Introduction

I am Ernie Micek, Chairman of Cargill, Incorporated. Cargill is a privately held agribusiness company founded over 130 years ago in Iowa. Today the company is headquartered in Minneapolis, Minnesota, and our 80,000 employees are engaged in marketing, processing, and distributing agricultural, food, financial, and industrial commodities throughout the world.

I am testifying before the Trade Subcommittee today as Chairman of the Emergency Committee for American Trade, comprised of the heads of major American companies with global operations who represent all principal sectors of the U.S. economy. The annual sales of ECAT companies total over one trillion dollars, and the companies employ approximately four million men and women.

ECAT believes that in order to have a successful Seattle WTO ministerial the focus of the meeting must be kept on trade expansion through the launching of a new, comprehensive round of trade negotiations. The ministerial should lay out an agenda for the new round that enhances market access for traditional industrial and agricultural products, while accommodating WTO rules to the development of new technologies that will be key to U.S. economic growth in the twenty-first century, such as biotechnology and electronic or e-commerce. The agenda also should strengthen the rules of the global trading system.

While building a positive, trade-expanding agenda for the ministerial and the new round are critical, we will not be successful with that agenda here at home unless we also maintain our efforts to build a consensus in support of trade expansion among American workers and their families. This means that we must make the case that trade liberalization improves the lives of American workers and their families and helps all economies meet basic human needs.

ECAT believes that one way to increase trade's contribution to human well-being is to make eliminating barriers to trade in food a central negotiating objective in the agenda coming forth from the Seattle ministerial. Toward this end, ECAT is launching a "Food Chain Coalition" that will promote the reduction or elimination of major barriers to trade at all levels of the food production and distribution chain. Putting food prominently among negotiating priorities will increase food security, accelerate economic development, and promote a sustainable environment. This new paradigm also can help to achieve the critical consensus necessary to support open trade policies.

The ECAT food chain concept builds on the idea of an open food system that has gained support within the Asia Pacific Economic Council (APEC) and extends it to the WTO. A study by the U.S. Department of Agriculture has concluded that two-thirds of the welfare gains from trade liberalization within APEC comes from the agri-food sector alone. Given the many global distortions to agri-food trade, there are similar benefits to come from an "open food" initiative within the WTO.

Before outlining our specific Food Chain Coalition proposal, I will present ECAT's recommendations for the Seattle WTO ministerial agenda and new WTO round.

Launching a New Trade Round at the Seattle WTO Ministerial Seattle WTO Ministerial Objectives

As we approach the millennium, we must ensure that U.S. trade and investment remain the powerful engines of economic growth that have helped to produce the longest period of peacetime economic expansion in American history and the lowest unemployment rate in 30 years. With 96 percent of the world's customers outside of the United States, the future growth of the American economy depends on expanding world markets. Just as ECAT member companies recognize that they must be global firms to thrive, the United States must maintain its preeminence as a global economy to continue to prosper into the next century.

To accomplish this, the United States must take the lead in crafting an agenda for the Seattle WTO ministerial and for a new round that is focused on trade liberalization. That agenda should avoid globally divisive issues, such as non-trade-related labor or environment matters or competition policy, on which there is not yet a broad-based consensus within the WTO. That is not to say that these issues are unimportant. It is merely to recognize that, if contentious issues dominate the ministerial, confidence in the global trading system and U.S. leadership will be undermined.

The United States needs to recognize and articulate the ways in which trade liberalization contributes to resolving some of these problems and to building consensus for cooperation. For example, the elimination of trade-distorting agricultural subsidies and the reduction of tariffs on environmental goods and services reduce harm to the environment, while speeding the spread of technologies that enable countries to be efficient and to be environmental stewards. The elimination of barriers to food trade that ECAT is proposing also yields environmental benefits by encouraging agricultural practices that promote production in advantaged areas while lessening demands on environmentally fragile lands. On labor issues, the United States is pursuing an appropriate course in increasing its support for the ILO and focusing its efforts to achieve a forum on global labor issues within that organization.

