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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

  BENEFITS OF TRADE TO THE MEDICAL TECHNOLOGY AND AGRICULTURE SECTORS

=======================================================================

                                HEARING

                               before the

                         SUBCOMMITTEE ON TRADE

                                 of the

                      COMMITTEE ON WAYS AND MEANS

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 14, 2001
                         BLOOMINGTON, MINNESOTA

                               __________

                           Serial No. 107-26

                               __________

         Printed for the use of the Committee on Ways and Means

                   U.S. GOVERNMENT PRINTING OFFICE
74-225                     WASHINGTON : 2001

---------------------------------------------------------------------------
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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
J. D. HAYWORTH, Arizona              LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin

                     Allison Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                         Subcommittee on Trade

                  PHILIP M. CRANE, Illinois, Chairman

E. CLAY SHAW, Jr., Florida           SANDER M. LEVIN, Michigan
AMO HOUGHTON, New York               CHARLES B. RANGEL, New York
DAVE CAMP, Michigan                  RICHARD E. NEAL, Massachusetts
JIM RAMSTAD, Minnesota               WILLIAM J. JEFFERSON, Louisiana
JENNIFER DUNN, Washington            XAVIER BECERRA, California
WALLY HERGER, California             JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania
JIM NUSSLE, Iowa

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                               __________
                                                                   Page
Advisory of May 4, 2001, announcing the hearing..................     2

                               WITNESSES

American Medical Systems, Douglas Kohrs..........................    37
American Soybean Association, and Minnesota Soybean Growers 
  Association, Gary Joachim......................................    57
Cargill, Incorporated, Scott Portnoy.............................    48
Gutknecht, Hon. Gil, a Representative in Congress from the State 
  of Minnesota...................................................    28
Kennedy, Hon. Mark R., a Representative in Congress from the 
  State of Minnesota.............................................    23
Medtronic, Inc., Art Collins.....................................    32
Minnesota Corn Growers Association, Gerald Tumbleson.............    74
Minnesota Farm Bureau Association, Al Christopherson.............    43
Minnesota, State of, Hon. Jesse Ventura, Governor................     9
Minnesota, Saint Paul, Hon. Norm Coleman, Mayor..................    17
National Association of Wheat Growers, Wheat Export Trade 
  Education Committee, U.S. Wheat Associates, and Minnesota Wheat 
  Research and Promotion Council, Bruce Hamnes...................    65
North Dakota Wheat Commission, Neal Fisher.......................    60

                                 ______

                       SUBMISSIONS FOR THE RECORD

AdvaMed, statement...............................................    81
American Forest & Paper Association, and Webster Industries, 
  Wayzata, MN, Paul Webster, statement...........................    83
Boston Scientific Corporation, Natick, MA, statement.............    86
Minnesota Department of Agriculture, Saint Paul, MN, Gene 
  Hugoson, statement.............................................    88
Minnesota Pork Producers Association, North Mankato, MN, Karl 
  Johnson, statement.............................................    90
Safe Park, Inc., Wayzata, MN, William A. Sternad, letter.........    95

 
  BENEFITS OF TRADE TO THE MEDICAL TECHNOLOGY AND AGRICULTURE SECTORS

                              ----------                              

                          MONDAY, MAY 14, 2001

                  House of Representatives,
                       Committee on Ways and Means,
                                     Subcommittee on Trade,
                                            Bloomington, Minnesota.
    The Subcommittee met, pursuant to notice, at 1:00 p.m., in 
the Grand Ballroom at the Radisson South Hotel, Bloomington, 
Minnesota, Hon. Philip M. Crane (Chairman of the Subcommittee) 
presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                         SUBCOMMITTEE ON TRADE

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE

May 4, 2001

No. TR-3

    Crane Announces Hearing on the Benefits of Trade to the Medical 
                   Technology and Agriculture Sectors

    Congressman Philip M. Crane (R-IL), Chairman, Subcommittee on Trade 
of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a field hearing on the importance of expanding 
trade and to identify the specific benefits free trade brings to the 
medical technology and agriculture industries as well as those who earn 
their livelihoods in these sectors. The field hearing will take place 
on Monday, May 14, 2001, in the Grand Ballroom at the Radisson South 
Hotel in Bloomington, Minnesota, beginning at 1:00 p.m.
      
    Oral testimony at this field hearing will be from both invited and 
public witnesses. Invited witnesses will include Minnesota Governor 
Jesse Ventura, St. Paul Mayor Norm Coleman, Art Collins, Chief 
Executive Officer of Medtronic, and other government and business 
leaders and economists specializing in the medical technology and 
agriculture industries. Also, any individual or organization not 
scheduled for an oral appearance may submit a written statement for 
consideration by the Committee or for inclusion in the printed record 
of the hearing.
      

BACKGROUND:

      
    Minnesota is one of the leading exporting States in the country, 
and international trade is strongly supported by businesses, farmers 
and individuals throughout the State. Congressman Jim Ramstad's (R-MN) 
district contains over 300 medical technology companies and is a leader 
in the development and manufacture of medical technology. These 
companies face a vast array of non-tariff barriers overseas, which 
severely limit their ability to export their goods. In addition, 
Minnesota is the seventh largest exporting State for agriculture 
products and is dependent on open markets abroad.
      
    The goals of this field hearing are to promote awareness of trade 
issues affecting the medical technology and agriculture industries and 
to examine the importance of international markets for both of these 
industries. Witnesses are expected to focus on significant trade issues 
such as challenging foreign-imposed non-tariff barriers on U.S. medical 
technology and agriculture products, the ongoing World Trade 
Organization (WTO) negotiations on services and agriculture, China's 
entry into the WTO, and long-standing trade dispute with the European 
Union over genetically modified organisms.
      
    In announcing the hearing, Chairman Crane stated: ``Expanding trade 
opportunities for America's exporters is one of my top priorities. 
Minnesota's dynamic medical technology and agriculture industries are 
prime examples of the benefits that expanding market opportunities can 
bring to U.S. businesses, workers, and their families. I look forward 
to hearing testimony on priorities for trade policy from the producers 
and government officials who work to expand U.S. presence in 
international markets.''
      

FOCUS OF THE HEARING:

      
    The focus of the hearing is to examine the unique challenges faced 
by the medical technology and agriculture industries in expanding their 
market opportunities abroad and to understand the importance 
international trade plays in the Minnesota economy.
      

DETAILS FOR SUBMISSIONS OF REQUESTS TO BE HEARD:

      
    Requests to be heard at the hearing must be made by telephone to 
Traci Altman or Pete Davila at (202) 225-1721 no later than the close 
of business, Tuesday, May 8, 2001. The telephone request should be 
followed by a formal written request to Allison Giles, Chief of Staff, 
Committee on Ways and Means, U.S. House of Representatives, 1102 
Longworth House Office Building, Washington, D.C. 20515. The staff of 
the Subcommittee on Trade will notify by telephone those scheduled to 
appear as soon as possible after the filing deadline. Any questions 
concerning a scheduled appearance should be directed to the 
Subcommittee on Trade staff at (202) 225-6649.
      
    In view of the limited time available to hear witnesses, the 
Subcommittee may not be able to accommodate all requests to be heard. 
Those persons and organizations not scheduled for an oral appearance 
are encouraged to submit written statements for the record of the 
hearing. All persons requesting to be heard, whether they are scheduled 
for oral testimony or not, will be notified as soon as possible after 
the filing deadline.
      
    Witnesses scheduled to present oral testimony are required to 
summarize briefly their written statements in no more than five 
minutes. THE FIVE-MINUTE RULE WILL BE STRICTLY ENFORCED. The full 
written statement of each witness will be included in the printed 
record, in accordance with House Rules.
    In order to assure the most productive use of the limited amount of 
time available to question witnesses, all witnesses scheduled to appear 
before the Subcommittee are required to submit 200 copies, along with 
an IBM compatible 3.5-inch diskette in WordPerfect or MS Word format, 
of their prepared statement for review by Members prior to the hearing. 
Testimony should arrive at the Subcommittee on Trade, c/o Office of 
Congressman Jim Ramstad, 1809 Plymouth Road South, Suite 300, 
Minnetonka, MN 55305, no later than Thursday, May 10, 2001. Failure to 
do so may result in the witness being denied the opportunity to testify 
in person.
      

WRITTEN STATEMENTS IN LIEU OF PERSONAL APPEARANCE:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Monday, 
May 29, 2001, to Allison Giles, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Trade, c/o Office of Congressman Jim 
Ramstad, 1809 Plymouth Road South, Suite 300, Minnetonka, MN 55305, by 
close of business on Friday, May 11, 2001.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or 
MS Word format, typed in single space and may not exceed a total of 10 
pages including attachments. Witnesses are advised that the Committee 
will rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at ``http://waysandmeans.house.gov.''

      
    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.

                                

    Chairman Crane. Good afternoon and welcome to this special 
field hearing of the Ways and Means Trade Subcommittee. As 
Chairman, it is my great pleasure to be here in Minnesota 
today, although I must confess, Jim, it would be nicer to be 
out on the golf course.
    Before we start, I'd like to remind everyone that this is a 
Congressional hearing subject to the rules of the U.S. House of 
Representatives. Testimony will be heard from listed witnesses 
only. This hearing is part of a broader plan to make the 
legislative process more accessible to the public, and we will 
be holding hearings like this one across the country.
    The Committee believes it is important to hear directly 
from local communities about their concerns on policy issues 
that we deal with such as trade. I also hope we can work 
together to educate the public on the importance of 
international trade to our economy and to get support for the 
President's ambitious trade agenda which he released last 
Thursday.
    Today's hearing will highlight Minnesota's global export 
leadership and growth in medical technology and agriculture. 
Based on Minnesota's compelling example, I hope to launch a 
broader national discussion regarding the benefits of free 
trade and granting trade promotion authority to President Bush.
    I welcome Governor Ventura and Mayor Coleman and our 
colleagues Mark Kennedy and Gil Gutknecht and look forward to 
their reports on Minnesota's great strides in the global 
marketplace and their comments on the dynamic economic growth 
Minnesotans have achieved through free trade, and I would also 
like to recognize a distinguished guest at our hearing, Senator 
David Durenberger. Is David here yet? Greetings. Congressman 
Tim Penny is also here. Nice to see you both. Thank you for 
being here.
    Governor Ventura has been one of the best advocates for 
free and open markets, and he appeared before our Ways and 
Means Committee last year, and his testimony was a huge hit 
with our Members. His common sense approach to trade has helped 
to illustrate that free commerce helps everyone from the 
corporate CEO to the family farmer and the stay-at-home parent.
    Minnesota has thrived under Governor Ventura's leadership, 
and Minnesota is a winner in international business. Your State 
exported $17.5 billion in goods and services in the year 2000, 
which represents over $15,500 for the average family of four in 
Minnesota. Thanks in part to Minnesota's medical device 
industry, last year the United States ran a trade surplus in 
medical technology of over $7 billion.
    We're going to hear testimony from several farmers later 
this afternoon. I know you've had a wet spring which has 
delayed your planting, and I appreciate your taking the time to 
be with us today.
    Agriculture is a considerable component of Minnesota's 
success in exporting. Minnesota was the seventh-largest 
exporting State in the country in 1999. In that year, 
Minnesota's farmers exported nearly $689 million worth of feed 
grains, $681 million worth of soybeans, $64 million of wheat, 
and $184 million worth of live animals and meat.
    These sales to foreign markets help Minnesota's farmers not 
only to put food on the table and turn on the lights, but to 
prosper. In 2000, Minnesota farms exported over $3.5 billion 
worth of agriculture and livestock products.
    Minnesota's success story is what President Bush and I plan 
to showcase here and around the country. Our country needs to 
understand that when Minnesota, and indeed all of the United 
States, jumps into the game to compete against the world, we 
can and do win.
    Now I'd like to acknowledge the man whose idea prompted us 
to be here today, my fellow Subcommittee Member, Congressman 
Jim Ramstad. Congressman Ramstad is clearly a strong advocate 
for his district and for Minnesota's medical device industry.
    He Co-Chairs the medical technology caucus and sits on both 
the House Ways and Means Trade and Health Subcommittees. He has 
had a tremendous impact on Committee work in these areas, and I 
am delighted that he invited the Trade Subcommittee to his 
district today to hold this hearing on the benefits of 
international trade to the medical technology and agriculture 
industries.
    Now I'd like to yield to Mr. Ramstad for any comments he'd 
like to make and to introduce our first witness.
    [The opening statement of Chairman Crane follows:]

  Opening Statement of the Hon. Philip M. Crane, a Representative in 
  Congress from the State of Illinois, and Chairman, Subcommittee on 
                                 Trade

    Good Afternoon. Welcome to this special field hearing of the Ways 
and Means Trade Subcommittee of the U.S. House of Representatives. As 
Chairman, it is my great pleasure to be here in Minnesota today. This 
hearing is part of a broader plan to make the legislative process more 
accessible to the public, and we will be holding hearings like this one 
across the country. The Committee believes it is important to hear 
directly from local communities about their concerns on policy issues 
that we deal with, such as trade. I also hope we can work together to 
educate the public on the importance of international trade to our 
economy and to get support for the President's ambitious trade agenda 
which he released last Thursday.
    Today's hearing will highlight Minnesota's global export leadership 
and growth in medical technology and agriculture. Based on Minnesota's 
compelling example, I hope to launch a broader national discussion 
regarding the benefits of free trade and granting ``trade promotion 
authority'' to President Bush.
    I welcome Governor Ventura and Mayor Coleman and look forward to 
their reports on Minnesota's great strides in the global marketplace 
and their comments on the dynamic economic growth Minnesotans have 
achieved through free trade.
    Governor Ventura has been one of the best advocates for free and 
open markets. He appeared before the Ways and Means Committee last year 
and his testimony was a huge hit with our Members. His common sense 
approach to trade has helped to illustrate that free commerce helps 
everyone from the corporate CEO to the family farmer and the stay-at-
home parent.
    Minnesota has thrived under Governor Ventura's leadership and 
Minnesota is a winner in international business. Your state exported 
17.5 billion dollars in goods and services in 2000--which represents 
over 15,500 dollars for the average family of four in Minnesota! Thanks 
in part to Minnesota's medical device industry, last year the United 
States ran a trade surplus in medical technology of over 7 billion 
dollars.
    We're going to hear testimony from several farmers later this 
afternoon. I hear you've had a wet spring which has delayed your 
planting and I appreciate you're taking the time to be with us today. 
Agriculture is a considerable component of Minnesota's success in 
exporting. Minnesota was the seventh largest exporting State in the 
country in 1999. In that year, Minnesota's farmers exported nearly 689 
million dollars worth of feed grains, 681 million dollars worth of 
soybeans, 64 million dollars of wheat, and 184 million dollars worth of 
live animals and meat. These sales to foreign markets helped 
Minnesota's farmers not only to put food on the table and turn on the 
lights, but to prosper. In 2000, Minnesota farms exported over 3.5 
billion dollars worth of agriculture and livestock products.
    Minnesota's success story is what President Bush and I plan to 
showcase here and around the country. Our country needs to understand 
that when Minnesota, and indeed all of the United States, jumps into 
the game to compete against the world, we can and do win.
    Now I'd like to acknowledge the man whose idea prompted us to be 
here today--my fellow Subcommittee Member, Congressman Jim Ramstad. 
Congressman Ramstad is clearly a strong advocate for his district and 
for Minnesota's medical device industry. He co-chairs the medical 
technology caucus and sits on both the Ways and Means Trade and Health 
Subcommittees. He has had a tremendous impact on Committee work in 
these areas and I am delighted that he invited the Trade Subcommittee 
to his district today to hold this hearing on the benefits of 
international trade to the medical technology and agriculture 
industries.

                                

    Mr. Ramstad. Thank you, Mr. Chairman, and thank you for 
traveling to Minnesota at my request for this hearing to get 
Minnesota's perspective on international trade and specifically 
the importance of the medical technology and agricultural 
sectors of our economy.
    I also want to welcome our Trade Subcommittee staff, 
Angela, Stephanie, and Kim. Thank you for your work in getting 
this hearing ready.
    I also want to thank each of the witnesses. Governor 
Ventura, good to see you as always, and Mayor Coleman, our two 
colleagues, friends from industry, from the medical technology 
sector, Art Collins, Doug Kohrs, Scott Portnoy, as well as our 
friends from the agricultural part of our economy, Al 
Christopherson is here, and others who will testify as well.
    The timing, Mr. Chairman, of this hearing cannot be better. 
This last Thursday President Bush released his much anticipated 
2001 agenda for international trade. Certainly the President 
recognizes that our economy is increasingly international in 
focus and that expanding trade is absolutely critical to 
continued economic growth and prosperity for America.
    Over 25 percent of the growth in our Nation's economy over 
the last decade is tied directly to international trade. Some 
12 million Americans owe their jobs to exports.
    Here in Minnesota expanding trade is critical. Last year 
alone, as you mentioned, we exported over 17 and a half billion 
dollars in goods and services, and that's an increase, by the 
way, of over $6 billion in the last decade, 60-percent increase 
in the last decade.
    You mentioned that Minnesota is the seventh-largest 
exporting State. Our Twin Cities metropolitan area is the 
ninth-biggest exporter among metropolitan areas nationally. So 
we are a manufacturing State. We are an exporting State. We are 
an agricultural State. In fact, exporting manufacturers in 
Minnesota represent 270,000 jobs. So this is absolutely 
important, absolutely critical to our continued growth and 
prosperity here in Minnesota, to both the medical technology 
sector and the agricultural sector of our economy.
    The President understands this. In fact, he's made trade 
promotion authority a cornerstone of his trade agenda, 
absolutely critical to expanding our economy. I think it's 
regrettable that the United States is falling behind in certain 
areas. We all know about the problem with our great deficit.
    Currently, the United States is party to just 2 of the 130 
free trade agreements in force around the world. Why? Because 
the President doesn't have fast track or, as now the vernacular 
goes, trade promotion authority.
    Europe, which is still our main international competitor, 
continues to negotiate free trade agreements with the rest of 
the world. Meanwhile, our country is being shut out. We're 
outside the process, and our interests are not taken into 
account. So our direct competitors are at the negotiating table 
while we sit and watch.
    In focusing, Mr. Chairman, on the medical technology and 
the agricultural sectors of our economy, it's important to note 
that the United States leads the world, leads the world in both 
these areas, and Minnesota farmers and Minnesota's medical 
alley are leaders in the United States. Our farmers and 
agribusiness people are the most efficient in the world, and 
our State, in fact, is the seventh largest agricultural 
exporting State in the nation.
    We're going to learn today about opportunities for 
developing and expanding our international trade economy, and 
Congress has a full agenda to expand trade. Hopefully, hearings 
like this and similar hearings scheduled in California and 
other places in the United States will develop support for 
expanding our markets and growing our economy through expanding 
trade opportunities.
    I just want to say in summary, Mr. Chairman, that I believe 
we stand at a crossroads. We can erect walls, barriers around 
our country and limit trade, limit the opportunities that trade 
represents, or we can grab the opportunity before us to grow 
our economy, create jobs, and continue to be the world's leader 
economically as well as in other ways.
    International trade is a win-win for America and our 
trading partners. We can grow our economy, promote employment, 
and keep prices low here at home while promoting democracy, 
freedom, environmental improvements in other countries as well.
    I think, Mr. Chairman, the choice is very clear, and which 
is a good segue into introducing our first witness today, who 
never is ambiguous in his policy statements, a leader who I'm 
proud to call my friend for over 20 years.
    In fact, when our Governor testified at my request before 
the Ways and Means Committee in Washington, our former 
Chairman, Bill Archer, who's not one to handing out bouquets or 
accolades--believe me, anybody who knows Bill Archer knows 
that's true--when our Governor finished his statement, finished 
his testimony before the full Ways and Means Committee on the 
importance of permanent normal trade relations with China, Bill 
Archer looked at him and said, ``Governor, you just hit a home 
run.''
    Well, here to hit another home run is somebody who needs no 
introduction to Minnesotans, who has truly been a leader in 
articulating the need to expand our markets for our farmers, 
our manufacturing sector and so forth, our Governor, my friend, 
Governor Ventura.
    Good to have you here today, Governor.
    [The opening statement of Mr. Ramstad follows:]

Opening Statement of the Hon. Jim Ramstad, a Representative in Congress 
                      from the State of Minnesota

    Mr. Chairman, welcome to Minnesota! I'd like to thank the staff 
from the Trade Subcommittee who also traveled to Minnesota, Angela 
Ellard, Stephanie Lester and Kim Jaske. Many thanks for honoring my 
request and traveling to our great state to get the Minnesota 
perspective on international trade and specifically the importance of 
the medical technology and agricultural sectors of our economy.
    I also want to thank each of the witnesses for testifying before us 
today. In particular, I want to thank Governor Ventura for being here. 
I'd also like to welcome each of you here today!
    The timing of this hearing couldn't be better. Last Thursday, 
President Bush released his much-anticipated 2001 agenda for 
international trade.
    President Bush clearly recognizes that the U.S. economy is 
increasingly international in focus and that expanding international 
trade is absolutely critical to continued economic growth in this 
country.
    Over 25% of the growth in our economy over the last decade is tied 
directly to international trade. Some 12 million Americans owe their 
jobs to exports.
    Here in Minnesota expanding trade is especially important. Last 
year alone, we exported over $17.5 billion in goods and services. This 
is an increase of over $6 billion--almost 60%--in the last decade. 
Minnesota is the 17th largest exporting state and the Twin 
Cities is the 9th biggest exporting metropolitan area. Over 
270,000 jobs in Minnesota manufacturing can be attributed to trade.
    The President understands this. As a result, he has made Trade 
Promotion Authority the cornerstone of this trade agenda. It is 
absolutely essential to the negotiation of trade agreements that will 
expand our economy.
    Regrettably, the U.S. is rapidly falling behind in this area. The 
U.S. is currently a party to just 2 of the 130 free trade agreements in 
force around the world. Europe, our main international competitor, 
continues to negotiate free trade agreements with the rest of the 
world. Meanwhile, the U.S. remains outside of the process and our 
interests are not taken into account. In other words, our direct 
competitors are at the table negotiating agreements while we sit and 
watch.
    Trade is especially important to the medical technology and 
agriculture sectors of our economy. The United States leads the world 
in both of these areas and Minnesota farmers and medical device 
manufacturers are leaders in the U.S. Our medical technology companies 
are the most advanced and sophisticated in the world and ran a $7 
billion surplus last year. Our farmers and agri-businesses are the most 
efficient in the world--and our state, in fact, is the seventh largest 
agricultural exporting state in the country.
    As we will learn today, opportunities abound for developing and 
expanding our international trade economy, and Congress has a full 
agenda to expand trade.
    Incorporating South and Central America into NAFTA and creating the 
Free Trade Area of the Americas would create the largest economic zone 
in the world. The NAFTA agreement has been an enormous benefit to our 
country, and we will further benefit by expanding free trade to the 
rest of the hemisphere. We should also continue to push for bilateral 
trade agreements with countries like Chile, New Zealand, Australia and 
Singapore. We should also continue to work with Europe to amicably 
settle our differences.
    There are, however, areas of concern. For example, the medical 
device industry, which is such a large part of the Minnesota economy, 
is currently facing difficulties exporting their goods to Japan. Last 
Friday, I sent a letter to the Administration urging them to work with 
the medical device industry on the issue and to bring it up in upcoming 
bilateral discussions with Japan and in other international meetings 
that will be held over the summer.
    I want to sum up by noting that we stand at a crossroads. We can 
raise walls around our country and limit trade and the opportunities it 
represents. Or, we can grab the opportunity before us to grow our 
economy, create jobs and continue to lead the world economically. 
International trade is a win-win for us and our trading partners. We 
can grow our economy, promote employment and keep prices low here at 
home, while promoting democracy and freedom in other countries, too. 
The choice is clear.
    Now, I would it is my great pleasure to introduce Governor Jesse 
Ventura. I've known the Governor for over 20 years. Today, we will get 
to hear his views on international trade and the role it plays in the 
U.S. economy.
    I'm pleased to say this isn't the first time I've heard the 
Governor testify on this issue. Last year, he came before the Ways and 
Means Committee in Washington and made the case for Permanent Normal 
Trade Relations with China. The not easily impressed Chairman of the 
Committee at the time, Bill Archer, was so impressed that he said, 
``Governor, you just hit a home run.'' I know that the Governor is 
going to hit a home run again today. Thanks for being here. We all look 
forward to what you have to say.
    Thanks again, Mr. Chairman, for holding this hearing in Minnesota, 
especially at this important time, and I look forward to hearing from 
Governor Ventura and the rest of our witnesses.

                                

   STATEMENT OF THE HON. JESSE VENTURA, GOVERNOR OF MINNESOTA

    Mr. Ventura. Thank you. Thank you, Mr. Chairman and 
Representative Ramstad. We do go back. It's hard to believe how 
time flies.
    Let me first welcome you, Chairman Crane and other Members 
of the Trade Subcommittee, to the great State of Minnesota. If 
you get a chance, may I suggest you take an extra day, visit 
one of our beautiful lakes, or take a stroll through the Mall 
of America, or see the hottest team in baseball right now, the 
Minnesota Twins.
    I think you'll find that Minnesota is truly one of the 
greatest States in the nation, if not in our humble opinion the 
greatest State.
    But we are much more than a great place to visit. We are 
also home to leading agriculture and medical manufacturing 
companies that feed people and save lives throughout the world.
    I'm glad to see that you've brought before you today some 
of these industry leaders. They are competing on the world 
stage while building a better Minnesota here at home. And they 
still have time to keep an eye on what you're up to in 
Washington, especially when it comes to trade.
    A critical portion of my Big Plan for Minnesota is about 
keeping Minnesota a competitor on the world stage. I want 
Minnesotans to set higher goals and to expect more.
    We cannot settle for being the best in the Midwest or the 
best in the country. We must strive to lead the world by 
increasing exports, creating better jobs, and building a 
stronger and more diverse Minnesota economy.
    Last year we set a record. For the first time, Minnesota-
manufactured exports surged to over $10 billion and our State's 
export rate grew by 11.2 percent. In case you didn't notice, we 
have arrived. But we're not stopping there.
    I'd like to highlight some of the important trade issues 
facing these industries and the work left to be done, but 
first, let me share some of my newfound Eastern philosophy.
    Last week I had the pleasure of meeting the Dalai Lama. I 
was impressed by his peaceful charisma and his statesmanship.
    To my surprise, the Dalai Lama and I bonded. After all: We 
both share a hairline with Buddha. He's written 56 books; I'm 
getting there. And although he's not a golfer, I did interest 
him in renting the movie Caddyshack. After all, he does play a 
major role in the movie, and he's never seen it.
    But above all, the Dalai Lama and I share a similar view on 
engaging the world in order to spread free markets and free 
ideals. The Dalai Lama preaches ``common responsibility'' when 
it comes to world relationships. He believes that we cannot 
close our doors to those around us, but we must embrace 
differences throughout the world and spread democracy and human 
kindness by forming those relationships.
    He believes that we must, I repeat, we must develop 
relationships with the Chinese people and the Chinese 
government, so that our democratic ideals and free trade ideals 
will spread like wildfire. If we don't, we will not change 
minds, we will not open markets, and we will not move forward.
    I took this encouragement very seriously, and I vow to 
spread this message when I go to China on a Minnesota-trade 
mission this coming fall. I'm going to China because I strongly 
believe that we have an opportunity, especially in Minnesota, 
to grow markets in China, especially in the areas of 
agriculture and medical technology.
    The last time we met, I was asking for your support for 
trade with China. Thankfully, the tri-partisan effort to 
establish permanent normal trading relations with China was a 
success.
    It goes to show you how good things can happen when 
partisanship is set aside and sound policy prevails. Thank you 
for your work on this issue. But don't stop there.
    Minnesota's medical technology and agriculture industries 
need you to continue to push for a Free Trade Agreement of the 
Americas and for what you are now calling ``trade promotion 
authority.''
    As you will learn today, Minnesota is home to a thriving 
international medical technology industry. We are a leader in 
medical manufacturing, with a total production of more than $1 
billion.
    Our innovative medical establishment, enterprising research 
institutions, educated labor force, and high-tech environment 
make Minnesota fertile ground for medical devices.
    Overall, the industry in Minnesota employs over 20,000 
people. Between 1988 and 1996, the industry added the largest 
number of new employees to the State, over 7,400 jobs. We like 
these high-wage, high-skilled jobs, and I think that free trade 
makes this industry stronger and more productive.
    But to keep this industry and others thriving, we need 
Washington to implement more free trade agreements. The sad 
fact is that while other countries forge ahead with new trade 
agreements, the United States is falling far behind.
    Congressman Ramstad mentioned that according to a recent 
study from the Business Roundtable, there are 130 free trade 
agreements in force throughout the world. The United States is 
currently part of only 2 free trade agreements, 2 out of 130. 
That means our farmers and our manufacturers face 
discrimination through higher tariffs in hundreds of markets 
throughout the world.
    Last year our strong exports in the medical manufacturing 
sector were driven by exports to Japan, Germany, Ireland, 
Canada, and the Netherlands. Unfortunately, you don't see any 
Central or South American nations in the top five. It's time 
for a Free Trade Agreement of the Americas, so our 
manufacturers can improve access and increase exports to 
markets right here in our own hemisphere.
    Agriculture producers remain the backbone of Minnesota's 
economy. Our dairy farms, live animal production, and commodity 
farmers export hundreds of millions of dollars worth of food 
every year, making us the seventh largest exporter of 
agricultural products in the United States. Minnesota's world-
class agricultural producers are responsible for 10 percent of 
our Nation's exports of soybeans and 10 percent of America's 
exports of feed grains.
    Because of the innovative spirit of Minnesotans, because of 
our strong work ethic, and because of our skilled work force, 
we have done a pretty darn good job with agriculture exports. 
But let's face it, we can do better.
    Of course, if we want more free trade agreements, the 
President needs sufficient negotiating authority. Thank you, by 
the way, for changing the term from ``fast track'' to ``trade 
promotion authority.'' No matter what you call it, we need it.
    Education is the key. The three most dangerous opponents of 
free trade are misinformation, misunderstanding, and ignorance. 
In a recent New York Times column talking about the protesters 
in Quebec City, Minnesota native Thomas Friedman put it best 
when he said, ``this anti-globalization movement is largely the 
well-intentioned but ill-informed being led around by the ill-
intentioned and well-informed.''
    In order to pass trade promotion authority, we need to 
first take this case to the American people and spread the word 
about the benefits of free trade. Your presence here today is a 
very good step in that direction.
    I applaud you for taking your Committee out of Washington. 
It's always good to get a fresh perspective. For far too long, 
discussions about trade have only taken place in the Committee 
rooms in Washington, the boardrooms of corporations, and the 
classrooms of economic professors. It's time to turn it up a 
notch and put the word on the streets.
    Let's move the discussion out of the Committee rooms and 
boardrooms and bring it to the break rooms and the living 
rooms. Let's move the discussion beyond the hallowed halls of 
our universities and take it to the people who get up and go to 
work every day.
    I have been around the world and back to promote 
Minnesota's products and workers and educate the citizens of my 
State about the jobs created through exports. I have been to 
Mexico and Japan and Canada, where I have seen firsthand that 
the products made in Minnesota save lives and feed people.
    Mr. Chairman and Congressman Ramstad, please take a message 
back to Washington from the people of Minnesota. We need 
Congress to approve trade promotion authority for the 
President, and we need to participate in more trade agreements. 
We want more high-paying jobs. We need more pacemakers in Peru, 
Panama, Paraguay, Portugal, Poland, and Pongo Pongo. We need 
more soybeans in Senegal, Saudi Arabia, South Africa, and 
Singapore.
    As the Dalai Lama told me, so I share it with you. ``Go 
into the world and make friends and take your values with 
you.''
    I'm going to China, and I'm taking my values with me. And 
I'll also take Minnesota soybeans, Minnesota medical devices, 
and Minnesota's hope for prosperity in the world.
    Let's engage. Let's move forward.
    Thank you very much for this opportunity, Mr. Chairman and 
Congressman Ramstad.
    [The prepared statement of Governor Ventura follows:]

   Statement of the Hon. Jesse Ventura, Governor, State of Minnesota

    Thank you, Mr. Chairman and Representative Ramstad.
    Let me first welcome you, Chairman Crane and other members of the 
trade subcommittee, to the great state of Minnesota.
    If you get a chance, may I suggest you take an extra day and visit 
one of our beautiful lakes, or take a stroll through the Mall of 
America or see a Twin's Game.
    I think you'll find that Minnesota is truly the greatest state in 
the nation.
    But we are much more than a great place to visit. We're also home 
to leading agriculture and medical manufacturing companies that feed 
people and save lives throughout the world.
    I'm glad to see that you've brought before you today some of these 
industry leaders. They are competing on the world stage while building 
a better Minnesota here at home.
    And they still have time to keep an eye on what you're up to in 
Washington, especially when it comes to trade.
    A critical portion of my Big Plan for Minnesota is about keeping 
Minnesota a competitor on the world stage. I want Minnesotans to set 
higher goals and expect more.
    We cannot settle for being the best in the Midwest or the best in 
the country. We must strive to lead the world by increasing exports, 
creating better jobs, and building a stronger and more diverse 
Minnesota economy.
    Last year, we set a record. For the first time, Minnesota 
manufactured exports surged to over $10 billion and our State's export 
rate grew by 11.2 percent.
    In case you didn't notice, we have arrived.
    But we're not stopping there.
    I'd like to highlight some of the important trade issues facing 
these industries, and the work left to be done, but first, let me share 
some of my newfound Eastern Philosophy.
    Last week, I had the pleasure of meeting the Dalai Lama. I was 
impressed by his peaceful charisma and statesmanship. To my surprise, 
the Dalai Lama and I bonded. After all:

   We both share a hairline with Buddah.
   He's written 56 books, I'm getting there.
   And, although he's not a golfer, I did interest him in 
        renting the movie Caddyshack. After all, he does play a major 
        role in the movie, and he's never seen it.

    Above all, the Dalai Lama and I share a similar view on engaging 
the world in order to spread free markets and free ideals.
    The Dalai Lama preaches ``common responsibility'' when it comes to 
world relationships. He believes that we cannot close our doors to 
those around us, but we must embrace differences throughout the world 
and spread democracy and human kindness through forming relationships.
    He believes that we must develop relationships with the Chinese 
people and the Chinese government so that our democratic ideals and 
free trade ideals spread like wildfire.
    If we don't, we will not change minds. We will not open markets. We 
will not move forward.
    I took this encouragement very seriously and I vow to spread this 
message when I go to China on a Minnesota trade mission this fall.
    I'm going to China because I strongly believe that we have an 
opportunity, especially in Minnesota, to grow markets in China, 
especially in the areas of agriculture and medical technology.
    Last time we met, I was asking for your support for trade with 
China. Thankfully, the tripartisan effort to establish permanent normal 
trading relations with China was a success.
    It goes to show you how good things can happen when partisanship is 
set aside and sound policy prevails. Thank you for your work on this 
issue.
    But don't stop there.
    Minnesota's medical technology and agriculture industries need you 
to continue to push for a ``Free Trade Agreement of the Americas'' and 
for what you are now calling ``Trade Negotiating Authority.''
    As you will learn today, Minnesota is home to a thriving 
international medical technology industry.
    We are a leader in medical manufacturing, with total production of 
more than $1 billion.
    Our innovative medical establishment, enterprising research 
institutions, educated labor force and high-tech environment make 
Minnesota fertile ground for medical devices.
    Overall, the industry in Minnesota employs over 20,000 people. 
Between 1988 and 1996, the industry added the largest number of new 
employees to the state--over 7,400 jobs.
    We like these high-wage, high-skill jobs and I think that free 
trade makes this industry stronger and more productive.
    But to keep this industry--and others--thriving, we need Washington 
to implement more free trade agreements.
    The sad fact is that while other countries forge ahead with new 
trade agreements, the United States is falling far behind.
    According to a recent study from the Business Roundtable, there are 
130 free trade agreements in force throughout the world. The United 
States is currently part of only 2 free trade agreements. That means 
our farmers and our manufacturers face discrimination through higher 
tariffs in hundreds of markets throughout the world.
    Last year, our strong exports in the medical manufacturing sector 
were driven by exports to Japan, Germany, Ireland, Canada, and the 
Netherlands. Unfortunately, you don't see any Central or South American 
nations in the top five. It's time for a Free Trade Agreement of the 
Americas, so our manufacturers can improve access and increase exports 
to markets right here in our hemisphere.
    Agriculture producers remain the backbone of Minnesota's economy. 
Our dairy farms, live animal production, and commodity farmers export 
hundreds of millions of dollars worth of food every year, making us the 
7th largest exporter of agricultural products in the United 
States. Minnesota's world class agricultural producers are responsible 
for 10% of our nation's exports of soybeans and 10% of America's 
exports of feed grains.
    Because of the innovative spirit of Minnesotans, because of our 
strong work ethic, and because of our skilled workforce, we have done a 
pretty darn good job with agriculture exports. But let's face it, we 
can do better.
    Of course, if we want more free trade agreements, the President 
needs sufficient negotiating authority. Thank you, by the way, for 
changing the term from Fast Track to ``Trade Promotion Authority.''
    No matter what you call it, we need it.
    Education is the key. The three most dangerous opponents of free 
trade are misinformation, misunderstanding, and ignorance. In a recent 
New York Times column talking about the protesters in Quebec City, 
Minnesota native Thomas Friedman put it best, when he said,

          ``this anti-globalization movement is largely the well-
        intentioned but ill-informed--being led around by the ill-
        intentioned and well-informed . . .''

