MR. BALES: Thank you very much. I'd like to thank the panel for this opportunity to address -- for giving the Montana Stockgrowers the opportunity to address the issues regarding the 1999 WTO round in Seattle this fall.

I am Keith Bales, I'm a rancher from Otter, Montana, President of the Montana Stockgrowers Association. Formed in 1884, MSGA represents the oldest livestock association in Montana whose policy is developed by its members through a committee structure and a board of directors. My testimony today represents the official position of more than 3,400 members of MSGA on trade issues. I also have some of my own thoughts. In addition, I have been asked to speak on behalf of the Wyoming Stockgrowers Association by its current president Rob Henry, and their 1,200 cattle producers.

The Montana Stockgrowers Association recognizes the need for trade. It is critical to the survival of our economy as the US represents only 4 percent of the world's population and yet produces approximately 25 percent of the food of the world. However, we also feel strongly that trade must be fair to all concerned. We feel imports do increase supply and have had an adverse effect on the profitability of Montana and Wyoming cow/calf and feeder operations. In many cases, these increased imports have violated the spirit, rules, regulations, and safeguards set up by the US Congress relative to live cattle and beef imports.

There is significant concern that NAFTA and GATT have resulted in an unfair trade environment for US cattle producers. Total accountability of beef and cattle trade activities is needed to determine the real impact of all beef and live cattle imports on US markets. Our members have requested that on several occasions that congress require a review of the effects of NAFTA on livestock industry and address those negative impacts.

With depressed cattle prices and increased imports in 1996, our members asked for aggressive action to implement a beef and live cattle import quotas and import tariffs to reduce beef and live cattle imports to levels that do not exceed 3 to 4 percent of the combined beef and live cattle trade differential. This concern has also caused MSGA, in 1998, to withhold support for fast track legislation until current inequities are addressed and we receive some assurances that a positive impact on cattle producers become a priority in any future trade negotiations.

Our frustration has also led to MSGA's member support of the current petitions filed against Canada and Mexico with regard to antidumping. In past WTO negotiation, it appears that US has taken the lead on free trade and set the free trade example by making the US market more accessible to most beef cattle and beef products from other countries. However, the US has failed to demand reciprocity through equal and open access to many of our trading partners' markets. A good example of this is the movement of live cattle from Canada into the US versus the movement of live cattle from the US into Canada. This led to the development of the Northwest Pilot Project approximately five years ago. The problems we have had with that will be detailed next by John Swanz in his testimony.

Another example is the current European Union ban on US hormone-fed beef. It appears the European Union would rather pay large countervaling duties and protect their ag producers than provide access for US beef in the European Union. MSGA strongly urges the US to demand more reciprocity in future trade negotiations. They should demand harmonization on regulations and demand access to foreign markets in return for access to US markets. US producers don't object to being asked to compete with other producers on a level playing field, but we feel helpless competing against other governments when the net result is a reduction in our standard of living.

While we recognize we are in a global marketplace for commodities, the only thing we have in common with producers in other countries is the commodity itself. The financial terms are different. Environmental regulations are different. The insecticide, pesticide, and animal health regulations are different. Food safety laws are different. The economies are different, and the societies are different. We find ourselves trading our market or marketing our commodity like beef with everyone operating from a different set of regulatory, economic, and social environments. The result is US producers see their standard of living decreased because the world commodity pricing system and foreign economies have worked largely to our disadvantage and has reduced our producers' standard of living similar to other poorer agriculture countries.

While congress is phasing out agriculture subsidies in the US through the Freedom to Farm Act, US producers become more dependent on ag exports for new markets. But at the same time, market access is denied by other countries putting US producers at a huge disadvantage. Just look at the commodity prices in general over the last several years and what has happened to the US agriculture. These issues must be addressed. US producers produce the most abundant, safest, highest quality, and predictable food supply of any country in the world. We have created the agricultural wonder of the world. But we have also made it a sacrificial land to free trade.

Future WTO discussions must correct this terrible inequity to lower the massive restructure of American agriculture as we know it today. We must have equal access if we are to save the family farm. Thank you for this opportunity to address the panel. I would be happy to answer questions.

MR. NELSON: Panel, questions or comments?

