[Senate Hearing 106-754]
[From the U.S. Government Publishing Office]
S. Hrg. 106-754
CHINA ACCESSION TO THE WORLD TRADE ORGANIZATION
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HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
ON
CHINA ACCESSION TO THE WORLD TRADE ORGANIZATION
__________
MARCH 1, 2000
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
U.S. GOVERNMENT PRINTING OFFICE
67-570 CC WASHINGTON : 2000
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
?
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
RICHARD G. LUGAR, Indiana, Chairman
JESSE HELMS, North Carolina TOM HARKIN, Iowa
THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota
PAUL COVERDELL, Georgia THOMAS A. DASCHLE, South Dakota
PAT ROBERTS, Kansas MAX BAUCUS, Montana
PETER G. FITZGERALD, Illinois J. ROBERT KERREY, Nebraska
CHARLES E. GRASSLEY, Iowa TIM JOHNSON, South Dakota
LARRY E. CRAIG, Idaho BLANCHE L. LINCOLN, Arkansas
RICK SANTORUM, Pennsylvania
Keith Luse, Staff Director
David L. Johnson, Chief Counsel
Robert E. Sturm, Chief Clerk
Mark Halverson, Staff Director for the Minority
(ii)
C O N T E N T S
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Page
Hearing:
Wednesday, March 1, 2000, China Accession To The World Trade
Organization................................................... 1
Appendix:
Wednesday, March 1, 2000......................................... 47
Document(s) submitted for the record:
Wednesday, March 1, 2000......................................... 93
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Wednesday, March 1, 2000
STATEMENTS PRESENTED BY SENATORS
Lugar, Hon. Richard G., a U.S. Senator from Indiana, Chairman,
Committee on Agriculture, Nutrition, and Forestry.............. 1
Cochran, Hon. Thad, a U.S. Senator from Mississippi.............. 43
McConnell, Hon. Mitch, a U.S. Senator from Kentucky.............. 13
Roberts, Hon. Pat, a U.S. Senator from Kansas.................... 4
Fitzgerald, Hon. Peter G., a U.S. Senator from Illinois.......... 28
Grassley, Hon. Charles E., a U.S. Senator from Iowa.............. 24
Craig, Hon. Larry E., a U.S. Senator from Idaho.................. 22
Conrad, Hon. Kent, a U.S. Senator from North Dakota.............. 29
Baucus, Hon. Max, a U.S. Senator from Montana.................... 6
Johnson, Hon. Tim, a U.S. Senator from South Dakota.............. 14
Lincoln, Hon. Blanche L., a U.S. Senator from Arkansas........... 8
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WITNESSES
Panel I
Glickman, Hon. Dan, Secretary of Agriculture, U.S. Department of
Agriculture, Washington, DC.................................... 10
Scher, Hon. Peter, Special Ambassador for Agriculture, Office of
the U.S. Trade Representative, Washington, DC.................. 14
Panel II
Burrack, Tim, on behalf of the Nation Corn Growers Association
and American Soybean Association, Arlington, Iowa.............. 42
Hardin, John Jr., on behalf of the National Pork Producers
Council, Danville, Indiana..................................... 36
Kress, Jerry, on behalf of the National Association of Wheat
Growers, Idaho Wheat Commission, and the Wheat Export Trade
Education Committee, American Falls, Idaho..................... 34
Moore, Sam, President, Kentucky Farm Bureau, on behalf of the
American Farm Bureau Federation, Louisville, Kentucky.......... 32
Suber, Tom, Executive Director, U.S. Dairy Export Council, on
behalf of the Dairy export Council, Arlington, Virginia........ 38
Wootton, Director of Federal Government Affairs, on behalf of
Sunkist Growers, Washington, DC................................ 40
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APPENDIX
Prepared Statements:
Lugar, Hon. Richard G........................................ 48
Craig, Hon. Larry E.......................................... 52
Johnson, Hon. Tim............................................ 50
Burrack, Tim................................................. 89
Glickman, Dan................................................ 54
Hardin, John, Jr............................................. 72
Kress, Jerry................................................. 67
Moore, Sam................................................... 62
Scher, Peter................................................. 58
Suber, Thomas M.............................................. 79
Wootton, Michael............................................. 86
Document(s) submitted for the record:
WTO Accession Agreement, Charts, Fact sheets, and excerpts
from FAS online, submitted by Tim Burrack.................. 94
U.S. Courts `missed opportunity on China,' warns Suber,
statement submitted by Thomas Suber........................ 193
Letter to Hon. William J. Clinton, from Hon. Kent Conrad..... 187
Letter To Hon. William J. Clinton, from Hon. Tim Johnson..... 178
Letter to Hon. William J. Clinton, from Hon. Richard J.
Durbin..................................................... 180
Letter to Hon. William J. Clinton, from Hon. Connie Mack..... 181
Letter to Hon. William J. Clinton, from Hon. Don Nickles..... 182
Letter to Constituents on decision to vote for PNTR with
China, submitted by Hon. Greg Ganske....................... 183
Letter to His Excellency Li Zhao Xing, from The U.S. Senate.. 187
Letter to His Excellency Li Zhao Xing, from The House of
Representatives............................................ 195
``Permanent MFN for China Will Do Nothing for America's
Farmers,'' submitted by Citizens Trade Campaign............ 197
Testimony of the Fertilizer Institute........................ 199
CHINA ACCESSION TO THE WORLD TRADE ORGANIZATION
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WEDNESDAY, MARCH 1, 2000
U.S. Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC.
The Committee met, pursuant to notice, at 9:02 a.m., in
room 192, Dirksen Senate Office Building, Hon. Richard G.
Lugar, (Chairman of the Committee), presiding.
Present or submitting a statement: Senators Lugar, Cochran,
McConnell, Roberts, Fitzgerald, Grassley, Craig, Conrad,
Baucus, Johnson, and Lincoln.
OPENING STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR FROM
IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION, AND
FORESTRY
The Chairman. This hearing of the Senate Agriculture
Committee is called to order.
In recent months we have heard much about China and, in
particular, about the proposed terms of China's accession to
membership in the World Trade Organization. The press accounts
of the bilateral agreement reached between the United States
and China, as well as the summary sheets issued by the
administration, suggest this could be one of the most important
international agreements ever for United States agriculture,
especially now that American farmers have been hit for several
year with slack demand and falling prices.
China's proposed accession agreement is also a watershed
agreement for the world trading system. The World Trade
Organization [WTO] and its predecessor institution, the General
Agreement on Tariffs and Trade, GATT, have provided the
framework for world trade since 1947. Over the past 50-years,
the initial GATT of about 40-countries has grown into the WTO
of nearly 140-nations. In all that time, however, China, the
most populous Nation in the world, has been neither a GATT
contracting party nor a WTO member. Ironically, the World Trade
Organization does not yet include the country with one-quarter
of the world's population.
There is, of course, good reason why China has historically
not been a part of the multilateral trading system. The GATT
and the WTO agreements were developed as rules for trade among
market economies. GATT/WTO rules, to as great an extent as
possible, attempt to ensure that trade is governed by
competition and market forces. China's centrally planned and
controlled economy operates on a different and incompatible set
of principles. As a result, since 1949 China has been sitting
on the sidelines of a multilateral trading system.
Over the past decade, as other centrally planned economies
have collapsed, Chinese leadership noted the tremendous
inefficiencies of the system and, however modestly, began to
liberalize the Chinese economy. And since the World Trade
Organization came into formal existence with the conclusion of
the Uruguay Round, the Chinese have been attempting to
negotiate their accession to the multilateral trade system.
Although China has not been a member of the GATT or WTO up
to now, it has benefitted from the multilateral trade regime in
a number of ways. Most importantly, the United States and a
number of other countries have extended to China ``most favored
nation'' status, meaning that China has access to our market on
the same terms we extend to other WTO nations. This is a
considerable privilege and one that China knows has great
value. The United States now extends Most-favored-nation [MFN]
status to China on a year-to-year basis. China seeks, as a part
of its WTO accession, permanent MFN status, or as it has come
to be known, a permanent normal trading relation [PNTR], the
PNTR relationship.
Any country that enters the WTO and obtains MFN status
automatically secures the market access benefits that have been
so arduously negotiated by the GATT and the WTO members in the
previous eight negotiating rounds over more than 50-years. It
has been asserted, inaccurately, in my view, that in the
bilateral deal negotiated between the United States and China,
the United States gains everything and gives nothing. This is
more than a little misleading. What the United States gives
and, more importantly, what China gains is permanent MFN access
to our market and to those of other WTO trading partners. And
to gain this privilege, China should be willing to give value
in return.
The good news is that China appears to have done so in a
bilateral agreement that was struck last spring and finally
affirmed between the Governments last fall prior to the Seattle
Ministerial. The agreement appears to offer significant market
access opportunity for the United States and has widespread
support in our business community in general and the
agriculture community in particular. The package includes
significant tariff reductions on a number of agricultural
products in which the United States is highly competitive, such
as citrus fruits, stone fruits, raisins, shell nuts, canned
sweet corn, soups, barley malt, beef, pork, chicken and turkey.
And China also commits to creating significant tariff rate
quotas in the major grain and oilseed sectors--eventually, 9.6-
million metric tons of wheat, 7.2-million metric tons of corn
and 5.3-million metric tons of rice. These Tariff-rate quota
[TRQ] amounts are many times the level of China's current
imports of these commodities. China has also agreed to forego
the use of export subsidies, to discipline the use of domestic
support, and to abide by international rules on sanitary and
phytosanitary regulations.
On paper, this agreement looks very promising and the
Office of the Trade Representative and the Department of
Agriculture are to be commended for their work in achieving
these impressive results. Senators will, of course, want to
learn more about the specifics of the agreement. For example,
the large tariff cuts and the very generous tariff rate quota
levels specified in the agreement would be particularly
significant for trade if China were a market economy with a
vibrant and competitive private sector. The question is how
significant for trade these will be in a situation in which
access to the Chinese market is dominated by a state importing
agency.
Apparently, China has agreed to liberalize its import
regime, to begin to develop a system of private trading rights,
and to reallocate unused TRQ amounts to ensure full access. The
specifics of these arrangements remain somewhat sketchy and we
will be interested to hear more detail on these types of
implementations and issues from administration witnesses.
Today we will be privileged to hear from the Secretary of
Agriculture Dan Glickman and from Ambassador Peter Scher. I
welcome both of these gentlemen back to the Committee and thank
them for being with us today and for being so forthcoming on
all of these trade negotiations in the past. We look forward to
their testimony.
I would note that the Committee also invited the Secretary
of Commerce, Mr. Daley, or a senior policy official of his
choice to testify at the hearing. We thought this would be
appropriate since the President has indicated that the issue of
China WTO accession is the priority trade issue for his
administration this year and because the President has
designated Secretary Daley as the lead spokesperson on this
issue. Secretary Daley's office indicated he had other more
pressing, business today and his office also declined to
designate a substitute witness. And thus we are sorry the
Commerce Department will not be represented at the hearing, in
light of the importance that the President has placed upon the
issue.
Nonetheless, we are delighted to have the witnesses that I
have mentioned and we will ask them and a panel of witnesses
representing a broad array of interests in the farming and
agribusiness communities to testify as a second panel. We will
have testimony from the American Farm Bureau Federation, as
well as representatives of the grain, meat, dairy and citrus
sectors.
I have noted on numerous occasions in this committee the
vital role that exports play today in the economic well-being
of American farmers. Nearly one-third of all American farm
acres are planted for the export market and when export
opportunities decline, as they have in the recent several years
because of the Asian financial crisis, farm prices and farm
income suffer.
I continuously urge the administration to assist our
farmers in opening and competing for export markets. It is
undeniable that the prosperity of the American farm sector
depends upon it. China, a market with a quarter of the world's
population, holds unparalleled promise as an export market for
high-quality U.S. food, feed and fiber. We look forward to
learning today more about China's proposed terms of accession
to the WTO and about what it will mean for America's farmers.
[The prepared statement of Senator Lugar can be found in
the appendix on page 48.]
At this juncture I would like to recognize my colleague,
Senator Roberts, if he has an opening comment.
STATEMENT OF HON. PAT ROBERTS, A U.S. SENATOR FROM KANSAS
Senator Roberts. Thank you, Mr. Chairman.
First I would like to associate myself with your remarks
and let the record show that the Chairman has long been a
champion and an eloquent spokesman and a common sense
spokesman, as well, for a consistent and aggressive trade and
export policy. I might add that the Chairman also has a great
deal of expertise and also recognition in foreign affairs and
national security.
And the one element of this that I would like to stress
prior to getting into my opening remarks is that in 1996 there
was a commission formed on what America's vital national
interests were. And interestingly enough, a bipartisan group
and a very heavyweight group indicated the number one issue of
concern was China's entree onto the world stage.
And not only is this a trade matter; not only is this a
matter in regard to our export policy and the WTO and China;
it's a matter of national security. As the distinguished
chairman has pointed out, our choice is whether or not the
remain engaged with China, despite all of the challenges we
have with that country or not.
So consequently, I think it is very important and I credit
the Chairman for his leadership on both accounts.
I am delighted to see my colleague and friend, Senator
Baucus, here. We wrote a letter recently to the Chinese urging
them to go ahead with the previous agreement in regard to the
purchase of U.S. wheat. And as of Monday, there was an
announcement in that regard, Max, and I think we both would
like to take a little pride in that effort, although 53 other
Senators signed the letter. And I think it is 50,000-tons, as I
recall, not enough hard red winter but some soft wheat and we
will quarrel about that on down the road.
Mr. Chairman, the Marines have landed in Hart 216 and as a
member of the Senate Armed Services Committee, I am going to
have to leave about 9:30 or 9:40. I do not want to be late for
the Commandant. But having said that, I am going to just
basically try to highlight here the statement that I have.
I want to welcome my old friend and my fellow Kansan back
to Capitol Hill. Dan, I appreciate all the hard work you do in
behalf of our farmers and particularly in respect to today's
subject matter, and that is in regard to international trade in
China. I also want to welcome our ambassador, as well.
And I want to thank you and express my sincere appreciation
for your recent comments. You said this: ``Winning
congressional approval of PNTR''--that is the acronym--``for
China will be the number one issue for agriculture in the year
2000.''
You are on point. You are mounting the parapets. You are
waving the flag. And I guess in Marine language it is two up,
one back and feed them hot chow.
However, let me point out that 3-months ago you said a very
similar thing in Seattle. And I credit you and the ambassador
and also our trade ambassador, and I sat in the Seattle hotel
ballroom--we did not have much alternative; we were locked in--
and I listened as the Secretary posed a similar question to the
one we are discussing today. Secretary Glickman said, ``What
would be the consequences if, after all this preparation, hard
work and negotiations, we made no progress and we failed?''