    In order to pass Trade Promotion Authority, we need to first take 
this case to the American people and spread the word about the benefits 
of free trade.
    Your presence here today is a good step in that direction.
    I applaud you for taking your committee out of Washington. It's 
always good to get a fresh perspective.
    For far too long, discussions about trade have only taken place in 
the committee rooms of Washington, the boardrooms of corporations and 
the classrooms of economics professors.
    It's time to turn it up a notch and put the word on the streets.
    Let's move the discussion out of the committee rooms and boardrooms 
and bring it to the break rooms and living rooms. Let's move the 
discussion beyond the hallowed halls of our universities and take it to 
the people who get up and go to work every day.
    I have been around the world and back to promote Minnesota products 
and workers and educate the citizens of my state about the jobs created 
through exports. I have been to Mexico and Japan, where I've seen 
firsthand that the products made in Minnesota save lives and feed 
people.
    Mr. Chairman and Congressman Ramstad please take a message back to 
Washington from the people of Minnesota. We need Congress to approve 
Trade Promotion Authority for the President, and we need to participate 
in more trade agreements. We want more high-paying jobs. We need more 
pacemakers in Peru, Panama, Paragauy, Portugal, Poland and Pongo Pongo. 
We need more soybeans in Senegal, Saudi Arabia, South Africa, and 
Singapore.
    As the Dalai Lama told me, so I share with you. ``Go into the world 
and make friends, and take your values with you. Let's engage. Let's 
move forward.''
    Thank you.

                                

    Chairman Crane. Thank you, Governor. We appreciate your 
testimony, just as we did so very much when you came to 
Washington and testified before our Committee.
    One thing in your testimony that raised a question in my 
mind was you made a reference that the Minnesota Twins are the 
hottest team in baseball. Don't they play in that league that 
we used to? I think Chicago had a team called the White Sox who 
used to play in that league too, right?
    Mr. Ventura. Well, they're about 14 behind us right now, 
Mr. Chairman.
    Chairman Crane. I didn't know they were still playing. We 
have the Chicago Cubs now as our fallback.
    But at any rate, I wanted to ask you a question based on 
your personal experience, and mine too. I worked for the Dredge 
and Dockworkers Union when I was going to college, and I 
understand that you're a Member of two unions and that labor 
unions are a key constituency in Minnesota, and yet your 
position on trade is at the other end of the spectrum from 
where the union leadership is taking positions right now.
    What do you think can be done to help change the opinion of 
the unions on trade liberalization?
    Mr. Ventura. Education and facts and going out and 
explaining to them that we can't isolate our country, we have 
to compete, and I think to promote them, inspire them, tell 
them, we have the best workers in the world and the most 
innovative, and why should we, the United States of America, be 
afraid of a challenge? That's not in our history. We've 
accepted every challenge from the time this great country was 
formed till today, and rather than hide or retreat, this 
country has always been known to advance forward and accept 
those challenges.
    And I would just say this also, Mr. Chairman, as being a 
Member of two unions, I found it interesting when I ran that I 
couldn't receive one union endorsement, and yet I had letters 
and phone calls from the rank and file of the union who said 
they supported me. In fact, I was there when a vote was taken 
to get an endorsement from a union.
    I think there's a disconnect between union leadership and 
rank and file today, and I think that it's up to us to ensure 
that rank and file is well-educated and understands that this 
is not going to destroy the unions, it's going to help them in 
the long run.
    Chairman Crane. I couldn't agree with you more. 
Communicating that message is so vital.
    I've mentioned to folks many times that in my district it 
may be the biggest export district in Illinois, but Illinois, 
like Minnesota, is a major export State, and yet when you bring 
up the question of trade, people start falling asleep at town 
meetings, and it's disturbing.
    I had a hearing about 5 years ago in my district, and at 
that hearing what was revealing--and I have in my district the 
corporate headquarters of Motorola, Sears, Kemper, Baxter, 
right down the line, and so forth. What was revealing was 
better than 90 percent of our Illinois exports come from 
companies employing 500 or fewer, and in your medical 
technology industry here in the State of Minnesota, the vast 
majority, better than 80 percent, I understand, employ less 
than 50 people.
    Mr. Ventura. That's correct.
    Chairman Crane. I mean, they're small businesses. And it is 
really vital for those people who own those businesses to 
communicate to their employees that the business's survival is 
dependent upon guaranteeing that we expand those markets 
worldwide and that their jobs are dependent upon that 
expansion.
    So, unfortunately, we're not getting the message out as 
well as we should, but you're doing an outstanding job, and you 
probably catch some heat for it, but I commend you for all 
you've done.
    One final question. Your testimony on China before Congress 
last year was so very effective that it put the benefits of 
China's World Trade Organization (WTO) accession into real 
terms for real people. Unfortunately, it looks like we're going 
to have another debate on that in June. It's because we have 
not seen China accede into the World Trade Organization yet and 
get permanent normal trade relations. So we have to give them 
their annual renewal this summer, and that's always a heated 
debate.
    Do you believe that continued economic engagement with 
China will eventually weaken the military anti-reform elements 
of the Chinese government?
    Mr. Ventura. I believe that this is the most important 
economic issue of this 21st century so far, and maybe I can add 
to it that for those that somehow think that you can avoid a 
global economy or globalization or whatever term they want to 
give to it, I think you need only look as far, Mr. Chairman, as 
the Internet. You will be able to go to a computer and 
communicate with someone in China in the near future, and that 
is going to make our world smaller and smaller and smaller, and 
there's no way around it.
    I believe that by trading with China and our influence into 
China will be the most important move for democracy and good 
business in this century, and it will be China that will 
experience a change, even more so than the United States of 
America.
    Chairman Crane. To which I can only say amen. I have an 
uncle who's still alive, he's 98 years old. He was a missionary 
in China in the twenties. And I salute him and give him and his 
colleagues credit for all of their efforts, but the fact of the 
matter is, trade has done more to advance civilized values 
worldwide than anything else in the span of recorded history, 
and it's a win-win proposition. We benefit and those with whom 
we trade benefit.
    Mr. Ventura. Let me add, Mr. Chair, if I may. Why will they 
listen to us if we don't have a relationship with them?
    Chairman Crane. Yes, exactly. Absolutely.
    Mr. Ventura. It ends right there.
    Chairman Crane. Absolutely. Mr. Ramstad.
    Mr. Ramstad. Thank you, Mr. Chairman. Thank you, Governor, 
for your excellent testimony. Once again, you put your 
abilities to good use in communicating and putting into real 
terms how it affects real jobs, real people, people on the 
street. And you're right, we have to take this out of the 
Committee rooms, out of the boardrooms, and take it to the 
people and explain to them the facts, because there's so much 
demagoguery out there, as you know.
    Let me just ask you this. It's a fair summary of your 
statement here today or your position that you share President 
Bush's top priority as far as trade is concerned and that is 
that we pass trade promotion authority this year?
    Mr. Ventura. Yes.
    Mr. Ramstad. That's the overriding concern that you share 
with Congressman Crane?
    Mr. Ventura. Absolutely. As well, again, when we're only 
involved in 2 trade agreements out of 130, we need more.
    Mr. Ramstad. And I hope, at some point we'll get to this, 
when it comes to the fore of the Committee that you will again 
be able to be involved and to come out and testify, because 
when you speak, Members listen, and I'd appreciate that once 
again.
    Mr. Ventura. Just call, and I'll be happy to. I enjoy trips 
to Washington.
    Mr. Ramstad. Thank you, Governor.
    Also, I want to ask you as a follow-up. You said the Dalai 
Lama shared with you the statement, ``Go into the world and 
make friends and take your values with you.''
    Mr. Ventura. Yes.
    Mr. Ramstad. Well, we have a problem with, first, of these 
trade issues, whether it's WTO bilateral trade negotiations, 
whether it's Free Trade of the Americas, whether it was North 
American Free Trade Agreement (NAFTA), General Agreement on 
Tariffs and Trade (GATT), whatever it might be, with some of 
our friends on the Committee and in Congress who insist on 
including labor protections and environmental protections as 
part of the agreements themselves.
    It's difficult sometimes to explain to these people or to 
get them to understand at least that I believe we can be more 
of a force for changing human rights conditions, for changing 
their workers' protections, for changing their environmental 
standards if we're present there, if we're a force there, 
rather than seeing the treaty go down as we've seen in the 10 
years I've been in the Congress too many times. Do you agree 
with that?
    Mr. Ventura. I agree fully with that. Again, I'll repeat 
myself. Bear with me. They're not going to listen to us unless 
they have a relationship with us. We can sit across the big 
expansion of the sea and shake our finger all we want, but 
unless there's some type of relationship, they're not going to 
listen.
    And to me it's simple. When our companies go into a country 
like China and when they employ Chinese workers, those workers 
are going to go back to their neighborhoods. They're people. 
They're the same as we are here.
    They're going to go back and talk, and they're going to 
say, gee, look at what this company does, look at how the 
working conditions are here, this is what we need to have our 
companies do and the conditions.
    And to me that's the only way you're going to change them, 
is by giving them concrete examples or hands-on experience to 
that change, not simply by just telling them.
    Mr. Ramstad. So you'll help us once again with permanent 
normal trade relations, the problems with the Navy surveillance 
plane notwithstanding?
    Mr. Ventura. Notwithstanding.
    Mr. Ramstad. Well, I know you have some work to do in St. 
Paul to finish up the legislative session. Again, I want to 
thank you, Governor, for being with us today, and thank your 
staff. I see John Woodley here and Steven Bosacker. Thank you, 
and let's continue to work together on these trade issues.
    Mr. Ventura. Thank you, Congressman Ramstad, and thank you, 
Chairman Crane. I appreciate it very much.
    Chairman Crane. Thank you, Governor. We're very grateful 
for your participation and look forward to working with you.
    Mr. Ventura. Thank you.
    Chairman Crane. And now I would like to ask the mayor if he 
will please come forward, since one of our Congressional 
colleagues is not yet here, and we're going to put the mayor in 
ahead of him.
    Now I would like to welcome Mayor Coleman and express my 
appreciation to you for participating in this important trade 
hearing today, and with that, I would yield to you and tell you 
that your oral testimony will, of course, be part of the 
record, but any written testimony you have above and beyond 
what you present orally will be made a part of the permanent 
record too. And with that, you may proceed.

    STATEMENT OF THE HON. NORM COLEMAN, MAYOR, SAINT PAUL, 
                           MINNESOTA

    Mr. Coleman. Thank you, Mr. Chairman. It's a great pleasure 
to be before you.
    My name is Norm Coleman, mayor of the capital city of St. 
Paul. It's a great pleasure to be before you and the 
Congressman from the Third District, my good friend, Jim 
Ramstad, who I have had the pleasure for many, many years of 
working together, for this opportunity to come before you 
today, and thank you for coming to Minnesota to hear about our 
concerns and thoughts on international trade and its importance 
for our State.
    You come today to a State and a capital city that's seen 
tremendous growth over the last half of the last decade. In 
many ways this tremendous growth is the result of the 
resurgence of St. Paul and other American cities.
    And I would note that I have modified my written testimony 
before you, and the official version will be forwarded in 
writing, later.
    In order for the American entrepreneur, the American 
businessperson, the American farmer to compete, they need to 
deliver the best product at the least cost, and they must have 
the opportunity to market and sell that product. Government 
shapes the environment by regulation and taxes, rules and 
requirements that impacts the ability to compete.
    In St. Paul we turned around a city that was dying 
economically by eliminating red tape, bureaucracy, and 
government regulation. We kept a lid on taxes. We attracted 
over $1 billion in new private investment. We didn't limit 
access to markets, and we sought to improve the growth of 
capital. We promoted job growth. This year we proudly earned 
the first AAA bond rating in the history of the city.
    It is particularly important that you are here today to 
talk about the importance of expanding trade to identify the 
specific benefits that free trade brings to the medical 
technology and agricultural sectors.
    To be sure, it is important to know that Minnesota ranks 
13th in the United States for exports to the world with a value 
of $14.4 billion. Today, agricultural exports still rank at the 
top, with food products, livestock, timber, technology, 
printing and metals falling closely behind.
    Mr. Chairman, we are not a closed society, nor an island 
unto ourselves. It is for that reason that I heartily support 
NAFTA and other efforts that will create a global trade zone 
unimpeded by unfair restrictions that undermine economic growth 
and freedom.
    In St. Paul we are home to some of the strongest medical 
and technology providers in the country and in the world. 
HealthEast, Alliant, and Regions Hospital continue to provide 
not only state-of-the-art medical services and innovation, but 
are leading the industry in new techniques to prevent heart 
disease, improve critical care patient services and expanded 
trauma-based services.
    In the area of technology, Lawson Software stands in the 
heart of our downtown, the largest independently owned software 
manufacturer in Minnesota, doing business across the nation and 
around the world.
    What all of these companies need is open markets and the 
ability to compete internationally without unfair trade 
restrictions.
    Some time ago I led a Sister City delegation to Neuss, 
Germany. There, with our friends from 3M and Northwest 
Airlines, we not only learned about our common bonds as people, 
but also our common bonds as trading partners. We all have the 
same goals in that respect. We want unfettered access to new 
markets for our products, we want to expand economic 
opportunity through economic freedom and trade, and above all, 
we want a global economy that lifts people up.
    Those who have rallied against free trade often forget that 
we, as the United States, can do more to enhance human rights 
and protect and expand freedoms by exposing societies to the 
promise of democracy and capitalism.
    I am unabashed in my support for free enterprise, Mr. 
Chairman. Cities need entrepreneurs, risk takers, and job 
creators. I support the vision of using our strength in 
technology and medical devices and agriculture as a way to open 
doors to new markets, but to also expand the horizons of 
freedom and democracy throughout the world.
    Our strength as a country depends on our courage to 
introduce our goods, our ingenuity and innovation to other 
countries, and the strength of a global economy depends on free 
trade.
    In St. Paul, 18,000 new jobs have been created since 1994. 
A large percentage have come from technology, insurance, and 
medical related fields. They are also a by-product of our 
expansion into the world economy. The future of cities will 
depend on our participation in a world economy.
    And, finally, although I am an urban Mayor, I have spent 
much time in rural Minnesota. I've heard the voices of many, 
many Minnesota farmers. Their message to me has been clear. 
They want one thing: Greater access to markets.
    They want to sell their products wherever in the world a 
buyer exists who is willing to pay a fair price. American 
farmers can compete on a level playing field with anyone in the 
world. Give them that chance.
    As you continue your deliberations today and through the 
weeks and months ahead, please take with you the very, very 
clear message that free trade not only works, it works wonders.
    America's thriving economy has benefited from global 
markets. The 3Ms, the Honeywells, the Cargills, and the Lawsons 
and the Minnesota Wire and Cables, all of these companies, 
large and small, benefit when markets are open and free from 
restrictions.
    I've often said that the best form of welfare reform for 
people is a job, and the best way to improve the lives of 
people is to bring them into the economic mainstream.
    Today, I believe the best way to foster freedom and 
democracy throughout the world, the best way to open the doors 
of closed societies and to bring countries into the world of 
nations, is to expand trade and economic opportunity. The best 
tool in the fight for freedom and human rights is economic 
advancement through trade.
    I wish you well in your discussions. I look forward to 
continuing to work with you and urge you to continue to seek 
ways to expand trade and economic opportunity at home for 
Minnesota and abroad.
    Thank you, Mr. Chairman.
    [The prepared statement of Mayor Coleman follows:]
    Statement of the Hon. Norm Coleman, Mayor, Saint Paul, Minnesota
    Chairman Crane, members of the House Ways and Means Committee, 
thank you for coming to Minnesota to hear our concerns and thoughts on 
international trade and its importance for our state.
    You come today to a state with a Capital City that has seen 
tremendous growth over the last half of the last decade-and in many 
ways the principles that have resulted in the resurgence of Saint Paul 
and other American cities are mirrored in the effort to open up trade 
opportunities. In order for the American entrepreneur, American 
business person, or American farmer to compete, they need to deliver 
the best product at the least cost. And they must have the opportunity 
to market and sell that product.
    Government shapes the environment; by regulation, and taxes, rules 
and requirements, that impact the ability to compete. In Saint Paul, we 
turned around a city that was dying economically by eliminating red 
tape, bureaucracy and government regulation.
    We kept a lid on taxes and attracted over $1 billion in new private 
investment. We didn't limits access to markets and we sought to improve 
the flow of capital. We promoted job growth. And this year we earned 
the first AAA bond rating in the history of the city.
    It is particularly important that you are here today to talk about 
the importance of expanding trade and to identify the specific benefits 
free trade brings to the medical technology and agricultural sectors.
    To be sure, it is important to know that Minnesota ranks 
13th in the United States for exports to the world with a 
value of $14.4 billion. Today, agricultural exports still ranks at the 
top, with food products, livestock, timber, technology, printing and 
metals following close behind.
    We are not a closed society--nor an island unto ourselves. It is 
for that reason that I heartily support the North American Free Trade 
Agreement (NAFTA) and other efforts that will create a global trade 
zone unimpeded by unfair restrictions that undermine economic growth 
and freedom.
    In Saint Paul, we are home to some of the strongest medical and 
technology providers in the country, and the world.
    HealthEast, Allina and Regions continue to provide not only state-
of-the-art medical services and innovation, but are leading the 
industry in new techniques to prevent heart disease, improve critical 
care patient services and expanded trauma based services.
    In the area of technology, Lawson Software stands in the heart of 
our downtown, the largest independently owned software manufacturer in 
Minnesota--doing business across the nation, and around the world. What 
all of these companies need is open markets--and the ability to compete 
internationally without unfair trade restrictions.
    Some time ago I led a Sister City delegation to Neuss, German. 
There, with our friends from 3M and Northwest Airlines we not only 
learned about our common bonds as people--but also our common bonds as 
trading partners. We all have the same goals in that respect. We want 
unfettered access to new markets for our products--we want to expand 
economic opportunity through economic freedom and trade--and above all, 
we want a global economy that lifts people up.
    Those who have railed against free trade often forget that we, as 
the United States, can do more to enhance human rights and protect and 
expand freedoms by exposing societies to the promise of democracy and 
capitalism.
    My friends, I am an unabashed in my support of free enterprise. 
Cities need entrepreneurs, risk takers and job creators. I support the 
vision of using our strength in technology, and medical devices and 
agriculture as a way to open doors to new markets--but to also expand 
the horizons of freedom and democracy throughout the world.
    Our strength as a country depends on our courage to introduce our 
goods, our ingenuity and innovation to other countries--and the 
strength of a global economy depends on free trade.
    In Saint Paul, of the 18,000 new jobs since 1994, a large 
percentage have come from technology, insurance and medical related 
fields.
    They are, also, a by-product of our expansion into the world 
economy. The future of cities will depend on our participation in a 
world economy.
    Finally, although I am an urban Mayor, I have spent much time in 
rural Minnesota and have heard the voices of many, many, Minnesota 
farmers. Their message to me has been clear. They want one thing: 
greater access to markets. They want to sell their product wherever in 
the world a buyer exists who is willing to pay a fair price. American 
farmers can compete on a level playing field with anyone in the world, 
give them that chance.
    As you continue your deliberations today--and through the weeks and 
months ahead--please take with you the very clear message that free 
trade not only works, it works wonders.
    America's thriving economy has benefited from global markets--the 
3Ms, the Honeywells, the Cargills, the General Mills--and the Lawsons, 
the Minnesota Wire and Cables--all of these companies, large and small, 
benefit when markets are open and free from restrictions.
    I've often said that the best form of welfare reform for people is 
a job--and the best way to improve the lives of people is to bring them 
into the economic mainstream. Today, I believe the best way to foster 
freedom and democracy throughout the world--the best way to open the 
doors of closed societies--and to bring countries into the world of 
nations--is to expand trade and economic opportunity. The best tool in 
the fight for freedom and human rights is economic advancement through 
trade.
    I wish you well in your discussions--I look forward to continuing 
to work with you--and urge you to continue to seek ways to expand trade 
and economic opportunity at home for Minnesota and abroad.

                                

    Chairman Crane. Thank you, Mayor Coleman.
    According to statistics compiled by the U.S. Department of 
Commerce, exports from the Twin Cities metro area to Mexico 
increased by over 340 percent since 1993. Clearly, NAFTA has 
had a positive impact on your city.
    How have current trade liberalization efforts, such as the 
Free Trade Area of the Americas which would create a free trade 
area spanning from Canada's northernmost province to the 
southern tip of South America, benefit your city?
    Mr. Coleman. Very, very simple, Mr. Chairman. We've seen a 
city--American cities, not just my city. I think I can speak 
for so many cities in this regard because the phenomenon is so 
clear and it's so simple. If we expand job growth and 
opportunities, we expand the opportunities for all businesses 
to grow and compete, you will strengthen American cities.
    We have seen that in St. Paul, and we have seen it, I 
believe, in speaking with Mayors across America throughout this 
United States.
    Chairman Crane. Well, it has, and I commend you for your 
insights and your commitment on this subject. Something that a 
lot of folks don't realize is every billion dollar increase in 
U.S. exports translates into 20,000 new jobs here at home, and 
those jobs pay on average 17 percent more than jobs for simply 
the domestic economy.
    Trade is a very beneficial thing to the working people of 
the United States and to our National economy as well and 
especially to your community here, and you're doing an 
outstanding job.
    Mr. Coleman. The best housing program, Mr. Chairman, is a 
job. The best welfare program is a job. The best opportunity to 
provide dignity and self-worth to families is a job. And free 
trades means opportunities for jobs, particularly in core 
cities I believe throughout this country.
    Chairman Crane. Thank you. Mr. Ramstad.
    Mr. Ramstad. Thank you, Mr. Chairman.
    Thank you, Mr. Mayor, for being here today. We have worked 
together and been good friends for over 20 years, and I 
appreciate all of your good efforts and your testimony here 
today.
    And this Mayor, Mr. Chairman, has done an incredible job of 
turning around a city that everybody in this room knows was 
dying, and St. Paul has been revitalized under Mayor Coleman's 
leadership, and I think when he says the future of cities will 
depend on our participation in world economy, certainly St. 
Paul's growth has been in large part due to the leadership of 
the Mayor and to the new jobs that he's attracted there, 18,000 
new jobs since 1994.
    My first question, Mr. Mayor, do you have any way of 
quantifying or can you quantify roughly, of the 18,000 new jobs 
since 1994, how many are tied directly or indirectly to trade 
would you say?
    Mr. Coleman. Congressman Ramstad, without giving you the 
specific numbers, I can tell you that many of those jobs are 
tied to technology and are companies like Lawson Software. 
Lawson Software brought over a thousand jobs to the core 
downtown.
    Lawson Software does business in Africa. Lawson Software 
does business in the Middle East. Clearly, if you speak, as I 
have, to Lawson Software, they will tell you that opening up 
free trade opportunities for them is important to their growth.
    St. Paul, as you know, Congressman Ramstad, is the home of 
3M, one of the great American companies, and they will tell you 
that their continued ability to compete grows and can be tied 
to opening up the global market.
    We don't live in one little corner of the universe that we 
occupy ourselves. We live in this global environment, and we 
have to give our businesses the opportunity to compete, so that 
our folks, our moms and dads, have jobs. That's what this is 
about.
    Mr. Ramstad. I'm going to ask you the same question. I'm 
going to ask everybody this today, because I think it's the 
most important question we could ask as it relates to trade.
    You have heard the Governor testify to the point, you heard 
me make the point in my opening statement, 130 free trade 
agreements, and the United States is only a party to 2. I don't 
know what more empirical data we need to support the 
President's position, our position, on trade promotion 
authority.
    And by the way, I supported what we then called ``fast 
track'' when the Democrats controlled the White House. All 8 
years I worked with President Clinton on the bipartisan whip 
team to try to get that done, as did our Chairman. And, 
unfortunately, we fell short; we fell a few votes short.
    Let me ask you this. Do you agree with the President, with 
us, that gaining trade promotion authority is the most 
important trade issue by far?
    Mr. Coleman. Mr. Chairman, Congressman Ramstad, absolutely, 
absolutely. And, again, I bring this from the perspective of a 
Mayor of an American city that has seen itself prosper by 
expanding opportunities with competition, for job growth and 
job development.
    If you can take a microcosm of a city, between Minneapolis 
and St. Paul, 15th largest metropolitan area in the country, 
you expand that nationwide, you'll understand that when you 
increase opportunities to compete, opportunities to expand 
business opportunity, what you do is you can make yourself 
strong.
    So clearly, from the perspective I have being at the very 
local level, I have seen what happens when you increase those 
opportunities, that we need to move forward in that area, and I 
share your concern in that respect.
    Mr. Ramstad. And that's another good and insightful 
commentary certainly on your part. We're the 15th largest 
population-wise, 15th largest metropolitan area in the country, 
but the 9th largest exporter as far as metropolitan areas go 
nationally.
    So I think that speaks well to our leadership here in 
Minnesota in industry as well as the agricultural sector and 
not to mention the great political leadership that we have 
certainly in St. Paul.
    My last question, Mr. Mayor. As long as I have known you, 
you've been a great advocate for human rights. Just share, if 
you will, briefly what your feelings are with respect to 
including labor protections, human rights protections, 
environmental protections as part of agreements, or should they 
be considered separately?
    Mr. Coleman. Mr. Chairman, Congressman Ramstad, I came to 
Minnesota in 1976, worked for the Attorney's General Office and 
represented human rights. I've been involved with those issues 
for many, many decades.
    If you want to strengthen human rights, you do what you can 
to make sure that mom and dad have some food in their belly. 
Start with that.
    Uplift the standards of living, create an environment so 
they don't--what happens is we can move forward by creating 
trade economy, and as we're doing that, one of the things--and 
I share this with others in this respect. The world is becoming 
smaller. As we move economically, as we establish relations, as 
we establish the human ties, the wave of human rights is 
inescapable, is inescapable.
    So I would argue that let us move forward, let us not 
hamper the ability to create opportunities, to lift up the 
standard of living, by creating barriers. And so the things 
that we can do, Mr. Chairman, Congressman Ramstad, to move 
forward, to strengthening the economic ties, put them on the 
front, make them happen, we will have a profound impact on the 
human rights situation.
    You can't hide. You can't escape it. The world is becoming 
closer and closer. But if we cut off the opportunity to create 
the ties, we will hurt those with a passion about human rights.
    Mr. Ramstad. Thank you very much, Mr. Mayor. Yield back, 
Mr. Chairman.
    Chairman Crane. Thank you very much, Mayor. We appreciate 
your testimony this morning and your willingness to be here and 
to present such outstanding commentary. And with that I will 
now let you depart, Mayor, and I will ask our Congressional 
panel to come forward.
    I think Mark Kennedy is the only one that's still here. 
And, Mark, you can hold oral testimony to 5 minutes. All 
printed testimony will be made a part of the permanent record. 
And with that, you may proceed.

  STATEMENT OF THE HON. MARK R. KENNEDY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MINNESOTA

    Mr. Kennedy. Thank you, and thank you, Chairman Crane, for 
coming here to hear the concerns of Minnesota on this very 
important topic, and thank you, Congressman Ramstad, for 
inviting the Committee here and for your leadership on this 
issue.
    I'm also very happy to see many Second District 
constituents here, and other Minnesotans whether that be Gerald 
Tumbleson, Al Christopherson, Mike Yost, or Duane Bakke, who 
will talk later. It's very appropriate that we have good Second 
District representation given how important trade is to our 
district.
    We're facing tough times in agriculture today. Net cash 
income is at its lowest level since the Depression, and we're 
facing that largely because of unfair trade barriers.
    We face about 62 percent in trade penalties, whereas 
America is only charging about 12 percent. Our tariffs are 
about 10 times higher in agriculture than what they are in 
industrial goods. In Europe, they're subsidizing their farmers 
at about 8 times the level that we do here in America.
    So, clearly we need a new round of global trade talks 
focusing on agriculture. Prior rounds have focused on goods and 
services.
    The protests in Seattle, in my view, set us back. We need 
to continue to push for another round of global trade talks to 
open up these trade barriers across the world because those 
barriers are really hurting our farmers.
    We also need to make sure that we don't impose sanctions on 
a unilateral basis on other countries, because, again, that 
only hurts the common, everyday people of those other countries 
and our own farmers.
    A lot has been spoken already of how important trade is to 
agriculture, how we're the 7th State in the country in terms of 
our exports, and we're top 10 in just about every commodity. 
And if you look at the Second District and how important 
agriculture is to southwest Minnesota, our rankings are even 
higher.
    We're the number one producer of soybeans, and one out of 
every two rows of soybeans is exported. We're very high in 
corn, and approximately one out of every three rows of corn is 
exported. So, with 30 percent of our cash receipts in the 
agricultural economy dependent on exports, it's absolutely 
critical that we tear down these trade barriers and create a 
level playing field.
    Value-added is also something important. This isn't just 
about exporting the commodities. Since we're the farthest away 
of just about any of our main agricultural States, we need to 
focus on value-added, and we've done a good job of that.
    Even though our commodity exports are down somewhat, we are 
up in terms of things like meat and where we have converted our 
corn and soybeans into a higher value-added product. We have a 
lot of that here across the Second District.
    We need to give the President trade promotion authority. 
And, yes, there are areas of agriculture that need to have 
special transition, special consideration, whether that be 
sugar or dairy, but that can be taken care of only when we are 
in the game and talking about the agreements, and that's why we 
need the trade promotion authority.
    This isn't the silver bullet to agriculture. We need to 
focus on other things, such as tax relief and better risk 
management tools, improving our conservation programs, and 
providing a better safety net to our farmers.
    But given that we passed crop insurance improvements last 
session in Congress, given that tax relief is on the way and 
we're working very hard on the safety net, this is absolutely 
critical to the success of agriculture, and not just 
agriculture. If you go around southwestern Minnesota or all of 
Minnesota, you'll see that there are a lot of businesses that 
are heavily dependent on exports.
    I'm very pleased to have three 3M plants in my district. I 
have Hutchinson Technology, ADC Telecommunications' largest 
plant, Seagate, and a lot of other smaller business that are 
very dependent on foreign exports.
    As we look at what we need to do about this economy, yes, 
we need to provide tax relief; yes, we need to make sure that 
we have an energy policy, to make sure that that vital input 
into our economy is affordable; but we need to open up trade.
    Trade is good for Minnesota. It's good for America. It's 
good for the world. When we do what we all do best, we benefit; 
everyone benefits.
    Trade opens up not just markets, but minds. It expands the 
influence of democracy, it expands our values in regards to 
human rights, and it improves the condition of labor, not just 
in other countries but in our own country.
    So I encourage you to continue to push for a new round of 
global trade talks and giving the President trade promotion 
authority, and thank you for being here today.
    [The prepared statement of Mr. Kennedy follows:]
  Statement of the Hon. Mark R. Kennedy, a Representative in Congress 
                      from the State of Minnesota
    Good afternoon Mr. Chairman. I am pleased to be here today to 
testify before this subcommittee on a topic so important to the Second 
District of Minnesota, the State of Minnesota, and our Nation as a 
whole. I would like to thank you and the members of the committee for 
holding this hearing in the great State of Minnesota, and would like to 
thank Congressman Ramstad for inviting you here. I also would like to 
thank you for inviting such a distinguished panel to testify today, 
including a number of my constituents including Gerald Tumbleson, Al 
Christopherson, Mike Yost, Duane Bakke and other distinguished guests.
    Times are tough in farm country. As an example, corn prices are at 
a fourteen-year low and soybean prices are at a twenty-seven year low. 
Net cash income on the farm over the last three years has fallen in 
real terms to its lowest level since the Great Depression. At the same 
time, production costs in farming are expected to set a record high of 
$179.5 billion in 2001.
    This whipsaw effect on farmers is due to a combination of factors, 
including unfair foreign trade. Unfair foreign trade comes in the form 
of import restrictions, non-tariff trade barriers, and outrageous 
foreign subsidy levels. For example, worldwide average tariff levels on 
U.S. agricultural products are at 62 percent and dwarf U.S. tariffs on 
foreign countries, which are about twelve percent. And, the European 
Union subsidizes its producers to the tune of $342 per acre compared to 
U.S. support of our producers at about $43 per acre. Unfair foreign 
trade practices throughout the world cannot be allowed to undermine the 
work of Minnesota producers--sugar and dairy for instance.
    Some may wonder, why does this concern Minnesota? Because we are 
the seventh largest farm state in America in terms of overall cash 
receipts. We rank in the top ten states for nearly every agricultural 
product that can be produced in our climate. We're number four in corn; 
number three in soybeans, hogs, spring wheat, and flaxseed; number two 
in turkeys, oats, sweet corn, and wild rice; number six in barley and 
dry edible beans; number five in sunflowers, milk, and rye; number 
eight in hay; number seven in potatoes; number one in sugar beets and 
green peas; number nine in eggs; number ten in chickens and cattle. 
What does a State of our size do with all of that product? The answer, 
for much of it, is we export it.
    Nationally, 30 percent of all cash receipts on the farm are from 
exports and 40 percent of all agricultural production is exported. 
Minnesota is ranked seventh in America in agricultural exports. Today, 
the production of one in every three acres of corn is exported. And, 
half of Minnesota's soybean production is exported. In short, Minnesota 
needs Minnesota farmers, and Mr. Chairman, Minnesota farmers need 
access to world markets.
    Access to world markets depends on tearing down foreign trade 
barriers and creating a level playing field. And, tearing down foreign 
trade barriers and creating a level playing field depends on Congress 
granting President Bush trade promotion authority.
    Granting President Bush trade promotion authority is especially 
important as Minnesota farmers work to add value to their crops. Here 
in Minnesota, value-added agriculture is critical to our future. As I 
mentioned, the last four years have been very challenging. Strong world 
production since 1997 coupled with a paltry 1.3% growth in the world 
economy since 1998 has caused the value of U.S. bulk exports, such as 
corn and soybeans, to free-fall by nearly one-third from 1996 to 2000, 
depressing crop prices and farm income.
    However, many Minnesota farmers I have talked to point out that, at 
the same time, the value of value-added agricultural exports, like 
meats, actually increased. So, as Minnesota farmers work to add value 
to their corn and soybeans here at home in order to capture a higher 
price for the product they ultimately sell on the market, it is just as 
important that Congress work to ensure that there is a market for 
value-added agricultural products, like pork, beef, turkey, chicken, 
cheese, and for a multitude of other products produced in Minnesota, 
like Distilled Dried Grain--or DDG--that is a high protein bi-product 
of ethanol production used for feeding livestock.
    Once again Mr. Chairman, I believe very strongly that the starting 
place is granting President Bush trade promotion authority.
    If President Bush is denied trade promotion authority, the EU will 
continue to subsidize its farmers eight times greater than the U.S., 
trade barriers around the world will continue to deny access to U.S. 
agricultural products, the farmers in my district will suffer, and so 
will all of Minnesota.
    Alternatively, if President Bush is granted trade promotion 
authority, the best-case scenario--and what I believe will be the 
outcome--he will be able to negotiate agreements that are good for 
farmers, good for Minnesota, and good for our national economy.
    However, in the worse case scenario, if I feel that my farmers and 
Minnesota are not served well by a trade agreement, I will tell the 
President to go back to the drawing board and begin again.
    Trade is not the only ingredient to a strong federal farm policy. 
We must also continue to advocate tax relief, improved risk management 
tools, conservation, and a strong safety net. But, with the crop 
insurance bill passed last year, tax relief on its way, and our current 
work on strengthening the farm safety net, new access to world markets 
can help ensure that America remains the world's source of the safest, 
most abundant, most affordable food supply in the world.
    Having a dependable domestic supply of food and fiber in this 
country is not only an economic and national security concern to me, it 
is a matter that goes right to the heart of what we care about in this 
country. As an early American farmer once put it, ``Cultivators of the 
Earth are the most valuable citizens. They are the most vigorous, the 
most independent, the most virtuous, and they are tied to their country 
and wedded to its liberty and interests by the most lasting bonds.'' 
It's hard to improve on Thomas Jefferson.
    Trade is central to agriculture in Minnesota--especially in the 
Second District. However, we must not neglect the promotion of 
industrial trade. Companies like Hutchinson Technology, ADC 
Telecommunications, Seagate, 3M and others must have access to foreign 
markets as well in order to create and maintain jobs and grow 
Minnesota's economy. Access to open markets is critical to continued 
prosperity in a diversified economy.
    Again, thank you Mr. Chairman and members of the Committee for the 
chance to testify today. I am happy to answer any questions you may 
have.

