[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
ADVANCING THE U.S. TRADE AGENDA:
BENEFITS OF EXPANDING U.S.
AGRICULTURE TRADE AND ELIMINATING
BARRIERS TO U.S. EXPORTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON TRADE
OF THE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
JUNE 11, 2014
__________
Serial 113-TR05
__________
Printed for the use of the Committee on Ways and Means
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COMMITTEE ON WAYS AND MEANS
DAVE CAMP, Michigan, Chairman
SAM JOHNSON, Texas SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin JIM MCDERMOTT, Washington
DEVIN NUNES, California JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois MIKE THOMPSON, California
JIM GERLACH, Pennsylvania JOHN B. LARSON, Connecticut
TOM PRICE, Georgia EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida RON KIND, Wisconsin
ADRIAN SMITH, Nebraska BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota DANNY DAVIS, Illinois
KENNY MARCHANT, Texas LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio
Jennifer M. Safavian, Staff Director and General Counsel
Janice Mays, Minority Chief Counsel
______
SUBCOMMITTEE ON TRADE
DEVIN NUNES, California, Chairman
KEVIN BRADY, Texas CHARLES B. RANGEL, New York
DAVID G. REICHERT, Washington RICHARD E. NEAL, Massachusetts
VERN BUCHANAN, Florida JOHN B. LARSON, Connecticut
ADRIAN SMITH, Nebraska EARL BLUMENAUER, Oregon
AARON SCHOCK, Illinois RON KIND, Wisconsin
LYNN JENKINS, Kansas
CHARLES W. BOUSTANY, JR., Louisiana
PETER J. ROSKAM, Illinois
C O N T E N T S
__________
Page
Advisory of June 11, 2014 announcing the hearing................. 2
WITNESSES
Dermot Hayes, Professor, Pioneer Chair in Agribusiness, Iowa
State University............................................... 7
Bob McCan, President, National Cattlemen's Beef Association...... 22
Andrei Mikhalevsky, President and CEO, California Dairies Inc.... 32
Terence Stewart, Managing Partner, Stewart and Stewart........... 49
Ryan Turner, President, Westside Trading Company................. 41
SUBMISSIONS FOR THE RECORD
American Farm Bureau Federation, statement....................... 80
Corn Refiners Association, letter................................ 83
European Union, letter........................................... 85
Express Association of America, statement........................ 86
Humane Society International and World Animal Protection,
statement...................................................... 88
National Farmers Union, statement................................ 92
National Milk Producers Federation, statement.................... 95
National Oilseed Processors Association, statement............... 102
National Pork Producers Council, statement....................... 111
QUESTIONS FOR THE RECORD
The Honorable Charles Rangel..................................... 77
ADVANCING THE U.S. TRADE AGENDA: BENEFITS OF EXPANDING U.S. AGRICULTURE
TRADE AND ELIMINATING BARRIERS TO U.S. EXPORTS
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WEDNESDAY, JUNE 11, 2014
U.S. House of Representatives,
Committee on Ways and Means,
Subcommittee on Trade,
Washington, DC.
The subcommittee met, pursuant to notice, at 10:05 a.m., in
Room 1100, Longworth House Office Building, the Honorable Devin
Nunes [chairman of the subcommittee] presiding.
[The advisory announcing the hearing follows:]
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Chairman NUNES. The hearing will come to order. But before
we start, today is a very special day for us, especially for
Mr. Rangel. It is his birthday today. So, Charlie, we brought
you a little--do you want to light the candle and blow it out?
Mr. RANGEL. Thank you, thank you, thank you.
Chairman NUNES. Should we do the--anybody know the Boehner
birthday song? I know you guys know it.
[Laughter.]
Chairman NUNES. Okay, ready? Kelly, ready?
This is your birthday song, it doesn't last too long. Hey.
[Applause.]
Mr. RANGEL. Thank you. Thank you.
Chairman NUNES. And Charlie is 62 today.
Mr. RANGEL. This is the 22nd anniversary of my 62 years
old.
[Laughter.]
Chairman NUNES. Well, congratulations, Charlie.
Mr. RANGEL. Thanks a million, Chairman.
Chairman NUNES. Absolutely. Good morning. Welcome to
today's hearing on the benefits of expanding U.S. agricultural
trade and eliminating barriers to agriculture exports--key
factors in advancing our trade agenda and creating U.S. jobs
and economic opportunity.
I would like to make four points. First, the United States
must remain the world's leading agriculture exporter. We excel
at producing and exporting a wide variety of agricultural
products. For example, my home state of California is a leading
export of dairy, beef, fruits, vegetables, and nuts. Global
demand for agriculture products is increasing rapidly, creating
opportunities to boost U.S. economic growth and create U.S.
jobs by selling to these expanding markets.
The second point, agriculture exports benefit both rural
and urban America. America's farmers and ranchers increasingly
depend, for their livelihood, on exports. In addition, two-
thirds of the jobs supported by agriculture exports are in the
non-farm sector in diverse areas such as transportation,
financial services, and biotechnology research.
Third, we must tear down tariff and non-tariff barriers to
U.S. agriculture. Tariffs must be eliminated without exclusion.
In negotiations for the Trans-Pacific partnership, or TPP, I am
concerned that the Administration is not holding Japan and
Canada to the level of ambition that Congress has demanded. In
some cases, a long timeframe may be warranted. But there has to
be a path to zero. If any countries insist on retaining
tariffs, then we must complete the negotiations without them,
and allow them to rejoin when they can commit to full tariff
elimination.
A growing concern is non-tariff barriers, particularly
unwarranted sanitary and phytosanitary or SPS measures. While
countries can implement measures to protect human, animal, and
plant health, many measures are actually thinly veiled
protectionist barriers that ignore science and international
standards, and do not enhance food safety in any way. I am
pleased the Administration has heard Congress's message that
only strong, enforceable rules will ensure that SPS measures
are transparent, science-based, and are not unduly restrictive.
I am particularly concerned by European restrictions on the
use of generic food names, which the EU improperly designates
as geographical indications. The TPP and the U.S.-EU trade
negotiations are good opportunities to reduce both tariff and
non-tariff barriers. To gain support in Congress, these
agreements must result in complete market access.
Fourth, to strengthen USTR's position in trade
negotiations, we must pass Trade Promotion Authority without
delay. The bipartisan Congressional Trade Priorities Act
introduced earlier this year would establish clear direction to
open agricultural markets and address unwarranted SPS measures
and other trade barriers. If the Administration finishes these
negotiations before TPA is granted, it will not get the best
deal for our farmers or other exporters. Therefore, I call on
the Administration to focus on passing TPA this Congress before
completing TPP.
Chairman NUNES. I will now yield to Ranking Member Rangel
for the purpose of an opening statement.
Mr. RANGEL. Thank you, Mr. Chairman. This is an important
and timely hearing. Agriculture imports are important in my
home state of New York, and to our country as a whole. Many
markets are still protected, or even closed to our farm, ranch,
and dairy products. We need to open those markets, and new
trade agreements are one way to do it.
But it isn't just foreign governments that deny our farmers
and ranchers access to the markets. In the case of Cuba, our
very own government stands in the way. And I know the chairman
does not agree with me on this issue, and I respect his views,
but, in my view, the embargo is not working, not for the Cuban
people, and certainly not for Americans. So, I hope we can work
together to find a path for the solution of this important
agricultural issue.
Another issue we want to discuss today is food safety.
Without a doubt, some of our trading partners put into place
laws that they say is about food safety, but they really are
keeping U.S. products out of their markets. We do need strong
rules in our trade agreement to prevent this from happening.
And I want to make certain that we don't agree to a set of
rules that ends up tying the hands of our own regulators, who
is trying to keep our people safe, and trying to protect our
crops from invasive pests. We need to eliminate bogus food
safety laws, but we also need to preserve the legitimate ones.
Our regulators are increasingly having to defend these
rules at the World Trade Organization. In the first years of
the WTO, U.S. sanitary measures was challenged just twice. But
in the last five years U.S. measures had been challenged five
times. It is important to remember that what makes U.S.
products so attractive to other markets is their quality. And
our regulatory regime supports that quality. Our regulators do
their best to make certain that we don't produce tainted food.
They protect our growers by doing their best to keep away
invasive pests. We need to make certain that any rules that we
sign into free trade agreements allow them to continue to
follow these high standards.
Finally, let me say a word about the Trans-Pacific
Partnership negotiations. They're at a critical stage, and our
attentions need to be focused on ensuring an outcome that this
Congress can support. We need to work with our colleagues, with
our stakeholders, and the Administration, on major outstanding
issues, as you pointed out, including tariff, as well as non-
tariff barriers on the agricultural products.
In Japan, in particular, have not--they have not
demonstrated an interest in opening up their agricultural
market, nor has Japan shown an interest in opening up its
automobile market, for that matter. Unfortunately, Japan's
position in these negotiations looks like a real problem that
still yet has to be resolved.
Some say the problem is that we haven't passed trade
promotion authority legislation, that Japan won't get serious
until TPA is in place. I don't believe that argument fits with
the facts. To the contrary, I think a lot of Members want to
make certain what the TPP negotiations are moving in the right
directions right now. I don't believe it is helpful to blame
ourselves for the position that has been taken consistently by
the Japanese Government.
So, I think these hearings are timely. I thank the chairman
for holding them. And I thank the witnesses for taking the time
to share their views with us this morning.
Chairman NUNES. Thank you, Mr. Rangel. Today we are joined
by five witnesses.
First we will hear from Professor Dermot Hayes, the Pioneer
Hybrid International Chair in Agribusiness, professor for
economics, and professor of finance at Iowa State University.
Professor Hayes is a highly regarded agriculture economic
expert, particularly regarding trade.
Second we will hear from Bob McCan, who is President of the
National Cattlemen's Beef Association and oversees the cattle
and other operations of his family's company, McFaddin
Enterprises, in Texas. Mr. McCan has a distinguished record as
a leader in the cattle industry.
Third we will hear from Andrei Mikhalevsky, President and
CEO of California Dairies. California Dairies is a top dairy-
processing cooperative in the leading dairy-producing state in
the country.
Fourth we will hear from Ryan Turner, President of West
Side Trading, a leading almond, pistachio, and walnut trading
company.
Finally, we will hear from Terence Stewart, managing
partner of the Law Offices of Stewart and Stewart.
We welcome all of you, and we look forward to your
testimony.
Before recognizing our first witness let me note that our
time this morning is limited so witnesses should limit their
testimony to five minutes, and Members should keep their
questioning to five minutes.
