MR. KUCHARIK: I would also like to thank you for the opportunity to appear before you here today. I am Charles Kucharik. I'm the vice-president of sales and marketing at Allen Family Foods. Our Delaware-based company produces and markets chickens in the northeastern United States and internationally.

I would like to reaffirm Mr. Turley's statements about the importance of exports to my company and to the industry as a whole. Last year, the U.S. exported 2.1 million tons of broilers, 202,000 tons of turkey, 49 million dozen eggs and $31.2 million of processed egg products. Poultry is Delaware's largest single agricultural export commodity, contributing $90 million to the state's economy.

My brief comments will focus on the issues related to subsidies, regulatory measures and market access. These issues are addressed in greater detail in the written comments which I'm submitting.

Export subsidies will no doubt be reduced in the next round and there will be a strong push to eliminate them altogether. The EU is the last major exporter to rely heavily on export subsidies and continues to employ such subsidies on poultry, as your graph showed. Our industry believes the U.S. should seek the total and immediate elimination of export subsidies. At the same time, we believe that as long as export subsidies continue to be permitted, our negotiators should make no commitment or reach any agreement that would prevent the use of export enhancement programs for poultry and egg products within the limits of the Uruguay Round.

U.S. poultry and egg exports continue to face many sanitary measures throughout the world, our industry phytosanitary agreement. We believe our negotiators should push for improvements in the current SPS agreement rather than by reopening or renegotiating the existing agreement. This approach would allow the poultry industry to seek stronger language on such issues as the role of science in regulatory decisions and equivalency without the risk of having the existing agreement weakened.

The EU can be expected to try to introduce provisions into the SPS agreement that would permit countries to justify food safety or other regulations on social rather than scientific grounds, consumer concerns, animal rights, whatever issues they would bring in, or on the basis of precautionary principle. The EU's objective is clear, to avoid phyto limits on its ability to restrict imports. That's its goal.

If such subjective considerations are incorporated, the EU could issue trade restrictions such as a ban on U.S. poultry because we use antimicrobial treatments in processing without the fear of a WTO challenge.

Under the precautionary principle, virtually any country could ban any product for nothing more than a domestic political pressure. Our industry is also interested in the U.S. strategies for addressing problems in market access and tariff reduction. Many tariffs around the world are exorbitant, providing the same effective level of protection from foreign competition as quotas, levies and even outright prohibitions that were eliminated in the Uruguay Round. U.S. tariffs generally are lower than ten percent and the U.S. supplies no additional protective measures.

Our industry strongly supports a formula approach to tariff reduction and believes a formula should result in deeper cuts in highest tariffs to provide for greater equity and global trade. One possibility is a formula where the higher the tariff, the deeper the percent reduction required. Another is to superimpose a maximum tariff level over a more traditional formula approach. A maximum ending tariff of, say, 25 percent would make a huge difference in the ability of U.S. exporters to penetrate certain foreign markets.

The industry also supports the elimination of tariff rate quotas, TRQs, by the end of the transition period of the next round. TRQs are introduced in the Uruguay Round as a mechanism for establishing minimum import/export levels based on domestic production. The trouble is TRQs are too often ineffective. In some cases, the TRQ import licenses for certain products are awarded to the domestic producers of those same products. Therefore, new disciplinary rules ought to be developed and adopted for this round.

Thank you for the opportunity to present these rules on behalf of the industry and the U.S. Poultry and Export Council. We look forward to participating actively to ensure a positive outcome for our industry. And I am submitting a full document from USP.

AMBASSADOR BAAS: If I could just make one observation and ask a question. I agree with you a hundred percent on cautionary principle. It's clearly, I think, protectionist. And I think what I find most objectionable is the implication that other countries, such as the United States, don't, in fact, care about the safety of their consumers and don't take precautions when, in fact, you as an industry, I think, probably know better than any people EFIS, FDA, EPA, their very basis of what they do is precaution and to make sure, in fact, the products we do put on the market are safe. So I think we are very much aware of the concerns you expressed and have been working very hard in a variety of 402 to try to prevent a principle of precaution to be adopted which would allow, as you say, any country to ban anything simply because they think there may be one more test out there which may prove that something is wrong with the product.

The question I would like or I would value your observation would be on animal welfare. I fear that this is a coming thing in the European Union. They just passed, as I'm sure you're aware, a minimum size, I guess, for chicken or hen coops or whatever everyone calls them. And, again, I see this as another effort probably to find a way to keep out our products. And I would appreciate your views on that, particularly since I think poultry may be the first industry in the cross here, so to speak.

MR. KUCHARIK: Absolutely. Well, when it comes to animal protection, quite obviously, to be a productive operation and be a successful operation, you have to have the proper treatment of the animals and this is something that our industry has strove for through the decades that have built it to the success that it is.

I think that it's difficult to really count too much on that from the standpoint that the way that animal rights can be used as a -- just a blocking -- as a non-tariff block is obviously an emotional issue. Different countries have taken different paths with regard to how they have respected the treatment of animals and that's no easy task as to how we would actually come up with a solution to it.