                                

    Chairman Crane. Thank you.
    One question that I have, you make a reference here to the 
impact on the corn and soybean industry, and I've got a farm in 
Indiana, and last year we took it on the shin, corn and 
soybeans. And, of course, I don't farm it myself. I've got a 
friend that was doing the farming. He packed it in this year 
because of last year's returns, and I've got someone doing it 
again.
    But one of the things that is so important, and you touched 
upon it in your testimony, is the elimination of barriers 
around the world to our exports of agricultural products, and I 
think that a lot of people didn't fully understand that if 
China becomes a Member of the World Trade Organization, and 
that's what we had that Permanent Normal Trade Relations (PNTR) 
vote about, that only applies to them after they become a 
Member of the World Trade Organization, and they've been 
dragging their feet on it. It's on the agricultural issue. 
They're talking about subsidies for agriculture. They get about 
a 10-percent subsidiary, and they want to try and preserve 
that.
    But the thing that is interesting is that the projections 
were if they join WTO with the elimination of their existing 
tariff barriers, that that would have translated in 1-year's 
time into literally billions, billions of dollars of increased 
U.S. ag exports just to China.
    I mean, it is critically important, and hopefully, 
notwithstanding the slowness of their advancement toward 
joining WTO, that they will achieve membership status by this 
fall. I mean, they're hinting at that, but there's no 
guarantee.
    In the interim, though, we have, as you know, coming up 
again the Jackson Vanek waiver in normal trade relations for 
China, and the President has to call for that. That's an annual 
thing. He has to call for that on June the 3rd, and we have to 
vote on it before July the 3rd, and that's always a sticky 
business.
    And so I hope, Mark, that we can count on you to help us 
rally some of the troops, to get them to understand the 
significance of it, the importance of it, and to make sure that 
China is encouraged to continue down a civilized path and not 
play the kinds of games that were played over the downing of 
the airplane there in Hunan and rather concentrate on the 
progress in terms of economic developments and the advancement 
of free trade.
    We're appreciative of your testimony today, and I'd like to 
yield now to your distinguished colleague from your home State 
here, Jim Ramstad.
    Mr. Ramstad. Thanks, Mr. Chairman.
    Mark, you've become a great partner in a very short time on 
these trade issues important to the Second District of 
Minnesota and indeed important to all Minnesotans, and I 
appreciate the good work you're doing on the AG Committee as 
well.
    Let me just ask you the same question I've asked the 
previous two witnesses. In your judgment, is trade promotion 
authority the most important trade measure we can pass to 
benefit farmers?
    Mr. Kennedy. Well, I think, it's critical. You know, we 
have to get a new farm bill. I've spent a lot of time focusing 
on that. But I would say for your Committee, it is the most 
important.
    Mr. Ramstad. As far as trade issues.
    Mr. Kennedy. Absolutely. And I come from a business 
background, and I know if you get too many cooks in the kitchen 
nothing gets done. And it's absolutely critical that every time 
we have the ability to have, a focus, say, on the energy 
objective, we need to have that to be able to put something 
before us in the House and in the Senate as it does make sense. 
Clearly, if it doesn't make sense for America, we'll vote 
against that.
    But it's been spoken of repeatedly again the trade 
agreements that we have been outside of, and as we look around 
the world, we're not going to be eating a whole lot more here 
in America. But as the standard of living in places in Asia and 
others increase, their protein intake is going to significantly 
increase.
    We need to be part of that gain. We need to be making sure 
that they're being fed with American corn, soybeans, livestock, 
and otherwise.
    So, I can't think of really anything more critical than 
giving the President trade promotion authority so that we can 
be at the table and involved with all these agreements.
    Mr. Ramstad. Thank you very much again, Mark, for being 
with us today and for the good job, great job you're doing in 
Washington. I yield back, Mr. Chairman.
    Chairman Crane. And now our belated witness, Gil Gutknecht 
has arrived, and perfect timing, Gil. And so if you will 
proceed with your testimony and try and limit your oral 
testimony to 5 minutes or less, and your written testimony will 
be made a part of the permanent record.

   STATEMENT OF THE HON. GIL GUTKNECHT, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MINNESOTA

    Mr. Gutknecht. Thank you, Mr. Chairman. I hate to waste 
time, and so we're not wasting any today, and I'm going to 
catch a plane to go back.
    Principally I wanted to stop by to say thank you for having 
this hearing because, as you undoubtedly already heard and will 
continue to hear, we in Minnesota are intensely dependent upon 
trade for our economy, both in terms of the technology sector 
as well as agriculture, and I think many people are surprised 
in my Congressional district, in the First Congress District of 
Minnesota, how much in fact we ultimately export.
    There is a glass company that manufactures large plate 
windows for skyscrapers principally down in Owatonna, 
Minnesota, called Viracon, and they export over 30 percent of 
what they produce in Owatonna, Minnesota, in large plate glass 
windows to markets around the world, principally to Asia.
    The problem, of course, we have is what we have in the 
United States, and that is we produce much more efficiently 
than our own markets can absorb, and as a result, we need 
access to those markets.
    In Rochester, for example, we have a very large IBM plant. 
Over a third of the computers that they manufacture in 
Rochester, Minnesota, the AS400s, are ultimately exported.
    We cannot possibly use all that we can produce, and we can 
produce very efficiently. So we are very dependent on foreign 
markets, and trade is extremely important.
    One of the points you need to know about Minnesota is 
because we are at the end of the river, if you will, in terms 
of exporting agricultural goods, some people are surprised at 
how much we ultimately export. As you may have already been 
told, and certainly may be told again, that over half of the 
soybeans that we grow in this part of the country ultimately 
wind up in export markets, and that comes as a surprise to an 
awful lot of people even here in Minnesota.
    The truth of the matter is--if you look around the room, 
you will understand this--we simply cannot eat all that we can 
grow. If you look at the people behind me, you will note that 
we're all fully fed. Ultimately, we need access for our farmers 
to be able to put more of what we can produce efficiently here 
in the State of Minnesota in other parts of the world.
    I talk a lot about some of the exports that we already 
have. If you came to Austin, Minnesota, for example, in my 
Congressional district, down in the southern part of my 
district, there's a little company called Hormel, and every day 
we turn 16,000 pigs into wonderful meat products, including the 
world's finest lunchmeat called Spam.
    Now, I joke a lot about Spam, but it is a fabulous export 
product for a lot of reasons. First of all, it requires no 
refrigeration, and it's one way that we can convert our corn 
and our beans into pigs and ultimately those pigs into a very 
good value-added product which we can export all over the 
world.
    And while people here in the United States sometimes joke 
about that product, ultimately it is a terrific export product, 
particularly in Asia. Asians like pork, they like salted pork, 
and they are particularly fond of that product.
    So, we need access to those markets, and we understand 
probably more than almost any other State how dependent we are 
on trade. You're going to hear from a number of experts, who 
are much more adept at describing their particular 
circumstances, but I do want to add one more important point, 
and that is in the area of dairy.
    There is one cheese plant in our district, right on the 
border of Mark's district and my self's, that every day they 
sell over 500,000 pounds of cheese. Now, if we had to eat all 
of the cheese that we produce here in southern Minnesota, well, 
we just simply couldn't do that. We need access to those 
markets.
    And so not only do we need access to markets in places like 
South America, Central America, Asia, and around the rest of 
the world, but I also want to say, Mr. Chairman, with all due 
respect, we also need access to markets in places like Vermont.
    So, as we look into opening up markets, one of the things 
we're going to be saying from the upper Midwest, and I hope 
you'll understand, is we want access to markets in Asia, and we 
also want access to markets in places like the Northeast where 
they have a dairy compact, which in a sense is a way of 
creating an internal cartel or an internal trade barrier, and 
that is one of the issues you're going to hear and learn more 
about, Mr. Chairman, as we go forward.
    I want to thank you again for coming today. You have a 
great group of folks who are testifying today.
    We hope that your visit to Minnesota is a pleasant one, and 
we look forward to working with you in terms of expanding trade 
and market opportunities, not only for our farmers but for our 
businesses here in Minnesota. So again, thank you, Mr. 
Chairman.
    [The prepared statement of Mr. Gutknecht follows:]

Statement of the Hon. Gil Gutknecht, a Representative in Congress from 
                         the State of Minnesota

    Thanks to Subcommittee Chairman Crane for holding this hearing and 
giving me the opportunity to testify.
    Thank you for inviting such a distinguished panel, particularly my 
constituent Karl Johnson.
    The purpose of this hearing is to discuss the importance of trade 
and, ultimately I suppose, underscore how important it is for Congress 
to grant President Bush Trade Promotion Authority. But, as I believe 
you've heard and will hear from your distinguished witnesses, that we 
must grant the President Trade Promotion Authority, is a foregone 
conclusion. It is not simply a desire, or a wish, it is an imperative.
    Let's think about the facts, as I'm sure you've heard, the European 
Union subsidizes its farmers at a level eight times greater than the 
United States provides to our farmers. This works out to $342 per acre 
in the European Union and only $43 per acre in the United States. And, 
Europe is one of many examples of this problem.
    So, how is this situation ever going to change? Do we suppose the 
EU and others will, out of a sudden sense of fair play, decide to just 
voluntarily and unilaterally level the playing field? Of course not. 
They are not going to change the way they do business until the United 
States calls them out on the rug. But, we can't do that unless we have 
a seat at the trade table. And, we can't do that unless we grant the 
President Trade Promotion Authority.
    In short, Trade Promotion Authority is imperative because without 
it, things are not going to change. The status quo, with all its 
inequities, is locked in place and my farmers and Minnesota lose.
    Of course, some might say there are alternatives. Some say if 
foreign governments want to subsidize their farmers to the point where 
U.S. farmers can't possibly compete, ``great, consumers win.'' But the 
illogic in this argument is glaring. First, we don't accept predatory 
pricing from within our borders, so why should we accept predatory 
pricing from foreign countries waged against our own farmers? Second, 
the inherent danger of over-reliance on foreign supplies should be 
painfully obvious as we approach $2 for a gallon of gas. A safe, 
abundant, and affordable domestic supply of food and fiber is a matter 
of national security.
    Still others argue that we should isolate ourselves and resurrect 
old protectionist policies. But before we allow Washington bureaucrats 
to start managing supply, or let the latter-day Elmer Gantrys to blow 
the dust off the Hawley-Smoot Tariff Act, we need to think about the 
irreparable harm this would do to our farmers, Minnesota, and all of 
America.
    If past is prologue, mandating set-asides will have the same 
adverse effect on America's farmers as our failed sanctions policy, as 
the Soviet grain embargo has had. This policy will invite increased 
foreign production in places like Brazil. And, this increased foreign 
production will quickly offset any temporary increase in prices that a 
short U.S. supply might bring. Then U.S. farmers are left holding the 
bag of lower prices and less market share. And we all know the price of 
protectionism. Hawley-Smoot levied the highest tariffs ever. These 
tariffs, in turn, invited foreign retaliation against the United 
States. World trade went in the tank and America sank deeper into the 
Great Depression.
    Minnesota farmers know that these are not the answers and that is 
why this distinguished group of agriculture leaders sits behind me 
today.
    So, Minnesota farmers and Minnesota need Trade Promotion Authority. 
But, I want to be clear: I will not blithely support agreements at any 
costs. I do not support trade for trade's sake. So, these trade 
agreements must be negotiated with U.S. agriculture in mind. They must 
be enforceable. And, to keep my support, they must be enforced. I have 
had enough with the EU--riddled with BSE and Hoof and Mouth disease 
problems--rejecting U.S. beef on trumped up charges and in blatant 
defiance of our trade agreements. I've had enough of foreign 
competitors skirting our trade rules and using loopholes to ship 
molasses into the United States, and converting it into sugar, shipping 
in concentrated milk proteins, and using them in dairy products, and 
the ongoing problem of the Canadian Wheat Board that, with each passing 
day, looks more like a bunch of commissars. These shenanigans erode 
public trust in trade. And so, as believers in trade, we must put a 
stop to them.
    Fortunately, I believe that President Bush, rooted in farm and 
ranch country, will negotiate agreements that create the kind of access 
to world markets that my farmers need to get a fair return on their 
products, and that he has the resolve to hold our trading partners 
proverbial feet to the fire to see to it they honor those agreements.
    We've seen four very tough years in farm country. But Minnesotans, 
today and throughout our heritage and history, have shown that we are 
cut from a tougher piece of cloth. We always see the light at the end 
of the tunnel.
    Mr. Chairman, I am optimistic that through value-added agriculture, 
the tax relief we are currently working on, the crop insurance bill we 
passed last year, the strengthened federal farm policy we are working 
on this year, and the increased access to the world market that we are 
embarking on today--the light at the end of this tunnel is going to get 
brighter and brighter.
    Once again, thank you for allowing me to testify today.

                                

    Chairman Crane. Thank you, Gil. Referring to your 
testimony, I didn't notice any overweight people in the 
audience. Not even you, Gil. I mean, you look fit to me.
    Mr. Gutknecht. We're not underfed, Mr. Chairman. We're well 
fed here in Minnesota and throughout the country.
    Chairman Crane. Well, I want to express appreciation to you 
not just for your testimony but for your support on this 
critically important issue and getting the message out to 
constituents back home. It's something that requires 
communication and getting the folks at home to understand the 
importance of their component part, whether it's just working 
in the fields or whether it's participating in the factories or 
whatever.
    They're an important part in the total equation to 
guaranteeing that the United States maintains supremacy as the 
world's biggest export nation on the face of this Earth and 
that it translates into jobs, higher-paying jobs, and a better 
economy not just for us, but for those people with whom we 
engage in trade.
    You're playing a key role, and we're going to bank on you 
heavily as we get into some of these upcoming battles before us 
this year.
    And with that, I'd like to yield to Jim Ramstad.
    Mr. Ramstad. Gil, I just want to thank you for being here 
as well and thank you for your work. It's a pleasure to work 
with you on these trade issues. You've always voted in the best 
interests of Minnesota farmers and Minnesota manufacturers and 
understand free trade, and I appreciate your testimony to that 
effect.
    You've already answered my question I've asked the previous 
witnesses when you say it's simply imperative, not a desire or 
a wish, but it's simply imperative that we grant the President 
trade promotion authority. So thanks for your help on that 
issue as well. Yield back, Mr. Chairman.
    Chairman Crane. With that, I will yield to our panelists 
for right now, but it is my hope that both of you might be able 
to stay, so that after the testimony both of you and Jim and I 
can participate in a press availability right here in this 
room. I mean, if you've got a conflict, don't feel guilty about 
it.
    Mr. Gutknecht. Mr. Chairman, I am going to catch a plane to 
go back to Washington this afternoon.
    Mr. Kennedy. I'll stay around. That will be great.
    Chairman Crane. All right. That will be great. Gil does 
everything by the numbers. That's why he got here right exactly 
on time. Thank you both.
    And with that, I would now like to call our panel, our 
first panel: Art Collins, chief executive officer, Medtronic; 
Douglas Kohrs, president and chief executive officer, American 
Medical Systems; Al Christopherson, president, Minnesota Farm 
Bureau Federation; and Scott Portnoy, corporate vice president 
of Cargill.
    If you gentlemen will please take seats and, in the order 
that I introduced you, if you will make your presentations, and 
again try and keep your oral testimony to 5 minutes or less, 
and any written testimony will be made a part of the permanent 
record.
    And with that, we shall commence with Art Collins.

    STATEMENT OF ART COLLINS, PRESIDENT AND CHIEF EXECUTIVE 
        OFFICER, MEDTRONIC, INC., MINNEAPOLIS, MINNESOTA

    Mr. Collins. Chairman Crane, Members of the Committee, 
welcome to Minnesota, home of the Golden Gophers, the Mall of 
America, and Congressman Jim Ramstad. Congressman Ramstad is a 
tireless champion for patients throughout the United States and 
around the world who benefit from medical technology developed 
by thousands of constituents in his district.
    Thank you for the opportunity to testify today on the 
importance of global trade to the medical technology industry.
    As you indicated, my name is Art Collins. I'm president and 
chief executive officer of Medtronic, Incorporated, 
headquartered here in Minneapolis.
    Medtronic is the world's leading medical technology 
company. With deep roots in the treatment of heart disease, 
Medtronic now provides a wide range of cardiovascular, 
neurological, and spinal therapies that help physicians solve 
the most challenging, life-threatening medical problems. We 
employ 25,000 people worldwide, some 6,000 here in Minnesota.
    As Congressman Ramstad knows, Minnesota is proud of its 
reputation as a leader in health care. Certainly, the vast 
number of medical technology companies in the State, and the 
significant amount of money and time we spend on research and 
development, is part of the reason that we are so successful 
and healthy.
    Another reason for our success involves the importance of 
international trade. Many Medtronic jobs, and much of all new 
job creation in our company, are directly related to new 
product development and product introductions outside the 
United States. Approximately one-third of our revenue comes 
from technology sold outside the United States, and two-thirds 
of our revenues come from new therapies introduced within the 
last 2 years.
    Medtronic and other Minnesota-based medical technology 
companies have historically benefited from U.S. trade policy 
that has sought to ensure open markets around the world. Our 
trade agreements have helped to reduce or eliminate tariff and 
non-tariff trade barriers, contributed to greater transparency 
and predictability, helped protect our intellectual property, 
and most importantly, improved patient access to innovative, 
life-enhancing, and cost-saving medical technologies.
    The dynamic pace of innovation in the U.S. medical 
technology industry, coupled with an effective U.S. trade 
policy, has created a $94 billion worldwide market and more 
than a $7 billion positive trade surplus.
    Before I cover several specific opportunities for trade 
reform, let me speak more broadly. U.S. medical technology 
firms and patients worldwide can benefit enormously from the 
introduction and enforcement of new bilateral trade agreements 
with other countries and regions.
    Medtronic, and the greater U.S. medical technology 
industry, supports extending trade promotion authority to the 
President in order to allow the Administration to aggressively 
pursue bilateral trade agreements in the medical technology 
sector.
    The Global Harmonization Task Force and its regulatory 
harmonization process also holds potential benefit for our 
industry. This effort, which incorporates input from both 
government and industry, should be supported by the U.S. 
government.
    Japan is a specific example of the importance of trade and 
U.S. trade policy. Japan is the single largest country market 
for medical technologies outside the United States, and it is 
also one of our most challenging countries in the industry.
    The establishment and rigorous enforcement of medical 
device trade agreements has helped lead to a 500-percent 
increase in U.S. medical technology exports to Japan between 
1987 and 2000. U.S. policy helped turn a 100 million dollar 
medical technology trade deficit in 1987 to a $1.1 billion 
trade surplus in 2000.
    Continued oversight has been necessary along the way, and 
continued enforcement is badly needed today. Japan has failed 
to fulfill some important trade commitments to reform its rules 
for new technology reimbursement and regulation. Rather, the 
government of Japan has used inconsistent means to reduce 
technology prices and has slowed the introduction of new 
products as a means to contain overall expenditures.
    In addition, there is an immediate, discriminatory threat 
in the Japanese government plan to introduce foreign reference 
pricing in the price-setting process. This is a particularly 
onerous and even dangerous attempt by the Ministry of Health, 
Labor, and Welfare to set prices in Japan based on prices in 
other markets. This would fail to capture the significant and 
unique costs of doing business in Japan.
    Mr. Chairman, Japan's average hospital stay is 30 days 
compared to 6 in the United States. Japan's failure to adopt 
new therapies not only impacts U.S. manufacturers and our 
employees, it also does nothing to enhance quality of care for 
Japanese patients and bring about greater system-wide 
efficiency in the Japanese health care system. Fully utilizing 
new medical technology can actually improve the financial 
health and productivity of their system, especially given 
Japan's rapidly shrinking and aging population.
    Let me move on to Europe. Likewise, U.S. trade policy can 
benefit from the industry's ability to compete in Europe, the 
second largest set of countries and the largest region for 
medical technologies. Today the industry exports some $8 
billion to Europe and currently maintains a $3 billion trade 
surplus.
    As the Member States of the European Union continue to 
reform their health care systems to accommodate the needs of an 
aging population, new health technology assessment processes, 
as well as new reimbursement and payment systems, must be 
transparent and capable of adopting new technologies in a 
timely manner.
    If properly implemented, the U.S.-EU Mutual Recognition 
Agreement will help streamline regulatory inspection processes 
for certain technologies while protecting public health. U.S. 
oversight must help ensure it is fully implemented by December 
2001, when the current 3-year transition period ends.
    U.S. trade policy should also encourage the European 
Commission to continue its efforts to preserve the uniform 
regulatory regime for medical technologies throughout the 
European Union (EU). A patchwork of regulatory policies 
throughout Europe would not only frustrate the medical 
technology innovation process and extend the time it takes to 
bring innovative technologies to the market, but also undermine 
the single market concept espoused by the European Union.
    In conclusion, the benefits of trade for the medical 
technology industry are many, and they are reflected in the 
thousands of jobs in Minnesota and the U.S. that we create, as 
well as the enormous contribution we make to the health and 
vitality of our State and country.
    This concludes my testimony. Thank you for the opportunity 
to testify. I look forward to answering any questions you may 
have.
    [The prepared statement of Mr. Collins follows:]

   Statement of Art Collins, President and Chief Executive Officer, 
                Medtronic, Inc., Minneapolis, Minnesota

    Chairman Crane, Members of the Committee, welcome to Minnesota--
home of the Golden Gophers, the Mall of America, and Congressman Jim 
Ramstad--a tireless champion for patients throughout the United States 
and around the world who benefit from the medical technology developed 
by the thousands of constituents in his district that work in the field 
of medical innovation.
    Thank you for the opportunity to testify today on the importance of 
global trade to the medical technology industry.
    My name is Art Collins, and I am the President and CEO of 
Medtronic, Inc. Headquartered here in Minneapolis, Medtronic is the 
world's leading medical technology company providing lifelong solutions 
for people with chronic disease. With deep roots in the treatment of 
heart disease, Medtronic now provides a wide range of cardiovascular, 
neurological, and spinal therapies that help physicians solve the most 
challenging, life-limiting medical problems and restore health, extend 
life, and alleviate pain.
    As Congressman Ramstad knows, Minnesota is proud of its reputation 
as a leader in health care. Certainly, the vast number of medical 
technology companies in the state, and the significant amount of money 
and time we spend on research and development, is part of the reason we 
are so successful and healthy.
    For example, Medtronic spends 10-15% of our yearly revenues on 
research and development, much of it in Minnesota. We employ 25,000 
people worldwide, some 6,000 here in Minnesota.
Benefits of International Trade for the Medical Technology Industry
    Another major reason we are successful is our ability to compete in 
international markets. Many of the aforementioned Medtronic jobs, and 
much of all new job creation for our company, are directly tied to new 
product development and product introductions outside the United 
States. Approximately one-third (1/3) of our revenue comes from 
technology sold outside the U.S., and two-thirds (2/3) of our revenues 
come from new therapies introduced over the last 2 years.
    Medtronic and other Minnesota-based medical technology companies 
have historically benefited from U.S. trade policy that has sought to 
ensure open markets around the world. Our trade agreements have helped 
to reduce or eliminate tariff and non-tariff trade barriers; 
contributed to greater transparency and predictability; and most 
importantly, have improved patient access to innovative, life-enhancing 
and cost saving medical technologies in key markets around the globe.
    The dynamic pace of innovation in the U.S. medical technology 
industry, coupled with an effective U.S. trade policy, has created a 
more than $7 billion trade surplus in our sector with our trading 
partners. I am not aware of data showing the precise impact expanded 
trade agreements on domestic job creation or of expanded trade on U.S. 
jobs in our industry. But the 1997 Benchmarking Study done by the U.S. 
Department of Commerce Bureau of Economic Analysis shows that exporting 
of all manufactured goods supported 7.7 million U.S. jobs. Indeed, one 
of every 5 manufacturing jobs in 1997 was tied directly or indirectly 
to exports.
    These agreements and increased sales also support activities in the 
U.S. such as expanded R&D that could not otherwise take place. Although 
80% of the medical device industry is made up of small companies with 
fewer than 50 employees, these companies devote increasingly large 
portions of their revenue to research on novel life-saving and life-
enhancing therapies. A Lewin Report last year showed that at the same 
time that the trade surplus for this industry has increased, R&D 
spending by the industry doubled during the last decade and is 
equivalent to that of the pharmaceutical industry. As trade increases, 
then, R&D increases, and new therapies whose development could not 
otherwise be sustained reach patients in your district as well as in 
nations abroad.

Global Trade Reforms
    Before I speak of specific opportunities for trade reform, let me 
speak more broadly. U.S. medical technology firms can benefit 
enormously from the introduction and enforcement of new bilateral trade 
agreements with other countries and regions, through which the U.S. 
government could help make regulatory regimes conform to 
internationally established principles and practices, and to adopt 
reimbursement processes that are more streamlined, transparent, and 
predictable.
    Medtronic, and the greater U.S. medical technology industry, 
supports extending ``trade promotion authority'' (TPA) to the President 
to allow the Administration to aggressively pursue bilateral trade 
agreements in the medical technology sector with our major trading 
partners.
    TPA could also be used to ensure further work on regional and 
global trade negotiations, including the Free Trade Area of the 
Americas (FTAA). Initiatives such as the Asia-Pacific Economic 
Cooperation (APEC) forum, and the Transatlantic Business Dialogue 
(TABD) are also important vehicles for the medical technology sector to 
ensure that global markets remain open to innovative medical 
technologies by reducing restrictive tariff and non-tariff barriers and 
by encouraging the adoption of sound health care policies.
    The Global Harmonization Task Force (GHTF), and its regulatory 
harmonization process, also holds potential benefit for our industry. 
It should be supported by the U.S. government. The GHTF is supported by 
both Japan and Europe, and both have made use of the GHTF documents.

Japan
    Japan is a prime, specific, example of the importance of trade--and 
U.S. trade policy--for the medical technology sector. Japan is the 
largest market for medical technologies outside the U.S. It is also one 
of the most challenging for our industry.
    The establishment and rigorous enforcement of medical device trade 
agreements has lead to a 500% increase in U.S. medical technology 
exports to Japan between 1987 and 2000. U.S. policy helped turn a $100 
million medical technology trade deficit in 1987 to a $1.1 billion 
trade surplus in 2000!
    Continued oversight has been necessary along the way. In 1999, our 
industry was prepared to file a 301 against Japan, until the U.S. 
government was able to negotiate an agreement with Japan to allow for 
the more timely adoption and integration of new medical technologies 
into their healthcare market.
    Despite success in Japan, and a good working relationship with 
individuals in Korosho, the Ministry of Health, Labor and Welfare, 
recent Japanese government policies and initiatives potentially 
threaten to undermine U.S. industry access to, and our presence in, the 
Japanese market.
    The medical technology sector could greatly benefit from additional 
oversight and aggressive enforcement of agreements in Japan today. 
Japan has failed to fulfill some of these important trade agreement 
commitments to reform its rules for new technology reimbursement and 
regulation. Rather, the government of Japan has used inconsistent means 
to reduce technology prices and has slowed the introduction of new 
products as a means to contain overall expenditures.
    In addition, there is an immediate, discriminatory threat in the 
Japanese government plan to introduce ``foreign reference pricing'' in 
the price-setting process. This is a particularly onerous and even 
dangerous attempt by the Ministry of Health, Labor and Welfare (MHLW) 
to base prices in Japan on prices in other markets. This would fail to 
capture the significant and unique costs of doing business in Japan.
    Mr. Chairman, with Japan's average hospital length-of-stay being 30 
days (compared to 6 in the U.S.), failing to adopt new technologies is 
not only troublesome for U.S. manufacturers, it also fails to bring 
about greater system-wide efficiency or enhance quality of care in the 
Japanese health system. Rather, fully utilizing new medical technology 
can actually improve the financial health and productivity of their 
system--especially given their rapidly aging and shrinking population.
    Just as in the past, U.S. trade leadership can help address these 
problems. Enforcement of previous trade agreements can require Japan to 
take certain agreed upon steps in an expeditious manner, including:

   Reducing the two-plus year delay in access to brand-new 
        technologies by establishing a process and timeframe for 
        granting provisional coverage and pricing, as well as a method 
        for establishing ``final'' reimbursement listing.
   Establishing clear-cut criteria and processes for creating 
        new reimbursement categories and ``final'' pricing for next 
        generation products.
   Abiding by the required government-industry consultations 
        process established in the 1986 MOSS trade agreement when 
        proposing major changes to either the reimbursement or 
        regulatory processes.

    Again, Japan is an example of how trade benefits the U.S. 
industry--and of how trade policy can continue to yield positive 
opportunities for U.S. medical device manufacturers.

Europe
    Likewise, U.S. trade policy can benefit the industry's ability to 
compete in Europe--the second largest foreign market for medical 
technologies, where we export some $8 billion products, for a $3 
billion trade surplus.
    As the Member States of the European Union continue to reform their 
health care systems to accommodate the needs of an aging population, 
new health technology assessment processes, as well as new 
reimbursement and payment systems, must be transparent and capable of 
adopting new technologies in a timely manner. It is critical that the 
European nations adopt health care policies that ensure adequate 
funding for and timely patient access to new and innovative medical 
technologies. This will ensure U.S. medical technology firms full 
access to important European markets; afford patients in Europe broad 
access to the best available technologies; and allow Member States to 
reap the enormous clinical and economic benefits of innovative medical 
technologies.
    For example, if properly implemented, the U.S.-EU Mutual 
Recognition Agreement (MRA) will greatly benefit both small and large 
U.S. medical technology firms because it will help streamline 
regulatory and inspection processes for certain technologies while 
protecting public health. U.S. oversight must help ensure it is fully 
implemented by December 2001, when the current three-year transitional 
period ends.
    U.S. trade policy can also benefit the medical device industry by 
encouraging the European Commission to continue its efforts to preserve 
the uniform regulatory regime for medical technologies throughout the 
European Union. A patchwork of regulatory policies throughout Europe 
would not only frustrate the medical technology innovation process and 
extend the time it takes to bring innovative technologies to the 
market, but it would undermine the intent of the European Medical 
Devices Directives and the ``Single Market'' concept espoused by the 
European Union.
Conclusion
    The benefits of trade for the medical technology industry are many, 
and they are reflected in the thousands of jobs in MN and the U.S. that 
we create, as well as the enormous contribution we make to the health 
and vitality of our state and country.
    The benefits of trade policy for the industry is to knock down the 
complex and bureaucratic policies in international markets that serve 
as access barriers for patient access to U.S. medical technologies 
abroad.
    This concludes my testimony. I look forward to any questions you 
may have. Thank you for this opportunity.

                                

    Chairman Crane. Thank you, Mr. Collins. Mr. Kohrs.

   STATEMENT OF DOUGLAS KOHRS, PRESIDENT AND CHIEF EXECUTIVE 
    OFFICER, AMERICAN MEDICAL SYSTEMS, MINNETONKA, MINNESOTA

    Mr. Kohrs. Thank you, Chairman Crane and Congressman 
Ramstad, for the opportunity to testify today on the benefits 
of trade for the medical technology industry, the many workers 
in the medical technology fields, and the Minnesota economy.
    My name is Doug Kohrs, and I'm the president and chief 
executive officer of American Medical Systems. AMS is a 
publicly held, NASDAQ-traded medical device company 
headquartered in Minnetonka, Minnesota. We are recognized as an 
industry and technology leader in the area of urological and 
surgical solutions.
    Our products treat patients suffering from male and female 
incontinence, prostate diseases, and erectile difficulties. 
Last year alone we successfully treated over 40,000-patients 
worldwide.
    Now, we employ over 500 people around the world. But, Mr. 
Chairman, we are one of those small companies that you referred 
to earlier that need your help. Our employment base is 350 
people here in Minnesota, and we manufacture virtually all of 
our products at our facility.
    The focus of today's hearing is to discuss the benefits of 
trade in the medical technology sector, but I would first like 
to comment on the benefits of the medical technology sector 
itself. Just as American Medical Systems is recognized as a 
leader for medical devices to treat urological disorders, the 
U.S. medical device industry is the global leader in medical 
device innovation.
    The U.S. is the largest producer and exporter of medical 
devices in the world. Our industry makes substantial 
contributions to the nation through high-paying employment and 
a consistent trade surplus. As you heard Governor Ventura 
mention earlier, we are a high-wage, high-skill, high-
productivity industry in Minnesota.
    Now, as you know, 96 percent of the world's population live 
outside the U.S., so obviously there are many people beyond our 
borders that can benefit from medical innovations.
    The demographics of an aging population and how this 
impacts the growth of a company like AMS are critical. We 
estimate that there are 160 million men and women around the 
world who are symptomatic of the diseases for which we have a 
solution. But of these 40,000 patients we treated in 2000, only 
8,000 or 20 percent of these medical technology beneficiaries 
were from outside the United States.
    The U.S. medical device industry looks to international 
trade to expand market opportunities, cultivate our businesses, 
increase the number of jobs we can create here in the U.S., 
grow our economy, and ultimately help more patients around the 
world.
    Given Minnesota's economic specialization in medical 
devices and the growth in foreign markets, it is not surprising 
that foreign exports play an increasingly larger role for our 
industry and our State. We've heard a lot about that already 
today. In Minnesota, foreign exports of medical technologies 
alone account for over 21 percent of the industry's value of 
shipments, but this could be even higher.
    Using American Medical Systems as an example, our total 
revenues in 2000 were just north of $100 million, but only $18 
million of our sales came from outside the U.S. An important 
aspect of our future growth is international expansion. The 
impact international growth would have on our employment base 
in Minnetonka cannot be overemphasized.
    We have a state-of-the-art facility, with world class 
employees, plenty of capital, and the desire to rapidly expand 
our business. As our industry continues to refine and improve 
existing products and develop new, breakthrough technologies, 
our reliance upon an aggressive and effective U.S. trade policy 
will only continue to grow.
    Now, Art Collins mentioned to you the problems that the 
medical device industry is having with Japan. Let me relate to 
you firsthand specific issues that my company, American Medical 
Systems, has experienced in Japan.
    I mentioned earlier that in 2000 our products will be used 
to treat over 40,000 patients around the world. Yet in Japan we 
treat less than 300 patients per year. Japan has roughly 50 
percent of the U.S. population, and yet our products are used 
to treat 1 percent as many patients.
    Now, we've developed, manufactured, and distributed ``Gold 
Standard'' products, as an example now, that we use to treat 
urinary incontinence. We estimate that in Japan more men suffer 
from this problem than in the U.S. Yet in Japan we treated only 
ten men who suffer from this disease.
    The reimbursement hurdles in Japan with this product have 
been significant. Since the early 1990s, this life-changing 
product has been in the reimbursement approval process within 
Japan.
    Now, we have been providing paperwork upon paperwork over 
the last 10 years, including completing a Japanese clinical 
study, to no avail, and amazingly we've had full Food and Drug 
Administration (FDA) and approval and reimbursement in the U.S. 
since 1983. There is no other product like this device on the 
market in Japan today. So therefore, until our device is 
approved in Japan, there are thousands of men who are 
needlessly suffering from this disease.
    U.S. technology firms would benefit enormously from the 
introduction and enforcement of new bilateral and multilateral 
trade agreements with other countries and regions. The U.S. 
Government should utilize such agreements to help make 
regulatory regimes conform to internationally established 
principles and practices and to adopt reimbursement processes 
that are more streamlined, transparent, and predictable.
    To aid in this effort, and Mr. Ramstad or Congressman 
Ramstad, you've asked us many times today, our industry 
encourages Congress to grant the President trade promotion 
authority, which is critical to pursuing bilateral trade 
agreements in the medical technology sector with our major 
trading partners.
    The medical technology industry is a vital contributor to 
the Minnesota and national economy. It has benefited from, and 
will continue to rely upon, international markets for its 
continued growth and vitality. We face significant challenges 
in assessing these foreign markets and look to partner with the 
U.S. Congress and the Administration to ensure our industry 
remains the world leader in innovation and exports.
    I greatly appreciate this opportunity that I have been 
given to speak before the Committee, and I look forward to any 
questions you may have.
    [The prepared statement of Mr. Kohrs follows:]

  Statement of Douglas Kohrs, President and Chief Executive Officer, 
            American Medical Systems, Minnetonka, Minnesota

    Chairman Crane, Congressman Ramstad and Members of the Committee, 
thank you very much for the opportunity to testify today on the 
benefits of trade for the medical technology industry, the many workers 
in the medical technology-related fields and the Minnesota economy.
    My name is Douglas Kohrs and I am the President and CEO of American 
Medical Systems. AMS is a publicly held medical device company 
headquartered in Minnetonka, Minnesota. We are recognized as an 
industry and technology leader in the area of urology. Our products 
treat patients suffering from Male and Female Incontinence, Prostate 
Diseases and Erectile Dysfunction. In the year 2000 alone, we treated 
over 40,000 patients around the world.
    AMS employs over 500 people around the world, with a significant 
employment base here in Minnesota. We manufacture virtually all our 
products at our facility in Minnetonka. It is at this facility that we 
employ approximately 350 people directly related to the development and 
manufacture of our products.
Importance of the Medical Technology Industry
    The focus of today's hearing is to discuss the benefits of trade to 
the medical technology sector, but I would first like to comment on the 
benefits of the medical technology sector itself.
    The 2000 report by the Lewin Group described our industry best when 
it said that,

          ``the industry has great potential to synthesize advances in 
        the sciences, bioengineering, biomaterials, genomics, computing 
        and telecommunications to develop innovative technologies that 
        will extend the capacity of the health care system to prevent, 
        diagnose and treat disease, and to enhance health status and 
        quality of life.''

