Statement of Bob Stallman, President, American Farm Bureau Federation

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

Hearing on Renewal of Normal Trade Relations with China

July 10, 2001

I appreciate the opportunity to speak with you today about china trade and the importance of granting normal trade relations to China.

For more than two decades, American commercial engagement has served as a cornerstone of improved U.S.-China relations. We support renewal of normal trade relations with China and underscore the importance of finalizing a U.S.-China WTO Accession Agreement soon.

At this critical juncture, when U.S.-China relations are under strain, it is vital that America maintains a stable economic relationship with China and forges ahead in completing China's accession to the WTO. A WTO agreement is overwhelmingly in America's interest and U.S. farmers and ranchers stand to realize huge improvements in access to China's expanding markets.

We are mindful of, and take very seriously, concerns that have been raised regarding sensitive security and military issues regarding China. These issues are important to all Americans. It is our view, however, that China is at a pivotal point between the hardliners and the reformists. Granting NTR status to China will signal U.S. support for the reformist movement and will pave the way for strengthened economic and political ties between our two nations.

Strengthening economic ties with China is in the best interest of our country. Our economic relationship with China is extremely important to the U.S. agricultural sector and will grow even more important once China joins the WTO.

Currently, China is the sixth largest export market for U.S. agricultural goods, exceeding $1.7 billion. Together, China and Hong Kong represent the second largest market for U.S. soybean exports and the third largest market for U.S. poultry meat.

At a time when most U.S. agricultural commodities are experiencing the lowest prices in decades, stable access to China's market is critical.

Good trade relations with China are a necessary condition for completing China's accession to the WTO. USDA forecasts that our number one growth export market over the coming decade will be China. We must bring China into the WTO under the terms of the bilateral agreement reached between our two countries.

Recently, the United States and China reached an agreement on domestic support spending. The agreement stipulates that China will not be allowed to spend in excess of 8.5 percent of the value of its agricultural production on product and non-product specific domestic supports. In addition, China waived its right to use other developing country subsidies. Farm Bureau would have preferred that the United States hold the limit on the amount of domestic agriculture support at the five percent ceiling required for developed countries. However, we reluctantly accepted the compromise to break the impasse in negotiations on China's accession to the WTO.

Upon entry into the WTO, China will have to play by the trade rules that are currently observed by the rest of the world. U.S. farmers and ranchers will be granted significant access to China's market for a number of commodities. Given today's low prices, access into China's market is critically important for our agricultural economy.

Granting NTR will continue to foster the cooperative trade relations that are needed in order to complete China's accession into the WTO. It is essential that China join the WTO before a new round of trade talks is launched in that important multilateral trading institution. We hope to have China at the negotiating table when a new round is launched so that additional market access can be negotiated for U.S. farmers and ranchers to supply China's growing market.

We also hope to use the bilateral deal that the United States reached with China as part of the terms of accession as a model for agricultural negotiations on export subsidies and state trading enterprises. In both instances, China agreed to path breaking commitments to eliminate export subsidies and discipline state trading operations.

One often overlooked fact is that China's accession into the WTO is synonymous with Taiwan's accession. Taiwan is an important market for U.S. agricultural exports. Taiwan represents our third largest market for coarse grains, fourth for fresh fruit, fifth for soybeans and sixth for red meats. Building on our important bilateral trading relationship with Taiwan is essential for the future viability of U.S. agriculture.

There are two important issues that must be resolved before China is allowed entry into the WTO. First, resolution of the bilateral agreement on sanitary and phytosanitary measures affecting U.S. meat, citrus and grain exports must be fully implemented. We understand that China has not fully complied with the letter of the agreement on grains. Full compliance and the commencement of U.S. exports of these commodities will signal that China intends to fulfill its international obligations.

Second, we understand that China is developing rules that will govern export approval for bioengineered commodities. To date we have not received full notification of the requirements that will be associated with China's regulations. The potential for China to disrupt U.S. grain trade with these regulations is significant. These regulations must be clarified and ultimately implemented in a manner that is consistent with WTO rules. Any standards associated with these regulations should not block market access for U.S. agricultural exports. Without such clarification, China should not be allowed entry into the WTO.

In summary, maintaining our current level of exports to China with an eye on sizeable increases when China joins the WTO is very important at a time when our agricultural economy needs to be strengthened. Granting NTR status to China this year is a critical step in that process.

We look forward to working with members of this Committee to secure NTR status for China, to finalize China's accession into the WTO and to enable American farmers and ranchers to more fairly compete to supply the food and fiber China's 1.3 billion consumers need.