U.S. GOVERNMENT PRINTING OFFICE

60–296 CC WASHINGTON : 2000

LEVELING THE PLAYING FIELD AND OPENING

MARKETS: NEGOTIATING A WTO AGRICULTURAL AGREEMENT

HEARING

BEFORE THE

SUBCOMMITTEE ON

INTERNATIONAL ECONOMIC POLICY AND TRADE

OF THE

COMMITTEE ON

INTERNATIONAL RELATIONS

HOUSE OF REPRESENTATIVES

ONE HUNDRED SIXTH CONGRESS

FIRST SESSION

ON

MARCH 23, 1999

Serial No. 106–50

Printed for the use of the Committee on International Relations

(

(II)

COMMITTEE ON INTERNATIONAL RELATIONS

BENJAMIN A. GILMAN, New York, Chairman

WILLIAM F. GOODLING, Pennsylvania

JAMES A. LEACH, Iowa

HENRY J. HYDE, Illinois

DOUG BEREUTER, Nebraska

CHRISTOPHER H. SMITH, New Jersey

DAN BURTON, Indiana

ELTON GALLEGLY, California

ILEANA ROS-LEHTINEN, Florida

CASS BALLENGER, North Carolina

DANA ROHRABACHER, California

DONALD A. MANZULLO, Illinois

EDWARD R. ROYCE, California

PETER T. KING, New York

STEVEN J. CHABOT, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

MATT SALMON, Arizona

AMO HOUGHTON, New York

TOM CAMPBELL, California

JOHN M. McHUGH, New York

KEVIN BRADY, Texas

RICHARD BURR, North Carolina

PAUL E. GILLMOR, Ohio

GEORGE RADANOVICH, California

JOHN COOKSEY, Louisiana

THOMAS G. TANCREDO, Colorado

SAM GEJDENSON, Connecticut

TOM LANTOS, California

HOWARD L. BERMAN, California

GARY L. ACKERMAN, New York

ENI F.H. FALEOMAVAEGA, American

Samoa

MATTHEW G. MARTINEZ, California

DONALD M. PAYNE, New Jersey

ROBERT MENENDEZ, New Jersey

SHERROD BROWN, Ohio

CYNTHIA A. MCKINNEY, Georgia

ALCEE L. HASTINGS, Florida

PAT DANNER, Missouri

EARL F. HILLIARD, Alabama

WILLIAM D. DELAHUNT, Massachusetts

GREGORY W. MEEKS, New York

BARBARA LEE, California

JOSEPH CROWLEY, New York

JOSEPH M. HOEFFEL, Pennsylvania

RICHARD J. GARON, Chief of Staff

KATHLEEN BERTELSEN MOAZED, Democratic Chief of Staff

SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY AND TRADE

ILEANA ROS-LEHTINEN, Florida, Chairperson

DONALD A. MANZULLO, Illinois

STEVEN J. CHABOT, Ohio

KEVIN BRADY, Texas

GEORGE RADANOVICH, California

JOHN COOKSEY, Louisiana

DOUG BEREUTER, Nebraska

DANA ROHRABACHER, California

TOM CAMPBELL, California

RICHARD BURR, North Carolina

ROBERT MENENDEZ, New Jersey

PAT DANNER, Missouri

EARL F. HILLIARD, Alabama

BRAD SHERMAN, California

STEVEN R. ROTHMAN, New Jersey

WILLIAM D. DELAHUNT, Massachusetts

JOSEPH CROWLEY, New York

JOSEPH M. HOEFFEL, Pennsylvania

MAURICIO TAMARGO, Subcommittee Staff Director

JODI CHRISTIANSEN, Democratic Professional Staff Member

YLEEM POBLETE, Professional Staff Member

CAMILA RUIZ, Staff Associate

(III)

C O N T E N T S

WITNESSES

Page

Dr. Charles D. ‘‘Chuck’’ Lambert, Chief Economist, National Cattlemen’s Beef

Association ............................................................................................................ 2

Mr. Thomas M. Suber, Executive Director, U.S. Export Dairy Council .............. 3

Mr. Nelson Denlinger, Vice President of Government Programs, U.S. Wheat

Associates .............................................................................................................. 5

Dr. Val L. Giddings, Vice President for Food and Agriculture, Biotechnology,

Biotech Industry Organization ............................................................................ 8

Mr. Nicholas D. Giordano, International Trade Counsel, National Pork Producers Council ...................................................................................................... 10

APPENDIX

Prepared statements:

Dr. Charles D. ‘‘Chuck’’ Lambert ............................................................................ 26

Mr. Thomas M. Suber ............................................................................................. 33

Mr. Nelson Denlinger .............................................................................................. 42

Dr. L. Val Giddings, ................................................................................................ 45

Mr. Nicholas D. Giordano ....................................................................................... 50

Hon. Ileana Ros-Lehtinen, Chair, Subcommittee on International Economic

Policy and Trade .................................................................................................. 66

Additional material supplied:

Letter from Thomas M. Suber, U.S. Dairy Export Council .................................. 41

(1)

LEVELING THE PLAYING FIELD AND OPENING MARKETS: NEGOTIATING A WTO AGRICULTURAL AGREEMENT

TUESDAY, MARCH 23, 1999

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTERNATIONAL ECONOMIC POLICY

AND TRADE,

COMMITTEE ON INTERNATIONAL RELATIONS,

Washington, DC.

The Subcommittee met, pursuant to call, at 2 p.m., in room 2255,

Rayburn House Office Building, Donald A. Manzullo (Chairman of

the Subcommittee) presiding.

Mr. MANZULLO. We will call this Subcommittee meeting to order.

The Chairman should be here shortly. The Subcommittee today is

going to deal with WTO and Agricultural products.

I am going to ask everybody if they would be willing to waive

any opening statements so we can move directly into testimony.

Would that be OK?

[Chorus of ayes.]

Mr. MANZULLO. Thank you. Any opening statement that you may

have had, please feel free to make a part of the record.

Our witnesses, Chuck Lambert is the Chief Economist for the

National Cattlemen’s Beef Association. He works closely with Legislative and Regulatory Staff to explain and influence the outcome

of beef industry economics on trade and marketing issues.

He staffs the Live Cattle Marketing Committee and is involved

in other organizations in order to get those puppies overseas, including my little herd that I produce each year. I appreciate all of

your efforts on that, Chuck.

Tom Suber is Chief Executive Officer of the U.S. Dairy Export

Council. As Chief Executive Officer of the Council, he is responsible

for the creation and implementation of all Council programs, develop export markets for U.S. dairy products. Welcome here today,

Tom.

Nelson Denlinger is Vice President of Government Programs for

the U.S. Wheat Associates. He serves as the organization’s liaison

with Government agencies, including the USDA, State Department,

and USTR on issues related to trade, credit, and legislation.

He would be involved formulating the organization’s position in

the next Trade Round. Good to have you here, Nelson.

Val Giddings is Vice President for Food and Agriculture of the

Biotech Industry Organization, which has 800 members. It is the

2

largest trade organization representing companies using biotechnology to produce new products in various industrial sectors.

Prior to joining USD, Dr. Giddings worked as a biotechnology

consultant to the World Bank. It is good to have you here, Val.

Nicholas Giordano is the National Pork Producers Council’s inhouse International Trade Counsel. Mr. Giordano is responsible for

the development and implementation of the Pork Producers Council’s international trade policy and for areas of foreign market development.

We appreciate you coming this afternoon. I am sorry that we are

starting a little bit late. This is a 5-minute clock. When it gets to

red, it is time to wind up.

Let us start here with Dr. Lambert.

STATEMENT OF DR. CHUCK LAMBERT, CHIEF ECONOMIST,

NATIONAL CATTLEMEN’S BEEF ASSOCIATION

Dr. LAMBERT. Thank you, Mr. Chairman and Members of this

Subcommittee. My name is Chuck Lambert. I am Chief Economist

for the National Cattlemen’s Beef Association.