    Just as American Medical Systems is recognized as the leader for 
medical devices that treat urological disorders, the U.S. medical 
device industry is the global leader in medical device innovation. With 
a technological edge over our foreign competitors, the U.S. is the 
largest producer and exporter of medical devices in the world. Our 
industry makes substantial contributions to the nation through high-
paying employment and a consistent trade surplus.
    We are a high-wage, high-skill, high-productivity industry in 
Minnesota. There are about 800 registered medical device firms in the 
state, according to 1997 data, we employ over 20,000 people in the 
manufacturing of medical technologies and supplies. Between 1988 and 
1996, our industry added the largest number of new employees to the 
state--over 7,400 jobs. I might add that through my last 2 publicly 
traded companies, I am personally responsible for adding 550 of those 
jobs during this time period.
    The medical technology sector attracts millions of dollars in 
venture capital investments to Minnesota ($34 million in 1997). Many 
other jobs are supported by these investment dollars in research and 
development--such as the scientists, physicians and medical experts at 
teaching hospitals and clinics (U of M and Mayo Clinic) that work with 
us and the NIH to help develop our innovations and conduct our clinical 
trials.
    AMS works with many physicians within the State of Minnesota, and 
across the U.S. to develop and bring to market new and innovative 
technologies. These new technologies bring benefits to patients around 
the world and new jobs to our facility in Minnetonka.
Benefits of Trade for the Medical Technology Industry
    Some 96% of the world's population lives outside the U.S. That 
means there are a lot of people beyond our borders that can benefit 
from medical innovations!
    As well, the demographics of an aging population and how this 
supports the growth of AMS are enormous. We estimate that there are 160 
million men and women around the world who are symptomatic of the 
diseases for which American Medical Systems offers a solution. As I 
mentioned earlier, in 2000 we treated approximately 40,000 patients 
around the world. But only 8,000, or 20% of those patients were from 
outside the United States.
    For the same reason our fifty states embraced interstate commerce 
long ago, the U.S. medical device industry looks to international trade 
to expand market opportunities, cultivate our businesses, increase the 
number of jobs we can create here in the U.S., grow our economy and 
ultimately help patients across the globe.
    Given Minnesota's economic specialization in medical devices and 
the growth in foreign markets, it is not surprising that foreign 
exports play an increasingly larger role for our industry and our 
state. In Minnesota, foreign exports of medical technologies alone 
account for over 21% of the industry's value of shipments.
    In 2000, AMS' total revenues were $100 million. Only $18 million of 
our sales came from outside the U.S. One of the most important aspects 
of AMS' future growth is International Expansion. It is our goal that 
international revenues will soon represent up to 40% of our total 
business. The impact that this type of international growth would have 
on our employment base in Minnetonka cannot be over-emphasized. We have 
a state-of-the-art facility, with world-class employees, in Minnetonka. 
It is not part of our long-term growth strategy to move our production 
capabilities away from our current facility. On the contrary, we are 
looking to continue to leverage the investment we have made in the both 
our facility and our employees.
    The U.S. medical device industry exports life-saving and life-
enhancing innovations that extend and improve the quality of life, 
regardless of national borders. And with the discovery of the human 
genome, the industry's ability to develop tests and devices that 
prevent, detect and treat illnesses earlier will only continue to grow 
exponentially.
    As our industry continues to refine and improve existing products, 
as well as develop new, breakthrough technologies, our reliance upon an 
aggressive and effective U.S. trade policy will only continue to grow. 
The situation with AMS is no different. We are confident that our 
technologies are the best in the world. In fact, in some cases, our 
products are so specialized that AMS is the only source for treatment 
anywhere in the world. We are equally confident that physicians and 
patients around the world will continue to look for our products.
    Current U.S. policy has yielded an over $7 billion trade surplus in 
the medical device sector with our trading partners. The medical device 
industry is one of the few industry sectors with a consistent, positive 
trade balance with Japan ($1.1 billion in 2000) and Europe ($3 billion 
in 2000)--and rigorous oversight and further trade negotiations is 
imperative for maintaining this positive trend.
The Role of U.S. Trade Policy for the Medical Device Industry
    U.S. trade policy is a vital component of this industry's continued 
export growth. At American Medical Systems, we will continue to make 
the best products in the world. Products that people all over the world 
will continue to ask for and to seek out, but without the help of our 
government to ensure our access to those people and those markets, it 
will at some point not make sense for us to continue to invest monies 
and continually encounter roadblocks.
    Japan, our industry's top foreign market, is a good example. Prior 
to the 1986 MOSS trade agreements, the U.S. had a $100 million medical 
technology trade deficit with Japan. Thanks to the negotiation and 
rigorous enforcement of trade agreements with Japan, with $2.75 billion 
exports to Japan, we now enjoy a $1.1 billion surplus in our sector. 
That's an increase of 500%, with the help of the U.S. trade team.
    Let me relate to you the issues that AMS has experienced in Japan. 
I first want to draw some parallels between U.S. and Japan 
demographics. As I mentioned early in my talk, AMS' business is very 
closely linked to population demographics, and specifically to 
population aging and the diseases that come with aging.
    Approximately 5% of the U.S. population are age 65 or over. In 
Japan, the percentage is even greater. I mentioned earlier that in 2000 
AMS products were used to treat over 40,000 patients around the world. 
Over 30,000 of those patients were in the U.S. Yet in Japan, our 
estimate is that we treat less than 300 patients per year. Japan has 
roughly 50% of the U.S. population, and yet AMS products were used to 
treat 1% as many patients.
    AMS developed, manufactures and distributes the ``Gold Standard'' 
for treating men with urinary incontinence. Our artificial urinary 
sphincter has been recognized as the Gold Standard for treatment of 
this disease since the early 1980's. Last year alone in the U.S., we 
treated 3,500 men who suffer from this disease. We estimate that in 
Japan more men suffer from urinary incontinence than in the U.S. Yet, 
in Japan last year, AMS treated fewer than 10 men who suffer from this 
disease. The reimbursement hurdles in Japan with this product have been 
significant. Since the early 1990's, the AUS has been in the 
reimbursement approval process within Japan. Since 1996 alone, AMS has 
implanted this device in over 17,000 men in the U.S. AMS has had 
regulatory approval and reimbursement in the U.S. for current version 
of the device since 1983. There is no other product like the AMS device 
in the market in Japan today. Therefore, until our device is approved 
in Japan, there are thousands of men in Japan who are needlessly 
suffering from this disease.
    The AMS story with our erectile dysfunction device is similar. We 
have 65+% of the market around the world, with devices that are again 
the ``Gold Standard'' for men suffering from Erectile Dysfunction. We 
continue to add new technological advances to this product, and in the 
U.S. last year we treated over 10,000 men who suffer from ED. We 
estimate that over 6 million men in Japan suffer from Erectile 
Dysfunction, and yet we treated less than 10 patients last year in 
Japan.
    This year alone, AMS is bringing to market 2 new products that can 
significantly improve the lives of women suffering from female 
incontinence and men suffering from BPH (non-cancerous swelling of the 
prostate gland). We estimate that 9 million men and over 6 million 
women suffer from these diseases in Japan alone. We are anxious to 
bring these new technologies to Japanese patients as quickly as 
possible, but we cannot do this alone.
    Today, Japan is the largest foreign market for U.S. medical 
devices. To keep it that way, we have had to be steadfast in our 
oversight of Japan's treatment of medical technologies, and enlist the 
continued assistance of the U.S. government. In 1999, our industry was 
prepared to file a 301 against Japan, until the U.S. government was 
able to negotiate an agreement with Japan to allow for the more timely 
adoption and integration of new medical technologies into their 
healthcare market.
    When Japan failed to meet its pledge last year, the U.S. stepped in 
once again and reached another agreement. Sadly, Mr. Chairman, here we 
are again this year asking that Japan be held accountable to its unmet 
promises. Japanese government policies and initiatives continue to 
threaten and undermine U.S. industry access to, and our presence in, 
the Japanese market.
    Japan has failed to fulfill some of these important trade agreement 
commitments to reform its rules for new technology reimbursement and 
regulation. Rather, the government of Japan has used arbitrary means to 
reduce technology prices and has slowed the introduction of new 
products as a means to contain overall expenditures.
    In addition, there is an immediate, discriminatory threat in the 
Japanese government plan to introduce ``foreign reference pricing'' in 
the price-setting process. This onerous plan to base prices in Japan on 
prices in other markets egregiously fails to capture the significant 
and unique costs of doing business in Japan.
    Unfortunately, Japan does not realize that these policies are not 
only problematic for U.S. manufacturers, but also detrimental to their 
own health care system. Japan has an average hospital length-of-stay 
being 30 days (compared to 6 in the U.S.). Fully utilizing new medical 
technology can actually improve the financial health and productivity 
of their system--especially given their rapidly aging and shrinking 
population.
    Just as in the past, U.S. trade leadership can help address these 
problems. Enforcement of previous trade agreements can require Japan to 
take certain agreed upon steps in an expeditious manner, including:

   Reducing the two-plus year delay in access to brand-new 
        technologies by establishing a process and timeframe for 
        granting provisional coverage and pricing, as well as a method 
        for establishing ``final'' reimbursement listing.
   Establishing clear-cut criteria and processes for creating 
        new reimbursement categories and ``final'' pricing for next 
        generation products.
   Abiding by the required government-industry consultations 
        process established in the 1986 MOSS trade agreement when 
        proposing major changes to either the reimbursement or 
        regulatory processes.

    Our industry looks to Congress and the Administration to enforce 
Japanese compliance with current U.S.-Japanese trade agreements and to 
reduce the delays in the introduction and integration of new 
technologies in the Japanese health system.
    Earlier I spoke about the impact international growth could have on 
the business and employment base of AMS. Let me emphasize that 
regulatory and reimbursement approvals in Japan alone that were both 
quicker and fairer would have a huge impact on AMS' business and 
employment base in Minnetonka.
    Likewise, U.S. trade policy can benefit the industry's ability to 
compete in Europe--the second largest foreign market for medical 
technologies, to which our industry exports some $8 billion products, 
for a $3 billion trade surplus.
    As the Member States of the European Union continue address the 
needs of an aging population and financially challenged health care 
programs, new health technology assessment processes, as well as new 
reimbursement and payment systems, must be transparent and capable of 
adopting new technologies in a timely manner. Adequate funding for and 
timely patient access to new technologies can both improve the quality 
of their health systems and allow them to reap the enormous clinical 
and economic benefits of innovative medical technologies.
    The U.S.-EU Mutual Recognition Agreement (MRA), if implemented 
accordingly, will greatly benefit both small and large U.S. medical 
technology firms as it streamlines regulatory and inspection processes 
for certain technologies while protecting public health. U.S. oversight 
must help ensure it is fully implemented by December 2001, when the 
current three-year transitional period ends.
    Europe is a critical market AMS as well. In Europe, AMS is a major 
player in the area of urology. We employ people all across the European 
continent through our wholly owned AMS subsidiaries. Europe today 
represents over 60% of our international business, and will continue to 
be a significant aspect of our business going forward.
    U.S. trade policy can also benefit the medical device industry by 
encouraging the European Commission to continue its efforts to preserve 
the uniform regulatory regime for medical technologies throughout the 
European Union. A patchwork of regulatory policies throughout Europe 
would not only frustrate the medical technology innovation process and 
extend the time it takes to bring innovative technologies to the 
market, but it would undermine the intent of the European Medical 
Devices Directives and the ``Single Market'' concept espoused by the 
European Union.

The Importance of U.S. Leadership in Global Trade Initiatives
    U.S. medical technology firms would benefit enormously from the 
introduction and enforcement of new bilateral and multilateral trade 
agreements with other countries and regions. The U.S. government should 
utilize such agreements to help make regulatory regimes conform to 
internationally established principles and practices, and to adopt 
reimbursement processes that are more streamlined, transparent, and 
predictable.
    To aid in this effort, our industry encourages Congress to grant 
the President ``trade promotion authority'' (TPA), which is critical to 
pursuing bilateral trade agreements in the medical technology sector 
with our major trading partners.
    TPA is also needed for further development on regional and global 
trade negotiations, including the Free Trade Area of the Americas 
(FTAA), the World Trade Organization (WTO), and the Asia-Pacific 
Economic Cooperation (APEC) forum. These, along with the Transatlantic 
Business Dialogue (TABD), are important vehicles for the medical 
technology sector to ensure that global markets remain open to our 
products by reducing restrictive tariff and non-tariff barriers and by 
encouraging the adoption of sound health care policies.
    Significant strides have been made toward reducing tariffs for 
medical technologies in important developed and emerging markets 
through APEC. However, more progress can and should be made, and 
Congress and the Administration should work to ensure that APEC's 
tariff and non-tariff barrier reduction initiatives come to fruition 
within the APEC context or even more broadly within the WTO.
    The U.S. medical technology sector continues to support TABD 
activities, through which further progress can be made on important 
issues related to technology assessment, reimbursement policies, and 
regulatory policies, particularly vis-a-vis the acceding European Union 
countries like Hungary, Poland, and the Czech Republic.
Conclusion
    The medical technology industry is a vital contributor to the 
Minnesota and national economy. It has benefited from, and will 
continue to rely upon, international markets for its continued growth 
and vitality. We face significant challenges in accessing these foreign 
markets, and look to partner with the U.S. Congress and the 
Administration to ensure our industry remains the world leader in 
innovation and exports.
    I look forward to any questions you may have. Thank you for this 
opportunity to speak before the Committee.

                                

    Chairman Crane. Thank you, Mr. Kohrs. Mr. Christopherson.

    STATEMENT OF AL CHRISTOPHERSON, CORN, SOYBEAN, AND HOG 
  PRODUCER, PENNOCK, MINNESOTA, AND PRESIDENT, MINNESOTA FARM 
            BUREAU FEDERATION, SAINT PAUL, MINNESOTA

    Mr. Christopherson. Thank you, Mr. Chairman and Congressman 
Ramstad. I am Al Christopherson, president of the Minnesota 
Farm Bureau, and a corn, soybean, and hog producer from 
Pennock, Minnesota. I might add the Minnesota Farm Bureau 
represents more than 32,000 member families throughout the 
State of Minnesota.
    As you've already heard, Minnesota agriculture is highly 
dependent upon access to world markets with over one-third of 
our commodities destined for other countries. Minnesota farmers 
compete head to head with their competitors in their own 
market, but are not given equal opportunities to compete in 
foreign markets.
    We need to secure trade promotion authority for the 
President in order to improve our access to world markets and 
correct the trade inequities now facing our sector. However, 
trade promotion authority should not include labor and 
environment provisions that use trade as a weapon.
    The negotiations in agriculture in the World Trade 
Organization represents another important opportunity to 
increase America's access to international export markets. Farm 
Bureau-supported objectives for these trade talks include, 
among others, the elimination of export subsides, substantial 
reduction of tariffs worldwide, increased transparency of State 
trading enterprises, access based on scientific principles for 
bioengineered products, expiration of the peace clause, and 
elimination of the blue box category of government allowed 
subsides.
    WTO Member countries should adopt a broad-based approach 
for a new round to ensure that all sectors of the global 
economy benefit from increased trade liberalization, including 
a single undertaking approach.
    Another important trade issue affecting agriculture is the 
completion of China's accession to the WTO. We are concerned 
that China has not fully implemented its bilateral agreement 
with the United States to import our wheat and meat products. 
The United States should not give final authorization for China 
to join the WTO until it indeed lives up to its commitments.
    Concerning regional agreements, the Free Trade Area of the 
Americas (FTAA) will create an open market to 34 countries. It 
is imperative that U.S. producers begin to enjoy access to the 
Free Trade Area of Americas' markets on equal terms.
    In retrospect, NAFTA has significantly benefited the U.S. 
agricultural sector. When you take a closer look at specific 
commodities, however, there have been some winners and some 
losers. While we cannot expect significant gains for all 
commodities and all trade agreements, we can and we must ensure 
that the rules that are adopted as part of the FTAA result in 
fair trading opportunities.
    Setting aside the issue of trade negotiations for a moment, 
there are also a number of trade disputes that need to be 
resolved. We support a negotiated solution to the Mexico sugar 
and high fructose corn syrup issue that is equitable for our 
producers and helps maintain their economic viability.
    We call upon the Canadian government to implement the WTO 
ruling on dairy in a manner that is consistent with WTO rules. 
We believe that the European Union should lift the ban on U.S. 
exports of hormone-treated beef consistent with the WTO ruling.
    The U.S.-Canada Softwood Lumber Agreement expired at the 
end of March, and we support the pursuit of a countervailing 
duty case by U.S. producers, but continue to believe that a 
negotiated solution is preferable to litigation.
    Regarding the trade title of the next farm bill, the 
market-oriented approach adopted in the 1996 farm bill places 
increased importance on an aggressive trade policy to further 
develop export markets. Farm Bureau supports additional funding 
for all export programs.
    Some examples of some successful market export programs 
that require additional funding include the market access 
program, the foreign market development program, the dairy 
export incentives program, and the export enhancement program.
    We feel Congress should support our producers in every way 
possible to make sure that access to foreign markets is 
unrestricted and the terms of trade are fair.
    Mr. Chairman and Congressman Ramstad, the United States is 
facing an important juncture for agricultural trade. Bilateral 
and multilateral negotiations are underway to design the future 
that will govern the global movement of our commodities, and 
international conventions are writing new rules and standards 
for tomorrow.
    The United States must assume a strong leadership role to 
ensure that these new rules and standards create a favorable 
trading environment for our producers. We are already the 
world's leader in production efficiency and product quality. We 
now need our government to take the necessary steps to make us 
a leader at the negotiating table and to once and for all open 
new markets for U.S. agriculture.
    I thank you for this opportunity to share the Farm Bureau's 
views on trade issues affecting agriculture and the trade title 
of the farm bill.
    [The prepared statement of Mr. Christopherson follows:]

   Statement of Al Christopherson, Corn, Soybean, and Hog Producer, 
 Pennock, Minnesota, and President, Minnesota Farm Bureau Federation, 
                         Saint Paul, Minnesota

    Mr. Chairman, members of the Committee, I am Al Christopherson, 
President of the Minnesota Farm Bureau Federation and a corn, soybean 
and hog producer from Pennock, Minnesota. MFBF represents more than 
32,000 member families throughout the state of Minnesota. Our members 
produce a variety of farm commodities and depend on access to foreign 
markets for our economic viability.
    I appreciate the opportunity to speak with you today about trade 
issues affecting Minnesota agriculture and the trade title of the next 
farm bill. As you know, Minnesota agriculture is highly dependent on 
access to world markets with over one-third of our commodities destined 
for foreign shores. Our sector has long enjoyed a trade surplus, but 
that surplus has steadily decreased in recent years due to declining 
export values and barriers to trade that are erected by our trading 
partners.
    At the same time, U.S. agricultural imports continue to rise. This 
is evidence that our market is among the most open in the world. 
Minnesota farmers compete head-to-head with their competitors in their 
own market, but are not given equal opportunities to compete in foreign 
markets.
    In addition, our competitors are outspending us in their use of 
export subsidies and market promotion programs. We can't expect our 
producers to compete on the world stage when they are outgunned by 
foreign government spending. Congress must equip U.S. producers with 
adequate funding to promote their exports.
    We need to secure Trade Promotion Authority for the president in 
order to improve our access to world markets and correct the trade 
inequities now facing our sector. Granting this authority will signal 
to the world that the United States is ready to negotiate.
    However, Trade Promotion Authority should not include labor and 
environment provisions that use trade as a weapon. Putting labor and 
environment standards in trade agreements, and more troubling, imposing 
sanctions on countries that fail to enforce their labor and environment 
standards, is a recipe for ensuring that no future commercially 
meaningful trade deal will be struck.
    Moreover, sanctioning U.S. exports historically has proven to be an 
ineffective policy tool that merely cuts off U.S. producers' access to 
vital export markets without achieving the desired policy result. 
Meanwhile, our competitors are all too happy to take over these 
sanctioned markets at our expense.
    It is for this reason that Farm Bureau continues to oppose 
unilateral export sanctions in any form on U.S. agricultural exports. 
The sanctions reform legislation that passed last year as part of the 
agricultural appropriations bill was a good first step on the road to 
achieving meaningful sanctions reform.
    However, the restrictions placed on the use of federal export 
promotion assistance, financing of sales and travel to Cuba, and 
licensing requirements are provisions that need to be repealed in order 
to allow U.S. farmers and ranchers true access to these previously 
sanctioned markets. We support S. 171, which will accomplish this 
objective.
    Congress should repeal these onerous restrictions as part of its 
proven desire to lift unilateral economic sanctions on U.S. 
agricultural exports. Full sanctions reform will enable America's 
producers to compete in a market valued in excess of $6 billion.
    The negotiations on agriculture in the World Trade Organization 
represents another important opportunity to increase America's access 
to international export markets. Farm Bureau-supported objectives for 
these trade talks include the elimination of export subsidies, 
substantial reduction of tariffs worldwide, increased transparency of 
state trading enterprises, access based on scientific principles for 
bioengineered products, expiration of the peace clause, elimination of 
the blue box category of government allowed subsidies, adoption of an 
equitable approach to domestic support spending between nations and the 
conclusion of negotiations on export credits in the Organization for 
Economic Cooperation and Development (OECD).
    However, true progress in the WTO agricultural negotiations cannot 
be achieved unless a global trade round is launched. WTO member 
countries should adopt a broad-based approach for a new round to ensure 
that all sectors in the global economy benefit from increased trade 
liberalization. To accomplish this, the United States must insist that 
a single undertaking approach for the negotiations is adopted wherein 
all elements of the agreement are concluded and implemented 
simultaneously.
    Another important trade issue affecting agriculture is the 
completion of China's accession to the WTO. Minnesota farmers are 
eagerly awaiting the opportunity to compete in the Chinese market. 
However, it is vitally important that all outstanding issues for 
China's accession package be resolved before the United States gives 
its final approval for China to join the WTO.
    We are concerned that China has not fully implemented its bilateral 
agreement with the United States to import our wheat and meat products. 
China must fully comply with the letter of that agreement. Importation 
of these products into China will serve as evidence that China intends 
to fulfill its international obligations. The United States should not 
give final authorization for China to join the WTO unless it lives up 
to its commitments, including the bilateral promise to remove sanitary 
and phytosanitary (SPS) barriers on U.S. wheat and meat exports.
    Additional regional and bilateral free trade agreements are now 
being negotiated that could significantly impact U.S. agriculture. 
These negotiations present an important opportunity to address specific 
bilateral and regional trade issues affecting our sector.
    On the bilateral front, Chile, as part of the free trade area 
negotiations now underway, must agree to resolve all outstanding SPS 
measures that restrict U.S. exports to that market, including meat, 
poultry and dairy, and must agree to eliminate its price band system, 
which places imports into that market at a price disadvantage.
    Recent reports indicate that the administration may be considering 
pursuing a free trade area with Australia. Australia is an important 
ally of the United States in the WTO negotiations on agriculture. 
However, there have been numerous bilateral SPS barriers to trade that 
Australia has erected to keep our exports out of its market. All 
outstanding SPS issues must be resolved in a scientific manner before a 
commitment is made to commence free trade negotiations with Australia.
    Regarding the Jordan Free Trade Area, Farm Bureau opposes including 
labor and environment provisions in the agreement and strongly objects 
to the use of sanctions to enforce labor and environment provisions.
    We also oppose Executive Order #13141 that mandates environmental 
reviews of trade agreements and believe this administration should 
rescind it. U.S. negotiating proposals for trade agreements should not 
be subjected to the faulty, non-science based process that this 
executive order will impose.
    Concerning regional agreements, the Free Trade Area of the Americas 
will create an open market of 34 countries. Several of these nations 
produce many of the same commodities that we grow in America. Producers 
from these countries already enjoy significant access to our market and 
also compete with us in the international marketplace. It is imperative 
that U.S. producers begin to enjoy access to the FTAA markets on equal 
terms.
    We also view the FTAA as an opportunity to apply the trade lessons 
we learned from the North American Free Trade Agreement. On average, 
NAFTA has significantly benefited the U.S. agricultural sector. When 
you take a closer look at specific commodities, however, there have 
been some winners and losers. While we cannot expect significant gains 
for all commodities in all trade agreements, we can, and must, ensure 
that the rules that are adopted as part of the FTAA result in fair 
trading opportunities. To this end, we have requested that special 
safeguards be implemented in the FTAA for perishable commodities that 
account for seasonality and regionality.
    Setting aside the issue of trade negotiations for a moment, there 
are also a number of trade disputes that need to be resolved.
    We support a negotiated solution to the Mexico sugar and high 
fructose corn syrup issue that is equitable for our producers and 
maintains their economic viability. We are also concerned that Mexico's 
requirements placed on the importation of dry beans are not consistent 
with its NAFTA obligations and should be corrected.
    We call upon the Canadian government to implement the WTO ruling on 
dairy in a manner that is consistent with WTO rules.
    We believe that the European Union should lift the ban on U.S. 
exports of hormone treated beef consistent with the WTO ruling. Because 
the EU has not complied, the list of European products subject to 
retaliation should be immediately rotated and continue to carousel in 
accordance with U.S. law until a solution to this longstanding dispute 
is imminent.
    The U.S.-Canada Softwood Lumber Agreement expired at the end of 
March. U.S. timber producers will now be subjected to unfairly 
subsidized imports of Canadian lumber, which promise to further 
exacerbate the low price conditions they already face. We support the 
pursuit of a countervailing duty case by U.S. producers, but continue 
to believe that a negotiated solution is preferable to litigation.
    The Andean Trade Preferences Act is set to expire at the end of 
this year. Renewal of this trade act should only be granted if a 
competitive trigger similar to that of the Generalized System of 
Preferences (GSP) is implemented that eliminates the tariff preference 
once a country becomes internationally competitive in a specific 
commodity and the safeguard mechanism for perishable products is 
improved.
    Finally, the issue of biotechnology continues to be a top trade 
concern for U.S. agriculture. The European Union has maintained a de 
facto moratorium since 1998 on additional approvals for new varieties 
of genetically enhanced commodities. However, the European parliament 
recently approved a revised 90/220 directive outlining the process for 
GMO approvals.
    Although all member states are required to conform to this revised 
directive, several have indicated that they will not implement it. In 
short, the de facto moratorium is legally over but not in practice. We 
believe the European Union should reinitiate its approval process based 
on science and should implement it without exception or delay.
    In addition, international provisions and standards governing 
biotechnology are being discussed and adopted in a number of forums, 
yet the United States lacks a coordinated policy approach on trade in 
these products. We support the establishment of an interagency 
committee to address biotechnology matters in a coordinated fashion. 
The United States should also forge stronger alliances with its 
international allies on this issue, thereby depolarizing the U.S.-EU 
biotechnology debate.
    Regarding the trade title of the next farm bill, the market-
oriented approach adopted in the 1996 farm bill places increased 
importance on an aggressive trade policy to further develop export 
markets. Farm Bureau supported provisions for the trade title of the 
next farm bill include:
    Approval for additional funding (up to the WTO allowed limits) for 
all export programs. We have participated with other agricultural 
groups to try to ascertain the necessary amounts for each of the 
export-related programs and are still working on those figures.
    Farm Bureau supports a greater percentage of increase in funding 
for expansion of agricultural exports than any other recommendation in 
our farm program testimony--$400 million in additional funding 
annually. With over one-third of our production moving into the export 
market, expanding those markets rather than allowing them to continue 
to shrink is key to the recovery of the current farm economy crisis. 
Opening markets and leveling the playing field is more important than 
ever. We cannot afford to remain on the sidelines while other countries 
use similar export programs to capture our markets.
    The GSM program is an export credit guarantee for commercial 
financing of U.S. agricultural exports. The programs encourage exports 
to buyers in countries where credit is necessary to maintain or 
increase U.S. sales, but where financing may not be available without 
such credit guarantees.
    Title I of the PL 480 program is used to provide overseas food aid, 
also known as Food for Peace, which includes concessional sales. Food 
aid is vitally important to many developing countries around the world. 
The ability to provide this assistance should not be altered in the 
ongoing negotiations on agriculture in the WTO. Farm Bureau supports a 
10 percent increase in food aid programs.
    The Market Access Program (MAP) uses funds to aid in the creation, 
expansion, and maintenance of foreign markets for U.S. agricultural 
products by forming a partnership between non-profit U.S. associations, 
cooperatives, small businesses, and the USDA to share the costs of 
overseas marketing and promotional activities such as consumer 
promotions, market research, trade shows, and trade servicing.
    MAP, after being adjusted for inflation and exchange rate movements 
has declined $45 million since 1986. Using the same assumptions, the 
MAP program would need to be funded at a minimum of $155 million rather 
than the current $90 million. In order to arm U.S. agriculture with the 
same amount of market development funding it had in 1986, the Foreign 
Market Development (FMD) program would need to be authorized at a 
minimum of $43 million rather than the current level of $33.5 million.
    We are very interested in USDA numbers for the FMD program which 
examine the global inflation and exchange rate changes that have 
reduced the ``real'' or ``effective'' levels of market development 
funding since 1986 (the year following the 1985 farm bill which was 
really the first push for expanded export programs). The numbers show 
that ``real'' FMD allocations, after being adjusted for inflation and 
exchange rate movements have gone down by almost $12 million since 
1986.
    In short, the FMD program authorization and appropriation should be 
increased to $43 million and the MAP program to $155 million.
    The DEIP helps exporters of U.S. dairy products meet prevailing 
world prices for targeted dairy products and destinations. The major 
objective of the program is to develop export markets for dairy 
products where U.S. products are not competitive because of the 
presence of subsidized products from other countries.
    The Export Enhancement Program (EEP) helps products produced by 
U.S. farmers meet competition from subsidizing countries, especially 
those of the European Union. The major objective of the program is to 
challenge unfair trade practices. The EEP authorization level has been 
at least $478 million over the past four fiscal years; however, the 
past administration never utilized any more than $5 million in any of 
those fiscal years.
    The EEP and DEIP programs should be reauthorized at the maximum 
levels consistent with export subsidy reduction commitments made in the 
WTO agreement.
    The total cost to increase food aid and export promotion programs 
by 10 percent per year and to raise EEP and DEIP to their maximum 
allowable WTO limits is about $120 million per year.
    U.S. farmers and ranchers are the most efficient producers in the 
world. They produce a high quality product that can out-compete the 
competition if they are allowed to meet it head on without being 
disadvantaged by excessive export subsidies and insurmountable barriers 
to trade.
    Congress should support our producers in every way possible to 
ensure that access to foreign markets is unrestricted and the terms of 
trade are fair. Increasing spending on MAP, FMD, EEP, DEIP and food 
aid, and securing trade promotion authority and full sanctions reform 
represents the best means in the short term for enabling U.S. producers 
to increase their export potential.
    Mr. Chairman, the United States is facing an important juncture for 
agricultural trade. Bilateral and multilateral negotiations are 
underway to design the future that will govern the global movement of 
our commodities and international conventions are writing new rules and 
standards for tomorrow.
    The United States must assume a strong leadership role to ensure 
that these new rules and standards create a favorable trading 
environment for our producers. We are already the world's leader in 
production efficiency and product quality. We now need our government 
to take the necessary steps to make us a leader at the negotiating 
table and to once and for all open new markets for U.S. agriculture.
    Thank you for this opportunity to share Farm Bureau's views on 
trade issues affecting agriculture and the trade title of the farm 
bill.

                                

    Chairman Crane. Thank you, Mr. Christopherson. Mr. Portnoy.

STATEMENT OF SCOTT PORTNOY, CORPORATE VICE PRESIDENT, CARGILL, 
              INCORPORATED, MINNEAPOLIS, MINNESOTA

    Mr. Portnoy. Mr. Chairman and Congressman Ramstad, thank 
you for the opportunity to present this testimony. I am Scott 
Portnoy, a corporate vice president at Cargill, Incorporated.
    Cargill is a 136-year-old firm based here in Minnesota's 
Third Congressional District. The company is an international 
marketer, processor, and distributor of agricultural food, 
financial and industrial products and services, with 85,000 
employees in 60-different countries.
    I have had the opportunity to live in Latin America and 
oversee Cargill's businesses in several of those nations. I 
have seen firsthand how international trade links farmers with 
consumers around the world. Trade moves commodities from 
regions of surplus to regions of deficit, enlarging markets for 
efficient farmers and expanding choices for consumers.
    I have a prepared statement that I'll submit for the 
record, but let me summarize that statement by making a few 
simple points.
    U.S. agriculture's future depends on getting better access 
to those foreign consumers who have rising incomes to spend on 
upgrading diets. Getting that access requires three steps.
    The first is to open up foreign markets by removing 
barriers to imports. That is primarily a governmental task. We 
call it building a global open food system.
    The U.S. Government needs to do the following as its part 
in this effort: Grant the President fast track or trade 
promotion authority, help launch a new multilateral trade round 
that is sufficiently broad to provide room to negotiate down 
agricultural trade barriers and that sufficiently focus to 
accomplish that task in years rather than decades, establish 
that the United States can be counted upon as a reliable 
supplier of basic foodstuffs by making clear that it will not 
impose food sanctions for economic or foreign policy reasons, 
and bring existing agricultural trade disputes and future 
agricultural negotiations to successful market-opening 
conclusions.
    We know it won't be easy. Agricultural tariffs are on 
average of 15 times higher than nonagricultural tariffs. But it 
is important. It is the single most important economic action 
for raising global living standards and for creating markets 
for American farmers.
    The other two steps that are critical to a dynamic, 
profitable U.S. agriculture primarily depend on the private 
sector. We need to get to know the needs of foreign customers 
better. Then we need to serve those needs better than other 
suppliers. Both of these steps have become more important with 
collapse of Communist economic systems, the growing 
privatization of national economies, and the spread of 
democratic institutions.
    As we enter the 21st century, we have a unique opportunity 
to show that private markets and democratic institutions can 
serve the needs and aspirations of all people. America's free 
enterprise system and open political institutions give us the 
advantage of serving these goals, but it is not an 
insurmountable advantage. As a country and as an economic 
system, we need to provide the leadership called for or else 
others will seize it from us.
    Thank you, and I will be happy to answer questions.
    [The prepared statement of Mr. Portnoy follows:]

    Statement of Scott Portnoy, Corporate Vice President, Cargill, 
                  Incorporated, Minneapolis, Minnesota

    Mr. Chairman and members of the subcommittee, thank you for the 
opportunity to present this statement.
    I am Scott Portnoy, a corporate vice president of Cargill, 
Incorporated. Cargill is a 136-year-old firm based here in Minnesota's 
Third Congressional District. The company is an international marketer, 
processor and distributor of agricultural, food, financial and 
industrial products and services with 85,000 employees in 60 countries. 
I have had the opportunity to live in Latin America and to oversee 
Cargill's businesses in several of those nations. I have seen firsthand 
how international trade links farmers with consumers around the world. 
Trade moves commodities from regions of surplus to regions of deficit, 
enlarging markets for efficient farmers and expanding choices for 
consumers.
    My statement addresses three topics:
    1. the potential markets liberalized trade would provide U.S. 
farmers;
    2. the benefits that would flow from a global ``open food system;'' 
and
    3. what the United States must do to move forward down these paths.
Potential of trade liberalization
    Let me begin with the potential of agricultural trade 
liberalization.
    U.S. agricultural production capacity far outstrips the ability of 
the American people to consume food. The United States either must 
export its surpluses or substantially downsize its agricultural 
economy. Fortunately, U.S. agriculture--from producers through 
processors and exporters--have demonstrated the desire and ability to 
compete in serving the 5.7 billion people who live outside our borders.
    This is not always an easy task. Import tariffs on agricultural 
products average about 60 percent worldwide, more than 10 times higher 
than non-agricultural tariffs. In addition, some food imports are 
restricted by tariff-rate quotas (TRQs), sanitary or phytosanitary 
(SPS) restrictions and other non-tariff barriers. Some countries 
provide export subsidies to dump surpluses that otherwise couldn't 
compete with output from more efficient producers. And many countries--
including the United States--have domestic support programs that 
distort production levels and trade flows.
    The Organization for Economic Cooperation and Development (OECD) 
calculates that agricultural protection in developed countries imposed 
costs of some $327 billion on the global economy in the year 2000. 
That's equivalent to 1.3 percent of worldwide GDP. The U.S. Department 
of Agriculture has estimated that two-thirds to three-fourths of the 
benefits from complete trade liberalization in the APEC (Asia-Pacific 
Economic Cooperation) countries would come from reform of agricultural 
policies. Another study suggested that China's economy would grow one 
percent per year faster through the savings generated by agricultural 
reform. It's clear that the global economy as a whole, and not just 
exporters, would benefit greatly from further agricultural trade 
liberalization.
    The 1994 Uruguay Round Agreement on Agriculture made a good start. 
It was a milestone achievement in that it established for the first 
time meaningful rules governing agricultural trade among nations. WTO 
members committed to reduce the use of agricultural export subsidies, 
to convert all non-tariff barriers into tariffs and reduce them 
modestly, to limit trade-distorting domestic support measures and to 
apply sound science to import regulations relating to the health and 
safety of imported products.
    While the Uruguay Round accomplished a great deal, it also left 
much to be done. Recognizing that, further agricultural negotiations 
were ``built in'' to the WTO agenda. The WTO agricultural negotiations 
now underway present an important opportunity to broaden and deepen the 
Uruguay Round's reforms.
    Behind all the barriers that distort and impede food trade, there 
is a large and growing market to be served. A growing population and 
rising incomes are pushing up food demand. The world's population is 
expected to reach about 7 billion by 2010, up about 16 percent. Over 
that same period, world GDP (gross domestic product) is anticipated to 
rise nearly $10 trillion--about 33 percent. Much of that income growth 
will occur in populous regions, like Asia, with limited land and water 
resources. It is a situation that calls for more reliance on trade to 
meet rising food demand.
    There are today roughly 3.5 billion people who are striving to 
become a global middle class. Their incomes have been rising and should 
continue to do so in the years ahead.
    One of the first things low-income people do with a little extra 
money is upgrade their diets with more proteins, dairy products, 
vegetable oils, fruits and vegetables. As just one example, Taiwan's 
rapid economic development between roughly 1960 and 1990 caused per-
capita meat consumption to quadruple, fruit consumption jumped fivefold 
and fish consumption doubled.
    Rising incomes and higher living standards also will place pressure 
on the global agricultural system to increase output in an efficient 
and environmentally sustainable way. This is where trade liberalization 
becomes important. In several regions, agricultural resources already 
are under severe stress. About a third of the world's forests have been 
cut since 1950 and not been replaced. Much of this deforestation has 
occurred to bring new land into production after existing agricultural 
land was lost to salinization, desertification, urban sprawl or other 
reasons.
    Water also is becoming increasingly precious. Currently, some 30 
countries are considered ``water-stressed''--and two-thirds of them are 
classified as ``water scarce.'' The water table is dropping about one 
and a half meters per year in the North China Plain, which produces 
roughly 40 percent of China's food on irrigated land. In India, 
groundwater is being used up faster than it can be replenished.
    In some circles it's fashionable to romanticize about the life of 
the subsistence farmer. But there is nothing romantic about keeping 
people poor and undernourished, nor about the slash and burn 
agriculture that is claiming so many forests and other wilderness 
lands.
    Solving the problems of global poverty and resource depletion will 
be a considerable challenge in the years ahead. Although not a complete 
answer, trade liberalization and reform of domestic agricultural 
policies would go a long way toward addressing those issues. That, in 
fact, is the vision that informs the idea of creating a global open 
food system.
Open Food System
    A global open food system would be one where the regions that grow 
food best are linked through trade with the regions that need food 
most. The overriding objective is to ensure a secure food supply at an 
affordable price, improving lives while promoting sustainable 
development. That is not the food system we have today.
    To get there, we need to do for agricultural trade in the WTO 
what's already been done for industrial trade under its predecessor, 
the General Agreement on Tariffs and Trade (GATT). Through a series of 
eight GATT trade negotiating rounds, industrial tariffs have been 
brought down from roughly 40 percent after World War II to about 4 
percent on average today. That has allowed trade to grow from 10 
percent to 20 percent of all usage of industrial products.
    In addition, the specialization encouraged by global trade--
producing what one country does best and shopping for what others do 
best--has enabled industrialized economies to enjoy the most dramatic 
period of sustained growth in human history.
    An open food system would harness the same process to perform the 
twin tasks of accelerating economic development and feeding people 
sustainably. By bringing agricultural tariffs down from today's average 
of 60 percent to the levels enjoyed by industrial trade, the share of 
global food consumption met by trade could double to perhaps 20 
percent.
    Even then, the overwhelming majority of a country's food needs 
would still be met through domestic channels. But those food needs 
would be delivered more reliably, more efficiently and in a more 
sustainable manner. It's the difference between costly self-sufficiency 
and meaningful food security.
    Self sufficiency means countries try to produce all their own food 
themselves, no matter what the cost to their economies or environments. 
Food security means that they grow what they can efficiently and import 
the rest, paying for those imports with earnings from activities in 
which they have labor or natural resource advantages.
    As an example, Taiwan's food self-sufficiency level halved from 30 
percent to 15 percent over the last 20 years. But its per capita GDP 
more than doubled during that time--from about US$5,000 to more than 
US$13,000.
    South Korea also cut its self-sufficiency nearly in half--from 
about 50 to 25 percent--since 1981. Its per capita GDP nearly tripled--
from about US$3,000 to US$9,000.
    Both still have significant pockets of agricultural protectionism--
as does Japan, where the same trend also holds true. But increased 
reliance on trade to feed their populations has gone hand in hand with 
rising living standards and sustained economic growth.
    What would the world look like under a global open food system?
    First, hundreds of millions of people would be better off. And I am 
not talking about marginally better off. Living standards would be 
measurably higher.

