The Chairman and Members of the Committee on Agriculture traveled to Egypt and Spain to discuss and review agricultural trade relations with other countries. Members pressed for reductions of tariff and non-tariff trade barriers while securing additional purchases of U.S. wheat in talks with officials in Egypt and laying the foundation for additional sales of U.S. corn in Spain.

In Egypt, the Members met with President Hosni Mubarak and Ministers of Agriculture, Supply and Trade, and Health stressing the need to reduce import restrictions on beef, poultry, and dairy products, while conveying appreciation and hopes for continued U.S. wheat sales which could amount to 66% of Egypt’s market this year. Immediately prior to the departure of the congressional delegation, Egypt purchased 250,000 tons of United States wheat. Additionally, Egypt purchased 200,000 tons of U.S. wheat during the delegation’s trip. Immediately following the Committee’s visit, Egypt purchased an additional 440,000 tons of wheat, bringing the value of Egypt’s purchases to a total of $90 million. These purchases, as a direct result of the Committee’s visit to Egypt, represent a total of 890,000 tons of U.S. wheat valued at almost $90 million.

In Spain, the Members met with the Minister of Agriculture, various government officials, including representatives of the Ministry of the Environment, agricultural groups and grain importers, stressing the need for Spain’s support for opening another corn tender this year. The delegation was successful in urging the Association of Spanish Cereal Traders to write to Spain’s Ministry of Agriculture and request that they be provided an opportunity to purchase U.S. corn at the earliest time possible. As a result of these efforts, Spain purchased 112,000 tons of U.S. corn.

Members also discussed the lengthy process used by the EU to review biotechnology products and its effect on sales of U.S. corn and other products. In addition, the delegation strongly urged wider-reaching Common Agriculture Policy (CAP) reforms to end market distorting export subsidies.

United States wheat sales to Egypt

Barriers to trade in poultry products in Egypt

Egyptian labeling requirements for meat and poultry

Egyptian import restrictions on beef

Egypt’s food safety inspection system

Egypt’s dairy product tariffs

"Toshka" South Valley Development Project

1999 World Trade Organization (WTO) agricultural negotiations

European Union (EU) Agenda 2000 and Common Agriculture Policy (CAP) Reform

Biotechnology and genetically modified organisms (GMO) and U.S. exports of corn

Biotechnology approval process in the EU

EU biotechnology labeling Rules

WTO Panel and Appellate Body decisions on the EU meat hormone ban

WTO Panel and Appellate Body decisions on the EU bananas regime

Veterinary Equivalency Agreement

EU export subsidies and domestic support

U.S.-EU wine trade issues

President of Egypt, Hon. Hosni Mubarek

Deputy Prime Minister and Minister of Agriculture, Hon. Youssuf Wally

Minister of Foreign Affairs, Hon. Amre Muhammad Moussa

Minister of Supply and Trade, Hon. Ahmed Goweily

Minister of Health, Hon. Ismail Awad Alla Sallam

Minister of Environment, Hon. Nadia Makram Ebeid

Mr. Shafik Gabr, President Mubarek’s Business Council

American Chamber of Commerce, Dr. Ahmed Shawki, President

U.S. Agricultural Business Delegation

Minister of Agriculture, Hon. Loyola de Palacio

Ministry of Environment, Sub-Secretary D. Claro Jose Fernandez-Carnicero

Chairman of Spain’s Agricultural Committee, Hon. D. Jose-Cruz Perez Lapazaran

Members of Spain’s Agricultural Committee

Association of Spanish Cereal Traders

Asociacion Agraria Jovenes Agricultores (ASAJA), (Spanish farmers’ organization)

U.S. Market Development Representatives

President of Cantabria, Hon. D. Jose Joaquin Marinez Sieso

Cantabria Commissioner of Agriculture, Hon. D. Jose Alvarez Gancedo

Esnutra Beef Farm, Santander

United States agriculture exports, and expansion of those exports, are on the top of the agenda for the Committee on Agriculture. These exports generate employment, income, and purchasing power. Each dollar received from agriculture exports stimulates another $1.38 in supporting activities to produce those exports. USDA estimates that 900,000 full time jobs are generated by agriculture export activity, more than half of which are in the non-farm sector. Exports are important to the success of United States farmers and ranchers.

In 1996, significant reforms were made to U.S. farm programs. These reforms returned control of the farming operation to the producers in exchange for sharp restrictions on the level of government support to the farmer. For this plan to be successful, the U.S. government must ensure that farmers and ranchers can compete against other exporters, and not against foreign governments. Therefore agricultural trade delegations like this one, to Egypt and Spain, provide opportunities to discuss trade barriers for U.S. exports and expansion of world trade markets for U.S. farmers and ranchers.

Members discussed many topics concerning improved agricultural trade between the United States and Egypt. The U.S. has been a reliable supplier of wheat for Egypt for years and hopes to improve upon that relationship. Members expressed hope that other U.S. products will have better access to the Egyptian market, such as U.S. beef, poultry, and cheese. Members stated their intention to continue discussions, begun in Egypt, to resolve issues that keep U.S. beef, poultry, and cheese out of the Egyptian marketplace.

