President, Iowa Farm Bureau
Before the U.S. International Trade Commission
May 14, 1998
The American Farm Bureau represents 4.8 million member families in the United States and Puerto Rico, and our members produce every type of farm commodity grown in America and depend upon sales to the export market for over one-third of our production. Agriculture, including the wide variety of industries involved in farm inputs and outputs, constitutes one of the largest sectors of the U.S. economy. In 1997, the food and fiber industries, which include producers of farm equipment and suppliers, processors, transporters, manufacturers, retailer and the financial and insurance service industries that service them, comprised 16 to 17 percent of the gross national product.
The agricultural industry is the nation's largest direct and indirect employer, and for the past several years agricultural commodities have provided the only positive return to our balance of trade. These accomplishments can only be sustained if our international markets remain open.
It has been well documented that unilateral trade sanctions are sanctions against U.S. markets and destroy our reputation as reliable suppliers. Farm Bureau strongly opposes all artificial trade constraints such as unilateral sanctions. We believe that opening trading systems around the world and engagement through trade are the most effective means of reaching international harmony, social and economic stability.
American agriculture, as well as other export dependent industries, are in a critical economic situation largely because of our inability to open new markets due to the lack of fast track, trade, negotiating authority and the ongoing fiscal crisis in Asia for which the International Monetary Fund is a major player in resolving the situation. Asia represents over 40 percent of agriculture's export market in 1997. For 1998, USDA has estimated that we have already lost over $40 million sales to this region, and further losses will go even higher. Until this crisis is turned around and these economies are again stabilized with returned buying power, agriculture is poised to lose from two to five percent of its export sales per year. This amount could then reach as high as $3 billion a year. It is unconscionable that the Administration and Congress have not taken the necessary steps to pass fast track legislation and provide the International Monetary Fund the needed resources to help stabilize world markets. Former President Ronald Reagan said the freer flow of world trade, the stronger the tides of human progress and peace among nations.
In the last decade, democracy has ascended amidst economic liberation in Taiwan, Korea, Poland, Hungary, Slovenia, the Czech Republic, Chile, Argentina, Bolivia, Peru, Brazil, Uruguay and Ecuador. The opportunities for peaceful American engagement and influence in the world are greater than ever before and must be guarded from unilateral sanctions that destroy these opportunities. Let me review some Farm Bureau policies that express the deep commitment of our members to opening and keeping open markets, not closing doors as happens when sanctions or embargoes are enacted.
Number one, we believe free trade should not be tied to social reforms or labor or environmental standards of other countries. Two, the Farm Bureau believes all agricultural products should be exempt from all embargoes except in the case of armed conflict.
Number three, should a trade embargo or restrictions be declared under such circumstances, the embargo should apply to all trade, technology and exchanges. An embargo should not be declared without the consent of Congress.
Number four, the threat of embargoes or other restrictions adversely affects markets and is an inappropriate tool in the implementation of foreign policy. If an embargo or sanctions are enacted, farmers should be compensated by direct payments for any resulting loss. Number five, all export contracts calling for delivery of agricultural commodities or products within nine months of date of sale should never be interfered with by the U.S. Government except following an embargo consented to by Congress. This sanctity of contract is essential to maintain the United States as a reliable supplier.
Farm Bureau is dedicated to more open trading systems around the world, not more sanctions or embargoes. For 50 years, the United States has followed a reasonably consistent policy of engagement with the world to promote peace and freedom.
Recently the United States has begun to depart from the long-standing preference of engagement. In just four years, the United States has imposed 61 unilateral economic sanctions on 35 countries according to the U.S. Alliance for Effective Engagement. These countries from which the United States is isolating itself contain about 40 percent of the world's population. Yearly votes on MFN for China have also tended to keep this gigantic market in limbo.
Professor Donald Losman of the U.S. Industrial College of the Armed Forces has stated, and I quote, "Comprehensive economic sanctions almost always fail to achieve their political goals, while at the same time opening a Pandora's box of economic and international relations headaches. They tend to strengthen offending regimes and policies. Pain without gain is probably the best description." The Institute for International Economics estimates that unilateral economic sanctions cost the United States $15 to $19 billion in lost exports in 1995. This translates into the loss of more than 200,000 American export related jobs.
A 1994 Council on Competitiveness report found that eight unilateral sanctions episodes cost the U.S. economy $6 billion in annual sales and 120,000 export related jobs. Currently sanctions are costing U.S. wheat producers up to 50 percent of the world markets. To continue to impose sanctions during a time when we are working to secure freer trade to the World Trade Organization and international agreements gives our partners very conflicting signals.
The Soviet grain embargo cost the United States about $2.8 billion in lost U.S. farm exports and the U.S. Government compensation to American farmers when the United States cut off sales of wheat to protest the Soviet invasion of Afghanistan while other suppliers -- France, Canada, Australia and Argentina -- stepped in. They expanded their sales to the Soviet Union, insuring that U.S. sanctions had virtually no economic impact. Russia still appears to restrict purchases of American wheat, fearing the United States may again impose food exports as a foreign policy weapon.
Unilateral sanctions open our markets up to our competitors. America's prosperity is tied to our competitiveness in global markets. Agricultural trade accounts for over 30 percent of U.S. production. Over 12 million working Americans and their families depend upon U.S. exports and access to global markets for their jobs.
The United States only accounts for five percent of the world's consuming population. We must maintain access to the 95 percent of our customers who are outside of our borders. Sanctions and embargoes are sanctions against our own people and only serve to disrupt the marketplace in which we depend.
The Department of State has identified 78 countries that could be responsible for actions that some would find as reasons for imposing unilateral sanctions. Sanctions against just six of these -- China, Egypt, Pakistan, Indonesia, Russia and Saudi Arabia -- would cost American farmers and ranchers over $5 billion in lost sales.
We cannot continue to provide American consumers with the most economical food supply in the world or maintain a positive return to the national trade balance if we do not have access to world markets to maintain our economic base.
The American Farm Bureau strongly supports passage of HR-2708, the Enhancements of Trade Security and Human Rights Sanctions Reform Act. This legislation will help prevent future useless embargoes such as the ongoing Cuban embargo by requiring a reasonable evaluation of consequences of imposing unilateral sanctions before they are imposed.
The United States, as the leader in world trade, has an unprecedented opportunity to promote its values throughout the world by peaceful engagement. Reaching out through engagement and trade, not withdrawing behind sanctions or embargoes, is the best way to achieve positive change, not by imposing unilateral sanctions.
Thank you for the opportunity to speak on behalf of American agriculture.
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