Testimony of
Roger Johnson
North Dakota Agriculture Commissioner
on
Agricultural Trade Issues

Hearing held by
US Senator Byron Dorgan
Holiday Inn
Minot, North Dakota
October 9, 2003
9:00 a.m.

Good morning, Senator Dorgan and ITC Commissioners Lane and Pearson. I am North Dakota Agriculture Commissioner Roger Johnson, and I'm very pleased to be with you today to discuss agricultural trade relative to North Dakota farmers and ranchers.

Background

Agriculture is the cornerstone of North Dakota's economy, generating more than $3 billion in cash receipts each year. We lead the nation in the production of eleven different commodities - flaxseed, canola, sunflower, durum wheat, spring wheat, pinto beans, dry edible peas, navy beans, all dry edible beans, barley and honey.

The bounty of our agricultural production is far too great to be consumed in North Dakota alone. For example, North Dakota farmers and ranchers produce enough wheat to make 17.6 billion loaves of bread and durum for 12 billion servings of spaghetti.

Both domestic and foreign markets are extremely important to our agricultural industry, and we rely on those customers as a primary market for our products.

North Dakota ranks first in the nation in the exports of sunflower seed and oil, second in wheat exports and products, and second in the exports of "other" products such as minor oilseeds, sugar, and miscellaneous vegetable products. Exports are big business for our farmers and ranchers, who exported agricultural products valuing an estimated $2 billion in 2002.

Exports can sometimes come at a costly price, however. Our producers deal with a number of trading partners and problems can arise. Trade barriers and trade disputes continue to emerge between trading partners throughout the world.

And, trade agreements that our country has entered into with the expectation of avoiding trade barriers and disputes often have been problematic for our producers. One example would be the North American Free Trade Agreement (NAFTA).

While many would argue that NAFTA has benefited our country, it is clear that some industries - especially agricultural industries - have been hurt by the agreement or are suffering the consequences of ineffective dispute resolution mechanisms and ill-conceived fine print written in the agreement.

Complex trade situations are becoming more and more commonplace for our farmers and ranchers.

ITC Ruling on Wheat Case

Just last week, the International Trade Commission (ITC) issued a final ruling on the countervailing duty and anti-dumping investigations regarding the imports of Canadian durum wheat and hard red spring wheat into the United States.

As you know, the ITC decided that the U.S. hard red spring wheat industry had been materially injured thereby retaining a 14.15 percent duty on hard red spring wheat imported from Canada. The ITC also handed down a disappointing ruling that the U.S. durum industry had not been materially injured by imports from Canada.

Just last month, the U.S. Commerce Department ruled that Canadian durum imports have in fact injured U.S. producers, and I believe that ruling should have been upheld by the ITC. It is puzzling that the ITC failed to arrive at the conclusion that durum producers have been injured by these imports.

The North Dakota Wheat Commission, along with the U.S. Durum Growers Association and the Durum Trade Action Committee, brought the action to the US Department of Commerce and the ITC. They are to be commended for their efforts.

It is my understanding that these groups will be discussing their options, including a possible appeal, with regard to the ruling on durum once the ITC has publicly released its final written decision. I fully support the efforts of the Wheat Commission and others to decide on a course of action in this case.

Fight is Far From Over

While US hard red spring wheat producers have won this round, the match is far from over. The Canadian Wheat Board has indicated that it plans to appeal the ITC decision on hard red spring wheat to the NAFTA board. That process, I'm told, could take up to a year to complete.

Tariffs will be placed on imports of hard red spring wheat for five years; however, the tariff rates will be reviewed with the potential to be adjusted on an annual basis.

In this instance alone, the ND Wheat Commission and its other partners in the case have spent approximately $4 million to wage the battle. Some estimate that Canada has spent more than $10 million to fight the case. Money is not the only resource that has been expended. Months and months of time and energy have been spent gathering data and information and working to make the case for US wheat producers.

Trade issues are not going to go away. In fact, I expect the number to increase along with the complexity of the issues at hand.

We must work to streamline the processes by which trade disputes are handled and subsequently resolved in order to minimize the costs and impacts to our various agricultural industries. I also believe that we must recognize the social implications of the decisions we make relative to trade agreements and disputes and work to implement fair trade policies that provide benefits to societies impacted by those policies.

