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S. HRG. 109–454

REVIEW THE DOMINICAN REPUBLIC-CENTRAL

AMERICA FREE TRADE AGREEMENT: POTENTIAL IMPACTS ON THE AGRICULTURE AND

FOOD SECTORS

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

JUNE 7, 2005

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

SAXBY CHAMBLISS, Georgia, Chairman 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

JAMES M. TALENT, Missouri 

CRAIG THOMAS, Wyoming 

RICK SANTORUM, Pennsylvania 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

CHARLES E. GRASSLEY, Iowa 

TOM HARKIN, Iowa 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

MARK DAYTON, Minnesota 

KEN SALAZAR, Colorado

MARTHA SCOTT POINDEXTER, Majority Staff Director 

DAVID L. JOHNSON, Majority Chief Counsel 

STEVEN MEEKS, Majority Legislative Director 

ROBERT E. STURM, Chief Clerk 

MARK HALVERSON, Minority Staff Director 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Review the Dominican Republic-Central America Free Trade Agreement:

Potential Impacts on the Agriculture and Food Sectors ................................... 01

Tuesday, June 7, 2005

STATEMENTS PRESENTED BY SENATORS 

Chambliss, Hon. Saxby, a U.S. Senator from Georgia, Chairman, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 01

Harkin, Hon. Tom, a U.S. Senator from Iowa, Ranking Member, Committee 

on Agriculture, Nutrition, and Forestry ............................................................. 09

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 05

Benjamin, Hon. Nelson E., a U.S. Senator from Nebraska .................................. 08

Conrad, Hon. Kent, a U.S. Senator from North Dakota ...................................... 02

Dayton, Hon. Mark, a U.S. Senator from Minnesota ........................................... 07

Johanns, Hon. Michael, Secretary, U.S. Department of Agriculture, Washington, DC; Accompanied by J.B. Penn, Under Secretary for Farm and 

Foreign Agricultural Services, U.S. Department of Agriculture, Washington, 

DC .......................................................................................................................... 09

Roberts, Hon. Pat, a U.S. Senator from Kansas ................................................... 07

Salazar, Hon. Ken, a U.S. Senator from Colorado ................................................ 08

Thomas, Hon. Craig, a U.S. Senator from Wyoming ............................................ 04

WITNESSES 

Buis, Tom, Vice President, Government Relations, National Farmers Union, 

Washinton, DC ..................................................................................................... 43

Dooley, Cal, President and Chief Executive Officer, Food Products Association, Washington, DC ........................................................................................... 38

Johnson, Allen F., Chief Agricultural Negotiator, Office of the United States 

Trade Representative, Washington, DC ............................................................. 12

McLendon, Robert E., National Cotton Council of America, Leary, Georgia ..... 36

Roney, Jack, Director of Economics and Policy Analysis American Sugar 

Alliance, Arlington, Virginia ............................................................................... 44

Stallman, Robert, President, American Farm Bureau Federation, Washington, 

DC .......................................................................................................................... 34

Tantillo, Augustine, Executive Director, American Manufacturing Trade

Action Coalition, Washington, DC ...................................................................... 46

APPENDIX 

PREPARED STATEMENTS: 

Harkin, Hon. Tom ............................................................................................ 52

Johanns, Hon. Mike ......................................................................................... 56

Buis, Tom .......................................................................................................... 132

Dooley, Cal ........................................................................................................ 129

Johnson, Allen F ............................................................................................... 62

Mclendon, Robert E .......................................................................................... 122

Roney, Jack ....................................................................................................... 135

Page

IV

PREPARED STATEMENTS—Continued

Salazar, Ken ...................................................................................................... 50

Stallman, Robert ............................................................................................... 71

Tantillo, Augustine ........................................................................................... 153

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Cochran, Hon. Thad ......................................................................................... 160

Dorgan, Hon. Byron .......................................................................................... 162

Grassley, Hon. Chuck ....................................................................................... 164

Landrieu, Hon. Mary ........................................................................................ 169

Stabenow, Hon. Debbie .................................................................................... 174

Vitter, Hon. David ............................................................................................ 176

Letters of support for CAFTA-DR ...................................................................179-271

Letters of opposition for CAFTA-DR ............................................................... 272

QUESTIONS AND ANSWERS: 

Baucus, Hon. Max ............................................................................................ 274

Salazar, Hon. Ken ............................................................................................ 284

Stabenow, Hon. Deborah ................................................................................. 276

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REVIEW THE DOMINICAN REPUBLIC-CENTRAL AMERICA FREE TRADE AGREEMENT: 

POTENTIAL IMPACTS ON THE AGRICULTURE AND FOOD SECTORS 

TUESDAY, JUNE 7, 2005, 

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

The committee met, pursuant to notice, at 9:38 a.m., in room 

106, Dirksen Senate Office Building, Hon. Saxby Chambliss, chairman of the committee, presiding. 

Present or submitting a statement: Senators Chambliss, Roberts, 

Talent, Thomas, Coleman, Harkin, Conrad, Baucus, Stabenow, Nelson, Dayton, and Salazar. 

STATEMENT OF HON. SAXBY CHAMBLISS, A U.S. SENATOR 

FROM GEORGIA, CHAIRMAN, COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY 

The CHAIRMAN. Good morning. I welcome you all here this morning to this hearing to review the Dominican Republic-Central 

America Free Trade Agreement, or DR-CAFTA. I appreciate our 

witnesses and members of the public being here as well as those 

who are listening through our website this morning. 

On December 17, 2003, the United States concluded a Free Trade 

Agreement with Central American countries, Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua, and the Dominican 

Republic later joined in March 2004. 

The DR-CAFTA follows agreements such as the Caribbean Basin 

Initiative and the North American Free Trade Agreement by lowering tariffs and reducing barriers to trade in the Western Hemisphere. Without a doubt, one of the more important and effective 

ways to create jobs in the United States is to increase our trading 

opportunities and open foreign markets. That way, we can sell 

more American products and increase our business opportunities 

overseas. 

The tangible rewards of increased sales makes the importance of 

supporting more open trade clear and convincing, and I don’t think 

there is any question but what the future of agriculture, which obviously we are concerned with today, depends on our ability to market what we know to be the finest quality of agricultural products 

grown by anybody in the world. So agreements like this certainly 

are critically important for the future of American agriculture. 

2

This hearing seeks to assess the impact of the DR-CAFTA on the 

agriculture and food sectors, recognizing both the benefits and the 

costs. As chairman of the Senate Agriculture Committee, I have 

heard from many agriculture and food groups, and I acknowledge 

the benefits of this Free Trade Agreement. In fact, recently, a coalition of 78 agriculture and food groups sent a letter to the Senate 

supporting the DR-CAFTA. The list is impressive and covers all 

commodities and sectors of agriculture. Without objection, I will insert this letter into the record. 

[The letter can be found in the Appendix on page 179.] 

The CHAIRMAN. However, this Free Trade Agreement will be perhaps one of the most difficult votes in the 109th Congress, and as 

with all agreements, it will have repercussions that we cannot fully 

predict. As elected officials, we need to be mindful of how the policies and legislation we pass on a national level impact our constituents intimately. We are holding this hearing for that specific purpose. 

We also need to better understand the impacts to domestic industries resulting from new competition and changes in law. One of 

my major concerns regarding the agreement rests on the fact that 

the agriculture provisions, specifically those concerning sugar in 

this instance, can and likely will seriously impair the operations of 

the sugar program as passed in the 2002 farm bill. 

When Congress granted trade promotion authority to President 

Bush in 2001, we understood that each agreement would have to 

be judged on the merits and that some might not pass the Congress. Certainly, the effects of a bilateral or regional agreement 

cannot yield the benefits that a multilateral agreement, as in the 

World Trade Organization, can afford and, as such, must be judged 

accordingly. 

The North American Free Trade Agreement illustrates that support for more open trade on a national level is extremely sensitive 

to the collection of individual experiences of workers in our community. 

I look forward to the testimony of our witnesses today as we continue to address the concerns that many of us have relative to this 

trade agreement. 

I am advised that my friend and colleague Senator Harkin will 

be here at approximately 10. If he wishes to make any opening 

comments, we will certainly afford him that opportunity at that 

time. 

I would now turn to my other colleagues who are here and 

present for any comments they might wish to make as an opening 

statement. Senator Conrad? 

STATEMENT OF HON. KENT CONRAD, A U.S. SENATOR FROM 

NORTH DAKOTA 

Senator CONRAD. Thank you, Mr. Chairman, and thank you for 

holding this hearing. It is extremely timely to have this hearing 

given that the Finance Committee may have a markup as early as 

next week, so thank you very much for holding this hearing. I 

think it is very important. 

Let me just go to a couple of charts. Let me first of all say I voted 

for a fair number of these trade agreements and I did so on the 

3

best advice of so many that came before us and told us this was 

a winning strategy for the country. I voted for the WTO. I voted 

for the China agreement. I opposed NAFTA and the so-called Canadian Free Trade Agreement because I could see that they were 

going to do significant harm to my State, and indeed, they have. 

Mr. President, as I look at the pattern here of our trade deficit, 

this is where we passed NAFTA. We were told that was going to 

improve things for us. But things got worse. We approved WTO 

here. We were told that was going to improve things, but things 

got much worse. We approved China here. We were told that was 

going to improve things, but they got steadily worse. 

It strikes me that we have got to begin to ask the question, how 

many of these successes can we afford, because the trade deficit 

has reached over $600 billion a year. We are on track for a $700 

billion deficit this year. 

And then I turn to the agreement before us, and we were told 

repeatedly that 80 percent of the goods going into these countries 

that we currently import from Central America and the Dominican 

Republic already enter the U.S. tariff-free, so that this is an enormous opportunity for us. Eighty percent of their goods come into 

our country tariff-free. Our goods face high tariff barriers. And so 

there is a significant opportunity here. 

One would think that would mean our trade deficit would be reduced as a result of this opportunity, but you know what? Our own 

International Trade Commission has reviewed this proposed treaty 

and they say it doesn’t make things better, it makes things worse. 

Here we have what is supposed to be an enormous opportunity and 

our own International Trade Commission says it makes our trade 

deficit with the region worse by $100 million a year. It increases 

our trade deficit, not reduces it. 

So I must say, Mr. Chairman and colleagues, I don’t get it. How 

can this be classified as a success when it once again makes the 

trade deficit with the region worse? 

And then we are told, well, this is going to help the economy substantially, and again, our own International Trade Commission, a 

nonpartisan government scorekeeper in trade agreements, has concluded that the impact on the U.S. Gross Domestic Product is too 

small to show up. On Table 4–3 from the International Trade Commission, here is what they say the effect is on the Gross Domestic 

Product of the United States. It is zero-point-zero-zero. That is 

zero. 

You know, I really don’t know what has happened to us here in 

terms of the use of language. But by any objective analysis, this 

doesn’t do anything for the economy. It makes our trade deficit 

with the region worse. And it threatens a very important industry 

in this country. Fundamentally, it threatens the sugar industry in 

the United States, an industry that employs 146,000 Americans. 

We have heard, well, it is just a teaspoon of additional sugar. No, 

it is not a teaspoon. This agreement permits 100,000 tons of additional sugar to come into this country. But that misses the larger 

part of the story, because if you apply the same precedent to the 

other agreements that are being negotiated, what you find out, if 

you apply this same standard to South Africa, to Thailand, and to 

4

the Andean countries, it is not 100,000 tons of additional sugar, it 

is over 500,000 tons. 

I held a hearing on this, Mr. Chairman, last year in North Dakota. We had economists of all stripes before us, from the State 

university, from the industry, objective sources. All of them said 

that level of additional imports would crush the price, would put 

the price below the redemption price and unwind the sugar program in this country, fundamentally threatening the sugar industry, which in my State is a $2 billion industry. 

So, Mr. Chairman, as I look at this proposal before us, what I 

see is an agreement that provides virtually no benefit to the larger 

economy. Our own International Trade Commission says it adds 

zero percent to the Gross Domestic Product. It threatens a major 

industry in our country, the sugar industry. And, most remarkably, 

it makes the trade deficit with the CAFTA counties worse according to our own International Trade Commission when our trade 

deficit is already at record levels. 

Again, I don’t know if we can afford many more of these successes. I said in the Finance Committee hearing, it reminded me 

a little of the German general who said in World War II he knew 

they were in trouble when they kept reporting the victories closer 

to Berlin. This is another one of those victories that you really have 

to wonder, is this going to make things better or is it going to make 

things worse? 

Mr. Chairman, I must say, I regrettably have concluded that this 

agreement, as negotiated, makes things worse, and I will be left 

with no option but to oppose it. I thank the chair. 

The CHAIRMAN. Thank you. Senator Thomas? 

STATEMENT OF HON. CRAIG THOMAS, A U.S. SENATOR FROM 

WYOMING 

Senator THOMAS. Thank you, Mr. Chairman, and thank you for 

holding this hearing. I am interested in trade, of course, because 

I am chairman of the Subcommittee on Finance on Trade. 

I think there are some things positive here. I think it does 

strengthen our position on WTO negotiations. It enhances U.S. and 

regional security, and those are things I have heard from a number 

of people. It strengthens democracies in some of the places and creates regional trading. There are benefits, of course, in most trade 

agreements. There are also problems in most trade agreements, 

and I think there are some problems here, as well. I guess that is 

not unusual. 

Really, I guess I just need to say, and I will be very short, I am 

a little surprised at the broad support. I met with the six presidents from the countries there and they talked about security, they 

talked about their economy, they talked about strengthening their 

governments and all those things. I met with the President of the 

United States and heard the same thing again, and so on. So I am 

a little surprised that in the negotiations, if it is that important, 

if it is that broad, if it has that much impact, why we took a little 

relatively small thing like sugar that we have dealt with in the 

past and put it in there and let it become one of the problems in 

terms of passage of something that is quite broader. 

5

So I met with our sugar folks. I met with them last week. A 

number of them are going to be here this week. Hopefully, we can 

find some ways, either in this agreement or in the future for the 

sugar industry, to do something. But at any rate, we need to see 

if we can’t deal with the sugar problem as we go forward. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

Do any of my other colleagues have an opening statement? Senator Baucus? 

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

MONTANA 

Senator BAUCUS. Thank you very much, Mr. Chairman. I will be 

brief here. 

This proposed agreement, actual agreement signed, not yet ratified by the Congress, if it is ratified, gives me a lot of concern. I 

strongly believe that trade, fair trade, free trade, just more trade, 

that is fair to all countries concerned and peoples concerned makes 

a lot of good sense. It helps people around the world. There is no 

doubt about that. And I have generally supported all trade agreements that have come before this body. I pushed hard on China 

PNTR, for example, and also worked very hard to prevent unconditional, or conditional MFN extensions for China. I supported 

NAFTA. I supported the Canadian Free Trade Agreement. 

I support trade agreements. I might say, at somewhat political 

expense. For example, I am the only person in the State of Montana, only public figure who has. Everybody else speaks loudly 

against them, saying this is bad for Montana, et cetera. But I support them, generally. 

I have trouble with this one for several reasons. One, it does not 

help an industry that is important to my State, sugar. We all know 

the sugar problems. And in addition to the points that the Senator 

from North Dakota made, which are very real, that is this is essentially the first of many potential revisions on sugar, very detrimental to the American sugar industry, not just the increased 

quota from DR-CAFTA countries, but also it sets a precedent for 

Colombia, South Africa, Thailand, and so forth. You add that up 

and that tonnage is very significant. 

Add to that Mexico. Under the NAFTA agreement, it is my understanding that Mexico will be entitled to export to the United 

States, if it is a net exporter of sugar, you know, 400,000 or 

500,000 tons. Mexico is already a net exporter of sugar. That was 

not contemplated when NAFTA was written. Nobody thought that 

would happen, but it has happened. 

So we add it all together and it is not a teaspoon, it is a flood, 

frankly. And I see no indications from the administration to address any of that. The sugar industry, my beet growers are just 

being stiff-armed. They won’t pay attention to them. That is just 

the deal. The administration seems to want to just shove this 

agreement through Congress, maybe by a one or two-vote margin 

in the House, without addressing the real legitimate concerns of an 

industry that doesn’t have much else, other places to go. 

Our beet growers, for example, what else are they going to do? 

