SECTION: PREPARED TESTIMONY

LENGTH: 5306 words

HEADLINE: PREPARED TESTIMONY OF JAY J. VROOM PRESIDENT AMERICAN CROP PROTECTION ASSOCIATION
 
BEFORE THE HOUSE AGRICULTURE COMMITTEE
 
SUBJECT - CURRENT AND FUTURE FARM POLICY AGRICULTURAL INPUT PERSPECTIVE

BODY:
 Thank you, Mr. Chairman:

I am Jay J. Vroom, President of the American Crop Protection Association (ACPA). ACPA is the U.S. industry trade association representing basic manufacturers, distributors, and formulators of crop protection and biotechnology products. These companies serve American agriculture from basic research and development of new products that protect crops from pests and weeds to the manufacture and marketing of these tools to our farmer customers. Our members include corporations and cooperatives, both large and small, which operate in a competitive and changing agricultural world.

I am here today also representing ACPA's affiliate association, RISE (Responsible Industry for a Sound Environment,) which represents our industry's specialty, largely urban-use pesticides. While today's hearing focuses on agricultural policy, I would be remiss if I did not point out the direct linkage that exists between both the markets and regulatory environment of agricultural and specialty pesticides. First, the market synergies of both sectors support common investment in product discovery, testing and development. In many cases, active ingredient molecules are used in ag and non-ag markets. Often the same companies discover, make and sell these products, benefiting customers on both sides of the equation. Together with RISE, we seek uniform and fair, science-based regulation of all pesticide products, no matter what the market. Additionally Mr. Chairman, I want to emphasize the essential public health benefit of many specialty uses of pesticides to control disease vectors such as the recent outbreak of mosquito-born encephalitis, to reduction of cockroach "dust" that is a major contributor of childhood asthma. This Committee has always paid close attention to the issues affecting specialty pesticide regulation and use, and we ask that you continue to maintain that important balance. By the way, we expect the synergies that have existed between the ag and non-ag synthetic technologies and products will continue as new biotechnology tools grow in both market arenas.

We commend Chairman Combest and this Committee for holding today's hearing about the impact of current and future farm policy on the input sector. As you examine a wide variety of alternatives to existing farm policy, we encourage you to continue considering the implications for the suppliers of farm goods and services.

As this Committee knows well, crop protection provides essential inputs for American farmers that enable them to produce sufficient food to feed a growing and hungry world. Farmers need a variety of crop protection tools in order to select the best match for their individual farming operations. Their needs can vary widely from year to year, depending on crops grown and rotation schedules, weather, pest populations, and product rotation to control pest resistance.

Despite the wide variety of crop protection tools on the market, when our customers experience low prices and low profitability, so do we. Over the past several years, this fact has caused flat to depressed sales of crop protection products. For example, last year sales by ACPA members were down 8.6%. Many companies have been forced to layoff a significant number of employees and some parent companies are channeling investments into more profitable sectors, away from crop protection. These trends will likely continue until profitability returns to the American farm.

Biotechnology & Stewardship

Before I turn to the subject of today's hearing, I would like to highlight two major opportunities for American consumers: biotechnology and stewardship.

As most would agree, biotechnology holds tremendous promise. But, its future depends upon public perception, our regulatory system, and demand in domestic and international markets, farmer acceptance, and threats to overrule science from misuse of the precautionary principle.

ACPA's Biotechnology Committee is pleased to work with growers and other stakeholders during these challenging times. In concert with representatives of the entire food chain, from technology providers to growers to food marketers, we will continue to promote sound public policy and inform consumers about biotechnology.

Mr. Chairman, as you and others on the Committee know, agricultural biotechnology companies are about to launch a major, nationwide public information effort -- in part as a response to suggestions received from you and the entire committee. The program will be undertaken by a new entity called The Council for Biotechnology Information, and I have been named to serve on its North American Governing Board. The Board met for the first time just before this hearing. I will be happy to answer any questions about available details concerning the impending launch of this important effort to provide to the American public a volume of more balanced and factual information about today's modern crop biotechnology products and their potential for the future.

