AMBASSADOR Portman: Well thank you all very much for being here this morning, another beautiful facility in the Conference Centre.  We want to thank the Hong Kong hosts, the people of Hong Kong, for their warm hospitality and their welcome. 

We arrived late last night straight from Washington, so our time it’s something like nighttime rather than noon, but many of you have also been on the road.  We’re delighted to be here.  I’m joined by Secretary of Agriculture Mike Johanns, who will be speaking here in a moment, and then we’ll both take questions. 

We’ve come here ready to work.  The United States believes that this meeting needs to be a productive exercise where we actually make progress on a wide a range of issues in the Doha round.  I’m not only joined by the Secretary of Agriculture, but also by a large and experienced U.S. delegation that is ready to roll up its sleeves and go to work.  We’re reaching out to our trading partners.  Already this morning, we’ve had a number of meetings.  I’ve met also with the Chairman of the Hong Kong meeting, John Tsang. 

Our goal is very simple.  We want to solidify the gains that we’ve already made since the July 2004 framework.  Second, we want to agree on a development package for the least developed countries, which will be connected to the overall result in the Doha round.  Third, we want to make tangible progress.  Pascal Lamy is fond of saying that we need to top up the core negotiating areas in Doha.  I think I know what that means, and we agree we need to top them up.  We need to make progress in each of the core areas.  We know we won’t get as far as we had hoped to in the Hong Kong Ministerial -- after all this is supposed to be the four modalities meeting, kind of the final framework -- but we also know that we need to use our time here very productively. Rarely do we have this opportunity to sit with our colleagues from 148 different nations around the world, all focused on one thing, which is the successful conclusion of the Doha Round which will enable us to see the benefits of trade spread broadly. 

In the area of development, we share the interest in improving market access for least developed countries.  The U.S. is already the most open major economy in the world to least developed country products.  The IMF and World Bank do an annual survey.  Some of you have seen this, it’s called the Global Monitoring Report.  I believe we have it here this morning, if you don’t have it already.  It indicates how open a developed country is to the products from least developed countries.  A lower number is better; the United States is at 5, Canada is at 6, the EU is at 13 and Japan’s at 21. 

So the United States is proud of our record.  In fact, through our preference programs like GSP, like AGOA, 91% of tariff lines are already duty-free.  As you know, we have a little trade deficit in the United States, in fact a substantial trade deficit.  Over 60% of that trade deficit is made up of goods from developing countries.  We’re proud of our record as the most open developed country of this group and we welcome others in their interest in matching us.  Specifically, we support the objective of duty-free, quota-free for least developed countries and we look forward to working with our trading partners this week on how to implement that, consistent with our existing preference programs I mentioned earlier, where we do have some latitude with respect to particular products from particular countries where they have demonstrated that they are already competitive. 

In addition, on the development front, just last week we achieved a landmark breakthrough in the TRIPS agreement.  This is concerning pharmaceuticals.  The agreement balances the need to protect patent rights with the need for life-saving medicines, especially in the developing world.  In the area of trade facilitation, eliminating red tape and customs procedures, our negotiating group there has prepared the way to move very quickly to the next stage.  The increased efficiencies that come from a success here will be particularly helpful to developing countries. 

In the area of aid for trade, we believe it is critical to further invest in developing countries to help them integrate into the global marketplace.  The U.S. takes a back seat to no one in this area.  A successful result will enable least developed countries to take full advantage of the market openings that are at the core of Doha, so all of the core negotiating areas, whether it’s agriculture or rules, services, non-agricultural market access, all these areas will only be able to benefit many least developed countries if there is adequate aid for trade to permit them to take advantage of a successful Doha round. 

The United States is the largest provider of trade-related assistance in the world; our total this year was $1.34 billion.  Now that’s up 46%, incidentally, from 2004.  We put a high priority on trade capacity building and aid for trade.  Our spending on trade-related assistance has doubled, in fact, in the last five years.  The United States has also pledged an additional contribution to the WTO Global Trust Fund.  We believe in this technical assistance activity because it works.  We’ve contributed over $6 million to that since the Doha round was launched.  We also have played a leading role in the integrated framework which coordinates the trade-aid efforts of the World Bank, the IMF, the United Nations and others, and we’re ready to do more there too as well. 

So I’m pleased with the progress we’ve already made on development.  I’m pleased with the prospect that we can do more here in Hong Kong with regard to a development package for least developed countries, but we have to remember that progress on the development package is no substitute for progress on the market access openings that are part of the overall success of this round.  I would even go so far to say, progress on the development package is not adequate in and of itself because it is tied to success in the overall round.  In other words, if we don’t complete the round successfully the benefits that come from the round will be lost but so will the specific benefits that we hope to agree to this week.  Because the real key to development is market access, and all the studies indicate that, and because agriculture access is our top challenge we think we need to make more progress here as well. 