MS. LAURITSEN: Yeah. Keith, I have a question, and John and anybody else might be interested in you referenced different sets of regulatory economic and social environments. The European Union has a mandate for the upcoming negotiations to negotiate on animal welfare rules. And, I guess, I would like to get your reaction to that.

MR. BALES: I guess my thought is too often times in the past many of these things have been negotiated on welfare or health standards and so on, and the US seems to be the only one that complies with those standards. And so too often times, those things are used to put US producers at an extreme disadvantage. I think that any rules or any negotiations, as far as animal welfare, needs to be based on sound science and fact. I, personally, do not believe that animals have the same rights as individuals. But I do believe in taking care of our animals, and I think all US producers do a good job of taking care of their animals and treating them properly.

But I do have the extreme fear that in these negotiations, that if rules are brought up, they will be used to inhibit us and yet not other nations of the world.

MR. SCHROEDER: Keith, I enjoyed your comments. Reciprocity, I've often thought that is a basic point of fairness, and it makes sense in our trade relationships to demand reciprocity. I guess the problem with that is, when you look around the world, you've got a lot of countries that don't match up very well.

Our Canadian neighbors, for example, I think the population up there is only 20 million?

MR. BALES: About a tenth of the US, I believe.

MR. SCHROEDER: So we have differences of population. The Mexicans grow a lot of tomatoes, we grow a lot of tomatoes. We can say, "Well, you can't sell your tomatoes to us unless you buy our tomatoes." You can think of it as, why are we trading tomatoes back and forth when we each grow a lot of tomatoes ourselves? The reciprocity sounds good, but then you begin to look at how markets match up and populations, there's a lot of diversity out there.

What we're trying to do is get all tariffs to come down, get all markets, basically, more open. And the reciprocity, I like it, but when you start to try and match it up, sometimes it doesn't work very well.

MR. BALES: I would agree with that, but by the same token, Canada does have a large agriculture base and a very small population. But when you compare that with Asian countries that have large populations and not an extreme amount of agriculture, we are put at an extreme disadvantage because all of those nations have extreme tariffs on our products going in. And in order to make free trade work, we have to have those barriers broke down the same as our barriers are broken down, and that is a lot of the problem today. And I think that that is a lot of the frustration of the livestock industry out there is that we feel we have lowered our barriers and we have allowed product to come in and yet we have not negotiated strong enough to make sure that that has happened with other countries, that they have had to lower their barriers to allow our product into them.

There is also another thing, and we feel very strongly in this as producers of beef in this nation, that we have the safest product in the world. And we have some concerns that insecticides and animal pharmaceuticals are used in other countries that are not allowed to be used in this country, therefore, it puts us at a disadvantage. And if they're not healthy for us to use them on our animals for our consumers, then they should not be allowed in other parts of the world either.

MR. GALVIN: If I could, I do accept your point that we could always do things better and there's room for improvement. But the bottom line question, I guess, is, are we better off with trade or without it? And I think if you look at the gains we've made in Mexico with red meat exports, for example, where last year we shipped them a record, and we're at a record or near a record in terms of our total red meat exports overseas on a dollar basis. It actually hit a record in '96, when we hit about $4.3 billion in red meat sales. That's declined a bit now to about $4 billion, but that's mostly due to lower values, our volume continues to be very strong.

So the question is, has trade over the last five or six years been a net benefit to the livestock industry or has it been unbalanced and harmful? And that's the real question I think we've got to examine.

MR. BALES: I would agree that trade can be very beneficial for the livestock industry. However, as I eluded earlier, it seems that even though you say our trade has increased, that's true, but the financial viability of the producers in Montana and the rest of the producers in the United States is far worse today than what it was five years ago. If we had had other markets opened up so that we could have exported more, we might not be in that shape. And, yet, at the same time, we have had lots of product coming in, too. We are importing more product than we are actually exporting, the dollar values are different, but as far as product, we are importing more than we're exporting.

MR. GALVIN: I think, no question, the condition of the industry is worse today than it was five years ago, no question about that. Again, would it have been worse off or better off if we would not have had two-way trade over the last five years? I think of pork exports, for example, up 20 percent last year, even though we had live hogs selling for $25 a head in December. But I think the question is, how much worse would we have been off had we not been exporting those record amounts? But I understand, too, that, clearly, imports are up as well, and that's especially true in the case of Canada on both live animals as well as meat. No question.