What if I had to say that? What if Senator Harkin, who had
just introduced our Secretary, had to go back to Iowa or, for
that matter, Pat Roberts back to Kansas or Senator Baucus back
to Montana? What if we had to go back and say that? I can tell
you that is not an option. And Dan worked overtime; so did
Charlene; so did everybody that was there at Seattle.
Unfortunately, despite the untiring efforts on the part of our
negotiators, the Seattle Round turned into a teargas round, Mr.
Chairman, and little progress and sent a signal, I think,
around the world that was most unfortunate.
I am not trying to assess any kind of responsibility for
that. I could but I will not. I just think that was most
unfortunate.
Well, now we have another shot. Now we have another chance,
it seems to me, Mr. Chairman. We have leadership and commitment
from most people in this room--a lot of witnesses, other
members--Senator Baucus and I have been working on this for
over 18-months--all the companies and the businesses and the
constituencies.
The question that I have to raise is the similar question
raised by Senator Moynihan last week when he said, and I am
quoting here, ``This is a very worrisome moment. It is a moment
of peril. We had reason to believe that normal trade relations
with China would be agreed to in this Congress.'' They were
going to report that bill in regard to the Committee on Finance
and he was worried in regard to leadership from the
administration and worried about some slippage in the Congress.
I just spent the morning earlier today over in the House
trying to assess this situation with the staff of the House Ag
Committee and members over there. I would report to you, Mr.
Chairman, I think it is a little iffy and I am very worried
about this. In the Senate we had all thought that we had the
votes. We have not had a whip check.
And I will tell you that some of the Senators that I know
and I trust and whose advice and counsel I trust, who are free-
traders, they are worried about all the challenges we have with
China. I am not going to go into the litany of them. I know
that. But I am concerned about this. And unless we have a full
and concerted, full-court press led by the Secretary and
certainly those of us that are involved and the President and,
more particularly, the Vice President of the United States, I
think we are in trouble. And I sure do not want to bring this
up and have it lost. And I am just on the cusp now.
I think this is so terribly important for us. We have a lot
of discussion about agriculture program policy. We must have
the freedom to market. This is a crossroads issue. So it seems
to me that with a lot of frustration and concern, I want to
thank the Secretary for leading point and I am going to be
riding with him. It is just like when I used to take him to
Dodge City. I would stand there right beside him as his shotgun
rider. Well, we are going to have to get the stage working,
Dan.
I would suggest to you, after March 7, we can get the Vice
President on the White House lawn with the President and you
and the Vice President and Max and me and we will do just like
we did in the House, Jim, when I used to play basketball with
the Vice President. He would shoot those threes and he would
make a couple but he would not go underneath the backboard,
would not do the rebounding, would not do the elbow work. He
has to come down and do that, Dan. Otherwise, I think we are
going to be in a world of trouble.
I am not trying to put you on the spot. I am just trying to
tell you this thing is an iffy situation right now and it
should not be. Seattle should not have been and this should not
be.
So I welcome your support. Let's see. You ride point, I
will ride drag, and we will get the job done.
The Chairman. Thank you very much, Senator Roberts. You
have already made a substantial contribution to the hearing.
Let me say that Senator Harkin would like to have made one but
he is involved in the education bill mark-up at this moment and
is likely to be there for quite a while, I am advised.
I would like to call now upon Senator Baucus, who has been
commended, and correctly so, for his leadership.
STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM MONTANA
Senator Baucus. Thank you, Mr. Chairman. Do I have to
follow Senator Roberts?
Mr. Chairman, Mr. Secretary, Mr. Ambassador, I think we all
know the main point that Senator Roberts said is pretty
accurate; namely, time is running out. This is so important,
this agreement, that we all of us have to burn some more
midnight oil and go the extra mile if we are going to pass it
this year.
My view is that we have several months yet. Once we get
into June, close to the presidential conventions and elections,
it is going to be more difficult. I also believe that the
Chinese white paper complicated matters somewhat significantly,
but that is just a complication. It is not a huge hurdle. There
have been other developments across the Pacific between Taiwan
and China--across the straits--that have been more significant
by far than this.
So I urge all of us to put all this in perspective, just
keep calm and keep our eye on the ball, which is getting PNTR
passed.
Whatever you can do, I urge you also to talk to the
Europeans in whatever channels are most appropriate because
clearly the bilateral that China agrees to with the European
Union [EU] is a precursor. It is a precondition probably to a
PNTR vote. My guess is it is going to be difficult for the
House to vote on PNTR before China and EU reach an agreement.
In any event, the agreement would make it easier, and I
know those talks have broken down temporarily and it is
important we try to kick-start those and get them back on
track.
I also have urged Chinese representatives to take more
concrete actions, not just the abstraction of the benefits of
trade but concrete actions to show the benefits and to show
that this is a commercial agreement and both sides benefit.
As Senator Roberts mentioned, he and I and other Senators
wrote a letter to President Jiang Zemin urging them to buy
American products, particularly wheat, and they did send over
their citrus team, and that is good and they did buy 50,000-
tons. The thought was once the Chinese show a specific action
of buying wheat pursuant to the cooperative agreement, which is
independent of the regular bilateral agreement, that shows good
faith. It shows that China will live to its end of the
agreement and it is helpful.
I have also encouraged the Chinese to do whatever they can
to show more transparency on their own in the interim, to show
that they are down-sizing their state enterprises or reforming
the banking system, just doing whatever they can to show that
China is even more and more entering the free market arena. I
think that will help give some confidence to some members of
the House and Senate.
With respect to the white paper and all the issues
surrounding that, I just strongly urge those who are concerned
about that issue to recognize that Taiwan and China and the
one-China policy is going to be our policy for a long time and
those are issues we can deal with, and will be much more easily
dealt with once PNTR is adopted and we have the bilateral
agreement consummated and China is a member of WTO. Those
political issues will be much more easily dealt with.
Conversely, it is much more difficult to deal with those
issues if, by chance--certainly if we were to vote down PNTR
but even if we were to delay a vote and not take up the issue
this year.
Agriculture is one of the main drivers here, clearly--you
know that better than I--in all the terms of the bilateral. I
think it is also important for the American people to
understand that this is not a gift, this agreement with China.
It is not a gift at all. I think some people across the country
think it is a gift, that we are kind of doing something for
China. We are granting PNTR. We are giving them something.
Really this agreement is not a gift. It is a negotiated
agreement which in many ways is a no-brainer in that it is
almost one-sided for the United States in that our country is
already open. We do not have trade barriers. They are very
minimal compared with those in China. The tariffs will be
reduced in China; the distribution system will be dismantled in
the sense that American companies can use their own
distribution systems, and all the other provisions of this
agreement.
So I just urge all of us. Senator Roberts made a good point
about the President. I personally have spoken with the Vice
President since this issue flared up. He is fully behind this
agreement. In fact, I will not go into all the details but
there are some misquotes in the press that got all this out of
proportion. But he is fully behind the agreement totally, so
that is not an issue.
But the administration, all the administration, business
community--I strongly encourage the business community to do
more than just have their CEOs stop by and see members of
Congress. They have to get their employees in their companies
visiting the district offices of key House members a couple,
three or four times, explaining in good, polite terms why this
is such a good agreement for America, let alone the countries.
I believe very firmly that the relationship between the
United States and China if probably one of the most crucial
relationships for the United States, for China and for the
world. We are on the cusp right now of taking the right step,
being on the right track with a good, solid relationship. We
have it within our grasp to begin to put this together in a
pretty good way.
We only have a couple or 3-months and it is such an
important opportunity, such an important opportunity, it
behooves all of us to put partisanship aside, put some of the
collateral peripheral issues aside and let's just keep our eye
on the ball and get this commercial agreement put together.
Then we can more easily deal with some of the other issues that
we always will deal with.
China is a separate country; United States is a separate
country. They have their interests; we have our interests. But
we have a mutual interest in getting this agreement together.
I compliment all the work you have both done, Ambassador
Scher. And as well as I know you, Mr. Secretary, I know how
hard you have been working--very, very hard. You are to be
complimented and credited for the terrific agricultural
provisions of this agreement. We just have to get that word out
better. Thank you.
The Chairman. Thank you, Senator Baucus.
Senator Lincoln.
STATEMENT OF HON. BLANCHE LINCOLN, A U.S. SENATOR FROM ARKANSAS
Senator Lincoln. Thank you, Mr. Chairman. As always, thank
you for your leadership in bringing about this hearing to
discuss what is a vital issue to us in Arkansas. I appreciate
the hard work that my colleagues Senator Roberts and Senator
Baucus have done on this issue.
It seems like oftentimes, Mr. Secretary, every time we
visit with you it is a really timely thing. It is timely when
it is emergency disaster, getting it out, getting it to our
agricultural producers and other things. And I do agree with my
colleagues that this is an enormously important, timely issue,
something that we do not have a great deal of time to do.
I appreciate very much the two of you all in your positive
attitudes towards PNTR for china but I will also echo my
colleagues' words, that we have to be as proactive and as
aggressive as we possibly can in moving this issue forward.
In reading the testimony of Ambassador Scher, he is right
on target--that China's WTO accession is a clear economic win
for the United States. And together with PNTR, it will
definitely open up markets that especially vital to
agriculture.
As Senator Baucus mentioned, we are talking about opening
up markets while U.S. markets are already open to that country.
I am sorry that Senator Roberts is gone but if it takes all of
us going down to the House gym to play basketball to get it
done, in his analogy--I have only been down there once but I am
willing to go back if that is what it takes.
Senator Baucus. Show them the cast on your leg. You mean
business.
Senator Lincoln. That is true. I mean business.
But I do think it is important and I will just ask
unanimous consent from the Chairman to put my entire opening
statement in the record. I would like to conclude by saying
that, in the overall debate of what we have started this year,
talking about surpluses and then talking about the strength of
the economy in this country and how important it is going to be
to the multitude of other issues that we are discussing,
whether it is the solvency of Social Security, maintaining
Medicare or other things, those are all absolutely essential--
educating our children, these are all dependent on the strength
of the economy.
If the economy in this country should take just a small
turn, those issues that in the everyday lives of our
constituents are so important are going to suffer a great deal.
And certainly in my opinion, this is probably one of the single
most important questions we will be asked as the Government
that could help us to sustain this country's economy in a
strong way.
So I certainly find granting PNTR to China to be one of the
most important things that we are doing and I encourage you all
to continue not only in your positive attitude but turn up the
heat, increase the progress and the aggressive with which we
are tackling this and let us move forward. And thank you very
much for being here.
Thanks
Senator Baucus. Mr. Chairman, if I might just very briefly,
I forgot to mention. Yesterday I introduced legislation which I
call the China WTO Compliance Act. The point of it is to give
the administration, the executive branch, a little more
authority to monitor compliance with the terms of the
agreement. It is my thought that, that will help the American
people, reassure the American people a little more that the
terms of the agreement will be lived up to.
Often we sign agreements and we tend to not forget about
them but we do not worry as much about enforcement and
execution. The point of this legislation is to help give us a
little more reassurance that once the agreement is signed,
execution and compliance will be followed. Thank you, Mr.
Chairman.
The Chairman. Thank you very much, Senator Baucus.
The Chair would like to make two announcements, one of
which is that we will have a vote at 10 a.m. So at that point
we will take about a 15-minute recess. I wanted the witnesses
to know that, as well as all who are observing our hearing.
The second is there will be a mark-up in the Committee
tomorrow at 10:30 on crop insurance risk management and other
issues that are before the Committee in the Committee spaces.
So for the benefit of all members and staff, we want to make
certain we are all present for that.
Secretary Glickman, our purpose in having this hearing
today is really to accelerate consideration of the issue. We
thought it was important to have a high-profile hearing at
which you and Ambassador Scher could testify and make the very
best case and likewise, elicit comments from the Senators,
which you have heard and which I think are important in showing
their individual leadership.
It is a privilege, as always, to have you. I ask you to
proceed. I will ask both of you to try to come within, say, a
10-minute framework if that is possible. If it is not, there
will be some leeway granted, as you know.
Secretary Glickman.
STATEMENT OF HON. DAN GLICKMAN, SECRETARY OF AGRICULTURE, U.S.
DEPARTMENT OF AGRICULTURE, WASHINGTON, DC.
Secretary Glickman. Thank you very much. Senator Lugar,
Senator Baucus, Senator Lincoln, it is an honor to be here.
First I would like to give credit to Ambassador Barshefsky
and Ambassador Scher. Together with some help from our USDA
team, they negotiated an extraordinary bilateral agricultural
agreement, which I would echo what Senator Baucus says. Not
only is it a no-brainer but in the area of agriculture, it is
really a one-way street in favor of the interests of the United
States of America.
Recently I spoke at the National Farmer Union convention in
Salt Lake City and there was a lot of deep concern about this
agreement and a lot of the questions were asked about previous
trade agreements and we gave away the store and there were
import surges here and there and some of the issues, I think,
the facts were wrong, but I understood what their concerns are.
But then I said to them, I said this is not the same as
those previous trade agreements. This is not North American
Free Trade Agreement [NAFTA]. This is not other agreements.
This is not an agreement whereby the United States is going to
increase the access to our markets of another country or
region's products. This is an agreement whereby another country
agrees to increase the access of our products to their markets,
period, with respect to agriculture.
Now, Ambassador Scher and Ambassador Barshefsky may talk
about the total effect, which I think is also very positive,
but this is truly an agreement that is a one-way street in
terms of how it affects agriculture. And it concerned me that,
that message was not out there in the countryside, that there
was a whole lot of collateral issues regarding exports, imports
and trade policy that is kind of infecting this discussion
here.
And it is really important for me and I know the President
feels this very strongly, to send a clear message as it relates
to agriculture: this is a 100-percent positive in the interest
of United States farmers agreement. It concerns me that we
could miss this opportunity, and that would be very, very
serious for America and for our farmers.
The other thing is when I put my hat on, I had the
privilege of, as you know, serving as a member and chairman of
the House Intelligence Committee in the early 1990s and this
agreement is also critically important to the national security
of the United States. I mean why walk away from our leadership
role, to try to influence other countries in the world? If we
do not do this, our ability to influence their human rights,
their environment, their labor policies will be dramatically
reduced. I mean it will be extraordinary, the effect on our
inability to influence that part of the world. And I think that
is another point that Senator Baucus has made over and over
again. I notice you, Senator Lugar, made the same point.
So I just think for double purposes, it is a one-way win
for American agriculture and it is critically important to the
United States of America that we proceed with this. And the
President feels this so strongly that he has sent his entire
cabinet out to really focus on this as certainly the primary
trade issue this year and one of the highest priority issues of
anything that this administration is fighting for.
And I want to also leave that as a clear message here. This
is a very high priority issue and there is unanimous agreement
within the administration that we should pursue this with full
vigor, and that is a tribute to the leadership of our United
States Trade Reoresebtatuve [USTR] in negotiating a good
agreement that we can be proud of, and I think that is going to
make a lot of difference.
