Third Annual Farm Journal Conference Release No. 0495.98 Remarks of Agriculture Secretary Dan Glickman Third Annual Farm Journal Conference Washington, D.C. November 30, 1998 TRADE OVERVIEW Thank you, Sonja [Hillgren]. I want to thank all the folks at Farm Journal which has been such a vital voice for U.S. agriculture. At a time when information is more important than ever before to any agricultural venture be it a small farm or a big agri-business conglomerate the role of Farm Journal will be even more important in the next 120 years than in your first 120 years. I'd like to thank you for your work and for the invitation to be here. I know the Vice President also is excited to speak to you tomorrow. And, we both are excited that your focus this year is on trade. Trade will be a big issue for agriculture in 1999 and beyond. It really is the key to getting our farm economy back on a positive growth track. Whether it is helping revive the global economy or breaking into new markets for our agricultural products, this Administration has been very aggressive in pursuing a strong trade agenda. I was with the Vice President in Malaysia for the Asian Pacific Economic forum. He made it crystal clear that agriculture ranks high on the U.S. trade agenda, as did the President during his state visits to Korea and Japan. With the 1999 World Trade Organization talks at hand, the United States will have its work cut out for us as we seek to strengthen and expand global trade. Nowhere will the challenges be more complex than in agriculture. Some countries feel that trade in food is different from trade in cars or computers or other commodities, and that food requires more protection. I agree that food is a basic fuel of life. But for me that makes it more important not less that food and fiber move more easily around the world through international commerce. It's good for American agriculture which is right now getting a reminder of just how linked our economic fate is to the world's. And, more free and fair agricultural trade is good for the world helping lift countries' economies while ensuring a stable, reliable global food supply. So this Administration has every intention of pushing hard in the international arena to open up more opportunities for American agriculture. I am proud of the job we have done over the past year, fighting to hold onto embattled Asian markets through very aggressive use of our export credit guarantees. We increased our credit line by 50% -- well over $1.5 billion -- this past year. As a result, while exports in dollars are down, we are holding onto our market share. Our foreign agriculture officials have been back and forth to Asia many times, getting personally involved in these efforts. During my recent visit, I was able to further these efforts, as well. As we gear up to persuade the public of the importance of more free and fair agricultural trade, I think we also need to give NAFTA some long overdue credit. Our exports to Canada and Mexico have posted their third straight record up close to $2 billion this past year. So even though we lost $4 billion in exports to Asia, U.S. farm exports only declined by half that amount because of strong, robust trading in our own hemisphere. So NAFTA may get a share of criticism from various sectors, particularly along the Canadian border, but by and large it's making a $2-billion difference for agriculture that is critical to prices and to farm income. Under a farm policy that is less based on government supports, expanding trade is vital to growing farm incomes. This Administration understands that. That's why we have fought so hard to open more markets to more products than any other Administration in modern history. But today we are learning important lessons that we cannot afford to ignore. One is that what happens in the global economy has an impact here at home. Another is that what happens to agriculture is affected by what happens to other sectors of the world economy, like currency valuations, banking policy and consumer demand for all sorts of products. That is why support for the International Monetary Fund and other efforts to shore up the global economy are so vital to agriculture. Strong exports require strong customers. My visits to Malaysia, Korea and Japan really brought home for me the fact that agriculture purchases from the U.S. do not exist in a vacuum. We should not delude ourselves, however, in assuming that America's farmers and ranchers believe en masse that more open markets are necessarily good for them. Many continue to believe that the benefits of expanded trade are outweighed by recent balance of trade deficits, as well as particular problems existing between the U.S. and the European Union and the U.S. and Canada. Many times I hear academics and some in the agri-business community bemoan the fact that if farmers really understood the statistics, they wouldn't be so ambivalent about free trade. But the fact is that many farmers perceive that free trade is often not reciprocal or fair. While that perception is often inaccurate and incomplete, the feelings are still there. And, the recent commodity price declines have not helped reverse this lack of confidence. Our job -- those of us in the private and public sectors -- is to better explain the positives of open markets while at the same time continuing our fight against unfair practices wherever they exist. We all must do our jobs better and commiserate much better if we are to be successful at the WTO and particularly in getting Congress to give the President the fast-track authority which he so desperately needs. SAFETY NET/EMERGENCY PAYMENTS We also have to understand what most every person who has a 401k plan understands: It is simply not realistic to expect that the global economy