Statement of A. Ellen Terpstra, Administrator
Before the Subcommittee on Agriculture, Rural Development,
Food and Drug Administration, and Related Agencies
March 9, 2006
Mr. Chairman, Members of the Subcommittee, I appreciate the
opportunity to review the work of the Foreign Agricultural Service (FAS) and
to present the President’s budget request for FAS programs for fiscal year
FAS is a small agency with a big mission: working
to expand and maintain international export opportunities for U.S.
agricultural, fish and forestry products; supporting international economic
development through trade capacity building and sustainable development
practices; and supporting the adoption and application of science-based
Sanitary and Phytosanitary (SPS) regulations to facilitate agricultural
trade. In addition to our Washington-based staff, the Agency maintains a
network of overseas offices that provide critical market and policy
intelligence to support our strategic goals, respond quickly in cases of
market disruption, and represent U.S. agriculture in consultations with
To meet new international challenges, FAS has
refined the three functions essential to our mission – market access,
intelligence, and analysis; trade development; and agricultural development
for national security. While the first two functions represent the historic
activities of the Agency, the third reflects new tasks that we have
identified as essential to support U.S. agriculture and broader U.S.
government policy goals.
In addition, we have developed a new strategic
focus for the Agency. We are placing a greater priority on inherently
governmental functions such as trade negotiations, enforcement of trade
agreements, and strategic management of country relationships. We have
increased our emphasis on SPS issues by stepping up our monitoring and
enforcement activities and increasing efforts to work through international
standard-setting bodies to support the development of science-based
regulatory systems. We are placing greater emphasis on trade capacity
building activities that are in line with the President’s trade agenda, and
we are shifting from implementing individual development activities to
coordinating USDA international activities.
Market Access, Intelligence,
Our core objective continues to be the expansion
and maintenance of overseas market opportunities for U.S. agriculture. If
we are to help U.S. food and agricultural exporters build on three
consecutive years of record export sales, expanding market opportunities
will be vital for America’s food and agricultural sector. We all recognize
the United States is a mature market, while around the world we see emerging
markets with rapidly growing middle classes.
Our primary tool to expand access is the
negotiation of new bilateral, regional, and multilateral trade agreements
that lower tariffs and reduce trade impediments. FAS provides the critical
analysis and policy advice to ensure U.S. agriculture achieves substantial
benefits in these negotiations.
Over the past several years, maintaining existing
market access has grown in importance. We monitor foreign compliance with
trade agreements, analyze trade issues, and coordinate with other trade and
regulatory agencies to develop effective strategies to avoid or reverse
trade-disruptive actions. We also use the extensive expertise within USDA
to pursue solutions to difficult technical issues that restrict trade, such
as those related to bovine spongiform encephalopathy (BSE) and biotechnology
or those that create barriers to trade, such as sanitary and phytosanitary
or food safety regulations. We have increased our efforts to ensure that
more trading partners use science-based regulatory systems and follow
international guidelines in order to reduce the number of technical problems
and non-science based policies that hinder trade. We also work with the
Office of the U.S. Trade Representative to ensure trade agreements are
enforced through formal dispute mechanisms, when necessary.
Our trade development function includes
price/credit risk mitigation and market development programs that support
U.S. firms and industries in their efforts to build and maintain overseas
markets for U.S. agricultural products. The price/credit risk mitigation
programs include the GSM-102 Export Credit Guarantee Program, the Supplier
Credit Guarantee Program and the Facility Guarantee Program.
FAS administers two major market development
programs – the Foreign Market Development (Cooperator) and Market Access
Programs. These are carried out chiefly in cooperation with non-profit
agricultural trade associations and private firms. Several smaller programs
– Technical Assistance for Specialty Crops (TASC) and the Quality Samples
Program (QSP) – also provide financial and technical support to U.S.
