[Senate Hearing 107-1084]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 107-1084

                         CHEMICAL HARMONIZATION

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

                                HEARING

                               before the

     SUBCOMMITTEE ON CONSUMER AFFAIRS, FOREIGN COMMERCE AND TOURISM

                                 OF THE

                         COMMITTEE ON COMMERCE,
                      SCIENCE, AND TRANSPORTATION
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 26, 2001

                               __________

    Printed for the use of the Committee on Commerce, Science, and 
                             Transportation



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       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

              ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii             JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West         TED STEVENS, Alaska
    Virginia                         CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts         TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana            KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota        OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
MAX CLELAND, Georgia                 GORDON SMITH, Oregon
BARBARA BOXER, California            PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida
               Kevin D. Kayes, Democratic Staff Director
                  Moses Boyd, Democratic Chief Counsel
                  Mark Buse, Republican Staff Director
               Jeanne Bumpus, Republican General Counsel
                                 ------                                

          SUBCOMMITTEE ON CONSUMER AFFAIRS, FOREIGN COMMERCE 
                              AND TOURISM

                BYRON L. DORGAN, North Dakota, Chairman
JOHN D. ROCKEFELLER IV, West         PETER G. FITZGERALD, Illinois
    Virginia                         CONRAD BURNS, Montana
RON WYDEN, Oregon                    SAM BROWNBACK, Kansas
BARBARA BOXER, California            GORDON SMITH, Oregon
JOHN EDWARDS, North Carolina         JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri              GEORGE ALLEN, Virginia
BILL NELSON, Florida


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 26, 2001....................................     1
Statement of Senator Burns.......................................    18
    Prepared statement...........................................    19
Statement of Senator Dorgan......................................     1
Statement of Senator Fitzgerald..................................    40

                               Witnesses

Fitchhorn, Ron, President, Illinois Corn Growers Association.....    32
    Prepared statement...........................................    33
Hoeven, John, Governor of North Dakota, prepared statement.......     9
Johnson, Roger, Commissioner, North Dakota Department of 
  Agriculture....................................................     4
    Prepared statement...........................................     6
    Timeline of NDDA Efforts on Pesticide Harmonization..........    13
Johnson, Stephen L., Assistant Administrator, Office of 
  Pollution, Pesticides, and Toxic Substances, Environmental 
  Protection Agency..............................................    20
    Prepared statement...........................................    22
McClure, Dave, President of the Montana Farm Bureau, American 
  Farm Bureau Federation.........................................    41
    Prepared statement...........................................    44
    Joint Prepared Statement by Canada/U.S. Producer Consultative 
      Committee on Grain.........................................    42
Pomeroy, Hon. Earl, U.S. Representative from North Dakota........     2
Vroom, Jay, President, American Crop Protection Association......    34
    Prepared statement...........................................    37
Zell, Hank, National Farmers Union...............................    46
    Prepared statement...........................................    48

                                Appendix

Perdue, Art, General Manager, Farmers Union Oil Co., prepared 
  statement......................................................    61
Stratton, Wendell, Chairman, Agriculture Retailers Association...    62

 
                         CHEMICAL HARMONIZATION

                              ----------                              


                        Thursday, July 26, 2001

                               U.S. Senate,
Subcommittee on Consumer Affairs, Foreign Commerce 
                                       and Tourism,
        Committee on Commerce, Science, and Transportation,
                                                   Washington, D.C.
    The Subcommittee met, pursuant to notice, at 9:08 a.m. in 
room SR-253, Russell Senate Office Building, Hon. Byron L. 
Dorgan, Chairman of the Subcommittee, presiding.

               STATEMENT OF HON. BYRON L. DORGAN,
                 U.S. SENATOR FROM NORTH DAKOTA

    Senator Dorgan. I call this hearing to order.
    My name is Senator Dorgan. I chair this Subcommittee, and 
Senator Burns is on his way. I believe he had a previous 
engagement this morning and should be here shortly. I believe 
Senator Ensign will also be with us this morning.
    The point of this hearing is to examine S.532, introduced 
by myself and Senator Burns, co-sponsored by Senators Baucus, 
Cleland, Conrad, Daschle, Dayton, and Johnson. S.532 would 
permit a State to register a Canadian pesticide for 
distribution and use within that State if the pesticide is 
substantially similar or identical to one already registered in 
the United States.
    The point is that there are significantly higher prices 
being charged to U.S. farmers than Canadian counterparts for 
exactly the same pesticides. We will be taking testimony today 
from a number of witnesses on this subject. I look forward to 
hearing their comments.
    Let me describe just for a moment why I introduced the 
legislation and describe the pricing differential with just a 
couple of visuals. Pesticides that are identical or 
substantially similar that are being sold in both the United 
States and in Canada can cost U.S. farmers considerably more 
money than their counterparts in Canada. Let me hold up a box 
of Folicur. This box contains chemicals. This is a unique box 
because it was originally marketed in the United States, but 
because this company was short of this chemical in Canada this 
box went to Canada and a Canadian label was slapped on it. So 
you have a box with both a U.S. and a Canadian label.
    The difference? It is the same chemical sold to farmers in 
the United States and in Canada. Only one difference: $500 
cheaper for this box in Canada. The only difference in the 
marketing of this chemical to a Canadian farmer and a U.S. 
farmer is the U.S. farmer is charged $500 more for this box and 
the chemicals that are in this box.
    Now, is there justification for that? In my judgment the 
answer is no.
    Let me give you another example. I will use a chart. This 
chart is a chart that describes the chemical Puma Super, and in 
this circumstance you have exactly the same quantity, the same 
chemical, with a difference in cost. The U.S. farmer pays $9.61 
an acre to apply this chemical--excuse me. The U.S. farmer pays 
$15 an acre, the Canadian pays $9.61 an acre. So that is the 
difference in price. The U.S. farmer is charged substantially 
more for the identical chemical.
    We have a box of Achieve. This is a chemical that is sold 
in both the U.S. and in Canada. The difference with respect to 
Achieve is only in price. For example, the price differential 
is $6.34 an acre more for a U.S. farmer to apply this chemical 
than for a Canadian farmer.
    These are just three examples of chemicals that are either 
identical or substantially the same that are priced 
dramatically different for a U.S.farmer versus a Canadian 
farmer. The question, is there justification for that, 
especially inasmuch as the U.S.-Canada Free Trade Agreement and 
NAFTA promise harmonization of chemical prices? My response is 
there is no justification for it. My response is that this 
represents overcharging of U.S. farmers and U.S. consumers for 
essentially the same chemical.
    How does it happen? Because it can happen, and we want to 
change that with legislation. I know there are differences of 
opinion with respect to this subject, but, as you might know 
from my opening statement, I already have an opinion. I would 
like us to see passage of the legislation that I have 
introduced with Senator Burns. We will have both pros and cons 
examined today on that subject.
    Let me welcome my chemical Congressman Pomeroy and let me 
also ask Commissioner Johnson to join him, and we will hear 
from the first two witnesses. First, my colleague from the U.S. 
House, Congressman Pomeroy, who has been very active on this 
issue and has introduced legislation and been very involved in 
writing legislation on this subject over the last couple of 
years. Congressman Pomeroy, welcome.

                STATEMENT OF HON. EARL POMEROY, 
             U.S. REPRESENTATIVE FROM NORTH DAKOTA

    Mr. Pomeroy. Mr. Chairman, thank you very much. It is with 
great pleasure that I say, ``Mr. Chairman.'' Farmers are hit 
with low prices and farmers are hit with high prices: low 
prices for the commodities they grow, high prices for the 
inputs it takes to grow them. Hopefully, today it will be a 
banner day to address those problems on both fronts.
    As we meet here in the Senate, the House Agriculture 
Committee begins its markup of the new farm program, adding 
income support when prices collapse, something that should 
never have been removed from the farm program in the first 
place. On this side, this hearing, Mr. Chairman, advances the 
Pesticide Harmonization Act, to allow our farmers to access 
chemicals at the best available price irrespective of which 
side of the border they are marketed on when there is no issue 
of public health or safety presented.
    The heart of the matter is whether chemical companies 
should be allowed to hide behind EPA red tape and prevent 
farmers from buying chemicals and pesticides at lower prices 
than those available to Canadian farmers when there is no issue 
of public health or safety presented. The current disparate 
pricing system is based on the ability of chemical companies to 
tightly control the distribution of their products and segment 
the U.S.-Canadian market under the Federal Insecticide, 
Fungicide, and Rodenticide Act (FIFRA).
    The proposed legislation that would amend FIFRA would 
guarantee, that the government retain control of the production 
and distribution of potentially harmful chemicals and allows, I 
believe, us to move in a very measured and prudent way to 
address this problem. It is unfortunately at present being used 
as a barrier to cross-border trading in chemicals, which allows 
the discriminatory pricing strategies of the chemical 
companies, inuring almost inevitably to the disadvantage of the 
United States farmer.
    In 1998, a survey conducted by the North Dakota 
Agricultural Statistics Service showed that farmers in North 
Dakota were paying between 117 percent and 193 percent higher 
prices for pesticides than Canadian farmers. A more recent 
study conducted this year by researchers at North Dakota State 
University showed a 3 to 5 percent average increase in net farm 
income if Canadian priced chemicals could be used in the United 
States.
    Through these studies, we are beginning to understand the 
harsh impact the two-tiered pesticide pricing structure has on 
our farmers.
    Now, the Pesticide Harmonization Act, if enacted, would 
eliminate the current barriers that prevent U.S. farmers, 
dealers, and distributors from accessing pesticides from 
Canadian sources. The bill would amend FIFRA to grant States 
the authority to issue State registrations to parties who wish 
to import Canadian pesticides that are identical or 
substantially similar to products registered with EPA for use 
in the United States.
    By eliminating access barriers, this act would essentially 
create a free market for pesticides and allow U.S. and Canadian 
farmers to compete on a much more level playing field. The 
legislation is reasonable and holds the potential to make a 
substantial impact on the ongoing harmonization issues between 
the United States and Canada.
    As important as what the bill would do, it is also 
important to know what it would not do. It would not endanger 
human or environmental health. It will not allow dangerous 
unapproved chemicals to enter U.S. borders and be applied on 
U.S. cropland. In order to register a Canadian pesticide in the 
United States, the State would have to certify that the 
pesticide is substantially identical to the domestic pesticide 
already registered for use in the United States, and that the 
pesticide meets the strict standards of the EPA under FIFRA.
    Given our proximity to the Canadian border, Mr. Chairman, 
you know and I know that the disparate pricing is a very 
substantial problem for farmers and a considerable aggravation 
to the whole free trade environment. We have got to compete 
with Canadian farmers post-harvest as their product comes 
flooding into our market, diminishing the price our farmers can 
get for their products. But pre-harvest the industry continues 
to segment and price discriminate.
    It is interesting to note the record of the industry, the 
chemical and pesticide producers, on the NAFTA legislation. 
They were all for it. They wanted a blended post-harvest 
marketplace. Well, if they are going to have the post-harvest 
market blended, they are going to have to be subject to more of 
a blending pre-harvest as well. Their price discriminating 
strategies simply cannot stand.
    This legislation, Mr. Chairman, introduced in the Senate, 
identical to what I have introduced in the House, was developed 
over considerable negotiations between the North Dakota 
Agriculture Department and the Environmental Protection Agency 
under the prior administration. It is not entirely clear what 
the position of the new administration is on this bill, but the 
record of our President I think is very clear in terms of not 
having a whole lot of patience for bureaucratic red tape not 
related to health or safety disrupting normal market activity, 
especially in a free trade environment. I do not think that the 
President would want to assert EPA requirements not related to 
health or safety that stop our farmers from getting the best 
price.
    In conclusion, I would just say that registrants simply are 
able to sell pesticides at higher prices in the United States 
than Canada because of differing regulatory schemes. This runs 
contrary to the intentions of free trade between the two 
nations and results in a situation where our producers compete 
with Canadian producers on the output side, but not on the 
input side.
    Your bill, Mr. Chairman, addresses that very directly. I 
congratulate you for introducing this legislation, for having 
this hearing, and I look forward to working with you and the 
administration to have this matter enacted.
    Senator Dorgan. Mr. Pomeroy, thank you. Are you able to 
stay for a few moments?
    Mr. Pomeroy. Yes, I am.
    Senator Dorgan. Why do we not hear from Commissioner 
Johnson? Let me say, Commissioner Johnson, I think you have 
done more work than anyone in State government in America on 
this issue. The Committee thanks you very much for your 
efforts. It would be very happy to hear your testimony.

    STATEMENT OF ROGER JOHNSON, COMMISSIONER, NORTH DAKOTA 
                   DEPARTMENT OF AGRICULTURE

    Mr. Roger Johnson. Thank you, Mr. Chairman, and thank you 
for all the work that you do on behalf of farmers across this 
country, and in particular thank you for your efforts in 
supporting this bill and in holding this hearing.
    I am going to summarize my testimony. You have a written 
copy and there are copies provided for others as well, I 
believe. I am going to glance quickly through it and just hit 
the highlights if I can.
    Every day--and I think Congressman Pomeroy made this 
point--every day Canadian grain moves freely across our border, 
and it directly competes with wheat that we produce, grain that 
we produce in North Dakota, in our domestic market as well as 
in the international market. We have to face the same market 
prices the Canadian grain faces with the products that we 
produce in agriculture.
    The difference, however, is that the costs of production in 
our country are substantially higher, particularly as they 
relate to pesticide prices. That is the central issue that we 
are attempting to get at in this bill. The reason that prices 
are higher here is because even though grain can move freely 
south across the border and compete into our markets, 
pesticides cannot. The border serves as an imaginary, and in 
fact a substantial, barrier so that companies can in fact 
segregate the market that would otherwise be one market into 
two separate markets and charge different prices in the 
respective markets.
    Let there be no mistake about the central issue. The 
central issue is that U.S. farmers pay substantially more for 
farm chemicals than do our Canadian counterparts. Pricing 
studies have repeatedly shown this to be the case.
    Attached to my testimony in attachment 1, * I give you 
detailed numbers that were generated about a year ago by the 
Minnesota Association of Wheat Growers. They show that, for 
example, in cereal grain production our producers pay as much 
as 40 percent more than their Canadian counterparts.
    I have also included as attachment 2 * in my testimony the 
complete study done by Richard Taylor and Won Koo, researchers 
for the Northern Plains Trade Research Center located at NDSU 
that Congressman Pomeroy earlier cited. That study demonstrates 
that there is about a $24 million disadvantage to the American 
producers.
    If you look at page 2 of my testimony, * I included a 
chart. We just pulled out a handful of products in North 
Dakota. We serve as sort of the clearinghouse through which 
pesticides must go before they are allowed to be used in North 
Dakota, and we listed there about 10 or 12 different products, 
the approximate acreage that these products are used on, and 
the price differences that apply.
    The results show something more than a $32 million 
disadvantage to our producers. Let there be no question about 
the direct link between pesticide prices and net farm income, 
either. The study I cited earlier, done by Koo and Taylor, 
demonstrates clearly that there is a direct link, that in fact 
just North Dakota hard red spring wheat producers alone face an 
$11.6 million annual disadvantage.
    This has been a large concern in the public in North 
Dakota. I have included as attachments, in attachment 3, * a 
copy of a resolution that was passed by the North Dakota 
legislature. In the description of the resolution, it describes 
it as being a resolution urging Congress to ensure the economic 
viability and competitiveness of American farmers by adopting 
legislation that would grant States the authority to issue 
State registration to parties who wish to import Canadian crop 
protection products that are identical or substantially similar 
to products registered with EPA for use in the United States.
    That language sounds an awful lot like the language that is 
included in your bill, Mr. Chairman. In fact, this resolution 
was specifically written and passed to express the support of 
the North Dakota legislative assembly for this piece of 
legislation.
    But this is not just a North Dakota problem. It is a 
national problem. I have included for you as attachments 4, 5, 
and 6 * different pieces of evidence suggesting that the 
problem goes much beyond North Dakota. First, about a year ago 
we had a little issue--you talked about it in your opening 
remarks--with a product called Achieve. I am not here to talk 
about any one particular product because it is an issue that is 
systemic, I think, through all the products.
    But we had an issue with this product and on raising the 
issue I wanted to send a letter to EPA saying: EPA, please help 
us address this pricing problem that we have with pesticides in 
North Dakota. What I did was I contacted a dozen of my 
colleagues all along the border States with Canada. Within 5 
days, 11 of the 12 signed onto a letter that went to EPA. That 
is included as an attachment to you. *
    Furthermore, a resolution expressing support for this bill 
was presented by the National Association of State Departments 
of Agriculture. All the 50 States are well on board with this 
proposal. In attachment 6, * I give you language that was 
adopted at the Agricultural Accord, a meeting of NAFTA 
partners, both the Canadian ministers as well as our partners.
---------------------------------------------------------------------------
    * The Information referred to has been retained in the Committee 
files.
---------------------------------------------------------------------------
    This act would solve the problem. We have approached this 
problem from the administrative perspective, and I think you 
will be hearing from Steve Johnson from EPA. In a moment we 
will talk about what we have been trying to do there. We have 
approached it from the judicial perspective and we are 
approaching it from the legislative perspective. There are no 
other ways to do this and this is the final, the ultimate fix 
to this problem.
    With that, Mr. Chairman, I see my time is up. I am strongly 
in support of this legislation and urge the Committee to give 
it a do-pass.
    [The prepared statement of Mr. Roger Johnson follows:]

     Prepared Statement of Roger Johnson, North Dakota Agriculture 
                              Commissioner

    Good morning. Chairman Dorgan and Members of the Sub-Committee, I 
am North Dakota Agriculture Commissioner Roger Johnson. I appreciate 
both the opportunity to offer testimony before you today and your 
willingness to hold this hearing to discuss pesticide price 
harmonization. I am here to testify in support of Senate Bill 532, 
which deals with the issue of pesticide price harmonization, a pressing 
issue in northern border states with nationwide impact.
Disparate chemical pricing harms U.S. farmers
    Every day, Canadian grain moves freely south across the U.S./Canada 
border to compete with domestic grain on the open market. Much of that 
Canadian grain has been produced using pesticides that are identical in 
chemical composition to pesticides registered for use in the U.S. but 
offered at a price substantially lower in Canada. However, barriers 
currently exist in federal statutes that prevent American growers or 
pesticide dealers from legally importing Canadian pesticides without 
the consent of the product registrant, even if the products are 
identical in composition to pesticides registered with EPA for the 
desired use. As a result, product registrants have been able to use the 
U.S./Canada border to create two separate pesticide markets.
U.S. farmers pay more for farm chemicals
    This system of segmented pesticide markets has resulted in 
significant economic impacts to American farmers. Pesticide pricing 
studies have repeatedly shown that American producers pay significantly 
higher pesticide prices than do Canadian producers. For reference, I 
have included a table of U.S. and Canadian pesticide prices recently 
compiled by the Minnesota Association of Wheat Growers (Attachment 1). 
* In cereal production, for example, herbicide prices are approximately 
40 percent higher for American farmers than for their Canadian 
counterparts.
    I have also included a copy of a recent Northern Plains Trade 
Research Center report by Richard Taylor and Won Koo that determined 
North Dakota farmers would save approximately $24 million if they could 
purchase pesticides at Canadian prices (Attachment 2--page 8, table 6). 
*
    Internal estimates at the North Dakota Department of Agriculture 
show this cost disparity to be even higher. Conservative estimates, 
using only a handful of common herbicides, indicate that North Dakota 
farmers would save over $32 million per year if they could pay Canadian 
prices.

     Table 1. Cost Summary of Pesticides That are Substantially More
  Expensive in North Dakota Than in Canada Based on 2000 Retail Prices.
------------------------------------------------------------------------
                                       Price      ND
                                    Difference   Acres   Increased Cost
   Product      Active Ingredient    per Acre    (000)   to ND Producers
                                       ($) a       b           ($)
------------------------------------------------------------------------
Achieve       Tralkoxydim               6.34    280.4          1,776,334
Assert        Imamethabenz              6.19    323.8          2,003,027
Avenge        Difenzoquat               1.50     30.6             45,790
Bromac        bromoxynil + MCPA         1.54    1757.6         2,714,437
Curtail M     clopyralid + MCPA         1.87     70.8            132,296
Discover      Clodinafop                2.70     72.3            195,196
Fargo         Triallate                 4.17    281.2          1,172,182
Liberty       Glufosinate              11.46    111.6          1,278,802
Stinger       Clopyralid                9.74    378.1          3,681,787
Puma          Fenoxaprop                5.39    3641.6        19,628,224
------------------------------------------------------------------------
Total                                                         32,628,174
------------------------------------------------------------------------
a Reflects the increased cost per acre in U.S. dollars in North Dakota
  vs Canada. These figures are based on 2000 retail prices. North Dakota
  retail prices were derived from the publication ``2001 North Dakota
  Weed Control Guide'' prepared by NDSU Extension Service. Canadian
  prices were derived from the publication ``Guide to Crop Protection
  2001'' prepared by Saskatchewan Agriculture and Food. Price
  differences are based on the same rate of active ingredient per acre.
b Product use numbers were obtained from the 2000 pesticide use survey
  conducted by the North Dakota State University Extension Service.


    Segmented markets and disparate pesticide prices have a direct 
effect on the economic viability of American farming operations. 
Pesticide costs are a major cash expense for producers and dramatically 
impact farm profitability.
    For example, 475 non-Red River Valley farms from North Dakota 
enrolled last year in the Farm Business Management Program sponsored by 
the North Dakota State Board for Vocational and Technical Education. 
These farms reported an average crop chemical expense of $17,480 in the 
year 2000. This figure represents 9.4 percent of a farm's average total 
reported cash expense. For these representative farms, a 10 percent 
decrease in chemical prices would have meant an increase of $1,748 or 
3.2 percent in net farm income.
    This direct link between pesticide prices and net farm income was 
further supported by the Taylor-Koo report mentioned previously. Taylor 
and Koo determined that net farm income for small size representative 
farms would increase 5.2 percent if American farmers could pay the same 
pesticide prices as their Canadian counterparts (Attachment 2--page 
10). * This puts American producers at an immediate competitive 
disadvantage, especially in the current agricultural economy. The 
report also concludes that the negative economic impact for North 
Dakota hard red spring wheat producers alone is $11.6 million 
(Attachment 2--page 7). *

Public concern
    Pesticide harmonization is a pressing issue in North Dakota. In the 
57th North Dakota Legislative Assembly held in 2001, several bills and 
resolutions dealt directly with the issue of pesticide harmonization. 
An outcome of the session was the passage of North Dakota House Bill 
1328, which created the Crop Protection Product Harmonization and 
Registration Board. This Board, chaired by the governor's office and 
including legislators, industry representatives, farmers, and myself, 
was formed to address and resolve pesticide harmonization issues. The 
57th Legislative Assembly also passed a resolution urging the U.S. 
Congress to adopt legislation granting states the authority to issue 
state registrations to parties who wish to import Canadian pesticides 
that are identical or substantially similar to pesticides registered 
for use in the United States. I have included a copy of this resolution 
with my written testimony (Attachment 3). *

This is a national problem
    It should be noted that pesticide price harmonization is not solely 
a North Dakota issue. I have included a copy of a letter sent to the 
Environmental Protection Agency (EPA) and signed by agriculture 
commissioners and directors from 12 northern border states expressing 
the need to eliminate barriers that segment Canadian and American 
pesticide markets (Attachment 4). I have also included a copy of a 
letter sent by the National Association of State Departments of 
Agriculture to members of the U.S. Congress fully supporting this bill 
(Attachment 5). * In addition, I have included a ``Joint Communique'' 
from the Tenth Meeting of the States/Provinces Agricultural Accord held 
in July of 2000 (Attachment 6). * In the communique, senior 
agricultural officials from Canada and the United States agreed on the 
importance of allowing farmers to purchase pesticides from neighboring 
countries.

