[Senate Hearing 107-847]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 107-847
 
                        U.S. EXPORT MARKET SHARE
=======================================================================



                                HEARING

                               before the

          SUBCOMMITTEE ON PRODUCTION AND PRICE COMPETITIVENESS

                                 of the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION


                               __________

                             AUGUST 1, 2001

                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry


  Available via the World Wide Web: http://www.agriculture.senate.gov








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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                       TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont            RICHARD G. LUGAR, Indiana
KENT CONRAD, North Dakota            JESSE HELMS, North Carolina
THOMAS A. DASCHLE, South Dakota      THAD COCHRAN, Mississippi
MAX BAUCUS, Montana                  MITCH McCONNELL, Kentucky
BLANCHE L. LINCOLN, Arkansas         PAT ROBERTS, Kansas
ZELL MILLER, Georgia                 PETER G. FITZGERALD, Illinois
DEBBIE A. STABENOW, Michigan         CRAIG THOMAS, Wyoming
BEN NELSON, Nebraska                 WAYNE ALLARD, Colorado
MARK DAYTON, Minnesota               TIM HUTCHINSON, Arkansas
PAUL DAVID WELLSTONE, Minnesota      MICHEAL D. CRAPO, Idaho

              Mark Halverson, Staff Director/Chief Counsel
            David L. Johnson, Chief Counsel for the Minority
                      Robert E. Sturm, Chief Clerk
              Keith Luse, Staff Director for the Minority

                                  (ii)











                            C O N T E N T S

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                                                                   Page

Hearing(s):

U.S. Export Market Share.........................................    01

                              ----------                              

                       Wednesday, August 1, 2001
                    STATEMENTS PRESENTED BY SENATORS

Conrad, Hon. Kent, a U.S. Senator from North Dakota..............    01
Lincoln, Hon. Blanche L., a U.S. Senator from Arkansas...........    14
Roberts, Hon. Pat, a U.S. Senator from Kansas....................    03
                              ----------                              

                               WITNESSES

Sharpless, Mattie R., Acting Administrator, Foreign Agricultural 
  Service, U.S. Department of Agriculture; accompanied by Mary 
  Chambliss, Deputy 
  Administrator for Exports Credits..............................    07

                                Panel I

Brothers, Carl, Senior Vice President for International Business, 
  Riceland Foods, Stuttgart, Arkansas............................    23
Condon, Leonard W., Vice President for International Trade, 
  American Meat Institute, Arlington, VA.........................    19
Von Tungeln, Henry Jo, Chairman, U.S. Wheat Associates and the 
  Wheat Export Trade Education Committee, Washington, DC.........    21
                              ----------                              

                                APPENDIX

Prepared Statements:
    Conrad, Hon. Kent: Letter to Keith Collins and his response..    65
    Brothers, Carl...............................................    59
    Condon, Leonard W.,..........................................    48
    Sharpless, Mattie R.,........................................    34
    Von Tungeln, Henry Jo........................................    52
Document(s) Submitted for the Record:
    Baucus, Hon. Max.............................................    70
    Testimony from Philip Seng, President and CEO, U.S. Meat 
      Export 
      Federation.................................................    72
Question and Answer:
    Questions to Ms. Sharpless, Mr. Von Tungeln and Mr. Brothers 
      submitted by Senator Pat Roberts (No answers were provided)    85
















                        U.S. EXPORT MARKET SHARE

                              ----------                              


                       WEDNESDAY, AUGUST 1, 2001

                                       U.S. Senate,
  Subcommittee on Production and Price Competitiveness, of 
     the Committee on Agriculture, Nutrition, and Forestry,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 9:02 a.m., in 
room SR-328A, Russell Senate Office Building, Hon. Kent Conrad, 
(chairman of the subcommittee), presiding.
    Present or submitting a statement: Senators Conrad, 
Lincoln, Cochran, and Roberts.

STATEMENT OF HON. KENT CONRAD, A U.S. SENATOR FROM NORTH DAKOTA

    Senator Conrad. The subcommittee will come to order. We 
have a beautiful day. No doubt some would prefer to be outdoors 
today. I might prefer to be outdoors today. We have an 
important subject before the subcommittee.
    I especially want to acknowledge the presence of the 
Senator from Kansas, who has been such a leader on all of these 
issues. It is good to have him here with us.
    Welcome to the witnesses; it is good to have you here.
    The subcommittee meets this morning to examine the issue of 
the United States share of world agricultural trade. We want to 
put the spotlight on U.S. market share for a number of reasons.
    First, traditionally, the Department of Agriculture has 
measured the export success of U.S. agriculture on the basis of 
the dollar value of the exports, and sets its export goals 
accordingly. In the mid 1990's, for example, USDA established 
the goal of $65 billion of U.S. exports by the year 2000, a 
goal we did not achieve. Although the focus on the dollar value 
of exports is helpful, it does not tell the whole story. For 
example, it is quite possible that even though the value and 
volume of exports may rise, we may be slipping in terms of the 
U.S. share of world agricultural trade if world trade is 
increasing faster than our own exports. To illustrate this 
point, let us take a look at a few charts.
    Earlier this year I wrote to the Department's chief 
economist, Keith Collins, noting that USDA's 10-year baseline 
projections generally forecast steadily rising exports for most 
of our major commodities. I asked him if those projections of 
rising exports translated into increasing U.S. market share. 
Unfortunately, for most of our commodities, it does not.
    Take the case of corn. Let's go to that. We can see that 
the pattern is very clear. The volumes have been increasing, 
but U.S. market share has been slipping. Seems to me that that 
ought to alert us to a long-term problem. USDA projects in corn 
that export volume will rise over the next 10 years. However, 
even as our exports increase by about 400 million bushels, our 
share of world corn trade will fall from 80 percent today to 
about 72 percent. In the case of soybeans, our exports are 
projected to increase by 100 million bushels, but our market 
share will slip by about 3 points. If you just concentrate on 
volume, it looks pretty good. If you measure it a different 
way, in terms of market share, again, we are losing ground. In 
the case of rice--let's go to that chart--the bad news is that 
both our export volume and our market share is expected to drop 
and drop significantly over the next 10 years. Look at that 
pattern. Both volumes and market share in steep decline.
    Let me emphasize the point. Even if USDA's projections of 
rising exports for most commodities come about, the fact is 
that U.S. export market share for many of these same 
commodities will continue to decline. In other words, we are 
not expected to keep up with what we hope will be a rising tide 
of world trade. I find that an unacceptable circumstance.
    Unfortunately, as this next chart shows, U.S. market share 
has generally been declining for the past 20 years. Here you 
can see where we are. We are the tan line. Well, this is the 
strategic goal. We had a strategic goal of being at, you can 
see, 22 percent, and you can see we are well below the 
strategic goal in market share.
    Let's go to that next chart as well, Tim. This shows what 
is happening with our major competitors. We are the yellow 
line. The EU is the green line. The Cairns Group is the red 
line. I would suggest to you it is not a pretty picture. We saw 
back in the 1980's a really dramatic turn where our market 
share dropped, the EU's market share increased dramatically, 
the Cairns Group has continued to increase, and, it seems to me 
this really is at the heart of a problem we ought to be 
discussing in terms of a strategy and a policy.
    I hope to accomplish three things with today's hearing. 
First, I hope to be reassured that the Department and the 
industry are sufficiently focused on the issue of market share. 
Does the Department and industry, for example, have the 
information we need to assess whether we have been gaining or 
losing market share as we look at U.S. exports in terms of 
individual commodities and a country-by-country basis?
    Second, once we are confident that we have the market share 
data we need, we need to fully assess who is winning and who is 
losing in the marketplace and why. For example, we talk about 
the U.S. continuing to lose market share, the European Union 
has been maintaining its position, while the Cairns Group, 
including Canada and Australia, have been increasing theirs.
    Let's go to the chart of what our major competitors, the 
Europeans, are doing that might be influencing the outcomes 
here. I have used this chart before, but to me it sends a very 
clear signal. This chart shows world agricultural export 
subsidies. The blue part of the chart is Europe. They account 
for nearly 84 percent of all world agricultural export subsidy. 
The U.S. share is that little thin red slice, 2.7 percent. The 
Europeans are outgunning us here 30 to 1, 30 to 1. We wonder 
why they have gained ground and we have lost ground. To me, it 
is about as clear as it can be. No magic here. They have been 
winning markets the old-fashioned way. They have been going out 
and buying these markets. That is what they are up to. We need 
to understand that, and I believe we need to fight back.
    Finally, as I say, we must determine the steps we need to 
take, either in the Farm Bill, through trade policy initiatives 
or in some other ways, to expand U.S. market share.
    At this point I would like to recognize our ranking member, 
Senator Roberts, for any statement that he might make and to 
thank him for being here, and thank him for his leadership. He 
has been intensely focused on agricultural issues for his 
entire career, and we appreciate his determination and 
persistence to make certain that the United States does not 
lose in this global competition.

