[Senate Hearing 108-687]
[From the U.S. Government Publishing Office]
S. Hrg. 108-687
HEARING ON S. 1406, THE PESTICIDE HARMONIZATION ACT
=======================================================================
HEARING
before the
SUBCOMMITTEE ON PRODUCTION AND PRICE COMPETITIVENESS
of the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
JUNE 23, 2004
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
Available via the World Wide Web: http://www.agriculture.senate.gov
______
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COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
THAD COCHRAN, Mississippi, Chairman
RICHARD G. LUGAR, Indiana TOM HARKIN, Iowa
MITCH McCONNELL, Kentucky PATRICK J. LEAHY, Vermont
PAT ROBERTS, Kansas KENT CONRAD, North Dakota
PETER G. FITZGERALD, Illinois THOMAS A. DASCHLE, South Dakota
SAXBY CHAMBLISS, Georgia MAX BAUCUS, Montana
NORM COLEMAN, Minnesota BLANCHE L. LINCOLN, Arkansas
MICHEAL D. CRAPO, Idaho ZELL MILLER, Georgia
JAMES M. TALENT, Missouri DEBBIE A. STABENOW, Michigan
ELIZABETH DOLE, North Carolina E. BENJAMIN NELSON, Nebraska
CHARLES E. GRASSLEY, Iowa MARK DAYTON, Minnesota
Hunt Shipman, Majority Staff Director
David L. Johnson, Majority Chief Counsel
Lance Kotschwar, Majority General Counsel
Robert E. Sturm, Chief Clerk
Mark Halverson, Minority Staff Director
(ii)
C O N T E N T S
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Page
Hearing(s):
Hearing on S. 1406, The Pesticide Harmonization Act.............. 01
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Wednesday, June 23, 2004
STATEMENTS PRESENTED BY SENATORS
Dole, Hon. Elizabeth, a U.S. Senator from North Carolina,
Chairwoman, Subcommittee on Production and Price
Competitiveness, Committee on
Agriculture, Nutrition, and Forestry........................... 01
Baucus, Hon. Max, a U.S. Senator from Montana.................... 02
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WITNESSES
Dorgan, Hon. Byron, a U.S. Senator from North Dakota............. 03
Sharp, Adam, Associate Assistant Administrator, Office of
Prevention,
Pesticides, and Toxic Substances, and Acting Agriculture
Counsel to the EPA Administrator, U.S. Environmental Protection
Agency, Washington, DC......................................... 05
Panel I
Gage, Mark, President, National Association of Wheat Growers,
Page, North Dakota............................................. 11
Gray, Jim, Pesticide Registration Coordinator, North Dakota
Department of Agriculture, on behalf of the National
Association of State Departments of Agriculture, Bismarck,
North Dakota................................................... 09
Vroom, Jay, President and Chief Executive Officer, CropLife
America,
Washington, DC................................................. 13
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APPENDIX
Prepared Statements:
Burns, Hon. Conrad........................................... 25
Dorgan, Hon. Byron........................................... 22
Gage, Mark................................................... 41
Gray, Jim.................................................... 35
Sharp, Adam.................................................. 27
Statements submitted by Senator Dole from Ralph Peck, Bob
Stallman, Jake Cummins, and Rob Rynning...................110-116
Vroom, Jay (with attachments)................................ 47
Document(s) Submitted for the Record:
Agricultural Policy Brief.................................... 123
Cochran, Hon. Thad........................................... 118
Conrad, Hon. Kent............................................ 120
Montana Farmers Union........................................ 133
Provinces-States Advisory Group/Tri-National Agricultural
Accord..................................................... 149
United States and Canadian Agricultural Herbicide Costs:
Impacts on North Dakota Farmers............................ 134
HEARING ON S. 1406, THE PESTICIDE HARMONIZATION ACT
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WEDNESDAY, JUNE 23, 2004
U.S. Senate,
Subcommittee on Production and Price Competitiveness, of
the Committee on Agriculture, Nutrition and Forestry,
Washington, DC
The Subcommittee met, pursuant to notice, at 10:01 a.m., in
room SR-328A, Russell Senate Office Building, Hon. Elizabeth
Dole,
[Chairwoman of the Subcommittee], presiding.
Present or submitting a statement: Senators Dole and
Baucus.
STATEMENT OF HON. ELIZABETH DOLE, A U.S. SENATOR FROM NORTH
CAROLINA, CHAIRWOMAN, SUBCOMMITTEE ON PRODUCTION AND PRICE
COMPETITIVENESS,
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
Senator Dole. Good morning. This meeting of the Senate
Subcommittee on Production and Price Competitiveness will come
to order.
Today, the Subcommittee will hear from various stakeholders
and experts on the proposal to register Canadian pesticides for
use in the United States. Specifically, we will focus on S.
1406 as proposed by Senator Dorgan and others.
Senator Dorgan, Senator Burns, and other cosponsors I know
have long sought legislation to ensure pricing parity across
the northern border with Canada. This subcommittee has a
responsibility to consider many factors associated with this
issue. Certainly, it is important that we evaluate the true
price differential data, including currency valuation and
patent considerations. Our responsibility goes beyond comparing
prices. We must also look at any new legal liability issues,
and we need to look at the effects such legislation will have
on EPA's ability to ensure that chemicals registered for use in
the United States are safe for humans and for the environment.
We have not previously tasked EPA with imposing penalties
derived from price comparisons, nor have we asked our courts to
answer the question of who is legally responsible for damages
due to application of a pesticide produced outside of this
country. It is my desire to have a full exploration of these
issues during today's hearing.
Senator Baucus.
STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM MONTANA
Senator Baucus. Thank you very much, Madam Chairwoman. I
regret I cannot stay for the entire hearing. We are marking up
in the Finance Committee now the Australian Free Trade
Agreement. I deeply appreciate your holding this hearing.
I might remind people who don't know this, but agriculture
accounts for over half of the economy in the State of Montana,
and it has been tough. Years of drought and low prices and
record high costs for fuel and for pesticides have contributed
to quite low profit margins, in some cases no profit margin,
and that is one reason why this hearing is so important. That
is why it is so important that we harmonize the prices between
the United States and Canada with respect to pesticides.