I appreciate the opportunity to visit with you today about issues

that are vitally critically to the U.S. beef industry. The beef industry has emerged as an exporting sector of agriculture.

As recently as 1985, we exported less than 1/2 of 1 percent of our

production. Last year, we exported about 8 percent of our production and about 12 percent of the value of sales came from the export market. So, we have seen an increasing reliance on the export

market.

We would anticipate in the future that as the aging of the U.S.

population takes place, and given the demographics in place, that

we will increasingly rely on younger, faster growing economies with

increasing disposable income.

The U.S. beef industry, as most U.S. agriculture has been very

supportive of it advancing and expanding trade, removing barriers

to trade.

We have some real concerns about recent events or ongoing

events involving the European Union in kind of an issue that has

been ongoing since 1989 when we were shut out of the European

Union because of use of technologies, which have been approved

here, and have been routinely used in the U.S. production system

since the 1960’s.

In the case of the European ban on U.S. beef, we filed a case

with the WTO in January 1996. Following that process, the U.S.

has won that case and the decision. It has been upheld upon an

appeal. The end of the reasonable period that the arbitrator granted the European Union to bring their regulations into compliance

ends on May 13, 1999.

We, as an industry, have worked closely with the Administration.

We have urged all parties to not let this deadline slip further. Concern that the Europeans have historically utilized stall and delay

tactics, which have postponed and basically kept them from complying with rulings of the WTO.

The U.S. beef industry feels that we have been patient and that

there is a growing sense of—even though we have been very protrade in the past—there is a growing sense of frustrating and of

3

protectionism in the Country and that we need to stand tough to

win a couple of these cases so that we can prove that the system

works to address concerns that we are not playing on a level playing field, and to regenerate some enthusiasm and some support for

continuing and expanding the trade agenda.

With respect to the 1999 Round, the beef industry, again, most

of agriculture feels that we should expand the trade agenda, not

just negotiate on agricultural issues. That, at least with the beef

industry, our market is probably the most open market in the

world.

Our tariff rate quotas are at levels that are rarely threatened of

being filled. So, generally the world does have access to our market. By expanding the trade agenda that we do have more leverage

and we will be able to address some of the issues of concern in the

beef industry.

I thank you for your time and will be willing to address any

questions.

[The prepared statement of Dr. Lambert appears in the appendix.]

Mr. MANZULLO. Thank you. We just got a list today of the $900

million in the retaliatory tariffs that the USTR is going to impose

on the Europeans. They just came out today.

I do not know if you are aware of that. It is quite a list. I am

going to be in Rome and Florence next week. What a time to go,

huh? They will be complaining about that.

Mr. Suber, I will do my best to time you with the mechanical

watch. Evidently, these things are not working too well.

STATEMENT OF THOMAS SUBER, CHIEF EXECUTIVE OFFICER,

U.S. EXPORT DAIRY COUNCIL

Mr. SUBER. Mr. Chairman and Members of this Subcommittee,

I am the Executive Director of the USTR Export Council. I am

pleased to appear today to testify on the upcoming WTO negotiations in agriculture.

U.S. Dairy Export Council is a non-profit membership organization focused solely on increasing the volume and value of U.S.

Dairy Exports. We received most of our funding from Dairy Management Incorporated, which is the organization responsible for

managing the farmer-funded dairy check-off.

The market promotion programs of USTA’s Foreign Agricultural

Service, however, also an important share of our funding. Our

members cover the full range of the dairy industry, dairy farmers,

processors, cooperatives, and export trading companies.

The U.S. dairy industry is the second largest agricultural commodity sector in the United States measured by farm receipts. Its

importance to the Nation is magnified when one also considers the

extensive investment and employment tied to the processing side

of the industry that turns a farmer’s milk into exportable products.

The industry is a relative new comer to international trade.

While its trade is modest in comparison to the $20 billion domestic

market, U.S. dairy exports have grown over the past 5 years. In

1998, despite the financial melt down affecting U.S. agricultural

exports generally, U.S. exports on a milk-equivalent basis actually

rose about 1 to 2 percent. The most remarkable growth took place

4

in markets where the industries invested most of its time and

money.

For example, cheese imports increasing 20 percent to Japan;

Korea taking 20 percent more away proteins, and American ice

cream, the highest of our high value products, increasing last year

to such countries as diverse and economically challenged as Japan,

Mexico, and China.

American dairy products can and do perform successfully where

there is a level playing field. Our industry’s slow emergence internationally, however, stems from the fact that the dairy industry is

one of the world’s most protected and subsidized industries.

Trade practices are exacerbated by widespread financial problems and they result in an artificially low world price in dairy, anywhere from 25 to 50 percent below U.S. prices. This is despite the

fact that the U.S. dairy industry is one of the world’s most efficient

and low cost producers at the production, processing, and the distribution levels.

This situation has motivated our members to seek substantial reductions and elimination of remaining trade barriers to dairy exports in the next WTO Round. Let me briefly describe two of our

five industry objectives. The others are contained in my written

testimony. The first one, the elimination by an established date of

all remaining dairy export subsidies. When the current WTO agriculture agreement is fully phased in next year, it will still permit

almost 60 percent of projected world dairy trade to remain subsidized.

The distribution of these subsidy allowances is highly skewed.

On a milk-equivalent basis, the European Union accounts for fully

72 percent of these subsidies while the United States will account

for just 3 percent.

The use of export subsidies is a primary factor that keeps world

dairy prices depressed below U.S. domestic prices and hobbles our

export expansion. The second major goal is the substantial reduction of remaining trade barriers to U.S. dairy exports. Let me give

you some examples.

The European Union, the world’s largest dairy market, under its

WTO commitments, can impose a tariff rate of 240 percent. It gets

all but a few limited quantities of cheese. Canada, our largest trading partner, imposes tariffs on U.S. cheeses at about 245 percent.

We also maintain significant tariff barriers against dairy products, but not at levels nearly as high as these. This is important

to emphasize that our dairy industry recognizes that we must give

access to get access.

Yet, unless all countries reduce their tariffs, especially the highly

protected markets with very high domestic prices, the U.S. will remain the primary target for lower cost suppliers.

To achieve these and other objectives, the Council strongly supports renewal as fast as possible of the fast track negotiating authority as essential to achieve a timely outcome.

The Export Council does have first-hand experience in how effective the WTO can be in reducing practices that distort international trade. For example, Canada had committed to reduce its

dairy producer finance export subsidy program in the last Round.

5

Shortly after implementation, the Canadian Government modified its programs, keeping key functions in tact, and then claimed

the program was no longer subject to the WTO subsidy constraints.

Despite high domestic costs, Canadian dairy exports ballooned

into low priced world markets and often displaced U.S. commercial

exports. More ominously, the European dairy industry, significantly larger, was considering adopting a similar system.

The U.S. dairy industry successfully petitioned our Government

to challenge both Canada’s program and its restrictive implementation of a commitment to allow fluid milk imports. Just last week,

the U.S. Trade Representative publicized the WTO Round ruled

that both Canadian programs violated its WTO commitments.

While Canada can and probably will appeal this decision within the

WTO, we are confident that the finding will stand and that Canada

will make the necessary changes to comply.

A decision supporting Canada would have thrown the foundation

of the current agreement into disarray and the upcoming negotiations could have deteriorated into a costly effort to fix a crippling

defect.

We appreciate very much the intensive work by USTR and

USDA in this cooperative and successful effort between Industry

and Government. We also applaud USTR’s resolute pursuit of compliance in recent weeks with other WTO rulings similar to that,

that Dr. Lambert described.

Finally, the Dairy Export Incentive Program, known as DEIP,

provides the necessary means to allow the U.S. dairy industry to

develop sustainable export markets in the face of continuing use of

subsidies by our competitors.

