Hearing of the House Committee on Agriculture - Review of Agricultural Trade Negotiation

Federal News Service

HEADLINE: HEARING OF THE HOUSE COMMITTEE ON AGRICULTURE

SUBJECT: REVIEW OF AGRICULTURAL TRADE NEGOTIATIONS

CHAIRED BY: REPRESENTATIVE BOB GOODLATTE (R-VA)

WITNESSES PANEL II:

TERRY JONES, PRESIDENT, AMERICAN SUGARBEET GROWERS ASSOCIATION;

SQUIRE SMITH, PRESIDENT, FLORIDA CITRUS MUTUAL; LAWRENCE T. GRAHAM, STEERING COMMITTEE COORDINATOR, COALITION FOR SUGAR REFORM;

JAN LYONS, PRESIDENT, NATIONAL CATTLEMEN'S BEEF ASSOCIATION;

JON CASPERS, IMMEDIATE PAST PRESIDENT, NATIONAL PORK PRODUCERS COUNCIL; DENNIS MCDONALD, TRADE COMMITTEE CHAIRMAN, RANCHER-CATTLEMEN ACTION LEGAL FUND, UNITED STOCKGROWERS OF AMERICA;

PANEL III:

DAVID J. FREDERICKSON, PRESIDENT, NATIONAL FARMERS UNION; CHARLES BECKENDORF, CHAIRMAN OF THE BOARD, NATIONAL MILK PRODUCERS FEDERATION; C. MANLY MOLPUS, PRESIDENT AND CEO, GROCERY MANUFACTURERS OF AMERICA;

ELLEN LEVINSON, EXECUTIVE DIRECTOR, COALITION FOR FOOD AID LOCATION: 1300 LONGWORTH HOUSE OFFICE BUILDING, WASHINGTON, D.C.

TIME: 10:00 A.M.

BODY:
REP. POMEROY: I thank the chairman.

Pursuing the a very interesting line of questioning by Mr. Case, it just seems to me, Mr. Graham, that what you're asking for, basically, is to pull the plug on the sugar program, allow your members, the confectioners of this country to have access to global dump price and the heck with the consequences for the U.S. domestic industry. Although you have indicated that you would like a resolution that is a level playing field for the growers, a level playing field for you, I don't know that that is possible in the global market where we are dealing with subsidizing practices by virtually every other producing country.

Do you have a win-and-win scenario you can paint for us? Are we left to understand this as it has been presented in other years. Basically you win or the domestic sugar industry wins, but somebody is going to come up short.

MR. GRAHAM: Well, I agree with-I think, Mr. Jones made the point that they would certainly be willing to have a free market if the rest of the world, particularly the European Union was, we favor that. But right now the situation is, is that sugar growers are protected from competition, candy manufacturers are not. And that's unfair to us, it's hurting our industry, it's making our guys who don't want to do this move factories overseas in order to get world sugar price to make their products because it's the largest ingredient in many of our products, particularly in the sugar side.

But, we're not trying to --

REP. POMEROY: What's the largest cost in component production? Raw material cost?

MR. GRAHAM: Probably labor costs are more.

REP. POMEROY: Labor costs. How does the United States compare in labor costs to these other countries?

MR. GRAHAM: It depends on the country, but in Canada there isn't much labor cost advantage.

REP. POMEROY: How about Caribbean?

MR. GRAHAM: Where?

REP. POMEROY: The Caribbean, how about the CAFTA countries?

MR. GRAHAM: Yeah, they're-I don't know off hand, and there isn't a lot of candy made there.

REP. POMEROY: I know that our labor costs are considerably higher, and so essentially you have laid out before the committee here-you know, if we don't get the cost of the sugar down we're going to have to go, where you've just told us the biggest component in the price of your products is labor and we know that there's very powerful inducements to relocate offshore chasing lower labor costs. And, in fact, industry after industry, that has nothing to do with sugar, have relocated, they've outsourced, they've shipped jobs everywhere chasing that lower labor production. So I believe you've actually presented a simplistic and I'm not sure wholly accurate view of the considerations before confectioners in terms of where they will locate their manufacturing.