Montana shares 445 miles of border with Canada. That is the
longest of any State in the nation. The border isn't everything
that we share with Canada. We also share a similar climate. We
share some of the same crops. When it comes to protecting these
crops with the same chemicals made by the same companies, we
face very different prices.
We in Montana estimate that our farmers lose millions of
dollars in increased pesticide costs a year. We are very
pleased, frankly, by the study done by the University of North
Dakota, which I know that the Senator from North Dakota will
talk about more explicitly, but essentially, that study showed
that the North Dakota producers' total pesticide expenditures
were at least 8 percent higher, 8.3 percent higher, than they
otherwise should have been.
There is a grower in Montana named Herb Carst. He is a
barley and wheat farmer, and this is a quote from him when he
talked to me about this. He said, ``Agriculture chemicals are
one of my most expensive inputs, at an annual cost of
approximately $50,000. I should be able to drive to my local
dealer and purchase those products for the same price as my
Canadian competitor. It is a barrier created through
labeling.'' He has anticipated he could save $4,000 if the
prices were the same.
He went up to Canada and poked around a little bit and he
found that for the chemical Achieve, there is a difference of
5.3 percent. For Fellowmaster, a 24 percent difference. For
Puma, a 29 percent difference. The average of those differences
is 19.6 percent.
For all these reasons, I am a strong supporter of Senator
Dorgan's bill, S. 1406. There are many other Senators, as you
mentioned, Madam Chairwoman, who are also cosponsors, including
my colleague Senator Burns from Montana.
This legislation amends the Federal Insecticide, Fungicide,
and Rodenticide Act to permit the EPA in certain States to
register a Canadian pesticide for distribution and use in the
United States if the pesticide is substantially similar or
identical to one already registered in the United States. It is
very important that this legislation or something very close to
it pass very quickly. The current regime is just unfair and we
believe very strongly that the approach taken by the Senator
from North Dakota is very much in the right direction.
Thank you very much, Madam Chairwoman, for holding this
hearing and for also allowing me to speak at this time.
Senator Dole. Thank you, Senator Baucus.
We will hear first from Senator Byron Dorgan, sponsor of
the legislation. Welcome, Senator Dorgan.
STATEMENT OF HON. BYRON DORGAN, A U.S. SENATOR FROM NORTH
DAKOTA
Senator Dorgan. Madam Chairwoman, thank you very much. As
you know from your service in the Senate, it is much harder to
get things started than it is to get things stopped. We have
been working a long while on this subject of chemical
harmonization.
As you know, the trade agreement that was done with Canada,
including the U.S.-Canada Free Trade Agreement and NAFTA,
offered promises of chemical harmonization, but as is usually
the case with trade agreements, there is much more effort to
negotiate them than there is to follow up on the details of the
trade agreements themselves, and that is certainly true with
this subject.
I noted this morning that there was a new story about this
issue and the chemical companies confidently predicted that
this issue will go nowhere. They perhaps made that prediction
based on past results. It has been a difficult and tortured
trail to try to get this kind of legislation passed in the
Congress.
The cosponsors of this bill are myself, Senator Burns,
Senator Conrad, Senator Daschle, Senator Crapo, Senator
Johnson, Senator Baucus, a big, pretty broad, bipartisan group
of Senators who believe very strongly that what is happening
with respect to cross-border trade, or the absence of it, with
respect to agricultural chemicals is unfair to our farmers.
I might just put up a couple of charts to show you a couple
of examples. I will, of course, do it from the standpoint of
the impact on North Dakota farmers. These are price
differentials, Stinger, Puma, Liberty, Glyphosphate, which is
commonly called Roundup. You will see the price differentials
there.
The second chart, if you will put the second chart up just
for a moment, the second chart talks about in the year 2002,
according to a North Dakota State University study, North
Dakota farmers paid $20 million more than they would have had
they bought chemicals at the prices that the identical or
nearly identical chemical was sold at in Canada. The point of
that study is markets must be segregated if different prices
are to be charged. The international border and trade
restrictions then offer that capability to segregate and that
is why we have these price disparities.
If I might have that box of Liberty, that is the herbicide
that--I am told by the manufacturer that they actually have a
different color box or a different kind of box. I assume they
are putting the same chemical in it, however. This is used on
canola acres. We plant a lot of canola acres in North Dakota.
You can purchase this chemical called Liberty in Canada or you
can purchase it in the United States. The names aren't
different and the chemical composition is not different in any
significant way.
The North Dakota cost would be $14 per acre applied and the
Canadian cost, $9.60 per acre. That is a difference of $4.40 an
acre. As I said, we have a substantial number of acres in North
Dakota and it makes a big difference with respect to this price
differential.
In fact, our farmers are engaged in an international
competition with respect to pricing. When you have input costs
that are dramatically different, it has an impact on our
ability to compete.
Roundup is a chemical that has not as much price
differential, $1.40 to $1.83 price differential, but we have
2.25 million acres on which Roundup is applied in North Dakota.
That is $3.7 million in increased chemical costs for North
Dakotans.
The question here is, should this exist? We are having a
similar debate with respect to reimportation of prescription
drugs, not just from Canada but from other countries. Should we
be able to reimport FDA-approved prescription drugs? It is an
interesting question. Congress is coming down on the side of,
yes, we should. The Senate has voted on that. The House has
voted on it. We haven't yet made that a law change because it
has been opposed up the line by the Speaker and some others.
In many ways, this is a similar question, and with respect
to cross-border trade with Canada, should American farmers be
prevented from accessing this chemical in Winnipeg, Canada, and
being able to import it back into this country. The answer now
is no. We suggest that with this legislation that this chemical
be labeled and that the EPA--we don't take this out of the
hands of the EPA, but that we would allow the State
agricultural authority, with the consent of EPA, to label an
identical chemical and allow it to be imported into this
country.
Madam Chairwoman, the question has been around for a long
while. It is long past the time to solve it. You will hear from
my colleagues, as well. You heard from Senator Baucus today.
You will hear from Senator Burns and Senator Crapo in Idaho.
