swer, Mr. Smith, to Chairman Crane. I hope everybody will hear. You say that we meaningfully need to begin to go down the road. I think people should understand no one is expecting overnight transformations. One is hopeful, and one can expect a structure that assures meaningful movement. I kind of chuckled, Mr. Dawson, when you described so effectively what is at stake with information technology. There will be controversy about some of these issues. An earlier panelist suggested we shy away from controversy at Seattle. Lord, there has never been a meaningful trade negotiation that was not embedded in controversy. It is going to be difficult. On environmental issues we face a real struggle over the Kyoto agreement as to the extent to which evolving economies participate in the evolution-not the revolution, the evolution of environmental standards. And until that is resolved, I don't think the Kyoto agreement will ever get the votes in the Senate. I think the same is true of labor market issues and with information technology. You are cautious, you do not want us to push issues before they are ripe, but I take it you want us to press issues to help make them become ripe. I think we need to do exactly that at Seattle to set the stage. You know, the issue of taxation in terms of the Internet is a controversial issue internally within this country, and you can just imagine what is going to happen as we confront it internationally. And it will be controversial, but we in this country have certainly faith in the evolution of free markets, and I think they should include all kinds of market, capital markets and labor markets, and I think increasingly that will have to be true of information technology. And I think we will expect some resistance, right? Mr. DAWSON. I did not mean to paint a picture that was without controversy. Mr. LEVIN. I am agreeing. I think it will be controversial. Mr. DAWSON. We are not cattle or bananas yet, though, I must admit. Mr. LEVIN. No, but it could happen quickly. Mr. DAWSON. Yes. Mr. LEVIN. I am not sure of that analogy, but we are having immense trouble with bananas and cattle, and I suspect the notion we had trouble at Singapore, so do not even unfold our tent, that is nonsense in the labor market issues. And the same is going to be true of the burgeoning information technology issues. They are doomed to be controversial because they are meaningful, right? And we have to figure out how far we want to go at Seattle. Expect resistance. But we have in mind the evolution of markets in terms of information technology. But I need to go and leave and see if I can get a ticket for my grandson on the Internet so I can take him back to Michigan. Through a travel agency. But anyway, Mr. Chairman, this has been a very useful hearing, and I think this last panel has really raised some vital issues, and we need to be in much further discussion. Mr. Pepper, while he was here, talked to Mr. Smith about this group within ACTPN chaired by Mr. Sweeney, Mr. Donahue, and we wish them the best. Mr. SMITH. Controversy is never very far away, but we are working at it hard. Mr. LEVIN. Good luck. Chairman CRANE. Could I add one quickie to some of Sandy's inquiries? Is there a chance that our trading partners will seek to define electronic commerce as a service rather than a good in order to escape the more rigorous guidelines and requirements? Mr. DAWSON. Yes. We are trying to lead them down a track that is difficult because we are describing it as being neither. Actually it is something quite different. And so that in and of itself is a substantial part of our educational effort, that things can be a medium, a product, a good at one point, and they can be converted in commerce to a service. And it is a more exotic existence than what we are used to in this kind of binary world of goods and services. Chairman CRANE. Well, there are more rigorous disciplines that apply to goods. That is why I was curious. Well, gentlemen, I want to thank you all for your participation. And as I told an earlier panel, please keep the channels of communication going, because this is an ongoing battle, and it is not even going to be totally resolved in Seattle come the end of November or early December. But at least, God willing, and thanks to your input, we will make progress. Thank you all. [Whereupon, at 3:40 p.m., the hearing was adjourned.] [Submissions for the record follow:] AD HOC WTO ROUND PROCESSED FOOD COALITION WASHINGTON, DC 20006 August 4, 1999 A.L. Singletion, Chief of Staff Dear Mr. Singleton: RE: WTO SEATTLE MINISTERIAL On behalf of the Ad Hoc WTO Round Processed Food Coalition, the following July 22, 1999 letter was sent to Ambassador Charlene Barshefsky relevant to the Seattle Ministerial and forthcoming multilateral trade negotiations. This letter is provided the Subcommittee on Trade in response to its July 8, 1999 request for private sector views relevant to the captioned subject. AD HOC WTO ROUND PROCESSED FOOD COALITION Subject: Ad Hoc WTO Round Processed Food Coalition/ Recommendations for the Seattle Ministerial and New Round of WTO Negotiations. Dear Ambassador Barshefsky: We, the undersigned trade associations and food companies, are writing to underscore the priority that should be given at the Seattle Ministerial and forthcoming World Trade Organization ("WTO") negotiations to liberalizing trade in the processed food sector. Further, this letter provides specific recommendations with respect to the scope, structure, and negotiating modalities that should be pursued in this important export sector to U.S. farmers, workers, and the American economy overall. TRADE LIBERALIZATION IN THE FOOD SECTOR. The U.S. food processing sector recognizes that the major achievement of the Uruguay Round was to introduce fundamental trade disciplines into the agriculture and food