Professor Hayes, your written statement, like those of all
the other witnesses, will be made part of the record. You are
now recognized for five minutes.
STATEMENT OF DERMOT HAYES, PROFESSOR, PIONEER CHAIR IN
AGRIBUSINESS, IOWA STATE UNIVERSITY
Mr. HAYES. Chairman Nunes, Ranking Member Rangel, thank you
for focusing on this issue at this time. The trade negotiations
that are underway with the Pacific Rim and with Europe have the
potential to fundamentally transform U.S. agriculture.
In the first class, when I teach Economics 101, I contrive
to get two copies of a textbook into the hands of one student.
I recognize that student, and then find a student who has yet
to purchase the textbook. The second copy is worth almost
nothing to the first student, but it is worth about $100 to the
second student. When they trade, each student comes out--they
typically trade at about $50, and each student comes out $50
ahead. In that sense, wealth is created with free trade. And
the theory that underlies the economic arguments in favor of
free trade are based on that simple principle: you take
resources from a place where they are in plenty supply, and you
move them to a place where it is scarce.
Now, as it happens, the U.S. has an abundance of
agricultural resources. So we are a natural exporter of
agricultural products. The problem is that the countries that
have imposed trade barriers on value-added agricultural
products, whereas they allow their raw materials to enter free.
So if these negotiations are successful, we will end up adding
much more value-added agriculture products to--and those
industries will effectively move from places like Asia back
into the U.S.
As crop production technology has improved in the U.S.,
rural areas have become depopulated. And this is a real
opportunity to repopulate those areas with people working in
livestock and dairy sectors, and with industries that use
livestock and dairy products such as ice cream or manufacturing
eggs. So that is the punch line.
So I see enormous opportunity here for my part of the world
in Iowa, and for all of rural America. And I really appreciate
your focusing at this time on this issue.
I want to make two points specifically to the ongoing
agreements. The first is about Japan and the TPP, and the
second is about Europe and the regulatory equivalence that we
should ask for.
Prior to the entrance of Japan, the focus of the
negotiations was to eliminate all duties and non-tariff
barriers, and progress was very, very successful.
Unfortunately, Japan has recently hijacked the negotiations by
insisting on permanent protection for its beef, pork, dairy,
wheat, rice, and sugar sectors. As announced, the intention of
using the money generated by these duties to subsidize the
relevant sectors--so, for example, duties collected on imported
pork would be used to subsidize the Japanese pork sector. And,
in that sense, the U.S. pork producer is paying a tax to
subsidize their competitor.
I sincerely hope that our negotiators will hold out for an
agreement that results in eventual free trade, and I do so for
the following reasons.
The benefits of trade I described earlier come from the
reallocation of resources, putting the resources in the right
place at the right time. What Japan is asking for is,
essentially, allowing free trade, but one student has to end up
with two textbooks. And that doesn't make sense. You can't
protect a sector under free trade.
The second, Japan has insisted on this outcome because of
food security. But Japan imports all of its feed grains. And
so, you don't get much food security from animals that are
located in Japan, but which are--rely exclusively on imported
feed.
And, third, if Japan gets away with this distortion, then
other countries that join the TPP, such as China, will ask for
a similar rule. And, in that sense, we could lose billions of
dollars in trade because of a giveaway right now.
Next I want to talk about equivalence and Europe. Right
now, in the U.S. corn market, we have a serious disruption
because China did not recognize one of our scientific
technologies, one of the varieties we grew last year, and it is
causing enormous disruption in that market. Now, the solution
to that would be for China and the U.S. to agree on similar
science. And, in so doing, when U.S. scientists approve of a
technology then it would be automatically approved in China.
That is called equivalence, and the U.S. has asked for that
equivalence in all of its--in most of its free trade
agreements.
And equivalence works because the scientists can eventually
form a consensus on what is safe. The process breaks down if
non-scientific arguments are introduced. The European Union has
allowed this to happen, and has imposed bans on genetically
modified crops and growth enhancers in livestock that
scientists all over the world view as being perfectly safe.
Now, I realize that some consumers in the U.S. oppose these
technologies. But under the U.S. system, these consumers have a
choice. The European system eliminates this choice, and it is
as if the people who shop in Whole Foods in the U.S. had a veto
power over the rest of us.
And in a well-structured TTIP agreement, the U.S. and EU
systems will be viewed as equivalent, and European consumers
will have a choice amongst the alternatives. Unless the deal
results in regulatory equivalence, countries will be able to
impose new subjective barriers to replace those that have been
eliminated. With equivalence, the U.S. will be able to avoid
the type of trade distortion currently roiling the U.S. corn
market. Thank you.
[The prepared statement of Mr. Hayes follows:]
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Chairman NUNES. Mr. McCan, you are now recognized for five
minutes.
STATEMENT OF BOB MCCAN, PRESIDENT, NATIONAL CATTLEMEN'S BEEF
ASSOCIATION
Mr. MCCAN. Chairman Nunes, Ranking Member Rangel, and
Members of the Committee, on behalf of the U.S. beef industry I
thank you for holding this hearing on the benefits of expanding
U.S. agricultural trade, and eliminating barriers to U.S.
exports. I am a rancher from Victoria, Texas, located in
southern Texas, near the Gulf of Mexico, not far from the
Mexican border. I am also the current president of the National
Cattlemen's Beef Association.
For NCBA, the elimination of tariff and non-tariff trade
barriers is a top priority for the U.S. beef industry. We view
potential trade agreements like the Trans-Pacific Partnership
as a great opportunity to eliminate tariffs, quotas, and non-
tariff trade barriers to all TPP countries. Terms that all
countries, including Japan, should agree to.
NCBA is also a strong supporter of trade promotion
authority because, without it, our negotiators will have a
difficult time finalizing terms of TPP. Unlike other parts of
our culture, the U.S. beef industry is not subsidized, nor do
we wish to be. To put it plainly, we thrive on competition, and
we live and die by the marketplace. The only guarantee we have
is that if we do not deliver a high-quality product to our
growing consumer base, then we will lose market share to
another country. At the same time, we are successful because we
do everything we can to give our consumers what they want: a
safe, tender, delicious product.
Many times, U.S. beef has been the victim of trade terms
that have been driven by politics and not science. For
instance, the United States has one of the safest risk
designations from the World Organization for Animal Health, yet
we continue to have age-based restrictions on our product that
are not supported by science. It is estimated that U.S. beef
has lost over $20 billion in export opportunities due to BSE
restrictions alone.
The removal of tariffs and quota restrictions are important
to our future success. But just as important is the
establishment of trade terms based on sound science.
Unfortunately, U.S. beef has also been victim to U.S. trade
policies that are also based on politics instead of science. As
you may know, we are facing an intense drought throughout
California and the southwestern part of the Unites States. Our
herd size in the United States is the smallest it has been
since the 1950s.
At the same time, international demand for U.S. beef is at
an all-time high. In order to continue meeting demand, we rely
on the importation of Mexican-born and Canadian-born cattle to
supplement our herd loss. My family has been importing Mexican-
born calves for many years, and we have enjoyed the benefits of
international trade. Unfortunately, the cost of compliance of
mandatory country-of-origin labeling has driven some feed yards
and processors out of the business, creating less competition
for my cattle. And that places me, and cattlemen like me, at a
disadvantage.
And if the World Trade Organization rules against the
United States on the pending appeal, you can rest assured that
beef will be at the top of the list of retaliatory tariffs.
Mexico and Canada are two of our largest export markets for
beef. But they won't be for very long if we face retaliation.
So, it is my hope that my testimony will highlight expanded
trade opportunities, as well as the barricades to trade that we
continue to face in the U.S. beef industry. I appreciate this
opportunity to appear before you today, and I look forward to
answering any of your questions. Thank you very much.
[The prepared statement of Mr. McCan follows:]
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Chairman NUNES. Thank you, Mr. McCan. Mr.--I should know
how to pronounce your name, but it is--you are my constituent,
so I should know.
Mr. MIKHALEVSKY. Andrei is fine.
Chairman NUNES. Andrei.
Mr. MIKHALEVSKY. Andrei is perfect.
Chairman NUNES. You are now recognized for five minutes.
STATEMENT OF ANDREI MIKHALEVSKY, PRESIDENT AND CEO, CALIFORNIA
DAIRIES INC.
Mr. MIKHALEVSKY. Thank you very much. Thank you, Mr.
Chairman and committee, for allowing California Dairies to come
speak with you today regarding a subject that it very important
to us, and it is a big part of our business every day.
My name is difficult, but I am Andrei Mikhalevsky, and I am
president and CEO of California Dairies. And I have been
fortunate in my career to be able to manage dairy businesses on
six continents, and the seventh continent doesn't have many
dairy cows right now.
My comments today will focus, really, in three areas. The
first is the opportunity for U.S. dairy exports; the second the
key barriers that we face in exporting product; and third, the
upcoming free trade agreements.
California Dairies may not be familiar to everyone, but we
are a member-owned cooperative based in California, and a major
dairy exporter today. You can find our products on your local
grocery store shelves in all 50 states, and you can find it in
50 foreign countries, also. We are responsible for 12 percent
of U.S. dairy exports. We export already today over 425 million
pounds of milk products every single year. And increasing these
dairy exports is very important to our industry, beneficial to
the United States, and also good for California Dairies.
And I will give you three areas that we believe these
benefits are centered: first it is around economic and
financial benefits; second, it creates jobs domestically and
creates jobs internationally; and, third, we believe there is
implications for national security of having a good dairy
export business.
In 2013, just last year, the industry reported a record 15
percent of all milk in the United States was exported valued at
about $6.7 billion. One day of every week's production of
milk--so one day of milking cows--now goes into export in the
United States. And in 2014, this year, California Dairies will
export more milk powder than we will sell domestically in the
United States. So we have become a larger exporter than we are
domestic seller in milk powder.
And the U.S. dairy industry is currently in a state of
transition from an inward-facing industry to a dominant world
exporter. And the question might be asked, ``Why is there a
change in the U.S. dairy industry?'' And the answer is, really,
opportunity. We all know the worldwide demand for dairy
continues to grow, driven by population growth and disposable
income growth. And this is creating a large demand gap in the
world market for dairy products. And dairy is very important.
Remember, people start from infants using dairy, all the way
through old age.
But there is barriers to us taking advantage of that export
growth, and they fall in the areas that were earlier mentioned:
tariff barriers; non-tariff barriers; and internal domestic
barriers, which we haven't mentioned.