The ``Pesticide Harmonization Act'' would solve the problem
    My staff and I have worked extensively with EPA to identify legal 
barriers that prevent parties from importing Canadian products for use 
in the United States without the consent of the product registrant. At 
the conclusion of that exercise, we worked collaboratively with North 
Dakota's congressional delegation, the North Dakota Office of the 
Attorney General, and EPA to draft this bill. If enacted, Senate Bill 
532 would amend the Federal Insecticide, Fungicide, and Rodenticide Act 
(FIFRA) to grant states the authority to issue state registrations to 
parties who wish to import Canadian pesticides that are identical or 
substantially similar to products registered with EPA for use in the 
United States. (Attachment 7 provides a section-by-section analysis of 
the bill). *
---------------------------------------------------------------------------
    * The Information referred to has been retained in the Committee 
files.
---------------------------------------------------------------------------
    This bill creates a system in which a party can serve as a state 
registrant for certain Canadian pesticides without the consent of the 
primary registrant. A state registrant for the Canadian product is 
necessary since it ensures that some party will assume responsibility 
for distributing and re-labeling the product to meet EPA requirements. 
To protect state registrants under this legislation, data compensation 
requirements are waived. The costs associated with data development 
would be waived because those costs should be included in the market 
pricing strategy used by the companies in a joint U.S./Canada market. 
In addition, the bill clearly states that state registrants would 
assume liability only for those parts of the product ``production'' 
(re-labeling and distribution) for which they had control and/or 
knowledge.
    The ability to issue state registrations without the consent of 
primary registrants is a critical component of this bill. My staff and 
I have attempted repeatedly to work with product registrants to import 
Canadian pesticides for use in the U.S. For example, we sent letters to 
at least five different agricultural chemical companies in the fall of 
1999 requesting their support to issue Section 24(c) Special Local 
Needs registrations for certain Canadian pesticides that were allegedly 
identical to more expensive products registered for use in the U.S. Not 
one of those companies granted their consent to allow access to their 
products at Canadian prices. Therefore, it is essential that a 
mechanism be created in which access to Canadian pesticides is not 
contingent upon primary registrant consent. This bill provides that 
mechanism.

Sustains high environmental standards
    A second major issue addressed in this bill is access to 
proprietary chemical composition data. To prevent unreasonable adverse 
effects to man or the environment and to ensure a safe and high-quality 
food supply, state registrations under this bill are limited to 
Canadian products that are identical or substantially similar to 
products currently registered with EPA for the desired use. The bill 
creates a mechanism that allows state regulatory agencies to access the 
Confidential Statement of Formula (CSF) for both the Canadian and 
comparable domestic pesticide products. This access to proprietary 
chemical composition data is critical to ensure that the Canadian and 
U.S. products are identical or substantially similar, and that the 
Canadian products do not contain unregistered active or inert 
ingredients.

Chemical distribution system would be maintained
    In many rural communities, the agricultural chemical dealer is a 
major part of the local economy. Therefore, we must ensure the economic 
viability of pesticide retailers and the contributions that they make 
to small towns across America. If this bill is enacted, I believe that 
the majority of registrants will be chemical distributors who will use 
the authority in the legislation to access Canadian pesticides from 
Canadian wholesale markets. Re-labeling for purposes of the bill will 
still be considered pesticide production, and it must be conducted at 
registered EPA establishments. Unlike farmers or commodity groups, 
distributors already have networks to accommodate product movement and 
registered establishments where re-labeling can occur. Therefore, the 
majority of Canadian pesticides imported under this bill will most 
likely move through the existing pesticide distributor/retail networks. 
The net effect will be a new, competitive market for these products, 
and manufacturers will be forced to discontinue segmenting U.S. and 
Canadian pesticide markets.

Recommendations for minor changes in bill draft
    I would also like to suggest some minor changes to improve the 
bill. First, Sections 3(B)(ii), 4(D), and 6(D) of the bill all discuss 
labels ``approved by the Administrator''. However, the label referenced 
in Section 3(B)(ii) is the Section 3 label of the comparable domestic 
pesticide, while the label referenced in Sections 4(D) and 6(D) is an 
approved state-specific label for a registration granted under this 
bill. References to a ``label'' throughout the bill should clearly make 
this distinction.
    Second, I recommend adding definitions or changing the language 
throughout the bill to differentiate more clearly primary registrants 
(holders of the Section 3 registration of the comparable domestic 
pesticide) from state registrants of a Canadian product for purposes of 
this bill.
    Third, I recommend removing Section 6(F) of the bill that 
eliminates the reporting requirements of EPA establishments that re-
label Canadian pesticides for purposes of the bill. We must ensure that 
importation of Canadian pesticides for purposes of this bill is 
conducted in a controlled, responsible, and trackable manner. 
Therefore, it is prudent to require state registrants under this bill 
to track and report the quantities of Canadian pesticides they import 
and re-label.
    American farmers have proven repeatedly that they can produce the 
safest, highest quality food in the world. However, in order to survive 
economically and compete in today's markets, they need to be able to 
operate on a level playing field with their competitors. Unfortunately, 
American farmers are not competing on a level playing field for 
pesticides. Instead, they compete in a free market with their outputs, 
while being forced to purchase pesticide inputs in a segmented, unfair 
and often higher-priced market. This bill provides an avenue for 
American farmers to purchase pesticides at prices now only available to 
their Canadian counterparts. Therefore, I would urge you to pass Senate 
Bill 532.

    Senator Dorgan. Mr. Johnson, thank you very much.
    Let me put in the record the statement from Governor Hoeven 
from North Dakota.
    [The prepared statement of Governor Hoeven follows:]

      Prepared Statement of John Hoeven, Governor of North Dakota

    Chairman Dorgan, thank you for the opportunity to submit a written 
statement in support of Senate Bill 532.
    The facts of North Dakota's agricultural economy and the variety of 
crops produced in the state will be well established by others 
testifying before you today. It is also acknowledged by witnesses 
appearing before you that our North Dakota farmers grow many of the 
same crops as producers directly across the border in Canada, thereby 
putting them in direct competition with their Canadian counterparts.
    North Dakota farmers have been challenged by low-priced 
commodities, higher input costs, and adverse long-term weather 
conditions leading to increased disease, weed, and insect pressure. 
These factors contribute to a the poor profit outlook for producers. 
Costs are at a level where farmers simply cannot make a profit.
    Because of increased pest problems coupled with high pesticide 
costs, I support legislation which can help make more crop protection 
products available to farmers at costs that are comparable to those 
paid by their Canadian neighbors.
    It is simply unfair that farmers, especially in a border state like 
North Dakota, are placed at a competitive disadvantage to Canadian 
farmers, both in terms of availability and price of pesticide products. 
Pesticide companies are able to charge higher prices in the United 
States because farmers are prohibited from purchasing similar products 
in Canada and importing those products to the United States. This bill 
seeks to provide for joint labeling, to effectively accomplish 
harmonization of pesticide products and their prices.
    The Environmental Protection Agency here in the United States and 
its counterpart in Canada, the Pesticide Management Regulatory Agency 
(PMRA), have tried to address the issue of product availability in 
their respective countries. While I am encouraged by the EPA and PMRA's 
progress regarding harmonization of new product registrations, the 
heart of the issue lies with existing product availability and pricing.
    While the pesticide companies often blame the regulatory agencies, 
it is often the manufacturers themselves who make registration timing 
decisions. The decision is impacted by expected return on investment 
and anticipated competition. This bill will effectively give the states 
the ability to register those products for the company, thereby 
bringing those products to market more quickly, to the benefit of the 
farmers and the companies.
    North Dakota's legislature has worked to expedite the chemical 
harmonization process, including providing the agriculture commissioner 
with the authority to seek special emergency exemptions on products 
registered in both countries. With my support, the legislature recently 
created the Crop Protection Product Harmonization and Registration 
Board. The bi-partisan board consists of elected state officials and 
farmers who have a common mission of working with regulators and 
pesticide manufacturers to make effective products available at fair 
prices.
    American and Canadian growers produce virtually identical crops and 
are forced to compete with one another in the global market. Therefore 
it is imperative that product availability and price stand on equal 
footing across borders. Senate Bill 532 will be an important step in 
amending the crop protection trade disparities between our two 
countries. Free trade policies must be applied consistently. The 
legislation may prove to be a tremendous asset in the effort to 
standardize the prices paid for substantially equal pesticides on 
either side of our shared border.

    Let me ask a couple questions. One, obviously the first 
question is, are you convinced that there is not a safety 
issue? Some would allege, particularly from the chemical 
industry, you know, there is a safety issue, that is why have 
these registrations and so on. Congressman Pomeroy, is there a 
safety issue here?
    Mr. Pomeroy. Well, we have made certain in the legislation 
that there is not a safety issue. The only products to be 
allowed for purchase under this bill would be products that 
have been registered in both countries. What would be required 
is a State agriculture department to make a finding that the 
product is identical or substantially similar in order to allow 
the State-based registration. So we are talking about those 
products which have already gone through the rigorous EPA 
review and approval process.
    I believe, Mr. Chairman, more needs to be done to harmonize 
the way we register chemicals and pesticides on both sides of 
the border. I think EPA and its Canadian counterpart have 
really not stepped up to their assignment under NAFTA to bring 
in place harmonized regimes of registration. Undoubtedly, that 
has caused additional costs for the chemical pesticide 
companies. I am sure they will tell you about that later in 
this hearing.
    But that is just tough. That should not in any way justify 
this price discriminating practice that charges our farmers 
more in a free trade environment where in the end they have got 
to compete with that Canadian-harvested product grown cheaper.
    Senator Dorgan. Let me also ask, Congressman Pomeroy, why 
is this hard to do? One would think that with the story of 
Achieve or other chemicals that we would just have a farmer go 
up and purchase the chemical for the lower price and come back 
down. What do we need from the EPA to make this happen?
    Mr. Pomeroy. Well, I am very pleased that EPA has 
approached this issue with an open mind, that they have not in 
any way wanted their requirements that are related and based in 
public health and safety to be used in a way that has nothing 
to do with public health and safety, just to basically 
facilitate price discrimination. They do not want chemical 
companies hiding behind them so that they can charge U.S. 
farmers more where there is not a public health or safety 
issue.
    As a result of that, the prior administration engaged in 
negotiations to produce this bill and signed off on this 
legislation. Again, it is unclear what the position of this 
administration is. It is my sense that they would view this in 
exactly the same sphere or maybe even be more impatient with 
the practice of price discrimination by chemical companies than 
the prior administration.
    Senator Dorgan. Mr. Johnson, respond to the assertion by 
the chemical industry that they pay more for testing and more 
rigorous registration requirements in the U.S., therefore they 
have justified charging higher prices in the U.S.?
    Mr. Roger Johnson. Mr. Chairman, all the evidence that I 
have seen suggests that the testing requirements are 
substantially harmonized, that they are very close to identical 
to the degree that they can be between the United States and 
Canada. There is just no evidence that I am aware of that it 
costs a lot more to register a product in the United States.
    I expect that perhaps Steve Johnson from EPA could add more 
to that, but that has certainly been my sense over the last 
several years as I have studied this issue in some detail. I 
have had extensive discussions with PMRA in Canada, which is 
sort of the EPA equivalent, and with EPA down here and I am 
just not aware that there is any validity to that argument.
    Mr. Pomeroy. Mr. Chairman, I would just add to that. Even 
if the costs are different, I believe in a free trade zone 
there is not a rationale for price discrimination. For example, 
doing business across the United States costs vary, but you do 
not see marketing strategies placing on North Dakotans 
significantly higher or lower costs than the prices charged in 
Florida. You harmonize prices. You cost it out over the entire 
market.
    Well, now we are in our free trade zone with Canada and we 
sure know that post-harvest. So pre-harvest if the costs are 
different, that is just tough. You blend the costs over the 
market and you are not allowed to price segment any more.
    Senator Dorgan. Let me ask Commissioner Johnson to correct. 
You indicated that the NDSU trade study described $24 million, 
$23.9 million, increased costs for U.S. farmers. That is 
actually just for North Dakotan farmers?
    Mr. Roger Johnson. Yes, yes.
    Senator Dorgan. Second and finally, the final question will 
be just for the two of you. Can you describe for the record the 
Achieve issue? We had a farmer in North Dakota that was going 
to move to Canada--was going to go to Canada and bring Achieve 
back. Would you describe that circumstance for the record, 
because that is in many ways what kicked off a lot of this 
activity.
    Mr. Roger Johnson. Mr. Chairman, I would be glad to. I have 
also copies of a time line of events that I will submit for the 
record that sort of describes in more detail.
    Mr. Roger Johnson. But very briefly, what happened is we 
had a North Dakota farmer who went to Canada and bought some 
Canadian Achieve, brought it across the border. We knew in 
advance that he was going to do it. In fact, he told us. We 
said: Well, you cannot do that; it would be illegal; and 
besides, you will never get it through Customs.
    Well, he called a couple days later and said: Guess what, I 
am going to Canada. Well, in fact, I went up, I sent my wife to 
Canada with the pickup truck. She came back with a load of 
Achieve, got it through Customs, declared it in fact, and for 
whatever reason it managed to get through.
    I said to him at that point: Well, for God's sakes do not 
use it, because if it does not have an EPA label it is a 
violation if you use it.
    Well, he used it. In fact he said it worked pretty good. We 
then had a real issue and I had a number of conversations with 
management in Zeneca, both in Canada and the U.S., to try and 
figure out what we should be doing with this, because if in 
fact it was an illegal product and it was different than what 
was registered in the U.S. I had a legal obligation as the 
enforcing agency of EPA laws in this case to quarantine that 
farm, to destroy the grain, because it may be unfit for human 
consumption.
    So I called EPA, or the Achieve manufacturer, Zeneca. In 
the end they confirmed that the Canadian product in fact was 
absolutely identical and that in fact the product that was 
used, the only difference was that it was twice as concentrated 
as the U.S. version. But the Canadian version in fact had also 
been registered at EPA, though it was not marketed here.
    So, based on that, I said, okay, the product is legal, it 
is the same. Zeneca told me it is the identical product that is 
registered at EPA called Achieve 80DG. The one that is marketed 
here is Achieve 40DG. So I got a copy of the registration for 
80DG, which included the label, by the way, which is what's 
required to be on a product in order for it to be used and U.S. 
producers must follow that EPA-approved label.
    I got a copy of the label, posted it to the Internet site, 
provided directions for farmers to make sure they printed the 
label off, went to Canada, purchased the product, applied the 
label, brought it back, and used it according to the label 
instructions. That is what they did.
    What happened following that is the border got closed 
because EPA had to require that Customs no longer allow the 
product to cross the border, arguing that the labels were 
attached in a fashion that was illegal, that being they were 
taped to the box by a producer instead of being fastened by a 
producer of the chemical product at a location with an EPA 
establishment number.
    So you know, the difference here is $10 an acre, is what 
this farmer paid for the Canadian product, $16 an acre is what 
he would have paid for the U.S. product. One thousand acres, 
$6,000.
    Mr. Pomeroy. Mr. Chairman, I want to commend Commissioner 
Johnson from constructively responding to a situation that 
faced him. I used to be a State regulator. Your responsibility 
is to the public. The Agriculture Commissioner's responsibility 
is to the public and to all farmers, not necessarily to make 
certain that the optimal pricing strategies of the chemical 
companies are adhered to.
    So when there was no public health issue, no public safety 
issue, a much cheaper product just across the border, I believe 
the creative solution that he advanced should have been allowed 
to continue; and that basically, when there is no dispute about 
the content of the chemical or its approved status in the 
United States, to have this stopped because of who is applying 
the label is simply bureaucratic red tape at its worst, that 
should not be permitted to prevent our farmers from getting 
their best deal.
    I really do think that the efforts of the North Dakota 
Agreement Department, Roger Johnson and his staff, in advancing 
this make a very compelling test case as to why the bill that 
you have introduced should move forward.
    Senator Dorgan. I think it would be helpful to have the 
Achieve story's time line put in the record. If you would 
submit it, we would have it included in the record.
    Mr. Roger Johnson. I would be happy to do that.
    [The material referred to follows:]

          Timeline of NDDA Efforts on Pesticide Harmonization

February, 1997
    Roger Johnson submitted a policy amendment to NASDA encouraging EPA 
to increase resources and efforts in US/Canada Technical Working Group 
on pesticides to harmonize pesticide regulations in the two countries. 
More effort also needs to be focused on establishing tolerances for 
pesticides registered in Canada and not in the US.

October 27, 1997
    Roger Johnson submitted a letter to EPA Region VIII Administrator 
encouraging EPA to step up its efforts toward ``harmonization of data 
requirements in the registration of pesticides.''

February 25, 1998
    Roger Johnson submitted an amendment to NASDA policy encouraging 
EPA to disallow imports of Canadian commodities unless adequate 
progress is made by the Technical Working Group to obtain registrations 
in the US of Canadian registered pesticides.

March 2, 1998
    NASDA approved a resolution submitted by North Dakota Agriculture 
Commissioner Roger Johnson calling for harmonization of pesticide 
regulations between the US and Canada.

May 6, 1999
    Roger Johnson attended the North American Market for Pesticide 
meeting in Washington DC. The purpose was to foster a dialogue among 
stakeholders on issues related to pesticide harmonization and joint 
registration of products. Specifically related to the differences in 
product availability and to identify opportunities for enhancing 
cooperation on pesticide harmonization issues (section IV A, E, and F 
of handout).

May 17, 1999
    Roger Johnson submitted a policy amendment to MASDA encouraging EPA 
for international harmonization of data requirements, the presentation 
of data and its interpretation, and risk assessment methodologies. 
Harmonization must be to the highest possible standards.

May 24, 1999
    Jeff Olson attended the Technical Working Group meeting in San 
Antonio between EPA, PMRA, and the Mexican delegation. This was the 
first meeting attended by Mexico. The North American Initiative (NAI) 
provides for the conceptual framework for the work of the Technical 
Working Group (TWG) to develop a North American market for pesticides 
and to establish joint reviews and work sharing as routine by 2002.
    The NAFTA Industry Work Group (IWG) reported on the outcome of a 
NAFTA label and concluded that the creation of the NAFTA label for an 
end product was impractical. The NAFTA IWG proposed the creation of a 
container label for country specific directions for use.

June 28, 1999
    Jeff Olson attended the first meeting dealing with the issue of 
seed treatments with EPA and PMRA officials in Washington DC. There was 
discussion on the timeline for reducing the use of Lindane in Canada 
and the progress towards registration of Helix and Gaucho.

July, 1999
    Roger Johnson submitted an action item to MASDA, urging NASDA to 
organize a meeting with the officials from EPA, FDA, USDA, and USTR to 
harmonize policies regarding chemical use and allowance on domestic and 
imported food production.

September 15, 1999
    Roger Johnson attended a meeting held with the Congressional 
delegation and representatives from the EPA, USDA, FDA, and USTR to 
discuss the differences in policies for allowing import of commodities 
with residue from products not registered in the U.S.

October 1999
    USDA releases report on ``Pesticide Price Differentials Between 
Canada and the United States.''

October 16, 1999
    Letters sent to four pesticide manufacturers, including Zeneca 
Agro, requesting permission to add a Special Local Needs label to 
Canadian pesticides.

October 26, 1999
    Zeneca responded in a letter, saying Achieve' 80DG will 
be discontinued worldwide over the next two years and would only be 
available ``in the distribution channels'' until the stock runs out. 
Zeneca said it will not produce an U.S. label for this reason.

October 27, 1999
    Attended the first Harmonization Committee meeting at Minot. The 
Department presented the Committee a copy of all the activities the 
Department has participated in dealing with the pesticide harmonization 
and price differential issues. The Committee suggested the Department 
pursue EPA funding for harmonization efforts.

November 15-17, 1999
    NDDA sponsored the Northern Plains Producer Conference attended by 
400 to 500 U.S. and Canadian Producers in Fargo.
March 8, 2000
    Jim Gray attended the second Harmonization Committee meeting in 
Washington D.C. where the Committee met with ACPA to discuss pesticide 
harmonization efforts by the industry.

April 14, 2000
    Jeff Olson attended the North American Market for Pesticides in 
Ottawa, Canada. Representatives from USEPA, USDA, Pest Management 
Regulatory Agency (PMRA), Agriculture and Agri-Food Canada (AAFC), 
Grower Associations, Industry Representatives, State, and Provincial 
representatives to discuss the continued process toward pesticide 
harmonization and joint registration of pesticide products.

May 2, 2000
    NDDA received a request for a Special Local Needs label from Norac 
Concepts, Canada for DCT seed treatment on dry beans. Need to overcome 
the following issues to meet EPA requirements that are not friendly to 
Harmonization: (1) EPA registered or approved sources; (2) EPA approved 
label; (3) use and distribution restricted to MD; (4) acute toxicity 
data even though it was not being ``used'' in the U.S.

May 25, 2000
    NDDA was informed that a ND producer brought Achieve' 
80DG down from Canada and declared it at U.S. Customs. Customs allowed 
the product to pass through the border into North Dakota.

May 26, 2000
    Commissioner Johnson wrote a letter to EPA Region 8 regarding 
potential enforcement action against the producer who brought 
Achieve' 80DG into the US. NDDA had a phone conversation 
with a Zeneca employee and was informed that Achieve' 80DG 
was already registered in the U.S., but not marketed here.

May 30, 2000
    EPA confirmed that Achieve' 80DG was registered in the 
U.S.

