[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
HEARING TO REVIEW PENDING FREE TRADE AGREEMENTS
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
MAY 12, 2011
__________
Serial No. 112-16
Printed for the use of the Committee on Agriculture
agriculture.house.gov
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COMMITTEE ON AGRICULTURE
FRANK D. LUCAS, Oklahoma, Chairman
BOB GOODLATTE, Virginia, COLLIN C. PETERSON, Minnesota,
Vice Chairman Ranking Minority Member
TIMOTHY V. JOHNSON, Illinois TIM HOLDEN, Pennsylvania
STEVE KING, Iowa MIKE McINTYRE, North Carolina
RANDY NEUGEBAUER, Texas LEONARD L. BOSWELL, Iowa
K. MICHAEL CONAWAY, Texas JOE BACA, California
JEFF FORTENBERRY, Nebraska DENNIS A. CARDOZA, California
JEAN SCHMIDT, Ohio DAVID SCOTT, Georgia
GLENN THOMPSON, Pennsylvania HENRY CUELLAR, Texas
THOMAS J. ROONEY, Florida JIM COSTA, California
MARLIN A. STUTZMAN, Indiana TIMOTHY J. WALZ, Minnesota
BOB GIBBS, Ohio KURT SCHRADER, Oregon
AUSTIN SCOTT, Georgia LARRY KISSELL, North Carolina
SCOTT R. TIPTON, Colorado WILLIAM L. OWENS, New York
STEVE SOUTHERLAND II, Florida CHELLIE PINGREE, Maine
ERIC A. ``RICK'' CRAWFORD, Arkansas JOE COURTNEY, Connecticut
MARTHA ROBY, Alabama PETER WELCH, Vermont
TIM HUELSKAMP, Kansas MARCIA L. FUDGE, Ohio
SCOTT DesJARLAIS, Tennessee GREGORIO KILILI CAMACHO SABLAN,
RENEE L. ELLMERS, North Carolina Northern Mariana Islands
CHRISTOPHER P. GIBSON, New York TERRI A. SEWELL, Alabama
RANDY HULTGREN, Illinois JAMES P. McGOVERN, Massachusetts
VICKY HARTZLER, Missouri
ROBERT T. SCHILLING, Illinois
REID J. RIBBLE, Wisconsin
------
______
Professional Staff
Nicole Scott, Staff Director
Kevin J. Kramp, Chief Counsel
Tamara Hinton, Communications Director
Robert L. Larew, Minority Staff Director
(ii)
C O N T E N T S
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Page
Lucas, Hon. Frank D., a Representative in Congress from Oklahoma,
opening statement.............................................. 1
Prepared statement........................................... 3
McGovern, Hon. James P., a Representative in Congress from
Massachusetts, prepared statement.............................. 4
Submitted letter............................................. 101
Peterson, Hon. Collin C., a Representative in Congress from
Minnesota, opening statement................................... 4
Witnesses
Vilsack, Hon. Thomas ``Tom'' J., Secretary, U.S. Department of
Agriculture, Washington, D.C................................... 6
Prepared statement........................................... 7
Submitted questions.......................................... 127
Kirk, Hon. Ron, United States Trade Representative, Washington,
D.C............................................................ 10
Prepared statement........................................... 11
Supplementary material....................................... 111
Submitted questions.......................................... 128
Stoner, Gordon, Member, Board of Directors, National Association
of Wheat Growers; farmer/rancher, Stoner Farms, Outlook, MT; on
behalf of U.S. Wheat Associates, Inc........................... 44
Prepared statement........................................... 45
Tolman, S. Richard ``Rick'', Chief Executive Officer, National
Corn Growers Association, Chesterfield, MO..................... 50
Prepared statement........................................... 51
Carney, Sam, Chairman, Trade Policy Committee, National Pork
Producers Council; Owner and Operator, Carney Farms, Inc.,
Adair, IA...................................................... 54
Prepared statement........................................... 55
Johnson, Roger, President, National Farmers Union, Washington,
D.C............................................................ 67
Prepared statement........................................... 68
Stallman, Bob, President, American Farm Bureau Federation; rice
and cattle producer, Columbus, TX.............................. 80
Prepared statement........................................... 82
Donald, Bill, President, National Cattlemen's Beef Association,
Washington, D.C................................................ 89
Prepared statement........................................... 91
Submitted Material
Cressy, Dr. Peter H., President and Chief Executive Officer,
Distilled Spirits Council of the United States, Inc., submitted
statement...................................................... 114
Cummings, Robert, Senior Vice President, USA Rice Federation,
submitted letter............................................... 117
Dorr, Thomas C., President and Chief Executive Officer, U.S.
Grains Council, submitted statement............................ 119
Erickson, Audrae, President, Corn Refiners Association, submitted
statement...................................................... 123
International Dairy Foods Association, submitted statement....... 124
Suber, Thomas M., President, U.S. Dairy Export Council; Jerry
Kozak, President and Chief Executive Officer, National Milk
Producers Federation, submitted joint statement................ 113
HEARING TO REVIEW PENDING FREE TRADE AGREEMENTS
----------
THURSDAY, MAY 12, 2011
House of Representatives,
Committee on Agriculture,
Washington, D.C.
The Committee met, pursuant to call, at 10:05 a.m., in Room
1300 of the Longworth House Office Building, Hon. Frank D.
Lucas [Chairman of the Committee] presiding.
Members present: Representatives Lucas, Goodlatte, Johnson,
King, Neugebauer, Conaway, Fortenberry, Schmidt, Thompson,
Stutzman, Gibbs, Austin Scott of Georgia, Tipton, Southerland,
Crawford, DesJarlais, Gibson, Hultgren, Hartzler, Schilling,
Roby, Peterson, Holden, McIntyre, Boswell, Baca, Cuellar,
Costa, Walz, Schrader, Pingree, Courtney, Fudge, Sewell,
Sablan, and McGovern.
Staff present: Mike Dunlap, Tamara Hinton, John Konya, John
Porter, Nicole Scott, Debbie Smith, Heather Vaughn, Andy Baker,
Liz Friedlander, and Jamie Mitchell.
OPENING STATEMENT OF HON. FRANK D. LUCAS, A REPRESENTATIVE IN
CONGRESS FROM OKLAHOMA
The Chairman. This hearing by the Committee on Agriculture
hearing to review pending free trade agreements will come to
order. Good morning. I would like to thank Secretary Vilsack
and Ambassador Kirk and our industry representatives for
joining us today to discuss free trade agreements.
As we know, there are three pending free trade agreements
with Korea, Colombia, and Panama. Unfortunately, it has been
nearly 4 years since these agreements were signed, and the
Administration is just now close to bringing the agreements
before Congress.
It is difficult to overstate the importance of these
agreements to America's farmers and ranchers and to our economy
as a whole. Trade has a ripple effect. Exports support one in
every three jobs in farming and two of every three jobs off the
farm in industries like transportation, food processing, and
manufacturing. All told, American agriculture exports support
nearly 900,000 jobs. Exports currently account for more than 25
percent of total agricultural sales.
For every dollar of those exports' sales, we create $1.48
in processing, financing, shipping, and packaging activities.
The benefits of trade are made possible by the incredible
productivity and hard work of America's farmers and ranchers.
Even in this economic downturn, they have managed to maintain a
trade surplus in agricultural exports. Our farmers and ranchers
are successfully competing in the global market and bringing
much needed income to communities across America.
But they are doing so in the face of stiff protectionism in
the form of high tariffs and non-tariff import restrictions.
The pending FTAs will dramatically reduce these barriers and
open markets for agricultural goods. The agreement with Panama
will immediately eliminate all duties on more than half of our
agricultural exports. The remaining tariffs will be phased out
over 15 years. This is critical to establishing a healthy
trading relationship since 99 percent of Panama's exports to
the U.S. are already duty-free.
The FTA with Colombia will immediately eliminate all duties
on more than half of our agricultural exports. In addition to
phasing out the remaining tariffs, Colombia will also eliminate
its price band system, which affects key U.S. exports
including, corn, wheat, dairy, pork, and poultry.
The Korean FTA will grant immediate duty-free access to \2/
3\ of U.S. agricultural products and phase out tariffs and
import quotas on most products within 10 years. By 2016, more
than 90 percent of U.S. pork will be imported duty-free, and
the elimination of the 40 percent tariff on U.S. beef will
create $325 million in savings once the agreement is fully
implemented. All told, American agriculture stands to gain an
additional $1.9 billion in new market access in Korea. The
agreements were finalized nearly 4 years ago, yet they are
still awaiting implementation. Each year that we delay action,
it costs us billions of dollars in unrealized benefits.
The FTAs are more than $2.5 billion annually in market
access for our farmers and ranchers. So our producers have
missed out on nearly $10 billion due to inaction on these
agreements.
What is more, our trading partners aren't sitting around
and waiting for us to act. Many of our competitors have
finalized and implemented agreements with Korea, Colombia, and
Panama in the past 4 years. That means that other countries are
gaining preferred access to these markets and gaining ground on
U.S. producers. Korea has an FTA with the European Union that
will go into effect on July 1. An agreement with Australia is
likely to be finalized within a year. Colombia has signed and
implemented FTAs with a number of trading partners in the past
4 years, and Panama recently completed an agreement with
Canada.
These FTAs include tariffs that will be phased out over 10
to 15 year periods. So it is critical that we do not allow our
competitors' products to gain a price advantage over American
products in the next decade. There is still time to prevent the
loss of valuable market access. However if we act quickly and
bring these agreements to a vote before July 1, we can ensure
that U.S. producers don't lose out on our competitive
advantages.
The agricultural communities overwhelmingly support these
FTAs and are eager to see them implemented as soon as possible.
It is time to take action. I look forward to hearing from
Secretary Vilsack and Ambassador Kirk on the Administration's
progress on readying these agreements for Congressional
consideration.
[The prepared statement of Mr. Lucas follows:]
Prepared Statement of Hon. Frank D. Lucas, a Representative in Congress
from Oklahoma
Good morning. I'd like to thank Secretary Vilsack and Ambassador
Kirk and our industry representatives for joining us today to discuss
free trade.
As we know, there are three pending free trade agreements with
Korea, Colombia and Panama. Unfortunately it has been nearly four years
since these agreements were signed and the Administration is just now
close to bringing the agreements before Congress.
It is difficult to overstate the importance of these agreements to
America's farmers and ranchers and to our economy as a whole.
Trade has a ripple effect--exports support one in every three jobs
in farming and two of every three jobs off the farm, in industries like
transportation, food processing, and manufacturing. All told, American
agricultural exports support nearly 900 thousand jobs. Exports
currently account for more than 25 percent of total agricultural sales.
For every dollar of those export sales, we create another $1.48 in
processing, financing, shipping, and packaging activities.
The benefits of trade are made possible by the incredible
productivity and hard work of America's farmers and ranchers. Even in
this economic downturn, they have managed to maintain a trade surplus
in agricultural exports. Our farmers and ranchers are successfully
competing in the global market and bringing much-needed income to
communities across America.
But they are doing so in the face of stiff protectionism in the
form of high tariffs and non-tariff import restrictions. The pending
FTAs will dramatically reduce these barriers and open markets for our
agricultural goods.
The agreement with Panama will immediately eliminate all duties on
more than half of our agricultural exports. The remaining tariffs will
be phased out over 15 years. This is critical to establishing a healthy
trading relationship, since 99 percent of Panama's exports to the U.S.
are already duty-free.
The FTA with Colombia will also immediately eliminate all duties on
more than half of our agricultural exports. In addition to phasing out
the remaining tariffs, Colombia will also eliminate its price band
system, which affects key U.S. exports including corn, wheat, dairy,
pork, and poultry.
The Korea FTA will grant immediate duty free access for two-thirds
of U.S. agricultural products and phase out tariffs and import quotas
on most other products within 10 years. By 2016, more than 90 percent
of U.S. pork will be imported duty-free. And the elimination of the 40
percent tariff on U.S. beef will create $325 million in savings once
the agreement is fully implemented. All told, American agriculture
stands to gain an additional $1.9 billion in new market access to
Korea.
The agreements were finalized nearly four years ago. Yet they are
still awaiting implementation. Each year that we delay action costs us
billions of dollars in unrealized benefits. The FTAs are worth more
than $2.5 billion annually in market access for our farmers and
ranchers. So our producers have missed out on nearly $10 billion due to
inaction on these agreements.
What's more, our trading partners aren't sitting around and waiting
for us to act. Many of our competitors have finalized and implemented
agreements with Korea, Colombia, and Panama in the last four years.
That means that other countries are gaining preferred access to these
markets and gaining ground on U.S. producers.
Korea has an FTA with the European Union that will go into effect
on July 1st. An agreement with Australia is likely to be finalized
within the year. Colombia has signed and implemented FTAs with a number
of trading partners in the past four years. And Panama recently
completed an agreement with Canada.
These FTAs include tariffs that will be phased out over 10 or 15
year periods, so it is critical that we do not allow our competitors'
products to gain a price advantage on American products for the next
decade.
There is still time to prevent the loss of valuable market access,
however. If we act quickly and bring these agreements to a vote before
July 1st, we can ensure that U.S. producers don't lose out on any
competitive advantages.
The agricultural community overwhelmingly supports these FTAs and
is eager to see them implemented as soon as possible. It is time to
take action. I look forward to hearing from Secretary Vilsack and
Ambassador Kirk on the Administration's progress on readying these
agreements for Congressional consideration.
The Chairman. And with that, I turn to the Ranking Member
for his opening comments.
OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE
IN CONGRESS FROM MINNESOTA
Mr. Peterson. Good morning, and thank you, Chairman Lucas,
for holding today's hearing, and thank you to the Secretary and
the Ambassador for being here to be with us today to examine
the potential benefits for agriculture under the three free
trade agreements currently pending with South Korea, Colombia,
and Panama.
All three agreements have broad support among U.S.
agriculture producers. Worldwide U.S. ag exports totaled $115
billion last year, and according to the International Trade
Commission, these three agreements together could boost
agricultural exports by $2 billion to $4 billion.
I want to mention, however, that there are some problems
with these agreements in regard to how they will benefit
farmers and ranchers. Under the Korea agreement, there is no
new access for rice, and I continue to worry about the beef
access given some of the unjust phytosanitary restrictions that
keep popping up all of the time. I would also like to know more
about how much imports that we are going to get under these
agreements. We can't forget NAFTA. When we did that, everybody
talked about all the increases. Nobody talked about the
increase in imports, and actually NAFTA was the opposite of
what we were told. So we need to make sure we know exactly what
the numbers are.
By and large, I think the three pending free trade
agreements are good for agriculture. Increasing market access
is always a good thing, but we should not ignore the fact that
these agreements also open our market, arguably the most
lucrative market in the world to our trading partners. We need
to continue other approaches in trade such as opening trade
with Cuba, which we previously supported in this Committee and
further developing fuels from the farm that could benefit U.S.
producers.
So I want to thank the chair for holding today's hearing
and I look forward to hearing the testimony of our witnesses.
The Chairman. The chair thanks the gentleman for his
opening comments. The chair requests that Members submit their
statements so that we can get to questioning the witnesses.
[The prepared statement of Mr. McGovern follows:]
Prepared Statement of Hon. James P. McGovern, a Representative in
Congress from Massachusetts
Thank you, Mr. Chairman. I'm going to confine my remarks and
questions to the Colombia FTA.
I've been to Colombia six times since February 2001.
I tend to stay for several days, travel to remote areas, and visit
some of the poorest city slums where you find hundreds of thousands of
Colombia's five million internally displaced; and to the border
regions, where hundreds of thousands more have fled Colombia's violent
countryside and are now refugees in neighboring countries.
As my colleagues know, Colombia has the greatest number of
internally displaced people in the world, last year surpassing Sudan.
Along with Afghanistan, it has the greatest number of landmine
victims.
Its homicide rate per capita--mainly from paramilitary, guerrilla
and criminal violence--is twice that of Mexico.
It has one of the highest levels of inequity, and the highest rate
of land concentration in the hemisphere.
I love Colombia and its people. But it is still a country in
violent conflict--President Santos told us that just a couple of days
ago. Most of that violence and conflict happens in the countryside--and
it primarily affects rural communities and small farmers.
In the United States, we take great pride in supporting our small
farmers. We should also be concerned about Colombian small producers
and how the Colombia FTA might affect them.
The most definitive study on this matter estimates that small-scale
producers of Colombia would lose around 16% of their net income from
agriculture under the Colombia FTA. For those who produce products that
will directly compete with U.S. agricultural imports, they will likely
experience a fall of between 48% and 70% in their net agricultural
income.
We should care. Because it means these people are likely to lose
their land and join the ranks of the displaced and growing urban poor.
Or they will move to more marginal land and start growing the best-
paying crop in town, namely coca.
Or, in search of income, they will join one of the many criminal
gangs that dominate rural Colombia.
Or, in search of food for their families, they will join the
paramilitaries or the guerrillas.
Their land will be scooped up by local land-owners, many of whom
are collaborators or full-scale partners with paramilitaries and
criminals.
Couple this with the on-going exploitation and violence suffered by
agricultural workers and by the port workers where U.S. agricultural
goods will enter Colombia, and you have a number of reasons why we
should proceed with caution.
The Labor Action Plan has a number of good proposals--but it would
be an understatement to say that it fails to go far enough, let alone
tackles the tough question of substantially reducing violence against
workers.
Sugarcane workers operate in a situation akin to modern-day
slavery. Workers on palm oil plantations are daily threatened with
death, including now when some are on strike. And Colombia's Vice
President described the situation of port workers as ``a humanitarian
crisis.'' Nothing in the Labor Action Plan addresses reducing violence
against these workers. Nothing.
The closest you get is to urge the Colombian Government to extend
protection to labor activists who receive continuous death threats. But
if we don't focus on eliminating the sources of violence and
dismantling their structures, all we're doing is increasing the pool of
individuals who need protection. And that number has no end.
There's no end to the violence aimed at small farmers and rural
communities.
There's no end to the violence against the displaced who the
government is asking to return to their lands.
And there's no end to the violence suffered by workers on medium-
and large-scale farms.
In June, the Santos Government is convening a forum on rural
development. The U.S. government, Colombian large-scale producers, a
few think tanks are all invited to participate. But not a single,
solitary rural campesino organization has been invited. No one
representing small-scale farmers has a seat at the table--at this
point, not even a token one, let alone the representation they truly
deserve.
So, I ask you, Mr. Ambassador and Secretary Vilsack, what in the
policies of your agencies and in the terms of the Colombia FTA will
concretely help change the violent reality and daily poverty
confronting over 93 percent of Colombia's rural population, namely
small-scale farmers and agricultural workers?
No platitudes about how trade lifts all boats. We know it doesn't.
Not here in the United States, and certainly not among Colombia's rural
poor.
Concretely, how do you plan to ensure that they are not displaced
from their land, fall deeper into poverty, or forced to grow illegal
crops, join one of the illegal armed actors, or go work for a criminal
network? Or the other choice, stand firm and be killed?
The Chairman. We would like to turn now to our panel, our
first panel, I should say, and welcome our witnesses to the
table. The Honorable Tom Vilsack, Secretary, U.S. Department of
Agriculture, Washington, D.C., and the Honorable Ron Kirk,
United States Trade Representative, Washington, D.C. And, Mr.
Secretary, you may begin whenever you are ready, sir.
STATEMENT OF HON. THOMAS ``TOM'' J. VILSACK, SECRETARY, U.S.
DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.
Secretary Vilsack. Mr. Chairman, and Members of the
Committee, thank you very much. I am pleased to appear before
you today with my colleague, Ron Kirk, to discuss the pending
trade agreements with South Korea, Colombia, and Panama, U.S.
agricultural exports, and the capacity of exports to create
economic opportunities in our rural communities.
Over the past 2 years, as the nation has rebounded from the
worst recession in decades, American agriculture has helped
lead our recovery by shattering trade records and creating
jobs. In Fiscal Year 2011, U.S. agricultural exports are
forecast to reach a record high of $135.5 billion, up nearly
$27 billion from the previous year with a record trade surplus
of $47.5 billion.
They will help support 1.1 million jobs nationwide. Just
yesterday, we learned that the U.S. farm exports reached an
all-time high of $75 billion in the first half of Fiscal Year
2011. This is up 27 percent from the same period last year, and
is keeping us on track to hit the forecast. And our pending
trade agreements will help continue that successful story.
These three trade agreements will create jobs. Through
agricultural exports alone, they will yield over $2.3 billion
in sales and help to support more than 19,000 American jobs in
agriculture and related industries.
The Korean agreement is a trade opportunity we cannot
afford to pass up worth an expected $1.9 billion annually to ag
producers. Sixty percent of the items that we currently trade
to Korea will be duty free immediately, including corn,
soybeans for crush, cotton, cherries, and grape juice. Other
commodities such as meat, poultry and dairy will see tariffs
and duties reduced over a period of time, creating tremendous
opportunity for us to grow our export opportunities.
The Colombia Trade Promotion Agreement also contains good
news for U.S. agriculture. Currently, no U.S. agricultural
exports enjoy duty-free access to Colombia, with most applied
tariffs ranging from 5 to 20 percent. But on day 1 of
implementation, U.S. exporters will receive duty-free treatment
on products accounting for almost 70 percent of current trade.
When implementation is complete, we expect to increase our
agricultural exports by 44 percent, which is an additional $370
million per year.
In Panama, U.S. agricultural exports have been on the rise,
growing to over $450 million in 2010. Our agreement with them
will continue this progress with an additional $46 million in
annual sales upon full implementation. Tariffs on 68 percent of
Panama's agricultural tariff lines accounting for more than
half of current trade by value will be eliminated by the
agreement.
It is critical for U.S. agriculture that we work together
to move these three pending trade agreements as part of a
broader trade agenda. Today, Korea, Colombia, and Panama have
approved or are negotiating trade agreements with a host of
other nations, as the Chairman indicated, including the EU,
Canada, Mexico, and New Zealand. Completing these three trade
agreements will level the playing field with some competitors
and secure better markets for U.S. agriculture ahead of others.
These trade agreements represent an important cornerstone
of our strategy to continue to increase agricultural trade, and
USDA is involved in a host of other activities. Thanks to the
President's National Export Initiative, which challenged U.S.
businesses to double exports by the end of 2014, USDA is
reaching out to producers and agribusiness, especially small
and medium-sized enterprises with information about how to
tackle the export market and financing to make it happen.
Whether it means helping small businesses attend trade shows or
directing U.S. companies in trade groups with foreign customers
by connecting them and bringing them to the country, we are
working to expand opportunity for agricultural trade.
We have focused many of our efforts in developing countries
with a growing middle class and increased purchasing power for
high quality U.S. agricultural products. It is one of the
reasons we sent a trade mission to Indonesia and Peru this year
and why China became our biggest export market last year.
We are engaged in nonstop efforts to break down sanitary
and phytosanitary and technical barriers, advocating forcefully
for the interest of American agriculture with other nations.
USDA is also addressing export barriers to U.S. specialty
crops, facilitating new exports and preventing disruptions that
would have affected hundreds of millions of dollars in exports
in Indonesia and the European Union.
When I travel the country, especially in rural America, and
talk about trade, the message I hear is simple. We need an
economy that makes, creates, and innovates, and we need a
nation that exports. That is why I am so proud of USDA's work
to increase exports and hope that Congress will act swiftly to
approve these trade agreements. At the end of the day,
increased exports mean more opportunities for small business
owners and for folks who package, ship, and market agricultural
products as well as American agricultural producers. It means
better incomes for our nation's family farmers, and more jobs
across rural America.
I look forward to answering the Committee's questions, and
I thank the chair for this opportunity.
[The prepared statement of Mr. Vilsack follows:]
Prepared Statement of Hon. Thomas ``Tom'' J. Vilsack, Secretary, U.S.
Department of Agriculture, Washington, D.C.
Mr. Chairman, Members of the Committee, I am pleased to appear
before you today. I welcome the opportunity to discuss the pending
trade agreements with South Korea, Colombia, and Panama, the
contribution to the economy of U.S. agricultural exports, and the
capacity of our rural communities to meet the country's agricultural
needs and capitalize on export opportunities.
In a word, the most paramount reason to implement these three
pending trade agreements is ``jobs.'' For agricultural exports alone,
USDA's Economic Research Service (ERS) projects that on full
implementation, the three agreements will yield over $2 billion in
sales. For every billion dollars of agricultural exports, there are
8,400 people working in America in jobs associated with those exports.
The additional jobs generated by the agreements will add to the
tremendous story of U.S. agriculture's contribution to our economy.
One out of every twelve jobs in this country is connected in some
way, shape, or form to American farms. Our farmers and ranchers also
make sure that this country is food secure. American consumers spend
less for their groceries than virtually anybody else in the world--a
recent study that we did at USDA suggested that just six to seven
percent of our paychecks, on average, go to the grocery store.
USDA looked at 2011 and we project that it is going to be a good
year for farm country. We see net farm income increasing to $94.7
billion. That is a 20 percent increase over last year, and last year
was a 34 percent increase over the year before. It will be the second
highest income level as adjusted for inflation in the last 3 decades.
That is certainly good news. Crop receipts are up 14 percent, to $24.1
billion, led by corn, cotton, soybeans, and wheat; and livestock
receipts also are edging up a bit. We now see the value of farm assets
exceeding $2 trillion. We have basically recouped all of the loss we
suffered in 2009, and that is certainly a good story.
Today we are here to talk about trade, one of the brightest spots
in the agricultural economy. As this Committee is aware, in
agriculture, we consistently post a trade surplus, and are coming off a
great year. USDA's forecast for U.S. agricultural exports for FY 2011
is a record high $135.5 billion, up from $108.7 billion in FY 2010, and
the previous record of $114.9 billion in FY 2008. We are projecting a
trade surplus of $47.5 billion. If we reach $135.5 billion, that means
over a million people will have jobs that might not otherwise be
employed but for agricultural exports.
USDA is focused on a trade strategy that will continue to increase
trade opportunities. In addition to our non-stop efforts to eliminate
unwarranted sanitary and phytosanitary (SPS) and technical barriers,
our strategy includes securing Congressional approval of the trade
agreements with South Korea, Colombia, and Panama.
In the Korea agreement (KORUS), we have a multi-billion-dollar
trade opportunity. Almost \2/3\ of the items that we currently trade to
Korea will be duty free immediately, including corn, soybeans for
crush, cotton, cherries, orange juice, grape juice, and whey. Other
commodities will have their tariffs and duties reduced over a period of
time, creating tremendous opportunity for us to grow our export
opportunities within Korea. ERS projects that on full implementation,
U.S. agricultural export gains under KORUS would be over $1.9 billion
annually.
Increased meat and poultry access includes reductions in Korea's
tariffs on beef, which will decline from the current 40 percent to zero
in 15 equal annual reductions; duty-free entry for more than 90 percent
of U.S. pork products by 2016; and tariffs on poultry leg quarters
dropping from 20 percent to zero over 10 years. The KORUS agreement
creates tariff-rate quotas that double current access for dairy
products.
Looking at the Colombia Trade Promotion Agreement, the news is also
good for U.S. agriculture. On full implementation, ERS estimates that
the Colombia agreement will generate an increase of 44 percent in U.S.
agricultural exports, or an additional $370 million per year. On day
one of implementation of the Colombia agreement, U.S. exporters receive
immediate duty-free treatment on products accounting for almost 70
percent of current trade. Currently, no U.S. agricultural exports enjoy
duty-free access to Colombia, with most applied tariffs ranging from 5
to 20 percent on agricultural products.
Colombia would immediately eliminate its price band system, which
affects more than 150 products, including corn, rice, wheat, oilseeds,
oilseed products, dairy, pork, poultry, and sugar. Under the current
price band system, the tariffs on these products vary with world
prices. Under the terms of the agreement with Colombia, all prime and
choice beef cuts receive immediate duty-free treatment. Tariffs on most
key pork products phase-out within 5 years and chicken leg quarters
receive an immediate 27,040 metric ton tariff-rate quota (TRQ) with
four percent annual growth.
U.S. agricultural exports to Panama have been on the rise, growing
to over $450 million in 2010. On full implementation of the Panama
agreement, U.S. exporters can expect an additional $46 million in
annual sales of rice, corn, meats, dairy, and processed foods. Tariffs
on 68 percent of Panama's agricultural tariff lines, accounting for
more than half of current U.S. trade by value, will be eliminated on
entry into force of the agreement.
Like the Colombia agreement, the Panama agreement will provide
immediate duty-free treatment for USDA Prime and Choice beef cuts.
Tariffs on pork variety meats will be eliminated immediately and
preferential duty-free TRQs will be established and grow over time for
fresh and frozen pork cuts, pork fat and bacon, and processed pork.
Likewise, a TRQ will be established for chicken leg quarters and, over
time, all tariffs on poultry will be eliminated.
It is critical for U.S. agriculture that we work together to move
the three pending trade agreements as part of our broader trade agenda
that includes the reauthorization of the 2009 Trade Adjustment
Assistance program, renewal of trade preference programs, and pursuing
Permanent Normal Trade Relations (PNTR) with Russia as it joins the
WTO. We must lock in equal and better access to these markets than our
competitors. Korea recently ratified an agreement with the European
Union, which will go into effect on July 1; recently signed an
agreement with Peru; already has in place a trade agreement with Chile;
and is negotiating with Australia, Colombia, Turkey, and New Zealand.
Colombia has finalized agreements with the EU and Canada, is a party to
the MERCOSUR-Andean Community agreement, and has many FTAs with
countries throughout the hemisphere. Panama negotiated an agreement
with Canada in 2010 and has recently initialed an agreement with the
European Union. Panama already has FTAs in place with Chile and
numerous Central American neighbors. Until we complete these three
trade agreements, U.S. agriculture will not have a level playing field
in these important markets.
In addition to the pending trade agreements, the Administration
seeks to renew the 2009 Trade Adjustment Assistance program, the Andean
Trade Preference Act (ATPA), and the Generalized System of Preferences
(GSP), and to secure Permanent Normal Trade Relations (PNTR) with
Russia. The preference programs, ATPA and GSP, are critical to
developing countries' continued growth, helping them grow their
industries and become more developed markets. Additionally, these
programs provide U.S. businesses the inputs and products they need to
keep good jobs here at home. Russia has become an increasingly
important destination for American agricultural goods, and moving
Russia fully into the global, rules-based WTO trading system will
benefit U.S. agricultural exporters.
At USDA, we have also focused on reducing trade barriers, and that
is why I was so pleased when President Obama and President Calderon met
and agreed on a path forward on the Mexican trucking issue. That is
going to be a great opportunity for us to remove the tariffs that
Mexico has assessed against 99 of our products, 54 of them agricultural
products. It will restore and expand trade opportunities for us in
Mexico. The U.S. Department of Transportation released the details of a
proposed new program that prioritizes safety, while satisfying the
United States' trade obligations. Mexico has committed to suspend 50
percent of the currently charged tariffs when an agreement is signed
and the remaining 50 percent when the first Mexican truck receives
authorization under the new program.
I am frequently asked about our efforts to reduce barriers to U.S.
beef exports. Nearly 100 countries are open to at least some U.S. beef
and beef products. This reflects the tireless efforts of USDA and USTR
to prevent markets from closing, as well as the re-opening of some 80
markets after the detection of a case of BSE in 2003. Continued
recovery and expansion of beef trade remains a priority for USDA and
USTR. U.S. beef and beef product exports were valued at nearly $4.08
billion in calendar year 2010. While that value of trade is on par with
the pre-BSE level of 2003, volumes still lag.
USDA has also addressed export barriers to U.S. specialty crops in
key markets. In FY 2010, the value of specialty crop exports increased
eight percent from FY 2009 levels to more than $17.4 billion. The
Administration secured Indonesia's recognition of the U.S. food safety
system for fresh foods including specialty crops, facilitating exports
valued at over $100 million last year. USDA arranged for a European
inspection visit regarding mycotoxins in California pistachios, thus
preventing disruption of exports that totaled $305 million in 2010. We
worked quickly with West Coast cherry exporters to address SPS concerns
in Korea and Taiwan, preserving export opportunities for $7 million in
perishable products.
We are going to continue to focus on countries where there are
increasing middle classes, and China is probably the best example. In
2010, China became our number one agricultural export market; so our
top three agricultural markets are now China, Canada, and Mexico.
Analysis by our Foreign Agricultural Service suggests that the size of
the middle class in developing countries could reach 731 million
households by 2020, up over 100 percent from 2009 levels. These middle
class households will have the purchasing power for high quality U.S.
agricultural products. It is one of the reasons we sent trade missions
to Indonesia and Peru this year, in an effort to continue to promote
agricultural opportunities--American agricultural opportunities. In
Peru, where we have preferential market access from an existing trade
agreement, USDA facilitated face-to-face meetings for twenty U.S.
companies with processors, buyers, and traders. Business deals were
finalized taking advantage of new opportunities, which translates into
American jobs.
We are going to continue our focus on export promotion, including
trade shows. We will bring more foreign buyers to the United States. We
are going to continue to promote American products. We are going to
make sure that we also encourage our trading partners to reduce the
sanitary and phytosanitary barriers that make it more difficult for us
to bring product into their markets. For example, we are in the process
of third-party mediation with Mexico in an effort to expand access to
all of Mexico for U.S. table stock potatoes, which are limited to a 26
kilometer border zone due to pest concerns.
Under the Administration's National Export Initiative, President
Obama has set a goal of doubling U.S. exports over 5 years. Opening new
markets is key. Also key to meeting that goal is the productivity of
U.S. farmers and ranchers. Nobody in this country, nobody in this
economy, has been as productive over the long haul as American
agriculture. In my lifetime, there has been a 330 percent increase in
corn production and an over 200 percent increase in soybeans and wheat
production. American farmers embrace technology, and because of that,
American farmers now are able to meet our food, feed, fiber, and fuel
needs and significantly boost our economy through exports to markets
around the world.
Mr. Chairman, Members of the Committee, the message I hear from
farm country is simple. We need an economy that makes, creates, and
innovates, and we need a nation that exports. When we do that, we see
the kind of income projections we are speaking of today in farm country
and all across the country.
This concludes my statement. I look forward to answering any
questions you may have. Thank you.
The Chairman. Thank you, Mr. Secretary. Mr. Ambassador, you
may begin when you are ready.
STATEMENT OF HON. RON KIRK, UNITED STATES TRADE REPRESENTATIVE,
WASHINGTON, D.C.
Mr. Kirk. Mr. Chairman, Congressman Peterson, Members of
the Committee, it is an honor to have an opportunity to join
Secretary Vilsack to discuss the importance of agricultural
exports to our country's trade agenda.
Since the Chairman and my colleague have spoken of the
economic impact of the three free trade agreements, I will move
on in the interest of time. I do want you to know that our
efforts to open markets for agricultural exporters and to keep
them open, the Obama Administration has pursued a two-pronged
approach that balances negotiating new market access with
strong enforcement of America's rights in the global trading
system.
Today, the pending agreements with South Korean, Panama,
and Colombia are at the forefront of our efforts to open new
markets. Last week, I am pleased to advise you we began the
technical discussions on drafting the implementing bills for
each of the free trade agreements with our committees of
jurisdiction. This is part of a broader agenda that also
includes reauthorization of a robust Trade Adjustment
Assistance Program as well as renewal of the expired trade
preference programs that benefit some of our poorest trading
partners and beginning a conversation with Congress about
granting permanent, normal trade relation status for Russia as
it prepares to join the World Trade Organization.
The U.S.-South Korea trade agreement will provide America's
farmers and ranchers, food processors, workers and businesses
they support with improved access to Korea's $1 trillion
economy and 49 million consumers. Selling more of what we grow
in America to South Korea will help support thousands of jobs
on U.S. farms and ranches and in our processing plants and
shipping centers.
As noted by the Chairman upon entry into force, the Korea
trade agreement will eliminate tariffs on \2/3\ of American
agricultural exports immediately including fruits, nuts,
vegetables, and soy beans.
Separately, in response to the Ranking Member's concerns
about beef access, we will request consultations with Korea
under the 2008 Beef Protocol to discuss the full implementation
and application of that agreement after the FTA goes into
effect. President Obama and I are absolutely committed to
working with Members of this Committee and others to further
open beef access to markets across Asia consistent with
international guidelines.
U.S. ag exporters will also benefit from the agreement with
Panama with more than half of our current exports to Panama
becoming duty free immediately, and the remaining gaining duty-
free access with the quota of tariffs reduced over time.
With respect to Colombia, more than half of our current
farm exports will become duty free immediately, and remaining
tariffs will be eliminated within 15 years. Overall, the
International Trade Commission estimates that the agreement
with Colombia can expand our exports by over $1 billion and
increase our GDP by $2.5 billion. Now, as we work with you to
implement and approve these FTAs, the Obama Administration is
also advancing our agricultural interests in other talks and
fora as well.
One of the most critical is our efforts to create a state-
of-the-art trade agreement with the Asia-Pacific region through
our Trans-Pacific Partnership. U.S. exports to this dynamic
market have an opportunity for extraordinary growth. We are
leading the effort to create this trade agreement within the
region and have an opportunity to have one of these most state-
of-the-art chapters on sanitary and phytosanitary standards of
any free trade agreement we have ever negotiated.
We are also working with other partners in the World Trade
Organization to find a sober and realistic solution to the
challenges of concluding the Doha round of talks. It is no
secret that the Doha round is confronting a very difficult and
challenging moment, but we are not throwing in the towel. And
we will continue to work with like-minded partners to find an
acceptable solution.
Aside from our ongoing negotiation, American farmers and
ranchers also benefit greatly to more access around the world
because of our efforts to hold our trading partners accountable
under our existing FTAs. I want to make sure that you know that
USTR will continue to work with our colleagues in the Federal
Government to hold other partners around the world accountable
and address unwarranted SPS rules.
Finally, improving market access to Russia is also critical
for U.S. agriculture including as we address Russia's accession
to the WTO. Just let me say this: Having Russia subject to the
same rules as the other members of the global trading community
will substantially increase the tools and enforcement
mechanisms that we have which are extremely limited right now.
In closing, I appreciate the opportunity to address the
Committee. We look forward to working with you toward passing
of the pending FTAs, and I would appreciate the opportunity to
take your questions at this time. Thank you.
[The prepared statement of Mr. Kirk appears follows:]
Prepared Statement of Hon. Ron Kirk, United States Trade
Representative, Washington, D.C.
Chairman Lucas, Congressman Peterson, and Members of the Committee,
thank you for inviting me to discuss the pending trade agreements with
Korea, Panama, and Colombia and the importance of agricultural exports
in the Administration's trade agenda.
President Obama has set a goal to double American exports by the
end of 2014, selling more of what we make and grow here to the ninety-
five percent of the world's population that resides outside the United
States. The growth of our food and agricultural exports has helped put
us on a path to reach that goal.
American agriculture derives more success from export markets than
do many other sectors. About ten percent of the overall U.S. economy
relies on export sales--but about twenty-five percent of our
agricultural economy depends on exports.
In Fiscal Year 2010, domestic exports of U.S. farm products
continue to increase for our farming sector, reaching a total of nearly
$109 billion, a 13 percent increase over FY 2009. Equally impressive
was the fact that we had a trade surplus in our agricultural trade of
almost $34 billion last year.
At the Office of the United States Trade Representative, our
objective is to ensure access for American farmers and ranchers to a
global customer base. The Obama Administration has pursued a two-
pronged approach that includes both negotiating new market-opening
opportunities and enforcing our rights in the global trading system.
American farmers and ranchers thrive in today's competitive global
marketplace because they are the most efficient and productive
producers in the world. Given a level-playing field, they can out-
compete agricultural producers from any other country. We work to
strike trade agreements and expand trade relationships so they can have
fair access to high-growth markets, where they can sell products to
generate growth and income here at home. Enforcing our trade agreements
with partner countries is just as critical to maintain the access we
have.
Today, the pending agreements with South Korea, Panama, and
Colombia are at the forefront of our efforts to open new markets. Last
week we started the technical discussions with Congress on the draft
implementing bills and draft Statements of Administrative Action. These
agreements are part of the Obama Administration's broad trade agenda
that also includes the reauthorization of the 2009 Trade Adjustment
Assistance program, renewal of the Andean Trade Preferences Act and of
the Generalized System of Preferences, and pursuing Permanent Normal
Trade Relations (PNTR) with Russia as they work towards joining the
WTO.
With respect to the U.S.-South Korea trade agreement, we are
committed to ensuring that the significant economic promise of that
agreement is fully realized--more than $10 billion in increased annual
exports of U.S. goods alone, and more than 70,000 American jobs.
The U.S.-South Korea trade agreement will provide America's
farmers, ranchers, food processors, workers and the businesses they
support with improved access to South Korea's $1 trillion economy and
49 million consumers. Selling more Grown in America products in South
Korea will support more U.S. jobs on our own farms and ranches, and in
our processing plants and shipping centers.
Immediately upon entry into force, the U.S.-South Korea trade
agreement eliminates tariffs on \2/3\ of ``Grown in America''
agricultural exports to South Korea, including fruits, nuts,
vegetables, and soybeans. South Korea is already our fifth-largest
agricultural export market, and the Department of Agriculture projects
that South Korea will purchase about $6.2 billion of U.S. agricultural
products during Fiscal Year 2011. This agreement will build on our
current export success to benefit our farmers and ranchers even more.
According to a recent report by USDA's Economic Research Service (ERS),
following implementation of the agreement, total U.S. agricultural
export gains in the Korean market are estimated at over $1.9 billion
annually, an increase of about 40 percent from current levels.
Improving beef access to the Asian markets in countries like China,
Japan, Korea, and Taiwan is an important issue. The President and I are
committed to working in close consultation with you, to further open
these markets consistent with international guidelines. In the
meantime, U.S. exports of beef and beef products are already growing.
Last year, sales to Korea reached $518 million, an increase of 140
percent in value over the previous year. Once the South Korea agreement
enters into force, our beef exports will grow even more as American
producers enjoy the progressive elimination of South Korea's high
tariff on beef.
With regard to Panama, the completion of action by the Panamanian
Government on tax transparency and labor cleared the way for the Obama
Administration to move forward with preparing this agreement for
consideration by Congress.
U.S. agricultural exporters would also stand to gain from the
Panama agreement. Despite U.S. agricultural goods exported to Panama
currently face an average tariff of 15 percent, with tariffs on some
products as high as 260 percent, American products account for almost
50 percent of Panamanian agricultural imports. More than half of
current U.S. farm exports to Panama will become duty-free immediately,
while other products will gain duty-free access through tariff rate
quotas, with out-of-quota tariffs reduced and eliminated over time.
Commodities that will be duty-free immediately include, for example,
high-quality beef, frozen turkeys, soybeans and soybean products,
wheat, most peanuts, whey, cotton, table wine, most fruit and fruit
products, most frozen and processed vegetables, most tree nuts, and
many processed products. Products such as standard beef cuts, chicken
leg quarters, pork, corn, rice and dairy products will receive duty-
free access for specific volumes of product immediately while the out-
of-quota tariffs are reduced and eliminated over time. Panamanian
duties on most other U.S. agricultural goods will be phased out within
5 to 12 years and, for a few of Panama's most import-sensitive
products, within 15 to 20 years. Though Panama represents a relatively
small market, according to the USDA/ERS report, the U.S.-Panama
agreement is expected to provide U.S. exporters with opportunities for
an additional $46 million in annual sales of rice, corn, meats, dairy,
and processed foods.
There has also been important progress on the Colombia agreement.
Last month, President Obama and President Santos agreed to an Action
Plan Related to Labor Rights through which Colombia is addressing a
number of labor-related concerns so that the U.S.-Colombia trade
agreement can move forward.
Many American agricultural commodities, including wheat, barley and
soybeans, will benefit from the Colombia agreement, as almost 70
percent of current U.S. farm exports to Colombia will become duty-free
immediately. Virtually all remaining tariffs will be eliminated within
15 years. Overall, the International Trade Commission has estimated
that the agreement would expand exports of U.S. goods to Colombia by
more than $1.1 billion, and increase U.S. GDP by $2.5 billion. For
agriculture, according to the USDA/ERS report, the agreement is
estimated to generate an increase of 44 percent in U.S. exports, or an
additional $370 million per year.
While we work toward preparing these agreements for your
consideration, the Obama Administration is pursuing other opportunities
to help America's agriculture community tap into the worlds' high-
growth markets.
The Trans Pacific Partnership trade agreement, or TPP, is one of
the Administration's top trade priorities. This high-standard, regional
agreement will help us expand U.S. exports and strengthen economic ties
to the dynamic and rapidly growing markets in the Asia-Pacific region.
TPP countries currently import $4.9 billion of U.S. agricultural
products. With a successful conclusion of TPP, we will be able to
substantially build on the $2.3 billion of U.S. agricultural exports to
countries with which we do not already have a free trade agreement. In
addition we are looking to have a TPP sanitary and phytosanitary
chapter that builds on WTO obligations to ensure that regulations in
each country are science based and transparent, and result in
meaningful market access openings for America's farmers, ranchers and
workers.
At the WTO, the Doha Round negotiations are confronting a difficult
moment. Serious gaps in ambition remain, and the path ahead is
uncertain. With regard to agriculture, based on what is currently on
the table, the nature of the commitments that the United States would
be making are far clearer than the benefits we would obtain in terms of
new access for U.S. agricultural exports in foreign markets. This is
not the basis for a deal.
Together with other WTO Members, the United States is currently
pursuing a sober and realistic evaluation of the Doha negotiations. We
are not throwing in the towel, and we will work with willing partners
to find solutions. But time is not on our side, and our consideration
of productive next steps must be serious, and immediate.
Even as we pursue new market access, the Obama Administration is
also ensuring that American farmers and ranchers benefit more fully
from existing trade agreements.
American farmers and ranchers now have greater access to world
markets because the Obama Administration has resolved long-standing
disputes and addressed other barriers to U.S. agricultural products.
For instance, we succeeded in reopening the markets in Russia, China,
Ukraine, Korea, Honduras and Thailand to U.S. pork and/or live hogs
after the H1N1 influenza outbreak. Enforcing our agriculture rights has
meant American ranchers are selling more beef to Europe than they have
in decades.
At the end of March, I sent to Congress and the President a report
detailing USTR's efforts over the past year to combat unwarranted
sanitary and phytosanitary (SPS) trade barriers. This report can be
found on our website at http://www.ustr.gov/. We made significant
progress in reducing or eliminating many of these barriers. The SPS
Report was created in 2010 to respond to the concerns of U.S. farmers,
ranchers, producers, and workers who are running into SPS trade
barriers as they seek to export high-quality American agricultural
products around the world. This year, USTR will continue to work with
colleagues from across the U.S. Government, as well as interested
stakeholders, to encourage governments around the world to remove their
unwarranted SPS rules.
Improving market access to Russia is important for U.S.
agriculture, including adding some certainty and predictability to that
access. Your frustrations, frankly, are my frustrations. USTR and our
interagency colleagues are working closely with our stakeholders to
improve access and remove the unjustified barriers applied to U.S.
agricultural products exported to Russia.
As we work to improve the SPS situation, however, it is important
to keep in mind why it is imperative to move Russia forward towards WTO
membership. Currently, our ``tool box'' for trade enforcement with
regard to Russia is a small one. Having Russia subject to the same
rules as 153 other WTO members puts meaningful enforcement tools in our
hands.
When Russia joins the WTO, they will agree to comply with all of
the terms of membership, including the Agreement on the Application of
Sanitary and Phytosanitary (SPS) Measures. That agreement requires that
SPS measures be based on science, including risk assessments, and
provides other disciplines on implementing SPS measures. Russia's
implementation of this agreement will help address significant barriers
facing U.S. exports of agricultural goods, in particular pork, beef,
dairy, and poultry. Importantly, once Russia becomes a member of the
WTO, it will be subject to all WTO mechanisms, including dispute
settlement, in the event Russia fails to comply with its obligations.
The Obama Administration supports Russia's membership in the WTO.
Russia aims to conclude its accession negotiations this year, and we
are doing what we can to support that goal. But as with any WTO
accession, the pace of accession is in the applicant country's hands.
As these efforts progress, we look forward to working with Congress to
grant Russia PNTR this year, which will ensure that American farmers
and ranchers enjoy the full benefits of Russia's accession.
In closing, I want to assure you that our focus at USTR is always
greater prosperity for American agriculture, and for the entire
American economy. We stand ready, as always, to work with you and other
stakeholders in pursuit of this goal.
The Chairman. Thank you, Mr. Ambassador. The chair would
like to remind Members that they will be recognized for
questioning in the order of seniority for Members who were here
at the start of the hearing. After that, Members will be
recognized in order of arrival. I do appreciate the Members'
understanding, and I now recognize myself for 5 minutes.
Mr. Ambassador, let us get down to the mechanics for a
little bit about what all it entails to make this happen. The
action plan that Colombia has agreed to on their domestic labor
laws has date-certain obligations that they must meet is my
understanding. Is the Administration placing any deadlines on
U.S. efforts to prepare the agreements for consideration by
Congress? We have asked for date-certain times, dealing with
certain issues. Are we doing that to ourselves?
Mr. Kirk. Well, we have structured the action plan with
Colombia, Mr. Chairman, in a manner that would allow us, as
they meet those obligations, those deadlines included in the
action plan to then continue with the progress that we have
begun with Congress. And the first deadline was at the end of
May. Colombia met those. We are continuing to work with them on
the next tranche. We believe and know that they are working
with us in good faith. As long as we have good progress on
that, we will be able to continue our progress and discussion
with the committees on bringing the FTA forward.
The Chairman. And to follow up on that, are you committed
to coordinating with Colombia in regard to those labor action
plans at a pace that will make it possible for us to consider
these agreements by July 1? You know a lot of my producers out
there would like to be selling in this market season, and they
view that July 1 as kind of target date to be able to do that.
Are you committed to working with Colombia in a way that we can
get there?
Mr. Kirk. Well, we--and I want to make in plain that the
deadlines in the action plan will allow us, if they meet those,
to then work with Congress on the broader goal of when we would
move all of the FTAs in concert with the other items that I
referenced, but particularly with respect to trade adjustment
assistance. So I want to be careful not to set a hard deadline
of July 1. We are well aware of the interests of our farmers
and others that want to get into this market. We want to get
there too. That is specifically why we structured the labor
action plan in the manner that we did.
The Chairman. And to reiterate one more time for the
benefit of the Committee, do you believe Colombia is working in
good faith on their elements of the labor action plan?
Mr. Kirk. Absolutely. I said when I was before the
Appropriations Committee a few months ago, and I know some
questioned whether we were doing this to just keep moving the
goalposts. But in many ways, our work with the Santos
Administration felt like we were pushing on an open door, and
to their credit, they very much and his Administration very
much understands it is in their interest to reform many of the
practices. Not just with respect to improving the protection of
labor and union leaders, but what he is trying to do with land
reform. So this has been a very strong partnership and
collaboration, and we are very hopeful we can continue to make
the good progress that we have.
The Chairman. One last question, Ambassador. I do lots of
town meetings, and there are certain questions that come up in
my town meetings. Could you describe for us the protections
that are included in these agreements to prevent, I guess, what
I would describe as transshipment of goods from non-FTA
countries into the United States?
Mr. Kirk. With respect to all three FTAs, Mr. Chairman, we
have not changed any of the rules as it relates to
transshipment of goods. And as a general rule, and every FTA we
have done--and it is the same in Korea, Panama and Colombia, we
are only dealing with granting tariff relief for goods produced
in those countries, not with respect to a transshipment. And
the rules of origin, as it applies here, are the same as they
have been. We have not changed that at all.
The Chairman. Thank you, Ambassador. I now recognize the
Ranking Member for 5 minutes.
Mr. Peterson. Thank you, Mr. Chairman. Secretary, when do
you plan to publish the proposed rule on animal traceability?
Secretary Vilsack. Representative Peterson, we are in the
final phases of working with our cooperators at the state
level, with state veterinarian groups, with the tribes, with a
number of commissioners and secretaries of agriculture. So we
anticipate sometime this late spring or early summer that that
rule will be available for review.
