Agriculture exports support nearly 750,000 jobs. Productions from nearly 1 out of 3 harvested acres is destined for overseas markets. Even in the current downturn, about 25 percent of agricultural sales are for export, compared with 10 percent on average for the rest of the economy. 96 percent of the world's consumers live outside of the US, so exports present one of the best ways to increase farm income.

Access to these foreign customers is critical because the US agriculture sector is especially reliant on export markets and this dependance is likely to grow. Agriculture is already more reliant on exports than the economy as a whole. US agricultural exports climbed to a record of nearly $60 billion in 1996. And if you add fish and forestry products to that total, you get almost $70 billion. And the $60 billion total is up from $40 billion at the beginning of the decade.

Export value declined the past two years, however, and will likely be down for 1999, as well, due to record world crop production for the past four years, the Asian financial crisis, and a stronger dollar. We project exports of $49 billion in the current year despite an increase in export volume of 5 percent, which I think is an indication that continued low commodity prices are holding down export values as well.

Because the 1996 Farm Bill made agriculture even more dependant on market returns, our export success is likely to be found in those commodities where we have a comparative advantage. With certain agricultural commodities, such as cattle hides, we are already exporting more than 50 percent of production. Export sales are over $1 million annually for a number of food and agricultural products. Especially those major bulk commodities where the US enjoys both production and marketing advantages.

Another factor pointing to the importance of exports to agriculture is the close relationship between farm equity and exports over the years. History shows that when exports rise, so does farm equity and vice versa. Exports are projected to recover, but with nearly 45 percent of the world economy outside of the US in depression or recession, that recovery is likely to be gradual. However, there are some indications that a turnaround is underway, such as in South Korea, for example.

A key to expanding export markets and increasing our access to customers outside the US is through trade agreements. Both the WTO and NAFTA agreements helped to expand trade over the past five years. Soon after the implementation of the Uruguay Round, US agriculture exports reached a record high. Of course, many factors were behind that performance, and as this slide makes clear, exchange rates have a huge influence on export levels. But almost all economists agree that lowering trade barriers through trade agreements has helped increase trade.

The imports continue to grow as well, but agriculture's positive net trade balance remains large even though it, too, has narrowed in recent years. It is estimated that by the year 2005, agriculture exports will be about $5 billion more annually than they would have been without the Uruguay agreement. Other agreements have produced similar benefits. For example, it's estimated that in 1994, we sold $1.3 billion more beef and citrus to Japan because of the agreement we negotiated with that country on those two commodities.

The NAFTA agreement has also had an impact. Our NAFTA partners, Canada and Mexico, have been more important destinations for US products, now accounting for over 25 percent of total US export sales and surpassing our exports to the European Union. We estimate that in its first three years, NAFTA accounted for a 3 percent increase in exports to Mexico and a 7 percent increase to Canada. Last year, US farm exports, through our two NAFTA partners, increased by 11 percent to a new record for both countries at the same time that our overall US exports declined by 6 percent mostly because of the Asian crisis.

Although recent trade agreements have produced real benefits for agriculture, we recognize that the playing field is far from level and that much more work needs to be done. A major part of our strategy to level the playing field for agriculture is to be successful in the upcoming WTO round of negotiations. To understand where we are going in the WTO, it is important to understand where we've been. The general agreement on tariffs and trade, or the GATT, was established in 1948 and set the basic rules for international trade. A number of GATT negotiations or rounds took place between 1948 and the present, with the most recent, the Uruguay Round, concluding in 1994. The Uruguay Round established the World Trade Organization which is basically a continuation of the GATT system.

The Uruguay Round agreements opened a new chapter in agricultural trade policy committing countries around the world to new rules and specific commitments to reduce levels of protection and support that were barriers to trade. Agriculture finally became a full partner in the multilateral trading system. For the first time, countries had to make across-the-board cuts in agriculture tariffs. For the first time, export subsidies had to be reduced and internal support policies that distort trade were capped and reduced. New rules set a scientific standard for measures that restrict imports on the basis of human, animal, or plant health and safety. And a new settlement process was adopted, one that we in the US have used successfully in a number of cases. In fact, the US has filed about one-third of the more than 150 cases that have been filed with the WTO since its founding five years ago, and that's more than any other country.

For example, we recently won dispute-settlement panels against the European ban on beef from cattle raised with growth hormones, and against the EU's banana import licensing regime, as well as, against Japan's restrictive quarantine requirements for fresh fruit, and Canada's dairy program. Our effort now is to ensure that the banana and hormones decisions are carried out so that US exporters have the market access that they are entitled to under these WTO decisions.

The Uruguay Round agreement was a good start. It has already resulted in new market opportunities and increased farm exports. But the Uruguay Round was just a start and the upcoming round of WTO talks are the next step.

The next round will be launched at a ministerial meeting in Seattle on November 30, with nearly 130 countries in attendance. The actual negotiations will start in early 2000. The full scope of the negotiations is yet to be determined, but agriculture and services will definitely be included. The general expectation is the negotiations will last three years, with implementation beginning in the year 2004.

In setting the agenda for the next WTO round of agriculture negotiations, we will build on the Uruguay Round accomplishments. Although tariffs were reduced in the Uruguay Round, they are still too high, with some countries maintaining agricultural tariffs at 50 percent, while the US average is about 8 percent. Our goal is to negotiate a further reduction in tariffs. We also want to expand market access under tariff-rate quotas by increasing the quota amount and decreasing the tariff outside the quota.

Another top priority is the elimination of export subsidies. As Senator Baucus indicated, the European Union, for example, accounts for about 85 percent of the total export subsidies used in agriculture worldwide, and they are currently permitted to outspend the US on export subsidies by about 10 to 1.

We also want to see discipline brought to the operation of so-called state trading enterprises, which our government-authorized export or import monopolies. This monopoly power allows STEs to price their products artificially low and unfairly increase market share. We'd also like to see STEs subject to greater competition or reformed so that they operate in a way that's fair and more transparent.

Trade distorting domestic support is being reduced under the WTO rules, but these subsidies also are too high. A comparison of such support shows that globally, domestic support in Europe and Japan remains higher than in the United States. Our goal for the next round is to make sure that such assistance has a minimal impact in interfering with markets and distorting trade. Programs that encourage farmers to produce surpluses without regard to efficiency or environmental costs are often maintained by keeping out import competition and dumping surplus production in world markets.

Other goals for the next round include: Ensuring that health and safety rules continue to be based on sound science under the so-called sanitary and phytosanitary agreement; and establishing rules that allow trade involving new scientific innovations, such as trade in products of biotechnology.

Again, we appreciate your attention here this morning and we look forward to hearing your comments both today and over the months ahead. Thank you very much.