ECAT also has some other specific recommendations for the ministerial. The United States could help in maintaining an open and transparent economy by urging that WTO members adopt a standstill commitment on trade-restrictive measures. Such a commitment would safeguard the liberalization achieved under the Uruguay Round and subsequent sectoral negotiations while preventing backsliding. It also would provide a positive foundation for continuing liberalization in the context of a new round. As the largest and most open economy in the world, the United States is in the best position to call for such a commitment. Indeed, the WTO Secretariat, in a recent highly laudatory report on U.S. trade policies, noted the critical role that the United States plays in serving as a positive role model for other WTO member countries by maintaining open markets. It also cited the key role of the United States in helping to restore global economic stability in the wake of the Asian financial crisis and the breakdown of the Russian economy.

To be successful, the ministerial agenda also should include a renewed effort to broaden WTO membership to include those emerging economies that are not yet subject to WTO rules. China, the largest emerging economy in the world, must be brought into the multilateral trading system. Its admission to the WTO on the basis of a commercially-acceptable protocol of accession should be given top priority. The high degree of financial instability in Asia and the slowdown in the global economy make it more critical than ever that China become subject to WTO rules and a participant in liberalization initiatives.

Reaching an agreement on sectoral market-access initiatives, such as the negotiations on the eight sectors covered under the Accelerated Tariff Liberalization (ATL) negotiations, at the time of the ministerial would help to make it a success and would provide momentum for even broader liberalization negotiations in a new round. ECAT particularly supports efforts under the ATL initiative to eliminate tariffs on chemicals, toys, medical equipment and scientific instruments, and forestry products. Similarly, progress at the ministerial in negotiations to remove non-tariff barriers in the information technology sector is important and would also promote a successful meeting.

U.S. business has a significant role to play in ensuring the success of the ministerial by encouraging the adoption of a positive agenda and making the case for the contributions of the WTO in continuing trade liberalization. ECAT supports the work of the Alliance for U.S. Trade, an ad hoc coalition of U.S. business associations and companies that is coordinating business support for ministerial activities, and similar efforts by other groups.

A WTO ministerial that produces a trade-expanding agenda backed by consensus will send a strong signal to global markets about the strength and vitality of the open trading system. A ministerial that endorses an expansion of the open trading system will encourage emerging economies to stay the course on trade liberalization. Success in advancing a trade-liberalizing agenda at the Seattle meeting will help to reinforce U.S. domestic support for the WTO by demonstrating that the WTO continues to advance American interests in promoting greater market access for U.S. goods, services, and agriculture. A clearly articulated trade liberalizing agenda also will build support for renewal of trade-negotiating authority.

The WTO New Round Agenda

In order to ensure that the new WTO round negotiations promote trade expansion, ECAT recommends that the formulation of the agenda be guided by the following principles:

      • The focus of the negotiations should be trade liberalization. Progress on non-trade related labor and environmental issues should be pursued in other appropriate international fora.

      • A new round agenda should be as comprehensive as possible in order to generate the greatest interest among WTO member countries and to maximize the opportunity for liberalization. A round should encompass the built-in agenda of agriculture and services, as well as industrial tariffs, customs facilitation, transparency in government procurement, and other new areas. However, the agenda should not open areas on which there is little consensus or likelihood of progress.

      • In keeping with the legal framework of the multilateral WTO agreements, all WTO members should be required to adhere to new round agreements once they are finalized.

      • A new round should be completed expeditiously according to an agreed timetable. Consideration should be given to allowing for provisional implementation of agreements concluded in advance of the agreed deadline but with leverage retained to ensure that progress is made across all areas, including difficult ones.

      • The United States should seek maximum liberalization in market-access negotiations with bound reductions in tariff and non-tariff barriers to agricultural and industrial products and in the services sector, with as few exceptions as possible. The negotiations on industrial products should cover as many sectors as possible.

