Skip Global Navigation to Main Content
Skip Breadcrumb Navigation
Official Text

Text: U.S. Secretary of Agriculture Daniel Glickman Testimony before the House of Representatives Agriculture Committee

Mr. Chairman and members of the committee, I appreciate this opportunity to review trade opportunities for U.S. agriculture in the Pacific Rim.

U.S. Agriculture's Competitiveness in World Markets

To set the stage for today's topic, I'd like to spend a few moments reviewing overall U.S. agricultural trade. Agricultural exports really are one of the success stories in the U.S. trade picture. 1995 marked 36 straight years of agriculture trade surpluses. The U.S. agricultural surplus jumped from $17,100 million in fiscal year (FY) 1994 to $24,600 million in 1995. This was the second largest surplus ever, and a major recovery from 1986 when it looked like the surplus dwindled to $5,400 million. (In 1996, the net trade surplus is projected to reach a new record: $29,500 million.) Agricultural exports in 1995 generated nearly 1 million jobs, with about one-third in the farm sector. The other two-thirds were off-farm in processing, marketing and transportation.

Not only are we the world's largest exporter of agricultural products, we also are the world's most improved competitor. Overall, the U.S. share of world agricultural trade is projected to reach 22 to 23 percent in 1996, the highest level in over a decade. In fact, since 1985, the U.S. share of world trade has grown more than that of any other exporting nation.

The export success of 1995 reflects growth in a broad diversity of customers and products. Exports were up in eight of 1995's top ten agricultural markets. In seven of them -- five in the Pacific Rim -- exports hit record levels. The results were equally impressive on the product side. U.S. sales were up in all three major categories of agricultural exports -- bulk, intermediate and consumer-oriented products.

Let me put these figures into perspective for you by citing just a few examples of what this means for U.S. agriculture and the economy as a whole.

-- For the first time in history, the United States is now exporting more than $1,000 million in agricultural products a week.

-- U.S. exports of agricultural, fish, and forestry products to Japan last year totaled a record-high $16,100 million, half of the total value of new road vehicles imported from Japan.

-- Each day, U.S. producers and processors exported over $20 million worth of coarse grains, over $14 million worth of soybeans, nearly $14 million worth of fruits and vegetables, over $13 million of wheat, almost $12 million of red meats, and more than $5 million in poultry meat.

For 1996, the trade numbers are impressive as well. The latest U.S. Department of Agriculture (USDA) export forecast anticipates a record-high $60,000 million in exports of U.S. agricultural products, up $5,900 million from last year. In the first six months of FY 1996, U.S. agricultural exports overall were up 12 percent. Exports were running ahead of year-earlier levels in eight of our top ten markets.

This is obviously good news because agriculture is one of the most export-sensitive industries in America. Today, agriculture's overall dependence on exports, as measured by exports as a share of gross cash receipts (excluding government payments), is estimated at 29 percent and rising -- to a projected 32 percent by the year 2000. While the overall economy's reliance on export markets is also growing, the dependence is far less, with overall exports accounting for only 11 percent of the nation's gross domestic product. The bottom line is that American agriculture is far more dependent on international markets than the economy as a whole.

Agriculture's future prosperity clearly lies in an expanding export market -- where rapid growth in demand can help sustain a strong and prosperous U.S. food and agricultural sector, with all the economic and job-creating benefits that accrue from that growth. Export growth is the key, we believe, to stronger farm incomes in the years ahead.

Agricultural Exports to the Pacific Rim

The growth in agricultural exports to the Pacific Rim has and will continue to play a key role in the health of the American farm economy. Since 1982, our exports to Asia have steadily increased from $12,900 million (33 percent of the total U.S. agricultural exports) to $24,700 million (46 percent of the total) in 1995. Within Asia, the Pacific Rim nations form the power center of economic growth and expanding trade opportunities. Together they accounted for $23,000 million in U.S. export sales in 1995 -- a figure expected to reach $27,000 million in 1996. These markets include Japan; China; the Four Tigers (South Korea, Taiwan, Hong Kong and Singapore); the ASEAN-4 (Thailand, the Philippines, Indonesia and Malaysia); Australia and New Zealand.

