Having reached agreement with the European Union (EU) on a proposal to harmonize agricultural supports in World Trade Organization (WTO) negotiations, the United States wants developing countries to open their markets to U.S. food, a U.S. trade official says.

Briefing reporters September 4 in Washington on the September 10-14 WTO ministerial-level meeting in Cancun, Mexico, Allen Johnson, chief agricultural negotiator, said agriculture is "at the center" of the negotiations.

Agriculture Secretary Ann Veneman said that in WTO negotiations the United States will push for lower limits on payments to the most trade-distorting domestic agricultural subsidies. "We think [the EU and Japan] need to come down a lot further," she said.

Other international fora outside the WTO are the proper place for discussing food aid, according to Johnson and Veneman.

"Our basic objective [in the talks] ... is to create a trade environment where we see liberalization take place," Johnson said.

Veneman said the Cancun talks are an opportunity for officials of the 146 WTO-member countries to assess how all can move forward to meet a negotiation completion deadline of January 1, 2005.

MODERATOR: Agricultural and trade officials from around the world will convene in Cancun, Mexico September 10th through the 14th for the fifth World Trade Organization [WTO] Ministerial Conference.

VENEMAN: Our focus today is international trade. With the WTO Midterm Ministerial beginning in Cancun next week, we believe that this was an appropriate time to review the administration's agricultural trade agenda. As you know, Ambassador [Robert] Zoellick [U.s. Trade Representative] and I work very closely together on agriculture trade issues, and unfortunately, he was unable to join us today. But we are very pleased to be joined by Ambassador Allen Johnson, and we truly appreciate the very strong and excellent working relationship we have with USTR [Office of the U.S. Trade Representative] and USDA [U.S. Department of Agriculture] working together on trade issues that impact America's farmers and ranchers.

Before moving to the specifics of Cancun, we need to again remind ourselves why we pay so much attention to trade. The most basic reason is quite simply that we need the foreign markets. Year in and year out we produce far more than we need to fully meet the demand here at home, so we naturally turn to the foreign markets. Those customers now account for about one-fourth of our total annual sales. In fact, we forecast those sales next year to reach $57 billion, up $1.5 billion from this year.

For some individual commodities and products the foreign markets are far more important. Among our major field crops we export: more than two-thirds of the cotton that we produce, more than half of the rice and the wheat that we produce, 38 percent of the soybeans that we produce, and we export the equivalent of an additional 5 percent of our total grain and oilseed production in the form of meat, up from just about 1 percent at the beginning of the 1990s.

For livestock products our total export sales now exceed $10 billion. Three of the top 10 fastest-growing exports are meats, including pork, beef and poultry. Pork has led all products in export growth, increasing by an average of $92 million per year over the past decade. And each year as new technology emerges, our farmers and food companies make new capital investments in technology, so our capacity to produce grows even larger, far out-pacing the rate at which our domestic consumption is growing.

So it's obvious that we must have increased access to the fast-growing markets elsewhere in the world, and we have to bring down the trade barriers in order to gain this access.

At its most basic, that is what the pursuit of new trade agreements is all about for America's farmers and ranchers. President Bush has long had trade at the top of his economic agenda, and he recognizes its critical importance for agriculture.

Yesterday he signed the free trade agreements with Chile and Singapore. He said at that time, quote, "We support free trade in America because it is vital to the creation of jobs and to the success of our economy. Exports accounted for roughly one-quarter of our economy's growth in the 1990s."

With the President's full support we have been pursuing a three-pronged approach to expanding agricultural markets including bilateral, regional and multilateral negotiations. We are pursuing very strategic bilateral free trade agreements with a solid mix of developed and developing countries, and broad geographic dispersion. We are also pursuing regional agreements among groupings of countries as well. The Free Trade Area of the Americas is the most prominent, but this also includes the Southern Africa Customs Union and the Central American Free Trade Agreement.