You know, these are Montanans. They grow sugar beets. They also 

6

have an interest in the plant there. If the sugar industry goes 

downhill, there is nothing left for them. There is a lot of opportunities for a lot of other people, other businesses and so forth, but not 

for these folks, and I represent them. They are very concerned. So 

it is the cumulative effect which is not being addressed by the administration that is causing a lot of problems. 

Add to that sort of the lingering concern. We talk about trade 

agreements and the general benefit it provides to people. There is 

a lot of lip service, but only lip service, to readjustment assistance 

to help when the people are displaced, not because of something 

they caused themselves, but because of an agreement or because of 

international trade dynamics. 

There are just no—there is no beef. Where is the beef? There is 

no beef in the administration’s efforts to do something to help those 

folks whose jobs are lost on account of trade. Let us take the sugar 

industry. There is nothing. We have heard nothing from the administration, no concern. It is like there is just a callous disregard, it 

seems. 

I know within the administration there are some who say, well, 

the heck with that. I negotiated this and so this is what is going 

to be. Others in the administration said, no, no, let us do something about this. But so far, what we hear is, forget it. This is the 

deal. Let us jam it through, a one-vote margin. We will twist 

enough arms. The White House has enough power just to get it 

through. 

I think that is a bad approach because it tends to cause people 

in the country to wonder what is in it for them. And I don’t want 

to stretch this analogy too far, but look what has happened in Europe in the last couple of weeks. The people of France, the people 

of the Netherlands, the people in these countries have said, hey, 

our leadership is too elite. They are too patrician. They are not caring enough about us, the people. 

And that is a little of what is happening in this country with 

trade agreements. People are wondering, what is in it for us as 

people? We are sure the companies get a good deal out of it. The 

management does. Stockholders might. But what is in it for us? It 

is beginning a significant resistance in this country to trade agreements because of the failure to just remedy adjustment problems 

and to show that the administration really cares. 

I see my time is up, Mr. Chairman, but let me just say, I have 

real problems with this agreement. The ITC studies show that 

about 3,000 jobs are going to be lost just with this alone, and that 

is not peanuts, if you will forgive me, Mr. Chairman. That is more 

than a spoonful of sugar. It is just not enough addressed here. 

You can go back and renegotiate. I hear all this, oh, we can’t renegotiate agreements. Yes, you can. Oh, the parliaments there 

have already passed it. So what? This administration, if it wants 

to, can go back and renegotiate, privately give a heads-up to the 

countries down there and say, hey, we have got to rearrange things 

a little bit. They will deal. They will figure out a way to deal. There 

is a lot of creativity around here. But no, there is no indication to 

even begin to open that door. One administration official said, well, 

we asked them, could you do that, and they said no. Well, of course 

7

they say no if you ask them. If you tell them, hey, we have to do 

this, they will find a way. 

And so I have significant reservations about the way this is being 

done, Mr. Chairman. Thank you. 

The CHAIRMAN. Senator Roberts? 

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

KANSAS 

Senator ROBERTS. Thank you, Mr. Chairman. I apologize for 

being late, and I will be brief. I know that comes as a shock to everybody here. 

I am going to save my tirade or my ranting not for the Secretary 

but a question to the Secretary in regards to what happens if 

CAFTA fails and what that means down the road for us in other 

trade negotiations and also what it means in regards to stability 

in those countries we are talking about, more especially from the 

standpoint of national security with immigration and drugs and 

trade and energy and so on and so forth. 

I think we are suffering, Mr. Chairman, from something called 

trade fatigue. I think many times we oversell trade agreements. I 

know we do that. I think many times we over-criticize them. I 

know we do that. And so now when people like myself or the Secretary or anybody here who is privileged to serve your farmers and 

ranchers go out and make a speech, it used to be the second thing 

they used to talk about was exports and trade. We don’t do that 

anymore. 

I don’t know whether—I don’t know what to call it. I don’t think 

it is isolationism. I don’t think it is protectionism. I think everybody is looking out for their own commodity interest, and I understand that, but there is a larger issue here in regards to not only 

national security and stability in that region. I don’t want to go 

back to the Ortega days. And so I think we have to be very careful 

as we go forward, and I am worried about this. I think that there 

has been an attitude change in farm country, even in Montana. 

I am worried about this idea that, stop the world and let me off. 

Let me grow what I can grow and we will sell that, except that in 

Kansas, we have to sell at least a third of our product somewhere. 

The same thing with Nebraska. So I am concerned about that. 

So I am going to end with that and I am going to have a question 

for our distinguished Secretary, what he thinks is going to happen 

if CAFTA loses, so that is the softball coming at you when it comes 

to my turn. 

The CHAIRMAN. Do any of my other colleagues wish to make any 

opening statement, and if you do, please make it brief. 

STATEMENT OF HON. MARK DAYTON, A U.S. SENATOR FROM 

MINNESOTA 

Senator DAYTON. I will, Mr. Chairman. I just want to thank you 

for this hearing. It is very timely. I also welcome the Secretary and 

his colleagues to our committee here. I will save my statement 

until my questions. Thank you. 

The CHAIRMAN. Senator Nelson? 

8

STATEMENT OF HON. BENJAMIN E. NELSON, A U.S. SENATOR 

FROM NEBRASKA 

Senator NELSON. Thank you, Mr. Chairman. I, too, want to welcome the Secretary and his staff for being here. I am looking forward to this hearing. I obviously am concerned, as we all are, about 

how we handle the diplomacy in the world and how we interact 

with our friends to the South, but it also impinges on agriculture 

and what the future of our sugar industry is. I am very anxious 

to get responses to the questions that are up and coming. 

And though I rarely align myself with the comments from my 

Senator from the South, Senator Roberts, this time, I am very 

happy to do so and I appreciate his concise statement. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Salazar? 

STATEMENT OF HON. KEN SALAZAR, A U.S. SENATOR FROM 

COLORADO 

Senator SALAZAR. Chairman Chambliss, first, thank you for holding this hearing. Second, I have not yet made up my decision with 

respect to DR-CAFTA. I will study it closely over the weeks and 

months ahead. I think it is important for us to put the finger on 

what it is that we are trying to accomplish with DR-CAFTA. Is it 

really an economic trade agreement or are there other issues related to national security and what is happening in Central America that are really the drivers to this agreement? 

As we move forward, other concerns that have already been expressed by my colleagues relative to what happens to sugar and 

our agricultural economy is going to be real important to us, as 

well as the question that I think Senator Baucus raised, whether 

or not the specific question related to the sugar industry is something that could be brought back in the form of a renegotiated 

CAFTA, or is the agreement that we are dealing with the agreement that we are going to take to some kind of up or down decision 

within this Congress. 

I very much look forward to learning a lot more about this, and 

Secretary Johanns and distinguished members of the panel, thank 

you for being here today. 

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

Appendix on page 50] 

The CHAIRMAN. Thank you. 

Gentlemen, thank you for your patience out there. Our first 

panel today will be comprised of the Honorable Michael Johanns, 

the Secretary of the U.S. Department of Agriculture. He is accompanied by Dr. J.B. Penn, who is Under Secretary for Farm and Foreign Agricultural Services, a longtime friend of this committee, as 

well as the Honorable Allen Johnson, the Chief Agriculture Negotiator for the U.S. Trade Representative Office. 

Secretary Johanns, I just want to tell you, you have been in your 

position now for almost 6 months and I want to compliment you 

for the job you are doing. You have been extremely accessible to not 

just the chairman of this committee, but I know to any number of 

other members of this committee as well as to other members of 

the Senate as a whole. You have been very responsive every single 

time we have called your office. So I want to commend you on the 

9

job you are doing. You have some difficult issues that you are facing, not just here today but otherwise, and you have been very 

forthright in addressing those issues and we look forward to continuing to work with you in all of those respects. 

I know today you are going to have to leave at 10:30. We understand that, and that Dr. Penn will respond to any questions that 

might be asked at that time, once you have to exit. 

We have been joined by Senator Harkin. Senator Harkin, I was 

going to turn to the panel for any opening statements, but if you 

wish to make any opening statement, we would certainly be happy 

to hear from you. 

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM 

IOWA 

Senator HARKIN. Mr. Chairman, thank you very much. I apologize for being a little late and I will just have my statement be 

made a part of the record. I would rather listen to the panel. 

Thank you, Mr. Chairman. 

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

Appendix on page 52] 

The CHAIRMAN. Secretary Johanns, we are pleased to have you 

here and look forward to your comments. 

STATEMENT OF HON. MICHAEL JOHANNS, SECRETARY, U.S. 

DEPARTMENT OF AGRICULTURE, WASHINGTON, DC; ACCOMPANIED BY J.B. PENN, UNDER SECRETARY FOR FARM AND 

FOREIGN AGRICULTURAL SERVICES, U.S. DEPARTMENT OF 

AGRICULTURE, WASHINGTON, DC 

Secretary JOHANNS. Thank you. Mr. Chairman, members of the 

committee, first and foremost, thank you for those kind words. It 

is my intent to do everything I can to be accessible to this committee and to the members of the Senate and the House. If you 

ever see any trail-off in that promise, let me know, because we definitely want to work with the committee, and it has been a pleasure 

working with you, Mr. Chairman. 

I do appreciate the opportunity to offer a few words on the Central America-Dominican Republic Free Trade Agreement. I have 

submitted a full text of my comments, so I am going to move 

through these comments fairly quickly in the hopes that I can at 

least take a couple questions before I do have to leave. 

To begin our discussion of CAFTA-DR and its importance, I hope 

I can take a moment here to provide some context relative to the 

farm economy, what we are seeing and the importance of trade to 

that economy. 

The U.S. farm economy is strong. Our export sales contribute to 

that. Farm income was the highest ever in 2004, actually by several billion dollars. We forecast another record for 2005. Income 

continues to run well ahead of the national average and it covers 

many sectors of the agriculture economy—the livestock sector, 

dairy, the crop sector is faring well at the same time as livestock, 

which is unusual in agriculture, as you know. There are widespread positive aspects of the economy, and we also recognize that 

there is adversity in some areas and in some localized parts of our 

country. 

10

Agriculture’s balance sheet, I might also mention, is the strongest ever, supported by firm land prices. That dates back over an 

extended period of time, actually dating back to the late 1980’s, 

and it doesn’t show any sign of slowing. 

I cannot emphasize enough that the future strength of agriculture does hinge on our success in the international marketplace. 

We set the standard for the world. We are the world’s largest exporter when it comes to agricultural products. We already derive 

27 percent of our gross receipts from our foreign customers. Every 

$1 billion of export sales creates $1.54 billion in supporting economic activity, and it supports nearly 16,000 jobs. 

Now, in terms of the numbers on export sales, in 2004, they reached a record of $62.3 billion, despite, I might add, having some 

key markets unjustifiably closed to beef and to poultry products. 

This growth reflects both higher prices and expansion of high value 

added products. 

Our latest forecast for 2005 could well reach the second-highest level on record, $60.5 billion, and I might add, that is still in an 

atmosphere where we are working to open up some key markets, 

especially in the beef industry. 

There are a lot of discussions about various aspects of trade that 

always pop up when you have a trade agreement. Let me offer 

some thoughts relative to past trade agreements. 

During this fiscal year, 2005, Mexico will overtake Japan and become our No. 2 export market. Canada remains our top export market. That means some 30 percent of our total exports will be from 

our partners in the North American Free Trade Agreement. In fact, 

trade with our NAFTA partners has doubled in 10 years, during 

the existence of that agreement. We do hear criticism, but quite 

honestly, when it comes to exports, we have really set a standard 

in terms of the amount we are exporting into these two partner 

countries. 

I might also mention that we have our work cut out for us. Our 

ability to produce is growing faster than consumption here at 

home. We need more markets like our NAFTA partners. Remember 

the statistic, 95 percent of all consumers don’t live here in the 

United States then live outside of our country. Those are our customers today and in the future. 

We work on trade in a number of ways, multilaterally -that 

would be the WTO; regionally CAFTA-DR is an example; and bilaterally Australia, Chile, Singapore, those agreements would be examples. 

We are engaged in an effort to liberalize trade in many areas so 

we don’t put all of our eggs in one basket. 

I do believe that we stand at a crucial crossroads. I think Chairman Roberts’ comments are accurate. I am talking, of course, about 

the ratification of this agreement. The passage of CAFTA-DR is essential. The economic stakes are very high. This is a good agreement for U.S. agriculture. The facts support that. 

The agreement gives us access to 44 million additional customers. I am pleased to report that we are seeing growing economies and stable governments; a vast change from what we have 

seen in the past. Without this agreement, our competitive position 

in the markets will diminish. We have already seen our share of 

11

these countries’ imports fall in recent years. In 1994, we had 52 

percent share of their imports. Today, that has fallen to 42 percent. 

Make no mistake, our competitors are there. They are very, very 

competitive. Canada, Mexico, South America are all working to 

gain access. We can regain market share with CAFTA-DR, I am 

confident of that, and again, I think the reasons are obvious. 

Look at the history of our relationship with this part of the 

world, and it extends over nearly two decades. Because of votes 

that were taken previously, and in some cases overwhelming majorities, bipartisan support for this approach, 99 percent of the 

goods from these countries from an agricultural standpoint enter 

our markets duty-free. It was our attempt to boost the economy of 

this part of the world, and incidentally, it worked. What you did, 

or your predecessors did, worked. 

But now we need to work on what we can do to level the playing 

field, because our duties are very high when we go to sell into 

those markets. 

Now, if I might just touch on the issue that has been mentioned 

a number of times and that always comes up, the impact on sugar. 

As you know, I come from a State where we had sugar beets. We 

had sugar processing in Scott’s Bluff, Nebraska. Needless to say, it 

was something I was going to take a close look at and I did. I have 

repeatedly emphasized, after significant study of what we have 

here, that I do not see an impact from CAFTA-DR on the U.S. 

sugar industry. Quite honestly, it is just not enough sugar. It is 

just simply not enough sugar. 

The agreement gives some added access to our market, but the 

additional sugar is little more than 1 day of U.S. production. The 

quantity involved is very small, very small. The over-quota duty 

wasn’t changed. It remains prohibitive at well over 100 percent. It 

will not be reduced as a part of this agreement, just as the sugar 

industry requested. 

The sugar program with its guaranteed benefits to American producers is really not changed in any way. The farm bill passed in 

2002 remains the same. We will administer the program under 

that farm bill the same when CAFTA is passed. So the overall impact on the sugar industry, we really see as not impacting that 

farm bill. 

I will just wrap up my comments by saying that it is not accidental that we have had such broad support from the agricultural 

industry. This is a good agreement for agriculture. At my confirmation hearing, I was asked by one of the members of this committee, 

Senator Nelson from my home State, where will you be on trade, 

and I said my goal is to put trade front and center. 

Well, today I stand before you, or sit before you with the ability 

to tell you that the current situation is not balanced. Ninety-nine 

percent of the products do come here duty-free. We pay very high 

duties. With the passage of CAFTA, those duties come down, in 

many cases immediately, and in all cases over time. That is exactly 

what I believe the terminology ‘‘level the playing field’’ means. 

Thank you very much, Mr. Chairman. 

The CHAIRMAN. Thank you. 

[The prepared statement of Secretary Johanns can be found in 

the Appendix on page 56.] 

12

The CHAIRMAN. Ambassador Johnson? 

STATEMENT OF ALLEN F. JOHNSON, CHIEF AGRICULTURAL 

NEGOTIATOR, OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE, WASHINGTON, DC 

Mr. JOHNSON. Thank you, Mr. Chairman, Senator Harkin, members of the committee, for this opportunity to discuss the Central 

American and Dominican Republic Free Trade Agreement. You 

have seen my written testimony, which I understand will be entered into the record. You have heard Secretary Johanns. You will 

hear from the next panel. You have seen the letter from some 80 

agricultural groups supporting this agreement, all of which points 

to, overwhelmingly, the agricultural benefits of this agreement justify its approval. 

As I thought about my testimony today, I actually thought I 

would focus on something that I have already heard Senator Roberts raise, which is what is the role of this agreement in our broader agricultural trade agenda? 

This weekend, I had the chance in a few moments to read a book 

called Decisive Moments in History. One of the stories in that book 

was about a guy by the name of Cyrus Field who took it upon himself to lay a cable between the United States and Europe, some 

375,000 miles of single-strand wire that they wove into a cable, 

about the amount you would need to connect the earth to the moon. 

