[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]




 
FOREIGN SUBSIDIES: JEOPARDIZING FREE TRADE AND HARMING AMERICAN FARMERS

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

                                HEARING

                               BEFORE THE

                        COMMITTEE ON AGRICULTURE
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                            OCTOBER 21, 2015

                               __________

                           Serial No. 114-31
                           
                           
                           
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                        COMMITTEE ON AGRICULTURE

                  K. MICHAEL CONAWAY, Texas, Chairman

RANDY NEUGEBAUER, Texas,             COLLIN C. PETERSON, Minnesota, 
    Vice Chairman                    Ranking Minority Member
BOB GOODLATTE, Virginia              DAVID SCOTT, Georgia
FRANK D. LUCAS, Oklahoma             JIM COSTA, California
STEVE KING, Iowa                     TIMOTHY J. WALZ, Minnesota
MIKE ROGERS, Alabama                 MARCIA L. FUDGE, Ohio
GLENN THOMPSON, Pennsylvania         JAMES P. McGOVERN, Massachusetts
BOB GIBBS, Ohio                      SUZAN K. DelBENE, Washington
AUSTIN SCOTT, Georgia                FILEMON VELA, Texas
ERIC A. ``RICK'' CRAWFORD, Arkansas  MICHELLE LUJAN GRISHAM, New Mexico
SCOTT DesJARLAIS, Tennessee          ANN M. KUSTER, New Hampshire
CHRISTOPHER P. GIBSON, New York      RICHARD M. NOLAN, Minnesota
VICKY HARTZLER, Missouri             CHERI BUSTOS, Illinois
DAN BENISHEK, Michigan               SEAN PATRICK MALONEY, New York
JEFF DENHAM, California              ANN KIRKPATRICK, Arizona
DOUG LaMALFA, California             PETE AGUILAR, California
RODNEY DAVIS, Illinois               STACEY E. PLASKETT, Virgin Islands
TED S. YOHO, Florida                 ALMA S. ADAMS, North Carolina
JACKIE WALORSKI, Indiana             GWEN GRAHAM, Florida
RICK W. ALLEN, Georgia               BRAD ASHFORD, Nebraska
MIKE BOST, Illinois
DAVID ROUZER, North Carolina
RALPH LEE ABRAHAM, Louisiana
JOHN R. MOOLENAAR, Michigan
DAN NEWHOUSE, Washington
TRENT KELLY, Mississippi

                                 ______

                    Scott C. Graves, Staff Director

                Robert L. Larew, Minority Staff Director

                                  (ii)
                                  
                                  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Conaway, Hon. K. Michael, a Representative in Congress from 
  Texas, opening statement.......................................     1
    Prepared statement...........................................     3
Peterson, Hon. Collin C., a Representative in Congress from 
  Minnesota, opening statement...................................     4

                               Witnesses

Hayes, Ph.D., Dermot J., Pioneer Hi-Bred International Chair in 
  Agribusiness, Professor of Finance, and Professor of Economics, 
  Departments of Economics and Finance, Iowa State University, 
  Ames, IA.......................................................     5
    Prepared statement...........................................     6
Adams, Ph.D., Gary M., President and Chief Executive Officer, 
  National Cotton Council, Cordova, TN...........................     8
    Prepared statement...........................................     9
Roney, Jack, Director of Economics and Policy Analysis, American 
  Sugar Alliance, Arlington, VA..................................    17
    Prepared statement...........................................    19
Castaneda, Jaime A., Senior Vice President, Strategic Initiatives 
  & Trade Policy, National Milk Producers Federation, Arlington, 
  VA.............................................................    27
    Prepared statement...........................................    29
    


FOREIGN SUBSIDIES: JEOPARDIZING FREE TRADE AND HARMING AMERICAN FARMERS

                              ----------                              


                      WEDNESDAY, OCTOBER 21, 2015

                          House of Representatives,
                                  Committee on Agriculture,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
1300 of the Longworth House Office Building, Hon. K. Michael 
Conaway [Chairman of the Committee] presiding.
    Members present: Representatives Conaway, Goodlatte, Lucas, 
King, Austin Scott of Georgia, Crawford, Hartzler, Benishek, 
LaMalfa, Yoho, Allen, Bost, Rouzer, Abraham, Moolenaar, 
Newhouse, Kelly, Peterson, Walz, McGovern, DelBene, Vela, Lujan 
Grisham, Kuster, Nolan, Kirkpatrick, Aguilar, Plaskett, Adams, 
Graham, and Ashford.
    Staff present: Bart Fischer, Callie McAdams, Haley Graves, 
Matt Schertz, Mollie Wilken, Scott C. Graves, Skylar Sowder, 
Faisal Siddiqui, John Konya, Andy Baker, Mary Knigge, Mike 
Stranz, Nicole Scott, and Carly Reedholm.

OPENING STATEMENT OF HON. K. MICHAEL CONAWAY, A REPRESENTATIVE 
                     IN CONGRESS FROM TEXAS

    The Chairman. All right, good morning everybody. We will 
start the hearing. I have asked Ralph Abraham to open with a 
quick prayer. Ralph.
    Mr. Abraham. Well, let's pray. Heavenly Father, we 
certainly appreciate the beautiful day you have afforded us, 
and thank you for the bounty that this nation provides us on a 
daily basis. We ask for your wisdom and understanding as we go 
through this hearing, this week, and this month. And we ask 
these things in Jesus' name. Amen.
    The Chairman. Thank you, Ralph.
    This hearing of the Committee on Agriculture regarding 
foreign subsidies jeopardizing free trade and harming American 
farmers, will come to order.
    The purpose of today's hearing is to examine the high and 
rising foreign subsidies, tariffs, and other barriers to trade 
and their impacts on American farmers and ranchers and the 
future of free trade.
    As you will recall, on June 3, this Committee held a 
hearing where witnesses catalogued the actions major foreign 
competitors around the world are taking to support their 
agricultural industries. In that hearing, we explored the 
findings of several studies indicating that already high 
foreign tariffs, subsidies, and trade barriers are on the rise. 
We learned that in many cases, what foreign countries are doing 
is patently illegal under their World Trade Organization 
commitments, while in other instances, foreign countries are 
extending support to their agricultural sectors in ways that 
fly below the radar of WTO discipline. And still in other 
cases, we learned of countries getting a free pass to ignore 
WTO rules by declaring themselves developing, despite these 
countries having very mature, strong, and in some cases, 
globally dominant agricultural sectors.
    Today, we are going to hear from a panel of witnesses who 
will testify to the very tangible impacts of these foreign 
countries' activities on America's farmers and ranchers.
    Based on the written testimony of our witnesses, this 
hearing will give those who doubt the need for U.S. farm policy 
a glimpse into what American farmers and ranchers are up 
against every single day. Their testimony is also a warning to 
our nation's trade negotiators that patience in a sector 
critical to passing future trade agreements is wearing thin.
    In 1993, Trade Promotion Authority, or TPA, was approved in 
the Senate by a vote of 76 to 16, and in the House by a vote of 
295 to 126. At that time, TPA won overwhelming majorities of 
Democrats and Republicans. But in this Congress, TPA was 
approved in the Senate by a margin of 60 to 38, and the House 
by a margin of only 218 to 208.
    The Senate's relatively healthy vote in support of TPA this 
Congress betrays the significant shift that has taken place 
over the last 23 years. A substantial majority of Democrats in 
both chambers and an increasing number of Republicans opposed 
TPA this go around. And, of course, in the House, TPA barely 
passed.
    Now, the Trans-Pacific Partnership has just concluded, but 
many question whether the newly minted agreement will have to 
wait until a lame duck session of Congress for consideration. 
Some speculate that Congressional consideration of TPP could 
just as easily slip into 2017.
    In short, it doesn't take a trade expert to recognize that 
these are not good omens for the future of our nation's trade 
agenda. Put simply: Americans are losing confidence in our 
trade deals.
    Now, I want to be clear that my aim here is not to place 
blame. This is a problem that has been brewing for a long time, 
and I am sure that there is plenty of blame to go around, but, 
I will offer one remedy. Our government must begin to take on 
those who are cheating on their trade commitments. These 
actions by our foreign competitors are undermining our trade 
agenda and, as we will hear in testimony today, cheating by 
foreign countries is also causing serious injury to our 
nation's farmers and ranchers.
    In the case of cotton farmers, who are substantially 
excluded from the farm bill's safety net, these producers have 
been whipsawed by Communist China's erratic policies. China has 
driven global cotton prices to record highs, only to then send 
them into a total free-fall. Despite these circumstances, there 
is little to no help for American cotton producers made 
available under the farm bill.
    There are a limited number of things that Members of 
Congress can do to draw attention to this serious situation. 
First, we can highlight the cheating going on around the world 
and to understand how it is harming the American people, jobs, 
and our economy, much like we are going to do today. Although, 
perhaps in the future we will need to explore taking more 
formal, legislative action to ensure our point is made and our 
rights under various trade agreements are enforced. In this 
regard, I really want to commend U.S. sugar farmers for banding 
together in successfully stopping the illegal dumping that was 
occurring back in 2013.
    Second, in the case of agriculture, we can maintain a 
strong U.S. farm policy and, when warranted, we can further 
strengthen that policy in order to give our farmers a fighting 
chance against the cheating that is going on.
    For the good of free trade, for the good of our farmers and 
ranchers, and for the good of our nation's economy and jobs, 
business as usual is no longer good enough. Things must change. 
Our agreements must be enforced.
    I hope that one day our trade agenda is able to zero out 
subsidies, tariffs, and other trade barriers around the world, 
including those here at home. But, until that day becomes a 
reality, we cannot and we will not unilaterally disarm 
America's farmers and ranchers.
    [The prepared statement of Mr. Conaway follows:]

  Prepared Statement of Hon. K. Michael Conaway, a Representative in 
                          Congress from Texas
    The purpose of today's hearing is to examine high and rising 
foreign subsidies, tariffs, and other barriers to trade and their 
impacts on America's farmers and ranchers and the future of free trade.
    As you will recall, on June 3rd, this Committee held a hearing 
where witnesses catalogued the actions major foreign competitors around 
the world are taking to support their agricultural industries. In that 
hearing, we explored the findings of several studies indicating that 
already high foreign subsidies, tariffs, and barriers to trade are on 
the rise.
    We learned that in many cases what foreign countries are doing is 
patently illegal under their World Trade Organization commitments, 
while in other instances, foreign countries are extending support to 
their agricultural sectors in ways that fly below the radar of WTO 
discipline. And still in other cases, we learned of countries getting a 
free pass to ignore WTO rules by declaring themselves ``developing'' 
despite these countries having very mature, strong, and in some cases 
globally dominant agricultural sectors.
    Today, we are going to hear from a panel of witnesses who will 
testify to the very tangible impacts of these foreign countries' 
activities on America's farmers and ranchers.
    Based on the written testimony of our witnesses, this hearing will 
give those who doubt the need for U.S. farm policy a glimpse into what 
American farmers and ranchers are up against every single day. Their 
testimony is also a warning to our nation's trade negotiators that 
patience in a sector critical to passing future trade agreements is 
wearing very thin.
    In 1993, Trade Promotion Authority, or TPA, was approved in the 
Senate by a vote of 76 to 16, and in the House by a vote of 295 to 126. 
At that time, TPA won overwhelming majorities of Democrats and 
Republicans.
    This Congress, TPA was approved in the Senate by a margin of 60 to 
38 and in the House by a margin of just 218 to 208.
    The Senate's relatively healthy vote in support of TPA this 
Congress betrays the significant shift that has taken place over the 
last 23 years. A substantial majority of Democrats in both chambers and 
an increasing number of Republicans opposed TPA this go around. And, of 
course, in the House, TPA barely managed to pass.
    Now, the Trans-Pacific Partnership has just concluded, but many 
question whether the newly minted agreement will have to wait until a 
lame duck session for Congressional consideration. Some speculate that 
Congressional consideration of TPP could just as easily slip into 2017.
    In short, it does not take a trade expert to recognize that these 
are not good omens for the future of our nation's trade agenda.
    Put simply: Americans are losing confidence in our trade deals.
    Now, I want to be clear that my aim here is not to place blame. 
This is a problem that has been brewing for a long time. And I am sure 
that there is plenty of blame to go around.
    But, I will offer one remedy: our government must begin to take on 
those who are cheating on their trade commitments. These actions by our 
foreign competitors are undermining our trade agenda and, as we will 
hear in testimony today, cheating by foreign countries is also causing 
serious injury to our nation's farmers and ranchers.
    In the case of cotton farmers, who are substantially excluded from 
the farm bill's safety net, these producers are being whipsawed by 
Communist China's erratic policies. China has driven global cotton 
prices to record highs, only to send them into a total free-fall. 
Despite these circumstances, there was little to no help for American 
cotton producers made available under the farm bill.
    There are a limited number of things that Members of Congress can 
do to draw attention to this serious situation.
    First, we can highlight the cheating going on around the world and 
how it is harming the American people, jobs, and our economy, much like 
we are doing today. Although, perhaps in the future we will need to 
explore taking more formal, legislative action to ensure our point is 
made and our rights under various trade agreements are enforced. In 
this regard, I really want to commend U.S. sugar farmers for banding 
together in successfully stopping the illegal dumping that was 
occurring back in 2013.
    Second, in the case of agriculture, we can maintain a strong U.S. 
farm policy and, when warranted, we can further strengthen that policy 
in order to give our farmers a fighting chance against the cheating 
that is going on.
    For the good of free trade, for the good of our farmers and 
ranchers, and for the good of our nation's economy and jobs, business 
as usual is no longer good enough. Things must change. Our agreements 
must be enforced.
    I hope that one day our trade agenda is able to zero out subsidies, 
tariffs, and other trade barriers around the world, including here at 
home. But, until that day becomes a reality, we cannot and we will not 
unilaterally disarm America's farmers and ranchers.
    With that, I recognize Ranking Member Peterson for any comments he 
would like to make.

    The Chairman. With that, I recognize Ranking Member 
Peterson for any comments he would like to make.

OPENING STATEMENT OF HON. COLLIN C. PETERSON, A REPRESENTATIVE 
                   IN CONGRESS FROM MINNESOTA

    Mr. Peterson. Thank you, Mr. Chairman. And I am pleased 
that we could follow up on what I thought was a good discussion 
in June. As I said then, we need to keep a close eye on how the 
countries subsidize agriculture, and this is especially 
important to keep in mind during our debates on the farm safety 
net. We need a level playing field if we are going to be able 
to be competitive in the global market.
    Today's hearing will cover a broad array of subsidies, 
ranging from dairy support programs in Canada and the EU; sugar 
subsidies in Brazil, Thailand, India, Mexico, and the EU; and 
subsidies for wheat, corn, rice, and cotton in China, India, 
and Turkey. We hope we can also continue the discussion that 
began last hearing on this issue about the impact of advanced 
developing countries increasing their subsidies. Again, I don't 
think it is fair for the developing countries, no matter how 
advanced, that they can designate themselves for special 
treatment. I also think it is time for the United States to 
start challenging those countries that fail to meet their WTO 
commitments.
    So I look forward to the testimony. I yield back.
    The Chairman. I thank the gentleman for his comments.
    The chair would request that other Members submit their 
opening statements for the record, so our witnesses may begin 
their testimony, and to ensure there is adequate time for 
questions.
    I would like to welcome to our witness table today Dr. 
Dermot Hayes, Professor and Pioneer Chair in Agribusiness, Iowa 
State University in Ames, Iowa. Dr. Gary Adams, President and 
Chief Executive Officer at the National Cotton Council, 
Cordova, Tennessee. Mr. Jack Roney, Director of Economics and 
Policy Analysis, American Sugar Alliance, here in Arlington, 
Virginia. Mr. Jaime Castaneda, Senior Vice President, Strategic 
Initiatives & Trade Policy, National Milk Producers Federation, 
Arlington, Virginia.
    Dr. Hayes, the floor is yours for 5 minutes.

     STATEMENT OF DERMOT J. HAYES, Ph.D., PIONEER HI-BRED 
INTERNATIONAL CHAIR IN AGRIBUSINESS, PROFESSOR OF FINANCE, AND 
 PROFESSOR OF ECONOMICS, DEPARTMENTS OF ECONOMICS AND FINANCE, 
                IOWA STATE UNIVERSITY, AMES, IA

    Dr. Hayes. Chairman Conaway, Ranking Member Peterson, and 
Members of the Committee, thank you for your continued 
attention to this important issue.
    As you mentioned, Craig Thorn documented subsidies in 
China, India, and Turkey from last year and showed that those 
countries are manipulating their internal markets to achieve 
self-sufficiency or greater. And the way they do that is to 
subsidize inputs such as fertilizer and seed, and on the output 
side they manipulate their domestic markets so that the farmers 
receive a price that is typically higher than the world price.
    As a follow-up to that study, National Wheat Associates 
asked us to run a model to calculate the impact of that on the 
world wheat market. The model we used is called the CARD-FAPRI 
model that we built at Iowa State University of Missouri over 
the last 30 years, and Dr. Adams to my left here, spent many 
years working on the crop side of that model. I think the model 
is conservative and it has been proven to be reliable.
    So in one scenario, we removed the input subsidies and 
domestic market supports in four countries, and examined what 
would happen to U.S. wheat prices and exports, and the results 
suggested that U.S. wheat prices would, in 2013, have been 
about five percent greater, and U.S. exports about nine percent 
greater. So those countries alone are costing the U.S. wheat 
industry about $1 billion. We did not do those numbers for 
corn, but I am familiar with the corn policies in those 
countries, and I would argue that the impact on the corn market 
has been even greater.
    And the other point I would like to make is that we in the 
U.S., we do have domestic support programs, but in the last 
farm bill we eliminated the distortions caused by those 
programs by tying the payments to historic acres and historic 
yields, rather than current acres and current yields. So there 
is a vast difference from an economic perspective between a 
program that guarantees a price for every bushel produced in a 
particular country, compared to one where the support is based 
on historic production and historic yields. Economists would 
say that that is not a starting program.
    I will finish my remarks by the following. Being in Iowa, I 
sense an enormous amount of support for TPP. It is a good deal, 
especially for livestock producers, but there has to be an 
understanding that when we make these agreements that people 
will follow through and police them. And I suspect that support 
from farm states may be enough to push that deal over the edge, 
but it is important for those producers who lead those charges 
to know that they can then expect the benefits that have been 
modeled and predicted. I think it is great that your Committee 
has decided to ensure that these commitments are being met 
because, in the absence of that, you would lose the trust of 
the producers and their support for these agreements.
    Thank you.
    [The prepared statement of Dr. Hayes follows:]

     Prepared Statement of Dermot J. Hayes, Ph.D., Pioneer Hi-Bred
    International Chair in Agribusiness, Professor of Finance, and 
  Professor of Economics, Departments of Economics and Finance, Iowa 
                                 State
                          University, Ames, IA
    Chairman Conaway, Ranking Member Peterson, and Members of the 
Committee--thank you for holding this hearing and for the invitation to 
testify this morning. This is an important topic, and I appreciate your 
continued attention to and interest in the impact of other countries' 
domestic support programs on U.S. agricultural producers. My name is 
Dr. Dermot Hayes, and I am the Pioneer Chair of Agribusiness at Iowa 
State University, as well as a Professor of Economics and Finance.
    As this Committee heard this past summer from Craig Thorn with DTB 
Associates, several advanced developing countries like China, India, 
Turkey, and Brazil have structured their agricultural support programs 
in ways that lead their farmers to over-produce and subsequently 
deflate the price of some commodities on the world market, particularly 
for wheat, corn, and rice.
    Earlier this year, I was asked by U.S. Wheat Associates to conduct 
a study to quantify the economic impact of those countries' support 
programs on U.S. producers. Last month, I joined with U.S. Wheat and 
the National Association of Wheat Growers (NAWG) in releasing the 
study, which included a briefing for this Committee and the 
Administration, as well as a press conference to share the findings.
    The predominant forms of support in these particular countries are 
input subsidies as well as market interventions aimed at ensuring a 
minimum price. These minimum prices supports often significantly above 
the world prices. In using a model that was developed by Iowa State's 
Center for Agriculture and Rural Development (CARD) and the Food and 
Agricultural Policy Research Institute (FAPRI), I looked at what would 
happen if price supports and input subsidies in Brazil, China, India 
and Turkey were removed, and what the resulting impact would be on 
production, trade, and prices in the U.S. and globally.
    The ``CARD-FAPRI model'' is a system of econometric, multimarket, 
price driven models of global agriculture, and it incorporates all 
major temperate crops, sugar, biofuels, dairy, and livestock and meat 
products for all major producing and consuming countries. The model 
captures derived demands for feed for livestock, feedstock for 
biofuels, substitution between similar products, and competition for 
land. This model is able to generate 10 year baseline projections of 
supply, utilization and prices for major agricultural commodities, and 
can be used to evaluate the impact of policy changes.
    In this study, we evaluated the impact of the removal of support 
prices and input subsidies in each country individually, as well as the 
net impact of the removal of these support programs in all four 
countries combined.
    These four countries play a particularly important role in the 
world wheat market, and, as the DTB study showed, they have recently 
ramped up their trade distorting support policies in recent years; DTB 
found that a few of these countries had dramatically increased the 
minimum government support for wheat by as much as $50 to $100 per 
metric ton since their last study in 2011. The econometric study, which 
I have enclosed with this testimony,* illustrates that if the trade-
distorting programs were removed in all four of these countries, global 
wheat prices would increase by almost 5%, with U.S. net exports 
increasing by over 9%. Ultimately, this means that U.S. wheat farmers 
are missing out on nearly a billion dollars a year in lost revenue as a 
result of depressed market prices. If such policies are removed in a 
country, it would lead to reduced domestic production and increased 
domestic consumption in that country, which could mean new trade 
opportunities for U.S. producers with those countries. Given the 
similarities in wheat and corn policies I suspect that the results for 
corn would have been very similar.
---------------------------------------------------------------------------
    * The document referred to is retained in Committee files.
---------------------------------------------------------------------------
    In conducting this analysis, my goal was to provide an accurate 
picture of the impact of subsidies that are structured in such a way 
that they distort markets. It is important to recognize, that the 
manner in which a country subsidizes its producers can have a 
significant impact on world markets. These four particular countries 
have continually exceeded their trade commitments, and a result, driven 
down prices received by our producers.
    The U.S. International Trade Commission recently conducted a 
comprehensive investigation of the competitiveness of the U.S. rice 
industry in response to a request from Ways and Means Committee 
Chairman Camp. This investigation, Rice: Global Competitiveness of the 
U.S. Industry, was published in April 2015 and included a quantitative 
assessment of the impact of government programs on the global rice 
market using the RiceFlow model developed by the University of 
Arkansas's Department of Agricultural Economics and Agribusiness. The 
Commission modeled the impact on global rice production and trade from 
the elimination of six policy instruments (including producer price, 
factor input and intermediate input supports; consumption support, 
tariffs and export taxes) across 11 countries including the United 
States and three of the four countries covered in DTB's report. The 
USITC staff conducted several simulations and the results are 
documented in the investigation report. The results indicate global 
disruptions caused by foreign government rice policies that hurt U.S. 
producers. Here are the key findings:
    Elimination of all barriers except tariffs would have increased 
U.S. paddy production by 182,000 metric tons (almost three percent) and 
increased exports by the same amount (almost six percent). Eliminating 
tariffs in addition to removing other support policies would have led 
to an expansion in U.S. production of over 1.3 million metric tons 
(over 21 percent) and a rice in exports of 1.4 million metric tons 
(about 45 percent).Under WTO rules, participating countries agree to 
limit various types of programs, based on the degree to which they are 
considered to be trade-distorting. In the U.S., the new programs 
created in the Agricultural Act of 2014--the Agriculture Risk Coverage 
(ARC) program and the Price Loss Coverage (PLC) program--are structured 
in such a way that payments are decoupled from current planting 
decisions. Additionally, the Federal Crop Insurance Program helps 
farmers manage yield and revenue risk through a market-based system. As 
a result U.S. farm programs are not currently viewed as trade 
distorting. Additionally, the United States has always met its 
notification commitments, and has never exceeded its Aggregate Measure 
of Support (AMS) limit. An outside observer would look at our Price 
Loss Coverage program, which is a reference price program, and think 
that this is the same thing as the price supports utilized by these 
other countries. What isn't always noted is that our PLC program is 
structured in a way that payments are decoupled and based on historical 
information for a particular producer. It's essentially a different 
program from the minimum government price support programs of these 
other trade-distorting countries.
    In developing my econometric study, I'm hopeful that I've been able 
to provide you with useful insight into why particular types of 
programs, like input subsidies and price supports, can cause distorted 
markets and ultimately drive down revenue for U.S. producers. Crop 
prices have fallen significantly since the DTB study was completed and 
I am sure that the distortive effect of these minimum price programs 
has actually increased in recent years.
    Let me finish with an observation. U.S. farmers appear to be highly 
supportive of TPP and I suspect that this support will be pivotal in 
getting this agreement through Congress. It is important that our crop 
and livestock producers know that commitments made during these 
agreements will be met. If countries continue to find ways to offset 
the concessions made during agreements there will be little reason for 
them to continue to support trade liberalization.