May 31, 2000
    Commissioner Johnson held a press conference announcing his plan to 
post the label, with the registration number, for Achieve' 
80DG on the NDDA website. The label, along with instructions for 
importing the herbicide, was posted the same day. EPA was notified of 
the action taken.

June 1, 2000
    NDDA learned of the first load of Achieve' 80DG crossing 
the border into the United States, minus the import form 3540-1. 
``Notice of Arrival of Pesticide and Devises''. NDDA was unaware of 
this form. Zeneca contacted Commissioner Johnson asking for a meeting 
to discuss his action. Jim Gray had a meeting with U.S. Customs at the 
Pembina office.

June 2, 2000
    Zeneca representatives flew to Bismarck to meet with Commissioner 
Johnson, Attorney General Heitkamp, and staff members and express an 
interest in resolving the situation. Johnson asked the company to 
publicly approve North Dakota's action, and they refused. Zeneca argued 
three reasons why the product was less expensive in Canada: (1) 
exchange rate (2) Canadian farmers aren't making much money (3) 
coagulation problems. During the same meeting, Zeneca confirmed that 
there is no danger to human health or the environment with the use 
Achieve' 80DG and that the coagulation problems with 
Achieve' 80DG were resolved in the mid 90's. Zeneca also 
promised a formal written response to North Dakota's action.

June 5, 2000
    Instead of providing North Dakota with a formal written response, 
Zeneca wrote EPA asking it to take action against North Dakota for 
FIFRA violations and also asked for a meeting to discuss the matter.

June 8, 2000
    After learning of Zeneca's letter and request for a meeting, 
Commissioner Johnson asked to participate in the meeting. NDDA was 
notified that EPA Region 8 had approved two 3540-1 forms. Commissioner 
Johnson also attended the Harmonization Committee meeting in Northwood 
and presented the Committee a detailed description of the Achieve/
Zeneca issue.

June 9, 2000
    Zeneca met with EPA in Washington, DC to discuss the situation. 
Commissioner Johnson and Attorney General Heitkamp joined the meeting 
via telephone. Heitkamp promised to issue a formal written response to 
EPA to address Zeneca's complaint. EPA notified NDDA that a decision 
would be forthcoming by early the following week after EPA received 
North Dakota's written response. That same day, EPA Region 8 stopped 
issuing the form 3540-1, based on a directive from EPA in Washington.

June 12, 2000
    Commissioner Johnson and Attorney General Heidi Heitkamp wrote EPA 
to refute Zeneca's arguments raised in the June 5 letter.

June 13-14, 2000
    Commissioner Johnson and Jeff Olson attended the Technical Working 
Group conference at Ottawa, Canada. Attendants included EPA, PMRA, and 
Mexico Agriculture representatives.

June 29, 2000
    Top agriculture officials from the 12 border-states joined Johnson 
in a letter asking EPA Administrator Carol Browner to help U.S. farmers 
obtain pesticides at the same prices as Canadian farmers. On the same 
day, the House Agriculture Committee held a hearing on agricultural 
input issues. Among those testifying were Zeneca Ag Products Inc. 
president, Robert Woods.

July 5, 2000
    EPA sent a letter to NDDA responding to their action with 
Achieve' 80DG and stated that placing a label on a pesticide 
is considered ``producing'' and those labelers would need an EPA 
``Establishment Number.''

July 7, 2000
    US Senator Byron Dorgan blocked approval of two EPA nominees until 
the matter is resolved.

July 12, 2000
    NDDA sent a letter to EPA with recommended language and reasoning 
for proposed federal legislation to facilitate Canadian pesticide 
importation and use.

July 13, 2000
    Commissioner Johnson sent a letter to EPA requesting their legal 
position on affixing labels in regard to emergency exemptions and 
special local needs (SLN) registrations. EPA sent NDDA reworked draft 
legislation. The language stated that North Dakota needs to be listed 
as the registrant. During phone conversations following receipt of the 
EPA letter, NDDA stated that this requirement was unacceptable.

July 24-25, 2000
    Commissioner Johnson, Assistant Attorney General Paul Germolus, and 
NDDA Registration Specialist Jim Gray met with EPA attorneys and staff 
to work on finalizing draft legislation.

July 26, 2000
    The Midwestern Association of State Departments of Agriculture 
adopted a resolution authored by Commissioner Johnson in support of 
chemical price harmonization.

July 28, 2000
    Tri-National Accord members supported harmonization efforts by 
including language in their ``Joint Communique.'' The Accord is an 
annual meeting of Commissioner Johnson's agricultural counterparts in 
the U.S., Canada, and Mexico.

August 2, 2000
    NDDA and EPA reached agreement on draft federal legislation.

August 11, 2000
    Attorney General Heitkamp and Commissioner Johnson filed a lawsuit 
against EPA regarding their interpretation of the Federal Insecticide, 
Fungicide, and Rodenticide Act (FIFRA).

August 11, 2000
    NDDA met with representatives of commodity groups, chemical 
dealers, and distributors to seek input on the draft legislation. Input 
from the meeting participants was then used to revise the draft 
legislation.

August 25, 2000
    Commissioner Johnson sent a letter to Jay Vroom, ACPA requesting a 
meeting between ACPA and Commissioner Johnson to discuss how the 
Department can help the industry in the registration process.

September 8, 2000
    Draft legislation was forwarded to Congressman Pomeroy's office.

September 14, 2000
    Congressman Earl Pomeroy introduced the ``Pesticide Harmonization 
Act'' (H.R. 5187).

September 28, 2000
    Commissioner Roger Johnson and staff attended the Harmonization 
Committee meeting in Bismarck. Johnson briefed the Committee on the 
lawsuit with EPA and other harmonization activities.

October 4, 2000
    Roger Johnson received award from EPA for ``Exemplary State-EPA 
teamwork in pesticide harmonization'' from Bill Yellowtail, EPA Region 
VIII Administrator.

November 2, 2000
    Jeff Olson and Jim Gray held a meeting with all commodity groups 
and extension personnel to determine emergency exemption needs for the 
2001 growing season.

November 28, 2000
    Commissioner Roger Johnson, Jeff Olson, and Jim Gray presented an 
open forum at the Agriculture Association annual meeting to discuss the 
``Pesticide Harmonization Act'' and other avenues to achieve pesticide 
harmonization.

December 1, 2000
    U.S. Department of Justice filed a ``Motion to Dismiss and 
Memorandum in Support of Motion to Dismiss'' in response to the lawsuit 
filed by the State of North Dakota and the North Dakota Department of 
Agriculture against EPA on August 11, 2000.

February 2, 2001
    The State filed with the Federal Court its response brief in 
opposition to the EPA's motion to dismiss. Lawsuit caption updated to 
reflect present agency officials (Stenehjem, et al. v. Whitman, et al). 
The Attorney General argued that the State has parens patriae standing 
because the State is not questioning the validity of a federal statute. 
Rather, the State was relying on the validity of a federal statute to 
challenge the EPA's violation of the statute. Second, the State was 
well within the 6-year statute of limitations since the State's ``right 
of action'' did not accrue when the EPA exceeded its authority in 
promulgating the regulations; the State's right of action accrued only 
after the EPA applied the regulations in question against the State. 
The State conceded to the dismissal of the Agriculture Commissioner as 
a party to the action.

February 8, 2001
    Commissioner Roger Johnson and Representative Earl Pomeroy sent a 
letter to Jay Vroom, President of ACPA. In the letter, Johnson and 
Pomeroy presented two proposals that would expedite pesticide 
registrations and directly address the market access component of 
pesticide harmonization. Johnson and Pomeroy also asked for ACPA's 
assistance in drafting federal legislation to implement the proposals.

March 12-14, 2001
    Jim Gray attended the AAPCO meeting in Washington DC While there, 
Gray co-moderated a meeting of border state representatives, ACPA, and 
industry representatives to discuss harmonization issues from the 
industry perspective. Gray also presented the two proposals outlined in 
the February 8, 2001, letter to ACPA, and asked for proposals to 
address the market access component of pesticide harmonization.

April 10-11, 2001
    Jeff Olson and Jim Gray attended a workshop on NAFTA Pesticide 
Registration Issues sponsored by the NAFTA Industry Working Group. 
Issues were centered around concerns by the pesticide industry. Six 
topics for further research were drawn-up at the end of the workshop. 
Jim Gray volunteered to lead the group to look at barriers and 
solutions to product assess across international borders. Results of 
their findings will be presented the full NAFTA Working Group in 
November, 2001.

June 20, 2001
    US District Judge Webb granted EPA's motion to dismiss ND's lawsuit 
regarding Achieve.

July 26, 2001
    Testifying in Washington DC, Commissioner Roger Johnson urged the 
Senate Subcommittee on Consumer Affairs, Foreign Commerce, and Tourism 
to pass the Pesticide Harmonization Act.

    Senator Dorgan. Your testimony has been very helpful in 
both cases. Congressman Pomeroy, you have introduced 
legislation, I believe, and worked on this legislation in the 
U.S. House.
    Unless Senator Burns has questions for this panel, I would 
release the panel and then call on Senator Burns for a 
statement.
    Senator Burns. Can I ask a question?
    Senator Dorgan. Yes, of course.

                STATEMENT OF HON. CONRAD BURNS, 
                   U.S. SENATOR FROM MONTANA

    Senator Burns. With the Chairman's permission, it would 
seem to me that we are dealing with a situation here. You said 
do not use it because the crop--the wheat might not be 
acceptable or there would be some public risk in the safety of 
that crop, the health of the public.
    We take their wheat. It is used on theirs, and it comes 
ripping across that border like you cannot believe. Now, 
somewhere we have got to level this out. We have been trying to 
deal with this normalization, but I will tell you, my friend, 
our dear friends to the North--and I have had meetings up there 
with them; we have met all over about this--They can dream up 
more non-tariff barriers than anybody in the world and sit 
there and be holier than thou. Then we come down here and our 
chemical companies are not any better.
    Now, I will tell you this. We have a circumstance that in 
this country, the cost may not be in the testing or the 
labeling of the product, but we have got other costs in that we 
produce a product that is not safe for the public and it gets 
through both--it flies--by both EPA and the company. We have 
got that cost to look at because we do more things in the 
preventative nature down here that are very costly than we do 
in the actual testing of the product. I think we will talk 
about that with another panel.
    If you want to excuse these, then I have got a short 
statement.
    Senator Dorgan. We appreciate very much your testimony and 
thank you for being here, Congressman Pomeroy and Commissioner 
Johnson.
    Why do we not ask Stephen Johnson, Assistant Administrator 
for the Office of Pollution, Pesticides, and Toxic Substances 
at the EPA, to come forward.
    Before I call on Mr. Johnson for his testimony, let me 
welcome Senator Burns. As I indicated when I started this 
hearing, Senator Burns and I worked together with a number of 
our colleagues to jointly introduce S.532. He has been very 
instrumental in helping put that legislation together and I 
welcome him here.
    Senator Burns. Thank you, Senator Dorgan. This is not the 
first year we have done this. We have been down this trail. You 
know, there are a couple of things that we think about in this 
town that really do not make headlines and are not the sexy 
issues, and this is one of them. Then you want to go around the 
corner and talk about weeds, and that does not go over very big 
in these fancy, foo-foo, white wine and Grey Poupon parties 
here in town. That is not a great subject to talk about, 
either. So we will get that out of the way.
    Mr. Chairman, thank you for holding this hearing, because I 
think it is very important, and we want to welcome a couple of 
my good friends from Montana: Dave McClure from Lewistown, the 
President of the Montana Farm Bureau; and Hank Zell. I do not 
know--Hank--oh, you are sitting back there hidden--Hank farms 
up there on the high line and has been instrumental in a lot of 
history along the Montana-Canadian border.
    I am going to submit my statement, but I do want to bring 
up the fact, what you mentioned a while ago, it just seems like 
when we are dealing with the same chemicals, with the same 
chemical properties and makeup, and then we have got that 
border that seems like is a barrier, and sometimes it is used 
as a price barrier and sometimes it is used as a trade barrier, 
and it all depends what fits the situation, I guess, how we 
apply it.
    So I am looking forward to the testimony today and working 
with the EPA and working with the Canadians. I think this is a 
problem that we have to address on both sides, and I am not 
really sure that our representative--that we should have a 
representative here today from the ITR, the International Trade 
Representative's office, because I think they have a stake in 
this, too, because that is probably where it will be resolved 
finally, by our Trade Representative and how we conduct 
ourselves on that border, and especially the movement of farm 
chemicals back and forth across that line.
    So I will just put my statement in the record and I am 
looking forward to the testimony today, especially Mr. Johnson 
and the rest of the panel. I thank the Chairman.
    [The prepared statement of Senator Burns follows:]

   Prepared Statement of Hon. Conrad Burns, U.S. Senator from Montana

    Thank you, Mr. Chairman, for holding this hearing on an issue of 
great importance to the people of my home state of Montana and to the 
rest of the country. I would also like to thank the witnesses for being 
here, particularly the two men from Montana, Mr. Dave McClure, 
President of the Montana Farm Bureau and Mr. Hank Zell of the Farmers 
Union.
    In the past, I have sponsored pesticide harmonization legislation. 
Last year, Senator Dorgan sought to address this problem in the VA/HUD 
Appropriations Conference. At that time, I committed myself to work 
with him and move this legislation this year. I am a cosponsor of this 
bill because of this commitment and to even out a serious trade 
imbalance facing the agriculture industry in our country.
    In my home state of Montana and many other western and mid-western 
states, we have faced a number of trade disputes between Canada and the 
United States. One of the most glaring discrepancies deals with 
pesticides. Chemicals that are sold for one price just across the 
border in Canada are sold at a considerably higher cost to American 
producers. Why does this happen you may ask? The EPA places strong 
regulations on chemicals used in the United States and therefore, the 
chemical companies believe they should hike up the prices to pay for 
their trouble.
    The chemicals in Canada and the United States, in most cases, have 
the exact same chemical properties and make up. The same company 
manufactures them, but often gives them a different name and nearly 
always prices the American chemicals higher. The crops treated with 
chemicals our farmers are not allowed to use are easily imported into 
the United States. These crops were developed at a lower production 
cost and are now competing with American products. I am a strong 
believer in fair trade, but for free trade to actually occur, this 
problem must be addressed.
    Currently, American farmers are facing a serious economic 
recession. Prices are the lowest they have been in a number of years 
and there does not appear to be a light at the end of the tunnel. 
Additionally, the West is facing yet another year of severe drought. 
Fertilizer costs are sky-rocketing with the high cost of fuel and 
energy. Compounding their problem is being forced to pay twice as much 
for nearly the same chemicals as their foreign neighbors.
    If enacted, this bill would eliminate many of the current obstacles 
and I would anticipate it leveling the playing field for our farmers. 
It would allow states or individual producers to seek a registration 
for a Canadian pesticide. This could only be done if, upon request by 
the State, the pesticide is found to be identical or substantially 
similar to the U.S. pesticide. The EPA still has final authority to 
disapprove the registrations within 90 days. Once the pesticide is 
found to be the same or similar and the EPA approves, the state or 
individual can travel to Canada and purchase the chemical.
    Our farmers and ranchers have been paying too much for their 
pesticides and chemicals for too long. From my years as a football 
referee, I learned everyone needs to follow the same rules to play the 
game. We need to make sure Canadian farmers and U.S. farmers are 
playing under the same rules and we are not making criminals out of 
honest, hardworking farmers who cross the border to buy chemicals.

    Senator Dorgan. Senator Burns, thank you very much.
    Mr. Johnson, welcome from the EPA. We appreciate your being 
here and why do you not proceed.

          STATEMENT OF STEPHEN L. JOHNSON, ASSISTANT 
        ADMINISTRATOR, OFFICE OF POLLUTION, PESTICIDES,
              AND TOXIC SUBSTANCES, ENVIRONMENTAL 
                       PROTECTION AGENCY

    Mr. Stephen Johnson. Good morning, Mr. Chairman, Senator 
Burns, and thank you for the opportunity to appear before this 
Subcommittee to discuss the concerns of American farmers 
concerning pesticide pricing between the United States and 
Canada. Roger Johnson of North Dakota and I have a long 
personal relationship on this issue and I am very glad to 
testify with him today.
    Today I will provide you with information on the long-term 
approach EPA is taking to address this issue, as well as 
discuss the current legislation which moves to remedy these 
pricing discrepancies in the near term.
    As you know, EPA's legal authority over pesticides is to 
ensure public health protection and environmental protection. 
Our authority does not extend to pricing. Current U.S. 
pesticides laws require an extensive scientific evaluation and 
a pesticide registration before it can be sold and distributed 
in the United States.
    EPA is not aware of any evidence that indicates that 
national pesticide registration requirements contribute 
significantly to existing price differences. Many factors 
contribute to pricing, such as marketing, availability, and 
demand.
    As all parties have acknowledged, this is a highly complex 
issue. That said, I know that EPA has worked very closely with 
Congressional staff over this last year as well as State 
officials and others to explore remedies that would help 
address pricing differences that U.S. farmers are experiencing.
    EPA has made significant progress on a variety of 
administrative and regulatory approaches to help facilitate 
equal access and harmonization. However, long-term approaches 
will not fully resolve this issue in the near term. Although 
these efforts over time should significantly help alleviate 
some of the pricing issues that exist today, let me describe 
this morning some of the longer term, more strategic actions 
that EPA is taking and partnerships that EPA has established to 
address this important issue.
    EPA is working closely with Canada and other trading 
partners to break down barriers and to facilitate trade and 
competitiveness. Together we are developing more consistent 
regulatory and scientific requirements, registering needed 
products, and supporting the principles of sustainable pest 
management.
    EPA's work on pesticide harmonization with Canada is 
beginning to provide benefits directly to the American farmer. 
In the long term, the creation and ongoing support of a North 
American harmonized market for pesticides will ensure a level 
playing field across borders, while maintaining our high 
standard of protection for human health and the environment.
    This effort is helping to break down the political and 
regulatory barriers with respect to the delivery and use of 
pest management tools on both sides of the border. An important 
piece of work is the creation of a NAFTA label which will 
enable the sale and distribution of a pesticide acrossNorth 
America, thereby guaranteeing its availability at the same time 
in the U.S. and Canada. One of the products under joint review, 
which will be for use on northern crops, will serve as a pilot 
for introduction of the NAFTA label. We believe expansion of 
products under NAFTA labels will help break down potential 
trade barriers.
    The NAFTA pesticide group has enabled EPA and Canada to 
work together on the entire range of pesticide regulatory 
requirements, review procedures and programs. To date the vast 
majority of data requirements and test guidelines that must be 
adhered to in the registration process have been harmonized and 
as a result of the work-sharing and joint reviews of recent 
pesticide registration submissions, the harmonization of risk 
assessment procedures is well under way between the U.S. and 
Canada.
    These are important milestones that are establishing the 
framework for facilitating equal access to pesticides, which 
could lead to more uniform pricing across borders. You have our 
commitment to continue to work within our current authorities 
to promote a level playing field for U.S. and Canada farmers.
    Now, regarding a near-term solution, EPA stands ready to 
work with Congress and others on possible legislative solutions 
that effectively address observed differences in pesticide 
pricing as long as the protection of public health and the 
environment are not compromised. EPA understands that this 
legislation is intended to create a structure which ensures 
that appropriate safeguards remain in place to enable EPA to 
achieve its primary mission, the protection of public health 
and the environment.
    However, there are some broad policy concerns with this 
legislation that will need to be fully addressed and the 
consequences fully considered. For example, a legislative 
approach, like this with a focus on one country alone, may have 
broad trade ramifications. EPA will continue to work with 
Congressional staff to address these issues as they arise.
    Another potential concern is that of implementation. For 
example, there are important questions regarding a State's 
ability to maintain confidential business information and other 
trade secret information. Any legislation should also not place 
unreasonable resource burdens on our pesticide registration 
program or cause unintended consequences on other priorities 
and regulated pesticides. Again, EPA will work with you closely 
and your staff to help address these types of implementation 
concerns.
    In conclusion, EPA has worked very closely with 
Congressional staff over this last year, as well as with State 
officials here today, to help alleviate the concerns of U.S. 
farmers that they have regarding differences in pesticide 
price. EPA continues to seek and create effective mechanisms 
that will ensure the safety of our health and environment while 
also ensuring an equal playing field for our farmers.
    In the long term, EPA is working to harmonize the 
availability of pesticide products between the U.S. and Canada 
through the NAFTA pesticide group. In the near term, with no 
adequate administrative or regulatory option available to 
address the potential pricing disparity between the U.S. and 
Canada, EPA supports seeking an appropriate legislative 
solution to this problem.
    However, although the legislation as drafted does not 
compromise protection of human health or the environment, which 
is EPA's principal criterion, there are some implementation 
issues and potential international trade concerns that we will 
have to continue to address. If these issues are resolved, EPA 
will be in a position to support this legislation.
    Again, EPA commits to working with Congress, the States, 
farmers, other Federal agencies, and industry to resolve these 
concerns. I look forward to working with you and other members 
of the Congress and other affected stakeholders on this 
important issue.
    I will be pleased to address any questions you may have.
    [The prepared statement of Mr. Johnson follows:]

  Prepared Statement of Stephen L. Johnson, Assistant Administrator, 
        Office of Pollution, Pesticides, and Toxic Substances, 
                    Environmental Protection Agency

Introduction
    Good morning Mr. Chairman and Members of the Subcommittee. Thank 
you for the opportunity to appear before this Subcommittee to discuss 
the concerns of American farmers with regard to with pesticide pricing 
between the U.S. and Canada. The U.S. Environmental Protection Agency 
(EPA) is committed to working with Congress, the states, farmers, other 
Federal Agencies, and industry to address this ongoing concern.
    Today, I will provide you with information on the long-term 
approach EPA is taking to address this issue, as well as discuss the 
current legislation which attempts to remedy these pricing 
discrepancies in the near-term. As you likely know, EPA's legal 
authority over pesticides is to ensure the protection of public health 
and the environment; our authority does not extend to pricing. Current 
U.S. pesticide laws require an extensive scientific evaluation and a 
pesticide registration before it can be sold and distributed in the 
U.S. Further, EPA is not aware of any evidence that indicates that 
national pesticide regulatory requirements contribute significantly to 
existing price differences. Many factors contribute to pricing, such as 
marketing, availability, and demand. As all parties have acknowledged, 
this is a highly complex issue.
    That said, I know EPA has worked very closely with congressional 
staff over the last year, as well as with state officials and others, 
to explore remedies that would help address prices differences that 
U.S. farmers may be experiencing. EPA has made significant progress on 
a variety of administrative and regulatory approaches that help 
facilitate equal access and harmonization. However, these long-term 
approaches will likely not fully resolve this issue in the near-term, 
although these efforts, over time, should significantly help alleviate 
some of the pricing issues that exist today.

