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| [House Hearing, 113 Congress] | |
| [From the U.S. Government Publishing Office] | |
| ADVANCING THE U.S. TRADE AGENDA: | |
| BENEFITS OF EXPANDING U.S. | |
| AGRICULTURE TRADE AND ELIMINATING | |
| BARRIERS TO U.S. EXPORTS | |
| ======================================================================= | |
| HEARING | |
| BEFORE THE | |
| SUBCOMMITTEE ON TRADE | |
| OF THE | |
| COMMITTEE ON WAYS AND MEANS | |
| U.S. HOUSE OF REPRESENTATIVES | |
| ONE HUNDRED THIRTEENTH CONGRESS | |
| SECOND SESSION | |
| __________ | |
| JUNE 11, 2014 | |
| __________ | |
| Serial 113-TR05 | |
| __________ | |
| Printed for the use of the Committee on Ways and Means | |
| [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] | |
| U.S. GOVERNMENT PUBLISHING OFFICE | |
| 21-2112 WASHINGTON : 2016 | |
| _______________________________________________________________________________________ | |
| For sale by the Superintendent of Documents, U.S. Government Publishing Office, | |
| http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, | |
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| E-mail, <a href="/cdn-cgi/l/email-protection" class="__cf_email__" data-cfemail="e087908fa08395939488858c90ce838f8d">[email protected]</a>. | |
| COMMITTEE ON WAYS AND MEANS | |
| DAVE CAMP, Michigan, Chairman | |
| SAM JOHNSON, Texas SANDER M. LEVIN, Michigan | |
| KEVIN BRADY, Texas CHARLES B. RANGEL, New York | |
| PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington | |
| DEVIN NUNES, California JOHN LEWIS, Georgia | |
| PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts | |
| DAVID G. REICHERT, Washington XAVIER BECERRA, California | |
| CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas | |
| PETER J. ROSKAM, Illinois MIKE THOMPSON, California | |
| JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut | |
| TOM PRICE, Georgia EARL BLUMENAUER, Oregon | |
| VERN BUCHANAN, Florida RON KIND, Wisconsin | |
| ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey | |
| AARON SCHOCK, Illinois JOSEPH CROWLEY, New York | |
| LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania | |
| ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois | |
| KENNY MARCHANT, Texas LINDA SANCHEZ, California | |
| DIANE BLACK, Tennessee | |
| TOM REED, New York | |
| TODD YOUNG, Indiana | |
| MIKE KELLY, Pennsylvania | |
| TIM GRIFFIN, Arkansas | |
| JIM RENACCI, Ohio | |
| Jennifer M. Safavian, Staff Director and General Counsel | |
| Janice Mays, Minority Chief Counsel | |
| ______ | |
| SUBCOMMITTEE ON TRADE | |
| DEVIN NUNES, California, Chairman | |
| KEVIN BRADY, Texas CHARLES B. RANGEL, New York | |
| DAVID G. REICHERT, Washington RICHARD E. NEAL, Massachusetts | |
| VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut | |
| ADRIAN SMITH, Nebraska EARL BLUMENAUER, Oregon | |
| AARON SCHOCK, Illinois RON KIND, Wisconsin | |
| LYNN JENKINS, Kansas | |
| CHARLES W. BOUSTANY, JR., Louisiana | |
| PETER J. ROSKAM, Illinois | |
| C O N T E N T S | |
| __________ | |
| Page | |
| Advisory of June 11, 2014 announcing the hearing................. 2 | |
| WITNESSES | |
| Dermot Hayes, Professor, Pioneer Chair in Agribusiness, Iowa | |
| State University............................................... 7 | |
| Bob McCan, President, National Cattlemen's Beef Association...... 22 | |
| Andrei Mikhalevsky, President and CEO, California Dairies Inc.... 32 | |
| Terence Stewart, Managing Partner, Stewart and Stewart........... 49 | |
| Ryan Turner, President, Westside Trading Company................. 41 | |
| SUBMISSIONS FOR THE RECORD | |
| American Farm Bureau Federation, statement....................... 80 | |
| Corn Refiners Association, letter................................ 83 | |
| European Union, letter........................................... 85 | |
| Express Association of America, statement........................ 86 | |
| Humane Society International and World Animal Protection, | |
| statement...................................................... 88 | |
| National Farmers Union, statement................................ 92 | |
| National Milk Producers Federation, statement.................... 95 | |
| National Oilseed Processors Association, statement............... 102 | |
| National Pork Producers Council, statement....................... 111 | |
| QUESTIONS FOR THE RECORD | |
| The Honorable Charles Rangel..................................... 77 | |
| ADVANCING THE U.S. TRADE AGENDA: BENEFITS OF EXPANDING U.S. AGRICULTURE | |
| TRADE AND ELIMINATING BARRIERS TO U.S. EXPORTS | |
| ---------- | |
| WEDNESDAY, JUNE 11, 2014 | |
| U.S. House of Representatives, | |
| Committee on Ways and Means, | |
| Subcommittee on Trade, | |
| Washington, DC. | |
| The subcommittee met, pursuant to notice, at 10:05 a.m., in | |
| Room 1100, Longworth House Office Building, the Honorable Devin | |
| Nunes [chairman of the subcommittee] presiding. | |
| [The advisory announcing the hearing follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| ----------- | |
| Chairman NUNES. The hearing will come to order. But before | |
| we start, today is a very special day for us, especially for | |
| Mr. Rangel. It is his birthday today. So, Charlie, we brought | |
| you a little--do you want to light the candle and blow it out? | |
| Mr. RANGEL. Thank you, thank you, thank you. | |
| Chairman NUNES. Should we do the--anybody know the Boehner | |
| birthday song? I know you guys know it. | |
| [Laughter.] | |
| Chairman NUNES. Okay, ready? Kelly, ready? | |
| This is your birthday song, it doesn't last too long. Hey. | |
| [Applause.] | |
| Mr. RANGEL. Thank you. Thank you. | |
| Chairman NUNES. And Charlie is 62 today. | |
| Mr. RANGEL. This is the 22nd anniversary of my 62 years | |
| old. | |
| [Laughter.] | |
| Chairman NUNES. Well, congratulations, Charlie. | |
| Mr. RANGEL. Thanks a million, Chairman. | |
| Chairman NUNES. Absolutely. Good morning. Welcome to | |
| today's hearing on the benefits of expanding U.S. agricultural | |
| trade and eliminating barriers to agriculture exports--key | |
| factors in advancing our trade agenda and creating U.S. jobs | |
| and economic opportunity. | |
| I would like to make four points. First, the United States | |
| must remain the world's leading agriculture exporter. We excel | |
| at producing and exporting a wide variety of agricultural | |
| products. For example, my home state of California is a leading | |
| export of dairy, beef, fruits, vegetables, and nuts. Global | |
| demand for agriculture products is increasing rapidly, creating | |
| opportunities to boost U.S. economic growth and create U.S. | |
| jobs by selling to these expanding markets. | |
| The second point, agriculture exports benefit both rural | |
| and urban America. America's farmers and ranchers increasingly | |
| depend, for their livelihood, on exports. In addition, two- | |
| thirds of the jobs supported by agriculture exports are in the | |
| non-farm sector in diverse areas such as transportation, | |
| financial services, and biotechnology research. | |
| Third, we must tear down tariff and non-tariff barriers to | |
| U.S. agriculture. Tariffs must be eliminated without exclusion. | |
| In negotiations for the Trans-Pacific partnership, or TPP, I am | |
| concerned that the Administration is not holding Japan and | |
| Canada to the level of ambition that Congress has demanded. In | |
| some cases, a long timeframe may be warranted. But there has to | |
| be a path to zero. If any countries insist on retaining | |
| tariffs, then we must complete the negotiations without them, | |
| and allow them to rejoin when they can commit to full tariff | |
| elimination. | |
| A growing concern is non-tariff barriers, particularly | |
| unwarranted sanitary and phytosanitary or SPS measures. While | |
| countries can implement measures to protect human, animal, and | |
| plant health, many measures are actually thinly veiled | |
| protectionist barriers that ignore science and international | |
| standards, and do not enhance food safety in any way. I am | |
| pleased the Administration has heard Congress's message that | |
| only strong, enforceable rules will ensure that SPS measures | |
| are transparent, science-based, and are not unduly restrictive. | |
| I am particularly concerned by European restrictions on the | |
| use of generic food names, which the EU improperly designates | |
| as geographical indications. The TPP and the U.S.-EU trade | |
| negotiations are good opportunities to reduce both tariff and | |
| non-tariff barriers. To gain support in Congress, these | |
| agreements must result in complete market access. | |
| Fourth, to strengthen USTR's position in trade | |
| negotiations, we must pass Trade Promotion Authority without | |
| delay. The bipartisan Congressional Trade Priorities Act | |
| introduced earlier this year would establish clear direction to | |
| open agricultural markets and address unwarranted SPS measures | |
| and other trade barriers. If the Administration finishes these | |
| negotiations before TPA is granted, it will not get the best | |
| deal for our farmers or other exporters. Therefore, I call on | |
| the Administration to focus on passing TPA this Congress before | |
| completing TPP. | |
| Chairman NUNES. I will now yield to Ranking Member Rangel | |
| for the purpose of an opening statement. | |
| Mr. RANGEL. Thank you, Mr. Chairman. This is an important | |
| and timely hearing. Agriculture imports are important in my | |
| home state of New York, and to our country as a whole. Many | |
| markets are still protected, or even closed to our farm, ranch, | |
| and dairy products. We need to open those markets, and new | |
| trade agreements are one way to do it. | |
| But it isn't just foreign governments that deny our farmers | |
| and ranchers access to the markets. In the case of Cuba, our | |
| very own government stands in the way. And I know the chairman | |
| does not agree with me on this issue, and I respect his views, | |
| but, in my view, the embargo is not working, not for the Cuban | |
| people, and certainly not for Americans. So, I hope we can work | |
| together to find a path for the solution of this important | |
| agricultural issue. | |
| Another issue we want to discuss today is food safety. | |
| Without a doubt, some of our trading partners put into place | |
| laws that they say is about food safety, but they really are | |
| keeping U.S. products out of their markets. We do need strong | |
| rules in our trade agreement to prevent this from happening. | |
| And I want to make certain that we don't agree to a set of | |
| rules that ends up tying the hands of our own regulators, who | |
| is trying to keep our people safe, and trying to protect our | |
| crops from invasive pests. We need to eliminate bogus food | |
| safety laws, but we also need to preserve the legitimate ones. | |
| Our regulators are increasingly having to defend these | |
| rules at the World Trade Organization. In the first years of | |
| the WTO, U.S. sanitary measures was challenged just twice. But | |
| in the last five years U.S. measures had been challenged five | |
| times. It is important to remember that what makes U.S. | |
| products so attractive to other markets is their quality. And | |
| our regulatory regime supports that quality. Our regulators do | |
| their best to make certain that we don't produce tainted food. | |
| They protect our growers by doing their best to keep away | |
| invasive pests. We need to make certain that any rules that we | |
| sign into free trade agreements allow them to continue to | |
| follow these high standards. | |
| Finally, let me say a word about the Trans-Pacific | |
| Partnership negotiations. They're at a critical stage, and our | |
| attentions need to be focused on ensuring an outcome that this | |
| Congress can support. We need to work with our colleagues, with | |
| our stakeholders, and the Administration, on major outstanding | |
| issues, as you pointed out, including tariff, as well as non- | |
| tariff barriers on the agricultural products. | |
| In Japan, in particular, have not--they have not | |
| demonstrated an interest in opening up their agricultural | |
| market, nor has Japan shown an interest in opening up its | |
| automobile market, for that matter. Unfortunately, Japan's | |
| position in these negotiations looks like a real problem that | |
| still yet has to be resolved. | |
| Some say the problem is that we haven't passed trade | |
| promotion authority legislation, that Japan won't get serious | |
| until TPA is in place. I don't believe that argument fits with | |
| the facts. To the contrary, I think a lot of Members want to | |
| make certain what the TPP negotiations are moving in the right | |
| directions right now. I don't believe it is helpful to blame | |
| ourselves for the position that has been taken consistently by | |
| the Japanese Government. | |
| So, I think these hearings are timely. I thank the chairman | |
| for holding them. And I thank the witnesses for taking the time | |
| to share their views with us this morning. | |
| Chairman NUNES. Thank you, Mr. Rangel. Today we are joined | |
| by five witnesses. | |
| First we will hear from Professor Dermot Hayes, the Pioneer | |
| Hybrid International Chair in Agribusiness, professor for | |
| economics, and professor of finance at Iowa State University. | |
| Professor Hayes is a highly regarded agriculture economic | |
| expert, particularly regarding trade. | |
| Second we will hear from Bob McCan, who is President of the | |
| National Cattlemen's Beef Association and oversees the cattle | |
| and other operations of his family's company, McFaddin | |
| Enterprises, in Texas. Mr. McCan has a distinguished record as | |
| a leader in the cattle industry. | |
| Third we will hear from Andrei Mikhalevsky, President and | |
| CEO of California Dairies. California Dairies is a top dairy- | |
| processing cooperative in the leading dairy-producing state in | |
| the country. | |
| Fourth we will hear from Ryan Turner, President of West | |
| Side Trading, a leading almond, pistachio, and walnut trading | |
| company. | |
| Finally, we will hear from Terence Stewart, managing | |
| partner of the Law Offices of Stewart and Stewart. | |