An immediate challenge we face is that current registrations for all biotechnology products with plant expressed protectant qualities will expire in 2001. We hope that the Environmental Protection Agency will do all it can to ensure that registrations are renewed and renewal decisions made before seed sales for the 2001 growing season begin in August 2000.

We remain firmly committed to providing relevant and useful information to regulators, our customers and the public to ensure that American growers continue to provide quality products for domestic and international markets. We look forward to working with you in reaching our common goal of fair access to world markets for American agricultural producers adopting this technology.

Regarding stewardship, the crop protection industry is making a significant commitment and investment for long-established pesticides, new chemistry and genetically modified products. We are committed to a partnership with the agricultural supply chain and farmers in support of a stewardship program that provides for continuous improvement in the manufacture, handling and storage of crop protection and production products. Increasing the level of professionalism throughout the supply chain to end-users is a key component. Through incentives and encouragement, the goal of the program is to, via an industry voluntary program, train and certify all users of crop protection and production products, including farmers, in order to facilitate safe and effective use, even beyond the high level of stewardship already in place today.

The crop protection industry also is making significant investments in e-commerce, including development of common platforms and standards to enable all in the supply chain to participate in a transparent and efficient way. Farmers will play a vital role as technology partners while the Internet and electronic information systems transform the way they purchase agricultural inputs and manage their operations.

The benefits of e-commerce technology include: start-to-finish product/container tracking, immediate access to use and regulatory compliance information, accurate and integrated field records with history of crops, crop yield, inputs, input efficacy and precise, informed emergency response. E-commerce is an evolving technology with an important role in our overall commitment to stewardship. ACPA's affiliate association, RAPID, is a leader of these technology developments in U.S. agriculture.

Current and Future Farm Policy

Many farmers are experiencing serious financial problems due to low prices and, for many, low crop yields resulting from natural disaster. These valued customers have needed the emergency assistance Congress provided for the last two years. However, pain continues to ripple throughout the farm economy, our members included.

For this reason, ACPA has supported the emergency market loss and disaster payments to infuse cash into the farm economy to supplement AMTA payments. AMTA payments were originally conceived to supplement reasonable market prices, not severely depressed prices. Unless Congress wants to continue to provide $6-8 billion a year in supplemental, unpredictable payments, it will be necessary to develop new approaches and solutions.

New policy approaches should recognize that most of the principles of the 1996 Farm Bill were (and are) sound: increased planting flexibility with less government intervention in farm decisions that gives growers more choice and independence in their operations. Farmers have more freedom to make planting decisions.

However, the elimination of AMTA payments scheduled by 2003 will leave production agriculture without a "safety net" in the face of extremely low prices. Barring an unforeseen turnaround in commodity prices, Congress will likely face continued need to provide emergency assistance to growers. Various options to change farm policy are surfacing, which will be considered in preparation for the 2002 Farm Bill or before. As you deliberate these important options, we urge that you provide a broad underpinning to support our customers, including ensuring that all of a producer's production remains eligible for loan and that eligibility for income support not be determined by farm size or income. We also recommend that any alternative sources of farm support continue to recognize the importance of pesticides and biotechnology in crop management and as a pillar of IPM.

In addition to farm policy, Congress has additional opportunities to help improve the fundamental outlook for American agriculture. We encourage Congress to help increase exports, build domestic demand, reduce agriculture's regulatory burden, and provide affordable, workable risk management tools to growers.

We recognize and appreciate that this Committee is addressing many of these issues. Hopefully, Congress will enact Permanent Normal Trade Relations with China and support its accession to the WTO, which will help build new foreign demand for U.S. production. Reform of U.S. sanctions policy, improved agricultural trade policies in the WTO and retooled U.S. government export credit programs also would help boost exports. With this Committee's action last year on crop insurance and recent Senate approval, Congress is closer to sending a bill to the White House that will increase affordable options for a broad array of producers and crops.

However, agriculture's regulatory burden has grown heavier since passage of the 1996 Farm Bill. Regulatory obstacles threaten unnecessary loss of pesticides, hinder our ability to provide farmers with new products, and may impose millions of dollars in new user fees upon us, and ultimately, our customers.

