Leonard Schock, who is the Chairman of the Montana Wheat and Barley Committee is next, followed by Mary Schuler, who is the National First Vice President of Women Involved in Farm Economies. Leonard, thanks for coming.

MR. SCHOCK: Mr. Nelson, distinguished members of the Panel, I'm Leonard Schock, a grain producer from eastern Montana, and currently the Chairman of the Montana Wheat and Barley Committee. This committee is a producer-funded checkup program in the state, and sister organizations in the other states are commonly called Commissions.

You have before you my formal written testimony regarding the WTO provisions that the producers of Montana would like the US Trade Office to honor. But I suspect at this late date, this being the last listening session, that there's probably little in my testimony that you have not already heard. In fact, the phytosanitary issues that some of our partners use as quasi quotas our domestic price supports are diminishing in this country but continue on with our traders around the world in their markets. State trading enterprises and the lack of transparency in those and general tariff reductions are all what you've heard before.

The US Trade Representative Office probably has the bulk of good position already drafted and ready for the table. So I would like to talk about an issue that seems to bother a lot of Montana grain producers, and that's the attitude that we go to these negotiations with.

In the early days of my farming career, I, along with my friends and neighbors, experienced the first of five historic trade-related federally mandated events; a 1985 Farm Bill and the EEP program. EEP is a direct subsidy of US exports for the first time, and was intended to send a clear message to the world the US can subsidize, too. "If you don't stop the practice, we will subsidize you into the ground."

Waiving our big EEP sword, the US went into GATT negotiations with a zero tolerance subsidies. But when GATT was concluded, we had compromised and agreed that a certain level of subsidization was okay. But by doing so, we legitimatized a practice that we had previously held to be wrong, subsidies maybe weren't so bad after all.

And then to compound the error, our US congress adopted a concept that the trade war was over. And as a result, the US has not maximized even the permitted amount of the subsidy.

After the 1985 Farm Bill, came the Canada Free Trade Agreement. The sense that I have after all these years that it was a warm up to US negotiations to the NAFTA agreement, and both were preliminary to the real action of GATT. Now, we producers have the fifth agreement that shapes our economic reality today, the 1996 Freedom To Farm.

This bill was designed for farmers to receive the reward from the marketplace, not the government. The carrot was I could raise whatever crops I wanted and the market would tell me what to raise, how much, rather than governments mandating this. Most producers, like myself, responded. I raise several other crops on the farm today, safflower, mustard, and peas, probably 60 percent of the wheat I raised in the eighties. But they all have one thing in common today, none of them are worth much.

In fact, the last decade and a half, nothing has changed in agriculture for the better of the market place. Before CFA, NAFTA, GATT, the 1985 and 1995 Farm Bills, US was a residual supplier of wheat to the world. We still are. Prices were very low in 1985, and they're even lower today. In the eighties, the US farmers competed not against foreign farmers, but against those foreign farmers' governments. And we still do today, the European Union with their heavy subsidies.

So my suggestion is simple, adopt a clear, simple, beneficial position for US Agriculture. I agree strongly, like Mr. Glickman, that a strong agriculture economy is good for the country. And when you come up with this position, stick with it. It's the last-minute compromises dictated by the Secretary of State's office or US Treasury or EPA that leaves agriculture holding the bag. Make sure your position going into this round is an economically viable one for our key industry. Go after the ratification, put some backbone in the negotiating attitude, and don't quit until we get a good agreement.

MR. NELSON: Thank you, Leonard. Panel?

MR. GALVIN: If I could just respond on a couple of points. I understand the feelings on the EEP program are very strongly held. It's been our position at USDA, based on very careful economic analysis, that given the marketplace of the last couple years, a really soft demand that we're seeing, that using EEP just wouldn't buy us much in terms of increased demand. And it would, quite possibly, force down prices not just worldwide for grain, but here as well. Maybe not so much on wheat, but on feed grains, in particular, if we were putting out a lot more subsidized wheat that was sold not for milling purposes but for feeding around the world. So that's been one big concern, is the effectiveness of EEP in this sort of very flat demand environment that we find ourselves today.

You're right, of course, that the EU continues to subsidize their wheat and flour exports. Although, even in their case, they're not subsidizing as much as they're entitled to under the WTO agreement. And, in fact, they've lost on wheat and flour exports over the last year, they're levels are down quite a bit as well.

I wanted to also mention some of the other tools that we're using, and I think using quite aggressively, to help on the export side. The first I want to mention is our export credit guarantee program. Last year we put out $6 billion, total, in export credit guarantees. That's the second highest level on record. And we felt that our aggressive use of that program was very helpful in allowing us to stay in the game in the wake of the collapse of our markets in Asia. We think that the export credit program made all the difference in export markets like South Korea, for example, where it really allowed their import system to stay in place and they could keep purchasing US commodities.

The second major tool I wanted to mention is our humanitarian assistance programs. And, as you may know, in the current year, we've got an unprecedented commodity donation program underway overseas. And, in fact, wheat is the largest component of that, by far. This year we're programming about five million metric tons of donation for wheat. So I think that's really been helpful as well in terms of trying to sustain some level of market activity even in the wake of the very soft commercial demand. So I just wanted to make those couple of general points.

I did have a question that I would like to hear a discussion about during the course of the day, and that is on the issue of state trading enterprises like the Canadian Wheat Board, and what specifically should be our objective toward those types of boards in the next round. Should we be out to have them abolished or, as I interpret your statement, that we instead should be looking to impose greater disciplines on them? Like more transparency or market disciplines and that sort of thing. So I think it would be good to hear some specific comment as to whether or not people would support abolishing those boards all together or whether you would simply like to see more discipline in their operations.

MR. SCHOCK: I think abolishing would be the ultimate goal. But in the negotiating process, it probably wouldn't happen. So we go for the more minor one of making it very transparent and maybe they would abolish within their own country's borders once people see the true cost of what those enterprises are costing the government. So the transparency is probably going to happen first.