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84–379 PDF 2003

S. HRG. 107–847

U.S. EXPORT MARKET SHARE

HEARING

BEFORE THE

SUBCOMMITTEE ON PRODUCTION AND

PRICE COMPETITIVENESS

OF THE

COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

AUGUST 1, 2001

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

TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont

KENT CONRAD, North Dakota

THOMAS A. DASCHLE, South Dakota

MAX BAUCUS, Montana

BLANCHE L. LINCOLN, Arkansas

ZELL MILLER, Georgia

DEBBIE A. STABENOW, Michigan

BEN NELSON, Nebraska

MARK DAYTON, Minnesota

PAUL DAVID WELLSTONE, Minnesota

RICHARD G. LUGAR, Indiana

JESSE HELMS, North Carolina

THAD COCHRAN, Mississippi

MITCH MCCONNELL, Kentucky

PAT ROBERTS, Kansas

PETER G. FITZGERALD, Illinois

CRAIG THOMAS, Wyoming

WAYNE ALLARD, Colorado

TIM HUTCHINSON, Arkansas

MICHEAL D. CRAPO, Idaho

MARK HALVERSON, Staff Director/Chief Counsel

DAVID L. JOHNSON, Chief Counsel for the Minority

ROBERT E. STURM, Chief Clerk

KEITH LUSE, Staff Director for the Minority

(II)

(III)

C O N T E N T S

Page

HEARING(S):

U.S. Export Market Share ...................................................................................... 01

Wednesday, August 1, 2001

STATEMENTS PRESENTED BY SENATORS

Conrad, Hon. Kent, a U.S. Senator from North Dakota ...................................... 01

Lincoln, Hon. Blanche L., a U.S. Senator from Arkansas .................................... 14

Roberts, Hon. Pat, a U.S. Senator from Kansas ................................................... 03

WITNESSES

Sharpless, Mattie R., Acting Administrator, Foreign Agricultural Service, U.S.

Department of Agriculture; accompanied by Mary Chambliss, Deputy

Administrator for Exports Credits ...................................................................... 07

Panel I

Brothers, Carl, Senior Vice President for International Business, Riceland

Foods, Stuttgart, Arkansas ................................................................................. 23

Condon, Leonard W., Vice President for International Trade, American Meat

Institute, Arlington, VA ....................................................................................... 19

Von Tungeln, Henry Jo, Chairman, U.S. Wheat Associates and the Wheat

Export Trade Education Committee, Washington, DC ..................................... 21

APPENDIX

PREPARED STATEMENTS:

Conrad, Hon. Kent: Letter to Keith Collins and his response ...................... 65

Brothers, Carl ................................................................................................... 59

Condon, Leonard W., ........................................................................................ 48

Sharpless, Mattie R., ........................................................................................ 34

Von Tungeln, Henry Jo .................................................................................... 52

DOCUMENT(S) SUBMITTED FOR THE RECORD:

Baucus, Hon. Max ............................................................................................ 70

Testimony from Philip Seng, President and CEO, U.S. Meat Export

Federation ...................................................................................................... 72

QUESTION AND ANSWER:

Questions to Ms. Sharpless, Mr. Von Tungeln and Mr. Brothers

submitted by Senator Pat Roberts (No answers were provided) .............. 85

(1)

U.S. EXPORT MARKET SHARE

WEDNESDAY, AUGUST 1, 2001

U.S. SENATE, SUBCOMMITTEE ON PRODUCTION AND PRICE

COMPETITIVENESS, OF THE COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY, Washington, DC.

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

SR–328A, Russell Senate Office Building, Hon. Kent Conrad,

(chairman of the subcommittee), presiding.

Present or submitting a statement: Senators Conrad, Lincoln,

Cochran, and Roberts.

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

NORTH DAKOTA

Senator CONRAD. The subcommittee will come to order. We have

a beautiful day. No doubt some would prefer to be outdoors today.

I might prefer to be outdoors today. We have an important subject

before the subcommittee.

I especially want to acknowledge the presence of the Senator

from Kansas, who has been such a leader on all of these issues. It

is good to have him here with us.

Welcome to the witnesses; it is good to have you here.

The subcommittee meets this morning to examine the issue of

the United States share of world agricultural trade. We want to

put the spotlight on U.S. market share for a number of reasons.

First, traditionally, the Department of Agriculture has measured

the export success of U.S. agriculture on the basis of the dollar

value of the exports, and sets its export goals accordingly. In the

mid 1990’s, for example, USDA established the goal of $65 billion

of U.S. exports by the year 2000, a goal we did not achieve. Although the focus on the dollar value of exports is helpful, it does

not tell the whole story. For example, it is quite possible that even

though the value and volume of exports may rise, we may be slipping in terms of the U.S. share of world agricultural trade if world

trade is increasing faster than our own exports. To illustrate this

point, let us take a look at a few charts.

Earlier this year I wrote to the Department’s chief economist,

Keith Collins, noting that USDA’s 10-year baseline projections generally forecast steadily rising exports for most of our major commodities. I asked him if those projections of rising exports translated into increasing U.S. market share. Unfortunately, for most of

our commodities, it does not.

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Take the case of corn. Let’s go to that. We can see that the pattern is very clear. The volumes have been increasing, but U.S. market share has been slipping. Seems to me that that ought to alert

us to a long-term problem. USDA projects in corn that export volume will rise over the next 10 years. However, even as our exports

increase by about 400 million bushels, our share of world corn

trade will fall from 80 percent today to about 72 percent. In the

case of soybeans, our exports are projected to increase by 100 million bushels, but our market share will slip by about 3 points. If

you just concentrate on volume, it looks pretty good. If you measure it a different way, in terms of market share, again, we are losing ground. In the case of rice—let’s go to that chart—the bad news

is that both our export volume and our market share is expected

to drop and drop significantly over the next 10 years. Look at that

pattern. Both volumes and market share in steep decline.

Let me emphasize the point. Even if USDA’s projections of rising

exports for most commodities come about, the fact is that U.S. export market share for many of these same commodities will continue to decline. In other words, we are not expected to keep up

with what we hope will be a rising tide of world trade. I find that

an unacceptable circumstance.

Unfortunately, as this next chart shows, U.S. market share has

generally been declining for the past 20 years. Here you can see

where we are. We are the tan line. Well, this is the strategic goal.

We had a strategic goal of being at, you can see, 22 percent, and

you can see we are well below the strategic goal in market share.

Let’s go to that next chart as well, Tim. This shows what is happening with our major competitors. We are the yellow line. The EU

is the green line. The Cairns Group is the red line. I would suggest

to you it is not a pretty picture. We saw back in the 1980’s a really

dramatic turn where our market share dropped, the EU’s market

share increased dramatically, the Cairns Group has continued to

increase, and, it seems to me this really is at the heart of a problem we ought to be discussing in terms of a strategy and a policy.

I hope to accomplish three things with today’s hearing. First, I

hope to be reassured that the Department and the industry are

sufficiently focused on the issue of market share. Does the Department and industry, for example, have the information we need to

assess whether we have been gaining or losing market share as we

look at U.S. exports in terms of individual commodities and a country-by-country basis?

Second, once we are confident that we have the market share

data we need, we need to fully assess who is winning and who is

losing in the marketplace and why. For example, we talk about the

U.S. continuing to lose market share, the European Union has been

maintaining its position, while the Cairns Group, including Canada

and Australia, have been increasing theirs.

Let’s go to the chart of what our major competitors, the Europeans, are doing that might be influencing the outcomes here. I

have used this chart before, but to me it sends a very clear signal.

This chart shows world agricultural export subsidies. The blue part

of the chart is Europe. They account for nearly 84 percent of all

world agricultural export subsidy. The U.S. share is that little thin

red slice, 2.7 percent. The Europeans are outgunning us here 30 to

3

1, 30 to 1. We wonder why they have gained ground and we have

lost ground. To me, it is about as clear as it can be. No magic here.

They have been winning markets the old-fashioned way. They have

been going out and buying these markets. That is what they are

up to. We need to understand that, and I believe we need to fight

back.

Finally, as I say, we must determine the steps we need to take,

either in the Farm Bill, through trade policy initiatives or in some

other ways, to expand U.S. market share.

At this point I would like to recognize our ranking member, Senator Roberts, for any statement that he might make and to thank

him for being here, and thank him for his leadership. He has been

intensely focused on agricultural issues for his entire career, and

we appreciate his determination and persistence to make certain

that the United States does not lose in this global competition.

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

KANSAS

Senator ROBERTS. Thank you, Mr. Chairman. Thank you for your

very kind comments, and I will endeavor to live up to that very fine

introduction. I want to thank you for holding this hearing. I am

struck by the fact that we have very fine attendance. We are substituting quality for quantity, but that in terms of this issue it has

certainly full-committee bearing, certainly a bearing on the full

Congress.

Any time you have a situation where our farmers and ranchers

must export a third to half of their produce or their productivity,

their wherewithal, the miracle of agricultural, and yet over the last

three years we have seen declining exports and a declining market

share, you are in a world of trouble. We talk about emergency

Farm Bill assistance, where that is, how much is enough. Basically,

if you do not sell the product, you are going to experience these

kinds of problems. It is at the heart of many of the issues that face

agriculture today, and as you go down and give a farm speech,

whether it be North Dakota or Kansas or anywhere in the country,

one of the things that you always mention in your speech, either

No. 1 or No. 2, is that we need a consistent and aggressive export

policy. There are some of us who have been rather critical of the

amount of funding and the amount of innovative thinking, and the

amount of out-of-the-box thinking and recommendations that we

need to become competitive.

The chairman has stated very well our export market share,

which has slipped from 24 percent in the early 1980’s, I have had

the privilege of serving in the House and the Senate, been through

six Farm Bills, and during those early Farm Bills, Mr. Chairman,

we were around 24 percent, as your chart has indicated. It is about

18 percent today, and obviously that has contributed a great deal

to the economic hardship that we have experienced in farm country.

Simply put, Mr. Chairman, business as usual is not going to improve our export market share and our farm prices. We cannot afford business as usual. We are going to have to become much more

aggressive in our pursuit of international markets. It is an increasingly competitive world. I know in talking to one of the presidents

4

of the wheat growers several years ago, at their annual convention,

he said, ‘‘Pat, we have to start taking a gun to a knife fight.’’ Now,

he was from out West, and so he was using a little harsh language,

but that indicates the feeling on the part of many of our commodity

groups and our farm organizations, and that has been promised by

virtually everyone that has the privilege of representing agriculture, regardless of which party that they represent.

