U.S. GOVERNMENT PRINTING OFFICE

67–570 CC WASHINGTON : 2000

S. HRG. 106–754

CHINA ACCESSION TO THE WORLD TRADE

ORGANIZATION

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

ON

CHINA ACCESSION TO THE WORLD TRADE ORGANIZATION

MARCH 1, 2000

Printed for the use of the

Committee on Agriculture, Nutrition, and Forestry

(

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

RICHARD G. LUGAR, Indiana, Chairman

JESSE HELMS, North Carolina

THAD COCHRAN, Mississippi

MITCH MCCONNELL, Kentucky

PAUL COVERDELL, Georgia

PAT ROBERTS, Kansas

PETER G. FITZGERALD, Illinois

CHARLES E. GRASSLEY, Iowa

LARRY E. CRAIG, Idaho

RICK SANTORUM, Pennsylvania

TOM HARKIN, Iowa

PATRICK J. LEAHY, Vermont

KENT CONRAD, North Dakota

THOMAS A. DASCHLE, South Dakota

MAX BAUCUS, Montana

J. ROBERT KERREY, Nebraska

TIM JOHNSON, South Dakota

BLANCHE L. LINCOLN, Arkansas

KEITH LUSE, Staff Director

DAVID L. JOHNSON, Chief Counsel

ROBERT E. STURM, Chief Clerk

MARK HALVERSON, Staff Director for the Minority

(II)
(III)

C O N T E N T S

Page

HEARING:

Wednesday, March 1, 2000, China Accession To The World Trade Organization ........................................................................................................................ 1

APPENDIX:

Wednesday, March 1, 2000 ..................................................................................... 47

Document(s) submitted for the record:

Wednesday, March 1, 2000 ..................................................................................... 93

Wednesday, March 1, 2000

STATEMENTS PRESENTED BY SENATORS

Lugar, Hon. Richard G., a U.S. Senator from Indiana, Chairman, Committee

on Agriculture, Nutrition, and Forestry ............................................................. 1

Cochran, Hon. Thad, a U.S. Senator from Mississippi ......................................... 43

McConnell, Hon. Mitch, a U.S. Senator from Kentucky ....................................... 13

Roberts, Hon. Pat, a U.S. Senator from Kansas ................................................... 4

Fitzgerald, Hon. Peter G., a U.S. Senator from Illinois ....................................... 28

Grassley, Hon. Charles E., a U.S. Senator from Iowa .......................................... 24

Craig, Hon. Larry E., a U.S. Senator from Idaho ................................................. 22

Conrad, Hon. Kent, a U.S. Senator from North Dakota ...................................... 29

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 6

Johnson, Hon. Tim, a U.S. Senator from South Dakota ...................................... 14

Lincoln, Hon. Blanche L., a U.S. Senator from Arkansas .................................... 8

WITNESSES

Panel I

Glickman, Hon. Dan, Secretary of Agriculture, U.S. Department of Agriculture, Washington, DC. .................................................................................... 10

Scher, Hon. Peter, Special Ambassador for Agriculture, Office of the U.S.

Trade Representative, Washington, DC. ............................................................ 14

Panel II

Burrack, Tim, on behalf of the Nation Corn Growers Association and American Soybean Association, Arlington, Iowa ........................................................ 42

Hardin, John Jr., on behalf of the National Pork Producers Council, Danville,

Indiana .................................................................................................................. 36

Kress, Jerry, on behalf of the National Association of Wheat Growers, Idaho

Wheat Commission, and the Wheat Export Trade Education Committee,

American Falls, Idaho .......................................................................................... 34

Moore, Sam, President, Kentucky Farm Bureau, on behalf of the American

Farm Bureau Federation, Louisville, Kentucky ................................................ 32

Suber, Tom, Executive Director, U.S. Dairy Export Council, on behalf of

the Dairy export Council, Arlington, Virginia ................................................... 38
Page

IV

Wootton, Director of Federal Government Affairs, on behalf of Sunkist Growers, Washington, DC. ........................................................................................... 40

APPENDIX

PREPARED STATEMENTS:

Lugar, Hon. Richard G. .................................................................................... 48

Craig, Hon. Larry E. ........................................................................................ 52

Johnson, Hon. Tim ........................................................................................... 50

Burrack, Tim ..................................................................................................... 89

Glickman, Dan .................................................................................................. 54

Hardin, John, Jr. .............................................................................................. 72

Kress, Jerry ....................................................................................................... 67

Moore, Sam ....................................................................................................... 62

Scher, Peter ....................................................................................................... 58

Suber, Thomas M. ............................................................................................ 79

Wootton, Michael .............................................................................................. 86

DOCUMENT(S) SUBMITTED FOR THE RECORD:

WTO Accession Agreement, Charts, Fact sheets, and excerpts from FAS

online, submitted by Tim Burrack .............................................................. 94

U.S. Courts ‘missed opportunity on China,’ warns Suber, statement submitted by Thomas Suber .............................................................................. 193

Letter to Hon. William J. Clinton, from Hon. Kent Conrad ......................... 187

Letter To Hon. William J. Clinton, from Hon. Tim Johnson ........................ 178

Letter to Hon. William J. Clinton, from Hon. Richard J. Durbin ................ 180

Letter to Hon. William J. Clinton, from Hon. Connie Mack ......................... 181

Letter to Hon. William J. Clinton, from Hon. Don Nickles .......................... 182

Letter to Constituents on decision to vote for PNTR with China, submitted by Hon. Greg Ganske ............................................................................. 183

Letter to His Excellency Li Zhao Xing, from The U.S. Senate ..................... 187

Letter to His Excellency Li Zhao Xing, from The House of Representatives ................................................................................................................ 195

‘‘Permanent MFN for China Will Do Nothing for America’s Farmers,’’

submitted by Citizens Trade Campaign ...................................................... 197

Testimony of the Fertilizer Institute .............................................................. 199
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CHINA ACCESSION TO THE WORLD TRADE

ORGANIZATION

WEDNESDAY, MARCH 1, 2000

U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Washington, DC.

The Committee met, pursuant to notice, at 9:02 a.m., in room

192, Dirksen Senate Office Building, Hon. Richard G. Lugar,

(Chairman of the Committee), presiding.

Present or submitting a statement: Senators Lugar, Cochran,

McConnell, Roberts, Fitzgerald, Grassley, Craig, Conrad, Baucus,

Johnson, and Lincoln.

OPENING STATEMENT OF HON. RICHARD G. LUGAR, A U.S.

SENATOR FROM IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

The CHAIRMAN. This hearing of the Senate Agriculture Committee is called to order.

In recent months we have heard much about China and, in particular, about the proposed terms of China’s accession to membership in the World Trade Organization. The press accounts of the

bilateral agreement reached between the United States and China,

as well as the summary sheets issued by the administration, suggest this could be one of the most important international agreements ever for United States agriculture, especially now that

American farmers have been hit for several year with slack demand and falling prices.

China’s proposed accession agreement is also a watershed agreement for the world trading system. The World Trade Organization

[WTO] and its predecessor institution, the General Agreement on

Tariffs and Trade, GATT, have provided the framework for world

trade since 1947. Over the past 50-years, the initial GATT of about

40-countries has grown into the WTO of nearly 140-nations. In all

that time, however, China, the most populous Nation in the world,

has been neither a GATT contracting party nor a WTO member.

Ironically, the World Trade Organization does not yet include the

country with one-quarter of the world’s population.

There is, of course, good reason why China has historically not

been a part of the multilateral trading system. The GATT and the

WTO agreements were developed as rules for trade among market

economies. GATT/WTO rules, to as great an extent as possible, attempt to ensure that trade is governed by competition and market

forces. China’s centrally planned and controlled economy operates

on a different and incompatible set of principles. As a result, since
2

1949 China has been sitting on the sidelines of a multilateral trading system.

Over the past decade, as other centrally planned economies have

collapsed, Chinese leadership noted the tremendous inefficiencies of

the system and, however modestly, began to liberalize the Chinese

economy. And since the World Trade Organization came into formal existence with the conclusion of the Uruguay Round, the Chinese have been attempting to negotiate their accession to the multilateral trade system.

Although China has not been a member of the GATT or WTO up

to now, it has benefitted from the multilateral trade regime in a

number of ways. Most importantly, the United States and a number of other countries have extended to China ‘‘most favored nation’’ status, meaning that China has access to our market on the

same terms we extend to other WTO nations. This is a considerable

privilege and one that China knows has great value. The United

States now extends Most-favored-nation [MFN] status to China on

a year-to-year basis. China seeks, as a part of its WTO accession,

permanent MFN status, or as it has come to be known, a permanent normal trading relation [PNTR], the PNTR relationship.

Any country that enters the WTO and obtains MFN status automatically secures the market access benefits that have been so arduously negotiated by the GATT and the WTO members in the previous eight negotiating rounds over more than 50-years. It has

been asserted, inaccurately, in my view, that in the bilateral deal

negotiated between the United States and China, the United States

gains everything and gives nothing. This is more than a little misleading. What the United States gives and, more importantly, what

China gains is permanent MFN access to our market and to those

of other WTO trading partners. And to gain this privilege, China

should be willing to give value in return.

The good news is that China appears to have done so in a bilateral agreement that was struck last spring and finally affirmed between the Governments last fall prior to the Seattle Ministerial.

The agreement appears to offer significant market access opportunity for the United States and has widespread support in our

business community in general and the agriculture community in

particular. The package includes significant tariff reductions on a

number of agricultural products in which the United States is highly competitive, such as citrus fruits, stone fruits, raisins, shell nuts,

canned sweet corn, soups, barley malt, beef, pork, chicken and turkey. And China also commits to creating significant tariff rate

quotas in the major grain and oilseed sectors—eventually, 9.6-million metric tons of wheat, 7.2-million metric tons of corn and 5.3-

million metric tons of rice. These Tariff-rate quota [TRQ] amounts

are many times the level of China’s current imports of these commodities. China has also agreed to forego the use of export subsidies, to discipline the use of domestic support, and to abide by

international rules on sanitary and phytosanitary regulations.

On paper, this agreement looks very promising and the Office of

the Trade Representative and the Department of Agriculture are to

be commended for their work in achieving these impressive results.

Senators will, of course, want to learn more about the specifics of

the agreement. For example, the large tariff cuts and the very gen-
3

erous tariff rate quota levels specified in the agreement would be

particularly significant for trade if China were a market economy

with a vibrant and competitive private sector. The question is how

significant for trade these will be in a situation in which access to

the Chinese market is dominated by a state importing agency.

Apparently, China has agreed to liberalize its import regime, to

begin to develop a system of private trading rights, and to reallocate unused TRQ amounts to ensure full access. The specifics of

these arrangements remain somewhat sketchy and we will be interested to hear more detail on these types of implementations and

issues from administration witnesses.

Today we will be privileged to hear from the Secretary of Agriculture Dan Glickman and from Ambassador Peter Scher. I welcome both of these gentlemen back to the Committee and thank

them for being with us today and for being so forthcoming on all

of these trade negotiations in the past. We look forward to their

testimony.

I would note that the Committee also invited the Secretary of

Commerce, Mr. Daley, or a senior policy official of his choice to testify at the hearing. We thought this would be appropriate since the

President has indicated that the issue of China WTO accession is

the priority trade issue for his administration this year and because the President has designated Secretary Daley as the lead

spokesperson on this issue. Secretary Daley’s office indicated he

had other more pressing, business today and his office also declined

to designate a substitute witness. And thus we are sorry the Commerce Department will not be represented at the hearing, in light

of the importance that the President has placed upon the issue.

Nonetheless, we are delighted to have the witnesses that I have

mentioned and we will ask them and a panel of witnesses representing a broad array of interests in the farming and agribusiness communities to testify as a second panel. We will have

testimony from the American Farm Bureau Federation, as well as

representatives of the grain, meat, dairy and citrus sectors.

I have noted on numerous occasions in this committee the vital

role that exports play today in the economic well-being of American

farmers. Nearly one-third of all American farm acres are planted

for the export market and when export opportunities decline, as

they have in the recent several years because of the Asian financial

crisis, farm prices and farm income suffer.

I continuously urge the administration to assist our farmers in

opening and competing for export markets. It is undeniable that

the prosperity of the American farm sector depends upon it. China,

a market with a quarter of the world’s population, holds unparalleled promise as an export market for high-quality U.S. food, feed

and fiber. We look forward to learning today more about China’s

proposed terms of accession to the WTO and about what it will

mean for America’s farmers.

[The prepared statement of Senator Lugar can be found in the

appendix on page 48.]

At this juncture I would like to recognize my colleague, Senator

Roberts, if he has an opening comment.
4

STATEMENT OF HON. PAT ROBERTS, A U.S. SENATOR FROM

KANSAS

Senator ROBERTS. Thank you, Mr. Chairman.

First I would like to associate myself with your remarks and let

the record show that the Chairman has long been a champion and

an eloquent spokesman and a common sense spokesman, as well,

for a consistent and aggressive trade and export policy. I might add

that the Chairman also has a great deal of expertise and also recognition in foreign affairs and national security.

And the one element of this that I would like to stress prior to

getting into my opening remarks is that in 1996 there was a commission formed on what America’s vital national interests were.

And interestingly enough, a bipartisan group and a very heavyweight group indicated the number one issue of concern was China’s entree onto the world stage.

And not only is this a trade matter; not only is this a matter in

regard to our export policy and the WTO and China; it’s a matter

of national security. As the distinguished chairman has pointed

out, our choice is whether or not the remain engaged with China,

despite all of the challenges we have with that country or not.

So consequently, I think it is very important and I credit the

Chairman for his leadership on both accounts.

I am delighted to see my colleague and friend, Senator Baucus,

here. We wrote a letter recently to the Chinese urging them to go

ahead with the previous agreement in regard to the purchase of

U.S. wheat. And as of Monday, there was an announcement in that

regard, Max, and I think we both would like to take a little pride

in that effort, although 53 other Senators signed the letter. And I

think it is 50,000-tons, as I recall, not enough hard red winter but

some soft wheat and we will quarrel about that on down the road.

Mr. Chairman, the Marines have landed in Hart 216 and as a

member of the Senate Armed Services Committee, I am going to

have to leave about 9:30 or 9:40. I do not want to be late for the

Commandant. But having said that, I am going to just basically try

to highlight here the statement that I have.

I want to welcome my old friend and my fellow Kansan back to

Capitol Hill. Dan, I appreciate all the hard work you do in behalf

of our farmers and particularly in respect to today’s subject matter,

and that is in regard to international trade in China. I also want

to welcome our ambassador, as well.

And I want to thank you and express my sincere appreciation for

your recent comments. You said this: ‘‘Winning congressional approval of PNTR’’—that is the acronym—‘‘for China will be the number one issue for agriculture in the year 2000.’’

You are on point. You are mounting the parapets. You are waving the flag. And I guess in Marine language it is two up, one back

and feed them hot chow.

