[Senate Hearing 107-370]
[From the U.S. Government Publishing Office]
S. Hrg. 107-370
REVIEW OF THE TRADE TITLE OF THE FARM BILL
=======================================================================
HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
APRIL 25, 2001
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
Available via the World Wide Web: http://www.agriculture.senate.gov
U.S. GOVERNMENT PRINTING OFFICE
78-561 WASHINGTON : 2002
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512-1800
Fax: (202) 512-2250 Mail: Stop SSOP, Washington, DC 20402-0001
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
RICHARD G. LUGAR, Indiana, Chairman
JESSE HELMS, North Carolina TOM HARKIN, Iowa
THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota
PAT ROBERTS, Kansas THOMAS A. DASCHLE, South Dakota
PETER G. FITZGERALD, Illinois MAX BAUCUS, Montana
CRAIG THOMAS, Wyoming BLANCHE L. LINCOLN, Arkansas
WAYNE ALLARD, Colorado ZELL MILLER, Georgia
TIM HUTCHINSON, Arkansas DEBBIE A. STABENOW, Michigan
MICHEAL D. CRAPO, Idaho BEN NELSON, Nebraska
MARK DAYTON, Minnesota
Keith Luse, Staff Director
David L. Johnson, Chief Counsel
Robert E. Sturm, Chief Clerk
Mark Halverson, Staff Director for the Minority
(ii)
C O N T E N T S
----------
Page
Hearing(s):
Review of the Trade Title of the Farm Bill....................... 01
----------
Wednesday, April 25, 2001
STATEMENTS PRESENTED BY SENATORS
Lugar, Hon. Richard B., a U.S. Senator from Indiana, Chairman,
Committee on Agriculture, Nutrition, and Forestry.............. 1
Dayton, Hon. Mark, a U.S. Senator from Minnesota................. 32
Miller, Hon. Zell B., a U.S. Senator from Georgia................ 2
Roberts, Hon. Pat, a U.S. Senator from Kansas.................... 29
Nelson, Hon. Ben, a U.S. Senator from Nebraska................... 37
----------
WITNESSES
PANEL I
Babcock, Bruce A., Director, Center for Agricultural and Rural
Development, Iowa State University............................. 3
Heck, Ron, Soybean Producer, Perry, Iowa and Vice President,
American Soybean Association................................... 6
PANEL II
Echols, James, Cordova, Tennessee, Chairman, National Cotton
Council........................................................ 22
Hamilton, Timothy F., Chicago, Illinois, Executive Director, Mid-
America International Agri-Trade Council, and Executive
Director, Food Export USA-Northeast............................ 25
McDonald, Dennis, Melville, Montana, Chairman, Trade Committee
for
R-CALF, United Stockgrowers of America......................... 27
O'Mara, Charles J., President, O'Mara and Associates, Washington,
DC, on behalf of The American Oilseed Coalition................ 20
Stallman, Robert, Columbus, Texas, President, American Farm
Bureau
Federation..................................................... 16
Swenson, Leland, Aurora, Colorado, President, National Farmers
Union.......................................................... 18
PANEL III
Hackett, Kenneth, Baltimore, Maryland, Executive Director,
Catholic Relief Services, on behalf of Coalition for Food Aid.. 51
Lewis, Judith, Acting Director of Resources and External
Relations, World Food Program, Rome, Italy..................... 48
Martin, Gary, President, North American Export Grain Association,
Washington, DC................................................. 54
----------
APPENDIX
Prepared Statements:
Fitzgerald Hon. Peter G...................................... 64
Miller, Hon. Zell B.......................................... 62
Babcock, Bruce A............................................. 66
Echols, James................................................ 109
Hackett, Kenneth............................................. 139
Hamilton, Timothy F.......................................... 120
Heck, Ron.................................................... 72
Lewis, Judith................................................ 132
Martin, Gary................................................. 156
McDonald, Dennis............................................. 124
O'Mara, Charles J............................................ 104
Stallman, Robert............................................. 87
Swenson, Leland.............................................. 96
Document(s) Submitted for the Record:
Coalition to Promote U.S. Agricultural Exports............... 174
Cotton Council International's COTTON USA Program............ 162
MIATCO....................................................... 163
Sims, Douglas, Chief Executive Officer of CoBank............. 177
----------
REVIEW OF THE TRADE TITLE OF THE FARM BILL
----------
WEDNESDAY, APRIL 25, 2001
U.S. Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC.
The Committee met, pursuant to notice, at 9:07 a.m., in
room SR-328A, Russell Senate Office Building, Hon. Richard
Lugar, [Chairman of the Committee], presiding.
Present or submitting a statement: Senators Lugar, Roberts,
Fitzgerald, Crapo, Conrad, Baucus, Miller, Nelson, and Dayton.
STATEMENT OF HON. RICHARD B. LUGAR, A U.S. SENATOR FROM
INDIANA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND
FORESTRY
The Chairman. I welcome everyone to this hearing of the
Senate Agriculture Committee.
This morning we will receive testimony on reauthorization
of the trade title of the Farm bill. The committee will convene
a second trade hearing in the near future in which witnesses
from the administration and the private sector will engage in
discussion of a broader range of trade issues impacting
agriculture.
Today, we will focus more specifically on the trade title
of the Farm bill and the issues and programs related to
reauthorization. As we begin this process of drafting a new
farm bill, we emphasize again the vital importance of foreign
markets to United States agriculture.
Nearly every one of our 50 States exports agricultural
commodities and benefits from export-generated employment,
income, and rural development. No sector of the United States
economy is more critically dependent on international exports
than agriculture. The products of roughly 3 out of every 10
acres of the United States agricultural production are
exported, and farmers in this country are reliant on the
ability to export what they grow.
Ninety-six percent of the world's population lives outside
of the United States, and each of these persons is a potential
customer. We can best secure our farmers' and ranchers'
profitability by promoting access to foreign markets. It should
be borne in mind that agricultural exports generate and sustain
hundreds of thousands of jobs and considerable income and
activity in the American non-farm economy as well.
When Congress enacted the last Farm bill, the FAIR Act of
1996, we gave farmers the right to make their own planting
decisions free from Government interference. However, there is
unfinished business which we are discussing again today in
securing free and fair trade in farm products and by opening
more foreign markets to agricultural production from our
country.
There are a number of programs to increase United States'
agricultural exports and facilitate farmers' access to those
markets. We will hear testimony this morning on the various
USDA export and food aid programs. It is important to remember
that many of the barriers to increased exports are
unfortunately outside the jurisdiction of this committee and
cannot be addressed by Congress in the context of the Farm
bill.
But today's hearing will begin an overview of the
agricultural export outlook, provided by Bruce Babcock of the
Food and Agricultural Policy Research Institute and Ron Heck, a
soybean producer from Iowa who will discuss his experience with
South American agriculture. His presentation is very important
as we consider the international agricultural landscape over
the years covered by the next Farm bill.
The second panel will address USDA's export programs. Bob
Stallman, of the Farm Bureau, and Lee Swenson, of the National
Farmers Union, will provide the committee with their
organizational views. Also appearing on the panel will be Joe
O'Mara, with O'Mara and Associates; James Echols, with the
National Cotton Council; Tim Hamilton, with Mid-America
International Agri-Trade Council and Food Export USA-Northeast;
and Dennis McDonald, with Ranchers and Cattlemen Action Legal
Fund.
The third panel will focus on food aid programs, and that
panel will include Judith Lewis, of the World Food Program; Ken
Hackett, of Catholic Relief Services; and Gary Martin, of the
North American Export Grain Association.
We are pleased and honored to have each of these witnesses
this morning. We look forward to an insightful hearing.
I would like to call on my colleague, Senator Miller, and
ask if he has an opening comment or statement.
STATEMENT OF HON. ZELL B. MILLER, A U.S. SENATOR FROM GEORGIA
Senator Miller. Thank you, Mr. Chairman.
I would like to thank all those who are going to testify
before the committee this morning.
I do have a statement, but in the interest of time, I will
submit it for the record.
The Chairman. It will be published in the record. I thank
the Senator.
[The prepared statement of Senator Miller can be found in
the appendix on page 62.]
The Chairman. Dr. Babcock and Mr. Heck, we are very pleased
to have both of you in front of us this morning. I will ask
that Dr. Babcock testify first and then Mr. Heck, second.
I will ask that you summarize your testimony in 10 minutes,
if that is possible.
We will proceed with you, Dr. Babcock.
STATEMENT OF BRUCE A. BABCOCK, DIRECTOR, CENTER FOR
AGRICULTURAL AND RURAL DEVELOPMENT, IOWA STATE UNIVERSITY,
AMES, IOWA
Dr. Babcock. Thank you, Mr. Chairman. Thank you for the
opportunity to participate in today's hearing.
My research center at Iowa State University, together with
FAPRI at the University of Missouri, jointly developed the
annual FAPRI baseline. From this baseline, I have prepared a
brief overview of what we see happening over the next 5 years
in the agricultural economy.
When are prices going to rebound? That is the No. 1
question that I am asked. Prices have been weak for most crops
since 1997, and pork and beef prices in the late 1990's hit
rock bottom, although both have subsequently recovered.
When discussing where prices are going, it helps first to
take a long historical view. For agriculture, if you look back,
the long run, inflation-adjusted price trend is clearly
downward. Productivity increases have resulted in the supply of
agricultural commodities growing faster than demand. Other
commodities such as metals, oil, wood, chemicals, and computer
capability have also experienced this downward trend.
This downward trend in inflation-adjusted prices really
does represent a success story for economic growth and wealth
creation. Despite claims that the world will inevitably run
short of basic commodities, low prices indicate that basic
commodities have become relatively less scarce over time, not
more.
Technological progress means that we can spend relatively
less on basic commodities, which helps increase standards of
living.
However, this long run trend does not imply that prices
cannot rise over a 5-year period, particularly if prices start
at a lower-than-expected base level, as they currently are now
for agricultural crops.
How did our prices get so low? First, the average yields
for corn, barley, and sorghum were above trend each year from
1996 to 1999. They fell slightly below trend in 2000. Average
world wheat yields were below trend in 1996 but above trend for
the following 4 years, so we had a lot of supply. As we look to
the next 5 years, we should expect a more equal number of years
in which yields are above trend or low trend, which should help
prices out over the next 5 years.
Second, the Asian financial crisis in 1998 had a direct
effect on United States prices. The economies of Thailand,
South Korea, Philippines, Indonesia and China either shrank in
size or had significant declines in growth rates. This crisis
caused United States exports to either fall, as in the case of
grains, or to remain flat, when they were expected to grow
sharply, as with meats.
Most Asian countries have rebounded quickly from that
crisis, with the notable exceptions of Japan and Indonesia.
Continued economic growth in the region should help strengthen
export demand for United States agricultural products.
Third, United States prices were weakened by the strength
of the dollar. Both in 1997 and again in 2000, the dollar
strengthened considerably against European and most Asian
currencies. It is difficult to determine if the dollar will
weaken any time soon, although some think it is overvalued
right now.
Last, changes in domestic policies in the mid-1990's
contributed to weak prices. The new United States farm policy
passed in 1996 allowed farmers to take advantage of high market
prices in the middle 1990's and expand their acreage, and large
countercyclical farm payments have helped keep United States
total planted acreage up even though price levels have fallen
dramatically.
China policy in 1997 and 1998--they decided to reduce the
size of their corn, wheat, and cotton stocks. This internal
policy decision helped switch China from a net importer to a
net exporter of these commodities, which weakened prices.
Public and private transportation infrastructure
investments in Brazil and Argentina have allowed both countries
to expand planted acreage, particularly soybean acreage, which
has tended to expand total world supplies.
Some of these policy decisions may be transitory. We expect
China to become a net importer of corn, wheat, and cotton as
they rationalize their producer incentives under the WTO.
Congress may decide to lower loan rates and eliminate any
further emergency payments; they may not. Brazil and Argentina
could decide to return to a policy of higher taxes on
agriculture, which would hold down their supply expansion. Any
of these policy changes would lead to higher United States crop
prices.
In summary, we see no reason to believe that the long run
trend in real prices will be reversed in the next 5 to 10
years. However, recent price weakness is caused by short-run
factors that are reversible, and we do see some reverse. So let
me talk about in particular some of the price projections we
are making.
Wheat prices are expected to increase by 16 percent, from
$2.67 to $3.17 in 2005. But United States exports are projected
to remain flat. Because of its policy reforms, the EU is able
to expand exports of wheat significantly without subsidies. If
major producing and consuming countries like China and India
suffer poor crops, wheat prices will be much higher than
projected.
Corn prices are projected to increase 20 percent between
now and 2005. Our projection that China will become a net
importer of corn by 2005 is a key factor underlying the price
increase. World stock levels are projected to be adequate to
forestall dramatic increases in price from a single year of
poor growing weather, so the private sector really is holding
stocks.
Continued large LDP payments to soybeans will limit United
States corn acreage, thus helping corn prices. If United States
soybean loan rates are rebalanced downward, corn prices would
tend to be lower than projected.
Soybean prices are projected to remain below United States
soybean loan rates for the next 5 years. Continued expansion of
soybean acreage in South America and continued expansion of
other acreage of competing oilseeds, combined with maintenance
of large United States soybean acreage, keep prices weak.
Despite continued high United States support prices, the
United States share of world soybean trade declined over the
period. Productivity gains in the United States and in other
countries have made soybeans a relatively attractive crop to
grow around the world.
Cotton prices have already rebounded somewhat from their
recent low levels. We project cotton prices to remain largely
at current levels over the next 5 years. This static projection
reflects moderate growth in world demand, significant increases
in cotton acreage in Brazil, and continued liquidation of large
Chinese stocks.
Domestic rice prices are projected to rise by 25 percent.
Strong increases in United States demand and growth in world
rice trade fueled this increase. However, United States prices
do not rebound as much as strong demand growth might suggest
because other exporting countries are in a position to increase
their share of world markets. Thailand, Vietnam, China, and
India are all projected to increase their rice exports.
Cattle prices are the bright spot in United States
agriculture. Strong domestic demand combined with a continued
decline in total cattle numbers have led to this strength. As
herds rebuild over the next 5 years, we project prices to
remain strong. In the short run, strong demand increases
imports of cattle, but as the cattle cycle moves on, and prices
fall a bit, we see exports expanding.
Strong domestic demand and problems with foot and mouth
disease in other exporting countries have led to a recovery in
pork prices, although they still remain below the levels
observed in most of the 1990's. Domestic hog numbers are
projected to increase over the next few years, driving down
price, but increasing exports. Pork exports are projected to
increase 36 percent over the next 5 years. The phenomenal
productivity growth in the United States pork sector is
projected to continue, making the United States a low-cost
producer in the world.
In our baseline projects, we assume that current policy
decisions are maintained throughout the projection period.
Thus, for dairy, we assume that the dairy support price program
is terminated at the end of 2001, which lowers price, and
United States production lowers as United States production
lowers as United States producers respond to lower dairy
prices.
Overall, we project moderate growth in crop prices over the
next 5 years. With the notable exception of soybeans, we should
see significant declines in price support payments. Crop prices
will rise significantly if there is a major supply disruption.
But over a 2- or 3-year period, the extent to which prices can
rise is limited by the continued downward pressure of
agricultural productivity increases in the United States and
other exporting nations.
We are optimistic about the health of the livestock sector.
Strong demand, low-cost producers, and high-quality products
are making the United States quite competitive in world
markets. Of course, this strong position would be quickly
eroded if the United States loses its FMD-free status. Public
investments in maintaining this status may yield the largest
short- and long-term returns in agriculture available to
Congress and the USDA.
As you rewrite the trade title of the Farm bill, keep in
mind that 10 years ago, program commodities accounted for 64
percent of the value of agricultural exports. In 2000, they
accounted for 49 percent. Continued world economic growth will
result in relatively greater demand for United States exports
of higher-value commodities. A farm bill that gives United
States agriculture the right incentives to deliver the kinds of
food products overseas customers want will enhance the long-
term health and competitiveness of the sector.
One last comment. The committee knows that it cannot spend
more than the amber box limits under the WTO of about $19.1
billion. This constraint, along with the generally accepted
notion that world economic growth is enhanced with increased
trade, gives momentum of the policies that do not directly
influence world prices or trade flows.
As the EU considers the future of its agricultural
policies, it seems that it is replacing its food security
rationale for intervention with a rural development/
environmental quality rationale. A similar search for
justification for United States intervention has led many to
push for expansion of conservation payments to farmers, such as
Senator Harkin's Conservation Security Act. Supporters of
conservation payments point out that taxpayers are more likely
to support payments to farmers if they are getting
environmental quality in return--and it is much easier for
conservation payment programs to be classified as green box
under the WTO.
Thank you again for the opportunity to participate.
The Chairman. Thank you very much, Dr. Babcock, for a very
comprehensive review in a very short period of time.
Let me just indicate to both of you gentlemen and to all of
the subsequent witnesses that your comments will be published
in full even though you have striven to summarize and given our
hopes that we could proceed in this way.
[The prepared statement of Dr. Babcock can be found in the
appendix on page 66.]
The Chairman. Mr. Heck, would you proceed with your
testimony.
STATEMENT OF RON HECK, PERRY, IOWA, VICE PRESIDENT, AMERICAN
SOYBEAN ASSOCIATION
Mr. Heck. Good morning, Mr. Chairman and members of the
committee.
I am Ron Heck, a soybean and corn producer from Perry,
Iowa. I currently serve as vice president of the American
Soybean Association, which represents 29,000 producer members
on national issues of importance to all United States soybean
farmers.
ASA commends you, Mr. Chairman, for holding this hearing
and appreciates the opportunity to testify today.
Brazil has emerged over the past decade as the principal
competitor to the United States for exports of soybeans,
soybean meal, and soybean oil. ASA and other United States
oilseed organizations are spending a great deal of time and
resources to assess the long-term challenge which Brazil
represents to our industry, since we depend on foreign markets
for fully one-half of our annual soybean production.
In addition to this national interest, every soybean
producer wants to base decisions affecting the viability of
their own operation on the best available information.
The future competitiveness of Brazil in both the world and
our own domestic market will affect the livelihood of my family
in the coming years. We all need to accurately assess the
impact of Brazilian production costs, production and exports in
making decisions on whether to purchase additional land and
plan to expand production.
For these reasons, I have visited Brazil and Argentina four
times in the last 14 months. I have also hosted Brazil's
largest soybean farmers, the Maggi family, in a visit to my
farm in September 1999 to tour Iowa State University's
Precision Farming Project on my farm.
Following these visits, I wanted to share my experiences
and views with my colleagues at ASA, with other producers, and
with the industry at-large. I developed a powerpoint
presentation which is summarized in the tables, charts, and
comments included in the balance of my testimony. I would like
to briefly summarize this information for the committee and
then will be happy to respond to any questions.
The title of the powerpoint presentation is ``Can U.S.
Farmers Compete with South America?'' It says I would like to
get the facts straight about that. I am disturbed about some of
the things I have been reading in the press.
The first thing I would like to call the committee's
attention to is the total world crop acres. In a long-term
chart, we used to add about 5 million acres a year in total
acres farmed for all crops, but in 1996, the year of $5 corn
and $8 soybeans, the world farmers suddenly added 45 million
acres all in 1 year, which is a 9-year supply of new acres and,
certainly, just before the Asian crisis, this caused a short-
term oversupply problem.
