TEXT: BARSHEFSKY ON TRADE IN AGRICULTURE
(U.S. to take tough stand on food health barriers)

Washington -- U.S. Trade Representative Charlene Barshefsky says the United States will be "vigilant" in tackling unfair foreign food safety and health trade barriers.

"As we negotiate trade agreements that reduce tariffs, SPS (sanitary and phytosanitary) barriers become more visible, relevant, and, to countries seeking to restrict access, attractive," Barshefsky said in May 7 testimony to the Senate Agriculture Committee. "We must guard against the increasing use of SPS barriers as the 'trade barrier of choice'."

Barshefsky also outlined U.S. priorities for the 1999 multilateral negotiations on agriculture. These include reduction in tariffs in such countries as Korea, Norway, Pakistan and India; disciplines on the use of export subsidies and activities of state trading enterprises; and responsible regulation of genetically modified organisms.

Following is the text of Barshefsky's testimony as prepared for delivery:

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Testimony of Ambassador Charlene Barshefsky U.S. Trade Representative Senate Committee on Agriculture, Nutrition and Forestry May 7, 1998

Thank you, Mr. Chairman and Members of the Committee. I appreciate the opportunity to join Secretary Glickman today and appear before you to discuss the Administration's preparations for renewed multilateral negotiations in agriculture which are set to begin in 1999.

The Importance of Trade to U.S. Economic Prosperity

Let me begin by putting agricultural trade in the context of the U.S. economy.

We are well into the seventh year of economic expansion for the United States. Unemployment is at its lowest level in nearly a quarter-century. The good news continues on inflation, and consumer confidence is at its highest level since 1970. We have created over 15 million new jobs since 1992; which means that more Americans are working today than at any time since the Government began recording labor statistics nearly 50 years ago.

In February the President submitted a balanced budget for 1999. For the first time since 1969 the federal government will spend no more than it takes in, an achievement that was not expected until 2002. We now are discussing budget surpluses for the first time in many of our memories.

And throughout this economic expansion, trade has played a crucial part. Its role, in fact, is hard to overstate. Since 1992, exports have accounted for over one third of U.S. economic growth. Over 12 million American jobs now depend on our exports, including one in five manufacturing jobs. One out of every six new jobs created in the last 5 years is because of exports. And that in turn means higher living standards, as jobs supported by exports pay an average of 13 to 16 percent higher than the U.S. national average.

Trade and Agriculture

And in no sector of our economy is the link between trade and today's prosperity clearer than in agriculture.

Agricultural exports help our entire economy: near-record farm exports of just over $57 billion in 1997 and a positive trade balance of $21 billion. Agricultural sales abroad account for nearly 10 percent of total merchandise exports. And during the last five years, U.S. agricultural exports are up by one-third.

Agricultural exports mean jobs and prosperity for America, and reduced risk for American agriculture. Overall, one out of every three acres of America's farms is dedicated to exports. Agricultural sales overseas support nearly one million jobs in the United States. And America's farmers and ranchers rely twice as heavily on foreign trade as the U.S. economy as a whole, with exports accounting for an estimated 30 percent of gross cash receipts.

In the future, exports will be still more important to our country and its farmers and ranchers. Americans comprise only 4 percent of the world's population and we are near zero population growth. But the world's population is growing rapidly, and the power of emerging middle classes made up of consumers with the ability to shift their consumption patterns have become a critical factor driving markets. In India, for example, there will be 115 million new members of the middle class by 2005. China, among the fastest growing economies in the world, will have 196 million more members of the middle class by 2005. All these new middle class consumers, and others around the world, represent a booming potential market for our products.

Results and Enforcement of Our Agreements

Today's impressive agricultural export numbers reflect the efficiency and competitiveness of U.S. agriculture. They also reflect years of bipartisan work to reduce trade barriers and gain access to foreign markets. Let me discuss our trade policy work in two areas: first, the results and enforcement of our major existing agreements; and second, the work ahead.

We have negotiated 253 separate trade agreements. They include five landmark market-opening accords -- the Information Technology Agreement, the Global Financial Services Agreement, the Global Telecommunications Agreement, the North American Free Trade Agreement (NAFTA) and the Uruguay Round Agreements.