They tried on several occasions. The first time, the cable broke 

at 350 miles. The second time, they were hit by a hurricane, so 

they had to return to port. The third time, after they basically lost 

half their investment, they went back yet again, risked everything, 

and actually succeeded in laying the cable. And as the American 

ship approached America, the English ship approached England, 

they radioed to each other through the cable that they could see 

both coasts and a celebration ensued and Mr. Field was named a 

national hero. The cable fell silent. 

Then 5 years passed as the Civil War raged. The project was 

abandoned, and 6 years later, Mr. Field tried again. Again, the 

cable broke, and then finally, in 1866, they succeeded to forever 

connect instantaneously America, the old and the new world. 

Now, what we do here is known within seconds around the 

world, and speculation, like seeds in a burst of wind, is known instantaneously and is beyond our control. In the next few weeks, 

you will be in the position here to decide what message you want 

to send through the cables of today. What message do you want to 

send to the capitals of San Salvador, Guatemala City, Tegucigalpa, 

Managua, San Jose, and Santo Domingo, where just a few years 

ago they traded blood and bullets across their borders instead of 

goods and services, where they are on the front lines of narco-terrorism, narco-trafficking, corruption, international organized crime, 

immigration, and economic and political freedom? 

The pro-American political leaders who dared to listen to our encouragement to follow their American dream are going to be waiting anxiously to hear if they were wrong in opening their markets 

in agriculture and paying a huge political price for that in tying 

their futures to ours. 

13

In addition, the capitals of Central America’s neighbors to the 

South, Bogota, Quito, and Lima, who we are currently negotiating 

with and are fighting against standing armies of narco-terrorists as 

well as the anti-American sentiments being promulgated by Venezuela’s president, they will be listening to hear if the message for 

these Central American countries who took some courageous political risks at home, that those decisions were well founded in putting their faith in the U.S. as partners. 

In the capitals of Brasilia, Buenos Aires, and Montevideo, they 

will be listening to hear if the message is that we have learned the 

lessons of the past by passing and reaching out with this agreement and not turning our back on the hemisphere yet again. 

And in the capitals of Havana and Caracas, they will be listening 

to see if they will have new material and a stronger voice to justify 

their anti-American sentiments around the hemisphere, or are we 

going to hush them by reaching out with our actions and passing 

this agreement. 

Unfortunately, due to Mr. Field’s cable and its technological descendants, the message isn’t going to stop at the ocean’s edge. It 

is going to go to Asia, Africa, the Middle East, where they will be 

listening to hear that while we are promoting democracies around 

the world, are we supporting them in our own neighborhood? 

In Tokyo and Seoul, major agricultural markets of today with 

even greater potential for consuming our agricultural products in 

the future, where there is huge internal resistance to agricultural 

reform and opening the markets to us, and where we are currently 

condemning them because of their policies in our access to their 

beef markets, there is going to be protectionists there listening to 

hear if they get a sigh of relief with the news that the U.S. is backing down on trade, or are they going to hear the loud and clear 

message that our relentless march toward addressing unfair trade 

practices around the world is not going to cease. 

And then in countries with the capitals of Moscow, Hanoi, and 

Kiev, where we are pushing them hard to liberalize agriculture in 

their WTO accession packages, they are going to be listening to see 

if we lead by example in passing this agreement. 

And then in Delhi, where we are constantly lecturing them on 

protecting their billion people behind tariff walls of over 100 percent duties on agriculture, they will be watching to see if we turn 

down an agreement with great benefits to U.S. agriculture that 

leaves in place, as Secretary Johanns said, 100 percent tariffs on 

some products because even the quantities involved here, the small 

quantities involved, is too liberal to be approved. 

And probably, if this agreement failed, the most astounded of all 

would be Beijing, who heard repeatedly that their textile exports 

are a threat to U.S. jobs and where they know that the U.S. textile 

industry is lobbying heavily for this agreement. Yet, if we turn this 

agreement down, the very agreement that is our best chance to 

compete against China in those same products. 

In Brussels, they will be watching to see if our policy is really 

‘‘do as I say, not as I do,’’ because they are looking for reasons to 

justify, as you mentioned earlier, their policies of subsidization and 

protection. 

14

And then in Geneva, where there are 148 members of the WTO 

looking to U.S. leadership anxiously -and make no mistake, the 

Doha Round will not move forward without agriculture and agriculture will not move forward without U.S. leadership—our credibility will be put at stake as to whether or not we are going to 

stand behind this agreement that we have signed and if it is going 

to fail because of some protectionist tendencies here. 

So that dream in the WTO of addressing export subsidies, where 

the Europeans outspend us 100–to-one, or the unfair trade practices of trade distorting domestic support where the Europeans outspend us about three-to-five-to-one, or addressing the high tariff 

barriers around the world where the average tariff in the world is 

about five times ours, those who look forward to that are going to 

be disappointed because we will have missed the opportunity to address these unfair trade practices if this agreement fails and with 

it our leadership in the WTO. 

Every one of the countries that I just mentioned is of interest to 

U.S. agriculture, and I know that because I have people coming 

through my door every day telling me what they want out of each 

one of these countries and in each one of these agreements. But the 

message that the administration and the Congress are divided on 

the goal of opening markets and addressing unfair trade practices 

will be welcomed by our foes and disappoint our friends and would 

impact every issue that we face in our agricultural trade agenda, 

both large and small, including putting at risk our ability to compete against our competitors for our customers in markets even 

close to home. 

But if the Dominican Republic and Central American Free Trade 

Agreement passes, the exact opposite message will be sent. The unmistakable message will be that the U.S. is going to continue to 

lead the world not just in democracy, but also in trade and economic freedom and the importance to this committee that U.S. agriculture is going to continue to lead the U.S. trade agenda. 

I like to think that when Mr. Field visualized his cable going 

across the Atlantic, that he envisioned an optimistic America, one 

engaged in the world, reaching out to friends, building partnerships, unafraid of competition. I believe that is the America that 

we need to be today. He probably envisioned the news going across 

his cables to be those of good news for our future and not retreat, 

one where we broke down walls, not built them higher. 

I share in Mr. Field’s optimism, and I know as leaders here you 

realize the American dream yourself and can understand why others around the world would be looking to us in trying to achieve 

that with our leadership. And because of that, I know that they are 

not going to be disappointed. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

[The prepared statement of Mr. Johnson can be found in the Appendix on page 62.] 

The CHAIRMAN. We are going to do something a little bit out of 

the ordinary because we are going to lose the Secretary here in a 

few minutes, and I am going to give everybody an opportunity, if 

you want, to direct a specific question to the Secretary. As long as 

we can keep him here, we will give you the opportunity to ask one. 

15

Then we will come back after the Secretary leaves and go back to 

our normal questioning process. 

Mr. Secretary, you are right. The most controversial provision in 

DR-CAFTA is that provision regarding sugar. The administration 

has minimized the impacts on the sugar industry and maintains 

that the compensation provision will help manage the U.S. sugar 

program. However, we have not seen any details on how this mechanism is going to work. Furthermore, many Senators believe that 

paying the Central American governments for surplus commodities 

or direct appropriations will be politically difficult to sustain or justify. While this is the first time that this provision has been included in the trade agreement, USDA has had over a year to detail 

the proposed mechanisms. 

With a vote imminent in the Senate and the House, can you tell 

us how the compensation mechanism will operate? What do you estimate will be the impact on the U.S. sugar program if DR-CAFTA 

is approved by Congress and additional sugar is allowed in the 

United States? And do you think the American public will accept 

taxpayer dollars being given to Central American governments, as 

provided for in this trade agreement? 

Secretary JOHANNS. Great questions. I would offer a couple of 

thoughts. I have read the discussion about the compensation agreement. It has come up, I think, in every hearing that has been held 

relative to CAFTA. The gentleman that actually negotiated that 

and put it in is one of the witnesses today, so the Ambassador may 

be able to offer some specific thoughts, but let me offer a thought 

from our standpoint in terms of management of this sugar program. 

Like I said, I have read the discussion with interest, but again, 

as we look at how we discharge the duties you have given to us 

here on the Hill and the broad powers we have over sugar in the 

United States, it just simply doesn’t appear that there is enough 

sugar involved here to impact how we manage the sugar program 

during the life of the farm bill. 

And I see the discussion about sugar. I watch the charts. But the 

only way that that case can be made about sugar crashing this program is by making assumptions about future agreements and future agreements and future agreements and then getting to a point 

where you say, ‘‘See, I told you so.’’

Under what we see here, I have to tell you, I would be very, very 

surprised, and I would be sitting here eating crow someday if literally the compensation agreement ever came into effect, because 

we just don’t see enough sugar involved that is going to impact how 

we manage this program. 

The CHAIRMAN. Senator Harkin? 

Senator HARKIN. Thank you, Mr. Chairman. First, just a short 

comment, and then I do have a question. 

Mr. Secretary, it just seems to me that every time one of these 

trade things comes around, we talk about how U.S. agriculture 

hinges on getting more of our goods sold abroad. I always go and 

check the oil prices. I check how much my farmers are paying for 

diesel and gasoline and what they are paying for fertilizer right 

now and the high cost of natural gas for making that fertilizer. It 

just seems to me we are selling more and more of our products 

16

overseas so we can get some money so we can turn around and buy 

more imported oil. 

I am all for trade. I have supported about every trade agreement 

that has ever come up here. I don’t know that it is getting us very 

far. It seems to me what the future of agriculture hinges on is recognizing that those fields out there and those farms out there can 

produce the energy that we need in this country. 

Trade is fine, but I don’t know that the future strength of American agriculture hinges—hinges—on our success in the international marketplace. I would say it hinges on whether or not we 

are actually going to start using the resources we have here to replace imported oil. That is everything from diesel, bio-diesel, ethanol, bio-based products, whether it is hydraulic fluids or all the 

different things that can be made that we can start replacing. All 

the plastic things that are made out of petroleum products can be 

made out of, as you know, because you have a plant north of 

Omaha there, that Dow-Cargill plant, you can make those things 

out of starch. 

So it seems to me that is where we have got to be focusing our 

energies. Now, we are doing a little bit of it, but not nearly enough. 

We spend all of our time and efforts on things like CAFTA. 

Now, Mr. Johnson, my good friend, says this is a great benefit. 

But as I understand it, the estimate that we have from the American Farm Bureau Federation is that agriculture exports will be 

$1.5 billion a year higher by the time the agreement is fully effective 15 to 18 years from now. Now, you point in your comments 

that it is a doubling. Well, sure. One to two is a doubling. It doesn’t 

say much. That still is about 1.5 percent of our expected U.S. agriculture exports for 2005––1.5 percent. 

Now, we talk about the benefits to these people in these other 

countries. I read how we are going to sell them prime cuts of beef 

and pork and all these wonderful things are going to go to these 

countries. But a third of the population lives on $2 a day or less 

in these countries. The average income in all the countries is about 

$2,200 a year. That is not even $200 a month. How are they going 

to buy that New York strip steak or an Iowa chop on that kind of 

income? 

So again, my thing is I think we have got the wrong focus. I am 

not saying this is necessarily a bad deal, but I think it is the wrong 

focus to think that we have got to put so much effort into this. 

Where our efforts ought to go is the Doha Rounds. This is a $3.3 

billion market. Doha Round, if it works, opens a $300 billion a year 

market for our agriculture producers in this country. That is where 

we ought to be focusing, and not on this thing. 

By the way, I also add, I was visited, Mr. Chairman, by a Bishop 

Ramizini from Guatemala. I had never met him before. He is a 

Catholic bishop of Guatemala, came to see me specifically to talk 

about the dire impacts that CAFTA would have on his people, his 

poor farmers, his poor people in Guatemala. Now, I don’t think he 

has any devious intentions, but he is saying that this could really 

drive his farmers off their land, drive them into cities and really 

hurt their rural population in those countries. 

And so, last, it raises the issue about sugar, also. I am not so certain that what is going to happen with sugar on this is that big 

17

of deal right now, but what it does do is it sets a precedent for 

opening up for other countries to come into which could devastate 

our sugar industry in this country. And when we are looking at the 

possibility of using sugar and sugar beets or cane, whatever it 

might be, as a source for energy down the road, I am not certain 

I want to see that go by the wayside. 

So, Secretary, I just wanted to make those statements and ask 

for your rejoinder on that in terms of the impact on poor people in 

Guatemala. Why is Bishop Ramizini wrong in how he is looking at 

this in terms of the impact on his people? And second, how is this 

going to help us export our high-quality cuts of beef and pork and 

everything else when people are making $2 a day? 

Secretary JOHANNS. I don’t really have any idea other than what 

you have said about the Bishop’s comments, but I would offer this 

thought. Back when NAFTA was being discussed, I was a mayor 

at the time, and I was asked to be part of a delegation that went 

to Mexico, and we actually met with the president, the then-president of Mexico, to talk about NAFTA. There were some of those 

same arguments made, that this massive agriculture industry in 

the United States would just dominate, and if not annihilate agriculture in Mexico. 

I was just back in Mexico, as Secretary of Agriculture, where I 

met with my counterpart, Secretary Usabiagas, and we compared 

notes. In fairness to NAFTA, we have doubled our exports, but they 

have also doubled their exports. As I have said so many times, 

trade is not only a two-way street, it is a superhighway. If they are 

doubling their exports, then obviously they have benefited from 

that agreement, and this is in a very short period of time. We are 

talking just over 10 years. 

I fully -#I21Senator Harkin. Excuse me. Are you talking 

about——

Secretary JOHANNS. I am talking about NAFTA. 

Senator HARKIN. Are you talking only about agriculture exports 

from Mexico or all exports from Mexico? 

Secretary JOHANNS. I am speaking of agricultural exports. 

Senator HARKIN. Just agricultural exports? 

Secretary JOHANNS. Just agriculture exports. It has been a rather remarkable success story, really on both sides, in agriculture. 

Now, let us look at CAFTA and see if we can draw a comparison 

there. I do believe you can. It is a market that is close to us. They 

have had a wonderful preference for a lot of years—this dates back 

to 1983, as a matter of fact. On three successive occasions, Congress has had an opportunity to reaffirm its commitment to this 

part of the world and said, yes, let us leave this part of the world 

open. Let them export their products into the United States dutyfree, and they have been doing that. 

And what this really does at this point is it allows for a leveling 

of the playing field. But they have a market here. Interestingly 

enough, even with the high duties, we have a market there. We exported about $1.8 billion worth of agricultural products into these 

countries in the last year. It is that trade and that relationship. 

Senator I will just offer one last comment. When the presidents 

were here, I had an opportunity to mostly sit and listen in a meeting where they were there to talk about the benefits that they saw 

18

in this agreement for their country. I just walked out of that meeting very, very proud of my country and the commitment that we 

had made to these countries that quite honestly 20, 25 years ago, 

many would have written off. And now, we see presidents that are 

enthused about their economies, enthused about this agreement, 

excited about the opportunity of creating an even better relationship with the United States. 

Like I said in my prepared testimony, I believe the right thing 

was done by this Congress over a long period of time, and I think 

it would be very, very unfortunate if, at this point, now some 20–

plus years into this, if we walked away in the final stage. And I 

think if every president were here before you from the CAFTA 

countries, I feel strongly that they would affirm what I just said 

to you. They want this relationship. They want this future. These 

are countries that have blossoming democracies, but they are fragile and they need our help and support, and I believe this agreement gets them there and they feel strongly about it. 

The CHAIRMAN. Mr. Secretary, I know time is short with you, but 

if you would answer one more question, maybe from Senator Thomas. 

Senator ROBERTS. Would the Senator yield? 

Senator THOMAS. Yes, absolutely. 

Senator ROBERTS. I don’t mean to perjure the intent or the concern of any member here or any commodity organization and their 

obligation to fight for their farmers and ranchers or particularly 

the sugar industry. My question to you, Mr. Secretary, is this. If 

we don’t approve CAFTA, if CAFTA is not approved, what do you 

do, sir, personally in regards to your public statements and we do 

from a policy standpoint, hopefully with working with the Congress 

in reference to the Free Americas Trade Act, in reference to the 

WTO, in regards to the cotton case and your efforts to open up the 

beef markets with Japan and South Korea? What do you do with 

the farm bill if, in fact, that is the signal we are saying, we are 

going back to acreage controls and higher supports. What are we 

doing here? I think this has ramifications for all of that. 

