Agricultural Trade Issues In the 106th Congress

Agricultural Trade Issues In the 106th Congress

Order Code IB10040
CRS Issue Brief for Congress
Received through the CRS Web
Agricultural Trade Issues
In the 106th Congress
Updated May 19, 2000
Geoffrey S. Becker, Charles Hanrahan, and Remy Jurenas
Resources, Science, and Industry Division
Congressional Research Service ˜ The Library of Congress

CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Overview
Agricultural Trade Trends
Exports
Imports
U.S. Agriculture and China’s Accession to
the World Trade Organization
Agriculture in World Trade Negotiations
Multilateral (WTO) Negotiations
African Growth and Opportunity Act
Economic Sanctions and Agricultural Exports
U.S.-EU Issues
Biotechnology Issues
Banana Dispute
Meat Hormone Dispute
Country-of-Origin Labeling
Agricultural Export and Food Aid Programs
LEGISLATION

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Agricultural Trade Issues in the 106th Congress
SUMMARY
U.S. agricultural interests are now fol-
annually. On November 15, 1999, the United
lowing U.S. trade policy developments against
States and China completed bilateral negotia-
a backdrop of weak foreign demand and large
tions on terms for China’s accession to the
world supplies of agricultural products. The
World Trade Organization (WTO). The
U.S. Department of Agriculture reports that
agreement provides for tariff reductions and
the value of U.S. agricultural exports fell
increased access to the Chinese market for a
between FY1996 (a record year) and FY1999
broad range of U.S. agricultural products. For
by almost $11 billion. FY2000 agricultural
the United States to benefit fully from China’s
exports are forecast by USDA to be $49.5
accession to the WTO depends in part on a
billion, a $500 million increase over FY1999.
congressional vote to grant China permanent
The projected agricultural trade surplus of
normal trade relations (NTR) status. Votes on
$11.5 billion in FY2000 would be less than
the matter are expected in the House and
half the FY1996 surplus of $27.2 billion.
Senate in late May and in June, respectively.
Many agricultural groups and their sup-
– The next round of WTO multilateral trade
porters in Congress believe that long-term
negotiations. Trade ministers, meeting in
remedies for low farm prices and income
Seattle November 30 to December 3, 1999,
depend upon enhancing U.S. trade policies,
were unable to agree on an agenda to launch a
including 1) legislation to permanently grant
comprehensive new round. Nonetheless,
China the same favorable access to U.S. mar-
sectoral talks on agriculture began March 23-
kets that almost all other nations have; 2)
24, 2000, but are expected to proceed slowly;
exempting agriculture from U.S. economic
sanctions; 3) increased use of export and food
– Proposals to exempt agricultural exports
aid programs; and 4) aggressive negotiations
from U.S. unilateral economic sanctions;
to deal with foreign-imposed barriers to the
movement of U.S. farm products.
– Annual funding for USDA export and food
aid programs. The President’s FY2001 budget
A few farm groups are wary of such
includes a proposed $5.8 billion program level
approaches. They point out that, by maintain-
for these programs. Both Appropriations
ing barriers to U.S. imports and their own high
Committees have reported new appropriations
export subsidies and internal farm supports,
bills; floor action could occur shortly.
not all countries have fully honored existing
trade agreements. In fact, some of these U.S.
– Efforts to resolve trade disputes with the
critics have pressed for more restrictions on
European Union (EU), such as over its banana
foreign farm and food imports.
import regime, its continued ban on imports of
meat treated with growth hormones despite a
Specific agricultural trade issues of inter-
WTO panel ruling that it be lifted, and pro-
est to the 106th Congress include:
nounced U.S.-EU differences over environ-
mental effects of genetically modified organ-
– Whether to accord China permanent normal
isms (GMOs) and the safety of GM foods.
trade relations (NTR) status with the United
States, which currently must be renewed
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS
On May 17, separate bills (S. 2277; H.R. 4444) were approved by Senate and House
Committees to accord China permanent normal trade relations (NTR) status. This
legislation follows completion, on November 15, 1999, of U.S.-China negotiations on terms
for the latter’s accession to the World Trade Organization (WTO). This agreement, and
similar ones between China and other WTO members, must be endorsed by two-thirds of the
Organization’s membership before China will be admitted. This accession agreement,
among other things, provides for tariff reductions and increased access to the Chinese
market for a broad range of U.S. agricultural products. For the United States to receive the
full range of benefits from China’s accession to the WTO depends in part on the
congressional vote to grant China permanent NTR status. Floor consideration is expected
in the House the week of May 22 and in the Senate in June.
Sectoral negotiations to further liberalize agricultural trade began on March 23-24 in
Geneva at a special session of the WTO’s Committee on Agriculture, but are expected to
proceed slowly. Part of the WTO’s “built-in agenda” agreed to in the 1994 Uruguay Round
Agreement, these negotiations will proceed even though the third ministerial conference of
the World Trade Organization (WTO), which met in late 1999 in Seattle, failed to reach
agreement on an agenda for more comprehensive multilateral trade talks.
