Statement of Dan Glickman
Secretary of Agriculture
Before the Senate Committee on Agriculture,
Nutrition, and Forestry
June 24, 1999
Mr. Chairman, members of the Committee, I am pleased to join Ambassador Barshefsky to discuss the new round of multilateral trade negotiations on agriculture under the World Trade Organization (WTO).
Importance of Trade to U.S. Agriculture
In my four years as Agriculture Secretary, I have learned anew what trade means to U.S. agricultures bottom line. Early in my tenure, agricultural exports totaled nearly $60 billion annually -- a record. That was a period of prosperity for our nations farmers and ranchers. But in the last year and a half, we have seen a steep drop in the value of agricultural exports. As a result of three years of record worldwide production coupled with the crisis in Asian financial markets, agricultural exports plummeted, and farm prosperity took a nose dive.
The key lesson, from both the good and bad periods of the last four years, is the critical significance of trade to our farm economy. We obviously have to do other things too -- we cannot live and breathe trade and neglect domestic policies. But the fact is that one quarter of U.S. agriculture production is exported. If our farmers are going to continue to prosper, we must look to the global economy to provide new markets.
That means we need a free and fair trading system and reliable markets. Do not take my word for it, look at the facts. Since 1960, tariffs worldwide have fallen by 90 percent while global trade has grown 1,500 percent. World economic production has quadrupled, while per capita income has more than doubled.
The true test came in late 1997 and 1998 when 40 percent of the world's economies stumbled badly. We are not out of the woods yet, but we are seeing positive signs in the economies of South Korea and Thailand, without any retrenchment into protectionism.
In his last State of the Union address, President Clinton called on the nations of the world to tear down barriers, open markets, and expand trade; he said "we must ensure that ordinary citizens in all countries actually benefit from trade." This of course, includes the United States.
U.S. Goals for Agriculture
Nowhere is this more important than in agriculture. That is why the United States has developed a bold agricultural agenda for the millennium round that includes:
1) The elimination of export subsidies, which make for unfair trading practices and depress world commodity prices for all producers.
2) Further reduction of worldwide tariffs, which average 50 percent on agricultural goods in other parts of the world.
3) The expansion of market access by raising the ceilings on tariff-rate quotas (TRQs) as an interim measure, as we try to phase them out over the long run.
4) Opening up the operations of State Trading Enterprises (STEs) so that they face the same risks in the marketplace as private traders.
5) The facilitation of trade in new technology products, including biotechnology.
6) Ensuring the continued effectiveness of the rules governing sanitary and phytosanitary (SPS) measures, so that science prevails and nations cannot mask protectionism behind unvalidated, secretive studies.
Since I first outlined these goals to the Committee, we at USDA have sought advice and ideas from all aspects of our agricultural industry as we refine U.S. agricultural trade policy goals for the next round.
For example, today representatives from USDA, USTR, and the State Department will be in Indianapolis for the fourth of twelve regional listening sessions scheduled to gather public comments on the upcoming trade round and the goals for agriculture. We have heard from farmers and ranchers, processors, exporters, and state and local government officials. Their testimony has been thoughtful. The testimony we have heard so far has reflected a general support for our trade agenda, and a real desire for a more level playing field in the world trading environment. This and the remaining sessions will help broaden our understanding about trade policies most effective in helping increase U.S. agricultural exports.
We continue to work through the Agricultural Policy Advisory Committee and the five Agricultural Technical Advisory Committees for Trade to gather advice on the U.S. negotiating strategy. We announced the new committee members earlier this month, and we have scheduled meetings with all six committees over the next several months leading into the Seattle ministerial in November.
One area where we need to work together closely is domestic support. We need to reduce trade-distorting subsidies, and the United States has led the way in creating policies that minimize effects on world markets. But we also have more work to do in creating a safety net of farm support that helps our farmers weather the cycles of agriculture. Matching these two goals, minimizing market distortion and supporting the rural sector, will require creativity and sound tactical planning, since we are likely to have to deal with writing a new farm bill before the results of the upcoming negotiations are implemented.
