Congress Urged to Use ‘Aggressive' Trade Policy

April 26, 2001

The United States needs an aggressive trade policy that employs full use of export programs to maintain market-oriented farm policies, the Senate Agriculture Committee was told Wednesday. Charles J. O'Mara said full planting flexibility and production require "enhanced efforts to increase U.S. farm exports and competitiveness."

O'Mara, president of O'Mara & Associates and previously counsel for international affairs to the Secretary of Agriculture and special trade negotiator for agriculture, testified on behalf of the American Oilseed Coalition (AOC). The AOC includes the American Soybean Association, the National Cottonseed Products Association, the National Oilseed Processors Association, the National Sunflower Association, and the U.S. Canola Association.

"The AOC fully supports export credit programs as a vital government incentive to encourage exports of oilseeds and oilseed products," he said. Under the Uruguay Round Agreement on Agriculture, export subsidies were reduced with further reductions or elimination "very likely" when the current World Trade Organization agriculture negotiations are completed.

In the Uruguay Round, the United States "came under enormous pressure from the Cairns Group and other agricultural exporting countries to accept disciplines on the use of export credit programs. The Cairns Group wanted export credits and credit guarantees to be treated as export subsidies and subject to the disciplines requiring reduction of such subsidies," O'Mara noted. The United States successfully resisted that pressure.

Export credit programs were given a special status that exempted them from reductions. In return, the United States and other WTO members agreed, "to work toward the development of internationally agreed disciplines to govern the provision of export credits, export credit guarantees or insurance programs" and to apply those disciplines once negotiated.

But there are problems, he added. "Because certain commodities were not receiving export subsidies at the time of the Uruguay Round base period, they have no authorized level of export subsidy support under the WTO." These commodities include corn, oilseeds, oilseed meals, cotton, hides and skins, and tallow. "In my view, these products could be particularly vulnerable to a circumvention challenge today. And if a challenge were successful, we would have to eliminate export credit programs for these commodities. And for other commodities, we could have to reduce the level of the export credit programs to ensure that we stayed within our overall export subsidy commitment level."

So far, O'Mara said, countries have refrained from challenging export credit programs as a circumvention of the export subsidy commitments mainly because of the ongoing discussions. "We need to successfully conclude the discussion ... on agricultural export credits as soon as possible. Such agreement would protect our oilseed, corn, cotton and other producers who benefit from export credits from a WTO challenge."

National Cotton Council Chairman James Echols told the committee that the U.S. cotton industry was dealing with the dual pressures of stiff international competition and a strong dollar and urged them not to abandon effective U.S. export programs. "The U.S. cotton industry faces competition for export markets and stiff competition in our domestic market from imported products," Echols said. "We need trade policy that ensures our raw product is competitive, that opens markets for both raw cotton and U.S. produced cotton textiles, and that ensures the terms of competition are fair."

Echols outlined polices designed to strengthen the position of cotton in domestic and international markets. He called upon Congress to: 1) maintain cotton's competitiveness provisions included in U.S. farm law; 2) ensure that existing regional trade agreements are effectively implemented; 3) maintain effective export promotion programs; 4) ensure the U.S.-China trade agreement is not detrimentally changed and monitor China's compliance; 5) ensure that new trade agreements are favorable to U.S. cotton; and 6) work for a new World Trade Organization (WTO) agreement that improves U.S. cotton's competitive position.

He cited cotton industry concerns with international negotiations concerning the U.S. export credit guarantee program (GSM-102), which Echols called "a mainstay of U.S. agricultural export assistance activities." He said the most recent proposals would undermine the GSM-102 program "while providing no corresponding reductions in subsidy programs operated by our competitors."

Echols said the proposal in the Organization for Economic Cooperation and Development would "place the United States at a disadvantage entering another round of multilateral agricultural trade negotiations. Instead of moving to cripple this important program, we should be attempting to improve its effectiveness."