The Export Council and other dairy organizations recently asked

the Secretary of Agriculture to release the so-called unused export

subsidies, approximately 74,000 tons of skim milk power, that were

not used in the first WTO Agreement.

Such reprogramming is allowed in the WTO. Our request is especially appropriate in light of U.S. Congress’ mandate in the last far

bill that the Secretary of Agriculture make maximum permissible

use of the DEIP Program. We welcome your interest in this matter

and that the Congressional wishes are carried out in connection

with this request. I appreciate the opportunity to testify. I will be

happy to answer any questions.

[The prepared statement of Mr. Suber appears in the appendix.]

Mr. MANZULLO. Thank you. Mr. Denlinger.

STATEMENT OF NELSON DENLINGER, VICE PRESIDENT OF

GOVERNMENT PROGRAMS, U.S. WHEAT ASSOCIATES

Mr. DENLINGER. Mr. Chairman and Members of this Subcommittee, thank you for the opportunity to appear today before

this Subcommittee on International Economic Policy. My name is

Nelson Denlinger. I am Vice President of Government Programs for

U.S. Wheat Associate, an organization that works to promote exports of wheat on behalf of U.S. producers.

We are delighted that this Subcommittee is having a hearing

today on this timely topic. Export markets are extremely important

for agricultural producers, in particular, wheat producers.

6

In any given year, we export approximately half of the wheat

that is grown in this Country. Unfortunately, dealing in the international marketplace can sometimes be an exercise in frustration

due to the many trade obstacles that we face.

One of the critical ones outside of the WTO’s concerns is the fact

that we have significant economic trade sanctions on wheat exports

and other agricultural products. We are concerned particularly

with regard to a number of key countries where we are excluded,

which constitute roughly 10 percent of the world’s wheat trade on

an average year.

Last August, the U.S. Wheat Associates adopted a policy statement that suggested that, other than in the case of war or national

security, the United States should refrain from the use of unilateral sanctions for food, food products, medicine, medical supplies,

including financing.

Other trade restrictions and obstacles can only be dealt with

through multi-lateral trade negotiations, such as the WTO, which

will hold its ministerial meeting in Seattle to kick-off the Trade Negotiating Round.

There are a number of important issues that U.S. wheat producers are concerned about, which they would like to see addressed

in terms of the Seattle kick-off, including export subsidies, domestic

supports, State Trading Enterprise, and genetically modified products.

In the area of export subsidies, the European Union’s use of direct export subsidies continues to be a problem. Not only does the

E.U. persist in the use of export subsidies to gain market share at

the expense of the United States and other, it also switches subsidies between wheat and flour in such a manner so that it disrupts trade in both commodities.

Unfortunately, these trade distorting subsidies are consistent

with the E.U.’s commitments under the Uruguay Round, which did

require a reduction in subsidies, but not an elimination.

We would urge that in the next round of the multi-lateral trade

negotiations within WTO that we have an elimination of export

subsidies. This would bring agriculture trade rules up on a par

with industrial goods where subsidies have been banned since the

1950’s.

The reform of the E.U.’s common agricultural policy, also known

as Agenda 2000, also is of serious concern to wheat producers who

fear that unlimited domestic support payments to E.U. farmers

with de-coupled payments will continue to encourage unwarranted

expansion of wheat production in Europe.

They will be reducing their export subsidies in all likelihood, but

the problem will still continue. We would urge close attention to

this matter, which we feel will be a continuing problem.

We would urge that all of the—supports under the Uruguay

Round be reviewed. As for domestic support programs here in the

United States, we should be prepared to see these programs reviewed, particularly the loan deficiency payments, Section 416 Purchase and Donate Program, since these programs were implemented since the conclusion of the Uruguay Round.

We expect that they will still be well under the levels of the Uruguay Round. It is important that these programs be measured in

7

relation to those operated by other WTO countries, particularly the

European Union.

The practices of the monopoly State Trading Enterprises, or

STE’s, such as those in Canada and Australia, have long been a

thorn in the side of U.S. wheat producers due to the discriminatory

pricing practices practiced by the STE’s. We strongly support the

introduction of disciplines on the non-transparent pricing practices

of the STE’s.

While it is difficult to document, our organization has evidence

indicating sales routinely being made by a variety of wheat importing countries by STE’s outside normal business practices, including

standing offers to undercut prices.

This lack of price transparency underscores the long-term need

to reform these entities. Government sponsored monopolies, such

as the Canadian and Australian Wheat Board, are anachronisms of

an old socialist era that do not belong in the modern world moving

toward free and fair trade.

In an era of genetically modified products, had the negotiators in

Cartegena, Columbia been able to agree on a biosafety protocol last

month, that protocol could have had substantial impact on the

international trade of genetically modified products.

This protocol would have required exporting countries to obtain

permission from importing countries before shipping genetically

modified seeds, plants, or products.

The United States and other countries objected to the proposal,

as it would have resulted in labeling and other requirements that

were unnecessary, or unduly restrictive, or that would have been

difficult to meet. The United States’ wheat growers would like to

see the WTO establish a time-defined science-based review and approval process for genetically enhanced products.

That WTO signatories, particularly Canada, the United States,

the E.U., and Japan promote effective communication and coordination among their regulatory authorities with respect to approval

processes for genetically enhanced products.

We also strongly urge the WTO establish clear rules based on

sound science with respect to trade in genetically enhanced products and ensure that biotechnology——

Mr. MANZULLO. You are running out of time.

Mr. DENLINGER. Sorry?

Mr. MANZULLO. You are running out of time.

Mr. DENLINGER. OK.

Mr. MANZULLO. You can conclude.

Mr. DENLINGER. I will conclude.

It is still on blue. I am sorry.

Mr. MANZULLO. Well, I guess it is.

Now it is not. I do not think this is working. So, forgive me.

Mr. DENLINGER. Last week, the Board of Directors of U.S. Wheat

Associates began the process to develop a formal U.S. wheat industry position for the next round of the WTO negotiations.

Following this meeting, the process of pulling these ideas together will take place and we will have approval this summer. We

would be happy to share the results of that effort with this body

and other Committees on the Hill.

Thank you very much.

8

[The prepared statement of Mr. Denlinger appears in the appendix.]

Mr. MANZULLO. Thank you. Dr. Giddings.

STATEMENT OF DR. VAL GIDDINGS, VICE PRESIDENT,

BIOTECH INDUSTRY ORGANIZATION

Dr. GIDDINGS. I would like to thank you, Mr. Chairman, and

Members of this Subcommittee for the opportunity to be here and

testify today. With your permission, I would like to submit my

written remarks to the record and summarize them.

Mr. MANZULLO. Without objection, all written remarks, reports,

or statements of members will be included in the record.

Dr. GIDDINGS. I would like to endorse the comments of my colleagues so far, and preemptively those of Mr. Giordano. I cannot

imagine him saying anything that would be objectionable with

Members that I represent here on behalf of the Biotechnology Industry Organization.

I am particularly pleased that Mr. Denlinger’s comments on the

biotechnology protocol, an issue I have worked on for nearly a decade, and which is very near to, if not my heart perhaps my gallbladder.

I was in Cartegena. We would be particularly delighted to talk

about that in a question and answer session if any of you folks

have questions about it.

I would like to address particularly the issue of biotechnology,

and biotechnology products, and agriculture in my brief remarks

today.

I will summary. I have already given you a little bit of a context.

I want to summarize briefly what biotechnology is doing to American agriculture and ultimately to global agriculture.

Basically, it is changing the face of agriculture. It’s transforming

it to a much more sustainable basis than anything we have ever

seen before, enabling us to increase dramatically production while

dramatically decreasing input costs and environmental impacts.

In the 1998 growing season, there were nearly 60 million acres

of transgenic crops being grown in the United States out of a total

of about 70 million worldwide. Those two numbers right there gives

you an indication of some of the sorts of problems that we have

with biotechnology products, agriculture, and international trade.