Members discussed the status of the Egyptian government’s work with the U.S. Department of Agriculture (USDA) to make Egypt’s food inspection and certification procedures more efficient and consistent with international practices.

There was a strong interest in development of food and agricultural processing industries in Egypt. A newly initiated credit guarantee program of the U.S. Department of Agriculture provides support for construction of processing facilities where these facilities also encourage the exports of U.S. agricultural commodities. Another program, the supplier credit guarantee program, can respond to issues related to Egyptian importers’ need concerning credit. Under this program the USDA assumes half of the risk from U.S. exporters when they extend "supplier credit" to their foreign customers. Providing this type of credit is a long-standing practice of European Union competitors. Putting this program at the disposal of U.S. exporters and their Egyptian customers is part of the U.S. effort to adapt to this rapidly changing international marketplace.

The recent purchases of 890,000 tons of wheat by Egypt are examples of a good trade relationship between the U.S. and Egypt.

In Spain, one of the major issues discussed was the process used by the European Union to evaluate and approve products made with the aid of biotechnology. Spain is known for its objective and scientifically rigorous approach to biotechnology. Members expressed concern that other countries within the European Union did not share this approach to biotechnology products. Because of the delays in European Union approval of certain biotechnology products, sales of U.S. corn total only 75,000 tons prior to August 1998. Last year Spain imported 1.1 million tons of U.S. corn. Members discussed additional sales of U.S. corn this year and are hopeful that these discussions will bear fruit. An additional 112,000 tons of U.S. corn were purchased in September 1998.

Also, Members brought up the upcoming 1999 World Trade Organization negotiations and discussed the goal for these negotiations to reform of the rules of agriculture trade. Tariffs must be reduced. Agriculture tariffs worldwide average about 56%, while U.S. tariffs are about 5%. Export subsidies need to be reduced and the link between production and domestic subsidies must be broken.

Members cited the decisions of the WTO regarding meat hormones and bananas. These decisions were favorable to the U.S. position; but until they are actually implemented U.S. farmers and ranchers will not see the benefits of that trade with the European Union. Members reiterated the need for countries to abide by WTO decisions.

In 1997, U.S. agriculture exports to Egypt totaled $1 billion and consisted primarily of wheat and feed grains. Egypt’s exports to the U.S. totaled $18 million and consisted mainly of spices and bulk commodities.

The GSM-102 program has been very successful in facilitating commercial private sector exports to Egypt, particularly for wheat and feed grains. In the past both the government of Egypt and its private sector have made use of the GSM credit guarantee program.

Agriculture is the most important sector in the Egyptian economy contributing 16% to the gross domestic product and 36% of total employment. Although yields for many agriculture crops in Egypt are high, the amount of arable lands is small and there is always pressure to produce more on what is a limited land resource base.

The Egyptian agribusiness sector lacks adequate processing and distribution facilities and therefore both the quality of the product and the value are low.

Egypt began its economic stabilization program in 1991 after suffering through inflation rates of more than 20% and a sharp drop in foreign reserves. They received help from the World Bank and the International Monetary Fund and ultimately reduced the budget deficit and liberalized its banking and financial sector. Egypt basically abolished its entire import ban list and adopted the harmonized tariff schedule. The import bans remain on textiles, apparel, and poultry. The ban on poultry imports is in direct violation of the WTO agreement.

Egypt is the largest purchaser of U.S. wheat and a significant customer for U.S. corn. The U.S. trade relationship with Egypt is extremely important and that is a key reason why the U.S. takes great care to remain a reliable supplier.

Egypt was the largest buyer of U.S. wheat in the 1997 to 1998 period. In recent years, U.S. wheat exports have averaged slightly less than 4 million tons. Price, credit and quality have been major factors underlying the success of U.S. wheat exports (U.S. market share averages 60%). However, with the absence of U.S. subsidies and the continued privatization of the Egyptian importing and milling sectors, competition from third country suppliers like the European Union (EU), Australia, Canada and Argentina will intensify. All these suppliers will be offering donated wheat, storage, bakeries and cash grants to gain market share. Growth in wheat imports are projected at 2.2% per year because long term growth in production is limited and the domestic demand for wheat is also estimated to increase at the population growth rate.

In 1996 to 1997 period, the EU, Argentina and Australia challenged U.S. dominance. A large U.S. crop with good quality characteristics reversed this situation the following year, when Egypt bought about 5 million metric tons of U.S. wheat. It is expected that competition from the EU will intensify during the 1998 to 1999 marketing year.

