S. growers. While adequate inspection and certification can be performed by either state or USDA inspectors, these countries are mandating a cost-prohibitive requirement that would force producers to pay for and Howse foreign inspectors in order to have access to their markets.

The next round should result in tariff equalization and increased market access by requiring U.S. trading partners to eliminate the tariff barriers within specified time frames. Our producers compete openly in their own domestic market with their foreign competitors, but we are shut out of the export markets due to prohibitively high tariffs. We need to correct this imbalance for our farmers. All WTO member countries should reduce tariffs, both bound and applied, in a manner that provides commercially meaningful access on an accelerated basis.

As has been stated earlier, the U.S. apple industry has filed a petition jointly with the U.S. Department of Commerce and U.S. International Trade Commission over the dumping of apple juice concentrate in the U.S. market at prices 91 percent below the cost of production. Apple juice concentrate imports from China increased more than 1200 percent between 1995 and 1998, from 3,000 metric tons in 1995 to 40,000 metric tons in '98. During that same time, the average price for apple juice concentrate from China declined by more than 50 percent, from $7.65 a gallon to $3.57 a gallon. China's share of the U.S. market has increased from one percent in '95 to 18 percent in '98. U.S. apple growers have suffered economic losses as a result. Between '95 and '97, the average price that U.S. growers received for juice apples fell 39 percent from $153 a ton to $93 a ton according to the USDA. As a consequence, many growers were forced to leave their apples in the orchards to rot because they could not recoup their cost of harvest.

I am a member of a fruit processing cooperative, Knouse Foods Cooperative, and until recently, we owned and operated a concentrate production facility. The massive increase in dumped concentrate from China that has occurred over the past few years has forced Knouse out of the concentrate business. And incidentally, they're part of the dumping suit that's going on right now.

Farm Bureau recognizes that China is not a WTO member country. However, we need to give China the opportunity to join WTO trade standards in order to address their dumping practices. Otherwise, we are forced to impose our own import duties on China apple juice concentrate. This is not the direction in which we can continue to move if we are to reach our goal of freer trade in agricultural world markets.

In summary, we support liberalization in global agricultural markets that will result in true reform of the current trading regime and bring about fair trade for all producers. The United States has a tremendous opportunity before it to shape the agenda for the next round and should seize this chance to demonstrate to the world that we are committed to opening new markets for U.S. agriculture. Given the economic turmoil being experienced in many of our important export markets, the launching of new negotiations to further open markets has never been more important.

Thank you so much.

MS. HOWSE: Yes. I just wanted to note that a couple of the problems that you've pointed out, ESPP barriers negotiated agreements with countries like Japan with regards to their inspectors coming here. It's been brought to our attention that some of the bilateral agreements that we negotiated back then when we first got into the game may be not necessarily the best agreements. And I think that the industry needs to work together with us, with USDA and USTR in ensuring that phyto bilateral agreements that we negotiate with regards to technical issues and standards are, in fact, consistent across the country so we don't set precedents, for example, in Japan with their inspectors coming here that we need to follow China, etcetera.

And we would have to rely on the industry as well to remember not to push us at the last minute to cut a deal in order to get into the market that may again cost us across the board later.

I think the same thing goes with regards to precertification, something that we want to probably try to stay away from in our bilateral agreements because it puts a lot of burden on our system and an extra step in terms of exporting and cost to U.S. producers.

MR. DONALDSON: I think the reason for that statement was I doubt very much whether our trading partners would want to have our inspectors come over and inspect their product coming in here. And that's the reason.

MS. HOWSE: And I think you want to get away from that in the trade agreements and the cooperation between government and industry will help assure that we don't do that.

MR. DONALDSON: I agree with that.

AMBASSADOR BAAS: Mr. Donaldson, I just want to compliment you on the quality of Adams County apples. I lived in 1994 to 1996 in Carlisle. I enjoyed the apples. I must say they were almost as good as Michigan apples that I remembered from my youth.

MR. DONALDSON: The Michigan apple growers would appreciate your comment.

SECRETARY TARBURTON: Guy, do you have a feeling about apple growers across the country -- this is a sanitary/phytosanitary question -- of what they might bring to the President or to Secretary Glickman regarding pasteurization of juices for export? There have been some people in New England, particularly, and Gus has received a lot of letters from apple growers who would rather not go that route. But it just seems to me as if that's --

UNDER SECRETARY SCHUMACHER: You're referring to exports, Jack?

SECRETARY TARBURTON: Yeah. Well, if you don't embrace the practice, there will always be the question of which juice got into the bottle.