   STATEMENT OF HON. PAT ROBERTS, A U.S. SENATOR FROM KANSAS

    Senator Roberts. Thank you, Mr. Chairman. Thank you for 
your very kind comments, and I will endeavor to live up to that 
very fine introduction. I want to thank you for holding this 
hearing. I am struck by the fact that we have very fine 
attendance. We are substituting quality for quantity, but that 
in terms of this issue it has certainly full-committee bearing, 
certainly a bearing on the full Congress.
    Any time you have a situation where our farmers and 
ranchers must export a third to half of their produce or their 
productivity, their wherewithal, the miracle of agricultural, 
and yet over the last three years we have seen declining 
exports and a declining market share, you are in a world of 
trouble. We talk about emergency Farm Bill assistance, where 
that is, how much is enough. Basically, if you do not sell the 
product, you are going to experience these kinds of problems. 
It is at the heart of many of the issues that face agriculture 
today, and as you go down and give a farm speech, whether it be 
North Dakota or Kansas or anywhere in the country, one of the 
things that you always mention in your speech, either No. 1 or 
No. 2, is that we need a consistent and aggressive export 
policy. There are some of us who have been rather critical of 
the amount of funding and the amount of innovative thinking, 
and the amount of out-of-the-box thinking and recommendations 
that we need to become competitive.
    The chairman has stated very well our export market share, 
which has slipped from 24 percent in the early 1980's, I have 
had the privilege of serving in the House and the Senate, been 
through six Farm Bills, and during those early Farm Bills, Mr. 
Chairman, we were around 24 percent, as your chart has 
indicated. It is about 18 percent today, and obviously that has 
contributed a great deal to the economic hardship that we have 
experienced in farm country.
    Simply put, Mr. Chairman, business as usual is not going to 
improve our export market share and our farm prices. We cannot 
afford business as usual. We are going to have to become much 
more aggressive in our pursuit of international markets. It is 
an increasingly competitive world. I know in talking to one of 
the presidents of the wheat growers several years ago, at their 
annual convention, he said, ``Pat, we have to start taking a 
gun to a knife fight.'' Now, he was from out West, and so he 
was using a little harsh language, but that indicates the 
feeling on the part of many of our commodity groups and our 
farm organizations, and that has been promised by virtually 
everyone that has the privilege of representing agriculture, 
regardless of which party that they represent.
    We held a hearing a year ago in this subcommittee on this 
very subject. I had the privilege of being the Chair, along 
with Bob Kerrey, the distinguished Senator from Nebraska, who 
is the ranking member. We had an individual, who at that time 
was the administrator of the Foreign Agriculture Service, 
somebody you know very well, Mr. Tim Galvin, who is sitting 
behind us in the godfather role here, as a staff member. He 
actually called upon us to increase our funding for programs 
such as the appeal for the Food for Peace Program, which by the 
way, was started by Clifford Hope and Frank Carlson of Kansas, 
two of the outstanding members that served agriculture so well 
in our state. He also said we needed better funding for Food 
for Progress Program, the Foreign Market Development Program, 
the Market Access Program, and to develop and build long-term 
trade opportunities.
    I took the liberty of getting Tim's statement, and I 
highlighted some of the things that he said last year, and 
because they are so relevant as of this year. ``To thrive in 
the 21st century, our farmers must have access to a freer and 
fairer global market.'' Then he indicated that we needed to 
reallocate unobligated export enhancement program funds, if in 
fact we are not going to use that, the EEP program, that sort 
of a shotgun program that aims at everybody, as opposed to a 
rifle, to certainly use those moneys for U.S. food assessments 
activities, including P.L. 480, Food for Progress, and for 
purchasing commodities to replenish the Bill Emerson 
Humanitarian Trust. That was good advice.
    Then he said, ``The USDA must continue its efforts to do 
more with less, as resources for administrating our export 
market development programs have not increased,'' and Ms. 
Sharpless will probably tell us that as well.
    Mr. Chairman, if it is any area in the Ag budget, and 
certainly we have a lot of difference of opinions where we need 
to increase the Ag. budget, but this is one where I just do not 
think we can continue with business as usual. Tim's advice is 
certainly well taken. If the U.S. is going to be competitive, 
especially as nations compete for access to all of our opening 
markets, more particularly the Chinese market, as your chart 
has shown, we are going to have to plus up our investment, and 
Tim said we had to join with the private sector in increasing 
our efforts to develop markets. Now, that is a year ago. We are 
a year later, and I do not think we have seen too much progress 
in regards to innovative thinking.
    International agriculture trade is not only increasingly 
competitive as I have indicated, it is a selective environment 
as well. No longer do larger foreign buying agencies push their 
shopping carts to the U.S. market in terms of being a reliable 
supplier and a residual supplier. We have thousands of 
different and distinct buyers pick and choose from among our 
many competitors to obtain the best deal they can, more 
especially with the value of the dollar. This is a different 
time. This is not the 1980's or the 1990's. This is a different 
environment entirely. We have to think out of the box, it seems 
to me. Since 1994, when the President's trade promotion 
authority expired, quite frankly, I do not think we have had 
the ability to compete or take advantage of our farmers' 
productivity and value, and to promote the merits of our 
nation's agriculture system to the rest of the world.
    We can do that, Mr. Chairman. You pointed it out. The 
safety of our nation's food supply, the quality of the food and 
the commodities produced and the nation's reputation as a 
reliable supplier. Additionally there are environmental 
benefits that our farmers generate, reduced greenhouse 
emissions through carbon sequestration, soil and water 
conservation, and the creation and the restoration of wildlife 
habitat. I do not think we sufficiently really promote these 
benefits, not only to buyers, but to the American public and to 
the American consumer.
    In 1996 ag. exports were over $60 billion. Actually they 
were about 61 billion. Last year ag. exports were only 51. We 
even sank down to about 49 billion. Now, some would point out 
that the difference approaches the level of assistance that 
Congress has provided to farmers over the last few years. In 
other words, you had 61 billion you were exporting, and now you 
have got 49 or 50. Subtract the difference. That might add up 
to, at least in parts, not a one-on-one thing, but it makes a 
lot of sense in terms of the emergency funds that we have had 
to fund.
    Let me say without hesitation that any future recovery and 
potential growth for agriculture rests on our ability to trade 
and access to our foreign markets, and I believe we need TPA, 
Trade Promotion Authority. We used to call it fast track. I was 
talking to Bob Zoellick, and I said, ``You know, I do not 
particularly like these acronyms, TPA, Trade Promotion 
Authority, Trade Access Authority, Trade Enhancement 
Authority.'' He said, ``Well, what would you think?'' I said, 
``How about `Sell the Damn Stuff Authority.'''
    [Laughter.]
    Senator Roberts. That is S-D-S--maybe that is not going to 
work out too well.
    [Laughter.]
    Senator Roberts. I am worried, Mr. Chairman. I hope this is 
not accurate, but I keep hearing in the press, some of who are 
writing this, who are in attendance, that this is on the back 
burner. If anything the trade authority could be considered--I 
do not want to add more amendments to the emergency Farm Bill, 
we need to get it done, and I am not going to get into that--
but if we do not do this, if we do not get this cracking, it is 
not going to make any difference in regards to whether or not 
the levels of funding on the emergency bill or what kind of a 
Farm Bill.
    There is an obvious reason the European Union and other 
nations are entering into the free trade agreements at an 
accelerated pace. We are treading water. They are proceeding 
full-steam ahead. We cannot do that. They complete the 
additional agreements that take the trade opportunities away 
from our American producers. The number is 133, may be 130 
bilateral agreements since the trade authority expired. We have 
been involved in 2. You cannot do that.
    Mr. Chairman, I commend you for putting together such a 
well-informed panel. Thank you for holding this hearing. I look 
forward to the testimony. I have some prepared questions for 
the witnesses, and like everything else around this place, you 
are supposed to be at two or three places at the same time. I 
am going to have to hit the dusty trail over to the Health 
Committee, where we are marking up a mental health parity bill. 
If we do not get this Ag. emergency bill done, I will need 
mental health parity, and so I hope we can get that done.
    [Laughter.]
    Senator Roberts. I have several questions for Ms. 
Sharpless. I have several questions for Henry Jo Von Tungeln, 
who is the Chairman of U.S. Wheat Associates, about research 
and development on new varieties of hard white wheat, happened 
to have been done at Kansas State University, the home of the 
ever optimistic and Fighting Wildcats.
    [Laughter.]
    Senator Roberts. It seems to me that we ought to look at 
the R&D in terms of our product as well if we are going to 
recapture the Asian market.
    Then I have a question for Mr. Carl Brothers, who is the 
Senior VP of Riceland Foods, and in regards to Food Aide.
    Mr. Chairman, I went to Egypt not too long ago. They have 
an increased population every year of 800 thousand people, 800 
thousand people, some living in utter deprivation. We talk 
about Egypt, talk about India, talk about other countries, so 
the U.S. Food Aid Program, we really have to take a hard look 
at that, and I know that Mr. Brothers has some suggestions. I 
am not going to go into the questions now, but I do have those 
prepared statements, and I, unfortunately, will have to leave 
you in about a half an hour. Thank you so much for holding this 
hearing.
    Senator Conrad. Thank you, Senator Roberts. Thank you for 
being here, and thank you for your statement.
    Before calling our first witness, I would like to insert in 
the record, at this point, a copy of my letter of April 24th to 
USDA's chief economist regarding the Department's 10-year 
export forecast and its implications for export market share, 
and a copy of the May 23rd response from Mr. Collins.
    [The letters of Senator Conrad can be found in the appendix 
on page 65.]
    Senator Conrad. We certainly want to welcome all of the 
witnesses who are appearing this morning. We also want to 
remind them that their full written statement will be made part 
of the record. We ask that they please summarize their 
statement in five minutes so that we can have sufficient times 
for questions and answers.
    At this point I would like to call our first witness, Ms. 
Mattie Sharpless, the Acting Administrator of USDA's Foreign 
Agricultural Service. Ms. Sharpless is accompanied by Ms. Mary 
Chambliss, the Deputy Administrator for Export Credits. Thank 
you very much for being here as well.
    Before Ms. Sharpless begins, I want to thank her for coming 
out to North Dakota several years ago, when she was our 
agricultural counselor at the U.S. Embassy in Paris. We still 
have a few pictures of Ms. Sharpless riding a four-wheel drive 
tractor in North Dakota.
    [Laughter.]
    Senator Conrad. Scott Stoffehren, who is on my staff, 
reminds me that he was with you at the time that you were in 
North Dakota, and said you made a very positive impression. 
Welcome. Please proceed.

           STATEMENT OF MATTIE R. SHARPLESS, ACTING 
ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE, U.S. DEPARTMENT OF 
      AGRICULTURE, ACCOMPANIED BY MARY CHAMBLISS, DEPUTY 
                   ADMINISTRATOR FOR EXPORT 
                            CREDITS

