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Testimony of Allen F. Johnson
President of the National Oilseed Processors Association
Before the Senate Agriculture, Nutrition
and Forestry Committee
September 30, 1999
Mr. Chairman and Members of the Committee, I appreciate the opportunity to
testify on the upcoming World Trade Organization (WTO) Ministerial Meeting
in Seattle, Washington. The National Oilseed Processors Association (NOPA)
represents companies operating "solvent extraction" plants - 75 plants in
23 states that process one or more of the 5 oilseeds that NOPA represents:
soybean, sunflower seed, safflower seed, canola, and flaxseed. NOPA member
companies process more than 1.6 billion bushels of oilseed annually and
employ more than 4,500 workers. Exports to key markets such as the E.U.
and China are critical to our industry. The total value of the industry's
seed, meal, and oil production is about $30 billion, with nearly $10
billion of this being for exports.
The 1999 WTO Negotiations are the best opportunity for the U.S. agriculture
to achieve more open and freer global markets.
1999 WTO Negotiations
For the U.S. oilseeds and oilseed products industry, the 1999 WTO
Negotiations are the only avenue to achieve our trade policy objectives. We
have advanced the concept of the Level Playing Field for Oilseeds and
Oilseed Products (LPF) domestically and internationally, which would create
greater market access and eliminate export distortions. NOPA's objectives
cover the broad range of the Uruguay Round Agreement on
Agriculture--including market access, export subsidies, and domestic
support, as well as areas outside the Agreement such as state trading
enterprises and differential export taxes. Our general objective is the
global elimination of all trade-distorting practices in oilseeds and
oilseed products. Our specific objectives are:
* The largest possible reductions in individual oilseeds and oilseed product
tariffs with eventual elimination of all tariffs on oilseeds and oilseed
products;
* Harmonization at the lowest possible level of all tariffs on oilseeds and
oilseed
products;
* Elimination of export subsidies;
* Elimination of differential export taxes and other trade-distorting measures;
* Disciplines on export credits and export financing; and,
* Elimination of coupled domestic support (support tied directly to production)
that distorts trade.
We believe that the reduction of barriers to trade in oilseeds and oilseed
products and all agricultural products is the only way to expand the
markets for our highly productive agricultural industry. The simple fact
is that 96 percent of the world's consumers live outside the U.S., and in
many developing countries the demand for food and agricultural products is
growing as income and population increase.
Biotechnology Regulation
More than 50 percent of U.S. soybean acreage was planted with genetically
modified varieties in 1999, up from 30 percent in 1998 and 13 percent in
1997. The U.S. oilseeds industry has been quick to adopt biotechnology
because of the benefits it brings for producers, consumers, and the
environment.
One of the reasons the United States is the world leader in the development
and commercialization of agricultural biotechnology products is that we
have an effective and efficient regulatory system that enjoys the trust of
consumers. Unfortunately, this is not the case in many other countries of
the world, including the E.U.
Unfortunately, the regulatory approval process in the E.U. is slow and
unpredictable. In fact, it now appears to have ceased functioning
altogether. The problem from our perspective is that political
considerations have been allowed to overwhelm sound science in the decision
making process. The result is that new genetically modified varieties
cannot be marketed in the United States without seriously threatening
exports to our top market.
E.U. labeling requirements for foods and food ingredients produced from
genetically modified crops also pose a potential threat to U.S. exports.
Under the guise of the "consumer's right to know," the E.U. is attempting
to establish labeling requirements for soybean products and corn products
derived from genetically modified crops. Uncertainty about the final rules
is adding to the concerns about their possible adverse effects on trade.
Some food companies in Europe are already acting on their fears that
products labeled as containing genetically modified organisms will be
unacceptable to consumers. These companies are shifting sourcing to
countries that have not approved GMO soybeans or avoiding soybeans all
together in order to guarantee that ingredients are GMO-free. U.S.
soybeans and products derived from soybeans are in danger of being
transformed from products valued for their high quality and beneficial
nutritional characteristics to products to be avoided in the manufacture of
food products.
NOPA has encouraged the Administration to make resolution of these problems
one of its highest priorities. If the E.U. approval system does not
function in an efficient, timely, and transparent manner, trade problems
will be unavoidable. The system should operate in such a manner that if
there are serious, scientifically valid concerns about the safety of a new
genetically modified crop variety, those concerns can be addressed before
the product is approved.
Sanitary and Phytosanitary Agreement (SPS)
The SPS Agreement should not be re-opened. The U.S. oilseeds and oilseed
products industry opposes any efforts to allow for the consideration of
non-scientific factors in establishing SPS measures. The commitment to
sound science embodied in the SPS Agreement must be maintained. We also
must not allow the SPS Agreement to be undermined by other international
agreements, such as the U.S. Biosafety Protocol, or negotiations in the WTO
on Trade and Environment.
The US oilseeds and oilseed products industry opposes any efforts to allow
the consideration of non-scientific factors in establishing SPS measure.
WTO rules should not be preempted by the UN Biosafety Protocol or any other
international agreement.
In the short time since its adoption, the SPS Agreement has already been
the subject of several politically charged dispute settlement cases. Many
more issues concerning questionable SPS issues have gone unresolved because
the parties have not wanted to invest the time and resources necessary to
pursue formal dispute settlement. A more informal process is needed for
addressing technical issues, measures affecting products in which trade is
not substantial, or any other situation in which formal dispute settlement
is not warranted. Article 12.2 of the SPS Agreement provides for such a
process. It allows the WTO SPS Committee to serve as an informal
facilitator of disputes between parties over the interpretation and
implementation of the SPS Agreement. During the Triennial Review of the
SPS Agreement in 1998, the United States proposed developing procedures to
make the provisions of Article 12.2. operative. We fully support this
effort.