I would also like to point out to the committee that since
1996, world acres have declined every year. We are not in an
expansion mode in world acres; we are in a world contraction.
The next slide, number 6, talks about the average yield for
coarse grains that Dr. Babcock referred to. We had an old trend
line yield, and the yields went up and down every year. But
there again, in the same year, 1996, we had a sudden
productivity jump of 5 percent all in 1 year, which is enough
of a production increase to last for 7 years, further
compounding the supply problem.
I believe this sudden jump was because of genetically
modified biotech crops, particularly in the coarse grains areas
from BT corn, which makes your yields much more stable and
higher than they were before that product existed.
In Slide 7, we take a look at the world coarse grains area,
which peaked in 1985 and has been going down ever since. As we
became more productive, we did not need as many acres in the
coarse grains, including corn and wheat, and the world's
farmers responded by planting more soybeans. You see that world
soybean production has been shooting up, but actually, world
soybean ending stocks, surprisingly, have been going down
during the decade of the 1990's.
There is, however, a troubling trend. Although United
States soybean stocks are down in the last 10 years, for the
last few years, they have been going up a little faster than
world carryover stocks. I think there are two reasons for this.
Slide 11 shows the 1995 projection for what the value of
the United States dollar would be, and this was the baseline
forecast for the FAIR Act. It was projected before the Asian
crisis and before the euro faltered that the value of the
dollar would decline, but instead of declining, it went up 25
percent higher than the forecast. I would say that our price
problem is largely because of this value of the dollar. Six-
dollar beans with the predicted $85 index instead has turned
into $4.50 beans with our current 115 dollar index. This is the
price problem.
But in theory, regardless of our price problem, the
marketing loan should allow our prices to go down to a level
where the United States stocks would always clear--yet this
does not seem to be happening exactly as I would have predicted
it. I think there is a reason for this, too.
Slide 12 shows European Union imports of soybeans and yield
by country of origin. You will notice that as their imports
from the United States have gone down, their imports from
Argentina and Brazil have gone steadily up. I would like to
point out to the committee that all of Argentina's beans are
GMOs, and the Europeans take them without complaint while they
do complain about ours.
The next few slides are general facts taken from the 1995
CIA Factbook; they are a little dated, but they are consistent,
and that is the source that I used.
Talking about the differences between the United States and
Argentina and Brazil, basically, they say over the next couple
of pages that we are a much larger country, with many more
resources to work with, including our Federal Government. In
the interest of time, we need to skip over that.
Slide 19, unemployment; of course, you know the United
States is fully employed. Argentina and Brazil now are
currently suffering through maybe 25 percent unemployment--I am
not sure that anyone really knows.
But so what? Here is the turning point. In 1995, the world
certainly needed more food, but we got three responses.
Investments were made by Europe and Japan in South American
infrastructure, leading to an acreage expansion down there. The
multinationals released the biotech products that they had, and
that caused an increase in productivity and more expansion and
supply. The U.S. Government passed the FAIR Act--all at the
same time. All three investments worked, and we got more food.
So, which one is going to survive? That may be up to some
of you in the room today.
Unfortunately for soybeans, soybeans became the
battleground, because they are the commodity that is easiest to
grow; they have a worldwide market; they have enough value per
bushel to pay the freight; and they have United States
production patent.
Now we get down to looking at our exact competitors in
South America, and there are really three. Southern Brazil is
the first one. Land down there is as high as $2,500 an acre,
just like ours. They grow mainly orange juice and ethanol. It
is fully developed. They cut soybean acreage this year to raise
more corn. Corn a year ago in Sao Paulo was $4 per bushel
because Brazil did not allow the import of Argentine or United
States corn, because they wanted to stay GMO-free. So Brazilian
farmers responded and planted more corn and less beans this
year, and they are really no further threat to expansion
because they are in full production.
Argentina has good soil and climate, but they only have 5
million acres that are still available. They are very
financially stressed, having a hard time, struggling. As you
know, they have lax patent and copyright infringement and
intellectual property laws, so they buy some of their inputs
cheaper because they do not pay royalties, but nevertheless,
they cannot expand much more, and they are suffering at these
prices.
Really, the Cerrados in central Brazil is the only area
that I am concerned about for myself. The reason is there are
several hundred million acres available; the land is cheap; but
they have transportation costs that are as high as $2 per
bushel. As they improve that, that will be a problem for us.
They give relatively decent yields--30 bushels an acre is
common, 45 bushels an acre on good farms--but they have very
high production expenses, which is in contrast to what you may
have heard.
Slide 25 is a list of areas where the Cerrados is certainly
not competitive. Slide 26 shows some areas where the Cerrados
is competitive. I would be happy to answer questions on that,
but time does not permit that we go through each one in detail.
Slide 27 is what is in the popular press and what is being
said about the cost of production in Iowa and Matto Grosso, and
I would like to slow down for a moment and take a closer look
at that.
In the lower right-hand corner there, the conclusion is
that Iowa's cost of production is $5.89 per bushel, and in
Matto Grosso, it is $2.98 per bushel. That gives the impression
that this is a hopeless situation for us, and that is just
absolutely not accurate.
The chart starts out with land as a fixed cost and a
permanent cost, and as farmers, we all know that land rent is
the residual after the production costs and revenue are
determined.
So let us take out the land and replace that with
transportation cost to deliver it to the customer, because
after all, the soybean on a farm has no value; it has to be
delivered to a customer.
Moving to the next page and the rest of the story, just
making the one change to freight instead of land and also, at
the bottom, changing the yield to 50 bushels an acre for Iowa
and 45 bushels for Matto Grosso--Matto Grosso has never reached
45 bushels an acre yet; I expect that they will, but they have
not yet. The Iowa cost is now lower than Matto Grosso's--$3.79
a bushel versus $4.67 in Matto Grosso.
We are not done with costs yet. Looking at the other
figure, $110.99 for Iowa and $40 for Matto Grosso.
Slide 29 talks about how inaccurate that statement is. It
is just not true.
So on Slide 30, the best estimate is that Iowa production
costs are $3.79; Matto Grosso costs are $6.23. So we are the
lower cost area. We have some short-term problems here. We can
handle our conservation problems in Iowa. In Matto Grosso and
the tropical areas, they are mining their soil of nutrients,
they are degrading their soil, they are operating at a loss,
and they are really only being kept in business because of
currency devaluations. The Brazilian real was cut in half in
January 1999, and they are producing for the current signals,
not for the market signals.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Heck can be found in the
appendix on page 72.]
The Chairman. Thank you very much, Mr. Heck. This
information is extremely valuable, and I commend to all the
members of the committee and the staff the powerpoint
presentation you have described and which is in fact a part of
your testimony. This is very valuable data.
Let me begin the questioning by pointing out that you, Dr.
Babcock, cited that you have had good weather, an Asian crisis,
expanded acreage--both of you pointed out the 1996 jump--and of
course, in your powerpoint presentation, Mr. Heck, you pointed
out that acreage remained high. In other words, it was a leap,
but people did not fall back in the total sense of the acreage
being utilized. Then, finally, there were policy changes;
policy changes here and elsewhere.
Yesterday, when I met, as some of us did, with the farm
editors, we were pointing out that some of these policy change
have an effect, of course, upon supply in the United States,
one of which is our crop insurance program. Many observers, and
perhaps you, Dr. Babcock, having done some work with FAPRI,
have indicated perhaps as much as three percent more production
occurs because we have crop insurance, and marginal lands, or
lands that would be more challenged, are in fact utilized
because of that.
Some have in fact pointed out--and the cost figures you
have presented, Mr. Heck, are very interesting, because they
get to the heart of the problem with the LDP--some have
suggested that the LDP, the loan deficiency payment, was meant
as a safety net, a sort of a catch-all at the lower end. But we
have some efficient producers who are apparently able to
produce for less than the LDP, and some incentive therefore to
do more.
The wide variety of costs on various farms is certainly an
important factor, but nevertheless we may be getting more
production even as we are trying to provide safety nets, either
with an LDP or a safety net through crop insurance. That is
likely to lead to lower prices. So on the one hand, as people
come in, as they will to this committee throughout our
discussion of the commodity title, lamenting lower prices, most
would not be in favor of eliminating crop insurance or lowering
the LDP or the soybean loan or any of the other fixtures that
we have, all of which would appear to contribute to more
production and consequently lower price, if you had the same
weather.
You are probably correct, Dr. Babcock--you will not always
have weather that is the same. You, Mr. Heck, have pointed out
that the dollar rose 25 percent as opposed to projections that
it would fall. Those are consequences beyond this committee and
maybe beyond any committee--they are the facts of life of the
world.
I would just suggest, finally, that although the price has
been a preoccupation, sometimes the volume is important; price
times volume equals income. As a matter of fact, as people have
become more efficient and produced three times as much now, 70
years later, than they did in the 1930's, revenue has increased
even though price in a secular way, as Dr. Babcock just pointed
out, may have decreased given these efficiencies or
breakthroughs in research and so forth.
I mention all of this because there is a mercurial aspect
about what we are chasing here. If somebody has price in mind,
and that is the only thing on their mind, why, that is one
problem. But if we were to look strictly at that, why, of
course, I suppose we would adopt policies that would be very
abnormal with regard to our freedom to use land, quite apart
from our export policy.
Let me ask as an overall question to both of you, if you
were to advise this committee on changes in farm legislation
that would have an effect on our ability to be better
exporters--and we have to take on faith now that our Trade
Representative will be more adept and that somehow, we'll get
fast-track authority, politically difficult as this may be, so
that we are credible and have some chance of making a
difference--because my judgment is that we will not have any
difference at all without fast-track; we'll be whistling in the
dark, hoping for something to happen there. But let's say we
get those assumptions, so we do have a freer road to negotiate
with other countries. What, in terms of our current policies,
should we change to make us more competitive or more likely to
be able to take advantage of those favorable world situations?
Can you offer a suggestion, Dr. Babcock?
Mr. Babcock. I look at the current farm policy, and I look
at it in terms of the policy tools that this committee has at
its disposal. It is export-friendly. I mean, if you look at the
guaranteed prices put in with the LDPs, as Ron Heck said, they
do allow the market price to fall to the level needed to clear
the markets, which means that--and if you look at world
markets, and you talk to other exporters, they think this is
the worst possible program for them because it hurts their
export price. So from a grains point of view and the program
crops, it is export-friendly.
From a livestock or meat side, it is export-friendly, too,
because we are not artificially driving up or, actually, with
the program causing prices to be lower than they were, which
lowers feed cost, which expansionary for the livestock sector,
which helps them.
So if I look at the current policy, it is already export-
friendly.
Now, you can talk about particular--and I think the later
panels will talk about particular programs that might expand
exports in one direction or another, but from a macro or a
global point of view, I think that the FAIR Act is the most
export-friendly policy that we have had.
The Chairman. Mr. Heck.
Mr. Heck. Yes, I would agree with that. I think that is an
excellent answer.
The question I really needed the answer to for my own farm,
and it is the same for the committee, too, is this a long-range
problem or a short-range problem; will the dollar always be
high, and will the Cerrados in Brazil always be able to
produce. I do believe it is a short-run problems that
currencies will correct. I do not believe the Cerrados can
continue at these prices.
I think that our current policies are actually the right
ones and should remain in place, and we should continue to
pursue more aggressively the elimination of trade barriers
around the world, whether they are tariffs or non-tariff
barriers.
The Chairman. Senator Baucus, I know that you have some
time constraints, so I want to call on you so that you have an
opportunity.
Senator Baucus. No, no. Senator Miller was here ahead of
me.
Senator Miller. I do not have any questions.
Senator Baucus. Thank you.
Which trade barriers are the worst, cause the greatest
problems for American producers, particularly wheat?
Mr. Babcock. My experience is that the worst trade barriers
are the ones that are not transparent, that you cannot get a
handle on. That is why the past negotiations have tried to
convert quotas, licensing restrictions, into tariffs, so that
then you can negotiate those tariffs down. But it is very hard
to get a handle on a trade barrier that is maybe a
phytosanitary trader barrier, because you cannot tell if it is
really reflecting true concerns about food safety or spread of
disease versus a true wanting to protect domestic producers.
Senator Baucus. Could you give me some examples of
phytosanitary barriers that you suspect are really trade
barriers? I will tell you that one is beef hormones. That is
clear. My authority is Margaret Thatcher. Several years ago, I
was sitting across the table from her, after listening to about
a half-an-hour lecture on everything under the sun, and we got
to talking about beef. I said, ``You know, we think that that
is trade-related, not health-related.''
She said, ``That is right; of course. But that is the
continent''--she was putting the blame on the continental
Europeans. But she flat out said that absolutely, that is what
that is all about. Of course, that is just her own opinion.
But what are some that come to your mind?
Mr. Babcock. That one came to my mind right off the bat. If
you look at it, look how long it has taken to--even though the
WTO ruled that it was not a phytosanitary reason for doing it,
or a health problem, we are still negotiating; it is still on
the table.
So those are the hardest to get resolved. IT is very
difficult--for example, we just instituted a policy to keep us
FMD-free, our FMD status free, and Russia banned imports from
the EU for the same reason. There, you have to say that that is
probably a wise decision. But where you draw the line on some
of the more phytosanitary things is more difficult than on
others. Some are true, some are not true. Some are trade-
restricting, some are not. Those are the hardest to get, and I
think people are moving more toward that, because they are
easier to defend.
I would say the worst ones also are strict quotas, and I
think the WTO has attacked import quotas as things that need to
be converted into tariffs over time.
Senator Baucus. In your statement, you say you think the
European Union is reforming its agricultural policy. I know
they talk a lot about it, and there is some talk that when they
take in those Eastern countries, they are forced to, but I will
bet you they bring them in under different conditions so that
they are a little less forced to restructure.
Mr. Babcock. The reform I am talking about is a lowering of
their intervention prices. Basically, they are putting more of
their programs into what we call the blue box, which are less
trade-distorting than their old programs were. As I said, they
seem to be going more for direct payments to farmers for rural
development/environmental quality reasons rather than for what
I would call enhanced production reasons.
Senator Baucus. Have you given any thought to what the best
leverage we have is as far as knocking down these trade
barriers? I believe that no country, altruistically, out of the
goodness of its heart, is going to lower a trade barrier. They
just do not. Why should they, unless there is leverage, unless
they are forced to?
Mr. Babcock. Our leverage over the EU, just talking about
EU now, is in a large sense--I have travelled through there--
they are a big country--or, a big entity, not a country--they
are a big entity, and they have lots of variation in the types
of production regions they have. They clearly can be self-
sufficient in food, and they--sometimes, I find it hard to get
a lever on the EU because they are so big, and their internal
politics are so complicated. It is hard for me to see how we
can leverage the EU to do something.
Now, the banana dispute was resolved, I think, because the
trade representatives from the United States and the EU got
together and decided that that was in the best interest of both
parties. But I read about the EU, and I cannot see what
leverage we have over them.
Senator Baucus. It is difficult; otherwise, we would have
come up with it by now, but we have got to find it, whatever it
is, because frankly, I just think that the EU is by far the
biggest offender with respect to agricultural trade barriers,
and it is going to be very difficult. There is talk in the WTO
that the next two big areas are agriculture and services, but I
do not know what leverage we have on the EU at this point to
get anywhere. But we have got to find it--that is our job. I
think we gave up the store a few years ago when we agreed to
proportionate reductions of export enhancements, and we sold
ourselves a bill of goods, frankly, by giving up too much at
that time, so we are in a box right now, and it is difficult
right now.
Nevertheless, that is a fact, that is what we face, and we
just have to deal with it the best we possibly can.
Mr. Chairman, thank you very much.
The Chairman. Thank you, Senator.
Senator Baucus. I also want to welcome Dennis McDonald,
from Melville, Montana, who will be testifying later in the
second panel. I will not be able to be here for his testimony,
but I urge you all to listen very closely. He is a very wise
guy, in many sense of the term.
The Chairman. We promise to do that, and thank you for your
introduction.
Senator Crapo.
Senator Crapo. Thank you very much, Mr. Chairman.
I just have one question. Dr. Babcock, in your testimony--
first of all, let me say I appreciate it--you address one of
the perplexing questions that we have asked ourselves for years
now, and that is why the ag prices continue to be so depressed.
And with regard to domestic policies, you stated in your
written testimony that ``Larger, countercyclical farm payments
have helped to keep United States planted acreage up even
though prices are down.''
Do you believe that the countercyclical farm payments are a
good or a bad aspect of United States domestic farm policy?
Mr. Babcock. Well, to answer that, you have to figure out
what the exact objective of United States farm policy is, and I
have struggled with that for the last couple years in
preparation for the next Farm bill, about identifying that
objective. If you could identify the objective, then you could
figure out if it is a good or a bad thing.
We can look at the effects of countercyclical policies, and
I think the biggest effect--and when I talk about
countercyclical policies, I am talking about the LDP payments,
the crop insurance payment, and the emergency AMTA payments.
All of those have gone up over the last 3 or 4 years, so
together, they are countercyclical.
What those three programs have done primarily is keep the
cash-flow flowing in agriculture, which has really reduced a
lot of financial difficulty in the agricultural sector. It has
also kept land rents up, land prices up. So it has probably
kept more people on the farm than otherwise would be, and it
has kept land prices up.
Now, whether that is good or bad depends on if that is your
objective, and I would say that that probably was the objective
of those countercyclical payments, and so in the short-run
objective, it is a good thing.
I think we have to look longer-term, though, and ask are
those countercyclical payments a way of creating more financial
stability so that we can keep liquidity flowing into
agriculture, or are they a way of basically transferring more
money to agriculture, because for example, my projection is
that the LDPs for soybeans will be there for a long time--that
is not an emergency safety net when it occurs 3 years, 4 years,
5 years, 6 years. What it really is is a transfer of income. So
it is moving away from kind of a countercyclical payment into
more of a transfer payment, so you get a little bit of a
divergence there. But I would say that it did what it was
intended to; it keeps people on the farm and keeps land prices
up.
Senator Crapo. Thank you.
The Chairman. Thank you very much.
Senator Miller.
Senator Miller. No questions, Mr. Chairman.
The Chairman. Let me comment on Senator Crapo's question
and your response, because I think this is really a very, very
important question and answer with regard to the Farm bill and
farm policy.
As you have said, Dr. Babcock, you have studied all of
this, and you have tried to define what our objective was in
this, and of course, one of the objectives was to bring about
more freedom of decisionmaking, and I think that has been
achieved, and likewise, to have an export-friendly situation,
which both of you have testified that you support and have
found very useful.
But what, clearly, although unstated, we have been
attempting to do is to really save every farm in America, that
is, to keep cash-flow or values or what-have-you alive. Now,
that may not have ever been blurted out in the precis or the
preamble of all of this and so forth, but the effect of looking
each year, as we have been doing, at what net farm income is--
and that line in the USDA report--and then at what the
projection of what that might be next year, and if it looked
like it was $4 billion less next year, or $5 billion less, it
has been fairly predictable that the Congress would plug in 4
or 5 or whatever was necessary to bring net farm income back up
to where it was before, leaving aside anything else going on in
the world, whether it was the high dollar or the Brazilian
exports or so forth.