We held a hearing a year ago in this subcommittee on this very

subject. I had the privilege of being the Chair, along with Bob

Kerrey, the distinguished Senator from Nebraska, who is the ranking member. We had an individual, who at that time was the administrator of the Foreign Agriculture Service, somebody you know

very well, Mr. Tim Galvin, who is sitting behind us in the godfather role here, as a staff member. He actually called upon us to

increase our funding for programs such as the appeal for the Food

for Peace Program, which by the way, was started by Clifford Hope

and Frank Carlson of Kansas, two of the outstanding members that

served agriculture so well in our state. He also said we needed better funding for Food for Progress Program, the Foreign Market Development Program, the Market Access Program, and to develop

and build long-term trade opportunities.

I took the liberty of getting Tim’s statement, and I highlighted

some of the things that he said last year, and because they are so

relevant as of this year. ‘‘To thrive in the 21st century, our farmers

must have access to a freer and fairer global market.’’ Then he indicated that we needed to reallocate unobligated export enhancement program funds, if in fact we are not going to use that, the

EEP program, that sort of a shotgun program that aims at everybody, as opposed to a rifle, to certainly use those moneys for U.S.

food assessments activities, including P.L. 480, Food for Progress,

and for purchasing commodities to replenish the Bill Emerson Humanitarian Trust. That was good advice.

Then he said, ‘‘The USDA must continue its efforts to do more

with less, as resources for administrating our export market development programs have not increased,’’ and Ms. Sharpless will probably tell us that as well.

Mr. Chairman, if it is any area in the Ag budget, and certainly

we have a lot of difference of opinions where we need to increase

the Ag. budget, but this is one where I just do not think we can

continue with business as usual. Tim’s advice is certainly well

taken. If the U.S. is going to be competitive, especially as nations

compete for access to all of our opening markets, more particularly

the Chinese market, as your chart has shown, we are going to have

to plus up our investment, and Tim said we had to join with the

private sector in increasing our efforts to develop markets. Now,

that is a year ago. We are a year later, and I do not think we have

seen too much progress in regards to innovative thinking.

International agriculture trade is not only increasingly competitive as I have indicated, it is a selective environment as well. No

longer do larger foreign buying agencies push their shopping carts

to the U.S. market in terms of being a reliable supplier and a residual supplier. We have thousands of different and distinct buyers

pick and choose from among our many competitors to obtain the

best deal they can, more especially with the value of the dollar.

5

This is a different time. This is not the 1980’s or the 1990’s. This

is a different environment entirely. We have to think out of the

box, it seems to me. Since 1994, when the President’s trade promotion authority expired, quite frankly, I do not think we have had

the ability to compete or take advantage of our farmers’ productivity and value, and to promote the merits of our nation’s agriculture

system to the rest of the world.

We can do that, Mr. Chairman. You pointed it out. The safety of

our nation’s food supply, the quality of the food and the commodities produced and the nation’s reputation as a reliable supplier.

Additionally there are environmental benefits that our farmers

generate, reduced greenhouse emissions through carbon sequestration, soil and water conservation, and the creation and the restoration of wildlife habitat. I do not think we sufficiently really promote

these benefits, not only to buyers, but to the American public and

to the American consumer.

In 1996 ag. exports were over $60 billion. Actually they were

about 61 billion. Last year ag. exports were only 51. We even sank

down to about 49 billion. Now, some would point out that the difference approaches the level of assistance that Congress has provided to farmers over the last few years. In other words, you had

61 billion you were exporting, and now you have got 49 or 50. Subtract the difference. That might add up to, at least in parts, not a

one-on-one thing, but it makes a lot of sense in terms of the emergency funds that we have had to fund.

Let me say without hesitation that any future recovery and potential growth for agriculture rests on our ability to trade and access to our foreign markets, and I believe we need TPA, Trade Promotion Authority. We used to call it fast track. I was talking to Bob

Zoellick, and I said, ‘‘You know, I do not particularly like these

acronyms, TPA, Trade Promotion Authority, Trade Access Authority, Trade Enhancement Authority.’’ He said, ‘‘Well, what would

you think?’’ I said, ‘‘How about ‘Sell the Damn Stuff Authority.’’’ [Laughter.]

Senator ROBERTS. That is S-D-S—maybe that is not going to

work out too well.

[Laughter.]

Senator ROBERTS. I am worried, Mr. Chairman. I hope this is not

accurate, but I keep hearing in the press, some of who are writing

this, who are in attendance, that this is on the back burner. If anything the trade authority could be considered—I do not want to add

more amendments to the emergency Farm Bill, we need to get it

done, and I am not going to get into that—but if we do not do this,

if we do not get this cracking, it is not going to make any difference

in regards to whether or not the levels of funding on the emergency

bill or what kind of a Farm Bill.

There is an obvious reason the European Union and other nations are entering into the free trade agreements at an accelerated

pace. We are treading water. They are proceeding full-steam ahead.

We cannot do that. They complete the additional agreements that

take the trade opportunities away from our American producers.

The number is 133, may be 130 bilateral agreements since the

trade authority expired. We have been involved in 2. You cannot

do that.

6

Mr. Chairman, I commend you for putting together such a wellinformed panel. Thank you for holding this hearing. I look forward

to the testimony. I have some prepared questions for the witnesses,

and like everything else around this place, you are supposed to be

at two or three places at the same time. I am going to have to hit

the dusty trail over to the Health Committee, where we are marking up a mental health parity bill. If we do not get this Ag. emergency bill done, I will need mental health parity, and so I hope we

can get that done.

[Laughter.]

Senator ROBERTS. I have several questions for Ms. Sharpless. I

have several questions for Henry Jo Von Tungeln, who is the

Chairman of U.S. Wheat Associates, about research and development on new varieties of hard white wheat, happened to have been

done at Kansas State University, the home of the ever optimistic

and Fighting Wildcats.

[Laughter.]

Senator ROBERTS. It seems to me that we ought to look at the

R&D in terms of our product as well if we are going to recapture

the Asian market.

Then I have a question for Mr. Carl Brothers, who is the Senior

VP of Riceland Foods, and in regards to Food Aide.

Mr. Chairman, I went to Egypt not too long ago. They have an

increased population every year of 800 thousand people, 800 thousand people, some living in utter deprivation. We talk about Egypt,

talk about India, talk about other countries, so the U.S. Food Aid

Program, we really have to take a hard look at that, and I know

that Mr. Brothers has some suggestions. I am not going to go into

the questions now, but I do have those prepared statements, and

I, unfortunately, will have to leave you in about a half an hour.

Thank you so much for holding this hearing.

Senator CONRAD. Thank you, Senator Roberts. Thank you for

being here, and thank you for your statement.

Before calling our first witness, I would like to insert in the

record, at this point, a copy of my letter of April 24th to USDA’s

chief economist regarding the Department’s 10-year export forecast

and its implications for export market share, and a copy of the May

23rd response from Mr. Collins.

[The letters of Senator Conrad can be found in the appendix on

page 65.]

Senator CONRAD. We certainly want to welcome all of the witnesses who are appearing this morning. We also want to remind

them that their full written statement will be made part of the

record. We ask that they please summarize their statement in five

minutes so that we can have sufficient times for questions and answers.

At this point I would like to call our first witness, Ms. Mattie

Sharpless, the Acting Administrator of USDA’s Foreign Agricultural Service. Ms. Sharpless is accompanied by Ms. Mary

Chambliss, the Deputy Administrator for Export Credits. Thank

you very much for being here as well.

Before Ms. Sharpless begins, I want to thank her for coming out

to North Dakota several years ago, when she was our agricultural

counselor at the U.S. Embassy in Paris. We still have a few picVerDate 11-MAY-2000 11:25 Feb 27, 2003 Jkt 084379 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 84379.TXT SAG1 PsN: SAG1
7

tures of Ms. Sharpless riding a four-wheel drive tractor in North

Dakota.

[Laughter.]

Senator CONRAD. Scott Stoffehren, who is on my staff, reminds

me that he was with you at the time that you were in North Dakota, and said you made a very positive impression. Welcome.

Please proceed.

STATEMENT OF MATTIE R. SHARPLESS, ACTING

ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE, U.S.

DEPARTMENT OF AGRICULTURE, ACCOMPANIED BY MARY

CHAMBLISS, DEPUTY ADMINISTRATOR FOR EXPORT

CREDITS

Ms. SHARPLESS. Thank you, Mr. Chairman. I must say I have the

pleasure of going to North Dakota again next week, so I will see

what I have out there then.

Well, Mr. Chairman, and members of the committee, I am very

pleased to be here today to discuss the U.S. Department of Agriculture’s strategy for expanding overseas sales. I have submitted

my full statement for the record, along with three charts that illustrate present trade concerns. Now I would like to take a few minutes to highlight the key points.

Trade continues to be critically important to the long-term economic health and prosperity of our food and agriculture sector.

Steadily expanding foreign demand brought on by income gains,

trade liberalization and changes in global market structures has

helped U.S. agriculture exports double from 15 years ago to 53.5

billion today. Clearly, without the offsetting effects of an expanding

export market, farm prices and net cash incomes would be significantly lower today.

While our total sales to foreign customers have grown, we have

not kept pace with our competitors, and a result, our market share

has steadily been eroded. We view this with considerable concern.

20 years ago, as you pointed out, we were the world’s export leader,

accounting for 24 percent of global agriculture trade. Today, as you

say, that has fallen to 18 percent. America’s once overwhelming

leadership as ag. exporter, has slipped to the point where our nearest rival, the European Union, is on the verge of overtaking us.

Several factors have contributed to the erosion in the U.S. market share. Most importantly are the strong dollar, aggressive competition and our reliance on mature markets. Our effort to help restore our export market share focuses primarily on three areas.

First, we must aggressively seek trade reform to remove market

distortions that will allow faster overall growth in trade. First and

foremost among these in enactment of the Trade Promotion Authority. It is essential to enable us to effectively pursue trade reform and to level the playing field for our producers and exporters.