The distinguished Vice Chairman has indicated that we need to 

become more energy independent, and I am all for biomass. He has 

hit the nail on the head. I am not too sure we can do that fast 

enough in regards to fossil fuel energy vis-a-vis the trade act, but 

I have a glass of ethanol every morning with Senator Grassley. It 

will warm you right up, Mr. Secretary. 

[Laughter.] 

Senator ROBERTS. But I want to know what you are going to do 

if, in fact, we say, stop the world, let me off, because we have this 

perception of something unfair. What are you going to do with all 

of these things that are lined up next? 

Secretary JOHANNS. You are a very astute observer of your constituency. You are absolutely right. When I ran for Governor in 

1998, my predecessor, Senator Nelson, had initiated trade missions, and they were hugely well received in our State and I was 

repeatedly asked, are you going to continue that? Are you going to 

continue that? I had groups tell me, I don’t think I could support 

you if you aren’t pro-trade and out there in the world. And now it 

19

just gets tougher and tougher. But the policies are still enormously 

important and they are the right policies. 

I believe if this doesn’t pass, we have some real challenges. I 

think we have stepped back, taken a huge step back. What do I 

mean by that? 

Well, the first thing is in the region. We first created this partnership, at least in modern times, in 1983, with President Reagan’s 

call. But the interesting thing about this is that we had bipartisan 

support for supporting these countries. President Clinton also 

asked for extension of the CBI, and those votes were overwhelming. 

One Senate vote passed 92–to-nothing. One passed, the House vote 

at that time passed 221–to–169. This has been a successive effort 

to try to stabilize these countries and give the opportunity for democracy and economies to grow. 

And here we are in this really last important stage, and I think 

if we back away from it, we send such a terrible message to these 

countries and to other countries that are looking for us for leadership in the economic realm and in the realm of democracy. 

Then you have got the bigger issue. How do you negotiate a WTO 

agreement when you can’t get a trade agreement approved that is, 

quite honestly, so one-sided for agriculture? We are not giving up 

anything here. We are not. They already have access to our markets. Ninety-nine percent of their products are here duty-free. All 

we are doing is leveling the playing field, but it is the relationships 

we create, the work that we do together after this passes that I just 

think is hugely important and is good for agriculture in America. 

So I just think all of a sudden, we are going to have a very, very 

tough time negotiating on a bilateral basis, a multilateral basis. 

We are in a critical stage with the WTO. A month ago, that could 

have easily fallen apart over very technical points. And you know 

the drill on the WTO, sir. You move that by consensus. And so, 

consequently, if you give anyone an excuse to back away from the 

table, you run the risk of jeopardizing that. 

I just think it would be a terribly unfortunate signal to these 

countries. Like I said, I will just wrap up with the comment I 

made. I walked out of that meeting with those presidents enormously proud to be a member of the President’s cabinet and proud 

to be an American, because you know what? Many countries would 

have written these folks off. They were in bad shape 20 years ago. 

We didn’t. We stood up for them. And I think this is an opportunity 

for us to do that. After 25 years of work here, it would be unfortunate to have such a setback. 

Senator ROBERTS. I appreciate your comments. Ambassador 

Johnson, I know that you have announced your plans to leave your 

post at USTR. Thank you for your leadership, and thank you, Mr. 

Chairman. 

The CHAIRMAN. Mr. Secretary, thank you very much for being 

here. I will tell my colleagues, the Secretary informed us that he 

was going to have to leave at 10:30, so I apologize for everybody 

not being able to give a direct question to the Secretary. We will 

now go back to our——

Senator DAYTON. Mr. Chairman, I must strongly protest. I was 

unaware of that, and I think you have done your best, Mr. Chairman, to try to accommodate his schedule, but I believe there has 

20

been one actual question directed in an hour to the Secretary about 

CAFTA from someone who has reservations or is opposed to that 

agreement. I think it is a disservice to this hearing. It is a disservice to those who I represent whose economic interests are at 

stake here when the one hearing this committee is having on this 

issue and the Secretary representing the administration is here 

and doesn’t have to field any questions about it from anybody who 

has reservations or is opposed to it. I think that is seriously unfair 

to the debate we should have and to the consideration this committee should give to it and to those who have their economic livelihoods at stake. And I don’t fault you, Mr. Chairman, because you 

have done your best, but a lot of time that was taken up, unfortunately, that did not give the Secretary a chance, as he should have 

been, to be subjected to questions from all of us. 

The CHAIRMAN. And that comment will be duly noted in the 

record. We have Dr. Penn here, who as the Secretary told me, 

knows a lot more about this than he does, so Dr. Penn, the pressure is going to be on you. 

We will go back to our regular rotation. Senator Salazar? 

Senator SALAZAR. Let me just ask you the question. I think the 

most vociferous statements that I have heard about a vote against 

CAFTA come from my constituents in Eastern Colorado, where 

there is still a sugar industry where significant investments have 

been made. I heard Secretary Johanns make the comment that he 

thinks that there is a de minimis impact with respect to the sugar 

industry in this country. I heard my good friend from North Dakota 

talk about how if CAFTA moves forward, it creates this precedential effect that ultimately will mean that it is going to have a huge 

impact on our sugar industry here in the United States. 

So if you were to be answering the concerns that I hear from my 

constituents in the Eastern plains of Colorado, how would you answer the concerns? 

Mr. JOHNSON. I have recently had the opportunity, actually in 

Western Nebraska, in Scott’s Bluff, in order to sit in a sugar beet 

plant to answer just exactly those kind of questions. And the way 

I answered it was very basic, which is we identified or listened very 

carefully to the sugar industry and the concerns that were raised 

while we were negotiating this agreement, many of which came 

from NAFTA, their concerns left over from the NAFTA agreement. 

And every single issue that we addressed, or that was raised about 

NAFTA, we addressed. 

They wanted to make sure that the auto-quota duty doesn’t go 

to zero, so the auto-quota duty doesn’t go to zero. It stays at well 

over 100 percent. 

They wanted to make sure that the quantities were manageable, 

and the quantities that we are talking about here is about 100,000 

tons in a ten million-ton market, so it is about 1 percent of U.S. 

consumption. 

They were concerned that there not be an opportunity for another country, let us say Brazil, to export product to one of these 

countries, thereby displacing their domestic production to be sent 

to us, so we put a substitution provision in that addressed that 

issue. 

21

And then just as an insurance policy, and the chairman just 

mentioned it, we put in a compensation provision that allows us, 

if we are wrong and this sugar that is coming in, which is equal—

the economic gain to these countries from this sugar is about $30 

to $40 million—if that is a threat to the U.S. industry, then we can 

compensate them with something other than sugar. It could be 

money. It could be sugar stocks. It could be whatever. It doesn’t 

have to be out of the Treasury. In fact, we have used a provision 

like this in the past in the United States in 2001. 

We also have the farm bill itself, which the Secretary referred to 

several tools that they have, which maybe Secretary Penn would 

want to comment on, to address those concerns. 

And then the basic question really comes down to on the issue 

that was raised about the amount of sugar with Mexico coming in. 

Mexico has not qualified over the last couple of years to send us 

any sugar other than their WTO minimum, which is about 10,000 

tons. And it is not envisioned that they will be able to send us in 

the next few years any amount of sugar close to the amounts that 

are being cited here. 

So we don’t see that there is a disruption in the program. We 

didn’t change a comma or a word in the farm program. And frankly, I think that the sugar industry—the basic challenge to the 

sugar industry, in my view, has always been how can we come up 

with agreements that allows the rest of agriculture, the rest of the 

economy, the rest of our national security interest to move forward 

while dealing with sugar industry sensitivity. And what we have 

tried to do over the last several years is come up with a set of tools 

in our tool box that allows us to do that, and I think we have 

achieved that in the CAFTA agreement. 

Now, you just were commenting on Senator Conrad’s charts. Let 

me just correct a couple of things. First of all, the ITC study shows 

that actually our trade deficit will go down by about $750 million 

as a result of this agreement because of the change in trading patterns that will occur. 

And second, what he assumes is certain precedents, and just to 

give you a sense of what precedent might mean, we closed with the 

Central American, the four Central American countries in early 

December, as the chairman mentioned. Since that time, we closed 

an agreement with Australia that didn’t include sugar at all. We 

closed an agreement with the Dominican Republic which has the 

substitution provision that some years, they won’t be qualified to 

send us anything at all, and at the maximum, 10,000 tons. And we 

closed an agreement with Morocco that the rules of origin prevents 

them from sending us anything. So I don’t know that there is a 

precedent. Each one of these agreements stands on their own merits. 

In this agreement, we are 100 percent confident and the 80 

groups of agriculture, agricultural groups that are supporting it, 

are confident that it is a good one for agriculture while dealing sensitively with sugar. 

Senator SALAZAR. Let me ask you just a follow-up question, if I 

may, Mr. Ambassador. Looking at the Australian agreement that 

was negotiated, sugar was left outside of that agreement. Would it 

be possible for this agreement to be renegotiated to do the same 

22

thing? What would it take to accomplish that and how long would 

it take to try to get that done? 

Mr. JOHNSON. First of all, the issue related to Australia, Australia was a different type of agreement, and you can just look at 

what happened with agriculture in the Australia agreement to understand. In this case, they have had 99 percent of their agricultural products duty-free to us already. So we had a lot of offensive 

interests. That is why so many agricultural groups are supporting 

this agreement. 

In order to get what we needed in agriculture, this eight-to-one 

ratio of increased exports over imports in agriculture, we needed to 

give them something, and what we gave them in this case was just 

a little bit of sugar. 

Australia was different. Australia was—they were basically all 

offense and we were mostly defense. And so to some extent, they 

were trying to give us things so that we could open our markets 

to them in agriculture and even—and obviously the industrial side, 

the non-agricultural side, was very interested in this agreement. 

In terms of CAFTA, the deal is what it is. We should expect that 

if this agreement went down, very simply, the anti-American as 

well as anti-trade forces in these countries, they are going to make 

headway, and they are running against CAFTA right now. I was 

down in Central America just a couple of months ago and on the 

TV, the anti-American folks are saying, aren’t you going to be embarrassed when CAFTA gets turned down? They are running 

against this agreement. 

So we should fully expect that, once having spent their political 

capital and taking these risks of giving us an eight-to-one ratio in 

agriculture, that these leaders, pro-American leaders, won’t have 

the equity, if you want to call it, political equity to go back and 

submit yet another agreement to them. 

Senator SALAZAR. Let me, if I may, just ask this question, and 

I know it is a hypothetical question because I know the administration is fully behind CAFTA and I have had conversations with Secretary Guitterez and a number of other people and I recognize the 

intense feelings that the administration has with respect to moving 

forward with DR-CAFTA in the way that it has been negotiated. 

But hypothetically, if you were to be sent back to the negotiating 

table to look at provisions within DR-CAFTA, is it feasible that you 

might be able to come back within 3 months or 6 months with a 

newly renegotiated agreement, from your point of view, if that was 

the direction that the President were to give to you? 

Mr. JOHNSON. My personal assessment is no. I think it would be 

a dead phone on the other end of the line. Remember what we are 

talking about here. Often, we are cited that sugar isn’t included in 

a lot of agreements, but remember that those same agreements 

that sugar isn’t included in, whether you are talking about the EUSouth African agreement, also leaves out things such as beef and 

dairy and grains and corn, things that are—poultry, things that are 

important to us. The Japan-Mexico agreement leaves out rice, 

things like wheat and barley and other things that are important 

to us. 

So I think, frankly, that not only would we have a dead phone 

on the other end of the line in terms of the Central Americans, I 

23

think a lot of U.S. agriculture, we would have a dead phone on this 

end of the line because they wouldn’t like the precedent that we 

would have to set for these other agreements that they are interested in, whether it is the Andean agreement, whether it is Thailand. There has been talk—some are interested in a deal with 

Korea, and the WTO. They wouldn’t like the precedent that their 

commodity was left out in order to pay for what is really provisions 

that aren’t a threat to the sugar industry because of the steps we 

went through. 

Senator ROBERTS. Thank you. 

The CHAIRMAN. Senator Thomas? 

Senator THOMAS. Thank you, Mr. Chairman. 

Mr. Ambassador, or either of you, I agree with many of the 

things you have said. On the other hand, the point that you continue to make is that this is such an insignificant amount, you 

know, one-and-a-half teaspoons a day of sugar for every person, 

and yet you talk about how important this is and the people there 

talk about how important it is. If it is that important, why in the 

world did you negotiate for this one-and-a-half teaspoons to screw 

up the whole thing? I don’t understand that. 

Mr. JOHNSON. Well, let me try. I know you and I have talked 

about this on a couple of occasions. 

Senator THOMAS. Yes, we have. 

Mr. JOHNSON. Let me try again. One of the things that you have 

to keep in mind, that when Central America came to the table on 

sugar, they didn’t come with this deal. When they came to the 

table, they were looking for somewhere between 300,000 and 

400,000 tons. They were looking for the auto-quota duty to go to 

zero. They didn’t have any interest in a substitution provision. 

They had no interest in—they never even heard of a compensation 

provision. So from their point of view, they have moved huge steps 

in order to allow this deal to move. And this is one of the only 

issues that they had an offensive interest in for obvious reasons. 

Ninety-nine percent of what they send us today is already dutyfree. 

And so I think, again, it would be misleading if I were to say 

that having spent that political capital in order to bring back a 

deal that gives the U.S. agriculture an eight-to-one ratio of increased agricultural exports over imports, that these leaders, these 

presidents that were just here, would have the political capital in 

a more antagonistic environment toward America and toward trade 

to be able to go back and submit yet another deal that is actually 

worse for them than the one that they have already passed. 

Senator THOMAS. The thing that makes it difficult is you guys go 

on and on, and I understand, about all the value of the agreement, 

and they do too. I met with their presidents. They talked for hours 

about all—they didn’t mention sugar— the good stuff it is going to 

do for their countries and so on. It just seems to me like you had 

a negotiating position. 

If you add CAFTA provisions to the already existing obligations, 

we exceed 1.5 million tons stipulated by Congress. What happens 

to that sugar now? There is going to be an excess—we already have 

sugar stored in Wyoming because it can’t be sold. 

24

Mr. JOHNSON. Well, a couple of things, and maybe J.B. should 

comment on this from a sugar programmatic point of view, because 

he is the one that manages the program. 

Senator THOMAS. Sure. 

Mr. JOHNSON. But we don’t see us exceeding the 1.5 or 1.4, depending on whether you are talking metric or short tons, cap, and 

the reason is is because what is included in the number that folks 

assume when they assume that is that Mexico sends us the whole 

250,000 tons that they could possibly send us. Well, Mexico hasn’t 

sent us more than 10,000 tons in the last couple of years. They 

haven’t qualified under——

Senator THOMAS. But we are not through resolving the letter. 

Even it is still out there. 

Mr. JOHNSON. Oh, the side letter. We have stood by the side letter——

Senator THOMAS. The dispute is still going on, how many years? 

I am sorry. I am——

Mr. JOHNSON. No, I just want to be clear, because we have stood 

by the side letter, and that is one of the points of friction between 

us and Mexico is because we have stood by this side letter and they 

don’t think we should. They don’t think it is justified. In fact—well, 

I will stop at that. But we don’t envision, and J.B. could talk about 

this probably better than I could in terms of envisioning these imports coming in from Mexico that would cause us to exceed that 

trigger. 

Senator THOMAS. As you know, I would like to see this happen, 

but there are some obstacles in the way and that is what we need 

to do, I think, is to see if we can’t do something to resolve those. 

I think one of the concerns about many producers is they look 

forward, whether it is Brazil or these other countries that are huge 

producers. How are you going to deal with them if you can’t deal 

with these people with this relatively small amount? I think they 

are concerned about the future as much as they are this particular 

one. Do they get any assurance from you that they won’t continue 

to have this same kind of problem? 

Mr. JOHNSON. Well, the thing that I would say is what we have 

done, which is we have created in this administration—remember, 

when we came in, there was no such thing as a substitution provision. In NAFTA, for example, there is no substitution provision. 