Egyptian buyers, in particular the government’s main buyer, are currently taking advantage of low world grain prices. The government imports about 500,000 tons of wheat per month on average, mainly lower-quality soft red winter wheat or French wheat. Private traders, on the other hand, import about 100,000 tons monthly of high quality hard wheat. With recent construction of new private mills, the private traders’ share of total Egyptian wheat imports are expected to increase in the future and, in conjunction, hard wheat imports should make up an increasing share of total imports.

Egypt is typically one of the U.S. corn industry’s top five export markets, averaging close to 2 million metric tons per year and 80% of the import market. Despite the availability of very low priced corn from Eastern Europe, Egypt continues to purchase U.S. and Argentine corn of higher quality and price. As the quality and availability of Argentine corn improves, Argentina is developing into a year-round competitor and is expected to supply 30% to 40% of Egypt’s corn imports in 1998.

Wheat production in Egypt accounts for only 45% of its annual consumption, thereby requiring considerable imports of wheat. The goal of the Egyptian government is to produce about 55% of the country’s annual wheat needs.

The United States will supply 66% of Egypt’s wheat needs this year (almost 5 million metric tons). However, last year the U.S. supplied less that 40% of Egypt’s wheat imports (2.6 million metric tons). The increase in U.S. wheat sales to Egypt is due to lower prices and increased wheat production in 1997, as compared to 1996.

In the 1994/1995 marketing year Egypt purchased 4.7 million metric tons of U.S. wheat (81% of its imports).

In the 1995/1996 marketing year Egypt purchased 4.9 million metric tons of U.S. wheat (83% of its imports).

In the 1996/1997 marketing year Egypt purchased 2.6 million metric tons of U.S. wheat (38% of its imports).

In the 1997/1998 marketing year USDA estimates that Egypt will purchase 4 million metric tons of U.S. wheat (60% of its imports).

Other suppliers of wheat to Egypt include France, Australia, and Argentina.

Members cited Egypt’s ban on imports of poultry parts, an 80% tariff on whole poultry, an arbitrary $1,500 per metric ton import reference price, and unnecessarily restrictive labeling requirements that combine to impede exports of U.S. poultry products to Egypt.

Members registered concern about Egypt’s import ban on poultry parts because it is in violation of the WTO Agreement on Agriculture. The 80% ad valorem tariff rate placed on whole poultry exceeds Egypt’s WTO bound rates, violating Egypt’s WTO market access commitments. Additionally, the minimum reference price of $1,500 per metric ton used in calculating the ad valorem tariff contributes to an even higher effective tariff rate, exacerbating Egypt’s violation. Furthermore, Egypt has enacted a new restrictive labeling regulation for meat and poultry product imports. The new regulation requires the insertion of labels inside of the packaging of all poultry imports. As Egypt has not been able to identify a reasonable basis for implementing its new labeling requirement, the new regulation is unnecessarily restrictive and, therefore inconsistent with WTO rules.

Additionally, in 1988, Egypt instituted an import ban on poultry meat to protect domestic producers. As part of its WTO accession package, Egypt agreed to replace the ban with a tariff by January 1995. The tariff was to have been initially set at 80% and then gradually reduced to 60% by 2005. Accordingly, the tariff, subject to annual reductions from 1995 levels, should have been set at 72% in 1998. In 1997, Egypt lifted its ban on the importation of whole poultry meat, but continued to ban imports of poultry parts. Members raised this issue and urged that Egypt comply with its WTO commitments.

The issue of Egypt’s poultry restrictions has been raised on several occasions in the WTO Committee on Agriculture. During those recent meetings, in response to questions about the remaining ban on poultry parts, Egypt justified the ban on the basis of concerns that imported meat may not be slaughtered according to Islamic rules (Halal). Egypt indicated that the ban would remain in place until the completion of a study on poultry imports and Islamic slaughter practices in exporting countries.

During recent discussions between the U.S. and Egypt, in response to Egyptian concerns about U.S. slaughter practices, the United States proposed that Egypt consider sending an assessment team to examine procedures in the United States. Members urged Egypt to agree to such a process.

Egypt’s restrictive labeling requirement for imports of meat and poultry products impedes U.S. access to the Egyptian market and results in unnecessary shipping delays and increased production costs, thereby impeding U.S. exports to Egypt. The labeling requirement does not appear to have any scientific basis. Egypt has failed to identify legitimate food safety concerns that would justify the need for interior labels. As such, the requirement violates the WTO Agreement on Technical Barriers to Trade.

USDA has urged Egypt to meet its WTO obligations and remove this unnecessary restriction. Members reiterated this request.

In November 1997, Egypt adopted new labeling requirements for meat and poultry products. These requirements call for the insertion of labels inside the packaging of all imported meat and poultry products. These labels must provide the country of origin and the name and address of the Egyptian importer.

This regulation has created serious logistical problems for U.S. exporters. The interior label requirement essentially forces processors to perform custom packaging, which unnecessarily raises production costs and delays shipping, thereby impeding U.S. exports to Egypt. This labeling requirement has the greatest impact on U.S. exports of beef livers, which totaled more than $25 million in 1997.

