SECTION: PREPARED TESTIMONY

LENGTH: 3780 words

HEADLINE: PREPARED STATEMENT OF DAVID MOORE ON BEHALF OF WESTERN GROWERS ASSOCIATION
 
BEFORE THE HOUSE COMMITTEE ON AGRICULTURE
 
SUBJECT - FEDERAL FARM POLICY

BODY:
 Thank you for holding this hearing to discuss federal agricultural policy issues and for the opportunity for Western Growers Association to submit a statement for the record. WGA was established in 1926, and represents over 3,300 members who grow, pack and ship more than half of the nation's fresh fruits, vegetables and nuts. The Association represents over 90% of the fresh vegetables and about 60% of the fresh fruits and nuts grown in Arizona and California.

Federal Agricultural Policy

The U.S. horticultural sector has always been on the periphery of farm policy because fruit and vegetable growers have never participated in the historical farm programs designed for other agricultural sectors. Our growers, moreover, believe that federal farm policy also includes import and export policies, and it is these policies that will be addressed first. In addition, there are a number of other issues of great importance to the fresh produce sector, including the Perishable Agricultural Commodities Act, the U.S. Department of Agriculture's Animal and Plant Health Inspection Service, planting flexibility on subsidized acreage under the 1996 Farm Bill, guest worker legislation, crop insurance, supermarket consolidation, and agricultural research. As you can see, fruit and vegetable growers have many issues on our plate. Agricultural Trade Policy

With U.S. tariffs on imports being among the lowest in the world, our market is open to fresh fruits and vegetables from around the world. When trade negotiators raise the issue of reducing domestic and export subsidies, there is nothing to debate with regard to the U.S. fruit and vegetable industry, since our industry receives no trade- distorting subsidies or aggregate measurements of support. There are no protectionist safeguards or sophisticated price or volume mechanisms designed to keep imports out when our produce is being harvested and marketed.

Let's compare this situation with the fruit and vegetable industry in Europe. Taking a look at the most recent data (marketing year 1996/97) which the European Union has provided to the World Trade Organization, we find that the EU's aggregate measurement of support (the WTO's measure of domestic support) was approximately $15.3 billion for HTS Chapters 7 and 8. Let me reiterate - the European industry received roughly $15.3 billion in benefits from government policy for one marketing year, compared to zero for the United States!

Additionally, the EU was allowed in the Uruguay Round to basically retain its Reference Price System for certain fruits and vegetables. It is now called the Entry Price System. This system imposes a duty on imports that enter the EU below a specified price. For the EU's most sensitive fruits and vegetables (15), there is a special volume-based safeguard (additional duty) that protects the domestic industry by effectively keeping out U.S. exports when the EU is harvesting and marketing its own crop(s).

In addition to these measures, the EU uses Producer Organizations (POs) to provide subsidies more directly to fruit and vegetable growers. Growers pay levies to the PO which are reimbursed 100% by the EU, up to 4.5% of the value of the product marketed. The U.S. Department of Agriculture's Foreign Agricultural Service estimates that in 1999, the total estimated EU direct support to the POs was approximately $328 million for fruits and vegetables. While the EU member states do report the activities of the POs to the European Commission in Brussels, there is no strict oversight by the EC. Thus, there is ample opportunity to report the activities of POs as non- trade distorting, a classification which does not require reductions in support levels. With ongoing efforts to reduce all subsidies, it is expected that more and more effort will be made to disguise the PO subsidies as non-trade distorting, and thus not subject to reduction efforts.

WGA is a member of the Agricultural Coalition on Trade (ACT) which is comprised of fruit and vegetable associations. ACT has reviewed the U.S./EU fruit and vegetable trade picture since the implementation of the Uruguay Round. Attached to my testimony are two charts for your review. Please note the significant increase in imports from the EU - over 141% in quantity (95% in value), while there has been a 12% decrease in the quantity (16% in value) of U.S. exports to the EU.

WGA believes that this disturbing imbalance of trade is due primarily to inadequate attention in the Uruguay Round to the U.S. fruit and vegetable sector. When the U.S. negotiating strategy is to reduce subsidies, and the U.S. sector has nothing to reduce, our industry stands to gain very little, especially when the subsidies are as high as those of the EU. The situation is even more severe when the subsidy reductions are made on an aggregate basis.

