Statement of Wayne Wood, President, Michigan Farm Bureau, Lansing, Michigan,
 on behalf of the American Farm Bureau Federation

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing to Explore Permanent Normal Trade Relations for Russia

April 11, 2002

Mr. Chairman, Ranking Member and members of the Committee, the American Farm Bureau Federation (AFBF) appreciates the opportunity to testify on the important issue of granting Permanent Normal Trade Relations status to the Russian Federation.

AFBF is the largest agricultural organization in the nation with over 5.1 million member families.  Our producer members cultivate every commodity grown in the United States and Puerto Rico and rely on trade for more than 30 percent of their farm income.

The ability to access Russia’s market, on terms that are favorable to our farmers and provide a level of certainty and transparency, is critically important.  That is why we welcome the eventual membership of Russia into the World Trade Organization to provide rules-based commitments for our bilateral trade relationship.  However, there are a number of important issues outstanding in the agricultural concessions of Russia’s accession agreement that must be satisfactorily addressed.

The Russian market offers an important opportunity for the U.S. food and agricultural sector.  However, it remains a largely untapped market for our exports for a number of reasons, not the least of which are inconsistent regulations, arbitrary bans and discriminatory preferences for other countries. These practices are not in accordance with international rules.  We must bring Russia into the global trading body to ensure that it begins to play by the rules.

Chief among our concerns with Russia is the arbitrary, unjustified ban that Russian authorities placed on our poultry exports to its market last month.  The ban lacked scientific merit and immediately shut the door on our largest poultry export market valued annually in excess of $660 million.  U.S. poultry exports to that market represent nearly 40 percent of our total foreign poultry shipments and constitute over 24 percent of the overall U.S.-Russian trade.

This is the second ban that Russia has suddenly and arbitrarily placed on our poultry exports.  In 1996, the Russians imposed a poultry ban on U.S. imports that was strikingly similar to the current ban.  Ultimately, a bilateral agreement was reached that resolved the issue.  Russian authorities are now alleging that the 1996 agreement is no longer valid.  The Russian market has been a top destination for our poultry exports for nearly 10 years, mostly without incident.  U.S. poultry exports to Russia have steadily climbed, with significant increases experienced immediately proceeding both poultry bans.  This is not without coincidence.

We also understand that Russian authorities, at the request of their domestic poultry industry, are considering implementing new quotas on imported poultry as early as this year.  This would be a very troubling development in advance of their accession to the WTO, which is intended to further liberalize – not restrict – the Russian market.

Russia already has established WTO-illegal minimum import prices for meat and poultry and recently the Duma passed legislation authorizing the implementation of tariff-rate quotas (TRQ's) for meat and poultry imports.  Notwithstanding the minimum import price rules, Russia has been the top U.S. poultry export market and one of the largest markets for U.S. beef and pork exports.  Implementation of the TRQ's would be a severe blow to U.S meat and poultry producers.  We strongly oppose the implementation of quantitative restrictions on Russian meat and poultry imports.

The agricultural concessions offered by Russia to date for its accession to the WTO are unacceptable.  The Doha Declaration calls for countries to eliminate export subsidies, yet Russia has requested authorization to use $726 million in export subsidies.  The trend is for WTO accession countries to eliminate export subsidies, as China agreed to do.

On domestic supports, Russia’s accession offer calls for an eight-fold increase in its trade distorting domestic supports from $2 billion to $16 billion, which indicates that Russia would like to further insulate its domestic producers from global market forces.

Farm Bureau supports Russia’s accession into the WTO once the following terms are met:

Export Subsidies

Elimination of agricultural export subsidies, consistent with the WTO accession agreement reached with China.

Market Access

Russian food and agricultural tariffs should be reduced sharply. Tariff reductions should be as comprehensive as possible and implemented on an accelerated schedule.

Under no circumstances should Russia be permitted to establish tariff rate quotas for products for which there is no recent history of a TRQ.

Products that currently are subjected to a low tariff should be bound at that rate, or lower.

Product Specific Market Access Issues:

Equitable treatment should be accorded to all countries that export product to Russia. Currently, wheat imports are assessed a twelve percent tariff, except those originating from Commonwealth of Independent States (CIS) countries (zero tariffs).  Certain discriminatory tariff discounts for soy oil imports that are extended to other countries must be provided on a most favored nation basis.

The United States should seek to achieve final bound tariff levels of no more than 10 percent for all cheese items and butter products.  Likewise, tariffs on skim milk powder and ice cream should also be maintained at a level no higher than 10 percent.

