February 12, 2005
Good morning ladles and gentlemen.
Let me begin my remarks with a few general comments about the U.S. trade agenda in general, and then specifically discuss NFU recommendations to restore profitability to farmers and ranchers worldwide.
I don’t believe there is any question but that farmers are increasingly skeptical about the impact of globalization, market concentration and trade agreements on their operations. For decades, we have been told time and time again that economic prosperity based on free trade is just around the corner. As producers we never seem to make it to that corner.
In part this is due to a flawed process and policy agenda that fails to recognize the unique nature of production agriculture here and abroad, and in part due to the exaggeration and misrepresentation by free trade advocates of the importance of trade to the economic well being of farmers. These concerns cut across all trade negotiations and agreements from the multilateral trade talks under the auspices of the World Trade Organization to the bilateral and regional free trade agreements the U. S. is so aggressively pursuing.
The issues under discussion, while important, fail to ensure producers will actually realize greater economic returns or stability, or address major factors that determine our global competitiveness including exchange rates, labor and environmental standards, and the impact of agricultural integration and concentration.
The strategy for the numerous free trade agreements being negotiated by the United States appears to employ an incremental approach to specific, sensitive commodities which serves to divide farmers and their organizations based on whether they expect to be harmed or not. These negotiation and agreements offer very little in the way of real trade opportunities for U.S. farmers. For the most part, the proposed free trade agreements have been with countries that have limited economic capacity to substantially increase their imports of U.S. farm commodities, while most represent real competition in both third world countries and our domestic agricultural markets for a wide range of agricultural products.
Furthermore, we are very concerned that the recently concluded WTO framework agreement may well set us up for even greater sacrifices at the alter of free trade in terms of inviting even more imports while being committed to reductions in domestic safety net programs before any benefits accrue to U.S. farmers.
Concerning the rhetoric and overstatements of the free trade advocates, free trade proponents lead one to believe that without trade agreements U.S. agricultural commodities would not move in world commerce. However, from 1985 to 1994, since the adoption of the Uruguay Round Agreement on Agriculture, our agricultural exports as valued by U.S. Customs grew by nearly 41 percent while imports rose 35 percent. From 1994 to 2003, after agricultural trade became subject to rules designed to improve market access, curtail export subsidies and reduce domestic safety net programs, our exports increased only 34.4 percent while imports rose over 86 percent and our agricultural trade surplus declined dramatically. Agricultural trade growth in some commodity markets such as Canada and Mexico, were more than offset by losses in others.
In addition, Secretary Veneman and many others are quick to cite the percentage of farm sales that result from exports, which they estimate will be about 27 percent this year, or about 1 out of every 3 acres of production. What they fail to explain is that they are comparing apples to oranges. The value of imports that compete with, and displace U.S. products in our domestic markets are not considered. Neither is the fact explained that the U.S. Customs value they utilize is determined on a “free alongside ship” basis. Their data includes the value of processing, transportation and other factors to put agricultural products, not necessarily farm commodities, in an export position. We estimate the farm gate value of U.S. agricultural exports amounts to about 6 percent of the total crop and livestock sales by producers when the value of competitive imports for non-farm inputs arc considered, not the 27 percent that has been cited. In addition, as the exports of more so-called value-added products increase as a percentage of total agricultural exports, the actual farm gate share of trade will decline even further.
The National Farmers Union is concerned that the current U.S. agenda at the WTO trade talks and numerous free trade agreement negotiations is not serving the best interests of America’s farmers and ranchers but is designed to continue an unfair, competitive “race to the bottom” in commodity prices and the economic security of U.S. farmers.
NFU is very concerned about the WTO framework agreement for the following reasons:
* The interests of farmers and ranchers have been traded away for agri-business and non-agriculture sectors.
* It does not identify a plan to improve economic returns to producers, and restore profitability.
* Fails to address specific trade distorting competitiveness issues such as, currency manipulation, labor and environmental standards.
* Contains greater specificity that will apply to future negotiations regarding domestic supports, while less specific, even vague about the future negotiations on market access and subsidies.
* Does not clarify how developing country status is to be determined.
* The agreement does nothing to stop the ‘Race to the Bottom’ of commodity prices.
* The agreement continues to pit ‘farmer against farmer’, ‘country vs. country’ to lower commodity prices.
* It does nothing to address the growing threat of global concentration by the multinational processing, retail, and supply conglomerates.
If we are to successfully turn this situation around, it is critical that producers and their organizations around the world stick together in challenging the negative components of each of these trade deals and promote trade policies that will truly level the playing field. At the same time we must demonstrate a willingness to work with other interests who share these concerns.
The National Farmers Union has been advocating a different approach to world trade — one that puts a greater emphasis on farmer profitability. It outlines many of the concerns, which affect producers in both the developed and developing world. Our proposal also discusses many of the issues we believe have been ignored in the negotiations and suggests an outcome for the negotiations that could achieve the aforementioned goals for agricultural trade that the vast majority of the world’s farmers share.
In summary, our proposal suggests an alternative to the destructive “Race to the Bottom” in commodity prices that is costing developed countries billions of dollars each year and jeopardizing the ability of developing nations to provide an adequate standard of living for their citizens.
Through a greater level of cooperation, we believe it is possible to achieve a constructive long term balance in supply, demand and producer prices within reasonable parameters that reduce the need for nations to engage in the level of unfair trade practices that exist today.
We believe it is possible to dramatically expand the demand for agricultural products in both the traditional food and fiber markets as well as industrial products such as renewable fuels. This will reduce the problems associated with increased production capacity that predictable results in commercial surpluses, depressed producers prices and direct or indirect dumping.
We also propose that developed nations, both exporters and importers, agree to establish and maintain limited, strategic reserves of basic food commodities in order to meet the humanitarian, food security and growing alternative market needs of the world community in case of production shortfalls.
Finally, should excess capacity continue to undermine the economic stability and sustainability of production agriculture, we propose that the major exporting nations commit to equitably shared responsibilities in the management of production and stocks to maintain the desired supply and demand balance.
|Texas Farmers Union, P.O. Box 738, Sweetwater, Tx 79556|