The Egyptian government has attempted to justify the new labeling regulations in terms of consumer protection. However, Egyptian officials have failed to identify any associated risk factors or concerns. Egypt has consistently been unable to demonstrate how the new regulation relates to food safety. There is no international standard which supports Egypt’s interior labeling requirement. The new regulation is unnecessarily restrictive and, therefore, inconsistent with WTO rules.

Imports of beef cuts with a fat content of greater than 7% are prohibited, supposedly for health reasons. This restriction sharply limits the importation of high quality beef from the United States. Because the current restriction does not appear to be based on any legitimate health concern, Members urged government representatives to remove the import ban without further delay.

In January 1995, the government of Egypt re-imposed a ban on the import of frozen beef cuts with a fat content of more than 7%. The Egyptian authorities maintain that the ban is a consumer health protection measure. Due to importer ingenuity in trimming imported meat in order to comply with Egyptian regulations, a small volume of U.S. quality beef continues to be imported into Egypt despite the fat requirements. In 1997, the United States exported $1.7 million of quality beef, an increase from 1996 exports of $900,000. However, U.S. sales are generally restricted to a few luxury hotels and restaurants. Industry estimates predict that unrestricted access to this market would yield an additional $30 million of U.S. beef exports each year.

Egyptian import standards, testing and certification procedures often result in significant delays in clearance or outright rejection of food and agricultural imports. Members noted Egypt’s recent willingness to work with USDA to make Egypt’s food standards, inspection and certification procedures more efficient and consistent with international practices. It is believed that these technical improvements will benefit consumers and also help Egyptian exporters of food and agricultural products compete in world markets.

U.S. exporters have expressed concern about the additional cost, uncertainties and delays caused by inefficient and faulty laboratory testing and inspection systems in Egypt. USDA is developing a project for training and technical assistance to strengthen the Egyptian Government’s system of food inspection and analysis laboratories.

USDA is also working directly with the Egyptian Organization for Standardization and Quality Control (ESO) to set the parameters of the project and to identify the government laboratories for the project. ESO, in turn, is enlisting the collaboration of the Egyptian Ministries of Agriculture and Commerce and Industry, whose food inspection laboratories are integral parts of the system.

Egypt’s current applied tariffs, maintained in excess of its WTO tariff reduction commitments, impede market access for several U.S. dairy product categories. The excessive tariffs impede U.S. access to the Egyptian market and unnecessarily raise food costs for Egyptian consumers. Members urged the Egyptian Government to reduce the import duties on these products in line with Egypt’s WTO tariff reduction commitments.

The U.S. Dairy Export Council conducts annual surveys of applied tariffs in selected importing countries. The current survey indicates that Egypt has exceeded its bound rate for several categories, including two important dairy products: grated or powdered cheeses, in containers weighing less than 20 kg; and processed cheese, not grated, in containers weighing less than 20 kg. Egypt’s current applied tariff of 30% for each of these products is in excess of the 1998 bound tariff level of 23% tariff that was established as part of Egypt’s Uruguay Round commitments. These products are also particularly important for U.S. fast-food companies located in Egypt.

One of President Hosni Mubarek’s main priorities during his Presidency is devoting more time and resources to southern Egypt. In January of 1997, President Mubarek approved the South Valley Development Project, known as "Toshka". The objective of the South Valley Project is to create a New Delta in the Western Desert to allow for the cultivation of 500,000 acres using water from the Nile River. Creating a New Delta west of the Nile Valley will have the effect of redistributing Egypt’s population across the country and increasing the area west of the Nile Valley from 6% to 25% over 20 years.

The total cost of the project is estimated to be almost $29 billion. The Egyptian government says it will fund $5.8 billion in major infrastructure funds. Agriculture Minister Wally advised members that the World Bank has agreed to lend $300 million to be channeled through the Principal Bank for Agricultural Development in the form of concessionary loans for private developers. The only significant private investor, Prince Walleed Bin-Talal of Saudi Arabia, has purchased 100,000 acres.

In 1997, U.S. agricultural exports totaled $1.4 billion, making Spain the eleventh leading market for U.S. agricultural products. The major U.S. exports to Spain include soybeans and soybean meal, forest products, corn and corn gluten meal, and tree nuts (almonds and walnuts).

Spain was among the top five markets for U.S. soybeans and meal in 1997. Other than Portugal, Spain is the only EU country that imports significant quantities of U.S. corn. Spain is also one of the few EU countries importing U.S. wheat, buying about 225,000 tons in 1997.

While bulk and intermediate commodities have traditionally comprised the majority of U.S. sales to Spain, other agricultural products are becoming increasingly important. For example, forest products (hard and softwood lumber and veneer) and seafood sales both registered record sales in 1997. In addition, while the sales values are still relatively small, both snack foods and pet foods sales set records. However, most other value-added agricultural sales to Spain declined in 1997, negatively effected by the rise of the dollar.

