[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
   LEVELING THE PLAYING FIELD AND OPENING MARKETS: NEGOTIATING A WTO 
                         AGRICULTURAL AGREEMENT

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                INTERNATIONAL ECONOMIC POLICY AND TRADE

                                 OF THE

                              COMMITTEE ON
                        INTERNATIONAL RELATIONS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                                   ON

                               __________

                             MARCH 23, 1999

                               __________

                           Serial No. 106-50

                               __________

    Printed for the use of the Committee on International Relations



                    U.S. GOVERNMENT PRINTING OFFICE
60-296 CC                   WASHINGTON : 2000




                  COMMITTEE ON INTERNATIONAL RELATIONS

                 BENJAMIN A. GILMAN, New York, Chairman
WILLIAM F. GOODLING, Pennsylvania    SAM GEJDENSON, Connecticut
JAMES A. LEACH, Iowa                 TOM LANTOS, California
HENRY J. HYDE, Illinois              HOWARD L. BERMAN, California
DOUG BEREUTER, Nebraska              GARY L. ACKERMAN, New York
CHRISTOPHER H. SMITH, New Jersey     ENI F.H. FALEOMAVAEGA, American 
DAN BURTON, Indiana                      Samoa
ELTON GALLEGLY, California           MATTHEW G. MARTINEZ, California
ILEANA ROS-LEHTINEN, Florida         DONALD M. PAYNE, New Jersey
CASS BALLENGER, North Carolina       ROBERT MENENDEZ, New Jersey
DANA ROHRABACHER, California         SHERROD BROWN, Ohio
DONALD A. MANZULLO, Illinois         CYNTHIA A. McKINNEY, Georgia
EDWARD R. ROYCE, California          ALCEE L. HASTINGS, Florida
PETER T. KING, New York              PAT DANNER, Missouri
STEVEN J. CHABOT, Ohio               EARL F. HILLIARD, Alabama
MARSHALL ``MARK'' SANFORD, South     WILLIAM D. DELAHUNT, Massachusetts
    Carolina                         GREGORY W. MEEKS, New York
MATT SALMON, Arizona                 BARBARA LEE, California
AMO HOUGHTON, New York               JOSEPH CROWLEY, New York
TOM CAMPBELL, California             JOSEPH M. HOEFFEL, Pennsylvania
JOHN M. McHUGH, New York
KEVIN BRADY, Texas
RICHARD BURR, North Carolina
PAUL E. GILLMOR, Ohio
GEORGE RADANOVICH, California
JOHN COOKSEY, Louisiana
THOMAS G. TANCREDO, Colorado
                    Richard J. Garon, Chief of Staff
          Kathleen Bertelsen Moazed, Democratic Chief of Staff
                                 ------                                

        Subcommittee on International Economic Policy and Trade

               ILEANA ROS-LEHTINEN, Florida, Chairperson
DONALD A. MANZULLO, Illinois         ROBERT MENENDEZ, New Jersey
STEVEN J. CHABOT, Ohio               PAT DANNER, Missouri
KEVIN BRADY, Texas                   EARL F. HILLIARD, Alabama
GEORGE RADANOVICH, California        BRAD SHERMAN, California
JOHN COOKSEY, Louisiana              STEVEN R. ROTHMAN, New Jersey
DOUG BEREUTER, Nebraska              WILLIAM D. DELAHUNT, Massachusetts
DANA ROHRABACHER, California         JOSEPH CROWLEY, New York
TOM CAMPBELL, California             JOSEPH M. HOEFFEL, Pennsylvania
RICHARD BURR, North Carolina
             Mauricio Tamargo, Subcommittee Staff Director
        Jodi Christiansen, Democratic Professional Staff Member
                Yleem Poblete, Professional Staff Member
                      Camila Ruiz, Staff Associate



                            C O N T E N T S

                              ----------                              

                               WITNESSES

                                                                   Page

Dr. Charles D. ``Chuck'' Lambert, Chief Economist, National 
  Cattlemen's Beef Association...................................     2
Mr. Thomas M. Suber, Executive Director, U.S. Export Dairy 
  Council........................................................     3
Mr. Nelson Denlinger, Vice President of Government Programs, U.S. 
  Wheat Associates...............................................     5
Dr. Val L. Giddings, Vice President for Food and Agriculture, 
  Biotechnology, Biotech Industry Organization...................     8
Mr. Nicholas D. Giordano, International Trade Counsel, National 
  Pork Producers Council.........................................    10

                                APPENDIX

Prepared statements:

Dr. Charles D. ``Chuck'' Lambert.................................    26
Mr. Thomas M. Suber..............................................    33
Mr. Nelson Denlinger.............................................    42
Dr. L. Val Giddings,.............................................    45
Mr. Nicholas D. Giordano.........................................    50
Hon. Ileana Ros-Lehtinen, Chair, Subcommittee on International 
  Economic Policy and Trade......................................    66
Additional material supplied:

Letter from Thomas M. Suber, U.S. Dairy Export Council...........    41




   LEVELING THE PLAYING FIELD AND OPENING MARKETS: NEGOTIATING A WTO 
                         AGRICULTURAL AGREEMENT

                              ----------                              


                        TUESDAY, MARCH 23, 1999

                  House of Representatives,
 Subcommittee on International Economic Policy and 
                                             Trade,
                      Committee on International Relations,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 2 p.m., in room 
2255, Rayburn House Office Building, Donald A. Manzullo 
(Chairman of the Subcommittee) presiding.
    Mr. Manzullo.  We will call this Subcommittee meeting to 
order. The Chairman should be here shortly. The Subcommittee 
today is going to deal with WTO and Agricultural products.
    I am going to ask everybody if they would be willing to 
waive any opening statements so we can move directly into 
testimony. Would that be OK?
    [Chorus of ayes.]
    Mr. Manzullo.  Thank you. Any opening statement that you 
may have had, please feel free to make a part of the record.
    Our witnesses, Chuck Lambert is the Chief Economist for the 
National Cattlemen's Beef Association. He works closely with 
Legislative and Regulatory Staff to explain and influence the 
outcome of beef industry economics on trade and marketing 
issues.
    He staffs the Live Cattle Marketing Committee and is 
involved in other organizations in order to get those puppies 
overseas, including my little herd that I produce each year. I 
appreciate all of your efforts on that, Chuck.
    Tom Suber is Chief Executive Officer of the U.S. Dairy 
Export Council. As Chief Executive Officer of the Council, he 
is responsible for the creation and implementation of all 
Council programs, develop export markets for U.S. dairy 
products. Welcome here today, Tom.
    Nelson Denlinger is Vice President of Government Programs 
for the U.S. Wheat Associates. He serves as the organization's 
liaison with Government agencies, including the USDA, State 
Department, and USTR on issues related to trade, credit, and 
legislation.
    He would be involved formulating the organization's 
position in the next Trade Round. Good to have you here, 
Nelson.
    Val Giddings is Vice President for Food and Agriculture of 
the Biotech Industry Organization, which has 800 members. It is 
the largest trade organization representing companies using 
biotechnology to produce new products in various industrial 
sectors.
    Prior to joining USD, Dr. Giddings worked as a 
biotechnology consultant to the World Bank. It is good to have 
you here, Val.
    Nicholas Giordano is the National Pork Producers Council's 
in-house International Trade Counsel. Mr. Giordano is 
responsible for the development and implementation of the Pork 
Producers Council's international trade policy and for areas of 
foreign market development.
    We appreciate you coming this afternoon. I am sorry that we 
are starting a little bit late. This is a 5-minute clock. When 
it gets to red, it is time to wind up.
    Let us start here with Dr. Lambert.