MR. DONALDSON: Having a retail farm market ourselves and having done cider, we were disappointed to see the pasteurization thing come down the road. Now, that result helped because someone was careless in using apples to make the cider. I'm sure there was, and I'm not being critical of our organic friends, but I'm sure there was manure used in the orchard. Something like that got on the apples and into the process.

Be that as it may, I think we need to ensure the consuming public that the product that we have to sell is pure and wholesome and not have anything like that in it. I think we tried to do that. Most of the juice that I'm familiar with in the process side coming out of the factories is -- it is a product that has been put through a heating process which would make, you know, would solve the problem as far as export is concerned.

Now, beyond that, I don't know what it is they're referring to. But I do know as far as this concentrate issue is concerned, we've been decimated by the price of juice apples. And Secretary Schumacher talked about calls. Well, actually it's the undersized apples, not necessary calls, but the undersized apples that go into that. And this year with the drought conditions that we have in Pennsylvania particularly, we are going to see a lot of that stuff going into juice. And at these kind of concentrate prices, we won't even near cover our cost of production. It'll be way below that. So we've got a hurting on us.

UNDER SECRETARY SCHUMACHER: The Chinese who we just announced, I think it was mentioned yesterday, yesterday we did announce that it was five to nothing vote for the ITC to move forward on the antidumping. That's going to take another few months, so it won't affect it immediately. But we're going to be pretty aggressive.

MR. DONALDSON: Well, their production has increased so dramatically over there, I can't even fathom the number of acres that they've increased their production. So we're going to continue to see it coming in here if we can't somehow resolve this issue.

UNDER SECRETARY SCHUMACHER: Just one final question. I'm sorry I was called to make a call. I was out in Washington last Friday. They have between 3 and 4,000 family-sized orchards. I always thought that Washington state had these mega orchards and they have, you know, smaller orchards in the way some of the small orchards in Pennsylvania. And I've visited the orchards quite a bit over in Pennsylvania. John Rice and quite a few fine apple growers there. They are in free-fall in the state of Washington in the family apple business. They can't cash flow. A combination of exports haven't been quite as strong. But it's the concentrate issue. There's some problems in Mexico and they are requesting their senators to come up with some kind of relief package to help family orchards get through this crisis. Do you have any comments on that?

MR. DONALDSON: U.S. Apple had contacted me about sitting on a committee in Washington to address this issue. Unfortunately, I was on a Farm Bureau committee that was addressing all of agriculture, not just the apple industry. And so I'm torn between which one do I go to.

The apple industry in Washington is dependent upon the fresh fruit market, primarily. And when export sales drop or cease to exist or, for whatever reason, it decimates those guys out there.

Now, what has happened with them is that the banks have said to the growers, because they can't cash flow, they either reduce the amount of credit that they give them to 50 percent or, in some cases, eliminate them. They can't get credit. And when you have a fresh fruit operation and you're on what they call a maintenance schedule, which is a bare bones minimum, the quality of the fresh fruit -- and I guess I should be careful how I say this because I don't want to hurt those guys out there -- but the quality of their fresh fruit may be very marginal this year. That could be even worse. That could compound the problem for them.

I think that, you know, we talk about the livestock industry getting disaster payments. And rightfully so. But here is a minor crop industry, a fruit and vegetable industry, that suffered the same losses. And how do you respond to them? I think that's what the Washington growers are asking their Congressmen to look at if there's something they can do to help them. And if it helps Washington, it'll help the rest of us, I think.

UNDER SECRETARY SCHUMACHER: It's very difficult to do it under federal -- Jack's condition in Massachusetts and it's very difficult -- the federal government cannot do it, what I call single state program. Whatever we do has to be a national program. And the question I think for phyto consideration, if the family-sized orchards in Washington which are in terrible economic stress, the banks will not cash flow them. They will not make the credit. If there is some kind of a support program, something that -- you know, Pennsylvania, you sound like you're not in as great a stress as they are in Washington. But I've been -- the Vermont orchards and New York orchards are in distress, especially west of New York as well. I mean, it's a domestic issue but it's also linked to the trade because of this Chinese dumping of apple concentrate.

MR. DONALDSON: I think the concentrate issue has made it rise to a higher level. And all states are really hurting as far as apples are concerned. It isn't just Washington. It's across the board.

UNDER SECRETARY SCHUMACHER: Can we counsel with you later on that issue?

MR. DONALDSON: You certainly can.

UNDER SECRETARY SCHUMACHER: There's going to be a lot of attention in the Congress to overall crisis, as Dr. Putz has said. But it's also affecting horticulture. Apples and cranberries. Cranberries have fallen from $80 a barrel to $23 a barrel. We always like that apple cranberry juice and we need to make more of it.