However, let me point out that 3-months ago you said a very

similar thing in Seattle. And I credit you and the ambassador and

also our trade ambassador, and I sat in the Seattle hotel ballroom—we did not have much alternative; we were locked in—and

I listened as the Secretary posed a similar question to the one we

are discussing today. Secretary Glickman said, ‘‘What would be the
5

consequences if, after all this preparation, hard work and negotiations, we made no progress and we failed?’’

What if I had to say that? What if Senator Harkin, who had just

introduced our Secretary, had to go back to Iowa or, for that matter, Pat Roberts back to Kansas or Senator Baucus back to Montana? What if we had to go back and say that? I can tell you that

is not an option. And Dan worked overtime; so did Charlene; so did

everybody that was there at Seattle. Unfortunately, despite the

untiring efforts on the part of our negotiators, the Seattle Round

turned into a teargas round, Mr. Chairman, and little progress and

sent a signal, I think, around the world that was most unfortunate.

I am not trying to assess any kind of responsibility for that. I

could but I will not. I just think that was most unfortunate.

Well, now we have another shot. Now we have another chance,

it seems to me, Mr. Chairman. We have leadership and commitment from most people in this room—a lot of witnesses, other

members—Senator Baucus and I have been working on this for

over 18-months—all the companies and the businesses and the constituencies.

The question that I have to raise is the similar question raised

by Senator Moynihan last week when he said, and I am quoting

here, ‘‘This is a very worrisome moment. It is a moment of peril.

We had reason to believe that normal trade relations with China

would be agreed to in this Congress.’’ They were going to report

that bill in regard to the Committee on Finance and he was worried in regard to leadership from the administration and worried

about some slippage in the Congress.

I just spent the morning earlier today over in the House trying

to assess this situation with the staff of the House Ag Committee

and members over there. I would report to you, Mr. Chairman, I

think it is a little iffy and I am very worried about this. In the Senate we had all thought that we had the votes. We have not had a

whip check.

And I will tell you that some of the Senators that I know and

I trust and whose advice and counsel I trust, who are free-traders,

they are worried about all the challenges we have with China. I am

not going to go into the litany of them. I know that. But I am concerned about this. And unless we have a full and concerted, fullcourt press led by the Secretary and certainly those of us that are

involved and the President and, more particularly, the Vice President of the United States, I think we are in trouble. And I sure do

not want to bring this up and have it lost. And I am just on the

cusp now.

I think this is so terribly important for us. We have a lot of discussion about agriculture program policy. We must have the freedom to market. This is a crossroads issue. So it seems to me that

with a lot of frustration and concern, I want to thank the Secretary

for leading point and I am going to be riding with him. It is just

like when I used to take him to Dodge City. I would stand there

right beside him as his shotgun rider. Well, we are going to have

to get the stage working, Dan.

I would suggest to you, after March 7, we can get the Vice President on the White House lawn with the President and you and the

Vice President and Max and me and we will do just like we did
6

in the House, Jim, when I used to play basketball with the Vice

President. He would shoot those threes and he would make a couple but he would not go underneath the backboard, would not do

the rebounding, would not do the elbow work. He has to come down

and do that, Dan. Otherwise, I think we are going to be in a world

of trouble.

I am not trying to put you on the spot. I am just trying to tell

you this thing is an iffy situation right now and it should not be.

Seattle should not have been and this should not be.

So I welcome your support. Let’s see. You ride point, I will ride

drag, and we will get the job done.

The CHAIRMAN. Thank you very much, Senator Roberts. You

have already made a substantial contribution to the hearing. Let

me say that Senator Harkin would like to have made one but he

is involved in the education bill mark-up at this moment and is

likely to be there for quite a while, I am advised.

I would like to call now upon Senator Baucus, who has been commended, and correctly so, for his leadership.

STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM

MONTANA

Senator BAUCUS. Thank you, Mr. Chairman. Do I have to follow

Senator Roberts?

Mr. Chairman, Mr. Secretary, Mr. Ambassador, I think we all

know the main point that Senator Roberts said is pretty accurate;

namely, time is running out. This is so important, this agreement,

that we all of us have to burn some more midnight oil and go the

extra mile if we are going to pass it this year.

My view is that we have several months yet. Once we get into

June, close to the presidential conventions and elections, it is going

to be more difficult. I also believe that the Chinese white paper

complicated matters somewhat significantly, but that is just a complication. It is not a huge hurdle. There have been other developments across the Pacific between Taiwan and China—across the

straits—that have been more significant by far than this.

So I urge all of us to put all this in perspective, just keep calm

and keep our eye on the ball, which is getting PNTR passed.

Whatever you can do, I urge you also to talk to the Europeans

in whatever channels are most appropriate because clearly the bilateral that China agrees to with the European Union [EU] is a

precursor. It is a precondition probably to a PNTR vote. My guess

is it is going to be difficult for the House to vote on PNTR before

China and EU reach an agreement.

In any event, the agreement would make it easier, and I know

those talks have broken down temporarily and it is important we

try to kick-start those and get them back on track.

I also have urged Chinese representatives to take more concrete

actions, not just the abstraction of the benefits of trade but concrete actions to show the benefits and to show that this is a commercial agreement and both sides benefit.

As Senator Roberts mentioned, he and I and other Senators

wrote a letter to President Jiang Zemin urging them to buy American products, particularly wheat, and they did send over their citrus team, and that is good and they did buy 50,000-tons. The
7

thought was once the Chinese show a specific action of buying

wheat pursuant to the cooperative agreement, which is independent of the regular bilateral agreement, that shows good faith. It

shows that China will live to its end of the agreement and it is

helpful.

I have also encouraged the Chinese to do whatever they can to

show more transparency on their own in the interim, to show that

they are down-sizing their state enterprises or reforming the banking system, just doing whatever they can to show that China is

even more and more entering the free market arena. I think that

will help give some confidence to some members of the House and

Senate.

With respect to the white paper and all the issues surrounding

that, I just strongly urge those who are concerned about that issue

to recognize that Taiwan and China and the one–China policy is

going to be our policy for a long time and those are issues we can

deal with, and will be much more easily dealt with once PNTR is

adopted and we have the bilateral agreement consummated and

China is a member of WTO. Those political issues will be much

more easily dealt with.

Conversely, it is much more difficult to deal with those issues if,

by chance—certainly if we were to vote down PNTR but even if we

were to delay a vote and not take up the issue this year.

Agriculture is one of the main drivers here, clearly—you know

that better than I—in all the terms of the bilateral. I think it is

also important for the American people to understand that this is

not a gift, this agreement with China. It is not a gift at all. I think

some people across the country think it is a gift, that we are kind

of doing something for China. We are granting PNTR. We are giving them something.

Really this agreement is not a gift. It is a negotiated agreement

which in many ways is a no-brainer in that it is almost one-sided

for the United States in that our country is already open. We do

not have trade barriers. They are very minimal compared with

those in China. The tariffs will be reduced in China; the distribution system will be dismantled in the sense that American companies can use their own distribution systems, and all the other provisions of this agreement.

So I just urge all of us. Senator Roberts made a good point about

the President. I personally have spoken with the Vice President

since this issue flared up. He is fully behind this agreement. In

fact, I will not go into all the details but there are some misquotes

in the press that got all this out of proportion. But he is fully behind the agreement totally, so that is not an issue.

But the administration, all the administration, business community—I strongly encourage the business community to do more

than just have their CEOs stop by and see members of Congress.

They have to get their employees in their companies visiting the

district offices of key House members a couple, three or four times,

explaining in good, polite terms why this is such a good agreement

for America, let alone the countries.

I believe very firmly that the relationship between the United

States and China if probably one of the most crucial relationships

for the United States, for China and for the world. We are on the
8

cusp right now of taking the right step, being on the right track

with a good, solid relationship. We have it within our grasp to

begin to put this together in a pretty good way.

We only have a couple or 3-months and it is such an important

opportunity, such an important opportunity, it behooves all of us

to put partisanship aside, put some of the collateral peripheral

issues aside and let’s just keep our eye on the ball and get this

commercial agreement put together. Then we can more easily deal

with some of the other issues that we always will deal with.

China is a separate country; United States is a separate country.

They have their interests; we have our interests. But we have a

mutual interest in getting this agreement together.

I compliment all the work you have both done, Ambassador

Scher. And as well as I know you, Mr. Secretary, I know how hard

you have been working—very, very hard. You are to be complimented and credited for the terrific agricultural provisions of

this agreement. We just have to get that word out better. Thank

you.

The CHAIRMAN. Thank you, Senator Baucus.

Senator LINCOLN.

STATEMENT OF HON. BLANCHE LINCOLN, A U.S. SENATOR

FROM ARKANSAS

Senator LINCOLN. Thank you, Mr. Chairman. As always, thank

you for your leadership in bringing about this hearing to discuss

what is a vital issue to us in Arkansas. I appreciate the hard work

that my colleagues Senator Roberts and Senator Baucus have done

on this issue.

It seems like oftentimes, Mr. Secretary, every time we visit with

you it is a really timely thing. It is timely when it is emergency

disaster, getting it out, getting it to our agricultural producers and

other things. And I do agree with my colleagues that this is an

enormously important, timely issue, something that we do not have

a great deal of time to do.

I appreciate very much the two of you all in your positive attitudes towards PNTR for china but I will also echo my colleagues’

words, that we have to be as proactive and as aggressive as we possibly can in moving this issue forward.

In reading the testimony of Ambassador Scher, he is right on target—that China’s WTO accession is a clear economic win for the

United States. And together with PNTR, it will definitely open up

markets that especially vital to agriculture.

As Senator Baucus mentioned, we are talking about opening up

markets while U.S. markets are already open to that country. I am

sorry that Senator Roberts is gone but if it takes all of us going

down to the House gym to play basketball to get it done, in his

analogy—I have only been down there once but I am willing to go

back if that is what it takes.

Senator BAUCUS. Show them the cast on your leg. You mean

business.

Senator LINCOLN. That is true. I mean business.

But I do think it is important and I will just ask unanimous consent from the Chairman to put my entire opening statement in the

record. I would like to conclude by saying that, in the overall de-
9

bate of what we have started this year, talking about surpluses and

then talking about the strength of the economy in this country and

how important it is going to be to the multitude of other issues that

we are discussing, whether it is the solvency of Social Security,

maintaining Medicare or other things, those are all absolutely essential—educating our children, these are all dependent on the

strength of the economy.

If the economy in this country should take just a small turn,

those issues that in the everyday lives of our constituents are so

important are going to suffer a great deal. And certainly in my

opinion, this is probably one of the single most important questions

we will be asked as the Government that could help us to sustain

this country’s economy in a strong way.

So I certainly find granting PNTR to China to be one of the most

important things that we are doing and I encourage you all to continue not only in your positive attitude but turn up the heat, increase the progress and the aggressive with which we are tackling

this and let us move forward. And thank you very much for being

here.

Thanks

Senator BAUCUS. Mr. Chairman, if I might just very briefly, I forgot to mention. Yesterday I introduced legislation which I call the

China WTO Compliance Act. The point of it is to give the administration, the executive branch, a little more authority to monitor

compliance with the terms of the agreement. It is my thought that,

that will help the American people, reassure the American people

a little more that the terms of the agreement will be lived up to.

Often we sign agreements and we tend to not forget about them

but we do not worry as much about enforcement and execution.

The point of this legislation is to help give us a little more reassurance that once the agreement is signed, execution and compliance

will be followed. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator Baucus.

The Chair would like to make two announcements, one of which

is that we will have a vote at 10 a.m. So at that point we will take

about a 15-minute recess. I wanted the witnesses to know that, as

well as all who are observing our hearing.

The second is there will be a mark-up in the Committee tomorrow at 10:30 on crop insurance risk management and other issues

that are before the Committee in the Committee spaces. So for the

benefit of all members and staff, we want to make certain we are

all present for that.

Secretary Glickman, our purpose in having this hearing today is

really to accelerate consideration of the issue. We thought it was

important to have a high-profile hearing at which you and Ambassador Scher could testify and make the very best case and likewise,

elicit comments from the Senators, which you have heard and

which I think are important in showing their individual leadership.

It is a privilege, as always, to have you. I ask you to proceed. I

will ask both of you to try to come within, say, a 10-minute framework if that is possible. If it is not, there will be some leeway

granted, as you know.

Secretary GLICKMAN.
10

STATEMENT OF HON. DAN GLICKMAN, SECRETARY OF AGRICULTURE, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, DC.

Secretary GLICKMAN. Thank you very much. Senator Lugar, Senator Baucus, Senator Lincoln, it is an honor to be here.

First I would like to give credit to Ambassador Barshefsky and

Ambassador Scher. Together with some help from our USDA team,

they negotiated an extraordinary bilateral agricultural agreement,

which I would echo what Senator Baucus says. Not only is it a nobrainer but in the area of agriculture, it is really a one-way street

in favor of the interests of the United States of America.

Recently I spoke at the National Farmer Union convention in

Salt Lake City and there was a lot of deep concern about this

agreement and a lot of the questions were asked about previous

trade agreements and we gave away the store and there were import surges here and there and some of the issues, I think, the

facts were wrong, but I understood what their concerns are.

But then I said to them, I said this is not the same as those previous trade agreements. This is not North American Free Trade

Agreement [NAFTA]. This is not other agreements. This is not an

agreement whereby the United States is going to increase the access to our markets of another country or region’s products. This

is an agreement whereby another country agrees to increase the access of our products to their markets, period, with respect to agriculture.

Now, Ambassador Scher and Ambassador Barshefsky may talk

about the total effect, which I think is also very positive, but this

is truly an agreement that is a one-way street in terms of how it

affects agriculture. And it concerned me that, that message was not

out there in the countryside, that there was a whole lot of collateral issues regarding exports, imports and trade policy that is kind

of infecting this discussion here.

And it is really important for me and I know the President feels

this very strongly, to send a clear message as it relates to agriculture: this is a 100-percent positive in the interest of United

States farmers agreement. It concerns me that we could miss this

opportunity, and that would be very, very serious for America and

for our farmers.

The other thing is when I put my hat on, I had the privilege of,

as you know, serving as a member and chairman of the House Intelligence Committee in the early 1990s and this agreement is also

critically important to the national security of the United States.

I mean why walk away from our leadership role, to try to influence

other countries in the world? If we do not do this, our ability to influence their human rights, their environment, their labor policies

will be dramatically reduced. I mean it will be extraordinary, the

effect on our inability to influence that part of the world. And I

think that is another point that Senator Baucus has made over and

over again. I notice you, Senator Lugar, made the same point.

So I just think for double purposes, it is a one-way win for American agriculture and it is critically important to the United States

of America that we proceed with this. And the President feels this

so strongly that he has sent his entire cabinet out to really focus

on this as certainly the primary trade issue this year and one of
11

the highest priority issues of anything that this administration is

fighting for.