There is a reason this refrain comes from those of us who
are on the border, because a farmer who farms just south of the
Canadian border discovers that the identical product is sold
just north but that he or she cannot purchase it and bring it
south at this point without violating the law, and the chemical
company understands this segregation of markets and they refuse
to label it in this country. Therefore, they are able to hold
up our farmers for a much, much higher price than is fair or is
reasonable.
We can correct that here in the Congress. This is where it
should be corrected, and it has taken far too long already for
this to have been done. My hope is that with your chairmanship
and with the subcommittee, we can begin the process of marking
this bill up, send it to the full committee, and send it to the
floor of the Senate, where I believe you will find very strong
support for the legislation.
Thank you, and let me thank Senator Cochran, as well, for
your willingness to hold this hearing.
Senator Dole. Yes, indeed. Thank you, Senator Dorgan. I
appreciate your concern regarding this issue, your hard work on
it, and your excellent presentation. Thank you very much.
Senator Dorgan. Thank you.
[The prepared statement of Senator Dorgan can be found in
the appendix on page 22.]
Senator Dole. I would like to include in the record the
prepared statement of Senator Conrad Burns, who could not be
with us this morning.
[The prepared statement of Senator Burns can be found in
the appendix on page 25.]
Senator Dole. We will hear next from Mr. Adam Sharp, who is
the Associate Assistant Administrator of the Office of
Prevention, Pesticides, and Toxic Substances of the
Environmental Protection Agency. Welcome, Mr. Sharp.
STATEMENT OF ADAM SHARP, ASSOCIATE ASSISTANT
ADMINISTRATOR, OFFICE OF PREVENTION, PESTICIDES, AND TOXIC
SUBSTANCES, AND ACTING
AGRICULTURE COUNSEL TO THE EPA ADMINISTRATOR, U.S.
ENVIRONMENTAL PROTECTION AGENCY, WASHINGTON, DC
Mr. Sharp. Thank you. Good morning, Madam Chair, members of
the subcommittee. I am Adam Sharp, Associate Assistant
Administrator, EPA's Office of Prevention, Pesticides, and
Toxic Substances. I am also currently the Acting Agricultural
Counselor to the EPA Administrator.
Let me ask first if I can have my full testimony, of
course, submitted to the record.
Senator Dole. Yes. Without objection, yes.
Mr. Sharp. Thank you. This morning, I will provide an
overview on the long-term approaches that EPA is taking that
will help address this issue as well as discuss the current
legislation under consideration.
First, I want to say that we have worked closely with
Congressional staff over the last several years as well as with
State officials and others to explore remedies that would help
address price differences that U.S. farmers may be
experiencing. As a result of those discussions, EPA has made
significant progress on a variety of administrative and
regulatory approaches that help facilitate equal access and
harmonization.
In the long term, let me describe some of our strategies
and actions that EPA has taken, has been a part of over the
last several years, as well as partnerships that we have
developed with the Canadians and others in helping to establish
some footholds on this very important issue.
First, under the North American Free Trade Agreement, under
the NAFTA Technical Working Group for Pesticides and through
other international forums, EPA has been working closely with
Canada and other trading partners to break down barriers and
facilitate trade competitiveness. These partnerships have led
to more consistent regulatory and scientific requirements,
which in turn has increased harmonization between the U.S. and
Canada. Over the years, EPA has achieved real success in
facilitating freer trade in pesticides.
For example, since 1998, the U.S. and Canada have been
guided by a Record of Understanding. This agreement included
provisions specific to pesticide harmonization and has
encouraged greater cooperation among government regulators,
growers, and the pesticide industry. This coordination has
helped advance harmonization efforts between our two regulatory
systems.
The NAFTA TWG recently issued a 5-year strategy which put
forward its goals for establishing a North American pesticide
market. This vision promotes equal access to pesticides by
offering incentives, including a harmonized review process for
new pesticide products and work sharing across national
boundaries.
To date, the vast majority of data requirements and test
guidelines have been harmonized. The submission procedures and
formats have also been harmonized, resulting in significant
efficiencies for both registrants and also government
reviewers. As a result, both work sharing and joint reviews of
recent pesticide registration submissions and harmonization of
risk assessment procedures between the U.S. and Canada have
significantly improved.
On priority pesticides, since 1999, EPA has worked very
closely with the North Dakota Department of Agriculture,
growers, industry groups, and others, trying to get a list of
the products that we think are the priorities that the growers
are telling us that they need and that there are real cost
differences for. We came up with a list of 23 identified
priorities. EPA has since registered 15 of those for growers'
use. We also have work underway to continue on the rest of
those.
Over the years, EPA has reached out to grower groups in an
ongoing effort to reflect grower priorities in our current
registration plans and priorities. We are focusing our
resources on products that are most needed by growers.
Another important piece of the TWG's efforts is the
creation of a NAFTA label, and some of the other folks after me
are also going to talk a little bit about the NAFTA label. This
is something we have been very supportive of. This label can
help enable the sale and distribution of a pesticide across
North America, thereby helping to make products available in
Canada and the U.S. at the same time.
The joint review program has resulted in simultaneous
registration of 22 new pesticide products in the U.S. and
Canada, with 12 additional products currently under review. The
governments are also sharing resources and scientific expertise
or work sharing in reviewing data on several other pesticide
products.
You have our commitment to continue work within our current
authorities to promote a level playing field for U.S. growers.
We believe regulatory harmonization will continue to bear fruit
and help create a more level playing field for pesticides. In
the near term, EPA stands ready to continue 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.
However, there are some broad policy implementation
concerns that the current legislation--that could have, I
believe, additional ramifications for ourselves as well as
potentially on other trade agreements, et cetera.
Specifically for EPA, one of our concerns is implementation
issues. For example, there are important questions regarding an
individual registrant's ability to assume the legal, financial,
reporting, and other requirements of FIFRA. Of course, any
legislation should not place unreasonable resource burdens on
the government's pesticide registration program or cause any
unintended consequences on other priorities in regulating
pesticides.
In the long term, EPA is working to harmonize the
availability of pesticide products between the U.S. and Canada
through the NAFTA Pesticide Working Group, in cooperation with
stakeholders, States, growers, and others. International
harmonization on pesticide regulation efforts continue to be a
key focus of EPA and these efforts hold significant promise to
help alleviate some of the alleged pricing issues.