The President, on February 7, unveiled his FY2001 budget request, which proposes a
program level of $5.8 billion for USDA’s agricultural trade and food aid programs. The
Senate and House Appropriations Committees reported, on May 10 and May 16,
respectively, FY2001 USDA money bills (S. 2536; H.R. 4461); both also include an
amendment exempting food from unilateral economic sanctions against Cuba and several
other countries. Floor action could occur as early as the week of May 22.
The President, on May 18, 2000, signed into law the African Growth and Opportunity
Act (H.R. 434), which includes several amendments aimed at supporting U.S. agriculture in
international trade. The conference report on the bill was passed by the House and Senate
on May 4 and 11, respectively.
BACKGROUND AND ANALYSIS
Overview
U.S. agricultural interests are following trade policy issues against a backdrop of weak
foreign demand and large world supplies of agricultural products. The U.S. Department of
Agriculture (USDA) estimates that the value of U.S. agricultural exports was $49 billion in
FY1999, down from nearly $54 billion in FY1998 and the record of nearly $60 billion in
FY1996. The FY1999 level, the lowest since 1987 is of concern because agricultural exports
account for about 20% of the value of farm production and 25% of farm income. The
forecast for FY2000 is $49.5 billion. Export volumes of wheat and corn are now expected
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to be lower in FY2000 than USDA had predicted earlier, although soybean, meat, and poultry
volumes are projected to increase.

Many agricultural groups and their supporters in Congress believe that long-term
remedies for low farm prices and income depend upon enhancements to U.S. trade policies,
including 1) passage of legislation granting permanent NTR status to China; 2) enacting into
law an exemption from U.S. economic sanctions for commercial sales of agricultural
products; 3) increased use of export and food aid programs; and 4) aggressive negotiations
to deal with foreign-imposed barriers to the movement of U.S. farm products. A few farm
groups are wary of such approaches. They point out that a number of our major trading
partners, by continuing barriers to U.S. imports and their own high export subsidies and
internal farm supports, have not fully honored existing trade agreements. Some of these
groups have pressed for more restrictions on foreign farm and food imports.
Agricultural Trade Trends
Exports
Export markets are extremely important to U.S. producers, who are the world’s leading
agricultural exporters. Exports accounted for about 25% of farm income, and production
from an estimated 30% of all U.S. crop acreage in 1998. Although agriculture consistently
enjoys a surplus trade balance—one of the few U.S. sectors that does—this balance declined
to $11.5 billion in FY1999, well below FY1998's $16.6 billion surplus and the lowest since
1987. The surplus is projected to remain at $11.5 billion in FY2000 (see chart).
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Leading Markets: The leading U.S. farm export markets (value, FY1997-99) are:
Japan, the European Union (EU), Canada, Mexico, Taiwan, and South Korea. Asia in
general, and China in particular, are viewed as critical long-term growth markets.
High Value Products: Worldwide, U.S. exports of bulk commodities (e.g., oilseeds
and grains) remain significant, but high-value exports such as meats, fruits, vegetables, and
processed foods are increasing—now representing more than 60% of the value of total U.S.
farm exports.
Dependence on Exports: Some products depend more heavily on exports for total
sales than others. For example, 70% of almond sales are exports. Hides/skins, wheat,
walnuts, and rice depend on exports for 50% or more of their total sales. Other products
where exports constitute 25% or more of sales include cotton, prunes, grapefruit, raisins,
soybeans, salmon, pulses, tobacco, animal fats, lemons, grapes, broccoli, pears, oranges,
coarse grains, canned corn.
State Export Rankings: Nearly every state exports agricultural products, led by
California, with agricultural exports valued (in 1998) at $7.7 billion—more than twice the
level of number two Iowa. Others with at least $1 billion (by rank, 1998) were Illinois, Texas,
Nebraska, Kansas, Minnesota, Washington, Arkansas, Indiana, North Carolina, Ohio,
Missouri, Wisconsin, Georgia, Florida, and South Dakota.
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World Market Share (1999): The United States was the major world exporter of:
! Corn, with 60% export market share. Major competitors were Argentina
(11%), China (5%), and South Africa (2%).
! Soybeans, with 57% export market share. Major competitors were Brazil
(23%), Argentina (8%), and Paraguay (6%).
! Wheat and products, with 29% export market share. Major competitors
were Canada (14%), Australia (16%), the EU (16%), and Argentina (9%).
! Cotton, with 18% export market share. Major competitors were Uzbekistan
(16%), Franc-Zone Africa (group of former French colonies that share a
common currency, 15%), and Australia (13%).
! Poultry meat, with 41% export market share. Major competitors were the
EU (14%), Hong Kong (14%), Brazil (12%), and China (7%).
The United States also had major shares of world markets for beef/veal, pork, and rice
— but trailed Australia, the EU, and Southeast Asia, respectively for each of those products.
Imports
U.S. agricultural imports, which were $37 billion in FY1998 and $33 billion in FY1997,
were a record $37.5 billion in FY1999 and are projected to be $38 billion in FY2000.