Let me first give an example of tariff barriers. Canada and
Japan, today who are in the news, both imposed astronomically
high tariffs on imported dairy products. The tariffs we face
every day are between 250 and 300 percent of the value of the
product that we ship into those countries. So, basically,
impossible to meet.
There is also non-tariff barriers, which are commonly known
as SPS measures, sanitary and phytosanitary measures. Those are
being abused in markets around the world.
And third, geographical indications. And the EU, as we all
know, is probably the most aggressive and abusive in its
interpretation of these GIs.
I would also just note that there are internal barriers
that we face also, but that is a conversation for another day.
I would like to shift now to free trade agreements. We have
talked about the TPP and the TTIP, TTIP. And both of these are
wonderful opportunities for us to break down these barriers and
expand our area of exports. And so I would like to just share
our viewpoint in a few sentences.
First, we actively support the inclusion of dairy in all
FTAs. We would like dairy in.
The second thing we would like to see is the inclusion of
all dairy products. For example, the South Korean FTA excludes
things like butter. It is a fundamental product, and we would
like to have all products in the FTAs.
We support the complete elimination of all tariffs. We need
a level playing field with our competitors. China, for example,
we don't have a level playing field with New Zealand. They get
the first 300,000 tons in there at a reduced tariff. We need a
level playing field.
Market access must be real, measurable, and equitable. And
we believe that TPP and TTIP are really the most likely--the
most important trade agreements that we have seen in a
generation. California Dairies also highly supports trade
promotion authority. We think it is essential.
So, in summary, there is a great opportunity here. But to
achieve the success, we must have FTAs that are comprehensive
and inclusive of all dairy, including zero tariff access, and
ensure that unjustified non-tariff barriers and regulatory
requirements do not block us, moving forward. Thank you very
much for your time today.
[The prepared statement of Mr. Mikhalevsky follows:]
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Chairman NUNES. Thank you, Mr. Mikhalevsky. Mr. Turner, you
are now recognized for five minutes.
STATEMENT OF RYAN TURNER, PRESIDENT, WESTSIDE TRADING COMPANY
Mr. TURNER. Good morning, Chairman Nunes, Ranking Member
Rangel, and the Members of the Subcommittee on Trade. Thank you
for inviting me to be here with you today. My name is Ryan
Turner, and I am here to testify today as a farmer and as the
president of Westside Trading Company, WTC. I founded WTC
three-and-a-half years ago to export California almonds,
walnuts, and pistachios.
WTC is a trading company that buys product from farmers and
packers and resells the product exclusively into export
markets. WTC specifically finds its niche in taking the export
risk for our suppliers. After purchasing the product from
California growers and processors, we are responsible for
payment to supplier, marketing, logistics, documentation, and
collection of the export sale. Any export-import problems,
failure to collect funds, false quality claim from the end
customer, it all falls on WTC. And we make our name by
insulating the suppliers from these risks. So we truly are on
the front lines of the trade discussion.
Since the inception of the company, we have exported to
more than 40 countries around the world. We have exported to
Canada and Mexico, South America, all over Europe and Eastern
Europe, Russia, Middle East, North Africa, as well as China,
India, Singapore, and Bangladesh. About 85 percent of the
products we have shipped to date are almonds, and so I will
focus, in the interest of time, on almonds for the rest of the
testimony.
The California almond industry is a great example of the
strong U.S. industry that dominates the world market because of
our significant long-term investment, innovation, high food
safety standards, and strong global marketing. California
almonds add $2.82 billion in export value in the 2012-2013
season, ranks as California's largest agricultural export, and
the U.S.'s largest specialty crop export. Currently, more than
80 percent of the world's supply of almonds are grown and
produced in California.
The U.S. is the largest buyer of California almonds,
consuming, on average, about a third of our supply. However,
that means that, on average, two-thirds of California almonds
are exported. The top 5 export countries are China, at
approximately 10 percent of the U.S. crop, followed by Spain,
India, Germany, and UAE. In total, California exported directly
to 57 countries last season.
The California almond industry is dependent on export for
the long-term sustainability of the industry, but it is also a
huge success story. Over the past decade, export growth has
averaged nearly 10 percent, year after year. The industry has
not been able to wait for trade agreements in many countries,
but has forged ahead in tackling major issues, opening new
markets around the globe. These challenges, though, however,
come at a high risk to farmers, processors, and exporters, as
well as our overseas processors and the end user, ultimately
increasing the cost of our products to consumers, worldwide.
WTC faces export challenges head-on every day, due to trade
barriers that exist in markets around the globe. From tariffs
and SPS differences to banking and finance rules, as well as
labeling requirements, port protocols, documentation
requirements, as well as dispute resolution issues. The almond
industry faces tariffs, specifically, in dozens of its markets.
However, like in other industries where the product is in
strong demand, gray market activities are developed to avoid
such tariffs. The biggest examples exist in two of our largest
export markets, China and India.
The vast majority of almonds are exported to China, are
shipped from California to Hong Kong, then redirected through
Vietnam and trucked north to various points for delivery to
processing plants mainly in China. Most U.S. exporters ship to
Hong Kong and are paid for the product at that point. While it
customarily only takes two weeks or so to ship a container from
California to Hong Kong, it could take an additional three to
four to move that product through the gray channels to the end
user.
While a larger percentage of customers actually pay the
tariff in India and take delivery in major ports, more and more
importers have begun to smuggle the product from Kashmir. This
product is mostly shipped from U.S. to Dubai and then shipped
in trucks, via trucks, saving the importer the tariff. While
lower trade barriers and relatively strong business protections
in Dubai and Hong Kong keep risks lower for us exporters, the
risks borne by our end customers through the gray channels
increases their risk and delays shipment of product.
In addition to the gray markets, where product is
physically moved to avoid tariffs, many markets in the Middle
East rely on falsification of documents to reduce tariff
exposure. These practices create challenges that differ in each
market which require exporters to constantly stay on defense,
to ensure that gray market behaviors do not put our companies
and our products at risk.
The U.S. produces the safest food and food products in the
world. Agricultural and food safety regulations, coupled with
innovation of farmers and processors themselves, have given our
products the strongest reputation for quality. However,
differing SPS standards in some of our export markets create
major problems, add costs, and, at times, significantly put our
products at risk. Whether it is lower allowable levels of
aflatoxin in the EU, or the ever-increasing changing and
somewhat arbitrary standards in other parts of the world, it is
extremely important that SPS standards must be, at a minimum,
based on science.
We have had many loads returned to the U.S., and many more
held at ports for long periods of time, subjecting our products
to additional testing and fees for results that we never see.
It is very important that any new trade agreement address
banking finance and dispute resolution protocols, as well, so
that exporters such as ourself can have more confidence in
international collection and contract enforcement. We have had
minor typographical errors lead to major searches of funds, we
have had several international banks release documents prior to
payment, we have had ports release containers without proper
documentation, we have had money rerouted and lost through
illegal foreign currency traders. These are just a few of our
examples caused by lack of uniform standards.
In conclusion, multi-faceted, comprehensive, regional trade
agreements that not only level the playing field, but normalize
business practices between the U.S. and its trading partners,
will allow us to grow export markets faster and more reliably.
Thank you for your time.
[The prepared statement of Mr. Turner follows:]
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Chairman NUNES. Thank you, Mr. Turner. Mr. Stewart, you are
recognized for five minutes.
STATEMENT OF TERENCE STEWART, MANAGING PARTNER, STEWART AND
STEWART
Mr. STEWART. Thank you, Mr. Chairman, Ranking Member
Rangel, Members of the Subcommittee. I am here in my personal
capacity, not representing any particular clients. We have had
the opportunity to work with agricultural fishery groups over
the years.
There is little doubt that the United States, as the
world's largest agricultural exporter, faces many unwarranted
barriers abroad, and that a key priority in any trade
negotiation should be the liberalization of tariffs, quotas,
and non-tariff barriers, such as SPS measures, and an effort to
restrict our friends in Europe in their effort to claim that
nothing can be shipped that doesn't come from Europe because of
geographical indications. Those are givens.
Global trade in agriculture in 2012 was $1.6 trillion. The
United States occupied about 8 to 9 percent of that, at 148
billion. And what our true exports could have been, if we had
had much more open markets, is anybody's guess. But it
certainly would be a far larger percentage and a far larger
dollar amount. So there are, obviously, enormous opportunities
for American business, American workers, and rural America, in
terms of liberalization of agriculture.
At the same time, when one looks at SPS measures, there is
a tension between food safety, on the one hand, and control of
the SPS measures on the other. The World Trade Agreement's
sanitary/phytosanitary agreement is the first global effort to
try to put some discipline into SPS measures. The United States
has tried to use that agreement to upgrade or harmonize, in an
upward direction, international standards. That is a desirable
objective. At the same time, we run into serious cultural and
political problems in other major trading partners. Europe has
been identified as one, and certainly the problems our beef
industry has faced from the BSE and that our grains exporters
have faced from genetically modified challenges around the
world are significant challenges.
When you look at it from the import side, which, from a
U.S. perspective, is relevant, as well, to consumers, the issue
is not whether there should be liberalization, the issue is
whether or not the liberalization is coupled with the ability
to ensure that products that enter the United States maintain
the food quality that the United States has been famous for,
and that U.S. consumers expect. That is an issue which, as
trade has developed with a lot of developing countries, is a
much more complicated matter. The United States engages in a
lot of technical assistance to try to help other countries
raise their standards, and that is important to do. But there
are many stories, including in seafood, but certainly also in
other agricultural products, where imported products contain
elements which are banned in the United States and yet have
made it into our food supply.
So, there are legitimate concerns from consumers about the
safety of their food supply. And, as you look at trade
negotiations, it is important that that aspect be dealt with.
At the same time, the merits of an SPS measure are often in the
eyes of the beholder. We--USTR puts out an annual report. There
is more than 100 measures that we identify abroad that are
problematic to U.S. exporters. Europe puts out its own report,
and there is a large list of things that they complain about in
terms of the United States. Dialogue is a critical element if
you are, in fact, going to get past disputes, and if you are,
in fact, going to facilitate the liberalization in agriculture,
particularly an SPS measure.
Technical assistance is important. With that I think that
you have a big challenge ahead of you, in terms of getting our
trading partners to comply. Japan is a classic example, and I
wish you great success, and the Administration great success in
that effort. Thank you.