Together with our customers we face:

* Capricious EPA implementation of the Food Quality Protection Act (FQPA) * Time delays to register new pesticides at EPA * Lost effective patent term and other threats to intellectual property * $30 million in proposed increase of EPA tolerance fees * TMDL's * International harmonization challenges * Threats to FIFRA preemption * EPA's new 6(A)(2) rule

Despite these challenges, USDA has grown as a strong advocate for American agriculture in efforts to gain sound, science-based FQPA implementation, encourage new product registration; provide valuable data to EPA for more reliable risk-assessments and generate analysis about agricultural impacts of legislative and regulatory proposals. Yet USDA's role needs to expand so that agriculture has an even stronger voice in EPA decisions.

Food Quality Protection Act

FQPA requires EPA to impose new, more challenging safety standards for pesticides and to reevaluate the maximum pesticide residues permissible on food. ACPA supports the law's fundamental goals, including additional protection of infants and children. However, FQPA should be implemented according to the latest, most accurate and sound scientific principles to prevent the unnecessary loss of pesticides.

Unfortunately, politics has overtaken science at EPA. The Agency frequently is using theoretical "worst case" assumptions in risk assessments to decide the fate of pesticides. This was most visible last August when EPA unnecessarily cancelled 42 crop uses of two major products, methyl parathion and azinphos methyl. This will continue to happen until EPA is forced to fix the way that it implements FQPA. The following describes some of ACPA's concerns over current FQPA implementation:

* EPA is creating policy "on the fly" to implement FQPA. This has involved several major, sudden capricious reversals and decisions on individual products and on broader policies, without informing or consulting stakeholders. Instead of giving ample time to generate new data called for by FQPA, EPA penalizes pesticides for not having data data EPA hasn't even required!

* EPA is ignoring credible, reliable data about individual pesticides, and selectively using questionable data from studies to help make what is often a political case against products.

* EPA has not yet published current comprehensive data requirements needed to determine whether a pesticide meets FQPA's new safety standards. As a result, pesticide companies must frequently guess which tests to conduct, and these may or may not satisfy EPA reviewers.

* EPA is making pesticide decisions before finalizing and publishing the science policies upon which the Agency says that it will base decisions.

* EPA's estimates about pesticide exposure and risk are often inflated by unsupportable assumptions, judgements, models and data, which do not resemble reality. This causes EPA to significantly overestimate actual risk to farmers and consumers, forcing unnecessary cancellation of uses and products.

For example, the FQPA's requirement for reliable exposure data on drinking water is being ignored by EPA and replaced with highly inaccurate, worst-case computer predictions. This use of inaccurate information is having a negative impact on the availability of new and old products for the pesticide user community.

The American public must be assured that pesticides on the market are safe when used according to the label -- both for farmers, consumers and others who apply them, and for the food supply. That is EPA's job. But EPA is going beyond "regulating on the side of caution." In fact, the Agency appears to be regulating on "phantom risk."

The public advisory committee on FQPA implementation (TRAC) expired last fall. Despite requests from many food and agricultural groups, to date EPA has failed to reinstate TRAC to ensure public input in the decision-making process. We remain hopeful that EPA and USDA will soon announce a replacement for TRAC.

Legislation introduced in the U.S. House of Representatives and the U.S. Senate (H.R. 1592, H.R. 1334 and S. 1464) would hold EPA to the original congressional intent for implementing FQPA. These bills would not change the Act's safety standards or its protections for children. Under H.R. 1592 and S. 1464 specifically, EPA would have to base decisions on sound science, and when reliable data is not available, registrants and others would have to provide it according to EPA guidelines. The legislation would also establish a permanent advisory committee on FQPA implementation.

Currently, H.R. 1592 has 214 cosponsors, and we thank the 42 cosponsors from this Committee (4/5 of the Committee) for your support.

The Subcommittee on Department Operations, Oversight, Nutrition and Forestry has held oversight hearings, and the hearing record demonstrates the need for this legislation to ensure that EPA implementation reflects congressional intent, not the Agency's political positioning. Due to its jurisdiction over the Federal Food, Drug and Cosmetic Act (FFDCA) and FQPA's pesticide tolerance reassessment, we are also urging the Commerce Committee to hold oversight hearings on FQPA implementation.