Mr. Peterson. And what risk do U.S. producers, meat
packers, and food companies face in the global marketplace
should we not have a viable animal traceability system
established?
Secretary Vilsack. Well, one of the concerns that we often
hear from our trading partners is the capacity to basically
trace back at least to the state of origin any problem with
animal health. This is why the traceability system is important
and why we wanted a system that was more effective than the
previous system, which was a voluntary system. It was one in
which roughly 30 percent of producers participated in, and it
really didn't provide us the certainty and the guarantee that I
believe this system will. It is much less complex. It is much
less expensive.
It recognizes that it only relates to interstate transfer
and transport of livestock, as opposed to things that occur
within the state. We are looking for the least expensive
technology in terms of traceability, in terms of
identification. So we think we are going to get much more
acceptance from this effort, and that should reassure our
trading partners.
Mr. Peterson. Thank you very much, and I yield back.
The Chairman. The gentleman yields back. Tim Johnson from
Illinois is recognized for 5 minutes.
Mr. Johnson of Illinois. Thank you, Mr. Chairman. I will
address this question to both of you. There is apparently
certain new European Union rules pertaining to sustainability
that have the potential to dramatically reduce or almost
eliminate our soybean producers and their access to the
European market. What--can you tell me what your role is and
what you are doing, your respective agencies, to try to deal
with that issue?
Mr. Kirk. If I might, Congressman, I think I can probably
respond for the both of us. This is an area that USTR works
hand-in-glove with the Department of Agriculture. And we have
engaged the EU immediately on what we think are the negative
impacts. This is what they call a renewable energy directive
that can widely impact and negatively, we think, impact
agricultural exports in general.
We have engaged the EU very early and directly with our
concerns, encouraged them to have the most transparent process
possible. We don't quarrel with the overriding objective of
what they are doing, but we have made them aware of the
implications that it could have in unfairly impacting exports
from the United States and other markets.
And I just want to assure you that this is an area that we
work hand-in-glove with the Department of Agriculture in terms
of our engagement with the EU.
Mr. Johnson of Illinois. Thank you. Another question. I
know these three agreements have really been executed quite
some time ago, and for a variety of reasons haven't been
submitted to the Congress yet for ratification. Can you give us
an indication of why we have delayed this long and what the
timetable is going forward?
Mr. Kirk. Yes. Well, let me, if I can, work from the end of
your question back. The good news is we began the informal
process that we follow in the Trade Promotion Authority of
reviewing in every detail the proposed implementing bills and
FTAs on Korea, Panama, and Colombia with our committees of
jurisdiction last week and are hoping to complete that review
as expeditiously as possible.
I would like to take a minute and address your broader
question of why it took us a while to get here, and one of the
challenges that we faced when we came into office was what to
do with the three FTAs that we inherited. And there were some
that believed the FTAs were just fine as they were and wanted
us to move. There were a number, including a number of your
colleagues in Congress, that thought each of the three
agreements had challenges with them that needed to be addressed
before we could move forward.
With respect to the Korea FTA, there was very broad concern
from Members on both sides of the aisle, that they thought was
just an unspeakable disparity in access to Korea's auto market
compared to ours. We were able to stay at the table and
negotiate a much better deal with respect to access to that
automotive market and for manufacturers that now puts us in a
position of having an agreement that has very broad support
from Members on both sides of the aisle, and also for the first
time in a very long time, having a trade agreement not only
endorsed by all of our agricultural interests and the Chamber
of Commerce, but also the United Auto Workers and the Food and
Commercial Workers, which is almost unprecedented in this time.
With respect to Colombia, I think many of you know there
was very strong concern, not so much with the FTA but whether
the United States would address those core issues that many
Americans were concerned about in terms of respect for human
rights and what some believed was an unspeakable amount of
violence against union organizers and labor leaders.
We believed Colombia had made great progress, but we also
believe that the United States entering an FTA for many
economies is like a gold seal of approval, and that we should
leverage that opportunity to try to advance some of our other
interests. And the good news is we were able to work with both
the Arriba and Santos Administrations to come up with the labor
action plan to move that forward.
With respect to Panama, the agreement was stalled for
reasons really having to do with neither of these. In the
previous Administration, unfortunately, Panama elected as the
head of their parliament, an individual who had been convicted
in our courts.
Mr. Johnson of Illinois. Let me just--I appreciate--let me
just get to one more question. I appreciate your response.
Mr. Kirk. I didn't mean to--
Mr. Johnson of Illinois. No, that is okay. I just wanted to
ask one more thing before my time expires. What do you foresee
as new opportunities in specific geographical areas around the
world?
Mr. Kirk. Well, part of what we are doing through the
National Export Initiative is to look at those. One of the next
frontiers, we believe, is that encompassed in the area in which
we are negotiating the Trans-Pacific Partnership. Most
economists forecast over half the world's growth in the next 25
years or so is going to be in the Asia Pacific region and then
including India, China, and Brazil and Africa. And so these are
areas in which we are paying specific attention.
Mr. Johnson of Illinois. Thank you.
The Chairman. The gentleman's time has expired. The
gentleman from Oregon, Mr. Schrader, is recognized for 5
minutes.
Mr. Schrader. Thank you very much. I guess, Mr. Trade
Representative and Mr. Secretary, which country of the three
holds the most promise to take more ag exports, American ag
exports?
Secretary Vilsack. Let me try to respond initially. It is
fairly clear that Korea, from an ag trade standpoint, has the
greatest potential, $1.9 billion of additional trade, which
would be Korea ag trade at $7.2 billion. To give you a sense of
how big that number is, if you take the nine previously
entered-into free trade agreements and totaled up ag activity
in those nine, it would equal less than $7.2 billion.
Mr. Schrader. Well, that is a good enough answer for me. Is
it true that our balance--I will ask Mr. Kirk this one. Is it
true that our balance of trade with Korea is actually narrowing
at this point, that the imbalance is getting better for
America?
Mr. Kirk. It is narrowing a bit. I mean one of our
challenges--our ag balance with Korea, we are wildly on the
surplus side. Now, on the manufacturing side, it has narrowed,
but on balance, it is a pretty strong relationship both ways.
Mr. Schrader. Isn't it also true that Korea has tariff
barriers in the neighborhood of, I guess, 11 to 13 percent
against American goods and we only have a three percent
barrier, if you will, on average to----
Mr. Kirk. Yes, actually in some cases, it is much higher
than that 11 and 12. But this is--these agreements, all three,
very much are going to operate in our favor because our tariffs
are so low.
Mr. Schrader. Yes, so it sounds like we are going to
obviously be net winners at the end of the day in terms of
being able to export more American goods, not jobs overseas, at
least to Korea.
Are we having the same problems with Panama and Colombia as
we are with Korea with regard to pending free trade agreements
with other countries that could undercut American opportunity?
Mr. Kirk. Well, as the Chairman noted, we are in, aside
from our own issues, we are in a very competitive environment,
and Korea and Panama, collectively, have signed 12 other free
trade agreements over the last 4 to 5 years. So there is some
imperative for us to resolve our differences and move forward.
Mr. Schrader. Is there anything like the Australia or EU
agreements with Korea pending right now in Panama and Colombia?
Secretary Vilsack. I simply will point out that over the
last several years, we have seen an erosion of our market share
in Colombia. So obviously there is very stiff competition, and
obviously the sooner we get this done, the better it will be
for us because tariffs will come down, and our goods will be
much more competitive than they have been.
Mr. Schrader. Isn't it, I guess, also true that our sugar
industry will be impacted negatively with any free trade
agreement with Colombia and Panama?
Mr. Kirk. Well, there is an elimination of the price band
system with sugar, which should be beneficial to sugar
producers as a result of the Colombian agreement.
Mr. Schrader. But won't we see greater imports from those
two countries to the United States?
Mr. Kirk. Well, there are obviously restrictions and
regulations in terms of the level of imports in sugar as part
of the sugar program.
Mr. Schrader. Well, I guess my point, if I may, Mr.
Chairman, is I am just trying to point out that there is one of
the three agreements that American farmers as well as American
workers are clear winners on. There is the Colombia agreement
that still is, while all the good intentions of the Santos
Administration work is great, right now, as long as labor
leaders are getting murdered and butchered in Colombia, it is a
little tough for Congress to step up and support that
particular agreement. I would hope the Administration, after
trying to submit all three agreements, finds that it doesn't
work that they would follow up very quickly with the Korea Free
Trade Agreement to make sure agriculture is protected at the
end of the day. I yield back.
Mr. Conaway [presiding.] The gentleman yields back. I
recognize myself for 5 minutes. Mr. Schrader, if you wouldn't
mind providing us with the murder and butchering data that you
just referenced.
Mr. Schrader. I can do that. I will be glad to.
Mr. Conaway. Okay, because I--my information is that is
pretty dated scenario. Start the clock. I am on a 5 minute
clock for myself. The Foreign Agricultural Service and USTR
have had a great role in developing all of these trade
agreements. Back home, the folks believe sometimes that ag is
traded out too often in many of these agreements, that we are--
ag interests don't have the same standing that others do. And
so having a standalone agency helps with that perception.
The President has recently asked OMB to merge all of trade-
related issues under one agency. You are shaking your heads no.
He has not done that?
Secretary Vilsack. He has asked the OMB to conduct a
conversation with all trade agencies and those who are engaged
in trade to see if there are ways in which we can simplify the
process in which we can provide a more streamlined effort and a
greater effort. And we have been engaged in that process.
Mr. Conaway. Okay, so could you help, just for the record,
Secretary Vilsack, state that it is your intention that ag
interests in that new arrangement, whatever it might be, would
have the same standing in the level of authority with respect
that they currently have in any kind of a new paradigm that you
would work out with OMB and the USTR.
Secretary Vilsack. Mr. Chairman, I have actually
specifically indicated that to the President, the importance of
maintaining the good relationship that we have with the Office
of the United States Trade Representative and others who are
involved in trade. Agriculture, in our view, is a very
specialized area, and it requires specialized information and
knowledge.
And the reality is that in many countries, agriculture is,
in terms of its overall economy, is a much greater proportion
to the overall economy than in the United States. And so you
have to be conscious of that when you are discussing any kind
of trade relationship.
Mr. Conaway. Okay, well, that is good news to hear that you
guys recognize that and that maybe the information we received
with respect to the breadth of what President Obama asked OMB
to do, it looked to us that they were going to put it all under
one umbrella. And that would, in our view, would decrease ag's
standing with respect to the overall negotiations. So it is
good to hear those reassuring comments. I will yield back. Now,
Ms. Fudge, I guess you are next. Five minutes.
Ms. Fudge. I thank you very much, Mr. Chairman, and I thank
both of you gentlemen for being here today. And I just have
three quick questions, and either of you, whichever one feels
comfortable, may answer. The first one is the TPP does include
Vietnam, which is now only second to China in the exports of
apparel to the United States. How will the U.S. trade
negotiators address issues surrounding trade of textiles and
apparel in TPP negotiations?
Mr. Kirk. We are--for reasons that I am surmising behind
your concern behind the question, we are seeking to have a
textile chapter. We have tabled one in one of our round of
negotiations so that we can address many of the concerns we
have heard from you and a number of your colleagues who
represent that industry.
We think it is an important opportunity to bring Vietnam in
because we don't have a free trade agreement. They are
potentially a huge market, but we--in the development of our
negotiating parameters for TPP in general, I would just say we
have done more outreach with Members of Congress and
stakeholders. Representatives of the textile industry have been
present at most of the six rounds we have had thus far, and so
we have had them engaged in every step of the way.
Ms. Fudge. Second, are there some parts of previous trade
agreements--we have heard colleagues talk about the fact that
some of us were not clear on what was in previous agreements.
But are there parts of previous trade agreements that U.S.
negotiators would seek to avoid this time as negotiations
proceed with TPP?
Mr. Kirk. Well, one of the things--one of our goals with
TPP was to learn from what we have done, what we have done
well, what we can do better, but also what we can address that
perhaps wasn't as relevant 20, 30 years ago. Our broad goal is
to have as aspirational and forward-looking of an agreement as
we can. For example, we know much more about what it takes to
compete against state-owned enterprises than we did 20 years
ago. So we are seeking to address some of those challenges.
Protecting intellectual property rights doesn't just go to
Microsoft, but in particular with agriculture. So much of what
we do in biotech in this industry is critical to make sure that
we have state-of-the-art language on that. So a lot of what we
are doing is making sure that we include those areas, in
particular with respect to labor rights and the environment,
which were side agreements, for example, in NAFTA. Those are
now embedded in just about everything we are proposing, going
forward.
Secretary Vilsack. If I might just add one comment about
this, I think there is a degree of sensitivity and acute
awareness on the part of negotiations and discussions as it
relates to the dairy industry. We want to make sure that
whatever is done in the TPP discussions that it is a fair and
balanced approached to that very important aspect of
agriculture, which is our dairy industry.
Ms. Fudge. Thank you. Is it possible that North Korean
inputs could find their way into South Korean company supply
chains and be exported to the United States directly or
indirectly? Do you think that is a possibility?
Mr. Kirk. We believe that it is not, and I want to make it
plain because there has been a lot of confusion about this.
Nothing in this trade agreement changes existing law, either
under FTA's or under Congress's authority to singularly make
the decision on whether or not we would allow goods to come
from North Korea under any circumstances. So nothing we do in
this agreement changes current law.
Now, there have been previously sanctions imposed by this
Congress on North Korea that had very limited exceptions for
some goods from North Korea. But it would take Congress making
that decision in order for that to happen.
Ms. Fudge. Okay, and my last question: What discussions or
options are going to be available to the United States to
protect our chief exporters?
Mr. Kirk. Under any of the agreements or all three?
Ms. Fudge. All three.
Mr. Kirk. Again, in every agreement, we have done
everything we could to create opportunities, reduce tariffs for
all of our ag exporters, particularly whether it is in dairy,
whether it is fluid milk or processed goods or cheese, and so
we have fairly detailed information, Congresswoman. Perhaps I
can have our staff sit down with you and go through those exact
elements in each of the agreements.
Secretary Vilsack. I would just add to that, in terms of
the Korean agreement, there is an opportunity for phasing out
duty-free access within tariff rate quotas that we will phase
out over a period of time as it relates to cheese. So that is a
benefit for cheese exports that should see--we should see an
increase. That is part of the $1.9 billion increase that we
think we will see from the Korean Free Trade Agreement.
Ms. Fudge. Thank you. I yield back, Mr. Chairman.
Mr. Conaway. The gentlelady yields back. The gentleman from
Ohio, Bob Gibbs, is recognized for 5 minutes.
Mr. Gibbs. Thank you, Mr. Chairman, and thank you Secretary
and Ambassador for coming in. And thank you for your work to
expand agricultural trade and exports. You know, gaining duty-
free access to markets has greatly expanded particularly in
regards to the livestock sector. In the pork industry alone,
passage of these three agreements would mean an estimated $800
million in additional exports annually. This goes along nicely
with the President's stated goal of doubling exports in the
next 4 years.
However, one of the biggest concerns I hear is from the
livestock sector on the feed availability issue, and this is to
Secretary Vilsack. I would be interested to hear your thoughts
about this issue, especially given the tight corn supplies that
we are looking at and the increased production with the trade
agreements. If USDA has any ideas or preparation to address the
situation to ensure that livestock producers have source feed
and have reliable supply and predictability.
Secretary Vilsack. A couple of things, Congressman. First
of all, notwithstanding the difficulties we are having from
weather, we are looking at fairly significant increases in
planting of corn in particular, roughly 4 to 5 million
additional acres. The yields that we are projecting are also
higher than last year's, so we are going to see an increase in
productivity, which should help address some of the concerns
that you have raised.
It is also important to point out that as we use our corn,
for example, to produce fuel, there is also a byproduct of that
process, which is a feed supplement, which has been very widely
used and very helpful in expanding the feed opportunities. So
the combination of those two things has us in a position where
we recognize there are tight supplies, but we are very
confident in the American producers' capacity and capability of
being able to meet the various needs.
I don't know of a single circumstance in my experience
where we haven't challenged agriculture where they haven't met
the challenge. And I see no reason why this will be any
different.
Mr. Gibbs. I agree with you, Mr. Secretary, and I think
that the free market should function. I just want to make sure
that there is no impediments to prevent the free market from
functioning, and price will ration supply and demand. And we
will see what happens, but I just wanted to make the point that
a lot of poultry and livestock producers are really concerned
about the feed situation.
So I just want to make that point. So I yield back, Mr.
Chairman. Thank you.
Mr. Conaway. The gentleman yields back. The gentleman from
Minnesota, Mr. Walz, is recognized for 5 minutes.
Mr. Walz. Thank you, Mr. Chairman. Thank you, Mr.
Secretary, Mr. Ambassador, for the work you do and for being
here. I just have one question, and you have spoken a little
bit on it. It goes to dairy, obviously critically important to
many of my colleagues and myself in southern Minnesota.
My question is a little different though, off the trade
agreement right now. It deals with access to the Indian market.
My producers and folks are pretty frustrated. They are not
asking for a trade agreement. They are simply asking India to
abide by its responsibilities to WTO, and that is a fast and a
large market. And we have been stymied now for 7 years. I just
kind of wanted to hear your take on this and maybe how do we
deal with countries like that?
Secretary Vilsack. Congressman, I share your frustration.
We have had opportunities to visit with the Indian ag minister,
agricultural minister on several occasions both here in the
U.S. and in India. I traveled with the President to India. The
discussions we have had have been primarily focused on the
dairy industry.
As you know, there are cultural and religious issues that
are raised whenever we discuss dairy, and we are continuing to
work to try to reassure India that we can meet the cultural and
religious concerns in terms of an understanding of the
physiology of cows and how they digest feed and how we can
reassure folks that the product that they are getting is
appropriate. We still have work to do.
We have sent the Indians a series of studies to support our
belief that we can provide them scientifically balanced and
supported assurances. We still continue to have a difficulty,
and we are going to continue to work on this until we finally
open that market. They are open obviously to the possibility of
organic milk products. The problem that our industry sees in
that particular market is really, really, really small at this
point in time and may not merit all of the activities that the
industry would have to go through in order to access that
market.
So we continue to negotiate. We continue to try to
convince. We continue to try to educate, but I don't want to
underestimate the difficulty of this. We have been very frank
in our conversations and will continue to be so.
Mr. Walz. Mr. Ambassador, do you have anything to add to
that, or does that sum it up?
Mr. Kirk. You know if the pained look on my face doesn't
convey our--I mean we share your--we have engaged the Indians
at every forum, every opportunity from when the prime minister
was here. I myself have been to India twice. Secretary Vilsack
has had his team with us. We continue to push. We thought we
had what was an acceptable resolution of it in terms of how we
feed our animals and get them ready. But they came up with yet
another creative response. But we are--one thing I might add is
because of that, in our conversations with many Members, if I
would just draw to your attention, one thing we did do is last
year, because of cases like this, for the first time now in
addition to our 301 report, we just published our annual report
on sanitary barriers entitled, Report on Sanitary and
Phytosanitary Measures. It helps to inform our work to try to
work with you on how we can attack those, and if you have not
seen that, I would like to make sure that we get that in your
hands of you and your staff.
Mr. Walz. Thank you both, and thanks for your service to
the country. I yield back, Mr. Chairman.
Mr. Conaway. The gentleman yields back. The gentleman from
Georgia, Austin Scott, is recognized for 5 minutes.
Mr. Austin Scott of Georgia. Thank you, Mr. Chairman, and
gentleman, thank you for coming before the Committee today.
Secretary Vilsack, just following up on what Mr. Gibbs said,
you said that you expect an increase in the productivity of the
corn crop. And I guess my question is: have y'all taken into
account the recent flooding and the disruption in planting and
anything that that may do to the actual yields of the crop?
Secretary Vilsack. We have. Notwithstanding those
difficulties and challenges, the yield projections which were
announced in the last day or 2 are actually, in my view,
significantly above what they were last year.
Mr. Austin Scott of Georgia. Okay, thank you. Thank you for
that, and I am sorry. I would like to move to the next
question. I will try to be brief. You said that you hope that
Congress will act swiftly. Are you talking about acting swiftly
on the South Korea, Panama, and Colombia trade agreements?
Mr. Kirk. Yes, sir.
Mr. Austin Scott of Georgia. Okay, well we want to act
swiftly on those as well, and, Mr. Ambassador, the President is
in the third year of a 4 year term. He has a Republican
Congress that is ready, willing, and able to work with him on
this. And, over a year ago, he said he was going to--new market
access was going to be a priority. This was over a year ago.
And we hear now that the informal review, the technical
discussions on drafting are moving along, but that Congress
should act expeditiously once we get them.
I mean this Committee, and I think that the vast majority
of the Committee Members are saying what are you waiting on.
What are you waiting on, and when can we expect the agreement?
And nobody in the Administration has shown us enough respect to
give us at least the goal of the timeline. And again, I
apologize that we haven't had more time to get to know each
other. But then you said that the Administration is essentially
waiting on union approval so that the unions would be on board
before we get the trade agreements.
And with all due respect to the President and the
Administration, if the American farmer is being held hostage
over union approval of these trade agreements, that is not
acceptable. And that is one of our chief concerns for the trade
agreements going forward and what the President wants to do and
what many of us believe will be diminishing the USDA's role in
negotiating trade agreements, going forward.
So there is a broad statement there, but I have a couple of
issues. One is, is agriculture going to be held hostage by the
unions in this Administration and trade agreements?
Mr. Kirk. Well, first of all, Congressman, I could
understand your frustration if that had been what I said, but
let us be clear. I did not. And we are not waiting on union
approval, and let me be clear. We finished negotiating the
Korean Free Trade Agreement in December. We sent a letter to
our committees in January and said we are ready to go. Let us
approve it. The Korean agreement hasn't been held up because of
the Administration. It was held up frankly because some of your
colleagues insisted they would not move on Korea until we
finished the work that we had done with Panama and Colombia. So
the delay on Korea has not been because of the Administration.
Second----
Mr. Austin Scott of Georgia. Let us get Korea, and let us
roll.
Mr. Kirk. We absolutely are ready to move on the Korea Free
Trade Agreement. Again that has been held because there were
many on both sides that wanted all of the agreements to move
forward at once. Now look, the good thing is we are not as far
apart as you think we are. We are ready to move those
agreements. There is a manner in which they go through an
informal review under TPA, and then we will formally submit
those agreements. We are having those conversations with the
committees of jurisdiction----
Mr. Austin Scott of Georgia. Sir.
Mr. Kirk. If I could----
Mr. Austin Scott of Georgia. We are short on time, and I
have a 5 minute time limit. And I apologize for that, but the
difference in a farmer which is a small or mid-sized business
owner and a bureaucracy--I mean time is money for both. The
more time a bureaucrat wastes, the more money they get. The
more time that is wasted from the standpoint of the small
business owner, the more opportunity, costs, and revenue they
lose. So I mean why can't we have these trade agreements ready
to vote on July 1?
Mr. Kirk. Well, that--listen some degree, that is now going
to be up to the leadership of the Ways and Means and Finance
Committees as we come up with the structure to move those
agreements as well as address the issues we have raised on
trade adjustment assistance and the preference programs. If it
is----
Mr. Austin Scott of Georgia. Okay, in your department that
you are in charge of, present them to the committees by July 1
so that the committees can start----
Mr. Kirk. That is not within the prerogative of my
department. We negotiate the agreements----
Mr. Austin Scott of Georgia. Whose prerogative is it?
Mr. Kirk. It will be up to the President to formally submit
them to Congress.
Mr. Austin Scott of Georgia. Thank you.
Mr. Conaway. The gentleman's time has expired. Mr. Boswell,
from Iowa, 5 minutes.
Mr. Boswell. Mr. Chairman, I appreciate you recognizing me.
I have been in and out. We were having our annual visit from
our Greater Des Moines Partnership, and my schedule in the
office is unbelievable. So I haven't heard the questions that
were asked, and I don't want to waste the Secretary's time to
ask the same questions that are already answered. So I guess I
will check the record, but I appreciate that discussion that
just took place. You tell me that you told us that the Korean
deal was ready to go, but the process here is holding it up
because they want all three packages together. Is that--did I
understand that clearly?
Mr. Kirk. That was one of the reasons. Yes, sir. But the
important thing is the Administration is--we have begun the
process of reviewing the implementing bills with the
committees. We think we have a reasonable way to move forward
and get all of the agreements done, but we have made it plain.
I want to say it again. For the Obama Administration, this
was never just about passing three FTAs. It is about trying to
come up with a more thoughtful, balanced trade policy that will
allow us to keep trade part of our economic growth, going
forward. And to do that, we have to demonstrate the same
commitment to trade adjustment assistance in America's workers
as the enthusiasm we have for opening up these new markets.
Mr. Boswell. Well, I appreciate that. I, personally, and
with others have worked very hard on the Korean side. There is
a guy in the next panel--I don't know if he is in the room or
not. The name is Carney. I just saw his hand go up. We have
been on this discussion for a long, long time. I went to Korea,
and a little sidelight, just for the fun of it. They said they
were glad to see us the day we were there because the next day
they were going to have a fight on the committee. And they had
a fight. They were tearing each other's clothes and bloody
noses and everything else. So I am glad we missed out on that,
Mr. Chairman. That was good.
But it seems to me like that move right along, but--on the
agreement. And you tell us it is ready to go, and we are
waiting on the other parts. I keep hearing things, problems in
the other countries. I don't know. I haven't had time to check
it out. I thought I would wait and see if something shows up,
but I appreciate your hard work. Thank you very much.
Mr. Kirk. Thank you.
Mr. Boswell. I yield back.
Mr. Conaway. The gentleman yields back. The gentleman from
Iowa, Steve King, for 5 minutes.
Mr. King. Thank you, Mr. Chairman. I want to thank the
Secretary and the Ambassador for your testimony here today, and
this aisle back-to-back thing, that can happen very well here,
and I appreciate that all the way around the triangle here
today.
I just have a series of questions that--one I would just
make a comment that the Cuban Free Trade Agreement isn't tied
to these three, or I would have a real problem with that, just
in case anybody wonders what my position is on Cuba. But I
would go beyond this. This has been a bit of a mystery to me on
the free trade agreements that we have had, and they have been
before this Congress, some might say, 4 years.
But I remember George Bush timing it so he could deliver
these three trade agreements to Congress because the law
required that there be a vote on the floor of Congress. And
there was a procedural vote that suspended that, and now here
we are, these years past, 2\1/2\ or so years into this
Administration. And finally they come forward.
And so I am curious. Mr. Secretary, I know you have been
engaged in trade, and I am curious as to what the directive has
been from the White House that might have made you less
aggressive than you would naturally be, and what has been the
directive now that brings this forward? I heard the details,
but I think there is something more behind this. And there is a
White House that runs a cabinet.
What is the theme? Have they taken a shift in their
position, or is it labor protectionism that many have reported
is part of it? What has finally been resolved in the larger
picture of politics? Mr. Secretary, please.
Secretary Vilsack. Representative King, the President has
been quite clear in every cabinet meeting that I have been
involved in where trade has been discussed that he wants an
aggressive effort, and it is one of the reasons why we
continually report the success of agricultural trade. I
indicated in my testimony that we are anticipating an ag
surplus this year of $47.5 billion. To give you a sense of
that, 5 years ago, that number was $5 billion. So the President
has been very consistent and very insistent on us being
aggressive, and that is the reason why we did 27 international
shows through the National Export Initiative, why we helped 970
exhibitors in foreign countries, why we participated in 250
trade missions, and why we also extended $5.5 billion of
financing help.
Mr. King. Mr. Secretary.
Secretary Vilsack. So, you know, we----
Mr. King. Why couldn't this have been before this Congress
in the first 2 or 3 months of President Obama's Administration
then?
Secretary Vilsack. Well, I can just speak to one aspect of
the Korean agreement that I am somewhat familiar with, and that
is the issue involving beef and the access to the beef market.
This is a very complicated issue, and it involves a wide
variety of not just the politics here in this country but
probably more so the politics in Korea. And I am very pleased
with the fact that we now have a roadmap pathway to opening up
access to that very significant market and a process and a
phase out of various tariffs.
Mr. King. So it would be your position then that the
Administration has been active and aggressive in promoting not
only trade but these specific free trade agreements and that
there were issues to work out that went beyond the issues that
were worked out under the Bush Administration?
Secretary Vilsack. That is correct, and I think probably
the Trade Representative is in a better position to respond to
that.
Mr. King. And I appreciate that, and I will come back to
that if I have time, Mr. Ambassador. But I had another subject
I wanted to raise that I think is important for us to think
about. I watched these free trade agreements be negotiated, and
I have been a promoter and active in all of them since I have
been here on this Agriculture Committee. And I appreciate the
balance in trade that has been improved because of our export
of agriculture. That is significant data.
I am also watching some trade protectionism take place
within the 50 states. And I speak specifically of California
that has been putting regulations on Iowa ag products including
ethanol and eggs. And when we are dealing with foreign trade
free trade agreements, I would suggest that some of the
protectionism that comes from within us, and that would be the
regulations in California, run up against the line and probably
cross the line of the commerce clause in the Federal
Government's preemption.
And so I would suggest this, Mr. Secretary. I would ask if
you would consider this proposal. That this Agriculture
Committee, working with the Energy and Commerce Committee,
produce some language that would eliminate the regulation of
commonly traded commodities based upon the means of production,
such as ethanol going into California with California CARB regs
on it that looks to me like they are trade protectionism for
California.
The requirement that Governor Schwarzenegger has signed
that there be only free range eggs--eggs from free-range hens
after 2014 in California. I would suggest that if you cannot
determine by analysis of the commodity, the means of
production, I would let them regulate the analysis of the
commodity. But the means of production is an entirely different
thing, and when we go into that area, we end up allowing
California to regulate and do trade protectionism.
From a Federal perspective, is that something you would
consider and perhaps support?
Secretary Vilsack. On the ethanol side, I will try to be
brief, Mr. Chairman. On the ethanol side, I think perhaps a
better way of looking at this would be to figure out ways in
which we can produce ethanol in other parts of the country from
sources in addition to the corn-based ethanol that you and I
are familiar with; which is what we are trying to do with a
strategy to expand this industry to create a million new jobs
in rural America and to provide great opportunity for producers
in all parts of the country. When we see that, Representative,
I think we will see greater acceptance, and perhaps we will see
less restriction on the lines that you have outlined.
Mr. King. But, of course, that is not an answer. But thank
you, Mr. Secretary. I yield back.
Mr. Conaway. The gentleman's time has expired. The
gentleman from--Joe Courtney, from Rhode Island, 5 minutes.
Mr. Courtney. I am a little further west in Connecticut,
Mr. Chairman.
Mr. Conaway. Sorry about that.
Mr. Courtney. I know from Texas, we just look like a little
county, but----
Mr. Conaway. It is a good sized county though, but
nevertheless a county.
Mr. Courtney. Thank you. I thank the witnesses for their
testimony today. Mr. Ambassador, actually during the last
break, I was over in the UK on a trade mission with the U.S.
Department of Commerce Export Assistance Center with 16
Connecticut companies. Last year, we did the Middle East. Year
before, we did Brussels.
First of all, I just want to make a comment that the export
assistance centers are absolute all-stars in terms of helping
U.S. firms, particularly small, medium-sized firms who, on
their own, would really struggle in terms of trying to find new
opportunities. It is a great program. We have real tangible
great stories to tell as a result of those last visits.
But I would say that being with them and actually in
meetings with prospective customers, I mean, it has been an
eye-opener and an education to me about what really is on the
minds of U.S. firms when they are sort of dealing with
international markets. This is not in your wheelhouse or this
Committee's wheelhouse necessarily, but the issue of export
controls, it is a problem that people are still bitterly
frustrated with. And I know Secretary Gates is trying to move
that initiative forward.
But I will tell you for the firms that I spent time with,
free trade agreements barely register on the Richter Scale in
terms of their issues. Export controls are just persistent and
vehement problems.
And second, I mean, the other issue is currency. You know,
when you have a product that is of the highest quality that
will match any firm or country in the world in terms of input
costs and productivity, but will be at a disadvantage because a
country is putting the thumb on the scale in terms of devaluing
their currency. Then it really kind of renders the whole effort
moot.
I mean right now in Europe, we are on the good side of that
because the Euro is overvalued, and we are undervalued. But the
fact is in Asia, that is not the case. And I realize, I am just
going to make that observation. I mean that is a real issue for
a lot of us who are looking at these trade deals in terms of
the lack of any provisions in terms of currency manipulation.
We went through the whole exercise in the last Congress of
passing a Currency Reform for Fair Trade Act, H.R. 2378, which
got huge bipartisan support in terms of final passage because
of the frustration level of the fact that it is just not a fair
system when a country is actually intervening into those
markets. It just renders all the hard work that you are doing
almost moot.
The question I want to ask though is does it apply ag? And
that is another issue which we are also waiting for action on,
and is the Trade Adjustment Assistance Reauthorization--we have
lobstermen who, frankly, were put at a tough disadvantage in
terms of Canadian lobsters. This is a program which has
provided real help for them. And I just want to hear your view
in terms of reauthorization and whether or not ag is still
going to be part of that program, which, again, I think is so
important.
Mr. Kirk. First, Congressman, thanks for your comments
about the export assistance, and I will pass those onto
Secretary Locke. That is a great program. Second, as you know,
we just finished a strategic economic dialogue with China. They
were here Monday and Tuesday. I want to assure you Secretary
Geithner, all of us, continued to press China on allowing their
currency to float to international standards. And that is
something we take very seriously.
And third, if you had heard my--I mean in my response to a
number Members of your--colleagues on the Committee, the Obama
Administration has been unequivocally clear that we think a
part of our overall trade strategy that allows us to move
forward with Panama, Colombia and Korea is keeping faith with
America's workers. And that means that we have to renew trade
adjustment assistance. We want it renewed at a level
commensurate to what was included in the 2009 Global Trade
Recovery Act, which did help many of those in agriculture. It
has been used by over a half a million workers in every state
in the country. We think it is the right thing to do, and we
are asking that Congress approve it just as they move forward
with these other agreements.
Secretary Vilsack. Representative, if I could just say that
the TAAF has helped about 11,000 farmers and producers and
fishermen, on a wide variety of products. Because of limited
funding this year, we are going to have to prorate our
payments, but they are going to be coming out very soon. We
will be prepared to do whatever Congress directs us to do, and
hopefully Congress will provide us the resources to be able to
do an adequate job of providing assistance and help to
producers that need it.
Mr. Courtney. I yield back.
Mr. Conaway. The gentleman's time has expired. The
gentleman yields back. Mr. Steve Southerland, from Florida, is
recognized for 5 minutes.
Mr. Southerland. Thank you, Mr. Chairman, and, Mr.
Secretary, Mr. Ambassador, thank you for being here today. I,
of course, am from Florida, and we produce a tremendous number
of specialty crops. So I wanted to ask some questions regarding
some of those specialty crops. I understand one of the chief
anticipated imports from Colombia and Panama is tropical fruits
and vegetables. How will these compete in Florida, the nation's
second largest producer of these products?
Secretary Vilsack. How will they compete?
Mr. Southerland. How will they compete? In other words, how
will the imports--obviously we in Florida are huge producers of
fruit and vegetables. I mean tell me in the agreements that you
are working on with Colombia and Panama, tell me what success
looks like.
Secretary Vilsack. Well, success from my perspective is
that we are actually exporting much of what is being produced
in your state, whether it is citrus, lemons, grapefruits, or
oranges. And all three of these agreements have opportunities
for expanded exports.
As tariffs come down, we have a more level playing field,
and we will be in a position to compete more effectively. So
success for me is immediate reductions and phased-in reductions
of those tariffs, resulting in higher exports from our
producers, which creates additional markets, which helps to
stabilize price.
Mr. Kirk. If I might just briefly----
Mr. Southerland. Yes.
Mr. Kirk.--Congressman. We have the reality that, one, I
don't know that Panama does a lot in agriculture, particularly
not in citrus. Colombia, most of what they bring to us is
coffee, is in coffee and cut flowers and others. But almost 99
percent of what comes currently from Panama and Colombia come
into the U.S. duty-free already. So as counterintuitive as it
is to some in agriculture, this is a huge win because we are
reducing our tariffs that is going to increase our
competitiveness going the other way.
Mr. Southerland. Let me ask. One of the things that we are
obviously concerned about in Florida is pests and disease,
okay, and we struggle there. Well, we just must be vigilant all
the time regarding that. Tell me about the safeguarding of
those issues in these agreements.
Secretary Vilsack. The process involves very close
examination and inspection of products that come in from other
countries at the border. APHIS works with the Customs folks to
make sure that they are properly trained and on the lookout.
Obviously as it relates to disease, we are very concerned about
citrus greening, which I know you are very well aware of. We
are spending millions, tens of millions of dollars now, as is
the industry, in an effort to try to figure out how to contain
and ultimately eliminate that pest.
This is a challenge for us. It is a challenge in a global
economy where we are now faced with roughly $1 billion of
investments in various disease and pest mitigation strategies.
But we are continuing to work on making sure that we are doing
a better job at the border.
Mr. Southerland. Let me ask another thing. I am going to
kind of switch gears. I know that you have mentioned in your
statement, Mr. Vilsack, that the U.S. needs to lock in equal
and better access to key markets than our competitors. How does
the department deal with the perception of inequities in our
trade agreements?
And this is something that is not just, I don't think, this
department, this Administration has had to deal with. This is
something that predates many Administrations. The American
families feel like in many ways these trade agreements that the
Americans get kicked in the teeth.
How do you go about, day-to-day, to convince the American
people otherwise?
Secretary Vilsack. Well, one of the things I try to point
out, Congressman, is the trade surplus that we enjoy in
agriculture. As I have said earlier today, we have a $47.5
billion expected ag surplus in trade, $135.5 billion of
expected sales. Every billion dollars of ag sales generates
somewhere in the neighborhood of 8,400 to 8,500 jobs. So this
is not just providing assistance to producers and growers and
farmers and ranchers to improve their bottom line, but it is
also creating jobs.
And speaking of bottom lines, last year was the second best
year we have seen in farm income in 35 years. Our expectation
is that this may be a record year for income, and part of that
is because we have a strong export story to tell. So one,
making sure they understand that we are aggressively pursuing
agricultural trade, that that puts money in the pockets of
those who produce the food, and two, that it is also a job
creator at home.
Mr. Southerland. Ambassador Kirk, if I could ask you to
kind of expand on that. I know my time is waning here. As far
as focusing on balanced trade rather than any kind of--so many
of the American people are aggravated with our trade
agreements, with China in particular. Can you expand on that as
far as our pursuit of----
Mr. Conaway. The gentleman's time has expired. Could we
take that for the record, or we will do a second round, Mr.
Southerland?
Mr. Southerland. That is fine.
Mr. Conaway. All right, thank you. Mr. Costa from
California.
Mr. Costa. Thank you very much, Mr. Chairman, for this
important hearing and having our two witnesses here. Let me
start first with Mr. Ambassador Kirk. I know there has already
been reference in previous questions with regards to the South
Korean treaty as it relates to the case on a region and
potentially North Korea benefiting as a result of this trade
agreement. I would just like to get it from you one more time
because I want to support the treaty, but a lot of folks who I
care about have very deep concerns that this is a loophole that
you could literally drive the proverbially truck through. So
will you please once again tell me why it is not going to
happen?
Mr. Kirk. As plainly as I can say, nothing in this
agreement makes a provision for an exception to U.S. law that
prohibits goods from North Korea coming to United States,
unless this Congress specifically decides you want to make an
exception.
Mr. Costa. So on that point is a side agreement or
legislation, separate legislation an option on this issue?
Mr. Kirk. Not within this FTA. As I understand it, they
have previously been in place, Congressman, and this isn't my
first field, brought sanctions against North Korea with very
limited exceptions. As I understand it, those exceptions are
now up for review, and Treasury and State are reviewing those.
But that would have to come back from Congress. That has
nothing to do with the FTA.
Mr. Costa. All right, well, I appreciate your efforts on
this. For a lot of my agricultural exporters, this is a big
effort. We appreciate also the effort and the focus on the beef
issue that both you and Secretary Vilsack have paid attention
to, given what I think has been some issues that the South
Korean Government has raised that frankly, are somewhat
duplicitous in terms of reaching an agreement. Is there any
effort going to be made, in your view, to tie all three
together where the Administration resists the effort to tie all
three treaties together?
Mr. Kirk. Well, if I can just say briefly, as many have
noted, all three of these agreements are coming forward under
previously authorized promotion authority. Each of those is
frankly very prescriptive. We don't know of any mechanism by
which there would be ``an omnibus vote'' where you roll them
all three into one.
Mr. Costa. Okay, let me move over. Mr. Secretary Vilsack,
it is always good to have you here. You were touting, and I
think deservedly so, the expansion of U.S. exports of
agricultural products. I think part of that is due to the
bipartisan effort we have on the 2008 Farm Bill. I think the
Market Access Program has been a good tool, along with some of
the other efforts. As we look at the 2012 Farm Bill, you have
any thoughts as it relates on how we build on that to continue
to expand our exports, and what will be your view on Market
Access Program?
Secretary Vilsack. Congressman, we have seen remarkable
returns on investment from the Market Access Program. For every
dollar that USDA has been involved and engaged in in investing
in trade, we have seen a $35 return in terms of trade activity.
So obviously we will be supportive of continuation of
investments in that area. Understanding that this is a
constrained fiscal environment that we are all working under,
we want to make sure that folks understand that there are ways
that you can grow your way out of a deficit as well as cutting
your way out of a deficit. And our hope would be that----
Mr. Costa. Well, and certainly we have a history here over
the last several years to see what works, and it seems to me we
ought to--you know it is--we don't want to be penny wise and
pound foolish. This is an area that brings in greater return
and revenues to our nation, as well as to farmers, ranchers,
dairymen throughout the nation. It is a good investment.
Secretary Vilsack. Yes, it is.
Mr. Costa. So we will be looking forward to hearing your
thoughts as we try to reauthorize that particular area on
specialty crops, which I think many of us here have a great
interest in.
Secretary Vilsack. Well, Congressman, we look forward to
working with you on this.
Mr. Costa. It is not directly related to the subject at
hand, but as it relates to exports of beef to South Korea and
other markets in Asia, I am very concerned about getting this
GIPSA rule worked out. I appreciate what the USDA has done to
address many of the concerns and the economic analysis.
Although, that was somewhat troublesome but now it is there. I
remain concerned about the process as you move forward. In the
new rule with the economic analysis put forth and the final and
interim or final rule, will there be any other opportunity for
the stakeholders to comment?
Secretary Vilsack. Well, Congressman, we have had 66,000
comments, 30,000 of which are unique, and all of that was
designed to inform the analysis that is in the process of
being----
Mr. Costa. Before my time runs out, what is the timeline--
--
Mr. Conaway. The gentleman's time has expired.
Mr. Costa. Well, I will take that for the record, or finish
quickly, Mr. Vilsack.
Secretary Vilsack. Mr. Chairman, our hope is that we get
this done sometime in the fall.
Mr. Costa. All right, thank you very much, Mr. Chairman.
Mr. Conaway. The gentleman's time has expired. The
gentleman from Arkansas, Mr. Crawford, for 5 minutes.
Mr. Crawford. Thank you, Mr. Chairman. I have a quick
question for the Ambassador. I understand the U.S. Free Trade--
Korea Free Trade Agreement offers no improved market access for
U.S. rice. In fact, rice was completely excluded from the
agreement at the insistence of the Korean Government. Besides
denying potential benefits to U.S. rice farmers and exporters,
the exclusion of rice, I believe, sets a terrible precedent
that will haunt U.S. negotiators in future deals.
Many of my colleagues and I understand the import
sensitivity surrounding food and agricultural products. There
are negotiating solutions to accommodate these sensitivities,
but exclusion is not one of them. And rice is one of the most
important import-sensitive foods around the globe.
And protectionism against U.S. rice is widespread and
significant. Our trading partners now look at the Korea
agreement as precedent to exclude rice from any trade
agreements they may be negotiating with the United States. What
assurances can you provide the Committee and to me that the
U.S. will not accept the exclusion of rice in current trade
negotiations like the upcoming Trans-Pacific Partnership or in
future negotiations?
Mr. Kirk. Well, Congressman, you are correct. Korea was
very protective of their rice market. We are encouraged though.
There is a minimum market access, 50,000 metric ton provision
for U.S. rice, and we are exceeding that last year by almost
another 40,000 tons. And we are going to continue to see if we
can't press and work with Korea to see if we can't improve on
that minimum market access. But we are selling just under $100
million worth of rice into the Korean market.
And in the interest of time, for all the reasons you
articulated, we are very careful in TPP that at least all the
parties we have asked to put everything on the table. Now you
can understand every country is then going to come back, and we
are concerned about dairy and others. But we are very cognizant
of those issues that you raised.
Mr. Crawford. Thank you, Mr. Ambassador. I yield back.
Mr. Conaway. The gentleman yields back. Mr. McGovern, from
Massachusetts, for 5 minutes.
Mr. McGovern. Thank you very much. I thank you both for
being here. I have a great admiration for your work, but I have
a lot of concern about these trade agreements. But I want to
confine my comments, if I could, and my questions to the
Colombia FTA. I also co-chair the Tom Lantos Human Rights
Commission, so human rights is a major concern of mine.
I have been to Colombia six times since February 2001, and
when I go, I tend to stay several days. I travel to remote
areas, visit some of the poorest city slums where you find
hundreds of thousands of Colombia's five million internally
displaced people, and to the border regions where hundreds of
thousands more have fled Colombia's violent countryside and are
now refugees in their neighboring countries.
Colombia is a wonderful country with so many incredible
people, but it is still a country in violent conflict. That is
what President Santos told us just a couple of days ago. Most
of that violence and conflict happens in the countryside, and
it primarily affects rural communities and small farmers.
Now, in the United States, we take great pride in
supporting our small farmers. We should also be concerned for
Colombia's small producers and how the Colombia FTA might
affect them. The most definitive study on this matter estimates
that small scale producers of Colombia would lose around 16
percent of their net income from agriculture under the Colombia
FTA. For those who produce products that will directly compete
with U.S. agricultural imports, they will likely experience a
fall of between 48 percent and 70 percent in their net
agricultural income.
And I think we should care because it means that these
people are likely to lose their land and joins the ranks of the
displaced and the growing urban poor.
Colombia, is only second to Sudan in terms of the number of
internally displaced people inside their country. But these
people, who are going to join the ranks of the displaced, or
they are going to end up moving--or they will move to more
marginal land and start the growing the best paying crop in
town, which is namely coca.
I worry that they will be--in search of income, they will
join one of the many criminal groups that dominate rural
Colombia, or they will join the paramilitaries or the guerillas
because there will be no other choice.
The Labor Action Plan has a number of good proposals, but
it would be an understatement to say that it fails to go far
enough, let alone tackles the tough questions of substantially
reducing violence against workers. So I ask you, Mr. Ambassador
and Mr. Secretary, what in the policies of your agencies and in
terms of the Colombia FTA will concretely help change the
violent reality and daily poverty confronting over 93 percent
of Colombia's rural population, namely small-scale farmers and
agricultural workers?
And concretely, how do you plan to ensure that they are not
displaced from their land, fall deeper into poverty, forced to
grow illegal crops, or join one of the illegal armed actors or
go to work for a criminal network? Or the other choice, stand
firm and end up being killed. It is a very serious situation,
and I appreciate the Administration coming forward with a
proposal. But, setting benchmarks and not insisting on results,
I don't think, is the right way to go. I mean from a human
rights perspective, there is a lot to be concerned about here,
and I appreciate your comments.
Mr. Kirk. Well, first of all, Congressman, I very much
appreciate the care and the attention that I know that you and
many others have brought to this issue. I would say for the
record for those that have asked why the Administration took
the time and care that we did to work with Colombia to come up
with the action plan is reflected in the concerns you
expressed. And for our Administration, we did think this is
important.
Now, to your latter question about what analysis, we do not
have the charge nor the resources to make a determination of
the impact of the FTA on what it is going to do in Colombia. I
would say broadly that your concern about what do we do to help
the poorest farmers in countries of our trading partners is
reflected in our request that Congress renew the Andean Trade
Preferences Act. It is designed specifically to address many of
the concerns that you spoke of. It is to get people away from
poverty other than being involved in the drug trade, either in
terms of farming or joining FARC.
And it is one of the reasons we think it is a real tragedy.
Congress could have approved that now. We asked them to do it
in December. We got a temporary extension to get through the
flower season and Valentine's Day, but it is one of the reasons
that the Administration has asked that, as proud as we are of
the work that we have done on Colombia with the action plan in
Korea and Panama, this all be done as part of a broad strategy
in which we renew the Preferences Act. We pass Trade Adjustment
Assistance right along with the three FTAs.
Mr. Conaway. The gentleman's time has expired. The
gentleman from--sir?
Mr. McGovern. I ask for an unanimous consent request to
insert in the record a memo to the Administration signed by six
Members of Congress expressing a concern about the agreement.
Mr. Conaway. Any objection? Without objection.
Mr. McGovern. Thank you.
[The document referred to is located on p. 99.]
Mr. Conaway. The gentleman's time has expired. The
gentleman from Nebraska, Mr. Fortenberry, for 5 minutes.
Mr. Fortenberry. Thank you, Mr. Secretary and Mr.
Ambassador, for coming today. First, Mr. Ambassador, let me
thank you for working so aggressively a while back on reopening
hog markets that were artificially closed, hog export markets.
You did a good job. I know you put a lot of effort into that. A
number of people were hanging in the balance, and I appreciate
that effort. I hadn't had a chance to see you since that
occurred, but thank you.
Gentlemen, let me ask a straightforward question. When is
your best estimate that these agreements will get done? The
President--this is a central component of the President's
economic policy, as we all know. Most Members of Congress agree
on this. You have talked about the broad coalition of groups
that support this. You gave a very good history of the free
trade agreements with Korea, the development of them with Korea
and Colombia. You got cut off on Panama. I would like to hear
the remainder of your answer that you were giving to Mr.
Johnson in regards to Panama. Your best estimate, given all the
convergence of variables that you have laid out well that have
to happen, your best estimate of a timeline.
Mr. Kirk. We believe--and, Congressman, thank you for your
remarks about our efforts to reopen the pork markets. That is a
great example again of where we work across the Administration
with USDA, Commerce, and others to protect the interests of our
farmers.
The President has made it clear we are ready. We would like
to see all these agreements implemented as soon as possible for
the reasons we want open markets, for competitive reasons, the
Korea EU FTA having been signed, with Colombia and Korea
moving.
But I would say I have to put it back on you. Largely now,
this is in the hands of Congress. We have made it plain, and I
will say again, it is a broken record. We want to see action on
all of these. The FTAs, Trade Adjustment Assistance, the
Preference Program. Congress can approve Trade Adjustment
Assistance now. You have had two votes on it. They stalled in
the House. We think it is important.
We have to make that covenant to American workers because
we are concerned for the reasons a number of you have raised,
the American public has lost faith with Congress in terms of
our trade policy. They know we get excited about passing FTAs,
but they don't believe we will enforce them. And we think we
have a good record on that, but they are really concerned that
we will stand up for the rights of workers and the environment
and will look and take care of American workers.
So if we can have Trade Adjustment Assistance pass, the
committees have a process we can move through and get these
agreements approved and ready, and they could be passed
certainly by August, perhaps sooner. But to some degree, this
is now in the hands of Congressional leadership.
Mr. Fortenberry. Okay, clearly my question is intended to
pressure, urge you to continue your forceful march toward
getting this done and to remain flexible so that we can
actually wrap this up. I think most people simply want to know
when is this going to happen.
If you could finish the commentary on the history of
Panama, I think that would be helpful. But also before I run
out of time, let me make a comment in regards to what you said
earlier. I appreciate your thinking that trade agreements are
an opportunity to leverage outcomes on human rights progress.