The NAFTA and the Uruguay Round are of particular significance for agriculture. We are now seeing the results come in, both in U.S. export figures and better ways to defend the rights of our farmers and ranchers in trade disputes.

Under NAFTA, our agricultural exports are booming. Let me repeat that. Our exports to our NAFTA partners are booming. In the current fiscal year, agricultural exports to Canada and Mexico are forecast to grow by $1 billion to $12.7 billion. Sales to these two countries should account for almost one quarter of all U.S. farm exports. In just the first five months of FY 1998, exports to Mexico are up 17 percent, and sales to Canada are up by 9 percent. And the increases are widespread, in exports of bulk, intermediate, and consumer-oriented products to each country.

NAFTA's preferential tariffs for U.S. exports, particularly in Mexico, are especially important given the Asian financial crisis. Exports to these countries have thus far offset to a great extent the severe decline in Asian demand. Of the top five U.S. export markets for agriculture, only sales to Canada and Mexico are running ahead of year-earlier levels.

The Uruguay Round helped us discipline export subsidies, improve market access; control domestic price supports; establish sanitary and phytosanitary (SPS) disciplines and create a tighter, more enforceable dispute settlement mechanism. By the year 2000, the value of global agricultural export subsidies will be about one-third less than when the Uruguay Round Agreements were signed.

We also have a series of bilateral achievements that have expanded access for U.S. agriculture. For example:

-- We have opened up markets and overcome phytosanitary hurdles for a range of U.S. citrus or and other fruits in countries like Brazil, Chile, Mexico, China, Korea, Japan, and Thailand.

-- During the Uruguay Round, we negotiated new access to Japan for U.S. pork and rice exports. Before these negotiations, Japan refused to purchase U.S. rice. Over the last two years they have purchased approximately 430,000 tons of our rice. The United States is now providing just over one-half of Japan's rice imports.

-- In April 1997, Japan removed its import ban on 25 varieties of U.S. tomatoes, a move which could open a $100-million market. We used our success in Japan to leverage export approval of these same 25 tomato varieties in Taiwan.

-- In China, we have opened the market for U.S. live horses, apples from the states of Washington, Oregon, and Idaho, cherries, and, most recently, grapes.

-- China has instituted a one year trial program to allow specific U.S. meat processing plants to export to China for retail sale.

-- U.S. officials have established export protocols to ship live swine to Argentina and Peru and to also export live cattle to Peru.

-- Last year's veterinary equivalence agreement with the EU addressed a range of sanitary issues blocking U.S. live animal and animal product exports to the EU.

-- In February, we negotiated a bilateral WTO accession agreement with Taiwan that was very favorable to U.S. agricultural exports, providing new access for U.S. poultry and pork and beef variety meats. Taiwan has also committed to begin the process of opening its rice market.

Dispute Settlement, SPS Agreement Critical to U.S. Agriculture Two of the most significant long-term achievements of the Uruguay Round are the dispute settlement system established in the World Trade Organization and the Sanitary and Phytosanitary (SPS) Agreement. These two agreements, along with renewed multilateral agricultural negotiations in 1999 and existing domestic trade legislation, form the basis of our attack on the remaining trade barriers facing U.S. farmers and ranchers.

Prior to the Uruguay Round, countries faced little cost within the international trading system if they refused to honor their trade obligations. Today, when countries do not live up to their commitments, we can pursue our rights in the WTO as well as utilize our domestic trade remedies.

Mr. Chairman, the Committee is, of course, well aware of our domestic tools including various provisions of the Trade Act of 1974, most commonly known as "Section 301" or "Special 301" to address unfair foreign government measures and intellectual property rights enforcement.

The ability of the United States to use access to its market as leverage in attacking foreign trade barriers has been enhanced under the WTO. The Dispute Settlement Understanding specifically provides for "cross-retaliation," across sectors and across agreements, providing greater leverage to enforce all the Uruguay Round agreements. This was not the case prior to the Uruguay Round.

