Statement by Dan Glickman

Secretary of Agriculture

Before the Senate Committee on Agriculture, Nutrition, and Forestry

Washington, DC

May 7, 1998

Mr. Chairman, members of the Committee, it is a pleasure to appear before you with Ambassador Charlene Barshefsky to review U.S. agricultural trade policy.

Trade Policy Successes Bring Real Opportunities

Over the past several years, much work has gone into improving U.S. competitiveness, opening new markets, and expanding trade--work involving the combined efforts of America's farmers and ranchers, commodity and trade associations, state governments, the Congress, and the Administration.

These efforts are paying off in world markets today. In the mid-1980's, U.S. agricultural exports were steady, running about $30 billion annually from 1985 through 1988. In 1989, they reached a new plateau of roughly $40 billion, and remained relatively steady at $41 billion on average until 1995. In 1996 we reached another plateau--$60 billion.

Given the Asian financial situation, it is no surprise that agricultural exports, like other U.S. exports have suffered. But the big news is that this fiscal year, even with the profound weakness in the economies of East and Southeast Asia, USDA is forecasting exports at $56 billion--up some $12 billion since 1994 and up nearly $16 billion since 1990. We have come a long way in a short time and USDA economists project U.S. agricultural exports to reach $84 billion by 2007. We continue to believe this target is achievable.

The challenge for U.S. agriculture is to continue moving forward, so that we are prepared to take advantage of growing foreign demand in the future. There is no doubt in my mind that the best way to do this is by reducing foreign trade barriers and opening new opportunities around the world, so that U.S. agriculture can continue to broaden, deepen, strengthen, and diversify its position in global trade. The efforts we make to meet these challenges will to a large degree determine how agriculture will fare in the years to come.

We need to maintain the momentum and U.S. leadership of the trade reform agenda. We need to continue the work that began with the North American Free Trade Agreement (NAFTA), the Uruguay Round Agreements, and other recent trade initiatives.

NAFTA and the Uruguay Round Agriculture Agreement are landmark achievements, creating new opportunities and setting a new path in world trade. The former marks a first step toward hemispheric free trade; the latter, the first major step in global agricultural trade reform.

Trade agreements often get little credit for the benefits they bring, and they seem to get blamed for just about everything else. NAFTA, especially, has been a lightening rod for all sorts of concerns. Not surprisingly, some people judge the agreement only in terms of individual grievances or concerns. It is true that NAFTA has not settled every issue, lifted every barrier, or satisfied every sector. But look how far we have come.

In four years under NAFTA, our agricultural exports to Canada and Mexico together have set new records every year, climbing from $8.9 billion in fiscal year 1993, the year before NAFTA, to $11.7 billion in 1997. The latest USDA forecast suggests these exports may reach a record $12.7 billion this year--23 percent of our total agricultural exports worldwide. Despite some concerns, we have seen enough progress to say that NAFTA's promise is being fulfilled for agriculture.

The Uruguay Round Agreements on Agriculture and on Sanitary and Phytosanitary Measures brought agriculture more fully under world trade rules and resulted in specific commitments by countries to reduce protection, trade-distorting support, and unjustified trade barriers. Those commitments have opened new opportunities for American farm and food products around the world. They opened rice markets in Japan for farmers in Arkansas, California, Louisiana, and other rice-producing states. Beef and pork producers in Texas, Nebraska, Kansas, Iowa, Colorado, and a dozen others are benefiting from sharply increased access to Japan and Korea. Poultry producers in Arkansas, Georgia, North Carolina, Alabama, and other states are benefiting from freer access and increased sales to Poland, South Korea, the Philippines, and other countries. Horticultural producers in California, Oregon, and Washington are benefitting from expanded access to Japan, the Philippines, and other countries.

We continue to monitor closely how other countries are implementing their Uruguay Round commitments, and the United States has not been slow in using the dispute-settlement process of the World Trade Organization (WTO) when those commitments are not fulfilled. Of the 35 complaints filed by the United States, over one-third have involved agriculture. And we have scored significant victories, such as the decision against the European Union's (EU) hormone ban, upheld by the WTO's Appellate Body earlier this year. We will continue to follow through on this case to make certain the EU implements this decision. We are also currently challenging the way Canada subsidizes dairy exports and Japan's varietal testing requirements for imported fruits.