   STATEMENT OF DR. CHUCK LAMBERT, CHIEF ECONOMIST, NATIONAL 
                  CATTLEMEN'S BEEF ASSOCIATION

    Dr. Lambert.  Thank you, Mr. Chairman and Members of this 
Subcommittee. My name is Chuck Lambert. I am Chief Economist 
for the National Cattlemen's Beef Association.
    I appreciate the opportunity to visit with you today about 
issues that are vitally critically to the U.S. beef industry. 
The beef industry has emerged as an exporting sector of 
agriculture.
    As recently as 1985, we exported less than 1/2 of 1 percent 
of our production. Last year, we exported about 8 percent of 
our production and about 12 percent of the value of sales came 
from the export market. So, we have seen an increasing reliance 
on the export market.
    We would anticipate in the future that as the aging of the 
U.S. population takes place, and given the demographics in 
place, that we will increasingly rely on younger, faster 
growing economies with increasing disposable income.
    The U.S. beef industry, as most U.S. agriculture has been 
very supportive of it advancing and expanding trade, removing 
barriers to trade.
    We have some real concerns about recent events or ongoing 
events involving the European Union in kind of an issue that 
has been ongoing since 1989 when we were shut out of the 
European Union because of use of technologies, which have been 
approved here, and have been routinely used in the U.S. 
production system since the 1960's.
    In the case of the European ban on U.S. beef, we filed a 
case with the WTO in January 1996. Following that process, the 
U.S. has won that case and the decision. It has been upheld 
upon an appeal. The end of the reasonable period that the 
arbitrator granted the European Union to bring their 
regulations into compliance ends on May 13, 1999.
    We, as an industry, have worked closely with the 
Administration. We have urged all parties to not let this 
deadline slip further. Concern that the Europeans have 
historically utilized stall and delay tactics, which have 
postponed and basically kept them from complying with rulings 
of the WTO.
    The U.S. beef industry feels that we have been patient and 
that there is a growing sense of--even though we have been very 
pro-trade in the past--there is a growing sense of frustrating 
and of protectionism in the Country and that we need to stand 
tough to win a couple of these cases so that we can prove that 
the system works to address concerns that we are not playing on 
a level playing field, and to regenerate some enthusiasm and 
some support for continuing and expanding the trade agenda.
    With respect to the 1999 Round, the beef industry, again, 
most of agriculture feels that we should expand the trade 
agenda, not just negotiate on agricultural issues. That, at 
least with the beef industry, our market is probably the most 
open market in the world.
    Our tariff rate quotas are at levels that are rarely 
threatened of being filled. So, generally the world does have 
access to our market. By expanding the trade agenda that we do 
have more leverage and we will be able to address some of the 
issues of concern in the beef industry.
    I thank you for your time and will be willing to address 
any questions.
    [The prepared statement of Dr. Lambert appears in the 
appendix.]
    Mr. Manzullo.  Thank you. We just got a list today of the 
$900 million in the retaliatory tariffs that the USTR is going 
to impose on the Europeans. They just came out today.
    I do not know if you are aware of that. It is quite a list. 
I am going to be in Rome and Florence next week. What a time to 
go, huh? They will be complaining about that.
    Mr. Suber, I will do my best to time you with the 
mechanical watch. Evidently, these things are not working too 
well.

STATEMENT OF THOMAS SUBER, CHIEF EXECUTIVE OFFICER, U.S. EXPORT 
                         DAIRY COUNCIL

    Mr. Suber.  Mr. Chairman and Members of this Subcommittee, 
I am the Executive Director of the USTR Export Council. I am 
pleased to appear today to testify on the upcoming WTO 
negotiations in agriculture.
    U.S. Dairy Export Council is a non-profit membership 
organization focused solely on increasing the volume and value 
of U.S. Dairy Exports. We received most of our funding from 
Dairy Management Incorporated, which is the organization 
responsible for managing the farmer-funded dairy check-off.
    The market promotion programs of USTA's Foreign 
Agricultural Service, however, also an important share of our 
funding. Our members cover the full range of the dairy 
industry, dairy farmers, processors, cooperatives, and export 
trading companies.
    The U.S. dairy industry is the second largest agricultural 
commodity sector in the United States measured by farm 
receipts. Its importance to the Nation is magnified when one 
also considers the extensive investment and employment tied to 
the processing side of the industry that turns a farmer's milk 
into exportable products.
    The industry is a relative new comer to international 
trade. While its trade is modest in comparison to the $20 
billion domestic market, U.S. dairy exports have grown over the 
past 5 years. In 1998, despite the financial melt down 
affecting U.S. agricultural exports generally, U.S. exports on 
a milk-equivalent basis actually rose about 1 to 2 percent. The 
most remarkable growth took place in markets where the 
industries invested most of its time and money.
    For example, cheese imports increasing 20 percent to Japan; 
Korea taking 20 percent more away proteins, and American ice 
cream, the highest of our high value products, increasing last 
year to such countries as diverse and economically challenged 
as Japan, Mexico, and China.
    American dairy products can and do perform successfully 
where there is a level playing field. Our industry's slow 
emergence internationally, however, stems from the fact that 
the dairy industry is one of the world's most protected and 
subsidized industries.
    Trade practices are exacerbated by widespread financial 
problems and they result in an artificially low world price in 
dairy, anywhere from 25 to 50 percent below U.S. prices. This 
is despite the fact that the U.S. dairy industry is one of the 
world's most efficient and low cost producers at the 
production, processing, and the distribution levels.
    This situation has motivated our members to seek 
substantial reductions and elimination of remaining trade 
barriers to dairy exports in the next WTO Round. Let me briefly 
describe two of our five industry objectives. The others are 
contained in my written testimony. The first one, the 
elimination by an established date of all remaining dairy 
export subsidies. When the current WTO agriculture agreement is 
fully phased in next year, it will still permit almost 60 
percent of projected world dairy trade to remain subsidized.
    The distribution of these subsidy allowances is highly 
skewed. On a milk-equivalent basis, the European Union accounts 
for fully 72 percent of these subsidies while the United States 
will account for just 3 percent.
    The use of export subsidies is a primary factor that keeps 
world dairy prices depressed below U.S. domestic prices and 
hobbles our export expansion. The second major goal is the 
substantial reduction of remaining trade barriers to U.S. dairy 
exports. Let me give you some examples.
    The European Union, the world's largest dairy market, under 
its WTO commitments, can impose a tariff rate of 240 percent. 
It gets all but a few limited quantities of cheese. Canada, our 
largest trading partner, imposes tariffs on U.S. cheeses at 
about 245 percent.
    We also maintain significant tariff barriers against dairy 
products, but not at levels nearly as high as these. This is 
important to emphasize that our dairy industry recognizes that 
we must give access to get access.
    Yet, unless all countries reduce their tariffs, especially 
the highly protected markets with very high domestic prices, 
the U.S. will remain the primary target for lower cost 
suppliers.
    To achieve these and other objectives, the Council strongly 
supports renewal as fast as possible of the fast track 
negotiating authority as essential to achieve a timely outcome.
    The Export Council does have first-hand experience in how 
effective the WTO can be in reducing practices that distort 
international trade. For example, Canada had committed to 
reduce its dairy producer finance export subsidy program in the 
last Round.
    Shortly after implementation, the Canadian Government 
modified its programs, keeping key functions in tact, and then 
claimed the program was no longer subject to the WTO subsidy 
constraints.
    Despite high domestic costs, Canadian dairy exports 
ballooned into low priced world markets and often displaced 
U.S. commercial exports. More ominously, the European dairy 
industry, significantly larger, was considering adopting a 
similar system.
    The U.S. dairy industry successfully petitioned our 
Government to challenge both Canada's program and its 
restrictive implementation of a commitment to allow fluid milk 
imports. Just last week, the U.S. Trade Representative 
publicized the WTO Round ruled that both Canadian programs 
violated its WTO commitments. While Canada can and probably 
will appeal this decision within the WTO, we are confident that 
the finding will stand and that Canada will make the necessary 
changes to comply.
    A decision supporting Canada would have thrown the 
foundation of the current agreement into disarray and the 
upcoming negotiations could have deteriorated into a costly 
effort to fix a crippling defect.
    We appreciate very much the intensive work by USTR and USDA 
in this cooperative and successful effort between Industry and 
Government. We also applaud USTR's resolute pursuit of 
compliance in recent weeks with other WTO rulings similar to 
that, that Dr. Lambert described.
    Finally, the Dairy Export Incentive Program, known as DEIP, 
provides the necessary means to allow the U.S. dairy industry 
to develop sustainable export markets in the face of continuing 
use of subsidies by our competitors.
    The Export Council and other dairy organizations recently 
asked the Secretary of Agriculture to release the so-called 
unused export subsidies, approximately 74,000 tons of skim milk 
power, that were not used in the first WTO Agreement.
    Such reprogramming is allowed in the WTO. Our request is 
especially appropriate in light of U.S. Congress' mandate in 
the last far bill that the Secretary of Agriculture make 
maximum permissible use of the DEIP Program. We welcome your 
interest in this matter and that the Congressional wishes are 
carried out in connection with this request. I appreciate the 
opportunity to testify. I will be happy to answer any 
questions.
    [The prepared statement of Mr. Suber appears in the 
appendix.]
    Mr. Manzullo.  Thank you. Mr. Denlinger.

