And then Dale Flikkema will speak on behalf of the Montana Mint Growers Association. Chase is also a state representative from Helena.

MR. HIBBARD: Thank you, Bruce, good to see you. Bruce, Ralph, distinguished members of the Panel, I appreciate the opportunity to speak with you this afternoon. For the record, I am Chase Hibbard, I am a sheep and cattle rancher from Helena. I am President of the Montana Wool Growers and I'm also appearing here today as a board member of the American Sheep Industry Association.

At the outset, I must set the record straight, however. A representative from the Montana Stockgrowers testified that it was oldest ag organization in Montana this morning. In reality, it was formed in 1884, and the Montana Wool Growers was formed in 1883. So I'm glad to get that taken care of.

In the sheep business, we produce two primary products wool and lamb. Wool prices are currently at five-year lows, with half the nation's clip unsold. Stock piles in countries around the world and the Asian financial crisis are primarily to blame. In addition, the US pelt market collapsed this summer when Russia buying pelts.

Just yesterday I was told that Wellman, a leading wool top manufacturer is getting out of the business. And I also heard that Pendleton is declaring bankruptcy. Our domestic infrastructure is dwindling.

The lamb situation is not much better. From August of '97 to June of '98, the US wholesale carcass for lamb dropped 30 cents from $1.81 to $1.50 a pound. During this year's Easter Passover, when the lamb market prices and volume generally peak, the carcass markets fell further to $1.35. Slaughter lambs sold 50 to 60 cents per pound live weight, compared to the $1.00 received a year previous.

Imports of lamb from Australia and New Zealand have flooded the US market and also contributed to excess lamb supply. In fact, in 1998, the US Department of Agriculture announced an $8 million purchase of lamb to bolster producer prices due to increased imports. Imported lamb on a volume basis has increased from just over 7 percent of total supply in 1993 to 20 percent in 1997. In 1998, the increase continues with import levels of 30 percent over '97. The Department of Agriculture figures show that trend continuing with lamb imports for the first four months of 1999, 10 percent above the same period in '98, and 30 percent above the first quarter of '97.

This increase in lamb imports is accentuated by the strength of the US dollar, which has made imports from Australia and New Zealand much less expensive today than a year ago. Similarly, a currency crisis in Asia makes the US more attractive as a lamb export destination. In addition, the US market has become the relief valve for excess lamb for major producing countries. Not only are producers in the US concerned, but Australian industry publications are also concerned about New Zealand flooding lamb markets around the world. We have no safe guards against import surges to keep the domestic market from being decimated as those countries seek outlets for excess lamb.

The European Union shields its domestic sheep industry by maintaining absolute quotas on lamb imports, plus subsidizes their sheep producers in excess of $2 billion annually. The domestic industry filed a Section 201 petition with the International Trade Commission last September.

We've heard a lot of doom and gloom here today, and I guess I've given you a little bit in the sheep and wool industry so far, but this is a real bright spot for our industry. It was approved by the President July 7th, 1999, and I think was just implemented a few days ago. Under this program, tariffs will be placed upon all lamb imported into the domestic market from Australia and New Zealand. The tariff is modest on the first 78 million pounds per year, which is an historical level, then it jumps to 40 percent at over that level of 78 million pounds a year. The quota increases in years two and three, and the tariff decreases. It also includes $100 million in assistance to the domestic industry over this three-year period. This is a wonderful thing for our industry.

However, problems with the European Union continue to persist. The EU's absolute quotas on lamb imports and production subsidies continue to give our European trading partners a distinct advantage. The American Sheep Industry Association has policy that requests the US Government to address this unfair trade situation for sheep producers due to these production subsidies and import quotas maintained in the European Union. The 201 Action will help us very much for the next three years. But this problem will continue when those three years are over.

Another issue is Country of Origin Labeling. Future trade agreements should not restrict labeling as an appropriate manner for imported meat. The American Sheep Industry policy supports positive identification of imported meat at retail. The debate over a labeling requirement in the US Congress this year clarified that it would not violate trade agreements. I appreciate your time and your attention, thank you.

MR. NELSON: Thank you, Chase. Panel?

MR. GALVIN: We've heard a lot today about the need to get rid of export subsidies in the next round. And I believe we've already said from USDA and USDR that that remains a top objective for us as we head to Seattle. But if you assume that we're successful in doing that, in getting rid of export subsidies, and thereby forcing a change in terms of European policy, how successful do you see the domestic industry here over the next three years, especially with this transition assistance that was provided in the package announced by the President, I think some of the money is supposed to go for improved genetics, more of a meat-type lamb rather than wool, and I would like to get your quick assessment as to how far you think the industry can come over the next three years to where given that period here, that you're going to be able to compete if things are fair out there.

MR. HIBBARD: Thank you for the question, and we appreciate you examining the export subsidy issue. That's a very good question. I think we're handed a real good opportunity here with three years and a $100 million to help improve our situation.

We have a number of things underway in the industry that have been underway for some time. And I think we'll get a real shot in the arm with this infusion of capital and a date certain out there when it's due to end. I also understand that there's an 18-month review of this 201, and if significant progress has not been made, it's possible that it may not go for a full three years. So we're under the gun to do something.

You've hit on a few, there's about nine general areas that I think can be focused. One is genetic improvements, there's huge opportunity to make genetic improvements and there's a lot of programs that have already begun that can be bolstered, that can be more focused to those areas to the benefit of the industry.

The use of new technologies and production processes. The encouragement of the formulation of industry alliances, which will lead to better market information, more timely marketing, and better marketing of our product.

Development of reproductive and therapeutic drugs. We're way behind many of our neighbors in this area.

Enhanced disease control, better food safety, increased control of predators, use of sheep for ecological maintenance. There's a huge market opening up for suppression of undergrowth or grazing under power lines or weed control, all sorts of new opportunities that we haven't really traditionally looked at. And there's also opportunities for better market reporting.

So I think there's lots of areas where we can focus on how successful we will be. We're under the gun, we realize we've got to do something or our industry is on the way out. So we're going to give it our best shot.