Hearing on Reauthorization of the Export Administration Act:
Government Agency Views

Prepared Testimony of the Honorable James Schroeder
Deputy Under Secretary for Farm and Foreign Agricultural Services
Department of Agriculture

10:00 a.m., Wednesday, June 23, 1999

Mr. Chairman, members of the Committee, I am pleased to appear before you today to testify on the reauthorization of the Export Administration Act of 1999, sanctions, and their effects on U.S. agricultural trade.

Reform of U.S. Sanctions Policy

Mr. Chairman, several weeks ago, President Clinton announced that the United States will exempt commercial sales of agricultural commodities and products, medicine, and medical equipment from future unilateral economic sanctions, except in compelling circumstances. This is a significant change in U.S. unilateral economic sanctions policy and it has important implications for American agriculture.

This policy was adopted in furtherance of two basic principles: a humanitarian principle that basics, such as food and medicine, should not be used as a tool of foreign policy; and an economic principle that our sanctions policy should not impose undue burdens on our farmers.

Last year, President Clinton signed legislation exempting certain U.S. Department of Agriculture (USDA) export credit guarantees from sanctions imposed against Pakistan and India under the Arms Export Control Act. He did so in order to avoid a de facto grain embargo against one of our leading wheat export markets. When he signed the bill, President Clinton said:

"We need to make sure that our sanctions policy furthers our foreign policy goals without imposing undue burdens on our farmers...When implementing sanctions, we must never forget their humanitarian impact...Whenever we can, we should look for ways to expand our agricultural exports, not restrict them."

That is the basis of our policy. Consumers around the world should know that the United States is committed to being a reliable supplier of food. When it comes to monitoring rogue nations and combating international terrorism, we will continue to be as vigilant as ever. But we have found too often that sanctions on agricultural products and medicine have no influence on the behavior of governing regimes. Instead, they may harm innocent and poor citizens, who may be denied basic tools of survival.

Farmers in this country know that we are committed to the expansion of U.S. agricultural export opportunities and that we will not restrict exports except in the most compelling circumstances. American agricultural export shares in sanctions markets are frequently captured by our global competitors. While this new policy does not mean automatic approval of agricultural sales, it places the presumption on the side of approval and gives U.S. producers and exporters an opportunity to compete in more markets.

The policy will permit licensing of commercial sales for exports to countries where unilateral economic sanctions are now in effect. Because under current policy, certain commercial sales of agricultural commodities are already licensed for Iraq, North Korea, and Cuba, this change affects only Iran, Libya, and Sudan.

We are working to implement these changes as quickly as possible. We are working with the Department of Treasury to develop licensing criteria consistent with standard industry practice to guide this review. These criteria will be designed to facilitate trade while ensuring that sanctioned governments do not gain unjustified or unwarranted benefits. Sales must be at prevailing market prices, and sales generally will be restricted to non-government entities or government procurement bodies not affiliated with coercive organs of the state. However, sales to some quasi-governmental organizations could be authorized, provided they are not affiliated with coercive organizations.

This policy change will cover agricultural commodities and products, medicine and medical equipment. We are working with the Departments of State, Commerce, and Treasury to develop precise definitions of the products to be covered.

This important step toward sanctions reform should help boost U.S. agricultural exports, particularly bulk commodities such as wheat, corn, rice, and vegetable oil. We estimate that our producers may sell an additional 500,000 to 1 million tons of both wheat and corn as a result of this change in policy. In addition, some of these countries were once major markets for U.S. rice, and we hope our rice producers will re-capture a fair share of these markets.

For example, Iran, a nation of 60-70 million people, represents around a $3-billion food market. Two decades ago, with only about half its current population, Iran was the biggest customer for American rice and one of the biggest for American wheat. Now our producers will have the opportunity to recapture their share of that market.

Reathorization of the Export Administration Act of 1999

Mr. Chairman, the legislation that the Committee is discussing today would forbid the President from imposing export controls on agricultural commodities and medicine on the basis of national security or foreign policy concerns. In addition, it sunsets all existing controls affecting agriculture and medicine mandated by law, unless Congress reimposes such controls by specific legislation within two years of the date of enactment of the Export Administration Act of 1999.

As our own policy demonstrates, the Administration believes that, in general, agricultural commodities, medicine, and medical equipment should not be used as a tool of foreign policy except in compelling circumstances. However, we believe that the President must have sufficient flexibility to impose comprehensive sanctions in compelling circumstances. The legislation before the Committee does not provide the President with sufficient flexibility.

Mr. Chairman, the Clinton Administration is committed to the reform of U.S. sanctions policies. We need to ensure that unilateral economic sanctions, if used, are effective; that the costs to U.S. interests are minimized; and that they contribute to U.S. foreign policy goals.

The changes that the Administration has announced follow through on the President's belief that agricultural commodities and other human essentials should not be used as instruments of foreign policy, absent compelling circumstances. However, we must

allow the President to have the flexibility to determine the most appropriate foreign policy and we are committed to working with the Congress to craft an acceptable approach to sanctions reform.

Mr. Chairman, that completes my statement. I would be happy to answer any questions the committee may have.

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