* WTO rules should not be preempted by the U.N. Biosafety Protocol or any
other international agreement.
* The US should take the lead to encourage other WTO Members to comply
with the objective of the SPS Agreement to harmonize sanitary and
phytosanitary measures. Encourage greater use of the informal
consultation provision in Article 12.2 of the SPS Agreement to
resolve disagreements that do not warrant formal dispute settlement.
WTO Dispute Settlement
The implementation requirements of a WTO dispute settlement panel decision
should be addressed. Negotiators should seek to better define the gray
areas of this critical component of the rules on multilateral trading.
Several possible changes may allow for the process to be shorter so
decisions can be implemented more promptly.
WTO Safeguards Agreement
The rights of affected Members to retaliate should be restored so that
safeguard actions are not taken casually. The Uruguay Round changed the
Safeguards Agreement with the effect of making it easier for countries to
impose import barriers by restricting the rightof affected Members to
retaliate before 3 years.
WTO Antidumping Rules
The U.S. should address WTO antidumping rules in the 1999 WTO Negotiations.
The methodology used to determine whether dumping has occurred does not
accurately reflect the dynamic nature of global agricultural markets.
International Association of Seed Crushers (IASC)
Currently I am serving on the Council of the IASC. NOPA has been working
with the IASC for many years in pursuing the LPF. Four members of the
IASC, NOPA, the European Oilseed Crushers" Association (FEDIOL), Associacao
Brasilerira Das Industrias de Oleos Vegetais (ABIOVE), and Camara de la
Industria Aceitera de la Republica Argentina (CIARA) have been working
together on a Joint Declaration to pursue liberalizing trade in oilseeds
and oilseed products during the WTO negotiations. The four organizations
hope to meet again in October in Geneva to continue discussions on a
unified set of objectives to pursue with our respective governments in
preparation for the upcoming WTO negotiations. Our goal is to form an
exporting coalition with a unified message that the major exporting
countries will take significant steps to level the playing field and that
our respective negotiators should work aggressively together to open up
import markets in order to gain access to consumers. It is vital that we
reach a WTO agreement, which provides that all countries eliminate import
tariffs and other trade barriers for oilseeds and oilseed products.
Seattle Round Agricultural Committee (SRAC)
In preparation for the November 30, 1999 WTO Ministerial Meeting in
Seattle, the Seattle Round Agricultural Committee (SRAC) was organized to
serve as a vehicle for exchanging points of view on the negotiations, both
within the agricultural community and with government, and when
appropriate, develop common policy positions. Members of the SRAC include
the varied agricultural and food organizations and companies that will be
affected by the outcome of the negotiations. I have worked closely with
Dean Kleckner and Audrae Erickson at the American Farm Bureau Federation in
helping to coordinate the SRAC in identifying policies that many in
agriculture support.
On April 6, 59 agricultural organizations sent a letter to President
Clinton expressing support of a comprehensive round of multilateral trade
negotiations that should include all goods and service, continue to reform
agricultural and food trade policy, promote global food security through
open trade, and increase trade liberalization in agriculture and food. The
SRAC recommended three process objectives that should be included in the
negotiations:
_ Conclusion with a single undertaking that encompasses all sectors
(i.e., no
early harvest).
_ Adoption of the Uruguay Round framework for the 1999 agricultural
negotiations to ensure that there are no product or policy exceptions (i.e.,
no request/offer approach).
_ Establishment of a three year goal for the conclusion of the
negotiations (by
December 2002).
On May 11, the SRAC sent a policy statement to President Clinton outlining
14 objectives that should be included in the negotiations. The SRAC 1999
WTO Policy Statement was approved by 69 agricultural organizations and
companies.
On May 25, the SRAC submitted its policy statement to be included as part
of the written record in response to the Federal Register (FR Doc. 99-9288)
printed on April 14.
On July 12 the SRAC sent a letter to President Clinton outlining concerns
that the Administration supports early and on-going results, or early
harvest, in the upcoming WTO negotiations. The SRAC believes such an
approach would be extremely harmful to American agriculture if adopted as
the format for the WTO trade discussions. The SRAC supports a single
undertaking format for the negotiations wherein all negotiations conclude
simultaneously.
Since April, the SRAC has grown to over 85 agricultural organizations. The
SRAC Policy Committee has met with Congressional Committee Staff,
Administration officials from the Department of Agriculture,Office of the
U.S. Trade Representative, and State Department. Issues discussed have
included, the SRAC Policy Statement, single undertaking, biotechnology,
dispute settlement and the Administration's objectives for the Seattle
Ministerial.
American Oilseed Coalition (AOC)
I also currently serve as a co-coordinator of the AOC. The AOC, which
includes the American Soybean Association (ASA), the National Cottonseed
Products Association, the National Sunflower Association, the U.S. Canola
Association, and NOPA strongly supports the global liberalization of trade
in oilseeds and oilseed products.
It is critical that the 1999 WTO Negotiations include, in a comprehensive
manner, as many sectors as possible. An inclusive approach is necessary
for the agricultural negotiations to achieve significant reductions in
trade barriers. Under a sector-by-sector approach, individual sectors would
be negotiated separately from all others and there would be no opportunity
for WTO Members to negotiate with full consideration of their overall trade
interests. The AOC submitted written comments on the 1999 WTO Negotiations
(USITC Investigation No. 332-296) last December.