The United States and Brazil are co-chairing the Free Trade Area of the Americas negotiations, and the next big step is a ministerial meeting in Miami in November. This agreement would result in a combined $13 trillion market with 800 million people, and right here in our own back yard.

But the most important objective in our trade agenda is a successful agreement in the current WTO multilateral round, called the Doha Development Agenda. American agriculture all across the country has a big stake in these multilateral negotiations.

The Cancun ministerial that will start next Wednesday is a midterm point in the negotiations mandated by the Doha Development Agenda. It will not conclude the negotiations. The main task for the 146 WTO members in Cancun is to take stock of progress in the negotiations and other work under the Doha Development Agenda.

The agenda in the agriculture negotiations clearly calls for substantial improvements in market access, significant reductions of trade distorting domestic support, and phasing out export subsidies, the three pillars, as we refer to them.

The United States was the first member to put forth an ambitious agenda addressing all three pillars. However, member countries were unable to reach consensus on the modalities for the agriculture negotiations.

At the mini-ministerial in late July in Montreal, WTO member nations asked the U.S. and the EU [European Union] to see if they could find a way to bridge the wide differences that separated us. We did, and in mid August, United States and the EU proposed a compromise framework, which has been an important step in developing momentum as we move forward to Cancun. The U.S.-EU framework has had the desired effect. WTO General Chairman Perez del Castillo now has crafted a Cancun ministerial text that can serve to facilitate the discussions next week.

We have also been engaging in bilateral discussions in advance of Cancun. Of course we have had several discussions with our EU counterparts, and last week I met with the Agriculture Minister from China, and just yesterday I met with my counterpart from Japan, Mr. Kamei.

We reiterated to Mr. Kamei the need to make significant progress on market access in the Doha Round. I also again urged him to remove these safeguards instituted last month.

We will be inundated with news and analysis as we move into the discussions next week. Some reports will be pessimistic, focusing on the protestors and predicting imminent collapse of the talks, while others will be optimistic and perhaps suggest significant breakthroughs.

The important thing is not to lose sight of the big picture. We will keep our objectives in the forefront at all times. We will not accept a framework just for the sake of having a framework. It must meet our objectives for an ambitious result from these negotiations.

We will move toward equity and fairness in agricultural trade and we will strive to bring developing countries more fully into the global trading community.

This midway point in the Doha development agenda gives us the opportunity to fully assess whether significant progress beyond the Uruguay Round agreement is truly possible at this time in history. We believe it is and it is an opportunity for U.S. farmers and ranchers to gain access to more markets and faster-growing markets.

JOHNSON: One of the reasons why we work so hard together is because we both recognize that for U.S. agriculture, the future really is trade.

Every year, we become more productive, our domestic consumption is relatively flat, and yet outside our borders there's a larger population, 96 percent of the world's population is outside our borders. That population is growing faster, their economies grow faster, and the diets are changing, some of the things that you [Veneman] mentioned in terms of things that we produce very effectively, specifically meat and processed foods.

In addition to trying to pursue the negotiating framework that you identified in a bilateral, regional, global basis, we also spend a lot of time working together on enforcement of our current agreement, whether that's in Mexico, with China, with the Europeans or Russia, or Japan, or Canada. We spent a great deal of time working with our colleagues both here in Washington as well as the various U.S. Department of Agriculture people around the world.

Why is the WTO important? It's the only place where all of our potential customers, all the trade distorting practices of the world are at the table at one time. As you outlined, we have three objectives within each one of the pillars.

Within export subsidies, our objective was stated very clearly in our proposal last year, which is we want to see export subsidies eliminated. That's important because today, for example, Europe outspends us about a 100 to one in terms of export subsidies.

We want to see harmonization as it relates to domestic support and reductions in trade-distorting domestic support. That's important because currently the Europeans outspend us, depending on how you count it, somewhere between three and five times what we spend here in the United States.

