Thank you, Representative Ness. Dave Preisler to be followed by Paul Christ with Land-O-Lakes and David Livingston with the Family Dairies USA.

MR. PREISLER:

Good morning, my name is David Preisler. I’m here representing the Minnesota Pork Producers Association. In 1998 the U.S. pork industry exported pork to 115 countries. Many of these countries provided only the most minimum level of access to imported pork. Moreover, prohibitively high tariffs and other barriers in other nations preclude the export of any U.S. pork. The sheer volume of countries with trade limiting practices precludes me from providing you today with an explanation of each. But I am going to talk about two specific countries or practices that we believe are priorities for the pork industry. Japan is the largest export market for U.S. -- for the U.S. pork industry, generating sales of almost $615 million in 1998 alone. The importance of expanding exports to Japan has never been greater. And we even have some personal examples of that here in Minnesota. We have two groups of small and medium sized farmers here in Minnesota that just themselves are exporting about $12 million of pork to Japan. And, again, these are just two small groups of exclusively small and medium size producers. They are looking at -- at renewing their contract with the Japanese company and the Japanese company would like to double it as quickly as possible. These farmers, by the way, actually were profitable in 1998 which is a far cry from where most all of the other pork producers were in that year. And so this is an example of where trade can really work to help. Japan’s pork import policy was among the most difficult issues dealt with in the Uruguay Round. Prior to the Uruguay Round Japan’s pork import regime was directly linked to its pork price stabilization scheme. The price system still exists and still has an upper price ban and a lower price ban based on the cost of production data gathered by the Ministry of Agriculture in Japan. Before the Uruguay Round when the domestic price for pork exceeded the upper price ban, the import gate price for pork would be lowed for pork and vice versa when the domestic price fell below the price ban. Today as a result of that Uruguay Round, the gate price is no longer linked to domestic price stabilization system. As part of that round agreement, the gate price was first fixed and is now being reduced by roughly 13 percent over a five-year period reaching its final level in Japan’s fiscal year 2000. So we have made some real progress. U.S. pork exports to Japan have increased under that agreement. However, we think that U.S. pork exports would explode if Japan’s market was liberalized further in the upcoming trade round. Greater market access to Japan is the number one country priority for the U.S. pork industry in the next round. The next thing I’d like to touch on briefly is the European Union pork subsidies and the effect that it’s having from a distortion standpoint in the market. The largest exporter of pork in the world is Denmark. That country is the world’s leading exporter for one simple reason, subsidies. These subsidies must be eliminated. Without these subsidies the Danes and other EU producers will lose market share in Asia and other foreign markets to efficient producers in the United States. The United States pork industry will be the primary beneficiary because the United States is the lowest cost producer of the safest, highest quality pork in the world. The EU pork regime came into operation in 1967 and has since undergone a number of changes with internal support measures playing a major role. The grain regime was introduced at the same time as the pork regime, and importantly pork is regarded as a processed grain in the EU. There are three basic methods of support that the EU is using. (1) is export refunds or export subsidies. These allow the EU to export surplus supplies under the world market preventing them from having a depressed effect on EU prices. (2) aid in private storage. These are introduced on a temporary basis to remove surplus supplies on the domestic market. (3) import tariffs and non-science based restrictions applied to non-EU product. Interestingly enough, as we got some comments from the person who is the -- in charge of the Danish agricultural sector acknowledging some of the restrictions that they’re looking with, especially antibiotic use, saying that, yes, we know that there’s no science here, and traditionally we make our decisions on science, but it didn’t change his mind. And so he very much acknowledged on some of the things that they were trying to do from a protectionist standpoint. These three methods have led to wide distortions in the world pork market and how the EU fits into that, and it’s also resulted in tremendously expanded production in the EU. And they are our competition. And pork prices around the world are at levels that are not sustainable at all. And with the type of subsidization that’s occurring in the EU, they are some of the only places that we’re seeing that may have some sort of a capability to come through this without some sort of change. Thank you for your time and I wish you well in Seattle.