Congressional Action
Mr. Chairman, first, thank you for holding this hearing. Second, I want to
thank you and the Members of this Committee for your leadership and
commitment in support of American agriculture.
I also want to thank Senators Fitzgerald, Grassley, Roberts, and Ashcroft
for introducing S. Res. 101 in support of the 14 SRAC policy objectives. I
have also attached a copy of the SRAC Policy Statement to my prepared
statement. I encourage Members to review this document and to sign on as a
cosponsor.
Mr. Chairman, also thank you for the letter that you and your colleagues
sent to Ambassador Barshefsky in support of a single undertaking. This is
the SRAC's first bullet point in its policy statement. We believe we must
have further trade liberalization to open new market opportunities for the
ever-increasing output of U.S. agriculture. We believe the U.S. should set
an ambitious agenda for the negotiations and use its global leadership role
to aggressive pursue a comprehensive trade liberalization package. We look
forward to working with you in achieving this vital objective.
Other Important Issues
China WTO Negotiations
With respect to China, it is critical that China accedes to the WTO with no
exceptions from the rules and disciplines by which all members abide. The
NOPA's overriding objective for the accession negotiations is greater and
more equitable access to the Chinese market for oilseeds and oilseed
products.
U.S. - E.U. Relationship
To further advance freer and more open global trade in agricultural
products, beyond the Uruguay Round Agreement on Agriculture, will require
the cooperation of our major trading partners, especially the E.U. The E.U.
is the primary user of export subsidies in today's global market and,
therefore, is likely to oppose the immediate elimination of export
subsidies. However, there are other common areas of interest to the U.S.
and E.U. including:
* Improving WTO disciplines through changes in Article 12 of the Uruguay
Round Agreement on Agriculture to impose penalties on exporting countries
if they prohibit or restrict exports-this would provide more protection to
food-importing developing countries;
* Establishing WTO rules for developing countries to graduate to full WTO
obligations using objective economic indicators such as per capita GDP;
* Establishing effective disciplines on the trade-distorting practices of
state trading enterprises and making their operations transparent.
Another key area of common interest to the U.S. and the E.U. is domestic
support. The Uruguay Round Agreement on Agriculture required reductions in
coupled support-support tied to production; established the "blue box" of
policies not subject to reduction including former U.S. deficiency payments
and E.U. compensatory payments to producers of grains and oilseeds; and
established "green box" (decoupled from production) programs exempt from
reduction if they met certain criteria that made them non trade distorting.
We would call for the eliminating of all coupled support and encourage
countries to move toward green box policies. We believe that it is very
important to refine green box criteria for decoupled support in a way that
they are practical for public policy. Green box criteria will permit
countries to pursue "multi functionality." This is the concept that
domestic programs have more objectives than supporting farm income. NOPA
supports the concept that domestic farm policies can have a number of
objectives as long as they do not distort production and trade. Additional
disciplines on blue box policies would help transition countries toward
fully decoupled policies. The point is that it is difficult for countries
to make an immediate direct change from coupled to decoupled policies and
they may need a transition period for this transformation. The E.U.'s
movement toward adoption of Agenda 2000 and revised payments for grains and
oilseeds, which while not fully decoupled and, therefore, subject to WTO
reductions, are a movement in that direction. It is in the interest of the
U.S. and our industry to encourage the movement toward decoupled policies
and we should support language in the WTO that permits that transition.
The U.S.-E.U. trading relationship is of vital economic importance to both.
In agricultural trade, there have been disputes, and the latest disputes
are bananas and bovine growth hormones. We believe that these disputes
spotlight how disruptive such issues can become when WTO panel decisions
have not been respected. Ongoing disputes such as these block progress on
other trade issues and make it difficult for the U.S. and E.U. to work
cooperatively to advance global trade liberalization. There are real
opportunities for the U.S. and the E.U. to work together to make sure that
the 1999 WTO Negotiations are successful in expanding global markets for
oilseeds, oilseed products, and other agricultural products.
Conclusion
As the host of the 1999 World Trade Organization (WTO) Ministerial, the
United States has a tremendous opportunity to influence the agenda for the
next round of WTO negotiations. As the largest, most dynamic economy in
the world the U.S. also has the most to gain from the next round. Further
trade liberalization is needed to open new market opportunities for the
ever-increasing output of U.S. agriculture. The U.S. must set an ambitious
agenda for the negotiations and use its global leadership role to
aggressively pursue a comprehensive trade liberalization package.
The ability of U.S. agriculture to gain and maintain a share of global
markets depends on many factors, including obtaining strong trade
agreements that are properly enforced, enhancing the administration's
ability to negotiate increased market access for U.S. agriculture and
building in necessary changes to the WTO dispute settlement process to
ensure timely resolution of disputes.
If our farmers, ranchers, and agribusinesses are going to prosper, we must
look to the global economy to provide new markets. Over 30 percent of U.S.
agriculture production is exported. The simple fact is that 96 percent of
the world's consumers live outside the U.S., and in many developing
countries the demand for food and agricultural products is growing as
income and population increase.
Mr. Chairman, that concludes my remarks. I would be pleased to answer any
questions.
