**Statement by Michael W. Yost**

**Administrator of the Foreign Agricultural Service**

**U.S. Department of Agriculture**

**Before the U.S. House Committee on Agriculture**

**Subcommittee Specialty Crops, Rural Development and Foreign
Agriculture**

**Washington, DC**

**Thursday, May 10, 2007**

Mr. Chairman, members of the Subcommittee, I am pleased to appear before
you today. I welcome the opportunity to discuss the trade and food aid
programs administered by the U.S. Department of Agriculture (USDA).

**INTRODUCTION**

Since the last Farm Bill was enacted in 2002, the trade programs
administered by the Foreign Agricultural Service (FAS) have served to
open new markets and maintain and expand existing markets for U.S.
agricultural products. These programs complement our efforts to open and
maintain markets through trade negotiations, diplomacy, and enforcement
of trade agreements. To ensure that agricultural interests are well
represented at the negotiating table, FAS works closely with the Office
of the U.S. Trade Representative (USTR) and coordinates the involvement
of USDA regulatory agencies.

During the past year and a half, the United States successfully
concluded trade agreements with Colombia, Panama, and Peru that provide
greater market access for all U.S. agricultural products. Last month, we
concluded negotiations with South Korea on the most commercially
significant free trade agreement in 15 years. Korea is projected to
already import over \$3 billion of U.S. agricultural products during
fiscal year 2007 and almost two-thirds of current U.S. farm exports to
Korea will become duty-free on the first day of implementation of the
new FTA.

Together, our trade programs and negotiations have contributed to a
strong farm economy and increasing foreign demand for U.S. food and
agricultural products. Trade continues to be critically important to the
long-term economic health and prosperity of the American food and
agricultural sector. Roughly 20-25 percent of U.S. production is
exported and, with productivity increasing faster than domestic demand,
export markets are important, particularly markets with a burgeoning
middle class such as China, India, Indonesia and Brazil.

The latest USDA export forecast of \$78 billion for fiscal year 2007
proves this point. This means the agricultural community is on track to
increase exports by an estimated \$9.3 billion over last year. That
would be the second largest increase on record and the fourth
consecutive year of record exports. USDA estimates that U.S. world
market share is over 19 percent -- almost one-fifth \-- of world
agricultural trade. This is particularly impressive when you consider
that the size of the world agricultural trade pie has doubled since
1990.

However, if we are to continue these impressive gains, we cannot rest on
our accomplishments. We must continue to expand access to overseas
markets, where 95 percent of the world's consumers live. We must
continue to refine and improve our longstanding programs to ensure that
they operate efficiently and effectively.

The Administration's Farm Bill proposals were crafted to strengthen U.S.
agriculture's competitive position, while meeting our international
obligations. The Farm Bill proposals are not only good farm policy, but
good trade policy. They are predictable, equitable, and designed to
withstand challenges from other countries. We appreciate Congress'
serious consideration of the proposals as Congress writes the 2007 Farm
Bill.

**TRADE PROGRAMS**

**Market Access Program**

The Department's largest market development program is the Market Access
Program (MAP), for which funding expires at the end of 2007. This
program uses funds from the Commodity Credit Corporation (CCC) to
create, maintain, and expand long-term export markets for U.S.
agricultural products.

USDA's Farm Bill proposals recommend increasing MAP funding from \$200
million to \$225 million annually. USDA will apportion the additional
funding to help address the imbalance between program crops and
non-program commodities. MAP forms a partnership between USDA and
non-profit U.S. agricultural trade associations, U.S. agricultural
cooperatives, non-profit state-regional trade groups, and small U.S.
businesses to share the costs of overseas marketing and promotional
activities such as consumer promotions, market research, trade shows,
and trade servicing.

I would like to share an example of a MAP success story from my home
state of Minnesota. Sunrich, a producer and exporter of soy food
ingredients, has used the MAP program to sharply expand its
international sales. The company has gone from having a single overseas
market to selling in Japan, Korea, Spain, France, Germany, Indonesia,
Australia, New Zealand, and Israel. Exports now generate several million
dollars in sales for Sunrich. The Market Access Program has helped them
do market research, produce targeted promotional materials, ship
samples, and provide technical support to potential buyers overseas.

**Technical Assistance for Specialty Crops**

As our exports have grown, some of our trade partners have increasingly
turned to sanitary, phytosanitary, and technical barriers to protect
their domestic industries and deny market access to U.S. agricultural
products rather than basing these policies on science. USDA has
successfully helped U.S. exporters regain market access for millions of
dollars of products from almonds to spinach. To continue to enhance
efforts, the Administration's 2007 Farm Bill proposals would expand
mandatory funding for the Technical Assistance for Specialty Crops
(TASC) grant program, which is currently funded at \$2 million per year,
by an additional \$2 million annually up to \$10 million for fiscal year
2011 and beyond.