The U.S. Trade Representative's Office (USTR) and USDA have also used the WTO process to convince countries to reach favorable settlements without having to proceed all the way through the panel process, as was the case, for example, with South Korea's shelf-life restrictions on processed foods and Hungary's excessive export subsidies. Also, the United States recently reached an agreement with the Philippines under which the Philippine government agreed to reform the way it administers tariff-rate quotas that had severely restricted access for U.S. pork and poultry meat. These actions are part of our continuing effort to make sure countries live up to their Uruguay Round obligations.

We also insist that countries wanting to enter the WTO first undertake a serious commitment to trade reform--just as we did in recent accession negotiations with Taiwan. In February, the United States and Taiwan signed a bilateral agreement in which Taiwan committed to opening its market at significantly reduced tariff rates to a broad range of U.S. products upon accession to the WTO. The agreement on rice will provide access to Taiwan's market for the first time. Taiwan also agreed to immediate market access for a number of U.S. products and lifted its import bans on several beef, pork, and chicken products.

Slowly but persistently, these efforts have been stripping away many of the trade barriers to U.S. products and challenging the unfair trade practices that exist. The benefits are evident in export numbers that are running about 40 percent higher than they were at the start of the 1990's--and that is despite the current Asian situation and despite the stronger U.S. dollar.

We must continue to pursue an active, aggressive, ambitious trade policy agenda.

WTO 1999: Next Steps in Global Agricultural Trade Reform

One of the most important initiatives of the Administration's trade agenda is continuing the global reform process begun in the Uruguay Round. Planning is already underway for the next round of multilateral agricultural trade negotiations, set to begin late next year. For more than a year now, USDA, working in partnership with USTR, has been laying the groundwork for success in the difficult negotiations that will take place.

I will join Ambassador Barshefsky at the next WTO ministerial meeting, just 11 days from now. I intend to be heavily involved in the next round of WTO agricultural negotiations from the start. I want to send a clear message to the rest of the world that agriculture is a top priority for the United States and that we remain fully committed to open markets and fair trade.

The U.S. delegation will be seeking a WTO mandate for countries to begin preparations for an ambitious trade agenda leading up to the next round of multilateral agricultural negotiations. We want to make sure the preparatory work gets underway to clear the way for serious negotiations to begin on schedule.

The Department, in coordination with other agencies, will be consulting with Congress, with exporters, farmers, and ranchers and with others in agriculture on specific negotiating priorities.

Several key issues stand out:

• We need to make substantial further reductions in tariffs. Agricultural tariffs worldwide still average about 56 percent, while our own tariffs are about 5 percent on average. High tariffs raise the price for U.S. commodities and can shut them out of markets.

• We believe that quantities receiving low duties under tariff-rate quotas (TRQs) should be increased substantially, or that TRQs be effectively eliminated by cutting the level of the out-of-quota duty. Small TRQ quantities and high out-of-quota duties curtail exports, and restrictive methods of administering TRQs also impede trade.

• Exporting countries should further cut or eliminate export subsidies. The EU, for example, carries out an extensive subsidy program--the EU budgeted $7.1 billion for export subsidies in 1997. This level of EU subsidization makes a very strong case for further negotiations to reduce these trade-distorting practices.

• The next agreement should impose rigorous discipline on state trading enterprises (STEs). Export and import monopolies severely distort trade to the detriment of American farmers and ranchers. STEs cannot be allowed to continue to manipulate markets without themselves being at risk in the marketplace. We need to eliminate STEs and their monopoly controls over imports and exports of agricultural products--we need to let the market work.



• The negotiations should impose tighter disciplines to prevent countries from circumventing their trade commitments through disguised subsidies or non-tariff measures.

• WTO members should continue the process of delinking domestic support measures from farmers' production decisions, so that government assistance does not distort trade.

• The parties should ensure that WTO rules on sanitary and phytosanitary measures are fully and effectively implemented. While maintaining the rights of countries to protect health and safety, we want to make sure that science is the basis for human, animal and plant health rules.