Now, that may or may not be a good idea, but I think that
very clearly, that is what we have been doing, with pretty wide
support in both Houses of the Congress.
Second, your point, Dr. Babcock, is that we have also been
engaged in what might be called transfer payments to
agriculture. This means essentially that in the pool of
taxpayer funds that comes to this Government, to this committee
and others, with the support of the Congress, we have dedicated
more of those funds to agriculture arbitrarily, if necessary,
either to supplement income, to keep the cash-flow going, or on
occasion simply to say that agriculture, as we have discovered,
is a low-return business in comparison to a lot of other things
going on in our economy, in fact, it is so low that those who
are having struggles in agriculture are likely to be below
zero. You get a four percent return on invested capital with
the best-managed farms over the years, and that is still a very
low return in comparison to Federal bonds, for example.
So you have a lot of latitude to make transfer payments
even to get that return up into the ball park to something that
might be competitive.
Now, whether the rest of the country will stand still for
that perpetually always remains a political question which is
resolved by all of us--not just by this committee, but by all
of our colleagues--who try to decide what the allocation of
resources should be.
Nevertheless, a lot of farm policy revolves around those
two concepts, and I think the question is critically important
as we try to discuss where we are headed, whether it be in
exports or in the various titles.
But we thank you for illuminating the territory so well,
with so much good data which will be very, very helpful for our
consideration.
Thank you for coming.
We will now call the next panel. That panel will include
Robert Stallman, president of the American Farm Bureau
Federation; Leland Swenson, president of the National Farmers
Union; Charles J. O'Mara, president of O'Mara and Associates in
Washington, D.C.; James Echols, chairman of the National Cotton
Council; Tim Hamilton, executive director of Mid-America
International Agri-Trade Council and executive director of Food
Export USA-Northeast; and Dennis McDonald, chairman of the
Trade Committee for R-CALF, the United States Stockgrowers of
America, from Melville, Montana.
Gentlemen, we welcome you to this hearing. I will ask that
you attempt to summarize your testimony in 5 minutes. The full
testimony which you have prepared will be made a part of the
record in full.
After we have heard from each of the six of you in the
order that I introduced you, we will ask questions of you, and
members will be recognized for that purpose.
First, Mr. Stallman.
STATEMENT OF ROBERT STALLMAN, PRESIDENT, AMERICAN FARM BUREAU
FEDERATION, COLUMBUS, TEXAS
Mr. Stallman. Thank you, Mr. Chairman, members of the
committee.
I am Bob Stallman, president of the American Farm Bureau
Federation, and a rice producer and cattleman from Columbus,
Texas. I appreciate the opportunity to speak with you today
about trade issues affecting agriculture and the trade title of
the next Farm bill.
As you know, United States agriculture is highly dependent
on access to world markets. Our sector has long enjoyed a trade
surplus, but it is steadily decreasing due to declining support
values and barriers to trade that are erected by our trading
partners.
At the same time, our competitors are outspending us on
export subsidies and market promotion programs. We cannot
expect our producers to compete on the world stage when they
are outgunned by foreign government spending. Congress must
equip United States producers with adequate funding to promote
their exports.
To put the specifics of the trade title in perspective, I
am going to highlight a couple of other issues to show what we
are up against, and much greater detail is in my written
testimony.
First, as the Chairman has indicated, Congress must secure
trade promotion authority for the President in order to improve
our access to world markets and correct the trade inequities
now facing our sector. Granting this authority will signal to
the world that the United States is ready to negotiate.
However, trade promotion authority should not include labor
and environment provisions that use trade as a weapon. Putting
labor and environment standards in trade agreements and, more
troubling, imposing sanctions on countries that fail to enforce
their labor and environment standards, is a recipe for ensuring
that no future commercially meaningful trade deal will be
struck.
Farm Bureau continues to oppose unilateral export
sanctions. The sanctions legislation that passed last year was
a good first step on the road to achieving meaningful reform.
We urge the administration to issue the implementing
regulations for this legislation without delay.
Also, the restrictions on Federal export promotion
assistance, financing of sales and travel to Cuba, and
licensing requirements must be repealed in order to allow
United States farmers and ranchers true access. We support S.
171, which will accomplish this objective.
The negotiations on agriculture in the World Trade
Organization are critical for our sector, as they represent our
best opportunity to increase market access. However, true
progress in these negotiations cannot be achieved unless a
global trade round is launched. WTO member countries should
support a broad-based round to ensure that all sectors in the
global economy benefit from increased trade liberalization.
Completion of China's accession to the WTO is another
critical issue. All outstanding issues for China's accession
package should be resolved before the United States gives its
final approval for China to join the WTO, including resolution
of China's allowable domestic support commitments and the
bilateral agreement to import our wheat, meat, and citrus
products.
On the bilateral front, Chile, as part of the Free Trade
Area negotiations now under way, must agree to resolve all
outstanding SPS measures that restrict United States exports to
that market and must agree to eliminate its price band system
which places imports into Chile at a price disadvantage.
Regarding the Jordan FTA, Farm Bureau opposes including
labor and environment provisions in the agreement and strongly
objects to the use of sanctions to enforce labor and
environment provisions.
Concerning regional agreements, the FTAA, Free Trade Area
of the Americas, will create an open market of 34 countries.
These countries already enjoy significant access to our market
and compete with us in the international marketplace. It is
imperative that United States producers begin to enjoy access
to the FTAA markets on equal terms.
Moving now to trade disputes, we believe that the list of
European products subject to retaliation should be immediately
rotated and continue to carousel in accordance with United
States law until EU lifts its ban on United States beef.
Now, regarding the trade title of the next Farm bill, Farm
Bureau supports approval for additional funding up to the WTO
allowed limits for all export programs. Specifically, we
support a 10 percent increase in food aid programs. The Market
Access Program, or MAP, need to be funded at a minimum of $155
million rather than the current $90 million, and the Foreign
Market Development Program, FMD, needs to be authorized at a
minimum of $43 million rather than the current level of $33.5
million.
The EEP and DEIP programs should be reauthorized at the
maximum levels consistent with WTO rules.
Mr. Chairman, the United States is facing an important
juncture for agricultural trade. International conventions are
writing new rules and standards for tomorrow, and ongoing
bilateral and multilateral negotiations will design the future
of global trade. The United States must assume a strong
leadership role to ensure that these new rules and standards
create a favorable trading environment for our producers. Our
Government must take the necessary steps to make us a leader at
the negotiating table and to once and for all open new markets
for United States agriculture.
Thank you for this opportunity for Farm Bureau to share our
views. I look forward to questions.
The Chairman. Thank you very much for your testimony. It is
always good to have American Farm Bureau at the table and
likewise to have National Farmers Union, and we will hear now
from Mr. Swenson.
[The prepared statement of Mr. Stallman can be found in the
appendix on page 87.]
STATEMENT OF LELAND SWENSON, AURORA, COLORADO, PRESIDENT,
NATIONAL FARMERS UNION
Mr. Swenson. Thank you, Chairman Lugar and members of the
committee.
I am Leland Swenson, president of the National Farmers
Union, and I thank you for holding this hearing and commend you
for taking the leadership in addressing this very important
issue as part of the discussion of the next Farm bill.
NFU understands and appreciates the potential benefits of
agricultural trade. I think it is important to understand that
the United States focus on export volume is not the cure for
the problems that exist as we take a look at the challenge
facing us in agriculture. It is a part of it, but it is not the
cure-all of the economic problems. Sometimes we use it as the
excuse when performance does not meet our expectations as to
why we have low prices, and sometimes I think we ignore the
importance of the domestic market, which has consistently shown
the highest level of demand growth and usage over the years.
When we look at the next Farm bill, and we take a look back
at the 1996 Farm bill, it was really based on a lot of
expectations of unabated growth and export demand that was
going to occur. Well, I think we ran into some bumps in the
road. We saw countries place a high value on self-sufficiency
and food security and concern for food safety and other
benefits that they saw to their society that they began to
address and effect what was expected to occur under the
structure of the Farm bill.
United States producers and other producers around the
world, who cannot individually influence what happens to price
but are directly impacted by what price occurs, sought then to
maximize returns or, as we have seen in the last number of
years, minimize losses by expanding production, because that
was their only alternative.
The United States is not likely, as we take a look at the
global situation, to be the low-cost supplier of most
commodities, because we do not find ourselves in the situation
to be the low-cost producer.
In agricultural trade, we find ourselves to be a residual
supplier to most countries when they do not provide a majority
of what they need themselves.
As we take a look at what has happened, the majority of
export earnings growth that occurred in the mid-1990's was due
to commodity price increases, not export volume. As we take a
look at the majority of the current reduction in export
earnings, it is due to a decline in commodity prices and not
necessarily a reduced export volume.
Competitive imports also represent the other side of the
ledger that I think we cannot ignore. United States
agricultural trade balances declined about one-third since
1989. It has been a function of both declining exports in
recent years, and an increase in competitive imports that we
have seen occur in this country.
Well, we can continue to blame periodic events--the Asian
crisis--but I just want to draw to members' attention to the
fact that we have seen these kinds of situations occur almost
every decade, be it the Russian crisis, the Mexican crisis, the
Poland crisis, the Brazil crisis. We have had similar events
that have had a tendency to disrupt the market decade after
decade.
We and others have trade-distorting policies. How likely is
it that we will be able to eliminate all those trade-distorting
policies in the near term? Will Congress, as AFBF president
Stallman just mentioned, and the administration support the
total removal as they apply to sanctions on food and medicines,
on a global basis?
So, for farmers and ranchers, a test of trade policy and
export promotion and sales promotion programs is the impact
that those initiatives have on the income and the future
opportunity for farmers and ranchers.
As we take a look at the trade issues, we have the
traditional issues--export subsidies, market access, sanitary/
phytosanitary regulations, dispute resolution, domestic
agricultural programs--and we believe they should all be
addressed.
But we cannot ignore other, what we would like to raise as
more important, issues affecting our competitiveness, such as
exchange rates, labor standards, environmental goals and the
regulation and harmonization of regulatory policies, the
emergence of genetically modified products, GMOs, and the trade
impact that these issues are having.
Let us take a look at trade objectives as we look at the
next Farm bill from the Farmers Union perspective. For
traditional trade issues, we have to improve our capacity to
monitor compliance. One of the biggest concerns we raised
during PNTR was how are we going to monitor and enforce
compliance. We should reform the dispute resolution process of
the WTO and the regional agreements.
We should ensure comparable health, safety, labor and
environmental standards, No. 1. No. 2, we should extend tariff
rate quota coverage to competitive imports that currently
circumvent our customs schedules, such as ``stuffed molasses''
and other products.
We should expand the application of end-use certificates to
legally imported products when utilization is restricted by
domestic law, such as milk protein concentrate.
We should require country-of-origin labeling for imported
agricultural products.
We should oppose further proportional reductions in trade
and domestic policies that reduce our capacity and flexibility
to respond to trade and economic circumstances until all
nations achieve comparable levels of reduction relative to the
size of their agricultural industry.
We should oppose any efforts to weaken or negotiate
reductions in domestic trade law, such as anti-dumping,
countervailing duty, and Section 201 and 301 trade remedies.
We should have a full review of all of our current export
promotion sales incentive programs.
We should review current practices, policies and barriers
to trade employed by others, including exchange rates.
We should eliminate unilateral economic sanctions, as we
mentioned, including Cuba.
here should be implementation of the Byrd Amendment and
extension of the Trade Adjustment Assistance Act to
agriculture.
We would also like to see included in the next Farm bill an
expansion of our humanitarian food assistance programs, such as
the proposed global school lunch program. We think that
provides a real opportunity in the area of enhancing
international trade opportunities.
We should also seek international cooperation to address
the potential of surplus production, including international
food security buffer stocks.
These are some of the areas that we believe, on an
international basis, provide a basis for some better
discussions on trade policy.
Mr. Chairman, those are some of the ideas that we bring to
the table, and we look forward to the questions and opportunity
to discuss those with you.
Thank you.
The Chairman. Thank you very much, Mr. Swenson.
[The prepared statement of Mr. Swenson can be found in the
appendix on page 96.]
The Chairman. Mr. O'Mara, would you please proceed with
your testimony.
STATEMENT OF CHARLES J. O'MARA, PRESIDENT, O'MARA AND
ASSOCIATES, WASHINGTON, DC, ON BEHALF OF THE AMERICAN OILSEED
COALITION
Mr. O'Mara. Thank you, Mr. Chairman.
I am here today on behalf of the American Oilseed
Coalition, which includes the American Soybean Association, the
National Cotton seed Products Association, the National Oilseed
Processors Association, the National Sunflower Association, and
the United States Canola Association. I am very grateful, Mr.
Chairman, to have the opportunity to speak on the important
trade programs of the 1996 FAIR Act--export credits, food aid,
and export promotion programs.
In 2000, United States producers harvested 2.8 billion
bushels of soybeans, the largest crop in our history, valued at
$12.5 billion. Exports of oilseeds and oilseed products in
calendar year 2000 were valued at over $7.5 billion. These data
show the importance of exports to our industry. United States
oilseed producers and processors depend on maintaining and
expanding access to world markets.
An aggressive United States trade policy and use of export
programs are essential in maintaining market-oriented foreign
policies. Full use of legitimate export assistance and
promotion programs, and expanded food aid programming, were key
commitments made by the Congress and the administration when
the current FAIR Act was enacted in 1996.
Full planting flexibility and production require enhanced
efforts to increase United States farm exports and
competitiveness. The success and continuation of currently
domestic farm policies will require a renewed commitment to use
our export credit and food aid programs consistent with our WTO
obligations.
The AOC fully supports export credit programs as a vital
Government incentive to encourage exports of oilseeds and
oilseed products. As you know, under the Uruguay Round
Agreement on Agriculture, export subsidies have been cut, with
further reductions or perhaps elimination, when the current WTO
agriculture negotiation is completed. This means that export
credits are the primary export tool available. We must make
sure that export credits are consistent with WTO rules and
disciplines.
How to deal with export subsidies, including export
credits, was one of the major issues during the Uruguay Round
of multilateral trade negotiations. In that negotiation, the
United States came under enormous pressure to accept
disciplines on the use of export credit programs. The Cairns
Group, for example, wanted export credits and credit guarantees
to be treated as export subsidies and subject to the
disciplines requiring reduction of such subsidies.
The United States successfully resisted this pressure, and
within the Uruguay Round Agreement on Agriculture, export
credit programs were not specifically listed as subsidies,
subject to the reduction commitments that were applied to such
programs as the United States Export Enhancement Program and
the EC export restitutions.
Export credit programs were given a special status that
exempted them from these reductions. In return, the United
States and other WTO members agreed ``to work toward the
development of internationally agreed disciplines to govern the
provision of export credits,'' and to apply these disciplines
once they were negotiated. This is the so-called Article 10(2)
of the Agreement on Agriculture.
Article 10(2) is a best-efforts commitment. It does not
specify a timetable for concluding discussions, nor does it
specify that credit programs need to be reduced. It was
intended to be a discipline to govern their use, not to reduce
them. Although not specified, the implicit assumption was that
the discussion would take place in the Organization for
Economic Cooperation and Development, or the OECD.
Many people have asked why we need this OECD agreement if,
during the Uruguay Round, we negotiated a special status for
export credits, and if there is no timeframe mandated by the
WTO for concluding negotiations.
The reason is that our program could be challenged under
what are known as the ``circumvention provisions'' of the
Article 10 of the same Agreement I spoke of a moment ago. These
circumvention provisions state that export subsidies not
subject to specific reduction commitments--in other words,
export credit programs--cannot be used in a manner that results
in circumvention of the agricultural export subsidy
commitments. Granting export credits or credit guarantees to a
product in excess of the WTO-bound commitment could lead to a
violation of our WTO obligations.
I see that my time is running out, Mr. Chairman, so I will
try to summarize even more quickly.
In two sentences, as far as export credits are concerned,
we are at a very important juncture on that program because of
the status of the OECD discussions, and as you can tell from
what I have said up to now in my testimony submitted for the
record, this is a vital, vital program that not only does the
soybean and soybean products industry need for exports, but all
of United States agriculture.
If I could take a few minutes on food aid, sir, the AOC
believes that food aid programs need to continue to be strongly
supported by the Congress and implemented by the
administration. The National Oilseed Processors Association and
ASA, the Soybean Association, have proposed a soy food
initiative that could reduce United States farm program outlays
by helping to raise soybean prices. Under the proposal, the
U.S. Department of Agriculture would purchase soybeans and
soybean products and donate them under various concessional
sale and donation programs, including P.L. 480 and the
International School Lunch Initiative.
There are other initiatives in my testimony for the record
that I will not mention now, but these initiatives could be
enacted without a new authorization or funding from Congress
and would result in a net savings to the Government and would
provide increased assistance to those in greatest need--the
hungry of the world.
Now, if you will just permit me another half-a-minute with
respect to the Market Development and MAP programs, both of
these programs are also essential to continued United States
agricultural export enhancement and promotion, and we would
appreciate you and the committee taking the importance of these
programs into account.
Thank you, Senator, and I will be happy to answer any
questions.
The Chairman. Thank you very much, Mr. O'Mara.
[The prepared statement of Mr. O'Mara can be found in the
appendix on page 104.]
Mr. Echols.
STATEMENT OF JAMES ECHOLS, CORDOVA, TENNESSEE, CHAIRMAN,
NATIONAL COTTON COUNCIL
Mr. Echols. Thank you, Mr. Chairman and members of the
committee. Thank you for having this hearing today.
My name is James Echols. I am president of Hohenberg
Brothers Cotton Company in Memphis, Tennessee, and I currently
serve as Chairman of the National Cotton Council of America. I
have been in the cotton merchandising business for over 40
years, selling both in the domestic and international markets.
Trade is very important to the United States cotton
industry, with about 40 percent of our approximately 17 million
bale crops exported each year. In addition, we exported the
equivalent of 5 million bales of cotton in the form of textile
and textile products in 2000.
Mr. Chairman, the United States cotton industry is facing
stiff competition for export markets and for our domestic
markets. We need trade policy that ensures our raw product is
competitive, that opens markets for both raw cotton and United
States-produced cotton textiles, and that ensures that the
terms of competition are fair.
One of the most significant influences on the United States
cotton market is cotton textile imports. Although domestic
consumption of cotton textiles at retail is about 21 million
bales, over half of that market is sourced by imported textiles
made from foreign cotton.
This level of competition in our domestic market will
continue to intensify as textile quotas are phased out.
We are also witnessing the impact of the strong dollar.
Compared to other agricultural products, cotton is uniquely
vulnerable to the effects of an appreciating dollar through its
impact on imports of cotton textiles and apparel products.
Mr. Chairman, we must remain competitive. Cotton's
marketing loan and three-step competitiveness provisions form
the cornerstone of an effective United States cotton program.
Maintaining all aspects of this program is central to the long-
term competitiveness of our industry. Without the presence of
cotton's Step 2 program to offset some of the impact of a
strong dollar, United States raw cotton exports would likely
have experienced a far larger decline than was the case in
2000.
