Statement Before

Senate Agriculture, Nutrition and Forestry Committee

By

Richard E. Bell

President and Chief Executive Officer

Riceland Foods, Inc.

May 11, 1999

Mr. Chairman and members of the committee, I am pleased to be here to represent the USA Rice Federation, an organization of rice growers, millers, marketers and allied businesses.

I am president and chief executive officer of Riceland Foods, Inc., headquartered at Stuttgart, Arkansas. Prior to joining Riceland, I served here in Washington as Assistant Secretary of Agriculture for International Affairs and Commodity Programs at the U.S. Department of Agriculture. I also served as president of the Department's Commodity Credit Corporation and as chairman of the Federal Crop Insurance Corporation. Earlier, I was a career officer in the Department's Foreign Agricultural Service and served in Dublin, Brussels and Ottawa.

Riceland is a farmer-owned cooperative serving rice farmers in Arkansas, Mississippi, Missouri, Louisiana and Texas. Riceland markets approximately 25 percent of the national rice crop and about 30 percent of that grown in the South.

I welcome the opportunity to be here today and support the policy imbedded in Senate bill S.566, the Agricultural Trade Freedom Act. We in the rice industry appreciate your leadership on this issue, Mr. Chairman, as well as the members who are supporting your efforts by co-sponsoring the bill.

Although U. S. rice consumption has increased dramatically during the past 15 years, exports continue to be extremely important to our industry. About

40 percent of our national production is exported. Last year, the industry exported rice to more than 100 countries. We at Riceland exported rice to more than 50 countries.

Trade and trade policy, therefore, are critical to our continuing success. The volume of exports usually is the dominating factor in determining the prices our growers receive for their rice.

I have often been asked during the past 18 months: "Why is rice doing so well compared to other commodities?" Part of the answer to this question is that we continue to increase per capita consumption of rice in this country. Rice fits today's lifestyle centered on diet, nutrition and health.

Equally important has been the success that rice has had from recent international trade negotiations.

The North American Free Trade Agreement (NAFTA) has given our industry access to a market that previously was restricted through state trading. NAFTA has transformed Mexico from state trading of rice, to an open market restricted only by moderate tariffs. As a result, Mexico was the leading export market for U.S. rice during the past three years.

In the Uruguay Round of trade negotiations, Japan agreed to import a share of its domestic consumption from the outside world. This concession has been of substantial benefit to the U.S. rice industry. Although most of the U.S. rice exported to Japan has come from California, the entire industry has benefited from the greater export demand, including we in the South.

With regard to the topic at hand, Mr. Chairman, probably no U.S. commodity or product has suffered more from U.S. trade sanctions than has rice. Three times we have lost leading export markets as a result of the U.S. Government imposing sanctions on exports to specific countries--Cuba in 1963, Iraq in 1990 and Iran in 1995.

At the time that the U.S. Government imposed sanctions on trade with Cuba, it was not only our largest export market for rice, but it took more than one-half of our total rice exports. The sanctions were a major blow to our industry; particularly to growers in the South who grow long grain rice.

It has been more than 35 years since we have been able to sell rice to Cuba. Our top quality, long grain rice has been replaced by cheap, low quality rice from East Asia. It is fair to say that many Cubans today have no recollection of the taste of top quality U.S. rice.

We do know, however, that the taste for it still exists among the Cuban population of South Florida. South Florida is now Riceland's No. 1 domestic market for our Riceland brand of long grain rice. As a result of this, we believe that we can regain the market in Cuba, if we can attain access to it.

As you are aware, Mr. Chairman, the Administration recently eased restrictions on exports of food and medicine to Cuba. As I understand the policy, we can export rice to Cuba if we can find a commercial buyer there. Unfortunately, there is no commercial market in Cuba, only state trading. In order to sell to Cuba, we need complete, open access to the entire Cuban market.

Our experience in two large markets in the Middle East, namely Iran and Iraq, is more recent. These countries are two of the world's leading importers of rice, particularly of the long grain rice produced in the southern United States.

