MR. PURCELL: Okay. We'll get started back again. And a reminder, we are running a little bit behind schedule. So a reminder, please keep your comments within the five-minute window, if you could, and we'll try and get back on schedule.

We left off -- our next speaker will be Dan Hunter, representing the National Peanut Growers Group.

MR. HUNTER: Do we want to wait on Commissioner Combs?

MR. PURCELL: No. She's going to be gone for about 20 to 25 minutes.

MR. HUNTER: Okay. First of all, I appreciate the opportunity to be here before you today. It's an honor to be able to come before this group, and we appreciate the efforts that's being made not only by USDA and USTR and the State Department as well, but we appreciate the listening sessions that are being held throughout the country.

I represent the Southwestern Peanut Growers Association. Today I'm here to represent the National Peanut Growers Group. The United States was, as was earlier mentioned, was once relied on as the predominant world market of peanuts based upon a combination of price and quality. With past trade agreements assuring Argentina and other countries a share of the U.S. market, the trade laws have encouraged an expansion of peanut production in countries which supplies not only part of the U.S. market but also much of the world market.

According to trade balance data, GATT and NAFTA appear to have caused America, especially in peanuts, to become more foreign food dependent, and history always tells us that those who become dependent upon other food supplies will always be vulnerable. And when we look at food security, we look at it as a national security issue and truly believe that food security is the umbrella of national security.

In our opinion, previous trade agreements have failed to adequately provide safeguards for changing exchange rates between currencies or for dramatic fluctuations in the stability of overseas economies. Asia has historically been one of the largest markets for U.S. exported peanuts, but the recent financial problems have dramatically reduced the amount of peanuts exported to this region. China is now the largest producer of peanuts in the world, and while only a small quantity of their peanuts can enter the U.S. annually, instead they enter through other countries such as Canada. In countries like Canada, these Chinese peanuts are then made into butter and/or paste, as was mentioned earlier, and are entering the U.S. in expanding quantities. China has also recently become a major world supplier in a market that has become driven by cash needs, with little or no consideration for quality or market price. The U.S. peanut-producing industry has been damaged as a result of the U.S. failing to ensure strict rules of origin when the Canadian Free Trade and North American Free Trade Agreements were negotiated.

The following points are a few items which we would like for you to consider, simple points when you develop trade policies, especially as they relate to the peanut industry. In looking back at past trade agreements, the U.S. peanut grower, to my knowledge, has not benefitted. There's now not a single country importing U.S. peanuts merely as a result of NAFTA or GATT. Rather than seeing exports increase as a result of the trade agreements, we have instead seen them decline. U.S. exports -- as was mentioned earlier, U.S. used to be the number one exporter in the world market as far as peanuts were concerned, with decrease from 403,000 metric tons in 1991 to almost half of that, of 203,000 metric tons, in 1997 and '98.

Secondly, to my knowledge, there's been no consideration given in the past agreements to the U.S. government regulatory system as compared to other countries. And it was mentioned earlier, and I'm sure will be mentioned throughout testimony today, the U.S. farmers must comply with the numerous amount of regulations. Many of these factors, of course, are not found in other countries, and put our producers at a disadvantage as far as price competition. We must be given the opportunity to compete on a level playing field, which in our case has not equated to the definition of free trade.

Market access must be controlled by strict rules of origin. As I mentioned earlier, Canada does not grow peanuts; however, they have built an entire infrastructure based upon processing peanuts into peanut products for the export market. And as I mentioned, China dumps these peanuts on the world market for cash needs and then countries such as Canada pick them up and process them and bring them into the U.S. market at below-market cost.

In addition, access for a commodity should be granted to countries, in our opinion, that are directly involved in producing the commodity as determined by the rules of origin. As you know, every imported peanut, peanut product, peanut paste coming into this country displaces the domestically produced peanut, displaces a peanut that the shellers can then shell and the manufacturer can then also manufacture. And it removes incomes from our farmers in their communities and damages our balance of payments.

Fourthly, the current agreements fail to adequately provide, in our opinion, safeguards in the event of change in exchange rates between countries, as evident by the recent economic woes in the Asian market. This is an important issue and must be considered in many future trade agreements.

It was also clear in the last meeting of the WTO in Geneva for the anniversary celebration, which Tim Galvin, you mentioned you were at, that phytosanitary and sanitary standards were to be a strong -- that, you know, that would be a strong concern. We need to continue to work towards those efforts and make sure that those efforts are strengthened in the sanitary and phytosanitary efforts.

And as far as other items, with the elimination, as you know, of the Section 22 during the NAFTA negotiations, import protections for peanut growers, of course, now are very few. One thing that we would ask, as an import sensitive product, that the Administration take a look at the possible snap-back provisions that would protect the peanut program at any time imports cause significant interference to the operation of the market.