TASC projects assist U.S. food and agricultural organizations to address
phytosanitary and technical barriers that prohibit or threaten the
export of U.S. specialty crops. The program has proven to be very
effective in providing support for specialty crop exports. In recent
years, TASC funding has been used to gain market access for California
nectarines in Japan, harmonize organic standards with Canada and the EU,
and create a database of pesticide tolerance levels and standards for
more than 300 specialty crops in more than 70 countries. In 2006, USDA
funded 26 TASC projects.

**Grant Program to Address SPS Issues**

To complement the successes and popularity of the TASC program, the
Administration's 2007 Farm Bill proposals include a new grant program
focused on sanitary and phytosanitary issues for other non-specialty
crop commodities. This new program would provide \$2 million in annual
assistance through mandatory funding. Like the TASC program, this
assistance could provide U.S. exporters with information on compounds
restricted by other countries and improve other countries' understanding
of U.S. safety standards and testing methodologies. It also would enable
us to tap targeted technical expertise on an ad-hoc basis for
non-specialty crop commodities.

**Technical Assistance to Resolve Trade Disputes**

For small agricultural producers and industries, defending their
products against inappropriate trade restricting measures such as
counterfeit labeling, copyright infringement, unfair administration of
tariff-rate quotas (TRQs) and other barriers to trade is a complex,
lengthy, and time-consuming process. While U.S. industries can pursue
unfair trade practices through U.S. trade laws or initiate a case in the
World Trade Organization (WTO), industries must pay high legal and
analytical costs for extended periods of time---sometimes years. This is
particularly challenging for limited resource agriculture industries.
Conversely, some U.S. agricultural sectors have themselves been
challenged either in the WTO or under other countries' domestic trade
laws. USDA, working closely with USTR, helps industries that have been
challenged. The Administration is requesting that the Secretary of
Agriculture be granted broad discretionary authority to provide limited
resource groups with enhanced monitoring, analytical support, and
technical assistance if he or she deems it would be beneficial to U.S.
agricultural exports.

**International Trade Standard Setting Activities**

USDA works closely with international standard-setting bodies, such as
the Codex Alimentarius, the International Plant Protection Convention,
and the World Animal Health Organization, to establish and harmonize
multilateral food, plant, and animal health and safety standards. By
assigning U.S. staff to work with these organizations, we have a say in
their decision-making process and ensure that they design and implement
standards for trade in agricultural products that are science-based and
recognize U.S. health and safety standards.

###### The United Nations Food and Agriculture Organization (FAO) works with member governments to place their nationals in FAO staff positions. However, the United States lacks sufficient funding to place adequate numbers of Americans in these positions. For example, out of approximately 100 positions in the FAO's associate professional officer program, European countries fund about 83 positions for their nationals, while the United States currently only funds one American.

###### As a result, the EU is in a better position to influence international organizations' policies and programs than we are. USDA needs dedicated funding to strengthen U.S. representation in these organizations. In addition, we are having difficulty hiring seasoned, director-level staff to represent the United States in these organizations because we do not have the funds or the authority to pay salaries and allowances commensurate with those received by international organization employees. For these reasons, the Administration's 2007 Farm Bill proposals request long-term mandatory funding of \$15 million over 10 years to enhance our ability to assign USDA staff support for international trade standard-setting bodies. 

**TRADE CAPACITY BUILDING**

Before developing countries can become reliable customers for U.S.
agricultural products, they must first become politically, economically,
and socially stable. President Bush's National Security Strategy
recognizes that a lack of economic development, particularly in fragile
and strategic countries and regions, results in economic and political
instability which can pose a national security threat to the United
States. A productive and sustainable agricultural sector is a critical
factor in creating stability. Only then can these countries and regions
integrate into the global economy and reduce hunger and poverty.

USDA works to develop the capacity of local governments in politically
stable, but fragile economies to support market-based agriculture. We
have provided technical assistance and trade capacity building in
markets such as Georgia, Armenia, Kenya, Uganda, and Pakistan so they
can harness the power of trade and create open and predictable policies
and procedures to boost economic growth and reduce poverty.

In recent years, USDA has worked with the Department of State, the
Department of Defense, the U.S. Agency for International Development,
and the National Security Council to assist in the reconstruction and
stabilization of Afghanistan and Iraq. Revitalization of these two
countries' agricultural sectors is essential to their development and
stability. USDA is conducting trade capacity building and technical
assistance activities in Iraq, including a \$7.8 million agricultural
extension project in conjunction with the U.S. Department of State, and
marketing education efforts in partnership with U.S. commodity groups.