I think it comes back to almost the same issue of equivalency. We do treat our animals fairly. We have to do that to be successful. And I think that we would just have to fight the battle on the basis that we would want to have the same equivalency that they require for importing over into here to export to the United States.

It's just an equivalency issue, I guess, for us.

UNDER SECRETARY SCHUMACHER: What is the mortality rate in the flocks in Delaware?

MR. KUCHARIK: I have technical people who would know that, but it is a very small percentage, yeah.

UNDER SECRETARY SCHUMACHER: I used to raise, when I was rather younger, a lot younger, I had a flock of laying hens and I have very great debates with folks in Europe because they want four or five different kinds of eggs now. They have battery eggs, barn eggs, feed range eggs, cage eggs for pritches, cage egg without pritches. So all leaning towards happy chickens. I used to raise happy chickens, but, unfortunately, 20 percent of my happy chickens went to chicken heaven before I intended them to do so. And that was always a problem with my mother who did not appreciate me with my less-than-happy chickens because they were in the barn and they would get out.

But it's an important issue and I think the market's right to raise it because I think we do have a very low mortality rate in our animals in the United States and we'll have substantial debates across the animal spectrum on that issue.

AMBASSADOR BAAS: One more question. Jack mentioned you were very involved in the former Soviet Union. We worked very, very hard. As that economy comes back, it's been coming back some, but -- that Soviet Union/Russian market plus the Chinese market. I'm so proud of what Teresa and her team did because I think that has real potential in China. They simply can't keep up. What they really want to do is use our biotechnology to have a four-footed chicken. Right now we only have two-feet chicken because the demand for chicken feet what I call the bits and pieces in China is substantial. If we could get further access, good veterinary agreement and the tariffs you have negotiated, Teresa, I think you ought to come in on Russia and China to counsel us. How should we conduct our negotiation with those two?

MR. KUCHARIK: Well, in regard to Russia, the true issue right now today is the cost of an imported item is four times what it was last August. That is the perspective. The valuation of the ruble is now worth 25 -- there's 25 rubles per dollar. It was down around six in August. So you've got an imported item into the Russian economy that is now four times as expensive as it was. That is the issue that has a very, very long-term detriment to the U.S. exports. And the potential for recovery into Russia is -- the buying power of the Russian public is quite low at this point in time. There's an awful lot of barter and other trade going on that allows them to subsist.

The efforts that are being made basically with a very long-range direction there, to further that comment.

As far as China, with over a billion people in that country, we applaud the efforts to get the tariff established and hopefully to get this agreement signed that we can proceed. There are a lot of hungry mouths that we have been quite successful in approaching with poultry products. It is a market that we will continue to work very hard to work on.

As far as obstacles, again, the price point of items going into China is quite low, as you say, the bits and pieces. It is a point that basically, again, helps to utilize some of the things that would not sell in a grocery store in the United States. But it is very much a very good opportunity for American poultry and we are working very hard. USP does have offices in China and Hong Kong and Singapore and throughout the Malaysian area to handle the growth there and we turn to them for expertise in those specific markets and offer their assistance, you know, for any in-detail discussions of opportunities into those markets.

UNDER SECRETARY SCHUMACHER: Just one quick question: As Dr. Putz in Texas indicated, things are not good in rural America. There is likely to be emergency package sometime August and September primarily focused on domestic agriculture. There's some senators on my staff and I'm working to have an export component to that emergency package because we are in some cases moving market share. The market access program, Jack, has been cut back to $20 million. Would your industry, if some senators came up with an export component to that, we could talk to Senator Roth, Senator Biden, other senators, would they be helped if we found additional support on a temporary basis to further foster your commodity, your chicken exports overseas? Would that be of some help or do you feel you have sufficient institutional capacity to route your exports overseas ?

MR. KUCHARIK: Well, I believe we would support basically the -- at least have an access to export enhancement type funds that would allow us to penetrate some of the markets that are still subsidized. When you look at the chart that you showed of what percentage of commodities are being exported as part of an industry, in poultry, as Mr. Turley said, you know, that ranges by company between, you know, 10 and 35 percent of the particular company's poultry is being exported. I think as an industry, it's around 17 percent. When we can't sell that product overseas, it comes back and it does damage the domestic market. It does hurt the farmer because that product no longer can be sold in those other world markets. It comes back and must be sold in the domestic markets. And, you know, it just ends up hurting everyone as it pushes down domestic prices. It helps the consumer if the consumer gets to see that price. Right now we have a dislocation where the consumer is not seeing the low prices that poultry is receiving. At grocery stores, you're still selling about the same price.

UNDER SECRETARY SCHUMACHER: That's a polite term. You call it dislocation. I call it polite greed.

MR. KUCHARIK: Thank you.

UNDER SECRETARY SCHUMACHER: Thank you very much for coming here and counseling us on these very important issues. You're doing a great job on your exports. Thank you.

MR. KUCHARIK: Thank you.