We have not been shy in using the WTO's dispute settlement system. The United States has filed 36 complaints with the WTO. Fourteen of them -- just over one-third -- involve agricultural products. We bring good cases to the WTO and we have scored significant victories; successfully resolving 18 of 19 U.S. complaints.

Of the agricultural cases we have brought, seven have been settled, all on terms favorable to the United States. Let me review briefly each of these successes:

-- Korea has made improvements to its regime for testing and inspecting agricultural imports that remove barriers to U.S. exporters;

-- Korea has also substantially revised its shelf-life standards for agricultural products that acted as an unjustified barrier to imports;

-- The EU signed a comprehensive agreement covering its import regime for grains with the United States;

-- Hungary has agreed with the United States and several other countries to bring its agricultural export subsidy regime into compliance with its WTO obligations.

-- The Philippines has agreed to administer its TRQ's for pork and poultry imports in a manner that allows imports to occur and does not discriminate against U.S. exporters.

-- We prevailed in a major case against the EU's import regime for bananas. This victory provides important disciplines and limitations on licensing schemes that have restricted trade.

-- Most recently in January, an appeals panel of the WTO reaffirmed the U.S. position that the EU's hormone ban, which denies full access to the EU market for high-quality U.S. beef, violates the EU's obligations under the SPS Agreement. The EU's restrictions have no basis in science.

The hormones case has been difficult. But the WTO appellate panel decision demonstrates that the WTO dispute settlement system can handle difficult disputes over food safety and health. Just last week WTO Director General Ruggiero appointed two arbitrators who will determine the length of a reasonable amount of time in which the EU must come into compliance with the WTO panel decision. Let me be clear that we expect the EU to comply with the hormones decision as well as the WTO's earlier ruling on the EU's banana regime.

We will be vigilant on similar issues whenever they appear. As we negotiate trade agreements that reduce tariffs, SPS barriers become more visible, relevant, and, to countries seeking to restrict access, attractive. We must guard against the increasing use of SPS barriers as the "trade barrier of choice."

Our ability to invoke an agreed set of international principles and rules on protecting plant, animal, and human health -- which we did not have three years ago -- is a key tool in influencing the decisions of many of our trading partners on these issues. Armed with this Agreement, the Administration has made progress in removing unjustified trade barriers and opening the door to increased agricultural and food exports.

But clearly more work is needed. This year's review of the SPS Agreement is a chance to address the overall compliance of WTO members as well as to address measures adopted by some members that violate provisions of the Agreement. The SPS Agreement is an important, effective, tool in our efforts to remove unjustified barriers to U.S. agricultural exports. We will continue to use WTO consultation and dispute settlement procedures, as well as our domestic laws, to remove these barriers.

Looking Ahead: Agricultural Negotiations in the WTO

Now let me look ahead. Because while American agriculture is justly proud of its export success, our work is not finished. Around the world, we still face high tariffs; trade restrictions thinly disguised as health and safety restrictions; administrative schemes for tariff rate quotas that mimic the tariffs they replace; and state trading enterprises that restrict imports and unfairly compete with our exports in third country markets.

New Agriculture Negotiations in 1999. The United States realized even before the negotiations for the Uruguay Round concluded that more must be done to reform world agricultural trade. And so we insisted that the Agreement on Agriculture provide for renewed multilateral talks in agriculture to begin in 1999.

As we develop our objectives for the negotiations, which will require consultations with a range of domestic interests, we can already identify a number of areas which need further attention. Let me address briefly some of these key areas:

-- Market access. The U.S. has on average among the world's lowest tariffs on agricultural products. Other countries such as Korea, Norway, Pakistan and India have much higher tariffs. Thus, across-the-board tariff reductions will help U.S. producers. We must also negotiate improved rules for tariff rate quotas and make sure countries cannot fall back on restrictive administrative procedures.

-- Export subsidies. We must build on the progress made thus far in reducing and eventually eliminating export subsidies. One need only look at the amount of money budgeted for exports subsidies in the EU -- just over $7 billion in 1997 -- to realize that the subsidy threat to U.S. exports has not vanished. We need further disciplines on export subsidies. This is vital if we are to ensure fairness for American farmers and ranchers.