Farmers Need New Pesticides: EPA Decisions Are Delayed

Slow and unpredictable EPA registrations of new pesticides and new pesticide uses are a significant regulatory burden for the crop protection industry and our customers. Fewer new pesticides are available since many move at a glacial pace through EPA approval process, causing a bottleneck for new pesticide registrations.

Having a wide variety of pesticides on the market is beneficial to growers for several reasons. Competition is enhanced. Customers have a broad range of choices from which to select the most efficacious, cost-effective product that meets their needs. They also can better manage development of resistance through pesticide rotation. Furthermore, additional products entering the market are needed to ensure an orderly transition for farmers to replacement pesticides for those that may be lost or curtailed under FQPA and the 1988 reregistration program.

EPA has been unable to keep pace with registration applications. Actual registration decision time is quite lengthy; on average, 4-5 years, which is far slower than in other developed nations with rigorous safety reviews like ours. Also the number of decisions per year has dropped steadily over the past 5 years, and until recently the Agency was refusing to accept additional registration applications for dozens of new pesticides. EPA just announced it will accept some additional applications for registration later this year, but it is unclear when the Agency will be able to act on these submissions.

All pesticides meeting the stringent standards for safety and use under the Federal Fungicide, Insecticide, Rodenticide and Insecticide Act (FIFRA) should receive EPA registration. EPA's responsibility is to grant a license to allow a pesticide to be sold only when the Agency concludes it is safe to use according to label instructions.

Instead, EPA has established priority systems to selectively act upon registration applications for products the Agency prefers over others. We believe EPA should act expeditiously and responsibly to make science-based registration decisions on all registration applications. Further, several aspects of the competing priority systems are redundant and illogical.

The registration process could be expedited in several ways while still preserving EPA's rigorous, important scientific scrutiny. Increased EPA accountability to Congress about meeting specific performance standards with increased efficiency would be an important step, for example.

EPA's registration process could be more efficient if it were streamlined and better organized. For example, simultaneous investigation and review of the different science components of a registration application could be conducted. To help Agency personnel manage the workload, more outside science reviewers could be utilized from EPA-accredited facilities. To fill "data gaps" created by FQPA, EPA could update its Part 158 testing guidelines so registrants would clearly understand which tests and methodologies to use before submitting registration applications. Currently, after initial EPA review, much time is spent repeating tests in a slightly different manner.

Limited federal funding and an increasingly complex risk assessment process are causing this registration bottleneck. ACPA supports increased federal funding for EPA's registration program to expedite registration decisions based on rigorous science, and to eliminate discriminatory treatment between products eligible for registration. We urge this Committee to express its support to the Appropriations Committee for sufficient, targeted EPA resources to ensure this job gets done. As this Committee is aware, ACPA's Board of Directors has authorized our Association to pursue the concept of a fee for registration service package with EPA. We remain guardedly optimistic that such a legislative proposal could gain Congressional consideration in the near future, thus providing yet another answer to the problem of gaining more timely registration decisions. We are committed to working closely with organizations representing farmers, other customers and other stakeholders in this process.

Intellectual Property

A perverse result of EPA's lengthy registration process is erosion of effective patent protection for crop protection products. The longer it takes EPA to register a product, the less patent life remains for that product in the marketplace. Current patent life technically is 20 years, but, effectively, only about 8 years since it takes 12 years on average to bring a pesticide to market. Much of this 12-year period is attributable to EPA's lengthy registration process.

Patent protection is important to American agriculture because it provides incentive for the scientific research and development needed to bring new technologies and products to our customers. It also helps to ensure product quality and stewardship. New, high quality products meeting EPA's rigorous safety standards help farmers increase yields and meet consumer demand without resorting to production on marginal, environmentally-sensitive land. Farmers benefit by increased value from their land, and consumers here and abroad enjoy abundant, affordable food. This high yield, intensive use of our resources, coupled with sound stewardship, will become increasingly important for the U.S. to remain a principal supplier of food and fiber to a growing, hungry world population.

