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Search Terms: Permanent Normal Trade Relations, House or Senate or Joint

Document 270 of 374.

March 1, 2000, Wednesday

SECTION: PREPARED TESTIMONY

LENGTH: 1732 words

HEADLINE: PREPARED TESTIMONY OF DR. JERRY KRESS PAST CHAIRMAN U.S. WHEAT ASSOCIATES AND THE WHEAT EXPORT TRADE EDUCATION COMMITTEE

BEFORE THE SENATE COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY

BODY:
Good morning Chairman Lugar, Senator Harkin, Senator Craig and members of the Committee. My name is Jerry Kress. I am a wheat producer from America Falls, Idaho. I am extremely pleased to be invited to speak today on behalf of a unified United States wheat industry by representing the U.S. Wheat Associates, the National Association of Wheat Growers and the Wheat Export Trade Education Committee. By speaking for a unified industry, I hope to impress upon you right at the beginning how important the Chinese market is not only to me personally but to the entire U.S. wheat industry.

I came to Washington earlier this week to participate in several events with the Chinese delegations which have been visiting the United States. I hope you were able to take advantage of their visit to meet with them as well. These teams traveled here as a result of the finalized negotiations that permit the export of U.S. wheat through Pacific Northwest ports and to review the developments of China - US trade relations over the past year. The potential Chinese market will effect me directly as most of my wheat is exported through the Port of Portland. There are four classes of wheat grown in Idaho - soft white winter (SWW), hard red winter (HRW), hard red spring (HHS) and hard white winter (HW). With these varieties Idaho is positioned to meet many of China's needs as the market there develops. The Chinese market holds great potential for Idaho and all U.S. wheat producers. We have transportation, quality and variety advantages over many of our foreign competitors.

However, I do not expect to be able to see a long term advantage in this market unless China is granted permanent normal trade relations status by the United States as it comes under the WTO rules based system.

Wheat producers across the United States strongly support China's entry into the World Trade Organization (WTO) and the immediate approval of permanent normal trade relations status for China.

As you are aware, China is potentially the world's largest wheat market. Unfortunately, it has maintained a non-tariff trade barrier on U.S. wheat exported from Pacific Northwest ports since 1972, and from Gulf ports since June of 1996, due to the perceived threat of Tilletia Controvera Kuhn (TCK), a wheat fungus known as TCK smut. This barrier to the Chinese market continues to have a very negative economic impact on all U.S. wheat producers.

In April of 1999, Prime Minister Zhu Rongji announced China's intention to lift its longstanding restrictions on the export of U.S. wheat from areas where TCK is known to occur. This agreement allows U.S. wheat to be exported from any state or any U.S. port to any Chinese port as long as these imports do not exceed a tolerance level of 30,000 TCK spores per 50-gram sample. This level can easily be met by U.S. wheat exporters while acknowledging China's concerns about this disease.

While the market access agreement is not tied to China's entry into the World Trade Organization, the Chinese unilaterally decided to link it to U.S. support for their WTO entry that has now been agreed upon. We had expected China to implement the TCK agreement immediately upon signing. We have strongly encouraged the Chinese to implement this agreement as a sign of good faith towards their WTO commitments.

The TCK announcement followed more than 20 years of extensive - at times frustrating discussions between the U.S. and China to resolve this issue. TCK restrictions were instituted due to China's concerns that its own wheat crop could become infected with TCK. It is significant that this longstanding dispute over TCK smut was resolved based on a framework that is consistent with the objectives of the Uruguay Round Agreement on Sanitary/Phytosanitary Measures (SPS). The SPS agreement is the heart of settling disputes of this type in the WTO as it requires that sound science, not political or other issues, determine whether products are safe to trade. Together, the U.S. and China agreed to let science, rather than political or other considerations, determine the terms of trade between our two countries.

Likewise in November of 1999, the U. S. and China completed negotiations on China's entry into the WTO. The WTO commitment agreement was formalized when the Chinese language version of the agreement was signed in Seattle last December.