      • New round negotiations should not weaken existing WTO agreements or create opportunities for the imposition of new trade-restrictive measures or discriminatory treatment, particularly with respect to new areas such as biotechnology and e-commerce.

      • A new round should promote full implementation of and compliance with existing WTO agreements. WTO members should consider the provision of additional technical assistance to developing countries to promote this goal.

      • The United States should align U.S. negotiating objectives with promoting higher U.S. and global living standards. Trade liberalization objectives that address basic human needs should be a focus of the WTO negotiations.

ECAT believes that these principles can effectively guide the formulation of U.S. objectives for a new round and can help maximize the benefits of the negotiations to the U.S. agricultural, manufacturing, and services sectors. ECAT's views on the major areas that should be included in a new round are provided below.

Agriculture

The agriculture negotiations should aim to secure substantial, progressive reductions in support and protection, including deep cuts in bound tariff rates and the elimination of export subsidies. Negotiations should reduce average tariff bindings over six years by 50 percent from current levels. Tariff peaks should be reduced to levels that will not prohibit imports. Negotiations should clarify that tariff-rate quotas are transitional measures and provide for their phase-out. Sectoral zero-for-zero tariff agreements should also be encouraged.

The agriculture negotiations should seek further reductions in trade-distorting domestic supports, both by reducing support levels and by shifting to less trade-distorting support mechanisms. The United States also should seek to eliminate the monopoly control of state-trading entities (STEs) and strengthen WTO rules to ensure that agricultural trade is conducted on commercial terms.

As outlined in greater detail in the section of our testimony describing our Food Chain Coalition proposal, ECAT believes that the Seattle ministerial declaration should build on the initiative being developed within APEC and establish a global "open food system." To this end, the ministerial declaration should include language establishing a "WTO Working Party on the Creation of an Open Food System."

General Agreement on Trade in Services (GATS)

The United States should pursue new negotiations to liberalize trade in services, particularly financial services, as part of a new round. The negotiations should seek to broaden and deepen the liberalization commitments under the GATS. Further liberalization of services trade will enhance global growth, assist developing countries in obtaining the necessary infrastructure to sustain development, and help restore investor confidence in global markets.

The services negotiations should also include a review of regulatory regimes in order to promote the creation of transparent, impartial, and pro-competitive regulatory regimes in local markets. The creation of such regimes is essential to make the GATS national treatment and market-access commitments meaningful.

In seeking expanded liberalization commitments, the United States should aim to limit reservations to the greatest degree possible. In particular, it should seek commitments to ensure national treatment and the right of establishment, eliminate restrictions on cross-border transactions, promote pro-competitive regulatory reform, and remove obstacles to the free movement of business personnel.

Market-Access Negotiations

A new round should include market-access negotiations to remove tariff and non-tariff barriers in a wide range of industrial sectors. The tariff negotiations on industrial products should include new zero-for-zero tariff initiatives on small engines and other industrial products. The negotiations should also seek the elimination of tariff peaks and so-called "nuisance" tariffs of five percent or less.

The market-access negotiations should include efforts to achieve tariff reductions in the eight ATL sectors to the extent such reductions have not been finalized by the time of the ministerial. As was recently endorsed by the APEC Ministers, the market-access negotiations should cover the six additional sectors identified in APEC for further liberalization, particularly food products.

Textile and apparel tariffs, which remain very high relative to other industrial products, also should be included in market-access negotiations, with the goal of seeking further reductions before the termination of textile and apparel quotas in 2005. Finally, the negotiations should encompass efforts to broaden membership in the Chemical Tariff Harmonization Agreement (CTHA), with the understanding that no further reductions in chemical tariffs should be considered until all major chemical-producing nations are fully committed to the CTHA.

