Transcript of Agriculture Secretary Mike Johanns remarks to the Carnegie Endowment for International Peace and Roll Call Policy Forum
Washington D.C. - February 14, 2006
SEC. MIKE JOHANNS: Thank you. That was a great introduction. I appreciate it immensely.
This is a very busy week for us because we have budget going on and so I was looking at the invitations, and the schedule and trying to figure out what I could get to. And I looked at this and I saw that Jim Wiesemeyer was going to be on the panel. Jim recently wrote a little piece that said, I think Secretary Johanns' popularity has maybe peaked.
So I wanted to come here to figure this out. You know, what is going on out there?
No. I'm just giving Jim a hard time.
It is great to be here. You know what an incredibly exciting time to be the Secretary of Agriculture from a number of standpoints. Needless to say we have the Doha Round, which is hugely important. We've done a lot of work on the Farm Bill. We had our listening sessions around the country. Farm Bill legislation will be written next year in 2007. And then of course we have budget challenges. That is not terribly new to me because we've dealt with that before.
All of those things that you so kindly mentioned in your introduction were done in an atmosphere, ladies and gentlemen, where we were required by our Constitution in Nebraska to not only deliver a balanced budget but Nebraska has a constitutional limitation on debt. We can go out and we can incur $50,000 worth of debt.
And so in Nebraska everything's pay as you go, even the highways, although I think we could probably do highway bonds. We've never done it. We pay as we go.
So this week as I deal with budget issues I remember my days as the governor where we were struggling to deal with budget issues back home. But that's kind of an aside, because you wanted to hear from me today on trade issues.
I thought maybe what I'd like to do is offer a few perspectives on the Doha Round and then what I'd really most be interested in doing is opening up to your questions, your comments. So you might be thinking about something you would like me to respond to in terms of your questions. And I do see media here, so I might mention that media has questions we'll deal with them outside. Right, Terri?
All right, good.
Well, the Doha Round has now been going on for a long time, a number of years. We've been working on this trade initiative, WTO process. Well, we are very much now at a very critical and important time. You have read a lot about agriculture over the last weeks and months relative to Doha. Agriculture is the major focus of the WTO Doha Development Agenda. And it should be because this is the development round, and if the round is truly to live up to its name, then we need to deal with some agricultural issues.
The round is a great opportunity to provide member nations with greater access to global markets. It will allow developing countries to share in the prosperity that free trade does bring.
To advance that goal, the Bush Administration made a very generous offer in October of 2005 to substantially cut trade-distorting domestic support and to eventually eliminate trade-distorting export subsidies in exchange -- it was an offer that was conditional -- in exchange for reciprocal cuts in protection by other nations, in other words, trade barriers.
This proposal dramatically changed the landscape of the negotiation. It highlighted the need to move ambitiously on all three pillars related to agriculture. If you would have gone back before our get-together here today and read the press reports, the media reports in September of last year or August of last year, you probably would have been reading reports that the European Union and the United States were literally locked in a situation where we were staring at each other -- who's going to move first?
Well, we made a very bold move, and now we are waiting for that move, that ambition to be matched.
That really, in my judgment, is the key to our success as we think about the days ahead in the ramp-up of the Doha Round.
Think about the future and the importance of this round. In the next 20 years the world will gain another 1.4 billion people, 25 percent increase in population. Think about the importance of this round to agriculture in the United States. We have the unbelievable capacity in this country to produce today more than we consume. We follow productivity at the Department of Agriculture, and our productivity is growing about 2 percent a year while our consumption in the population is growing less than that.
And 95 percent of the world's population does not live in the United States; it lives outside the United States. And even today 27 percent of our receipts do come from trade.
When we think about the population outside the United States, most people live in expanding urban centers of developing countries and add greatly to the world's demand for food. Prospects are good that economic growth in developing countries will continue raising incomes and improving diets for billions of people on a worldwide basis. Demand for meats and vegetables, fruits and other goods is likely to grow significantly as consumers use their increased ability to buy, to diversify their diets.
And open market places is essential to meeting this expanded demand. The overall objective of the Doha Round must be to promote open markets.