While WGA believes this situation can only be rectified by complete elimination of all domestic and export subsidies, we are realists and do not expect this to happen in the next trade round. However, WGA believes the U.S. fruit and vegetable sector can benefit from a new trade round only if the following approaches are taken:

1) Substantial percentage reductions in subsidies based on the value of the aggregate measure of support (AMS) for each product (i.e., the higher the AMS, the larger the percentage reduction);

2) Elimination of export subsidies;

3) Elimination of the Peace Clause;

4) Clarification and harmonization (to the greatest extent possible) of domestic support terms (i.e., price support, direct aid, premium, etc.) used in WTO notifications;

5) More transparency in WTO required notifications to clearly determine whether the support is appropriately placed in the green, amber, or blue box; and,

6) Symmetry in safeguard measures.

WGA recognizes that members of the House Committee on Agriculture will not be the negotiators for the next WTO trade round. However, decisions made in the next trade round will directly affect the future economic health of the U.S. fruit and vegetable sector. Thus, when developing U.S. farm policy, members must carefully scrutinize the impact of our trade actions on all sectors of U.S. agriculture. This includes specialty crops as well as the bulk commodities.

With respect to the Free Trade Area of the Americas (FTAA), these negotiations are proceeding faster than the WTO negotiations. WGA is concerned that our government's WTO objectives are influencing the FTAA negotiations. The domestic subsidy objective appears to be the same as the WTO objective - a substantial reduction in domestic trade distorting subsidies. Why? The Western Hemisphere countries do not appear to be subsidizing their horticultural crops. Congress needs to consider separating the trade negotiations for horticultural crops from other agricultural crops and prohibit domestic subsidies.

Europe has over 375 million consumers, but this potential market is essentially closed to our growers and shippers, whereas the European fruit and vegetable industry has an open market in the United States. WGA hopes that, as members of the Committee focus on U.S. trade policy and the future health of American agriculture, you will be able to support a trade policy that is fair and equitable to the U.S. fruit and vegetable industry.

Market Access Program Legislation

WGA strongly supports legislation currently pending before this committee to expand the successful Market Access Program (MAP). This legislation, H.R. 3593, would authorize $200 million annually for the MAP, $35 million annually for FMD, and allow 50% of unused Export Enhancement Program funds to be used for market development and promotion activities. As members of this committee are well aware, the non-trade distorting MAP program has proven to be extremely successful in promoting the expansion of U.S. agricultural exports in international markets, especially those in which we face unfair trade barriers. Passage of the legislation, which would restore MAP funding to levels of the early 1990's, would expand agricultural exports and also would strengthen the U.S. negotiating position in new WTO trade discussions. We hope the committee will expeditiously approve this legislation.

Perishable Agricultural Commodities Act

The Perishable Agricultural Commodities Act (PACA), which is administered by the USDA to regulate fair trading standards in fresh produce but which is fully funded by the industry, is critically important to our industry. PACA has enabled growers, shippers, and receivers to move perishable fruit and vegetable crops great distances with assurances that all parties are fairly compensated. In playing a critical role in ensuring an abundant and affordable supply of healthy fruits and vegetables, the PACA provides many benefits to all sectors of the industry, including the consumer.

Hunts Point Terminal Market Criminal Activity

Unfortunately, it was learned last year that USDA inspectors and wholesalers at the Hunts Point Terminal Market in New York City entered into a massive kick-back scheme to defraud growers and shippers by falsifying inspections of fresh produce over nearly a two decade period. All of the indicted inspectors involved in the scheme and many of the wholesalers' employees have agreed to plead guilty in criminal proceedings. WGA is pleased to see that this criminal activity has been uncovered and prosecuted.

However, WGA is concerned that growers and shippers will have great difficulty in fully pinpointing the financial losses suffered due to the Hunts Point criminal activity. While the PACA process permits defrauded shippers to file grievances against wholesalers to recoup losses suffered as a result of criminal activity, the burden of proof rests solely with the shippers. Some accommodation must be made to relieve the shippers' overwhelming burden of proof requirement in this situation, or it will be virtually impossible to recover any of the losses caused by this criminal activity. It is the contention of WGA that all of the inspections performed by the guilty inspectors at the implicated wholesalers are suspected of being part of the same kick- back scheme. Therefore, immediate action should be taken on all of the inspections performed by the guilty inspectors at the wholesalers where employees were indicted by having the USDA certificates voided. This would shift the burden of proof off the growers/shippers and on to the wholesale companies alleged to have participated in the scheme.

The statute of limitations will expire on July 27, 2000, yet the evidence needed to go forward in the PACA proceedings is still in the process of being forwarded to shippers by USDA Fresh Products Branch. It is therefore appropriate for Congress to extend the statute of limitations in order that shippers have an appropriate time frame to submit PACA claims.

