SECTION: CAPITOL HILL HEARING TESTIMONY

LENGTH: 1260 words

COMMITTEE: SENATE COMMERCE, SCIENCE AND TRANSPORTATION

SUBCOMMITTEE: CONSUMER AFFAIRS, FOREIGN COMMERCE AND TOURISM

HEADLINE: PESTICIDE PRICING IN U.S. AND CANADA

TESTIMONY-BY: EARL POMEROY, SENATOR

BODY:
July 26, 2001

Statement of Senator Earl Pomeroy

U.S. Senate Subcommittee on Consumer Affairs,

Foreign Commerce, and Tourism

First, I would like to thank Chairman Dorgan for allowing me the opportunity to testify. The Chair and I have worked together -- in concert with officials from the Environmental Protection Agency and the North Dakota Department of Agriculture -- for several years on the topic of pesticide harmonization, an area of special concern for North Dakota farmers. I happy to see the Senator in a position to draw increased attention to this issue and I am excited about the issue's prospects in the Senate.

This hearing is especially timely and important. We are working this year to revise the Farm Bill to better assist our farmers during times of low prices. However, in addition to the low market prices we have seen in recent years, producers are also feeling the pain of high input prices. This "squeeze" on farm income has put farmers in the position of relying on government payments to make a living. We can address low market prices through the Farm Bill and I think we can address part of the high input costs through the hearing today and subsequent legislation. I am sure the witnesses here will provide a thorough understanding of the issue at hand. I just want to begin by spending a couple of moments summarizing what I see as the core issues for this hearing, concentrating on why we are in this current situation, how this bill will help to solve the problem, and how this bill fits in with a larger emphasis on free trade and overall harmonization efforts.

The Situation

The current disparate pricing system is based on the ability of agricultural chemical companies to tightly control the distribution of their products and to segment the US/Canadian markets. The Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) guarantees that the government retains control over the production and distribution of potentially harmful chemicals.

However, FIFRA also sets up a barrier to cross-border trading of agricultural chemicals, allowing chemical companies to sell the same chemicals in the United States and Canada at different prices. Although a Canadian chemical may be identical in substance and use to the American chemical, it cannot be imported because of strict labeling and production requirements stipulated under FIFRA. Without free trading in these chemicals, there is no possibility of the natural economic arbitration of those prices.

According to a 1998 survey conducted by the North Dakota Agricultural Statistics Service, farmers in North Dakota were paying between 117 percent and 193 percent higher prices for pesticides than Canadian farmers. A more recent study conducted this year by researchers at

the North Dakota State University showed a 3 to 5 percent average increase in net farm income if Canadian priced chemicals could be used in the United States. Through these studies, we are beginning to understand the impact of having a two-tiered pesticide pricing structure.

What the bill would and would not do If enacted, the Pesticide Harmonization Act would eliminate the current barriers that prevent U.S. farmers, dealers, and distributors from accessing pesticides from Canadian sources.

The Act would amend FIFRA to grant states the authority to issue state registrations to parties who wish to import Canadian pesticides that are identical or substantially similar to products registered with EPA for use in the United States.By eliminating access barriers, the Pesticide Harmonization Act would essentially create a free market for pesticides, and allow U.S. and Canadian farmers to compete on a more level playing field. I believe the legislation is reasonable and holds the potential to make a substantial impact on the ongoing harmonization issues between the United States and Canada.

As important as what the bill would do is what the bill would not do. This bill will not endanger human or environmental health. It will not allow dangerous, unapproved chemicals to enter U.S. borders and be applied on U.S. cropland. In order to register a Canadian pesticide in the United States, the state will have to certify that pesticide as being identical to the domestic pesticide already registered for use in the United States and that the pesticide meets the strict standards set by the EPA under FIFRA.

Effects on North Dakota and U.S. Producers

Given our proximity to the Canadian border, the Chair and I along with several others Senators on this Committee have a unique understanding of the impact of disparate input pricing. Our farmers must compete with their Canadian counterparts post- harvest and face higher input prices pre-harvest. With such a situation, it is impossible to win.

That is not to say that the issue does not affect other states and other producers. It does. The unfair pricing scheme of the chemical distributors unfairly distorts the entire input market in

the United States. Farmers across the United States are placed at a competitive disadvantage. Over the past few years, the cost of inputs has skyrocketed leaving farmers with an even lower bottom line in times of extremely low commodity prices. North Dakota lawmakers and producers have been the loudest because they have seen the uneven pricing first hand.

Impact within a larger harmonization effort

I strongly believe that if we are going to create a free AND fair trade regime then we must address this inequitable situation. The Canada - US Trade Agreement (CUSTA) came into effect more than ten years ago to foster free trade between the two countries. Part of the understanding for that agreement was that our two nations were going to move rapidly toward the harmonization of pesticide regulation. Now, ten years later, we have seen little progress in meaningful harmonization.

American farmers ought to have access to the same environmentally safe chemicals available to their Canadian counterparts at comparable prices. I am sure that it would be the goal of many people here to advance this legislation as part of an overall focus on harmonization. Creating common pesticide regulatory authority between Canada's PMRA and the EPA should indeed be a goal for us.

The legislation introduced by Senator Dorgan and myself on the House side is a narrowly crafted solution to this problem. It does not seek to solve wider issues, which I would acknowledge certainly exist and need a remedy as well. As I understand it, the EPA is working with PMRA on this issue and I am hopeful they will be able to arrive at an agreement. Until that point, however, solving this narrower issue would help alleviate some of the financial strain caused by high input costs. Recognizing and remedying this inequitable situation is merely holding true to the purpose of both CUSTA and NAFTA.

In Closing

Registrants simply are able to sell pesticides at higher prices in the United States than in Canada because of the differing regulatory schemes. This runs contrary to the intent of free trade between the two nations and results in a situation where our producers compete with Canadian producers on the output side, but not the input side. The proposed legislation would allow a carefully controlled fix to that problem.

In closing, I want to congratulate my fellow member of the North Dakota delegation, Senator Dorgan, for his new role in this Committee. I am grateful that he is acting swiftly to use that role to advance the cause of U.S. farmers.



LOAD-DATE: August 8, 2001