S. HRG. 103-982
THE GATT AGREEMENT
4. AC 8/3: S. HRG. 103-982
he Gatt Agreenenb S.Hrg. 103-982,...
HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
ON
THE IMPLEMENTATION OF THE URUGUAY ROUND AS IT AFFECTS
UNITED STATES AGRICULTURE
APRIL 20, 1994
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
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U.S. GOVERNMENT PRINTING OFFICE
88-235 CC WASHINGTON : 1994
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-046945-7
f y \ S. HRG. 103-982
\y THE GATT AGREEMENT
4. AC 8/3: S. HRG. 103-982
le Gatt Agreenenb S.Hrg. 103-982/...
HEARING
BEFORE THE
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
ONE HUNDRED THIRD CONGRESS
SECOND SESSION
ON
THE IMPLEMENTATION OF THE URUGUAY ROUND AS IT AFFECTS
UNITED STATES AGRICULTURE
APRIL 20, 1994
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
""^m,
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*PR, 8
U.S. GOVERNMENT PRINTING OFFICE
t995
88-235 CC WASHINGTON : 1994
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
ISBN 0-16-046945-7
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
PATRICK J. LEAHY, Vermont, Chairman
DAVID H. PRYOR, Arkansas RICHARD G. LUGAR, Indiana
DAVID L. BOREN, Oklahoma ROBERT DOLE, Kansas
HOWELL HEFLIN, Alabama JESSE HELMS, North Carolina
TOM HARKIN, Iowa THAD COCHRAN, Mississippi
KENT CONRAD, North Dakota MITCH McCONNELL, Kentucky
THOMAS A. DASCHLE, South Dakota LARRY E. CRAIG, Idaho
MAX BAUCUS, Montana PAUL COVERDELL, Georgia
J. ROBERT KERREY, Nebraska CHARLES E. GRASSLEY, Iowa
RUSSELL D. FEINGOLD, Wisconsin
Charles Riemenschneider, Staff Director
JAMES M. CUBIE, Chief Counsel
Christine Sarcone, Chief Clerk
CHARLES CONNER, Staff Director for the Minority
(ID
CONTENTS
Statements
Hon. Patrick J. Leahy, U.S. Senator from Vermont 1
Hon. Max Baucus, U.S. Senator from Montana 2
Prepared statement 4
Hon. Thomas Harkin, U.S. Senator from Iowa 5
Hon. Paul Coverdell, U.S. Senator from Georgia 5
Hon. Richard G. Lugar, U.S. Senator from Indiana 7
Hon. Kent Conrad, U.S. Senator from North Dakota 8
Hon. Larry E. Craig, U.S. Senator from Idaho 10
Hon. Robert Dole, U.S. Senator from Kansas, prepared statement 11
Hon. Mitch McConnell, U.S. Senator from Kentucky, prepared state-
ment 12
Hon. Robert Kerrey, U.S. Senator from Nebraska 13
Hon. Russell D. Feingold, U.S. Senator from Wisconsin 14
Prepared statement 16
Hon. Thad Cochran, U.S. Senator from Mississippi 31
Prepared statement 34
Hon. Charles E. Grassley, U.S. Senator from Iowa, prepared statement .... 36
Hon. Jesse Helms, U.S. Senator from North Carolina 41
Hon. Mike Espy, Secretary of Agriculture 18
Hon. Michael Kantor, U.S. Trade Representative 23
APPENDLX
Prepared statements
Hon. Mike Espy 53
Hon. Michael Kantor 55
New England Brown Egg Council 60
Additional material for the record
Senators' questions submitted to witnesses with responses thereto 62
Letters
To President Bill Clinton, from the Members of the Senate Com-
mittee on Agriculture, Nutrition, and Forestry, U.S. Senate, Wash-
ington, DC 79
(III)
HEARING ON THE GATT AGREEMENT
WEDNESDAY, APRH. 20, 1994
U.S. Senate,
Committee on Agriculture, Nutrition, and Forestry,
Washington, DC.
The committee met, pursuant to notice, at 10:09 a.m., in room
SD-562, Dirksen Senate Office Building, Hon. Patrick J. Leahy,
Chairman of the committee, presiding.
Present or submitting a statement: Senators Leahy, Harkin,
Conrad, Baucus, Kerrey, Feingold, Lugar, Dole, Helms, Cochran,
McConnell, Craig, Coverdell, and Grassley.
STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR
FROM VERMONT
The Chairman. Good morning. I am glad to see so much interest
in agricultural matters.
We are here today to begin debate on GATT, which was signed
last week in Marrakesh. Ambassador Kantor tells me that it was
an all-day signing. Secretary Espy, I appreciate your telephone call
from there, bringing me up to date. I also appreciated the invita-
tion to go over, but having heard that it was a 10-hour signing, I
am glad to just have your accounts of it and not had the oppor-
tunity to see it personally.
Six months ago, when we met to discuss the North American
Free Trade Agreement, we heard many reports of doom versus
boom. In debating GATT, we are hearing some of the same issues.
Opponents assert if we pass GATT, it will destroy the family farm,
undermine all our public health and environmental standards, and
limit our ability to effectively respond to unfair trade practices. At
the other end of the spectrum, proponents contend that the United
States faces economic obscurity if we don't pass this accord.
Today, we are here to carry the GATT debate one step further.
As with NAFTA, there are responsible voices on both sides of this
issue. On the other hand, I am not going to take very kindly to peo-
ple on either side who try to make their case by exaggerating the
benefits or the risk for the Uruguay Round Accord. I said once on
NAFTA that it was neither as great as its extreme proponents said
or as terrible as its extreme opponents said. We want to talk about
the good and the bad, but I think we can do it honestly.
First and foremost, I will judge this agreement on how it is going
to affect jobs, and when I do that, I am going to look, understand-
ably, at jobs in Vermont. We have a large interest in semiconductor
manufacturing. We have become more and more of a high-tech
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State. I will look at that. I will also look at its effect on family
farms, and in our State, that is largely dairy.
I want to make sure our environment is protected, that we are
not going to run over the efforts we have made over the last 20
years to protect the environment in this country in the rush to free
trade.
I think, as Chairman of the Senate Agriculture, Nutrition, and
Forestry Committee, it is my responsibility to see that we are not
compromising the safety and integrity of our food supply in the
United States simply to champion free trade. Secretary Espy has
said a number of times that we have the safest and best food sup-
ply in the world, and I compliment you, Mr. Secretary, on the steps
you have been taking to make it even safer. I know Ambassador
Kantor would be the last person in the world to want to see us
compromise that safety.
The Uruguay Round Accord promises a new trading regime — and
perhaps it can deliver — but we have to be certain. We must realize
that it will not be a panacea for our economic, agricultural, and en-
vironmental concerns. There are many unsettled and contentious
issues.
For the first time in 48 years, the Accord, if implemented, will
fully bring agricultural trade into the GATT framework. The fact
that the United States and other GATT negotiators were able to
even reach an agreement is commendable. Frankly, I don't know
how you put that kind of a Rubik's cube together, and I compliment
you in doing it.
We have been assured that GATT benefits U.S. agriculture — that
the provisions on export subsidies, market access for agricultural
products, and sanitary and phytosanitary measures will benefit
U.S. farmers, agribusiness, and consumers alike. We are told that
the conversion of non-tariff barriers to tariffs will allow future U.S.
negotiators to continue to advance the position of U.S. agriculture
in international markets.
I hope today we will hear something of the ongoing trade discus-
sions with Canada, our largest trading partner. We are very con-
cerned about the outcome of these negotiations. For many in the
agriculture community, including dairy, the outcome will color
their perspective on the GATT agreement.
Let us hear what is best for the United States in this, not just
what is best for world trade.
Senator Baucus, do you have an opening statement?
STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR
FROM MONTANA
Senator Baucus. Yes, I thank the Chairman. I very much appre-
ciate being recognized, and I apologize to you, Mr. Chairman, to
the committee, and to Ambassador Kantor and Secretary Espy. I
have to leave, hopefully soon, to meet Secretary Browner and nine
others who are touring the Anacostia River promoting, frankly,
changes in the Clean Water Act, and that tour begins in about 15
minutes. I hope you will accept my apologies for not being with
you.
Mr. Chairman, and Secretary Espy and Ambassador Kantor, I,
too, want to thank all of you for working very aggressively to try
to get a good agreement in the Round.