Ultimately, trade and economies are about persons and societal
well-beings and should not just be about the potential of
propping up unjust structures elsewhere, such as we see in
China for instance.
I would like you to define though how you measure progress
on human rights.
Mr. Kirk. Well, let me--first of all, we believe that if
the United States is going to enter into an agreement with
another country, we owe it at least to the American public to
give them the confidence. We are not trading our jobs away,
which a lot of people believe. And they know we get great
consumptive benefits, cheaper food, fresher products, cheaper
computers, but right now, Americans are concerned about jobs.
And they want to make sure we are doing a trade agreement with
another country that doesn't have the minimum standards of
labor so we encourage businesses from here to move production
elsewhere. So that is why we took the time and the care that we
did.
Now, we did everything we could to work with Panama to
address some of those most egregious cases, have a real labor
ministry. They have agreed they are going to hire 100 labor
inspectors and enforcers. They are going to deal with the
backlog of cases. They are going to extend protection not just
to union leaders. Much of the violence is against teachers, and
I won't belabor it. But if you look at the action plan, it has
very specific benchmarks and guidelines what we have asked them
to address.
And then finally in interest of time, what stalled the
Panama agreement were two things. One, the Bush Administration,
and we applauded it for that, said we will not bring this
agreement forward as long as you have sitting at the head of
your legislative body someone convicted of murdering an
American soldier. Once that was resolved, we had the
circumstance of OECD labeling Panama a tax haven, and we had
leadership of----
Mr. Fortenberry. I think we could do an entire hearing on
this very question as to how we couple the advance of economic
progress between peoples with social progress as well. But
thank you.
Mr. Conaway. The gentleman's time has expired. The
gentleman from Indiana, Mr. Stutzman, for 5 minutes.
Mr. Stutzman. Thank you, Mr. Chairman. And thank you, Mr.
Secretary and Ambassador, for being here. I want to touch on
something that I am hearing from folks back in my district in
northeast Indiana, and that is the rising cost of feed. And I
am a corn farmer and high prices, high commodity prices to me
are a good thing as long as you sell high and buy your input
costs at a reasonable rate.
But large poultry--we have a lot of poultry production in
Indiana and also beef. I am looking through the trade
agreements specifically in Korea. Seems like poultry and beef
are put at a disadvantage, and I know that eventually the
tariffs will be removed long term. But even through the other
trade agreements, and I would like your thoughts on
international trade specifically to beef and poultry. Seems
like they continually are put at a disadvantage. Agree or
disagree, and what are some of your thoughts?
Secretary Vilsack. Well, let me start. On the beef trade,
we are working our way out of a circumstance that occurred in
2003 with BSE, and we are now almost to the level where we were
prior to that incident. And we continue to work with countries,
Korea, China, Japan and others who have concerns about the
safety of product, trying to reassure them that it is safe and
in fact it is high quality and it is affordable.
This Korean agreement helps us open the door for an even
more aggressive effort in some of those other countries that
have been closing their markets to beef trade. So I am
confident we are going to see more activity here.
In terms of poultry, we have been working aggressively with
Russia, for example, to deal with some of the concerns that
they have raised. And sometimes it is frustrating because some
of those concerns, we don't think, are backed by science. They
are not consistent with international standards and
organizations.
I think it is one of the reasons why the Administration is
looking at Russian accession to the WTO as an opportunity
perhaps to get them to a point where they don't necessarily
arbitrarily impose things on our products that disrupt the
trade as they have done in the past.
I think these trade agreements move that process forward. I
think we are aggressively promoting the sanitary and
phytosanitary standards so that it is a science-based, rules-
based system and that we are going to continue to encourage
other countries to abide by those same standards.
Mr. Stutzman. I mean don't you agree that we are somewhat
putting ourselves at a disadvantage when corn exports are up,
and we are shipping feed to other countries--and I appreciate
that you said that you are aggressively pushing our poultry and
beef. And I understand the concerns from the past, but my fear
is that we continually ship our feed products overseas. They
then feed their poultry and beef and other livestock. Are we
coming back around to where we are going to be the leader and
then continue to be growing our exports in our livestock
production?
Secretary Vilsack. Well, we have seen rather dramatic
growth in all aspects of agriculture exports, and we see no
reason that that growth is going to abate, given the rising
middle class, given the aggressive efforts and the resources
that we are putting behind this; and the President's insistence
that we focus on exports, knowing full well that it not only
helps the bottom line for farmers and ranchers and growers, but
also helps to create jobs here back at home.
Mr. Stutzman. Because I hear a lot of folks think that it
is really ethanol that is driving commodity prices higher, and
that is not really--I mean that may play into it a very small
part. But it is really the global demand that is driving
commodity prices higher. We have a weaker dollar. We have debt
problems and all sorts of issues that play into all of this.
But, I mean, I think that our folks back home are trying to
figure out why--what are we going to do to encourage purchases,
internationally and domestically, for our beef and our poultry
products.
Secretary Vilsack. We are focusing our efforts and
targeting our efforts on countries where we see emerging middle
classes where we know that will result in the need for more
protein, and I think we have seen some success with those
efforts. We are going to continue to see more with this
agreement in Korea for sure, and I think again this agreement
gives us an opening to renew our discussions with the Chinese
in a more aggressive fashion than we have. Although we have
been very aggressive with the Chinese on this.
And once Japan gets itself through dealing with the
disaster that struck them just several months ago, I think we
have an opportunity to more aggressively look at that market as
well. So I think there are great opportunities here with this
agreement basically paving the way.
Mr. Stutzman. All right, thank you, Mr. Chairman.
Mr. Conaway. The gentleman's time has expired. The
gentleman from Pennsylvania, Mr. Thompson, 5 minutes.
Mr. Thompson. Thank you, Mr. Chairman. Mr. Secretary, Mr.
Ambassador, it is good to see you. Thanks for your continued
service, and thanks for your, Mr. Secretary, well, both of you,
thanks for your support of these free trade agreements. It is
obviously very important. You know they have been slow coming
for a multitude of reasons, and we have heard good discussion
on that.
I am kind of looking ahead of that. You know we have lost--
I think because of others, and you referenced some of the other
negotiations some of these countries have been doing, have been
able to facilitate goes along a little quicker than what we
have. So they have kind of got in line or they have them
implemented.
Are there any strategies to regain market share, going
forward? Any of the lost market share that we have perhaps lost
as a result of these delays?
Mr. Kirk. Well, and thanks for your comments. It will sound
fairly simple. One of the smartest things we can do is get
these trade agreements passed because it will--even against
those odds, we see a very strong, strong preference still all
around the world. The good news is, ``Grown in America,''
``Made in America,'' is still just absolutely one of the most
powerful brands in the world. Anything we can do that reduces
our cost, reduces tariffs on us is going to enhance our
competitiveness.
Second, and to some degree, this goes to your colleague's
question, if I could just add briefly, Mr. Chairman. It is one
reason we try to spend as much time on enforcement as we do on
market access, and we spend an extraordinary amount of time
engaging industry. And they are as frustrated because of some
barriers other countries put up, and again I would reference--
commend again for Committee's consideration the report that we
put out to you now addressing sanitary and phytosanitary
barriers.
But broadly, what we are seeking to achieve is to get all
of our partners to just play by the rules. If you do that, we
know consumers around the world have a strong preference for
products made here. So both opening new markets, enforcing our
rules, and then trying to look down the road at this incredible
universe now of 95 percent of world's consumers who live
outside of the United States where are they moving into a
middle class that they can afford American beef and pork and
other products. And that is where we are beginning to look in
terms of new opportunities.
Secretary Vilsack. I might just simply add to that that we
anticipate and expect that there is going to be an aggressive
marketing effort once the Korean Free Trade Agreement is
approved. The Meat Export Federation is indicated a real desire
to really begin to aggressively promote the American brand in
beef, and I suspect that that will be successful. We do have
the best, highest quality, best tasting, and competitively
priced livestock opportunities in the world. And we need to
continue to market that, and I think you are going to see a
very aggressive move on the part of all of us to do that.
Mr. Thompson. Thank you. I apologize. I came in late, and
so if this was already traveled--this discussion, I missed it.
I did hear some discussion about organic milk products. I am
just--beyond that, how will these agreements affect dairy
exports? And by extension, how might these increase--if we see
an increase in exports, would this help increase our dairy
prices?
[The information referred to is located on p. 111.]
Secretary Vilsack. Congressman, we know that in the Korean
Free Trade Agreement, we are going to look at a doubling of
access immediately for cheese with the TRQ and that that will
grow over time. We anticipate a similar situation with butter.
We will see duty-free access within the TRQs for skimmed and
whole milk powder in Korea. In Panama, we are going to see a
greater commitment to sanitary and phytosanitary standards that
will promote more dairy opportunities. And I think a similar
circumstance is true with the elimination of the price bands in
the Colombia agreement.
So we see that there is a real opportunity across the board
in all three of these agreements. And that is why we project
significant increases in agricultural exports as a result of
these three agreements.
Mr. Thompson. Great. That is good news. Any potential
within these free trade agreements in terms of affecting timber
exports that you are aware of?
Mr. Kirk. I don't know that there is an extraordinary
amount of timber, but if you will allow our staff to go back
and look at that, and if we can follow up with you.
[The information referred to is located on p. 112]
Mr. Thompson. That would be great. I appreciate it.
Secretary Vilsack. There is the product of timber. Nuts
is--there is an opportunity for nuts.
Mr. Thompson. That is going out on a branch. I yield back.
Mr. Conaway. The gentleman yields back. The gentleman from
Texas, Mr. Neugebauer, for 5 minutes.
Mr. Neugebauer. Thank you, Mr. Chairman. And Secretary and
Ambassador, thank you for being here, and thanks for your hard
work on these important trade agreements. I think there is a
broad agreement that this will be a positive thing for American
agriculture. I do have some questions from some of my
constituents, particularly in the textile area. And one of the
things that they are concerned about that they think that--and
in fact, according to a former Customs agent, that there is a
weak area of their enforcement in the ability to actually make
sure that textiles from other countries aren't filtered through
Korea and then to avoid, or circumvent the system. And I heard
you say, Ambassador, a while ago that you have been stepping up
your enforcement area.
What kind of assurances can I give the folks back home that
we are going to be on the lookout and make sure that that's not
the case?
Mr. Kirk. First of all, and a number of your colleagues,
Congressman, have been concerned about potentially goods
coming, say, from North Korea through Kaesong. And I just want
to make it plain again. Nothing in this Korea FTA permits goods
made outside of Korea to be transshipped, or in any of our
FTAs.
With respect to North Korea, if that were to happen, that
would have to--that would require an affirmative decision by
this Congress to make an exception, which Congress has done in
very limited cases under the previous sanctions. But again we
don't touch that in the FTA at all, and generally, our rules of
origin apply to the FTA, and the tariff protections only go to
goods made in those countries. And if I might say, you can be
pretty much assured most countries that negotiate an FTA with
us are much more interested in creating jobs for their people
and products just as we are creating them here. So there is
nothing in the agreement that would facilitate that.
Now, the responsibility to inspect those is more Customs
than us. The enforcement to which I was referring to Mr.
Thompson is looking at our current agreements and making sure
we get the access that we have been entitled to. I will give
you one example. I came in the office, and one of the Members
was expressing concern about impact on farmers. We had a
dispute with the European Union over beef access that had gone
on for 14 years. I thought that was absolutely nuts.
Now, we can't do it in every case. We were able to get that
resolved within 90 days, and we now are selling about $120
million, about 11,000 metric tons of beef back into Europe that
we should have been doing. So we are looking in every case
where our partners aren't living up to their agreements in
addition to negotiating new market access to make sure we get
those markets open.
Mr. Neugebauer. Well, I agree with you that most countries
want to create jobs in their countries. But where there are
opportunities for arbitrage where if I can bring goods in from
China, or I can bring goods in from North Korea cheaper than I
can build them or make them in South Korea, then it is to my
advantage to manipulate the system, change the labels,
whatever.
And so I think the primary question for my constituent is
what kinds of enforcement resources and processes are in place
to watch over that kind of activity?
Mr. Kirk. Well, again, the rules of origin provisions
within the FTA speak to how much of that product has to be made
in that agreement to be considered a product of that country
and get the benefits. And I would have to--I would be happy to
get DHS and Customs to perhaps walk you through your concerns
about what they do in terms of inspection and enforcement on
that end.
[The information referred to is located on p. 112]
Mr. Neugebauer. I appreciate it. Thank you very much. I
yield back, Mr. Chairman.
Mr. Conaway. The gentleman yields back. Mrs. Roby, from
Alabama, for 5 minutes.
Mrs. Roby. Thank you. I too apologize for being late. So if
this is a repeat, I am sorry, but I too have lots of concerns
from the textile industry in Alabama. And so I want to address
that. Colombia Free Trade Agreement will benefit many
businesses in my district, in particular our textile producers.
And as you are aware, the Andean Trade Preference Program
expired in February. Colombian manufacturers, many of whom
depend on U.S. producers for inputs, are now paying 15 to 30
percent in duties to import products into the United States.
And while we appreciate very much your efforts to achieve
Congressional approval of the Colombia Free Trade Agreement, I
would like to know your plans to extend the Andean program in
the meantime so that important businesses in the region,
Colombia in particular, is not lost during the FTA approval
process.
As you know, 95 percent of all cotton exported to Colombia
is U.S. cotton, and Colombia will consume more than 250,000
bales of U.S. cotton in 2011. So, Ambassador Kirk, if you could
just kind of address this, that would be great.
Mr. Kirk. Well, first of all, Congresswoman, welcome to the
Committee.
Mrs. Roby. Thank you.
Mr. Kirk. And I just want you to know on behalf of the
Administration that we still are all, our hearts and prayers,
with many of your constituents with respect to the recent
natural disasters that have occurred in your state.
Mrs. Roby. Thank you very much.
Mr. Kirk. I have said to the point of making--well, still
somewhat of a bore on the Committee for the Obama
Administration. We are proud of the work we have done to get
Panama, Korea, and Colombia in a position that Congress could
approve them. But we think it should be part of a comprehensive
strategy that includes renewal of the Trade Preferences
Program, particularly the Andean program.
And we worked very hard to try to get Congress to authorize
that in December. We were only successful in getting an
extension through Valentine's because of the importance of the
flower industry, but we have been very up front in asking the
justice--we are asking Congress to embrace and improve the free
trade agreements. They should extend not only to Andean but the
generalized system of preferences for many of the same reasons
you articulated and trade adjustment assistance as well.
Mrs. Roby. Thank you. And again, I apologize if this is a
repeat of concerns of my colleagues. What was the
Administration's process in determining which parts of the
South Korea Free Trade Agreement were to be renegotiated? The
textile producers in my district have real concerns with how
the Korea agreement is structured, and I understand from my
constituents, and, of course, my colleague just addressed some
of the issues. But I understand that certain fixes to the
agreement would have gone a long way to stem the estimated
40,000 jobs lost to the industry if the agreement is approved
as is.
The auto and beef industry had their opportunity. Why did
the Administration shut out textiles? My constituents on the
one hand would benefit under the Colombia agreement, but if
Korea goes into effect, that agreement threatens to shift
product lines that flourish under the Andean and soon-to-be
Colombian Free Trade Agreement into South Korea, China,
Vietnam. Was there any impact analysis done industry by
industry with all three agreements?
Mr. Kirk. First, let me answer your first question. When we
met, I--for reasons you articulated, I took the time to go to
North Carolina. I have been to Maine. I have been throughout
the South. We have met with many in the textile industry. We
raised some of those issues, but we knew we were not going to
be able to rewrite the entire agreement and get everything.
But I hear your concern. We are disappointed. We were not
able to address those. We did think we had an opportunity to
greatly improve the agreement, particularly on the auto side
because the imbalance was so extraordinary. And then I did
advise your colleagues we did--I sent a letter to Congress last
week advising them that, in addition to the extraordinary
progress we have made in getting beef back into the market, we
will be requesting consultations under the 2008 Beef Protocol
once the agreement goes into force.
Now, for the reasons you articulated, we have been very
careful with respect to whether it is Colombia, Panama, but
more importantly, what we are looking for down the road with
the Trans-Pacific Partnership to engage the textile industry
often and early. They have been a participant in just about all
of our sessions, and we have tabled a textile chapter as part
of what we are putting forward in the Trans-Pacific Partnership
hopefully so that we can get a much better deal for the
industry.
Mrs. Roby. Thank you so much. I yield back.
Mr. Conaway. The gentlelady yields back. Panel, thank you
very much. We have a request for one second round. I think, Mr.
McGovern, if you want to quickly ask something within a 5
minute timeframe.
Mr. McGovern. Yes, thank you. I just want to again re-
emphasize this issue of human rights. I think if the United
States stands for anything, we need to stand out loud and
foursquare for human rights. And there is a human rights
problems in Colombia, and I am a great--I am hopeful with the
new President, President Santos, that he can get things under
control. He said all the right things, but, I have been here a
long time. And I have heard people say nice things, but it
doesn't always necessarily follow with nice actions. And, I
mean, there are--right now, the sugarcane workers in Colombia
operate in a situation akin to modern day slavery. I mean it is
an atrocity. I mentioned the number of people who were
displaced. You know I appreciate the kind of notion that a
rising tide lifts all boats, but it doesn't always work that
way.
And I believe that Americans are focused on jobs, but I
think most Americans want jobs not at the expense of the
displacement of more workers in Colombia. And I think this is
an opportunity that I think we are missing to leverage a trade
agreement to actually get some real improvements in human
rights in Colombia. And I appreciate the attempts that you have
made, but I would be more comfortable and I would be more
supportive if it were based on results and not on future
promised actions.
And so again I would just--I would urge the Administration
to not relegate human rights kind of as a side agreement or an
afterthought. Yes, we want jobs. But I will tell you in the
long run, to the extent that we can benefit and small farmers
in Colombia can benefit, I think it is a win-win. And again
Colombia is the most dangerous place in the world to be a trade
unionist. And I just--I wish we would focus more on this issue
of human rights. I think in the long run, it is in our
interest, and not only from a moral perspective, but also in
our economic interest. And I think what you have proposed in
your action plan falls short on that issue, and I would be
remiss if I didn't emphasize that concern. I mean we should be
more concerned with human rights. I appreciate you being here.
Thanks.
Mr. Conaway. The gentleman's time has expired. The
gentleman yields back. Mr. Ambassador, thank you very much. Mr.
Secretary, thank you very much. We appreciate it. We will now
move to the second panel.
[Recess.]
Mr. Conaway. We appreciate the second panel's patience with
the lengthy questioning of our Trade Representative and also
the Secretary Vilsack. Let me quickly introduce the panel. We
have Gordon Stoner, Stoner Farms, on behalf of the National
Wheat Growers and the U.S. Wheat Association from Outlook,
Montana. Rick Tolman, Chief Executive Officer from the National
Corn Growers Association, Chesterfield, Missouri. Sam Carney
from--do we have Mr. Carney? Okay, Mr. Carney decided to take a
quick break. Meantime, we have Mr. Roger Johnson, President of
the National Farmers Union here in D.C. Bob Stallman, American
Farm Bureau, D.C. And Bill Donald, National Cattleman's Beef
Association here in D.C.
You latter three understand the drill. You three from out
of town, thank you for coming in. If you could keep your
comments within the 5 minute timeframe, we would appreciate
that. And with that, Mr. Stoner, if you will--your testimony,
with unanimous consent, will be--the written testimony will be
entered into the record as you have presented it. So hit the
highlights for us within your 5 minutes.
STATEMENT OF GORDON STONER, MEMBER, BOARD OF
DIRECTORS, NATIONAL ASSOCIATION OF WHEAT GROWERS; FARMER/
RANCHER, STONER FARMS, OUTLOOK, MT; ON
BEHALF OF U.S. WHEAT ASSOCIATES, INC.
Mr. Stoner. Very good. Good morning, Chairman Lucas,
Ranking Member Peterson, Members of the Committee. My name is
Gordon Stoner. I am fourth generation farmer/rancher from
Outlook, Montana where I run a diversified operation raising
durum wheat, peas, lentils, and cattle. Thank you for the
opportunity to testify before you today to discuss the values
these three outstanding free trade agreements hold for U.S.
wheat growers.
Free and open trade is critical. We are the third largest
wheat-producing country in the world and also the largest
exporter of wheat in the world. In a typical year, we export
about half of the product we produce, meaning that we really do
feed the world. Agricultural export markets are even more
important to Montana farmers because we export approximately 80
percent of our annual wheat production.
In fact, if Montana residents were required to consume all
the wheat we produce within our borders, every person would
have to eat 400 loaves of bread every day.
The entire U.S. wheat exports for 2009/2010 marketing year
was nearly seven times the average annual production of my own
home state. The U.S. wheat industry strongly supports immediate
ratification of the three outstanding free trade agreements
with Colombia, Panama, South Korea. We request that when the
Administration sends the agreements to Congress, you support
them and move them through the approval process.
Last year, U.S. wheat farmers exported to these three
countries wheat that at today's prices would be valued at more
than $650 million. With the agreements, we will be able to
maintain and grow these volumes because immediately upon
implementation, duties on wheat imports to each country will be
eliminated.
The U.S.-Colombia FTA is of particular importance. Colombia
is a wheat-dependent import country, and the United States has
been the dominant supplier of wheat to the Colombian people. It
is estimated that U.S. wheat producers will lose $100 million
in annual sales to this market without an FTA. In marketing
year 2007/2008, our share of the Colombian wheat market was
almost 70 percent, representing almost one million metric tons.
However in every year since, U.S. sales have declined by
hundreds of tons per year. The Colombian people are not eating
less wheat. They simply are looking and buying it elsewhere,
especially from Canada and Argentina. There is every indication
that sales will continue to decline, especially as our
competitors gain preferential access through lower duties.
This marketing year, Colombia has purchased five of our six
classes of U.S. wheat from farmers across the country, loading
vessels out of the Gulf of Mexico and the Pacific Northwest.
Colombia's purchases of different classes of wheat means that
this FTA will benefit wheat producers from coast to coast.
Competition with Canadian wheat in the Colombian market means
our market share is hanging by a thread.
Additionally, increasing and maintaining sales of U.S.
wheat abroad reaps rewards for the entire U.S. economy. A USDA
Economic Research Service study found that for every billion
dollars in exports, 8,400 jobs are created in the United States
from farms to export barges to my local equipment dealer and
grocery store.
Ultimately, Mr. Chairman, these agreements are about jobs.
U.S. wheat growers welcome developments that indicate the
Administration is ready to begin technical discussions. We
encourage Congress and the Administration to work together to
quickly move and approve these agreements as soon as possible.
Mr. Chairman, Mr. Peterson, Members of the Committee, thank
you for allowing me this opportunity to be here with you today
to discuss the importance of these trade agreements to my
industry. Immediate ratification of each will increase U.S.
wheat sales abroad and create much needed jobs here at home. I
look forward to answering any questions you may have.
[The prepared statement of Mr. Stoner follows:]
Prepared Statement of Gordon Stoner, Member, Board of Directors,
National Association of Wheat Growers; Farmer/Rancher, Stoner Farms,
Outlook, MT; on Behalf of U.S. Wheat Associates, Inc.
Chairman Lucas, Ranking Member Peterson, Members of the Committee,
my name is Gordon Stoner, and I am a fourth generation farmer/rancher
from Outlook, Mont., where I run a diversified operation raising durum
wheat, peas, lentils and cattle.
Thank you for giving me the opportunity to testify before you today
to discuss the value these three outstanding free trade agreements
(FTAs) hold for U.S. wheat farmers.
I currently serve as President of the Montana Grain Growers
Association; on the board of directors for the National Association of
Wheat Growers (NAWG); and as Vice Chairman of the Joint International
Trade Policy Committee coordinated between NAWG and U.S. Wheat
Associates, Inc.
Free and open trade is critical to U.S. wheat farmers. We are the
third largest wheat producing country in the world after China and
India, but the largest exporter of wheat in the world. In a typical
year, we export about half of the product we produce, meaning we really
do feed the world.
Free and open trade with other countries is a vital component for
ensuring the financial viability of U.S. wheat farmers. Nearly 96
percent of the world's consumers live beyond U.S. borders. The
remaining four percent, those who live within the U.S., do not consume
enough wheat products to utilize the abundance of our nation's farms.
As growers of an export-dependent commodity, NAWG welcomes every
opportunity to reduce costs for our international customers and compete
on an equal playing field with our competitor suppliers.
In the most recently completed marketing year of 2009/2010, the
United States exported 24 million metric tons (MMT) of wheat, roughly
40 percent of production. One metric ton is equivalent to 2,204.623
pounds or about 37 bushels of wheat. One million metric ton of wheat is
then 37 million bushels. So 24 MMT is roughly 6.7 times the average
Montana wheat harvest of 131 million bushels (2005-2010 average
production as reported by USDA). World wheat exports in 2009/2010 were
estimated at 135.8 MMT, with the United States accounting for nearly 18
percent of global exports.
The 2010/2011 market year projections by USDA indicate an
increasingly important picture for U.S. wheat exports with 34.7 MMT
expected to be sold to buyers around the world, which represents 58
percent of production, and accounting for 28 percent of world wheat
trade.
World and U.S. Wheat Production, Exports and Ending Stocks
--------------------------------------------------------------------------------------------------------------------------------------------------------
World U.S. World ending U.S. ending
production production U.S. share World exports U.S. exports U.S. share stocks stocks U.S. share
Mkt year 1 (million (million (percent) (million (million (percent) (million (million (percent)
bushels) bushels) bushels) bushels) bushels) bushels)
--------------------------------------------------------------------------------------------------------------------------------------------------------
1991 19,970.574 1,980.139 9.92 4,039.897 1,282.305 31.74 5,997.970 475.021 7.92
1992 20,673.261 2,466.798 11.93 4,043.241 1,353.580 33.48 6,505.106 530.652 8.16
1993 20,520.260 2,396.440 11.68 3,810.947 1,227.761 32.22 6,706.682 568.484 8.48
1994 19,218.100 2,320.981 12.08 3,608.784 1,188.277 32.93 6,004.584 506.585 8.44
1995 19,750.332 2,182.708 11.05 3,644.792 1,241.143 34.05 5,726.544 376.020 6.57
1996 21,365.365 2,277.388 10.66 3,928.013 1,001.522 25.50 6,045.700 443.607 7.34
1997 22,422.188 2,481.466 11.07 3,836.521 1,040.391 27.12 7,279.407 722.478 9.93
1998 21,694.809 2,547.321 11.74 3,722.028 1,045.743 28.10 7,690.753 945.918 12.30
1999 21,561.099 2,295.560 10.65 4,169.235 1,086.499 26.06 7,728.488 949.748 12.29
2000 21,425.441 2,228.160 10.40 3,730.479 1,062.041 28.47 7,633.579 876.182 11.48
2001 21,441.976 1,947.453 9.08 3,891.710 962.311 24.73 7,514.015 777.112 10.34
2002 20,893.833 1,605.878 7.69 3,882.818 850.211 21.90 6,202.779 491.416 7.92
2003 20,384.492 2,344.415 11.50 3,995.254 1,158.324 28.99 4,935.195 546.439 11.07
2004 23,028.533 2,156.790 9.37 4,108.902 1,065.911 25.94 5,637.661 540.100 9.58
2005 22,749.354 2,103.325 9.25 4,298.463 1,002.781 23.33 5,528.716 571.190 10.33
2006 21,908.548 1,808.416 8.25 4,108.865 908.476 22.11 4,799.133 456.153 9.50
2007 22,490.641 2,051.088 9.12 4,309.376 1,262.612 29.30 4,627.834 305.818 6.61
2008 25,066.192 2,499.164 9.97 5,278.601 1,015.415 19.24 6,123.597 656.505 10.72
2009 25,125.606 2,218.061 8.83 4,989.833 881.017 17.66 7,271.911 975.637 13.42
2010 23,779.831 2,208.391 9.29 4,561.989 1,275.000 27.95 6,717.963 839.235 12.49
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Aggregated based on local marketing years. Latest data may be preliminary or projected.
Source: USDA, Foreign Agricultural Service, Production, Supply, and Distribution Database and USDA, World Agricultural Outlook Board, World Agricultural
Supply and Demand Estimates.
Agricultural export markets are even more important to Montana
farmers because we send 80 percent of our annual wheat production into
export channels. In 2010 Montana growers produced more than 200 million
bushels of wheat and the U.S. Census listed our state population at
989,415 people. We simply do not have a large enough consumer base to
support our state's large agricultural production. In fact, if Montana
citizens were required to consume all of the wheat we produce within
our borders, every person would have to eat 400 loaves of bread every
day.
The U.S. wheat industry strongly supports immediate ratification of
the three outstanding free trade agreements with Colombia, Panama and
South Korea. We request that when the Administration sends the
agreements to Congress, you support the agreements as they move through
the Congressional approval process. Each of these three countries has
been a valuable buyer of U.S. wheat, and passage of these agreements
will enable us to maintain and grow sales and market share.
Implications for FTAs with Colombia, Panama and South Korea
Last year, U.S. wheat producers exported 645 thousand metric tons
to Colombia, 123 thousand metric tons to Panama, and 1.1 MMT to South
Korea. Using today's export price of $350 per metric ton, trade to
these three countries represents more than $650 million for wheat
farmers, and thousands of jobs in the United States. U.S. wheat farmers
will be able to maintain and grow these volumes with the FTAs as
immediately upon implementation, duties on wheat imports to each
country will be eliminated.
U.S. Exports to Colombia by Class
1,000 Metric Tons
Panama is a consistent market for U.S. wheat producers, buying hard
red winter (HRW), hard red spring (HRS) and soft red winter (SRW)
wheat, and sourcing almost all of their needs from the United States.
The FTA will lock in zero duties and Panama will not be able to
increase tariffs to a bound level of three percent.
U.S. Exports to Panama U.S. by Class
1,000 Metric Tons
South Korea is a large market for U.S. wheat and is the sixth-
largest world market for U.S. wheat farmers based on a 5 year average.
They purchase a range of wheat classes that impact wheat farmers in
several growing regions.
The South Korea FTA would mean they will not be able to increase
tariffs to 1.8 percent. Econometric analysis i indicates
that this agreement would cause a gradual increase of $0.08/bushel in
farm gate prices for wheat when implemented. Although this seems small,
when multiplied by the entire U.S. wheat production of over 2 billion
bushels, the economic gain is significant.
U.S. Exports to South Korea by Class
1,000 Metric Tons
Commercial sales to Colombia and South Korea have risen in the
current market year, indicating the preference these buyers have for
U.S. wheat when we are able to compete on a similar playing field, but
also the increased trade we have to lose with delayed ratification.
Colombia of Particular Importance
The U.S.-Colombia FTA is of particular importance to U.S. wheat
farmers. Colombia is a wheat import-dependent country, and the United
States has been the dominant supplier of wheat to the Colombian people.
It is estimated that U.S. wheat producers will lose $100 million in
annual sales to this market without an FTA.
In marketing year 2007/2008, our share of the Colombian wheat
market was almost 70 percent, representing almost one million metric
tons. However, in every year since, U.S. sales have declined by
hundreds of tons per year. The Colombian people aren't eating less
wheat--they are simply looking elsewhere to buy it, particularly from
Canada and Argentina. There is no indication that this decline will not
continue, especially as competitors gain preferential access through
lower duties.
In marketing year 2009/2010, Colombia was the eighth largest market
for U.S. wheat. Colombia has routinely been the top South American
market for U.S. wheat producers for many years, but has been nudged out
this marketing year by Peru (1 MMT in sales)--in part because of an
implemented free trade agreement that entered into force in February
2009.
This marketing year Colombia has purchased five of our six classes
of U.S. wheat from farmers across the country, loading vessels in the
Gulf of Mexico and the Pacific Northwest. Colombia's diversity of
purchases to make various end products means that this FTA will benefit
wheat producers from coast to coast.
Sadly this FTA is no longer about giving U.S. wheat farmers an
advantage into the Colombian market. Instead, it is now about being on
an equal playing field with our competitors. Argentine wheat, under the
MERCOSUR agreement, currently enters Colombia duty free. Argentine
wheat was basically non-existent in this market until their duties were
decreased in February 2005, making imports from Argentina more
attractive, resulting in a 375 percent increase year on year due to
this preference. Similarly, Canadian wheat will not be subject to
tariffs once the Colombia-Canada FTA is implemented, which is expected
in early July of this year.
Colombian flour millers have told us that they like using U.S.
wheat, and would like to continue doing so. However, they have also
said that they cannot continue to buy our wheat at the volumes they
have been if it is more expensive than Canadian wheat. More concerning
to me as a farmer is that they tell us that Argentine and Canadian
wheat blend together quite well. If millers become accustomed to an
Argentine-Canadian blend, it will be more difficult to get them to
recalibrate their mills back to using mainly U.S. wheat.
The U.S. agreement will eliminate Colombia import duties currently
applied at ten percent, and they will not be able to increase duties to
their World Trade Organization-bound limit of 124 percent. Also
eliminated will be Colombia's price band system, a variable import
tariff scheme to keep domestic prices within a specific price range
that is based on fluctuations in international prices. The certainty
granted to U.S. farmers and Colombian importers by a permanent zero
tariff rate is critical for the United States to remain competitive in
this market. I can not stress enough how important this market and FTA
is for us. The same econometric analysis i also indicates a
$0.10/bushel increase in farm gate price for the Colombia FTA.
Tangible Benefits for the U.S.
Increased sales of U.S. wheat abroad--or not losing sales as is the
case in Colombia--isn't just beneficial for U.S. wheat growers but it
reaps rewards for the entire U.S. economy. A USDA Economic Research
Service study found that for every $1 billion in exports, 8,400 jobs
are created in the United States--from farming to product
transportation to banking and related support industries. During this
time of economic recovery, we must take advantage of every opportunity
to create jobs. Passage of the FTAs with Colombia, Panama and South
Korea are three perfect opportunities to do just that.
Reduced trade barriers also have the potential to increase demand
as lower-priced products and increased economic well-being contribute
to greater purchases of food. We cannot afford to miss out on these
markets as these countries are not waiting on us. Negotiations and
talks are underway between these three countries and a number of
others, including major wheat competitors, such as Australia, Canada,
European Union and the MERCOSUR block that includes Argentina. A USDA
Economic Research Service report states that the number of regional
trade agreements has proliferated from fewer than 25 in 1990 to over
290 in 2010. The United States and U.S. wheat producers are missing out
on new market access by having only 11 trade agreements in place with
17 countries.
Conclusion
Last week, the U.S. Trade Representative notified Congress that the
Administration is ready to begin technical discussions on the FTAs and
kick off the process of sending the agreements to Congress for
ratification. U.S. wheat farmers welcome this development, and
encourage Congress and the Administration to work together quickly
through the technical discussions and bring the agreements up for a
vote as soon as possible. There is broad support for both agreements,
and they should be passed with bipartisan support. Competition with
Canadian wheat in the Colombian market is looming as a critical market
for U.S. wheat farmers hangs by a thread.
Mr. Chairman, Mr. Peterson and Members of the Committee, thank you
for allowing me the opportunity to be with you today to discuss the
importance of these free trade agreements to my farm. Immediate
ratification of each will increase U.S. wheat sales abroad and create
much-needed jobs here at home. I am happy to answer any questions you
have.
Endnote
i DTB Associates LLP, Allen F. Johnson and Associates,
AgRisk Management LLC, Dan Sumner & William Mathews, Global AgriTrends.
(2010) Analysis of the Effects of Trade Agreements on U.S. Agricultural
Exports and U.S. Market Development Programs--A Global Broad-Based
Initiative Study.
Mr. Conaway. Thank you, Mr. Stoner. I appreciate you
finishing right on the button. Mr. Tolman for 5 minutes.
STATEMENT OF S. RICHARD ``RICK'' TOLMAN, CHIEF
EXECUTIVE OFFICER, NATIONAL CORN GROWERS
ASSOCIATION, CHESTERFIELD, MO
Mr. Tolman. Thank you very much, Mr. Chairman and Members
of the Committee, and thank you for the opportunity to testify
about these pending trade agreements and their importance to
agriculture. My name is Rick Tolman. I am the Chief Executive
Officer of the National Corn Growers Association. Our
association was founded in 1957 and represents over 35,000
dues-paying corn growers and others who are affiliated through
our state associations.
I appreciate this Committee holding this hearing so we can
demonstrate how developing new markets for our country's
agricultural products will help lead the nation in economic
growth and international competitiveness. Our members have a
lot to gain from ratification of free trade agreements with
Korea, Colombia, and Panama. Beyond just increasing and holding
international demand for corn, passing these free trade
agreements benefits our important customers in the livestock
and poultry industries. And we are very supportive of these
agreements for those reasons.
The U.S. is the largest corn producer and exporter in the
world. Our exports of corn and corn products are essential to
farmer income. During the last marketing year, we exported
about 2 billion bushels of corn worldwide. Corn co-products
such as dried distillers grains represent a growing export
market for our farmers, and in the last year, the United States
exported over 8 million tons of dried distillers grains.
Despite numerous weather issues from 2008 to 2010, U.S.
corn growers producers over 12 billion bushels each of those
years annually. And Mother Nature has ensured that this year is
going to be another exciting year. We are off to a little bit
of a challenging start this spring, but we expect to produce a
record amount of corn this year, as you heard from Secretary
Vilsack a few minutes ago.
Now, under the free trade agreements, Korea is the United
States' third-largest corn market. In the last year, Korea
imported 279 million bushels of corn from the United States,
and we know that Korea is a market that we cannot afford to
ignore. We also don't want to lose this market to our
competitors. Just earlier this month, Korea's National Assembly
ratified its free trade agreement with the European Union. And
we know, as we have heard this morning, that Korea is in
negotiations with other competitors, such as Canada, Australia,
and China.
When the FTA has passed, Korea's imports of U.S. corn for
feed are guaranteed to enter at zero duty immediately. This is
certainly according to our growers' desire to ensure a robust
and reliable export market. Although Korea currently imports
large quantities of corn at zero tariff under its autonomous
quota, Korea can legally discontinue this zero tariff at any
time and revert to the WTO tariff of five percent for the first
about 240 million bushels of corn and 328 percent for any
imports above that quantity.
The growth in ethanol production here in the United States
has lead to increased production of dried distillers grains.
This high-protein feed is a direct co-product of the ethanol
industry. Korea imported 351,000 tons of dried distillers
grains last year from the United States. While somewhat small
in volume, imports are growing, and there is significant
potential for increased use in feed rations. Once this
agreement is signed, it will provide duty-free access for dried
distillers grains into the Korean market.
On to Colombia. Colombia is currently importing corn from
U.S. competitors in Argentina, Brazil, and Paraguay. Typically
Colombia is one of our top ten export markets, but there is an
import duty preference for these other countries. We have
watched this market slip away, particularly to our largest
competitors in the region, Brazil and Argentina. Failure to
implement a trade agreement with Colombia will place the U.S.
corn producers at a competitive disadvantage.
From a corn grower's perspective, the pending trade
agreements with result in benefits far beyond increasing
international markets for U.S. corn. NCGA recognizes any
opportunity to increase access to downstream value-added
products, such as meat products, as a benefit to our economy.
We respectfully request that Members of this Committee and
others in Congress support pending trade agreements with Korea,
Colombia, and Panama. Our members want to preserve current
export markets, increase the exports of dried distillers
grains, but significantly important to us is to increase demand
for corn domestically through other value-added exports like
meat exports.
We appreciate the efforts of U.S. trade negotiators to
increase meaningful and achievable access to foreign markets.
Moreover, U.S. corn producers stand ready to develop and
provide corn products to meet the demands of modern global
consumption. Thank you very much.
[The prepared statement of Mr. Tolman follows:]
Prepared Statement of S. Richard ``Rick'' Tolman, Chief Executive
Officer, National Corn Growers Association, Chesterfield, MO
Chairman Lucas, Ranking Member Peterson and Members of the
Committee, thank you for the opportunity to testify about the pending
free trade agreements and their importance to the agriculture sector.
My name is Rick Tolman, and I am the Chief Executive Officer for the
National Corn Growers Association (NCGA). NCGA was founded in 1957 and
represents over 35,000 dues-paying corn growers. NCGA and its
affiliated state associations work together to help protect and advance
corn growers' interests.
NCGA members have much to gain from ratification of free trade
agreements with Korea, Colombia and Panama. Beyond increasing domestic
and international demand for corn, passing free trade agreements also
benefits our customers in the livestock and poultry industries.
Developing new markets for our country's agricultural products will
help our sector lead the nation in economic growth and international
competitiveness.
NCGA supports a consistent U.S. trade policy so that corn and corn
products are not disadvantaged for the benefit of another sector. In
finalizing the pending agreements, NCGA emphasizes the need to
eliminate sanitary and phytosanitary barriers that are not based on the
unique science of agriculture products derived from biotechnology.
U.S. Corn Production and Export Demand
The United States is the largest corn producer and exporter in the
world, and exports of corn and corn products are essential to producer
income. During the 2009-10 marketing year, the United States exported
50.4 million metric tons of corn worldwide. Corn co-products such as
distiller's dried grains (DDGS) represent a growing export market for
domestic producers. In marketing year 2010, the United States exported
over 8 million metric tons of DDGS.
Production growth and consistency make the United States both a
reliable supplier of grain and a steadfast advocate for new export
markets for corn and livestock products. Despite numerous weather
issues from 2008 to 2010, U.S. corn growers produced over 12 billion
bushels of corn annually. Mother Nature has ensured that this year is
also off to a challenging start. However, the rebounds witnessed in
previous years indicate growers' ability to harvest a record crop.
U.S Corn Supply and Demand
------------------------------------------------------------------------
(mil bushel) 2007-08 2008-09 2009-10 2010-11
------------------------------------------------------------------------
Carry-in 1,304 1,624 1,673 1,708
Average Yield 151 153.9 165 152.8
Production 13,038 12,092 13,092 12,447
Supply 14,362 13,729 14,773 14,169
Feed & 5,913 5,246 5,242 5,200
Residual
Ethanol 3,049 3,677 4,474 4,922
FSI 1,338 1,276 1,365 1,390
Export 2,437 1,858 1,985 2,000
Carry-out 1,624 1,673 1,708 658
------------------------------------------------------------------------
Source: USDA World Agricultural Supply and Demand Estimates (WASDE).
Corn Sales to Korea
The Republic of Korea (Korea) boasts a $1 trillion economy and 49
million consumers. Based on these statistics alone, corn growers
understand that Korea is a market we cannot afford to ignore. More
importantly, Korea is a market we cannot afford to lose to our largest
competitors. On May 4, 2011, Korea's National Assembly ratified its
free trade agreement with the European Union. Additionally, we know
that Korea is in negotiations with U.S. competitors including Canada,
Australia and China.
The U.S. share of agricultural imports to Korea stood at nearly 30
percent in 2010. The U.S. Department of Agriculture's Foreign
Agricultural Service (USDA FAS) warns that if the United States fails
to implement the U.S.-Korea Trade Agreement (KORUS), that share will
certainly decline.
Korea is the United States' third largest corn market, and it is a
potentially important market for corn co-products such as DDGS. In
marketing year 2009-2010, Korea imported over 7 million metric tons of
corn from the United States. The flow of corn into Korea is affected by
a myriad of factors, and Korea remains one of our more volatile export
markets.
Marketing Year (September-August)
----------------------------------------------------------------------------------------------------------------
2004-5 2005-6 2006-7 2007-8 2008-9 2009-10
----------------------------------------------------------------------------------------------------------------
MT 2,100,515 5,585,993 4,042,566 8,555,974 5,195,554 7,075,479
Bushels 82,692,774 219,908,574 159,147,161 336,830,362 204,537,828 278,546,446
----------------------------------------------------------------------------------------------------------------
Under KORUS, Korea's imports of U.S. corn for feed are guaranteed
to enter at zero duty immediately. Although Korea currently imports
large quantities of feed corn at zero tariff under its autonomous
quota, Korea can legally discontinue this zero autonomous tariff at any
time and revert to the World Trade Organization (WTO) tariff of five
percent for the first 6.1 million tons, and 328 percent for any imports
above this quantity. KORUS is critical to corn growers because the
tariff will be fixed at zero percent. This is the certainty growers
desire to ensure robust, reliable export markets.
The growth in corn-based ethanol production has led to increased
production of DDGS. This high protein feed is a direct co-product of
the ethanol industry. In 2009-2010, Korea imported 351,389 metric tons
of DDGS from the United States. While relatively small in volume,
imports are growing, and there is significant potential for increased
use in feed rations. Korea's WTO bound rate for DDGS is 6.6 percent.
Once more, KORUS provides immediate duty-free access for DDGS into the
Korean market.
Allowing greater market access can alleviate volatility and, more
importantly, open the Korean market to meat imports. Only a decade ago,
the United States exported 44,000 metric tons of pork to Korea. Today
that number is zero. Ratifying KORUS will translate into significant
increases in pork, beef and other livestock product exports. Such
increases in market access not only help NCGA members who raise
livestock, but also enhance total demand for corn and DDGS
domestically.
Corn Sales to Colombia
Colombia is traditionally one of the top ten export markets for
U.S. corn. During marketing year 2007-2008, the Unites States exported
114 million bushels of corn to Colombia, with an estimated value of
nearly $627 million. Unfortunately, U.S. corn exports declined
dramatically during the 2009-2010 marketing year. Only 36 million
bushels of corn were exported to Colombia during that time, valued at
$152 million. The decline in exports reflected a loss of $475 million
to the U.S. economy.
Marketing Year (September-August)
----------------------------------------------------------------------------------------------------------------
2004-5 2005-6 2006-7 2007-8 2008-9 2009-10
----------------------------------------------------------------------------------------------------------------
MT 1,932,544 2,597,611 3,148,527 2,902,893 1,234,651 912,954
Bushels 76,080,116 102,262,379 123,950,761 114,280,677 48,605,564 35,941,043
----------------------------------------------------------------------------------------------------------------
Under the U.S.-Colombia Trade Promotion Agreement (Colombia TPA),
U.S. corn producers would gain immediate access to the Colombian market
for 2.1 million metric tons of corn at zero percent duty. Over the
course of the 12 year phase out for corn's 25 percent over-quota base
tariff, the rate would be reduced each year by two percent, while the
volume of the tariff rate quota would increase by five percent,
compounded annually.
Currently, Colombia is importing corn from U.S. competitors
including Argentina, Brazil, Paraguay and the majority of MERCOSUR
members because of an import duty preference. We cannot afford to watch
important export markets slip away, particularly to our largest
competitors in the region, Brazil and Argentina. Failure to implement a
trade agreement with Colombia will place U.S. corn producers at a
competitive disadvantage in the world market.
Corn Sales to Panama
The U.S.-Panama Trade Promotion Agreement (Panama TPA) stands to
level the playing field between U.S. and Panamanian exports. U.S. grain
tariffs into Panama can be as high as 90 percent, while nearly all
Panamanian exports enter the United States duty free under the
Caribbean Basin Initiative passed by Congress in 1983.
According to USDA FAS, under the agreement Panama will establish a
298,700 ton duty free preferential tariff rate quota for corn. The
over-quota rate tariff will be eliminated in 15 years, with no
reduction in the first 5 years.
Corn exports to Panama peaked in 2007 and have since dropped 20
percent. In 2010, U.S. share of Panama's agricultural imports stood at
48 percent. Similar to the Colombia TPA, if the United States fails to
capture the opportunities presented in the Panama TPA, our share of
Panama's agricultural imports will plummet.
Value-Added Products
U.S. corn markets are directly impacted by increased exports of
value-added products such as meat. To put this into perspective, it
takes approximately 79 bushels of corn to produce one metric ton of
poultry, under a 2:1 conversion ratio of corn to white and/or dark
meat. Likewise, it takes approximately 232 bushels of corn to make one
metric ton of pork. As referenced in the section discussing corn sales
in Korea, the loss of 44,000 metric tons of pork in the Korean market
affects 10 million bushels of corn.
From a corn grower's perspective, the pending trade agreements will
result in benefits far beyond increasing international markets for U.S.
corn. NCGA recognizes any opportunity to increase access to downstream,
value-added products as a benefit to the U.S. economy.
Conclusion
NCGA respectfully requests that the Members of this Committee and
others in Congress support the pending trade agreements with Korea,
Colombia and Panama. Our members want to preserve current export
markets, increase exports of DDGS and significantly increase demand for
corn through opportunities in value-added corn products.
NCGA remains committed to the development and maintenance of fair
and open global trade policies. We appreciate efforts by U.S. trade
negotiators to increase meaningful and achievable access to foreign
markets. Moreover, U.S. corn producers stand ready to develop and
provide corn products to meet the demands of modern global consumption.
Mr. Conaway. Thank you, Mr. Tolman. We appreciate that. Mr.
Carney, you missed a lengthy introduction a while ago by being
out of the room. So I will abbreviate it. Mr. Carney represents
the National Pork Producers Council from Adair--Adair or Adair?
Mr. Carney. Adair.
Mr. Conaway. Adair, Iowa. Mr. Carney for 5 minutes.
STATEMENT OF SAM CARNEY, CHAIRMAN, TRADE POLICY COMMITTEE,
NATIONAL PORK PRODUCERS COUNCIL; OWNER AND OPERATOR, CARNEY
FARMS, INC., ADAIR, IA
Mr. Carney. All right, good afternoon. I am Sam Carney, a
pork producer from Adair, Iowa, immediate past President of
National Pork Producers Council, and Chairman of NPPC's Trade
Policy Committee. I appreciate the opportunity to appear here
before you today.
The future of the U.S. pork industry and America's family
hog farms, like mine, depend on free and fair trade and the
continued expansion of our exports. The U.S. is now the lowest
cost producer of pork in the world and the number one global
exporter of pork. In 2010, the United States exported more than
$4.8 billion of pork, which was nearly 20 percent of the pork
produced in the United States. That is up about six percent
from 10 years ago.
Those exports added $56 to the price I received for each
hog I sold. There is no disputing that free trade agreements
have been a major factor in the rapid growth of the U.S. pork
exports over the last few decades. Since the year before NAFTA
was implemented in 1994, for example, U.S. pork exports to
Mexico, now our number two market, have increased 780 percent
to almost $1 billion last year. And similar increases have
occurred in other countries in which the U.S. has FTAs.
Increasing pork exports is important to more than just pork
producers. The U.S. pork industry supports an estimated 550,000
domestic jobs, 110,000 of which are result of pork exports.
Just last year, U.S. pork exports grew by almost $500,000. USDA
estimated that for each $1 billion in meat exports generated,
about 12,000 new U.S. jobs. Meaning that last year, pork
exports created 6,000 new U.S. jobs.
Mr. Chairman, as you can see on our display, we export
products, not jobs. Currently, the U.S. has pending FTAs with
Colombia, Panama, and South Korea. These FTAs will generate
over $770 million in additional pork exports annually, causing
live hog prices to increase by more than $11 and creating more
than 10,000 direct pork industry jobs.
We need to approve these FTAs as soon as possible before
other pork export competitors like EU and Canada move forward
with their own FTAs with Colombia, Panama, and South Korea.
Economists have projected that we will be out of all three
markets in 10 years if the U.S. fails to implement its
agreements with these countries as a result of the FTAs these
nations have concluded with U.S. competitors. Losing these
markets would mean less value to the hogs I sell, which I would
translate into less profit and ultimately lost jobs.
Let me touch on three other trade topics. NPPC is pleased
that the U.S. and Mexican Governments have resolved the long-
standing truck dispute. The United States has agreed to its
NAFTA obligations, and Mexico will suspend its tariffs on $2.4
billion of U.S. goods including pork. Congress should allow a
U.S. pilot program that lets Mexican trucks haul products into
the United States to go forward. If it doesn't, Mexico
undoubtedly will reinstate and possibly raise the tariffs on
pork and other U.S. goods.
Russia is an important market for us, but in recent years,
we have lost sales there because of the tariff rate quota
system and use of non-science-based restrictions delisting U.S.
pork plants over unfounded SPS issues.