In addition, the negotiation of a free trade area of the Americas is

being reemphasized and World Trade Organization negotiations,

now under way, must be brought to a successful conclusion.

Second, we must insure our exporters have the necessary tools

to capture a greater share of the benefits that will flow from trade

reform and the resulting global market expansion. The programs

we now operate have served our food and agriculture sector well,

8

but the upcoming Farm Bill presents an opportunity to review all

of our programs with an eye to improving them to meet tomorrow’s

challenges and opportunities. We look forward to working with the

committee throughout the Farm Bill process to examine ways in

which improvement might be made.

Third, we must sharpen our strategic focus to more effectively

capitalize on trade opportunities offered by fast-growing emerging

markets. The most promising long-term opportunities lie in the developing countries and Asia, particularly China and Southeast

Asia, Latin America, Russia, and some selected opportunities in Africa and the Middle East. Over the next decade food consumption

in these markets will surge, driven by favorable demographics,

some 600 million new middle class consumers with rapidly rising

disposable income, eager to spend on more and better food.

In the long run, gaining access and share in these fast-growing

markets without sacrificing hard-won gains in our large, mature

markets, will prove to be the most effective approach for increasing

our overall share of world trade.

Mr. Chairman, U.S. agriculture strong reliance on world markets

for its economic future means there is no question that we must

strengthen our efforts to expand sales. Our strategy focuses on an

ambitious trade liberalization agenda, and new and retooled export

promotion programs to capitalize on the opportunities offered by

significant growth and future world demand. We know that trade

liberalization works. It helps create new sales opportunities as

growing numbers of foreign consumers with purchasing power gain

increased access to goods produced in many countries. Strategically

targeted export programs work. With adequate funding, proper execution and patience, export programs and export assistance carried

in targeted high-return markets will enable our producers to capture more new opportunities than our competitors.

The concludes my statement, Mr. Chairman. I would be pleased

to respond to questions you or other members may have. Thank

you.

Senator CONRAD. Thank you very much. Thank you for your

statement.

Let me go to this chart. I appreciate the position on Trade Promotion Authority. I supported the Uruguay round, and I supported

our opening to China. I believe those were appropriate and necessary. I tell you, honestly, I have spent a lot of time with the Europeans. I hosted the man that represented them in all trade talks,

hosted him here, and he hosted me in Geneva, I spent a lot of time

talking to him. It was very clear to me that they have a strategy

and a plan for dominating world agriculture. That is their intention. They are spending significant sums of money to do it. This

chart says very well what the Europeans are doing in terms of support for agricultural exports. They are spending $5 billion a year,

$5 billion. As I analyze the challenge facing us, it seems to me we

have got to go out there and match them.

Now, let me just tell me what they have told me. The Europeans

have said to me, ‘‘Senator, we think you are so successful in so

many other areas that you will give up on agriculture.’’ They have

told me, ‘‘Look, we have much higher levels of support than you do

in the United States, and we believe we will always be able to get

9

equal percentage reductions in those levels of support from those

unequal bases, and at some point the United States will fall off the

cliff.’’

Do you have any knowledge of what the administration intends

to do with this imbalance in the export subsidy of our major competitors with what we are doing? Do you have any idea of the administration intends to recommend sharply increased spending on

behalf of United States’ producers in this area?

Ms. SHARPLESS. Mr. Chairman, in the area of export subsidies,

I can firmly say that the administration still has that as one of the

major goals in the World Trade Organization, to work for the elimination of export subsidies, because in the past, and as you know

and others know, that truly has been one of the dilemmas between

the European Union and the United States competing against

treasuries out in the export markets. That continues to be one of

the goals, and that is why it is so important to work to get Trade

Promotion Authority to try to get this trade round launched off in

order to continue to work to get export subsidies eliminated.

Senator CONRAD. Can I say to you, and I hope through you to

the administration, that they are going at it backward. I said this

to the previous administration. It has got nothing to do with which

administration we are dealing with. They have it backward as well.

Here is why we have got it backward. I do not think we are going

to get the Europeans to back off without leverage.

When Seattle occurred, our previous trade Ambassador asked me

to go in and meet with the European, the representatives of the

Europeans. We had about a 2-hour long debate. They are very good

at making their case. They claim we have higher subsidies than

they do, and that is not true, but they try to make the case. I asked

the previous trade Ambassador, ‘‘What leverage do you have here

to get a result?’’ She kind of looked at her shoes, because did not

have any leverage. This is what concerns me, when I look at this

disparity, what the Europeans are doing and what we are doing.

Then we go into trade talks and say, ‘‘We want you to back off.’’

They are on the high ground here, and there is not much pressure

on them to back off. It is a little like the cold war, where we built

up to build down. That really, to me, is the only strategy that is

going to have any effect. We can get on our high horse and go to

these trade talks and tell them, ‘‘Gee, you really ought to do this.

It is the right thing to do.’’ Meanwhile, they are gaining market

share, and they are getting in a more dominant position.

I just hope I can deliver this message through you to the administration. I personally believe we have got to take them on. To the

extent we can under trade law, we need to match them.

Let me ask you this on a more technical basis, and please take

that message back. I am delivering it to everybody I can in this administration, as I did with the previous administration. Is the Department able to tell us on any given day if we are gaining or losing market share on major commodities such as grains, oilseeds,

cotton, beef; do we have that data readily available?

Ms. SHARPLESS. Mr. Chairman, thank you very much, and I will

assure you that your message will be taken back to the Department and to the Secretary.

10

On the question you just posed, we have that data available for

the major crops and the major meat-type products. It is more difficult to have that data available on a daily basis for the specialty

crops, but it can be gathered, and if you would like that data, we

would be very pleased to gather it to forward it to you on the major

crops.

Senator CONRAD. I would be very interested in that. Can you tell

me, is the Department able to tell us if we are gaining or losing

market share on our significant export destinations such as Japan,

Canada, China, Mexico? Do we follow our market share in those

critical markets?

Ms. SHARPLESS. In those markets like Mexico, our market share

has gradually increased. As our market share overall has gone

down, our market share and some of the markets you mentioned,

of course, have gone down also, but some have gone down slightly

and some have gone up slightly, but overall the trend is down, as

we know, and we are working a strategy to try to turn it——

Senator CONRAD. Do you have that information on a country-bycountry basis on market share?

Ms. SHARPLESS. We can provide that information, yes, also.

Senator CONRAD. OK. USDA, as I understand it, reports it export

information around three broad categories: bulk, intermediate and

consumer-oriented products. As we look separately at each of those

broad categories, is the U.S. market share increasing or decreasing? What do you see in each of those: bulk, intermediate and consumer-oriented? Can you tell us the pattern in each of those three?

Ms. SHARPLESS. I can clearly say for bulk commodities the market share had trended downward. For consumer products, it had

been going up quite rapidly, but recently, it has been trending

downward also. I am not able to say exactly about intermediate.

Probably has rather remained stable, but there too, I would be

pleased to pull the data together to forward to you to give you the

exact movement of each of those three categories.

Senator CONRAD. Your testimony notes on page 6 that one of the

reasons the U.S. is losing market share is because our competitors

are out spending us on market promotion activities, and by a large

margin, according to your analysis. In light of that, I note that the

Farm Bill, approved last week in the House, includes substantial

increases for the market access program from 90 million annually

to 200 million dollars, and the cooperator program, from about 30

million to 35 million dollars. Does the administration support those

increases?

Ms. SHARPLESS. The administration is still in the process of looking at what we need to be doing from a strategic perspective, and

trying to turn our export situation around, and we are still in the

process of developing positions of what we could do if we had additional funds to do so.

Senator CONRAD. Well, can I just say you will not get the money

unless the administration aggressively goes after it, and frankly, I

hope they send a signal, a clear signal, quickly, on these programs,

but they are relatively minor. I hope they send a message on this

issue, and that they send it quickly, that the United States is not

just going to go to trade talks and talk about what is right and

what is wrong and what is fair and what is not fair, but that the

11

United States will take an aggressive position and say, ‘‘We are

going to fight back. We are not going to accept other countries taking markets that have traditionally been ours because they have

simply got more resources to go out and buy them.’’ That would do

more good in terms of getting a result than any other single thing

we could do.

We are going to hear from witnesses in the next panel, especially

those from the rice industry, that slumping U.S. Food Aid donations are having a major impact on our exports of commodities, including rice. In fact, our food donations this year are about half of

last year’s level. Can you tell us why the falloff?

Ms. SHARPLESS. Mr. Chairman, if you do not mind, I would like

Mary Chambliss—she is also serving as Acting General Sales Manager—and if she would respond to that question for us, I would appreciate it.

Senator CONRAD. All right.

Ms. CHAMBLISS. Surely. Thank you, Senator.

Yes, I am well aware of the concern from our friends in the rice

trade about the current Food Aid Program. We at the Department

have had several meetings with them. In fact, there will be one

later on this morning, with some of our colleagues in the rice trade.

The situation really—the current year’s programming of rice

really is back to a more normal year, if you would. We have gone

back and looked at the historical series, and it has been running

about 250,000 tons most years. In the 1-year, fiscal year 1999, we

had several countries, particularly Russia, which normally are not

a major participant in our Food Aid Program, as you will appreciate, and they were a user of rice that year. We also, in that period of time, of course, that was when the Indonesian situation was

quite bad. We hope it is on a better track now, for lots of reasons

and for lots of commodities. The year we did provide quite a lot of

rice for basically emergency direct feeding kinds of programs in Indonesia, which we are not doing.

If you take out those unusual situations, we are about at a normal pattern. However, I appreciate the rice trade’s interest in expanding our Food Aid Programs. We are looking, and we will continue to work with them, to see if we can identify some additional

markets. It really becomes a situation of where the demands are

for the rice products primarily that we have to relate to.

Senator CONRAD. Can you tell me where we are in terms of overall food donations, not just rice, but all commodities?

Ms. CHAMBLISS. Certainly. I will be happy to. This year, we will

have, oh, probably, if I am thinking of all food aid, and I am including the AID food aid accounts in my mind right now, we will probably be between 6 and 7 million metric tons of total food aid, slightly down from the peak, which was fiscal year 1999, then it was

down a little bit last year, will be down a little bit more this year.

