So I'm pleased to introduce Tim Galvin.

MR. GALVIN: Thank you, Tony. Good morning. I would like to join the others in thanking Commissioner Combs and the State of for all that they've done to organize today's event and to provide this wonderful place for the forum. This is actually the eighth of the 12 regional hearings that we're doing around the country, and I can tell you up to this point every one has been a real success. And that's been largely due to the fact that we've had the full support and assistance of the National Association of State Departments of Agriculture as well as the National Conference of State Legislatures. And that's just -- again, the quality, I think, of the hearings just would not have been the same without their complete support and cooperation.

Last year in Geneva at the 50th anniversary of the world trading system, 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 evolution of the WTO.

That is exactly what we're trying to do with this series of listening sessions around the country. We want to get your input to help our agricultural trade policies for the new round of negotiations under the WTO as we enter the next century.

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

As you know, while our national economy has been booming, it has been a year of struggle and hardship in many parts of rural America. We at USDA, from Secretary Glickman on down, recognize that much of agriculture is going through a very difficult period right now. At USDA we are marshaling all of our resources to address this economic situation. We're 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 the agenda, that consolidations and mergers sweeping agriculture are subject to proper scrutiny, and that we continue to press to open new markets for our exports.

What I'd like to do now is take just a few minutes to review three things; first, the critical role that exports play for agriculture, second, the role that trade agreements have played in obtaining the current level of agricultural exports, and third, our general goals for the upcoming WTO round of negotiations. We then want to hear from you, those who are most directly affected by our ag agreements, and we'd like to hear your direct experiences with our trade agreements; what is working, what is not, and how we should forward.

We have to dim the lights here a bit. We want to be at the third slide here. U.S. agricultural exports reached 58.6 billion in 1998, agricultural exports supported nearly 750,000 jobs, and products of nearly one in three harvested acres are destined for overseas markets.

Even in the current downturn, about 25 percent of agricultural sales are export sales, compared with 10 percent, on average, for the rest of the economy. The vast majority, or 96 percent, of potential customers for U.S. products, including agricultural products, live outside the United States. We must work to increase our opportunities to sell these products in global markets.

Access to customers in foreign markets is a key factor in 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 in importance of exports. The overall trend been one of increasing exports for American agriculture. U.S. agricultural exports climbed to nearly 60 billion in 1996, up from 40 billion at the beginning of the 1990s. Exports were down last year, and likely will be down for 1999 as well due to record worldwide crop production, the financial crisis in Asia, and the strong dollar. And although agricultural exports were at nearly 54 billion last year, we project exports at about 49 billion dollars in the current year.

However, I should point out that we actually expect export volume to be up five percent this year. So the fact that total value is down simply reflects the current low prices that we're all experiencing. When the global economy rebounds, the trend of increasing exports is projected to continue, and exports should account for a larger percentage of farm income.

The 1996 Farm Bill increased the market orientation of agriculture, and to be prosperous in an increasingly competitive market, we must increase our exports in those areas where we have a competitive advantage. Certain agricultural sectors such as almonds are already exporting more than 60 percent of production.

Export sales are over one billion dollars annually for a number of food and agricultural products. U.S. agricultural productivity is increasing while domestic demand for agricultural products is growing more slowly. Therefore, we must develop new overseas markets for our products.

Another factor pointing to the importance of exports -- to agriculture is the level of farm equity as it has tracked level of exports over time. Expanding export markets, while certainly not the only tool, is a very important tool for leading us out of the current slump agriculture. The recovery is likely to be a gradual one. It is estimated that 45 percent of the world's economy outside the United States is now suffering recession or depression. But there are some promising signs of recovery, such as in Korea, example.

As a long-term strategy, expanding our export markets is critical. A key to expanding export markets and increasing our access to customers outside the U.S. is through trade agreements. We would not be at the level of exports currently if we had not negotiated trade agreements such as the Uruguay Round and the North American Free Trade Agreement.

Trade agreements have clearly boosted exports. Soon after the implementation of the Uruguay Round, U.S. agricultural exports reached their highest level. Of course, many factors, including exchange rates, affect the level of exports, but almost all economists agree that lowering trade barriers through trade agreements has been a critical factor. It is estimated that in the year 2005, agricultural exports will be five dollars more annually than they would have been without the Uruguay Round agreement.

Other trade agreements have similar benefits. It is estimated that in 1994 we sold 1.3 billion dollars more beef and citrus to Japan than we would have without the trade agreement we successfully negotiated with that country. For export growth to continue, we must move forward with our strategy for opening markets through trade agreements.