Agricultural Development for
President Bush’s National Security Strategy recognizes
international economic development, along with defense and diplomacy, as one
of the three pillars of U.S. foreign and national security policy. The
Strategy recognizes that the lack of economic development, particularly in
fragile and strategic countries and regions, results in economic and
political instability, which can pose a national security threat to the
United States. For most developing countries, a productive and sustainable
agricultural sector and open markets are the key elements for economic
FAS deploys USDA’s unique resources and expertise in
agricultural development activities to promote market- and science-based
policies and institutions, and sustainable agricultural systems. One way
that USDA helps developing countries increase trade and integrate their
agricultural sectors in the global economy is to improve regulatory
frameworks. Promoting productivity-enhancing technologies that will help
increase food security is also a priority. In addition, we support
agricultural reconstruction in post-conflict or post-disaster countries or
regions such as in Afghanistan.
Activities and Goals
In 2005, FAS was a key contributor to the bold
U.S. agriculture proposal that has been credited with providing new impetus
to the Doha Development Agenda of the World Trade Organization (WTO)
negotiations. While much work needs to be done to bring the negotiations to
a successful conclusion, we believe that the Hong Kong Ministerial
Declaration laid a solid foundation for the final phase of the
negotiations. Later this week, Secretary Johanns will participate in a
Ministerial meeting in London. Ministers will be working to narrow
differences in order to meet the April target for defining modalities.
In preparation for and follow-up to the Hong Kong
Ministerial, FAS actively worked to convince developing countries,
particularly cotton-producing African countries, of the benefits of trade to
their economic growth. In addition, FAS conducted several technical
assistance programs to help improve those countries’ ability to trade.
These efforts played a key role in helping move the Doha trade talks
Last year saw Congressional ratification of the
Central America-Dominican Republic-United States Free Trade Agreement. FAS
worked in tandem with the Office of the United States Trade Representative (USTR)
on the development, analysis and negotiation needed to bring the agreement
to completion. When implemented, it will provide U.S. exporters improved
access to 40 million consumers with growing incomes.
In 2005, we worked to recover trade lost as a
result of the finding of BSE in the United States when 51 markets closed
their borders to our products. I am pleased to report that we have regained
at least partial access to 26 (not including Japan) of these markets for
beef and beef products, representing 45 percent of our 2003 export value.
Momentum in reopening export markets for U.S. beef gained considerably since
Japan announced on December 12, 2005, that it was resuming imports of U.S.
beef. Hong Kong, Korea, Taiwan, and Singapore all agreed to open to
boneless beef. In addition, Mexico announced the lifting of its import ban
on U.S. bone-in beef. These openings represented market access gains of 82
percent of our 2003 export value for beef and beef products (includes
Japan). Unfortunately, as you know, Japan ($1.4 billion market) has since
closed its market due to the finding of vertebral column in a few boxes of a
U.S. veal shipment, reducing our regained market access to $2.5 billion. We
continue to work on regaining Japanese confidence in U.S. beef and our
ability to meet Japan’s import requirements.
We successfully defended U.S. export market access
in a number of countries. In the European Union (EU), our intervention
delayed the implementation of debarking requirements for wood packaging
materials. This ensured continued smooth trade in U.S. exports packed in or
on wood packaging materials. That trade is valued at nearly $80 billion
annually. With the help of our industry partners, we were able to preserve
$300 million in corn gluten feed exports to the EU.
Through our monitoring and enforcement of the WTO
Sanitary and Phytosanitary Agreement, we reviewed over 600 foreign SPS
regulations and took direct action against 40 that were inconsistent with
U.S. regulations or did not comply with the WTO Agreement. Our successes
with India and China are particularly noteworthy. As a result of our
efforts, India relaxed import requirements that could have blocked U.S.
shipments of almonds, pulses, and horticultural products. Almond shipments,
the top U.S. agricultural export to India, increased from $95 million to
$118 million, and U.S. sales of pulses grew from $500,000 to over $3 million
in one year. Our actions caused China to change its import regulations on
meat, wine, spirits and fresh fruit. U.S. exports of these products grew
from $142 million to $252 million.
