Trade is fundamental to U.S. agriculture and agriculture is fundamental to U.S. trade. Opening markets for agricultural products remains central to our objectives when conducting negotiations within the World Trade Organization’s Doha Round and numerous bilateral agreements. U.S. farmers know how crucial it is to promote more open trade. U.S. farmers have been a driving force in the pursuit of free trade. Robust support for free trade from farm country has been important in determining the shape of U.S. trade policy, and the Bush Administration will continue to stand up for the interests of farmers and ranchers in trade agreements. This mutual support will be crucial to creating new opportunities for farmers.
How important is trade to agriculture now? Consider this. Roughly 25 percent of U.S. agricultural cash receipts are generated from exports every year. One of every three acres is planted for export markets, where we sell over $60 billion a year. Without these export markets U.S. production and your returns would be much smaller. On the other hand, the United States imports a lot of agricultural products, particularly tropical products not grown here, specialty products (e.g., beers, wines, chocolates, and cheeses), and counter-seasonal products. So it is clear, farmers need ever expanding export markets to put food on their tables, and consumers need imports to help put the food they are interested in on their tables.
How about the future? Consider this. Over ninety-five percent of the world’s population lives outside the United States. With this fact in mind, the United States is pursuing a trade policy to raise incomes of billions of people and improve our access to these markets. A recent World Bank report concluded that free trade could lift tens of millions out of poverty. As incomes rise in the rest of the world and our market further matures, trade will be ever more important for agriculture. Consumers around the globe will not only want but will also be able to pay for the products from the United States.
Our objective is to use trade negotiations, both multi- and bi-lateral, to create new and better opportunities for American agriculture. That means opening new export markets for U.S. food and agricultural products and it also means fighting unjustified trade measures imposed on U.S. agricultural products.
World Trade Organization (WTO)
Let’s turn first to the WTO. The World Trade Organization (WTO) with its 149 members is where we should have the best opportunity for broad agricultural reform.
The WTO sets the baseline for global rules on trade, covering tariffs, subsidies, sanitary and phyto-sanitary measures and other government policies. It is also the place where these 149 countries have committed to the objective of creating a more market-oriented agricultural trading system.
Last month, the United States arrived in Hong Kong for the WTO ministerial meeting with bold proposals to substantially open markets and cut trade-distorting subsidies. We saw this as a key to moving the Doha negotiations forward. In Hong Kong, some headway towards a final agreement was made, but many core issues remain in front of us. While often they are the focal point, agriculture negotiations are part of a larger multi-lateral trade liberalization effort – one that consists of negotiations also in industrial products and services – all of which must move forward in relation to one another. At the time of Hong Kong, unresolved issues outside agriculture as well as reluctance to moving on agriculture issues impeded progress in market access, the most difficult and importance issue we face in the agriculture negotiations. As we have done since the beginning of these negotiations, the United States in Hong Kong consistently pushed our proposal on agriculture, particularly the European Union on market access. As the negotiations proceed we will continue to seek an ambitious and comprehensive outcome on agriculture.
There was some good news out of Hong Kong. WTO Members agreed to end agricultural export subsidies by 2013, with some earlier. I would note that when I came to USDA in 1989 and began working on the Uruguay Round, there was not even an agreement to discipline export subsidies on agricultural products. Now we have set a date certain for their elimination - a long-standing U.S. objective to help our producers compete in export markets. The ministerial also provided the opportunity to clear away some issues that were cluttering the negotiating agenda – such as rules for dealing with IPR protection in the face of health crisis like HIV/AIDs and malaria, providing development assistance to developing countries, and further opening markets for the products of least developed countries. But we are under no illusions. Much hard work on the most important issue of trade liberalization - market access and its relationship with domestic support -remains to be done and will be at the forefront of discussions when talks resume in Geneva in January.