[The prepared statement of Mr. Stewart follows:]
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Chairman NUNES. Thank you, Mr. Stewart. Since you discussed
SPS measures, we will start on SPS. The real issue is whether
or not we are going to have dispute resolution. Because, as all
of you are well aware, all of the other areas of the economy
and all the previous trade agreements are subject to dispute
resolution. Agriculture, however, has always been left at the
table without dispute resolution, and so they are forced to go
to the WTO, which can take years and years to come to
resolution.
So, do you see any problem with having--and I will just
start with Mr. Stewart and I will ask the same question--a
dispute resolution mechanism in TPP?
Mr. STEWART. The answer is I don't see a problem with
having dispute resolution in any free trade agreement. The real
issue is how it will be administered, and whether there is
agreement, in terms of the basic terms and conditions. The
challenge that we face in the WTO, as an example, where there
is dispute settlement, is that we are the subject of 8 of 41
challenges that have been made. If you were to step back and
ask yourself would you expect the United States to be one of
the worst offenders in terms of SPS measures, I think your
answer would be the same as mine: obviously not.
So, part of the challenge is whether the rules actually
work to conform practice to what you have agreed to, or whether
it becomes a forum for people to achieve that which they
haven't achieved through the negotiations themselves. But I
don't have a philosophical issue with having dispute settlement
in TPP or any other agreement.
Chairman NUNES. Thank you, Mr. Stewart. One of the reasons
I wanted to have Mr. Turner here is because he is an exporter.
Mr. Turner, I don't know if you could walk the committee
through a real-life example of the problems that you face. If
you could pick one example and just kind of walk the committee
through where you faced an SPS measure that has blocked the
entry of your product.
Mr. TURNER. The most consistent SPS issue that we deal with
is in Europe. And Europe has, as I mentioned, lower allowable
levels for aflatoxin. And so, there is now an entirely
different process to deal with and work with the EU in getting
product in.
But basically, because they require a lower allowable
level, the almond board has worked with the industry to create
what we call a--or what is called a VASP. So it is a voluntary
aflatoxin sampling program--I believe it is program. And so,
every single load that is going to go to Europe has to
basically have this additional test. Right? And it is a--
sampling procedures that are required by Europe. Then we go
through the entire process, and then it has got to have this
VASP report.
We have probably had a--I would say maybe about 10 loads
that we have had stuck for any sort of reason, but just related
to not having the proper VASP. So when we ship product, all of
it has been certified, inspected by USDA, internal, as well--
internals, as well. And we shop that product. Europe requires
the VASP, though. So if you--we have had product that we have
shipped to the Middle East. We need to redirect it, it can't go
to Europe. So that is it.
Chairman NUNES. Thank you, Mr. Turner. I am going to shift
gears, Mr. Mikhalevsky, to talk about TPP. Specifically, you
are probably well aware, but there has been rumors floating
around that Japan has hundreds of items that they want to take
off the table. And in your testimony you mentioned how butter
was left out of the South Korean agreement. What do you think
the solution is?
For example, if Japan does not want to reduce these tariffs
and take them to zero, should we wait and have Japan come in
later? Or do you have any other options of how we could move
forward?
Mr. MIKHALEVSKY. Well, I truly believe, optimistically,
that with proper negotiation we can get Japan in. And it is
very important. Japan is a highly developed market in dairy. It
is very important to us. There is a lot of things in TPP and
TTIP. Ultimately, they will probably be the blueprint for maybe
70 percent of the traded dairy around the world. So it is
important we get these first ones right. And I would be
optimistic about getting Japan in. And, from our perspective,
dairy has to be one of those items in, not just because we are
in the industry. We think it is because it is also very
important, as you look at the other countries that are
involved, and how important dairy is to them. So that would be
kind of my response.
Chairman NUNES. Mr. McCan, can you answer the same
question?
Mr. MCCAN. Yes. I think that it is--you know, Japan needs
to comply by the same rules that all the other TPP countries
have to comply with. And, you know, we don't--I don't think we
are at that point yet to where--in our negotiations where we--
they really tried to shift the weight towards us, which--I
think Japan really wants to be part of this trade pact more
than they are letting on. And so I think, you know, we just
need to work through it. It may take more time, but it is
important, as Andrei mentioned, that this is a 21st century
type modern trade pact. Because, as we look forward towards
TTIP and the European negotiations, we need to make sure that
it is that type of a trade pact with tariff elimination.
And the beef industry has certainly put pressure on Japan
for the tariff elimination, and that is what we would look
forward to.
Chairman NUNES. Thank you, Mr. McCan. In the interest of
time, I will go ahead and recognize the ranking member, Mr.
Rangel.
Mr. RANGEL. Thank you so much, Mr. Chairman. Do any of you,
as exporters, see any sound economic or political reasons why
we should continue the embargo against Cuba? Are there any
reasons that you could suggest to guide the Congress as to what
is in our best national security or economic interests?
[No response.]
Mr. RANGEL. Then I assume, by your silence, that all of you
think that it would be sound trade policy for us to resume
negotiation with Cuba, for the Cubans and for the United
States, and let competition be an element where we can gain, as
we would with any trade agreements.
I hope that you don't find yourself being placed in a
political position because of this, but we are talking about
exports, we are talking about jobs, we are talking about
improving our economy. And if there is no reason why we should
not expand these exports, I think that, under American system,
you have to be heard.
The second question is that all of you agree that we should
have--maintain a high quality of imports that come into the
United States because, while you cannot expect each and every
product, the reputation of our country in having high standards
is something that has to be maintained. Have any of you ever
thought about the issue as to whether or not the Congress
provides enough resources to make certain that we can do this?
Has that ever been an issue that you discuss? Anybody? Mr.
Stewart.
Mr. STEWART. Thank you, Congressman Rangel. The issue is
that, for many industries that confront imports, where there
are issues of quality there is a perception that the
Administration does not have the resources to be able to ensure
the safety of the product. Some of that flows from the change
in patterns of trade that have occurred over the last decade or
so, where we are dealing with a lot more developing countries,
and developing countries have greater challenges, in terms of
getting their standards up to what the U.S. requires. And some
of it has to do with practices in certain countries where,
whatever the agreement is as to the standard they should
export, individual producers choose to go around that and ship
product in that clearly is not suitable.
When you take a look at the small percent of products that
can be inspected at the border, the answer is that the security
of the food supply system in the United States can be at risk.
And so it is an important issue for Congress to consider, to be
sure that we don't let ourselves get into that situation.
Mr. RANGEL. Well, I am hoping that when you have your trade
associations meetings, and you have your priorities, which we,
as Americans, support because it is good for our great country,
that you also put in there what you expect the Congress to do
to maintain these standards, to help us to have less of a
political problem, and more that is related to the expertise
which you bring to the field, which--clearly, you have more
than any of us.
Lastly, you very strong about--say in Japan--that they
maintain their international standards, that they don't protect
just their products, in terms of our exports, and allow theirs
to come in. Now, how would you expect the Congress to support
the positions that we agree with? Most of you know that the
Constitution gives this authority to the Congress, and nobody
would want to have 535 negotiators with these countries. And
so, therefore, we agree to give the trade promotion authority
to the President.
Now, when the bill finally comes to the Congress, it is
just yes or no. In order to protect some of the things that you
advocate, and we support, wouldn't you believe that we have to
get that into the trade promotion authority, that what
authority we give the President has to include the things that
we are talking about in terms of fairness in trade?
There is another way to do it, and that is just to give
them authority to do whatever he wants to do. And after they
negotiate, then we have to say, well, it doesn't help our dairy
people, doesn't help our cattle people, and then we are left
either swallowing the whole trade package, or rejecting it
because of something that could be local. Have you discussed
the trade promotion authority? I know you should be advocating
that we give that authority to the President. Without doing it,
our trade ambassador cannot adequate negotiate. Isn't that
correct?
How could he negotiate--if he is negotiating with people
that have the authority to cut a deal, and we are sending an
ambassador that can't cut the deal unless he comes back to the
Congress, doesn't it make sense that he should have--the
President should have some authority to close the deal and
bring it back to us?
[No response.]
Mr. RANGEL. The answer is yes. Well, you better give some
thought to it, because I can see that you haven't. And it is
going to be a big political problem. We want to make certain
that the President is able to authorize the negotiations of
deals that are good for the American people in international
trade.
By the same token, it just doesn't make sense to have
included or excluded from agreements the things that may cause
us not to be able to support it. Some of them is labor
standards, some is environmental issues. Some of it is just the
quality of the products. But please help your congresspeople to
resolve these problems and not leave it to us to seek a
political solution to come and--problems that we have to
resolve.
Thank you, Mr. Chairman.
Chairman NUNES. Thank you, Mr. Rangel. Mr. Reichert is
recognized for five minutes.
Mr. REICHERT. Thank you, Mr. Chairman, and thank you all
for taking time to be here today. I am from Washington State,
so I visit with my farmers, apple growers, cherries, heading
into the wine--little bit of--I think we are second from
California now, with the amount of wine we produce out of
Washington State.
So, you know, when I talk to my Washington farmers, they
are pro-trade, obviously. Washington State is the most trade-
dependent state in the country. And they also recognize,
though, that the way to get there is--and I am going to jump on
Mr. Rangel's bandwagon and the chairman's bandwagon--and that
is TPA.
And I talked to some business folks yesterday, and
explained the need for TPA and how important it is for us to
proceed forward with TPP, and asked for their help. And I think
that is what Mr. Rangel is saying today, too, is we need your
help to convince others in Congress that TPA is a needed tool
here to move forward with this trade agreement.
And--but I am also interested in your testimony that you
shared today about the benefits incurred from previous trade
agreements, the benefits as it relates to jobs. And if we don't
work hard to continue to increase American ag exports, what
happens? What is the negative impact, Professor Hayes, if we
don't continue to increase our ag imports, United States?
Mr. HAYES. Our agricultural exports. If we----
Mr. REICHERT. I am sorry, exports, yes.
Mr. HAYES. Yes, yes. Argentina is a great example of how
you can go wrong. Fifty years ago, it was the seventh
wealthiest country in the world. Then it began to look for
import substitution. It began to fight trade. It taxed exports.
It tried to create domestic alternatives for imports. And it
fell from number 7 to number 75 in wealth tables. And so it
essentially created poverty.
Singapore is an example of the other side. Average person
in Singapore makes 20 percent more than the average American.
And it is a complete free trade country; they even import their
water. They have no resources, and they are a very wealthy
country, based on the principle of free trade. Wealth is
created when you move from surplus to deficit areas.
Mr. REICHERT. So if TPP doesn't move forward, what do you
see happening in the United States?