FAS has worked aggressively
to recover, maintain and expand markets for U.S. farm products that have
been produced with agricultural biotechnology. A high priority is assisting
other countries in their efforts to develop, safely regulate, and begin
using this important tool to reduce hunger and alleviate poverty. For
example, for the past two years, the United States has aggressively pursued
a WTO case against the EU's moratorium on agricultural biotechnology, which
has cost U.S. producers of corn and related products, hundreds of millions
of dollars each year. In addition, FAS leads U.S. efforts to work with
like-minded countries to assure that international rules and regulations for
agricultural biotechnology are science-based and implemented in transparent
and predictable ways.
As in the case of the EU’s biotechnology
moratorium, when we are unable to resolve problems bilaterally, we have used
the WTO dispute settlement mechanism to advance our trade objectives. In
2005, we were successful in cases with Japan on fire blight in apples and
with Mexico on rice and high-fructose corn syrup.
Just as we look to the WTO to enforce our
complaints against trading partners, we must also live up to WTO decisions
that raise questions about U.S. programs. After the WTO decision in the
Brazil cotton case, we were able to revise our export credit guarantee
programs to comply with the deadline imposed by the WTO. Officials of
several developing countries have complimented the United States on our
efforts to bring our export credit guarantee programs in line with the WTO
decision. Of course, we also recognize the important role that the Congress
has played in working with the Administration to address these critical
issues. We appreciate that Congress recently approved legislation
including repeal of the Continued Dumping and Subsidy Offset Act – the Byrd
Amendment – and the Step 2 cotton program. Both programs were ruled
inconsistent with our WTO obligations. This action demonstrates that the
United States intends to live up to our WTO commitments.
In the area of trade development, we launched
several e-gov initiatives to improve electronic access to key programs to
meet requirements of the President’s Management Agenda. We launched a new
electronic registration system for the export credit guarantee programs that
allows U.S. exporters to quickly register sales via the Internet. We are
implementing a streamlined, integrated process to manage grant
Our projects to promote agricultural development
took us to many countries. We participated in post-conflict reconstruction
efforts in Afghanistan by sending 26 USDA advisors to nine provinces to
assist with livestock management, irrigation methods, and rudimentary food
safety procedures. We expanded trade capacity building and technical
assistance efforts in Armenia, Algeria, Malawi and Yemen. We worked with
African countries to help them develop the institutional capacity to expand
their exports and to regulate imports according to principles of sound
science. We placed pest risk assessment advisors in the trade hubs
sponsored by the U.S. Agency for International Development, and we are
training 200 people from 35 countries on a wide variety of sanitary and
phytosanitary issues. We hosted an Avian Influenza Conference last summer
for the Asian Pacific Economic Cooperation (APEC) forum that was attended by
more than 100 officials from the 21 APEC economies.
Under the Cochran Fellowship Program, we provided
short-term training for nearly 500 participants from 81 countries. Cochran
participants meet with U.S. agribusiness, attend policy and food safety
seminars, and receive technical training related to market development and
trade capacity building. Under the Borlaug Fellows program, launched in
2004, 120 researchers, policymakers and university staff received short-term
scientific training and research opportunities at U.S. colleges and
Our food aid programs have helped millions of
hungry people around the world. For example, under the McGovern-Dole
International Food for Education and Child Nutrition Program, a record 3.4
million children and mothers benefited from our 2005 programming efforts.
In 2006, our goals include bringing the
multilateral trade talks to a successful conclusion, working to complete the
outstanding bilateral free trade agreements with the United Arab Emirates,
Peru, Panama and Thailand, launching new negotiations with Korea, and
monitoring existing agreements. We also will continue our efforts to ensure
that more trade partners use science-based regulatory systems and follow
international guidelines, particularly regarding BSE and products from
agricultural biotechnology. Our trade capacity activities will be used to
support all these efforts. We will continue the process to realign our
overseas staff to meet the changing world trading environment, focusing on
Mr. Chairman, our FY 2007 budget proposes a funding level of
$162.5 million for FAS and 974 staff years, an increase of $11.0 million
above the FY 2006 level. The budget has been developed to ensure the
agency’s continued ability to conduct its full array of activities and
provide services to U.S. agriculture.