TABLE OF CONTENTS
SENATE AGRICULTURE COMMITTEE
SEPTEMBER 30, 1999 - WTO HEARING
LETTER OF INVITATION
A
STATEMENT SUBMITTED FOR THE RECORD B
STATEMENT (SHORT) 5 MIN.
C
SRAC DOCUMENTS D
LATEST SRAC POLICY STATEMENT
SRAC LETTER TO PRESIDENT (JULY 12)
USTR-USDA RESPONSE TO JULY 12, LETTER
SRAC LETTER TO USTR-WTO COMMENT PERIOD
SRAC LETTER TO PRESIDENT (MAY)
SRAC LETTER TO PRESIDENT (APRIL)
AMERICAN OILSEED COALITION E
WTO RECOMMENDATIONS TO ITC
EXPORT CREDITS LETTER TO FAS
INTERNATIONAL ASSOCIATION OF SEED CRUSHERS F
MEMO
DECLARATION
POLICY PAPERS
G
BIOTECHNOLOGY
DISPUTE SETTLEMENT
BIOSAFETY PROTACALL
EARLY HARVEST
OECD EXPORT CREDIT PROPOSAL
CONGRESSIONAL ACTIONS H
LETTER TO PRESIDENT (JULY 13)
S.RES. 101
ADMINISTRATION RESPONSE TO LETTERS I
SEPTEMBER 8
STATISTICS
J
OTHER
K
The Level Playing Field for Oilseeds and Oilseed Products (LPF) will be
advanced in the WTO 1999 Negotiations within the context of a broader set
of issues that will make up the framework for the negotiations. Specific
LPF objectives are as follows:
This paper reviews the Uruguay Round Agreement on Agriculture
(URAA) and discusses key issues in the 1999 WTO Negotiations, including
recommendations for achieving LPF objectives.
Recommendations for LPF Issues
Inclusive 1999 WTO Negotiations
1999 WTO Negotiations should include, in a comprehensive manner, as many
sectors as possible.
Market Access
Largest possible formula reductions in all individual agricultural
tariffs (e.g., a 35 percent minimum reduction) and for all tariffs (e.g.,
70 percent average reduction in all tariffs) with a maximum bound tariff of
25 percent.
For oilseeds and oilseed products, flexibility in formula reductions to
enable the largest possible reductions in individual oilseeds and oilseed
product tariffs, with eventual elimination of these tariffs, and
harmonization of oilseeds and oilseed product tariffs at the lowest
possible level. There should be no increase in oilseeds and oilseed
product tariffs.
Eliminate tariff-rate quotas by a date certain. Tariff-rate quotas are
not non-tariff barriers as defined by the WTO but to meet the objectives of
the LPF, tariff-rate quotas should be eliminated.
Significant growth in tariff-rate quotas during the transition period to
their elimination. Over-quota tariffs should be phased out over the
transition period.
Provide a WTO system and budget for technical assistance to developing
countries and new WTO Members for effective tariff enforcement and related
issues.
Export Subsidies
Immediate elimination of export subsidies.
Differential Export Taxes
Immediate elimination of differential export taxes.
Export Credits
The AOC is in the process of forming its position on export credits and
will be in communication with the Administration by mid-January 1999.
Domestic Support
Refine "green box"criteria for decoupled support (support not tied to
production). The distinction between coupled and decoupled support should
be maintained and green box criteria should be refined in a way that they
are practical for public policy (more pragmatic than theoretical). Green
box criteria will permit countries to pursue "multi-functionality," the EU
concept that domestic programs have more objectives than just supporting
farm income, without distorting production and trade. Trade-distorting
subsidies and import protection are not justified on the basis of civil
society, multi functionality or any other non-economic rationalization.
Add disciplines to the "blue box" and transition Members toward decoupled
policies. This is reflective of US policy changes under the 1996 Farm Bill
and the EU's movement toward adoption of Agenda 2000 and revised payments
for grains and oilseeds, which while not fully decoupled and otherwise
subject to WTO reductions, are a movement in that direction.
The US should insist that any changes in EU policy do not nullify nor
impair the benefits provided by the Blair House Agreement, which is bound
in the EU's WTO schedule of concessions.
Recommendations for Related Issues
Export Prohibitions and Restrictions
Improve WTO disciplines through changes in Article 12 of the URAA to
impose penalties on exporting countries if they prohibit or restrict
exports.
Food Aid
Support existing WTO disciplines related to food aid.
Special and Differential Treatment for Developing Countries
Establish WTO rules for developing countries to graduate to full WTO
obligations using objective economic indicators such as per capita GDP.
State Trading Enterprises
Establish effective disciplines on the trade-distorting practices of
state trading enterprises. In addition, their operations should be made
transparent.
Sanitary and Phytosanitary Agreement
Oppose any efforts to allow the consideration of non-scientific factors
in establishing SPS measures. WTO rules should not be preempted by the UN
Biosafety Protocol or any other international agreement.
Encourage other WTO Members to comply with the objective of the SPS
Agreement to harmonize sanitary and phytosanitary measures.
Encourage greater use of the informal consultation provision in Article
12.2 of the SPS Agreement to resolve disagreements that do not warrant
formal dispute settlement.
WTO Dispute Settlement
WTO Safeguards Agreement
Restore the rights of affected Members to retaliate so that safeguard
actions are not taken casually. The Uruguay Round changed the Safeguards
Agreement so that countries could impose import barriers without penalty by
restricting the right of affected Members to retaliate until after 3 years.