For the United States to maintain access to the Russia pork
market and to begin recovering lost sales, it is critical that
the Obama Administration use the WTO accession negotiations
with Russia to eliminate that country's restrictions on U.S.
pork.
We also must negotiate an equivalency agreement with Russia
on SPS issues and plant inspections. Like Russia, Vietnam has
imposed non-science-based restrictions on U.S. pork. As part of
the negotiations for joining the TPP, Vietnam should abide by
WTO principles.
Finally, while free and fair trade will continue to be a
boom to the U.S. pork industry, it will do little good if
domestic policies hamper pork producers' ability to operate.
Unfortunately that is exactly what the USDA's regulation on
buying and selling of livestock and poultry with the GIPSA rule
will do if implemented as currently drafted. The bottom line is
it will raise my cost and make the U.S. pork industry less
competitive in a global market that will mean lost U.S. jobs.
In closing, to continue as leaders in the global and
domestic economies, U.S. pork industry needs free and fair
trade and domestic policies to support America's producers. Mr.
Chairman, thank you. I am happy to answer any questions.
[The prepared statement of Mr. Carney follows:]
Prepared Statement of Sam Carney, Chairman, Trade Policy Committee,
National Pork Producers Council; Owner and Operator, Carney Farms,
Inc., Adair, IA
Introduction
The National Pork Producers Council (NPPC) is an association of 43
state pork producer organizations and serves as the voice in Washington
for the nation's pork producers. The U.S. pork industry represents a
significant value-added activity in the agriculture economy and the
overall U.S. economy. Nationwide, more than 67,000 pork producers
marketed more than 110 million hogs in 2010, and those animals provided
total gross receipts of $15 billion. Overall, an estimated $21 billion
of personal income and $34.5 billion of gross national product are
supported by the U.S. hog industry. Economists Dan Otto and John
Lawrence at Iowa State University estimate that the U.S. pork industry
is directly responsible for the creation of 34,720 full-time equivalent
pork producing jobs and generates 127,492 jobs in the rest of
agriculture. It is responsible for 110,665 jobs in the manufacturing
sector, mostly in the packing industry, and 65,224 jobs in professional
services such as veterinarians, real estate agents and bankers. All
told, the U.S. pork industry is responsible for more than 550,000
mostly rural jobs in the U.S.
Exports of pork continue to grow. New technologies have been
adopted and productivity has been increased to maintain the U.S. pork
industry's international competitiveness. As a result, pork exports
have hit new records for 17 of the past 19 years. In 2010, the U.S.
exported more than 1.9 million metric tons of pork valued at $4.8
billion of pork. Exports last year represented about 20 percent of pork
production. The U.S. pork industry today provides 21 billion pounds of
safe, wholesome and nutritious meat protein to consumers worldwide.
The demand for meat protein is on the rise in much of the world.
Global competitiveness is a function of production economics,
regulations, labor costs and productivity. The U.S. pork industry can
continue to be a leader in food production and meet the needs of
increased consumer demands as long as exports continue to grow, feed
grains are available and producers are allowed to operate without undue
legislative and regulatory burdens.
Free Trade Agreements
There is considerable global demand for pork and pork products.
Pork represents 44 percent of global meat protein intake, far more than
beef and poultry. And there is no disputing that free trade agreements
have been a major factor in the rapid growth in U.S. pork exports over
the last 2 decades. Since the year before the North American Free Trade
Agreement was implemented in 1994, for example, U.S. pork exports to
Mexico have increased 780 percent to $986 million last year; since the
year before the Australia FTA was implemented, U.S. pork exports to
that country have grown by 1,300 percent to $148 million; since the
year before the Central America FTA was implemented, U.S. pork exports
to the CAFTA countries have increased by 313 percent to $119 million;
and in the 2 years since the Peru FTA took effect, U.S. pork exports to
that South American country have more than doubled to $1.3 million.
Iowa State University economist Dermot Hayes estimates that U.S. pork
prices were $56 per hog higher in 2010 than they would have been in the
absence of exports.
The United States is now the lowest-cost pork producer in the
world, and the U.S. pork industry has established itself as the number
one global exporter. But the industry will not stay in that position,
even as the lowest-cost producer, if competitor countries cut trade
deals in key markets and the United States does not.
U.S. pork producers have been and continue to be strong supporters
of trade agreements, including the deals with Colombia, Panama and
South Korea, which are pending Congressional approval. Iowa State
University economist Dermot Hayes estimates that, when fully
implemented, those FTAs will generate more than $770 million in
additional pork exports, causing live hog prices to increase by $11.35
per head and creating more than 10,200 direct pork industry jobs.
The failure of the United States to approve free trade agreements
with Colombia, Panama and South Korea would result in the U.S. pork
industry eventually being out of those markets. Not only would U.S.
pork producers forgo the increase in hog prices, but the U.S. pork
industry and the U.S. economy, in general, would lose thousands of
jobs, according to analyses conducted by Iowa State University
economist Dermot Hayes.
Given that South Korea already has an FTA with Chile and that its
agreement with the European Union becomes effective July 1, 2011, and
under a scenario in which the U.S. dollar returns to a price of $1.25
to the Euro--reflecting the long-run equilibrium between these two
currencies--if the United States fails to implement its FTA with South
Korea, U.S. market share in Korea would fall by three percentage points
per year for the entire projection period, and the U.S. would be
eliminated from the Korean market over a 10 year period. That, Hayes
calculates, would cost the United States more than 3,600 full-time
positions in the pork industry and 18,000 total full-time positions
after allowing for indirect employment affects.
Likewise, because Colombia and Panama have concluded FTAs with
Canada, if the United States fails to implement its agreements with
those countries, it will be out of the markets in 10 years at a loss of
hundreds of jobs.
U.S. Trade Obligations
As it demands of other countries, the United States must live up to
its trade obligations. Bilateral and multilateral trade agreements lay
out specific commitments for the signatories, and failure to abide by
them can--and often does--lead to disputes that hurt one or more
countries.
Such was the case with the trucking provision of the North American
Free Trade Agreement (NAFTA) among the United States, Canada and
Mexico. The provision allowed each country's trucks to haul goods into
the other nations, but the United States refused to allow Mexican
trucks into the country. Mexico took its case to a NAFTA dispute-
settlement panel, which ruled that it could retaliate against the
United States. In March 2009, the Mexican Government placed tariffs of
up to 20 percent on 89 U.S. products worth $2.4 billion; in August
2010--after no U.S. action to resolve the dispute--it added more
products, including pork, to its retaliation list. The duties made U.S.
goods going to Mexico less competitive with products from other
countries and placed more than 26,000 U.S. jobs in jeopardy.
NPPC is pleased that the U.S. and Mexican Governments have reached
a framework agreement that should lead to resolution of the dispute.
Under the agreement, the United States will implement its NAFTA
obligations over time, and Mexico will suspend the tariffs on U.S.
goods while the U.S. implements its commitments. Congress should allow
a U.S. pilot program that lets Mexican trucks haul products into the
United States to go forward. If it does not, Mexico undoubtedly will
reinstate, and possibly raise, the tariffs on pork and other U.S.
goods.
Other Trade Issues
Russia
Russia until recently has been a very important market for U.S.
pork exports. In 2008, U.S. pork sales to Russia totaled more than
203,000 metric tons (MT), making it the fourth largest market in the
world for U.S. pork exports. Since that time, however, U.S. pork sales
to Russia have plummeted, totaling only 83,000 MT in 2010.
The rapid decline in U.S. pork exports to Russia can be attributed
primarily to restrictive Russian import policies. Since 2008, Russia
has unilaterally reduced the tariff rate quota (TRQ) it provides for
pork imports. In addition, it has imposed a series of sanitary and
phytosanitary (SPS) restrictions that have resulted in the delisting of
a large number of U.S. pork plants, representing close to 60 percent of
U.S. pork production capacity.
For the United States to maintain access to the Russian pork market
and to begin recovering sales it has lost in recent years, it is
critical that the Obama Administration use the World Trade Organization
(WTO) accession negotiations with Russia to eliminate non-science-based
and WTO-inconsistent Russian restrictions on U.S. pork.
Russia currently maintains a global tariff rate quota for pork of
472,100 MT, 57,500 MT of which is allocated to the United States. This
stands in contrast to the commitments Russia made in a bilateral Meat
Agreement with the United States in 2008, under which it was supposed
to provide a global pork TRQ of 531,900 MT, 100,000 MT of which was
allocated to the United States. In recent WTO accession negotiations,
Russia has been proposing to even further reduce the size of the global
TRQ for pork, while maintaining the U.S. country allocation at close to
its current level of 57,500 MT, by increasing the U.S. share of the
overall quota. This approach is unacceptable to the U.S. pork industry
and would essentially freeze the U.S. country allocation at an
unacceptably low level.
In addition to a larger quota, pork producers seek either
elimination of or a deep reduction in Russia's current 15 percent in-
quota tariff rate applied under the TRQ. As a secondary priority, the
industry would like to see a reduction in the out-of-quota duty,
currently set at 75 percent. Also, it is important that Russia include
commitments on a fair and transparent system for administering its pork
TRQ.
In addition to restricting U.S. pork exports by reducing the size
of the TRQ, Russia has used spurious SPS measures to limit U.S. pork
exports. The most serious SPS problem that the U.S. pork industry faces
with Russia is the Russian Government's arbitrary, unpredictable and
non-science-based delistment of U.S. pork plants from eligibility to
ship product to Russia. Over the course of several years of
discussions, U.S. officials have amply demonstrated the efficacy of the
U.S. meat inspection system in ensuring product safety. U.S. consumers
and U.S. trading partners around the world recognize the effectiveness
of the U.S. system in ensuring a safe product. In spite of this, the
Russian Government has refused to recognize the U.S. pork plant
approval process, continues to insist that U.S. establishments strictly
comply with Russian plant approval rules and has delisted a large
number of U.S. plants from eligibility to export to Russia. At present,
U.S. plants representing 60 percent of U.S. pork production capacity
have been banned from exporting pork to Russia.
A fundamental principle contained in the WTO Agreement on the
Application of Sanitary and Phytosanitary Measures is that of
``equivalence.'' The equivalence principle requires that WTO members
recognize the SPS measures of other trading partners as equivalent to
their own if they achieve an appropriate level of health and sanitary
protection. The United States was able to extract highly valuable
commitments from China and Vietnam as part of the WTO accession
process, recognizing the U.S. Federal meat plant inspection system as
fully equivalent to their own. It is critical that United States obtain
the same kind of clearly worded equivalence commitment from Russia
through the WTO Accession negotiations.
Directly linked to the massive delistment of U.S. pork plants are a
variety of Russian SPS measures covering technical issues such as
compound and pathogen tolerance levels in pork products. For example,
Russia maintains an effective zero tolerance for the antibiotic
tetracycline in pork production, even though both the U.S. Food and
Drug Administration and the Codex Alimentarius have found the
controlled use of the antibiotic to be safe in pork production. Russia
also maintains an effective zero tolerance for pathogens such as
salmonella on meat products, even though it is virtually impossible for
any country, including Russia, to ensure absolute freedom from such
pathogens. Russia insists on testing for trichinosis in fresh/chilled
pork from the United States, even though there has not been a single
case of trichinosis in the U.S. commercial herd in more than a decade.
SPS technical measures of this kind have frequently been used by
the Russians as a pretext for the delistment of U.S. plants. None of
these measures is based on legitimate food safety concerns. They
violate fundamental requirements of the WTO SPS Agreement that SPS
measures be based on a scientifically based risk assessment or
internationally established standards.
To address these issues in a systemic way, the United States will
need additional assurances from Russia that go beyond the commitment to
accept the U.S. Federal meat plant inspection and approval system as
equivalent to its own. Along with the equivalence commitment, Russia
should provide a specific commitment that it will abide by the WTO SPS
Agreement obligations as it relates to tetracycline, pathogens on meat,
trichinosis and other SPS import measures by either adhering to
internationally established standards or conducting a science-based,
peer reviewed risk assessment in the establishment of import policies.
Trans-Pacific Strategic Economic Partnership
NPPC strongly supports U.S. participation in the Trans-Pacific
Strategic Economic Partnership (commonly referred to as TPP). U.S. pork
producers would derive major benefits from this proposed regional free
trade agreement, through the elimination of import duties and sanitary-
phytosanitary (SPS) barriers to trade in participating countries.
The U.S. pork industry has a number of non-tariff issues with some
of the countries now negotiating to join the TPP. U.S. trade
negotiators must focus not only on the removal of tariffs but the
removal of all non-tariff barriers to trade, particularly SPS barriers.
Of the countries currently participating in the TPP negotiations,
Vietnam offers the most potential for expanded U.S. pork exports.
According to Iowa State University economist Dermot Hayes, the short-
term potential for U.S. pork exports to Vietnam if import duties and
SPS barriers are eliminated is $80 million, while the long-term
potential is $600 million. Market prices in Vietnam are three times
higher than those in the United States, and more than 60 percent of
Vietnam's pork is produced by inefficient backyard producers.
Unfortunately, Vietnam recently has taken a series of actions that
seriously restrict U.S. pork sales. These actions run contrary to the
trade liberalizing objectives of the TPP negotiations and are having a
negative impact on U.S. pork exports to Vietnam.
Vietnam instituted in July 2010 an effective ban on the importation
of all pork offals. No explanation was given for the import ban. As a
result of the de facto ban on pork offals, U.S. pork offal sales to
Vietnam plummeted from 5,868 MT in 2008 to 611 MT in 2010. Vietnam also
refuses to recognize the scientific process of applying a ``reference''
maximum residue level (MRL) for compounds in pork offals. This process
is recognized by the Codex Alimentarius and used by the United States
and most other countries. In lieu of establishing a reference MRL,
Vietnam has instead established non-science-based MRL requirements for
individual pork offal products. So even if the import ban on offals is
lifted, this practice will continue to inhibit our exports of offals.
Further, Vietnam's zero-tolerance policy for pathogens on raw meat
products, including pork, is not acceptable. No country in the world,
including Vietnam, can guarantee the complete absence of pathogens on
raw meat products. The United States and many other countries use the
Hazard Analysis and Critical Control Points (HACCP) process to ensure
product safety as it relates to pathogens. Vietnam's zero-tolerance
policy for pathogens is not based on science and likely violates
numerous provisions of the WTO's Agreement on the Application of
Sanitary and Phytosanitary Measures. If strictly applied to U.S. pork,
it would act as an effective ban on U.S. pork sales to Vietnam.
Malaysia is another country with excellent potential for increased
pork imports from the United States. There is a large ethnic Chinese
population in Malaysia, and an estimated ten million people in that
country consume pork. Per capita consumption among those who consume
pork in Malaysia is 22 kilograms per year, a level roughly equal to
that of Australia and New Zealand. Malaysia's domestic pork production
industry is small and inefficient. According to Iowa State's Hayes, the
long-term potential in Malaysia if import tariffs and SPS barriers are
eliminated is $100 million.
Malaysia's Department of Veterinary Services maintains a list of
pork products that are allowed entry into Malaysia. The allowable
import list includes bellies, pig feet, ribs and intestines for the
fresh market and hams and other cuts for further processing. However,
except in cases of exceptional shortages, Malaysia does not allow
imports of most fresh and frozen pork cuts for direct sale on the
Malaysian retail market. Malaysia has never provided an adequate
explanation of why it maintains an effective import ban on sales of
most pork products into its retail market. The effective ban is clearly
WTO illegal.
In addition, Malaysia has indicated that it intends to impose a new
and highly burdensome registration process for all foreign meat
establishments supplying product to Malaysia. This includes a long
questionnaire that requires all foreign plants to provide confidential
business information on their operations. Many U.S. plants are unlikely
to complete the Malaysian plant registration process for this reason.
The plant registration process acts as a significant barrier to trade
and should be removed through the TPP negotiations.
As a result of the 2005 U.S.-Australia FTA, U.S. pork exports have
surged to Australia from about 2,700 MT in 2004, the year before the
agreement went into effect, to 43,800 MT in 2008, valued at $111
million. However, there is still potential for growth in U.S. pork
sales to Australia if SPS barriers are removed.
Australia has implemented an unreasonable and unscientific zero-
tolerance approach to two commonly managed diseases that are endemic in
the U.S. and other major pork producing countries in the world,
including the European Union and Canada: Porcine Reproductive and
Respiratory Syndrome (PRRS) and Post Systemic Wasting Syndrome (PMWS).
Neither disease is a food-safety issue and does not pose a risk to
human health.
As the result of a 2004 risk assessment, Australia partially opened
its market to U.S. pork, allowing processed pork and frozen boneless
pork for further processing. The risk of introduction of PRRS or PMWS
from U.S. pork to the Australian pork herd is negligible. Therefore,
Australia should take action to fully open its import market to U.S.
pork.
New Zealand restricts imports of U.S. pork for further processing
and only a few months ago allowed imports of consumer-ready high-value
cuts. These restrictions are because of an unreasonable and
unscientific zero-tolerance approach to two commonly managed diseases
that are endemic in the U.S. and other major pork producing countries
in the world, including the European Union and Canada: Porcine
Reproductive and Respiratory Syndrome (PRRS) and Post Systemic Wasting
Syndrome (PMWS). Neither disease is a food-safety issue and does not
pose a risk to human health. The New Zealand restrictions are not
justified by any legitimate health or sanitary concerns.
Chile, Singapore and Peru impose restrictions on U.S. pork exports
based on unscientific concerns of transmission of trichinae. These
countries impose costly and unnecessary trichinae risk mitigation
requirements such as freezing and testing of all U.S. pork. These
testing requirements are prohibitively expensive and act as a major
barrier to U.S. exports of fresh/chilled and frozen pork and pork
products to these countries.
While trichinae is a concern in domestic pork from many developing
countries, there is negligible risk in the U.S. commercial herd because
of the high level of biosecurity and commercial production practices.
According to Dr. Ray Gamble, President of the International Commission
on Trichinellosis, the odds of trichinae in the U.S. commercial food
supply is 1 in 300 million. Under the USDA Agricultural Marketing
Service's Trichinae Export Program, more than 38 million tests have
been conducted for trichinae in pigs. Not a single pig was infected
with trichinae.
NPPC and virtually every other U.S. food and agriculture group
support the addition of Japan to the TPP negotiations. NPPC urges the
Obama Administration and Congress to make this a reality should Japan
request to become part of the TPP.
Thailand
Although Thailand has relatively high per capita consumption of
pork, it imports only a small amount of pork from the United States
because of a variety of import restrictions. In the absence of current
import barriers, Thailand could be a very good market for U.S. pork
exports.
Thailand imposes an import inspection fee of 5 Baht per kilogram,
currently equal to about $166 per MT, on pork imports. Thailand argues
that this fee is needed to cover the cost of health inspections for
imported pork, but the fee is far in excess of the cost of any
legitimate inspection costs. Domestically produced pork in Thailand is
assessed an inspection fee of only $15 MT. Thailand needs to reduce the
import fee on pork imports, which contravenes WTO rules, to a level no
more than the fee currently applied to domestically produced pork.
Additionally Thailand's Department of Livestock and Development rarely,
if ever, grants import licenses for U.S. pork, other than cooked pork.
The policy has been in place for a number of years, but the Thai
Government never has provided a justification for this arbitrary import
permit refusal. Indeed, there is no justification for this practice,
which violates WTO rules.
Thailand also has a ban on imports of pork produced with
ractopamine despite the fact that its Ministry of Health has approved
ractopamine for domestic use. Ractopamine is a feed ingredient that is
used to improve efficiency in pork production in the United States and
in other pork-producing countries. In 1999, it was approved and
recognized as safe by the U.S. Food and Drug Administration and has
been proved safe in several scientific safety reviews by the Joint FAO/
WHO Expert Committee on Food Additives (JECFA)--the independent
international scientific advisory committee to the Codex Alimentarius
Commission. At least 26 countries now recognize the safety of
ractopamine in pork production. In fact, some countries such as Japan,
which is the number one importer of U.S. pork, have already adopted the
JECFA safety tolerance for imported pork.
WTO Doha Round
NPPC remains hopeful that the WTO Doha Round negotiations, which
have been going on for nearly 10 years, can be resumed. For NPPC, a
successful Doha Round agreement would include improved market access
for U.S. pork in developed and developing countries--particularly
Japan, the EU and the Philippines--and the elimination of the European
Union's trade-distorting export subsidies for pork. The average global
tariff on pork is a staggering 77 percent.
Ractopamine
As noted above, ractopamine is an FDA-approved feed ingredient that
is used to improve efficiency in pork production in the United States
and in at least 25 other pork-producing countries, including several
Asian nations.
Despite the product being deemed safe by FDA, 25 other national
authorities and the JECFA, several countries, including China, the
European Union, Singapore, Taiwan and Thailand, have banned imports of
pork produced using ractopamine without any scientific justification.
The feed additive has been up for final adoption the past 3 years
by the Codex Alimentarius Commission, which establishes international
food standards, guidelines and codes of practice for the trade of safe
food. At its last meeting in July 2010, the commission determined that
a ``draft'' maximum residue level (MRL) for ractopamine, the same
standard that has been up for adoption the past 3 years, met human
safety standards. However, because of unscientific concerns raised by
several Codex members, the adoption of the ractopamine MRL has been
delayed, causing further market disruptions for U.S. pork producers.
NPPC is concerned that the commission has become politicized and that
decisions are not being based on science. NPPC strongly urges the Codex
Alimentarius Commission to adopt without further delay the MRLs for
ractopamine at its next meeting in July 2011.
Legislation and Regulation
As NPPC recently testified before the Committee on Agriculture's
Livestock, Dairy, and Poultry Subcommittee, while exports have been,
and with new FTAs will continue to be, a boon for the U.S. pork
industry, they will do little good if domestic policies hamper
producers' ability to operate.
NPPC restates its strong opposition to the U.S. Department of
Agriculture's proposed regulation on the buying and selling of
livestock and poultry--the GIPSA rule. Congress in the 2008 Farm Bill
asked USDA to address five specific issues related to production
contracts. But USDA's proposed rule goes well beyond those issues and
includes provisions considered and clearly rejected by Congress. If
implemented as currently drafted, the GIPSA rule would have a
devastating impact on livestock producers. According to an analysis of
the rule conducted by Informa Economics, it would cost the U.S. pork
industry nearly $400 million annually. Industry analysis of the
regulation concluded that it likely will have a chilling effect on
innovation and flexibility, will create legal uncertainty that will
drive costs higher and cause an increase in vertical integration in the
livestock sector, driving producers out of the business and possibly
affecting meat supplies. All of those effects will harm the U.S. pork
industry's international competitiveness, costing U.S. on-farm and pork
processing jobs as well as negatively affecting the U.S. balance of
trade.
NPPC continues to urge USDA to scrap the current GIPSA rule and to
write a regulation that sticks to the five mandates it was given by
Congress in the 2008 Farm Bill. It wants USDA to conduct a cost-benefit
analysis--open to public comment--before any rule is finalized. It also
requests Congress to conduct oversight hearings on the origins of the
rule, the legal and economic analyses used to develop it and the rule's
impact on small businesses.
Conclusion
The U.S. pork industry is the lowest-cost producer and number one
exporter of pork in the world, and U.S. pork producers continue to
produce the most abundant, safest, most nutritious pork in the world.
They have proved very resilient, most recently weathering financial
crises in 1998-1999 and 2008-2009 as well as the vagaries of a free
market economy, all while investing in and adopting new technologies
that have promoted animal health, protected the environment and added
thousands of jobs and billions in national income to the American
economy.
To continue as leaders in the global and domestic economies, the
U.S. pork industry needs free and fair trade and domestic policies that
support America's pork producers.
Attachments
February 14, 2011
Hon. Barack Obama,
President of the United States,
The White House,
Washington, D.C.
Dear Mr. President:
Many of the undersigned food and agriculture organizations first
declared their support for the Colombia and Panama free trade
agreements (FTAs) in 2007. Four years of trade benefits for U.S.
farmers, ranchers and food processors have now been forfeited by our
inaction on these agreements, and competitor countries have taken
advantage of this lapse to grab U.S. market shares. It is time to bring
this situation to an end.
We greatly appreciate Ambassador Kirk's recent statement to
Congress that the Administration is committed to intensifying
negotiations with Colombia and Panama and to resolving the issues that
have prevented you from submitting the implementing legislation to
Congress. We urge you to direct U.S. negotiators to move forward with
these efforts as quickly as possible.
Colombia and Panama each have undertaken important changes in
policies to correct problems identified by Members of Congress. There
is little debate that those governments have worked hard to address
U.S. concerns. We believe that a strong and mutually beneficial
relationship between our respective nations may well advance legitimate
U.S. objectives in these areas more than continuing to withhold
approval of the FTAs. At some point, the current approach could cause
us to lose not only the trade agreements but the friendships of those
important regional allies.
As you know, each agreement will provide important new market
access benefits to U.S. food and agricultural exports that will in turn
create U.S. jobs and strengthen rural economies. Many U.S. food and
agricultural products will become eligible for duty-free treatment in
those countries immediately upon entry into force of the agreements,
and virtually all will receive duty-free treatment over specified
phase-in periods.
According to the American Farm Bureau Federation, the U.S.-Colombia
FTA would result in U.S. agricultural export gains of more than $815
million per year at full implementation, and the Panama FTA would add
another $195 million. This extra $1 billion in exports would generate
6,000-8,000 new jobs here at home. But we are already several years
behind in implementing the agreements, and those jobs are going
elsewhere.
Colombia is on the verge of implementing FTAs with Canada and the
European Union, and other major agricultural exporting countries, such
as Argentina and Brazil, already have preferential access to that
market. Our share of that market in wheat, feed grains and other
products is certain to plummet unless we act promptly to correct these
inequities. According to USDA, the U.S. share of Colombia's total
agricultural imports has already fallen from almost 44 percent in 2007
to 27 percent in 2009.
Mr. President, implementation of these agreements, along with the
Korea FTA, will significantly advance your effort to double U.S.
exports over 5 years. On the other hand, because these countries are
negotiating agreements with some of our main competitors, the failure
to implement the agreements will be a real set-back to that objective.
Once again, we urge you to move forward rapidly to finalize the FTAs
and submit the implementing bills as soon as possible.
Sincerely,
American Farm Bureau Federation;
American Feed Industry Association;
American Frozen Food Institute;
American Meat Institute;
American Peanut Product Manufacturers, Inc.;
American Seed Trade Association;
American Soybean Association;
Animal Health Institute;
Blue Diamond Growers;
California Table Grape Commission;
Commodity Markets Council;
Corn Refiners Association;
Distilled Spirits Council of the United States;
Grocery Manufacturers Association;
Idaho Barley Commission;
International Dairy Foods Association;
National Association of State Departments of Agriculture;
National Association of Wheat Growers;
National Barley Growers Association;
National Cattlemen's Beef Association;
National Chicken Council;
National Confectioners Association;
National Corn Growers Association;
National Council of Farmer Cooperatives;
National Grain and Feed Association;
National Meat Association;
National Milk Producers Federation;
National Oilseed Processors Association;
National Pork Producers Council;
National Potato Council;
National Renderers Association;
National Sorghum Producers;
National Sunflower Association;
National Turkey Federation;
North American Equipment Dealers Association;
North American Export Grain Association;
Northwest Horticultural Council;
Produce Marketing Association;
Sweetener Users Association;
U.S. Apple Association;
U.S. Canola Association;
U.S. Dairy Export Council;
U.S. Livestock Genetics Export, Inc.;
U.S. Wheat Associates;
United Egg Association;
United Egg Producers;
USA Dry Pea & Lentil Council;
USA Poultry & Egg Export Council;
USA Rice Federation;
Western Growers Association.
CC:
Hon. Ron Kirk, U.S. Trade Representative;
Hon. Tom Vilsack, U.S. Secretary of Agriculture.
______
January 24, 2011
Hon. John Boehner, Hon. Harry Reid,
Speaker, Majority Leader
U.S. House of Representatives, U.S. Senate,
Washington, D.C.; Washington, D.C.;
Hon. Nancy Pelosi, Hon. Mitch McConnell,
Democratic Leader, Republican Leader,
U.S. House of Representatives, U.S. Senate,
Washington, D.C.; Washington, D.C.
Dear Speaker Boehner and Leaders Reid, Pelosi and McConnell:
The undersigned food and agricultural groups and companies,
representing nearly all sectors of the agricultural economy, applaud
the recent agreement between the United States and the Republic of
Korea on issues that have delayed approval by Congress of the Korea-
U.S. Free Trade Agreement (KORUS FTA). We strongly support this
agreement and urge that it be approved at the earliest possible
opportunity.
Below we offer a number of compelling reasons for supporting the
KORUS FTA. But the simple heart of the matter is that the agreement is
overwhelmingly good for American agriculture and presents no risks. It
will create significant new and expanded market opportunities for U.S.
exports but will not result in any appreciable increase in agricultural
imports.
Risks for U.S. agriculture--and they are extremely serious--arise
if the KORUS FTA is not implemented. If this agreement is rejected, we
stand to relinquish our export sales to countries that have implemented
their own FTAs with Korea.
This is not a trivial concern. There are 13 such agreements in
place or in the works involving some 50 nations around the world. They
include some major agricultural producing and exporting countries:
Chile, Australia, New Zealand, Canada, the 27-nation European Union,
Mexico, MERCOSUR (Argentina, Brazil, Paraguay and Uruguay), Peru and
the ASEAN bloc. In fact, South Korea's FTA with the European Union is
set to enter into force on July 1, 2011. This, coupled with the failure
to implement the KORUS FTA, will put U.S. food and agriculture products
at a severe disadvantage with respect to competition from the European
Union in the Korean market.
Imagine, for example, Korea's current 25 percent tariff remaining
in place on U.S. pork but eliminated for pork from the European Union.
Our standing as the top global pork exporter would count for nothing.
Iowa State economist Dermot Hayes has calculated that we would be
completely out of the Korean market in 10 years. The same predicament
would face a wide range of U.S. agricultural exports.
Another example of a U.S. agricultural product losing out on an
important export market is corn starch. The European Union secured a
highly advantageous deal for its starch exports. In some cases,
European starches received approximately four times the market access
that U.S. starches did. Moreover, tariffs on European starch products
are eliminated more rapidly than tariffs on U.S. corn starch exports.
If Congress fails to ratify the agreement in a timely manner, the U.S.
corn refining industry will be placed at a significant competitive
disadvantage relative to its European competitors.
With the KORUS FTA, on the other hand, existing import barriers
will be removed immediately for nearly $3 billion of U.S. food and
agricultural products. These exports represent more than 60 percent of
our sales and include wheat, feed corn, soybeans, hides and skins,
cotton and a large number of high-value agricultural products,
including almonds, pistachios, wine, raisins, grape juice, orange
juice, fresh cherries, cranberries, frozen French fries, frozen orange
juice concentrate, Bourbon, Tennessee Whiskey and pet food.
In just 2 years, many other products will be tariff-free, including
avocados, lemons, dried prunes and sunflower seeds. In 5 years, more
products will gain free access, including food preparations, chocolate
and chocolate confectionary, sweet corn, sauces and preparations,
alfalfa and other forages, breads and pastry, grapefruit and dried
mushrooms.
Still other important U.S. farm products will benefit from new or
expanded tariff rate quotas. These include skim and whole milk powder,
whey for food use, cheese, starches, barley, popcorn and soybeans for
food use. Market access improvements were also achieved for beef and
pork products, eggs and egg products, pears and table grapes.
Put together, these access benefits mean greatly expanded exports
to Korea. According to an analysis by the American Farm Bureau
Federation, the KORUS FTA would result in $1.8 billion in additional
sales to Korea, a 46 percent increase over existing sales. This
analysis appears very conservative according to Dr. Hayes of Iowa State
and the American Meat Institute, who forecast increased U.S. beef, pork
and poultry exports alone to be more than $2.1 billion.
These new exports would create thousands of new jobs on the farm
and in rural communities and throughout the economy. They would expand
our share of trade in a growing economy with the 15th highest GDP in
the world. For 3 years, these important benefits have been forfeited
while the implementing legislation has been on hold.
We can either lose jobs as our market share declines in Korea, or
we can create new jobs by expanding exports to that market. We urge
Congress to choose the latter. In addition, we urge Congress to work
with the Obama Administration so that the Colombia and Panama trade
agreements also may soon be sent to Congress for approval. These
agreements, like the KORUS, will generate additional agricultural
exports and create new jobs.
Sincerely,
Agri Beef Co.;
American Farm Bureau Federation;
American Feed Industry Association;
American Frozen Food Institute;
American Meat Institute;
American Peanut Product Manufacturers, Inc.;
American Soybean Association;
California Dried Plum Board;
California Fig Advisory Board;
California Strawberry Commission;
California Table Grape Commission;
California Walnut Commission;
Cargill;
Commodity Markets Council;
ConAgra Foods, Inc.;
Corn Refiners Association;
Distilled Spirits Council of the United States;
Grocery Manufacturers Association;
Hormel Foods;
International Dairy Foods Association;
JBS USA;
National Association of State Departments of Agriculture;
National Association of Wheat Growers;
National Barley Growers Association;
National Cattlemen's Beef Association;
National Chicken Council;
National Confectioners Association;
National Corn Growers Association;
National Council of Farmer Cooperatives;
National Grain and Feed Association;
National Grape Cooperative Association Inc.;
National Meat Association;
National Milk Producers Federation;
National Oilseed Processors Association;
National Pork Producers Council;
National Potato Council;
National Renderers Association;
National Sorghum Producers;
National Turkey Federation;
North American Equipment Dealers Association;
Northwest Horticultural Council;
Ocean Spray Cranberries, Inc.;
Pet Food Institute;
Produce Marketing Association;
Seaboard Foods;
Smithfield Foods;
Sunmaid Growers of California;
Sunsweet Growers Inc.;
Sweetener Users Association;
Tyson Foods, Inc.;
U.S. Canola Association;
U.S. Dairy Export Council;
U.S. Premium Beef;
United Egg Association;
United Egg Producers;
United States Dry Bean Council;
USA Dry Pea & Lentil Council;
USA Poultry & Egg Export Council;
Valley Fig Growers;
Welch Foods Inc., A Cooperative;
Western Growers Association;
CC:
Members of the U.S. House of Representatives,
Members of the U.S. Senate.
______
U.S. Pork Exports
Mr. Conaway. Mr. Carney, thank you very much. Roger Johnson
from the National Farmers Union. Mr. Johnson for 5 minutes.
STATEMENT OF ROGER JOHNSON, PRESIDENT, NATIONAL FARMERS UNION,
WASHINGTON, D.C.
Mr. Roger Johnson. Mr. Chairman, Members of the Committee,
thank you for the opportunity to testify. At our recent
convention in Texas, our National Farmers Union delegates voted
to oppose the three pending free trade agreements before you
today because they will force thousands of Americans out of
their jobs and worsen America's overall trade deficit.
We take a very holistic approach to trade. While
recognizing that there are agricultural advantages posed by
these agreements, we know that there are disadvantages in other
areas. There are many reasons for entering into trade
agreements: market access, economics, diplomatic purposes,
building democracies. Free trade agreements are often promoted
by claiming new markets and new jobs, but trade deficits and
lost jobs are the much more common result.
If a trade agreement is desired to help stabilize a country
and bring about better democracy in that country, the agreement
should be sold on those merits, instead of misleading claims
about more markets and more U.S. jobs.
U.S. agriculture has a history of generating significant
agricultural trade surplus, as shown in Figure 1 of my
testimony. On the other hand, the U.S. economy as a whole has a
history of generating significant trade deficits as shown in
Figure 2 of my testimony. U.S. agriculture has actually done
worse after trade agreements than prior to the agreements.
Figure 3 shows net agricultural trade with countries that have
entered into trade agreements with the U.S. Contrast that with
the ag trade surplus in Figure 1 for the rest of the world.
Following the 1988 Canada-U.S. Free Trade Agreement,
American imports of Canada's six major grains and oilseeds
increased substantially. Consequently, my organization strongly
opposed NAFTA. We feared that our experience with Mexico might
be similar to what we had experienced with Canada: 680,000 U.S.
jobs were lost since NAFTA took effect. One year before NAFTA
was implemented, the U.S. had a $1.6 billion trade surplus with
Mexico that supported nearly 30,000 U.S. jobs.
Per Figure 4, post-NAFTA exports did increase, but imports
increased much faster, leading to a large trade deficit. NAFTA
was sold as providing new market access to farmers. Then Mexico
devalued their peso, and those benefits turned to losses. The
ITC estimates that U.S. beef exports to South Korea could
increase by about $1 billion under the FTA, but will they?
During NAFTA debates, USDA predicted increases in U.S.
exports of beef to Mexico. History shows large losses occurred
instead. It seems foolish to think that these free trade
agreements will be much different. They are based on the same
model. We need a new model, and that new model, we believe,
should be based on the TRADE Act, which, among other things,
would address environmental, health, and labor standards, deal
with currency manipulation, increase inspections on imported
food and mandate trade pact reviews to determine whether the
promises made materialize.
So how do these three agreements before you today stack up
against those benchmarks? Korea, certainly there are benefits
to agriculture, especially meat. More important perhaps is
solidifying an already strong alliance with South Korea as a
vital ally of the U.S. However, South Korea has a history as a
currency manipulator, and this agreement does not address
currency manipulation. So any benefits for added market access
could well be negated. We worry that we may repeat the NAFTA
experience.
The ITC predicts the Korea agreement will increase the
overall U.S. goods trade deficit by $300 to $400 million and
cost us 159,000 jobs. And historically the ITC projections have
been overly optimistic.
Colombia, this agreement would likely increase market
access. It is a part of Colombia's overall development
strategy. It would most likely promote economic growth and
stability. However, as this Committee has heard earlier today,
Colombia has some of the lowest labor standards in the world,
and our members are concerned about those. Violence against
labor is widespread in Colombia. It is the most dangerous place
in the world to be a trade unionist, and the agreement so far
that it has been structured is not proven. We would like to see
some action before the agreement is adopted.
Panama is a tax haven. Only recently has Panama begun to
address the tax avoidance practices, and we have no experience
to find out whether they are going to be effective. In fact,
the OECD has called for more time to review the effectiveness
of their new policies. National Farmers Union supports trade,
fair, mutually beneficial trade that seeks to increase human
welfare and respects sovereign nation's need for food and
national security. Thank you.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of Roger Johnson, President, National Farmers Union,
Washington, D.C.
Chairman Lucas, Ranking Member Peterson, and other Members of the
U.S. House of Representatives Committee on Agriculture, I personally
thank you on behalf of the U.S. family farmers, ranchers, fishermen and
consumers my organization represents. I am Roger Johnson, President of
National Farmers Union (NFU).
NFU was founded in 1902. We are one of the largest general farm
organizations in the United States and have members in all 50 states,
with organized divisions in 32 states. I stand here today in opposition
to the three pending free trade agreements (FTAs) before the United
States Congress on behalf of the hard working members of NFU who labor
every day to produce a safe and affordable food supply for American
consumers. The Korea, Panama, and Colombia FTAs will force thousands of
Americans out of their jobs, result in the importation of products that
could be produced domestically, and displace our own family farmers,
ranchers and fishermen.
NFU is a grassroots organization. Our members believe that trade
policy should help U.S. producers gain greater market access, increase
the quality of life for the citizens of all parties in a trade
agreement, and provide other mutual economic, social and governance
benefits. NFU takes a holistic approach to trade.
There are many reasons for entering into trade agreements. One
could be to gain better market access. Another may be on strictly
economic grounds. The U.S. may want to establish a trade agreement for
diplomatic purposes to help build relationships or even assist
countries that are struggling with democracy. Free trade agreements are
often justified by claims that the agreements will open new markets and
create jobs in the U.S. A study of previous agreements suggests that
trade deficits and lost jobs are the more common result. If a trade
agreement is desired to help stabilize a country and bring about better
democracy, the agreement should be sold on those merits instead of
misleading claims about more markets and more U.S. jobs.
NFU has historically opposed free trade agreements on the basis
that the agreements were more likely to increase imports rather than
open new markets to U.S. goods, as claimed by proponents. We have been
proved correct. Vague promises of ``market access'' have been too often
empty and factually inaccurate.
Net U.S. Agricultural Trade with the World
Source: U.S. Department of Agriculture Foreign Agriculture
Service.
U.S. agriculture has a history of generating agriculture trade
surplus, as shown in Figure 1. We have a very efficient system of
family farmers, ranchers and fishermen, and have historically provided
a safety net for agriculture that helps our producers survive difficult
times. This has resulted in long-term agricultural surpluses. On the
other hand, the U.S. economy as a whole has a history of generating
trade deficits as seen below in Figure 2.
Figure 2
Total U.S. Trade Surplus (Deficit)
Source: U.S. International Trade Commission (ITC).
On the whole, U.S. agriculture has actually done worse after trade
agreements have been entered into than prior to the agreements. Figure
3 below shows the net agriculture trade surplus (deficit) with
countries that have entered into trade agreements with the United
States. Each year only includes trade data from countries with which
the U.S. had a free trade agreement in that year. This subpar
performance contrasts with U.S. agriculture's performance as a whole,
as depicted in Figure 1. For example, the 1998 data includes only trade
information with Israel, Canada and Mexico. Table 1 shows when the
United States entered into agreements with each of the 17 countries
with which it has an FTA.
Figure 3
Net Agriculture Trade with Countries That Have FTAs with the U.S.
Source: U.S. Department of Agriculture Foreign Agriculture
Service.
Table 1
------------------------------------------------------------------------
Agreement Year Effective
------------------------------------------------------------------------
United States-Israel Free Trade 1985
Agreement
Canada-United States Free Trade 1988
Agreement
North American Free Trade Agreement
Includes:
Canada and Mexico (Superseded 1994
Canada-United States FTA).........
United States-Jordan Free Trade 2001
Agreement
Australia-United States Free Trade 2004
Agreement
United States-Chile Free Trade 2004
Agreement
United States-Singapore Free Trade 2004
Agreement
Dominican Republic-Central America
Free Trade Agreement Includes:
Dominican Republic, Costa Rica, El 2005
Salvador, Guatemala, Honduras, and
Nicaragua.........................
United States-Bahrain Free Trade 2006
Agreement
United States-Morocco Free Trade 2006
Agreement
United States-Oman Free Trade 2006
Agreement
United States-Peru Trade Promotion 2007
Agreement
------------------------------------------------------------------------
We have many FTAs with countries that do not have the economic
purchasing power to afford our products. U.S.-produced goods are more
expensive than those in such countries because we maintain strong
labor, environmental protection, and other standards.
With our economic ability in the U.S., we are able to purchase
their products, which increases our imports and offsets our own
domestic production, resulting in lost U.S. jobs and even higher U.S.
trade deficits.
History
Albert Einstein said, ``Insanity is doing the same thing over and
over again and expecting different results.'' Following the 1988
Canada-U.S. Free Trade Agreement that laid the foundation for the North
American Free Trade Agreement (NAFTA), American imports of Canada's six
major grains and oilseeds increased 38 percent from 1990 to 1991. From
1991 to 1992, the rate of growth of Canadian exports to the
U.S. grew faster than any of the other top ten U.S. trading partners.
U.S. imports of Canadian wheat increased by 76 percent after the
implementation of the Canada-U.S. Free Trade Agreement, U.S. barley
imports increased by 213 percent, and durum imports increased 130
percent.
Based on this dismal agricultural trade data, NFU strongly opposed
NAFTA. We feared that our experience with Mexico might be similar to
what we had already experienced with Canada. What happened?
A recently released Economic Policy Institute study shows that
682,900 U.S. jobs have been lost or displaced since NAFTA took effect
in 1994.
The main reason for the job loss is a $97.2 billion trade deficit
with Mexico. In 1993, one year before NAFTA was implemented, the United
States had a $1.6 billion trade surplus with Mexico that supported
nearly 30,000 U.S. jobs. The states with the most jobs displaced since
NAFTA went into effect were California (86,500 jobs), Texas (55,600),
Michigan (43,600), Ohio (34,900), Illinois (34,700), New York (34,300),
Florida (28,800), Pennsylvania (26,300), Indiana (24,400) and North
Carolina (18,900).\1\
---------------------------------------------------------------------------
\1\ Scott, Robert E. (May 3, 2011) Heading South U.S.-Mexico trade
and job displacement after NAFTA. Retrieved from http://epi.3cdn.net/
fdade52b876e04793b_7fm6ivz2y.pdf.
---------------------------------------------------------------------------
As illustrated in Figure 4, post-NAFTA exports did increase, but
our imports increased more quickly, leading to a growing trade deficit
with our NAFTA partners. Only the Great Recession interrupted this
downward trend.
Figure 4
U.S.-Mexico Trade Before and After NAFTA, 1989-2010
Source: Economic Policy Institute Briefing Paper Number 308,
May 3, 2011.
Most of the jobs displaced by trade with Mexico, 415,000 jobs or
60.8 percent of the total, have been in manufacturing. The hardest hit
manufacturers have been in computer and electronic parts with 150,300
jobs lost or displaced, or 22 percent of the total number of jobs, and
motor vehicles and parts losing 108,000 jobs or 15.8 percent.\2\
---------------------------------------------------------------------------
\2\ Ibid.
---------------------------------------------------------------------------
During NAFTA negotiations, Members of Congress were given a list of
tariff cuts for crops in their districts as evidence of the new market
access their farmers would obtain. In reality, those tariff cut
benefits were eliminated when Mexico devalued the peso 50 percent
shortly after NAFTA went into effect.\3\ Now the same old promises have
returned. The U.S. International Trade Council (ITC) has estimated that
``U.S. beef exports to South Korea could increase by $600 million to
$1.8 billion under the FTA.'' \4\
---------------------------------------------------------------------------
\3\ Espana, Juan R. (July, 1995) The Mexican peso crisis: impact on
NAFTA and emerging markets. Retrieved from http://findarticles.com/p/
articles/mi_m1094/is_n3_v30/ai_17221265.
\4\ Cooper, William F. (June 17, 2009) The Proposed U.S.-South
Korea Free Trade Agreement (KORUS FTA): Provisions and Implications.
CRS Report RL34330.
---------------------------------------------------------------------------
During the NAFTA debates, USDA analysts predicted an increase in
U.S. exports of beef products to Mexico.\5\ The reality is that beef
and pork, two projected NAFTA winners, saw their exports to Mexico fall
13 percent and 20 percent, respectively, in the 3 years after NAFTA was
implemented compared to the 3 years prior to NAFTA.\6\
---------------------------------------------------------------------------
\5\ Congressional Budget Office. (May 1993) Agriculture in the
North American Free Trade Agreement. Retrieved from http://www.cbo.gov/
ftpdocs/64xx/doc6444/93doc176.pdf.
\6\ Calculations based on data obtained from the USDA Foreign
Agricultural Service's (FAS) Global Agricultural Trade System on Jan.
21, 2011. Data was inflation-adjusted using the Consumer Price Index--
U-RS as estimated by the Congressional Budget Office in the backup data
for Table C-1 of their ``The Budget and Economic Outlook: An Update'',
released August 2010. FAS aggregations used for beef were ``Beef &
Veal,Fr/Ch/Fz'' and ``Beef&Veal, Prep/Pres''. FAS aggregations used for
pork were ``Pork, Fr/Ch/Fz'', ``Pork,Hams/Shldrs,Crd'', ``Pork, Bacon,
Cured'', ``Hog Sausage Casings'', ``Pork,Prep/Pres,Nt/Cn'', and
``Pork,Prep/Pres,Cannd''.
---------------------------------------------------------------------------
As noted by a former World Bank chief economist, ``. . . the real
depreciation of the peso, given its magnitude, was a larger influence
on trade than was the entry into NAFTA. This is because the total
reduction in tariffs at the end of 15 years would average only ten
percent, in contrast with the 50 percent real depreciation.'' \7\ Due
to the peso devaluation, U.S. products became more expensive in Mexico
after NAFTA, and many sectors suffered.
---------------------------------------------------------------------------
\7\ Krueger, Anne O. (June, 2000) ``NAFTA's Effects: A Preliminary
Assessment,'' The World Economy, Volume 23, Issue 6, at 764.
---------------------------------------------------------------------------
Trade is vital in maintaining standards of living, cultural
exchange, economic development, and even national security. But bad
trade agreements work contrary to those objectives and create
uncertainty and difficulties for affected people. Now that free trade
agreements with South Korea, Colombia, Panama, and a Trans-Pacific
Partnership are being debated, we have an opportunity to learn from our
mistakes.
When we look back on the broken promises that free trade agreements
were supposed to deliver, it seems foolish to think the United States-
Korea Free Trade Agreement (KORUS), Panama or Colombia free trade
agreements will be much different. They are based on the same model as
NAFTA.
We desperately need a new model. The current free trade agenda has
consistently failed to live up to its promised benefits, encouraging a
race to the bottom to see who can produce the cheapest food and fiber,
regardless of the conditions under which it was produced. Future trade
agreements must address additional issues. NFU believes that new models
should be based on the Trade Reform, Accountability, Development and
Employment (TRADE) Act.\8\
---------------------------------------------------------------------------
\8\ H.R. 3012: Trade Reform, Accountability, Development and
Employment (TRADE) Act of 2010 (111th Congress). Retrieved from http://
www.gpo.gov/fdsys/pkg/BILLS-111hr3012ih/pdf/BILLS-111hr3012ih.pdf.
---------------------------------------------------------------------------
The TRADE Act would address environmental, health, and labor
standards of all countries involved in the agreement, and deal with
issues such as currency manipulation (Appendix 1). It would increase
inspections on imported food, mandate trade pact reviews, restore
Congressional oversight of future agreements, and enact national
security exceptions and remedies that must be included in trade pacts.
The TRADE Act would set requirements with respect to public services,
farm policy, investment, government procurement and affordable
medicines.
The bill would also create a committee, comprised of the chairs and
ranking members of each committee whose jurisdiction is affected by
trade agreements, to review the President's plan for renegotiations.
Under the terms of the legislation, the U.S. Government Accountability
Office (GAO) would be required to conduct a comprehensive review of
existing trade agreements with an emphasis on economic results,
enforcement, and compliance and to analyze non-tariff provisions of the
agreements.
The TRADE Act would restore your authority as Members of Congress
to direct how this country should negotiate trade agreements. It would
establish clear benchmarks for assessing trade agreements. So how do
the three agreements before you today stack up against those
benchmarks?
Pending Free Trade Agreements
KORUS
The Korean Economy
South Korea is considered a high-tech industrialized country. In
2010, its Gross Domestic Product (GDP) was $1.467 trillion with a GDP
per capita of $30,200. The economy is highly service-sector based, with
only three percent of the population working in agriculture. Rice is
the biggest agriculture product, and technology products and motor
vehicles are the major exports.\9\
---------------------------------------------------------------------------
\9\ U.S. Central Intelligence Agency. The World Factbook. Retrieved
from https://www.cia.gov/library/publications/the-world-factbook/geos/
ks.html.
---------------------------------------------------------------------------
Benefits of KORUS Agreement
The Bush Administration completed the FTA in 2007 and the Obama
Administration renegotiated the text in late 2010. NFU acknowledges
that there are benefits to the KORUS agreement, especially to American
agriculture exports. Korea was our fifth largest agricultural export
market in 2009. The removal of tariffs should substantially open the
Korean economy to U.S. products.
For example, U.S. beef producers would likely see savings of $90
million annually because of tariff eliminations on Korea's 40 percent
tariff on beef.\10\
---------------------------------------------------------------------------
\10\ U.S. Trade Representative. Retrieved from http://
www.whitehouse.gov/sites/default/files/
fact_sheet_economic_value_us_korea_free_trade_agreement.pdf.
---------------------------------------------------------------------------
More important than any potential economic benefit is solidifying
an already strong alliance. South Korea is a vital ally in the region,
and with threats such as North Korea, it is in the interest of U.S.
national security to fortify that alliance.\11\
---------------------------------------------------------------------------
\11\ U.S. Department of State. Retrieved from http://fpc.state.gov/
documents/organization/161348.pdf.
