*EPF407 04/22/2004
Transcript: China To Resume Trade in Some U.S. Beef Products, Biotech Corn
(Veneman, Zoellick April 21 media availability) (3900)

China has agreed to resume trade in some beef products and biotech corn with the United States, Secretary of Agriculture Ann M. Veneman told the press April 21.

China had closed its markets to U.S. beef and beef products after a scare that bovine spongiform encephalopathy (BSE), or "mad cow" disease, had infected U.S. herds. But after talks with Chinese Vice Premier Wu Yi, who is now visiting Washington, Veneman said that China will resume some trade in embryos, semen and tallow. "We will begin further discussions among our experts to enable normal trade to resume on other beef and beef products," Veneman said.

The U.S. side, Veneman said, "pointed out the amelioration measures that we have implemented fully comply with the international guidelines and ensure that U.S. beef is safe."

Veneman said she hopes China would soon join the OIE, or World Organization for Animal Health. With 166 member nations, the OIE sets international standards governing sanitary rules for international trade in animals and animal products.

China, she said, has "agreed to become more active in going to meetings at the OIE with an eventual, I believe, view toward becoming a member."

According to Veneman, "there's been a recognition through our discussions over the past few days that it's important to be proactive in these international organizations because I think we've agreed that we want to base our regulations and our requirements on sound science and that the international organizations play a key role in that regard."

Estimates show that consumption of beef in China has increased more than 30 percent in the last five years. "Clearly, China is a very important export market for American agriculture and it will continue to be so in the future," Veneman said.

The secretary also announced that China has approved an additional four biotech corn varieties and seven biotech canola varieties. She added that China's approval remains outstanding on two more corn varieties, which it will review in May. "Approval of these varieties is critical to ensure that our exports are not restricted later in the year," Veneman said.

Veneman said the two sides also discussed avian influenza (AI), which has impacted both countries and resulted in the ban of U.S. poultry in China.

"Our sales of poultry items has reached $100 million prior to the ban," Veneman said. "We are now in the process of working toward mutual recognition of AI-free status."

Following is the U.S. Department of Agriculture's transcript of the media availability:

(begin transcript)

Remarks at media availability regarding
The U.S.-China Joint Commission on Commerce and Trade with
Agriculture Secretary Ann M. Veneman and
USTR Ambassador Robert T. Zoellick
Washington D.C.
April 21, 2004

SECRETARY VENEMAN: Well, good afternoon, and thank you all for being here today. I'm very pleased at the turnout we have here today, and I'm also very pleased to be joined by Ambassador Zoellick with us this afternoon.

As you know, we work very, very closely together, and we truly appreciate the very cooperative working relationship that we have on so many issues together.

Today we have both been participating in the U.S. China Joint Commission on Commerce and Trade, or the JCCT. And this committee is co-chaired by Secretary Evans and Ambassador Zoellick, and representing the Chinese side has been Vice Premier Wu Yi.

We know that a number of you who are here today have been following the progress of these discussions, and we particularly wanted an opportunity to have this particular briefing to update you on some of the food and agriculture issues, the trade as well as some of the issues that are being discussed.

Let me begin by saying that we have developed a very significant trading relationship in food and agriculture with China. When China joined the WTO in late 2001 they made a very large number of commitments, and we believe they've done an admirable job in complying with many of their accession obligations.

I am told that this process involved the changing of some 3,000 Chinese laws and regulations, and the Chinese have done this in just three years.

Since China joined the WTO in December of 2001, it has become the fifth largest market for U.S. agricultural products. It is estimated that exports to China will total nearly 10 percent of our overall agricultural exports. The increase in agricultural trade since 2001 has been dramatic. We estimate that U.S. exports to China have tripled in just two years. Since 2001 we have seen impressive growth in demand from China for products such as soybeans, cotton, hides and skins, and more recently wheat.

Joining us today are John Gordley from the American Soybean Association, Allen Terhaar from the National Cotton Council of America, Jim Hodges from the U.S. Hide, Skins and Leather Association; and I don't see Alan Tracy -- oh, and Alan Tracy from U.S. Wheat Associates.

I want to tell you that we truly appreciate you being here with us today.

And in recent months China has committed to purchase nearly 3 million tons of U.S. wheat, 1.4 million tons this year, and 1.6 million in the next marketing year. Those sales are valued at almost $500 million compared to $17 million in wheat sales in 2001.

