STATEMENT OF

THE AMERICAN FARM BUREAU FEDERATION

TO THE

SENATE AGRICULTURE, NUTRITION AND FORESTRY COMMITTEE

REGARDING

PERMANENT NORMAL TRADE RELATIONS FOR CHINA

Presented by:

Sam Moore

President

Kentucky Farm Bureau

March 1, 2000

Good morning, Mr. Chairman. I am Sam Moore, President of the Kentucky Farm Bureau and I raise corn, soybeans, wheat, and cattle in Morgantown, Kentucky. I am here today on behalf of the American Farm Bureau. AFBF represents more than 4.9 million member families in all 50 states and Puerto Rico. Our members produce every type of farm commodity grown in America and depend on access to customers around the world for the sale of over one-third of our production.

I appreciate the opportunity to speak before you today on the important subject of the recently signed U.S. - China bilateral trade agreement and China's accession into the World Trade Organization (WTO). Farm Bureau has long supported China's entry into the WTO on a commercially meaningful basis. There has been a long-standing concern that the U.S. and other trading partners would consider China's entry into the WTO for geopolitical reasons. Since we now have an accession package which is indeed commercially meaningful for both the U.S. and Chinese economies, we should accelerate this accession protocol for precisely those geopolitical considerations.

This agreement is good for the American people. Having China -- the largest emerging economy in the world -- in the WTO will expand trade among all members leading to increased global economic prosperity, the very foundation of trade liberalization efforts. Having China in the WTO will advance the rule of law within China, and more importantly, will bind China to the rules of commercial law represented by the WTO. For China, this agreement will undoubtedly lead to increased economic and political freedoms. The promise, and premise, of trade liberalization is more than just that. It is the exchange of ideas and values that can lead to more fulfilling civic institutions and citizens.

We urge Congress to grant permanent normal trading relations for China as soon as the vote can be scheduled. There are a host of reasons to do so, but none better than improving the daily lives of the American and Chinese people.

This agreement is good for American farmers and ranchers. China is broadly recognized as the most important growth market for U.S. agricultural exports. The Department of Agriculture estimates that China's admission into the WTO could lead to an increase of $1.7 billion in sales of agricultural products within one year, just about doubling our current exports to that large country.

In addition, U.S. exports to the Asian region as a whole are expected to increase in the next few years as a result of China's accession into the WTO. This is likely to occur as Chinese consumption levels increase, domestic production patterns skew more to global prices, China ceases to employ export subsidies, and there is a commensurate decline in Chinese agricultural exports to the Asian region. This agreement may be with China, but it will have impacts far beyond Chinese borders.

China has agreed to several major concessions regarding agriculture. Many of the commitments go beyond what is currently mandated by the WTO.

1) China will begin to reduce tariffs immediately (upon accession), from an average of over 31% to an average of 15%. All tariff reductions are bound and will be fully implemented by 2004.

2) China has agreed to establish tariff rate quotas for bulk commodities such as wheat, corn, rice and cotton, which will give U.S producers a chance to compete for that market, without import licensing schemes or quantitative restrictions.

3) China has agreed that sanitary and phytosanitary disputes should, and will, be settled on a scientific basis.

--U.S. citrus exports to China will be phased in over a period of two years. After that, citrus exports would be permitted based on U.S. export standards.

--China will lift the ban on wheat and other grain exports from the northwestern U.S. by raising the tolerance level on TCK smut in bulk shipments.

--China has agreed to recognize the U.S. certification system for meat and poultry which will allow these products access to all segments of Chinese markets.

4) China has committed to eliminate use of export subsidies. This will be especially beneficial to U.S. producers as we export to third-country markets.

5) China has agreed to increase trading rights for the private sector and will phase out the state trading of soy oil. The right for importers to act on their own, without going through a state agent or middleman, could lead to a sizeable increase in imports.

China has signed a bilateral agreement in which they have agreed to solid market access commitments for American food and fiber products. In some instances, they have gone beyond what their minimum commitments would be under current WTO rules. Even the more conservatives estimates point to these commitments as placing China in the "top five" of U.S. agricultural export markets by the close of the decade.

I'd like to also mention the commitments that the U.S. has retained, or strengthened, as a result of this agreement to protect the U.S. market from unfair dumping of products by the Chinese.

This agreement ensures that American farmers and ranchers will have strong protections against unfair trading practices, including dumping. The U.S. will retain our current antidumping methodology, which treats China as a "non-market economy" in the future, without the risk of a WTO challenge. This provision will remain in force for 15 years after China's accession into the WTO. Its important that we were able to retain this provision given the production characteristics of an economy dominated by state or quasi-state run operations.

This agreement also ensures that American farmers and ranchers will have substantial protection against import surges of Chinese products. This mechanism, labeled the Product - Specific Safeguard, will address increased imports that cause, or threaten, to cause market disruption to any U.S. industry or sector. China is an agricultural exporter, and we have had instances of Chinese agricultural exports disrupting the U.S. internal market (e.g. apple juice concentrate, crawfish). While the U.S. has had success through its own domestic dumping laws in the past to address these issues, this new provision will accelerate the review and adjudication process. This Product-Specific Safeguard provision can be applied unilaterally by the U.S. under legal standards that are lower than those of the WTO. However, having a tool and using a tool are two different matters. We urge the administration to continue to use all tools available to combat the results of unfair production, marketing, and trade practices used by any exporting country.

The Chinese have offered American agriculture an historic opportunity which could greatly enhance our export potential at a time when it is drastically needed. It can positively impact farm income in the U.S. when the agreement goes into effect.

China has also offered the equivalent of this bilateral negotiation to many of our competitors. China will join the WTO, and our competitors will have the market to themselves unless Congress acts quickly to grant China permanent normal trading relations.

The vote for permanent normal trade relations is about trade. It's a vote for continuing the U.S. economic expansion and hopefully having that expansion flow into the U.S. agricultural sector. Farmers and ranchers are already hampered in developing export markets by our own unilateral sanctions and the unfair trading practices of other competing nations. We must ensure that we do not unilaterally disengage from this historic opportunity for American farmers and ranchers.