Committee Members traveled to Argentina and Chile to meet with government officials and private sector organizations on matters related to U.S. agriculture trade. The United States shares the goals of open and fair trade and the reduction of barriers to world-wide agriculture trade. The issues discussed included non-tariff trade barriers; liberalization of world-wide agriculture trade and continuation of agriculture trade reform; MERCOSUR (the common market made up of Argentina, Brazil, Paraguay and Uruguay, with Chile as an associate member); and accession of Chile to NAFTA.

Members discussed specific barriers to United States agriculture exports and the importance of trading partners having access to each others' markets in order to have equitable bilateral trade.

ARGENTINA

Argentina produces wheat, corn, sorghum, soybeans, sunflower seeds, and cattle. Total agricultural exports to the United States are $800 million and the major exports are grains, meats, and fruit and vegetable juices. This represents an increase in exports to the United States since 1992, when the value of agricultural exports totaled $530 million.

Argentina imports $156 million in agriculture products from the U.S. (bulk commodities, planting seeds, sugar sweeteners, and other processed products). In 1992, the value of agricultural imports from the United States were $102 million.

Argentina's overall exports are valued at $13 billion while their imports are $16.8 billion.

Members of the Committee met with President Carlos Menem and other government officials to discuss trade issues between the United States and Argentina. Since 1989, Argentina has moved to establish economic stability and the reduction of the role of government in several economic areas, including agriculture. The Argentine Government appears to be strongly committed to these reforms and the resultant economic successes they have created. In addition, the democratic reforms seem to enjoy much popular support.

Argentina is one of the world's largest exporters of food and food products. Argentina played a significant role in the Uruguay Round General Agreement on Tariffs and Trade (GATT) negotiations, as a member of the CAIRNS group, and was allied with U.S. agriculture negotiators on several issues.

In the meeting with President Menem, Members cited the other positive relationships between the countries on matters related to agriculture as well as international issues. Members discussed the desire to move forward on multilateral agriculture trade to secure the elimination of barriers to trade. President Menem described Argentina's participation in MERCOSUR and his desire to see a free trade area of the Americas (FTAA).

Members met with Argentine government officials and discussed issues related to the exclusion of United States fruit exports and the progress of the U.S. Department of Agriculture's (USDA) approval of Argentine exports of beef and peanuts to the United States, under agreements reached during Uruguay Round negotiations. Argentine government officials expressed strong support for MERCOSUR and its positive results for its members. These officials are interested in bringing the countries of MERCOSUR into the North American Free Trade Agreement (NAFTA) or a free trade area of the Americas (FTAA) as a group rather than individually.

CHILE

The agriculture production of Chile is primarily divided among three areas: livestock, fruit, and forestry. Chile's agricultural exports to the United States in 1996, totaled $1.1 billion and the primary exports included fresh fruit, seafood, and forest products. This is an increase over 1992 agricultural exports to the United States of $685 million.

The U.S. exported $140 million of agriculture, fish and forestry products to Chile in 1996. Feed grains represented the major U.S. export to Chile. In 1992, United States agricultural exports to Chile were $91 million.

Chile exports a total of $11.5 billion and its imports are valued at $10.9 billion.

Chile's economy is marked by its adherence to free-market policies and a strong private sector. Its economic successes are evident. However, Chile bans several U.S. agriculture products from entry on what appear to be non-tariff trade barriers. U.S. wheat, beef, poultry, many fruits and vegetables are prohibited from entry into Chile. In their meetings with Chilean government officials, Members made clear their displeasure at the banning of these U.S. agriculture products.

For agriculture, many Members believe there should be even more cooperation between the U.S. and Chile since their growing seasons complement each other. Members believe that bilateral discussions can resolve many of the differences between the U.S. and Chile and that from these good trade relationships others will follow in other areas.

