66 



flaws in the agreement so that it truly benefits farmers, businesses and workers in 

 my State and across the country. 



Senator FEfNGOLD 



I want to thank Chairman Leahy for calling this hearing today on this very im- 

 portant issue and I want to thank those who have taken time out their schedules 

 to testify before this committee. 



I can think of no issue that is as complex for policymakers as the one before us 

 today. When the issue of the North American Free Trade Agreement comes up at 

 one of my listening sessions or town meetings in Wisconsin, as it invariably does, 

 it generates diverse reactions and emotions ranging from anger and apprehension 

 to enthusiasm and anticipation. I expect nothing less from this hearing today. 

 NAFTA, as it relates to agriculture, provides us with a unique challenge. We are 

 faced with reconciling the goals of NAFTA with the goals of our domestic agricul- 

 tural policies. Obviously this is not an easy task. 



One of the most significant concessions the United States would make under 

 NAFTA is the immediate elimination of our Section 22 import quotas with Mexico. 

 Section 22 has been central in our efforts to stabilize domestic prices and supplies 

 for commodities such as dairy, cotton, sugar and peanuts. Under NAFTA, of course, 

 those quotas are converted to tariff-rate quotas eventually allowing unlimited im- 

 ports. The magnitude of this concession cannot be ignored. This change could render 

 our domestic support programs ineffectual. Our price support program for dairy 

 would be rendered useless if we are flooded with imports of surplus commodities. 

 I am concerned that this provision will be carried through to any GATT agreement 

 we may have for agriculture. This major concession on market access will likely 

 make it difficult to maintain our Article 25 Waiver for Section 22 in GATT creating 

 a flood of imports from the EC. 



Now, I've been told by many farmers in Wisconsin that the key to a successful 

 NAFTA or GATT agreement is market access. In NAFTA, Canada has been ex- 

 cluded from the agreement on dairy. Clearly, U.S. producers have not gained access 

 to that lucrative market. We have surrendered Section 22 while allowing Canada 

 to continue to protect their domestic industry. The question then, at least for dairy, 

 is what level of market access do we achieve with Mexico. The answer to that ques- 

 tion is not clear. 



While Mexico converts their import licenses for dairy products to tariff rate quotas 

 (TRQ's) and the United States converts our Section 22 quotas into TRQ's, the tariffs 

 for nonfat dry milk imports above the duty-free quantity are much higher for U.S. 

 imports into Mexico than for Mexican imports into the United States. In fact, the 

 tariff is so high that it is unlikely that the United States would export beyond the 

 duty-free amount. Similarly, the Mexicans are given 15 years to phase out their tar- 

 iffs on nonfat dry milk, while the United States allows unlimited access to our mar- 

 ket after just 10 years. 



For cheese the agreement raises similar questions. It seems unlikely that the 

 dairy sector will benefit from the deal made for cheese. The United States would 

 allow 5500 tons of cheese duty free while rto U.S. exports to Mexico would be al- 

 lowed in duty free. Tariffs on cheese, currently subject to import licensing, would 

 be set at 20 percent for hard cheese and 40 percent for fresh cheeses which is, I'm 

 told, the preferred cheese type in Mexico. A report from Texas A&M indicated that 

 hard cheeses are typically consumed only by the middle and upper classes due to 

 the high cost. The cost of U.S. cheeses would be even higher due to the tariffs, mak- 

 ing increased demand unlikely. 



It appears that the U.S. dairy industry has given up a great deal for limited mar- 

 ket gain. I am concerned that the side agreement on import surges is inadequate 

 to protect our domestic producers from substantial harm from this agreement. The 

 Working Group on Emergency Action, created by the agreement, appears to provide 

 little more than a mechanism for slowing down action by a country to protect itself 

 from import surges. 



I am concerned that at best this agreement provides little benefit to agricultural 

 producers in this country, and at worst will cost farmers their markets, incomes and 

 ultimately their livelihoods. Particularly in agriculture there appear to be some 

 clear losers. The citrus, tomato, sugar, wheat and peanut industries certainly feel 

 as though they have a lot to lose under this agreement. 



Some observers say these adverse results will not occur. In fact there are a large 

 number of agribusiness and commodity trade associations that have endorsed this 

 agreement. The group "Ag for NAFTA, consisting of 101 agricultural organizations, 

 believes that U.S. agriculture will be clear beneficiaries of this agreement. The De- 



