February 10, 2000

Mr. Chairman and Members of the Committee, I appreciate the opportunity to testify on the World Trade Organization (WTO). The National Oilseed Processors Association (NOPA) represents companies that process one or more of five oilseeds: soybean, sunflower seed, safflower seed, canola, and flaxseed. NOPA member companies operate 75 plants in 23 states and process more than 1.6 billion bushels of oilseed annually. The total value of the industry’s seed, meal, and oil production is about $30 billion, with nearly $10 billion of this being for exports.

The WTO negotiations are the best opportunity for U.S. agriculture to achieve more open and freer global markets. The United States and other members of the WTO must move forward if we are to continue to create export opportunities and growth. We will need to be bold and creative in meeting the challenges we now face. The U.S. must lead. Our strategy should include bilateral discussions with our trading partners in developing a common vision of the future.

We sincerely appreciate the efforts made by U.S. negotiators in December to launch the next round of WTO negotiations in Seattle. While we are disappointed that a new round was not launched in Seattle, we also recognize that the Uruguay Round Agreement provides for the services and agricultural negotiations to begin this year. As an active member of the Seattle Round Agricultural Committee (SRAC), NOPA has encouraged the Administration to continue to aggressively pursue the negotiations in agriculture while making it clear that any final agreement must be part of a broad agreement that encompasses all sectors in a single undertaking.

As soon as possible the next round of multilateral trade negotiations should be launched. It is critical that the WTO negotiations include, in a comprehensive manner, as many sectors as possible. An inclusive approach is necessary for the agricultural negotiations to achieve the significant reductions in trade barriers described later in this testimony. If the ultimate agreement were conducted under a sector-by-sector approach, individual sectors would be negotiated separately from all others and there would be no opportunity for WTO members to negotiate with full consideration of their overall trade interests.

The simple fact is that the future of U.S. agriculture is outside our borders. 5.8 billion of our customers (96% of the world’s population) are out outside the United States, compared to only 274 million people in the U.S. In addition, the population outside our borders will grow much faster than in the U.S. and all of those people, as their economic environment improves, will eat more. Also, U.S. agriculture continues to increase its productivity significantly every year, well beyond our domestic customers’ ability to increase consumption.

The reality is that even the best farm policy can never undo a bad trade environment. Today, the production from one out of every three acres planted in the U.S. is exported. When exports are down—as they were last year by about $11 billion (almost a 20% drop) from just 3 years ago (1996)—agriculture feels the pain. When the U.S. agricultural balance of trade is down—as it was last year to only $11 billion, the smallest agricultural trade surplus in 12 years since 1987—it strikes a serious blow to the overall U.S. balance of trade.

No one can question that progress was made in Uruguay Round Agreement on Agriculture (URAA). A few of the more important steps were:

• Establishment of disciplines and reduction of trade-distorting domestic support;

• Disciplines and reductions of export subsidies;
• Tariffication and reduction of tariffs; and
• Establishment of sound science as the rule for regulations affecting human, plant, and animal health.

However, we all know that more needs to be done. All around the world governments have attempted to swim upstream against the river of progress by maintaining barriers and continuing their trade-distorting practices.

Average bound agricultural tariffs for all WTO members at the end of implementation will be around 50 %, with some as high as 300%, while the U.S. agricultural tariffs are less than 10%. This is in comparison to average non-agricultural tariffs worldwide of about 4%. Final bound EU and Japanese agricultural subsidies are 3.5 times ($70 billion) and 2 times ($38 billion) higher than the U.S. limit of less than $20 billion. The EU is also spending over $7 billion in export subsidies, 57 times as much as the United States (about $122 million). In addition, in many areas we continue to see countries drag their feet in implementing their WTO obligations, particularly in the use of non-tariff trade barriers, such as regulatory approval practices.

While some of the issues can and should be part of bilateral discussions, the only avenue to address these issues in a meaningful comprehensive way will be in a broad WTO round of negotiations.

