Senate Banking, Housing and Urban Affairs Committee

Subcommittee on International Trade and Finance


Hearing on the Effects of International Institutions
on U.S. Agricultural Exports

10:00 a.m., Tuesday, May 4, 1999


Prepared Testimony of Mr. Bryce Neidig
President
Nebraska Farm Bureau Federation


10:00 a.m., Tuesday, May 4, 1999

Mr. Chairman, members of the Committee, I am Bryce Neidig, President of the Nebraska Farm Bureau Federation and a member of the board of directors of the American Farm Bureau Federation. My family owns and I operate, along with my son, a 600-acre corn, soybean and alfalfa farm in northeastern Nebraska near the town of Madison. We appreciate the opportunity to testify before you today regarding negotiating objectives for agriculture in the next round of trade talks in the World Trade Organization.

The American Farm Bureau represents over 4.8 million member families in the United States and Puerto Rico. Our members produce every commodity grown in America and depend on access to customers around the world for the sale of over one-third of our production. Agriculture is one of the few U.S. industries that consistently runs a trade surplus, posting a positive balance of trade every year since 1960. The U.S. along with agriculture must be at the negotiating table in the next WTO round in a meaningful way, with trade negotiating authority, to ensure that this trade surplus continues.

I would like to note that an agricultural coalition of over 80 associations and companies has formed to begin preparing for the upcoming negotiations on agriculture in the WTO. This coalition, the Seattle Round Agricultural Committee or "SRAC," was formed in January of this year and represents U.S. agriculture from producer to processor. The SRAC is now finalizing its policy positions on the negotiating objectives for the new WTO round which will begin in Seattle at the WTO Ministerial Conference later this year. In addition, the SRAC is also making plans to showcase U.S. agriculture at the Seattle Ministerial Conference. My comments today, on behalf of the American Farm Bureau Federation, are complimentary to the negotiating objectives of the SRAC. In fact, our organization plays a pivotal role in the SRAC by serving as the coordinator of its meetings.

The ability of U.S. agriculture to gain and maintain a share of global markets depends on many factors, including obtaining strong trade agreements that are properly enforced, enhancing the administration's ability to negotiate increased market access for U.S. agriculture and building in the necessary changes to the WTO dispute settlement process to ensure timely resolution of disputes.

When Congress passed the 1996 Freedom to Farm Act, it phased out farm price supports, making U.S. agriculture more dependent on the world market. American farmers and ranchers produce an abundant supply of commodities far in excess of domestic needs and their productivity continues to increase. Exports are agriculture's source of future growth in sales and income.

As you are well aware, U.S. agriculture is reeling from low commodity prices. Given an abundant domestic supply and a stable U.S. population rate, the job of expanding existing market access and opening new export markets for agriculture is more important than ever. Agriculture’s longstanding history of a balance of trade surplus will not continue if we are relegated to the sidelines as new negotiations in agriculture commence.

Moreover, global food demand is expanding rapidly and more than 95 percent of the world's consumers live outside U.S. borders. Despite significant progress in opening U.S. markets, agriculture remains one of the most protected and subsidized sectors of the world economy. In addition, U.S. agricultural producers are placed at a competitive disadvantage due to the growing number of regional trade agreements among our competitors.

U.S. leadership of the global trade liberalization agenda has paid off for American agriculture. If the United States now leaves it to others to form new trade pacts and write future rules for trade, U.S. producers, processors, and exporters will be severely disadvantaged in the competitive marketplace of the 21st century. We are counting on this Administration and Congress to ensure that U.S. farmers and ranchers have a significant place at the negotiating table, armed with the tools they need, including trade negotiating authority.

Objectives for the Next Round

Higher living standards throughout the world depend upon mutually beneficial trade among nations. We urge that trade policies be developed that promote the growth in world trade.

To this end, U.S. negotiators must comprehensively address high tariffs, trade-distorting subsidies, and other restrictive trade practices in the new round of negotiations on agriculture.

The American Farm Bureau supports expediting action on the next round for agriculture in the WTO. Our market is the most open in the world. We cannot sit idly by while our competitors trade openly in our market, but deny us access to their markets on equal terms. We must begin the negotiations and conclude them as early as possible to put U.S. agricultural producers on a level playing field with the rest of the world. To this end, we have set a goal to complete the agricultural negotiations by the end of 2002 to ensure that our producers gain increased market access in a timely manner.