  STATEMENT OF NELSON DENLINGER, VICE PRESIDENT OF GOVERNMENT 
                PROGRAMS, U.S. WHEAT ASSOCIATES

    Mr. Denlinger.  Mr. Chairman and Members of this 
Subcommittee, thank you for the opportunity to appear today 
before this Subcommittee on International Economic Policy. My 
name is Nelson Denlinger. I am Vice President of Government 
Programs for U.S. Wheat Associate, an organization that works 
to promote exports of wheat on behalf of U.S. producers.
    We are delighted that this Subcommittee is having a hearing 
today on this timely topic. Export markets are extremely 
important for agricultural producers, in particular, wheat 
producers.
    In any given year, we export approximately half of the 
wheat that is grown in this Country. Unfortunately, dealing in 
the international marketplace can sometimes be an exercise in 
frustration due to the many trade obstacles that we face.
    One of the critical ones outside of the WTO's concerns is 
the fact that we have significant economic trade sanctions on 
wheat exports and other agricultural products. We are concerned 
particularly with regard to a number of key countries where we 
are excluded, which constitute roughly 10 percent of the 
world's wheat trade on an average year.
    Last August, the U.S. Wheat Associates adopted a policy 
statement that suggested that, other than in the case of war or 
national security, the United States should refrain from the 
use of unilateral sanctions for food, food products, medicine, 
medical supplies, including financing.
    Other trade restrictions and obstacles can only be dealt 
with through multi-lateral trade negotiations, such as the WTO, 
which will hold its ministerial meeting in Seattle to kick-off 
the Trade Negotiating Round.
    There are a number of important issues that U.S. wheat 
producers are concerned about, which they would like to see 
addressed in terms of the Seattle kick-off, including export 
subsidies, domestic supports, State Trading Enterprise, and 
genetically modified products.
    In the area of export subsidies, the European Union's use 
of direct export subsidies continues to be a problem. Not only 
does the E.U. persist in the use of export subsidies to gain 
market share at the expense of the United States and other, it 
also switches subsidies between wheat and flour in such a 
manner so that it disrupts trade in both commodities.
    Unfortunately, these trade distorting subsidies are 
consistent with the E.U.'s commitments under the Uruguay Round, 
which did require a reduction in subsidies, but not an 
elimination.
    We would urge that in the next round of the multi-lateral 
trade negotiations within WTO that we have an elimination of 
export subsidies. This would bring agriculture trade rules up 
on a par with industrial goods where subsidies have been banned 
since the 1950's.
    The reform of the E.U.'s common agricultural policy, also 
known as Agenda 2000, also is of serious concern to wheat 
producers who fear that unlimited domestic support payments to 
E.U. farmers with de-coupled payments will continue to 
encourage unwarranted expansion of wheat production in Europe.
    They will be reducing their export subsidies in all 
likelihood, but the problem will still continue. We would urge 
close attention to this matter, which we feel will be a 
continuing problem.
    We would urge that all of the--supports under the Uruguay 
Round be reviewed. As for domestic support programs here in the 
United States, we should be prepared to see these programs 
reviewed, particularly the loan deficiency payments, Section 
416 Purchase and Donate Program, since these programs were 
implemented since the conclusion of the Uruguay Round.
    We expect that they will still be well under the levels of 
the Uruguay Round. It is important that these programs be 
measured in relation to those operated by other WTO countries, 
particularly the European Union.
    The practices of the monopoly State Trading Enterprises, or 
STE's, such as those in Canada and Australia, have long been a 
thorn in the side of U.S. wheat producers due to the 
discriminatory pricing practices practiced by the STE's. We 
strongly support the introduction of disciplines on the non-
transparent pricing practices of the STE's.
    While it is difficult to document, our organization has 
evidence indicating sales routinely being made by a variety of 
wheat importing countries by STE's outside normal business 
practices, including standing offers to undercut prices.
    This lack of price transparency underscores the long-term 
need to reform these entities. Government sponsored monopolies, 
such as the Canadian and Australian Wheat Board, are 
anachronisms of an old socialist era that do not belong in the 
modern world moving toward free and fair trade.
    In an era of genetically modified products, had the 
negotiators in Cartegena, Columbia been able to agree on a 
biosafety protocol last month, that protocol could have had 
substantial impact on the international trade of genetically 
modified products.
    This protocol would have required exporting countries to 
obtain permission from importing countries before shipping 
genetically modified seeds, plants, or products.
    The United States and other countries objected to the 
proposal, as it would have resulted in labeling and other 
requirements that were unnecessary, or unduly restrictive, or 
that would have been difficult to meet. The United States' 
wheat growers would like to see the WTO establish a time-
defined science-based review and approval process for 
genetically enhanced products.
    That WTO signatories, particularly Canada, the United 
States, the E.U., and Japan promote effective communication and 
coordination among their regulatory authorities with respect to 
approval processes for genetically enhanced products.
    We also strongly urge the WTO establish clear rules based 
on sound science with respect to trade in genetically enhanced 
products and ensure that biotechnology----
    Mr. Manzullo.  You are running out of time.
    Mr. Denlinger.  Sorry?
    Mr. Manzullo.  You are running out of time.
    Mr. Denlinger.  OK.
    Mr. Manzullo.  You can conclude.
    Mr. Denlinger.  I will conclude.
    It is still on blue. I am sorry.
    Mr. Manzullo.  Well, I guess it is.
    Now it is not. I do not think this is working. So, forgive 
me.
    Mr. Denlinger.  Last week, the Board of Directors of U.S. 
Wheat Associates began the process to develop a formal U.S. 
wheat industry position for the next round of the WTO 
negotiations.
    Following this meeting, the process of pulling these ideas 
together will take place and we will have approval this summer. 
We would be happy to share the results of that effort with this 
body and other Committees on the Hill.
    Thank you very much.
    [The prepared statement of Mr. Denlinger appears in the 
appendix.]
    Mr. Manzullo.  Thank you. Dr. Giddings.

