MR. MILLER: Thank you, good morning panelists, as well. I have the responsibility for Proctor & Gamble's international trade policy matters. I appreciate the opportunity to address myself to this group. Proctor & Gamble markets more than three hundred brands to nearly five billion consumers in 140 countries. Our brands include Tide, Crest, Pampers, Pantene, Folgers Coffee, Crisco,, Bounty, Oil of Olay, and Vicks. Last year Proctor & Gamble recorded sales of over 37 billion dollars of which 4.3 billion were food and beverage products. On behalf of the company I would like to thank the Tennessee Department of Agriculture, USDA, USTR and Department of State for convening this important listening session on agriculture and trade. We particularly appreciate the opportunity to offer our comments here in Tennessee because Tennessee is home to our most successful food and beverage product worldwide, that is Pringles Potato Chips. Pringles are produced by over 1300 men and women in Jackson, Tennessee, about an hour's drive from where we are now. Our Jackson plant has a payroll exceeding 55 million dollars per year. In addition, P&G spends more than 115 million dollars on Tennessee goods and services and pays around three million dollars in state and local taxes. At the Jackson plant are justifiably proud of the Pringles business. This unique product was one of our company's 300 brands to be sold literally in every country where we do business. Pringles got its start in Jackson in 1971, but it wasn't until about 1990 we began to develop an export business. Today 37 percent or over one out of three cans of Pringles that we produce in Jackson is sold outside the U.S. Importantly there are many benefits to this. I will give you some examples of what we sell. This is Pringles. It's a violet can in Spanish and Portuguese for Latin America.. We have Pringles for Eastern Europe and the newly independent states.

MR. SCHUMACHER: Do these have potato chips in them?

MR. MILLER: Oh, yes. Listening is hard work and I understand that you will have an appetite as the day wears on and would encourage you to enjoy the snacks. Mr. Wheeler will take an empty can probably back and include it in your display of Tennessee export products. This is an Asian package. It's got four different Asian languages. It's the nonsalt version, which is actually preferred in Asia. But in any case there are -- I have no intention of carrying them back. So you enjoy them and understand that this is an incredible contribution of our business in Jackson and throughout the world.

Importantly it's not just Proctor & Gamble that benefits when we sell cans of Pringles outside the U.S. Idaho potato farmers, cotton and soybean growers, oil refiners, including our largest oil refinery based here in Memphis, dozens of small and medium-size companies that supply packaging, materials and transportation. All of them have seen our business flourish right along with Jackson.

Things like the plastic lids that are made by a company in Missouri, (inaudible) the company to make these plastic lids. So it's a tremendous opportunity for suppliers as well as us. Proctor & Gamble views the upcoming WTO Ministerial in Seattle as a crucial opportunity for the United States to continue its agenda of pressing the trade liberalization, market access measures, reduce tariffs and dismantling disguised, and frankly not so disguised, barriers to trade.

P&G's food and beverage business has three key priorities for low level trade. They are, the, tariff reductions on processed foods; second, customs carbonization, particularly transparency or platiscation and valuation, and, third, protection of the strong agreement on sanitary and phytosanitary standards, known as SPS.

The, let me address the tariff reductions. As has been already said here today agriculture is one of America's most export dependent sectors. Therefore, increased market access is a vital issue for both those how process food products and primary commodities. As Commissioner Wheeler mentioned, we particularly processed foods but also we believe America should be a strongly growing sector of (inaudible.) Over the past 25 years the total ag exports have grown from 22 billion dollars a year to 52 billion dollars a year. Consumer food exports, finished products, have grown to just ten percent of the total to a little over 40 percent of the total, while bulk agriculture products, which were once 75 percent of the total, are now slightly under 40 percent. The balance is about 23 percent in intermediate but not consumer goods. Forty percent of all agriculture exports are consumer foods.

Unfortunately tariffs on many processed products remain on the highest of the agricultural sector. Tariffs on processed food and beverages are not nearly is local items. The consumer exports also suffer from multiple Very show such as tariff peaks, tariff escalation with higher levels of processing, tariff free quotas and domestic substance. In some cases high tariffs on processed foods are established because local producers pay inflated prices for bulk commodities, but whatever the reason, the consumer winds up paying for protectionism.

We've learned that consumers all over the world love Pringles. But high tariffs translate fundamentally into a discriminatory sales tax of as much as 40 percent of the final pricing products, which significantly inhibits the market share and export growth. We work diligently to find ways to lower these barriers, but unfortunately once protectionist measures are in place, they're very difficult to remove.

Proctor & Gamble has built its reputation on providing products of superior quality and value. We, therefore, advocate total elimination of tariffs and export subsidies and strongly support the zero-for-zero initiative issue on all processed foods as a move that will benefit American agricultural producers, processors and consumers. Lower tariffs would translate directly in our view to lowering consumer prices. This would certainly help us grow our Pringles export business in Jackson.

