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Hearing of the Finance Subcommittee, of the United States Senate Committee on Finance

Statement

By:
Date:
Location: Washington, DC

Today during a Finance Subcommittee hearing, U.S. Senator Maria Cantwell (D-WA) pressed the nation's top negotiator for agricultural trade issues to continue working to gain full access to Mexico's markets for American potatoes. Currently, American potatoes can only be exported to a region within 16 miles of the U.S.-Mexico border. Full access would expand the U.S. potato export market to Mexico by at least fourfold, from $24 million to $100 million in the next five years, according to U.S. potato industry estimates.

"It is important to continue to focus on what we're doing to gain market access for products," Cantwell said today to United States Trade Representative's Chief Agricultural Negotiator Islam Siddiqui at today's hearing. "So I wanted to ask first Ambassador Isi Siddiqui about the potato market in Mexico. We've been very aggressive about trying to get Northwest product into that country and so what are we doing to make sure we're fully opening access and resolving the issues there?"

Ambassador Siddiqui responded: "Senator, the potato issue with Mexico is a very high priority issue for both the USTR and USDA. …We have made it very clear to Mexico that we expect them to resolve this issue sooner than later. This 26 kilometer boundary that has been set was not based on science and there's adequate science to support our contention. … So we are hoping that Mexico can resolve this issue in the near future."

Watch a video of Cantwell remarks at today's hearing.
In December 2010, Cantwell sent a letter to Department of Agriculture Secretary Tom Vilsack urging an agreement with Mexico to allow American potato growers full access to Mexico's markets. Since Vilsack's trip to Mexico in December 2010, Mexico has agreed to move forward on opening up full access for American potato growers but progress has stalled. Today, Cantwell urged the USTR's top agriculture negotiator to keep pressure on Mexico to get this done.

In 2003, Cantwell traveled to Mexico with the Washington Potato Commission to support expanded fresh potato trade with Mexico. Shortly thereafter, Mexico agreed to allow fresh potato exports into the 16-mile zone, with the expectation that all of Mexico would soon be open to American potato exports. Prior to the 2003 U.S.-Mexican agreement, Mexico allowed no fresh potato exports from the United States. Since the agreement, Mexico has become the second largest buyer of U.S. fresh potatoes, importing over $24 million worth in 2009.
During today's hearing,Cantwell also pressed Ambassador Siddiqui and a U.S. Department of Agriculture (USDA) official to aggressively pursue resolving phytosanitary issues with South Korea to allow for U.S. apple exports to the South Korean market.

"We're very excited obviously that the free trade agreement got signed and obviously we think it represents an opportunity for a lot of Washington products," Cantwell said to Ambassador Siddiqui. "Wine, probably all Northwest wine. But obviously there's lots of other products that we want to gain access. Apples being an important Northwest product and so just want to see what steps we need to take to make sure that they are going to get that access."

"It appears that Korea has indicated that they will begin that pest risk assessment process to assess the risk for fire blight which is the first step in, unfortunately, a lengthy process in order to gain access," replied Darci Vetter, Deputy Under Secretary, Farm and Foreign Agriculture Services, USDA. "But at least that is now underway and they are beginning in concert with our regulatory officials to go through that process. So we have pushed for them to begin and they have indicated their willingness to do so. And we'll make sure they'll continue along in that process."
Cantwell responded: "I hope that we're going to be aggressive about pursuing this in a timely fashion."
Vetter: "We absolutely will."
With the implementation of the U.S.-Korea Free Trade Agreement last month came the immediate elimination of dozens of tariffs on various agricultural products important to Washington state's economy. The deal is expected to provide a boost in exports for Washington state cherries, wine, beef, potatoes, hay, and wheat as soon as this year. However, apples are currently not allowed into South Korea for phytosanitary reasons.

Washington state has a lot to gain from access to South Korea's market for apples. South Korea is an important export market for Washington state. The country is the fourth largest export market for Washington state goods, taking in $1.4 billion worth of agriculture exports from the state last year. Today, Cantwell questioned top agriculture officials on the United States' progress in gaining access to the Korean apple market.
Opening up the Chinese market to American pears and apples and the South Korean market to apples would not only help Washington farmers, it would also provide more business for the state's ports and cargo transporters. Washington's ports and waterways are the closest to Asia and Alaska of all U.S. ports. Nearly $13 billion in food and agricultural products were exported through Washington ports in 2010, the third largest total in the United States.

During today's hearing, Cantwell also questioned the vice president of the Northwest Horticultural Council, Mark Powers of Yakima, on the importance to local growers of expanding market access in China for pears and apples.
China currently does not allow imports of American pears but the United States allows imports of Chinese Ya and fragrant pears. Washington state produces more pears than any other state in the nation, with a total crop value of $189 million in 2010. Currently China only accepts two varieties of U.S. apples -- red and golden delicious -- and South Korea accepts none due to phytosanitary reasons. In the Yakima Valley, the top apple producing area in the state, nearly two-thirds of the total apple growing acreage is devoted to apple varieties not currently sold at grocery stores in China.

