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Hearing of the House Agriculture Committee on Review of Agricultural Trade Negotiations

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Date:
Location: Washington, DC


HEADLINE: HEARING OF THE HOUSE AGRICULTURE COMMITTEE

SUBJECT: REVIEW OF AGRICULTURAL TRADE NEGOTIATIONS

CHAIRED BY: REPRESENTATIVE BOB GOODLATTE (R-VA)

WITNESSES: ANN M. VENEMAN, SECRETARY OF AGRICULTURE;

ROBERT B. ZOELLICK, UNITED STATES TRADE REPRESENTATIVE LOCATION: 1300 LONGWORTH HOUSE OFFICE BUILDING, WASHINGTON, D.C.

BODY:

REP. BOB GOODLATTE (R-VA): Good morning. This hearing of the House Committee on Agriculture to review agricultural trade negotiations will come to order. I have an opening statement. On behalf of the committee I welcome our distinguished witnesses, Secretary Veneman and Ambassador Zoellick. We are honored to have you both appear before this committee to discuss issues related to agricultural trade and negotiations.

This has been a busy year for both in the area of agricultural trade, and will in all likelihood become much busier as the year progresses. I note that the WTO has issued a preliminary decision on the matter brought by Brazil concerning U.S. farm programs and reports indicate that the administration intends to appeal that decision. I support that action. To the extent you can, I hope Secretary Veneman and Ambassador Zoellick, you will discuss this matter.

Under the WTO rules, countries are permitted to support their farmers in ways that are the least trade distorting, and WTO rules govern the amounts countries may provide their farmers. The United States abides by the WTO rules and is and has been in accord with its rules on agriculture. World trade in agriculture is highly competitive and barriers such as high tariffs are rampant. Countries regularly deny access for U.S. agriculture products for many reasons, including nonscientific barriers for U.S. beef, grains, poultry and fruits and vegetables. I have said repeatedly that gaining access for U.S. agricultural products is the most important objective of the ongoing WTO negotiations.

Our agricultural tariffs are low. The average is 12 percent, while worldwide agricultural tariffs average 62 percent. Changes to countries agricultural policies should come through the give and take of negotiations, not through decisions that do not appear based on WTO rules. Regarding trade negotiations, agreement has been reached in the Morocco, CAFTA, Dominican Republic and Australian negotiations, and talks are still going on in the South African Customs Union and the free trade area of the Americas, although very slowly.

Free trade negotiations are beginning in Thailand, Panama, the Andean countries and Bahrain. However, I encourage the administration to work towards initiating trade agreements with countries with larger populations that offer greater opportunities for U.S. agriculture exports. On top of all that, there are trade disputes with several other countries. For example, the European Union had the moratorium on approval of biotechnology products, will not accept U.S. beef and wants to take away U.S. trademarks and certification marks that are properly registered, and allow EU companies to claim such products as their own.

Mexico has passed a tax on products containing U.S. high fructose corn syrup, assessed antidumping duties in questionable investigations on U.S. apples, rice and beef. China has not kept its WTO accession agreement on access to its market for U.S. cotton, pork and poultry. Now, especially with regard to China, I know that Secretary Veneman and Ambassador Zoellick have worked under the auspice of the U.S.- China Joint Commission on Commerce and Trade to help resolve these issues, and I anticipate hearing from them this morning.

United States agriculture depends on exports and a vibrant trade policy is important to the United States farmers and ranchers and to all of agribusiness. We want to see greater opportunity for our agricultural products, and trade negotiations can make that possible. We want to see markets open around the world. U.S. agricultural markets are already open to imports, and our tariffs are low. Agricultural tariffs worldwide average about 62 percent, while U.S. agricultural tariffs are 12 percent. If you look at this chart, the European Union 31 percent, Japan 51 percent, Korea 66 percent and India a whopping 114 percent are indicative of what we face when we attempt to export our products. It is to the advantage of U.S. agriculture that we continue to open markets and remove barriers to our agriculture exports.

The overall U.S. trade deficit in 2003 is $489 billion. This means U.S. borders are open and U.S. consumers have significant access to foreign goods. Our borders are open, we import significantly more than we export, and countries around the world know this and on a daily basis successfully sell their products in the United States. How about the EU? Its trade deficit for 2003 is $14.8 billion, and if you look at the figures for 2002 you will find that the EU has a trade surplus of $10 billion. What does that tell you? It tells you that U.S. farmers and ranchers experience barriers to beef, poultry and other U.S. products and they continue to exist in the EU.