Our increasing farm exports to China are not surprising. China's economic growth has consistently been the strongest in Asia with annual average growth rates around 8 percent over the last decade.

With a large and growing middle class, Chinese society is already taking advantage of its rising prosperity. We often say that as incomes rise in developing countries, the demand for more and greater quality food and agriculture exports or products is one of the first things that you see in terms of increasing incomes.

It is estimated that consumption of beef alone has increased more than 30 percent just in the last five years. Clearly, China is a very important export market for American agriculture and it will continue to be so in the future.

However, we will not take anything for granted. And USDA will work closely with all sectors of American agriculture to ensure that they are ready to supply high quality products at competitive prices in the Chinese market.

The accession of China to the WTO was a major milestone in the course of economic development. And Ambassador Zoellick and I were both in Doha, Qatar when that happened in 2001. We have high expectations for China to live up to their accession commitments, which cut across most sectors of their economy.

We consider their commitments under the SPS Agreement or the Sanitary and Phytosanitary Agreement as some of the most important in the agricultural area, and we are committed to working closely with the Chinese on their implementation.

One of the fundamental principles of the SPS Agreement is the use of sound science and international standards in developing import regulations. Earlier this week on Monday I met with Minister Li of China's State Administration for Quality Supervision Inspection and Quarantine. This is an agency of the Chinese government that roughly corresponds in responsibility to our Animal Plant Health Inspection Service and our Food Safety Inspection Service.

So we have a number of issues that we discussed with this ministry, along with the relationship that we have with a number of other ministries in China including the Agriculture Ministry.

During this meeting we held frank and productive talks on a whole host of issues ranging from meat and poultry market access to continued implementation of the accession agreement as well as some of the issues for products that the Chinese are interested in.

We also discussed our mutual desire for greater technical cooperation as a way to improve our understanding of each other's systems and how to make them more compatible. We discussed the ban on U.S. beef and related products stemming from the BSE (Bovine Spongiform Encephalopathy, or "mad cow" disease) issue, and we pointed out the amelioration measures that we have implemented fully comply with the international guidelines and ensure that U.S. beef is safe.

We have thus requested that China open its market to U.S. beef and beef products. I am pleased to report that China will resume some trade-- trade in embryos, semen and tallow -- and that we will begin further discussions among our experts to enable normal trade to resume on other beef and beef products.

We also discussed avian influenza (AI) and the impact in both of our countries of this disease, and the fact that our poultry is banned in China because of this find in the United States, and we requested that we see a resumption of poultry trade.

Our sales of poultry items has reached $100 million prior to the ban. We are now in the process of working toward mutual recognition of AI-free status.

Also with regard to biotechnology, as you know this has been an issue that we have been discussing between our countries for some time. It was an issue when I was in China in 2002 that we had discussions across a number of ministries, and we decided as a result of that meeting to establish a joint U.S.-China working group on biotechnology.

As a result we have seen cooperation in research, we've seen cooperation in a number of areas, and we have requested approval of additional biotech varieties.

We are pleased to report that China has approved an additional four biotech corn varieties and seven biotech canola varieties, approval remains outstanding on two more corn varieties, and we have a commitment from the Chinese that these will be reviewed in May.

Approval of these varieties is critical to ensure that our exports are not restricted later in the year.

In addition, we've had difficulty since the WTO accession with tariff rate quotas, which were discussed in the context of these meetings that we've had over the last couple of days. I'm also pleased to report that the Chinese have agreed to provide the recipient names of the TRQ holder companies upon written request. So we appreciate that effort as well.

We look forward to continuing our discussions on a whole range of issues. The meeting today and the visit to the United States by Vice Premier Wu and her delegation, including Minister Li, have been a milestone in our bilateral trade.

I believe she said that 12 different ministries were represented today from China, and that issues cross many of the jurisdictional issues that we have here at USDA and a number hat Ambassador Zoellick and Secretary Evans are talking about on a whole range of issues.

This evening Minister Li and I will sign a letter of intent to develop a Memorandum of Understanding that can provide a framework to facilitate our work together on particularly sanitary and phytosanitary issues. It will involve information exchanges on relevant laws and regulations, personnel exchanges at the technical level, seminars and training, and cooperative research on common problems such as BSE and AI.