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Types of Products: Most U.S. agricultural imports are high value. The largest
component is horticultural products, which have contributed heavily to the year-to-year rise
in imports. Leading imports by value ($1 billion or more annually) are: coffee, vegetables and
preparations, fruits and nuts, meats and poultry, animals, cocoa, rubber, and bananas.
Major Suppliers: Canada, the EU, and Mexico are the leading exporters to the United
States. Oceania (mainly Australia and New Zealand), Indonesia, Colombia, Brazil, Chile, and
other Latin American countries are also major import suppliers. (For more data see: CRS
Report 98-253, U.S. Agricultural Trade: Trends, Composition, Direction, and Policy.)
U.S. Agriculture and China’s Accession to the WTO
The prospect of future growth in demand for agricultural products makes China’s
accession to the WTO an important issue for U.S. agriculture. Most U.S. agricultural interest
groups are looking to China’s eventual membership in the WTO as a way to enhance U.S.
agricultural exports and increase farm incomes. U.S. agricultural exports to China were
valued at $1.002 billion in 1999, making it the eighth largest market for U.S. farm products.
Another $1.3 billion of U.S. farm products were shipped to Hong Kong in 1999. In the short
run, U.S. agricultural exports to China are expected to decline because China’s economic
growth, and thus its demand for imports, has slowed. In the long run, if growth resumes, as
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many economists expect, China’s 1.2 billion population, and its growing middle class, suggest
an enormous potential as a market for U.S. agricultural products.
The U.S.-China negotiations on terms for the latter’s accession to the WTO were
concluded November 15, 1999. The agricultural components of this agreement appear
identical to those of an earlier agreement negotiated in April 1999 but not finalized due to
U.S. problems with it and, subsequently, to diplomatic fallout from the accidental U.S.
bombing of China's embassy in Yugoslavia on May 8, 1999. Negotiations resumed in
September 1999. The November 15, 1999 agreement provides that China, if it becomes a
member of the WTO, will make substantial reductions in agricultural tariffs and establish
market access quotas that should expand trade for several important U.S. agricultural
products, including soybean products, wheat, corn, rice, and cotton. Several other WTO
members, notably the EU, also must conclude agreements with China; ultimately, China’s
application for membership must be agreed to by other members of the WTO.
U.S.-China WTO negotiations in April 1999 were accompanied by bilateral agreements
to end China’s sanitary and phytosanitary (SPS) barriers to U.S. wheat, meat, and citrus
exports. When accession negotiations were suspended, however, China’s implementation of
the bilateral agreements came to a standstill. Since the November 15 agreement, China has
begun to implement the bilateral agreements, with reported purchases of wheat, citrus, and
meats occurring by May 2000.
The WTO requires that members extend most-favored-nation (MFN) treatment, also
known as normal trading relations (NTR), to all other members. Such status means that
products enter the United States at the same low tariff rates that apply to virtually all other
nations. To benefit from the full range of concessions, Congress would have to grant China
permanent NTR status. The Administration submitted permanent NTR legislation to
Congress on March 8.
On May 17, 2000, the Senate Finance Committee and the House Ways and Means
Committee each approved bills (S. 2277; H.R. 4444) to accord permanent NTR. These bills
are expected to reach the House floor the week of May 22 and the Senate floor in June.
Under current law, the United States can extend NTR treatment to China on an annual
basis only if China complies with freedom of emigration conditions in the Jackson-Vanik
amendment to the Trade Act of 1974 (P.L. 93-618, Section 401). Providing NTR for China
has depended on the extension of an annual waiver of Jackson-Vanik by the President, subject
to a resolution of disapproval by either congressional chamber. Such disapproval resolutions
have always met with defeat (see Legislation section).
(For more information, see: CRS Report RS20169, Agriculture and China’s Accession
to the World Trade Organization, and China and U.S. Agriculture, in the CRS electronic
briefing book on trade.)
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Agriculture in World Trade Negotiations
Multilateral (WTO) Negotiations
A new round of multilateral trade negotiations was to be launched formally when trade
ministers of World Trade Organization (WTO) countries met November 30-December 2,
1999, in Seattle. Continuing the process of agricultural trade liberalization begun in the
Uruguay Round Agreement has been a priority. While the Uruguay Round provided new and
strengthened rules for the conduct of agricultural trade, a new round is intended to expand
markets for agricultural products and further ease trade barriers, export subsidies, and trade-
distorting domestic support. The operations of state trading enterprises (STEs), like the
Canadian Wheat Board, and trade in genetically engineered products also are at issue.
Trade ministers at the Seattle meeting were unable to agree on an agenda for a
comprehensive new round, which would have included not only agriculture, but services,
intellectual property, industrial tariffs, and perhaps broader issues of competition, investment,
and the relationship of trade agreements to labor and environmental considerations.
However, Article 20 of the Uruguay Round Agreement on Agriculture requires negotiations
in agriculture to begin in early 2000. These sectoral negotiations on agriculture were
launched March 23-24, 2000 at a special session of the WTO’s Committee on Agriculture,
where it was that countries would submit their detailed negotiating proposals by March 2001.