And I want to also leave that as a clear message here. This is

a very high priority issue and there is unanimous agreement within the administration that we should pursue this with full vigor,

and that is a tribute to the leadership of our United States Trade

Reoresebtatuve [USTR] in negotiating a good agreement that we

can be proud of, and I think that is going to make a lot of difference.

Now, I think we have sent these little cards up. You all may

have these little cards. It is kind of a summary. I do not know if

you have one. I want to make sure everybody has one. OK, they

do.

It is kind of my whole statement. On one page there is a——

Senator BAUCUS. We appreciate it. We will hear from Mr. Scher

now.

[Laughter.]

Secretary GLICKMAN. Well, on one side it is all the tariff cuts,

which are dramatic—meats, beef, pork, poultry, dairy, and all the

other items. On the other side are the TRQ changes, which are dramatically increased. And there are obviously the key provisions for

U.S. agriculture, which is significant, as well.

I would say that we expect conservatively U.S. export gains to approach $2 billion a year, an increase as the Chinese reduce their

tariffs, which should happen by the year 2005. And we see this

agreement with China eliminating export subsidies, reducing

trade-distorting domestic supports, establishing TRQs, and the

other things and, as both Senator Lugar and Senator Baucus

talked about, providing the right to import and distribute without

going through state trading enterprises.

I would also say, you know, this is not the easiest thing for

China to do. Recently there was a story in the Wall Street Journal.

This is a predominantly agrarian society, China. Its entire political

system has been based upon the history of the nature of peasants

and the agrarian population and the control of the central government over their people.

Now, I am not a great historian or political scientist but it does

not take a rocket scientist to know that the Chinese themselves, in

moving into the 21st century and dramatically reducing their tariffs on all their agriculture products and the other items that are

here, are also taking a fairly significant risk in terms of their political system. They are moving from an agrarian society to one that

is more modern, urbanized, technologically advanced, and I am

sure that causes some nervousness within the halls of power in

Beijing.

But the fact of the matter is that they are doing this, which

means that their markets will become dramatically more open to

our products in agriculture, which affects the heart of their last

couple of thousand years of history. And you talk about an influencing factor to help change their ways. This probably would have

more impact on their political system ultimately than anything else

I can imagine, as well as helping America’s farmers.

Now, I would make a couple of comments. We do need to be vigilant to ensure that China lives up to its WTO commitments and
12

also fully implements last year’s agricultural agreement that reduces phytosanitary barriers for citrus, wheat and meats. That

means we need China’s leadership to make the changes necessary

to ensure that trade in these products can begin without delay.

Prompt purchase of these products, including wheat, citrus and

meats, will be the clearest indication that China intends to honor

its commitments.

And I am fully cognizant of the letter that Senator Baucus and

Senator Roberts wrote. As it was referred just this week, China

purchased 50,000 tons of U.S. wheat. This will be the first significant shipment of wheat originating from the Pacific Northwest in

over two decades and the first purchase under our Agricultural Cooperation Agreement, which Ambassador Barshefsky and her team

negotiated, along with our help. This is encouraging news and we

hope that there will be many more such purchases to come.

While this is not a major purchase, it does break what I call the

Tilletia controversa kuhn [TCK] Chinese embargo on U.S. wheat

and recognizes that the agreement provides for a modern view of

sanitary and phytosanitary measures and we are watching to make

sure that this initial purchase is followed by additional purchases

of wheat, as well as honoring the commitments the Chinese made

on citrus and on meats. Those things are very important and I am

sure to you all they are very important, to make sure that the Chinese know that we expect them to honor their commitments that

they have made before.

We are in an era in which American agriculture has been suffering and it is linked to the global economy and increasingly dependent on trade. As I have said before, we have nothing to gain and

a great deal to lose by walking away from our agreement with

China. The only winners would be the EU, would be Australia,

would be Canada, would be Argentina and would be every exporter

in the world, who will see us as engaging in a disarmament in

world trade and will move in to suck up those markets from us.

And once they are in, they will be in for good and we will be out

for a very long time.

So the fact is that it is a dog-eat-dog world out there. I cannot

remember who on some TV show said that but I will repeat it and

I am sure if they did not say it, they will after I have said it today.

If we are out of these markets, we are lost for a very long period

of time, and that hurts American agriculture, which is increasingly

dependent on these foreign markets, as well.

I believe that the WTO accession agreement with the U.S. is a

bold statement that China intends to be a major player on the

world stage. The Chinese have shown in these agreements they understand that they must commit to long-standing principles governing world trade—transparency, fair trade practices, peaceful settlement of disputes and, most importantly, the rule of law. The agreement that we negotiated is strong evidence of China’s willingness

to move beyond the stagnant, protectionist policies of the past and

embrace economic and trade principles that will have a ripple effect

on their economic, social and political institutions, as well.

In fact, changes in Chinese agricultural policies are a good indication that China is beginning to see the advantages of stronger

ties to the global economy. Now China’s leaders, after years of in-
13

creasing its grain production to meet the growing needs of its population, they are talking about the need for food self-sufficiency rather than food security, and pointing out that China might be able

to raise farm incomes by diverting resources away from areas

where they do not have a comparative advantage, like grain production, and into areas that would take advantage of the large Chinese labor pool, like horticulture products.

In fact, Chinese policy-makers are now saying that China could

live with a self-sufficiency rate of 95-percent, rather than 100-percent. And that may not sound like a lot but when you look at the

history of China, that is a dramatic acceptance of economic reality.

If China imported just 5-percent of its grain needs, that would

equal 20-million-tons of grain a year, making China the world’s

second largest market for imported grain after Japan. That is why

approving NTR for China is so important for America’s farmers.

This is an historic opportunity because what it can achieve in

opening Chinese society goes way beyond the economic

underpinnings of improved trade with China. In granting permanent NTR, we are not abandoning the principles we as a Nation

have always valued but instead, we are providing tangible economic benefits to the American people.

Mr. Chairman, that completes my statement and I thank you

very much.

[The prepared statement of Secretary Glickman can be found in

the appendix on page 54.]

The CHAIRMAN. Thank you very much, Secretary Glickman.

Senator McConnell, I would like to recognize you for a moment.

STATEMENT OF HON. MITCH MCCONNELL, A U.S. SENATOR

FROM KENTUCKY

Senator MCCONNELL. Thank you, Mr. Chairman, for accommodating me. I just wanted to introduce one of your subsequent witnesses briefly, an old and dear friend of mine who happens to be

president of the Kentucky Farm Bureau, Sam Moore, who will be

testifying on the second panel.

Sam and the 250-members of the Kentucky Farm Bureau are actually in town this week. We just had a meeting with them earlier.

I wanted to welcome him to our committee on behalf of everyone

in Kentucky who is so proud of his leadership of the Kentucky

Farm Bureau.

Sam is an active farmer himself, raising beef cattle, corn, soybeans, feed grains and, of course, tobacco, which is so important to

our state. He is from Morgantown, Kentucky in West Kentucky and

has spent almost 50-years really around farms. He started very

early.

Sam has been extremely busy this last year trying to secure a

substantial amount of Kentucky’s phase 1 tobacco company for agricultural development in our state. He has done a remarkable job

on that.

And Mr. Chairman, I just wanted to thank you for the opportunity to interject here and introduce Sam, from whom all of you

will be hearing a little bit later. Thank you.

The CHAIRMAN. Thank you very much, Senator McConnell.
14

Senator Johnson, do you likewise have a short introduction? We

are delighted to hear from you.

STATEMENT OF HON. TIM JOHNSON, A U.S. SENATOR FROM

SOUTH DAKOTA

Senator JOHNSON. I will help expedite the process here and submit a statement, Mr. Chairman.

I appreciate your holding this hearing. I think that expanded agricultural trade with China is a very key issue, both in terms of

our economy and in terms of democratization and the other values

that we hold, as well.

So I am pleased to have this hearing today.

[The prepared statement of Senator Johnson can be found in the

appendix on page 50.]

The CHAIRMAN. Thank you very much.

Ambassador Scher.

STATEMENT OF PETER SCHER, SPECIAL AMBASSADOR FOR

AGRICULTURE, OFFICE OF THE U.S. TRADE REPRESENTATIVE, WASHINGTON, DC.

Mr. SCHER. Mr. Chairman, thank you. I would ask that my full

statement be included in the record and I will make brief remarks.

The CHAIRMAN. It will be included in full.

Mr. SCHER. I am very pleased and honored to be here with Secretary Glickman because I do believe that the effort we have made

with China has really been a team effort, in particular between

USTR and USDA under the leadership of Secretary Glickman and

Ambassador Barshefsky.

If I might just take a minute, I would like to recognize three of

the career people who have been part of this team and who normally do not get recognized but I think really deserve it here.

Three people are here—Teresa Howes and Jason Hafmeister from

my staff and Lynn Alfala from USDA’s Foreign Agricultural Service.

The CHAIRMAN. Please stand so we can identify you.

Senator BAUCUS. That would be a good idea.

Secretary GLICKMAN. May I just interject? We have our Ag attache from Beijing who is here, Suzanne Hale. I would like to recognize her, as well.

The CHAIRMAN. Suzanne is there; great.

Mr. SCHER. I have to say, Mr. Chairman and members of the

Committee, these are people who very rarely get recognized but

whose expertise and tireless work and very long nights really resulted in this agreement and I think they deserve the Committee’s

recognition and all of our recognition, as well.

Senator BAUCUS. Mr. Chairman, if I might interject, I agree. I

know Suzanne Hale. I was over in December to China. I know she

represents everybody else. She is aces. She works hard and does

a great job and I am glad, Ambassador, that you have recognized

everybody because it is very true.

The CHAIRMAN. I agree. Thank you for giving that recognition.

Mr. SCHER. Mr. Chairman, let me just say briefly I think, as Secretary Glickman and many of the members of the Committee have

said, China’s accession to the WTO is a clear economic win for the
15

United States. Together with permanent normal trade relations, it

will, for the first time, open the world’s largest Nation to our goods,

to our farm products, and to our services. Without permanent NTR,

as Secretary Glickman said, our competitors in Asia and Latin

America and Canada and Europe will reap those benefits and this,

I believe, is the critical question facing Congress.

Before I update you on the status of the negotiations on China’s

accession, I would like to just give a brief overview of the specific

agriculture commitments because these commitments reflect every

commodity of interest to the United States. They are comprehensive. They will be phased in over a very short period of time. They

hold China to the same standard we would expect of all new WTO

members. And, most important, in each case they reflect very specific enforceable commitments.

We will be opening China’s market for all commodities of significant interest to the United States and moreover, we will be addressing a broad range of policy issues of concern to American producers. China will make significant cuts in tariffs and will complete them by January of 2004. This is one of the shortest phaseins for any accession in the WTO. And these will be in the commodities of top concern to the United States, everything from beef and

pork to citrus, processed foods, wine and dairy. Tariffs will be reduced from an average of 31-percent to an average of 14-percent for

our priorities. China will establish a generous tariff rate quota system for bulk commodities, like wheat, corn, cotton, and rice.

This will result, for the first time, in decisions on the imports of

these products being made based on the market and not based on

government edict.

China will guarantee the right to import and distribute products

without having to go through state trading enterprises or middlemen.

China has agreed to cap and to reduce trade-distorting domestic

support and it has agreed to eliminate the use of export subsidies.

If we can get Europe to make the same commitment, we would be

in pretty good shape in world agricultural trade.

And, as somebody referred to, China agreed last year, even before entry into the WTO, to eliminate Sanitary and phytosanitary

[SPS] barriers on meat, on citrus and on wheat, which resulted earlier this week in the purchase of 50,000-tons of wheat, the first

such purchase from the Pacific Northwest in 25-years.

Let me say I think it is important to note, and I think both Secretary Glickman and Senator Baucus referred to this, while we are

pleased that China has taken these steps under the bilateral agreement—they have sent the citrus team; they sent the wheat team;

they purchased wheat—we are very concerned about how quickly

they are implementing this agreement, particularly as regards to

meat and poultry. And I think we have been clear to the Chinese,

and I want to be clear to this committee, that we will not be satisfied until all of the necessary changes have been made by China

to implement the agreement and exports of all three commodities

have occurred. That is our bottom line.

Overall, Mr. Chairman, the WTO agreement that we have negotiated addresses the full web of trade barriers in this market—barriers at the border, unfair restrictions on marketing within China,
16

and unscientific inspection standards. But the work is not yet done.

China must now complete bilateral market access agreements with

a number of WTO members, including the European Union, and it

must also complete a multilateral negotiation at the WTO, particularly covering commitments on rules, and these steps are proceeding. And we are encouraging countries to move as quickly as possible, including the European Union, including Mexico and some of

the Latin American, countries, as well as China itself, to move this

as quickly as possible.

Mr. Chairman, let me conclude. I believe that the case for China’s entry into the WTO and therefore for Congress’s granting

China permanent normal trade relations is very, very compelling.

As Secretary Glickman said in his remarks, no changes to U.S.

laws or import policies need to be made for China to become a

WTO member, unlike any of the trade agreements we have ever

brought before Congress. We change none of our market access

policies. We lower no tariffs. We change none of our laws controlling the export of sensitive technologies. And we amend none of our

own trade laws.

We do risk losing the benefits of this agreement if we fail to

grant China permanent normal trade relations. So we would obviously encourage—we are doing everything we can and would encourage Congress to do everything it can to consider this matter expeditiously. Thank you, Mr. Chairman.

[The prepared statement of Mr. Scher can be found in the appendix on page 58.]

The CHAIRMAN. Thank you very much, Ambassador Scher.

The columnist Tom Friedman in the New York Times yesterday

in a column called ‘‘Eyes on the Prize’’ said, and I quote, ‘‘It is now

going to be very tempting for Congress, caught between the rightwingers, who have been energized by the threats from Beijing

against Taiwan, and the left-wingers, who have been energized by

Mr. Gore’s ambivalent support for his own trade negotiators, to

walk away from the Clinton deal for bringing China into the WTO.

Nothing could be more reckless. This is the time to keep our eyes

on the prize and the prize remains the stable, steady transformation of China into a responsible member of the world trading

system, into a more free and open society. Few things are more important for world stability than that.’’

This is preface for my general line of questions today. Obviously

we are interested, as an Agriculture Committee, in the very remarkable details that you have negotiated and recognition has

been given to that and you are, in your testimony, illustrating that.

Secretary Glickman, on his blue cards, has really given us all the

facts.

The problem that I foresee, however, is that a major reason and

maybe the major reason for this agreement is the national security

of the United States of America. It is not an original thought but

many have suggested that our ability to work with Russia, to work

with China so that these countries in due course move into a situation of democracy, human rights, market economic principles, freedom of the press, freedom of religion, is terribly important for the

generation of our children to come and that if we fail in this respect over the details, then the consequences are likely to be great,
17

given the proximity of weapons of mass destruction and the ability

of nations to use these with awesome results.

