**Protecting and Promoting**

**American Agriculture**

*Bruce I. Knight, Under Secretary for*

*Marketing and Regulatory Programs*

*National Farmers Union*

*Washington, DC*

*September 17, 2007*

Good morning, and welcome to Washington. Fall is a wonderful time to
visit the Capital. I hope you enjoy your time here.

This morning I want to focus on two areas that are vital to all of us
involved in agriculture in America. First, the National Animal
Identification System and then a closely related topic---agricultural
trade.

**[NAIS]{.underline}**

As you know, NAIS is a voluntary program designed to safeguard animal
health. It has been---and will continue to be---one of Secretary
Johann's top priorities.

NAIS moves beyond USDA programs that concentrate on eradicating or
controlling individual diseases. It's a partnership effort among USDA,
state and local officials, producers and industry to enable us to
quickly address disease outbreaks.

It's simple. Animal ID is about your animals, your livelihood, your
future.

The bottom line on animal ID is [your]{.underline} bottom line. You need
to be part of this effort, beginning by registering your premises.

I want to make clear that NAIS is not so much something new as it is an
updated, modernized and integrated approach to animal identification and
tracing. Our ultimate goal is a 48-hour traceback capability.

We're looking for a rapid response when a disease outbreak occurs. NAIS
offers comprehensive, state-of-the-art solutions that will work more
effectively than the system we have now.

I don't need to tell you that animal diseases are costly. Responding
more quickly will help cut losses, reduce delays and retain markets. Let
me give you just a few recent examples of the cost of disease outbreaks.

Take bovine TB, for example. Since 2002, USDA has spent about \$130
million on indemnities and control activities for diseased or suspect
cattle. Over the past five years, more than 25,000 cows have been
destroyed of nearly 790,000 tested to prevent the spread of bovine TB.

Then there's BSE. The discovery of BSE in one cow in the U.S. in
December 2003 brought our export market to a crashing halt. We lost 80
percent of our beef trade in 2004. USDA also spent \$5 million
investigating the outbreak and later \$189 million on the enhanced BSE
surveillance program.

And don't forget the 2002 outbreak of exotic Newcastle disease. It began
in California in two backyard poultry flocks. The largest outbreak in 30
years, it took 10 months to eradicate at a cost of nearly \$160 million.
There were 22 commercial premises affected along with 2,400 backyard
flocks. Four million birds had to be euthanized, and more than 1,600
federal and state personnel were involved in the disease-fighting task
force.

The key to safeguarding animal agriculture in the U.S. is to get
everyone involved in NAIS. The first step is for everyone to register
their premises. We need to know where the herds and flocks are so that
if a problem arises we can notify everyone who has livestock or poultry.

Today, we have more than 416,000 premises registered out of an estimated
1.4 million. That's more than double the 170,000 premises registered in
Australia and more than the premises registered in Canada---and both of
these countries have mandatory systems.

To boost premises registrations, USDA has signed cooperative agreements
with partner organizations including:

-   the National Pork Board, which is seeking to register all 36,000
    commercial pork producers

-   the FFA, which is targeting 50,000 farms/ranches

-   the USAIO, focusing on 110,000 cattle/bison producers

-   IDairy, reaching out to 25,000 dairy operations, and

-   the American Angus Association, which plans to sign up 15,000 beef
    cattle premises.

Registration is free and quick---and it enables us to alert you when an
outbreak occurs. It's a strategy to safeguard your livestock and protect
your neighbors as well. If you are not registered, please do so. And
encourage your neighbors to register also.

**[Building Markets]{.underline}**

I've talked about how NAIS will better enable us to safeguard animal and
poultry health in the U.S. That's the purpose first and
foremost---protecting flocks and herds and preserving the livelihoods of
producers.

But there are other benefits as well. Knowing we can pinpoint problems
and address them should a disease outbreak occur builds confidence in
the health and wholesomeness of U.S. meat and poultry products.

Further, the animal ID program enables us to meet the international
obligations we face in the world market. Having the system in place will
smooth the way for our exports.

**[Importance of Trade]{.underline}**

And exports are crucial to American agriculture. Let me just review a
few statistics with you. I'm sure you've heard many of them before.

First, do you realize that trade now accounts for about one-quarter of
total U.S. farm cash receipts? Last year the U.S. exported more than
\$68 billion worth of food and agricultural products. This year we're
expecting another export record with sales of \$79 billion. We are
looking for 2007 to be our fourth record year in a row and our eighth
straight year of growth in agricultural exports. Next year should be
even better with exports projected at \$83.5 billion for 2008---that's
20 percent growth in just two years.

The statistics continue to amaze me---70 percent of cotton, half the
rice and a third of the soybeans grown in the U.S. are sold abroad.
Further, higher value products---meats, fruits, vegetables, dairy
products and processed foods---now account for about 60 percent of our
exports.

Right now there are four trade agreements awaiting Congressional
approval that have the potential to significantly expand and improve
trade opportunities for U.S. agricultural products. They are all
supported by more than 40 major U.S. farm organizations.

Each of these agreements reduce tariffs, making trade a two-way street,
and address sanitary and phytosanitary issues. Once ratified, the
agreements would give these four countries priority for U.S. trade
capacity building programs to help them benefit from the new partnership
with us.