In closing, I look forward to working with you, other
Members of Congress and other affected stakeholders on this
important issue, and I will take any questions that you have at
this time.
Senator Dole. Thank you, Mr. Sharp.
[The prepared statement of Mr. Sharp can be found in the
appendix on page 27.]
Senator Dole. The proposed legislation requires the
Environmental Protection Agency to obtain the confidential
statement of formula for any Canadian pesticide proposed for
U.S. registration to determine if it is, in fact, identical or
substantially similar to a product currently registered
domestically. Now, how will EPA determine if a Canadian
pesticide is substantially similar in composition to a
domestically registered chemical? How will ``substantially'' be
interpreted?
Mr. Sharp. Right. We have talked with Senator Dorgan's
staff and others about technical advice on this legislation and
there is certainly a list of issues that we have provided
advice on. This is one of those, and for us, this is a key one.
If the legislation passed, it would have a requirement on
us to make a substantially similar finding, and the way the
legislation currently is written, that burden is on EPA to make
that decision.
Our problem with that is the question that you just asked.
Do we have any legal ability to get that information, the
confidential business information, from a Canadian company to
make that finding? The answer to that is no. We don't have an
ability to do that. Do we make substantially similar findings?
Yes, we do, and we do all the time on ``me too'' types of
registrations. It is a very specific type of registration
activity that we take part of on a constant basis. That type of
decision, a ``me too'' decision, is based on the confidential
statement of formula that we have. If we can't get it, it
creates a real problem for us.
Senator Dole. Companies registering a product in the United
States currently pay registration fees to help generate
resources for EPA to conduct the necessary reviews. Now, under
the proposed legislation, no such fee would be required, yet
the EPA has to approve or disapprove the application within 60
days. How would this be paid for?
Mr. Sharp. That is an unknown. I mentioned actually in my
testimony the resource constraints. We have, and we are very
happy to have, actually, the support of Congress recently in
passing the PRIA legislation, a new fee system, and that is a
terrific opportunity for us, for growers, for companies and
others to be able to produce the results that folks have been
wanting to get, which is a more timely assessment of products
and registration of products. It also sets up a new fee system
and a fee of scheduling for moving products through that
system.
This legislation would be outside that realm. I am not sure
how it would actually fold in with the fee system or with our
current resources. It would be potentially a resource drain on
us to have to pull a priority and/or workloads from priority
areas that we currently have and move them into doing this type
of work. I guess one of our concerns has been if you move this
legislation without additional resources, it certainly would
cause a problem.
One of the other issues that you mentioned is the 60-day
time limit. I mentioned the ``me too's'' a few minutes ago, of
how we register products that are substantially similar within
this country if we have the proper information. One of the
challenges that we would have with this legislation is that
currently, we have 90 days to make that type of finding. This
would require 60 days. You certainly are even pushing the time
limits down and the constraints even more so on the agency.
Senator Dole. You are saying it could divert attention away
from registering new products?
Mr. Sharp. Yes, it could. We currently have a priority
system set up where we are registering newer, safer products
all the time. Methyl bromide alternatives and others have
priority standing within our systems and that is why we would
have to shift probably resources from those to this area.
Senator Dole. S. 1406 allows EPA to delegate its authority
to register a pesticide to a State, possibly resulting in a
patchwork of pesticide registrations. At the same time, EPA is
bound by NAFTA to work toward harmonization, as you said, at
the Federal level and it is responsible for enforcing treaty
obligations intended to result in harmonization throughout the
States and territories. How will EPA reconcile these
conflicting directives?
Mr. Sharp. The legislation has changed a number of times.
Certainly, at one point in time, and I am not sure if it is the
current version or a prior version, but one of the prior
versions has set up this type of a system where the delegation
of registration would be moved from EPA to a State. That would
potentially cause the type of situation where you would have
individual States setting their individual standards or making
individual regulatory decisions on products that are different
from the Federal level.
Senator Dole. You would end up with a patchwork there.
Mr. Sharp. Create a patchwork. That is a situation that we
don't currently have. We have several States that do extensive
work on pesticides, but in this type of an arena, this type of
a situation, we don't have that currently and it could be
troubling. I guess I look at it as it could actually lead to
slowing down registrations.
Senator Dole. How will the U.S. meet its NAFTA obligation
to protect confidential proprietary information supplied in
connection with harmonization efforts if it has delegated
authority to a State to compel confidential information?
Mr. Sharp. Obviously, we have protections under FIFRA for
protecting CBI information, confidential business information.
One of the challenges that I know has come up in the past with
this legislation and certainly one of the pieces of advice we
have given Congress is that we would be very concerned if you
moved the delegation to a State where you do have sunshine
provisions and other types of requirements that could have that
information moved out of the protected arena. That has been a
concern for us.
We, of course, under FIFRA have certain responsibilities,
as well, when we are looking at information that we are making
decisions on, that there are certain types of agreements made
with the protection of that information and compensation and
other requirements so that we can use that information. It
would raise a lot of questions if you did move that type of an
authority to a State as far as protection of information.
Senator Dole. How will EPA coordinate with Customs in
processing the commerce of third party registrant chemicals?
Mr. Sharp. This is a question that is unclear to us of how
we would answer that if you had this legislation passed,
because the question on coordinating with Customs, currently,
we have a system in place where if you are going to import a
pesticide into this country, there is a system set up where the
importer notifies the EPA. We check the proper paperwork. We
send back documentation that that product is allowed to come
into this country. Then that paperwork comes with the product
into this country.
This legislation, when it talks about any person being a
registrant, we are not sure what that means and who
specifically would then be the registrant, who would be
responsible for that paperwork movement and how you could
coordinate it then with Customs in order to move product across
the border. We have talked with and given our advice on this in
that it is difficult for us to understand exactly practically
how this could work for an individual to go across the border
literally and purchase a product and bring it back, given that
it does have to move across an international border. How that
practically could work has been not real clear to us, the way
the legislation is currently drafted.
Senator Dole. Thank you very much, Mr. Sharp. I appreciate
your testimony this morning and look forward to working with
you on this and other issues.
Mr. Sharp. Absolutely. Thank you.
Senator Dole. Thank you very much.