It will be the wide array of commodities, all of the traditional ones

that we have seen. That is probably what, at the end of the day,

by the time we get all the shipping and all the legal requirements

complied with and the food aid legislation, I would guess 6 to 7 million tons in total of the various programs for this year.

Senator CONRAD. All right. Senator Roberts.

12

Senator ROBERTS. Just to followup on that, if I might, the criteria

for food donations are the driving factor as to why in 1999 it would

be increased or it might be a little bit lower as of right now, or especially within the news. I serve on the Intelligence Committee,

and my take on Indonesia is that that will continue to be a very

difficult area of the world—the world’s fourth most populous nation—with stability, and consistency really in question. They do

now have a new government, but, gee, they are going to go through

a tough time, and I am not aware of any decrease in the need of

food aid. Can you just sort of go over the criteria as to what you

think is the major driving force as to the amount of food aid that

we are supplying, please?

Ms. CHAMBLISS. Surely. I will mention a couple of general things,

and then if you would bear with me a moment on Indonesia, because we too are very concerned and looking specifically at Indonesia recently. The main driving force in the last several years

have been some of the major emergency requirements. I am thinking particularly of the situation in the North Korea situation and

Afghanistan has a huge drought. There are obviously people suffering greatly, I assume——

Senator ROBERTS. I am sorry for interrupting, but most of that

in North Korea goes through the World Food Program; is that not

correct?

Ms. CHAMBLISS. Right. As in Afghanistan, it also does.

Senator ROBERTS. With Catherine Bertini and all the folks that

work for that, all right.

Ms. CHAMBLISS. Right. The world has sort of looked to the World

Food Program to meet the emergency needs wherever they happen

to be, including in Africa. We also, of course, make major provisions to governments, as well as to our colleagues in the private

voluntary organization community. Those tend not to be the emergencies. The big ones you hear tend to be emergencies that really

drive large—— Senator ROBERTS. They are disaster driven.

Ms. CHAMBLISS [continuing]. Quantities. You know, when it varies a lot, it tends to be because of that.

We too have been looking at Indonesia. You are quite right, the

new president there, she is going to have a difficult time. Let us

hope it succeeds well for both our commercial exports, which have

been quite large under our GSM commercial program this year. We

are beginning to have some very preliminary signals from some

parts of the government of Indonesia, that they may have some additional food aid requirements. That may mean rice. I do not know

yet. I say these are very preliminary indications, but we will certainly be talking with our colleagues in the Indonesian Government

to see what seems appropriate and what we can be helpful with.

Senator ROBERTS. What is the major obstacle that you have in

regards to food aid? What is the biggest thing that is your problem?

Ms. CHAMBLISS. Well, that is a tempting question, Senator.

There are several things.

Senator ROBERTS. Well, give me two then, if you do not want to

choose one.

Ms. CHAMBLISS. I was going to mention one. It is a piece of legislation, but I will not go there, OK?

13

Senator ROBERTS. No, no, no. Please, we would like to hear.

Ms. CHAMBLISS. Well, I was going to mention, of course, cargo

preference, because it is a problem in terms of operations.

Senator ROBERTS. Maybe we should not go there.

[Laughter.]

Ms. CHAMBLISS. I told you, Senator, we did not want to go there.

Senator ROBERTS. Congressman English and Congressman Roberts, over a decade ago, tried to address that, and—— Ms. CHAMBLISS. I do not want to go there either, Senator.

Senator ROBERTS. We just did not figure out that the folks in the

middle of the country, that their representatives did not outnumber

the folks surrounding.

[Laughter.]

Ms. CHAMBLISS. I will not go there.

The problems tend to be, obviously, budgetary concerns, our

problem for all programs. Food aid is no exception to that general

U.S. Government concern. I would have to list budgetary concerns

and the totality of the food aid programs.

The other dilemma is, we deliver food aid to very poor countries

in very difficult situations. It is not an easy job. The people in our

private voluntary organizations, the World Food Program, they are

hard places to be. They are risky. Both of those entities have lost

people in recent years, carrying out our food aid programs.

Senator ROBERTS. Especially in Africa. I know that is a very difficult situation.

Ms. CHAMBLISS. Particularly, I mean, it has been very difficult

for them. Partly it is the logistical, operational constraints that we

face on the ground. Any budgetary constraints that we have to deal

with here are really among the hardest obstacles to running a successful food aid program.

Senator ROBERTS. I am going to ask you an unfair question. This

is sort of a curve ball. If we are making efforts in regards to rice,

or for that matter, any other commodity, with the freedom-loving

people of North Korea, through the World Food Program—and I

was part of a delegation that went to Pyongyang with Chairman

Stevens some years ago, trying to work out a third-party arrangement to at least get the North Koreans to explore the real world

of trade. It was not successful. I hoped that we could see some

breakthroughs as they continue their efforts with South Korea. If

we doing that with the freedom-loving people, and we are reviewing our sanctions, if that is the word to say, with Iraq and Libya

and North Korea, what about the freedom-loving people of Cuba?

In regards to rice, that would make a marvelous opportunity. Now,

there are some of us going to have some legislation in that regard.

That is an unfair question. Do you have any comment about that?

Ms. CHAMBLISS. Simply to note that when Congress passes the

laws, we will find a way to implement them as best we can.

Senator ROBERTS. There is some food aid going to Cuba?

Ms. CHAMBLISS. Yes. You have made some—there is some leeway, and of course—— Senator ROBERTS. Through Catholic Relief mostly, right?

Ms. CHAMBLISS. Right. I was going to say Catholic Relief Service

we know has done some, and I want to say one of our cooperators

a couple of years ago also delivered some food aid.

14

Senator ROBERTS. Yes. There was a breakthrough.

Ms. CHAMBLISS. There were some actions.

Senator ROBERTS. You know, very temporary.

Ms. CHAMBLISS. Not with government food aid, but in the food

aid context if you will.

Senator ROBERTS. Well, thank you. You have been very helpful.

Let’s—we have Blanche here, who will probably now compare pits

of the rice effort and wave her flag, so I will not do that.

[Laughter.]

Senator ROBERTS. Do you feel that there is ample coordination,

trade, market promotion, market development, between the Department of Agriculture, USTR, Department of Commerce, U.S.

Trade and Development Agency, U.S. Agency for International Development? Are you all working together? Do you have periodic

meetings where you all sit and try to coordinate so it is not so

stovepiped, if in fact it is stovepiped?

Ms. SHARPLESS. Senator Roberts, yes, we work very closely with

USTR. We also work very closely with U.S. Department of Commerce, and with AID on areas where we work with AID.

Senator ROBERTS. Well, one of the things that Secretary

Veneman indicated, when she was Secretary of California, and

then prior to that, when she was an assistant secretary here, was

the need for an interagency task force in regards to exports and all

of these subjects, and I would certainly hope that that could be the

case. I know that is what she wants to do, along with others down

at the Department. I also know they do not have their full team

on board as well, which is a continuing problem. See if you cannot

get that done for us.

[Laughter.]

Senator ROBERTS. Anyway, the coordination is very important. I

am not going to ask that question. I will yield to my good friend.

Senator CONRAD. Before we go to Senator Lincoln, I would just

like to followup. You had indicated that food aid this year was

going to be 6 to 7 million tons. Could you tell us what it was for

2000 and for 1999?

Ms. CHAMBLISS. I want to say in 1999, Senator, we got close

probably to 8 to 9 million tons, last year probably 7 to 8. I will get

the specific numbers for you, and we will be happy to provide it.

Senator CONRAD. OK. I would be interested in that.

We have been joined by our very able colleague from Arkansas,

a valued member of the committee and subcommittee, Senator

Blanche Lincoln. Welcome.

STATEMENT OF BLANCHE LAMBERT LINCOLN, A U.S.

SENATOR FROM ARKANSAS

Senator LINCOLN. Thank you. Delighted to be with you two gentleman. You all always give me great hope and great promise, not

to mention a hard time.

[Laughter.]

Senator LINCOLN. Thank you, Mr. Chairman, for holding such an

important hearing this morning, and for your unwavering leadership on the issue of international trade and agriculture. It is absolutely critical. For those of us who have worked with Chairman

Conrad on the committee as well as on the Finance Committee, we

15

know of his passion for preserving the American farmers’ place at

the head of the global table, and I for one am a follower of this

chart, which I have used many times over.

I am also very pleased that in the next panel we will be joined

by a good friend of mine, Carl Brothers from Stuttgart, Arkansas,

who will be testifying on behalf of Riceland Foods, which is a farmer-owned cooperative that markets rice, soybeans and wheat, and

I know that he will address more of the difficulties that rice farmers are facing, and certainly in the marketing scheme of things,

and the global marketplace.

As everybody here knows, rice, soybeans, wheat, cotton, these are

all important commodities to our State in Arkansas, and the success of these industries really closely parallels the success of the

entire delta region, which many people on Capitol Hill have heard

me talk about time and time again as one of the largest poverty

areas in our Nation, and with the inability to be able to market our

farm products, we are seeing our inability to be able to build our

economy in the delta region.

When Congress passed Freedom to Farm back in 1996, there was

a true hope that the global marketplace would respond favorably

to a more market-oriented policy in the U.S., and our farmers were

told that Freedom to Farm would liberate them from government

intrusion in the marketplace. Unfortunately, the exact opposite has

occurred, because as we freed them up from heavier government

support at home, we have subjected them to the vagaries of greater

foreign-government intrusion in the global marketplace. This chart

back here is just a great example. As we all know, the key to success for our farmers is in the global marketplace, and we are going

to have to fight for our share there.

Of course, the cruel irony of all of this is that the intrusion by

the U.S. Government in the form of trade sanctions against potentially important markets, such as Cuba, which Senator Roberts has

mentioned, has been one of the more frustrating obstacles to our

former success abroad. As many of you all know, roughly 50 percent of our rice exports in Arkansas used to go to Cuba, and it was

an enormous part of our economy in Arkansas.

The answer to all of this is, on one hand, very simple, we have

got to help our farmers gain the greater market access overseas

that they need and deserve, yet it is also very complicated, as I

have found, as I have gotten more and more involved in these trade

issues.