There is no such thing as—we kept the auto-quota duty at over 100 

percent. That didn’t exist in NAFTA. We put in place these quantities that were very manageable which don’t exist in NAFTA. We 

created—whether you wanted to use it or not, it is purely at our 

option—this insurance policy, this compensation provision. 

So we have this tool box of tools that I think if you look at past 

as prologue, the sugar industry should feel very comfortable that 

we have managed each one of these trade agreements and allowing 

the rest of agriculture and allowing the rest of the economy and the 

rest of our national security interest to move forward while dealing 

with them sensitively. So I feel very comfortable with that and we 

would work with them very well in the future. 

Now, one thing to keep in mind is that the sugar industry with 

us has a goal of achieving trade liberalization in the WTO. That 

is also enhanced by this moving forward. I can tell you, and some 

25

of you were in Cancun, when we walked out of Cancun, everyone 

was wringing their hands and gnashing their teeth. Well, the 

United States went to work and closed Free Trade Agreements 

with eight countries in 12 weeks. Within 7 months, all of a sudden, 

the rest of the WTO members were back at the table and we got 

a historic framework agreement last summer. 

Senator THOMAS. Well, there is, as you know, some interest in 

seeking a WTO resolution so that you deal with the whole just of 

things at one time. Where you do it with bilaterals, which I happen 

to favor, well, you never know what is going to be next. Cancun 

was a failure. 

So at any rate, thank you very much. I hope we can find a solution. I hope we can find a solution for the sugar people, even if you 

have to go outside of this agreement in some other kind of way. 

Thank you. 

The CHAIRMAN. Ambassador Johnson, we have been trying to 

find a copy of that side letter that you and Senator Thomas were 

discussing. Do you all have a copy of that side letter? 

Mr. JOHNSON. I don’t have one with me. The short answer is that 

I am sure that there is one. I don’t have one. But let me describe, 

first of all, what the side letter means, because I think a lot of people misunderstand what it is. 

What the side letter is is only about the in-quota quantities between the time NAFTA started and 2008, when the tariff goes to 

zero. So to some extent, the implications of the side letter becomes 

less and less relevant every year because the auto-quota tariff is 

coming down. It is now, I think, about 4.5 cents, four cents. On 

January 1, 2006, it will be a little bit around three cents. So every 

year, the side letter’s relative importance actually is diminished because, theoretically, Mexico could send over-quota sugar and the 

side letter doesn’t apply to that. 

The CHAIRMAN. That is one of the great mysteries of the U.S. 

Senate today, is this side letter, and we sure would like to have a 

copy of it. So when you get back, if you would send us one, we 

would appreciate it. 

Senator Stabenow? 

Senator STABENOW. Thank you, Mr. Chairman, and welcome to 

our guests. I appreciate the hard work that has gone into negotiating this agreement. I do, though, want to raise some—a number 

of concerns and then ask a different kind of question of Dr. Penn, 

if I might. 

Just a general statement, first of all, that, Mr. Ambassador, I noticed some of the words that you are using in terms of objecting 

to CAFTA, having those with protectionist tendencies. I think it is 

important for those of us who have concerns, particularly about 

sugar but broader concerns, as well, to be able to state very clearly 

that I think it is a very old debate to talk about free trade versus 

protectionism. The Internet can jump any wall we put up. It is no 

longer that string or wire. 

What we are really talking about now is how are we going to be 

smart in the United States so that we keep our food and fiber production in the United States, so that we keep our jobs here and 

strengthen American businesses here while taking advantage of 

business around the world. It is the question of being smart. And 

26

these are old labels back and forth, this idea that if we object to 

how something is enforced or if we object to how something is written, that it is protectionism. 

So I think it is important that we clear the way to say—I don’t 

think there is anybody here that wouldn’t say we want to increase 

our markets for agricultural products. The question is how are we 

going to be smart about it so we aren’t losing production and aren’t 

losing jobs. 

I think we also all care about unfair trade practices, and one of 

my major concerns is that, in general, we are not doing enough to 

enforce trade agreements that you worked so hard to negotiate and 

others worked so hard to negotiate. I am hopeful that legislation 

that Senator Lindsey Graham and I have introduced, bipartisan 

bill to create a chief trade prosecutor within the office of where you 

work will be able to be passed and created so that we actually have 

folks separate from those negotiating to be able to place priority on 

enforcing those agreements, because I think we look rather foolish 

when we aren’t tough in terms of enforcement after the good work 

has gone into creating these kinds of agreements. 

So I have supported and voted for most of what you talked about 

in terms of Chile, Australia, the other kinds of agreements, but I 

am very, very concerned that we are not enforcing those agreements and it is resulting in job loss and trade deficits that are 

huge. Our trade deficit is much larger than our budget deficit, $666 

billion this year. So when we talk about CAFTA somehow decreasing the trade deficit by $750 million, that is great, but we are talking about a $666 billion trade deficit right now. 

I also, Mr. Chairman, wanted to just for the record indicate that 

while I know there have been positive things from NAFTA, coming 

from Michigan, which is a State that benefits in many ways positively and negatively I mean, we have lots of different pieces of our 

economy and certainly there are pieces of our economy that benefit 

by CAFTA as well as those who are devastated, I believe, by 

CAFTA. But NAFTA as an example, just overall, if we are looking 

at the last 11 years, U.S. workers have lost nearly a million jobs 

due to the growing trade deficits with our NAFTA partners and 

real wages not only have gone down in America, but in Mexico, as 

well. And so more and more people living in poverty. 

And so when we look at overall, the effect since 1994 with Canada and Mexico, we are seeing our trade deficit balloon 12 times 

its pre-NAFTA size, reaching $111 billion. So we have got some 

work to do there. We have some work to do about how we are going 

to be smart and benefit from these markets, but be smart about 

how we do that, because lowering our standard of living down to 

theirs is not what I call being smart, and I am afraid, Mr. Chairman, certainly in my State, where manufacturing as well as many 

parts of agriculture have been seriously impacted by the fact that 

we don’t have a level playing field, we are not being smart about 

what we are doing, we are not creating agreements that bring 

other countries up, we are having pressure to bring us down, and 

that is of great concern to me. 

Let me just specifically -and I do have one question. I am concerned right now in this agreement. We are hearing from, I know 

the American Sugar Alliance is going to speak later, statistics that 

27

job losses in the sugar sector will be 38 times greater than job loss 

in the textile sector as a result of this agreement. That is no small 

thing in my State, of great concern. 

Dr. Penn, one quick question because I appreciate my time is 

coming to an end. On a totally different subject that relates to the 

Department of Agriculture within the context of this agreement 

and other agreements, as we increase trade, one of the things that 

we are finding across the country, certainly in Michigan, is that we 

increase our risk of invasive species and disease, opening the borders. We certainly have found that with China, the emerald ash 

borer in Michigan, which has devastated literally millions of trees. 

We are losing our ash trees as a result of that. We see that in so 

many areas where we are opening trade. Different kinds of species 

come in, have impact that we certainly would not want to have. 

I am wondering what the USDA is planning, as well as APHIS, 

as we look at, in working with Homeland Security, as we are looking at preparing for new risks, whether it be CAFTA, whether it 

be other areas. What are we doing in terms of the budgets within 

those areas to make sure that you have what you need? What 

kinds of things are you looking toward? 

I know I have been working with the Secretary and had numerous conversations with him about the fact that we are not providing the funding in Michigan alone, let alone the other surrounding States, related to emerald ash borer and what is happening. Those beetles are killing our trees and we are not moving 

fast enough on emergency funds or other funds in order to be able 

to address this. 

I am deeply concerned about what happens as we open up other 

markets and our inability to be prepared to deal with unforseen 

circumstances as it relates to disease and as it relates to pests, and 

I am wondering if you have looked at that in the context of what 

risks may be opened—we may be opening ourselves to as it relates 

to CAFTA or more broadly with other countries. 

Mr. PENN. Thank you for the question, and I certainly agree that 

you have identified a very key area that is, in my view, going to 

loom large in agricultural trade in the future. As we have had some 

success in reducing the traditional trade barriers, the economic 

trade barriers, quotas and tariffs, then other factors become the 

new trade barriers or the new trade problems of the future, and we 

are seeing that sanitary and phytosanitary issues are becoming 

more and more important. We are seeing that with avian influenza 

and BSE and other plant and animal diseases. 

With respect to looking forward, the Secretary has asked each of 

the mission areas in the Department to look at what they want to 

accomplish in the next 4 years. When we walk out the door in 4 

years’ time, what will we have accomplished? One of those big 

issue areas is exactly the one that you raised. It is how will we deal 

with sanitary and phytosanitary regulations in the international 

trade context. 

So one of our big initiatives is involving the marketing and regulatory programs mission area of the Department, the food safety 

mission area, and mine, the farm and foreign agricultural services 

mission area, and we are going to try to look at how sanitary and 

phytosanitary regulations, including the increased threat of 

28

invasive species, play a role, what kind of budget resources we are 

going to need, what kind of organizational, structural changes we 

are going to need to try to deal with those. 

With respect to the emerald ash borer, that falls in Under Secretary Hawk’s area, as you know, but I do know that APHIS is 

looking at this. There have been discussions about the adequacy of 

the funding, how soon additional funding could be obtained. Even 

the Canadians have broached us about doing some joint activity, 

because I understand there is a threat on their side of the border, 

as well. So it is something that is getting attention and you have 

identified a very important area. 

Senator STABENOW. Thank you, Dr. Penn, and I would just indicate that in the case of emerald ash borer, and I am sure this is 

an example of what is coming in other ways, we have to move very 

quickly. Otherwise, the spread becomes extremely difficult for us to 

be able to address. And once we are—and Canadians as well as 

those in Michigan are deeply concerned about what is happening. 

It has gone from Southeastern Michigan now up to across the 

bridge in the UP and Wisconsin, the Midwest. I mean, this moves 

very quickly and I hope that you will move as quickly as possible 

to make sure that we are prepared for those things. 

Thank you, Mr. Chairman. 

The CHAIRMAN. Senator Coleman? 

Senator COLEMAN. Thank you, Mr. Chairman. 

Gentlemen, this is an agreement that I would like to be able to 

support. I come from a State that one out of every three rows of 

corn is grown for export. I understand that we are now opening up 

markets for our folks in comparison to folks who had had access 

to our markets. I am chairman of the Western Hemisphere Subcommittee on Foreign Relations. I have met with all the presidents 

of these countries. 

To my colleagues who are concerned about the impact on the 

poor, I can tell you that the firm belief of these leaders is that this 

trade agreement offers the best opportunity for the poor in those 

countries to finally have something to reach for, to be lifted up. So 

I understand that and appreciate it. 

I also appreciate the fact that there are some things in this, particularly in regard to sugar, that were successful. Second-tier terrorists, it kept them in place. The quantities are not overwhelming, 

but still a concern. 

But when I listen to—and I will just put in a personal note. The 

Secretary and I go back to days we have both been mayors. I know 

him, and I know how important this is and he believes in this and 

I trust him. 

But the problem I have is when he talks about the impact upon 

these small communities and the people in the villages and towns 

in Central America, I think of places like Echo, Minnesota, near 

Renville, or Felton, near Moorhead, or Fertile, near Crookston. I 

have got small towns and I have got a sugar industry that is important to the State. I must say, I get somewhat offended when I 

hear this phrase, protectionist, as somehow we are looking to close 

our eyes and ears to the concerns of people protecting, quote, an 

industry, and I am concerned about people. 

29

Ambassador Johnson, we have had the conversation, and you 

will say, well, 8,000 sugar growers, and I will tell you I have got 

40,000 people in my State alone, I believe, whose livelihoods, whose 

lifeblood, whose ability to take care of their families is tied to a 

sugar industry and is impacted by a sugar program. It is processors 

and it is truck drivers and it is folks that make equipment and sell 

product to an industry that is the bulwark of Northwest Minnesota. 

So to me, it is not about, quote, protectionist. Yes, I am protectionist of the families, of the economic livelihood of the underpinning of an industry that is critically important to my State, and I 

can tell you, as you well know, obviously, hearing again and again, 

we are troubled that the assurances that are laid out are not providing the level of comfort that is needed. As a result, I can’t raise 

my hand and say yes now. 

It would seem to me after all the discussion we have had that 

there are things that one can do if there was really a willingness 

to make this work. And if it is so insignificant, then figure a way 

to deal with the level of anxiety. There are a few things that I have 

kind of laid on the table, and I will just kind of lay them out, not 

for comment now because I don’t want you to say no and box yourself in. What I would like you to do is listen and see if we can come 

to a level of understanding that would provide a greater sense of 

comfort to folks not just in Minnesota, but in Wyoming and 

throughout this country. 

One, an agreement that might ensure that U.S. sugar policy 

would operate as it is intended to be operated by Congress and no 

net cost to taxpayers. Without getting into the details of that, Dr. 

Penn, you understand all that, overall allotment quantities. But 

that can be done, no net cost, which is what our growers want, 

which can be done. 

We can provide that any additional CAFTA-DR access to the U.S. 

sugar market will be introduced on a needs-only basis, dedicating 

any excess supply to other uses so you are not impacting the program. The concern that we have, and it has been mentioned by a 

few, if you put NAFTA sweetener dispute, resolve that, you have 

got CAFTA-DR, all of a sudden you have got imports over 1.532 

metric tons. You have got a problem and you have got anxiety. 

Again, this may be a little thing to some folks, but it is not a little 

thing to the people whose livelihood depends on this. They are looking at their economic future. 

Sugar—we have talked about this many times—negotiate sugar 

in Doha Round and in future multilateral agreements just as supports for other crops in negotiations, but not in future bilateral regional agreements. Tell folks that we understand the concern about 

the slippery slope here and that we are going to look at sugar being 

involved in the Doha Round and that is what we will do. And you 

can give people a tremendous level of confidence by making that 

statement, making that commitment. And it doesn’t hurt anybody 

to do that. 

And then, four, the industry needs some certainty regarding the 

NAFTA sweetener dispute. There is uncertainty. 

So what you have is, in effect, gentlemen, you are saying, I am 

from the government. Trust me that a compensation agreement is 

not going to come into effect and we are not going to do things that 

30

impact overall allotment quantities that is going to destabilize the 

program. And I am telling you that I have got folks who their economic future is as tied to this, they believe, as any of the poor folks 

living in Central America and they don’t want to slip back into poverty. They have got a good life here. But they have a sense of uncertainty. 

And so my plea to you is we are getting to the 11th hour on this. 

We have had discussions in Cartagena, Colombia, over dinner talking about this. We have had discussions everywhere, and in many 

places, but we still don’t have the measure of comfort that is needed, and there are few things, I believe, that can provide that. And 

it is not about protectionist in a sense of, well, we are just kind of 

covering this big sugar. It is protecting the little guy, protecting 

folks whose livelihood depends on an industry. 

And if you firmly believe that, in fact, the amounts are minimal 

and that the impact is minimal, help us, and that is my plea. Just 

help us and figure out a way that we can get some of these things. 

You don’t have to renegotiate an agreement to do that. I understand the impact of having to go back to legislative bodies in these 

countries and I am sensitive to that. But we can do some things 

here that doesn’t impact many others but provide a level of comfort 

that then sugar could join with the rest of the agricultural community and say, hey, we understand there is great benefit to many. 

When you talk about leveling the playing field, sometimes when 

you level something, you bulldoze something under, and we certainly don’t want to see the sugar program bulldozed under and the 

people whose livelihood depend on it find themselves in big trouble. 

The CHAIRMAN. Thank you very much. Very good comments, Senator Coleman. 

Senator COLEMAN. Thank you, Mr. Chairman. 

The CHAIRMAN. Dr. Penn, many times, farmers and ranchers will 

cite chronic disruptions to trade when criticizing existing agreements, and NAFTA is a good example of that. Most of the commodities represented or listening to this hearing can point to market 

access or sanitary and phytosanitary problems with at least one of 

our two largest trading partners. How do we maintain confidence 

and ensure existing agreements are implemented while we are negotiating additional Free Trade Agreements with other countries, 

and do you have the resources to do both? If not, do we need to 

start making difficult choices regarding relative priorities? 

Dr. PENN. Well, that is a very good question, Senator, and I appreciate it because it is something that we grapple with just about 

every day. We are in sort of a new world. These trade agreements 

are relatively new. People forget, but we got the first of the multilateral agreements in the Uruguay Round Act. That came into force 

in the mid–1990’s. We got the NAFTA agreement at about the 

same time, the mid–1990’s. So we have had about 10 years’ experience in implementing those agreements and in negotiating the additional few Free Trade Agreements that we have. 

