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Congressional Testimony
March 01, 2000
SECTION: CAPITOL HILL HEARING TESTIMONY
LENGTH: 2827 words
HEADLINE:
TESTIMONY March 01, 2000 RICHARD G. LUGAR, CHAIRMAN SENATE
AGRICULTURE, NUTRITION AND FORESTRY US CHINA FARM TRADE
BODY:
Opening Statement Chairman Richard G. Lugar,
March 1, 2000 In recent months, we have heard much about China and, in
particular, about the proposed terms for China's accession to membership in the
World Trade Organization. The press accounts of the bilateral agreement reached
between the United States and China, as well as the summary sheets issued by the
Administration, suggest that this could be one of the most important
international agreements ever for U.S. agriculture, especially, now, after
American farmers have been hit for several years with slack demand and falling
prices. China's proposed accession agreement is also a watershed agreement for
the world trading system. The WTO and its predecessor institution, the General
Agreement on Tariffs and Trade (GATT), have provided the framework for world
trade since 1947. Over the past fifty years, the initial GATT of about forty
countries has grown into the WTO of nearly 140 nations. In all that time,
however, China, the most populous nation in the world, has been neither a GATT
contracting party nor a WTO member. Ironically, the "World" Trade Organization
does not yet include the country with one quarter of the world's population.
There is, of course, good reason why China has historically not been part of the
multilateral trading system. The GATT and WTO agreements were developed as rules
for trade among market economies. GATT/WTO rules, to as great an extent as
possible, attempt to ensure that trade is governed by competition and market
forces. China's centrally- planned and controlled economy operates on a
different and incompatible set of principles. As a result, since 1949, China has
been sitting on the sidelines of a multilateral trading system. Over the past
decade, as other centrally-planned economies have collapsed, Chinese leadership
noted the tremendous inefficiencies of their system and, however modestly, began
to liberalize the Chinese economy. Since the World Trade Organization came into
formal existence with the conclusion of the Uruguay Round, the Chinese have been
attempting to negotiate their accession to the multilateral trade system.
Although China has not been a member of the GATT or WTO up to now, it has
benefitted from the multilateral trade regime in a number of ways. Most
importantly, the United States and a number of other countries have extended to
China "most favored nation" status, meaning that China has access to our market
on the same terms that we extend to other WTO nations. This is a considerable
privilege and one that China knows has great value. The United States now
extends MFN status to China on a year-to-year basis. China seeks, as part of its
WTO accession, permanent MFN status, or as it has come to be known, "Permanent
Normal Trading Relations" (PNTR). Any country that enters the
WTO and obtains MFN status automatically secures the market access benefits that
have been so arduously negotiated by the GATT and WTO members in the previous
eight negotiating rounds over more than fifty years. It has been asserted,
inaccurately in my view, that in the bilateral deal negotiated between the
United States and China, the United States gains everything and gives nothing.
This is more than a little misleading. What the United States gives - and more
importantly, what China gains - is permanent MFN access to our market and to
those of other WTO trading partners. And to gain this privilege, China should be
willing to give value in return. - MORE - LUGAR OPENING STATEMENT AG HEARING ON
CHINA PAGE 2 The good news is that China appears to have done so in a bilateral
agreement that was struck last Spring and finally affirmed between the
governments last Fall prior to the Seattle Ministerial. The agreement appears to
offer significant market access opportunity for the United States and has
widespread support in our business community in general, and in our agricultural
community in particular. The package includes significant tariff reductions on a
number of agricultural products in which the United States is highly competitive
such as citrus fruits, stone fruits, raisins, shell nuts, canned sweet corn,
soups, barley malt, beef, pork, chicken and turkey. China also commits to
creating significant tariff rate quotas in the major grain and oilseed sectors -
eventually, 9.6 million MT of wheat, 7.2 million MT of corn and 5.3 million MT
of rice. These TRQ amounts are many times the level of China's current imports
of these commodities. China also has agreed to forego the use of export
subsidies, to discipline its use of domestic support, and to abide by
international rules on sanitary and phytosanitary regulation. On paper, this
agreement looks very promising and the Office of the Trade Representative and
the Department of Agriculture are to be commended for their work in achieving
these impressive results. Senators will, of course, want to learn more about the
specifics of the agreement. For example, the large tariff cuts and the very
generous tariff rate quota levels specified in the agreement would be
particularly significant for trade if China were a market economy with a vibrant
and competitive private sector. The question is how significant for trade these
will be in a situation in which access to the Chinese market is dominated by a
state importing agency. Apparently, China has agreed to liberalize its import
regime, to begin to develop a system of private trading rights, and to
reallocate unused TRQ amounts to ensure full access. The specifics of these
arrangements remain somewhat sketchy, and we will be interested to hear more
detail on these types of implementation issues from the Administration
witnesses. Today we will hear from Secretary of Agriculture Dan Glickman and
from Ambassador Peter Scher. I want to welcome both of these gentlemen back to
the Committee and to thank them for being with us today. We look forward to
their testimony. I would note that the Committee also invited Secretary of
Commerce Daley, or a senior policy official of his choice, to testify at this
hearing. We thought that this would be appropriate since the President has
indicated that the issue of China WTO accession is the priority trade issue for
his Administration this year, and because the President has designated Secretary
Daley as the lead spokesperson on this issue. Secretary Daley's office indicated
he had other more pressing business today, and his office also declined to
designate a substitute witness. We are sorry that the Commerce Department will
not be represented at this hearing and, in light of the importance that the
President apparently attaches to this issue, we find Commerce Department's
absence disappointing and perplexing. Nonetheless, we will proceed initially
with Secretary Glickman and Ambassador Scher. Later this morning we will hear
from a panel of witnesses representing a broad array of interests in the farming
and agribusiness communities. We will have testimony from the American Farm
Bureau Federation and the National Farmers Union, as well from representatives
of the grain, meat, dairy and citrus sectors. I have noted, on numerous
occasions in this Committee, the vital role that exports play today in the
economic well-being of American farmers. Nearly one-third of all American farm
acres are planted for the export market. When export opportunities decline, as
they have in the recent several years because of the Asian financial crisis,
farm prices and farm income suffers. I have continuously urged the
Administration to assist our farmers in opening and competing for export markets
because it is undeniable that the prosperity of America's farm sector depends
upon it. China, a market with a quarter of the world's population, holds
unparalleled promise as an export market for high quality U.S. food, feed and
fiber. We look forward to learning more today about China's proposed terms of
accession to the WTO and about what it will mean for American farmers.
LOAD-DATE: March 3, 2000 
