Statement by Marc Curtis

Chairman, American Soybean Association

before the

Subcommittee on Production and Price Competitiveness

United States Senate

July 18, 2000

Good afternoon, Mr. Chairman and Members of the Subcommittee. I am Marc Curtis, Chairman of the American Soybean Association, which represents 28,000 producer members on issues of importance to all U.S. soybean farmers. ASA compliments you on calling this hearing, Mr. Chairman, and appreciates the opportunity to present our views on this important issue.

Exports are vital to maintaining and enhancing soybean prices and U.S. soybean producer profitability. One out of every two bushels of annual soybean production must be exported in the form of soybean, soybean oil and soybean meal. The importance of export markets has only increased as U.S. soybean acres have increased from 62.5 million in 1995 to 74.5 million this year.

The 1996 FAIR Act introduced changes in U.S. farm policy that have heightened the importance of having effective export programs and trade policies. Elimination of crop acreage bases and set-asides in favor of full planting flexibility on all cropland has made U.S. agriculture truly market-oriented and market-dependent.

This linkage was recognized by the authors and supporters of "Freedom to Farm" when it was enacted four years ago. It has been reiterated on various occasions since then, including in a letter of May 17, 1998, from major farm organizations, to the Administration and Congressional leadership. The need for strengthened export programs and trade policies have been at the top of ASA's list of priority actions needed to make the current domestic farm program successful.

Unfortunately, many of the initiatives urged by ASA and other farm groups since 1996 have either been ignored or given only partial attention by the Administration and Congress. The exception has been in the area of trade policy, when House approval of China PNTR was a solid victory for U.S. agriculture. ASA strongly urges the Senate to take similar action as soon as possible, and certainly before the August recess. Also, the WTO negotiating position tabled by the Administration in Geneva last month contains a number of positive proposals to reduce import tariffs, eliminate export subsidies and balance trade-distorting domestic support programs.

On the other side of the ledger, however, we are very concerned about the inability of Congress and the Administration to support reform of unilateral economic sanctions on agricultural exports, as provided for in legislation authored by Senator Ashcroft and others. And we will remain uncertain over the status of the new WTO round until Congress provides Trade Negotiation Authority and comprehensive talks are finally launched.

In addition, there has simply not been enough attention and support for programs designed to enhance U.S. competitiveness in the short and long-term. I would like to comment briefly on five areas where more needs to be done - market development, export credits, humanitarian food assistance, the Export Enhancement Program, and funding for FAS and APHIS activities.

Market Development

ASA and other Cooperators under the Foreign Market Development program have been seeking a long-term commitment to fund the program at not less than $40 million. Overseas programs and personnel who carry them out involve multi-year commitments and planning, and should not be subject to annual proposals to cut FMD funding by up to one-third in the President's Budget. The decision to transfer FMD funding from discretionary accounts through the appropriations process to the Commodity Credit Corporation has increased the priority of providing a minimum funding level in FMD's authorizing legislation, and we urge the Congress to provide a minimum authorization level as soon as possible.

We are also concerned about recommendations contained in USDA's checkoff task force report that would limit Cooperators' ability to utilize checkoff funds to inform foreign customers and governments about the effects of foreign laws and regulations. As countries around the world increasingly try to restrict U.S. exports through law or regulation, it is critical that Cooperators be able to continue to utilize checkoff funds in FAS-approved activities.

Finally, we understand that CCC funds provided to operate various export programs at USDA, including FMD and MAP, are not being made available by OMB until well into each Fiscal Year. These delays can cause serious problems as Cooperators have ongoing expenses to pay. Congress should take action to ensure that OMB allocates the full amount of funding for these programs promptly so that funds are available at the beginning of the Fiscal Year.

Export Credits

The GSM-S Export Credit Guarantee program has been a significant tool in financial sales of U.S. soybeans, soybean meal and soybean oil to foreign markets. With suspension of the Export Enhancement Program after 1994, GSM credit is the only government program available to assist U.S. agricultural exports to compete for commercial sales.

Under the last two farm bills, Congress authorized $5.5 billion in annual export credit sales. Since 1995, however, use of this important program has averaged only about $3.5 billion per year. There has been no clear indication as to why the full authorized amount of credit has not been utilized.

The 1996 farm bill also authorized the Supplier Credit Program under which private companies can initiate credit sales that would otherwise not be made under the GSM-102 program. USDA recently increased the amount of risk or coverage it will provide from 50 percent of the transaction value to 65 percent. Still, the program is not being widely used and is not achieving its potential in facilitating U.S. exports. ASA urges the Congress and USDA to consult with exporters that handle

bulk commodities to determine how terms of the Supplier Credit Program can be improved to make it useful in facilitating sales of soy products.

Humanitarian Food Assistance

The declining U.S. commitment to support humanitarian food assistance during the last 20 years is one of the most tragic casualties of the effort to balance the federal budget. Between 1985 and 2000, Congress and the Administration agreed to reduce by more than half funding for our core food aid program, P.L. 480, from $2.2 billion to $1.0 billion. Worse, funding for the market development portion of P.L. 480, Title I, has been greatly reduced.

As commodity surpluses have grown since 1997, the Administration has turned increasingly to donations under Section 416 (b) to complement the decline in P.L. 480 programming. In March 1999, ASA submitted to USDA a list of potential recipients of soy products under Section 416 totaling $1.0 billion. ASA also worked with soy processors and Private Voluntary Organizations to develop 14 proposals covering 21 countries, submitted to USDA last November. In February of this year, the Department announced its Section 416 allocation for this year. Soy products totaled only 425,000 tons--a fraction of ASA's request--and included only two of the countries targeted by the ASA/PVO proposals.