    Ms. Sharpless. Thank you, Mr. Chairman. I must say I have 
the pleasure of going to North Dakota again next week, so I 
will see what I have out there then.
    Well, Mr. Chairman, and members of the committee, I am very 
pleased to be here today to discuss the U.S. Department of 
Agriculture's strategy for expanding overseas sales. I have 
submitted my full statement for the record, along with three 
charts that illustrate present trade concerns. Now I would like 
to take a few minutes to highlight the key points.
    Trade continues to be critically important to the long-term 
economic health and prosperity of our food and agriculture 
sector. Steadily expanding foreign demand brought on by income 
gains, trade liberalization and changes in global market 
structures has helped U.S. agriculture exports double from 15 
years ago to 53.5 billion today. Clearly, without the 
offsetting effects of an expanding export market, farm prices 
and net cash incomes would be significantly lower today.
    While our total sales to foreign customers have grown, we 
have not kept pace with our competitors, and a result, our 
market share has steadily been eroded. We view this with 
considerable concern. 20 years ago, as you pointed out, we were 
the world's export leader, accounting for 24 percent of global 
agriculture trade. Today, as you say, that has fallen to 18 
percent. America's once overwhelming leadership as ag. 
exporter, has slipped to the point where our nearest rival, the 
European Union, is on the verge of overtaking us.
    Several factors have contributed to the erosion in the U.S. 
market share. Most importantly are the strong dollar, 
aggressive competition and our reliance on mature markets. Our 
effort to help restore our export market share focuses 
primarily on three areas.
    First, we must aggressively seek trade reform to remove 
market distortions that will allow faster overall growth in 
trade. First and foremost among these in enactment of the Trade 
Promotion Authority. It is essential to enable us to 
effectively pursue trade reform and to level the playing field 
for our producers and exporters. In addition, the negotiation 
of a free trade area of the Americas is being reemphasized and 
World Trade Organization negotiations, now under way, must be 
brought to a successful conclusion.
    Second, we must insure our exporters have the necessary 
tools to capture a greater share of the benefits that will flow 
from trade reform and the resulting global market expansion. 
The programs we now operate have served our food and 
agriculture sector well, but the upcoming Farm Bill presents an 
opportunity to review all of our programs with an eye to 
improving them to meet tomorrow's challenges and opportunities. 
We look forward to working with the committee throughout the 
Farm Bill process to examine ways in which improvement might be 
made.
    Third, we must sharpen our strategic focus to more 
effectively capitalize on trade opportunities offered by fast-
growing emerging markets. The most promising long-term 
opportunities lie in the developing countries and Asia, 
particularly China and Southeast Asia, Latin America, Russia, 
and some selected opportunities in Africa and the Middle East. 
Over the next decade food consumption in these markets will 
surge, driven by favorable demographics, some 600 million new 
middle class consumers with rapidly rising disposable income, 
eager to spend on more and better food.
    In the long run, gaining access and share in these fast-
growing markets without sacrificing hard-won gains in our 
large, mature markets, will prove to be the most effective 
approach for increasing our overall share of world trade.
    Mr. Chairman, U.S. agriculture strong reliance on world 
markets for its economic future means there is no question that 
we must strengthen our efforts to expand sales. Our strategy 
focuses on an ambitious trade liberalization agenda, and new 
and retooled export promotion programs to capitalize on the 
opportunities offered by significant growth and future world 
demand. We know that trade liberalization works. It helps 
create new sales opportunities as growing numbers of foreign 
consumers with purchasing power gain increased access to goods 
produced in many countries. Strategically targeted export 
programs work. With adequate funding, proper execution and 
patience, export programs and export assistance carried in 
targeted high-return markets will enable our producers to 
capture more new opportunities than our competitors.
    The concludes my statement, Mr. Chairman. I would be 
pleased to respond to questions you or other members may have. 
Thank you.
    Senator Conrad. Thank you very much. Thank you for your 
statement.
    Let me go to this chart. I appreciate the position on Trade 
Promotion Authority. I supported the Uruguay round, and I 
supported our opening to China. I believe those were 
appropriate and necessary. I tell you, honestly, I have spent a 
lot of time with the Europeans. I hosted the man that 
represented them in all trade talks, hosted him here, and he 
hosted me in Geneva, I spent a lot of time talking to him. It 
was very clear to me that they have a strategy and a plan for 
dominating world agriculture. That is their intention. They are 
spending significant sums of money to do it. This chart says 
very well what the Europeans are doing in terms of support for 
agricultural exports. They are spending $5 billion a year, $5 
billion. As I analyze the challenge facing us, it seems to me 
we have got to go out there and match them.
    Now, let me just tell me what they have told me. The 
Europeans have said to me, ``Senator, we think you are so 
successful in so many other areas that you will give up on 
agriculture.'' They have told me, ``Look, we have much higher 
levels of support than you do in the United States, and we 
believe we will always be able to get equal percentage 
reductions in those levels of support from those unequal bases, 
and at some point the United States will fall off the cliff.''
    Do you have any knowledge of what the administration 
intends to do with this imbalance in the export subsidy of our 
major competitors with what we are doing? Do you have any idea 
of the administration intends to recommend sharply increased 
spending on behalf of United States' producers in this area?
    Ms. Sharpless. Mr. Chairman, in the area of export 
subsidies, I can firmly say that the administration still has 
that as one of the major goals in the World Trade Organization, 
to work for the elimination of export subsidies, because in the 
past, and as you know and others know, that truly has been one 
of the dilemmas between the European Union and the United 
States competing against treasuries out in the export markets. 
That continues to be one of the goals, and that is why it is so 
important to work to get Trade Promotion Authority to try to 
get this trade round launched off in order to continue to work 
to get export subsidies eliminated.
    Senator Conrad. Can I say to you, and I hope through you to 
the administration, that they are going at it backward. I said 
this to the previous administration. It has got nothing to do 
with which administration we are dealing with. They have it 
backward as well. Here is why we have got it backward. I do not 
think we are going to get the Europeans to back off without 
leverage.
    When Seattle occurred, our previous trade Ambassador asked 
me to go in and meet with the European, the representatives of 
the Europeans. We had about a 2-hour long debate. They are very 
good at making their case. They claim we have higher subsidies 
than they do, and that is not true, but they try to make the 
case. I asked the previous trade Ambassador, ``What leverage do 
you have here to get a result?'' She kind of looked at her 
shoes, because did not have any leverage. This is what concerns 
me, when I look at this disparity, what the Europeans are doing 
and what we are doing. Then we go into trade talks and say, 
``We want you to back off.'' They are on the high ground here, 
and there is not much pressure on them to back off. It is a 
little like the cold war, where we built up to build down. That 
really, to me, is the only strategy that is going to have any 
effect. We can get on our high horse and go to these trade 
talks and tell them, ``Gee, you really ought to do this. It is 
the right thing to do.'' Meanwhile, they are gaining market 
share, and they are getting in a more dominant position.
    I just hope I can deliver this message through you to the 
administration. I personally believe we have got to take them 
on. To the extent we can under trade law, we need to match 
them.
    Let me ask you this on a more technical basis, and please 
take that message back. I am delivering it to everybody I can 
in this administration, as I did with the previous 
administration. Is the Department able to tell us on any given 
day if we are gaining or losing market share on major 
commodities such as grains, oilseeds, cotton, beef; do we have 
that data readily available?
    Ms. Sharpless. Mr. Chairman, thank you very much, and I 
will assure you that your message will be taken back to the 
Department and to the Secretary.
    On the question you just posed, we have that data available 
for the major crops and the major meat-type products. It is 
more difficult to have that data available on a daily basis for 
the specialty crops, but it can be gathered, and if you would 
like that data, we would be very pleased to gather it to 
forward it to you on the major crops.
    Senator Conrad. I would be very interested in that. Can you 
tell me, is the Department able to tell us if we are gaining or 
losing market share on our significant export destinations such 
as Japan, Canada, China, Mexico? Do we follow our market share 
in those critical markets?
    Ms. Sharpless. In those markets like Mexico, our market 
share has gradually increased. As our market share overall has 
gone down, our market share and some of the markets you 
mentioned, of course, have gone down also, but some have gone 
down slightly and some have gone up slightly, but overall the 
trend is down, as we know, and we are working a strategy to try 
to turn it----
    Senator Conrad. Do you have that information on a country-
by-country basis on market share?
    Ms. Sharpless. We can provide that information, yes, also.
    Senator Conrad. OK. USDA, as I understand it, reports it 
export information around three broad categories: bulk, 
intermediate and consumer-oriented products. As we look 
separately at each of those broad categories, is the U.S. 
market share increasing or decreasing? What do you see in each 
of those: bulk, intermediate and consumer-oriented? Can you 
tell us the pattern in each of those three?
    Ms. Sharpless. I can clearly say for bulk commodities the 
market share had trended downward. For consumer products, it 
had been going up quite rapidly, but recently, it has been 
trending downward also. I am not able to say exactly about 
intermediate. Probably has rather remained stable, but there 
too, I would be pleased to pull the data together to forward to 
you to give you the exact movement of each of those three 
categories.
    Senator Conrad. Your testimony notes on page 6 that one of 
the reasons the U.S. is losing market share is because our 
competitors are out spending us on market promotion activities, 
and by a large margin, according to your analysis. In light of 
that, I note that the Farm Bill, approved last week in the 
House, includes substantial increases for the market access 
program from 90 million annually to 200 million dollars, and 
the cooperator program, from about 30 million to 35 million 
dollars. Does the administration support those increases?
    Ms. Sharpless. The administration is still in the process 
of looking at what we need to be doing from a strategic 
perspective, and trying to turn our export situation around, 
and we are still in the process of developing positions of what 
we could do if we had additional funds to do so.
    Senator Conrad. Well, can I just say you will not get the 
money unless the administration aggressively goes after it, and 
frankly, I hope they send a signal, a clear signal, quickly, on 