"Obviously they [China] do allow access to two varieties and yet if you look at the Yakima Valley and our production in general, two-thirds of that production, you know, we're looking at a variety of varietals that are not allowed in China," Cantwell said to Powers. "So what do we need to do to make sure that we get more than two varieties and get past these issues that are not, we don't need pest assessments; that's not what the problem is. So how do we get past this?"
Powers responded: "It takes more than what we've been able to do so far. …I think there has to be something of value to China in order to move forward. And at this point what we know is that they have basically said that until we allow them to have access into U.S. for their apples we're not going to move forward on our apple access issue."
"And where do you think we are with pears?" Cantwell asked Powers.
"On pears I'm much more optimistic," Powers said. "There is a clear recognition that China needs to allow us in the Northwest and California to have access for our pears going into China. They are working on a work plan. Agencies are involved on that so we're hopeful that perhaps by this next harvest season or if not then the next one that the technical issues will be resolved and exports will be allowed to move forward."

The United States and China have had discussions about opening the pear market for nearly two decades to allow the import of fresh sand pears from China and the export of U.S. pears to China. However, since last November, talks between the two countries to open the pear market have gained momentum. Chinese and American officials are still discussing the details of mitigation measures for pests and disease.

On February 15, during a meeting with Chinese Vice President Xi Jingping in Washington, D.C., Cantwell urged China to further open its market to American pears. Xi, who is likely to be the next leader of China, was meeting with U.S. Senators and Congressmen on Capitol Hill. Cantwell encouraged him to move forward on a deal that would enable Washington pears to be sold in China.
Currently China only accepts two varieties of U.S. apples -- red and golden delicious. Washington state produces more than 20 different apple varieties. In the Yakima Valley, the top apple producing area in the state, nearly two-thirds of the total apple growing acreage is devoted to apple varieties not currently sold at grocery stores in China. The potential for apple export growth in China is huge. China has 1.3 billion people -- or one-fifth of the world's population -- and is already Washington state's tenth largest export market for apples.
A complete transcript of Cantwell's remarks made at today's hearing follows:
First Panel

Senator Cantwell: Thank you Mr. Chairman and thanks for holding this important hearing. It is important to continue to focus on what we're doing to gain market access for products. And yes there's a lot that goes on between Portland and Seattle and we're very proud of our large export markets there. So I wanted to ask first Ambassador Isi Siddiqui about the potato market in Mexico. We've been very aggressive about trying to get Northwest product into that country and so what are we doing to make sure we're fully opening access and resolving the issues there?

Ambassador Isi Siddiqui: Senator the potato issue with Mexico is a very high priority issue for both the USTR and USDA. Both Ambassador Kirk and Secretary Vilsack at USDA have raised the issue there after meeting with their counterparts in Mexico. We have made it very clear to Mexico that we expect them to resolve this issue sooner than later. This twenty-six kilometer boundary that has been set was not based on science and there's adequate science and justification to support our contention. So we'd like to have that issue resolved. As you know there was a panel, a scientific panel put together at the request of USDA which actually agreed in principal by and large with our contention on this issue. So we are hoping that Mexico can resolve this issue in the near future.

Senator Cantwell: Do you think the panel of experts on…?
Ambassador Isi Siddiqui: This was on potatoes; it's called North American Plant Protection Organization. The panel was assembled after Secretary Vilsack met with his counterpart, Secretary Mayorga, about I believe a year and a half ago. And so we are waiting for Mexico to make a move.
Senator Cantwell: And when do you expect the finality of that report?
Ambassador Isi Siddiqui: That is, Senator, hard for me to predict but it continues to be one of the highest priorities in terms of the issues we have with Mexico in agriculture, we will expect them to resolve.
Senator Cantwell: Okay. And what are we doing with South Korea and phyto-sanitary issues as is it relates to getting apples into South Korea? What are the next steps?

Ambassador Isi Siddiqui: Senator I don't have the information on….if you're talking about the pesticide MRL issue…but I don't have…
Senator Cantwell: Well we're very excited obviously that the free trade agreement got signed and obviously we think it represents an opportunity for a lot of Washington products. Wine, probably all Northwest wine. But obviously there's lots of other products that we want to see gain access. Apples being an important Northwest product and so just want to see what steps we need to take to make sure that they are going to gain that access.

Ambassador Isi Siddiqui: I was just given a note so I think this issue has to do, I suspect it's not pesticide, its fire blight. It's a disease of apples where many of the countries put these restrictions against apples but we'll continue to work with our counterparts in Korea to again, lift those restrictions based on science and international standards. This is not the first time we've faced if you remember we had similar issues with Japan before Japan allowed our market access for US apples. So this is an old issue which comes up in many countries which either do not have fire blight or if they have it they don't want to admit it.

