| ||||||||||||
| ||||||||||||
| ||||||||||||
| ||||||||||||
Stuart E. Eizenstat
Under Secretary for Economic, Business and Agricultural Affairs
Statement before the Subcommittee on International Trade
U.S. Senate Finance Committee
Washington, DC, March 15, 1999
Agricultural Trade Issues: China and Europe
Mr. Chairman and members of the subcommittee, it is a pleasure to be here today to discuss current agricultural trade issues with China and Europe. In both China and Europe, we are dealing with issues that have enormous implications for our agricultural interests and the world trading system as a whole.
Let me state at the outset that the State Department fully appreciates the importance of international trade and open markets for America's farmers and ranchers. I do not think there is any sector in our nation that is more integrated into the global economy than our agricultural sector. Studies show that farmers and ranchers are twice as reliant on overseas markets than other parts of the economy. The continued liberalization of world markets and the resulting expansion in trade holds great promise for the growth of and vitality of our farm sector.
But this promise of continued trade expansion is not something that will happen on its own accord. It is an effort that we in the United State have to lead. One of the best ways for us to show this leadership is to strongly affirm internationally the set of basic trade principles that has underpinned the growth of world trade since 1945.
One such principle is the importance of respecting trade commitments. Another is the importance of establishing a clear, transparent and predictable process to govern the regulation of trade. A third, crucial principle, has been the affirmation that decisions on the environmental, health and safety aspects of products must be made on the basis of scientific criteria.
It will be all the more important to reaffirm these principles internationally as we prepare for the next round of WTO trade negotiations. And in terms of the topics for today's hearing, these principles have direct relevance to the sets of issues we now face in China and Europe.
Looking first at China, when and on what terms China is fully integrated into the world trading system is an issue that has enormous significance for our farmers. China may have escaped the worst effects of the economic malaise that has struck many of its neighbors, but its economic growth has slowed. Despite this, U.S. exporters have achieved significant gains. Our exports to China recently have had double-digit growth while other regions' exports to China have stagnated. China is our fourth-largest agricultural market, with exports more than doubling since 1991.
As China grows and consumer income rises, there will be a huge potential for the expansion of our food exports. However, this potential can be fully realized only to the extent that we are able to implement the trade principles outlined above.
I am sure Ambassador Scher will cover China's WTO accession and related issues in more detail in his statement. Let me simply note that it is extremely important that China join the WTO on commercially meaningful terms and that China fully respects the rules of the system. The principles regarding transparency and the importance of using science-based decision-making have direct relevance to some of the ongoing disputes we have with China over wheat, beef and citrus.
During her recent trip to China, Secretary Albright pressed the Chinese strongly regarding their trade commitments, including on agriculture. She also stressed the importance of making progress on WTO accession. This is not just a narrow trade issue. It is part of a larger effort to help shape the way China interacts with the world trading system and to develop the type of market that future farmers and ranchers will face in Asia in the 21st century.
Turning to Europe, it is worth remembering that we often let the immediacy of our current trade disputes blind us to the very real benefits the U.S. and EU enjoy from access to each other's market. Two-way trade and investment flows account for more than one trillion dollars. Studies have shown that the relationship directly supports more than 6 million jobs on both sides of the Atlantic. One in 12 industrial jobs in the U.S. is in a European-owned factory. Europeans are the biggest foreign investors in 41 of the 50 U.S. states.
The strong economic relationship is also reflected in bilateral agricultural flows. From 1991 to 1997, U.S. agricultural exports to the EU rose from $7.0 billion to $8.6 billion; during that period, we consistently ran an agricultural trade surplus of between $2 - $3 billion. And, over the years, our overall trade with Europe has been largely balanced and based on strong environmental and labor standards on both sides of the Atlantic.
But obviously there are challenges in front of us. We are now entering a crucial period in our economic relationship with Europe. The EU is engaged in a politically difficult process of reforming its Common Agricultural Policy, with large implications for the types of subsidies our own farmers will have to compete against in the future.
The CAP reforms are partially related to EU efforts to admit a new group of Central European, Baltic and other countries into the Union, a process that has important security as well as commercial implications for our interests. We, the EU and others are also preparing for the next round of WTO trade talks, which will certainly focus specifically on some of the very programs -- such as export subsidies -- that have underpinned EU farm policy.