We are far enough ahead. A number of other folks are looking

for ways to slow us down while they catch up. The importance,

therefore, of predictable and regular science-based regime for

reaching regulatory decisions with regard to the introduction of

these products is extremely important.

It is essential to recognize that all of these products entering into

commerce through production, research, and development in the

United States are exhaustively reviewed for safety, environmental

impacts, human health, and so forth.

These new products have been reviewed, orders of magnitudes

more rigorously than any previous products in human history.

There is no question about their safety. There is no question about

the enormous over-balance of benefits as opposed to risks that they

provide.

9

The benefits that biotechnology is bringing and will bring to producers around the world, the problems with international trade are

making it difficult for biotech companies to develop and commercialize these new products with the necessary speed and economic

confidence.

We are working hard, along with others in the agricultural Committee, the Congress, and Administration to address these problems. It is extremely important that we take advantage of the opportunity posed by the upcoming round of the WTO negotiations to

extend the protection of fair and scientifically based trade.

It is very imperative that the U.S. exercise its traditional leadership role in these international negotiations. We are encouraged to

see so many people in Government working to make sure that happens.

We feel that the strategic approach to these negotiations should

be that they should cover a broad spectrum of issues and not take

things on in a piecemeal basis. We think that only if agriculture

is part of a much larger context of discussions, will the necessary

leverage and potential for tradeoffs be made possible—disciplines

already apply biotechnology products in agricultural trade. There is

some misunderstanding on this point and some mistaken notions

have achieved a degree of currency in the European Union.

We, at Bio, have recently done an exhaustive survey of the language and intent of the SPS agreements under WTO. We find some

very reassuring conclusions. The WTO agreements, according to

our analysis, already impose substantial disciplines on countries

that regulate agricultural biotechnology products.

The agreement on the application of sanitary and phytosanitary

measures, the SPS agreement, requires that any measure applied

to protect human, animal, or plant life or health, shall be based on

scientific principles and a science-based assessment of risk.

Most regulatory activity with respect to transgenic products

would be subject to these disciplines. The agreement on technical

barriers to trade covers any technical regulations that do not fall

under the SPS agreement.

The TVT agreement requires that such measures not be more

trade restrictive than necessary in order to fulfill a legitimate objective. Certain disciplines under the GATT and the agreement on

agriculture, for example, tariff bindings, national treatment of prohibition of quantitative restrictions are also relevant to non-SPS

technical measures. In some respects, the current disciplines are

not adequate to address the trade problems we are currently facing.

Our principle problem with respect to the European Union, right

now, is less with the regulatory decisions themselves, but with the

length of time and the unpredictability of the approval process in

the European Union.

Annex C of the agreement addresses this issue. For example, it

requires members to ensure that approval procedures are undertaken and completed without undue delay. The rules clearly need

to be strengthened.

There are other disciplines in the agreement that are potentially

helpful, but are in need of elaboration before they can effectively

address the problems we are facing.

10

We believe that the new round of trade negotiations provides the

United States with an excellent opportunity to strengthen and expand the disciplines in the SPS agreement to meet the needs of

American exporters of transgenic products.

It also provides an opportunity for the U.S. to raise the profile

of biotech-related trade issues and promote a trade-friendly WTO

consistent international consensus on those issues.

We hope the U.S. negotiators will take advantage of this opportunity. A favorable outcome to the WTO negotiations could be critical to the long-term health of the biotechnology industry. It will

certainly have an important affect on our ability to continue to

apply this promising new technology for the benefit of U.S. farmers, U.S. consumers, and the U.S. environment.

Thank you.

[The prepared statement of Dr. Giddings appears in the appendix.]

Mr. MANZULLO. Thank you, Dr. Giddings.

I observed that tie with all the floor on there. I wonder if that

was biotechnology-enhanced.

Dr. GIDDINGS. Well, there is a lot—in traditional technology. I

am sure that the improvements in the silk production are in the

works.

Mr. MANZULLO. What an answer. Mr. Giordano.

STATEMENT OF NICHOLAS GIORDANO, INTERNATIONAL

TRADE COUNSEL, NATIONAL PORK PRODUCERS COUNCIL

Mr. GIORDANO. Thank you, Mr. Chairman and Members of this

Subcommittee. I very much appreciate the opportunity to be here

today on behalf of America’s pork producers.

The National Pork Producers Council is Chairing the Agriculture

Trade Coalition, which is comprised of 80 agricultural organizations representing interests in all 50 States, including each of the

five organizations represented here before you today.

As Mr. Suber said, we urge you, the Congress, and the Administration to work together in a bipartisan manner to get traditional

trade negotiating authority renewed and hopefully before the upcoming WTO Ministerial in Seattle.

We believe that the agenda for the new trade round should be

comprehensive. It is well-established that agriculture is one of the

most sensitive areas in international trade. Some of our closest

trading partners, such as the European Union, Japan, and South

Korea will be reluctant participants when it comes to agriculture.

Only in the context of a large package of agreements and concessions will these countries be able to accept an ambitious outcome

on farm trade. While a sectorial approach may have worked for the

Information Technology Agreement, this type of approach will not

work for agriculture. Traditionally, these multi-lateral negotiations

have not been concluded until agreement that the end of trade

round, through a single undertaking covered in all areas.

This approach was devised to force negotiators to finish their

work in the most sensitive areas or risk an overall failure. This approach was essential for agriculture in the Uruguay Round.

While most other countries are calling for a comprehensive negotiation in a single undertaking, some U.S. officials have talked

11

about sector-by-sector negotiations and an early harvest for areas

where negotiations can be completed more quickly.

We believe that such an approach would be disastrous for U.S.

agriculture. Notwithstanding the progress made in the Uruguay

Round, tariffs on agricultural products remain very high.

U.S. Agricultural Tariffs, which average only about 5 percent,

are dwarfed by agricultural tariffs of other nations, which average

about 50 percent. Agricultural tariffs must be lowered from these

high levels on an accelerated basis.

A date certain should be established by which all tariffs will be

reduced to zero. The elimination of all subsidies is a top priority

for the U.S. pork industry as well in the upcoming trade negotiations.

The U.S. pork industry does not support reopening the sanitary

and phytosanitary agreement for further negotiation in the next

trade round. We believe it is working well. The fact that the E.U.

is dragging its feet on implementing the hormone ban does not go

to the WTO which made the proper finding.

It goes to the recalcitrants of the European Union on agricultural

issues. Two priority areas in the upcoming negotiations for the U.S.

pork industry will be greater market access in Japan, our largest

export market, but we have only really touched the tip of the iceberg there, and elimination of E.U. pork subsidies.

The largest exporter of pork in the world is Denmark. That country is the world’s leading exporter for one simply reason; subsidies.

Well, the next round is the appropriate form to eliminate E.U. pork

subsidies.

Much can be done right now to assist the U.S. pork industry offset the unfair advantages of the European Union. Pork is an extremely compelling candidate to be included on the final retaliation

list, if the hormone matter is not settled to the satisfaction of the

U.S. beef industry.

Pork is on the proposed retaliation list which was proposed yesterday. Many of the U.S. beef packing plants being injured by the

E.U. hormone ban also are in the pork business and must compete

here in the U.S. with subsidized E.U. pork. Although the E.U. exports virtually no beef or poultry to the United States, during the

last 5 years every E.U. country, with the exception of Greece and

Luxembourg, has exported pork to the United States.

Despite two Section 301 cases filed by the U.S. meat industry,

the E.U. pork market has been closed to the U.S. for over 10 years

a result of the E.U.’s third country meat directive.

The regulation which affects not only U.S. pork, but also beef

and poultry bound for the U.E. It has completely usurped the role

of USDA’s Food Safety and Inspection Service, and does not enhance the safety of U.S. meat and poultry as the E.U. claims.

