Canadian Agricultural Trade Conference Release No. 0173.99 Remarks As Prepared for Delivery by Secretary of Agriculture Dan Glickman Canadian Agricultural Trade Conference Ottawa, Canada April 19, 1999 "Thank you for that introduction Minister Vanclief. I also want to thank you for your leadership in working with the United States to confront the challenges that face our two countries and in moving forward with a strong agenda on behalf of farmers and ranchers. "With me today from USDA are Tim Galvin, Administrator of the Foreign Agricultural Service and Dr. Isi Siddiqui, my Special Assistant on Foreign Agriculture. They do a terrific job working with our trading partners in Canada and all over the world to maintain a steady flow of goods. . "It is an honor to be in this great and beautiful city, though I notice a certain melancholy in the air with Wayne Gretzky having played his last game in Canada here last Thursday. You know if only I could do for agricultural trade what Wayne Gretzky did for hockey, maybe they'd call me "The Great One." "I realize I'm skating on thin ice invoking "The Great One's" name in a speech about trade, but I think that's the point. He's your national treasure, but we adopted him in the United States. Just as borders have disappeared in sports, one day perhaps there will be no more barriers to trade. "I'm very glad to have this opportunity to speak to you about our common goals in the global world of agriculture, particularly with respect to the upcoming World Trade Organization talks. "President Franklin Roosevelt said, "In the field of world policy I would dedicate this nation to the policy of the good neighbor." For our two nations, that is certainly the case. Look at the close ties we've developed during 132 years of history together . On the international front, Canada and the United States were strong allies in Iraq, Bosnia and now Kosovo. On the economic front, every day 1 billion U.S. dollars in commerce crosses our mutual border in both directions. In agriculture we do nearly $15 billion in business together annually and if you add forestry and fish the total jumps to almost $28 billion. And it's a two-way street. That's a testament to what we've achieved together and what we mean to each other, not just as friends and neighbors, but as partners. It's a partnership that works for both countries and a partnership worth building on. "That's not to say we don't have differences. Of course we do. Just because we're close, both geographically and in the way we do business, that doesn't mean we're clones. It's true that we agree on the vast majority of things, but in some areas there is work to be done. "That's why I'm very proud of the Record of Understanding in agriculture our two countries signed in December. It puts into practice some long standing principles that both countries have been advocating. Such as applying sound sanitary and phytosanitary standards toward trade rules. The agreement is a first step to help level the playing field for farmers and ranchers of both countries. And it calls upon both countries to work together to combat unfair trade practices by the EU such as high subsidies on oat exports. It reaffirms our commitment to cooperate in biotechnology development and coordinate the use of pesticides in our two countries. However, we need to continue making progress on the agreement to ensure reciprocity and sound science prevails. People are watching us closely and while encouraged, expect continued progress in the months and years to come. "But this agreement also recognizes that problems can be solved before they become bigger than they should in the first place. The fact is, as close as our two nations are, we should be sitting down and talking more often. This agreement comes at a time when nerves on both sides of the border are frayed. It's understandable that, as pressures from declining prices have mounted on all of our farmers, tensions have increased. That made it increasingly clear that we needed a process for finding trouble before it gets out of hand. In short, an early warning system. Tomorrow, Minister Vanclief and I will sit down and explore what we can do. "In my four years as Agriculture Secretary I have seen what trade means to ag's bottom line. Early in my tenure, we saw record ag exports totaling over $60 billion annually. During the same time Canada had strong trade numbers as well. That was a period of prosperity for both our nations' farmers and ranchers. But in the last year and a half, we saw the bottom literally drop out. As a result of three years of record worldwide production coupled with the disaster in Asian financial markets, ag exports plummeted, and ag prosperity followed suit. "Knowing the importance of agriculture to the overall well-being of our general economies and our abilities to feed our nations, both governments came up with significant aid packages to help farmers and ranchers weather the storm. This aid was well within U.S. WTO limits and was provided in such a way as not to distort markets. But let there be no misunderstanding, though we are experiencing some growing pains as we seek to redefine the structure of agriculture in the U.S., the United States has no intention of going back to the days of intrusive government programs or telling farmers what to plant. We have made the commitment to a market-based system for agriculture and we will stay with it. "But the key lesson, from both the good and bad periods of the last four years, is how significant trade is to our bottom line. That is not to say that in everything we do, we live and breath trade and nothing else. But the fact is a quarter of U.S. agriculture production is exported and Canada relies on the export market even more. For example, 50% of the U.S. wheat crop is exported whereas 75% of Canadian wheat is sold to other countries. "The clear message here is