Trade Facilitation

ECAT strongly supports the inclusion of business-facilitation issues on the ministerial agenda. The United States should seek a WTO agreement on trade facilitation that would encompass the adoption of a binding WTO agreement based on the rules contained in the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention), a work program on trade facilitation, and a commitment to simplify rules of origin. The United States should encourage the WTO to focus its trade-facilitation efforts on customs procedures and advocate the establishment of a WTO working group on the harmonization and simplification of customs procedures. The United States also should support the simplification and harmonization of non-preferential rules of origin, so that they no longer create unnecessary trade impediments.

TRIPs Agreement

The United States should ensure that the full implementation of the TRIPs agreement remains a priority under the WTO built-in agenda. It should resist any effort by developing countries to extend the year 2000 deadline for their implementation of the agreement and support the provision of technical assistance to developing countries to facilitate implementation. It also should oppose the extension of the moratorium on the application of WTO dispute settlement to intellectual property cases in which there is no direct violation of the TRIPs agreement.

The United States should oppose efforts to expand Article 27.3 of the TRIPs agreement, which provides that WTO members may deny the patentability of certain plants and animals. Under the WTO built-in agenda, this provision is to be reviewed four years after the date of entry into force of the WTO agreement. The review was originally intended to provide the opportunity to eliminate or narrow the exclusion. Some WTO members are now advocating that the review be used as the occasion to broaden the exception based on concerns about the increasing use of biotechnology in agriculture and other areas. While the United States may not now be able to succeed in eliminating the exception, it should nonetheless continue to oppose any expansion of the exclusion.

ECAT also believes that strict enforcement of the TRIPs agreement should remain a priority, particularly in the areas of piracy of computer software, music CDs, and violations of the trademarks of U.S.-branded products such as apparel.

Government Procurement

ECAT supports U.S. efforts to bring more countries into the WTO Procurement Agreement, to broaden its coverage, and to negotiate an agreement on transparency in procurement. The United States should seek to conclude an agreement on transparency by the time of the ministerial. It should include requirements regarding the transparency of procurement laws and regulations, adequate notice of bidding opportunities, use of objective criteria in preparing bid specifications and in evaluating bids, adequate dispute settlement, and WTO notification of preference levels.

The transparency provisions of the Government Procurement Agreement should be harmonized with the text of a new transparency agreement.

Sanitary and Phytosanitary Standards (SPS) Agreement

The Uruguay Round produced a strong agreement on sanitary and phytosanitary standards that requires such standards be based on sound science. This agreement should be rigorously enforced and should not be reopened in the course of new round negotiations. The WTO rules should continue to require that governments base regulations on the best scientific information available and not impose an unattainable "zero-risk" standard. The United States should oppose any effort to allow SPS standards to be imposed on any basis other than the current sound science requirement, as it would substantially weaken the agreement and create the opportunity for WTO members to use health and safety regulations to create new trade barriers.

Dispute Settlement

While the WTO dispute settlement process has overall been a strong enforcement mechanism for WTO rules and market-access commitments, the process can be strengthened. For example, procedural reforms in the areas of expediting the timetable for the dispute settlement panel process and implementation of panel and appellate body reports should be considered.

E-Commerce

E-commerce is an increasingly important venue for international trade throughout all sectors of the economy. It is imperative that WTO rules address trade barriers and other trade-related aspects of e-commerce. ECAT believes that a top priority for the Seattle ministerial should be to make the current standstill regarding tariffs on electronic transmissions permanent.

ECAT's Food Chain Coalition

Objectives

ECAT has formed a Food Chain Coalition to promote the elimination of major barriers to food trade affecting the agricultural, manufacturing, and services sectors within the WTO. The Coalition has three primary objectives: 1) providing a framework for focusing on a key area in which trade liberalization meets basic human needs; 2) extending the trade liberalization component of the APEC Food System concept into the WTO; and 3) creating greater leverage to pursue improved market access and other goals in a new round by facilitating a cross alliance of interests organized around barriers to food production and distribution. There are several reasons ECAT has chosen to take this unusual step.

