Statement by August Schumacher, Jr.
Under Secretary for Farm and Foreign Agricultural Services
U.S. Department of Agriculture
Before the Senate Finance Committees
Subcommittee on International Trade
April 21, 1998
Mr. Chairman, members of the Committee, it is a pleasure to appear before you with Ambassador Peter Scher to discuss preparations for the next round of multilateral agricultural trade negotiations.
Trade Policy Successes Bring Real Opportunities
The Uruguay Round Agriculture Agreement stands as a landmark achievement, creating new opportunities and setting a new path in world trade. Renewed fast track negotiating authority will be needed for the next major steps.
Recent trade agreements have opened new opportunities for American farm and food products around the world. They opened rice markets in Japan and Korea for farmers in Arkansas, California, Louisiana, and other rice-producing states. Beef and pork producers in states like Texas, Nebraska, Kansas, Iowa, Colorado, and a dozen others are benefiting from sharply increased access to Japan, Korea, and Mexico.
For fruit and vegetable producers in California and across the country, trade agreements have expanded access for many products going into Canada, Mexico, Japan, the Philippines, and other countries. Poultry producers in Arkansas, Georgia, North Carolina, Alabama, and other states are benefiting from freer access and increased sales to Mexico, Poland, South Korea, the Philippines, and other countries.
Combined with an aggressive trade policy, the big agreements pave the way for smaller successes as well. The single-sector openings are important, too -- the first commercial shipment of U.S. tomatoes to Japan, gaining access for sweet cherries to Mexico, re-opening the Chilean market to U.S. wheat. Market by market, they add up, bringing real benefits to our farmers and ranchers.
Take a look at the Japanese wood products market. In 1990, the United States and Japan reached a bilateral agreement that greatly improved access for U.S. value-added wood products. In 1996, a second agreement improved the situation even further. As a result of these two agreements, U.S. producers dramatically expanded sales of certain value-added wood products to Japan. A Portland, Oregon company, Willamette Industries, now sells $14 million worth of these products to Japan -- a 600 percent increase during 1990-1997 period. Ondo and Company, another major U.S. producer based in Kirkland, Washington, increased sales to Japan 20-fold to over $14 million.
We continue to monitor closely how other countries are implementing their Uruguay Round commitments, and the United States has not been slow in using the dispute-settlement process of the World Trade Organization (WTO). Of the 35 complaints filed by the United States, just over one-third have involved agriculture. And we have scored significant victories, such as the recent decision against the European Unions (EU) hormone ban, upheld by the WTOs Appellate Body earlier this year.
The U.S. Trade Representative (USTR) and USDA have also used the WTO process to convince countries to reach favorable settlements without having to proceed all the way through the panel process, as was the case, for example, with South Koreas shelf-life restrictions on processed foods and Hungarys excessive export subsidies. Earlier this year, the United States concluded an understanding with the Philippines under which the Philippine government agreed to reform the way it administers tariff-rate quotas that had severely restricted access for U.S. pork and poultry meat. We are currently challenging the way Canada subsidizes dairy exports and Japans varietal testing program for horticultural products.
These actions are part of our continuing effort to make sure countries live up to their Uruguay Round obligations. We also insist that countries wanting to enter the WTO first undertake a serious commitment to trade reform -- just as we are working on with Taiwan. In February, the United States and Taiwan signed a bilateral agreement in which Taiwan committed to opening its market at significantly reduced tariff rates to a broad range of U.S. products upon accession to the WTO. The agreement on rice will, for the first time, provide real access to Taiwans consumer market. Taiwan also agreed to immediate market access for a number of U.S. products, including lifting its import bans on several beef, pork, and chicken products.
Slowly but persistently, these efforts have been stripping away many of the trade barriers to U.S. products and challenging the unfair trade practices that exist. The benefits are evident in export numbers that are running about 40 percent higher than they were at the start of the 1990's -- and thats despite the current Asian situation and despite the stronger U.S. dollar.
However, the hard work is not done. We are going to continue to pursue an active, aggressive, ambitious trade policy agenda.
WTO 1999: Next Steps in Global Agricultural Trade Reform
One of the most important initiatives of the Administrations trade agenda is continuing the global reform process begun in the Uruguay Round. Planning is already underway for the next round of multilateral agricultural trade negotiations, set to begin late next year. For more than a year now, USDA, working in partnership with USTR, has been laying the groundwork for success in the difficult negotiations that will take place. We are placing special emphasis on technical and regulatory trade restrictions.
USDA, in coordination with other agencies, will be consulting with Congress, with members of the Agricultural Policy Advisory Committee for Trade, the five Agricultural Technical Advisory Committees for Trade, and with others in agriculture on specific negotiating priorities. Generally we will be seeking substantial improvements in the trading environment for U.S. farm products. These negotiations will provide us with a significant opportunity to reduce further tariffs, open new markets, and address unfair trade practices on a global scale.
Several key issues stand out:
These last two goals should lower some of the more elusive trade barriers that range from unnecessary red tape to regulatory practices that erect unjustified sanitary and phytosanitary barriers. For example, the major trade disputes causing tension in the U.S.-EU relationship -- the EU hormone ban, specified risk materials, and EU approvals for new biotech products -- all demonstrate the need for greater international harmonization on the basis of more clearly defined rules on technical barriers.
When we enter this new round of agricultural talks, the process of global trade reform must not come to a halt. However, this could happen if negotiations on new actions and larger tariff cuts are not completed by 2001, when most Uruguay Round commitments will be fully implemented by the developed countries.
We are beginning to explore with our WTO trading partners ways to continue implementing tariff and export subsidy cuts and other measures, even as we work on new disciplines that will need to be negotiated. The Uruguay Round commitments were just the first step in agricultural trade reform and we still have a long way to go. So, any pause in reform would be unfortunate. In the Uruguay Round, countries agreed to continue the reform process beyond the year 2000, and we will work with our trading partners to see that this commitment is met without a pause. Our initiative is simple -- No stopping and waiting for a new agreement to emerge -- no pause.
U.S. Leadership Must Continue
We have a lot of work to do -- globally, regionally, and bilaterally -- in enforcing existing agreements, opening new markets, and leveling the playing field. That is why we need to maintain the momentum and U.S. leadership of the trade reform agenda. Much of the world still looks to us for leadership, but countries will not sit around waiting. Our neighbors in this hemisphere are signing new trade agreements among themselves, often leaving U.S. producers at a disadvantage. The European Union and others recognize these opportunities and are pursuing these markets. Recently, the European Commission announced plans for a free trade agreement with Mexico.
The EU is also interested in pursuing a "New Transatlantic Marketplace Agreement" with the United States. We agree with many members of Congress and U.S. Trade Representative Barshefsky that agriculture should be included in any agreement. We will be working with USTR as talks progress on this issue.
We also need to move forward with ongoing initiatives and with other new global, regional, and bilateral initiatives. We need to stay out front, where we can continue to play a leadership role in setting the agenda and writing the future rules for trade.
The trade policy successes of the past few years have brought new opportunities to U.S. agriculture. We must continue to build on those successes, and we at USDA are committed to that task.
Mr. Chairman, that completes my statement. I would be happy to answer any questions.