These barriers come from high tariffs. The EU's geographical indications policy and other nonscientific barriers such as those related to biotechnology and beef hormones. In 2002, the U.S. trade deficit with the European Union was $82 billion, and the U.S. trade deficit with Japan was $70 billion. Trade negations offer an opportunity for the United States to increase agricultural exports. U.S. goals for these negotiations are to decrease and harmonize tariffs, eliminate export subsidies, and reduce and harmonize trade distorting domestic support policies.

Just look at the status quo. The EU is allowed to spend more than three times as much as the U.S. in domestic agricultural payments. Japan is allowed to spend one and a half time the amount the U.S. is allowed to spend under the Uruguay round agreement. That chart reflects that disparity. It is wrong to continue the Uruguay round kind of reductions in domestic support, that is just applying a percentage reduction to allowable spending. The disparity in spending among the U.S., the EU and Japan must be reconciled and harmonized, and harmonization must be a central part of the agriculture negotiations.

The U.S. and the EU have similar agricultural output, and yet the EU can spend significantly more than the U.S. under the current WTO agreement. Japan has fewer acres dedicated to agriculture than the U.S. and they also can spend in excess of the U.S. American farmers and ranchers recognize the necessity of export for their success, however I am concerned that confidence in trade agreements and agriculture's place in those agreements is weak.

The reasons why include the beef hormone WTO decision affecting U.S. exports to the European Union and enforcement of the provisions agreed to in negotiations over China's accession to the WTO. I'm also concerned about the problems with agricultural trade with Mexico and its efforts to restrict U.S. exports. Our two distinguished witnesses will address these issues and provide the committee with information regarding the status of agricultural negotiations. I made a promise at the beginning of this Congress that the committee intends to pay very close attention to all trade negotiations and to listen to U.S. agriculture's views on this important matter.

Last year, the committee held hearings on agricultural trade, biotechnology and geographical indications. The committee will continue to follow these issues. This includes ongoing multilateral trade negotiations and all regional and bilateral negotiations. It also includes oversight of past agreements, such as with China and other accessions to the WTO, such as Russia. It means looking closely at problems U.S. agriculture faces regarding sanitary and phytosanitary issues, such as those with Australia.

Again, I welcome our witnesses and look forward to their testimony and at this time it is my pleasure to recognize the ranking member from Texas, the gentleman from Texas, Mr. Stenholm.

BREAK IN TRANSCRIPT

REP. GOODLATTE: I thank the gentleman.

In order to proceed directly to our witnesses and allow members the maximum amount of time to be able to question the witnesses, we will put other members' opening statements in the record.

At this time we would welcome again the secretary of Agriculture, Ann Veneman-I'm going to suspend that because we do have another important activity to acknowledge.

The gentleman from Texas.

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REP. GOODLATTE: I, too, would like to welcome Congressman Chandler, and tell him that I spent a couple of days in his district just about 10 days ago, and it certainly is beautiful in and around Lexington, Kentucky. So you're very fortunate to represent a great part of the bluegrass state. Would the gentleman care to say anything?

REP. BEN CHANDLER (D-KY): Thank you, Mr. Chairman.

I am very pleased to have the opportunity to serve on the Agriculture Committee. I'm very much looking forward to it. I hope that you manage to go to a race while you were in the bluegrass. We-this is a good time of year to be in central Kentucky and we would invite you back often.

Mr. Ranking Member, thank you very much for that kind introduction, which of course is well beyond my due, but I look forward to being a useful contributing member to this committee and I appreciate the kindnesses that have been displayed to me. Thank you very much.

REP. GOODLATTE: I thank the gentleman for his kind words and for his invitation to come back. I probably will since that time I didn't leave much behind.

And now we'll turn to our distinguished witnesses, the secretary of Agriculture, Ann Veneman, and the United States Trade Representative, Robert Zoellick. We are pleased to have both of you with us and we will start with Secretary Veneman.

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REP. GOODLATTE: Thank you, Secretary Veneman.

Ambassador Zoellick, welcome.

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REP. GOODLATTE: Thank you, Mr. Ambassador.

In that light, let me introduce to the committee another distinguished visitor that we have with us this morning, and that is the new ambassador to the United States from Brazil, Ambassador Roberto Abdenur. Ambassador, we are pleased to have you with us to listen to our side of the story.

And in that regard also, Ambassador Zoellick and Secretary Veneman, I'm pleased to hear that you will consult with and keep the members of this committee fully informed of all activities related to this case, and that you will aggressively pursue all possible appeals in this case so that we can maintain our farm programs that were designed to be and are fully consistent with our WTO obligations.