So we are talking about something that is very grave, and I

would hope and I presume the President will make this case and

the Vice President and each one of you on a number of occasions.

This is a trade agreement and it is an extremely important one,

but we are really talking about consolidation of China with the rest

of the world and the globalization of that enormous population and

that economy at a time in which apparently the Chinese are willing

and perhaps at least portions of their society are eager to come into

this. I stress this because I fear we could lose the argument if it

is strictly a trade issue.

I ask you, Secretary Glickman, from your experience in the

House, to analyze once again the fact that there have been fast

track authority votes in the House of Representatives, at least two

of them fairly recently, in which House members, by sizable majorities, have rejected giving our President fast track authority.

It seems to me to be unlikely that members who have voted

against fast track authority, which clearly were trade votes, are

likely to change their minds without an enormous effort and probably argumentation that goes well beyond the normal business of

jobs and parochialism and protectionism and all the rest of the

things that encumber our society even as we talk about trade.

How can these people change their minds? What is the administration’s strategy? Or is there is not a very good one, is there any

very good reason to have the vote at all? That is a question being

raised increasingly.

Secretary GLICKMAN. Well, I think that the administration has

a clear strategy to try to sell this agreement, both to the American

people and then, of course, the people would sell it to Congress. Let

me make a couple of points here.

One is the President himself agrees with you that this is a national security vote as much as it is a trade vote, and if it is focussed strictly on the dollars and cents of how much X we are

going to sell over there, that, in and of itself, may not be enough

to cut the deal and get it passed.

The CHAIRMAN. That is my impression.

Secretary GLICKMAN. But I also think that in addition to that, it

is important to recognize that this is not the same boat as fast

track and this is not the same boat as NAFTA. This is a focussed

vote on a trade relationship with one country, China, and it contains in most areas and particularly in agriculture, substance

which is 100-percent in the favor of the United States of America.

As Mr. Scher said, as others have said, we give up nothing, zero,

nothing in the agriculture area. We do not allow access, for all purposes in the production agriculture area, to anything that is not already there. And, of course, our markets are open to the world.

Now look at this. We sell China $14 billion worth of things a

year—things, everything you can think of—a little agriculture, airplanes, some other things. They sell us $70 billion worth of material. They have a 5-to-one advantage over the United States of

America.

What we are saying in this agreement is we would like to equalize that advantage just a little bit. And what Mr. Scher and Ms.
18

Barshefsky has done is negotiated an agreement where it can only

go in our favor. It cannot go the other way.

That message is not yet out there in the countryside. There is

the belief out there that this is just one more trade agreement, like

every other trade agreement. And by and large, NAFTA, I think,

has been positive for the United States. There have been some people who have probably not been helped as much as others, and the

negatives and the horror stories have dominated the public debate.

I could see that at a recent farm convention I was at where some

people have talked about all these possible negative things that

have happened on other trade agreements and they are putting

them all on China now, when they have nothing to do with China

at all. We just have to do a better job of selling that and getting

the information out there.

But let me just finally say the President—he has talked with

many members of Congress; he has had them up to the White

House. He intends to continue to do that. He agrees with you absolutely about the importance of this to our national security. Sorry

for the long-winded answer.

The CHAIRMAN. I think it was a very important answer. Even

after you were with the National Farmers Union, as you know, the

vote was still 64 to 62 against it. This is a farm group.

Now apparently the word was there, I suppose——

Secretary GLICKMAN. Before I got there it would have been much

more overwhelmingly negative.

Senator ROBERTS. Yes, but which way?

[Laughter.]

The CHAIRMAN. Well, this is a significant agricultural group in

our community and it is important that those of us in agriculture

at least have as much enthusiasm and understanding; others in

our society may not. So my plea would be that you go back to the

group with some of the arguments that we are talking about today

that are national security, in addition to the esoterics of trade.

Now just one final question, and that is what if we do not have

a vote this year? I have heard predictions that in due course, the

Chinese will work out their problems with the EU and they will

work out their rule-making situations with the WTO organization

and that their accession to WTO might not occur in calendar 2000

but it might occur in the first quarter of 2001, with or without a

vote of the United States.

Is this true? And what are the implications if that format were

to happen?

Mr. SCHER. The dangers for us I think is that we lose the benefits. I mean the WTO rules require that all countries, all members

of the WTO be granted ‘‘immediate and unconditional MFN.’’ So if

China becomes a member of the WTO which, as you know, the actual accession of China does not require a vote but the granting of

permanent NTR does, then the risk if we do not provide PNTR is

that China would have the right to say we do not need to provide

the benefits to the United States because the United States is not

providing us with the benefits that we are entitled to.

So Europe, which will have provided permanent NTR, you know,

all these Latin American countries, Canada, they will get the benefits. And even if it is just a short period of time, the leg up that
19

our competitors—I mean, our wheat growers believe they have an

opportunity to really compete effectively in this market. We do not

want Canada and Australia and other countries getting in there

before us and having better opportunities than us.

So I think the dangers are very real and the risk is very significant that we would lose those benefits.

The CHAIRMAN. Thank you very much.

Senator Baucus, we will try to have a 5-minute limit so we can

all ask questions.

Senator BAUCUS. First, Mr. Chairman, I very much compliment

you for holding this hearing as a forum to get the word out just

how beneficial this agreement is.

I have the same concerns that Secretary Glickman has. People

in the country just think trade deals are not good and what are we

giving up here? China is China; they do all those things over there

and why are we doing this? And it could not be further from the

facts and the truth.

I urge, too, both of you to get around the country a lot, in addition to going to members of Congress. And use the bully pulpit of

the White House to the degree the President gets around the country because he gets public attention when he goes around the country and he speaks. I know you guys do, too, but he gets a little

more. It may take that to get people to understand just how important this is.

Stating it even more directly, if by chance there is an unfavorable PNTR vote, my understanding is that we revert to SmootHawley-era tariffs on Chinese products coming into the United

States, up to 70-percent. It is very, very high. If MFN or PNTR is

not granted, automatically we go to Smoot-Hawley-era tariffs,

which is obviously just disastrous. All the main points have already

been said but I just encourage us to keep working.

One question I do have, let’s say we get the agreement. How are

we going to compete with Europe’s export subsidies and other aggressive marketing tools, even though under the agreement, China

has agreed to TRQ of roughly 7-million tons?

Mr. SCHER. 7.3 on wheat.

Senator BAUCUS. 7.3 and then up to 9-million after a couple of

years. Last year they bought about a million?

Mr. SCHER. Right.

Senator BAUCUS. A little over a million. Of course, that was because of the Asian financial crisis.

OK, we get a higher TRQ, 7- to 9-million metric tons. What assurance do we have that we are going to be able to take advantage

of that in the face of European export subsidies?

Mr. SCHER. Let me say two things. Obviously we face European

export subsidies around the world and that is a reality that we are

trying to change in the next negotiations, which begin this month

in Geneva.

I think the view that we have taken, and we have worked very

closely with the wheat industry on this, is that the TRQs for the

first time give us an opportunity to compete. I mean before now,

we have not even been able to compete for the market share because all the decisions in China are made by central planners. I

mean now, under this new system, you are going to have the deci-
20

sions shifted to the end users, to the millers, to the people in China

producing animal feed.

So our view is that we can compete in that market. Obviously it

creates a disadvantage that we are all aware of, having to face European export subsidies, and we need to bring those down and we

need to address those. And frankly, China’s commitment not to use

export subsidies is a fairly powerful message to the EU. But I

think that the TRQ system does give us, for the first time, an opportunity to compete for the business. And I think our view and I

think the wheat growers’ view is that we can produce a quality

product at reasonable prices and that opportunity will make the

difference in China’s market.

Senator BAUCUS. You made a very good point with respect to the

market mechanisms here. When President Jiang Zemin, who is

head of COFCO, was in Montana a few days ago, I was struck with

how often he would say, you know, we will buy if the price is right

and the quality is right and the terms are right. Over and over and

over, it was on a commercial basis, which I thought was a big

change, a very important change, almost a profound change—that

is, not political but on commercial terms, which means that we

have a good opportunity because we believe we have high quality,

good wheat, but it means even more that we have to work hard to

compete.

Mr. SCHER. Right.

Senator BAUCUS. We have to have the product. We have to have

the price and clearly find some way to get the Europeans to back

off a bit. But China does want, it seems, to negotiate on a commercial basis, which gives us a real opportunity, particularly since the

mind set in China seems to be more commercial than it has been.

Secretary GLICKMAN. I met with him yesterday. In addition to

saying what he said, he kept saying, ‘‘Do not think of me as a government person; I am not. I am a businessman.’’

Senator BAUCUS. Yes, he made that same point to me over and

over again.

Mr. SCHER. If I might add, I think it is an indication of the movement in China because I think people like President Zhou COFCO

are being forced to be more efficient and they want to have the opportunity to buy wheat, particularly from the Pacific Northwest

that they can get it at better prices.

Senator BAUCUS. Thank you. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you.

Senator Roberts.

Senator ROBERTS. Thank you, Mr. Chairman.

Tim Galvin, a former staffer of the sometimes powerful House Ag

Committee, doing an outstanding job trying to get our exports

cracking, I am quoting: The U.S. market share of global agriculture

trade has eroded so much, ‘‘this could culminate in the United

States losing out to the European Union as the world’s top Ag exporter in 2000.’’

In fiscal year 1981 and 1998, Tim said, ‘‘World trade in agriculture doubled but U.S. exports lagged behind major competitors

and overall U.S. market share fell from 24-percent in 1981’’ when

both the Secretary and I were serving on the Ag Committee, ‘‘to 18-

percent today.’’
21

‘‘Galvin and Agriculture Under Secretary Gus Shumacher,’’ and

Gus is in the room and I cannot think of anybody who has worked

harder and persevered tirelessly in behalf of our exports, doing

great battle in a very positive way with the European Union, and

thank you, Gus, for your efforts, ‘‘urged the panel to increase the

budget for Foreign Agricultural Service [FAS] and said approving

permanent normal trading relations with China and China’s accession to the World Trade Organization would produce great gains.’’

When Dan and I were out at the convention, not at the same

time but at the convention of the National Wheat Growers, this

was the number one issue. When 105 presidents came in from all

the counties of Kansas this week and they wore big buttons and

they had this as the number one issue. I can say the livestock sector would do the same thing. I do not know about the National

Farmers Union [NFU]. You always have folks, the exception to the

rule or people who go upstream with high waders on. I think the

water is a little high in that respect.

Let me just say that this is a tremendous issue. I think it is a

crossroads issue. I have already made my speech on that.

Dan, at the last minute in the November negotiations, trading

rights for fertilizer were apparently at the highest levels removed

from the agreement, but both sides made a commitment, as you are

aware, to address the issue in the coming months. We were able

to get over 70 Senators—as a matter of fact, I think it was exactly

70, Mr. Chairman, in a letter and personal conversations with the

Chinese ambassador.

We met just this past week—Secretary Daley, you, others—in regard to this subject. I was happy to learn the administration considers trading rights for the United States’ fourth largest export to

China top priority. Can you give me any update on these efforts?

Secretary GLICKMAN. I think Peter probably could.

The CHAIRMAN. Mr. Ambassador, if I could just interject for a

moment, to conserve both of your time, I am going to leave to vote.

Senator Roberts I will leave in control of the Committees while he

is questioning. Then Senator Craig and Senator Grassley will be

back. In that way we will utilize this time.

I apologize for interjecting.

Mr. SCHER. Senator, on the issue of fertilizers, as you know, we

were able to reduce tariffs and eliminate quotas and get distribution rights, but the issue of trading rights was pulled back in November, essentially the right to export freely in China.

We have been clear to the Chinese. In fact, Ambassador

Barshefsky and I met with Vice Minister Sung from the Trade

Ministry 2-days ago, I believe it was, and were clear to him that

this issue had to be resolved and we have made a proposal to

China on how to resolve it. We have done that in conjunction with

our industry, with the fertilizer industry. And the plan right now

is for Don Phillips, who is our senior China negotiator at USTR,

to go to China next week to sit down with the Chinese and to work

this out.

But I will tell you that Ambassador Barshefsky, in every conversation she has with the Chinese, makes clear that this has to

be resolved, and I think the letter from the 70 Senators weighed

heavily with the Chinese on that.
22

Senator ROBERTS. So you can take the letter of the 70 and, at

the appropriate time—I know they are very interested in this

whole trade agreement, in some kind of a whip check. You could

say well, on one hand; then, on the other, here are 70-votes that

are very crucial.

Monday China, as I have said, announced a purchase of 50,000-

tons of American wheat. One of the prospects for future purchases

in relation to the PNTR—I do not want to put that thought in their

mind but it is on everybody’s minds in regard to future sales. If we

do not do the right thing in regard to this trade agreement, it worries me in regard to future sales. And the ambassador has already

indicated every one of our competitors is going to have a leg up.

Would you care to comment on that?

Secretary GLICKMAN. Well, one is I told the President of COFCO

and made the public statement that this was a good first step but

this was not everything that we expected them to do in honor of

their agreement under the bilateral arrangements, and 50,000-tons

is nice, a good step, but in the big scheme of things, it is a drop

in the bucket.

They also agreed, as part of this bilateral agreement, to implement it, would be to purchase wheat, citrus and meat products. We

are going to follow this shipment of 50,000-tons to make sure that

it gets into the ports, that the ports have been adequately instructed that the phytosanitary measures have been taken care of.

I mean they still have work to do to ensure that they intend to

implement the agreement that they have agreed to, but part of that

implementation is purchase of additional commodities. We have

made that message clear. I cannot tell you what is going to come

between now and April and May of additional commodities but we

would hope that more would come and we have relayed that to

them.

Senator ROBERTS. Thank you.

Senator Craig.

Senator CRAIG. Thank you, Mr. Chairman.

Senator ROBERTS. Did you want to mark up crop insurance right

now?

Senator CRAIG. Done.

[Laughter.]

Senator ROBERTS. Just a thought.

Senator CRAIG. We will let that one hang.

Mr. Secretary, Mr. Ambassador, thank you very much. I will ask

the unanimous consent that my full statement be a part of the

record.

Senator ROBERTS. Without objection, it is so ordered.

STATEMENT OF HON. LARRY E. CRAIG, A U.S. SENATOR FROM

IDAHO

Senator CRAIG. I may not be here for the full hearing but I also

want to recognize in the audience Jerry Kress from American Falls,

who is here representing the National Association of Wheat Growers and the Idaho Wheat Commission.

Mr. Secretary, I had the unique opportunity while you folks were

duking it out in Seattle to take a trade mission to China. We were

the first trade mission on the mainland following Ambassador
23

Barshefsky’s bringing together this agreement to bring China into

the WTO with the normal trade relations.