Now, I think we have sent these little cards up. You all
may have these little cards. It is kind of a summary. I do not
know if you have one. I want to make sure everybody has one.
OK, they do.
It is kind of my whole statement. On one page there is a--
--
Senator Baucus. We appreciate it. We will hear from Mr.
Scher now.
[Laughter.]
Secretary Glickman. Well, on one side it is all the tariff
cuts, which are dramatic--meats, beef, pork, poultry, dairy,
and all the other items. On the other side are the TRQ changes,
which are dramatically increased. And there are obviously the
key provisions for U.S. agriculture, which is significant, as
well.
I would say that we expect conservatively U.S. export gains
to approach $2 billion a year, an increase as the Chinese
reduce their tariffs, which should happen by the year 2005. And
we see this agreement with China eliminating export subsidies,
reducing trade-distorting domestic supports, establishing TRQs,
and the other things and, as both Senator Lugar and Senator
Baucus talked about, providing the right to import and
distribute without going through state trading enterprises.
I would also say, you know, this is not the easiest thing
for China to do. Recently there was a story in the Wall Street
Journal. This is a predominantly agrarian society, China. Its
entire political system has been based upon the history of the
nature of peasants and the agrarian population and the control
of the central government over their people.
Now, I am not a great historian or political scientist but
it does not take a rocket scientist to know that the Chinese
themselves, in moving into the 21st century and dramatically
reducing their tariffs on all their agriculture products and
the other items that are here, are also taking a fairly
significant risk in terms of their political system. They are
moving from an agrarian society to one that is more modern,
urbanized, technologically advanced, and I am sure that causes
some nervousness within the halls of power in Beijing.
But the fact of the matter is that they are doing this,
which means that their markets will become dramatically more
open to our products in agriculture, which affects the heart of
their last couple of thousand years of history. And you talk
about an influencing factor to help change their ways. This
probably would have more impact on their political system
ultimately than anything else I can imagine, as well as helping
America's farmers.
Now, I would make a couple of comments. We do need to be
vigilant to ensure that China lives up to its WTO commitments
and also fully implements last year's agricultural agreement
that reduces phytosanitary barriers for citrus, wheat and
meats. That means we need China's leadership to make the
changes necessary to ensure that trade in these products can
begin without delay. Prompt purchase of these products,
including wheat, citrus and meats, will be the clearest
indication that China intends to honor its commitments.
And I am fully cognizant of the letter that Senator Baucus
and Senator Roberts wrote. As it was referred just this week,
China purchased 50,000 tons of U.S. wheat. This will be the
first significant shipment of wheat originating from the
Pacific Northwest in over two decades and the first purchase
under our Agricultural Cooperation Agreement, which Ambassador
Barshefsky and her team negotiated, along with our help. This
is encouraging news and we hope that there will be many more
such purchases to come.
While this is not a major purchase, it does break what I
call the Tilletia controversa kuhn [TCK] Chinese embargo on
U.S. wheat and recognizes that the agreement provides for a
modern view of sanitary and phytosanitary measures and we are
watching to make sure that this initial purchase is followed by
additional purchases of wheat, as well as honoring the
commitments the Chinese made on citrus and on meats. Those
things are very important and I am sure to you all they are
very important, to make sure that the Chinese know that we
expect them to honor their commitments that they have made
before.
We are in an era in which American agriculture has been
suffering and it is linked to the global economy and
increasingly dependent on trade. As I have said before, we have
nothing to gain and a great deal to lose by walking away from
our agreement with China. The only winners would be the EU,
would be Australia, would be Canada, would be Argentina and
would be every exporter in the world, who will see us as
engaging in a disarmament in world trade and will move in to
suck up those markets from us. And once they are in, they will
be in for good and we will be out for a very long time.
So the fact is that it is a dog-eat-dog world out there. I
cannot remember who on some TV show said that but I will repeat
it and I am sure if they did not say it, they will after I have
said it today. If we are out of these markets, we are lost for
a very long period of time, and that hurts American
agriculture, which is increasingly dependent on these foreign
markets, as well.
I believe that the WTO accession agreement with the U.S. is
a bold statement that China intends to be a major player on the
world stage. The Chinese have shown in these agreements they
understand that they must commit to long-standing principles
governing world trade--transparency, fair trade practices,
peaceful settlement of disputes and, most importantly, the rule
of law. The agreement that we negotiated is strong evidence of
China's willingness to move beyond the stagnant, protectionist
policies of the past and embrace economic and trade principles
that will have a ripple effect on their economic, social and
political institutions, as well.
In fact, changes in Chinese agricultural policies are a
good indication that China is beginning to see the advantages
of stronger ties to the global economy. Now China's leaders,
after years of increasing its grain production to meet the
growing needs of its population, they are talking about the
need for food self-sufficiency rather than food security, and
pointing out that China might be able to raise farm incomes by
diverting resources away from areas where they do not have a
comparative advantage, like grain production, and into areas
that would take advantage of the large Chinese labor pool, like
horticulture products.
In fact, Chinese policy-makers are now saying that China
could live with a self-sufficiency rate of 95-percent, rather
than 100-percent. And that may not sound like a lot but when
you look at the history of China, that is a dramatic acceptance
of economic reality. If China imported just 5-percent of its
grain needs, that would equal 20-million-tons of grain a year,
making China the world's second largest market for imported
grain after Japan. That is why approving NTR for China is so
important for America's farmers.
This is an historic opportunity because what it can achieve
in opening Chinese society goes way beyond the economic
underpinnings of improved trade with China. In granting
permanent NTR, we are not abandoning the principles we as a
Nation have always valued but instead, we are providing
tangible economic benefits to the American people.
Mr. Chairman, that completes my statement and I thank you
very much.
[The prepared statement of Secretary Glickman can be found
in the appendix on page 54.]
The Chairman. Thank you very much, Secretary Glickman.
Senator McConnell, I would like to recognize you for a
moment.
STATEMENT OF HON. MITCH MCCONNELL, A U.S. SENATOR FROM KENTUCKY
Senator McConnell. Thank you, Mr. Chairman, for
accommodating me. I just wanted to introduce one of your
subsequent witnesses briefly, an old and dear friend of mine
who happens to be president of the Kentucky Farm Bureau, Sam
Moore, who will be testifying on the second panel.
Sam and the 250-members of the Kentucky Farm Bureau are
actually in town this week. We just had a meeting with them
earlier. I wanted to welcome him to our committee on behalf of
everyone in Kentucky who is so proud of his leadership of the
Kentucky Farm Bureau.
Sam is an active farmer himself, raising beef cattle, corn,
soybeans, feed grains and, of course, tobacco, which is so
important to our state. He is from Morgantown, Kentucky in West
Kentucky and has spent almost 50-years really around farms. He
started very early.
Sam has been extremely busy this last year trying to secure
a substantial amount of Kentucky's phase 1 tobacco company for
agricultural development in our state. He has done a remarkable
job on that.
And Mr. Chairman, I just wanted to thank you for the
opportunity to interject here and introduce Sam, from whom all
of you will be hearing a little bit later. Thank you.
The Chairman. Thank you very much, Senator McConnell.
Senator Johnson, do you likewise have a short introduction?
We are delighted to hear from you.
STATEMENT OF HON. TIM JOHNSON, A U.S. SENATOR FROM SOUTH DAKOTA
Senator Johnson. I will help expedite the process here and
submit a statement, Mr. Chairman.
I appreciate your holding this hearing. I think that
expanded agricultural trade with China is a very key issue,
both in terms of our economy and in terms of democratization
and the other values that we hold, as well.
So I am pleased to have this hearing today.
[The prepared statement of Senator Johnson can be found in
the appendix on page 50.]
The Chairman. Thank you very much.
Ambassador Scher.
STATEMENT OF PETER SCHER, SPECIAL AMBASSADOR FOR AGRICULTURE,
OFFICE OF THE U.S. TRADE REPRESENTATIVE, WASHINGTON, DC.
Mr. Scher. Mr. Chairman, thank you. I would ask that my
full statement be included in the record and I will make brief
remarks.
The Chairman. It will be included in full.
Mr. Scher. I am very pleased and honored to be here with
Secretary Glickman because I do believe that the effort we have
made with China has really been a team effort, in particular
between USTR and USDA under the leadership of Secretary
Glickman and Ambassador Barshefsky.
If I might just take a minute, I would like to recognize
three of the career people who have been part of this team and
who normally do not get recognized but I think really deserve
it here. Three people are here--Teresa Howes and Jason
Hafmeister from my staff and Lynn Alfala from USDA's Foreign
Agricultural Service.
The Chairman. Please stand so we can identify you.
Senator Baucus. That would be a good idea.
Secretary Glickman. May I just interject? We have our Ag
attache from Beijing who is here, Suzanne Hale. I would like to
recognize her, as well.
The Chairman. Suzanne is there; great.
Mr. Scher. I have to say, Mr. Chairman and members of the
Committee, these are people who very rarely get recognized but
whose expertise and tireless work and very long nights really
resulted in this agreement and I think they deserve the
Committee's recognition and all of our recognition, as well.
Senator Baucus. Mr. Chairman, if I might interject, I
agree. I know Suzanne Hale. I was over in December to China. I
know she represents everybody else. She is aces. She works hard
and does a great job and I am glad, Ambassador, that you have
recognized everybody because it is very true.
The Chairman. I agree. Thank you for giving that
recognition.
Mr. Scher. Mr. Chairman, let me just say briefly I think,
as Secretary Glickman and many of the members of the Committee
have said, China's accession to the WTO is a clear economic win
for the United States. Together with permanent normal trade
relations, it will, for the first time, open the world's
largest Nation to our goods, to our farm products, and to our
services. Without permanent NTR, as Secretary Glickman said,
our competitors in Asia and Latin America and Canada and Europe
will reap those benefits and this, I believe, is the critical
question facing Congress.
Before I update you on the status of the negotiations on
China's accession, I would like to just give a brief overview
of the specific agriculture commitments because these
commitments reflect every commodity of interest to the United
States. They are comprehensive. They will be phased in over a
very short period of time. They hold China to the same standard
we would expect of all new WTO members. And, most important, in
each case they reflect very specific enforceable commitments.
We will be opening China's market for all commodities of
significant interest to the United States and moreover, we will
be addressing a broad range of policy issues of concern to
American producers. China will make significant cuts in tariffs
and will complete them by January of 2004. This is one of the
shortest phase-ins for any accession in the WTO. And these will
be in the commodities of top concern to the United States,
everything from beef and pork to citrus, processed foods, wine
and dairy. Tariffs will be reduced from an average of 31-
percent to an average of 14-percent for our priorities. China
will establish a generous tariff rate quota system for bulk
commodities, like wheat, corn, cotton, and rice.
This will result, for the first time, in decisions on the
imports of these products being made based on the market and
not based on government edict.
China will guarantee the right to import and distribute
products without having to go through state trading enterprises
or middlemen.
China has agreed to cap and to reduce trade-distorting
domestic support and it has agreed to eliminate the use of
export subsidies. If we can get Europe to make the same
commitment, we would be in pretty good shape in world
agricultural trade.
And, as somebody referred to, China agreed last year, even
before entry into the WTO, to eliminate Sanitary and
phytosanitary [SPS] barriers on meat, on citrus and on wheat,
which resulted earlier this week in the purchase of 50,000-tons
of wheat, the first such purchase from the Pacific Northwest in
25-years.
Let me say I think it is important to note, and I think
both Secretary Glickman and Senator Baucus referred to this,
while we are pleased that China has taken these steps under the
bilateral agreement--they have sent the citrus team; they sent
the wheat team; they purchased wheat--we are very concerned
about how quickly they are implementing this agreement,
particularly as regards to meat and poultry. And I think we
have been clear to the Chinese, and I want to be clear to this
committee, that we will not be satisfied until all of the
necessary changes have been made by China to implement the
agreement and exports of all three commodities have occurred.
That is our bottom line.
Overall, Mr. Chairman, the WTO agreement that we have
negotiated addresses the full web of trade barriers in this
market--barriers at the border, unfair restrictions on
marketing within China, and unscientific inspection standards.
But the work is not yet done. China must now complete bilateral
market access agreements with a number of WTO members,
including the European Union, and it must also complete a
multilateral negotiation at the WTO, particularly covering
commitments on rules, and these steps are proceeding. And we
are encouraging countries to move as quickly as possible,
including the European Union, including Mexico and some of the
Latin American, countries, as well as China itself, to move
this as quickly as possible.
Mr. Chairman, let me conclude. I believe that the case for
China's entry into the WTO and therefore for Congress's
granting China permanent normal trade relations is very, very
compelling. As Secretary Glickman said in his remarks, no
changes to U.S. laws or import policies need to be made for
China to become a WTO member, unlike any of the trade
agreements we have ever brought before Congress. We change none
of our market access policies. We lower no tariffs. We change
none of our laws controlling the export of sensitive
technologies. And we amend none of our own trade laws.
We do risk losing the benefits of this agreement if we fail
to grant China permanent normal trade relations. So we would
obviously encourage--we are doing everything we can and would
encourage Congress to do everything it can to consider this
matter expeditiously. Thank you, Mr. Chairman.
[The prepared statement of Mr. Scher can be found in the
appendix on page 58.]
The Chairman. Thank you very much, Ambassador Scher.
The columnist Tom Friedman in the New York Times yesterday
in a column called ``Eyes on the Prize'' said, and I quote,
``It is now going to be very tempting for Congress, caught
between the right-wingers, who have been energized by the
threats from Beijing against Taiwan, and the left-wingers, who
have been energized by Mr. Gore's ambivalent support for his
own trade negotiators, to walk away from the Clinton deal for
bringing China into the WTO. Nothing could be more reckless.
This is the time to keep our eyes on the prize and the prize
remains the stable, steady transformation of China into a
responsible member of the world trading system, into a more
free and open society. Few things are more important for world
stability than that.''
This is preface for my general line of questions today.
Obviously we are interested, as an Agriculture Committee, in
the very remarkable details that you have negotiated and
recognition has been given to that and you are, in your
testimony, illustrating that. Secretary Glickman, on his blue
cards, has really given us all the facts.
The problem that I foresee, however, is that a major reason
and maybe the major reason for this agreement is the national
security of the United States of America. It is not an original
thought but many have suggested that our ability to work with
Russia, to work with China so that these countries in due
course move into a situation of democracy, human rights, market
economic principles, freedom of the press, freedom of religion,
is terribly important for the generation of our children to
come and that if we fail in this respect over the details, then
the consequences are likely to be great, given the proximity of
weapons of mass destruction and the ability of nations to use
these with awesome results.