---------------------------------------------------------------------------
NFU understands that it is too late to alter the pending FTA with
South Korea, and it is now up to Congress to approve or reject the
agreement. While Obama Administration negotiations added more access
for U.S. pork exports and automobiles during the renegotiation,\12\ we
cannot support this agreement for a number of reasons. NFU delegates
passed a Special Order of Business specifically opposing KORUS
(Appendix 2), and it states that trade negotiations must take into
consideration more than just traditional trade barriers such as tariffs
and import quotas.
---------------------------------------------------------------------------
\12\ ``Statement by the President Announcing the U.S.-Korea Trade
Agreement.'' December 3, 2010. The White House.
---------------------------------------------------------------------------
Currency Manipulation
First and foremost, NFU is concerned about South Korea's history as
a currency manipulator, which could be damaging to U.S. exports. The
U.S. Treasury Department has listed South Korea as one of only three
countries to be a currency manipulator.\13\ Disturbingly, South Korea
is currently taking similar steps to manipulate their currency
according to the Treasury Department's semi-annual ``Report to Congress
on International Economic and Exchange Rate Policies.''\14\ According
to the report, the Korean Government intervened during the 2008
economic crisis in order to support the won. However, as the economy
began to recover and capital flows and exports increased, the Korean
Government then began going in the opposite direction in the currency
markets. In particular, Korea is intervening in global currency markets
by buying up U.S. financial assets in order to keep the Korean won at a
deflated exchange rate. The report goes on to cite a 2010 International
Monetary Fund Article IV consultation with Korea that states that the
exchange rate of the won is undervalued relative to its equilibrium
level by between five and 20 percent. This is despite the fact that
Korea has $23 billion more in their coffers compared to pre-crisis
levels.
---------------------------------------------------------------------------
\13\ U.S. Department of Treasury. Retrieved from http://
www.treasury.gov/resource-center/international/exchange-rate-policies/
Documents/appendix2finalapril152009.pdf.
\14\ U.S. Department of Treasury. Retrieved from http://
www.treasury.gov/resource-center/international/exchange-rate-policies/
Documents/Foreign%20Exchange%20Report%20
February%204%202011.pdf.
---------------------------------------------------------------------------
Unfortunately, the negotiated agreement does not deal with currency
manipulation. If South Korea continues to devalue its currency, any
benefits stemming from added market access in the FTA could well be
negated.
Sadly, past FTAs have also failed to take currency manipulation
into account. As previously stated, after passing NAFTA, Mexico
devalued the peso by 50 percent.\15\ This devaluation negated the
tariff cuts as a result of NAFTA.\16\ NFU is concerned that without
provisions to prevent currency manipulation, South Korea will do the
same.
---------------------------------------------------------------------------
\15\ Espana, Juan R. (July 1995) ``The Mexican peso crisis: impact
on NAFTA and emerging markets,'' Business Economics. Retrieved from
http://findarticles.com/p/articles/mi_m1094/is_n3_v30/ai_17221265/.
\16\ Krueger, Anne O. (June 2000) ``NAFTA's Effects: A Preliminary
Assessment,'' The World Economy, Volume 23, Issue 6.
---------------------------------------------------------------------------
Negative U.S. Trade Balance
The U.S. ITC predicts that the KORUS agreement will lead to an
increase in the overall U.S. good trade deficit of $308 to $416 million
because seven U.S. industrial sectors will see net losses.\17\ However,
using history as a guide, projections by the ITC have been overly
optimistic. As stated earlier, the U.S. ITC projected net trade
surpluses following the NAFTA agreements. As we now know, this
agreement led the U.S. on a direct path to a greater trade deficit. In
fact, as earlier discussed, U.S. exports to countries with which it has
an FTA have not grown as fast as exports to non-FTA countries. In
addition, if Korea devalues its currency as it has in the past, the
trade deficit would be even greater.
---------------------------------------------------------------------------
\17\ U.S. International Trade Commission. (September, 2007) ``U.S.-
Korea Free Trade Agreement: Potential Economy-wide and Selected
Sectoral Effects.'' USITC Publication 3949. Corrected printing March
2010. Retrieved from http://www.usitc.gov/publications/332/pub3949.pdf.
---------------------------------------------------------------------------
Job Losses
The U.S. ITC report also predicts greater imports than exports as a
result of the FTA.\18\ Because of the increased imports and resulting
loss of production in the U.S., implementing the KORUS agreement is
projected to lead to a net loss of 159,000 jobs.\19\ At a time of high
unemployment, it seems unwise to pass an agreement that would lead to
even more job losses. We are aware that there is another ITC report
that has been circulated on the Hill which shows the FTA in a more
favorable light.
---------------------------------------------------------------------------
\18\ Ibid.
\19\ Scott, Robert E. (Feb. 25, 2010) Trade Policy and Job Loss,
Economic Policy Institute, Working Paper #289. Retrieved from http://
www.epi.org/publications/entry/trade_policy_
and_job_loss/.
---------------------------------------------------------------------------
Colombia Free Trade Agreement
The Colombian Economy
Colombia is still very much a developing country. In 2010, Colombia
had a GDP of $431.9 billion with a GDP per capita of $9,800. In 2010,
Colombia had exports totaling $40.24 billion, up from $32.08 billion in
2009. The Colombian economy continues to struggle because of
inequality, underemployment, and narco-trafficking. The unemployment
rate is hovering around 12 percent and 45.8 percent of Colombians live
below the poverty line.\20\
---------------------------------------------------------------------------
\20\ U.S. Central Intelligence Agency. (May 4, 2011). The World
Factbook. Retrieved from https://www.cia.gov/library/publications/the-
world-factbook/geos/co.html.
---------------------------------------------------------------------------
Benefits of a Colombia FTA
A Colombia FTA would increase market access for U.S. goods and
services in Colombia, which is currently not provided for in the
existing unilateral trade preference program under the existing Andean
Trade Preference Act (ATPA). About 90 percent of U.S. imports from
Colombia enter the United States duty-free under either ATPA, other
trade preferences or through normal trade relations. A Colombia FTA is
expected to provide economic benefits for both the U.S. and Colombia as
trade increases between the two countries. Additionally, a free trade
agreement with the U.S. is part of Colombia's overall development
strategy, with expectations that the FTA would attract increased
foreign investment and promote economic growth and stability.
Specific benefits of the FTA for agriculture include phase out of
tariffs over a period ranging from 3 to 19 years. The FTA would provide
duty-free access on 77 percent of all agricultural tariff lines, which
account for 52 percent of current U.S. exports to Colombia.\21\
---------------------------------------------------------------------------
\21\ Villarreal, M. Angeles, Congressional Research Service. (April
12, 2011). Proposed U.S.-Colombia Free Trade Agreement: Background and
Issues. Retrieved from http://www.fas.org/sgp/crs/row/RL34470.pdf.
---------------------------------------------------------------------------
Neglect of Labor Laws
Trade policy should promote economic growth, job creation,
increased wages, and workers' rights. Although the benefits of the
arrangement may appear lucrative to the U.S., Colombia has some of the
lowest labor standards in the world. The labor agreement in the
Colombia FTA includes only the provision for the government to enforce
its own labor laws. While the agreement does require Colombia to adhere
to ILO core labor standards, it does not prevent Colombia from
weakening their national labor laws. In addition, the Colombia FTA does
not prevent violent land displacement for agriculture and use of other
natural resources.
Colombia does have laws regarding labor standards, and is a member
of the International Labor Organization (ILO). ILO requirements
include: freedom of association, the right to collective bargaining,
the elimination of forced behavior, the abolition of child labor, and
the elimination of discrimination.\22\ Unfortunately, even as a member
of the ILO, Colombia falls short on labor standards in all of those
categories. Language in the FTA does require strict adherence to ILO
requirements and has additional labor standard stipulations.\23\ It is
hard to believe, however, that when the agreement with the ILO has been
ignored for so long that conditions in the FTA will be taken seriously.
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\22\ International Labour Organization. (2006) International Labour
Standards by Subject. Retrieved from http://www.ilo.org/ilolex/english/
subjectE.htm#s01.
\23\ Office of the United States Trade Representative. (n.d.).
Colombia FTA Final Text: 17. Labor. Retrieved from http://www.ustr.gov/
sites/default/files/uploads/agreements/fta/colombia/
asset_upload_file993_10146.pdf.
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Through government corruption, impunity, and power, Colombian labor
laws are frequently altered or ignored. Although the Colombian
Government allows for the organization of unions, workers join unions
at the risk of being subject to discrimination, abuse, violence and
often death. In 2005, approximately 900,000 workers were members of
unions, making up less than five percent of trade workers. The labor
code allows for automatic recognition of a union that is supported by
25 signatures but official recognition can take years.\24\
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\24\ U.S. Department of State. (March 8, 2006). Country Reports on
Human Rights Practices-Colombia. Retrieved from http://www.state.gov/g/
drl/rls/hrrpt/2005/61721.htm.
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Colombian law allows for collective bargaining only when a union
represents more than \1/3\ of a firm's workers. The law encourages
employers to use this statute as a means to reduce union membership
below the \1/3\ threshold.\25\ This is certainly not in line with the
ILO agreements, that state terms of employment should be negotiated
under collective agreement, and direct negotiations should be possible
only in the absence of a union.\26\ In addition, a union must represent
half of the workers in each firm in order to bargain at an industry-
wide level.\27\
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\25\ The Labor Advisory Committee for Trade Negotiations and Trade
Policy (LAC). (October 4, 2006). The U.S.-Colombia Free Trade
Agreement. Retrieved from http://www.aflcio.org/issues/jobseconomy/
globaleconomy/upload/colombia_LAC_report.pdf.
\26\ International Labour Organization. (2006) International Labour
Standards by Subject. Retrieved from http://www.ilo.org/ilolex/english/
subjectE.htm#s01.
\27\ The Labor Advisory Committee for Trade Negotiations and Trade
Policy (LAC). (October 4, 2006). The U.S.-Colombia Free Trade
Agreement. Retrieved from http://www.aflcio.org/issues/jobseconomy/
globaleconomy/upload/colombia_LAC_report.pdf.
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Unionist Violence and Impunity
Violence against union organizers and labor rights leaders is
widespread. In 2010, 51 union members were killed in Colombia.\28\ The
International Trade Union Confederation ranks Colombia as the most
dangerous place to be a trade unionist. The country is home to 63.12
percent of trade unionists murdered in the world over the last
decade.\29\
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\28\ U.S. Labor Education in the Americas Project (USLEAP).
(December 2010). Murder and Impunity of Colombian Trade Unionists.
Retrieved from http://www.usleap.org/files/
Colombia%20Fact%20Sheet_Dec%202010.pdf.
\29\ International Trade Union Confederation. (June 11, 2010). 2010
Annual Survey of Violations of Trade Union Rights. Retrieved from
http://survey.ituc-csi.org/+-Whole-World-+.html?lang=en.
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The frequency of unionist killings stems from the level of impunity
allowed in Colombia. According to the Escuela Nacional Sindical (ENS),
only six percent of the 2,857 unionist murders ever reached a verdict,
and only 25 percent of these murders even went under investigation.\30\
In addition, those who actually planned the killings are usually not
convicted.
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\30\ Acosta, Jennifer, Council on Hemispheric Affairs. (December 5,
2008). The Colombia FTA: A Less Attractive Face for Trade? Retrieved
from http://www.coha.org/the-colombia-fta-a-less-attractive-face-to-
trade/.
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Poor Labor Conditions
The lack of ability to unionize, as well as the lack of labor law
enforcement leaves Colombian workers to face unfavorable working
conditions. In addition to poor standards, physical or sexual abuse is
common. Agricultural workers often work in unhealthy labor situations,
such as being exposed to toxic pesticides, but continue in fear of
losing their jobs.\31\ Child labor laws are also frequently neglected
in Colombia. There are 2.5 million children employed in Colombia, two
million of them working illegally. Only 38 percent of these children
attend school. Significant numbers of children work in illegal mining
operations, as coca pickers, or are used as child soldiers.\32\
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\31\ U.S. Department of State. (March 8, 2006). Country Reports on
Human Rights Practices-Colombia. Retrieved from http://www.state.gov/g/
drl/rls/hrrpt/2005/61721.htm.
\32\ U.S. Department of State. (n.d.). Colombia. Retrieved from
http://www.state.gov/documents/organization/160452.pdf.
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Agriculture and Land Displacement
The Colombia FTA encourages agricultural trade with a nation that
has faced serious conflict in terms of land ownership. Millions of
people have been displaced from their land in these conflicts, fleeing
to cities or deeper into the jungle. When the latter is the case, the
only economically viable crop to grow is coca.
Cheap agricultural commodities coming in from America will make the
markets of the nine basic crops in Colombia difficult to maintain. A
report done by the Colombian Ministry of Agriculture in 2004 stated
that with an increase in agricultural products from the U.S. and no
support system for Colombian farmers, rural issues could increase.
Colombian farmers would be left with the choices of migration,
cultivating opium or coca, or joining illegal armed groups.\33\
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\33\ Colombia Ministry of Agriculture. (July 2004). Colombian
Agriculture Before the Free Trade Agreement with the U.S.
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Free Trade's Impacts on the Environment
Colombia is an ecologically rich country, home to ten percent of
the world's species. Colombia is ranked second in the world for
biodiversity; 18 percent of the birds, amphibians, mammals, reptiles
and fish species and 30 percent of the plant species are native only to
Colombia.\34\ The U.S.-Colombia FTA requires each party to ``establish
its own levels of domestic environmental protection and environmental
development priorities, and to adopt or modify accordingly its
environmental laws and policies.'' \35\ The environmental stipulations
in the agreement only require the parties involved to enforce their own
environmental regulations. The FTA puts much more value on trade and
investment provisions than environmental protection.\36\ Increasing the
opportunity for industrial and agricultural development will certainly
have implications for this biologically rich country.
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\34\ The Nature Conservancy. (n.d.). Colombia. Retrieved from
http://www.nature.org/ourinitiatives/regions/southamerica/colombia/.
\35\ Office of the United States Trade Representative. (n.d.).
Colombia FTA Final Text: 18. Environment. Retrieved from http://
www.ustr.gov/sites/default/files/uploads/agreements/fta/colombia/
asset_upload_file993_10146.pdf.
\36\ Acosta, Jennifer, Council on Hemispheric Affairs. (December 5,
2008). The Colombia FTA: A Less Attractive Face for Trade? Retrieved
from http://www.coha.org/the-colombia-fta-a-less-attractive-face-to-
trade/.
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In the Colombian industrial sector, a substantial environmental
impact will be seen on water quality and air quality. Liquid chemical
byproducts and effluents will impact water quality. The impacts on air
quality include: pollution from water vapor, emissions, incineration of
solid residues, organic components from hydrocarbons and chemical
reactions and other particles. Ecological influences from increased
trade will also be seen from changes in agriculture. Increased
opportunity for livestock production will result in deforestation and
biodiversity loss. Water and land pollution will be amplified as
through soil erosion and chemical treatments. In addition, greenhouse
gas emissions will increase.\37\
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\37\ Organization of American States. (2007). Colombia FTA Impacts
by Sector. Retrieved from http://www.oas.org/dsd/EnvironmentLaw/trade/
Documents/TablasColombia,EcuadoryPeru
disponibles.pdf.
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Panama Free Trade Agreement
Panamanian Economy
Although it is amidst Central America's fastest growing economies,
Panama is still very much a developing nation. Panama's per capita GDP
was $7,579 in 2010, which ranked 91st among all countries.\38\ The
isthmus nation is unique among Central American countries in that the
service sector dominates the economy. More than 80 percent of Panama's
economic activity is generated by the Panama Canal, the Colon Free
Zone, container ports, flagship registry, tourism, banking, insurance
and other services.\39\ In 2010, Panama had exports totaling $12.52
billion, an increase from $10.9 billion in 2009, but ran a total
account balance deficit of $5.946 billion in 2010, larger than the
$4.991 billion deficit in 2009.\40\
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\38\ International Monetary Fund, ``World Economic Outlook
Database.'' Retrieved from
https://www.imf.org/external/pubs/ft/weo/2010/01/weodata/index.aspx.
\39\ Labor Advisory Committee for Trade Negotiations and Trade
Policy. (April 25, 2007) Report to the President, the Congress and the
U.S. Trade Representative on the U.S.-Panama Free Trade Agreement.
Retrieved from http://ustraderep.gov/assets/Trade_Agreements/Bilateral/
Panama_FTA/Reports/asset_upload_file696_11235.pdf.
\40\ U.S. Central Intelligence Agency, ``The World Factbook.''
Retrieved from https://www.cia.gov/library/publications/the-world-
factbook/geos/pm.html.
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Panama as a Tax Haven
Panama has been considered by the GAO to be a ``tax haven,'' or a
state that allows for a greater degree of financial privacy for
depositors, among 50 other countries.\41\ This is especially attractive
in a country that is heavily involved in the shipping industry. Many
transportation companies that might otherwise be based in the United
States are headquartered in Panama, home not only to a vital canal but
also to secretive financial institutions.
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\41\ United States Government Accountability Office. (December,
2008) International Taxation: Large U.S. Corporations and Federal
Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or
Financial Privacy Jurisdictions. GAO-09-157.
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Only recently were these tax avoidance practices addressed by the
Panamanian Government. After significant pressure from U.S. trade
negotiators, Panama entered into a Tax Information and Exchange
Agreement (TIEA) with the United States in November 2010 that would
allow for the exchange of data for the purposes of tax assessment.
Panama's legislative assembly ratified the TIEA in April 2011, which
followed legislation passed in June 2010 that would allow the
Panamanian Government to implement and enforce the treaty.\42\
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\42\ Hornbeck, J.F. (April 21, 2011) The Proposed U.S.-Panama Free
Trade Agreement. CRS Report RL32540.
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Although the agreement aims to end tax shelter policies in Panama,
the language of the law is deficient. The agreement contains a
significant loophole for prohibiting American access to tax information
if Panama determined ``the disclosure of the information request would
be contrary to the public policy.'' \43\ This allows for unlimited
exemptions to the new tax disclosure rules. The Organisation for
Economic Co-operation and Development (OECD) has called for more time
to review the effectiveness of the new tax information access process.
OECD will not conclude its review of Panama's compliance with world
standards until late 2012.\44\
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\43\ U.S. Department of Treasury. ``Agreement Between the
Government of the United States of America and the Government of the
Republic of Panama for Tax Cooperation and the Exchange of Information
Relating to Taxes.'' Signed in U.S. November 30, 2010. Ratified in
Panama on April 13, 2011. Retrieved from http://www.treasury.gov/
resource-center/tax-policy/treaties/Documents/PanamaTIEA10.pdf.
\44\ Organisation for Economic Co-operation and Development (April,
2011) OECD's Current Tax Agenda. Retrieved from http://www.oecd.org/
dataoecd/38/17/1909369.pdf.
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In addition, Panamanian politicians have already begun to pursue a
challenge to the constitutionality of the agreement.\45\ The
superficial efforts made by Panama to squelch tax evasion by foreign
corporations were conducted simply in the hopes of assuaging the
concerns of American trade negotiators. More information is needed to
fully understand the strength and force of the new tax information
system before entrusting a known tax haven with easier access to
American business.
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\45\ Robinson, Roberto. (April 14, 2011) ``PRD se queja por tratado
con Estados Unidos (Revolutionary Democratic Party's complaint with the
U.S. Treaty),'' El Siglo. Retrieved from http://www.elsiglo.com/
mensual/2011/04/14/contenido/354357.asp.
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Panama and Human Rights
Although human rights concerns in Panama are not as grave as in
Colombia, the Panamanian Government has used force against its own
citizens during labor disputes within the last year. In July 2010,
several thousand indigenous workers at an American-owned fruit
plantation demonstrated in the Changuinola in the Bocas del Toro
province. The uprising came as a result of the laborers' opposition to
a controversial law that would roll back many workers and environmental
protections.\46\ Ignoring a warning from the United Nations, security
forces suppressed the protestors with violence, killing several workers
and injuring more than 100.\47\ Entering into a free trade agreement
with a country that resorts to violence to settle labor disputes
encourages such behavior. American trade policy should not condone such
actions by eliminating trade restrictions with countries that violate
internationally recognized human rights standards.
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\46\ Organization of American States: Inter-American Commission on
Human Rights. (August 3, 2010) IACHR Expresses Concern over Deaths and
Injuries During Demonstration in Panama. Retrieved from http://
www.cidh.oas.org/Comunicados/English/2010/77-10eng.htm.
\47\ The Regional Office of the United Nations High Commissioner
for Human Rights (July 10, 2010) Urgent Statement on the events in
Bocas del Toro in Panama. Retrieved from http://www.oacnudh.org/
novedades/comunicado-urgente-sobre-los-sucesos-de-bocas-del-toro-en-
panama/37.
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Panama and the Environment
The enforcement of environmental regulations in Panama is a major
concern for independent observers, as well as the people of Panama. A
recent poll found that 61 percent of Panamanians believed that public
servants care little about improving the condition of the
environment.\48\ These concerns are justified by the fact that between
1970 and 2008 Panama lost 838,000 hectares (2,070,000 acres) of forest,
equivalent to 11 percent of the country's total land area.\49\ Panama
has been identified by international organizations to be failing to
satisfactorily protect its environment. According to the Inter-American
Commission on Human Rights, an entity of the Organization of American
States, Panama lacks adequate environmental quality standards to ensure
the health and quality of life of its citizens and the preservation of
natural resources.\50\ Free trade with the United States will encourage
further degradation of environmental quality by encouraging development
of natural resources without functional oversight from the Panamanian
Government.
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\48\ Newsroom Panama. (April 21, 2011) 90% of Panamanians want
stronger enforcement of environmental standards--poll. Retrieved from
http://www.newsroompanama.com/environment/2661-90-of-panamanians-want-
stronger-enforcement-of-environmental-standards-poll-.html.
\49\ Ibid.
\50\ Interamerican Association for Environmental Defense. (April
19, 2010) Universal Periodic Review of Panama Situation of the human
right to a healthy environment and related human rights. Retrieved from
http://www.aida-americas.org/sites/default/files/UPRjointsub_envhr
groups_Panama%20Eng.pdf.
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NFU policy calls for trade agreements that address differences in
environmental standards, human rights, working conditions, health care,
and currency. Such standards should meet or exceed those of the U.S. It
also is necessary to ensure that trade agreements do not undermine U.S.
laws, including the tax code.\51\ Although some attempts at improvement
have been initiated, the proposed agreement with Panama does not
satisfy those principals. As a result, NFU opposes the Panama FTA.
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\51\ National Farmers Union. (March 15, 2011) 2011 Policy of the
National Farmers Union. Retrieved from http://nfu.org/policy-nfu.
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Conclusion
When NFU considers trade agreements, there are key elements that
are always considered. Legislation introduced in the 110th and 111th
Congresses encompasses these ideals. The TRADE Act called for all trade
agreements to be considered on the basis of their effects on economics,
the environment, national security, health and safety.
More than 2 years of research and work went into the TRADE Act. It
charted a course for how our country should approach trade, clearly
laying out a path to steer the U.S. away from repeating the failures of
the FTAs of the past. It is vital that elements of the TRADE Act be
applied to pending FTAs, to the Trans Pacific Partnership, and to
future agreements.
Agriculture is a multifunctional industry with a value that cannot
be fully quantified by trade balance. Nations will protect their
domestic agricultural production for national security, to maintain
economic independence, and due to rural employment concerns that
surround food production.\52\ It is unreasonable to expect our trading
partners to fully remove their trade barriers. What one nation may
describe as trade barriers another may describe as incentives for
domestic agricultural production that are important to their own
national security. If the past has taught us anything, it is that too
often these free trade agreements have not delivered on promises of
increased revenue and more jobs. A trade agreement that grants the
United States additional market access for our agricultural goods does
not necessarily mean more exports, job creation and money for family
farmers.
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\52\ OECD Department for Trade and Agriculture (July 20, 2007)
Multifunctionality, Retrieved from http://www.oecd.org/dataoecd/62/43/
40782915.pdf.
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National Farmers Union supports trade; fair, mutually beneficial
trade that seeks to increase human welfare and respects sovereign
nations' need for food and national security.
Appendix 1
Support the TRADE Act
The current free trade agenda has consistently failed to
live up to its promised benefits, encouraging a race to the
bottom to see who can produce the cheapest food and fiber
regardless of the conditions it has produced.
Future trade agreements must address all factors of trade,
including environmental standards, health and labor standards
and currency manipulation.
Rapidly rising unchecked food imports and an inadequate
import inspection system jeopardize consumer confidence in the
quality and safety of ALL food products.
The Trade Reform, Accountability, Development and Employment
(TRADE) Act (H.R. 3012--Michaud) mandates trade pact reviews,
establishes uniform standards, protects workers in developing
nations and restores Congressional oversight of future
agreements.
Congress should pass the TRADE Act and demonstrate its
commitment to ensuring American agricultural producers compete
on a level playing field. The TRADE Act will:
Establish standards for labor and environmental
protections, food and product safety, national security
exceptions and remedies that must be included in new trade
pacts;
Restore Congressional oversight of trade agreements;
Set requirements with respect to public services, farm
policy, investment, government procurement and affordable
medicines;
Require the President to submit renegotiation plans
for current trade pacts prior to negotiating new agreements
and prior to Congressional consideration of pending
agreements;
Create a committee, comprised of the chairs and
ranking members of each committee whose jurisdiction is
affected by trade agreements, to review the President's
plan for renegotiations; and
Require the Government Accountability Office (GAO) to
conduct a comprehensive review of existing trade agreements
with an emphasis on economic results, enforcement and
compliance and an analysis of non-tariff provisions.
Appendix 2
National Farmers Union
Special Order of Business 2011
Free Trade Agreements and Agriculture
Whereas, past free trade agreements such as the North American Free
Trade Agreement (NAFTA) and the Central American Free Trade Agreement
(CAFTA) did not perform as promised to U.S. agriculture, nor did they
hold all participant countries to comparable U.S. standards for labor,
environmental, health and food safety; and
Whereas, past trade agreements have allowed food imports into the
U.S. that do not meet U.S. domestic food safety standards; and
Whereas, the service sector provisions of such agreement require
financial deregulation and promote the global concentration of
agricultural markets, agribusiness trading, and shipping; and
Whereas, U.S. trade agreements prohibit the use of ``Buy America''
and Buy Local procurement policies with respect to food and other
products; and
Whereas, past free trade agreements and all pending trade
agreements do nothing to address currency manipulation which puts U.S.
producers at an economic disadvantage; and
Whereas, National Farmers Union policy calls for all U.S. trade
agreements to address currency manipulation; and
Whereas, many countries in the last twenty years have implemented
value-added taxes (VATs) to raise tax revenues while also providing
significant trade export and import advantages; and
Whereas, the U.S. does not utilize value-added taxes, and as such
is at a significant disadvantage when trading with nations that do have
VATs in place; and
Whereas, the U.S. does not have nor is in the process of developing
any trade policy tools that could be utilized to equalize the
inequities that result when the U.S. engages in trade with nations that
do have VATs in place: and
Whereas, the Korea, Colombia and Panama FTAs contain a prohibition
on reference to the International Labor Organization Convention; and
Whereas, NFU policy is in support of the Trade Reform
Accountability Development and Employment Act which sets forth a new
model to capture the benefits of trade expansion without replicating
the damaging provisions of NAFTA and CAFTA; and
Whereas, U.S. environmental, health, labor and food safety
standards continue to be at a higher level than those of Colombia or
Panama; and
Whereas, the U.S. International Trade Commission predicts that the
KORUS agreement would lead to an increase in the overall U.S. good
trade deficit of $308-$416 million because seven U.S. industrial
sectors will see net losses and the Economic Policy Institute projects
the agreement will cost the U.S. 159,000 jobs in its first 7 years; and
Whereas, the U.S. International Trade Commission predicts that the
Korea FTA could result in the trade balance for some U.S. agricultural
sectors being improved while some agricultural sectors would see
declines; and
Whereas, South Korea is one of only three countries that the U.S.
Treasury Department has officially cited as a currency manipulator and
noted in its February 2011 Semiannual Report on International Economic
and Exchange Rate Policies as currently intervening to hold down its
currency's value; and
Whereas, currency devaluations and VATs have been used time after
time in past trade agreements to more than offset any perceived
benefits from additional tariff cuts and market access;
Therefore, Be It Resolved, that NFU opposes the KORUS agreement
even though additional agriculture access was granted to the U.S.,
especially in the meat and livestock sectors, and will not support such
agreements until the below concerns are addressed;
Be It Further Resolved, that NFU will not support trade agreements
as long as they simply repeat and replicate the mistakes of the NAFTA-
CAFTA model and do not adequately address currency manipulation or the
inequities created by the use of VATs; and
Be It Further Resolved, that NFU will not support the trade
agreements with Colombia and Panama and other future trade agreements
if they do not meet the standards of the International Labor
Organization Conventions and products from such countries do not meet
U.S. standards for environment, health and food safety; and
Be It Further Resolved, that NFU will not support the Trans-Pacific
Partnership (TPP) unless dairy is exempt from the negotiations between
the U.S. and New Zealand, unless it does not include the NAFTA-CAFTA
foreign investor and service sector deregulation provisions, unless all
TPP countries are required to meet the International Labor Organization
Convention standards for labor, and products from such countries meet
U.S. standards for environment, health and food safety and unless such
agreement adequately addresses currency manipulation.
Mr. Conaway. Thank you, Mr. Johnson. Mr. Stallman from
American Farm Bureau Federation, 5 minutes.
STATEMENT OF BOB STALLMAN, PRESIDENT, AMERICAN FARM BUREAU
FEDERATION; RICE AND CATTLE PRODUCER, COLUMBUS, TX
Mr. Stallman. Mr. Chairman, Members of the Committee, my
name is Bob Stallman, and I am President of the American Farm
Bureau Federation and a rice and cattle producer from Columbus,
Texas. I appreciate the invitation to share Farm Bureau's views
on the three pending free trade agreements and their benefits
for U.S. agriculture.
Farm Bureau is the nation's largest general farm
organization with more than 600 million member families
representing producers of nearly every commodity grown or
raised commercially in all 50 states and Puerto Rico.
The American Farm Bureau Federation supports passage of the
Korea, Colombia, and Panama Free Trade Agreements with the
United States. Combined, these agreements represent almost $2.5
billion in additional trade for U.S. agricultural producers,
but that is only if they are implemented.
The U.S. is facing a proliferation of FTAs that increase
the export potential of our competitors while putting U.S.
agriculture at a disadvantage. Due to the Administration and
Congress's inaction on these agreements, the debate is no
longer simply about generating potential export gains but about
how to prevent the loss of existing export markets. These trade
agreements are not only important to the bottom line of
America's farmers and ranchers, but also the economic health of
our rural communities and the overall U.S. economy. The USDA
estimates that every billion dollars in agricultural exports
supports 9,000 U.S. jobs. There is a long supply chain made up
of American workers who get products from the farm gate to our
foreign consumers.
A decline in our exports means a decline in work for those
that are part of that supply chain. Given the state of our
economy, we must do whatever we can to assure we are creating
opportunities for work and not taking them away.
The U.S.-Korea Free Trade Agreement, or KORUS, provides a
significant opportunity for the U.S. agriculture sector. When
the agreement is fully implemented, we estimate export gains to
exceed $1.9 billion annually. Korea has completed an agreement
with the European Union, which is expected to be implemented by
July of 2011. The Korea-EU FTA in 5 years will eliminate 94
percent of Korea's tariffs. In contrast, the KORUS would
eliminate 94.5 percent of Korea's tariffs in 3 years of
implementation.
We know that the Korea-EU agreement will enter into effect
before KORUS. If we further delay passage, European exporters
will gain a significant competitive advantage over the United
States in the Korean market.
Loss of market share in Korea because of U.S. competitors
preferential access has become a reality for some segments of
U.S. agriculture. Wine consumption has been increasing in
Korea. During the 2000-2009 period, Chilean market share, by
value, rose from 2.4 percent to 21.5 percent while the U.S.
share fell from 17.1 percent to 10.8 percent. This is believed
to be the direct result of the 15 percent import duty
eliminated on Chilean wine under the Korea-Chile Free Trade
Agreement implemented in 2004.
The Colombia Trade Promotion Agreement eliminates Colombian
tariffs on U.S. agricultural products, correcting the current
imbalance in agricultural trade between our countries, created
in part by Congressional passage and extension of the Andean
Trade Preference Act. Recent analysis of the agreement suggests
gains in exports in this agreement of $370 million. This is
significantly less than the $815 million that we estimated just
a few years ago. And this adjustment is due in large part to
the delay in passing the Colombia agreement, thus allowing our
competitors to move in and displace U.S. agricultural products.
Our competitors such as Brazil, Argentina, Uruguay, and
Paraguay have passed agreements with Colombia granting
preferential access to this growing market at the expense of
U.S. exporters. Colombia continues to negotiate and sign free
trade agreements with additional U.S. competitors such as the
EU and Canada.
Overall, we have seen not only the value of our exports
decline, but also a U.S. market share decline. We have seen
almost a billion dollar loss in exports to the country since
2008 and a drop in market share from 46 percent to 21 percent.
In other words, the United States has already blown a major
trade opportunity and will need to work hard to ever return to
our earlier status.
In April, I lead a Farm Bureau delegation to Colombia and
Panama to see firsthand what the potential of the market holds
for U.S. agriculture, and there is a demand. We consistently
heard from the Colombians that they want to purchase U.S.
products because of the high quality, but they are buying from
Brazil and Argentina because the price is better, given that
they face little to no tariff on their products due to the
MERCOSUR Agreement. Passage of the U.S.-Colombia agreement will
put us back in the game.
Under the Panama agreement, we estimate increased exports
of U.S. ag exports to exceed $45 million. Panama has completed
a trade agreement with Canada. If this agreement enters into
effect before the U.S. agreement, Canadian exporters will gain
a significant competitive advantage over the United States.
Mr. Chairman, just to restate, these agreements contain
significant export gains for U.S. agriculture that will only be
realized by passage and implementation. Conversely inaction has
proven to result in loss of market share and forfeiture of
economic growth here. We need to pass these agreements, and
Farm Bureau supports passage of all three. Thank you for the
opportunity to share our views.
[The prepared statement of Mr. Stallman follows:]
Prepared Statement of Bob Stallman, President, American Farm Bureau
Federation; Rice and Cattle Producer, Columbus, TX
My name is Bob Stallman. I am President of the American Farm Bureau
Federation (AFBF) and a rice and cattle producer from Columbus, Texas.
I appreciate the invitation to share Farm Bureau's views on the three
pending free trade agreements (FTA) and their benefits for U.S.
agriculture. Farm Bureau is the nation's largest general farm
organization, with more than six million member families, representing
producers of nearly every commodity grown or raised commercially in all
50 states and Puerto Rico.
The American Farm Bureau Federation supports passage of the Korea,
Colombia and Panama trade agreements with the United States. Below is a
detailed description of each agreement. Combined, these agreements
represent almost $2.5 billion in additional trade for U.S. agricultural
producers, but that is only if they are implemented. The U.S. is facing
a proliferation of FTAs increasing the export potential of our
competitors, while putting U.S. agriculture at a disadvantage. Due to
the Administration and Congress' inaction on these agreements, the
debate is no longer about generating potential export gains but about
how to prevent the loss of existing export markets.
These trade agreements are not only important to the bottom line of
America's farmers and ranchers, but also to the economic health of our
rural communities and the overall U.S. economy. The Agriculture
Department estimates that every $1 billion in agricultural exports
supports 9,000 U.S. jobs. There is a long supply chain made up of
American workers who get products from the farm gate to our foreign
consumers. They are transportation workers, processors, packers,
longshoreman, sales and marketing employees and administrative and
clerical staff. A decline in our exports means a decline in work for
those who are a part of that supply chain. Given the state of our
economy, we must do whatever we can to assure we are creating
opportunities for work, not taking them away.
U.S.-Korea Free Trade Agreement (KORUS)
KORUS provides a significant opportunity for the U.S. agriculture
sector. When the agreement is fully implemented, increased exports of
the major grain, oilseed, fiber, fruit, vegetable and livestock
products are likely to exceed $1.9 billion annually. KORUS allows the
United States to become a competitive supplier of agricultural products
to South Korea by providing duty-free and reduced tariff access.
Agricultural tariff rates in South Korea range from just over one
percent to nearly 500 percent, depending on the commodity. Eliminating
these tariff rates through KORUS would be extremely beneficial to the
United States' agricultural sector. The United States currently has
less than \1/3\ of the market share and faces considerable pressure
from other suppliers. Lower tariff rates on U.S. products will make the
United States more competitive with the European Union, Australia,
China, Japan and other agricultural suppliers to South Korea.
Benefits for U.S. Agriculture
Under KORUS, almost \2/3\ of current U.S. agricultural exports to
South Korea will become duty-free immediately. Items that receive
immediate duty-free treatment include wheat, corn, soybeans for
crushing, hides and skins, cotton and a broad range of high-value and
processed products including almonds, pistachios, bourbon whisky, wine,
raisins, grape juice, fresh cherries, frozen French fries and frozen
orange juice concentrate.
KORUS will provide an opportunity for the United States to expand
exports of grains, oilseeds, fiber, fruits, vegetables and livestock
products. Unlike previous free trade agreements where trade gains have
been focused in bulk agricultural commodities, the largest gains from
KORUS are focused in the processed and semi-processed products. In
addition to the usual products, livestock products, fish, fruits,
vegetables and nuts all benefit substantially from the agreement. The
table below shows the value of these increased exports.
Summary of KORUS Benefits to U.S. Agriculture
------------------------------------------------------------------------
Current Imports from U.S. Estimated Gains
-----------------------------------
Agricultural Product 22006-2008 Avg 2009-2010 Avg
---------------------------------------------------
(Values in U.S. Dollars)
------------------------------------------------------------------------
Rice 44,056,800 78,818,200 ^1,000,000
Wheat 433,854,000 343,148,400 30,000,000
Corn 1,493,024,100 1,501,800,300 ^11,880,000
Other Grains 8,811,800 8,503,800 ^120,000
Fruits, Vegetables 372,601,800 429,645,000 133,000,000
and Nuts
Soybeans & Products 292,431,500 439,650,100 71,064,000
Other Oilseeds & 97,639,800 102,223,200 12,936,000
Products
Cotton 123,756,800 122,167,100 14,000,000
Beef 97,042,000 353,556,200 563,000,000
Poultry 57,544,900 76,493,800 52,440,000
Pork 239,426,500 207,482,700 223,560,000
Other Livestoc457,839,200 430,943,000 49,000,000
Products
Dairy 97,716,800 114,372,100 93,000,000
Processed Food and 320,656,100 416,961,500 404,000,000
Fish Products
Other Agriculture 378,847,300 436,685,300 301,000,000
---------------------------------------------------
Total............. 4,515,249,400 5,062,450,700 1,934,000,000
------------------------------------------------------------------------
Source: USDA ERS, American Farm Bureau Federation Economic Analysis.
Looking at some of the specific commodities of export interest to
the United States, the agreement would put the United States in a
strong position to capitalize on the following commodity opportunities
in what will be a fast-growing market:
Growing import demand for livestock products related to
growth in population and per capita incomes, combined with
limited domestic production potential, and a 2011 outbreak of
foot-and-mouth disease will drive considerable expansion of
U.S. exports. KORUS would allow the United States to use its
cost advantages and its wide variety of beef, pork and poultry
products to fill a growing share of this market. Prior to the
agreement, all U.S. beef had been shut out of the Korean
market. U.S. exports of beef to South Korea are rebounding
dramatically since the market was reopened in 2006. In 2010
alone, U.S. beef exports to Korea increased more than 140
percent from the previous year to total $518 million in sales.
Reduction of import tariffs will further boost the United
States' efforts to re-gain supplier of choice status in this
important market. The U.S. and Korean beef industries have
agreed that the United States will export to the Korean market
only beef less than 30 months of age. This is a worthy first
step in allowing U.S. beef into the market and achieving
consistency with the World Organization for Animal Health
standards. While we urge the U.S. and Korean Governments to
continue to discuss further opening of the market, Congress
should move ahead and pass the trade agreement.
Related to growing import demand for livestock products,
indirect exports of grains and oilseed products are likely to
be substantial. For U.S. corn and soybean producers, exports of
meat products will have a large and important impact. The
livestock products produced for export will be grown
domestically utilizing domestic feed, thereby indirectly
increasing exports of corn and soybeans. Indirect exports of
corn as a result of KORUS are estimated to exceed $212 million
per year. Indirect exports of soybeans are estimated to exceed
$66 million per year. With no wheat and oilseed production
capacity, South Korea's dependence on imports is likely to grow
steadily. South Korea has already made a transition to fed
livestock (producing some livestock and importing the
feedstuffs). The trade agreement puts the United States in a
strong supplier position to compete on a level playing field
with other trade partners.
Gains in fruit and vegetable import demand are expected to
be substantial. South Korea imports a wide variety of fruits,
processed fruits and vegetables, and tree nuts. Exporters of
oranges, cherries, grapes, processed potatoes, sweet corn,
shelled walnuts and shelled almonds will benefit greatly. KORUS
will put the United States in a position to capture the
remaining market share.
Gains in other agricultural products and processed food and
fish products will also be substantial. The United States
exports a broad range of farm products to South Korea. Other
commodities or commodity groupings of importance include dairy
products, snack foods, horticultural products, food ingredients
and other animal products, such as hides. KORUS will allow the
United States to capture a larger share of these expanding
markets as well.
Lost Opportunities
Korea has completed an agreement with the European Union (EU),
which is expected to be implemented by July 2011. The Korea-EU FTA will
immediately eliminate 82 percent of Korea's tariffs; in 5 years, the
agreement will eliminate 94 percent of Korea's tariffs. In contrast,
KORUS will eliminate 94.5 percent of Korea's tariffs within 3 years of
implementation; virtually all tariffs will be eliminated in 10 years.
If the Korea-EU FTA agreement enters into effect before KORUS, European
exporters will gain a significant competitive advantage over the United
States in the Korean market.
Loss of market share in Korea because of U.S. competitors'
preferential access has become a reality for some segments of U.S.
agriculture. Korean wine imports were increasing sharply and peaked at
about $167 million in 2008. During the 2000-2009 period, Chile's Korean
market share (by value) rose from 2.4 percent to 21.7 percent, while
the U.S. share fell from 17.1 percent to 9.8 percent. This is believed
to be the direct result of the 15 percent import duty which was
eliminated on Chilean wine under the Korea-Chile trade agreement
implemented in April 2004. There is a real potential for the U.S.
position to be further eroded if South Korea's FTA with the EU, which
currently enjoys a market share in excess of 50 percent, enters into
force before KORUS. In addition to the EU, other U.S. competitors--
Australia, Canada and the members of MERCOSUR--are currently
negotiating deals with Korea, any of which could further erode the U.S.
competitive position.
South Korea Wine Imports
2000-2010
Source: American Farm Bureau Federation Economic Analysis.
U.S.-Colombia Trade Promotion Agreement (CTPA)
The CTPA eliminates Colombian tariffs on U.S. agricultural
products, correcting the current imbalance in agricultural trade
between our countries created in part by Congressional passage and
extension of the Andean Trade Preference Act (ATPA). It is important to
understand that the CTPA allows the United States to become a
competitive supplier of agricultural products to Colombia. The United
States will be able to land product duty-free and compete with
Colombia's Latin American trading partners who currently supply a large
percent of the Colombian food and fiber market through preferential
trade agreements. This also levels the playing field by providing U.S.
products exported to Colombia the same duty-free access already enjoyed
by Colombian products imported to the United States.
Colombia has one of the highest tariff structures in South America.
This is the major impediment to market access in many sectors,
including agriculture. Colombian import duties on agricultural and
processed food products are currently high, and the average tariff rate
is roughly 30 percent. Elimination of Colombia's duties in the
agricultural sector would create new opportunities for American farmers
and ranchers in this market, particularly relative to other suppliers
that already have trade agreements with Colombia.
Benefits for U.S. Agriculture
Under the CTPA, more than 80 percent of current U.S. exports to
Colombia will become duty-free immediately. Agricultural items that
receive immediate duty-free treatment include high-quality beef,
cotton, wheat, soybeans, soybean meal, apples, pears, peaches, cherries
and some processed food products. In addition, the United States and
Colombia have worked to resolve sanitary and phytosanitary (SPS)
barriers to agricultural trade, including food safety inspection
procedures for beef, pork and poultry.
Summary of CTPA Benefits to U.S. Agriculture
------------------------------------------------------------------------
Current Imports from U.S. Estimated Gains
-----------------------------------
Agricultural Product 22006-2008 Avg 2009-2010 Avg
---------------------------------------------------
(Values in U.S. Dollars)
------------------------------------------------------------------------
Rice 584,900 13,193,500 28,600,000
Wheat 234,443,400 159,251,800 90,100,000
Corn 588,056,800 195,707,100 68,537,700
Other Grains 4,398,100 6,300,300 762,300
Fruits, Vegetables 31,445,700 46,315,200 2,500,000
and Nuts
Soybeans & Products 320,609,300 199,432,900 62,969,400
Other Oilseeds & 21,518,800 26,176,900 7,230,600
Products
Cotton 64,127,200 91,393,400 9,600,000
Beef 440,600 649,400 17,500,000
Poultry 14,840,000 21,518,900 12,670,000
Pork 8,534,500 12,372,500 5,430,000
Other Livestock22,136,300 16,658,000 2,400,000
Products
Dairy 8,340,400 5,001,700 2,300,000
Processed Food and 50,001,200 98,131,900 55,900,000
Fish Products
Other Agriculture 134,230,700 143,761,500 4,100,000
---------------------------------------------------
Total............. 1,503,707,900 1,035,865,000 370,600,000
------------------------------------------------------------------------
Source: USDA ERS, American Farm Bureau Federation Economic Analysis.
As shown in the table, our analysis of the agreement suggests CTPA-
related gains in exports of $370 million.
Looking at some of the specific commodities of export interest to
the United States, the agreement would put the United States in a
strong position to capitalize on the following commodity opportunities
in what will be a fast-growing market overall:
Colombia's growth in imports of grains and oilseed products,
related both to growing food demand for wheat and vegetable
oils and to growing domestic livestock demand for feed grains
and protein meals, is likely to be substantial. The trade
agreement puts the United States in a strong supplier position
to compete on a level playing field with other preferential
trade partners.
Gains in cotton imports are key, due to increased domestic
demand for cotton and import demand from the U.S. for finished
textiles and apparel. The CTPA would put the United States in a
position to price competitively and boost market share.
Gains in other agricultural products could also be
substantial. The United States exports a diverse basket of farm
products to Colombia. The commodities noted specifically above
account for \2/3\ of the United States total exports. Other
commodities or commodity groupings of importance include
fruits, vegetables, tallow and other processed products.
Lost Opportunities
In addition to detailing the potential gains to U.S. agriculture, a
review of the CPTA would be incomplete without discussing the potential
losses of continued inaction on the CPTA. In 2009, AFBF's Economic
Analysis Department estimated that the increased total U.S.
agricultural exports likely with the CTPA in place could exceed $815
million. AFBF models used at that time accurately reflected the
potential gains from trade that would have been experienced given the
agricultural trade situation of the 2005 to 2008 base period.
However, since that time, there have been several significant
global economic changes affecting trade, including increased energy and
agricultural commodity prices, a worldwide financial crisis, newly
enacted SPS and technical barriers to trade (TBT) measures, and
considerably shifted global trade patterns. These changes, and the
continued inaction on the CTPA, led to continuing and considerable
losses for U.S. agricultural exports to the Colombian market.
While passage of the CPTA has languished in the United States, our
competitors such as Brazil, Argentina, Uruguay and Paraguay (MERCOSUR)
have passed agreements with Colombia, granting preferential access to
this growing market, at the expense of U.S. exporters. Colombia
continues to negotiate and sign free trade agreements with additional
U.S. competitors, such as the EU and Canada. This, combined with
further implementation of the MERCOSUR agreement, will continue to
erode the U.S. competitive position, likely closing the U.S. out of the
Colombian market if the CPTA is not enacted. As a result, potential
trade losses grow larger with each day the CPTA is not passed. This
inaction could lead to U.S. agricultural export losses in excess of
$1.1 billion annually. The annual losses for the United States are
detailed in the table below.
Estimated Losses from Non-Passage of the Pending Colombia FTA United States
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2006-2008 Average
2009-2010 Average
------------------------------------------------------------------------------------------------------------------------------------------------
Agricultural Product Imports from World Imports from United U.S. Market Share Imports from World Imports from United U.S. Market Share Potential U.S. Loss
States States
----------------------------------------------------------------------------------------------------------------------------------------------------------------------
Million $U.S. Dollars
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Rice 43.9 0.6 1% 31.4 13.2 42% ^10.1
Wheat 417.5 234.4 56% 353.8 159.3 45% ^166.4
Corn 677.7 588.1 87% 729.8 195.7 27% ^115.5
Other Grains 115.7 4.4 4% 110.1 6.3 6% ^1.3
Fruits, Vegetables, and 246.9 31.4 13% 340.2 46.3 14% ^85.6
Nuts
Soybeans & Products 629.1 320.6 51% 831.4 199.4 24% ^98.4
Other Oilseeds & Products 155.7 21.5 14% 240.3 26.2 11% ^11.3
Cotton 76.7 64.1 84% 94.8 91.4 96% ^347.2
Beef 7.3 0.4 6% 11.4 0.6 6% ^0.4
Poultry 21.4 14.8 69% 32.4 21.5 66% ^14.5
Pork 23.3 8.5 37% 31.9 12.4 39% ^13.1
Other Livestock Products 55.6 22.1 40% 60.1 16.7 28% ^8.0
Dairy 75.4 8.3 11% 73.0 5.0 7% ^14.6
Processed Food and Fish 281.0 50.0 18% 384.9 98.1 25% ^207.7
Other Ag 416.1 134.2 32% 486.4 143.8 30% ^60.0
Total.................. 3,243.2 1,503.7 46% 3,812.0 1,035.9 27% ^1,154.0
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: USDA ERS, American Farm Bureau Federation Economic Analysis.
Colombia Agricultural Imports
2000-2010
Source: American Farm Bureau Federation Economic Analysis.
U.S.-Panama Trade Promotion Agreement (PTPA)
The United States already has a very large share of the Panamanian
agricultural market. In fact, averaged across all agricultural
products, the United States already supplies 47 percent of Panamanian
agricultural imports. For the commodities that the United States has
the most interest in, the share is more than 80 percent. However, the
agreement will prevent other countries, specifically other Latin
American suppliers, from taking some of the current U.S. share of the
Panamanian market. The agreement also levels the playing field by
providing U.S. products exported to Panama with the same duty-free
access already enjoyed by Panamanian products exported to the United
States through the Caribbean Basin Initiative (CBI).
While Panama's agricultural sector is very small, there are some
segments that are protected from imports. For the most part, Panama's
tariffs on bulk and intermediate commodities are low. However, high-
value and consumer-ready products, which tend to compete directly with
local Panamanian producers, generally face higher tariffs. Agricultural
tariff rates in Panama range from just three percent to nearly 160
percent, depending on the commodity. Eliminating, or even significantly
reducing, these tariff rates through free trade agreement negotiations
could be beneficial to the U.S. agricultural sector.
Benefits for U.S. Agriculture
Under the PTPA, more than half of current U.S. agricultural exports
to Panama will become duty-free immediately. Items that receive
immediate duty-free treatment include high-quality beef, mechanically
de-boned chicken, frozen whole turkeys and turkey breast, pork variety
meats, whey, soybeans and soybean meal, cotton, wheat, barley, most
fresh fruits, almonds, walnuts and many processed products.
The PTPA will provide an opportunity for the U.S. to expand exports
of grains, oilseeds, fiber and livestock products. The PTPA allows the
United States to maintain its competitive supplier position for
agricultural products to Panama. Passing the PTPA will put the United
States in a position to take full advantage of Panama's expected
economic growth when the Panama Canal's expansion is completed in 2014.