The U.S. and EU are now facing a tough set of trade issues on bananas, beef hormones and in the more general area of biotechnology. Our disagreement with the EU over bananas and beef hormones has broader ramifications for the future of the WTO dispute resolution system. On bananas the EU has failed on numerous occasions to develop first GATT and then WTO compliant banana regimes following trade body rulings. With regard to beef hormones, it is still not certain if the EU has the political will to comply with the WTO findings against its ban. These actions undercut critically needed support in Congress and the agricultural community for the WTO.
In this environment of internal pressures within the EU and serious bilateral transatlantic trade concerns, it will again be important for us to hammer home the principles of fair and transparent trade rules, of respecting international commitments and of using scientific principles, not politics, to make environmental, health and safety decisions. Relying on these principles is the best way in which to reduce our frictions with the EU and to remove the emotions which so often cloud what should be technical actions.
The need for a set of clear and rational trading principles may be greatest in the area of biotechnology.
As U.S. agriculture and related products -- everything ranging from tomato paste to vegetable oil -- increasingly involve biotechnology, this issue is one of growing importance to our competitiveness in the 21st century. Within a few years, virtually 100% of U.S. agricultural commodity exports will be genetically modified or mixed with GMO products. While we recognize a legitimate desire to assure safety in this area, it is important that our trade in these products be based on a framework that allows beneficial trade to grow and develop while allowing fair and transparent procedures to address safety on a scientific basis. I have long personal experience with this issue from my time as U.S. Ambassador to the EU. I still bear scars from the bruising fight we had to obtain EU approval of Roundup Ready Soybeans. We barely had time to recover from that process when we were faced with another bloody battle over Bt corn. Now there are new biotechnology varieties on the way and the prospect for further problems with the EU remains.
We of course respect the EU's right to have a system of government oversight for genetically modified organisms -- or GMOs. No government can abdicate its responsibility to have a system in place to ensure the safety of food, feed and the environment. But the system must be predictable, transparent efficient and scientifically based -- as the WTO rules require.
Although the U.S. does not have a separate regulatory system for GMOs, they still go through the same rigorous examination process for safety that all of our food and feed products go through. This exam takes place under the "Coordinated Framework for Regulation of Biotechnology" which was articulated in 1986. Under this approach, biotechnology products are regulated using existing statutes, as are other, similar products. USDA, EPA and FDA are the primary regulatory agencies responsible for products of agricultural biotechnology. Under the Framework, some biotechnology products may be regulated by all three agencies and some may be regulated by one or two agencies, depending on whether or not there are issues such as environmental safety, food safety or labeling involved. Since 1994, 20 genetically modified agricultural products have successfully moved through our regulatory system toward commercialization and marketing. The transparency and predictability of our process goes a long way to explain why these products have largely enjoyed general consumer acceptance.
In Europe, it is different. Because there is no scientifically based governmental system to approve GMO products, the European public is susceptible to ill-informed scare tactics. Public opinion in Europe is therefore far more emotional on this issue than in the U.S. Not all of the roadblocks our exporters face are the result of poor procedures or trade competition. The European Parliament often reflects this public sentiment.
The EU approval system for GMOs is non-transparent, unpredictable, not based on scientific principles, and all too susceptible to political interference. There are a number of reasons for this. The poor handling of the BSE, or mad cow disease, problem has shaken the European public's faith in its scientific health authorities.
The EU's weak decision-making machinery in this area is also partly to blame, as it often allows single member states to throw up roadblocks and stall progress for reasons unrelated to scientifically-based concern about health, safety, or the environment. This was certainly the case in the summer of 1998, when France for non-health reasons blocked two U.S. GMO corn products that had already been approved by EU scientific bodies. The products were eventually allowed into the EU after heavy pressure was applied all the way up to President Clinton, but in the meantime our corn farmers lost significant sales.
The process in Europe is further complicated by the huge amount of misinformation about GMOs in the media. This has so slanted the European public's views on the issue that governments are reluctant to undertake perfectly appropriate, but politically difficult, regulatory decisions. Nowhere is this more evident today than in the UK, where virulent attacks on GMOs in the press -- both tabloids and mainstream -- have made it difficult to hold a rational debate about the benefits of biotechnology.
Many of the issues related to biotechnology are also found in other trade disputes we have with the EU.