    The Chairman. Thank you, Dr. Hayes.
    Dr. Adams, for 5 minutes.

    STATEMENT OF GARY M. ADAMS, Ph.D., PRESIDENT AND CHIEF 
    EXECUTIVE OFFICER, NATIONAL COTTON COUNCIL, CORDOVA, TN

    Dr. Adams. Well, thank you, Chairman Conaway, Ranking 
Member Peterson, and Members of the Committee, for the 
opportunity to present the views of the National Cotton Council 
regarding government support conveyed in other countries, and 
the resulting impacts on U.S. cotton producers.
    Burdensome global stocks, stagnant world demand, a stronger 
U.S. dollar, and lower manmade fiber prices are contributing to 
cotton prices that are at their lowest level since 2009. U.S. 
producers responded to the current market situation with 2015 
plantings of 8\1/2\ million acres; the lowest since 1983. U.S. 
cotton production of 13.3 million bales is just 12 percent of 
world production.
    In recent years, while U.S. Government support for cotton 
has declined, government intervention in other countries has 
been on the increase. Between 2010 and 2015, India's minimum 
support price increased by 52 percent, with the current level 
between 70 and 80 per pound. Cotton farmers in India also 
benefit from subsidized fertilizer prices. The impacts of these 
subsidies are evident. Over the past decade, India's cotton 
area rose by 35 percent, while area outside of India fell by 
more than 20 percent.
    China offers both tremendous challenges and tremendous 
opportunities. China's fiber policies have been one of the 
largest factors influencing cotton markets over the past 5 
years. From 2011 through 2013, China supported its cotton 
farmers by purchasing vast amounts of production into 
government reserves at a price well above the world market. 
During that same time, China annually imported between 14 and 
24 million bales from the world market. After 3 years of 
amassing more than 50 million bales in government reserves, 
China, in 2014, instituted a target price program in the 
Xinjiang Province with the current support level set at $1.40 
per pound. At various times during the year, China will 
announce additional import quota above the WTO-required level. 
However, the process for determination of additional quota is 
not transparent. Due to the government-owned reserves, China is 
limiting import quotas to the minimum TRQ of 4.1 million bales. 
As a result, cotton imports in 2015 are expected to be the 
lowest since 2002.
    Pakistan, the fourth largest cotton producer, operates a 
minimum support price estimated between 65 and 78 per pound. 
Cotton producers in Brazil receive support through a marketing 
program based on guaranteed prices. The program supported 
almost 60 percent of the 2014 crop, with a minimum guaranteed 
price between 55 and 70 per pound. Brazil also provides 
support through production financing with subsidized interest 
rates.
    In recent years, Turkey has been the second largest export 
customer of U.S. cotton. Unfortunately, over the past year, 
Turkish authorities have been investigating U.S. cotton 
exporting companies to determine if U.S. cotton is being dumped 
into the Turkish market. While we do not believe there is any 
economic basis for the claims, the uncertainty of the ongoing 
investigation is dampening interest in U.S. cotton by Turkish 
mills, as current sales for this marketing year are just \1/3\ 
of year-ago levels.
    U.S. cotton farmers are competing with international cotton 
producers that are benefiting from higher support levels. A 
November 2014 report by ICAC estimated average direct 
assistance to cotton production across all countries at 26 per 
pound. However, for the U.S., the average support was just 7 
per pound.
    Notwithstanding the current policies that underscore the 
challenging condition facing U.S. producers, there are 
proposals within the WTO that would lead to a further imbalance 
in the situation. We oppose any efforts to further alter U.S. 
cotton policy in the WTO's upcoming ministerial conference. We 
believe that the actions already taken by the United States 
with respect to cotton policy should be more than sufficient to 
allow U.S. negotiators to resist any further calls for 
concessions on cotton. As Ambassador Froman noted before the 
Senate Finance Committee this past January, a defensive posture 
regarding U.S. cotton support is outdated, and justifies a 
shift in focus to other countries' status regarding their WTO 
obligations. We continue to urge U.S. negotiators to push other 
countries to be as current and as transparent as the United 
States with their domestic support notifications. Those 
continuing to call for U.S. policy changes fail to recognize 
the actions and impacts of other major cotton-producing 
countries.
    I encourage this Committee and our negotiators to hold 
firmly to the position that ag markets have changed over the 
past decade, and that U.S. cotton policy has evolved in ways 
that far exceed the previous demands within the WTO. A cotton-
specific solution focused on developed countries does not 
address the realities of today's global fiber markets. And to 
groups that continue to criticize U.S. cotton support, our 
message is simple: our programs are not having a detrimental 
impact on world markets or producers in other countries. Under 
the current farm bill, U.S. cotton farmers are even more 
attuned to market conditions, and for the U.S. cotton industry 
to sustain production and infrastructure, it is imperative that 
production and trade policies in other countries not put U.S. 
farmers at a disadvantage.
    Thank you for the chance to make this statement. I look 
forward to any questions you may have.
    [The prepared statement of Dr. Adams follows:]

    Prepared Statement of Gary M. Adams, Ph.D., President and Chief 
        Executive Officer, National Cotton Council, Cordova, TN
Introduction
    I would like to thank Chairman Conaway, Ranking Member Peterson, 
and Members of the Committee for the opportunity to present the views 
of the National Cotton Council regarding government support conveyed to 
cotton farmers in other countries and the resulting impacts on cotton 
markets and U.S. cotton producers.
    The National Cotton Council (NCC) is the central organization of 
the United States cotton industry. Its members include producers, 
ginners, merchants, cooperatives, warehousers, textile manufacturers 
and cottonseed processors and merchandisers. Cotton is a cornerstone of 
the rural economy in the 17 cotton-producing states stretching from 
Virginia to California. The scope and economic impact extends well 
beyond the approximately 19,000 farmers that plant between 9 and 12 
million acres of cotton each year. Taking into account diversified 
cropping patterns, cotton farmers cultivate more than 30 million acres 
of land each year. Processors and distributors of cotton fiber and 
downstream manufacturers of cotton apparel and home furnishings are 
located in virtually every state. Nationally, farms and businesses 
directly involved in the production, distribution and processing of 
cotton employ almost 200,000 workers and produce direct business 
revenue of more than $27 billion. Accounting for the ripple effect of 
cotton through the broader economy, direct and indirect employment 
surpasses 420,000 workers with economic activity well in excess of $100 
billion.
Current Market Situation
Production
    As the 2015 harvest progresses in the United States, producers 
across the Cotton Belt are facing difficult economic conditions. Cotton 
futures prices at the Intercontinental Exchange have traded in a 
sideways pattern since August 2014. With futures markets currently 
trading in the low to mid 60 cent range, prices are at the lowest 
levels since the middle of 2009. Burdensome global stocks, concerns 
about world demand, a stronger U.S. dollar and general price pressure 
in commodity markets have all played a factor in the current price 
environment.
    In response to the weaker price conditions for cotton relative to 
competing crops, U.S. producers responded with plantings of just 8.5 
million acres of cotton in 2015 (based on the October 2015 NASS 
estimates). Acreage is down in all regions, and the U.S. total is the 
lowest since 1983, which was a year when acreage was sharply reduced by 
government programs that encouraged land idling. With the lower cotton 
planted area, USDA estimates production of 13.3 million bales, down 18% 
from the 2014 crop.
    With 88% of world production occurring internationally, the United 
States cotton sector can be heavily impacted by developments in other 
countries. Historically, eight countries--the United States, China, 
India, Pakistan, Brazil, Uzbekistan, Turkey, and Australia--account for 
the vast majority of world cotton production (Figure 1). Going a step 
further, the Top 5 countries account for almost 80% of the world's 
crop.

                     Figure 1. World Cotton Production, Historical 5 Year Averages and 2015
----------------------------------------------------------------------------------------------------------------
                                               1995-99       2000-04       2005-09       2010-14        2015
----------------------------------------------------------------------------------------------------------------
World Production (Mil Bales)                        90.1          99.4         114.3         121.7         107.4
Share of World Production:
  India                                              14%           13%           20%           24%           27%
  China                                              22%           25%           30%           27%           24%
  United States                                      19%           19%           16%           13%           12%
  Pakistan                                            9%            9%            8%            8%            9%
  Brazil                                              2%            5%            5%            6%            6%
  Uzbekistan                                          6%            5%            4%            3%            3%
  Turkey                                              4%            4%            2%            2%            3%
  Australia                                           3%            3%            1%            3%            2%
----------------------------------------------------------------------------------------------------------------

    China has historically been the world's largest producer. Until 
2006, the U.S. followed closely behind China, with India coming in 
third. Prior to 2004, India generally produced between 10-14 million 
bales. Starting in 2004, India significantly increased production to 19 
million bales and has continued to increase each year since. For the 
2015 crop year, India will be the largest cotton producer, surpassing 
China for the first time.
    The latest USDA estimates show a drop in world cotton production to 
107 million bales for 2015, which is more than 10 million bales less 
than last year. China is responsible for the largest decrease in 
production, with a drop of 4.7 million bales compared to last year. As 
previously mentioned, the U.S. crop is estimated to be 13.3 million 
bales, 3 million bales lower than last year. Pakistan's crop is 
projected to be about 1 million bales less in 2015. Production in India 
and Brazil is each expected to decline by 500,000 bales in 2015, while 
Turkey is projected to lower production by 400,000 bales.
Mill Use
    Shifting attention to cotton consumption, world mill use for the 
2015 marketing year is expected to exceed production for the first time 
in 6 years. In a manner similar to production, world mill use is also 
concentrated in a few key countries. For 2015, the leading eight 
countries (Figure 2) are expected to account for more than 85% of the 
world total. China maintains the top spot in terms of mill use, with a 
market share of 31%, which is stable relative to the previous 5 year 
period. India's cotton use continues to increase and now accounts for 
almost \1/4\ of the total. U.S. textile mills are expected to increase 
consumption in 2015, marking the fourth consecutive year of higher 
consumption as a result of new investment and growth in textile mills 
in the United States. However, cotton mill use in the U.S. remains well 
below levels observed in the late 1990s.

                      Figure 2. World Cotton Mill Use, Historical 5 Year Averages and 2015
----------------------------------------------------------------------------------------------------------------
                                               1995-99       2000-04       2005-09       2010-14        2015
----------------------------------------------------------------------------------------------------------------
World Mill Use (Mil Bales)                          87.4          98.5         119.0         109.7         112.3
Share of World Mill Use:
  China                                              22%           30%           42%           31%           31%
  India                                              14%           14%           16%           18%           24%
  Pakistan                                            8%            9%           10%            8%           10%
  Turkey                                              5%            6%            5%            5%            6%
  Bangladesh                                          1%            2%            3%            4%            5%
  Vietnam                                             0%            1%            1%            2%            4%
  United States                                      12%            7%            4%            3%            3%
  Brazil                                              4%            4%            4%            3%            3%
----------------------------------------------------------------------------------------------------------------

    Even with modest demand growth projected for the 2015 marketing 
year, total mill use of 112.3 million bales will be 12 million bales 
short of the record consumption registered in the 2006 marketing year. 
Reduced cotton demand relative to previous levels remains a factor 
contributing to the current price levels. Competition from lower-priced 
manmade fibers and uncertainty in the global economy make it difficult 
to envision a significant increase in cotton prices in the near term.
Stocks
    For U.S. cotton farmers, the prospect of higher cotton prices is 
further challenged by a world stocks-to-use ratio that exceeded 100% in 
the 2014 marketing year (Figure 3). Current stocks-to-use ratios stand 
in stark contrast to historical stocks that generally ranged between 50 
and 60 percent of total use. However, the recent increase in stocks was 
the direct result of policies in place in China for the 2011 through 
2013 crops. Outside of China, stocks remain more in line with 
historical averages. Efforts by China to reduce the reserve level have 
not been successful and large ending stocks still hang over the market.
Figure 3. Cotton World Stocks-to-Use Ratio


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

Trade
    International markets are of critical importance to the U.S. cotton 
industry with approximately 75% of U.S. cotton production exported. The 
U.S. will remain the largest exporter of cotton with 2015 shipments 
estimated at 10.2 million bales. China remains the largest cotton 
importer although they are projected to significantly lower imports 
given the current balance between supply and demand. In recent years, 
China's imports have accounted for as much as 50% of total world trade, 
but recent declines in their trade position has lowered that share to 
below 20%. Much of the reduction in Chinese imports is projected to be 
offset by increased imports from Bangladesh and Vietnam.
    In the last 5 years, the share of U.S. exports by country has 
changed considerably, particularly for China, Vietnam, and Indonesia. 
In 2014, China accounted for 23% of U.S. cotton exports compared to 
their 2010-2014 5 year average of 37%. Vietnam accounted for 15% of 
U.S. cotton exports in 2014, compared to their 2010-2014 5 year average 
of 6%. Turkey, Indonesia, and Mexico have continued to remain important 
export customers as well. Over the past 5 years, Turkey has continued 
to be our second largest customer, accounting for about 15% of U.S. 
cotton exports. In the past few years, Korea, Thailand, Peru, and 
Bangladesh have also increased imports of U.S. cotton.
Government Support & Trade Policies in Other Countries
    While U.S. cotton policy has often been a focal point in 
international circles, there are ample studies and reports that 
document the various forms of government support present in almost all 
cotton-producing countries. In recent years, while U.S. support for 
cotton has been declining, government intervention in other countries 
has been on the increase.
India
    With one out of every four bales of the global cotton crop now 
produced in India, their government programs can have a significant 
impact on the world market. In recent years, India has an active 
history of intervening in cotton support and trade policies. Since 
2010, India has employed a variety of trade policies ranging from 
export subsidies to export bans.\1\ The resulting impact of significant 
policy changes was to create additional uncertainty in the global 
market. Changes enacted in December 2014 removed the requirement to 
register cotton exports with the Directorate General of Foreign Trade 
in an effort to boost exports.
---------------------------------------------------------------------------
    \1\ U.S. Department of Agriculture. Foreign Agricultural Service. 
India Cotton and Products Annual 2015. GAIN Report Number IN5039.
---------------------------------------------------------------------------
    While India's trade policy has been inconsistent in recent years, 
the government's support to cotton producers has consistently 
increased. India operates a Minimum Support Price (MSP) for seed cotton 
in order to ensure a price that will be received by the farmer. If 
local market prices fall below the MSP, then India's Government will 
purchase seed cotton at the MSP and then subsequently sell bales of 
ginned cotton into the market. Any differences between the MSP and the 
prevailing market price at the time of auction are borne by the 
government.
    The Cotton Corporation of India, a government-run procurement and 
distribution company, is responsible for administering the price-
support program. The MSP is announced by the government each year. 
Between 2010 and 2015, the MSP for medium staple cotton increased by 
52%, while the MSP for long staple cotton increased by 42%. The MSP is 
announced on the basis of seed cotton. Converting to a lint-equivalent 
basis requires an assumption about turn-out rates when the cotton is 
ginned. Assuming gin turn-out rates between 35% and 40%, current 
minimum prices in India equate to between $0.70 and $0.80 per pound.
    Cotton farmers in India also benefit from subsidized fertilizer 
prices. Though not just limited to cotton, total fertilizer subsidies 
are estimated at more than $9 billion per year.\2\ For urea, producers 
are estimated to be paying only \1/4\ of the costs that it takes to 
produce the product. On a per-acre basis, fertilizer subsidies are 
estimated to reduce production costs by approximately $100.\3\ The 
result is a significant savings in costs of production and a 
competitive advantage over growers in other countries.
---------------------------------------------------------------------------
    \2\ http://timesofindia.indiatimes.com/business/india-business/
India-can-save-1-8-billion-on-fertilizer-subsidies/articleshow/
48806936.cms.
    \3\ Konduru, S., Yamazaki, F. and M. Paggi. ``A Study of Indian 
Government Policy on Production and Processing of Cotton and Its 
Implications.'' Journal of Agricultural Science and Technology. Pp. 
1016-1028. 2012.
---------------------------------------------------------------------------
    India's Government support to cotton is one factor that has allowed 
India to achieve its position as the largest cotton producer. Over the 
past decade, India's cotton area is up by approximately 35%, while 
aggregate area outside of India fell by more than 20% over that time 
period. Currently, 38% of world cotton area is located in India, up 
from a share of 25% just a decade ago. It is also the case that India's 
area generally shows less responsiveness to market signals than acreage 
movements in other countries. Barring a significant change in policies, 
India appears poised to remain a significant cotton producer for the 
foreseeable future.
China
    China offers both tremendous challenges and tremendous 
opportunities for the U.S. cotton industry. China remains a valued and 
significant customer of U.S. cotton. China's fiber policies have been 
one of the largest factors influencing cotton markets over the past 5 
years. In addition, China's policy has been one that has undergone 
significant changes over those same years and appears to be a policy 
that is still evolving. For the 2011 through 2013 crops, China 
supported its cotton farmers by purchasing vast amounts of China's 
production into government reserves at a price well above the world 
market. With most domestic production locked in reserves, China 
imported annually between 14 and 24 million bales from the world 
market. Over the 3 year period, total imports from all sources was 
almost 59 million bales, with 14 million bales being U.S. cotton.
    There were a number of significant outcomes resulting from China's 
policy of building reserves. First, purchasing the majority of the 
domestic crop at the support level essentially established a floor on 
internal cotton prices. By late 2011, China's cotton prices were well 
above international cotton prices and also well above polyester prices. 
China's mill use of cotton suffered as a result of uncompetitive 
prices. China's cotton area was generally stable between 12 and 14 
million acres.
    However, it became clear that continually building stocks was not a 
long-term solution. After 3 years of amassing more than 50 million 
bales of cotton in government reserves, China instituted a target price 
program for the 2014 crop at a level of roughly $1.45 per pound. The 
new target price program was applicable to the western province of 
Xinjiang, while the remaining cotton-producing provinces received a 
direct subsidy of $0.15 per pound. The target price program was 
continued for the 2015 crop, although the target price was reduced by 
3.5% when measured in local currency. The announced target price 
equated to approximately $1.40 per pound based on exchange rates 
prevailing at planting time. In another change from the 2014 crop, no 
direct support was announced for the eastern provinces. As a result, 
cotton area in those provinces has sharply declined.
    Under the target price program, cotton producers in Xinjiang are 
compensated for the difference between the target price and an 
established market price. The current program allows prices to be more 
reflective of market signals. However, the current situation still 
provides a challenging situation for the foreseeable future.
    China continues to hold approximately 50 million bales in 
government reserves. Previous efforts to auction cotton from the 
reserves have yielded very modest success. In 2015, China offered as 
much as 8.5 million bales for auction, but were only successful in 
auctioning approximately 290 thousand bales.\4\ Cotton made available 
during the auctions was from either 2011 or 2012 and offered at prices 
above current internal cotton prices. Given the lack of success in the 
auctions, China continues to hold significant reserves of cotton. This 
does not appear to be a situation that will correct itself for some 
time to come.
---------------------------------------------------------------------------
    \4\ U.S. Department of Agriculture. Foreign Agricultural Service. 
China Cotton and Products Update: MY15/16 Cotton Imports Expected to 
Plummet. GAIN Report Number CH15029.
---------------------------------------------------------------------------
    At various times during the year, China will announce additional 
cotton import quota above the WTO-required tariff rate quota (TRQ). The 
process for determination by Chinese authorities of additional quota is 
unknown and non-transparent. Furthermore, those imports are generally 
subject to a variable levy ranging from 5% to 40%, in order to maintain 
cotton prices in China significantly above international prices and 
protect prices paid to Chinese cotton growers. An additional problem is 
that importers must receive import licenses from the central 
authorities before entering into import contracts. Cotton can also be 
imported outside of the quota system. However, the importer is still 
required to acquire an import license and will be assessed a 40% 
tariff.
    With ample supplies in reserves, China has responded by limiting 
import quota to the WTO-required TRQ of 4.1 million bales. As a result, 
cotton imports in the 2015 marketing year are expected to be lowest 
since 2002.
    With China's cotton policies limiting demand, manmade fiber 
consumption has never been greater. Current mill use of manmade fiber 
is approaching 170 million bales, approximately five times the level of 
cotton mill use. Cotton demand in China continues to struggle with 
internal cotton prices in the upper 90 range, limited import quotas 
and polyester prices just below 50 per pound.
Pakistan
    Pakistan, the fourth largest cotton producer, accounts for 9% of 
world cotton production. In order to provide support to cotton 
producers, Pakistan's Government operates a minimum support price. In 
November 2014, the Trading Corporation of Pakistan, the government's 
trading arm, announced that it would purchase 1 million bales at the 
MSP in order to support prices received by producers.\5\ According to 
industry sources, the 2015 MSP is expected to be set between 2,600 and 
3,000 rupees per 40 kg of seed cotton. These values are estimated at 
the equivalent of between $0.65 and $0.78 per pound of cotton lint.
---------------------------------------------------------------------------
    \5\ https://www.icac.org/Press-Release/2014/PR-27-Low-World-Cotton-
Prices-Incite-Government-In?lang=fr-FR.
---------------------------------------------------------------------------
Brazil
    As reported by the International Cotton Advisory Committee 
(ICAC),\6\ cotton producers in Brazil receive support through a 
marketing program that is based on guaranteed prices. The program is 
called the Equalizer Price Paid to the Producer Program, or PEPRO. The 
premium under the program represents the difference between the minimum 
guarantee price and the price buyers are willing to pay. In 2014, the 
Brazilian Government authorized purchases of 905 thousand tons, or 
almost 60% of the 2014/15 crop, under PEPRO.\7\ Depending on exchange 
rates, the minimum guaranteed price ranges between $0.55 and $0.70 per 
pound.
---------------------------------------------------------------------------
    \6\ International Cotton Advisory Committee. Production and Trade 
Policies Affecting the Cotton Industry. November 2014. Washington D.C.
    \7\ U.S. Department of Agriculture. Foreign Agricultural Service. 
Brazil Cotton and Products Annual: Domestic Economic Factors to Affect 
Cotton Planted Area. April 2015. GAIN Report Number BR0965.
---------------------------------------------------------------------------
    Brazil also provides support to cotton production through 
production financing at subsidized interest rates. Credit subsidies to 
cotton producers in the form of subsidized interest are estimated at 
$75 million per year. At current acreage levels, that equates to 
approximately $30 per acre of cotton.
Turkey
    In recent years, Turkey has been the second largest export customer 
for U.S. cotton. The textile industry in Turkey is a critical segment 
of the overall economy, providing jobs at textile mills and export 
revenue through trade in textile products. With the assistance of 
government support averaging approximately $0.25 per pound (as 
estimated by ICAC), Turkish cotton farmers produce only about \1/2\ of 
the cotton required by the textile industry. In addition to a lack of 
quantity, Turkey's cotton production also fails to meet the quality 
specifications required for certain textile production. As a result, 
Turkey has been a reliable customer of U.S. cotton.
    However, U.S. cotton farmers and merchandising firms are currently 
facing a challenging situation due to an investigation launched by the 
Turkish Government. For the past year, Turkish authorities have been 
investigating U.S. cotton exporting companies to determine if U.S. 
cotton is being dumped into the Turkish market. According to 
international trade rules, dumping occurs when product is sold into a 
market at below costs of production or at a price below that being sold 
in other markets. An affirmative finding by Turkish officials would 
mean that an anti-dumping duty would be applied to U.S. cotton imports, 
while imports from other countries would remain duty free. Turkey has 
historically been the second largest export customer of U.S. cotton. A 
duty would undermine the competitiveness of U.S. cotton and directly 
impact prices received by U.S. cotton farmers. The uncertainty of the 
ongoing investigation is already dampening interest in U.S. cotton by 
Turkish mills, as current sales for this marketing year are just \1/3\ 
of year-ago levels.
    The Turkish Government self-initiated the investigation shortly 
after the U.S. announced anti-dumping/countervailing duty (AD/CVD) 
investigations of Turkish steel pipe. The Minister of Economy was 
quoted in Turkish press as saying Turkey would launch three 
investigations for every one the U.S. aimed at Turkish products. The 
document produced to support the initiation of the investigation is 
largely redacted, so the information upon which the allegation of 
dumping is based is not available for parties to rebut. Many observers 
believe that Turkey seeks to damage the U.S. cotton industry by using 
the AD investigation not to benefit their domestic industry but out of 
retribution for the U.S. steel cases. This is just as much in 
contravention of the WTO as using trade barriers out of protectionist 
intent.
Comparing U.S. Support with Other Countries
    U.S. cotton policy underwent fundamental changes in the 2014 Farm 
Bill in order to resolve the long-standing trade dispute with Brazil. 
Fixed support levels under the Counter-Cyclical Payment program and 
Direct Payment program were eliminated beginning with the 2014 crop. 
The marketing loan was retained but with modifications necessitated by 
the resolution of the dispute. As a result, upland cotton's only fixed 
support price is the marketing loan set at $0.52 per pound. However, 
even the marketing loan can adjust across years, moving as low as $0.45 
per pound should the cotton market enter a sustained period of low 
prices.
    Set well below the costs of production, the marketing loan provides 
only a basic safety net to producers as a source of cash flow shortly 
after harvest. The marketing loan is not set at a level that will 
induce a farmer to plant cotton. In the U.S., cotton farmers are making 
planting decisions based on market signals of cotton and competing 
crops.
    With reduced support in the 2014 Farm Bill, U.S. cotton farmers are 
competing with cotton producers in other countries that are benefiting 
from higher support levels. Two recent reports illustrate the 
comparative support rates across selected cotton producing countries. 
In June 2015 testimony to the House Agriculture Committee, Dr. Darren 
Hudson with Texas Tech University noted that the marketing loan in the 
United States was below support prices in China, India, Pakistan, 
Brazil, and Uzbekistan.\8\
---------------------------------------------------------------------------
    \8\ http://agriculture.house.gov/uploadedfiles/
hudson_testimony.pdf.
---------------------------------------------------------------------------
    In a November 2014 report,\9\ ICAC reported that average direct 
assistance to cotton production across all countries was $0.26 per 
pound. However, for the United States, ICAC estimated the average 
support at $0.07 per pound. Direct assistance to U.S. cotton producers 
was well below levels provided in other countries. It should be noted 
that the ICAC study was based on the 2013 crop year, which was the last 
year before the significant changes implemented by the new farm 
legislation.
---------------------------------------------------------------------------
    \9\ International Cotton Advisory Committee. Production and Trade 
Policies Affecting the Cotton Industry. November 2014. Washington D.C.
---------------------------------------------------------------------------
    The studies underscore the challenging conditions facing U.S. 
producers. Unfortunately, current proposals submitted within the World 
Trade Organization (WTO) would lead to a further imbalance in the 
situation.
Cotton's Concerns within the WTO
Notifications and Transparency
    The WTO establishes a rules-based trading system that relies on 
timely and accurate notifications by each member and a transparent 
reporting process. This includes being responsive to questions and 
information requests from other WTO members and the WTO leadership. 
Unfortunately, there continues to be a lack of timely notifications 
from several major cotton producing and exporting countries. 
Specifically, neither China nor India have notified their domestic 
support for cotton (or other commodities) since 2010.
Cotton Dedicated Discussions
    As a result of the Bali Ministerial decision on cotton in December 
2013, biannual dedicated discussions are held regarding trade-related 
developments for cotton. The most recent meeting occurred on July 9, 
2015. These discussions are seen as a way to help improve transparency 
and monitoring of WTO member notifications. It was recommended by 
Chairman Adank that the continuation of these dedicated discussions be 
considered as part of the outcome of the WTO's 10th Ministerial 
Conference (MC-10) in Nairobi, Kenya.
    At the most recent meeting, the WTO Secretariat provided a revised 
background paper with Members' responses to questions posed regarding 
cotton policy, however several Members noted that other Members need to 
either provide and/or improve their replies and to bring their 
notifications up to date to allow for a more extensive discussion in 
relation to domestic support. Chairman Adank also noted that the 
domestic support pillar of the WTO agriculture negotiations is the most 
difficult and it would be difficult to envision a specific outcome on 
cotton in that pillar until a broader outcome became clear.
WTO Ministerial in Nairobi
    The drive to further alter U.S. cotton policy in the December 2015 
10th Ministerial Conference is flawed on several fronts: Neither the 
2005 Hong Kong Mandate nor the 2013 Bali Declaration require further 
compromise on cotton; U.S. policy changes in recent years exceed any 
expectation for a ``final solution''; and the current state of 
agriculture markets has rendered the ``cotton problem'' obsolete.
    As Ambassador Michael Froman noted before the Senate Finance 
Committee this past January, a defensive posture regarding U.S. cotton 
support is outdated and justifies a shift in focus to other countries' 
status regarding their WTO obligations.
    U.S. cotton policy has evolved dramatically since the Hong Kong 
Mandate and Bali Ministerial Declaration. As a result of a negotiated 
agreement between the U.S. and Brazil resolving the WTO dispute on 
certain agriculture subsidies and trade promotion programs, the Step 2 
program was terminated in 2006, and the Direct and Counter-cyclical 
programs were terminated and the Marketing Loan program modified in the 
2014 Farm Bill. The U.S. also implemented new rules for the GSM 102 
program affecting fees and tenor, bringing the program into WTO 
compliance. Additionally, this past June, legislation was enacted and 
recently implemented extending the Generalized System of Preferences 
(GSP) benefits and eliminating import duties on cotton imports from 
LDCs for five additional tariff lines. This meets the U.S. commitment 
to provide complete duty free/quota free access on cotton to LDCs. All 
of these changes to U.S. cotton policy result in a significantly 
different U.S. cotton industry than that of 2005. U.S. cotton policy 
criticisms enshrined in the Hong Kong Mandate and Bali Declaration are 
outdated and no longer apply.
    However, at a conference in Geneva, the International Centre for 
Trade and Sustainable Development (ICTSD) released a report alleging 
that cotton policies in the 2014 Farm Bill cause significant 
distortions in global cotton markets, leading to economic damage to 
cotton producers in other countries. The paper describes itself as an 
``impartial, evidence-based assessment'' intended to provide a 
``fruitful contribution'' to the ongoing debate on agricultural 
subsidies. However, a review of the analysis and assumptions suggests 
that the paper misses on both accounts and accomplishes nothing more 
than spreading misinformation.
    In contrast to other economic studies regarding the 2014 Farm Bill, 
the paper asserts large cotton production and price impacts through 
manufactured and arbitrary adjustments to a mathematical model. In 
deriving the alleged effects, the authors are recycling arguments 
previously rejected by the original panel in the WTO dispute between 
the U.S. and Brazil.
    In addition to standing in stark contrast to other studies, the 
ICTSD report:

