Craig.

MR. PEDERSON: Thank you. My name is Craig Pederson, and I'm a third generation farmer, also currently Chairman of the California Wheat Commission, which is responsible for research and promotion of California wheat. I will cover phytosanitary and biotechnology and then I will say a bit more about U.S. strategy and trade negotiations.

First of all, phytosanitary measures. The Uruguay Round produced a very encouraging agreement on sanitary and phytosanitary issues. It uses sound science as the basis for settling and enforcing plant health restrictions. We should build on this success in the next round and we should improve the process for settling disputes with strict time lines.

Our main SPS problem right now is with Mexico. We cannot shift wheat from anywhere in California to Mexico ostensibly due to Karnal bunt. USDA quarantine applies to less than one percent of our state's wheat acreage yet Mexico imposes a ban on the entire state. This is a perfect example of the U.S. engaging in unilateral disarmament.

About a year and a half ago Mexico convinced the U.S. to recognize a Karnal bunt free zone, and allow wheat imports from that area. We agree. As long as the zone was based on sound science and is carefully monitored, Mexico should be allowed to ship wheat to the U.S. But we asked our trade officials for assurances that Mexico would also recognize our quarantine boundaries and begin allowing California wheat from outside the Karnal bunt area into Mexico. After all, we're using sound science.

USDA told us that the U.S. would lead by example and Mexico would follow. So now we are importing wheat from Mexico's pest free zones, but we are

till barred from the Mexican market despite a healthy demand for our product. What happened to our leverage? We gave it away without a word?

We'd like to see the Mexico situation resolved before the WTO round, but we raise it as an illustration of unfair health restrictions that persist despite current rules.

We are pleased with the recent agreement with China that overcomes years of TCK related problems. We must cement the agreement with two steps, establishing normal trade relations with China and completing China's entry into the WTO.

Next biotechnology. Secretary Rominger, who's here today, told us this month that he thinks worldwide the issue of the GMOs will be a bigger issue than bananas and beef hormones. We think he's right.

Our negotiations should ensure that sound science prevails, but it won't be easy, because consumer fears are involved. We hope that the end-use characteristics of food, not the method used to produce it, will be the basis for gaging food safety. If a product is deemed safe for human and animal consumption, it should not face trade restrictions. The marketplace, not the WTO, should determine whether labeling and other special handling is appropriate.

Just a word of caution on biotech issues. We must not let our European counterparts use their unfair trade barrier GMOs as leverage against the United States. The discussion must stay focused on science.

I see I'm running short on time. I'll finish with my conclusions here now.

The U.S. administration has a lot of homework to do. We must know exactly what program other nations use, be they export credit programs, state trading enterprises, pricing schemes, quality give-aways, tax incentives, export restitutions or other methods. And we must know exactly how those programs affect world consumption. And then the United States must identify what can be gained and lost in each area.

Thank you.