The negotiations are expected to proceed slowly.
Many agricultural interests support U.S. participation in a comprehensive round (rather
than a sectoral negotiation) because they believe the trade-offs possible in a larger negotiation
would result in improved market prospects for U.S. agricultural exports. Some agricultural
groups, who feel that they have been disadvantaged by previous trade agreements, oppose
U.S. participation in a new round. In Congress, the Senate Agriculture Committee held
hearings on WTO issues on June 24 and September 30, 1999; the House Agriculture
Committee held its own hearing on June 23, 1999. In early 2000, several other committees
had started hearings on the WTO Seattle meeting and its implications for future talks,
including on agriculture. The African Growth and Opportunity Act (H.R. 434; see below)
contains negotiating objectives for agriculture.
A joint resolution (H.J.Res. 90) to withdraw from the WTO was introduced on March
2, 2000, but final passage is viewed as doubtful at this time. (See The WTO Seattle
Ministerial in the CRS electronic briefing book on trade; CRS Report 98-254, Agricultural
Negotiations in the World Trade Organization; and CRS Report RS20422, United States'
Withdrawal from the World Trade Organization: Legislative Procedure.)

African Growth and Opportunity Act
The President, on May 18, 2000, signed into law the African Growth and Opportunity
Act (H.R. 434), which includes a number of amendments of direct interest to agriculture. The
primary purpose of H.R. 434 is to increase trade opportunities with Africa and the Caribbean
Basin. Among the agricultural provisions added by the Senate in November 1999 and
retained by conferees is the so-called "carousel retaliation" provision that would require the
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Administration periodically to rotate, or change, the types of products targeted for trade
retaliation against a foreign country. Its immediate objective is to intensify pressure on the
EU to permit imports of beef produced with hormones and to resolve a long-running dispute
over banana imports (see below), by penalizing wider range of foreign industries and regions.
Other agriculture-related provisions include: creation of a chief agricultural negotiator in the
office of the U.S. Trade Representative, and a list of explicit U.S. objectives for agriculture
in WTO negotiations, including an end to export subsidies and a reduction of foreign trade
barriers.
A Senate provision permitting farmers to apply for Trade Adjustment Assistance benefits
was dropped from the final conference version (H. Rept. 106-606), which then passed the
House on May 4 and the Senate on May 11, 2000.
Economic Sanctions and Agricultural Exports
To counter the fall in agricultural exports and declining commodity prices, farm groups
and agribusiness advocate that U.S. sanctions policy be changed to exempt agricultural
commodities and food products from prohibitions and restrictions on their export to targeted
countries. Their position is reflected in proposals that the 106th Congress has debated and
considered, and in their support for broader measures to change the process and scope of
future sanctions imposed by both the executive branch and Congress.
The U.S. government restricts, but does not prohibit, commercial exports of agricultural
products as part of across-the-board economic sanctions currently imposed on Cuba and Iraq.
Exceptions are allowed for humanitarian reasons, allowing food products to be licensed for
sale and donation to these two countries. The Administration in 1999 moved to lift
prohibitions on U.S. commercial sales of most food and agricultural products to three other
countries–Iran, Libya, and Sudan. The Treasury Department on July 27, 1999, issued
country-specific export licensing regulations to implement the Administration's policy decision
to exempt commercial sales of food and medical products from future, and some current,
sanctions. This now allows sales that meet specified conditions and safeguards to be made
to these three countries. Since this policy went into effect, Treasury has approved licenses
that have resulted in U.S. exports of corn to Iran and durum wheat to Libya. This policy
change reflected the view that food should not be used as a foreign policy tool, with officials
acknowledging that U.S. sanctions policy had cost farmers lost sales to targeted countries.
A separate September 17, 1999, White House announcement on easing sanctions against
North Korea likely means that farm product sales will be allowed under a less restrictive
licensing policy, expected to be finalized sometime this year.
Reflecting the situation prior to the Administration's announcements, the above six
countries account for a relatively small share of world agricultural trade. In 1998, they
purchased $7.7 billion of agricultural products (1.9% of worldwide agricultural imports).
USDA estimates that U.S. economic sanctions on these six countries "reduced U.S.
agricultural exports by roughly $500 million in 1996."
Spurred by falling farm exports, mounting interest in this issue led lawmakers to
introduce almost 20 bills to exempt food and medicine from U.S. economic sanctions and to
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change the way that such sanctions can be imposed. Five committees held hearings on
selected bills. Those in favor of having agricultural and food exports exempted in the
application of U.S. sanctions policy argue that prohibitions only hurt U.S. farmers and
business, undermine this country's reputation as a "reliable supplier," and do not change
targeted countries' behavior. Exemption opponents argue that current law gives the President
sufficient flexibility to permit humanitarian food shipments, and that U.S. foodstuffs, if sold,
could be misused by foreign governments or not made available to those in need.