A Long-Term Solution: Harmonization
    First, let me describe some of the longer-term, more strategic 
actions that EPA is taking, and partnerships that EPA has established, 
to address this important issue. EPA is working closely with Canada and 
other trading partners to break down barriers and facilitate trade and 
competitiveness. Together, we are developing more consistent regulatory 
and scientific requirements, registering needed products, and 
supporting the principles of sustainable pest management. EPA's work on 
pesticide harmonization with Canada, which began in earnest in 1993, is 
beginning to provide benefits directly to the American farmer. In the 
long term, the creation and ongoing support of a North American 
harmonized market for pesticides will ensure a level playing field 
across borders while maintaining our high standards of protection for 
human health and the environment.
    EPA has also had recent successes in facilitating free trade. In 
December of 1998, the U.S. and Canada signed a formal agricultural 
trade ``Record of Understanding.'' This agreement includes provisions 
specific to pesticide harmonization by encouraging greater cooperation 
among government regulators, growers, and the pesticide industry. 
Subsequently, two public meetings, co-chaired by the Deputy Secretary 
of the U.S. Department of Agriculture (USDA) and the Deputy Minister of 
Agriculture and Agri-Food Canada (AAFC) were held in May 1999 and April 
2000. These discussions have resulted in significant improvements in 
the approach EPA and the Canadian Pest Management Regulatory Agency 
(PMRA) are taking toward international harmonization. The Record of 
Understanding has led to more frequent and open dialogue among EPA, 
grower groups, and industry, which in turn, has begun to accelerate 
regulatory harmonization. We have learned through this process that 
harmonization depends on a partnership with our key public 
stakeholders, growers, and industry, so that strategic planning and 
priority setting across borders can occur simultaneously.
    In April 2001, EPA, together with representatives from industry and 
North American grower groups, participated in a tri-national workshop 
on North American Free Trade Agreement (NAFTA) pesticide registration. 
Participants identified, deliberated, and agreed to a number of 
priorities for harmonization targets. As a result of this meeting, a 
working group on equal access and joint labeling was established, with 
officials of EPA and PMRA serving as a resource. EPA strongly supports 
these broad-based efforts, which will move us closer to a harmonized 
North American market for pesticides. In essence, this vision of a 
North American market, elaborated by the NAFTA pesticides group, 
promotes equal access to pesticides by offering incentives, a 
harmonized review process, and work sharing across national boundaries.
    This recent effort is helping to break down the political and 
regulatory barriers with respect to the delivery and use of pest 
management tools on both sides of the border. An important piece of 
this work is the creation of a ``NAFTA label,'' which will help enable 
the sale and distribution of a pesticide across North America, thereby 
guaranteeing its availability at the same time in the U.S. and Canada. 
We have already made strides in putting this into practice, building on 
the existing Joint Registration Review program. The joint review 
program has resulted in the simultaneous registration of nine new 
pesticide products in the U.S. and Canada, with eight additional 
products currently under review. The governments are also currently 
sharing resources and scientific expertise, or ``work sharing,'' in 
reviewing data on several other pesticide products. One of the products 
under joint review, which will be for use on northern crops, will serve 
as a pilot for introduction of a NAFTA label. We believe expansion of 
products under NAFTA labels will help break down potential trade 
barriers.
    Overall, the NAFTA pesticide group has enabled EPA and PMRA to work 
together on the entire range of pesticide regulatory requirements, 
review procedures, and programs. Mexico is our other important partner, 
and the Mexican pesticide regulatory authority participates on 
individual projects as its resources permit. The NAFTA pesticide group 
has improved governments' capacities to address trade irritants by 
building national scientific and regulatory capabilities, by sharing 
the data review burden, and by coordinating scientific and regulatory 
decisions. To date, the vast majority of data requirements and test 
guidelines that must be adhered to in the registration process have 
been harmonized, and as a result of work sharing and joint reviews of 
recent pesticide registration submissions, the harmonization of risk 
assessment procedures is well underway between the U.S. and Canada. 
These are important milestones that are establishing the framework for 
facilitating equal access to pesticides, which could lead to more 
uniform pricing across borders. You have our commitment to continue to 
work within our current authorities as creatively and flexibly as 
possible to promote a level playing field for U.S. and Canadian 
farmers.

A Near-Term Solution
    EPA stands ready to work with Congress and others on possible 
legislative solutions that effectively address observed differences in 
pesticide pricing, as long as the protection of public health and the 
environment are not compromised. As you know, two bills have been 
introduced, S.532 and H.R. 1084, which would amend Federal Insecticide, 
Fungicide, and Rodenticide Act (FIFRA) to permit Canadian products that 
are substantially similar to U.S. registered products to be imported 
and registered in the U.S. The intent of this legislation is to help 
alleviate as quickly as possible the inequities U.S. farmers may be 
experiencing today as a result of pricing differences.
    EPA's understanding is that this legislation, if passed, would 
authorize a state to register certain Canadian pesticides, thus 
allowing such pesticides to be imported into the U.S. for use in that 
state. Any person or state may seek registration of a qualified 
Canadian pesticide. To be qualified for registration under this 
proposed legislation, a Canadian pesticide must be identical or 
substantially similar in composition to a U.S. registered pesticide 
that is not subject to any enforcement, administrative, or regulatory 
review, control or action. There must also be a tolerance or tolerance 
exemption for any intended use of the Canadian pesticide. In addition, 
the Canadian pesticide must be registered in Canada by the registrant 
of the comparable domestic pesticide or an affiliate of that 
registrant. Once registered, the Canadian pesticide must bear only the 
labeling required under this bill, which is essentially the EPA 
approved labeling for the comparable domestic pesticide but excludes 
use directions unrelated to the intended use(s) of the Canadian 
pesticide in the U.S. Furthermore, the registrant must affix the 
labeling required under this proposal to the Canadian pesticides at an 
establishment registered with EPA.
    The legislation would require that the registrant of the comparable 
domestic pesticide provide to a state any information that is necessary 
for the state to make the determinations required for registration, 
providing that state can certify that it can and will maintain 
confidentiality of any trade secrets and confidential commercial and 
financial information provided by the registrant of the comparable 
domestic pesticide. As drafted, the registrant of the Canadian 
pesticide would not be liable for compensation for data supporting the 
registration of such pesticide.
    EPA understands that this legislation is intended to create a 
structure which ensures that appropriate safeguards remain in place to 
enable EPA to achieve its primary mission: the protection of public 
health and the environment.
    However, there are some broad policy concerns with this legislation 
that will need to be fully addressed, and the consequences fully 
considered. For example, a legislative approach like this, with a focus 
on one country alone, may have broad trade ramifications. EPA will 
continue to work with congressional staff to address these issues as 
they arise.
    Another potential concern is that of implementation. For example, 
there are important questions regarding a state's ability to maintain 
confidential business information and other trade secrets, which in 
this legislation is a critical step in acquiring a state registration 
of a Canadian pesticide. In fact, there are some states which are 
required by right-to-know and other information disclosure laws to 
reveal any information they may hold. Also, the current legislation 
insulates state registrants from data compensation, potentially denying 
manufacturers their rights to be compensated for the use of their data 
to support registration. As a result, pesticide companies may take 
legal action to prevent the states from collecting this data, or seek 
compensation. We also must ensure that intellectual property rights are 
protected. Furthermore, any legislation should not place unreasonable 
resource burdens on our pesticide registration program, or cause any 
unintended consequences on other priorities in regulating pesticides. 
Again, EPA will continue to work closely with your staff to help 
address these types of implementation concerns.

Conclusion
    In conclusion, again, I would like to emphasize that EPA has worked 
very closely with congressional staff over the last year, as well as 
with state officials and others, to explore remedies that would help 
alleviate the concerns U.S. farmers have regarding differences in 
pesticide pricing. EPA continues to seek and create effective 
mechanisms that will ensure the safety of our health and environment, 
while also ensuring an equal playing field for our farmers.
    In the long-term, EPA is working to harmonize the availability of 
pesticide products between the U.S. and Canada through the NAFTA 
pesticide group in cooperation with stakeholders, including 
registrants, farmers, and concerned states. International harmonization 
of pesticide regulation efforts continues to be a key focus for EPA, 
and these efforts hold significant promise to help alleviate some of 
the pricing issues that exist today.
    In the near-term, with no adequate administrative or regulatory 
option available to fully address the potential pricing disparity 
between the U.S. and Canada, EPA supports seeking an appropriate 
legislative solution to this problem. However, although the legislation 
as drafted does not compromise protection of human health or the 
environment--EPA's principal criterion--there are some implementation 
issues and potential international trade concerns that EPA will 
continue to address. If these issues are resolved, EPA would be in a 
position to support this legislation. Again, EPA commits to working 
with Congress, the states, farmers, other Federal Agencies, and 
industry to resolve these concerns.
    Thank you for the opportunity to discuss these matters. I look 
forward to working with you and other members of Congress, and other 
affected stakeholders on this important issue.

    Senator Dorgan. Mr. Johnson, thank you very much for your 
testimony. Let us go to the last page of your testimony and see 
if we can dig into some of these issues. You said: ``However, 
the legislation as drafted does not compromise the human health 
or environment.'' So you are saying there is not a safety issue 
from the standpoint of EPA?
    ``There are some implementation issues and potential 
international trade concerns that EPA will need to address.'' 
Let us just deal with these implementation issues. My view is 
that EPA is not really an agency that is terribly concerned 
about trade issues. We are working on that with USTR. Frankly, 
I do not think there are any trade issues here, but that is 
just a difference between us.
    Let us talk about any concerns that EPA has. If you 
eliminate health and safety, which I think you have done in 
your statement, what additional implementation concerns exist?
    Mr. Stephen Johnson. Let me mention a few, Mr. Chairman. 
One is access and the use of confidential business information. 
For example, in order for a State to receive the 24D 
registration and be able to make the determination that the 
products are identical or substantially similar across the 
borders, they have to have access, the States have to have 
access, to this confidential or trade secret information in 
order to make that determination.
    The current legislation allows that. We are aware of some 
States that have either public disclosure policies or laws in 
place that require a State certainly as a policy to release 
that information. Well, obviously it cannot be maintained 
confidential at the same time it is going released. So we need 
to address--and it is very State-specific. I am aware, I 
believe the State of Washington as well as Vermont either have 
a policy and-or a regulation in place.
    So we would have to work through that, because a State has 
to have the access to confidential business information and at 
the same time they have to have the ability to protect that 
confidential business information.
    Senator Dorgan. But we could simply limit the legislation 
so that the States could make a choice. They could either 
access that information by passing a law--if for example the 
State of Washington has a disclosure law that would compromise 
this proprietary information, this legislation when passed 
would essentially give rise to the choice: Do you want to pass 
State legislation that allows the State regulatory authority 
here to keep that proprietary information private? If you do, 
you can take advantage of this legislation that we have passed 
here in Congress. If not, you are out of luck.
    It would seem to me that one is easy to deal with and we 
can deal with that, which is a line or two in our bill to 
provide that in only States in which they can maintain the 
proprietary records in a private manner would it be effective. 
So that is one; we can solve that.
    Mr. Stephen Johnson. Well, I believe that we can work our 
way through and solve all of these. Let me just mention a 
couple of others.
    Senator Dorgan. All right.
    Mr. Stephen Johnson. One involves data compensation. As you 
are well aware, under the current legislation States seeking to 
register a Canadian pesticide would need the information, as I 
have just mentioned. Current legislation allows the State to 
acquire that data from manufacturers, but insulates the State 
registrants from data compensation.
    What has been characterized to me is that this potentially 
denies manufacturers their rights to be compensated for use of 
their data, and certainly some attorneys have advised us that 
it is sort of unclear what a court would ultimately do, given 
this situation, because it feels that their intellectual 
property rights have been infringed. Again, I flag this as an 
issue.
    Senator Dorgan. I am not understanding that. Would you 
explain more simply for me?
    Senator Burns. Down on our level.
    Mr. Stephen Johnson. Well, let me try to rephrase that. The 
current law, pesticide law, allows for--the company has to 
provide literally millions of dollars worth of testing data to 
the agency.
    Senator Dorgan. To the EPA?
    Mr. Stephen Johnson. To the EPA.
    Senator Dorgan. Right.
    Mr. Stephen Johnson. So we receive probably somewhere 
between 30 and $50 million worth of test data to license a 
product. The current law says that if someone wants to use 
those data to get a similar product registered, then those 
companies have data compensation rights. In other words, they 
have spent these millions of dollars and it is sort of only 
fair that if somebody is going to use it that they have the 
ability to be compensated.
    So that is what the current law is. The legislation as 
drafted protects the State or it says the State does not have 
to compensate the companies.
    Senator Dorgan. Does our legislation not only deal with 
pesticides that are registered here? If that is the case, if 
they have registered the pesticide, the company itself has made 
a decision. They are not selling it here, they are just 
registering it here and then withholding the sale. So I do not 
understand why this would be an issue at all. The chemical 
companies themselves would have made a decision to register, 
but then withhold from sale.
    If the State regulator certifies that it is essentially the 
same chemical, it has been registered here and therefore there 
are no safety issues. I do not understand what this issue is, 
honestly.
    Mr. Stephen Johnson. Well, I think that it probably gets to 
more of a case where there is substantially similar, where it 
may be a little slightly different product, but it is pretty 
much substantially similar. So there may be some additional 
data that would be necessary, but different than what the U.S. 
registration was based upon. So again, I flag this as an area 
that I am aware of that we need to work through on data 
compensation.
    Senator Dorgan. Excuse me. That is not typically an EPA 
issue or an EPA concern, is it?
    Mr. Stephen Johnson. Well, in one sense it is not. Our 
responsibility is to make sure that when those instances happen 
where there is data compensation rights, first of all, we have 
to identify what data we used to make our decision for somebody 
else, and if indeed we used that then the primary registrant or 
chemical company has data compensation rights. So our 
responsibility is first to say what we have done to make our 
decision.
    Second, the law requires that that company that used the 
other data make an offer to pay. So as long as they have made 
an offer to pay, then they have fulfilled their obligations 
under EPA.
    Senator Dorgan. I want to call on my colleague. Before I 
do, I want to ask you one final question. If I might have that 
box of Folicur one more time. Mr. Johnson, the current 
situation I believe is this, and correct me if I am wrong. This 
Folicur box contained a chemical that was marketed in both the 
United States and Canada. This box actually was owned by a U.S. 
farmer, but this is an unusual box in the sense that it was a 
chemical that was being sold in the U.S., it was shipped by the 
chemical company to Canada because they were short up in Canada 
of this chemical, so that they also slapped a Canadian label on 
it.
    The only difference between the U.S. and Canada, the same 
chemical, the same box, the U.S. farmer was charged $500 more 
for the identical product than the Canadian farmer. If the 
chemical company had decided, we are registered in both 
countries with this product, but we now decide not to market it 
in the United States anymore, we will just market it in Canada, 
is it not the case that the U.S. farmer would be unable to 
access this chemical despite the fact that it has been 
registered in this country?
    You say there are no safety issues, but the chemical 
company controls, (A), the price, in this circumstance charging 
the U.S. farmer a much higher price; and (B), the decision of 
whether they will even market it in this country.
    I guess my question is, because you come from a regulatory 
agency dealing with health and safety, is there any 
justification, on behalf of consumers now, U.S. consumers--that 
is who we represent--is there any justification at all for the 
chemical companies to have that capability?
    Mr. Stephen Johnson. Again, our concern is the public 
health and safety. In that case and in the other cases that you 
mentioned, there was no concern over public health and safety. 
We do not want, I do not want, our American farmers to be 
disadvantaged and having to pay more than others. We believe 
and I believe that there needs to be a level playing field.
    Senator Dorgan. So there is no health or safety issue, but 
the reason a chemical company could market this in Canada and 
not in the U.S. and therefore prevent the U.S. farmer from 
acquiring it, is they could hide behind the EPA even though 
there is no safety issue at the present time, is that correct?
    Mr. Stephen Johnson. That is a way of putting it, yes, that 
is correct.
    Senator Dorgan. Is that not using EPA as an unwitting 
shield here, in a manner not intended by Congress?
    Mr. Stephen Johnson. Well, I would rather not be in the 
position that we are, but you are correct.
    Senator Dorgan. I do not mean to use the term ``unwitting'' 
in an incorrect way.
    You have been very helpful to us. I hope that we can expect 
even more assistance to right a wrong. Clearly what is 
happening here is wrong and we do not want in any way to raise 
public safety questions. But nor do we want the chemical 
industry to be able to use the EPA to describe prices on the 
U.S. side of the border at a much higher level than prices they 
charge on the Canadian side. It is just unfair for that to 
continue to happen.
    Let me call on my colleague Senator Burns.
    Senator Burns. I have just a couple of questions. The NAFTA 
label intrigues me. You will have to do some business with the 
ITR's office, though.
    Mr. Stephen Johnson. Well, actually we have, and they are 
as well very excited about the NAFTA label. There is a chemical 
company who has now submitted a NAFTA label for registration. 
It is the first one that we have received. What it does--and 
actually both Canada and the United States are both reviewing 
the licensing application at the same time and looking at, if 
you will, the one label that fits both of our needs.
    As I said, this is the first time. We are very excited 
about it because from a licensing standpoint, from a grower's 
standpoint, from a health and safety standpoint, it just makes 
good sense.
    Senator Burns. Tell me about the attitude of our trading 
partners to the South?
    Mr. Stephen Johnson. They also would very much like to 
participate in this kind of a process. They do not at this 
point have a registration program quite as sophisticated as 
both Canada and the United States does, but we are working with 
them very cooperatively to allow free trade and to make sure 
that what they are doing in Mexico is not in conflict with what 
the U.S. is doing as well.
    Senator Burns. Can this be--now, I have already answered 
one question because you have a fungicide that was up here. 
This is also extended to herbicides and fungicides?
    Mr. Stephen Johnson. That is correct. It is all pesticides, 
which includes insecticides, fungicides, rodenticides.
    Senator Burns. Okay. Now, can you extend that also into the 
animal health?
    Mr. Stephen Johnson. Animal health as far as a pesticide, 
that is correct.
    Senator Burns. Because I can see as we expand the free 
trade zone or the free trade talks going further into South 
America, Argentina, Chile, and the chemicals that are used to 
produce table grapes, strawberries, and melons of all shapes, 
sizes, and descriptions, and also in livestock, and how they 
take care of their livestock, would also--I can see this, this 
NAFTA label, or a label that pertains to a trading agreement 
being very beneficial.
    Now, a while ago you said the business information and the 
protection of intellectual properties. Can you be more specific 
on that as far as your responsibility or the States' 
responsibility in the licensing and testings of a product?
    Mr. Stephen Johnson. Yes. When a company submits a 
pesticide registration application to us, as I said, there is 
literally millions of dollars worth of information. A portion 
of that information is considered trade secret or confidential 
information, typically the kind of information that is how the 
product is actually developed, the synthesis procedure, and 
things like that, that they have a great deal of patent both 
responsibility and protection.
    So that information is submitted to us. We have to go 
through very rigorous procedures within the agency to ensure 
that that trade secret data are maintained as trade secrets. So 
in the case of the proposed legislation, in order for a State 
to be able to make a determination that the product across the 
board is identical or substantially similar they, the State, 
would need to have access to this confidential information. Of 
course, with the access also is the responsibility to make sure 
the trade secret for confidential business information is 
protected or is maintained.
    My point earlier was that I am aware that some States have 
some other laws and-or policies in place, which this kind of 
information would be in conflict. So it is an issue that we 
just have to resolve.
    Senator Burns. Well, I am going to footnote. This is just 
sort of a statement. Now, we know now doing business with 
economies of scale there are going to be some differences. 
There always are, and the translation or the exchange rate in 
the moneys that are used.
    But I will tell you, Mr. Johnson, we would not be here 
having this hearing today if we had five dollar wheat. I will 
guarantee you that, because the economy right now on the farm 
is not in great shape.
    I think what the American farmer right now is really 
feeling, and this is the reason that we are trying to find ways 
to run our operations more efficiently and probably do it on 
less money, is that the American processor and the American 
public still do not have a good idea of how we get more 
dollars, more percentage of the consumer dollar, back on the 
farm.
    For years and years we operated around 15 to 17 cents and 
it kind of fluctuated and agriculture did pretty good. Now we 
are down around 9 or 10 and probably worse than that if you are 
buying Wheaties by the pound in the grocery store. So that is 
what is driving these issues, and our government has to be 
responsive to those things and get aggressive with our trading 
partners and find out how we can deal with the irritants on the 
border, how maybe we can elevate the standard of living both in 
agriculture on both sides of the line.
    The Canadian farmer is not in any better shape than we are, 
and I will say right now that the farm economy is what is 
driving these issues, because I just have an idea that there 
are going to be dramatic changes in the next 4 to 5 years in 
agriculture that we have never seen before, and some of it I am 
afraid will be on the negative side. That is what is driving 
this dialogue.
    So I thank you for coming today. I appreciate--and by the 
way, I have got one thing. You said you are working very 
closely with Congressional representatives up here. Your shadow 
has never darkened my door. So give me a call.
    Mr. Stephen Johnson. Senator, I would be happy to.
    Senator Burns. Thank you very much.
    Senator Dorgan. Mr. Johnson, just one or two final 
questions. You indicate EPA is working closely with Canada and 
other trading partners to break down barriers and facilitate 
trade and competitiveness.
    Mr. Stephen Johnson. Yes.
    Senator Dorgan. Frankly I have been concerned about 
harmonization efforts. I think we are much more interested in 
doing new trade agreements than following up on requirements 
from old agreements. We have, for example, this notion now that 
we need to provide fast track authority. Well, my reaction is 
maybe we should provide some requirements that we fast track a 
few solutions to the problems created in the old agreements 
before we give anybody fast track to go make new agreements.
    But one of the issues in the NAFTA agreement was chemical 
harmonization, and I know you say you are making some progress, 
but I must confess to you I see precious little evidence of 
that. Let me ask this question. Assuming this legislation does 
not pass, let us assume this legislation does not move, is 
there any expectation on your part that 2 years from now, 4 
years from now, that our farmers will be able to access the 
substantially similar chemicals from Canada and bring them 
across the border?
    Mr. Stephen Johnson. In the short term, I do not believe 
that we do have a solution other than legislation.
    Senator Dorgan. So you believe the legislative solution is 
the only mechanism to address this issue?
    Mr. Stephen Johnson. Certainly in the short term.
    Senator Dorgan. And you believe, from your testimony, that 
there is a problem here with respect to equity and fairness?
    Mr. Stephen Johnson. Yes.
    Senator Dorgan. You do not believe there is a problem with 
respect to safety, public safety, as the legislation is 
drafted, is that correct?
    Mr. Stephen Johnson. That is correct.
    Senator Dorgan. And you will continue to work with us as we 
strive to perfect this legislation? You have raised, I think, 
for example in the issue with respect to proprietary 
information some fair points. I do not know that that is an EPA 
issue so much. It is more a corporate issue. But I think we 
should probably add a very brief provision to this legislation 
saying that those States in which the information would not be 
held proprietary will not be able to participate until the 
State legislatures make that judgment. That is an easy thing to 
do.
    I think if you would be willing to give us a list of the 
things you think need to be done to improve this legislation, 
as far as I am concerned--and I would hope to speak on behalf 
of Senator Burns and the other co-sponsors--I think we would 
want to make the changes, improve this legislation, and then we 
would like to move it with the support of the EPA.
    Mr. Stephen Johnson. I would be happy to do so.
    Senator Dorgan. I would say that Administrator Whitman has 
been extraordinarily helpful on a range of issues and, while I 
do not know her well and have not worked with her a great deal, 
those issues that we have worked with her on tell me that she 
is somebody that wants to do the practical thing, figure out 
what the problem is, find some solutions, and take practical 
steps to solve some problems.
    I like that attitude. I like an Administrator who does 
that. That is a refreshing thing, because every agency has so 
many attorneys telling the administrator of the agency why they 
cannot do something. I think it is refreshing to find 
administrators who say, let us solve problems. I think 
Administrator Whitman is someone who wants to do that.
    Senator Burns. Mr. Chairman, I also want to interject. 
There have been two or three meetings already between the EPA 
Administrator and the Secretary of Agriculture. That is unheard 
of since I have been here, because we cannot get agencies to 
talk to one another. They do not want to give up any of their 
turf; we do not want to give away any of our secrets here in 
this town. So that contributes to 17 square miles of logic-free 
environment.
    We are all in this thing together and the dialogue between 
the agencies is going to have to be increased.
    Senator Dorgan. Is that sound that you made a cutback or a 
callas bell sound? I was trying to figure that out.
    [Laughter.]
    Senator Burns. I picked it up in Regent, North Dakota.
    Senator Dorgan. You picked it up, but you did not keep it 
long.
    Mr. Johnson, we deeply appreciate your testimony, and not 
just today, but we appreciate the work that you have done and 
have been willing to do with us. We look forward to meeting 
with you again, perfecting this legislation, getting the EPA's 
written support, written unconditional support. We will try to 
move that through the Congress.
    Thank you very much.
    Mr. Stephen Johnson. Thank you, Mr. Chairman. Thank you, 
Senator Burns.
    Senator Dorgan. Let me, while I excuse Mr. Johnson, call 
the next panel forward: Mr. Ron Fitchhorn, President of the 
Illinois Corn Growers Association, of Bloomington, Illinois; 
Mr. Dave McClure, President of the Montana Farm Bureau. Mr. Art 
Purdue was going to be with us, General Manager Cenex Minot, 
North Dakota. He is not here because of a medical situation, so 
he has submitted a statement. Mr. Jay Vroom, President of the 
American Crop Protection Association; and Hank Zell, National 
Farmers Union.
    If you all would come forward and take a seat, we would 
appreciate it.
    Mr. Fitchhorn, you are President of the Illinois Corn 
Growers. We will begin with you. Your entire statement will be 
made a part of the record and we would ask you to summarize, 
and we welcome you here today.