NAFTA is also fulfilling its promise to agriculture. Our NAFTA partners, Canada and Mexico, have become more important destinations for U.S. products, now accounting for over 25 percent of U.S. export sales, surpassing the total for the European Union. We estimate that in its first three years, NAFTA can take credit for three percent additional exports to Mexico and seven percent additional exports to Canada. The 11 percent growth from 1997 to 1998 in exports to Mexico and Canada was especially welcome, as overall U.S. exports fell six percent that same year. Thus, the NAFTA agreement helped offset the sales declines that we experienced with several leading Asian markets.

On the other hand, we recognize that although we achieved many benefits for agriculture in our recent trade agreements, the playing field is far from level and there's much work to be done. A major part of our strategy to level the playing field for agriculture is to be successful in the upcoming WTO round. To understand where we are going in the WTO, it is important to understand where we have been. The General Agreement on Tariffs and Trade, or the GATT, was established in 1948 and set the basic rules for international trade. A number of multilateral GATT negotiations, or rounds, took place between 1948 and the present with the most recent round, the Uruguay Round, concluding in 1994. The Uruguay Round established the World Trade Organization, or the WTO, which is basically a continuation of the GATT system.

The Uruguay Round agreements opened a new chapter in agricultural trade policy, committing countries around the world to new rules and specific commitments to reduce levels of protection and support that were barriers to trade. Agriculture finally became a full partner in the multilateral trade system. 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 distort 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, one that we have successfully used in a number of cases. In fact, something like 150 cases have been filed with the WTO over the last five years, and more than a third of those were brought by the U.S.

And just to give you an example, we recently won dispute settlement panels against the European ban on beef and cattle produced with growth hormones, and against the EU's banana import licensing regime, and also against Japan's restrictive quarantine requirements for fresh fruit. We now must maintain a firm line to ensure that the banana and hormone decisions are carried out so that U.S. exporters have the access determined to be their legal right.

The Uruguay Round agreement was a good start and it has contributed to increased U.S. ag exports, but the Uruguay Round was just a start and the first important step in global agricultural trade reform. We are now planning for the next major step, which, of course, will begin in Seattle on November 30th. That meeting will be a event, with representation by most of the 134 member countries. We also expect strong private sector attendance. The actual negotiations will start next year and the scope of coverage of the negotiations is yet to be finally determined. But agriculture and will definitely be included. The general expectation is that the negotiations should last three years and be completed in 2004.

In setting the agenda for the next WTO round of ag negotiations, we will build on the Uruguay Round accomplishments. Tariffs were reduced in that Uruguay Round, but as others here have said, they're still too high, with some countries maintaining ag tariffs of 50 percent or more, while the U.S. average is about eight percent. It is our goal to negotiate further reductions in these tariffs. We also want to expand market access under Tariff Rate Quotas by increasing the quota amount and decreasing the tariff outside the quota.

We also want to see a reduction or elimination of export subsidies, especially for the European Union. The EU has outspent us by more than 20 to one on export subsidies, and last year the EU accounted for 85 percent of the worldwide use of export subsidies.

Another problem in agricultural markets are State Trading Enterprises, or STE's, which are government entities that act as trading monopolies. When an STE has government authority and monopoly power, it may be able to price their products artificially low and unfairly increase their market share. It is important that we develop stricter WTO rules to ensure that STE's operate in a fair and transparent manner.

Trade-distorting domestic support is being reduced under the WTO rules, but here again, the playing field is still very uneven. A comparison of the levels of such support show that globally, but especially in Europe and Japan, domestic support remains high. Our goal for the next round is to make further progress in seeing that governments give to -- seeing that government assistance for agriculture is provided in ways that do not distort markets. Generous subsidy programs that encourage farmers to produce as much as possible without regard to efficiency or environmental costs can only be sustained by keeping out competition and dumping surplus production on the world markets. And that tends to hurt U.S. products.

Other goals for the round include ensuring that existing strong -- the existing strong agreement requiring that barriers related to health and safety be based on sound science is continued and finding better ways to allow trading products resulting from scientific innovation, such as biotechnology.

Trade reform through the WTO provides the single best means to increase market access for U.S. products worldwide. In one WTO agreement we can get 134 countries to cut tariffs and other barriers. But getting all these countries to agree on major reforms will take a lot of time and effort and it won't be easy. The U.S. has already completed much preparatory work in Geneva where the WTO is located. We are using the WTO Committee on Agriculture to identify places where current rules and commitments don't go far enough to open up markets. At the same time, we're using a less formal process to build a consensus and prepare the ground for the tough negotiations that are yet to come.

Input from those of you who will be most affected by the results of the WTO negotiations is critical at this early stage and as USDA and USTR work together in the negotiations that lie ahead. We need your advice and suggestions, including any specific proposals that you may have for our negotiations.

Finally, I would just like to add that in addition to the testimony that we receive here today, we certainly encourage you, in an ongoing way, to continue to provide your comments to USDA, to USTR, to the State Department as our positions on these various ag negotiations become more detailed and formalized over the months ahead. And thank you and we look forward to the testimony.