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What's at Stake for U. S. Agriculture in the Next Two Months?

Location: Washington, DC


Mr. SANTORUM. Mr. President, our top U.S. trade negotiators traveled this week and last in Europe, Africa, and Asia. They are making a concerted effort to encourage certain influential countries among our 148 trading partners in the World Trade Organization to put meaningful agricultural offers on the table in Geneva. We are coming down to the wire in the most recent round of multilateral trade negotiations, referred to as the Doha Development Round. The offers that our trading partners put on the table in the next month or two are the starting point for agricultural negotiators. That deal in agriculture will be combined with the results of similar negotiations in the manufacturing and services sectors of the economy. Together, they constitute the outcome of the round that has been going on for the last 4 years. Without a deal in agriculture, however, the Doha Development Round will falter.

While bilateral trade agreements are beneficial to U.S. exporters, it is through multilateral negotiations that across-the-board tariff reductions can be achieved. That is why the Doha Development Round is so crucial.

The agricultural negotiations are significant to all of us representing states with agricultural constituencies. In the case of Pennsylvania, production agriculture generated $4 billion in cash receipts in 2003, according to USDA statistics. That's $4 billion for the producers of livestock and commodities in my State. Pennsylvania generates only 2 percent of agricultural cash receipts received by producers nationwide, so you can imagine how important agriculture is to the 31 States with larger agricultural economies. Then there is the added value to the Pennsylvania economy of further processing and manufacture of food products and their export. Virtually every State has a stake in these negotiations.

The producers of U.S. food and fiber no longer are producing for the U.S. market alone. Those days are gone forever. Our farmers are part of the global economy. In fact, because they are so efficient, they produce in excess of what the U.S. can consume and must gain access to global markets to expand sales opportunities.

Yet many markets overseas remain closed to U.S. producers because of high tariffs applied against U.S. exports. Particularly egregious are the tariffs imposed by the European Union and Japan among developed economies and by certain developing countries such as India and Brazil, where they continue to claim developing status despite making major advances in certain sectors of their economies.

These issues have been discussed at the WTO during the past 4 years of the current Doha Development Round, with little movement in agriculture. In an effort to move the round forward, the U.S. last month put forth in Geneva an aggressive proposal to jumpstart the stalled negotiations. Since U.S. tariffs already are low compared to our trading partners, there was little the U.S. could offer in market access to encourage comparable reductions. So the U.S. proposed to pull back its own domestic subsidies in exchange for significant cuts by our trading partners in the tariffs protecting their market access.

The rationale behind the offer is that U.S. producers are so efficient that they require minimal domestic subsidies, as long as they have unfettered access to expanding markets. Those markets increasingly are found overseas where the increased prosperity of growing middle classes demands the kind of dietary diversity and convenience we have long enjoyed. U.S. producers and food manufacturers can supply both that diversity and convenience and supply it year in and year out.

But not all agriculture is as efficient as that in the U.S. Rather than improve efficiency, some countries protect producers excessively with high tariff barriers to market access. And they are not forthcoming with offers of significance to begin the process of reducing those barriers. Frankly, there isn't much time left. The round ends at the end of 2006, and the initial offers for negotiation should be on the table this December at the Hong Kong ministerial meeting so negotiators are able to assemble the final package of tariff reductions and subsidy cuts in the next year. They will need every minute to do so.

After last week in Europe, the Secretary of Agriculture and the U.S. Trade Representative were far from optimistic that the Hong Kong ministerial meeting would grapple with the type of formulas to be used in cutting tariffs or with the number of ``sensitive'' products that countries could declare protected behind a high tariff.

And what happens if there is no agreement or a face saving agreement with minimal substance? That's what worries me and should worry American farmers. U.S. production agriculture has been a partner in the international effort of our trade negotiators to gain market access. But how long can the partnership last if the round fails? Where do farmers and ranchers put their efforts if the latest round of negotiations fails to live up to its promise?

