Copyright 2000 Federal News Service, Inc.
Federal News Service
June 29, 2000, Thursday
SECTION: PREPARED TESTIMONY
LENGTH: 3259 words
HEADLINE:
PREPARED TESTIMONY OF JAY VROOM PRESIDENT AMERICAN CROP PROTECTION ASSOCIATION
BEFORE THE
HOUSE COMMITTEE ON AGRICULTURE
BODY: Mr. Chairman and Members of the
Committee:
I am Jay Vroom, President of the American Crop Protection
Association (ACPA). ACPA is a national trade association representing the
manufacturers, distributors and formulators of virtually all crop protection
chemicals and crop biotechnology products used in the United States. I
appreciate the opportunity to testify before you this morning on agricultural
input prices, along with four ACPA member companies represented here today.
We're also pleased to appear alongside our colleagues from the American Seed
Trade Association (ASTA).
Producing and marketing crop protection and
the new array of biotechnology products involves a complex matrix of factors,
including crops, competitive chemicals, soil/climate conditions, geographic
region, dealer and distributor incentives, volume discounts, patent life,
liability costs, minor use considerations, regulatory compliance, regulatory
delays, transition to and reinvestment in "safer" products, research and
development costs, and a multitude of other considerations, not the least of
which is the impact of the uncertain and inconsistent implementation of the
Food Quality Protection Act (FQPA). Specific to the issue of
biotech seed sales, our biotech member companies market seeds on a global basis.
Considering their substantial investment in agricultural research, we strongly
support protection of their intellectual property rights. The ability to recoup
their investment costs based on the market value of their discovery is a right,
long championed in the U.S. The GAO Report issued earlier this year comparing
prices of biotech seeds indicated, for example, that a key reason that the price
of biotech soybeans was lower in Argentina than in the U.S. was the lack of
patent and other intellectual property protection for these products in
Argentina, including the lax enforcement of seed laws there. The pricing
differential between the two countries is a result of weak controls that
encourage black market seed sales, not marketing practices by the technology
providers. We appreciate your efforts on our behalf in the WTO dispute
settlement proceedings against Argentina, where you urged the inclusion of
intellectual property protection for biotechnology. As mentioned earlier, we are
pleased that you have also invited testimony for this hearing from ASTA. ASTA's
long standing expertise in plant variety protection laws here and around the
world is parallel to ACPA's FIFRA knowledge, and the questions you wish to
address at today's hearings will undoubtedly call on both areas of expertise.
We are pleased that our member company investments in research and
development have provided a vast arsenal of insect, disease and weed control
tools for American farmers. Yields of many crops in the U.S. have doubled and
tripled since the introduction of modern pesticides and much of this increase is
due to the effectiveness of these tools in controlling crop pests. As I address
the Committee, I realize how easily we get caught up in the daily regulatory
battles to register new products and promote responsible public policy. But I
would like to take a moment to share with you some of our current achievements:
I brought with me today a copy of the year 2000 version of the "Crop Protection
Reference," a four-inch thick publication which lists virtually all the
agricultural chemicals and uses in the U.S. Today we have an estimated 9000 plus
tolerances on crops from wheat, soybeans, canola, barley to sunflowers, flax,
zucchini and kiwi. We recognize that there is still work to be done -- some
growers, especially minor use farmers, would like to have additional
registrations. To that end, we work closely with growers, USDA, EPA and the
NAFTA Technical Working Group to accommodate these needs when possible. For the
last few years, for example, we have worked very closely with the canola growers
in their quest for more pesticide tools in the U.S. Since this crop is
relatively new in the U.S. compared to Canada, and the U.S.-planted acres is
considerably smaller than in Canada, U.S. growers are eager to gain access to
products which have already been registered across the border. We are pleased
that our work with the growers and EPA are beginning to pay off. Since 1995, we
have registered 10 tolerances for canola, and there are an additional 8
tolerances pending approval at EPA for FY 2000. In addition, credit is due to
USDA's IR-4 program for their attention to and actions that have contributed
solutions in this minor use area.
The challenges to this industry are
many-fold. We are committed to servicing the American farmer by providing the
best technology at the farm gate and supporting their farm and rural policy
objectives in the legislative and regulatory arenas. We recognize that this
Committee is addressing many of these issues and we encourage Congress to help
increase exports, build domestic demand, reduce agriculture's regulatory burden,
and provide affordable, workable risk management tools to growers.
Hopefully, Congress will enact Permanent Normal Trade Relations with
China and support that country's 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 leadership
on crop insurance we now have a law which will increase affordable options for a
broad array of producers and crops.