It is important that opportunities to increase demand be
fully realized. Last year, the cotton industry stressed the
importance of enacting a CBI, Caribbean Basin Initiative,
parity bill to grant trade preferences for apparel produced in
the Caribbean Region from United States-origin textiles. The
CBI bill is enacted, but implementation is not complete. As a
result, we have not yet experienced significant increases in
demand. We have urged the United States Customs Service to
issue final regulations implementing this legislation as
quickly as possible.
We must also have strong export assistance programs in
place. However, a proposal being considered in the Organization
for Economic Cooperation and Development would undermine our
export credit guarantee program while providing no
corresponding reductions in export subsidy programs operated by
our competitors.
Over $5.5 billion in agricultural exports have benefited
from that GSM-102 program the past 2 years alone, yet the
latest OECD proposals contain fee increases, shortened loan
terms, and repayment requirements that would make the program
ineffective for United States exports of cotton.
We have estimated these changes could reduce annual United
States cotton exports around one-half million bales and have as
much as a 3-cent-per-pound impact on prices.
United States officials have kept us informed but have not
provided any estimate as to the actual fee increases expected,
nor have they provided an analysis as to the impact of these
changes on United States agricultural exports.
The Council is very concerned about the future of this
critical United States export program. We urge the committee to
closely monitor the OECD negotiations, and we have provided
suggestions for improving the GSM program in the new Farm bill
in our written statement.
The Council also supports market promotion activities
carried out under the Market Access Program and Foreign Market
Development Program. These programs are consistent with World
Trade Organization rules and are classified as green box
activities.
The combined investment of private and public funds coupled
with industry marketing expertise results in innovative,
forward-looking programs that leverage money into high-dollar-
impact campaigns and promotional efforts. Our written statement
includes a number of examples of highly successful
accomplishments carried out by the cotton industry using the
MAP funds.
It should be noted that funding under the FMD program in
particular has not kept pace over the last 2 years. We
encourage the committee to provide funding for the FMD program
at a minimum of $35 million per year and to consider restoring
overall support for the MAP program to its 1992 level of $200
billion. We urge our tradeofficials to ensure the United
States-China Agreement is not undermined during the final
accession discussion. China is the largest cotton-producing
country and the largest textile and apparel exporter in the
world.
While the agricultural portion of the United States-China
agreement were favorable to the United States, the textile
provisions of that agreement would introduce even more
competition into the United States textile market. But even the
agricultural portion of this could be undermined if China is
allowed to claim developing country status with respect to
agriculture and textiles.
The National Cotton Council supports the concept of fast-
track negotiating authority provided that it requires
consultation with Congress and the private sector and contains
negotiating objectives that will encourage trade agreements
that will benefit the United States cotton industry.
While the cotton industry supports expanded and liberalized
trade, each new trade agreement must be evaluated on its own
merits. While we support free trade arrangements that will
benefit our industry, we have concerns about arrangements that
further open our markets to our most difficult competitors.
These concerns are particularly evident concerning textiles,
where all quota restrictions are due to be phased out in four
years. Should the United States complement that quota phaseout
with the elimination of import duties on some of the world's
most prolific textile-producing countries, the United States
textile industry will not be able to recover.
The cotton industry therefore supports the efforts of our
Government to further liberalize market access and trading
rules within the WTO and has outlined a set of priorities for
the ongoing negotiations, including improving market access for
cotton and textiles, improving rules restricting the use of
downstream export subsidies, limiting exemptions for countries
that are competitive in cotton and textile products, and
ensuring countries do not erect nontariff trade barriers
against agricultural biotechnology products.
This concludes my testimony, and I will be happy to answer
any questions at your convenience.
Thank you.
The Chairman. Thank you very much, Mr. Echols.
[The prepared statement of Mr. Echols can be found in the
appendix on page 109.]
Mr. Hamilton.
STATEMENT OF TIMOTHY F. HAMILTON, CHICAGO, ILLINOIS, EXECUTIVE
DIRECTOR, MID-AMERICA INTERNATIONAL AGRI-TRADE COUNCIL, AND
EXECUTIVE DIRECTOR, FOOD EXPORT USA-NORTHEAST
Mr. Hamilton. Thank you, Mr. Chairman.
I would like to tell you this morning about how the Market
Access Program specifically is being used to help United States
food producers not only get started exporting but also to
promote our country's value-added exports.
Secretary Veneman has outlined that expanding trade is the
administration's top priority for United States agriculture. We
feel that continued support for trade promotion through the
Market Access Program is a critical part of that effort.
The MAP is designed to focus on value-added products. There
are approximately 70 non-profit industry groups across this
country representing all sectors of agriculture that
participate in this program.
The 50 State departments of agriculture participate in MAP
through four State regional trade groups which I represent
today. These groups coordinate the export promotion efforts of
the States and focus on assisting particularly smaller food and
agricultural processors.
Our services rely heavily upon funding from the MAP
program, along with considerable private and State investment.
We identify three different levels of assistance for
smaller exporters--specifically, exporter education and
training, market access and opportunity, and market promotion.
Let me tell you how we use MAP funds to support these efforts.
Under exporter education and training, our Food Export
Helpline is available to companies with specific questions on
how to enter new markets, or how to handle documentation or
other technical issues that they confront. We also publish a
regular newsletter which informs thousands of particularly
smaller companies around the country about opportunities and
events in the export market.
Under market access and opportunity, we simply help
companies find importers and distributors overseas.
International trade shows are one of the most important means
of locating new customers. We support United States companies
with the technical information that they need to learn if their
product can be competitive in a market.
Under market promotion, our Branded Program offers cost
share assistance through which we support 50 percent of the
promotional costs for small companies. This encourages firms to
take the risk to attend international shows and promote their
goods--risks that they might not otherwise take. We routinely
hear from small companies that they simply would not have
considered the export market were it not for the market access
program.
The MAP focuses on value-added products, including branded
foods. Overseas consumers, like those here in the United
States, tend to buy products based on brand names. By promoting
those brand names that contain American agricultural
ingredients, we build long-term demand for our products. These
value-added products support jobs and encourage investment in
our own domestic processing industries.
I would like to give you just one example, if I could.
Palermo's Villa is a small Midwestern supplier of frozen
pizzas. They used MAP funding to sponsor in-store promotions in
Canada, just like you see at grocery stores here in the United
States. From these promotions, their export sales have more
than tripled, and as a result of that, they have doubled their
purchase of agricultural inputs like wheat flour, cheese,
tomato sauce, and meat. They have added more than 30 new jobs
at their small plant. This effort supports long-term
sustainable demand for those United States agricultural
products and the jobs that add value to those products here in
the United States.
The MAP also stimulates private investment. While the MAP
requires that companies match all Federal dollars on a one-for-
one basis, in fact, most of our companies spend much more than
that. Last year, companies in our program contributed
approximately $4 for each dollar that they were reimbursed
under our program.
During the last year, United States companies signed more
than 1,000 new customer agreements worldwide as a result of
help through the MAP, and over 200 small companies made their
first export sale ever. None of this would have been possible
without support from this important program.
Our competitors in Europe outspend us by a factor of 20 to
one in promoting their products worldwide. As we have seen
increased spending by other nations, we have seen our United
States market share decline.
How does this play out in the marketplace? Some major
retail chains around the world have simply stopped budgeting
for their buyers to travel to other countries, and they simply
rely on their suppliers and promotion agencies like ourselves
to simply pay for those costs. If we are not willing to pay
those costs, they are not interested in looking at our
products. Just last week, a major importer in Hong Kong
canceled our invitation to visit the United States because he
received a more generous offer from Canada.
American products are seen worldwide as high-quality
products, safe products. Selling higher-quality products
requires promotion. The MAP is an investment in promotion that
pays off.
As world trade increases, so does competition. It is
essential that we retain and in fact increase funding for the
Market Access Program in order to continue to build our export
markets for United States agriculture. We encourage the
committee's support for efforts to increase funding for MAP,
including S. 366 introduced by Senators Murray, Craig, and
others, which would do just that.
I have included additional information, including other
stories about companies that have used the program
successfully, and I have included a statement from the
Coalition to Promote Agricultural Exports, which we are a
member of.
Mr. Chairman, thank you.
The Chairman. Thank you very much, Mr. Hamilton.
[The prepared statement of Mr. Hamilton can be found in the
appendix on page 120.]
The Chairman. Mr. McDonald, you have already been
introduced by Senator Baucus earlier, and hopefully, you were
present for his comments, and we promised to listen carefully
to you, which we will.
Please proceed.
STATEMENT OF DENNIS MCDONALD, MELVILLE, MONTANA, CHAIRMAN,
TRADE COMMITTEE FOR R-CALF UNITED STOCKGROWERS OF AMERICA
Mr. McDonald. Well, thank you, Mr. Chairman, members of the
committee.
I am Dennis McDonald from Melville, Montana. I am a cattle
rancher there, although I must say not a real wise cattle
producer, as Senator Baucus alluded to.
You probably do not know where Melville is located. It is
located in south central Montana, about an hour's drive north
of Yellowstone Park.
My wife, Sharon, of 25 years and our four children operate
the ranch. Our children share the love of the ranch and
participate in its operation. Sharon and I would like nothing
more than to be able to pass this ranch on to our children, and
we would like to do so without being accused of child abuse.
The ranch consists of about 30,000 acres where we run 850-
plus mother cows, and after weaning in the fall, background our
calves and often continue to own the cattle until slaughter. We
also breed about 100 brood mares, quarterhorses primarily,
cutting, reining, and working cow horses.
I am here representing the Ranchers-Cattlemen Action Legal
Fund. R-CALF was formed about 3 years ago to litigate an
antidumping and countervailing duty case against Mexico and
Canada. We represented 29,000 cattle producers from across the
country and 140 different cattle organizations. The Department
of Commerce determined that we represented 25 percent of the
Nation's cow herd. In that endeavor, we collected over $1
million in small donations to finance the litigation.
Today, R-CALF has members in 30 States and is the fastest-
growing cattle organization in the Nation. As an organization,
we focus on trade and market issues. We have actively
participated in restructuring and rulemaking of the Packers and
Stockyards Administration, sought and helped obtain an
agricultural representative within the Justice Department,
pushed for mandatory price reporting of live cattle, and
participated in the rulemaking process. We have been active in
trade matters and hold two active seats on the Business Forum
of the Americas for input into the Free Trade Area of the
Americas negotiations.
I serve on the Agricultural Trade Advisory Committee, and I
thank Senator Daschle and Senator Baucus for giving me that
opportunity.
I travel here to Washington in that capacity several times
a year. I have attended WTO hearings around the world,
including the Ministerial in Seattle and most recently, the
Business Forum of the Americas in Buenos Aires, where I spent a
week earlier this month.
R-CALF strongly supports the free trade efforts and
specifically supports efforts to expand access of United States
cattle producers to foreign markets. In that regard, R-CALF
supports those provisions in the Farm bill that promote exports
of United States beef and related products.
However, R-CALF believes that more attention must be paid
to ensuring that the benefits of expanded exports and market
access flow equally to individual ranchers and cow/calf
producers, as well as to the shareholders of large
agribusiness.
We are really mindful that last year, for the first time in
history, we exported over 2 million metric tons of beef. But we
are acutely aware that all too often, the effect of that export
trade has not filtered down to our family ranches and
communities.
Therefore, in addition to the current provisions in the
Farm bill, R-CALF urges the committee to look forward and
consider what additional measures and provisions should be
included to ensure a viable and profitable cattle industry at
the grassroots level. Maintaining a strong cattle industry will
assist in preserving and rekindling the energy in rural America
and help maintain our conservation measures and maintain our
national vistas.
Specifically, we urge, as has been mentioned earlier, that
country of origin be a primary issue. As cattle producers, we
feel that we are raising and can market the most nutritious,
safest, cleanest, best, most tasty beef in the world. We need
the opportunity to set our product apart from that produced in
the rest of the world.
In addition, and just as important, we need our foreign
trade partners to identify the product that they are selling in
our market. USDA recently entered into a rule with regard to
Argentine beef, requiring that that beef be labeled as
originating in Argentina. Our trading partners, the European
Union, Japan, South Korea, all have stringent country of origin
labeling requirements. It is a shame that we have not done
likewise. R-CALF strongly supports Senator Tim Johnson's bill,
known widely as ``The Consumer's Right to Know.'' You go to the
store, and you know where your clothing is manufactured, you
know where the tools that you buy are made--it is a shame that
you go to the meat counter, and you cannot determine where the
beef that you are purchasing originates.
I see that my time is about up. I would like to mention one
last issue, and that is the USDA grade stamp. That grade stamp
is a mark of excellence known around the world. Cattle
producers made it so by raising, again, the best beef in the
world. It is a shame that that stamp is being placed on beef
and cattle coming down from Canada and up from Mexico. That is
our brand, and ranchers need to have that trademark. Again, it
is known around the world as a mark of excellence.
I did not get through nearly what I wanted to say, but I
thank you very much for the opportunity.
[The prepared statement of Mr. McDonald can be found in the
appendix on page 124.]
The Chairman. Thank you, Mr. McDonald. As you know, your
full statement will be made a part of the record for the
benefit of Senators and staff and the public.
I am going to defer my questions for a moment and call upon
my colleagues in this order. I will call upon Senator Roberts,
then Senator Dayton, Senator Fitzgerald, and Senator Nelson.
Senator Roberts.
STATEMENT OF HON. PAT ROBERTS, A U.S. SENATOR FROM KANSAS
Senator Roberts. Thank you, Mr. Chairman.
I would like to thank all the members of the panel for
excellent testimony. I have a short statement, and then I want
to get to the questions, and I know that we have limited time.
Last year, former Senator Kerrey and I held a subcommittee
hearing that the chairman agreed to do where we took a serious
look at all the export programs in the USDA, and quite frankly,
what we found was that these programs are underfunded, they are
understaffed, and they need a redirection of resources. I have
indicated my strong belief in that regard as to the result of
the hearings to our current Secretary and the staff down there.
Tim Galvin came up and gave that testimony.
I think it is time that we start to think out of the box. I
might add that I am not sure there ever was a box that Senator
Kerrey was in, Mr. Chairman, but at any rate, I think that we
should really start to think about that. We have a good number
of programs in place, but in the last 4 or 5 years, we have
seen the United States share of export markets continue to
fall. All the witnesses have testified to that, more especially
with the value of the dollar.
One study last year argued that a 16 percent appreciation
in the value of the United States dollar was responsible for a
17 to 25 percentage point decline in corn and wheat prices.
Four years ago, it was $61 billion in exports, and now it is
somewhere between $49 and $51 billion. If you just subtract the
difference, I think you can take a look at the budget and see
what we are sending out with regard to lost income payments to
farmers.
It is not a one-for-one cause--do not misunderstand me--but
I think that it is germane.
There is another problem here, and that is in regard to
sales. It used to be that the United States--we hoped we were
not a residual supplier. Sometimes, we got to that. We were a
very reliable supplier. But today, sales have shifted and are
being made to private buyers in countries that are purchasing
much smaller quantities at a time, as opposed to a large
Government sale. So they shop around, and they purchase grain
from our competitors at a cheaper level than they can get it
from the United States, and that is the way it is.
This is a fundamental shift in the way that we are doing
business, and I think we need to take a serious look at the
existing programs, Mr. Chairman, and really stop for a minute
and think and ask, are we in the same situation that we were
before.
I think most of the witnesses and most of my prejudice is
to say that we have good programs on the books. I remember the
people who put them in place. I used to work for Senator Frank
Carlson a long time ago as a staff member. He was one of the
godfathers of the Food for Peace program, the P.L. 480 program.
I am not quarreling with that at all--it is next to motherhood
and sunsets in Kansas--I think it is a good program, but I
think we really have to take a good, hard look.
I know there is a school of thought, a generational gap in
Kansas, that when we are sitting around the coffee table or a
coffee klatsch, and some of the younger farmers will tell some
of the older farmers, ``Hey, this is not the 1950's.'' Well,
this is not even the 1985's. So we are in a different world,
and the landscape has changed, and I do not think these
programs may be able to get the job done any longer.
I remember the first time I went down to a meeting of the
Export Enhancement Program, Ben, when Ed Zorinsky said, ``I am
not going to vote for a budget until we get this stuff sold.''
I do not want to give you any ideas, but that is what he said.
So Berkeley Bidell from Iowa and I went down to the first
meeting, and we were very puzzled as to the fact that here was
an export program that we really felt was to move the grain,
but it was on a very selective basis, had to go through a
committee, and all sorts of things. It was sort of alike a
shotgun. I am not really advocating the E-Program now, but at
least during that particular time, we were faced with a big
problem, and I think we need to put our thinking cap on.
In terms of questions here, I will try to get to them
quickly. Let me just say, Bob, thank you for coming to the
committee. If you had one recommendation for a new program to
increase United States access to world markets, what would it
be--not especially the ones that you testified to, but if you
had one idea out of the box, what would it be?
Mr. Stallman. I think it may be outside the trade title. I
talked about the programs within the trade title that are very
important. But I think it has more to do with trade policy, and
actually, for the future, in terms of the single most important
policy that we can implement, it is probably trade promotion
authority, because without it, we are not going to go out and
negotiate any meaningful trade agreements.
Senator Roberts. So it would be fast track, or what we now
call the Presidential trade--I call it enhancement--I changed
the MAP program, by the way, when I was somebody in the House
and was chairman of the sometimes powerful House Agriculture
Committee--instead of ``trade promotion,'' I called it
``access.'' I think that that whole perception--access and
enhancement. But you would say that that would be the most
important thing?
Mr. Stallman. For the current makeup of where we stand in
international markets, I think that would be key.
Senator Roberts. All right, sir.
Leland, you made some very good comments in regard to the
currency concerns. Do you have any ideas along those lines? I
have been wracking my brain trying to figure out what kind of
an export program you could address on a sliding scale. I do
not even know what I am talking about yet, but the value of the
dollar and these currency concerns, there is no question that
that study shows that we have lost a tremendous amount of
products.
Do you have any comments?
Mr. Swenson. Senator, I think that that is the No. 1 issue
in eliminating our ability to expand our export market, as well
as impacting the level of imports coming into this country.
I agree with you--I think we have got to think outside the
box about how to address that issue. I think we could use an
adjustable type of monetary financing program. You talked about
the Export Enhancement Program. I think we should look at a
monetary finance program that levels the playing field in the
area of currency. We should aggressively seek to do that,
because most of our competitors on an international basis are
within specific commodities. It is not just across the board.
We know who our wheat export competition is. We know what our
feedgrains export competition is. We know what our beef
competition is. We can center those out, and we need to
aggressively address them.
Senator Roberts. Let me tell the witnesses that my
colleagues, the distinguished chairman, myself, and others,
went down to the White House about 2 weeks ago in advance of
the meeting in Canada with the President, and we talked about
fast track. There were about 15 to 20 Members down there, both
Democrat and Republican, House and Senate, and it was obvious
that we were trying to figure out the third away.
Our trade ambassador, Bob Zoellick, was there, and we were
trying to figure out how on earth we could do this with the
environment and labor, and the distinguished chairman is now
quoted today in the National Journal. He indicated that some
countries will accuse the United States of trying to intervene
in their domestic affairs and insisting on labor and
environmental provisions in the trade agreements, but he says
the United States is not credible as a trading partner without
fast track. Then, the chairman says this: We have our work
really cut out for us.
