The Grocery Manufactures of America (GMA) welcomes this opportunity to present our views on the Free Trade Area of the Americas (FTAA) negotiations. GMA supports the FTAA negotiations and has actively participated in the both the Toronto and Buenos Aires Americas Business Forums.

GMA is the world's largest association of food, beverage and consumer product companies. With US sales of more than $460 billion, GMA members employ more than 2.5 million workers in all 50 states. The organization applies legal, scientific and political expertise from its member companies to vital food, nutrition and public policy issues affecting the industry. Led by a board of 42 Chief Executive Officers, GMA speaks for food and consumer product manufacturers at the state, federal and international levels on legislative and regulatory issues. The association also leads efforts to increase productivity, efficiency and growth in the food, beverage and consumer products industry.

GMA views the FTAA negotiations as an important opportunity to build upon the success of the North American Free Trade Agreement (NAFTA), and enhance economic integration throughout the Western Hemisphere. In FY-2001, US exports of processed food products to the hemisphere reached their highest level since 1970. In fact, at roughly $9.44 billion, processed food exports alone represent 39 percent of all US agricultural exports to the region.

Yet, despite this optimistic outlook, food manufacturers have been unable to realize the full potential of the market due to trade barriers in the region. GMA believes the FTAA process is an appropriate vehicle through which to address these impediments. The following are GMA’s specific comments with respect to negotiating modalities for the FTAA, and in particular, those of the Agriculture Negotiating Group. In addition, we also offer comments on the prospects for success of the negotiations.

Barriers to processed food and beverages in the FTAA countries remain significantly higher than those for many other products. And, although the WTO Agreement on Agriculture delivered some benefits, the reductions in tariffs for processed foods and beverages were mostly at the lower end of the allowable range. Because the rules allowed countries to average their tariff cuts, countries naturally chose to make high percentage reductions on already low tariffs and lower percentage reductions on higher tariffs. Consequently, tariffs on processed food product exports to the region range between 20 to 40 percent and, in some cases, exceed 100 percent.

To address these barriers, GMA recommends tariff elimination based on a formula approach that will accelerate the elimination of tariff peaks (asymmetrically high tariffs) and address the problem of tariff escalation, where tariffs increase with the level of processing. This approach should, in essence, reduce the higher tariffs faster than the lower ones to create meaningful market access for processed food products in a reasonable time frame. GMA also suggests that negotiations should also result in elimination of non-tariff barriers to processed food products. In addition, we recommend that this liberalization in tariff and non-tariff barriers be completed in less than the ten-year period negotiated in the NAFTA.

GMA also believes that there should be no product or policy exceptions in the FTAA negotiations. For the benefits of the FTAA to be truly realized by the food processing industry, it is imperative that sugar, peanuts and dairy be subject to meaningful reform and liberalization throughout the hemisphere. Tariff-rate quotas (TRQ), which are often utilized to provide access for sensitive commodities, must be employed judiciously and administered in a market-oriented and pro-competitive manner. Finally, we recommend that the negotiations on tariff reductions begin from applied rather than bound rates to ensure commercially meaningful reductions in a reasonable timeframe.

GMA supports the Ministerial objective of a hemisphere-wide "subsidy free zone." Export subsidies artificially distort world market prices and steal market share from efficient producers. Elimination and prohibition of future subsidies in the FTAA is an important fist step toward multilateral commitments in the same area.

GMA believes the most effective means for achieving a reduction in domestic support for agricultural commodities will come through increased market access and an elimination of export subsidies. We recommends however, that any continued domestic support be decoupled from production so that it is the least trade distorting as possible, consistent with provisions in WTO Agreement on Agriculture.

We urge negotiators to ensure that any FTAA sanitary and phytosanitary regulations are fully consistent with the WTO Agreement on Sanitary and Phytosanitary Measures (SPS) and based soundly on science. Sound science should necessarily be at the core of any agreement in order to ensure that national health and safety regulations are not used as disguised barriers to trade. In addition, we support increased cooperation and consultation on SPS-related trade barriers in the region. We recommend that the US consider a NAFTA-like SPS committee to work on harmonization of science-based regulations and standards throughout the region.

GMA firmly believes that the success of the FTAA is necessarily linked to the launch of a new round of negotiations in the WTO and the passage of Trade Promotion Authority.

Agriculture has emerged as one of the most contentious sectors in the FTAA negotiations. For example, at the April Trade Ministerial in Buenos Aires, many countries argued for a direct linkage between reductions in domestic support and reductions in tariffs. In addition, although countries have committed to the elimination of export subsidies in the region, they are conflicted as to how to deal with subsidized exports from third country markets. Unfortunately, these issues cannot realistically be solved in the FTAA context. Rather, they must be addressed in a multilateral context to achieve meaningful commitments from all trading partners. It makes no sense for the US to "unilaterally disarm" and lose leverage against our most significant and reluctant trading partners, the EU and Japan. Put simply, it is unlikely there will be an FTAA agreement without agriculture and extremely difficult to achieve any results in agriculture negotiations in the FTAA without a comprehensive round of negotiations in the WTO.

Trade Promotion Authority (TPA) is an essential and necessary tool for progress in the FTAA. TPA establishes a partnership between the Administration and the Congress that protects trade agreements negotiated by the Administration from amendment during congressional consideration. With TPA, the Administration can ensure trading partners that commitments made during negotiations will be honored when Congress considers these trade agreements. Without TPA, it is unlikely that trading partners will put forth meaningful offers for fear concessions will be withdrawn later. GMA is committed to the passage of Trade Promotion Authority by the end of this year.

Thank you for this opportunity to share our views on the Free Trade Area of the Americas. GMA firmly believes that it is of critical importance to farmers and producers alike to continue to expand market access, reduce tariffs and dismantle barriers to food and agricultural products. Achieving the objectives discussed above will benefit consumers throughout the hemisphere with a more reliable, diverse, safe and affordable food supply. We look forward to working with you and the Administration to achieve these goals.