Now, I would like to call our panel to the front, please,
Mr. Jim Gray, Pesticide Registration Coordinator for the North
Dakota Department of Agriculture; Mr. Mark Gage, President of
the National Association of Wheat Growers; and Mr. Jay Vroom,
President and Chief Executive Officer of CropLife America.
Welcome, gentlemen.
Let me begin with Mr. Gray. Mr. Gray, certainly the North
Dakota Department of Agriculture is qualified to address some
of these registration requirements. What principally do you
view as your role under this proposal?
STATEMENT OF JIM GRAY, PESTICIDE REGISTRATION
COORDINATOR, NORTH DAKOTA DEPARTMENT OF
AGRICULTURE, ON BEHALF OF THE NATIONAL
ASSOCIATION OF STATE DEPARTMENTS OF AGRICULTURE, BISMARCK,
NORTH DAKOTA
Mr. Gray. Thank you, Madam Chair. My role under this
proposal as a State regulator would be to work with EPA. If
they delegated that authority to a State, I would review that
package. Otherwise, I would be a stakeholder in the process.
Would you like for me to present the oral testimony now?
Senator Dole. Yes, please.
Mr. Gray. Thank you. Thank you, Madam Chair. My name is Jim
Gray, Pesticide Registration Coordinator for the North Dakota
Department of Agriculture, and I am here to testify in full
support of S. 1406. I speak today on behalf of the National
Association of State Departments of Agriculture, which
represents the Commissioners, Secretaries, and Agriculture
Directors of the State Departments of Agriculture in the 50
States and four U.S. territories.
S. 1406 deals with the issue of pesticide price
harmonization with Canada, a pressing issue in northern border
States with nationwide impact. By granting EPA the authority to
issue registrations to those parties that wish to import
certain Canadian pesticides, the bill desegments the U.S.
market with Canada, thereby eliminating significant pesticide
price disparities.
There are currently barriers in Federal statutes that
prevent American farmers from legally importing and using
Canadian pesticides without the consent of the product
registrant, even if the products are identical in composition
to pesticides already registered with the U.S. EPA. As a
result, product registrants have been able to use the U.S.-
Canadian border as a real artificial barrier to create two
separate pesticide markets. Similar to the situation with
pharmaceuticals, these artificially segmented pesticide markets
can cause significant pesticide price disparities.
Senator Dorgan presented many of those price disparities
this morning. There is no need for me to go into those again.
However, the price disparities are simply a symptom of this
system of two segmented pesticide markets.
The system of segmented pesticide markets is simply unfair
to U.S. farmers, especially since grain from Canada treated
with those lower-cost Canadian pesticides travels south of the
border every day to compete with U.S. grain on the open market.
We cannot continue to ask U.S. farmers to compete on such an
unlevel playing field.
Furthermore, the current system is a clear violation of
Article 102 of NAFTA, which states that the parties shall
eliminate barriers to the trade in and facilitate the cross-
border movement of goods and services between the territories
of the parties. It is evident that existing Federal statutes
pertaining to pesticide labeling create a clear barrier to the
free trade in and cross-border movement of pesticides.
Now, the ability to issue registrations for these Canadian
pesticides without the consent of the registrants is a needed
component of this bill. State pesticide regulators and farmers
have tried to work in the past with registrants to import their
pesticides from Canada, and so far, not one pesticide company
has given its consent to purchase their products in Canada and
import and use those products. Therefore, it is essential that
a mechanism be created in which access to these Canadian
pesticides is not contingent upon primary registrant consent
and this bill provides that mechanism.
I would also like to suggest two minor changes to the bill
to focus efforts as well as to create a real long-term solution
to this problem. Mr. Sharp this morning raised some resource
concerns with EPA, and the issue with disparate pesticide
prices between the U.S. and Canada is most prominent with
farmers and ranchers, in the agricultural sector. Therefore, to
focus on the most pressing needs of the agriculture user
community, I recommend that the scope of S. 1406 be limited
only to agricultural pesticides.
Second, while S. 1406 is a real critical need to address
pesticide price harmonization, it is not a long-term solution
to the problem. Instead, the long-term solution to desegment
the U.S. market with Canada is to label pesticides with joint
pesticide labeling that meets the requirements of both the U.S.
and Canada. Labeling products in such a way would negate the
need for registrant consent for those products to cross the
border. Instead, those jointly labeled products could cross the
U.S.-Canadian border freely based solely on market forces.
It is my understanding that the regulatory barriers to the
creation of joint pesticide labeling have been largely
resolved. However, use of joint labeling remains a voluntary
option for the pesticide manufacturers. Because of this, the
use of joint pesticide labeling has been virtually nonexistent.
I suggest that language be added to S. 1406 mandating the
use of joint U.S.-Canadian pesticide labeling in those
situations where an identical or substantially similar
pesticide is registered for use in both countries. However,
such a requirement for use of joint pesticide labeling should
become effective only when a similar mandate exists in Canada.
Such language would be a logical complement to the existing
bill. S. 1406 provides a real workable short-term solution,
while mandatory use of joint pesticide labeling is the ultimate
long-term solution.
American farmers have proven that they can produce the
safest, highest-quality food in the world. However, to compete
in today's agricultural economy, they need to be able to
operate on a level playing field with their major competition.
This bill is one step in the creation of that level playing
field. Thank you.
Senator Dole. Thank you, Mr. Gray.
[The prepared statement of Mr. Gray can be found in the
appendix on page 35.]
Senator Dole. Mr. Gage?
STATEMENT OF MARK GAGE, PRESIDENT, NATIONAL ASSOCIATION OF
WHEAT GROWERS, PAGE, NORTH DAKOTA
Mr. Gage. Madam Chairman, members of the committee, my name
is Mark Gage. I am a wheat, barley, and soybean producer from
Eastern North Dakota and I am currently President of the
National Association of Wheat Growers. I would like to thank
the committee for holding this hearing today to help answer a
simple but extremely important question. Why should I, as an
American producer, have to pay a significantly higher price for
crop protection products than my Canadian counterpart when we
are both using the same product on the same crop?
