Thank you Chairman Lugar, Ranking Member Harkin, and other distinguished Senators for holding this important hearing regarding the plight of our nation's dairy industry. Your interest and desire in improving the domestic dairy industry is much appreciated.

The dairy industry is one of Wisconsin's leading industry. In 1998, approximately 22,000 dairy farmers produced 22.8 billion pounds of milk. Gross milk receipts for 1998 were approximately $3.5 billion. Roughly 160,000 people are employed in our state's dairy industry. Eighty-five percent of Wisconsin's milk is processed into cheese and other manufactured products. Wisconsin cheese is nationally and internationally renowned.

In the past few years, however, Wisconsin, like nearly every other state, has seen a tremendous exodus of farmers from the dairy industry. While much of the farm loss can be attributed to structural changes occurring within the industry, we cannot forget the impact that this nation's discriminatory federal milk marketing order pricing system and lack of international trade opportunities has on the average Wisconsin dairy farmer's balance sheet.

Mr. Chairman, much attention has recently been given about the fallout from the World Trade Organization (WTO) talks in Seattle. Specifically, many within the agriculture industry believe that not enough was done to reduce tariffs and other barriers to trade and expand market access for U.S. agriculture products.

Unfair blame has been directed toward U.S. Department of Agriculture Secretary Dan Glickman and U.S. Trade Representative Charlene Barshevsky regarding our agriculture trade woes. Blame, however, should not be placed squarely on their shoulders. After all, it is Congress, not the Administration, that permits the continuation of a byzantine federal milk marketing order system that favors one region of the country over another. It is Congress, not the Administration, that during the Fall 1999 sought to extend the life-support for a six-state milk pricing cartel that increases the price for fluid milk products for consumers and the government.

Ironically, just months before the Seattle WTO summit, the House passed a bill that replaced the U.S. Department of Agriculture's (USDA) market-oriented reform with a water-down version of the 60-year plus milk pricing system that favors those in the Northeast and Southeast. Not surprisingly, industry representatives from those regions of the country that benefit from the non-market oriented current pricing policy opposed USDA's plan and showered Congress with pleas

Kind testimony

February 8, 2000

to maintain the status quo even though it was the failures in the federal milk marketing order

system that led to the farmers demise.

In December 1998, I, along with Senator Pat Roberts -- a distinguished member of this Committee -- traveled to Brussels and met with members of the European Union's agriculture commission. There the Europeans told us that America's demand for the EU to lower their domestic and export subsidies and their import tariffs was hypocritical due to our nation's long desire to maintain our federal milk marketing order system.

According to a June 1999 report submitted by the Netherlands Ministry of Agriculture, Nature Management and Fisheries, "[T]he FMMOs (Federal Milk Marketing Order System) result in a consumer-financed subsidy of about $500 million a year to dairy farmers. This form of cross-subsidisation allows the American dairy sector to sell its butter, cheese, and milk powder at a lower price on the domestic market and on the export market. In view of WTO regulations, the FMMOs are controversial, to say the least." Mr. Chairman, why is it that members of Congress have no problem pointing out the flaws of the Europeans when it comes to domestic subsidies but we cannot acknowledge our own.

Wisconsin's dairy industry is not afraid of the international marketplace. In fact, my state's dairy manufacturers are equipped to sell specialized dairy products to any consumer, wherever he or she may live. While there are only so many things that Congress can do to assist, opening new markets and removing outdated and unnecessary domestic and international trade impediments are the most important.

Mr. Chairman, over the next two days, a number of industry representatives from those regions of the country that benefit from the non-market oriented current pricing policy will appear before your committee. I urge you to see through their arguments.

Without question, America's dairy farm families are enduring an unprecendented financial crisis with the price of raw milk at the 1978 level. This problem will not be resolved by creating new, regionally beneficial program that help some and harm others. Instead, any new pricing system must be fair, equitable, and best position the U.S. dairy industry for the economic challenges of the 21st century.

Thank you for the opportunity to appear this morning. I would be happy to answer any questions the committee may have.