that if our two nations are to continue to grow and prosper, then we must look to the global economy to provide new markets for our producers. That means we need an open trading system and reliable markets. But don't take my word for it, look at the facts. Since 1960, tariffs worldwide have fallen by 90% while global trade grew 1500%. World economic production has quadrupled while per capita income more than doubled. "The true test came in late 1997 and 1998 when 40% of the world's economies stumbled badly. Rather than a wave of protectionism, discretion ruled the day and allowed for special trade and financial measures to help different sectors and countries. We're not out of the woods yet, but already we are seeing positive signs in the economies of South Korea and Thailand. "In his annual State of the Union address to the American people, President Clinton called on the nations of the world to tear down barriers, open markets and expand trade. He also added that, 'we must ensure that ordinary citizens in all countries actually benefit from trade.' "Nowhere is this more important than in agriculture. Farmers do some of the hardest, riskiest, most important work there is to be done. And, around the world today, they are bearing the brunt of the economic difficulties facing many countries. The stock market may be booming, but down on the farm prices are busting and many farmers are in trouble. Their difficulties today should remind all of us how important a robust agricultural sector is to our quality of life. And also remind us that notwithstanding our commitment to the free market, government will and should respond with appropriate assistance to help farmers deal with a highly and increasingly volatile world market place as long as that assistance is not trade-distorting. We cannot ignore the human side of the production of food. "But trade is a two-way street. If other countries want to sell their goods in thriving economies like the U.S. and Canada, then they must understand that trade must be free and fair, and unfettered by creative trade restrictions. You don't get something for nothing in this world. If other nations want access to markets in Toronto, Vancouver, St. Louis and Pittsburgh, they should not expect the United States or Canada to accept anything less than unrestricted access to markets in their countries. That's what we mean by fair trade. To paraphrase Vice President Al Gore, North America cannot be the importer of only resort. That's why the upcoming round of the World Trade Organization talks is so important. "The Uruguay Round of the WTO was a giant step forward for trade. Eight years in the making, it set the foundation for creating a fairer, more just trading system with a way to handle disputes and achieve enforcement. It began making inroads in reducing tariffs, and increasing market access. For the first time in history, agricultural trade was brought into the world trading system. All in all, it was a very good start. It set the stage for a broader and deeper WTO that will include more countries and a stronger move away from isolationism and protectionism. Now that we know it works, it's time to build on that success. "But don't let my optimism mask the challenges before us. There is much progress to be made, but, as Robert Kennedy said, "Progress is a nice word. But change is its motivator and change has its enemies." "In order to create an equitable world trading system, countries will have to change the way they're used to doing business and accept that some of their traditional practices and internal systems will have to give way to a new world order. "Just look at the situation with China. China badly wants in to the WTO, and I would be remiss if I didn't say that all of us want China to join. But we are not going to just throw the doors open willy-nilly without requiring that China adhere to the strict requirements of WTO membership. It's the rules and the enforcement of those rules that make the WTO work for everyone. "Just last week we announced significant progress toward an historic agriculture agreement with China, provisions largely dealing with sanitary and phytosanitary measures. While China has not yet acceded to the WTO, Chinese willingness to make important concessions to WTO countries means expanding markets for both Canada and the U.S. "Seeing how long and how difficult a process it's been getting China to change its ways in order to join the WTO is a clear example of how difficult it is to get countries to accept new ways of doing business. That just goes to show how difficult the road ahead will be in the next round where we will be asking major concessions from all members. "Despite the progress made in the Uruguay Round, there is much to do. Agricultural tariffs remain high on average 10 times higher than industrial goods. Agricultural export subsidies continue to distort markets and both producers and consumers are faced with protectionist and unsound restrictions on the use of new technologies in agriculture. 