While the PTPA does not guarantee the United States expanded exports,
the United States will be able to land product duty-free, along with
Panama's other regional suppliers. The increased total U.S.
agricultural exports likely with a PTPA in place could exceed $45
million if other agricultural and processed products grow at the same
pace.
Summary of PTPA Benefits to U.S. Agriculture
------------------------------------------------------------------------
Current Imports from U.S. Estimated Gains
-----------------------------------
Agricultural Product 22006-2008 Avg 2009-2010 Avg
---------------------------------------------------
(Values in U.S. Dollars)
------------------------------------------------------------------------
Rice 22,947,500 25,326,600 13,810,300
Wheat 35,268,700 36,633,200 1,999,500
Corn 64,321,200 75,949,700 6,776,000
Other Grains 1,614,400 789,900 124,200
Fruits, Vegetables 46,745,000 60,730,300 8,190,000
and Nuts
Soybeans & Products 52,418,100 66,164,300 5,100,000
Other Oilseeds & 12,001,400 14,613,300 893,000
Products
Cotton 2,400 4,500 3,800
Beef 662,700 2,651,700 1,200,800
Poultry 13,290,800 18,662,100 2,035,300
Pork 5,550,900 9,334,200 1,301,200
Other Livestock 6,945,500 11,063,400 39,900
Products
Dairy 16,814,600 19,236,900 737,600
Processed Food and 60,153,100 88,478,300 3,497,200
Fish Products
Other Agriculture 19,829,300 23,482,700 0
---------------------------------------------------
Total............. 358,565,600 453,121,100 45,708,800
------------------------------------------------------------------------
Source: USDA ERS, American Farm Bureau Federation Economic Analysis.
Lost Opportunities
In addition to detailing the potential gains to U.S. agriculture, a
review of the PTPA would be incomplete without discussing the potential
losses of continued inaction on the PTPA. In 2009, AFBF's Economic
Analysis Department estimated that the increased total U.S.
agricultural exports likely with the PTPA in place could exceed $195
million. AFBF models used at that time accurately reflected the
potential gains from trade that would have been experienced given the
agricultural trade situation of the 2005 to 2008 base period.
However, since that time, there have been several significant
global economic changes affecting trade, including increased energy and
agricultural commodity prices, a worldwide financial crisis, newly
enacted SPS and TBT measures, and considerably shifted global trade
patterns. These changes, and the continued inaction on the PTPA, led to
continuing and considerable losses for U.S. agricultural exports to the
Panamanian market.
While passage of the PTPA has languished in the United States, our
competitors--Chile, Costa Rica, El Salvador and Honduras, among
others--have secured agreements with Panama, granting preferential
access to this growing market, at the expense of U.S. exporters.
Additionally, Panama has completed trade agreement negotiations with
Canada and the EU. If these agreements enter into effect before the
U.S. agreement, the United States will lose an important competitive
advantage in the market for products such as beef, frozen potato
products, beans, lentils, pork, malt and other processed foods.
Mr. Conaway. Thank you, Mr. Stallman. Mr. Donald for 5
minutes.
STATEMENT OF BILL DONALD, PRESIDENT, NATIONAL CATTLEMEN'S BEEF
ASSOCIATION, WASHINGTON, D.C.
Mr. Donald. Good morning, Mr. Chairman and Members of the
Committee. My name is Bill Donald, and I am President of the
National Cattlemen's Beef Association. It is my pleasure to
testify before your Committee to discuss the importance of the
Korea, Colombia, and Panama Free Trade Agreements. I am a
third-generation rancher from Melville, Montana, and I know how
important access to foreign markets is for the beef industry.
With 96 percent of the world's consumers living outside the
U.S., it is understandable that those of us in the beef
industry are overwhelmingly supportive of these trade
agreements. Fast-growing economies in Asia and South America
represent an ever-growing consumer base that enjoys eating
American beef. I appreciate the Administration's efforts to
finalize these agreements, but time is ticking. And we need to
begin implementation.
Time is of the essence because, as a cattle producer, I am
competing with other cattlemen in the EU, Australia, Canada,
Argentina, and Brazil. We are all courting the same consumer
base, particularly in Asia and South America. These foreign
governments are independently working to secure trade
agreements and market access for their own cattle producers.
In Korea, the largest competitor to U.S. beef is Australian
beef. In 2010, Australia had 53 percent of the Korean market
compared to 32 percent for U.S. The Australian Government is
currently negotiating a similar bilateral trade agreement with
South Korea. And if they sign their agreement before the U.S.
ratifies ours, then Australian producers will have a 2.67
percent tariff advantage over American beef producers for the
next 15 years.
In October of last year, the EU and South Korean Government
signed a free trade agreement that will likely take effect in
July. Korea also recently announced they will reopen their
markets to Canadian beef as early as next month. Our
government's failure to implement these trade agreements sends
the wrong message to major exporting markets including Russia
and China.
Let me be clear. NCBA fully supports the immediate
implementation of the Korean Free Trade Agreement. Korea is one
of the largest markets for American beef. In 2010, the U.S.
exported nearly $518 million worth of beef, which is 140
percent increase on sales over 2009. However, due to the 40
percent tariff on all cuts of U.S. beef, we paid over $200
million in tariffs.
The Korean trade agreement phases out the 40 percent tariff
on beef imports and includes $15 million in tariff reductions
the first year and $325 million annually once fully
implemented. The U.S. International Trade Commission's report
states that annual exports of U.S. beef could increase as much
as $1.8 billion after full implementation.
Additionally NCBA supports the immediate passage of the
Colombia trade agreement. Recently I sent a letter to President
Obama urging him to work with Congress to pass and implement
the revised agreement. Despite an 80 percent tariff Colombia
currently has in place on U.S. beef imports, consumers
purchased $759,000 worth of U.S. beef in 2010. This agreement
eliminates that massive tariff. Cattlemen are also supportive
of the Panama Free Trade Agreement. Currently American beef
faces a 30 percent tariff on prime and choice cuts. This tariff
would immediately be eliminated, and the duties on all other
cuts would be phased out over the next 15 years.
We are pleased this agreement is ready for Congressional
conclusion--consideration, excuse me. We can't talk enough
about discussing trade without discussing non-tariff trade
barriers. International trade must be based on sound science,
not political science. Abiding by the internationally
recognized science-based guidelines like those set by OIE
promotes fair trade for the U.S. and developing countries. We
are extremely supportive of the fact that both Colombia and the
Panama agreements provide assurances for a stable export market
through planned equivalency inspections and OIE guidelines
related to BSE.
According to CattleFax, the U.S. beef industry lost nearly
$22 billion in potential sales since 2003 due to BSE bans and
restrictions that were not in compliance in OIE standards.
In closing, I want my sons and my grandchildren to be able
to carry on the family business. The beef industry is not
asking for a handout from Washington, but we are asking for the
opportunity to compete for consumers in Korea, Colombia, and
Panama. Exports have added $145 per head advantage, and these
agreements will increase that number. Pass the trade agreements
and enhance America's cattle producers' ability to do what we
do best, produce the safest, most wholesome and affordable beef
in the world. I look forward to answering any questions.
[The prepared statement of Mr. Donald follows:]
Prepared Statement of Bill Donald, President, National Cattlemen's Beef
Association, Washington, D.C.
Chairman Lucas, Ranking Member Peterson, and Members of the
Committee thank you for giving me the opportunity to testify before
your Committee today. The three pending trade agreements are a top
priority for the beef industry and it's a privilege to be here
representing my fellow cattlemen and women. I'm Bill Donald, President
of the National Cattlemen's Beef Association (NCBA). I am a third
generation rancher from Melville, Mont. Along with my family, I own and
operate Cayuse Livestock Company, a cow/calf/yearling operation. My
wife, our two sons and their families are actively involved with our
operation, which is headquartered in the foothills of the Crazy
Mountains in South Central Montana.
NCBA is the nation's oldest and largest national trade association
for cattlemen and represents more than 140,000 cattle producers through
direct membership and our state affiliates. NCBA is producer-directed
and consumer-focused and represents all segments of the beef industry.
Our top priority is to produce the safest, most nutritious and
affordable beef products in the world. This has been consistent
throughout our industry's history and in our long-term efforts to
continually improve our knowledge and ability to produce beef products
to meet consumer preferences.
With 96 percent of the world's consumers living outside of the
United States, access to foreign markets for our beef and beef products
is significantly important for our industry to grow. Exports are
vitally important for the future success of U.S. beef producers and
rural America. Future growth of the U.S. economy depends upon our
ability to produce and sell products competitively in a global
marketplace. Economic globalization is not simply a matter of
ideological or political preference; it is a fundamental reality that
will determine whether America remains an economic super-power or
becomes a secondary economic force.
Fast-growing economies in Asia and South America expose a growing
consumer base to U.S. beef, and as statistics show, they enjoy eating
U.S. beef. The pending free trade agreements with Korea, Colombia and
Panama give cattlemen like me and my sons the opportunity to compete on
a level playing field with cattlemen around the world. We're all
courting the same consumers internationally. I'm here to say today--
please do not handicap us by delaying these agreements any longer. I
want my sons and grandchildren to be able to carry on the family
business. The beef industry is not asking for a handout from Washington
but we are asking for the opportunity to compete for consumers in
Korea, Colombia and Panama. These trade agreements would allow the beef
industry to grow and create economic opportunities throughout rural
America without costing taxpayers a dime.
NCBA continues to encourage Congress to expedite the technical
discussions with President Obama and U.S. Trade Representative Ron
Kirk, draft legislation and send the three pending agreements to
Capitol Hill for swift consideration. I appreciate the recent efforts
to finalize these agreements, but we cannot afford to wait any longer
to implement them. Each day that goes by without implementing these
agreements is another day we risk losing more American jobs by losing
market share to other countries. Additionally the free trade agreements
are an important factor to reach President Obama's goal of doubling
exports. The progress made last week to move forward with technical
discussions is definitely welcome, but I will not be satisfied until
the ink is dry and the trade agreements are implemented. As a
cattleman, I am only as good as my word. And quite frankly, I've heard
a lot of bull when it comes to trade. Last May, a group of us from the
agriculture industry came to Washington and heard lots of promises and
talk about action on these trade agreements. But here we are one year
later. The agreements still have not been implemented. It's time. Not 6
months from now. Right now.
Competing for Market Share
The European Union (EU), Australia, Canada, Argentina and Brazil
are independently competing with the United States for access and
market share of foreign markets. Further delay of these free trade
agreements keeps outrageously high tariff rates in place that put
American cattlemen at a competitive disadvantage. If other countries
secure agreements that eliminate or reduce their tariff rates before we
do, their beef will be sold at a lower cost than ours. This means we
lose even more market share and consequentially will export more
American jobs.
The U.S. beef industry's largest competitor is Australia. In 2010,
Australia had 53 percent of Korean market share compared to 32 percent
by U.S. If the Australians successfully ratify a similar bilateral
trade agreement with South Korea before the United States, they will
have a 2.67 percent tariff advantage over American beef for the next 15
years, allowing them to sell more of their product at a cheaper price.
Additionally, South Korea and the EU signed a free trade agreement in
October 2010 that will take effect this July. Recently, Korea announced
they will re-open their market to Canadian beef as early as June 2011.
Time is ticking--we can't continue to sit on the sidelines while other
countries move forward and sign their trade agreements. Furthermore,
other key Asian trading partners are closely watching the Korea-U.S.
Free Trade Agreement (KORUS FTA) as this agreement will likely set the
benchmark for American beef trade with Japan, China and Hong Kong.
Other countries are also competing with the United States for
market share in Central and South America. Most recently, Canada and
Mexico aggressively pursued free trade agreements with Colombia and
have been successful in securing those agreements. Failure to implement
the pending free trade agreements sends the wrong message to major
export markets like China and Russia--markets with tremendous potential
consumer demand but limited or non-existent access. That demand will be
met, let us meet it with American beef. Pass the trade agreements and
allow America's cattle producers to do what they do best--produce the
safest, most wholesome and affordable beef in the world.
NCBA Supports Implementation of Korea-U.S. Free Trade Agreement (KORUS
FTA)
NCBA fully supports immediate implementation of the KORUS FTA.
Korea is one of the largest export markets for American beef. The
United States exported nearly $518 million of beef in 2010, which is a
140 percent increase in sales over 2009. American beef exports to South
Korea added $25 in value to each of the 26.7 million head of steers and
heifers produced in the United States in 2010. Unfortunately, American
beef faces a 40 percent tariff on all cuts, resulting in over $200
million in tariffs in 2010. NCBA strongly believes the 40 percent
tariff is the greatest hindrance to U.S. beef exports to Korea.
Implementation of the KORUS FTA would phase out South Korea's 40
percent tariff on beef imports, with $15 million in tariff benefits for
beef in the first year of the agreement alone and about $325 million in
tariff reductions annually once fully implemented. According to U.S.
International Trade Commission, annual exports of U.S. beef could
increase as much as $1.8 billion once the agreement is fully
implemented. Eliminating the 40 percent tariff will give more Korean
consumers greater access to safe, wholesome U.S. beef at a more
affordable price.
NCBA Supports Implementation of U.S.-Colombia Trade Promotion Agreement
(CTPA)
NCBA supports immediate passage of the U.S.-Colombia Trade
Promotion Agreement (CTPA). I recently sent a letter to President Obama
urging him to work with Congress to pass and implement the revised
agreement with Colombia. I am pleased that Ambassador Kirk has notified
Congressional leaders of his intent to begin technical discussions, and
I hope these discussions are completed as soon as possible.
Colombia is an important market for U.S. beef and beef variety meat
exports. Unfortunately, Colombia places up to an 80 percent tariff on
U.S. beef imports, making it one of the highest tariffs U.S. beef faces
anywhere in the world. Once the CTPA is implemented, high quality U.S.
beef will have duty-free access and the tariffs on all other beef and
beef products will be reduced over the next 15 years. For the first
time ever, the CTPA puts American beef on a competitive footing with
beef imports from Brazil and Argentina. In 2010, the United States
exported approximately $759,000 of beef and beef products to Colombia,
a paltry sum considering the excessive duties. In addition to
eliminating tariffs, CTPA addresses non-tariff barriers by providing
assurances for a stable export market through plant inspection
equivalency. It also fully reopens the Colombian market to U.S. beef by
assuring that Colombia adheres to the World Organization for Animal
Health (OIE) guidelines related to BSE.
NCBA Supports Implementation of Panama Free Trade Agreement
Another important lynch pin for U.S. beef trade is the Panama Free
Trade Agreement. NCBA is pleased that all outstanding issues have been
addressed and that the agreement is ready for further action by
Congress. Like the CTPA, the Panama Free Trade Agreement provides
assurances for a stable export market through plant inspection
equivalency and Panama also modified its import requirements related to
bovine spongiform encephalopathy (BSE) to be consistent with
international standards. Additionally, the 30 percent tariff on prime
and choice cuts would be immediately eliminated and the duties on all
other cuts would be phased out over 15 years. Once the agreements with
Panama and Colombia are put into place, the United States will
ultimately have free trade for U.S. beef with approximately \2/3\ of
the population in the Western Hemisphere.
Abiding By Internationally-Recognized Science-Based Standards Insures
Fair Trade
International trade must be based on sound science, not political
science. Allowing U.S. beef producers to be subject to the whim of
foreign governments who do not base their decisions on internationally
recognized science-based standards creates a high level of market
volatility. According to CattleFax, U.S. beef lost nearly $22 billion
in potential sales through 2010 due to BSE bans/restrictions.
Abiding by internationally recognized science-based guidelines as
those set by the OIE guidelines promotes fair trade for the U.S. and
developing countries. Additionally, this creates less market volatility
and encourages safer production practices. But if you question the need
for abiding by internationally recognized science-based standards, take
a look at what has happened to U.S. beef in some key Asian markets.
China's market remains closed to U.S. beef since the 2003 discovery
of a Canadian-born cow infected with BSE in the United States. China
uses non-science based standards to keep out U.S. beef, which is
recognized internationally as a safe product. U.S. Beef sales in China
could exceed $200 million if given access. Beef isn't the only industry
to suffer from these non-science based trade restrictions. On a larger
scale, the elimination of China's tariff and other trade restrictions
could lead to an additional $3.9 to $5.2 billion in U.S. agricultural
exports to China, according to an U.S. International Trade Commission
study.
Historically, Japan was the top market for U.S. beef exports at
$1.4 billion. In 2010, the U.S. exported $640 million in U.S. beef in
Japan--far short of pre-BSE levels due to Japan's 20 month age
restriction, which is not based on internationally recognized sound
science. If Japan would follow OIE guidelines and recognize U.S. beef
as the safe product it is by raising the age limit, it is estimated
that Japan would once again easily be a $1 billion market for U.S.
beef.
Unfortunately, Taiwan is another example of what happens when
internationally-recognized science-based standards are not in place.
Recently, 20 United States senators sent a letter to Taiwan President
Ma urging his government to use internationally-recognized scientific
standards regarding U.S. beef.
In January 2011, the Taiwan Food and Drug Administration began
testing for the existence of ractopamine in imported beef. Based on
trace amounts of the feed additive in U.S. beef products, Taiwanese
officials pulled products from grocery shelves and rejected affected
products at ports of entry. Ractopamine is recognized by the U.S. Food
and Drug Administration as a safe feed additive. Taiwan's current zero-
policy standard lacks scientific standing and is out of step with
accepted international standards. Further, the zero-tolerance policy is
inconsistent with Taiwan's own risk assessment in 2007, which found
that ractopamine was safe for use. Taiwan's non-science based actions
create an unnecessarily volatile trading environment. U.S. exporters
are extremely reluctant to ship product to Taiwan given the uncertainty
presented by the amplified testing regime. Prior to the enhanced
testing regimen, Taiwan had been a historically strong market for U.S.
beef. In 2010, Taiwan purchased more than $216 million worth of U.S.
beef, a 53 percent over 2009 levels of $141 million in sales.
Exports Create Jobs
Without question, exports create jobs. According to CattleFax, fed
steers have been selling near $115 per hundred weight (cwt), or roughly
$1,495/head. Of that, Cattlefax estimates that exports have added a
minimum of $145/head in value (as opposed to not having exports). I
believe the potential value added to each head that is created by
increased exports provides the essential economic incentive needed to
curb out-migration in rural America. An aging agricultural workforce is
a serious problem facing our country. A profitable future in
agriculture is the draw we need to get younger generations involved in
food and fiber production.
I am fortunate and blessed that my sons have chosen to return to
our family ranch, but that isn't the case everywhere. One of the
biggest problems facing agriculture today is an aging workforce with
fewer young people returning to the farm to participate in farming and
livestock production. There is a growing global demand for food, and
some predict that global food production must double by 2050 to meet
demand. ``[G]lobal food production may have to double by 2050, says
agriculture economist Robert Thompson of the Chicago Council on Global
Affairs. From 2010 to 2050, the world's population is projected to
increase 38 percent, from 6.9 billion to 9.5 billion, with gains
concentrated in poorer countries.'' (Samuelson, Robert, ``The Global
Food Crunch,'' The Washington Post, 03/13/2011).
The shrinking number of young folks returning to production
agriculture isn't the only challenge. For those men and women who do
choose farming and ranching, they face a wide array of challenges.
Rising land prices and startup costs make it difficult for younger
generations to begin ranching unless they inherit the family business.
High startup costs for production agriculture and market volatility
make livestock production a risky investment for young people with
little credit. ``Higher land values also can have a crippling effect on
beginning and limited resource farmers or ranchers who may not have the
capital necessary to initiate or expand their operations. Nationwide,
the annual number of new farm entrants under age 35 declined from
39,300 from 1978-1982 to 15,500 from 1992-1997 (Gale, 2002).'' (``Final
Benefit-Cost Analysis for the Farm and Ranch Lands Protection Program
(FRPP),'' USDA--Natural Resources Conservation Service, December 2010)
Without question, development of land formerly used for production
agriculture is making farm/grazing land more scarce and more expensive.
``As development pressure increases, agricultural land values are hard
pressed to compete with developed uses. Farm real estate values
continue to increase. These values have been driven largely by non-
agricultural factors, such as low interest rates and demand for
residential development and recreational uses.'' (``Final Benefit-Cost
Analysis for the Farm and Ranch Lands Protection Program (FRPP),''
USDA--Natural Resources Conservation Service, December 2010).
Rural America is facing a growing trend of out-migration primarily
due to lack of employment opportunities.
Nonmetro Population Change, 2000-05
Source: USDA, using ERS data from the U.S. Census Bureau.
As you can see, most of this out-migration is occurring in the
middle of cattle country. According to USDA-ERS, one of the reasons we
are experiencing out-migration in rural areas is due to few non-
agriculture related jobs. Between 2000 and 2005, population patterns in
non-metro counties reverted to those of the 1980s. Population in an
estimated 1,027 out of 2,051 non-metro counties (about half) declined
in population, compared with the decline in 593 counties between 1990
and 2000. This is a reversion to patterns of the 1980s. For the most
part, the newly declining counties are found in and among the large
agriculture-dependent zones of the Great Plains and Corn Belt that lost
people in the 1990s. But counties with declining populations also
include Appalachian mining areas and a number of Southern counties that
have relied heavily on manufacturing. Population decreased overall in
both farming and mining county types (in the ERS county typology
system) during 2000-05. (http://www.ers.usda.gov/Briefing/Population/
Natural.htm)
One way to fight trend of out-migration is to develop more jobs in
rural areas. If exports add value to and increase demand for
agricultural products, then increasing exports is a benefit to
employment in rural America. The U.S. should stop relying on government
programs as the main incentive for young people to get into
agriculture. Greater market access for U.S. agricultural goods means
greater economic incentive for young people to get involved in
agriculture.
In closing, I appreciate the opportunity to testify before you
today on an issue of such importance to beef producers. I support
President Obama's effort to double U.S. exports and create jobs in
rural America. NCBA and many other stakeholders ask for your continued
support in expanding market access by voting for the pending free trade
agreements.
Mr. Conaway. I want to thank the panel. Excellent job of
staying right under the 5 minute window. I appreciate that. Did
you want to ask questions, or you want to go to----
The Chairman. Mr. Chairman, since I was detained at a
Financial Services Committee markup, I will let the other
Members go first who were able to be here for the process.
Mr. Conaway. All right, the gentleman from Iowa, Mr.
Boswell, for 5 minutes.
Mr. Boswell. Well, thank you, Mr. Chairman. Interesting
presentation. It seemed like everybody is on the same frequency
except for one, and I am concerned, Mr. Johnson, where you come
up with the details regarding the currency business. I haven't
heard that one. I have heard it a lot about China, but I
haven't heard about Korea.
Mr. Roger Johnson. Well, Mr. Chairman, Congressman Boswell,
my prepared testimony is actually pretty extensively footnoted
as to where these references came from. I believe it is the
ITC. It was the U.S. Government that has recognized Korea as a
currency manipulator, one of three. And it is a large concern
of ours. We--I think we all, in this room, are aware of the
issue that we face with China right now, and it is largely an
issue that is predicated on their ability and, in fact, action
to manipulate their currency to take advantage of this very
lucrative market in this country.
Korea has a similar history, and so it was really sort of
astounding to us that, given the detail, the amount of
attention that was provided to these agreements, that the
question of currency manipulation was not an issue that was put
on the table. As I think was stated earlier in the hearing,
this body, the full Congress, in fact, the House--not
unanimously--overwhelmingly approved a bill in the last session
dealing with this very question. So I think this is an issue
that has broad support, but it simply is not recognized in any
of these agreements.
And in Korea in particular, it is the one where history has
shown that we ought to be most concerned about.
Mr. Boswell. I appreciate that. I will read your testimony
to learn more about it. Mr. Carney, we have known each other a
long time.
Mr. Carney. Long time.
Mr. Boswell. And we have spent a lot of time over the last
many months or year or 2 on the deal with some of the
pharmaceutical stuff going on. Has that kind of quieted down
now? Is there any question about this with like Korea or any
other place? And we went through that landmark deal, and I
don't want to reinflame that. I am just curious. I haven't had
a chance to talk to you. I suppose you have been planting corn.
Are you done?
Mr. Carney. Got the corn in. Still planting beans.
Mr. Boswell. Okay, well, good luck. I heard going to the
airport yesterday or the day before rather, that we are at the
5 year average getting the corn in so I hope that is true.
Anyway, anything about the question that I just asked? You have
any concerns there with this market?
Mr. Carney. With the pharmaceuticals, as of now, no, there
has not been any problems. They have not raised any concerns
that I know about, and I can check into it in more depth if you
would like.
Mr. Boswell. No, I just haven't had a chance to talk to you
because we have both been busy. I was just curious about it
because we spent a lot of time on it once before. So good. I
yield back.
Mr. Conaway. The gentleman yields back. Mr. Johnson, from
Illinois, for 5 minutes.
Mr. Johnson of Illinois. Thank you, Mr. Chairman. I think
that this is as much a statement as it is a question, but I am
interested to see any of the panelists' response. I think one
of the underlying points that we sometimes forget in a hearing
of this sort, we get so focused on the nuances and specific
aspects of trade agreements that we maybe partially lose sight
of the fact that we are not just talking about the agricultural
sector that benefits from these trade agreements, but also the
whole economic social infrastructure of any one of our states.
And we represent Iowa, North Carolina, Oklahoma, Texas,
Pennsylvania, and we all have grocery stores and implement
dealers and restaurants and so forth that benefit very directly
when farmers and the agricultural sector is prosperous. And
when they are not, those same areas that employ a lot of people
have a tendency to go the other way. So I don't know if any of
you have any particular response to that, but it seems to me
that is something that we ought to make sure to continue to
tell the American people and continue to tell the world, that
this is a symbiotic relationship. Any thoughts about that?
Mr. Stallman. Well, absolutely. I mean we focus in
agriculture as producers on what our ag exports numbers are and
what our commodity prices are. But the reality is that the
whole food chain from producer gate all the way to, in the
U.S., to consumer plate or to the ultimate consumer plates in
other countries where we are providing product for.
All of that creates jobs, and the range of those jobs are
tremendous and the number tremendous, and sometimes I don't
think we really pay a lot of attention to that or enough
attention to that when we talk about the benefits of these
trade agreements. But the benefit is very real as you have
stated. I have watched rural communities. When agriculture does
well in rural communities, rural communities tend to do well,
and the reverse is true.
Mr. Johnson of Illinois. Another question for really any of
the panelists. I know the earlier two panelists, Mr. Kirk and
Mr. Vilsack, were certainly helpful to us, but they seemed to
be very self-congratulatory in terms of their movement on these
trade agreements, which, as I understand it, were largely
framed a good many years ago.
I guess my question for any of you--and I don't think any
of you want to be in a position of criticizing the
Administration for obvious reasons. Wouldn't you agree that
time is a very significant factor and the passage of time from
point--even before the point when Speaker Pelosi refused to
call the Colombian trade agreement for a vote, that you and
various other competitors move into that market and that time
is a very, very significant matter?
Mr. Donald. Yes, sir, I agree wholeheartedly that time is
of the essence, and being from Montana, I would like to just
acknowledge that our senior senator, Senator Baucus, has been
very adamant that this agreement must address the issue of
getting South Korea to set standards before he wanted to allow
it through his committee. And I will acknowledge, while that
has been a delay, the Senator has confidence that that is the
direction that South Korea is going to go, and this
Administration is committed to ensuring that we get to that
point.
And now, with that hurdle behind us, I absolutely recommend
that this Congress and the Administration work together to get
this done as quickly as possible because we are going to be at
a competitive disadvantage to our main competitors in the
market, and so that is why timing is such an issue. Thank you
for bringing that up.
Mr. Johnson of Illinois. And last, Mr. Johnson, I don't
meant to single you out, but I think it is a fair assessment of
your testimony that it stands in fairly sharp contrast to the
other five and in contrast to what I believe. And again,
everybody is entitled to their own opinion, not everybody is
entitled to their own facts.
It seems to me that what we are doing with respect to
meeting the deadlines under the action plan that the
Administration required in Colombia as well as the whole
dynamic of what this does to exports and imports, again, I am
not going to get into a one-on-one debate with you. But what I
would simply say is that the greater weight of evidence to me
is very strongly that this will help America. It will help our
exports. It will help our balance of trade, and that we are
doing a very, very good job, we have, to meet some of those
labor and human rights concerns that we all have.
Mr. Roger Johnson. We share that hope. In the 3 seconds
remaining, I would simply say that our members are the ones
that adopt our positions, and they carefully looked at all
these questions, understanding there are significant values to
agriculture that come from these agreements. But there are also
other things that need to be considered.
Mr. Conaway. The gentleman's time has expired. Mr.
McIntyre, from North Carolina, for 5 minutes.
Mr. McIntyre. No questions at this time. Thank you.
Mr. Conaway. Thank you. Mr. Thompson, from Pennsylvania,
for 5 minutes.
Mr. Thompson. Thank you, Mr. Chairman. Mr. Stoner, who are
your chief competitors in the global market, and what is the
best way you see to outpace them and secure additional market
share?
Mr. Stoner. Depending on the market we are looking at, that
varies. Colombia, clearly Canada, Argentina. Argentina, is a
member of the MERCOSUR region, 2005. That agreement was
implemented by 2009. Their tariffs went to zero. Canada has an
FTA in place likely to be implemented by July 2010, we lost to
Argentina our place as Colombia's number one supplier of
agricultural products, clearly due to their trade preference.
Our market share of wheat in Colombia has declined from 73
percent, 2008, to now about 43 percent. Canada's market share
is increasing because the mills are anticipating duty-free
wheat entering their country shortly. They are switching over.
We need a level playing field.
Other countries, the Asian Rim, certainly Australia is a
competitor. As time continues on, the EU, the Black Sea region,
as their infrastructure ramps up. Wheat is grown the world
over. If we do not have at least as competitive a marketplace,
the American farmer cannot compete.
Mr. Thompson. Thank you, sir. President Stallman, you
mentioned in your testimony that there have been several
significant global economic changes affecting trade, including
increased energy and agricultural commodity prices. Can you
elaborate a little bit on that?
Mr. Stallman. Well, that was just acknowledgement that when
you do these kind of analyses as to what the impacts are going
to be, you have a lot of variable factors. And obviously the
economic volatility that has occurred over the course of the
past several years, the commodity price volatility and energy
price volatility all weigh into those numbers. And that is
really all that that refers to is that there are a lot of
factors that adjust the analysis, if you will, and how you come
out with the numbers.
Mr. Thompson. In your view, is the trade agenda that is
outlined by the current Administration aggressive enough to
position U.S. agricultural exporters at the forefront of the
global markets that are obviously out there?
Mr. Stallman. Well, I will say it is better than it was. I
guess that is the best way to characterize it. We have been
actively and aggressively calling for passage specifically of
these three FTAs the sooner the better. From the time this
Administration came in, we are pleased that where it looks
like--we are not certain--but it looks like we are getting to
the point where we are going to be able to pass these three
agreements.
In terms of trade enforcement and trade negotiations, we
have been working closely with USTR and USDA, and we have been
relatively pleased with the process that has unfolded, whether
we are talking about Doha or talking about dealing with some of
these phytosanitary bilateral situations that we have. Probably
we would say that it is never strong enough, and that may apply
to any Administration. But at least we think directionally we
are headed the right way.
Mr. Thompson. Okay, thank you. Well, I think that is the
nature of agreements versus mandates, I guess. Mr. Tolman, you
mentioned that the challenges your exporters face with regard
to the sanity, the phytosanitary barriers. Do you feel the SPS
issues are adequately addressed in these agreements, and is
this an approach you feel should be--should or should not be
replicated with other trading partners?
Mr. Tolman. I think the approach in these agreements are to
move forward, and they are ones that we should look at using in
other agreements. We continue to have new products, new traits,
particularly in air and biotechnology. And there are times when
the SPS--standards in certain countries are used as trade
barriers to keep us from getting our product in there. And the
more we can get worldwide agreement on those standards and some
consistent basis for evaluating regularly in those, the better
off we are going to be.
But these agreements certainly are a step forward and a
good measure for us to use in other agreements as well.
Mr. Thompson. Okay, Mr. Chairman, given the waning seconds,
I will yield back.
Mr. Conaway. The gentleman yields back. The real Chairman
of the Agriculture Committee is recognized for 5 minutes. Mr.
Lucas.
The Chairman. Thank you, Mr. Chairman. Let me speak from an
Oklahoma perspective for just a moment, and while we are
traditionally thought of as a state that is wheat and it is
cattle and Farm Bureau members and, yes, the single largest
farmers' union membership, I believe, in the country. Correct,
Mr. Johnson, is still in Oklahoma?
Mr. Roger Johnson. Yes.
The Chairman. Nonetheless, we have an industry that has
grown rather dramatically in the last 20 years in regard to
pork. And looking again at some of the information provided by
the panel, it would indicate that right behind beef in
Oklahoma, pork would be the biggest gainer. Could you expand
for just a moment, Mr. Carney? And I apologize for being
delayed in a Financial Services markup coming back. Expand for
just a moment. If I am doing a town meeting and I am trying to
explain in Oklahoma why it is important we raise those millions
of pigs, the effect this potential has on pork not only in
Oklahoma but across the country?
Mr. Carney. Yes, Mr. Chairman, what you would tell them
right now is if we get these three free trade agreements
passed, it will add approximately $11 a pig. It is going to add
billions of dollars of export----
The Chairman. That is a stat they understand, yes.
Mr. Carney. I know. And then it will add exports, and when
you--for every billion dollars of exports, USDA says there are
12,000 new jobs, so they will provide new jobs. And I don't
know if you have this chart. I thought maybe I got it passed
out to everyone up there, but I am not sure. This chart--and I
will make sure you get one.
For every time that we have passed a free trade agreement,
our export levels have went up every year, every time, except
for 2009, and we had this little thing called H1N1. We lost
exports. It went down. We got things fixed. We worked hard at
it, very hard at it. And in 2010, our exports started going
back up.
So you can tell your folks, it is going to add jobs. It is
going to help their bottom line, and it is just a boom boom for
the pork industry.
The Chairman. Thank you, sir. And in that spirit, Mr.
Chairman, I will yield back the balance of my time.
Mr. Conaway. The gentleman yields back. Well, gentlemen,
thank you very much for coming today. Any other comments? Thank
you very much for coming today. We appreciate your testimony.
We appreciate the impact you have on helping us decide policy
in this arena. Under the rules of the Committee, the record of
today's hearing will remain open for 10 calendar days to
receive additional material and supplementary written responses
from witnesses to any question posed by a Member. This hearing
of the Committee on Agriculture is adjourned.
[Whereupon, at 12:47 p.m., the Committee was adjourned.]
[Material submitted for inclusion in the record follows:]
Submitted Letter by Hon. James P. McGovern, a Representative in
Congress from Massachusetts
March 17, 2011
Hon. Barack Obama,
President of the United States,
The White House,
Washington, D.C.
Dear President Obama,
We write to you with significant urgency about the consideration of
the pending U.S.-Colombia Free Trade Agreement (FTA), and to offer a
credible and meaningful basis for assessing whether conditions on the
ground in Colombia have been sufficiently transformed to merit
consideration of this FTA by Congress.
At a time of economic uncertainty, with millions of families across
our country struggling to support themselves, it is our responsibility
as Members of Congress to do everything in our power to promote and
protect American jobs. One of the most important ways we can safeguard
the ability of American families to make a living and keep their jobs
is by guaranteeing they are not in competition with workers in other
countries whose wages are kept low not simply because their countries
are poor, but because they lack the essential democratic rights that
American workers have to improve their standards of living--the right
to speak out, to protest, to organize unions, to bargain collectively
and directly with their employers, and to freely support political
efforts to improve their economic condition. Colombia, sadly, stands
out as a country where wages are kept low and workers are repressed
through widespread violence against employees trying to better their
lot.
Mr. President, we have long been engaged on human rights issues in
Colombia, many of us for over a decade; these are matters of critical
concern in their own right, which demand your attention and the
attention of Congress. Our monitoring of the labor and human rights
situation on the ground in Colombia indicates that very little tangible
progress has been made in improving human rights. Colombia continues to
lead the world in murders of trade unionists. The level of murder and
violence is not declining. Despite this, we believe this is a moment of
opportunity for the United States and Colombia to break the stalemate
and address the underlying problems that have made consideration of
this FTA untenable for many Members of Congress and a broad swath of
the American public.
The United States and Colombia currently enjoy a robust trade
relationship, and we believe that should be continued by providing a 2
year extension of the Andean Trade Promotion and Drug Eradication Act
(ATPDEA). In that same spirit, and consistent with your commitment to
ensure that trade agreements reflect our values as a nation, we provide
for your serious consideration the attached memo outlining measures
that can be undertaken immediately and in the near term by the
Colombian Government. If implemented with strong and sincere political
will, these measures could result in Colombia showing substantial
progress in areas that have long been under scrutiny by those concerned
about labor and human rights conditions in Colombia.
These are credible, achievable steps Colombia can take in the near
term to comply with internationally recognized labor rights; protect
unionists and other rights activists from violence, attacks and
threats; and break with its long history of impunity. Anyone familiar
with Colombia understands that the magnitude and roots of the
challenges it faces cannot be addressed in one or 2 years, but the
measures we describe would clearly show that Colombia has turned the
corner and is committed to irrevocable and sustainable change.
We support international trade and we are dedicated to doing
everything possible to increase American jobs--but only if the terms
are fair to American workers. Therefore, before you send us an FTA with
Colombia for consideration, we ask that you first assure us that
Colombia's long track record of repression, violence and murder of
labor unionists has truly changed and that trade between our countries
can take place on an even playing field for both nations' workers. As
you have commented, ``The history in Colombia right now is that labor
leaders have been targeted for assassination on a fairly consistent
basis and there have not been prosecu-
tions . . . We have to stand for human rights and we have to make sure
that violence isn't being perpetrated against workers who are just
trying to organize for their rights.''
The question remains of how to evaluate and determine whether the
situation on the ground in Colombia has improved substantially with
regards to basic labor rights for Colombia's workers, and by
dramatically diminishing the level of violence carried out with
impunity against unionists and rights defenders.
We believe that in order to make such a determination it is
essential to ask those most affected by the lack of rights and the
threat of violence. As Members of Congress, we will consult and speak
directly with Colombian trade unionists, rights defenders, Afro-
Colombian and indigenous leaders, and rely upon the analysis of
Colombian organizations such as the Escuela Nacional Sindical and
others, to determine the situation on the ground and whether
substantial, sustainable and irreversible change is genuinely
occurring. We recommend that responsible officials in your
Administration interfacing with Colombia use the good offices of the
Bureau of International Labor Affairs in the U.S. Department of Labor
to do the same.
Please feel free to contact us should you have any questions about
these recommendations. We would welcome the opportunity to discuss them
with you.
Sincerely,
Hon. James P. McGovern, Hon. George Miller, Hon. Rosa L. DeLauro,
Member of Congress; Member of Congress; Member of Congress;
Hon. Michael H. Hon. Janice D. Hon. Linda T. Sanchez,
Michaud, Schakowsky,
Member of Congress; Member of Congress; Member of Congress;
attachment 1
Date: March 17, 2011
To: Hon. Barack Obama,
President of the United States,
The White House,
Washington, D.C.
From: Hon. James P. McGovern;
Hon. George Miller;
Hon. Rosa L. DeLauro;
Hon. Michael H. Michaud;
Hon. Janice D. Schakowsky
Hon. Linda T. Sanchez
Subject: Advancing Colombian Labor and Human Rights and Congressional
Consideration of the U.S.-Colombia Free Trade Agreement
For the past several years, the proposed U.S.-Colombia Free Trade
Agreement (FTA) has not advanced in the U.S. Congress because of labor
rights and human rights abuses in Colombia. A chief concern has been
the plight of Colombia's trade unionists, who defend the rights of
workers producing the goods to be traded with the United States, and
who continue to be threatened, attacked and killed. Colombian workers
also lack the basic rights to organize unions, bargain collectively,
strike or otherwise engage in public protest aimed at improving their
standard of living. Internationally, Colombia, in particular, is set
apart by its long history of murder and threats against labor unionists
and the deprivation of the most basic worker rights.
Colombia continues to be ranked by the International Trade Union
Confederation as the single most dangerous country in the world for
unionists, with the annual number of union murders in Colombia often
equal to or exceeding the total murders of unionists in all other
countries combined. Violence against Colombian trade unionists
continues unabated, and in most cases, no one has been held
accountable. The International Labor Organization (ILO) has repeatedly
reported that the Colombian Government has failed to provide in law and
practice the most fundamental rights of workers and has failed to
effectively enforce those laws, including in the recent conclusions and
recommendations issued by the ILO High-Level Tripartite Mission to
Colombia following its February 14-18, 2011 meetings and consultations
in Colombia.
Anti-union violence has not only taken the lives of thousands of
men and women belonging to labor and union organizations, it has also
affected the labor movement as a whole. Collectively, the Colombian
labor movement has been adversely affected by stigmatization, a
reduction in the number of affiliates, and the weakening of its
capacity for action, mobilization and participation in Colombian
democracy.
The attacks, murders and death threats against trade unionists are
manifestations of much larger threats to the rule of law in Colombia,
especially the continued power that illegal armed groups exercise over
many of Colombia's regions and political structures. Among these groups
are the successor organizations to the paramilitaries that only
partially demobilized in 2005. Several regions of the country are
dominated by a combination of these paramilitary structures, organized
crime, and their accomplices among local politicians, landowners, and
sectors of the security forces. In addition to trade unionists, these
illegal successor groups threaten and attack sectors of the population,
particularly Afro-Colombian and indigenous communities. They target
human rights defenders, victims seeking return of stolen land, and
religious and community leaders who, like trade unionists, advocate for
fundamental rights.
Further, members of Colombia's own military and security forces
collaborate with these illegal groups. According to its 2010 Annual
Report, publicly released on February 24, 2011, the U.N. High
Commissioner for Human Rights (UNHCHR) in Colombia estimates that more
than 3,000 persons may have been victims of extrajudicial murders,
primarily attributed to the Army. Most occurred over the past 6 years,
and the majority remain unresolved. In particular, for those murders
carried out by the Colombian military that took place during the period
of 2004-2008, a verdict has been reached in only 6% of the cases.
Despite this problematic landscape of violence and rights abuses,
we believe there is a window of opportunity for the United States and
Colombia to advance the rule of law and the rights and security of
trade unionists--and by extension, of all civil society. President Juan
Manuel Santos has established a welcome tone for civil discourse by
asserting the legitimacy of human rights defenders and their work;
improving relations with the Supreme Court and Constitutional Court and
recognizing their independence; submitting to the Colombian Congress
laws on land restitution and victims' rights; directing the security
forces to more forcefully target and arrest leaders of successor groups
to paramilitaries; and announcing a commitment to address poverty and
inequity and to modernize the Colombian state. While these proposed
policies would help to align the government with the victims of
violence rather than its perpetrators, they have not yet been
implemented and face powerful opposition from armed groups and their
political supporters and benefactors.
It is incumbent upon the United States, along with its European and
Canadian counterparts, to support the Colombian Government in these
efforts so that concrete and sustained results can be achieved in
addressing violence against trade unionists and its larger causes, and
creating a climate in which workers can exercise their fundamental
labor rights without fear.
We understand that it might take years for many of these ongoing
problems, some with deep historical roots, to be fully addressed and
resolved. Nonetheless, we believe concrete measures can be taken--
decrees issued and robustly carried out, laws adopted and implemented,
policies enforced, and relevant government agencies strengthened--that
would demonstrate over time that Colombia is engaged in irreversible
change.
After consulting with labor and human rights organizations in
Colombia and the United States, and carefully reviewing recent reports
by the ILO, United Nations and others on the labor and human rights
situation in Colombia, we believe, at this time, that the conditions on
the ground in Colombia do not allow for consideration of the FTA. It is
our belief that the U.S.-Colombia FTA should not be brought before the
Congress, Mr. President, until you can assure and demonstrate to
Congress that the changes outlined in this memo have occurred. We
recommend that responsible officials in your Administration interfacing
with Colombia use the good offices of the Bureau of International Labor
Affairs (ILAB) in the U.S. Department of Labor when making such a
determination. We view as insufficient superficial gains that fail to
create an environment in which workers can exercise their fundamental
rights, do not decrease substantially the level of violence and threat
targeted at unionists and other rights defenders, and do little to end
impunity.
With these challenges in mind, we provide you these measures for
realizing sustainable change and ask you to support and work with
Colombian Government efforts dedicated to achieving them in three major
categories:
Ending Violence Against Trade Unionists and Other Human
Rights Defenders;
Strengthening Investigation, Prosecution and Breaking the
Culture of Impunity; and
Strengthening Fundamental Worker Rights.
I. Ending Violence Against Trade Unionists and Other Human Rights
Defenders
From 1986 to the present, the Escuela Nacional Sindical (ENS),
Colombia's most prominent NGO monitoring labor rights, has recorded the
murder of over 2,800 unionists. The number of assassinations of
unionists per year remains shocking, with 149 unionists murdered over
the past 3 years alone--51 in 2008, 47 in 2009 and 51 in 2010. New
murders of unionists have already occurred in 2011, including the
killings of three teachers. Other forms of violence also remain at
crisis levels, including death threats, forced disappearances,
kidnappings, attempted murders, arbitrary detentions, torture, forced
displacement and illegal break-ins targeted at trade unionists. These
facts horrify. As the February 2011 ILO Mission to Colombia recognized
in its conclusions, ``the only acceptable situation is one in which all
acts of violence have ceased and there is need to act with
determination to bring this about.'' The challenge is how to
effectively and sustainably reduce sharply and ultimately end the level
of violence and threat against unionists, target the source(s) of that
violence, dismantle the structures that support and benefit the
perpetrators of violence, bring to justice those engaged in murdering
and threatening unionists along with their collaborators, and increase
the state's ability to provide effective protection to unionists and
others who live under a state of constant threat and violence.
In 2003-2006, Colombia instituted a demobilization process aimed at
the coalition of right-wing armed paramilitary organizations known as
the AUC. Almost immediately, after the seriously flawed process had
ended, new groups cropped up all over the country, taking the reins of
the criminal operations that the AUC leadership previously ran. These
groups--often led by mid-level commanders of demobilized paramilitary
organizations--are committing widespread abuses, including massacres,
killings, rapes and forced displacement. They have taken on roles
similar to the defunct AUC, such as murdering and issuing threats
against labor, Afro-Colombian, indigenous, religious, human rights and
community leaders. For example, according to the Colombian Commission
of Jurists, 14 human rights defenders were killed in 2010. And on March
7th, the Inter-American Commission on Human Rights (IACHR/OAS)
condemned the continuing threats, harassment, and murders of family
members of human rights defenders in Medellin, charging the state with
having failed to provide effective measures for protection. On February
24, 2011, with the release of its 2010 Annual Report, the UNHCHR-
Colombia stated that criminal organizations linked to former
paramilitary groups drove a dramatic increase (34%) in massacres in
2010, and killed human rights activists, trade unionists, public
officials and other civilians. In January 2011, Colombian National
Police Director Oscar Naranjo acknowledged that successor groups to
paramilitaries are responsible for the majority of violence in
Colombia.
The emergence and increasing consolidation of these successor
groups is largely due to the Colombian Government's failure to
thoroughly investigate and dismantle the military, financial and
political networks of the AUC; effectively identify and recover the
illegally seized property that provides a material and economic base
for the new groups' on-going activities and recruitment of new members;
or bring to justice the majority of paramilitary gunmen, sponsors and
beneficiaries. In many regions, Colombian military, police, political
and judicial officials have been collaborators with these armed actors,
or at a minimum, tolerated and turned a blind eye to their violence,
threats, abuses, murders and criminal activities. The result has been
continuing and increased violence in those regions where these groups
hold sway. In some cases, U.S. corporations and investors with
operations within Colombia have made extortion payments to these groups
for so-called ``protection.'' In effect, they provided funds for
criminal groups engaged in violence against the civilian population,
including labor activists employed by the U.S. corporations.
If the Santos Administration is to have success in carrying out its
land restitution and victims' rights initiatives, it will need to
confront this challenge head on, providing greater protections to labor
and rights activists, and to those who represent families and
communities dispossessed of their lands who are now being asked to
return. The government will need to work forcefully and effectively to
dismantle the structures that support and benefit from these
paramilitary and criminal organizations. It is encouraging that the
Santos Administration has recently announced a new strategy to combat
successor groups, but the implementation and results of this policy
remain to be seen. Success must be measured in terms of reduction of
abuses against the civilian population, well-founded prosecutions of
members of successor groups and their accomplices, and the dismantling
of organizational structures.
Recommended Measures
With these challenges in mind, the Colombian Government must:
Demonstrate a dramatic and sustained decrease from current
levels in murders and attacks against trade unionists and
rights defenders, with the clearly-defined goal and recognition
that the only acceptable situation is one where all murders
have ceased;
Ensure that members of state security forces do not engage
in extrajudicial executions or other serious abuses against
civilians, or collaborate with paramilitary successor groups
and other illegal groups; and
Demonstrate a substantial reduction in abuses committed by
successor groups to the paramilitaries, and significant
progress in dismantling their organizational structures.
To achieve these goals the Colombian Government must, among other
steps:
(1) Establish and enforce a ``zero tolerance'' policy on
extrajudicial killings by Colombia's military, police and other
state actors, including immediate suspension from duties and
ending any incentives that may encourage such abuses.
(2) Establish and enforce a ``zero tolerance'' policy on
collaboration with abuses carried out by guerrillas,
paramilitaries or other illegal armed groups and criminal
networks by Colombian military, police or other state actors,
including immediate suspension from duties.
(3) Substantially strengthen the presence of professionally trained
police in areas where successor groups to the paramilitaries
are present, particularly in rural areas where police often are
not present, ensuring full compliance with the zero tolerance
policies and practices stated above.
(4) Strengthen the Early Warning System of the Ombudsman's Office
(Defensoria), so that it has the necessary resources and
stability to continuously monitor potential threats to
civilians posed by successor groups. Ensure that the system's
risk reports are made public and that other state agencies take
necessary actions to respond to these reports, protect the
population and address the threats, including taking actions to
sanction state agents who fail to carry out such duties.
(5) Ensure that protection programs and measures for trade
unionists, rights defenders and other community leaders receive
adequate and sustainable resources so that no one at risk or
under threat who requires protection fails to receive it. In
addition, the state should not delegate its responsibility to
protect its citizens, and should abide by the recommendations
described in the March 2010 Mission to Colombia Report of the
U.N. Special Rapporteur on the Situation of Human Rights
Defenders, namely that protection measures offered under
Colombia's Protection Program should not be privatized.
(6) Ensure the removal from national intelligence files of
references to unionists and union organizations that were
included in the files because of their union activity.
(7) In coordination with union organizations, carry out a multi-
year national campaign to promote the legitimacy of union
organizations in Colombian society.
(8) Dismantle organizational structures and substantially reduce
abuses by paramilitary successor groups by establishing and
effectively enforcing a mechanism to identify land and illegal
assets that paramilitaries, members of successor groups or
their accomplices may be holding, and ensure their recovery and
restitution to victims. Importantly, this needs to include
measures and funding that effectively protect the safety of
those returning to their former lands. It also needs to include
return of land to Afro-Colombian and indigenous communities in
a manner that respects their Constitutionally-protected rights,
including the right of prior consultation.
II. Strengthening Investigation, Prosecution and Breaking the Culture
of Impunity
The history of impunity in Colombia has made it difficult for the
Colombian people, victims of abuse, and the international community to
have confidence in the judicial system. While there have been modest
advances over the past decade, the Attorney General's Office (Fiscalia)
is still largely ineffective in investigating and prosecuting even high
profile crimes and abuses, due to a variety of structural, financial,
technical, logistical, and political deficiencies. While the Government
of Colombia has created new structures and made modest progress
prosecuting those responsible for committing various crimes against
unionists, the overwhelming majority of violent crimes against
unionists remain in impunity. According to the Colombian Commission of
Jurists, the Fiscalia is only investigating 25.5% of union killings
since 1986, and no one has been held accountable in 98% of crimes
against unionists. Even the limited number of convictions reached has
been marred by serious flaws in the methodologies authorities employ to
investigate anti-union violence.