Opening up markets by reducing tariffs will benefit farmers everywhere, but particularly in developing countries.  The World Bank, as you know, has determined that over 90% of the gains in agriculture will come from market access opportunities.  As you all know, the United States made a bold agriculture proposal back in October.  It has yet to be matched in boldness by others, including the European Union.  The gains of expanding trade will not accrue to the people of the developing world, or to Europeans for that matter, unless and until the EU Commission is willing to agree to a formula that meets the Doha requirement of new trade flows: substantial improvement in market access.  The EU has insisted that the more advanced developing countries must make more generous offers to lower barriers in industrial goods and in services in order for them to make progress on agriculture.  The United States agrees. 

We need to see more progress in the area of manufactured goods and services.  We agree with the EU that’s very important.  After all, manufactured goods alone account for three-quarters of global trade and developing countries have the most to gain here, too.  Seventy percent of the tariffs paid by developing countries are paid to other developing countries.  But we cannot avoid the hard choices needed to reach an agreement on agriculture, which from the start has been at the core of the Doha round.  Opening markets and reducing subsidies will go a long way toward development but we also have to invest in trade-related aid as we’ve talked about earlier. 

Our biggest challenge this week, we believe though, is top up the core areas as Director-General Lamy has suggested.  This, in our view, will determine whether the Hong Kong meeting is a success or not.  In agriculture we must make sure that whatever gains can be achieved by deeper tariff cuts are not undermined by granting too many exemptions for sensitive products, that’s something we should be able to agree to here in Hong Kong.  In the area of trade and services we challenge our partners to offer better quality market-access commitments, particularly in key sectors such as financial services, telecommunications, computer-related services, express delivery, distribution and energy services.  And we need to set a new deadline for tabling revised and improved offers.  That’s something we can do here in Hong Kong. 

In industrial goods, we should agree that benefits flow from cutting higher tariffs the most. That, after all, was the philosophy of Doha.  We should agree specifically on the so-called Swiss formula which does exactly that.  With two coefficients, one for the developing world, one for the developed world and then allow negotiators to work out the specific details in the first part of the year.  We should be able to agree to that in Hong Kong. 

Frankly, we’re running out of time in the critical mission we have before us.  It’s important to have this agreement finished by the end of 2006 – we must meet that deadline.  If we don’t we take a big risk, specifically in the United States we take a risk that our trade promotion authority would expire, which would happen in mid-2007 unless it is renewed.  But we’ve been at this for four years now.  It’s time to bring the Doha round together.  It’s time to make the tough decisions.  It’s time to move forward.  If we do not, I fear we will have lost a once-in-a-generation opportunity to build a better world through trade. 

We cannot let that happen.  We have to make progress in Hong Kong this week; we’ve outlined what kind of progress we think is essential. We also believe that we need to have another meeting.  Unfortunately, we’re not going to have the full modalities, all of the formulas decided, all the numbers decided that we’d hoped for in Hong Kong so we need to make more progress in the core negotiating areas but we also need to set a date early in the year for another session, another deadline to keep our feet to the fire, to be sure that when we leave Hong Kong we don’t let our guard down, we continue to work hard to meet the potential and the promise of Doha.  With that I would like the Secretary of Agriculture to say a few words and then we will be happy to open up for your questions on any topic.  Chief Secretary.

SECRETARY OF AGRICULTURE JOHANNS:  Thank you, Mr Ambassador.  Just eight weeks ago, the United States put forward a very bold, a very aggressive proposal.  We tabled it, and the whole essence of this proposal was to actually cut and eventually eliminate trade-distorting farm subsidies in exchange for reciprocal cuts in tariff protection by other nations. 

Doha has unique potential to generate economic growth and significantly help the poorest countries in the world.  As the Ambassador pointed out, 70% of duties paid by developing countries are paid to other developing countries.  That’s largely a function of very high tariff rates.  Reform will lead to more trade between developed and developing countries.  When you think about it, as difficult and complex as the issues can be, this is really not very complicated.  Market access equals development. 

Many countries share our view that the response to our proposal, the response by the EU falls short in offering greater access to their protected farm markets.  EU tariffs are high. The EU still maintains it needs to designate 8% of total tariff lines as sensitive products so it just begs the question where in that response is the market access?  I believe very strongly that most of the 148 WTO member countries view Hong Kong as we do, as an opportunity to make tough decisions on the framework for discussions so we can move forward. 

