Remarks of Deputy Secretary of Agriculture Richard Rominger Special Grains Conference 1998 of the International Grains Council Buenos Aires, Argentina December 2, 1998 Release No. 0500.98 Remarks of Deputy Secretary of Agriculture Richard Rominger Special Grains Conference 1998 of the International Grains Council Buenos Aires, Argentina December 2, 1998 "CHALLENGES of the NEW MILLENNIUM for GRAIN MARKETS" Thank you. On behalf of the United States, I want to express our deep appreciation to Secretary of Agriculture Gumersindo Alonso for his invitation and to the people of Argentina for hosting this prestigious conference and for their gracious hospitality. It is an honor to bring the U.S. viewpoint to these proceedings, especially at this timely moment for economic and trading relations around the world. I doubt that any among us would challenge the statement that agriculture is clearly among our deepest ties and connects all of our nations to a shared future -- in ways more complex and profound than ever. That is certainly what brings us together, along with the compelling fact that the way we handle those connections and the choices we make will affect the future of our farmers ... our economies ... and our ability to feed growing world populations. At the same time, those choices must be broad and wise enough to balance economic motivation with environmental concern. They must protect the resources of this planet we all call home so that it, in turn, can protect our children and their children. To the people of Argentina, the people of the United States say thank you for your leadership on behalf of all our children ... for hosting this month's global meeting of the UN ... and for stepping forward as the first nation to commit to reducing greenhouse gases among all the nations that were not required to do so by the Kyoto Protocol. If we share this vision of a healthy, prosperous community of nations built on a foundation of free and fair trade, the question is how to achieve it. For the world's grain and feed producers and traders, in particular, seizing the opportunities and meeting the challenges of this new age hinges on open markets ... on expanding commerce that closes the gaps between those who have and those who have not ... and on the adaptability of government policies to strong demand growth and changing dynamics of international trade. REPERCUSSIONS OF ASIAN SITUATION Look, for example, at the domino effect of the Asian financial crisis. What's been happening halfway around the world has not only stalled U.S. export growth in the past year, but dramatically highlighted our stake in a shaky or solid world economy. Speaking last week in Japan, President Clinton noted that, " ... in part, the present difficulties are the product of our own successes. The world financial system fashioned at the end of World War II has played a central role in dramatically expanding trade, promoting prosperity, reducing hunger and disease throughout the world. But today the sheer volume of economic activity intensified by technological change has created new risks risks which are not adequately being managed today by national systems or by the current international arrangements." For U.S. agricultural exports, the results are severe. Forty percent of our agricultural exports go to Asia, and they are certainly hurt right now because strong exports require strong customers. This situation -- compounded by bad weather, crop diseases, and a strong dollar hurting our competitiveness in world markets -- has made this one of the worst periods on record for some U.S. producers, particularly in the Plains states. As a farmer myself, I've made it a point to travel around and talk with family farmers who have lost their land. Others are selling off machinery just to make it. Many are just barely hanging on. Some grain farmers are dealing with 1948 prices ... and 1998 expenses. Two weeks ago, at the APEC forum in Malaysia, Vice President Al Gore pointed out that U.S. farm exports won't likely renew their rapid growth until Asia renews its own economic growth. More clearly than ever before, our folks back home are realizing that what happens in Japan, in Korea, in Russia, in Brazil is linked to the health of our own farm economy. HELP TO U.S. FARMERS IN THE SHORT -TERM: EMERGENCY RELIEF To help our farmers out, our Congress passed an emergency relief package. It achieves our short-term objective -- bolstering depressed incomes and partly compensating for lost crops with $6 billion in assistance. As we worked out the details, we made certain this stop-gap funding does something more ... that it upholds our global commitments and in no way undermines the movement toward fair trade in the long-term. I understand that some nations view this support with skepticism ... as the U.S. backtracking from the decoupled income support mechanisms of the historic Farm Bill of 1996. Let me remind you that the United States has always supported the position within the World Trade Organization that every government has the sovereign right to support its farmers ... but in a way that is the least disruptive to trade. Consistent with WTO rules, this temporary relief mostly in the form of natural disaster payments and income support is well below our allowed limit. Not linked to prices or to production levels or to planting decisions, it is a direct, straightforward income transfer from government to farmers hit hard by crop and animal losses. In coming up with this relief package, we were scrupulous to stay within the bounds of our WTO obligations ... to take measures that don't disrupt trade, aren't protectionist, and interfere only minimally with the interests of other nations. We've also carefully weighed the interests of other nations as we've allotted 2.5 million tons of wheat for overseas donations. Certainly this is a policy tool that matches U.S. surpluses with the world's neediest people. Clearly it extends a helping hand to those suffering hunger in the developing world, in our nation's best humanitarian tradition. But first we made certain that these allocations would not disrupt commercial sales, and carefully