The problems confronting investigations, prosecutions and breaking
the culture of impunity are intimately tied with the challenges in
providing protection and ending the violence, murders, threats and
stigmatization against trade unionists, other rights defenders and
vulnerable populations. It is impunity--the ability to literally get
away with violence and murder unpunished--that results in and
encourages further violence, threats and abuses.
The Santos Government has demonstrated that when the political will
exists, investigations and arrests of state and non-state perpetrators
of violence, including the intellectual authors, can occur in a swift
and professional manner. The arrests of members of security forces
accused of the rape and murders of children in Tame, Arauca and the
arrests of those responsible for the murders of two Universidad de los
Andes students are recent examples of the government's capacity when a
mandate and appropriate resources are provided. This same mandate and
political will must be demonstrated, at a minimum, in new cases of
violence, murder and threats perpetrated against trade unionists and
rights defenders.
Recommended Measures
With these challenges in mind, the Government of Colombia must
demonstrate a dramatic increase from current levels in the rate and
significant improvement in the quality of criminal investigations and
prosecutions of:
Perpetrators of anti-union violence, including convictions
in a significant number of the more than 2,800 killings of
trade unionists reported since 1986;
Perpetrators of violence against other rights defenders,
including Afro-Colombian and indigenous leaders;
Members of paramilitary successor groups and their
accomplices;
State actors responsible for extrajudicial killings; and
State actors who have collaborated with, benefited from, or
tolerated the criminal acts of paramilitaries or their
successor groups.
To achieve these goals, the Colombian Government must, among other
steps:
(1) 3Develop a new strategy for investigating and prosecuting cases
of anti-union violence, drawing upon the expertise of union and
human rights organization through direct consultation on such a
strategy, and including the following measures:
Staff the Attorney General's special sub-unit for crimes
against union members with prosecutors with expertise in
the subject area and reassign all other cases unrelated to
trade union violence. (When the sub-unit was created, it
pooled prosecutors from unrelated divisions and added the
union cases onto their workload.)
Ensure investigations examine the context of these crimes
rather than treating them as isolated cases. The failure to
do so means that connections are not made that could lead
to the identification of other perpetrators, intellectual
authors or beneficiaries. Every effort must be made to
identify and prosecute intellectual authors.
Ensure prosecutors follow up on credible evidence that
implicates members of the armed forces, politicians or
business leaders. If the evidence points towards state
actors, prosecutions should continue up the chain of
command to those responsible.
Ensure that the accused and convicted be in custody, as
trials in absentia do not adequately end impunity. Far too
many of the sentences are unenforceable because the accused
is not in custody.
Ensure that convictions are based on more than the mere
admissions of guilt by paramilitaries participating in the
Justice and Peace process. Prosecutors should follow all
lines of inquiry in order to establish full truth about
crimes and acquire information to identify intellectual
authors and who benefited from the murder.
Ensure that the special prosecutors for labor union cases
handle all the reported cases, not just the reduced number
they are currently investigating. Assess the universe of
murder cases found in the database of the Escuela Nacional
Sindical (ENS), not the subset currently under review by
the Fiscalia. Issue a plan for overcoming impunity that
establishes a credible process for investigating and
prosecuting this caseload, with annual benchmarks and the
financial and institutional resources required to
accomplish those benchmarks. (Colombian labor organizations
have suggested designing a 10 year plan to achieve this
goal.) Special attention should be given to the 12
departments and 25 unions that account for 85% of the
homicides against unionists and investigations should
prioritize the murders of the 737 union leaders killed
since 1986.
Further, the Colombian Government must, among other steps:
(2) Ensure that all criminal cases involving human rights abuses by
state actors, including members of the military and security
forces, are handled by civilian authorities.
(3) Strengthen and increase the size of the specialized unit of
prosecutors in the Attorney General's Office charged with
investigating successor groups and assign them sufficient
resources to carry out their work effectively.
(4) Ensure that the National Unit for Human Rights and
International Humanitarian Law of the Attorney General's
Office, including its Sub-Unit for Crimes Against Union Members
and the sub-units charged with investigating extrajudicial
killings and violence against rights defenders, have sufficient
resources and staff to effectively carry out their work.
(5) Conduct thorough investigations not only of individual members
of successor groups, but of their criminal networks, including
financial backers and collaborators within the state.
(6) Provide the mandate and resources to vigorously arrest,
investigate and prosecute the perpetrators of new cases of
violence against trade unionists and rights defenders so that
violence and murder with impunity are no longer the norm.
(7) Increase funding for the Attorney General's witness protection
program for human rights cases, especially those involving
violence against trade unionists and other rights defenders, so
that the program has sufficient resources to ensure that all
witnesses requiring it in fact receive appropriate, timely and
effective protection measures.
(8) Establish and implement a robust system to effectively
investigate threats against trade unionists and other rights
defenders and bring to justice the perpetrators. Threats have a
chilling effect on trade union activity and human rights
advocacy and amplify the ability of perpetrators of violence to
operate with impunity.
(9) Develop a state policy that establishes collective reparations
for the union movement, including collective reparations within
the Draft Law on Reparations for Victims of Violence, as
expressed in the conclusions of the February 2011 ILO Mission
in Colombia.
III. Strengthening Fundamental Worker Rights
Although Colombia has ratified all of the eight core ILO
conventions, its laws and regulations fail to comply with the minimum
obligations set forth in these conventions. Moreover, even the laws
that are currently on the books are not effectively enforced. In
industry after industry, Colombian workers, many of whom make goods for
export to the U.S. market, are unable to exercise their fundamental
labor rights. Further, the development of industries that potentially
compete with American workers--mining, agriculture, alternative fuels
and transportation--have been expanded through the seizure and violent
forced displacement of campesino, Afro-Colombian and indigenous
communities.
Colombian employers and authorities have created and/or permitted
the use of a series of schemes to undermine or disguise direct
employment relationships in order to deny workers the rights they would
normally be due under law or collective bargaining agreements. These
include, but are not limited to, the practice of forcing employees into
involuntary ``cooperatives'' functionally controlled by the employer
(CTAs), hiring workers under commercial rather than employment
contracts, and employing workers through temporary service companies,
among others. Additionally, workers face a number of other hurdles such
as: the institution of pactos colectivos--contracts often unilaterally
imposed by employers on unorganized workers; restrictions on the right
to bargain or strike; the blanket prohibition on public employees and
apprentices from collective bargaining; and the denial of national-
level union organizations the right to negotiate for industry-wide
agreements. Through these and other strategies, millions of Colombian
employees have been denied even the most basic labor rights. According
to the conclusions of the February 2011 ILO High-Level Tripartite
Mission to Colombia, the level of trade union density in Colombia
remains very low, variously estimated between 4% and 7%, and collective
bargaining lower still, marking a steep decline from the 15% who
enjoyed collective bargaining coverage in 1990.
Colombia has also failed to uphold international standards
concerning child labor. According to government statistics, an
estimated 1.6 million Colombian children are currently working in
violation of child labor laws, including significant numbers in trade-
related industries such as agriculture and mining.
Beyond child labor violations in the mining industry, Colombian
miners are exposed to dangerous conditions, including preventable coal
dust explosions caused by primitive mine safety laws. Miners receive
scant protections because Colombia has failed to provide more than a
handful of inspectors for some 2,000 mines. Further, mining companies
are hamstrung because the government-controlled enterprise, Industria
Militar (INDUMIL), has blocked the import of special ``permissible''
safe explosives designed for mining to reduce mine explosions. These
matters have received attention inside Colombia due to mining accidents
and deaths over the past few months.
Article 63 of the recent Law on Formalization and Generation of
Employment (Law 1429 of 2010) is a modest step forward in combating
involuntary ``cooperatives'' by substantially increasing the penalties
for employers who violate the prohibition on using involuntary
``cooperatives'' to hire workers to perform the core functions of an
enterprise (as defined by the employer), and which were largely already
prohibited by law but rarely enforced. We remain concerned, however,
that the law does not actually outlaw involuntary ``cooperatives.'' The
law also does not adequately address the many other forms of indirect
employment that, like involuntary ``cooperatives,'' deny workers the
rights to unionize and negotiate directly with their employers.
Indeed, along with specific requests to be carried out by the
Colombian Government between April and September of this year, the
February 2011 ILO High-Level Tripartite Mission to Colombia identified
three key areas where urgent action is needed:
``Renewed legislative and enforcement measures to put an end
to the labor intermediary activities of cooperatives (CTAs),
and to all other legal and practical obstacles to freedom of
association and collective bargaining;
Additional effective legal and practical action to ensure
that collective accords concluded by employers with non-union
workers are not used against the exercise of freedom of
association and collective bargaining; and
A major effort to strengthen labor inspection, enforcement
and effective sanctions so that acts of anti-union
discrimination, including dismissals and intimidation, are
prevented, or addressed through expeditious, accessible, and
effective procedures and remedy.''
Recommended Measures
With these challenges in mind, the Colombian Government must take
immediate measures to address these concerns:
(1) Colombian labor law must explicitly provide for the full range
of rights contained in the ILO Declaration on Fundamental
Principles and Rights at Work and in the eight core ILO
conventions that Colombia has ratified (see Adenddum), as
required under the terms of the FTA, although little has been
done to do so since Colombia formally approved the FTA in 2007.
These include, but are not limited to: the rights of all
workers, both public and private, to freedom of association and
to collectively bargain over their terms and conditions of
employment; revising the legal definition of ``essential
services'' in which employees are banned from striking in
conformity with ILO definitions and jurisprudence; explicitly
permitting parties to engage in industry-wide bargaining; and
recognizing the fundamental right to strike. Particular
attention must be given to advancing the absolute prohibition
of acts of anti-union discrimination and other obstacles to the
exercise of freedom of association and collective bargaining
presented by the use of associated work cooperatives (CTAs), as
well as collective accords in enterprises with non-unionized
workers (pactos colectivos). The President should ensure legal
conformity with these rights through the promulgation of
decrees, executive orders, regulations and directives to
relevant ministries; by proposing to and gaining the approval
of the Colombian Congress of changes to current labor law and
the labor code; and by robustly implementing the resulting laws
and policies.
(2) As recommended by the February 2011 ILO Mission, the Colombian
Government must ensure changes to Colombian labor law and
legislative action are vigorously pursued in a timely and
expeditious manner. These measures should be submitted for
consultation, at a minimum, to the appropriate ILO mechanisms
set up to work with Colombia on these matters, Colombian labor
organizations, and the National Commission on Social Policy and
Salaries prior to their submission to Congress.
(3) The Ministry of Labor should be reconstituted, as announced by
the Santos Government, and provided consistent and sufficient
funding to carry out its functions, including the necessary
funds and personnel to carry out labor inspections and enforce
employment policy. It should draw upon the technical assistance
offered by the ILO Office, be designed to conform with
internationally-recognized ILO standards, and as recommended by
the February 2011 ILO Mission to Colombia, facilitate national
dialogue that results in agreements between the government,
union organizations and the private sector.
(4) In addition to strengthened inspection enforcement that occurs
through a reconstituted Ministry of Labor, working through the
Ministry of Mining and Energy, the Director of Mines, and the
Director of INGEOMINAS (mine safety enforcement, mine rescue,
etc.) the Colombian Government should codify new mine safety
rules that will prevent mine explosions and fires, eliminate
non-tariff trade barriers so that mining companies can import
safe explosives designed for mining, and provide the necessary
resources to expand the number of mine inspectors with
qualified staff in order to ensure mines are regularly
inspected for compliance.
(5) The Colombian Government must demonstrate and increase
confidence in its ability and commitment to guarantee the
rights of freedom of association and collective bargaining. In
order to do so, it should issue decrees and regulations that
allow workers to contract directly with their employers in
industry sectors where such relationships existed in the past
and/or where agreements were negotiated but not implemented.
These include, but are not limited to, ensuring that:
The port workers contract directly with the Port
Societies, eliminating all subcontractors in port-related
employment and allowing 100% direct contracting between
labor (employees) and the Port Society (employer). The
President should direct the Ministry of Labor and provide
it with the necessary support to remove subcontractors in
all port-related employment, transition employees into the
formal workforce with direct contracts, and ensure
compliance with international labor rights and standards.
The President should provide port workers protection during
this transition period.
The sugarcane workers contract directly with refineries,
eliminating use of third party sub-contractors, including
the Associative Labor Cooperatives (CTAs). The President
should direct the Ministry of Labor and provide it with the
support necessary to remove the CTAs, transition employees
into the formal workforce with direct contracts, and ensure
compliance with international labor rights and standards.
The President should provide the sugarcane workers with
protection during the transition period.
The telecommunications workers contract directly with
telecom companies, eliminating the use of cooperatives
(CTAs). The President should direct the Ministry of Labor
and provide it with the necessary support to remove the
CTAs, transition employees into the formal workforce with
direct contracts, and ensure compliance with international
labor rights and standards. The President should provide
the telecom workers with protection during the transition
period.
IV. Conclusions and Final Recommendations
We believe these are credible and achievable measures. We intend
that they provide you with a meaningful basis for discussions between
yourself and President Santos and decisions you must take on how the
Colombian Government must demonstrate that it has achieved concrete
results in protecting and upholding the rights and security of workers
in Colombia.
As stated above, we believe there is a window of opportunity to
move forward these fundamental labor rights and human rights issues.
These are matters of grave concern to Colombians, and the Santos
Government has announced initiatives under consideration on some of the
measures noted here, although most have yet to be implemented.
Pronouncements are welcome first steps, but they are not change. Any
serious undertaking will require much more than a matter of days or
weeks to achieve genuine change, although some, like demonstrating the
political will, commitment and mandate could happen immediately.
Others, like bringing Colombian labor law into conformity with ILO
standards and conventions, might take months. Still others, such as
substantially reducing the level of violence against unionists, rights
defenders and civil society leaders, breaking the culture of impunity,
and dismantling the structures of those most responsible for violence
against unionists require time to implement and mature before
sustainable results on the ground are realized.
We emphasize, therefore, that the U.S.-Colombia FTA should not be
brought before the Congress, Mr. President, until you can assure and
demonstrate to Congress that these changes have occurred, as current
conditions on the ground do not now warrant its consideration.
The question remains of how to evaluate and determine whether the
situation on the ground in Colombia has improved substantially with
respect to guaranteeing basic labor rights for Colombia's workers and
dramatically diminishing the level of violence carried out with
impunity against unionists and rights defenders. We believe that in
order to make such a determination it is essential to ask those most
affected by the lack of rights and the threat of violence. As Members
of Congress, we will consult and speak directly with Colombian trade
unionists, rights defenders, Afro-Colombian and indigenous leaders, and
rely upon the analysis of Colombian organizations such as the Escuela
Nacional Sindical and others, to determine the situation on the ground
and whether substantial, sustainable and irreversible change is
genuinely occurring. We recommend in the strongest possible terms that
you and the responsible officials in your Administration interfacing
with Colombia use the good offices of ILAB in the U.S. Department of
Labor to do the same.
We believe it is essential that your Administration, under the
direction of ILAB, establish immediate direct consultation with the
sectors inside Colombia cited above that have been most affected by the
lack of rights, violence and threats and create jointly a formal
mechanism to monitor and determine the status of union rights and
security currently and over the longer term. Such joint consultation
and the resulting formal mechanism should also identify and determine
how the U.S. would respond and sanction Colombian commercial interests
and/or the government should there be a dramatic deterioration in the
situation of labor rights, security and protections in the future.
We recognize that it might be difficult for the Colombian
Government to achieve some of these measures without additional
targeted financial, technical, logistical and other assistance from the
United States, Canada, the European Union and other international
parties. We strongly recommend that the U.S. Government take the lead
in ensuring those resources are available. Over the past decade, the
U.S. has invested substantial sums in strengthening rule of law and the
ability of the Attorney General's Office to bring to justice those
state and non-state actors responsible for carrying out acts of
violence and murder against trade unionists, rights defenders and other
civil society leaders. As these recommended measures make clear, the
task is far from done. We should not squander these prior investments
by failing now to provide the resources needed to strengthen the
Fiscalia's professional quality, staffing, and its investigative
capacity and infrastructure. If the Santos Government commits itself to
carrying out these measures, then the United States must provide the
necessary resources so that they can be implemented expeditiously.
Mr. President, we trust that these measures will receive your most
serious attention. Should you have any questions or desire additional
information, we would welcome the opportunity to discuss them further
with you.
addendum
The Eight Core ILO Conventions Signed and Ratified by Colombia:
29--Forced Labor Convention
87--Freedom of Association and Protection of the Right to Organize
Convention
98--Right to Organize and Collective Bargaining Convention
100--Equal Remuneration Convention
105--Abolition of Forced Labor Convention
111--Discrimination (Employment and Occupation) Convention
138--Minimum Age Convention
182--Worst Forms of Child Labor Convention
attachment 2
Violence Against Colombian Trade Unionists: Fact vs. Myth
The Myth:
``Most experts agree that the violence [against Colombian trade
unionists] has abated recently.''--The New York Times, March 1,
2011 news story.
The Facts:
The Number of Colombian Trade Unionists Murdered Is Not Declining
Source: Escuela Nacional Sindical (ENS), Colombia.
---------------------------------------------------------------------------
* In the October 15, 2008 presidential debate, candidate Barack
Obama defended his opposition to the Colombian Free Trade Agreement,
saying: ``The history in Colombia right now is that labor leaders have
been targeted for assassination on a fairly consistent basis and there
have not been prosecutions . . . We have to stand for human rights and
we have to make sure that violence isn't being perpetrated against
workers who are just trying to organize for their rights.''
Impunity Continues Unabated Colombia Continues to Lead the
World in the Number of Unionists
Killed Each Year
(1986-2010) (2005-2009)
Source: Escuela Nacional Sindical Source: International Trade Union
(ENS), Colombia Confederation.
U.S. Labor Education in the Americas Project, www.usleap.org
______
Supplementary Material Submitted by Hon. Ron Kirk, United States Trade
Representative
During the May 12, 2011 hearing entitled, Hearing To Review Pending
Free Trade Agreements, requests for information were made to Hon. Ron
Kirk. The following are information submissions for the record.
Inserts 1 & 2
Mr. Thompson. Thank you. I apologize. I came in late, and so
if this was already traveled--this discussion, I missed it. I
did hear some discussion about organic milk products. I am
just--beyond that, how will these agreements affect dairy
exports? And by extension, how might these increase--if we see
an increase in exports, would this help increase our dairy
prices?
* * * * *
1Mr. Thompson. Great. That is good news. Any potential within
these free trade agreements in terms of affecting timber
exports that you are aware of?
Mr. Kirk. I don't know that there is an extraordinary amount
of timber, but if you will allow our staff to go back and look
at that, and if we can follow up with you.
Response for Insert 1
The three pending trade agreements will provide significant new
market access for U.S. dairy products through the phased elimination of
tariffs. In addition, under each of the agreements the creation of
tariff rate quotas (TRQs) will provide duty free access for various
dairy products during the transition period. According to projections
made by the Department of Agriculture's Economic Research Service,
growth in exports of U.S. dairy products to Korea is projected to be
145 percent, or more than $90 million per year under the KORUS trade
agreement. Similarly, the USDA projects U.S. dairy exports to Colombia
to increase an additional 50 percent as a result of the elimination of
tariffs under the Colombia Trade Promotion Agreement. A sentence about
the specific benefits to Pennsylvania exporters, including dairy could
be added here.
Response for Insert 2
All three agreements eliminate 100 percent of duties on wood,
lumber and paper products.
Under the U.S.-Korea Trade Agreement more than 92 percent of U.S.
wood and lumber exports to Korea by value would receive duty-free
treatment within three years of implementation of the agreement; Korean
wood and lumber tariffs currently average 5.9 percent, ranging up to 12
percent. All U.S. paper product exports to Korea will receive duty-free
treatment immediately upon implementation of the agreement. Korean
paper and paper product tariffs currently range from 0 to 7 percent.
Under the U.S.-Colombia TPA more than 84 percent of U.S. wood and
lumber exports to Colombia would receive duty-free treatment within
five years of implementation of the agreement; Colombian tariffs on
wood and lumber currently average 12 percent, ranging up to 20 percent.
More than 97 percent of U.S. paper and paper product exports to
Colombia would receive duty-free treatment within five years of
implementation of the agreement; Colombian paper and paper product
tariffs currently average 12.5 percent, ranging up to 20 percent.
Under the U.S.-Panama TPA over 80 percent of U.S. exports of forest
products (wood, lumber and paper products) to Panama would receive
duty-free treatment immediately upon implementation of the agreement.
Insert 3
Mr. Neugebauer. Well, I agree with you that most countries
want to create jobs in their countries. But where there are
opportunities for arbitrage where if I can bring goods in from
China, or I can bring goods in from North Korea cheaper than I
can build them or make them in South Korea, then it is to my
advantage to manipulate the system, change the labels,
whatever.
And so I think the primary question for my constituent is
what kinds of enforcement resources and processes are in place
to watch over that kind of activity?
Mr. Kirk. Well, again, the rules of origin provisions within
the FTA speak to how much of that product has to be made in
that agreement to be considered a product of that country and
get the benefits. And I would have to--I would be happy to get
DHS and Customs to perhaps walk you through your concerns about
what they do in terms of inspection and enforcement on that
end.
U.S. Customs and Border Protection maintains a number of tools and
processes to implement and enforce our agreements. We have contacted
U.S. Customs and Border Protection, which we understand will be
reaching out to your staff shortly for a in-depth discussion of this
issue.
______
Submitted Joint Statement by Thomas M. Suber, President, U.S. Dairy
Export Council; Jerry Kozak, President and Chief Executive Officer,
National Milk Producers Federation
The National Milk Producers Federation (NMPF) and the U.S. Dairy
Export Council (USDEC) would like to express our strong support for the
passage of the Free Trade Agreements with South Korea, Panama and
Colombia and appreciate the opportunity to provide comments on this
issue in the context of the Agriculture Committee's May 12th hearing on
these agreements. As debate on these agreements moves forward, we would
also like to express our support for a renewal of Trade Adjustment
Assistance (TAA). TAA, including its component that targets assistance
to impacted agricultural sectors meeting the program's criteria, is a
complementary trade program that helps solidify support for the
expansion of beneficial U.S. trade agreements.
The members of NMPF's 31 cooperatives produce the majority of the
U.S. milk supply, making NMPF the voice of more than 40,000 dairy
producers on Capitol Hill and with government agencies. USDEC is a
nonprofit, independent membership organization that represents the
export trade interests of U.S. milk producers, proprietary processors,
dairy cooperatives, and export traders.
Despite a temporary decline in 2009, U.S. dairy exports have been
on an upward trend for the past several years. In fact, the U.S. dairy
industry has become a significant supplier to the world dairy market,
and these overseas markets are playing a greater role in determining
prices for dairy products in the United States.
Given the expected benefits to our industry of the three FTAs with
South Korea, Panama and Colombia, USDEC and NMPF are urging broad
support for these agreements when they are submitted to Congress. We
applaud the commitment by many in our government to ensure that these
agreements, which were all negotiated years ago, finally get the
opportunity to be approved. We greatly hope that Congressional
consideration of each FTA will be positive given the strong benefits
for the U.S. dairy sector from these three agreements.
Most of the anticipated growth in U.S. dairy exports as a result of
these FTAs will be the result of improved access for U.S. cheese, whey,
skim milk powder, and certain other processed dairy products. In
addition to directly benefiting those companies actively involved in
these export sales, the additional exports will help bolster milk
prices for America's dairy farmers, and help to support additional jobs
in the dairy processing and transportation sectors. Although the value
of the agreements differs, each of them offers positive new market
access opportunities for the U.S. dairy industry. At this time of
heightened global competition, it is all the more important to take
advantage of all positive opportunities since even relatively smaller
markets become quite meaningful when the benefits of each begin to
accumulate.
The U.S. Free Trade Agreement (KORUS FTA) will provide the best
opportunity since the U.S.-Mexico portion of the North American Free
Trade Agreement to expand U.S. dairy exports. We estimate that the
benefit to the U.S. dairy industry over the first several years of the
agreement will yield approximately an additional $380 million per year
on average. Based on Commerce Department multipliers, we estimate that
the expected increase in U.S. dairy exports would mean as many as
10,000 additional U.S. jobs, on and off the farm. Our industry is very
eager to take advantage of this remarkable opportunity, particularly
considering the fact that Korea's FTA with one of our major
competitors, the European Union, will go into effect this summer,
thereby putting U.S. dairy exports at a tariff disadvantage.
The FTA will help to grow a high-value market that has historically
strictly limited imports. (Korea has temporarily allowed for greater
access to its dairy market in the wake of the Foot and Mouth Disease
crisis it suffered earlier this year and the devastation that wreaked
on its dairy sector.) U.S. sales to Korea in 2010 totaled $130 million.
Conversely, if the agreement is not approved, we risk losing even our
existing market share not only to the EU but also to major competitors
Australia and New Zealand, with whom Korea is swiftly negotiating new
FTAs. That would put U.S. suppliers at a distinct disadvantage in the
Korean market.
The agreements with Colombia and Panama will also provide very
helpful new export avenues to our industry. They build on the natural
proximity advantage we have over our three largest dairy exporting
competitors: the European Union, New Zealand, and Australia. We
estimate that the combined benefit to the U.S. dairy industry over the
first several years of each of these agreements will be additional $50
million per year, on average.
The Colombian and Panamanian dairy markets are relatively
restricted currently. This is particularly the case in Colombia, to
which the U.S. exported only $6 million last year. Similarly, we also
anticipate meaningful gains above the $16 million the U.S. exported to
Panama in dairy products last year. The European Union has just
completed FTA negotiations with both countries, creating a strong need
for swift action by the U.S. government to approve these agreements to
maximize the possibilities for U.S. suppliers to gain an early
advantage or at a minimum not lose competitive ground to the European
Union in these markets.
We look forward to working with this Committee to continue to
provide information as these agreements move forward through the
Congressional process. Thank you for the opportunity to submit comments
in relation to this Committee's May 12th hearing on the three FTAs.
Sincerely,
Thomas M. Suber, Jerry Kozak,
President, President and CEO,
U.S. Dairy Export Council; National Milk Producers Federation.
Point of Contact:
Shawna Morris,
Vice President, Trade Policy,
National Milk Producers Federation & U.S. Dairy Export Council.
______
Submitted Statement by Dr. Peter H. Cressy, President and Chief
Executive Officer, Distilled Spirits Council of the United States, Inc.
The following statement is submitted on behalf of the Distilled
Spirits Council of the United States, Inc. (Distilled Spirits Council)
for inclusion in the printed record of the Committee's hearing on the
pending bilateral free trade agreements (FTAs) with Colombia, Panama
and South Korea. The Distilled Spirits Council is a national trade
association representing U.S. producers, marketers and exporters of
distilled spirits products. Its member companies export spirits
products to more than 130 countries worldwide, including to Colombia,
Panama and South Korea.
I. Overview
Distilled spirits are processed agricultural products that fall
within the scope of Chapter 22 of the Harmonized Tariff Schedule of the
United States, the WTO Agreement on Agriculture and the agriculture
chapters of the free trade agreements the United States has negotiated
with a number of key trading partners. The Distilled Spirits Council
and its member companies have a strong and growing interest in
agricultural trade, from a commercial perspective and from a policy
perspective.
The Council and its members enthusiastically support Congressional
approval and prompt entry-into-force of the free trade agreements
(FTAs) with Colombia, Panama and South Korea, which will bring about
significant and measurable benefits for U.S. spirits exporters. As a
commercial matter, the Council's members have become increasingly
reliant on exports to fuel growth. Indeed, as shown below, U.S. spirits
exports have more than doubled since 2000, and have surpassed the $1
billion mark for the fourth consecutive year. The vast majority of U.S.
spirits exports are comprised of whiskeys, including Bourbon and
Tennessee Whiskey, which are distinctive products of the United States.
As of 2008, the industry supported 676,000 direct employees. Expanding
exports to foreign markets will help to support current and future
employment in the industry.
Global U.S. Distilled Spirits Exports
(2000-2010)
While the Uruguay Round negotiations produced significant benefits
for U.S. distilled spirits exporters, including substantial reductions
in import tariffs and non-tariff barriers, numerous barriers still
remain. Thus, the U.S. distilled spirits industry actively supports the
U.S. government's efforts to seek the elimination or reduction of these
remaining barriers within the context of the ongoing World Trade
Organization negotiations, and in other multilateral and bilateral
negotiations.
The pending FTAs eliminate several of the barriers that U.S.
spirits exporters currently face in these markets. Prompt Congressional
approval and implementation of the FTAs will permit U.S. spirits
exporters to benefit from improved market access to Colombia, Panama
and South Korea, thus ensuring the continued growth of the U.S.
distilled spirits industry.
II. Benefits of the U.S.-Colombia Agreement to U.S. Distilled Spirits
Exporters
The U.S.-Colombia Free Trade Agreement (or Trade Promotion
Agreement (CTPA)) will provide significant benefits for the U.S.
distilled spirits industry in the growing Colombian spirits market,
which was valued at $2.5 billion in 2010 (retail sales). Although the
overall spirits market is growing, the market for imported spirits
faces several hurdles in Colombia. The spirits market is dominated by
locally-produced spirits (i.e., aguardiente and rum). Aguardiente, in
particular, has a long-standing place in Colombia's beverage alcohol
market, accounting for approximately 67% of total spirits volume in
2010. The dominance of domestically-produced categories is due, in
part, to the benefits these products have enjoyed from lower tax rates
via Colombia's discriminatory consumption tax regime, as well as by the
existence of alcohol monopolies or licoreras in several states or
departamentos. As detailed below, implementation of the CTPA will
address these concerns and provide meaningful market access
improvements for U.S. spirits exporters to Colombia.
First, the U.S.-Colombia FTA provides essential protections for
Bourbon and Tennessee Whiskey--two distinctly American spirits. Under
the agreement, Colombia has agreed to provide explicit protection in
the Colombian market for Bourbon and Tennessee Whiskey as distinctive
products of the United States. Such recognition ensures that only
spirits produced in the United States, in accordance with the laws and
regulations of the United States, may be marketed in Colombia as
Bourbon and Tennessee Whiskey.
Second, Colombia has agreed to eliminate its 20% ad valorem tariff
on all U.S.-origin spirits, except whiskey, rum, and vodka, immediately
upon entry-into-force of the agreement. The tariffs on U.S.-origin
whiskey, rum, and vodka will be phased out over a 10 year period. While
the U.S.-Colombia FTA remains in limbo, both Canada and the European
Union--the U.S. spirits industry's key competitors in international
markets--have concluded FTAs with Colombia. Once in force, Colombia
will phase out its tariffs on imports of Canadian whisky and vodka over
a 12 year period and will phase out its tariffs on European whiskeys
and vodka over a 10 year period. Unless the U.S.-Colombia FTA is
promptly implemented, U.S. spirits exporters will be placed at a
significant competitive disadvantage vis-a-vis European and Canadian
producers.
Third, Colombia has agreed to eliminate the discriminatory aspects
of its tax regime for distilled spirits within 4 years of entry-into-
force of the agreement. Colombia's tax regime, which has been in place
since 2003, discriminates against imported distilled spirits through
arbitrary breakpoints that have the effect of applying a lower tax rate
per degree of alcohol to domestically-produced spirits than the rate
that applies to most imported spirits. Every year that the agreement
has remained in limbo has added another year to the time that U.S.
spirits exports continue to be subject to Colombia's discriminatory tax
system.
Finally, the agreement contains important obligations with regard
to national treatment (Article 2.2) and prohibitions with regard to
import/export restrictions (Article 2.8), which will help to address
the industry's concerns regarding the operation of Colombia's alcohol
monopolies (i.e., licoreras) in several states or departamentos. The
licoreras control the distribution and marketing of distilled spirits,
restricting the ability of U.S. distilled spirits companies to do
business in Colombia. These state monopolies are subject to the
national treatment obligations in the CTPA. The state monopolies remain
a significant and real concern: earlier this year press reports
suggested that the monopolies proposed to prohibit certain imported
spirits. Thus, once the agreement is implemented, it should usher in
much needed reform to this system.
III. Benefits of the U.S.-Panama Agreement to U.S. Distilled Spirits
Exporters
Similarly, the U.S. spirits industry stands to benefit from the
provisions of the U.S.-Panama FTA. Panama's 15% ad valorem tariff on
U.S. spirits imports will be eliminated immediately upon entry into
force of the agreement, significantly improving the competitiveness of
U.S. spirits in this market. Panama currently ranks as the fifth
largest export market in Latin America for U.S. distilled spirits; in
2010, exports totaled almost $4.8 million (FAS value). As in the case
of Colombia, further delays in implementation of the FTA will be costly
to U.S. exporters. Canada, one of the U.S. spirits industry's major
competitors, particularly in the whiskey category, signed a free trade
agreement with Panama in May 2010. Under that agreement, Panama will
immediately eliminate its tariffs on most spirits imported from Canada,
including Canadian whisky. Prompt action on the U.S.-Panama FTA is
required to ensure that U.S. exporters will not be disadvantaged.
In addition, under the FTA Panama has agreed to provide explicit
protection in its market for Bourbon and Tennessee Whiskey as
distinctive products of the United States which, as stated above, is an
important tool to ensure that only spirits produced in the United
States, in accordance with the laws and regulations of the United
States, may be marketed in Panama as Bourbon and Tennessee Whiskey.
IV. Benefits of the U.S.-Korea Agreement to U.S. Distilled Spirits
Exporters
Prompt implementation of the U.S.-Korea Free Trade Agreement (KORUS
FTA) will ensure that U.S. spirits exporters will be able to compete in
one of the most important markets in Asia with strong potential for
increased spirits sales. In 2010, the Korean spirits market was valued
at $10.1 billion (based on retail sales prices), ranking it as the
tenth largest spirits market in the world, and fourth among Asian
nations behind China, India and Japan, respectively.
The spirits market in Korea is dominated by two categories: whiskey
and soju, the domestically-produced spirit made from any of the
following ingredients: rice, wheat, barley, sweet potatoes or tapioca.
In volume terms, soju accounts for an astonishing 96% of total spirits
sales in Korea. In value terms, however, the market is more evenly
divided, with soju accounting for 56% and whiskey accounting for 39%.
Thus, the whiskey category is comprised mainly of higher-priced premium
and super-premium brands--the segment were U.S. whiskeys compete.
Whiskey is forecast to grow by over 45% from 2009 to 2014 in value
terms (Euromonitor International).
Korea's whiskey market is dominated by Scotch Whisky; sales of
Scotch Whisky accounted for almost 98% of total whiskey sales (retail)
in Korea in 2010 (Euromonitor International). The leading U.S. spirits
exports to Korea are Bourbon and Tennessee Whiskey, accounting for 68%
of total exports in 2010. Although American whiskeys are growing in
popularity in Korea, they are still considered as niche products and
have not been able to penetrate significantly the whiskey market in
Korea, in large part due to the high tariffs and taxes that currently
apply and Scotch Whisky's continued dominance.
Under the KORUS FTA, Korea will eliminate its 20% ad valorem tariff
on Bourbon (and Tennessee Whiskey), which as noted above comprises 68%
of total U.S. spirits exports to Korea, immediately upon entry into
force. The tariffs on all other U.S. origin spirits (between 15-20% ad
valorem) will be phased out over a 5 year period. Prompt action to
approve the KORUS FTA is needed to ensure that U.S. spirits exporters
are not competitively disadvantaged vis-a-vis European spirits
producers: under the terms of the EU-Korea FTA, which will enter into
force on July 1, 2011, Korea will eliminate its tariffs on Scotch and
Irish whisky over 3 years.
In addition, as noted above with the Colombia and Panama FTAs, the
KORUS FTA provides recognition of Bourbon and Tennessee Whiskey as
distinctive products of the United States. Securing this recognition is
critical because it provides the U.S. spirits industry with an
important anti-counterfeiting tool.
V. Conclusion
In summary, the pending free trade agreements with Colombia, Panama
and South Korea successfully address the principal trade barriers
currently impeding U.S. exports of distilled spirits to those markets.
The Distilled Spirits Council, therefore, strongly supports these
agreements, which, once implemented, will provide considerable tangible
benefits to U.S. spirits exporters. We stand ready to work closely with
the Congress in seeking the swift approval of these agreements, so that
U.S. spirits exporters may begin soon to enjoy improved access to the
Colombian, Panamanian and South Korean markets.
Thank you very much for your consideration.
Written Statement of:
Dr. Peter H. Cressy,
President/CEO,
Distilled Spirits Council of the United States, Inc.
______
Submitted Letter by Robert Cummings, Senior Vice President, USA Rice
Federation
May 16, 2011
Hon. Frank D. Lucas,
Chairman,
House Committee on Agriculture,
Washington, D.C.
Via Electronic Submission
Re: Comments Concerning the House Agriculture Committee Hearing on the
Pending Free Trade Agreements with Colombia, Panama, and South Korea
The USA Rice Federation (USA Rice), located at 4301 N. Fairfax
Drive, Suite 425, Arlington, VA 22203, is the global advocate for all
segments of the U.S. rice industry with a mission to promote and
protect the interests of producers, millers, merchants and allied
businesses. USA Rice members are active in all major rice-producing
states: Arkansas, California, Florida, Louisiana, Mississippi, Missouri
and Texas. The USA Rice Producers' Group, USA Rice Council, USA Rice
Merchants' Association and the USA Rice Millers' Association are
members of the USA Rice Federation.
USA Rice appreciates the opportunity to comment on the pending free
trade agreements. Rice is a sensitive political and economic commodity
throughout the world, and protectionism is extensive. The U.S. rice
sector is a key player in the global rice market and the economic
health of the rice industry is tied to exports. While the United States
produces only two percent of global rice output, the United States
ranks, in any year, as the third or fourth largest global exporter and
between 45 and 50 percent of the U.S. rice crop is exported.
Through free trade agreements, rice is able to be a competitive
commodity and, in turn, create U.S. jobs. According to a recent
economic impact study completed by the Agriculture and Food Policy
Center at Texas A&M, the rice industry contributed 127,186 jobs to the
U.S. economy in 2009. This figure, based on 2009 rice production and
sales information, is a component of the total value-added to the U.S.
economy from rice production, milling, and selected end-users of $17.5
billion in 2009. Small businesses are well represented within the
thousands of rice farmers across the six rice-producing states.
Colombia
The free trade agreement with Colombia offers tremendous short and
long term economic benefits to U.S. rice producers, millers and
exporters. We believe that this trade agreement holds the most promise
for the rice industry since the North American Free Trade Agreement was
implemented more than 10 years ago.
The free trade agreement with Colombia reflects the sensitivity of
rice. Import duties on U.S. rice phase out over 19 years, with
reductions from the bound rate of 80% not beginning until year 7. A
tariff rate quota for 79,000 mt (milled equivalent basis) of U.S. rice
is established in year one, growing 4.5% annually until free trade is
achieved in year 19.
The rice provisions of the agreement with Colombia are similar to
those in the CAFTA-DR agreements, but with one substantial and positive
difference. The Colombia agreement provides that the net revenue from
auctioning licenses to import under the TRQ will be split evenly
between the U.S. and Colombian industries. This provision remains a
singular achievement of U.S. negotiators that distinguishes this
agreement from other U.S. free trade agreements in the region and
significantly increases its value to U.S. rice farmers and marketers,
who otherwise would wait nearly 2 decades for free trade.
The USA Rice Federation recently estimated that the gross revenue
to the United States from a 79,000 TRQ would be approximately $11.5
million. While the net figure would be somewhat smaller because of the
expenses associated with administering the TRQ, the remaining revenue
is significant and would greatly benefit the rice industry. The USA
Rice Federation has proposed that all net revenue be allocated to the
state rice research boards in the six producing states to be used
exclusively for rice research.
Because of Colombia's 80% duty on imported rice, U.S. sales to date
have been sporadic and surged only in response to production
shortfalls. Annual imports from the United States have rarely exceeded
5,000 mt in the current decade, except in 2009 when a crop shortfall
caused Colombia to establish a zero-duty TRQ for 75,000 mt, which the
United States promptly filled nearly exclusively. U.S. sales suffer
further from the duty-free treatment afforded rice from Venezuela and
Ecuador.
Without the passage and implementation of this agreement, U.S. rice
exports to Colombia will be sporadic at best and the key benefit of
sharing the quota rents from the TRQ between the two rice industries
will be lost. Colombia is an important commercial and political partner
of the United States and the trade agreement with Colombia is a key
tool for strengthening this agreement that should not be lost.
Panama
The U.S.-Panama Free Trade Agreement will also benefit U.S. rice
producers, millers and exporters. The agreement phases out Panama's
duties on U.S. rice over a 20 year period. Two separate TRQs are
established for rough rice and milled rice, which allow for duty-free
imports.
The milled rice TRQ in year one is 4,240 mt and will increase 6%
each year before becoming duty free in year 20. Average U.S. milled
rice exports to Panama for 2005-2009 were only 758 mt. This TRQ will
allow for substantial access for U.S. milled rice starting in the
agreement's first year of implementation.
The rough rice TRQ in year one is 7,950 mt and will similarly
increase 6% each year before becoming duty free in year 20. However,
the TRQ for all years is less than the 2005-2009 average for U.S. rough
rice imports of 59,405 mt.
Unlike the CAFTA-DR agreement, domestic purchase as a requirement
of import under the TRQ is forbidden. The agreement calls for detailed
TRQ administration requirements to guarantee quota fill and to exclude
producers from influencing quota administration. Thus, domestic
producers cannot be allocated or awarded a portion of the TRQ. Any
unfilled TRQ licenses must be surrendered by September 1 and a final
auction held by October 1.
Although the 20 year phase out until free trade is 3-5 years longer
than the CAFTA-DR, it is an important agreement supported by USA Rice.
South Korea
USA Rice does not support the agreement due to the exclusion of
rice. Free trade agreements entered into by the United States should be
comprehensive and include all products, even those that are politically
sensitive.
The U.S. rice industry understands the political and cultural
sensitivity of the matter for Korea. However, the U.S. rice market is
open, and about 15 percent of U.S. rice consumption is imported. Tariff
protection in the United States for rice is virtually non-existent.
We appreciate the opportunity to provide these comments. Please
contact us if you have any questions.
Sincerely,
Robert Cummings,
Senior Vice President,
USA Rice Federation.
______
Submitted Statement by Thomas C. Dorr, President and Chief Executive
Officer, U.S. Grains Council
Chairman Lucas, Ranking Member Peterson, and distinguished Members
of the House Committee on Agriculture. My name is Tom Dorr. I am
President and CEO of the U.S. Grains Council (USGC). Founded in 1960,
The Council is a private, nonprofit corporation with ten international
offices and programming in more than 50 countries. Its unique
membership includes barley, corn and sorghum producer organizations and
agribusinesses from across the United States with a common objective in
developing export markets.
The Council appreciates the efforts of the Committee in holding
hearings regarding the importance of ratification of the existing free
trade agreements (FTAs) with Colombia, Panama and South Korea. All are
important export markets for the coarse grains and important co-
products (i.e., distiller dried grains, corn gluten feed, corn gluten
meal) we represent and offer significant opportunities for growth and
each of which the Council has had extensive involvement in capacity-
building and increasing demand for these products. We offer this
statement to explain the economic implications and importance of these
FTAs.
Korea--Important Asian Market
The Republic of Korea has been a strong and important export market
for U.S. feed grains, and is third largest market for U.S. corn. Korea
is Asia's fourth largest economy with a $1 trillion gross domestic
product (GDP) that is projected to grow by five percent in 2011.
Korea produces a total of only about 300,000 metric tons (tmt) of
barley, corn, and sorghum a year, representing about three percent of
total domestic consumption. As the world's third largest grain
importer, the U.S. has been a consistent and reliable supplier
providing over 65% of Korea's feed grains and substitutes market. Corn
imports to Korea in 2010 totaled $1.7 billion. It has also been a
growing market for DDGs with the U.S. supplying over 90% Korea's total
imports. As a result, U.S. feed grains and co-products are critical in
meeting their food security needs.
The U.S. feed grains industry has enjoyed the existence of low or
zero tariff rates for corn imports to Korea. Under the U.S.-Korea FTA,
the tariff for U.S. corn will be fixed at zero and eliminating the
current ability of Korea to discontinue the zero autonomous tariff and
revert back to the WTO tariff of five percent for the first 6.1 million
tons, and 328 percent for any imports above this quantity. Similarly,
Korea's current 6.6 percent tariff on DDGS will be provided duty free
access upon implementation of the FTA.
In addition to providing coarse grains for the Korea livestock
industry, the U.S. also provides corn to Korea's food and industrial
sector. Currently, Korea imports practically no corn starch from the
U.S. as almost all of its 6.1 million ton WTO Tariff Rate Quota is used
to import feed corn and corn starch for manufacturing. Korea's over-
quota tariff on corn starch is 226 percent.
With the FTA, the U.S. will have an opportunity to establish a
foothold in Korea's corn starch market. During the first year of the
agreement, 10,000 tons of U.S. corn starch will enter Korea duty free.
The quota will grow three percent a year through the beginning of year
15, when all U.S. corn starch will enter duty free.
With respect to barley and malting barley, the FTA will provide
U.S. barley a tariff advantage over its competitors. The agreement
creates a 2,500 duty-free quota for U.S. unhulled and naked barley
(excluding malting barley), which increases two percent a year while
the tariffs are phased out over 15 years. Outside the FTA, Korea has an
unhulled barley autonomous TRQ of 50,000 tons at a two percent tariff
and a WTO 23,582 ton TRQ that covers both unhulled and naked barley at
five percent with over-quota tariffs of 324 and 300 percent,
respectively.
In addition, in the first year of the agreement, the U.S. will be
able to export 9,000 tons of unroasted malt barley and malting barley,
combined, into Korea duty free. The duty free quota grows two percent a
year through year 15, at which time all U.S. shipments of malt and
malting barley will enter duty free. This provides the U.S. a ten
percent tariff advantage over our competitors for malt and 20 percent
for malting barley. At a minimum, this will keep the United States on a
level tariff playing field if Korea concludes similar trade agreements
with Canada, the EU and Australia.
Finally, passage of the FTA will allow the Council to continue to
promote the advantages of U.S. grains and their reliable supplies to
meet Korea's growing feed, food and industrial demand. It will also
help the Council in promoting the growing use of DDGs of Korea's
poultry and livestock operations.
Panama--Gateway Corridor to Central and South America
While Panama is a small country with only 3.3 million people it is
a key building block in the U.S. strategy to advance free trade within
the Western hemisphere. Spearheaded by transportation,
telecommunications, commercial and tourism sectors, Panama's economy is
based on a well-developed services sector. GDP in 2010 was nearly $26
billion and is anticipated to grow at more nine percent in 2011.
Panama is an important market for U.S. agricultural exports. The
U.S. corn industry has traditionally been the sole supplier to this
market with poultry sector as the dominant end-user of feed grains.
However, there has been some erosion in 2010 due to, among other
reasons, a lack of progress on the U.S.-Panama FTA.
The agreement will provides for immediate duty-free treatment for
over 60 percent of current U.S. exports to Panama. Current duty-free
agricultural products such as wheat, barley, cotton, crude soybean oil,
soybeans and soybean meal will be made permanent.
The FTA will also provide opportunities for immediate duty-free
access through tariff-rate quotas (TRQs) for many of Panama's more
sensitive products including corn, refined corn oil. Most remaining
tariffs will be eliminated within 15 years. Upon the FTA's
implementation a tariff-rate quota of 298,700 mt with zero tariffs
would apply to corn. The quota would be increased annually three
percent (compounded) and corn imports exceeding the quota would have a
40 percent levy. The over-quota tariff of 40 percent will be gradually
eliminated between the fifth and fifteenth years of the Agreement.
Sorghum will be duty-free within 5 years while barley, DDGS and crude
corn oil would receive immediate duty-free treatment.
Ratification of the FTA will accelerate the ability of the Council
to work with Panamanian end-users to introduce feed grain co-products
and value-enhanced grains. In addition, promoting the use of corn co-
products will provide cost savings to feed millers and as a result
create more demand for U.S. corn.
Colombia--Key Strategic U.S. Agricultural Export Market
Colombia is a key strategic market with exceptional growth
potential. Colombia has the second-largest population in South and
Central America and the Caribbean, and is the third-largest economy in
the region. Colombia is experiencing strong economic growth, projected
to exceed four percent annually over the next 3 years. Colombia's per
capita income has grown steadily over the last decade, exceeding
$9,000, and is projected to increase to nearly $12,000 by 2015. As a
result, its middle class continues to grow and is projected to increase
to more than 25 percent of the total population by 2020.
This higher growth income has resulted in more consumption of
animal proteins with an increase in pork production (32 percent),
poultry (32 percent) and eggs (12 percent) in the last 5 years. While
Colombia is a net exporter of agricultural commodities, it imports over
80 percent of the corn it uses domestically. Similarly, it imports over
95 percent of the wheat and soybeans products it consumes.
Colombia is an important market for America's farmers and ranchers.
Total U.S. agricultural exports exceeded $1.6 billion in 2008. Colombia
is the fifth-largest market for U.S. coarse grains, eclipsed only by
Mexico, Japan, Taiwan and South Korea.
But it is a situation where we have experienced extraordinary
challenges with an increasing loss of market share in what is one of
the strongest growth markets in our own hemisphere. Until 2008, the
U.S. agricultural sector had been the beneficiary of Colombia's growing
need for imports of agricultural commodities. U.S. market share of
Colombia's total agricultural imports grew steadily from 2005 to 2008
reaching nearly 50 percent. However, since 2008, U.S. market share has
declined rapidly to only 21 percent. Conversely, Argentina's market
share of Colombia's total agricultural imports rose sharply from eight
percent to nearly 30 percent over the same time period.
For U.S. coarse grains, the decline has been even more dramatic. At
its peak, U.S. exports of coarse grains approached $635 million and
accounted for 83 percent of the total Colombian coarse grains imports.
In 2010, U.S. coarse grains exports declined to $118 million and market
share fell to 18 percent, a residual suppler level. The loss of market
share can be attributed to major inroads by Argentina and Brazil. In
2008, Argentina held an 11 percent share of coarse grains imports,
primarily corn. By 2010, Argentina's market share was 66 percent. Over
the same time period, Brazil's market share of coarse grains imports to
Colombia increased from 5 to 16 percent.
Tariff Constraints Erode U.S. Competitiveness
Colombia protects its local production with a common external duty
(15 percent) that includes corn (and other agricultural commodities).
In addition, Colombia is a party to the MERCOSUR-Andean Community
agreement, under which it has implemented bilateral agreements with
Brazil, Argentina and Paraguay. Under that agreement exists a price
band mechanism which levies additional duties on the 15 percent duty
when international corn prices are lower than a preference and
conversely reduces the basic duty when international corn prices are
higher. This price band mechanism operates as a protective policy when
international prices are lower by increasing the import duty, while
high international prices act as natural protection for the local
production.
Colombia's trade agreement with MERCOSUR allows member countries to
receive a preferential duty treatment. Argentina and Brazil receive an
annual duty reduction on corn imports to Colombia, which completely
phases out the basic duty by 2018. Beginning in 2006, the duty
preference on the basic duty (15 percent) granted for corn was 31
percent or a duty of 10.35 percent--a 4.65 percent advantage over corn
import from the United States. By 2009, the duty preference reached 49
percent and then 54 percent in 2010. In 2011, the duty preference
increased to 60 percent, which represents a nine percentage point
advantage over corn imports from the United States. Even with the duty
preferences in place, the United States remained competitive until
2008. However, the increased duty preference to corn imports from
MERCOSUR has virtually eliminated that advantage.