The U.S. is pushing hard for a very successful meeting.  We’ll work around the clock.  We’ll be doing everything we can to build the consensus for a successful ministerial and therefore for successful negotiations in 2006.  To achieve the tariff and subsidy-free world that is envisioned by President Bush, we propose a practical two-stage reform, real straightforward.  Initially by making deep cuts and then over time eliminating all trade-distorting measures.  But a point I’ve made over and over again is that it all has to be a complete package.  It must be a complete package and progress must be substantial on all three pillars, including market access.  We’ve been responsible players, and we’re going to continue to be.  We’re going to continue to stay engaged and negotiate, but we all recognize of course that the clock is ticking.  We ask for that same commitment from our member countries, our colleagues, that we have shown in our proposal.  Thank you very much.

QUESTION: I have a question to both of the speakers. To Mr. Portman, Brazilian President Lula called President Bush yesterday at the end of last week suggesting a meeting a summit meeting of leaders, the main partners in the WTO to try to put a political input in the negotiations.  Is the American government really interested in this kind of a meeting at the beginning of next year?  And the question to Secretary of Agriculture.  In your interview to the Financial Times in the weekend, you sounded very like saying this bold proposal of the United States is taking it now or leaving it.  Is my read of the interview correct or not?

SECRETARY JOHANNS:  Well, let me go ahead and address the last question.  Our attitude about the proposal we have is that we intend to stay at the table.  We intend to do everything we can to get a result.  We are absolutely committed to this round, and we have indicated that we’ll stay engaged.  We’ve not put a single proposal on the table with an attitude of “here it is, this is the best we can do,” or the last word on any topic.  We believe we can do a lot of things, but the ambition has to be matched.  A response that says tariffs will remain high, that will have an ability to pivot tariffs 15%, that will have the ability to take 8% of our tariff lines and set them off the table, doesn’t match that ambition.  I believe fundamentally what is really going to change the world when it comes to agriculture trade is when we commit as a world to reducing and then eliminating subsidies, trade-distorting subsidies, and we open up markets. As the Ambassador indicated, we truly are the most open market really anywhere in the world.  We feel very very strongly that that’s the right approach, and we’re ready to make the hard decisions.  We’re ready to stay engaged, and we’re going to be there to the very end to try to get an agreement that really makes a worldwide difference.

AMBASSADOR PORTMAN: Just a quick addition to that.  Having just spent 12 years in the U.S. Congress, I can tell you that in order to take through our political system the proposal that we have put on the table will require more market access.  It’s just a reality, and I think that perhaps that was what you were referring to.  I think the Secretary’s absolutely right, we are not putting anything forward as take it or leave it.  Other countries have said that.  We’re saying we’re willing to negotiate, roll up our sleeves and work on all these different areas.

But the reality is that in order to have the subsidy reductions we’re talking about, you have to have, as a matter of fairness, a leveling of the playing field in terms of the tariffs and the quotas.  It also happens to be in the interests of the developing world and there we’re very much aligned with countries around the globe that have a comparative advantage in agriculture, who are developing countries.  This is the G20 proposal that we have indicated is a very constructive contribution to the mix.  This morning we met with one of the trade ministers from one of the African countries and had the same discussion we have again and again with developing countries, which is that they too share our concern about increasing market access, lowering tariffs, lowering the barriers to trade. 

With regard to our presidential meeting or our heads of state meeting, we’ll see what happens in Hong Kong.  If we’re as successful as I hope we are, it might not be necessary to have that shot in the arm.  On the other hand, if we have another meeting where we just can’t make progress on these core issues, a meeting at that level could be helpful. 

That’s my view, not necessarily the view of my boss.  I haven’t heard his view directly, although I know that President Lula has been doing a lot of outreach, not just to President Bush, but to other heads of state around the world, and I applaud him for that.  Brazil has been very engaged in these talks from the start.  Brazil understands the importance to the global economy of having a successful Doha round, and I applaud President Lula’s direct and personal interest.

Yes, sir.

QUESTION:  I’m from Russian news agency Novosti.  I have a specific question for Mr. Portman.  Can you expect any breakthrough in U.S.-Russian negotiations on joining the WTO here in Hong Kong?  If it’s not going to be a breakthrough, what can you expect?

AMBASSADOR PORTMAN:  I hope to have a meeting with Trade Minister (Mr. German) Gref while I’m here to talk about the outstanding issues that remain with regard to our bilateral agreement with Russia.  It’s strongly in the interest of the global economy to have Russia join the WTO.  I believe it is in the interests of the United States as well.  So we will do everything we can to try to resolve our remaining issues and get Russia in a position, from a U.S. perspective, where they are ready and able to join the WTO.  They also have negotiations, as you know, with a number of other countries still outstanding.  It’s not just the United States where we still have some outstanding issues. 