As Senator Conrad has explained so eloquently many times, and

as I have mentioned, I have used this chart at home, I have used

it in many places, to try and really bring about the stark contrast

that it does present to the people in my home state in terms of

what our problems are that we are dealing with, and certainly to

those that we deal with here in Washington. The U.S. has truly allowed itself to slip into a position of wheat bargaining leverage versus our major competitor, such as the European Union. The EU

subsidizes its farmers at such a high level, that simply lowering

relative support levels by some formula would do very little to resolve the inherent disadvantage our farmers find themselves facing. This is why we need a new Farm Bill with a strong safety net

to give our farmers the security that they need to be able to comVerDate 11-MAY-2000 11:25 Feb 27, 2003 Jkt 084379 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 84379.TXT SAG1 PsN: SAG1
16

pete. As has been said time and time again, our farmers are not

competing with other farmers in a global marketplace, they are

more so than not, competing with other governments.

It is also why I strongly support passing a Trade Promotion Authority bill as soon as possible. I know that our witnesses here

have mentioned that. We have to give our negotiators the tools and

the flexibility they need to open up markets and to address the unfair trading policies of our trading competitors. TPA alone will not

solve all of our problems. We have got to have the assurances that

agriculture is going to be at the table, it is going to be a primary

player at the table, it is not going to be left behind as a third or

fourth resort in terms of these negotiations. It has got to be a player and it has got to be considered that way.

We also need to fix some of the problems that we have created

here on our own turf by removing these counterproductive trade

sanctions that do little but penalize our own farmers. After 40 or

50 years of a trade policy, it is clear if it is not working, we need

to do something about it. I have been a huge advocate of that here,

and I will remain a loud voice on that.

We must utilize to the fullest those market promotion and food

aid programs that are available to our farmers. That has been

touched on a little bit today, but without a doubt, we have, under

funded in the past, and we need to be able to focus on that. If we

do these things and if we do them expeditiously, then we can reassert our place at the head of the global table. Again, as Senator

Conrad has mentioned, and I have been proud to be able to echo,

we are at a critical juncture at this point, and if we do not make

our place at that table, if we do not utilize this critical time to be

able to be a player in this global marketplace, in the next two decades, we are going to have a real serious problem, as these other

nations have been in that marketplace, in that global marketplace,

and we have not found our way or our place at that table.

We appreciate you ladies being here today and the other panels.

I may have to excuse myself after a while, Mr. Chairman, but we

are certainly very proud to have Carl Brothers from Arkansas here.

I would just like to ask these two ladies a brief question. Many

of our export commodities in Arkansas, of course, rice and poultry,

cotton, even an import commodity, catfish, are having trouble

maximizing market shares. I am sorry that I missed your testimony earlier, and you may have already touched on some of this,

but what role do you see the market promotion programs playing

in improving their market shares, those that we have some difficulties with, anything there?

Ms. SHARPLESS. We believe, with a more aggressive market promotion program, that we could really reach out to expand our market shares overall. We have a global market strategy that we are

developing down at the Department, where we are going to be putting attention on the emerging markets, and therefore—and we are

also going to be looking at bringing new, more exporters into markets, especially with the high-value products that we have there.

We believe that in the long run, once we put more attention on

these emerging markets and do our very best to retain our mature

markets, there will be potential for growth for many of the comVerDate 11-MAY-2000 11:25 Feb 27, 2003 Jkt 084379 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 84379.TXT SAG1 PsN: SAG1
17

modities that we have traditionally exported, as well as new-tomarket exports.

Senator LINCOLN. Well, I would just echo a little of what Senator

Conrad said, and that is that as you aggressively look for that, I

hope that you will equally as aggressively push for the funding for

those programs. In your response earlier, I am not sure that we felt

the comfort level that we wanted to in terms of how aggressive the

administration will be pushing for some of those budgetary items,

which, as we all know, they do not happen without funding. Neither do our aid programs.

Do you see any promises in maybe some of the regional negotiations, the Indian trade?

Ms. SHARPLESS. The Free Trade of the Americas is a high priority of this administration. President Bush has said over repeatedly

that we hope to get those negotiations finished by 2005. Of course,

we are pushing too for the WTO on negotiations, and with the accession of China to the WTO, and more market opportunities that

will open there that will be a great gain for an enormous amount

of trade for the United States there.

We also are working on the U.S.-Chile Free Trade Agreement,

which should bring about additional access. Working to renegotiate

the U.S.-Israeli agreement, hopefully to bring about more agricultural access there too.

Senator LINCOLN. Well, just in conclusion, Mr. Chairman, I

would not be worth the salt that the people of Arkansas have invested in me to come up here, if I did not mention also, and echoing Senator Roberts’ comments about Cuba, it is certainly crucial

that we break down the artificial barriers of trade sanctions that

are only blocking our farmers from profitable markets. After reviewing 40 plus years of policy, we can certainly assert that it has

accomplished all that it is going to accomplish in those 40 years,

and I would certainly encourage the administration to be a little

more active and a little more forward in working through some of— and certainly taking a role in terms of being able to open up a market that is roughly 90 miles from our border and could be an unbelievable trading partner for one of our commodities, many of our

commodities, but certainly in particularly rice.

Thank you, Mr. Chairman.

Senator CONRAD. Thank you, Senator. Let me just go back, if I

can, to this chart that shows what has happened to our market

share. Our market share is in decline. We have gone from 24 percent 20 years ago to 18 percent today, and each percentage

amounts to $3 billion in lost export sales, so that is $18 billion.

That is real money and would make a profound difference.

Let us go to the next chart, because I want to rivet this point:

these two are connected. Market share is going down, and our main

competitor accounts for 84 percent of all the world’s export subsidy.

We account for 2.7 percent. They are trumping us there 30 to 1.

My question, Ms. Sharpless, would be, what does the administration intend to do about this? In their budget submission, they propose doing nothing about it. There was no increase. In fact, they

were proposing substantial cuts. I would ask you: what do they propose to do about this, European dominance of world agricultural

export subsidies? What are they going to do to take these folks on?

18

Ms. SHARPLESS. As I said earlier, Mr. Chairman, in the World

Trade Organization, that is one of our major goals. Also the Uruguay Round agreement put limits on export subsidies, and although I have not followed it quite closely most recently, but the

European Union itself has stopped using as many subsidies as it

used to use because the market situation did not require as much.

The requirements of the Uruguay Round, the subsidy levels themselves are going to be somewhat curtailed.

I can appreciate the point you are making about our being consumed by the European Union. We clearly know that ourselves,

and USTR or USDA, Department of Commerce, all of us have dealt

with this battle. I am going to take your message back to the Department, and I still say with our going into the WTO is probably

going to be the best opportunity and the best venue to deal with

export subsidies head on, and I appreciate the support we have

heard this morning about the need to get the Trade Promotion Authority approved, so that it will enable us to go to the negotiating

table. I would like to say too that Agriculture intends to play a

major role in these negotiations and be at the table along with

USTR, to make sure that we are bringing about a level playing

field for our producers and our exporters.

Senator CONRAD. Let me just say that I agree with all of those

sentiments. To me it is kind of a meaningless exercise unless we

put dollars behind the words, that talking about leveling the playing field is different than leveling the playing field. The way you

level the playing field is you put dollars behind it, and you actually

level the playing field. I was highly critical of the previous administration. I am going to be highly critical of this administration if it

does not do something tangible and real. It is just not enough to

talk about being at the table. It is not enough to talk about leveling

the playing field if we do not do anything to actually accomplish

it.

In your testimony, you pointed out the three things that are

causing erosion in market share. One, the strong dollar; second, aggressive competition; and third, over-reliance on mature markets.

I agree with all those. It is very clear, a strong dollar is hurting

our exports, not only in agriculture but it other sectors as well. Second, aggressive competition, and that is really the point I am trying to drive home today. In your testimony you point out, Europeans have been especially problematic for our exports. The Organization for Economic Cooperation and Development estimates

total EU production supports to be 114.5 billion in 1999, compared

to 54 billion for the United States. That is a $60 billion difference.

My entreaty to the administration is: you need to send a message

by what you request for this Farm Bill and by what you request

for export promotion that we will take on our major competitors.

We are going to be watching. I hope you will take this message

back to the administration. It is not going to be enough for this

Senator, to say we are going to try to get something accomplished

in trade talks, because without leverage in trade talks, I do not

know how we succeed.

I told this to the previous administration, so please do not take

this as I am just beating up on this administration. I told the previous administration: explain to me how you are going to accomVerDate 11-MAY-2000 11:25 Feb 27, 2003 Jkt 084379 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 84379.TXT SAG1 PsN: SAG1
19

plish the result at the trade talks. How is it, when their level of

support is up here and ours is down here, how are you going to get

that closed? Who is going to give up? Are the Europeans going to

give up their position? I do not think so. I do not think negotiations

work that way, in my experience. Unless you have leverage to compel them to change, they will not change.

Please deliver that message strongly to the administration. I am

going to be asking and continue to ask what they are doing tangibly to deal with this differential, because it is right at the heart

of what is happening in terms of our loss of world market share.

Do you have any final comment?

Ms. SHARPLESS. I just wanted to let you know that I will deliver

this message to the Department, and as a matter of fact, we at the

Department will have a meeting with USTR to make sure that the

message is delivered there also.

Senator CONRAD. I appreciate that, and it is critically important.

I have told our new trade Ambassador precisely what I told our

previous trade Ambassador. I do not think we are going to be successful without leverage.

I would like to note for the record that Ms. Sharpless has been

nominated by the President to serve as the U.S. Ambassador to the

Central African Republic, and that she is only the second USDA

Foreign Service officer to be named an ambassador. That is a great

honor, and we want to say on behalf of the committee and all of

agriculture, congratulations. That is a great honor, and I am sure

well deserved.

Ms. SHARPLESS. Thank you.

Senator CONRAD. I am confident you will represent us well.

Ms. SHARPLESS. I will do my best, Mr. Chairman.

Senator CONRAD. Thank you very much, and good luck.

Ms. SHARPLESS. Thank you.

[The prepared statement of Ms. Sharpless can be found in the

appendix on page 34.]

Senator CONRAD. We will now call on our second panel, including

Mr. Len Condon, Vice President for International Trade at the

American Meat Institute; Mr. Henry Jo Von Tungeln, U.S. Wheat

Associates and Mr. Carl Brothers, Senior Vice President of

Riceland Foods of Stuttgart, Arkansas.