   The second World Food Summit showed that sounder 
        agricultural and rural development policies would halve the 
        number of hungry, and perhaps do much better.
   Farmers in virtually every country would have larger 
        opportunities to produce for markets at home and abroad.

    Very simply, an open food system based on trust, cooperation and 
interdependency is the single most important trade step nations can 
take to reduce hunger and stimulate sustainable economic development.
    Second, the global environment would be more sustainable:

   Land intensive crops would be grown on the already cropped 
        acres best suited to them, using advances in no-till 
        cultivation techniques, precision agriculture and biotechnology 
        to produce more with less erosion and chemical runoff.
   Labor intensive commodities would be produced in more 
        populous regions, stemming the out-migration from rural areas 
        to already overcrowded urban centers.
   The increasing pressures of population on water resources 
        and fragile ecosystems would be mitigated through 
        specialization and efficient transfer of environmentally 
        sensitive technologies.

    This concept of eco-efficiency--more output in a more sustainable 
way--could become a reality under a global open food system because it 
would harness trade and technology to the attainment of these twin 
goals.
    Third, food security would be enhanced because trade can provide 
food security at a fraction of the cost of self-sufficiency.

   Local crops fluctuate eight to 10 times more than annual 
        global output, so a trade-based food strategy makes people less 
        vulnerable to a crop disaster at home.
   Annual food stock carrying costs are two to three times 
        greater than interregional food transportation costs, so a 
        trade-based food strategy also is more affordable.
   Trade also provides more choice for consumers and more 
        reliable supplies at a lower cost, offering a more diverse, 
        nutritious diet.

    An open food system requires bringing down border barriers and 
curbing market-distorting domestic subsidies. It also requires an end 
to export subsidies and other forms of unfair competition. And it 
requires a commitment to end sanctions on food. The United States could 
bring an open food system dramatically closer to reality by being the 
first to forswear food embargoes. This would create the foundation of 
trust needed to embrace a trade-based strategy for ensuring food 
security and environmental sustainability.
    The logic for such a step is compelling. Trade creates prosperity. 
Prosperity promotes peace. Of course, these are dividends from open 
trade generally, making both individual families and countries more 
secure. But no area of commerce will do more to advance these goals 
than agricultural trade. That's why I hope we can all work together to 
take down the protectionist walls that impede sustainability, 
prosperity and security.

Moving forward
    Let me conclude my presentation by highlighting other steps the 
United States should take to move agricultural trade liberalization 
forward.
    Trade promotion authority (``fast track''). Our trading partners 
need to know that Congress will be prepared to vote either to accept or 
reject any trade package the Administration negotiates. Call it ``trade 
promotion authority,'' ``fast track'' or whatever other term you want 
to use--progress toward agricultural trade liberalization will 
basically be on hold until this issue is resolved. The world is 
suffering from lack of U.S. leadership on behalf of trade 
liberalization. Until the Administration once again has negotiating 
authority, other nations will drive the global trade agenda and the 
United States will remain on the sidelines.
    Launch a new multilateral trade round. The WTO agricultural 
negotiations that were mandated by the Uruguay Round began last year. 
Although some useful preliminary work has been done, there is little 
hope for substantive talks until a broader trade round is begun that 
puts issues of interest to other countries on the negotiating table. 
The United States should make every effort to launch a new round of 
multilateral negotiations at the November 2001 WTO ministerial meeting 
in Qatar.
    Resolve trade disputes. The new Administration has made a good 
start at resolving agricultural trade disputes. This is helping to 
establish an atmosphere of improved cooperation between nations that 
should strengthen the prospects for further trade liberalization. The 
United States should continue seeking thoughtful approaches that lead 
to settlement of the remaining disputes.
    Free-Trade Area of the Americas (FTAA). Frankly, the FTAA 
negotiations are not the highest priority for U.S. agriculture. 
Regional free trade areas do not attack the most significant or 
embedded distortions of agricultural trade, and they should not be 
allowed to drain negotiating energy from the primary task of opening up 
the global food system.

Conclusion
    I'd like to conclude with some succinct thoughts on the value of 
trade written by someone far more eloquent than I am. A gentleman named 
Libanius in the fourth century B.C. wrote as follows:
    ``God did not bestow all products upon all parts of the earth, but 
distributed His gifts over different regions, to the end that men might 
cultivate a social relationship because one would . . . need the help 
of another. And so He called commerce into being, that all men might be 
able to have common enjoyment of the fruits of the earth, no matter 
where produced.''
    Libanius said clearly in a paragraph what I've taken pages to say: 
trade builds prosperity and closer human relations. Mr. Chairman, that 
concludes my statement.

                                

    Chairman Crane. Thank you, Mr. Portnoy.
    Let me first comment that I appreciate all of your 
testimony today, and President Bush has now portrayed on the 
top of his radar screen, and he attempted at the Summit of 
Americas in Quebec last month and released last week his recent 
trade agenda.
    In his and our campaign to educate the public on the 
benefits of trade, there's a vital role for industry leaders 
such as yourselves because we've got an education problem on 
our hands, and it's getting the message out of the direct 
benefits to American businesses, and that translates into jobs, 
and that is a message that is not being told as well as it can 
be.
    This question I would like to put to all of you, and we'll 
start with Mr. Collins. How long ago did you decide to venture 
into foreign markets and what has been the impact upon the size 
and the operations of your organization today and what 
percentage of jobs would you attribute to your overseas sales?
    Mr. Collins. Medtronic actually started a little over 50 
years ago, and our first forays into international markets 
really were in the last 35 years. Today approximately one-third 
of the revenues that are generated in each year for Medtronic 
come from sales outside the United States.
    We currently employ approximately 25,000 employees 
worldwide. About 6,400 of those are outside the United States. 
But I would hasten to add that many of those U.S. jobs are 
dependent on our ability to sell products outside the United 
States.
    Chairman Crane. Thank you. Mr. Kohrs.
    Mr. Kohrs. Yes. Similar to what Art had to say, is that the 
international business for American Medical Systems represents 
approximately 20 percent of everything that we sell. The 
company has been in business for approximately 28 years. We 
have been in international markets for that whole time period. 
We want to see that 20 percent grow to an even higher number.
    The number of people employed in Minnesota that contribute 
to that 20 percent is probably about 150 people that are 
involved in the manufacturing, involved with the devices that 
we send overseas.
    Chairman Crane. Thank you. Mr. Christopherson.
    Mr. Christopherson. Well, certainly trade has been around a 
long time in terms of agricultural commodities. For us in this 
part of the world, in this part of the United States, trade is 
extremely important by virtue of the fact that we are so far 
from many of the other parts of the U.S. in terms of 
transportation, so on a relative basis we have a greater 
advantage for world trade than we do sometimes for trade even 
within our own country.
    Having said that, I think in terms of what it has meant to 
this area, obviously we've heard the figure that a third of 
what we produce has to find a home someplace other than our own 
soil.
    To put it in context possibly, for those of you who have 
any kind of experience with agriculture or listen to markets, 
et cetera especially in July or August, if on a crop report the 
report comes out that there's going to be a 10-percent 
reduction in yields or even in acres at some point in time 
earlier, that can add a dollar to the price of a bushel of 
soybeans.
    And so there's all kinds of ways to look at this, but it 
has a very dramatic effect on agriculture, the whole area of 
trade and what it means for our industry.
    Chairman Crane. Mr. Portnoy.
    Mr. Portnoy. Cargill has been around for 136 years, and I 
believe we began trading in foreign markets in the late 
twenties and early thirties. Today approximately 40 percent of 
our business is overseas, with 60 percent still being within 
the borders of the United States.
    However, as Mr. Collins pointed out, for us many of the 
opportunities that are created in foreign markets come from our 
activities here in the United States. So we are very, very 
interested in seeing the promotion of an open food system 
because of the fact that we believe that markets 
internationally will respond to demand that comes from opening 
up markets and not from supply restrictions.
    Chairman Crane. Something that came to mind, Mr. Kohrs, 
have you seen today's USA Today business section? It deals with 
trade with Japan and Japan's economy and the internal elections 
that have people guardedly optimistic about improvements.
    Let me raise a question here with our first two panelists. 
You've referenced how U.S. trade policy has benefited the 
medical technology industry and allowed it to be able to 
operate around the world.
    Knowing the problems that you've raised with respect to 
Japan, how can U.S. trade policies or initiatives serve to 
reduce the problems and improve nations' access to your 
innovations overseas?
    Mr. Collins. Let me give you three specific examples. First 
of all, I think it's very important that we continue not only 
to establish these trade agreements but also to monitor them.
    First, there is a 2-plus year delay in access to current 
therapies that exists, and we believe that we should have a 
process that establishes guidelines, time frames, as well as 
appropriate follow-up. The time is even longer for new 
technologies.
    We would also recommend that we have strict adherence to 
government industry consultations as established in the 1986 
MOSS trade agreements, and we would propose that any major 
changes in either reimbursement or the regulatory process have 
open and frank discussion with the industry.
    Chairman Crane. Mr. Kohrs.
    Mr. Kohrs. Yes. Specifically with respect to Japan, one of 
the things you have to understand about their regulatory 
process is that they are basically a system in place mimicking 
the same regulatory process that is in place with the United 
States with the Food and Drug Administration.
    The reason there is this 2-year lag that he's talked about 
is that companies like Medtronic and ours go through all the 
trouble of complying with the Food and Drug Administration, go 
to Japan, and then have to comply with all the same parameters 
all over again.
    There's an excellent opportunity for the Japanese 
government to save money by recognizing what's done with the 
Food and Drug Administration in the United States, and that 
would streamline the whole process, and with regard to the 
article that you referred to this morning, it would save them a 
lot of money.
    Chairman Crane. Mr. Ramstad.
    Mr. Ramstad. Thank you, Mr. Chairman. And thank you, 
gentlemen, all four of you, for being here today. I know each 
of you well and appreciate the collaboration you've provided 
through the years on the support of trade issues.
    I want to congratulate you, Art. Since we last saw each 
other, your ascension has been complete to the positions of 
president and CEO of Medtronic. I've been to Medtronic; and, 
Doug, recently the second visit to AMS. I appreciate that.
    Certainly, as you know, Scott, I've been to Cargill many 
times. It's located in my backyard.
    I guess the only place that I haven't been represented by 
these gentlemen here today, Mr. Chairman, is your farm, Al. I'm 
waiting for an invitation. You certainly have been very 
helpful, all four of you, and I appreciate your testimony here 
today.
    I think it's a fair statement to say that all Minnesotans 
and millions of people worldwide know the Medtronic story, 
25,000 employees worldwide, 6,000 here in Minnesota, certainly 
a leader in your field worldwide.
    Let me ask you the first question, Art, that I have. When 
you say that--and I certainly know, obviously, that Medtronic 
supports trade promotion authority and realizes as well as 
anybody in the world the significance. You stated in your 
testimony to create promotion authority is essential to 
ensuring further work on regional and global trade 
negotiations.
    You heard the testimony and you know that of the 130 
bilateral free trade agreements in force today the United 
States is only a party to 2. Can you just in any way quantify 
or explain how that fact, the fact that we're only party to 2 
of 130 bilateral free trade agreements, how that impacts 
Medtronic?
    Mr. Collins. Well, I think it puts the industry and 
Medtronic at a disadvantage. Even though we have a $9 billion 
positive trade balance, compared to a number of industries, we 
don't necessarily get on their radar screen.
    The WTO is not particularly effective in our case, and to 
allow the President to have the ability to negotiate these 
trade agreements we would see would put us on a much more equal 
footing with many of our competitors that are in other 
countries, particularly in Europe and Japan.
    Mr. Ramstad. Thank you also, Art, for your kind words and 
your testimony.
    I want to ask you, Doug Kohrs, representing AMS, and 
certainly AMS is recognized as a leader for medical devices 
that treat urological disorders. In fact, I said to my staff as 
I left AMS the last time just recently that I hope I never need 
your devices, but like other males throughout the world, I 
probably will.
    Your story is a real success story. You now have 500 
employees and started with a couple people. Could you just 
briefly, just briefly talk about, just for my benefit, the 
impact of trade on AMS and your rapid growth?
    Mr. Kohrs. Thank you. To again expand a little bit upon 
what Art said, we have been able to grow our international 
business to the 20-percent level, as I mentioned earlier. We 
have the products and unique products to where that can be as 
much as 40 percent of the company's overall business.
    What's keeping us from doing that is that the trade 
barriers that are in effect are in essence making it difficult 
for us to reach that goal and keep jobs in Minnesota. To really 
reach that goal and play around the edges of the rules in 
places like Argentina, in places like China, et cetera, you 
almost have to move to offshore manufacturing, and that's not 
something that we're going to do.
    By lowering those trade restrictions, we can keep the jobs 
in Minnesota, grow business here, and I think really bring a 
lot of great surgical solutions to people around the world.
    Mr. Ramstad. Let me ask finally, either you, Scott, can 
answer this, or Al. I note from your testimony, Scott, you 
state that frankly the Free Trade Area of the Americas 
negotiations are not the highest priority for U.S. agriculture.
    Could you just expand briefly, either one of you? Why don't 
you, Scott, since those are your words, and then, Al, you can 
add to it.
    Mr. Portnoy. I think that if you look at interregional 
trade and agricultural products between the United States and 
South America and to some degree Central America, you will find 
that in the scheme of things trade promotion authority is more 
important than the FTAA, and that's simply because of the 
nature of the trade that takes place between the entities, the 
United States and many of the South American nations.
    So presumably there will be requests from Brazil and 
Argentina to open up U.S. markets that might to a large degree 
have an offsetting benefit for U.S. production in agriculture 
in areas that are hard to resolve. So from the perspective of 
ourselves, we think that if you break down the barriers around 
subsidies and you work at overall trade equalization outside of 
the Americas, you probably will do more to create that demand 
that I mentioned in my remarks than you might within the 
hemisphere itself from an agricultural standpoint.
    Mr. Ramstad. Did you want to comment, Al?
    Mr. Christopherson. Yes, two things. First of all, 
recognizing that in the Free Trade of Americas geographic area 
there will be quite a potential for increase in the standard of 
living for a number of people, that's the plus, and I think 
trade is going to help address that.
    The other part of that, getting to what was just said here 
a moment ago, certainly if we have areas in which agriculture 
is hesitant on trade, it's the border areas, and we see it as 
it relates to part of Minnesota and Canada, because we have 
some feelings there that we recognize, and those are hard to 
overcome. You see the same thing in Florida and to some extent 
Arizona and California as it relates to citrus products and 
those types of things.
    Those are tough issues, we recognize that, and as I said in 
my testimony, there are going to be winners and losers. 
Overall, trade is positive, but recognizing that there will be 
winners and losers, and if you happen to be one of those who 
falls through that crack, it can be a very painful experience.
    Mr. Ramstad. Mr. Chairman, before I yield back, let me just 
make one more statement. Art, this is directed at you. In 
addition to congratulating you on your new position, I must 
congratulate you on your newest hire. It's certainly my loss 
and your gain, and we're happy for Dave Fisher, who's joining 
Medtronic.
    Dave has done a great job, more than anybody on my staff, 
my trade council on Ways and Means, in setting up this hearing 
today, and he's going to do a great job for you as well. Thank 
you all for your testimony.
    Mr. Collins. You keep sending them our way.
    Mr. Ramstad. We'll keep training them. Thank you very much. 
I yield back, Mr. Chairman.
    Chairman Crane. Thank you all. We appreciate your 
participation and look forward to working with you.
    Now I would like to invite our final panel, Gary Joachim, 
soybean farmer and with the American Soybean Association; Neal 
Fisher, wheat and cattle farmer and administrator of the North 
Dakota Wheat Commission; Bruce Hamnes, wheat farmer, on behalf 
of the Wheat Export Trade Education Committee, U.S. Wheat 
Associates; and Gerald Tumbleson, farmer and director of 
Minnesota Corn Growers Association.
    If you gentlemen would please take your seats and proceed 
in the order that I introduced you and try to keep your oral 
testimony to 5 minutes or less, and your written testimony will 
be made a part of the permanent record.
    And with that, Mr. Joachim, you may proceed.

   STATEMENT OF GARY JOACHIM, SOYBEAN, CORN, AND HOG FARMER, 
 CLAREMONT, MINNESOTA; BOARD MEMBER, MINNESOTA SOYBEAN GROWERS 
ASSOCIATION; AND MEMBER, TRADE POLICY AND INTERNATIONAL AFFAIRS 
  COMMITTEE, AND CHAIR, LATIN AMERICA SUBCOMMITTEE, AMERICAN 
                      SOYBEAN ASSOCIATION

    Mr. Joachim. Thank you, Mr. Chairman, and thank you, 
Representative Ramstad, for holding this hearing here in 
Minnesota. I'm Gary Joachim, and I am a soybean and hog farmer 
from Claremont, Minnesota. Claremont is about 75 miles south of 
St. Paul, Minnesota, and in the Minnesota First District.
    I've been on the board of the Minnesota Soybean Growers 
Association since 1990 and on the board of the American Soybean 
Association since 1999. Currently I am a member of the ASA 
Trade Policy and International Affairs Committee, and I am 
chairing currently the Latin America Subcommittee.
    Once again, thank you for this opportunity to testify on 
the importance of trade to soybean farmers and soybean-related 
businesses in the United States and Minnesota.
    Just a little background. In the year 2000 the U.S. grew 
2.77 billion bushels of soybeans. In the Supply Demand Report 
that came out last week on May 10th, it estimates that for the 
2000-2001 marketing year, when all is said and done, the U.S. 
will export 990 million bushels of whole soybeans, 1.4 billion 
pounds of soybean oil, 6.9 million short tons of soybean meal. 
In whole soybean equivalents, that amounts to 1.243 billion 
bushels of soybeans, and that's 45 percent of the crop we grew 
last year.
    If you consider that the U.S. is also a net exporter of 
meat and other products that consume soybeans, it's no 
exaggeration to say, as we've heard in this room before, that 
every other row of soybeans is grown for export.
    Just looking a little bit at the world situation on the 
production side, since 1990 U.S. production is up 800 million 
bushels, 43 percent. Brazil, which we hear so much about, is up 
500 million bushels or 65 percent, and Argentina has the 
biggest percentage increase of 100 percent or 425 million 
bushels. Overall in the last 10 years, world soybean production 
has increased 2.2 billion bushels.
    Economic growth and trade liberalization have been the keys 
to increasing demand for soybeans fast enough to use up this 
increase in world production. For instance, the North American 
Free Trade Agreement has allowed U.S. farmers access to the 
growing Mexican demand for soybean protein, and Mexico is now 
the equal of Japan as a market for U.S. soybeans.
    The other thing we've done to grow the market has been 
promotion efforts paid for by U.S. soybean producers through 
their national check off and in cooperation with the United 
States Department of Agriculture's foreign market development 
and market access programs.
    These programs have been instrumental in seeing China go 
from basically zero in 1990 to become our largest buyer of 
soybeans in this marketing year, with purchases to date of over 
215 million bushels of soybeans.
    The Foreign Market Development (FMD) and the Market Access 
Program (MAP) programs seek to build on U.S. advantages in 
quality, service, and technical support, to build new markets 
and to maintain existing markets. The American Soybean 
Association believes that FMD and MAP should be funded at a 
level fully sufficient to maintain their effectiveness.
    In this time of low market prices, increases in soybean 
price due to increased exports save the United States 
Department of Agriculture and the U.S. government exactly the 
same amount in reduced farm program costs with load deficiency 
payments.
    We all know that the world of trade and trade agreements is 
not static. The U.S. is in danger of being shut out of markets 
as other countries form bilateral and regional trade 
agreements. For instance, Columbia and Venezuela are a part of 
the MERCOSUR trade group. They can import soybeans from 
Bolivia, a fellow member of the pact, duty-free.
    The situation for importation of U.S. origination soybeans 
is complex, but basically it's a combination of tariffs and 
value-added tax imposed on U.S. soybeans that amount to an 
effective tariff of over 50 percent, and that has shut the U.S. 
out of all soybean shipments to those two countries.
    It is vital that the President of the United States be 
granted trade promotion authority in order to effectively and 
expeditiously secure the benefits of open markets for the 
United States.
    President Bush recently made a big push for the Free Trade 
Area of the Americas, and we support that, but we think that 
the U.S. is suffering from a little bit of bipolar trade 
disorder when on the one hand we're promoting the Free Trade 
Area of the Americas and on the other hand we have what amounts 
to an embargo in place yet in Cuba.
    Technically, we can sell food there, but as a matter of 
fact, the rules are such that we basically are still shut out 
of the market, which not only means the loss of the Cuban 
market which would naturally be ours, but this illogical flow 
from other countries to Cuba which we should service probably 
90 percent or more means that other countries in the Caribbean 
basin, while the ship is underway to Cuba, they can drop off 
part of a load someplace else. So we think that sanctions 
reform is another area that really can be used to promote 
exports of United States soybeans and all other commodities.
    Back to my prepared testimony. The American Soybean 
Association supports the safe and responsible use of 
biotechnology. The only widely planted biotech soybean has been 
shown to be the equivalent of soybeans produced from 
traditional breeding techniques. It has official acceptance by 
all of our major trading partners.
    However, we are opposed and believe that the United States 
should oppose using the precautionary principle or labeling 
rules in the Codex Alimentarius as a means of discriminating 
against soybeans and soybean products that come from the U.S. 
On the other hand, if the customer is willing to pay for the 
extra costs for identity preserved shipments, the United States 
farmer is able to produce for this or any other specialty 
market segment.
    Mr. Chairman, I would like to stress the importance of the 
completion of Chinese accession to the WTO in a timely manner. 
Also, I'd like to stress the importance of and the need for the 
start of meaningful negotiations on the next round of trade 
liberalization when the WTO meets this November.
    Finally, I'd like to comment on the effect that the strong 
U.S. dollar has had on our ability to compete with our 
competition. In terms of Brazilian currency, the producer of 
Brazil is getting more for his soybeans than he was three years 
ago when the price in U.S. dollars was higher.
    This is perhaps a simplistic way of viewing the situation, 
but in the short-term the effect of the strong U.S. dollar on 
ag exports has been real. The strength of the dollar is also 
working at cross-purposes with the market-oriented philosophy 
of the Freedom to Farm Act.
    Thank you, and I'll answer any questions when the time 
comes.
    [The prepared statement of Mr. Joachim follows:]

 Statement of Gary Joachim, Soybean, Corn, and Hog Farmer, Claremont, 
  Minnesota; Board Member, Minnesota Soybean Growers Association; and 
 Member, Trade Policy and International Affairs Committee, and Chair, 
        Latin America Subcommittee, American Soybean Association

    Mr. Chairman I am Gary Joachim a soybean, corn, and hog farmer from 
Claremont Minnesota. Claremont is 70 miles South of St. Paul Minnesota.
    I have been on the board of the Minnesota Soybean Growers 
Association since 1990 and on the board of the American Soybean 
Association since 1999. Currently I am a member of the ASA Trade Policy 
and International Affairs Committee and I chair the Latin America 
Subcommittee.
    Thank you for this opportunity to testify on the importance of 
trade to the soybean farmer and soybean related businesses in the 
United States.
    In 2000 the United States grew 2.77 billion bushels of soybeans. 
The May 10, 2001 Supply-Demand Report estimates that the U.S. will 
export 990 million bushels of whole soybeans, 1.4 billion pounds of 
soybean oil, and 6.9 million short tons of soybean meal. In whole 
soybean equivalents this is 1.243 billion bushels of exports in the 
2000-2001 marketing year. This amounts to 45% of U.S. production in the 
2000 crop year. If you consider that the U.S. is a net exporter of meat 
it is not an exaggeration to say that every other row of soybeans grown 
in the United States is destined for export.
    World production and demand of soybeans has grown dramatically 
since 1990.

   U.S. production up over 800 million bushels--43%
   Brazil production up over 500 million bushels--65%
   Argentina up over 425 million bushels--100%
   Total world production up by 2.2 billion bushels since 1990

    Economic growth and trade liberalization have been the keys to 
increasing demand for soybeans fast enough to use up this increase in 
world production. For instance the North American Free Trade Agreement 
has allowed U.S. farmers open access to the growing Mexican demand for 
protein and Mexico has become the equal of Japan as a market for U.S. 
soybeans.
    Market promotion efforts paid for by U.S. soybean producers through 
their National Soybean Check-Off and in cooperation with the USDA 
Foreign Market Development Program and Market Access Program have been 
instrumental in seeing China go from zero in 1990 to become our largest 
buyer of soybeans in this marketing year with purchases to date of over 
215 million bushels in the 2000-2001 marketing year. These programs 
seek to build on U.S. advantages in quality, service, and technical 
support to build new markets and to maintain existing markets. The 
American Soybean Association urges that FMD and MAP be funded at a 
level sufficient to maintain their full effectiveness. In this time of 
low market prices increases in soybean price due to increased exports 
save the USDA that same amount in reduced Load Deficiency Payments.
    The world of trade and trade agreements is not static and the 
United States is in danger of being shut out of markets as other 
countries form bilateral and regional trade agreements. For instance 
Columbia and Venezuela are a part of the Mercusor trade group. They can 
import soybeans from Bolivia a fellow member of the pact duty free. The 
situation for importation of U.S. origination soybeans is complex. The 
combination of tariffs and value added tax imposed on U.S. soybeans in 
that market is over 50% which has shut the U.S. out of the bulk soybean 
market in these two countries. It is vital that the President of the 
United States be granted Trade Promotion Authority in order to 
effectively and expeditiously secure the benefits of open markets for 
the United States.
    The American Soybean Association supports the safe and responsible 
use of biotechnology. The only widely planted biotech soybean has been 
shown to be the equivalent of soybeans produced from traditional 
breeding techniques. It has official acceptance by all of our major 
trading partners. We are opposed and believe that the United States 
should oppose using the Precautionary Principle or labeling rules in 
the Codex Alimentarius as a means of discriminating against soybeans 
and soybean products that come from the U.S. If the customer is willing 
to pay for the extra costs for Identity Preserved shipments the United 
States farmer is able to produce for this or any market segment.
    Mr. Chairman I would stress the importance of the completion of 
China's accession to the World Trade Organization in a timely manner. I 
would also stress the importance of and the need for the start of 
meaningful negotiations on the next round of trade liberalization when 
the WTO meets in Qatar this November.
    Finally I would like to comment on the effect that the strong U.S. 
dollar has had on our ability to compete with our competition. In terms 
of Brazilian currency the producer in Brazil is getting more for his 
soybeans than he was 3 years ago when the price in U.S. dollars was 
higher. This is perhaps a simplistic way of viewing the situation but 
in the short term the effect has been real. The strength of the dollar 
has worked at cross purposes with the market oriented philosophy of the 
Freedom to Farm Act.
    Thank you and I would welcome any questions.

                                

    Chairman Crane. Thank you. Mr. Fisher.

    STATEMENT OF NEAL FISHER, WHEAT AND CATTLE FARMER, AND 
 ADMINISTRATOR, NORTH DAKOTA WHEAT COMMISSION, BISMARK, NORTH 
                             DAKOTA

    Mr. Fisher. Mr. Chairman, thank you for the opportunity to 
appear before you today. I'm Neal Fisher, administrator of the 
North Dakota Wheat Commission.
    The Commission, just for reference, is a market development 
and promotion organization which represents 28,000 North Dakota 
wheat producers. We're funded by a 1-cent check off on every 
bushel of wheat and durham sold in North Dakota.
    At her confirmation hearing earlier this year, Secretary of 
Agriculture Ann Veneman correctly stated that with 96 percent 
of the world's population living outside the country, we need 
to expand trade and eliminate barriers to access for our 
products in what is an ever-expanding global economy. We agree 
with the Secretary completely in this case.
    U.S. wheat producers are especially export dependent. We've 
heard about the soybean situation and others today. Each year 
we export approximately 50 percent of what we produce annually. 
North Dakota producers are no exception, exporting 50 percent 
of the high quality hard red spring wheat and durum we produce 
each year also. U.S. wheat producers have a lot at stake 
therefore in expanding trade opportunities and securing those 
opportunities in fairly negotiated and fairly implemented trade 
agreements.
    I'm also proud to acknowledge that the North Dakota Wheat 
Commission's producer board of directors has been at the 
forefront of the debate over every major trade issue facing 
U.S. agriculture since the negotiation of the Canada-U.S. Free 
Trade Agreement or CUSTA. Our experience dictates that farmers 
must remain deeply involved in the development of U.S. trade 
policy. Trade and trade negotiations are dynamic and essential 
elements of U.S. farm policy.
    That said, it is imperative that we revisit and correct 
inequities when they occur, such as in CUSTA and NAFTA. This is 
important as negotiations for the Free Trade Agreement of the 
Americas move forward.
    As many of you are probably aware, the North Dakota Wheat 
Commission is currently involved in a section 301 investigation 
into the Canadian Wheat Board. It centers primarily on their 
government-sponsored, monopolistic trade practices.
    Many of the problems with the Canadian Wheat Board date 
back to the negotiations regarding CUSTA. Those negotiations 
did not adequately address the practices of a State-supported 
monopoly and its impact on U.S. producers.
    North Dakota and Minnesota producers have been particularly 
vulnerable to these practices, not only because we live on the 
border, but because we produce the same classes of wheat that 
they do, especially unique wheats that compete in the same 
markets that Canada does.
    As the world's largest wheat exporter, the Canadian Wheat 
Board's (CWB) government-mandated monopoly actions distort 
world grain trade and deflate world wheat prices, including 
those of the United States. Canada's unfair trade practices 
have reduced returns to U.S. producers and raised U.S. taxpayer 
outlays in the form of larger loan deficiency payments and 
emergency government assistance payments, as we have witnessed 
this last year.
    It is obvious that the Wheat Board's actions distort trade, 
depress prices, and create an environment which is directly 
counter to what is currently being sought in the larger scope 
of global world trade negotiations.
    To allow the Wheat Board to market wheat in the free trade 
zone created by the CUSTA and expanded in the NAFTA, under its 
current structure, is unacceptable to our producers. The world 
trading system also can no longer tolerate the unfair trade 
practices of State-trading enterprises, referred to as STEs, 
like the Canadian Wheat Board.
    Government involvement in wheat purchasing and sales has 
declined rapidly worldwide. Brazil, Egypt, even Yemen and 
Algeria now allow some private buying. Argentina and South 
Africa have also dismantled their grain boards.
    I find it extremely ironic that when China enters the WTO, 
this highly centrally planned country will have agreed to more 
disciplines on its STEs than Canada has ever even allowed to be 
discussed.
    No previous case, investigation, or temporary settlement 
has addressed the fundamental problem of the Canadian Wheat 
Board; that is, the existence and operation of a full-fledged 
monopoly marketing board in a free trade zone. Contrary to the 
vigorous claims of the Wheat Board, past investigations have 
not vindicated the Board's activities, but rather raised a 
difficult question, and that is, can U.S. and Canadian wheat 
farmers continue to exist in an environment where one country's 
farmers must compete in a totally free market, while the others 
hide behind the veil of a government-sanctioned and financed 
monopoly marketing board?
    The ongoing section 301 trade action specifically targets 
the operations of the Wheat Board in the United States but 
maybe more importantly in third country markets. This case and 
its outcome may provide our last best opportunity to negotiate 
a comprehensive and lasting settlement with Canada with respect 
to exports of Canadian wheat to the United States and third 
country markets. We have documented case studies of several 
traditional markets, such as the Philippines, Venezuela, 
Guatemala, and others where these violations are very glaring.
    The International Trade Commission will hold a hearing, a 
public hearing, in connection with the investigation on June 6, 
2001, at the ITC Building in Washington, D.C. ITC is assisting 
with the wheat investigation at the request of the Office of 
the U.S. Trade Representative. The ITC will submit a 
confidential report to the U.S. Trade Representative (USTR) by 
September 24, 2001.
    In that effort we have recommended the following 
negotiating objectives: Eliminating the Wheat Board's export 
monopoly, eliminating the Wheat Board's supply monopoly, 
instituting full market access for U.S. wheat in Canada, and 
establish full transparency of the Wheat Board's operations.
    We've also asked the Office of the U.S. Trade 
Representative to establish tariff rate quotas for two crop 
years. These tariff rate quotes are temporary measures that can 
be adjusted or eliminated in subsequent years as the 
fundamental reforms that we're discussing are implemented.
    In conclusion, our producers have been unfairly 
disadvantaged by the continuation of monopoly marketing boards 
in a free trade area. The inequities contained in the CUSTA 
were perpetuated in the NAFTA. The Uruguay Round Agreement 
failed to address and discipline the unfair practices of STEs. 
That may be addressed in WTO this time around.
    Over the last decade, the national wheat organizations have 
supported numerous trade and sanction agreements, including 
NAFTA, most-favored-nation (MFN) for China, Uruguay Round, PNTR 
for China, fast track, I'll refer to it as trade promotion 
authority, and continued negotiations for agricultural trade 
reform in the WTO. However, with the CWB trade dispute 
unresolved, it becomes increasingly difficult for our rank and 
file producers to envision how they can directly benefit from 
these expanded trade opportunities, and opportunities they 
really are. We respectfully request the full support of this 
Committee and the entire Congress in our section 301 
investigation and its successful outcome.
    We know that our future lies in the expansion of export 
market opportunities and fair competition for those 
opportunities. We now have an opportunity before us to make 
fundamental changes and improvements to the trade environment 
which is so critical to the success of our industry. To miss 
this opportunity would be a grave and critical mistake.
    Thank you very much for this opportunity.
    [The prepared statement of Mr. Fisher follows:]

 Statement of Neal Fisher, Wheat and Cattle Farmer, and Administrator, 
          North Dakota Wheat Commission, Bismark, North Dakota

    Mr. Chairman and members of the Committee, thank you for the 
opportunity to appear before you today. I am Neal Fisher, Administrator 
of the North Dakota Wheat Commission. The North Dakota Wheat Commission 
(NDWC) is a market development and promotion organization representing 
28,000 North Dakota wheat producers and is funded by a one cent per 
bushel checkoff on wheat and durum sales in North Dakota. In addition 
to serving as Administrator of the NDWC, I operate a family wheat and 
cattle operation in central ND.
    At her confirmation hearing before this committee, Secretary of 
Agriculture Ann Veneman correctly stated that ``with 96 percent of the 
world's population living outside the United States, we need to expand 
trade and eliminate barriers to access for our products in what is an 
ever expanding global economy.'' We agree with the Secretary 
completely. U.S. wheat producers are especially export dependent. Each 
year we export approximately 50 percent of what we produce annually. 
North Dakota producers are no exception, also exporting 50 percent of 
the high quality hard red spring wheat produced each year and 40 
percent of the state's annual durum output. As an industry, U.S. wheat 
producers have a lot at stake in expanding trade opportunities and 
securing those opportunities in fairly negotiated and fairly 
implemented free trade agreements.
    I am proud to acknowledge that the North Dakota Wheat Commission's 
producer Board of Directors has been at the forefront of the debate 
over every major trade issue facing U.S. agriculture since the 
negotiation of the Canada-U.S. Free Trade Agreement or CUSTA. Our 
experience, awakened by the CUSTA and reinforced in the bilateral 
disputes with Canada since 1989, dictates that farmers must remain 
deeply involved in the development of U.S. trade policy. We see trade 
and trade negotiations as dynamic and essential elements of U.S. farm 
policy. We further believe that it is imperative that we revisit and 
correct the inequities in the CUSTA and the NAFTA as the negotiations 
for the Free Trade Agreement of the Americas (FTAA) move forward. 
Correction of these past flaws will ultimately be positive in FTAA 
deliberations.
Section 301 Investigation into the Canadian Wheat Board
    Our problems with the Canadian Wheat Board date back to the 
negotiations regarding CUSTA. Unfortunately, these negotiations and the 
resulting agreement did not adequately address the practices of a 
state-supported monopoly export board and their impact on U.S. 
producers. We in North Dakota have been particularly vulnerable to 
these practices not only because we live along the border with Canada, 
but also because we produce unique, specialty wheats for the same 
export markets as does Canada.
    Since the implementation of the CUSTA in 1989 and the North 
American Free Trade Agreement (NAFTA) in 1994, the cross border 
tensions over wheat trade have worsened. As the world's largest wheat 
exporter, the CWB's government mandated monopoly actions distort world 
grain trade and deflate world wheat prices. Canada's unfair trade 
practices have reduced returns to U.S. producers, and as a result have 
raised U.S. taxpayer outlays in the form of larger loan deficiency 
payments and emergency government assistance payments. It is obvious 
that the CWB's actions distort trade, depress prices and create an 
environment which is directly counter to what is being sought in the 
larger scope of global trade negotiations. To allow the CWB to market 
wheat in the free trade zone created by the CUSTA and expanded in the 
NAFTA, under its current structure, is unacceptable. As evidenced in 
the WTO negotiating positions tabled over the last year in Geneva, the 
world trading system can no longer tolerate the unfair trade practices 
of state-trading enterprises (STEs) like the CWB.
    Prior to 1990, almost 90 percent of all international wheat 
purchases were made by governments. That figure is now nearer 40 
percent and declining, as Brazil, Egypt, and even Yemen and Algeria 
allow at least some private buying. The presence of Government-
sponsored export monopolies has also declined, with Argentina 
dismantling its grain boards and South Africa abruptly eliminating its 
24 commodity boards. It is ironic that when China enters the WTO, this 
highly centrally-planned country will have agreed to more disciplines 
on its own STEs, including the introduction of private-sector imports, 
than Canada has ever even entertained.
    Despite our best efforts, no previous case, investigation, or 
temporary settlement has addressed the fundamental problem of the 
Canadian Wheat Board. That is, the existence and operation of monopoly 
marketing board in a free trade zone. Contrary to the vigorous claims 
of the CWB, past investigations have not vindicated the Board's 
activities, instead they have led us inevitably to this difficult 
question. Can U.S. and Canadian wheat farmers continue to exist in an 
environment where one country's farmers must compete in a free market, 
while the farmers of the other country hide behind the veil of a 
government-sanctioned and financed monopoly marketing board?
    On September 8, 2000, the NDWC filed a petition under Section 301 
of the Trade Act of 1974, to seek relief for the state's wheat growers 
from trade distorting policies and practices of the Canadian Wheat 
Board and the Government of Canada. The ongoing section 301 trade 
action specifically targets the operations of the CWB in the United 
States and in third country markets. Further, the Section 301 trade 
action is a complement to the U.S. wheat industry's overall trade 
priorities for the negotiations underway in the World Trade 
Organization and the FTAA. This case and its outcome may provide our 
last best opportunity to negotiate a comprehensive and lasting 
settlement with Canada with respect to exports of Canadian wheat to the 
United States and third country markets. We have documented case 
studies which vividly describe the unfair trade practices of the 
Canadian Wheat Board, which have led to sharp reductions in U.S. market 
share in such key, traditional markets as the Philippines, Venezuela, 
Guatemala and others. A meaningful and lasting settlement in this 301 
trade case can serve as a model for solution of the unfair trading 
practices of export state trading enterprises in the WTO.
    The International Trade Commission (ITC) has formally docketed and 
issued official notice of the procedures it will follow in a general 
fact-finding investigation into conditions of competition between U.S. 
and Canadian wheat. The notice states that a public hearing will be 
held in connection with the investigation on June 6, 2001, at the ITC 
Building in Washington, D.C. The ITC is assisting with the wheat 
investigation at the request of the Office of the U.S. Trade 
Representative (USTR). The ITC will submit a confidential report to the 
USTR by Sept. 24, 2001.
    We have recommended the following negotiating objectives:
    (1) Eliminate the CWB's export monopoly. The Board should be 
compelled to export wheat on commercial terms in competition with other 
grain exporters.
    (2) Eliminate the CWB's supply monopoly. The Board should be 
required to acquire its wheat in commercial competition with other 
exporters and processors.
    (3) Institute full market access and national treatment for U.S. 
wheat entering Canada. Currently, Canada maintains a unique form of 
quality control and sanitary-phytosanitary barriers that effectively 
prohibit U.S. wheat from moving into Canada's domestic market. This is 
grossly unfair given the almost completely open access that Canadian 
wheats have to the U.S. market. We believe this system is designed to 
perpetuate the supply and export monopoly of the CWB.
    (4) Establish full transparency of the CWB's operations. This 
transparency must include the notification of acquisition costs, 
disaggregated export pricing and other sales information unique to 
single-desk exporters. Full transparency would include the terms and 
conditions of long-term grain agreements, forward pricing contracts, 
and quality over-delivery.
    (5) In the event that a transition period is required to ease the 
impact of the full elimination of the supply and export monopolies, the 
Canada-U.S. Free Trade Agreement acquisition price definition must be 
changed to a percentage that represents the full cost of the grain 
minus the percentage of the prior year's crop costs accounted for by 
the CWB's administrative costs. Sales below this adjusted acquisition 
price should lead to automatic punitive sanctions.
    We have also recommended to the Bush Administration and Congress 
specific remedies in the event that the unreasonable, discriminatory, 
and burdensome practices of the CWB are not immediately resolved by 
this investigation. We have asked the Office of the U.S. Trade 
Representative to establish tariff rate quotas for two crop years. For 
durum wheat, we recommend no increased tariff for wheat imports up to 
300,000 metric tons. Over that amount, the U.S. should levy a tariff-
rate of $50.00/metric ton. For other spring wheat, we recommend no 
change on imports up to 500,000 metric tons. Above that amount, a 
tariff rate of $50.00/metric ton should be applied. These tariff rate 
quotas are temporary measures that can be adjusted or eliminated in 
subsequent years as the fundamental reforms of the CWB are implemented.