So we are talking about something that is very grave, and I
would hope and I presume the President will make this case and
the Vice President and each one of you on a number of
occasions. This is a trade agreement and it is an extremely
important one, but we are really talking about consolidation of
China with the rest of the world and the globalization of that
enormous population and that economy at a time in which
apparently the Chinese are willing and perhaps at least
portions of their society are eager to come into this. I stress
this because I fear we could lose the argument if it is
strictly a trade issue.
I ask you, Secretary Glickman, from your experience in the
House, to analyze once again the fact that there have been fast
track authority votes in the House of Representatives, at least
two of them fairly recently, in which House members, by sizable
majorities, have rejected giving our President fast track
authority.
It seems to me to be unlikely that members who have voted
against fast track authority, which clearly were trade votes,
are likely to change their minds without an enormous effort and
probably argumentation that goes well beyond the normal
business of jobs and parochialism and protectionism and all the
rest of the things that encumber our society even as we talk
about trade.
How can these people change their minds? What is the
administration's strategy? Or is there is not a very good one,
is there any very good reason to have the vote at all? That is
a question being raised increasingly.
Secretary Glickman. Well, I think that the administration
has a clear strategy to try to sell this agreement, both to the
American people and then, of course, the people would sell it
to Congress. Let me make a couple of points here.
One is the President himself agrees with you that this is a
national security vote as much as it is a trade vote, and if it
is focussed strictly on the dollars and cents of how much X we
are going to sell over there, that, in and of itself, may not
be enough to cut the deal and get it passed.
The Chairman. That is my impression.
Secretary Glickman. But I also think that in addition to
that, it is important to recognize that this is not the same
boat as fast track and this is not the same boat as NAFTA. This
is a focussed vote on a trade relationship with one country,
China, and it contains in most areas and particularly in
agriculture, substance which is 100-percent in the favor of the
United States of America. As Mr. Scher said, as others have
said, we give up nothing, zero, nothing in the agriculture
area. We do not allow access, for all purposes in the
production agriculture area, to anything that is not already
there. And, of course, our markets are open to the world.
Now look at this. We sell China $14 billion worth of things
a year--things, everything you can think of--a little
agriculture, airplanes, some other things. They sell us $70
billion worth of material. They have a 5-to-one advantage over
the United States of America.
What we are saying in this agreement is we would like to
equalize that advantage just a little bit. And what Mr. Scher
and Ms. Barshefsky has done is negotiated an agreement where it
can only go in our favor. It cannot go the other way.
That message is not yet out there in the countryside. There
is the belief out there that this is just one more trade
agreement, like every other trade agreement. And by and large,
NAFTA, I think, has been positive for the United States. There
have been some people who have probably not been helped as much
as others, and the negatives and the horror stories have
dominated the public debate.
I could see that at a recent farm convention I was at where
some people have talked about all these possible negative
things that have happened on other trade agreements and they
are putting them all on China now, when they have nothing to do
with China at all. We just have to do a better job of selling
that and getting the information out there.
But let me just finally say the President--he has talked
with many members of Congress; he has had them up to the White
House. He intends to continue to do that. He agrees with you
absolutely about the importance of this to our national
security. Sorry for the long-winded answer.
The Chairman. I think it was a very important answer. Even
after you were with the National Farmers Union, as you know,
the vote was still 64 to 62 against it. This is a farm group.
Now apparently the word was there, I suppose----
Secretary Glickman. Before I got there it would have been
much more overwhelmingly negative.
Senator Roberts. Yes, but which way?
[Laughter.]
The Chairman. Well, this is a significant agricultural
group in our community and it is important that those of us in
agriculture at least have as much enthusiasm and understanding;
others in our society may not. So my plea would be that you go
back to the group with some of the arguments that we are
talking about today that are national security, in addition to
the esoterics of trade.
Now just one final question, and that is what if we do not
have a vote this year? I have heard predictions that in due
course, the Chinese will work out their problems with the EU
and they will work out their rule-making situations with the
WTO organization and that their accession to WTO might not
occur in calendar 2000 but it might occur in the first quarter
of 2001, with or without a vote of the United States.
Is this true? And what are the implications if that format
were to happen?
Mr. Scher. The dangers for us I think is that we lose the
benefits. I mean the WTO rules require that all countries, all
members of the WTO be granted ``immediate and unconditional
MFN.'' So if China becomes a member of the WTO which, as you
know, the actual accession of China does not require a vote but
the granting of permanent NTR does, then the risk if we do not
provide PNTR is that China would have the right to say we do
not need to provide the benefits to the United States because
the United States is not providing us with the benefits that we
are entitled to.
So Europe, which will have provided permanent NTR, you
know, all these Latin American countries, Canada, they will get
the benefits. And even if it is just a short period of time,
the leg up that our competitors--I mean, our wheat growers
believe they have an opportunity to really compete effectively
in this market. We do not want Canada and Australia and other
countries getting in there before us and having better
opportunities than us.
So I think the dangers are very real and the risk is very
significant that we would lose those benefits.
The Chairman. Thank you very much.
Senator Baucus, we will try to have a 5-minute limit so we
can all ask questions.
Senator Baucus. First, Mr. Chairman, I very much compliment
you for holding this hearing as a forum to get the word out
just how beneficial this agreement is.
I have the same concerns that Secretary Glickman has.
People in the country just think trade deals are not good and
what are we giving up here? China is China; they do all those
things over there and why are we doing this? And it could not
be further from the facts and the truth.
I urge, too, both of you to get around the country a lot,
in addition to going to members of Congress. And use the bully
pulpit of the White House to the degree the President gets
around the country because he gets public attention when he
goes around the country and he speaks. I know you guys do, too,
but he gets a little more. It may take that to get people to
understand just how important this is.
Stating it even more directly, if by chance there is an
unfavorable PNTR vote, my understanding is that we revert to
Smoot-Hawley-era tariffs on Chinese products coming into the
United States, up to 70-percent. It is very, very high. If MFN
or PNTR is not granted, automatically we go to Smoot-Hawley-era
tariffs, which is obviously just disastrous. All the main
points have already been said but I just encourage us to keep
working.
One question I do have, let's say we get the agreement. How
are we going to compete with Europe's export subsidies and
other aggressive marketing tools, even though under the
agreement, China has agreed to TRQ of roughly 7-million tons?
Mr. Scher. 7.3 on wheat.
Senator Baucus. 7.3 and then up to 9-million after a couple
of years. Last year they bought about a million?
Mr. Scher. Right.
Senator Baucus. A little over a million. Of course, that
was because of the Asian financial crisis.
OK, we get a higher TRQ, 7- to 9-million metric tons. What
assurance do we have that we are going to be able to take
advantage of that in the face of European export subsidies?
Mr. Scher. Let me say two things. Obviously we face
European export subsidies around the world and that is a
reality that we are trying to change in the next negotiations,
which begin this month in Geneva.
I think the view that we have taken, and we have worked
very closely with the wheat industry on this, is that the TRQs
for the first time give us an opportunity to compete. I mean
before now, we have not even been able to compete for the
market share because all the decisions in China are made by
central planners. I mean now, under this new system, you are
going to have the decisions shifted to the end users, to the
millers, to the people in China producing animal feed.
So our view is that we can compete in that market.
Obviously it creates a disadvantage that we are all aware of,
having to face European export subsidies, and we need to bring
those down and we need to address those. And frankly, China's
commitment not to use export subsidies is a fairly powerful
message to the EU. But I think that the TRQ system does give
us, for the first time, an opportunity to compete for the
business. And I think our view and I think the wheat growers'
view is that we can produce a quality product at reasonable
prices and that opportunity will make the difference in China's
market.
Senator Baucus. You made a very good point with respect to
the market mechanisms here. When President Jiang Zemin, who is
head of COFCO, was in Montana a few days ago, I was struck with
how often he would say, you know, we will buy if the price is
right and the quality is right and the terms are right. Over
and over and over, it was on a commercial basis, which I
thought was a big change, a very important change, almost a
profound change--that is, not political but on commercial
terms, which means that we have a good opportunity because we
believe we have high quality, good wheat, but it means even
more that we have to work hard to compete.
Mr. Scher. Right.
Senator Baucus. We have to have the product. We have to
have the price and clearly find some way to get the Europeans
to back off a bit. But China does want, it seems, to negotiate
on a commercial basis, which gives us a real opportunity,
particularly since the mind set in China seems to be more
commercial than it has been.
Secretary Glickman. I met with him yesterday. In addition
to saying what he said, he kept saying, ``Do not think of me as
a government person; I am not. I am a businessman.''
Senator Baucus. Yes, he made that same point to me over and
over again.
Mr. Scher. If I might add, I think it is an indication of
the movement in China because I think people like President
Zhou COFCO are being forced to be more efficient and they want
to have the opportunity to buy wheat, particularly from the
Pacific Northwest that they can get it at better prices.
Senator Baucus. Thank you. Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Roberts.
Senator Roberts. Thank you, Mr. Chairman.
Tim Galvin, a former staffer of the sometimes powerful
House Ag Committee, doing an outstanding job trying to get our
exports cracking, I am quoting: The U.S. market share of global
agriculture trade has eroded so much, ``this could culminate in
the United States losing out to the European Union as the
world's top Ag exporter in 2000.''
In fiscal year 1981 and 1998, Tim said, ``World trade in
agriculture doubled but U.S. exports lagged behind major
competitors and overall U.S. market share fell from 24-percent
in 1981'' when both the Secretary and I were serving on the Ag
Committee, ``to 18-percent today.''
``Galvin and Agriculture Under Secretary Gus Shumacher,''
and Gus is in the room and I cannot think of anybody who has
worked harder and persevered tirelessly in behalf of our
exports, doing great battle in a very positive way with the
European Union, and thank you, Gus, for your efforts, ``urged
the panel to increase the budget for Foreign Agricultural
Service [FAS] and said approving permanent normal trading
relations with China and China's accession to the World Trade
Organization would produce great gains.''
When Dan and I were out at the convention, not at the same
time but at the convention of the National Wheat Growers, this
was the number one issue. When 105 presidents came in from all
the counties of Kansas this week and they wore big buttons and
they had this as the number one issue. I can say the livestock
sector would do the same thing. I do not know about the
National Farmers Union [NFU]. You always have folks, the
exception to the rule or people who go upstream with high
waders on. I think the water is a little high in that respect.
Let me just say that this is a tremendous issue. I think it
is a crossroads issue. I have already made my speech on that.
Dan, at the last minute in the November negotiations,
trading rights for fertilizer were apparently at the highest
levels removed from the agreement, but both sides made a
commitment, as you are aware, to address the issue in the
coming months. We were able to get over 70 Senators--as a
matter of fact, I think it was exactly 70, Mr. Chairman, in a
letter and personal conversations with the Chinese ambassador.
We met just this past week--Secretary Daley, you, others--
in regard to this subject. I was happy to learn the
administration considers trading rights for the United States'
fourth largest export to China top priority. Can you give me
any update on these efforts?
Secretary Glickman. I think Peter probably could.
The Chairman. Mr. Ambassador, if I could just interject for
a moment, to conserve both of your time, I am going to leave to
vote. Senator Roberts I will leave in control of the Committees
while he is questioning. Then Senator Craig and Senator
Grassley will be back. In that way we will utilize this time.
I apologize for interjecting.
Mr. Scher. Senator, on the issue of fertilizers, as you
know, we were able to reduce tariffs and eliminate quotas and
get distribution rights, but the issue of trading rights was
pulled back in November, essentially the right to export freely
in China.
We have been clear to the Chinese. In fact, Ambassador
Barshefsky and I met with Vice Minister Sung from the Trade
Ministry 2-days ago, I believe it was, and were clear to him
that this issue had to be resolved and we have made a proposal
to China on how to resolve it. We have done that in conjunction
with our industry, with the fertilizer industry. And the plan
right now is for Don Phillips, who is our senior China
negotiator at USTR, to go to China next week to sit down with
the Chinese and to work this out.
But I will tell you that Ambassador Barshefsky, in every
conversation she has with the Chinese, makes clear that this
has to be resolved, and I think the letter from the 70 Senators
weighed heavily with the Chinese on that.
Senator Roberts. So you can take the letter of the 70 and,
at the appropriate time--I know they are very interested in
this whole trade agreement, in some kind of a whip check. You
could say well, on one hand; then, on the other, here are 70-
votes that are very crucial.
Monday China, as I have said, announced a purchase of
50,000-tons of American wheat. One of the prospects for future
purchases in relation to the PNTR--I do not want to put that
thought in their mind but it is on everybody's minds in regard
to future sales. If we do not do the right thing in regard to
this trade agreement, it worries me in regard to future sales.
And the ambassador has already indicated every one of our
competitors is going to have a leg up. Would you care to
comment on that?
Secretary Glickman. Well, one is I told the President of
COFCO and made the public statement that this was a good first
step but this was not everything that we expected them to do in
honor of their agreement under the bilateral arrangements, and
50,000-tons is nice, a good step, but in the big scheme of
things, it is a drop in the bucket.
They also agreed, as part of this bilateral agreement, to
implement it, would be to purchase wheat, citrus and meat
products. We are going to follow this shipment of 50,000-tons
to make sure that it gets into the ports, that the ports have
been adequately instructed that the phytosanitary measures have
been taken care of.
I mean they still have work to do to ensure that they
intend to implement the agreement that they have agreed to, but
part of that implementation is purchase of additional
commodities. We have made that message clear. I cannot tell you
what is going to come between now and April and May of
additional commodities but we would hope that more would come
and we have relayed that to them.
Senator Roberts. Thank you.
Senator Craig.
Senator Craig. Thank you, Mr. Chairman.
Senator Roberts. Did you want to mark up crop insurance
right now?
Senator Craig. Done.
[Laughter.]
Senator Roberts. Just a thought.
Senator Craig. We will let that one hang.
Mr. Secretary, Mr. Ambassador, thank you very much. I will
ask the unanimous consent that my full statement be a part of
the record.
Senator Roberts. Without objection, it is so ordered.
STATEMENT OF HON. LARRY E. CRAIG, A U.S. SENATOR FROM IDAHO
Senator Craig. I may not be here for the full hearing but I
also want to recognize in the audience Jerry Kress from
American Falls, who is here representing the National
Association of Wheat Growers and the Idaho Wheat Commission.
Mr. Secretary, I had the unique opportunity while you folks
were duking it out in Seattle to take a trade mission to China.
We were the first trade mission on the mainland following
Ambassador Barshefsky's bringing together this agreement to
bring China into the WTO with the normal trade relations.
I must tell you that I was impressed with what I sensed was
a very real commitment on the part of the Chinese. In fact, it
was a bit unique, I am told by our shop over there, that
President Jiang Zemin gave us nearly 2-hours of conversation--
not just me but literally sat down with all of those
businessmen and women, wanted to know what they were doing and
why they were there and what their interests were and talked
passionately about his working with the ambassador to put the
agreement together, spoke personally of his involvement.
