65 



the lowest price in the developed world — receives the full benefit of a 15-year transi- 

 tion period. 



NAFTA also treats potato and edible bean producers unfairly. Because U.S. nego- 

 tiators did not accurately measure U.S. edible bean exports to Mexico, the tariff rate 

 ?uota established by the NAFTA will cut U.S. exports to Mexico in half. While 

 FSTR argues that the quota is a minimum amount and may be increased if the 

 Mexican domestic supply is inadequate, there is no guarantee that U.S. producers 

 and Mexican purchasers will receive adequate notice of any temporary increase in 

 the quota nor that other countries will not gain advantageous access to the Mexican 

 market in this situation. It is my hope that this ambiguity could be cleared up 

 through an exchange of letters with Mexico. 



While potatoes did not fare quite as badly as edible beans, potato producers ap- 

 pear to be worse off under NAFTA than they would have been without it. Over the 

 past several years, potato exports to Mexico have doubled each year as Mexican 

 processing plants sprouted in northern Mexico. The NAFTA stops this growth in its 

 tracks. 



To be completely fair, NAFTA will likely increase U.S. exports of a number of 

 commodities produced in North Dakota. Exports of corn, oilseeds, pork and beef are 

 projected to increase as a result of the NAFTA. However, unless something is done 

 to address the problems I identified above, the overall impact on North Dakota pro- 

 ducers will be negative. 



Beyond the impact of the NAFTA on individual commodities, I have serious con- 

 cerns about the application of the rules of origin and sanitary and phytosanitary 

 portions of the agreement. On paper, the rules of origin are strong and detailed. But 

 the provisions enforcing these rules are weak. In practice, because agricultural com- 

 modities are fungible, there will be little more to rely on than the good faith of 

 Mexican producers and the Mexican Government. Unfortunately, self-certification is 

 insufficient to prevent non-Mexican goods from receiving the preferential treatment 

 granted to Mexican products in the NAFTA — especially as Mexico concludes trade 

 agreements and expands its trade with other Latin American and Caribbean na- 

 tions. Yet the cumbersome notification requirements in the verification procedures 

 virtually guarantee that there will be little effective oversight beyond self-certifi- 

 cation of Mexican exporters. Unless the verification procedures are considerably 

 strengthened, I fear that the NAFTA could lead to significant transshipment of agri- 

 cultural goods through Mexico into the United States. 



Similarly, the agreement contains strong sanitary and phytosanitary standards on 

 paper. However, there is no question that food safety and consumer protection 

 standards in Mexico are significantly lower than in the United States. While the 

 agreement allows the United States to maintain its current standards and apply 

 them to Mexican imports, I have two concerns. The first is that — given the realities 

 of USDA border inspections — some Mexican imports will not be adequately tested. 

 The second is that there will be strong pressure for the United States to accept 

 Mexican standards as equivalent to our own when — because they are not effectively 

 enforced — they are, in fact, weaker. We should not allow the NAFTA to threaten the 

 safety of our food supply nor undercut our lengthy and expensive disease control 

 and pest eradication efforts. Not only would a less safe food supply risk the health 

 of U.S. consumers — and even their lives, as the E. coli attack this spring dem- 

 onstrated — it could lead to significantly lower domestic consumption and negate any 

 projected benefits to U.S. producers from expanded exports to Mexico. 



Finally, I am concerned about how the availability of low-cost labor and lower 

 standards might affect the location of food processing facilities. While I recognize 

 that many factors other than just labor go into facility location decisions, labor costs 

 are often one of the most significant factors within the control of management. 

 Value-added processing and other light manufacturing ventures have been touted 

 as the key to economic development in rural communities. Rural America cannot af- 

 ford to lose the diversification and incomes provided by these enterprises. This is 

 clearly a risk: as I mentioned earlier, Mexico is investing in potato processing facili- 

 ties, and Green Giant moved a major processing plant from Watsonville, California 

 to Mexico in 1983. As the Green Giant example suggests, some of this will happen 

 without the NAFTA, but NAFTA will undoubtedly accelerate the process. Unless 

 Mexican wages rise to levels commensurate with the productivity of Mexican work- 

 ers using modern U.S. equipment, I fear that NAFTA could lead more value-added 

 processing to move south of the border. 



While I have many concerns about elements of this particular agreement, I be- 

 lieve strongly in expanding trade. I am convinced that U.S. agriculture can compete 

 successfully with anyone on a level playing field. As I said at the beginning of my 

 statement, I hope that the administration will move expeditiously to repair the 