Russia maintains a minimum price invoicing system on imported meat.  Establishing minimum or target prices for imported products is contrary to WTO rules.  This system should be abolished.

Feed grains currently enjoy access into Russia’s market with a five-percent tariff and are not subject to a TRQ.  However, since imports from CIS countries and some developing countries receive duty free status, feed grain tariffs should be reduced from the five-percent tariff.

There is a 10 percent value added tax (VAT) on all products domestically produced or imported into Russia. This tax is not assessed on Russian exports, and, given the inability of the Russian tax collection system to accurately account for all the domestic production or cross border trade, it is likely that a significant amount of domestic production and imports from CIS countries escape the 10 percent VAT assessment, further disadvantaging U.S. exports.

Domestic Support Payments

The bar should not be lowered for Russia.  Trade-distorting domestic support should be limited to a level equal to, or lower than, historical levels of Russian support payments to its agricultural sector or that amount which other countries entering the WTO have been held to as a percentage of their total value of agricultural production.  Amber box qualifying de minimis product specific and non-product specific payments should not exceed 8.5 percent, consistent with the WTO accession agreement reached with China.

SPS Measures

Russia should meet all obligations specified under the WTO Agreement on Sanitary and Phytosanitary Measures.

The administration should ensure that Russian sanitary and phytosanitary measures that are not based on science, and/or represent arbitrary and unjustifiable health and safety regulations, are removed prior to Russia’s accession to the WTO.  

Russia should not be permitted to nullify or impair its market access commitments through the use of sanitary barriers.

As part of its accession agreement, Russia should agree to terminate sanitary measures that impede imports of U.S. agricultural products and have no scientific basis. 

Specific SPS issues to be addressed

Russia should agree to accept meats from all U.S. federally inspected plants.  Current Russian requirements for U.S. meats related to trichinae and vesicular stomatitis that have no scientific basis, and that impede market access, should be eliminated.

A bilateral agreement on pest/weed levels & quarantine issues should be achieved. Russian restrictions on pests/weeds, that are not necessary for quarantine purposes and lack scientific merit, should be eliminated.

The U.S. government needs to ensure that products of biotechnology do not become an impediment to trade.  Prior to WTO accession, the administration should get an official commitment from the Russian government to let trade of biotech products already in the marketplace continue uninterrupted, and that any implementation of rules governing biotechnology be transparent, timely, and scientifically based.

We oppose mandatory labeling requirements for genetically modified foods or agricultural commodities, including any requirement that meats be labeled to indicate that the animal had consumed genetically modified feed.

Other Non-Tariff Barriers

Russia should agree to adopt internationally accepted standards/specifications, including those pertaining to soybean and soybean products.  Current differences in the Russian GOST Standards (Russian State Standards) and the FGIS and NOPA standards, as well as differences in the method of analysis and terminology for the standards, impede timely market access.

Trade Facilitation

Measures should be implemented to improve and standardize Russia’s customs procedures consistent with acceptable international commercial practices.

Coordination of all the Russian governmental bodies and documentation requirements necessary to import commodities and clear cargo should be achieved.  Currently there are numerous documents required by various Russian governmental bodies with each promulgating their own rules, absent central control.  Approximately 80 percent of goods imported into Russia require certificates, compared with only 16 percent in the EU.

Permanent Normal Trade Relations Status

Farm Bureau cannot support granting Permanent Normal Trade Relations status to Russia until its ban on our poultry exports is fully lifted and resumption of our poultry exports to the Russian market approximates previous levels.  We note that the de-listing of certain poultry plants for export to Russia could be used to curtail future imports, a development that we would strongly oppose.

In addition, the Farm Bureau seeks assurances regarding commitments to seek Farm Bureau’s objectives outlined above for Russia’s WTO accession.  We are working with the administration closely on this matter and appreciate the efforts of the Office of the United States Trade Representative in attempting to build our sector’s confidence that a meaningful accession package that accommodates our concerns will be achieved.  We look forward to a firm commitment in this regard.

In closing, the overall U.S.-Russia trade relationship strongly favors Russia with its exports to our market reaching $6.5 billion, compared to $2.5 billion in U.S. exports.  Unfortunately, our agricultural trade relationship with Russia has been severely damaged by its arbitrary and unjustifiable ban on our largest export to its market, poultry.  Every effort must be taken to ensure that this issue is resolved in a manner that rapidly restores our access to that market and ensures that actions of this nature are not allowed to disrupt the important relationship that our country is trying to build with that nation.  We recognize the significance of granting Permanent Normal Trade Relations status to Russia, but regret that we cannot endorse PNTR until this important issue is fully resolved.