processing area. These new disciplines included the conversion of non-tariff measures to tariffs, the binding of tariffs at maximum levels, and rules on the use of sanitary and phytosanitary (SPS) measures. However, only minimal improvements in market access were actually achieved in the Uruguay Round. In some cases, conversion of non-tariff measures to tariffs actually increased the degree of protection provided to processed foods. The complex tariff formulas adopted by some countries, particularly the nations of the European Union, impose high, variable tariffs based on standard "recipes" that may bear little resemblance to the actual composition of a processed food product. Despite the existence of significant market access barriers, world trade in processed food products is increasing twice as fast as trade in primary commodities. By 2000, trade in processed and value-added products is predicted to account for 75 percent of global agrifood trade. A range of economies, including net food importing countries, now export processed foods. Value-added consumer-ready food exports have a greater positive impact on the U.S. economy than bulk commodity exports. In 1998, U.S. consumer-ready processed food exports to the world accounted for 39 percent of the total $51 billion of "agricultural" exports. For the first, time, the value of consumer-ready exports was equal to that of bulk agricultural commodities. Further processed products create high-paying jobs and value in the United States. Seven of the largest 10, and 22 of the largest 50, food processing firms in the world are headquartered in the United States. U.S. farmers and their families are a major beneficiary of increased exports of processed food products, both through farm sales and off-farm employment opportunities. For example, 1.9 billion pounds of U.S.-grown potatoes were purchased and further processed into exports of $286 million in french fries in 1997. U.S. exports of processed foods would be even higher but for market access barriers. Globally, tariffs on processed foods remain higher than those on basic agricultural commodities, and higher than those on industrial products. Bound agricultural tariffs average over 40 percent ad valorem, and tariff bindings on processed foods average significantly more than 40 percent. RECOMMENDATIONS FOR THE SEATTLE MINISTERIAL AND WTO NEGOTIATIONS. The next round of trade negotiations will provide an opportunity to capitalize on the fundamental restructuring of the trade rules for food and agriculture. Strong opposition to lowering trade barriers is already apparent, and countries such as Japan and Norway-which fear low incomes and declining employment in agriculturehave positioned themselves to fight against further liberalization. The United States must take the lead in combating this opposition and insisting that further liberalization take place. The highest priority for the United States should be commercially meaningful reductions (including zero-for-zero in certain tariff lines) in tariffs and further disciplines on non-tariff measures (NTMs) facing U.S. exports of highly competitive processed food exports. Such products include processed cereal products (e.g., cookies, crackers and snack foods); pet food; processed vegetable and fruit products (e.g. soups, french fried potatoes, juices and sauces); processed meat and poultry products; and certain miscellaneous food preparations (e.g. formulated protein mixes and nutritional supplements). 1. Tariffs. • The United States should insist on a formula that will lead to significant reductions in tariff peaks, rather than a simple percentage reduction across the board. There is ample precedent for formula cuts in the industrial product area. The so called "Swiss formula" 1 was used for industrial goods during the Tokyo Round. There are any number of other ways in which such reductions can be achieved, including the harmonization of tariffs at certain levels or in certain bands. A formula approach that cuts high tariffs more than low tariffs will help address "tariff escalation." Tariff escalation occurs where tariffs for processed products are high compared to the primary products from which they are derived. Tariff escalation still prevails in important product chains in many countries, impeding imports of processed products. • Reducing high tariffs more than low tariffs will also help reduce the gaps and address the distortions that are created when countries have very high bound tariff rates, but apply actual tariff rates below the bindings. Countries often adjust these applied rates to protect domestic production from market price signals. The United States should argue strongly for the simplification of tariff structures. Complex formulas and tariffs based on "standard recipes" should be eliminated and replaced by straightforward ad valorem tariffs which are fair and consistent with free trade principles. • Countries must not be permitted to "average" tariff reductions in specific food and agricultural commodities to achieve agreed reductions. Averaging allows countries to make high percentage reductions on already low tariffs, and lower percentage reductions on lines with higher tariffs. In order to achieve meaningful improvements in trading opportunities, the reverse should occur: the greatest reductions in tariffs must occur where tariff levels are the highest. • Request-offer negotiations are not an acceptable negotiating option. In past negotiations, such an approach resulted in little improvement in overall market access or in disciplining trade barriers. Request-offer negotiations do not systematically address the problems of tariff escalation nor do they assure that very high tariffs will be reduced at all. However, should the United States ultimately find it necessary to engage in request-offer negotiations, efforts