Statement of Sara Lilygren, Vice President for Federal Government Relations, Tyson Foods, Inc., on behalf of National Chicken Council

Testimony Before the Full Committee
of the House Committee on Ways and Means

July 12, 2006

Thank you, Chairman Thomas, Ranking Member Rangel, and Members of the Committee for the opportunity to present the U.S. poultry and egg producers/processors views, comments, and recommendations regarding the implementation of the U.S.-Peru Trade Promotion Agreement.  On behalf of the National Chicken Council, the USA Poultry and Egg Export Council, the National Turkey Federation, and the United Egg Producers, I am pleased to share the position of these organizations on the important issue of today’s hearing.

I am Sara Lilygren, Vice President of Federal Governmental Relations for Tyson Foods.  I am pleased to represent the organizations supporting the comments being presented.  Tyson Foods is the leading processor of chicken in the United States with more than 6,500 family farms producing the live birds for the company.  Tyson is also a leading processor of beef and pork.  Exports are a vital part of the economic well-being of Tyson Foods and the U.S. poultry and egg industry.

U.S. poultry associations have long been strong supporters of this Administration’s continuing efforts to liberalize international trade and, in particular, of its efforts to forge free trade arrangements with certain developing and emerging economies in the Western Hemisphere.  The U.S. poultry industry was a strong supporter of the NAFTA agreement and has worked diligently with both the United States government and with its counterpart industry in Mexico to ensure a successful and mutually acceptable implementation.  Several years ago, when difficulties arose with respect to Mexico’s implementation of its original NAFTA poultry access commitment on chicken leg quarters, the U.S. poultry export industry met with its Mexican counterparts and developed a joint proposal to resolve the issue through a mutually-acceptable exercise of the NAFTA safeguard provisions.  That proposal was eventually accepted by both governments and liberalization of the NAFTA poultry markets continued without unnecessary trade disruption.

Similarly, the U.S. poultry and egg export industries were active in assisting the U.S. government to achieve a successful resolution of poultry market access during the CAFTA negotiations.  All the Central American countries had identified poultry products and, specifically, chicken leg quarters, as particularly sensitive.  Rather than allow poultry issues to undermine the negotiations, the U.S. poultry and egg industry met with representatives of its counterpart industries in Central America and, through a series of meetings over more than a year, forged a mutually-acceptable proposal for CAFTA poultry market access that was similar in many respects to the solution that had been achieved in NAFTA.  The proposal was also accepted by the respective governments and became the basis for the poultry market access commitments in the CAFTA. 

The U.S. poultry industry has not yet realized the benefits of the CAFTA negotiations.  Full CAFTA implementation has been delayed while the parties work to resolve disagreements about the methods of implementation for some agricultural products, for intellectual property, and for textiles.  However, industry leaders are hopeful that significantly improved market access will be achieved soon.  The CAFTA came into force with respect to El Salvador, Honduras and Nicaragua earlier this year, and with Guatemala on the first of this month.  Guatemala is now officially in CAFTA and is a key player in poultry trade.  The U.S. industry will begin to benefit from a new 21,800 metric ton Tariff Rate Quota (TRQ) for chicken leg quarters, as well as immediate liberalization or significantly lower tariff rates for all other poultry and egg items.  A joint arrangement for an export trading company is a key component in the process involved in filling the TRQ for leg quarters.

In recent months there have been certain significant steps taken by some of our CAFTA partners to recognize and accept USDA regulatory systems.  In particular, certain progress has been made involving APHIS’s system for determining the prevalence of animal diseases and FSIS’s system for approving and inspecting poultry processing facilities.  However, more needs to be achieved in that area. For example, El Salvador continues to block imports of U.S. shell eggs and poultry by imposing questionable sanitary inspection requirements and that issue needs to be resolved quickly before other countries implement similar measures, like the ones published by Honduras last month.  More progress needs to be achieved for the market access for U.S. eggs and poultry negotiated in the agreement.  Some progress is being achieved with CAFTA partners on Sanitary/Phytosanitary (SPS), issues. The U.S. government continues to press for additional improvement on these issue.

As in the cases of NAFTA and CAFTA, the U.S. poultry industry has supported the Administration’s efforts to forge free trade agreements with the countries of the Andean region.  In anticipation of Andean FTA negotiations, representatives of the U.S. poultry industry met on several occasions with their counterpart industries in that region, once in Atlanta and once in Cartagena, Colombia.  They were never able to develop a joint proposal as they had in the NAFTA and CAFTA cases.  Nonetheless, the U.S. industry has continued its dialogue with the Andean region poultry industries during the course of the negotiations.  Moreover, the industry has worked very closely with our government negotiators both at the Office of the U.S. Trade Representative and within the U.S. Department of Agriculture to ensure that they fully understood the poultry and egg industries’ interests in the negotiations as well as the areas in which it was possible to construct compromise solutions and longer-term liberalization scenarios in order to ensure successful negotiations. 

