STATEMENT OF

MR. DAVID J. FREDERICKSON

PRESIDENT

NATIONAL FARMERS UNION

BEFORE THE

SUBCOMMITTEE ON PRODUCTION AND

PRICE COMPETITIVENESS

OF THE

SENATE AGRICULTURE, NUTRITION AND

FORESTRY COMMITTEE

JULY 18, 2002

Chairman Conrad, Members of the Subcommittee, I am David Frederickson, President of the National Farmers Union. On behalf of our 300,000 family farmer and rancher members it is an honor to appear before you today to discuss S. 532, the Pesticide Harmonization Bill and the effect of our current pesticide regulations that allow differential pricing between the U.S. and Canadian agricultural input markets. In addition, I would like to submit a separate statement on behalf of the North Dakota Farmers Union and request that it also be made part of the hearing record.

Mr. Chairman, the NFU commends you, and Senators Burns, Baucus, Daschle, Dorgan and Johnson for the introduction S. 532. This legislation will amend the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) to establish conditions that would allow a state to register a Canadian pesticide for use within that state if the product is substantially similar or identical to one already registered in the U.S. We fully support this legislative initiative.

Since the ratification of the Canada-U.S. Trade Agreement (CUSTA), North American Free Trade Agreement (NAFTA) and the Agreement on Agriculture in Uruguay Round of the World Trade Organization (WTO); U.S. grain farmers, particularly those in the northern tier of states, have been frustrated by a number of trade issues with Canada due to provisions of the agreements. Since adoption of the agreements, Canadian exports of wheat and barley to the U.S. have increased many-fold even though the U.S. is a large surplus producer of these crops. This has resulted in clogged transportation and warehousing facilities near the border, increased competition for sales in our own domestic market and reduced producer prices for wheat and barley.

There are numerous reasons why the open border with Canada, that was created by trade agreements, has harmed U.S. producers. These include Canada's regulated marketing and transportation system, which are beyond the scope of this hearing. However, one key economic issue that has served to disadvantage U.S. farmers relative to our Canadian neighbors is the effect of our own pesticide labeling regulations on production costs. U.S. pesticide product labeling requirements have clearly provided pesticide manufacturers the opportunity to engage in differential pricing for similar or identical products between the U.S. and Canadian markets in ways that generally advantage Canadian farmers over U.S. producers without a further contribution to food, consumer, worker or farm operator safety.

It is hypocritical, that under the guise of free trade, we allow the import of food products from other countries that may be produced with pesticides that are illegal to use in this country or applied in a manner that may well be outside the strict limitations established under U.S. regulations. At the same time U.S. farmers are prohibited from the opportunity to purchase pesticide products in Canada that are identical to those registered for use in this country.

The purpose of FIFRA, administered by the Environmental Protection Agency (EPA), is to utilize the best available science in registering pesticide products to assure consumer safety of the food products to which they are applied as well as ensure their safe and effective use by producers and farm workers. I do not believe it was the intent of Congress to provide a shield for the manufacturers and marketers of pesticides so they could "gouge" their U.S. customers. Unfortunately that is exactly the experience we face under current U.S. regulations.

The environmental and agronomic factors that affect most farming operations in the Northern Plains states are comparable to those experienced by farmers in the Canadian prairies. However, the Canadian input-cost structure is significantly different than that of U.S. producers. Part of this difference is related to the type and level of federal and provincial programs available to farmers when compared to those in the U.S. A significant difference in farming costs, however, can be directly attributed to the wide differential in the cost of pesticides that U.S. producers pay versus those paid by our Canadian neighbors who are also our competitors in the U.S. and global agricultural markets.

Last year we developed a comparison of the per-acre costs for a variety of registered pesticides for the wheat and barley crops typically produced in both the U.S. and Canada. A table listing a sample of the information is attached at the end of this testimony. Although the data is based on last year's prices, it remains valid today in demonstrating the significant differences in producer costs for crop protection products. The U.S. pricing information was obtained from a local dealer located in Montana. A Canadian farm input supplier, whose business is located just across the border from the U.S. dealer, provided the Canadian price information.

For a typical 1500 acre wheat and barley farm that produces crops on 1200 acres and maintains 300 acres of summer fallow each year, the bill for crop pesticides is about $13,400 per year greater for the U.S. producer than his Canadian counterpart. This is serious money, and represents 12-15 percent of a farm's total gross crop income assuming average yields and current market prices. The impact of differential pricing of pesticides results in a significant competitive advantage for Canadian producers in both the domestic and global markets and results in a further reduction in U.S. producer market opportunities and income.

Under the proposed legislation, a state, farm organization or a farm-supply company could serve as the U.S. registrant for Canadian pesticides if they are identical or substantially similar to U.S. registered products. Many of the pesticides normally used by U.S. producers fit within this requirement and would therefore be eligible for purchase and use on U.S. farms after applying the appropriate U.S. registration label to the product container. While the opportunity for producer savings would be reduced somewhat by the additional inconvenience, transportation and re-labeling costs, the impact on most farms would still be substantial. The potential access to less costly pesticides provided by this legislation should result in more consistent regional and nationwide pricing policies by the manufacturers that will benefit all producers who utilize products that are registered in both countries.

The NFU is not seeking to reduce the level of regulation or oversight provided by the EPA to ensure the safety of agricultural pesticides. In fact, we support a more globally harmonized system of regulation based on scientific principles and risk assessment for these products that is comparable to those established in the U.S. This legislation does not weaken that objective. It simply provides the opportunity for economic relief from an artificially maintained pricing system affecting products that have been approved or are comparable to those registered by the EPA.

We support this legislation because it engenders fair market conditions and competition between the U.S. and Canada by reducing the potential for differential pricing by pesticide manufacturers. Additionally, it can provide greater equity and economic opportunity for U.S. agricultural producers by eliminating the ability of pesticide manufacturers to hide behind a U.S. regulatory technicality.

Mr. Chairman, I appreciate the opportunity to appear before the subcommittee today and offer the support of the National Farmers Union for the pesticide harmonization legislation you and many of your colleagues have introduced. We look forward to working with you to achieve passage of this important bill as expeditiously as possible. I will be pleased to respond to any questions you or your colleagues may have.