Secretary Veneman, in that same regard, I wonder if you would comment on the participation of developing countries in the negotiations on agriculture. I understand that the Doha Development Agenda directs that special and differential treatment for developing countries is to be part of all negotiations. The real question is, what is a developing country? Is Brazil? I've been to Brazil. We're not talking about small farms, inefficient processes. We're talking about very large, massive farms. I visited one company that raises 500,000 acres of soybeans and has developed quite an infrastructure in the country for the export of this.

They are a very modern and advanced and very competitive country when it comes to agricultural products. They're the world's largest exporters of soybeans, citrus, world's largest exporters of coffee and tobacco, world's largest exporters of sugar. And I wonder what is expected when a country-is it expected that a country will continue to be able to declare itself as a developing country, with no opportunity for any other country to object, and thereby have a longer time period to implement reforms to its agriculture program without being challenged on that basis?

MS. VENEMAN: Mr. Chairman, thank you for the question. And certainly, as you know, developing countries are paying a key role in this round of WTO negotiations, hence the name Doha Development Agenda. The developing countries, as I said, be they in Africa or around the world, have been very proactive in the discussions, and certainly I think when you joined us in Cancun you saw the significant role that they are playing.

But the question you raised is a very, very important one and one that we have continued to press in the negotiations as well, and that is that while countries may be deemed to be developing countries generally, many times in agriculture that is not the case. And particularly in the case of a country like Brazil, where they are very developed from an agricultural perspective, and we don't believe that Brazil and countries like it should be deemed to be developing countries for purposes of their commitments under a WTO agreement. This is a point of negotiation but certainly something that we in the United States feel very strongly about.

REP. GOODLATTE: Thank you.

Ambassador Zoellick, can you update the committee on the issues related to geographical indications and the WTO agricultural negotiations? I understand that the European Union included provisions in its market access proposal for agriculture that could have adopted-harm exports of U.S. products such as meats and cheeses. I would appreciate if you'd bring us up to date on the issue of geographical indications as related to the current WTO negotiations and the USTR's recent action to seek consultations in the WTO over the European Union's action on geographical indications.

As you know, this is already a problem for U.S. companies in Europe, and now they want to extend that to the United States and elsewhere around the world. I'm sure everybody in the room is very familiar with this green can that contains parmesan cheese. Most Americans have one in their refrigerator, and they do not because of anything that anybody in Parma, Italy did, but because of the marketing efforts of Kraft and a great many other food processing companies in the United States and elsewhere in the world.

In Europe today-we found this in Europe on my last visit. This is what Kraft is reduced to. They must sell it under the name Pamesello Italiano. It does not allow them to use the name parmesan because of rules in Europe. And I'd appreciate your comments on that.

On a brighter note, I was also pleased to learn that you have been advised that the EU will not allow the Czech Republic to use the terms they listed as GIs in their accession treaty to the EU in translation, which means that they'll not be able to translate their terms to Budweiser, obviously an important American trade name as well that has been talked about as being excluded from being able to use that name in Europe. So we thank you for those efforts. I wonder if you'd comment on the subject in general.

MR. ZOELLICK: Well, Chairman, you'll appreciate knowing that-and the committee may be interested. When I had lunch with the chairman and he brought out the parmesan cheese, I thought it was for my salad, but I realize there was now a larger point being made. And I keep it in my office and sometimes people from other countries say, why do you have that there, and I point out the importance of the issue.

A couple of points, Chairman. First, in terms of trying to get the WTO negotiations back on track, this issue hasn't really changed since you last left it, and our position has remained as it has been, which as you know, in the area of wines and spirits, we're willing to negotiate a voluntary register but we do not want this to become a new device for protectionism.

One way we wanted to drive home that point is the second issue that you mentioned, which is that there's a real irony in the European Union's position, because we believe the European Union's treatment of other countries' geographic indicators violates WTO rules, because they're not allowing national treatment. You can only register a name if it's based on an EU place name, or unless you accept their system, which is reciprocity requirements, not national treatment. And so we thought this is a way of combining a case with our larger point.

And then third, as you said, we had been working closely with the European Union. As the Czech Republic came in, they managed to protect three Czech names. We wanted to make sure that the translation to Budweiser wasn't something accepted, and we were just able to verify that in the past day or so.

REP. GOODLATTE: Well, thank you. We are inclined to call all of this a bunch of baloney, but then we find that that's, indeed, another name the Europeans want back and don't want to allow us to use in this country. So we appreciate your efforts and hope you will persist in that.

