MR. TILLISON: Thank you, Mr. Jones. My name is Jim Tillison and I'm the executive vice-president of the Alliance of Western Milk Producers. The member cooperatives of the Alliance of Western Milk Producers are owned by producer owners who produce half of the $4 billion dairy industry in California.

On May 18th, the Board of Directors of the Alliance of Western Milk Producers voted unanimously to support the following resolution regarding the WTO trade negotiation rounds scheduled to begin later this year.

The United States dairy industry has the ability to compete in the marketplace with any dairy industry in the world. However, export subsidies, import quotas and tariffs and State trading enterprises have greatly inhibited the ability of the U.S. dairy industry to fairly compete for the world markets.

Therefore, the member organizations of the Alliance of Western Milk Producers urges the United States agriculture World Trade negotiators to predicate free trade on fair trade. That is access to the United States marketplace should be in direct relationship to access in exporting foreign markets. Tariff rates on dairy product imports into the United States should be based on the exporting country's level of direct and indirect government subsidies used in marketing its dairy products worldwide.

The member organizations of the Alliance of Western Milk Producers also supports elevating the jurisdictional status of the House Agriculture Committee to the same level as the House Ways and Means Committee to review and approve the activities of the United States Trade Ambassador's Office as they relate to agriculture prior to or in conjunction with congressional approval of Fast Track authority.

Free trade is not fair trade. That is why the Alliance believes that access to the United States' marketplace should be in direct relationship to access to foreign markets. The members of the Alliance were quite disturbed when the United States Department of Agriculture announced that the rollover of unused dairy export incentive program tonnage could not be sold in the Asian markets to protect, what USDA called, traditional market relationships.

The Alliance believes it is a dangerous precedent to block the sale of U.S. dairy products to certain parts of the world because it is someone else's market. Last year, the U.S. sold about $40 million of dairy products into Asia, traditionally New Zealand's and Australia's market.

By comparison, New Zealand sold $250 million worth of dairy products into the United States, arguably our market. Our approach to fair trade would mean we would have equal access to traditional markets. Recently, the European Union announced it was going to delay implementation of relatively minor export reforms until 2005.

It is evident to the Alliance that the U.S.'s goal of getting rid of export subsidies in the next round would be extremely difficult to achieve in a timely manner. Therefore, the Alliance believes that there must be an incentive for exporters to get rid of subsidies.

Our suggestion is to tie tariffs on dairy products coming into the United States for the subsidy rate being used by the exporting country as it sells its products in the world marketplace.

For example, the EU's direct or indirect subsidy rate on cheese sold in the world marketplace would determine the tariff level on any EU cheese coming into the U.S. There is one thing the United States does better than anyone else in the world and that is produce food.

In addition, the United States is the premier market in the world for food, because of the level of income our citizens have available to buy food. The Alliance believes too often agriculture, and in particular dairy, has been a give-up item in order to achieve trade objectives not related to agriculture. That is why the Alliance has spoken in support of the House Agriculture Committee having some jurisdiction -- having the same jurisdictional status as the House Ways and Means Committee to review and approve the activities of the USTR as they relate to Agriculture.

I appreciate the opportunity to talk with you regarding our concerns and to offer possible approaches to open world markets to U.S. dairy products.

Thank you very much.