Now, I must tell you that was impressive to me because I
think he recognizes how this agreement and ultimately our
acceptance of it and work here with it brings them in and
brings them down a road toward the rule of law, and it is
something that we cannot miss and I hope we do not miss, that
they are really opening the door not for us but for them to
begin to participate in a set of rules and laws that we are all
agreeing to as a part of the WTO that heretofore they have not.
That is of significant importance and it has not missed them in
any sense of the word.
So I would hope and the reason I say this is I like to hear
people like you say we are committed to getting this; we will
come to the Hill and work in the trenches here to make it
happen. Can I expect that?
Secretary Glickman. You bet.
Secretary Craig. Good, because that is what it is going to
take. You and I both know the politics of this issue and the
timing of this issue and the frustrations on all sides with
different pieces of the puzzle. And I would also say that
sometimes and right now the Chinese are sending signals that
are frustrating as it relates to other issues that go on in
that area and the ability to polarize a vote here or there
against that, looking at the immediate versus the broader
picture of the future and the relationship that future can
bring us.
So I think it is important that we move sooner than later
and it will be especially true in the House, but we will make
every effort to make it happen here in the Senate, and I think
that we can do that.
I must tell you that I agree with you that the 50,000-
metric-tons I hope is a beginning. We hosted the trade
delegations in our office yesterday and they worked out of our
office and we have met with them and we spent a good deal of
time with them on the issue. I think it is important that we
stay on top of it and you have already outlined your intent to
stay on top of it as it relates to timing and movement and a
clear show of good faith as it relates to this, to make sure
that we can move expeditiously and in a timely manner. I am
certainly going to encourage that on the Pacific side of this
issue, at our ports, and would hope that we could get that
done.
But I stopped by this morning not only because we are all
very, very interested in this but the timing is important and I
think we miss an opportunity here if we stumble now at a time
when the politics of this may at times be frustrating. But I
will tell you that when you decide on an orchard, an apple
orchard, that you are going to start pulling trees out and that
orchard, under a normal market scenario, would have three to 5-
years of life left but you are pulling them out because a
Nation decided they would go out and capture a market, and in
the last decade, that is exactly what the Chinese have done and
they are dumping in this market a concentrated apple juice that
has taken, if you will, the safety net out from individual
orchard operators' margins, and that is happening across the
sunny slopes of Idaho today and the Yakima Valley of the State
of Washington and it has put that industry in turmoil.
It is critical, and I use this as an example that our
trading partner China come inside and begin to play by the
rules. They will grow by it and we will gain by it. And any
failure on our part to miss this opportunity is a tremendous
opportunity lost.
Thank you both very much for being here. I caught the gist
of your response to the questions of the Senator from Kansas
and I think those were adequate for responding to the questions
I had. I thank you very much.
[The prepared statement of Senator Craig can be found in
the appendix on page 52.]
Senator Roberts. The Chair is delighted to recognize the
distinguished Senator from Iowa, Senator Grassley, for any
questions he might like to pose to the distinguished panel.
Senator Grassley. Well, I thank the really junior Senator
from Kansas.
Senator Roberts. The Chair might welcome the second panel
under the circumstances.
[Laughter.]
Senator Roberts. The Senator is recognized.
STATEMENT OF HON. CHARLES E. GRASSLEY, A U.S SENATOR FROM IOWA
Senator Grassley. I do have respect for you.
First of all, I was here, Secretary Glickman, when you gave
a very enthusiastic endorsement of why we need to proceed and
also that it is a win-win situation for us, and I think that
enthusiasm is very well and the extent to which it is
duplicated and repeated by everybody in the administration as
enthusiastically as you have said it will help us very much
with the process of getting it through the Congress. So I thank
you for that.
I am going to focus on the Agricultural Access Agreement,
as opposed to the market access portion of it, if I could,
because China's implementation of this and what they
demonstrate about adhering to past agreements and the
enthusiasm with which they do it I think is going to set a
stage over the next couple of months for how easy or how hard
it is to get a normal trade relations with China bill passed,
and obviously I am enthusiastic for the reasons you gave for
that, our doing the normal trade relations with China.
I am disturbed by reports that I have heard about China's
lack of cooperation in implementing the portion of the
agreement, particularly that covering meats, beef, pork and
poultry. I understand that China is apparently saying that the
Chinese language version of the agreement dealing with
acceptance of United States meat is conditional, in a sense
saying that the agreement allows meat to be shipped to China if
China decides to accept our products.
Is this, in fact, what China is saying? And in the process
of answering that, could you tell us what I believe, that the
English language version of the agreement is controlling?
Mr. Scher. The short answer is yes to the last question.
The agreement that was negotiated by our team and translated by
our team is the same agreement. And frankly, we are very
concerned--is probably an understatement--that China has taken
no action to implement the agreement on meat, unlike citrus,
which they have sent inspectors and wheat, as well.
We have been very focussed on this issue. As I indicated, I
think, when you were out of the room, Senator Grassley,
Ambassador Barshefsky raised this issue earlier this week with
China's Vice Minister for Trade, Mr. Sung, and she indicated to
him that this was a top priority and frankly, this was about
the credibility of the Chinese with our Congress.
China committed to immediately begin accepting imports of
U.S. meat and poultry that have been certified by USDA as
wholesome. No other technical work needs to be done, and we
expect China to begin doing that immediately. And we have been
very clear with them in the starkest of terms that their
failure to do that would be very unhelpful.
Senator Grassley. Are they, in fact, saying it is
conditional?
Mr. Scher. I am sorry.
Senator Grassley. Are they, in fact, saying it is
conditional in regard to meat shipments?
Mr. Scher. Well, there are a lot of different people saying
a lot of different things, so I do not want to pretend to speak
on behalf of the Government of China. The bottom line for us is
they have not taken the steps they need to take and we have
told them that they have to take the steps they need to take,
that the support of many of the agricultural groups and many
members of Congress--from the pork producers to the cattlemen
and the poultry producers--frankly is contingent on their
implementing this agreement.
Secretary Glickman. If I just might add, the agreement
language says--it is interesting--it says that China accepts
the USDA Food Safety Inspection Service meat and poultry export
certificate of wholesomeness as proof that FSIS-certified meat
and poultry complies with U.S. inspection standards and
therefore any meat accompanied by the certificate is eligible
for import into China. So that is good.
But on meats, there is still some insistence on their part,
and again as Peter says, it kind of depends on perhaps who you
are talking to there, that this allows them to postpone the
implementation until they are satisfied with our meat
inspection system and it is possible that they might request
that we allow quarantine officials to inspect our system as a
prerequisite for implementation. I do not know; perhaps that is
for optical reasons within China. And if we open this Pandora's
box, they will never implement the agreement.
So I think your point is a good point. It is one that
Ambassador Barshefsky is working on. I think we can work it out
but it is not one that is resolved completely yet.
Senator Grassley. I hope so because I had a chance while I
was in Seattle to have a meeting with some of my colleagues
with the trade minister for China and there was nothing about
that meeting that was in any way negative about China's
acceptance, not only the wording but the spirit of it, as well.
In fact, I came away so enthused that, you know, there is
no problem. Well, maybe if you look at citrus, you would say
there are no problems, but in the segments of agriculture that
come from the Midwest, it seems to me that we are being hurt
because it is not being accepted and it seems to me that China
then makes it a little more difficult for some Senators to vote
for normal trade relations and I hope they realize that.
Has China published its version of the Agriculture
Cooperative Agreement? And if not, what is the delay?
Mr. Scher. No, they have not published it. We can find out
why. We have certainly published our version of the agreement
and we also have--as you know, Ambassador Barshefsky in Seattle
signed the Chinese version.
Obviously they have communicated to some of the key
ministries aspects of the agreement, which is why I think you
saw the citrus-inspecting team here and why you saw the wheat
team here last week. So there are steps being taken. Why they
have not published, I just do not know.
Senator Grassley. Mr. Secretary, I understand that you did
a very good job of explaining to the Chinese in a seminar last
year how our meat inspection system worked and particularly the
certification process. When the Chinese attended this seminar
last year, did you get a sense that they did not understand how
our meat inspection system operates or that they needed more
information? Because I am told that we keep hearing from them
that they need more information about meat inspection before
they can implement this.
Secretary Glickman. It was last June, I think, when our
Food Safety Inspection Service gave the training and no, I was
not under the impression that at the time there were any
additional difficulties--whether they wanted plant by plant
inspection or other kinds of things, which would make it
impossible for us to practically sell meat products over there.
This is something that still has to be worked out. It is
not yet totally resolved and I hope they are listening to this
exchange.
Senator Grassley. I have also heard that the Chinese, and
at what level I do not know but they have told President
Clinton that they do not want to implement the meat portion of
the Agriculture Cooperation Agreement before they get into the
WTO. Have you heard anything of that nature?
Secretary Glickman. No, have not.
Senator Grassley. Well, I guess maybe the last point I
would make to the Chinese leaders is that I hope they do not
try to link the two. Now, you have not heard of that. Maybe my
information is wrong. But if there is any attempt to do that,
that is going to be----
Secretary Glickman. If they had said something to the
President on this, I am sure it would have been passed down to
us. I do not believe that is accurate.
Mr. Scher. In fact, I think to the contrary, the President
has made clear to the Chinese that this needs to be done and
that the agreement and the commitment was that this would be
done independent of the WTO.
Secretary Glickman. Senator, I would just tell you quickly,
you know, they have put together a team of senior officials
within the departments in the White House full-time to manage
this China WTO. Patrick Steele, who is the number two person at
the Foreign Agricultural Service, is a senior member of that
team full-time in the White House working on WTO. And David
Lane, who is Secretary Daley's chief of staff, is kind of
heading the team up. He is a pretty good conduit of information
and if you or anybody else need to know if something like this
is happening, you should feel free to contact him directly.
Senator Grassley. OK. Maybe we can go beyond that and them
I am done. And that is just the point that if you hear that,
would you let us know?
Secretary Glickman. Yes.
Senator Grassley. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Grassley.
I have just two more questions. The agreement we are
talking about today has the tariff reductions that you have
illustrated in your testimony. But in the past we have noted
tariff reductions are of limited value where there is no
competition among importers and where the tariff is being paid
by our government agency.
Now, you have touched upon this but can you explain in
greater detail how the Chinese might go about liberalizing
their import regime to make our tariff reductions meaningful?
Mr. Scher. I think there are a couple of points to make.
First of all, and I think you are right; obviously the tariff
portion of this is an important portion but it is not the only
portion, which is why trading rights for U.S. companies and for
other foreign companies, distribution rights, and frankly, if I
could just spend a minute on the tariff rate quota system is, I
think, a perfect example of how Chinese is liberalizing its
import regime.
Right now decisions on imports of bulk commodities like
wheat and corn and cotton are made by the Government. If the
Government decides they want to import it, they imported it.
Under the system, the new TRQ system, China will be required to
issue import licenses--for example, in the wheat area, we are
about 7.3-million metric tons of import licenses--to end users,
to millers, to other producers. Those end users will then have
the right to import. In some cases it is through the state
trading enterprises but in many cases it is through private
companies.
So you are now shifting the burden of that decision-making
away from the central planners, away from the Government to the
market, and I think that is a perfect example of how China has
recognized that the Government cannot continue to make these
decisions.
Secretary Glickman. There are also use-or-lose provisions
in these proposals which say that if the public sector does not
import, then those amounts can go into the private sector,
additional amounts, which is, I think, a very positive step.
The Chairman. China has committed to cap and reduce trade-
distorting domestic subsidies. However, the United States and
other WTO countries are already bound by specific domestic
subsidy reduction commitments. As I understand the agreement
that China will have a determination of this through
multilateral negotiations.
Does this mean that China might be granted WTO membership
before it makes a specific commitment on domestic support and
if not, when will these multilateral negotiations commence?
Mr. Scher. That will be done, Mr. Chairman, as part of what
we call the protocol negotiations. Once the bilateral
negotiations are finished, then we negotiate multilateral and
what we call the rules. So China, in that context--we have had
extension discussions with China looking at and frankly, the
Economic Research Service at USDA has been critical in this,
looking at the time period that China wants to use. And if you
look at any of the time periods that China is talking about,
you are talking about very limited use of domestic supports,
frankly, less than a billion dollars where U.S. has $19 billion
and EU has $60 some billion.
So we are very confident that China will be bound to limit
their domestic supports to a very small amount.
The Chairman. Senator Fitzgerald, do you have questions?
STATEMENT OF HON. PETER G. FITZGERALD, A U.S. SENATOR FROM
ILLINOIS
Senator Fitzgerald. Thank you, Mr. Chairman. Yes, I have a
couple.
I understand that Senator Roberts earlier brought up the
issue of the fertilizers and their access to Chinese markets. I
just want to echo his concerns about that. I agree with him and
I hope we can work on that.
I did want to ask you--some of the popular press accounts
have connected the upcoming vote on normal trading relations,
permanent normal trading relations with China, with China's
accession to the WTO. Can you clarify the connection between
permanent normal trading relations and China's membership in
the WTO?
Mr. Scher. Senator, there are two issues. China's actual
accession does not congressional approval. The President has
the right to make the decisions, as we have done in other
cases. In order for the United States to get the full benefits
of this agreement, Congress must grant permanent normal trade
relations, and that is a requirement of the WTO. The WTO rules
essentially say that all members are entitled to immediate and
unconditional MFN or NTR. So that piece of it requires Congress
to approve permanent NTR.
So the result is if China enters the WTO but the United
States has not granted permanent NTR to China, we risk losing
the benefits of this agreement. And in that case, our
competitors in the world market will have benefits in this
market that we will not.
Senator Fitzgerald. I am wondering and maybe you could
elaborate a little bit on the upcoming amendments to the China
permanent normal trading relations bill. Given the Vice
President's remarks to labor leaders last week with respect to
the agreement, I am wondering how committed is the
administration to getting China permanent normal trading
relations through the Congress?
Secretary Glickman. The administration is not only
absolutely committed; it is, at least in my judgment, the
highest priority that we have on any kind of domestic policy
agenda and that is everybody within the administration,
including the Vice President. So I would not be concerned that
the administration is not involved in a full court press on
this issue.
Senator Fitzgerald. Now, there is a potential for many
amendments, I would imagine, to that bill. Were you hoping to
keep it a clean bill?
Secretary Glickman. We are hoping to keep it clean. We
recognize that, for example, Senator Baucus has dropped in a
bill which deals with the issue of monitoring. We think that
there are a lot of things that are actually pretty good in his
proposal. We obviously want to work with you but we would hate
to see this become a receptacle for all sorts of amendments
which would be counterproductive to what we are trying to do
with China.
Mr. Scher. I think one other point I would add, Senator, is
the agreement cannot be changed. The agreement is what the
agreement is. If there are amendments that do not seek to alter
the terms of the agreement, then obviously I think, as
Secretary Glickman said, we are open to look at those, but the
agreement itself is the agreement.