You will recall that when the Uruguay Round opened, we hoped
to expand the GATT to meet the economic challenges of a new cen-
tury; that is, the world has been changing dramatically and each
new Round addresses the new changes. We planned not only to
continue the tariff and quota cuts of previous Rounds, but to ex-
tend GATT coverage to trade in agriculture, trade in services, and
agree on ways to protect intellectual property, a very important in-
dustry to America.
We are here today, though, to look specifically at those provisions
which impact the agriculture industry of our country. Agriculture
is not simply a special interest, not one of many interests. It is a
$100 billion industry and must be treated very carefully. In many
areas, production agriculture remains the only game in town, and
we must ensure that our efforts do not rain on the game.
Take my State of Montana. Agriculture is the largest contributor
to the economy. Our two largest crops are beef and wheat, and
since our cows outnumber our people by three to one, we depend
greatly on exports. Recently, unfortunately, too many of our people
have been leaving our State. So a good GATT represents a great
deal of market potential to my GATT.
According to the USDA, the value of wheat exports should in-
crease by at least $100 million annually in the year 2000, and by
$600 million, 5 years later. For beef producers, it is even better.
Beef exports will increase by $1.7 billion by the year 2005. That
translates to higher farm income, and that serves America's farm-
ers and ranchers quite well.
It sounds good, so where is the catch? I believe there are several,
and I will address them very briefly.
To many in my State, it appears that we have given up way too
much in exchange for much too little. In fact, if you look at the cuts
we made in the 1985 and the 1990 farm bills, we went to the table
with little to give. Coupled with reductions in the Export Enhance-
ment Program, which were agreed to during the Round, it could be
argued that, as regards agriculture, we went to war without our
armor and we came home without our clothing.
Our producers argue that they have given enough. It is time to
start getting something back. Farmers — and I agree with them on
this — expect several provisions from the agreement at this time.
First, agriculture's financial contribution to the cost of the GATT
must be limited to their proportionate share. Since agriculture cuts
are costing just $608 million in reduced tariffs, the industry should
not be forced to bear the burden of cuts beyond that level. That
means we don't want to see any cuts in farm programs suggested
to pay for the GATT — none.
In fact, since the EEP cuts will total nearly 3 times that amount,
I would suggest that those funds be directed back into GATT-
allowable agriculture programs. We must stop disarming ourselves
and hoping other countries will follow suit. That is a sure way to
export our agriculture and that is simply not acceptable.
Finally, I must say that the maintenance of our trade laws is
critical. Great pain must be taken to ensure that essential Amer-
ican trade laws — section 301, countervailing duty, anti-dumping,
for example — are not weakened. I believe it is possible to not only
preserve, but also strengthen, our trade laws in the context of the
GATT implementing language.
Since Canada discovered our wheat markets in 1989, we have
seen the devastating impact that unfair trade can have on an area
like Northern Montana, and I speak for the Dakotas and other
parts of our country as well. This demonstrates that it is impera-
tive that we maintain and commit to the use of trade laws to pre-
vent other countries from flooding our markets with dumped and
subsidized goods. Lumber, wheat, beef, pork, sugar, too many in-
dustries have been hurt by unfair trade, and it is time we take
steps to prevent further harm.
On a related topic, and I know you have heard me say this be-
fore, we have been trying for some time to get Canada to play fair
when it comes to the wheat trade in North America. In my State,
one of the most important goals of free trade is getting Canada to
eliminate their barriers to free trade in wheat. We must increase
pressure on them to achieve transparency in their wheat pricing
and to eliminate barriers to the northbound movement of grain. I
think an agreement to provide for truly free trade is more impor-
tant than a temporary import restraint.
Although I must leave for another hearing, as I mentioned to
you, I expect that you will address these points in the course of this
hearing. I look forward to hearing what you have to say, because
I know very much that other Senators will concentrate on many of
these same questions.
I urge all of us to act quickly, because the people in our country
are getting frustrated. They know these problems even better than
we. They expect us to produce. That is why we are here; that is
why we sought these provisions. The time bomb is ticking, and if
we don't produce quickly, I think that the results will be not to our
liking.
Thank you very much.
[The prepared statement of Senator Baucus follows:]
STATEMENT OF SENATOR MAX BAUCUS
Thank you Mr. Chairman, and thank you to our witnesses today, Secretary Espy
and Ambassador Kantor. It is both appropriate and timely that you are here today.