STATEMENT OF DR. VAL GIDDINGS, VICE PRESIDENT, BIOTECH INDUSTRY 
                          ORGANIZATION

    Dr. Giddings.  I would like to thank you, Mr. Chairman, and 
Members of this Subcommittee for the opportunity to be here and 
testify today. With your permission, I would like to submit my 
written remarks to the record and summarize them.
    Mr. Manzullo.  Without objection, all written remarks, 
reports, or statements of members will be included in the 
record.
    Dr. Giddings.  I would like to endorse the comments of my 
colleagues so far, and preemptively those of Mr. Giordano. I 
cannot imagine him saying anything that would be objectionable 
with Members that I represent here on behalf of the 
Biotechnology Industry Organization.
    I am particularly pleased that Mr. Denlinger's comments on 
the biotechnology protocol, an issue I have worked on for 
nearly a decade, and which is very near to, if not my heart 
perhaps my gallbladder.
    I was in Cartegena. We would be particularly delighted to 
talk about that in a question and answer session if any of you 
folks have questions about it.
    I would like to address particularly the issue of 
biotechnology, and biotechnology products, and agriculture in 
my brief remarks today.
    I will summary. I have already given you a little bit of a 
context. I want to summarize briefly what biotechnology is 
doing to American agriculture and ultimately to global 
agriculture.
    Basically, it is changing the face of agriculture. It's 
transforming it to a much more sustainable basis than anything 
we have ever seen before, enabling us to increase dramatically 
production while dramatically decreasing input costs and 
environmental impacts.
    In the 1998 growing season, there were nearly 60 million 
acres of transgenic crops being grown in the United States out 
of a total of about 70 million worldwide. Those two numbers 
right there gives you an indication of some of the sorts of 
problems that we have with biotechnology products, agriculture, 
and international trade.
    We are far enough ahead. A number of other folks are 
looking for ways to slow us down while they catch up. The 
importance, therefore, of predictable and regular science-based 
regime for reaching regulatory decisions with regard to the 
introduction of these products is extremely important.
    It is essential to recognize that all of these products 
entering into commerce through production, research, and 
development in the United States are exhaustively reviewed for 
safety, environmental impacts, human health, and so forth.
    These new products have been reviewed, orders of magnitudes 
more rigorously than any previous products in human history. 
There is no question about their safety. There is no question 
about the enormous over-balance of benefits as opposed to risks 
that they provide.
    The benefits that biotechnology is bringing and will bring 
to producers around the world, the problems with international 
trade are making it difficult for biotech companies to develop 
and commercialize these new products with the necessary speed 
and economic confidence.
    We are working hard, along with others in the agricultural 
Committee, the Congress, and Administration to address these 
problems. It is extremely important that we take advantage of 
the opportunity posed by the upcoming round of the WTO 
negotiations to extend the protection of fair and 
scientifically based trade.
    It is very imperative that the U.S. exercise its 
traditional leadership role in these international 
negotiations. We are encouraged to see so many people in 
Government working to make sure that happens.
    We feel that the strategic approach to these negotiations 
should be that they should cover a broad spectrum of issues and 
not take things on in a piecemeal basis. We think that only if 
agriculture is part of a much larger context of discussions, 
will the necessary leverage and potential for tradeoffs be made 
possible--disciplines already apply biotechnology products in 
agricultural trade. There is some misunderstanding on this 
point and some mistaken notions have achieved a degree of 
currency in the European Union.
    We, at Bio, have recently done an exhaustive survey of the 
language and intent of the SPS agreements under WTO. We find 
some very reassuring conclusions. The WTO agreements, according 
to our analysis, already impose substantial disciplines on 
countries that regulate agricultural biotechnology products.
    The agreement on the application of sanitary and 
phytosanitary measures, the SPS agreement, requires that any 
measure applied to protect human, animal, or plant life or 
health, shall be based on scientific principles and a science-
based assessment of risk.
    Most regulatory activity with respect to transgenic 
products would be subject to these disciplines. The agreement 
on technical barriers to trade covers any technical regulations 
that do not fall under the SPS agreement.
    The TVT agreement requires that such measures not be more 
trade restrictive than necessary in order to fulfill a 
legitimate objective. Certain disciplines under the GATT and 
the agreement on agriculture, for example, tariff bindings, 
national treatment of prohibition of quantitative restrictions 
are also relevant to non-SPS technical measures. In some 
respects, the current disciplines are not adequate to address 
the trade problems we are currently facing.
    Our principle problem with respect to the European Union, 
right now, is less with the regulatory decisions themselves, 
but with the length of time and the unpredictability of the 
approval process in the European Union.
    Annex C of the agreement addresses this issue. For example, 
it requires members to ensure that approval procedures are 
undertaken and completed without undue delay. The rules clearly 
need to be strengthened.
    There are other disciplines in the agreement that are 
potentially helpful, but are in need of elaboration before they 
can effectively address the problems we are facing.
    We believe that the new round of trade negotiations 
provides the United States with an excellent opportunity to 
strengthen and expand the disciplines in the SPS agreement to 
meet the needs of American exporters of transgenic products.
    It also provides an opportunity for the U.S. to raise the 
profile of biotech-related trade issues and promote a trade-
friendly WTO consistent international consensus on those 
issues.
    We hope the U.S. negotiators will take advantage of this 
opportunity. A favorable outcome to the WTO negotiations could 
be critical to the long-term health of the biotechnology 
industry. It will certainly have an important affect on our 
ability to continue to apply this promising new technology for 
the benefit of U.S. farmers, U.S. consumers, and the U.S. 
environment.
    Thank you.
    [The prepared statement of Dr. Giddings appears in the 
appendix.]
    Mr. Manzullo.  Thank you, Dr. Giddings.
    I observed that tie with all the floor on there. I wonder 
if that was biotechnology-enhanced.
    Dr. Giddings.  Well, there is a lot--in traditional 
technology. I am sure that the improvements in the silk 
production are in the works.
    Mr. Manzullo.  What an answer. Mr. Giordano.