In 1999 floor action, the House and Senate approved measures that differ in their
approach. The "Selective Agricultural Embargoes Act of 1999" (H.R. 17; H.Rept. 106-154,
Parts I and II), passed by the House under suspension of the rules on June 15, 1999, lays out
congressional procedures for the approval or disapproval of a future embargo on agricultural
products that is not a part of an embargo on all products to a country. The Senate on August
4 adopted, after considerable debate, an amendment to its version of the FY2000 agriculture
appropriations bill (H.R. 1906) to exempt commercial sales of agricultural commodities and
food products from U.S. unilateral sanctions. A motion to table the amendment was defeated
on a 29-70 vote. The Administration signaled its opposition to the amendment, arguing that
to require the President to secure congressional approval before sanctions that include farm
commodities can be applied limits the President's flexibility in using sanctions to advance
foreign policy and national security objectives. Because conferees were not able to agree on
how to handle this amendment, primarily because of opponents' concern that it would relax
the long-standing trade embargo on Cuba, congressional Republican leaders dropped this
contested language from the final agriculture appropriations conference report.
Agricultural commodity groups and business interests have continued to push for
legislating the agricultural exemption in U.S. sanctions policy. For example, language in S.
2382 is similar to that added by the Senate to the agriculture appropriations measure last
summer, but dropped in conference. If enacted, its significance would be to effectively allow
commercial sales of U.S. agricultural exports to Cuba. Food and medical products would be
allowed to be sold to governmental entities in sanctioned countries; such exports, though,
would be subject to specific export licensing requirements. Prohibited would be the use of
U.S. government export programs (e.g., credit guarantees, subsidies) to facilitate such
exports to countries affected by this policy change.
The most active vehicle for the sanctions legislation currently is the USDA FY2001
money bill, which was reported by the Senate Appropriations Committee on May 10, 2000
(S. 2536) and by the House Appropriations Committee on May 16, 2000 (H.R. 4461). Both
bills include amendments to exempt food and medical products from U.S. unilateral sanctions
that apply to Cuba and other countries. Floor consideration of these bills could occur the
week of May 22, with the sanctions provision currently encountering some strong opposition
in the House. (For more information, see CRS Report RL30108, Economic Sanctions and
U.S. Agricultural Exports, and Economic Sanctions and Agricultural Exports in the CRS
electronic briefing book on trade.)
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U.S.-EU Issues
Biotechnology Issues
Disputes over genetically engineered crops and foods which contain them threaten to
disrupt U.S.-European agricultural trade. Generally referred to as genetically modified
organisms, or GMOs, in trade discussions, such crops and products are a focus of disputes
over differences in approval procedures and on whether there is a need to label GMO
products. Underlying the disputes are pronounced U.S.-EU disagreements over the
environmental effects of GMOs and the safety of GM foods.
Crops produced from GMOs are rapidly being introduced into U.S. agriculture,
especially crops for export such as corn, soybeans, and cotton. Acceptance of GMOs in the
EU and other markets for U.S. agricultural products is thus critical for U.S. producers and
exporters. In the United States, for the most part, consumers have not questioned the health
or safety of GM foods, although some U.S. consumer groups have called for labeling.
Conversely, in the EU, environmentalists, consumer groups, and some scientists argue that
the long-term effects of GMOs on health and the environment are unknown and not
scientifically established.
The U.S. approval process for GMOs has facilitated their introduction into the U.S. food
system. The U.S. position has been that GM foods are no different from non-GM foods.
Thus existing regulations for approving them are appropriate and adequate. The EU,
however, maintains a separate (and longer) regulatory system for approving GMOs. The EU
also requires mandatory labels for products containing GMOs, which it justifies, not on the
basis of science, but on consumers’ right to information. Labeling is not required in the
United States, except when there is a significant difference between the conventional and the
GM product or if the GM product poses a health risk.
The EU Council of Ministers instituted, on June 24-25, 1999, a de facto moratorium on
any new approvals of GMO crops while a new approval and regulatory framework is
established. This new process would become effective in 2001. The prospect of an effective
approval process is attractive to many proponents of GMO crops because under the present
system practically no new GMO crops are being approved. However, some harbor doubts
about the ability of the EU to overcome apparent strong consumer and environmental
resistance to GMOs even with a more effective and scientifically based system. Such doubts
may have contributed to recent decisions by major U.S. agribusiness firms to ask suppliers
to begin separating GMO and non-GMO corn and soybean products.
Congress is becoming a main venue for the domestic debate on labeling of GM foods.
S. 2080 and H.R. 3377 would require that food that contains a genetically engineered
material, or that is produced with a genetically engineered material, be labeled accordingly.
A more recently introduced bill, H.R. 3883, would levy user fees on firms seeking approval
for GM foods to pay for FDA safety reviews and ban GM foods likely to cause allergic
reactions. The debate will reflect views of regulators and manufacturers who argue that GM
foods are safe, and those of opponents who say long-term effects and unintended problems
have not been adequately assessed. Several bills introduced in the 106th Congress reflect the
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views of opponents of labeling and those who are concerned that it may become a trade
barrier. S. 19, S. 101, S. 566, and H.R. 817 would require U.S. trade negotiators to address
any “unjustified restrictions or commercial requirements affecting new technologies, including
biotechnologies” in the next round of trade negotiations (For more information, see CRS
Report 98-861, U.S.-European Agricultural Trade: Food Safety and Biotechnology Issues,
and Biotechnology and Agricultural Trade in the CRS electronic briefing book on trade.)