I see my time is expired, but could you just indicate to us
what is the ``third way''? Now, I have to admit to you that I
am the doberman on the chain on this issue; I think that if you
add in labor and environmental issues, which are terribly
important--but I think we have other venues we can approach
that with--I do not think you will make many sales. On the
other hand, I know that we are not going to pass fast track
unless we have a third way. What is the third way?
Mr. Swenson. To pass fast track?
Senator Roberts. Yes. What is the third way that we can
bring in the labor and the environmental concerns and still not
get into a muddle or a real briar patch in that regard and not
make sales?
Mr. Swenson. Well, I think that we need members to think
outside the box about how important producers in this country--
--
Senator Roberts. That is not fair--you are using my terms
back at me. Come on.
Mr. Swenson. But we have members who are stuck in a rut,
who say we cannot do anything about the environment, we cannot
do anything about labor, and they stay there, and that is all
they see.
I think that we have got to think outside the box.
Environmental rules and regulations are impacting the cost of
production for producers in this country and making us
noncompetitive in the world market. We hear companies talk
about the need for MAP assistance to promote and compete in the
global market. We have got to be able to level that playing
field, and there are factors that come into play, and those
include environmental costs of rules and regulations, chemicals
that they can use in Canada and produce in a week that we
cannot use in this country, made by the same company, based in
this country.
We have got to get outside that mentality and outside that
rut, that furrow. We do not plow anymore. We use no-till. We
have got to take a look at how we can address these issues and
do it aggressively in negotiating trade agreements. I do not
think that we need fast track to negotiate trade agreements.
This President can do it; past Presidents have done it. They
can be responsible to you as Members of Congress, and if they
lay a good trade agreement before you, this Congress will pass
it.
Senator Roberts. I did not play that speech, Mr. Chairman,
but I thought I would toss up a softball to Leland and let him
express that.
Mr. Swenson. Thank you.
Senator Roberts. My time has expired. I have several other
questions, and I hope we have time for another round.
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Roberts.
Senator Dayton.
STATEMENT OF HON. MARK DAYTON, A U.S. SENATOR FROM MINNESOTA
Senator Dayton. Thank you, Mr. Chairman.
Thank you, members of the panel.
I believe I have an open mind regarding trade, but I have a
very parochial concern, which is how does it imbalance benefit
or harm Minnesota farmers, producers, and the Minnesota
economy, and I have a broader concern which is America first--
how does it imbalance, benefit, or harm our national farm and
overall economy, and it is that measure and trying to achieve
that measure of balance that kind of dictates my views on this
topic.
I guess I would like to use as a starting point, Mr.
Stallman, your comment and ask each of you, given my brief
time, to respond briefly in turn to this. But I think your
point is very well-taken. You said we view FTAA--and I would
say also the redrafting of this Farm bill--as an opportunity to
apply the trade lessons we have learned from the North American
Free Trade Agreement. On average, NAFTA has significantly
benefited the United States agricultural sector. When you take
a look at specific commodities, however, there have been some
winners and losers.
I confess--and I think it would be an exercise that I would
like to try to engage in--assessing imbalance and whether
Minnesota farmers and producers have benefited or been harmed,
but I know anecdotally--and maybe I hear from the sectors that
are being harmed more than those that are benefiting--that
certainly, Minnesota dairy producers, Minnesota sugarbeet
growers, and wheat producers have been adversely affected both
by the design of some of these agreements and I think also the
failure of our own Government to enforce our side of the
agreements. Certainly in areas like corn production, soybeans,
I would say the export imbalances have probably been
beneficial, although I think the specter of some of this
countries like Brazil, in terms of soybean production and the
like, do not auger well for the future.
So I guess I would like to ask each of you what specific
lessons you think we have learned from NAFTA that we could
apply to the future negotiations, and as you view the specter
of enlarging this agreement to include all of central Latin and
South America, do you view in the balance that it is going to
be of benefit or not?
Mr. Stallman. On balance, I definitely think it would be a
benefit to have an FTAA agreement.
Among the lessons that we have learned, one in particular
is that with respect to agriculture as an industry sector in
these agreements, we have to real sure that at the end of the
day, agriculture is not held out and the deal cut, in essence,
not as good a deal for agriculture as perhaps other sectors
get, in terms of looking over the shoulders and being sure what
we are getting.
I would concede that NAFTA is not perfect. There are things
that need to be addressed. There were side letter agreements
which were purported to solve some problems that have not
actually been enforced, and enforcement then gets to be the
second lesson we have learned, and that goes across the trading
board.
Being a Texas cattleman, I will use beef and the been
hormone issue in the EU. There is a growing sense in the
countryside that we are truly not willing to enforce the trade
agreements based on the laws that are available, particularly,
in this case, carousel retaliation. So I think that to be
credible for the future, for our members and for our producers
out there, we have to show a real willingness to enforce those
agreements. So those are two things--watch out for the
negotiations with respect to agriculture and be sure we enforce
the agreements.
Senator Dayton. Thank you.
Mr. Swenson.
Mr. Swenson. Just touching quickly on some of the issues
relating to the NAFTA agreement that I think we need to address
as we look at expanding it to the Free Trade of the Americans,
one is the currency, and I will come back to that. Second is
harmonization--the use of chemicals in some countries that you
cannot use in other countries and the very same chemical and
components thereof; import surges and how we are going to deal
with import surges and their impact on producers. The other
thing is what I call the transshipment. For example, we have
the ``stuffed molasses'' issue of a product coming in from
Canada that has been exchanged, and we have sugar now, we have
the peanut paste issue. There are a number of those that we
have failed to address. Those are some of the things that I
think we have got to deal with as we expand the trade
agreement.
Senator Dayton. Thank you.
Mr. O'Mara.
Mr. O'Mara. I was a big part of the NAFTA agreement in my
former capacity, and I think there are really two lessons to be
learned from it from the standpoint of being on the negotiating
side.
One is that a lot of the mistakes that were made with the
United States-Canadian Free Trade Agreement were not
duplicated, as a matter of fact, on the Mexican side, and those
mistakes on the Canadian-United States Free Trade Agreement,
most of the time was wasted on what the two sides were not
going to do; the focus was all on the negative, so dairy was
left out, for example. How can you have a free trade agreement
with that important sector left out?
On the Mexican side of the Free Trade Agreement, there were
no exceptions. Now, I accept that has caused complications in
certain sectors like sugar, but I think that if you look at the
numbers, and you look at the overall benefit of the agreement,
the outcome on the Mexican part of the NAFTA speaks for itself.
I think the second point is--and I was very happy to hear
compliments already made about the new United States Trade
Representative by the chairman--I think that it is essential to
have an aggressive United States trade policy, not necessarily
in-your-face, but people who are competent in dealing with the
immensely complex issue such as exchange rates. If there is a
way to do it in a trade agreement, frankly--I have not thought
out of the box far enough to figure that one out--but I think
you have to have competent people in the field, and I think you
have them in this administration in both Bob Zoellick and
Secretary Veneman.
So I think that the outlook for the FTAA is a positive one.
Senator Dayton. I see my time is up, so I will ask each of
you to respond briefly, if I may have the chair's indulgence.
The Chairman. Yes.
Senator Dayton. Thank you.
Mr. Echols.
Mr. Echols. The National Cotton Council has been a strong
supporter of NAFTA. However, as we consider FTAA, a lot of
those countries are significant producers of both textiles and
raw cotton. We are still evaluating exactly how that may impact
the two sides of our industry, both our domestic industry as
well as the producer segment. A lot will depend on the rules of
origin that are adopted there as to exactly what our position
might be.
Senator Dayton. Thank you.
Mr. Hamilton.
Mr. Hamilton. I think that our country's strength as a
producer and our strength in the marketplace is based on our
position as a value-added and a high-quality producer, so to
the extent that our producers fit into that marketplace--and in
Minnesota, I think you are taking a lead in a lot of those
areas with identity preservation and value-adding--so to the
extent that we are in that position in the marketplace, I think
that the FTAA offers some real opportunities for us. It is
important that we differentiate ourselves from the other
members of the FTAA, however, to give ourselves that
competitive advantage.
Senator Dayton. Thank you.
Mr. McDonald.
Mr. McDonald. I agree with all the comments of the folks
here on the committee. I guess I would just say two things.
One, as we go down this road negotiating the Free Trade Area of
the Americas Agreement in particular, we need grassroots
participation in the process. I have been told that I am the
first grassroots cattle producer to serve on the Agricultural
Advisory Livestock Committee. That committee, which has 15
members, should be dominated by grassroots producers.
So, Senators, I would ask that you see that those slots on
those committees, Small Grains, be filled by your grassroots
constituents. I think they can have valuable input.
Second, an idea that I have been carrying around is a
variable-rate tariff quota so that at times of surges in
imports and collapsing commodity price, that variable tariff
rate quota could serve as some support. It would certainly work
for cattle and beef. I am less sure that it would be useful for
grains. But that is an idea that I have been trying to put out
at some of these meetings.
Senator Dayton. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Dayton.
Senator Fitzgerald.
Senator Fitzgerald. Thank you, Mr. Chairman.
I would ask for unanimous consent that I be allowed to
submit my statement for the record.
The Chairman. It will be accepted and published in full in
the record.
[The prepared statement of Senator Fitzgerald can be found
in the appendix on page 64.]
Senator Fitzgerald. Thank you.
I want to welcome Mr. Hamilton to the committee. Mr.
Hamilton is from Chicago and is thus one of my constituents. So
I appreciate your being here, Mr. Hamilton.
I know that Mr. Swenson indicated that he did not feel that
fast track was necessary, and I wonder if other members of the
panel want to comment on that, particularly Mr. Stallman.
How important do you think fast track is to the farmers in
your organization?
Mr. Stallman. It is very important. Yes, it is true, you
can negotiate agreements without a trade promotion authority or
without that process. But at the end of the day, you will find
it very difficult to, quote, get the ``best deal'' from the
parties, the other countries you are trading with, if they know
they have to take a certain amount of political heat for
putting a proposal on the table to meet in the middle, and then
it comes before the Congress and can be amended and cut apart.
So in essence, you can negotiate the agreement, but you are not
going to get the best deal. That is the essence of the problem
without having trade promotion authority to do that.
Senator Fitzgerald. Do other members of the panel want to
comment on that issue?
Mr. O'Mara. I would just add, if I could, Senator, that
fast track, or trade promotion authority as it is now being
called, is essential. President Stallman is absolutely correct;
you cannot possibly negotiate agriculture globally without fast
track.
The second point is that we also must have a comprehensive
negotiation to get the best deal for agriculture. It cannot be
a sector-by-sector negotiation.
Senator Fitzgerald. I am also wondering if any of you would
care to comment on what lessons we might have to learn from the
Russian food aid program that we could apply to future food aid
programs. There was a lot of criticism about significant waste,
fraud, and abuse in the Russian food aid program, and I am
wondering whether that harms our food aid programs going
forward.
Would anybody care to comment?
Mr. Swenson. I think that any time you are dealing with a
country in as much turmoil as Russia has been through in the
last number of years, as any developing country--it depends on
the type of structure of government within those countries--you
risk, in developing markets with them, some fraud and some
abuse. Should that distract from continuing to try to move
forward and continuing to try to improve programs? I do not
believe it should, because if we are going to create market
opportunities, every market opportunity expansion and
exploration is probably going to have some risk in it. We hope
that we will make adjustments and improvements and be able to
address those issues.
It is one of the reasons that I believe some of the
initiatives even of the World Bank and the IMF are misdirected,
in that they push a lot toward free markets and market-driven
structures rather than looking at what investments they make in
infrastructure. If we are really going to have market access to
get food products, value-added products, out to the people for
their consumption, they have got to have an infrastructure in
many of those countries with which to be able to access that
food and that food product. We see less commitment being made
to some of those infrastructures then we do trying to create
this market development, and I really think that that is one of
the redirections that, as a committee, you should try to
encourage the World Bank and the IMF to look at.
Senator Fitzgerald. Thank you.
Some are concerned that large food aid shipments are
displacing potential commercial markets. What effect has the
food aid program had on the world's commodity price? What
efforts does the USDA take in approving food aid programs to
not displace domestic markets or disrupt free trade in the
world marketplace?
Would anyone care to address that?
Mr. Stallman. Just briefly, there are processes in place to
prevent that from happening. The criticism has been that even
with that determination process that it has occurred--and you
can get significant debate as to what extent and how often.
Once again, it sometimes becomes a judgment call--how do you
really know when you have displaced a commercial sale with a
subsidized sale or with free aid? It is difficult to determine.
I think that you need to make every effort to try not to
displace commercial sales, but I do not think you can use the
possibility that that may occur infrequently and at some times
as a reason to do away with or limit those food aid programs,
because I think they are very important, and they are a topic
of concern in the WTO negotiation amongst all the countries of
the world.
So I think it is something that we have to be in and
continue to be in. I think we have to monitor it and try to
keep it from displacing commercial sales.
Senator Fitzgerald. Thank you.
Deloitte and Touche released a study evaluating the Market
Access Program. This evaluation shows positive impacts for the
MAP program. However, like GAO, the study also showed that
MAP's management and measurement of benefits could be improved.
What should be done to improve the management of the
program and the tracking of its impact?
Mr. Hamilton.
Mr. Hamilton. I have seen the report, and I have actually
seen some changes that have been implemented by USDA in the
form of implementing some called ``results-oriented
management,'' and in the allocation of the MAP funds, they have
directed them more toward those groups that have done an
effective job of planning and evaluating based on strategic
performance measures. So it is not simply things like overall
export sales, but it is interim steps that are leading toward
additional export sales.
Those are some of the steps that have already been put in
place. I think there has also been some relaxation in the
administrative regulations that had been implemented early on
with the program as a way to give industry more flexibility to
use the funds. The MAP is a market-driven program; we are
dealing with buyers and sellers in the open market here, so we
need the flexibility to accommodate the needs of those,
particularly our customers. I think that some of those changes
have been made on the administrative side.
Senator Fitzgerald. Thank you.
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Fitzgerald.
Senator Nelson.
STATEMENT OF HON. BEN NELSON, A U.S. SENATOR FROM NEBRASKA
Senator Nelson. Thank you, Mr. Chairman.
The trade title of the Farm bill is clearly one of the most
important components, in my opinion, at least. I think I agree
with many of my colleagues and many who have witnessed the
relationship of American agriculture in the world today, that
the expanded trade opportunities can provide great promise to
the future of agriculture as well as the food aid or commodity
donation programs have a dual value, both in helping needy
people, which is worthy, and supporting our agricultural
industries, which is likewise worthy. So I am pleased that the
committee is taking up these issues today.
In Nebraska, agricultural trade is extremely important.
While Governor, I took 11 trade missions, and we increased our
international trade by 200 percent over 8 years. We are
currently ranked third among States in agricultural exports. We
export nearly $3 billion worth of commodities annually, led by
meat and feedgrains, and the export business continues to grow
in Nebraska. Our meat exports, for example, increased 13.5
percent between 1997 and 2000.
I do not want to take full credit--I just want people to
remember that it happened during my watch.
But despite these rosy numbers, I think trade has a
different cast to it today than it had at one time. I think it
is less popular and has the risk of becoming unpopular as times
goes by. In particular, many of the producers see a connect
between the export statistics and their own individual bottom
line, and when that occurs, it is hard to disagree with them,
because we need to look not only at volume but at what the
impact is, the export value to producers.
We cannot look at agriculture as a monolith, although
typically, we do that. We try to break it down by sector, but
typically, people will talk about agriculture--and I must
include myself--as thought it is a singular industry, and what
is good for part of it seems to be good for the rest of it may
not always be the case. That is why the work of this committee
is so important.
I really do look forward to close examination of the
existing agricultural trade programs and the policies as we
consider the new Farm bill. I am encouraged by comments by the
chair that we need to take into account labor and environmental
issues as we move forward on this. I think it has bene pretty
clear that we have expected agriculture to take a
disproportionate share of the costs of trading. It is always an
afterthought in trade agreements, not part of the original
agreement--side letters, enforcement questions, sanctions, and
all the rest of the things that agriculture faces today and has
for the last several years, it is little wonder that we are
experiencing some of the challenges in agriculture that we are
experiencing today.
So I hope that we will be able to focus on this and come up
with trade and food aid programs that clearly make sense both
in the short term and the long term, and that we will stop
having agriculture be an afterthought as we move forward on
trade issues.
I appreciate it. I will extend my time back to my
colleague, Senator Roberts, who has already indicated that he
has a bunch more questions that he would like to ask.
The Chairman. Very well.
Senator Roberts.
Senator Roberts. Well, Mr. Chairman, I do not want to take
your time.
The Chairman. I will take some at the end. Go ahead.
Senator Roberts. I appreciate that.
I would like to go further down the list and ask Charles in
the ``out of the box'' category--just to refresh your memory, I
think you indicated that we have many existing programs on the
books now, and most of us feel that they are underfunded, and
we always need to shake that up some in terms of direction, and
you have had quite an experience in that regard and bring a
great deal of expertise.
Do you have any recommendation under the category of ``out
of the box'' that you could share with the committee?
Mr. O'Mara. Thank you, Senator Roberts.
It is always good that you force me to think out of the box
every time I meet with you. I think that many comments that
have been made here this morning have been very relevant to
thinking out of the box, actually. There is just no question
that even though there are certainly differences of views
represented at this table, fundamentally, United States
agriculture has to be market-driven, and there may be ways and
maybe ways need to be found to deal with certain dislocations
or complications that happen from time to time--the exchange
rate issue has been raised by you and others--but of course,
exchange rates change in most cases because of market forces,
and sometimes the dollar is high, sometimes the dollar is low.
That is the way it is. Is it a requirement of foreign policy to
deal with that? Well, I guess that is an issue that the
committee is going to have to face. I think it would be very
difficult to do it. Or, is there some other way to manage
income complications because of exchange rate differences?
Well, the fact is the green box that comes out of the
Uruguay Round Domestic Support Agreement provides for the
Congress, provided for the administration to convey income to
producers without restrictions as to what the reason for it is.
It dictates how it is delivered. So if your motivation is to
compensate for exchange rate differences, as long as you do it
in a decoupled way, you can do it.
So fundamentally, we have to keep on the market orientation
track.
Senator Roberts. I think we need to upgrade this debate in
a more general way if we possibly can. Let me give you an
example.
I was in Egypt with some appropriators and the chairman of
the Appropriations Committee, Ted Stevens. There are one
million new Egyptians born every 9 months; one million people
they are adding every 9 months. I know the soybean folks have a
food supplement--it is a new kind of food supplement, and I
apologize for not knowing the name of it--and they feel this
will have a very dramatic effect in alleviating the problem of
hunger and malnutrition.
I went down to Latin America with the leader of the Senate,
Trent Lott, and we visited Guatemala, Ecuador, Costa Rica, and
Panama and other countries. I remember talking with President
Clinton about this, and he had a win-win-win speech, talking
about we could export the bulk commodities if we had fast
track. This was during one of the efforts where, unfortunately,
that did not pass. If we exported the bulk commodities, those
countries could go to more specialty crop areas. As we toured
the countries, we saw people putting all sorts of agricultural
chemicals to increase their production of the basic commodities
that basically were not suited to that part of the country, and
obviously, that led to a lot of degradation to that part of
that country.