The budget proposes an increase of $7.4 million to meet higher
operating costs at FAS overseas offices. The FAS network of 77 overseas
offices covering over 130 countries is vulnerable to macro-economic events
and developments that are beyond the agency's control but which must be met
if FAS’ overseas presence is to be maintained. Specifically, these
$3.4 million for wage and
price increases to meet higher operating costs at overseas offices.
Declines in the value of the U.S. dollar, coupled with overseas
inflation and rising wage rates, have led to sharply higher operating
costs that must be accommodated in order to maintain our current
$1.1 million for increased
payments to Department of State (DOS) for International Cooperative
Administrative Support Services (ICASS). The DOS provides overseas
administrative support for foreign affairs agencies through the ICASS
system. FAS has no administrative staff overseas, and thus relies
entirely on DOS/ICASS for this support.
$2.9 million for the
Capital Security Cost Share program assessment. In FY 2005, DOS
implemented a program through which all agencies with an overseas
presence in U.S. diplomatic facilities pay a proportionate share for
accelerated construction of new secure, safe, and functional diplomatic
facilities. These costs are allocated annually based on the number of
authorized personnel positions. This plan is designed to generate a
total of $17.5 billion to fund 150 new facilities over a 14-year
period. The FAS assessment will increase annually in roughly $3 million
increments until FY 2009 to total annual assessed level of $12 million.
This level is assumed to remain constant at that point for the ensuing 9
The budget also requests $1.5 million in support
of the President’s trade policy agenda for Trade Capacity Building. One of
the challenges we face is obtaining the dedicated funding that can be used
throughout the Department in support of this initiative. Through technical
assistance, training, and related activities, this initiative will support
U.S. trade policy objectives on a proactive basis by assisting developing
countries to adopt scientifically sound health and safety standards that
will enable U.S. exporters to take advantage of negotiated market access.
It will also strengthen their ability to participate in, and benefit from,
the global trading arena and, thereby, enhance opportunities for U.S.
agricultural exports. Successful Free Trade Agreement (FTA) implementation
requires that market access issues based on SPS problems be resolved,
otherwise the benefits of the FTA are not realized by either side. In this
works closely with
USDA agencies, such as APHIS and FSIS, and the Food and Drug
Administration. Obtaining a dedicated source of funding will lay the
foundation for more effective resolution of ongoing and emergent SPS market
access issues without recourse to time-consuming and costly dispute
Finally, the budget includes an increase of $2.1
million to cover higher personnel compensation costs associated with the
anticipated FY 2007 pay raise. Without sufficient funding, absorption of
these costs in FY 2007 would primarily come from reductions in agency
personnel levels that will significantly affect FAS efforts to address
market access for U.S. food and agricultural exports.
Mr. Chairman, the FY 2007 budget proposes
approximately $4 billion for programs administered by FAS designed to
promote U.S. agricultural exports, develop long-term markets overseas, and
foster economic growth in developing countries.
Export Credit Guarantee Programs
The budget includes a projected
overall program level of $3.2 billion for export credit guarantees in FY
2007. Under these programs, the Commodity Credit Corporation (CCC) provides
payment guarantees for the commercial financing of U.S. agricultural
exports. Last year, we announced changes to these programs to comply with
the WTO cotton decision in a dispute with Brazil. We implemented a
risk-based fee structure for the GSM-102 and Supplier Credit Guarantee
Programs. Fee rates are now based on the country risk that CCC is
undertaking, as well as the repayment term and repayment frequency under the
guarantee. We also suspended operation of the GSM-103 program, effective
July 1, 2005, in response to a WTO dispute panel decision. In addition,
USDA proposed legislative changes to the cotton and export credit programs.
Congress passed legislation to repeal the Step 2 Program and the repeal
will take effect on August 1, 2006.
As in previous years, the budget estimates reflect actual levels
of sales expected to be registered under the programs and include
billion for the GSM‑102 program;
million for Supplier Credit guarantees; and
million for Facility Financing guarantees.