When lengthy registration delays eroded pesticide patent life in Europe, the European Union (EU) adopted a Supplementary Protection Certificate (SPC) mechanism to extend effective patent protection. With an SPC, the patent term is extended for up to 5 years after the patent expires to compensate for patent time lost while a manufacturer waited for registration approval. A similar law would benefit the U.S. crop protection sector as well.

Protection of intellectual property from piracy is a critical challenge. Our industry, which submits millions of dollars worth of proprietary data to EPA for product review, wants to ensure that all countries abide by the World Trade Organization's Trade Related Aspects of Intellectual Property Rights (TRIPs) requirements. TRIPs is the first international intellectual property agreement that protects trade secrets, especially proprietary data submitted by innovators to government. As of January 1, developing countries must abide by the TRIPs requirements. The United States Trade Representative must vigilantly and aggressively monitor TRIPs compliance by other countries.

Importantly, a special March 2000 issue of Farm Chemicals International focuses on intellectual property rights (attached). It is the first and most comprehensive discussion to date of the benefits of intellectual property to agriculture, including farmers, the farm input sector, the food industry and consumers worldwide. The magazine also describes in detail the challenges facing our industry's extensive investment in research and development absent comprehensive, worldwide patent protection and data compensation.

New User Fees

EPA has proposed a new $30 million per-year user fee to pay for all tolerance actions by the Agency. While EPA's authority to collect tolerance fees has remained virtually unchanged over the years, the Agency wants to impose a near-800% increase in per tolerance fees (from $68,000 to $542,000). EPA also proposes to make these new fees retroactive to 1996.

For more than 40 years, section 408 of the Federal Food Drug and Cosmetic Act (FFDCA) has authorized the collection of "such fees as will in the aggregate be sufficient over a reasonable term to provide, equip and maintain an adequate service for the performance of the Administrator's function under (section 408)."

The impact of the new tolerance fee proposal is considerable. Many pesticides have tolerance levels set for a number of different crops. A single pesticide may be used on major and minor crops, perhaps having as many as 100 tolerances. EPA proposes to assess its new, high fees for decisions on each tolerance.

As well, EPA predicts no gains in productivity from the new tolerance user fees. Since nothing will be gained in the process, our additional regulatory costs will be passed on to others, including our farmer customers.

The additional costs to industry will cause product lines to be dropped (especially for minor use crops), depriving farmers of needed risk management tools, or farmers will pay higher prices for the product, which will further pinch operating margins. This all will be further exacerbated because the EPA proposal is retroactive. Industry has submitted applications for products based on known financial and marketing costs. Companies may now be billed hundreds of thousands -- perhaps into millions -- of dollars in retroactive charges.

Last year Congress approved a 1-year moratorium on EPA's ability to implement the tolerance fee rule. We urge Congress to continue this moratorium, especially given production agriculture's financial distress.

TMDL's

EPA's proposed final rule on Total Maximum Daily Load (TMDL) regulations is a vast over-reach that would impose costly and illegal controls on non-point sources. The proposals would change TMDLs from simple programs into a rigid enforcement tool for both point and non- point sources.

We are concerned that the rule would mandate the inclusion of non- point source into the TMDL program and by definition, treat "threatened " waters as "impaired," thus significantly adding to the cost and coverage of the effort. The use of pesticides in silvicultural applications would be restricted without justification and aquatic pesticides would be treated as chemical wastes.

ACPA joins in a large and growing group of national and state organizations, as well as tens of thousands of individual farmers and ranchers, who oppose this rule in its present form. We urge Congress to step up its opposition to this proposal by insisting that EPA revisit the rule to address the common issues raised by agriculture and the states.

U.S.--Canada Harmonization

Lack of consistent and "harmonized" scientific testing and data requirements for pesticide registrations in the U.S. and Canada have been a major source of concern for the crop protection industry and our farmer customers. The result has been slower registrations and slower access to new products for farmers.