   fails to accurately model current cotton policies;

   imposes crop insurance purchase decisions on the model that 
        are not in line with historical experience; and

   inflates impacts by overestimating expected benefits from 
        insurance.

    Specifically, the report presents findings that are inconsistent 
with other economic studies; misrepresents the U.S. marketing loan 
program for cotton; exaggerates crop insurance usage by producers; 
inflates crop insurance benefits; and attempts to dismiss previous 
findings of the WTO panel in the Brazil case.
    In summary, the ICTSD study is grossly misleading and misrepresents 
the structure and market impacts of U.S. cotton programs. 
Unfortunately, the report serves only to inflame rather than inform any 
discussion of cotton programs. It does not capture the realities of 
today's cotton market or global cotton policies. The reality is that 
current U.S. cotton policy represents a dramatic shift in the 
agriculture safety net, which serves to bring U.S. policy in line with 
WTO commitments.
    The African, Caribbean and Pacific (ACP) Group of countries 
submitted a document to WTO negotiators on July 30, 2015, that proposed 
possible areas of agreement within the Doha Development Agenda. Among 
these proposals is a final solution on cotton per the 2005 Hong Kong 
Mandate. Most recently, on October 12th, the Cotton 4 (C-4) countries 
of Benin, Burkina Faso, Chad, and Mali circulated their draft decision 
for cotton in advance of the 10th Ministerial. The C-4 proposal calls 
for developed countries to provide duty free and quota free access for 
cotton from LDCs by January 1, 2016; to implement export competition 
obligations by January 1, 2016; and to reduce amber box domestic 
support by 50% in 2016 leading to a full elimination by 2018.
    The National Cotton Council firmly opposes both of these proposals, 
as there is no basis for further agreements on cotton while the primary 
conditions agreed to in the Hong Kong Mandate and the Bail Ministerial 
Declaration of 2013 remain unmet. The Hong Kong Mandate states:

          ``Without prejudice to Members' current WTO rights and 
        obligations, including those flowing from actions taken by the 
        Dispute Settlement Body, we reaffirm our commitment to ensure 
        having an explicit decision on cotton within the agriculture 
        negotiations and through the Sub-Committee on Cotton 
        ambitiously, expeditiously and specifically as follows:

     All forms of export subsidies for cotton will be 
            eliminated by developed countries in 2006.

     On market access, developed countries will give duty and 
            quota free access for cotton exports from least-developed 
            countries (LDCs) from the commencement of the 
            implementation period.

     Members agree that the objective is that, as an outcome 
            for the negotiations, trade distorting domestic subsidies 
            for cotton production be reduced more ambitiously than 
            under whatever general formula is agreed and that it should 
            be implemented over a shorter period of time than generally 
            applicable. We commit ourselves to give priority in the 
            negotiations to reach such an outcome.''

    According to this text, reduction of trade distorting subsidies is 
contingent on a ``general formula (that) is agreed,'' and that it is 
implemented in less time ``than generally applicable,'' both 
prerequisites that rely on a general agriculture agreement establishing 
such formula and implementation timeline. Market access commitments are 
also contingent on their being a known implementation period, which can 
only be established through a general agriculture agreement.
    Under the Bali Declaration, countries continue to meet in effort to 
``enhance transparency and monitoring'' of cotton trade policy. These 
meetings underscore the lack of transparency as countries continue to 
refuse to provide timely notifications of domestic support and a lack 
of transparency in the administration of tariff rate quotas (TRQs). 
There should be agreement regarding the content and timing of 
notifications, and effective enforcement mechanisms. This most basic 
requirement of providing notifications must be met by all countries 
before there can be further meaningful dialogue on cotton.
    It is our understanding that the U.S. is seeking a limited 
agreement for the 10th Ministerial in Nairobi and then an agreed to 
path to move beyond the Doha declaration. We support such an approach 
and believe that the actions already taken to date by the U.S. with 
respect to cotton policy should be more than sufficient to allow the 
U.S. negotiators to resist any further calls for concessions on cotton. 
Those that are continuing to call for U.S. policy changes fail to 
recognize the actions and impacts of other major cotton producing 
countries. We stand ready to assist U.S. negotiators in any way 
possible to make this case within the WTO membership, as we also 
continue to inform U.S. policymakers of the significant industry 
concerns about any further concessions regarding U.S. cotton policy.
    Our industry greatly appreciates the work of Ambassadors Froman, 
Punke and Vetter as they continue their efforts toward U.S. agriculture 
being able to compete in a fair global market. We especially thank 
Ambassador Punke for his efforts in Geneva to hold other countries 
accountable for their lack of notifications and transparency within the 
WTO.
    I repeat our concern and steadfast opposition to any proposals 
considered in the lead up to or during the December Ministerial that 
further commits the U.S. to additional changes in cotton policy. I 
encourage this Committee and our negotiators to hold firmly to the 
position that agriculture markets have changed since 2005, and that the 
U.S. cotton industry has evolved in ways that far exceed the demands of 
the Hong Kong Mandate. A cotton specific ``solution'' in the WTO 
negotiations is no longer necessary.
Summary
    In closing, I would again like to thank the Committee for providing 
an opportunity to offer views on the current economic situation and 
policies impacting the U.S. cotton market. Current economic conditions 
are characterized by lower prices, weak demand, a strong U.S. dollar, 
and competition from polyester priced at 50 per pound. U.S. growers 
have responded to the current market situation by reducing area by 
almost 20% in 2015.
    To those groups that continue to criticize U.S. cotton support, our 
message is simple: U.S. programs are not having a detrimental impact on 
world markets or producers in other countries. Under the new farm law, 
U.S. cotton farmers are even more attuned to market conditions than 
under previous farm legislation. For the U.S. cotton industry to 
sustain production and infrastructure into the future, it is imperative 
that production and trade policies in other countries not put U.S. 
farmers at a disadvantage. It is also important to reiterate that the 
scope of policies affecting U.S. cotton farmers is not limited to 
direct cotton support, but also encompasses policies and support for 
manmade fibers.
    Thank you, and I will be happy to answer any questions at the 
appropriate time.

    The Chairman. Thank you, Dr. Adams.
    Mr. Roney.

   STATEMENT OF JACK RONEY, DIRECTOR OF ECONOMICS AND POLICY 
               ANALYSIS, AMERICAN SUGAR ALLIANCE,
                         ARLINGTON, VA

    Mr. Roney. Thank you, Mr. Chairman, Mr. Peterson, Members 
of the Committee, for convening this important hearing.
    I am Jack Roney, Economist of the American Sugar Alliance. 
The ASA is a national coalition of sugarbeet and sugarcane 
growers, processors, and refiners. We grow sugarbeets in 11 
states, and sugarcane in four, and overall we generate 142,000 
good-paying jobs in 22 states.
    The U.S. sugar industry is a major player in the world 
sugar market. The U.S. is the world's fifth largest producer, 
fourth largest consumer, and second largest importer. We 
provide guaranteed import access to 41 countries. This makes us 
one of the world's most open markets for sugar.
    We are good at what we do. The U.S. is the twentieth lowest 
cost among the 95 largest sugar-producing nations. Most of 
these are developing cane producers with far lower government-
imposed costs for worker, consumer, environmental compliance 
than we face.
    So if we are so efficient, why do we need a U.S. sugar 
policy? The answer is in the tremendous distortion of the so-
called world sugar price. This chart tracks the world average 
cost of producing sugar over the past 25 years. The cost has 
averaged about 18 per pound over those years. If I added world 
average sugar prices to this chart, what would you expect? 
Certainly, we would expect prices averaging above the cost of 
production; high enough to keep producers in business. But here 
is the reality. The so-called world price, the red line, has 
averaged just 12; almost always well below production cost. 
The 25 year average production cost is 50 percent higher than 
the average price. With prices so far below cost, how can any 
sugar producer survive? The answer is in the domestic markets 
where most sugar is produced and sold. Governments maintain 
much higher prices than the world price so their farmers can 
stay in business. Only about \1/4\ of sugar is sold at the 
world dump price. The remaining \3/4\ is sold at much higher 
levels.
    This chart shows world dump market refined sugar futures 
prices over the past decade. This red line, it averages about 
21. The green line shows the actual wholesale prices at which 
most sugar is sold; much higher, 31, nearly 50 percent higher 
than the dump price. And the purple line shows the developed 
country average prices, averaging 41, are nearly double the 
world dump market price. This then, with price protection from 
the governments, is how sugar farmers stay in business. None 
can survive at the so-called world price.
    How does the U.S. compare? The U.S. wholesale refined sugar 
prices are currently about 33 a pound. That is right at the 
world average, and well below the average in other developed 
countries.
    As you would expect, with our wholesale prices at or below 
world levels, U.S. consumer prices are also well below world 
levels. As this chart shows, the world average retail sugar 
price, the green bar, is 20 percent higher than the U.S. price, 
the red bar. The developed country average consumer price for 
sugar, the yellow bar, is 29 percent higher than ours. With 
sugar policy in place, American consumers get a great deal on 
sugar.
    What keeps the world dump market prices low are the 
subsidies around the world that encourage over-production and 
the unloading of surpluses on the world market. This chart 
shows the world's major sugar exporters, all subsidized to some 
degree, some more than others. The prime examples, Brazil, with 
about $3 billion per year of support via cane ethanol program 
and massive government debt relief programs. Thailand, which 
has quadrupled its exports in the past decade to hide 
government-set prices and other inducements that over-produce 
and export. India, which is violating WTO rules by subsidizing 
its producers to export their surplus sugar problem onto the 
world market. Mexico, whose government-owned mills have long 
dominated their market. Mexico exploited its free trade access 
to the U.S. market under NAFTA to flood our country with 
subsidized dump sugar and collapsed our market in 2013. The 
U.S. Government responded with subsidy and dumping duties at 
high levels. The U.S. and Mexican Governments have since worked 
out agreements to suspend the duties and resume sugar trade 
with Mexico. We hope these suspension agreements will remain in 
place and maintain market stability.
    What is the solution to this historic low of the sugar 
market? Multilateral reform. All countries, all subsidies. We 
strongly support Congressman Yoho's zero-for-zero resolution. 
We pledge to eliminate U.S. sugar policy when foreign countries 
eliminate theirs. With a level playing field, we can compete 
and compete well, but to weaken or surrender our sugar policy 
before global reform, as some sugar-using corporations have 
proposed, would be unilateral disarmament; sacrificing good 
American jobs in favor of imported, subsidized foreign sugar. 
We must maintain the successful U.S. sugar policy as it is 
until foreign sugar subsidies can be reined-in.
    Thank you, Mr. Chairman and Members of the Committee, for 
convening this hearing, and for your support for efficient 
American sugar farmers.
    [The prepared statement of Mr. Roney follows:]

  Prepared Statement of Jack Roney, Director of Economics and Policy 
            Analysis, American Sugar Alliance, Arlington, VA
Global Sugar Subsidies on the Rise
Summary
    American sugar producers are among the world's most efficient, and 
most socially and environmentally responsible, but, without a sound 
U.S. farm policy, they cannot compete in a world sugar market badly 
distorted by foreign subsidies. So called ``world market'' prices are 
running barely \1/2\ the world average cost of producing sugar. Foreign 
sugar subsidies are expanding as governments seek to protect their 
industries against the sharp deterioration of world prices, which 
itself is mainly the result of such subsidization.
    American sugar producers support the goal of multilateral 
elimination of global sugar subsidies. Absent government intervention, 
the world sugar price would rise to reflect the cost of producing 
sugar, and American producers could compete well on a level playing 
field. We have endorsed a Congressional resolution to eliminate U.S. 
sugar policy when foreign countries eliminate theirs.
    But unilateral weakening or elimination of U.S. sugar policy, as 
some policy critics suggest, would sacrifice jobs in an efficient, 
dynamic American industry in favor of foreign jobs in countries that 
are less efficient, but heavily subsidized.
Background
    The American Sugar Alliance (ASA) is the national coalition of 
sugarbeet and sugarcane growers, processors, and refiners. The U.S. 
sugar-producing industry generates 142,000 jobs in 22 states and $20 
billion in annual economic activity.\1\
---------------------------------------------------------------------------
    \1\ LMC International, ``The Economic Importance of the Sugar 
Industry to the U.S. Economy--Jobs and Revenues,'' Oxford, England, 
August 2011.
---------------------------------------------------------------------------
    The U.S. sugar industry is a major player in the world sugar 
market. The United States is the world's fifth largest sugar-producing 
country and is among the most efficient.
    The U.S. is the 20th lowest cost among the 95 largest sugar-
producing nations. Most of these are developing countries with far 
lower government-imposed costs for worker, consumer, and environmental 
protections. U.S. beet sugar producers, mostly in northern-tier states, 
are the lowest-cost beet producers in the world.\2\
---------------------------------------------------------------------------
    \2\ LMC International, ``Sugar & HFCS Production Costs: Global 
Benchmarking,'' Oxford, England, August 2011.
---------------------------------------------------------------------------
    The United States is also the world's fourth largest sugar-
consuming country and the second largest sugar importer. We provide 
guaranteed, essentially duty-free, access to 41 countries. This makes 
the U.S. one of the world's most open markets to foreign sugar. The 
amount of duty-free access is determined under the various trade 
agreements the United States has entered into.
    The just-concluded Trans-Pacific Partnership (TPP) negotiations 
potentially open our market still further, with additional access to 
the U.S. sugar market granted to Australia, Canada, Vietnam, Malaysia, 
and Japan.
Justification for U.S. Sugar Policy
    Since U.S. sugar producers are among the lowest cost in the world, 
one might ask why the industry requires a sugar policy at all. The 
answer is in the distorted, dump nature of the world sugar market.
    Foreign governments subsidize their producers so egregiously that 
many of these countries produce far more sugar than the market demands. 
Rather than store these surpluses, or close mills and lose jobs, as the 
United States has done, these countries dump their subsidized sugar 
onto the world market for whatever price it will bring. This dumping 
threatens further harm to American farmers.
    As a result of these dumped surpluses, the so-called ``world 
price'' for sugar has been rendered essentially meaningless. Rarely in 
the past few decades has the world price reflected the actual cost of 
producing sugar--a minimal criterion for a meaningful market price.
    The world price is so depressed by subsidies and dumping that, over 
the past 25 years, the world average cost of producing sugar has 
averaged fully 50% more than the world price (Figure 1).\3\
---------------------------------------------------------------------------
    \3\ LMC International, ``Sugar & HFCS Production Costs: Global 
Benchmarking,'' Oxford, England, July 2014.
---------------------------------------------------------------------------
    The world sugar price has dropped by more than \1/2\ since 2010/
11--from more than 32 per pound to less than 11--and is now barely 
\1/2\ of the current estimated world average cost of production. One 
would expect such low prices to put many producers out of business, and 
signal planting reductions to all. Yet, despite the price collapse, 
world sugar production has actually risen, up 7% in the past 5 
years.\4\
---------------------------------------------------------------------------
    \4\ U.S. Department of Agriculture, http://apps.fas.usda.gov/
psdonline/.
---------------------------------------------------------------------------
    Sugar producers are responding not to world market signals but 
rather to domestic market prices and the government programs that 
sustain those prices.
    One European market expert summarizes: ``The world market price is 
a `dump' price . . . (it) should never be used as a yardstick to 
measure what benefits or costs may accrue from free trade in sugar.'' 
\5\
---------------------------------------------------------------------------
    \5\ Patrick Chatenay, ``Government Support and the Brazilian Sugar 
Industry,'' Canterbury, England, April 2013.
---------------------------------------------------------------------------
    But how can a world sugar industry exist if the price received for 
the product is just a fraction of the cost of producing it? The answer 
is twofold:

  1.  Only about 20-25% of the sugar produced each year is actually 
            traded at the so-called ``world price.''

  2.  The other 75-80% of sugar is consumed in the countries where it 
            is produced, at prices considerably higher than the world 
            price, and higher than production costs.