will march ever upward without a single hitch. So as tempting at it may be to some folks, we cannot shove off all the responsibility of a safety net onto trade. It's convenient, sure. But it won't work in the real world where markets go up and markets come down, sometimes with devastating results. That's the lesson of 1998. Back in 1996, President Clinton and I asked the question: What happens when prices and exports aren't so strong? What happens then to family farmers in the absence of a sturdy safety net? Over the past year, as some of our worst economic nightmares came true, we got our answer as family farm after family farm went up on the auction block not because of a bad business decision, but because of the size of the wheat crop in Argentina or the value of the yen in Japan or the severity of the weather in Texas or North Dakota. Government should not stand by and watch farmers go out of business through no fault of their own. That's why this Administration took such a strong stand to ensure farmers got the level of emergency assistance they needed to plan for a Spring crop instead of a Spring auction. In the near future, USDA will announce how the final $2.4 billion in crop loss payments will be made. For now, I will simply say that we will try to be fair to all farmers in all parts of the country. Our decisions will encourage the use of crop insurance, at the same time we work to make that program stronger so it can do some of the heavy-lifting of any future farm safety net. I also think we in agriculture need to respect the fact that American taxpayers have been very generous in helping us through this difficult time. The dollars allocated to agriculture in the recent budget bill are significant -- especially when you combine it with other things, such as the advanced and enhanced AMTA payments and LDP funds. These funds will be used to address some very serious problems in today's farm economy. But we also must do our utmost under the law to ensure that these emergency funds are spent properly, that they go to folks who suffered losses, and that we have a program that is fair to farmers and to taxpayers. If we are not vigilant in this respect, I worry that it will cost us down the road. A lot of folks outside of agriculture will be scrutinizing these decisions, especially in light of the serious fiscal choices we will have to make in the Year 2000 budget. So we must put our best foot forward and use this help appropriately. CONSOLIDATION So the challenge before us today is to ensure our farm families can share in the economic opportunity that is clearly on the horizon for American agriculture. Unfortunately, that is easier said than done due in part to the trend toward fewer and larger operations which is working its way through every sector of agriculture today, as it is throughout our economy. Just in the past few days, we've all read about the union of America On-Line and Netscape as well as talks between Exxon and Mobil Oil. In agriculture, we read about Monsanto-DeKalb and more recently Cargill-Continental. It's important that agriculture become more productive, more efficient and more globally competitive. But it's also important that these changes do not come at the expense of family farmers and ranchers who also deserve a fair shake in the marketplace. My opinion is that we need not a knee-jerk reaction against consolidation, but some thoughtful reflection -- about agriculture's future, about the value of competition and about the fate of individual economic opportunity as we go further and further down this path that no one seems quite sure where it leads. Throughout my time in public service, I have been wary of decreased competition. As many of you know, I opposed the UP-SP rail merger. I feel fairly vindicated after all the gridlock and grain on the ground following the merger, although service seems to have improved in recent months. I also was very involved when I first became Secretary with concentration in the meat- packing industry. I still worry about individual ranchers' ability to get a fair price in a less competitive marketplace. From banking to transportation to seed companies, I am concerned about the structural changes taking place in the farm economy, and worry about how it may affect the ability of family farm agriculture to cope in a changing world. That is why this week I will ask the Department of Justice and the Federal Trade Commission to do a thorough review of the proposed Cargill-Continental consolidation. I do not yet know if this arrangement should be blocked or approved, but I believe enough legitimate questions have been raised to warrant keeping the rubber stamp in the drawer. The American free-enterprise system depends on adequate competition to ensure there are choices available in the marketplace. My belief is that the appropriate anti-trust regulators will and should actively examine these mergers in that context. CONCLUSION So agriculture has a lot on its plate in the year ahead. We have to work on reviving the global economy and continuing our export expansion. We have to re-stitch the safety net by improving our risk management mechanisms and strengthening the crop insurance program. And, we need to look out for family farmers and ensure that they, too, have the chance to participate in the world of opportunity that is out there for U.S. agriculture in the next century. There are no easy solutions. But I do think that working together we can get the farm economy back on a positive growth track and do it in a way that is beneficial to all parties in American agriculture. I want to thank you for the opportunity to speak to you today. I also want to thank you for the work you do every day on behalf of American agriculture, our nation and the world. Thank you. #