MR. GRAHAM: In the chocolate side of our industry-I was primarily talking about the sugar confection-there's chocolate candy and then there's non-chocolate. In the chocolate side where they don't use as much as sugar, factories have not been moving overseas, they have not been moving to Canada and Mexico --

REP. POMEROY: We're their market.

MR. GRAHAM: If the labor costs were there they would be moving at the same pace as the sugar --

REP. POMEROY: Not necessarily. Not necessarily, Mr. Graham. Their market is the United States. Their principal market is here.

MR. GRAHAM: Same with the sugar manufacturers-the sugar candy manufacturers. That's their principle market.

REP. POMEROY: Are there differences in shipping chocolate versus hard candy?

MR. GRAHAM: There are some differences.

REP. POMEROY: I don't want to get it into it, we don't have time, but there's a whole lot of things at play here beyond the U.S. sugar program. I believe we could end U.S. domestic production-which would be the consequence, by the way, of what you're urging this morning-and we're still going to have other economic considerations, including labor cost and other issues relative to where these jobs are located. Now, in terms of just what's a good trade-off here, it's not a good deal, in my view, to trade off domestic sugar production in exchange for the uncertain incentive that it would provide to the confectionery industry to keep production here.

I've got another issue I want to direct at Ms. Lyon and Mr. McDonald as my time expires. You know, as we try to get our markets back, it seems to me, Ms. Lyon, between what you have suggested and what my friend, Charlie Stenholm, has suggested, the biggest impediment to our getting into those other markets is proving that we're dealing on a sound science basis with the issue of Canadian imports. I take issue with that. I fundamentally disagree with that. I believe we have to show these other markets that the U.S. livestock industry, hoof-to-finished-product, meets their consumer safety specifications.

Now, by bringing live cattle back down from Canada again, it seems to me that as we try to get those markets back, you not only have to prove up the U.S. system, we have to prove up the Canada system. I'm all for sound science, but it seems to me we've got a hard enough burden of proof that has not been successfully discharged just trying to prove the United States system without co-mingling U.S. and Canada again to try and get these markets back.

I'm done with my question but-Mr. Chairman, I would ask leave if Ms. Lyons and Mr. McDonald could respond.

MS. LYON: Yes, and I would be happy to respond to that. And as you know, both Canada and the U.S. have worked very closely on these issues since back in May when Canada had their first case of BSE. And So I would tell you that those regulations and requirements are very similar, they are harmonized and we work closely to make sure that it is based on sound science, that those regulations are. And so I would take issue to the fact that we have not done a good job of telling people about that because, you know, you look at consumer confidence and where it is in this country and it's very high, and that is because people know that they can trust the regulations that are in place, that the government has done a really good job of not only putting those in place but adhering to those as well.

And so we're very pleased that consumer confidence in the safety of beef is still at 89 percent acceptance on last --

REP. POMEROY: I was talking about the skepticism of these markets we're trying to get back, not the U.S. market.

Mr. McDonald?

MR. McDONALD: And I think your point's well taken. And I happen to believe it's as simple as listening to your customer. Our customers are telling us they want certain safeguards in place. We have private enterprise here in this country that wants to comply and USDA regulations, thus far, have prohibited them from doing that. It's nonsensical. Secondly, we're not totally harmonized with Canada on safeguards. We haven't adopted and put in place the same regulations vis-?-vis Canada and their BSE problem, as we have with other markets worldwide. And that's exactly what Judge Sebell (ph) found when he ruled that USDA's offer to allow increased beef imports from Canada entailed.

Finally the Japanese wanted a system of labeling-mandatory labeling that they could rely on, so that if they were buying U.S. beef they knew it was U.S. beef and we couldn't comply. And so it's just another where USDA needs to listen to our customer and let's see what we can do to accommodate their request.