Another problem in the Hunts Point matter is the shipments involved in the government's sting operation. The shippers were unknowingly involved in, and paid a heavy price for, federal efforts to document criminal activity. WGA believes that shippers who unknowingly were victims of this surveillance should be compensated for the fair market value of the produce involved in the government sting operation. It is well within the power of Congress to reimburse shippers for such losses caused by federal law enforcement efforts.

Further, a need for a direct restitution package should be required compensation to the industry. USDA was mandated by Congress to prepare a report on the extent of the losses and recommend a process to compensate those who suffered financially because of this scheme. WGA asks for expedited consideration by Congress of such a restitution package.

Planting Flexibility on Subsidized Acreage

WGA is strongly opposed to allowing fruits, vegetables and nut trees to be grown on acreage which is enrolled in USDA subsidy programs for the bulk commodities. This is necessary to ensure that producers of fruits and vegetables who do not receive USDA subsidies are not put at a competitive disadvantage against growers who do participate in the federal farm programs. This policy also prevents against the disruption of produce markets due to artificially imposed signals arising from changes in government policy.

Along with other produce organizations, WGA worked hard to ensure that Congress abided by this policy in writing both the 1990 and 1996 Farm Bills. Section 118 of the Federal Agricultural Improvement Act of 1996 (1996 Farm Bill) prohibits the planting of fruits and vegetables on all USDA contract acres, with certain narrow exceptions specified in the law. In testimony before the House Agriculture Committee in 1999, Secretary of Agriculture Glickman recommended that Congress expand planting flexibility so that producers can elect to plant fruits and vegetables (on subsidized acres) if they choose to do so.

This proposed amendment would overturn the policy, included in the 1996 Farm Bill, of preventing subsidized growers from planting fruits and vegetables on contract acreage. WGA is strongly opposed to Secretary Glickman's proposal, and will strongly oppose any new legislation which would allow subsidized producers to compete against non-subsidized growers in the production of fruits and vegetables.

WGA also is concerned about USDA's enforcement of Section 118 of the 1996 Farm Bill. On May 5, 1999, USDA issued an Advance Notice of Proposed Rulemaking indicating that some growers believe the penalties for violating Section 118 are unduly harsh, and that the agency is considering reducing these penalties. While WGA does not believe that such penalties should be unnecessarily punitive, we do believe it is incumbent upon USDA to ensure that any reduction in the current penalty regime does not lessen the deterrent effect of the penalties in enforcing the Flex Acreage policy, as clearly intended by Congress. WGA will oppose any substantial change in the penalties which would significantly weaken current law.

WGA remains committed to ensuring that the fundamentally fair policy of prohibiting subsidized growers from competing against growers who do not receive government assistance in fruit and vegetable production remains the law of the land, and that the law is effectively enforced.

Guest Worker Legislation

Western Growers Association also strongly supports bipartisan legislation to reform the H-2A agricultural guest worker program (S.1814, H.R. 4056, H.R. 4548). An effective guest worker program is needed to ensure that legal workers are available to harvest perishable crops when there are not enough domestic workers for this purpose. The inability to secure a sufficient number of workers in a timely fashion to harvest perishable crops results in adverse consequences for growers, workers, and consumers of fresh fruit and vegetables.

In recent years, the H-2A program has proven to be cumbersome and inefficient when faced with the task of supplying significant numbers of guest workers on short notice. As our industry continues to experience localized labor shortages throughout California and Arizona, the need for a reformed program to avert labor shortages continues to grow. Thus, legislation to reform the H-2A guest worker program is very important to the California fresh produce industries.

S. 1814 and H.R. 4056 also include provisions that will provide undocumented workers with the opportunity to earn permanent status through employment in agriculture. This adjustment of status provision is a win-win situation for growers and farmworkers.

Growers benefit through the stability of a legal workforce and the certainty that highly perishable crops will be harvested in a timely manner. Farmworkers benefit by earning the right to legal status, avoiding the substantial risks inherent in undocumented status, and get the protection of U.S. labor laws.

Again, WGA strongly supports the bipartisan agricultural guest worker legislation with adjustment of status for farmworkers, and urges Congress to enact this legislation in 2000.

Supermarket Consolidation

Supermarket consolidation is a concern from the grower to the consumer. The ability of the supermarket to drive farm-gate prices down and drive retail prices up when a supermarket chain dominates the market is economically unacceptable. Unlike non-perishable consumer products, a family farmer with a perishable crop ready for harvest does not have the alternative of waiting for prices to rise. The immediate requirement to market the product is further complicated when the market is dominated by a few large chain supermarkets. The trend of retail supermarkets demanding slotting fees from grower/shippers of fresh produce is evidence of market power which puts family farmers at a great disadvantage.