ASA estimated that this program would raise prices and reduce LDP payments to farmers by as much as $2.5 billion, which has not been disputed by anyone. During my year as ASA President, this is the most frustrating issue I faced. I do not understand why this Administration can choose not to invest $1.0 billion to save up to $2.5 billion and help feed poor and starving people around the world, and help U.S. farmers in the process, just to say that they didn't give farmers any money.

ASA has renewed its request for a substantial increase in soy product exports this year under P.L. 480 and the Food in Progress program as well as under Section 416. Facing another large soybean crop, we are calling on Secretary Glickman to designate soybeans, soybean meal and soybean oil as surplus commodities, and that USDA will purchase a substantial quantity of these products using CCC Charter Act authority. We ask that these actions be taken as quickly as possible this Fall to ensure a positive impact on prices at harvest, which would reduce LDP outlays on the 2000 soybean crop.

One of the largest obstacles in securing approval of Section 416 proposals is lack of consensus in the interagency Food Aid Policy Committee, which includes State Department, AID and OMB, as well as USDA. In the 1990 Farm Bill, Congress attempted to streamline approvals of food aid initiatives by making the interagency process consultative rather than requiring approval of USDA decisions. Unfortunately, this system has broken down into bureaucratic bickering, with OMB playing the role of rejecting food aid donations and concessional sales in order to limit agricultural spending. Clearly the food aid approval system has broken down and must be fixed.

ASA has also noted with interest the proposal for an International School Lunch Program, initiated by U.S. FAO Ambassador George McGovern and former Senate Majority Leader Bob Dole. When fully implemented, the U.S. would fund one-quarter of its projected annual budget of $3 billion to provide nutritious meals to school age children in recipient countries. This concept could be

expanded to include pre-school children in a "Food for Child Development" Program. There is an undeniable linkage between nutrition and mental as well as physical development that provides a strong moral and humanitarian motivation for this approach to improving life in the world's poorest countries. ASA urges the Congress to begin consideration of an international school lunch program that not only would benefit children around the world in the long and short terms, but also U.S. farmers and ranchers.

Export Enhancement Program

As Members of the Subcommittee recall, the 1996 FAIR Act authorized funding of the Export Enhancement Program at levels permitted under the Uruguay Round Agreement on export subsidies. The total amount of EEP funds authorized for FY-1995 through FY-2000 totaled over $2.0 billion. However, the Administration discontinued use of EEP after 1994, and less than $100 million has been used in the past six years. Furthermore, since it has been clear that EEP will not be used, the Congressional Budget Office regularly scores the cost of EEP at zero. This means that EEP funds, although authorized every year, are not available for use under other WTO-legal programs. Congress should pass legislation authorizing unused EEP funds to be used for other export development and assistance programs.

Foreign Agricultural Service and APHIS Trade Support Funding

The Foreign Agricultural Service (FAS) administers market development and export programs, conducts and supports trade negotiations, analyzes export markets, and must rapidly respond to and address measures that disrupt U.S. agricultural exports. Likewise, Animal and Plant Health Inspection Service (APHIS) personnel work with FAS to address sanitary and phytosanitary issues affecting U.S. exports. Currently, FAS and APHIS do not have the resources necessary to fully support U.S. agricultural exports. ASA urges the Congress to provide FAS and APHIS with additional staff and budget resources to allow them to better support U.S. agricultural exports, Cooperators and exporters.

Recommendations

Mr. Chairman, U.S. agriculture is owed a substantial back debt in funding for export programs. ASA recommends the following actions to restore the competitiveness of U.S. exports and reduce price-depressing surpluses:

· Authorize funding of the Foreign Market Development Program at not less than $40 million.

· Establish an Export Program Task Force to work with USDA to identify additional markets to utilize the maximum $5.5 billion in export credit guarantees.

· Have the Task Force also work with exporters to determine how terms should be adjusted to make the Supplier Credit Program effective for bulk commodities.

· Restore the Food for Peace program to its 1985 level of $2.2 billion under a "Super P.L. 480" initiative, with substantial funding utilized under the Title I market development portion of that program.

· Pass legislation authorizing unused EEP funds to be used for the market development and export assistance activities.

· Expand exports of soybeans and soy products, including soy protein products under the Food for Progress and Section 416 for FY-2001.

· Have the Export Program Task Force develop recommendations on how the inter-agency Food Aid Policy Committee can streamline its review process in order to expedite USDA recommendations on Section 416 and other food aid initiatives.

· Direct the Task Force to work with the World Food Aid Program and PVOs to develop the International School Lunch Program as a "Child Development Program," with the goal of providing nutritious meals to the pre-school and school-age children in the world's poorest countries.

· Provide FAS and APHIS with additional staff and budget resources to support trade-related activities.

Obviously, several of these programs entail substantial costs, and would need to be vamped up over a period of years. Others, including full funding of FMD, full use of the export credit program, an increase in Section 416 donations, and changes in administering Supplier Credit Programs and making approved CCC funds available at the beginning of each Fiscal Year can and should be done immediately. The fact that $2.0 billion in funds authorized to make U.S. exports more competitive in foreign markets under EEP have gone unused since 1994 is ample justification for moving ahead with these recommendations. If another reason is needed, the consequence of inaction is the status quo of production exceeding demand, low prices and farm income, and federal price and income support payments in the $17-19 billion range.

Thank you, Mr. Chairman, I will be glad to respond to questions.