We must build on progress we made in Hong Kong and focus on market access leading up to April 30, 2006 the deadline WTO Members have agreed to establish modalities, the basic formulas and rules, in all areas of the negotiations. These formulas will set the stage for the final bargaining through the end of the year over specific commitments, product-by-product and country-by-country. This is an aggressive timetable, but it is needed to conclude the Doha Round by the end of 2006, before the expiration of the President’s trade promotion authority in 2007. Put succinctly, our objective is to maximize our new export opportunities by cutting tariffs and reducing global agricultural subsidies while maintaining adequate flexibility for Congress to design a Farm Bill that addresses domestic needs.
For the United States, the WTO is a platform to address the big issues, and opportunities, our farmers and ranchers face in trade. These big issues are:
· opening markets by cutting tariffs;
· expanding global demand for agricultural products;
· eliminating export subsidies;
· providing greater harmonization of domestic support spending; and
· clarifying liability on WTO disputes.
Let me talk in a bit more detail on each of these areas and lay out some of the challenges we face.
Market access. The global average allowed agriculture tariff is around 62%. The U.S. average is just 12%. We have emphasized to our partners that achieving a substantial result here is fundamental for gaining support of U.S. agriculture for a Doha agreement – and particularly important for us to make the kinds of reforms they are seeking on trade-distorting domestic support. It is, however, the area where other countries have been the most unwilling to make concessions. WTO members have agreed that the highest tariffs will face the deepest cuts. This leaves negotiations this year regarding the specifics of the cuts, as well as unresolved issues concerning the treatment of sensitive products, special safeguard measures, and developing country sensitivities. Clearly, this is the most important and difficult issue in front of us.
Economic growth. As I noted earlier, U.S. farmers have a lot at stake in the economic growth of other countries. Most of the world would spend more on food if they had more money – the best thing we can do for our farmers is empower consumers in other countries to increase demand for food products. Fostering this demand requires increasing income in other countries. Trade agreements that increase productivity and create new economic opportunities are the best hope for doing that. China is a good example of where economic growth has increased the demand for agricultural products. Since 2001 when China joined the WTO, U.S. agricultural exports to China increased 189 percent, from $1.9 billion to $5.5 billion in 2004. Getting China into the WTO helped accelerate a trend that had begun earlier as China’s economy developed. The increase in U.S. agricultural export to China over the past decade has been greater in absolute terms than the growth of our agricultural exports to any other market in the ten year period (1994 – 2004).
Export subsidies. The EU is permitted to spend over $8 billion annually in export subsidies (they spend roughly $3 billion lately). These, most trade-distorting subsidies are hardly used within the United States (less than $100 million a year lately). In 2004, WTO Members agreed to the elimination of export subsidies by a certain date. We also established complementary disciplines for export credits, state trading enterprises, and food aid. In Hong Kong, we agreed to a date – 2013, with a majority of the reforms coming by 2010. It was also agreed that disciplines would be extended to the future use of monopoly powers by state trading enterprises. This specifically targets entities such as the Australian Wheat Board and the Canadian Wheat Board.
Domestic support. The EU – although reforming its policies toward more decoupled support – is permitted over four times the amount of trade-distorting domestic support as the United States. In the negotiations we have agreed that countries with higher levels of trade-distorting support (the "amber" box) must make larger reductions (the U.S. has the third highest level of allowed trade-distorting support, after the EU and Japan). It was also agreed that we need tightened rules on less trade-distorting measures (the "blue" box) while ensuring other policies are no more than minimally trade-distorting (the "green" box). WTO Members agreed upon an approach containing three steps: the European Union alone will face the deepest cuts of domestic support; Japan and the United States will face the second deepest cuts in the second tier; and all others will follow. In addition, we have agreed on a principle that those countries having relatively higher levels of domestic support (such as Norway and Switzerland) will make deeper cuts.
