Hearing on Reauthorization of the Export Administration Act:
Private Sector Views

Prepared Testimony of Mr. Andrew Whisenhunt
Arkansas Farm Bureau

10:00 a.m., Thursday, June 24, 1999

Mr. Chairman, members of the Committee, I am Andrew Whisenhunt, president of the Arkansas Farm Bureau Federation, a member of the board of directors of the American Farm Bureau Federation and chairman of its trade advisory committee, and a soybean farmer from Bradley, Arkansas. I appreciate the opportunity to testify today on the Export Administration Act, and specifically the agricultural exceptions to the export control provisions of that Act.

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. However, U.S. farmers and ranchers have been denied access to five export markets due to unilateral economic sanctions: Iran, Libya, Sudan, Cuba and North Korea.

The future of American agriculture depends upon access to foreign markets. Especially today, when agricultural exports are projected to decline from $60 billion in 1997 to $50 billion due to the Asian financial crisis, any action such as an embargo or sanction does direct and long-term harm to farmers and the agricultural economy.

American Farm Bureau Policy on Sanctions

Farm Bureau has longstanding policy opposing artificial trade constraints such as sanctions. We believe that opening trading systems around the world and open engagement with our trading partners are the most effective means of achieving international harmony and economic stability.

Farm Bureau believes that all agricultural products should be exempt from embargoes and unilateral sanctions, except in the case of armed conflict. Should trade embargoes or restrictions be declared in case of armed conflict, the embargo or sanction should apply to all trade, technology and exchanges. An embargo should not be declared without the consent of Congress.

Moreover, the threat of embargoes or other restrictions adversely affects markets and is an inappropriate tool in the implementation of foreign policy. If an embargo is enacted, farmers should be compensated by direct payments for any resulting loss.

Finally, all export contracts calling for delivery of agricultural commodities or products within nine months of date of sale should never be interfered with by the U.S. government, except following an embargo consented to by Congress. This sanctity of contracts is essential to maintain the reputation of the United States as a reliable supplier.

The Effect of Sanctions on U.S. Agriculture

The cost to American farmers resulting from sanctions and embargoes is high. According to USDA, the Soviet grain embargo of the early 1980s cost the United States about $2.3 billion in lost farm exports and government compensation to American farmers.

When the United States cut off sales of wheat to protest the Soviet invasion of Afghanistan, other suppliers-France, Canada, Australia and Argentina-stepped in. These countries expanded their sales to the Soviet Union, ensuring that U.S. sanctions had virtually no economic impact on the target country.

Not only do unilateral sanctions inflict no economic damage on the target country, they often result in little change in the foreign policy actions of that nation. Our competitors in these markets rub their hands with glee when the United States imposes unilateral sanctions. They are quick to expand their sales and take over the U.S. share in these foreign markets. Moreover, U.S. producers are branded unreliable suppliers and lose access to important markets for decades to come. Unilateral sanctions on agricultural exports must end.

In addition, unilateral sanctions are often counterproductive because target nations use images of suffering, innocent civilians to depict the United States as cruel and vindictive, thereby discouraging other nations from following suit.

As you are well aware, the Congressional Budget Office (CBO) recently conducted a study on the economic impact of unilateral sanctions on the U.S. economy. The CBO concluded that such sanctions "can be costly for individual U.S. businesses that lose out when markets adjust to accommodate new trade flows." The CBO also noted, however, that the overall cost of unilateral sanctions is negligible because the nation's total levels of trade and investment do not change as a result of sanctions.

We believe that this study underestimated the significant impacts on a sector-by-sector basis, particularly the devastating decline in loss of exports for U.S. agriculture. As a result of unilateral sanctions, over 14% of our rice market, 10% of our wheat market, 5% of our vegetable oil market, 5% of our barley market and 4% of our corn market have been taken off the table. This loss of market access is not "negligible." Given today's low commodity prices and declining agricultural exports, we simply cannot afford to have our access to export markets cut off.

It should be noted that when any type of sanction or embargo is imposed, either political or trade related, agriculture is the sector that is often the first to be hit in retaliation. To make matters worse, customers lost due to unilateral sanctions are very hard to win back. A case in point is the growth of soybean production in South America, primarily Brazil, as a result of embargoes in the 1970s and 1980s.

Sanctions on Cuba

Several Farm Bureau members recently participated in an agricultural trade exploratory mission to Cuba. It became very apparent on that trip the Castro regime has had an oppressive effect on the Cuban economy. It was also strikingly obvious, however, that U.S. sanctions on this tiny island have not had any impact in ending Castro's influence. U.S. unilateral sanctions on trade with Cuba have now been in effect for more than three decades with no tangible results. Meanwhile, leading agricultural economists predict that U.S. exports to Cuba could reach $1 billion annually if the sanctions were lifted. Cuban citizens are hungry for U.S. products and want to engage in trade with Americans. It is time that we lift unilateral sanctions on agricultural exports and stop making our producers pay the price.

The Export Administration Act (EAA)

We are pleased with the recognition of this committee that unilateral export controls cause long-term harm to U.S. agriculture and other sectors of our economy. We applaud your efforts to reform U.S. policy on export controls in a manner that would create an exemption for agriculture. This exemption would affect both existing and future sanctions, consistent with American Farm Bureau policy. We believe that provisions such as those written into the Export Administration Act (EAA) are what the United States needs in order to begin to restore the international reputation of our agricultural producers as reliable suppliers.

However, we note that the EAA currently excludes Cuba from its list of exemptions, thereby keeping current export controls, or sanctions, on Cuba intact. We urge your committee to revisit this specific exception of the EAA recognizing the positive effects of engagement with undemocratic nations like Cuba. We believe that trade with Cuba is one way to bring about democratic reform and note that decades of sanctions against this country have not been effective. It is time to adopt a new approach toward Cuba, one with the potential to result in true reform and one that will not exact a toll on our nations' producers like that of unilateral sanctions.

Recent Changes in Sanctions Licensing Policy

As you know, the administration announced a recent policy change with respect to unilateral sanctions now in force for Iran, Libya and Sudan. Commercial sales of food, medicine and medical equipment are eligible for exemption from sanctions to these nations.

We understand that the new policy will require exporters to obtain an export license covering a specific, already negotiated sale. Each export request will be reviewed on a case-by-case basis.

This new policy does not signal automatic approval of agricultural sales. Moreover, the new policy does not completely resolve the issue of U.S. producers being viewed as unreliable suppliers, because, in theory, an agricultural sale could be denied. The administration must grant approval to all agricultural sales in order to reverse the unreliable supplier image caused by unilateral sanctions.

The United States has an unprecedented opportunity to promote its values throughout the world by peaceful engagement. Reaching out, not withdrawing behind export controls, sanctions, or embargoes, is the best way to achieve change.

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