Our second key priority for the multilateral agenda is customs harmonization, which we would expect would be addressed under the heading of trade facilitation. P&G believes that transparent consistent rules for customs classifications and valuation go hand in hand for lower tariffs as a driver of economic benefits. We believe the World Customs Organization, the WCO, fulfills an important role in the multilateral trading system by delivering high levels of uniformity.

The continued success of the WCO depends in large measure on each product in international commerce being correctly classified. Incorrect, or more frequently individually negotiated categorization can lead to fragmented administration of customs and can lead to weird tariff rules and barriers to free competition. In the case of Pringles, we welcome the recent efforts by the WCO to clarify the classification of similar products. This action will contribute to the efficiency of exporting Pringles to many countries.

Let me now turn to the third key priority but frankly the most important and that is protection of the agreement on sanitary phytosanitary standards. SPS was a landmark agreement in the Uruguay Round. It assured that governments base food safety regulations on sound science and true risk assessment as justification. SPS's reliance on international scientific standards is essential to ensure that food safety measures are not simply disguised as trade barriers. Simply put, the U.S. should oppose any attempt to water down these requirements. The WTO, in our view, has not followed through with a constructive start through the dispute settlement system in implementing the SPS systems. Dispute panels and the appellate body are giving fair interpretations to the requirements to ensure that regulations have scientific justification and are based on risk assessment. We believe more attention could be given to the provision calling for governments to base their SPS measures international standards except when those standards fail to provide a high enough level of public health protection. We believe greater organization or mutual recognition of food safety standards will in the end lead to a safer world food supply and will help achieve dual goals of fewer trade restrictions and the avoidance of episodes in which protectionists blame tainted on open trade. Pringles, like virtually all the products in American agriculture, are safe and wholesome and that's a testament to the strong U.S. food and safety standards which are reported by sound science.

We believe that the WTO rules must continue to require the government base regulations on the best scientific information available and not enforce an unattainable zero risk standard. Allowing trade restrictions on the basis of so-called precautionary principle or any other basis other than the sound science requirement in the current SPS agreement would significantly weaken WTO rules and create tremendous opportunities for countries to impose new trade areas disguised as health and safety regulations. In our judgment any reopening of the SPS agreement at this time could lead to a weakening of its provision, so we strongly oppose taking a step backward on SPS.

If I could make a side comment, I have had a lot of discussions with individuals who often don't see it the way we see it and who have concerns whether it's public health or environmental safety products, whether they are fully protected within the SPS. What I have observed is there is often not a common understanding of what the SPS really offers and how it operates. So I would encourage, you as panel members will be hearing from a lot of the people and working with many different groups, that there is provided to all of us some base understanding of how SPS works with case law and why does the country choose a higher standard that is actually permissible under SPS as long it has the scientific justification and a risk assessment. It is one where almost everyone I have talked to who wants to (inaudible) SPS has a different understanding of what the current agreement has than what I have. So I just offer that as a suggestion.

In conclusion I want to pledge our full cooperation as you develop specific proposals and to negotiating objectives. Proctor & Gamble will do everything they can to ensure the Seattle Ministerial conference and the next WTO round are successful for farmers, businesses and employees and consumers. Thank you.

MR. SCHUMACHER: I want to clarify a question if I may. Could you explain a little bit more on your side bar about SPS and your concerns -- Jim and I had a meeting and one of the key issues that we -- I think Jim does a good job on the original SPS language. There is pressure in EU to weaken that and we are very much opposed to that, of course. Can you tell us an example of where your concerns on the SPS are and give us some kind of understanding on that?

MR. MILLER: The concern with our products would be the products of modern biotechnology or (inaudible) crops. Frankly, the cans of Pringles you have in front of you have large quantities of BT potatoes and BT cotton in the form of cotton seed oil, all of which are qualified safe and wholesome. Because of concerns about products (inaudible) and, frankly, a patchwork guilt regulatory systems for dealing with these throughout the world. There has been an underlying consumer concern. The consumer concern has risen up and in some cases turned into a legitimate food scam. In Britain at the moment there is a full-fledged food scam going on in products of biotechnology that have no basis in science. What is -- what is typical in people who do have these concerns whether it is for the safety of products modified technology or for potentially unforeseen impacts. As you recall in a recent issue of Nature Magazine there was an article published about a lab test at Cornell University on Monarch butterflies and it was that Monarch larvae were farmed in this laboratory section by (inaudible). Now it's an interesting finding. It's not, frankly, not surprising at all given that Monarch butterfly larvae are very similar to the BT corn borer that BT toxin is known to be effective against. So while it's not a surprising result, it is a result that has given rise to concerns about whether the SPS is strong enough. What I've noticed in those people with those concerns is that their the impulse is let's reopen SPS, okay? And often that impulse to reopen SPS is not based on the clear understanding of what is possible within the existing agreement.

I think the existing agreement was hard won and it is very solid. In our view if you move away from sound science and risk assessment, you have really no basis for proving anything new ever.

So we don't want to slide away from that, but at the same time I think there is greater reassurance we have to strengthen the current agreement that is not fully appreciated by many who are raising the questions. Is that helpful?

MR. SCHUMACHER: Yes.