Under this system, E.U. inspectors determine, on the basis of

very arbitrary factors, such as the color of plant walls, whether a

plant is qualified to export to the E.U. The random enforcement of

this regulation has resulted in a complete cutoff of U.S. poultry exports, and has reduced to a trickle U.S. pork and non-hormone beef

exports from a few token plants.

Ironically, it is widely known that the majority of E.U. meat

plants do not even meet the third country meat directive requireVerDate 11-SEP-98 07:43 May 16, 2000 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 60296.TXT HINTREL1 PsN: HINTREL1
12

ments. The E.U, lead by Denmark, recently approved without scientific basis, a ban on the use of many antibiotics and livestock

feed.

The Danes, the E.U.’s largest pork producer, know that this antibiotic ban will ensure that U.S. pork, or beef, or poultry for that

matter, never, ever will be sold in the E.U. The ban becomes effective as to all member states on July 1st. A strong response to the

E.U. treatment of U.S. pork exports is long over due and need not

wait until the next trade round.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Giordano appears in the appendix.]

Mr. MANZULLO. Thank you. Mr. Delahunt.

Mr. DELAHUNT. Thank you, Mr. Chairman.

I think it was Mr. Denlinger who said that unilateral sanctions

imposed by this Government have impacted the export of wheat.

Can you amplify that? Enumerate the countries for me.

Mr. DENLINGER. The countries that I have on my list here, there

are lots of other countries that have had sanctions applied to them,

but major wheat markets that are closed to the United States include Cuba, Iran, Libya, the Sudan, and North Korea. The 10 percent is an average figure. Some years it might be more than that.

Mr. DELAHUNT. Ten percent of?

Mr. DENLINGER. Of the world trade roughly.

Mr. DELAHUNT. Of the world trade.

Mr. DENLINGER. Yes.

Mr. DELAHUNT. How many countries did you enumerate?

Mr. DENLINGER. Five or six.

Mr. DELAHUNT. So, five or six of those would represent 10 percent of the world’s trade.

Mr. DENLINGER. Iran being a very big one.

Mr. DELAHUNT. And Iran being the largest of them.

Mr. DENLINGER. Yes.

Mr. DELAHUNT. Now, are those total sanctions; no wheat whatsoever can be exported? Even for humanitarian efforts?

Mr. DENLINGER. Well, in the case of North Korea, we have been

providing some wheat and other agricultural products for humanitarian purposes. Cuba has been getting, very recently, some small

contributions, but other than that it is basically a closed door.

Mr. DELAHUNT. Could you provide me and the Committee, I do

not know how—do you weigh wheat; by the ton?

Mr. DENLINGER. Yes. That is how you export it, sure.

Mr. DELAHUNT. If you could provide me some figures. Give me

the figures on those countries.

Mr. DENLINGER. I will be glad to.

Mr. DELAHUNT. I would address this to all of the Members of the

panel. In terms of the process itself as far as the WTO is concerned, what is your evaluation? Several of you expressed frustration.

Is the frustration based upon delay? In other words, from the

time that the complaint is filed to a final disposition of the case?

Why do we not start with you, Dr. Lambert.

Dr. LAMBERT. In the beef case, the original case was brought before the WTO in January 1996. As I have said, the end of the reaVerDate 11-SEP-98 07:43 May 16, 2000 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 60296.TXT HINTREL1 PsN: HINTREL1
13

sonable period is May 13, 1999. By normal court standards, that

period of time probably is not out of line.

Mr. DELAHUNT. Well, that depends on what court.

Dr. LAMBERT. Correct. But the frustration is, if we were close to

compliance by the European Union and this close to being settled,

I think the frustration more has been with the European response

and an indication, at least, that they will not be able to comply by

the end of the reasonable period. That this case could drag on further, which we have said is absolutely——

Mr. DELAHUNT. In other words, there has been no resolution on

the merits itself, to be really clear.

Dr. LAMBERT. Correct.

Mr. DELAHUNT. So, we have had 3 years. There has been no resolution on the merits. I would draw the analogy to a trial court.

Then there is an appeal process subsequent to that. Am I accurate

when I make that statement?

Dr. LAMBERT. The appeals process has been finalized. Basically,

we are at the settlement process. Different from a court case, there

is no back settlement or no back injury. Any settlement now is only

from here forward. So, there is an incentive to postpone the inevitable for as long as they can.

Mr. DELAHUNT. So, we are right at the final stages.

Dr. LAMBERT. Yes.

Mr. DELAHUNT. Mr. Suber.

Mr. SUBER. I would not have anything to add since we are now

facing implementation with the Canadian decision after the appeal

is likely decided in the middle of the summer. Therefore, we are

keenly interested.

Mr. DELAHUNT. When was the complaint initiated?

Mr. SUBER. It was in late 1997. So, it is a process is predictable

and better than the one that preceded it. I have to emphasize, better than the one that preceded it. It does have issues with respect

to stalling in settlement that are important to settle.

Mr. DELAHUNT. Dr. Giddings, do you have a comment?

Dr. GIDDINGS. Yes, sir.

A little bit different situation with biotechnology products in

trade. It is not that Europeans have refused to abide by WTO rulings. It is that their regulatory process which has been busted

since its inception continues not to function.

In particular, they have under Directive 199220 specified a series

of time lines by which regulatory decisions on approval for imports

of transgenic crops should be taken. They are now in 400 percent

over-run over those time runs at a minimum, with no end in sight.

Last year, 20 million acres out of 80 million acres of corn were

transgenic in the United States. About 2 million acres of that

transgenic corn are 1/10 of the total consisted of varieties that have

not been approved by the European regulatory process.

Mr. DELAHUNT. Your problem is different then.

Mr. SUBER. It is different.

Mr. DELAHUNT. Mr. Giordano.

Mr. GIORDANO. Just a couple of comments, Congressman.

First, under the old system, under the GATT, countries could

block decisions. So, I believe that there were adverse decisions

against the E.U., both on beef and bananas, under the old GATT.

14

The problem was you could not get any enforcement. That has

changed under the WTO. I would agree with my colleagues that

the problem is not so much the WTO, which I think has functioned

very well, it is the recalcitrants of the E.U.

Mr. DELAHUNT. So, that goes to the issue of enforcement.

Mr. GIORDANO. Well, it does, but unlike some have characterized

the WTO as a big bad villain that is going to force us to change

all of our laws to come into compliance. It really is not that.

Either you do what the E.U. directs you do and change your offending regime, or you pay compensation, or you get retaliated

against.

I would argue, although it seems that the Congress and the Administration is being vilified in the press for putting the pressure

on the E.U., you are doing exactly what you should be doing and

the process is working.

We are within our legal rights to retaliate. If in fact they are not

going to implement these decisions, then we need to retaliate.

Frankly, I think they believe that we are going to blink. That is

not to say that the WTO does not need some reform.

Mr. DELAHUNT. Your position would be then, without retaliation

what we really do is erode the essence of the WTO.

Mr. GIORDANO. There has got to be retaliation as a threat out

there to make the system work.

Mr. DELAHUNT. So, it is not just about bananas. It is about something a lot more.

Mr. GIORDANO. Oh, it is absolutely not just about bananas. With

all due respect to Chuck and to the cattlemen, it is not just about

beef.

Whether they are intending to do so or not, they are strangling

the WTO in its infancy and we cannot allow it. That is why it is

so important to retaliate in these cases, if they will not change

their practices.

Mr. DELAHUNT. Mr. Chairman, I hear the gavel.

Mr. MANZULLO. Mr. Bereuter.

Mr. BEREUTER. Thank you, Mr. Chairman.

I had not expected to be up this quickly. Just a clarification on

something you said, Mr. Denlinger. I think I am right in this. The

embargo against North Korea still holds. The wheat we have provided has been strictly through the World Food Program, although

the current proposal that we are going to get is that some processed foods, 100 million metric tons would go through NGO’s for

the first time, American NGO’s, for a Title III, Food For Work Program, related to their potato industry.