should be concentrated on processed food product commitments by nations in the Asia Pacific and South American regions. Despite recent economic difficulties, these regions show the greatest promise for intermediate-term processed product export opportunities. The focus of U.S. negotiations should be to obtain significant multilateral commitments for food and agriculture as a whole. However, the Ad Hoc Coalition would also support a "zero-for-zero" 2 approach for specific product sectors such as soups, french fried potatoes, biscuits and snack foods, and pet food. • "Nuisance Tariffs" (e.g. below 2 percent) should be eliminated. The Administrative costs to collect these tariffs exceed the revenue generated and are a hindrance to commerce. • The next Round of multilateral negotiations should eliminate all tariff-ratequotas on agricultural products. This would complete efforts achieved in the Uruguay Round to progressively liberalize and limit the use of tariff-rate-quotas. However, the process of converting tariff-rate quotas to tariff equivalents should not result in a reduction in market access. 2. Non-Tariff Barriers to Trade. • The WTO Agreement on Sanitary and Phytosanitary ("SPS") Measures-which insists on sound science and risk assessment-should not be open for negotiation in the new Round. . However, the Agreement on Technical Barriers to Trade should ensure that standards for biotechnology be based on sound science and not used as a disguised non-tariff trade barrier. The U.S. government should support technical assistance to developing countries, many of which lack the expertise to comply with SPS measures, labeling and technical standards of trade. 3. Key Participation by Developing Countries. • Developing countries such as India must participate fully in the negotiations and provide improved access opportunities for processed food products. Consideration might be given, e.g., to modified tariff reduction commitments and extended implementation periods, but exemptions should not be permitted. 1 The "Swiss formula" is new tariff=(old tariff * agreed coefficient)/(old tariff +agreed coefficient). Such a formula not only reduces the highest tariffs the most, but it also establishes an upper bound on all tariffs (depending on the coefficient chosen). 2 The "zero-for-zero" approach is one in which countries agree that all tariffs on a group of specific products will be reduced to zero. During the Uruguay Round, such an agreement was successfully concluded for beer. 4. Services, Investment and Intellectual Property. • The Ad Hoc Coalition also supports renewed negotiations in the areas of services, investment and intellectual property. Enhanced agreements should guarantee freedom of sale, transport, and all forms of distribution (including direct selling); protect U.S. investments in the food processing, distribution and sales sectors of other nations; and protect U.S. brands and trademarks. Without such guarantees, improvements in market access will be meaningless. • Moreover, as famous U.S. brands become more globally dominant in the 21st century, we will witness an increase in efforts by developing countries to unfairly tax U.S. brands at higher rates than local brands and competing products. Such discriminatory taxation is a particularly serious problem facing the U.S. soft drink industry and should be addressed in the next Round of WTO negotiations. We look forward to working with you as we approach the Seattle Ministerial and begin negotiating in 2000. With your support and leadership, the upcoming negotiations will at long last result in meaningful benefits for the U.S. food sector. We stand ready to provide whatever assistance might be appropriate. Sincerely, Bestfoods General Mills Herbalife International J. R. Simplot Co. Lamb-Weston National Food Processors Association National Potato Council Nestle USA Oregon Potato Commission Pet Food Institute Ralston Purina Tricon Global Restaurants Wm. Wrigley Jr. Company Respectfully submitted on behalf of the Ad Hoc WTO Round Processed Food Coali tion, JOHN F. MCDERMID President, IBC, Inc. Statement of the Aluminum Association, Inc. Mr. Chairman and Members of the Trade Subcommittee: The Aluminum Association appreciates the opportunity to present its views on the U.S. negotiating objectives for the WTO Seattle Ministerial Meeting. The members of The Aluminum Association are domestic producers of primary and secondary ingot, aluminum mill products and castings. Mill products include sheet and plate, foil, extrusions, forgings and impacts, electrical conductor, and wire, rod and bar. The membership also includes producers of master alloys and additives and aluminum pigments and powders. The association is a primary source for statistics, technical standards and information on aluminum and the aluminum industry in the United States. Member companies operate approximately 300 plants in 40 states. OVERVIEW The members of the Aluminum Association are fully committed to a fair and open world market for aluminum. We believe strongly that tariff elimination or reduction should occur only as the result of the mutual agreement of all the parties to a tariff negotiation, such as the up-coming WTO Seattle Round, and only over a multi-year phase-in period. BACKGROUND The aluminum industry is global. The largest aluminum producers are multinational companies production, fabricating and distribution facilities around the world. During 1998, world aluminum production totaled an estimated 22.1 million metric tons. The leading producing countries include the United States, Russia Canada, the European Union, China, Australia, Brazil, Norway, South Africa, Venezuela, the Gulf States (Bahrain and United Arab Emirates), India and New Zealand; together they represent more than 90 percent of the world primary aluminum production. 65-092 D-00--7 |