As you know, the peanut industry as a whole opposed -- or the growers opposed both NAFTA and GATT. And our reasons for opposing the agreements are more evident today. We have lost not only our number one world ranking as far as exporting in the market, but we also lost 20 percent of our market share. And to be more competitive, U.S. farmers were also asked to reduce their prices, and took a 10 percent reduction in the last Farm Bill as far as their domestic support prices. That price support rate has remained frozen, as you well know, which essentially, for the farmer out there, equates into an annual decline and reduction of income due to inflationary costs. As a peanut farming industry, we are not better off today prior to NAFTA and GATT -- as we were prior to NAFTA and GATT. And this is not only evidenced by the farm income reductions, but is also evident by the reduction in the number of U.S. peanut farmers. We have seen 35 percent, over one-third of the U.S. farmers in the United States that produce peanuts, go out of business.

In order that the U.S. peanut producers can make adjustments necessary to maintain their role in producing the world's highest quality peanuts, as was mentioned earlier by Mr. Plowden, our product goes into the market, into the export market, as an edible market. Most other peanuts, especially those produced in China, which is the largest producer, goes into the crush market or into the oil market.

We believe that both domestic and import markets have -- we have the highest quality in both those markets. And we strongly recommend that minimum access import levels for peanuts entering U.S. trade channels not be increased above the level permitted in the last year of the Uruguay Round. And over quota -- and secondly, over-quota tariff rates for shelled and in-shell peanuts be maintained at the level specified in the last year of the agreement.

As the U.S. moves forward with its farm policy, we realize that we must -- that less than two percent of the population carries the food security risk of our country. The farm population is not going to increase. While the demands placed upon them continue to grow every year, we cannot reduce our production capability or allow the U.S. producer to be driven out of the market. Because the United States undertook an across-the-board reduction, a one-size-fits-all approach, if you will, to GATT and NAFTA, the U.S. peanut farmer lost a great deal in both of the agreements. And as a direct result of import concessions by the U.S., we have seen over a half of a billion tons -- or half of a million tons of peanuts be imported into the United States since GATT was finalized.

If there are U.S. commodities and products that would benefit from trade talks, the U.S. should limit its discussion, in our opinion, to those commodities and those products. The U.S. must avoid punishing across-the-board Tariff Rate Quota reductions for this country or discussions of allowing countries to meet average tariff rate reduction commitments by decreasing tariffs on products of no interest to the U.S. We acknowledge that this process, of course, would add more difficulty to the talks, but in our opinion, it's very vital to our industry.

Finally, we ask that the Administration understand the dramatic loss that the U.S. peanut producer has experienced from GATT and NAFTA trade agreements, and we ask that you take this into account when considering any new trade agreements.

I thank you for your time, and once again, we appreciate the opportunity to be here today. And I'll answer any questions.

MR. GALVIN: Thank you, Dan. I've got, I guess, a two-part question. First, could you comment just very briefly on the world playing field for peanuts? How unlevel is it? What sort of subsidies or protection do some of the other major producing countries offer their peanut industry? And then the second part of that question is, if we ever got to this sort of nirvana, where there was a perfect world, a perfectly level playing field, how competitive then do you think the U.S. peanut industry would be?

MR. HUNTER: In answer to your first question, let me maybe put it into context in a realization of what the peanut production in the worldwide is. If you took what the United States currently produces, which is around 1.5 million tons of peanuts, and you added even the production in South America and essentially every part of the world except for India and China, that's about three million tons. The Chinese produce 11 million tons of peanuts. Okay? When they dump a significant part of their product on the market - and when I say dump, literally, essentially, that's what they're doing as a cash need - when we look at the competitiveness there, it's not necessarily a price distorting as far as subsidies are concerned. But you have to realize that we in the United States, as I said, produce about 1.5 million tons. They're producing 11 million tons, and they still hand pull every peanut plant, shake every peanut plant by hand, and pick every peanut off the peanut plant itself. So when you look at that production cost, there's one of the items that you'll never be able to truly address, I guess is what I'm saying there.

And the perfect nirvana, as far as what the world market would look like, I think you have to realize that in the United States we produce a product that is important to the consumer out there, and we feel it's very important that the consumer have a product at a good price. And that's very evident by the fact that any time you look at when there's talk of being competitive on the world market, products coming into the United States at less than world market or less than domestic market price, if you'll notice that even since 1996 and since GATT and NAFTA were negotiated, consumer prices, even with the 10 percent reduction in domestic support rate and an influx of cheaper imports, consumer prices have yet to go down.

So I think that kind of answers that question. Yes, ma'am?

MS. BOMER-LAURITSON: I want to make sure I understand the reasons behind comments that you and Mr. Plowden made, and that's the loss of market share on the export market for edible peanuts. On the edible peanuts side, who are the competing countries and what are the factors that have led to us no longer being the number one –

MR. HUNTER: Well, part of it is what he mentioned with regards to an aflatoxin. We also have seen an increase in those countries out there where we have helped, as far as in trade agreements, to increase their production, such as Argentina. China, once again, is exporting more peanuts into the world market than ever before and become a major player.

Thank you very much.