The continued rise in incomes, the competitive value of the U.S. dollar, a growing demand for western foods and successful U.S. market promotion efforts are the driving factors behind this growth. Given their expected high rates of income growth through 2000 and generally free market orientation, these countries are expected to offer the greatest opportunities for new sales well into the next century.

Mr. Chairman, during my tenure as secretary, I have led two trade missions to Asia to learn first-hand about these important U.S. export markets. In Indonesia, I saw signs promoting U.S. apples everywhere -- even at sidewalk produce stalls. In China, I saw what I already knew to be true: China is an extremely important customer for U.S. commodities. I've also visited Japan, our largest and steadiest buyer, and Singapore, a small but growing market for our products.

Let me give you a few examples of how important the Pacific Rim market is for U.S. agriculture.

-- Last year, the United States shipped $2,600 million worth of U.S. beef worldwide. Exports to Japan alone reached a record $1,700 million and accounted for 64 percent of the total value of U.S. beef exports. On a volume basis, East Asia bought roughly 75 percent of U.S. shipments, with Japan accounting for 56 percent of the total volume of U.S. beef exports, followed by South Korea with 15 percent of the total. Korea will continue as the fastest growing market for U.S. beef in East Asia.

-- U.S. cotton exports soared in 1995 reaching a 70-year high of 9.5 million bales valued at $3,500 million. Of the eight leading markets, seven were Pacific Rim countries -- China, Japan, Indonesia, South Korea, Thailand, Taiwan and Hong Kong.

-- The U.S. share of global apple exports has nearly doubled in the past six years. U.S. trade performance is being led by Asian markets, including Taiwan, Hong Kong and Indonesia.

-- Exports of coarse grains soared last year by 62 percent to $7,500 million. Four of the top five markets were Japan, Korea, Taiwan and China. These four markets accounted for 57 percent of the total value of U.S. coarse grain exports.

-- In 1995, U.S. exports of soybean oil rose 87 percent to a new record $809 million. China was the leading purchaser, buying over $350 million worth of U.S. soybean oil.

-- Forest product exports reached $7,300 million last year, with Japan, Korea and Taiwan accounting for more than half the total.

Long-Term Outlook

Looking to the future, late last year USDA released its Long-Term Agricultural Trade Strategy that set the department's international trade mission and export goals for the year 2000. In the report, USDA identifies two types of markets where we will focus our export assistance efforts -- leading growth markets and emerging growth markets. The Pacific Rim presents leading growth market opportunities, expected to account for over 50 percent of U.S. agricultural exports by the year 2000. Emerging growth markets toward the year 2000 will include Southeast and South Asia, along with Southern Africa and Latin America.

Why are we so optimistic on the future of the Pacific Rim?

-- World's fastest economic growth. Strong growth will create millions of new jobs in the region. By 2000, there will be 1,000 million middle class consumers in the Pacific Rim, with 400 million having purchasing power equal to the world's wealthiest countries.

-- Trade liberalization. The Uruguay Round Agreement and the future accession of China and Taiwan to the World Trade Organization (WTO) will lower barriers and boost import demand by stimulating economic growth. The Uruguay Round Agreement could boost U.S. exports to the Pacific Rim by $3,000 million by 2000 and is a wonderful example of how our bipartisan commitment to trade liberalization can pay off for American agriculture.

-- Large and growing populations. With a combined population expected to reach 2,000 million people by 2000 (one-third of the world's total) and limited arable land, the Pacific Rim is now a net agricultural importer and will become more reliant on imported food and fiber in the future.

-- Changing dietary patterns. Growth in fast food and family-style restaurants, and lifestyle changes including satellite television and travel in the United States are increasing demand for U.S.-style foods. Increasing incomes are spurring demand for meat and poultry products, fruits and vegetables, and processed foods and beverages.

-- Growth in Western-style supermarkets. Modern supermarkets stock a wider variety of imported foods and permit in-store promotions for U.S. foods. New food discount warehouses are increasingly looking to U.S. suppliers for quality products at competitive prices.

-- The value of the dollar. The value of the dollar versus other major currencies is creating opportunities for the United States by boosting the purchasing power of importers.