ACPA is committed to working with the NAFTA Technical Working Group (TWG) and our commodity partners to achieve harmonization of regulatory processes. We believe that new product registrations will be expedited, duplication of studies and analysis can be reduced, ultimately providing greater market competition in both availability and pricing. In order to get there, however, we need to continue working through the TWG to harmonize guidelines, define the "core data set," and streamline the EPA registration process.

In an effort to expedite this process, ACPA is pleased to support the Administration's request to make U.S.-Canada joint registrations one of EPA's "registration priorities," in order to expedite the registration of new products. We must note, however, that continually putting other priorities ahead of the rest of the registration queue will slow down all registrations, ultimately jeopardizing the availability of newer and safer products for our nation's farmers.

FIFRA Preemption

FIFRA preemption, or primacy of the federal pesticide label, is a key provision of FIFRA, under this Committee' s jurisdiction. Recently, the U.S. Department of Justice (DOJ) and EPA unsuccessfully sought to undermine federal preemption, even though over 200 state and federal courts have upheld it over the years. FIFRA expressly prohibits states from imposing any requirements for pesticide labeling that are in addition to or different from those imposed by EPA under FIFRA. By mandating that each pesticide product be distributed with nationally uniform labeling regulated solely by EPA, Congress sought to ensure that a single federal agency in possession of the necessary data, expertise, and experience would determine what warnings and other information should or should not appear on a pesticide's label.

Loss of FIFRA preemption would diminish farmer confidence in the credibility of EPA's regulatory process and, in turn, consumer confidence in the safety of the food supply. Pesticides are sold nationwide, and lack of federal preemption would lead to different state labels for each product, resulting in a barrier to interstate commerce. This at a time when our new, e-commerce economy is taking the marketplace in exactly the opposite direction! Lack of preemption could reduce the availability of crop protection products, especially for small markets (minor use products), because of uncertainties and potential liabilities that would be attributed to the labels of the pesticide registrants.

A landmark legal case recently upheld FIFRA preemption. Earlier this month the Supreme Court of California soundly rejected EPA's arguments against preemption, submitted through DOJ's amicus curiae brief and oral arguments in Etcheverry v. Tri-Ag Service and Bayer Corporation. In rejecting the plaintiff's and EPA/DOJ's claims, the Court held that other decisions finding that FIFRA does preempt state tort claims were "numerous, consistent, pragmatic and powerfully reasoned."

This important legal victory upholding FIFRA cannot be overstated. We appreciate this Committee's attention to this issue and continued vigilant oversight.

EPA's New FIFRA 6(a)(2) Rule

Another important legal issue facing our sector is EPA's final rule under FIFRA Section 6(a)(2) that establishes new requirements to report adverse effects caused by pesticides, including all "opinions" concerning the toxicity of a pesticide. The rule eliminates the attorney-client privilege and attorney work product doctrine for such reporting. As a result, registrants are required to report adverse opinions from testifying and non-testifying experts retained by their attorney defending a product liability action.

EPA's new rule impairs the right of registrants to be represented by counsel and to defend themselves against litigation, completely prejudicing the legal process against them. The release of information concerning attorneys' strategies and opinions, as well as information gathered in preparation for litigation, will drastically bias any proceedings against registrants, as registrants cannot obtain any corresponding disclosure from adverse parties. FIFRA registrants are placed at a severe disadvantage, as protections provided to all other attorneys allowing them to fully investigate and research a case, and hold frank attorney-client discussions, are not available to defendants who happen to be FIFRA registrants.

Only Congress has the authority through explicit language to abrogate the work-product doctrine and the attorney-client privilege. The work- product doctrine and attorney-client privilege are simply too important and too firmly rooted in our system of justice to permit an agency to eliminate or curtail the doctrine by regulation. Nothing in the statutory 6(a)(2) language or the legislative history of FIFRA even suggests an intent on the part of Congress to abrogate any common law privilege, much less the well recognized protections provided by the work-product doctrine or the attorney-client privilege. Because FIFRA does not authorize abrogation of these common law privileges, EPA cannot issue a regulation that has such an effect.

In conclusion, thank you for the invitation to testify before this Committee. ACPA and its member companies look forward to working with you for a more prosperous American agriculture.

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LOAD-DATE: March 30, 2000