| We welcome all of you, and we look forward to your | |
| testimony. | |
| Before recognizing our first witness let me note that our | |
| time this morning is limited so witnesses should limit their | |
| testimony to five minutes, and Members should keep their | |
| questioning to five minutes. | |
| Professor Hayes, your written statement, like those of all | |
| the other witnesses, will be made part of the record. You are | |
| now recognized for five minutes. | |
| STATEMENT OF DERMOT HAYES, PROFESSOR, PIONEER CHAIR IN | |
| AGRIBUSINESS, IOWA STATE UNIVERSITY | |
| Mr. HAYES. Chairman Nunes, Ranking Member Rangel, thank you | |
| for focusing on this issue at this time. The trade negotiations | |
| that are underway with the Pacific Rim and with Europe have the | |
| potential to fundamentally transform U.S. agriculture. | |
| In the first class, when I teach Economics 101, I contrive | |
| to get two copies of a textbook into the hands of one student. | |
| I recognize that student, and then find a student who has yet | |
| to purchase the textbook. The second copy is worth almost | |
| nothing to the first student, but it is worth about $100 to the | |
| second student. When they trade, each student comes out--they | |
| typically trade at about $50, and each student comes out $50 | |
| ahead. In that sense, wealth is created with free trade. And | |
| the theory that underlies the economic arguments in favor of | |
| free trade are based on that simple principle: you take | |
| resources from a place where they are in plenty supply, and you | |
| move them to a place where it is scarce. | |
| Now, as it happens, the U.S. has an abundance of | |
| agricultural resources. So we are a natural exporter of | |
| agricultural products. The problem is that the countries that | |
| have imposed trade barriers on value-added agricultural | |
| products, whereas they allow their raw materials to enter free. | |
| So if these negotiations are successful, we will end up adding | |
| much more value-added agriculture products to--and those | |
| industries will effectively move from places like Asia back | |
| into the U.S. | |
| As crop production technology has improved in the U.S., | |
| rural areas have become depopulated. And this is a real | |
| opportunity to repopulate those areas with people working in | |
| livestock and dairy sectors, and with industries that use | |
| livestock and dairy products such as ice cream or manufacturing | |
| eggs. So that is the punch line. | |
| So I see enormous opportunity here for my part of the world | |
| in Iowa, and for all of rural America. And I really appreciate | |
| your focusing at this time on this issue. | |
| I want to make two points specifically to the ongoing | |
| agreements. The first is about Japan and the TPP, and the | |
| second is about Europe and the regulatory equivalence that we | |
| should ask for. | |
| Prior to the entrance of Japan, the focus of the | |
| negotiations was to eliminate all duties and non-tariff | |
| barriers, and progress was very, very successful. | |
| Unfortunately, Japan has recently hijacked the negotiations by | |
| insisting on permanent protection for its beef, pork, dairy, | |
| wheat, rice, and sugar sectors. As announced, the intention of | |
| using the money generated by these duties to subsidize the | |
| relevant sectors--so, for example, duties collected on imported | |
| pork would be used to subsidize the Japanese pork sector. And, | |
| in that sense, the U.S. pork producer is paying a tax to | |
| subsidize their competitor. | |
| I sincerely hope that our negotiators will hold out for an | |
| agreement that results in eventual free trade, and I do so for | |
| the following reasons. | |
| The benefits of trade I described earlier come from the | |
| reallocation of resources, putting the resources in the right | |
| place at the right time. What Japan is asking for is, | |
| essentially, allowing free trade, but one student has to end up | |
| with two textbooks. And that doesn't make sense. You can't | |
| protect a sector under free trade. | |
| The second, Japan has insisted on this outcome because of | |
| food security. But Japan imports all of its feed grains. And | |
| so, you don't get much food security from animals that are | |
| located in Japan, but which are--rely exclusively on imported | |
| feed. | |
| And, third, if Japan gets away with this distortion, then | |
| other countries that join the TPP, such as China, will ask for | |
| a similar rule. And, in that sense, we could lose billions of | |
| dollars in trade because of a giveaway right now. | |
| Next I want to talk about equivalence and Europe. Right | |
| now, in the U.S. corn market, we have a serious disruption | |
| because China did not recognize one of our scientific | |
| technologies, one of the varieties we grew last year, and it is | |
| causing enormous disruption in that market. Now, the solution | |
| to that would be for China and the U.S. to agree on similar | |
| science. And, in so doing, when U.S. scientists approve of a | |
| technology then it would be automatically approved in China. | |
| That is called equivalence, and the U.S. has asked for that | |
| equivalence in all of its--in most of its free trade | |
| agreements. | |
| And equivalence works because the scientists can eventually | |
| form a consensus on what is safe. The process breaks down if | |
| non-scientific arguments are introduced. The European Union has | |
| allowed this to happen, and has imposed bans on genetically | |
| modified crops and growth enhancers in livestock that | |
| scientists all over the world view as being perfectly safe. | |
| Now, I realize that some consumers in the U.S. oppose these | |
| technologies. But under the U.S. system, these consumers have a | |
| choice. The European system eliminates this choice, and it is | |
| as if the people who shop in Whole Foods in the U.S. had a veto | |
| power over the rest of us. | |
| And in a well-structured TTIP agreement, the U.S. and EU | |
| systems will be viewed as equivalent, and European consumers | |
| will have a choice amongst the alternatives. Unless the deal | |
| results in regulatory equivalence, countries will be able to | |
| impose new subjective barriers to replace those that have been | |
| eliminated. With equivalence, the U.S. will be able to avoid | |
| the type of trade distortion currently roiling the U.S. corn | |
| market. Thank you. | |
| [The prepared statement of Mr. Hayes follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| ----------- | |
| Chairman NUNES. Mr. McCan, you are now recognized for five | |
| minutes. | |
| STATEMENT OF BOB MCCAN, PRESIDENT, NATIONAL CATTLEMEN'S BEEF | |
| ASSOCIATION | |
| Mr. MCCAN. Chairman Nunes, Ranking Member Rangel, and | |
| Members of the Committee, on behalf of the U.S. beef industry I | |
| thank you for holding this hearing on the benefits of expanding | |
| U.S. agricultural trade, and eliminating barriers to U.S. | |
| exports. I am a rancher from Victoria, Texas, located in | |
| southern Texas, near the Gulf of Mexico, not far from the | |
| Mexican border. I am also the current president of the National | |
| Cattlemen's Beef Association. | |
| For NCBA, the elimination of tariff and non-tariff trade | |
| barriers is a top priority for the U.S. beef industry. We view | |
| potential trade agreements like the Trans-Pacific Partnership | |
| as a great opportunity to eliminate tariffs, quotas, and non- | |
| tariff trade barriers to all TPP countries. Terms that all | |
| countries, including Japan, should agree to. | |
| NCBA is also a strong supporter of trade promotion | |
| authority because, without it, our negotiators will have a | |
| difficult time finalizing terms of TPP. Unlike other parts of | |
| our culture, the U.S. beef industry is not subsidized, nor do | |
| we wish to be. To put it plainly, we thrive on competition, and | |
| we live and die by the marketplace. The only guarantee we have | |
| is that if we do not deliver a high-quality product to our | |
| growing consumer base, then we will lose market share to | |
| another country. At the same time, we are successful because we | |
| do everything we can to give our consumers what they want: a | |
| safe, tender, delicious product. | |
| Many times, U.S. beef has been the victim of trade terms | |
| that have been driven by politics and not science. For | |
| instance, the United States has one of the safest risk | |
| designations from the World Organization for Animal Health, yet | |
| we continue to have age-based restrictions on our product that | |
| are not supported by science. It is estimated that U.S. beef | |
| has lost over $20 billion in export opportunities due to BSE | |
| restrictions alone. | |
| The removal of tariffs and quota restrictions are important | |
| to our future success. But just as important is the | |
| establishment of trade terms based on sound science. | |
| Unfortunately, U.S. beef has also been victim to U.S. trade | |
| policies that are also based on politics instead of science. As | |
| you may know, we are facing an intense drought throughout | |
| California and the southwestern part of the Unites States. Our | |
| herd size in the United States is the smallest it has been | |
| since the 1950s. | |
| At the same time, international demand for U.S. beef is at | |
| an all-time high. In order to continue meeting demand, we rely | |
| on the importation of Mexican-born and Canadian-born cattle to | |
| supplement our herd loss. My family has been importing Mexican- | |
| born calves for many years, and we have enjoyed the benefits of | |
| international trade. Unfortunately, the cost of compliance of | |
| mandatory country-of-origin labeling has driven some feed yards | |
| and processors out of the business, creating less competition | |
| for my cattle. And that places me, and cattlemen like me, at a | |
| disadvantage. | |
| And if the World Trade Organization rules against the | |
| United States on the pending appeal, you can rest assured that | |
| beef will be at the top of the list of retaliatory tariffs. | |
| Mexico and Canada are two of our largest export markets for | |
| beef. But they won't be for very long if we face retaliation. | |
| So, it is my hope that my testimony will highlight expanded | |
| trade opportunities, as well as the barricades to trade that we | |
| continue to face in the U.S. beef industry. I appreciate this | |
| opportunity to appear before you today, and I look forward to | |
| answering any of your questions. Thank you very much. | |
| [The prepared statement of Mr. McCan follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| ----------- | |
| Chairman NUNES. Thank you, Mr. McCan. Mr.--I should know | |
| how to pronounce your name, but it is--you are my constituent, | |
| so I should know. | |
| Mr. MIKHALEVSKY. Andrei is fine. | |
| Chairman NUNES. Andrei. | |
| Mr. MIKHALEVSKY. Andrei is perfect. | |
| Chairman NUNES. You are now recognized for five minutes. | |
| STATEMENT OF ANDREI MIKHALEVSKY, PRESIDENT AND CEO, CALIFORNIA | |
| DAIRIES INC. | |
| Mr. MIKHALEVSKY. Thank you very much. Thank you, Mr. | |
| Chairman and committee, for allowing California Dairies to come | |
| speak with you today regarding a subject that it very important | |
| to us, and it is a big part of our business every day. | |
| My name is difficult, but I am Andrei Mikhalevsky, and I am | |
| president and CEO of California Dairies. And I have been | |
| fortunate in my career to be able to manage dairy businesses on | |
| six continents, and the seventh continent doesn't have many | |
| dairy cows right now. | |
| My comments today will focus, really, in three areas. The | |
| first is the opportunity for U.S. dairy exports; the second the | |
| key barriers that we face in exporting product; and third, the | |
| upcoming free trade agreements. | |
| California Dairies may not be familiar to everyone, but we | |
| are a member-owned cooperative based in California, and a major | |
| dairy exporter today. You can find our products on your local | |
| grocery store shelves in all 50 states, and you can find it in | |
| 50 foreign countries, also. We are responsible for 12 percent | |
| of U.S. dairy exports. We export already today over 425 million | |
| pounds of milk products every single year. And increasing these | |
| dairy exports is very important to our industry, beneficial to | |
| the United States, and also good for California Dairies. | |
| And I will give you three areas that we believe these | |
| benefits are centered: first it is around economic and | |
| financial benefits; second, it creates jobs domestically and | |
| creates jobs internationally; and, third, we believe there is | |
| implications for national security of having a good dairy | |
| export business. | |
| In 2013, just last year, the industry reported a record 15 | |
| percent of all milk in the United States was exported valued at | |
| about $6.7 billion. One day of every week's production of | |
| milk--so one day of milking cows--now goes into export in the | |
| United States. And in 2014, this year, California Dairies will | |
| export more milk powder than we will sell domestically in the | |
| United States. So we have become a larger exporter than we are | |
| domestic seller in milk powder. | |
| And the U.S. dairy industry is currently in a state of | |
| transition from an inward-facing industry to a dominant world | |
| exporter. And the question might be asked, ``Why is there a | |
| change in the U.S. dairy industry?'' And the answer is, really, | |
| opportunity. We all know the worldwide demand for dairy | |
| continues to grow, driven by population growth and disposable | |
| income growth. And this is creating a large demand gap in the | |
| world market for dairy products. And dairy is very important. | |
| Remember, people start from infants using dairy, all the way | |
| through old age. | |
| But there is barriers to us taking advantage of that export | |
| growth, and they fall in the areas that were earlier mentioned: | |
| tariff barriers; non-tariff barriers; and internal domestic | |
| barriers, which we haven't mentioned. | |
| Let me first give an example of tariff barriers. Canada and | |