Then there are multilateral issues, rules issues, they need to work through with the WTO.  I hope we can make some progress this week.  We had hoped to be able to finish up by the end of this year, as you know.  We’re not there yet.  We still have some tough issues to work through, but I’m hoping we’ll have another good meeting this week as we did at the APEC summit.

QUESTION:  Kyodo News from Japan.  One question to Ambassador Portman, the other to Secretary Johanns.  Ambassador Portman, do you have any comment on the Japanese plan to assist the LDC, which was announced by Prime Minister Mr. Koizumi on the weekend?  And Mr. Johanns, could you comment on the Japanese decision to resume beef imports from the United States?  Thank you very much.

AMBASSADOR PORTMAN:  It’s about time somebody asked that question. (Laughter.)  Secretary Johanns is going to answer first because he’s got a big smile on his face having spent countless hours on this issue over the past many months.  Then I will comment on the Koizumi development package.  Mr. Secretary.

SECRETARY JOHANNS:  Thank you, Mr. Ambassador.  I appreciate the opportunity to make this announcement.  I’m very pleased to announce that the Japanese market is now open to U.S. beef products.  Resuming beef trade with Japan is great news for American producers and Japanese consumers, as well as an important step toward normalized trade based upon scientifically sound, internationally recognized standards.  As you all know, reopening the Japanese market to U.S. beef has been a top priority for me as Secretary, really dating back to my time in front of the United States Senate Ag Committee in my confirmation hearing.

I will use that question to express my appreciation to Ambassador Portman for his assistance, my appreciation to President Bush – as you know, this issue was raised by the President on a number of occasions – and finally to express my thanks to Chairmen Goodlatte and Chambliss.  And probably most importantly to express my appreciation to our excellent trading partners in Japan.  This was a very careful, thoughtful -- as I have described -- sometimes painstaking process by them, but it was science-based and it was thorough.  We welcome this news.  It is very, very good news.

AMBASSADOR PORTMAN:  Thank you.  It is good news, and it’s an example of where through persistence we can achieve results in trade negotiations.  This is one issue that will be of benefit to Japan and to the United States.  Our farmers and ranchers deserve to have their product, which is safe, be on the shelves in Japan.  That will now be able to happen.  We’re hoping that will now happen in other countries as well, including here in Hong Kong and in Korea, China and elsewhere.  I would like to personally commend also our colleague, Agriculture Minister Shoichi Nakagawa, for his personal involvement in this issue and his assistance.  He was the trade minister, as you know, until a month or so ago, and we worked closely with him on this issue.

With regard to Japan’s announcement on aid for trade, I want to commend the Japanese government for helping us to achieve more momentum here in Hong Kong on the aid for trade package.  We look forward to seeing the details of the Japanese proposal.  Our understanding of it is that it is a combination of lowest interest loans, grant, technical assistance programs focusing on export promotion and increasing productivity.  The U.S. approach is a little different.  We provide grants and fewer loans. 

So as you are looking at these various proposals, as I said earlier, the United States takes the lead around the world in providing aid for trade.  We intend to continue to do that, but ours will be more focused on grants.  You will hear more from me about this as the week progresses, but we commend Japan today for its initiative. 

QUESTION:  I am Swanson with Inside U.S. Trade.  Just a quick follow up on the beef question for those of us who aren’t in the (inaudible).  Is that effective today or tomorrow?  When will the beef shipments actually be able to start entering Japan?  And then my real question is on cotton.  Last week, Mr. Portman, you made some comments suggesting that we might hear something new this week on U.S. willingness to reduce cotton tariffs.  I’m just wondering if this would be in the context of the duty-free quota-free initiative for LDCs and whether under USTR’s analysis this would actually lead to increased market access for those countries in Africa, or whether it wouldn’t, given that they would be competing in the U.S. market with subsidized U.S. cotton.

SECRETARY JOHANNS:  In reference to the issue about the Japan decision on beef, it is effective right away.  Having said that, there are some last stages here.  They will be dispatching a team to the United States -- I think that happens tomorrow, as a matter of fact.  It will happen very quickly.  We have plants in the United States that are ready for their review and inspection to make sure that we are complying with the Japanese requirements.  We don’t anticipate any problem there.  We hope that sign off on those plants can literally occur within the week.  That would mean that beef could be heading toward Japan certainly within the next week to ten days.  Again, we’ve been very, very engaged with the Japanese on these issues.  I don’t think either side is anticipating any surprises at all.  We should be ready to implement this very quickly.