Ms. Darci Vetter: Senator if I might, it appears that Korea has indicated that they will begin that pest risk assessment process to assess the risk for fire blight which is the first step in, unfortunately, a lengthy process in order to gain access. But at least that is now underway and they will be working in concert with our regulatory officials to go through that process. So we have pushed for them to begin and they have indicated their willingness to do so. And we'll make sure that they continue along in that process.
Senator Cantwell: I hope that we're going to be aggressive about pursuing this in a timely fashion.

Ms. Darci Vetter: We absolutely will.
Senator Cantwell: Thank you. Thank you Mr. Chairman. I know we're going to have a second panel so I have questions for them as well.
Second Panel

Senator Cantwell: Thank you Mr. Chairman, thank you for that courtesy. I greatly appreciate it and panelists thank you so much for your testimony. Mr. Crider I think you actually have a facility in Skagit County as well.
Mr. Steve Crider: That's wine based yes.

Senator Cantwell: Great. Well glad you're here and Amy's is good product so thank you for having facilities in our state as well. And Mr. Thompson I'm sending a letter to the agricultural committee this week in support of the MAP program, it's vitally important and hopefully this proposed legislation will include that.
Mr. Steve Thomson: Thank you. I'd also like to point out that King Estate winery has a winery project in the Columbia Valley, Walla Walla, and we produce Washington wines as well.

Senator Cantwell: All I have to say is there is good wine in the Northwest and that's good by us. So, Mr. Powers I wanted to talk about apples if we could. Thank you for representing the Northwest horticultural industry and all that you do. One of the issues I wanted to talk about was China. Obviously they do allow access to two varieties and yet if you look at the Yakima Valley and our production in general, two-thirds of that production, you know, we're looking at a variety of varietals that are not allowed in China. And we've had, you know, these issues in discussions you've heard what my questions were to our trade representatives trying to push forward on getting access to markets. So what do we need to do to make sure that we get more than two varieties and get passed these issues that are not, we don't need pest assessments that's not what the problem is so how do we get past this?

Mr. Mark Powers: (off mic) seeking access for apples to China since the early 90s. And we do have access for two varieties. Really varietal issues are not at the heart of SPS questions, really. I mean if we have access for apples we should have access for all varieties of apples. However, China doesn't necessarily see it that way. And while the two technical agencies have been involved in dialogues for years. At a certain point, and this happened a few years ago, there was a recognition that this wasn't about a technical dialogue. This was basically a political matter. And I think that's at the heart of it. What we're facing. And we're not just facing it in China. We're facing it in many countries where the technical discussions can go on and on and on and often times do and what is needed is a political solution. Or a political trade-off at the end of the day that needs to occur. With China I think that's the same situation and it's a dicey one. Because as you may know the Chinese want access into the US for their apples. And so the US is working through the Animal Plant Health Inspection Service, is working through that pest assessment on Chinese apples and that process is unfolding. And we have legitimate concerns about the threat of invasive pests that might be present on apples coming from China. And so until that process works through, and we want to make sure that it is thorough, we're unlikely to see much in the way of advances on our other apple varieties into China. Simply because things aren't necessarily resolved on the basis of their technical merits. And I don't have a solution, quite frankly. I think that we will have to continue to be part of the dialogue between the two governments and hopefully the resolution will appear. But there is no real technical reason at this point related to fire blight that wouldn't allow our apples…

Senator Cantwell: And so what do you think the solution is from a political perspective. How do you get the issue above you know the discussions that is on the technical points and up to the political level. What do you think that takes?
Mr. Mark Powers: It takes more than what we've been able to do so far. I mean I don't have a great solution to that. I think there has to be something of value to China in order to move forward. And at this point what we know is that they have basically said that until we allow them to have access into US for their apples we're not going to move forward on our apple access issue.

Senator Cantwell: And where do you think we are with pears?
Mr. Mark Powers: On pears I'm much more optimistic. Again it's a long-standing issue, China has access to the US for two varieties of its pears and it's now, APHIS is now working on a third variety. That process is in rule-making at this point and appears to be moving forward. And there is a clear recognition that China needs to allow us in the Northwest and California to have access for our pears going into China. They are working on a work plan. Agencies are involved on that so we're hopeful that perhaps by this next harvest season or if not then the next one that the technical issues will be resolved and exports will be allowed to move forward.
Senator Cantwell: Well I certainly hope so. And I thank you for your work in this area. Having visited Chinese supermarkets and seeing these products there you want to make sure we get access, that we get access and compensation for the products that are there. So I would hope that we could continue to make movement on these issues and find a solution that would give this wide variety of products from our state access to that market. So thank you Mr. Chairman I appreciate it.


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