Now who stands to gain from this process? I've talked a little bit about our situation here, but let's take a look maybe at the global view if you will. Two-thirds of the WTO membership is comprised of developing countries; 32 are classified as least-developed countries really very poor. And these countries, over 70 percent of the poor live in very rural areas where agriculture is the employer. That really is about it.
Agriculture accounts for about 60 percent of the labor force in developing countries and about 25 percent of the GDP. Trade liberalization achieved through Doha will have an enormous reach throughout the global economy. These countries stand to gain. Economic opportunity, political freedom are keys to eliminating the destabilizing effects of poverty, no hope, desperation.
That is why agriculture and trade development are fundamental to trade negotiations, and that's why a certain amount of the Hong Kong ministerial was devoted to these development issues.
Under Doha every nation does stand to gain, but the developing world in my judgment stands to gain the most. Global free trade would increase income in developing nations over $200 billion annually, 2.5 times the amount of annual official development assistance, and reduce global poverty. Millions of the world's poor could be pulled out of poverty by a successful round.
The other piece of it is that trade capacity is also part of our discussions, and when you speak to the least developed countries one of the things that they'll emphasize is the need for assistance with their trade capacity building. And we have already been a part of that and want to continue our efforts there.
So what needs to happen now; if we're to chart a course for the success of Doha, where do we go from here? It is a unique opportunity to broaden and deepen and extend the current economic expansion. No other initiative I know of out there at the moment has more potential. No other initiative in my judgment even comes close.
But to wrap up the Doha negotiations by the end of 2006 as agreed the talks urgently need energy, momentum and leadership, really by all of the WTO members. To really unleash the potential of Doha we must first break a deadlock in the agricultural negotiations. In July 2004, WTO members agreed on a framework. It's a very, very sound piece of work.
We have asked for the support of our nation's agricultural industry here in the United States and in Congress to help us move this trade agenda forward. But we want to be clear -- and it's important that I am clear -- our proposals are part of an overall package. We do not cut our support 60 percent as proposed unless we get like cuts in terms of our negotiating partners.
If there was one message I would give you today, we are absolutely committed to continued support of the Doha Round. We want to do everything we can to make it successful. We will be there to the last day trying to achieve a successful result.
Now if I might just touch on some of the items that were agreed upon at the Hong Kong Ministerial, and then as I indicated I would be happy to deal with your questions.
As you know we had significant discussion on duty free/quota free when we were in Hong Kong. The United States was a key part of those discussions, and we have agreed upon an overall approach at least, a conceptual approach to duty free/quota free.
Cotton of course is a significant issue; it was in Hong Kong, continues to be. We had productive discussions with our C4 countries and other cotton-producing countries, and, in fact, last year I was in Africa on two separate occasions relative to cotton discussions.
We announced that least developed countries will receive duty free/quota free for cotton. We also announced kind of an overall framework again in terms of how to deal with support for cotton.
The Hong Kong Ministerial contained text that gives us a general guide at least in terms of our ongoing negotiations. In the area of Aid for Trade the United States provided more than $1.3 billion on trade grants last year. I emphasize "grants." These are not loans; they're actual dollars that go out.
We announced new money that would double that commitment yet again to $2.7 billion by 2010. Trade capacity building fits into that area.
Concerning food aid, we have proposed reforms that deal with some of the claims relative to trade distortion. The reality of food aid is this; last year we exported in the vicinity of $65 billion, exported. By comparison our food aid was $1 billion-plus, a billion and a half in that ballpark at least. A fair percentage of that food aid was designed for emergency situations, the most desperate of situations where I think everybody is agreeing that should not be limited. If you can get food aid to people in those situations you should under any circumstances, whether it's cash or food or whatever.
I think there's a great opportunity for a story here, Jim Wiesemeyer on just how significant food aid is because there's an impression that's been created that somehow half of our ag production, just to pick a number, actually goes into food aid. And really nothing could be further from the truth. When you quantify the real numbers here, really what it comes down to is a very, very small portion of our food aid would be impacted by these discussions.
Concerning export subsidies, there was a plus out of the Hong Kong Ministerial. I don't think anyone started that ministerial believing we would set a deadline for the elimination of export subsidies, but a deadline was agreed upon. And that's 2013.
