| The Clinton Administration Agenda For Seattle WTO:
Expanding Opportunities For American Agriculture
December 1, 1999
I. Building On Progress of the Uruguay Round In Boosting Opportunities For American Agriculture Through Trade: The completion of the Uruguay Round in 1994 marked the first major step toward construction of a system of international rules governing trade in agricultural products. The agreement improved market access for farmers and ranchers, reduced unfair trade practices, restricted our trading partners from using measures not based on sound science to block American goods while preserving our right to maintain the highest possible standards of food safety for consumers, and provided a strong and credible means of settling disputes. Specifically, the Uruguay Round's Agreements on Agriculture lowered tariffs and reduced trade-distorting export subsidies. Its Agreement on Application of Sanitary and Phytosanitary Measures (SPS) ensured that all WTO members -- 110 at the time, 135 today -- would use science-based sanitary and phytosanitary measures to protect human, animal and plant health rather than as an arbitrary means to bar imports. The Uruguay Agreements also created a strong WTO dispute settlement system which the U.S. has used thirteen times in the past four years to enforce the Agriculture and SPS Agreements on issues ranging from fruit sales to Japan, pork exports to the Philippines, and dairy sales in Canada.
II. Next Step Is To Launch Negotiations In Seattle To Achieve U.S. Agricultural Objectives: The Uruguay Round made considerable progress toward open markets, fair trade, respect for science, and an enforceable rule of law in agriculture. But while those negotiations produced a very strong beginning, we are still far from having achieved our goals. The United States has developed a set of specific proposals for Seattle that constitute an ambitious and achievable agenda for the new WTO Round. Our agenda addresses the major concerns raised in consultations with farmers, ranchers and others, including elimination of export subsidies, reform of Europe's Common Agricultural Policy -- which is the world's largest single distortion of agricultural trade, reduction of worldwide tariff disparities, improvement in market transparency and restriction of unfair practices of state trading monopolies, and the establishment of fair treatment for trade in agriculture products made using biotechnology. In Seattle, our goal is to launch negotiations to expand opportunities for farmers, ranchers, and other agricultural producers with a specific agenda that will:
- Completely Eliminate Remaining Export Subsidies. The European Union spends 50% of its overall budget on agricultural supports that distort trade. This includes $7 million in export subsidies to support the 2% of the population involved in agriculture-related activities. These EU subsidies represent 85% of the total world's agricultural export subsidies - and put U.S. producers at a disadvantage in world markets. In September, the U.S. helped forge an agreement among APEC nations in Auckland, New Zealand to make elimination of export subsidies an "important objective for the Seattle Round."
- Reduce Agricultural Tariffs And Improve Access For Products That Are Limited By Tariff Rate Quotas. Since 1948, tariffs on manufactured goods have dropped 90% to an average of just 4% today. Agricultural tariffs, however, remain too high, with bound rates averaging around 50% worldwide, while U.S. agricultural tariffs average under 10%. This tilted playing field disadvantages American agricultural producers and consumers. Along with a reduction in tariffs, we will work to expand the Tariff Rate Quotas (TRQs) so that U.S. exports can grow.
- Reduce Trade-Distorting Domestic Supports and Strengthen Rules That Ensure All Production-Related Support is Subject to Discipline. Currently, European Union farmers are paid to increase production irrespective of market conditions. This causes excess production for the world market and has the effect of depressing international prices. After the Uruguay Round commitments are fully implemented, the European Union will be able to provide $80 billion of trade-distorting domestic support each year, while the United States will be capped at less than $20 billion. This level of spending distorts world trade and undermines the competitiveness of U.S. agricultural producers in world markets.
- Open Up the Operations of State Trading Enterprises (STEs) So That They Face The Same Risk In The Marketplace As Private Traders. U.S. agricultural producers have lost too many sales in third country markets due to the non-competitive, nontransparent operations of STEs.
- Ensure Fair Treatment For Agricultural Products Made With Biotechnology. Biotechnology -- the use of genetic engineering to raise productivity and create pest-resistant plant strains, develop new medicines and other innovations -- offers remarkable opportunities to protect the environment and fight hunger in the years to come. It also, however, raises consumer concerns which must be met through fair, transparent and scientifically based regulatory processes. In the new Round, we will address disciplines to ensure that these products are treated fairly, consumers and public health are fully protected, and the world's farmers and consumers get the full potential benefits of biotech products.
III. Steps At Seattle WTO To Boost Agricultural Trade Will Matter For The U.S. Economy - Particularly Our Rural Economy. In the past year, a series of unpredictable events - the financial crisis overseas, natural disasters at home, and a boom in world production - have placed many rural communities in financial distress. Opening markets so that American farmers, ranchers, and agricultural producers can sell more of their products to the 96% of the world's population that lives outside U.S. borders will help boost farm sales and incomes and lift the overall U.S. economy. According to US Department of Agriculture estimates:
- The United States is the largest exporter of agricultural goods in the world. In 1998, agricultural exports totaled $52 billion -- this year, USDA has estimated that agricultural exports will total $49 billion. These exports represent about 1/4 of total U.S. agricultural production.
- Agriculture is one of the few sectors that has consistently run a trade surplus, posting a positive balance of trade every year since 1960. This surplus is estimated to be $11 billion in 1999.
- U.S. agriculture exports rose by 23.3% between 1994 and 1997, before sharply lower commodity prices and reduced Asian demand caused a turn-around.
- Each export dollar creates another $1.28 in supporting activities to process, package, ship and finance products. This means that farm exports generated about $122 billion of total economic activity in 1998.
- Agricultural exports currently support three-quarters of a million U.S. jobs. Until the last year's drop in commodity prices and Asian economic growth, agricultural exports supported even more jobs - more than 900,000.
- The production from 1 in every 3 acres planted in America is exported. These jobs pay higher than average wages and are distributed among a range of communities and professions, both on and off farm, in urban and rural communities. One-third of these jobs are in rural areas, many of which rely on agriculture-related industries as their primary employer and source of economic growth.
IV. Trade Agreements That Break Down Barriers Are Essential to Increasing U.S. Agricultural Exports:
- USDA estimates that agricultural export gains attributed solely to trade liberalization since 1985 have been at least $3.5 billion per year. Once the Uruguay Round and NAFTA are fully implemented by 2005-2008, the projected impact is estimated to grow to over $10 billion per year. With agriculture exports expected to grow substantially by then, exports directly attributed to trade liberalization will represent 13% of total U.S. agricultural exports. These export gains have already translated into increased opportunities for tens of thousands of U.S. workers --over the next decade this number is expected to approach 200,000.
- Bulk agricultural commodities depend on overseas markets. The portion of domestic commodities like wheat, soybeans, corn, cotton, and rice exported is typically in the 20-50% range. High-value agriculture products also depend on overseas markets. These products include cattle hides (62% of total production exported), poultry meat (17%), beef (8%), pork (6%); almonds (71%), walnuts (51%), sweet cherries (40%), prunes (39%), and raisins, citrus, grapes, pears, sweet corn (26-37%).
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