I commend you, Mr. Chairman, for holding this hearing today. We have several cru-
cial issues in the GATT debate which must be addressed today.
When the Uruguay Round opened we hoped to expand the GATT to meet the eco-
nomic challenges of a new century. We planned not only to continue the tariff and
quota cuts of previous rounds; but to extend GATT coverage to trade in agriculture
and services; and agree on ways to protect intellectual property.
We are here to look specifically at those provisions which impact the agricultural
industry of this Nation. First, it is proper to briefly look at that industry.
As my colleague Senator Kerrey has said before, agriculture is not simply a spe-
cial interest. It s a hundred-billion-dollar industry and it must be treated carefully.
In many areas, production agriculture remains the only game in town and we must
be sure that our efforts do not rain on the game.
Montana is a State where agriculture is the largest contributor to the economy.
Our two largest crops are beef and wheat. Since our cows outnumber our people 3
to 1, we depend on exports. So a good GATT represents a great deal of market po-
tential to my state.
According to USD A, the value of wheat exports should increase by at least $100
million annually in the year 2000, and by $600 million, 5 years later. For beef
producers, it's even better. Beef exports will increase by $1.7 billion by the year
2005. That translates to higher farm income and that serves America's farmers and
ranchers well.
It sounds good so where's the catch. Well, I believe there are several and I'll ad-
dress them right here.
To many in my State it appears we have given up way too much in exchange for
much too little. In fact, if you look at the cuts weve made in the 1985 and 1990
farm bills, we went to the table with little to give. Coupled with the reductions in
the Export Enhancement Program which were agreed to during the Round, it could
be argued that, as regards agriculture, we went to war without our armor and we
came home without our clothing.
Our producers argue that they've given enough. It's time to start getting some-
thing back. Farmers, and I agree with them on this, expect several provisions from
the agreement at this time.
First, agriculture's financial contribution to the costs of the GATT must be limited
to their proportionate share. Since agriculture cuts are costing just $608 million in
reduced tariffs, the industry should not be forced to bear the burden of cuts beyond
that level. That means we don't want to see any cuts in farm programs suggested
to pay for the GATT — none.
In fact, since the EEP cuts will total nearly 3 times that amount, I'd suggest that
those funds be directed back into GATT-allowable agricultural programs. We must
stop disarming ourselves and hoping other countries will follow suit. That is a sure
way to export our agriculture and that is simply not acceptable.
Finally, I must say that the maintenance of our trade laws is a critical concern.
Great pain must be taken to ensure that essential American trade laws — section
301, countervailing duty, and anti-dumping law — are not weakened. I believe it is
possible to not only preserve but to also strengthen our trade laws in the context
of the GATT implementing language.
Since Canada discovered our wheat markets in 1989, we've seen the devastating
impact that unfair trade can have on an area like Northern Montana. This dem-
onstrates that it is imperative that we maintain — and commit to the use of — trade
laws to prevent other countries from flooding our markets with dumped and sub-
sidized goods. Lumber, wheat, beef, pork, sugar — too many industries have been
hurt by unfair trade and it's time we take steps to prevent further harm.
On a related topic, and I know you've heard me say this before, we've been trying
for some time to get Canada to play fair when it comes to the wheat trade in North
America. In my state, one of the most important goals of free trade is getting Can-
ada to eliminate their barriers to free trade in wheat. We must increase pressure
on them to achieve transparency in their wheat pricing and to eliminate barriers
to the northbound movement of grain. I think an agreement to provide for truly free
trade is more important than a temporary import restraint.
Although I must leave for another important event, I expect that you will address
these concerns later in the hearing and I look forward to hearing your replies. We
have a long ways to finishing this agreement and I urge you to make certain that
agriculture is not the sacrificial lamb in this effort.
Thank you, Mr. Chairman.
The Chairman. Senator Coverdell, do you have an opening state-
ment?
Senator Coverdell. Mr. Chairman, I have no opening state-
ment. I am ready to hear from our guests.
The Chairman. Thank you.
Senator Harkin?
STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR
FROM IOWA
Senator Harkin. Thank you very much, Mr. Chairman.
I, too, am sorry that I have to leave. The President is inaugurat-
ing his immunization program this morning, and those of us that
are heavily involved in that are going down for that ceremony.
I just have four items I want to mention very briefly.