At this point, I would also like to
thank the Chairman and Ranking Member for your support and oversight provided on
implementation problems associated with the FQPA and a very special thanks to
the 44 members of this Committee for cosponsoring Mr. Pombo's bill, H.R.
1592,"The Regulatory Fairness and Openness Act of 1999." We also credit the
early FQPA-corrective legislative work of Mr. LaHood and his bill, H.R. 1334,
for bringing FQPA problems to light and advancing solutions. ACPA is working
very closely with the Implementation Working Group (IWG) to bring common sense
and fairness to the implementation of FQPA. Likewise, the Committee is to be
commended for the work you've done on oversight of Total Maximum Daily Load
(TMDL) water quality regulation. All such efforts to bring reason, science, and
transparency to agriculture's regulatory burden provide positive outcomes.
Recent years have certainly taken a toll on U.S. agriculture, with
declining prices, natural disasters, and distressed world economies. Many U.S.
farmers are experiencing serious financial problems. Congress has provided
emergency assistance to farmers, but the pain continues to ripple throughout the
farm economy, with ACPA members included. A recent report from Doane
Agricultural Service indicates that total agricultural pesticide sales for all
US crops for all pesticide types (including herbicides, insecticides, miticides,
fungicides, plant growth regulators, and nematicides) dropped by nearly 10 per
cent from $
7.410 billion in 1998 to $
6.691
billion in 1999. When the agriculture economy is stressed, our member companies
are negatively impacted also.
This morning, I would like to address some
of the key variables related to crop protection product pricing.
These
include: differences in product testing and registration standards between the
United States and Canada pending efforts towards harmonization of such standards
between the two countries EPA implementation of the 1996 Federal
Food
Quality Protection Act (FQPA) that has resulted in exacerbating
differences in costs and availability of products between the US and other
countries the 1999 USDA Study: "Pesticide Price Differentials Between Canada and
the US;" public statements by the USEPA in support of some of our contentions
the differences in terrain, climate, soil type, and even crop value, along with
a host of other variables that contribute to different marketing strategies of
crop protection compounds between different regions of North America.
Pesticide Registration Regulatory Processes/U.S. vs. Canada In the U.S.,
fewer than 1 in 20,000 compounds will make it from the discovery laboratory to
the farm field; and only after that one chemical goes through 120 or more
federally mandated tests over a period of ten years or more at a cost of upwards
of $
150 million. This time and cost is borne completely by the
initial registrant before one cent can be generated in revenue. In Canada, a
similar chemical would have to undergo sometimes very different batteries of
tests and procedures. EPA implementation practices on FQPA are being exported to
Canada, where worst case default decisions may be adopted in the name of
harmonization. This regulatory approach, if adopted, will reduce the number of
products available to growers on both sides of the border, and will impact the
prices of remaining products. Also in Canada, the registration processes
including testing and data requirements can at times be significantly different,
at lesser cost, and with much less time between laboratory development and
ultimate marketplace sales.
Harmonization
Under the North
American Free Trade Agreement (NAFTA), the governments of Mexico, Canada and the
United States formed the Technical Working Group (TWG) on Pesticides in 1996.
The scope of work for the TWG has been to develop a coordinated pesticides
regulatory framework among NAFTA partners to address trade irritants, build
national regulatory/scientific capacity, share the review burden, and coordinate
scientific and regulatory decisions on pesticides.
We support the goals
of NAFTA TWG which include:
1) Sharing the work of pesticide regulation;
2) Harmonizing scientific and policy considerations for pesticide
regulations;
3) Reducing trade barriers;
4) Maintaining current
high levels of protection of public health and the environment while supporting
the principles of sustainable pest management.
We believe that through
this process, new product registrations can be expedited and 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 regulatory data set," and streamline the EPA registration process
Implementation of the 1996 Federal
Food Quality
Protection Act
Unfortunately, politics has overtaken science at
EPA. The Agency is regularly 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, as well as earlier this month when they forced
the unnecessary cancellation of the residential uses of chlorpyrifos. This will
continue to happen until Congress or the courts force EPA 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 other so- called studies to help
make what is often largely 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, how to conduct them, and then
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, judgments, 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.
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.
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 many
other developed nations with rigorous safety reviews like ours. Availability
(and presumably price) will suffer from lack of competition as new products/uses
are prevented from a timely entry into the U.S. market. From the other end of
the spectrum, wholesale losses of existing product label uses also diminish
market competition unnecessarily. This will occur due to unscientific and overly
conservative FQPA tolerance reassessments and related reregistration review
processes by the EPA.