The wheat trade dispute case is just one of many trade issues impacting agricultural producers today.

Looming Issues

While the issue I'm about to discuss does not deal directly with the International Trade Commission, it is of significant importance for all of us.

In late June, a single case of bovine spongiform encephalopathy (BSE) was diagnosed in a cow in the Canadian province of Alberta. The U.S. border was closed to imports of Canadian cattle at that time. Recently, the U.S. has opened the border to allow imports of Canadian boneless beef under 30 months of age.

The U.S. Department of Agriculture is now in the process of issuing a proposed rule that outlines the process by which the U.S. would allow the importation of live Canadian cattle. The proposed rule is expected to be published in the Federal Register either this month or next, with a 60-day comment period.

Following the comment period, USDA will review the comments and begin working on a final rule. It is expected that imports of live Canadian cattle will resume sometime in 2004.

The case of BSE in Canada has had a devastating impact on the Canadian livestock industry, with reports of producers at times exterminating and burying their own cattle because they are worth so little. Canadian beef is worth pennies on the dollar, while the US beef industry has seen a marked increase in the value of their animals.

It is important to recognize that this case of BSE could have just as easily happened in the United States as it did in Canada and has served to point out some inefficiencies in the U.S. system.

Before we resume live cattle trade with Canada, I believe that we must implement improved and expanded inspection of imported livestock, meat and meat products. We must also put in place a total ban on ruminant protein in cattle feed and ruminant byproducts in poultry litter. And we need to increase surveillance in our own herds, particularly with respect to animals which die on farms or ranches.

The National Association of State Departments of Agriculture (NASDA) recently passed a resolution I introduced regarding BSE. My counterparts from around the country agree that the U.S. must continue the regulatory effort that began with the closing of U.S. borders. We also believe that Canada must implement the recommendations of the world animal health agency, the Office Internationale des Epizooties, before the ban can be lifted. I have attached a copy of the resolution for your information [Attachment 1].

I also believe that Canada must work with the United States to harmonize animal heath standards before imports of Canadian cattle resume in the U.S. For years, we've been trying to work with the Canadians who have unfairly restricted access to their markets because of the presence of blue tongue, anaplasmosis, tuberculosis and brucellosis in the United States.

Pesticide harmonization is another issue that continues to impact our producers. NAFTA allows agricultural commodities from the U.S., Canada, and Mexico to compete freely in the international marketplace. However, barriers currently exist in federal statutes that prevent American growers or pesticide dealers from legally importing Canadian pesticides without the consent of the product registrant, even if the products are identical in composition to pesticides registered with EPA for the desired used. As a result, product registrants have been able to use the U.S./Canada border to create two separate pesticide markets. This system of merged markets for agricultural outputs and segmented markets for agricultural inputs puts U.S. growers at substantial disadvantage.

According to a study recently released by the NDSU Center for Agricultural Policy & Trade Studies, price disparities in the U.S. and Canadian pesticide markets cost North Dakota producers more than $20 million annually. Another report published by the Northern Plains Trade Research Center determined that net farm income for small farms would increase 5.2 percent if American farmers could pay the same pesticide prices as their Canadian counterparts.

I'd like to commend Senator Dorgan for his work in the U.S. Senate to try and solve this issue. He has introduced legislation - S 1406 - which would eliminate the current barriers that prevent U.S. farmers, dealers, and distributors from accessing lower-priced pesticides from Canada. The bill would amend the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) to grant EPA the authority to issue registrations to parties who wish to import Canadian pesticides that are identical or substantially similar to products already registered for use in the United States. By eliminating access barriers, the bill would de-segment U.S. and Canadian pesticide markets, and allow U.S. farmers to pay the same pesticide prices as their Canadian counterparts.

Conclusion

What is needed is equality and fairness in the global marketplace. U.S. producers - and producers throughout the world - deserve to openly compete in the fairest way possible.

Senator Dorgan and Commissioners Lane and Pearson, thank you again for the opportunity to present some of my thoughts on agricultural trade issues today. I would be happy to address any questions you may have.