considered the poverty levels, harvests, and current international donations of recipient countries. In connection with international obligations, the United States regrets that negotiation of a new Food Aid Convention has not been concluded. We must note that all participants, except the European Union, seem able to reach an agreement. The United States urges the EU to come next week to Washington with a mandate to successfully conclude the negotiation. SHARING IN THE GLOBAL ECONOMY The real key to strong future farm incomes -- in America and around the world -- will be the extent to which we help producers take full advantage of a world of opportunity. Farm incomes will be linked to the integrity, size and strength of the global economy. That's the chief reason President Clinton fought hard for and won Congressional support for $18 billion in new funds for the International Monetary Fund. It's mighty hard to build markets for our goods when other countries can't afford to buy them. A strong U.S. economy needs a strong global economy that's free of trade barriers ... And perhaps no industry has a greater stake than our grain sectors. Driven by long-term factors like rising population, urbanization, and income levels, we think prospects are good for strong growth in world trade of wheat and coarse grains for at least the next decade. In short, we share a collective outlook for growth. But from that point, there are some hard choices to make growth strong, to participate in that growth, and position our producers and traders to take the fullest possible advantage of open 21st century markets ... or to undermine our participation on a competitive world stage and limit growth and global prosperity. It is the obligation of every nation to put in place trade-liberalizing policies. Governments' willingness to effect these policy changes will make a profound difference in the extent of future global trade growth. PREPARING FOR WTO TALKS IN 1999 As we come up on the next round of WTO talks, the United States will push to see that all countries take greater strides toward realizing the full potential of a free and fair world trading system. We want to see every country play by the same set of rules. We want to put behind us politicized trade battles that disrupt economic growth and international relations ... put behind us spiraling trade spats that have nothing to do with the quality and safety of our products ... and put in front of us a new world in which the community of nations stays the course of free trade. That's why the United States has insisted that before China is allowed to join the WTO it demonstrate its willingness to abide by the WTO's trading rules. That's why we sought and got a landmark ruling from the WTO against the EU restriction on U.S. beef based on hormone concerns. If the EU, or any other major player, can simply walk away from the rules -- in this case, the Sanitary and Phytosanitary disciplines -- then the integrity of the entire process is put at risk. If one country does not honor the rules, other countries will be tempted to follow suit, and the whole system breaks down. President Clinton stressed last spring in Geneva that WTO members must clamp down on the trade distorting practices of State Trading Enterprises. They must eliminate trade distorting export subsidies. I know that our host nation, Argentina, has expressed concern that the United States might use the Export Enhancement Program for grains. Despite the EU's use of export subsidies, the U.S. has not used the EEP for any grain for almost three-and-one-half years other than a small barley EEP this spring. The EU's continued aggressiveness with flour exports, displacing our sales in some markets, has prompted us to seriously consider a flour EEP. Even if we should implement a flour EEP, we do not see it leading to an EEP for wheat, as some of our trading partners have argued, because the economics are completely different. We have not re-instituted the Export Enhancement Program for wheat for a range of economic reasons. However, we retain this right if conditions warrant. We will use the program only when we believe it's the right tool to meet the right goal under the right circumstances. It's important to note, though, that even if the U.S. should reinstate wheat export subsidies, this would be perfectly consistent with our WTO obligations. This only serves to highlight the need for eliminating export subsidies in the next round of WTO talks. Some of our trading partners have recently been questioning whether U.S. loan deficiency payments are consistent with WTO rules. Not only has the WTO Committee on Agriculture never questioned our domestic support notifications, but there is no link between receiving a loan deficiency payment and exporting. Speaking of rules, the United States is also adamant that under WTO rules we must collectively guard against one of the biggest threats to fair trade -- phony scientific barriers and other schemes that block trade. The open exchange of sound scientific information was a major factor in decisions by Brazil and Chile to re-open their markets to U.S. wheat. Just three months ago, after almost two years of effort on the Karnal bunt issue, we made our first significant wheat sale to Chile. And let me say to our Brazilian audience that we were pleased to negotiate a protocol last month allowing the re-entry of U.S. hard red winter wheat. This is a good moment in the longstanding history of the U.S.