Conclusion
    Our producers have been unfairly disadvantaged by the continuation 
of monopoly marketing boards in a free trade area. The inequities 
contained in the CUSTA were perpetuated in the NAFTA. Moreover, the 
failure of the Uruguay Round Agreement on Agriculture to adequately 
address and discipline the unfair pricing practices of STEs like the 
CWB served as an additional blow to our producers' confidence in 
expanding free trade agreements.
    Over the last decade, the national wheat organizations have 
supported the NAFTA, annual MFN for China, the Uruguay Round Agreement 
of GATT, PNTR for China, fast-track (now-Trade Promotion Authority), 
and continued negotiations for agricultural trade reform in the WTO. 
With the CWB trade dispute unresolved, it becomes increasingly 
difficult for our rank and file producers to envision how they can 
directly benefit from these expanded trade opportunities. We 
respectfully request the full support of this Committee and the entire 
Congress in our Section 301 investigation and its successful outcome.
    Our future lies in the expansion of export market opportunities and 
fair competition for those opportunities. Our wheat producers just want 
to achieve a situation that is ``as good'' as those that exist for 
other commodities or U.S. industries. A wealth of experience and 
disappointment has led us to this point. We now have before us an 
opportunity to make fundamental changes and improvements to the trade 
environment which is so critical to the success of our industry. To 
miss this opportunity would certainly be a big mistake.
    I thank you for your attention to my remarks. I look forward to 
answering your questions at the appropriate time.

                                

    Chairman Crane. Thank you, Mr. Fisher.

 STATEMENT OF BRUCE HAMNES, WHEAT, SOYBEAN, AND CANOLA FARMER, 
  STEPHEN, MINNESOTA; CHAIRMAN, WHEAT EXPORT TRADE EDUCATION 
COMMITTEE; CHAIRMAN, U.S. WHEAT ASSOCIATES; AND PAST CHAIRMAN, 
 MINNESOTA WHEAT RESEARCH AND PROMOTION COUNCIL; ON BEHALF OF 
             NATIONAL ASSOCIATION OF WHEAT GROWERS

    Mr. Hamnes. Good afternoon, Chairman Crane. I too want to 
welcome you to Minnesota.
    My name is Bruce Hamnes, and I produce wheat and soybeans 
on my 2,000-acre farm in Stephen, Minnesota, in northwest 
Minnesota. Thank you for allowing me the opportunity to 
highlight the many challenges faced by U.S. wheat producers as 
we compete in the world market. This hearing is an excellent 
opportunity for wheat producers in Minnesota and throughout the 
country to impress upon this Subcommittee how vital trade is to 
our livelihood.
    My written statement contains information that time does 
not permit me to cover here, but I would like to highlight two 
points that we need to take into account.
    As Neal has just told you, 96 percent of the world's 
consumers live beyond our borders; and, second, we export 
nearly half of our total production. As you can imagine, our 
success and failure hinges on the ability of U.S. wheat to be 
exported around the world.
    With the challenges facing U.S. wheat producers, reform is 
necessary in negotiations of the World Trade Organization and 
the Free Trade Area of the Americas. Trade promotion and market 
development are vital components of success in world wheat 
trade.
    U.S. wheat is exported to over 130 countries around the 
world. In each of these markets the trend toward privatizing 
the milling and baking industries has dramatically increased 
the time and resources it takes to ensure our buyers' needs are 
being met. As an officer of U.S. Wheat Associates, I've had the 
opportunity to visit many of these overseas markets and see 
firsthand how important it is to have a presence in those 
markets.
    Trade negotiations such as the multilateral efforts in the 
WTO and the FTAA and bilaterals with Chile and Jordan are 
critical means of addressing trade challenges. These 
negotiations have potential to build alliances, remove 
barriers, and allow greater access to markets and discipline 
unfair trade practices.
    The U.S. wheat industry has been a firm supporter of trade 
agreements. However, there are several issues we feel need to 
be addressed as we proceed through the negotiating process.
    First, the export State trading enterprises, such as the 
Canadian Wheat Board which operates as a State-mandated 
monopoly, must be addressed, as you have just heard from Mr. 
Fisher.
    Second, we urge the United States to place its highest 
priority on complete elimination of trade export subsidies. 
European export subsidies represent the international trading 
system's single greatest market distortion.
    Third, Europe continues to lavish its producers with trade 
distorting support, while clinging to the rationale of multi-
functionality. Europe applies this term in an effort to justify 
exporting the cost of supporting European farmers. The U.S. 
should refrain from negotiating on domestic supports within the 
context of the FTAA. We must not unilaterally disarm within the 
hemisphere, leaving the EU to continue subsidizing their 
producers.
    Fourth, the average U.S. tariff on agricultural imports is 
about 5 percent, while in the rest of the world it exceeds 50 
percent. Until such time as significant reductions are made by 
others, U.S. agricultural tariffs should not be further 
reduced. In the WTO and the FTAA, negotiations reducing these 
high tariffs must be a priority.
    Fifth, events over the past year have made it clear that 
food safety issues will continue to create challenges to 
international trade. Science must be the foundation for 
addressing these issues, not murky concepts such as the 
precautionary principle.
    The wheat industry strongly believes that Congress should 
grant trade promotion authority to the President that is 
unencumbered by environmental or labor provisions. The 
importance of the environmental and labor protection is without 
question; however, we believe these concerns are more 
appropriately addressed in other forums and by other methods.
    Granting this authority would send a strong signal that the 
U.S. is committed to maintaining its leadership role and 
promoting free and fair trade.
    We recognize that significant work was done last year to 
reform U.S. sanctions policy. However, the industry supports 
continued efforts to ease access to formally sanctioned markets 
by eliminating licensing requirements, allowing access to 
export credit programs, and rescinding travel restrictions and 
the prohibition on U.S. commercial financing for Cuba trade.
    Last year's historic granting of China permanent normal 
trade relations was a positive first step toward realizing the 
massive potential of this market for U.S. wheat producers. Our 
nation's agreement with China promises U.S. wheat producers 
unprecedented access to the largest market in the world. Upon 
China's accession to the WTO, the U.S. will have greater 
recourse than ever in dealing with Chinese trade problems.
    Biotechnology also represents significant challenges to 
trade. We in the wheat industry have taken a long, hard look at 
what happens to our markets when wheat produced using 
biotechnology is commercialized. This may be as early as 2003. 
We believe that biotechnology holds tremendous potential for 
American agriculture and the wheat industry.
    The needs of our customers are of utmost importance to us. 
However, we must not be barred from fair competition by 
nonscience-based approval and clearance systems like those 
proposed in the European Union and by activists' misinformation 
campaigns.
    With over 50 percent of our sales overseas, we must protect 
the viability of U.S. markets by maintaining and requiring that 
all regulatory systems be based on internationally recognized 
scientific principles.
    We thank you for your attention to our concerns and 
recommendations and want you to know that the entire wheat 
industry stands ready to work with the Congress to address 
these issues. I'll be happy to respond to your questions at the 
appropriate time.
    [The prepared statement of Mr. Hamnes follows:]
Statement of Bruce Hamnes, Wheat, Soybean, and Canola Farmer, Stephen, 
Minnesota; Chairman, Wheat Export Trade Education Committee; Chairman, 
U.S. Wheat Associates; and Past Chairman, Minnesota Wheat Research and 
 Promotion Council; on behalf of National Association of Wheat Growers
    Good afternoon Chairman Crane, Congressman Levin, Congressman 
Ramstad and members of the Subcommittee. My name is Bruce Hamnes. I 
produce wheat, soybeans and canola on my 2,000-acre farm in Stephen, 
Minnesota. Thank you for allowing me this opportunity to highlight the 
many challenges faced by U.S. wheat producers as we compete in the 
world market. This field hearing is an excellent opportunity for wheat 
producers in Minnesota and throughout the country to impress upon this 
Subcommittee how vital trade is to our livelihood.
    Let me begin by highlighting two points that wheat producers in the 
United States must take into account. First, 96 percent of the world's 
consumers live beyond our border. Second, we export nearly half of our 
total production. As you can imagine, our success and failure hinges on 
the ability of U.S. wheat to be exported around the world. The U.S. has 
the largest, safest and cheapest food supply in the world. Trade is a 
vital component for ensuring the financial viability of U.S. farmers 
and continuing this trend. World wheat trade is dynamic and new 
challenges arise with remarkable frequency.
    Despite these many challenges, we are optimistic about the great 
potential we have to market U.S. wheat around the world. Hard Red 
Spring, the type of wheat I grow here in Minnesota, has seen expanded 
market opportunities for new and current customers. U.S. wheat 
producers are some of the most effective and efficient wheat producers 
in the world and time and again grow enough high quality wheat to 
service hundreds of markets.
    The 1996 farm bill, the Uruguay Round Agreement on Agriculture and 
NAFTA gave wheat producers optimism for the future of our industry. 
However, unmet promises associated with the farm bill and continued 
inequities with our competitors from the Uruguay Round and NAFTA have 
soured our prospects. While the basics tenets of the 1996 farm bill, 
such as the freedom to make planting decisions based on market 
conditions, are without question, positive for our industry, it is 
impossible to move away from high levels of government assistance 
without an aggressive, well-funded trade strategy being implemented. 
Additionally, further reform in agriculture is necessary in 
negotiations of the World Trade Organization (WTO) and the Free Trade 
Area of the Americas (FTAA).
    The challenges facing U.S. wheat producers to expand market 
opportunities are numerous and varied. I would like to highlight as 
many of them as we can reasonable accommodate in this testimony. My 
written statement contains information that time does not permit me to 
cover.
Trade Promotion and Market Development
    U.S. wheat is exported to over 130 countries around the world. In 
each of these markets the trend towards privatizing the milling and 
baking industries has dramatically increased the time and resources it 
takes to ensure our buyers needs are being met.
    As a farmer I do not have the time or resources to visit our 
international customers to ensure they understand how to source U.S. 
wheat, understand what specifications to ask for to get the product 
they need or what technical problems may be inhibiting the importation 
of U.S. wheat to a particular market. In order to service these markets 
I must count on U.S. Wheat Associates, our market development 
organization, and the USDA. As an officer of U.S. Wheat Associates, I 
have had the opportunity to visit overseas markets and see first hand 
how important it is to have a presence in the market. Our customers can 
turn to our overseas staff and receive the help they need and desire.
    As a Minnesota producer I contribute one cent for every bushel of 
wheat I deliver to the local elevator, which goes to the wheat checkoff 
managed by the Minnesota Wheat Research and Promotion Council. The 
council utilizes part of this money to fund the overseas promotion 
activity of U.S. Wheat Associates. In addition to producer funds, U.S. 
Wheat Associates utilizes funding from the Foreign Market Development 
(FMD) program and the Market Access Program (MAP), which are 
administered by USDA and authorized by Congress.
    Market development and promotion programs are ``green box'' 
programs not subject to limitation by the WTO. Increases in funding for 
these programs will enhance our negotiating leverage and ultimately 
return their cost to the government by increasing sales around the 
world and reducing producer reliance on government payments. While 
these programs are vitally important, to maintain competitiveness, the 
U.S. must maximize the use of all trade programs within the WTO's 
limitations.
    As a producer I have been urged by the government to accept reduced 
commodity support payments in exchange for a ``market-oriented'' farm 
policy. It is timely and appropriate at this juncture to take steps to 
preserve and strengthen the trade programs administered by the USDA to 
fulfill the commitment made to U.S. farmers. The commitment to trade 
programs cannot work alone to solve the unique challenges of the 
agricultural industry. Substantial promises were also made during the 
1996 farm bill debate with respect to easing the tax and regulatory 
burden placed on farmers. A commitment to expanding market 
opportunities coupled with tax and regulatory relief will go a long way 
in fulfilling the promise of the 1996 farm bill.
    Support for increased access and creating greater market demand 
abroad is a significant part of sound federal farm trade policy.
Foreign Market Development Program
    The wheat industry strongly supports one of our longest standing 
and most effective agricultural export programs, the Foreign Market 
Development (FMD) or Cooperator Program. The Cooperator Program is 
funded jointly by U.S. agricultural producers and the federal 
government. The commitment of wheat producers to this program is 
highlighted by the fact that for every $1.00 of government funding, 
producers in the U.S. gave $1.10 for market development during FY2000. 
The producer contribution has increased every year despite low prices 
and increased production costs. None of these producer-supported 
organizations have a business interest in or receive remuneration from 
specific sales of agricultural commodities.
    The Cooperator program has played an important role in helping to 
increase U.S. agricultural exports from $3 billion at its inception in 
1955 to a level of $53 billion in fiscal year 2000. It is one of the 
key building blocks of a sustainable, results-oriented U.S. 
agricultural export strategy. In order to secure the growth and health 
of the FMD program, the U.S. wheat industry believes that it should be 
funded at no less than $43.25 million now, with progressive increases 
throughout the life of the next farm bill.
Market Access Program
    The wheat industry supports aggressive funding for the Market 
Access Program (MAP). USDA's Market Access Program is a cost-share 
program which requires that farmers and other participants contribute 
their own resources. It has been and continues to be an excellent 
example of an effective public/private partnership that works. During 
FY 1999 for every $1.00 spent by the government, U.S. producers funded 
market access activities $1.80. Since it was originally authorized, 
funding has been gradually reduced from a high of $200 million to its 
current level of $90 million--a reduction of more than 50 percent. 
Clearly, in the face of continued subsidized foreign competition, this 
needs to be reversed.
    Global agricultural trade is still characterized by our competitors 
extensive use of export subsidies and unfair trade practices. While 
programs such as MAP have been reduced in recent years, our foreign 
competitors have continued to heavily subsidize and aggressively 
promote their products in an effort to capture an increasing share of 
the world market at the expense of U.S. producers. A recent USDA study 
shows our competitors outspending the U.S. by as much as 20 to 1 on 
market promotion and export subsidies.
    Our competitors are spending over $100 million just to promote 
their products into the United States--more than what the U.S. 
currently spends under MAP to help promote exports of all American 
grown and produced commodities world-wide.
    For these reasons, we strongly urge that funding for MAP be 
increased from its current $90 million level to $200 million as part of 
the next farm bill. This would send a strong message to our competitors 
and enhance the negotiating leverage of the U.S. throughout the current 
round of WTO negotiations.
Export Enhancement, Credits and Food Aid
    In addition to FMD and MAP, U.S. wheat producers support the 
continued authorization of the Export Enhancement Program (EEP), 
aggressive use of the GSM 102/103 credit guarantee programs and a 
commitment to distribute a consistent level of food for assistance.
    We support the reauthorization and full funding of EEP until all 
export subsidies have been eliminated. EEP has not been utilized in its 
current form since 1996 despite continued use of export subsidization 
by our competitors. We support the availability of EEP funds for all 
market promotion and development programs that may positively impact 
exports. The EEP structure should be flexible enough to allow for funds 
to be used for market development or as a direct subsidy in response to 
unfair competition.
    USDA's export credit guarantee programs were designed to facilitate 
the sales of U.S. agricultural products. GSM programs have effectively 
assisted many countries in the purchase of U.S. wheat as part of the 
process from concessionary food assistance to cash customers. The 
industry supports the continuation of the GSM programs. Additionally, 
we support revising the export credit program to better meet the needs 
of private sector buyers.
    The wheat industry supports the continued use of P.L. 480 Food for 
Peace program, including Section 416(b). We are prepared to consider 
the proposed international school lunch program as plans are developed. 
We urge that funding for Title I under PL 480 be restored and that less 
reliance be placed on Section 416(b) programs.
    Food aid and other humanitarian programs are under attack by our 
trading partners as export subsidies. Our competitors argue that the 
United States only uses these programs to offset weak markets and low 
producer prices. We believe these programs are important resources for 
reaching the world's hungry and countries in crisis. To ensure the 
integrity and availability of these programs and remove any perceived 
use as market support programs, the Congress should designate a defined 
commodity level that will be made available for humanitarian use 
regardless of market conditions. Countries in crisis should be able to 
turn to their neighbors and know that food will be available. However, 
due attention must be given to ensure that humanitarian programs do not 
disrupt commercial markets or a recipient's ability to develop their 
own economy.
    Each of these tools are essential to meeting the fierce competition 
that marks world wheat trade. These programs have consistently enabled 
producers to earn a better return for their wheat. However, without 
aggressive use and increased funding, the effectiveness of these 
programs will be greatly reduced.
Trade Negotiations
    Multilateral negotiations such as the WTO and FTAA, and bilaterals 
such as Chile and Jordan are important as a means of addressing many of 
the trade challenges U.S. wheat producers face. These negotiations have 
the potential to remove barriers, allow greater access to markets and 
discipline unfair trade practices that are detrimental to U.S. wheat 
producers.
    The WTO agricultural negotiations mandated by Article 20 of the 
Uruguay Round Agreement on Agriculture have proceeded through the 
``stock-taking'' stage and are now proceeding with greater urgency as 
the expiration of the ``peace clause'' occurs in 2003. The ``peace 
clause'' currently prohibits WTO members from taking each other to a 
dispute settlement panel over their agricultural subsidies regimes. The 
upcoming ministerial meeting in Qatar may launch a new round of 
comprehensive negotiations. This is critical for the agricultural 
negotiations to bring about greater liberalization of world trade and 
eliminate problems such as the unfair and anti-competitive practices of 
export state trading enterprises and the market distortions of export 
subsidies.
    Occurring simultaneously with the WTO, the FTAA negotiations 
recently received momentum as leaders of the 34 democracies in the 
Western Hemisphere signaled their commitment to negotiate an FTAA by 
2005. The emphasis President Bush has placed on these negotiations 
clearly has elevated the FTAA process and it is our hope that an 
agreement can be reached and implemented that will benefit U.S. wheat 
producers.
    The U.S. wheat industry has been a firm supporter of trade 
agreements, however, there are several issues we feel need to be 
addressed as we proceed through the negotiating process.
Export State Trading Enterprises
    The Canadian Wheat Board (CWB) operates a state-mandated monopoly. 
It controls virtually every aspect of wheat production in Canada, 
including varietal control, day-to-day execution of sales contracts and 
long-term market development. It is the largest grain marketing board 
in the world, handling about 20 percent of world wheat and barley 
trade. To put it into perspective, recall the Cargill acquisition of 
Continental's grain business. Together, the two merged companies 
control roughly 20 percent of U.S. wheat exports, or about 228 million 
bushels, based on a five-year average. In contrast, the CWB controls 
annual average wheat exports of 680 million bushels, or about three and 
a half times as much as Cargill and Continental combined.
    As a government-funded grain buying agency, the CWB uses discounted 
price offers, bonus deliveries, supplemental cleaning, delayed 
payments, indirect transportation subsidies, and other favorable 
contract terms to often undercut U.S. grain prices. None of these 
options can be provided without additional cost by private companies 
that face commercial risk. The impact of this system is particularly 
devastating in third country markets where the U.S. and Canada compete.
    Last year the North Dakota Wheat Commission filed a Section 301 
petition with the Office of the U.S. Trade Representative (USTR). USTR 
initiated an investigation of the CWB under section 301 at the urging 
of the National Association of Wheat Growers, U.S. Wheat Associates, 
the Wheat Export Trade Education Committee, the American Farm Bureau 
Federation, the National Farmers Union and every state-level wheat 
commission.
    Under section 301, the U.S. government has twelve months to 
investigate the practices in question and negotiate a remedy. If a 
negotiated solution cannot be reached, Section 301 authorizes 
retaliation.
    The U.S. industry has made specific, realistic suggestions for 
addressing the underlying problems with the CWB. Our particular focus 
has been breaking the state-mandated monopoly and subjecting the CWB to 
market discipline.
    The section 301 case is intended to work in conjunction with 
negotiations in the WTO over export state trading entities. A solution 
through the section 301 process could be used as a model for 
disciplining these entities in the WTO.

Export Subsidies
    We urge that the United States continue to press, as its highest 
multilateral priority, the complete elimination of direct trade 
distorting export subsidies. European export subsidies represent the 
international trading system's single greatest market distortion, and 
cannot be allowed to stand.
    Given Europe's defiance on this issue, the United States should 
signal now that it will not fight with one arm tied behind its back. 
For example, we continue to support legislated triggers for increases 
in EEP expenditures. We have been disappointed that EEP has not been 
used since 1995 against European export subsidies, and hope that the 
new Administration will not hesitate to use these funds aggressively. 
By the same token, we hope the Administration will reject efforts to 
extend the Peace Clause beyond 2003.

Domestic Supports
    Europe continues to lavish its producers with trade distorting 
support, while clinging to the rationale of ``multifunctionality.'' 
Europe applies this term in an effort to justify exporting the cost of 
supporting European farmers via international markets. For its part, 
the new Administration should retain its negotiating flexibility on 
domestic supports until the shape of the new Farm Bill becomes more 
apparent. The Administration should notify to the WTO our supplemental 
AMTA payments as ``green box.''
    In contrast to the Uruguay Round, the new WTO negotiation must not 
create a ``one size fits all solution'' (such as across the board, 
percentage reductions). This time, underlying inequities must be 
eliminated.
    Although pressured by some Latin American countries, the U.S. 
should refrain from negotiating on domestic supports within the context 
of the FTAA. It would be unwise to unilaterally disarm within the 
hemisphere leaving the EU to continue subsidizing their producers at 
high levels.

Market Access
    The average U.S. tariff on agricultural imports is about 5 percent, 
while in the rest of the world it exceeds 50 percent. Until such time 
as significant reductions are made by others, U.S. agricultural tariffs 
should not be further reduced. American farmers deserve and need a 
minimal level of protection against the trade distorting practices of 
competing exporters. In the previous WTO round, there were many non-
tariff barriers that were converted to tariffs under `tariffication' 
that resulted in very high tariff levels being established. In the new 
round, reducing these high tariffs must be a priority. This should also 
be a priority in the FTAA discussions.
    Tariff levels in developing countries are frequently set at very 
high levels in order to protect their domestic producers. These tariffs 
also can be quite erratic in terms of how they are applied. The 
developing countries need to be brought into the WTO process and 
encouraged to reduce their tariffs in order to receive the benefits of 
a more open economy.
    Those countries that administer tariff quotas (TRQ'S) do so in a 
variety of ways from auctioning to allocation of licenses to producer 
groups which clearly hinders U.S. exports. The duties outside the quota 
need to be targeted for reduction. Additionally, the fill-rate of 
tariff quotas appears to be very low among some countries, resulting in 
part from TRQ administration. To correct the problem, the U.S. may want 
to consider an incentive-based system to encourage increased imports 
where fill rates are low.
    The FTAA must be negotiated so that we have duty-free access to 
Brazil, along with other growing markets in Latin America. Brazil may 
be the largest wheat importer in the world this year, but we face a 
tariff differential versus MERCOSUR member Argentina that puts U.S. 
wheat at an unfair disadvantage. Just as NAFTA has allowed us to double 
our wheat exports to Mexico, FTAA will give us access on par with 
Argentina and Canada to the entire hemisphere and the growing economies 
of 800 million people.
    In the last WTO trade round, the EU refused to establish a TRQ on 
wheat imports as they should have done. This would have involved a 
wheat import level of over 2.0 million metric tons, based on requiring 
that, as a minimum, imports of 3 percent of domestic usage shall be 
allowed. In the new round, the EU should be required to establish a 
substantial TRQ for wheat. The EU has also utilized a reference price 
system in implementing its wheat import regime under the last round 
rather than the development of a more flexible invoice system. The 
current reference price system is more cumbersome and restrictive on 
trade, and the U.S. should urge that the invoice system be adopted.
    In addition to tariffs and TRQ's, the price band system that has 
been utilized fairly extensively in Latin America needs to be 
eliminated in favor of a system of tariffs. The tariffs need to be set 
at reasonable levels and should not constitute a new barrier to 
imports.

Sanitary/Phytosanitary Issues
    Events over the past year make clear that food safety issues will 
continue to create challenges to international trade. Science must be 
the foundation for addressing these issues--not murky concepts such as 
the ``precautionary principle'' as used by the EU and Japan. The United 
States must continue to strongly resist all efforts to reopen 
negotiations on the Agreement on Sanitary and Phytosanitary Measures. 
We support the inclusion of the WTO SPS agreement within the framework 
of the FTAA.

Other Issues
Trade Promotion Authority and Environment/Labor Standards
    The wheat industry believes that Congress should grant trade 
promotion authority to the President that is unencumbered by 
environmental or labor provisions. This authority had been granted to 
every President for the 25 years prior to its expiration in 1994. Trade 
Promotion Authority is a tool that gives the United States the 
opportunity to remove foreign barriers to trade and opens markets for 
American exports. Since U.S. wheat producers export nearly half of what 
we produce, unfettered access to the worldwide market is absolutely 
imperative.
    The importance of environmental and labor protection is without 
question; however, those concerns are more appropriately addressed in 
other forums and by other methods than through trade promotion 
authority. Trading partners will be reluctant to engage the U.S. in 
market opening negotiations if they feel that they will be held hostage 
to environmental and labor provisions. Developing countries, already 
disenchanted with the income gap between themselves and industrialized 
countries, have shown concern that the linkage between trade, the 
environment and labor standards is simply a wealthy countries form of 
protectionism. The U.S. must do its part to quell these concerns by 
promoting the idea that world economic and trade liberalization will 
allow developing countries to address environmental degradation and 
labor policy issues without the fear of trade sanctions or other 
retaliatory methods.
    President Bush in his address to a joint session of Congress, 
stated that ``Free trade brings greater political and personal 
freedom,'' and requested that Congress pass trade promotion authority 
``quickly.'' United States Trade Representative Robert Zoellick echoed 
this sentiment a week later in the release of the ``2001 Trade Policy 
Agenda,'' and added that ``If other countries go ahead with free trade 
agreements and the United States does not, we must blame ourselves. We 
have to get back in the game and take the lead.'' We fully support this 
and look forward to working with Congress and the Administration to 
ensure the passage of trade promotion authority.
    Granting this authority would send a strong signal to our trading 
partners that the U.S. will continue its leadership role in promoting 
free and fair trade around the world. The potential for altering 
already negotiated positions due to a lack of trade promotion authority 
will give our trading partners great pause before they make politically 
difficult decisions to dismantle trade barriers and open domestic 
markets to U.S. products.

Sanctions
    We recognize that significant work was done last year to reform 
U.S. sanctions policy. However, the industry supports continued efforts 
to ease access to formally sanctioned markets by eliminating licensing 
requirements, allowing access to export credit programs and domestic 
commercial banking for all countries without a presidential waiver, and 
rescind the travel restrictions and the prohibition on U.S. commercial 
financing for Cuba trade. It is not surprising that Cuba, whose people 
need our product, is not willing to make needed purchases. The Congress 
has continued to single Cuba out and denies even the basic humanitarian 
needs by the unacceptable restrictions placed on moving food into the 
Cuban market.
    Unilateral trade sanctions do not work. A sanction imposed against 
our trading partners results in lost markets and the U.S. is labeled an 
unreliable supplier. Unilateral sanctions rarely if ever put pressure 
on the country intended, as there are other suppliers of almost every 
product produced in the United States. Our competitors stand ready to 
step into the market vacuum created by sanctions.
    Additionally, the Export Administration Act (EAA) has been a 
safeguard to agricultural producers against export embargoes since 
1985. It allows agricultural producers to export directly without 
controls. The EAA expired June 1994 and has been temporarily extended 
each year. Currently legislation to reauthorize the Export 
Administration Act is being considered (S. 149). However, all 
provisions to protect American agricultural producers from export 
embargoes have been removed from this legislation. Some believe that 
the sanction reform legislation passed by the 106th Congress 
is sufficient to address agriculture's concerns. It is not. There are a 
number of provisions in that legislation that restrict exports, and 
there are other embargo issues still outstanding. We would urge you to 
support inclusion of exemptions for agriculture that are at least as 
strong as the original EAA language, and that do not weaken the 
Sanctions Reform and Export Enhancement Act of 2000.

China
    Last year's historic granting of China permanent normal trade 
relations is a positive first step towards realizing the massive 
potential of this market for U.S. wheat producers. The wheat industry 
has always supported normal trade relations with China as a necessary 
component of our worldwide trade strategy. The lines of communication 
must remain open to effectively exact change on the Chinese system that 
will allow for growth in trade between the two nations.
    Our nation's agreement with China promises U.S. wheat producers 
unprecedented access to the largest market in the world. Additionally, 
the commitments China made during this process mark an amazing turn in 
the role China will play in the world market. Upon accession the U.S. 
will have greater recourse than ever in dealing with Chinese trade 
problems as well as a formal structure for recourse when trade breaks 
down.

Biotechnology
    The wheat industry has taken a long hard look at what happens to 
our markets when a wheat product produced through biotechnology is 
commercialized, which may be as early 2003. We believe that 
biotechnology holds tremendous potential for American agriculture and 
the wheat industry.
    We also recognize the legitimate concerns of our customers about 
biotechnology. Their needs are of the utmost importance to us. However, 
me must not be barred from fair competition by non-science based 
approval and clearance systems like other products have experienced in 
the European Union and by activists' misinformation campaigns. The 
wheat industry has developed the following position statement in an 
attempt to meet these concerns:

          1. The U.S. wheat industry commits itself absolutely to the 
        principle that our customers' needs and preferences are the 
        most important consideration. We support the ability of our 
        wheat customers to make purchases on the basis of specific 
        traits.
          2. We will work with all segments of the industry to develop 
        and assure that a viable identity preservation system and 
        testing program is instituted prior to commercialization of 
        products of biotechnology. We strongly urge technology 
        providers to obtain international regulatory approval and to 
        ensure customer acceptance prior to commercialization.
          3. We urge the adoption of a nationally and internationally 
        accepted definition of biotechnologically-derived products. We 
        also urge international harmonization of scientific standards 
        and trade rules.
          4. We support voluntary labeling of food products, provided 
        it is consistent with U.S. law and international trade 
        agreements and is truthful and not misleading. We oppose 
        government-mandated labeling of wheat products in both the U.S. 
        and international markets based upon the presence or absence of 
        biotechnologically-derived traits that do not differ 
        significantly from their conventional counterpart.
          5. We support the establishment of a reasonable threshold 
        level for adventitious or accidental inclusion of 
        biotechnologically-derived traits in bulk wheat or wheat food 
        products in both U.S. and international markets.
          6. We invite valued and interested customers to join with us 
        in a working partnership to explore the emerging biotechnology 
        industry.

    The wheat industry is committed to working toward a closed loop or 
identity preserved system from farm to consumer, to prevent commingling 
with non biotech or traditional wheat products--recognizing that zero 
tolerance is not practical or possible. With over 50 percent of our 
market overseas, we must insist that the U.S. government work with us 
to protect the viability of the U.S. food industry by maintaining and 
requiring that all approvals, testing, monitoring and IP systems be 
based on internationally recognized scientific principles.
    Thank you for your attention to our comments and recommendation. 
Trade opportunities are vital to the success of our industry, and 
alleviating the many challenges associated with trade would ensure the 
long-term viability of U.S. agriculture. The wheat industry 
respectfully urges you to focus on market development funding for 
agriculture, trade promotion authority and further sanctions reform 
during the current legislative session. The entire wheat industry 
stands ready to work with Congress to address these critical issues. I 
will be happy to respond to questions at the appropriate time.

                                

    Chairman Crane. Thank you, Mr. Hamnes. Mr. Tumbleson.