AMBASSADOR PORTMAN:  And with regard to cotton, as you know, the United States takes this issue very seriously.  We are fully engaged.  In fact, this morning I’ve already had one conversation with a trade minister from one of the C5 countries.  We have a meeting scheduled – with Secretary Johanns and myself – with these countries coming up, either – is it tomorrow?  And we are in constant communication with them.  In fact, there is a conference going on right now about cotton where my deputy, Karan Bhatia, is present so that I could be here with you, addressing the issue, talking about the U.S. response, things we have already done in response to the concern.  And we will be making further announcements as the week progresses. 

It’s an issue that we take very seriously.  The ultimate answer to the issue in our view is a more competitive cotton industry, not just in these four West African countries but in other countries of Africa that have an interest in cotton and in reducing trade-distorting subsidies that directly affect cotton, and finally in additional market access to cotton.  We think our proposal is the best proposal on the table to do all of those things. 

We are working under the assumption that this week we will continue to have very constructive talks with these ministers from the C4 plus Senegal, so C5 countries.  Our talks have been excellent so far, and that we’ll be able to come up with a good resolution of the issues.

I’d like to say a couple of things about cotton if I could, having spent a lot of time on this issue over the past few months since I became USTR.  First of all, the cotton production from the C5 countries is roughly 3% of the world cotton production, roughly 10% of trade.  The degree to which U.S. subsidy programs affect the price of cotton and the price for their cotton as they attempt to export it is subject to a lot of different analyses.  There are 11 studies out there; some of you have seen all 11 of them.  The IMF/World Bank study would indicate that the impact on prices of West African cotton of the U.S. subsidy program is about 2.8%.  The average of all of the studies that go from 2% to about 11% or 12% is about 4%.  So if you look at this problem in terms of the perspective here, it’s a relatively small part of the trade in cotton, and the subsidy part of it is a relatively small part of the final price that these growers receive.

Having said that, the United States is very focused on this issue, and we want to be very responsive, and we have been responsive.  The cotton improvement program that we have initiated is providing millions of dollars specifically for making these cotton growers more competitive.  Why is that important?  Their yields are half the yields globally of the U.S. cotton farmers.  And not only are their yields relatively low, but the revenue that the farmers receive is relatively low because of the way in which the cotton is marketed. 

And so, starting with the soil and the seed and all the way through the marketing, the U.S. is very focused on providing the technical assistance to make these growers more competitive and more efficient.  Should that happen, think about it, even going from their current yields to a 50% increase in yields – much less than a 100% increase in yields – you would see a dramatic impact that would exceed the amount of the subsidy impact. 

The marketing issue is a major concern.  So is market access.  So to Ian’s specific question on market access, we will be making an announcement about that, but yes, we believe there should be additional market access provided.  I think you will see that we have addressed the concerns quite specifically -- and I think ambitiously and expeditiously – within the context of the agriculture negotiations, which was a commitment back in July 2004.  All I can say is, spending a lot of time on this issue, we’re beginning to understand the parameters of it better, and we think that this is an issue where we can make a difference here in Hong Kong in terms of helping those farmers in these least developed countries in Africa, and indeed then being able to make even more progress on the ultimate issue here, which is how do you get true market distortions out of agriculture.  How do you really reduce subsidies, how do you really reduce tariffs, get the quotas out of the way, which would be of great benefit to the West African cotton growers, but also so many other developing countries that have an advantage in agriculture.

QUESTION:  Doug Palmer with Reuters.  I just wanted to go back to the point you made about sensitive products and wondered if you could elaborate on what it is you’re trying to achieve here this week?  Do you want to walk away from this meeting with an understanding on the percentage of tariff lines that would be allowed to be designated as sensitive products?  And then just a second question that has to do with the development package.  Are you hoping that this development package neutralizes the preference erosion argument so that preference erosion is no longer an obstacle to reaching a final package?  You may be aware that Senator Grassley, for example, has expressed frustration with countries using this argument as a reason not to agree to a final package, and he has hinted that Congress may not be disposed to reauthorize preferential programs if they are going to be used against the United States in trade negotiations.

AMBASSADOR PORTMAN:  Interesting point.  In terms of preference erosion, the United States acknowledges it’s an issue and needs to be addressed.  We also understand that it’s less than 4% of the trade in agriculture, and that with regard to those countries where they may be a preference eroded, if you provide more market access – not just to the developed country where they have a preference, but to their neighbors and to all other countries, there will actually be a net benefit. 

Will there be some instances where the preference will be so eroded that it’s more than the net benefit?  Probably, and there you can address it specifically.  As you know, there is a program to do that, supported by the WTO under the IMF, (inaudible) program that provides funding for that precise purpose.  There’s also a responsibility, in my view, on a bilateral basis for countries that have preference programs to help with regard to preference erosion. 