WTO Antidumping Rules
Revise the WTO methodology used to determine whether dumping has occurred
to accurately reflect the dynamic nature of global agricultural markets.
Those provisions should not allow other countries to restrict imports of US
agricultural products unfairly.
Regional Trade Agreements
Agreements reached in regional trade agreements such as APEC and the FTAA
should be consistent with LPF objectives in the WTO. Regional trade
agreements should be comprehensive and inclusive of agriculture.
WTO Accession Negotiations
All Accession Agreements should be consistent with LPF objectives in the
1999 WTO negotiations. New Members acceding to the WTO must not be
exempted from WTO rules and disciplines, including the Understanding on
Dispute Settlement and the SPS Agreement. With respect to China, the
objectives are harmonized treatment for all oilseeds and oilseed products
with the stipulation that duties should not be raised above currently
applied rates to achieve harmonization, tariff-rate quota growth and phase
out, no use of export subsidies, elimination of the value added tax on
soybeans and soybean oil, and phase out of state trading enterprises.
US OILSEEDS AND OILSEED PRODUCTS INDUSTRY: THE LEVEL PLAYING FIELD
ISSUES FOR 1999 WTO NEGOTIATIONS
I. Introduction
The World Trade Organization (WTO) is formally beginning
preparations for the 1999 Negotiations. There was a special meeting of the
General Council on September 24, 1998 to start the process. The WTO
Committee on Agriculture has been monitoring the implementation of the
Uruguay Round Agreement on Agriculture (URAA) and holding informal Analysis
and Information Exchanges that allow countries to raise issues and present
papers on potential 1999 issues. The Administration has begun to focus on
1999, including requesting a study by the US International Trade
Commission. Other Members such as the Cairns Group, Japan and the EU are
well advanced in defining their objectives.
The US oilseeds and oilseed products industry has advanced the
concept of the Level Playing Field for Oilseeds and Oilseed Products (LPF)
domestically and internationally. LPF objectives cover the broad range of
the URAA-- market access, export subsidies, and domestic support, as well
as areas outside the URAA such as state trading enterprises and
differential export taxes. The general objective of the LPF is the global
elimination of all trade-distorting practices in oilseeds and oilseed
products. Specific LPF objectives are as follows:
* The largest possible reductions in individual oilseeds and oilseed
product tariffs with eventual elimination of all tariffs on oilseeds and
oilseed products;
* Harmonization at the lowest possible level of all tariffs on oilseeds and
oilseed products;
* Elimination of export subsidies;
* Elimination of differential export taxes and other trade-distorting measures;
* Disciplines on export credits and export financing; and,
* Elimination of coupled domestic support (support tied directly to
production) that distorts trade.
The 1999 WTO Negotiations are the opportunity for the U.S. oilseeds
and oilseed products industry to achieve its trade policy objectives.
Although there are other trade initiatives
in process, such as APEC and the FTAA, advancing global trade
liberalization and assuring that
new trade-distorting measures are not introduced are paramount in WTO
negotiations. The LPF will be advanced in the WTO 1999 Negotiations within
the context of a broader set of issues that will make up the framework for
negotiations.
Section II of this paper reviews the URAA, Section III discusses
key issues and approaches to the 1999 WTO Negotiations, including
recommendations for achieving LPF objectives, and Section IV addresses
related issues.
II. Overview of the Uruguay Round Agreement on Agriculture
The URAA is fundamentally different from the results of past GATT
agricultural negotiations. For the first time, the URAA brings agricultural
trade under comprehensive GATT/WTO disciplines through a framework
agreement that includes:
* Market access.
* Domestic support (farm programs).
* Export subsidies.
* Sanitary and Phytosanitary (SPS) Agreement that complements the URAA
because it prohibits the use of non-scientific health and safety measures
as barriers to agricultural trade.
In past negotiations when there was no comprehensive framework, the
"request-offer" approach resulted in some tariff reductions and trade-offs
among commodities, but little improvement in market access or disciplines
on trade barriers. Broader liberalization of agriculture in the Uruguay
Round was possible only because US negotiators insisted that the sector
must be negotiated with all other sectors.
The URAA, in the 4th year of the 6-year implementation period
(1995-2000), has shown both strengths and weaknesses in improving
international trade. For example, tariff-rate quotas generally have
improved market access but over-quota tariffs are exceptionally high;
domestic support disciplines, while bringing more global attention to farm
programs and establishing some constraints on increases in coupled support,
have not directly caused any significant reductions in coupled support; and
export subsidy disciplines have reduced subsidized exports even though
unused subsidies can be carried over from one year to the next. However,
all countries in the 6th year (2000) must meet the obligation that export
subsidies be reduced 21 percent (volume) and 36 percent (value) from the
1986-90 base period.
Japan and developing countries are concerned about the effects of freer
global trade on food security, especially actions of exporting countries to
restrict exports. Also, the Uruguay Round agreement did little to
discipline state trading enterprises, particularly those that export.
Measures that have the same effect as export subsidies, such as
differential export taxes, were not disciplined despite efforts to do so.
The URAA gives developing countries preferential treatment in meeting their
obligations. Graduation is an important issue for 1999 but when China joins
the WTO, the developing country bloc will become even more important. In
addition to China, another 30 countries, including some developing
countries, are in various stages of accession negotiations.