I must tell you that I was impressed with what I sensed was a

very real commitment on the part of the Chinese. In fact, it was

a bit unique, I am told by our shop over there, that President Jiang

Zemin gave us nearly 2-hours of conversation—not just me but literally sat down with all of those businessmen and women, wanted

to know what they were doing and why they were there and what

their interests were and talked passionately about his working

with the ambassador to put the agreement together, spoke personally of his involvement.

Now, I must tell you that was impressive to me because I think

he recognizes how this agreement and ultimately our acceptance of

it and work here with it brings them in and brings them down a

road toward the rule of law, and it is something that we cannot

miss and I hope we do not miss, that they are really opening the

door not for us but for them to begin to participate in a set of rules

and laws that we are all agreeing to as a part of the WTO that

heretofore they have not. That is of significant importance and it

has not missed them in any sense of the word.

So I would hope and the reason I say this is I like to hear people

like you say we are committed to getting this; we will come to the

Hill and work in the trenches here to make it happen. Can I expect

that?

Secretary GLICKMAN. You bet.

Secretary CRAIG. Good, because that is what it is going to take.

You and I both know the politics of this issue and the timing of

this issue and the frustrations on all sides with different pieces of

the puzzle. And I would also say that sometimes and right now the

Chinese are sending signals that are frustrating as it relates to

other issues that go on in that area and the ability to polarize a

vote here or there against that, looking at the immediate versus

the broader picture of the future and the relationship that future

can bring us.

So I think it is important that we move sooner than later and

it will be especially true in the House, but we will make every effort to make it happen here in the Senate, and I think that we can

do that.

I must tell you that I agree with you that the 50,000-metric-tons

I hope is a beginning. We hosted the trade delegations in our office

yesterday and they worked out of our office and we have met with

them and we spent a good deal of time with them on the issue. I

think it is important that we stay on top of it and you have already

outlined your intent to stay on top of it as it relates to timing and

movement and a clear show of good faith as it relates to this, to

make sure that we can move expeditiously and in a timely manner.

I am certainly going to encourage that on the Pacific side of this

issue, at our ports, and would hope that we could get that done.

But I stopped by this morning not only because we are all very,

very interested in this but the timing is important and I think we

miss an opportunity here if we stumble now at a time when the

politics of this may at times be frustrating. But I will tell you that

when you decide on an orchard, an apple orchard, that you are

going to start pulling trees out and that orchard, under a normal
24

market scenario, would have three to 5-years of life left but you are

pulling them out because a Nation decided they would go out and

capture a market, and in the last decade, that is exactly what the

Chinese have done and they are dumping in this market a concentrated apple juice that has taken, if you will, the safety net out

from individual orchard operators’ margins, and that is happening

across the sunny slopes of Idaho today and the Yakima Valley of

the State of Washington and it has put that industry in turmoil.

It is critical, and I use this as an example that our trading partner China come inside and begin to play by the rules. They will

grow by it and we will gain by it. And any failure on our part to

miss this opportunity is a tremendous opportunity lost.

Thank you both very much for being here. I caught the gist of

your response to the questions of the Senator from Kansas and I

think those were adequate for responding to the questions I had.

I thank you very much.

[The prepared statement of Senator Craig can be found in the

appendix on page 52.]

Senator ROBERTS. The Chair is delighted to recognize the distinguished Senator from Iowa, Senator Grassley, for any questions he

might like to pose to the distinguished panel.

Senator GRASSLEY. Well, I thank the really junior Senator from

Kansas.

Senator ROBERTS. The Chair might welcome the second panel

under the circumstances.

[Laughter.]

Senator ROBERTS. The Senator is recognized.

STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S SENATOR

FROM IOWA

Senator GRASSLEY. I do have respect for you.

First of all, I was here, Secretary Glickman, when you gave a

very enthusiastic endorsement of why we need to proceed and also

that it is a win-win situation for us, and I think that enthusiasm

is very well and the extent to which it is duplicated and repeated

by everybody in the administration as enthusiastically as you have

said it will help us very much with the process of getting it through

the Congress. So I thank you for that.

I am going to focus on the Agricultural Access Agreement, as opposed to the market access portion of it, if I could, because China’s

implementation of this and what they demonstrate about adhering

to past agreements and the enthusiasm with which they do it I

think is going to set a stage over the next couple of months for how

easy or how hard it is to get a normal trade relations with China

bill passed, and obviously I am enthusiastic for the reasons you

gave for that, our doing the normal trade relations with China.

I am disturbed by reports that I have heard about China’s lack

of cooperation in implementing the portion of the agreement, particularly that covering meats, beef, pork and poultry. I understand

that China is apparently saying that the Chinese language version

of the agreement dealing with acceptance of United States meat is

conditional, in a sense saying that the agreement allows meat to

be shipped to China if China decides to accept our products.
25

Is this, in fact, what China is saying? And in the process of answering that, could you tell us what I believe, that the English language version of the agreement is controlling?

Mr. SCHER. The short answer is yes to the last question. The

agreement that was negotiated by our team and translated by our

team is the same agreement. And frankly, we are very concerned—

is probably an understatement—that China has taken no action to

implement the agreement on meat, unlike citrus, which they have

sent inspectors and wheat, as well.

We have been very focussed on this issue. As I indicated, I think,

when you were out of the room, Senator Grassley, Ambassador

Barshefsky raised this issue earlier this week with China’s Vice

Minister for Trade, Mr. Sung, and she indicated to him that this

was a top priority and frankly, this was about the credibility of the

Chinese with our Congress.

China committed to immediately begin accepting imports of U.S.

meat and poultry that have been certified by USDA as wholesome.

No other technical work needs to be done, and we expect China to

begin doing that immediately. And we have been very clear with

them in the starkest of terms that their failure to do that would

be very unhelpful.

Senator GRASSLEY. Are they, in fact, saying it is conditional?

Mr. SCHER. I am sorry.

Senator GRASSLEY. Are they, in fact, saying it is conditional in

regard to meat shipments?

Mr. SCHER. Well, there are a lot of different people saying a lot

of different things, so I do not want to pretend to speak on behalf

of the Government of China. The bottom line for us is they have

not taken the steps they need to take and we have told them that

they have to take the steps they need to take, that the support of

many of the agricultural groups and many members of Congress—

from the pork producers to the cattlemen and the poultry producers—frankly is contingent on their implementing this agreement.

Secretary GLICKMAN. If I just might add, the agreement language

says—it is interesting—it says that China accepts the USDA Food

Safety Inspection Service meat and poultry export certificate of

wholesomeness as proof that FSIS-certified meat and poultry complies with U.S. inspection standards and therefore any meat accompanied by the certificate is eligible for import into China. So that

is good.

But on meats, there is still some insistence on their part, and

again as Peter says, it kind of depends on perhaps who you are

talking to there, that this allows them to postpone the implementation until they are satisfied with our meat inspection system and

it is possible that they might request that we allow quarantine officials to inspect our system as a prerequisite for implementation. I

do not know; perhaps that is for optical reasons within China. And

if we open this Pandora’s box, they will never implement the agreement.

So I think your point is a good point. It is one that Ambassador

Barshefsky is working on. I think we can work it out but it is not

one that is resolved completely yet.

Senator GRASSLEY. I hope so because I had a chance while I was

in Seattle to have a meeting with some of my colleagues with the
26

trade minister for China and there was nothing about that meeting

that was in any way negative about China’s acceptance, not only

the wording but the spirit of it, as well.

In fact, I came away so enthused that, you know, there is no

problem. Well, maybe if you look at citrus, you would say there are

no problems, but in the segments of agriculture that come from the

Midwest, it seems to me that we are being hurt because it is not

being accepted and it seems to me that China then makes it a little

more difficult for some Senators to vote for normal trade relations

and I hope they realize that.

Has China published its version of the Agriculture Cooperative

Agreement? And if not, what is the delay?

Mr. SCHER. No, they have not published it. We can find out why.

We have certainly published our version of the agreement and we

also have—as you know, Ambassador Barshefsky in Seattle signed

the Chinese version.

Obviously they have communicated to some of the key ministries

aspects of the agreement, which is why I think you saw the citrusinspecting team here and why you saw the wheat team here last

week. So there are steps being taken. Why they have not published, I just do not know.

Senator GRASSLEY. Mr. Secretary, I understand that you did a

very good job of explaining to the Chinese in a seminar last year

how our meat inspection system worked and particularly the certification process. When the Chinese attended this seminar last

year, did you get a sense that they did not understand how our

meat inspection system operates or that they needed more information? Because I am told that we keep hearing from them that they

need more information about meat inspection before they can implement this.

Secretary GLICKMAN. It was last June, I think, when our Food

Safety Inspection Service gave the training and no, I was not under

the impression that at the time there were any additional difficulties—whether they wanted plant by plant inspection or other kinds

of things, which would make it impossible for us to practically sell

meat products over there.

This is something that still has to be worked out. It is not yet

totally resolved and I hope they are listening to this exchange.

Senator GRASSLEY. I have also heard that the Chinese, and at

what level I do not know but they have told President Clinton that

they do not want to implement the meat portion of the Agriculture

Cooperation Agreement before they get into the WTO. Have you

heard anything of that nature?

Secretary GLICKMAN. No, have not.

Senator GRASSLEY. Well, I guess maybe the last point I would

make to the Chinese leaders is that I hope they do not try to link

the two. Now, you have not heard of that. Maybe my information

is wrong. But if there is any attempt to do that, that is going to

be——

Secretary GLICKMAN. If they had said something to the President

on this, I am sure it would have been passed down to us. I do not

believe that is accurate.

Mr. SCHER. In fact, I think to the contrary, the President has

made clear to the Chinese that this needs to be done and that the
27

agreement and the commitment was that this would be done independent of the WTO.

Secretary GLICKMAN. Senator, I would just tell you quickly, you

know, they have put together a team of senior officials within the

departments in the White House full-time to manage this China

WTO. Patrick Steele, who is the number two person at the Foreign

Agricultural Service, is a senior member of that team full-time in

the White House working on WTO. And David Lane, who is Secretary Daley’s chief of staff, is kind of heading the team up. He is

a pretty good conduit of information and if you or anybody else

need to know if something like this is happening, you should feel

free to contact him directly.

Senator GRASSLEY. OK. Maybe we can go beyond that and them

I am done. And that is just the point that if you hear that, would

you let us know?

Secretary GLICKMAN. Yes.

Senator GRASSLEY. Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Grassley.

I have just two more questions. The agreement we are talking

about today has the tariff reductions that you have illustrated in

your testimony. But in the past we have noted tariff reductions are

of limited value where there is no competition among importers

and where the tariff is being paid by our government agency.

Now, you have touched upon this but can you explain in greater

detail how the Chinese might go about liberalizing their import regime to make our tariff reductions meaningful?

Mr. SCHER. I think there are a couple of points to make. First

of all, and I think you are right; obviously the tariff portion of this

is an important portion but it is not the only portion, which is why

trading rights for U.S. companies and for other foreign companies,

distribution rights, and frankly, if I could just spend a minute on

the tariff rate quota system is, I think, a perfect example of how

Chinese is liberalizing its import regime.

Right now decisions on imports of bulk commodities like wheat

and corn and cotton are made by the Government. If the Government decides they want to import it, they imported it. Under the

system, the new TRQ system, China will be required to issue import licenses—for example, in the wheat area, we are about 7.3-million metric tons of import licenses—to end users, to millers, to

other producers. Those end users will then have the right to import. In some cases it is through the state trading enterprises but

in many cases it is through private companies.

So you are now shifting the burden of that decision-making away

from the central planners, away from the Government to the market, and I think that is a perfect example of how China has recognized that the Government cannot continue to make these decisions.

Secretary GLICKMAN. There are also use-or-lose provisions in

these proposals which say that if the public sector does not import,

then those amounts can go into the private sector, additional

amounts, which is, I think, a very positive step.

The CHAIRMAN. China has committed to cap and reduce tradedistorting domestic subsidies. However, the United States and

other WTO countries are already bound by specific domestic sub-
28

sidy reduction commitments. As I understand the agreement that

China will have a determination of this through multilateral negotiations.

Does this mean that China might be granted WTO membership

before it makes a specific commitment on domestic support and if

not, when will these multilateral negotiations commence?

Mr. SCHER. That will be done, Mr. Chairman, as part of what we

call the protocol negotiations. Once the bilateral negotiations are

finished, then we negotiate multilateral and what we call the rules.

So China, in that context—we have had extension discussions with

China looking at and frankly, the Economic Research Service at

USDA has been critical in this, looking at the time period that

China wants to use. And if you look at any of the time periods that

China is talking about, you are talking about very limited use of

domestic supports, frankly, less than a billion dollars where U.S.

has $19 billion and EU has $60 some billion.

So we are very confident that China will be bound to limit their

domestic supports to a very small amount.

The CHAIRMAN. Senator Fitzgerald, do you have questions?

STATEMENT OF HON. PETER G. FITZGERALD, A U.S. SENATOR

FROM ILLINOIS

Senator FITZGERALD. Thank you, Mr. Chairman. Yes, I have a

couple.

I understand that Senator Roberts earlier brought up the issue

of the fertilizers and their access to Chinese markets. I just want

to echo his concerns about that. I agree with him and I hope we

can work on that.

I did want to ask you—some of the popular press accounts have

connected the upcoming vote on normal trading relations, permanent normal trading relations with China, with China’s accession

to the WTO. Can you clarify the connection between permanent

normal trading relations and China’s membership in the WTO?

Mr. SCHER. Senator, there are two issues. China’s actual accession does not congressional approval. The President has the right

to make the decisions, as we have done in other cases. In order for

the United States to get the full benefits of this agreement, Congress must grant permanent normal trade relations, and that is a

requirement of the WTO. The WTO rules essentially say that all

members are entitled to immediate and unconditional MFN or

NTR. So that piece of it requires Congress to approve permanent

NTR.

So the result is if China enters the WTO but the United States

has not granted permanent NTR to China, we risk losing the benefits of this agreement. And in that case, our competitors in the

world market will have benefits in this market that we will not.

Senator FITZGERALD. I am wondering and maybe you could elaborate a little bit on the upcoming amendments to the China permanent normal trading relations bill. Given the Vice President’s remarks to labor leaders last week with respect to the agreement, I

am wondering how committed is the administration to getting

China permanent normal trading relations through the Congress?

Secretary GLICKMAN. The administration is not only absolutely

committed; it is, at least in my judgment, the highest priority that
29

we have on any kind of domestic policy agenda and that is everybody within the administration, including the Vice President. So I

would not be concerned that the administration is not involved in

a full court press on this issue.

Senator FITZGERALD. Now, there is a potential for many amendments, I would imagine, to that bill. Were you hoping to keep it

a clean bill?