But we feel strongly, and it sounds like Senator Grassley does, too – as do, by the way, most of the members of the WTO we’re hearing from, including members of the Africa group – that you cannot hide behind preference erosion as a way to protect your own farmers.  It’s cynical, and it doesn’t hold up in terms of the economic analysis.  What we need to do is provide real market access so that not just in the United States and the European Union, but around the globe, you have a reduction of these barriers, which based on the economic analysis will result in huge development gains in agriculture.  That’s been the core of the Doha agreement from the start:  That we need to deal with market access and agriculture because it provides these development benefits.  To hide behind the least developed countries that might have a preference in order not to make that important decision of opening up trade globally, I think, would sell Doha short.

We hope that again here in Hong Kong – to answer your specific question – we can make some progress in this regard.  I mentioned the sensitive products area because it seems one area where the European Union has told us and said publicly that they have some flexibility.  So wherever they have flexibility, we would like to probe that and to see what progress we can make.  We think at the end of the day, a watered-down agreement that provides very little market access of very little reduction in subsidies is not a good agreement.  I think we need to keep our expectations high and keep our ambition high for the round.  But, by the same token, wherever we can make progress, we want to make it. 

And so we’ve focused on the area of flexibility and particularly with regard to the number and amount of sensitive products and then how they are treated under tariff-rate quotas, that’s an area where we can make progress here over the next several days.

QUESTION:  Thank you, Ambassador.  I’m Li Ping from 21^st Century Business Herald from China.  Mr. Mandelson said last week in an interview that he thinks that China should play a more active role on the DDA (Doha Development Agenda) negotiations and that China should open the market more to the developing countries.  I wonder what is your opinion?  My opinion -- maybe not so many people are concerned – is that China has already implemented all her promises in the WTO while the other major players didn’t.  We suffer now from the threat from U.S. cotton because we opened the market.  What is your opinion?

AMBASSADOR PORTMAN:  Thank you for your opinion.  Are you from the Chinese government or from a media source?  I disagree with you.  I think China has an obligation to step forward and I think they will.  China is a major beneficiary of the global trading system.  China has embraced trade.  They’ve looked to the South and looked at this city and seen the benefits of trade, among other examples, and they’ve chosen to do the same.  I applaud them for that.  We think that’s good.  We think it will help in terms of the economic development of China, where they still have hundreds of millions of people who live in the rural area who live on dollars a day.  We also think it’s good for the global economy.  But we also think that when you are a beneficiary of the global trading system, you have a responsibility to be at the table and to help ensure that that liberalization continues.

I’ve seen China take a more and more active role.  They did at the APEC meeting.  China specifically talked about the need for improvement in market access and agriculture, and I applaud them for that.  So I think they have a responsibility to more in terms of promoting a global trading system that has fewer barriers.  I also think they have a responsibility in their own market to continue to open up. 

Cotton’s a great example, since you mentioned it.  Guess who the biggest purchaser of cotton in the world is?  China.  China purchases more cotton than any other country in the world, and for China to open more to these least-developed countries in terms of reducing their tariffs would certainly make sense.  That’s just one example where if we are all going to come together and help solve this problem, we all should make contributions.

QUESTION:  Frances Williams from the Financial Times.  Various people in Congress have expressed reservations about your expressed intent to expand duty-free quota-free access to sensitive products such as textiles.  At today’s press conference this morning, Peter Mandelson seemed to make taking a notably softer line than he has done, for example last week, saying that he recognized that the U.S. had certain need for flexibility in the duty-free quota free area.  My question is, do you think that this softer line will make it easier to reach a deal in Hong Kong?  And are you proposing to make an announcement along the lines that the Japanese have made, and if so, when?

Secretary Johanns: First of all, I’m pleased to hear that Commissioner Mandelson talked about the need for us all to work together to provide more market access for least developed countries. We agreed to that last week in Geneva as you may recall, agreed we’d have a common platform on that, and then I heard some other press accounts that maybe that was not the case anymore, so I’m glad to hear that we’re pursuing a common platform, because that’s what’s in the interest of the least developed countries.

As I said earlier, the United States is very proud of our record of openness. We are more open to the products of the less developed countries than are any other of the major developed countries, and we intend to continue that. But we do need to do it through our existing preference programs, and we need some ability with particular products from particular countries to have some flexibility.

Why? In part because of our domestic concerns. But I think as important, some would say more important, with regard to the AGOA countries in particular, which is the sub-Saharan African countries, with regards to textiles. It’s a tough issue for us, because so many of them are at this point working on textiles. And so there are some countries that are least developed countries that are globally competitive. In other words they have a very competitive product. We want to instead focus our efforts on those countries that need help in order to be competitive.

So that’s the basis of it. I’m being very frank with you. The United States will again remain the most open, we believe, of any of the developed countries. This includes not just tariffs, by the way. We need to look beyond tariffs and be sure that country of origins, standards, are such that the LDCs have some flexibility and there the US country of origin procedures tend to be more flexible.