these programs, but they are relatively minor. I hope they send 
a message on this issue, and that they send it quickly, that 
the United States is not just going to go to trade talks and 
talk about what is right and what is wrong and what is fair and 
what is not fair, but that the United States will take an 
aggressive position and say, ``We are going to fight back. We 
are not going to accept other countries taking markets that 
have traditionally been ours because they have simply got more 
resources to go out and buy them.'' That would do more good in 
terms of getting a result than any other single thing we could 
do.
    We are going to hear from witnesses in the next panel, 
especially those from the rice industry, that slumping U.S. 
Food Aid donations are having a major impact on our exports of 
commodities, including rice. In fact, our food donations this 
year are about half of last year's level. Can you tell us why 
the falloff?
    Ms. Sharpless. Mr. Chairman, if you do not mind, I would 
like Mary Chambliss--she is also serving as Acting General 
Sales Manager--and if she would respond to that question for 
us, I would appreciate it.
    Senator Conrad. All right.
    Ms. Chambliss. Surely. Thank you, Senator.
    Yes, I am well aware of the concern from our friends in the 
rice trade about the current Food Aid Program. We at the 
Department have had several meetings with them. In fact, there 
will be one later on this morning, with some of our colleagues 
in the rice trade.
    The situation really--the current year's programming of 
rice really is back to a more normal year, if you would. We 
have gone back and looked at the historical series, and it has 
been running about 250,000 tons most years. In the 1-year, 
fiscal year 1999, we had several countries, particularly 
Russia, which normally are not a major participant in our Food 
Aid Program, as you will appreciate, and they were a user of 
rice that year. We also, in that period of time, of course, 
that was when the Indonesian situation was quite bad. We hope 
it is on a better track now, for lots of reasons and for lots 
of commodities. The year we did provide quite a lot of rice for 
basically emergency direct feeding kinds of programs in 
Indonesia, which we are not doing.
    If you take out those unusual situations, we are about at a 
normal pattern. However, I appreciate the rice trade's interest 
in expanding our Food Aid Programs. We are looking, and we will 
continue to work with them, to see if we can identify some 
additional markets. It really becomes a situation of where the 
demands are for the rice products primarily that we have to 
relate to.
    Senator Conrad. Can you tell me where we are in terms of 
overall food donations, not just rice, but all commodities?
    Ms. Chambliss. Certainly. I will be happy to. This year, we 
will have, oh, probably, if I am thinking of all food aid, and 
I am including the AID food aid accounts in my mind right now, 
we will probably be between 6 and 7 million metric tons of 
total food aid, slightly down from the peak, which was fiscal 
year 1999, then it was down a little bit last year, will be 
down a little bit more this year. It will be the wide array of 
commodities, all of the traditional ones that we have seen. 
That is probably what, at the end of the day, by the time we 
get all the shipping and all the legal requirements complied 
with and the food aid legislation, I would guess 6 to 7 million 
tons in total of the various programs for this year.
    Senator Conrad. All right. Senator Roberts.
    Senator Roberts. Just to followup on that, if I might, the 
criteria for food donations are the driving factor as to why in 
1999 it would be increased or it might be a little bit lower as 
of right now, or especially within the news. I serve on the 
Intelligence Committee, and my take on Indonesia is that that 
will continue to be a very difficult area of the world--the 
world's fourth most populous nation--with stability, and 
consistency really in question. They do now have a new 
government, but, gee, they are going to go through a tough 
time, and I am not aware of any decrease in the need of food 
aid. Can you just sort of go over the criteria as to what you 
think is the major driving force as to the amount of food aid 
that we are supplying, please?
    Ms. Chambliss. Surely. I will mention a couple of general 
things, and then if you would bear with me a moment on 
Indonesia, because we too are very concerned and looking 
specifically at Indonesia recently. The main driving force in 
the last several years have been some of the major emergency 
requirements. I am thinking particularly of the situation in 
the North Korea situation and Afghanistan has a huge drought. 
There are obviously people suffering greatly, I assume----
    Senator Roberts. I am sorry for interrupting, but most of 
that in North Korea goes through the World Food Program; is 
that not correct?
    Ms. Chambliss. Right. As in Afghanistan, it also does.
    Senator Roberts. With Catherine Bertini and all the folks 
that work for that, all right.
    Ms. Chambliss. Right. The world has sort of looked to the 
World Food Program to meet the emergency needs wherever they 
happen to be, including in Africa. We also, of course, make 
major provisions to governments, as well as to our colleagues 
in the private voluntary organization community. Those tend not 
to be the emergencies. The big ones you hear tend to be 
emergencies that really drive large----
    Senator Roberts. They are disaster driven.
    Ms. Chambliss [continuing]. Quantities. You know, when it 
varies a lot, it tends to be because of that.
    We too have been looking at Indonesia. You are quite right, 
the new president there, she is going to have a difficult time. 
Let us hope it succeeds well for both our commercial exports, 
which have been quite large under our GSM commercial program 
this year. We are beginning to have some very preliminary 
signals from some parts of the government of Indonesia, that 
they may have some additional food aid requirements. That may 
mean rice. I do not know yet. I say these are very preliminary 
indications, but we will certainly be talking with our 
colleagues in the Indonesian Government to see what seems 
appropriate and what we can be helpful with.
    Senator Roberts. What is the major obstacle that you have 
in regards to food aid? What is the biggest thing that is your 
problem?
    Ms. Chambliss. Well, that is a tempting question, Senator. 
There are several things.
    Senator Roberts. Well, give me two then, if you do not want 
to choose one.
    Ms. Chambliss. I was going to mention one. It is a piece of 
legislation, but I will not go there, OK?
    Senator Roberts. No, no, no. Please, we would like to hear.
    Ms. Chambliss. Well, I was going to mention, of course, 
cargo preference, because it is a problem in terms of 
operations.
    Senator Roberts. Maybe we should not go there.
    [Laughter.]
    Ms. Chambliss. I told you, Senator, we did not want to go 
there.
    Senator Roberts. Congressman English and Congressman 
Roberts, over a decade ago, tried to address that, and----
    Ms. Chambliss. I do not want to go there either, Senator.
    Senator Roberts. We just did not figure out that the folks 
in the middle of the country, that their representatives did 
not outnumber the folks surrounding.
    [Laughter.]
    Ms. Chambliss. I will not go there.
    The problems tend to be, obviously, budgetary concerns, our 
problem for all programs. Food aid is no exception to that 
general U.S. Government concern. I would have to list budgetary 
concerns and the totality of the food aid programs.
    The other dilemma is, we deliver food aid to very poor 
countries in very difficult situations. It is not an easy job. 
The people in our private voluntary organizations, the World 
Food Program, they are hard places to be. They are risky. Both 
of those entities have lost people in recent years, carrying 
out our food aid programs.
    Senator Roberts. Especially in Africa. I know that is a 
very difficult situation.
    Ms. Chambliss. Particularly, I mean, it has been very 
difficult for them. Partly it is the logistical, operational 
constraints that we face on the ground. Any budgetary 
constraints that we have to deal with here are really among the 
hardest obstacles to running a successful food aid program.
    Senator Roberts. I am going to ask you an unfair question. 
This is sort of a curve ball. If we are making efforts in 
regards to rice, or for that matter, any other commodity, with 
the freedom-loving people of North Korea, through the World 
Food Program--and I was part of a delegation that went to 
Pyongyang with Chairman Stevens some years ago, trying to work 
out a third-party arrangement to at least get the North Koreans 
to explore the real world of trade. It was not successful. I 
hoped that we could see some breakthroughs as they continue 
their efforts with South Korea. If we doing that with the 
freedom-loving people, and we are reviewing our sanctions, if 
that is the word to say, with Iraq and Libya and North Korea, 
what about the freedom-loving people of Cuba? In regards to 
rice, that would make a marvelous opportunity. Now, there are 
some of us going to have some legislation in that regard. That 
is an unfair question. Do you have any comment about that?
    Ms. Chambliss. Simply to note that when Congress passes the 
laws, we will find a way to implement them as best we can.
    Senator Roberts. There is some food aid going to Cuba?
    Ms. Chambliss. Yes. You have made some--there is some 
leeway, and of course----
    Senator Roberts. Through Catholic Relief mostly, right?
    Ms. Chambliss. Right. I was going to say Catholic Relief 
Service we know has done some, and I want to say one of our 
cooperators a couple of years ago also delivered some food aid.
    Senator Roberts. Yes. There was a breakthrough.
    Ms. Chambliss. There were some actions.
    Senator Roberts. You know, very temporary.
    Ms. Chambliss. Not with government food aid, but in the 
food aid context if you will.
    Senator Roberts. Well, thank you. You have been very 
helpful. Let's--we have Blanche here, who will probably now 
compare pits of the rice effort and wave her flag, so I will 
not do that.
    [Laughter.]
    Senator Roberts. Do you feel that there is ample 
coordination, trade, market promotion, market development, 
between the Department of Agriculture, USTR, Department of 
Commerce, U.S. Trade and Development Agency, U.S. Agency for 
International Development? Are you all working together? Do you 
have periodic meetings where you all sit and try to coordinate 
so it is not so stovepiped, if in fact it is stovepiped?
    Ms. Sharpless. Senator Roberts, yes, we work very closely 
with USTR. We also work very closely with U.S. Department of 
Commerce, and with AID on areas where we work with AID.
    Senator Roberts. Well, one of the things that Secretary 
Veneman indicated, when she was Secretary of California, and 
then prior to that, when she was an assistant secretary here, 
was the need for an interagency task force in regards to 
exports and all of these subjects, and I would certainly hope 
that that could be the case. I know that is what she wants to 
do, along with others down at the Department. I also know they 
do not have their full team on board as well, which is a 
continuing problem. See if you cannot get that done for us.
    [Laughter.]
    Senator Roberts. Anyway, the coordination is very 
important. I am not going to ask that question. I will yield to 
my good friend.
    Senator Conrad. Before we go to Senator Lincoln, I would 
just like to followup. You had indicated that food aid this 
year was going to be 6 to 7 million tons. Could you tell us 
what it was for 2000 and for 1999?
    Ms. Chambliss. I want to say in 1999, Senator, we got close 
probably to 8 to 9 million tons, last year probably 7 to 8. I 
will get the specific numbers for you, and we will be happy to 
provide it.
    Senator Conrad. OK. I would be interested in that.
    We have been joined by our very able colleague from 
Arkansas, a valued member of the committee and subcommittee, 
Senator Blanche Lincoln. Welcome.