Mr. HAYES. A stagnation. But, more importantly, other
countries are concurrently negotiating free trade agreements.
Europe has a negotiation with Japan. Canada, outside of TPP,
has a negotiation with Japan. If we don't participate and keep
up with those countries, they will form free trade agreements,
and we will be left out.
Mr. REICHERT. It is already happening, isn't it?
Mr. HAYES. Yes, it is already happening.
Mr. REICHERT. Yes, sir. Anyone else wish to comment?
Mr. MCCAN. I would add that, in the free trade agreement
that was negotiated recently, that the United States gained a
pretty good advantage over our Australian friends because we
were able to negotiate a quicker phase-in of tariff
elimination. And so we are benefiting from a good advantage of
being able to export bigger volumes of beef to Korea because of
that. We got in there with a free trade agreement before the
Australians did. They have ultimately got one now, but they are
behind us because we have got a better tariff advantage to
them. So we are able to get more volume there. So----
Mr. REICHERT. That is a great point. And--yes, sir?
Mr. MIKHALEVSKY. I thought I would just add, too, we were--
two subjects to address your questions.
First, in terms of jobs, when a--there is $1 billion worth
of exports generated out of the manufacturing sector. It
generates about 5,500 jobs in the U.S. When you have $1 billion
worth of agriculture products go, you generate about 6,800
jobs. So, moving agriculture and moving more into agriculture
exports actually does more for job creation, we believe, in the
United States.
Secondly, the power of free trade agreements. While, from
my company's point of view, we are not satisfied with the South
Korean free trade agreement due to exclusion of products, dairy
actually gained nine share points just increasing exports of
cheese, whey, and lactose after that agreement was signed. And
that is share of imported products. So it actually has a real
benefit, once you get these free trade agreements. And
expanding exports and agriculture products also generates more
jobs.
Mr. REICHERT. Well, appreciate your testimony. And,
remember, we do need your help. I yield back.
Chairman NUNES. The gentleman from Massachusetts is
recognized for five minutes.
Mr. NEAL. Thank you, Mr. Chairman. Mr. McCan, you seem to
indicate during your testimony that you had some inside
knowledge as to the Japanese coming around on some of these
issues. Do you perhaps have some perspective that you want to
share with us on currency manipulation?
Mr. MCCAN. It is just my personal opinion that----
Chairman NUNES. Mr. McCan, your mike is not on.
Mr. MCCAN. I think it is just my personal observation. I
think they would like to try to shift the weight to us that we
really need them in here, whereas I really feel that Japan, you
know, wants to be part of this trade pact pretty badly. They
were a latecomer into the negotiations, and I think they are--
they really want it worse than what they are letting on to us.
But, you know, I think eventually we will get there with
them, but I don't have any particular intelligence that I could
base that on.
Mr. NEAL. Okay. And perhaps--Mr. Stewart, would you expound
on the whole notion of currency manipulation and remind us
again of why it is such a barrier?
Mr. STEWART. Thank you, Congressman. You know, if you--
well, it has primarily arisen from industrial users such as the
auto sector vis a vis Japan. We have had problems with
misaligned currencies that are driven by government policies
for several decades with countries in Asia, Japan being one of
the major ones, Korea being another. And, obviously, China is
the one that has received most of the attention.
And it is--if you think about liberalizing trade and
reducing tariffs, if you permit a false exchange rate, you
basically create a new tariff, which, in many ways, is often
higher than the average tariff that is being eliminated. So it
is a question of whether you are really liberalizing trade or
not. And currency manipulation, when it occurs, can drive a
dramatic false competitive advantage.
Mr. NEAL. As you know, the President has set out a pretty
assertive and a pretty aggressive trade agenda, and he has been
able to, I think, highlight some pretty encouraging statistical
data, as well. But there are, as it relates to Asia and the
Pacific, there are a number of very stubborn problems, as we go
forward. And we are going to have to wait and see how they are
best resolved. But I think it is fair to say that, whether it
is beef, or whether it is currency manipulation, there is a
ways to go on all of this. Thank you, Mr. Chairman.
Chairman NUNES. The gentleman yields back. Mr. Buchanan is
recognized for five minutes.
Mr. BUCHANAN. Thank you, Mr. Chairman. I want to thank all
our panelists. As one of my colleagues mentioned from a
different state, I am from Florida, and I can just tell you,
over the last four or five years, where it has been difficult
construction and tourism is up, but it was also impaired to
some extent. Agriculture kind of carried along the state. It is
a gigantic industry in our state. So I appreciate the
opportunity to visit with everybody here today.
Let me mention, Mr. Stewart--I want to start off with you--
I just got back about 30 days--or it seems like 30 days or
maybe 60 days ago--one of the largest delegations, Democrats
and Republicans, we went to Tokyo. We are talking about China
and the Japanese, but all of us--a lot of us were concerned. I
think we had 13 Democrats, 7 Republicans, so we had a large
delegation, I think the largest in 30 years.
But everybody--and some of my colleagues have brought up
about the whole thing of the--we spent a lot of time on TPP.
But the thought was--is that, you know, the idea is a lot of
them were for the free trade agreement, but they want to make
sure it is fair.
And one of the things they bring up as it relates to these
industries, even if you get an agreement--and I can tell you,
the prime minister, we had a chance to meet with him, he seems
like he would like to move, you know, clearly, in this
direction--but as we look to the ag industry and we talk about
Japan, the thought was, by some of the Members, is that when
you look to the auto industry, we have somewhat of a free trade
agreement, but they have 30 percent of the marketplace here in
the U.S., or whatever that number is--and I am in the car
business, so I will say that--but the other side is we had less
than one percent there.
So, even if you get the trade agreement, and you get a
point where it looks like it is fairly fair, the question is,
does it work both ways, and why hasn't it worked that way in
the auto industry. But that was one of the concerns they
brought forward, and it is a concern I have, as well. So I will
boot it to you.
Mr. STEWART. Well, I think that that is a very valid
concern with certain of our trading partners, where it is not--
for Japan it has not been an issue of what the tariff levels
are, although in agriculture they can be extraordinary. My
recollection is that the end of the Uruguay round they had a
deal on rice where they could charge 600 percent duties and
have a 400 percent minimum markup, and they still wouldn't let
any rice in the country, even it could come in and compete at
those prices.
But in industrial goods, and I think in agriculture, if a
country is not, in fact, committed to opening its market, there
are lots of ways to do that, and you will spend your time in
disputes, trying to go step by step. But we have had the same
problem with Europe on beef. I mean how long ago was the beef
case? It was back in the 1980s, as I recall. And we are 25
years later, and we have had a little bit of progress, but
hardly the kind of progress that the----
Mr. BUCHANAN. I think the mindset--let me just say this,
because we are limited time--is that a lot of us are free
trade. But at the end of the day, my idea of negotiation--I
have been in business 40 years--at the end of the day, in 6
months, a year, 5 years, it has got to be somewhat a win-win.
Mr. STEWART. That is right.
Mr. BUCHANAN. And that is the attitude I take to it,
because I want to fight for our industries. I want to--and I
think if we do, we got a good chance to win.
Dr. Hayes, let me just mention just quickly, you had
mentioned that these trade agreements would transform our
exports. Could you expand on that a little bit, what you mean
by that?
Mr. HAYES. Sure. As I indicated, most of what we export now
without duty are raw materials, such as corn and soybeans. The
duties that are in place against our products are typically
against value-added products like pork or milk or beef. And so
it is as if those countries are artificially located value-
added industries in their own countries. And, with free trade,
those industries would naturally migrate back to the U.S.
because it is far more efficient to move the final product than
it is to move the bulkier raw material.
But to put this in an example, free trade with China, we
could double or triple some of our livestock industries just to
access--just because of the potential demand out of that
market.
Mr. BUCHANAN. Thank you. And I am going to go with Andrei.
The--you had mentioned about tariffs being 250, 300 percent.
That is unbelievable to me. I mean maybe it is something I
should know about, but why is it so high?
Mr. MIKHALEVSKY. I think generally, for Canada and for
Japan, they are protecting their internal dairy industry. But
it also has the added detriment to the people in those
countries that they are paying an awful lot for the dairy
products that they have. And if you look at the price of dairy
products in Canada, it is much higher than you might find in
the United States.
Similarly, I believe Japan probably has the highest priced
dairy products on shelf for their consumers of anywhere in the
world. So it is really, I believe, just protectionism of the
local industries. And I think that is pretty much the simple
answer.
Although there are areas--for example, China--where the
duty is around 10 percent on dairy products. But their
countries get an advantage of five percent for a product. And
that puts us on an unlevel playing field. And that is why it is
so important we have a level playing field as we look out
around the world.
Mr. BUCHANAN. Yes. And let me just say, Mr. McCan, in terms
of the beef industry, you know, I have eaten a lot of meat
around the world, been in 60, 70 countries. We have got the
best beef in the world. And the bottom line, you know, what
more can we do, or should we do, to help get our exports, as it
relates to your industry out there? Because, obviously, you
know, you are getting blocked in a lot of different directions.
But is there a couple of things that we could do to make a big
difference on it? Because I think that is an industry that has
enormous opportunity, worldwide.
Mr. MCCAN. Well, I think, from the beef industry
standpoint, you know, we adding about $300 a head to every
animal, fed animal, harvested right now that is due to our
international export market. So it is significant, what that
trade does for our industry. And, you know, I think what--all
we would ask is that, you know, we try to get all these trade
pacts back to sound science negotiations, and non-tariff-type
trade barriers, and it would help tremendously. It really adds
a lot.
In 2013 we exported $6.1 billion worth of beef,
internationally. And it was pretty much all due to a lot of the
trade pacts of the past. However, as Andrei mentioned, we have
a very high tariff in Japan. We exported $1.4 billion worth of
beef in Japan in 2013. They love our beef. It is the highest
quality, we feel like, in the world. And so they want it. And
if we could remove that tariff, it would mean a lot for our
producers and for our market, certainly.
Mr. BUCHANAN. Thank you and I yield back.
Chairman NUNES. Thank you. Thank the gentleman. Mr. Smith
is recognized for five minutes.
Mr. SMITH. Thank you, Mr. Chairman. Thank you to our
witnesses today.
Dr. Hayes, if you could, touch a little bit more on the
impact to consumers, foreign consumers, for example. You
mentioned a little bit about how wealth is created when you
move away from a surplus. And also, how protectionism--and then
I think we heard also how the price of dairy to consumers with
protectionism is much higher. Could you elaborate more on that?