Those close working relationships have been advantageous both to our industry and to the U.S. government, as is evident by the results recently achieved in the U.S.-Peru Trade Promotion Agreement (TPA).  The U.S.-Peru FPA clearly represents one of the best market access arrangements for poultry ever negotiated in a free trade agreement.  The arrangement recognizes interests on both sides of the table, providing immediate or near term market access for nearly all poultry products, while liberalizing trade in the most sensitive product – chicken leg quarters.  The trade of chicken leg quarters is addressed through the use of a tariff rate quota over a longer period of time.  Appropriately, the U.S. industry will gain immediate market access, duty-free, for 12,000 metric tons of chicken leg quarters.  Initially, any additional CLQ imports will be subject to a reasonable over-quota duty of 25 percent, but that duty will be slowly reduced and eliminated over time. The agreement also has a growth factor so that, over ten years, the amount of duty free access will grow to approximately 24,000 metric tons.  This approach presents a considerable opportunity.  The United States has never exported more than 2,400 metric tons of poultry, and that includes all poultry products, to Peru in any year.

In the meantime, the tariffs on all other products will be eliminated immediately, or will be reduced and eliminated over the next five years.  A few issues remain to be clarified.  For example, the U.S.-Peru TPA calls for TRQ access on a “first-come-first-served” basis.  The industry awaits further information on how such a system will operate.  However, for the most part, the U.S.-Peru TPA negotiations have been a great success and, hopefully, will provide the model for poultry market access negotiations in future free trade agreements.

In reaching agreement on the Peru TPA, U.S. government negotiators also achieved a number of improvements over past agreements TPA’s.  Most notably, the U.S. government obtained specific commitments on the part of the Peruvian government to recognize and accept the APHIS system for determining disease status and the FSIS system for approving poultry slaughter and processing facilities.  In the past, U.S. poultry exports to Peru have been blocked by Peruvian regulators on grounds that the U.S. product allegedly posed a threat of avian influenza and Newcastle disease or even Salmonella.  Hopefully, the commitments that Peru has now made to respect decisions of U.S. animal health regulators will ensure that the U.S. industry will benefit immediately from the market access provisions of the agreement and will not have those benefits blocked by the imposition of non-tariffs barriers in the form of dubious SPS requirements. In this regard, the Peruvian agreement is a further improvement on past agreements in that our government negotiators have anticipated some of the basic implementation problems that we have experienced in the past and have taken additional measures to try to ensure implementation occurs more quickly and smoothly in the case of Peru.

There have been concerns voiced by some that a trade agreement with the United States could be ruinous to industries in less developed countries.  In the case of poultry trade, we do not believe that will be true for several reasons.  First, the U.S. poultry and egg industries have made it their practice to accommodate particularly sensitive situations when they occur so that mutually acceptable terms can be incorporated into these agreements.  In short, our industry sees that it is in their interest to be accepted as welcome participants in these markets.  Secondly, a free trade area with the United States provides a developing country with the opportunity to significantly raise the standard of living for many of its citizens and thereby to increase the consumption of poultry products to the benefit of both the domestic and the U.S. poultry industries.  Economic studies have shown that when the economies of developing counties improve and their low-income citizens become middle class, the first thing that they spend their extra income on is an improved diet with additional farm agriculture animal protein.  And, the least costly and most dependable source of dietary protein in the world is poultry and egg products.  In other words, in the context of a free trade agreement, the U.S. poultry and egg industry and the domestic industry of our free trade partner are not competing over a fixed pie with a result that increased imports simply displace domestic production.  The greater economic prosperity occasioned by a successful free trade agreement can mean a larger market for both domestic and imported poultry and eggs.  

In conclusions, Mr. Chairman, the U.S. poultry and egg industry, especially its export segment, has worked long and diligently to support the Administration in its free trade initiatives, particularly those in the Western Hemisphere.  In the course of achieving NAFTA and CAFTA, we have developed an excellent working relationship with our government negotiators, and have reached out to our counterpart industries in those countries to help guarantee a successful negotiations and also to achieve mutually acceptable results for both industries.  Those efforts have clearly paid dividends with the conclusion of the U.S.-Peru TPA that represents the best package of market access commitments obtained thus far.  We congratulate the USTR and USDA negotiators on their work in that agreement.  We respectfully ask this committee and its members to fully support the U.S-Peru TPA when it is ultimately submitted for congressional approval.

U.S. Poultry and Egg Exports to Peru

2001 to Present

• The National Chicken Council (NCC) represents companies that produce and process about 95 percent of the young meat chickens (broilers) in the United States.

• The USA Poultry & Egg Export Council (USAPEEC) represents companies that export over 95 percent of U.S. poultry and eggs sold into international markets.

• The National Turkey Federation (NTF) represents 98 percent of the U.S. turkey industry, including processors, growers, breeders, hatcheries, and allied industry companies.

• The United Egg Producers (UEP) represents companies that produce over 90 percent of the shell eggs.