| Japan, today who are in the news, both imposed astronomically | |
| high tariffs on imported dairy products. The tariffs we face | |
| every day are between 250 and 300 percent of the value of the | |
| product that we ship into those countries. So, basically, | |
| impossible to meet. | |
| There is also non-tariff barriers, which are commonly known | |
| as SPS measures, sanitary and phytosanitary measures. Those are | |
| being abused in markets around the world. | |
| And third, geographical indications. And the EU, as we all | |
| know, is probably the most aggressive and abusive in its | |
| interpretation of these GIs. | |
| I would also just note that there are internal barriers | |
| that we face also, but that is a conversation for another day. | |
| I would like to shift now to free trade agreements. We have | |
| talked about the TPP and the TTIP, TTIP. And both of these are | |
| wonderful opportunities for us to break down these barriers and | |
| expand our area of exports. And so I would like to just share | |
| our viewpoint in a few sentences. | |
| First, we actively support the inclusion of dairy in all | |
| FTAs. We would like dairy in. | |
| The second thing we would like to see is the inclusion of | |
| all dairy products. For example, the South Korean FTA excludes | |
| things like butter. It is a fundamental product, and we would | |
| like to have all products in the FTAs. | |
| We support the complete elimination of all tariffs. We need | |
| a level playing field with our competitors. China, for example, | |
| we don't have a level playing field with New Zealand. They get | |
| the first 300,000 tons in there at a reduced tariff. We need a | |
| level playing field. | |
| Market access must be real, measurable, and equitable. And | |
| we believe that TPP and TTIP are really the most likely--the | |
| most important trade agreements that we have seen in a | |
| generation. California Dairies also highly supports trade | |
| promotion authority. We think it is essential. | |
| So, in summary, there is a great opportunity here. But to | |
| achieve the success, we must have FTAs that are comprehensive | |
| and inclusive of all dairy, including zero tariff access, and | |
| ensure that unjustified non-tariff barriers and regulatory | |
| requirements do not block us, moving forward. Thank you very | |
| much for your time today. | |
| [The prepared statement of Mr. Mikhalevsky follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| ----------- | |
| Chairman NUNES. Thank you, Mr. Mikhalevsky. Mr. Turner, you | |
| are now recognized for five minutes. | |
| STATEMENT OF RYAN TURNER, PRESIDENT, WESTSIDE TRADING COMPANY | |
| Mr. TURNER. Good morning, Chairman Nunes, Ranking Member | |
| Rangel, and the Members of the Subcommittee on Trade. Thank you | |
| for inviting me to be here with you today. My name is Ryan | |
| Turner, and I am here to testify today as a farmer and as the | |
| president of Westside Trading Company, WTC. I founded WTC | |
| three-and-a-half years ago to export California almonds, | |
| walnuts, and pistachios. | |
| WTC is a trading company that buys product from farmers and | |
| packers and resells the product exclusively into export | |
| markets. WTC specifically finds its niche in taking the export | |
| risk for our suppliers. After purchasing the product from | |
| California growers and processors, we are responsible for | |
| payment to supplier, marketing, logistics, documentation, and | |
| collection of the export sale. Any export-import problems, | |
| failure to collect funds, false quality claim from the end | |
| customer, it all falls on WTC. And we make our name by | |
| insulating the suppliers from these risks. So we truly are on | |
| the front lines of the trade discussion. | |
| Since the inception of the company, we have exported to | |
| more than 40 countries around the world. We have exported to | |
| Canada and Mexico, South America, all over Europe and Eastern | |
| Europe, Russia, Middle East, North Africa, as well as China, | |
| India, Singapore, and Bangladesh. About 85 percent of the | |
| products we have shipped to date are almonds, and so I will | |
| focus, in the interest of time, on almonds for the rest of the | |
| testimony. | |
| The California almond industry is a great example of the | |
| strong U.S. industry that dominates the world market because of | |
| our significant long-term investment, innovation, high food | |
| safety standards, and strong global marketing. California | |
| almonds add $2.82 billion in export value in the 2012-2013 | |
| season, ranks as California's largest agricultural export, and | |
| the U.S.'s largest specialty crop export. Currently, more than | |
| 80 percent of the world's supply of almonds are grown and | |
| produced in California. | |
| The U.S. is the largest buyer of California almonds, | |
| consuming, on average, about a third of our supply. However, | |
| that means that, on average, two-thirds of California almonds | |
| are exported. The top 5 export countries are China, at | |
| approximately 10 percent of the U.S. crop, followed by Spain, | |
| India, Germany, and UAE. In total, California exported directly | |
| to 57 countries last season. | |
| The California almond industry is dependent on export for | |
| the long-term sustainability of the industry, but it is also a | |
| huge success story. Over the past decade, export growth has | |
| averaged nearly 10 percent, year after year. The industry has | |
| not been able to wait for trade agreements in many countries, | |
| but has forged ahead in tackling major issues, opening new | |
| markets around the globe. These challenges, though, however, | |
| come at a high risk to farmers, processors, and exporters, as | |
| well as our overseas processors and the end user, ultimately | |
| increasing the cost of our products to consumers, worldwide. | |
| WTC faces export challenges head-on every day, due to trade | |
| barriers that exist in markets around the globe. From tariffs | |
| and SPS differences to banking and finance rules, as well as | |
| labeling requirements, port protocols, documentation | |
| requirements, as well as dispute resolution issues. The almond | |
| industry faces tariffs, specifically, in dozens of its markets. | |
| However, like in other industries where the product is in | |
| strong demand, gray market activities are developed to avoid | |
| such tariffs. The biggest examples exist in two of our largest | |
| export markets, China and India. | |
| The vast majority of almonds are exported to China, are | |
| shipped from California to Hong Kong, then redirected through | |
| Vietnam and trucked north to various points for delivery to | |
| processing plants mainly in China. Most U.S. exporters ship to | |
| Hong Kong and are paid for the product at that point. While it | |
| customarily only takes two weeks or so to ship a container from | |
| California to Hong Kong, it could take an additional three to | |
| four to move that product through the gray channels to the end | |
| user. | |
| While a larger percentage of customers actually pay the | |
| tariff in India and take delivery in major ports, more and more | |
| importers have begun to smuggle the product from Kashmir. This | |
| product is mostly shipped from U.S. to Dubai and then shipped | |
| in trucks, via trucks, saving the importer the tariff. While | |
| lower trade barriers and relatively strong business protections | |
| in Dubai and Hong Kong keep risks lower for us exporters, the | |
| risks borne by our end customers through the gray channels | |
| increases their risk and delays shipment of product. | |
| In addition to the gray markets, where product is | |
| physically moved to avoid tariffs, many markets in the Middle | |
| East rely on falsification of documents to reduce tariff | |
| exposure. These practices create challenges that differ in each | |
| market which require exporters to constantly stay on defense, | |
| to ensure that gray market behaviors do not put our companies | |
| and our products at risk. | |
| The U.S. produces the safest food and food products in the | |
| world. Agricultural and food safety regulations, coupled with | |
| innovation of farmers and processors themselves, have given our | |
| products the strongest reputation for quality. However, | |
| differing SPS standards in some of our export markets create | |
| major problems, add costs, and, at times, significantly put our | |
| products at risk. Whether it is lower allowable levels of | |
| aflatoxin in the EU, or the ever-increasing changing and | |
| somewhat arbitrary standards in other parts of the world, it is | |
| extremely important that SPS standards must be, at a minimum, | |
| based on science. | |
| We have had many loads returned to the U.S., and many more | |
| held at ports for long periods of time, subjecting our products | |
| to additional testing and fees for results that we never see. | |
| It is very important that any new trade agreement address | |
| banking finance and dispute resolution protocols, as well, so | |
| that exporters such as ourself can have more confidence in | |
| international collection and contract enforcement. We have had | |
| minor typographical errors lead to major searches of funds, we | |
| have had several international banks release documents prior to | |
| payment, we have had ports release containers without proper | |
| documentation, we have had money rerouted and lost through | |
| illegal foreign currency traders. These are just a few of our | |
| examples caused by lack of uniform standards. | |
| In conclusion, multi-faceted, comprehensive, regional trade | |
| agreements that not only level the playing field, but normalize | |
| business practices between the U.S. and its trading partners, | |
| will allow us to grow export markets faster and more reliably. | |
| Thank you for your time. | |
| [The prepared statement of Mr. Turner follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| ----------- | |
| Chairman NUNES. Thank you, Mr. Turner. Mr. Stewart, you are | |
| recognized for five minutes. | |
| STATEMENT OF TERENCE STEWART, MANAGING PARTNER, STEWART AND | |
| STEWART | |
| Mr. STEWART. Thank you, Mr. Chairman, Ranking Member | |
| Rangel, Members of the Subcommittee. I am here in my personal | |
| capacity, not representing any particular clients. We have had | |
| the opportunity to work with agricultural fishery groups over | |
| the years. | |
| There is little doubt that the United States, as the | |
| world's largest agricultural exporter, faces many unwarranted | |
| barriers abroad, and that a key priority in any trade | |
| negotiation should be the liberalization of tariffs, quotas, | |
| and non-tariff barriers, such as SPS measures, and an effort to | |
| restrict our friends in Europe in their effort to claim that | |
| nothing can be shipped that doesn't come from Europe because of | |
| geographical indications. Those are givens. | |
| Global trade in agriculture in 2012 was $1.6 trillion. The | |
| United States occupied about 8 to 9 percent of that, at 148 | |
| billion. And what our true exports could have been, if we had | |
| had much more open markets, is anybody's guess. But it | |
| certainly would be a far larger percentage and a far larger | |
| dollar amount. So there are, obviously, enormous opportunities | |
| for American business, American workers, and rural America, in | |
| terms of liberalization of agriculture. | |
| At the same time, when one looks at SPS measures, there is | |
| a tension between food safety, on the one hand, and control of | |
| the SPS measures on the other. The World Trade Agreement's | |
| sanitary/phytosanitary agreement is the first global effort to | |
| try to put some discipline into SPS measures. The United States | |
| has tried to use that agreement to upgrade or harmonize, in an | |
| upward direction, international standards. That is a desirable | |
| objective. At the same time, we run into serious cultural and | |
| political problems in other major trading partners. Europe has | |
| been identified as one, and certainly the problems our beef | |
| industry has faced from the BSE and that our grains exporters | |
| have faced from genetically modified challenges around the | |
| world are significant challenges. | |
| When you look at it from the import side, which, from a | |
| U.S. perspective, is relevant, as well, to consumers, the issue | |
| is not whether there should be liberalization, the issue is | |
| whether or not the liberalization is coupled with the ability | |
| to ensure that products that enter the United States maintain | |
| the food quality that the United States has been famous for, | |
| and that U.S. consumers expect. That is an issue which, as | |
| trade has developed with a lot of developing countries, is a | |
| much more complicated matter. The United States engages in a | |
| lot of technical assistance to try to help other countries | |
| raise their standards, and that is important to do. But there | |
| are many stories, including in seafood, but certainly also in | |
| other agricultural products, where imported products contain | |
| elements which are banned in the United States and yet have | |
| made it into our food supply. | |
| So, there are legitimate concerns from consumers about the | |
| safety of their food supply. And, as you look at trade | |
| negotiations, it is important that that aspect be dealt with. | |
| At the same time, the merits of an SPS measure are often in the | |
| eyes of the beholder. We--USTR puts out an annual report. There | |
| is more than 100 measures that we identify abroad that are | |
| problematic to U.S. exporters. Europe puts out its own report, | |
| and there is a large list of things that they complain about in | |
| terms of the United States. Dialogue is a critical element if | |
| you are, in fact, going to get past disputes, and if you are, | |
| in fact, going to facilitate the liberalization in agriculture, | |
| particularly an SPS measure. | |
| Technical assistance is important. With that I think that | |
| you have a big challenge ahead of you, in terms of getting our | |
| trading partners to comply. Japan is a classic example, and I | |