 STATEMENT OF RON FITCHHORN, PRESIDENT, ILLINOIS CORN GROWERS 
                          ASSOCIATION

    Mr. Fitchhorn. Thank you, Chairman Dorgan and Senator 
Burns. Thank you for this opportunity to appear before you 
today on this very important issue. My name is Ron Fitchhorn 
and I grow 2,000 acres of corn and soybeans in central 
Illinois, and I also serve as the Illinois Corn Growers 
Association President this year.
    The issue of price disparity that the Committee is 
addressing today has plagued U.S. farmers for many years. 
However, awareness of these inconsistent pricing schemes is at 
an all-time high. Increasing competition amongst the world's 
farmers means U.S. growers are now keenly aware that unfair 
agricultural input pricing subsidies are subsidizing the inputs 
of our competitors. This puts America farmers at a 
disadvantage.
    Senator Dorgan's bill focuses on chemical inputs. However, 
the same issue exists with seed pricing, both conventional and 
in new seed varieties developed through biotechnology. Farmers 
deal with many factors outside of their control in raising a 
crop. Unlike the weather, I think we can have a positive impact 
in addressing the issue of price disparity of inputs like 
chemicals and seed.
    Other panelists have noted the recently completed North 
Dakota State University study which shows U.S. farmers were 
paying substantially more for chemical inputs, specifically 
herbicides, than farmers in neighboring Canada. Researchers 
found that the net income for large, medium, and small sized 
representative farms would increase 3.8, 4.6, and 5.2 
respectively if Canadian priced herbicides could be used in the 
United States.
    The study went on to note that the total impact on U.S. 
agriculture would be quite substantial, at least $1.46 per acre 
in the herbicide industry alone.
    These numbers are alarming, especially given the current 
poor state agricultural economy in the United States. Pesticide 
expenses in the United States increased from 1.2 percent of the 
total production expenses in 1965 to 5.1 percent in 1999. Today 
this means U.S. farmers are paying $6 million more for the 
widely used herbicide called Roundup alone.
    Although the study focused on North Dakota farmers for much 
of the information, it can be applied to farmers in any State. 
For example, in my home State of Illinois the price of 
Atrazine, the most widely used herbicide in the State, was 
$3.17 per pound during the time that the data was collected for 
the North Dakota study. In Canada the same product sold for 
$2.53. The same situation also exists for most of the other 
chemical inputs used in Illinois. I would be happy to supply 
the Committee with further data if necessary.
    The Illinois Corn Growers Association has had many 
discussions with input providers on the price disparity of 
needed chemicals, but with limited response.
    But two-tiered pricing does not stop with chemicals. In 
January of 2000, the Government Accounting Office released a 
study in which they found that the prices American farmers were 
paying for biotech seed and conventional seed are likewise 
distorted. The study looked at prices being paid by U.S. 
farmers and those in Argentina.
    The study found that U.S. farmers paid within the range of 
20 to $23 for a 50-pound bag of Roundup Ready soybeans, while 
the farmers in Argentina paid 12 to $15 for the same bag. For 
BT corn seed this disparity also exists, with U.S. producers 
paying 83 to $122 per 80,000-seed bag and Argentina's prices 
ranging between 75 and $117.
    Even this small margin is costing me approximately $5,000 
on my operation this year. If you add in the $1.46 with the 
herbicide, we are getting up toward $8,000 on my own operation.
    Conventional seed is also more expensive in the United 
States. Conventional soybean seed in the United States will 
cost a grower 13 to $17 per bag and the Argentina farmer pays 8 
to 10 for the same product.
    In total, U.S. farmers pay much more for the inputs than 
our competitors.
    I commend you, Senator Dorgan, for your attempt to shed 
light on this important issue. However, I would suggest that we 
consider a further step to assure pricing fairness. It has been 
difficult to monitor global price disparities because there is 
no centralized recording requirement. I would urge Congress to 
consider requiring USDA's Economic Research Service to publish 
input prices every 2 years. This publication would be a useful 
tool, especially if it includes the prices being paid by our 
major competitors.
    The Illinois Corn Growers Association believes it is 
neither prudent nor logical to shackle U.S. farmers with higher 
chemical prices than our competitors.
    Thank you for your time and your consideration on this 
matter.
    [The prepared statement of Mr. Fitchhorn follows:]

 Prepared Statement of Ron Fitchhorn, President, Illinois Corn Growers 
                              Association

    I would like to thank Chairman Dorgan, Ranking member Fitzgerald, 
and the rest of the Committee for the opportunity to appear before you 
today on this very important issue. My name is Ron Fitchhorn. I grow 
2,000 acres of corn and soybeans on my Central Illinois farm. I also 
serve as Illinois Corn Growers Association president.
    The issue of price disparity that the Committee is addressing today 
has plagued U.S. farmers for many years. However, awareness of these 
inconsistent pricing schemes is at an all-time high. Increasing 
competition amongst the world's farmers means U.S. growers are now 
keenly aware that unfair agricultural input pricing subsidizes the 
inputs of our competitors. This puts American farmers at a 
disadvantage. Senator Dorgan's bill focuses on chemical inputs; 
however, the same issue exists with seed prices for both conventional 
and new seed varieties developed through biotechnology.
    Farmers deal with many factors outside of their control in trying 
to raise a crop. Unlike the weather, I think we can have a positive 
impact in addressing the issue of price disparity of inputs like 
chemicals and seed. Other panelists have noted the recently completed 
North Dakota State University study (United States and Canadian 
Agricultural Herbicide Costs: Impacts on North Dakota Farmers) which 
showed U.S. farmers were paying substantially more for chemical 
inputs--specifically herbicides--than farmers in neighboring Canada.
    Researchers found that ``net farm income for large, medium, and 
small size representative farms would increase 3.8%, 4.6% and 5.2%, 
respectively, if Canadian priced herbicides could be used in the United 
States.'' The study went on to note that the total impact on US 
agriculture is $23.9 million, or $1.46 per acre in the herbicide 
industry alone. These numbers are alarming, especially given the 
current poor state of the agricultural economy in this nation.
    Pesticide expenses in the United States increased from 1.2% of 
total production expenses in 1965 to 5.1% in 1999. Today this means 
U.S. farmers are paying $6 million more for the widely used herbicide 
called Round-up alone.
    Although the study focused on North Dakota farmers, much of the 
information can be applied to farmers in any state. For example, in my 
home state of Illinois the price for Atrazine, the most widely used 
herbicide, was $3.17 per pound during the time the data was collected 
for the North Dakota study. In Canada the same product sold for $2.53. 
The same situation also exists for most of the other chemical inputs 
used in Illinois. I would be happy to supply the Committee with this 
data if necessary.
    The Illinois Corn Growers Association has had many discussions with 
input providers on the price disparity of needed chemicals, with 
limited response. And this two-tiered pricing does not stop with 
chemicals. In January 2000, the Government Accounting Office (GAO) 
released a study (Information on Prices of Genetically Modified Seeds 
in the United States and Argentina) in which they found the prices 
American farmers are paying for biotech seed and conventional seed are 
likewise distorted. The study looked at prices being paid by U.S. 
farmers (specifically Iowa and Illinois farmers) and those in 
Argentina.
    The study found U.S. farmers pay within a range of $20-$23 per 501b 
bag of Roundup Ready soybean seeds. Farmers in Argentina pay only $12-
$15 for same bag. For BT corn seeds, the disparity also exists--with 
U.S. producers paying $83-$122 per 80,000 seed bag and Argentina prices 
ranging between $75-$117. Even this small margin is costing me 
approximately $5000 on my operation this year.
    Conventional seed is also more expensive in the U.S. Conventional 
soybean seeds in the U.S. will cost a grower $13-$17 per 80,000 seed 
bag. Argentina's farmers pay $8-$10 for the same product.
    In total, U.S. farmers pay much more for inputs than our 
competitors. I commend Senator Dorgan for his attempt to shed light on 
this important issue. However, I would suggest that we consider a 
further step to assure pricing fairness. It has been difficult to 
monitor global price disparities because there is no centralized 
recording requirement. I would urge Congress to consider requiring 
USDA's Economic Research Service (ERS) to publish input prices 
(chemical and seed) every two years. This publication would be a useful 
tool, especially if it includes the prices being paid by our major 
competitors.
    Illinois Corn Growers Association believes it is neither prudent 
nor logical to shackle U.S. farmers with higher chemical prices than 
our competitors. Thank you for your time and consideration on this 
matter.

    Senator Dorgan. Mr. Fitchhorn, thank you very much.
    Why do we not just go down the row. Let me ask Mr. Jay 
Vroom, President of the American Crop Protection Association, 
to testify.

  STATEMENT OF JAY VROOM, PRESIDENT, AMERICAN CROP PROTECTION 
                          ASSOCIATION

    Mr. Vroom. Thank you, Mr. Chairman, Senator Burns. We 
appreciate the opportunity to be here today. We have submitted 
a written statement and ask that that be entered into the 
record. I would like to summarize a few thoughts if I might in 
the time allotted for oral remarks.
    No doubt that this is an important issue, both in terms of 
the reality of the actual disparities in terms of product 
availability and the unevenness that that has created in the 
marketplace for my industry's crop protection products and 
biotechnology products across this particular border. But it, 
as it has been said earlier here by other witnesses and by 
yourselves, this is not an issue just confined to the U.S.-
Canada border.
    Likewise, there is a substantial perception problem that we 
also think needs to be addressed, and more transparency and 
information about what costs really are and what kinds of 
inequities there might actually be in the marketplace is 
appropriate.
    For those who may be here today listening that are not 
acquainted with the agricultural community, I think it is 
important for this opportunity for me to point out that ACPA 
and our member companies that we represent and their customers, 
which are in some cases not members of ACPA, distributors of 
agrichemicals in the United States and biotechnology seed 
products, and the independent dealers across this country, have 
worked extensively throughout the duration of our opportunity 
to be in this marketplace for more than 40 years with our farm 
customers.
    I know of no one that actively participates in the United 
States marketplace for these technologies that intentionally 
discriminates against the American farmer. That is contrary to 
everything that we do, including the advocacy for support of 
farm programs that provide essential safety nets for the 
American farmer, as well as advocacy for more free trade for 
agricultural output, and also the fundamental positions that we 
have taken and energy and resources that we put into advocating 
for harmonization of rules and regulations and legislation that 
govern our industry's products.
    As I have thought about some of the remarks that have been 
made here so far this morning, particularly around the 
requirements of U.S. EPA and the Pesticide Management 
Regulatory Authority in Canada, both are interesting case 
studies in the old adage that, at least in terms of American 
democracy, it is imperfect, it is ugly, it is run by human 
beings, but it is the best system in the world and it is the 
best system that has ever been implemented in the world.
    Can it be better? Can our regulation of pesticides be 
better, more fair or harmonized? And can we lower that barrier 
that is the Canadian-U.S. border to create a more unitized 
market for our industry products? Absolutely, and we commend 
the things that EPA has done and achieved already, even working 
with our industry and many grower groups on both sides of the 
border, to effect some progress.
    But let me tell you that, while the progress that has been 
made, particularly in the last year or two, is substantial, 
when put into context with the fact that we have been working 
on this since 1988--even before there was a NAFTA, there was a 
U.S.-Canada Free Trade Agreement, as those of you along the 
northern tier States know all too well. We have been actively 
investing in trying to move this ball forward in terms of 
greater harmonization.
    If you put it in the context of 12 to 13 years, the success 
that we have got to show in terms of progress in harmonizing 
and joint reviews and now on the verge of maybe having the 
first NAFTA-labeled pesticide product available for U.S. and 
Canadian and Mexican farmers, it is a pretty dismal record. So 
we would like to go faster. We would like to see more progress 
in that regard.
    But we also commend the fact that we have a pretty good 
system that has established an ability for my industry to have 
incentives to innovate and develop billions of dollars worth of 
products that have been very effectively used by American 
farmers and farmers around the world. We are in favor of 
greater harmonization and we look forward to working with you, 
Mr. Chairman, and other Senators who are interested in this 
issue, as well as our grower customers that are absolutely at 
the forefront of this issue.
    We recognize the fact that there is economic strife in the 
farm economy. We feel it directly. As was reflected in my 
written testimony, my industry's sales in the United States 
have come down substantially in the last 3 years, even more 
dramatically when measured against our peak sales years 1995 
and 1996 in the United States. So we are suffering along with 
our farm customers. I know that most personally because I am 
from Illinois and I am still engaged in the family farm 
operation with my cousins and brothers-in-law and I hear 
regularly from them about the difficulties that are being 
experienced by family farmers back in Illinois. So I understand 
personally as well as professionally on behalf of representing 
ACPA here today that these are issues that need to be 
addressed.
    We do have some serious concerns with some of the 
provisions that are in your bill, Mr. Dorgan. But we would 
commit ourselves to continue to work with your staff and EPA 
and the grower interests to see if we can find some common 
ground and move forward here.
    With that, in conclusion, I thank you again for the 
opportunity to be here and look forward to responding to any 
questions.
    [The prepared statement of Mr. Vroom follows:]

 Prepared Statement of Jay Vroom, President, American Crop Protection 
                              Association

    Mr. Chairman and Members of the Committee:
    I am Jay Vroom, President of the American Crop Protection 
Association (ACPA). ACPA is a national trade association representing 
the manufacturers, distributors and formulators of virtually all crop 
protection chemicals and crop biotechnology products used in the United 
States. I appreciate the opportunity to testify before you this morning 
on pesticide and biotech seed harmonization issues.
    Producing and marketing crop protection and the new array of 
biotechnology products involves a complex matrix of factors, including 
crops, competitive chemicals, soil/climate conditions, geographic 
region, dealer and distributor incentives, volume discounts, patent 
life, liability costs, minor use considerations, regulatory compliance, 
regulatory delays, transition to and reinvestment in reduced risk 
products, research and development costs, the state of the farm economy 
and a multitude of other considerations, not the least of which is the 
impact of the uncertain and inconsistent implementation of the Food 
Quality Protection Act (FQPA).
    We are pleased that our member company investments in research and 
development have provided a vast arsenal of insect, disease and weed 
control tools for American farmers. Yields of many crops in the U.S. 
have doubled and tripled since the introduction of modern pesticides 
and much of this increase is due to the effectiveness of these tools in 
controlling crop pests. I believe it is important to recognize the 
benefits of the U.S. crop protection industry and some of our major 
accomplishments:

   First and foremost is the vast array of tools we provide the 
        American farmer. Today we have more than 9,000 product 
        tolerances on crops from wheat, soybeans, canola, barley to 
        sunflowers, flax, zucchini and kiwi.

   We understand that some growers, especially minor use 
        farmers, would like to have additional registrations and we'll 
        continue to work closely with growers, USDA, EPA and the NAFTA 
        Technical Working Group to accommodate these needs when 
        possible. For the last few years, for example, we have worked 
        very closely with the canola growers in their quest for more 
        pesticide tools in the U.S. Since this crop is comparatively 
        new in the U.S. compared to Canada, and the U.S.-planted 
        acreage is considerably smaller than in Canada, U.S. growers 
        are eager to gain access to products which have already been 
        registered across the border.

   We are pleased that our work with the growers and EPA is 
        beginning to pay off. Since 1995, a significant number of new 
        pesticide uses have been registered for canola. EPA's current 
        FY 2001 work plan includes nine such uses, of which five have 
        been registered. In addition, credit is due to USDA's IR-4 
        program for its attention to and actions that have contributed 
        solutions in this minor use area.

    There are multiple challenges to the crop protection and biotech 
industry. We are committed to serving the American farmer by providing 
the best technology at the farm gate and supporting their farm and 
rural policy objectives in the legislative and regulatory arenas. The 
Senate Agriculture Committee is addressing many of these issues and we 
encourage Congress as they consider the current Farm Bill to help 
increase exports, build domestic demand, reduce agriculture's 
regulatory burden and provide affordable, workable risk management 
tools to growers.
    Recent years have certainly taken a toll on U.S. agriculture, with 
declining prices, natural disasters, and distressed world economies. 
Many U.S. farmers are experiencing serious financial problems. Congress 
has provided emergency assistance to farmers, but the pain continues to 
ripple throughout the farm economy, with ACPA members included in the 
economic-pain quotient. Doane Agricultural Service reports that total 
agricultural pesticide sales for all U.S. crops for all pesticide types 
(including herbicides, insecticides, miticides, fungicides, plant 
growth regulators, and nematicides) dropped by nearly 10 per cent from 
$7.410 billion in 1998 to $6.691 billion in 1999. When the agriculture 
economy is stressed, our member companies are negatively impacted also. 
Our own association sales survey data shows that the total U.S. sales 
of ACPA member companies declined from $8.327 billion in 1998 to $7.837 
billion in 2000. Even more dramatic declines in our total sales can be 
found if we go back to earlier years for comparison.
    Relative to the subject of this hearing this morning, I would like 
to address some of the key variables related to crop protection and 
crop biotech product pricing.

1. Pesticide Registration Regulatory Processes / United States vs. 
        Canada
    The most important factor in pricing differentials results from the 
significant differences in product testing and registration standards 
between the United States and Canada. At our own initiative, ACPA 
formed a special Industry Working Group to help move the regulatory 
harmonization process forward. We have been working with EPA and their 
Canadian counterpart PMRA for the last several years to harmonize some 
of these requirements so that products on both sides of the border 
would be more equally available, and therefore likely to be more evenly 
priced. It seems reasonable that the U.S. and Canada could mutually 
accept pesticide tolerances, rather than have separate processes and 
reviews. Although frustrated, we will continue to press our regulatory 
bodies to move more expeditiously toward harmonization.
    In the U.S., fewer than 1 in 20,000 compounds will make it from the 
discovery laboratory to the farm field; and only after that one 
chemical passes at least 120 or more federally mandated tests during a 
period of 10 years or more at a total invested cost in the product's 
development of upwards of $150 million. This time and cost is borne 
completely by the initial registrant before one cent can be generated 
in revenue. In Canada, a similar chemical would have to undergo 
sometimes very different batteries of tests and procedures.
    EPA implementation practices on FQPA are being exported to Canada 
where worst-cased default decisions may be adopted in the name of 
harmonization. This regulatory approach, if adopted, will reduce the 
number of products available to growers on both sides of the border, 
and will undoubtedly impact the prices of remaining products. The 
registration processes in Canada including, testing and data 
requirements, can be significantly different, sometimes resulting in 
lesser cost and time between laboratory development and ultimate 
marketplace sales.

2. Harmonization
    Under the North American Free Trade Agreement (NAFTA), the 
governments of Mexico, Canada and the United States formed the 
Technical Working Group (TWG) on Pesticides in 1996. The scope of work 
for the TWG has been to develop a coordinated pesticides regulatory 
framework among NAFTA partners to address trade irritants, build 
national regulatory/scientific capacity, share the review burden, and 
coordinate scientific and regulatory decisions on pesticides. We 
support the goals of NAFTA TWG which include: (1) Sharing the work of 
pesticide regulation; (2) Harmonizing scientific and policy 
considerations for pesticide regulations; (3) Reducing trade barriers; 
and (4) Maintaining current high levels of protection of public health 
and the environment while supporting the principles of sustainable pest 
management.
    We believe that through this process, new product registrations can 
be expedited and duplication of studies and analysis can be reduced, 
ultimately providing greater market competition in both availability 
and pricing. In order to get there, however, we need to continue 
working through the TWG to harmonize guidelines, define the ``core 
regulatory data set,'' and streamline the EPA registration process.