So we have work to do. There is much left to be done before we wrap up and have a final agreement. We spent a fair amount of time in Davo on trade agreements just recently, and I have to tell you I think the mood is good. I think countries are committed, they want to get an agreement; and so I'm optimistic that can occur before the end of 2006.
With that, thank you very much.
M: Thank you very much, Mr. Secretary. If we can get a copy of your text we'll post it on our website.
SEC. JOHANNS: Okay.
M: That will be good. We now welcome your questions. As always please just stand and identify yourself. I think the Secretary made a point, we'll defer the press until after the gathering. First question? Oh come on. Go ahead.
QUESTION: If you don't mind -- Kim Elliot (sp) of the Institute for International Economics and the Center for Global Development -- if you don't mind me getting in the weeds a little bit I wonder if you have any thoughts yet in the Department on how you might respond, how U.S. policy might respond to the part of the Cotton Panel's decision saying that direct payments were not eligible for the green box if farmers go in fruits and vegetables. You'd have to deal with that in some way, and there are some more or less positive ways. Your thoughts on that?
SEC. JOHANNS: Your observation is right. I just reread that language recently from the Panel's decision. And they raised that issue in terms of our farm legislation being out of compliance with WTO requirements I think is the bottom line. If, in fact, we haven't done enough in terms of fixing the cotton program through the elimination of Step 2 then you could have Brazil not only raising that issue but some other issues.
Here's my impression-- again not to get out of the weeds--but my impression is this. I think Brazil has observed our very, very good faith efforts to have a successful Doha Round, our very good faith effort in terms of dealing with the Step 2 program; and at least today -- this could change tomorrow, but at least today they have said, look, we'll see what happens.
We're kind of in a make or break position with the Doha Round. We're going to know before too long whether this comes together. And we'll sit tight.
I don't think I'm sharing any secrets here. They have an interest in the Hong Kong work. It's not just the fruit and vegetable provision; it's not just the Step 2 program. It's the marketing loan program and how we deal with that.
And like I said, if Brazil were here I think they would step up and say, yep, that's kind of what we're talking about, that we're hopeful the Doha Round will be successful.
The other thing I will offer is this. Brazil is not alone. Uruguay and some others have said, what about the rice program? You know what Canada did recently in terms of duties and countervailing duties relative to pork. I said a few months ago when I testified before House or Senate Committee, I don't remember which -- we testified in front of both and I probably said it to both -- the most risky approach may be to just stay the course. That may be the most risky approach in terms of farm policy.
So I think that issue is there, but I think there's a whole host of other issues that have kind of been put a little bit on the side track as this Doha Round goes forward. And they're kind of saying, we'll see what comes out of that.
Now that view could change tomorrow as you know, but that's my impression of where they're at.
QUESTION: Hugh Corbett, Cordell Hall Institute. Could I ask the Secretary if you could speculate a little, just a little, on what happens if things are not wrapped up this year. Whether you join with Mr. Corbin in not discounting the possibility of extending commercial authority. We hear all the time that the mood is better. We've been hearing since 1971. It's sort of perennial. The problem always is that there's a big problem, and it's all from the European Union. We heard this morning that the European Union can't change it's internal procedures and can't yet make a further offer on agriculture until it sees something happening on other states. So there's a major problem there, which might only change after (unclear). So that's why (unclear). What's the prognosis for extending trade negotiating authority?
SEC. JOHANNS: Hugh, here's my concern. I think if you offer a pathway different than where you're at today there's going to be tremendous temptation to go down that pathway. I believe for the purposes of the Doha Negotiations you have to make assumptions based upon reality. And the reality is that TPA disappears next year. And it does. And we know how difficult it was to get TPA renewed. It was an issue that was out there for a lot of years before it was renewed.
My belief is that we have to absolutely stay committed to the Doha Round. There is just serious focus on the importance of moving this through to 2006, worry that the thing unravels and the TPA issue. You've got an issue with not only farm policy and the European Union but farm policy here. I just think that's a pathway that I don't even want to visit. Any way I can I believe I need to beat the drum as loudly as I can that this is the time, a historic opportunity here, and a historic window of opportunity. But we have to be mindful of the fact that that window could shut down.