Welcome to all of you. As I indicated at the beginning, your full

statements will be made part of the record, and we would ask you

to summarize in five minutes or so, so we will have time for questions. Again, thank you very much for being here. We certainly appreciate the opportunity to hear from you.

We will start with Mr. Condon, again, the Vice President for

International Trade at the American Meat Institute. Welcome.

STATEMENT OF LEONARD W. CONDON, VICE PRESIDENT FOR

INTERNATIONAL TRADE, AMERICAN MEAT INSTITUTE,

ARLINGTON, VIRGINIA

Mr. CONDON. Thank you, Mr. Chairman. I would just like to

thank you for making those very nice comments about Ms.

Sharpless. The honor she has received is very well deserved.

I represent the meat industry. We know we are different. We

know that we are the exception, and we are doing very well, but

20

basically the message I want to deliver is we think we could be

doing much better, so my members are not content.

The transformation of the U.S. meat and poultry industry from

a virtual non-participant in global trade to an exporting dynamo,

has been one of the U.S. agricultural highlights of the last two decades. U.S. beef exports have grown from less of 1 percent of domestic production in 1980 to over 9 percent last year, lifting the U.S.

from the eighth largest beef exporter to second.

Much of the long-term growth in U.S. exports of meat can be

linked to trade liberalizing agreements. The most significant event

for beef was the U.S.-Japan Beef and Citrus Agreement of 1988. A

subsequent agreement with Korea, the U.S.-Canada Free Trade

Agreement, and NAFTA, all helped to create substantial new market opportunities that have paid big dividends for the U.S. beef industry.

Japan imported nearly a billion and a half dollars worth of U.S.

beef last year. Because of NAFTA, Mexico has become our second

largest export market for beef, and that market is continuing to

grow at an impressive rate. Exports to the four countries: Japan,

Mexico, Korea and Canada, accounted for over 90 percent of the $3

billion worth of beef the U.S. exported to the world last year.

Exports of pork have been growing at an even faster rate. The

U.S. is the world’s third largest pork exporter. Pork exports to the

world last year represented 7 percent of U.S. production, compared

with only 1.6 percent exported as recently as 1990. From 1995 to

2000, U.S. pork exports grew 68 percent. Like beef, our pork exports are heavily concentrated among a relatively small group of

countries. Three countries, Japan and our NAFTA partners, Mexico

and Canada, accounted for almost 90 percent of the $1.2 billion

worth of pork we shipped to the world last year.

As trade has increased and per capita incomes have generally

risen around the world, demand for meats and other processed

foods and beverages have blossomed.

The composition of U.S. agricultural imports has shifted significantly. In 1980 bulk exports accounted for nearly 70 percent of the

value of U.S. agricultural exports, but the share declined steadily

to less than 40 percent in 1998. More emphasis on opening markets

for processed foods and beverages, including meat products, offer

substantial potential for increasing U.S. export income, creating

jobs and enhancing U.S. living standards.

While U.S. meat exports grew dramatically over the last two decades, this growth primarily resulted in progress made in reducing

tariff and non-tariff barriers in a few key markets. High tariffs in

many world markets continue to stifle U.S. meat and poultry exports. USDA’s Economic Research Service recently found that global export tariffs averaged a whopping 62 percent, compared with

only 4 percent from manufactured goods.

U.S. agricultural tariffs averaged 12 percent and they are among

the lowest in the world. With its low average tariffs, U.S. agriculture as a whole, and U.S. livestock and meat and poultry sectors

in particular, stand to gain from deep multilateral tariff cuts. For

that reason, AMI, along with all of the other U.S. livestock, meat

and poultry organizations, are urging the administration to pursue

21

the global elimination of all tariffs on beef, pork and poultry in the

next round of multilateral trade negotiations.

U.S. livestock, meat and poultry industries are also very united

in their strong support for renewal or Presidential trade promotion

authority. We urge the Congress to grant that authority as soon as

possible. Clearly, if the Congress and the administration cannot resolve this issue before the next WTO ministerial conference scheduled to be held in Doha in early November, the launch of a new

round of global negotiations will be at risk. With two consecutive

failures, the credibility of the multilateral system could suffer irreparable damage leading to a proliferation of bilateral and regional deals that do not serve U.S. global trade interests.

In its recent study on tariffs, ERS also noted that key U.S. agricultural exports, again including meats, face an abundance of

‘‘megatariffs’’ (above 100 percent). Most of these are associated with

tariff rate quotas established under Uruguay Round agreements.

Specific examples of outrageously high tariff, blocking access for

U.S. meats are included in my testimony.

While our meat and poultry exports have been doing well, closer

examination of our trade profile shows that our exports are restricted to a few countries. In general, global access for U.S. meat

and poultry products remain severely restricted by high tariffs and

numerous sanitary barriers, not all of them legitimate.

We could and should be selling much greater amounts of highly

desirable U.S. meat and poultry products to the world.

That concludes a summary of the high points of my testimony,

Mr. Chairman. I would be pleased to join the panel later in answering any questions you might have. Thank you.

[The prepared statement of Mr. Condon can be found in the appendix on page 48.]

Senator CONRAD. Thank you very much for your testimony.

Now we will hear from—is it Mr. Tungeln, is that how you pronounce it?

Mr. VON TUNGELN. Von Tungeln. You did very well with it.

Senator CONRAD. Thank you. Welcome. Good to have you here.

STATEMENT OF HENRY JO VON TUNGELN, CHAIRMAN, U.S.

WHEAT ASSOCIATES AND WHEAT EXPORT TRADE

EDUCATION COMMITTEE, WASHINGTON, DC

Mr. VON TUNGELN. All right. It is a great pleasure to be here,

and my name is Henry Jo Von Tungeln, and I am a wheat farmer

from Calumet, Oklahoma. As I said before, it is an honor to be here

today.

I am Chairman of the U.S. Wheat Associates and Chairman of

the Wheat Export Trade Education Committee. I am also speaking

on behalf of the National Association of Wheat Growers.

As we have for decades, the U.S. continues to lead the world in

wheat exports. Last year the U.S. exported 29 million metric tons

of wheat, almost half our total domestic production, for a market

share of 28 percent. This is substantially less than it was in the

1970’s when it ranged from 41 to 49 percent. Then we had the Russian wheat embargo, and the market share tumbled 7 percent in

1 year. It continued to drop until EEP was fully utilized for wheat

in the early 1990’s.

22

If I might, I would like to present a chart depicting U.S. market

share and wheat exports over the last 10 years. There is a popular

misconception, that this graph will hopefully correct, that U.S.

wheat exports are in a steep nosedive. This is simply not the case.

In the years since 1996, exports have been consistent at around 28

to 29 million metric tons, and market share has also been consistent at 27 to 28 percent.

I would like to briefly mention some of the factors that negatively

impacted sales and market share. In 1996 China’s U.S. wheat imports dropped by two-thirds, from 3 million metric tons to 1 million

metric ton. Egypt cut their purchases almost in half, from 5 million

metric tons to 2.8 million tons. Obviously, when two customers cut

sales by 4 million metric tons, you feel the impact. This year USDA

voluntarily stopped using—this same year, USDA voluntarily

stopped using EEP for wheat as prices spiked and subsidies were

no longer justified. When EEP was dropped, France and others

stepped in immediately.

Twenty percent of the world wheat market is largely inaccessible

to us, another reason. We cannot sell to Iran, Iraq or Cuba because

of ongoing political situations, and we can only nibble at Brazil’s

market because of Mercosur’s tariff block on our full and free access.

I was in Brazil recently, visiting with the largest grain buyer and

miller in Brazil, and he was outlining the problems they had in

getting the quality of wheat they needed because they are locked

in with Argentina under the Mercosur agreement. Finally I asked

him, ‘‘Is there anything within our power that we could do to correct that situation?’’ He said, ‘‘I can answer in two words: fast

track.’’ Also, importing markets are changing dramatically, going from

government buyers to private buyers. The change, unfortunately,

has played into the hands of the state export trading monopolies

for three reasons.

First, the U.S. marketing system is rather complex compared to

the one-stop marketing shopping offered by the Wheat Boards. Second, with privatization, supply relationships can transcend price

comparisons, and the STEs were quicker to develop those relationships. Third, the STEs used their monopoly pricing to undercut

U.S. wheat market prices. They give away loyalty fees, that in the

United States, would be termed graft. They give away higher protein that in the United States must be specified and paid for, and

they can do it all under a cloak of darkness.

I would like to bring out a second chart, this one made by the

USDA, depicting world wheat imports, to show you where the opportunities exist. Contrary to popular opinion, wheat is a growth

market, and this graph vividly illustrates that, even as the former

Soviet Union and China have removed themselves from the import

picture.

We go where the growth is, and the industry is trying to address

the needs of those markets. The grain trade and USDA are working on providing cleaner wheat and more specific wheat qualities.

U.S. Wheat Associates works with the new foreign buyers, millers

and bakers, teaching them about U.S. wheat quality characteristics

and contracting.

23

Australia has convinced Asian markets that they need Australia’s white wheat for the best noodles. The competing class in

the United States would be hard white wheat, but it is not yet produced in sufficient volumes, and we really need to work on that.

The U.S. grain trade has been slow to realize that they have to

be marketers and not traders. We are now starting to see them

make a good effort, however.

There are actions that we urge the U.S. Government to take. The

Congress has the power to take the first step toward removing barriers around the world, by passing the Trade Promotion Authority.

U.S. Wheat strongly encourages you to do so this year. Also to pursue the Free Trade of the Americas and bilateral agreements, and

WTO can reduce barriers, but the FTAA will go much further within our hemisphere by eliminating them. The FTAA would, for instance, put us on an equal tariff footing with Argentina in the large

Brazilian market. We are heartened by the committee approval of

the U.S.-Vietnam bilateral trade agreement, and hope the Senate

will soon approve that agreement.

We will need more. Again, achieving the FTAA and bilaterals

will depend on Congress giving the administration trade promotion

authority, which we strongly support.

We cannot over emphasize the importance of reforming the AWB

and CWB trade practices. We reiterate the U.S. needs to go to the

WTO negotiating round, demanding that the Wheat Boards be

stripped of their monopoly powers and be made transparent.