The National Association of Wheat Growers strongly supports
S. 1406, introduced by Senators Dorgan and Burns, as the best
means to address this problem. I would urge the committee to
favorably consider this legislation as part of any future
deliberation. Prices on crop protection products between the
United States and Canada have varied over the years for a
number of reasons. However, even when taking exchange rates
into consideration, many of these products have consistently
been priced lower in Canada than their identical counterpart
sold in the United States.
Considering the fact that the cost of crop protection
products represents anywhere from ten to 15 percent of variable
production costs, minor differences in these prices add a
significant amount to the cost of doing business when competing
with Canadians to sell our products in a global marketplace.
As mentioned in my written testimony, a number of studies
have shown that this price disparity exists. I would simply
like to quote from an updated study completed in 2003 by North
Dakota State University. The controversy between the U.S. and
Canadian chemical prices is over 6 years old. With the
exception of a few herbicides, very little has changed. The
overall cost difference in 2002 is about $1.56 per acre, but
producers who use Liberty, Puma, Far-Go, or Assert are
disadvantaged by more than $3 per acre. Whether the situation
is due to market manipulation or other economic factors is
undetermined, but the cost difference exists and the cost for
North Dakota farmers is over $20 million annually.
Therefore, to eliminate price disparities, the U.S. and
Canadian herbicide markets must be desegmented. This bill can
best remedy this inequitable pricing structure by allowing the
purchase of a less costly Canadian product to be registered for
use by EPA in the U.S. if its identical or substantial product
is already registered for domestic use. This product would
remain under EPA regulation. It would not pose a health or
environmental risk. It simply brings an additional degree of
competitive pricing into the marketplace.
Every competitive edge is needed in a global market.
However, much is made of the current high commodity prices as
if that should serve as cushion against high production cost,
whether they are chemicals, fertilizer, or energy. Wheat is
currently bringing $3.81 per bushel at my local elevator. My
Canadian competitor, the state trading enterprise, can sell at
the same elevator and get $3.81. I can't get the Canadian price
of $5.80 an acre for certain chemicals.
This brings up a larger problem affecting all American
agriculture. I attached to my written testimony a Wall Street
Journal article dated June 18, 2004, titled, ``New Farm Powers
Sow the Seeds of America's Agricultural Woes.'' While the focus
of this article is on wheat, implications for all of
agriculture are very stark and very real. As the article notes,
America's run as a wheat powerhouse and dominant player in
global agriculture is under attack from a crop of newly
emboldened international rivals who are striking at one of the
main pillars of American agricultural might, food exports. U.S.
farmers are increasingly under pressure as they compete with
commodities including Brazilian soybeans, Indian wheat, Chinese
apples, Mexican tomatoes, and Argentine peanuts. This ``farms
race'' has implications beyond agriculture. America's influence
on issues such as international trade owes much of its
domination to food.
Madam Chairman, jump-starting America's farms race for the
21st century ought to be the top priority not only for the U.S.
agricultural community, but also for all of America. Providing
access to competitive production input costs is crucial, and
that is why I strongly urge you to favorably report on S. 1406,
the Pesticide Harmonization Act of 2004.
Thank you, and I would be happy to answer any questions.
Senator Dole. Thank you, Mr. Gage.
[The prepared statement of Mr. Gage can be found in the
appendix on page 41.]
Senator Dole. Mr. Vroom, welcome.
STATEMENT OF JAY VROOM, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
CROPLIFE AMERICA, WASHINGTON, DC
Mr. Vroom. Thank you, Madam Chairman. Thank you for this
opportunity to represent the industry here this morning. I am
Jay Vroom, President of CropLife America, the trade association
that proudly represents the manufacturers, distributors, and
formulators of virtually all the crop protection chemical and
crop biotechnology products used by our most valued customer in
the entire world, the American farmer.
I want to express my appreciation to you for inviting me to
present our views. My remarks will highlight some items out of
our written testimony, which I appreciate the inclusion in the
record, and also respond to some of the other comments that
already have been made this morning.
As regards the attachments to our advance written
testimony, we have those items on posters. The first one
illustrates the notations that have already been made this
morning about the fact that the Canadian dollar has
strengthened against the United States dollar and that has
contributed significantly to addressing the disparities that
have been addressed previously.
This next chart illustrates the fact that American farmers
overall are paying much, much less for the same or greater
amounts of our industry products in the last 10 years or so.
This is driven by the fact that we have more and more
competitors, many of our products have gone off patent, and the
fact that the approximately $1.5 billion that have come off of
our total sales earnings by industry in the United States
really has gone straight to the bottom line of the American
farmer.
This chart illustrates the comparative relativity of the
green line across the bottom, which is barely visible and
represents the cost of pesticides as part of the American
farmers' expense over the last 12 or so years, and the fact
that it is essentially a flat line when cast against the larger
economics of gross farm income, total farm expenses, and the
like.
Despite the fact that our industry sales have gone down,
our industry's investment in research and development to find
newer, better products and defend older products' safety has
continued, and as Mr. Sharp has indicated in his testimony
earlier this morning, the EPA has continued to register more
new products of our industry as presented for licensing
application in recent years. The total number of new use
products adopted and approved by EPA has also continued to
improve.
These are important illustrations that provide a backdrop
to the discussions that we are having here this morning around
S. 1406.
My organization has been involved and I have led it in this
regard for more than 15 years around these issues related to
U.S.-Canada pesticide harmonization. In fact, I and my staff
were involved before there was a NAFTA, when we called it the
U.S.-Canada Free Trade Agreement and we were very pleased with
the support that we got even in the early days of the Canada
Free Trade Agreement during the Reagan administration.
As the issue expanded into the controversy of price
perceptions across the border 6 years ago, I have been
personally engaged at every stage of the way. I have testified
now at each of the four U.S. Congressional hearings on the
price perception issue. I have engaged in attempts to dialog,
compromise, fix, and respond to the 13 separate Congressional
bills that have been introduced on this subject over these 6
years. I have represented my industry at two U.S.-Canada summit
meetings convened by USDA during the Clinton administration,
spent countless hours with our industry experts and grower
organizations as we partner together with EPA, working in the
NAFTA Technical Working Group that Mr. Sharp referred to
earlier.