Members met with Chilean government officials and others interested in agriculture trade between the United States and Chile. Members toured various farms, representing Chile's exports of fresh fruit and wine. Representatives of the Chilean government expressed interest in the status of providing fast track negotiating authority to the President. However, they made it clear that if Chile does not accede to the North American Free Trade Agreement (NAFTA), other avenues remain available. Chilean officials discussed their recent association with MERCOSUR as an associate member. Chilean officials discussed the option of full membership in the MERCOSUR if NAFTA negotiations are not concluded.

In 1995, the United States, Canada, and Mexico invited Chile to enter into negotiations to accede to NAFTA. Negotiations have been suspended until the issue of renewal of fast track negotiating authority is resolved. Chilean officials expressed their disappointment in working toward a NAFTA agreement and then being delayed by the U.S. political situation concerning fast track.

BRIEFINGS FOLLOWING THE COMMITTEE ON AGRICULTURE'S TRIP TO ARGENTINA AND CHILE

Upon return, Chairman Smith and Members of the Committee discussed results of the meetings in Argentina and Chile and their observations with the Secretary of Agriculture, the Honorable Dan Glickman, and the President's Special Envoy to Latin America, Mr. Thomas (Mack) McLarty.

Chairman Smith wrote to the President to advise him of the Committee's trip and the issues related to access to the markets of Argentina and Chile for United States agricultural products. In addition, Chairman Smith also wrote to the Honorable Gabriel Guerra-Mondragon, the U.S. Ambassador to Chile, and to Mr. Alex Fernandez, the President of the American Chamber of Commerce in Santiago, Chile, concerning access for U.S. agricultural products.

ARGENTINA/BRIEFINGS/MEETINGS

Buenos Aires, Argentina

January 23, 1997 - January 26, 1997

U.S. Charge D'Affairs Ronald D. Godard

U.S. Agriculture Counselor Gary C. Groves

Dr. Carlos S. Menem, President of the Republic of Argentina

Dr. Roque Fernandez, Minister of Economy, Public Works, and Services

Mr. Guido di Tella, Minister of Foreign Affairs

Mr. Felix Cirio, Deputy Secretary of Agriculture, Fisheries, and Food

Deputy Erman Gonzalez, President of the Foreign Relations Committee and Members of the Committee

Major Issues Discussed

-----During the Uruguay Round Agreement, a quota was negotiated between the U.S. and Argentina (20,000 metric ton quota), based on a agreement that the U.S. would make its best effort to resolve outstanding differences relating to U.S. restrictions of Argentine beef. On April 18, 1996, APHIS published a proposed rule regarding access to the U.S. market for fresh, chilled, or frozen beef. Comments received were critical of the APHIS proposal. Since Argentina is not free of foot and mouth disease, any entry into the U.S. of Argentine beef must be considered along with a risk assessment and the concept of regionalization (allowing entry from parts of a country without foot and mouth disease).

-----The United States established a tariff rate quota (TRQ) for peanuts from Argentina as a result of the Uruguay Round trade agreement on market access. Argentina wants the TRQ administered so that only peanuts accompanied by a certificate of origin issued by the Argentine government will be eligible for the low TRQ duty. The Office of the U.S. Trade Representative has resisted this proposal. Negotiations continue.

-----Argentina wants to export citrus to the United States but due to the presence of various pests and diseases, Argentine citrus is banned from the U.S.

-----The United States is seeking to gain access for fresh Florida citrus but has been denied access because of phytosanitary restrictions. Argentina placed an embargo (due to oriental fruit fly detection) on California fruits and vegetables in October 1995. This was partially lifted in December 1996 and Argentina agreed to accept produce from 17 counties. Florida citrus and other U.S. fruits are denied access to Argentina or face uncertain phytosanitary barriers. In 1996, the U.S. exported $224,000 of fresh fruit, down by 78% from the prior year (due to the California embargo that was only partially lifted).

-----Representatives of the Washington, Oregon, California Pear Bureau are working with Argentine producers to establish a cooperative relationship. Trips by producers from each country to the other are being discussed.