The Administration's 2007 Farm Bill proposals provide \$2 million
annually in mandatory funding for agriculture trade capacity building
for fragile countries and regions by improving food safety, supporting
agricultural extension projects, agricultural knowledge initiatives, and
building bilateral partnerships.

**FOOD AID PROGRAMS**

In addition to this trade capacity building assistance, USDA administers
three food aid programs that support economic development in countries
needing assistance to get on their feet or needing help in a crisis or
emergency---the Food for Progress Program, the McGovern-Dole
International Food for Education and Child Nutrition Program, and the
Public Law 480, Title I (P.L. 480, Title I) Program. These programs
support international assistance and development activities that
alleviate hunger and improve nutrition, education, and agriculture in
some of the world's poorest countries. Through the provision of
agricultural commodities, we are able to feed millions.

**Food for Progress Program**

During the past two decades, the Food for Progress Program has supplied
over 12 million metric tons of commodities to developing countries and
emerging democracies committed to introducing and expanding free
enterprise in the agricultural sector. Commodity purchases totaling
nearly \$3 billion over this period for Food for Progress programming
have been handled through the Commodity Credit Corporation (CCC).

Under this program, during fiscal year 2006, the United States provided
more than 215,000 metric tons of CCC-funded commodities valued at about
\$77 million. This effort supported 19 developing countries that were
making commitments to introduce or expand free enterprise elements in
their agricultural sectors. Again this year, more than 215,000 metric
tons of commodities will be provided. More than 2 million people in

11 countries, including Afghanistan and countries throughout Africa and
Central America will be fed by this program this fiscal year. In fiscal
year 2008, the President's budget includes an estimated program level of
\$163 million for Food for Progress grant agreements carried out with
CCC funds.

**McGovern - Dole Program**

Another highly successful program is the McGovern-Dole International
Food for Education and Child Nutrition Program, which helps support
education, child development, and food security in low-income,
food-deficit countries that are committed to universal education.

This year, we will feed nearly 2.5 million women and children in 15
developing countries, including Cambodia, Guatemala, and Malawi, with
the \$99 million appropriated funding level. We appreciate the strong
support this program has received from members of Congress. In fiscal
year 2008, we are requesting \$100 million for the McGovern-Dole
program. This amount will be supplemented by an estimated \$8 million to
be received from the Maritime Administration for cargo preference
reimbursements.

In the last five years, the McGovern-Dole program has helped feed more
than 10 million children in more than 40 countries. Last year, USDA
awarded Counterpart International (CPI) a grant to provide more than
9,000 tons of commodities for use in Senegal. This McGovern-Dole project
is using vegetable oil, textured soy-protein, and barley to feed nearly
18,000 primary school children and 1,800 pre-school children over a
three-year period. The proceeds from the sale of soybean oil are being
used to improve school sanitation, repair schools, and improve the
skills of teachers. The project includes a maternal and child health
component, which provides take-home rations to needy mothers with young
children. It also provides a growth monitoring and promotion program,
along with a health education and assistance campaign. The leader of one
of the villages in which the school feeding project is being conducted
told the visiting U.S. Ambassador to Senegal that, "We have already seen
immediate results from this program as students are able to stay in
school longer and learn more each day." This McGovern-Dole school
feeding program provides hot daily meals to students, permitting them to
remain in the classroom and learn for longer periods.

The multi-year dimension of this program is essential to addressing
comprehensively the issue of chronic hunger. Moreover, providing meals
both at school and through take-home rations provides a powerful
incentive for children to remain in school. Government-to-government
partnerships coupled with the important resources provided by the
private voluntary organizations (PVOs) are vital to sustaining these
programs and ensuring success.

**P.L. 480, Title I Program**

Historically, the P.L. 480, Title I program has been geared primarily
toward countries with a shortage of foreign exchange and difficulty in
meeting their food needs through commercial channels. Assistance has
been provided on a government-to-government basis by selling U.S.
agricultural commodities on credit terms. In recent years, the demand
for food assistance using credit financing has fallen, mostly because
worldwide commercial interest rates have been relatively low. For
example, in 2006 we signed only three government-to-government credit
agreements compared to seven in 2002. As recently as 1993, 22 Title I
agreements were signed, but the number has steadily declined over the
past 14 years. We are not requesting any additional funding for P.L.
480, Title I for 2008. The budget recommends that all P.L. 480
assistance be provided through Title II donations.

**Bill Emerson Humanitarian Trust**

USDA also manages the Bill Emerson Humanitarian Trust, which serves as a
backstop commodity reserve for the P.L. 480 program. This reserve is
available to provide emergency humanitarian food assistance to
developing countries, allowing the United States to respond to
unanticipated food crises with U.S. commodities. We currently have
915,000 metric tons of wheat in the Trust and \$107 million in cash.
Cash in the Trust provides the flexibility we need to purchase
appropriate U.S. commodities based on availability and the specific
need. With commodities in the Trust, we must pay storage costs. Holding
the 915,000 metric tons of wheat in the Trust is costing more than \$9
million each year or about \$10 per ton. Cash in the Trust also allows
us to respond much more quickly to a food crisis because we can easily
purchase U.S. commodities, whereas substituting what we have in the
Trust for what we need to provide consumes precious time.