    The International Sugar Organization (ISO) recently surveyed 78 
countries to learn actual wholesale prices--the price producers in 
those countries receive for their sugar. The ISO documents that, 
globally, actual wholesale refined sugar prices have averaged 46% 
higher than the world price over the past decade. Prices in developed 
countries have been nearly double the world dump market price--
averaging 94% higher (Figure 2).\6\
---------------------------------------------------------------------------
    \6\ International Sugar Organization, ``Domestic Sugar Prices--a 
Survey,'' MECAS (15)06, May 2015.
---------------------------------------------------------------------------
    This, then, explains how we can have a vast world sugar industry: 
Governments shield their producers from the world dump market sugar and 
maintain prices high enough--above the dump market and above production 
costs--to sustain a domestic industry and generate and defend jobs.
    Further, this explains why we require a U.S. sugar policy--even 
with American sugar producers among the lowest cost, and most 
responsible, in the world. Generous domestic pricing encourages over-
production in many countries, whose governments then seek to export 
their surplus. Absent U.S. sugar policy, those dumped, subsidized 
surpluses would sink the U.S. market and displace efficient American 
sugar farmers.
American Consumer Benefits
    With U.S. wholesale prices at or below world average levels, one 
would expect American consumer prices, too, to be low. They are. World 
average retail sugar prices are 20% higher than U.S. prices; developed-
country prices are 29% higher (Figure 3). With a stable U.S. sugar 
policy and industry, American consumers get a great deal on high-
quality, safe, responsibly-produced sugar.
Zero-for-Zero
    U.S. sugar producers recognize that subsidies and other market-
distorting polices must be addressed in order for the world dump market 
to recover and better reflect free market principles. Therefore, 
American producers have publicly pledged to give up U.S. sugar policy 
when foreign producers agree to eliminate their subsidies.
    The American Sugar Alliance has endorsed a Congressional resolution 
introduced by a Member of this Committee, Representative Ted S. Yoho of 
Florida. This ``zero-for-zero'' resolution explicitly calls for the 
U.S. to surrender its sugar policy when other major producers have done 
the same.\7\
---------------------------------------------------------------------------
    \7\ https://www.congress.gov/bill/114th-congress/house-
concurrentresolution/20/
text?q=%7B%22search%22%3A%5B%22%5C%22zero+for+zero%5C%22%22%5D%7D.
---------------------------------------------------------------------------
    However, to weaken or surrender sugar policy without any foreign 
concessions, as some critics of U.S. sugar policy have called for, 
would amount to foolish unilateral disarmament. We would be sacrificing 
good American jobs in a dynamic, efficient industry in favor of foreign 
jobs in the countries that continue to subsidize.
The Nature of Foreign Sugar Subsidies
    The sugar futures markets, particularly the raw sugar #11 ICE 
contract, are mathematically the most volatile of commodity markets. 
This is because it is relatively thinly traded and, historically, has 
been a dumping ground for surplus sugar. It is also the market to which 
consumers turn for residual supplies when weather problems have left 
world sugar supplies tight.
    Over the past 40 years, monthly average prices have ranged from 
less than 3 per pound to more than 57. Just in the past 4 years, 
prices have dropped to less than 11 from a temporary peak above 32 
(Figure 4).
    More than 100 countries produce sugar, and the governments in all 
these countries intervene in their markets in some way, to defend their 
producers, or their consumers, or sometimes both. A world market this 
volatile necessitates some buffer for domestic sugar sellers and 
buyers.
    Government interventions among the largest producers and exporters 
have the most profoundly distorting effects on the world market. LMC 
International, in a 2008 study, examined market-distorting practices 
among eleven of the largest players in the world sugar market. LMC 
discovered a wide range of trade-distorting practices and categorized 
them as ``transparent''--fitting into recognized World Trade 
Organization (WTO) categories of intervention; and, 
``nontransparent''--less obvious interventions not specifically subject 
to WTO disciplines, but still trade distorting.\8\
---------------------------------------------------------------------------
    \8\ LMC International, ``Review of Sugar Policies in Major Sugar 
Industries: Transparent and Non-Transparent or Indirect Policies,'' 
Oxford, England, 2008.
---------------------------------------------------------------------------
    Figure 5 provides a snapshot of government interventions in the 
world sugar market in 2008. Since that time, the extent of government 
intervention has increased considerably.
    Countries that have long intervened in their sugar markets have, 
for the most part, continued to do so, with many expanding their 
programs. Other countries, including advanced developing countries that 
are becoming larger players in the world sugar market, have achieved 
their expansion largely through government intervention. Developing 
countries are not subject to the same WTO disciplines as developed 
countries, and some take advantage of this special treatment to 
perpetuate subsidies that developed countries are committed to reducing 
or avoiding.
Major Exporters, Major Subsidizers
    Figure 6 provides examples of some of the elaborate forms of 
government intervention that enable major producers to continue to 
export sugar, even when world prices are running \1/2\ the world 
average cost of production--as they are now.
    The following provides some more detail on the trade-distorting 
practices of some of the biggest exporters, and subsidizers--Brazil, 
Thailand, India, Mexico, and the European Union.
    Brazil. Brazil is a prime example of a ``developing'' country with 
an advanced, modern, and, in this case, massive agricultural industry. 
Brazil is the largest sugar exporter by a huge margin, dominating with 
nearly \1/2\ of all sugar exports. But the Brazilian sugar industry 
would be a fraction of that size were it not for a Brazilian Government 
decision in the early 1970s to fund a huge sugarcane ethanol industry.
    With subsidies to plant more sugarcane and build mill/distilleries 
that could convert the cane to sugar or ethanol, with ethanol 
consumption mandates and ethanol and gasoline price controls, the 
Brazilian cane industry exploded. Brazil came to be the world's largest 
cane ethanol producer, and sugar exporter, by far.
    After its ``Pro-Alcool'' program was unleashed in 1975, Brazilian 
cane ethanol production soared from small amounts to 28 billion liters, 
sugar production from 6 million tons to 38 million, and sugar exports 
from 1 million tons to 28 million. Cane planting decisions have been 
driven primarily by government ethanol policies, with more than \1/2\ 
of cane going to ethanol, and the remainder to sugar.
    With the cane industry propped up by ethanol subsidies, Brazil 
could continue its reckless sugar export expansion, even as world sugar 
prices dipped as low as 3 per pound in 1985.
    The value of this indirect subsidy of the Brazilian cane sugar 
industry, by way of the subsidy of the cane ethanol industry, along 
with related government benefits, has been placed at $2.5-$3.0 billion 
per year. Unfortunately, since these subsidies do not fit neatly into 
WTO subsidy categories--direct supports, import tariffs and direct 
export subsidies--they are largely immune to WTO disciplines.
    Sugar market expert Patrick Chatenay has noted that, in addition to 
direct payments, the government aids Brazil's cane industry with low-
interest loans, debt forgiveness, ethanol usage mandates and reduced 
tax rates. He estimates the value of these subsidies alone at $2.5 
billion per year, and notes that unreported debt restructuring probably 
puts the actual total much higher.\9\
---------------------------------------------------------------------------
    \9\ Patrick Chatenay, op. cit.
---------------------------------------------------------------------------
    Since Chatenay published his $2.5 billion per year Brazilian sugar 
subsidy estimate in 2013, the government has provided an additional 
$450 million in tax relief and made available $3 billion in soft 
loans.\10\
---------------------------------------------------------------------------
    \10\ http://www.sugaralliance.org/brazils-sugar-subsidies-expand-
as-global-prices-fall-4399/.
---------------------------------------------------------------------------
    Unfortunately, because most of Brazil's sugar subsidies are 
considered indirect, they are not subject to the WTO disciplines to 
which most developed countries adhere.
    The impact of Brazilian subsidies on the world sugar market has 
been exacerbated by the sharp drop in value of Brazilian real, which 
has enabled Brazilian producers largely to maintain returns in domestic 
prices despite the sharp drop in the world (dollar) price.
    Thailand. Thailand is the world's second largest sugar exporter. It 
surged into that position by quadrupling its exports within the past 
decade--from 2 million metric tons in 2005/06 to 8 million tons this 
past year.
    Thailand is not a particularly efficient sugar producer. But 
government programs enabled its stunning expansion, oblivious to 
remarkably low world prices.
    In a recent study, Antoine Meriot estimates the value of government 
subsidies to the Thai industry at no less than $1.3 billion per year. 
The $1.3 billion includes direct payments and indirect export 
subsidies, but does not include Thai sugar producers' substantial 
benefit from soft loans and input subsidies the Thai Government makes 
available to all its farmers.\11\
---------------------------------------------------------------------------
    \11\ Antoine Meriot, Sugar Expertise, ``Thailand's sugar policy: 
Government drives production and export expansion,'' Bethesda, 
Maryland, June 2015.
---------------------------------------------------------------------------
    Meriot points out that world sugar prices dropped by 40% from 2010 
to 2014, yet Thai sugar exports rose by 70% during that same period. He 
explains that Thai sugar producers were cushioned from the world price 
drop by much higher guaranteed prices for sugar sold within Thailand. 
This is the type of indirect export subsidy that the WTO found to be 
illegal in a 2005 ruling against European Union sugar exports.
    Meriot reveals a number of other ways the Thai Government assists 
its sugar industry, including: Direct payments and input subsidies to 
cane growers; soft loans, at a fraction of market interest rates; 
guaranteed prices for growers and millers; sales limits; import 
tariffs; and cane ethanol subsidies.
    Even with low world sugar prices, the Thai Government is showing no 
signs of letting up. It is switching from encouraging rice production 
to encouraging sugar production. Its goal: a 50% increase in sugarcane 
production in just the next 5 years.
    Meanwhile, Brazil and Australia, which had successfully challenged 
the European Union's indirect export subsidy scheme, are questioning 
the WTO on Thailand's similar scheme.
    India. In 2010, world sugar prices were approaching a 30 year high 
and India was one of the world's largest sugar importers, with net 
imports of 2.2 million metric tons. Since that time, world prices have 
dropped by \1/2\, but India has become a significant net exporter.
    How has India achieved the transformation from sugar importer to 
exporter, though world sugar prices were declining? Government 
decisions to set prices and encourage production and to flaunt WTO 
rules with blatant export subsidies.
    India has blatantly ignored complaints from other WTO members that 
these export subsidies violate their WTO obligations and, in the face 
of such criticism, has actually increased them. Generous Federal, and 
even state, subsidies have enabled India to export an estimated 2 
million tons of sugar last year and this year--contributing to the 
global surplus and the sharp decline in world sugar prices.
    A recent article summarized the most recent Indian Federal and 
state government support for its sugar industry with these points:

   $90 million in WTO-illegal export subsidies from the Federal 
        Government;

   $22 million in WTO-illegal export subsidies from a state 
        government;

   $320 million in additional interest free loans to sugar 
        mills and $140 million in tax debt forgiveness from a state 
        government;

   A doubling of import taxes to block foreign sugar;

   Elimination of an excise tax on ethanol to promote sugar-
        based fuels.\12\
---------------------------------------------------------------------------
    \12\ http://www.sugaralliance.org/living-off-subsidies-and-still-3-
billion-in-the-hole-5293/.

    Thailand, though currently under WTO scrutiny for its own sugar 
subsidies, is questioning the WTO about the legality of India's export 
subsidy programs.
    Mexico. When the NAFTA went into effect in 1994, the Mexican sugar 
industry was struggling financially and an occasional exporter of small 
volumes of sugar. In 2001, the government expropriated \1/2\ of all 
Mexican sugar mills, rather than allowing them to go out of business. 
With government help, Mexican sugarcane area exploded--up 66% since 
NAFTA was signed--and Mexico became one of the world's largest sugar 
exporters. Virtually all those exports have been aimed at the U.S. 
market--fully open to Mexican sugar since 2008 under NAFTA rules.
    Until very recently, the Mexican Government was Mexico's largest 
sugar producer and exporter, accounting for \1/5\ of production and 
mills. Government-owned mills still account for 10% of Mexican sugar 
production (Figure 7). In addition to government ownership, Mexican 
producers benefit from Federal and state cash infusions, debt 
restructuring and forgiveness, and government grant programs to finance 
inventory, exports, and inputs.\13\
---------------------------------------------------------------------------
    \13\ http://www.sugaralliance.org/mexican-export-subsidies-
injuring-u-s-sugar-producers-4990/.
---------------------------------------------------------------------------
    In 2012/13, Mexican sugar production soared to an all-time high, a 
stunning 38% higher than the previous year's production. Yet, despite 
the huge domestic market surplus, Mexico was able to sustain sugar 
prices higher than in the U.S. How did they manage to balance their 
market? By dumping their subsidized surplus on the U.S. market.
    The subsidized and dumped Mexican surpluses collapsed the U.S. 
sugar market and caused the first government cost for U.S. sugar policy 
in a dozen years, American farmers struggled to repay loans they 
normally repay fully, principal plus interest.
    The U.S. sugar industry last year filed unfair trade petitions. In 
response, the U.S. Department of Commerce imposed preliminary 
countervailing and antidumping duties on Mexican sugar averaging 56% in 
2014; last month, the DOC calculated final subsidy and dumping margins 
that totaled a stunning average of 79% (Figure 8).\14\
---------------------------------------------------------------------------
    \14\ U.S. Department of Commerce http://enforcement.trade.gov/
download/factsheets/factsheet-mexico-sugar-ad-cvdfinal-091715.pdf.
---------------------------------------------------------------------------
    Late last year, the U.S. and Mexican Governments negotiated 
agreements to suspend the collection of duties, resume sugar trade with 
Mexico, and eliminate the threat of injury by dumped and subsidized 
Mexican sugar. The U.S. International Trade Commission, meanwhile, 
proceeded with its final injury investigation.
    European Union. Decades of generous subsidies transformed the EU 
from a net importer of sugar to, in the 1990's and early 2000's, the 
world's second largest sugar exporter. In 2005, the WTO ruled that EU 
exports were benefiting from WTO-illegal indirect export subsidies, and 
the EU subsequently revamped its sugar program. As a result of its 
unilateral sugar policy changes, 83 EU sugar mills closed, an estimated 
120,000 jobs were lost, and as sugar production plunged and the EU 
became a net importer of sugar, EU consumer prices for sugar 
soared.\15\
---------------------------------------------------------------------------
    \15\ Patrick Chatenay, ``Lessons from the 2006 EU Sugar Regime 
Reform,'' Canterbury, England, August 2012.
---------------------------------------------------------------------------
    Still, the EU remains the third largest sugar producer in the 
world, with about 16 million tons of production. The EU plans further 
changes to its sugar policy in 2017, but the government's role in the 
industry will remain substantial. A recent study estimated that, by 
2019, EU Government support for sugar producers will total about $665 
million per year and that ``the EU may well return to being a 
significant net exporter.'' \16\
---------------------------------------------------------------------------
    \16\ Patrick Chatenay, ``European Union Sugar Industry Support,'' 
Canterbury, England, August 2015.
---------------------------------------------------------------------------
    So, despite changes in their sugar policy, the EU remains a 
subsidized sugar export threat.
Conclusion
    In a world awash in subsidized foreign sugar, the U.S. is the 
world's second largest importer. We are obligated to provide access for 
sugar from 41 countries under WTO and free trade agreement concessions. 
All of these countries subsidize their producers in some way, but there 
have been limits on how much sugar we must take from all except one--
Mexico. When Mexico used its subsidies to damage the market, the U.S. 
Government responded, and we are hopeful the reasonable solution the 
U.S. and Mexican Governments negotiated will stay in place.
    Meanwhile, the rest of the world continues to subsidize its sugar 
producers, and at growing volumes. The U.S. sugar industry supports 
elimination of all these direct and indirect subsidies, multilaterally. 
We are among the lowest cost producers and could compete in a world 
free of subsidies, where the world price for sugar reflects the cost of 
producing it.
    We cannot, however, endorse efforts to weaken or eliminate U.S. 
sugar policy without any foreign concessions. This would amount to 
unilateral disarmament and the sacrifice of American jobs in favor of 
foreign countries where governments continue to subsidize.
                                Figures
Figure 1
World Raw Sugar Dump Market Price: Historically Does Not Reflect Actual 
        Cost of Producing Sugar
--Cents per pound--

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Sources: World Price: USDA, #11 raw contract, Caribbean 
        ports. monthly average prices, 1970-2015.
          Cost of Production: ``Sugar Production Cost, Global 
        Benchmarking Report,'' LMC International, Oxford, England, July 
        2014. (31-P)
Figure 2
World Average Wholesale Refined Sugar Price Nearly 50% Higher than 
        World Dump Market Price; Developed-Country Average Nearly 
        Double
--2005-2014, cents/lb--
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: International Sugar Organization (ISO), ``Domestic 
        Sugar Prices--a Survey'', MECAS(15)06, May 2015. A survey of 78 
        countries, representing 79% of world sugar consumption; 2014 
        preliminary. U.S. 10 year average: 37; September 2015 price: 
        33.
          \1\ EU-28 and other OECD countries in ISO survey.
Figure 3
Developed Country Average Retail Sugar Price: 29% Higher than U.S.; 
        Global Average: 20% Higher than U.S.
        [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
        
          Source: SIS International Research, ``Global Retail Sugar 
        Prices,'' July 2015, from Euromonitor, International Monetary 
        Fund; 2014 prices.
          Surveyed countries represent 67% of global sugar consumption. 
        Developed countries include OECD member countries and Hong 
        Kong.
Figure 4
World Sugar Dump Market Price, 1970-2015: World's Most Volatile 
        Commodity Market
--Cents per pound--
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: USDA, #11 raw contract, Caribbean ports. Monthly 
        Average prices, 1970-2015.
Figure 5

                                                         Table SUM. 1: Summary of Support for Sugar Industry in Selected Countries, 2008
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                           Australia        Brazil       China        Colombia          EU          Guatemala        India        Indonesia        Mexico         S. Africa         Thailand
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Transparent Support
 
                                                                                    Domestic Market Controls
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Guaranteed Support                                                                                                                                          
 Prices
Supply Management/                                                                                    
 Controls
Market Sharing/Sales                                                                                                                                                      
 Quotas
Domestic/Export                                                                                                                                                
 Revenue Equalization
 Measures
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Import Controls
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Import Quota/TRQ                                                                                                                                            
Import Tariff                                                                                                            
Import Licenses                                                                                                                                                    
Quality Restrictions                                                                                    
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Export Support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Export Subsidies                                                                                             
Single Desk Selling                                                                                                                                            
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                     Non-Transparent Support
 
                                                                                      Direct Financial Aid
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
State Ownership                                                                                                                              
Income Support                                                                                                                                                            
Debt Financing                                                                                        
Input Subsidies                                                                                                                       
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                   Indirect Long-Term Support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Programs to Improve                                                                                                            
 Efficiency
Ethanol Programs                                                        
 (mandates/tax
 breaks)
Consumer Demand                                         
 Support
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
LMC International, 2008.

Figure 6
World's Largest Sugar Exporters: All Subsidize
--2010/11-2014/15 Average--
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

          Source: Export data--USDA, FAS May 2015; Subsidies--FAS 
        attache reports, press reports, country studies.
Figure 7

                  Remaining Government-Owned Mexican Sugar Mills: Share of production, 2013/14
----------------------------------------------------------------------------------------------------------------
                                               Metric tons  tel quel               Share of national total
----------------------------------------------------------------------------------------------------------------
                     El Modelo                                116,546                                 2.0%
                    El Potrera                                192,424                                 3.3%
                              La Providencia                   92,141                                 1.6%
                  Plan de San Luis                            137,754                                 2.3%
                 San Miguelito                                 55,042                                 0.9%
                                      --------------------------------------------------------------------------
  Total..............................                         593,907                                10.1%
                                      ======================================
    National Total...................                       5,892,333
----------------------------------------------------------------------------------------------------------------
Source: CONADESUCA.

Figure 8

                                           DOC Dumping and Countervailing Duties on Sugar Imports from Mexico
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     Dumping Margins                       Subsidy Rates                            Total
                                          --------------------------------------------------------------------------------------------------------------
                                              FEESA     GAM Group     Others       FEESA     GAM Group     Others       FEESA     GAM Group     Others
--------------------------------------------------------------------------------------------------------------------------------------------------------
Preliminary Determination       26-Aug-14                                           17.01%        2.99%      14.87%
                                28-Oct-14      39.54%       47.26%      40.76%                                           56.55%       50.25%      55.63%
Final Determination             16-Sep-15      40.48%       42.14%      40.74%      43.93%        5.78%      38.11%      84.41%       47.92%      78.85%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Commerce. FEESA is the group of nine government-owned mills, which accounted for 23% of Mexican sugar production in 2013/14.
  The GAM Group is a private company.
Note: Duties were suspended as a result of agreements the U.S. and Mexican Governments reached in December 2014. These suspension agreements are
  currently being appealed.


    The Chairman. Thank you, Mr. Roney.
    Mr. Castaneda.

          STATEMENT OF JAIME A. CASTANEDA, SENIOR VICE
        PRESIDENT, STRATEGIC INITIATIVES & TRADE POLICY,
       NATIONAL MILK PRODUCERS FEDERATION, ARLINGTON, VA

    Mr. Castaneda. Thank you, Chairman Conaway, Ranking Member 
Peterson, and Members of the Committee. Thank you for inviting 
me to testify today on foreign subsidies in the dairy sector.
    My name is Jaime Castaneda, and I am a Senior Vice 
President of the National Milk Producers Federation. I work 
closely with the U.S. Dairy Export Council in defending the 
dairy industry interests on trade matters.
    Mr. Chairman, as you will see in our written submission, a 
wide range of programs are used to support dairy sectors around 
the world. Some involve direct aids to producers, but many are 
more indirect; using input protection or regulatory measures to 
give domestic producers an advantage over competitors in their 
own market and globally. This is important to our industry 
because we are now competing in that global market. The U.S. 
has gone from exporting less than $1 billion in dairy products 
in the year 2000, to exporting a record $7.1 billion in 2014; 
an increase of 625 percent. An important part of this success 
has been trade agreements that have lowered and removed 
barriers to our exports. However, they have done little to 
constrain the use of domestic supports in the dairy sector. The 
negotiations in this type of support takes place in the WTO, 
such as the Doha Round, but those talks have been on life 
support since 2008.
    Although many developing countries provide direct support 
to their dairy sectors, their greatest protection often takes 
the form of restrictions on import access. But developed 
countries are the biggest providers of both direct and indirect 
supports to the dairy sectors, and the EU is certainly the 
largest. All EU farmers, including dairy producers, are 
supported through the EU's Common Agricultural Policy which 
represents over \1/3\ of the total EU budget. And specifically, 
the EU dairy programs include, among others, a direct or basic 
payment previously known as the single payment, an ad hoc 
system providing subsidies for the private storage of dairy 
products, a price support program for butter and skimmed milk 
powder, and most recently, a substantial package of emergency 
aid provided to EU dairy farmers due to low domestic prices, 
and other supports under the auspices of rural development.
    Taken collectively, EU subsidy programs in the dairy sector 
provide a substantial assistance package aimed at ensuring 
profitability of European dairy farmers. But such aid to dairy 
is not enough for the EU. In recent years, the EU has 
undertaken an effort to block the use of many commonly used 
product names. What better way to impede or prevent imports of 
a given product than to ban the use of its name. An American 
producer of feta or parmesan cheese, for example, can no longer 
sell such products in the EU and in some foreign countries, 
despite the fact that those names have been widely and 
generically used around the world for many years.
    Now, let me switch to our trade partner from the north, 
Canada. Canada maintains one of the most tightly guarded dairy 
markets in the world, by imposing astronomically high tariffs 
on imported products. Canadian dairy tariffs typically range 
from 250 percent to 300 percent. The purpose of such tariffs is 
to protect Canada's supply managed price support system. The 
support program and the tariff regime are inseparable, and 
highly effective forms of domestic support. Yet what is more 
disturbing is the fact that Canada has also found ways to 
restrict even the limited amount of access it has already 
agreed to provide through its NAFTA and WTO commitments, which 
we enumerate in our written testimony.
    When talking about foreign subsidies and protection, India 
stands out too. One of the biggest problems with Indian's 
subsidies is the support through various methods, but more 
importantly, India's support through regulatory barriers that 
prevent the importation of dairy products.
    Finally, a key support that hurts us in global markets is 
the monopolistic structure of New Zealand's dairy industry, 
where one company controls approximately 85 percent of the milk 
produced in that country, and until recently, up to 90 percent. 
This monopolistic structure grants an immense advantage to New 
Zealand dairy product exports, and it is of significant concern 
to the U.S. dairy industry. Very few companies in any economic 
sector in the world have the level of market share that New 
Zealand has obtained through domestic policies.
    We have provided information on other countries in our 
submission, but in the interest of time, I will stop here and 
thank you for the opportunity to provide our views on this 
important subject.
    [The prepared statement of Mr. Castaneda follows:]

   Prepared Statement of Jaime A. Castaneda, Senior Vice President, 
     Strategic Initiatives & Trade Policy, National Milk Producers 
                              Federation,
                             Arlington, VA
    Chairman Conaway, Ranking Member Peterson, and Members of the 
Committee, thank you for inviting me to testify on foreign subsidies in 
the dairy sector. My name is Jaime Castaneda and I am a Senior Vice 
President of the National Milk Producers Federation (NMPF).
    In addition to my role for NMPF, I also lead trade policy issues 
for the U.S. Dairy Export Council in order to pursue policies that help 
advance the interests of the broader dairy industry. In this capacity, 
I serve as a cleared trade advisor for Ambassador Mike Froman and 
Secretary Tom Vilsack.
    NMPF develops and carries out policies that advance the well-being 
of dairy producers and the cooperatives they own. The members of NMPF's 
31 cooperatives produce the majority of the U.S. milk supply, making 
NMPF the voice of more than 30,000 dairy producers on national issues. 
International trade is one of those issues and in recent years it has 
been one of the most important to our industry.
    Our nation has gone from exporting less than $1 billion in dairy 
products in 2000 to exporting a record $7.1 billion in 2014, an 
increase of 625%. It is not a coincidence that the enormous growth over 
this period occurred as the U.S. began negotiating market-opening free 
trade agreements. These agreements lowered and ultimately removed 
tariff barriers to trade, and in many cases gave our products an 
advantage over other dairy exporting countries. In many cases, they 
also helped remove technical and regulatory barriers to our trade.
    However, these agreements have done little to constrain the use of 
domestic or export subsidies in the international dairy sector 
globally, or the agricultural sector as a whole. The reason is obvious: 
reducing domestic supports in an FTA would be a concession to an FTA 
partner country and to all other countries competing in the global 
market without any reciprocal benefits. The non-FTA countries would get 
a free ride. The negotiation of limits to such subsidies has and should 
only occur as part of multilateral trade deals, the most recent of 
which is the Doha Round of trade negotiations in the World Trade 
Organization.
    Regrettably, the Doha Round, which began 14 years ago, has been 
essentially comatose since 2008. Recent negotiations on how to revive 
the talks have focused largely on domestic supports in agriculture. 
Several important developing countries have pushed for an agreement in 
this area based on the state of play in 2008.
    Those terms call for substantial reductions in supports, mainly by 
the United States. They fail to take into account the declines in U.S. 
agricultural subsidies since 2008. At the same time, some developing 
countries are seeking to protect their own growing domestic supports. 
In addition to direct domestic subsidies, many developing countries, 
including Brazil and India, use non-tariff barriers to keep foreign 
dairy products from reaching their markets. Additionally, less 
transparent subsidies are used to bolster domestic dairy markets. 
Developed countries also remain heavy supporters of their dairy 
sectors.
    All this is an important backdrop to our testimony on trade-
distorting forms of support to dairy sectors around the world. We 
appreciate the Committee holding this hearing. It is clear that, while 
the United States has reduced its dairy subsidies and support 
mechanisms, other countries have maintained and expanded theirs.
    Let me begin with the European Union.
Structure of EU Support
    Milk is one of the most important agricultural products in the EU, 
accounting for approximately 15% of agricultural output. Around 148 
million tonnes of cow's milk was delivered in 2014 across all EU Member 
States. The milk quota regime introduced in 1984 to address surplus 
production expired on April 1. Despite this, several publicly supported 
safety net measures remain.
    For example, all EU farmers, including dairy farmers, are supported 
through the EU's Common Agricultural Policy (CAP), which accounts for 
37.8% of the EU budget and is equivalent to =362.8 billion through 
2014-2020.\1\ For each EU Member State, the total value of all 
allocated direct payments entitlements and rural development payments 
are shown in Table 1.
---------------------------------------------------------------------------
    \1\ In 2011 prices; EU Budget period runs for 7 years, current 
period 2014-2020.