This is in addition to the cooperative agreement that I signed some months ago with Agriculture Minister Du in China, and we also have many cooperative activities that we are engaged in in the areas of research and technology.

In addition to the high level discussions on important bilateral trade issues, the meetings today are strengthening both our personal and commercial relationships. This meeting could not have come at a more important time.

Our trading relationship is strong, it's mature, and it's growing. Today, in the spirit of that cooperation, we began to lay the foundations for the future. On behalf of USDA I look forward to our continued cooperation and discussions with China.

I will now turn the podium over to my good friend Bob Zoellick.

AMBASSADOR ROBERT ZOELLICK: Well, as Secretary Veneman mentioned, we are actually in the midst of these discussions with Chinese right now as part of the JCC team, and we'll have to get back soon. But the two of us wanted to take an opportunity to brief you even if rather quickly because American agriculture has been one of the great success stories of the U.S.-China trading relationship.

And I want to start out by thanking the Secretary for her leadership, J.B. Penn who just returned from China working on some of these issues, and I'm delighted we have a number of the different commodity groups here that we work with hand and glove. And as you could see, actually one of our advisory committee meetings recently -- even though we've had a great boost in cotton sales, the Cotton Council raised some of the questions we had on how the tariff rate quotas are cooperating. And you can see J.B. and my colleague Josette Shiner, the person on this issue, and we think we've made some other headway in getting those lists for you.

So while a lot of what you see are the big numbers, we know there's a lot of detail to make this work. And we really appreciate working together with you.

As Secretary Veneman said, frankly today there are few relationships in the world that are as important to you farmers and ranchers as our trade ties with China. Since China joined the WTO it has become America's fifth largest agricultural export market. In 2003 agricultural exports to China accounted for almost 10 percent of U.S. agricultural exports, and that's up from only 2 percent as recently as 1999.

Last year the United States by calendar year number enjoyed a $4.1 billion agriculture surplus with China, with total exports of about $5.4 billion, a record amount.

And that relationship continues to grow. In the first two months of 2004 agricultural exports to China grew 18 percent compared with the same period last year. At that pace, we hope that 2004 will be another record year for American agriculture.

China has grown to be the single most important cotton market for U.S. farmers, buying 23 percent of all U.S. cotton exports in 2003. Soybean sales last year were $2.9 billion; that's 36 percent of all of America's soybean exports. And growth in sales of our third most important agricultural export, hides and skins, grew 370 percent to about one-half of one billion dollars. And as Ann mentioned, we're pleased the Wheat Associates are here because with about half a billion dollars of extra wheat being committed, we hope to get those numbers up as well.

Now, these export numbers aren't an accident. We have worked hard to remove the barriers that stand in the way of our agricultural products. And spurred by these efforts, China has taken steps to try to deal with some of the systemic problems with tariff rate quotas or for the bulk agriculture commodities.

We've made some good headway on the biotech area, and all these together try to I think produce the record sales that we've had. And I'm very pleased, coming out of JB's most recent trip that I think we're even going to get more news on the biotech front.

For those of you that have worked so hard with us about this you can imagine the benefit it has with some others around the world where we can show the U.S.-China relationship is making great headway in biotech for both developed and developing countries.

So we're proud of the work that we've done on behalf of U.S. farmers and ranchers and agribusinesses. And, frankly, all of you should be very proud too because without having the most productive workers and the highest quality products, our efforts wouldn't be nearly as successful.

So I want to salute the American farm community for their success in China. And again, I'd like to thank our colleagues, in particular JB and my deputy, Josette Shiner, for their work on behalf of America's farmers and ranchers.

So thank you for coming, and thank you for your continued support.

And we have time for a few questions if you'd like.

QUESTION: Pete Casper from Inside U.S.-China Trade.

I just wanted to ask, speaking of TRQs, you'd mentioned one of the three issues that I think are outstanding. The other ones being China's -- it's still apparently splitting TRQ among sort of domestic processors versus processors for reexport. And also there's another issue on whether they're distributing in commercial viable quantities. The transparency issue is certainly progress. Can you cite any progress in those other two issues?

AMBASSADOR ZOELLICK: I read something that you just came back with, JB. What's your --"

J. B. PENN: We think they're going to make the overall process more transparent. But as to the specifics of the commercially viable quantities, we didn't discuss that explicitly. But I think that we have a commitment from them to make the whole process more transparent."