Secretary GLICKMAN. We are hoping to keep it clean. We recognize that, for example, Senator Baucus has dropped in a bill which

deals with the issue of monitoring. We think that there are a lot

of things that are actually pretty good in his proposal. We obviously want to work with you but we would hate to see this become

a receptacle for all sorts of amendments which would be counterproductive to what we are trying to do with China.

Mr. SCHER. I think one other point I would add, Senator, is the

agreement cannot be changed. The agreement is what the agreement is. If there are amendments that do not seek to alter the

terms of the agreement, then obviously I think, as Secretary Glickman said, we are open to look at those, but the agreement itself

is the agreement.

Senator FITZGERALD. And cannot be altered.

Mr. SCHER. Cannot be altered. No, it cannot be altered by

amendment.

Senator FITZGERALD. Well, I look forward to working with the administration and I applaud your commitment to trade. There is no

question that opening up the Chinese market to our American agricultural sector, I think would be a great boon for our agricultural

economy and certainly would benefit many states, especially my

home state of Illinois, and I look forward to working with you gentlemen toward the success of our initiatives here.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you, Senator Fitzgerald.

Senator Conrad, do you have questions for the witnesses?

Senator CONRAD. Thank you. Thank you, Mr. Chairman. And

thanks to Secretary of Agriculture Glickman and Ambassador

Scher.

STATEMENT OF HON. KENT CONRAD, A U.S. SENATOR FROM

NORTH DAKOTA

I think the greatest concern that I have is that China has a bit

of history here of making agreements and then not keeping them.

There are a lot of things that I could reference. You know them

better than I do. I think of where we were back last year where

they signed an agreement and said they were going to drop their

closing off shipments of U.S. wheat out of the Northwest. They

were going to stop these spurious claims on TCK smut that were

blocking our wheat shipments out of the Northwest. And they said

when they signed that agreement that it would be effective upon

signature. That did not happen.

The meat agreement. I understand—I was not here. I apologize.

We had a vote over on the floor. Senator Grassley apparently was

making the point with respect to that.

China has now made a purchase of wheat, a very modest purchase, but nonetheless a purchase that shows some good faith. Why
30

is this agreement and how is this agreement going to be different?

And how can we be certain that there will be compliance?

Mr. SCHER. Senator, I think this is a very important area and

I know this is something that you have been focussed on and we

in the administration have. I think we have taken steps in this

agreement, frankly, well beyond what we have done in any other

agreement, to give us as many enforcement tools as possible.

For example, the commitments in the WTO agreement, for example on the administration of TRQs, are very specific, frankly, more

specific than in any other agreement we have had with any other

country. So, for example, China fails to distribute import licenses

for the 7.3-million-tons of wheat under that TRQ; that will be a violation and we would have the right to go to the WTO to enforce

that violation and if they found in our favor, we would have the

right to retaliate against them.

We have preserved all of our rights under our own trade laws,

including our dumping, Countervailing duty [CVD] laws, and we

have particularly guaranteed the right to use nonmarket economy

anti-dumping methodologies.

We have also created in this agreement, which is not the case in

any other agreement with any other WTO member, a product-specific safeguard for import surges, which would only have to meet

the standard of market disruption. You and I have talked a lot

about the 201 law in relation to other countries, which has a standard of injury or threat of serious injury. In this case it would be

a lower standard.

So if there was an import surge from China, we would only have

to meet the standard of market disruption. We can move much

quicker than the normal 201 process and we can impose import restraints on China under that agreement.

We are also going to create within the WTO a multilateral review mechanism. So it is not just the United States trying to beat

up on China to enforce, but it is the other 134 countries that would

have regular review of this agreement.

I am not going to suggest to you it is going to be easy, but I think

we have taken steps to really enhance our opportunity to enforce

this agreement in a way that will benefit U.S. farmers.

Senator CONRAD. Let me ask the Secretary if I could, fertilizer

is left out of this deal. It is a bit of a mystery to me as to why that

is the case. Why have we wound up with this result, that fertilizer

just seems to have been shunted off to the side?

Secretary GLICKMAN. Well, we have spoken about this before.

Ambassador Scher talked about this with Senator Roberts. Maybe

you want to repeat that, basically.

Mr. SCHER. Senator, we were able to reduce tariffs. We were able

to create distribution rights and eliminate quotas on fertilizer. The

sticking point in November became the issue of trading rights, essentially the right to export freely, an issue that Ambassador

Barshefsky raised directly with Premier Zhu Rongji, and we have

been very clear to China that this was an issue that needed to be

resolved. We need to get trading rights for U.S. and foreign fertilizer producers.

China has committed to us to work out a solution. We have

worked with our fertilizer industry to develop a proposal, which
31

has been presented to the Chinese. Our senior China negotiator at

USTR, Don Phillips, plans to go to China next week specifically on

this issue because obviously we recognize the importance of this

issue and the number of Senators and House members who have

written to us on it. So it remains a very high priority.

Senator CONRAD. Secretary, you have indicated we would see a

very dramatic increase in our exports to China. What is the basis

of those estimates and how confident are you in them?

Secretary GLICKMAN. They are Economic Research Service estimates. Part of that is based upon the TRQs, which will affect oilseeds and oilseed products. Cotton and grains bulk we estimate

about $1.6 billion and that is a fairly conservative estimate. That

is an annual increase by the year 2005. We also estimate an additional $350- to 400-million in citrus, meats, pork, poultry and

fruits, vegetables in reduced tariffs, and most of this is due to the

fact that if you have this little blue card that I have put out—I do

not know if you have one or not but I put it out at every table—

it is an estimate based upon the tariff cuts, along with the TRQ

increases. The tariff cuts are very dramatic in the meats area and

some of the dairy products area, in the citrus area, so that is the

basis upon which the estimates are made.

Now, I would also point out interestingly, and Peter, you could

probably verify this; I understand that assuming this agreement is

implemented, and we hope it will be, that the tariffs that the Chinese will have will be lower than the average tariffs, way below the

world average tariffs and below what a lot of European countries

have as tariffs.

Mr. SCHER. Right now, as you know, Senator, and you have

raised this constantly, the average agricultural tariffs for WTO

members range from the 40- to 50-percent range. For our priorities

the average in China will be about 14-percent and overall they will

be about 17-percent in agriculture, so I think we are making great

strides on tariffs.

Secretary GLICKMAN. And then there was some elimination of export subsidies, as well, by China, which we put into that $2 billion

figure.

Senator CONRAD. And will they support the elimination of export

subsidies for everyone? WTO round?

Mr. SCHER. The interesting thing frankly, Senator, we have not

had a specific conversation about the next round with China. We

have been focussed on getting this done. But I think one of the

things we have seen is that the developing countries in the WTO

have been some of the greatest advocates for the elimination of export subsidies. And frankly, China—I should correct this—China,

which is actually a member of APEC—the APEC leaders last year

put out a statement, and this included China, calling for the elimination of export subsidies.

So I think we can be very optimistic that with China’s entry, Europe will be even more isolated on the issue of export subsidies.

Senator CONRAD. All right.

The CHAIRMAN. Thank you very much, Senator Conrad.

Gentlemen, we thank you very much. You have been with us well

over 2-hours of excellent testimony. It has been very, very helpful.

We thank you for coming, as always.
32

The Chair would like to recognize now a panel composed of Mr.

Sam Moore, president of the Kentucky Farm Bureau; Mr. Jerry

Kress, American Falls, Idaho, on behalf of the National Association

of Wheat Growers; Mr. John Hardin, Jr. of Danville, Indiana on behalf of the National Pork Producers Council; Tom Suber, Arlington,

Virginia on behalf of the Dairy Export Council; Mr. Michael

Wootton, Washington, DC., on behalf of Sunkist Growers; and Mr.

Tim Burrack, Arlington, Iowa, on behalf of the National Corn

Growers Association.

Gentlemen, we appreciate very much your coming to be a part

of this hearing this morning. I will ask, if you can, to summarize

your remarks within a five-minute time period. Without asking

permission, let me just grant permission for all statements to be

published in the record in full, and they will be.

Mr. Moore, I will ask you to testify first and then each of the witnesses in the order that you were introduced and are seated at the

table. You received a wonderful introduction from your Senator,

Mitch McConnell, and we appreciated that and I am delighted that

you are here. Would you please proceed?

STATEMENT OF SAM MOORE, PRESIDENT, KENTUCKY FARM

BUREAU, LOUISVILLE, KENTUCKY, ON BEHALF OF THE

AMERICAN FARM BUREAU FEDERATION

Mr. MOORE. Well, I do thank Senator McConnell for the generous

introduction that he gave me.

I am Sam Moore. I am president of the Kentucky Farm Bureau.

I raise corn, soybeans, wheat, cattle and tobacco in south central

Kentucky, Morgantown.

I am here today on behalf of the American Farm Bureau, which

represents more than 4.9-million member families in all 50 States

and Puerto Rico. Our members produce every type of farm commodity grown in America and depend on access to customers

around the world for the sale of over one-third of our production.

I appreciate the opportunity to speak before you today on the

very important issue of the U.S. and China bilateral trade agreement and China’s accession into the World Trade Organization.

Farm Bureau has long supported China’s entry into the WTO on

a commercially meaningful basis. This agreement is good for the

American farmer. Having China in the WTO will expand trade

among all members, leading to increased global economic prosperity.

Having China in the WTO will bind it to the rules of commercial

law represented by the WTO and for China, this agreement will

undoubtedly lead to increased economic and political freedom.

This agreement is also good for American farmers and ranchers.

China is broadly recognized as the most important growth market

for U.S. agricultural exports. The Department of Agriculture estimates that China’s admission into the WTO would lead to an increase of $1.7 billion in sales of agriculture products within 1-year,

just about doubling our current exports to that large country.

In addition, U.S. exports to the Asian region as a whole are expected to increase in the next few years as a result of China’s accession into the WTO. This is likely to occur as Chinese consumption levels increase and China ceases to employ export subsidies.
33

This agreement may be with China but it would have impacts far

beyond Chinese borders.

You know, it is no coincidence that the American farm economy

started a decline at just about the same time that the Asian financial crisis took hold. Since 1997 we have lost nearly $10 billion in

annual farm exports, with much of that loss to the nations in the

Pacific Rim. To me there is no doubt that increased exports are the

key to combatting our current farm situation. The agreement with

China could spark that turnaround.

In Kentucky, the Nation’s leader in the number of small family

farms, farmers are in great need of some new marketing opportunities. I know all of you are aware of the current problems facing tobacco, Kentucky’s leading cash crop. In just 3-years, our 45,000-tobacco-farmers have lost over 65-percent of their production quotas

set by the price support program. That translates into more than

a half a billion dollars in lost farm income in Kentucky alone in

a very short time. Needless to say, we are faced with a very serious

economic problem in rural Kentucky.

Our governor and our state legislature currently are addressing

this problem with legislation that would appropriate 50-percent of

the funds that Kentucky is to receive from the phase one of the

master settlement agreement on tobacco. However, any expansion

or diversification of our farm economy will hinge on finding buyers

for the commodities we produce to replace lost tobacco income. Simply put, Kentucky farmers need marketing opportunities at home

and abroad.

I would like to also mention the commitment that the U.S. has

retained or strengthened as a result of this agreement to protect

the U.S. market from unfair dumping of products by the Chinese.

The U.S. will retain our current anti-dumping methodology, which

treats China as a nonmarket economy in the future without the

risk of a WTO challenge. This provision will remain in force for 15-

years after China’s accession into the WTO. It is important that we

were able to retain this provision, given the production characteristics of an economy dominated by state-and quasi-state-run operations.

This agreement also ensures that American farmers and ranchers will have substantial protection against import surges of Chinese products. This mechanism, labeled the product-specific safeguard, will address increased imports that cause or threaten to

cause market disruption to any U.S. industry or sector.

The Chinese have offered American agriculture a historic opportunity which would greatly enhance our export potential at a time

when it is drastically needed. If this agreement is enacted, farm income in the United States will be positively impacted.

China has also offered the equivalent of this bilateral negotiation

to many of our competitors. China will join the WTO and our competitors will have the market to themselves unless Congress acts

quickly to grant China permanent normal trading relations. Permanent normal trade relations would help provide for the continuance of the U.S. economic expansion and hopefully that expansion

would flow into the U.S. agriculture sector.

Farmers and ranchers are already hampered in developing export markets by our own unilateral sanctions and the unfair trad-
34

ing practices of other competing nations. We must ensure that we

do not unilaterally disengage from this historic opportunity for

American farmers and ranchers.

We urge Congress to grant permanent normal trading relations

with China as soon as the vote can be scheduled. There are a host

of reasons to do so but none better than improving the daily life

of the American people or American farmers and the Chinese people. Thank you very much.

[The prepared statement of Mr. Moore can be found in the appendix on page 62.]

The CHAIRMAN. Thank you very much, Mr. Moore.

Mr. Kress.

STATEMENT OF JERRY KRESS, ON BEHALF OF THE NATIONAL

ASSOCIATION OF WHEAT GROWERS, IDAHO WHEAT COMMISSION, AND THE WHEAT EXPORT TRADE EDUCATION COMMITTEE AMERICAN FALLS, IDAHO

Mr. KRESS. Good morning, Chairman Lugar, members of the

Committee. My name is Jerry Kress. I am a wheat producers from

Idaho. I am pleased to be invited to speak today on behalf of the

entire United States wheat industry.

The Chinese market is critically important, not only to me but

to the entire wheat industry. I want to make absolutely clear at the

outset that wheat producers across the United States strongly support China’s entry into the WTO and we urge in the strongest possible terms the immediate approval of permanent normal trade relations for China.

I have been in China three times. Each time I was there, millers

and end users emphasized the desire to have access to United

States wheat, especially wheat from the Pacific Northwest part of

this country. Unfortunately, China has maintained a nontariff

trade barrier on U.S. wheat from the Pacific Northwest ports since

1972 and has also maintained that barrier from Gulf ports since

1996 due to the perceived threat of TCK, a wheat fungus. This barrier to the Chinese market has had a very negative economic impact on all U.S. wheat producers.

In April of this last year, Prime Minister Zhu Rongji announced

China’s intention to lift its longstanding restriction on the import

of U.S. wheat from areas where TCK is known to occur. This agreement allows U.S. wheat to move from any state or any U.S. port

to any Chinese port so long as the tolerance level of 30,000 TCK

spores per 50-gram sample is not exceeded. This level can be easily

met by U.S. wheat exporters while acknowledging China’s concerns

about the disease.

The TCK announcement followed more than 20-years of extensive and at times frustrating discussions between the United

States and China, and I personally participated in some of those

discussions and I know how frustrating they have been.

But finally, the United States and China agreed to let science

rather than political or other considerations determine the terms of

trade between our two countries. This is in accord with the principles of the Uruguay Round agreement on SPS issues.

In November of this last year, the U.S. and China completed negotiations on China’s entry into the WTO. The WTO agreement
35

was formalized when the Chinese language version was signed in

Seattle in December.