Now, as I said earlier, as we have had some success in removing 

the economic barriers to trade, other barriers to trade have suddenly emerged, and sanitary and phytosanitary barriers are one of 

the main ones that we now confront. 

31

Also, as we enter into more and more trade agreements and as 

our trade expands over time, we have more opportunities for problems. There is just no doubt about it. In 1991, when China joined 

the WTO, we sold about $1.8 billion worth of agricultural products 

to China. This past year, we sold $6 billion worth. So in just three 

short years, we greatly expanded our trade, and we now see that 

China has become the No. 1 market for cotton, soybeans, and hides 

and skins, and the No. 5 market for wheat. It is our No. 5 market 

overall. And we have a lot more trade problems with China. We 

hear a lot more discussion about difficulties with China. Part of 

that is to be expected. As trade expands, we are going to have more 

and more of these disruptions. 

But what we have to try to do is to minimize the disruptions; because they are costly, they greatly affect our industries. We have 

seen that again with BSE and avian influenza. So now we are paying a lot of attention to sanitary and phytosanitary regulations. We 

are trying to make sure that our regulations are all science-based, 

as we believe they are. We are trying to make them as transparent 

as we possibly can. And we are encouraging other countries to use 

science as the basis for their sanitary and phytosanitary regulations. 

So if we can achieve that and then get some degree of harmonization among countries with respect to their regulations, then we 

should be able to reduce these barriers. But we are just in the beginning of that. We are on the forefront of that, because we are 

dealing with a lot of countries that don’t understand the science or 

they don’t have the capacity to yet implement the kinds of regulations that are needed, or in some cases they are—I hate to use that 

word here—being protectionist. They are just being flat protectionist. 

So as we at USDA are working with USTR to try to get new 

trade agreements, negotiate new trade agreements, we are spending resources on that. We are also spending resources on looking 

at sanitary and phytosanitary regulations and trying to work on 

getting a science basis there. 

And then our other big activity, what we call market maintenance, is trying to make sure that we keep open the markets that 

we have already got open. It takes a lot of resources to make sure 

that people live up to the agreements that they have already entered into, and we feel very strongly about that. Thus far, we have 

been able to realign resources to be able to shift people around to 

do things as the priorities have changed that have suddenly become more important, and we will see how things go. 

At the moment, I think we have adequate resources to do that. 

But if we keep opening new markets, and we keep having expanded trade and we keep seeing trade difficulties, then we will 

have to have some additional resources at some point. 

The CHAIRMAN. Thank you. 

Ambassador Johnson, you and other administration officials have 

stated that DR-CAFTA will have minimal impact on the U.S. sugar 

industry. My main concern through this whole process is that we 

have seen the jurisdiction of Congress usurped by a trade agreement. When you look at the numbers, when you look at the farm 

bill, if imports exceed 1.532 million short tons, then USDA would 

32

lose its authority to administer the marketing allotments. Accounting for the current WTO commitment of 1.256 million short tons 

and the NAFTA and DR-CAFTA commitments, imports would exceed the statutory cap by approximately 81,000 short tons. 

Now, that is my problem, and that is why I agree with Senator 

Thomas’s question earlier about why should we do that? Why 

would we negotiate something that we know flies in the face of the 

farm bill? 

You made assumptions that Mexico is not going to ever achieve 

their quota of 250,000 tons that they have been allotted, and that 

may be true, but that is an assumption that you have to make. 

Frankly, if we resolved our high fructose corn syrup issue with 

Mexico, I don’t know where they would be. They would have excess 

sugar that they are using now that maybe they would decide to export to the United States. I don’t know. 

But it looks like what you have done is that you have taken the 

difference between Mexico’s allotted amount that they can export 

to the United States and the actual amount that they have been 

exporting under the history of NAFTA and you are reallocating the 

Mexican sugar that is not coming into the United States now. 

Does this mean that sugar is going to be a part of every future 

bilateral, and if so, are we going to continue to reallocate the unused portion of Mexico’s allowed amount? 

Mr. JOHNSON. Well, first of all, because you and I also had this 

conversation, just to reaffirm that we did not change anything in 

the farm bill. We haven’t changed a word. We haven’t changed a 

comma. 

I know the numbers that you cite make certain assumptions, 

also. They make assumptions that Mexico would fill that whole 

250,000 tons, and you identify the situation, well, what if the soft 

drink tax issue was resolved and then we were sending HFCS to 

Mexico and they were sending sugar here. 

The real question then becomes, first of all, when we look at this, 

and we worked closely with USDA on this, we didn’t see a scenario 

where we are going to be exceeding that amount of sugar coming 

in that would cause the trigger to be triggered. So we are very confident about that. 

Now, the scenario that you described, if we started sending 

HFCS to Mexico and then they started sending sugar here, that is 

really not even an issue about the 250,000 tons, because as we 

were just talking about earlier, the out-of-quota tariff on sugar 

with Mexico goes down year after year. It ends up at zero at 2008. 

That is not an issue that is relevant to the 250,000 tons. That is 

just zero. And CAFTA doesn’t change that one way or the other. 

It just doesn’t have any impact on that. That agreement states that 

as of today, Mexico can send us over-quota sugar by paying a fourcent duty by January 1, 2006, a three-cent duty, and then it goes 

down to zero in 2008. 

So the 250,000 tons that you are citing is really sort of a number, 

but it is not a number that under any analysis we think is going 

to be triggered. And if what you are worried about is the displacement of Mexican sugar coming here because of the soft drink tax 

issue going away and the zero occurring in the over-quota tax, that 

33

is not a 250,000–ton issue, either. That is the fact that NAFTA 

goes to zero in 2008. 

So I don’t see that as being something that you should look at 

as a violation of the farm bill, because we clearly were not and we 

have left in place all the tools that the farm bill had and we have 

added a few tools in our trade policy that allows us to manage this 

situation should it become a problem. 

And again, it allows us to manage the situation with CAFTA, 

with Central America and the Dominican Republic, either through 

the substitution provision, which would have stopped sometimes 

the Dominican Republic from sending us sugar, or through the 

compensation provision, which I know Ambassador Portman told 

me as recently as this morning that he is looking forward to continuing, not just on this issue, but all issues engaging with this 

committee as we move forward with our trade agenda. 

So the NAFTA issue is almost a totally separate issue that I 

know Senator Coleman just mentioned. That is an agreement that 

has nothing to do with CAFTA. 

The CHAIRMAN. Well, I guess we can agree to disagree over 

whether or not nothing in the farm bill was changed, because if you 

just look at the numbers and you look at what is provided for in 

NAFTA and what is provided for in DR-CAFTA, and if everybody 

exercises their rights under those two agreements, then the trigger 

in the farm bill is going to be pulled. When that trigger is pulled, 

that is the point in time where the sugar industry, in this case, is 

going to be harmed. 

You know, I don’t have a dog in this fight relative to this product 

from a parochial standpoint. My sugar folks, in fact, are on the 

other side of this issue. But as chairman of this committee, I think 

I have an obligation to ensure that the 2002 farm bill is implemented per the exact language in the farm bill. I really do think 

that you made a mistake in trying to legislate a change. Again, you 

have got to make all the right assumptions. Everything has to fall 

in place maybe for the trigger to be pulled, but that is why you 

have legislation. With the possibility of that being in play out 

there, we are obviously having problems in trying to get a consensus and a majority of folks in the Senate to support this bill. 

It may be corn next time. It may be peanuts next time. It just 

happens to be sugar this time. But if we continue to legislate as 

we did on the Singapore and the Chile agreement relative to the 

H–1B visas, we are going to continue to have problems with these 

trade agreements. 

Now, you and I have talked about that. Ambassador Portman 

and I have talked about that. I know that he is committed to making sure that we have an open dialog between Congress and USTR, 

which I think has been a little bit lacking here to fore. This problem could have been totally avoided if there had been that open dialog and if we had been made aware from a legislative standpoint 

exactly what was going on relative to this issue. 

But be that as it may, I think we have still got some further discussion that we are going to have to have relative to this issue. I 

am very appreciative of the comments that Senator Coleman made 

because it is, in your words, it is a very small issue, and it is an 

issue that somehow we ought to be able to resolve. I don’t think 

34

you have to rewrite the farm bill to accommodate the sugar industry or the sugar provision in the farm bill. By the same token, I 

don’t think you have to make any changes in this agreement to be 

able to come to some satisfactory conclusion to this issue along the 

lines of what Senator Coleman just said. 

So we need to continue to work at this and see if we can’t find 

some way that we can resolve what you say is a very small issue. 

Let me tell you, it is not a small issue to these folks who have been 

sitting around here today who have to go back home and face their 

constituents who are going to lose their jobs if all of the assumptions that they are making are carried out, irrespective of the assumptions that you are making. 

So with that, does anyone else have any further comment for 

these gentlemen? 

[No response.] 

The CHAIRMAN. Dr. Penn, thanks. You did a good job of pinch 

hitting for the Secretary. You handled yourself well there. 

Mr. PENN. Thank you, Mr. Chairman. Thank you. 

The CHAIRMAN. And Ambassador Johnson, I know this may be 

one of the last times we get to put you under oath and cross-examine you up here. We understand that you may be leaving USTR 

sometime in the near term and we want to tell you how much we 

appreciate your service to our country and we appreciate your leadership. 

Thanks to both of you for being here today. 

Our next panel, if you will come forward, Mr. Bob Stallman, 

President of the American Farm Bureau Federation, a longtime 

good friend; Mr. Bob McLendon from the National Cotton Council, 

who happens to be from a place called Leary, Georgia, a longtime 

dear friend of mine; and the Honorable Cal Dooley, President and 

Chief Executive Officer of the Food Products Association, another 

longtime good friend of mine who I had the privilege of serving 

with in the House and working on a number of not just agriculture 

issues with, but other issues with. 

Gentlemen, we are very pleased to have each of you here, and 

Bob, we are going to start with you and go to Bob McLendon and 

then to you, Cal, for any opening comments that you would like to 

make. Welcome, and thanks for being here. 

STATEMENT OF ROBERT STALLMAN, PRESIDENT, AMERICAN 

FARM BUREAU FEDERATION, WASHINGTON, DC 

Mr. STALLMAN. Thank you, Mr. Chairman, members of the committee. We certainly appreciate the opportunity to present testimony on CAFTA before the Senate Agriculture Committee. I am 

Bob Stallman, President of the American Farm Bureau Federation, 

and a rice and cattle producer from Columbus, Texas. 

As a general farm organization, American Farm Bureau Federation has studied the impact of the Central American-Dominican Republic Free Trade Agreement on all sectors of U.S. agriculture and 

we strongly support passage of the CAFTA-DR. We have provided 

as an attachment to this statement a copy of our full economic 

analysis that describes how the agreement will impact the livestock, crop, and specialty crop sectors, as well as its effects on the 

35

sugar industry. On balance, we believe that CAFTA-DR will overwhelmingly be a positive opportunity for U.S. agriculture. U.S. agriculture currently faces a $700 million trade deficit with 

this region of the world. While the market holds potential for U.S. 

agriculture exports, our products currently face high tariffs. At the 

same time, agricultural products from the five Central American 

nations and the Dominican Republic receive mostly duty-free access 

to the United States. Trade preferences provided under the Caribbean Basin Initiative allow 99 percent of agricultural products from 

these countries and the Dominican Republic to enter the United 

States duty-free. 

Unless CAFTA-DR is passed, U.S. agriculture will continue to 

face applied tariffs of between 15 and 43 percent. These tariffs put 

U.S. producers at a disadvantage in a competitive market. CAFTADR, if enacted, will eliminate these barriers. 

This agreement provides balance by allowing U.S. agriculture the 

same duty-free access that CAFTA-DR nations already have to our 

markets. In fact, many of our competitors in the region, such as 

Chile, already receive preferential access because of their own 

trade agreements with the Central American countries. When enacted, this agreement would give U.S. producers access equal to or 

greater than that of our competitors. 

The American Farm Bureau Federation analysis shows that U.S. 

agriculture would see increased agricultural exports in the amount 

of $1.5 billion by the end of full implementation. 

Looking at some of the major commodities of export interest to 

the United States, the agreement would put the United States in 

a strong position to capitalize on, first, Central American growth 

in imports of grains and oil seed products, which relates to both 

growing food demand for wheat, rice, and vegetable oils, and to 

growing livestock demand for feed grains and protein meals. With 

no wheat and limited rice and oil seed production capacity, the region’s dependence upon imports is likely to grow steadily. The Free 

Trade Agreement puts the United States in a strong preferred supplier position to maintain and expand its high market share for 

items such as rice and soybean meal and to build on its lower market share for items such as wheat. 

Second, we would capitalize on the expanding regional import demand for livestock products related to growth in population and 

per capita incomes combined with their limited domestic production 

potential. Rapid growth in tourism should also help to stimulate 

demand for meats in the hotel and restaurant trade, which could 

be significant on its own. Growth in domestic demand for livestock 

products is likely to outpace production despite significantly larger 

imports of feed grains and protein meals. CAFTA-DR would allow 

the United States to use its cost advantages and its wide variety 

of beef, pork, and poultry products to fill a growing share of these 

markets. 

Third, the United States exports a diverse basket of other farm 

products to the six Central American countries. Commodities or 

commodity groupings of importance include fruits, vegetables, tallow, sugar, tropical products, and other processed products. 

Assuming that the same pattern of growth is likely as for grains, 

fiber, oil seeds, and livestock products, CAFTA-DR would allow the 

36

United States to capture a larger share of these expanding markets, as well. The added exports in these categories resulting from 

the agreement would likely exceed another $845 million by 2024. 

While there are numerous overall benefits for U.S. agriculture in 

the agreement, the U.S. sugar sector may see a less-than-positive 

impact. As a part of the agreement, the United States will allow 

CAFTA-DR countries to import an additional 164,000 short tons of 

sugar above their current sugar quota. This is related to a total 

production of about 9.5 million short tons. This additional sugar 

will have a minimal impact on the industry, as demonstrated in 

our economic analysis. We expect the U.S. sugar industry to experience about an $80.5 million negative impact for an approximately 

$2.1 billion domestic industry. This additional sugar translates into 

about 1.5 percent of domestic sugar production. 

In light of the possible, yet minimal, negative effects on the 

sugar industry, our trade negotiators negotiated certain protections 

for the U.S. sugar industry. First, the tariff on sugar is never decreased or eliminated. And second, we have the compensation provision this committee has already heard about and the net surplus 

exporting provisions. 

It is important to note that if sugar had been excluded from the 

agreement, it could have led to other U.S. commodities facing the 

same type of exclusions by CAFTA-DR country negotiators. In fact, 

these countries had a list of roughly a dozen commodities they 

wished to exclude from the agreement. These products included 

U.S. beef, pork, poultry, and rice. And, in fact, we paid a price for 

the protection provisions that are already in there for the sugar industry in the potatoes, onions, and white corn. Our products going 

into those countries faced similar treatment as were provided in 

the sugar area. Overall, we believe that these provisions make the 

agreement a fair one for sugar. 

U.S. agriculture will benefit a great deal from this agreement. 

The gains to U.S. agriculture certainly outweigh the losses. If this 

agreement fails, it will be to the disadvantage of America’s farmers 

and ranchers. Without CAFTA-DR, these six countries retain existing duty-free access to the United States while U.S. agriculture will 

continue to face the same high tariffs currently applied. 

In looking at the variety of U.S. commodities that would benefit 

because of increased trade due to a Central American-Dominican 

Republic Free Trade Agreement, one can only conclude that a ‘‘yes’’ 

vote on CAFTA-DR is a vote for agriculture and agricultural exports. 

Thank you, and I look forward to questions. 

[The prepared statement of Mr. Stallman can be found in tge Appendix on page 71.] 

The CHAIRMAN. Mr. McLendon? 

STATEMENT OF ROBERT E. McLENDON, NATIONAL COTTON 

COUNCIL OF AMERICA, LEARY, GEORGIA 

Mr. MCLENDON. Mr. Chairman, members of the committee, my 

name is Bob McLendon and I own and operate a diversified farming operation in Leary, Georgia. I have served as President of the 

National Cotton Council and Southern Cotton Growers. Thank you 

37

for the opportunity to present the views of the National Cotton 

Council today. 