Second, we support a single undertaking for the next round wherein all negotiations conclude simultaneously. This format would prevent other countries from leaving the difficult agricultural negotiations until the bitter end while cherry picking the easier negotiations in other sectors. We believe that a short timeframe for the next round, coupled with a single undertaking approach, will prevent long drawn out negotiations that become too complicated to conclude expeditiously.

Third, we must call for the elimination of export subsidies by all WTO member countries. Our producers cannot compete against the mountain of spending by our primary competitors, like the EU. The EU spends in excess of eight times the level of domestic and export subsidies as the United States. Data from the U.S. Department of Agriculture and the European Commission show that total EU domestic and export subsidy expenditures for 1997 exceeded $46 billion compared to $5.3 billion spent by the United States. This level of spending distorts world trade and undermines U.S. producers’ competitiveness in vital export markets.

Fourth, we believe that the new negotiations must include a recommitment to binding agreements to resolve sanitary and phytosanitary issues based on scientific principles in accordance with the WTO Agreement on Sanitary and Phytosanitary Measures (SPS Agreement). The provisions of the Uruguay Round SPS Agreement are sound and do not need to be reopened. The United States has successfully litigated several SPS cases that underscore the strength of this agreement. Cases have now been tried that set precedence in each of the three areas of the SPS Agreement. For example, the successful U.S. litigation of the EU beef ban strengthens the provisions regarding human health, the Japan varietal testing case underscores aspects regarding plant health, and the Australia salmon case bolsters the animal health text of the SPS Agreement. Any change to the SPS Agreement would expose the sound scientific principles now embedded in its provisions – changes that the EU would relish making to restrict rather than facilitate trade.

Fifth, the next round should result in tariff equalization and increased market access by requiring U.S. trading partners to eliminate tariff barriers within specified time frames. Our producers compete openly in their own domestic market with their foreign competitors, but are shut out of export markets due to prohibitively high tariffs. We need to correct this imbalance for our farmers. All WTO member countries should reduce tariffs, both bound and applied, in a manner that provides commercially meaningful access on an accelerated basis.

Sixth, we must impose disciplines on state trading enterprises (STEs) that distort the flow of trade in world markets. Every effort should be made to craft an agreement that sheds light on the pricing practices of STEs and ends their discriminatory practices. Our producers have lost too many sales in third country markets due to the noncompetitive, nontransparent operations of STEs.

Seventh, we must ensure market access for biotechnology products produced from genetically modified organisms. Significant delays and a lack of transparency in the regulatory approval process for GMOs in the EU have heightened the need for science based, transparent provisions governing bioengineered products. We cannot continue to be held hostage to the EU’s nontransparent, discriminatory procedures that deny market access for our GMO products.

Next, we must end the use of all nontariff barriers to trade. There are several practices that have been employed by our trading partners to shut out competition in their domestic markets. These practices include, but are not limited to, domestic absorption requirements, discriminatory licensing procedures, price bands, and the administration of tariff rate quotas that prevent true competition. Provisions to address these and other nontariff barriers should be written into the new agreement on agriculture.

Finally, our negotiators must make changes to trading practices that would facilitate and shorten dispute resolution procedures and processes. The process for a WTO dispute settlement case typically runs three years, if the WTO ruling is implemented. We have seen in both the EU banana and EU beef cases that compliance is not always assured. Our trading partners cannot be allowed to unilaterally weaken the very principles that we negotiated in the Uruguay Round Agreement. The expedited dispute settlement process for perishable agricultural products outlined in the WTO Dispute Settlement Understanding should be modified to allow the procedure to be used if the aggrieved party requests it. Currently, the WTO requires that both parties in a case agree to use this procedure. As a result, it has never been used. This simple change should be enacted promptly. Doing so would address the fundamental problem of a dispute settlement procedure that requires too much time and prevents market access for several marketing seasons before a resolution is reached.

In summary, we support liberalization in global agricultural markets that will result in true reform of the current trading regime and bring about fair trade for our producers. The United States has a tremendous opportunity before it to shape the agenda for the next round and should seize this chance to demonstrate to the world that we are committed to opening new markets for U.S. agriculture. Given the economic turmoil being experienced in many of our important export markets, the launching of new negotiations to further open markets has never been more important.


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