In 1997, U.S. imports from Spain reached a new record of about $591 million. Olive oil, wine, and processed fruits and vegetables continue to be Spain’s primary exports to the United States. Among processed vegetable imports, olives, canned tomatoes, and artichokes are the primary goods. Led by Clementine sales, Spain’s fresh fruit sales to the United States are also growing in importance.

Members discussed the importance of the 1999 WTO agriculture negotiations and stated they will be a significant opportunity to secure lasting reductions in agricultural trade barriers. Members cited the need to reduce and eliminate tariffs and subsidies and to open agricultural markets around the world.

The Uruguay Round established a framework to progressively liberalize agricultural trade, and the implementation of the Uruguay Round has been proceeding. The Ministerial Conference that will launch the new WTO agriculture negotiations will be held in the United States in late 1999. Between now and the Ministerial Conference, the WTO General Council will meet periodically to make preparations for the new negotiations.

In the 1999 negotiations, the United States will pursue, among other things, export subsidy reductions, market access expansion through tariff reductions, further liberalization of tariff rate quotas, and improved disciplines on tariff rate quota administration; and domestic support that is decoupled from production incentives.

In addition, Members discussed other issues that may be included in the 1999 WTO negotiations. They included state trading enterprises (STE) that can distort trade and frequently operate behind a veil of secrecy. STE’s allow some countries to undercut U.S. exports into third markets and restrict imports.

Biotechnology holds tremendous promise globally for food consumers and producers, and the United States leads in developing these genetically modified organisms. The world’s population is growing by about 2% annually. Other countries threaten to adopt policies regarding the importation and planting of biotechnology products and the labeling of such products that are not based on scientifically-justified principles. As the world’s largest and most efficient agricultural producer, U.S. farmers and ranchers must have access to the technology that will allow them to be more productive.

The United States is prepared for serious further agricultural trade reform through the upcoming 1999 WTO negotiations and in the prospect of continuing agricultural trade liberalization during the interim before the conclusion of the next Round.

Members cited goals for the 1999 WTO negotiations. They include:

• Agricultural tariffs worldwide still average about 56%, while U.S. tariffs are about 5% on average. High tariffs raise the price for U.S. commodities and can shut them out of markets.

• Tariff-rate quotas (TRQs) should be increased substantially or effectively eliminated by cutting the level of the out-of-quota duty. Small TRQ quantities and high out-of-quota duties curtail exports and restrictive methods of administering TRQs impede trade.

• Exporting countries should further cut or eliminate export subsidies. The EU, for example, carries out an extensive subsidy program. The EU budgeted $6.1 billion for export subsidies in 1997. This level of EU subsidization makes a very strong case for further negotiations.

• Rules on domestic subsidies should be tightened to cut the link between support to rural communities and requirements that farmers produce specific crops or herds.

• The next agreement should impose rigorous discipline on state trading enterprises (STE). The U.S. has been seeking greater transparency in the operation of these entities, both import and export monopolies, through the WTO Working Party on State Trading Enterprises. This effort will help identify practices that may need to be disciplined in the upcoming negotiations.

• The negotiations should impose tighter disciplines to prevent countries from circumventing their trade commitments through disguised subsidies, non-tariff measures, or technical measures, such as unnecessarily rigid labeling requirements.

• WTO members should reaffirm and where necessary more clearly define and tighten rules on sanitary and phytosanitary measures to ensure fair competition. While maintaining the rights of countries to use legitimate measures to protect health and safety, the U.S. wants to make sure that science, not internal politics or protectionism, is the basis for public, animal and plant health rules.

The EU is debating a proposed reform of its Common Agricultural Policy (CAP). The details of the proposal were published in March 1998. Implementation of the proposed reforms will likely begin in 2000. Members cited Agenda 2000's focus on economic efficiency and global competitiveness. The more market orientation it brings to Europe, the better it will serve Europe and the global trading environment. However, Members expressed the belief that reforms could go much farther.

True market orientation requires elimination of agricultural price supports, production and export subsidies and all farm income supports linked to production. Members agreed with the EU’s desire to support farmer income. Still, the EU can and should break the distorting link between production and government payments and still support its farmers.

In July 1997, the EU Commission released its Agenda 2000 report. The report outlined the EU’s budgetary guidelines until 2006, proposed changes in the CAP, and highlighted the cost of enlarging the EU by five new member states in the next decade. The EU proposals extend earlier CAP reforms, implemented in 1992, which started the shift away from price supports in favor of direct payments for both the cereal and livestock sectors. Agenda 2000 proposes a 20% cut in the intervention price of cereals beginning in the 2000-01 season, a 30% cut in beef support prices three stages, and a 15% cut in dairy prices, combined with a milk production quotas increase of 2%. Reductions in price support are offset by proposed increases in direct compensation payments to farmers.

The EU estimated that these reforms would increase the CAP's cost by about 7% per year above a simple extension of the status quo. The EU projects that increased support for beef and dairy will account for most of the net increase. This increase will be offset somewhat by cuts in export refunds for pork, eggs, poultry, and some other products. The EU estimates that costs of support for grains and oilseeds will be less by 2006 than they would be under an extension of the current CAP.