As we plan our negotiating strategy, we also are consulting with other countries. While we have many allies in our quest for freer and fairer world agricultural trade, there is of course, considerable opposition. But there are powerful voices who see agricultural trade not as a win-win situation, but as a zero-sum game where the exporter wins and the importer loses. Many nations protect their domestic producers by blocking access to their markets with tariff and non-tariff barriers.
Everyone will benefit if the most populous country in the world participates in the new round. Chinas accession to the WTO would hasten its integration into the world economy and complement our efforts to maintain stability in the Pacific by linking Chinas economy more closely with the rest of the worlds.
Chinas accession to the WTO would be a win for everyone. For the United States, the benefit is obvious a more level playing field in the worlds largest market and greater consistency in a market that has been fairly erratic. A sound agreement with China will open Chinese agricultural markets to U.S. exporters, strengthen the world trading system, and give U.S. farmers and agricultural-interests, stronger protection against unfair trade practices and import surges. The principles of the WTO transparency, fair trade practices, peaceful settlement of disputes, the rule of law are those we hope to advance in China and worldwide.
Since 1 in 5 people live in China, our trade relationship with the Chinese people becomes very important. With rising incomes, China will be a growing customer for agricultural products for years to come. Also of importance, is the fact that China cannot be self-sufficient. Last year, China was the fourth largest market for U.S. agricultural products, buying more than $3.3 billion worth of soybeans and soybean oil, cotton, hides and skins, and a wide variety of other products, including meats, fruits, and vegetables. We believe this trade could expand significantly if we reduce the trade barriers between China and the United States.
China is also one of our most capable competitors and a net agricultural exporter, with steady, record increases in grain production, plentiful grain stocks, and ample ability to further increase yields. As the worlds largest producers of farm products, the United States and China need to work together to promote an open world trading system. The United States will work with China to build a strong trade partnership, but the timing of Chinas accession is up to China.
Our trade relationship with the European Union (EU) illustrates the need for the agricultural reforms that I mentioned before. Earlier this year, in its Agenda 2000 proposal, the EU retreated from fundamental reform of its domestic agricultural policies. These polices have invariably led to the use of export subsidies and domestic support programs that distort world agricultural trade.
The EU has yet to comply with WTO rulings on lifting the ban on US beef from hormone treated cattle, and on bananas. It is important for the integrity of the system that all WTO members, including the EU, honor their international obligations.
In biotechnology, the EUs slow pace, indecision, and failure to develop a consistent, science-based approval process has disrupted trade and threatens to constrain innovation in one of the most promising new technologies for ensuring future global food security. Countries cannot be free to independently develop ad hoc policies based on questionable science. That will lead to trade chaos and thwart progress for agricultural issues in the next round.
Mr. Chairman, everyone in this room knows the importance of trade to U.S. agriculture. In the past year, we've been sobered by a global financial crisis that devastated many of the emerging Asian economies, as well as Japan, and softened demand in Russia - one of the world's most important markets for meat and poultry, as close to 30 percent of U.S. poultry meat exports went to Russia in 1998. While we are seeing some strengthening in the Asian economies, we continue to face global oversupply of many commodities that sent prices plunging to their lowest levels in years. We have learned that our farmers cannot rely entirely on trade as their only safety net, but we must continue our efforts to reform world agricultural trade so they have new, more open markets.
As President Clinton said earlier this month in Chicago,
"We ought to continue to expand trade. We ought to enforce our agreements more vigorously. But I do not believe that a country with 4.5 percent of the worlds people can maintain its standard of living if we dont have more customers."
To realize the potential of the global marketplace, we have a lot of work ahead of us. We must construct a world trading system where every producer gets a fair shake and where all products, goods and services are traded freely across oceans and continents.
The next round of WTO negotiations will be a turning point, and we will be working hard to help American agriculture realize that potential. Mr. Chairman, that concludes my statement. I would be happy to answer any questions the committee may have.
# # #