In accordance with this agreement, China will liberalize its purchase of bulk agricultural commodities like wheat, corn, soybeans, rice and cotton. China will adopt tariff-rate quotas - that is, very low tariffs on a set volume of these bulk commodities. The wheat TRQ, for example, begins at 7.3 million tons and rises to 9.3 million tons by 2004. (Present import levels are below 2 million metric tons.) In all commodity TRQs, private traders will be guaranteed a share of the TRQ and a right to import using the portions of the share given to state trading companies that are not used by the state agencies. This will help establish legitimate private-sector trade in China. Taken together, the TCK resolution and the U.S.-Chinese trade agreement, represent an important new commercial opportunity for U.S. wheat producers at a critical time in the economic health of the industry.

China is the world's largest wheat producing and largest wheat consuming nation. The U.S. is the world's largest wheat exporter. U.S. wheat exports to China have varied over the years, contingent upon Chinese wheat production levels and those of other wheat suppliers. Throughout the early 1990s, China imported from one million metric tons to 5.6 million metric tons of U.S. wheat each year. In recent marketing years, Chinese imports of U.S. wheat have declined significantly due to major increases in China's own production and the stringent enforcement of the TCK zero tolerance restriction.

Nevertheless, we expect China to once again become a major importer of U.S. wheat. We base our expectations on economic developments and production constraints in China. China has a huge and growing population, burgeoning coastal cities, growing demand, declining stocks, stagnant acreage and reduced domestic price supports. We anticipate that over a period of a few years, increased China trade would have a significant impact on the world supply and demand situation that should be positive for prices.

To put it plainly, nothing else on the horizon could have such a big impact in the short term on U.S. wheat exports and the economic stability of wheat producers or hold such potential for expanded growth in the future.

USDA's baseline projection puts China's wheat imports at 4.2 mmt in five years. By U.S. Wheat Associates estimates, the U.S. market share could be one third to one half of total Chinese imports.

The U.S. now holds very high market shares in a number of neighboring countries and we believe that our market share with China has greater potential than most estimates. This is based on work by U.S. Wheat Associates personnel located in China who believes that China's wheat imports have focused on the need for "quality" wheat. The import demand is projected to focus on wheat with qualities needed for better consumer products that are not produced in large quantities in China.

In order for U.S. wheat producers to realize the full potential of the Chinese market, it is absolutely critical that Congress approves legislation to grant China Permanent (Most Favored Nation) Normal Trading Status (PNTR) as soon as possible.As Ambassador Barshefsky said in her testimony before the House Ways and Means Committee there is "no option" to addressing PNTR now. There is no option for U. S. wheat producers but to have the opportunity to participate in the Chinese market. If we are to achieve the benefits of this long sought agreement and give producers the opportunity to market into this huge economy, China must be brought under the rules based system of the WTO. We have that opportunity with the agreements delivered in April.

By granting permanent normal trade relations for China Congress will be giving nothing away to China, our market is already open. However, you will be fulfilling one of the "unmet promises" of the 1996 Freedom To Farm Bill, that of continuing to provide export markets for U.S. farmers and ranchers. I believe that every farmer would rather have open fair markets than receive payments from the government. Farmers want to add to the balance of payments by exporting our products.

This point is especially timely and crucial as the U.S. trade deficit reaches its all-time high. Our trade deficit with China has ballooned to $68.67 billion in 1999 as reported by the U.S. Department of Commerce. The only way to counter this trend is to open markets throughout the world and facilitate the exportation of U.S. products. Bulk commodities such as wheat can have a substantial positive impact on the trade balance as demand for high quality foods continues to rise. The Chinese economy is poised to reach new heights and as their middle class swells it is imperative for U.S. producers to have fair and unfettered access to this market.

Various people, including Ambassador Barshefsky, have stated that it would indeed be ironic if the United States after over 14 years of negotiations to include China in a rules based world trading system would decide not to grant them PNTR. By doing so we would be allowing our competitors to have the benefits of China opening its market--the most dynamic and rapidly growing in the world. The U.S. leverage and any means of influencing China under the WTO rules system would be lost and the United States would yield its leadership in the trade arena.

I believe I can speak for the entire U.S. wheat industry in saying we look forward to working with you and others in the Congress to make permanent normal trade relations for China happen this year. The wheat industry will do everything it can to mobilize grassroots support, but it is necessary for supporters in Congress and the Administration to exhibit strong leadership and cooperation in order to deliver a positive vote for America's farmers, laborers and industries. This is an opportunity that we can not afford to let slip away.

Thank you again for the chance to appear today.

I look forward to responding to your questions at the appropriate time.

END

LOAD-DATE: March 2, 2000

Document 270 of 374.


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