Statement of

LELAND SWENSON

PRESIDENT

NATIONAL FARMERS UNION

Before the

United States Senate

Agriculture, Nutrition and Forestry Committee

Washington, D.C.

September 30, 1999

Statement of Mr. Leland Swenson

President, National Farmers Union

Before the United States Senate

Agriculture, Nutrition and Forestry Committee

Washington, D.C.

September 30, 1999

Mr. Chairman, Mr. Ranking Member, Members of the Committee,

I am Leland Swenson, a farmer from South Dakota, and president of the National Farmers Union. It is my pleasure to appear before this committee to represent the views of the 300,000 family farmers and ranchers who comprise the National Farmers Union.

Our members are families located throughout the United States, and as a grassroots farm organization our policies reflect the views of actual producers, farm and ranch families who make their living growing food, fiber and raising livestock in America. Our livelihoods depend on a price and trade policy of our government that allows farmers to receive fair and honest prices in the marketplace in exchange for the labor, economic risk, efficient production methods, and resource conservation that produce the safest, highest quality of food in the world. The upcoming Seattle Round of the Multilateral Trade Negotiations will be a key event in shaping U.S. and world trade and agricultural policy for years to come.

Mr. Chairman, family farmers, ranchers and independent fishermen desperately need to be heard during the next round of the WTO negotiations. The National Farmers Union has asked farm organizations, producer groups, and independent farmers, ranchers and fishermen to join in a newly formed WTO Farmers, Ranchers and Fishermen Committee. As we begin the Seattle Round, virtually every industry is represented. We find in agriculture that the processing and the multi-national merchandising sectors are well represented within the process. Unfortunately, that hasn't been the case for independent family farmers, ranchers, and fishermen. We should not expect international grain traders and multi-national agribusiness's to represent the interests of farm families, and therefore, cannot accept a role for that sector that suggests they speak for family farmers. Producers need the opportunity to speak for themselves.

The increased volatility of the global economy that is at least a partial result of the more liberalized trading rules following the last negotiations have made the business of farming much more difficult. The National Farmers Union hopes trade rules can be shaped that give national governments the flexibility to deal with domestic farm policy, and food security and safety issues.

The previous Uruguay Round adopted new rules governing agricultural trade policy through a variety of disciplines, established rules surrounding the use of sanitary and phytosanitary procedures, formulated implementation guideline and timeframes, formed an agreement on a method for settling trade disputes, and established the World Trade Organization (WTO) to replace the General Agreement on Tariffs and Trade (GATT).

Our farmers need a fair trade environment, but since implementation of the Uruguay Round three years ago, there have been significant modifications to American farm and trade policy we believe are unmatched by any other significant agricultural producing nation. Is this fair to our independent family farmers? Have we unilaterally disarmed in the arena of world trade? Will our future trade policies favor 'corporate farming' over our independent family owned operations?

The Uruguay Round Agreement on Agriculture has contributed to a shift in U.S. domestic support of agriculture from safety-net policies that were designed to enhance the economic stability of producers. The 1996 farm bill reflects additional, unilateral policy adjustments that were not fully achieved or required by the Uruguay Round. These changes have placed U.S. farmers and ranchers at increased risk and competitive disadvantage relative to our major competitors. Many producers sincerely believe that through the NAFTA and WTO agreements, the U.S. gave away far more than we gained.

The Uruguay Round Agreement on Agriculture requires countries to reduce budget outlays for domestic policies that provide commodity specific assistance to producers. Management of production volumes, trade levels and commodity prices for U.S. farmers and ranchers have been left to a global market place. Recent global economic instability has caused dramatic currency fluctuations and reduced product demand beyond the producer's control. As a result, we have witnessed historic low prices for many farm products and increased stocks due to export demand that failed to meet the growth expectations of many policymakers and merchandising and processing experts whose vested interest is the expansion of trade volumes from any source, not improved income prospects for American farmers and ranchers.

Until 1996, U.S. domestic agriculture policy for major crops provided crop specific assistance mechanisms that generally maintained historic program benefit relationships in an equitable fashion among the major crop commodities. Policy changes for commodities have left farmers and ranchers in America without an adequate safety net for income support and risk management. Whether by accident, design, or political necessity, the shift to decoupled, direct payments for eligible program crop support and the diverse and arbitrary specifications that were placed on the remaining commodity marketing loans, has created inequity among producers, crops, and production regions. This has caused distorted production and marketing signals across U.S. agriculture. Mr. Chairman, the National Farmers Union has proposed a strategy to deal with this glaring problem, called the Commodity Equity Payment Program, and though it is beyond the scope of this hearing, I would be pleased to visit with you later about our proposal at your convenience.

The Uruguay Round calls for the decoupling of domestic supports to producers. We believe decoupled income supports are not necessarily and certainly not proven, the least trade distorting instruments under all economic conditions. Simplistic 'whole farm' agricultural policy scenarios are not often realistic responses to, or predictors of, international trade variables that necessitate a domestic policy response. Decoupled payments often lead to higher land values and cash rents, regardless of the value of the commodity produced, and allow for the "cross subsidization" of other commodities affecting supply and demand fundamentals that are difficult to predict. An important domestic reason for allowing direct payments to farmers is to ensure efficient family owned farms and ranches remain productive and an integral part of rural communities even in turbulent trade times. We feel this should be a primary objective of U.S. agricultural and trade policy.