In accordance with this agreement, you have heard that we will

be able to export more wheat because of the TRQ levels to China,

and I will not go into the details of those because they have been

presented several times to the Committee already.

China has just demonstrated its sincerity about these agreements where it counts most—in the marketplace. Taking a major

step toward implementation of its agricultural agreements with the

United States, the People’s Republic of China this week purchased

50,000 metric tons of United States wheat from the Pacific Northwest. The purchase is significant in that it is a reliable indication

that the Chinese are establishing a sound basis for future trade

with the United States.

China is the world’s largest wheat-producing country, the largest

wheat-consuming country, and many years it is the largest wheatimporting country. The United States is the largest wheat exporter

in the world. U.S. wheat exports to China have varied over the

years, contingent upon Chinese needs. But through the early

1990s, China imported between 1-million metric tons and 5.6-million-metric-tons of United States wheat each year. In recent marketing years, China’s needs have declined and the market has declined significantly, due not only to decreases in China’s needs but

in their stringent enforcement of the zero tolerance policy on TCK.

But we expect China in the future to once again become a major

importer of United States wheat. We base our expectations on economic developments and production constraints in China. China

has a huge and growing population, burgeoning coastal cities,

growing demand, declining stocks, stagnant acreage and reduced

domestic price supports. We anticipate that over a period of a few

years, increased China trade will have a significant impact on the

world’s supply and demand situation for wheat, and that should be

very positive for prices.

To put it plainly, nothing else on the horizon could have such a

big impact in the short term on U.S. wheat exports and the economic stability of the wheat industry or hold such potential for expanded growth in the future. In order for U.S. wheat producers to

realize this potential, it is absolutely critical that Congress approves PNTR for China as soon as possible.

By granting PNTR for China, Congress will be giving nothing

away to China, the point that was made earlier. Our market is already open to them. However, you will be fulfilling one of the

unmet promises of the 1996 Freedom to Farm Bill—that of continuing to provide export markets for United States farmers and ranchers. I believe that every farmer would rather have open and fair

markets. Every farmer would rather receive a fair price for his

product than to receive payments from the Government. Farmers

want to add to the balance of payments by exporting our product.

This point is especially timely now that the U.S. trade deficit has

reached its all-time high.

Various people, including Ambassador Barshefsky, have stated

that it would indeed be ironic if the United States, after 14-years

of negotiations, failed to grant China PNTR. By doing so, we would

allow our competitors to have the benefits of opening the China
36

market. This would amount to another self-imposed sanction on the

agriculture community, sanctioning us out of a major world market.

I believe I speak for the entire United States wheat industry in

saying we look forward to working with you and others in Congress

to make PNTR for China happen this year. The wheat industry

will do everything it can to mobilize grassroots support and you

will see our members in the halls of Congress.

It is necessary, however, for supporters in Congress and for the

administration to exhibit strong leadership and cooperation in

order to deliver a positive vote. The administration must make this

an absolutely top priority and not be deterred from the right course

of action by the difficulties of the primary and general election

campaigns.

We have heard this week the disturbing opinion expressed

around Washington that it does not really matter whether PNTR

is passed this year, that you can go ahead and pass it next year.

We believe this is absolute folly. If you want to slap the Chinese

in the face—they have come and they have demonstrated their sincerity and they bought U.S. wheat—if you want to slap China in

the face, if you want to precipitate the potential fall of Zhu Rongji

in China and the possible fall of the Government of Jiang Zemin,

if you want to pave the way for the hardliners to regain sway in

China and stifle Chinese reforms and give those who rattle the

sabre against Taiwan the lead role and the sway in China, then

fail to pass PNTR this year.

The time is now. The opportunity is at hand. Do not be lulled by

any temporary political advantage into believing that you can always set right next year what you fail to do right today. This is

an opportunity that we cannot let slip away.

Thank you again for the chance to appear today and I look forward to responding to your questions.

[The prepared statement of Mr. Kress can be found in the appendix on page 67.]

The CHAIRMAN. Thank you, Mr. Kress. As you have noted already, there is some urgency with this committee with this item

and, of course, that is why we are having the hearing today and

we appreciate so much your participation.

The next witness is the distinguished Hoosier farmer. John Hardin and his family have been involved in international work, in addition to the specific work they have done, international trade for

agriculture. It is a real privilege to have you before the Committee

today, John. Would you please participate and testify?

STATEMENT OF JOHN HARDIN, JR., ON BEHALF OF THE

NATIONAL PORK PRODUCERS COUNCIL, DANVILLE, INDIANA

Mr. HARDIN. Thank you very much, Mr. Chairman. I appreciate

your remarks. I am a pork producer from Central Indiana and also

run a grain farm.

As of today, China’s de facto ban on pork imports remains in effect, making it virtually impossible to export pork directly to China.

There are two agreements that impact the future of U.S. pork exports to China. The first is the Bilateral Agreement on U.S.–China

Agricultural Cooperation, in which China committed to accept beef,
37

pork and poultry from any USDA-approved plant. In other words,

China agreed to accept products from the same inspection system

that assures the safety of the meat and poultry that Americans eat

every day.

The second agreement is the U.S.–China WTO Agreement that

covers many issues and sectors, including pork. Unfortunately, the

Bilateral Agricultural Cooperation Agreement, which both sides

agreed became effective in Seattle in December, is not being implemented by the Chinese. China now argues that the Chinese language version of the agreement signed in Seattle does not obligate

China to accept meat from all USDA-approved facilities.

Now, I am not a linguistic scholar but I can tell you this: the

English language version of the agreement, which was signed by

both sides last April and which I understand is legally binding, requires China to accept pork, beef and poultry from all USDA-approved facilities. Moreover, China’s recent request for further information concerning our meat inspection system underscores China’s

intention to disregard the agreement.

Between late 1996 and early 1999, Chinese government officials

made five trips to U.S. meat and poultry facilities. During this

time, U.S. government officials and U.S. private sector representatives provided Chinese officials with exhaustive information on our

meat inspection system. These visits and exchanges of information

culminated in the signing of the Bilateral Agricultural Cooperation

Agreement in April of 1999. As a followup to the April agreement,

last summer USDA hosted meat industry officials from every province in China for a training seminar based on the April 1999 agreement. Thus, there is absolutely no need to host another Chinese

delegation or otherwise provide information to the Chinese concerning our meat inspection system. These delaying tactics by the Government of China must not be accepted by the U.S. government.

We have an agreement and the Chinese must honor that agreement.

I want to be clear that China’s failure to implement the Bilateral

Agricultural Cooperation Agreement is not the fault of our trade

negotiators. They have been steadfast in pushing China to honor

its commitment and to implement the bilateral agricultural accord.

The failure to implement this agreement rests squarely on the

shoulders of the Government of China.

We have raised this issue privately with the Chinese to no avail.

We are now compelled to speak publicly on this most important

issue, as the time necessary to fully implement the Bilateral Agricultural Agreement is short. We are not alone. Our friends in the

beef and poultry industries share these very serious concerns.

To add insult to injury, the Chinese recently struck a deal on

sanitary measures with the Canadians. According to reports from

both the press and our Canadian counterparts, Canadian meat exports to China will soon begin.

Mr. Chairman, I cannot overstate the level of concern in our industry regarding this issue. Our trade officials repeatedly have

asked the Chinese to publish and publicize the bilateral accord in

China. To date, the Chinese have not done so. At a minimum,

China must publish regulations which explicitly provide that any
38

importer in China can bring in meat and poultry from any USDAapproved plant.

Having said all this, I want to make it clear that we continue to

support permanent normal trade relations for China. In spite of the

current serious problems, we remain optimistic that China will

fully implement the Bilateral Agricultural Cooperation Agreement.

Mr. Chairman, we appreciate your support and the support of

the members of this committee and we look forward to working

with you to make the bilateral agreement work and to get permanent normal trade relations for China passed. Thank you.

[The prepared statement of Mr. Hardin can be found in the appendix on page 72.]

The CHAIRMAN. Thank you very much, Mr. Hardin.

Mr. Suber.

STATEMENT OF THOMAS M. SUBER, EXECUTIVE DIRECTOR,

U.S. DAIRY EXPORT COUNCIL

Mr. SUBER. Good morning, Mr. Chairman and members of the

Committee. I am Tom Suber, executive director of the U.S. Dairy

Export Council and I am very pleased to appear before you today

to testify in favor of the U.S.–China trade agricultural agreement

and, in particular, its impact on the dairy sector.

The U.S. Dairy Export Council is a nonprofit, independent membership organization representing the trade interests of U.S. milk

producers, proprietary processors, dairy cooperatives, and export

traders. We maintain offices in eight countries, including two in

China, to pursue our mission of increasing exports of U.S. dairy

products worldwide. The council works closely with and coordinates

with other dairy groups on activities of like interest and today the

National Milk Producers Federation shares the views I am presenting to the Committee. With more than $24 billion in farm cash receipts, the U.S. dairy

industry is the second largest agricultural commodity sector in the

U.S. Beyond farm receipts, dairy processors add considerable value

to milk as it becomes exportable products, such as cheese, butter,

milk powder and specialty proteins.

Most importantly for the subject at hand, however, U.S. ability

to increase milk production is virtually unconstrained. In fact, U.S.

milk supply grew a remarkable 3-percent plus last year, to reach

a new record high.

This makes our efforts to market U.S. dairy products for export

all the more important to the industry and to the national economy, but the U.S. dairy industry is at a disadvantage in compared

to the large export subsidies and high tariffs used by Europe, Canada, Japan and other members of the WTO. Precisely because of

these trade distortions, the China agreement is extremely important. It provides for both greater sales into China, as well as providing a push for greater overall dairy exports by achieving greater

reform and global trade. Thus, the U.S. dairy industry strongly

supports the WTO U.S.–China Agreement and consequently calls

for Congress to grant China permanent normal trade relations.

One of the primary points I would like to make is that China,

in joining the WTO, is granting all the concessions. No additional

access to U.S. markets is provided to China beyond that which it
39

currently enjoys. Once implemented, Chinese tariffs for key dairy

products will be cut as much as fivefold, making imported dairy

products less expensive to Chinese consumers.

U.S. negotiators were remarkably successful in obtaining tariff

concessions for dairy products in which the U.S. has either competitive parity or an advantage. In cheese, lactose, ice cream and

infant formula, the declines are quite substantial and will increase

our opportunities significantly.

Because of China’s existing import barriers and relatively low

per capita income, dairy consumption is currently relatively low.

However, as a market in transition, it offers tremendous potential

to expand dairy product consumption. As their economy changes,

per capita dairy consumption has increased. Urbanization, nutritional awareness, Westernization of their diets, income growth and

availability have all had a positive effect on imports.

Specifically, the fast food industry and other markets have had

a profound effect on the consumption of dairy products. As a member of the WTO, China would be able to experience similar growth

in a sector currently not as developed, where it uses cheese on

pizza, hamburgers, yogurt and ice cream to drive sales of U.S.

dairy products.

Whey and lactose also constitute some of our largest exports to

China. In fact, U.S. is the largest single supplier of both these

products to China. Though considered a cheese by-product, whey

and lactose sales can increase plant productivity and profitability

while also increasing the pressure on prices paid to farmers for

milk made into cheese.

The tariffs described above will apply to all the WTO countries,

yet the agreement puts the U.S. in a greater position to compete

for the Chinese market. Consequently, a second key point I would

like to make is that if other nations ratify China’s accession to the

WTO and the U.S. does not, then the U.S. would likely forego any

WTO tariff concessions while only our competitors would benefit.

Therefore, permanent normal trade relations are critical to

achieving what we estimate would be at least $135 million more

sales after tariffs have been fully phased down for U.S. dairy products. We believe this is a conservative estimate based upon the potential of the market and the relative lack of capability of the Chinese to expand their own domestic milk production.

In addition, the China agreement offers invaluable opportunity to

continue the reform of worldwide dairy trade in the WTO due to

China’s promise to eliminate export subsidies for agricultural products. This will provide significant momentum to our effort to seek

the elimination of all export subsidies during the current WTO

talks.

Like all WTO members, upon joining, China will be subject to

binding resolution of trade disputes. In light of the recent favorable

ruling of a WTO panel against Canada for its practice of circumventing its dairy product export subsidies, the U.S. industry is

confident of the WTO’s ability to eventually enforce fair and equitable trading practices.

Of course, we know that not everyone share’s agriculture’s enthusiasm for granting PNTR to China. We believe some of these concerns are legitimate, of course, dealing with Chinese labor and
40

human rights practices. However, we believe that bringing China

to WTO as a full-fledged member is the best way to address these

concerns.

Beyond all the rhetoric and predictions however, what we believe

is the simple truth is that China is on track to join the WTO

whether the U.S. approves PNTR or not. If we deny permanent

normal trade relations, our dairy competitors from Europe, Australia, New Zealand and Argentina will enjoy the benefits of the

lower tariffs and we will not. We will put ourselves at a competitive disadvantage at the precise instant the world’s largest market

is opening itself up to the world. There will be a missed opportunity from which the U.S. would have a hard time recovering.

On behalf of the U.S. dairy industry, I urge Congress to grant

China permanent normal trade relations this year and we welcome

this committee’s interest in ensuring that benefits for dairy and agriculture in general are carried out. Thank you.

[The prepared statement of Mr. Suber can be found in the appendix on page 79.]

The CHAIRMAN. Thank you very much, Mr. Suber.

Mr. Wootton.

STATEMENT OF MICHAEL WOOTTON, DIRECTOR OF FEDERAL

GOVERNMENT AFFAIRS, SUNKIST GROWERS, WASHINGTON,

DC.

Mr. WOOTTON. Thank you, Mr. Chairman, Senator Cochran. I am

Michael Wootton, director of Federal Government Affairs for

Sunkist Growers.

As you may know, Sunkist Growers is a 107-year-old nonprofit

farmer-owned marketing cooperative comprised of 6,500 citrus

farmers in California and Arizona. Today our growers produce

about 65-percent of the oranges, lemons, grapefruit and tangerines

grown in Western United States. And we have enjoyed at Sunkist

a long and successful history of developing and expanding foreign

markets, to the point where today about 33-percent of our fresh

fruit is sold in overseas markets, and that accounts for about 45-

percent of our farmers’ fresh fruit revenue.

I would like to first commend the Committee for holding this

hearing today on the subject of the U.S. China agricultural trading

relationship and examining whether the recently concluded U.S.

China trade agreement enhances that relationship.

Market access for U.S. citrus fruit exports to the huge and potentially profitable consumer markets of China has long been a goal

and an objective both for the U.S. citrus industry and for our government. With growing intensity and determination since signatures were first affixed to the 1992 Bilateral Memorandum of Understanding entered into between the two countries, negotiators

from the Office of the U.S. Trade Representative and from the U.S.

Department of Agriculture have pursued this objective.