| wish you great success, and the Administration great success in | |
| that effort. Thank you. | |
| [The prepared statement of Mr. Stewart follows:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| ----------- | |
| Chairman NUNES. Thank you, Mr. Stewart. Since you discussed | |
| SPS measures, we will start on SPS. The real issue is whether | |
| or not we are going to have dispute resolution. Because, as all | |
| of you are well aware, all of the other areas of the economy | |
| and all the previous trade agreements are subject to dispute | |
| resolution. Agriculture, however, has always been left at the | |
| table without dispute resolution, and so they are forced to go | |
| to the WTO, which can take years and years to come to | |
| resolution. | |
| So, do you see any problem with having--and I will just | |
| start with Mr. Stewart and I will ask the same question--a | |
| dispute resolution mechanism in TPP? | |
| Mr. STEWART. The answer is I don't see a problem with | |
| having dispute resolution in any free trade agreement. The real | |
| issue is how it will be administered, and whether there is | |
| agreement, in terms of the basic terms and conditions. The | |
| challenge that we face in the WTO, as an example, where there | |
| is dispute settlement, is that we are the subject of 8 of 41 | |
| challenges that have been made. If you were to step back and | |
| ask yourself would you expect the United States to be one of | |
| the worst offenders in terms of SPS measures, I think your | |
| answer would be the same as mine: obviously not. | |
| So, part of the challenge is whether the rules actually | |
| work to conform practice to what you have agreed to, or whether | |
| it becomes a forum for people to achieve that which they | |
| haven't achieved through the negotiations themselves. But I | |
| don't have a philosophical issue with having dispute settlement | |
| in TPP or any other agreement. | |
| Chairman NUNES. Thank you, Mr. Stewart. One of the reasons | |
| I wanted to have Mr. Turner here is because he is an exporter. | |
| Mr. Turner, I don't know if you could walk the committee | |
| through a real-life example of the problems that you face. If | |
| you could pick one example and just kind of walk the committee | |
| through where you faced an SPS measure that has blocked the | |
| entry of your product. | |
| Mr. TURNER. The most consistent SPS issue that we deal with | |
| is in Europe. And Europe has, as I mentioned, lower allowable | |
| levels for aflatoxin. And so, there is now an entirely | |
| different process to deal with and work with the EU in getting | |
| product in. | |
| But basically, because they require a lower allowable | |
| level, the almond board has worked with the industry to create | |
| what we call a--or what is called a VASP. So it is a voluntary | |
| aflatoxin sampling program--I believe it is program. And so, | |
| every single load that is going to go to Europe has to | |
| basically have this additional test. Right? And it is a-- | |
| sampling procedures that are required by Europe. Then we go | |
| through the entire process, and then it has got to have this | |
| VASP report. | |
| We have probably had a--I would say maybe about 10 loads | |
| that we have had stuck for any sort of reason, but just related | |
| to not having the proper VASP. So when we ship product, all of | |
| it has been certified, inspected by USDA, internal, as well-- | |
| internals, as well. And we shop that product. Europe requires | |
| the VASP, though. So if you--we have had product that we have | |
| shipped to the Middle East. We need to redirect it, it can't go | |
| to Europe. So that is it. | |
| Chairman NUNES. Thank you, Mr. Turner. I am going to shift | |
| gears, Mr. Mikhalevsky, to talk about TPP. Specifically, you | |
| are probably well aware, but there has been rumors floating | |
| around that Japan has hundreds of items that they want to take | |
| off the table. And in your testimony you mentioned how butter | |
| was left out of the South Korean agreement. What do you think | |
| the solution is? | |
| For example, if Japan does not want to reduce these tariffs | |
| and take them to zero, should we wait and have Japan come in | |
| later? Or do you have any other options of how we could move | |
| forward? | |
| Mr. MIKHALEVSKY. Well, I truly believe, optimistically, | |
| that with proper negotiation we can get Japan in. And it is | |
| very important. Japan is a highly developed market in dairy. It | |
| is very important to us. There is a lot of things in TPP and | |
| TTIP. Ultimately, they will probably be the blueprint for maybe | |
| 70 percent of the traded dairy around the world. So it is | |
| important we get these first ones right. And I would be | |
| optimistic about getting Japan in. And, from our perspective, | |
| dairy has to be one of those items in, not just because we are | |
| in the industry. We think it is because it is also very | |
| important, as you look at the other countries that are | |
| involved, and how important dairy is to them. So that would be | |
| kind of my response. | |
| Chairman NUNES. Mr. McCan, can you answer the same | |
| question? | |
| Mr. MCCAN. Yes. I think that it is--you know, Japan needs | |
| to comply by the same rules that all the other TPP countries | |
| have to comply with. And, you know, we don't--I don't think we | |
| are at that point yet to where--in our negotiations where we-- | |
| they really tried to shift the weight towards us, which--I | |
| think Japan really wants to be part of this trade pact more | |
| than they are letting on. And so I think, you know, we just | |
| need to work through it. It may take more time, but it is | |
| important, as Andrei mentioned, that this is a 21st century | |
| type modern trade pact. Because, as we look forward towards | |
| TTIP and the European negotiations, we need to make sure that | |
| it is that type of a trade pact with tariff elimination. | |
| And the beef industry has certainly put pressure on Japan | |
| for the tariff elimination, and that is what we would look | |
| forward to. | |
| Chairman NUNES. Thank you, Mr. McCan. In the interest of | |
| time, I will go ahead and recognize the ranking member, Mr. | |
| Rangel. | |
| Mr. RANGEL. Thank you so much, Mr. Chairman. Do any of you, | |
| as exporters, see any sound economic or political reasons why | |
| we should continue the embargo against Cuba? Are there any | |
| reasons that you could suggest to guide the Congress as to what | |
| is in our best national security or economic interests? | |
| [No response.] | |
| Mr. RANGEL. Then I assume, by your silence, that all of you | |
| think that it would be sound trade policy for us to resume | |
| negotiation with Cuba, for the Cubans and for the United | |
| States, and let competition be an element where we can gain, as | |
| we would with any trade agreements. | |
| I hope that you don't find yourself being placed in a | |
| political position because of this, but we are talking about | |
| exports, we are talking about jobs, we are talking about | |
| improving our economy. And if there is no reason why we should | |
| not expand these exports, I think that, under American system, | |
| you have to be heard. | |
| The second question is that all of you agree that we should | |
| have--maintain a high quality of imports that come into the | |
| United States because, while you cannot expect each and every | |
| product, the reputation of our country in having high standards | |
| is something that has to be maintained. Have any of you ever | |
| thought about the issue as to whether or not the Congress | |
| provides enough resources to make certain that we can do this? | |
| Has that ever been an issue that you discuss? Anybody? Mr. | |
| Stewart. | |
| Mr. STEWART. Thank you, Congressman Rangel. The issue is | |
| that, for many industries that confront imports, where there | |
| are issues of quality there is a perception that the | |
| Administration does not have the resources to be able to ensure | |
| the safety of the product. Some of that flows from the change | |
| in patterns of trade that have occurred over the last decade or | |
| so, where we are dealing with a lot more developing countries, | |
| and developing countries have greater challenges, in terms of | |
| getting their standards up to what the U.S. requires. And some | |
| of it has to do with practices in certain countries where, | |
| whatever the agreement is as to the standard they should | |
| export, individual producers choose to go around that and ship | |
| product in that clearly is not suitable. | |
| When you take a look at the small percent of products that | |
| can be inspected at the border, the answer is that the security | |
| of the food supply system in the United States can be at risk. | |
| And so it is an important issue for Congress to consider, to be | |
| sure that we don't let ourselves get into that situation. | |
| Mr. RANGEL. Well, I am hoping that when you have your trade | |
| associations meetings, and you have your priorities, which we, | |
| as Americans, support because it is good for our great country, | |
| that you also put in there what you expect the Congress to do | |
| to maintain these standards, to help us to have less of a | |
| political problem, and more that is related to the expertise | |
| which you bring to the field, which--clearly, you have more | |
| than any of us. | |
| Lastly, you very strong about--say in Japan--that they | |
| maintain their international standards, that they don't protect | |
| just their products, in terms of our exports, and allow theirs | |
| to come in. Now, how would you expect the Congress to support | |
| the positions that we agree with? Most of you know that the | |
| Constitution gives this authority to the Congress, and nobody | |
| would want to have 535 negotiators with these countries. And | |
| so, therefore, we agree to give the trade promotion authority | |
| to the President. | |
| Now, when the bill finally comes to the Congress, it is | |
| just yes or no. In order to protect some of the things that you | |
| advocate, and we support, wouldn't you believe that we have to | |
| get that into the trade promotion authority, that what | |
| authority we give the President has to include the things that | |
| we are talking about in terms of fairness in trade? | |
| There is another way to do it, and that is just to give | |
| them authority to do whatever he wants to do. And after they | |
| negotiate, then we have to say, well, it doesn't help our dairy | |
| people, doesn't help our cattle people, and then we are left | |
| either swallowing the whole trade package, or rejecting it | |
| because of something that could be local. Have you discussed | |
| the trade promotion authority? I know you should be advocating | |
| that we give that authority to the President. Without doing it, | |
| our trade ambassador cannot adequate negotiate. Isn't that | |
| correct? | |
| How could he negotiate--if he is negotiating with people | |
| that have the authority to cut a deal, and we are sending an | |
| ambassador that can't cut the deal unless he comes back to the | |
| Congress, doesn't it make sense that he should have--the | |
| President should have some authority to close the deal and | |
| bring it back to us? | |
| [No response.] | |
| Mr. RANGEL. The answer is yes. Well, you better give some | |
| thought to it, because I can see that you haven't. And it is | |
| going to be a big political problem. We want to make certain | |
| that the President is able to authorize the negotiations of | |
| deals that are good for the American people in international | |
| trade. | |
| By the same token, it just doesn't make sense to have | |
| included or excluded from agreements the things that may cause | |
| us not to be able to support it. Some of them is labor | |
| standards, some is environmental issues. Some of it is just the | |
| quality of the products. But please help your congresspeople to | |
| resolve these problems and not leave it to us to seek a | |
| political solution to come and--problems that we have to | |
| resolve. | |
| Thank you, Mr. Chairman. | |
| Chairman NUNES. Thank you, Mr. Rangel. Mr. Reichert is | |
| recognized for five minutes. | |
| Mr. REICHERT. Thank you, Mr. Chairman, and thank you all | |
| for taking time to be here today. I am from Washington State, | |
| so I visit with my farmers, apple growers, cherries, heading | |
| into the wine--little bit of--I think we are second from | |
| California now, with the amount of wine we produce out of | |
| Washington State. | |
| So, you know, when I talk to my Washington farmers, they | |
| are pro-trade, obviously. Washington State is the most trade- | |
| dependent state in the country. And they also recognize, | |
| though, that the way to get there is--and I am going to jump on | |
| Mr. Rangel's bandwagon and the chairman's bandwagon--and that | |
| is TPA. | |
| And I talked to some business folks yesterday, and | |
| explained the need for TPA and how important it is for us to | |
| proceed forward with TPP, and asked for their help. And I think | |
| that is what Mr. Rangel is saying today, too, is we need your | |
| help to convince others in Congress that TPA is a needed tool | |
| here to move forward with this trade agreement. | |
| And--but I am also interested in your testimony that you | |
| shared today about the benefits incurred from previous trade | |
| agreements, the benefits as it relates to jobs. And if we don't | |
| work hard to continue to increase American ag exports, what | |
| happens? What is the negative impact, Professor Hayes, if we | |
| don't continue to increase our ag imports, United States? | |
| Mr. HAYES. Our agricultural exports. If we---- | |
| Mr. REICHERT. I am sorry, exports, yes. | |
| Mr. HAYES. Yes, yes. Argentina is a great example of how | |
| you can go wrong. Fifty years ago, it was the seventh | |
| wealthiest country in the world. Then it began to look for | |
| import substitution. It began to fight trade. It taxed exports. | |
| It tried to create domestic alternatives for imports. And it | |
| fell from number 7 to number 75 in wealth tables. And so it | |
| essentially created poverty. | |