                             Table 1: Amounts Assigned to Member States for the CAP
                                                (in million Euro)
----------------------------------------------------------------------------------------------------------------
                                                   Common Agricultural Policy ** (6)
                                            ----------------------------------------------
                                              Direct Payments (1)                                Total CAP
                                                (2) (3) (4) (5)     Rural Development (7)
----------------------------------------------------------------------------------------------------------------
Belgium                                                      3.603                648                      4.251
Bulgaria                                                     5.106                  2.367                  7.472
Czech Republic                                               5.985                  2.306                  8.291
Denmark                                                      6.044                919                      6.963
Germany                                                     34.534                  9.446                 43.980
Estonia                                                    839                    823                      1.663
Ireland                                                      8.507                  2.191                 10.697
Greece                                                      14.808                  4.718                 19.526
Spain                                                       34.634                  8.297                 42.931
France                                                      51.354                 11.385                 62.739
Croatia                                                      1.482                  2.026                  3.508
Italy                                                       26.850                 10.444                 37.294
Cyprus                                                     351                    132                    484
Latvia                                                       1.452                  1.076                  2.527
Lithuania                                                    3.104                  1.613                  4.717
Luxembourg                                                 234                    101                    335
Hungary                                                      8.932                  3.431                 12.362
Malta                                                       37                     97                    134
Netherlands                                                  5.223                765                      5.988
Austria                                                      4.850                  3.938                  8.787
Poland                                                      23.313                  8.698                 32.010
Portugal                                                     4.105                  4.058                  8.163
Romania                                                     11.638                  8.128                 19.766
Slovenia                                                   960                    838                      1.797
Slovakia                                                     3.016                  1.560                  4.576
Finland                                                      3.662                  2.380                  6.042
Sweden                                                       4.866                  1.764                  6.630
United Kingdom                                              22.283                  5.200                 27.483
----------------------------------------------------------------------------------------------------------------
* Amounts are subject to change due to the flexibility to shift amounts between direct payments and rural
  development payments.
Source: EU Multiannual Financial Framework (http://ec.europa.eu/budget/mff/preallocations/index_en.cfm).

    As referenced above, the European Union subsidies to its dairy 
sector under the Common Agricultural Policy (CAP) include (1) direct 
payments or ``basic payments'' (previously known as the Single 
Payment), (2) ad hoc subsidies for the private storage of dairy 
products, (3) dairy price support programs, and (4) most recently, a 
substantial package of nearly =500 million in emergency agricultural 
financial aid. In addition, there is support under the auspices of 
Rural Development, due to low domestic dairy prices.
    Taken collectively, EU subsidy programs for dairy farmers provide a 
substantial assistance package aimed at ensuring profitability. For 
instance, it is estimated that \1/3\ of the total income for British 
dairy farmers comes from subsidy programs.\2\ With the EU made up of 28 
nations, all of which produce milk, the scope of the support is 
substantial.
---------------------------------------------------------------------------
    \2\ ``Quick Facts: Dairy Subsidies'', AF News Agency, March 9, 
2015.
---------------------------------------------------------------------------
    Despite this high level of support, these subsidies are not likely 
to result in a WTO domestic subsidy violation because the EU's limit on 
domestic subsidy spending is a massive =72 billion ($84 billion), with 
notified subsidy levels below =7 billion ($8.2 billion).
The Basic Payment Scheme
    EU farmers, including dairy farmers, are provided a basic payment 
(prior to 2015 referred to as ``The Single Payment'') based on their 
historical farming area. Since these payments are not directly tied to 
the type of agricultural production or to prices, the EU treats these 
subsidies as non-trade distorting ``Green Box'' subsidies for purposes 
of its subsidy notifications to the World Trade Organization. The 
receipt of the basic payment is contingent on farmers complying with 
environmental, sanitary, and animal welfare requirements. In 2014, the 
European Union provided =40.5 billion ($47.6 billion) in basic payments 
to EU farmers.
Dairy Premium
    In addition to basic payments, EU dairy farmers are eligible for a 
dairy premium based on historical production quantities. In its most 
recent WTO subsidy notification, covering marketing year 2011/12, the 
EU reported the subsidy level for this program at =176 million ($207 
million).\3\
---------------------------------------------------------------------------
    \3\ EU WTO Subsidies notification for MY 2011/12, October 22 2014. 
G/AG/N/EU/20.
---------------------------------------------------------------------------
    Although the EU shifted away from production aid to per hectare 
payments, some products, such as dairy, can still be supported by 
coupling payments to production. This means that the profitability of 
producing milk does not depend only on the price, but also on the 
amount of the direct payment that is paid for milk. Nineteen out of 28 
Member States are supporting the dairy sector in this way, particularly 
in areas with difficult economic or environmental factors (e.g., 
mountain farming). For instance, France allocated =135 million of its 
CAP payments in 2015 to coupled support for dairy farmers, Poland =152 
million, Spain =94 million, Italy =89 million, Romania =78 million.\4\ 
Voluntary coupled support can amount to only up to 8% of the Member 
State's envelope. Just the payments to these five member states this 
year under this specific program amount to =548 million.
---------------------------------------------------------------------------
    \4\ Information from European Commission on voluntary coupled 
support--http://ec.europa.eu/agriculture/direct-support/direct-
payments/docs/voluntary-coupled-support_en.pdf.
---------------------------------------------------------------------------
    The EU also allocates a payment system for small farmers, with 
payments of up to =1,250/year/farmer.
Private Storage Aids
    The EU operates an ad hoc system of private storage aid (PSA), 
which is activated when dairy commodity prices are low. The subsidy 
levels are based on storage costs, quality, depreciation and any 
relevant market price increases. The PSA system operates for butter, 
cheese, and skim milk powder and many GI products. Stocks under the PSA 
program at the end of 2014 were 32,000 MT for cheese, 22,000 MT for 
butter, and 17,000 MT for skim milk powder. PSA subsidy levels were 
established at =18.9 per MT ($22.2 per MT) for butter, =8.86 per MT 
($10.4 per MT) for skim milk powder and =15.5 per MT ($18.2 per MT) for 
cheese.
EU Support Price Programs
    The EU operates a price support program for butter and skim milk 
powder. The price support for butter is set at =2,217.5 per MT ($2,608 
per MT), and for skim milk powder at =1,698 MT ($1,997 MT). EU price 
support levels for butter and skim milk powder have been lowered in 
recent years, and as a consequence the program has been less active. 
However, because of recent lower market prices, the EU did begin to 
intervene by purchasing skim milk powder in 2015. The EU notifies these 
price support programs as trade distorting ``Amber Box'' subsidies to 
the WTO, and correctly uses full production rather than the amount of 
product procured under the program as the basis for the price support 
subsidy calculation.
Special Subsidy Programs
    Due to low domestic prices for dairy and meat products in 2015, the 
EU Council agreed to provide dairy farmers and livestock producers with 
a =500 million ($588 million) package of subsidy assistance in the fall 
of 2015: =420 million ($494 million) of that total was slated to go to 
EU dairy farmers. In addition, EU Member States have the opportunity to 
provide matching funds under the program, providing potential total 
subsidies of over =800 million ($941 million) to EU dairy producers.
Baltic Region Aid
    Following the Russian ban on imports of EU dairy products in 2014, 
the EU in 2015 provided $36 million in special subsidy assistance to 
dairy farmers in Lithuania, Latvia and Estonia.
EU Export Subsidies
    The EU is allowed under WTO rules to subsidize the export of up to 
411,000 MT of butter, 323,000 MT of skim milk powder, and 331,000 MT of 
cheese. The total permissible level of subsidies in value terms is over 
=1 billion ($1.18 billion). When the EU makes use of export subsidies 
it causes massive distortions in world dairy markets.
Geographical Indications
    It would be negligent not to mention the matter of geographical 
indications (GIs) in this discussion. Support to farmers can take many 
forms, including the use of import barriers to minimize competition and 
prop up prices. Tariffs and tariff rate quotas are sanctioned under 
international rules, but when they fail to provide sufficient 
protection, or when they have been removed in trade agreements, 
governments sometimes resort to novel approaches to provide 
compensating protection to their producers.
    This is what the EU has undertaken in recent years in its effort to 
block the use of many commonly used product names by any producer 
outside prescribed areas of the EU. What better way to impede or block 
imports of a given product than to ban the use of its name? An American 
producer of feta or parmesan cheeses, for example, can no longer sell 
such products in the EU, despite the fact that those names have been 
widely and generically used around the world for many years. There is 
no question that the EU's effort to ``claw back'' the use of such names 
is a form of support to its producers.
    To make matters infinitely worse the EU is insisting in its free 
trade deals that its trading partners prohibit the use of such names 
except by EU producers. The EU's actions therefore also serve as a form 
of export support that puts at risk hard-won U.S. market access 
opportunities in markets around the world. Products employing 
Geographical Indications also benefit significantly under the EUs 
promotional programs (referenced below), thereby employing EU policies 
not only to block competition but also to help support the replacement 
product from the EU.
Milk Programs
    Other subsidies in the dairy sector include a School Milk Scheme, 
through which preschools as well as primary and secondary schools can 
claim subsidies if they supply their pupils with dairy products. The EU 
and the national governments jointly fund this scheme. The EU is 
limited to a maximum of 0.25 liter of milk equivalent per pupil, per 
day.
    The Commission also earmarked =30 million to fund the distribution 
of dairy products to refugees. This money will come out of the =500 
million package to support European dairy and livestock farmers which 
was agreed upon in September 2015.
Delayed Penalty on Dairy Quota Payments
    As part of the quota regime that was in place until March of this 
year, EU milk producers had to pay a surplus levy when exceeding the 
national dairy quotas. However, in view of the end of the milk quotas 
on the 31st of March 2015 and at Member States' request, the Commission 
adopted new measures to allow the EU milk producers, who will have to 
pay a surplus levy for 2014/2015, to make their payments over a maximum 
of 3 years in zero interest installments. The measure aimed to 
alleviate the financial burden on those producers that exceeded their 
quota threshold as they struggle with cash-flow problems amid a drop in 
prices. This was not a traditional subsidy, but `de minimis' aid,\5\ 
compatible with WTO rules, which applies to aid granted to undertakings 
active in the primary production of agricultural products, including 
dairy products.
---------------------------------------------------------------------------
    \5\ The total amount of `de minimis' aid granted per Member State 
to a single undertaking shall not exceed =15,000 over any period of 3 
fiscal years, provided that the global amount of such aid does not 
exceed 1% of the annual agricultural output as provided in Regulation 
No. 1408/2013 on the application of Articles 107 and 108 of the Treaty 
on the Functioning of the European Union to de minimis aid in the 
agriculture sector. Link (http://eur-lex.europa.eu/legal-content/EN/
TXT/PDF/?uri=CELEX:32013R1408&qid=1425313435298&from=EN).
---------------------------------------------------------------------------
State Aids
    Member States have the possibility of providing national funding 
under the de minimis rules (below =15,000 for agricultural primary 
production or =200,000 for marketing and processing activities over 3 
years). Even outside Rural Development Programs, Member States may use 
state aids, for example: aid for investments, agri-environment-climate 
or animal welfare commitments, organic farming, and the participation 
in quality schemes, etc. Under certain conditions, state aids can also 
cover promotion, the closure of production capacity and, under strict 
conditions, rescue and restructuring aid for companies in severe 
financial difficulties.
EU Promotion Programs
    The Commission has developed a promotion policy,\6\ which was last 
reviewed in 2014. Its objective is to enhance the competitiveness of 
the EU's agricultural sector. More specifically, the information 
provision and promotion measures aim to increase consumers' awareness 
and the consumption of EU agricultural products, raise their profile 
both inside and outside the Union and increase the market share of 
those products. In the event of serious market disturbance, loss of 
consumer confidence or other specific problems, those measures should 
help restore normal market condition.
---------------------------------------------------------------------------
    \6\ Latest revision of the Regulation on promotion measures of 
agricultural products was adopted in 2014 and it will apply as of 1 
December 2015. Link (http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/
?uri=CELEX:32014R1144&from=en).
---------------------------------------------------------------------------
    Under the promotion policy, the EU approved different programs to 
promote agricultural products. In 2015, there are six new information 
and promotion programs for the dairy sector. All six are targeting 
third country markets--worth nearly =12.2 million from the EU budget 
over 3 years. They are 50% co-funded by public or private funds. These 
new programs come in addition to 14 ongoing multi-annual programs for 
the dairy sector, which were launched between 2011 and 2014.
    Starting December 1, 2015, the new rules agreed upon in last year's 
reform of the EU promotion policy will enter into force. In addition to 
a gradual increase in the EU budget contribution to =200 million per 
year, the new regulation will adjust the co-funding rules (no national 
co-financing and higher rate of EU-funding), and introduce simpler 
procedures such as a single approval process, wider scope of 
beneficiaries and eligible products, annual work program and calls for 
proposals.
Rural Development
    The EU's rural development policy \7\ is a policy that aims at co-
financing of Member State budgets. France (=11.4 billion), Italy (=10.4 
billion), Germany (=9.4 billion) and Poland (=8.7 billion) are the four 
biggest beneficiaries of the rural development policy (see Table 1 for 
more details). If national contributions from co-financing are 
included, the funding available under the second pillar of the CAP 
amounts to =161 billion over the period as a whole.
---------------------------------------------------------------------------
    \7\ Regulation No. 1305/2013 on support for rural development by 
the European Agricultural Fund for Rural Development (EAFRD). Link 
(http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/
?uri=CELEX:32013R1305&qid=1445005900450&from=EN).
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    Each Member State develops its own rural development program taking 
into account four out of six of the EU's priorities for rural 
development, which focus on knowledge transfer and innovation; 
competitiveness of agriculture; food production chain; animal welfare 
and risk management in farming; agricultural and forest ecosystems; 
efficient use of resources and a low-carbon economy; and finally social 
inclusion, poverty reduction and economic development.
    While the European measures for rural development do not cover 
specifically the dairy sector, there are more general measures, which 
can be applied to dairy. For instance: physical investment, such as 
processing of farm products, which can be dairy products, investment in 
infrastructure, and improving the performance and sustainability of 
holdings can be applied to the dairy sector. There are also measures on 
setting up producer groups and organizations to increase the 
competitiveness of the dairy sector. There are also payments to areas 
facing natural or other specific constraints, such as mountain regions 
or protected areas (e.g., Danube Delta). Other measures include 
subsidies for organic farming, environmentally friendly practices, and 
animal welfare.
    The measures also include a risk management toolkit, which includes 
insurance premium subsidies for crops, livestock, and plants (financial 
contributions to premiums for crop, animal and plant insurance against 
economic losses to farmers caused by adverse weather events, animal or 
plant diseases, pest infestation, or an environmental incident); a 
mutual fund to respond to adverse weather events, animal and plant 
diseases, parasite infestations and environmental incidents (with a 
view to the payment of financial compensation to farmers for the 
resultant economic losses); and an income stabilisation tool, in the 
form of financial contributions to mutual funds, providing compensation 
to farmers following a severe drop in income. This income stabilization 
tool supports farmers facing a severe drop in income (minimum 30% loss 
compared to the 3 previous years). Nevertheless, only a few Member 
States (e.g., Italy, Hungary and Spain) have activated and allocated 
sufficient resources to make the instrument workable, probably due to 
its complexity and lack of available historical income data, as well as 
the rigidity of the threshold of the drop in income.
Canada Structure Support
    Many of the world's largest dairy consuming countries maintain high 
tariffs on imported dairy products. Canada, for example, maintains one 
of the most tightly guarded dairy markets in the world by imposing 
astronomically high tariffs on imported products. Canadian dairy 
tariffs typically range from 250% to 300%.\8\ A 300% tariff means the 
price of an imported good is quadrupled when imported. The purpose of 
tariffs of such magnitude is to protect Canada's supply managed price 
support system. The support program and the tariff regime are 
inseparable and Canada has maintained them through the Canada-U.S. FTA, 
North American Free Trade Agreement (NAFTA), and now the Trans Pacific 
Partnership.
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    \8\ World Trade Organization notifications.
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    As in the case of GIs in the EU, Canada has found ways to restrict 
the limited amount of access it has already agreed to provide through 
its NAFTA and WTO commitments to date. Collectively, these reflect an 
effort by the Canadian Government to use regulatory tools to provide 
further protection to its dairy support regime. Here are several 
examples:

   Politically-driven legislation to change an objectively-
        determined customs classification ruling to prohibit imports of 
        a food preparation product containing mozzarella (and 
        pepperoni, oil and spices). The effect of the action was to 
        commercially nullify all imports of the relevant food 
        preparation products from the U.S. by reclassifying the cheese 
        portion of them into a category where they would be subject to 
        a commercially nonviable duty of more than 200%.

   Creation of new milk classes designed specifically to thwart 
        imports: One of the more troubling developments in the past few 
        years has been an increasing level of creation of new special 
        milk classes that are specifically targeted and designed to 
        compete against imports of products that have made in-roads 
        into the Canadian market, such as chocolate milk.

   Implementation of revised cheese standards that restricted 
        opportunities for U.S. dairy imports of both cheese and dairy 
        ingredients. The revised standards permit the use of dried 
        dairy ingredients (which tend to be imported) only after the 
        minimum casein content established in the regulations is met 
        with fluid milk products. Internal discussions leading up to 
        this change made it clear that the revisions were intended to 
        limit the growth in the use of imported ingredients, 
        particularly those from the U.S., in Canadian cheese-making.

   Consideration of additional restrictions on the use of 
        ultra-filtered milk in Canadian cheese-making. Reports suggest 
        that the Canadian Government may be contemplating additional 
        regulatory steps that would negatively impact U.S. sales of 
        this product.

    These are just a few examples of the continue attempt by Canadian 
officials to prevent exports of U.S. dairy products into Canada.
Japan
    Japan is a relatively small dairy producer, but has a 
disproportionate impact on world markets, because it is one of the 
world's largest dairy importers.
    Japan provides direct payments to dairy farmers for production 
within government designated production quotas. In 2015, the direct 
payment was set at 12,800 ($107.62) per farm for production 
falling within the national quota of 1.8 million metric tons. This 
translates into nationwide dairy payments to farmers of 22.9 
billion ($193 million). While the production quota has decreased over 
time, the direct payment to dairy farmers has increased over time. Ten 
years ago, in 2005, the direct subsidy level was 10,400 per MT.
    Japan notifies the direct payment as a trade distorting ``Amber 
Box'' subsidy to the WTO. In its last available WTO notification, for 
2012, Japan notified direct subsidy payments at 27 billion. 
Japan's has a WTO Amber Box spending limit of 3.9 trillion, and 
total notified spending, including dairy and other agricultural 
products, was 608 billion in 2012, far below the 3.9 trillion 
subsidy ceiling.
    In addition to the direct subsidy payment, the Japanese Government 
subsidizes insurance for Japanese farmers, including dairy farmers, 
through partial payment of insurance premiums. In its 2012 WTO 
notification, Japan notified the insurance program as a non-product 
specific subsidy (meaning it covers a range of agricultural products) 
at a level of 19.3 billion ($162 million).
    Another major component of Japan's support to its domestic dairy 
farm and processing sector stems from a tariff-rate quota for natural 
cheese used for further processing. In this TRQ, Japan suspends its 
sizeable tariff for natural cheese only if it intended to be used as an 
ingredient for domestic manufacture of processed cheese in a prescribed 
ratio with domestic natural cheese. Through this TRQ, combined with a 
high ad valorem tariff for processed cheese (0406.30), Japan creates an 
implicit subsidy for its domestic manufacturers of natural cheese, 
processed cheese, and the farm milk serving that market.
India
    India is the world's second largest producer of fluid milk, behind 
only the European Union, and the world's largest producer of butterfat. 
Given the size of the Indian dairy market, Indian subsidies to the 
dairy sector are capable of having a significant impact on world 
markets.
The National Dairy Development Board
    The National Dairy Development Board (NDDB) was established by the 
Indian Government in 1965, and has been credited with helping India 
become one of the world's largest dairy producers. On its website, NDDB 
says that it was created by the government to ``promote, finance and 
support producer owned and controlled organizations.'' The NDDB derives 
its funding from government sources.
    The NDDB, in partnership with the Government of India, has 
developed a National Dairy Plan to increase dairy productivity, enhance 
links between dairy producers and processors, and assist in the 
development of dairy cooperatives. The first phase of the plan has 
allocated $416 million to fourteen dairy producing states in India, 
which account for 90% of milk production. Elements of the project 
include improving cattle genetics, replacing 20 million low producing 
dairy cows with genetically superior animals, addressing animal 
diseases, and improving the artificial insemination industry. (Source: 
FAS GAIN reports)
National Bank for Agriculture and Rural Development
    The National Bank for Agriculture and Rural Development (NBARD) is 
a state supported bank established by the Indian Parliament in 1982. 
Its role is to provide credit and subsidy programs in rural areas. 
NBARD will cover 25% of the costs in the form of ``back end'' credit 
subsidies, related to (1) startup outlays for small dairy producers, 
(2) costs associated with rearing small heifers, for up to 20 calves, 
(3) outlays for milking machines, and (4) outlays for cold storage 
facilities. (Sources: India Department of Animal Husbandry, Dairying 
and Fisheries, India Filings, ``How to Get NBARD Subsidy for Dairy 
Farming'')
Non-Tariff Barriers Sheltering Market from Competition
    In addition, the U.S. dairy industry has faced significant and long 
standing non-tariff market access barriers in the Indian market. Since 
late 2003, the vast majority of U.S. dairy exports have been blocked 
from the Indian market due to unjustified India's dairy certificate 
requirements. This significant non-tariff barrier has historically 
operated in a way that shields India's dairy industry from the full 
extent of outside competition.
New Zealand
    The monopolistic structure of New Zealand's dairy industry, where 
one company, Fonterra, controls approximately 85% of the milk produced 
in that country, poses a significant concern to the U.S. dairy 
industry. Both producers and a number of processors believe this 
situation poses a serious challenge to fair trading relationships both 
between the U.S. and New Zealand and in dairy markets throughout the 
world. This monopolistic structure grants an immense advantage to New 
Zealand dairy product exports. Moreover, very few companies in any 
economic sector have the level of market share that New Zealand has 
obtained through domestic policies. Such concerns present a serious 
challenge to our industry as we strive to compete against this 
international dairy powerhouse in world markets.
Conclusion
    In closing I would like to thank this Committee for the opportunity 
to testify today on this important issue and hope this information has 
been informative.