Members cited the delay in EU approval of several genetically-modified products and expressed concern about several biotechnology food products that still face a lengthy EU approval process and consumer opposition in several Member States.

On April 22, 1998, after numerous delays and several scientific reviews, the EU approved three biotech corn varieties and one rapeseed variety for commercialization. Before the corn products could be marketed, however, the sponsors of the varieties (France and the United Kingdom) had to grant their consent. The corn varieties had been under review in the EU for approximately two years. During that time, a variety of scientific experts, including those from the EU Environment Ministry and several scientific committees, reviewed and approved the corn varieties. Throughout the process, the U.S. voiced its objections to ad hoc changes in existing approval procedures and repeatedly emphasized to the EU the importance of a transparent process that minimizes uncertainty and delays for producers.

After the EU gave final approval, the original sponsoring countries (in this case, the U.K. for one corn variety and France for the other two) had to give their consent. The U.K. granted its consent on June 9, 1998. However France announced that it would not grant its consent until after a public debate on biotechnology (called the "Conference of Consensus") held on June 20, 1998. The interim report from the Conference, which recommended that these two varieties be approved, was released in late June. Unfortunately, France did not officially grant its consent until August 5, 1998.

The French decision to delay its consent has had serious consequences for U.S. corn shipments to Spain. The EU has quota commitments for corn into Spain as compensation to the U.S. for lost trade when Spain acceded to the EU. The EU committed to a 2 million-ton corn quota into Spain (less Spanish imports of non-grain feed ingredients). Spain has purchased about 815,000 tons under this year’s quota so far. Of the total, only 75,000 tons came from the United States.

During meetings with the Spanish Minister of Agriculture, Members raised this issue and the need for Spain’s support for opening additional tenders for corn in 1998. Members successfully urged the Association of Spanish Cereal Traders to write to the Ministry of Agriculture and request that they be provided an opportunity to purchase U.S. corn. Following the Committee trip, 112,000 tons of U.S. corn was purchased.

On May 26, 1998, the EU adopted a regulation on labeling of foodstuffs containing or derived from two varieties of biotechnology-produced corn and soybeans. The U.S. maintains that there is no scientific basis for requiring labeling simply because a product has been genetically modified. Members expressed concern that the EU is preparing to impose labeling requirements on genetically modified products. The U.S. takes the position that labeling of products should be based on science and does not see a good reason for labeling a food product simply because it is made from genetically modified inputs.

The U.S. applies the same labeling requirements to biotechnology products as to all other food products. From the perspective of food safety, a product of biotechnology should not require additional labeling unless there are scientifically established issues of safety, such as the introduction of a known allergen, or a significant change in nutrients or composition. In these cases the specific change is the subject of a label, rather than the process by which it is produced.

The U.S. expressed its concern about the significant adverse potential for corn and soybean trade; the lack of clear guidelines for importers; concern over efficient and consistent application of the regulation; and the lack of scientific justification.

There is also concern that a policy requiring labeling of all products of biotechnology is likely to confuse consumers by implying a risk that does not exist. The U.S. will review the EU policy as it develops to try to ensure that it: 1) does not require segregation of biotech products from non-biotech products; 2) is non-discriminatory and objective in its application; 3) does not stigmatize biotech products nor imply health or environmental risks that do not exist. Such a policy should not become a non-tariff barrier that adversely affects trade.

On May 29, 1998, the WTO ruled that the EU must implement within 15 months (or by May 13, 1999) the WTO Panel and Appellate Body rulings that the EU’s hormone ban is inconsistent with the WTO Sanitary and Phytosanitary (SPS) Agreement. Furthermore, the WTO found that the period for implementation should not set aside time for additional risk assessments to be completed. Members cited the WTO arbitrator’s decision requiring prompt compliance by the EU and that the WTO dispute settlement process works, even in the case of sensitive, long-running disputes. Members also expressed the belief that the EU must now take the necessary steps to bring its policies into compliance with the WTO rulings.

On January 1, 1989, the EU implemented a ban on imports of red meat from animals treated with growth promoting hormones, cutting off U.S. beef exports valued at approximately $100 million annually. Since then, some trade has resumed, as some U.S. plants have been able to ship beef certified as coming from animals not treated with hormones.

Following WTO consultations in March 1996 (in which the United States was joined by Canada, Australia, and New Zealand), the U.S. requested a WTO dispute settlement panel. This was the first case taken under the new WTO SPS Agreement.