The problems caused by lack of transparency and predictability are very apparent in the beef hormone case. As is the case with biotechnology, political opinion portrays this as a health and safety issue despite the broad scientific evidence to the contrary. I fear some in Europe continue to try to find the "right" scientific evidence to support a political prejudice against beef produced with growth hormones. In response to the WTO ruling against its ban, the European Commision has initiated 17 separate risk assessment studies on hormones (none of which were called for in the WTO finding). We have so far been unable to get any information about these studies from EU authorities. We do not know who is conducting the studies, how those conducting them were chosen, what evidence they are looking at, nor what procedures they are following. As far as we can tell, there is no consistent opportunity for public comment. Needless to say, this lack of information heightens our concerns that factors other than legitimate environment, health and safety issues may influence the final conclusions. And we wonder when this process will ever end. The EU cannot be permitted to endlessly use the excuse of needing to conduct just one more study that might, this time, possibly find something to justify keeping trade restrictions in place.
In relation to growth promotant hormones, these substances have been extensively studied over 20 years by international scientists, including the EU's own scientists, and have repeatedly been found to be safe at the levels currently used.
Problems in the regulatory process have led to a pattern whereby every major, new GMO marketed in by the U.S. becomes the subject of a prolonged and bitter battle to gain entrance to the EU market.
But while we have been taking on these specific problems with EU, we have also been working to break this pattern of confrontation by trying to improve the coordination between U.S. and EU GMO regulatory processes and thereby reestablish the importance of the principles regarding transparency, predictability and science-based decision making. Some of this work is modeled on the cooperative relationships we now have with Canadian and Japanese authorities. Under the Transatlantic Economic Partnership, we and the EU have set up a Biotechnology Working Group to address bilateral issues related to GMOs. The first meeting of the group was held in February in Washington, at which the U.S. proposed a pilot project designed to coordinate better the GMO regulatory processes on both sides of the Atlantic. We are also using this forum to raise our concerns about the inadequacy of the EU's current GMO regulatory system and to continue a dialogue on ways to reform it.
We have also been exploring ways to address the public perception problem in the EU regarding biotechnology and other issues. The State Department and other agencies have been developing a public diplomacy campaign on the beef hormone issue, to make sure the facts are available regarding the many scientific studies that have failed to find any harmful effects from U.S. beef. This type of campaign can easily be broadened to include information about biotechnology, that not only stresses the safety of marketed products and the importance of an open, transparent regulatory system, but also highlights the many benefits that biotechnology can bring. These include the potential for reduced pesticide and herbicide use and hence greater protection of the environment, and larger yields than can help to feed hungry people around the globe necessitating less conversion of land to agricultural purposes. It is also worth keeping in mind the significant efficiency gains brought by use of biotechnology. Given the historical outlook for declining EU support to farmers and increasing reliance on market mechanisms, these potential gains cannot be overlooked. Half or more of this year's U.S. soybean and cotton crop, and one third of this year's corn crop, could be produced with genetically modified seed.
It is not unrealistic to expect that the EU, too, will inevitably move in this direction and that one day Europe will seek to promote its own agricultural biotechnology industry. Biotechnology and its related issues are not just a U.S.-EU problem. We are facing the problems with lack of respect for certain trade principles in other fora as well. A good example is the recent Biosafety Protocol negotiations in Cartagena, Colombia. The negotiations were suspended when it became clear the parties could not agree on key provisions, including those which would have affected trade in GMOs. We were disappointed that the talks did not result in a workable agreement that would have protected biodiversity. However, we and a number of other nations recognized that certain proposals would have created disguised barriers to trade, would not have protected the environment, and practically speaking would have resulted in a Protocol not capable of being implemented. This would have led to unnecessary trade restrictions on the world's food supply and limited the ability of other nations to enjoy the benefits of modern biotechnology. In our view, having no agreement was better than a bad agreement that could not have been implemented. One of the greatest concerns of the Cartagena talks was the degree to which many developing countries, many of whom could be the largest beneficiaries of biotechnology's promise of greater yields and reduced environmental damage, sided with those who would have used the Protocol to restrict trade in food products. In the run-up to the next negotiating session, we will continue to work internationally to bridge these differences.
Facing these problems regarding biotechnology in so many different areas underlines the need for a strong and consistent U.S. policy that ensures the safety of these products domestically while at the same time reaffirming internationally the importance of using scientific principles -- not politics -- as the basis for permitting marketing. It also imposes on us, as leaders in the world trading system, the responsibility to do what is necessary to ensure that the basic set of principles regarding transparent rules, respect for commitments and reliance on science-based decision making remain at the center of any international agreement covering trade in new products.