Because of the unique framework established by the URAA--the result
of long multilateral negotiations, substantial progress in improving market
access for oilseeds and oilseed products is now possible in the 1999
Negotiations. A return to a "request-offer" or "exceptions" approach would
make it impossible to achieve the LPF objectives. For example, an
exceptions approach would permit individual countries to take oilseeds and
oilseed products off the table or to except other commodities which could
result in the same outcome for oilseeds and oilseed products.
III. Issues for 1999 WTO Negotiations
Inclusive 1999 WTO Negotiations
Market Access
Discussion The key market access provisions of the URAA are:
* Formula reductions in agricultural tariffs with no tariff reduced by less
than 15 percent and all agricultural tariffs reduced by an average of 36
percent;
* Conversion of non-tariff barriers, such as quotas, to tariffs
(tariffication);
* Minimum access commitments implemented through tariff-rate quotas (TRQ).
TRQs must increase from 3 to 5 percent of base period consumption (1986-88)
over the transition period. (The US has TRQs for dairy products, sugar,
beef, cotton, and peanuts.) A TRQ permits a fixed quantity of a product to
be imported at low or minimal duty with over-quota imports subject to a
much higher tariff. An over-quota tariff represents the level of
protection previously provided by a non-tariff barrier. Over-quota tariffs
for products such as dairy products and sugar generally are very high,
exceeding100 percent.
Issues For tariffs, the issues are:
* Size of the formula reduction, e.g, the levels of the minimum and overall
average reductions-- the URAA 36 percent across-the-board average reduction
allowed countries to substantially reduce tariffs of non-sensitive
commodities while keeping tariffs on sensitive commodities at relatively
high levels;
* Setting of a maximum bound tariff level--the highest permitted tariff,
which was not done under the URAA.
* The URAA allowed countries to not undertake tariffication under certain
conditions if minimum access is assured through TRQs that increase from 4
to 8 percent of base period domestic consumption. The issue is whether to
continue this approach, and if so, under what conditions and terms. Japan,
for example, did not undertake tariffication for rice.
* Further growth in TRQs during the transition period and elimination at
end of the period; and treatment of over-quota tariffs which are generally
much higher than for other tariffs, e.g., different reductions or bound
levels than for other tariffs.
Recommendations
* Largest possible formula reductions in all individual agricultural
tariffs (e.g., a 35 percent minimum reduction) and for all tariffs (e.g.,
70 percent average reduction in all tariffs) with a maximum bound tariff of
25 percent.
* For oilseeds and oilseed products, flexibility in formula reductions to
enable the largest possible reductions in individual oilseeds and oilseed
product tariffs, with eventual elimination of these tariffs, and
harmonization of oilseeds and oilseed product tariffs at the lowest
possible level. There should be no increase in oilseeds and oilseeds
product tariffs.
* Tariff-rate quotas are not non-tariff barriers as defined by the WTO but
to meet the objectives of the LPF, tariff-rate quotas should be eliminated.
Members should reach agreement to eliminate tariff-rate quotas by a date
certain.
* Significant growth in tariff-rate quotas during the transition period to
their elimination. Over-quota tariffs should be phased out over the
transition period.
* A WTO system and budget for providing technical assistance to developing
countries and new WTO Members for effective tariff enforcement and related
issues.
Export Subsidies and Other Export-Related Provisions
Export Subsidies
Discussion The URAA requires reductions in both volume and value
of export subsidies, prohibits Members from implementing new export
subsidies, and commits Members to not take actions that circumvent these
disciplines on export subsidies. During the Uruguay Round negotiations, the
US argued successfully that marketing loans/loan deficiency payments were
not export subsidies since the payments were not conditioned on export.
The US should continue to make the case that marketing loans/loan
deficiency payments are domestic support.
Issue. The basic issue for export subsidies is whether to eliminate
them immediately or phase them out over a transition period.
Recommendation.
* Elimination of export subsidies.
Export Credits
Issue The URAA requires the establishment of internationally agreed
disciplines for export credits. The basic issue is whether to respond to
that requirement now in the Organization for Economic Cooperation and
Development, or later in the 1999 WTO Negotiations.
* The AOC is in the process of forming its position on export credits and
will be in communication with the Administration by mid-January 1999.
Export Prohibitions and Restrictions
Discussion The URAA commits food-exporting Members to consider
the effect of their actions to prohibit and restrict exports on importing
Members' food security. During the
Uruguay Round negotiations, Japan and developing countries were concerned
about the effect of trade liberalization on the price and availability of
internationally traded food and agriculture products. Japan, in particular,
took a strong position that any action to open up its domestic market would
increase its dependence on imports and threaten its food security. This
provision is aimed at these concerns. (The Uruguay Round also addressed
these concerns in the Decision on Measures Concerning the Possible Negative
Effects of the Reform Program on Least Developed and Net Food-Importing
Countries.)
Issues The threat of export prohibitions or restrictions in periods
of tight global supplies is a major concern of Japan and other food
importing countries and they can be expected to concentrate on this issue
in the 1999 Negotiations. The primary negotiating point is how can WTO
disciplines (Article 12 of the URAA) be changed, including penalties, to
make it more
difficult for exporting Members to restrict exports. State trading
enterprises also can limit exports through pricing and marketing decisions
without overt government action. Export prohibitions and restrictions are
of concern to all US agricultural interests.
Recommendation.
* Improve WTO disciplines through changes in Article 12 of the URAA to
impose penalties on exporting countries if they prohibit or restrict
exports.
International Food Aid
Discussion The URAA commits Members to ensure that international
food aid is not provided in a manner that circumvents export subsidy
commitments.