USDA and Agri-Food Canada Report "Pesticide
Pricing Study on Differentials Between Canada and the United States"
"The Pesticide Price Differentials Between Canada and the U.S." was
released in the fall of 1999, as mandated in the U.S. -- Canada Record of
Understanding. The study was conducted by expert researchers at the North
Carolina State University and University of Guelph in Ontario, Canada. The
conclusions of the study show that on a cost-per-treated acre basis, Canadian
farmers spend far more on chemical inputs in general than farmers in the
northern plains states. Selective use of the data may misrepresent the author's
findings, and we feel it is important to look at the whole picture.
Some
of the key conclusions are summarized below: Individual Northern US growers may
have higher costs of production than Canadian counterparts, but these have much
more to do with non- chemical issues such as land, labor and management costs.
Some pesticide products have lower prices in Canadian provinces than similar
products in North Dakota.
Conversely, others are listed as being the
opposite: lower priced in ND. The marketplace factors given for price
differentials include: differences in patent protection length; differences in
market size and costs; differences in farmer demands; differences in
availability of alternative products. Availability is not generally a problem in
either region, except in the case of products registered for canola. As we have
stated in testimony before the N.D. state legislature, the reasons for this have
much more to do with more recent demand for canola in the U.S. compared to
historically higher demand for the crop in Canada and other parts of the world.
However, the situation for canola is rapidly changing for the better. ND growers
generally spend less on weed control products than their northern counterparts.
Frequently used products in Manitoba and Saskatchewan differ from those
frequently used in ND or MN. There is a difference of US $
3 --
4 on a per treated acre basis, with ND growers spending less then growers in MB
or SK. Overall, cost per treated acre in ND is significantly lower than in
Canadian provinces. The percent difference that MB growers spend over ND growers
by crop was: +209 percent for wheat, +169 percentfor barley, +41 percent for
canola, +29 percent for potatoes.
Likewise, the latest data from
Agriculture and Agri-Food Canada comparing fertilizer and fuel prices in North
Dakota and Manitoba show variances --sometimes our growers pay more and
sometimes their growers pay more. It varies by season, type of input and year. I
have attached a copy of the relevant data from "Farm Income, Financial
Conditions and Government Assistance Data Book" at the end of my testimony.
Other Factors Influencing Pest Control Pricing
The pricing of
pesticides takes into account many factors that encompass research and
development costs, distribution and marketing costs, crop value and related
liability, availability of competitive products, and available patent life.
Cost of Liability
Much has been said, Mr. Chairman, about the
litigious society that the US has become. Much attention has been paid to the
notion of tort reform, but little has been accomplished in changing the law or
the practice of frivolous lawsuits.
U.S. agrochemical manufacturers know
the facts of these conditions all too well. Our companies face a literal barrage
of legal actions -- both threatened and formally filed -- covering the full
range of liability exposures: product performance, environmental damage,
personal injury, and so on. The business of being sued, and having to defend the
underlying business -- whether through rigorous court action or out of court
settlement -- is a real and growing cost center of our U.S. business. Some
states are home to courts that encourage or allow more frivolous litigation than
others, accounting for different underlying cost assumptions in different parts
of our domestic markets.
Different crops vary widely in their overall
per acre value. The potential liability that accompanies the marketing of
pesticides on high valued crops forces registrants to pay special attention to
conditions that might cause crop damage. These factors increase the costs of
products on some crops. Highly competitive marketing strategies, including
rebates, must also be accounted for in the pricing of products to growers.
Labeling Issues of FIFRA and N.D. Department of Agriculture
Section 24(c) of the Federal Insecticide, Fungicide and Rodenticide Act
(FIFRA) governs ways by which state governments can address special local needs
(SLN) of an existing or imminent pest problem for which there is no available
federally registered pesticide product. Last year, the N.D. Department of
Agriculture transmitted memos to at least five crop protection manufacturers
asking if there was interest in applying for 24(c) SLN for products they
marketed in Canada which allegedly had same or similar formulations in North
Dakota at different prices.
Recent actions by the North Dakota
Department of Agriculture demonstrate the need to aggressively pursue government
to government harmonization. Pricing and availability issues cannot be solved by
individual state actions on individual products. Our regulatory bodies have an
obligation to promulgate clear federal government rules and guidelines, so as to
avoid confusion and disruption in the marketplace. We would like to work with
this Committee to find some reasonable and workable solutions to the irritant
issues to which these recent, unfortunate SLN actions have been devised to
respond.
Mr. Chairman, thank again for the opportunity to share our
views with the Committee. I will be pleased to respond to any questions.
END
LOAD-DATE: June 30, 2000