Senator Fitzgerald. And cannot be altered.
Mr. Scher. Cannot be altered. No, it cannot be altered by
amendment.
Senator Fitzgerald. Well, I look forward to working with
the administration and I applaud your commitment to trade.
There is no question that opening up the Chinese market to our
American agricultural sector, I think would be a great boon for
our agricultural economy and certainly would benefit many
states, especially my home state of Illinois, and I look
forward to working with you gentlemen toward the success of our
initiatives here.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Fitzgerald.
Senator Conrad, do you have questions for the witnesses?
Senator Conrad. Thank you. Thank you, Mr. Chairman. And
thanks to Secretary of Agriculture Glickman and Ambassador
Scher.
STATEMENT OF HON. KENT CONRAD, A U.S. SENATOR FROM NORTH DAKOTA
I think the greatest concern that I have is that China has
a bit of history here of making agreements and then not keeping
them. There are a lot of things that I could reference. You
know them better than I do. I think of where we were back last
year where they signed an agreement and said they were going to
drop their closing off shipments of U.S. wheat out of the
Northwest. They were going to stop these spurious claims on TCK
smut that were blocking our wheat shipments out of the
Northwest. And they said when they signed that agreement that
it would be effective upon signature. That did not happen.
The meat agreement. I understand--I was not here. I
apologize. We had a vote over on the floor. Senator Grassley
apparently was making the point with respect to that.
China has now made a purchase of wheat, a very modest
purchase, but nonetheless a purchase that shows some good
faith. Why is this agreement and how is this agreement going to
be different? And how can we be certain that there will be
compliance?
Mr. Scher. Senator, I think this is a very important area
and I know this is something that you have been focussed on and
we in the administration have. I think we have taken steps in
this agreement, frankly, well beyond what we have done in any
other agreement, to give us as many enforcement tools as
possible.
For example, the commitments in the WTO agreement, for
example on the administration of TRQs, are very specific,
frankly, more specific than in any other agreement we have had
with any other country. So, for example, China fails to
distribute import licenses for the 7.3-million-tons of wheat
under that TRQ; that will be a violation and we would have the
right to go to the WTO to enforce that violation and if they
found in our favor, we would have the right to retaliate
against them.
We have preserved all of our rights under our own trade
laws, including our dumping, Countervailing duty [CVD] laws,
and we have particularly guaranteed the right to use nonmarket
economy anti-dumping methodologies.
We have also created in this agreement, which is not the
case in any other agreement with any other WTO member, a
product-specific safeguard for import surges, which would only
have to meet the standard of market disruption. You and I have
talked a lot about the 201 law in relation to other countries,
which has a standard of injury or threat of serious injury. In
this case it would be a lower standard.
So if there was an import surge from China, we would only
have to meet the standard of market disruption. We can move
much quicker than the normal 201 process and we can impose
import restraints on China under that agreement.
We are also going to create within the WTO a multilateral
review mechanism. So it is not just the United States trying to
beat up on China to enforce, but it is the other 134 countries
that would have regular review of this agreement.
I am not going to suggest to you it is going to be easy,
but I think we have taken steps to really enhance our
opportunity to enforce this agreement in a way that will
benefit U.S. farmers.
Senator Conrad. Let me ask the Secretary if I could,
fertilizer is left out of this deal. It is a bit of a mystery
to me as to why that is the case. Why have we wound up with
this result, that fertilizer just seems to have been shunted
off to the side?
Secretary Glickman. Well, we have spoken about this before.
Ambassador Scher talked about this with Senator Roberts. Maybe
you want to repeat that, basically.
Mr. Scher. Senator, we were able to reduce tariffs. We were
able to create distribution rights and eliminate quotas on
fertilizer. The sticking point in November became the issue of
trading rights, essentially the right to export freely, an
issue that Ambassador Barshefsky raised directly with Premier
Zhu Rongji, and we have been very clear to China that this was
an issue that needed to be resolved. We need to get trading
rights for U.S. and foreign fertilizer producers.
China has committed to us to work out a solution. We have
worked with our fertilizer industry to develop a proposal,
which has been presented to the Chinese. Our senior China
negotiator at USTR, Don Phillips, plans to go to China next
week specifically on this issue because obviously we recognize
the importance of this issue and the number of Senators and
House members who have written to us on it. So it remains a
very high priority.
Senator Conrad. Secretary, you have indicated we would see
a very dramatic increase in our exports to China. What is the
basis of those estimates and how confident are you in them?
Secretary Glickman. They are Economic Research Service
estimates. Part of that is based upon the TRQs, which will
affect oilseeds and oilseed products. Cotton and grains bulk we
estimate about $1.6 billion and that is a fairly conservative
estimate. That is an annual increase by the year 2005. We also
estimate an additional $350- to 400-million in citrus, meats,
pork, poultry and fruits, vegetables in reduced tariffs, and
most of this is due to the fact that if you have this little
blue card that I have put out--I do not know if you have one or
not but I put it out at every table--it is an estimate based
upon the tariff cuts, along with the TRQ increases. The tariff
cuts are very dramatic in the meats area and some of the dairy
products area, in the citrus area, so that is the basis upon
which the estimates are made.
Now, I would also point out interestingly, and Peter, you
could probably verify this; I understand that assuming this
agreement is implemented, and we hope it will be, that the
tariffs that the Chinese will have will be lower than the
average tariffs, way below the world average tariffs and below
what a lot of European countries have as tariffs.
Mr. Scher. Right now, as you know, Senator, and you have
raised this constantly, the average agricultural tariffs for
WTO members range from the 40- to 50-percent range. For our
priorities the average in China will be about 14-percent and
overall they will be about 17-percent in agriculture, so I
think we are making great strides on tariffs.
Secretary Glickman. And then there was some elimination of
export subsidies, as well, by China, which we put into that $2
billion figure.
Senator Conrad. And will they support the elimination of
export subsidies for everyone? WTO round?
Mr. Scher. The interesting thing frankly, Senator, we have
not had a specific conversation about the next round with
China. We have been focussed on getting this done. But I think
one of the things we have seen is that the developing countries
in the WTO have been some of the greatest advocates for the
elimination of export subsidies. And frankly, China--I should
correct this--China, which is actually a member of APEC--the
APEC leaders last year put out a statement, and this included
China, calling for the elimination of export subsidies.
So I think we can be very optimistic that with China's
entry, Europe will be even more isolated on the issue of export
subsidies.
Senator Conrad. All right.
The Chairman. Thank you very much, Senator Conrad.
Gentlemen, we thank you very much. You have been with us
well over 2-hours of excellent testimony. It has been very,
very helpful. We thank you for coming, as always.
The Chair would like to recognize now a panel composed of
Mr. Sam Moore, president of the Kentucky Farm Bureau; Mr. Jerry
Kress, American Falls, Idaho, on behalf of the National
Association of Wheat Growers; Mr. John Hardin, Jr. of Danville,
Indiana on behalf of the National Pork Producers Council; Tom
Suber, Arlington, Virginia on behalf of the Dairy Export
Council; Mr. Michael Wootton, Washington, DC., on behalf of
Sunkist Growers; and Mr. Tim Burrack, Arlington, Iowa, on
behalf of the National Corn Growers Association.
Gentlemen, we appreciate very much your coming to be a part
of this hearing this morning. I will ask, if you can, to
summarize your remarks within a five-minute time period.
Without asking permission, let me just grant permission for all
statements to be published in the record in full, and they will
be.
Mr. Moore, I will ask you to testify first and then each of
the witnesses in the order that you were introduced and are
seated at the table. You received a wonderful introduction from
your Senator, Mitch McConnell, and we appreciated that and I am
delighted that you are here. Would you please proceed?
STATEMENT OF SAM MOORE, PRESIDENT, KENTUCKY FARM BUREAU,
LOUISVILLE, KENTUCKY, ON BEHALF OF THE AMERICAN FARM BUREAU
FEDERATION
Mr. Moore. Well, I do thank Senator McConnell for the
generous introduction that he gave me.
I am Sam Moore. I am president of the Kentucky Farm Bureau.
I raise corn, soybeans, wheat, cattle and tobacco in south
central Kentucky, Morgantown.
I am here today on behalf of the American Farm Bureau,
which represents more than 4.9-million member families in all
50 States and Puerto Rico. Our members produce every type of
farm commodity grown in America and depend on access to
customers around the world for the sale of over one-third of
our production.
I appreciate the opportunity to speak before you today on
the very important issue of the U.S. and China bilateral trade
agreement and China's accession into the World Trade
Organization. Farm Bureau has long supported China's entry into
the WTO on a commercially meaningful basis. This agreement is
good for the American farmer. Having China in the WTO will
expand trade among all members, leading to increased global
economic prosperity.
Having China in the WTO will bind it to the rules of
commercial law represented by the WTO and for China, this
agreement will undoubtedly lead to increased economic and
political freedom.
This agreement is also good for American farmers and
ranchers. China is broadly recognized as the most important
growth market for U.S. agricultural exports. The Department of
Agriculture estimates that China's admission into the WTO would
lead to an increase of $1.7 billion in sales of agriculture
products within 1-year, just about doubling our current exports
to that large country.
In addition, U.S. exports to the Asian region as a whole
are expected to increase in the next few years as a result of
China's accession into the WTO. This is likely to occur as
Chinese consumption levels increase and China ceases to employ
export subsidies. This agreement may be with China but it would
have impacts far beyond Chinese borders.
You know, it is no coincidence that the American farm
economy started a decline at just about the same time that the
Asian financial crisis took hold. Since 1997 we have lost
nearly $10 billion in annual farm exports, with much of that
loss to the nations in the Pacific Rim. To me there is no doubt
that increased exports are the key to combatting our current
farm situation. The agreement with China could spark that
turnaround.
In Kentucky, the Nation's leader in the number of small
family farms, farmers are in great need of some new marketing
opportunities. I know all of you are aware of the current
problems facing tobacco, Kentucky's leading cash crop. In just
3-years, our 45,000-tobacco-farmers have lost over 65-percent
of their production quotas set by the price support program.
That translates into more than a half a billion dollars in lost
farm income in Kentucky alone in a very short time. Needless to
say, we are faced with a very serious economic problem in rural
Kentucky.
Our governor and our state legislature currently are
addressing this problem with legislation that would appropriate
50-percent of the funds that Kentucky is to receive from the
phase one of the master settlement agreement on tobacco.
However, any expansion or diversification of our farm economy
will hinge on finding buyers for the commodities we produce to
replace lost tobacco income. Simply put, Kentucky farmers need
marketing opportunities at home and abroad.
I would like to also mention the commitment that the U.S.
has retained or strengthened as a result of this agreement to
protect the U.S. market from unfair dumping of products by the
Chinese. The U.S. will retain our current anti-dumping
methodology, which treats China as a nonmarket economy in the
future without the risk of a WTO challenge. This provision will
remain in force for 15-years after China's accession into the
WTO. It is important that we were able to retain this
provision, given the production characteristics of an economy
dominated by state-and quasi-state-run operations.
This agreement also ensures that American farmers and
ranchers will have substantial protection against import surges
of Chinese products. This mechanism, labeled the product-
specific safeguard, will address increased imports that cause
or threaten to cause market disruption to any U.S. industry or
sector.
The Chinese have offered American agriculture a historic
opportunity which would greatly enhance our export potential at
a time when it is drastically needed. If this agreement is
enacted, farm income in the United States will be positively
impacted.
China has also offered the equivalent of this bilateral
negotiation to many of our competitors. China will join the WTO
and our competitors will have the market to themselves unless
Congress acts quickly to grant China permanent normal trading
relations. Permanent normal trade relations would help provide
for the continuance of the U.S. economic expansion and
hopefully that expansion would flow into the U.S. agriculture
sector.
Farmers and ranchers are already hampered in developing
export markets by our own unilateral sanctions and the unfair
trading practices of other competing nations. We must ensure
that we do not unilaterally disengage from this historic
opportunity for American farmers and ranchers.
We urge Congress to grant permanent normal trading
relations with China as soon as the vote can be scheduled.
There are a host of reasons to do so but none better than
improving the daily life of the American people or American
farmers and the Chinese people. Thank you very much.
[The prepared statement of Mr. Moore can be found in the
appendix on page 62.]
The Chairman. Thank you very much, Mr. Moore.
Mr. Kress.
STATEMENT OF JERRY KRESS, ON BEHALF OF THE NATIONAL ASSOCIATION
OF WHEAT GROWERS, IDAHO WHEAT COMMISSION, AND THE WHEAT EXPORT
TRADE EDUCATION COMMITTEE AMERICAN FALLS, IDAHO
Mr. Kress. Good morning, Chairman Lugar, members of the
Committee. My name is Jerry Kress. I am a wheat producers from
Idaho. I am pleased to be invited to speak today on behalf of
the entire United States wheat industry.
The Chinese market is critically important, not only to me
but to the entire wheat industry. I want to make absolutely
clear at the outset that wheat producers across the United
States strongly support China's entry into the WTO and we urge
in the strongest possible terms the immediate approval of
permanent normal trade relations for China.
I have been in China three times. Each time I was there,
millers and end users emphasized the desire to have access to
United States wheat, especially wheat from the Pacific
Northwest part of this country. Unfortunately, China has
maintained a nontariff trade barrier on U.S. wheat from the
Pacific Northwest ports since 1972 and has also maintained that
barrier from Gulf ports since 1996 due to the perceived threat
of TCK, a wheat fungus. This barrier to the Chinese market has
had a very negative economic impact on all U.S. wheat
producers.
In April of this last year, Prime Minister Zhu Rongji
announced China's intention to lift its longstanding
restriction on the import of U.S. wheat from areas where TCK is
known to occur. This agreement allows U.S. wheat to move from
any state or any U.S. port to any Chinese port so long as the
tolerance level of 30,000 TCK spores per 50-gram sample is not
exceeded. This level can be easily met by U.S. wheat exporters
while acknowledging China's concerns about the disease.
The TCK announcement followed more than 20-years of
extensive and at times frustrating discussions between the
United States and China, and I personally participated in some
of those discussions and I know how frustrating they have been.
But finally, the United States and China agreed to let
science rather than political or other considerations determine
the terms of trade between our two countries. This is in accord
with the principles of the Uruguay Round agreement on SPS
issues.
In November of this last year, the U.S. and China completed
negotiations on China's entry into the WTO. The WTO agreement
was formalized when the Chinese language version was signed in
Seattle in December.
In accordance with this agreement, you have heard that we
will be able to export more wheat because of the TRQ levels to
China, and I will not go into the details of those because they
have been presented several times to the Committee already.