The deepening integration of world markets in recent decades has blurred the lines of what were formerly sharp distinctions between "domestic" and "international" policies. Global agricultural trade has led to increased scrutiny of the differing domestic policy approaches utilized to provide stability to agriculture. Increasingly, restrictive technical import trade barriers based on health, quality, safety, or environmental standards of importing countries have attracted much attention. The regulatory environment agricultural producers confront is likely to become more complex unless clear and legitimate rules are established concerning such forms of market intervention.

This summer I returned from the International Federation of Agricultural Producers Commodities Conference in Regina, Canada. Not surprisingly, WTO issues were prominent on the agenda, including treatment for developing nations. In the Uruguay round, developing countries received special treatment, including less stringent disciplines in reforming their trade policies than those applied to developed countries. In the Seattle round, developing countries will continue to have a particular interest in the area of special and differential treatment, export restraints, price stability, food security, food aid, and food reserve policies. As developing countries more clearly identify their objectives and positions, it should be expected that additional coalitions of countries with common trade interests will emerge.

American farmers and ranchers must compete in a global agricultural and food economy. The prices they receive are dependent on what their commodities will bring on the world market. Fair trade requires access to markets on a level playing field, free from trade distorting policies. American family farmers and ranchers can compete in a fair trade environment that includes transparent trade and market policies and equitable, enforceable rules that are consistently applied. American family producers should not be asked to compete with agricultural products that are produced under less stringent health, safety, environmental, labor and other standards that are required of U.S. farmers and ranchers. Nor should our family farms be asked to compete with merchandising and processing systems whose vested interest is to achieve market power based on the elimination of fair competition.

Mr. Chairman, our specific recommendations are:

· Before any trade agreements are negotiated under new Seattle round provisions, an economic impact statement should be concluded concerning the effects of NAFTA and the WTO on family-sized farming and ranching operations in the U.S., by state and commodity.

· The establishment of a short-term international conservation reserve during periods of excess supply of commodities. An International reserve to idle acreage would help support commodity prices, reduce government subsidy expenditures, as well as provide environmental and conservation benefits.

· Urge trade negotiators to address the trade inequities created by currency differences and fluctuations among countries.

· Step up efforts to harmonize trade agreements to include labor, environmental, health, and safety standards that are leveled up to U.S. standards.

· Agreements should specifically retain the right of Congress to provide disaster assistance when the level of economic loss exceeds the level of risk management protection.

· Country-of-origin labels should be required on all agricultural products, in addition to more comprehensive standards for U.S. border and port inspections.

· Trade agreements should provide for a timely, workable dispute resolution process, and strengthen the current rules for implementing WTO dispute panel decisions.

· The U.S. must ensure that state trading enterprises make sales solely in accordance with commercial considerations, and achieve a recognizable level of price transparency.

· Trade negotiations should require consultation with both the House and Senate Agriculture Committees, and those committees should provide oversight throughout the negotiating process. Producer representation on trade advisory committees throughout the negotiations is essential.

· The Special Ambassador for Agriculture should be a permanent position in the Office of the U.S. Trade Representative.

· U.S. food security and supply issues should be examined as part of the policy directives of the National Security Council to specifically include oversight of the recent agribusiness consolidations, much as it is regarding national defense issues.

· Trade agreements should include a Trade Adjustment Assistance program to provide substantial funding to compensate producers for losses due to import surges, currency fluctuations, and other global variables.

· Trade agreements should include the ability for policies to compensate producers for the role they play in reducing worldwide greenhouse gas emissions.

· Trade agreements should allow for the continuation of the sugar, peanut and tobacco supply management programs.

We are concerned about the effects of the world farm economy on U.S. producers, and the challenges U.S. farmers face due to the variability of world markets. As we all know, currency fluctuations and political upheaval affect farm imports and exports. Markets that suddenly can no longer sustain or honor trade and contractual expectations are another example of trade events that negatively affect the farm and ranch families in the United States. These worldwide events are beyond the control of producers, and for the most part of governmental policies, including those of national and international regulators. As such, American farmers and ranchers should also be protected from market collapses, import surges and dumping through application of the Trade Adjustment Act of 1974 that protects American industrial workers from similar actions. Legislation was offered in the Senate Finance Committee by Senators Conrad and Grassley to create a Trade Adjustment Act for agriculture. We fully support their continued efforts to enact this important legislation.

We will oppose attempts by U.S. negotiators to bargain away existing American farm policies or authorities that could limit net farm income in the U.S., or even in other countries. Any trade policy that negatively affects net farm income will only force efficient family-sized farms into untenable economic situations, leading to the further loss of rural communities and unnecessary concentration of farming enterprises in the United States.

Thank you, Mr. Chairman for the opportunity to appear before you today to represent the views of the families of the National Farmers Union who farm and ranch in the United States.