And we want to see significant improvement to market access, which also means harmonization. The world's average tariff in agriculture is about five times what we have here in the United States.

We took a significant step last month in working with the EU in developing a framework. Now we didn't do that, just run off and do that on our own. Members of the WTO, many of them asked us to do that, and that action has helped improve the general environment for the WTO as well as, frankly, the U.S. position in these negotiations.

By that I mean the points I just outlined. The domestic support. We're able to get the concept of harmonization into the negotiations, which up to that point had not been in the negotiations in the form of a chairman's draft or outside of the U.S. proposal.

In market access, we've got the concept of harmonization in the formula that again is part of these negotiations now in the form of the chairman putting forward a draft for next week in Cancun.

On export competition, we've got the concept of treating parallelism, as we call it, which means that our programs will only be reduced as we see export subsidies also reduced and eventually eliminated.

The chairman's draft captures much of these concerns that we've outlined; but there are concerns that remain, particularly as it relates to developing countries' market access.

Out of the 146 members of the WTO, roughly 120 of them or so are developing countries. That's where a large part of the population is and that's where a lot of our exporters have an interest.

It's important to keep in mind as we move through next week, that decisions in WTO are made by consensus, so by definition, any one of 146 members could stand up and object and you don't get an agreement.

That's one of the reasons why Doha was such an impressive success, is that all 146 countries agreed that these negotiations would move forward with an ambitious objective in agriculture.

Just to give you some sense of the different groups that are involved here, we have Japan, as the Secretary mentioned, who we meet with regularly, who have a lot of concerns about frankly providing additional market access in these negotiations.

A lot of developing countries worry about the social, economic and political unrest that additional market access could imply to their societies.

We had one group that's emerged now, a so-called Group of 20, that's held together basically by a view that they want to see developed countries reduce their subsidies and improve market access for developing countries into their markets, but they're very hesitant to provide market access in their own countries.

We believe very strongly and will be pursuing this next week, that all members must contribute and take responsibility for success at the WTO and that includes success in Cancun, and that includes contributing to trade liberalization.

So we're going to be working hard on that. There's also going to be negotiations -- the package includes non-agricultural market access, so-called industrial products, services [and] so-called Singapore issues which are basically governance issues as it relates to competition, policy, investment and other issues.

And we've also put forward the makings of an agreement as it relates to TRIPPS [Trade-Related Aspects of Intellectual Property Rights] and medicine which really gives developing countries access to some important -- to fulfill some of their needs in terms of medicine and address some of the diseases that they're currently facing.

QUESTION: Some farm groups are saying that they're concerned that a lot of the focus on eliminating trade subsidies which would increase exports won't necessarily translate into improved prices for farmers at home.

Also calling for new price supports to go along with your efforts in WTO. Your comment?

VENEMAN: We have had extensive discussions with the private sector. We've had a tremendous amount of dialogue as we've gone through this process with both our advisory committees as well as a number of other ag groups that have been interested in these negotiations.

We kept them informed as we have put together this U.S.-EU framework, we've had numerous briefings, and we have a lot of support for the direction these negotiations are currently going in terms of the framework that's been established.

[In] July 2002 we put forward a very bold proposal. We had considerable support from a broad range of agricultural interests and we continue to have a lot of support.

As prices are concerned, prices in agriculture are impacted by so many other issues other than trade, from weather to supply in other places around the country.

We have over 300 private sector people that will be in Cancun next week, because there is a great deal of interest in what we're doing and I know that as we go forward we will have a tremendous amount of opportunity to continue to visit with folks and to get their input.

JOHNSON: One of the implications is that we're moving forward on domestic support sort of in a vacuum. I can assure you that that's not the case. The bottom line is what we've said very clearly is that for us to move forward on domestic support and further liberalization or reductions, we need to see two things happen: One is we need to see closer harmonization between us and Europe as it relates to the amount of subsidies they use, because as I said, conceptually within the framework that we're talking about now. The other is we need to see opportunities in the form of market access. And that's what the rest of the negotiations is going to be about.