Actually, the wheat embargo is still total with respect to North

Korea. Is that correct?

Mr. DENLINGER. That is right.

Mr. BEREUTER. I just heard the comments made about the need

to retaliate. I do agree with you. I think it is essential. I am wondering what your recommendations will be for a new round to

strengthen the expeditious enforcement of decisions made by the

dispute settlement mechanism that is now in place.

How do we avoid the Europeans changing their proposal again,

and again, and delaying it a maximum amount of time while great

15

damage is done to us? Would anybody like to make a suggestion

in that respect?

Mr. GIORDANO. I will take a shot at that Congressman. I think

that to a certain extent, if the E.U. is going to be recalcitrant on

these issues, there may be not much we can do, but just retaliate.

I do think that some reforms can be made, for example, there has

been some confusion about how Articles 21 and 22 relate to one another.

I think perhaps a clarification would be useful. I think, as I

pointed out in my written comments, the amount of time to establish a panel could be truncated in a time certain, a deadline given,

and perhaps the entire process could be somewhat streamlined.

We have come up with this arbitrary 15-month period. I understand that it does take time for legislatures, for the Congress, if a

law needs to be changed or a regulation that, that takes time.

Yet, would it not more serve our purposes if perhaps that period

of time was truncated. I think most, if not all of us, in agriculture

I think would be pro-WTO. We would also say yes, there is some

positive reform that we could undertake in this upcoming round.

Mr. BEREUTER. Of course, I focused on the problems the meat industry has had with the European Union since more red meat is

typically processed in my Congressional District in a month than

anyone in the Country.

We have had problems, of course, with the beef hormone matter

for some time, even though as I understand it, we have assured

that the meat that we would provide would have no hormone residue.

The European Parliament, it seems to me, has passed a number

of resolutions which are emotionally driven, which are contrary to

good science. Now, with the problems in the European Commission,

and the growing power of the European Parliament, to what extent

do you think we could actually move the institutions of the European Union, including the European Parliament, to agreeing to

science-based regulations; whether it is the meat industry or any

other industry?

I think American exporters would be happy to live with the results of good science, but that seems to be a problem for us to overcome with respect to the European Union. Do you any of you have

comments or suggestions about that subject?

In fact, is this a reasonable indication of what the situation is

with respect to the European Parliament and the European Union?

Dr. LAMBERT. I think we would agree with your observations.

That is the reason that we, in the beef industry, have called for a

large injury figure, have called for the retaliation list to be published, and to look for creative ways that retaliation might be implemented to bring the strongest pressure to bear to change those

who may be on the fence with respect to whether they would vote

to repeal the current regulations that are in violation of the WTO.

We agree that the shift of the balance of power in Europe will

make it probably more difficult for them to change the regulations.

Mr. BEREUTER. One more area of questions, if I can. That is related to subsidies for exported products from the European Union

where there are our third country competitors.

16

We have, of course, established some time ago the Export Enhancement Program which is one means of attempting to counteract those very heavy export subsidies that the European Union

does have, but we are not using them unfortunately.

The talks that are going on between the E.U. and Mexico now

suggest that they will be able to cut dramatically into our export

market in grains and into meat as well as other products.

To what extent is the Uruguay Round and to what extent do you

think the next round, has it been determined to be Seattle; a round

should address the question of export subsidies.

Is this something that will strictly come under the scrutiny of the

OECD, or do you think it is appropriate for additional focus of the

next round to be on export subsidies?

Mr. SUBER. As it affects the dairy industry, I think there is no

single more important issue than the elimination of export subsidies at a certain date. One could negotiate what is the implementation period; 5 years, 8 years, 10 years. There should be a date

when it is known that export subsidies will be fully eliminated.

Without that, there is the political will within each country. It

changes from crop season to crop season.

It changes with demographics. You must have that out there as

a target so that all of the trading countries know what is ahead

of them and can make adjustments accordingly to react to the marketplace. That should remain within the WTO.

Dr. GIDDINGS. Sir, if I could respond to the previous question

very briefly about the virtues of relying on science as a basis for

regulatory decisionmaking. That is absolutely essential. It is the

only way for achieving universal consensus.

Although necessary, it is plainly not sufficient—reason is clearly

insufficient to triumph in these discussions with the Europeans. An

appeal to scientific validity of the regulatory decisionmaking processes will not help either, if that is all we do. There has got to be

some additional diplomacy and perhaps of muscle of one sort or another applied.

Mr. BEREUTER. I cannot resist the question to ask if any of you

gentlemen want to offer if a recommendation——

Dr. GIDDINGS. If I could.

Mr. BEREUTER. Sure.

Mr. MANZULLO. Mr. Menendez.

Mr. BEREUTER. I am sorry.

Mr. MENENDEZ. Thank you, Mr. Chairman.

Let me first assure my colleagues, as the Ranking Democrat on

the Committee that I have not switched sides. In the spirit of bipartisanship, I sat here—I did not want to—that will be for the

Chair Lady to discuss. We always welcome her to our side.

I want to ask unanimous consent to include my statement in the

record.

Mr. MANZULLO. Without objection.

Mr. MENENDEZ. The reason both she and I are late is because we

were managing a resolution on the floor. I brought us here a little

late, but I got to hear most of the testimony. I came here with the

intention of asking a series of questions as to how we can best help

you.

17

For someone who comes from an urban district that is basically

black-top, I find interesting we vary on other issues. Of course, the

Garden State of New Jersey has more than just black-top in the

process. So, there is some interest in agricultural issues.

I am compelled, based upon Mr. Denlinger’s remarks to ask the

questions that I did not come here to ask. I see in your statement

then, in your comments—would you yield?

Mr. MANZULLO. It is ‘‘Denlinger;’’ right?

Mr. DENLINGER. Right.

Mr. MANZULLO. We went to ‘‘Dilenger.’’

Mr. DENLINGER. They gave that up awhile back. Uncle John left

a long time ago. I do not know what it says there.

Mr. MANZULLO. It is wrong. It is ‘‘Denlinger.’’

Mr. MENENDEZ. I see that you have comments here with reference to—sanctions. The resolution that the Chair Lady and I

were handling on the floor was about Cuba. So, I find it interesting. Let me ask you with reference to the Wheat Association, do

you have any position on how we deal with weapons of mass destruction?

Mr. DENLINGER. No.

Mr. MENENDEZ. Do you have any position on how we deal with

terrorism?

Mr. DENLINGER. No.

Mr. MENENDEZ. Do you have any position on how we deal with

promoting the opportunity to ensure that food is not used in a rationing to control people in other countries.

Mr. DENLINGER. No. We believe that food is fungible.

Mr. MENENDEZ. If the only way for me to get that food is to

stand in a line with the ration card that the state gives me, is

something that we want to be a part of?

Mr. DENLINGER. I do not think we have any control over that.

The group of countries that you list is a group that, in my mind,

Iran, Libya, North Korea, Sudan, all are engaged in either issues

of terrorism, state-sponsored terrorism, development of weapons of

mass destruction, violation of people’s human rights.

It seems to me that the business community, while we certainly

want to be helpful to you, and I have serious questions about how

the WTO is operating in the context of a series of decisions that

we keep winning but cannot seem to get enforcement.

Hence the whole conversation of retaliation and what not, and

looking for better mechanisms. I am also concerned about State

Trading Enterprises and that whole issue. It seems to me that one

of the questions we have to ask is if there is only a handful of

peaceful diplomacy pools that any country has, and that includes

the United States, it is the use of your aid in trade to induce countries to act a certain way.

It is the international opinion that you can create for those countries who are willing to dissuade themselves to international opinion. Last, it is the use of your aid in trade and the denial of that

aid in trade is what we would call sanctions.

Your Association’s view that but for war or national security reasons that the United States should disarm itself from any use of

unilateral sanctions under any set of circumstances I think is irresponsible as it relates to U.S. foreign policy.