Mr. Chairman, you know the cotton industry very well, so you 

understand how difficult it is for our organization to reach consensus on trade policy. We have growers, merchants, and cooperatives who rely on domestic and international markets. We have 

manufacturers who have made investments necessary to remain 

competitive but who are losing markets to low-cost imports from 

China. 

Our decision to support CAFTA was not made lightly or in haste. 

The Council has made every effort to work with the textile industry 

and the U.S. negotiators throughout the CAFTA negotiation. Our 

message was simple. We need an agreement that benefits U.S. 

farmers, manufacturers, and the region, not third parties. If we 

provide preferential access to a product, then the components 

should be sourced in the United States in CAFTA. 

The CAFTA we are supporting is not perfect in that respect, but 

we believe many of the imperfections will be corrected during the 

implementation. These would be important improvements to an 

agreement that already includes a special textile safeguard mechanism, enhanced customs enforcement, and elimination of duties as 

high as 18 percent. 

We currently export over 200,000 bales of cotton annually to the 

region. That is about 90 percent of their consumption, so it is good 

business for us. None of the CAFTA countries impose import duties 

on U.S. cotton, but they could, so the elimination of duties is important. 

But CAFTA is really about the preservation of our manufacturing base. We believe it will provide an opportunity for the establishment of a sustainable Western Hemisphere platform for the 

conversion of U.S. cotton into yarn, fabric, and apparel that could 

compete with China. 

In the year 2004, U.S. manufacturers exported yarn and fabric 

that contained 2.4 million bales of U.S. cotton to the CAFTA countries. This is up 50 percent from the year 2001. Those value-added 

exports are expected to grow more rapidly if CAFTA is approved 

than would occur if we simply continued to rely on the Caribbean 

Basin Initiative legislation. 

We are pleased that the administration recently took action to 

utilize the special safeguard authorization in China’s WTO accession agreement to slow the extraordinary growth of Chinese textile 

exports to the United States. Safeguards are important short-term 

measures. Properly applied, they can provide time for the U.S. industry to adjust and for CAFTA to work, but this is only shortterm. 

CAFTA can be an important component of a trade policy to preserve the $4 billion a year in textile exports and thousands of jobs 

that depend on these exports. 

Mr. Chairman, international trade in textiles and apparel is competitive and complicated. Effective rules of origin are one of those 

complicating factors. But those rules make it possible for U.S. manufacturers to partner with firms in the CAFTA region in order to 

strengthen their competitive positions relative to China and other 

low-cost suppliers. 

38

The Council is joined in its support for CAFTA by the National 

Council of Textile Organizations, the Carpet and Rug Institute, the 

Non-Woven Industry Association, the American Fiber Manufacturers, and the American Textile Manufacturers Association. The support for CAFTA is not unanimous in the textile industry by the 

membership of the organizations I have just mentioned, but they 

produce a very significant portion of the United States production 

capacity. Their combined sales exceed over $100 billion a year in 

U.S., and 13 percent of the U.S. cotton production is currently exported to the region in raw cotton and value-added exports. 

As I have said, this agreement is not perfect, but it can be a 

foundation on which to build. With the leadership of the U.S. Trade 

Representative and the Secretary of Commerce, combined with the 

oversight by Congress, we believe it will serve our needs. Therefore, I respectfully request that you and your colleagues support it 

when it is presented to Congress for approval. 

Mr. Chairman, as a Georgian involved in agriculture, I want to 

close by thanking you for your leadership and your continued commitment to support U.S. agriculture. Farm and trade policy are 

tough issues, but I am confident you will continue to lead us to the 

balanced and effective solution. Thank you. 

The CHAIRMAN. Thank you. 

[The prepared statement of Mr. McLendon can be found in the 

Appendix on page 122.] 

The CHAIRMAN. Mr. Dooley? 

STATEMENT OF CAL DOOLEY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, FOOD PRODUCTS ASSOCIATION, WASHINGTON, DC 

Mr. DOOLEY. Thank you. 

The CHAIRMAN. We are glad to have you here, Cal. 

Mr. DOOLEY. Well, thank you, Mr. Chairman. I am glad to be 

here, and Mr. Thomas, thank you for allowing me to testify. I am 

here as the President and CEO of the Food Products Association, 

which is one of the largest food and beverage associations in the 

United States and certainly the world. 

The Food Products Association, along with the vast majority of 

agriculture producers and other processors, strongly support the 

passage of CAFTA, and the reasons for that are obvious. It is clear 

that this agreement will provide new market opportunities for U.S. 

agriculture products, including processed foods and beverages. 

You have heard the statements before that the CAFTA countries 

together represent our 12th largest trading partner, and more than 

80 percent of the food and agriculture products imported into the 

United States from CAFTA currently enter duty-free. By contrast, 

U.S. exporters to Central America face duties of 11 percent, on average, and some of our food processing products such as cheese and 

yogurt face prohibitive tariffs in excess of 60 percent in a number 

of CAFTA-DR countries. 

Under this agreement, tariffs on most food products will be 

phased out within 15 years and many food products, like pet foods, 

cereals, soups, and cookies, will become duty-free immediately. 

Others, such as certain canned and frozen fruits and vegetables, 

have immediate or a 5–year phase-out. 

39

Our colleagues, FPA’s colleagues at the Grocery Manufacturers 

Association of America, recently commissioned a study to quantify 

CAFTA-related benefits for processing food and beverage products. 

The study found that the potential savings from tariff reductions 

and quota expansions alone will be nearly $8.8 million annually. 

When the agreement is fully ratified or in place, it would amount 

to $28 million annually for food processed products and beverages. 

The study also measures the potential aggregate increase in exports to these five Central American countries and the Dominican 

Republic, and the trade flow analysis suggests that upon elimination of tariffs, exports could increase from $359 million to $662 

million, an 84 percent increase over current exports to the region. 

Listening to the earlier comments, I think sometimes we are losing sight of one of the traditional economic concepts of relative advantage. It is clear why CAFTA countries had these tariffs in place 

that were harming and impeding the ability of U.S. value-added 

processed food products to enter their market, because they did not 

have a relative advantage there. They clearly understood that they 

would have difficulty competing with U.S. producers and processors. This agreement levels the playing field, allows us to have 

access to those markets without the burden of these tariffs. 

We need to show some level of intellectual consistency as how we 

approach some commodities which the CAFTA countries perhaps 

have a relative advantage, and that is why the Food Products Association, with the vast majority of agricultural producers, support 

the approach that the administration has taken as it pertains to 

sugar, because we cannot allow one commodity to impede the ability for those commodities and those sectors of our economy that 

have an interest in competing internationally to be impeded from 

the access to those marketplaces. 

Just in closing, I just had the opportunity to visit El Salvador 

just last year, my last year in Congress, with a few of my colleagues. One of the most, I think, telling opportunities was the 

chance that we had to go visit a textile company called Charles 

Products. We went down on the floor of this textile manufacturer 

and there was this basically sea of sewing machines, a thousand 

sewing machines, and what was remarkable about it was there was 

not one person that was sitting behind those sewing machines. And 

the reason for that was because the company, without the certainty 

that the tariffs were going to be maintained, made the decision to 

move their investment out of El Salvador and into Asia. This 1,000 

sewing machines that were vacant meant 1,500 jobs for people in 

El Salvador, primarily supporting their families. 

The failure to ratify CAFTA is only going to see a further exodus 

of these type of jobs, and as Mr. McLendon said, that is not in the 

interest of U.S. cotton producers. It is not in the interest of the 

United States in terms of maintaining an economic partnership 

with Central America that can facilitate their growth. 

I would be the first to admit that this is not a perfect agreement, 

but you, I think, all know as members of the Senate, and from my 

past experience as a Member of Congress, when you do have a policy that comes before you that has the endorsement of the Wall 

Street Journal as well as the Washington Post, there must be 

something in it that has some merit. I would hope that we would 

40

be able to see the ability to put together the bipartisan support 

that would result in the enactment of this agreement, that would 

provide the economic benefits to many of my members in the food 

processing sector, and would certainly provide that helping hand of 

partnership to our friends in Central America. 

The CHAIRMAN. Thank you very much, gentlemen. 

[The prepared statement of Mr. Dooley can be found in the Appendix on page 129.] 

The CHAIRMAN. Mr. Stallman, if this agreement should fail to 

win approval, do you think that U.S. agriculture would be put at 

a disadvantage in any way? 

Mr. STALLMAN. Well, Mr. Chairman, I do, and I will give you a 

direct example of that. I was in Geneva for a week, the last week 

in April, and obviously talking about the process of the WTO negotiations and mind-numbing topics like ad valorem equivalents. But 

the single most consistent question I got from the trade negotiators 

from other countries was what is the U.S. Congress going to do 

with CAFTA? Is the Congress going to pass it or not? And there 

is a high level of interest in, in essence, trying to see what our commitment to trade agreements is, particularly in the case of agriculture, one that is so positive for U.S. agriculture. 

And I do believe, based on that experience and other conversations I have had over the past period since this agreement has been 

out there and waiting for a vote and approval, what we do on this 

agreement is going to send a really strong message on what we do 

in other negotiations or what other countries will do in other negotiations and primarily in the WTO. So it does concern me about the 

prospect of this one not moving forward. 

The CHAIRMAN. Your policy is to provide for comprehensive trade 

negotiation. Do you have any feelings about whether or not the 

U.S. ought to exclude any commodities from being placed on the 

table relative to future trade agreements? 

Mr. STALLMAN. Mr. Chairman, our policy addresses that directly. 

It is a long-held position that we believe that everything should be 

on the table. All commodities should be on the table. We have an 

additional policy that, in essence, says import-sensitive products 

should be considered in negotiations and provisions should be put 

in place to minimize negative effects, and that is where we think 

the CAFTA agreement really meets those policy provisions with respect to sugar, given the provisions that are incorporated in that 

agreement to protect the sugar industry. 

So we understand that any time in negotiations that you take a 

commodity off the table, other countries want to take their commodities of interest off the table, which may be our export interest 

and thus harm the pocketbooks of other U.S. producers. 

The CHAIRMAN. In this CAFTA agreement, you have heard us 

discuss the possibility of compensation being given to the countries 

that are a part of this agreement from Central America in the 

event that the trigger is pulled and that more sugar is indeed purported to be imported into the United States from these countries, 

and in lieu of that, we have the right to pay compensation to those 

countries. What would people in your part of Texas think about the 

Federal Government writing checks to Central American countries 

41

in lieu of allowing those countries to import sugar into the United 

States? 

Mr. STALLMAN. Well, I am not sure what they would think. We 

support that compensation provision as one of the tools to minimize 

the negative effects on the sugar industry if it is needed. But Secretary Johanns, I think, clearly laid it out in the first panel. Given 

the structure of the domestic sugar program, given the control that 

USDA has on how that program is managed and run, I think it is 

highly unlikely we would get to that point. Given the fact that beef, 

and we will use Texas as an example, beef would certainly benefit, 

as would rice, which are both, coincidentally, commodities I raise, 

I think if that became necessary that the benefits still extended to 

these other commodities for the opening of those export markets, 

they would understand and be supportive. But that is speculative. 

The CHAIRMAN. And I will have to tell you, we don’t grow any 

rice in Georgia, but if rice had been singled out in a negative way 

in this trade agreement, I would be in the same position of trying 

to make sure that the farm bill were carried out and that rice receive the protections that it was entitled to under the farm bill, and 

that is where I am struggling, Bob, relative to the responses that 

I have gotten today regarding not just the compensation provision, 

but all of the assumptions that have been made. 

Mr. McLendon, are you fully satisfied that the FTA will ensure, 

as you state, a sustainable, effective Western Hemisphere platform 

for the U.S. cotton and textile industry? 

Mr. MCLENDON. We certainly hope so. I don’t think any commodity will benefit by this CAFTA more than the cotton industry 

will. And you realize that we have lost domestic consumption in the 

domestic industry. We have gone from 11.5 million bales down to 

about 6.5 million bales in 7 years and we have lost that market to 

production in Asia. 

We feel like that CAFTA will give us the opportunity to ship raw 

cotton and also fabric and value-added products to Central America 

so that those products can be brought back into the United States 

and compete with China. If we don’t do something like that, we are 

going to fully lose the textile industry in this country, and I don’t 

think any commodities will benefit as much as cotton will from this 

CAFTA agreement. 

We don’t have consensus. We do in the Cotton Council, but we 

don’t have consensus in the cotton industry, particularly from manufacturing. 

We would hope that this agreement would turn around the loss 

of the market that we have had in this country. We are consuming 

about 32 million bales of cotton in textile and apparel products at 

retail, but a great deal of this is now is coming from China and 

from Asia. It is cheap sources of production that have taken our 

market. If we don’t do something, we are going to completely lose 

the textile industry in this country except for niche products. 

The CHAIRMAN. You and I know what has happened to the textile 

industry in Georgia over the last ten to 15 years and those thousand cut-and-sew jobs that Mr. Dooley referred to as moving from 

Central America to Asia may have moved from Georgia to Central 

America at some point in time. I am just sitting here thinking 

about what drives the purchase of cotton, particularly U.S. cotton. 

42

Obviously, we know there is no finer quality of cotton produced by 

anybody in the world. What about shipping costs, going to Central 

America versus going to, say, China? 

Mr. MCLENDON. That is one of the biggest advantages we have. 

You can go back to the 17th century. The textile industry moved 

from England to the Northeastern United States because there was 

labor there that was available to produce textile products. People 

needed jobs. It moved to the South because of the same reason, and 

it has moved to Central America, and to Asia. 

What we have is a transportation advantage to this CAFTA area 

that will enable us to better compete with Asia for these textile 

products to come back in our country. China is our No. 1 customer 

for raw cotton now. It is not a very dependable market. I can’t depend on that as being somebody that is going to consistently buy 

my cotton. But we have an advantage and we can sell the cotton 

to Central America, the CAFTA countries, because they have an 

advantage buying our raw cotton and using our fabric, whereas the 

transportation cost from Asia is much more expensive. 

So that gives us a competitive advantage and we think that by 

utilizing the labor force that is in Central America, we will be able 

to compete with the Chinese textile products being brought into 

this country. 

The CHAIRMAN. Mr. Dooley, I notice that the processed food exports to the DR-CAFTA countries already account for about 25 percent of the total food imports and are increasing faster than any 

other agricultural export. What is driving the increased demand 

and who are your main competitors in that market? 

Mr. DOOLEY. I think that the increased demand is oftentimes directly correlated to improvements in per capita GDP, is that what 

we see in the example I used with Charles Products is that when 

you see an employment opportunity that provides greater discretionary and disposable income by a family is that they oftentimes 

spend a significant portion of that, certainly in the developing 

world, on food and, to some extent, fiber products. Their expenditures oftentimes go to products or food products that have an additional processing that is included into that, which is what the U.S. 

and U.S. food processors excel in and where we have that competitive advantage. 

In terms of where we could see competition, you know, when you 

asked an earlier question in terms of what would be the impact if 

we didn’t pass CAFTA to the agriculture sector, it brought to mind 

what we saw happen when Canada entered into a bilateral agreement with Chile that preceded the U.S.-Canadian bilateral agreement significantly. Canada then became the preferred supplier of 

wheat, became the preferred supplier of certainly Caterpillar tractors for their mining industry. In some instances, Canada has a 

very well developed processed food industry which they could become the preferred supplier to Chile. 

If the United States doesn’t ratify CAFTA, we are going to create 

a vacuum, to some extent, that isn’t just going to remain. Somebody is going to fill it, whether it is going to be Chile, whether it 

is going to be Brazil, whether it is even going to be the EU that 

has been looking to structure additional bilateral and regional 

agreements. And that is where I think many of us are concerned, 

43

is that if we do not, the United States does not maintain the leadership in pursuing even these bilateral agreements, is that we are 

not going to be advancing the interest of U.S. companies and also 

work to the benefit of the people they employ. 

The CHAIRMAN. Gentlemen, thank you very much for your testimony, for your insight in this very complicated issue, and we appreciate very much you being here. Thank you. 