Another issue is regulations, specifically, SPS, Sanitary and Phyto-Sanitary regulations. There the United States with regard to LDCs tends to have some more flexibility. And that’s one reason you see in this global monitoring report, it’s not just a matter of tariffs, it’s a matter of true openness to the products of the least developed countries across the board, including rules of origin, SPS, and other issues.

So, we will roll up our sleeves, and we will be in a position to provide essentially all products from all countries duty-free treatment if they are least developed countries. But we do need some of that flexibility that Commissioner Mandelson talked about in order for it to work through our existing preference programs.

At the end of the day, we will be expanding what we do, and also challenging other countries to do the same. And market access will be enhanced for least developed countries. (Do you want to comment?)

QUESTION: This is Higuchi with Jiji Press. I have two questions, one is for the Ambassador, the other is the Secretary.

To the Secretary: I have a question about the Japanese beef issue. The Japanese Government has decided reopen its market to US beef. How about Kobe beef? And has the United States finally decided to reopen its market to Japanese beef?

And, the other is for Mr. Portman. You mentioned about sensitive products. What do you think about the G-10 proposal including Japan, which is referring to the 15% of tariff line?

Secretary Johanns: I’ll go ahead and answer your question about Kobe beef, or wagyu beef. As you know we have been going through a process ourselves relative to reopening the United States market to wagyu beef, a very extensive process like Japan: risk analysis, and all of the other things that are involved in that.

We will issue a statement at 8 a.m. Eastern time in the United States, but you’ve asked a direct question and I’ll give you a direct answer. That statement will be a positive statement. We will indicate that our rule-making process is done, and that we are ready for that market to reopen. So that’s about as direct as I can be.

AMBASSADOR Portman: With regard to the G10 proposal and Japan’s role. The G10 proposal on market access is in some ways more generous than the EU proposal. Interestingly, because the G10 tends to be the most protected agriculture markets in the world. In other ways, in particular with regard to sensitive products, it’s probably on par with the EU proposal.

One part of the G10 proposal that concerns us the most probably is the tariff cap. That there should not be sort of an arbitrary decision made that EU cannot cap any tariffs. We think there ought to be a cap somewhere, so that you don’t have tariffs that are extraordinarily high, such as the 700% percent tariff.

So the G10 proposal does concern us in some respects, but in other respects, it actually is a proposal we think is more consistent with the Doha commitment than is the EU proposal.

With regard to Japan, I want to make a specific comment, though. And this also holds true with Korea, by the way. Both of which are APEC members and discussed this issue of agriculture market access during the APEC Summit. They have shown considerable flexibility. I won’t try to speak for them today, but just to say that they have shown considerable flexibility, and a very constructive attitude on the agriculture issues.

‘Cause that’s surprised some observers. But I think it reflects the commitment from the Prime Minister through the Japanese Government to come to a successful conclusion of the Doha round. And I think their aid-for-trade proposal’s another example that …  and incidentally to the woman’s question earlier -- I’m sorry I didn’t respond -- on the aid-for-trade. Yes, the US will have additional comments to make on the aid-for-trade before the week is out.

I want to commend Japan for the flexibility that they have shown in order for all of us to come together and reach an agreement in agriculture.

QUESTION: Hi, Steven Sproul from National Review.  Is it still a US priority for any final agreement to have included in it changes to the blue box so that our counter-cyclical payments fit there?

AMBASSADOR Portman: In the US proposal, as you know, there is a reduction in our trade distorting support in the amber box, which is the most trade distorting subsidy programs of about 60%. Well it is 60%. When you take out all the water, meaning the amount between what we’re allowed to do under the bound rate and what we actually do under our applied rate, it’s closer to a 47% cut. That’s a deep cut because it would make it very difficult for us to continue to have the programs in place.

In particular, I’ll let the Secretary speak to this, but our marketing loan program could not operate within those same numbers, so it would have to be reformed. This is why we are getting a lot of heat from Congress, as someone talked about earlier, on these programs. This is why market access is critical to go along with these cuts.

The second most trade distorting area is called blue box. If you look at the July 2004 framework agreement of the WTO, it explicitly references what’s called our counter-cyclical program, which is not production-related, therefore less trade distorting, but it is price-related. And it was provided for in the 2004 framework, as part of the blue box, and the blue box was to be limited to 5% of your production. Right now it’s unlimited. And the European Union has, I think, 33 billion dollars worth of aid in the blue box. The European Union, as you know, has the ability to use 4 ½ times more support than we do, and uses 3 times more.