First of all, burden sharing in terms of agriculture, we talked
about it a little bit before. I hope this will be fully explained here.
From my initial look at this, it looks as though out of the $14 bil-
lion that we are being asked to make up in terms of lost tariffs,
that agriculture is being asked to swallow about $4 to $5 billion of
that. That is about a third, and I think that is unfair. If there is
some way that we ought to look at that differently, I would like to
know about it, but I think it is grossly unfair that agriculture is
asked to take that much of the burden.
Second, the longer I have been involved in this Canadian wheat
dispute, just as I was with the oilseed dispute we had a few years
ago with the EEC, the more I am convinced that it is easy to vio-
late GATT but it is awful to resolve it. So those that violate are
in the driver's seat. To try to resolve these disputes drags on for
years and years. The oilseed dispute took us over 5 years, and it
wasn't until we threatened to use our own section 301 in retalia-
tion that they finally came to our senses.
I guess I am hoping that in this new GATT agreement, setting
up mis world-trade organization, that there is a more timely dis-
pute resolution process.
My third point, Ambassador Kantor and Secretary Espy, has to
do with the drafting of the farm bill next year. We are iust months
away from that. I have heard a lot of concern expressed by produc-
ers in my State that perhaps the GATT agreement may limit our
policy options and what we may want to do in the 1995 farm bill.
For example, Mr. Ambassador, earlier this year, Secretary Espy
raised the loan rates. I think that was met with a great round of
applause throughout the farming sector. I supported that. I know
my producers supported that. What we are concerned about is that
under the GATT agreements, would such action by the Secretary
be allowed in the future? What kind of policy options will we be
hemmed in on as we begin to debate and develop the 1995 farm
bill?
I guess, as one farmer said to me last weekend in Iowa, he said,
will the farm bill be written in the implementing legislation for
GATT, or will you be writing it in the Agriculture Committees?
That is a real concern out there.
My last point has to do with the reduction in export subsidies
that is coming about through this GATT agreement. We can all ap-
plaud that. I hope that Europe lives up to that, the European com-
munity lives up to that. However, if we reduce our export sub-
sidies, that means that a lot of countries are going to have to pay
more for our grains. That concerns me in terms of some of the poor-
er countries, where they do not have the wherewithal to pay more
for the food stuffs that they need, which means I think there is
going to be more of a demand for our Public Law 480.
I am one of those who has long believed that the more we put
into Public Law 480, both Title I and Title II, that it helps our pri-
vate sector even more, and we can prove that demonstratively, that
the more we put into Title I and Title II, the more it develops mar-
kets in poorer countries. Again, that is going to be a hit on our
budget.
In other words, as we decrease the export subsidies, we are going
to have to make sure that poorer countries are able to get access
to food stuffs, and that may raise the need for increased input into
Public Law 480, Title I and Title II.
I just wanted to mention those, Mr. Chairman. I thank you very
much and look forward to the response. I am sorry I have to leave.
The Chairman. Thank you.
Senator Lugar?
STATEMENT OF HON. RICHARD G. LUGAR, A U.S. SENATOR
FROM INDIANA
Senator Lugar. Thank you very much, Mr. Chairman.
Mr. Chairman, the Uruguay Round will have a broad impact on
the international commerce and standard of living of this country.
For many commodities, the Round's provisions will mean rising ex-
ports, prices, and income.
Among commodities very important to my State of Indiana, the
United States Department of Agriculture projects improved exports
and prices for corn, soybeans, pork, beef, poultry, wheat, and other
products, and for that, we are grateful.
But the Round is equally important for the new principles it in-
troduces: that export subsidies are to be reduced, that import bar-
riers are to be made transparent, and likewise reduced; that inter-
nal supports which distort trade are to be disciplined, and subject
to international scrutiny. For American farmers who are competi-
tive world-class producers of a broad array of crops and livestock,
these principles are certainly welcome.
Soon, we will begin to work with the administration and develop
implementing legislation that will be considered under expedited
fast-track procedures. I would like to express my hope that the ad-
ministration will adhere to a somewhat stricter standard for what
can be included in the GATT legislation than was the case during
the NAFTA debate. Including clearly extraneous provisions can
only serve, in the long run, to undermine congressional support for
the entire concept of fast track.
In particular, I want to outline at this hearing, Mr. Chairman,