    The Chairman. Well, thank you, gentlemen.
    The chair would remind Members that they will be recognized 
for questioning in order of seniority for Members who were here 
at the start of the hearing. After that, Members will be 
recognized in the order of arrival. I appreciate Members' 
understanding.
    And with that, I recognize myself for 5 minutes.
    Gentlemen, I represent an awful lot of cotton farmers, so I 
will ask Dr. Adams to expand on his testimony.
    Can you talk to us about what the impact is on the ground 
of the reduction of the number of acres planted this year? Can 
you talk to us about the broader impacts on rural communities, 
and other economic things that are going on out in the real 
world as a result of these distorted foreign policies that have 
been hampering our crop producers?
    Dr. Adams. Yes, sir, Mr. Chairman. Thank you for that 
question. And I did mention the impacts that we have seen on 
the area, with it being the lowest since 1983. But the other 
thing to keep in mind when we look at cotton production in 
rural communities is, it is, in many areas, in many locations, 
and your district certainly being one of them, it is a 
cornerstone of the rural economy. When it gets to the farm 
gate, they are still warehousing the processing and 
distribution of cotton, as well as the cottonseed that comes 
from the production, that generates a tremendous amount of 
economic activity. I know there was a study by Louisiana State 
University that looked at the impacts on the rural economy in 
the loss of infrastructure that can occur when you see reduced 
cotton production. And we know that every dollar that gets 
turned over in the rural economy is increased by another four 
to five times that amount. So it is certainly a tremendous 
impact on the rural economy when we see that revenue from 
cotton production fall. We have already seen some very 
significant impacts in some parts of the Cotton Belt in the 
mid-South region around Memphis, we have seen a decline in 
infrastructure and a decline in production. Out West, we have 
seen similar declines.
    Certainly, our concern is, when we look at the returns from 
cotton production today and we compare that to cost of 
production, we understand why an area adjusted lower this year. 
Our concern as we look into the future is just going to become 
increasingly difficult for cotton producers as they look at 
where prices now sit relative to cost of production.
    The Chairman. You walked us through a litany of the price 
supports, but you also mentioned input subsidies. Can you 
equate that to a per pound subsidy for cotton producers for 
fertilizer and other things, such as seeds? Do you have that 
number by chance?
    Dr. Adams. Well, what we have are some numbers that--
perhaps not on per pound, but we can talk about some things on 
a per acre basis. And I mentioned a couple of the input 
subsidies. One in Brazil would be on the interest rate 
subsidies and getting lower interest rates than the current 
market rates, and have seen estimates that would put that at 
roughly $30 per acre in interest savings. And then when we look 
at India, for example, they are the largest producer, they are 
a significant competitor in the export market to U.S. cotton. 
And then we look at the numbers that have been associated with 
their fertilizer subsidies across their cotton production, we 
were estimating numbers that were approaching $100 per acre in 
input subsidies. So again, it is very significant in terms of 
effecting the cost or production side, efforts that just 
continue to keep India more competitive in markets.
    The Chairman. You were pretty clear on your statements 
about the ministerial conference coming up in Nairobi. Would 
you reiterate one more time, just for the record, what NCC's 
position is, and is it shared by a broader group of ag 
interests?
    Dr. Adams. Well, certainly, when we look at cotton--and I 
do think when we--not to speak for the broader ag group, but I 
certainly think that U.S. negotiators and the U.S. Government 
position has been that as we look at agricultural markets in 
general. The world is much different today than it was going 
back to 2008 when we had the last, really meaningful text that 
was developed. And in that text, there were, frankly, too many 
concessions for countries that qualified or want to qualify 
themselves as a developing country. We know that progress has 
been difficult in the broader ag negotiations, and our concern 
is that that just turns the attention more and more to cotton, 
and that if there can't be a broader ag agreement, then efforts 
will be to look for some cotton-specific agreement. That is not 
an outcome that we want to see because our concern is it is 
going to disproportionately try to impact policies in developed 
countries such as the United States. First, we have to step 
back and really look at how developed countries compare to 
developing countries, and really rethinking that playing field 
as we head into this ministerial conference.
    The Chairman. All right, thank you. I yield back.
    Mr. Peterson, for 5 minutes.
    Mr. Peterson. Well, thank you, Mr. Chairman.
    Mr. Roney, I agree that it would be wonderful if we could 
get to a zero-zero subsidy situation in sugar. And I applaud 
you for what you guys did with the Mexico situation and that 
successful outcome. And having worked through that with you, my 
question is, I am a little bit skeptical about how we would 
ever get to a situation where we actually could be sure that 
these countries got rid of their subsidies. There is so much 
disinformation put out there, and you did a great job here 
today laying out the reality, but you have people in the sugar 
industry or sugar users putting out disinformation--propaganda. 
You have people in ethanol doing it, and then you have Brazil 
which takes those two and uses that situation by lowering the 
price of ethanol when they can to subsidize sugar, and vice-
versa, and all the other stuff that is going on.
    So the question is how would we ever be able to assure if--
say that everybody agreed tomorrow they are going to get rid of 
their subsidies, how could we be sure that they have--given 
their manipulating currency in Brazil and, all of this stuff. 
Do you think we could ever be sure that these countries weren't 
pulling something minor back and we would be able to root it 
out?
    Mr. Roney. Thank you, Mr. Peterson. I appreciate your 
skepticism, which is very well placed.
    I think it will be extremely difficult to get foreign 
countries to roll back their agricultural subsidies in general, 
sugar in particular. The only way to potentially achieve that 
is at the WTO, where you have all countries at the table and 
all programs on the table, developed countries and developing 
countries. Certainly, there will be some problems with 
enforcement down the road.
    I think it is a noble goal to work in that direction. The 
U.S. sugar industry supports that. We could compete on a level 
playing field if we got there. But you are right, that level 
playing field is very hard to attain, and that is why we make 
our argument to Congress, and why we appreciate Congress' 
support, that until we get that level playing field, we need to 
retain the U.S. sugar policy we have in place now.
    Mr. Peterson. How realistic is it to get rid of the 
developing nation status for countries like Brazil?
    Mr. Roney. Well----
    Mr. Peterson. They are not a developing nation when it 
comes to agriculture.
    Mr. Roney. Yes, that is a real problem at the WTO that the 
countries are self-designating. They regard themselves as a 
developing country, and yet they have one of the most advanced 
agricultural systems in the world. And that is another 
disadvantage that we have to tackle in that multilateral 
process.
    Mr. Peterson. Is there anything on the table to get rid of 
that in the WTO process? Is anybody working on that?
    Mr. Roney. I am not really aware that there is, 
Congressman, but it is certainly something that we have to keep 
pushing for at every opportunity.
    Mr. Peterson. Mr. Castaneda, the Canadian situation, this 
TPP, the thing that really sticks in my craw is that we are 
letting them keep this supply management system. And my 
question is: I see what they are doing and they are protecting 
their market and, apparently, we are allowing them to do that. 
But, my concern is the Canadians are now becoming big players 
in our processing market. They are now buying up all kinds of 
companies and they have moved up, one of them is second in 
processing in the United States. Right? So is this happening 
because they have the supply management system and they have a 
guaranteed profit, and they can't reinvest it in their industry 
in Canada, is that why they are coming to the U.S.?
    Mr. Castaneda. Thank you for the question, Mr. Peterson.
    I can't for sure say that is the reason that they are 
coming to the United States. One of the things that I can 
assert is the fact that they do have a guaranteed margin in 
Canada, and also the fact that they don't have any opportunity 
to grow in Canada. We have seen not only Canadian companies 
coming to the United States but European companies, and you can 
see that actually they expand and they grow in the U.S. as 
opposed to in their own countries.
    The problem that we have with Canada is, as I have stated 
in my written testimony, is the fact that they are constantly 
changing the play of the game. They constantly are changing the 
rules in how we export into Canada. That is something that we 
consistently insist to the U.S. Government to have an agreement 
with Canada can prevent that from happening.
    Mr. Peterson. Thank you. Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired. Mr. Trent 
Kelly, of Mississippi, is recognized for 5 minutes.
    Mr. Kelly. Good morning, Dr. Adams. I flew in with you 
yesterday and got to meet you on the plane, and of course, 
Mississippi has a lot of cotton so most of my questions will be 
directed to you.
    In your testimony, you talked about the situation in India, 
and how they have grown as a producer and an exporter and 
subsidizer of cotton production. Can you talk more about how 
their support is structured, how that compares to the support 
in the United States for cotton, and what the resulting impact 
is on U.S. producers?
    Dr. Adams. Okay. Yes, sir. Thank you, Congressman, for that 
question.
    And when we look at India specifically, we look at how they 
convey support to growers. They do it through a minimum support 
price program. Essentially, think about it as acting as a floor 
on the market. So the Government of India, through an agency, 
will essentially step in and purchase cotton off of the market 
at that minimum support price in order to create a price 
guarantee back to their growers. In some ways, that is a key 
difference in terms of comparing it to support in the United 
States that generally allows market prices to go where they are 
going to go. This is much more of an intervention into the 
market to try to set a floor so they keep that support as the 
minimum. And that, as I mentioned in my testimony, has been a 
price support that has increased over time, certainly, to 
ensure that they continue to keep production at a level that 
right now is approximately 30 million bales. Essentially, in 
the world crop, 1 out of every 4 bales are produced in India, 
and they are an exporter anywhere between 5 and 7 million bales 
per year. I think that is the impact, in times of low prices, 
we don't see their acreage adjust because of that price floor. 
We continue to see them being a presence in the export market. 
And in times of low prices, it is due to the presence of that 
support program.
    Mr. Kelly. And I failed to thank you, Mr. Chairman, and the 
witnesses for being here. Sometimes I get excited to be asking 
these questions, since people have such knowledge in the area.
    And this is to any of you. Dr. Hayes or any of the other 
witnesses. How do you feel about the TPP, from your point of 
view, do you feel like it is good for your industry, do you 
think it is good that Congress support the TPP, and if you can 
explain why please?
    Dr. Hayes. I haven't seen all the details of the agreement, 
but those I have seen are good for the commodities that are 
produced in Iowa. In particular, the Japanese gate price system 
practically disappears over a long period of time, and we get 
access into 19 million consumers in Vietnam for beef, pork, and 
the products of corn and soybeans. So it is unambiguously good 
for a state such as Iowa that has a lot of land because the 
deal is with countries like Japan and Vietnam that are land 
scarce.
    Mr. Kelly. And my final question: Dr. Adams, China's cotton 
subsidies that you described are egregious and damaging to the 
United States and world producers of cotton. What is the 
outlook for those subsidy programs being reduced or eliminated?
    Dr. Adams. Good question. And I will say we certainly 
continue to see evolution in the way China is structuring their 
policies, because they went from 2011 through 2013, 
essentially, purchasing cotton off the market, putting it into 
government reserves, and establishing a price floor. That has 
evolved now in 2014 to be a target price program applied to a 
portion of their country. It is continuing to evolve in 2015. 
It is still in place. It went through some adjustments. 
Frankly, they are continuing to seek out ways to provide 
support to producers. I had the pleasure to attend a conference 
in China back in June, and this was a key topic that was talked 
about within their industry is, how do they evolve support over 
time. And the other question they have is what do they do with 
the 50 to 60 million bales of cotton stocks that they have 
amassed over that period of building reserves? They are still 
struggling with how to move that cotton back into the market, 
or what do with it because it is, right now, hanging over the 
market.
    Mr. Kelly. Mr. Chairman, Ranking Member, and witnesses, I 
thank you for your time. And I yield back, Mr. Chairman.
    The Chairman. I thank the gentleman.
    Ms. DelBene, for 5 minutes.
    Ms. DelBene. Thank you, Mr. Chairman. And thanks to all of 
you for being with us today.
    Mr. Castaneda, you talked about the EU and some of the 
challenges there, and I wondered if you could compare the level 
of support the EU is providing to its dairy producers to 
support we are providing under the new U.S. dairy programs.
    Mr. Castaneda. Thank you so much, Congresswoman. And thank 
you for your support of the dairy industry at all times.
    I would offer to give the Committee an extended comparison, 
but today, I can tell you that you can see how much the EU has 
been doing in the last couple of years, including this year, in 
supporting their dairy industry with the emergency aid and 
storage aids, and a number of other elements, compared to our 
programs in which the U.S. dairy farmers have only two 
programs. One is the Margin Protection Program, and a Donation 
Program, the Donation Program has not been implemented. In the 
Margin Protection Program, in fact, if you look at the number 
of--it is not official, but it seems to be that the U.S. dairy 
farmers pay to the government over $50 million under the Margin 
Protection Program. And the other element that the U.S. dairy 
farmers have is a self-support, cooperative, working together, 
which has nothing to do with the government.
    So as you can see, while the United States dairy industry 
and dairy farmers community is supporting themselves for the 
most part, the EU is heavily, heavily subsidized by the EU 
Government.
    Ms. DelBene. And you talked about kind of de facto support 
with geographical indicators. Can you quantify that in some way 
or give us some examples?
    Mr. Castaneda. We are working on an economic analysis and 
we hope to actually have that soon, but at some point, the 
Grocery Manufacturers of America, several years ago, and our 
analysis seems to actually--we could actually see up to 
billions of dollars in losses, not only from the direct 
producers of these cheese products, meat products, but also on 
producers who actually sell the milk to the processors.
    Ms. DelBene. And are there other countries outside of the 
EU that also are providing kind of similar, or other types of 
de facto support or other things that support----
    Mr. Castaneda. There are many, many countries, as stated, 
Canada is one of them, India certainly, and many countries like 
Brazil, Ecuador, Turkey, they are always finding ways, through 
regulatory or through other methods, to protect their dairy 
industry. So it is a constant battle to try to prevent these 
countries from encouraging new barriers against U.S. dairy 
products.
    Ms. DelBene. And you talked about this a little bit with 
Mr. Peterson. In your initial review of the Trans-Pacific 
Partnership, and you talked about Canada specifically, but if 
you look at it more broadly, what is the impact in terms of 
leveling the playing field potentially for our domestic 
producers?
    Mr. Castaneda. Thank you so much for that question. We 
still think that the jury is still out. We haven't seen all the 
details. Dairy, unlike other commodities, we have hundreds of 
tariff lines, so we are not 100 percent sure yet what is the 
outcome with every single tariff line in Japan, as well as what 
the last-minute concessions were given to other countries. But 
we certainly have determined that this is not an agreement that 
the dairy industry would oppose, but we are still trying to 
figure it out as to what grade we give them at the end.
    Ms. DelBene. Okay, thank you.
    Dr. Hayes, one of the things that we hear frequently is 
underreporting or lack of reporting, in some cases, of domestic 
supports that other countries are providing, lack of reporting 
to the WTO. That underreporting is having a big impact and may 
be inconsistent with WTO rules. And so I wondered if you could 
tell us whether you think this is a widespread problem or not, 
and kind of your overall view of what needs to be done to 
address that.
    Dr. Hayes. I think economists in developed, rule-of-law 
countries do a good job of reporting. Turkey has not reported 
recently at all. Brazil and India have reported, but there are 
flaws in how they did that.
    Let me give an example. If China were to buy 20 percent of 
the corn crop to maintain high corn prices, then they attribute 
the support only to the 20 percent, rather than acknowledge 
that that brought up prices for the other 80 percent of the 
crop. So there are issues in both the timing of reporting and 
the quality of the numbers.
    Ms. DelBene. Yes. My time has expired. I thank you, Mr. 
Chairman.
    The Chairman. The gentlelady's time has expired.
    Ms. DelBene. I yield back.
    The Chairman. Mr. Benishek, for 5 minutes.
    Mr. Benishek. I thank you, Mr. Chairman.
    Mr. Roney, I have a couple of questions for you. As you 
know, sugar is pretty big business in Michigan and this 
International Trade Commission just voted to affirm that these 
Mexican subsidies were really causing the U.S. sugar industry 
to suffer.
    So can you tell me about how that affects my district, 
specifically, and Michigan? What, exactly, is the result of 
that?
    Mr. Roney. Thank you, Congressman. That is an extremely 
important result for us, for all sugar producers in the United 
States, Michigan and elsewhere, really for two reasons. Number 
one, it reaffirmed our contention that Mexico is responsible 
for collapsing the U.S. sugar market in 2013. We are not 
surprised by that result because the Department of Commerce, in 
its final determination on the extent of subsidizing and the 
extent of dumping by the Mexicans, they came up with combined 
margins of 80 percent. It is just mind-boggling the extent to 
which Mexico is taking advantage of NAFTA to subsidize and dump 
on our market.
    The second way that this is very important is what it 
leaves in place are the suspension agreements that the U.S. and 
Mexican Governments negotiated to restore trade with Mexico, 
duty-free, but now we are going to balance the amount of sugar 
that Mexico can send with how much we need. It is very simple, 
the commonsense type of approach.
    Mr. Benishek. Yes, but I guess I don't understand, tell me 
in simple terms so I understand what this actually means. What 
is this going to mean? What are you going to be able to do 
about it?
    Mr. Roney. Well, what it means, Congressman, is that we can 
now expect--as long as the suspension agreements stay in place, 
and they are undergoing appeal that will be decided in 2016, as 
long as those stay in place, we can expect a stable market in 
the United States. We can expect to be able to avoid more 
dumping on the U.S. market by Mexico. So it is very important 
for the financial horizon for our producers looking forward, 
and for the lenders to know that as long as we have sugar 
policy and we have the suspension agreements, we are looking at 
a stable market for years to come.
    Mr. Benishek. Let me ask a question about the TPP. Is this 
going to change the way these kind of trade subsidies work in 
the future in the world sugar market?
    Mr. Roney. Congressman, the problem with FTAs with the 
bilateral and regional free trade agreements is that they don't 
address subsidies in those countries; they are purely focused 
on market access, tariffs and quotas, and so they are not a 
vehicle to address subsidies in those countries. In some ways, 
that is the biggest flaw in the bilateral regional approach. 
And it makes sense because if you are doing a bilateral 
agreement with one other country, you are not going to 
eliminate all your price supports for any commodity just 
relative to that country because then everyone is going to take 
advantage of it.
    Mr. Benishek. Well, what is the solution to that problem?
    Mr. Roney. Well, the only solution, Congressman, is in the 
WTO, the World Trade Organization. The Doha Round has been 
stalled for some time, but it is trying to address all 
subsidies around the world. And even within that framework, as 
we were discussing before, developing countries are often able 
to sidestep the disciplines that the WTO is meant to impose. 
But that is the only approach. You have to get all countries at 
the table, and all programs on the table.
    Mr. Benishek. Is there any sign that these kind of 
subsidies are slowing down on their own, or market forces are 
making that happen, or what is actually going on in the world?
    Mr. Roney. So in the world of sugar, the opposite is 
happening. As the world sugar price is dropping, we are seeing 
countries stepping up their subsidies. They have to keep their 
farmers afloat. As I tried to show earlier, the world price for 
sugar is running about \1/2\ the world average cost of 
producing sugar. So for any country to stay in business, they 
have to subsidize their producers, and they are doing it more 
and more generously the more the world price drops. So I am 
afraid the opposite is happening. We are not seeing any 
diminishment in foreign subsidies.
    Mr. Benishek. Thank you, Mr. Roney.
    I will yield back the remainder of my time.
    The Chairman. The gentleman yields back.
    Ms. Adams from North Carolina, 5 minutes.
    Ms. Adams of North Carolina. Thank you, Mr. Chairman. And 
thank you, gentlemen, for your testimony.
    Dr. Adams, I appreciated the opportunity to meet with 
cotton farmers from North Carolina earlier this spring. Cotton 
is grown throughout my state, including the twelfth district 
that I represent.
    Since U.S. cotton has been the subject of much litigation 
with Brazil at the World Trade Organization over the last 
decade, what recommendations would you have for how to approach 
the upcoming WTO session from a U.S. cotton perspective?
    Dr. Adams. Thank you for that question. I think as we look 
at the ministerial conference and the focus on cotton in the 
WTO, certainly, there is an opportunity there to really focus 
on making sure the countries are current in their notifications 
and also transparent in the support they are provided. There 
are what is referred to as dedicated discussions that were 
established out of the last ministerial conference; dedicated 
discussions on cotton, that were an opportunity for countries 
to dig in, so to speak, and evaluate what is being done in 
countries. And, frankly, as I can tell, there hasn't been a lot 
of progress on that front. So there is still work to be done 
there just to understand and get everybody to the point where 
they are talking in the same terms, and they are notifying and 
they are transparent.
    I think though, until that is done, we don't want to see 
any additional concessions on cotton until we have that 
stepping-off point. And certainly, as we plan toward the next 
ministerial conference, we don't see that there is any need for 
any cotton-specific outcome within that ministerial conference.
    Ms. Adams of North Carolina. Okay, thank you. As a follow-
up, what is the National Cotton Council's view on the finalized 
agreement of the TPP, both from a grower's and a manufacturer's 
perspective?
    Dr. Adams. Thank you. Yes, when we look at TPP, and as the 
negotiations went along, we always understood that really the 
focus of any outcome of TPP would be much more on the textile 
manufacturing side probably directly so, more so on the 
growers. Most of the trade that occurred in cotton between the 
countries involved was generally occurring with very low duties 
and no quotas.
    But on the textile side it can be a much different story, 
particularly with Vietnam being a participant in the TPP 
negotiations. That has always been a concern of the industry. 
We certainly appreciated that as the negotiations went along, 
U.S. negotiators talked to the textile association, talked to 
the cotton industry so they understood our concerns.
    In terms of our view of the final agreement, right now, we 
are just still a bit in a wait-and-see mode until we see all 
the specific agreements, and all the specifics, particularly 
from the textile side. We do understand there is a yarn forward 
rule-of-origin which we find to be very important. So it is 
moving in a positive direction, but there are some details that 
we need to see on the final agreement before establishing the 
final word.
    Ms. Adams of North Carolina. Okay. Finally, Dr. Adams, your 
statement covered some of the current challenges facing U.S. 
cotton producers, would you please elaborate on the economic 
condition of the U.S. cotton industry and what the outlook is, 
given the current prices and production levels?
    Dr. Adams. The market situation we are in right now, we are 
seeing futures markets trade in the low-to-mid 60 range, and 
that is certainly much lower than where we were 2 or 3 years 
ago. Returns for cotton production are off about 25 percent 
from where they were 2010 to 2013. Most of the producers that I 
talked to, that unless they have above-average yields, this 
crop is not going to meet their cost of production. I think 
that is the challenge they face. And unfortunately, right now, 
until we can see some recovery in demand, some adjustment in 
the supply and demand situation, it looks to us like the 
pressure is going to be there as we head into 2016. We are 
setting up for a challenging environment on the cotton side for 
the next year or 2. And that just underscores some of the 
financial pressures that are out there.
    Ms. Adams of North Carolina. Thank you, sir.
    Mr. Chairman, I yield back.
    The Chairman. The gentlelady yields back.
    Mr. Crawford, 5 minutes.
    Mr. Crawford. Thank you, Mr. Chairman. And I thank the 
members of the panel for being here today.
    Dr. Adams, you alluded to China's cotton subsidies, and I 
would agree that they are egregious and damaging to U.S. and 
world producers of cotton. What is the outlook? Do you see that 
being reduced or eliminated at any point?
    Dr. Adams. I don't see it being eliminated. I think China 
is going to go with--they are probably going to take the view 
that they want to provide support to their agricultural 
producers. Now, will it be modified over the coming years? I 
think that is a question they are still dealing with, because 
they have gone through some fairly significant changes in their 
policy, but I don't see it being eliminated. I think they will 
continue to want to provide support to their producers. 
Hopefully, it will be done in a way that does not provide 
distortions to the markets.
    I think the big question that they have to deal with too, 
in addition to how they support their producers is, what do 
they do with that 50 to 60 million bales that are sitting in 
stocks, because that comes at a cost and it is overhanging the 
market.
    Mr. Crawford. Let me ask you about that. Sixty-three 
million bales in government-owned stocks in China, and expected 
to rise to 68 million bales. Are we pretty sure on those 
numbers, because I am a little concerned about their reporting 
and how that may impact the market? And then also, have we seen 
those levels before? And please talk about what the market 
impacts are going to be.
    Dr. Adams. Yes, the short answer is we have not seen those 
levels before. But, going back to your first question. There is 
always an uncertainty around any of the data estimates that 
come out of China. I think the data is better than it was a few 
years ago, and we have some sense of how much was purchased, or 
reports of how much was purchased into the reserves, and some 
idea of how much was auctioned. So I think there is a better 
idea there. Now, is it 60 million bales? Could it be off by 5 
or 10 million bales? Possibly so.
    I think one of the uncertainties that is also associated 
with that is not only the quantity of the cotton but the 
quality of the cotton.
    Mr. Crawford. Right.
    Dr. Adams. Some of it has been there for 4 or 5 years. But 