'The United States intends to take an active role in establishing the agenda, scope, content, and timetables of the negotiations. We hope Canada will take an active role as well. That's why along with Canada, the United States joined the E.U., Japan and Australia for the Quint Agricultural Ministerial last year and we look forward to another Quint session in Vancouver this summer to better prepare for the upcoming WTO Ministerial Conference in November. "Our agenda is nothing less than ambitious, and for good reason. Enhancing a strong WTO will ensure that we do not fall back into the dark ages of protectionism and isolationism. Without the WTO rule of law, it is easy to envision trade disputes escalating to serious international confrontations that shake the foundations of trust and reliability that are critical to international trade and the global economy. "Our goals for the next round, while easily stated, will not easily be achieved. "First, we need to enhance export competition by eliminating export subsidies. Export subsidies depress world commodity prices and discourage production by producers who would otherwise be able to compete in the absence of subsidies. The ones most hurt are those in the developing world. The EU, for example, carries out an extensive subsidy program. The EU budgeted $6.1 billion for export subsidies in 1997 and accounted for 80% of global subsidy expenditures in the first two years of the WTO. "One key objective of the United States will be to rein in the trade distorting practices of agricultural State Trading Enterprises. We will seek more discipline and greater transparency in the monopoly activities that these government-run entities engage in. I realize this is a serious bone of contention between our two countries, particularly with respect to the Canadian Wheat Board. But it is my feeling that we need to look at all activities that WTO members feel distort markets or otherwise circumvent the fairness that the WTO process is trying to achieve. In an effort to achieve true balance, we are asking all countries, including our own, to look at the way they are doing business and to consider change. Change is hard. We know that. But it is essential. "Consider our own experience in the United States with the 1996 farm bill with respect to the row crops that had been subject to intense government regulations and control for 60 years. That law threw out 60 years of tradition and fundamentally changed the way U.S. farmers run their operations, doing away with government's day to day involvement in the management of agriculture production. During the current crisis in agriculture, many of our producers have been hit hard. And while we've stepped in with a relief package to help them, as you have done, we have resisted calls to turn back the clock, especially with measures to limit supply, because we know in the long run, market discipline will be good for agriculture. My point is the same with STE's. In the short run, change will be difficult, but for the long run it is the kind of concession and change that will contribute to true balance in the world trading system. "Another major goal is to enhance market openings through further reductions in tariffs. Agricultural tariffs worldwide still average over 50 percent. In the U.S., ag tariffs are around 5%. High tariffs encourage inefficient production and unfairly raise the price of U.S. and Canadian commodities and can shut us out of markets. "Another area where we can make further advances in increasing access to markets is in disciplining tariff-rate quotas. In the Uruguay Round TRQs were used to ease market restrictions for products not previously subject to tariffs. But TRQs can also have the effect of curtailing exports and impeding trade. Now we have the chance to explore opportunities to discipline TRQs so that they are not used as additional barriers to trade. "Also, it's time the WTO take further steps toward disciplining trade- distorting domestic subsidies that encourage farmers to overproduce without regard to efficiency or costs to the environment. "And I think we need to forcefully address the questions surrounding emerging issues such as biotechnology products. We want to ensure that the rules governing trade will maintain legitimate health protection but we must do so without unnecessarily and arbitrarily blocking free and fair trade. And we must guard against using science as a disguise for trade barriers. Particularly controversial issues such as proper use of biotechnology -- can help feed a hungry world in a reasonable fashion using less pesticides and less water; but we also have to measure the public trusts to ensure the independence of the process. "Finally, for the next round to be truly successful, full participation by developing countries is essential. We must ensure that the special circumstances of these countries are adequately addressed so that they are able to fully participate and benefit from the global trading system. Our experience tells us that countries -- whether developed or developing -- which are open to trade and investment with the world as a whole have generally been able to create growth, competition, and prosperity. Open trade in agriculture can relieve farmers in developing countries of the burdens imposed by protectionism and export subsidies while reducing the number of food insecure people by offering consumers reliable supplies of food at good prices. "Now is the time to redouble our efforts to construct a more integrated world trading system. To feed those who are hungry today and the many more people who will join us in the future requires a trading system that allows the smooth flow of goods from one country to another and encourages producers to work efficiently for world markets. "The United States recognizes that our ambitious objectives in the upcoming negotiations may not be achieved immediately, but they are necessary to encourage the level of investment, research, and infrastructure development required to meet the world's future food and fiber needs. While other countries express trepidation over the consequences of further action on trade reform, the United States is far more concerned with the consequences of inaction -- rising world hunger, economic stagnation and global instability. "A far more positive outlook for our future is well within our grasp, but it will require far-reaching reforms in agricultural trade. The United States looks forward to an intensive preparatory process to set the table for the next round. We look forward to having all countries at the table, ready to discuss serious negotiating proposals that enable us to build together a more stable, prosperous and food secure world in the 21st century. Thank you." ###