So if you would export the bulk commodities, that is a win
for us; if you were able to assist these countries, which we
have many programs to do, with the specialty crop production--
there are 360 million people in the Southern Command, average
age 14 years--so the humanitarian programs are leading those
countries to become more self-sufficient with specialty crops,
and then you do not get into the business of simply tearing up
the rain forest. So it is a win for the environment, a win for
those countries, and a win for the bulk commodities.
With the President talking about that in connection with
fast track legislation or some kind of bilateral agreement as,
say, Leland has talked about, that is the kind of talk that I
think is very helpful. You put it on a larger scale than you do
in terms of an individual commodity.
Do you have any suggestions in regard to how our food aid
programs could be improved? Senator Durbin has a bill to use
the 416 program on a humanitarian basis as well as to export
the bulk commodities.
Do you have any suggestions on the food aid situation?
Mr. O'Mara. Frankly, I am not an expert on this, but I do
have an opinion, if that is OK to make.
Senator Roberts. Yes.
Mr. O'Mara. I think the focus on food aid needs to be, as
we have talked throughout this morning, on what the problems
are now--not what existed when P.L. 480, frankly, was
established a few years ago, even before I was born.
I think we need to take a very serious look at what the
food aid needs are. They are very different. They are broader,
and in many cases, they are not only hunger-driven, but they
are driven, as they are in Africa, by HIV and other diseases. I
am not at all convinced, either from the point of view of the
Government or the private voluntary organizations that work on
these matters, that these broader issues are properly taken
into account.
Senator Roberts. That was exactly the advice that we
received from people in Egypt, that if you were able to apply
this soybean supplement to the AIDS victim, that then got the
AIDS patient to a level of health where other medicines could
be applied. Without that, it is just a losing proposition. It
seems to me that that is important.
Jim, any out-of-the-box suggestions?
Mr. Echols. Well, I think we have some as far as cotton is
concerned. We have our Step 2 program to help us counteract
some of the currency adjustments, but the strong dollar is a
tough hurdle. It has been mentioned a dozen times by virtually
everyone here. It is a very difficult one to overcome. But up
through 1995, I think, we exported about 47 percent of our
crop, and since then, with the strengthening of the dollar, we
have dropped to 37 percent. The cost of a pound of yarn in
Pakistan, for instance, was $1.42 back in that period, and now
it is about 87 cents, so it is a really serious problem to our
domestic textile manufacturers, and I think we will come up
with a proposal specifically for cotton, but I cannot speak for
the other commodities.
Senator Roberts. Mr. Hamilton.
Mr. Hamilton. I will echo the earlier comment; I think it
must be market-driven. I think we are still reeling from the
effects of the programs that were eliminated under the FAIR
Act; we still have the effect that there is a lack of
connection between production and market demand, so we need to
be producing those products that our customers are looking for
specifically, and as that goes into specialty crops and things
like that, I think we will find more opportunities there. But
there is still a sense among producers that they will produce
what they have always produced, without regard for what the
customers are looking for. As a marketer, I am looking to what
the customers want rather than what we have to sell, and there
is not always a connection between those.
So I think we need to look at creating that connection
between what customers are looking for and what we are really
producing.
Senator Roberts. I might add that that was part of the
design of the FAIR Act--I had a little bit to do with that--to
give the farmer the flexibility to seek different markets or
niche markets or whatever, as opposed to command and control
from Washington. I had to put in that editorial.
Mr. McDonald.
Mr. McDonald. Yes, thank you.
My thought is, particularly with regard to the cattle
industry, that support for programs, especially programs that
will help us reach those niche markets--we received in Montana
a grand from USDA that was very helpful, and we were able to
set up the Montana certified CAP program, protocol for
vaccination, basically improving the quality of the cattle, to
reach those specialty markets.
I was going to tell Senator Nelson, another such program
that was very helpful in Nebraska was the certified corn
program, which was very similar. So, support for those kinds of
programs that will help us to reach that niche market.
Second, I have carried around another idea--we have heard
several comments about the effect of currency fluctuations
among our trading partners and the effect on our commodity
prices here. This is just an idea that, again, I have been
carrying around, and that is creating a watch committee within
USDA so that producers could get up-to-date information on
these currency fluctuations. I know that during the depressed
cattle market in 1994, 1995, 1996, one of the things that
prolonged the down leg of the cycle was the low Canadian dollar
that made it attractive to the Canadians to take advantage of
some of the opportunities here.
I think, just having come back from South America, that
several of those currencies may be facing devaluation once
again. I am thinking of the real in Brazil, but also the
Argentine peso, which as you know has been tied to the dollar,
and they are now in their third year of some difficult economic
times, and there is some movement to rid the country of that
coupling of the peso with the dollar.
So if that could be monitored and that information provided
to producers on a timely basis, it might give us an opportunity
to react as some global opportunity.
Senator Robert. I want to thank all the witnesses.
Mr. Chairman, I do not want to let this opportunity go by
without thanking you for your continued leadership and your
perseverance on sanctions reform. You have I think by far the
best comprehensive bill. We tend to look at it on a country-by-
country basis, but I want to encourage you to keep up the
fight, and you will have my strongest help.
Staff has just given me a note--400,000 metric tons we
could sell; beef exports would be 20 to 50 million annually;
rice exports would be 40 to 60 million per year; soybean meal
exports would be 42 to 48 million a year. We passed something
called sanctions reform on Cuba--that is what I am talking
about--but there is no United States-based credit or financing
or travel or access to the report, yet we called it reform.
I do not understand that, and I hope we can make some
progress, and I want to thank you for your continued efforts.
The Chairman. Well, thank you very much, Senator Roberts,
for that comment, and I will lead off from that thought.
Clearly, comprehensive sanctions reform legislation is
important, I believe, for what we are talking about today. I
visited with administration people, and we are eager to proceed
with another comprehensive bill, but we want their support. We
want to make sure that somebody is holding our coat back there
as opposed to undermining the procedure, which has been
occurring, really, during the last 8 years of these efforts.
But I think the sanctions situation brings to the fore part
of the problem that we have in this committee and part of the
problem that we have in agricultural America. That is, we are a
fairly small situation, and when push comes to shove--and I
think you made this point, Mr. O'Mara--the need to have a
comprehensive negotiation is critical. I think Mr. Stallman and
Mr. Swenson also pointed out that sometimes, if we are not
careful, agriculture is sacrificed. The fact is that
agriculture would not even have been at the table during the
Uruguay Round, ultimately, or the GATT before that, without
there being a lot of other things that people in this country
and in this world wanted. We discussed leverage with the
Europeans earlier. On agriculture alone, our first witnesses
were hard-pressed to figure out where the leverage is. Well, it
is not with agriculture, and if we are to make progress with
the European Community, it comes because there are a number of
things that Europeans do want to see in terms of trade
liberalization, and we want to see agriculture as a part of
that package.
Ultimately, this is why the fast track authority, or trade
promotion authority, is absolutely critical. It is impossible
to do this without having that authority.
We come then to our own current political situation in the
Congress, and President Clinton tried very hard twice, and the
House of Representatives by fairly large majorities rejected
fast track authority.
The new administration comes, and President Bush hoped to
approach the Quebec conference this last weekend with the fast
track authority in hand, or some promise that it might occur.
But it is a long distance away, and the fact is that Mr.
Zellich and the President and everybody else meet continuously
with people at the White House, trying to see if in fact they
really want to have trade liberalization or not. The answer
thus far has frequently been no, they do not.
So here we are having a discussion on how to enhance
agricultural exports in the world in the face of pretty strong
feelings by many Americans and their representatives indicating
this that they really do not want to take that chance. They
want to protect particular things that are important to them
and their States and their localities and their professions.
I heard a very interesting speech yesterday by the former
President of Russia, Mikhail Gorbachev. He spoke about many
things, but one thing that disturbed him was that he had had a
visit with John Sweeney, the head of the AFL-CIO, and he said,
``I agree with Mr. Sweeney that essentially, trade and business
ought not to be our paramount objectives. We must be protecting
the environment of the world.'' He got into a little bit of the
globalization rhetoric that had been a part of Quebec and
Seattle. Well, that is a fairly big issue right now, with many
people fearing that ``globalization,'' in quotes, undermines
their status in all countries around the world, and some
Americans feel that way here, too, so they want to protect what
they have. They do not want to see this liberalization that we
are talking about.
Sanctions reform does not come about in large part because
a lot of Members of Congress and previous administrations
wanted sanctions. They want to have that ability, arbitrarily
and fairly rapidly, to impose sanctions and make it very
difficult ever to remove them, modify them, even get cost
estimates of them, and to sunset them. So the books are filled
with this sort of thing.
Here we are in this committee--we have passed out of the
committee, as Senator Roberts has pointed out, bills from time
to time that we thought we had some jurisdiction on, but the
Foreign Relations Committee has frequently said, ``No--we have
jurisdiction on that. You are overstepping your bounds, because
this is a foreign policy problem, not an agricultural
problem.''
I simply mention this because this is a rock-and-a-hard-
place situation. We are talking about looking outside the box,
but if you look inside the box, at the politics of just simply
getting the votes to get this authority, getting votes to get
sanctions reform or to support those who want to do so it is
pretty formidable.
Mr. Swenson, you made the point--and I think this is worth
exploring--that after all, trade is important, but our domestic
markets are large, and they may expand. That may be true. My
own common sense, though, leads me to believe that probably,
consumption of food products in America is fairly stable. It
may change product by product or in differentiation of product.
Granted, we are growing a little bit as a population each year,
incrementally. I think we still are back to the fact that we
are fully able to produce by several times everything we need
in this country.
In other words, if we are thinking in terms of any kind of
dynamic growth, it probably has to be outside the country. But
could you illuminate that issue just for a moment?
Mr. Swenson. Yes. Thank you, Mr. Chairman.
First of all, let me commend you--I think that when you
talk about the whole issue, we have a tendency to have it
perceived in the public that trade is the silver bullet that is
going to solve all of our problems. We have got to get past
that. It is not the silver bullet, but it is a component, it is
one of the elements that can be beneficial if we advance it in
the right way.
In the area of domestic market, I just want to point out,
and I want to commend you, Mr. Chairman, for your leadership in
the introduction of the renewable fuels standard. What a
tremendous increase in demand that could create for not only
corn, but sugar products, soybeans, and alternative uses, not
necessarily a food or a feed product, but benefit our economy
as a whole. That is one example of tremendous growth in demand.
We just returned within the last 8 months from a trade trip
to Japan and China with a group of our organization's
leadership, trying to advance a market opportunities for value-
added products, looking at cheese components, trying to take a
look at some rendering products, those types of items, into an
international market.
I think we can take a look at value-added products that are
processed domestically and can create some opportunities in the
market. We have a tendency to look mainly at bulk commodities.
I think we have got to rethink what our growth potential is,
and I think some of it is looking at what we can do in value-
added in a diverse manner.
In addition, I think one element is sanctions relief, but
we need total sanctions relief, not the piecemeal approach that
is perceived to provide some benefits.
I just want to emphasize that there are a number of
factors. Let us not leave with the perception that production
agricultre's problems are all going to be solved with one
silver bullet.
The other component is a strong domestic farm program that
is able to complement the other initiatives.
The Chairman. Well, I appreciate that comment, and I
certainly agree that the use of agricultural products for fuel
or energy for industrial situations, we really have to promote,
and certainly this committee will work with you and all of your
members to do that.
To get back to the problem of needing breakthroughs, I
think, in terms of our exports if we are going to have very,
very substantial gains, I think we are all of a mind to try to
do that, and my comments today are really to try to enlist the
support of the witnesses--the other way around--because I think
that that kind of political input is going to be important if
we are going to get out of this situation.
Let me make a comment, because a lot of you have talked
about the dollar and its strengths. We started with a very
interesting powerpoint presentation and graph which was
mentioned, but which indicates that a forecast of one group was
that the dollar would decline in value with regard to the bulk
of currencies, and in fact it went up by 25 percent from 1996.
But the chart also shows, using a model of 1982 as the
baseline, that it really never got below 100 throughout the
eighties and the nineties. In other words, the dollar has been
strong. Now, this is not a surprise, because essentially, as we
all know, many people deposit their money in the United States
of America. The safety of having it here is obvious. This
fluctuates as political risk is perceived. But here we have a
world in which the U.S. Government sometimes offers gratuitous
advice to Japan on how to improve their economy and are
disappointed that for 10 years, they have not made headway with
that, even if they took the advice. That certainly is strange;
if you were to hold a hearing in this committee, as some of us
remember, say, 24 years ago, with regard to the yen and the
dollar, there was a very different outlook. People were
commenting that the Japanese were eating our lunch at that
time, and that it was only a matter of time until the West
Coast might very well be purchased. But not so for the last 10
years. The Asian community has had its problems, but these are
exacerbated by having this enormous country, Japan, with a
great economy, in a position where it has not been able to make
much difference in that area.
Now, Latin American countries are up and down with their
currencies, and even the euro, which was forecast to be a
strong competitor to the dollar, and many people were very
worried about that situation, has not turned out to be that
strong thus far.
So here we have a very strong dollar. Most Americans, if
they think about that, think that that is probably a pretty
good idea, because it has brought huge amounts of capital to
this country and has kept our interest rates very low in a
secular way. As a matter of fact, to take the other standpoint,
if we really were to advocate a weaker dollar, and people began
to sell Treasury bonds wholesale and move off into some other
situation, we would have some problems, in agriculture or in
any other business.
What we have wrestled with today is given the fact that
this is an overall good for America, it is not necessarily an
overall good for specific farmers who are exporting cotton or
wheat or what-have-you.
In a way, the countervailing policies that Congress has
adopted have tried to meet that problem, and one reason why net
farm income is not sometimes as high as it was the year before
is because export sales have been down. Some reasons for that
relate to a high dollar, among other things. In other words,
the attempt to have some countervailing payments, whether as an
extra payment that was not contemplated by the Farm bill,
another AMTA payment or whatever we are doing, in a way tries
to be a countervailing factor against these situations. Maybe
we are not doing enough of it. Some will say we are doing too
much of it all the time. Some lament all of this. But I do not
know how you concoct a policy that would be better than that. I
do not know how you index each crop versus the dollar, or that
type of thing. You have an aggregate problem, I believe.
I mention that just off the top of the head really to gain
your reaction. If you are trying to weigh against this dollar
problem, you take a comprehensive look at what agricultural
income is in the country, you try to take some steps to shore
it up or at least to keep it at that point. Maybe our
rationalization has not been as good about that as it might
have been, but this is at least one way you could argue it, I
suppose.
Mr. Stallman, you have surely thought a lot about this.
What comment do you have about it?
Mr. Stallman. Well, you have covered the ball park pretty
well, Mr. Chairman. I think it is very difficult to address the
currency exchange problem in the context of farm policy. I
think that what we have been doing, providing the supplemental
assistance to offset many effects, but that being one of them,
to net farm income in this country is probably about the best
you are going to do. The idea of variable rate tariff
structure, commodity-by-commodity, country-by-country, sounds
unworkable, to be perfectly honest, in terms of addressing this
problem, and we think that that is probably the wrong direction
to go in the international context of trade.
The globalization that is occurring throughout the world is
really democratization--democratization of finance, of
information, of technology, and of capital flows and goods. As
all of that occurs, these situations with currency exchange
rates are going to fluctuate, but as the borders are open, the
come back into balance. When you start trying to seal off the
borders is when countries get into difficulties, and they do
not achieve that balance.
So what we are doing domestically to support net farm
income in the context of the problems we face internationally,
I think has certainly been useful and helpful. I do not know
that we can do a lot more in terms of directly affecting
exchange rate, however.
The Chairman. Mr. Swenson, do you have a comment?
Mr. Swenson. I appreciate your comments. I think a couple
of things have unfolded, though, in the last 10 to 15 years
that we need to recognize in the area of the currency.
No. 1 is to identify the impact, especially on the
producers, of the lack of access to markets. We saw a reduction
in tariffs, which we thought was going to increase our market
access, but countries simply took the opportunity to adjust
their currencies so the tariff reduction provided no greater
access, but provided greater access of many of their
commodities to the United States, and we have seen a
significant increase in the import of competitive products
during this same timeframe--and I am not at all an advocate of
devaluating the dollar; do not get me wrong. I think we have
got to search for a mechanism to level that currency issue.
The Chairman. Would you agree, though, that if a country
deliberately lowers the value of its currency, it is
deliberately hurting the standard of living of its people. In
other words, it may be a way of stopping our wheat from
entering the country, but the people of that country who are
trying to stop it are going to be hurting because clearly, that
depreciates their standard of living.
Mr. Swenson. When you take a look at what Australia and New
Zealand did, for example, in the adjustment to the tariff we
placed on lamb, they adjusted their currency and continued to
flow lamb into this country. So yes, it does have an impact on
their producers.
But one of the other things I wanted to point out that we
have seen is a change in the multinational structure of
entities, both in the food retailing system as well as the
processing and the marketing system. It has changed
dramatically in the last 10 years in the movement of commerce.
The other is the importance of the diversity of trade, and
how the currency issue impacts all crops and products . It is
not just the exchange of bulk commodities that can be tied to
the exchange rate issue. I agree with Bob--I am not sure how
you would tie it into the structure of farm programs, because
the impact is more than just bulk commodities. It is the impact
exporting value-added products and other areas of international
commerce. That is why I think the importance of addressing
currency is so critical.
The Chairman. Mr. Hamilton, I wanted your thoughts--you
made a good point, I believe, that we ought to have production
that is market-driven, and that is what you look at. You
suggested that some farmers, some producers, are continuing to
produce whatever they used to produce without regard to this,
which is probably true. Some here would say, ``Well, what else
do you want me to produce?'' In other words, I have a weather
problem, or a climate problem, traditional situations.
Ideally, under the FAIR Act, people would take advantage of
freedom to farm to produce new things or different quantities
with relation to the market.
On the other hand, some of the other policies, of course,
that we have adopted, whether it be the crop insurance
situation I mentioned earlier on, or LDPs, or various safety
net situations, in a way encourage farmers to continue along
that course. They offer a comfort level that maybe more
rigorous market economies would not.
Would you illuminate further what you mean when you say you
feel we need to move in that direction, and why don't people
see it that way--why aren't they more market-oriented, in your
judgment?
Mr. Hamilton. If I could, Mr. Chairman, first, I would like
to go back and address your earlier question about exchange
rates and currency values. I think the effect that the high
dollar has had over the last number of years is that it is
simply a price issue, and it makes United States products more
expensive than those of our competitors, and any time you are
asking your customer to pay more for a product, they are going
to want to know what is in it for them, what is the additional
value that you have added in order to require that additional
cost. I think that that is where we as a country do have a
competitive strength. If we are matching our products on a
commodity-for-commodity basis, then it is difficult to try to
exact higher price from your customer. So I think that where we
need to look is at what value are we adding with our products
in order to convince our customers to buy those products. If
you look at the export profile of the United States over the
last 25 years, you will see that the value-added component of
our agricultural exports has increased steadily over those 25
years, and in fact last year I think exceeded the bulk
commodities for the first time, and it is part of a very steady
long-term trend.