| Singapore is an example of the other side. Average person | |
| in Singapore makes 20 percent more than the average American. | |
| And it is a complete free trade country; they even import their | |
| water. They have no resources, and they are a very wealthy | |
| country, based on the principle of free trade. Wealth is | |
| created when you move from surplus to deficit areas. | |
| Mr. REICHERT. So if TPP doesn't move forward, what do you | |
| see happening in the United States? | |
| Mr. HAYES. A stagnation. But, more importantly, other | |
| countries are concurrently negotiating free trade agreements. | |
| Europe has a negotiation with Japan. Canada, outside of TPP, | |
| has a negotiation with Japan. If we don't participate and keep | |
| up with those countries, they will form free trade agreements, | |
| and we will be left out. | |
| Mr. REICHERT. It is already happening, isn't it? | |
| Mr. HAYES. Yes, it is already happening. | |
| Mr. REICHERT. Yes, sir. Anyone else wish to comment? | |
| Mr. MCCAN. I would add that, in the free trade agreement | |
| that was negotiated recently, that the United States gained a | |
| pretty good advantage over our Australian friends because we | |
| were able to negotiate a quicker phase-in of tariff | |
| elimination. And so we are benefiting from a good advantage of | |
| being able to export bigger volumes of beef to Korea because of | |
| that. We got in there with a free trade agreement before the | |
| Australians did. They have ultimately got one now, but they are | |
| behind us because we have got a better tariff advantage to | |
| them. So we are able to get more volume there. So---- | |
| Mr. REICHERT. That is a great point. And--yes, sir? | |
| Mr. MIKHALEVSKY. I thought I would just add, too, we were-- | |
| two subjects to address your questions. | |
| First, in terms of jobs, when a--there is $1 billion worth | |
| of exports generated out of the manufacturing sector. It | |
| generates about 5,500 jobs in the U.S. When you have $1 billion | |
| worth of agriculture products go, you generate about 6,800 | |
| jobs. So, moving agriculture and moving more into agriculture | |
| exports actually does more for job creation, we believe, in the | |
| United States. | |
| Secondly, the power of free trade agreements. While, from | |
| my company's point of view, we are not satisfied with the South | |
| Korean free trade agreement due to exclusion of products, dairy | |
| actually gained nine share points just increasing exports of | |
| cheese, whey, and lactose after that agreement was signed. And | |
| that is share of imported products. So it actually has a real | |
| benefit, once you get these free trade agreements. And | |
| expanding exports and agriculture products also generates more | |
| jobs. | |
| Mr. REICHERT. Well, appreciate your testimony. And, | |
| remember, we do need your help. I yield back. | |
| Chairman NUNES. The gentleman from Massachusetts is | |
| recognized for five minutes. | |
| Mr. NEAL. Thank you, Mr. Chairman. Mr. McCan, you seem to | |
| indicate during your testimony that you had some inside | |
| knowledge as to the Japanese coming around on some of these | |
| issues. Do you perhaps have some perspective that you want to | |
| share with us on currency manipulation? | |
| Mr. MCCAN. It is just my personal opinion that---- | |
| Chairman NUNES. Mr. McCan, your mike is not on. | |
| Mr. MCCAN. I think it is just my personal observation. I | |
| think they would like to try to shift the weight to us that we | |
| really need them in here, whereas I really feel that Japan, you | |
| know, wants to be part of this trade pact pretty badly. They | |
| were a latecomer into the negotiations, and I think they are-- | |
| they really want it worse than what they are letting on to us. | |
| But, you know, I think eventually we will get there with | |
| them, but I don't have any particular intelligence that I could | |
| base that on. | |
| Mr. NEAL. Okay. And perhaps--Mr. Stewart, would you expound | |
| on the whole notion of currency manipulation and remind us | |
| again of why it is such a barrier? | |
| Mr. STEWART. Thank you, Congressman. You know, if you-- | |
| well, it has primarily arisen from industrial users such as the | |
| auto sector vis a vis Japan. We have had problems with | |
| misaligned currencies that are driven by government policies | |
| for several decades with countries in Asia, Japan being one of | |
| the major ones, Korea being another. And, obviously, China is | |
| the one that has received most of the attention. | |
| And it is--if you think about liberalizing trade and | |
| reducing tariffs, if you permit a false exchange rate, you | |
| basically create a new tariff, which, in many ways, is often | |
| higher than the average tariff that is being eliminated. So it | |
| is a question of whether you are really liberalizing trade or | |
| not. And currency manipulation, when it occurs, can drive a | |
| dramatic false competitive advantage. | |
| Mr. NEAL. As you know, the President has set out a pretty | |
| assertive and a pretty aggressive trade agenda, and he has been | |
| able to, I think, highlight some pretty encouraging statistical | |
| data, as well. But there are, as it relates to Asia and the | |
| Pacific, there are a number of very stubborn problems, as we go | |
| forward. And we are going to have to wait and see how they are | |
| best resolved. But I think it is fair to say that, whether it | |
| is beef, or whether it is currency manipulation, there is a | |
| ways to go on all of this. Thank you, Mr. Chairman. | |
| Chairman NUNES. The gentleman yields back. Mr. Buchanan is | |
| recognized for five minutes. | |
| Mr. BUCHANAN. Thank you, Mr. Chairman. I want to thank all | |
| our panelists. As one of my colleagues mentioned from a | |
| different state, I am from Florida, and I can just tell you, | |
| over the last four or five years, where it has been difficult | |
| construction and tourism is up, but it was also impaired to | |
| some extent. Agriculture kind of carried along the state. It is | |
| a gigantic industry in our state. So I appreciate the | |
| opportunity to visit with everybody here today. | |
| Let me mention, Mr. Stewart--I want to start off with you-- | |
| I just got back about 30 days--or it seems like 30 days or | |
| maybe 60 days ago--one of the largest delegations, Democrats | |
| and Republicans, we went to Tokyo. We are talking about China | |
| and the Japanese, but all of us--a lot of us were concerned. I | |
| think we had 13 Democrats, 7 Republicans, so we had a large | |
| delegation, I think the largest in 30 years. | |
| But everybody--and some of my colleagues have brought up | |
| about the whole thing of the--we spent a lot of time on TPP. | |
| But the thought was--is that, you know, the idea is a lot of | |
| them were for the free trade agreement, but they want to make | |
| sure it is fair. | |
| And one of the things they bring up as it relates to these | |
| industries, even if you get an agreement--and I can tell you, | |
| the prime minister, we had a chance to meet with him, he seems | |
| like he would like to move, you know, clearly, in this | |
| direction--but as we look to the ag industry and we talk about | |
| Japan, the thought was, by some of the Members, is that when | |
| you look to the auto industry, we have somewhat of a free trade | |
| agreement, but they have 30 percent of the marketplace here in | |
| the U.S., or whatever that number is--and I am in the car | |
| business, so I will say that--but the other side is we had less | |
| than one percent there. | |
| So, even if you get the trade agreement, and you get a | |
| point where it looks like it is fairly fair, the question is, | |
| does it work both ways, and why hasn't it worked that way in | |
| the auto industry. But that was one of the concerns they | |
| brought forward, and it is a concern I have, as well. So I will | |
| boot it to you. | |
| Mr. STEWART. Well, I think that that is a very valid | |
| concern with certain of our trading partners, where it is not-- | |
| for Japan it has not been an issue of what the tariff levels | |
| are, although in agriculture they can be extraordinary. My | |
| recollection is that the end of the Uruguay round they had a | |
| deal on rice where they could charge 600 percent duties and | |
| have a 400 percent minimum markup, and they still wouldn't let | |
| any rice in the country, even it could come in and compete at | |
| those prices. | |
| But in industrial goods, and I think in agriculture, if a | |
| country is not, in fact, committed to opening its market, there | |
| are lots of ways to do that, and you will spend your time in | |
| disputes, trying to go step by step. But we have had the same | |
| problem with Europe on beef. I mean how long ago was the beef | |
| case? It was back in the 1980s, as I recall. And we are 25 | |
| years later, and we have had a little bit of progress, but | |
| hardly the kind of progress that the---- | |
| Mr. BUCHANAN. I think the mindset--let me just say this, | |
| because we are limited time--is that a lot of us are free | |
| trade. But at the end of the day, my idea of negotiation--I | |
| have been in business 40 years--at the end of the day, in 6 | |
| months, a year, 5 years, it has got to be somewhat a win-win. | |
| Mr. STEWART. That is right. | |
| Mr. BUCHANAN. And that is the attitude I take to it, | |
| because I want to fight for our industries. I want to--and I | |
| think if we do, we got a good chance to win. | |
| Dr. Hayes, let me just mention just quickly, you had | |
| mentioned that these trade agreements would transform our | |
| exports. Could you expand on that a little bit, what you mean | |
| by that? | |
| Mr. HAYES. Sure. As I indicated, most of what we export now | |
| without duty are raw materials, such as corn and soybeans. The | |
| duties that are in place against our products are typically | |
| against value-added products like pork or milk or beef. And so | |
| it is as if those countries are artificially located value- | |
| added industries in their own countries. And, with free trade, | |
| those industries would naturally migrate back to the U.S. | |
| because it is far more efficient to move the final product than | |
| it is to move the bulkier raw material. | |
| But to put this in an example, free trade with China, we | |
| could double or triple some of our livestock industries just to | |
| access--just because of the potential demand out of that | |
| market. | |
| Mr. BUCHANAN. Thank you. And I am going to go with Andrei. | |
| The--you had mentioned about tariffs being 250, 300 percent. | |
| That is unbelievable to me. I mean maybe it is something I | |
| should know about, but why is it so high? | |
| Mr. MIKHALEVSKY. I think generally, for Canada and for | |
| Japan, they are protecting their internal dairy industry. But | |
| it also has the added detriment to the people in those | |
| countries that they are paying an awful lot for the dairy | |
| products that they have. And if you look at the price of dairy | |
| products in Canada, it is much higher than you might find in | |
| the United States. | |
| Similarly, I believe Japan probably has the highest priced | |
| dairy products on shelf for their consumers of anywhere in the | |
| world. So it is really, I believe, just protectionism of the | |
| local industries. And I think that is pretty much the simple | |
| answer. | |
| Although there are areas--for example, China--where the | |
| duty is around 10 percent on dairy products. But their | |
| countries get an advantage of five percent for a product. And | |
| that puts us on an unlevel playing field. And that is why it is | |
| so important we have a level playing field as we look out | |
| around the world. | |
| Mr. BUCHANAN. Yes. And let me just say, Mr. McCan, in terms | |
| of the beef industry, you know, I have eaten a lot of meat | |
| around the world, been in 60, 70 countries. We have got the | |
| best beef in the world. And the bottom line, you know, what | |
| more can we do, or should we do, to help get our exports, as it | |
| relates to your industry out there? Because, obviously, you | |
| know, you are getting blocked in a lot of different directions. | |
| But is there a couple of things that we could do to make a big | |
| difference on it? Because I think that is an industry that has | |
| enormous opportunity, worldwide. | |
| Mr. MCCAN. Well, I think, from the beef industry | |
| standpoint, you know, we adding about $300 a head to every | |
| animal, fed animal, harvested right now that is due to our | |
| international export market. So it is significant, what that | |
| trade does for our industry. And, you know, I think what--all | |
| we would ask is that, you know, we try to get all these trade | |
| pacts back to sound science negotiations, and non-tariff-type | |
| trade barriers, and it would help tremendously. It really adds | |
| a lot. | |
| In 2013 we exported $6.1 billion worth of beef, | |
| internationally. And it was pretty much all due to a lot of the | |
| trade pacts of the past. However, as Andrei mentioned, we have | |
| a very high tariff in Japan. We exported $1.4 billion worth of | |
| beef in Japan in 2013. They love our beef. It is the highest | |
| quality, we feel like, in the world. And so they want it. And | |
| if we could remove that tariff, it would mean a lot for our | |
| producers and for our market, certainly. | |
| Mr. BUCHANAN. Thank you and I yield back. | |
| Chairman NUNES. Thank you. Thank the gentleman. Mr. Smith | |
| is recognized for five minutes. | |
| Mr. SMITH. Thank you, Mr. Chairman. Thank you to our | |
| witnesses today. | |
| Dr. Hayes, if you could, touch a little bit more on the | |
| impact to consumers, foreign consumers, for example. You | |
| mentioned a little bit about how wealth is created when you | |
| move away from a surplus. And also, how protectionism--and then | |
| I think we heard also how the price of dairy to consumers with | |
| protectionism is much higher. Could you elaborate more on that? | |
| Mr. HAYES. Sure. I will give you an example. In Colombia | |
| they have almost no feed grains, and so, therefore, pork | |
