MR. MOWERY: Mr. Chairman and members of the committee, the State of Texas appreciates your opportunity of coming here and letting us sound our comments. We appreciate the opportunity to testify today before you regarding negotiating objectives for agriculture in the next round of trade talks in the World Trade Organization. Our organization, the Texas Farm Bureau, represents 312,836 members in the state of Texas. Our members produce a broad diversity of agricultural commodities including beef cattle, cotton, dairy, poultry, corn, wheat, rice, vegetables, and a number of other crops. Texas producers depend on access to customers around the world; more than 24 percent of Texas cash receipt were attributed to agricultural exports, 3.1 billion in 1997. Texas agricultural exports generated an additional 4.1 billion in economic activity and created 44,000 jobs in the state.

Agriculture is one of the few U.S. industries that consistently runs a trade surplus, posting a positive trade balance of trade every year since 1960. The U.S., along with agriculture, must be at the negotiating table in the next WTO trade rounds in a meaningful way with trade negotiating authority to ensure that the surplus, this trade surplus, continues.

The ability of U.S. agriculture to gain and maintain a share of global markets depends on many factors, though, 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 the necessary changes to the WTO dispute settlement process to ensure timely resolution of disputes.

When Congress passed the 1996 Freedom to Farm Act, it phased out our price supports, making U.S. agriculture more dependent on the world market. American farmers and ranchers produce an abundant supply of commodities far in excess of our domestic needs, and our productive value continues to increase every year. Exports are agriculture's source for future growth in sales and income.

As you're well aware, U.S. agriculture is reeling from low commodity prices this year. In Texas, total cash receipts from foreign markets declined 3.5 percent from 1997 to 1998 and have fallen an additional 11 percent so far this year. For 1999, Texas cash receipts for crops are off 38 percent compared to this same time last year. Given an abundant domestic supply and a stable U.S. population rate, the job of existing market access and opening new export markets for agriculture is more important now than ever. Agriculture's long-standing history of a trade surplus will not continue if we relegate to the sidelines as new negotiations in agriculture commerce continue.

Moreover, global food demand is expanding rapidly, and more than 95 percent of the world's consumers live outside the U.S. borders. Despite significant progress in opening U.S. markets, agriculture remains one of the most protected and one of the most subsidized sectors in the world's economy. In addition, U.S. agricultural producers are placed at a competitive disadvantage due to the growing number of regional trade agreements among our competitors. MERCOSUR, for example, has provided Argentina with trade preference to Brazil wheat markets, costing Texas producers lost sales and profits in that market for grains.

What we see is objectives for the next round. Our U.S. negotiators must comprehensively address high tariffs, trade distorting subsidies, and other restrictive trade practices in the new round of negotiations on agriculture.

Our market is the most open in the world. There's no denying that. We cannot sit idly by while our competitors trade openly in our markets but deny us access into their markets. We must begin the negotiations and conclude them as early as possible to include U.S. and Texas agricultural producers on a level playing field with the rest of the world. To this end, we suggest a goal to complete the agricultural negotiations by the end of 2002 to ensure that producers gain increased market access to these markets.

Second, we support a single undertaking for the next round wherein all negotiations conclude simultaneously. This format would prevent other countries from leaving the difficult agricultural negotiations until the bitter end, while more or less cherry-picking the easier negotiations in other sectors. We believe that this approach will prevent long, drawn-out negotiations that become too complicated to conclude expeditiously.

Third, we must call for the elimination of export subsidies by all WTO member countries. Our producers cannot compete against the mountain of spending by our primary competitors like the EU. The EU spends in excess of eight times the level of domestic and export subsidies as the United States. Data from the USDA and the European Commission show that total EU domestic and export subsidy expenditures for 1997 exceeded 46 billion dollars, compared to 5.3 billion spent by the United States. This level of spending distorts world trade and undermines U.S. producers' competitiveness in vital export markets. EU export subsidies on wheat alone average $1.13 a bushel during April of 1999.

As a result, Texas wheat has been put at a distinct disadvantage on the world market, selling at nearly $5 a ton above wheat from the EU. Consequently, EU export subsidies were one of the factors contributing to the decline in U.S. Gulf wheat exports.

Fourth, we believe that the new negotiations must include a recommitment to a binding agreement to resolve sanitary and phytosanitary issues based on scientific principles according to the WTO agreement of sanitary and phytosanitary measures. Unfounded Mexican health restrictions on hogs are one example of a non-scientific animal health regulation which has virtually stopped Texas hog producers from entering Mexico during certain time periods. Fortunately, many of these issues have been resolved, but not before trades were disrupted and prices declined. The provisions of the Uruguay Round SPS agreement are sound and do not need to be reopened, in our opinion.

Fifth, the next round should result in tariff equalization and increased market access by requiring U.S. trading partners to eliminate trade barriers within specific time frames. Our producers compete openly in their own domestic market and with their foreign competitors, but are shut out of export markets due to high tariffs.

Canadian tariffs of 250 percent on imported milk and 300 percent on butter have severely limited Texas access to affluent consumer markets. We need to correct this imbalance for all our farmers. All WTO member countries should reduce tariffs, both bound and applied, in a manner that provides commercially meaningful access on an accelerated basis.