18

In essence, of the five possible tools of peaceful diplomacy, the reality is that you would disarm yourself to the use of your aid and

trade for the purposes of promoting U.S. interests abroad, not U.S.

interests as you narrowly define it in terms of war and national security reasons.

So, I think that, you know, I know none of us want to send our

sons and daughters into war. I think that we have to consider what

other ways does this Country have to try to get countries to act a

certain way, short of armed intervention. I think it is incredibly

dangerous for this Country to unilaterally disarm itself of what is,

in some cases, not in all cases, and it is a rather blunt instrument

sometimes, but ultimately to unilaterally disarm itself of the potential of unilateral sanctions in some cases, I think, is a disservice

to the national interests of the United States.

Having said that, let me just ask one question. The Administration has already signaled that it wants to see activities in State

Trading Enterprises that some countries employ to market agricultural products become subject to multi-lateral trading disciplines,

like the Australian Wheat Board, the Canadian Wheat Board, the

New Zealand Dairy Board.

Can you give the Committee of Members, particularly those of us

who may not come from farming communities, how the activities

of the STE’s affect the ability of your Members to compete in world

markets?

Mr. DENLINGER. Should I begin?

Mr. MENENDEZ. Yes.

Mr. DENLINGER. Basically, the problem with the STE’s is they

are monopolies. They essentially market their commodities, in the

case of wheat, on behalf of their producers.

The producers have no say in what their marketing decisions

are. The country decides when they will sell. they are free to undercut open market prices as they will.

If they want to be very aggressive, if they have a lot of wheat

to sell in a particular year, they will undercut prices very freely.

They look at the U.S. open market prices as a starting point, as

a point of reference.

From there on, they will offer $6, $8, $10 per ton less, if they

wish. That is where the unfairness of it is. There is no transparency. This is all very much under the table, unknown to most

people. But you, of course, get anecdotal information.

They may also offer a different class of wheat, a higher class of

wheat. In other words, it may be a $20 per ton discount, if they

are aggressive that year.

Mr. Suber. I would reinforce what he said about export STE’s. I

should also highlight the fact that there are import State Trading

Enterprises which are just as problematic for U.S. trade.

China happens to run quite a few of them, not in dairy, but there

are ones in Japan and in Canada. The issue there is they can practice discrimination on their sourcing in a way that can be used for

political purposes, much as you discussed on national security

basis.

They can decide to buy from this country for policy reasons and

not that country; totally unrelated to the commercial viability of

the supplier. So, in that sense, import STE’s are just as important

19

an issue as export STE’s and subject to the same, should be subject

to more disciplines and transparency.

Mr. MENENDEZ. Do you all want to see these fall on the multilateral regime? Do you want to see the suggestion that, as I understand, the Administration set forth? Is that something you support

or do you have variation with it?

Mr. SUBER. I am sorry. The question was, should that be connected to the WTO disciplines?

Mr. MENENDEZ. Yes.

Mr. SUBER. Yes, they should.

Mr. DENLINGER. We would agree.

Mr. MENENDEZ. Thank you.

Ms. ROS-LEHTINEN—[presiding] Mr. Burr.

Mr. BURR. Thank you. I wish I had an excuse for my tardiness.

I do not have the excuse of a bill on the floor. Let me just try to

cover a few things. If I in fact go over, then I apologize.

Let me restate I think what Mr. Menendez asked. What is broken? Is it our ability to negotiate a trade deal that is fair or enforcement of a fair trade deal? I will just throw it out to each one

of you for any comment.

Dr. LAMBERT. I think there is room for improvement of the existing trade deal; the tariff reduction, the elimination of State Trading

Entities, the elimination of export subsidies so that there is room

for improvement.

From the beef industry’s viewpoint and the current process that

we are involved in, the existing process is much better than the old

GATT system in that at least cases can be brought through to conclusion.

It is getting the resolution. It is imposing the will, I guess, if you

can in our case with the European Union to have them change

their regulations to come into compliance with the WTO ruling.

Mr. SUBER. I think to talk about what is broken must put into

perspective that the Uruguay Round is the first time agriculture

had ever been included in a trade agreement. So, that was the first

step for agriculture and its distorting trade practices to be brought

under some discipline.

So, as a first step, it was a fine first step. There are more steps

that must be taken to treat agriculture like industrial goods, which

is to say zero tariffs and maximum market access to be built over

time.

These are issues that take time for industries as traditionally

protected as agriculture to accommodate themselves. That it has

started and now it needs to go significantly farther.

The U.S. agriculture sector is one of the most competitive and

simply cannot wield its influence when it is fighting against the

treasuries of other countries.

Mr. BURR. How much does the lack of transparency in their systems affect our ability?

Mr. SUBER. It depends upon the subject matter, the country, and

the product. Any time there is lack of transparency on the rules to

implement import access, or the manner which export subsidies are

calculated, or in STE’s, it is impossible to put your finger on what

the problem is if you cannot see the workings of the system.

20

Dr. GIDDINGS. I would say that if there is anything broken, it

would be the European Union’s willingness to abide in good faith

by the commitments they have voluntarily entered into.

The WTO agreements, as has been mentioned here, are a very

good start. The problem seems to be in the political willingness in

Brussels to abide by the consequences of those agreements.

It seems to me that, that is an artifact of the fact that the treaty

of Rome or the—treaty does not have an interstate commerce

clause which gives their Brussels the capacity to enforce decisions

throughout Europe.

What you have got is subsidiaries which leave most of the power

for decisionmaking in these issues, you know, lodged in the national capitals which gives parochial interests the right to trump

European, the broader European interest with the result that we

have these same sorts of technical barriers to trade or non-tariff

trade obstacles erupting in a variety of vastly different specific

trade contexts.

Mr. GIORDANO. In the pork industry, our exports are up 86 percent by volume and 80 percent by values since the Uruguay Round

went into effect. We have greatly benefited from that agreement.

I dare say most of American agriculture, at least, I do not think

you would have 80 organizations in a coalition trying to get traditional trade authority renewed if they had not benefited.

I think that we hear so much about beef and bananas, they are

high profile cases. For beef and bananas, there are so many other

cases where the U.S. has prevailed or other countries have prevailed and the system has not broken down.

My understanding is that there have been more cases litigated

already under the WTO than from the late 1940’s when the GATT

system was created to the formation of the WTO. That tells you

that countries have a lot more confidence in that system.

I think as my colleague said in agriculture, the Uruguay Round

was the first time we were included in a major trade round. You

had disciplines on industrial subsidies years before.

The Uruguay round was the first time for agriculture. I think,

yes, there are many high profile problems. We certainly have them

in the meat industry. We have talked about some of those today.

There are a lot of great success stories. We all know our future is

based on trade and why we want the opportunity to trade more.

Mr. BURR. I will clearly admit that I have no banana producers.

I have quite a few pork producers that are on the verge of going

bankrupt, even with an 86 percent increase, which forces me to ask

you the follow-up question.

Does that mean the rest of the world is open to our pork products? Are there still markets that are closed and markets that subsidize their pork exports?

Mr. GIORDANO. I dare say that if we did not have so many foreign market barriers, we would have been able to move a lot more

pork out of the country this year. For all of the success we have

had, and that is why we are so intent on getting further liberalization in this new round, there are many markets that remain closed,

many markets where we have access now, but we need to increase

that access.

21

Again, I think that is really a function of the Uruguay Round

really being the first time that we started that process. So, we have

had a lot of success, but you are absolutely right. Much needs to

be done.

Our producers, I think across the board in American agriculture,

but certainly in the pork industry, we are the world’s lowest cost

large scale producer. We produce the highest, most highest quality,

safest pork. When Denmark and the other E.U. producers lose

their subsidization, when these markets are opened up, we are

going to benefit.

We are going to provide pork and other agricultural products to

the world. When you look at 3 billion people being added, probably

by the year 2050, our future is exporting. It is just imperative that

we knock down these barriers.