3. ``Pesticide Pricing Study on Differentials Between Canada and the 
        United States''
    In 1999 USDA and Agri-Food Canada conducted a comprehensive study 
of products and price differentials between the two countries, as 
mandated in the U.S.-Canada Record of Understanding. The study was 
conducted by expert researchers at the North Carolina State University 
and University of Guelph in Ontario, Canada. The conclusions of the 
study show that on a cost-per-treated acre basis, Canadian farmers 
spend far more on chemical inputs in general than farmers in the 
northern plains states. Selective use of the data may misrepresent the 
author's findings, and we feel it is important to look at the whole 
picture.
    We believe that this governmental report reflects an accurate 
snapshot of pricing between the two countries, concluding that some 
pesticides are higher in the U.S., while others are higher in our 
neighboring country. We would support this data being updated by a 
credible governmental body, or its contractors, so a current and 
accurate assessment can be conducted. Some of the key conclusions from 
the 1999 Report are summarized below:

   Individual Northern U.S. growers may have higher costs of 
        production than Canadian counterparts, but these have much more 
        to do with non-chemical issues such as land, labor and 
        management costs.

   Some pesticide products have lower prices in Canadian 
        provinces than similar products in North Dakota. Conversely, 
        others are listed as being the opposite: lower priced in ND. 
        The marketplace factors given for price differentials include: 
        differences in patent protection length; differences in market 
        size and costs; differences in farmer demands; differences in 
        availability of alternative products.

   ND growers generally spend less on weed control products 
        than their northern counterparts.

   Frequently used products in Manitoba and Saskatchewan differ 
        from those frequently used in ND or MN.

   There is a difference of US $3-4 on a per treated acre 
        basis, with ND growers spending less then growers in MB or SK.

   Overall, cost-per-treated acre in ND is significantly lower 
        than in Canadian provinces.

   The percent difference that Manitoba growers spend above ND 
        growers by crop was: +209 percent for wheat, +169 percent for 
        barley, +41 percent for canola, +29 percent for potatoes.

   ``The estimated impact of purchasing lower priced pesticides 
        in either Manitoba or North Dakota using existing herbicide 
        market shares is small on a per treated acre basis (usually 
        less than US $0.50 per acre).''

    I would also like to refer the Subcommittee to the February 26, 
1999 GAO report on pesticide pricing in Canada and the U.S., which 
addresses the marketing complexities both within the U.S. and between 
the two countries.

4. Cost of Liability
    It is important to recognize what a litigious society the U.S. has 
become and how this burden is factored into market strategies in 
response to frivolous lawsuits. Much attention has been paid to the 
notion of tort reform, but little has been accomplished in changing the 
law or the practice of frivolous lawsuits.
    U.S. agrochemical manufacturers understand these conditions all too 
well. Our companies face a literal barrage of threatened or formal 
legal actions covering the full range of liability exposures: product 
performance, environmental damage, personal injury, and so on. Having 
to defend the underlying business--whether through rigorous court 
action or out of court settlement--is a real and growing cost of our 
U.S. business. Some states are home to courts that encourage or allow 
more frivolous litigation than others, accounting for different 
underlying cost assumptions in different parts of our domestic markets.
    Different crops vary widely in their overall per acre value. The 
potential liability that accompanies the marketing of pesticides on 
high-valued crops forces registrants to pay special attention to 
conditions that might cause crop damage. These factors increase the 
costs of products on some crops. Highly competitive marketing 
strategies, including rebates, must also be accounted for in the 
pricing of products to growers.

5. Labeling Issues of FIFRA and N.D. Department of Agriculture
    Section 24(c) of the Federal Insecticide, Fungicide and Rodenticide 
Act governs ways by which state governments can address special local 
needs of an existing or imminent pest problem for which there is no 
available federally registered pesticide product. The N.D. Department 
of Agriculture has contacted several crop protection manufacturers to 
see if there was interest in applying for 24(c) SLN for products they 
marketed in Canada, which had same or similar formulations in North 
Dakota at different prices. If legislation is considered, a minor 
change to FIFRA Sec 24 (c) might give EPA additional authority to 
address the concerns we are discussing this morning.

6. Biotech Seeds
    Specific to the issue of biotech seed sales, our biotech member 
companies market seeds on a global basis. Considering their substantial 
investment in agricultural research, we strongly support protection of 
their intellectual property rights. The ability to recoup their 
investment costs based on the market value of their discovery is a 
right, long championed in the U.S. The January 2000 GAO Report issued 
last year comparing prices of biotech seeds indicated that a key reason 
that the price of biotech soybeans was lower in Argentina than in the 
U.S. was the lack of patent and other intellectual property protection 
for these products in Argentina, including the lax enforcement of seed 
laws there. The pricing differential between the two countries is a 
result of weak controls that encourage black market seed sales, not 
marketing practices by the technology providers. In the WTO dispute 
settlement proceedings against Argentina last year, we were pleased 
that members of Congress and the U.S. Special Trade Representative 
urged the inclusion of intellectual property protection for 
biotechnology.
    Last month one of our technology providers announced the 
elimination of separate technology fees for corn and soybean seed. 
Starting with the 2002 planting season, growers will make a single 
payment to the seed company for technology and seed, rather than 
separate payments to the seed company and the technology provider for 
the patented technology. This independent decision by one technology 
company is an illustration of the fact that this market is rapidly 
evolving and that market forces are functioning.

Summary
    The frustrations around all these issues demonstrate the need to 
aggressively pursue government-to-government harmonization. Pricing and 
availability issues cannot be solved by individual state actions on 
individual products. Our regulatory bodies have an obligation to 
promulgate clear federal government rules and guidelines, so as to 
avoid confusion and disruption in the marketplace.
    The pricing of pesticides and biotech products takes into account 
many factors that encompass research and development costs, 
distribution and marketing costs, crop value and related liability, 
availability of competitive products, state of the farm economy and 
available patent life. The most important factor in our marketplace, 
however, is a healthy customer. As stated earlier in this testimony, 
our U.S. farmer customer is in dire economic straights, and so is our 
industry. We hope that the issues of concern at this hearing can be 
properly put in the larger context--that we have a regulatory system 
that has enabled development and marketing of crop technology products 
over the last several decades that have contributed to the U.S. 
agricultural system being the envy of the world. Inadvertently 
compromising the positive strength of this system could have profound, 
long term negative impacts on our entire technology innovation system.
    Thank you again for the opportunity to share our views with the 
Subcommittee. We look forward to working with the Chairman and other 
Senators to address the U.S.-Canada harmonization concerns discussed 
here today.

    Senator Dorgan. Mr. Vroom, thank you very much.
    We are joined by Senator Fitzgerald. Would you like to make 
a statement? We have two additional witnesses to testify.

              STATEMENT OF HON. PETER FITZGERALD, 
                   U.S. SENATOR FROM ILLINOIS

    Senator Fitzgerald. I want mainly to thank Mr. Fitchhorn. 
He is the President of the Corn Growers in Illinois, the new 
President. I would like to welcome him, my constituent, here, 
and Mr. Vroom, who indicated he was born and raised in 
Illinois. I guess you are from Bureau County, is that right?
    Mr. Vroom. Yes.
    Senator Fitzgerald. So you are still an honorary 
constituent, I guess. Welcome.
    Senator Burns. He still votes there.
    Senator Dorgan. Pardon?
    Senator Burns. He still votes there.
    Senator Fitzgerald. Do you still vote there?
    Mr. Vroom. No, sir. I vote in the Commonwealth of Virginia.
    [Laughter.]
    Senator Fitzgerald. I want to thank you for being here.
    I have not heard much on this issue from Illinois farmers. 
I think it probably more pertains to the farmers along the 
border in Senator Burns' and Senator Dorgan's states. But it is 
a legitimate issue and I hope we can find out some solution 
that helps the farmers in the northern tier of states around 
the country.
    I appreciate you all being here and thank the Chairman for 
holding this hearing.
    Senator Dorgan. Senator Fitzgerald, thank you very much.
    Next we will hear from Mr. McClure. Mr. McClure, would you 
proceed.

          STATEMENT OF DAVE McCLURE, PRESIDENT OF THE 
           MONTANA FARM BUREAU, AMERICAN FARM BUREAU 
                           FEDERATION

    Mr. McClure. Good morning, Mr. Chairman and Committee 
members. I am Dave McClure, a farmer and rancher from 
Lewistown, Montana. I raise wheat, barley, cattle and hay. I am 
also the President of the Montana Farm Bureau and a member of 
the board of directors of the American Farm Bureau Federation. 
I am testifying today on behalf of both the American Farm 
Bureau and the Montana Farm Bureau.
    The Farm Bureau is the Nation's largest farmer and rancher 
organization, with over 5 million members in all 50 States and 
Puerto Rico. As you know, Mr. Chairman, farmers and ranchers in 
all 50 States have been facing some rather difficult hard times 
in these past few years. These difficult times have forced 
those of us in production agriculture to take a closer look at 
our bottom line and attempt to do whatever we can to reduce any 
unneeded costs and hopefully to realize a profit or simply 
break even. This has been hard to achieve in recent years.
    This examination has exposed a number of increasing costs 
that farmers are now voicing concern about and attempting to 
mitigate. Such expenditures include ever-increasing 
environmental regulation costs, labor costs, energy costs, and 
agricultural chemical costs, which is what we want to focus on 
today.
    Let me begin by saying the Farm Bureau strongly supports 
Senate bill 532, the Pesticide Harmonization Act, which is also 
co-sponsored by both Senators from my State, Senator Burns and 
Senator Baucus. Mr. Chairman, from your opening comments I 
realize that you do not have to be convinced on this bill. 
Thank you for that.
    This legislation would allow farmers, cooperatives, farm 
supply stores access to lower-priced Canadian agricultural 
chemicals that are identical or substantially similar to those 
sold in the United States.
    The high cost of some pesticides in the U.S. is 
contributing to the current farm crisis by inflating 
agricultural producer input costs. Producers in other nations, 
such as Canada, use pesticides substantially similar in content 
to those used in the U.S., but their farm products are often 
less expensive. Under current law, U.S. producers cannot import 
those pesticides from other nations.
    We farm in a global market. Our competitors are not just 
down the road, but around the world. To remain competitive and 
hopefully profitable, we must constantly search for ways to 
reduce our production costs. From the producer's point of view, 
there is a price disparity among some agricultural chemicals in 
the U.S. and Canada that impedes our competitiveness and 
profitability.
    We believe this legislation will work to remove that 
disparity. Under the Pesticide Harmonization Act, States can 
petition the Environmental Protection Agency to issue pesticide 
labels to be placed on the Canadian products where the only 
significant difference between the products is price. The U.S. 
product label would allow our farmers to buy a Canadian 
pesticide for use on their farms in the United States.
    The Farm Bureau believes this legislation is a significant 
step towards achieving the goals of gaining access to 
affordable and needed products by U.S. farmers while at the 
same time maintaining U.S. standards designed to protect U.S. 
consumers, farmers, and the environment. Farmers in this 
country need a level playing field to compete with foreign 
growers and having equal access to less expensive crop 
production materials will improve the competitive position of 
U.S. producers.
    Studies have been conducted of cost differences by USDA and 
others and the results do demonstrate that similar compounds 
used on both sides of the border can be priced differently. 
While the U.S. grower does benefit by some examples of 
pesticide cost comparisons, we also pay a much higher cost for 
a variety of products, such as Roundup, Liberty, Puma, Buctril, 
all of which are registered for use on U.S. crops such as wheat 
and barley.
    Sometimes these price differences are significant. Senator 
Baucus has stated that recent surveys have shown that U.S. 
farmers can pay as much as 117 percent to 193 percent more than 
farmers in Canada for virtually the same products. Sometimes 
these cost differences are less so, but a USDA study puts this 
in perspective by stating that: ``Although pesticide 
expenditures are not high for the study crops in the Canadian-
U.S. prairie area compared with some crops and areas, they are 
relatively high compared with per-acre profits. A few dollars 
of extra cost can make the difference between a profitable and 
an unprofitable year.''
    The American Farm Bureau and the Canadian wheat pools have 
sponsored producer meetings for the last 3 years. This effort 
has resulted in forming the U.S.-Canadian Producer Consultative 
Committee on Grain. I represent the Montana Farm Bureau on that 
committee. These exchanges have resulted in the identification 
of issues that are important to grain producers in Canada and 
the United States.
    We reached a consensus that harmonization of pesticide 
registration and labeling was desirable. There is no dispute on 
that between producers on both sides of the border. If we can 
solve this trade or border irritant, perhaps we can solve other 
issues.
    I would like to submit for the record a copy of the 
committee's joint statement from March of this year.
    [The material referred to follows:]

Joint Prepared Statement by Canada/U.S. Producer Consultative Committee 
                                on Grain

    The undersigned organization met in Winnipeg on March 30, 2001 in 
an effort to facilitate dialogue between grain producers in Canada and 
the United States.
    We urge the Governments of Canada and the United States to 
recognize us as the producer grain consultative group as identified in 
the 1998 Canada/U.S. Record of Understanding.
    The Canada/U.S. Producer Consultative Committee has reached 
consensus that the following issues require the attention of producer 
organizations and governments, or require further study:
Issue Categories
    1. Current Canada/U.S. Grain Trade Issues that should be considered 
by producers and their organizations

     Disparities in government support distort production and 
        trade
     Marketing structures differ--a monopoly marketing board is 
        operating in a free trade zone
     Trade actions have broader effects than just the original 
        targets (e.g. Canadian corn countervail hurt Canadian hog 
        industry)

    2. Current Canada/U.S. Grain Trade Issues that should be considered 
by Governments

     Definitions of and conditions for launching of trade 
        actions (CVD, AD, 301)
     Pre-screen potential farm support programs and trade 
        practices for trade acceptability
     Cost of trade actions are borne by producers who must 
        defend against them

    3. Current Canada/U.S. Grain Trade Issues that require further 
research and study

     Disparities in government support distort production and 
        trade
     Marketing structures differ--a monopoly marketing board is 
        operating in a free trade zone
     Cost of trade actions are borne by producers who must 
        defend against them (contingency fund? Pre-screening?)
     Taxation policies kind the services provided from tax 
        dollars, differ between Canada and the U.S.
     Exchange rate impacts input costs, product pxices and 
        trade
     Impact of IMF and the World Bank on trade and markets
     Harmonization of grading systems
     Country of origin labelling

    4. General areas identified for proactive cooperation

     Potential for trade actions (CVI), AD, 301) limit ability 
        to design support programs
     WTO Agriculture Negotiations

       EU Export Subsidies
       Tariff and non-tariff barrier reductions
       Domestic support definitions
       SPS measures (precautionary principle)
       Non-trade concerns (social, environmental, labor, animal 
        welfare etc.)

     FTAA negotiations

       Export subsidies
       Domestic support definitions
       SPS measures (precautionary principle)
       Non-trade concerns (social, environmental, labor, animal 
        welfare etc.)

     GMO Wheat--conditions for release
     Foot and Mouth Disease--development of a common plan for 
        the grain industry
     Harmonization of pesticide registration and labelling

    5.Other Issues

     Farm support and trade practices are capitalized into land 
        and machinery prices
     US wheat sold into Canadian elevator system for export 
        must be segregated and identitied as US wheat

    The Consultative Committee is committed to annual meetings 
alternating between Canada and the United States to review and update 
the work plan as a proactive effort to identify, study and resolve 
potential trade issues.
    Supported by:
      Agricore Cooperative Ltd.
      Idaho Farm Bureau
      Keystone Agricultural Producers
      Montana Farm Bureau
      North Dakota Farm Bureau
      South Dakota Farm Bureau
      Western Canadian Wheat Growers Association
      Wild Rose Agricultural Producers
      Grain Growers of Canada
      Kansas Farm Bureau
      Minnesota Farm Bureau
      Nebraska Farm Bureau
      Saskatchewan Wheat Pool
      Western Barley Growers Association
      Wheat Export Trade Education Committee

    Mr. McClure. I applaud EPA's efforts to work with our 
international trade partners to promote consistency in various 
regulatory and scientific requirements regarding pesticides, 
such as the work being conducted with the technical working 
group for pesticides developed under NAFTA. However, while the 
administration's actions are helpful, they have not resolved 
the issue.
    The Farm Bureau does understand that, because pesticides 
must be registered in the U.S. before they can be sold or 
distributed, there are certain limits on EPA's involvement in 
this issue, but EPA must continue to work within current 
authorities to find solutions. We were pleased to hear the 
statement of EPA Administrator Steve Johnson during his 
confirmation hearing regarding the need for legislation, and I 
quote from Mr. Johnson: ``I believe that legislation is needed 
because there does not appear to be adequate administrative or 
regulatory solutions.''
    We encourage the EPA to continue to work closely with the 
sponsors of bill 532 to address any specific technical concerns 
that they may have with the bill. I hope that the agency can be 
very supportive of this legislation, and it appears that they 
are.
    In summary, while the Farm Bureau understands that ag 
chemical companies do have concerns with certain sectors of the 
legislation, it is our hope that these issues can be openly 
discussed and addressed. The Farm Bureau and the crop 
protection industry have worked very well together in the past 
and will continue to do so in the future to address our many 
common concerns. It is our hope that we can work together to 
achieve passage of this legislation.
    Thank you, Mr. Chairman. I see my time is up. I will be 
happy to answer any questions that you may have.
    [The prepared statement of Mr. McClure follows:]

  Prepared Statement of David McClure, President, Montana Farm Bureau 
                               Federation

    Good morning Mr. Chairman and Committee Members. I am Dave McClure 
a farmer/rancher from Lewistown, Montana. I raise wheat, barley, cattle 
and hay. I am also the president of Montana Farm Bureau and a member of 
the board of directors of the American Farm Bureau Federation. I am 
testifying today on behalf of both the American Farm Bureau Federation, 
and the Montana Farm Bureau.
    Farm Bureau is the nation's largest farmer and rancher organization 
with over five million member families in all 50 states and Puerto 
Rico. As you know Mr. Chairman, farmers and ranchers in all 50 states 
have been facing some rather hard times these past few years. These 
difficult times have forced those of us in production agriculture to 
take a closer look at our bottom line and attempt to do whatever we can 
to reduce any unneeded costs and hopefully realize a profit, or simply 
break even. This has been hard to achieve in recent years. This 
examination has exposed a number of increasing costs that farmers are 
now voicing concern about and attempting to mitigate. Such expenditures 
include ever increasing environmental regulation costs, labor costs, 
energy costs and agricultural chemical costs, which is what we want to 
focus on today.
    Let me begin by saying that Farm Bureau strongly supports S.532, 
the Pesticide Harmonization Act, which is sponsored by both senators 
from my state, Senator Baucus and Senator Burns.
    This legislation will allow farmers, cooperatives and farm supply 
stores access to lower-priced Canadian agricultural chemicals that are 
identical or ``substantially similar'' to those sold in the United 
States. The high cost of some pesticides in the U.S. is contributing to 
the current farm crisis by inflating agricultural producer input costs. 
Producers in other nations, such as Canada, use pesticides 
substantially similar in content to those used in the U.S., but the 
foreign products are often less expensive. Under current law, U.S. 
producers cannot import those pesticides from other nations.
    We farm in a global market. Our competitors are not just down the 
road but around the world. To remain competitive and hopefully 
profitable, we must constantly search for ways to reduce our production 
costs. From the producer's point of view, there is a price disparity 
among some agricultural chemicals in the U.S. and Canada that impedes 
our competitiveness and profitability. We believe that this legislation 
will work to remove that disparity.
    Under the Pesticide Harmonization Act, states could petition the 
Environmental Protection Agency to issue pesticide labels that can be 
placed on Canadian products when the only ``significant difference'' 
between the products is the price. The U.S. product label would allow 
our farmers to buy the Canadian pesticide for use on their farms in the 
U.S.
    Farm Bureau believes this legislation is a significant step toward 
achieving the goals of gaining access to affordable and needed products 
for U.S. farmers while at the same time maintaining U.S. standards 
designed to protect consumers, farmers and the environment. Farmers in 
this country need a level playing field to compete with foreign growers 
and having equal access to less expensive crop protection materials 
will improve the competitive position of U.S. producers.
    Studies have been conducted on cost differences by USDA and others, 
and the results do demonstrate that similar compounds used on both 
sides of the border can be priced differently. While the U.S. grower 
does benefit in some examples of pesticide cost comparisons, we also 
pay much higher costs for a variety of products such as Roundup, 
Liberty, Puma and Buctril, all of which are registered for use in the 
U.S. on crops such as wheat and barley.
    Sometimes these price differences are significant. Senator Baucus 
has stated that recent surveys have found that U.S. farmers can pay as 
much as 117 percent to 193 percent more than farmers in Canada for 
virtually the same product. Sometimes these cost differences are less 
so. But, a USDA study puts this in perspective by stating that although 
pesticide expenditures are not high for the study crops in the 
Canadian/U.S. prairie area compared with some crops and areas, they are 
relatively high compared with per acre profits. A few dollars of extra 
cost can make the difference between a profitable and an unprofitable 
year.''
    The American Farm Bureau and the Canadian wheat pools have 
sponsored producer meetings for the last three years. This effort has 
resulted in forming the Canada/U.S. Producer Consultative Committee on 
Grain. I represent Montana Farm Bureau on that committee. These 
exchanges have resulted in the identification of issues that are 
important to grain producers in Canada and the United States. We 
reached consensus that harmonization of pesticide registration and 
labeling was desirable. If we can solve this trade or border irritant, 
perhaps we can solve other issues. I would like to submit for the 
record a copy of the committee's joint statement from March of this 
year.
    I applaud EPA's efforts to work with our international trading 
partners to promote consistency in the various regulatory and 
scientific requirements regarding pesticides, such as the work being 
conducted with the Technical Working Group for Pesticides developed 
under NAFTA. However, while the administration's actions are helpful, 
they have not resolved the issue.
    Farm Bureau does understand that because pesticides must be 
registered in the U.S. before they can be sold and distributed, there 
are certain limits on EPA's involvement in this issue. But EPA must 
continue to work within current authorities to find solutions.
    We were pleased to hear the statement of EPA Assistant 
Administrator Steve Johnson during his confirmation hearing regarding 
the need for legislation to address this problem and I quote: ``I 
believe that legislation is needed because there does not appear to be 
adequate administrative or regulatory solutions.'' We encourage the EPA 
to continue to work closely with you, Mr. Chairman, to address any 
specific technical concerns they may have with the Pesticide 
Harmonization Act. It our hope that the agency can be fully supportive 
of this legislation.
    In summary, while Farm Bureau understands that agricultural 
chemical companies do have concerns with certain sections of the 
legislation, it is our hope that these issues can be openly discussed 
and addressed. Farm Bureau and the crop protection industry have worked 
very well together in the past and will continue to do so to address 
many common concerns. It is our hope that we can work together to 
achieve passage of this legislation.
    Thank you Mr. Chairman and Committee Members for the opportunity to 
comment. I'll be happy to address any questions you may have for me 
following the testimony of the other panelists.