-- Rapidly increasing urbanization, especially in developing countries in Asia. More people are moving from rural areas to urban areas in search of better, high-paying jobs. As a result, the region's most affluent consumers are now more localized and easier to reach with market promotion activities.

-- Improvements in transportation and port facilities. Improvements in shipping times, port capacities, air transport facilities and refrigeration technology help assure the quality and timely arrival and storage of U.S. products to Asia.

-- Growth in Asian food processing industry. Asia's food processors are increasingly looking to the United States for low cost, high quality ingredients to maintain their profitability. This will benefit U.S. bulk and intermediate product exporters.

USDA Export Assistance

Just as we have targeted the Pacific Rim countries, our competitors have done so too. Denmark, for example, has launched an aggressive pork marketing campaign in the Japanese and Korean markets and will have new trade offices in Seoul and Beijing. A major Argentine promotion program, PROMEX, has targeted Japan, Hong Kong, Indonesia, Thailand and the Philippines. Australian promotion groups -- including the Wheat Board, the Dairy Corporation, the Meat and Livestock Corporation, the Horticultural Corporation and the Wine and Brandy Corporation -- have targeted a wide range of Asian countries. So you can see, our competitors are not standing still.

And neither are we. As you can see, opportunities are there, but so is the competition. It will take a strong public/private sector partnership to bring home the maximum benefits for U.S. agriculture and related industries. It is just this kind of partnership that makes agriculture so unique among U.S. industrial sectors. Since the creation of the Foreign Market Development (FMD) program more than 40 years ago, USDA and American agriculture -- from farmers to processors to exporters -- have been working together to build a strong future. Let me tell you now what we are doing at USDA to help American agriculture make the most of these opportunities.

-- Retooling and targeting our export assistance programs. The Federal Agriculture Improvement and Reform Act of 1996 has a strong trade title that supports efforts already taken in developing and implementing an effective long-term agricultural trade strategy. For example, USDA is working on implementing a new short-term supplier credit guarantee activity that we believe will be especially helpful in expanding sales of high-value products to some Pacific Rim countries. We expect the program to begin operation later this fiscal year.

The new farm legislation also changed the emerging democracies program to an emerging markets program. This will allow us to re-target this valuable technical assistance program to build on our export efforts in several Asian countries such as China, Indonesia and Malaysia.

Since 1995, we have targeted Pacific Rim markets under the Dairy Export Incentive Program (DEIP), and our efforts are paying off. Since that time, Asian markets have accounted for 20 percent of our total nonfat dry milk sales.

Under our FMD Program and the Market Access Program (MAP), we continue to encourage U.S. exporters to target markets in the Pacific Rim. During the 1995 program year, 45 percent of FMD funds and 49 percent of MAP funds were allocated to Pacific Rim markets. In Japan, for example, 45 MAP participants conducted market development activities valued at $34 million. Other markets such as Korea, with 39 participants, and Hong Kong, with 25 participants, also were targeted. For the FMD program, Japan was targeted by 25 cooperators, China, 17 cooperators, and Korea, 11 cooperators.

Let me cite just a few examples here. Earlier, I mentioned the importance of the Japanese market for U.S. beef exports. Those figures that I cited represent years of market development work on the part of the U.S. Meat Export Federation in conjunction with USDA, and important trade policy developments such as our Beef and Citrus Agreement with Japan. Not only are U.S. exporters gaining total sales in the Japanese market, but they are also continuing to pull market share away from competing suppliers. In fact, the United States is challenging Australia's role as the leading supplier of beef to the Japanese market.

A newer effort under the MAP is the Almond Board of California's plan for the Chinese market. The board used funds to conduct market research to identify and analyze major markets and hold food technology and marketing seminars. The effort is already paying off. Shipments into China, directly and through Hong Kong, more than doubled between 1993/94 and 1994/95, according to the board.

-- Realignment of overseas resources. Recognizing the importance of Pacific Rim markets, we are shifting resources from the stable markets of Europe to the rapidly expanding markets in East and Southeast Asia. As a result of our annual review of field resources, we have decided to open an agricultural affairs office in Hanoi, Vietnam. We also are opening an Agricultural Trade Office (ATO) in Jakarta, Indonesia to complement our existing agricultural affairs office. We also are adding staff to our ATOs in Tokyo and Seoul.