   STATEMENT OF BLANCHE LAMBERT LINCOLN, A U.S. SENATOR FROM 
                            ARKANSAS

    Senator Lincoln. Thank you. Delighted to be with you two 
gentleman. You all always give me great hope and great promise, 
not to mention a hard time.
    [Laughter.]
    Senator Lincoln. Thank you, Mr. Chairman, for holding such 
an important hearing this morning, and for your unwavering 
leadership on the issue of international trade and agriculture. 
It is absolutely critical. For those of us who have worked with 
Chairman Conrad on the committee as well as on the Finance 
Committee, we know of his passion for preserving the American 
farmers' place at the head of the global table, and I for one 
am a follower of this chart, which I have used many times over.
    I am also very pleased that in the next panel we will be 
joined by a good friend of mine, Carl Brothers from Stuttgart, 
Arkansas, who will be testifying on behalf of Riceland Foods, 
which is a farmer-owned cooperative that markets rice, soybeans 
and wheat, and I know that he will address more of the 
difficulties that rice farmers are facing, and certainly in the 
marketing scheme of things, and the global marketplace.
    As everybody here knows, rice, soybeans, wheat, cotton, 
these are all important commodities to our State in Arkansas, 
and the success of these industries really closely parallels 
the success of the entire delta region, which many people on 
Capitol Hill have heard me talk about time and time again as 
one of the largest poverty areas in our Nation, and with the 
inability to be able to market our farm products, we are seeing 
our inability to be able to build our economy in the delta 
region.
    When Congress passed Freedom to Farm back in 1996, there 
was a true hope that the global marketplace would respond 
favorably to a more market-oriented policy in the U.S., and our 
farmers were told that Freedom to Farm would liberate them from 
government intrusion in the marketplace. Unfortunately, the 
exact opposite has occurred, because as we freed them up from 
heavier government support at home, we have subjected them to 
the vagaries of greater foreign-government intrusion in the 
global marketplace. This chart back here is just a great 
example. As we all know, the key to success for our farmers is 
in the global marketplace, and we are going to have to fight 
for our share there.
    Of course, the cruel irony of all of this is that the 
intrusion by the U.S. Government in the form of trade sanctions 
against potentially important markets, such as Cuba, which 
Senator Roberts has mentioned, has been one of the more 
frustrating obstacles to our former success abroad. As many of 
you all know, roughly 50 percent of our rice exports in 
Arkansas used to go to Cuba, and it was an enormous part of our 
economy in Arkansas.
    The answer to all of this is, on one hand, very simple, we 
have got to help our farmers gain the greater market access 
overseas that they need and deserve, yet it is also very 
complicated, as I have found, as I have gotten more and more 
involved in these trade issues.
    As Senator Conrad has explained so eloquently many times, 
and as I have mentioned, I have used this chart at home, I have 
used it in many places, to try and really bring about the stark 
contrast that it does present to the people in my home state in 
terms of what our problems are that we are dealing with, and 
certainly to those that we deal with here in Washington. The 
U.S. has truly allowed itself to slip into a position of wheat 
bargaining leverage versus our major competitor, such as the 
European Union. The EU subsidizes its farmers at such a high 
level, that simply lowering relative support levels by some 
formula would do very little to resolve the inherent 
disadvantage our farmers find themselves facing. This is why we 
need a new Farm Bill with a strong safety net to give our 
farmers the security that they need to be able to compete. As 
has been said time and time again, our farmers are not 
competing with other farmers in a global marketplace, they are 
more so than not, competing with other governments.
    It is also why I strongly support passing a Trade Promotion 
Authority bill as soon as possible. I know that our witnesses 
here have mentioned that. We have to give our negotiators the 
tools and the flexibility they need to open up markets and to 
address the unfair trading policies of our trading competitors. 
TPA alone will not solve all of our problems. We have got to 
have the assurances that agriculture is going to be at the 
table, it is going to be a primary player at the table, it is 
not going to be left behind as a third or fourth resort in 
terms of these negotiations. It has got to be a player and it 
has got to be considered that way.
    We also need to fix some of the problems that we have 
created here on our own turf by removing these 
counterproductive trade sanctions that do little but penalize 
our own farmers. After 40 or 50 years of a trade policy, it is 
clear if it is not working, we need to do something about it. I 
have been a huge advocate of that here, and I will remain a 
loud voice on that.
    We must utilize to the fullest those market promotion and 
food aid programs that are available to our farmers. That has 
been touched on a little bit today, but without a doubt, we 
have, under funded in the past, and we need to be able to focus 
on that. If we do these things and if we do them expeditiously, 
then we can reassert our place at the head of the global table. 
Again, as Senator Conrad has mentioned, and I have been proud 
to be able to echo, we are at a critical juncture at this 
point, and if we do not make our place at that table, if we do 
not utilize this critical time to be able to be a player in 
this global marketplace, in the next two decades, we are going 
to have a real serious problem, as these other nations have 
been in that marketplace, in that global marketplace, and we 
have not found our way or our place at that table.
    We appreciate you ladies being here today and the other 
panels.
    I may have to excuse myself after a while, Mr. Chairman, 
but we are certainly very proud to have Carl Brothers from 
Arkansas here.
    I would just like to ask these two ladies a brief question. 
Many of our export commodities in Arkansas, of course, rice and 
poultry, cotton, even an import commodity, catfish, are having 
trouble maximizing market shares. I am sorry that I missed your 
testimony earlier, and you may have already touched on some of 
this, but what role do you see the market promotion programs 
playing in improving their market shares, those that we have 
some difficulties with, anything there?
    Ms. Sharpless. We believe, with a more aggressive market 
promotion program, that we could really reach out to expand our 
market shares overall. We have a global market strategy that we 
are developing down at the Department, where we are going to be 
putting attention on the emerging markets, and therefore--and 
we are also going to be looking at bringing new, more exporters 
into markets, especially with the high-value products that we 
have there. We believe that in the long run, once we put more 
attention on these emerging markets and do our very best to 
retain our mature markets, there will be potential for growth 
for many of the commodities that we have traditionally 
exported, as well as new-to-market exports.
    Senator Lincoln. Well, I would just echo a little of what 
Senator Conrad said, and that is that as you aggressively look 
for that, I hope that you will equally as aggressively push for 
the funding for those programs. In your response earlier, I am 
not sure that we felt the comfort level that we wanted to in 
terms of how aggressive the administration will be pushing for 
some of those budgetary items, which, as we all know, they do 
not happen without funding. Neither do our aid programs.
    Do you see any promises in maybe some of the regional 
negotiations, the Indian trade?
    Ms. Sharpless. The Free Trade of the Americas is a high 
priority of this administration. President Bush has said over 
repeatedly that we hope to get those negotiations finished by 
2005. Of course, we are pushing too for the WTO on 
negotiations, and with the accession of China to the WTO, and 
more market opportunities that will open there that will be a 
great gain for an enormous amount of trade for the United 
States there.
    We also are working on the U.S.-Chile Free Trade Agreement, 
which should bring about additional access. Working to 
renegotiate the U.S.-Israeli agreement, hopefully to bring 
about more agricultural access there too.
    Senator Lincoln. Well, just in conclusion, Mr. Chairman, I 
would not be worth the salt that the people of Arkansas have 
invested in me to come up here, if I did not mention also, and 
echoing Senator Roberts' comments about Cuba, it is certainly 
crucial that we break down the artificial barriers of trade 
sanctions that are only blocking our farmers from profitable 
markets. After reviewing 40 plus years of policy, we can 
certainly assert that it has accomplished all that it is going 
to accomplish in those 40 years, and I would certainly 
encourage the administration to be a little more active and a 
little more forward in working through some of--and certainly 
taking a role in terms of being able to open up a market that 
is roughly 90 miles from our border and could be an 
unbelievable trading partner for one of our commodities, many 
of our commodities, but certainly in particularly rice.
    Thank you, Mr. Chairman.
    Senator Conrad. Thank you, Senator. Let me just go back, if 
I can, to this chart that shows what has happened to our market 
share. Our market share is in decline. We have gone from 24 
percent 20 years ago to 18 percent today, and each percentage 
amounts to $3 billion in lost export sales, so that is $18 
billion. That is real money and would make a profound 
difference.
    Let us go to the next chart, because I want to rivet this 
point: these two are connected. Market share is going down, and 
our main competitor accounts for 84 percent of all the world's 
export subsidy. We account for 2.7 percent. They are trumping 
us there 30 to 1.
    My question, Ms. Sharpless, would be, what does the 
administration intend to do about this? In their budget 
submission, they propose doing nothing about it. There was no 
increase. In fact, they were proposing substantial cuts. I 
would ask you: what do they propose to do about this, European 
dominance of world agricultural export subsidies? What are they 
going to do to take these folks on?
    Ms. Sharpless. As I said earlier, Mr. Chairman, in the 
World Trade Organization, that is one of our major goals. Also 
the Uruguay Round agreement put limits on export subsidies, and 
although I have not followed it quite closely most recently, 
but the European Union itself has stopped using as many 
subsidies as it used to use because the market situation did 
not require as much. The requirements of the Uruguay Round, the 
subsidy levels themselves are going to be somewhat curtailed.
    I can appreciate the point you are making about our being 
consumed by the European Union. We clearly know that ourselves, 
and USTR or USDA, Department of Commerce, all of us have dealt 
with this battle. I am going to take your message back to the 
Department, and I still say with our going into the WTO is 
probably going to be the best opportunity and the best venue to 
deal with export subsidies head on, and I appreciate the 
support we have heard this morning about the need to get the 
Trade Promotion Authority approved, so that it will enable us 
to go to the negotiating table. I would like to say too that 
Agriculture intends to play a major role in these negotiations 
and be at the table along with USTR, to make sure that we are 
bringing about a level playing field for our producers and our 
exporters.
    Senator Conrad. Let me just say that I agree with all of 
those sentiments. To me it is kind of a meaningless exercise 
unless we put dollars behind the words, that talking about 
leveling the playing field is different than leveling the 
playing field. The way you level the playing field is you put 
dollars behind it, and you actually level the playing field. I 
was highly critical of the previous administration. I am going 
to be highly critical of this administration if it does not do 
something tangible and real. It is just not enough to talk 
about being at the table. It is not enough to talk about 
leveling the playing field if we do not do anything to actually 
accomplish it.
    In your testimony, you pointed out the three things that 
are causing erosion in market share. One, the strong dollar; 
second, aggressive competition; and third, over-reliance on 
mature markets. I agree with all those. It is very clear, a 
strong dollar is hurting our exports, not only in agriculture 
but it other sectors as well. Second, aggressive competition, 
and that is really the point I am trying to drive home today. 
In your testimony you point out, Europeans have been especially 
problematic for our exports. The Organization for Economic 
Cooperation and Development estimates total EU production 
supports to be 114.5 billion in 1999, compared to 54 billion 
for the United States. That is a $60 billion difference.
    My entreaty to the administration is: you need to send a 
message by what you request for this Farm Bill and by what you 
request for export promotion that we will take on our major 
competitors. We are going to be watching. I hope you will take 
this message back to the administration. It is not going to be 
enough for this Senator, to say we are going to try to get 
something accomplished in trade talks, because without leverage 
in trade talks, I do not know how we succeed.
    I told this to the previous administration, so please do 
not take this as I am just beating up on this administration. I 
told the previous administration: explain to me how you are 
going to accomplish the result at the trade talks. How is it, 
when their level of support is up here and ours is down here, 
how are you going to get that closed? Who is going to give up? 
Are the Europeans going to give up their position? I do not 
think so. I do not think negotiations work that way, in my 
experience. Unless you have leverage to compel them to change, 
they will not change.
    Please deliver that message strongly to the administration. 
I am going to be asking and continue to ask what they are doing 
tangibly to deal with this differential, because it is right at 
the heart of what is happening in terms of our loss of world 
market share.
    Do you have any final comment?
    Ms. Sharpless. I just wanted to let you know that I will 
deliver this message to the Department, and as a matter of 
fact, we at the Department will have a meeting with USTR to 
make sure that the message is delivered there also.
    Senator Conrad. I appreciate that, and it is critically 
important. I have told our new trade Ambassador precisely what 
I told our previous trade Ambassador. I do not think we are 
going to be successful without leverage.
    I would like to note for the record that Ms. Sharpless has 
been nominated by the President to serve as the U.S. Ambassador 
to the Central African Republic, and that she is only the 
second USDA Foreign Service officer to be named an ambassador. 
That is a great honor, and we want to say on behalf of the 
committee and all of agriculture, congratulations. That is a 
great honor, and I am sure well deserved.
    Ms. Sharpless. Thank you.
    Senator Conrad. I am confident you will represent us well.
    Ms. Sharpless. I will do my best, Mr. Chairman.
    Senator Conrad. Thank you very much, and good luck.
    Ms. Sharpless. Thank you.
    [The prepared statement of Ms. Sharpless can be found in 
the appendix on page 34.]
    Senator Conrad. We will now call on our second panel, 
including Mr. Len Condon, Vice President for International 
Trade at the American Meat Institute; Mr. Henry Jo Von Tungeln, 
U.S. Wheat Associates and Mr. Carl Brothers, Senior Vice 
President of Riceland Foods of Stuttgart, Arkansas.
    Welcome to all of you. As I indicated at the beginning, 
your full statements will be made part of the record, and we 
would ask you to summarize in five minutes or so, so we will 
have time for questions. Again, thank you very much for being 
here. We certainly appreciate the opportunity to hear from you.
    We will start with Mr. Condon, again, the Vice President 
for International Trade at the American Meat Institute. 
Welcome.