Mr. HAYES. Sure. I will give you an example. In Colombia
they have almost no feed grains, and so, therefore, pork
production is extremely expensive. And people in Colombia can
literally not afford to eat pork. However, we now have a free
trade agreement with them. And their per capita pork
consumption is skyrocketing. They literally have access to
something they didn't have before.
I have been in supermarkets in Korea and seen pork selling
at four or five times the U.S. price. When those consumers
eventually get access to our product, they will benefit from
having a much more affordable product. And, in that sense,
their wealth grows.
Mr. SMITH. Is--are there any examples of where consumers--
perhaps in Japan, because Japan is such a central point of
discussion here this morning, with protectionism--do Japanese
consumers benefit from any of their protectionism? Can anyone
point to such a thing?
Mr. HAYES. I will take a stab at it. They believe that they
have food self-security because of protectionism. But, as I
mentioned, they are importing all their animal feed, so it
doesn't make a lot of sense.
Mr. SMITH. Anyone else? Mr. Stewart.
Mr. MIKHALEVSKY. Yes. I would just say that they import a
tremendous amount, as Dr. Hayes said, import a tremendous
amount of their product. And there is a very small percentage
of the population that are actually ag producers there. So it
is--and it is a--they are very protectionist.
Mr. SMITH. Mr. Stewart.
Mr. STEWART. Just address the food security issue, because
it has been a big issue in Japan and in a number of other
countries.
If you go back to 2007, 2008, grain prices, rice prices
went up 200, 300, 400 percent because there ended up being a
few shortages. And I think it was 35 or 40 countries imposed
export restraints on key agricultural products, including rice,
including wheat, including a number of other products.
If you are an import-dependent country like Japan, right
now the international trading system doesn't guarantee them
access to food supplies. Every country has a right to restrict
exports if they perceive it to be in their national interests.
That is a legitimate issue. Whether it drives the high tariffs
and other things, I would say probably not. That is large
political. But that is an issue that the overall trading system
has not addressed.
Mr. SMITH. Okay. All right. I thank you, Mr. Chairman. I
yield back.
Chairman NUNES. I thank the gentleman. The gentleman from
Oregon is recognized for five minutes.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I would like to
just continue the discussion dealing with Japan. I am wondering
if we are going to reach a point where the Japanese political
system, or their philosophy regarding trade negotiations, just
makes it no longer reasonable for us to pursue. Or do we reach
a point where we just decide that it is not worth it to fight
to keep Japan in the agreement?
Mr. MCCAN. I would just say I don't think we are at that
point yet, Mr. Congressman. I hope. I think, from our industry,
we certainly view Japan as an important part of this
negotiation. And we just remain confident that we--in the
future we will be able to bring them on board at the level of
all the other TPP countries.
Mr. BLUMENAUER. Mr. Turner.
Mr. TURNER. Yes, I would just say that the framework of the
TPP itself is supposed to be a living treaty, you know, to grow
and to adapt. And I think to--not to fight through those issues
with Japan now--Japan gives the TPP much more credibility with
the size being added to it, and it is important.
And I just relate to a lot of my packers and suppliers. You
either ship to Japan or you don't. There is no middle ground.
Because you have to do certain things, you have to work through
it. But, at the end of the day, good business opportunities,
and a big market, and I think it should be included--at least
fought for.
Mr. BLUMENAUER. Well, certainly that is the philosophy with
which we have pursued it. And, all things being equal, we are
all better off in a comprehensive agreement that speaks to some
of the problems that you are alluding to.
But I just wonder--and perhaps, just in terms of making the
negotiations work better, if it is clear that there is a point
where we do pull the plug, where we are just not going to
continue down this path, that we will reach a point, if we
can't reach reasonable accord on things that give our producers
access, and we are not facing pretty grotesque barriers, that
it is clear that we are not going to play.
I must admit I was blown away recently in conversation with
some Japanese officials about their expectations dealing with
fisheries. Pretty unsettling, in terms of what their plans
were, and some of their practices that are going to pose a
challenge for us, I think, in reaching an agreement that is
acceptable for most of us. And I am just curious at your
reflections. Appreciate your feedback. Thank you.
Thank you, Mr. Chairman.
Chairman NUNES. The gentleman yields back. The gentlelady
from Kansas, Ms. Jenkins, recognized for five minutes.
Ms. JENKINS. Thank you, Mr. Chairman, and thank you all on
the panel for being here today. I represent eastern Kansas, and
I have seen firsthand how strong trade agreements open
international markets to Kansas beef, pork, Kansas wheat and
cereal grains, as well as planes and other products
manufactured in Kansas.
I also know that the best way for Congress to ensure that
we can get strong agreements that include congressional
priorities is to pass legislation like the bipartisan
Congressional Trade Priorities Act that Chairman Camp has
introduced, along with our chairman and Chairman Sessions. And
it is my hope that we can get that important legislation
through the House and the Senate this summer.
Mr. McCan, as president of the National Cattlemen's Beef
Association, you are well aware that the World Organization for
Animal Health places U.S. beef at its lowest possible risk
category. Unfortunately, some countries, including some of
those who are currently participating in the Trans-Pacific
Partnership negotiations, continue to either ban or limit U.S.
beef exports.
So, Mr. McCan, could you please discuss the markets that
are still closed to U.S. beef and pork, and the impact this has
on U.S. producers? I would also like you to discuss the
challenges that the mandatory country-of-origin labeling, or
COOL standards, created by the USDA plays on our negotiators
when they try to get other countries to end non-tariff based
barriers.
I specifically mention COOL because, over the past couple
of years, I have heard from many Kansas producers that these
standards are placing an unworkable burden on their operations.
In addition, a study done back in November of 2012 by
Professors Glynn Tonsor, Ted Schroeder, Michael Taylor from
Kansas State University, and Jayson Lusk of Oklahoma State
University found that U.S. consumers are not willing to pay a
premium for labels that distinguish between livestock born in
Canada but raised in Montana and those born and raised anywhere
else in the U.S. So it appears that these standards may be more
trouble than they are worth. Could you comment?
Mr. MCCAN. Yes, ma'am. I will answer your concerns about
the BSE status first. We are a negligible risk status country
now, which is the lowest status you can be for BSE. And there
are other countries who are exporting beef that don't have as
low a status for BSE than we do that are exporting beef to
China. China we view as a really huge future market for us. We
were locked out of China in 2003 with the BSE cattle from
Canada, and we have not been able to get access back into
China.
So, we certainly view that as something that we need to--
our Administration, I think, needs to work hard on. And our
industry views that as a very important market. And we don't
see any reason why we should be kept out at this point.
As to the country--mandatory country-of-origin labeling, it
has--in our opinion, in the beef industry, we--it has not
really benefited anyone. Referring to the study that you
referred to done at Kansas State and other universities, our
domestic consumers really don't seem to really care, really pay
a lot of attention to that origin label. So it has certainly
not shown any economic benefit to any of our producers in the
United States, although it has been a really tough rule to
comply with.
And we handle Mexican steers on our family's operation. And
so, every year, when we market them, we are faced with anywhere
from a $35 to a $50 a head discount for no apparent reason. And
when those cattle come in to this country, they are lightweight
calves, usually. And it is an added value type of a program. We
add value at the ranch level, the feed lot operators add value,
the packers add value. By the time those animals are processed
and ready for distribution in the retail markets, the majority
of the value of that animal is value that has been put on them
here in this country.
So, another reason why we don't see any real benefit to the
mandatory country-of-origin labeling rule right now. And I--and
it has caused some serious disruption on the borders, south and
north. There are some processing facilities that have recently
gone out of business that depend on a lot of that border trade,
and because of mandatory COOL have been hurt and had to go out
of business.
So, we have limited infrastructure now across the country
for processing cattle. We want to protect that infrastructure
as much as we can to keep a good, robust competition in our
industry.
Ms. JENKINS. Thank you, Mr. Chairman. I would yield back.
Chairman NUNES. Thank the gentlelady. The gentleman from
Louisiana is recognized for minutes.
Mr. BOUSTANY. Thank you, Mr. Chairman. And I thank all the
witnesses for their testimony. My home state of Louisiana is a
maritime state, highly dependent on trade. And agricultural
exports are the top--our top export item. Rice is very
important in my district, and getting a high level agreement
that opens up markets for rice and some of our other
agricultural commodities is of major importance to me.
But I would submit that, even with all the work done on TPP
and TTIP, the negotiations, very difficult negotiations, much
more needs to be done. And these are much more than commercial
agreements. They are not static. This is the way we get back to
a rules-based trading system. And I will tell you. American
leadership is in demand more so than ever before to get this
done. And the first step, I think, that is critical in exerting
this American leadership in this engagement is to get trade
promotion authority.
Now, we have a bill, the Bipartisan Congressional Trade
Priorities Act of 2014. It was introduced on January 9th. A lot
of work was put into that. It is much more--it is a much more-
evolved piece of legislation than the previous TPA. And I
believe it addresses all the 21st century issues, from SPS to,
you know, the global digital economy, state-owned enterprises.
It also enhances the consultative role of Congress as it
engages with the executive branch and USTR.
So, my question to all of you is--I want each of you to
answer this for the record. Do you believe that our negotiators
can get the best possible deal, which I believe is essential,
the best possible deal in these negotiations, if we don't have
trade promotion authority, and specifically, this legislation
we have before us?
Why don't we start with Dr. Hayes?
Mr. HAYES. Common sense suggests that you don't give your
best deal until the very last minute. And you can't do that
under the current situation. Because without trade promotion
authority, there is always the possibility we will go back and
reopen the deal. So I absolutely agree with you.
Mr. BOUSTANY. And would you agree that time is slipping by?
There are a lot of external events going on, both politically
and economically?
Mr. HAYES. Yes, just----
Mr. BOUSTANY. That is why we need to have a sense of
urgency?
Mr. HAYES. Absolutely. Just looking at the congressional
timeline and the U.S. election process, this is a very critical
moment.
Mr. BOUSTANY. Thank you. Mr. McCan.
Mr. MCCAN. I would concur that I think the trade promotion
authority is critical in being able to get these negotiations
done in a timely manner, and get the right trade pact that we
are looking for, and a good, modern, 21st century-type trade
pact. I think we need to give the Administration all of the
latitude that we can, and the agencies that they have at their
disposal.
Mr. BOUSTANY. Thank you. Yes, sir?
Mr. MIKHALEVSKY. Thank you. Two comments. First, as I said
in my comments, we are highly supportive of the trade promotion
authority. Right on board, we believe that it is essential to
make this thing go forward, and so we are right on with that.