    Senator Dorgan. Mr. McClure, thank you very much. Finally, 
we will hear from Hank Zell of the National Farmers Union. Mr. 
Zell, welcome.

         STATEMENT OF HANK ZELL, NATIONAL FARMERS UNION

    Mr. Zell. Thank you, Chairman Dorgan and Ranking Member 
Senator Burns of the Subcommittee. I am Hank Zell, a third 
generation farmer--
    Senator Dorgan. Will you pull the microphone closer, 
please.
    Mr. Zell. I am Hank Zell. I am a third generation grain and 
livestock producer from Shelby, Montana. Shelby is a farming 
community located about 85 miles north of Great Falls, 30 miles 
south of the Canadian border. I farm 2400 acres of hard red 
spring wheat each year and also maintain pasture for my 
livestock herd.
    It is a pleasure to be before you today on behalf of 
300,000 family farm and ranch members of the National Farmers 
Union to discuss the impact of differential prices of 
pesticides between the U.S. and Canadian agricultural markets. 
Mr. Chairman, the NFU commends you and Senators Burns, Baucus, 
Conrad, Daschle, and Johnson for introducing S.532, legislation 
to amend the Federal Insecticide, Fungicide, and Rodenticide 
Act to establish conditions that would allow a State to 
register Canadian pesticides for use within the State if the 
products are substantially similar or identical to the ones 
already registered in the U.S. We fully support this 
legislative initiative.
    Since ratification of the North American Free Trade 
Agreement, U.S. farmers, especially those along the northern 
tier States, have been frustrated with a number of trade issues 
with Canada due to provisions of the agreement. Since adoption 
of the agreement, Canadian exports of wheat and barley to the 
U.S. have increased many-fold, even though the U.S. is a large 
surplus producer of these crops. This has resulted in the 
clogging of our transportation system, warehouse facilities, 
and border, increased competition for sales in our own domestic 
market, and reduced producer pricesfor wheat and barley.
    There are numerous reasons why the open border with Canada 
has harmed the U.S. producers that are beyond the scope of this 
hearing. However, one key issue that has served to disadvantage 
U.S. farmers relative to our Canadian neighbors is the effect 
of our pesticide labeling regulations on production costs. U.S. 
pesticide labeling requirements have clearly provided pesticide 
manufacturers the opportunity to engage in differential pricing 
for similar or identical products between the U.S. and Canadian 
markets in ways that generally advantage Canadian farmers over 
the U.S. producers without further contribution to the food 
consumer, worker, or farm operator safety.
    It seems hypocritical that, under the guise of free trade, 
we allow the import of food products from other countries that 
may be produced with pesticides that are illegal in this 
country or applied in a manner that may well be outside the 
strict limitations established under U.S. regulations, at the 
same time U.S. farmers are prohibited from the opportunity to 
purchase pesticide products in Canada that are identical to 
those registered in this country.
    The purpose of FIFRA is to utilize the best available 
science in registering pesticide products to assure consumer 
safety of the food products to which they are applied, as well 
as to ensure their safe and effective use by producers and farm 
workers. I do not believe it was the intent of Congressto 
provide a shield for the manufacturers and marketers of 
pesticides so they could gouge their U.S. customers. 
Unfortunately, that is exactly the experience we face under the 
U.S. current regulations.
    The environmental and agronomic factors that affect my 
farming operation are comparable to those experienced by 
farmers in the Canadian prairies. However, their input cost 
structure is significantly different than mine. Part of this 
difference can be directly attributed to the difference in cost 
of pesticides that I pay versus my Canadian neighbors who are 
also my competitors in the agricultural market.
    In the attached table I have provided a comparison of the 
per acre cost of various registered pesticides that I utilize 
on my farm and are typical for the spring wheat and barley 
crops produced in the region in both the U.S. and Canada. The 
U.S. pricing information was obtained from my local dealer. A 
farm input supplier whose business is located just across the 
border provided Canadian prices.
    At a minimum, I must treat my 2400 wheat and barley acres 
for two types of weeds, broadleaf and wild oats. In addition, I 
generally spray two applications of a non-selective herbicide 
and about 500 acres of fallow. Typically, I would apply Assert 
to control wild oats and utilize a combination of Puma plus 
Bronate for broadleaf weeds on my crop acres. My normal 
practice is to apply Roundup on a portion of my summer fallow 
to control weeds and conserve valuable moisture for the next 
year's crop.
    Under this scenario, my bill for pesticides will be $26,396 
per year greater because I am an American farmer than if I was 
a Canadian farmer. For me this is serious money. It represents 
about 10 percent of my farm's total gross income.
    Under the proposed legislation, a State such as Montana, a 
farm organization or a farm supply company could serve as an 
agent of a U.S. registrant for Canadian pesticides if they are 
identical or substantially similar to U.S.-registered products. 
Most, if not all, pesticides that I normally use fit into this 
requirement and therefore would be eligible for purchase and 
use on my farm after affixing the appropriate U.S. label, 
registration label, on the containers.
    While my cost of $26,396--while my savings--while my 
$26,396 savings would be reduced by some additional 
transportation and relabeling costs, the impact on my farm 
would still be substantial.
    The potential access to less costly pesticides provided by 
this legislation should result in more consistent nationwide 
and regional pricing policies by the manufacturers that will 
benefit all producers who utilize these products that are 
registered in both countries.
    The National Farmers Union is not seeking to reduce the 
level of regulations or oversight by the EPA for the safety of 
agricultural pesticides, and this legislation does not weaken 
that objective. It simply provides the opportunity for economic 
relief from an artificially maintained pricing system affecting 
products that have been approved and are compatible to those 
registered by our EPA.
    We support this legislation because it engenders fair 
market conditions and competitiveness between the U.S. and 
Canada by reducing the potential for differential pricing by 
pesticide manufacturers and limiting their ability to hide 
behind U.S. regulations.
    Mr. Chairman, I appreciate the opportunity to share my 
personal experiences with the Subcommittee today and offer the 
support of the National Farmers Union for the pesticide 
harmonization legislation and you and Senator Burns have 
introduced. We are looking forward the working with you to 
achieve passage of this important bill as expeditiously, as 
soon as possible. I am pleased to respond to any questions you 
or your colleagues may have.
    [The prepared statement of Mr. Zell follows:]

        Prepared Statement of Hank Zell, National Farmers Union

    Chairman Dorgan, Ranking Member Fitzgerald, Members of the 
Subcommittee. I am Hank Zell, a third generation grain and 
livestock producer from Shelby, Montana. Shelby is a farming 
community located about 85 miles north of Great Falls and 30 
miles south of the Canadian border. I raise about 2400 acres of 
hard red spring wheat and barley each year in a summer fallow 
rotation and also maintain pasture for my livestock herd. It is 
a pleasure to appear before you today on behalf of the 300,000 
family farmer and rancher members of the National Farmers Union 
(NFU) to discuss the impact of differential pricing of 
pesticides between the U.S. and Canadian agricultural markets.
    Mr. Chairman, the NFU commends you, and Senators Burns, 
Baucus, Conrad, Daschle and Johnson for the introduction S. 
532, legislation to amend the Federal Insecticide, Fungicide 
and Rodenticide Act (FIFRA) to establish conditions that would 
allow a state to register a Canadian pesticide for use within 
that state if the products is substantially similar or 
identical to one already registered in the U.S. We fully 
support this legislative initiative.
    Since the ratification of the Canada-U.S. Trade Agreement 
(CUSTA), North American Free Trade Agreement (NAFTA) and the 
Agreement on Agriculture in Uruguay Round of the World Trade 
Organization (WTO); U.S. grain farmers, particularly those in 
the northern tier of states, have been frustrated by a number 
of trade issues with Canada due to provisions of the 
agreements. Since adoption of the agreements, Canadian exports 
of wheat and barley to the U.S. have increased many-fold, even 
though the U.S. is a large surplus producer of these crops. 
This has resulted in clogged transportation and warehousing 
facilities near the border, increased competition for sales in 
our own domestic market and reduced producer prices for wheat 
and barley.
    There are numerous reasons why the open border with Canada 
that was created by trade agreements has harmed U.S. producers, 
including Canada's regulated marketing and transportation 
system, that are beyond the scope of this hearing. However, one 
key economic issue that has served to disadvantage U.S. farmers 
relative to our Canadian neighbors is the effect of our own 
pesticide labeling regulations on production costs. U.S. 
pesticide product labeling requirements have clearly provided 
pesticide manufacturers the opportunity to engage in 
differential pricing for similar or identical products between 
the U.S. and Canadian markets in ways that generally advantage 
Canadian farmers over U.S. producers without a further 
contribution to food, consumer, worker or farm operator safety.
    It seems hypocritical, that under the guise of free trade, 
we allow the import of food products from other countries that 
may be produced with pesticides that are illegal to use in this 
country or applied in a manner that may well be outside the 
strict limitations established under U.S. regulations. At the 
same time U.S. farmers are prohibited from the opportunity to 
purchase pesticide products in Canada that are identical to 
those registered for use in this country.
    The purpose of FIFRA, administered by the Environmental 
Protection Agency (EPA), is to utilize the best available 
science in registering pesticide products to assure consumer 
safety of the food products to which they are applied as well 
as ensure their safe and effective use by producers and farm 
workers. I do not believe it was the intent of Congress to 
provide a shield for the manufacturers and marketers of 
pesticides so they could ``gouge'' their U.S. customers. 
Unfortunately that is exactly the experience we face under 
current U.S. regulations.
    The environmental and agronomic factors that affect my 
farming operation are comparable to those experienced by 
farmers in the Canadian prairies. However, their input cost 
structure is significantly different than mine. Part of this 
difference is related to the type and level of federal and 
provincial programs available to farmers when compared to those 
in the U.S. a significant difference in farming costs, however, 
can be directly attributed to the wide differential in the cost 
of pesticides that I pay versus those paid by my Canadian 
neighbors who are also my competitors in the agricultural 
market.
    In the attached table, I have provided a comparison of the 
per acre costs for a variety of registered pesticides that I 
utilize on my farm and are typical for the spring wheat and 
barley crops produced in this region, in both the U.S. and 
Canada. The U.S. pricing information was obtained from my local 
dealer. A farm-input supplier whose business is located just 
across the border provided Canadian prices. I believe these 
pesticide prices are consistent with other information that has 
also been provided the Subcommittee.
    At a minimum, I must annually treat all 2400 of my wheat 
and barley acres for two types of weeds--broadleaf weeds and 
wild oats. In addition, I generally spray two applications of a 
non-selective herbicide on about 500 acres of summer fallow. 
Typically, I would apply the product Assert to control wild 
oats, and utilize a combination of Puma plus Bronate for 
broadleaf weeds on my crop acres. My normal practice is to also 
apply Roundup on a portion of my summer fallow acres to control 
weeds and conserve valuable soil moisture for the next year's 
crop. Under this scenario, my bill for crop pesticides will be 
$26,396 per year greater because I farm in the U.S., than if I 
were a farmer in Canada. For me this is serious money, 
representing about 10% of my farm's total gross crop income.
    Under the proposed legislation, a state, such as Montana, a 
farm organization or a farm supply company could serve as a 
U.S. registrant for Canadian pesticides if they are identical 
or substantially similar to U.S. registered products. Most, if 
not all, of the pesticides I normally use fit within this 
requirement and would therefore be eligible for purchase and 
use on my farm after affixing the appropriate U.S. registration 
label onto the container. While my $26,396 savings would be 
reduced by some additional transportation and re-labeling 
costs, the impact on my farm would still be substantial. The 
potential access to less costly pesticides provided by this 
legislation should result in more consistent nationwide and 
regional pricing policies by the manufacturers that will 
benefit all producers who utilize products that are registered 
in both countries.
    The NFU is not seeking to reduce the level of regulation 
and oversight provided by the EPA for the safety of 
agricultural pesticides. In fact, we support a more globally 
harmonized system of regulation based on scientific principles 
and risk assessment for these products to extend greater levels 
of safety to all producers and consumers through regulations 
that are comparable to those contained in the U.S. system. This 
legislation does not weaken that objective. It simply provides 
the opportunity for economic relief from an artificially 
maintained pricing system affecting products that have been 
approved or are comparable to those registered by the EPA.
    We support this legislation because it engenders fair 
market conditions and competition between the U.S. and Canada 
by reducing the potential for differential pricing by pesticide 
manufacturers. Additionally, it can provide greater equity and 
economic opportunity for U.S. agricultural producers by 
eliminating the ability of pesticide manufacturers to hide 
behind a U.S. regulatory technicality.
    Mr. Chairman, I appreciate the opportunity to share my 
personal experiences with the Subcommittee today and offer the 
support of the National Farmers Union for the pesticide 
harmonization legislation you and Senator Burns have 
introduced. We look forward to working with you to achieve 
passage of this important bill as expeditiously as possible. I 
will be pleased to respond to any questions you or your 
colleagues may have.

                            Comparison of Canadian and U.S. Pesticide Costs per Acre
----------------------------------------------------------------------------------------------------------------
                                                                    Canada
                                                         ---------------------------- U.S. Price/A   Difference
          Chemical                  Pesticide Type           Price/A    Price/A  (US     (US $)      U.S.-Canada
                                                             (Cdn $)         $)*
----------------------------------------------------------------------------------------------------------------
Assert                         Herbicide                        15.91         10.31         13.72          3.41
Banvel                         Herbicide                         2.99          1.94          1.41         -0.53
Curtail                        Herbicide                        10.55          6.84          9.53          2.69
Puma Super**                   Herbicide                        15.96         10.34
Puma + Bronate                 Herbicide                                                    17.02          6.68
Tilt                           Fungicide                        13.76          8.92         10.87          1.95
Round Up                       Herbicide                         4.50          2.92          5.10          2.18
----------------------------------------------------------------------------------------------------------------
*Canadian dollar = .6480 U.S. dollars
**Pre-mixed with Bronate, adds about U.S. $2.77 per acre to cost of Puma