      STATEMENT OF LEONARD W. CONDON, VICE PRESIDENT FOR 
         INTERNATIONAL TRADE, AMERICAN MEAT INSTITUTE, 
                      ARLINGTON, VIRGINIA

    Mr. Condon. Thank you, Mr. Chairman. I would just like to 
thank you for making those very nice comments about Ms. 
Sharpless. The honor she has received is very well deserved.
    I represent the meat industry. We know we are different. We 
know that we are the exception, and we are doing very well, but 
basically the message I want to deliver is we think we could be 
doing much better, so my members are not content.
    The transformation of the U.S. meat and poultry industry 
from a virtual non-participant in global trade to an exporting 
dynamo, has been one of the U.S. agricultural highlights of the 
last two decades. U.S. beef exports have grown from less of 1 
percent of domestic production in 1980 to over 9 percent last 
year, lifting the U.S. from the eighth largest beef exporter to 
second.
    Much of the long-term growth in U.S. exports of meat can be 
linked to trade liberalizing agreements. The most significant 
event for beef was the U.S.-Japan Beef and Citrus Agreement of 
1988. A subsequent agreement with Korea, the U.S.-Canada Free 
Trade Agreement, and NAFTA, all helped to create substantial 
new market opportunities that have paid big dividends for the 
U.S. beef industry.
    Japan imported nearly a billion and a half dollars worth of 
U.S. beef last year. Because of NAFTA, Mexico has become our 
second largest export market for beef, and that market is 
continuing to grow at an impressive rate. Exports to the four 
countries: Japan, Mexico, Korea and Canada, accounted for over 
90 percent of the $3 billion worth of beef the U.S. exported to 
the world last year.
    Exports of pork have been growing at an even faster rate. 
The U.S. is the world's third largest pork exporter. Pork 
exports to the world last year represented 7 percent of U.S. 
production, compared with only 1.6 percent exported as recently 
as 1990. From 1995 to 2000, U.S. pork exports grew 68 percent. 
Like beef, our pork exports are heavily concentrated among a 
relatively small group of countries. Three countries, Japan and 
our NAFTA partners, Mexico and Canada, accounted for almost 90 
percent of the $1.2 billion worth of pork we shipped to the 
world last year.
    As trade has increased and per capita incomes have 
generally risen around the world, demand for meats and other 
processed foods and beverages have blossomed.
    The composition of U.S. agricultural imports has shifted 
significantly. In 1980 bulk exports accounted for nearly 70 
percent of the value of U.S. agricultural exports, but the 
share declined steadily to less than 40 percent in 1998. More 
emphasis on opening markets for processed foods and beverages, 
including meat products, offer substantial potential for 
increasing U.S. export income, creating jobs and enhancing U.S. 
living standards.
    While U.S. meat exports grew dramatically over the last two 
decades, this growth primarily resulted in progress made in 
reducing tariff and non-tariff barriers in a few key markets. 
High tariffs in many world markets continue to stifle U.S. meat 
and poultry exports. USDA's Economic Research Service recently 
found that global export tariffs averaged a whopping 62 
percent, compared with only 4 percent from manufactured goods.
    U.S. agricultural tariffs averaged 12 percent and they are 
among the lowest in the world. With its low average tariffs, 
U.S. agriculture as a whole, and U.S. livestock and meat and 
poultry sectors in particular, stand to gain from deep 
multilateral tariff cuts. For that reason, AMI, along with all 
of the other U.S. livestock, meat and poultry organizations, 
are urging the administration to pursue the global elimination 
of all tariffs on beef, pork and poultry in the next round of 
multilateral trade negotiations.
    U.S. livestock, meat and poultry industries are also very 
united in their strong support for renewal or Presidential 
trade promotion authority. We urge the Congress to grant that 
authority as soon as possible. Clearly, if the Congress and the 
administration cannot resolve this issue before the next WTO 
ministerial conference scheduled to be held in Doha in early 
November, the launch of a new round of global negotiations will 
be at risk. With two consecutive failures, the credibility of 
the multilateral system could suffer irreparable damage leading 
to a proliferation of bilateral and regional deals that do not 
serve U.S. global trade interests.
    In its recent study on tariffs, ERS also noted that key 
U.S. agricultural exports, again including meats, face an 
abundance of ``megatariffs'' (above 100 percent). Most of these 
are associated with tariff rate quotas established under 
Uruguay Round agreements. Specific examples of outrageously 
high tariff, blocking access for U.S. meats are included in my 
testimony.
    While our meat and poultry exports have been doing well, 
closer examination of our trade profile shows that our exports 
are restricted to a few countries. In general, global access 
for U.S. meat and poultry products remain severely restricted 
by high tariffs and numerous sanitary barriers, not all of them 
legitimate.
    We could and should be selling much greater amounts of 
highly desirable U.S. meat and poultry products to the world.
    That concludes a summary of the high points of my 
testimony, Mr. Chairman. I would be pleased to join the panel 
later in answering any questions you might have. Thank you.
    [The prepared statement of Mr. Condon can be found in the 
appendix on page 48.]
    Senator Conrad. Thank you very much for your testimony.
    Now we will hear from--is it Mr. Tungeln, is that how you 
pronounce it?
    Mr. Von Tungeln. Von Tungeln. You did very well with it.
    Senator Conrad. Thank you. Welcome. Good to have you here.

    STATEMENT OF HENRY JO VON TUNGELN, CHAIRMAN, U.S. WHEAT 
               ASSOCIATES AND WHEAT EXPORT TRADE 
              EDUCATION COMMITTEE, WASHINGTON, DC

    Mr. Von Tungeln. All right. It is a great pleasure to be 
here, and my name is Henry Jo Von Tungeln, and I am a wheat 
farmer from Calumet, Oklahoma. As I said before, it is an honor 
to be here today.
    I am Chairman of the U.S. Wheat Associates and Chairman of 
the Wheat Export Trade Education Committee. I am also speaking 
on behalf of the National Association of Wheat Growers.
    As we have for decades, the U.S. continues to lead the 
world in wheat exports. Last year the U.S. exported 29 million 
metric tons of wheat, almost half our total domestic 
production, for a market share of 28 percent. This is 
substantially less than it was in the 1970's when it ranged 
from 41 to 49 percent. Then we had the Russian wheat embargo, 
and the market share tumbled 7 percent in 1 year. It continued 
to drop until EEP was fully utilized for wheat in the early 
1990's.
    If I might, I would like to present a chart depicting U.S. 
market share and wheat exports over the last 10 years. There is 
a popular misconception, that this graph will hopefully 
correct, that U.S. wheat exports are in a steep nosedive. This 
is simply not the case. In the years since 1996, exports have 
been consistent at around 28 to 29 million metric tons, and 
market share has also been consistent at 27 to 28 percent.
    I would like to briefly mention some of the factors that 
negatively impacted sales and market share. In 1996 China's 
U.S. wheat imports dropped by two-thirds, from 3 million metric 
tons to 1 million metric ton. Egypt cut their purchases almost 
in half, from 5 million metric tons to 2.8 million tons. 
Obviously, when two customers cut sales by 4 million metric 
tons, you feel the impact. This year USDA voluntarily stopped 
using--this same year, USDA voluntarily stopped using EEP for 
wheat as prices spiked and subsidies were no longer justified. 
When EEP was dropped, France and others stepped in immediately.
    Twenty percent of the world wheat market is largely 
inaccessible to us, another reason. We cannot sell to Iran, 
Iraq or Cuba because of ongoing political situations, and we 
can only nibble at Brazil's market because of Mercosur's tariff 
block on our full and free access.
    I was in Brazil recently, visiting with the largest grain 
buyer and miller in Brazil, and he was outlining the problems 
they had in getting the quality of wheat they needed because 
they are locked in with Argentina under the Mercosur agreement. 
Finally I asked him, ``Is there anything within our power that 
we could do to correct that situation?'' He said, ``I can 
answer in two words: fast track.''
    Also, importing markets are changing dramatically, going 
from government buyers to private buyers. The change, 
unfortunately, has played into the hands of the state export 
trading monopolies for three reasons.
    First, the U.S. marketing system is rather complex compared 
to the one-stop marketing shopping offered by the Wheat Boards. 
Second, with privatization, supply relationships can transcend 
price comparisons, and the STEs were quicker to develop those 
relationships. Third, the STEs used their monopoly pricing to 
undercut U.S. wheat market prices. They give away loyalty fees, 
that in the United States, would be termed graft. They give 
away higher protein that in the United States must be specified 
and paid for, and they can do it all under a cloak of darkness.
    I would like to bring out a second chart, this one made by 
the USDA, depicting world wheat imports, to show you where the 
opportunities exist. Contrary to popular opinion, wheat is a 
growth market, and this graph vividly illustrates that, even as 
the former Soviet Union and China have removed themselves from 
the import picture.
    We go where the growth is, and the industry is trying to 
address the needs of those markets. The grain trade and USDA 
are working on providing cleaner wheat and more specific wheat 
qualities. U.S. Wheat Associates works with the new foreign 
buyers, millers and bakers, teaching them about U.S. wheat 
quality characteristics and contracting.
    Australia has convinced Asian markets that they need 
Australia's white wheat for the best noodles. The competing 
class in the United States would be hard white wheat, but it is 
not yet produced in sufficient volumes, and we really need to 
work on that.
    The U.S. grain trade has been slow to realize that they 
have to be marketers and not traders. We are now starting to 
see them make a good effort, however.
    There are actions that we urge the U.S. Government to take. 
The Congress has the power to take the first step toward 
removing barriers around the world, by passing the Trade 
Promotion Authority. U.S. Wheat strongly encourages you to do 
so this year. Also to pursue the Free Trade of the Americas and 
bilateral agreements, and WTO can reduce barriers, but the FTAA 
will go much further within our hemisphere by eliminating them. 
The FTAA would, for instance, put us on an equal tariff footing 
with Argentina in the large Brazilian market. We are heartened 
by the committee approval of the U.S.-Vietnam bilateral trade 
agreement, and hope the Senate will soon approve that 
agreement.
    We will need more. Again, achieving the FTAA and bilaterals 
will depend on Congress giving the administration trade 
promotion authority, which we strongly support.
    We cannot over emphasize the importance of reforming the 
AWB and CWB trade practices. We reiterate the U.S. needs to go 
to the WTO negotiating round, demanding that the Wheat Boards 
be stripped of their monopoly powers and be made transparent.
    I see my time is up. I have other comments we could make. 
Just one more issue I would like to, and that is in the area of 
biogenetics, and most of the buyers of the world say they will 
not buy that, and we need to be very careful. Congress needs to 
be very careful to ensure that genetically modified wheat will 
not be registered in the United States until we have all of the 
structure worked out so that we can provide it to customers as 
they would like it.
    Thank you again for the opportunity, and I will answer any 
questions you might have.
    [The prepared statement of Mr. Von Tungeln can be found in 
the appendix on page 52.]
    Senator Conrad. Thank you very much.
    Mr. Brothers.