I see my time is up. I have other comments we could make. Just

one more issue I would like to, and that is in the area of biogenetics, and most of the buyers of the world say they will not buy that,

and we need to be very careful. Congress needs to be very careful

to ensure that genetically modified wheat will not be registered in

the United States until we have all of the structure worked out so

that we can provide it to customers as they would like it.

Thank you again for the opportunity, and I will answer any questions you might have.

[The prepared statement of Mr. Von Tungeln can be found in the

appendix on page 52.]

Senator CONRAD. Thank you very much.

Mr. Brothers.

STATEMENT OF CARL BROTHERS, SENIOR VICE PRESIDENT

FOR INTERNATIONAL BUSINESS, RICELAND FOODS,

STUTTGART, ARKANSAS

Mr. BROTHERS. I first want to begin by thanking you, Mr. Chairman, for your efforts this morning on behalf of agriculture and also

on behalf of rice and the opportunity to speak to you about rice this

morning.

Mr. Chairman, members of the subcommittee, I am Carl Brothers, Senior Vice President for International Business of Riceland

Foods, Incorporated, located in Stuttgart, Arkansas. Riceland is a

farmer-owned cooperative that markets rice, soybeans and wheat,

grown by its 9,000 members. It is the nation’s largest miller and

marketer of rice, one of the nation’s ten largest grain companies,

and a major soybean processor in the South. Riceland markets

products in more than 50 countries worldwide.

24

I am pleased to testify this morning on behalf of the USA Rice

Federation on the topic of export market share for U.S. Rice. USA

Rice is a federation of the U.S. Rice Producer’s Group, USA Rice

Council, and the Rice Millers Association, working together to address common challenges, advocate collective interests, and create

opportunities to strengthen the long-term economic viability of the

U.S. rice industry. USA Rice members are active in all major riceproducing states.

Exports represent between 45 and 50 percent of domestic rice

production. U.S. high-quality rice has typically enjoyed success in

world markets. From 1960 through 1990 U.S. rice averaged a 20

percent world market share. The 1990’s have not been kind to our

industry, however. The U.S. share of world rice trade averaged just

14 percent from 1990 to 2000, and USDA’s current baseline

projects a further decline to less than 10 percent in the current

decade.

World rice more than doubled in the 1990’s, but U.S. exports

grew by just 14 percent. Competitive suppliers like China, Vietnam, India and Thailand, captured the lion’s share of this growth,

due largely to locational advantage of these suppliers to growth

markets in East Asia, the Middle East and parts of Africa.

In addition to the competition from Asian suppliers, U.S. trade

sanctions have caused more harm to the U.S. rice industry than

any other commodity group. Cuba, Iran and Iraq were each the

largest export market for rice at one time, but they effectively have

been shut off. Steps toward trade sanctions reform, as contained in

the Trade Sanctions Reform Act of last year, are just now being implemented. The total size today of markets in Cuba, Iran and Iraq,

is 2.85 million metric tons of rice, close to total U.S. rice exports

in 2000. These three markets were the backbone of the U.S. rice

industry for many years, and their loss contributes significantly to

the current level of the U.S. export share.

U.S. rice exports also continue to face high duties in key markets, discriminatory duties that favor one type of rice over another,

and thus override market signals. Non-tariff barriers like reference

prices and price bands that have the effect of discouraging rice imports. For example, U.S. rice exported to Japan above Japan’s tariff

rate quota, faces an effective duty of 1,000 percent. High duties on

fully milled rice and rough rice make U.S. exports of these types

of rice to the EU uneconomical. Although we do ship brown rice to

the EU, the duties we face are high, and they protect domestic rice

production.

Many countries in Latin America, Europe and Africa place discriminatory tariffs on milled rice imports. U.S. rough rice exports

benefit, but the U.S. milling sector suffers as foreign milled rice

markets are close and milling value for U.S. rough rice is added

overseas rather than at home.

If there are any doubts that trade agreements provide an advantage to U.S. rice, then we need only look at the North American

Free Trade Agreement to put these concerns to rest. At the beginning of the 1990’s, U.S. rice sales to Mexico were less than 100,000

tons. In marketing year 1999/2000 U.S. exports, because of

NAFTA, had surged to nearly 400,000 tons, making Mexico the No.

1 export destination by quantity.

25

Food aid is an important component of rice exports, accounting

for up to 20 percent of exports in recent years. While the rice industry works toward a level playing field in foreign markets and

the removal of U.S. economic sanctions, food aid remains an important support of the export infrastructure of our industry, providing

needed jobs and income to rural communities, and giving humanitarian assistance to those in need.

I am joined in Washington this week, Mr. Chairman, by my producer colleagues and miller colleagues, to press for immediate assistance to our industry in the form of a Presidential food aid initiative for 500,000 tons of rice. Food aid movements planned for fiscal year 2001 are well below shipments in the last two fiscal years.

This is particularly serious in the southern-most rice-producing regions, where an estimated 75 percent of the business of rice mills

is in food aid.

Senator Lincoln of this subcommittee and Senator Hutchinson of

the full committee, have signed a letter to the President, along

with other rice state senators, urging such an initiative, and the

rice industry is thankful for their support.

In conclusion, the U.S. rice industry has a substantial amount of

work ahead of it in international markets. We must continue to

trade on the hallmarks of U.S. rice on the world market, that is,

high quality and reliable delivery. We must also use wisely the

trade promotion dollars that are made available to us and continue

to ensure that adequate food aid resources from the U.S. Government are available so that the maximum amount of rice can be programmed to fight world hunger.

We cannot prevail alone. Mr. Chairman, and members of the

subcommittee, I want to strongly urge you, on behalf of the U.S.

rice industry, to support a rice food aid initiative, to lift economic

trade sanctions, and to support the President’s request for trade

promotion authority. Well-negotiated agreements that bring levels

of protection to an equitable basis and are consistently and strongly enforced are critical to the U.S. rice producers and millers. There

simply is no other option than open and vibrant foreign markets

for the long-term economic viability of the U.S. rice industry.

I wish to thank you for this opportunity to appear before the

committee, and I welcome your questions.

[The prepared statement of Mr. Brothers can be found in the appendix on page 59.]

Senator CONRAD. Thank you very much. I appreciate the testimony of all three of you. We have heard now from one part of the

industry that is struggling, one part of the industry doing very

well, one part of the industry that is kind of holding its own, and

that was by design. That is what we intended to do here today.

I want to thank you all for what was really excellent testimony.

Let me start by asking Mr. Condon, as you look at this pattern, we

see what the Europeans are doing versus what we are doing. When

you see a chart like that, does it concern you?

Mr. CONDON. Yes, and I actually think your chart is a little out

of date. There is actually more blue in there now. Some of the yellow, South Africa, has done away with its subsidy, actually the

community is accounting for a higher percentage now of the export

subsidies.

26

Export subsidies, of course, are a horrible trade-distorting mechanism. They not only affect developing countries, but the worst aspect of export subsidies is the impact they have on the developing

world. They certainly hamper our exports. The beef industry or the

pork industry export subsidies are not as big a factor as they are

in the grains side of the equation, but we are hoping, and we, along

with most people in the U.S. agricultural industry, are urging the

administration to make export subsidies No. 1 priority in what we

hope will be an upcoming round of trade negotiations.

Senator CONRAD. I am hopeful of that too. My experience with

the Europeans is unless they see that you have leverage in a negotiation, not much happens. You know, when I got to Seattle, the

first night the trade Ambassador met with me and asked me to go

meet with the Europeans, as I indicated earlier. I could see from

that meeting, they had absolutely no intention to do anything but

confuse the issue, try to divert people’s attention somewhere else,

and I am very concerned, if we do not give leverage to our negotiators, it will be pretty hard for them to bring home a victory.

Mr. CONDON. Well, one of the advantages we have on export subsidies is the community is pretty much isolated. I mean, they are

the only ones paying export subsidies. While almost everyone in

the rest of the world wants to get rid of them, or at least severely

restrict the amount of export subsidies, so we have some advantage

there.

Senator CONRAD. Mr. Von Tungeln, when you see a chart like

that, what does it tell you?

Mr. VON TUNGELN. Well, as a farmer, it tells me we are probably

getting a raw deal.

[Laughter.]

Mr. VON TUNGELN. Really, as I came here this morning and listened to your opening comments and those of Senator Roberts and

Senator Lincoln, I felt like my leaving Oklahoma at six o’clock yesterday morning to arrive here at nine o’clock this morning was

kind of a waste of time, because you all are more aware of the

problems then we are. I do appreciate this opportunity to add my

comments and to have the opportunity to learn from this experience more about what the problems are, and certainly this is one

of them, and I appreciate your concerns about the leverage that we

need to go into the WTO negotiations as you very well expressed

all morning.

Of course, the wheat industry feels like there are other steps we

need to take. Perhaps we will get into that a little later.

Senator CONRAD. Let me ask you this question if I could. We look

at the worldwide stocks-to-use ratio for wheat, and we see that it

is at just over 22 percent. That is the lowest level in 30 years. Yet

prices are very, very low. What is your explanation for that?

Mr. VON TUNGELN. Well, really, I am just a farmer and do not

have a lot of education in economics or anything, but economics

would tell us that wheat prices should be the highest they have

been because of the stocks-to-use ratio. We would have to try to figure out why prices are so low when conditions are so favorable to

us. I suppose the strong dollars is one of those, and that perhaps

we have not efficiently used all of the programs that have been

27

available to us, and that we have not sufficiently funded other programs, like the FMD and MAP.

The wheat industry is optimistic about our industry, and making

further sales, but we need some help. We need to get the barriers

let down in the countries that have been mentioned several times

here this morning. We need to have adequate funding. Our producers have to be optimistic because we are putting a lot of our own

dollars into these programs that the USDA leverages with funds to

help us build and promote and maintain and keep markets. That

is what we are all about.

Senator CONRAD. If I could suggest my own read of what is happening to us, the strong dollar that you mentioned is clearly playing a role in what is happening to us in terms of exports and market share. Second, the Foreign Agriculture Service testified to the

competitive position we see on that chart. Our competitors are

going out there and buying markets.

Mr. VON TUNGELN. They are.

Senator CONRAD. They are spending a lot of money doing it. A

third element is that inventory management has changed. You

know, we see a lot of just in time delivery, and improved transportation systems, and there is a lot less grain in the pipeline than

there used to be, and that really changes things in terms of the

stocks-to-use ratio and we certainly see the effect. All of those are

contributing to the fact we have a very low, historically low stocksto-use ratio, and yet we have a price problem.