China has just demonstrated its sincerity about these
agreements where it counts most--in the marketplace. Taking a
major step toward implementation of its agricultural agreements
with the United States, the People's Republic of China this
week purchased 50,000 metric tons of United States wheat from
the Pacific Northwest. The purchase is significant in that it
is a reliable indication that the Chinese are establishing a
sound basis for future trade with the United States.
China is the world's largest wheat-producing country, the
largest wheat-consuming country, and many years it is the
largest wheat-importing country. The United States is the
largest wheat exporter in the world. U.S. wheat exports to
China have varied over the years, contingent upon Chinese
needs. But through the early 1990s, China imported between 1-
million metric tons and 5.6-million-metric-tons of United
States wheat each year. In recent marketing years, China's
needs have declined and the market has declined significantly,
due not only to decreases in China's needs but in their
stringent enforcement of the zero tolerance policy on TCK.
But we expect China in the future to once again become a
major importer of United States wheat. We base our expectations
on economic developments and production constraints in China.
China has a huge and growing population, burgeoning coastal
cities, growing demand, declining stocks, stagnant acreage and
reduced domestic price supports. We anticipate that over a
period of a few years, increased China trade will have a
significant impact on the world's supply and demand situation
for wheat, and that should be very positive for prices.
To put it plainly, nothing else on the horizon could have
such a big impact in the short term on U.S. wheat exports and
the economic stability of the wheat industry or hold such
potential for expanded growth in the future. In order for U.S.
wheat producers to realize this potential, it is absolutely
critical that Congress approves PNTR for China as soon as
possible.
By granting PNTR for China, Congress will be giving nothing
away to China, the point that was made earlier. Our market is
already open to them. However, you will be fulfilling one of
the unmet promises of the 1996 Freedom to Farm Bill--that of
continuing to provide export markets for United States farmers
and ranchers. I believe that every farmer would rather have
open and fair markets. Every farmer would rather receive a fair
price for his product than to receive payments from the
Government. Farmers want to add to the balance of payments by
exporting our product. This point is especially timely now that
the U.S. trade deficit has reached its all-time high.
Various people, including Ambassador Barshefsky, have
stated that it would indeed be ironic if the United States,
after 14-years of negotiations, failed to grant China PNTR. By
doing so, we would allow our competitors to have the benefits
of opening the China market. This would amount to another self-
imposed sanction on the agriculture community, sanctioning us
out of a major world market.
I believe I speak for the entire United States wheat
industry in saying we look forward to working with you and
others in Congress to make PNTR for China happen this year. The
wheat industry will do everything it can to mobilize grassroots
support and you will see our members in the halls of Congress.
It is necessary, however, for supporters in Congress and
for the administration to exhibit strong leadership and
cooperation in order to deliver a positive vote. The
administration must make this an absolutely top priority and
not be deterred from the right course of action by the
difficulties of the primary and general election campaigns.
We have heard this week the disturbing opinion expressed
around Washington that it does not really matter whether PNTR
is passed this year, that you can go ahead and pass it next
year. We believe this is absolute folly. If you want to slap
the Chinese in the face--they have come and they have
demonstrated their sincerity and they bought U.S. wheat--if you
want to slap China in the face, if you want to precipitate the
potential fall of Zhu Rongji in China and the possible fall of
the Government of Jiang Zemin, if you want to pave the way for
the hardliners to regain sway in China and stifle Chinese
reforms and give those who rattle the sabre against Taiwan the
lead role and the sway in China, then fail to pass PNTR this
year.
The time is now. The opportunity is at hand. Do not be
lulled by any temporary political advantage into believing that
you can always set right next year what you fail to do right
today. This is an opportunity that we cannot let slip away.
Thank you again for the chance to appear today and I look
forward to responding to your questions.
[The prepared statement of Mr. Kress can be found in the
appendix on page 67.]
The Chairman. Thank you, Mr. Kress. As you have noted
already, there is some urgency with this committee with this
item and, of course, that is why we are having the hearing
today and we appreciate so much your participation.
The next witness is the distinguished Hoosier farmer. John
Hardin and his family have been involved in international work,
in addition to the specific work they have done, international
trade for agriculture. It is a real privilege to have you
before the Committee today, John. Would you please participate
and testify?
STATEMENT OF JOHN HARDIN, JR., ON BEHALF OF THE NATIONAL PORK
PRODUCERS COUNCIL, DANVILLE, INDIANA
Mr. Hardin. Thank you very much, Mr. Chairman. I appreciate
your remarks. I am a pork producer from Central Indiana and
also run a grain farm.
As of today, China's de facto ban on pork imports remains
in effect, making it virtually impossible to export pork
directly to China. There are two agreements that impact the
future of U.S. pork exports to China. The first is the
Bilateral Agreement on U.S.-China Agricultural Cooperation, in
which China committed to accept beef, pork and poultry from any
USDA-approved plant. In other words, China agreed to accept
products from the same inspection system that assures the
safety of the meat and poultry that Americans eat every day.
The second agreement is the U.S.-China WTO Agreement that
covers many issues and sectors, including pork. Unfortunately,
the Bilateral Agricultural Cooperation Agreement, which both
sides agreed became effective in Seattle in December, is not
being implemented by the Chinese. China now argues that the
Chinese language version of the agreement signed in Seattle
does not obligate China to accept meat from all USDA-approved
facilities.
Now, I am not a linguistic scholar but I can tell you this:
the English language version of the agreement, which was signed
by both sides last April and which I understand is legally
binding, requires China to accept pork, beef and poultry from
all USDA-approved facilities. Moreover, China's recent request
for further information concerning our meat inspection system
underscores China's intention to disregard the agreement.
Between late 1996 and early 1999, Chinese government
officials made five trips to U.S. meat and poultry facilities.
During this time, U.S. government officials and U.S. private
sector representatives provided Chinese officials with
exhaustive information on our meat inspection system. These
visits and exchanges of information culminated in the signing
of the Bilateral Agricultural Cooperation Agreement in April of
1999. As a followup to the April agreement, last summer USDA
hosted meat industry officials from every province in China for
a training seminar based on the April 1999 agreement. Thus,
there is absolutely no need to host another Chinese delegation
or otherwise provide information to the Chinese concerning our
meat inspection system. These delaying tactics by the
Government of China must not be accepted by the U.S.
government. We have an agreement and the Chinese must honor
that agreement.
I want to be clear that China's failure to implement the
Bilateral Agricultural Cooperation Agreement is not the fault
of our trade negotiators. They have been steadfast in pushing
China to honor its commitment and to implement the bilateral
agricultural accord. The failure to implement this agreement
rests squarely on the shoulders of the Government of China.
We have raised this issue privately with the Chinese to no
avail. We are now compelled to speak publicly on this most
important issue, as the time necessary to fully implement the
Bilateral Agricultural Agreement is short. We are not alone.
Our friends in the beef and poultry industries share these very
serious concerns.
To add insult to injury, the Chinese recently struck a deal
on sanitary measures with the Canadians. According to reports
from both the press and our Canadian counterparts, Canadian
meat exports to China will soon begin.
Mr. Chairman, I cannot overstate the level of concern in
our industry regarding this issue. Our trade officials
repeatedly have asked the Chinese to publish and publicize the
bilateral accord in China. To date, the Chinese have not done
so. At a minimum, China must publish regulations which
explicitly provide that any importer in China can bring in meat
and poultry from any USDA-approved plant.
Having said all this, I want to make it clear that we
continue to support permanent normal trade relations for China.
In spite of the current serious problems, we remain optimistic
that China will fully implement the Bilateral Agricultural
Cooperation Agreement.
Mr. Chairman, we appreciate your support and the support of
the members of this committee and we look forward to working
with you to make the bilateral agreement work and to get
permanent normal trade relations for China passed. Thank you.
[The prepared statement of Mr. Hardin can be found in the
appendix on page 72.]
The Chairman. Thank you very much, Mr. Hardin.
Mr. Suber.
STATEMENT OF THOMAS M. SUBER, EXECUTIVE DIRECTOR, U.S. DAIRY
EXPORT COUNCIL
Mr. Suber. Good morning, Mr. Chairman and members of the
Committee. I am Tom Suber, executive director of the U.S. Dairy
Export Council and I am very pleased to appear before you today
to testify in favor of the U.S.-China trade agricultural
agreement and, in particular, its impact on the dairy sector.
The U.S. Dairy Export Council is a nonprofit, independent
membership organization representing the trade interests of
U.S. milk producers, proprietary processors, dairy
cooperatives, and export traders. We maintain offices in eight
countries, including two in China, to pursue our mission of
increasing exports of U.S. dairy products worldwide. The
council works closely with and coordinates with other dairy
groups on activities of like interest and today the National
Milk Producers Federation shares the views I am presenting to
the Committee.
With more than $24 billion in farm cash receipts, the U.S.
dairy industry is the second largest agricultural commodity
sector in the U.S. Beyond farm receipts, dairy processors add
considerable value to milk as it becomes exportable products,
such as cheese, butter, milk powder and specialty proteins.
Most importantly for the subject at hand, however, U.S.
ability to increase milk production is virtually unconstrained.
In fact, U.S. milk supply grew a remarkable 3-percent plus last
year, to reach a new record high.
This makes our efforts to market U.S. dairy products for
export all the more important to the industry and to the
national economy, but the U.S. dairy industry is at a
disadvantage in compared to the large export subsidies and high
tariffs used by Europe, Canada, Japan and other members of the
WTO. Precisely because of these trade distortions, the China
agreement is extremely important. It provides for both greater
sales into China, as well as providing a push for greater
overall dairy exports by achieving greater reform and global
trade. Thus, the U.S. dairy industry strongly supports the WTO
U.S.-China Agreement and consequently calls for Congress to
grant China permanent normal trade relations.
One of the primary points I would like to make is that
China, in joining the WTO, is granting all the concessions. No
additional access to U.S. markets is provided to China beyond
that which it currently enjoys. Once implemented, Chinese
tariffs for key dairy products will be cut as much as fivefold,
making imported dairy products less expensive to Chinese
consumers.
U.S. negotiators were remarkably successful in obtaining
tariff concessions for dairy products in which the U.S. has
either competitive parity or an advantage. In cheese, lactose,
ice cream and infant formula, the declines are quite
substantial and will increase our opportunities significantly.
Because of China's existing import barriers and relatively
low per capita income, dairy consumption is currently
relatively low. However, as a market in transition, it offers
tremendous potential to expand dairy product consumption. As
their economy changes, per capita dairy consumption has
increased. Urbanization, nutritional awareness, Westernization
of their diets, income growth and availability have all had a
positive effect on imports.
Specifically, the fast food industry and other markets have
had a profound effect on the consumption of dairy products. As
a member of the WTO, China would be able to experience similar
growth in a sector currently not as developed, where it uses
cheese on pizza, hamburgers, yogurt and ice cream to drive
sales of U.S. dairy products.
Whey and lactose also constitute some of our largest
exports to China. In fact, U.S. is the largest single supplier
of both these products to China. Though considered a cheese by-
product, whey and lactose sales can increase plant productivity
and profitability while also increasing the pressure on prices
paid to farmers for milk made into cheese.
The tariffs described above will apply to all the WTO
countries, yet the agreement puts the U.S. in a greater
position to compete for the Chinese market. Consequently, a
second key point I would like to make is that if other nations
ratify China's accession to the WTO and the U.S. does not, then
the U.S. would likely forego any WTO tariff concessions while
only our competitors would benefit.
Therefore, permanent normal trade relations are critical to
achieving what we estimate would be at least $135 million more
sales after tariffs have been fully phased down for U.S. dairy
products. We believe this is a conservative estimate based upon
the potential of the market and the relative lack of capability
of the Chinese to expand their own domestic milk production.
In addition, the China agreement offers invaluable
opportunity to continue the reform of worldwide dairy trade in
the WTO due to China's promise to eliminate export subsidies
for agricultural products. This will provide significant
momentum to our effort to seek the elimination of all export
subsidies during the current WTO talks.
Like all WTO members, upon joining, China will be subject
to binding resolution of trade disputes. In light of the recent
favorable ruling of a WTO panel against Canada for its practice
of circumventing its dairy product export subsidies, the U.S.
industry is confident of the WTO's ability to eventually
enforce fair and equitable trading practices.
Of course, we know that not everyone share's agriculture's
enthusiasm for granting PNTR to China. We believe some of these
concerns are legitimate, of course, dealing with Chinese labor
and human rights practices. However, we believe that bringing
China to WTO as a full-fledged member is the best way to
address these concerns.
Beyond all the rhetoric and predictions however, what we
believe is the simple truth is that China is on track to join
the WTO whether the U.S. approves PNTR or not. If we deny
permanent normal trade relations, our dairy competitors from
Europe, Australia, New Zealand and Argentina will enjoy the
benefits of the lower tariffs and we will not. We will put
ourselves at a competitive disadvantage at the precise instant
the world's largest market is opening itself up to the world.
There will be a missed opportunity from which the U.S. would
have a hard time recovering.
On behalf of the U.S. dairy industry, I urge Congress to
grant China permanent normal trade relations this year and we
welcome this committee's interest in ensuring that benefits for
dairy and agriculture in general are carried out. Thank you.
[The prepared statement of Mr. Suber can be found in the
appendix on page 79.]
The Chairman. Thank you very much, Mr. Suber.
Mr. Wootton.
STATEMENT OF MICHAEL WOOTTON, DIRECTOR OF FEDERAL GOVERNMENT
AFFAIRS, SUNKIST GROWERS, WASHINGTON, DC.
Mr. Wootton. Thank you, Mr. Chairman, Senator Cochran. I am
Michael Wootton, director of Federal Government Affairs for
Sunkist Growers.
As you may know, Sunkist Growers is a 107-year-old
nonprofit farmer-owned marketing cooperative comprised of 6,500
citrus farmers in California and Arizona. Today our growers
produce about 65-percent of the oranges, lemons, grapefruit and
tangerines grown in Western United States. And we have enjoyed
at Sunkist a long and successful history of developing and
expanding foreign markets, to the point where today about 33-
percent of our fresh fruit is sold in overseas markets, and
that accounts for about 45-percent of our farmers' fresh fruit
revenue.
I would like to first commend the Committee for holding
this hearing today on the subject of the U.S. China
agricultural trading relationship and examining whether the
recently concluded U.S. China trade agreement enhances that
relationship.
Market access for U.S. citrus fruit exports to the huge and
potentially profitable consumer markets of China has long been
a goal and an objective both for the U.S. citrus industry and
for our government. With growing intensity and determination
since signatures were first affixed to the 1992 Bilateral
Memorandum of Understanding entered into between the two
countries, negotiators from the Office of the U.S. Trade
Representative and from the U.S. Department of Agriculture have
pursued this objective.