So this isn't a case where the U.S. is going to unilaterally disarm. We're looking for opportunities, and it's a net plus for U.S. agricultural trade that we're going to be pursuing.

Q: Your colleague in Brussels this morning suggested that it's time for everybody to show a little flexibility. Could you lay out what sort of flexibility you see the U.S. taking to Cancun?

VENEMAN: We have been showing considerable flexibility as we have worked with the EU on this framework. But we do not want to compromise our overall principles.

JOHNSON: We were asked by a number of countries in Montreal to work with the Europeans to develop a common approach because the world recognized that although the EU-U.S. agreeing isn't necessarily sufficient for the round to succeed, it was essential that we did agree in order for us to have a chance at succeeding in this round.

Both Europe and [the U.S.] showed a great deal of flexibility. Other countries also need to contribute to this process. We need to see further improvement in market access, particularly as it relates to developing countries.

There's another step in this process . . . related to how many opportunities are created for us in market access.

Q: My question regards food aid, which I believe is on the table and was in that framework agreement with the EU. How do you bring discipline to food aid? And would the U.S. ever accept, I guess, that we would only give money and not commodities in kind?

VENEMAN: The U.S. is by far the largest contributor to global food aid of any country around the world, and we have actually been encouraging other countries to step up to the plate and provide more food aid.

There have been some discussions about whether or not food aid should be on the table. We don't believe that it should be discussed in the context of the WTO; rather, there's an International Food Aid Convention that should consider these issues. But as you indicate, there are certain countries, including the EU, who want to discuss it in the context of the WTO.

We think food aid is very important. Our farmers and ranchers have contributed significantly to helping people around the world. There's 800 million hungry people around the world. And as you know, we held a conference earlier this year to address the issues of global hunger and how to help people produce more and better food for their own consumption. We believe that we need to continue to provide food aid as well as to provide technical expertise to help the hungry people around the world.

Q: What kind of progress needs to be done at this Cancun meeting to really meet the schedule for this current round? Is there some sense of urgency that we need to get a certain amount of things accomplished in agriculture so we can move on to some of the other areas of trade?

JOHNSON: Agriculture is the center of these negotiations, and that's not just our point of view, which it clearly is, but that's the view around the world. So many other countries are looking to see what happens in agriculture in terms of how they approach some of the other subjects I've mentioned, whether it's non-agricultural market access, services, or so-called Singapore issues.

From a perspective of seeing progress in agriculture as essential to see progress in the rest of the negotiations, that's clear.

It's also clear the opposite is true, which is that we had, prior to the launch in Doha, agriculture negotiations occurring in the WTO. But they frankly weren't making progress because the package wasn't large enough in the overall economic benefit to different societies to generate enough synergy in order to get the agreement done.

What we need to see coming out of Cancun really is continue the progress of Doha consistent with what we agreed to in Doha in agriculture, and that is now in the form of the chairman's draft, which he submitted to the membership, that basically outlines the framework, not unlike what we did with the Europeans last month. That then tells the negotiators, like myself, that you get back to work and your job now is to fill in these numbers and try to move the process forward so we can meet that January 1, 2005 deadline.

Q: Why should we leave the discussion of food aid out of this particular set of negotiations?

VENEMAN: As I indicated in response to the previous question, there are other international fora in which food aid is discussed. There are certainly international organizations that are involved in food aid, and we believe that these other international fora, such as the International Convention on Food Aid, are the appropriate places to discuss these issues and that food aid is not a topic that should be a part of the agriculture negotiations within the context of the World Trade Organization.

In our view, we don't need to limit food aid. We need to provide more food aid to the 800 million people who are hungry around the world.