The WTO panel, in August 1997, upheld all the principles argued by the United States, and ruled that the EU ban was inconsistent with the principles of the SPS Agreement. The EU appealed this finding, and in January 1998, the Appellate Body (AB) upheld the Panel findings. Because the parties were not able to agree on a "reasonable period of time" for implementation (15 months has been the norm) within 45 days of the date of adoption of the report, the EU requested binding arbitration. The EU argued that it required 4 years in which to come into compliance (2 years to conduct a risk assessment and 2 years to complete legislative procedures, depending on the outcome of the risk assessment). The WTO arbitrator decided, however, that the EU only needed 15 months, and that it was not necessary to conduct another risk assessment. The 15 months started in February 1998, with the adoption of the Appellate Body report, and the deadline will expire on May 13, 1999.

Since the late 1980's Latin American countries and the United States have urged the EU to implement the "Single Market" for bananas in a manner consistent with their international obligations under the GATT and the subsequent international agreements under the WTO. A group of Latin American countries, Colombia, Costa Rica, Guatemala, Nicaragua and Venezuela, tried twice in the GATT to convince the EU to reform its discriminatory banana rules. The GATT panels found that EU banana rules were GATT-inconsistent (1993, 1994) and the EU ignored those GATT panels and proceeded to extend and compound discriminatory trade barriers.

As a result of the EU’s failure to reform its discriminatory system, a case was filed by five complaining parties (Ecuador, Guatemala, Honduras, Mexico, United States) with the WTO in February 1996, and a dispute settlement panel was established to review the EU banana regime on May 8, 1996. The panel’s May 22, 1997, report listed violations of fundamental WTO provisions in goods and services. The Appellate Body report, released on September 9, 1997, confirmed the panel’s major findings of WTO-inconsistency of the EU regime.

During meetings of the WTO Dispute Settlement Body (DSB) in September and October 1997, the EU indicated its intentions to meet its international obligations but would not specifically state that it would implement all the WTO reports’ rulings and recommendations. As a result, the five complaining countries requested WTO arbitration over the issue of "reasonable period", the time the EU would be provided to comply with the WTO reports. As a result of resort to arbitration, the EU expressly agreed that it would use the period until January 1, 1999, to implement all of the rulings and recommendations.

On January 14, 1998, the European Commission adopted a proposal that continues many of the WTO-inconsistent measures in the current regime. The European Agriculture Council approved the Commission proposal, with minor amendments, on June 26, and on July 21 the European General Affairs Council approved regulations to implement this approach by January 1, 1999. The United States and the other complaining parties have clearly and repeatedly expressed their concerns about this approach and have informed the EU that it will not go unchallenged.

In Spain, Members emphasized the issue of EU compliance with the WTO banana reports and indicated that failure to do so can result in a weakening of the WTO dispute settlement process.

As part of the 1992 single market initiative, the EU introduced new import controls for all animal and animal products (effective January 1993), that threatened to disrupt U.S. exports to the EU. To avoid any trade disruptions, the United States and the EU began a consultative process that developed into equivalency negotiations. For four years, the United States and the EU worked towards a bilateral agreement to facilitate trade in animal and animal products (approximately 40 product areas valued at $1.5 billion) by establishing a framework for recognizing equivalency between U.S. and EU sanitary measures.

In April 1997, agreement was reached on an overall framework for recognizing each other’s veterinary inspection systems as equivalent. The agreement incorporates the provisions for equivalence included in the Uruguay Round SPS Agreement.

In the April 1997, exchange of letters, USDA committed to publish a proposed rule on the EU’s animal disease status based on the information supplied by the EU. In return, the EU was to present the U.S.-EU Equivalency Agreement to the November 1997, Agricultural Council for adoption. USDA published the proposed rule on the EU disease status in November. However, the EU stated that this rule was insufficient, and therefore did not present the Agreement to the Council. To try to accommodate some of the EU’s concerns, USDA committed that it would publish a new proposed rule. Based on the USDA commitments, the EU approved the Veterinary Equivalency Agreement, contingent on publication of this second proposed rule on the EU’s animal disease status.

Both the U.S. and the EU provide income support to farmers and subsidize exports. However, the EU domestic support and export subsidies in 1997 were more than 8 times larger than U.S. subsidies. ($46.8 billion for the EU versus $5.3 billion for the U.S.)

In the U.S., domestic support and export subsidies are concentrated on wheat, rice, grains, and cotton.

The EU provides domestic support and export subsidies to a broader range of products, including grains, sugar, oils and fats, dairy products, meat, poultry, eggs, fruits, and vegetables.

Producer’s Subsidy Equivalents (PSE’s) measure assistance to producers in terms of the value of transfers to farmers generated by a country’s agricultural policy. Such transfers are paid either by consumers or by taxpayers in the form of market price support, direct payments, or other support. (Calculated by the Organization for Economic Cooperation and Development, OECD)

The PSE’s for all agricultural products in the EU has averaged around 47% in the 1990’s, about the same as those in the 1980’s. Products with the highest PSE’s are milk, beef, veal, oilseeds, and sugar.

The PSE’s for all agricultural products in the U.S. was estimated at 16% in 1996, down from 30% during the 1980’s. Products with the highest PSE’s are sugar, milk, and wheat.

