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74–225 PS 2001

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

(

ii

COMMITTEE ON WAYS AND MEANS

BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois

E. CLAY SHAW, JR., Florida

NANCY L. JOHNSON, Connecticut

AMO HOUGHTON, New York

WALLY HERGER, California

JIM MCCRERY, Louisiana

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JIM NUSSLE, Iowa

SAM JOHNSON, Texas

JENNIFER DUNN, Washington

MAC COLLINS, Georgia

ROB PORTMAN, Ohio

PHIL ENGLISH, Pennsylvania

WES WATKINS, Oklahoma

J. D. HAYWORTH, Arizona

JERRY WELLER, Illinois

KENNY C. HULSHOF, Missouri

SCOTT MCINNIS, Colorado

RON LEWIS, Kentucky

MARK FOLEY, Florida

KEVIN BRADY, Texas

PAUL RYAN, Wisconsin

CHARLES B. RANGEL, New York

FORTNEY PETE STARK, California

ROBERT T. MATSUI, California

WILLIAM J. COYNE, Pennsylvania

SANDER M. LEVIN, Michigan

BENJAMIN L. CARDIN, Maryland

JIM MCDERMOTT, Washington

GERALD D. KLECZKA, Wisconsin

JOHN LEWIS, Georgia

RICHARD E. NEAL, Massachusetts

MICHAEL R. MCNULTY, New York

WILLIAM J. JEFFERSON, Louisiana

JOHN S. TANNER, Tennessee

XAVIER BECERRA, California

KAREN L. THURMAN, Florida

LLOYD DOGGETT, Texas

EARL POMEROY, North Dakota

ALLISON GILES, Chief of Staff

JANICE MAYS, Minority Chief Counsel

SUBCOMMITTEE ON TRADE

PHILIP M. CRANE, Illinois, Chairman

E. CLAY SHAW, JR., Florida

AMO HOUGHTON, New York

DAVE CAMP, Michigan

JIM RAMSTAD, Minnesota

JENNIFER DUNN, Washington

WALLY HERGER, California

PHIL ENGLISH, Pennsylvania

JIM NUSSLE, Iowa

SANDER M. LEVIN, Michigan

CHARLES B. RANGEL, New York

RICHARD E. NEAL, Massachusetts

WILLIAM J. JEFFERSON, Louisiana

XAVIER BECERRA, California

JOHN S. TANNER, Tennessee

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.

iii

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

(1)

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:]

2

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

SUBCOMMITTEE ON TRADE

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1721

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.’’

3

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.

4

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 Comfield hearing of the Ways and Means Trade Subcommittee. As

mittee as noted above.

Chairman CRANE. Good afternoon and welcome to this special

f 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.

5

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

6

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

traveling to Minnesota at my request for this hearing to get Mintrade to the medical technology and agriculture industries.

Mr. RAMSTAD. Thank you, Mr. Chairman, and thank you for

f nesota’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 exVerDate 11-MAY-2000 07:02 Sep 19, 2001 Jkt 074225 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\A225.XXX pfrm11 PsN: A225
7

panding 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

8

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.

9

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

fMINNESOTA

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.

10

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-manufac- tured 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 highVerDate 11-MAY-2000 07:02 Sep 19, 2001 Jkt 074225 PO 00000 Frm 00014 Fmt 6633 Sfmt 6602 E:\HR\OC\A225.XXX pfrm11 PsN: A225
11

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

12

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.

13

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,

14

‘‘this anti-globalization movement is largely the well-intentioned but illinformed—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.’’

timony, just as we did so very much when you came to Washington

Thank you.

Chairman CRANE. Thank you, Governor. We appreciate your tesf 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 reVerDate 11-MAY-2000 07:02 Sep 19, 2001 Jkt 074225 PO 00000 Frm 00018 Fmt 6633 Sfmt 6602 E:\HR\OC\A225.XXX pfrm11 PsN: A225
15

treat, 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

16

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.

17

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

18

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-ofthe-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 prodVerDate 11-MAY-2000 07:02 Sep 19, 2001 Jkt 074225 PO 00000 Frm 00022 Fmt 6633 Sfmt 6602 E:\HR\OC\A225.XXX pfrm11 PsN: A225
19

ucts, 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.

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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.

21

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 C

According to statistics compiled by the U.S. Department of ComRANE. Thank you, Mayor Coleman.

f merce, 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

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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.

23

Mr. RAMSTAD. And that’s another good and insightful commentary certainly on your part. We’re the 15th largest populationwise, 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.

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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

25

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 fourteenyear 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

26

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 bestcase 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 C

One question that I have, you make a reference here to the imRANE. Thank you.

f pact 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.

27

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.

28

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

29

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:]

30

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.

31

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.

I didn

Once again, thank you for allowing me to testify today.

Chairman C ’t notice any overweight people in the audience. Not evenRANE. Thank you, Gil. Referring to your testimony,

f 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

32

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, lifethreatening 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

33

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.

34

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

35

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

36

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.

f

37

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 reve- nues in 2000 were just north of $100 million, but only $18 million

38

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.

39

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 in- vestments 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

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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 longterm 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.

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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.

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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

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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.

STATEMENT OF AL CHRISTOPHERSON, CORN, SOYBEAN, AND

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

f 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.

44

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.

45

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 onethird 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 headto-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

46

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.

47

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.

48

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.

f 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

49

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.

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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

51

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 marketdistorting 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.

52

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 C

Let me first comment that I appreciate all of your testimony

RANE. Thank you, Mr. Portnoy.

f 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.

53

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

54

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.

55

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.

56

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.

57

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

58

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

59

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.

60

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 acces- sion 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.

STATEMENT OF NEAL FISHER, WHEAT AND CATTLE FARMER,

Thank you and I would welcome any questions.

Chairman CRANE. Thank you. Mr. Fisher.

f 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.

61

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.

62

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 governmentsanctioned 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 reVerDate 11-MAY-2000 07:02 Sep 19, 2001 Jkt 074225 PO 00000 Frm 00066 Fmt 6633 Sfmt 6602 E:\HR\OC\A225.XXX pfrm11 PsN: A225
63

quest 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.

64

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 centrallyplanned 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

65

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.

f 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

66

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 multifunctionality. 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,

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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 nonsciencebased 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

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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.

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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

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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 anticompetitive 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 statelevel 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 statemandated 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.

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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 nontariff 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.

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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

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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.

f

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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.

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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 standVerDate 11-MAY-2000 07:02 Sep 19, 2001 Jkt 074225 PO 00000 Frm 00079 Fmt 6633 Sfmt 6621 E:\HR\OC\A225.XXX pfrm11 PsN: A225
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ard 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 C

I read a statistic that estimates that the world

RANE. Thank you, Mr. Tumbleson.

f ’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

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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

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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.

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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.

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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.

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[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.

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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.

83

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 EUbased 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

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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.

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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 exVerDate 11-MAY-2000 07:02 Sep 19, 2001 Jkt 074225 PO 00000 Frm 00089 Fmt 6633 Sfmt 6621 E:\HR\OC\A225.XXX pfrm11 PsN: A225
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ample, 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.

Introduction

Statement of the Boston Scientific Corporation, Natick, Minnesota

f 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 nontariff 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,

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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 fourmonth 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 ‘‘presubmission 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-newto-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.

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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

f –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.

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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.

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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

f 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

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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 onethird 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

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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’’

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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-forzero 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

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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-forzero 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.

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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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