Mr. VON TUNGELN. Excuse me, Senator.

Senator CONRAD. Yes, sir.

Mr. VON TUNGELN. One other place that we could perhaps do

more is in the area of credit guarantees. Some are saying we

should do less. We contend that we should do much more, particularly in the developing countries around the world. We need to

strengthen our credit guarantee program. That might help us.

Senator CONRAD. The Europeans are coming after that too.

Mr. VON TUNGELN. Certainly are.

Senator CONRAD. They made a big point of that in Seattle.

Mr. VON TUNGELN. Yes.

Senator CONRAD. Let me ask. You said something else, that

grain boards, state trading enterprises, give away loyalty fees to

their customers. That is what you called it, loyalty fees. What does

that entail, loyalty fees?

Mr. VON TUNGELN. I thought I describe it in some other way. I

hate to do this, but I was recently in a country where we were trying to recover some of our market share, and our market share had

been declining. We were trying to recover it. We were making all

the arguments and everything, and they were telling us that our

quality was not quite right, that the noodles did not have the right

feel in your mouth, all those things, that the qualify of our grain

just did not quite fit their market. Then they said there is another

reason, that we do not give good service. Man, we were really taken

aback by that, because we thought that was the area where we excelled. We give technical advice. You know, if anybody has a problem, we send someone to help them with it and all.

We said, ‘‘What do you mean we do not give good service?’’ Well,

they said, ‘‘Why cannot you take us to Hawaii for a week to play

28

golf, or why cannot you provide us with other things?’’ We cannot

do that. It would not be legal and it would be unethical and everything. Maybe that is—— Senator CONRAD. Actual grain buyers asked you why you could

not take them to Hawaii?

Mr. VON TUNGELN. Right. That is part of the loyalty fees. You

know, they are able to do things that we cannot do, and as we said,

they buy markets. I hate to bring that up, but it happened.

Senator CONRAD. It is reality, is it not?

Mr. VON TUNGELN. Yes.

Senator CONRAD. It is reality. I wish I could say you are the first

one I have heard it from, but it is not. We have to understand this

is a tough business out there.

Mr. VON TUNGELN. It is a tough business.

Senator CONRAD. The Europeans have been playing this game a

long time. They are good at mercantilist economics, and that is basically what they are engaged in, mercantilist economics. They

have been at this game for hundreds of years, and they are good

at it, and they are good at misrepresenting it.

Mr. VON TUNGELN. The STEs have certain advantages that they

can do these things under the cloak of darkness.

Senator CONRAD. No transparency. They are able to go in there

and cut prices.

Mr. VON TUNGELN. Absolutely, no transparency.

Senator CONRAD. We had a circumstance a number of years ago

where a representative of ours was in the room, and they did not

know they were in the room, and the question of pricing came up,

and our European counterparts told them, ‘‘Well, do not worry

about that. We will be under the U.S. price, whatever it is.’’ Certain state trading enterprises made that same representation, ‘‘Do

not worry about that. We deliver you a price that is below whatever is on their market. Whatever is on the board, we will come

in under that.’’ Mr. VON TUNGELN. ‘‘Or we will give you a half percent protein

better or more cleanliness than you specified,’’ whatever.

Senator CONRAD. Mr. Brothers, when you see a chart like that,

what does it tell you?

Mr. BROTHERS. I look at it three different ways. You have the export subsidy side of it, which is true, but then you have the strong

internal supports in Europe as well, and then you have the tariffs

on the products that we ship to Europe. It is not a double-edge

sword, it is a triple-edged sword.

Senator CONRAD. The triple whammy.

Mr. BROTHERS. Yes, sir.

Senator CONRAD. I also have a chart that shows the EU is providing, on average, $300 an acre in domestic support. These are

OECD numbers, not my numbers, not USDA numbers. These are

OECD numbers. OECD is the international scorekeeper. They are

giving over $300 an acre of internal support, and we are giving $38

an acre. That is point No. 2 that you are making.

Point No. 3 is tariff barriers. I was very struck in your testimony

by what Japan does in terms of their barriers to us. It is really dramatic. Could you just remind us of the point that you made on

Japan?

29

Mr. BROTHERS. Oh. First off, the markup there, the block to get

in the country is huge but even with the negotiation in the Uruguay Round, where now we have an opening of around 400,000

tons in round numbers to Japan, and the United States is enjoying

about 200,000 tons annually of that opening, the quality of that

opening just absolutely stinks. Once the rice is tendered for—— Senator CONRAD. Is that a technical trade term?

[Laughter.]

Mr. BROTHERS. Once the rice is tendered, I mean you have a

state agency tendering for the rice, it is going into storage in

Japan. They mark the product up so that it will not clear to the

market. We have one small opening under the Japan agreement,

where we can get product in there, like about a half percent of the

total opening, that we can get in there and work directly with customers. Otherwise, you are working through the state, and the rice

going into storage sits there. Recently, it is my belief, that it was

donated to North Korea. It never really entered the Japanese market. We are really fighting now to gain better quality access on that

opening to Japan, because we really do not have what we need

here the way—and that is what happens each time people circumvent what you negotiate.

Senator CONRAD. Really play the game.

A number of you have mentioned that. For example, Mr. Condon,

you mentioned in your testimony the need to increase funding for

MAP and the cooperator program. Do you have specific funding levels in mind?

Mr. CONDON. Well, in that circumstance, the more we can get,

the better. The industry has been talking about a doubling of those

funding sources, but they do an enormous amount of good. We can

really leverage those moneys so they are very helpful to all of the

agricultural industries.

Senator CONRAD. Mr. Von Tungeln, what would your position be?

Do you think those should be increased and—— Mr. VON TUNGELN. Absolutely. That FMD is the heart of our program, and we would like to see FMD increased at least to 43.25

million, 43.25, and MAP at not less than 200 million.

Senator CONRAD. OK.

Mr. VON TUNGELN. That is just the heart of our program. That

is what we depend on. That is what keeps our overseas offices open

and carries out our activities that we—— Senator CONRAD. You believe those are truly useful, and not

some boondoggle.

Mr. VON TUNGELN. Absolutely not.

Senator CONRAD. Some people charge, that it is just corporate

welfare, a waste of money.

Mr. VON TUNGELN. It is the only way we can carry out the programs that we try to do to promote exports for our producers, the

use of those funds.

Senator CONRAD. Mr. Brothers, what would you say on this question?

Mr. BROTHERS. Rice has also used the funds successfully. We are

constantly being critical ourselves, looking at these programs, making sure we are using the money in the best way that we possibly

can. Many refer to getting the most bang for the buck on the

30

money spent, but it is an integral part of what we do and important to our success overseas.

Senator CONRAD. Do you have a figure in mind?

Mr. BROTHERS. No, sir, I do not. We have been successful in getting a fair share of these funds through the years, and it is based

upon the quality of the programs we put forward.

Senator CONRAD. OK. You have seen people coming and going.

We have a real problem because the Disaster Assistance Bill is on

the floor, and important decisions have to be made in the next 20

minutes. I am going to bring this to a close.

Before I do that, let me just ask each of you if you have an additional message, something that you have not been asked about here

today, or something that you think is an important message to

send our colleagues.

Mr. Condon?

Mr. CONDON. Well, I have already mentioned TPA. TPA is extremely important. I would just leave you with that message. We

are, as you have already noted, the meat industry is doing very

well, but most of our exports go to a few markets. We want to export to the world.

Senator CONRAD. We need to broaden it.

Mr. CONDON. Absolutely. We need to diversify.

Senator CONRAD. Mr. Von Tungeln?

Mr. VON TUNGELN. Yes. TPA and the funds that we have talked

about before. One additional one that I know that Senator Roberts

wanted to ask about was the hard white wheat, and that is a very

important thing in marketing wheat. I had an Egyptian trade team

in my home this past month, as a matter of fact, and had buyers

around my table that represented 60 percent of the purchases from

Egypt, which is our No. 1 hard wheat, winter wheat buyer, and

they said, ‘‘What about hard white wheat?’’ We said we just are not

ready with it yet. Kansas devotes 85 percent of their research and

development funds to that. Oklahoma devotes about 25 percent of

theirs. Nebraska devotes some. Colorado devotes some. Everybody

is trying to come up with good hard white wheat varieties that

would not only produce, but have good milling characteristics.

Senator CONRAD. It is a big market out there.

Mr. VON TUNGELN. Yes. Everybody in the world, wherever you

travel, they want hard white wheat. The Egyptian millers said,

‘‘We bring you this message.’’ They said, ‘‘We like hard white

wheat. We are going to buy it. We would like to buy it from the

United States. If we cannot, we will buy it somewhere else.’’ Senator CONRAD. Very good message.

Mr. VON TUNGELN. I do not know what you can do to help us

on that. It is a very difficult situation. You have to treat it like a

whole new crop, like it was a corn or a bean or something, and you

cannot commingle it. It has to be delivered from my farm to the

miller in Egypt or wherever, clean and pure. There are a lot of

problems, but we are working on it real hard. We recognize what

the problem is, and working on it.

Senator CONRAD. Very good.

Mr. VON TUNGELN. Help us if you can. First and foremost is the

trade promotion authority and the funding.

Senator CONRAD. Very well. Mr. Brothers.

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Mr. BROTHERS. Short term, long term. Short term, you can see

the politics that seem to be involved in the rice business with some

of the countries that are important to us. It means food aid continues to be on the short term very important to the rice industry.

Longer term, trade promotion authority is ultimate. I do think that

we need to do a better job of negotiations, try to close off some of

these loopholes. I am particularly concerned about preferential tariffs in the world, where people are using tariffs to enhance their

own interior economics and at the demise of the United States.

Trade promotion authority is very important, we have got to be

smarter about it than we have been in the past, as I have heard

you say often this morning.

Senator CONRAD. Thank you so much. I appreciate you all coming to testify, and the really excellent testimony from each of you.

The committee appreciates it, and I appreciate it. Have a good day.

[Whereupon, at 10:43 a.m., the subcommittee was adjourned.]

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A P P E N D I X

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DOCUMENTS SUBMITTED FOR THE RECORD

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QUESTIONS AND ANSWERS

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