-Brazil trading relationship. It's a positive step forward. As scientific discussions move along, we believe they will show that other classes of U.S. wheat also pose no unreasonable risk to Brazil. These are true success stories for all three countries. They're a success story for the ability of nations to negotiate the removal of critical trade barriers based on the best possible science. And they're a promise of the continued strengthening of bilateral and regional agricultural relations in this hemisphere. HEMISPHERIC TRADE When President Clinton was here in Argentina a year ago, he said that he and President Menem "share a vision of a thriving American market of 800 million people from Point Barrow, Alaska, to Patagonia, investing in each other's future, enriching each other's lives, strengthening each other's institutions for freedom and democracy and peace and security. "Argentina," he said, "is at the heart of movements bringing our hemisphere together, working with your neighbors through Mercosur and your strategic alliance with Brazil to spur democracy, economic reform, and regional security cooperation ... the United States welcomes reconstructive efforts by others to bring our hemisphere together." The fact is that the western hemisphere is the fastest growing market in the world. The United Nations tells us that agricultural trade within the Western Hemisphere has grown faster than world trade. For the U.S., Latin America is our fastest growing trading partner. U.S. agricultural exports to the 30 nations of the Western Hemisphere are a singular bright spot against this year's bleak economic bulletins from around the world. Although our total agricultural exports dropped 6 percent in fiscal '98, sales to Western Hemisphere countries shot up by 10 percent. But, as President Clinton said, a thriving American market means investing in each other's future. Trade must be mutual, a two-way street. In this period of economic disruption, the U.S. has kept its doors open and remained a good market. Agricultural exports to the U.S. from Western Hemisphere nations rose almost 4 percent in fiscal '98 over the year before. That is why every step taken, whether it's Mercosur, NAFTA, CARICOM, the Andean Pact, helps to build momentum toward what we believe should be our ultimate goal a free trade area of the Americas. This is important to every nation in the region, evidenced by the solid progress at the fourth FTAA Ministerial last spring in Costa Rica. To some extent, we feel in the United States that we're on the fringe of the region's steady march toward integration. There are some 30 bilateral and regional trade agreements in the western hemisphere, but the U.S. is party to only one NAFTA. To the extent that regional arrangements increase trade liberalization and economic reform, they are consistent with President Clinton's push for a Free Trade Area of the Americas. Let me express U.S. appreciation to Argentina for your excellent, constructive work as chair of the FTAA Negotiating Group on Agriculture and vice chair of the Trade Negotiating Committee. The negotiations will build on the work of the WTO. They will address market access, SPS measures, export subsidies, and the range of issues determining free and fair trade in this Hemisphere. They'll incorporate advances that will be made in the upcoming multilateral negotiations in the WTO, so that progress on the world stage becomes progress in the Americas. THE ROLE OF SCIENCE IN ACHIEVING FOOD SECURITY As we establish these 21st century trade rules, we must commit ourselves to preserving the social contract so that trade advances also advance the health and well-being of ordinary citizens ... so that freer agricultural trade is about feeding the world. The United States -- along with almost 200 other nations -- signed onto a goal at the World Food Summit in 1996 to cut in half the world's undernourished by the year 2015, to achieve a true food security. This means a serious, shared commitment to worldwide sustainable development. This is potentially one of the greatest collaborations among nations ever ... the idea that we can build a future together that will help us work for peace, preserve the environment, fight disease, face up to world hunger, and grow our economies. If an internationally safe and plentiful food supply is a top goal for a food-secure world, then cutting-edge research and technology are critical to getting us there. We must look to technology for serious answers to tough questions: How do we feed a growing world while protecting our land? And how do we produce more food from existing farmland? One in seven of the world's people suffer from hunger and malnutrition. Over the next 25 years or so, global population will increase by more than two billion people. That's the equivalent of two more India's or three more sub- Saharan Africa's. World food supply has logged years of progress, but the numbers are still bad. Without biotechnology, we will be forced to exploit highly erodible farm and forest land. The alternative and the hope are in the laboratories and research centers of our dedicated scientists around the world -- places like the International Center for the Improvement of Corn and Wheat in Mexico. Science is on our side. Biotechnology holds out the promise of food security by improving disease and pest resistance, increasing tolerance to environmental stress, raising crop yields, and preserving plant and animal diversity. It's been said that, "Responsible biotechnology is not the enemy; starvation is." In sub-Saharan Africa where hunger is most epidemic it is estimated that a doubling of the projected increase in grain yields over the next 10 years could cut the region's hungry by half making a 25 percent dent in total world food aid needs. Responsible science is not an end in itself ... it's a 21st century tool offering enormous potential to meet our commitment to humanity, to stem world hunger, while preserving our fragile environment. One of our nation's greatest statesmen, Vice President Hubert Humphrey, used to tell a story that went like this. "In ancient days, kings would look around for a scientist who could take base metal and convert it into gold. They called him an alchemist. They'd lock him up in the tower and say, 'Now here's a stack of iron ore. Change it into gold.' "Finally, we've found a way," Humphrey said, "to take a ton of grain and change it literally into gold into health, into nutrition, into education, and into facilities that make life better for millions and millions of people." In a sense, we are all alchemists. Through the decisions we make on science and free and fair rules of trade through discussion, collaboration, and negotiation we have it within our power to make life better for millions ... to truly change grain into gold. Thank you.