**Upcoming Issues**

This year, several food assistance issues will come to the forefront in
the domestic and international arenas. USDA chairs the Food Assistance
Policy Council, which includes senior representatives from USAID, the
Department of State, and the Office of Management and Budget. Over the
years, this group has made significant progress in ensuring policy
coordination of food assistance programs under the Agricultural Trade
Development and Assistance Act and the Food for Progress Act. The
Council recently identified key issues to receive attention this year:
food aid quality, the Administration's 2007 Farm Bill proposals, and the
challenges facing food aid policy in the WTO.

For more than 40 years, USDA and USAID have provided micronutrient
fortified food commodities to vulnerable, food-insecure populations. We
are proud of our record in feeding at-risk recipients of U.S. food aid
around the world. However, in recognition that both the science of
nutrition and the nature of recipient populations have changed over
time, we are examining whether current food aid formulations and product
manufacturing practices address the needs of at-risk recipients and
reflect the best available science.

Toward that end, our initiative includes an in-depth review of the types
and quality of food products used in the administration of U.S. food aid
programs. We seek recommendations of what changes, if any, should be
made to the composition and mix of our commodities. The project also
continues our efforts to review existing contract specifications used to
obtain food aid commodities, and to improve our post-production
commodity sampling and testing regime based upon sound scientific
standards. All three parts of the project were announced formally in
April at the International Food Aid Conference.

USDA and USAID agree on a division of labor for the project. We have
identified funding. Our respective Requests for Information have been
published to identify available, independent expertise. Our goal is to
consult with many stakeholders in food aid, including nutritionists,
scientists, commodity associations, the World Food Program, and the
private voluntary organization (PVO) community, to make sure all
viewpoints are heard. We want to ensure that the food aid we provide in
the next 40 years is of the highest caliber to meet the nutritional
requirements necessary to address chronic hunger.

The Administration's Farm Bill proposals include a recommendation that
will provide flexibility in providing food aid when rapid response is
critical to saving lives. The proposal would authorize use of up to 25
percent of P.L. 480, Title II, annual funds for the local or regional
purchase of food to assist people threatened by a food security crisis.

This authority would enable U.S. assistance to be more effective and
more efficient. The authority would be used in those instances where the
rapid use of cash for local or regional procurement is critical to
saving lives in response to an emergency. The intention is not to change
the way the United States meets most food aid needs, but rather to
enhance the variety of tools at our disposal to address food
emergencies. This authority will provide the ability to purchase food
near the scene of a crisis instead of taking the additional time that it
can take to load and ship the aid from the United States. As Secretary
Johanns has said, we do not anticipate opting for local purchases often
-- only when we believe that it is essential to deliver aid in the
timeframe that it is needed. As I mentioned, our proposal would allow us
to use no more than 25 percent of total Title II annual funding.
U.S.-grown food will continue to play the primary role and will be the
first choice in meeting global needs. We simply ask for every available
tool to save lives.

As you are aware, food aid is a subject of discussion in the WTO
negotiations. In the negotiations, the United States continues to
strongly defend our ability to use in-kind food aid in emergency and
non-emergency situations. Emergency food aid should not be disciplined
because flexibility must be maintained to respond to people in crisis.
Non-emergency food aid should only be disciplined to ensure that it does
not displace commercial sales. Cash and in-kind food aid should be
treated equally in operational disciplines and transparency provisions.

A variety of programming options must remain available to ensure that
food aid programs can be tailored to local needs and that sales do not
disrupt local markets or displace commercial imports. The monetization
of food aid to generate funds for supporting projects that result in
increased economic activity and thereby directly confront poverty should
continue. As the United States has repeatedly stated in these
negotiations, we seek to help lift poor families out of poverty by
helping governments design projects that are self-sustaining.

**CONCLUSION**

As Administrator of USDA's Foreign Agricultural Service, I am proud of
our efforts to improve foreign market access for U.S. products, build
new markets, improve the competitive position of U.S. agriculture in the
global marketplace, and provide food aid and technical assistance to
foreign countries.

I believe the 2007 Farm Bill Trade Title proposals will make U.S. farm
policy more equitable, predictable, and better able to withstand
challenge, while ensuring fairness and providing greater export
opportunities to farmers, ranchers, and other stakeholders.

This concludes my statement. I look forward to answering any questions
you may have. Thank you.

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