The European Union, for example, insists that dairy is sensitive and deserves special protection. How can the dairy farmers of the U.S. be convinced that overseas market access is the key to increased profitability if the European market remains unavailable behind high tariff walls? I am concerned that agriculture will lose patience with the trade negotiation process and return to familiar domestic farm programs to augment its income because the world market could not. What do responsible Members of Congress do then, facing the kind of fiscal constraints we do in 2006, just as existing farm programs expire?

There is real potential under those circumstances for backlash. Testimony by commodity groups earlier this month in the House has telegraphed that already. Wheat, corn, and soy producers all expressed reservations at the degree of ambition and commitment to trade liberalization shown by U.S. trading partners, particularly the European Union and the G-20 group of developing nations, as evidenced by their counter proposals to the U.S. proposal in the WTO. U.S. producers are savvy. They see the inadequacy of those offers by our trading partners and have no intention of venturing too far in the direction of liberalized trade alone without a very strong safety net. The weaker the commitment to reform among our trading partners, as evidenced by the degree of success in the Doha Development Round, the more expensive will be the net required by our producers. That's bad news for those in Congress wishing to lead their agricultural producers toward a more productive and profitable model based on increased markets overseas, where 95 percent of the world's consumers live.

A recent study by Australia, a leading member of the Cairns Group of trade-liberalizing nations within the WTO, underscores the potential loss if the more robust proposal of the U.S. in the WTO is not realized. Australia's agricultural economics bureau, ABARE, estimates the U.S. proposal would deliver an extra $17.5 billion in gross income per year to U.S. farmers from increased exports. Much of that increase would flow to producers of meat and fruit and vegetables, who would benefit from increased market access. In fact, the U.S. proposal would benefit all efficient producers in the world, according to ABARE.

This is not the time to accept less than the U.S. proposal in the negotiations. ABARE estimates the European Union proposal would yield only about $3 billion, barely enough to account for assumption variables in the study, and it would continue to protect a number of its product lines where the U.S. stands to gain the most from market access. The proposal of the G-20 group would yield an extra $7.5 billion per year, a bare minimum.

Moreover, the benefit to U.S. production agriculture from increased earnings under the U.S. proposal would provide latitude for writers of the next farm bill to adjust domestic programs to accommodate two important realities. Some of our domestic programs have been ruled trade-distorting under the WTO. Ultimately we will have to reform these programs. Either we change our farm programs now by negotiation in the WTO where we can get something in return for them, or we will be forced to change them by litigation by which we don't get anything for them. Here is the perfect opportunity, where we can gain market access and income to offset changes made domestically.

The second reality is the cost of farm programs. That cost may not seem like much in years of little budget competition. But today we are in a budgetary climate where any policy that depends on government financing is subject for review. There is strong competition for public outlays, and an effort to reduce the deficit places new scrutiny on all programs.

We all have just experienced the budget reconciliation process in Congress. In agriculture, we were obligated to find $3 billion worth of savings to accommodate budget targets. That is just the beginning, and we are well advised to know the alternatives available to us to make adjustments in important programs in advance of the need. This WTO negotiation provides the U.S. with the opportunity to convert its aggressive proposal for reform into real income for farmers and agribusiness. For instance, if the U.S. program crops like wheat, corn, rice, and soybeans continue to be under pressure in the WTO for the portions of their domestic subsidy programs that ``distort'' trade, the advent of the next farm bill provides us a chance to convert supports for those crops into a format that conforms to WTO guidelines. In return, we gain the market access from our trading partners to sell them U.S. fruit and vegetables, meat and dairy products, and other specialty crops not previously allowed into their markets in sufficient quantity.

If we don't succeed in opening those opportunities for U.S. agriculture, we will have nothing with which to persuade our producers to give up the expensive domestic subsidies to which they have become accustomed. Another expensive, non-innovative, and divisive farm bill might unfortunately be the result. Mr. President, a great deal is riding on the success of the Doha Round.

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