Sixth, we must impose disciplines on State Trading Enterprises that distort the flow of trade in world markets. Every effort should be made to craft an agreement that sheds light on the pricing practices of the STE's and end their discriminatory practices. Our producers have lost too many sales in third country markets due to the noncompetitive, nontransparent operations of STE's.

Seventh, we must ensure market access for biotechnology products formed from the GMO. Significant delays and a lack of transparency in the regulatory approval process for GMO's in the EU indicate a need to clearly establish that biotechnology products are covered by the science-based provisions of the WTO SPS Agreement.

We cannot continue to be held hostage to the nontransparent discriminatory process that deny us market access just because of our GMO products. Finally, our negotiators must make

changes to trading practices that would facilitate and shorten dispute resolution procedures and processes. The process for a WTO dispute settlement case typically runs two years; three years if the WTO ruling is implemented. Our trading partners cannot be allowed to unilaterally weaken the very principles negotiated in that Uruguay Round Agreement. The expedited dispute settlement process for perishable agricultural products outlined in the WTO Dispute Settlement Understanding should be modified to allow the procedure to be used if the agreed party requests it. Currently the WTO requires that both parties in the case agree to use this procedure. As a result, it's never been used.

As mentioned, nearly 25 percent of Texas farm cash receipts are attributed to agricultural exports, with an additional 4.1 billion in economic activity to Texas tied directly to these same exports. In summary, we support liberalization in global agricultural markets that will result in true reform of the current trading regime and bring about fair trade for our producers. With declining government supports to U.S. agriculture, however, greater access to international markets will be an important force in influencing the future growth and prosperity of the agricultural economy of Texas and the United States.

Mr. Chairman, on a personal note, it's extremely important that this message be delivered in Washington, the importance of opening markets with which we currently have trading restrictions with. These include such countries as Iran, Iraq, Libya and even neighbors of the U.S., Cuba. The survival of the agriculture industry in this country as we know it today is dependent upon the principles set forth in the presentation and the opening of sanctioned markets.

Just as a side note, we thank you for the -- as Commissioner Combs alluded to, about the lamb issue on the markets, the lamb industry needs that significantly. But we feel it shows the need for a more speedy resolution to those WTO disputes.

If you have any questions, I'll be happy to answer those.

MR. GALVIN: Thanks, Curt. Just a couple of quick comments, if I can. First of all, on your point about sanctions, as you know, the President has announced a revised sanctions policy.

And we're very busy now working on the regs to put that in place, and we're hoping that they're going to be adopted in the next two to three weeks so that we can actually start making sales to places like Iran and Libya and elsewhere.

I'd like to go back to one of the earlier points that you made, because I think it's a point that's often overlooked. And that is, there are a lot of free trade agreements, special trading arrangements in this hemisphere; there's over 30 of them, and the U.S. is a party to only one of them, and, of course, that's NAFTA. I think one of the real risks we have if we don't have the negotiating authority we need is that we won't be able to really get to the table to make sure that we have a part in these market opening agreements.

And a good example of how that disadvantages U.S. producers is the current free trade arrangement that Canada has with Chile. Because those two countries have a free trade agreement, Canadian grain and livestock and other products get into Chile essentially duty-free, and that's an 11 percent advantage that we don't enjoy here in the U.S.

MR. MOWERY: That's great. We appreciate that.

MS. BOMER-LAURITSON: Yeah, I have a question on -- you raised the issue of the single --

basically the single undertaking that we should include all parts of a multilateral agreement at the same time so that agriculture doesn't get left behind. And I know that's a concern to the agricultural community; I guess, though, if what your view is if the reverse were true. For instance, if we were able to get agreement on agriculture in the two or three-year time period,

but there are actually some much more difficult sectors that we are looking to negotiate on, should we hold agriculture hostage to the conclusion of the negotiations of some of those other sectors?

MR. MOWERY: We -- in our opinion, we feel to some extent agriculture has been held hostage to that. They have gotten to an agreement and need one more bargaining chip; that bargaining chip seems to be our segment, our industry. It seems to be something that will probably cause the least amount of problem or least amount of grief up in Washington when the agreement is sold. And it's -- whether the tariffs are increased to that country or whatever, whatever it takes to make it work, we pretty much feel we're the bargaining chip that is used to help get the agreement to go ahead and settle through.

MS. BOMER-LAURITSON: And I have another question on biotechnology. You made a comment that you don't really see a reason for opening up the SPS Agreement for renegotiation, but looking for recommitment to it. And then, in your later remarks, you talked about biotechnology incorporating that into SPS. Have you looked at a mechanism of how we balance those two so that we don't open up the SPS, but somehow make sure that the problems we are having with EU on approval processes is somehow more firmly linked to the SPS?

MR. MOWERY: No, we haven't. Not to my knowledge, no.

MS. BOMER-LAURITSON: And that would be something I think we would welcome ideas --

MR. MOWERY: On that? Yeah.

MS. BOMER-LAURITSON: -- on that as to how we're going to move biotech forward without opening up the SPS Agreement.

MR. MOWERY: Okay. We can do that. Thank you.