 STATEMENT OF NICHOLAS GIORDANO, INTERNATIONAL TRADE COUNSEL, 
                NATIONAL PORK PRODUCERS COUNCIL

    Mr. Giordano.  Thank you, Mr. Chairman and Members of this 
Subcommittee. I very much appreciate the opportunity to be here 
today on behalf of America's pork producers.
    The National Pork Producers Council is Chairing the 
Agriculture Trade Coalition, which is comprised of 80 
agricultural organizations representing interests in all 50 
States, including each of the five organizations represented 
here before you today.
    As Mr. Suber said, we urge you, the Congress, and the 
Administration to work together in a bipartisan manner to get 
traditional trade negotiating authority renewed and hopefully 
before the upcoming WTO Ministerial in Seattle.
    We believe that the agenda for the new trade round should 
be comprehensive. It is well-established that agriculture is 
one of the most sensitive areas in international trade. Some of 
our closest trading partners, such as the European Union, 
Japan, and South Korea will be reluctant participants when it 
comes to agriculture.
    Only in the context of a large package of agreements and 
concessions will these countries be able to accept an ambitious 
outcome on farm trade. While a sectorial approach may have 
worked for the Information Technology Agreement, this type of 
approach will not work for agriculture. Traditionally, these 
multi-lateral negotiations have not been concluded until 
agreement that the end of trade round, through a single 
undertaking covered in all areas.
    This approach was devised to force negotiators to finish 
their work in the most sensitive areas or risk an overall 
failure. This approach was essential for agriculture in the 
Uruguay Round.
    While most other countries are calling for a comprehensive 
negotiation in a single undertaking, some U.S. officials have 
talked about sector-by-sector negotiations and an early harvest 
for areas where negotiations can be completed more quickly.
    We believe that such an approach would be disastrous for 
U.S. agriculture. Notwithstanding the progress made in the 
Uruguay Round, tariffs on agricultural products remain very 
high.
    U.S. Agricultural Tariffs, which average only about 5 
percent, are dwarfed by agricultural tariffs of other nations, 
which average about 50 percent. Agricultural tariffs must be 
lowered from these high levels on an accelerated basis.
    A date certain should be established by which all tariffs 
will be reduced to zero. The elimination of all subsidies is a 
top priority for the U.S. pork industry as well in the upcoming 
trade negotiations.
    The U.S. pork industry does not support reopening the 
sanitary and phytosanitary agreement for further negotiation in 
the next trade round. We believe it is working well. The fact 
that the E.U. is dragging its feet on implementing the hormone 
ban does not go to the WTO which made the proper finding.
    It goes to the recalcitrants of the European Union on 
agricultural issues. Two priority areas in the upcoming 
negotiations for the U.S. pork industry will be greater market 
access in Japan, our largest export market, but we have only 
really touched the tip of the iceberg there, and elimination of 
E.U. pork subsidies.
    The largest exporter of pork in the world is Denmark. That 
country is the world's leading exporter for one simply reason; 
subsidies. Well, the next round is the appropriate form to 
eliminate E.U. pork subsidies.
    Much can be done right now to assist the U.S. pork industry 
offset the unfair advantages of the European Union. Pork is an 
extremely compelling candidate to be included on the final 
retaliation list, if the hormone matter is not settled to the 
satisfaction of the U.S. beef industry.
    Pork is on the proposed retaliation list which was proposed 
yesterday. Many of the U.S. beef packing plants being injured 
by the E.U. hormone ban also are in the pork business and must 
compete here in the U.S. with subsidized E.U. pork. Although 
the E.U. exports virtually no beef or poultry to the United 
States, during the last 5 years every E.U. country, with the 
exception of Greece and Luxembourg, has exported pork to the 
United States.
    Despite two Section 301 cases filed by the U.S. meat 
industry, the E.U. pork market has been closed to the U.S. for 
over 10 years a result of the E.U.'s third country meat 
directive.
    The regulation which affects not only U.S. pork, but also 
beef and poultry bound for the U.E. It has completely usurped 
the role of USDA's Food Safety and Inspection Service, and does 
not enhance the safety of U.S. meat and poultry as the E.U. 
claims.
    Under this system, E.U. inspectors determine, on the basis 
of very arbitrary factors, such as the color of plant walls, 
whether a plant is qualified to export to the E.U. The random 
enforcement of this regulation has resulted in a complete 
cutoff of U.S. poultry exports, and has reduced to a trickle 
U.S. pork and non-hormone beef exports from a few token plants.
    Ironically, it is widely known that the majority of E.U. 
meat plants do not even meet the third country meat directive 
requirements. The E.U, lead by Denmark, recently approved 
without scientific basis, a ban on the use of many antibiotics 
and livestock feed.
    The Danes, the E.U.'s largest pork producer, know that this 
antibiotic ban will ensure that U.S. pork, or beef, or poultry 
for that matter, never, ever will be sold in the E.U. The ban 
becomes effective as to all member states on July 1st. A strong 
response to the E.U. treatment of U.S. pork exports is long 
over due and need not wait until the next trade round.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Giordano appears in the 
appendix.]
    Mr. Manzullo.  Thank you. Mr. Delahunt.
    Mr. Delahunt.  Thank you, Mr. Chairman.
    I think it was Mr. Denlinger who said that unilateral 
sanctions imposed by this Government have impacted the export 
of wheat. Can you amplify that? Enumerate the countries for me.
    Mr. Denlinger.  The countries that I have on my list here, 
there are lots of other countries that have had sanctions 
applied to them, but major wheat markets that are closed to the 
United States include Cuba, Iran, Libya, the Sudan, and North 
Korea. The 10 percent is an average figure. Some years it might 
be more than that.
    Mr. Delahunt.  Ten percent of?
    Mr. Denlinger.  Of the world trade roughly.
    Mr. Delahunt.  Of the world trade.
    Mr. Denlinger.  Yes.
    Mr. Delahunt.  How many countries did you enumerate?
    Mr. Denlinger.  Five or six.
    Mr. Delahunt.  So, five or six of those would represent 10 
percent of the world's trade.
    Mr. Denlinger.  Iran being a very big one.
    Mr. Delahunt.  And Iran being the largest of them.
    Mr. Denlinger.  Yes.
    Mr. Delahunt.  Now, are those total sanctions; no wheat 
whatsoever can be exported? Even for humanitarian efforts?
    Mr. Denlinger.  Well, in the case of North Korea, we have 
been providing some wheat and other agricultural products for 
humanitarian purposes. Cuba has been getting, very recently, 
some small contributions, but other than that it is basically a 
closed door.
    Mr. Delahunt.  Could you provide me and the Committee, I do 
not know how--do you weigh wheat; by the ton?
    Mr. Denlinger.  Yes. That is how you export it, sure.
    Mr. Delahunt.  If you could provide me some figures. Give 
me the figures on those countries.
    Mr. Denlinger.  I will be glad to.
    Mr. Delahunt.  I would address this to all of the Members 
of the panel. In terms of the process itself as far as the WTO 
is concerned, what is your evaluation? Several of you expressed 
frustration.
    Is the frustration based upon delay? In other words, from 
the time that the complaint is filed to a final disposition of 
the case? Why do we not start with you, Dr. Lambert.
    Dr. Lambert.  In the beef case, the original case was 
brought before the WTO in January 1996. As I have said, the end 
of the reasonable period is May 13, 1999. By normal court 
standards, that period of time probably is not out of line.
    Mr. Delahunt.  Well, that depends on what court.
    Dr. Lambert.  Correct. But the frustration is, if we were 
close to compliance by the European Union and this close to 
being settled, I think the frustration more has been with the 
European response and an indication, at least, that they will 
not be able to comply by the end of the reasonable period. That 
this case could drag on further, which we have said is 
absolutely----
    Mr. Delahunt.  In other words, there has been no resolution 
on the merits itself, to be really clear.
    Dr. Lambert.  Correct.
    Mr. Delahunt.  So, we have had 3 years. There has been no 
resolution on the merits. I would draw the analogy to a trial 
court. Then there is an appeal process subsequent to that. Am I 
accurate when I make that statement?
    Dr. Lambert.  The appeals process has been finalized. 
Basically, we are at the settlement process. Different from a 
court case, there is no back settlement or no back injury. Any 
settlement now is only from here forward. So, there is an 
incentive to postpone the inevitable for as long as they can.
    Mr. Delahunt.  So, we are right at the final stages.
    Dr. Lambert.  Yes.
    Mr. Delahunt.  Mr. Suber.
    Mr. Suber.  I would not have anything to add since we are 
now facing implementation with the Canadian decision after the 
appeal is likely decided in the middle of the summer. 
Therefore, we are keenly interested.
    Mr. Delahunt.  When was the complaint initiated?
    Mr. Suber.  It was in late 1997. So, it is a process is 
predictable and better than the one that preceded it. I have to 
emphasize, better than the one that preceded it. It does have 
issues with respect to stalling in settlement that are 
important to settle.
    Mr. Delahunt.  Dr. Giddings, do you have a comment?
    Dr. Giddings.  Yes, sir.
    A little bit different situation with biotechnology 
products in trade. It is not that Europeans have refused to 
abide by WTO rulings. It is that their regulatory process which 
has been busted since its inception continues not to function.
    In particular, they have under Directive 199220 specified a 
series of time lines by which regulatory decisions on approval 
for imports of transgenic crops should be taken. They are now 
in 400 percent over-run over those time runs at a minimum, with 
no end in sight.
    Last year, 20 million acres out of 80 million acres of corn 
were transgenic in the United States. About 2 million acres of 
that transgenic corn are 1/10 of the total consisted of 
varieties that have not been approved by the European 
regulatory process.
    Mr. Delahunt.  Your problem is different then.