The American farmer, agribusiness, and food companies are the most efficient in the world. The average person in the U.S. spends 10.9% of his income on food, the lowest in the world. At the same time we are feeding America, 25% of U.S. agricultural production is exported to others in the world.

The benefit to the U.S. of having 89% of its income available for other economic activity is immense. Lower food costs make available time and resources to other economic, social and cultural activities and have allowed for the U.S. to make the great technological and economic advances we enjoy today.

However, other countries, by protecting their agricultural industries, are allowing the opposite to occur. They not only cheat their consumers out of the benefits we enjoy in lower food costs, but they are also limiting their ability to use their resources more productively. In effect, they are limiting their citizens’ ability to improve their quality of life and the opportunity to benefit from and contribute to a growing global economy. In the process they limit even their best producers’ and agribusinesses’ ability to respond to customer demands and to make the adjustments necessary to survive in this competitive world long-term.

As the leader of the free world the U.S. must lead. The world looks to the U.S. to provide leadership. While the current political environment does not bode well for granting the President Fast Track Authority for negotiation of a comprehensive WTO Round, those steps must be taken as soon as possible. In the mean time, we should be laying the ground work both in the U.S. and with our trading partners. This includes education. U.S. citizens and others around the world must recognize the benefits of trade and must be given the opportunity to benefit from the fruits of more open markets. Of course, that means both buying the products and being able to sell them. One-sided trade is not in anyone’s interest and is ultimately not sustainable.

Another area of opportunity is sanctions reform. Food and medicine should not be used as weapons. Over the last few years we have begun to see a growing awareness of this fact. Opening markets to food provides a "beach head" for democracy and freedom to follow where it does not exist and supports it where it does exist.

China is the largest growth market for oilseed products. China is currently an $847 million market for the oilseed industry and we expect it to exceed $1 billion annually in a short period of time. The WTO Accession agreement provides for greater market access in the form of stable import duties, growing TRQs with eventual elimination, and guaranteed private sector share of trade starting at 50% and growing to 100% by 2006. All of this under the rules and disciplines of the WTO. The importance of this agreement and this market can not be overstated.

Our specific objectives are:

• The largest possible reductions in individual oilseed and oilseed-product tariffs with eventual elimination of all tariffs on oilseeds and oilseed products;
• Harmonization at the lowest possible level of all tariffs on oilseeds and oilseed products;
• Elimination of export subsidies;
• Elimination of differential export taxes and other trade-distorting measures; and
• Disciplines on export credits and export financing.

We believe that the reduction of barriers to trade in oilseeds and oilseed products and all agricultural products is the only way to expand the markets for our highly productive agricultural industry.

NOPA has been working with the IASC for many years in pursuing the LPF. Five members of the IASC—NOPA, the European Oilseed Crushers Association (FEDIOL), Associacao Brasilerira das Industrias de Oleos Vegetais (ABIOVE), Camara de la Industria Aceitera de la Republica Argentina (CIARA), and the Canadian Oilseed Processors Association (COPA)—have signed a Joint Declaration to pursue liberalizing trade in oilseeds and oilseed products during the WTO negotiations. The five organizations have established a unified set of objectives to pursue with our respective governments in preparation for the upcoming WTO negotiations. Our goal is to form an exporting coalition with a unified message that the major exporting countries should take significant steps to level the playing field and that our respective negotiators should work aggressively together to open up import markets in order to gain access to consumers. It is vital that we reach a WTO agreement that provides for all countries to eliminate import tariffs and other trade barriers for oilseeds and oilseed products.

More than 50% of U.S. soybean acreage was planted with genetically modified varieties in 1999, up from 30% in 1998 and 13% in 1997. The U.S. oilseeds industry has been quick to adopt biotechnology because of the benefits it brings for producers, consumers, and the environment.

One of the reasons the United States is the world leader in the development and commercialization of agricultural biotechnology products is that we have an effective and efficient regulatory system that enjoys the trust of consumers. Unfortunately, this is not the case in many other countries of the world.

For example, the regulatory approval process in the EU is slow and unpredictable. The problem from our perspective is that political considerations have been allowed to overwhelm sound science in the decision-making process. The result is that new genetically modified varieties cannot be marketed in the United States without seriously threatening exports to our top market.