nonetheless, it is leading them with those reserves basically 
there to come on the market. It makes them withdraw and be a 
smaller importer of cotton than they were a few years ago. That 
is one of the most significant impacts.
    Mr. Crawford. You said maybe a 5 to 10 million bale 
variance there. That is pretty significant.
    Dr. Adams. That is----
    Mr. Crawford. How does that manifest in terms of market?
    Dr. Adams. I think what it manifests itself into is 
uncertainty in terms of, can you put a dollar value on it? I 
think that is a challenge, but certainly, as the market 
participants look at the conditions, they are always trying to 
assess what is going on in China and what will happen. So yes, 
those are big numbers when we talk about it, and it is an 
uncertainty just in terms of how they choose to manage that, 
going forward.
    Mr. Crawford. Let me ask you this. I want to get into a 
deal with Turkey, but what would you advise that we might be 
able to do here from a policy perspective that might force 
China to report more accurately? Is there anything that we can 
do?
    Dr. Adams. Well, if we just continue to urge U.S. 
negotiators and those in Geneva that represent the U.S. at the 
WTO to continue to push. And I know they have been over this 
past year. In fact, there was just recently a press story out 
earlier this week on some of the discussions that went on 
between the U.S. and other countries; namely, China and India. 
I still see that as the first step, is to continue to push 
there and get an explanation on the table so that we at least 
have a better understanding of where we are.
    Mr. Crawford. Let me ask you this about Turkey. This 
antidumping, countervailing duties investigation that Turkey 
initiated against U.S. cotton exporting companies. And I 
understand it is rare for a government to self-initiate a case, 
and there may be some political motivation for that in 
retaliation for U.S. antidumping and countervailing duties on 
Turkish steel. If you wouldn't mind, give us an update on what 
is going on there and how the cotton industry has been 
involved, what this Committee might do to help resolve the case 
favorably.
    Dr. Adams. Thank you. Yes, we are a year into that 
investigation. It was self-initiated. The first time that 
Turkey has self-initiated an investigation. Turkish officials 
have sent requests of two questionnaires to our exporting 
companies. So our exporting companies have had to submit a 
tremendous amount of data on all of their transaction-by-
transaction data for a certain period of not only their sales 
to Turkey, but their sales to other markets as well. So it has 
been a burden from that standpoint.
    We, as an association representing the industry, we have 
status as an interested party. We have made three submissions 
into the process, really trying to rebut any of the economic 
arguments that the Turkish Government put forward. I had a 
chance to be in Turkey just the week before last to have 
meetings with ministry officials.
    Their evaluation is still ongoing. We know there is some 
political underpinnings in this investigation. There is still a 
tremendous amount of uncertainty. Our understanding is that 
this investigation will likely go on for another 6 months or 
so. The challenge it creates is that textile mills in Turkey 
are reluctant to buy U.S. cotton because they don't know if, by 
the time they make the purchase decision to have it landed in 
Turkey, will there be a duty applied in that interim. So as a 
result, they are backing off their purchase of U.S. cotton.
    I think we have to, and perhaps for this Committee, 
continue to just make sure that Turkish officials know that 
this has a high profile within the United States, and that they 
are being watched from a standpoint of how they conduct the 
investigation, the transparency, and are they following the 
guidelines for these investigations that are established within 
the WTO.
    Mr. Crawford. Thank you, sir. I yield back.
    The Chairman. The gentleman's time has expired.
    Ms. Plaskett, 5 minutes.
    Ms. Plaskett. Yes, hi. Thank you, Mr. Chairman. And thank 
you, panelists.
    Mr. Crawford, we were on the same wavelength because the 
same issues that you are interested in were the questions that 
I was going to ask the witnesses, so I will be very brief and 
really trying to drive those questions to specific purposes.
    With regard to the first issue that Mr. Crawford talked 
about; that being the WTO's and the Chinese Government and 
Turkey, and when it comes to cotton, if you could tell me, Dr. 
Adams, or even, Dr. Hayes, for small producers of cotton such 
as Haiti and the Dominican Republic, how do the markets like 
the Chinese, who do not follow the rules of the WTO quite 
often, how does that affect them in terms of their production 
and their pricing?
    Dr. Adams. I think that certainly, if you talk about some 
of the smaller producers, it certainly creates a challenge for 
them getting into the market. One of the things that I hadn't 
really talked about much in this oral testimony, that is worth 
noting, and I made mention of it in the written testimony, is 
that when we talk about some countries that are looking at a 
cotton and/or textile industry, one of the challenges that come 
up is not just what happens within cotton markets, but cotton 
is one fiber that competes within a global fiber market. And so 
you really have to look at also what is going on in manmade 
fiber, and specifically polyester. That is another one of those 
factors that come in and its reach and its effects are going to 
be extensive, particularly when you look at the fact that the 
polyester market globally is about 2\1/2\ times the size of the 
cotton market, and right now, we see polyester prices at about 
50 a pound in China. So we don't want to lose sight of all 
those potential implications as well when we particularly 
talk--if you talk about some countries that are trying to get a 
cotton and textile industry up off the ground.
    Ms. Plaskett. Well, what about other natural fibers, do 
they face the same impediments or have the same issues?
    Dr. Adams. I think it gets tough when you talk to some of 
the other natural fibers, are those more specialized uses, for 
example, if you talk about wool or silk, it may be more 
difficult to say to the extent those are affected, but we 
certainly know, when we look at a lot of the uses of cotton, 
that in many cases polyester comes in and is a direct 
competitor when we talk about the textile production. That has 
an impact, especially on the demand side.
    Ms. Plaskett. Okay. The other question I had was regarding 
this antidumping case by the Government of Turkey. And we 
talked about this and there is a theory that this is 
potentially a retaliation against trade cases and the U.S. 
market and how we operate, particularly when it comes to 
cotton. But I know that my own district, the Virgin Islands, is 
constantly getting threats from other Caribbean Nations with 
regard to rum and how we utilize rum, and the subsidies and the 
support that the U.S. Government gives us. My question is 
really focused on, with the WTO cases that come forward, do you 
find, any of you, Dr. Hayes or others, Mr. Roney, has the U.S. 
Government been supportive of protecting U.S. markets and U.S. 
industry when other countries attempt to use the WTO as kind of 
a way to strong-arm U.S. markets because of the subsidies that 
the United States is able to provide? I stumped you guys. I 
love this.
    Mr. Roney. Well, in sugar, we have not brought cases 
against the many countries that subsidize because we do have 
import quotas that prevent them from damaging our market. When 
we did go to our government with complaints about Mexico, the 
U.S. Government came through very well in finding that there 
was injury from Mexico, and in finding that there was a major 
amount of dumping and subsidizing there. So our experience has 
been positive.
    I think that we have consistently found the U.S. Government 
to be very receptive to what our concerns are. There are limits 
on how much they can achieve in the international arena, but we 
have always found--whatever Administration is in place--to be 
very receptive.
    Ms. Plaskett. Okay, thank you.
    I yield the balance of my time. Thank you, Mr. Chairman.
    The Chairman. The gentlelady yields back.
    Mr. Rouzer, 5 minutes.
    Mr. Rouzer. Thank you, Mr. Chairman.
    I have a couple of questions. One follows up on the first. 
And my first one is this: A lot of times we operate under the 
theory that if America moves to a complete total free market, 
other countries will follow suit. My question for each of you 
is, do we have any indication that that has ever translated 
into reality? Dr. Hayes? Dr. Adams? I am just curious about 
your response.
    Dr. Hayes. I can try. As Mr. Roney mentioned, the issue 
with bilateral trade agreements is that they do not influence 
domestic support policies. So under a free trade agreement, it 
is possible that those countries could reduce barriers as part 
of the agreement, and then ramp-up their domestic supports. And 
that is why this meeting is so important. If those agreements 
are policed properly, as is occurring right now, their ability 
to do that is far less.
    Again, back to the TPP, Japan does not have enough AMS 
available to protect its producers unless it violates their WTO 
agreement. And the same would be true for Vietnam. So the 
policing is as important as the agreements themselves.
    Mr. Rouzer. Yes. Dr. Adams?
    Dr. Adams. Excuse me. I think too when we look at it from 
cotton's perspective, we are not seeing that. I mean as U.S. 
support has declined, we don't see it declining in other 
countries. We always look at the WTO as being a multilateral 
effort to try to level that playing field. And this has been 
alluded to in some of the previous discussion. One of the 
challenges we have is that as we look at some of the text that 
is on the table, the requirements of developed countries are 
more stringent than the requirements on developing countries. 
So even to live up to the letter of those agreements would 
still probably allow the developing countries to provide more 
support, and it doesn't bring them down to the same level as 
developed countries.
    Mr. Roney. Mr. Rouzer, thank you for that question. And it 
is important to note there is in trade policy, this notion of 
moral suasion that if we would just eliminate our subsidies, 
other countries would get in line and follow suit. There is 
absolutely no evidence that that has ever happened. If we give 
up our policies unilaterally, it is just a signal to take 
advantage of us, to send subsidized goods in to replace ours. 
So that is why we emphasize that it has to be done 
multilaterally and simultaneously. If we tried to lead the way, 
we would just be destroyed in the process.
    Mr. Castaneda. I just want to echo, and thank you for the 
question, Congressman, we see ourselves in that same place in 
which we are asked on a regular basis to do a unilateral 
disarmament, whether it is lowering our tariffs through this 
TPP agreement, but we don't necessarily receive the same 
treatment from other countries. And certainly, we have actually 
moved away from price supports, and we have a much more market-
friendly programs. We are not seeing that in other countries.
    Mr. Rouzer. And my follow-up is for cotton and for sugar. 
If you can, it is your discretion, pick your primary competitor 
or the one that you have the most concern about at this point 
in time, and explain to us what their support structure is and 
how it is different from ours, and how it has adversely 
affected our producers here at home. I will start with Dr. 
Adams.
    Dr. Adams. All right, thank you. Well, as we went through 
the testimony, I highlighted a few of those, and I will just go 
back and reiterate a couple. And if we talk about it 
specifically from the standpoint of a competitor to U.S. 
cotton, the competitor that is out there on the U.S. cotton is 
India. They are an exporting country. They are the largest 
producer. They are maintaining that minimum support price that 
equates to somewhere between 70 and 80 per pound in order to 
keep that land in cotton production, and it allows them to be 
an exporter.
    The other thing we have seen is they will be very 
aggressive in pricing. So they will come in and you will see 
similar qualities offered, 2 or 3 or 4 less than U.S. 
cotton. That creates a number of challenges just from that 
standpoint.
    We have talked about China. China is a significant customer 
of U.S. cotton. Certainly, how they manage those stocks, going 
forward, is going to be a challenge. Their focus on manmade 
fiber is a challenge as well.
    And then in the near term, going back to just Turkey, 
creating basically a trade barrier that there is no economic 
rationale for is something that is dampening the market right 
now.
    Mr. Roney. And just quickly, on sugar it would be Mexico is 
our competitor under NAFTA for our market. And what we have 
seen in Mexico as recently as 2001, that the Mexican mills were 
in a lot of trouble. They were threatening to go out of 
business, and the government stepped in and expropriated \1/2\ 
the mills in Mexico. And that government ownership has 
continued until today. It is small now; they would be able to 
sell off some of those mills, but for years and years, 
particularly once NAFTA phased-in, the biggest sugar producer 
and exporter in Mexico was the Mexican Government. That is not 
exactly ideal free trade. We are trying to compete. And the 
Department of Commerce has shown that about 40 percent of 
Mexican grower revenues are based on government support in the 
cases that we just brought.
    Mr. Rouzer. Thank you, Mr. Chairman. My time has expired.
    The Chairman. The gentleman's time has expired.
    Mr. Aguilar, 5 minutes.
    Mr. Aguilar. Thank you, Mr. Chairman. I want to thank all 
of you for your research that clearly demonstrates that other 
countries are subsidizing many of their agricultural industries 
above the WTO limits.
    Dr. Hayes, in response to a previous question you were 
talking about the policing ability in this kind of 
investigative--what I am going to say, kind of investigative 
efforts. Is there more that this Committee and the government 
can do to support the investigative efforts to make a strong 
case to the WTO that American farmers are at an economic 
disadvantage?
    Dr. Hayes. Well, this hearing is a huge effort, as was the 
hearing in June, so we all appreciate that. The next step would 
be to take one of these countries to the WTO, and that is a 
decision that will be made elsewhere, but I think that the 
people who will make that decision would be influenced by your 
opinions.
    Mr. Aguilar. Any other comments about kind of investigative 
next steps and things that we can do to help these efforts?
    Dr. Adams. Well, again, you are right, as Dr. Hayes said, 
this hearing raises the profile and speaks to what is going on 
in other countries, because sometimes there becomes an 
impression that agricultural programs are only present in the 
United States, or predominantly present in the United States, 
but they are basically present in essentially every country 
that has an agricultural program.
    Mr. Roney. Yes, it is clear, Congressman, that food is 
important, every country is going to try to maintain food 
security, and they are going to become very protective of their 
farmers and their consumer food supplies, and that is why I 
believe the countries are most reluctant to reduce their 
agricultural subsidies because of the importance to them of 
their rural communities and food supply to their people. It is 
a very tough problem.
    Mr. Aguilar. I appreciate it. One more question. You have 
talked a little bit about kind of EU from the dairy 
perspective, could I ask you to expand a little bit more on the 
dairy certificate requirement that India has in place? I 
understand that it has created substantial barriers to U.S. 
dairy exporters. And do you have any insights on what we can do 
to support our farmers and to help them meet these 
requirements?
    Mr. Castaneda. Thank you, Congressman. Absolutely. In 
addition to actually finding a number of problems with the EU 
subsidization, they also are changing a number of different 
rules on SPS. With respect to India, this Administration has 
actually tried a number of times, even the President discussed 
this issue with the Prime Minister of India, and India still 
refuses to bring on a specific issue with respect to some of 
the elements that are not sound science, that are presenting on 
this health certificate. Some of them are related to their own 
culture and how they treat cows, and basically we are trying to 
find a solution. There is a new Administration in India. The 
U.S. Government is trying to address this issue, but we 
certainly need the support and we ask this Committee to help us 
with the Food and Drug Administration and USDA and USTR to find 
a solution with respect to how we can export to India.
    Mr. Aguilar. Any others? Thank you so much. I appreciate 
it.
    I yield back, Mr. Chairman.
    The Chairman. The gentleman yields back.
    Mr. Abraham, 5 minutes.
    Mr. Abraham. Thank you, Mr. Chairman. I apologize for my 
tardiness.
    U.S. sugar policy has historically been attacked by groups 
that buy the sugar, often because they want access to foreign 
subsidized dump sugar. Does this mean that they generally 
embrace the foreign subsidies in dumping?
    Mr. Roney. Yes, thank you, Mr. Abraham. It is very odd. The 
nature of multinational food companies that oppose sugar policy 
claim to be free traders, and yet you are absolutely right that 
when they oppose U.S. sugar policy, or they call for unilateral 
disarmament of U.S. sugar policy, what they are essentially 
arguing is that they should have access to dumped subsidized 
foreign sugar. And that seems to be antithetical to genuine 
free trade.
    Mr. Abraham. Has this hurt the U.S. sugar industry?
    Mr. Roney. Yes, sir, I believe that it has because they 
have brought constant pressure on us, on Congress, to minimize 
U.S. sugar policy to the greatest extent they can. They have 
been successful in keeping our support level at about the same 
level as it has been since the mid-1980s. So there is constant 
pressure that we have to try to withstand.
    Mr. Abraham. Thank you.
    Dr. Adams, what is China going to do with all their cotton 
stockpiles that they are holding, and what is going to happen 
if they decide to sell off in a bunch?
    Dr. Adams. That is a big question. And, in fact, at a 
meeting earlier this year in China, at a conference I had the 
pleasure to attend, there were several speakers from China that 
openly, frankly discussed that question, and just the challenge 
it creates for them. They did offer, what was it--they made 
available roughly 6 to 8 million bales through an auction 
process earlier this year. That occurred in July and August. 
The challenge was though that at the end of the auctions, they 
had managed to sell only about 260,000 bales, after making 
available 6+ million bales. The price they were offering it at 
was, frankly, it was a combination of a price being still in 
the upper 90 range, and the fact that it was cotton that was 
from either 2011 or 2012. So you had old cotton offered at a 
high price. Textile mills were not willing to purchase it. So 
they basically came out of those auctions in much the same 
place they were before the auctions occurred. I don't know if 
there is an answer yet because it does depend on the timing of 
the sales, the eventual price, and are there textile mills in 
China that want to purchase that cotton. It is a challenge they 
have to deal with that, unfortunately, it is going to be with 
us for a while.
    Mr. Abraham. Okay. Thank you, Mr. Chairman. I yield back.
    The Chairman. The gentleman yields back.
    Mr. Ashford, 5 minutes.
    Mr. Ashford. Thank you, Mr. Chairman.
    Dr. Hayes, a question for you first of all, then I will get 
into more substance. I am wondering if you can guarantee that 
my freshman son at Iowa State is in class this morning. If you 
could check and get back to me on that, I personally have been 
not able to verify it, but thank you.
    Excuse me, Mr. Chairman, for that. It was just something I 
had to get off my chest.
    Anyway, in my state, Nebraska, obviously, we export a lot 
of corn, soybeans, and beef. The criticism that--there are many 
positives that we hear in Nebraska about the benefits of TPP, 
and, quite frankly, of NAFTA, and our ability to export 
additional grain products and beef products throughout the 
NAFTA area. To those who say, basically, that NAFTA really 
hasn't been a benefit to our grain farmers and our beef 
producers in Nebraska, and that TPP won't either, I realize it 
is a relatively general question but what would be your 
response to that?
    Dr. Hayes. I don't track the sugar market or the fruit and 
vegetable market, and I suspect that if I did, my answer would 
be different, but it has been unambiguously good for the kind 
of products we grow in the Corn Belt. Mexico is a huge importer 
of U.S. meat. Probably 30 to 40 percent of the meat consumed 
down there is imported. And that has skyrocketed since NAFTA. 
And even in eastern Canada, we actually export quite a bit of 
meat there. So we learn in our introductory freshman courses 
that free trade is good, and I tend to believe in that. And 
NAFTA was a solid, well-structured free trade agreement.
    Mr. Ashford. Right. And then as we look forward to TPP from 
our area, from Nebraska, and I agree with you that NAFTA has 
been a significant benefit to our producers, how do you see 
that TPP impacting what already has evolved in NAFTA?
    Dr. Hayes. Well, Japan has import duties of 45 percent on 
beef, and depending on how you measure it, maybe 30 to 40 
percent on pork, and they go to ten percent, and then for beef, 
close to zero. The Japanese beef and pork industries simply 
cannot survive if they are competing against U.S. product. And 
as they reduce production and as their consumers eat more, the 
U.S. is in a really good position to meet those markets. The 
other competing country is Europe, and it does not have the 
ability to ship chilled product into those countries. So Japan 
is there, and then Vietnam is a pork country, but they are 
eliminating all of their duties under products of relevance to 
the Midwest over about 10 years. And that is 90 million hungry 
people who are entrepreneurial and I sense disagreement will 
make them wealthy, and instead of developing their own value-
added livestock industries, a lot of that will be imported if 
these agreements are enforced as designed.
    Mr. Ashford. All right, thanks very much. And one last 
question from an economics perspective. And this is, I am sure, 
difficult to speculate on necessarily, but on the price side, 
the feedback, of course, the question we get is, Brad, is this 
going to help us on the price of our product, and what is your 
general comment on that, of the TPP now?
    Dr. Hayes. I watch the futures markets and I can tell when 
we are going to have a good month for exports, by the way, our 
export statistics are 2 months out-of-date, but the futures 
market is up-to-the-minute because the people in those 
companies taking the orders need to buy the product. And I can 
tell when we are exporting a lot because the futures markets 
and the cash markets are up.
    Even though the U.S. is huge in terms of demand and supply, 
a small division caused by a new export order can significantly 
influence price.
    Mr. Ashford. All right. That is all I have.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. The gentleman yields back. And good luck with 
that son going to class. Thanks.
    Mr. King, 5 minutes.
    Mr. King. Thank you, Mr. Chairman. And I thank the 
witnesses for your testimony and time, and the commitment you 
make to these issues.
    I would first reflect on the statement made by Mr. Peterson 
with regard to countries that have emerged declaring themselves 
to be developing nations. And I wanted to point out a little 
narrative. Sitting down in Brazil with the Brazilian Minister 
of Trade, who said to us in a square diplomatic seating, with 
the Members of the House and Senate there, he said, we have won 
the agricultural trade war with the United States. It will be 
quite impossible to compete with us. That told me a couple of 
things, but one of them was they don't understand Americans. 
You don't tell us it is quite impossible to compete with us. I 
want to make that point, and perhaps that will echo its way 
down to Brazil and maybe help in a little way to start to 
remove that label.
    But I wanted to also say to Mr. Roney, your presentation on 
the portions of the sugar markets I thought was excellent, and 
it is some of the things I have looked at for some time 
reinforced here. And it tells us how difficult it is to compete 
in a global market when you have state-sponsored subsidies 
taking place in that way. It brings me around to this question. 
If people are hungry in the world, and that has always been the 
case and likely always will be the case, what is the interest 
in governments in subsidizing products that diminish the 
availability of the nutrition available to their citizens?
    Mr. Roney. Well, Congressman, it is certainly problematic 
because countries do take their food supplies seriously, one 
would certainly expect, and so they are extremely generous in 
their ag subsidy supports. Their rural infrastructure depends 
on it and their domestic food supplies depend on it. So I think 
that makes it very difficult for us to persuade them to reduce 
their policies and their subsidies.
    Mr. King. Could you anchor that back in the effort on the 
part of their ag producers within their countries lobbying for 
their trade protectionism?
    Mr. Roney. I am--say that again, Congressman. I didn't 
quite----
    Mr. King. Okay. Could you anchor this back in countries 
that are strongly subsidizing their food production, could you 
anchor that in the lobbies of their farmers and their ranchers 
and lobbying for trade protectionism for their particular 
trade?
    Mr. Roney. Yes. Certainly, their lobbying efforts are very 
strong, and it would seem very successful, and it is hard for 
us to compete on that level. It is hard for us to compete 
against those foreign subsidies. I totally agree with you that 
we could compete--our American farmers could compete with any 
country on a level playing field, but the ag lobbies in those 
countries are strong and effective.
    Mr. King. Let's say if we got to that place that you put 
out there that maybe characterizes an ideal situation for trade 
to abolish the subsidies for sugar globally, if that happened, 
what--let me take it another way. If that happened in the 
United States and not in the rest of the world, what would 
happen to that land that is in sugar production in the United 
States today?
    Mr. Roney. We would be knocked out of production. I think a 
limited amount of that land could shift to other crops. Our 
beet producers tend to be diversified in wheat, corn, and 
soybeans, but then it is a question of whether--we need wheat, 
corn, and soybeans--more acreage of that. Our cane areas tend 
to be a monoculture, and in the State of Hawaii, for example, 
three of the four islands there have gone out of sugar because 
of flat pricing over the years, and for the most part, there is 
nothing on that land.
    Mr. King. I wanted to hear that. Thank you. I appreciate 
that.
    And then, Dr. Adams, I will ask you a little bit different 
way. I used to have this discussion with some of the now-
retired Members of this Committee, and I ask this question of 
you. We are subsidizing food production in many categories in 
the United States, but if the cotton operations in the United 
States were shut down in a similar fashion, say, lack of 
subsidy in a world market that over-subsidizes, so your cotton 
producers could no longer compete, what crops would those 
fields go to?
    Dr. Adams. I think when we look, we can just take it 
regionally, when you look at the southeastern United States, 
most of our cotton producers are diversified there. Primary 
competing crops are where you would see those acres likely 
shift to, with probably peanuts as the first place. You would 
pick up maybe some soybeans and corn. In the mid-South or Delta 
region, those acres would most likely shift into corn, 
soybeans, maybe a little bit of wheat.
    Mr. King. Is the Corn Belt growing down into the cotton 
regions?
    Dr. Adams. We have seen, following down the Mississippi 
River, you see a lot more corn and soybeans in those areas than 
you did several years ago. I think a challenge comes in Texas 
where you have so many of the acres that are devoted to cotton, 
they are not as suitable to other crops, there are fewer 
alternatives, maybe a little bit of grain sorghum or wheat, but 
it would be a real challenge on them because you might just see 
those acres go out of production.
    Mr. King. Thank you. And if the Chairman would indulge me 
with a short question for Dr. Hayes?
    The Chairman. All right.
    Mr. King. Thank you, Mr. Chairman.
    Dr. Hayes, your review of the Trans-Pacific Partnership, 
could you tell us in summary the market access that we would 
gain versus the market access that we would grant with regard 
to ag products?
    Dr. Hayes. Well, I can only speak for the ag products I am 
familiar with. And we don't really restrict the importation of 
those products into the U.S. We are natural exporters.
    For beef, the duties go from about 45 percent down to ten 
percent, and stay there for Japan for pork. The the current 
gate price is the equivalent of about a 35 percent import duty, 
and it goes to practically zero over a 15 year period. Then in 
Vietnam, which is very land-scarce, both of those duties go to 