Four out of every ten pounds of cheese traded internationally receives a European export subsidy. U.S. domestic price supports for dairy will end after 1999 and many in the industry see opportunities to continue the growth in U.S. cheese exports beyond the current $100 million (32,000 MT) level.

In addition to concerns for the U.S. dairy trade, an EU policy of transferring subsidies from one product category to another could spread to other agricultural products, such as using grain export subsidies to produce low cost poultry.

Members discussed the differences remain between the U.S. and the EU that prevent progress towards reaching agreement on a new Wine Accord.

The United States and the EU concluded a Wine Agreement in 1983 that has since expired. The EU has continued to grant annual derogations for U.S. enological practices. The EU exports 10 times as much wine to the United States as the United States exports to the EU. However, key differences remain on issues such as mutual recognition of enological practices, tariffs, and the use of geographical designations (such as Burgundy and Chablis) by U.S. vintners.

The United States proposed that there be mutual recognition of enological practices. This approach would not preclude either country from blocking imports of wine that pose a legitimate health or safety risk. Under mutual recognition, when new wine making practices would be approved in the United States, they would be accepted in the EU. The major EU argument against mutual recognition centers on differing concepts of "good wine making practices."

The United States is also proposing that each side reduce its tariffs to zero. The EU’s tariffs on wine are higher than those of the United States.

The major issue for the EU is the use by some U.S. vintners of geographical indications. The EU has indicated that it is of critical importance to protect its own geographical indications. Many U.S. vintners have already moved away from using European geographical indications. While some large U.S. companies have stated that the cost of making this kind of change would be unacceptable, many have indicated a willingness to phase in such a change over a period of time in exchange for mutual recognition of enological practices and other concessions from the EU.

July 2, 1998, Letter to The Honorable Daniel Kurtzer, U.S. Ambassador to Egypt, re: barriers to U.S. trade

July 2, 1998, Letter to The Honorable Youssuf Wally, Deputy Prime Minister and Minister of Agriculture, Egypt, re: barriers to U.S. trade

August 5, 1998, Letter to The Honorable Dan Glickman, re: U.S. corn exports to Spain

August 5, 1998, Letter to the Honorable Charlene Barshefsky, re: U.S. corn exports to Spain

August 17, 1998, Letter to The Honorable Youssuf Wally, Deputy Prime Minister and Minister of Agriculture, Egypt, re: purchase of U.S. wheat

August 20, 1998, Letter to The Honorable Dan Glickman, re: U.S. corn exports to Spain

August 20, 1998, Letter to The Honorable Charlene Barshefsky, re: U.S. corn exports to Spain

August 26, 1998, Letter from Acting U. S. Trade Representative, Richard Fisher, re: U.S. corn exports to Spain

August 31, 1998, Letter to The Honorable Dan Glickman, re: purchase of U.S. wheat and corn

September 1, 1998, Letter to The Honorable Charlene Barshefsky, re: purchase of U.S. wheat and corn

September 1, 1998, Letter to Mr. Bruce Knight, re: U.S. corn exports to Spain

September 15, 1998, Letter from American Chamber of Commerce in Egypt, re: Toshka

September 16, 1998, Letter from the Honorable Thomas Foglietta, U.S. Ambassador to Italy

October 5, 1998, Letter from The Honorable Charlene Barshefsky, re: Committee trip to Egypt and Spain

December 23, 1998, Letter from The Honorable Dan Glickman, re: purchase of U.S. wheat and corn

August 23, 1998, The Egyptian, Agricultural Cooperation with U.S. Praised

August 24, 1998, The Egyptian, U.S. Businessmen, Investors Willing to Participate in Agriculture Projects in Toshka

August 24, 1998, Al Akhbar, Congressional Delegation Visits Toshka

August 24, 1998, Alam Al Yom, How to Move an American Mountain to Egypt?

August 25, 1998, Al Akhbar, Chairman of Agricultural Delegation After meeting the President in Alexandria

August 25, 1998, Al Wafd, Chairman of Agricultural Committee Describes Toshka Project as Immature

August 25, 1998, The Oregonian, Hurdles Still Loom in Trading with Egypt

August 30, 1998, Alerta, U.S. Agriculture Committee in Cantabria

August 30, 1998, Cantabria, American Congressmen Visit the Region

September 1, 1998, The Mail Tribune, Rep. Smith Upbeat about Successful Trade Mission

September 21, 1998, Feedstuffs, Spain Picks up 112,000 Tons of U.S. Corn

August 31, 1998, Smith, Agriculture Committee members Urge Reduction in Trade Restrictions in Egypt, Spain

September 9, 1998, European Union Corn Tender Follows Committee Trade Mission to Spain

September 10, 1998, Egypt Purchases an Additional 440,000 Tons of U.S. Wheat, Spain buys 112,000 tons of U.S. Corn Following Committee Trade Mission

September 29, 1998 briefing by Republic of Egypt Government Officials on Toshka Project