The FY 2005, the GSM-102 program provided credit guarantees
which facilitated sales of approximately $2.2 billion of U.S.
agricultural exports to 8 countries and 6 regions. In FY 2005, the Supplier
Credit Guarantee Program (SCGP) registered approximately $455 million in
credit guarantees which facilitated sales of over $700 million to 9
countries and 8 regions. USDA has also undertaken a top-to-bottom review of
the Supplier Credit Guarantee Program. Most recently, USDA announced an
Advanced Notice of Proposed Rulemaking on the SCGP and invited suggestions
on changes that would improve program operations and efficiency. Several
factors are behind the effort to improve program operations. As the SCGP
has grown, defaults have also increased. Although CCC has improved its
claims recovery process, further changes may be necessary. The comment
period closed in late February and USDA is reviewing the comments.
Market Development Programs
Funded by CCC, FAS
administers a number of programs to promote the development, maintenance,
and expansion of commercial export markets for U.S. agricultural commodities
and products. For FY 2007, the CCC estimates include a total of $148
million for the market development programs, $100 million below the FY 2006
level and includes:
- $100 million for the Market Access Program;
- $34.5 million for the Foreign Market Development (Cooperator) Program;
- $10 million for the Emerging Markets Program;
- $2.5 million for the Quality Samples Program; and
- $2 million for the Technical Assistance for Specialty Crops Program.
The lower program level for these
activities reflects a proposal to limit funding for the Market Access
Program to $100 million in FY 2007, which is intended to achieve savings in
mandatory spending and contribute to government-wide deficit reduction
International Food Assistance
The United States continues to play a leading role
in providing international food aid. In this regard, the FY 2007 budget
includes an overall program level for U.S. foreign food assistance of $1.6
billion consisting of:
- $1.3 billion for P.L.
480 which is expected to provide approximately 2.2 million metric tons of
commodity assistance. The budget proposes that all P.L. 480 food assistance
be provided through the Title II donations program in FY 2007, which is
administered by the U.S. Agency for International Development. In recent
years, there has been significant decline in demand for food assistance
provided through concessional credit financing, accordingly, no funding is
requested for Title I credit sales and grants. The budget includes an
appropriation request of $1.2 billion for P.L. 480 Title II, an increase of
$80 million over the 2006 enacted level, and proposes a new provision that
will allow up to 25 percent of the funding to be used to purchase
commodities locally in emergency situations thereby saving more lives.
- $161 million for the
CCC-funded Food for Progress Program. Funding at that level is expected to
support 300,000 metric tons of commodity assistance.
- $103 million for the
McGovern-Dole International Food for Education and Child Nutrition Program.
This comprises $99 million in appropriations and an estimated $4 million in
reimbursements from the Maritime Administration. Funding at this program
level will assist an estimated 2.5 million women and children through the
donation of nearly 80,000 metric tons of commodities.
Export Subsidy Programs
FAS administers two export subsidy programs
through which payments are made to exporters of U.S. agricultural
commodities to enable them to be price competitive in overseas markets where
competitor countries are subsidizing sales. These include:
- $28 million for the
Export Enhancement Program (EEP). World supply and demand conditions have
limited EEP programming in recent years and therefore, the budget assumes a
limited program level for 2007. However, the 2002 Farm Bill does include a
maximum annual EEP program level of $478 million which could be utilized
should market conditions warrant reactivation of the awarding of bonuses.
- $35 million for the
Dairy Export Incentive Program (DEIP), $33 million above the FY 2006
estimate of $2 million. This estimate reflects the level of subsidy
expected to be required to facilitate export sales consistent with projected
U.S. and world market conditions. The actual level of bonuses awarded may
change during the programming year as market conditions warrant.
Trade Adjustment Assistance for Farmers
Authorized by the Trade Act of 2002, the Trade
Adjustment Assistance Program for Farmers authorizes USDA to make payments
of up to $90 million annually to members of eligible producer groups when
the current year's price of an eligible agricultural commodity is less than
80 percent of the national average price for the 5 marketing years preceding
the most recent marketing year, and the Secretary determines that imports
have contributed importantly to the decline in price.
This concludes my statement, Mr. Chairman. I will
be pleased to answer any questions.