NOPA has encouraged the Administration to make resolution of these problems one of its highest priorities. If the EU approval system does not function in an efficient, timely, and transparent manner, trade problems will be unavoidable. The system should operate in such a manner that if there are serious, scientifically valid concerns about the safety of a new genetically modified crop variety, those concerns can be addressed before the product is approved.

In the short time since its adoption, the SPS Agreement has already been the subject of several politically charged dispute-settlement cases. Many more issues concerning questionable SPS issues have gone unresolved because the parties have not wanted to invest the time and resources necessary to pursue formal dispute settlement. A more informal process is needed for addressing technical issues, measures affecting products in which trade is not substantial, or any other situation in which formal dispute settlement is not warranted. Article 12.2 of the SPS Agreement provides for such a process. It allows the WTO SPS Committee to serve as an informal facilitator of disputes between parties over the interpretation and implementation of the SPS Agreement. During the Triennial Review of the SPS Agreement in 1998, the United States proposed developing procedures to make the provisions of Article 12.2. operative. We fully support this effort.

The implementation requirements of a WTO dispute-settlement panel decision should be addressed. Negotiators should seek to better define the gray areas of this critical component of the rules on multilateral trading. Several possible changes may allow for the process to be shorter, so decisions can be implemented more promptly.

WTO Safeguards Agreement

The rights of affected members to retaliate should be restored so that safeguard actions are not taken casually. The Uruguay Round changed the Safeguards Agreement with the effect of making it easier for countries to impose import barriers by restricting the right of affected members to retaliate before 3 years. As the world’s largest exporter of agricultural and food products, the U.S. is the most vulnerable to the misuse of safeguards agreements.

WTO Antidumping Rules

The U.S. should address WTO antidumping rules in the next round of WTO negotiations. The methodology used to determine whether dumping has occurred does not accurately reflect the dynamic nature of global agricultural markets.

In preparation for the WTO Ministerial meeting in Seattle, the Seattle Round Agricultural Committee (SRAC) was organized to serve as a vehicle for exchanging points of view on the negotiations, both within the agricultural community and with government, and when appropriate, to develop common policy positions. Members of the SRAC include the varied agricultural and food organizations and companies that will be affected by the outcome of the negotiations.

On April 6, 1999, 59 agricultural organizations sent a letter to President Clinton expressing support of a comprehensive round of multilateral trade negotiations that include all goods and service, continue to reform agricultural and food trade policy, promote global food security through open trade, and increase trade liberalization in agriculture and food. The SRAC recommended three process objectives that should be included in the negotiations:

• Conclusion with a single undertaking that encompasses all sectors (i.e., no early harvest).
• Adoption of the Uruguay Round framework for the agricultural negotiations to ensure that there are no product or policy exceptions (i.e., no request/offer approach).
• Establishment of a three-year goal for the conclusion of the negotiations by December 2002.

On May 11, 1999, the SRAC sent a policy statement to President Clinton outlining 14 objectives that should be included in the negotiations. The SRAC 1999 WTO Policy Statement was approved by 69 agricultural organizations and companies.

On May 25, 1999, the SRAC submitted its policy statement to be included as part of the written record in response to the Federal Register (FR Doc. 99-9288) printed on April 14.

On July 12, 1999, the SRAC sent a letter to President Clinton outlining concerns that the Administration supports early and on-going results, or early harvest, in the upcoming WTO negotiations. The SRAC believes such an approach would be extremely harmful to American agriculture if adopted as the format for the WTO trade discussions. The SRAC supports a single undertaking format for the negotiations wherein all negotiations conclude simultaneously.

Since last April, the SRAC has grown to over 107 agricultural organizations. The SRAC Policy Committee has met with Congressional committee staff, and Administration officials from the Department of Agriculture, Office of the U.S. Trade Representative, and State Department. Issues discussed have included, the SRAC Policy Statement, single undertaking, biotechnology, dispute settlement and the Administration’s objectives for the Seattle Ministerial. In addition, the SRAC sponsored a series of very successful activities in Seattle including daily press conferences, briefings for Members of Congress, bilateral discussions with similar organizations in other countries, and a program of trade discussions on "Agriculture Day" concluding with a reception for the world agricultural trade community.

