MR. SCHUTTER: I am Sid Schutter, a potato grower from Montana. I'm here today on behalf of the National Potato Council for which I am currently Vice President of the Grower/Public Relations Committee.

The NPC represents the potato growers in all 50 US states. Our growers' production has a farm gate value level of over $2.4 billion. Our potatoes are sold domestically and in export markets in both fresh and processed forms. Total export value for both the fresh and processed potatoes is over $700 million.

I am pleased to have the opportunity to discuss with the panel the US potato industry's concerns and the goals for the upcoming WTO negotiations in agriculture. Our US potato growers ask that, as our key negotiators on agriculture, you incorporate these into the US Government's objectives for the negotiations.

What our industry seeks most from the upcoming agriculture negotiations are two things:

First, we want more liberalized and predictable access to foreign markets for our fresh and processed potato exports. This means reduced tariffs and the removal of scientifically unjustified sanitary and phytosanitary restrictions.

Second, we want assurances that trade-distorting subsidies in the potato sector will be disciplined and reduced and eliminated. Subsidies in Canada have been a long-standing issue for our industry and one we have yet to receive relief from.

Because of our industry's experience with Uruguay Round, NAFTA, and the US-Canada Free Trade Agreement, the US potato growers are skeptical that the upcoming negotiations can achieve these benefits for our industry. Despite the liberalization goals of the prior agreements, US potato exports still face high tariffs in many export markets, unjustified sanitary and phytosanitary restrictions, and increased competition from a growing Canadian industry that seeks benefits that still benefit from direct and indirect government aid.

To correct the shortcomings of the prior trade agreements, we urge four specific improvements to the Uruguay Round agreement and one new area we propose to be covered in the upcoming negotiations.

The first area where we seek improvement is tariff reductions. The NPC has supported the Early Voluntary Sectorial Liberalization Initiative for foods, including french fries, endorsed by the Asia-Pacific Economic Cooperation economies. Now that this initiative has been moved to the WTO, we urge the US Government to push the WTO to support for eliminations of tariffs on processed -- tariffs on fresh and processed potatoes, or at a minimum, a substantial reduction of these tariffs by all WTO member countries. In the Uruguay Round, many of the Asia-Pacific countries, which are some of the US industry's best export markets, are considered development countries and hence we are required to only make minimal tariff reductions from extremely high base rates. Thus, while US tariffs on potato products are reduced to minimal levels, many of our export markets were not required to make similar reductions. We need assurances that this inequity will be corrected in this round and that all the WTO countries will be required to substantially reduce their tariff rates on potato crops.

The second area in which we urge a more aggressive approach is domestic subsidies. Here US potato growers urge US negotiators to seek sector-specific reductions. The Uruguay Round did nothing to reduce the level of domestic subsidies benefiting the Canadian potato sector. This was because reduction commitments were made to an Aggregate Measure of Support across the broad group of products, rather than requiring reductions to be made to aid levels specific to the potato sector.

In the post Uruguay Round/NAFTA period, Canada subsidies continued to be a problem for our industry. US imports of both fresh and processed potatoes from Canada have increased, and at times, significantly. Our US trade representative Charlene Barshefsky has identified "Canadian federal and provincial assistance measures on potatoes" to be one of several priority issues for formal consultations with Canada. We hope the new round will finally address these subsidies and eliminate the advantages they present for our Canadian competitors. If not, our growers will continue to lose US market share to Canadian industry that is competitive, not because of its innate competitiveness, but because of its benefits from governmental aid and currency advantage.

The third improvement we are seeking is in the area of sanitary and phytosanitary restrictions. This is an area where many WTO member countries have been slow or resistant all together to removing SPS restrictions on potatoes that have no scientific basis. The upcoming round should be used to strengthen the disciplines already embodied in the Uruguay Round SPS Agreement, strengthen the commitment to science, adopt reasonable time frames for countries to abide by these principles.

The fourth change is to strengthen the dispute settlement rules so that countries fully comply with Appellate Body rulings. The recent actions by the European Union to avoid compliance in both the bananas and beef hormones cases raised concerns about whether the system is indeed "foolproof" and the whether countries will feel compelled to comply with the WTO rules.

Finally, a new area that deserves recognition in the WTO is biotechnology. From research we are already doing, we know that new food technologies will diversify, develop, and further expand uses of potatoes and the product's nutritional value. We therefore support the development of science-based principles in the WTO to discipline and monitor the safe use of biotechnology in the food supply. In conclusion, the US potato growers urge the US Government to adopt these objectives for the new round. These are changes we believe are necessary to put potato producers on equal footing with other world producers. We also believe that if the new round is to provide any benefit to US agriculture growers and processors, it must be completed within a reasonable period of time. We support the Administration's call for the conclusion of the negotiations within a three-year period.

This concludes my remarks. I would be pleased to answer any questions.

MR. NELSON: Thank you, Sid. Panel?

MR. GALVIN: I have a couple of questions. Thank you for your testimony. Can you tell me if the Canadians are using any biotech varieties?

MR. SCHUTTER: Yes, they are.

MR. GALVIN: So we're in the same position with them in that regard; right?

MR. SCHUTTER: Yes, we are.

MR. GALVIN: Can you describe perhaps in a little bit more detail the nature of the subsidies the Canadians are providing to their potato producers?

MR. SCHUTTER: One that comes to mind is the providence of Alberta has issued a $35 million fund for waste water treatment, specifically for potato processing plants. Some of that is being used at a new plant that was put in this past year in Taber, Alberta. There's also the providence of Manitoba has given growers this spring a monetary amount to help them get their potatoes planted due to the adverse weather, so they hired commercial planting crews to come in.

MR. NELSON: Panelists, any other questions or comments?

MR. GARROS: Your final point was on biotech. I wonder if you could elaborate a little bit on what form you have in mind in terms of bringing biotech into the next round? Are you thinking a separate agreement? Where do you see it fitting into the overall scheme of the talks?

MR. SCHUTTER: Well, certainly anything with biotech has to be safe for human consumption, without a doubt. What we're asking for is sound science, not to be used as a trade negotiation or to enhance one country's overabundance of potatoes so they don't just say, "Okay, we're not going to allow these spuds to come in because they're biotech."

Potatoes are a little bit unique in that because we're eating the raw product, whereas corn and soybean, we're using a processed product. Right now, Europe is not accepting potatoes that have the BT gene in it, even though they're using oils to fry their french fries that have it in there.

MS. LAURITSEN: Have they rejected the potatoes or have they not approved it?

MR. SCHUTTER: They're not accepting anything from process companies that have it in them. There's strong resistance there.