First, ECAT has learned from its TradeWorks trade education focus group research that supporters of global trade expansion must demonstrate the importance of trade to the daily lives of American workers and their families to enjoy their support for liberalization. This theme is echoed in the Administration's call for putting a "human face" on trade. One of the most compelling ways that we can emphasize the human dimension of global trade liberalization is by eliminating barriers to food trade. This will make food supplies more secure, stabilize prices in world markets, and improve access to needed foodstuffs.

Second, the Food Chain Coalition can build on the momentum within APEC for an open food system by extending its trade-liberalization objectives to the WTO. The Information Technology Agreement and the current Accelerated Tariff Liberalization negotiations provide ample precedent for the incorporation of APEC initiatives into the WTO system.

Third, the Food Chain Coalition expresses the broad interest in agri-food trade liberalization. That interest extends well beyond farmers to the people who supply them with seeds, chemicals, fertilizer, equipment, and capital and to those who handle, transport, process, finance, and market food products. In using the elimination of barriers to trade and investment at all levels of the food chain as an organizing principle, the Food Chain Coalition seeks to create cross-sectoral alliances in support of common negotiating priorities, such as eliminating export subsidies, zeroing out tariffs, and eliminating investment restrictions. The Food Chain Coalition also enables business to express its shared stake in open markets. People must be well and reliably fed before they can become regular customers for other goods and services. Focusing on the shared interests in economic development and liberalization enables businesses and governments to build a new set of alliances and common interests that will increase the potential for success in new round negotiations.

The Coalition covers a broad spectrum of issues -- ranging from traditional agricultural tariff, quota, and, export subsidy matters to the intellectual property, regulatory, labeling, and import-restriction questions raised by a new generation of biotechnology products. It covers agri-food products themselves, as well as equipment, machinery, financial services, and other inputs that go into a modern food system.

By reaching outside the traditional core of companies and groups involved in agricultural trade issues to equipment, chemical, pharmaceutical, apparel, financial, and other industries that are increasingly affected by food issues, the Coalition will garner broader domestic and international support for its priority negotiating objectives. The Food Chain Coalition also will focus attention on issues that directly affect the welfare and health of hundreds of millions of people now joining the global economy, thereby putting a "human face" on trade.

Priorities for the WTO Ministerial

The 1999 WTO ministerial provides an historic opportunity for the United States to shape the world trade agenda into the next century and to lay the foundation in particular for global liberalization of food trade. To that end, the Coalition supports the inclusion of language in the ministerial declaration establishing a WTO "Working Party on the Creation of an Open Food System."

The Coalition would like to see the working party examine not only traditional liberalization initiatives, but also other issues, such as achieving food security through a principle of non-discrimination, that are integral to meeting the challenge of providing the world's growing population affordable, abundant, nutritious, and environmentally sustainable food supplies. Among the novel issues to be addressed should be providing technical assistance to developing countries on rural development strategies, sanitary and phytosanitary standards issues, and the use of trade and financial risk tools to enhance food security.

Priorities for the WTO New Round

The Coalition sees this broader, more integrated strategy as critical to achieving its fundamental goal in this historically sensitive area -- more open markets for the products and services involved in the production and distribution of food. In particular, the Coalition urges the United States to seek "zero-for-zero" tariff harmonization on agri-food products wherever possible. The Coalition also supports the initiation of "zero-for-zero" tariff negotiations on engines and engine systems and the expansion of the existing "zero-for-zero" tariff agreements for construction and agricultural equipment to include a greater number of WTO member countries. The Coalition also believes that the elimination of agricultural export subsidies should be a priority in a new round.

Conclusion

The Trade Subcommittee's hearing today is a vitally important part of the overall effort that must be made by the Administration, the Congress, and the U.S. business community to work together to forge a trade-expanding agenda for the Seattle WTO ministerial and a new WTO round. ECAT looks forward to continuing to work with you, Mr. Chairman, and other Trade Subcommittee members on negotiating objectives for the new round and in particular on our Food Chain Coalition project.

I appreciate the opportunity to present ECAT's views and would be happy to answer any questions subcommittee members may have.

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