The second Part I wanted to answer a little bit
differently, and I just wanted to talk about time running out,
and the sense of urgency. From a dairy industry perspective,
the EU has caps on dairy products today that go off in 2014 and
2015. Those products--there is a significant amount of product
that is going to flood into the world market at that point in
time. So it is really important that we tie these things up
very quickly. Otherwise, we will be at a competitive
disadvantage in the dairy industry in the future.
Mr. BOUSTANY. Thank you. Mr. Turner.
Mr. TURNER. I agree that trade promotion authority is not
only urgent, but required. The sooner, the better.
Mr. BOUSTANY. Thank you. Mr. Stewart.
Mr. STEWART. Thank you, Congressman. I will be--take a
contrarian view, simply because I am a bit of a historian. We
didn't have TPA before 1974, and we managed to do lots of trade
agreements. I am not opposed to TPA, and the bill that was
introduced is a good start. And for some trading partners it
may be a help. But I don't actually believe that it is critical
to have before you have a deal.
Most of the trading partners we deal with have a process
that is not a lot different than ours. And, theoretically, the
deals could be taken back and reopened. And they don't do TPA,
we are the only country that does. So, I am in favor of TPA,
but I don't view it as a critical element, legally or
historically.
Mr. BOUSTANY. I would just simply submit that history is a
nice guide, but we are in a much more complex negotiating
environment with many very difficult 21st century issues. And I
do believe that the full weight of the U.S. Government needs to
be exerted in these negotiations. And if we get bipartisan
trade promotion authority, that sends a very powerful signal to
all of our negotiating partners that we mean business. It is
essential to get the best possible deal.
And, with that, I will yield back, Mr. Chairman, thank you.
Chairman NUNES. Thank you, Dr. Boustany. The gentleman from
Wisconsin, Mr. Kind, is recognized for five minutes.
Mr. KIND. Thank you, Mr. Chairman. I want to thank the
panelists for your testimony today. Obviously, being from
Wisconsin, agriculture is a very important part of our state's
economy. Dairy, in particular, second in the nation when it
comes to dairy exports.
And I would agree with my friend from Louisiana, Dr.
Boustany. I would have preferred to see TPA dealt with sooner,
rather than later. Obviously, I am concerned that we are not
going to get the last best offer from those in TPP, unless they
have some assurance that the President can ultimately deliver
the agreement at the end of the day, and trying to negotiate
with 535 independent Members of Congress is going to make that
a little bit dicey.
But let me also paint a little political scenario which
would make TPA passage eventually very difficult in this
Congress. I think the political reality is we are not going to
be able to move it before the elections. If there is a flip in
the Senate, if there is any backing away from the May 10th
agreement, which was embraced by the previous Bush
Administration, involving core international labor and
environmental standards and access to prescription medicine in
the developing world, it is going to make getting the votes for
TPA very, very difficult in this place. And so, I think the
November elections are going to be very important to where the
trade agenda goes in the future.
We have also--I have also done a lot of outreach with our
TPP negotiating partners. I have had meetings, breakfast and
lunch meetings, with the TPP ambassadors, including the
Japanese ambassador. It would be weird, to say the least, if we
moved forward on TPP without Japan being there at the end of
the day.
And my impression, Mr. McCan--I think I agree with you--a
little more optimistic. I think all the nations involved in
negotiations want to get to yes, they want to get to an
agreement. But, naturally, all eyes are on Japan right now. I
would like to be able to support a good negotiated agreement,
but I have a hard time supporting a bad agreement. I think a
lot of Members in this place probably feel the same way. And
agricultural access to these markets is going to play a crucial
role in where this agreement ultimately ends up. And we all
know that there is more work to be done.
But let's face it. We have got work to do in our own
Congress when it comes to our own agriculture policy to be good
stewards of the global trading system. So I have been so active
in the past on farm bill debates, trying to move us away from
these market and trade-distorting commodity subsidy programs
that tend to get us into trouble, globally.
Probably the most salient one that we are dealing with
right now is the box we are in with Brazil and our domestic
cotton subsidy program, and the WTO implications of that. I
understand this week there are important negotiations to see if
we can resolve this with Brazil. They are convinced that this
Congress did not fix it--neither am I--in the last farm bill.
And, because of that, we have been, in effect, bribing Brazil
with $150 million worth of payments that now go to subsidize
Brazil cotton farmers. It just shows you how crazy this farm
bill has gotten in this country.
And we have a responsibility to be living up to some of our
trade obligations and the challenges that we face in the WTO on
the front end, as well. So I am hoping that, as we continue
talking about our own agricultural reform programs, that trade
and the implications of trade are considered a little more
deeply in it, rather than kind of shoulders being shrugged, and
we taking our chances through WTO claims and cases. That puts
us in a bad spot.
Mr. Turner, you came and talked about SPS and that, too, is
kind of a new phenomenon that we have in our trade agreements,
and certainly with the trade promotion authority legislation
that was introduced earlier. Is there any concern on your part
in regards to the standards used for SPS--because it is a two-
way street--that they might ultimately be used against us or
our products?
Or do you see the way it is being negotiated and the
language that is being used right now is going to create a
livable world for us when it comes to some of the nuances of
SPS and some of the non-tariff barriers that we face,
especially for agriculture in recent years?
Mr. TURNER. Everything I have seen so far, I mean, looks
good. You know the two-edged sword. As a farmer I used to
struggle with the stringent requirements that we had growing
our food with both federal standards and state standards and
everything else in California. But now, as an exporter, and
someone who spends time traveling the world, I have a great
appreciation for the reputation that we have built globally,
based on our high standards. And so I do think it is very
important.
You know, we have to respect foreign countries' standards,
and the reasons why they want to do things the way they want to
do them. And they have a right to protect the food in the best
way that they seek. However, at the end of the day,
transparency, and if it is based on science, I think we can all
agree with that.
Mr. KIND. I think it really comes back to whether it is
science-based research that we can agree to, as far as the
equivalency standards and what not. That will be crucial,
moving forward.
Mr. Mikhalevsky, obviously we would like to be able to work
with you a little bit more about how we can take advantage of
some of the greater export opportunities in the dairy market
that exist in the Pacific Rim, China, right now. One of the--I
think the tragedies of Russia and Crimea was we had talks in
regards to Russia with dairy that suddenly collapsed overnight.
We have been shut out since 2010. Hopefully there will be an
avenue to try to revive them when things start settling down
again over there.
Thank you, Mr. Chairman. I yield back.
Chairman NUNES. Thank you, Mr. Kind. Mr. Paulsen is
recognized for five minutes.
Mr. PAULSEN. Thank you, Mr. Chairman. And this is a topic
that is important to my home state of Minnesota, as well. And
while I don't have a district that is necessarily agriculture-
oriented, there is no doubt that Minnesota is an
agriculturally-oriented state. In fact, Minnesota is the fourth
largest agriculture exporting state in the country.
In 2012, our agriculture exports totaled about $8.2
billion. That was a 14 percent increase over the year before,
which is a pretty common pattern, I am thinking, from--based on
some of the testimony we have had here, and what I have read,
and has happened in other states. And so the agriculture and
food industry accounts for more Minnesota exports, actually,
than any other industry in our state. More than double,
actually, than the next closest industry, which is machinery.
So, we are absolutely helping feed the world, much as you and
the folks that you represent are. And so it is absolutely vital
to our economy.
I just want to associate my comments about the importance
of getting TPA authority so we can get the best-negotiated
deals possible that will benefit American consumers and
American exporters. And I just want to thank you for your
testimony, for your help, for asserting that relevance of
having trade promotion authority. It is actually really, really
critical.
And, of course, as you mention, we are not just dealing
about tariffs, which are issues, though. It is also these non-
tariff barriers and the opportunity to think about 21st century
trade agreements, modernizing high-standard agreements so that
other countries will then follow our lead. Right?
And the United States has definitely gotten back into the
game with the passage of the recent agreements that occurred
with Korea, and Colombia, and Panama. And so, we are back on
the playing field. But we need to push forward with these huge
opportunities with both the Trans-Pacific Partnership and the
TTIP.
Let me do this. I just want to ask a question real quick,
because it is not just, as we mentioned, tariffs, it is non-
tariff barriers. But, Mr. Turner, I was interested in your
testimony. You are directly involved in getting agriculture
products through this myriad of administrative and regulatory
hurdles to get those products into foreign markets. You deal
with that every day for your customers.
Can you describe a little bit just your experience in
dealing with countries that have multiple entry requirements,
and the lack of harmonization of customs procedures between
countries, and the opportunity that we should be looking at
with these agreements in trade?
Mr. TURNER. Yes. Are you looking for a specific example, or
just kind of talk about----
Mr. PAULSEN. Yes, anecdotal stories. I mean give some
perspective of why this is important, and why this is something
that we should address, or help address, that can benefit us in
the United States.
Mr. TURNER. Yes. You know, there--when you look at the SPS
issues in particular, there are just so many different things
to get products from one place to another. And we look at--you
know, the easy part, when we talk about the businesses doing
the commodity trade and doing the sale, and then we have to,
you know, then send that through the office and the conference
room, where the ladies do the real work, and deal with all the
different layers and all the different things. And it is just--
every single country is different, you know.
We have import permits required in some places. Import
permits are very, very challenging. We have products that need
to get shipped out, but we can't ship the product until it has
been labeled properly with an import permit number. We face
that mostly in India. Fumigation requirements are different.
Biggest challenge is Chilean fumigation. Chilean fumigation has
to--is a--even the packers themselves have to weave a fine
little line to be able to accomplish what needs to be
accomplished to get into Chile with still being legal in the
U.S. It just goes on and on and on.
Mr. PAULSEN. Let me just follow up on your comment about
India, because U.S. agriculture exports to India are actually
really small, or paltry, with a mere $863 million in 2013, and
it has gone up a little bit in 2012. But you think about India,
it should be a booming market of opportunity, right? Growing
middle class, rapidly growing population becoming wealthier.
Can all of you maybe just comment and just follow up on
that regarding what are some of the barriers to agriculture
that we see right now with--dealing with India? Maybe Mr.
McCan? Or you can go right down the line.
Mr. MCCAN. I am not terribly familiar with all of those
issues, but I know that, because of their--because of the--
their feeling towards bovines in that country--and I am not
sure how it really relates to beef consumption--that there is
just not a huge interest to negotiate with the beef industry
for importing much of our product.
They also have a huge population of water buffalos, which
they export. And they don't put on the same equivalency as a
bovine animal over there. So there is lots of kind of cultural
issues there that seem to complicate the trade over there. And,
yes, we haven't had much opportunity there at all.