Issues The key issue is whether to develop and impose more WTO
restrictions on the use of food aid. The recent US action to provide
extensive food aid and the actions of other Members such as the EU to do
the same will bring more attention to this issue in 1999.
Recommendation
* Support existing WTO disciplines related to food aid.
Differential Export Taxes
Discussion Immediate elimination of differential export taxes is a
key LPF objective. Differential export taxes applied by Argentina and
Brazil have had the same effect as export
subsidies in encouraging the export of oilseed products rather than
oilseeds. Differential export taxes in Malaysia and Indonesia have had the
same effect as export subsidies in encouraging export of processed palm oil
rather than crude palm oil.
In September 1996, Brazil eliminated its differential taxes on
soybeans, soymeal, and soyoil (13.0/11.1/8.0 percent). This action to
eliminate ICMS (Imposto sobre Circuilacao de Mecadorias e Services) taxes
was part of an overall change in Brazilian economic policy. Argentina
maintains an export tax of 3.5 percent on soybeans while granting export
rebates (of certain taxes) of 1.35 percent on crude soyoil and 3.15 percent
on refined soyoil. During the Uruguay Round, the US tried to get rules on
differential export taxes but there was no support. Export taxes are
currently not prohibited under the WTO Agreement on Subsidies and
Countervailing Measures.
Issues The key concern will be how to get support from other major
trading partners in the WTO in eliminating differential export taxes. While
Brazil's elimination of differential export taxes has removed an important
distortion to world trade in oilseeds and products, only new WTO rules can
prevent Brazil from re-imposing them.
Recommendation
* Immediate elimination of differential export taxes.
Domestic Support
Discussion Domestic support disciplines were one of the most
contentious issues of the Uruguay Round. Countries with substantial
domestic support programs were reluctant to make binding GATT commitments
to reduce domestic support. There were basic questions as to how
domestic support would be measured, e.g., base period, policies to include,
commodity-specific or agricultural sector wide, etc.
The URAA commits Members to reduce their Total Aggregate Measure of
Support for coupled support (support tied to production) for agricultural
commodities by 20 percent from a 1986-88 base period level. The discipline
is not commodity specific; support for individual
commodities can increase from the base period level as long as the total
level of support is reduced 20 percent. (The Total Aggregate Measure of
Support is the sum of the calculated support for each supported commodity
plus non-product specific support that can't be attributed to individual
commodities).
Two types of support are not included in the reduction commitment:
* Direct payments under production limiting programs such as former US
deficiency payments and current EU compensatory payments on grains and
oilseeds are not subject to the reduction commitment. This outcome of the
Uruguay Round was the product of long and intense debate between the US
and EU. At the time, both needed to protect their major farm program
payments from Uruguay Round reductions through the so-called "blue box"
although the 1996 Farm Bill subsequently eliminated deficiency payments.
* Decoupled support (support not tied to production) which meets defined
criteria (so-called "green box" policies) is exempt from the reduction
commitment. The US has notified the WTO that production flexibility
payments under the 1996 Farm Bill meet the criteria to make them exempt.
(The EU and other s are prepared to challenge that US production
flexibility payments do not meet URAA criteria.)
The US Total Aggregate Measure of Support covers 18 commodities,
including soybeans and minor oilseeds, and was $23.9 billion in the 1986-88
base period. In 1995, the first year of the URAA, US total support was
notified to the WTO as $6.2 billion, nearly 75 percent below the base and,
therefore the US far exceeded the 20 percent cut commitment in the first
year. In the base period, support for soybeans and minor oilseeds was less
than 5 percent of their value of production and therefore, the aggregate
measure of support for each was zero.
The URAA disciplines on domestic support have had little direct
effect on reducing coupled domestic support levels since the most affected
Members, the US and EU, had already changed policy since the1986-88 base
period and blue box support was not subject to the reduction commitment.
However, the URAA makes it more difficult for countries to implement
new policies that are inconsistent with their commitments and provides an
incentive for countries to move toward green box support.
Issues The main issues for domestic support are:
* Refining criteria for permitted policies, i.e. "green box" criteria.
* Extension and revision of "blue box" payments.
* Level of reductions in coupled support.
* Disciplines on commodity-specific support vs. total level of support
(with large US oilseed marketing loans/loan deficiency payments in 1998/99,
commodity-specific support could be a problem).
* Changes in how domestic support is measured.
Recommendations
* Focus on refining "green box" criteria for decoupled support (support not
tied to production). The distinction between coupled and decoupled support
should be maintained and green criteria should be refined in a way that
they are practical for public policy (more pragmatic than theoretical).
Green criteria will permit countries to pursue "multi-functionality," the
EU concept that domestic programs have more objectives than just supporting
farm income, without distorting production and trade. Trade-distorting
subsidies and import protections are not justified on the basis of civil
society, multi functionality or any other non-economic rationalization.
* Focus on ways to add disciplines to the "blue box" and transition Members
toward decoupled policies (policies not tied to production.) This is
reflective of US policy changes under the 1996 Farm Bill and the EU's
movement toward adoption of Agenda 2000 and revised payments for grains and
oilseeds, which while not fully decoupled and otherwise subject to WTO
reductions, are a movement in that direction.
Blair House Agreement
Discussion The Blair House Agreement (BHA), which is bound in the
EU's WTO schedule of concessions, limits the area of oilseeds that can
receive domestic support. The rights of the US and other WTO Members are
based on the competitive relationship between
domestic and imported oilseeds established by the combination of the zero
tariff binding and the domestic support regime for oilseeds defined in the
BHA.
