Our next guest that I want to introduce to you James Schroeder, Deputy Undersecretary, Farm and Foreign Agricultural Services with the Department of Agriculture. He's principally concerned in that job with international trade issues and the government services and programs. Before joining the USDA in 1993, he was a practicing lawyer in Washington D.C., and he specialized in international trade issues. Prior to moving to Washington, he practiced in Denver, Colorado, for eight years, primarily in the area of natural resources and resort area development.

So please help me in welcoming Jim Schroeder.

JAMES SCHROEDER: Good morning everybody. I'm delighted to be here. I, of course, join my colleagues in welcoming you to this WTO listening session. You've heard the bad news. I'm a lawyer, I'm a bureaucrat from Washington, I'm even from Colorado. The good news is, through my wife, I've got so many relatives in this state, you wouldn't believe it from Auburn and Lincoln out back east, all the way to Ogallala on the west. My mother-in-law was born in Gibbon, went to this school when it was Kearney State Teacher's College. My father-in-law was from Cozad. I've got relatives down in Holdrege, Republican City, Alma. So I'm getting a lot of benefit of being here today. They all think it's wonderful when I'm out here.

I'm also delighted to be here today because it's always my privilege to appear in a group with the kind of congressional leadership that you all have here in Nebraska; Senator Kerrey, Senator Hagel, they're articulate, they're tireless, they're leaders in the Senate, particularly on agriculture. Your congressional delegation; Bill Barrett, these are terrific men, and they're leaders in the agriculture area. I'm always delighted to be here and appear with people that like. Your state leaders; we just heard from your new Governor. Director Carlson, pretty good guy. Used to work for some of the wrong people, but that's all right. The FSA officials, doing a terrific job, so you also have absolute state leaders and one of the benefits in what we're trying to achieve in these listening sessions, is to develop stronger partnerships with our state officials and our state leaders.

Finally, I really enjoy appearing with my colleagues Jim Murphy. Jim Murphy has worked tirelessly at USTR. Believe it or not, before he started dealing with the Europeans, he weighed more than I did.

And I hope in our breaks here, you'll meet some of our folks from the Foreign Agriculture Service.

Francine Radler, for example, critical role in our negotiations with the Chinese and the agreement that we have reached that will finally open up China to our white meat producers in the northwest and others here. I hope you get to talk to them. These are your shock troops. These are the people around the world who are out there on the front lines dealing with our competitors and our markets.

So this session is part of preparation for this Third World Trade Organization Ministerial conference that will be held in Seattle in November.

Last year in Geneva at the 50th anniversary of the world trading system, President Clinton commented on the importance of open trade to all nations. He also highlighted the need for the WTO to provide a transparent and open forum where business, labor, environment and consumer groups can provide regular and continuous input to help guide further evaluation and evolution of the WTO.

And so this is exactly what we are trying to do with this series of listening sessions around the country. Get your input to help shape our agriculture trade policies for the new round of negotiations.

We appreciate the time and effort that you have all made to attend this session today. As we prepare for the beginning of a new round of multilateral negotiations, it is critical that we hear and understand the issues that should be priorities. This will help us in developing our negotiating strategy.

We are fully aware while our national economy has been booming, it has been a year of struggle and hardship in most parts of rural America. So we at USDA from Secretary Glickman on down, recognize that much of agriculture is going through an extremely difficult period right now.

At USDA we are marshaling all of our resources to address this economic situation. We are making sure that emergency economic relief gets to producers as soon as possible, that strengthening of the farm safety net is at the top of our agenda, that the consolidations and mergers sweeping agriculture are subject to proper scrutiny, and that we continue to press to open new markets for our exports.

So what I would like to do here with the slides is to make a brief presentation that will set the stage for our discussions today.

We'll address the following areas: the critical role that exports already play in agriculture.

Second, the role that trade agreements have played in obtaining the current level of agricultural exports.

And third, our goals for the upcoming WTO round of negotiations.

After our presentation, we expect to hear from you the people most directly affected by these agreements. We need to hear your experiences with trade agreements, what is working, what is not working and how to move forward.

Now as Jim Murphy has alluded to, exports are critical for agriculture. U.S. agricultural exports reached almost $54 billion in 1998. Agricultural exports support nearly 750,000 jobs. Products of nearly one in every three harvested acres are destined for overseas markets. Even in the current downturn, about 25 percent of agricultural sales are export sales compared with just 10 percent on average for the rest of our economy.

Again, as both the Governor and Jim mentioned, 96 percent of our customers live outside our boundaries. So we must work to increase our opportunities to sell into the global marketplace.