     STATEMENT OF CARL BROTHERS, SENIOR VICE PRESIDENT FOR 
            INTERNATIONAL BUSINESS, RICELAND FOODS, 
                      STUTTGART, ARKANSAS

    Mr. Brothers. I first want to begin by thanking you, Mr. 
Chairman, for your efforts this morning on behalf of 
agriculture and also on behalf of rice and the opportunity to 
speak to you about rice this morning.
    Mr. Chairman, members of the subcommittee, I am Carl 
Brothers, Senior Vice President for International Business of 
Riceland Foods, Incorporated, located in Stuttgart, Arkansas. 
Riceland is a farmer-owned cooperative that markets rice, 
soybeans and wheat, grown by its 9,000 members. It is the 
nation's largest miller and marketer of rice, one of the 
nation's ten largest grain companies, and a major soybean 
processor in the South. Riceland markets products in more than 
50 countries worldwide.
    I am pleased to testify this morning on behalf of the USA 
Rice Federation on the topic of export market share for U.S. 
Rice. USA Rice is a federation of the U.S. Rice Producer's 
Group, USA Rice Council, and the Rice Millers Association, 
working together to address common challenges, advocate 
collective interests, and create opportunities to strengthen 
the long-term economic viability of the U.S. rice industry. USA 
Rice members are active in all major rice-producing states.
    Exports represent between 45 and 50 percent of domestic 
rice production. U.S. high-quality rice has typically enjoyed 
success in world markets. From 1960 through 1990 U.S. rice 
averaged a 20 percent world market share. The 1990's have not 
been kind to our industry, however. The U.S. share of world 
rice trade averaged just 14 percent from 1990 to 2000, and 
USDA's current baseline projects a further decline to less than 
10 percent in the current decade.
    World rice more than doubled in the 1990's, but U.S. 
exports grew by just 14 percent. Competitive suppliers like 
China, Vietnam, India and Thailand, captured the lion's share 
of this growth, due largely to locational advantage of these 
suppliers to growth markets in East Asia, the Middle East and 
parts of Africa.
    In addition to the competition from Asian suppliers, U.S. 
trade sanctions have caused more harm to the U.S. rice industry 
than any other commodity group. Cuba, Iran and Iraq were each 
the largest export market for rice at one time, but they 
effectively have been shut off. Steps toward trade sanctions 
reform, as contained in the Trade Sanctions Reform Act of last 
year, are just now being implemented. The total size today of 
markets in Cuba, Iran and Iraq, is 2.85 million metric tons of 
rice, close to total U.S. rice exports in 2000. These three 
markets were the backbone of the U.S. rice industry for many 
years, and their loss contributes significantly to the current 
level of the U.S. export share.
    U.S. rice exports also continue to face high duties in key 
markets, discriminatory duties that favor one type of rice over 
another, and thus override market signals. Non-tariff barriers 
like reference prices and price bands that have the effect of 
discouraging rice imports. For example, U.S. rice exported to 
Japan above Japan's tariff rate quota, faces an effective duty 
of 1,000 percent. High duties on fully milled rice and rough 
rice make U.S. exports of these types of rice to the EU 
uneconomical. Although we do ship brown rice to the EU, the 
duties we face are high, and they protect domestic rice 
production.
    Many countries in Latin America, Europe and Africa place 
discriminatory tariffs on milled rice imports. U.S. rough rice 
exports benefit, but the U.S. milling sector suffers as foreign 
milled rice markets are close and milling value for U.S. rough 
rice is added overseas rather than at home.
    If there are any doubts that trade agreements provide an 
advantage to U.S. rice, then we need only look at the North 
American Free Trade Agreement to put these concerns to rest. At 
the beginning of the 1990's, U.S. rice sales to Mexico were 
less than 100,000 tons. In marketing year 1999/2000 U.S. 
exports, because of NAFTA, had surged to nearly 400,000 tons, 
making Mexico the No. 1 export destination by quantity.
    Food aid is an important component of rice exports, 
accounting for up to 20 percent of exports in recent years. 
While the rice industry works toward a level playing field in 
foreign markets and the removal of U.S. economic sanctions, 
food aid remains an important support of the export 
infrastructure of our industry, providing needed jobs and 
income to rural communities, and giving humanitarian assistance 
to those in need.
    I am joined in Washington this week, Mr. Chairman, by my 
producer colleagues and miller colleagues, to press for 
immediate assistance to our industry in the form of a 
Presidential food aid initiative for 500,000 tons of rice. Food 
aid movements planned for fiscal year 2001 are well below 
shipments in the last two fiscal years. This is particularly 
serious in the southern-most rice-producing regions, where an 
estimated 75 percent of the business of rice mills is in food 
aid.
    Senator Lincoln of this subcommittee and Senator Hutchinson 
of the full committee, have signed a letter to the President, 
along with other rice state senators, urging such an 
initiative, and the rice industry is thankful for their 
support.
    In conclusion, the U.S. rice industry has a substantial 
amount of work ahead of it in international markets. We must 
continue to trade on the hallmarks of U.S. rice on the world 
market, that is, high quality and reliable delivery. We must 
also use wisely the trade promotion dollars that are made 
available to us and continue to ensure that adequate food aid 
resources from the U.S. Government are available so that the 
maximum amount of rice can be programmed to fight world hunger.
    We cannot prevail alone. Mr. Chairman, and members of the 
subcommittee, I want to strongly urge you, on behalf of the 
U.S. rice industry, to support a rice food aid initiative, to 
lift economic trade sanctions, and to support the President's 
request for trade promotion authority. Well-negotiated 
agreements that bring levels of protection to an equitable 
basis and are consistently and strongly enforced are critical 
to the U.S. rice producers and millers. There simply is no 
other option than open and vibrant foreign markets for the 
long-term economic viability of the U.S. rice industry.
    I wish to thank you for this opportunity to appear before 
the committee, and I welcome your questions.
    [The prepared statement of Mr. Brothers can be found in the 
appendix on page 59.]
    Senator Conrad. Thank you very much. I appreciate the 
testimony of all three of you. We have heard now from one part 
of the industry that is struggling, one part of the industry 
doing very well, one part of the industry that is kind of 
holding its own, and that was by design. That is what we 
intended to do here today.
    I want to thank you all for what was really excellent 
testimony. Let me start by asking Mr. Condon, as you look at 
this pattern, we see what the Europeans are doing versus what 
we are doing. When you see a chart like that, does it concern 
you?
    Mr. Condon. Yes, and I actually think your chart is a 
little out of date. There is actually more blue in there now. 
Some of the yellow, South Africa, has done away with its 
subsidy, actually the community is accounting for a higher 
percentage now of the export subsidies.
    Export subsidies, of course, are a horrible trade-
distorting mechanism. They not only affect developing 
countries, but the worst aspect of export subsidies is the 
impact they have on the developing world. They certainly hamper 
our exports. The beef industry or the pork industry export 
subsidies are not as big a factor as they are in the grains 
side of the equation, but we are hoping, and we, along with 
most people in the U.S. agricultural industry, are urging the 
administration to make export subsidies No. 1 priority in what 
we hope will be an upcoming round of trade negotiations.
    Senator Conrad. I am hopeful of that too. My experience 
with the Europeans is unless they see that you have leverage in 
a negotiation, not much happens. You know, when I got to 
Seattle, the first night the trade Ambassador met with me and 
asked me to go meet with the Europeans, as I indicated earlier. 
I could see from that meeting, they had absolutely no intention 
to do anything but confuse the issue, try to divert people's 
attention somewhere else, and I am very concerned, if we do not 
give leverage to our negotiators, it will be pretty hard for 
them to bring home a victory.
    Mr. Condon. Well, one of the advantages we have on export 
subsidies is the community is pretty much isolated. I mean, 
they are the only ones paying export subsidies. While almost 
everyone in the rest of the world wants to get rid of them, or 
at least severely restrict the amount of export subsidies, so 
we have some advantage there.
    Senator Conrad. Mr. Von Tungeln, when you see a chart like 
that, what does it tell you?
    Mr. Von Tungeln. Well, as a farmer, it tells me we are 
probably getting a raw deal.
    [Laughter.]
    Mr. Von Tungeln. Really, as I came here this morning and 
listened to your opening comments and those of Senator Roberts 
and Senator Lincoln, I felt like my leaving Oklahoma at six 
o'clock yesterday morning to arrive here at nine o'clock this 
morning was kind of a waste of time, because you all are more 
aware of the problems then we are. I do appreciate this 
opportunity to add my comments and to have the opportunity to 
learn from this experience more about what the problems are, 
and certainly this is one of them, and I appreciate your 
concerns about the leverage that we need to go into the WTO 
negotiations as you very well expressed all morning.
    Of course, the wheat industry feels like there are other 
steps we need to take. Perhaps we will get into that a little 
later.
    Senator Conrad. Let me ask you this question if I could. We 
look at the worldwide stocks-to-use ratio for wheat, and we see 
that it is at just over 22 percent. That is the lowest level in 
30 years. Yet prices are very, very low. What is your 
explanation for that?
    Mr. Von Tungeln. Well, really, I am just a farmer and do 
not have a lot of education in economics or anything, but 
economics would tell us that wheat prices should be the highest 
they have been because of the stocks-to-use ratio. We would 
have to try to figure out why prices are so low when conditions 
are so favorable to us. I suppose the strong dollars is one of 
those, and that perhaps we have not efficiently used all of the 
programs that have been available to us, and that we have not 
sufficiently funded other programs, like the FMD and MAP.
    The wheat industry is optimistic about our industry, and 
making further sales, but we need some help. We need to get the 
barriers let down in the countries that have been mentioned 
several times here this morning. We need to have adequate 
funding. Our producers have to be optimistic because we are 
putting a lot of our own dollars into these programs that the 
USDA leverages with funds to help us build and promote and 
maintain and keep markets. That is what we are all about.
    Senator Conrad. If I could suggest my own read of what is 
happening to us, the strong dollar that you mentioned is 
clearly playing a role in what is happening to us in terms of 
exports and market share. Second, the Foreign Agriculture 
Service testified to the competitive position we see on that 
chart. Our competitors are going out there and buying markets.
    Mr. Von Tungeln. They are.
    Senator Conrad. They are spending a lot of money doing it. 
A third element is that inventory management has changed. You 
know, we see a lot of just in time delivery, and improved 
transportation systems, and there is a lot less grain in the 
pipeline than there used to be, and that really changes things 