Animal and Plant Health Inspection Service

WGA encourages the Committee to provide strong oversight and provision of adequate authorization of funding for one of the most important agencies of the U.S. Department of Agriculture, the Animal and Plant Health Inspection Service (APHIS). This agency provides invaluable assistance to exporters of U.S. agricultural products by working with foreign plant health officials to resolve phytosanitary barriers which stop or delay our exports. Unfortunately, APHIS's efforts to improve our export picture have been diminished by the growing list of import petitions received from foreign governments eager to export to the U.S.

Another concern is that the responsibilities of APHIS were increased dramatically with the adoption of the Uruguay Round WTO Agreement (which includes the Sanitary and Phytosanitary (SPS) Agreement), yet the agency's personnel and other resources were not increased at anything close to the level needed. The release last year of the National Plant Board's study, Safeguarding American Plant Resources, makes clear how extensive the needs are at the agency - and how important this agency is to the future of U.S. agriculture.

Given the critical importance of opening new international markets for our fresh produce exports, WGA believes that APHIS should have a specific mandate from Congress to assist U.S. agriculture in these efforts.

WGA is also concerned that APHIS is being made subject to political pressures, and is not taking the necessary care required to protect domestic agricultural crops from the risk of pest infestation before approving new import petitions. Exotic pest infestations are much more prevalent than they were even 10 years ago, due to the increased level of international trade. With increased trade comes increase risk of exotic pest infestation, and APHIS must have the resources to confront the task of keeping exotic pest infestations to a relatively low level. Obviously this is necessary if we are to continue to have a successful agriculture industry - for both specialty crops and commodity crops.

Federal Crop Insurance

WGA recognizes the need to expand effective risk management tools to growers of fresh fruits and vegetables. However, due to recent experience, we are concerned about potential adverse impacts on growers from any expansion of the federal crop insurance program.

WGA believes that RMA's watermelon crop insurance pilot program was a major factor contributing to the increased supply of watermelons in the U.S. market in 1999. The pilot program implemented in select counties in a few states appears to have provided incentives for growers to expand production, or for new growers to enter the market. This created an imbalance in an industry that previously was characterized by a reasonably balanced supply and demand history. Large increases in acreage planted to watermelons in areas served by the pilot program indicate that the program may have been a major factor in causing this shift into watermelon acreage. WGA strongly opposes the continuation of the watermelon pilot program until RMA can assure growers that it will not disrupt traditional marketing patterns.

Ensuring that new programs are available on an equal basis among all growers, and will not disrupt existing markets, should be a standard requirement for RMA in developing any new crop insurance programs. WGA also believes that associations and cooperatives have a vital role to provide in crafting crop insurance policies and providing premium discounts to growers. WGA urges USDA/RMA to keep the concerns of fruit and vegetable growers foremost in mind as it implements the recently enacted crop insurance reform law, and urges vigilante oversight by the House Agriculture Committee.

Food Quality Protection Act Reform WGA strongly supports efforts to provide for a better implementation process of the Food Quality Protection Act (FQPA), such as the Regulatory Fairness and Openness Act of 1999 (H.R. 1592) by Rep. Pombo. This legislation does not change the fundamental requirements of FQPA, but rather reinforces the original FQPA language to ensure that the EPA uses actual data and realistic models in their risk calculations. The bill also would require EPA to use the data call-in provision of the law where there are data gaps. Effective and fair implementation of FQPA based on actual data and sound science is critical to ensuring that growers have access to the crop protection tools needed to grow nutritious and affordable fruits and vegetables.

WGA is pleased to see that this FQPA reform bill has 218 cosponsors, thus attaining the support of a majority of the 435 members of the House, and urges Congress to move forward with this legislation as soon as possible.

Agriculture Research

WGA appreciates the small increase in funding for federal agricultural research that Congress has provided in the last year or two. However, our industry has two concerns regarding research. First, the Agricultural Extension Service has been decimated over the last 15 years. Their advice and applied research is critical to assisting growers in the development of more efficient ways of growing crops. In California, many of the long time extension advisors are reaching retirement age and it is not clear that there is the will to replace them. Secondly, we believe that more funding should be directed towards applied research. As we struggle with changes in pest control, new environmental legislation, and other challenges, applied research has the potential to assist in the development of new solutions to these issues.

Thank you for this opportunity to present the WGA's views on federal agricultural policy. I will be glad to respond to any questions.

END

LOAD-DATE: August 2, 2000