JOHNSON: What it currently says in the chairman's draft is that additional disciplines would be agreed in order to prevent commercial displacement through food aid operations. The objective of food aid is not to displace commercial operations. The objective of food aid is to fulfill a humanitarian need. And that's clearly what our objectives have been and we're going to continue to have.

Q: Commissioners Lamy [Pascal Lamy, EU trade commissioner] and Fischler [Franz Fischler, EU agriculture commissioner] were talking about this subject this morning, and they said that they thought that there shouldn't be any negotiations, any attempt to limit Green Box subsidies within the WTO because that was beyond the competence of the WTO, they said. Apparently WTO doesn't have any jurisdiction over that issue.

What did U.S. farmers really give up in these negotiations in order to get more market access if you strike a deal that simply moves their subsidy from the Amber Box column into the Green Box column and they receive the same level of payments? What sacrifices are they making?

VENEMAN: It's important to recognize there are some countries who have proposed that Green Box payments be limited, but as you know, those are the least trade distorting. Those are the kind of payments that, to the farmers that aren't looked at as having a trade-distorting impact.

The Amber Box on the other hand is the box that is disciplined because it is the most trade-distorting subsidy, and certainly I think we agree with the EU that Green Box should not be limited, but the proposals that are currently pending is that all of the other boxes, whether it's Amber Box, Blue Box, or what they call the de minimis, all should be limited under this Doha Development Agenda.

We in the U.S., of course, already have a lot lower limits than the EU and Japan. We think they need to continue to come down a lot further with regard to their limits on domestic supports than we do. That's the harmonization concept that we've put into our proposal.

JOHNSON: One of the things that's overlooked in the reality is there is a difference between the most trade-distorting supports, i.e, the Amber Box, and virtually non-trade distorting supports such as the Green Box.

What the objective is in the moving of the reform process forward is to move policies towards non-trade distorting policies. In Doha what we agreed, that there should be substantial reductions in trade-distorting domestic support. We're still happily pursuing that because that's in our best interest, to see some of the distortions that the Secretary just mentioned addressed globally.

Our view is, is if we're presented market access opportunities, our farmers are much better off in a world with less subsidies, and less market access barriers than they are in one with more subsidies and more market access barriers and that's the world that we're trying to pursue.

Q: Ambassador Johnson, last week in an interview with USDA Radio, you said that nobody can guarantee success in Cancun and that we may not be able to come to an agreement on modalities there. If you can't come to an agreement on a framework, can you sketch out the course of subsequent talks? For example, would there be another ministerial before Hong Kong sometime next year?

In talking about the need to get developing countries on board, I'm wondering whether the U.S. and EU are kind of picking a fight with those very countries by talking about taking away some of the special differential treatment for net exporters?

JOHNSON: What our basic objective here is, is to create a trade environment where we see liberalization take place. Special and differential treatment is something that we see as important because there is social, economic and political concerns that some countries have. I mean some countries have 70 percent of their population in rural areas. India's fond of pointing out that they have 650 million people in their rural areas.

We recognize the need for special and differential treatment, and I think we said that many, many times last week and the week before. So in that sense I don't think that we're picking a fight with anybody. However, we do recognize that there are some very competitive agricultural producers out there that we think are better off in a world where there's more liberalization and not less. And part of that means that some of the policies that would naturally apply to somebody who is not competitive in agriculture may not be the same policies that apply to someone who is competitive in agriculture.

In terms of sketching out what the next steps are, that's part of what the discussion will be next week. I think I wouldn't want to prejudge where that's going. Obviously, one of the steps is going to have to be if you agree to a framework, how do you fill in the numbers or when do you fill in the numbers? And obviously, that will try to be done in a way that we fulfill the January 1, 2005 deadline that we set in Doha.

In terms of if we don't agree to a framework, really my view is, is we'll have to just sort of assess where we're at, at that point, because clearly the Chairman has put forward -- and I would even say courageously, because there's parts of it that we don't like and there's parts of it that a lot of other people don't like -- has put forward a paper that is a basis for discussion, and we think that the membership should roll up their sleeves and try to move it forward.