Access to foreign markets is a key factor to the health of U.S. agriculture. Compared to the general economy, U.S. agriculture's reliance on export markets is higher and projected to grow faster. Agriculture is already more reliant on exports than the economy as a whole.

Other factors point to the increasing importance of exports. The overall trend has been one of increasing exports. U.S. agricultural exports climbed to nearly 60 billion in 1996, up from 40 billion at the beginning of the 1990's. Now exports were down last year and unfortunately, they'll likely to be down again this year 1999 due to record worldwide crop production around the world in countries like China and Japan. The Asian financial crisis which is still not completed over there and the strong dollar. So our exports in 1998 down, as I said to 53.6 billion, and unfortunately they'll probably drop to below 50 billion in 1999.

But the global economy will rebound, the trend of increasing exports is predicted to continue, and exports will continue to account for a large percentage of farm income.

Now the 1996 farm bill increased the market orientation of agriculture. And so to be prosperous in an increasingly competitive marketplace, we must increase our exports where we have the comparative advantage. Certain sectors, for example, almonds are already exporting more than 6O percent of their production.

U.S. agricultural production is increasing while domestic demand for agricultural products is growing slowly. Therefore we've got to develop overseas markets for our products.

Another factor pointing to the importance of exports to agriculture is how closely the level of our farm equity has tracked the level of exports. Expanding export markets while certainly not the only tool is very important for leading us out of the slump in agriculture. We must be realistic. Exports are projected to fall this year. But we've got to remember that 45 percent of the world's economies are still in recession or depression. Until the global economy turns around, we're not going to immediately increase our customer base. But as a long-term strategy, we must look to and expand these export markets.

The key to expanding these markets and increasing our access to customers outside the United States is through trade agreements that are good for American agriculture. We would not be at the level of exports we are today if we had not negotiated trade agreements such as the multilateral Uruguay Round of the WTO or the NAFTA. Trade agreements have boosted exports. Soon after the implementation of the Uruguay Round, U.S. agricultural exports reached their highest level.

Now many factors including exchange rates and factors such as financial items have lead to that rise. But almost all economists agree that lowering trade barriers through trade agreements is a critical factor.

And, of course, these trade agreements are two-way streets, and we must reduce our own barriers as well. But because we already have one of the more liberalized markets, we have very little to lose and much to gain through new agreements reducing trade barriers further. We are an efficient, competitive agricultural producer both abroad and in our own domestic market.

It is estimated that in 20O5 exports including agriculture will be $5 billion more annually than they would have been without the Uruguay Round agreement.

Other trade agreements have similarly provided benefits. It is estimated that in 1994, 1.29 billion more beef and citrus are going to Japan than we would have hada without the trade agreement that was successfully negotiated with Japan. Jim Murphy played an important role in that citrus agreement with Japan.

For this kind of growth to continue, we must move forward with our strategy for opening markets through trade agreements.

The Governor mentioned, NAFTA. NAFTA, believe it or not, is fulfilling its promise for agriculture. Our NAFTA partners Canada and Mexico have become more important destinations for our U.S. products, now accounting for over 25 percent of all our exports; surpassing that of Europe.

We estimate that in the first three years, NAFTA can take credit for 3 percent of additional exports from Mexico and 7 percent additional exports to Canada. The 11 percent growth from 1997 to 1998 in exports to Mexico and Canada was especially welcomed as our overall exports fell 6 percent.

We recognize that although we have achieved many benefits for agriculture from recent trade agreements, the playing field certainly is not level yet, and there is much work to be done.

U.S. tariffs on average are much lower than those of our major trading partners. When it comes to subsidies, one of our major trading partners, the European Union outspent us 20 to 1. We've got to continue to work to make sure that health and safety measures do not act as designed protection and are based on science.

A major part of our strategy to level the playing field for agriculture is to be successful in this up-and-coming WTO round.

Why is this round important? It includes trade from 134 countries. The upcoming round must continue and improve on the progress made in the Uruguay Round.

While we in the administration are engaged in many market opening endeavors, the up-and-coming WTO round has got to be the center piece of our efforts.

Now to understand where we are going, it is important to understand where we have been. The GATT, or the General Agreement on Tariffs and Trade, was established in 1948 and set the basic rules for international trade. And we've had a number of rounds or agreements over these years since 1948, and the present with the most recent round, the Uruguay Round concluded in 1994.

Two major accomplishments. Number one, we've finally got agriculture on the table, and number two, we now have a court. For 40 years, is you had a dispute and accused some country of not following the rules, but there was mechanisms to enforce the rules. Now we have an organization and a dispute settlement method that we can actually enforce the rules. Two

major accomplishments.