    Mr. Suber.  It is different.
    Mr. Delahunt.  Mr. Giordano.
    Mr. Giordano.  Just a couple of comments, Congressman.
    First, under the old system, under the GATT, countries 
could block decisions. So, I believe that there were adverse 
decisions against the E.U., both on beef and bananas, under the 
old GATT.
    The problem was you could not get any enforcement. That has 
changed under the WTO. I would agree with my colleagues that 
the problem is not so much the WTO, which I think has 
functioned very well, it is the recalcitrants of the E.U.
    Mr. Delahunt.  So, that goes to the issue of enforcement.
    Mr. Giordano.  Well, it does, but unlike some have 
characterized the WTO as a big bad villain that is going to 
force us to change all of our laws to come into compliance. It 
really is not that.
    Either you do what the E.U. directs you do and change your 
offending regime, or you pay compensation, or you get 
retaliated against.
    I would argue, although it seems that the Congress and the 
Administration is being vilified in the press for putting the 
pressure on the E.U., you are doing exactly what you should be 
doing and the process is working.
    We are within our legal rights to retaliate. If in fact 
they are not going to implement these decisions, then we need 
to retaliate. Frankly, I think they believe that we are going 
to blink. That is not to say that the WTO does not need some 
reform.
    Mr. Delahunt.  Your position would be then, without 
retaliation what we really do is erode the essence of the WTO.
    Mr. Giordano.  There has got to be retaliation as a threat 
out there to make the system work.
    Mr. Delahunt.  So, it is not just about bananas. It is 
about something a lot more.
    Mr. Giordano.  Oh, it is absolutely not just about bananas. 
With all due respect to Chuck and to the cattlemen, it is not 
just about beef.
    Whether they are intending to do so or not, they are 
strangling the WTO in its infancy and we cannot allow it. That 
is why it is so important to retaliate in these cases, if they 
will not change their practices.
    Mr. Delahunt.  Mr. Chairman, I hear the gavel.
    Mr. Manzullo.  Mr. Bereuter.
    Mr. Bereuter.  Thank you, Mr. Chairman.
    I had not expected to be up this quickly. Just a 
clarification on something you said, Mr. Denlinger. I think I 
am right in this. The embargo against North Korea still holds. 
The wheat we have provided has been strictly through the World 
Food Program, although the current proposal that we are going 
to get is that some processed foods, 100 million metric tons 
would go through NGO's for the first time, American NGO's, for 
a Title III, Food For Work Program, related to their potato 
industry.
    Actually, the wheat embargo is still total with respect to 
North Korea. Is that correct?
    Mr. Denlinger.  That is right.
    Mr. Bereuter.  I just heard the comments made about the 
need to retaliate. I do agree with you. I think it is 
essential. I am wondering what your recommendations will be for 
a new round to strengthen the expeditious enforcement of 
decisions made by the dispute settlement mechanism that is now 
in place.
    How do we avoid the Europeans changing their proposal 
again, and again, and delaying it a maximum amount of time 
while great damage is done to us? Would anybody like to make a 
suggestion in that respect?
    Mr. Giordano.  I will take a shot at that Congressman. I 
think that to a certain extent, if the E.U. is going to be 
recalcitrant on these issues, there may be not much we can do, 
but just retaliate. I do think that some reforms can be made, 
for example, there has been some confusion about how Articles 
21 and 22 relate to one another.
    I think perhaps a clarification would be useful. I think, 
as I pointed out in my written comments, the amount of time to 
establish a panel could be truncated in a time certain, a 
deadline given, and perhaps the entire process could be 
somewhat streamlined.
    We have come up with this arbitrary 15-month period. I 
understand that it does take time for legislatures, for the 
Congress, if a law needs to be changed or a regulation that, 
that takes time.
    Yet, would it not more serve our purposes if perhaps that 
period of time was truncated. I think most, if not all of us, 
in agriculture I think would be pro-WTO. We would also say yes, 
there is some positive reform that we could undertake in this 
upcoming round.
    Mr. Bereuter.  Of course, I focused on the problems the 
meat industry has had with the European Union since more red 
meat is typically processed in my Congressional District in a 
month than anyone in the Country.
    We have had problems, of course, with the beef hormone 
matter for some time, even though as I understand it, we have 
assured that the meat that we would provide would have no 
hormone residue.
    The European Parliament, it seems to me, has passed a 
number of resolutions which are emotionally driven, which are 
contrary to good science. Now, with the problems in the 
European Commission, and the growing power of the European 
Parliament, to what extent do you think we could actually move 
the institutions of the European Union, including the European 
Parliament, to agreeing to science-based regulations; whether 
it is the meat industry or any other industry?
    I think American exporters would be happy to live with the 
results of good science, but that seems to be a problem for us 
to overcome with respect to the European Union. Do you any of 
you have comments or suggestions about that subject?
    In fact, is this a reasonable indication of what the 
situation is with respect to the European Parliament and the 
European Union?
    Dr. Lambert.  I think we would agree with your 
observations. That is the reason that we, in the beef industry, 
have called for a large injury figure, have called for the 
retaliation list to be published, and to look for creative ways 
that retaliation might be implemented to bring the strongest 
pressure to bear to change those who may be on the fence with 
respect to whether they would vote to repeal the current 
regulations that are in violation of the WTO.
    We agree that the shift of the balance of power in Europe 
will make it probably more difficult for them to change the 
regulations.
    Mr. Bereuter.  One more area of questions, if I can. That 
is related to subsidies for exported products from the European 
Union where there are our third country competitors.
    We have, of course, established some time ago the Export 
Enhancement Program which is one means of attempting to 
counteract those very heavy export subsidies that the European 
Union does have, but we are not using them unfortunately.
    The talks that are going on between the E.U. and Mexico now 
suggest that they will be able to cut dramatically into our 
export market in grains and into meat as well as other 
products.
    To what extent is the Uruguay Round and to what extent do 
you think the next round, has it been determined to be Seattle; 
a round should address the question of export subsidies.
    Is this something that will strictly come under the 
scrutiny of the OECD, or do you think it is appropriate for 
additional focus of the next round to be on export subsidies?
    Mr. Suber.  As it affects the dairy industry, I think there 
is no single more important issue than the elimination of 
export subsidies at a certain date. One could negotiate what is 
the implementation period; 5 years, 8 years, 10 years. There 
should be a date when it is known that export subsidies will be 
fully eliminated. Without that, there is the political will 
within each country. It changes from crop season to crop 
season.
    It changes with demographics. You must have that out there 
as a target so that all of the trading countries know what is 
ahead of them and can make adjustments accordingly to react to 
the marketplace. That should remain within the WTO.
    Dr. Giddings.  Sir, if I could respond to the previous 
question very briefly about the virtues of relying on science 
as a basis for regulatory decisionmaking. That is absolutely 
essential. It is the only way for achieving universal 
consensus.
    Although necessary, it is plainly not sufficient--reason is 
clearly insufficient to triumph in these discussions with the 
Europeans. An appeal to scientific validity of the regulatory 
decisionmaking processes will not help either, if that is all 
we do. There has got to be some additional diplomacy and 
perhaps of muscle of one sort or another applied.
    Mr. Bereuter.  I cannot resist the question to ask if any 
of you gentlemen want to offer if a recommendation----
    Dr. Giddings.  If I could.
    Mr. Bereuter.  Sure.
    Mr. Manzullo.  Mr. Menendez.
    Mr. Bereuter.  I am sorry.
    Mr. Menendez.  Thank you, Mr. Chairman.
    Let me first assure my colleagues, as the Ranking Democrat 
on the Committee that I have not switched sides. In the spirit 
of bipartisanship, I sat here--I did not want to--that will be 
for the Chair Lady to discuss. We always welcome her to our 
side.
    I want to ask unanimous consent to include my statement in 
the record.
    Mr. Manzullo.  Without objection.
    Mr. Menendez.  The reason both she and I are late is 
because we were managing a resolution on the floor. I brought 
us here a little late, but I got to hear most of the testimony. 
I came here with the intention of asking a series of questions 
as to how we can best help you.
    For someone who comes from an urban district that is 
basically black-top, I find interesting we vary on other 
issues. Of course, the Garden State of New Jersey has more than 
just black-top in the process. So, there is some interest in 
agricultural issues.
    I am compelled, based upon Mr. Denlinger's remarks to ask 
the questions that I did not come here to ask. I see in your 
statement then, in your comments--would you yield?
    Mr. Manzullo.  It is ``Denlinger;'' right?
    Mr. Denlinger.  Right.
    Mr. Manzullo.  We went to ``Dilenger.''
    Mr. Denlinger.  They gave that up awhile back. Uncle John 
left a long time ago. I do not know what it says there.
    Mr. Manzullo.  It is wrong. It is ``Denlinger.''
    Mr. Menendez.  I see that you have comments here with 
reference to--sanctions. The resolution that the Chair Lady and 
I were handling on the floor was about Cuba. So, I find it 
interesting. Let me ask you with reference to the Wheat 
Association, do you have any position on how we deal with 
weapons of mass destruction?
    Mr. Denlinger.  No.
    Mr. Menendez.  Do you have any position on how we deal with 
terrorism?
    Mr. Denlinger.  No.
    Mr. Menendez.  Do you have any position on how we deal with 
