8 



marketing skills. FAS's recruiting profile and training programs 

 should ensure that it has staff with these necessary skills. 



Using the FAS attache service, USDA maintains an extensive 

 presence throughout the world, with about 75 posts located in 

 about 60 countries. However, FAS does not have an overall long- 

 term strategic plan that guides the location and staffing of its 

 posts. A strategic marketing approach would focus USDA's over- 

 seas resources in those countries that are likely to be the most ben- 

 eficial in terms of increasing U.S. agricultural exports. 



While the just completed Uruguay Round of GATT reached 

 agreement to reduce trade distorting agricultural subsidies and 

 other trade barriers, tariffs and nontariff barriers remain. Even 

 with a market-oriented export strategy, USDA will still find it val- 

 uable to have programs and tools that allow it to combat unfair for- 

 eign trade practices and trade-distorting subsidies and help provide 

 pressure to bring our trading partners to the negotiating table as 

 foreseen in the coming 4-year period to negotiate further reductions 

 in trade distorting subsidies and barriers. 



In addition, even in a world with reduced barriers, market im- 

 perfections continue to exist. Certain developing countries may be 

 weak credit risks or lack hard currency but still have long-term po- 

 tential as future cash customers for U.S. agricultural products. To 

 overcome these imperfections, and provide maximum export oppor- 

 tunities for U.S. producers, USDA may still have to continue to use 

 tools such as export credit guarantees in certain markets. 



One side effect of the U.S. production-oriented policies of the past 

 was that the United States invariably ended up holding large car- 

 ryover stocks of staple grains. These inventories contributed to 

 world food security by ensuring that in the event of drought or 

 other natural disasters, stocks would exist that could cover a short- 

 fall in production. 



If the shift to a market-oriented approach leads to a reduction in 

 surplus U.S. production and related carryover inventories, the 

 United States might not have sufficient inventories to continue to 

 play this food security role. This could happen if production of cer- 

 tain bulk commodities declined, if exports increased, or if a com- 

 bination of the two possibilities occurred. 



Such a change might require the United States to determine, in 

 conjunction with other food exporting countries, the needed size of 

 carryover stocks to ensure world food security and to decide how 

 the costs of carrying these inventories should be borne. 



In conclusion, we believe that a shift from programs and policies 

 that emphasize production to an approach that emphasizes strate- 

 gic marketing is the type of change needed to help U.S. agriculture 

 increase exports in a dynamic world market and remain competi- 

 tive into the next century. And we look forward to working with 

 Chris and FAS in efforts to make this transition. 



Mr. Chairman, this concludes my oral statement and I will be 

 happy to answer any questions you or the members of the sub- 

 committee may have. 



[The prepared statement of Mr. Mendelowitz appears at the con- 

 clusion of the hearing.] 



Mr. Penny. Thank you for your presentation. Chris, in your testi- 

 mony, you made reference to sales to Russia, totaling $345 million 