So the Uruguay Round agreements opened a new chapter in agricultural trade policy.

Agriculture finally became a full partner in the multilateral trading round. And for the first time, countries had to make across-the-board cuts in agricultural tariffs. For the first time, export subsidies had to be reduced and internal support policies that distorts 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 dispute settlement process was adopted. And as Jim Murphy mentioned, we used that very successfully in a number of cases.

The option for solving disputes in a formal legal setting has been invaluable in achieving tangible gains for our U.S. agriculture and has also acted as a deterrent. Trading partners know that we have this option if they do not live up to their agreements. For example, we recently won dispute settlement panels against the Europeans on beef from cattle treated with growth hormones against the EU's ban. The banana case. Another case against Japan's restrictive quarantine requirements for fresh fruit. The Japanese wanted to take every apple that came through and say, okay these apples are okay and then the next apple say, oh, this is a different variety, we have to do all the testing. No. And the dairy policy. We won a case recently on the dairy policy subsidies.

So we've got to maintain a firm line to ensure that the banana case, the hormones case decisions are carried out so our exporters have the access to these markets.

The Uruguay Round agreement was a good start. It has already contributed to increased exports, but it was just a start. As I mentioned, we had eight rounds on industrial tariffs and products before agriculture got on the table.

So we want to continue and go forward and as Jim said at a faster pace.

The next round will be kicked off at Seattle, from November 30th to December 3rd of this year. 134 member countries. We also expect a strong private sector attendance.

I've spent a lot of time negotiating over the last three or four years actually working with the USTR on China. I am pleased the USDA will support USTR.

The third part of this is the private sector. We have got to have and we value the contributions and input from our private sector. They've got to tell us what works in the marketplace. What they can do, what they can live with, what is unrealistic from a business or practical standpoint. So we all work together, and we look forward in this next round to continued input from our commodity groups and our private sector.

I don't -- I think Jim has mentioned our goals. We want to reduce tariffs further. Our tariffs on agriculture probably average around 8 percent. The agriculture tariffs of other countries probably average 50 percent. So it's not level. The other countries are too high, and we've got to bring those down.

Tariff rate quotas, we want to increase the quota amount and decrease the tariff outside the quota. We'll talk about that more later.

Subsidies. As has been mentioned, the Europeans out deal us 20 to 1. The Europeans probably use 80 percent of all the export subsidies that are used in the world.

On state trading enterprises, it's difficult for us to tell the Canadians that they have to do everything the way we do it or the Australians, but they're going to use a monopolistic state enterprise, we think they have to use it in a responsible way. We have to know what they're doing and how they're doing it and hopefully over time, we'll get them to see our way of thinking and get away from those practices which are so uncompetitive in the world marketplace.

Domestic support. We all support our farmers. Certainly we're going to support our farmers here in this country. But, again, the levels of support show that globally particularly in Europe and Japan, domestic support remains extremely high. And our goal is to see that these programs are reduced and that they're done in a way that is non-trade distorting.

Other issues. A very important agreement part of the Uruguay Round involves sanitary and phytosanitary standards, that health and safety restrictions on imports should be based on sound science. We certainly want to protect that.

And biotechnology, of course, is going to come into that discussion.

So trade reform through this WTO process we believe provides the biggest bang for the buck. In one agreement, for example, we can get 134 countries to cut tariff barriers on exports. But getting all these countries to agree on major reforms -- it's difficult, but it's worth the time and effort.

Again, as Jim has mentioned, we've done a lot preparatory work in Geneva, but we need continuing discussion, and that's why we're holding these listening sessions. We need your support, your suggestions, including specific proposals you may have for our negotiations. You can make your voice heard on these issues, make your views known to your local farm groups, to your state government representatives, to your Legislators or the executive branch, through our Agriculture Trade Advisory Committees and, of course, through your federal representatives.

We want to send a clear message to the rest of the world that agriculture is a top priority for the United States and that we remain fully committed to open markets and fair trade. But we need your support to achieve and make sure that trade agreements continue to work for American farmers and for U.S. agribusiness.

So don't hesitate to give us your views on the Internet or in letters, cards, or whatever.

In conclusion, U.S. agriculture is--whether we like it or not--already a globalized industry. It is inevitable that globalization is going to continue.

To establish the best international rules for U.S. agriculture, we must stay engaged in this process of negotiation of trade agreements. Our next major opportunity will begin this November in Seattle.

We thank you for your interest, and we hope that we have your input not only now but as we begin and we go forward with these important negotiations.

And I haven't told any Nebraska jokes. Thank you.