-- Transparency and improved disciplines on State Trading Enterprises: The United States has much to gain from disciplining STEs. STEs can distort trade and they frequently operate behind a veil of secrecy. They allow some countries to undercut US exports into third markets and restrict imports. We intend to build upon our ongoing efforts in the WTO's Working Group on STEs so that we will be ready to move aggressively in this area when negotiations begin.

-- Biotechnology. The United States leads in developing genetically modified organisms (GMO's) that hold tremendous promise for global consumers and producers. The world's population grows about 2 percent annually; and thus it has 80 million more mouths to feed each year. That requires more production from every acre, and biotechnology helps our farmers and ranchers provide it. But other countries threaten to adopt policies regarding importation and planting of GMO's and the labeling of products containing GMO's that are not based on scientifically-justified principles. As the world's largest and most efficient agricultural producer, our farmers and ranchers must be able to use the technology which will allow them to be more productive.

In Geneva, we are using the WTO's Committee on Agriculture as the vehicle for moving toward consensus on an agenda of issues for the 1999 negotiations.

Here in Washington, we are beginning to gather the views of agriculture producer and commodity groups, private sector companies, academics, Congress and others to identify the goals, objectives, and negotiating positions for U.S. agriculture. We have begun a series of meetings to draw on the accumulated knowledge of government and university researchers. We will then reach out to individuals and groups in the private sector to gain the benefits of their experience.

The advice and counsel of non-governmental groups will be critical for identifying objectives for the negotiations. The Administration benefits from the advice received from the statutorily mandated private sector advisory committees that were established pursuant by the Trade Act of 1974. We expect, in addition, to undertake a full range of consultations, including a solicitation of public comment.

I would like to note at this point, Mr. Chairman, that our agenda for 1999 will benefit all Americans. We intend that the global agricultural negotiations will add to a long string of multilateral agreements that have resulted in a progressively more liberal world trading environment for goods, services, and investment. That is a world in which consumers have more choice, and therefore more freedom. In which human, financial, and natural resources are used more efficiently and productively with gains to all rather than a select few. And in which society prospers while hunger diminishes.

U.S. Agriculture Must Stay Involved in World Trade

Mr. Chairman, let me say in conclusion that the price of inaction would be very high.

Our major competitors -- the EU, Canada, Australia, Brazil and Argentina -- are developing foreign markets, often through preferential trade agreements that go around us, rather than include us. And thus we risk being placed on the sidelines of global farm trade as our competitors write the rules without us and secure markets at our expense.

Nowhere does the rush to expand trade agreements affect U.S. agriculture more than in Latin America. The danger of inaction in Latin America, and other regions where free trade agreements are being signed, is lost opportunity for U.S. agriculture. We risk losing out to others in our own neighborhood -- and not because they are more efficient producers, but because they are party to trade agreements that put the United States at a commercial disadvantage. That is why the upcoming negotiations for a Free Trade Area of the Americas are so important. We will begin talks on agriculture this summer with the goal of improving access for U.S. producers and building momentum for the 1999 global agricultural negotiations.

The problems we face today in agricultural trade are clear: high tariffs, phony science, and preferential treatment enjoyed by other countries. These things reduce farm income. And the solution is to be very, very aggressive in using all of the tools at our disposal to crack open what is clearly a world of opportunity. And the result will be more prosperous farms, higher standards of living in rural counties, and a stronger American economy generally.

As the President said in his State of the Union Address:

"As we enter the 21st century, the global economy requires us to seek opportunity not just at home, but in all the markets of the world. We must shape this global economy, not shrink from it."

As the President has consistently stated, fast track is an important trade policy tool and the Administration is committed to securing fast track authority. We intend to continue to work with the Congress on a bi-partisan basis to build the necessary consensus to assure passage. At the same time, we are going to move ahead with a comprehensive, entrepreneurial trade agenda that seeks new opportunities for U.S. exporters around the world.

I look forward to working with you, Mr. Chairman, members of the Committee, and with the agriculture community, to get the job done.

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