Let’s talk now about bilaterals. A multilateral framework for agricultural trade liberalization is the best way to help bring economic benefits to all farmers. However, the potential to improve trade opportunities also exist outside of the WTO in the form of free trade agreements (FTAs). FTAs allow the United States to open markets where our exports are restricted by tariffs or other measures. They also level the playing field against other competitors who may already have concluded a trade agreement with our potential FTA partner. Since the U.S. market is already relatively open to imports of most products, we stand to gain by reciprocity of an agreement where all tariffs are phased out. Along with providing the United States a fast-track option to freer trade in some countries, the FTAs help to keep the pressure on our partners in the WTO by showing them that we are willing to deal with countries ready to fully open markets. This option allows the United States to continually move ahead, opening new markets and building strategic alliances, while other less progressive countries are left behind. With fewer parties involved in these negotiations, FTAs, while comprehensive, can also allow U.S. import sensitivities to be better addressed on a case-by-case basis.
The United States has concluded FTAs with 17 countries. These countries represent significant markets for U.S. agricultural products with 2004 agricultural exports to them totaling about $23.5 billion, over a third of total exports..
What’s more, current negotiations are underway with another 10 countries. These countries represent significant markets for U.S. agricultural products with 2004 agricultural exports totaling about $2.1 billion (3 percent). In addition, we continue to aspire to a Free Trade Area of the Americas (FTAA) with 34 countries in the Hemisphere.
In addition, the Administration is examining the potential for FTAs with four countries – Egypt, Korea, Malaysia, and Switzerland. These countries represent significant markets for U.S. agricultural products with 2004 agricultural exports totaling about $4.0 billion. Korea alone is the United State’s fifth largest export market for agricultural products.
So you can see, the United States is prepared to act boldly and provide leadership in achieving success in multilateral talks while at the same time moving energetically in looking for bilateral opportunities.
Next let’s talk about enforcement. In my arena, multi- or bi-lateral negotiation, active and effective enforcement of U.S. rights under trade agreements is critical to enjoying the gains from trade and maintaining support in the United States for a healthy, open trading system. We place a high priority on eliminating unfair and unjustified barriers to U.S. food and agriculture exports. The United States will vigorously pursue its rights, including those through dispute settlement procedures if needed, to end barriers to our agriculture exports that violate the WTO or other trade agreements.
The United States has already succeeded in challenging a number of other countries’ actions which violate our trade agreements. For example, the United States has won cases against Canada’s export subsidies on dairy products; Japan’s phytosanitary standards on U.S. apples; Europe’s ban on the use of growth promoting hormones in beef; and Mexico’s antidumping order on U.S. rice. Furthermore, the United States has challenged the EU’s moratorium on biotechnology products.
Overall, the WTO dispute settlement system is working well. This does not mean that every conclusion is beyond criticism or that no new, and perhaps more serious challenges are on the horizon. In fact, simply put, if the Doha talks stall, if our timetable is overshot, and current U.S. policies continue as they have, the United States faces the prospect of additional challenges to its current programs. For example, I am sure many of you have already read reports of potential challenges to our rice, soybean, and corn programs.
Where disputes arise, the United States prefers to resolve differences through less costly, less time consuming, more certain and face-saving bilateral negotiations rather than through the dispute settlement process. But we will use this formal process where U.S farmers are facing unfair barriers. For example, we will continue to confront trade barriers not based on internationally accepted scientific standards. Negotiations have led to the recent reopening of important markets for U.S. beef exports throughout Asia and the rest of the world. I would note that as long as it took us to re-open Japan’s market for beef, it would have taken even longer if we had taken a formal WTO case.
In summary, with the goal of improving the world market environment and opportunities for our farmers and their products, we realize we have two powerful tools at our disposal to create new opportunities, the WTO and bilateral FTAs. While both can spur economic growth and tear down barriers to trade, we recognize that the WTO process, while slower and more difficult, ultimately provides our farmers with the greatest opportunities. To ensure the enforcement of our trade agreements, we will continue to use all means necessary to fight unjustified trade measures imposed on U.S. agricultural products.
This work is predicated on the commitment of the Administration to the central importance of U.S. farmers and ranchers, and our judgment that the American farmer is the best in the world, and given the chance to compete in a free trade environment, he or she has the ability, resources, and ingenuity to prosper. The job will not be easy. As we go through the intense process immediately ahead of us we invite your input and we invite your help in this important task.
Thank you again for inviting me. I look forward to working with you.