AMBASSADOR ZOELLICK: When Al Johnson was there recently he talked about these same issues. And I think they're supposed to be putting out part of this is for the next year. So part of it, we'll have to see how they follow through on it. But so far everything -- when we bring it to their attention and work with them, we've had some pretty good response. Oh, and by the way, the other major issue you mentioned TRQs, but biotech was one we pushed very heavily on to.

QUESTION: Ira Dreyfus, AP.

Beef tallow and hides, or semen, is probably not the biggest part of U.S. exports to China. I'm curious to see exactly how much it is.

And also I'm curious to see, since these things are not notably tied to BSE, what the particular hang-ups right now that the Chinese have regarding BSE are."

SEC. VENEMAN: Well, I think you've raised a very important question. I don't have the numbers available, but we'll get them to you. But these are items that they do buy from us and that the OIE does not recognize as at-risk items. And so basically they were issues that the Chinese agreed that they would open up the market.

They closed the market to virtually all beef and beef products and materials related.

One of the things that we have had I think some very good discussion with the Chinese about is, participation in the OIE. They are not members of the OIE, which is the international standard-setting group. They have agreed to become more active in going to meetings at the OIE with an eventual, I believe, view toward becoming a member.

And I think there's been a recognition through our discussions over the past few days that it's important to be proactive in these international organizations because I think we've agreed that we want to base our regulations and our requirements on sound science and that the international organizations play a key role in that regard."

AMBASSADOR ZOELLICK: Let me just add to a point on this. As you know, Secretary Veneman and I work hand and glove to first get open the Mexican market, which is about $750 million. And as you know, that was done in two parts starting with the boxed beef and then the rest of the products. As we all know, Asia was going to be a harder nut to crack. We've been focusing very heavily on Japan. It's an item that the Vice President raised when he was there recently. And the Secretary's strategy, with, we've worked very closely with her on, is to say, we know this is a sensitive issue, but let's follow the international standards regime. And that was the heart of her letter to her Japanese counterparts.

Well, it's a similar logic in China. And the point that the Secretary just mentioned is one that I really want to emphasize. You see this across the board with China on trade topics. Remember, they just came into the WTO.

I mean, when I first visited China in 1980 when I was living in Hong Kong, they've come a very long way. But they are just getting into some of these international organizations and getting comfortable with them. It's actually an excellent way to work with China because China's much more comfortable when it can take part in international standard setting. We're dealing with this in some of the high tech areas as well.

So one way that we can, frankly, hope that not only for this issue, but avian influenza and the issues that come in advance, is to try to always represent American agriculture wants to take care of people's health and safety, but we do that according to international standards so people don't take protectionist responses.

So I think you can see this as a first step. But a lot of our focus right now is on Japan because that's a big market for us.

SEC. VENEMAN: Bill?

QUESTION: Thank you, Madam Secretary. Bill Tomson, Oster Dow Jones.

I just want to confirm something. China has not agreed, or refused to regionalize their poultry ban because of AI. In other words --"

SEC. VENEMAN: We are still in discussions about the AI, and there are some additional scientific exchanges that need to take place before we have a final agreement on that. So I don't have anything to announce on that now.

QUESTION: Rick Cowan from Reuters.

Just a few days ago on Friday you seemed to be leaving, Secretary Penn seemed to be giving indications that there would be movement today on poultry and more movement on beef. Was it a disappointment, the Chinese response today? And does it at all undercut the negotiations in Japan this weekend?

SEC. VENEMAN: I wouldn't call it a disappointment, no. I think that we've had very, very productive discussions with the Chinese on these issues. They, I think the discussions all along on BSE, they really, I don't think, have a scientific base upon which to evaluate the BSE issue; and they're following a lot of other countries in doing the bans.

They want some additional scientific evidence. I think it will help that we are going to be dealing with them with technical teams, and that's one of the things we agreed to is that we will have a series of technical exchanges.

As we went through these issues on Monday, one of the things that Minister Li and I agreed to was that we have got to keep the technical teams talking to each other; we've got to keep them on a schedule. And so we've asked them that the first item of business is to have a schedule upon which they're going to discuss all these things and get them resolved -- because it seems as if we have many of these issues that go on needing more science or discussions for a long time.

And so we want to bring them to a conclusion because it does impact trade.

But I'm hopeful that we can quickly have scientific discussions which will bring additional market openings in these areas.

(end transcript)

(Distributed by the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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