Banana Dispute
A World Trade Organization dispute arbitration panel has ruled that the EU’s
preferential regime for importing bananas violates WTO rules and that the United States has
the right to retaliate against the EU by imposing prohibitive duties on almost $200 million in
EU imports. (Recently a WTO panel has ruled preliminarily that the United States erred in
its decision in March 1999 to suspend clearance of EU exports by the U.S. Customs Service
before it had been authorized to do so multilaterally. The ruling will be finalized after 30 days
at which point the United States may appeal or possibly negotiate compensation with the EU
if it is established that the EU suffered trade losses as a result of the suspension of customs
clearance.)
Since 1993, the EU has operated a banana import regime favoring imports from EU
countries’ former colonies, especially in the Caribbean, and limiting access to bananas
produced in Latin America and marketed by U.S. firms. The EU has indicated its acceptance
of the WTO ruling, but the United States and other complainant countries have rejected EU
proposals for altering the banana import regime. Attention in both the United States and the
EU still focuses on finding a solution to this long-running dispute, and the effects of the ruling
on banana exporters in developing countries is a factor.
Options for changing the banana import regime include: 1) establishing a tariff-only
banana import regime (apparently unlikely), while maintaining some degree of preferential
treatment for bananas imported from former European colonies; or 2) revising the existing
tariff-rate quotas and licensing procedures to expand market access to the EU for Latin
American bananas. A related consideration is the issue of compensation or adjustment aid
for developing country exporters for the withdrawal or reduction of banana trade preferences.
The United States and Ecuador rejected an EU Commission proposal to change its
banana import rules that would set two separate tariff-rate quotas for Latin American and
African, Caribbean and Pacific bananas, and change to a system based on tariffs only on
January 1, 2006. Ecuador requested and was granted WTO permission to retaliate against
the EU for failure to comply with WTO rulings, but has delayed retaliating in hopes of
reaching a negotiated settlement. The United States has criticized the EU proposal for
continuing to discriminate against Latin American bananas regarding license allocations and
tariff preferences, but has not re-instituted WTO dispute settlement.
While many in Congress have supported the U.S. approach to the banana issue in the
WTO because of its implications for dispute settlement, some Members have indicated that
they think the banana decision will harm developing countries that depend on bananas for
export earnings. Legislation reflecting this point of view (H.R. 1361) has been introduced in
the 106th Congress. It would bar the United States from retaliating against the EU because
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of its failure to comply with the WTO’s decision. (For more information, see CRS Report
RS20130, The U.S.-European Banana Dispute, and U.S.-EU Banana Dispute in the CRS
electronic briefing book on trade.)
Meat Hormone Dispute
WTO dispute settlement panels have ruled that an EU ban, in place since 1989, on
imports of meat derived from animals treated with growth hormones, is inconsistent with the
Uruguay Round SPS Agreement. The WTO panels agreed with the U.S. argument that the
ban lacks a scientific justification; left open the option for the EU to conduct a risk assessment
of hormone-treated meat; and gave the EU until May 13, 1999, to bring its hormone measure
into compliance with SPS rules. The EU did not meet this deadline. Citing studies that, it
contends, raise human health questions about the use of such hormones, the EU said it would
maintain the ban while continuing a risk assessment. In response, the United States in May
stated that it would seek to impose economic sanctions on EU products valued at $202
million. A WTO panel agreed that sanctions are warranted, but in July set the value subject
to sanctions at $116.8 million. The United States then announced the list of agricultural
goods on which the 100% tariffs will be imposed, effective July 29, 1999.
The EU has lifted a threat to ban the export of all U.S. meats to its market as a result of
inadequate residue testing and standards for ensuring that meat is hormone free. The EU has
indicated that this decision, which clears the way for hormone-free meat exports, should
facilitate negotiations to reduce the $116 million retaliation list imposed for the EU’s refusal
to accept imports of hormone-treated meat. The EU would presumably offer increased
market access for hormone-free meat as compensation for not importing hormone-treated
meat. Some in the U.S. meat industry are cool to the idea, arguing that imports of hormone-
free meat would not be adequate to compensate it for losses incurred on account of the EU’s
ban on hormone-treated meat. (See CRS Report RS20142, The European Union’s Ban on
Hormone-Treated Meat, and U.S.-EU Meat Hormone Dispute in the CRS electronic briefing
book on trade.)
Country-of-Origin Labeling
Federal law requires most imports, including many food items, to bear labels informing
the “ultimate purchaser” of products’ country of origin. However, for certain foods (e.g.,
meats, produce) such labels appear only on bulk containers usually not seen by retail
purchasers. Bills have been introduced into Congress that would impose expanded country-
of-origin labeling requirements on meat products, fruits, and vegetables at the retail level.
