MR. WYRICK: Good afternoon, panel. I'm a dairy producer from the State of Oklahoma and I'm pleased to appear before you today to testify on the topic of DFA agriculture and trade priorities from -- for the World Trade Organization negotiations. DFA, Dairy Farmers of America, is also a member of U.S. Dairy Export Council and also National Milk Producer Federation and in the area of export trade policy work especially close with those organizations. DFA as well as the National Milk Producers Federation and the U.S. Dairy Export Council are committed to expanding the exports of U.S. dairy products through reduction of foreign trade barriers and other measures that history international trade on milk and dairy products. The U.S. dairy industry is the second largest commodity sector in the United States measured by farm cash receipts of 20 billion dollars per year and is one of the top three agricultural sectors in half of the 50 states. In addition, dairy processors put the annual retail value of the industry at 70 billion dollars per year. Despite the large size domestically, the industry is a relative newcomers to international trade. What we have learned in our relatively short export history is that American dairy producers can and do perform successfully in markets where there is a level playing field and where trade distorting practices do not hamper our ability to compete. In fact, the industry's slow and difficult emergence internationally stems from the fact that dairy is one of world's most protected subsidized industries.

When the Uruguay Round was deadlocked over agriculture, the U.S. dairy industry made many, many key concessions so that an agreement could by reached. We also recommended that GATT negotiations never attempt to control the kind and level of agriculture subsidies and most rules were brand new.

Today agriculture has a history in the WTO and we must ensure the next round serves first to revise the rules that have not worked. By the same token, the dairy industry is very supportive of this Administration's effort to further reduce trade distorting practices in agriculture. We are prepared to do our part to accomplish that goal. However, both dairy producers and dairy processors firmly believe that we must first level the playing field with respect to subsidies and market access between the U.S. and other WTO member companies, especially the EU, Canada and Japan. Dairy will not give further concessions unless we are given equal treatment. Obviously the next round must build on the accomplishments of the Uruguay Round. The U.S. dairy industry strongly supports the next round of WTO multilateral negotiations and believes that the U.S. should focus on these priorities: Eliminating dairy -- eliminating export subsidies; creating real assets for the reduction of tariffs and eliminating all nontariff measures. The U.S. Government should also pursue the revision of current rules to close loopholes that allow countries to evade their WTO commitments.

We believe the U.S. Government in the upcoming round of negotiations should address the following issues:

The elimination by date of all remaining use of dairy export subsidies. Export subsidies are extremely common in world trade. When the current agriculture agreement is fully phased in next year, it will permit almost 60 percent of projected dairy world trade to be subsidized. And the distribution of these subsidy allowances is highly skewed. On the equivalent basis the EU accounts for fully 782 percent of these subsidy allowances while the U.C. accounts for just three percent of them. The use of export subsidies is the primary factor that keeps the world domestic prices depressed below domestic prices and hobbles the expansion of sustainable, commercial U.S. dairy exports. If subsidies are not eliminated or if the new agreement calls for an extended phase-out period, America's dairy industry will continue to suffer from the extreme imbalances in the WTO permitted subsidies that now impede the competitiveness. Moreover, the dairy industry would not be able to support further liberalization on market access and internal support.

Two, substantial increases in real access through reduction of remaining trade barriers to U.S. dairy exports. Let me give you an example of the kinds of barriers American dairy products face. The European Union, the world's largest dairy market, is able under its WTO commitments to impose tariffs at a rate of about 240 percent against all but very limited quantities of cheese, an important U.S. Dairy export product. Canada, our largest trading partner, imposes tariffs on U.S. Cheese at a 245 percent rate. Japan, which is a major net importer of dairy products has relatively open markets for certain products, but may hold the record tariff for a dairy product. It's WTO final bound tariff for butter represents a rate equivalent of about 1,075 percent of current world prices. The U.S. Also maintains tariff barriers against dairy imports, but not at levels as high as these. Moreover, all in-quota tariffs are low and provide real market access. This is not the case with other WTO members. This Administration must first guarantee that upon implementation of the next WTO rounds, countries will cap ordinary tariffs and harmonize tariff rate quotas (TRQ). Any further reductions in remaining barriers to dairy market access must be both meaningful and balances. The U.S. industry recognizes that it must give access to get access. Yet, unless all countries participate in tariff reductionis, especially the highly protected markets that facilitate very high domestic prices through both small quotas and very high over quota rate, the U.S. will remain the primary market for lower costs suppliers.

Therefore, changes to the current situation allowing significant new access to the U.S. Market while reducing only the unnecessarily excessive portion of extreme tariffs elsewhere, thus providing no new U.S. export access. Would be unacceptable. In order for U.S. dairy producers and processors to continue their support for the concept of free trade, the U.S. government, working through the WTO, needs to work to promote fair trade.

Future trade negotiations cannot result only in unilateral concessions made by our government. Any further opening of our market must be matched with enforceable and usable access to even more protected markets, such as Canada, the European Union and Japan.

Third, Continued reduction of all production related domestic supports. The EU already produces up to 15 percent more milk than its domestic market requires, and thus large surplus drives its continued heavy use of export subsidies. Expanding the EU's milk production quotas will make it more, not less, difficult for the EU to agree to eliminate subsidies and provide meaningful new access to its dairy markets. We support the U.S. Government position to tighten the rules on domestic support in order to ensure that support of rural communities is not used to defend production gluts that distort trade and prices.

Moreover, we believe that the expiration of the Peace Clause in the Uruguay Round Agreement on agriculture provides the U.S. With an opportunity to press other nations, especially the EU, t reduce these trade distorting subsidies.

Number four, improved transparency and disciplines on the trade-distorting effects of both import and export state trading enterprises (STE"S.) Export STE's provide de facto export subsidies through their ability to price discriminate between high and low value markets and their ability to keep their transactions private. In dairy, the New Zealand Dairy Board is the most conspicuous example. The U.S. dairy industry favors negotiation of commitments that would require increased transparency in the operations of both import and export STE's as well as disciplines on the activities of STE's that truly distort trade. With regard to the new WTO negotiations themselves, the U.S. dairy industry supports structuring the negotiations as a single undertaking encompassing all sectors, as opposed to a sector-renewal as soon as possible of fast-track negotiating authority to achieve a timely outcome that further reduces distortions to international dairy and agricultural trade. Panel, I appreciate the opportunity to speak with you. I feel a lot of responsibility standing here trying to represent my fellow dairy farmers. I hope my testimony weighs heavy with you all. Thank you.