Our last panel of the day will consist of Mr. Tom Buis, National 

Farmers Union; Mr. Jack Roney, Director of Economics and Policy 

Analysis from the American Sugar Alliance; and Mr. Augustine 

Tantillo, Executive Director, American Manufacturing Trade Action 

Coalition. 

Gentlemen, we welcome each one of you here today and we look 

forward to your testimony. Mr. Buis, we will start with you and go 

to you, Mr. Roney, and then to you, Mr. Tantillo. 

STATEMENT OF TOM BUIS, VICE PRESIDENT, GOVERNMENT 

RELATIONS, NATIONAL FARMERS UNION, WASHINGTON, DC 

Mr. BUIS. Thank you, Mr. Chairman. It is a pleasure to be here 

and we want to start by commending you for holding this hearing. 

I think there is a lot of interest in trade around the country. 

I noted Senator Roberts and Senator Baucus earlier talking 

about if you go out into the agriculture community and you mention trade as the solution to your problems, you are probably going 

to get a lot of resistance and a lot of criticism. I think farmers are 

skeptical, increasingly cynical about trade because they have often 

been oversold, basically with promises that have never been kept. 

We are always led to believe that we are just one trade agreement away from prosperity and we never seem to reach that goal. 

Both NAFTA and the Uruguay Round, China, Australia, if you go 

back and look at the statements advancing those trade agreements, 

the rhetoric is just almost identical, a win-win, a win-win-win for 

agriculture, rosy, optimistic scenarios that sound great, but in reality fall short. 

The proponents of these agreements also suggest without these 

agreements, no U.S. agriculture products would move in world 

commerce. However, if you look at the period from 1990 to 1994, 

before NAFTA and before the WTO, our agriculture exports resulted in an average trade surplus of $23 billion per year. Compare 

that to what is happening after NAFTA and WTO. Look at last 

year. While exports were at a record level, primarily because of a 

falling dollar, a weak dollar against other currencies, it just barely 

exceeded imports. And this year, for the first time in a half-century, the United States is likely to import more agriculture products than we export. 

It clearly demonstrates what is happening to American agriculture as a result of these agreements. We are losing. We are losing because our trade negotiators do a great job at getting agreements, but an incomplete job of protecting our agriculture interests. They are negotiating agreements that open our borders to 

competitive imports without expanding our export opportunities. 

We don’t believe this one-way trade can be sustained. 

The problem is not that we are negotiating trade. Trade is important. The problem is we are only negotiating part of those factors. 

44

Major trade factors, such as currency manipulation, labor, health, 

and environmental standards are not on the table. To U.S. farmers, 

currency, labor, and environment ultimately determine our competitiveness in international markets. 

Currency obviously determines the price our products will sell in 

the international market. 

Labor costs, especially in the high-value and value-added industry, are often the single biggest input cost for producers. Look at 

the textile industry and what has happened with it. It is following 

cheap labor, not just in the United States, but around the world. 

And environmental and health standards are significant input 

cost factors, and a lot of people are surprised to hear that coming 

from a farm organization. But if you stop and figure out all the 

money spent by farmers and ranchers to comply with environmental regulations that this country has deemed important and all 

the health and safety factors that are deemed important, and the 

list keeps growing. Right now, we are facing animal identification 

regulations, regulations on the handling of farm fuel, even in the 

back of their pick-ups, the regulation of nitrogen fertilizers so terrorists don’t use it to build a bomb, and a host of other factors. In 

fact, last week in South Dakota, I had a rancher come up to me 

and he estimated that that is about a third of his cost of raising 

cattle, is complying with environmental health safety standards. 

Yet we don’t require other countries to do the same. 

The advocates also say that trade agreements are not the place 

to negotiate labor and environmental standards. We disagree. If 

trade agreements can dictate how we farm and what our U.S. farm 

policy should be, then I think the trade agreements can dictate how 

countries treat their workers and protect their environment. 

Specifically regarding CAFTA, the Farmers Union is opposed, we 

are unanimously opposed. A resolution was adopted at our convention. We hope Congress rejects it. We hope they go back to the 

drawing board and include these factors. We think it is a continuation of the failed trade policy that is clearly not working for us. 

It is based on overly optimistic assumptions that have not materialized in the past and they are unlikely to do so in the future. 

It is an incremental approach to trade at a time—a heavy emphasis on bilateral and regional trade agreements when we should be 

negotiating on the worldwide level. And it sets a precedent that 

could have devastating impacts, especially on the sugar industry. 

The argument made by the CAFTA supporters begs the question. 

Which is better, a bird in the hand or two in the bush? They are 

advocating trading our bird in the hand, a $10 billion U.S. sugar 

industry, for two birds in the bush that we may never catch in the 

future and way out in the future when fully implemented and the 

optimistic assumptions are minimal. 

In summary, we are opposed and we think this agreement will 

increase, not decrease, the outsourcing of our nation’s food and 

fiber production and continue to race to the bottom of commodity 

prices. Thank you, Mr. Chairman. 

The CHAIRMAN. Thank you. 

[The prepared statement of Mr. Buis can be found in the Appendix on page 132.] 

The CHAIRMAN. Mr. Roney? 

45

STATEMENT OF JACK RONEY, DIRECTOR OF ECONOMICS AND 

POLICY ANALYSIS, AMERICAN SUGAR ALLIANCE, ARLINGTON, VIRGINIA 

Mr. RONEY. Thank you, Mr. Chairman. I am Jack Roney, Director of Economics and Policy Analysis for the American Sugar Alliance. I have the privilege of speaking today on behalf of 146,000 

American farmers, workers, and their families who grow, process, 

and refine sugar beets and sugar cane in 19 States. 

The proposed CAFTA threatens American sugar jobs in all 19 of 

these States. By the government’s own estimates, sugar job losses 

from the CAFTA will be far greater than any other sectors, 38 

times greater than the next biggest job loser, textiles. The same 

International Trade Commission study also questions the overall 

value of the CAFTA to our economy. The ITC concluded that the 

CAFTA will increase the trade deficit with that region, not reduce 

it. 

The lack of evidence of any economic benefit for the U.S., or for 

that matter for the Central American countries, has led to widespread opposition to the CAFTA. Sugar is by no means the sole opponent. National polls show the majority of Americans oppose the 

CAFTA. Key farm groups oppose, including the National Farmers 

Union, RCAF, the national association of independent ranchers, the 

National Association of State Departments of Agriculture, grower 

organizations for commodities that would have to absorb the 2.5 

million acres of displaced beet and cane, and that includes a number of State wheat and corn associations, and several State Farm 

Bureau Federations. Large numbers of labor, environmental, 

human rights, Hispanic, and religious groups in the United States 

and in the CAFTA countries oppose the CAFTA. 

Our sugar growers and processors are among the most efficient 

in the world. Like other American farmers, we can compete against 

foreign farmers, but we cannot compete against foreign government 

subsidies. The world sugar market is the world’s most distorted 

commodity market. A vast global array of subsidies encourages 

overproduction and dumping. We support correcting this distorted 

dump market through genuine global trade liberalization. 

There is a right way and a wrong way to attack global sugar subsidies. The right way: the WTO, all countries at the table, all subsidies on the table. The wrong way: bilateral and regional FTAs, 

where markets are wrenched open without addressing any foreign 

subsidies. Virtually every FTA ever completed around the world excludes import access mandates for sugar. Only the U.S. has ever 

guaranteed access to its sugar market in an FTA, in the NAFTA 

and in the CAFTA, and these agreements are mired in controversy. 

Sugar must be reserved for the WTO, where genuine trade liberalization can occur. 

American sugar farmers know their industry and their policy 

well. We have examined the CAFTA provisions soberly and carefully. We regard the CAFTA as a life or death issue. American 

farmers and workers who will lose their jobs are insulted by 

CAFTA proponents who trivialize the potential harm from this 

agreement with cutsey, misleading depictions of additional access 

and teaspoons or packets per consumer per day. 

46

We are already one of the world’s most open sugar markets. Past 

trade agreement concessions force us to import upwards of 1.5 million tons of sugar per year from 41 countries duty-free. This makes 

us the world’s fourth largest net sugar importer. The CAFTA countries and the DR are already our biggest duty-free supplier, accounting for a fourth of our imports. 

Unfortunately, our market is already oversupplied. U.S. sugar 

producers are currently holding a half-million tons of sugar off the 

market and storing it at their own expense. Every additional ton 

of sugar we are forced to import from foreign countries is one ton 

less that struggling American sugar farmers will be able to sell in 

their own market. Import more foreign sugar, export more American jobs. 

The CAFTA poses both short-term and long-term dangers to 

American sugar farmers and workers. In the short term, CAFTA 

sugar market access concessions on top of import commitments the 

U.S. has already made in the WTO and the NAFTA will prevent 

the USTA from administering a no-cost sugar policy as Congress 

directed it to in the 2002 farm bill. The additional concessions will 

trigger off the marketing allotment program that permits USDA to 

restrict domestic sugar sales and balance the market. Absent marketing allotments, surplus sugar would cascade onto the U.S. market and destroy the price. 

In the long term, the CAFTA is the tip of the FTA iceberg. Behind the CAFTA countries, 21 other sugar-exporting countries are 

lined up like planes on the tarmac, waiting to do their deal with 

the U.S. No doubt, they expect no less than the concessions already 

granted to the CAFTA countries. Combined, these 21 countries export over 25 million tons of sugar per year, nearly triple U.S. sugar 

consumption. Obviously, the precedent the CAFTA concessions set 

will make it impossible for the U.S. sugar industry to survive future agreements. 

In conclusion, Mr. Chairman, the CAFTA will cost thousands of 

American sugar farmers and workers their jobs. The certain dangers of the CAFTA to the U.S. economy far outweigh the marginal 

possible benefits. We respectfully urge that this committee reject 

the CAFTA and focus U.S. trade liberalization efforts instead on 

the WTO, where there is genuine potential for progress. Thank 

you. 

The CHAIRMAN. Thank you. 

[The prepared statement of Mr. Roney can be found in the Appendix on page 135.] 

The CHAIRMAN. Mr. Tantillo? 

STATEMENT OF AUGUSTINE TANTILLO, EXECUTIVE DIRECTOR, AMERICAN MANUFACTURING TRADE ACTION COALITION, WASHINGTON, DC 

Mr. TANTILLO. Thank you, Mr. Chairman. I greatly appreciate 

this opportunity to appear before your committee. My name is 

Auggie Tantillo. I am the Executive Director of the American Manufacturing Trade Action Coalition. AMTAC is a consortium of U.S. 

manufacturers that come from all points on the industrial spectrum, manufacturers of chemicals, tools, plastics, paper products, 

47

packaging products, and, of course, textiles and apparel. In fact, 

textiles and apparel make up for well over half of our membership. 

AMTAC strongly opposes CAFTA because we believe it is a 

flawed component of an overall flawed trade policy, a policy that 

insists on marrying the U.S. market to low-wage, low cost of production trading partners, such as those in Central America, Free 

Trade Agreements that pit U.S. workers who are making $12 to 

$15 an hour traditionally in the textile and apparel sector, who are 

being paid health care, who receive pension benefits, against workers who are making less than $1 per hour, who receive no health 

care, no pension benefits, who work under conditions that have 

long since been outlawed in the United States, who work for manufacturers who oftentimes have no regard for the environment, and 

therefore are able to vastly underprice exports or products in our 

own market. 

It is no surprise that because of our current trade policy, which 

insists on Free Trade Agreements with low-cost, low wage-producing nations, that we now have a $617 billion trade deficit and 

that millions of manufacturing jobs have been exported over the 

past 10 years, factories closed and companies bankrupted. 

As I mentioned, Mr. Chairman, a significant portion of our membership is textile and apparel related. Our membership strongly 

disagrees with the view that CAFTA is going to be a benefit. In 

fact, we view it as a major detriment that is going to cost at least 

$1 billion in current exports to that region. I make that statement 

because under the current law, which is the Caribbean Basin Trade 

Partnership Act, imports of apparel made in Central America—

Honduras, Guatemala, Nicaragua, El Salvador—come into the 

United States today duty-free if they use U.S. fabric made from 

U.S. yarn. Under the CAFTA arrangement, the requirement to 

strictly use U.S. components, such as fabric and yarn, is removed. 

In addition to using U.S. fabric and yarn, they can use their own 

yarn and fabric produced in that region. 

As if that were not enough to entice the Central Americans to 

sign this agreement, the U.S. negotiating team felt compelled to go 

a major step further and to say that for a billion square meters of 

fabric, those components can come from China, India, Pakistan, in 

some cases Mexico and Canada. And as a result, we are going to 

displace existing exports to this very important region due to these 

provisions that we call loopholes or exceptions to the rule of origin. 

These provisions include ideas such as cumulation, which means 

that Mexico can send their fabric to Honduras. That fabric can be 

cut and sewn, sent to the United States duty-free in the form of 

a garment. A tariff preference level with Nicaragua, which means 

that for 100 million square meters of cotton trousers, for example, 

Nicaragua can purchase the yarn and fabric from China. Certain 

products, such as brassieres, pajamas, and boxer shorts are exempted from the rule of origin altogether. They can get those components from any country in the world. There are other items in 

a garment that the U.S. Trade Representative deemed as non-essential—pocketing fabric, lining fabric, which can come from any 

supplier in the world and be assembled in Central America and 

then sent to the United States in the form of a garment, again, 

duty-free. 

48

It is for that reason, Mr. Chairman, that the two largest textile 

companies in Georgia, Avondale Mills and Miliken and Company, 

strongly oppose CAFTA. We believe it is going to displace existing 

sales to that region and we don’t understand why the U.S. Government had to conclude an agreement that had so many loopholes in 

it for third-party countries, countries that are not part of the region, countries that were not at the negotiating table. 

I heard earlier today that the USTR testified that this is a bulwark against China. It is an effort to stem the flood of textile and 

apparel imports from China. Well, we have two major concerns 

with that argument. The first is that we don’t need any more excuses not to deal directly with the China problem. It is time for the 

U.S. Trade Representative to develop a rational policy with the 

Chinese that deals with their currency manipulation, their export 

rebates, their state-sponsored subsidies, their nonperforming loans, 

which are literally destroying the U.S. manufacturing base. 

Second, it is illogical to argue that we are going to give the Chinese a back-door entry into our market by shipping component 

yarns and fabrics to Central America to be assembled and then 

sent to the United States duty-free. It is illogical to argue that that 

is going to address the China textile trade problem. In essence, it 

is going to give them another half-a-billion dollars in access, this 

time under a tariff-free arrangement. 

So we ask that this agreement be defeated and that the U.S. negotiating team go back to the table and produce an agreement that 

excludes loopholes that allow for third-party countries to benefit 

and ensures that, at the very least, the existing exports that go 

from U.S. textile manufacturers to that region are preserved. 

Mr. Chairman, we appreciate the fact that you are digging so 

deeply into this issue and looking for the proper posture in regards 

to this. We ask that the Senate take a strong look not only at what 

the agriculture components are, but what the upstream or downstream circumstances are. As you know, the U.S. textile industry 

is a major consumer of U.S. cotton, and we consume over six million bales a year. Anything that impacts us as seriously as we believe CAFTA will impact us is definitely going to have an impact 

on the U.S. cotton industry. 

Thank you very much. 

The CHAIRMAN. Gentlemen, thank you. 

[The prepared statement of Mr. Tantillo can be found in the Appendix on page 153.] 

The CHAIRMAN. The lack of Senators being here is no reflection 

on their interest in your positions. It has a lot more to do with a 

vote on which the time has now expired that I must run to. 

Thank you very much for your testimony. We appreciate your 

being here and we will leave the record open for 5 days for any additional items that anyone would like to include in the record. Gentlemen, thank you. 

The hearing is adjourned. 

[Whereupon, at 12:20 p.m., the committee was adjourned.] 

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258


22643.221
259


22643.222
260


22643.223
261


22643.224
262


22643.225
263


22643.226
264


22643.130
265


22643.228
266


22643.229
267


22643.230
268


22643.231
269


22643.232
270


22643.233
271


22643.234
272


22643.227
(273)

QUESTIONS AND ANSWERS

JUNE 7, 2005

274


22643.239
275


22643.240
276


22643.241
277


22643.242
278


22643.243
279


22643.244
280


22643.245
281


22643.246
282


22643.247
283


22643.248
284

Æ


22643.249