Last spring these efforts finally reached fruition with the

achievement of a citrus market access agreement which included

acceptance by China of specific work plans and phytosanitary protocols for each of the U.S. citrus production states—Arizona, California, Florida and Texas. This phytosanitary agreement and the

implementing work plans and protocols constitute, in our view, a
41

model for commodity trade agreements, negotiated by USDA and

USTR in close coordination with the U.S. citrus industry.

By accepting these terms, China has joined with the United

States in adhering to sound science and pragmatism in its application to trade policy. China is committed to fully abide by the terms

of the WTO SPS agreement requiring that all animal, plant and

human health import requirements be based on sound science, not

political or protectionist concerns.

In keeping with the obligations of that agreement, as Secretary

Glickman and Ambassador Scher noted, last month Chinese

phytosanitary inspectors conducted a two-week inspection tour of

Florida, Texas, Arizona and California and they concluded that all

of the phytosanitary requirements incumbent upon the U.S. producers in that agreement had indeed been met.

We are now awaiting an announcement by the Chinese government officially opening their markets to U.S. citrus for the first

time since 1980. And as the Secretary earlier noted, certainly that

market opening will certainly demonstrate to all concerned that

they do indeed fulfill their commitments.

So we are very eager to enter into that market. In fact, Mr.

Chairman, I have a sample of one of our cartons ready-made for

the China market, celebrating the Year of the Dragon, which we

hope to fill with fruit soon and be able to ship.

Under the terms of that U.S.–China trade agreement, benefits,

in our view, accrue exclusively to U.S. interests, including the interests of our industry. China has agreed to dramatically reduce its

tariffs on citrus imports from the current level of 40-percent to 12-

percent by 2004. They have imposed no quota or volume limits, so

we are eligible to ship whatever the market will demand.

But in order to be able to benefit from these hard-fought trade

concessions, China clearly must gain membership in the WTO and

the Congress must extend PNTR to China.

I should also note that ultimately when their tariff reductions

take place, even including the fact that they have a value-added

tax, that the burden on our imports into the China market will be

still significantly less than the current tariff burden that we face

in a mature market like Japan, which is our biggest market in

Asia.

In our view therefore, it is not an overstatement to say that

China will in the course of the next several years become the single

most important U.S. agricultural export market. Studies have indicated there is a consumer market with disposable income of upwards of 200-million people in China today. The middle class in

China is projected to grow by 170-million over the next 5-years.

We urge the Congress therefore to extend to China the same normal trade relations policy granted on a permanent basis to 133

WTO country trading partners. To our advantage, that membership

will furthermore obligate China to adhere to the same rules of

international trade and commerce as subscribed to by all other

WTO member countries, including the United States.

Thank you, Mr. Chairman. I appreciate the opportunity to

present our views.

[The prepared statement of Mr. Wootton can be found in the appendix on page 86.]
42

The CHAIRMAN. Thank you very much, Mr. Wootton.

Mr. Burrack.

STATEMENT OF TIM BURRACK, ON BEHALF OF THE NATIONAL

CORN GROWERS ASSOCIATION AND AMERICAN SOYBEAN ASSOCIATION, ARLINGTON, IA

Mr. BURRACK. Thank you, Chairman Lugar, Senator Cochran. I,

too, have an information-packed testimony this morning, so I will

follow the example set by Henry VIII when he told his wives, ‘‘I

will not keep you long but it will be intense.’’

My name is Tim Burrack and I produce corn and soybeans in

Northeast Iowa and I am here today representing the National

Corn Growers and the American Soybean Associations. Both of

these organizations see tremendous potential in the expanding Chinese market. The People’s Republic of China, with a population estimated at 1.25-billion, is considered the most important growth

market for U.S. agriculture.

Economic expansion in China will contribute to increased consumption of food and fiber. It will also create export opportunities

for U.S. farmers, but only if Congress eliminates the sanctions that

treat China differently than any other trading partner.

Last November, China and the United States completed bilateral

negotiations for China’s admission to the WTO. China agreed to

one-way trade concessions, creating new market opportunities for

corn and soybeans. In return, the United States agreed to grant

China permanent normal trade relations.

As a farmer from the Midwest, it is hard for me to see how Congress can say no to a deal like this. The agreement with China will

significantly reduce the border restrictions that have kept U.S.

farmers from fully benefitting from our comparative advantage in

agricultural production. China agreed to rapidly cut tariffs by more

than half on priority agricultural products and to end its system

of discriminatory licensing and import bans for bulk commodities.

As a corn and soybean farmer, I expect to benefit from the entire

trade agreement. Increased exports of meat, poultry and dairy

products will translate into increased domestic demand for grains

and oilseeds, specifically corn.

China has been a sporadic customer for U.S. corn farmers. Our

exports spiked during the 1994 marketing year at 130-million

bushels. Two-years later, China did not buy a single bushel. Under

the WTO accession agreement, China has committed to establish a

tariff rate quota for corn. This will give us the opportunity to build

markets rather than wait for China to let corn come in. The TRQ

will apply to 177-million-bushels in the first year and increase to

283-million-bushels in the fourth year. With the TRQ, we can easily exceed the export levels of 1994.

The state-run grain trading enterprise and private sector will

share the quota. The private sector share will increase from 25- to

40-percent during the 4-year implementation. Additionally, any

quota not used by the end of October will be released for private

sector use. The introduction of private trade will ensure increased

opportunities for U.S. corn exports.

Perhaps the most exciting provision for U.S. corn farmers in China’s commitment to eliminate export subsidies. China is the second
43

largest producer of corn in the world, producing over 5-billion bushels last year. Over the last several years, China has aggressively

exported surplus corn at the expense of U.S. corn farmers. In February the USDA increased its projection for Chinese corn exports

by 120-million bushels to 315-million bushels. When China eliminates export subsidies, U.S. corn will be very competitive in markets that have been buying subsidized Chinese corn.

On soybeans, for the U.S. soybean industry, China represents the

largest potential market for the 21st century. When the Uruguay

Round agreement was concluded, the American Soybean Association conditioned its support on a commitment by the administration to make oilseeds and oilseed products a key priority. American

Soybean Association [ASA] and the National Oilseed Process Association have met regularly with the USTR and the USDA over the

past 5-years to emphasize the importance of obtaining a significant

increase in access for soybeans, soybean meal and soybean oil into

the Chinese market.

The China WTO accession agreement negotiated last November

is particularly beneficial to the U.S. soybean producers and the soybean industry. It will lock in currently applied tariffs on soybeans

and soybean meal at 3-percent and 5-percent respectively. For soybean oil it will reduce and bind the current tariff from 13-percent

to 9-percent and increase the amount of soyoil imports at this duty

from 1.7- to 3.2-million tons over the 6-year period.

The tariff on over-quota soyoil will be reduced to 9-percent in

2006, after which the TRQ will be eliminated.

U.S. soybean producers strongly support the China WTO accession agreement and urge Congress to approve PNTR relations for

China as quickly as possible. We already have too many restrictions on U.S. farm exports in the form of unilateral economic sanctions. To turn access to the Chinese market over to our competitors

after negotiating this agreement would deal a terrible blow to efforts to restore profitability to the U.S. farm economy.

Conclusion. Quite simply, this is a one-way deal for U.S. agriculture. We gain access to the largest market in the world and we

give up nothing in return. We may not know the magnitude of this

market-opening opportunity for several years but what is abundantly clear is that U.S. farmers will only benefit from this trade

agreement if Congress approves permanent normal trade relations

for China.

On behalf of the National Corn and Soybean Associations, we

will be working diligently for passage of this agreement. Thank

you.

[The prepared statement of Mr. Burrack can be found in the appendix on page 89.]

The CHAIRMAN. Thank you very much, Mr. Burrack.

Senator Cochran, do you have comments or questions?

STATEMENT OF HON. THAD COCHRAN, A U.S. SENATOR FROM

MISSISSIPPI

Senator COCHRAN. Mr. Chairman, thank you very much. I came

over to thank you for having this hearing and letting us have the

opportunity to receive comments and statements from Secretary

Glickman the U.S. Trade Representative’s Office about the agree-
44

ment that has been reached with China. And this panel has a particularly important role, I think, at our hearing today to tell us

what the practical consequences are for a number of commodity

groups and agricultural interests in the United States if we approve permanent normal trade relations with China and try to implement this agreement that has been reached.

I support our approval of normal trade relations with China. I

think it is in our best interest. I think it is clear that it will improve our opportunities to sell more of what we produce in that

market and the potential for growth there is enormous, and you

have all eloquently talked to that point.

There have been some problems because of failure to reach

agreement on some items, such as the export of fertilizer to China.

We had hoped that, that agreement would include some language

relating to the state-owned agriculture fertilizer enterprises in

China and the monopoly that it now enjoys in that market. And

unless some change is made in policy, it may very well continue as

a government-owned monopoly in the future, or at least government-sanctioned monopoly in the future.

I have had an opportunity to talk this week with both Ambassador Li of China and the Vice Minister of Trade and Economic Development, Minister Sung, who has been here in Washington. I

hope that we have been able to impress upon the Chinese the importance of making this change and recognizing the importance of

an opportunity for Americans and others to be able to sell chemical

fertilizers in China.

The European Union, as some of you have pointed out and observed, are continuing their round of discussions on an agreement.

It may be that, that will offer an opportunity for the Chinese to

make some commitment in this regard. We hope that they do.

It may be difficult to pass legislation in the Congress right now

on normal trade relations because of the white paper that has been

written with respect to Taiwan and whether or not that is a new

and different kind of impression that China has of their relationship with Taiwan needs to be explored.

And there are other problems. I am not saying that everything

is perfect and that we are going to have no complaints about policies in China. We will have, I think, more opportunities to have access to discuss these problems and to work out and resolve differences for our mutual interests, best interests, and in the cause

of stability of the relationship and ultimately peace in the world.

So I am hopeful that this is a step that the Congress will agree

to take and I intend to do everything I can here in the Senate to

push the process forward and see that we approve normal trade relations as soon as possible.

Thank you, Mr. Chairman.

The CHAIRMAN. Thank you very much, Senator Cochran.

Senator Cochran has mentioned the fertilizer issue, as have several Senators today to specifically get a response from the administration on this issue. This is still unsettled business but I appreciate at least that the issue has been raised, and that was one purpose of our situation today.

Three of you have mentioned unilateral economic sanctions imposed by our own government. This has been a subject of intense
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advocacy by this committee to remove them and we have passed

legislation from the Committee that is agriculture-specific. We have

also tried various other committees in terms of more general policy

changes, not without some success; namely, our own government

has been imposing these fewer and fewer times and there is a more

rational argument now in terms of the threshold of what ought to

occur. But nevertheless, this still remains unfinished business and

we appreciate your underlining it in your testimony.

Mr. Hardin, you have heard earlier the discussion with reference

to pork, I think Senator Grassley and Senator Fitzgerald and others have raised this issue on inspection, because it is a very serious

one. You have gone into greater detail about the numbers of Chinese delegations and the degree of scrutiny with which all of this

has occurred.

What was your reaction to the administration witnesses as they

tried to respond to this issue, as they did earlier on today? Do you

feel any sense of hope, optimism, or what would you advise, having

heard them?

Mr. HARDIN. Well, the purpose in my going into such detail was

obviously to go beyond this room as to how very important this is

to the pork industry for our final support. I remain hopeful, but the

Chinese must fulfill their commitments.

The CHAIRMAN. And it is apparent that they have not done so

and they have bought pork apparently from Canada. With all these

contacts you have had with the Chinese, do you have any inkling

as to what is going on here?

Mr. HARDIN. I guess I will engage in some uninformed speculation. There are obviously many levels that need to make a change

in Chinese society and I think we have to get down below the

Chairman’s level to confront that and move them along, but it is

absolutely essential that we settle this now.

I remember 9-years ago this spring Ambassador Hills told me,

‘‘Withdraw your suit and I will get you access to the European

Community.’’ Kevin sitting behind you has worked innumerable

hours on these types of issues with Europe and it is absolutely important that we settle this now and move on.

The CHAIRMAN. Let me ask you, Mr. Suber, about the dairy situation. You have what I thought was an optimistic forecast of $135

million of sales. How would that be broken down? In your testimony you mentioned several types of products the Chinese might

want to purchase but the logistics factors would seem to be considerable, except maybe for a solid product of some sort, and the distribution process. How did you come up with the sales forecast?

Mr. SUBER. The bulk of it, on a volume basis, we would say is

in the ingredient sector, such as whey and lactose, which does not

have a logistical issue because it moves unrefrigerated, much of

which goes to animal feed for their burgeoning pork industry, in

fact, but also into food processing that is gaining greater and greater sophistication in China.

But on a value basis, a good chunk of that would be represented

by cheese and ice cream. Cheese, the big driver, as I mentioned,

for cheese consumption around the world has been pizza. The tariff

on cheese has made pizza generally an uncompetitive menu item

for most fast food chains. This will make it a competitive food item
46

and the success that the company Tricon has had in its Kentucky

Fried Chicken chain will be able to transfer to its Pizza Hut chain

and to its competitors to drive more pizza consumption and we expect that it will be a player, not the only player but a player in

providing cheese to that market.

The CHAIRMAN. It was mentioned by you, Mr. Hardin, and maybe

earlier by the administration witnesses in response to questions,

that the agreement has not yet been published in China, which is

a curious situation and, of course, difficult as you try to resolve the

pork situation, but that could be true of others.

Do you have any idea as to why? What have the Chinese people

you have talked to had to say about that?

Mr. HARDIN. Well again, I believe there is resistance below the

highest levels and the highest levels must dictate to those below

what has been agreed on. And obviously China today is not a country of law, and this is part of the very essential transition to that,

to make things move forward, and we must be firm.

The CHAIRMAN. Senator Cochran, do you have additional questions?

Senator COCHRAN. No, thank you, Mr. Chairman. We appreciate

very much the assistance of this panel though, to our understanding of the practical consequences of this agreement.

The CHAIRMAN. We do indeed. Many of you have had from your

testimony extensive contact with Chinese citizens and government

officials. As you heard from Senators today, who were not merely

name-dropping, this has been a committee that has been internationally involved with a good number of members having visited

China and had specific interest in this treaty, as well as in specific

commodities, and that will continue to be the case. We are grateful

for these contacts but they probably are very important.

To pick up the point Mr. Hardin has made, the Chinese debates

internally would appear to be very substantial. We have talked

today about our debates and it is substantial and we admit this,

but nevertheless, in China it is apparent that there are very diverse views as to whether this is a good thing or not for a society

that might go forward or might not.

So it is a critical moment for us to understand the politics of each

other and to some extent through our dialogue perhaps to enhance

the possibilities.

We thank all of you for coming. We thank everyone who has participated in the hearing and the hearing is adjourned.

[Whereupon, at 11:34 a.m., the Committee was adjourned.]
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