This is despite the fact that the United States, with its close
proximity to Colombia, has a freight transportation advantage over
Argentina and Brazil. According to estimates provided by Colombian feed
importers, the lower import tariff by itself currently provides a $20/
ton advantage over U.S. shipments.
Corn makes up a larger percentage of grain imported into Colombia,
which leads importers to combine it with other grain imports, such as
soybeans, wheat and other grain co-products to complete their grain
cargo. As U.S. corn imports have declined, the same has occurred with
other bulk products. The decline of U.S. imports has lowered the
incentive to import other U.S. grains as well.
Equally troubling, the shift in grain flows from the United States
to Argentina and Brazil has allowed those countries to include
additional quantities of corn over and above the shipments to Colombia
that are later shipped to Latin American countries such as Panama and
the Dominican Republic. The lower tariff rates allow Argentina and
Brazil to import corn into these markets despite the transportation
disadvantage. These are markets where the United States has a clear
competitive advantage and yet we are seeing them be eroded because of
the pernicious effects of the lower duty preferences. Once trade flows
become established and relationships are formed with other trading
partners, it is very difficult to win back these markets.
In addition to the MERCOSUR-Andean Community Agreement, Colombia
currently has free trade agreements (FTA) in place with Chile, El
Salvador, Guatemala, Honduras, Mexico and Uruguay. It is also a member
of the Andean Community Customs Union (Bolivia, Ecuador and Peru). In
2010, Colombia finalized FTAs with Canada and the European Union, and
is presently negotiating new FTAs with Panama, South Korea and
Singapore. Without the U.S.-Colombia FTA, U.S. coarse grains producers
as well as the producers of other U.S. agricultural commodities will
cede this market to our competitors.
USGC Capacity-Building Efforts in Colombia
The Council works closely with the Colombian feed, livestock and
poultry industries to build capacity and increase efficiency to utilize
U.S. coarse grains products. Several of the numerous Council programs
include: Capacity-building to the poultry and dairy sectors in disease
management and training in feed formulation; training in nutritional
and price benefits associated with using distiller's dried grains and
an introduction of U.S. sorghum into the Colombian livestock sector;
and U.S. grain trade promotion through grain marketing and risk
management training for major Colombian grain importers. The resulting
productivity gains have greatly enhanced Colombia's ability to meet the
needs of their growing middle class and supply high-quality protein
products at low cost to their consumers.
Separately, the Council and the United Soybean Board participated
in a technical cooperation agreement with the Inter-American Institute
for Cooperation on Agriculture on a 2004 study on the impact of the
elimination of Colombian trade protection on corn, sorghum and
soybeans. That study revealed that with the elimination of Colombia's
tariff barriers, prices of corn and sorghum would fall by 33 percent.
Imports of corn and sorghum would increase by 92 percent with a value
of $192 million. The lower feed prices would increase the demand for
feed and the Colombian livestock and poultry sector would benefit
through projected increases in the value of production of poultry (17
percent); pork (14 percent); and eggs (11 percent).
As a result of these ongoing efforts, the Council has established a
strong partnership with Colombia's livestock and poultry sectors. U.S.
producers gained their trust as a long-term, reliable supplier that
provides consistent, quality products. As valued customers, the Council
consistently provides technical support and outreach to meet their
needs.
The Colombian feed, livestock and poultry industries want to retain
and build on that relationship. Representatives of the Colombian feed
milling, swine and wheat industries traveled to Washington, D.C.,
earlier this year and provided Congressional briefings to this
Committee as well as the Senate Agriculture Committee, Senate Finance
Committee and House Ways and Means Committee. They explained that
Colombia must import agricultural commodities at competitive prices to
meet their growing demand for protein products. While the United States
has been a reliable supplier, they stressed that duty preferences
afforded to Argentina and Brazil has eroded the competitiveness of U.S.
commodities and they have no choice but to import corn and other
commodities from those markets. They stated that the U.S.-Colombia FTA
would allow them the opportunity to acquire more U.S. commodities.
However, price is paramount and if the United States cannot compete
they will continue to source products from our competitors.
U.S.-Colombia FTA Removes Tariff Constraints--Levels Playing Field
The benefits provided under the U.S.-Colombia FTA will eliminate
the tariff constraints that are eroding the competitiveness of U.S.
agricultural exports. Upon implementation of the FTA, the applied
tariffs are eliminated, providing immediate duty-free access to coarse
grains and more than 80 percent of current U.S. agricultural exports to
Colombia. Colombia will immediately eliminate its price band system,
which in addition to corn, affects more than 150 agricultural products.
For yellow corn, Colombia will provide immediate duty-free access
through a 2.1 million tariff rate quota (TRQ) with five percent annual
growth. Colombia will phase out its out-of-quota tariff of 25 percent
over 12 years. For white corn, a staple product for Colombia's
consumers, the agreement will provide immediate duty-free access
through a 136,500 ton TRQ with five percent annual growth. Colombia
will phase out the out-of-quota tariff on 20 percent over 12 years.
The Council has worked aggressively to promote the use of grain
sorghum in feed rations in Colombia. Under the agreement, Colombia will
provide immediate-duty free access through a 21,000 ton TRQ with five
percent annual growth. Colombia will phase out the out-of-quota tariff
of 25 percent over 12 years.
Tariffs on barley and barley products, with the exception of feed
barley, will be eliminated immediately. Important co-products--
distiller's dried grains, corn gluten feed and corn gluten meal--will
also be provided immediate duty-free access.
Concluding Remarks
In summary Mr. Chairman, Colombia is a key strategic market with
exceptional growth potential right in our own hemisphere. The United
States is already losing hundreds of millions of dollars in annual
exports and this is compounded by the loss or non-creation of thousands
of U.S. jobs. If U.S. agriculture is to remain competitive and
capitalize on this significant opportunity it must also maintain its
leadership role. Without removal of these trade constraints, the U.S.
coarse grains producer will lose this market.
If we are to collectively meet the critical objectives of the
National Export Initiative, we see great opportunity and progress if
there is ratification of the Colombia, Panama and South Korea FTAs.
Equally important, should Congress ratify these FTAs it will enhance
the credibility of the United States with its global trading partners
on the overall trade agenda and increase its ability as the world's
largest trading partner to marshal completion of the Doha Development
Round and the Trans-Pacific Partnership agreement.
Again, Mr. Chairman, Ranking Member Peterson, and Members of the
Committee, I appreciate the opportunity to present the views of the
U.S. Grains Council.
______
Submitted Statement by Audrae Erickson, President, Corn Refiners
Association
The Corn Refiners Association (CRA) is pleased to submit the
following comments for the record in response to the House of
Representatives Committee on Agriculture's hearing on the pending free
trade agreements with Colombia, Panama, and South Korea on May 12,
2011. The CRA strongly supports these agreements and urges swift
Congressional approval of them.
CRA is the national trade association representing the corn
refining (wet milling) industry of the United States. CRA and its
predecessors have served this important segment of American
agribusiness since 1913. Corn refiners manufacture sweeteners, ethanol,
starch, bioproducts, corn oil, and feed products from corn components
such as starch, oil, protein, and fiber. In 2010, our industry's
exports of refined corn products were valued at $2.3 billion.
CRA favors all three agreements because of their benefits to
agriculture in general and the corn refining industry in particular.
The specific benefits of each agreement are outlined below.
Colombia-U.S. Trade Promotion Agreement
Even with current restrictive tariffs, Colombia has been a growing
market for U.S. exports of refined corn products. Passage of this
agreement would accelerate this growth, particularly for corn gluten
feed and meal. Duties on these products will be eliminated immediately,
which would provide an important export market for the growing supply
of ethanol co-products in the United States.
In addition, duties on corn starch, crystalline fructose, dextrin,
and modified corn starch will be eliminated immediately. Colombian
tariffs on most processed food--a major market for U.S.-produced corn
starches, sweeteners, and oil--will be reduced to zero upon enactment
of the agreement. The elimination of price-band systems for vegetable
oils, coupled with full duty elimination in 5 years, will restore and
increase trade for U.S. corn oil that was lost in the 1990s. Duties on
most glucose syrup and high fructose corn syrup will be eliminated over
10 years. In the meantime, a new tariff-rate quota for U.S. glucose
syrup will expand trade by 300%.
While the CRA seeks the shortest path to duty free trade, the
significant market access granted in the Colombian agreement for
starches, sweeteners, oil, feed and processed food products is a major
step. CRA supports passage of the Colombian Trade Promotion Agreement.
Korea-U.S. Free Trade Agreement
Currently, Korea imposes high tariffs on refined corn imports that
prevent entry of many of our exports. Under the KORUS Agreement,
several products of the U.S. corn refining industry would have all
duties eliminated in 5 to 7 years, including corn oil, corn syrup, high
fructose corn syrup, and crystalline fructose.
The most highly protected segment of the Korean market for
processed corn products--corn starches and high-value modified
starches--would see duties eliminated over the life of the agreement
and new duty-free quotas will enable U.S. firms to enter the market
during this transition period.
While the KORUS awaits U.S. ratification, Korea is actively
pursuing free trade or preferential trade agreements with other
nations. It has successfully concluded agreements with the European
Union, the ASEAN group of countries, and India. Negotiations are
ongoing with Australia, Canada, China, Mexico, New Zealand, and Peru.
All of these countries are current or future competitors for the U.S.
corn processing industry in the Korean market. Failure to adopt the
KORUS will make the U.S. a residual supplier to the Korean market
compared to these countries, or will prevent U.S. corn refiners from
competing in this market altogether.
This is especially true in the case of corn starch products in the
Korea-European Union Agreement, an agreement that will go into force in
July 2011. The European Union secured a highly advantageous deal for
their starch exports, in some cases European starches received
approximately four times the market access that U.S. starches received.
Moreover, tariffs on European starch products are eliminated more
rapidly than tariffs on U.S. corn starch exports.
Failure to secure expeditious ratification of the KORUS will place
the U.S. corn refining industry at a significant competitive
disadvantage relative to its European competitors. We urge immediate
Congressional approval of the KORUS to ensure that the Korean market is
not handed over to the European starch industry.
Panama-U.S. Trade Promotion Agreement
The Corn Refiners Association also supports passage of the Panama-
U.S. Trade Promotion Agreement (TPA). Currently, Panama maintains
restrictive duties on imports of U.S. refined corn oil, dextrose,
crystalline fructose, and corn gluten feed and meal. The U.S.-Panama
TPA will eliminate these duties in incremental steps, resulting in full
free trade in all refined corn products in fifteen years. Immediate
tariff reductions for animal feed products will provide rapid
opportunities for U.S. exporters.
Thank you for the opportunity to provide these comments for the
record in conjunction with the House Agriculture Committee hearing.
______
Submitted Statement by International Dairy Foods Association
The International Dairy Foods Association (IDFA),\1\ representing
the nation's dairy processing and manufacturing industry, strongly
supports the pending free trade agreements (FTAs) with South Korea,
Colombia, and Panama. Dairy exports have grown into a vitally important
aspect of the U.S. dairy industry and continued expansion overseas is
the market's logical progression. The U.S. dairy market is fairly
mature, meaning that opportunities to grow domestic consumption of
dairy products are limited. Demand abroad, however, is growing rapidly.
In 2010, the U.S. exported over $3.7 billion worth of dairy products
around the world, up 64% from 2009 and the second-highest level ever.
The U.S. ran a dairy trade surplus last year of over $1.2 billion.
These numbers are a clear departure from a decade ago when the U.S.
dairy industry historically ran a trade deficit and many dairy product
exports occurred only due to government export subsidies.
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\1\ The International Dairy Foods Association (IDFA) represents the
nation's dairy manufacturing and marketing industries and their
suppliers, with a membership of 550 companies representing a $110
billion a year industry. Our member companies manufacture more than 85%
of the milk, cultured products, cheese and frozen desserts produced and
marketed in the United States.
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U.S. Dairy Import/Export Quantity: 2000-2010
Although job creation is difficult to quantify, it has been
estimated that every $1 billion increase in exports creates nearly
5,000 new jobs here in the United States. Several new dairy processing
plants have been built or expanded in recent years, resulting in more
jobs in our facilities and the opportunity for dairy farm operations to
grow. Much of the expansion in our industry in the past decade was
dependent upon export sales.
With the right domestic and international policies, we are
confident that these positive job creation and industry growth trends
will continue.
In 2009, the Innovation Center for U.S. Dairy, funded by dairy
producers, commissioned a study by Bain & Co. which found that
international demand for dairy products will grow faster than the
available world milk supply creating a latent demand gap resulting in
major export growth opportunities for the U.S. dairy industry. The
study found that our international competitors have problems that will
negatively affect their ability to fill the gap, but only in the near
term. Thus, the U.S. industry has a limited window of opportunity to
capture this significant increase in market share.
Global Dairy Net Trade: Milk Protein
Source: ``World Trade Trends 2008,'' USDEC; FAPRI.
The study recommended that the dairy industry focus its attention
on becoming a ``consistent exporter'' and that we change many of our
domestic and international policies in order to position our dairy
industry to take advantage of this opening. IDFA agrees with this
recommendation and urges you to review the full report.\2\
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\2\ http://www.usdairy.com/Globalization/GlobalImpactStudy/Pages/
BusinessCase.aspx.
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Concerning international policies, FTAs are an extremely important
opportunity to advance dairy trade and break down barriers that
obstruct the global growth of the dairy industry. The agreements
currently pending before Congress, including those with Colombia,
Panama, and South Korea, offer enormous potential for growth in new
markets for U.S. dairy products.
In particular, quick action is needed to move the Korea-U.S. Free
Trade Agreement (KORUS FTA) forward as South Korea's dairy market is
particularly important to American exporters. Assuming the U.S. is able
to make full use of the new market access opportunities negotiated,
this agreement embodies what IDFA believes is one of the most important
free trade deals for the American economy since the North American Free
Trade Agreement.
U.S. dairy exports to Korea have been subject to high tariffs
starting at 36 percent, while most of Korea's agricultural exports
enter the U.S. market with tariffs of about ten percent. Despite these
barriers, in 2010 South Korea constituted the U.S. dairy industry's
sixth largest export market and imported over $115 million worth of
American dairy products, which was a 72 percent increase over 2009.
South Korea was the fourth largest export destination for U.S. cheeses
and curds and the eighth largest export destination for ice cream and
related products.
Estimates from the U.S. International Trade Commission (ITC)
Report: U.S.-Korea Free Trade Agreement ``Potential Economy-wide and
Selected Sectoral Effects'' indicate that full implementation of the
KORUS agreement would increase U.S. dairy exports by $175-$336 million
(249-478 percent).\3\ The report notes that the domestic Korean dairy
industry is currently unable to supply total Korean demand for dairy
products. One-half of non-fluid dairy consumption in Korea is supplied
by imports. If the market access opportunities for the U.S. dairy
industry under the KORUS-FTA are fully realized, U.S. farmers,
processers and their suppliers are well positioned to meet this demand.
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\3\ Impact relative to a 2008 base. See chap. 2 of U.S.
International Trade Commission U.S.-Korea Free Trade Agreement:
Potential Economy-wide and Selected Sectoral Effects report for
additional information regarding the economy-wide analysis: http://
www.usitc.gov/publications/pub3949.pdf.
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Perhaps most importantly, the ITC report estimated that the dairy
sector would be among the industries seeing the largest gains in output
and employment. Based on Commerce Department multipliers, such an
increase in U.S. dairy exports could mean 10,000 or more additional
U.S. jobs when considering the effect across the dairy industry value
chain.
In addition to supporting the approval of the KORUS-FTA at the
earliest opportunity, IDFA also strongly supports quick approval of the
FTAs with Colombia and Panama. The estimated benefit to the U.S. dairy
industry over the first several years of each of these agreements will
be an additional $25 million per year, on average.
If Congress fails to act, these tremendous opportunities for market
expansion and resultant job growth in the U.S. will be critically
threatened, especially in light of the rapid pace at which the European
Union has negotiated competing FTAs with these countries.
With regard to domestic agriculture policy, the Bain report
specifically recommends against establishing policies that would create
a ``Fortress USA'' by establishing government programs which attempt to
manage dairy price volatility or control the supply of farm milk. The
report warns that such policies will lead the U.S. towards being a
secondary and inconsistent supplier thereby reducing opportunities for
growth in export markets.
When considering the potential benefits of the pending FTAs the
committee should be aware that the type of policies that would create a
``Fortress USA'' by establishing a new mandatory growth management
program to address volatility are being considered by Congress. Studies
of milk supply control programs established in other countries such as
Canada and the European Union have shown that exports decline and
imports increase under such programs.\4\ If growth management or price
stabilization programs are established here, they will work at cross
purposes to undermine the market access gains of the pending FTAs for
the dairy industry.
---------------------------------------------------------------------------
\4\ http://www.keepdairystrong.com/files/
Informa_International_Comparison_Supply_
Control_Impacts_0910.pdf.
---------------------------------------------------------------------------
One proposal in particular, the Dairy Market Stabilization Program,
that is included in a dairy reform package called the Foundation for
the Future, and sponsored by the National Milk Producers Federation
(NMPF), would create a new mandatory government program to limit milk
supply when producers' operating margins fall. NMPF claims that this
program will not have an impact on exports because it is temporary of
emergency in nature. However, studies sponsored by NMPF found that the
impact of the stabilization program will be to increase domestic prices
for dairy products well above international levels. Logically, this
will hurt U.S. dairy exports.
In fact, one of the studies prepared by FAPRI at the request of
NMPF specifically details the significant negative impact that the
stabilization program would have on U.S. dairy exports.\5\ In addition,
Informa Economics has also reviewed the FAPRI analysis of the
stabilization program and found that ``FAPRI's estimated average of
Class III and Class IV milk prices would have averaged $1.62 per
hundredweight more than the equivalent prices in Oceania, which likely
would have reduced U.S. exports from 14 billion pounds of milk
equivalent to just 12 billion pounds, a 14% reduction.'' \6\
---------------------------------------------------------------------------
\5\ http://www.fapri.missouri.edu/outreach/publications/2011/
FAPRI_MU_Report_04_
11_Appendix.pdf.
\6\ http://www.keepdairystrong.com/page.php?ID=InformaReports.
---------------------------------------------------------------------------
The adoption of the NMPF stabilization program, or any other
program to limit milk supply in an attempt to manipulate farm milk
prices, would clearly reduce our industry's ability to compete
internationally and harm our industry's ability to export dairy
products. Because the NMPF stabilization program triggers off and on,
U.S. dairy companies would be hard pressed to become reliable
exporters; our domestic prices would at times unpredictably be
manipulated by government policy to be above international competition.
As such, the so-called temporary operation of the program runs counter
to the importance of being a ``consistent'' or reliable supplier to the
world dairy market.
IDFA urges members of this Committee and Congress to work
diligently to approve these long-pending FTAs and to reject any effort
to impose milk supply controls. These actions are viewed by IDFA as
crucial to ensure the industry's continued overseas growth and logical
progression towards becoming a ``consistent exporter.''
IDFA appreciates the opportunity to provide comments on the
importance of these issues to the future of our industry. Thank you.
______
Submitted Questions
Response from Hon. Thomas ``Tom'' J. Vilsack, Secretary, U.S.
Department of Agriculture
Question Submitted by Hon. Reid J. Ribble, a Representative in Congress
from Wisconsin
Question. Mr. Secretary, given your Department's role in promoting
agriculture abroad and maintaining and expanding export markets for
America's agricultural products, and the President's stated goal of
doubling exports in the next 4 years, I would be curious to hear if
your agency has undertaken a review of a proposed rule from GIPSA
regarding the buying and selling of livestock. Specifically, I would
like to hear if you have analyzed the potential trade impacts this rule
will have on U.S. agricultural exports.
I have heard from pork and livestock producers in my district that
they are concerned that this rule will result in a single pricing
system and that value-based marketing programs will become a thing of
the past out of fear of legal challenges to differential pricing. I
know that many of our trading partners, specifically in Asian
countries, demand a unique product that requires a greater degree of
specialization to produce. How will the U.S. producer be able to meet
this demand if they are not adequately paid for their more ``high end''
product?
Answer. GIPSA has received a large number of comments addressing
the sections of the proposed rule regarding livestock purchasing
practices. Some of the comments addressed issues similar in nature to
the issue you have raised in this question. GIPSA will take the
comments into consideration in preparing the rule. While it would
violate the rules governing the rulemaking process to discuss the
details of what revisions are being considered based on the comments,
we fully recognize there are concerns with some aspects of the rule and
we are working to addressing them.
Question and Letter Submitted by Hon. Joe Courtney, a Representative in
Congress from Connecticut
Question. Extract from letter.
As Chairman of the Congressional Dairy Farmers Caucus, I
greatly appreciate the Administration's efforts to resolve the
export issues America's dairy farmers face in accessing India's
dairy market. During the hearing you had an exchange with my
colleague Congressman Tim Walz of Minnesota in which you
stressed the importance of respecting India's cultural
sensitivities regarding dairy trade. While I appreciate those
concerns, I would ask you to clearly state how USDA and USTR
plan to ensure that India honor their WTO obligations by basing
their requirements on scientific grounds and not on cultural
concerns, or perceived Indian consumer preferences.
Answer. As indicated in recent letters from Secretary Vilsack and
Ambassador Kirk to the dairy industry, USDA and USTR remain seriously
concerned about the issue of dairy access to the Indian market and will
accordingly continue to address our concerns, including any concerns
related to India's WTO obligations, through all appropriate fora that
can help lead to a resolution. This includes formal bilateral meetings,
technical exchanges where relevant, agriculture-related meetings in the
WTO, and informal opportunities for bilateral engagement, all of which
would continue to be premised on ensuring any restrictions are applied
in a non-discriminatory manner and are based on appropriate criteria
justifiable under the WTO agreements.
letter
Hon. Thomas J. Vilsack, Hon. Ron Kirk,
Secretary, Ambassador,
U.S. Department of Agriculture, U.S. Trade Representative,
Washington, D.C.; Washington, D.C.
Dear Secretary Vilsack and Ambassador Kirk,
I want to thank each of you for your recent testimony before the
House Agriculture Committee on pending free trade agreements with
Colombia, Korea and Panama.
I want to first take a moment to express my appreciation for your
efforts to increase trade and remove roadblocks that businesses face as
they attempt to enter the export market. During my most recent trade
mission to the United Kingdom, which I discussed at the hearing, it is
clear that there is more we can do together to increase opportunities
for American businesses in foreign markets.
I wanted to follow up with you regarding a matter I did not get to
discuss during my limited question and answer time. As Chairman of the
Congressional Dairy Farmers Caucus, I greatly appreciate the
Administration's efforts to resolve the export issues America's dairy
farmers face in accessing India's dairy market. During the hearing you
had an exchange with my colleague Congressman Tim Walz of Minnesota in
which you stressed the importance of respecting India's cultural
sensitivities regarding dairy trade. While I appreciate those concerns,
I would ask you to clearly state how USDA and USTR plan to ensure that
India honor their WTO obligations by basing their requirements on
scientific grounds and not on cultural concerns, or perceived Indian
consumer preferences.
I look forward to your response and appreciate your continued
efforts to increase opportunities for American businesses.
Sincerely,
Hon. Joe Courtney,
Member of Congress.
Response from Hon. Ron Kirk, United States Trade Representative
Question Submitted by Hon. Jim Costa, a Representative in Congress from
California
Question. I appreciated Sec. Vilsack's assurances at the hearing
about the need to find a fair and balanced outcome in TPP for America's
dairy industry. As you know from discussions and letters over the past
year, that objective and particularly the concerns about any expansion
of U.S.-New Zealand dairy trade, is very important to me and many of my
colleagues. How is USTR ensuring that this sensitive issue is being
dealt with at the most appropriate time and in a way that will
sufficiently address these concerns?
Answer. During the seventh round of TPP negotiations in Vietnam in
June, the United States made progress in market access discussions with
TPP partner countries with a goal of increasing U.S. food and
agricultural exports. There will be further discussions on market
access for agricultural products at the upcoming round in September. We
recognize fully the import sensitivities related to market access for
dairy products from New Zealand and continue to work closely with U.S.
industry and Congress to develop our approach in the negotiations. At
this stage, no decisions have been made on the issue of market access
for dairy products from New Zealand.
Questions Submitted by Hon. Peter Welch, a Representative in Congress
from Vermont
Question 1. The benefits to U.S. agriculture of increasing our
exports is clear. Secretary Vilsack stated that no U.S. agricultural
exports currently enjoy duty-free access to Colombia, but that 70
percent of current trade would be duty-free immediately when the FTA
enters into force. What impact will this have on farmers in Colombia?
Answer. Colombian farmers will gain improved market access in the
United States under the Agreement. In addition, and perhaps at least as
important, they will enjoy the certainty of long-term access to the
largest market in the world, which in turn encourages investment. Much
of Colombia's access to the U.S. market to date has been under time-
limited preference programs that were subject to expiration, which
created uncertainty.
Question 2. According to an Oxfam commissioned study by leading
Colombian economists there are 1.8 million small-scale farmers in
Colombia, 89 percent of the total farming population. They contribute
about half of agricultural production in Colombia, and nearly 30
percent of the area they cultivate is sown with crops that compete with
U.S. exports. The vast majority of these small farmers now live in
poverty. Has anyone within the USTR explored the impact on small-scale
Columbian farmers?
Answer. The Agreement provides for long phase-out periods for
tariffs on sensitive agricultural products, and applies other tools
such as agricultural safeguards, designed to enable local populations
to adjust gradually to trade liberalization. In addition, the phase-out
of Colombia's barriers to agricultural imports from the United States
will advance the competitiveness of Colombian agricultural interests
who use U.S. inputs and contribute to lowering the cost of food for
Colombian consumers. The Agreement also constitutes an important means
for fighting poverty by spurring new economic activity, creating jobs
and opportunities for Colombian workers. Finally, the Agreement
includes commitments to coordinate trade capacity building programs in
Colombia to help promote growth and reduce poverty.
0Question 3. According to Oxfam, \2/3\ of rural households in
Colombia live in poverty, and \1/3\ of those live in extreme poverty.
Rural poverty fuels both the armed conflict and the illegal economy.
The U.S. has invested $8 billion over the last decade in counter-
narcotics, counter-insurgency and alternative development efforts. If
small-scale farmers in Colombia are negatively impacted by the FTA
could this undermine our counter-narcotics and counter-insurgency
efforts? What can be done to ensure that this does not occur?
Answer. The U.S. Government and the Colombian Government have a
multi-part strategy to address this concern. First, as I indicated, the
Agreement contains a number of mechanisms to ensure an adjustment to
the new terms of competition. In addition, the U.S. Government
administers an integrated set of programs in Colombia to promote
alternative development as an important component of our
counternarcotics efforts. Both our governments are committed to
promoting development, growth and opportunity in Colombia while
combating narcotics production and trafficking.
Question 4. I want to thank you for meeting with the dairy caucus
during the last Congress. As you may remember from the meeting, I and
many of my colleagues are concerned about any expansion of U.S.-New
Zealand dairy trade as part of Trans Pacific Partnership FTA. Can you
provide an update on the progress of the TPP talks and how the issue of
NZ dairy is being dealt with?
Answer. During the seventh round of TPP negotiations, which were
held in Vietnam in June, the United States made progress in market
access discussions with TPP partner countries with a goal of increasing
U.S. food and agricultural exports. There will be further discussions
on market access with TPP partners at the September round. At this
stage, no decisions have been made on the issue of market access for
dairy products from New Zealand. USTR will continue to work closely
with the U.S. dairy industry and Congress as the negotiations move
forward.
Question 5. It is my understanding that sanitary and phytosanitary
(SPS) problems often hinder agricultural exports. As the USTR moves
forward with the Korea, Panama, and Columbia FTA's can you discuss how
these issues are handled in the three agreements and how what USTR is
doing to combat this problem plaguing agricultural exports with other
countries?
Answer. The South Korea, Colombia, and Panama trade agreements will
open markets for U.S. firms, increasing trade and exports. Increasing
U.S. exports through these agreements will support additional jobs for
American workers and support the Administration's goal of doubling U.S.
exports by 2014. In particular, these three agreements will provide
important opportunities to significantly increase economic benefits for
American farmers and ranchers, as the agreements will eliminate high
tariffs and restrictive tariff rate quotas and address non-tariff
measures that limit market access. As to the latter, all three
agreements lay out a framework to help ensure that the sanitary and
phytosanitary measures of the parties to these agreements are based on
science and international standards and do not unfairly block
agricultural exports. These provisions will help U.S. exporters
maintain and enhance their competitiveness against other suppliers in
these key foreign markets.
Question and Letter Submitted by Hon. Steve Southerland II, a
Representative in Congress from Florida
Question. Extract from May 12, 2011 letter.
As you are aware, on October 12, 2006, the second U.S.-Canada
Softwood Lumber Agreement (SLA) came into effect and terminated
more than 20 different legal disputes surrounding Canada's
softwood lumber subsidies and below cost of production sales in
the U.S. market. The agreement encourages Canadian provinces to
forego their long-standing practices of subsidizing Canadian
lumber production.
These unfair trade practices have caused hundreds of U.S.
lumber mill closures, thousands of U.S. job losses, and have
suppressed the market for thousands of private timberland
owners.
Effective enforcement of the U.S.-Canada Softwood Lumber
Agreement can make the difference between survival and
permanent closures for U.S. softwood lumber manufacturers.
Your assistance would be appreciated in providing my office
and the House Committee on Agriculture, information regarding
what steps the Office of the U.S. Trade Representative has
taken to resolve unfair trade practices affecting the U.S.
lumber industry and forestry producers to sustain and promote
economic growth and fair trade policy. Specifically please
provide details on actions to resolve non-compliance with the
U.S.-Canada Softwood Lumber Agreement and whether your agency
is prepared to take appropriate enforcement steps in a timely
manner should Canada further violate this trade agreement?
Answer This Administration has made enforcement of the 2006
Softwood Lumber Agreement (SLA) a top priority and is fully committed
to its swift enforcement. USTR actively manages the SLA and will
continue to evaluate and act on any evidence of non-compliance to
ensure that the Agreement is enforced.
The United States has pursued three arbitrations in the LCIA
against Canada under the SLA within the last 4 years. In each case we
have challenged what appear to be actions taken by Canadian Government,
in breach of the SLA.
We prevailed in the first two arbitrations, which resulted in the
imposition of additional export charges totaling over $100 million on
certain softwood lumber products coming from Canada into the United
States. The third arbitration, which is currently underway, concerns
alleged under pricing of logs in British Columbia.
As our record demonstrates, the United States is committed to
taking timely action to hold Canada accountable for circumventing the
SLA.
We also would note that industry stakeholders have been satisfied
with the SLA, and Canada's share of U.S. consumption has fallen from 33
percent in 2006 to 29 percent in 2010.
letter
May 12, 2011
The Honorable Ron Kirk, United States Trade Representative (USTR):
Thank you for your testimony before the House Agriculture
Committee, Hearing to Review Pending Trade Agreements of May 12, 2011.
I appreciate the opportunity you took to testify on behalf of the
Administration's trade agenda and the promotion of economic growth for
U.S. producers in the global market.
As you noted in your testimony, ``American farmers and ranchers
thrive in today's competitive global marketplace because they are the
most efficient and productive producers in the world. Given a level-
playing field, they can out-compete agricultural producers from any
other country.'' Toward that end, I ask for your continued attention to
the issues affecting U.S. lumber production with the goal of open
competition, free of subsidies, to enhance and sustain jobs and promote
fair trade among nations.
As you may agree, subsidized lumber imports are not in the best
interest of forest landowners and softwood lumber manufacturing
facilities in Florida and throughout the United States. Since nearly
all of the Canadian timberland is owned by the government, Canadian
subsidies may not only affect the commodity price for lumber, but also
the value of the forest resource.
Lumber mills in Florida and the United State pay market value for
timber that, on average, represents roughly 65-70 percent of a mill's
variable production cost. Canadian lumber shipments to the United
States beyond the market-supported level results in artificially
depressed prices that affect sawmills and the value of the resource for
the landowner.
With timber prices falling in Florida and throughout the U.S. and
mill closings occurring almost daily, Florida landowners and lumber
sawmills are facing a crisis. Lumber prices are below 1995 levels and
shutdowns are spreading as import volumes increase. Free and open
competition for lumber and logs is the only real long-term solution to
the problem.
As you are aware, on October 12, 2006, the second U.S.-Canada
Softwood Lumber Agreement (SLA) came into effect and terminated more
than 20 different legal disputes surrounding Canada's softwood lumber
subsidies and below cost of production sales in the U.S. market. The
agreement encourages Canadian provinces to forego their long-standing
practices of subsidizing Canadian lumber production.
These unfair trade practices have caused hundreds of U.S. lumber
mill closures, thousands of U.S. job losses, and have suppressed the
market for thousands of private timberland owners.
Effective enforcement of the U.S.-Canada Softwood Lumber Agreement
can make the difference between survival and permanent closures for
U.S. softwood lumber manufacturers.
Your assistance would be appreciated in providing my office and the
House Committee on Agriculture, information regarding what steps the
Office of the U.S. Trade Representative has taken to resolve unfair
trade practices affecting the U.S. lumber industry and forestry
producers to sustain and promote economic growth and fair trade policy.
Specifically please provide details on actions to resolve non-
compliance with the U.S.-Canada Softwood Lumber Agreement and whether
your agency is prepared to take appropriate enforcement steps in a
timely manner should Canada further violate this trade agreement?
Thank you very much. These efforts will not only result in
strengthening and enhancing U.S. trade policy, but are also in keeping
with USTR's stated goal of, ``greater prosperity for American
agriculture, and for the entire American economy.''
Question and Letter Submitted by Hon. Joe Courtney, a Representative in
Congress from Connecticut
Question. Extract from letter.
Dear Secretary Vilsack and Ambassador Kirk,
* * * * *
I wanted to follow up with you regarding a matter I did not
get to discuss during my limited question and answer time. As
Chairman of the Congressional Dairy Farmers Caucus, I greatly
appreciate the Administration's efforts to resolve the export
issues America's dairy farmers face in accessing India's dairy
market. During the hearing you had an exchange with my
colleague Congressman Tim Walz of Minnesota in which you
stressed the importance of respecting India's cultural
sensitivities regarding dairy trade. While I appreciate those
concerns, I would ask you to clearly state how USDA and USTR
plan to ensure that India honor their WTO obligations by basing
their requirements on scientific grounds and not on cultural
concerns, or perceived Indian consumer preferences.
Answer. As indicated in recent letters from Secretary Vilsack and
Ambassador Kirk to the dairy industry, USDA and USTR remain seriously
concerned about the issue of dairy access to the Indian market and will
accordingly continue to raise our concerns, including any concerns
related to India's WTO obligations, through all appropriate fora that
can help lead to a resolution. This includes formal bilateral meetings,
technical exchanges where relevant, agriculture-related meetings in the
WTO, and informal opportunities for bilateral engagement, all of which
would continue to be premised on ensuring any restrictions are applied
in a non-discriminatory manner and are based on appropriate criteria
justifiable under the WTO agreements.
letter
Hon. Thomas J. Vilsack, Hon. Ron Kirk,
Secretary, Ambassador,
U.S. Department of Agriculture, U.S. Trade Representative,
Washington, D.C.; Washington, D.C.
Dear Secretary Vilsack and Ambassador Kirk,
I want to thank each of you for your recent testimony before the
House Agriculture Committee on pending free trade agreements with
Colombia, Korea and Panama.
I want to first take a moment to express my appreciation for your
efforts to increase trade and remove roadblocks that businesses face as
they attempt to enter the export market. During my most recent trade
mission to the United Kingdom, which I discussed at the hearing, it is
clear that there is more we can do together to increase opportunities
for American businesses in foreign markets.
I wanted to follow up with you regarding a matter I did not get to
discuss during my limited question and answer time. As Chairman of the
Congressional Dairy Farmers Caucus, I greatly appreciate the
Administration's efforts to resolve the export issues America's dairy
farmers face in accessing India's dairy market. During the hearing you
had an exchange with my colleague Congressman Tim Walz of Minnesota in
which you stressed the importance of respecting India's cultural
sensitivities regarding dairy trade. While I appreciate those concerns,
I would ask you to clearly state how USDA and USTR plan to ensure that
India honor their WTO obligations by basing their requirements on
scientific grounds and not on cultural concerns, or perceived Indian
consumer preferences.
I look forward to your response and appreciate your continued
efforts to increase opportunities for American businesses.
Sincerely,
Hon. Joe Courtney,
Member of Congress.
Questions and Letters Submitted by Hon. Reid J. Ribble, a
Representative in Congress from Wisconsin
Question 1. Ambassador Kirk, you referenced in your testimony
USTR's work on a Trans-Pacific Partnership sanitary and phytosanitary
(SPS) Chapter that ``builds on WTO obligations to ensure that
regulations in each country are science-based and transparent, and
result in meaningful market access openings for America's farmers,
ranchers and workers.'' I applaud USTR's commitment to this goal, given
its importance to American agriculture. Could you explain further what
USTR is doing to ensure that these obligations would be genuinely
effective in addressing the most common barriers our agricultural
exports face, such as constantly evolving import certificate
requirements and a lack of clearly mandated time-frames for commenting
on and adjusting to changing SPS requirements?
Answer. The TPP Sanitary and Phytosanitary (SPS) negotiations
provide the United States with a strong opportunity to resolve specific
trade concerns. In addition to affirming our current WTO obligations,
the United States would like to use the TPP to promote improved
transparency and the need for science based SPS measures. Too often, we
encounter barriers in other countries that are imposed without proper
notification. And most importantly, many barriers are not based on
science and sound risk assessments. In Singapore, the United States
introduced a new SPS text proposal with detailed transparency and risk
analysis obligations for all Parties that will ensure that stakeholders
are aware of proposed regulations, have a chance to review and comment
and review the underlying scientific basis for the measure prior to
implementation. We will continue to focus our SPS negotiations building
on WTO obligations to ensure that regulations are science based,
transparent and result in meaningful market access openings for
America's farmers, ranchers and workers.
Question 2. Ambassador Kirk, Thailand is the largest beneficiary of
the Generalized System of Preferences program, shipping over $3 billion
in products through this program to the United States last year.
However, Thailand does not provide reciprocal market access; it has a
de facto ban on U.S. pork. The country discriminates against U.S. pork
by refusing any pork that was produced with the FDA-approved feed
additive ractopamine, applying excessive import inspection fees, and
rarely issuing pork import permits. Each of these barriers appears to
violate WTO rules. What is USTR doing to open the Thai market to U.S.
pork exports?
Answer. Thailand continues to maintain barriers that limit access
of U.S. producers to the Thai market, including continuing to ban pork
containing trace amounts of ractopamine. Such a restriction is
inconsistent with recommendations of recognized international
scientific bodies, and Thailand has not produced any scientific
evidence to warrant this restriction. USTR, in close collaboration with
USDA, continues to urge Thailand at every opportunity to resolve this
issue so that we can normalize pork trade based on science and in a
commercially viable manner. For example in June, USTR officials met
with Thai officials to urge Thailand to lift this unwarranted
restriction on U.S. pork.
Question 3. Extract from attachment 1.
Collectively, America's packaged food and beverage industry
is a job creator representing 1.7 million manufacturing jobs--
14% of total U.S. manufacturing jobs. The industry produces
300,000 products and annually exports over $50 billion worth of
goods to more than 200 countries. In 2010, packaged food and
beverage exports of over $50 billion exceeded food imports by
over $10 billion. Very simply, our industry is one of our
nation's few net exporters.
However, the longer it takes to implement these agreements,
the more we risk losing not only future opportunities to create
jobs and increase exports, but also the market share and access
we currently enjoy. Already these countries either have, or are
pursuing, free trade pacts with some of our biggest economic
competitors. An agreement between South Korea and the European
Union (EU) will take effect July 1, jeopardizing 345,000 U.S.
jobs and $1.7 billion in U.S. food exports. Similarly, Colombia
already has trade pacts with the EU and Canada in place, while
Panama has agreements with Canada and Chile.
Each of these pending agreements provides significant new
market access opportunities for the foods and beverages we
produce, including immediate duty-free access for many of our
products and greatly improved tariff treatment for other
products. We encourage Congress and the White House to take all
necessary steps to ensure each of these agreements can be
approved and implemented as soon as possible.
In addition, we urge Congress to approve long-term extensions
of the Andean Trade Preferences and Drug Eradication Act and
the Generalized System of Preferences. These trade preference
agreements enable U.S. businesses to globally source inputs and
products, not readily available in the U.S., helping to reduce
costs for businesses and consumers. Reauthorizing these
agreements will go a long way to reducing the uncertainties
many of our companies now face when attempting to engage
international trade partners.
Our organizations believe we must embrace these opportunities
now in order to provide America with a much needed economic
boost. We ask you to act quickly to approve and extend these
trade pacts and help dramatically improve the economic outlook
for U.S. businesses. Our organizations stand ready to work with
Congress and the Administration to help ensure that the promise
offered by these trade agreements soon becomes a reality.
Answer. President Obama has made sure that these agreements with
South Korea, Colombia, and Panama are fairer for American workers and
businesses, hold our partners accountable to keep their promises, and
also reflect core American values on key issues like worker rights and
protections. These agreements will help to boost U.S. exports and
support tens of thousands of American jobs, and we are committed to
their passage. Advancing Trade Adjustment Assistance with these pending
pacts is the right thing to do--because a balanced trade agenda
recognizes the tough realities of trade for some Americans, even as we
seize trade's opportunities to create jobs here at home. America can
and must do both, and we look forward to working with Congress to
secure approval of the three agreements.
We also agree that it is important to renew the Generalized System
of Preferences and the Andean Trade Preference Act, which expired in
December 2010 and February 2011, respectively. These programs are
designed to promote economic growth in the developing world by
providing preferential duty-free entry for products from designated
beneficiary countries and territories; they also support American jobs
and improve American competitiveness since many American businesses use
imports under these programs as inputs to manufacture goods in the
United States.
Question 3. Extract from attachment 2.
As we work to recover from one of the worst recessions in our
nation's history, we urge you to send implementing language to
Congress on the pending free trade agreements (FTAs) with South
Korea, Colombia, and Panama as quickly as possible. If they are
fully implemented, these FTAs will represent nearly $3 billion
in new trade for American agricultural producers.
However, we are concerned that inaction on the pending FTAs
will result in lost opportunities for American farmers and
ranchers. Colombia will soon implement trade agreements with
Canada and the European Union, while Argentina and Brazil
already have critical access to the Colombian market.
Similarly, South Korea is in the process of completing trade
pacts with many of our agricultural competitors, including
Chile, Australia, New Zealand, Canada, the European Union, and
Mexico. At a time when unemployment still hovers around nine
percent, we cannot afford to sacrifice significant access to
these overseas markets.
Should the U.S.-Korea Free Trade Agreement (KORUS FTA) be
adopted in short order, increased farm exports to South Korea
will likely surpass $1.8 billion annually, a 46 percent
increase over current levels. U.S. exports of wheat, corn,
soybeans, cotton, fresh cherries, grape juice, and numerous
other processed foods will receive immediate duty-free access
under the FTA. Additionally, the U.S. dairy industry, which
endured significant losses amidst the global economic downturn
in 2009, will take in roughly $380 million per year during the
first few years of the FTA as a result of expanded market
access for cheese, whey, skim milk powder, and other products.
The KORUS FTA, if realized at its full potential, would result
in the creation of thousands of new jobs in the agricultural
and rural sectors of our economy.
Likewise, implementation of the U.S.-Colombia Trade Promotion
Agreement would enable over 80 percent of current U.S. exports
to become duty-free upon enactment, including beef, cotton,
wheat, soybeans, apples, and cherries. Total export gains for
American agriculture would likely exceed $815 million per year
upon full implementation. Similarly, the U.S.-Panama Trade
Promotion Agreement would allow more than half of our current
agricultural exports to become duty-free immediately upon
implementation. Additional exports could total $195 million as
a result of the pact's approval. The two FTAs combined would
likely yield between 6,000 and 8,000 new jobs as a result of
this enhanced market access.
While you are undoubtedly familiar with these figures, we
believe that they bear repeated emphasis in the current
economic climate. Moreover, moving forward on these FTAs would
support the President's stated goal of doubling U.S. exports by
2014. We know from our experience building businesses, in some
cases in agriculture, that increasing trade nets new jobs
across many sectors of our economy. We therefore support quick
action on the FTAs with South Korea, Colombia, and Panama and
we are hopeful that you will send us the implementing language
for the pacts in very short order.
Answer. We agree that the three pending trade agreements with South
Korea, Panama, and Colombia, will support tens of thousands of American
jobs--each one a lifeline to a working family in this country. The
Administration has successfully addressed the concerns that had been
raised with respect to each of the agreements. We are eager to work
with Congress to advance these agreements along with a responsible,
cost-effective Trade Adjustment Assistance package.
attachment 1
May 5, 2011
Hon. John A. Boehner, Hon. Harry Reid,
Speaker, Majority Leader,
U.S. House of Representatives, U.S. Senate,
Washington, D.C.; Washington, D.C.;Hon. Nancy Pelosi, Hon. Mitch McConnell,
Democratic Leader, Republican Leader,
U.S. House of Representatives, U.S. Senate,
Washington, D.C.; Washington, D.C..
Dear Speaker Boehner and Leaders Reid, Pelosi and McConnell:
Our organizations represent a diverse spectrum of food and beverage
manufacturers who play a pivotal role in helping nourish our nation and
the world. We have joined together to express our support for action on
a variety of trade initiatives, including swift approval and
implementation of free trade agreements with Colombia, Panama and South
Korea.
America exports more than $2 billion worth of food and beverage
products to Colombia, Panama and South Korea each year, a figure that
will surely grow as a result of our pending free trade agreements with
these countries--further increasing our industry's already large world-
wide net export position.
Collectively, America's packaged food and beverage industry is a
job creator representing 1.7 million manufacturing jobs--14% of total
U.S. manufacturing jobs. The industry produces 300,000 products and
annually exports over $50 billion worth of goods to more than 200
countries. In 2010, packaged food and beverage exports of over $50
billion exceeded food imports by over $10 billion. Very simply, our
industry is one of our nation's few net exporters.
However, the longer it takes to implement these agreements, the
more we risk losing not only future opportunities to create jobs and
increase exports, but also the market share and access we currently
enjoy. Already these countries either have, or are pursuing, free trade
pacts with some of our biggest economic competitors. An agreement
between South Korea and the European Union (EU) will take effect July
1, jeopardizing 345,000 U.S. jobs and $1.7 billion in U.S. food
exports. Similarly, Colombia already has trade pacts with the EU and
Canada in place, while Panama has agreements with Canada and Chile.
Each of these pending agreements provides significant new market
access opportunities for the foods and beverages we produce, including
immediate duty-free access for many of our products and greatly
improved tariff treatment for other products. We encourage Congress and
the White House to take all necessary steps to ensure each of these
agreements can be approved and implemented as soon as possible.
In addition, we urge Congress to approve long-term extensions of
the Andean Trade Preferences and Drug Eradication Act and the
Generalized System of Preferences. These trade preference agreements
enable U.S. businesses to globally source inputs and products, not
readily available in the U.S., helping to reduce costs for businesses
and consumers. Reauthorizing these agreements will go a long way to
reducing the uncertainties many of our companies now face when
attempting to engage international trade partners.
Our organizations believe we must embrace these opportunities now
in order to provide America with a much needed economic boost. We ask
you to act quickly to approve and extend these trade pacts and help
dramatically improve the economic outlook for U.S. businesses. Our
organizations stand ready to work with Congress and the Administration
to help ensure that the promise offered by these trade agreements soon
becomes a reality.
Sincerely,
American Bakers Association;
American Beverage Association;
American Frozen Food Institute;
American Meat Institute;
Distilled Spirits Council of the United States;
Grocery Manufacturers Association;
International Dairy Foods Association;
National Chicken Council;
National Confectioners Association;
National Fisheries Institute;
National Frozen Pizza Institute;
National Turkey Federation;
Pet Food Institute;
Snack Food Association;
Sweetener Users Association.
CC:
Senate Finance Committee;
House Ways and Means Committee;
House Agriculture Committee.
attachment 2
April 19, 2011
Hon. Ron Kirk,
U.S. Trade Representative,
Washington, D.C.
Dear Ambassador Kirk:
We write to you as new Members of the House of Representatives with
proven experience creating jobs, manufacturing products, and providing
services. To put our business backgrounds to use, we have recently
formed a working group to propose and advance policy intended to spur
job growth throughout our economy. Our experience bears out that
expanding trade will support new jobs in many industries, but few
sectors are as trade-dependent as agriculture, which drives commerce in
many of our Congressional Districts.
As we work to recover from one of the worst recessions in our
nation's history, we urge you to send implementing language to Congress
on the pending free trade agreements (FTAs) with South Korea, Colombia,
and Panama as quickly as possible. If they are fully implemented, these
FTAs will represent nearly $3 billion in new trade for American
agricultural producers.
However, we are concerned that inaction on the pending FTAs will
result in lost opportunities for American farmers and ranchers.
Colombia will soon implement trade agreements with Canada and the
European Union, while Argentina and Brazil already have critical access
to the Colombian market. Similarly, South Korea is in the process of
completing trade pacts with many of our agricultural competitors,
including Chile, Australia, New Zealand, Canada, the European Union,
and Mexico. At a time when unemployment still hovers around nine
percent, we cannot afford to sacrifice significant access to these
overseas markets.
Should the U.S.-Korea Free Trade Agreement (KORUS FTA) be adopted
in short order, increased farm exports to South Korea will likely
surpass $1.8 billion annually, a 46 percent increase over current
levels. U.S. exports of wheat, corn, soybeans, cotton, fresh cherries,
grape juice, and numerous other processed foods will receive immediate
duty-free access under the FTA. Additionally, the U.S. dairy industry,
which endured significant losses amidst the global economic downturn in
2009, will take in roughly $380 million per year during the first few
years of the FTA as a result of expanded market access for cheese,
whey, skim milk powder, and other products. The KORUS FTA, if realized
at its full potential, would result in the creation of thousands of new
jobs in the agricultural and rural sectors of our economy.
Likewise, implementation of the U.S.-Colombia Trade Promotion
Agreement would enable over 80 percent of current U.S. exports to
become duty-free upon enactment, including beef, cotton, wheat,
soybeans, apples, and cherries. Total export gains for American
agriculture would likely exceed $815 million per year upon full
implementation. Similarly, the U.S.-Panama Trade Promotion Agreement
would allow more than half of our current agricultural exports to
become duty-free immediately upon implementation. Additional exports
could total $195 million as a result of the pact's approval. The two
FTAs combined would likely yield between 6,000 and 8,000 new jobs as a
result of this enhanced market access.
While you are undoubtedly familiar with these figures, we believe
that they bear repeated emphasis in the current economic climate.
Moreover, moving forward on these FTAs would support the President's
stated goal of doubling U.S. exports by 2014. We know from our
experience building businesses, in some cases in agriculture, that
increasing trade nets new jobs across many sectors of our economy. We
therefore support quick action on the FTAs with South Korea, Colombia,
and Panama and we are hopeful that you will send us the implementing
language for the pacts in very short order.
Sincerely,
Hon. Reid J. Ribble, Hon. Tom Reed,
Member of Congress; Member of Congress;
Hon. Billy Long, Hon. Vicky Hartzler,
Member of Congress; Member of Congress;
Hon. Marlin A. Stutzman, Hon. Richard L. Hanna,
Member of Congress; Member of Congress;
Hon. Robert T. Schilling, Hon. Eric A. ``Rick'' Crawford,
Member of Congress; Member of Congress;
Hon. Mike Kelly, Hon. E. Scott Rigell,
Member of Congress; Member of Congress;
Hon. Robert J. Dold, [*]
Member of Congress;
* Editor's note: There was no
signatory adjacent to Mr. Dold's
signature.
Hon. Bill Flores, Hon. Diane Black,
Member of Congress; Member of Congress.