promoting the opportunity to ensure that food is not used in a 
rationing to control people in other countries.
    Mr. Denlinger.  No. We believe that food is fungible.
    Mr. Menendez.  If the only way for me to get that food is 
to stand in a line with the ration card that the state gives 
me, is something that we want to be a part of?
    Mr. Denlinger.  I do not think we have any control over 
that. The group of countries that you list is a group that, in 
my mind, Iran, Libya, North Korea, Sudan, all are engaged in 
either issues of terrorism, state-sponsored terrorism, 
development of weapons of mass destruction, violation of 
people's human rights.
    It seems to me that the business community, while we 
certainly want to be helpful to you, and I have serious 
questions about how the WTO is operating in the context of a 
series of decisions that we keep winning but cannot seem to get 
enforcement.
    Hence the whole conversation of retaliation and what not, 
and looking for better mechanisms. I am also concerned about 
State Trading Enterprises and that whole issue. It seems to me 
that one of the questions we have to ask is if there is only a 
handful of peaceful diplomacy pools that any country has, and 
that includes the United States, it is the use of your aid in 
trade to induce countries to act a certain way.
    It is the international opinion that you can create for 
those countries who are willing to dissuade themselves to 
international opinion. Last, it is the use of your aid in trade 
and the denial of that aid in trade is what we would call 
sanctions.
    Your Association's view that but for war or national 
security reasons that the United States should disarm itself 
from any use of unilateral sanctions under any set of 
circumstances I think is irresponsible as it relates to U.S. 
foreign policy.
    In essence, of the five possible tools of peaceful 
diplomacy, the reality is that you would disarm yourself to the 
use of your aid and trade for the purposes of promoting U.S. 
interests abroad, not U.S. interests as you narrowly define it 
in terms of war and national security reasons.
    So, I think that, you know, I know none of us want to send 
our sons and daughters into war. I think that we have to 
consider what other ways does this Country have to try to get 
countries to act a certain way, short of armed intervention. I 
think it is incredibly dangerous for this Country to 
unilaterally disarm itself of what is, in some cases, not in 
all cases, and it is a rather blunt instrument sometimes, but 
ultimately to unilaterally disarm itself of the potential of 
unilateral sanctions in some cases, I think, is a disservice to 
the national interests of the United States.
    Having said that, let me just ask one question. The 
Administration has already signaled that it wants to see 
activities in State Trading Enterprises that some countries 
employ to market agricultural products become subject to multi-
lateral trading disciplines, like the Australian Wheat Board, 
the Canadian Wheat Board, the New Zealand Dairy Board.
    Can you give the Committee of Members, particularly those 
of us who may not come from farming communities, how the 
activities of the STE's affect the ability of your Members to 
compete in world markets?
    Mr. Denlinger.  Should I begin?
    Mr. Menendez.  Yes.
    Mr. Denlinger.  Basically, the problem with the STE's is 
they are monopolies. They essentially market their commodities, 
in the case of wheat, on behalf of their producers.
    The producers have no say in what their marketing decisions 
are. The country decides when they will sell. they are free to 
undercut open market prices as they will.
    If they want to be very aggressive, if they have a lot of 
wheat to sell in a particular year, they will undercut prices 
very freely. They look at the U.S. open market prices as a 
starting point, as a point of reference.
    From there on, they will offer $6, $8, $10 per ton less, if 
they wish. That is where the unfairness of it is. There is no 
transparency. This is all very much under the table, unknown to 
most people. But you, of course, get anecdotal information.
    They may also offer a different class of wheat, a higher 
class of wheat. In other words, it may be a $20 per ton 
discount, if they are aggressive that year.
    Mr. Suber. I would reinforce what he said about export 
STE's. I should also highlight the fact that there are import 
State Trading Enterprises which are just as problematic for 
U.S. trade.
    China happens to run quite a few of them, not in dairy, but 
there are ones in Japan and in Canada. The issue there is they 
can practice discrimination on their sourcing in a way that can 
be used for political purposes, much as you discussed on 
national security basis.
    They can decide to buy from this country for policy reasons 
and not that country; totally unrelated to the commercial 
viability of the supplier. So, in that sense, import STE's are 
just as important an issue as export STE's and subject to the 
same, should be subject to more disciplines and transparency.
    Mr. Menendez.  Do you all want to see these fall on the 
multi-lateral regime? Do you want to see the suggestion that, 
as I understand, the Administration set forth? Is that 
something you support or do you have variation with it?
    Mr. Suber.  I am sorry. The question was, should that be 
connected to the WTO disciplines?
    Mr. Menendez.  Yes.
    Mr. Suber.  Yes, they should.
    Mr. Denlinger.  We would agree.
    Mr. Menendez.  Thank you.
    Ms. Ros-Lehtinen--[presiding] Mr. Burr.
    Mr. Burr.  Thank you. I wish I had an excuse for my 
tardiness. I do not have the excuse of a bill on the floor. Let 
me just try to cover a few things. If I in fact go over, then I 
apologize.
    Let me restate I think what Mr. Menendez asked. What is 
broken? Is it our ability to negotiate a trade deal that is 
fair or enforcement of a fair trade deal? I will just throw it 
out to each one of you for any comment.
    Dr. Lambert.  I think there is room for improvement of the 
existing trade deal; the tariff reduction, the elimination of 
State Trading Entities, the elimination of export subsidies so 
that there is room for improvement.
    From the beef industry's viewpoint and the current process 
that we are involved in, the existing process is much better 
than the old GATT system in that at least cases can be brought 
through to conclusion.
    It is getting the resolution. It is imposing the will, I 
guess, if you can in our case with the European Union to have 
them change their regulations to come into compliance with the 
WTO ruling.
    Mr. Suber.  I think to talk about what is broken must put 
into perspective that the Uruguay Round is the first time 
agriculture had ever been included in a trade agreement. So, 
that was the first step for agriculture and its distorting 
trade practices to be brought under some discipline.
    So, as a first step, it was a fine first step. There are 
more steps that must be taken to treat agriculture like 
industrial goods, which is to say zero tariffs and maximum 
market access to be built over time.
    These are issues that take time for industries as 
traditionally protected as agriculture to accommodate 
themselves. That it has started and now it needs to go 
significantly farther.
    The U.S. agriculture sector is one of the most competitive 
and simply cannot wield its influence when it is fighting 
against the treasuries of other countries.
    Mr. Burr.  How much does the lack of transparency in their 
systems affect our ability?
    Mr. Suber.  It depends upon the subject matter, the 
country, and the product. Any time there is lack of 
transparency on the rules to implement import access, or the 
manner which export subsidies are calculated, or in STE's, it 
is impossible to put your finger on what the problem is if you 
cannot see the workings of the system.
    Dr. Giddings.  I would say that if there is anything 
broken, it would be the European Union's willingness to abide 
in good faith by the commitments they have voluntarily entered 
into.
    The WTO agreements, as has been mentioned here, are a very 
good start. The problem seems to be in the political 
willingness in Brussels to abide by the consequences of those 
agreements.
    It seems to me that, that is an artifact of the fact that 
the treaty of Rome or the--treaty does not have an interstate 
commerce clause which gives their Brussels the capacity to 
enforce decisions throughout Europe.
    What you have got is subsidiaries which leave most of the 
power for decisionmaking in these issues, you know, lodged in 
the national capitals which gives parochial interests the right 
to trump European, the broader European interest with the 
result that we have these same sorts of technical barriers to 
trade or non-tariff trade obstacles erupting in a variety of 
vastly different specific trade contexts.
    Mr. Giordano.  In the pork industry, our exports are up 86 
percent by volume and 80 percent by values since the Uruguay 
Round went into effect. We have greatly benefited from that 
agreement.
    I dare say most of American agriculture, at least, I do not 
think you would have 80 organizations in a coalition trying to 
get traditional trade authority renewed if they had not 
benefited.
    I think that we hear so much about beef and bananas, they 
are high profile cases. For beef and bananas, there are so many 
other cases where the U.S. has prevailed or other countries 
have prevailed and the system has not broken down.
    My understanding is that there have been more cases 
litigated already under the WTO than from the late 1940's when 
the GATT system was created to the formation of the WTO. That 
tells you that countries have a lot more confidence in that 
system.
    I think as my colleague said in agriculture, the Uruguay 
Round was the first time we were included in a major trade 
round. You had disciplines on industrial subsidies years 
before.
    The Uruguay round was the first time for agriculture. I 
think, yes, there are many high profile problems. We certainly 
have them in the meat industry. We have talked about some of 
those today. There are a lot of great success stories. We all 
know our future is based on trade and why we want the 
opportunity to trade more.
    Mr. Burr.  I will clearly admit that I have no banana 
producers. I have quite a few pork producers that are on the 
verge of going bankrupt, even with an 86 percent increase, 
which forces me to ask you the follow-up question.
    Does that mean the rest of the world is open to our pork 
products? Are there still markets that are closed and markets 
that subsidize their pork exports?