zero over 10 years. And for Malaysia, it is immediate access 
for our products.
    Mr. King. Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    Ms. Lujan Grisham.
    Ms. Lujan Grisham. Thank you, Mr. Chairman. I too want to 
thank the panel for being before the Committee today. And I am 
going to actually do, unfortunately, what too many of us do, 
and fortunately both, focusing on the issues in our districts, 
which means that sometimes we are repeating some of the 
information that you have heard already, and asking you to 
delve in a little bit deeper on some of the issues.
    So I want to go to Mr. Castaneda, and I want to talk a 
little bit more about dairy. And I want to highlight for you 
that in my state, the dairy industry, which you probably 
already know, New Mexico, is a huge economic driver and the 
leading agricultural economic driver, with export sales 
reaching about $125 million in 2012. According to the New 
Mexico State University, the total economic impact of the dairy 
industry in my state is about $1.8 billion, and that is a 2014 
number. We are currently ranked ninth in the nation for milk 
product, and fifth in the nation for cheese production. We have 
about 150 dairies, and we have the largest average herd size; 
about 2,300+ cows, which is, as you know, significantly higher 
than what the average is; about 187. In your testimony, and you 
have highlighted in some of the questions and answers, that it 
is becoming more difficult for U.S. dairy producers to compete 
in the international market when other countries are 
subsidizing and continue to ramp-up their dairy subsidies. So 
it is not only the old problem that we were dealing with in 
terms of the subsidies so that they can unfairly deal with the 
price of milk in the international market, but they continue to 
ramp that up, or further hampering our ability to support our 
own dairy exports in a meaningful way.
    So I want you to talk a little bit more about that, but I 
want you, if you can, is there any differentiation about herd 
size, and is there something that we can do as policymakers 
that looks to those benefits for states like New Mexico that 
helps us compete more effectively, perhaps?
    Mr. Castaneda. Thank you so much, Congresswoman, for that 
question. And as you stated perfectly, the industry in New 
Mexico has been a very good example. We are growing in most of 
the states in the United States, and one of the reasons is 
because trade agreements that have done a good job in being a 
fair trade agreement, a balanced trade agreement, have promoted 
that. And NAFTA, as to the question of Mr. Ashford, has been a 
tremendous success from the Mexican side of the United States. 
Mexico is today our number one market. And New Mexico is taking 
advantage specifically the plants in New Mexico that actually 
are exporting a lot of cheese to that country. In general, our 
number one problem that we are encountering is border 
protections, and, of course, increasing additional aid in 
Europe. We are now very dependent of international markets. So 
every single impact, or every single action by other 
governments to prevent imports of our dairy products, it 
certainly goes back, ultimately the price that it is paying to 
dairy farmers. And that certainly is impacting the size of 
farms. Farmers want to grow. In New Mexico in particularly, 
there has been a lot of expansion as well as in Texas, and 
those farms are actually producing primarily for the export 
market. So this is why it is so critical. And what the 
Committee can do----
    Ms. Lujan Grisham. But then they are also really at risk, 
these large herds and large farms if we don't----
    Mr. Castaneda. Absolutely.
    Ms. Lujan Grisham. Okay.
    Mr. Castaneda. Absolutely.
    Ms. Lujan Grisham. I am going to ask you, with the time I 
have left, that in the border security, border protections, in 
New Mexico in particular, we have created kind of a trade 
center, it is called Santa Teresa, that really helps us in the 
context of moving our exports and imports across the border. 
Are there things specific to that investment that you see that 
would make a difference for us to continue to compete and 
solidify that export market with Mexico?
    Mr. Castaneda. Specifically, supporting our work with the 
different regulatory agencies in the United States, like APHIS 
or the Food and Drug Administration is the way to go. The Food 
and Drug Administration is an agency that has jurisdiction over 
dairy, and part of the problem is that they don't have an 
export angle. They are, obviously, reminding us that their role 
is not to necessarily look at export side. So anything that the 
Committee and others can do to help us enhance the budget of 
the Food and Drug Administration to support more exports, 
because as we have discussed before with respect to India and 
other countries, a lot of times we have issues and problems 
with respect to finding the right time and the right resources 
to negotiate these health certificates.
    Ms. Lujan Grisham. All right. Thank you very much.
    I yield back, Mr. Chairman.
    The Chairman. The gentlelady's time has expired.
    Mr. Yoho, 5 minutes.
    Mr. Yoho. Thank you, Mr. Chairman.
    And I want to pick up where Congressman King left off, when 
he was talking about what happens to that land, whether it is 
sugarbeets or cane or cotton, or one of the other commodities, 
it goes fallow on a lot of those cases, but more importantly, 
what is after that. The infrastructure that produces or refines 
those products, like the sugar mills or the cotton gins, they 
go out of business. And we have seen that happen with the UK 
when they got away from their subsidy programs, their market 
collapsed, it killed jobs, and it weakened their economy. 
Everything we do from this point from the Federal Government 
should be making America stronger, not just militarily but 
economically. And if we are strong economically, people benefit 
in this country. So we have always got to keep that in mind.
    And, Dr. Hayes, you brought up something that often gets 
overlooked in the debate, when the U.S. decoupled the farm 
policies from production back in 1996, and we have been working 
to get more and more away from that, and I have talked to my 
producers, whether it is in some type of crop or dairy, they 
have said, man, we would love to get the Federal Government out 
of this as much as we can. And this goes back to Mr. Roney, and 
I appreciate your presentation. I think you are spot-on. You 
know where I stand on that zero-to-zero. And I had the good 
fortune of being in Mexico, November of 2014, and we were with 
the Minister of Finance, who negotiated NAFTA, and we got him 
to admit they did dump sugar on our market. And Chairman Royce 
was there and it was a wonderful time. And I am glad to see 
that you guys have stood strong. And there is so much 
misconception about what the sugar subsidy is. And we 
understand it is the loan program, and it is not paid out a 
dime, zero, zilch, nada, until they dumped that sugar on the 
market. And that is something we need to take and let people 
understand.
    And so I guess my question is, when we get into these 
multinational trade negotiations, and we are going through that 
now, and, Dr. Hayes, you hit on this with Japan and our beef 
production. We have to get in there so we can lower the tariffs 
over 10, 15 years, depending on what country, but in the 
meantime, Australia is negotiating with Japan unilaterally. Do 
you see it would be more beneficial for America, for our 
competitiveness, to work more on unilateral or bilateral trade 
agreements with other countries versus getting tied into this 
big quagmire with all these other countries, and just, instead 
of waiting to get it perfect, just move on and start making 
these negotiations? I guess that is open for everybody.
    Dr. Hayes. Well, I will respond first. I am pessimistic 
about the WTO. You have over 100 countries----
    Mr. Yoho. I am glad to hear you say that.
    Dr. Hayes.--and it just takes one or two countries to ruin 
the situation. But take a bilateral. Let's say the bilateral we 
have with Korea, we were lukewarm about actually implementing 
that until we realized that if we didn't, the Europeans were 
going to take our markets away. And suddenly we woke up and we 
were interested in not losing that market. And TPP, I mean we 
could walk away from that, but that doesn't stop the Europeans 
from having a free trade agreement with Japan, which is very 
close, and it certainly doesn't stop Canada using the TPP to 
access our markets in Japan. So in a sense, the bilaterals are 
the smaller agreements and they are almost viral. If somebody 
signs one, then just to keep your market you have to sign it, 
or if you don't sign it, somebody else will take your market 
share away. So the competitiveness works in favor of these 
smaller regional agreements and against the multilaterals.
    Mr. Yoho. Dr. Adams, you want to weigh-in on that?
    Dr. Adams. Well, I would say too, from the WTO's 
perspective, obviously, there would be benefits if there was a 
multilateral negotiation, but it is a challenge with it working 
under a consensus rule and essentially one or two countries can 
block up any negotiations. I think you look historically at the 
track record for the U.S. cotton industry, probably some of the 
greatest benefits have been more in the unilateral or regional 
trade agreements. Those have probably had more tangible 
benefits over the last 2 or 3 decades than trying to do 
something under a broader perspective.
    Mr. Yoho. Well, and that is what I see is, and we focus on 
the big picture of TPP, but in the meantime, you see other 
countries like Australia negotiating with Japan, and I am not 
hearing any trade agreements working on the side and say, 
``Well, let's get this done until we can work these other 
things out.''
    And let's see here. Mr. Roney, you want to weigh-in on any 
of that?
    Mr. Roney. Well, yes. Thank you, Congressman. And thank you 
for your support for U.S. sugar farmers. We really appreciate 
that. The problem with the bilateral and regional agreements, 
while they can gain some market access by reducing tariffs or 
increasing quotas, what they never address are the subsidies in 
those countries. So when we are looking at a world market as 
distorted as sugar, these bilaterals, they don't make any 
progress on those levels of distortion. So as difficult as it 
is, and I certainly acknowledge it is very difficult, but the 
only way to approach that is at the WTO where you do look at 
domestic supports and export subsidies, as well as import 
access. So it is very difficult, but it is the only way to make 
genuine progress on global subsidies.
    Mr. Yoho. Thank you. I am out of time.
    The Chairman. The gentleman's time has expired.
    Mr. Yoho. Thank you, Mr. Chairman.
    The Chairman. Mr. Allen, 5 minutes.
    Mr. Allen. Thank you, Mr. Chairman.
    And, of course, we have talked a lot about cotton, and I 
appreciate your input on that. Of course, that is the largest 
crop in our district. And it seems to me, because I am always 
looking for solutions, that we have talked about the WTO and we 
need a solution on how to deal with that. And I would 
appreciate hearing from you on that because I will tell you 
what the American people are really getting tired of, and our 
farmers are really getting tired of, is, we have to export 80 
percent of our cotton in my district. The world market now is 
around 60. You can't make it on 60. We have to send it to 
China. We have to mix it with their lesser grade of cotton. 
They are paying their farmers like $1.40. And then we walk into 
a retail store in this country and we buy a shirt for $35, and 
we are the gorilla in the room as far as consumer products are 
concerned. How in the world do we deal with that? I mean it 
looks like to me that if we don't get--our exposure is the fact 
that we are out of the textile business----
    Dr. Hayes. Yes.
    Mr. Allen.--and we are out of the shirt-making business. I 
mean somehow we have to address the end product and the fact 
that we are buying, what, 80 percent of the world's goods and 
services, but yet we are getting killed on the raw product. 
That is not good business sense. Not a good business deal. Any 
comments? I would like to just go down through the panel. And, 
Dr. Hayes, I will start with you. Can we think of the beginning 
with the end in mind and say, okay, wait a minute, this is the 
way to fix this?
    Dr. Hayes. Well, your comment about 60 here and $1.40 
there, that is what this hearing is about is to tell the 
Chinese, first, you committed not to do that; and second, you 
should stop doing that. Now, if you went back to 60, their 
cotton producers would cut back on production, which would 
expand our price.
    Mr. Allen. But then we can't seem to get them to understand 
the fact that, okay, if you don't do something about this, you 
can keep your shirts in China.
    Dr. Hayes. That is a good point.
    Mr. Allen. Dr. Adams?
    Dr. Adams. Well, I don't know that I have any magic answer 
for you, but you do raise an issue that when we look at the 
potential economic activity and the economic impact, it goes 
beyond the farm gate, particularly when we talk about the 
cotton and textile industries. Excellent point in terms of just 
the changes that we have seen, the elimination of import quotas 
over the last--went through a multiyear period of eliminating 
import quotas on textile products, and probably not having the 
attention to detail as we looked at some of the changes that 
have occurred in textile policy, both within a multilateral 
agreement. And unfortunately, we lose that end-use 
manufacturing and then you see market share going to not only 
countries like China, but countries like Vietnam stepping in 
and gaining market share as well.
    I think what we have--I don't know if there is an easy way 
to undo that other than trying to work to somehow level that 
playing field and realize it is beyond the farm gate; it is 
also on the manufacturing side, particularly, on the textile 
side.
    Mr. Allen. Mr. Roney, you have any solutions on this?
    Mr. Roney. Well, Congressman, I wish I did, but I don't. We 
just have to be really fastidious about how we look at these 
agreements. And for us, and sugar being an import crop, it is 
awkward, it is difficult, because the U.S. is doing these 
agreements to try to gain access for information technology and 
so on. But what do those countries want? Well, they want access 
to our agricultural market. And so we are always kind of on the 
chopping block there. So, yes, we certainly don't want to stand 
in the way of trade agreements to get more access to foreign 
markets for our country, but we don't want to be the 
sacrificial lamb in that process.
    Mr. Castaneda. I would only just add that one of the ways 
that we can try to resolve this is to provide more funding and 
resources. We used to be able to go USTR, and we used to be in 
a time in which we enforced these trade agreements and we have 
actually a number of cases in the WTO, and we actually are not 
seeing a lot of that, and we certainly would like to have the 
U.S. Government take more of the cases that will help all of 
us.
    Mr. Allen. Well, anything that this House can do to provide 
a strategy so we can deal with this issue where we are getting 
the short end of the deal. And like I said, the American people 
are a little tired of that, and we are seeing that everywhere. 
Please come to us and let us know how we can help you in your 
negotiations to deal with these problems.
    I yield back.
    The Chairman. The gentleman's time has expired.
    Mr. Goodlatte, 5 minutes.
    Mr. Goodlatte. Thank you very much, Mr. Chairman. I 
appreciate you holding this hearing, and I appreciate the 
testimony of all of these witnesses.
    Mr. Roney, I wanted to direct a question to you. Your 
written testimony and your testimony earlier in the hearing 
highlighted that many of the top sugar exporters are also top 
sugar subsidizers, and you have been rightly critical of those 
subsidy programs. However, one country I noticed to be missing 
from your list and that is Australia. According to the USDA's 
Foreign Agricultural Service, Australia is the world's ninth 
largest producer of sugar and the third largest exporter. 
However, in recent discussions regarding trade and sugar policy 
around the world, the assertion has been raised that Australian 
supports for sugar are quite minimal in comparison to the rest 
of the world. So I wondered if you could comment on this claim, 
and then furthermore, could you give an opinion as to how 
Australia is able to compete in the world market without these 
subsidies if they are, in fact, minimal?
    Mr. Roney. Thank you, Congressman. Australia's subsidies 
have been relatively small, relative to other countries, but 
their government has come to their rescue at times when prices 
were low or there has been weather damage, and they have also 
had a single-desk seller which is of some question under WTO 
rules for safe trading and enterprises. But we also look at how 
Australia has fared with its relative exposure to world prices, 
and they have not fared well. Their production has been 
struggling, it has been down in many years. Their role in the 
world market has been diminished by countries that have 
continued to subsidize. They have lost out on the market share, 
for example, they used to be the world's second biggest sugar 
exporter. Now Thailand is the world's second biggest sugar 
exporter by far, and that was entirely through the Thai 
Government decisions to set high prices and to encourage 
exports onto the world market. So Australia, for not coming to 
the rescue for its producers more than it has, has really 
suffered from that.
    Mr. Goodlatte. Right, but they are also the third largest 
exporter.
    Mr. Roney. Still declining but, yes, still third.
    Mr. Goodlatte. Third. Third is still pretty high. 
Especially when they are obviously exporting a very large 
quantity of their sugar if they are ninth in production but 
third in exports.
    Mr. Roney. Yes.
    Mr. Goodlatte. The other question I would like to follow up 
on with regard to Mr. Peterson is, if you think you have any 
practical ways to apply pressure to other countries to come to 
the table to negotiate down the subsidies.
    Mr. Roney. I think in the world of sugar, the promise or 
the hope would be that as these countries reduce their 
subsidies, that world prices would rise, that the least 
efficient producers would fall out of the business, and as 
world prices rise to reflect the cost of producing sugar, then 
the most competitive would survive. For some countries, like 
ourselves, we are--who are relatively competitive by world 
standards, we would welcome that approach. The problem and the 
obstinacy comes from the countries that are not relatively 
efficient, but are really, really committed to their sugar 
industries and will be reluctant to reduce the supports for 
them.
    Mr. Goodlatte. Thank you.
    Let me just ask briefly each of you with regard to the TPP. 
I know we haven't seen the language yet, but I am just going to 
go down, and I will start with you, Dr. Hayes, your general 
reaction to how it will treat American agriculture, getting 
access to these markets or giving up too much access to our 
markets, do you have a favorable or unfavorable--I don't need 
you to go into details but----
    Dr. Hayes. Favorable.
    Dr. Adams. I think on cotton fiber, fiber trade, it should 
be favorable there. The question mark for us will be what 
happens with the textile trade, and that is a question yet to 
be seen in terms of some of the details.
    Mr. Goodlatte. Sure. Mr. Roney?
    Mr. Roney. We are still waiting for the details, as are the 
others, but at this point, we are optimistic that the amount of 
additional access granted will not jeopardize the no-cost 
operation of U.S. sugar policy.
    Mr. Goodlatte. Thank you. Mr. Castaneda?
    Mr. Castaneda. Yes, I think that actually we echo Mr. 
Roney. I think it may be slightly unbalanced if you see what we 
grant to other countries with what we got, but at the end, we 
hope, once we see all the details, that perhaps it may be a net 
positive on the economic overall, but we don't know yet.
    Mr. Goodlatte. I know you were very concerned going into 
the final negotiations, but were some steps taken there that 
help dissuade some of your concerns?
    Mr. Castaneda. I think that a letter from many Members of 
Congress and many calls from Members of Congress help us at the 
end to prevent a really bad agreement. I think that going into 
the final--and I have heard that dairy was one of the last 
issues to be discussed at 5:00 in the morning on Monday of the 
conclusion of the agreement. So I think that we avoided a 
really bad agreement. Again, the jury is still out to see how 
good it is, but it doesn't look like we have this great access 
into Canada or Japan which we were looking for.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    Mr. Newhouse, 5 minutes.
    Mr. Newhouse. Thank you, Mr. Chairman. Thank you for having 
this hearing, and I appreciate all of you being here.
    I am going to try to get to each one of you, so if you 
could help me with keeping your answers at least within my time 
period of about a minute or so.
    Mr. Roney, Ronney, I am sorry, I got your name----
    Mr. Roney. Roney.
    Mr. Newhouse. Roney? You kind of breached this subject so I 
wanted to follow up with you first. Could you talk a little bit 
about how domestic support programs used in other countries 
generally impact commodity production in those countries? Do 
they go up, do they go down? And then what would you see the 
effect of that on global production and prices?
    Mr. Roney. Well, classically what we have seen in the world 
of sugar is support prices that are generous enough to keep 
farmers in business, and in many cases, to expand their 
production. And the problem then becomes when their production 
expansion goes beyond what their market needs, what do they do 
with that surplus.
    Mr. Newhouse. Okay.
    Mr. Roney. Well, they have tended to dump it on the world 
sugar market for whatever price it would bring.
    Mr. Newhouse. Okay.
    Mr. Roney. So you have, for example, the European Union, 
for many, many years, had price supports of around 30, 35 per 
pound, that induced a tremendous surplus in the European 
market, and then you were witness to the spectacle of their 
dumping sugar onto the world market at 10 per pound. But their 
farmers were able to stay in business----
    Mr. Newhouse. Okay.
    Mr. Roney.--because they were getting such a generous 
amount for the sugar they were selling within the EU.
    Mr. Newhouse. Yes, it seems like a vicious circle, and----
    Mr. Roney. Yes.
    Mr. Newhouse.--you just can't get out of it----
    Mr. Roney. Yes.
    Mr. Newhouse.--and that seems to be where we are.
    Dr. Hayes, I appreciated your testimony. Could you name 
foreign countries and the commodities they produce that cause 
us the most problems? In your report, you talked about the 
wheat study and the potential billion dollar impact to U.S. 
farmers. In naming those foreign countries and commodities, 
also talk about what effect that has on our producers?
    Dr. Hayes. I believe it is China first and then India. And 
I will use corn as an example. The current support price in 
China is about $9.25 a bushel, which is about double the cost 
that our corn could go in there at. So we have market prices 
for corn are falling. And if the Chinese consumer could see 
lower corn prices, they would buy more. If the producers saw 
lower corn prices, they would produce less. And so that creates 
a distortion, and it is true for corn and it is true for wheat. 
And then India, which is more opaque, but very similar 
programs----
    Mr. Newhouse. Corn also in India?
    Dr. Hayes. No, wheat in this case.
    Mr. Newhouse. Wheat? Wheat? Okay.
    Dr. Hayes. Yes. And one quick comment. You may notice I 
have a funny accent. I was born in Europe and farmed there, and 
it is true that those policies were enormously distorting, but 
pressure from the U.S. and pressure from economists has 
gradually resulted in the Europeans backing away from----
    Mr. Newhouse. Okay.
    Dr. Hayes.--those distorted programs.
    Mr. Newhouse. Thank you. Well, that leads to my next 
question, thank you.
    And, Dr. Adams, could you talk a little bit, and I know 
just in a minute, it is going to be tough, but what actions we 
as a country could take in response to subsidies by foreign 
producers to help U.S. farmers compete in these world markets?
    Dr. Adams. Well, as we look at it from cotton's 
perspective, the WTO is going to be the area where those 
discussions--that is the venue for where those discussions take 
place. And in the case of cotton, out of the Bali ministerial, 
there were dedicated discussions that were specific to cotton, 
and that is an opportunity, for the discussion to occur to 
really try to understand what is happening in other countries. 
And again, other countries have a long way to go in terms of 
their notifications being as current as the United States and 
as transparent. But in the case of cotton, that is the venue to 
start those discussions and to really try to level that playing 
field.
    Mr. Newhouse. Yes, it seems to have some impact, if Dr. 
Hayes' observations are correct.
    Mr. Castaneda, no surprise that our two most important 
trading partners, as it relates to dairy, Canada and the EU, 
have significant price supports. Can you talk a little bit 
about how that impacts our dairy farmers?
    Mr. Castaneda. Sure. Thank you so much for the question.
    Just as an example, Russia, when they banned all their 
imports from the western world, it impacted Europe the most 
because we were still working on a health certificate to see 
our products into Russia. But what that did is have over 6 
billion pounds of milk equivalent that were actually going into 
the Russian market, in Europe have to actually find a different 
market. All that was pretty much dumped into the international 
markets through aids by the EU. So that gives you a context of 
how bad the markets can be distorted by situations, primarily 
from aiding by the EU. And low milk powder prices have actually 
been all over the world, and has impacted, to a certain extent, 
dairy producers that focus on Class IV and on the powder side. 
But for the most part, we are doing better here than anywhere 
else in the world that has a pretty much open market. We are 
not Canada, we are not North Korea, but actually, if you look 
at countries, if you look at the different prices, the U.S. 
actually is doing better than most other countries.
    Mr. Newhouse. Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    One quick question. Obviously, some of the focus of my 
opening comments, as well as some of the others, is that 
enforcement of our deals, whether within the WTO or within a 
bilateral FTA, is an important issue. The anti-dumping, 
countervailing duty cotton case that Turkey brought against the 
U.S., while I don't think there is any empirical evidence at 
this point, followed very closely on our suit against Turkey 
dumping their steel. It appears to be a retaliatory tactic. Is 
this a new tactic, or has this been used before--where America 
has tried to enforce an agreement, and the respondent country 
triggered an unrelated case in retaliation?
    Dr. Adams. Well, I will speak to in this case, I am not 
aware of, necessarily past situations, where we have had this 
much back-and-forth, but in the case of Turkey, there was a 
Turkish official who was quoted publicly back in September of 
2014 as saying that for each investigation that the U.S. 
launched, that Turkey would, in fact, launch three 
investigations. And then not a month after that, we saw the 
investigation launched for cotton. And so now we, 
unfortunately, are caught in the cross-hairs of what has become 
just a back-and-forth of investigations.
    The Chairman. Are any of the other witnesses aware of 
retaliatory things like that?
    I want to thank our panel for being here today. It has been 
really informative. We have had great, succinct answers. I 
appreciate my colleagues sticking to the 5 minute rule. The 
earlier question about whether you support TPP, I appreciate 
that you all responded in the affirmative, but we also have the 
caveat that we don't have all the language yet and that we are 
going to look at the full deal. Rice, tobacco, and some other 
things may not end up going as well, and all of us are 
anxiously awaiting the language to make sure we understand how 
the process unfolded.
    I appreciate each of you highlighting the negative impacts 
that foreign subsidies are having on U.S. agriculture. Farmers 
and ranchers across this nation are competing on an unfair, 
unlevel global playing field. Part of the responsibility of the 
Agriculture Committee is to help the American people understand 
the need for our farm safety net. We ratcheted down our safety 
net in the 2014 Farm Bill, and we are seeing the direct 
impacts. This is especially evident in the cotton industry 
where they have next to nothing in terms of a safety net. I 
want to thank each of you for your statements, and the work 
that you are doing to support this narrative that each of my 
colleagues and I need to be a part of. Unfair competition is 
just that--it is unfair, and people who cheat need to be held 
accountable. Cheating by foreign countries should not be 
tolerated. It hurts American producers, and ultimately our 
consumers.
    Under the rules of the Committee, the record of today's 
hearing will remain open for 10 calendar days to receive 
additional material and supplemental written responses from the 
witnesses to any question posed by a Member.
    The hearing of the Committee on Agriculture is adjourned. 
Thank you.
    [Whereupon, at 12:00 p.m., the Committee was adjourned.]