So if you are trying to address the issue of currency and
exchange rates, I think that is a much larger issue than we can
address within the context of agriculture, so you have to kind
of deal with what the market is giving you; so if our products
are going to be more expensive, then we have to justify that
additional cost by adding value.
With regard to your second question and relating to the
issue of production, I think you are dealing with a very long
tradition of producers who are comfortable producing what they
always have; there is a disconnect between individual producers
and overseas markets. It is a long way from Nebraska to Japan,
and there are a lot of steps in between, moving those products
from Nebraska to Japan.
Again, we have the largest, most homogeneous market that we
have ever had in the history of the world. Our producers here
are focused on that domestic market, and their decisions are
based on what they see around them. I think we need to do a
better job of communicating back to our producers what the
market demand really is about. There are many issues about
identify preservation, genetic modification, those kinds of
issues, that I think that if producers had all the information
in their hand and if there were a distribution and
transportation system in place, they would be able to make more
informed decisions.
I think we are starting to see that--some of the more
proactive producers and suppliers are out there--but I think
that that is a longer-term trend that we need to encourage.
The Chairman. Mr. Swenson.
Mr. Swenson. I want to challenge the statement that farmers
have not adapted. I think that farmers have adapted in the
United States more quickly than producers in any other country
in the world, and they will adapt to different production, to
different commodities, as well as we have adapted to changes in
genetics, be it in the livestock and/or in the grains sectors.
First of all, farmers are going to look at price--can they
afford to make the investment in the production of that
particular commodity, the equipment that it takes, and
everything else, versus the return they are going to get? If
the processor wants it well below the cost of production,
absolutely, producers are going to be leery of making the
investment. But I have watched agriculture change. I have been
involved in the change in production agriculture, and producers
have adapted in this country. That is why, when you talk about
yield, we are the most efficient yield producers in the
country, not necessarily the lowest-cost producers.
The other element that farmers get caught in is the rules--
they are not clear, they are not understood. Take a look at
Starlink and the impact that it has had on producers, and on
the whole market system.--The local elevators, the segregation
of commodities, the contamination--and we are supposed to trust
that system?
We are willing to adapt. I have never seen a system more
easily adaptable and willing to change--but we have got to get
decent compensation for it.
The Chairman. Well, I thank each one of you, not only for
your testimony but for staying through this extended period.
You can tell that members of the committee are deeply
interested in what you have had to say, and we will refer back
to your testimony as we proceed to our next trade hearing and
formulation of that section of our bill.
I thank you for coming.
The Chairman. I want to call now on our third panel, which
includes Judith Lewis, acting director of Resources and
External Relations at the World Food Program; Ken Hackett,
executive director of the Catholic Relief Services; and Gary
Martin, president of the North American Export Grain
Association.
We appreciate your coming before the committee and look
forward to your testimony. I will ask each of you to attempt to
summarize your testimony in five minutes, and your full
comments will be placed in the record in full.
Ms. Lewis.
STATEMENT OF JUDITH LEWIS, ACTING DIRECTOR OF
RESOURCES AND EXTERNAL RELATIONS, WORLD FOOD
PROGRAM, ROME, ITALY
Ms. Lewis. Thank you, Chairman Lugar, members of the
committee.
Thank you for this opportunity to speak to you today on the
issue of global food assistance.
Katherine Bertini, the executive director of the World Food
Program, wanted to be with you today, but she had a family
emergency and was not able to be here, so she sends her most
sincere best wishes for a wonderful hearing.
The Chairman. Please convey our best wishes to her. She is
a good friend of the committee, has appeared frequently, as you
know, and we are glad that you are here.
Ms. Lewis. Thank you so much.
I would like to start my comments today by thanking
Congress and the U.S. Government for its continued commitment
to reducing hunger around the world.
There are approximately 800 million hungry people today in
this world. Every 4 seconds, someone dies from hunger. It is
hard for us to imagine this type of hunger, but it does exist,
and in far too many countries in the 21st century.
Since its inception in 1963, the World Food Program has
been on the front lines of fighting throughout the world.
Today, WFP is the largest humanitarian agency in the world.
Last year, we delivered approximately 3.8 million tons of food
to 83 million people in more than 80 countries--and more than
1.5 million tons of this food was produced by American farmers.
I would like to start my comments today by mentioning one
of the most exciting initiatives underway today, which you have
already heard about several times this morning. This is the
Global Food for Education Initiative.
This initiative, which has been spearheaded by former
Senator Bob Dole and Ambassador George McGovern, provides a
wonderful opportunity for WFP, other NGO's and PVO's, and the
U.S. Government to work together to provide nutrition and
education to tens of millions of children who are deprived of
both.
There are more chronically hungry children in the
developing world than there are people in the United States--
over 300 million in all. Studies have proven that children will
stay in school longer and graduate if there is some type of
food incentive present. This is especially critical for girls.
When girls are educated, they grow up to become women who are
more likely to be engaged in the work force and have smaller,
healthier, and more prosperous families.
The Global School Feeding Initiative is not charity, and it
is not an international entitlement program. The vision that
Senators McGovern and Dole have is to assist developing
countries as they build their own capacity to maintain their
own school feeding programs and then phaseout the foreign
assistance.
The U.S. Government has been critical in getting the Global
School Feeding Initiative off the ground, and WFP is working
hard to gain additional support from other countries for school
feeding activities. Continued United States support,
demonstrating to other countries that the School Feeding
Initiative is not simply a short-term effort dictated by the
presence of surplus United States commodities, is critical for
securing broader international commitment and to keep this
initiative on track and growing.
I hope the members of this committee and Congress in
general will look favorably on this legislation for this
initiative and support our joint efforts of feeding and
educating tens of millions of children throughout the world.
Mr. Chairman, as you begin your deliberations on the Farm
bill, I would like to urge you to continue to strengthen the
United States commitment to food aid. Increased levels of food
aid will help nearly 800 million hungry people around the
world; and increased levels of food aid will help America's
farmers, many of whom have been struggling with low prices for
the past several years.
According to the 1999 United States Action Plan on Food
Security, United States levels of food aid decreased from 8.3
million tons to 3 million tons between 1986 and 1996. This
alarming downward trend in food aid has only been arrested due
to the availability of exceptional food surpluses that have
been made available to WFP under Section 416(b) of the
Agricultural Act of 1949.
Considering that the number of humanitarian emergencies has
been on the rise in recent years, it is hoped that the U.S.
Government will put in place the necessary mechanism to ensure
a stable source of humanitarian food aid in the years to come.
In this regard, I would like to point out that during the
1980's, two-thirds of WFP's resources went to development
efforts. Today, nearly 80 percent of our resources are focused
on keeping people alive in emergency situations--emergencies
like the Kosovar refugees who fled by the hundreds of thousands
into Albania two years ago; the people of El Salvador and India
who lost their homes and livelihoods in earthquakes this year,
and the millions who suffered the effects of a devastating
drought in the Horn of Africa last year.
Thanks to the U.S. Department of Agriculture's 416(b)
stocks, the past few years have been a reverse in the
decreasing food aid trend. However, 416(b) is an unpredictable
source of aid, and it is based on the availability of surplus
commodities. Therefore, P.L. 480 Title II remains the major and
most stable source of United States food assistance.
The appropriated levels of Title II resources have
essentially been frozen over the past 8 years, ranging between
$821 and $837 million since 1994. Given the rising number of
humanitarian emergencies throughout the world, the stagnation
of funding provided through Title II is extremely alarming.
While recognizing that the appropriated funding level for
Title II resources will be debated in the Agriculture
Appropriations Subcommittee, I urge this committee to support
increases to Title II authorization and appropriation funding
levels.
Another issue that I would ask you to look at during your
consideration of P.L. 480 Title II is the coverage of costs
associated with commodity contributions. The P.L. 480 Title II
funding window has provided WFP and various American NGO's and
PVO's, including CRS, with millions of tons of food over the
past few years. In addition to the actual commodities, the
United States has provided accompanying funds to pay for
transport, storage, handling, and associated costs for the
food. This funding is imperative for our operations. However,
under the current Title II language, it is only available to
emergency-related operations.
I would ask that during its reexamination of the Farm bill,
this committee consider amending the Title II language so that
costs related to recovery and development activities can be
included as well.
As has been stated today in the other panels, unless food
aid is carefully managed, it can undercut local prices and
remove incentives for local farmers to produce. Poorly managed
monetization of donated food aid can be particularly damaging.
WFP has designed its food aid operations to minimize local
market disruptions. We have adopted a fairly strict regime
against local monetization, as we distribute food in projects
or in emergency operations only. We do not simply hand over
large amounts of food to governments. WFP's food assistance is
targeted to the very poorest and the most vulnerable people in
the poorest countries in the world.
Our targeting helps to ensure that food gets into the
mouths of the country and not for sale in the markets. Our
philosophy is that food is to be eaten.
Another issue of concern is the possibility that food aid
could supplant a surplus sale by the United States or another
exporter. To ensure that there is no market displacement, our
food aid activities are reviewed in the Consultative
Subcommittee on Surplus Disposal, which is chaired by the FAO,
to see that our projects are not supplanting commercial exports
by the United States or other major exporters.
But the simple fact of the matter is that the beneficiaries
that WFP is supporting are not commercial buyers. They are
people fleeing drought, crowded into refugee camps, or in the
most remote corners of desperately poor countries--not people
who are usual commercial buyers of imported food.
The good news is that studies have repeatedly shown that as
poor people in developing countries earn more, the first thing
they spend their money on is more food and better food, and
this is good news for America's farmers, as 1 day, these same
beneficiaries may well be commercial food buyers.
Mr. Chairman, as I started my remarks, I said every 4
seconds, someone dies from hunger worldwide. The talent and
productivity of America's farmers can be brought to bear in a
renewed battle to end that tragedy. With the strong commitment
of the U.S. Congress, this battle can be won.
Thank you.
The Chairman. Thank you very much, Ms. Lewis.
[The prepared statement of Ms. Lewis can be found in the
appendix on page 132.]
Mr. Hackett.
STATEMENT OF KENNETH HACKETT, BALTIMORE, MARYLAND, EXECUTIVE
DIRECTOR, CATHOLIC RELIEF SERVICES, ON BEHALF OF THE COALITION
FOR FOOD AID
Mr. Hackett. Thank you very much, Senator.
I would really like to thank you for this opportunity that
you and the committee have offered to s how our appreciation
for the food assistance that has been provided under the Farm
bill through the private voluntary agencies.
I am here also today to encourage urgently needed changes
in food aid legislation so that we can make a much stronger
contribution to our Nation's commitment to cut world hunger and
poverty.
I am speaking to you today both as the executive director
of Catholic Relief Services and as the spokesperson for the
Coalition for Food Aid, which is a group of 13 American private
voluntary organizations--CARE, Save the Children, Africare, the
Adventist, et cetera. These 13 organizations count millions of
private contributors and constituents across our Nation.
I would like to start by stepping back a bit from many of
the complicated details of the United States food aid program
to make a few key points pertaining to, first, the levels and
the stability of assistance that is needed in terms of food
aid, and second, a fundamental change in the mindset needed in
the way the U.S. Government works with private voluntary
organizations on these programs.
The Coalition members, these 13 private voluntary
organizations here in the United States, believe that food aid
is a very precious resource. We have all used food aid, many of
since the 1950's, to respond to emergencies, drought, civil
unrest. We have supported development programs in health and
agriculture, and have really helped people who have limited
capacity to help themselves, and we have done it all with food
assistance.
We have support from the American people in these efforts,
and we are representing what we feel to be the true exhibition
of solidarity and concern and compassion of the people of the
United States. That was attested to by a recent study by the
University of Maryland indicating that Americans overwhelming
support efforts to alleviate hunger and world poverty. We want
to work with the Congress to make the critical changes
necessary to the upcoming farm bill so that United States
international food aid programs, in all of their
manifestations, become much more effective tools for private
voluntary organizations and organizations such as the World
Food Program to use in meeting the needs of hunger around the
world.
First, I would like to ensure, if we may, that there be
adequate budgetary provisions so that the United States private
voluntary organizations can rely on United States food aid and
programs for their multiyear programs and for multiyear
periods. To date, food aid availability has varied widely
depending on production here in the United States, and the
discussion that went on a little bit earlier indicates the
motivations of American farmers that are changing continually.
Production obviously is a function of weather and of the
planting decisions and farming decisions of American farmers.
But on the other hand, food aid needs are generated out of
circumstances that are often beyond the control of
organizations such as our own, are generated from drought and
civil unrest and AIDS epidemics, and the commitments that PVO's
and other organizations have toward changing and affecting
long-term improvements in health and agriculture and education.
We need to increase tonnage levels for Title II from 2
million metric tons to 2.5 million metric tons, and for Food
for Progress from 500,000 metric tons to 1 million metric tons,
with a discretionary provision for the Secretary of Agriculture
to add an additional million metric tons to the program. This
will ensure a solid-based level of assistance above which
additional resources may be programmed on a short-term basis.
Second, we are proposing radical change in the way food
programs are conceived. Radical may relate to Senator Roberts'
comments on ``out of the box,'' but we are asking that United
States food aid be provided to United States PVO's to support
the PVO's' planned relief and development activity.
That really does not sound very radical, but it is a
radical departure from what has gone on over the last decades.
We want to be able to find the best ways, innovative and
creative ways, to use food aid to support our own strategic
plans, which will incorporate, in addition to the U.S.
Government assistance, the private resources we raise here
among our contributors in the United States.
Over the last 10 to 15 years, PVO's have been increasingly
constrained in how we can use food aid. We often feel treated
as contractors carrying out a changing agenda, one which we
have not helped to establish and one which has not benefited
from our practical on-the-ground experience. For many years,
for example, PVO's have been discouraged from developing school
lunch and education programs under the Title II program. Then,
only last year, we were very happy to see the new major global
food initiative launched.
The point is it came on us very rapidly; it was something
new, something different, and we had to scurry about trying to
address those concerns.
A central component of this new conception of how food aid
programs are carried out is to make the private voluntary
organizations part of the decisionmaking process for resource
allocation and for how programs are implemented and evaluated.
We have accumulated expertise in technical fields and in
food management and logistics. We have knowledgeable national
and international staff in countries where we work around the
world. We have many partner organizations that work directly
with communities and with people who benefit from assistance.
Yet we are not at the table when the priorities are set and the
decisions are made.
We are open and willing to explore new U.S. Government
institutional arrangements and structures that will support us
and improve our work on the front lines of hunger and poverty.
We are not asking for carte blanche. We commit ourselves to
meet the agreed-upon performance standards for food programs.
We welcome U.S. Government audits and systems of
accountability. But we need your help to make some big changes
in how these programs are designed and run in the future.
Finally, let me reiterate a point that I made in our
testimony last July in front of your committee. We believe that
the distribution of food aid alone, without complementary and
supportive resources, is an insufficient and in many cases
wasteful use of this precious resource. As recently as last
month, an evaluation of school feeding programs in Haiti which
we were a part of indicated that food distribution alone is an
ineffective means of improving nutrition or enhancing
educational impact. Food distribution can only be effective
when it is combined into an entire program with a series of
complementary inputs.
So as we think through the future of food aid programs, I
hope we can find ways to leverage other complementary
Government resources as well as the resources of our own
private contributors to make food assistance more meaningful
and effective.
I thank you very much, Mr. Chairman.
The Chairman. Thank you very much, Mr. Hackett.
[The prepared statement of Mr. Hackett can be found in the
appendix on page 139.]
The Chairman. Let me intervene at this point to mention
that our distinguished ranking member, Senator Tom Harkin of
Iowa, had planned to attend this hearing but encountered very
difficult circumstances in terms of scheduling today, including
attending to matters of a death in the family. He simply wants
all witnesses to know of his regard for them and their
testimony, which he will study.
In particular, he wants to note the attendance of Iowa
witnesses and in his stead, I will do that, and we appreciate
the ranking member.
Mr. Martin.
STATEMENT OF GARY MARTIN, PRESIDENT, NORTH AMERICAN EXPORT
GRAIN ASSOCIATION, WASHINGTON, DC
Mr. Martin. Thank you, Mr. Chairman and members of the
committee, for the opportunity to participate in the hearing
this morning. It is a special privilege, Mr. Chairman, for me
to appear before you, our association's recipient of the
Agricultural Trade Leader of the Year Award just this past
year.
The North American Export Grain Association, founded in
1912, is the association that represents the publicly and
privately owned companies as well as cooperatives that ship
practically all the bulk grains and oilseeds from the United
States. That is $16 to $20 billion, perhaps as much as 40
percent of our total agricultural exports each year. When we
ship, we take the risk, both in the short-term, of individual
shipments that range up to $35 million and, of course, have the
long-term investment risk in the facilities that provide for
the export of the grain.
Food aid programs in particular are a very significant and
important component of the United States bulk grain and export
market. Every year, NAEGA member companies sell millions of
tons of commodities, which are exported through the various
food aid programs.
Our association recognizes and supports the contribution of
United States international food assistance, not only in
alleviating hunger but also in providing for economic growth,
the foundation of increased demand for our products.
As commercial exporters, we see much opportunity to improve
and strengthen United States food aid programs. The testimony
which you have been kind enough to enter into the record
emphasizes and makes recommendations related to three
priorities of our association--first, to provide for
consistency and sustainability of food aid funding and improve
performance in the delivery of United States food aid programs
to recipients themselves; second, to improve the process of
allocating commodities to specific countries in order to ensure
that food aid programming is consistent with overall market
development and domestic agriculture support programs; and
third, to ensure compatibility of our food assistance programs
with the United States strategy to provide for more open and
free international trade.
In our testimony, we make four very specific
recommendations. First of all, the process under which the USDA
and others determine aid eligibility and target food donations
to specific countries needs improvement. Food aid is an
important component of the bulk grain export market, as I said
before, and it does provide additional demand for bulk grains,
but at an excessive level, food aid displaces commercial
exports. Our companies feel that most directly.
Shifting the resource base for food aid away from surplus
to more permanent funding and including private sector input
into the decisionmaking process is key to more effective
programming. Food aid programming in the United States and
around the world is based on internationally accepted
calculations based on usual marketing requirements. We suggest
that United States producers and agriculture business should be
engaged in the development of UMR and UMR formulae for more
timely and market-sensitive--not only based on quantity but
also on quality--programming standards.
Second, food aid shipments prior to fiscal year 1999
averaged about 3 million metric tons per year; after that, 8 to
9 million metric tons per year in recent years has been the
case. That level of 3 million metric tons plus an expansion of
perhaps a million metric tons, depending on emergency and
programming justification, is much more reasonable,
sustainable, and acts as a cap to assist in the prevention of
commercial displacement.
Again, provisions to provide for long-term funding would
alleviate most of the adverse program consequences and lead to
the necessary incorporation of market needs from the commercial
markets.
Third, the Title I P.L. 480 concessional program is a
valuable market tool and should be retained in any rewrite of
the food aid title. While our competitors maintain the ability
to directly subsidize exports and distort markets through the
monopoly power of State trading enterprises, our Title I
concessional sales program is fully justified and should be
more strongly promoted and defended in international trade
negotiations.