It's now my pleasure to recognize the gentleman from Texas, Mr. Stenholm.

REP. STENHOLM: Thank you, Mr. Chairman. I think it would be important to reiterate the comments, Mr. Chairman, you made, and both the secretary and ambassador made regarding the importance of world trade. And also, for the world to begin answering the question as to how long you believe the United States of America can keep buying $540 billion from you ever year, more than we buy from you without the law of economics taking over-our politics. And that's what the WTO round, the Doha round's all about, is attempting to open markets. All markets. And as has been pointed out, ours is relatively open. But we're not perfect, and in being not perfect, that means you negotiate through good faith negotiations to do something about it.

You know, something my colleagues in the Congress had better start thinking about is when we buy this $540 billion from the rest of the world, what happens to the money? Thank goodness these same folks that we sometimes criticize are buying our debt, because if they were to stop buying our debt that we're running up at an even more alarming rate, we'd have real problems. And it's time that we start thinking about that, other than doing what we're going to be doing on the House floor later today, just building up more debt and saying it doesn't matter. I think my colleagues on this committee particularly ought to start thinking about that a little more than we do.

You know, China right now, buying a lot of cotton, and we're very appreciative of that. But the question is are they going to buy it next year? Are they going to live up to their WTO agreement? I hope so. That's critical to all of us. As the chairman has made it very specific, this committee-certainly I'll speak only for myself, but I believe that in a very bipartisan way we will live up to our agreements. And we believe to the best of our ability, the 2002 farm bill did live up to our agreement, that which was negotiated. Now we're facing with the potential. It's allegedly, it's hypothetical. We don't know.

Mr. Ambassador, you pointed out what came out in the papers is an initial report.

We do not know any specifics of what we are talking about as yet, and therefore will not comment on that which we do not know. By June we will know. But I think we can safely say this. We now know that we've got a new dimension in our trade negotiations. It's called litigation. And it's very difficult to be in the courts litigating at the same time that you are going to be having good faith negotiations. That's something that we all need to think-it's certainly got me to thinking because the bilaterals that you spoke about, each of them have got some problems of their own merit, but one of the strengths of agriculture and one of the great strengths of this committee for as long as I can remember has been we worked together. We don't have Republican and Democratic ideas on this committee, we have agricultural ideas.

And I know there's one that's now saying, taking a look at these bilaterals, we've got a new dimension that's been thrown in that is going to cause at least this one member to sit back for just a moment until we can fully analyze what this WTO finding really means, because we-I know once we find out what it really means, we will address it. But by doing that-I've always been a little nervous about us negotiating bilaterally until we can get some of the multilateral deals made. You know, you've caught a lot of criticism, Mr. Zoellick, because of the exclusion of sugar from the Australian agreement. Well, my question to you is, isn't that fairly normal in negotiations that something gets excluded?

MR. ZOELLICK: Mr. Stenholm, it certainly is. When I was in South Africa on this trip, pushing the WTO, I was talking to my South African counterpart and he was saying how delighted he was that some 45 percent of their agriculture was covered in their free trade agreement with the EU. And the Mexicans covered about 45 percent of their agriculture, they told me, with Japan. Now, we do try to be comprehensive. Now, in the NAFTA, actually, many people forget with Canada we excluded sugar and some dairy and some eggs, so we've already done this.

The reason we try to be comprehensive is because we need to get other people to put their items on the table. And in the case of Central America, for example, there was a very strong export interest to the United States in agriculture. And to draw out their positions on a number of these items, corn, soybeans, beef, poultry and others, we had to be able to say we'll be able to discuss everything. But then what we tried to do was deal with sugar very sensitively.

Frankly, in the case of Australia, we felt there was enough diversity in this agreement and there is enough interest, and we knew there is enough sensitivity in the agriculture community, we had to deal with beef, dairy and sugar in special ways, and that's what we did. That's why I think it's a good agreement on the manufacturing, as well as the agriculture side.

REP. STENHOLM: My time has expired, Mr. Chairman.

REP. GOODLATTE: I thank the gentleman.

The gentleman from Michigan, Mr. Smith.

BREAK IN TRANSCRIPT

REP. GOODLATTE: I thank the gentleman.

I would say, Mr. Ambassador, I speak for myself. I know Mr. Stenholm, and I suspect most of the members of the committee, that we strongly support your efforts to fight these attacks on our programs. And we have said that all of this is subject to negotiation, and that if we can accomplish major reductions in European export subsidies, in domestic subsidies elsewhere in the world, and most especially in tariffs, that we're prepared to negotiate, but we are not prepared to unilaterally disarm and receive nothing in exchange for what is already the most open agricultural market in the world.