Since the support regime in the BHA is a bound commitment, any
change to that commitment would be subject to review in the WTO. Even
though Agenda 2000 would change
the oilseed regime crop-specific payment to a uniform payment for cereals,
oilseeds and protein crops (the uniform payment will not meet WTO green
criteria), this policy change would not absolve the EU from its bound WTO
commitment. The WTO commitment prohibits the EU
from increasing the level of support for oilseeds.
Recommendation
* The US should insist that any changes in EU policy do not nullify nor
impair the benefits provided by the Blair House Agreement.
Special and Differential Treatment for Developing Countries
Discussion The URAA allows developing countries 10 years to
implement their obligations, as compared with 6 years for other Members.
In addition, the obligations of developing countries are 2/3 those of other
Members, e.g., developing countries must reduce all tariffs by an average
of 24 percent instead of 36 percent. It is long-standing GATT/WTO practice
for countries to self-designate if they are developing. Least developed
countries are exempt from URAA commitments.
Issue The principal issue is how to bring developing countries
into conformity with other WTO Members, e.g., how to "graduate" developing
countries from special and differential treatment status. Since developing
countries have until 2004 to implement their URAA commitments, continuation
of special and differential treatment could extend their special status
well after 2010. Accession of large trading countries like China to the WTO
as a developing country and the continuation of countries like India as a
developing country Member will make the developing country bloc much more
influential.
Recommendation
* Establish WTO rules for developing countries to graduate to full WTO
obligations using objective economic indicators such as per capita GDP.
State Trading Enterprises
Discussion As a result of the Uruguay Round, the WTO established a
Working Party on State Trading Enterprises which has met regularly. Its
primary accomplishment is the development of a new notification
questionnaire that Members are completing on the status of
state trading enterprises. The Working Party has finished an illustrative
list of state trading enterprise activities and relationships. The US
wanted to get transparency in the operations of state trading enterprises
but was not successful because of substantial resistance from Canada,
Australia, and New Zealand. Article XVII of the WTO/GATT gives state
trading enterprises substantial leeway for trade-distorting practices, such
as price discrimination.
Issues The basic issue is how to impose greater disciplines on
state trading enterprises so that their trade-distorting practices are
constrained.
Recommendation
* Establish effective disciplines on the trade-distorting practices of
state trading enterprises. In addition, their operations should be made
transparent.
IV. Related Issues
Sanitary and Phytosanitary Agreement The US oilseeds and oilseed products
industry should, as a matter of general principle, oppose any efforts to
allow the consideration of non-scientific factors in establishing SPS
measure. WTO rules should not be preempted by the UN Biosafety Protocol or
any other international agreement.
In the short time since its adoption, the SPS Agreement has
already been the subject of several politically charged dispute settlement
cases. Many more issues concerning questionable SPS issues have gone
unresolved because the parties have not wanted to invest the time and
resources necessary to pursue formal dispute settlement. A more informal
process is needed for addressing technical issues, measures affecting
products in which trade is not substantial, or any other situation in which
formal dispute settlement is not warranted. Article 12.2 of the SPS
Agreement provides for such a process. It allows the WTO SPS Committee to
serve as an informal facilitator of disputes between parties over the
interpretation and implementation of the SPS Agreement. During the
Triennial Review of the SPS Agreement in 1998, the United States proposed
developing procedures to make the provisions of Article 12.2. operative.
We fully support this effort.
* WTO rules should not be preempted by the UN Biosafety Protocol or any
other international agreement.
* The US should take the lead to encourage other WTO Members to comply with
the objective of the SPS Agreement to harmonize sanitary and phytosanitary
measures.
* Encourage greater use of the informal consultation provision in Article
12.2 of the SPS Agreement to resolve disagreements that do not warrant
formal dispute settlement.
WTO Dispute Settlement The implementation requirements of a WTO dispute
settlement panel decision should be addressed. Negotiators should seek to
better define the gray areas of this critical component of the rules on
multilateral trading.
WTO Safeguards Agreement The rights of affected Members to retaliate should
be restored so that safeguard actions are not taken casually. The Uruguay
Round changed the Safeguards Agreement with the effect of making it easier
for countries to impose import barriers by restricting the right of
affected Members to retaliate until after 3 years.
WTO Antidumping Rules The US should address WTO antidumping rules in the
1999 WTO Negotiations. The methodology used to determine whether dumping
has occurred does not accurately reflect the dynamic nature of global
agricultural markets. Those provisions should not allow other countries to
restrict imports of US agricultural products unfairly. As the world's
largest agricultural exporter, the United States has a special interest in
WTO antidumping rules.
Regional Trade Agreements . Agreements reached in regional trade
agreements such as APEC and the FTAA should be consistent with LPF
objectives in the 1999 WTO Negotiations. Regional trade agreements should
be comprehensive and inclusive of agriculture.
WTO Accession Negotiations. All Accession Agreements should be consistent
with LPF objectives in the WTO. New Members acceding to the WTO must not
be exempted from WTO rules and disciplines, including the Understanding on
Dispute Settlement and the SPS Agreement. With respect to China, the
objectives are harmonized treatment for all oilseeds and oilseed products
with the stipulation that duties should not be raised above currently
applied rates to achieve harmonization, tariff-rate quota growth and phase
out, no use of export subsidies, elimination of the value added tax on
soybeans and soybean oil, and phase out of state trading enterprises.
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