Maybe most importantly, I still own my family farm in
Illinois and I have to look my brother-in-laws and cousin in
the eye when we talk about these very issues. After more than
30 years of working in various agribusiness segments in the
United States, I take this role seriously. I want U.S.
agriculture overall and my personal little part of it to
prosper, to compete fairly, and succeed.
I mentioned previously that on this U.S.-Canadian
legislation we have offered previously to seek common ground,
to consider compromise to legislative solutions. That is no
longer my position nor the position of CropLife America. As you
can see from my written testimony, we have done the most
comprehensive analysis yet of S. 1406 and have both more
completely articulated the problems with the legislation that
we had previously pointed out and have identified a significant
host of additional concern areas.
Most, if not all of these areas, I am confident, are
unintended consequences in Senator Dorgan's drafting, for he
would not purposely set out to propose legislation with such
negative side effects. They are problems nonetheless. The
significant list includes five I would like to lift up in just
a few moments.
No. 1, the legislation does not advance the already
substantial progress of regulatory harmonization accomplished
under the TWG. In fact, we believe honestly that S. 1406 would
seriously dilute the continued progress of the TWG and our
EPA's ability to advance real regulatory progress. Mr. Sharp's
comments supported that notion, as well.
No. 2, we believe that S. 1406 is not in harmony with our
existing NAFTA and WTO treaty obligations, and as such is
probably not even the exclusive jurisdiction of the Agriculture
Committee.
No. 3, S. 1406 contravenes many crucial U.S. intellectual
property laws and international trade obligations.
No. 4, S. 1406 creates potential user safety concerns.
No. 5, potential for crop application and mistakes and crop
risks.
On the latter two points, I refer you to several product
label examples that we brought along today that are attached to
our written testimony showing the comparable U.S. and Canadian
labels for what have been portrayed by many in this debate in
recent years as products that farmers use on both sides of the
border and depend on heavily.
Concerns of note that these labels illustrate include the
fact that labels in the United States are in English only,
while Canada requires French companion language presentations
on the labels. No. 2, U.S. products bear measurements in
English units, Canadian labels are in metric units. The two
countries require different warning pictograms for safety
communications. Different product question toll-free numbers
apply on both sides of the border, and in fact, you cannot
access from most United States telephone exchanges Canadian 800
numbers, raising the question that if, in the case of an
emergency, someone tried to dial one of those numbers, would
help not be able to be provided?
Often, products that appear to be identical are actually
not. Significantly different product formulations are used in
the two markets and one might be too strong and damage crops if
used in the other market using practices that farmers in that
domestic market were used to employing.
Another important point Mr. Sharp alluded to. How would
Customs officials figure out if the correct S. 1406
supplemental labels applied to the correct Canadian product
container when presented for import into the United States?
What are the security considerations that follow along that
track?
Finally, Madam Chairman, we point out that when examined
overall and not on the basis of selective price comparisons,
any previously existing significant price differentials that
disadvantage allegedly North Dakota farmers compared to
Canadian farmers have evaporated. In fact, the most recent
North Dakota State University study that Mr. Gage just referred
to, the 2003 study, shows that overall, North Dakota farmers
were better off by over $1 million on the list of 35 products
on the chart as opposed to what Canadian farmers paid.
We do not find anything about S. 1406 that we can agree
with or suggest a compromise for. Indeed, Senator Dorgan and
others who have proposed such legislation in these past 6 years
have drawn a great deal of attention to the issues of more fair
product availability and cost and they have been heard by the
marketplace and by those who have had the continued impact of
progress around regulatory harmonization. The price problem, to
the extent that it previously existed, has been extensively
addressed.
Senator Dorgan can take credit, just as President Reagan
won the Cold War without firing a shot, of helping resolve an
issue without having to amend U.S. law. We propose to continue
to work with Mr. Dorgan and others on the Hill and in the
administration to ensure continued progress around real
regulatory harmonization and that we continue this journey of
positive interchange under the context of NAFTA.
I look forward to responding to your questions,
particularly around some of the product-specific issues that
have been raised.
Senator Dole. Thank you, Mr. Vroom.
[The prepared statement of Mr. Vroom can be found in the
appendix on page 47.]
Senator Dole. Mr. Gray----
Mr. Gray. Yes?
Senator Dole. The legislation allows the Administrator of
EPA to delegate functions under this subsection to a State. Do
you believe that most State Departments of Agriculture have the
financial resources and the expertise necessary to carry out
such functions as determining that the chemical is identical or
substantially similar to a domestically-registered pesticide or
obtaining a confidential statement of formula or determining
tolerances for food use chemicals?
Mr. Gray. Thank you, Madam Chair. The answer is yes. As a
pesticide regulator, I review confidential statements of
formula all the time as part of my State regulatory duties. I
would urge the EPA, if they did delegate this authority, to
delegate it only to those States that they are convinced have
expertise and adequate resources and adequate State laws that
do protect that data as being confidential.
The real process of that review is to lay the Canadian
confidential statement of formula side-by-side with the U.S.
confidential statement of formula and make sure that the
products have the same ingredients at comparable
concentrations, and most State regulators have that technical
expertise.
Senator Dole. What are the standards? How is an applicant
to demonstrate that a pesticide is identical or substantially
similar? What kind of standards----
Mr. Gray. We would need to work with EPA on really
developing what that definition of ``substantially similar''
means. My definition would be that the Canadian product only
contains U.S.-approved active and inert ingredients at the same
concentrations. To me, that would be identical or substantially
similar. Then you get into questions of, what if it is 2 or 3
percent concentration different? Is that substantially similar?
We would need some guidance from EPA on that.
Senator Dole. I note the legislation limits the liability
of both the EPA and the individual registrant. Do you believe
there are instances in which a State Department of Agriculture
could be held legally liable for injury or damages resulting
from use of a Canadian product registered under the new
subsection? This assumes, of course, that much of the data used
to support the registration will be furnished by the State
Agriculture Departments.
Mr. Gray. I don't see liability as being a major issue with
this bill. What the bill does limit EPA's liability is as the
registering agency, not as the registrant. Now, the
supplemental registrant, for lack of a better term, for this
bill, and for the most part, that is not going to be an
individual farmer going north of the border to purchase a
Canadian product.