Last spring these efforts finally reached fruition with the
achievement of a citrus market access agreement which included
acceptance by China of specific work plans and phytosanitary
protocols for each of the U.S. citrus production states--
Arizona, California, Florida and Texas. This phytosanitary
agreement and the implementing work plans and protocols
constitute, in our view, a model for commodity trade
agreements, negotiated by USDA and USTR in close coordination
with the U.S. citrus industry.
By accepting these terms, China has joined with the United
States in adhering to sound science and pragmatism in its
application to trade policy. China is committed to fully abide
by the terms of the WTO SPS agreement requiring that all
animal, plant and human health import requirements be based on
sound science, not political or protectionist concerns.
In keeping with the obligations of that agreement, as
Secretary Glickman and Ambassador Scher noted, last month
Chinese phytosanitary inspectors conducted a two-week
inspection tour of Florida, Texas, Arizona and California and
they concluded that all of the phytosanitary requirements
incumbent upon the U.S. producers in that agreement had indeed
been met.
We are now awaiting an announcement by the Chinese
government officially opening their markets to U.S. citrus for
the first time since 1980. And as the Secretary earlier noted,
certainly that market opening will certainly demonstrate to all
concerned that they do indeed fulfill their commitments.
So we are very eager to enter into that market. In fact,
Mr. Chairman, I have a sample of one of our cartons ready-made
for the China market, celebrating the Year of the Dragon, which
we hope to fill with fruit soon and be able to ship.
Under the terms of that U.S.-China trade agreement,
benefits, in our view, accrue exclusively to U.S. interests,
including the interests of our industry. China has agreed to
dramatically reduce its tariffs on citrus imports from the
current level of 40-percent to 12-percent by 2004. They have
imposed no quota or volume limits, so we are eligible to ship
whatever the market will demand.
But in order to be able to benefit from these hard-fought
trade concessions, China clearly must gain membership in the
WTO and the Congress must extend PNTR to China.
I should also note that ultimately when their tariff
reductions take place, even including the fact that they have a
value-added tax, that the burden on our imports into the China
market will be still significantly less than the current tariff
burden that we face in a mature market like Japan, which is our
biggest market in Asia.
In our view therefore, it is not an overstatement to say
that China will in the course of the next several years become
the single most important U.S. agricultural export market.
Studies have indicated there is a consumer market with
disposable income of upwards of 200-million people in China
today. The middle class in China is projected to grow by 170-
million over the next 5-years.
We urge the Congress therefore to extend to China the same
normal trade relations policy granted on a permanent basis to
133 WTO country trading partners. To our advantage, that
membership will furthermore obligate China to adhere to the
same rules of international trade and commerce as subscribed to
by all other WTO member countries, including the United States.
Thank you, Mr. Chairman. I appreciate the opportunity to
present our views.
[The prepared statement of Mr. Wootton can be found in the
appendix on page 86.]
The Chairman. Thank you very much, Mr. Wootton.
Mr. Burrack.
STATEMENT OF TIM BURRACK, ON BEHALF OF THE NATIONAL CORN
GROWERS ASSOCIATION AND AMERICAN SOYBEAN ASSOCIATION,
ARLINGTON, IA
Mr. Burrack. Thank you, Chairman Lugar, Senator Cochran. I,
too, have an information-packed testimony this morning, so I
will follow the example set by Henry VIII when he told his
wives, ``I will not keep you long but it will be intense.''
My name is Tim Burrack and I produce corn and soybeans in
Northeast Iowa and I am here today representing the National
Corn Growers and the American Soybean Associations. Both of
these organizations see tremendous potential in the expanding
Chinese market. The People's Republic of China, with a
population estimated at 1.25-billion, is considered the most
important growth market for U.S. agriculture.
Economic expansion in China will contribute to increased
consumption of food and fiber. It will also create export
opportunities for U.S. farmers, but only if Congress eliminates
the sanctions that treat China differently than any other
trading partner.
Last November, China and the United States completed
bilateral negotiations for China's admission to the WTO. China
agreed to one-way trade concessions, creating new market
opportunities for corn and soybeans. In return, the United
States agreed to grant China permanent normal trade relations.
As a farmer from the Midwest, it is hard for me to see how
Congress can say no to a deal like this. The agreement with
China will significantly reduce the border restrictions that
have kept U.S. farmers from fully benefitting from our
comparative advantage in agricultural production. China agreed
to rapidly cut tariffs by more than half on priority
agricultural products and to end its system of discriminatory
licensing and import bans for bulk commodities.
As a corn and soybean farmer, I expect to benefit from the
entire trade agreement. Increased exports of meat, poultry and
dairy products will translate into increased domestic demand
for grains and oilseeds, specifically corn.
China has been a sporadic customer for U.S. corn farmers.
Our exports spiked during the 1994 marketing year at 130-
million bushels. Two-years later, China did not buy a single
bushel. Under the WTO accession agreement, China has committed
to establish a tariff rate quota for corn. This will give us
the opportunity to build markets rather than wait for China to
let corn come in. The TRQ will apply to 177-million-bushels in
the first year and increase to 283-million-bushels in the
fourth year. With the TRQ, we can easily exceed the export
levels of 1994.
The state-run grain trading enterprise and private sector
will share the quota. The private sector share will increase
from 25- to 40-percent during the 4-year implementation.
Additionally, any quota not used by the end of October will be
released for private sector use. The introduction of private
trade will ensure increased opportunities for U.S. corn
exports.
Perhaps the most exciting provision for U.S. corn farmers
in China's commitment to eliminate export subsidies. China is
the second largest producer of corn in the world, producing
over 5-billion bushels last year. Over the last several years,
China has aggressively exported surplus corn at the expense of
U.S. corn farmers. In February the USDA increased its
projection for Chinese corn exports by 120-million bushels to
315-million bushels. When China eliminates export subsidies,
U.S. corn will be very competitive in markets that have been
buying subsidized Chinese corn.
On soybeans, for the U.S. soybean industry, China
represents the largest potential market for the 21st century.
When the Uruguay Round agreement was concluded, the American
Soybean Association conditioned its support on a commitment by
the administration to make oilseeds and oilseed products a key
priority. American Soybean Association [ASA] and the National
Oilseed Process Association have met regularly with the USTR
and the USDA over the past 5-years to emphasize the importance
of obtaining a significant increase in access for soybeans,
soybean meal and soybean oil into the Chinese market.
The China WTO accession agreement negotiated last November
is particularly beneficial to the U.S. soybean producers and
the soybean industry. It will lock in currently applied tariffs
on soybeans and soybean meal at 3-percent and 5-percent
respectively. For soybean oil it will reduce and bind the
current tariff from 13-percent to 9-percent and increase the
amount of soyoil imports at this duty from 1.7- to 3.2-million
tons over the 6-year period.
The tariff on over-quota soyoil will be reduced to 9-
percent in 2006, after which the TRQ will be eliminated.
U.S. soybean producers strongly support the China WTO
accession agreement and urge Congress to approve PNTR relations
for China as quickly as possible. We already have too many
restrictions on U.S. farm exports in the form of unilateral
economic sanctions. To turn access to the Chinese market over
to our competitors after negotiating this agreement would deal
a terrible blow to efforts to restore profitability to the U.S.
farm economy.
Conclusion. Quite simply, this is a one-way deal for U.S.
agriculture. We gain access to the largest market in the world
and we give up nothing in return. We may not know the magnitude
of this market-opening opportunity for several years but what
is abundantly clear is that U.S. farmers will only benefit from
this trade agreement if Congress approves permanent normal
trade relations for China.
On behalf of the National Corn and Soybean Associations, we
will be working diligently for passage of this agreement. Thank
you.
[The prepared statement of Mr. Burrack can be found in the
appendix on page 89.]
The Chairman. Thank you very much, Mr. Burrack.
Senator Cochran, do you have comments or questions?
STATEMENT OF HON. THAD COCHRAN, A U.S. SENATOR FROM MISSISSIPPI
Senator Cochran. Mr. Chairman, thank you very much. I came
over to thank you for having this hearing and letting us have
the opportunity to receive comments and statements from
Secretary Glickman the U.S. Trade Representative's Office about
the agreement that has been reached with China. And this panel
has a particularly important role, I think, at our hearing
today to tell us what the practical consequences are for a
number of commodity groups and agricultural interests in the
United States if we approve permanent normal trade relations
with China and try to implement this agreement that has been
reached.
I support our approval of normal trade relations with
China. I think it is in our best interest. I think it is clear
that it will improve our opportunities to sell more of what we
produce in that market and the potential for growth there is
enormous, and you have all eloquently talked to that point.
There have been some problems because of failure to reach
agreement on some items, such as the export of fertilizer to
China. We had hoped that, that agreement would include some
language relating to the state-owned agriculture fertilizer
enterprises in China and the monopoly that it now enjoys in
that market. And unless some change is made in policy, it may
very well continue as a government-owned monopoly in the
future, or at least government-sanctioned monopoly in the
future.
I have had an opportunity to talk this week with both
Ambassador Li of China and the Vice Minister of Trade and
Economic Development, Minister Sung, who has been here in
Washington. I hope that we have been able to impress upon the
Chinese the importance of making this change and recognizing
the importance of an opportunity for Americans and others to be
able to sell chemical fertilizers in China.
The European Union, as some of you have pointed out and
observed, are continuing their round of discussions on an
agreement. It may be that, that will offer an opportunity for
the Chinese to make some commitment in this regard. We hope
that they do.
It may be difficult to pass legislation in the Congress
right now on normal trade relations because of the white paper
that has been written with respect to Taiwan and whether or not
that is a new and different kind of impression that China has
of their relationship with Taiwan needs to be explored.
And there are other problems. I am not saying that
everything is perfect and that we are going to have no
complaints about policies in China. We will have, I think, more
opportunities to have access to discuss these problems and to
work out and resolve differences for our mutual interests, best
interests, and in the cause of stability of the relationship
and ultimately peace in the world.
So I am hopeful that this is a step that the Congress will
agree to take and I intend to do everything I can here in the
Senate to push the process forward and see that we approve
normal trade relations as soon as possible.
Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator Cochran.
Senator Cochran has mentioned the fertilizer issue, as have
several Senators today to specifically get a response from the
administration on this issue. This is still unsettled business
but I appreciate at least that the issue has been raised, and
that was one purpose of our situation today.
Three of you have mentioned unilateral economic sanctions
imposed by our own government. This has been a subject of
intense advocacy by this committee to remove them and we have
passed legislation from the Committee that is agriculture-
specific. We have also tried various other committees in terms
of more general policy changes, not without some success;
namely, our own government has been imposing these fewer and
fewer times and there is a more rational argument now in terms
of the threshold of what ought to occur. But nevertheless, this
still remains unfinished business and we appreciate your
underlining it in your testimony.
Mr. Hardin, you have heard earlier the discussion with
reference to pork, I think Senator Grassley and Senator
Fitzgerald and others have raised this issue on inspection,
because it is a very serious one. You have gone into greater
detail about the numbers of Chinese delegations and the degree
of scrutiny with which all of this has occurred.
What was your reaction to the administration witnesses as
they tried to respond to this issue, as they did earlier on
today? Do you feel any sense of hope, optimism, or what would
you advise, having heard them?
Mr. Hardin. Well, the purpose in my going into such detail
was obviously to go beyond this room as to how very important
this is to the pork industry for our final support. I remain
hopeful, but the Chinese must fulfill their commitments.
The Chairman. And it is apparent that they have not done so
and they have bought pork apparently from Canada. With all
these contacts you have had with the Chinese, do you have any
inkling as to what is going on here?
Mr. Hardin. I guess I will engage in some uninformed
speculation. There are obviously many levels that need to make
a change in Chinese society and I think we have to get down
below the Chairman's level to confront that and move them
along, but it is absolutely essential that we settle this now.
I remember 9-years ago this spring Ambassador Hills told
me, ``Withdraw your suit and I will get you access to the
European Community.'' Kevin sitting behind you has worked
innumerable hours on these types of issues with Europe and it
is absolutely important that we settle this now and move on.
The Chairman. Let me ask you, Mr. Suber, about the dairy
situation. You have what I thought was an optimistic forecast
of $135 million of sales. How would that be broken down? In
your testimony you mentioned several types of products the
Chinese might want to purchase but the logistics factors would
seem to be considerable, except maybe for a solid product of
some sort, and the distribution process. How did you come up
with the sales forecast?
Mr. Suber. The bulk of it, on a volume basis, we would say
is in the ingredient sector, such as whey and lactose, which
does not have a logistical issue because it moves
unrefrigerated, much of which goes to animal feed for their
burgeoning pork industry, in fact, but also into food
processing that is gaining greater and greater sophistication
in China.
But on a value basis, a good chunk of that would be
represented by cheese and ice cream. Cheese, the big driver, as
I mentioned, for cheese consumption around the world has been
pizza. The tariff on cheese has made pizza generally an
uncompetitive menu item for most fast food chains. This will
make it a competitive food item and the success that the
company Tricon has had in its Kentucky Fried Chicken chain will
be able to transfer to its Pizza Hut chain and to its
competitors to drive more pizza consumption and we expect that
it will be a player, not the only player but a player in
providing cheese to that market.
The Chairman. It was mentioned by you, Mr. Hardin, and
maybe earlier by the administration witnesses in response to
questions, that the agreement has not yet been published in
China, which is a curious situation and, of course, difficult
as you try to resolve the pork situation, but that could be
true of others.
Do you have any idea as to why? What have the Chinese
people you have talked to had to say about that?
Mr. Hardin. Well again, I believe there is resistance below
the highest levels and the highest levels must dictate to those
below what has been agreed on. And obviously China today is not
a country of law, and this is part of the very essential
transition to that, to make things move forward, and we must be
firm.
The Chairman. Senator Cochran, do you have additional
questions?
Senator Cochran. No, thank you, Mr. Chairman. We appreciate
very much the assistance of this panel though, to our
understanding of the practical consequences of this agreement.
The Chairman. We do indeed. Many of you have had from your
testimony extensive contact with Chinese citizens and
government officials. As you heard from Senators today, who
were not merely name-dropping, this has been a committee that
has been internationally involved with a good number of members
having visited China and had specific interest in this treaty,
as well as in specific commodities, and that will continue to
be the case. We are grateful for these contacts but they
probably are very important.
To pick up the point Mr. Hardin has made, the Chinese
debates internally would appear to be very substantial. We have
talked today about our debates and it is substantial and we
admit this, but nevertheless, in China it is apparent that
there are very diverse views as to whether this is a good thing
or not for a society that might go forward or might not.
So it is a critical moment for us to understand the
politics of each other and to some extent through our dialogue
perhaps to enhance the possibilities.
We thank all of you for coming. We thank everyone who has
participated in the hearing and the hearing is adjourned.
[Whereupon, at 11:34 a.m., the Committee was adjourned.]
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A P P E N D I X
March 1, 2000
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DOCUMENTS SUBMITTED FOR THE RECORD
March 1, 2000
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