This time I'd like to recognize the gentleman from Minnesota, Mr. Peterson.

BREAK IN TRANSCRIPT

REP. GOODLATTE: I thank you.

The gentleman from North Carolina, Mr. Etheridge.

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REP. GOODLATTE: I thank the gentleman.

The gentleman from Texas, Mr. Neugebauer.

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REP. GOODLATTE: I thank the gentleman.

The gentleman from Hawaii, Mr. Case?

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REP. GOODLATTE: I thank the gentleman.

The gentleman from Iowa, Mr. King?

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REP. GOODLATTE: Excuse me, the gentleman from North Dakota, Mr. Pomeroy.

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REP. GOODLATTE: I thank the gentleman.

The gentleman from California is the last question, or if you'd like to ask some, before you go, but I have voted and you haven't, so just by way of full disclosure.

REP. POMEROY: Can she-I don't think she got a chance to finish.

REP. GOODLATTE: If you want to yield to him to allow them to answer the question, that would be fine, but time had expired.

REP. CALVIN M. DOOLEY (R-CA): Sure, I actually had the same question for the Secretary, so --

MS. VENEMAN: Well let me just briefly review what we've been doing to reopen our beef markets. As you know, we did have most of our markets cut off as a result of the BSE find in the United States on December 23rd. Our largest - first of all, it's important to point out and to recognize that 90 percent of the beef that we produce is consumed domestically, and we have maintained consumer confidence in this country, and we have not lost any market in the United States, that's number one.

As far as our export markets are concerned, which takes about 10 percent of our total production, or did take about 10 percent, our number one market is Japan, we've worked very, very hard to try to reopen the Japanese market. As you know, I sent a team to Asia within three days after the find, they left over the weekend, between Christmas and New Years, and began the discussions with our Asian trading partners. There have been a whole series of exchanges, we've made proposals, there have been a lot of discussions, it is a sensitive issue in Japan, primarily because of the way their consumers have responded to the BSE finds they've had in their own country, where they saw a significant drop in demand after they first discovered BSE on September 10th, 2001.

As a result of Dr. Penn's-and his team which was an inter- agency team including USTR, FDA, State Department and so forth, this past weekend, we have a process now in place and people are beginning to work in technical teams to determine how we can best open that market, and we expect to have those discussions continuously throughout the next few months.

Our number two export market is Mexico, and we have succeeded through extensive discussions with our counterparts in Mexico to re- open that market over 90 percent. We have also worked closely with Mexico and Canada to look at the entire North American market and to determine how we can best harmonize our regulations because it is a North American market, before the-certainly, the disruptions.

And so we've been working in technical groups to try to harmonize to the greatest extent possible our regulations. The most important thing is that we use science in all of our decisions, and that harmonization group is looking at the science and comparing the science. And that ought to be the guide as we seek to open up markets, whether it's an import market or an export market.

Our third largest market is Korea, we've continued discussions with them as I indicated in my remarks, we're hoping that we may have a team from Korea come as early as the next couple of weeks.

REP. GOODLATTE: I think both the gentleman who started the question and the one who finished are gone, but the gentleman from California has voted, so we'll recognize him as our last questioner, when the next bells go off, that will be a signal for a five minute vote and he and I will depart very rapidly when that occurs. The gentleman from California.

BREAK IN TRANSCRIPT

REP. GOODLATTE: Thank you. I want to reiterate what Ambassador Zoellick said and I think Mr. Dooley. This litigation is the beginning, not the end of processes, and it's certainly not the end of farm programs. But I want to reiterate my concern that if these kind of things are not negotiated at the table, we're going to find that it could be the end of the ability to negotiate deals at the table, because we thought we had a deal and now we're told there may be a different rule we're abiding by. And the farm community, which has provided great support for trade negotiations, for trade promotion authority and so on, is going to be concerned about that.

That's our warning that we have five minutes to go. So let me thank both Secretary Veneman and Ambassador Zoellick for appearing before the committee today. We look forward to continuing to work with you. We'll continue to watch these issues carefully as we proceed through the summer. On May 19th, the committee will hold another trade hearing and farmers and ranchers representing various farm organizations will testify. We will want to hear the agriculture community's reaction to agriculture negotiations as they are completed and as they're being discussed.

Without objection, the record of today's hearing will remain open for 10 days to receive additional material and supplementary written responses from witnesses to any question posed by a member of the panel. I don't see anybody here to object.

This hearing of the House Committee on Agriculture is adjourned.

END

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