Since Seattle the SRAC has had several meetings with USDA and USTR to discuss how we should proceed in the WTO Agriculture negotiations. On January 24, 2000, the SRAC sent a letter to the Administration. This letter is attached to my testimony. In summary the letter thanked the negotiators again for their efforts, expressed our strong view that the WTO agricultural negotiations move forward as part of the built in agenda, reaffirmed our support for the SRAC Policy Statement, including the need for a comprehensive round, and commented on issues related to biotechnology.

The American Oilseed Coalition (AOC), which includes the American Soybean Association, the National Cottonseed Products Association, the National Sunflower Association, the U.S. Canola Association, and NOPA, strongly supports the global liberalization of trade in oilseeds and oilseed products.

The AOC submitted written comments on the 1999 WTO negotiations (U.S. ITC Investigation No. 332-296) in December 1998. Those comments are available to the Committee for your consideration.

• Improving WTO disciplines through changes in Article 12 of the Uruguay Round Agreement on Agriculture to impose penalties on exporting countries if they prohibit or restrict exports. This would provide more protection to food-importing developing countries;
• Establishing WTO rules for developing countries to graduate to full WTO obligations using objective economic indicators such as per capita GDP; and
• Establishing effective disciplines on the trade-distorting practices of state trading enterprises and making their operations transparent.

Another key area of potential common interest to the U.S. and the EU is domestic support. The Uruguay Round Agreement on Agriculture required reductions in coupled support, support tied to production; established the "blue box" of policies not subject to reduction, including former U.S. deficiency payments and EU compensatory payments to producers of grains and oilseeds; and established "green box" (decoupled from production) programs exempt from reduction if they met certain criteria that made them non-trade distorting.

We would encourage all countries to move toward green box policies. We believe that it is very important to refine green box criteria for decoupled support in a way that they are practical for public policy. Green box criteria will permit countries to pursue "multi-functionality." This is the concept that domestic programs have more objectives than supporting farm income. NOPA supports the concept that domestic farm policies can have a number of objectives as long as they do not distort production and trade. Additional disciplines on blue box policies would help transition countries toward fully decoupled policies. The point is that it is difficult for countries to make immediate direct change from coupled to decoupled policies and they may need a transition period for this transformation. The EU’s movement toward adoption of Agenda 2000 and revised payments for grains and oilseeds, which while not fully decoupled and, therefore, subject to WTO reductions, is a movement in that direction. It is in the interest of the U.S. and our industry to encourage movement toward decoupled policies, and we should support language in the WTO that permits that transition.

The U.S.-EU trading relationship is of vital economic importance to both. In agricultural trade, there have been disputes. The latest disputes are bananas and bovine growth hormones. We believe that these disputes spotlight how disruptive such issues can become when WTO panel decisions have not been respected. Ongoing disputes such as these block progress on other trade issues and make it difficult for the U.S. and EU to work cooperatively to advance global trade liberalization. There are real opportunities for the U.S. and the EU to work together to make sure that the next WTO negotiations are successful in expanding global markets for oilseeds, oilseed products, and other agricultural products.

As the world looks to our country for leadership in moving forward in international trade, the United States has a tremendous opportunity to influence the agenda for the next round of WTO negotiations. As the largest, most dynamic economy in the world, the U.S. also has the most to gain from the next round. Further trade liberalization is needed to open new market opportunities for the ever-increasing output of U.S. agriculture. The U.S. must set an ambitious agenda for the negotiations and use its global leadership role to aggressively pursue a comprehensive trade liberalization package. We must also be creative in approaching the challenges and opportunities that face us today and into the future.

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 changing the WTO dispute-settlement process to ensure timely resolution of disputes.

Mr. Chairman, that concludes my remarks. Thank you for holding this hearing. I would be pleased to answer any questions.