If the window shuts down and we don't get a Doha Round the world really pays the price for that. And it would be terribly unfortunate because the window of opportunity may not open literally for a generation. These are very -- there's a very positive alignment of the stars right now, and I just hate to send a signal that we should do anything except remain absolutely committed to the success of this round.
The final thing I would say on this point, it's not like the round was discovered last July. It's been going on for years. And I think if you take the pressure off the round and who knows, you may have a round going on indefinitely. That doesn't serve anybody's purposes.
QUESTION: Following that, Mr. Secretary, could I ask how you envision coordinating progress on the Farm Bill with negotiations in the Doha Round?
SEC. JOHANNS: Let me offer a couple of thoughts on farm policy relative to the Doha Round. There's been a suggestion or two out there or three or four that maybe what we do is just we extend the Farm Bill a year or two and we wait for the outcome of the Doha Round, the WTO negotiations.
Well if you're opposed to trade then you kind of get into this discussion of, wait, where are you coming from? And 27 percent of America's receipts come from trade. So I'm very mindful. And I need to recognize that the Doha process is going on. But I also have to tell you, we need to move the farm policy discussion.
And then there's another thing I would tell you. I think it's very, very important that we not lose sight of the fact that that also comes up for renewal in 2007. I see a lot of good work on the House side, on the Senate side. We've done a lot of good work. Groups across the country are very engaged in this discussion.
And so my goal is going to be to do everything I can to be ready for that debate in 2007. I believe we will be.
Every Farm Bill recognizes that there are some limitations by the WTO process. The current Farm Bill is limited in dollars because of the WTO process. But again, I want to focus on what's good farm policy for the future of agriculture in our country.
Yes. Way back there.
QUESTION: I'm Lenora Tidings (sp) from an Environmental Work Group, and I was just wondering, in the construction of U.S. farm subsidies what role do you see of conservation programs playing as well as other environmental sustainable programs and the ethanol initiative as well?
SEC. JOHANNS: Well, for this, conservation, as you know, as a general rule fits into the green box. And so you could do conservation programs and at least theoretically there isn't a limit on that. We're all limited by budgets and this and that and by whatever is going on. But by and large they're green box payments.
But actually what's more interesting to me and maybe somewhat even more compelling in terms of answering your question, when we went out for our Farm Bill forums we got to a point where very quickly as a matter of fact, where we just decided, you know the best way of doing this is just to have an open mind. You know we had these six ideas that we wanted some talks about, but quite honestly people just wanted to get up and talk about what they saw in terms of farm policy.
With very, very little exception across the board people got up and spoke in support of the conservation programs. A little bit of push-back in cow/calf country where there was a feeling maybe we were competing with the need for grazing land or maybe running the price up a little bit and this and that. But by and large, almost universal support in terms of conservation programs.
Somebody did an analysis of those and said, yeah, that's what we're seeing in terms of analyzing. And I think they analyzed 41 of our listening sessions. Saw a lot of support for the conservation programs, but again not news to me. That's what I was hearing out there.
So I just think you're going to have a strong conservation title in any Farm Bill on into the future. And there's a lot of reasons for that. But probably the significant reason, it just gets a lot of support.
Is there an opportunity for some other ideas, working lands, conservation? We heard that concept. I think that's a very interesting concept. And then in terms of ethanol, I think the day has arrived. What do I mean by that? I'm sitting down there in a great seat listening to the President of the Untied States talk about ethanol from biomass and products other than corn although we know 14 percent of our corn crop now goes to ethanol production. My goodness. You know 10 years ago had you tried to convince a president to put ethanol in the State of the Union I don't think you would have gotten it there. And now it was a major piece of the President's energy initiative.
Now ladies and gentlemen, you're probably wondering why this lady here in this red jacket is standing there. This is Terri Teuber. She's the Director of Communications. Now you're all wondering-- well, why would he need a director of Communications? This is how it works I'm going to walk out of here right away here; she's trying to tell me I need to. I will talk to the media. And then when I'm done, she'll go to the media and say, Folks, this is what the Secretary really meant to say.
So thank you.