Mr. BURR. When do you think that openness will come?

Mr. GIORDANO. I think, again, we made great headway.

Mr. BURR. Let me rephrase it. Do you believe that will really

happen?

Mr. GIORDANO. Yes, I do. I think it is imperative because I think

that if it does not happen and we follow the model that the E.U.

would like us to follow in agriculture, we are going to have a whole

lot of people in this world priced out of affordable food and safe

food.

That is why as Dr. Giddings and my colleagues have said, the

focus has got to be based on science. I think we need more of an

open world trading system. We need rules that are based on

science. If that is the case, the United States truly will continue

to be the leading supplier of food to the world, but affordable and

safe food.

Mr. BURR. Last question. Can I ask just one more?

Ms. ROS-LEHTINEN. Sure.

Mr. BURR. If anybody wants to comment. Are there specific countries that are continual problems? That if we looked at a list that

was broken down by category, you would consistently find that

country on there. If there are, would you share them with us?

Dr. GIDDINGS. From the biotechnology standpoint, almost every

country in Europe is a problem. At the top of the list, I would probably put France, if you want me to name names. They are not

alone in sinning against—in this arena.

Mr. BURR. Anybody else?

Mr. SUBER. There are some other countries in Asia that have

generally been slower, but the scale of their problem, meaning the

scale of the product they are keeping out is not quite on the level

of what Europe has done.

So, Japan, though it frequently reaches headlines, has steps it

can take to increase its access. It is making progress over time, especially in dairy. Korea continually needs more transparency, going

to your earlier question.

Then of course, China, should it enter the WTO, will go a long

ways toward making it one of the most important markets, U.S. agriculture and to dairy specifically.

Mr. BURR. I thank the Chairman.

Ms. ROS-LEHTINEN. Thank you. Thank you Mr. Burr.

22

Following up on that, I think that we all agree that, as a Country, we want greater market liberalization of our agricultural products. However, when our U.S. tariffs on farm good average 3 percent and the world’s average is 56 percent, what recommendations

would you make on what you think the U.S. should offer in multilateral negotiations with our dealings to countries to induce them

into open up their markets. What are the one or two things that

you would recommend that would be the most helpful?

Mr. GIORDANO. The negotiations need to be comprehensive so

that agriculture is not the only thing on the table. It is very difficult for countries like South Korea and Japan.

We are not going to be able to conclude with those countries, if

agriculture is the only thing on the table. That is why we reacted

so strongly a couple of years ago. When the Fast Track vote was

pulled, there was discussion about an agriculture-only or WTO-only

Fast Track and we opposed that simply because we believe you

need comprehensive round in order for there to be tradeoffs in all

sectors.

I guess probably all of us would agree that the ideal that we are

all trying to reach, no matter what sector you are in, is openness

and transparency. I mean, the U.S. are we going to prevail in every

single sector? No.

As you say, we have the lowest tariffs. We have the most open

and transparent market. So, if we can get our trading partners to

open their markets somewhat, we are going to benefit. We are

going to come out ahead.

Dr. GIDDINGS. I would concur with we Nick has said. It is absolutely the smartest way to approach the WTO Round that is coming up.

All of this takes place in a larger foreign policy context. I mentioned in my testimony that it is very important for the U.S. to assert its traditional leadership here.

A part of that is tied in with other issues that have nothing to

do with trade or trade negotiations. As the Secretaries of State

mentioned in this morning’s letter in the Washington Post, great

nations pay their bills.

We should pay our arrears to the United Nations. I know extremely well about all of the non-sense that happens under the context of the United Nations that is no one’s interest. Nonetheless,

the fact remains that it is a vehicle for the U.S. to exert leadership.

If were are not in good standing there, it makes it much more

difficult for us to achieve a whole host of foreign policy objectives

across the wide spectrum of issues. The importance of that cannot

be over-estimated.

The degree to which our status on this issue has poisoned numerous other negotiations that are vitally important to U.S. national interests cannot be over-estimated.

Ms. ROS-LEHTINEN. Thank you gentlemen for being with us. I

ask for my statement to be included in the record.

[The prepared statement of Ms. Ros-Lehtinen appears in the appendix.]

Ms. ROS-LEHTINEN. Mr. Delahunt, do you have an additional

question?

Mr. Delahunt? Yes. Thank you Madam Chair.

23

I want to follow-up on my friend from North Carolina, Mr. Burr,

when he asked when can we expect it. My sense is that, and I am

guessing because he is concerned about the small farmer.

We can survive, but we can only survive by achieving certain

economies, large scale economies, by merges, acquisitions, consolidations. So, I just wonder if, you know, when we achieve this utopia, whether the face of the American—whether American agriculture looks a lot different than it does today.

Am I making myself clear? I do not know whether, you know,

Mr. Burr, if that was the import of this question. I mean, I see it

happening. I come from a Coastal District. We have serious problems in terms of the depletion of certain fisheries.

What is occurring is that the larger, better capitalized, the factory—fleet, if you will, will survive. In the course of that process,

the casualty will be a way of life. Many small fishermen and their

families will end up in the dust ben of oblivion, if you will.

Mr. BURR. If the gentleman would yield?

Mr. DELAHUNT. I yield.

Mr. BURR. I think his point is where I was at. I would like to

make sure that one of our jobs up here is not to explain to the

American people that Safeway is not a farm. Unfortunately, if we

do not find a way to expand our trade relationships because of our

agricultural capabilities, we are not going to be able to have the

most efficient pork production or the most efficient anything.

I think that puts us at risk long-term to where we will look back.

Whether it is the small family farm, small family fishermen, we

will regret, if in fact we get to the point that, that is not the case.

Mr. DELAHUNT. Reclaiming my time for a moment.

It is that time that we can share as long as we want now, since

nobody is here. Well, you are here.

Mr. BURR—[presiding] I think the gentleman has got the Chair.

Mr. DELAHUNT. Well, thank you.

But that is exactly my point. When we are talking these macroeconomic issues, you know, we are omitting the reality on the

ground and on the sea, if you will, for many people.

So that while we can continue to negotiate and work in a certain

direction, all of you or most of you represent, I dare say, you know,

many small farmers that are not going to survive a lengthy process. I dare say that we have to do everything that we can to accelerate that process so that many people will have a choice, whether

it is to farm or to fish.

Mr. SUBER. If I can make a comment with respect to dairy on

that. The dairy industry loses about 5,000 dairy farmers every

year. That has not changed regardless of 10 or 15 years of changing dairy policy.

So, the issue when I have spoken in front of dairy farmer meetings, the issue of large versus small does not usually come down

to international verses domestic.

If our dairy system is locked into concern with just the 260 million consumers in the United States, then the small dairy farmer

is almost certainly going to be facing the same assimilation and

going out of business that it has historically anyway.

They have as much to fear from a large California farm as they

do from the subsidies internationally. They can only take the presVerDate 11-SEP-98 07:43 May 16, 2000 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 60296.TXT HINTREL1 PsN: HINTREL1
24

sure off of the large Western farms and their efficiency, if the international market is open to a more efficient farm.

Mr. DELAHUNT. That is exactly my point. I think that all of us,

you know, we obviously want to encourage the prosperity that is

engendered by trade. Yet we just, at least I am speaking for myself

at this point, do not simply want to see it benefit the large multinational corporation, but the small farmers, and the small fishermen, the small pork producers, the small wheat growers. That is

what we are talking about.

Mr. BURR. The gentleman’s time has expired.

The Chair will not hold it against him the fact that his fishermen

are taking North Carolina fish.

I would like to thank all of our witnesses today. This has been

a very fruitful and important hearing. I hope those Members on the

Subcommittee who were not here have an opportunity to read your

testimony.

This hearing is adjourned.

[Whereupon, at 3:35 p.m., the Committee was adjourned.]

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A P P E N D I X

MARCH 23, 1999

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