Thank you for the opportunity to be with you today to discuss the Cancun Ministerial held last September, U.S. agricultural trade policy agenda, and suggest an alternative approach to the multilateral trade negotiations that are occurring under the auspices of the World Trade Organization.
Regardless of the post-Cancun rhetoric of some agricultural leaders who wish to blame the failure of the ministerial on other economic sectors that are also a part of the global trade negotiations, or the Singapore issues, which the U.S. generally characterizes as non-trade concerns, it is clear that agriculture was in fact the primary issue that could not be resolved to the satisfaction of the WTO members. While the action of the so called G-12 group of developing countries was applauded in some quarters and cursed in others, it strongly suggests that global trade agreements and the agricultural trade policy agenda are no longer the sole domain of a few developed countries, namely the U.S. and European Union.
The lack of action at the Cancun Ministerial was the result of the inability of the WTO members to achieve a politically acceptable balance among the major items that comprise the agricultural negotiations - export subsidies, domestic support, market access and special and differential treatment for developing nations. Additionally, the impasse reflected concern over the impact of these policies on both trade and domestic agricultural markets and the unwillingness to consider other agricultural issues important to many countries such as the multifunction of agriculture.
In the U.S. free trade advocates have been very effective at promoting a global trade agenda by promising that agricultural prosperity and economic stability are just around the corner based on expanding export markets. For a long time, this approach has been well received by many U.S. producers because it reinforces our own false beliefs concerning our agricultural efficiency, productivity and competitiveness. However, the growing realization that we never seem to get to that corner, makes it hardly surprising that U.S. farmers are becoming more than a little cynical about trade.
The failure in Cancun provides the time and opportunity for the WTO members to consider broadening the agricultural trade agenda to acknowledge that the agriculture sector is in fact different from the other commercial sectors being negotiated and therefore must be treated differently. I do not believe the Administration's approach of seeking additional bi-lateral or regional free trade agreements represents a viable alternative for agriculture. FTA's generally fail to address many of the same issues that were the cause of Cancun's stalemate. For the U.S., our current FTA agenda is focused on countries that represent our major competition in the world's agricultural markets, including our own domestic market. In addition, the parties to these negotiations offer very limited market growth potential that will benefit our farmers and ranchers.
For the world's agricultural producers, an agenda that continues to be based on the same ideological view of free trade that has prevailed for over two decades will not work. Agreements that only seek to apply disciplines to the most transparent subsidies and border measures fail to address the root cause of the problems confronting farmers and ranchers in both the developed and developing world. The continued pursuit of a policy based on a theoretical model of free trade and market competition in agriculture will not provide adequate market returns for farmers. It will continue to favor multinational companies and further consolidation within all agricultural sectors. It is unlikely to reduce the costs to taxpayers. And, it will still fail to help feed the 800 million people on this planet who go to bed hungry every day.
Globally, agricultural trade represents less than 10 percent of total food consumption and yet the rules governing that trade define the conditions that apply to nearly all agricultural markets. In the case of the United States, agricultural exports have been flat since the mid-1970s while imports of competing products continue to expand. Our agricultural trade surplus has declined by more than 50 percent compared to 1996, and some analysis are predicting the U.S. may become a net farm product importer before the end of this decade.
While there are those who suggest these changes in U.S. agricultural trade are due to shifts in consumer food preferences, I believe they are more likely the result of three other factors that directly impact our global competitiveness. First, the U.S. is maintaining a strong dollar policy while other countries seek to expand agricultural trade through weak currencies and manipulation of exchange rates. Second, many nations are enhancing their competitive position at the expense of their own workers. Not only are wages and worker standards low in many countries for production agriculture, but also in processing. Multinational firms are encouraging increased production and the development of processing industries in these countries to take further advantage of inadequate labor standards. Third, many of those with whom we must compete either do not have or fail to enforce a level of environmental regulation that compares with our own.
It is no wonder we are losing the competitive battle, not because we have set the bar to high in terms of our own standards. We are losing the trade battle because others are taking advantage of factors that are generally less transparent than the policies that would be subject to discipline under a multilateral agreement and which are not ever on the table at the WTO.
Agriculture is different. Food represents the most basic human need. Therefore farming has social, political, economic and even moral significance that separates it from other commercial enterprises in both developed and developing countries. This has necessitated a public policy goal, on a global scale, of developing and maintaining excess production capacity that would not exist in other businesses. Additionally, agriculture does not quickly or easily adjust to reflect market conditions. This inability to self-correct is due to several factors. The agricultural resource base, primarily farm and pastureland as well as specialized equipment has few alternative uses. Individual producers have little power to influence production or prices. Agricultural markets are inelastic - changes in commodity prices have little impact on consumption or production.
As we look beyond Cancun, all parties to the negotiations should consider what is needed to resolve the conflict that has resulted from the narrow scope of the existing agricultural trade agenda and apparent unwillingness to address the issue most important to agricultural producers - the price received for their commodities. I believe agricultural trade solutions must be developed in a cooperative fashion that actually lead to improved economic sustainability for producers and preserve the autonomy and flexibility of individual nations to determine their policies as long as they are consistent with this broader objective. In addition, it is imperative that any agreement address global hunger and long term food security issues.
By committing to these new objectives in a cooperative manner, agricultural trade agreements can be part of a solution to enhancing producer returns in a way that is fair, reflects national priorities and sovereignty and reduces the public cost of all forms of trade distorting intervention. In addition, this approach is consistent with the goal of eliminating world hunger, guaranteeing food security for all and establishing conditions where the negative effects of market concentration are reduced.
For farmers all over the world, success at the WTO requires a restructuring of the agricultural marketplace. Farmers must no longer be pitted against one another in unfettered competition. Federal treasuries must be allowed to support their national priorities without encouraging commodity dumping and other agricultural market disruptions. And, the "race to the bottom" in commodity prices must be brought to a halt.
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