| production is extremely expensive. And people in Colombia can | |
| literally not afford to eat pork. However, we now have a free | |
| trade agreement with them. And their per capita pork | |
| consumption is skyrocketing. They literally have access to | |
| something they didn't have before. | |
| I have been in supermarkets in Korea and seen pork selling | |
| at four or five times the U.S. price. When those consumers | |
| eventually get access to our product, they will benefit from | |
| having a much more affordable product. And, in that sense, | |
| their wealth grows. | |
| Mr. SMITH. Is--are there any examples of where consumers-- | |
| perhaps in Japan, because Japan is such a central point of | |
| discussion here this morning, with protectionism--do Japanese | |
| consumers benefit from any of their protectionism? Can anyone | |
| point to such a thing? | |
| Mr. HAYES. I will take a stab at it. They believe that they | |
| have food self-security because of protectionism. But, as I | |
| mentioned, they are importing all their animal feed, so it | |
| doesn't make a lot of sense. | |
| Mr. SMITH. Anyone else? Mr. Stewart. | |
| Mr. MIKHALEVSKY. Yes. I would just say that they import a | |
| tremendous amount, as Dr. Hayes said, import a tremendous | |
| amount of their product. And there is a very small percentage | |
| of the population that are actually ag producers there. So it | |
| is--and it is a--they are very protectionist. | |
| Mr. SMITH. Mr. Stewart. | |
| Mr. STEWART. Just address the food security issue, because | |
| it has been a big issue in Japan and in a number of other | |
| countries. | |
| If you go back to 2007, 2008, grain prices, rice prices | |
| went up 200, 300, 400 percent because there ended up being a | |
| few shortages. And I think it was 35 or 40 countries imposed | |
| export restraints on key agricultural products, including rice, | |
| including wheat, including a number of other products. | |
| If you are an import-dependent country like Japan, right | |
| now the international trading system doesn't guarantee them | |
| access to food supplies. Every country has a right to restrict | |
| exports if they perceive it to be in their national interests. | |
| That is a legitimate issue. Whether it drives the high tariffs | |
| and other things, I would say probably not. That is large | |
| political. But that is an issue that the overall trading system | |
| has not addressed. | |
| Mr. SMITH. Okay. All right. I thank you, Mr. Chairman. I | |
| yield back. | |
| Chairman NUNES. I thank the gentleman. The gentleman from | |
| Oregon is recognized for five minutes. | |
| Mr. BLUMENAUER. Thank you, Mr. Chairman. I would like to | |
| just continue the discussion dealing with Japan. I am wondering | |
| if we are going to reach a point where the Japanese political | |
| system, or their philosophy regarding trade negotiations, just | |
| makes it no longer reasonable for us to pursue. Or do we reach | |
| a point where we just decide that it is not worth it to fight | |
| to keep Japan in the agreement? | |
| Mr. MCCAN. I would just say I don't think we are at that | |
| point yet, Mr. Congressman. I hope. I think, from our industry, | |
| we certainly view Japan as an important part of this | |
| negotiation. And we just remain confident that we--in the | |
| future we will be able to bring them on board at the level of | |
| all the other TPP countries. | |
| Mr. BLUMENAUER. Mr. Turner. | |
| Mr. TURNER. Yes, I would just say that the framework of the | |
| TPP itself is supposed to be a living treaty, you know, to grow | |
| and to adapt. And I think to--not to fight through those issues | |
| with Japan now--Japan gives the TPP much more credibility with | |
| the size being added to it, and it is important. | |
| And I just relate to a lot of my packers and suppliers. You | |
| either ship to Japan or you don't. There is no middle ground. | |
| Because you have to do certain things, you have to work through | |
| it. But, at the end of the day, good business opportunities, | |
| and a big market, and I think it should be included--at least | |
| fought for. | |
| Mr. BLUMENAUER. Well, certainly that is the philosophy with | |
| which we have pursued it. And, all things being equal, we are | |
| all better off in a comprehensive agreement that speaks to some | |
| of the problems that you are alluding to. | |
| But I just wonder--and perhaps, just in terms of making the | |
| negotiations work better, if it is clear that there is a point | |
| where we do pull the plug, where we are just not going to | |
| continue down this path, that we will reach a point, if we | |
| can't reach reasonable accord on things that give our producers | |
| access, and we are not facing pretty grotesque barriers, that | |
| it is clear that we are not going to play. | |
| I must admit I was blown away recently in conversation with | |
| some Japanese officials about their expectations dealing with | |
| fisheries. Pretty unsettling, in terms of what their plans | |
| were, and some of their practices that are going to pose a | |
| challenge for us, I think, in reaching an agreement that is | |
| acceptable for most of us. And I am just curious at your | |
| reflections. Appreciate your feedback. Thank you. | |
| Thank you, Mr. Chairman. | |
| Chairman NUNES. The gentleman yields back. The gentlelady | |
| from Kansas, Ms. Jenkins, recognized for five minutes. | |
| Ms. JENKINS. Thank you, Mr. Chairman, and thank you all on | |
| the panel for being here today. I represent eastern Kansas, and | |
| I have seen firsthand how strong trade agreements open | |
| international markets to Kansas beef, pork, Kansas wheat and | |
| cereal grains, as well as planes and other products | |
| manufactured in Kansas. | |
| I also know that the best way for Congress to ensure that | |
| we can get strong agreements that include congressional | |
| priorities is to pass legislation like the bipartisan | |
| Congressional Trade Priorities Act that Chairman Camp has | |
| introduced, along with our chairman and Chairman Sessions. And | |
| it is my hope that we can get that important legislation | |
| through the House and the Senate this summer. | |
| Mr. McCan, as president of the National Cattlemen's Beef | |
| Association, you are well aware that the World Organization for | |
| Animal Health places U.S. beef at its lowest possible risk | |
| category. Unfortunately, some countries, including some of | |
| those who are currently participating in the Trans-Pacific | |
| Partnership negotiations, continue to either ban or limit U.S. | |
| beef exports. | |
| So, Mr. McCan, could you please discuss the markets that | |
| are still closed to U.S. beef and pork, and the impact this has | |
| on U.S. producers? I would also like you to discuss the | |
| challenges that the mandatory country-of-origin labeling, or | |
| COOL standards, created by the USDA plays on our negotiators | |
| when they try to get other countries to end non-tariff based | |
| barriers. | |
| I specifically mention COOL because, over the past couple | |
| of years, I have heard from many Kansas producers that these | |
| standards are placing an unworkable burden on their operations. | |
| In addition, a study done back in November of 2012 by | |
| Professors Glynn Tonsor, Ted Schroeder, Michael Taylor from | |
| Kansas State University, and Jayson Lusk of Oklahoma State | |
| University found that U.S. consumers are not willing to pay a | |
| premium for labels that distinguish between livestock born in | |
| Canada but raised in Montana and those born and raised anywhere | |
| else in the U.S. So it appears that these standards may be more | |
| trouble than they are worth. Could you comment? | |
| Mr. MCCAN. Yes, ma'am. I will answer your concerns about | |
| the BSE status first. We are a negligible risk status country | |
| now, which is the lowest status you can be for BSE. And there | |
| are other countries who are exporting beef that don't have as | |
| low a status for BSE than we do that are exporting beef to | |
| China. China we view as a really huge future market for us. We | |
| were locked out of China in 2003 with the BSE cattle from | |
| Canada, and we have not been able to get access back into | |
| China. | |
| So, we certainly view that as something that we need to-- | |
| our Administration, I think, needs to work hard on. And our | |
| industry views that as a very important market. And we don't | |
| see any reason why we should be kept out at this point. | |
| As to the country--mandatory country-of-origin labeling, it | |
| has--in our opinion, in the beef industry, we--it has not | |
| really benefited anyone. Referring to the study that you | |
| referred to done at Kansas State and other universities, our | |
| domestic consumers really don't seem to really care, really pay | |
| a lot of attention to that origin label. So it has certainly | |
| not shown any economic benefit to any of our producers in the | |
| United States, although it has been a really tough rule to | |
| comply with. | |
| And we handle Mexican steers on our family's operation. And | |
| so, every year, when we market them, we are faced with anywhere | |
| from a $35 to a $50 a head discount for no apparent reason. And | |
| when those cattle come in to this country, they are lightweight | |
| calves, usually. And it is an added value type of a program. We | |
| add value at the ranch level, the feed lot operators add value, | |
| the packers add value. By the time those animals are processed | |
| and ready for distribution in the retail markets, the majority | |
| of the value of that animal is value that has been put on them | |
| here in this country. | |
| So, another reason why we don't see any real benefit to the | |
| mandatory country-of-origin labeling rule right now. And I--and | |
| it has caused some serious disruption on the borders, south and | |
| north. There are some processing facilities that have recently | |
| gone out of business that depend on a lot of that border trade, | |
| and because of mandatory COOL have been hurt and had to go out | |
| of business. | |
| So, we have limited infrastructure now across the country | |
| for processing cattle. We want to protect that infrastructure | |
| as much as we can to keep a good, robust competition in our | |
| industry. | |
| Ms. JENKINS. Thank you, Mr. Chairman. I would yield back. | |
| Chairman NUNES. Thank the gentlelady. The gentleman from | |
| Louisiana is recognized for minutes. | |
| Mr. BOUSTANY. Thank you, Mr. Chairman. And I thank all the | |
| witnesses for their testimony. My home state of Louisiana is a | |
| maritime state, highly dependent on trade. And agricultural | |
| exports are the top--our top export item. Rice is very | |
| important in my district, and getting a high level agreement | |
| that opens up markets for rice and some of our other | |
| agricultural commodities is of major importance to me. | |
| But I would submit that, even with all the work done on TPP | |
| and TTIP, the negotiations, very difficult negotiations, much | |
| more needs to be done. And these are much more than commercial | |
| agreements. They are not static. This is the way we get back to | |
| a rules-based trading system. And I will tell you. American | |
| leadership is in demand more so than ever before to get this | |
| done. And the first step, I think, that is critical in exerting | |
| this American leadership in this engagement is to get trade | |
| promotion authority. | |
| Now, we have a bill, the Bipartisan Congressional Trade | |
| Priorities Act of 2014. It was introduced on January 9th. A lot | |
| of work was put into that. It is much more--it is a much more- | |
| evolved piece of legislation than the previous TPA. And I | |
| believe it addresses all the 21st century issues, from SPS to, | |
| you know, the global digital economy, state-owned enterprises. | |
| It also enhances the consultative role of Congress as it | |
| engages with the executive branch and USTR. | |
| So, my question to all of you is--I want each of you to | |
| answer this for the record. Do you believe that our negotiators | |
| can get the best possible deal, which I believe is essential, | |
| the best possible deal in these negotiations, if we don't have | |
| trade promotion authority, and specifically, this legislation | |
| we have before us? | |
| Why don't we start with Dr. Hayes? | |
| Mr. HAYES. Common sense suggests that you don't give your | |
| best deal until the very last minute. And you can't do that | |
| under the current situation. Because without trade promotion | |
| authority, there is always the possibility we will go back and | |
| reopen the deal. So I absolutely agree with you. | |
| Mr. BOUSTANY. And would you agree that time is slipping by? | |
| There are a lot of external events going on, both politically | |
| and economically? | |
| Mr. HAYES. Yes, just---- | |
| Mr. BOUSTANY. That is why we need to have a sense of | |
| urgency? | |
| Mr. HAYES. Absolutely. Just looking at the congressional | |
| timeline and the U.S. election process, this is a very critical | |
| moment. | |
| Mr. BOUSTANY. Thank you. Mr. McCan. | |
| Mr. MCCAN. I would concur that I think the trade promotion | |
| authority is critical in being able to get these negotiations | |
| done in a timely manner, and get the right trade pact that we | |
| are looking for, and a good, modern, 21st century-type trade | |
| pact. I think we need to give the Administration all of the | |
| latitude that we can, and the agencies that they have at their | |
| disposal. | |
| Mr. BOUSTANY. Thank you. Yes, sir? | |
| Mr. MIKHALEVSKY. Thank you. Two comments. First, as I said | |
| in my comments, we are highly supportive of the trade promotion | |
| authority. Right on board, we believe that it is essential to | |
| make this thing go forward, and so we are right on with that. | |
| The second Part I wanted to answer a little bit | |
| differently, and I just wanted to talk about time running out, | |
| and the sense of urgency. From a dairy industry perspective, | |
| the EU has caps on dairy products today that go off in 2014 and | |
| 2015. Those products--there is a significant amount of product | |
| that is going to flood into the world market at that point in | |