The proposals are viewed (by some advocates) as a way to help U.S. producers dealing with
low farm prices, on the assumption that most U.S. consumers will choose U.S. over foreign
goods. Also, some perceive that food products from certain countries might pose greater
risks than those from the United States. Proponents of the bills contend that additional
country labeling requirements would enable consumers to know the source of retail food
offerings and include that knowledge in selecting their purchases. Opponents counter that
country-of-origin labeling bears no relation to food safety and would not raise U.S.
commodity prices. They argue that it would impose excessive and costly regulatory burdens
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on processors, retailers and consumers, be difficult to enforce, and—by imposing new non-
tariff trade barriers—undermine ongoing U.S. efforts to reduce other countries’ trade barriers
and expand international markets for U.S. products.
In Congress, bills covering meat products include H.R. 222, H.R. 1144, S. 242, and S.
251. Bills covering fruits and vegetables include H.R. 1145 and S. 860; others (H.R. 3263;
S. 1669) would cover peanuts and peanut products. New country labeling requirements for
meats and produce were included in a wide-ranging Democrat farm relief amendment (S.
Amt. 1514) that was defeated by the Senate on August 4, 1999. Hearings on this issue were
held on April 28 and May 26, 1999, in the House and Senate Agriculture Committees,
respectively. (For more information, see CRS Report 97-508 ENR, Country-of-Origin
Labeling for Foods: Current Law and Proposed Changes, and Country-of-Origin Labeling
in the CRS electronic briefing book on trade.)
Agricultural Export and Food Aid Programs
The 1996 Federal Agricultural Improvement and Reform (FAIR) Act (P.L.104-127),
authorized several USDA programs that 1) subsidize agricultural exports; 2) develop foreign
markets for U.S. farm products; 3) guarantee commercial financing of exports; and 4) finance
concessional sales or donate commodities to low-income developing countries.
Export subsidies include the Export Enhancement Program (EEP), used mainly to
subsidize wheat, oilseeds, and other bulk commodities, and the Dairy Export Incentive
Program (DEIP). USDA’s export promotion programs include the Market Access Program
(MAP) and the Foreign Market Development (FMDP) or “Cooperator” Program. MAP,
which can be used to fund promotion of brand name products overseas, is often a target of
budget cutters who consider it corporate welfare.
Export credit guarantees are authorized at the level of $5.5 billion (the value of exports
financed under the program, not the outlays incurred). They have been used extensively to
finance U.S. agricultural exports to Asian countries currently experiencing financial and
economic difficulties. Food aid programs include P.L. 480 (concessional finance and
donations), Food for Progress (mainly donations), and Section 416 (donations). Food aid
programs have also been used extensively to finance or donate U.S. agricultural exports to
Russia, some financially stressed Asian countries such as Indonesia, and several food-short
developing countries such as North Korea.
Many in Congress support these programs, especially when demand for U.S. agricultural
exports is weak as in the current international economic environment. They view the
programs as helping maintain agricultural exports in markets which are experiencing slow
economic growth. Others contend that some of the programs are “corporate welfare” and
thus should be eliminated. Legislation reflecting this latter point of view, H.R. 1470, would
repeal both EEP and MAP. Some U.S. trading partners have criticized recent large U.S.
food aid shipments, alleging that food aid is being used to reduce surpluses and increase
domestic U.S. prices rather than meet international food needs. U.S. food aid shipments have
not yet , however, been challenged in multilateral trade dispute settlement on the basis that
they distort trade.
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Funding for export and food aid programs is taken up in annual appropriations bills.
The FY2000 USDA appropriation (P.L. 106-78; H.R. 1906), signed by the President on
October 22, 1999, sets funding at $5.6 billion of program activity. The FY1999 program
level was $5.7 billion.
The President’s FY2001 budget plan, released February 7, 2000, proposes a program
level of $5.8 billion for these activities next year. The plan also includes a proposal for
legislation permitting USDA to reallocate unused EEP funds to food aid and market
development programs. The House and Senate Appropriations Committees in May marked
up and reported the 2001 bills (H.R. 4461, H. Rept. 106-619; S. 2536, S. Rept. 106-288).
Both versions generally provide funding to support the Administration’s proposed program
levels for the major programs, although at slightly lower levels for some. (For more
information see CRS Report RL30501, Appropriations for FY2001: U.S. Department of
Agriculture and Related Agencies.)
LEGISLATION
(Selected bills that have seen committee action.)
Trade Policy (General)
H.R. 434 (Crane)
African Growth and Opportunity Act. Final version includes the following amendments
affecting agriculture: "carousel retaliation" requiring the Administration to rotate, or change,
the products targeted for retaliation (in order to pressure the EU to resolve the meat
hormone and banana disputes by penalizing a wider range of foreign industries and regions);
creation of a chief agricultural negotiator with the office of the U.S. Trade Representative;
and a statement of U.S. objectives for agriculture in WTO negotiations. Introduced February
2, 1999. Passed House without the agriculture amendments on July 16, 1999. Passed Senate
with the agriculture amendments on November 4, 1999. Conference report (H. Rpt. 106-
606) filed on May 4, 2000, and passed by the full House on the same day. Passed by the full
Senate on May 11, 2000. Signed into law by the President on May 18, 2000.