 STATEMENT OF GERALD TUMBLESON, CORN, SOYBEAN, AND HOG FARMER, 
  AND DIRECTOR, MINNESOTA CORN GROWERS ASSOCIATION, SHERBURN, 
                           MINNESOTA

    Mr. Tumbleson. Welcome, Mr. Chairman and Mr. Ramstad, and 
if you ask Mr. Ramstad, you'll realize that this is not one of 
our better weather days. Minnesota is much better than this. So 
come back another time.
    My name is Gerald Tumbleson, and I'm a farmer from 
southwestern Minnesota, and I serve as a director of the 
Minnesota Corn Growers Association Board. I farm with my wife, 
two sons, and a brother.
    Your roles as policy leaders and our roles as ag leaders 
require us to be visionary, peering into the future to see what 
lies ahead for those we serve. The long view of agriculture 
finds a world with a growing population and a growing demand 
for energy of all types. Agriculture will be a player in this 
growth.
    Middle America can be a prosperous place if we can capture 
the full value of the raw commodities we produce. Corn, for 
example, is a complex package of valuable chemical building 
blocks, with potential to help in meeting our energy, fiber, 
plastic, and nutritional needs.
    Depleting hydrocarbon sources, coupled with growth in 
demand for fuels and chemical foodstocks, indicate that to 
continue our strong economic growth we must begin to 
incorporate renewables. We refer to this as the carbohydrate 
economy. When we capture the sun's energy through the 400 
million acre solar panel of cropland across the country, then 
convert it efficiently into more valuable meats, fuels, feed 
products, anything with a higher value, it benefits many 
sectors of the U.S. economy.
    These renewable resources will not directly compete with 
petrochemical resources, but will complement them and help meet 
the incremental growth in demand. This carbohydrate economy is 
sustainable, environmentally friendly, and helps reduce our 
reliance on imported oil and the resulting trade imbalances.
    As we process these products through our carbohydrate 
economy, if you take the corn kernel, for example, and break it 
up into starch, protein, fiber, and oil, and then export those 
commodities, we not only have increased the value, but we have 
put many job opportunities here in Minnesota, and they're high-
paying jobs, and therefore our economy advances along with our 
exports.
    As many of you know if you live in southwestern Minnesota, 
Mankato is a city, and it's probably the largest soybean 
processing city in the United States. These processing plants 
become very important to us in the trade negotiations and how 
we go about that.
    So the lack of a nimble trade negotiating authority limits 
our ability to access foreign markets, increase exports and 
investment overseas, and sustain the dynamic performance of our 
economy. Trade promotion authority allows quick response to 
often fleeting opportunities, yet it gives Congress the 
authority to vote the negotiated agreement up or down. This is 
important to agriculture because negotiations that drag on lead 
to missed opportunities. Trade promotion authority will 
reinforce our commitment to the pursuit of free trade.
    Agriculture makes a positive contribution to our balance of 
trade, and that positive value will grow in the future. The 
improvements in genetics and cultural practices will bring 
continued increases in crop yields while also protecting the 
environment.
    This growing supply of raw commodities will enable growth 
in value-added processing and the sales of both processed goods 
and raw grains to both domestic and foreign customers. While 
domestic food and energy consumption provides the base demand 
American agriculture is built around, Minnesota farmers depend 
on the continued growth of trade opportunities throughout the 
world for future prosperity.
    As we move ahead in processing these products in Minnesota, 
and fortunately you're in Minnesota because it's one State that 
processes a lot of these products, you will understand how 
exports can become very valuable in the future because we're 
going to be exporting a much higher valued product.
    Thank you for coming to Minnesota.
    [The prepared statement of Mr. Tumbleson follows:]

   Statement of Gerald Tumbleson, Corn, Soybean, and Hog Farmer, and 
   Director, Minnesota Corn Growers Association, Sherburn, Minnesota

    Mr. Chairman, Members of the Subcommittee, good afternoon. My name 
is Gerald Tumbleson. I am a farmer from Southwestern Minnesota, serving 
as a director of the Minnesota Corn Growers Associations. I farm with 
my wife, two of our sons and my brother, and together we grow corn, 
soybeans, and hogs.
    Your roles as policy leaders and our roles as ag leaders require us 
to be visionary, peering into the future to see what lies ahead for 
those we serve. The long view of agriculture finds a world with a 
growing population and growing demand for energy of all types. 
Agriculture will be a player in this growth. Middle America can be a 
prosperous place if we capture the full value of the raw commodities we 
produce. Corn, for example, is a complex package of valuable chemical 
building blocks, with potential to help in meeting our energy, fiber, 
plastic, and nutritional needs. Depleting hydro-carbon sources, coupled 
with growth in demand for fuels and chemical feedstocks, indicate that 
to continue our strong economic growth we must begin to incorporate 
renewables. We refer to this as the ``carbohydrate economy.'' When we 
capture the sun's energy through the 400-million-acre solar panel of 
cropland across this country, then convert it efficiently into more 
valuable meats, fuels, feed products--anything with a higher value--it 
benefits many sectors of the U.S. economy. These renewable resources 
will not directly compete with petrochemical resources, but will 
complement them and help meet the incremental growth in demand. This 
``carbohydrate economy'' is sustainable, environmentally friendly, and 
helps reduce our reliance on imported oil and the resulting trade 
imbalances.
    Meeting the needs of our foreign customers will be increasingly 
important in the future. Trade agreements around the world are moving 
away from protectionism and artificial trade barriers. Trade agreements 
at their best allow the economies of both trading partners to grow. For 
example, NAFTA has increased the level of trade between the United 
States, Canada and Mexico, opening these markets to American goods. 
This in turn provides Americans with greater access to products from 
Mexico and Canada. As this North American economy grows, demand for 
more and higher valued products will grow as well.
    Unfortunately, the United States has not been involved in the vast 
majority of free trade agreements. Of the 130 or so agreements reported 
to the WTO since 1990, the U.S. has been involved in only two, with a 
third expected to be in place soon. This hampers the efforts of our 
agricultural producers to access much of the world market.
    The Peoples Republic of China is home to more than one-fifth of the 
world's population. Direct access to this large market is vitally 
important to agricultural producers. The U.S. has been a residual 
supplier to China, but to develop consistent demand we need to develop 
a normal trading relationship with China. The economies of both China 
and the U.S. will be enhanced by normalization of trade.
    The reduction of trade distorting agricultural subsidies worldwide 
is an objective of the WTO. As farmers, we want to grow the crops that 
are in demand and respond to market forces. The American farmer is an 
efficient producer and sets the standard in the production of food, 
energy, and fiber. We will succeed because in the absence of artificial 
trade barriers, over time, resources will be allocated to their best 
use. However, we also recognize that a minimum level of support is 
required to stabilize our rural economies in times of depressed 
markets. This baseline of support assures that until free trade is the 
norm, our producers will not be forced out of business by production 
distorting tariffs and subsidies.
    As the global economy grows, trading partners need assistance to 
develop their economies so that their people can afford our goods. The 
U.S. has the ability and responsibility to assist developing countries 
in improving their incomes, diets, and creating markets for our 
products.
    This is especially important as we attempt to export higher valued 
products.
    Trading partners also need the assurance that the availability of 
basic goods such as food and medicine will not be affected by 
sanctions. Disruptions in trade harm our reputation as a reliable 
supplier and represent a lost opportunity for our economy.
    The lack of a nimble trade negotiating authority limits our ability 
to access foreign markets, increase exports and investment overseas, 
and sustain the dynamic performance of our economy. Trade promotion 
authority allows quick response to often fleeting opportunities, yet 
gives Congress authority to vote the negotiated agreement up or down. 
This is important to agriculture because negotiations that drag on can 
lead to missed opportunities. Trade promotion authority will reinforce 
our commitment to the pursuit of free trade.
    Differing attitudes toward biotechnology also contribute to trade 
inequities. We believe that new products should be evaluated through 
sound science by the appropriate regulatory agencies. We must not allow 
the use of biotech acceptance as an artificial trade barrier. We 
recognize the consumer's right of choice, but expect that education and 
information will lead to greater acceptance of this new technology. In 
the meantime, international harmonization of standards for biotech-
enhanced crops would provide direction for farmers around the world.
    Agriculture makes a positive contribution to our balance of trade, 
and that positive value will grow in the future. Improvements in 
genetics and cultural practices will bring continued increases in crop 
yields while also protecting the environment. This growing supply of 
raw commodities will enable growth in value-added processing and the 
sales of both processed goods and raw grains, to both domestic and 
foreign customers. While domestic food and energy consumption provides 
the base demand American agriculture is built around, Minnesota farmers 
depend on the continued growth of trade opportunities throughout the 
world for future prosperity.

                                

    Chairman Crane. Thank you, Mr. Tumbleson.
    I read a statistic that estimates that the world's 
population in 2050 is expected to hit 9 billion, and that's a 
lot of people, and without continued advancements in land use 
and crop production, there may not be enough food to feed 
everyone.
    Biotechnology attempts to solve this problem, yet it's been 
met with serious opposition. What is your industry doing to 
counter the critics of biotechnology? I don't know if you have 
comments.
    Mr. Joachim. Mr. Chairman, the American Soybean Association 
has been very active since 1995 when we first sought the 
approval to plant, in our instance, Roundup 30 soybeans and 
educating foreign buyers, and also we've been active since then 
in making sure that the companies have basically used due 
diligence and not released any soybean for general planting 
that hasn't been approved.
    We have full faith in the products that are being sold. 
Obviously, farmer acceptance of the biotech soybeans is well 
over half the crop, I guess somewhere around 60 percent.
    We have been blessed or cursed by our competition in 
Argentina that run a level that's much higher than the U.S. 
even, 90 percent, and which basically meant that back in 1996 
that the people, when soybeans were tight worldwide, basically 
with the circumstances they really had no choice but to take on 
Brazilian soybeans, and the world didn't come to an end, but 
that doesn't mean that there couldn't be this problem run 
through a variety.
    And I think it's unfortunate, but looking back I really 
don't know how it could have happened any different that the 
first rights out really had economic trades that benefited the 
farmer and not specific output trades that benefited the 
consumer, but when I look at--like I say, in hindsight we might 
have wished that would have happened differently, but 
practically I don't see how it could have happened.
    I think it's just a matter of education. I think Mr. 
Ventura used that term in his testimony earlier this afternoon.
    Chairman Crane. Any thoughts, Mr. Fisher?
    Mr. Fisher. Yes, I do, and I think Mr. Hamnes as chairman 
of U.S. Wheat will have some additional comments on the topic.
    I think our position is somewhat drafted following the 
soybean, corn examples, if you will, because we have yet to 
have a Roundup ready for biotech wheat out in the fields at 
this point. It's said that it will be between 2003 and 2005 
before that occurs.
    The wheat industry has chosen to embrace the technology, 
but also in developing the biotechnology committee some years 
ago and developing their position statement, clearly 
acknowledged the fact that----
    Chairman Crane. I thought we were in California.
    Unidentified Speaker. Ladies and gentlemen, the power went 
out in the whole hotel. Just hang loose. It might be coming 
back on here shortly.
    Chairman Crane. Well, with the lights that we have, I think 
we can continue.
    Mr. Fisher. Mr. Chairman, the biotech committee chose to be 
sure to include in its position statement a rather go-slow 
approach, for lack of a better way to say it, because the 
concerns were heightened with the Starling episode and the rash 
of customer concerns that seemed to follow that. So the wheat 
industry has adopted a rather go-slow approach, in other words, 
to embrace the technology but to make sure that we have 
adequate reassurances for our customers and education, as the 
Governor said, to make sure that we get this done right.
    We have a little time, since our first biotech wheats are 
not yet out there. However, they will be spring wheat, so it 
will affect North Dakota and Minnesota and Montana and States 
like that as soon as they are available. That seems to be the 
target.
    So we have a little time yet, and I think it has great 
promise, and I also think that the customer benefits, the 
secondary benefits also hold more promise in helping that 
education or meeting the issue I think with the customer at 
this point, although it tends to benefit, as in the Roundup 
technology, for example, tends to benefit the producer, and so 
there's a little less linkage there to the ultimate consumer.
    Chairman Crane. Very good. Mr. Hamnes, any thoughts?
    Mr. Hamnes. Mr. Fisher has summed it up quite well, but we 
do have this Committee, and in fact we just had a team that 
came back from Japan, which is our second-largest wheat 
customer, and visited very extensively with them about what we 
were doing here and to assure them that our customers are first 
and that we would take their considerations very seriously.
    We are also working with industry to attempt to put 
together a system so that we can assure our customers that when 
the technology does become commercial that they can be assured 
that they will get the product they want, and if they don't 
want a genetically modified organism (GMO) wheat, they will not 
get that.
    Also, we're trying to work in the international arena with 
discussions on tolerances, because there is no such thing as a 
zero tolerance. So we're moving on a number of different fronts 
to give confidence to our customers that their concerns are 
first, but also as we move forward on this technology which we 
think is going to be part of our life in the future, that we'll 
be ready to put it into operation and that will be acceptable 
by all our customers.
    Chairman Crane. Mr. Tumbleson.
    Mr. Tumbleson. Yes. Coming here from corn, it's an 
interesting discussion, isn't it, because you've all heard of 
Starling. That was not approved, and the corn growers did try 
to keep that controlled. As you know, corn is a pollen that 
fertilizes, so it's a different crop than soybeans and wheat 
like that.
    But let it not be misunderstood, technology benefits the 
consumer more than the producer, and when the United States has 
such inexpensive food, the world can be supplied the same way. 
You have to understand that technology is out there. The GMO is 
not going to make the farmer rich, but it's going to make the 
consumer much happier.
    When the education process is done, that will not be a 
problem. The problem is still going to exist in trade, and as 
we increase our production, which we will double probably in 20 
years through technology, maybe taking hopefully not less, but 
maybe, the consumer will benefit from this. So how we do it, 
how we get the scientific information out there, is very 
critical.
    Chairman Crane. One final quickie question. Which markets 
are of a higher priority to you folks, Latin America or Europe, 
the EU? Mr. Joachim.
    Mr. Joachim. Well, we have an allocation model for where we 
spend our money. It's interesting, 7 years ago Latin America 
was number one, followed by then I think Asia and Europe. The 
way we've got the world split up for soybeans, we're about 
tied. Now Asia is about 50 percent of where we're spending our 
market money, and Europe is roughly 28 or 29, and Latin America 
is the rest.
    Part of that is because of the sheer number of people in 
Asia and the fact that our biggest competitors for soybeans are 
in South and Latin America, South America, and in Europe we're 
looking at a more mature market, so there it's more of a 
maintenance situation where those guys--and you can't tell a 
farmer in Denmark a whole lot about feeding a pig that he 
doesn't already know.
    So you can't spend the same kind of money on that kind of 
program in Europe that you can, for instance, in Indonesia or 
Vietnam or Thailand or someplace like that. But we foresee the 
biggest growth is going to be in Asia.
    Chairman Crane. Mr. Fisher.
    Mr. Fisher. Well, in spring wheat in particular, and that 
catches most of the production in North Dakota and Minnesota, 
there is a vast and mature market in Europe that has now begun 
to grow again a bit with more specialty products and more 
attention to quality there again. But we've always felt that 
Latin America held a lot of promise, and we've worked hard to 
open phytosanitary discussions with the Brazilians, and, of 
course, that goes on. Almost weekly there's a new one, it 
seems.
    But for the very fact that there's a huge market there, 
we've always looked at Latin America as being a very important 
market as well, Mr. Chairman. I think at this time we have 
about a million tons of spring wheat sold to Europe and just 
shy of that to the Latin America markets at this point in the 
marketing year.
    Chairman Crane. Mr. Hamnes.
    Mr. Hamnes. I think Latin America is much more important in 
the long-term for us. We've got a growing market in Mexico, now 
close to our third largest importer or user of U.S. wheat.
    Brazil is also the largest buyer of wheat in the world, 
even though they buy most of their wheat from Argentina, but 
we're locked out of that wheat, not only by phytosanitary 
concerns that they have put up, but also by the MERCOSUR 
Agreement where they're able to import the wheat from Argentina 
with very little tariff, and so it's a growing market.
    I've had occasion to spend some time in South America, and 
it has great potential for us, and it's also so close to us, so 
we have a definite freight advantage to other areas.
    Chairman Crane. Mr. Tumbleson.
    Mr. Tumbleson. It's an interesting question, because you'd 
think it would be Latin America looking at it, and I think 
Latin America is important, but I spent two trips to Europe in 
the last year and a half. There is a concern over there whether 
they have the ability to farm. As you know in England now with 
the foot and mouth, they are thinking of making a tourist 
country, and other countries over there are thinking of the 
same thing.
    So it's an interesting thing when you look at it. You can't 
narrow it down to that concept, because, as I was saying 
before, as we break the kernel apart, the products we sell are 
going to be entirely different 20 years from now than they are 
today. So we have to look into the future and how we're going 
to sell them and where we're going to distribute them.
    We can't compete with Brazil, Argentina, and the Ukraine in 
raw grain. Their land costs are less. Their living costs are 
down. We can't do that. We will compete, though, in processing. 
Now we have to look where we sell those products.
    Chairman Crane. Thank you. Mr. Ramstad.
    Mr. Ramstad. Thank you again, Mr. Chairman. Thank you, 
gentlemen. All four of you represent the agricultural sector 
very well.
    I appreciate the Chairman agreeing to our friend Earl 
Pomeroy's request. He regretted he couldn't be here today, Mr. 
Fisher, but glad that you were added to the panel. Earl was the 
newest Member on the other side of the aisle of our Ways and 
Means Committee and a valuable addition, represents agriculture 
well, and so we're glad to see you here today.
    Let me just ask any or all of you whether you think a new 
round of the WTO is the best way to proceed with respect to 
Minnesota's position or North Dakota's in the agricultural 
sector. Do you think a new round of the WTO is the best way to 
go? Mr. Hamnes.
    Mr. Hamnes. Yes, I definitely think we do need a new round, 
and we've got to have rules to trade by, and that's what this 
is all about. And so if we get some rules, we'll do well in the 
trade.
    Mr. Ramstad. Anybody else?
    Mr. Joachim. Mr. Ramstad, we definitely think we need to 
proceed with the WTO because, for one thing, the circumstances 
change, the world changes, and we all have the goal of further 
liberalization for one thing, and there are certain 
inefficiencies and things that pop up over the life of the 
agreement.
    I guess the only concern of soybeans that we really have--I 
mean, we have plenty of concerns, but one concern we have is 
that agriculture doesn't get traded out for other issues, 
industrial issues or information issues or media kind of 
issues.
    Mr. Ramstad. Anybody else?
    Mr. Fisher. Mr. Ramstad, I would share the optimism, I 
guess, that Mr. Hamnes has shared with you already. U.S. Wheat 
Associates, which is our national organization, has spent 
considerable time in preparing for the WTO negotiations, 
actually selected what we call a WTO ambassador to carry our 
message there, and I think it would be tragic if we were not 
involved in the process.
    But we also share the concerns that the gentleman from the 
soybeans has just raised, and I think in the testimony that I 
presented earlier on the part of U.S. spring wheat producers in 
particular in the CUSTA, we felt that maybe we were traded off 
a bit for some of the other industries that may have had a 
little higher profile at the time.
    So that is a concern certainly in any of these 
negotiations, that we make sure that we're on solid footing and 
that we have a good negotiating position and then that maybe 
even we have a chance to correct some of the inequities that 
were allowed to pass in some of these earlier agreements as 
well. I think that's also an opportunity in the FTAA.
    Mr. Tumbleson. Yes, I think for the corn it's the same. We 
need the WTO. We need some form of something like that.
    As you know, in the last campaign for our presidential 
election, the statement was made that we can import our food 
cheaper than we can raise it. Now, think about that.
    As they move into a WTO, if you leave agriculture out of 
this, the only thing you have to remember: We're a renewable 
resource. We're a very efficient resource. We're the 
carbohydrate economy that's going to take over the hydrocarbon 
economy in time.
    So how you make these WTOs today is the 20- to 50-year 
thing that we have to be looking at. You and I might not be 
living then, but that's not what we're really here for anyway.
    Mr. Ramstad. Thank you again, gentlemen, for being here, 
for your excellent testimony, and I can assure you, we will 
share it with the rest of our Subcommittee and Committee. Thank 
you.
    Chairman Crane. Absolutely. Thank you all. We look forward 
to working with you on a continuous basis too. And with that, 
the hearing stands adjourned.
    [Whereupon, at 3:30 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

                          Statement of AdvaMed

    AdvaMed represents over 800 of the world's leading medical 
technology innovators and manufacturers of medical devices, diagnostic 
products and medical information systems. Our members are devoted to 
the development of new technologies that allow patients to lead longer, 
healthier, and more productive lives. Together, our members manufacture 
nearly 90 percent of the $71 billion in life-enhancing health care 
technology products purchased annually in the United States, as well as 
50 percent of the $165 billion in medical technology products purchased 
globally. Our industry currently enjoys a trade surplus of $7.1 billion 
vis-a-vis our trading partners.
    Minnesota is home to many of the U.S. medical technology companies, 
and our sector is a vital employer and contributor to the state's 
vibrant economy. We appreciate the Committee's willingness to go out to 
a state with one of the largest concentrations of medical device 
manufacturers to hear directly from them about the importance of 
international trade to their overall strength and future growth as an 
industry.

The Benefits of International Trade
    The medical technology industry relies heavily on, and benefits 
greatly from the ability to compete internationally. International 
trade opportunities allow U.S. firms to reach patients beyond our 
borders, where some 96% of the world's population lives. Many of the 
jobs at U.S. medical device manufacturers, and certainly most of the 
new job creation in our sector, are tied to new product development and 
product introductions outside the United States.
    The medical technology industry has historically benefited from 
U.S. trade policy that strives to open markets around the world. U.S. 
trade agreements have helped to reduce or eliminate tariff and non-
tariff trade barriers; contributed to greater transparency and 
predictability; and most importantly, have improved patient access to 
innovative, life-enhancing and cost saving medical technologies in key 
markets around the globe.
    The dynamic pace of innovation in the U.S. medical technology 
industry, coupled with an effective U.S. trade policy, has created a 
more than $7 billion trade surplus in our sector with our trading 
partners.

The International Benefits of Medical Innovations
    Innovative medical technologies offer an important solution for 
industrialized nations, including Japan and European Union members that 
face serious health care budget constraints and the demands of aging 
populations. Advanced medical technology can not only save and improve 
patients' lives, but also lower health care costs, improve the 
efficiency of the health care delivery system, and improve productivity 
by allowing people to return to work sooner.
    However, when regulatory policies and payment systems for medical 
technology are complex, non-transparent, or overly burdensome, they can 
significantly delay or deny patient access to the latest, state-of-the-
art innovations. They can also serve as non-tariff barriers, preventing 
U.S. products from reaching patients in need of innovative health care 
treatments.
    AdvaMed believes the USTR, Department of Commerce (DOC) and 
Congress should monitor regulatory, technology assessment and 
reimbursement policies in foreign health care systems and push for the 
creation or maintenance of transparent assessment processes and the 
opportunity for industry participation in decision making. We look to 
the Administration and Congress to actively oppose excessive 
regulation, government price controls and arbitrary, across-the-board 
reimbursement cuts imposed on foreign medical devices and diagnostics.
    The industry also supports additional multilateral, regional, and 
bilateral trade initiatives and agreements to further reduce 
international barriers to trade, including the World Trade Organization 
(WTO), Free Trade Area of the Americas (FTAA), the Asia Pacific 
Economic Cooperation forum (APEC) and the Transatlantic Business 
Dialogue (TABD). To negotiate future trade agreements, the industry 
also supports the extension of presidential trade promotion authority. 
In addition, the Enhanced Initiative with Japan, through which USTR and 
Commerce are able to address problems for certain industries operating 
in Japan, is scheduled to expire this spring. It has been an effective 
tool that the medical technology sector, along with other specific 
industries, strongly supports. We strongly encourage the U.S. 
Government to renew this sector specific initiative.

Multilateral Opportunities Should be Utilized to Establish Basic 
        Principles to Expand Global Trade and Patient Access to New 
        Technologies
    A primary goal of all economies is to provide high quality, cost 
effective healthcare products and services to all citizens. Another 
mission is to ensure their citizens have timely access to state-of-the-
art, life-saving equipment and that compliance procedures are efficient 
and effective. To further expand patient access to safe and effective 
medical devices and ensure cost effective regulatory compliance, USTR 
should seek to ensure that regulatory agencies around the world make 
their policies and practices conform to the relevant and appropriate 
international trading rules established by the WTO.
    Toward that end, member economies should agree to make their 
medical device regulatory regimes conform to these guiding principles:

   Acceptance of International Standards;
   Conformity/Provision of Transparency and National Treatment;
   Use of Harmonized Quality or Good Manufacturing Practice 
        Inspections;
   Recognition of Others Product Approvals (or the Data Used 
        for Those Approvals);
   Development of Harmonized Auditing and Vigilance Reporting 
        Rules;
   Use of Non-Governmental Accredited Expert Third Parties 
        Bodies for Inspections and Approvals, where possible.

    Similarly, many economies require purchases of medical technologies 
to take place through centralized and/or government-administered 
insurance reimbursement systems. To ensure timely patient access to 
advanced medical technologies supplied by foreign as well as domestic 
sources, member economies should agree to adopt these guiding 
principles regarding the reimbursement of medical technologies:

   Establish clear and transparent rules for decision-making;
   Develop reasonable time frames for decision-making;
   Data requirements should be sensitive to the medical 
        innovation process;
   Ensure balanced opportunity for the primary suppliers and 
        developers of technology to participate in decision-making, 
        e.g., national treatment.
   Establish meaningful appeals processes.

Key Markets: Japan and Europe
    Efforts to oversee foreign policies impacting the export and sale 
of U.S. medical devices abroad should primarily focus on our two 
largest foreign markets, Japan and the European Union (EU). After the 
U.S., Japan is by far the largest global market for medical 
technologies ($24 billion) followed by Germany ($16 billion) and France 
($7 billion.) U.S. manufacturers annually export over $2 billion to 
Japan and manufacture another $6.5 billion in the region for the 
Japanese market. Our trade surplus with Japan is an impressive $1.3 
billion. We believe that this statistic is a good indicator our 
industry's global competitiveness in the field of medical technology 
and it strongly underscores the importance of critical ongoing efforts 
with the U.S. government to open the Japanese market further to cost-
saving and life-enhancing medical technologies. U.S. manufacturers also 
export nearly $8 billion annually to the EU and maintain a $3.6 billion 
trade surplus with the EU.

Japan
    Japan is the largest market for medical technologies outside the 
U.S. It is also one of the most challenging for our industry. Access to 
their market is key for the medical technology industry.
    The establishment and rigorous enforcement of medical device trade 
agreements has lead to a 500% increase in U.S. medical technology 
exports to Japan between 1987 and 2000. U.S. policy helped turn a $100 
million medical technology trade deficit in 1987 to a $1.1 billion 
trade surplus in 2000!
    Continued oversight has been necessary along the way. In 1999, our 
industry was prepared to file a 301 against Japan, until the U.S. 
government was able to negotiate an agreement with Japan to allow for 
the more timely adoption and integration of new medical technologies 
into their healthcare market.
    Recent Japanese government policies and initiatives potentially 
threaten to undermine U.S. industry access to, and our presence in, the 
Japanese market. The medical technology sector could greatly benefit 
from additional oversight and aggressive enforcement of agreements in 
Japan today. Japan has failed to fulfill some of these important trade 
agreement commitments to reform its rules for new technology 
reimbursement and regulation. Rather, the government of Japan has used 
arbitrary means to reduce technology prices and has slowed the 
introduction of new products as a means to contain overall 
expenditures.
    In addition, there is an immediate, discriminatory threat in the 
Japanese government plan to introduce ``foreign reference pricing'' in 
the price-setting process. Basing prices in Japan on prices in other 
markets fails to capture the significant and unique costs of doing 
business in Japan.
    Japan's average hospital length-of-stay being 30 days (compared to 
6 in the U.S.). Failing to adopt new technologies is not only 
troublesome for U.S. manufacturers, it also hinders greater system-wide 
efficiency or enhanced quality of care in the Japanese health system. 
Fully utilizing new medical technology can actually improve the 
financial health and productivity of their system--especially given 
their rapidly aging and shrinking population.
    Just as in the past, U.S. trade leadership can help address these 
problems. Enforcement of previous trade agreements can require Japan to 
take certain agreed upon steps in an expeditious manner, including:

   Reducing the two-plus year delay in access to brand-new 
        technologies by establishing a process and timeframe for 
        granting provisional coverage and pricing, as well as a method 
        for establishing ``final'' reimbursement listing.
   Establishing clear-cut criteria and processes for creating 
        new reimbursement categories and ``final'' pricing for next 
        generation products.
   Abiding by the required government-industry consultations 
        process established in the 1986 MOSS trade agreement when 
        proposing major changes to either the reimbursement or 
        regulatory processes.
Europe: Seek Appropriate Policies That Improve Patient Access to 
        Innovative Medical Technologies
    In the EU, enforcement of current trade agreements is key. The 
U.S.-EU Mutual Recognition Agreement (MRA) must be fully implemented. 
Bringing healthcare products to the market faster is an important 
priority consistent with the protection of public health and the 
reduction of regulatory costs and redundancy. The European Commission 
(CEC) should be encouraged to take all proper measures to ensure that 
the MRA is operational by January 2002, when the current three-year 
transitional period is scheduled to end.
    In addition, European Member States should be encouraged to adopt 
policies for their health technology assessment (HTA) decisions 
affecting medical technologies that are transparent and timely, and 
industry participation should be allowed. U.S. firms, as the leaders in 
innovative medical technologies, stand to suffer disproportionately 
from unnecessarily long delays in HTA decisions in Europe. The CEC 
should ensure that the EU Medical Devices Directives are implemented 
uniformly by the Member States. Uniform implementation of the Devices 
Directives is essential to the furtherance of the European Single 
Market--a concept strongly advocated by the TABD. To the extent that 
additional regulatory requirements are deemed necessary in Europe, 
Member State must be advised to consult with industry in advance and to 
ensure that such requirements are consistent with the objectives of 
global harmonization.
    AdvaMed supports the Safe Harbor agreement struck between the EU 
and U.S.--an agreement that promises the uninterrupted data flow from 
the EU to the U.S. The agreement, reached in response to the 1995 EU 
Data Privacy Directive, provides additional flexibility (along with 
specific data privacy contracts or compliance with the actual directive 
itself) for U.S. firms to continue to receive data from EU-based 
companies. AdvaMed and its member companies look forward to working 
with both sides on implementing the agreement in such a way that 
supports transatlantic business and economic activities and, in 
particular, supports industry's efforts to research, develop, and bring 
to market medical technologies that offer great promise for patients on 
both sides of the Atlantic.
Conclusion
    AdvaMed appreciates the interest of the Committee in our sector, 
and the many ways in which international trade can benefit it. Our 
industry can also benefit the international community with products 
that save and enhance lives, reduce overall health care costs and 
improve productivity in health care systems. We look forward to working 
with this Committee, the Congress and the Administration to further 
reduce barriers to patient access to technology worldwide.
                               __________
  Statement of Paul Webster, American Forest & Paper Association, and 
                 Webster Industries, Wayzata, Minnesota

    My name is Paul Webster, President of Webster Industries located in 
Wayzata, Minnesota. I am submitting this testimony on behalf of Webster 
Industries, as well as the American Forest & Paper Association, of 
which my company is an active member.
    The American Forest & Paper Association is the national trade 
association of the forest, pulp, paper, paperboard and wood products 
industry. This vital national industry accounts for 7% of total U.S. 
manufacturing output. It employs approximately 1.7 million people, with 
an annual estimated payroll of $51 billion, and sales in excess of $250 
billion.
    I am pleased to have this opportunity to submit this testimony on 
the benefits of trade to the agricultural sector, and in particular, to 
the U.S. forest products industry. For the U.S. forest products 
industry, the answer is simple. Exports mean jobs--and jobs that exist 
often in small or rural communities across the country. In Minnesota 
alone, the forest products industry employs over 266,000 people with an 
annual payroll that exceeds $8.4 billion.
    For my company and others in the U.S. forest products industry, the 
premise that the U.S. has fallen behind in gaining market access for 
its manufacturers--and that U.S. exporters and their workers are facing 
discriminatory customs tariffs as a result--is, unfortunately, a 
painful fact of everyday life.
    Our sector is being battered by cheap imports while at the same 
time the products where we have a comparative advantage--value-added 
wood products--are shut out of some key markets due to tariff and non-
tariff barriers.
    As U.S. export markets for most solid wood products have declined 
over the past several years, wood imports into the U.S. have surged, 
increasing the negative balance of trade in solid wood products to $10 
billion in 1999. Between 1990 and the year 2000, the U.S. moved from 
being the world's largest solid wood exporter to the world's largest 
importer. Given the trillion-dollar U.S. housing market, the strong 
U.S. dollar, and the lack of barriers to import into the United States, 
the U.S. market has become the target of choice for overseas wood 
suppliers.
    At the same time, we face substantial trade barriers in the export 
of higher value wood products produced in the U.S. These barriers are 
even more significant when coupled with the expansion of plantations 
and mill capacity in Europe, South America and Oceania. As a direct 
result, the U.S. share among major wood exporters has fallen from 18 
percent in 1997 to 16 percent in 1999 and employment associated with 
the production of lumber and wood products fell from 831,000 in 
December 1999 to 788,000 in March 2001, a decline of 5.2%.
    For the U.S. forest products industry, it is easy to see how we got 
here. Going into the Uruguay Round of trade negotiations, our industry 
was the first to propose a zero for zero tariff concept because we 
recognized three things about the future direction of our industry:

   Although we were then one of America's most globally 
        competitive industries, exports would be an increasingly 
        important component of our business.
   Although developed country producers and markets still 
        dominated, the real growth--in terms of demand and capacity 
        expansion--would be shifting to developing countries.
   As our industry globalized, surviving companies would be 
        those capable of serving global markets with minimized 
        transactions costs.

    With virtually all U.S. tariffs on wood and paper products already 
reduced to zero, this meant that the future competitiveness of the 
U.S.-based forest products industry depended on the elimination of all 
overseas tariff barriers on our products.
    Regrettably, the U.S. was not able to fully achieve this objective 
in the Uruguay Round. The Japanese refused to eliminate wood tariffs, 
so other participants in the Uruguay Round would not go beyond a one-
third formula cut, and most developing countries made no tariff cutting 
commitments of any kind.
    The result in terms of the competitive landscape for our industry 
has been that the tariff inequity we attempted to eliminate in the 
Uruguay Round has only gotten worse over time:

   With impressive new capacity now coming on line, developing 
        country suppliers are taking full advantage of the U.S. zero 
        tariff to cut into our domestic sales base.
   Competitors are negotiating preferential trade arrangements 
        and cutting into our share of existing export markets.

    Let me offer my own experience of what this means to Webster 
Industries. Our company has watched a steady decline in our export 
hardwood business in the Japanese market over the past 4 years, because 
of three specific things that we have no control over as an U.S. 
exporter:
    1. Strong dollar--weak yen.
    2. Substantial tariffs on our hardwood exports to Japan.
    3. Strong hardwood shipments from the former eastern block 
countries to Japan that don't encounter the high trade barriers and 
tariffs that U.S. hardwood manufacturers do.
    To take another example: In 1997, when Canada concluded its Free 
Trade Agreement with Chile, virtually all Canadian wood and paper 
products received duty free treatment immediately on implementation. 
The effect on U.S. wood and paper sales was immediate and devastating.

   Chilean imports of Canadian forest products increased 33% in 
        1998 as their FTA was implemented. U.S. exports of wood 
        products to Chile declined by 25% over the same period. At the 
        same time, free access to products to the U.S. from $16 million 
        in 1988 to over $420 million in 1999.

What needs to be done?
    First, we urge the Administration to move rapidly to conclude the 
FTA agreement with Chile and in particular, to ensure that all tariffs 
on U.S. wood and paper products will be reduced to zero immediately on 
implementation. The mandate for U.S. negotiators must make it clear 
that the priority objective must be to achieve immediate parity with 
our Canadian competitors. The U.S. cannot accept an agreement that 
prolongs the period during which our country's forest products are 
treated less favorably than those of our Canadian competitors.
    Second, the Administration must work with Hemisphere trading 
partners to accelerate the timetable for conclusion of a Free Trade 
Area of the Americas (FTAA), and to advance the date when concrete 
results can be realized. The U.S. catch-up strategy for market access 
must include the concept of early deliverables in selected sectors--
including forest products.
    Third, the Administration must revitalize the trade liberalization 
dimension in our relationship with the countries of the Asia Pacific 
region, and especially the initiative to achieve zero tariffs in 
selected sectors known as Early Voluntary Sectoral Liberalization 
(EVSL), or Accelerated Tariff Liberalization (ATL). The U.S. must not 
allow Japanese obstructionism to block regional trade liberalization. 
We must make it clear that we will proceed with partners willing to 
work with us--including New Zealand, Australia, China and Singapore.
    Fourth, the U.S. should look opportunistically at the FTA's 
concluded by our major competitors. We must identify those markets 
where there is a substantial competitive challenge to the U.S. and move 
quickly to restore the balance of competitive opportunity. The recent 
announcement of a possible FTA with Korea is strongly supported by our 
industry as value-added product exports are currently blocked by high 
tariffs.
    Fifth, we agree that the WTO and multilateral negotiations offer 
the best, most direct route to achieving barrier-free market access on 
a global scale. So the U.S. must continue to press for the launch of 
industrial tariff negotiations, including early sectoral tariff 
liberalization, without defining a specific relationship to a possible 
New Round. In doing so, however, we must learn from the experience of 
the past four years and not allow the advent of a possible Round to 
exercise a chilling effect on negotiations in other fora.
    Sixth, we strongly support new fast track negotiating authority for 
the President and urge Congress to enact Trade Promotion Authority 
(TPA) legislation at the earliest possible time. Without strong and 
flexible negotiating authority, U.S. negotiators do not have all the 
tools--or Congressional imperative--needed to address our industry's 
tariff disparity problems. The Administration must have the authority 
to conclude a range of trade negotiations (multilateral, regional and 
bilateral) in a way that is credible to trading partners.
    Finally, Congress needs to ensure the future support for U.S. 
agricultural exports. The U.S. forest products industry has relied on 
its partnership with the U.S. Department of Agriculture's Market Access 
Program (MAP) and Foreign Market Development Cooperator program (FMD) 
to aggressively market U.S. wood products overseas for over a decade. 
The industry has united behind a global strategy to level the playing 
field for U.S. wood products internationally through a combined effort 
to eliminate market access barriers and promote the benefits of U.S. 
wood. We are not alone in this effort--many agriculture-based groups 
use these programs to develop new markets and to maintain and expand 
existing markets.
    The generic, promotion-based activities associated with these 
programs are, and will continue to be, essential for the U.S. forest 
products industry to improve its market share overseas, and thus it is 
essential that Congress adequately authorize funding for these 
programs. This is particularly important as our major competitor in 
agricultural exports, the European Union, is outspending the U.S. by a 
ratio of at least 10 : 1 in export promotion programs. These programs 
can continue to help counteract market access problems and grow markets 
for the future. For example, U.S. hardwood product exports have grown 
from less than $500 million in 1987 to over $2 billion in 2000. This 
export performance is important to the industry since while exports 
account for roughly 7%-8% of U.S. hardwood production by volume, that 
figure is closer to 13% by value. The MAP and FMD programs have been 
instrumental in bringing many small mills, such as my own, to the 
export market and have grown the pie for the industry as a whole.
    Looking toward the 2002 Farm Bill, our industry is supportive of 
seeing both the MAP and FMD programs re-authorized, at least at current 
levels--MAP--$90 million/year; FMD--at least $35 million/year. There 
have also been a number of discussions about increasing the budgets for 
these programs from the levels at which they are currently authorized, 
accounting for inflation and increased costs of conducting programs 
overseas. We support this increase.
    Over the decade of the nineties, companies like Webster Industries 
and others in the U.S. forest products sector have made the difficult 
decisions necessary to ensure we can compete in the global marketplace. 
However, unless the U.S. can move quickly to allow us the same 
unfettered access to export markets that our competitors enjoy here, we 
as a nation will squander our remarkable competitive advantage and 
jeopardize our economic prosperity. We owe it to our workers and to our 
communities to make sure that does not happen.