-- Trade policy efforts. We are negotiating with our Pacific Rim trading partners on a number of issues. We are working with China and Taiwan on their accessions to the WTO. In the future, we hope to begin discussions with Vietnam on its accession, and currently we are working with the Vietnamese government on a bilateral trade agreement. With Thailand we are seeking further tariff reductions for consumer-oriented products and an increase in the tariff-rate quota for soybean meal. We are pressing Korea to live up to its commitments on rice, oranges and peanuts made under the Uruguay Round Agreement.

-- Sanitary and phytosanitary efforts. Sanitary and phytosanitary measures are increasingly being employed by countries to restrict imports, and this is certainly true in Pacific Rim countries. Last year, I established an action team to identify and respond to sanitary and phytosanitary problems. The team includes representatives from six USDA agencies and is designed to respond quickly to unjustified barriers to trade.

Currently, we are working to resolve two WTO disputes with Korea over sanitary and phytosanitary issues -- one on shelf-life and a second on Korean inspection, testing and standards for imported food products. With Japan, we continue to work to resolve concerns over U.S. tomatoes and apples. Australia has restricted U.S. fruits, poultry and pork. We have raised with New Zealand our concerns over its strict plant and animal health regulations for grains, livestock, poultry and horticultural products. With China, we have outstanding issues of U.S. citrus, plums, grapes, cherries, apples, tobacco and Pacific Northwest wheat.

We are working both domestically and internationally to respond to concerns over the outbreak of karnal bunt in the U.S. Southwest. USDA officials have been working non-stop since the outbreak was discovered to contain the problem and to assure our foreign buyers that they will continue to receive the top-quality U.S. wheat they have become accustomed to purchasing.

-- Technical Cooperation. Our technical assistance programs in Asia result in mutual benefits to the United States and Asia. For example, our scientific exchange program has resulted in U.S. scientists obtaining new varieties of plant germplasm and biocontrol agents that are native to Asia but not the United States. The Cochran Fellowship Program brought over 100 individuals from Asia to the United States last year for short-term training that included supermarket management, food safety, plant and animal quarantine and livestock nutrition programs. Training provided through the Cochran Program helps improve the foreign specialists' understanding of U.S. practices.

-- Participation in the Asia Pacific Economic Cooperation (APEC) group. The 18 members of APEC have embraced a vision of an Asian-Pacific community cooperating to achieve economic growth and development. Members have committed themselves to dismantling virtually all barriers to trade and investment no later than 2010 for developed economies, and 2020 for developing economies. And APEC now has an action plan for translating the vision and goals into reality. Although new initiatives are always difficult in an election year, it is essential that Congress ultimately renew the president's fast-track negotiating authority if the United States is to maintain a leadership role in efforts such as APEC. Lack of fast-track authority ties the president's hands in trade negotiations.

Conclusion

For U.S. farmers and exporters, there must be a new way of thinking about trade. The future of American agriculture will be increasingly dependent on developments in countries far away from our shores, particularly in the Pacific Rim.

To be a good exporter, we must know our customers. For example, in the import-dependent Asian nations, food security concerns are of paramount importance. We need to encourage these nations to view food security through the prism of open markets, free trade and exchange of economic information, and market-oriented domestic farm policies, rather than the traditional approach of self-sufficiency. We need to build and maintain trust that the United States and other large exporters intend to remain reliable suppliers of high-quality products, and I think the new farm legislation is a positive step in this effort.

We need to realize that we can make more progress by maintaining economic ties than by severing them. That is why President Clinton has decided to extend unconditional Most Favored Nation (MFN) status to China. As the president said, revoking MFN would drive us back into a period of mutual isolation and recrimination that would harm America's interests, not advance them.

There is an old Chinese proverb that goes something like this: Opportunity only knocks. It is up to you to open the door, greet it, and make it feel welcome.

The remarkable growth of the Asian-Pacific region presents a unique opportunity for American agriculture, and we at USDA are working every day to open the door ever wider to markets hungry for U.S. agricultural products.