Let me give you just a few highlights:

-   [Columbia]{.underline}---Signed November 22, 2006, makes half of
    U.S. farm exports duty-free immediately, where virtually all
    products face tariffs today. Other duties phase out over 15 years.
    Estimated gains for U.S. agriculture---when fully
    implemented---\$690 million [each year.]{.underline}

-   [Korea]{.underline}---Signed April 7, 2007, most commercially
    significant free trade agreement in nearly 20 years. Korea is 6^th^
    largest export market for U.S. farm products, and with this
    agreement 2/3 of U.S. farm products will be duty-free immediately;
    40% tariff on beef will be eliminated over 15 years and 90% of pork
    will be duty-free by 2014. Estimated value---when fully
    implemented---\$1.6 billion in additional farm exports.

-   [Panama]{.underline}---Signed December 19, 2006, makes more than 60%
    of current U.S. farm exports duty-free immediately and eliminates
    most remaining tariffs within 15 years. Estimated value---when fully
    implemented---\$195 million annually in additional U.S. agricultural
    exports.

-   [Peru]{.underline}---Signed April 12, 2006, drops tariffs
    immediately on 2/3 of U.S. farm commodities, 98% of which currently
    carry duties, and ends the remaining tariffs within 15 years; 90% of
    current U.S. exports will be duty-free right away. Estimated value
    is \$705 million annually in gains for U.S. farm exports.

Together these agreements have the potential to expand farm exports by
nearly \$3.2 billion every year. We need to have them ratified!

**[Beef Trade]{.underline}**

I want to focus for a few minutes specifically on beef trade. Another
one of Secretary Johanns' high priorities is normalizing beef trade.
Animal identification is going to be a vital part of regaining our beef
export markets.

My deputy, Chuck Lambert, and others at USDA have been working nearly
fulltime on trade issues, particularly beef---and getting results. The
good news is that beef exports were up 70 percent last year. We're
expecting an increase of about \$300 million this year for beef and
veal, and projecting an increase in volume of more than 50,000 metric
tons.

Restoring beef export markets has required some adjustments. It's called
for flexibility. But it's made us more resilient and more able to
penetrate niche markets in the future.

For example, many in the U.S. meat industry had dismissed the European
Union market. The cumbersome restrictions on hormones made it too much
trouble to bother with. Now I'm hearing increasing interest in meeting
that market as well.

But we all know that times have changed. We've realized with the export
restrictions we've operated under due to the BSE concerns that we can
respond to very specific market demands---either international or
domestic---whether that market driver is Japan or McDonalds.

In addition, with the increased interest in organics here in the U.S.,
we've recognized that for some in the industry, segmentation is not so
much a problem as it is an opportunity---to expand the market.

Further, I would argue that exports can contribute more to the bottom
line for beef than simply providing an outlet for increased production.
Perhaps more importantly, exports also increase the value of our beef.

The prize, of course, lies not with sending swinging sides of beef
abroad. It's all about parts and pieces. In fact, most of the beef we
export is in cuts and parts, offering opportunities for premium prices
for the short plate, the short rib and the chuck roll. These cuts that
are exported would otherwise end up as lower-valued ground beef if they
remained in the domestic market. In addition, tongues, livers and tripe
are more highly prized in other parts of the world than here.

We need to continue our efforts to rebuild and expand our export
markets. Strong domestic demand and reduced inventories have kept prices
strong. But as producers rebuild herds and weight gains continue, U.S.
beef production is forecast to increase over the next several years.
Combined with higher feed costs, that means cattle prices will likely
remain below recent high levels---unless we find additional outlets.

**[OIE Designation]{.underline}**

Here's the ticket for making that happen. In May, the OIE---the World
Organization for Animal Health---awarded the U.S. a formal
classification of "controlled risk" for BSE. As Secretary Johanns put
it, "That classification confirms what we have always contended---that
U.S. regulatory controls are effective and that U.S. fresh beef and beef
products from cattle of all ages can be safely traded due to our
interlocking safeguards."

The controlled risk classification is essentially an international clean
bill of health for our national cattle herd. It's a determination based
on a scientific assessment of risk using internationally agreed upon
standards. Any nation that recognizes the OIE standards now has no
scientific reason to block imports of U.S. beef---of any age.

Meeting this standard should put an end to the need for export
verification programs. The key is for our trading partners to adopt the
OIE standards as their own standards for safe trade. And we must do the
same.

**[MRR2]{.underline}**

We've taken the first steps to harmonize U.S. standards with OIE
standards with the proposed minimal risk rule that we finalized just
last Friday. This rule expands the list of allowable beef imports from
countries with minimal risk of BSE---based on a scientific risk
assessment. Canada is currently the only minimal-risk country.

The Canadians also received a controlled risk classification from OIE in
May.

This has been controversial. Opening markets for imports is not always
easy.

The link to two-way trade isn't always obvious. But we need to keep the
focus where it belongs---on the science.

We want our trading partners to establish a scientific basis for
accepting imports. We need to lead by example on our own rules for
imports---and move as fast as we can.

Our next step is to amend all of our BSE-related import regulations to
make them consistent with international guidelines. Our goal is to
publish a "Comprehensive BSE" proposed rule within the next year. All
the while, we'll be pushing our traditional trade partners who buy red
meat to accept the OIE designation for the U.S. and restore or expand
their markets.

**[Conclusion]{.underline}**

As some of you know, I have a farm in South Dakota, where there's a good
bit of populist sentiment, some of which bubbles up as protectionism.
But, I remember an old saying that you still hear today among farmers
and ranchers out West:

"Trade doesn't guarantee prosperity for farmers,

But you cannot have prosperity without trade."

Trade is of tremendous value to the U.S. as a nation, and to individual
farmers who increasingly produce for the international marketplace. I'm
excited about new opportunities that are opening up for you to expand
your business.

I'm pleased about our progress on NAIS and the strength this animal
identification system brings to our efforts to safeguard animal
agriculture. We look forward to working with you to protect and promote
U.S. agriculture.