So what we have said in our proposal is, the blue box instead of being limited from unlimited to 5% of production, should go down to 2 ½ % of production. Which further squeezes what can be in the blue box and provides the ultimate discipline on blue box, which is less aid, less support. So that would be our proposal, that the current 5% number is about 5 billion. The counter-cyclical program is at 7.6 billion, authorized. So it would require reforms in that program as well. Hope that answers your questions. Yes sir.

QUESTION: Sergio Leo from Brazil newspaper Valor Econômico.  Since you are talking about big expectations in the WTO in credibility, I’d like to know why, what impedes you, why don’t you fix . . . set a timeline, set a deadline to comply with the decision of the WTO about illegal subsidies for American cotton?

And, Mr Mandelson in the interview today also talked about . . . talked that it’s time to stop focusing so much on agriculture, and try to discuss the other issues in this meeting to advance with the round. What do you think about that?

Secretary Johanns: I might address the issue on the cotton program. WTO ruling was received and absolutely everything that I could do as Secretary, administratively, we did, in full compliance with the WTO ruling. The WTO ruling also went to a legislative item, and that’s the Step 2 cotton program. That’s basically a subsidy program for exports.

Because it is legislative, I don’t have the power as Secretary to repeal legislative actions taken by our House and our Senate. But we submitted the legislation to repeal that and that legislation has now been approved by House and Senate. They’ve got to get together and work that out. We’re optimistic that that is going to occur. We’ve been working very hard to make that occur.

So that’s the issue you addressed. Everything was done administratively and we have acted immediately on the legislative piece, and we are working that through the legislative process, but that’s something that I could not do administratively.

AMBASSADOR Portman: (Okay we have one more question for Richard. I’m sorry for the other questioners, but the Brazilians are here and they have the room next.) Just briefly to the second part of that question about Commissioner Mandelson’s view that we need to move on from agriculture.

We need to, as I said earlier, make progress in all the areas of Doha. I think this should be done in a parallel fashion. But whether the United States believes that or not, and whether the EU would like to go first in other areas or not, as a practical matter, it’s our belief that until you can solve the agriculture dilemma, which is how do you put together a proposal the reduces trade distorting subsidies, provides substantial improvement in market access, and gets rid of export subsidies on a specific date. Until you resolve that, it will be very, very difficult to make progress in the other areas.

So we agree that we need progress across the board, but we also think that by not making the tough decisions in agriculture, we are risking losing all of the benefits of the Doha round. Richard.

QUESTION: Just two quick questions. First, you mentioned the need for some new deadlines. I wondered if you could give us an idea of precisely what deadline that might be: the end of April, the end of March, May?

And secondly, in answer to a colleague’s question about duty-free access. You said it wasn’t easy to give duty-free access to competitive producers. Presumably you’re talking about Bangladesh on textiles, because that could harm your preference programs with sub-Saharan Africa. But aren’t you using exactly the same logic that you’re accusing Mr. Mandelson of using over preference in general? That you can’t harm the . . . you know, you’ve got to look after the weaker because of (inaudible) to need these programs?

AMBASSADOR Portman: To these, Richard. One, I’m meeting with Pascal Lamy this evening, and I want to wait and have more of an opportunity to speak with the Director General before I tell you what date I think is appropriate. But I think it needs to be soon, sooner rather than later.

From the US perspective, it will depend on how much progress we make here, but we don’t want to give people a breather after Hong Kong. We think we should redouble our efforts after Hong Kong. Unless we come up with some grand agreement here, which seems to be unlikely, we think we ought to push hard in the new year.

With regard to my comments on textiles, I think I started saying domestic manufacturers are part of the concern. But there is also an AGOA concern. That concern can be addressed to a certain extent, but the bigger picture is not whether we provide market access or not. We’re perfectly willing to do that, and you know our proposal is the most aggressive on reducing tariffs, and we’d be subject to that same tariff reduction.

The question is whether in a preference program, a new preference program, whether you create an additional duty-free preference. So it’s a little different calculation, although I understand the point that you’re making.

Our issue on textiles is, again, a relatively small issue in the sense that we do allow textiles in duty-free now, from such LDCs, as you know. We will continue to do that. We can even expand that. But for the most competitive textile producers, there will be some obvious political concerns from getting that through our political process. So I’d rather be up front with that, and frank with that, than to have that issue come up a year from now, when we’re trying to get this through our political process. So we will be able to provide duty-free access to essentially all products from essentially all least-developed countries, with the exception of these areas where there is a global competitor.

And therefore we think we can make progress on the duty-free/quota-free front this week. We encourage other countries to do the same.

Thank you all very much. Look forward to being with you this week.

QUESTION: Very short question, very short one?

AMBASSADOR Portman: I don’t a room anymore. I’ll talk to you afterwards if you want. 

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