in terms of the stocks-to-use ratio and we certainly see the 
effect. All of those are contributing to the fact we have a 
very low, historically low stocks-to-use ratio, and yet we have 
a price problem.
    Mr. Von Tungeln. Excuse me, Senator.
    Senator Conrad. Yes, sir.
    Mr. Von Tungeln. One other place that we could perhaps do 
more is in the area of credit guarantees. Some are saying we 
should do less. We contend that we should do much more, 
particularly in the developing countries around the world. We 
need to strengthen our credit guarantee program. That might 
help us.
    Senator Conrad. The Europeans are coming after that too.
    Mr. Von Tungeln. Certainly are.
    Senator Conrad. They made a big point of that in Seattle.
    Mr. Von Tungeln. Yes.
    Senator Conrad. Let me ask. You said something else, that 
grain boards, state trading enterprises, give away loyalty fees 
to their customers. That is what you called it, loyalty fees. 
What does that entail, loyalty fees?
    Mr. Von Tungeln. I thought I describe it in some other way. 
I hate to do this, but I was recently in a country where we 
were trying to recover some of our market share, and our market 
share had been declining. We were trying to recover it. We were 
making all the arguments and everything, and they were telling 
us that our quality was not quite right, that the noodles did 
not have the right feel in your mouth, all those things, that 
the qualify of our grain just did not quite fit their market. 
Then they said there is another reason, that we do not give 
good service. Man, we were really taken aback by that, because 
we thought that was the area where we excelled. We give 
technical advice. You know, if anybody has a problem, we send 
someone to help them with it and all.
    We said, ``What do you mean we do not give good service?'' 
Well, they said, ``Why cannot you take us to Hawaii for a week 
to play golf, or why cannot you provide us with other things?'' 
We cannot do that. It would not be legal and it would be 
unethical and everything. Maybe that is----
    Senator Conrad. Actual grain buyers asked you why you could 
not take them to Hawaii?
    Mr. Von Tungeln. Right. That is part of the loyalty fees. 
You know, they are able to do things that we cannot do, and as 
we said, they buy markets. I hate to bring that up, but it 
happened.
    Senator Conrad. It is reality, is it not?
    Mr. Von Tungeln. Yes.
    Senator Conrad. It is reality. I wish I could say you are 
the first one I have heard it from, but it is not. We have to 
understand this is a tough business out there.
    Mr. Von Tungeln. It is a tough business.
    Senator Conrad. The Europeans have been playing this game a 
long time. They are good at mercantilist economics, and that is 
basically what they are engaged in, mercantilist economics. 
They have been at this game for hundreds of years, and they are 
good at it, and they are good at misrepresenting it.
    Mr. Von Tungeln. The STEs have certain advantages that they 
can do these things under the cloak of darkness.
    Senator Conrad. No transparency. They are able to go in 
there and cut prices.
    Mr. Von Tungeln. Absolutely, no transparency.
    Senator Conrad. We had a circumstance a number of years ago 
where a representative of ours was in the room, and they did 
not know they were in the room, and the question of pricing 
came up, and our European counterparts told them, ``Well, do 
not worry about that. We will be under the U.S. price, whatever 
it is.'' Certain state trading enterprises made that same 
representation, ``Do not worry about that. We deliver you a 
price that is below whatever is on their market. Whatever is on 
the board, we will come in under that.''
    Mr. Von Tungeln. ``Or we will give you a half percent 
protein better or more cleanliness than you specified,'' 
whatever.
    Senator Conrad. Mr. Brothers, when you see a chart like 
that, what does it tell you?
    Mr. Brothers. I look at it three different ways. You have 
the export subsidy side of it, which is true, but then you have 
the strong internal supports in Europe as well, and then you 
have the tariffs on the products that we ship to Europe. It is 
not a double-edge sword, it is a triple-edged sword.
    Senator Conrad. The triple whammy.
    Mr. Brothers. Yes, sir.
    Senator Conrad. I also have a chart that shows the EU is 
providing, on average, $300 an acre in domestic support. These 
are OECD numbers, not my numbers, not USDA numbers. These are 
OECD numbers. OECD is the international scorekeeper. They are 
giving over $300 an acre of internal support, and we are giving 
$38 an acre. That is point No. 2 that you are making.
    Point No. 3 is tariff barriers. I was very struck in your 
testimony by what Japan does in terms of their barriers to us. 
It is really dramatic. Could you just remind us of the point 
that you made on Japan?
    Mr. Brothers. Oh. First off, the markup there, the block to 
get in the country is huge but even with the negotiation in the 
Uruguay Round, where now we have an opening of around 400,000 
tons in round numbers to Japan, and the United States is 
enjoying about 200,000 tons annually of that opening, the 
quality of that opening just absolutely stinks. Once the rice 
is tendered for----
    Senator Conrad. Is that a technical trade term?
    [Laughter.]
    Mr. Brothers. Once the rice is tendered, I mean you have a 
state agency tendering for the rice, it is going into storage 
in Japan. They mark the product up so that it will not clear to 
the market. We have one small opening under the Japan 
agreement, where we can get product in there, like about a half 
percent of the total opening, that we can get in there and work 
directly with customers. Otherwise, you are working through the 
state, and the rice going into storage sits there. Recently, it 
is my belief, that it was donated to North Korea. It never 
really entered the Japanese market. We are really fighting now 
to gain better quality access on that opening to Japan, because 
we really do not have what we need here the way--and that is 
what happens each time people circumvent what you negotiate.
    Senator Conrad. Really play the game.
    A number of you have mentioned that. For example, Mr. 
Condon, you mentioned in your testimony the need to increase 
funding for MAP and the cooperator program. Do you have 
specific funding levels in mind?
    Mr. Condon. Well, in that circumstance, the more we can 
get, the better. The industry has been talking about a doubling 
of those funding sources, but they do an enormous amount of 
good. We can really leverage those moneys so they are very 
helpful to all of the agricultural industries.
    Senator Conrad. Mr. Von Tungeln, what would your position 
be? Do you think those should be increased and----
    Mr. Von Tungeln. Absolutely. That FMD is the heart of our 
program, and we would like to see FMD increased at least to 
43.25 million, 43.25, and MAP at not less than 200 million.
    Senator Conrad. OK.
    Mr. Von Tungeln. That is just the heart of our program. 
That is what we depend on. That is what keeps our overseas 
offices open and carries out our activities that we----
    Senator Conrad. You believe those are truly useful, and not 
some boondoggle.
    Mr. Von Tungeln. Absolutely not.
    Senator Conrad. Some people charge, that it is just 
corporate welfare, a waste of money.
    Mr. Von Tungeln. It is the only way we can carry out the 
programs that we try to do to promote exports for our 
producers, the use of those funds.
    Senator Conrad. Mr. Brothers, what would you say on this 
question?
    Mr. Brothers. Rice has also used the funds successfully. We 
are constantly being critical ourselves, looking at these 
programs, making sure we are using the money in the best way 
that we possibly can. Many refer to getting the most bang for 
the buck on the money spent, but it is an integral part of what 
we do and important to our success overseas.
    Senator Conrad. Do you have a figure in mind?
    Mr. Brothers. No, sir, I do not. We have been successful in 
getting a fair share of these funds through the years, and it 
is based upon the quality of the programs we put forward.
    Senator Conrad. OK. You have seen people coming and going. 
We have a real problem because the Disaster Assistance Bill is 
on the floor, and important decisions have to be made in the 
next 20 minutes. I am going to bring this to a close.
    Before I do that, let me just ask each of you if you have 
an additional message, something that you have not been asked 
about here today, or something that you think is an important 
message to send our colleagues.
    Mr. Condon?
    Mr. Condon. Well, I have already mentioned TPA. TPA is 
extremely important. I would just leave you with that message. 
We are, as you have already noted, the meat industry is doing 
very well, but most of our exports go to a few markets. We want 
to export to the world.
    Senator Conrad. We need to broaden it.
    Mr. Condon. Absolutely. We need to diversify.
    Senator Conrad. Mr. Von Tungeln?
    Mr. Von Tungeln. Yes. TPA and the funds that we have talked 
about before. One additional one that I know that Senator 
Roberts wanted to ask about was the hard white wheat, and that 
is a very important thing in marketing wheat. I had an Egyptian 
trade team in my home this past month, as a matter of fact, and 
had buyers around my table that represented 60 percent of the 
purchases from Egypt, which is our No. 1 hard wheat, winter 
wheat buyer, and they said, ``What about hard white wheat?'' We 
said we just are not ready with it yet. Kansas devotes 85 
percent of their research and development funds to that. 
Oklahoma devotes about 25 percent of theirs. Nebraska devotes 
some. Colorado devotes some. Everybody is trying to come up 
with good hard white wheat varieties that would not only 
produce, but have good milling characteristics.
    Senator Conrad. It is a big market out there.
    Mr. Von Tungeln. Yes. Everybody in the world, wherever you 
travel, they want hard white wheat. The Egyptian millers said, 
``We bring you this message.'' They said, ``We like hard white 
wheat. We are going to buy it. We would like to buy it from the 
United States. If we cannot, we will buy it somewhere else.''
    Senator Conrad. Very good message.
    Mr. Von Tungeln. I do not know what you can do to help us 
on that. It is a very difficult situation. You have to treat it 
like a whole new crop, like it was a corn or a bean or 
something, and you cannot commingle it. It has to be delivered 
from my farm to the miller in Egypt or wherever, clean and 
pure. There are a lot of problems, but we are working on it 
real hard. We recognize what the problem is, and working on it.
    Senator Conrad. Very good.
    Mr. Von Tungeln. Help us if you can. First and foremost is 
the trade promotion authority and the funding.
    Senator Conrad. Very well. Mr. Brothers.
    Mr. Brothers. Short term, long term. Short term, you can 
see the politics that seem to be involved in the rice business 
with some of the countries that are important to us. It means 
food aid continues to be on the short term very important to 
the rice industry. Longer term, trade promotion authority is 
ultimate. I do think that we need to do a better job of 
negotiations, try to close off some of these loopholes. I am 
particularly concerned about preferential tariffs in the world, 
where people are using tariffs to enhance their own interior 
economics and at the demise of the United States. Trade 
promotion authority is very important, we have got to be 
smarter about it than we have been in the past, as I have heard 
you say often this morning.
    Senator Conrad. Thank you so much. I appreciate you all 
coming to testify, and the really excellent testimony from each 
of you. The committee appreciates it, and I appreciate it. Have 
a good day.
    [Whereupon, at 10:43 a.m., the subcommittee was adjourned.]
      
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