    Mr. Giordano.  I dare say that if we did not have so many 
foreign market barriers, we would have been able to move a lot 
more pork out of the country this year. For all of the success 
we have had, and that is why we are so intent on getting 
further liberalization in this new round, there are many 
markets that remain closed, many markets where we have access 
now, but we need to increase that access.
    Again, I think that is really a function of the Uruguay 
Round really being the first time that we started that process. 
So, we have had a lot of success, but you are absolutely right. 
Much needs to be done.
    Our producers, I think across the board in American 
agriculture, but certainly in the pork industry, we are the 
world's lowest cost large scale producer. We produce the 
highest, most highest quality, safest pork. When Denmark and 
the other E.U. producers lose their subsidization, when these 
markets are opened up, we are going to benefit.
    We are going to provide pork and other agricultural 
products to the world. When you look at 3 billion people being 
added, probably by the year 2050, our future is exporting. It 
is just imperative that we knock down these barriers.
    Mr. Burr.  When do you think that openness will come?
    Mr. Giordano.  I think, again, we made great headway.
    Mr. Burr.  Let me rephrase it. Do you believe that will 
really happen?
    Mr. Giordano.  Yes, I do. I think it is imperative because 
I think that if it does not happen and we follow the model that 
the E.U. would like us to follow in agriculture, we are going 
to have a whole lot of people in this world priced out of 
affordable food and safe food.
    That is why as Dr. Giddings and my colleagues have said, 
the focus has got to be based on science. I think we need more 
of an open world trading system. We need rules that are based 
on science. If that is the case, the United States truly will 
continue to be the leading supplier of food to the world, but 
affordable and safe food.
    Mr. Burr.  Last question. Can I ask just one more?
    Ms. Ros-Lehtinen.  Sure.
    Mr. Burr.  If anybody wants to comment. Are there specific 
countries that are continual problems? That if we looked at a 
list that was broken down by category, you would consistently 
find that country on there. If there are, would you share them 
with us?
    Dr. Giddings.  From the biotechnology standpoint, almost 
every country in Europe is a problem. At the top of the list, I 
would probably put France, if you want me to name names. They 
are not alone in sinning against--in this arena.
    Mr. Burr.  Anybody else?
    Mr. Suber.  There are some other countries in Asia that 
have generally been slower, but the scale of their problem, 
meaning the scale of the product they are keeping out is not 
quite on the level of what Europe has done.
    So, Japan, though it frequently reaches headlines, has 
steps it can take to increase its access. It is making progress 
over time, especially in dairy. Korea continually needs more 
transparency, going to your earlier question.
    Then of course, China, should it enter the WTO, will go a 
long ways toward making it one of the most important markets, 
U.S. agriculture and to dairy specifically.
    Mr. Burr.  I thank the Chairman.
    Ms. Ros-Lehtinen.  Thank you. Thank you Mr. Burr.
    Following up on that, I think that we all agree that, as a 
Country, we want greater market liberalization of our 
agricultural products. However, when our U.S. tariffs on farm 
good average 3 percent and the world's average is 56 percent, 
what recommendations would you make on what you think the U.S. 
should offer in multi-lateral negotiations with our dealings to 
countries to induce them into open up their markets. What are 
the one or two things that you would recommend that would be 
the most helpful?
    Mr. Giordano.  The negotiations need to be comprehensive so 
that agriculture is not the only thing on the table. It is very 
difficult for countries like South Korea and Japan.
    We are not going to be able to conclude with those 
countries, if agriculture is the only thing on the table. That 
is why we reacted so strongly a couple of years ago. When the 
Fast Track vote was pulled, there was discussion about an 
agriculture-only or WTO-only Fast Track and we opposed that 
simply because we believe you need comprehensive round in order 
for there to be tradeoffs in all sectors.
    I guess probably all of us would agree that the ideal that 
we are all trying to reach, no matter what sector you are in, 
is openness and transparency. I mean, the U.S. are we going to 
prevail in every single sector? No.
    As you say, we have the lowest tariffs. We have the most 
open and transparent market. So, if we can get our trading 
partners to open their markets somewhat, we are going to 
benefit. We are going to come out ahead.
    Dr. Giddings.  I would concur with we Nick has said. It is 
absolutely the smartest way to approach the WTO Round that is 
coming up.
    All of this takes place in a larger foreign policy context. 
I mentioned in my testimony that it is very important for the 
U.S. to assert its traditional leadership here.
    A part of that is tied in with other issues that have 
nothing to do with trade or trade negotiations. As the 
Secretaries of State mentioned in this morning's letter in the 
Washington Post, great nations pay their bills.
    We should pay our arrears to the United Nations. I know 
extremely well about all of the non-sense that happens under 
the context of the United Nations that is no one's interest. 
Nonetheless, the fact remains that it is a vehicle for the U.S. 
to exert leadership.
    If were are not in good standing there, it makes it much 
more difficult for us to achieve a whole host of foreign policy 
objectives across the wide spectrum of issues. The importance 
of that cannot be over-estimated.
    The degree to which our status on this issue has poisoned 
numerous other negotiations that are vitally important to U.S. 
national interests cannot be over-estimated.
    Ms. Ros-Lehtinen.  Thank you gentlemen for being with us. I 
ask for my statement to be included in the record.
    [The prepared statement of Ms. Ros-Lehtinen appears in the 
appendix.]
    Ms. Ros-Lehtinen.  Mr. Delahunt, do you have an additional 
question?
    Mr. Delahunt? Yes. Thank you Madam Chair.
    I want to follow-up on my friend from North Carolina, Mr. 
Burr, when he asked when can we expect it. My sense is that, 
and I am guessing because he is concerned about the small 
farmer.
    We can survive, but we can only survive by achieving 
certain economies, large scale economies, by merges, 
acquisitions, consolidations. So, I just wonder if, you know, 
when we achieve this utopia, whether the face of the American--
whether American agriculture looks a lot different than it does 
today.
    Am I making myself clear? I do not know whether, you know, 
Mr. Burr, if that was the import of this question. I mean, I 
see it happening. I come from a Coastal District. We have 
serious problems in terms of the depletion of certain 
fisheries.
    What is occurring is that the larger, better capitalized, 
the factory--fleet, if you will, will survive. In the course of 
that process, the casualty will be a way of life. Many small 
fishermen and their families will end up in the dust ben of 
oblivion, if you will.
    Mr. Burr.  If the gentleman would yield?
    Mr. Delahunt.  I yield.
    Mr. Burr.  I think his point is where I was at. I would 
like to make sure that one of our jobs up here is not to 
explain to the American people that Safeway is not a farm. 
Unfortunately, if we do not find a way to expand our trade 
relationships because of our agricultural capabilities, we are 
not going to be able to have the most efficient pork production 
or the most efficient anything.
    I think that puts us at risk long-term to where we will 
look back. Whether it is the small family farm, small family 
fishermen, we will regret, if in fact we get to the point that, 
that is not the case.
    Mr. Delahunt.  Reclaiming my time for a moment.
    It is that time that we can share as long as we want now, 
since nobody is here. Well, you are here.
    Mr. Burr--[presiding] I think the gentleman has got the 
Chair.
    Mr. Delahunt.  Well, thank you.
    But that is exactly my point. When we are talking these 
macroeconomic issues, you know, we are omitting the reality on 
the ground and on the sea, if you will, for many people.
    So that while we can continue to negotiate and work in a 
certain direction, all of you or most of you represent, I dare 
say, you know, many small farmers that are not going to survive 
a lengthy process. I dare say that we have to do everything 
that we can to accelerate that process so that many people will 
have a choice, whether it is to farm or to fish.
    Mr. Suber.  If I can make a comment with respect to dairy 
on that. The dairy industry loses about 5,000 dairy farmers 
every year. That has not changed regardless of 10 or 15 years 
of changing dairy policy.
    So, the issue when I have spoken in front of dairy farmer 
meetings, the issue of large versus small does not usually come 
down to international verses domestic.
    If our dairy system is locked into concern with just the 
260 million consumers in the United States, then the small 
dairy farmer is almost certainly going to be facing the same 
assimilation and going out of business that it has historically 
anyway.
    They have as much to fear from a large California farm as 
they do from the subsidies internationally. They can only take 
the pressure off of the large Western farms and their 
efficiency, if the international market is open to a more 
efficient farm.
    Mr. Delahunt.  That is exactly my point. I think that all 
of us, you know, we obviously want to encourage the prosperity 
that is engendered by trade. Yet we just, at least I am 
speaking for myself at this point, do not simply want to see it 
benefit the large multi-national corporation, but the small 
farmers, and the small fishermen, the small pork producers, the 
small wheat growers. That is what we are talking about.
    Mr. Burr.  The gentleman's time has expired.
    The Chair will not hold it against him the fact that his 
fishermen are taking North Carolina fish.
    I would like to thank all of our witnesses today. This has 
been a very fruitful and important hearing. I hope those 
Members on the Subcommittee who were not here have an 
opportunity to read your testimony.
    This hearing is adjourned.
    [Whereupon, at 3:35 p.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                             March 23, 1999

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