Q: A new report from the group, Oxfam says that U.S. Government subsidies to the corn farming industry in the United States is allowing U.S. corn to be dumped on the Mexican market, causing prices to plummet and driving Mexican corn farmers out of business.

Could you comment on that report and whether you think that this is indeed an unfair practice as regards to Mexico? And more specifically, what do you say to the complaints by developing countries that U.S. and European subsidies are driving their farmers out of business?

PENN: First of all, we've only seen the Executive Summary of this report by Oxfam and we haven't had a chance to study it thoroughly. But I think our view is that it is pretty grossly overstated. We don't think that there is any corn that is dumped on the market, and in fact, the Mexican producers by and large produce white corn, which is for human consumption. Most of the corn that we are sending to the Mexican market is yellow corn that's intended for livestock feed. And the Mexicans have a deficit in yellow corn for livestock feed. In fact, they're trying to develop their livestock industry so that they can produce more protein and improve the diets of the Mexican people. And we provide the raw material for those industries.

In fact, the Mexicans just increased the quota, the allowable amount of yellow corn into the country because they have a deficit and it's needed for these industries.

And for this matter in general, I think this is something that a lot of groups have jumped on, talking about the subsidies from the developed countries and the amount of damage that they're doing to developing countries. I, again, think that this is largely overstated. I don't think there's any doubt but we are willing to put our domestic supports on the line if other people are willing to do the same thing.

But again, I think we have to be realistic about this and not just jump on some sort of crusade without having a good analytical underpinning.

Q: One question about cotton which seems to slip its way onto the agenda. That seems to be one issue where the U.S. is kind of alone in its subsidies and kind of looks really bad in a way because of those. One, where do you think cotton's going in Cancun, and what can the U.S. do to both keep its cotton farmers happy and also take care of the interests of Burkina Faso and Brazil and other countries?

JOHNSON: Well, first of all, I assume you're discussing the sectoral issue put forward actually by four African countries. It doesn't include Brazil. It's four African countries in West Africa.

I listened very carefully in the last few weeks in discussions with these countries, and I recognize that they have some very important issues that they raise. Some of them are related to humanitarian issues. Some of them are related to development or competition issues. Some of them are related to trade issues.

What we've said to them, and will continue to try to work with them, is that we share a common interest as it relates to trying to lower or eliminate trade-distorting practices in the world. The cotton industry in particular, you have to recognize there's a lot of distortions that take place. It's not as clean as people would like to think it is in terms of it just being subsidies.

The average tariff allowed for cotton in the WTO right now is about 56 percent. The major consuming countries, such as India, have 113 percent tariffs. Pakistan has over 40 percent tariffs. There is quota administration issues as they relate to China. There's a lot of cotton produced in countries who have high barriers. There's others that have various disruptions that occurred, which a very related industry is what happens in textiles.

So we recognize that all of these issues need to be addressed, and the various proposals that the U.S. has put forward both within agriculture and on the nonagricultural side, we think would address a lot of these issues, and we'd like to work with them to try to bring them to fruition.

VENEMAN: As I indicated earlier, this is a midterm review of the Doha Development Agenda. It's an opportunity for the ministerial level people involved in the WTO to take stock of where we are and see how to move the process forward so that we can meet the January 1st, 2005 deadline. We feel very strongly that we would like to see a successful result in these negotiations, and agriculture is a very key part of the global negotiations that are going on.

Our farmers and ranchers have a tremendous amount at stake in these negotiations, and to the extent that we can get increased market access, it will be of great benefit to our farmers and ranchers because we do so depend upon the global marketplace for, as was indicated earlier, the 96 percent of the world's consumers who live outside the United States.

So we go to Cancun next week with a great deal of hopefulness that we can have a successful meeting and that we can make progress in these negotiations and move them forward.