                                

   Statement of the Boston Scientific Corporation, Natick, Minnesota
Introduction
    Boston Scientific is a global leader in less invasive medicine. 
With 14,000 employees worldwide, 15 technology centers and direct 
marketing and sales operations in 40 countries, Boston Scientific has 
product offerings that span multiple clinical specialties:

   Electrophysiology
   Endoscopy
   Endourology
   Interventional Cardiology
   Interventional Neuroradiology
   Interventional Radiology
   Oncology
   Vascular Surgery

    As a global competitor in healthcare markets, Boston Scientific 
Corporation (BSC) strongly supports basic principles of free trade in 
medical devices. Tariff and non-tariff barriers to medical device 
imports increase the cost of products that save lives. Many countries 
in the world are facing fiscal pressures in their health care 
industries. BSC believes that a reduction in barriers to trade--with 
the corresponding effects of increasing efficiencies, reducing costs, 
and increasing quality of care--is a key component of reducing overall 
health care costs.
    BSC is greatly appreciative of the ongoing efforts of the House 
Ways and Means Subcommittee on Trade to support free trade principles, 
and to identify and rectify barriers to free trade.
    BSC is therefore concerned to find that in an era of economic 
growth and deregulation, some countries are effectively increasing 
barriers to trade. These barriers may take the form of tariffs, but in 
the modern trade context, many of these barriers are of the non-tariff 
variety. BSC increasingly finds that regulatory mechanisms of 
government are used in a manner that creates unnecessary obstacles to 
trade.

Trade Concerns in Japan
    BSC would like to take this opportunity to draw the Subcommittee's 
attention to Japan as an example of a country in which we have 
traditionally had significant market access problems, and where a new 
regulatory initiative in the healthcare system may undermine the 
progress that has been made by our trade negotiators in recent years.
    As is the case with other countries, Japan is faced with managing 
the growth of their public budget for health care, a sluggish economy, 
an aging population, and coping with increased calls for restructuring 
a relatively inefficient care delivery system. The Japanese government 
has identified pharmaceutical and medical device components of the 
national health budget as significant budget growth areas that must be 
managed more aggressively. However, unlike the pharmaceutical industry, 
the medical device sector in Japan does not have a strong base of 
political support, making it a target for cost-cutting measures out of 
proportion to its share of total Japanese health care expenditures. We 
are especially concerned that any new regulatory pricing scheme will 
fail to properly distinguish between the pharmaceutical and medical 
device markets. The medical device market differs significantly from 
the pharmaceutical market, making reference pricing concepts, used 
occasionally for pricing pharmaceuticals, especially problematic. For 
instance, unlike pharmaceuticals, medical devices do not enjoy long-
term patent protection, have a short product cycle marked by rapid 
obsolescence, and frequently target a niche market.
    The United States and Japan have been discussing market access for 
medical equipment at a significant negotiation level since 1986, 
through the Market-Oriented, Sector-Selective (MOSS) Discussions. More 
recently, the United States and Japan have engaged in discussions on 
similar issues through the Enhanced Initiative on Deregulation and 
Competition Policy (Enhanced Initiative). While these talks have been 
productive in some aspects, market access in Japan remains replete with 
obstacles. For that reason, the U.S. industry in 1999 threatened to 
file for action under ``Section 301'' to seek a reduction of these 
barriers. The industry withdrew its request for the investigation when 
the United States and Japan reached an agreement that called for Japan 
to make significant changes to its approval, coverage, and payment 
policies for medical devices.

Regulatory Barriers for Medical Devices in Japan
    Regulatory reviews: First, regulatory review and approval of 
medical devices in Japan remains a thorny issue, and we urge the U.S. 
government to continue to press Japan for improvement. While these 
negotiations have produced some tangible benefits, including steps to 
reduce redundant medical device reviews, BSC is concerned that some of 
these changes have not gone far enough, and others may create new 
problems as well. It still takes over two years for breakthrough 
technology (C-2) products to be eligible for reimbursement in Japan. 
Moreover, under the new policy, some devices that have been approved 
under one category subject to a four-month review may now be subject to 
a one-year review period.
    Second, room for improvement also exists in the product safety 
review and classification system. Japan should clarify definitions and 
criteria, offer an improved ``pre-submission consultations'' process 
and a submissions ``checklist,'' use harmonized international 
standards, and conduct regular ``real time'' reviews with applicants, 
as set forth under the 1999 agreement.
    Transparency: Third, transparency has proven to be another source 
of concern, particularly in the area of reimbursement. Japan has 
already promised to reduce the excessive time it takes to cover and 
reimburse new technologies. Under this agreement, Japan should adopt 
appropriate policies for ``next generation'' and brand-new-to-Japan 
products. For ``next generation'' products, Japan should articulate the 
criteria and process for establishing new product reimbursement 
categories and establish a ``final'' price by the next biannual price 
revision. For ``brand-new-to-Japan'' products, Japan should establish a 
process and timeframe for granting provisional coverage, reimbursement, 
and access to new medical technology, and final prices should be set in 
a reasonable timeframe.
    Proposed Pricing Changes: Last, and of immediate concern, a 
potential change in the government's pricing of medical devices has 
become a major issue in Japan's efforts to manage health care costs. 
The Japanese government has identified as a key issue price differences 
for the same or similar products between Japanese and non-Japanese 
markets. The government believes that higher prices in Japan for 
medical devices are an important driver of overall budgetary growth. 
Four medical device areas have been singled out for pricing 
readjustment: PTA and PTCA balloon catheters; thermodilution catheters; 
implantable cardiac rhythm management devices; and orthopedic implants. 
There is increasing evidence that the Japanese government may propose 
to price devices sold in Japan at levels derived from prices of those 
devices in other countries, without regard for the economics of 
significant underlying differences in the healthcare sectors that lead 
to legitimate price differentials across countries.
    BSC considers Japan's proposal to adopt ``foreign reference 
pricing'' to be a step backward. The exact methodology to be adopted is 
uncertain, but BSC expects that the final system will disadvantage 
these and potentially other product classes. Many Japanese devices are 
not sold in other markets, so that ``foreign reference pricing'' may 
ultimately discriminate against imports. The proposal may indeed 
violate the ``national treatment'' principle, a cornerstone of the 
General Agreement on Tariffs and Trade that seeks to prevent countries 
from discriminating against foreign products in favor of the like 
domestic product.
    BSC also believes that the Japanese proposal should be evaluated in 
light of the World Trade Organization's Agreement on Technical Barriers 
to Trade (TBT Agreement), which establishes the procedures that must be 
followed when regulatory decisions affecting goods such as medical 
devices are adopted. For example, the TBT Agreement requires that 
technical regulations not be ``more trade-restrictive than necessary to 
fulfill a legitimate objective'' and urges members to use relevant 
international standards where they exist, as well as to give positive 
consideration to accepting as equivalent technical regulations of other 
WTO members.
    Recent information suggests that final recommendations on pricing 
methods will be made during the July to August 2001 timeframe, with a 
formal announcement by October 2001. Final implementation is expected 
in 2002. BSC urges the U.S. government to weigh in to ensure that any 
pricing regime that is adopted does not discriminate against imports.
    One of the main achievements of the MOSS trade agreement was the 
Japanese government's commitment to consult with the U.S. government 
and the U.S. industry whenever changes to the regulatory environment 
were set to have a substantial impact on U.S. industry. While Japan has 
generally honored this commitment, its recent policy to cut prices 
using arbitrary means, such as reducing the number of product 
reimbursement categories, and by slowing approval and reimbursement of 
innovative U.S.-made devices, is not consistent with its consultative 
commitment.
    Historically, Japan has made promises during trade negotiations 
that have not always been implemented. Aside from petitioning for a 
Section 301 investigation when Japan obstructs market access for 
American products, the only way to ensure that Japan abides by the 
letter and spirit of its commitments is for the U.S. government to 
continue to press the government to implement its obligations.

Recommendation
    BSC urges the Members of this Subcommittee, as well as key 
officials in the Administration, to impress upon Japan the full measure 
of our commitment to see to it that market access is improved in real 
terms in the medical device sector. This issue is an appropriate 
subject for discussion in all available trade fora, including the APEC 
Senior Officials' meeting at the end of this month, the APEC trade 
ministers' meeting next month, and the G-8 Summit. Further, if the Quad 
countries get together to discuss the next WTO round, this topic should 
be raised again.
    In short, we must make it clear to Japan that a mere nod to 
deregulation and transparency is insufficient: Positive changes to 
create genuinely open and competitive markets must be implemented.
    BSC thanks the Subcommittee again for the opportunity to present 
its views on trade and medical technology. We would be happy to follow-
up with Subcommittee Members and staff if any further information is 
required: please contact Randel Richner, VP Reimbursement and Outcomes 
Planning, 508-647-2611

                                

 Statement of Gene Hugoson, Minnesota Department of Agriculture, Saint 
                            Paul, Minnesota

    Minnesota farmers are among the world's best when it comes to 
producing corn, soybeans and other commodities. Our fertile soil and 
favorable growing conditions help us produce crops that are the envy of 
farmers around the world. However, Minnesota's 5 million people consume 
far less than our farmers grow. As a result, much of our farm 
production must be sold to consumers in other states and countries.
    International exports are especially important for us. Each year, 
Minnesota farmers export a third of their corn crop, half of their 
soybean crop, and a third of their wheat crop. According to the U.S. 
Department of Agriculture, Minnesota is the seventh biggest 
agricultural exporter and the ninth most export-dependent among all 50 
states.
    The USDA also reports that Minnesota farm exports support more than 
44,000 jobs both on the farm and off the farm in processing, storage 
and transportation businesses. Measured as a function of exports 
divided by total farm cash receipts, Minnesota's reliance on exports 
rose from 24 percent to 32 percent since 1991.
    The picture is much the same for the country as a whole. 
Nationwide, agriculture is more than twice as export-dependent as the 
rest of the economy. A quick look at the numbers tells the story: U.S. 
farmers produce 41 percent of the world's corn, 47 percent of the 
world's soybeans and 12 percent of the world's wheat, but we have only 
4 percent of the world's population. As tough as the current economic 
climate is for farmers, it would be a whole lot tougher if we couldn't 
export.
    On a more personal level, agricultural exports play a major role in 
determining the price each farmer gets for his or her crops. In 1995, 
U.S. farmers exported $54.7 billion in farm goods. In 1996, they 
exported $59.9 billion. During this time of strong international trade, 
Minnesota corn prices rose to $3.95 per bushel and Minnesota soybean 
prices soared to a peak of $8.23 per bushel.
    However, the picture changed dramatically when the Asian economic 
crisis hit in the summer of 1997. As the financial meltdown caused 
foreign countries to cut back on their import of American farm 
products, U.S. grain stockpiles rose and prices dropped. In 1998, U.S. 
farm exports dropped to $53.7 billion and by 1999, exports had sagged 
to just $49 billion. In that same time, Minnesota corn prices dropped 
below $2 per bushel. By August 2000, Minnesota corn prices had sunk to 
$1.40 per bushel--just 35 percent of what the price had been four years 
earlier.
    Some critics dismiss the positive impact of free trade on 
agriculture, saying only large agribusinesses such as Cargill ever see 
the benefits. However, there are many examples of small to medium sized 
farm families and businesses that have directly benefited from 
expanding foreign trade opportunities.
    One excellent example is Kaehler's Homedale Farms, owned and 
operated by Ralph and Frank Kaehler of St. Charles, Minnesota. These 
two brothers, along with 19 other independent cattle breeders, recently 
exported 150 head of beef breeding stock to the Yunnan Province of 
China. Kaehler says he and his partners fared very well in the deal. In 
addition to selling stock at a very good price, the Chinese deal helped 
the Minnesota and North Dakota ranchers by attracting international 
attention to their high-quality breeding stock.
    There are other examples of Minnesota producers who have benefited 
from international trade. In November 1999, Ellison Meat Company of 
Pipestone signed a major export agreement with Nichimen Corporation, a 
large, diversified company that distributes pork to restaurants and 
retailers throughout Japan. The agreement calls for exporting nearly 
100 metric tons per month of premium pork center loins and other 
processed pork products to Japan.
    Ellison is owned by a group of nearly 80 southwest Minnesota family 
farm pork producers. The farmers are part of the unique Pipestone 
System, in which farmers jointly own and operate breeding and farrowing 
facilities, but raise the hogs to market weight at their own family 
farms.
    Bob Newgord of Sleepy Eye, Minnesota, owns and operates Tri-State 
Seed & Ag, Inc., which primarily trades waxy corn seeds. Two years ago 
Chinese contacts asked him to supply seeds to Changchun, a major city 
in Northeast China. The city apparently had built a large specialty 
corn processing plant, and the Chinese wanted to supply the seed to 
nearby farmers so they could grow the waxy corn needed to supply the 
plant.
    Last year, Newgord supplied Changchun with a few bags to try out. 
Subsequently, he sold them 4 metric tons of seed and the Chinese have 
expressed interest in purchasing up to 40 metric tons of seed.
    To help generate more of these sorts of success stories, states and 
the federal government must work together. Here in Minnesota, one of 
Governor Jesse Ventura's top priorities is to help boost the 
competitive ability of our farmers by reducing their regulatory and tax 
burdens. We are also working hard to introduce Minnesota producers and 
agribusinesses to potential foreign customers, but we cannot do it 
alone.
    We need the federal government to help us by opening new markets 
and leveling the playing field in existing markets. With that in mind, 
the new Bush Administration deserves credit for placing emphasis on 
developing trade ties between America and other countries. 
Specifically, the administration should be supported in its pursuit of 
Trade Promotion Authority (formerly known as ``Fast-Track''), which 
will help us expedite new trade deals with foreign customers. I 
encourage Congress to take action to give President Bush this 
authority.
    I also encourage Congress to support the Bush Administration's 
attempts to level the playing field between America and our top trading 
partners during future rounds of World Trade Organization negotiations. 
Right now, there is a sharp disparity in the level of our partners' 
trade distorting domestic support. While the U.S. currently has $19 
billion in trade-distorting supports as defined by the World Trade 
Organization, Japan has $35 billion and the European Union has $68 
billion. Those higher levels of domestic support in Japan and Europe 
mean that our farmers have a strike against them before they even step 
up to the plate. These disparities must be reduced to allow our farm 
exporters to enjoy the type of access America gives other nations' 
exporters.
    There is no doubt that we live in an increasingly global economy, 
whether we like it or not. Given that our farmers produce much more 
than our citizens can consume, it is absolutely essential that Congress 
and the federal government do everything possible to ensure that our 
farmers have full and fair access to the world's markets. After all, 96 
percent of our potential customers are outside America's borders. We 
cannot afford to ignore them.

                                

Statement of Karl Johnson, Minnesota Pork Producers Association, North 
                           Mankato, Minnesota
    Mr. Chairman and members of the Subcommittee: I am Karl Johnson, a 
pork producer from Mankato, Minnesota. I am the past President of the 
Minnesota Pork Producers Association and the National Pork Producers 
Council. I have also been active for a number of years at the local, 
state and national level with the pork producer's organization. I very 
much appreciate the opportunity to appear here on behalf of U.S. pork 
producers to express our views on the importance of continued trade 
liberalization.

I. INTRODUCTION
    The National Pork Producers Council is a national association 
representing 44 affiliated states that annually generate approximately 
$11 billion in farm gate sales. According to a recent Iowa State study 
conducted by Otto and Lawrence, the U.S. pork industry supports an 
estimated 600,000 domestic jobs and generates more than $64 billion 
annually in total economic activity. With 10,988,850 litters being fed 
out annually, U.S. pork producers consume 1.065 billion bushels of corn 
valued at $2.558 billion. Feed supplements and additives represent 
another $2.522 billion of purchased inputs from U.S. suppliers which 
help support U.S. soybean prices, the U.S. soybean processing industry, 
local elevators and transportation services based in rural areas.
    Minnesota has an 11.5% national market share of pork production at 
the farm level. Approximately 60% of Minnesota farm level production is 
processed within the state with the remainder almost exclusively going 
to Iowa and South Dakota.
    Minnesota pork produces are also directly impacted in a positive 
way by increased trade. For example, scores of small and medium size 
producers within the state are involved in Berkshire programs with 
almost 100% of their production exported directly to Japan. Our two in 
state packers also export around the world. 80% of the pork produced in 
Minnesota must leave the state to be consumed. Obviously much of it is 
consumed within the U.S., but exports out of the U.S. are more and more 
important.
    Pork is the world's meat of choice. Pork represents 47 percent of 
daily meat protein intake in the world. (Beef and poultry each 
represent less than 30 percent of daily global meat protein intake.) As 
the world moves from grain based diets to meat based diets, U.S. 
exports of safe, high-quality and affordable pork will increase because 
economic and environmental factors dictate that pork be produced 
largely in grain surplus areas and, for the most part, imported in 
grain deficit areas. However, the extent of the increase in global pork 
trade--and the lower consumer prices in importing nations and the 
higher quality products associated with such trade--will depend 
substantially on continued agricultural trade liberalization.
    U.S. pork producers were ardent proponents of the Uruguay Round 
Agreement and the North American Free Trade Agreement. The industry 
strongly supports further trade liberalization measures. As the low-
cost producers of safe, high-quality pork, these trade agreements 
permit U.S. pork producers to exploit their comparative advantage in 
international markets. However, even with the progress made in the 
Uruguay Round, much more needs to be done. The U.S. pork industry still 
is either locked out of many markets, or has only partial access to 
markets, due to high tariffs, non-tariff trade barriers, and subsidized 
competition.

II. TRADE PROMOTION AUTHORITY SHOULD BE RENEWED
    U.S. pork producers are major beneficiaries of the Uruguay Round 
Agreement and NAFTA. Our industry needs prompt renewal of trade 
promotion authority so that further trade agreements may be 
consummated. These trade agreements permit U.S. pork producers to 
exploit their comparative advantage in international markets. The 
future of the pork industry rests, in large part, on the ability to 
expand exports.
    Since 1995, when the Uruguay Round Agreement went into effect, U.S. 
pork exports to the world have increased 100 percent in volume terms 
and 108 percent in value terms. In 2000 the U.S. exported a record 
568,203 metric tons of pork valued at $1.31 billion. Pork exports from 
the U.S. to Mexico exploded in 1994 when NAFTA went into effect. Even 
with the devaluation of the peso U.S. pork increased market share in 
Mexico--this never would have happened without NAFTA. Mexico is now the 
pork industry's second most important market behind Japan.
    Pork exports generate wealth and create good paying jobs that 
contribute significantly to the economic well being of rural America. 
According to a study by CF Industries, exports were so important to the 
industry in 1997 (when cash hog prices were close to current prevailing 
levels) that cessation of exports (due for example to an embargo or 
animal disease outbreak) would have caused cash hog prices to plummet 
by $15.73 per head. Research conducted by the Economic Research Service 
of the United States Department of Agriculture (ERS) indicates that for 
each dollar of value-added agricultural exports such as pork, $1.63 in 
additional U.S. economic activity is generated. Moreover, ERS 
calculates that every billion dollars in pork exports creates an 
additional 23,000 new jobs in the U.S. economy.
    During the past decade the number of hogs processed in the United 
States increased from 85 million to 101 million while the pork derived 
from these hogs increased from 15.4 billion pounds to 19 billion 
pounds. While not all of this increase is attributable to exports, much 
of it is. As a consequence of this increased production, more people 
are employed in the supply and processing industries. This means that 
packers and processors will operate at higher levels of capacity and/or 
build new facilities. More U.S. inputs, such as corn and soybeans, and 
more U.S.-made machinery will be utilized. More packaging supplies are 
used and more shipping services are consumed. Exports contribute to the 
well being of rural America through such growth. Given that 96 percent 
of the world's population resides outside the United States, it is 
exports that will drive the future growth and viability of the 
industry. In the short term, the benefit will be higher prices. In the 
long run it will be a larger and growing, vibrant industry.
    Indeed, the Cross-Commodity Analysis conducted by the Foreign 
Agricultural Service of the United States Department of Agriculture 
(FAS) underscores the important contribution of pork exports to the 
U.S. economy. The report states that:

          The shift toward greater exports of high-value foods such as 
        meat instead of feed grain has major beneficial implications 
        for the U.S. rural economy. First, expanding exports of red 
        meat and poultry expands domestic demand for feed grain and 
        oilseed meal. Second, the income multiplier effect from high-
        value exports is greater than from bulk commodity exports (2.88 
        versus 1.86). This means dollar-for-dollar, high-value exports 
        generate more jobs than exports of bulk commodities.

    Further, another study by FAS points out that if the U.S. exported 
meat instead of the feed grains used to produce meat in foreign 
markets, U.S. agricultural employment would increase by approximately 
50 percent.
    The United States is uniquely positioned to reap the benefits of 
liberalized world pork trade. U.S. pork producers are the lowest cost, 
large-scale commercial suppliers of the safest, highest quality pork in 
the world. But without the renewal of trade promotion authority for the 
Executive branch by Congress, U.S. pork producers and the rest of U.S. 
agriculture will be forced to remain on the sidelines while other 
countries continue to negotiate new trade agreements at a staggering 
pace. According to a report prepared for the Office of the U.S. Trade 
Representative, about one-third of total world exports are covered by 
EU free trade and customs agreements, compared to only 11 percent for 
U.S. free trade agreements. Of the approximately 130 free trade 
agreements in the world the United States is a party to only two, the 
NAFTA and the U.S.-Israel FTA.
    In order to expedite the WTO agriculture negotiations, U.S. trade 
officials need trade promotion authority. The longer the U.S. goes 
without renewing trade promotion authority, the longer the WTO 
agricultural negotiations will drag on. Trade promotion authority is 
also needed so that the U.S. can pursue trade liberalization regionally 
with our Western Hemisphere neighbors in the Free Trade Agreement of 
the Americas initiative (FTAA) and regionally with the countries of the 
Asia Pacific Economic Cooperation forum (APEC). Finally, trade 
promotion authority is needed so that the U.S. can pursue bilateral 
free trade agreements with countries such as Chile and Singapore.
    The U.S. pork industry is disadvantaged by the failure of the 
United States to keep up with the pace of trade agreements in the 
world. The rapidly expanding Brazilian pork industry--a key competitor 
to the U.S. industry--now has preferential access into many markets to 
the detriment of U.S. producers. For example, the U.S. pork industry 
recently obtained access to the Argentine pork market. We are 
disadvantaged selling into Argentina because of the preferential access 
that Brazilian pork exports receive by virtue of the MERCOSUR customs 
Union. Specifically, the U.S. faces a 34.5% duty on pork exported to 
Argentina while Brazil enjoys duty free access on its pork exported to 
Argentina. The U.S. pork industry currently is trying to obtain access 
to the Chilean pork market, another market in which Brazil has 
preferential access. Canada, which probably is our most significant 
competitor in pork, has gained preferential access into Chile through a 
free trade agreement. Mexico, which has some world-class pork 
operations and counts Japan among its pork export markets, has 
negotiated close to 30 free trade agreements. If left unchecked, Mexico 
will dominate a number of Western Hemisphere pork import markets to the 
detriment of the U.S. pork industry. The export-competitive Chilean 
pork industry, which like Mexico counts Japan as one of its export 
markets, has preferential access into many Western Hemisphere pork 
markets to the detriment of the U.S. pork industry. While the United 
States sits idly by, Mexico, Chile, and Canada have wrestled away from 
the United States the mantle of the Western Hemisphere's trade leader.
    In Europe, the European Union continues to cut trade deals with the 
countries of Central and Eastern Europe (CEE). In these so-called 
double zero agreements, the EU and the CEE country typically agree to 
offer duty free quotas for a specific quantity of a given agricultural 
product, such as pork, while anything above the quota is subject to 
duty. Further the EU and the CEE country agree not to use any export 
subsidies for the given agricultural product. For example, in July 
2000, Hungary and the EU signed a double-zero agreement. The agreement 
calls for reduced tariffs and an end to export subsidies for 72 percent 
of Hungary's exports of unprocessed agricultural products to the EU and 
54 percent of the EU's agricultural exports to Hungary. The agreement 
established three lists of goods. For the first list, accounting for a 
third of Hungary's agricultural exports to the EU, all tariffs were 
abolished. For the second list, tariffs were abolished for exports up 
to a given quota, provided exports above the quota are not subsidized. 
This second list includes pork. The duty-free quotas on pork are to 
increase by 10 percent per year.
    The U.S. pork industry is disadvantaged in two ways by these double 
zero agreements. First, the EU gets better market access in CEE 
countries for its pork exports. Second, the EU is able to conserve its 
pork export subsidies for other markets outside Europe where we have to 
compete with them. Even with a small CEE country such as Estonia, the 
EU expects to `save' around 3,500 metric tons in pork export subsidies. 
Total EU shipments of pork to CEE countries are about 220,000 metric 
tons, an amount equal to about 40 percent of total U.S. pork exports.
    The EU, Mexico, Chile, and Canada are gaining the benefits of trade 
for their citizens while the U.S. engages in a negotiation with itself 
about the benefits of trade. Our comparative advantage in pork is 
increasingly being offset by the failure of the U.S. to get into the 
free trade game.

III. THE U.S. SHOULD PURSUE A ZERO FOR ZERO ON PORK IN THE WTO 
        AGRICULTURE NEGOTIATIONS
    NPPC believes that the United States should adopt as a primary 
negotiating objective in the World Trade Organization agriculture 
negotiations the total elimination in the shortest possible time frame 
of all tariffs; all export subsidies and all trade-distorting domestic 
support for pork and pork products. The U.S. industry is ready to 
compete in a free and open environment; we believe that pork producers 
in a number of other countries are willing to do the same. Indeed, the 
Canadian pork industry has also asked its government to pursue a zero-
for-zero initiative on pork and pork products and there is strong 
interest in this initiative in a number of other countries. The United 
States should use its negotiating leverage to push this objective with 
our more reluctant trading partners in order to ensure that we are 
afforded the opportunity to take advantage of our natural 
competitiveness.

NPPC Urges the Following Negotiating Objectives For Agriculture in the 
        WTO
    Fundamental liberalization in the pork industry can be most easily 
achieved in the context of an ambitious overall agreement in 
agriculture. NPPC supports an aggressive approach to this trade round 
which goes beyond the consensus Seattle Round Agricultural Coalition 
(SRAC) policy statement. Among other things, NPPC advocates the 
following points as general U.S. negotiating objectives for 
agriculture:

1. Tariff Reductions Must Be Accelerated
    Notwithstanding the progress made in the Uruguay Round, tariffs on 
agricultural products remain very high. U.S. agricultural commodity 
tariffs, which according to the Economic Research Service of USDA 
average only about 12 percent, are dwarfed by the agricultural tariffs 
of other nations, which range on average from 50 to 91 percent. Foreign 
tariffs on pork, beef, and poultry average about 80 percent according 
to ERS.
    The best way to achieve such comprehensive liberalization is 
through the use of a tariff cutting formula that is applied to every 
product without exception. There are an infinite number of formulas 
that could be devised to cut tariffs, the ``best'' formula obviously 
depending on the results desired. NPPC prefers an approach like the 
Swiss formula used in the Tokyo Round negotiations, which resulted in 
substantially larger cuts in higher tariffs and had the effect of 
dramatically reducing the disparities in levels of protection. In 
addition, countries could engage in request/offer negotiations to 
achieve deeper-than-formula reductions for specific products. This 
segment of the negotiation would provide the opportunity to pursue the 
zero-for-zero objective in the pork sector.

2. The Administration of Tariff Rate Quotas Must Be Improved
    In most instances, creating a TRQ satisfied the minimum access 
commitment for tariffied agricultural products in the Uruguay Round.
    Unfortunately, in some cases, the administration of TRQ's has been 
used as an instrument to thwart imports. In the upcoming trade 
negotiations, rules on TRQ administration must be clearly delineated. 
In addition, ceilings must be established for over-quota duty levels.

3. Export Subsidies Should Be Eliminated
    Data compiled by USDA shows that during GATT year 1998/1999, the EU 
subsidized more than 750,000 metric tons of pork exports, a subsidized 
tonnage that exceeds our entire amount of exports. NPPC supports the 
complete elimination of all export subsidies and the complete 
elimination of all trade distorting domestic support.

4. Trade-Distorting Domestic Support Should Be Further Disciplined
    The pork industry recognizes the complexities of agricultural 
politics and acknowledges that farm programs often are designed to meet 
social as well as economic objectives. Nonetheless, it is essential for 
the next trade round to accomplish much stricter disciplines on trade-
distorting domestic support programs than was possible in the Uruguay 
Round. The 20 percent reduction in the Aggregate Measure of Support 
(AMS) achieved in the Uruguay Round did not go far enough. We need to 
see further significant reductions. Moreover, those reductions should 
be applied on a commodity-by-commodity basis, rather than a sector-wide 
basis, as was the case under the Uruguay Round agreement. For pork, all 
trade-distorting supports should be eliminated, and all tariffs and 
export subsidies abolished as part of the zero-for-zero initiative.
    The U.S. advocated commodity-specific domestic support reduction 
commitments until the final stages of the Uruguay Round negotiations. 
The sector-wide approach was the result of a Blair House compromise 
with the EU. As a consequence of this change, countries such as the EU 
and Japan, both of whom have AMS limits over three times that of the 
U.S., have had significant flexibility to shift support between 
commodities and avoid painful reductions.
    Of course, commodity-by-commodity commitments could also lead to 
changes in U.S. domestic programs. However, the potential gains in the 
world market from achieving disciplines on EU and Japanese policies 
justify the acceptance of more discipline on U.S. policy making. We 
have acknowledged this to be the case with respect to export subsidies 
and import barriers, and it is just as true for domestic subsidies. 
Without stronger disciplines and greater reduction commitments, our 
major trading partners will continue to be permitted to subsidize their 
producers at a significantly higher rate than the U.S.

5. The Peace Clause Should Not Be Extended
    One of the most promising sources of meaningful leverage for the 
United States is Article 13 of the Uruguay Round Agreement on 
Agriculture--the so-called Peace Clause. Article 13, which was included 
in the Agreement at the insistence of the European Union, suspends 
until January 1, 2004, the application to agricultural products of 
certain WTO disciplines, the most significant of which are Articles 3, 
5 and 6 of the Agreement on Subsidies and Countervailing Measures. With 
the expiration of Article 13, the EU would immediately be in breech of 
its obligations under Article 3 of the Subsidies Agreement, which 
prohibits export subsidies (Article 13(c)(ii)). At the same time, the 
U.S. would be in a position to begin dispute settlement proceedings 
under Article 6 against any domestic or export subsidies that are 
causing serious prejudice to U.S. exports in third-country markets 
(Article 13(b)(ii)). Obviously, these are powerful disciplines.
    The Peace Clause expires automatically. The only way to extend it 
would be to negotiate a new agreement that includes similar 
protections. The EU, in particular, will have a strong incentive to 
achieve such an agreement and will presumably be ready to pay a high 
price for it. It should be much easier to achieve an agreement within 
three years that includes a phased elimination of export subsidies and 
meaningful disciplines on trade-distorting domestic subsidies if the EU 
is facing, in the absences of such an agreement, the immediate 
application of even stronger measures.
    The United States should do everything possible to take advantage 
of the leverage offered by the Peace Clause. As a first step, the U.S. 
should publicly declare its willingness to allow the provision to 
expire. More important, the United States should begin preparing 
dispute settlement cases now against the European Union. The United 
States should be ready to file these cases against the EU under the 
Subsidies Agreement on January 1, 2004.
    Of course, U.S. programs could also be challenged if the peace 
clause expires. However, the U.S. is much less exposed than the EU. 
AMTA payments, which account for a significant portion of U.S. support, 
would almost certainly be considered non-product-specific, and 
therefore non-actionable, under the Subsidies Agreement. Product-
specific programs in the U.S. are much less significant than those in 
the EU, and it is difficult to demonstrate a link between U.S. programs 
and level of U.S. exports.
    More importantly, using peace clause leverage could actually reduce 
U.S. vulnerability to an eventually challenge. Doing so increases the 
likelihood of achieving a good agreement on agriculture before the end 
of 2003. Without such an agreement, the peace clause would inevitably 
lapse. In the context of such an agreement, the peace clause could be 
extended.

6. Export Credits Should Be Disciplined in the OECD
    Under the Uruguay Round Agreement the United States committed, 
along with other WTO members, to negotiate disciplines on export 
credits and credit guarantees in the OECD. Unfortunately, the OECD 
talks have not yet produced an agreement. Now some countries are 
talking of developing disciplines in the WTO rather than the OECD.
    The OECD has experience in the area of export credits, having 
administered for many years an agreement on export credits for 
industrial products. It is the proper place to develop disciplines for 
credit programs for agricultural products. Despite the fact that the 
United States is currently the biggest user of such credits, we have a 
long-run interest in imposing disciplines to guard against future 
abuses by our trading partners.

7. The S&P Agreement Should Not Be Reopened
    The pork industry does not support opening the SPS Agreement for 
further negotiation in the next trade round. It is working well.

8. The U.S. Must be a Reliable Supplier of Agricultural Products
    Trade liberalization is not a one-way street. If we expect food-
importing countries to open their markets to U.S. exports and rely more 
on world markets to provide the food they need, we should at the same 
time commit to being reliable suppliers. Current WTO rules permit 
exporting countries to tax exports whenever they choose (GATT Article 
XI.1), and to prohibit or otherwise restrict exports to relieve 
domestic shortages (GATT Articles XI.2(a) and XX(i) and (j)). These 
provisions should be eliminated in conjunction with the phasing out of 
import barriers. Such a move would not affect the ability of the United 
States to impose trade sanctions for reasons of national security; that 
right would be preserved under GATT Article XXI.

IV. THE U.S. PORK INDUSTRY STRONGLY SUPPORTS THE FTAA PROCESS AND 
        BILATERAL INITIATIVES WITH CHILE AND SINGAPORE
    Given the strong support of the U.S. and Canadian pork industries 
for a zero-for-zero approach on pork in the WTO agriculture 
negotiations and the likelihood that Brazilian producers also will 
embrace this initiative, the FTAA process should provide fertile ground 
for the thorough liberalization of the pork sector in the western 
hemisphere. However, if the Congress does not pass Trade Promotion 
Authority and the FTAA process languishes, the United States pork 
industry and other sectors of the U.S. economy will be forced to 
continue to sit on the sidelines and watch as the Mexicans, the 
Canadians, the Chileans and others continue to cut trade deals in what 
once was considered the domain of the United States.
    The U.S. pork industry also supports bilateral initiatives with 
Chile and Singapore. Comments regarding each of these initiatives are 
attached as appendices to this statement.

                                

                                    Safe Park, Inc.
                              WAYZATA, MINNESOTA 55391-0008
                                                       May 14, 2001

Honorable Jim Ramstad and
MEMBERS of the WAYS AND MEANS COMMITTEE

    I served in the Navy in WW2 and have been a mechanical engineer for 
52 years. I am the founder of a Minnesota corporation--SPI. I have a 
patented design for an AUTOMATIC MECHANICAL PARKING SYSTEM (AMPS). 
Similar systems are quite common in Asia and Europe. In fact, I 
recently attended a presentation of five foreign vendors of this class 
of equipment. The first was from Korea, the second from Italy and the 
next three were from Germany. And though my design projects superior 
qualities, we will have our market flooded by these people. I 
appreciate that we're living in one world, but if we don't get our act 
together TRADE IS GOING TO BE ONE-WAY.
    My stomach churned when I recently received a solicitation from 
CHINA for the sale of large electric motors, the designs for which were 
sold to them by the Westinghouse corporation as they exited the 
business for greater profitability investments. It is this mentality of 
our financial community to maximize profits without regard for the 
welfare of our country that is challenging. Two years ago I declined an 
invitation to come to Beijing to build my first demonstration. I have 
walked away from several ``Venture Capitalists'' propositions because 
of the avarice and arrogance they expressed.
    Members of this Committee, please don't tell me where to go--in the 
bureaucracy. My experience persuades me that their objective, by and 
large, is to perpetuate their jobs. The Congress regularly includes 
riders in Bills for tax advantages and grants to corporations. If you 
can't afford a grant, extend a low-interest loan to SAFE PARK, INC. and 
watch its value to the community as we address ENERGY CONSERVATION, 
MASS TRANSPORTATION & POLLUTION amelioration.
    With $1 million SPI will demonstrate its value on the property of a 
non-profit institution and become viable.

            Sincerely,
                                         William A. Sternad
                                                          President

                                
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