Economic Sanctions and Agricultural Trade
H.R. 4461 (Skeen); S. 2536 (Cochran)
Agriculture, Rural Development, Food and Drug Administration, and Related Agencies
Appropriations Act for 2001. Both committee versions contain an amendment to exempt
food and medical products from U.S. economic sanctions imposed on Cuba, Iran, Libya,
Sudan, and North Korea. See Agricultural Export and Food Aid Programs, below, for status.
H.R. 17 (Ewing)
Selective Agricultural Embargoes Act of 1999. Amends the Agricultural Trade Act of
1978 to require the President to report to Congress on any selective embargo on agricultural
commodities, to provide a termination date for the embargo, to provide greater assurances
for contract sanctity, and for other purposes. Introduced January 6, 1999; referred to
Committees on Agriculture, and on International Relations. Agriculture Committee and
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International Relations Committee reported the bill May 20, and June 14, 1999, respectively
(H.Rept. 106-154, Parts I & II). Passed House under suspension of rules June 15, 1999.
S. 566 (Lugar)
Agricultural Trade Freedom Act. Amends the Agricultural Trade Act of 1978 to exempt
agricultural commodities and value-added products from unilateral economic sanctions, to
prepare for future trade negotiations affecting United States agriculture, and for other
purposes. Introduced March 8, 1999, referred to Committee on Agriculture. Committee
approved the bill and ordered it reported, with an amendment in the nature of a substitute,
May 26, 1999. S.Rept. 106-157 filed on September 13, 1999.
S. 1712 (Gramm)
Export Administration Act of 1999. Title IV exempts agricultural commodities,
medicine and medical supplies from the bill’s foreign policy export control provisions.
Exemption specifically does not apply to Cuba and North Korea or to export . Reported by
the Senate Banking Committee on October 8, 1999 (S.Rept. 106-180). Laid before the
Senate, but returned to the calendar, on March 8, 2000.
S. 2382 (Helms)
Trade Sanctions Reform and Export Enhancement Act of 2000 (Title I, Subtitle C).
Exempts agricultural and medical products from U.S. unilateral embargoes maintained for
foreign policy or national security reasons unless Congress specifically approves (following
a prescribed process) the imposition of agricultural and medical product sanctions.
Committee on Foreign Relations ordered bill reported as an original measure on March 23,
2000. Report filed April 7 (S. Rpt. 106-257); placed on Senate legislative calendar. Referred
to the Committee on Banking, Housing, and Urban Affairs April 11, 2000.
China
S. 2277 (Roth)
A bill to terminate the application of Title IV of the Trade Act of 1974 with respect to
the People's Republic of China. Introduced March 23, 2000; referred to Finance Committee.
Committee approved the bill, 19-1, on May 17, 2000.
H.R. 4444 (Archer)
To authorize extension of nondiscriminatory treatment (normal trade relations treatment)
to the People’s Republic of China. Introduced May 15, 2000; referred to the Ways and
Means Committee. Committee approved the bill, 34-4, on May 17, 2000.
H.J.Res. 57 (Rohrabacher)
Joint resolutions disapproving extension of normal trade relations with China. H.Res.
57 introduced June 7, 1999; referred to Ways and Means Committee, which reported the
measure, adversely, by voice vote July 1, 1999. The full House voted against the resolution
on July 27, 1999, by a vote of 170 to 260.
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Agricultural Export and Food Aid Programs
H.R. 4461 (Skeen); S. 2536 (Cochran)
Agriculture, Rural Development, Food and Drug Administration, and Related Agencies
Appropriations Act for 2001. Includes funding for agricultural export and food aid programs.
Senate bill reported as an original measure by the Appropriations Committee on May 10,
2000 (S. Rept. 106-288). House bill reported as an original measure by the Appropriations
Committee on May 16, 2000 (H. Rept. 106-619).
P.L. 106-78/H.R. 1906 (Skeen); S. 1233 (Stevens)
Agriculture, Rural Development, Food and Drug Administration, and Related Agencies
Appropriations Act, 2000. Includes funding for agricultural export and food aid programs.
House bill reported as an original measure by the Appropriations Committee May 21, 1999
(H.Rept. 106-157). Passed, with amendments, by House June 8, 1999. Received in Senate
June 9, 1999, and referred to Committee on Appropriations, which reported its version June
17, 1999 (S.Rept. 106-80). Passed Senate August 4, 1999; among floor amendments are
provisions exempting agricultural commodities from current and future unilateral economic
sanctions, and that require the President to obtain advance congressional approval for such
decisions. Conference agreement, reported September 30 (H.Rept. 106-354), dropped the
sanctions amendment. Conference agreement approved by the House October 1, and by the
Senate on October 13, 1999. Signed into law October 22, 1999.
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