    Senator Dorgan. Mr. Zell, thank you very much.
    Mr. Fitchhorn, you indicated that this problem exists not 
just on the border, but around the country. How significant is 
it in your State that farmers recognize the price disparity? In 
my State or in Montana, where farmers could easily drive ten 
miles near the border and go across and get a cheaper chemical, 
they instantly recognize the unfairness and disparity. Do folks 
in your State regularly recognize it?
    Mr. Fitchhorn. Yes, we do. Even though you are highlighting 
this up on the border, we for quite some time, quite a few 
years, have been aware that there was a price disparity in 
chemicals and seed even in South America and North America. We 
have, like I said, we had quite a few meetings with seed 
producers and herbicide companies, with very little being 
resolved in those meetings.
    Senator Dorgan. Mr. McClure, you support the legislation, 
you indicated in your testimony. You heard the testimony by the 
EPA. Are you satisfied that we are making progress on chemical 
harmonization? What is your impression of where we are in that 
subject?
    Mr. McClure. Well, I would hope so. I was pleased to hear 
that EPA was willing to work with you and the other sponsors to 
make this thing work. But I also have to recall Mr. Johnson's 
comments that probably the agency and the regulatory is 
somewhat limited and legislation may be needed. Hopefully, this 
will help us.
    Senator Dorgan. Mr. Vroom, your organizations represents 
the chemical manufacturers, is that correct?
    Mr. Vroom. That is correct.
    Senator Dorgan. Most of the major chemical manufacturers 
would be in your organization?
    Mr. Vroom. Yes.
    Senator Dorgan. You heard my questions earlier and I read 
your testimony last evening and listened to your testimony 
earlier today. You in your testimony seem to suggest that there 
is not a price difference. You referred to a USDA study. If 
there is no price difference--I would contest that, of course. 
But if there is not a significant price differential that 
currently exists between the U.S. and Canada and if the EPA 
says there is no safety issue, why then would a chemical 
company care whether this legislation is enacted?
    Mr. Vroom. Well, let me make clear that I absolutely and my 
organization completely acknowledges the fact that there are 
price differences between different markets for our industry 
products, both those that are identical and those that are 
substantially similar. Those that are off patent have generic 
competition in some countries, not in others. Vast differences, 
no question about that.
    So I want to be clear that if you have misunderstood me to 
suggest I do not think there is any price difference, that is 
not what I intended to convey. I do think that some of the 
arithmetic that has gone into trying to impute sort of an 
aggregate differential, price and overall cost structure 
differential disadvantage that might exist between Canada and 
North Dakota or whatever, probably has suffered from efforts to 
try to do quick studies.
    The reason that I referred in our written testimony to the 
1999 study that USDA and Agrifoods Canada jointly did is that 
we think that that represents a more robust snapshot of the 
marketplace at that point in time than the data that was used 
by the State University researchers more recently, which is 
more current, obviously, but not as robust in terms of an 
overall look.
    For instance, the NDSU study only looked at a handful, 20 
different herbicide products. Our industry in the United States 
markets hundreds of herbicide products. So there is a little 
bit of out of context arithmetic that comes out of sort of the 
bottom line of that.
    But again, I want to emphasize that there is no question 
about the fact that there are differences in prices and that is 
from a manufacturers standpoint solely driven by the fact that 
we are required, with the very minimal exceptions of those 
products that are now finally in joint review between the U.S. 
and Canada regulatory authorities, we are required to approach 
these markets as distinct and separate markets. Frankly, as I 
have told your staff and others that we have been visiting with 
in recent weeks again over this issue, I think that our 
companies have been so intentionally focused on responding to 
the discrete regulatory authorities in these two sovereign 
nations that they frankly have never thought much about the 
fact, other than the few times that this kind of issue has been 
discussed in public hearings and in the media and intensely in 
your home State capital as the legislature and the 
administrative branch, including Commissioner Johnson, have 
raised this issue--but our companies have not thought much or 
very often about the fact that there is a great deal of 
transparency right along this border.
    They price their products in order to be competitive, to 
gain market share, to serve the farmer, and it has only been 
recently that we have begun to think about the fact that, oh, 
yes, there is a need to sort of keep your eyes on that these 
markets adjoin each other.
    Senator Dorgan. Mr. Vroom, I would guess it is not the 
case, however, that the companies are required to treat these 
as distinct and discrete markets in a manner that requires them 
the price the product differently. For example, the Folicur 
which I held up, there is nothing which would require the 
manufacturer of Folicur to say to the U.S. producer, you pay 
$500 more for this box than the Canadian one. There is nothing 
that requires that.
    Mr. Vroom. No. I am glad that you brought that example 
along this morning because--and I brought along the complete 
reference guide from about 40 of our member companies' labels 
in the United States for 2001. As you can see, this is a 
hundreds of pages thick book. Folicur is in here. The table 
that shows how it is registered in the United States indicates 
that 18 of the 52 authorities, including D.C. and Puerto Rico, 
that are governed by U.S. EPA for pesticide regulations, 18 of 
those entities, most of them States, do not have a label for 
the use of Folicur, either.
    So I am really keen to follow up with your staff after the 
hearing to learn more about this particular instance. Did the 
farmer in North Dakota that had this particular excess 
inventory, was he asked by his dealer to sell it back through 
that chain?
    One of the other factors in this pricing mechanism in the 
United States and almost identically in Canada is that 
manufacturers publish suggested retail prices, but that is 
hardly ever the price that the farmer pays. It may be more or 
less than the farmer pays. The manufacturer almost always sells 
to the distributor. The distributor then sells to an 
independent dealer, and the dealer ultimately to the farmer.
    Senator Dorgan. Yes, but we know what farmers pay. We are 
comparing what the farmers can buy the chemical for in North 
Dakota versus Canada. That is not some theoretical thing, and 
that is why farmers are upset, because essentially the same 
chemical is overpriced in the U.S. versus Canada, which is a 
deliberate attempt by the chemical companies, as I indicated, 
to use the EPA as a shield when in fact the EPA says there is 
no safety issue here.
    Mr. Vroom. My members, my manufacturers nor our 
distributors are bound by suggested retail price lists, and the 
market ultimately impacts what the margins are of profit that 
are enjoyed by distributors and dealers. Those margins, 
according to university studies that have been done over the 
years, range anywhere from 2 or 3 percent markup, profit, gross 
profit margin, to as much as 20 or 25 percent depending on the 
product, the market, and the year.
    It is another reason I think that the original USDA-Ag 
Canada study had a lot more depth to it, in that it looked at 
more than 20 products and over more than one year of price 
experience.
    Senator Dorgan. Except that it looked at the products that 
were most frequently used. That would be the most logical thing 
to look at. That is the final question. I will come back in 
another round, but I still do not understand how the industry 
opposes this legislation, supports globalization but opposes 
this legislation, and then says that what is to me 
discriminatory pricing and not as a result of discrete markets 
or distinct markets, simply discriminatory pricing practices, 
how it believes in a global market and can continue to do that 
and yet take advantage of the global market for the inputs it 
uses to produce chemicals.
    Mr. Vroom. Simply by way of the fact that we are only 
allowed to sell products that are registered in a country, and 
that is established by the sovereign nations that control those 
regulatory authorities. We are seeing some progress finally, as 
I indicated earlier, over the last 15 years toward some 
harmonization of regulatory requirements and processes and 
joint reviews between countries.
    Senator Dorgan. This is not about what you are allowed to 
sell. It is about how you price. You changed the subject. I am 
talking about how you price, not where you are allowed to sell.
    Mr. Vroom. The manufacturers of these products do not set 
the price that the farmers pay.
    Senator Dorgan. Of course they do.
    Mr. Vroom. Pardon me?
    Senator Dorgan. How do you suggest the manufacturers are 
not setting price? Clearly the increased price that is charged 
the U.S. consumer versus Canada is as a result of the 
manufacturers passing along an increased price to the 
distributors in both countries. Do you disagree with that?
    Mr. Vroom. I do not believe that the studies that you have 
cited or that I am aware of that have been done around this 
issue have looked at what manufacturer prices actually are. 
They look at what the farmer pays, which is, as you just 
stated, the important point at the end of the day anyway.
    Senator Dorgan. Is the villain something other than the 
manufacturer? Are you just shoehorning this off to a 
distributor or a retailer?
    Mr. Vroom. No. What I am saying, Mr. Chairman, is that the 
way these products are priced is much more complicated than 
just a one product manager decision at a manufacturer corporate 
headquarters. It is a function of not only what the 
manufacturer's costs are and what they think they can sell 
their product for at the distribution level, but also what the 
market evolution is, how quickly can they expand the label's 
authorized uses from EPA or in Canada from the regulatory 
authority up there.
    Most of the time we get a new chemical compound registered 
for use, a company has had 10 to 15 years of development and 
discovery investment before that first label use is authorized 
by U.S. EPA. Normally they will only give you one or two crop 
labels initially, when in fact the product was designed for use 
on dozens or scores of different crops, and it takes years to 
get those additional crops added to the label.
    All of those costs are unknowns because you do not know how 
quickly EPA will go in terms of making decisions. One of the 
major herbicides, I might just tell you as an anecdote, that is 
in the NDSU study that was cited in Commissioner Johnson's 
testimony this morning is an older product that just came off 
of patent in the United States last fall, has been off patent 
for a while in Canada.
    But a similar formulation label that will be of important 
value to fallow wheat farmers in your State and along the 
northern tier States has been waiting for registration. In 
other words, another formulation, label expansion, the company 
has been waiting for EPA to approve for some years, just got 
approval a couple of weeks ago, and there is a strong 
correlation between that regulatory decision and the occasion 
of this hearing.
    So all those are factors that go into the embedded costs of 
these products from the manufacturer's standpoint. The 
distributors also face a varied marketplace year to year. We 
all do the best job that we can to support and supply the 
American farmer. We do the same thing, I am sure, in the 
Canadian market.
    The sooner we get to many more NAFTA labels and greater 
harmonization of product availability across the board, the 
more quickly the concerns that you are here to express and are 
the same in Montana and the other border States will be 
resolved. Frankly, we do not think that additional legislation 
is necessary in order for EPA to make faster and more effective 
progress along these lines.
    Senator Dorgan. I would just observe that the legislation 
actually is a step toward harmonization. So if your industry 
supports harmonization, you would want to support the 
legislation.
    Senator Burns.
    Senator Burns. You have got to watch those final shots.
    Mr. Vroom, give me your idea, what is your attitude toward 
a NAFTA label or a label that would be acceptable in a trading 
agreement?
    Mr. Vroom. Well, we think it has a lot of merit as long as 
it really is a level playing field in terms of being able to 
get market access for NAFTA countries, for instance, in all 
three countries simultaneously with the same data set 
requirements and the same final decisionmaking on the part of 
the regulatory authorities in all three countries.
    If it is only half a loaf, then it can get very complicated 
and tip the playing field in a direction that would not be 
comfortable for our industry's economic interests.
    One of the other problems with a NAFTA label concept is 
that most likely it would be applied, as it is so far and 
currently being entertained and developed, for new products. 
New products typically are going to come into the U.S. market 
through EPA approval at the rate of 12 to 15 a year. That is a 
tiny drop in this overall bucket for a marketplace when you 
consider that we have over 600 active ingredients currently in 
the marketplace which are unevenly registered on both sides of 
the U.S.-Canadian, and I might add also with regard to 
Mexico's, border.
    Another problem we have serious concerns around in terms of 
the NAFTA label is, once you get past getting the product 
approved, is regulatory oversight and enforcement. Clearly, as 
we all know, the regulatory enforcement mechanism in Mexico is 
far below what we have in the United States and even in Canada. 
So we do have some concerns about government oversight and 
enforcement capabilities in a Mexican context when you start to 
approach a NAFTA label approach.
    So there are a lot of other wrinkles that need to be 
considered in this process. But generally we are very 
enthusiastic because it can save our industry time and money in 
terms of getting product to the marketplace.
    Senator Burns. What intrigues me about it is if you say 
their enforcement is weaker than ours, but once we find a 
violation in the application or in the properties of the 
product for application, if that product is kept out of this 
market and cannot be shipped to this market, would that help 
those folks in energizing their regulatory oversight?
    Mr. Vroom. Yes. We think that once again, especially in the 
NAFTA context, there are things that are practically achievable 
with regard to sort of raising the enforcement capabilities of 
the Mexican authorities. We have seen a lot of progress just in 
terms of the learning that has been accomplished by way of the 
meetings and interchanges that have come about through these 
harmonization discussions with the regulators in all three 
countries along with the stakeholders that are allowed to 
participate in most of those meetings as well over much of the 
last 10 years.
    Senator Burns. Also now, whenever you start testing a new 
product and you have got it refined to where you want it and 
then you start making applications for licenses and the labels, 
with regard to Canadian and the American situation, are you 
doing the same exact labeling exercise in Canada as you have to 
do in the United States?
    Mr. Vroom. No, sir.
    Senator Burns. In other words, Canadian authorities accept 
an EPA label that has been perfected here in the United States 
carte blanche?
    Mr. Vroom. No, absolutely not. That is why this news that 
we now have conceptual agreement between the United States, 
Canada, and Mexican governments to proceed with the first NAFTA 
label compound is almost earth-shattering. It represents a 
willingness, particularly on the part of the Canadian 
authorities, to accept some U.S. approaches that heretofore 
they have been unwilling to reach in terms of accommodation and 
compromise.
    Senator Burns. But my first question was, do you have to 
jump through the same hoops in Canada as you do in the United 
States in order to get a product on the market?
    Mr. Vroom. Some of them are the same and many of them are 
different.
    Senator Burns. Okay. I do not know.
    Mr. Vroom. The battery of tests, the sort of baseline set 
of tests that are required by U.S. EPA, exceed 120 different 
human health and environmental safety tests. So there is all 
kinds of detail, as you can imagine. We actually had one of our 
member companies a few years ago in a House Ag Committee 
hearing bring the entire data set that was submitted on a new 
chemical compound. It was 35 to 40 cardboard boxes full of 
scientific test data. So you can imagine how many variants you 
can get into even just inadvertently between one regulatory 
authority sort of parsing through that and setting up the test 
protocols.
    One government might say, well, we need a 90-day acute 
exposure rat study. The next government might say, well, it 
needs to be 120 days, and the next might say 180 days. That 
requires an entirely different set of tests to be run, data to 
be assembled and submitted.
    Senator Burns. Well, I can see where there would be some 
differences with regard to the countries and the difference 
between how you use a chemical in Kansas and how you use it in 
Montana because of moisture situations of soil types. There is 
a lot of variables in there that are going to affect the use of 
the product and I understand that.
    I do not know why we are saddled with mostly doing the 
testing in the United States, but we pay for that testing and 
that is all paid for by the consumer and the farmer. That cost 
is finally passed on to them. I have a feeling that sometimes I 
think we pay--it is like doing business on the forest. If you 
put up a forest sale and the whole world and the environmental 
community says, we hate below-cost sales in forestry, when 
basically a forest will put up a sale and they will pile 
everything into that sale as far as their overhead is 
concerned, so it does look like below-cost. It is unbelievable 
how we do our bookkeeping on that.
    But I appreciate your testimony here, and I understand you 
were very supportive of an amendment to the Senate education 
legislation that dealt with pesticides in schools. I would hope 
that you would work with us with that same attitude. I think we 
can find common ground here. I do not think that we are going 
into an area where--I think most of us pretty much understand 
the variables that we had, but the pricing situation, just like 
I said, if we had three dollar corn and five dollar wheat, 
there would not be any of us here today. We would be home 
plowing corn. Of course, you do not do that much any more.
    Mr. Fitchhorn. No, we use chemicals on it.
    Senator Burns. You put chemicals on it. You ought to go 
home and just hold, just plow and hold. I have been down that 
track because I was born and raised just across the river from 
you to the west, so I understand that.
    I look forward to working with my colleagues on this 
legislation and also with all of you, because I think we have 
possibilities here. I am still intrigued with the label and 
trading agreements. That may be part of our discussions as we 
start talking about fast track, how are we going to deal with 
the situations of how we do business and how we will compete on 
the production agriculture side. We did not do that in NAFTA 
and that is the reason I voted against NAFTA. They would not 
take into consideration the rules and regulations on the 
exchange of crops, especially the same crop, and that we were 
operating out of two different rule books or three different 
rule books and it would not work.
    This label idea intrigues me and I think we have to pursue 
it. If everybody operates out of the same rule book, then we 
can make it work. But it has to be out of the same rule book.
    Thank you, Mr. Chairman.
    Senator Dorgan. Thank you.
    Mr. Vroom, let me ask you just a couple of more questions. 
Look, you represent the chemical manufacturers. I happen to 
think that they are imposing prices on U.S. farmers that are 
unfair relative to prices they apply to others. I do not think 
you are a bad guy, but I just think the industry has the 
opportunity to extract money out of the pockets of American 
farmers in a way that is unfair.
    Let me just ask you, if I can. I mentioned the chemical 
Achieve. This is what started it all in North Dakota with 
Commissioner Johnson and a farmer who wanted to put Achieve 
that he bought in North Dakota on his crops in North Dakota. 
Now, he went up to Canada and bought this chemical for a much, 
much lower price than he could buy it in the U.S.
    The Canadian farmer will put this on the Canadian farmer's 
crop and then ship the crop to the U.S., so we are going to get 
this chemical on their crop anyway, and the EPA says there is 
no safety issue. The only issue is the chemical companies 
charge more for this to American farmers than they do to the 
Canadian farmers, and you are I think trying to tell me that it 
is really not the manufacturers, it is some amorphous marketing 
descriptions out there and it is distributors and retailers.
    Look. Is it not the case that manufacturers are setting the 
baseline prices for these chemicals, and they have decided that 
they can extract a higher price from Americans and therefore 
they do and they will? Our legislation is going to correct that 
and you, on behalf of the chemical manufacturers, do not 
support our legislation because you want to keep charging more 
to the American consumer. What is wrong with that statement? 
You disagree with my statement obviously, so tell me what is 
wrong with the factual base of my assertion?
    Mr. Vroom. Well, once again, I respectfully disagree with 
the notion that manufacturers of agrichemicals are 
discriminatorily pricing against American farmers. If you look 
at the aggregate markets for our industry's products in the 
United States, just in my written testimony, last year it was 
over $7 billion U.S. currency. The Canadian market is probably 
no more than $1 billion U.S. currency.
    There is just no logic to the notion that we would want to 
discriminate against the best customer base that we have in the 
world.
    Senator Dorgan. Except, Mr. Vroom, this [indicating] is 
discrimination. This company with this chemical have said to 
U.S. farmers: You pay more. Why? Because we insist you do. That 
is discrimination. I am not talking about theory; I am talking 
about reality. This is discriminatory. Do you not agree?
    Mr. Vroom. No, I do not agree.
    Senator Dorgan. Well then, how do you justify the pricing 
differential?
    Mr. Vroom. It is a marketing decision that that company 
made in terms of the way that they priced it and sent it 
through the distribution and dealer networks in both countries, 
and also by way of the fact of how they chose to offer the 
product in different forms in the U.S. and the Canadian 
markets. They knew, as I am told, that the higher active 
ingredient concentration that was and is sold in Canada is much 
more applicable to ground rig application and that most of the 
market in the United States would be for aerial or airplane, 
fixed wing, application, and the higher concentration active 
ingredient has physical property difficulties in aerial 
application with regard to clogging the nozzles and pumping 
mechanisms, and they were fearful of the fact that it would not 
be effective in that sort of formulation.
    So that is the rationale for the two different formulations 
to be marketed different in the two different countries, in 
part.
    Senator Dorgan. But Mr. Vroom, the only method by which the 
chemical companies could manufacturer a higher price for 
American farmers versus the Canadian farmers for the same 
product is to hide behind the EPA. The EPA is what allows you 
to prevent an American farmer--I mean, plugging up a nozzle? 
Well, maybe a farmer says, I am willing to see if a nozzle 
plugs up, I am willing to go to Canada and bring it down. The 
only reason they cannot bring Achieve down is because the 
chemical companies are hiding behind the EPA, when in fact the 
EPA says there is no safety issue here.
    I do not want to be unfair to the chemical manufacturers, 
but the evidence is overwhelming that there is an approach here 
to say to the American consumer, you pay the highest prices, 
and say to others, you pay the lower price, and the reason we 
can extract the higher price from the American farmer and the 
American consumer is because we have the ability to do it 
because we can stop it from coming across the border.
    We cannot stop the grain. The grain comes across that has 
the Canadian chemical on it, but we can stop the American 
farmer from going to Winnipeg and buying the chemical. It seems 
patently unfair to me. It seems like it is kind of a sweetheart 
deal for the chemical manufacturers.
    Mr. Vroom. Could I make one other point?
    Senator Dorgan. Of course.
    Mr. Vroom. That is, I am not here to defend any one of my 
member companies' specific product or pricing strategy. I want 
to make it clear that it is my view and the association's view 
that there are lots of examples where there are price 
differentials, some of them actually where a product that is 
identical or substantially similar is less expensive in the 
United States than in Canada.
    But if you look again at the vast marketplace that we are 
talking about, the $7 billion market in the United States and 
the $1 billion market in Canada, there are many more examples 
where prices of these kinds of technology are more similar than 
dissimilar. I think we have focused on a few examples of where 
there are differentials, and I believe that it is fundamentally 
a product of a free marketplace where prices will respond to 
supply and demand.
    There is no question but what focusing on those issues in 
isolation creates the perception of a serious problem. I do not 
think the problem is as great as some of the data would portray 
in the way it is taken out of context. But we are committed to 
working with you on a harmonization approach.
    By the way, I think that Mr. Johnson, the new EPA Assistant 
Administrator who was here earlier, probably has the ability to 
drive a harmonization process much faster between the U.S. and 
Canada than his predecessors in the last 8 years of the Clinton 
Administration were able to do. So even without legislation, I 
believe that EPA and the Canadian authorities can go faster and 
address some of these what I would characterize as more 
isolated problems and get a more level marketplace established 
in those isolated and limited places where there are trade 
irritant concerns.
    Senator Dorgan. Mr. Vroom, there is no free market when Mr. 
McClure cannot go to Canada to access the same chemical for a 
lower price. So this free market stuff does not work with 
respect to the border. The border is an impediment to free 
markets.
    You are an assertive witness on behalf of your industry. My 
hope is that, if you support harmonization, that you would 
support the legislation as a step towards harmonization. I 
think price disparities that exist are at this point not 
supportable, and I hope very much that, with the work by 
Commissioner Johnson and my colleagues, that we can pass 
legislation.
    We have a disagreement here, obviously, and I do not mean 
to badger you about the disagreement we have. I feel very 
strongly and passionately that something is happening here that 
is not isolated, it is not theoretical. It is real and it is 
pervasive, especially for our farmers.
    I must say that I do not agree that if wheat were five 
dollars a bushel we would not be talking about this. I think 
price discrimination when it exists is a bur under the saddle 
of people who I think are the victims of it.
    Let me make one additional point. That is, the testimony by 
Mr. Johnson indicated--and I just want to put it in the 
record--that EPA ``is not aware of any evidence that indicates 
that national pesticide regulatory requirements contribute 
significantly to existing price differences,'' because that has 
been part of our discussion.
    This has been an interesting hearing and the first step of 
a journey that I hope will result in the passage of 
legislation. I think the testimony we have received today will 
be helpful, and this hearing is now adjourned.
    [Whereupon, at 11:15 a.m., the Subcommittee was adjourned.]

                            A P P E N D I X

          Prepared Statement of Art Perdue, General Manager, 
                         Farmers Union Oil Co.

    My name is Art Perdue, and I am the general manager of the Farmers 
Union Oil Co. of Minot, N.D. We are a farm supply cooperative owned by 
4000 farmers in a 10-county area around Minot. Our main product lines 
are fuels and petroleum products, farm machinery, hardware, and 
agronomy products, including crop nutrients and crop protection 
products. Our total annual sales are about $40 million. Our annual 
sales of crop protection products are about $3 million.
    To start, I want to commend Sen. Dorgan and the other cosponsors of 
S. 532 for your efforts to help provide farmers, cooperatives, and 
other distributors access to lower cost crop protection products. The 
problem that this legislation seeks to address is well documented and 
deserves the attention of policy-makers in Congress.
    The producers who are my patrons and the owners of the cooperative 
are frustrated by the unfair treatment that currently exists. Across 
the border, Canadian grain growers have access to crop protection 
products that are identical to, or substantially the same, as products 
that are offered in the United States. However, the price of these 
products is less in Canada than the same or equivalent product that's 
available through my local cooperative.
    Even though the products are essentially the same, if they are not 
labeled for use in the United States, I cannot access them in Canada 
and distribute them to my patrons. Individual farmers cannot legally 
buy them in Canada and use them on their North Dakota fields.
    The goal of our nation's trade policy is to promote reducing trade 
barriers and creating a more level playing field for agricultural 
producers. But the North Dakota grain growers who are my patrons are 
caught in a lose-lose situation. Canadian grain growers have access to 
lower-cost production inputs, and our current trade rules allow them to 
sell their grain in the United States, when the market here is 
favorable. But U.S. growers cannot buy and use those same lower-cost 
inputs, and so are put at a cost disadvantage compared to the Canadian 
grower.
    Long term, the solution to this problem must lie in harmonization 
of product registration rules between the United States and Canada. But 
we see little progress on that in the near term, so an interim solution 
must be found. S. 532 offers such a solution.
    My understanding of the bill is that it will allow a state to 
register a Canadian product for distribution and use in that state as 
long as the product is either identical to or substantially the same as 
a product that is registered for use in the United States. For my 
cooperative and my patrons, the bill would establish a procedure by 
which North Dakota may apply for and receive an Environmental 
Protection Agency label for agricultural chemicals sold in Canada. 
Those products must be identical or substantially similar to products 
used in the United States.
    Under the provisions of this bill, my cooperative would gain the 
flexibility to distribute lower-cost crop protection products. It also 
would permit North Dakota growers to buy approved products in Canada 
and use them on their farms.
    As I have reviewed this bill and discussed it with other 
cooperative managers in North Dakota, we have identified some 
considerations that concern us.
    It appears as though if my cooperative wishes to distribute a 
Canadian crop protection product under the terms of this law, we become 
responsible for re-labeling the product with a label approved by the 
EPA. Similarly, if individual farmers choose to buy and use a Canadian 
product under the terms of this law, they become individually 
responsible for re-labeling that product.
    My observation is that few crop protection product distributors, 
and even fewer individual farmers, are in a position to handle this 
responsibility. I would encourage a more active involvement by the 
state in the actual re-labeling of products under this legislation.
    Next, I want to encourage the authors to consider whether you wish 
to allow individual farmers to seek a state registration.
    First, as dealers, we have a concern about loss of business. By 
making individual farmers eligible to apply for state registration of a 
Canadian crop protection product, the legislation effectively 
eliminates the role of the North Dakota dealer. Modern, technology-
driven crop production systems rely on a partnership between the grower 
and a local dealer who assists in identifying appropriate products to 
deal with site-specific problems in the field. The local dealer also 
plays a role in assuring that the product is used properly. As dealers, 
we compete with each other for the grower's business. While S. 532 
assures price competition, I am concerned that it will not promote the 
same level of close working relationship between the local dealer and 
the grower.
    Similarly, I am concerned that S. 532 does not adequately deal with 
legal liability for either inadvertent or intentional misuse of the 
product. If an individual grower buys a regulated product in Canada, 
and sometime in the future there's a problem with the product, it 
doesn't appear that there is any way to bring the Canadian dealer into 
our U.S. civil justice system.
    Finally, there's a stewardship issue. These registered products 
require special knowledge for safe transportation and handling. In the 
United States, people who transport these products are required to have 
a special drivers license certification. There also are strict 
requirements and limitations for handling the products, storage, spill 
clean up, and use. We believe these requirements are best handled by 
crop protection professionals who have the experience and training to 
assure sound stewardship of the environment.
    In closing, I want to thank you for the opportunity to present my 
comments on this legislation. I would be pleased to answer any 
questions about how this bill would affect my cooperative or my 
patrons. Please direct your questions to me at the Farmers Union Oil 
Co. My office phone is 701-852-2501, and my e-mail address is 
[email protected].
                                 ______
                                 
Prepared Statement of Wendell Stratton, Chairman, Agriculture Retailers 
                              Association

    Mr. Chairman:
    Thank you for the opportunity to submit comments on the proposed 
Pesticide Harmonization Act, S. 532. Agricultural retailers provide 
many valuable goods and services to our nation's farmers including crop 
protection chemicals and professional guidance on mixing and 
application of those chemicals as well as direct custom application.
    As retailers we, like the farmers we serve, operate on thin profit 
margins. Agricultural retailers have to meet many regulatory and 
quality standards with regard to the U.S. Environmental Protection 
Agency (EPA), Department of Transportation (DOT) regulations, and 
Occupational Safety and Health Administration (OSHA) programs. We 
appreciate the frustration of farmers and our retail members concerning 
the different pesticide regulations and product testing standards 
between the United States and Canada. These differences cause what is 
perhaps the biggest area of frustration--product price differentials.
    There are many factors influencing the price of pesticides in the 
U.S. and Canada. In addition to different regulatory requirements, 
reviews and timelines between the two countries, there are also 
different patent periods. For example, when the patent recently expired 
in the U.S. for glyphosate, we saw U.S. prices decline. Protecting 
these patent rights is necessary to the manufacturers so they can 
continue to reinvest in research and new product development, however 
the eventual maturity of the patents will alleviate much of the price 
differences. There are others forces at work that contribute to 
different prices such as exchange rates. Several years ago, Canadian 
farmers felt disadvantaged by cheaper pesticides in the U.S. and 
petitioned their government for regulatory changes.
    We believe the proposed language of the Pesticide Harmonization 
Act, S.532 will place the burden of policing the application and 
stewardship of products not registered or purchased in the U.S. 
squarely on the shoulders of retailers. This burden would be further 
increased if producers were able to purchase products in Canada, thus 
taking away valuable business from Ag Retailers in the United States. 
While it is true that Ag Retailers would be free to purchase products 
in Canada as well, we believe that this is unlikely in most cases.
    It is important to remember that most farmers rely heavily on their 
local Ag Retailer for the majority of their information regarding crop 
protection products. This could also mean that Ag Retailers could be 
dealing with products using different and unfamiliar percentages of 
active and inert ingredients, formulas, mixing directions and even 
basic measurements, thus creating potential for crop injury as well 
human exposure problems. Therefore, we believe the proposed language of 
the Pesticide Harmonization Act, S.532 will add another tier of 
complexities to the management and potential liability of a retailers' 
business that is unwarranted at this time.
    In addition, we share the concerns about S.532 raised by the 
American Crop Protection (ACPA) in recent testimony before the Senate 
Commerce Committee and echo EPA Assistant Administrator's testimony 
that ``international harmonization of pesticide regulation efforts . . 
. hold significant promise to help alleviate some of the pricing issues 
that exist today.''
    We look forward to working with you on expediting U.S.-Canada 
regulatory harmonization and on any legislation under consideration.

                                  
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