Fourth, we are quite satisfied with the procurement
operations that exist under the current program, P.L. 480
Titles I, II, 416(b), and Food for Progress, but would suggest,
as we look forward to a more sustainable environment that
provides for long-term funding, more flexible conditions for
procurement and delivery that recognize, again, market needs
not only from a timeliness standpoint but from a quality
standpoint as well as a quantity standpoint and both economic
development and humanitarian needs.
I see that I have just a bit of time, and I am going to
take the liberty of digressing from my prepared statement to
address two trade issues that I think were somewhat overlooked
in this morning's hearing. I have had the privilege of sitting
through the entire hearing.
First of all, mentioned in my testimony is the problem and
the barriers represented by the State trading enterprises,
particularly for the United States wheat industry. Those must
be addressed very directly as part of this next round of
agricultural negotiations.
Second, on Senator Baucus' comments that the biggest
problem is the most serious trade barriers, I think we would be
remiss if we did not point out that the lack of consistency in
terms of trade and regulatory procedures with regard to
biotechnology in international trade are perhaps the most
significant and growing barrier to United States trade of
agricultural products, particularly grains and oilseeds, that
we have to deal with today.
A drive for international consistency in those regulatory
and trade terms is an absolute imperative. Our members have
seen a loss of market share around the world in particular
commodities, like corn that may exceed 10 million metric tons
in just the last 12 months.
Those two points in particular I wanted to bring out in
addition to the testimony.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Martin can be found in the
appendix on page 156.]
The Chairman. Thank you very much, Mr. Martin.
Let me begin by mentioning--although none of you addressed
this specifically--that one barrier to our feeding people
around the world has frequently been political repression.
For instance, we have had Dr. Borlug and others before us
estimating the need for maybe three times as much food
production in the world in the next 50 years given population
increases and likewise rising standards of living. But as all
of you have testified from your experience and as we have heard
from the earlier witnesses, the flow of this food is obstructed
in many ways. There is no industry in the world more protected
than agriculture, and it is because specific governments have
adopted policies to protect either their producers or
themselves in some cases, or protect certain parts of the
population even in worst cases, that others are left to starve.
These are difficulties which are beyond our committee, but
we recognize an imperfect world and a very imperfect flow in
terms of the trading system, whether it be humanitarian or
commercial, as the case may be.
Having said that, the subject of the Global Food for
Education Initiative is important to what we are discussing
this morning, because it is a bold suggestion. Our former
colleagues, Senator Dole and Senator McGovern, who used to sit
around this table, as you know, are very distinguished giants
of the American political system, and they remain that, and
their initiative was listened to by the committee at a well-
attended hearing in which I think some of you were involved.
The dilemma of translating that into legislation boils down
to some of the things that you have mentioned, Mr. Hackett. As
we proceeded into the minutiae of this, the problem of how the
private voluntary organizations are to be treated--as you say,
why they were not at the table in this big initiative was sort
of a surprise--well, it cannot just remain a surprise, and it
is not going to work out until the PVO's, all of the
organizations which have some legitimate reason to be involved
in addition to the multinational organizations, are there.
That will take some doing in terms of the internal politics
of humanitarian distribution. I want to underline that. This
was an immediate feeling, not necessarily of bad faith but of
difficulty, even among people whose idealism could not be
questioned, so we take that seriously.
You mentioned the monetization problem, Ms. Lewis. We heard
testimony at that hearing, and we have been hearing it ever
since, and it comes down to something like this. People who are
in rural schools in developing countries frequently say that
the dilemma of distribution of this food to the children or to
other recipients is very difficult. Furthermore, we have a
school lunch program which seems almost axiomatic--children who
are better fed learn better, and so forth, and this is likely
true in developing countries. As a practical matter, it boils
down to this suggestion: let us monetize the food because we
need the money; We need the money to set up a school that will
even have teachers in it.
We had very poignant testimony about parts of Africa where
large numbers of the teaching staff have been seized with AIDS
and are suddenly gone in the prime of life. The recruitment of
staff, quite apart to ever getting to place where you have a
stable school, education, and then feed the children lunch or
breakfast, assumes all sorts of infrastructure.
The thought that you globalize the school lunch program is
an important idea. But then, as you get into the various
countries--you have all dealt with this as experts--actually
making this work is very complex.
So the monetization issue is not a sticky point, but it is
really going to have to be addressed in several different ways
that will require great sophistication.
Then, the commercial displacement issue is always with us
in this area. It is not going to disappear, yet at the same
time, sometimes is more of a problem than in others. I simply
mention it because if monetization is a factor, which I think
it is, as well as the cooperation of governments, who is to
allow this intrusion? Well, this requires a fairly liberal
regime on some occasions, some schools to be more favored than
others, and so on--a number of various issues differing from
region to region.
Leaving those very large barriers aside, I simply want to
mention this because this committee takes very seriously the
initiative. It is something that, from the beginning, I have
been enthusiastic about and have been a public witness to that.
But I am also listening to sophisticated people like
yourselves on who are bringing these factors to light that are
going to be important if we are going to have ongoing
legislation as opposed to a one-shot appropriation or a
Presidential edict that says we will do it this year, but you
work out the details.
If we are going to have something that has longevity long
after this committee has been sitting here, these are factors.
So I invite you--you are very specific technical witnesses
beyond this hearing; you know the issues well, you know the
problems of legislative language that finally can help persons
such as yourselves or those who will administer your duty after
you have left.
Beyond that, let me say that in hearings such as this one,
although it has been unstated today, I shall state it--we have
a number of producers who off the record would say, ``Listen,
we have huge surpluses. We have overhanging surpluses. They
depress our prices.'' Now, it would be nice if you could think
of some legitimate way of getting this out of here in a
humanitarian sense. But in fact, if it is sunk in a boat at
sea, it would accomplish the same thing. In other words, move
it, under any circumstances, any time you can.
That, of course, disrupts everybody. If it sinks at sea, no
one eats. If it gets to a country and is monetized, this
bothers some people. If it is maldistributed by a government
that uses it for its own political advantage, that seems to me
worse still. If it displaces a commercial sale or roils
internally a country that says, ``Despite all that you are
saying, what you folks are really after is dumping on us''--you
have got a big problem.
It is amazing--we have talked about Russian aid today, and
having had some experience back and forth in that country on
other circumstances, on arms control, I run into Russians who
say, cynically, ``Of course, there are a lot of us who do not
have very much food, but in fact your motivation is clear--you
have got surpluses, and you are dumping them on us, and you are
hurting Russian farmers, whoever they may be.'' This is widely
felt throughout the world; there is a cynicism as opposed to an
appreciation for American idealism.
From the other standpoint, American taxpayers, if you take
a look at firm appropriations for this, say, OK, maybe we
should be doing more than the $814 to $837 million--the range
that you mentioned, Ms. Lewis--but on the other hand, how is
this being administered? Is this good money after bad? Who are
the people doing it, and who are the recipients? Are they
appreciative?
Well, maybe so, maybe not. Many of them feel that our
motivation is unclean. But the taxpayers' motivation is clean.
They were not farmers or producers. This is a transfer payment
from other taxpayers to American agriculture, in a way, or to a
humanitarian organization to achieve something.
So if cynicism abounds too much, then we have not only
freezes on this, but we may have declines. The whole foreign
aid area that we discuss in the Foreign Relations Committee is
indicative of this. It has been declining substantially, and
for all sorts of reasons, because many Americans say we have
big problems with Medicare and Social Security right here at
home, or food pantries in our cities.
It is all well and good to talk about this, but we are not
really sure, we are not as confident about this. So it is
incumbent upon all of us who are involved in the emergency
projects to be pretty clear in describing what we are doing,
and that is hard to do, because there are many of us doing it,
many organizations, under various auspices.
I make this precis because I think you all are
knowledgeable about it. Can you make some comment, specifically
targeting for a moment the Global Food Initiative on how can we
work out in a sophisticated way both the problems of how PVO's
generally can be involved, and what do we do with regard to
monetization and the problem with these school teachers or the
others who are trying to help.
Have you given thought to that--I am sure you have--and
what advice do you have today?
Ms. Lewis. I think all of us have thought about this and
discussed it. We see it as an opportunity for partnership where
we can use food for the actual school feeding initiative, and
then, other partners who want to be involved can monetize to
provide the educational equipment, to help build an
infrastructure, to help provide teachers.
So you could see it as a well-balanced partnership if we
work together, if we are certain that we are all working in the
same areas and the most vulnerable areas where we can make the
most of the initiative.
So that is one way we could look at it, as looking at
strong partnerships to make the entire initiative not only for
food but for the education as well.
The Chairman. Ms. Lewis--and that is a reasonable outline--
but moving from that to legislative language that will last the
test of time, how do we draw this up in ways in which the
guidelines are clear as to what is prohibited or what we can do
and so forth? Is that possible?
Ms. Lewis. I do not know. I would have to seek Mr.
Hackett's opinion.
Mr. Hackett. If I may, Senator, I believe it is possible,
and I think the American PVO's are ready to put the energy
behind such an effort soon. We will work with WFP and others to
make sure that we are not bumping into each other and stepping
on each other's toes, but are basically complementing each
other's efforts so that we can make a significant impact.
Senator Lugar. Well, I invite you to do that promptly,
because we have a legislative situation here where a lot of
people are very hopeful of success, yet we are not making a lot
of headway in part because the expertise and even the
organizations involved in these issues have got to help us come
to grips with a sharp pencil as to how you draft this and what
do you say so that there is not an afterglow that somehow we
forgot that or that someone was shortchanged.
I mention that really specifically to take advantage of
this hearing. This is an ongoing project but one of some
urgency, certainly felt by you in your testimony today. The
extent to which you can work with our staffs on some
legislative language would be very helpful.
Mr. Hackett. If I may, Senator, again to repeat, the
Coalition is prepared to go all the way, so to speak.
I was taken by a comment in the earlier testimony when we
were talking about farm bill and the trade relations and food
aid, that it is not the same as it was 50 years ago. I believe
this is the opportunity for all of us to take a look at what it
should be for the future, not what it was.
The Chairman. I agree.
Mr. Hackett. So we are with you on that.
The Chairman. Good.
Mr. Martin, looking at this from your perspective, what
would you advise the Global Food Initiative people who are
going to be meeting and helping us with this language? Do you
have some suggestions?
Mr. Hackett. Actually, I think the suggestion has been
turned into action already in that the producer groups,
commodity groups, and commercial entities involved in handling
grain and oilseeds in particular, but even other products, have
agreed to sit at the table with the PVO community and sort
through the legislative process to support initiatives like the
Global Food Initiative, but expand that into the consideration
of Title II expansion as well as discipline on the overall food
aid.
The Chairman. Well, that is important while you are at the
table to take up Title II and other issues. I do not mean to
have an exclusive conference, but obviously the Global Food
Initiative is a large new subject that was not a part of the
1949 Farm bill or subsequent iterations. But it offers an
avenue, once again, to discuss this among yourselves and with
the American people, who must ultimately support this idea if
it is to be politically viable and to have some legs over time.
I think we all understand what we are talking about here
within this committee and the hearing group and the
humanitarian group. This is an initiative that could strike
people as being a very, very good idea and others as almost a
fanciful giveaway of sorts. We need to make sure it is the
former by a really sound program that has the commercial people
and the Catholic Relief Services and other PVOs and the world
organizations--everybody--aboard in a very unusual but
important coalition.
I appreciate very much your preparation of your testimony,
which will be published in full, and likewise your testimony
and responses this morning. We look forward to working with you
and entertaining you back here again some time.
Having said that, the hearing is adjourned.
[Whereupon, at 12:28 p.m., the committee was adjourned.]
=======================================================================
A P P E N D I X
April 25, 2001
=======================================================================
[GRAPHIC] [TIFF OMITTED] T8561.001
[GRAPHIC] [TIFF OMITTED] T8561.002
[GRAPHIC] [TIFF OMITTED] T8561.003
[GRAPHIC] [TIFF OMITTED] T8561.004
[GRAPHIC] [TIFF OMITTED] T8561.005
[GRAPHIC] [TIFF OMITTED] T8561.006
[GRAPHIC] [TIFF OMITTED] T8561.007
[GRAPHIC] [TIFF OMITTED] T8561.008
[GRAPHIC] [TIFF OMITTED] T8561.009
[GRAPHIC] [TIFF OMITTED] T8561.010
[GRAPHIC] [TIFF OMITTED] T8561.011
[GRAPHIC] [TIFF OMITTED] T8561.012
[GRAPHIC] [TIFF OMITTED] T8561.013
[GRAPHIC] [TIFF OMITTED] T8561.014
[GRAPHIC] [TIFF OMITTED] T8561.015
[GRAPHIC] [TIFF OMITTED] T8561.016
[GRAPHIC] [TIFF OMITTED] T8561.017
[GRAPHIC] [TIFF OMITTED] T8561.018
[GRAPHIC] [TIFF OMITTED] T8561.019
[GRAPHIC] [TIFF OMITTED] T8561.020
[GRAPHIC] [TIFF OMITTED] T8561.021
[GRAPHIC] [TIFF OMITTED] T8561.022
[GRAPHIC] [TIFF OMITTED] T8561.023
[GRAPHIC] [TIFF OMITTED] T8561.024
[GRAPHIC] [TIFF OMITTED] T8561.025
[GRAPHIC] [TIFF OMITTED] T8561.026
[GRAPHIC] [TIFF OMITTED] T8561.027
[GRAPHIC] [TIFF OMITTED] T8561.028
[GRAPHIC] [TIFF OMITTED] T8561.029
[GRAPHIC] [TIFF OMITTED] T8561.030
[GRAPHIC] [TIFF OMITTED] T8561.031
[GRAPHIC] [TIFF OMITTED] T8561.032
[GRAPHIC] [TIFF OMITTED] T8561.033
[GRAPHIC] [TIFF OMITTED] T8561.034
[GRAPHIC] [TIFF OMITTED] T8561.035
[GRAPHIC] [TIFF OMITTED] T8561.036
[GRAPHIC] [TIFF OMITTED] T8561.037
[GRAPHIC] [TIFF OMITTED] T8561.038
[GRAPHIC] [TIFF OMITTED] T8561.039
[GRAPHIC] [TIFF OMITTED] T8561.040
[GRAPHIC] [TIFF OMITTED] T8561.041
[GRAPHIC] [TIFF OMITTED] T8561.042
[GRAPHIC] [TIFF OMITTED] T8561.043
[GRAPHIC] [TIFF OMITTED] T8561.044
[GRAPHIC] [TIFF OMITTED] T8561.045
[GRAPHIC] [TIFF OMITTED] T8561.046
[GRAPHIC] [TIFF OMITTED] T8561.047
[GRAPHIC] [TIFF OMITTED] T8561.048
[GRAPHIC] [TIFF OMITTED] T8561.049
[GRAPHIC] [TIFF OMITTED] T8561.050
[GRAPHIC] [TIFF OMITTED] T8561.051
[GRAPHIC] [TIFF OMITTED] T8561.052
[GRAPHIC] [TIFF OMITTED] T8561.053
[GRAPHIC] [TIFF OMITTED] T8561.054
[GRAPHIC] [TIFF OMITTED] T8561.055
[GRAPHIC] [TIFF OMITTED] T8561.056
[GRAPHIC] [TIFF OMITTED] T8561.057
[GRAPHIC] [TIFF OMITTED] T8561.058
[GRAPHIC] [TIFF OMITTED] T8561.059
[GRAPHIC] [TIFF OMITTED] T8561.060
[GRAPHIC] [TIFF OMITTED] T8561.061
[GRAPHIC] [TIFF OMITTED] T8561.062
[GRAPHIC] [TIFF OMITTED] T8561.063
[GRAPHIC] [TIFF OMITTED] T8561.064
[GRAPHIC] [TIFF OMITTED] T8561.065
[GRAPHIC] [TIFF OMITTED] T8561.066
[GRAPHIC] [TIFF OMITTED] T8561.067
[GRAPHIC] [TIFF OMITTED] T8561.068
[GRAPHIC] [TIFF OMITTED] T8561.069
[GRAPHIC] [TIFF OMITTED] T8561.070
[GRAPHIC] [TIFF OMITTED] T8561.071
[GRAPHIC] [TIFF OMITTED] T8561.072
[GRAPHIC] [TIFF OMITTED] T8561.073
[GRAPHIC] [TIFF OMITTED] T8561.074
[GRAPHIC] [TIFF OMITTED] T8561.075
[GRAPHIC] [TIFF OMITTED] T8561.076
[GRAPHIC] [TIFF OMITTED] T8561.077
[GRAPHIC] [TIFF OMITTED] T8561.078
[GRAPHIC] [TIFF OMITTED] T8561.079
[GRAPHIC] [TIFF OMITTED] T8561.080
[GRAPHIC] [TIFF OMITTED] T8561.081
[GRAPHIC] [TIFF OMITTED] T8561.082
[GRAPHIC] [TIFF OMITTED] T8561.083
[GRAPHIC] [TIFF OMITTED] T8561.084
[GRAPHIC] [TIFF OMITTED] T8561.085
[GRAPHIC] [TIFF OMITTED] T8561.086
[GRAPHIC] [TIFF OMITTED] T8561.087
[GRAPHIC] [TIFF OMITTED] T8561.088
[GRAPHIC] [TIFF OMITTED] T8561.089
[GRAPHIC] [TIFF OMITTED] T8561.090
[GRAPHIC] [TIFF OMITTED] T8561.091
[GRAPHIC] [TIFF OMITTED] T8561.092
[GRAPHIC] [TIFF OMITTED] T8561.093
[GRAPHIC] [TIFF OMITTED] T8561.094
[GRAPHIC] [TIFF OMITTED] T8561.095
[GRAPHIC] [TIFF OMITTED] T8561.096
[GRAPHIC] [TIFF OMITTED] T8561.097
[GRAPHIC] [TIFF OMITTED] T8561.098
[GRAPHIC] [TIFF OMITTED] T8561.099
=======================================================================
DOCUMENTS SUBMITTED FOR THE RECORD
April 25, 2001
=======================================================================
[GRAPHIC] [TIFF OMITTED] T8561.100
[GRAPHIC] [TIFF OMITTED] T8561.101
[GRAPHIC] [TIFF OMITTED] T8561.102
[GRAPHIC] [TIFF OMITTED] T8561.103
[GRAPHIC] [TIFF OMITTED] T8561.104
[GRAPHIC] [TIFF OMITTED] T8561.105
[GRAPHIC] [TIFF OMITTED] T8561.106
[GRAPHIC] [TIFF OMITTED] T8561.107
[GRAPHIC] [TIFF OMITTED] T8561.108
[GRAPHIC] [TIFF OMITTED] T8561.109
[GRAPHIC] [TIFF OMITTED] T8561.110
[GRAPHIC] [TIFF OMITTED] T8561.111
[GRAPHIC] [TIFF OMITTED] T8561.112
[GRAPHIC] [TIFF OMITTED] T8561.113
[GRAPHIC] [TIFF OMITTED] T8561.114
[GRAPHIC] [TIFF OMITTED] T8561.115
[GRAPHIC] [TIFF OMITTED] T8561.116
[GRAPHIC] [TIFF OMITTED] T8561.117
[GRAPHIC] [TIFF OMITTED] T8561.118
[GRAPHIC] [TIFF OMITTED] T8561.119
-