-----The U.S. introduced an initiative during the Uruguay Round negotiations to liberalize world trade in oilseed and its products. This initiative would reduce all tariffs, domestic support, and export subsidies to zero over 5 years, beginning in 1997. The Uruguay Round ended before this initiative could be resolved. Oilseed liberalization is a high priority for U.S. producers and could gain significant markets for the U.S. During the Uruguay Round, Argentina supported the U.S. proposal. However, despite promises to liberalize its policies, Argentina does operate a differential export tax system, taxing oilseeds at a higher rate than oilseed meal and vegetable oil. This results in artificially enhancing Argentina's competitiveness in meal and vegetable oil.

-----U.S. proposed suspension of Generalized System of Preferences (GSP) due to Argentina's inadequate patent protection law for pharmaceutical products. This will affect about $260 million of Argentina products coming to the U.S. This will be done because of Argentina's failure to implement adequate pharmaceutical patent protection laws, thereby allowing Argentina's pharmaceutical companies to freely copy drugs developed by U.S. firms. The U.S. pharmaceutical companies estimate that because of the lack of patent protection in Argentina, they lose about $500 million per year. If this issue is not resolved within specific time limits it is expected that the President will issue a list of products for which GSP duty free status will be lifted. This could affect agriculture products coming into the U.S. from Argentina.

In 1995, the Argentine Congress passed a new patent law that provided for intellectual property protection for pharmaceutical products, but only after a five year transition period. The Menem Administration issued regulations but the Argentine Congress objected to the regulations and passed another law overturning the regulations. That law was partially vetoed and the Menem Administration and the Argentine Congress negotiated a new set of regulations. The U.S. does not expect the new regulations to improve patent protection in Argentina.

CHILE/BRIEFINGS/MEETINGS

Santiago, Chile

January 26, 1997 - January 28, 1997

The Honorable Gabriel Guerra-Mondragon, U.S. Ambassador to Chile

Deputy Chief of Mission Charles S. Shapiro

Agricultural Counselor Richard J. Blabey

Mr. Mariano Fernandez, Acting Minister of Foreign Relations

Mr. Alex Fernandez, President of the American Chamber of Commerce and Members of the Chamber of Commerce

Mr. Jaime Lavados, Rector, University of Chile

Mr. Alvaro de la Fuente and Mr. Pablo Maluenda, U.S. Wheat Associates

Mr. Donald Long, importer of U.S. meat to Chile

Major Issues Discussed

-----Chile prohibits all imports of U.S. wheat because of the presence of Karnal bunt in some areas of the United States.

The U.S. Wheat Associates sponsored Chileans to come to the U.S. so that they could be shown the protection initiated against Karnal bunt. USDA has been working to assure Chile that since U.S. phytosanitary standards for Karnal bunt are accepted by other countries, Chile should be able to accept them as well. Chile had been a $100 million market for U.S. wheat. Chile imports more wheat from Canada, Australia and Argentina now.

-----Imports of U.S. poultry are prohibited because Chile has not responded to repeated requests to send inspectors to the U.S. to approve poultry slaughter houses and Chile requires that all poultry imports to be salmonella free. The United States considers these to be non-tariff trade barriers because Chile imposes inspection requirements on imports that are not required of domestic production. Chile does not allow imports of raw poultry meat because it has a zero tolerance requirement for salmonella. This is effectively a non-tariff trade barrier because Chile's requirement is not attainable. Chile maintains this issue cannot be resolved at the technical level. This issue was raised by the U.S. at the WTO Sanitary and Phytosanitary Group in October 1996.

-----Because of Chilean meat grading requirements, U.S. beef is effectively prevented from entry into Chile. Chile's meat law bars U.S. beef imports because it does not recognize the USDA grade standards or the international high-quality beef definition. Chile grades meat on age, sex, and fat cover of the animal. Meat quality is not included in their standards. Chile requires imports to have an equivalency grade standard. Chile and USDA/AMS have tried to reach an accommodation; however, USDA/AMS says that since the Chilean system bears no relationship to the U.S. grading standard (no quality standard), no equivalence of the system is possible. USDA/AMS did submit a proposal in coordination with the U.S. Meat Export Federation. Chile rejected it.

