MR. CAMERLO: Good afternoon. I am Tom Camerlo, I am a dairy farmer from southern Colorado. It's not too far from here, but yesterday it took me 20 hours to fly Delta up here, so it must be quite a ways further than I thought.

I am the Vice President of a newly formed cooperative Dairy Farmers of America, who markets milk for 23,000 dairy farmers in this country in 44 states, including the five states that are represented here, and we market the majority of the farmers' milk in that area. The reason we put this cooperative together is so we can compete with emerging America superstructures like the Kroegers and the Safeways of the world and we can market our product through them. In other capacities, I am the president of the National Milk Producers Federation in Washington and Chairman of the US Dairy Export Council Trade Policy Committee.

And I want the thank the director and all of you for allowing me to be here today. It's really been an interesting meeting and I hope you can take a lot from this meeting. Particularly, thanks to the Department for being such wonderful hosts, they gave me a lot of information, they even worried about me when I didn't get here.

Let me start by underlining the importance of the US dairy industry in this country. Dairy is the second largest agriculture commodity sector in the United States, and it generates a farm income of $20 billion a year and a retail expenditure of about $70 billion a year. Despite its domestic size, the industry is relatively a newcomer to international trade. Yet our export share has been growing in recent years. One of our primary reasons for US dairies' slow and difficult emergence internationally has been the fact that dairy is one of the world's most protected and subsidized industries. No one disagrees with the achievements of the Uruguay Round. Nevertheless, the Uruguay Round ultimately amounts to just a starting point in a long process for agriculture trade liberalization, especially in dairy.

For the upcoming round, our greatest fear is that the US Government will give up additional concessions to our market while leaving other countries' trade barriers in place or effectively allow them to erect new barriers. This, of course, would be absolutely unacceptable to the dairy farmers of the America. We are aware that the US dairy industry has much to gain from successful negotiations, but I can't stress enough to this Administration that dairy farmers will lose future growth, growth capacity, if an incomplete or poorly balanced agreement results. You must know the details.

I would like to briefly go over some of our most important issues and recommendations for the upcoming negotiations.

First, scope and time in the negotiations. I never thought I'd be here this afternoon and start my recommendations expressing my extreme concern about USDR's plans to support a round of negotiations that would accommodate early agreements in other sectors. I understand that some action has been taken by USDR, but it is not enough. We urge you to publicly oppose the concept of "early harvest."

Second, we would like to see all of dairy export subsidies, all dairy export subsidies eliminated in no more than five years starting no later than 2002. The elimination of export subsidies is the first and utmost priority for dairy farmers in America. In the absence of significant progress in eliminating all export subsidies, US dairy farmers would not be able to support negotiations on market access, domestic support, or any other sector.

Third, the US should focus on leveling the playing field and forcing the access obtained during the Uruguay Round. To this end, the US should work to reduce ordinary peak tariffs and cap over-quota tariffs. Dairy farmers do not support expanding the minimum access beyond the Uruguay Round concessions. We cannot have a situation in which the US over-quota tariff at 60 to 90 percent, depending on the product, is permitting imports above the quota while Canada, Japan, EU, Korea, among other countries, keep over-quota tariffs on these items at 300 percent or more.

In the Uruguay Round, the US gave "real and clean" access to its market. Unfortunately, exporting to other countries with tariff rate quotas or even under ordinary tariffs has been difficult or simply infeasible due to the administration of the TRQs or other non-tariff measures.

Given this situation, dairy farmers believe that over-quota tariffs on dairy products subject to TRQs must be harmonized through immediate reduction in some maximum bound level rather than increasing minimum market access that would only give greater access to US dairy markets while maintaining limited access in other markets.

Four, seek greater discipline on domestic supports while ensuring the EU supports do not exceed the United States. We support the US Government's position to tighten the rules on domestic support to ensure that such programs do not encourage excess production that distorts trade. However, we strongly believe that disarmament cannot be unilateral and we cannot afford to leave dairy farmers at the mercy of the European government outlays. And fifth, dispute settlement and circumvention. We would also caution the Administration about circumvention of WTO commitments is a problem. Agriculture, and particularly my industry, cannot afford time nor the resources to bring other countries into compliance. You are to be complemented for using the private sector in helping settle these problems. That's new, that's good. Keep it up, do more of it.

Finally, let me reiterate that the US dairy farmers are prepared to do their part to accomplish further trade liberalization in world dairy trade. However, the dairy industry is adamant what about what our priorities should be. First and foremost, support the single undertaking framework; second, eliminate export subsidies, zero; third, subsequent to a successful agreement on zero export subsidies, we would engage in negotiations on market access that level the playing field and enforce the previous agreements; and fourth, bring EU domestic supports under control. Thank you.

MR. NELSON: Thank you, Tom. Panel?

MS. LAURITSEN: I have a question. If we look at achieving the things that you have outlined, single undertaking elimination of export subsidies and then moving into the market access and domestic support, and then you made reference to other regulations and how other countries might try to circumvent maybe those kinds of commitments, I guess I wanted to find out from you what other types of border measures do we need to keep an eye out for in the case of the dairy industry?

MR. CAMERLO: There are several. Let me give you an example of one that we ran across in the Uruguay Round, and I think the USDA is aware of this also. When we were in attendance at the Uruguay Round, at the end of it when everything was being put together, we had an opportunity to get some cheese exports to Europe, which is almost impossible with their tariffs and their licensing and everything they do. But we had an opportunity to get some mozzarella cheese because in this country we have the largest mozzarella maker in the world headquartered in Denver. He has a process that puts the cheese out for pizza cheese specifically and it's different than anything else.

So we got the specifications of that, we had an agreement of an open window of 5,000 tons, which isn't much, to the European Union for this product, and we were the only one making it, we've got the patent on it. Got the deal closed, and as of today, we've exported 420 tons and that was in the first few months of the agreement. The reason was, first, we run into customs; they didn't check that mozzarella was mozzarella and whatever came in came in. The second thing we ran into was the license. After we spent time, USDR's time, and yours, and USDA's time really working on the licensing, and then customs seemed to find out we had a licensing problem. It was almost impossible for us to export this product by market. And the company that put this all together who I was working with said it isn't worth it, it just isn't worth the trouble.

So I think when you get the tariffs worked out, that isn't the only deal. We've got to look at the licensing. How the countries take a look at the product and define the product. It's a real problem.