Mr. PAULSEN. Mr. Mikhalevsky, on the dairy side, can you
speak to that just a little bit?
Mr. MIKHALEVSKY. Sure. The--one of the issues that we have
when we ship to countries--and I will primarily speak about
India in a second--is we are actually testing for 933 separate
substances today in order to meet different export
requirements, which creates a lot of cost in our system. But
there is a number of things that you test for that are related
to food safety, and then there are other things that you test
for that are related to food quality and perception of quality.
And, for us, the food safety one is essential. The food quality
one is a matter of judgement.
When it comes to India specifically, they do have a
wonderful market there. They have tariffs there. They do give
tariff holidays occasionally when they need product to come
into the market. But we have generally had problem with the SPS
standards there. One example of that would be testing for
things like Para tuberculosis in milk and that. There are a
number of standards that they impose that are more food quality
standards, as opposed to food safety.
And so, the way I would respond is it is a closed market to
us and many of the other dairy exporters around the world, and
it is a wonderful opportunity.
The last piece on dairy, which might be interesting, is
dairy in India is different than dairy here. We assume that our
dairy comes from cows. Over there it may come from buffalo or
other sources.
Mr. PAULSEN. Thank you, Mr. Chairman. Yield back.
Chairman NUNES. I thank the gentleman. The gentleman from
Pennsylvania is recognized for five minutes.
Mr. KELLY. I thank the chairman, and thank you all for
being here. I am greatly interested in this. I come out of the
automobile industry--in fact, the retail end of it. We do a lot
of bid work. But as we would go through the bid process, there
were--sometimes the bid specs were set up so that no matter
what the final price was, I couldn't have met the specs.
And I am looking at each of you. You are producers. So,
first of all, you better have a product that everybody wants to
own. Right? And then you better be able to put it at a price
point that is affordable. And we are looking now at--talking
with you about these trade agreements. One of the things for me
that was very important, if I was sitting across from a
perspective owner I had to have the decision-maker at the
table. Or none of the negotiations mattered. It was just
chatter.
And the other thing was time was always of the essence,
because I would know that if I wasn't able to satisfy a need at
that time, or fill a need at that time, this person is probably
going to leave our dealership and go someplace else. And the
next day there would be an automobile in their driveway with
somebody else's name on the back of it, which really didn't
help me, because I still had payrolls to meet.
I think sometimes we get really involved in these things as
to what it is that we're trying to do.
So, American products, globally. Globally. And did I read
there somewhere--one of you say that the consumers, as a
percentage, consumers--outside of the United States, how big is
the market?
Mr. MCCAN. I would just tell you for the beef market we
consider that 96 percent of our product's consumers are outside
of this country.
Mr. KELLY. So out of 10 buyers, 9.6 of them are not here.
You are trying to fill a market that is someplace else.
Mr. MCCAN. Ninety-six percent.
Mr. KELLY. Ninety-six percent. Well, okay. But my whole
point is your market is not just the United States. And you are
producing not just for the United States, because there is no
way in heck we could digest the product that you are producing.
There is an overcapacity, which we have watched in the
automobile industry with some of the domestics. You can't
overproduce for a market that isn't there. And if you do, you
better look at the market that is available, and then produce
for that and get your share of it. You are all looking for your
share of the market. Is that not true? And all you are asking
for is to be treated fairly, and not to get gamed.
So, my question is, when we go into these other places, and
we are trying to drive these trade negotiations--and I am with
Dr. Boustany, because I do believe time is of the essence. And
if we think we can sit back and the world will wait for us to
come around, I guarantee you somebody will put a product in
somebody else's driveway, and we will never get a chance to get
back in that home again.
So this TPA, a lot of question about that back home. In
Pennsylvania ag is the number-one business. There is a lack of
confidence, or a lack of trust that it is going to be handled
the right way. I have people tell me, ``No, you guys better
keep track of that. You better not let him do something that
really hurts us. Okay?'' Now, whether you agree with the
President or don't agree with the President, there is a real
perception out there that we have a problem in negotiations.
You are all here for a very particular reason. And I like
what Mr. Rangel said. You have got to help congresspeople
understand what is going on. But, more importantly, we have got
to help the American people to understand what it is we are
trying to get to. Don't we?
I mean if we don't get a bigger share of this global
economy, we won't have a dynamic and robust economy. We will
not have jobs. We will not have the ability to fuel all these
wonderful programs we have, because they are all revenue-
driven. Tell us. What would be the best way right now? Because
I know you are all looking for something.
Mr. McCan, you are in beef. Mr. Turner, you are in almonds.
Andrei, you are with the dairy products. Mr. Stewart, you have
been on both sides of it, right? Mr. Hayes, just tell us,
please, because I think it is critical that the American people
understand where it is we are trying to get.
And I got to tell you, from my perspective, I wanted to be
in everybody's driveway every day. I didn't want to get there
from time to time. But I didn't want to get gamed, either, by
the process. How badly gamed are we right now, in order to get
our products around the world? If 96 percent of the market is
outside our shores, then that is the target we have got to
shoot for.
What else can we do, gentlemen?
Mr. MCCAN. Well, I will take a stab at it, Mr. Congressman.
But, you know, we view trade promotion authority as very
critical in the negotiations. The Administration----
Mr. KELLY. But tell me why. Why is it important?
Mr. MCCAN. Well----
Mr. KELLY. Because the American people need to know why----
Mr. MCCAN. My personal view, the President has his
different agencies, the USTR, USDA, FAS, they are all very
critical in these negotiations and these trade pacts. And, you
know, without TPA, I view it that they are somewhat weakened if
they don't have that strength of the TPA authority. And those
are the people that are at the table on these things, more so
than anybody.
Mr. KELLY. Decision-makers are at the table.
Mr. MCCAN. Exactly.
Mr. KELLY. The people who are going to say yes or no are at
the table.
Mr. MCCAN. Exactly.
Mr. KELLY. So if we are going to negotiation, but the
person or the entity that needs to be there to go ahead and
compete head to head doesn't have that same authority----
Mr. MCCAN. They have the expertise for these negotiations,
whether it is technical, you know, non-tariff stuff, SPS, they
have the expertise within these agencies, and those agencies
are part of this Administration.
Mr. KELLY. Okay. Any of you? I know you are all facing a
difficult challenge. Tell us--and not so much Congress, but the
American people--about the market and how we have to go about
getting a bigger market share. Because, at the end of the day,
it is good for America. And our products, I don't think it is a
matter of not having the right product, it is just not having
the right policies. At least that seems to me--and the other
thing is time. We cannot continue to let this time slip away.
It is the one thing you can never get back. And another thing
you will never get back, you will never claw back market share.
Andrei, were you going to say something? Because the dairy
products that we put out are phenomenal.
Mr. MIKHALEVSKY. Well, I was just going to say that you
asked about why TPA is so important and how we might explain
that----
Mr. KELLY. Right.
Mr. Mikhalevsky [continuing]. Outside of this room. And my
view on that is whenever you do a negotiation, as you
mentioned, if you don't think you have someone across the desk
that can make a decision, or that had some authority, your
negotiation is not going to go very far. And if you believe
that negotiation, when you bring it back, is going to get
modifications or twisted or turned around, you are very unsure
of how you are going to negotiate. You may not put your best
foot forward, because you don't believe that you are actually
negotiating the final and best deal for both countries.
So, our support for TPA is we believe that is the fastest
way to get the best deal, and then you bring it back to
Congress for an up or down vote. But you have to have the
authority sitting at the table, and people have to believe it.
And that is the way I would explain it to anyone in our area.
Mr. KELLY. Mr. Turner? Anything at all on that?
Mr. TURNER. I would just expand on your prior question,
which is, you know, we are competing globally. When you look at
the population growth in India and China, Southeast Asia, you
know, there is limited ag land, there is limited water,
globally speaking. And we are here, the time is now, to
position ourselves in the best possible way that we can to
compete globally to feed the world and the next generation.
Mr. KELLY. Okay. Well, I got to tell you, just from what I
have done all my life, if I didn't have the decision-maker
sitting across from me, I knew there was no sense in going
forward with it, because I couldn't finish the deal. And I
think that is what we are looking at right now. You all do such
great things with the product, you work so hard. At the end of
the day we are looking to get market share that grows and grows
and grows and gets the American people back to work and does an
awful lot of things.
I think people want to own American products. I think
sometimes we get to the point and we forget we are not the only
person in town with a product. There is other people that will
work just as hard for the market. But I just don't like the way
we get gamed sometimes. Sometimes the specs are set up that, no
matter what we do, we can't get there. And I guess that is
where the oversight part comes in. But I want to thank you all
for what you do. Not just what you--by coming here today.
But would you please do me a favor, and to everybody in
Congress, and the country? You all have such great credentials.
You have great credibility. Your associations have the ability
to get the message out to the American people in a way that
they will believe it and they will understand it. That is the
real challenge we have right now, the lack of understanding of
how we get to market domination. How we get to growing our
market share all lies in the fact that people just don't
understand, and they seem to think that there is somehow that
we can just sit back and they will come to us, the world will
flow to us.
I really do believe, with the market opportunity we have,
the sky is the limit. We never had bluer skies or a stronger
wind at our back in America than we have right now, of all the
assets that we have. So it is just a time now to put ourselves
in order, get out, win these trade negotiations. But we better
have somebody at the table that can actually drive a hard
bargain and come back home and say, ``You know what? I closed
the deal, and it is good for everybody.'' It is a win-win
situation.
Thanks so much. Mr. Chairman, thank you for allowing me to
be here. I appreciate that.
Chairman NUNES. The gentleman yields back. I will just say
that Congress has the authority vested by the Constitution. If
we look at what has happened in the previous few years, whether
it is the implementation of different laws that have passed the
Congress, the various different executive orders, and not to
get into the politics of this, but the situation with the
Bergdahl-Taliban five swap, clearly--and I will just
reiterate--we have to have trade promotion authority, or you
could very well kill TPP in its infancy. That is the reality of
the politics that we face, and it is the law.
And so, I would encourage the Administration to work as
quickly as they can with Chairman Camp and others to pass TPA
as quickly as possible.
Our record will remain open until June 25th. I urge
interested parties to submit statements to inform the
Committee's consideration of the issues discussed today.
I want to thank all of you for your testimony. This
Committee is now adjourned.
[Whereupon, at 11:49, the subcommittee was adjourned.]
[Questions for the record follow:]
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