Another aspect to the biotechnology issue concerns proposals for labeling. It is therefore worth reviewing what the U.S. position on labeling is.
The Food and Drug Administration (FDA) requires labeling for any food, GMO or not, that presents a significant change in nutritional or compositional value, contains a new or unexpected allergen, or that needs to be used or stored in a different way.
For example, GMO high-oleic canola would have to be labeled in the U.S. because it has a higher oil content than conventional canola, not because it is a biotechnology product.
We recognize that countries have the sovereign right to have mandatory food labeling regulations, and we will certainly comply with them. What we require, however, is more specific guidance as to how our companies can comply. Regarding the issue of biotech food products, U.S. consumers have confidence in our regulatory agencies to ensure the highest food safety and quality standards.
We do not object to voluntary labeling that is truthful and not misleading and that otherwise complies with the food labeling regulations of the FDA as part of a company's marketing plan. We encourage companies to disseminate information about biotechnology so that consumers have a better understanding of the many benefits that biotechnology provides to health, the environment, food security, and nutrition.
What we should not allow is labeling that is misleading and may be used to infer that U.S. products are somehow dangerous, when there is no scientific evidence to indicate a risk to human health. Before I close, I would like to touch on one additional aspect of our relationship with Europe, the reform the EU's Common Agricultural Policy (CAP). This is of course an internal EU process but it is one that does have important implications for our interests. This reform is being driven by a number of factors. Roughly half of the EU's budget goes to support the CAP. The EU has now agreed to put a ceiling on total budget expenditures and this cannot be done without CAP reform. Second, the EU is, like all WTO members, preparing for the next round of trade talks, which we plan to kick off this November in Seattle. Europe recognizes the need to reform policies on subsidies in advance of the talks. Finally, and perhaps most importantly, the EU is committed to an enlargement process that will eventually bring in the countries of Central Europe and the Baltics. To do so under current generous but inefficient subsidy programs would impose an enormous strain on the EU's budget. However, despite all these pressures for reform, the negotiations of the last few weeks have shown how difficult it is to enact significant cuts in farm programs.
Though the CAP reforms have not yet received final approval, we are still able to offer some initial assessments on the package. Last week, the EU's Agriculture Ministers took a partial step in the right direction by modifying the CAP -- cutting guaranteed prices for cereals over the next several years by 20% and phasing out of payments to farmers for taking land out of production; cutting guaranteed prices of milk by 15%; and cutting the basic price of beef by 20%. The Ministers failed to adopt the Commission's proposal to reduce direct payments to large farmers. Overall spending cuts were adopted, a critically important step since CAP spending has grown almost continually since 1962 and is nearly half of the EU's annual budget. We of course welcome any movement toward agricultural reform in the EU, particularly to the extent that these reforms will reduce the use of trade distorting export and other subsidies. The global trend in farm policies is moving away from the direct intervention policies that have historically underpinned the CAP and we certainly hope that this trend will extend to Europe as well.
That said, however, the reforms approved by the Agriculture Ministers do not appear to go far enough in terms of reducing the CAP's distorting effects on the world trading system. We have consistently urged the EU to go farther and made clear our intentions in the next round to limit and/or eliminate those types of farm policies that impose costs on others. Vice President Gore laid this out well recently in Davos, Switzerland, when he said we will seek nothing less than the elimination once and for all of trade-distorting export subsidies.
We will continue to send this message, making clear our ambitious objectives for the next WTO round and stressing that the more market-oriented the EU's farm policies become, the better it will serve Europe and the world trading system.
In conclusion, let me reiterate the importance of successfully resolving the issues before us in China and Europe -- whether it be on WTO accession, beef hormones or biotechnology -- to our ability to move forward with an agenda of trade liberalization and opening markets for our farmers and ranchers. We must continue to advance the basic principles of respecting trade commitments, establishing transparent and predictable regulatory processes, and using science-based decision making on environmental, health and safety issues. In the end, we fully realize that our trade agenda has to rest on a solid foundation of domestic support. If we cannot show Americans that the trading system works for them, then we will not be able to sustain our policies in the international arena.
[end of document]
Economic and Trade Policy | Department of State This is an official U.S. Government source for information on the WWW.
Inclusion of non-U.S. Government links does not imply endorsement of contents.