| time. So it is really important that we tie these things up | |
| very quickly. Otherwise, we will be at a competitive | |
| disadvantage in the dairy industry in the future. | |
| Mr. BOUSTANY. Thank you. Mr. Turner. | |
| Mr. TURNER. I agree that trade promotion authority is not | |
| only urgent, but required. The sooner, the better. | |
| Mr. BOUSTANY. Thank you. Mr. Stewart. | |
| Mr. STEWART. Thank you, Congressman. I will be--take a | |
| contrarian view, simply because I am a bit of a historian. We | |
| didn't have TPA before 1974, and we managed to do lots of trade | |
| agreements. I am not opposed to TPA, and the bill that was | |
| introduced is a good start. And for some trading partners it | |
| may be a help. But I don't actually believe that it is critical | |
| to have before you have a deal. | |
| Most of the trading partners we deal with have a process | |
| that is not a lot different than ours. And, theoretically, the | |
| deals could be taken back and reopened. And they don't do TPA, | |
| we are the only country that does. So, I am in favor of TPA, | |
| but I don't view it as a critical element, legally or | |
| historically. | |
| Mr. BOUSTANY. I would just simply submit that history is a | |
| nice guide, but we are in a much more complex negotiating | |
| environment with many very difficult 21st century issues. And I | |
| do believe that the full weight of the U.S. Government needs to | |
| be exerted in these negotiations. And if we get bipartisan | |
| trade promotion authority, that sends a very powerful signal to | |
| all of our negotiating partners that we mean business. It is | |
| essential to get the best possible deal. | |
| And, with that, I will yield back, Mr. Chairman, thank you. | |
| Chairman NUNES. Thank you, Dr. Boustany. The gentleman from | |
| Wisconsin, Mr. Kind, is recognized for five minutes. | |
| Mr. KIND. Thank you, Mr. Chairman. I want to thank the | |
| panelists for your testimony today. Obviously, being from | |
| Wisconsin, agriculture is a very important part of our state's | |
| economy. Dairy, in particular, second in the nation when it | |
| comes to dairy exports. | |
| And I would agree with my friend from Louisiana, Dr. | |
| Boustany. I would have preferred to see TPA dealt with sooner, | |
| rather than later. Obviously, I am concerned that we are not | |
| going to get the last best offer from those in TPP, unless they | |
| have some assurance that the President can ultimately deliver | |
| the agreement at the end of the day, and trying to negotiate | |
| with 535 independent Members of Congress is going to make that | |
| a little bit dicey. | |
| But let me also paint a little political scenario which | |
| would make TPA passage eventually very difficult in this | |
| Congress. I think the political reality is we are not going to | |
| be able to move it before the elections. If there is a flip in | |
| the Senate, if there is any backing away from the May 10th | |
| agreement, which was embraced by the previous Bush | |
| Administration, involving core international labor and | |
| environmental standards and access to prescription medicine in | |
| the developing world, it is going to make getting the votes for | |
| TPA very, very difficult in this place. And so, I think the | |
| November elections are going to be very important to where the | |
| trade agenda goes in the future. | |
| We have also--I have also done a lot of outreach with our | |
| TPP negotiating partners. I have had meetings, breakfast and | |
| lunch meetings, with the TPP ambassadors, including the | |
| Japanese ambassador. It would be weird, to say the least, if we | |
| moved forward on TPP without Japan being there at the end of | |
| the day. | |
| And my impression, Mr. McCan--I think I agree with you--a | |
| little more optimistic. I think all the nations involved in | |
| negotiations want to get to yes, they want to get to an | |
| agreement. But, naturally, all eyes are on Japan right now. I | |
| would like to be able to support a good negotiated agreement, | |
| but I have a hard time supporting a bad agreement. I think a | |
| lot of Members in this place probably feel the same way. And | |
| agricultural access to these markets is going to play a crucial | |
| role in where this agreement ultimately ends up. And we all | |
| know that there is more work to be done. | |
| But let's face it. We have got work to do in our own | |
| Congress when it comes to our own agriculture policy to be good | |
| stewards of the global trading system. So I have been so active | |
| in the past on farm bill debates, trying to move us away from | |
| these market and trade-distorting commodity subsidy programs | |
| that tend to get us into trouble, globally. | |
| Probably the most salient one that we are dealing with | |
| right now is the box we are in with Brazil and our domestic | |
| cotton subsidy program, and the WTO implications of that. I | |
| understand this week there are important negotiations to see if | |
| we can resolve this with Brazil. They are convinced that this | |
| Congress did not fix it--neither am I--in the last farm bill. | |
| And, because of that, we have been, in effect, bribing Brazil | |
| with $150 million worth of payments that now go to subsidize | |
| Brazil cotton farmers. It just shows you how crazy this farm | |
| bill has gotten in this country. | |
| And we have a responsibility to be living up to some of our | |
| trade obligations and the challenges that we face in the WTO on | |
| the front end, as well. So I am hoping that, as we continue | |
| talking about our own agricultural reform programs, that trade | |
| and the implications of trade are considered a little more | |
| deeply in it, rather than kind of shoulders being shrugged, and | |
| we taking our chances through WTO claims and cases. That puts | |
| us in a bad spot. | |
| Mr. Turner, you came and talked about SPS and that, too, is | |
| kind of a new phenomenon that we have in our trade agreements, | |
| and certainly with the trade promotion authority legislation | |
| that was introduced earlier. Is there any concern on your part | |
| in regards to the standards used for SPS--because it is a two- | |
| way street--that they might ultimately be used against us or | |
| our products? | |
| Or do you see the way it is being negotiated and the | |
| language that is being used right now is going to create a | |
| livable world for us when it comes to some of the nuances of | |
| SPS and some of the non-tariff barriers that we face, | |
| especially for agriculture in recent years? | |
| Mr. TURNER. Everything I have seen so far, I mean, looks | |
| good. You know the two-edged sword. As a farmer I used to | |
| struggle with the stringent requirements that we had growing | |
| our food with both federal standards and state standards and | |
| everything else in California. But now, as an exporter, and | |
| someone who spends time traveling the world, I have a great | |
| appreciation for the reputation that we have built globally, | |
| based on our high standards. And so I do think it is very | |
| important. | |
| You know, we have to respect foreign countries' standards, | |
| and the reasons why they want to do things the way they want to | |
| do them. And they have a right to protect the food in the best | |
| way that they seek. However, at the end of the day, | |
| transparency, and if it is based on science, I think we can all | |
| agree with that. | |
| Mr. KIND. I think it really comes back to whether it is | |
| science-based research that we can agree to, as far as the | |
| equivalency standards and what not. That will be crucial, | |
| moving forward. | |
| Mr. Mikhalevsky, obviously we would like to be able to work | |
| with you a little bit more about how we can take advantage of | |
| some of the greater export opportunities in the dairy market | |
| that exist in the Pacific Rim, China, right now. One of the--I | |
| think the tragedies of Russia and Crimea was we had talks in | |
| regards to Russia with dairy that suddenly collapsed overnight. | |
| We have been shut out since 2010. Hopefully there will be an | |
| avenue to try to revive them when things start settling down | |
| again over there. | |
| Thank you, Mr. Chairman. I yield back. | |
| Chairman NUNES. Thank you, Mr. Kind. Mr. Paulsen is | |
| recognized for five minutes. | |
| Mr. PAULSEN. Thank you, Mr. Chairman. And this is a topic | |
| that is important to my home state of Minnesota, as well. And | |
| while I don't have a district that is necessarily agriculture- | |
| oriented, there is no doubt that Minnesota is an | |
| agriculturally-oriented state. In fact, Minnesota is the fourth | |
| largest agriculture exporting state in the country. | |
| In 2012, our agriculture exports totaled about $8.2 | |
| billion. That was a 14 percent increase over the year before, | |
| which is a pretty common pattern, I am thinking, from--based on | |
| some of the testimony we have had here, and what I have read, | |
| and has happened in other states. And so the agriculture and | |
| food industry accounts for more Minnesota exports, actually, | |
| than any other industry in our state. More than double, | |
| actually, than the next closest industry, which is machinery. | |
| So, we are absolutely helping feed the world, much as you and | |
| the folks that you represent are. And so it is absolutely vital | |
| to our economy. | |
| I just want to associate my comments about the importance | |
| of getting TPA authority so we can get the best-negotiated | |
| deals possible that will benefit American consumers and | |
| American exporters. And I just want to thank you for your | |
| testimony, for your help, for asserting that relevance of | |
| having trade promotion authority. It is actually really, really | |
| critical. | |
| And, of course, as you mention, we are not just dealing | |
| about tariffs, which are issues, though. It is also these non- | |
| tariff barriers and the opportunity to think about 21st century | |
| trade agreements, modernizing high-standard agreements so that | |
| other countries will then follow our lead. Right? | |
| And the United States has definitely gotten back into the | |
| game with the passage of the recent agreements that occurred | |
| with Korea, and Colombia, and Panama. And so, we are back on | |
| the playing field. But we need to push forward with these huge | |
| opportunities with both the Trans-Pacific Partnership and the | |
| TTIP. | |
| Let me do this. I just want to ask a question real quick, | |
| because it is not just, as we mentioned, tariffs, it is non- | |
| tariff barriers. But, Mr. Turner, I was interested in your | |
| testimony. You are directly involved in getting agriculture | |
| products through this myriad of administrative and regulatory | |
| hurdles to get those products into foreign markets. You deal | |
| with that every day for your customers. | |
| Can you describe a little bit just your experience in | |
| dealing with countries that have multiple entry requirements, | |
| and the lack of harmonization of customs procedures between | |
| countries, and the opportunity that we should be looking at | |
| with these agreements in trade? | |
| Mr. TURNER. Yes. Are you looking for a specific example, or | |
| just kind of talk about---- | |
| Mr. PAULSEN. Yes, anecdotal stories. I mean give some | |
| perspective of why this is important, and why this is something | |
| that we should address, or help address, that can benefit us in | |
| the United States. | |
| Mr. TURNER. Yes. You know, there--when you look at the SPS | |
| issues in particular, there are just so many different things | |
| to get products from one place to another. And we look at--you | |
| know, the easy part, when we talk about the businesses doing | |
| the commodity trade and doing the sale, and then we have to, | |
| you know, then send that through the office and the conference | |
| room, where the ladies do the real work, and deal with all the | |
| different layers and all the different things. And it is just-- | |
| every single country is different, you know. | |
| We have import permits required in some places. Import | |
| permits are very, very challenging. We have products that need | |
| to get shipped out, but we can't ship the product until it has | |
| been labeled properly with an import permit number. We face | |
| that mostly in India. Fumigation requirements are different. | |
| Biggest challenge is Chilean fumigation. Chilean fumigation has | |
| to--is a--even the packers themselves have to weave a fine | |
| little line to be able to accomplish what needs to be | |
| accomplished to get into Chile with still being legal in the | |
| U.S. It just goes on and on and on. | |
| Mr. PAULSEN. Let me just follow up on your comment about | |
| India, because U.S. agriculture exports to India are actually | |
| really small, or paltry, with a mere $863 million in 2013, and | |
| it has gone up a little bit in 2012. But you think about India, | |
| it should be a booming market of opportunity, right? Growing | |
| middle class, rapidly growing population becoming wealthier. | |
| Can all of you maybe just comment and just follow up on | |
| that regarding what are some of the barriers to agriculture | |
| that we see right now with--dealing with India? Maybe Mr. | |
| McCan? Or you can go right down the line. | |
| Mr. MCCAN. I am not terribly familiar with all of those | |
| issues, but I know that, because of their--because of the-- | |
| their feeling towards bovines in that country--and I am not | |
| sure how it really relates to beef consumption--that there is | |
| just not a huge interest to negotiate with the beef industry | |
| for importing much of our product. | |
| They also have a huge population of water buffalos, which | |
| they export. And they don't put on the same equivalency as a | |
| bovine animal over there. So there is lots of kind of cultural | |
| issues there that seem to complicate the trade over there. And, | |
| yes, we haven't had much opportunity there at all. | |
| Mr. PAULSEN. Mr. Mikhalevsky, on the dairy side, can you | |
| speak to that just a little bit? | |
| Mr. MIKHALEVSKY. Sure. The--one of the issues that we have | |