While we pursue this new round of agricultural talks, the process of global trade reform must not come to a halt. However, this could happen if negotiations on new actions and larger tariff cuts are not completed by 2001, when most Uruguay Round commitments will be fully implemented by the developed countries.

We are beginning to explore with our WTO trading partners ways to continue implementing tariff and export subsidy cuts and other measures, even as we work on new disciplines that will need to be negotiated. The Uruguay Round commitments were just the first step in agricultural trade reform and we still have a long way to go.

So, any pause in reform would be unfortunate. In the Uruguay Round, countries agreed to continue the reform process beyond the year 2000, and we will work with our trading partners to see that this commitment is met without a pause. Our initiative is simple--No stopping and waiting for a new agreement to emerge--no pause.

While U.S. proposals for major new trade disciplines are unlikely to receive an enthusiastic reception from some of our trading partners, we do have allies who support further liberalization. In March, I participated in a meeting with farm ministers of the Cairns Group, which includes Australia, Canada, Brazil, South Africa, and 11 other nations. At that meeting, the Cairns Group adopted a communique calling for further tariff reductions, an end to all export subsidies, open access to approved agricultural technology, and several other objectives that largely parallel our own.

Regional Trade Initiatives

All of us have watched the proliferation of new trading agreements in this hemisphere. Most of these agreements have one thing in common--they do not include the United States. Of the 30 or so regional and bilateral trade agreements in the Western Hemisphere right now, we are party to only one--NAFTA. As other countries lock in preferential trade agreements, U.S. producers are often locked out of sales.

This is why we are pursuing other important trade initiatives--especially in the Asian-Pacific area through APEC and here in our own hemisphere. Last month, President Clinton and Ambassador Barshefsky participated in the second Summit of the Americas in Santiago, Chile, where negotiations on a Free Trade Area of the Americas (FTAA) were formally launched and an agriculture negotiating group established.

The FTAA talks are just getting started. We still have a long way to go, with an agreement scheduled to be completed by 2005, but the Ministers have already committed to achieve concrete progress by the year 2000.

The objectives of the FTAA negotiations with respect to agriculture include: (1) addressing market access barriers; (2) removing unnecessary and unjustified SPS measures; (3) eliminating export subsidies affecting trade in the hemisphere; and (4) identifying other trade distorting practices for agricultural products. The last two objectives provide the scope to address all trade-distorting practices that affect trade in the hemisphere, including practices of state-trading enterprises.

The other major regional trade initiative is the Asia-Pacific Economic Cooperation (APEC) Forum. In November 1994, the leaders of the 18 APEC member economies met in Bogor, Indonesia and laid down the groundwork to establish a free and open trade and investment area in the Asia-Pacific region by the year 2020; developed nations were put on a faster track and agreed to open markets by the year 2010.

Four of the 15 proposals for early trade liberalization are in the agricultural area, and all four include efforts to reduce or eliminate tariff and non-tariff barriers.

Just as with the FTAA, the overall plan is to take commitments achieved in the sectoral APEC negotiations and apply them multilaterally in the WTO, along the lines of the recently completed information technology agreement.

Conclusion

We have a lot of work to do--globally, regionally, and bilaterally--to enforce existing agreements, open new markets, and level the playing field. That is why we need to maintain the momentum and U.S. leadership of the trade reform agenda. Much of the world still looks to us for leadership, but countries will not sit around waiting. Our neighbors in this hemisphere are signing new trade agreements among themselves, often leaving U.S. producers at a disadvantage. The European Union and others recognize these opportunities and are pursuing these markets. Recently, the European Commission announced plans for a free trade agreement with Mexico.

The EU is also interested in pursuing a transatlantic trade initiative with the United States. We agree with many members of Congress and Ambassador Barshefsky that agriculture should be included in any agreement. We will be working with USTR as talks progress on this issue.

The trade policy successes of the past few years have brought new opportunities to U.S. agriculture. We must continue to build on those successes, and I am committed to that task.

Mr. Chairman, that completes my statement. I would be happy to answer any questions.

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