I envision if this bill passes that the majority of
registrants are going to be the major chemical distributors and
dealers that are going to source Canadian wholesale sources of
these products. Their liability really centers upon those
stages of production that are under their knowledge or under
their control.
The way EPA's enforcement viewpoint works now is that if
there is a problem with the formulation or packaging of a
product, that party that had the direct control over the
formulation or packaging would have that liability. I don't see
that changing with this bill. If there is a problem with the
importation or the relabeling, the secondary registrant would
have to assume liability for that.
Senator Dole. Thank you very much.
Mr. Gage, under the proposed legislation, any person may
seek to register a Canadian pesticide, including an individual
farmer or farmer cooperative that might then sell it to other
farmers. The registrant or farmer cooperative in this case is
responsible for labeling the product appropriately, and I note
that the proposal, for example, holds the farmer cooperative
harmless if the product becomes adulterated. However, I do not
see any protection for mislabeling. Do you think the farmer
cooperative could be held liable for any inadvertent crop
damages resulting from mislabeling?
Mr. Gage. As I understand the bill, when they pick up the
product, it would be relabeled at that point. I do not believe
that there would be--that there is a problem with mislabeling,
and so I don't foresee that problem. I don't see a problem
with--for my local cooperative in liability.
Senator Dole. S. 1406 does not speak to whether Canadian or
U.S. intellectual property laws apply to Canadian pesticides
sold in the United States. Are intellectual property laws in
the U.S. and Canada the same, and if they are not, which
intellectual property laws would apply to Canadian pesticides
sold in the United States if S. 1406 is passed?
Mr. Gage. I really don't know if the intellectual property
laws are exactly the same in the U.S. and Canada. Since we are
in the United States, I would assume that U.S. laws apply here.
Senator Dole. How do your growers feel about a NAFTA label?
Mr. Gage. We are very supportive of a NAFTA label.
Ultimately, that will be our ultimate goal. We need remedies
before that takes place. I know that there have been examples
cited, how the agencies are working together and passing
products through under that format now. There are things that
can happen in that process that can throw that out of line.
I personally know of an example of a chemical that I was
told by a company that was under joint review, and so I was at
EPA and I was asking how the registration process was coming on
this because it is under joint review, as I understood it. EPA
told me that it wasn't under joint review. They were sharing
some information, but it didn't qualify for joint review
because you have regulations on determining what qualifies for
joint review. One of those regulations was that it had to be--
the registration had to be applied for on the same day in the
United States and Canada, and under that particular product,
the company applied in Canada months before, earlier than they
applied in the U.S. Really, it wasn't under joint review, which
throws that process out of whack and raises questions with
growers.
Why are we being penalized? We need something in the
meantime when we are working toward a NAFTA label. We need this
legislation in the meantime to equalize some of the disparities
in prices.
Senator Dole. Thank you, Mr. Gage.
Mr. Vroom, the domestic companies you represent are not
seeking to register Canadian product in the United States.
However, under this proposal, they must supply EPA with
information about the Canadian chemical simply because it is
produced by an affiliate. The Canadian affiliate is not bound
by U.S. law to provide this information, leaving the domestic
company vulnerable to litigation in a situation that they have
little control over. It seems that domestic chemical companies
carry the entire burden with none of the financial benefits.
Could the increased costs associated with this proposal
result in the need to raise prices on products that they sell
domestically?
Mr. Vroom. Senator, there is a very real possibility of
that and we certainly understand that the litigation question
is not theoretical. Our industry faces substantial product
liability litigation on an ongoing basis across the country,
and in fact, as we look at our global marketplace, the United
States is the most expensive to operate in with regard to the
litigation overhead cost, defense, settlement of cases, and the
like.
Senator Dole. I understand that Liberty herbicide is sold
in both the United States and Canada, correct?
Mr. Vroom. Yes.
Senator Dole. If a grower were to purchase the Canadian 150
formulation in Canada and bring it to the United States to use
on his corn crop, what would be the result?
Mr. Vroom. We would anticipate that there would be a very
real possibility of crop damage by way of misapplication of the
product because of what appears to be a slight, but a
substantial, differentiation in the product concentration. We
actually have brought as props for my presentation copies of
the Liberty boxes and labels. There are two here and one is on
the floor.
As you can see, they look very similar in the United States
formation, which is this one, to the Canadian one, but, in
fact, the bottles inside are different size, one being in
metric and the other being in English units. The container
instructions and language are also different. We feel that it
would be very easy to make a mistake in crop application and
damage the crop, and then back to your earlier question, whose
liability is that?
Senator Dole. Is Liberty more or less expensive in the
United States today than in Canada?
Mr. Vroom. According to the experts that we have consulted,
including the manufacturer of the product, if you compare the
like product, active ingredient concentrations, the price per
gallon in the United States today is lower. Senator Dorgan
referred to 2002 comparative data on Liberty. The 2003 data
clearly show that that relationship has switched.
Senator Dole. If Liberty is now cheaper in the United
States than in Canada on a per gallon basis, what happened in
the past few years to effectuate this change?
Mr. Vroom. Well, a number of factors as is the case when
markets are working. In the case of Liberty, the manufacturer
have heard from their growers and part of that was amplified by
the work that Senator Dorgan and Congressman Pomeroy and other
proponents of their legislation on the Hill. They have reduced
their price in the United States by nearly a third.
I can't speak to their other specific reasons for changing
pricing, but the result of generic competitors that have come
into the marketplace with competing products, the impact of the
change in the relationship of currency valuations, and many
other factors contribute.
Senator Dole. Gentlemen, I thank all three of you very much
for being here today.
I would like to include for the record written statements
from Ralph Peck, Director of the Montana Department of
Agriculture; the Montana Grain Growers Association; Bob
Stallman, President of the American Farm Bureau Federation;
Jake Cummins, Executive Vice President of the Montana Farm
Bureau Federation; and Rob Rynning, President of the National
Barley Growers Association.
[The prepared statements can be found in the appendix on
page 110.]
Senator Dole. Since there are no other questions, I declare
this Subcommittee hearing adjourned.
[Whereupon, at 11 a.m., the Subcommittee was adjourned.]
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A P P E N D I X
June 23, 2004
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DOCUMENTS SUBMITTED FOR THE RECORD
June 23, 2004
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