| when we ship to countries--and I will primarily speak about | |
| India in a second--is we are actually testing for 933 separate | |
| substances today in order to meet different export | |
| requirements, which creates a lot of cost in our system. But | |
| there is a number of things that you test for that are related | |
| to food safety, and then there are other things that you test | |
| for that are related to food quality and perception of quality. | |
| And, for us, the food safety one is essential. The food quality | |
| one is a matter of judgement. | |
| When it comes to India specifically, they do have a | |
| wonderful market there. They have tariffs there. They do give | |
| tariff holidays occasionally when they need product to come | |
| into the market. But we have generally had problem with the SPS | |
| standards there. One example of that would be testing for | |
| things like Para tuberculosis in milk and that. There are a | |
| number of standards that they impose that are more food quality | |
| standards, as opposed to food safety. | |
| And so, the way I would respond is it is a closed market to | |
| us and many of the other dairy exporters around the world, and | |
| it is a wonderful opportunity. | |
| The last piece on dairy, which might be interesting, is | |
| dairy in India is different than dairy here. We assume that our | |
| dairy comes from cows. Over there it may come from buffalo or | |
| other sources. | |
| Mr. PAULSEN. Thank you, Mr. Chairman. Yield back. | |
| Chairman NUNES. I thank the gentleman. The gentleman from | |
| Pennsylvania is recognized for five minutes. | |
| Mr. KELLY. I thank the chairman, and thank you all for | |
| being here. I am greatly interested in this. I come out of the | |
| automobile industry--in fact, the retail end of it. We do a lot | |
| of bid work. But as we would go through the bid process, there | |
| were--sometimes the bid specs were set up so that no matter | |
| what the final price was, I couldn't have met the specs. | |
| And I am looking at each of you. You are producers. So, | |
| first of all, you better have a product that everybody wants to | |
| own. Right? And then you better be able to put it at a price | |
| point that is affordable. And we are looking now at--talking | |
| with you about these trade agreements. One of the things for me | |
| that was very important, if I was sitting across from a | |
| perspective owner I had to have the decision-maker at the | |
| table. Or none of the negotiations mattered. It was just | |
| chatter. | |
| And the other thing was time was always of the essence, | |
| because I would know that if I wasn't able to satisfy a need at | |
| that time, or fill a need at that time, this person is probably | |
| going to leave our dealership and go someplace else. And the | |
| next day there would be an automobile in their driveway with | |
| somebody else's name on the back of it, which really didn't | |
| help me, because I still had payrolls to meet. | |
| I think sometimes we get really involved in these things as | |
| to what it is that we're trying to do. | |
| So, American products, globally. Globally. And did I read | |
| there somewhere--one of you say that the consumers, as a | |
| percentage, consumers--outside of the United States, how big is | |
| the market? | |
| Mr. MCCAN. I would just tell you for the beef market we | |
| consider that 96 percent of our product's consumers are outside | |
| of this country. | |
| Mr. KELLY. So out of 10 buyers, 9.6 of them are not here. | |
| You are trying to fill a market that is someplace else. | |
| Mr. MCCAN. Ninety-six percent. | |
| Mr. KELLY. Ninety-six percent. Well, okay. But my whole | |
| point is your market is not just the United States. And you are | |
| producing not just for the United States, because there is no | |
| way in heck we could digest the product that you are producing. | |
| There is an overcapacity, which we have watched in the | |
| automobile industry with some of the domestics. You can't | |
| overproduce for a market that isn't there. And if you do, you | |
| better look at the market that is available, and then produce | |
| for that and get your share of it. You are all looking for your | |
| share of the market. Is that not true? And all you are asking | |
| for is to be treated fairly, and not to get gamed. | |
| So, my question is, when we go into these other places, and | |
| we are trying to drive these trade negotiations--and I am with | |
| Dr. Boustany, because I do believe time is of the essence. And | |
| if we think we can sit back and the world will wait for us to | |
| come around, I guarantee you somebody will put a product in | |
| somebody else's driveway, and we will never get a chance to get | |
| back in that home again. | |
| So this TPA, a lot of question about that back home. In | |
| Pennsylvania ag is the number-one business. There is a lack of | |
| confidence, or a lack of trust that it is going to be handled | |
| the right way. I have people tell me, ``No, you guys better | |
| keep track of that. You better not let him do something that | |
| really hurts us. Okay?'' Now, whether you agree with the | |
| President or don't agree with the President, there is a real | |
| perception out there that we have a problem in negotiations. | |
| You are all here for a very particular reason. And I like | |
| what Mr. Rangel said. You have got to help congresspeople | |
| understand what is going on. But, more importantly, we have got | |
| to help the American people to understand what it is we are | |
| trying to get to. Don't we? | |
| I mean if we don't get a bigger share of this global | |
| economy, we won't have a dynamic and robust economy. We will | |
| not have jobs. We will not have the ability to fuel all these | |
| wonderful programs we have, because they are all revenue- | |
| driven. Tell us. What would be the best way right now? Because | |
| I know you are all looking for something. | |
| Mr. McCan, you are in beef. Mr. Turner, you are in almonds. | |
| Andrei, you are with the dairy products. Mr. Stewart, you have | |
| been on both sides of it, right? Mr. Hayes, just tell us, | |
| please, because I think it is critical that the American people | |
| understand where it is we are trying to get. | |
| And I got to tell you, from my perspective, I wanted to be | |
| in everybody's driveway every day. I didn't want to get there | |
| from time to time. But I didn't want to get gamed, either, by | |
| the process. How badly gamed are we right now, in order to get | |
| our products around the world? If 96 percent of the market is | |
| outside our shores, then that is the target we have got to | |
| shoot for. | |
| What else can we do, gentlemen? | |
| Mr. MCCAN. Well, I will take a stab at it, Mr. Congressman. | |
| But, you know, we view trade promotion authority as very | |
| critical in the negotiations. The Administration---- | |
| Mr. KELLY. But tell me why. Why is it important? | |
| Mr. MCCAN. Well---- | |
| Mr. KELLY. Because the American people need to know why---- | |
| Mr. MCCAN. My personal view, the President has his | |
| different agencies, the USTR, USDA, FAS, they are all very | |
| critical in these negotiations and these trade pacts. And, you | |
| know, without TPA, I view it that they are somewhat weakened if | |
| they don't have that strength of the TPA authority. And those | |
| are the people that are at the table on these things, more so | |
| than anybody. | |
| Mr. KELLY. Decision-makers are at the table. | |
| Mr. MCCAN. Exactly. | |
| Mr. KELLY. The people who are going to say yes or no are at | |
| the table. | |
| Mr. MCCAN. Exactly. | |
| Mr. KELLY. So if we are going to negotiation, but the | |
| person or the entity that needs to be there to go ahead and | |
| compete head to head doesn't have that same authority---- | |
| Mr. MCCAN. They have the expertise for these negotiations, | |
| whether it is technical, you know, non-tariff stuff, SPS, they | |
| have the expertise within these agencies, and those agencies | |
| are part of this Administration. | |
| Mr. KELLY. Okay. Any of you? I know you are all facing a | |
| difficult challenge. Tell us--and not so much Congress, but the | |
| American people--about the market and how we have to go about | |
| getting a bigger market share. Because, at the end of the day, | |
| it is good for America. And our products, I don't think it is a | |
| matter of not having the right product, it is just not having | |
| the right policies. At least that seems to me--and the other | |
| thing is time. We cannot continue to let this time slip away. | |
| It is the one thing you can never get back. And another thing | |
| you will never get back, you will never claw back market share. | |
| Andrei, were you going to say something? Because the dairy | |
| products that we put out are phenomenal. | |
| Mr. MIKHALEVSKY. Well, I was just going to say that you | |
| asked about why TPA is so important and how we might explain | |
| that---- | |
| Mr. KELLY. Right. | |
| Mr. Mikhalevsky [continuing]. Outside of this room. And my | |
| view on that is whenever you do a negotiation, as you | |
| mentioned, if you don't think you have someone across the desk | |
| that can make a decision, or that had some authority, your | |
| negotiation is not going to go very far. And if you believe | |
| that negotiation, when you bring it back, is going to get | |
| modifications or twisted or turned around, you are very unsure | |
| of how you are going to negotiate. You may not put your best | |
| foot forward, because you don't believe that you are actually | |
| negotiating the final and best deal for both countries. | |
| So, our support for TPA is we believe that is the fastest | |
| way to get the best deal, and then you bring it back to | |
| Congress for an up or down vote. But you have to have the | |
| authority sitting at the table, and people have to believe it. | |
| And that is the way I would explain it to anyone in our area. | |
| Mr. KELLY. Mr. Turner? Anything at all on that? | |
| Mr. TURNER. I would just expand on your prior question, | |
| which is, you know, we are competing globally. When you look at | |
| the population growth in India and China, Southeast Asia, you | |
| know, there is limited ag land, there is limited water, | |
| globally speaking. And we are here, the time is now, to | |
| position ourselves in the best possible way that we can to | |
| compete globally to feed the world and the next generation. | |
| Mr. KELLY. Okay. Well, I got to tell you, just from what I | |
| have done all my life, if I didn't have the decision-maker | |
| sitting across from me, I knew there was no sense in going | |
| forward with it, because I couldn't finish the deal. And I | |
| think that is what we are looking at right now. You all do such | |
| great things with the product, you work so hard. At the end of | |
| the day we are looking to get market share that grows and grows | |
| and grows and gets the American people back to work and does an | |
| awful lot of things. | |
| I think people want to own American products. I think | |
| sometimes we get to the point and we forget we are not the only | |
| person in town with a product. There is other people that will | |
| work just as hard for the market. But I just don't like the way | |
| we get gamed sometimes. Sometimes the specs are set up that, no | |
| matter what we do, we can't get there. And I guess that is | |
| where the oversight part comes in. But I want to thank you all | |
| for what you do. Not just what you--by coming here today. | |
| But would you please do me a favor, and to everybody in | |
| Congress, and the country? You all have such great credentials. | |
| You have great credibility. Your associations have the ability | |
| to get the message out to the American people in a way that | |
| they will believe it and they will understand it. That is the | |
| real challenge we have right now, the lack of understanding of | |
| how we get to market domination. How we get to growing our | |
| market share all lies in the fact that people just don't | |
| understand, and they seem to think that there is somehow that | |
| we can just sit back and they will come to us, the world will | |
| flow to us. | |
| I really do believe, with the market opportunity we have, | |
| the sky is the limit. We never had bluer skies or a stronger | |
| wind at our back in America than we have right now, of all the | |
| assets that we have. So it is just a time now to put ourselves | |
| in order, get out, win these trade negotiations. But we better | |
| have somebody at the table that can actually drive a hard | |
| bargain and come back home and say, ``You know what? I closed | |
| the deal, and it is good for everybody.'' It is a win-win | |
| situation. | |
| Thanks so much. Mr. Chairman, thank you for allowing me to | |
| be here. I appreciate that. | |
| Chairman NUNES. The gentleman yields back. I will just say | |
| that Congress has the authority vested by the Constitution. If | |
| we look at what has happened in the previous few years, whether | |
| it is the implementation of different laws that have passed the | |
| Congress, the various different executive orders, and not to | |
| get into the politics of this, but the situation with the | |
| Bergdahl-Taliban five swap, clearly--and I will just | |
| reiterate--we have to have trade promotion authority, or you | |
| could very well kill TPP in its infancy. That is the reality of | |
| the politics that we face, and it is the law. | |
| And so, I would encourage the Administration to work as | |
| quickly as they can with Chairman Camp and others to pass TPA | |
| as quickly as possible. | |
| Our record will remain open until June 25th. I urge | |
| interested parties to submit statements to inform the | |
| Committee's consideration of the issues discussed today. | |
| I want to thank all of you for your testimony. This | |
| Committee is now adjourned. | |
| [Whereupon, at 11:49, the subcommittee was adjourned.] | |
| [Questions for the record follow:] | |
| [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] | |
| ----------- | |
| [all] | |
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