-----In 1989, the FDA temporarily suspended imports of Chilean grapes because of contaminated grapes. Chile adamantly opposed this action and sought compensation through the U.S. courts. In 1995, the U.S. Supreme Court refused to hear the Chilean appeal of lower courts rulings that the U.S. government could not be held liable for damages. Chile is seeking an alternative route (and a monetary settlement) to resolve this issue with the U.S. State Department. Chile does not consider this issue closed and it remains a domestic political issue.

----Chile bars most U.S. fruit imports (apples, avocados, berries, citrus, grapes, kiwifruit, pears, and stone fruit) due to phytosanitary concerns. There have been discussion between the countries over a long period of time and there are positive signs regarding U.S. apples and pears. Chile exports almost $400 million of fresh fruit to the U.S. The potential for U.S. exports of fresh fruits to Chile are estimated to be $16 million.

Chile exported over 260,000 metric tons of grapes to the U.S. in 1996. No U.S. grapes were imported to Chile. Chile exported apples, fresh pears, peaches, apricots, plums, and raspberries to the U.S. in 1996. Chile imported none of these products from the U.S. during the same period.

-----In 1995, the United States, Canada, and Mexico invited Chile to enter into negotiations to accede to NAFTA. Negotiations have been suspended until the issue of renewal of fast track negotiating authority is resolved. The Clinton Administration plans to ask for renewal of broad fast track authority in the 105th Congress in order to negotiate further trade agreements, including a Free Trade Area of the Americas (FTAA). Additionally, the Clinton Administration wants future trade agreements to include provisions relating to labor and environmental standards.

Agriculture interests that have expressed concern about Chilean accession to NAFTA include fresh fruits, canned peaches, grapes, salmon and forestry products (furniture). Fresh fruits are Chile's second largest exports and the U.S. is the largest market for Chilean exports. Chile's growing season occurs during the U.S. winter months and its fruit exports tend to complement U.S. However, grapes (the largest dollar-value Chilean export to the U.S.) have been the subject of disputes in the past. Chile and the U.S. are still in disagreement over Chile's demand for compensation with respect to a 1989 temporary suspension on grape imports to the U.S.

-----In the U.S., a program known as the Cochran Fellowship Program provides training in the U.S. for specialists from other countries. In 1996, nine Chileans were selected to participate in the Cochran Fellowship Program for training in trade policy, dairy herd management; meat marketing; forest management and natural resources management. The next Cochran interviews are scheduled for March 1997.

-----Farmed salmon is imported to the U.S. from Chile in amounts that cause the U.S. farm salmon industry (Maine and Washington) concern. Chilean exports rose from 1.2 million pounds in 1989, to 50 million pounds in 1996. During that period the wholesale price dropped from $4.20/lb. to $2.20/lb. The U.S. industry is considering filing an anti-dumping action with the ITC. It would like to avoid taking this step. U.S. producers would like to develop a system to resolve the differences between U.S. and Chilean industries. The U.S. industry wants the Chilean industry to meet the same health and environmental standards as must be met here. The U.S. industry suggests that shipping of salmon by Chile on consignment drives down the price of U.S. salmon.

-----The U.S. adopted the Kiwifruit Research, Promotion, and Consumer Information Act in 1990. AMS is in the process of reviewing comments and will conduct a referendum among domestic producers and importers of kiwifruit. Many Chilean exporters of kiwifruit oppose the program because they believe it is unnecessary and violates GATT. Chilean exporters want representation on the kiwifruit board in proportion to the level of assessments that must be paid. The law provides that 51% or more of the board must be domestic producers. Approximately 45% of the assessments are projected to be paid on U.S. production.