Iran emerged in the 1970s as a major buyer of U.S. rice. This trade did not just happen. It had to be developed. In fact, the people at Riceland participated in a trade mission to Iran in the early 1970s which was instrumental in opening the market for U.S. rice.

By the end of the 1970s, Iran was the top market for U.S. rice, purchasing as much as 20 percent of all U.S. rice exports. Furthermore, Iran purchased only our highest quality rice. As was the case earlier in Cuba, we built a strong preference in Iran for U.S. rice.

With the change in Iran's government in 1979, Iranian purchases of U.S. rice came to a halt. The Iranian leadership did not want its people buying U.S. products.

During the 1980s, there was sporadic business in U.S. rice to Iran. Much of it apparently entered Iran as transshipments from other ports in the Persian Gulf region. By the early 1990s, we were gradually rebuilding the market when in 1995, the Administration imposed sanctions on U.S. trade with Iran, including transshipments.

Ironically, when we lost the Iranian market in 1979, we began developing the market for U.S. rice in neighboring Iraq which had similar tastes and market characteristics. We spent considerable time and resources during the 1980s to develop the Iraqi market. For example, one of our engineers at Riceland spent considerable time in Iraq teaching them the details of processing and using U.S. rice. All of this was lost, of course, with the eruption of the Persian Gulf war in the late 1980s. The war was followed by the imposition of U.S. sanctions on all private trade with Iraq.

In the instances of Iran and Iraq, our industry not only lost volume related to those markets, but we also lost markets for top-quality rice. These markets were not replaceable with other markets around the world. We had to sell our high quality rice elsewhere in the world at lower values.

In all three circumstances which I have discussed, namely Cuba, Iran and Iraq, there is no tangible evidence that our trade sanctions have done anything toward meeting U.S. foreign policy goals. Fidel Castro is still in charge in Havana. Saddam Hussein remains in Baghdad. The government in Tehran still disdains the U.S. Government.

Mr. Chairman, the only real winners in these cases are suppliers of lower quality rice elsewhere in the world. The big losers are the U.S. rice industry and the consumers in Cuba, Iran and Iraq. This is no way to run an enlightened trade policy.

It is interesting, Mr. Chairman, when on April 28, President Clinton announced his administration was moving to ease restrictions on trade with Iran, Sudan and Libya, that we at Riceland received a message from a former customer in Iran asking for price quotes for U.S. rice for export to Iran. Undoubtedly, memories of the taste and high quality of U.S. rice still linger in Iran.

Unfortunately, the policy initiated by the Administration on April 28 is not the one we originally anticipated. It appears as if the Administration is intending to put in place a system of export licensing for trade with these three countries. If so, this is disappointing.

I do not understand the reason for the Administration's proposal for case-by-case licensing. If it is to monitor sales, there is already a system in place to do this, namely the Export Sales Reporting program at the Agriculture Department. I am much more comfortable with the job being done at Agriculture than at The Treasury. This is why the reporting requirement was moved from Commerce to Agriculture in the 1970s.

In the case of rice to Iran, we need open trade if trade is to occur and grow. As a matter of fact, our potential customer in Iran who asked for the price quotes has faded away. He apparently has doubt that real trading will be permitted by the regulations being drafted by the Administration's executive departments. We do, however, applaud the Administration for its direction. But it is not as much as we had hoped for or need.

Some people will say that access to trade with these three countries--Cuba, Iran and Iraq--cannot be all that important to U.S. rice exports. After all, the U.S. rice industry exported to more than 100 countries last year.

This is simply not the case, Mr. Chairman. These three countries import 2 million tons of rice a year. This is equivalent to nearly 30 percent of our production last year and nearly 75 percent of our exports. Access to those markets would help our growers gain higher prices and reduce their costs through higher productivity, permit rice millers to get better returns on their investments, and allow allied industries to employ more people at better wages.

In conclusion, Mr. Chairman, I again commend you for your leadership in this matter and hope for success in passage and enactment of bill, S.566.

Thank you for your time and attention.