I traveled to London for a series of meetings with officials of the government of the United Kingdom and representatives of the private sector to discuss agricultural trade issues. While in London, I met with:

Ambassador William J. Crowe, Jr.: Ambassador Crowe has been our Ambassador to the Court of St. James since May, 1994. Having completed his tour of duty in the United Kingdom, he is returning to the United States. He is being replaced by Ambassador designate Philip Lader.

The Honorable Jeff Rooker, M.P.: Mr. Rooker was recently appointed Minister of State to the Ministry of Agriculture, Fisheries, and Food. He is responsible for food safety, food standards, meat hygiene, animal health, pesticides, veterinary medicines, plant health and research policy. Mr. Rooker is a Member of Parliament.

Mr. Michael Mackenzie: Mr. Mackenzie is the Director General of the Food and Drink Federation, a post he has held since 1986. This group is the largest representative of food and beverage retailers in the United Kingdom and plays an active role in agricultural trade issues.

National Farmer's Union (NFU): The NFU is the British equivalent of the American Farm Bureau and the National Farmers Union combined. It represents the majority of agricultural producers in the United Kingdom. I met with Ian Gardner, Director of Policy for the NFU; Richard Macdonald, Director General of the NFU; and Ben Gill, Deputy President of the NFU.

Food Law Group: I spoke to a group of 20 United Kingdom lawyers whose practices are concentrated on agricultural law.

My discussions with these groups focused in the following areas:

1999 World Trade Organization Agriculture Negotiations
Genetically Modified Organisms/Labeling
European Union Cosmetic Directive/Tallow
Meat Hormone Ban-WTO Decision
European Union Banana Regime - WTO Decision

In my discussions in London I emphasized that the goal of the United States for the 1999 WTO negotiations is improving access for agricultural products, lowering barriers to trade, and reducing government spending that interferes with free and fair trade. I distributed a chart which shows the large disparity between subsidies in the European Union and the United States. (A copy of that chart is attached to this report.) I indicated my belief that the 1999 WTO negotiations should not be a forum for rehashing the decisions reached in the Uruguay Round Agreement. The Uruguay Round Agreement was a first step, not an end to agricultural trade reform. If the 1999 WTO Round is to be successful we must enter those negotiations with a history of trade decisions being based on sound science and adherence to WTO decisions by the member states.

I emphasized that the United States Congress works closely with Secretary of Agriculture Glickman and Ambassador Barshefsky on agriculture trade negotiations. The Congress and the Administration speak with one voice on agriculture trade matters.

It was generally thought by those with whom I met that our Freedom to Farm Act would put the United States in a favorable position for the 1999 Round. By contrast for the European Union, the recently released Common Agricultural Policy (CAP) "Agenda 2000" shows how much ground there is to cover on the European Union side. I was told that the CAP reform will cost almost an additional $8 billion dollars by 2006 and that the European Union will budget $100 billion for European Union enlargement and assistance to new European members from 2000 to 2006.

The British agricultural representatives with whom I spoke were very interested in the farm program reforms which the United States made last year and which returned control of the farming operation to the producers in exchange for sharp restrictions in the level of government support to the farmer. Clearly, the United States is ahead of Europe on the road to reducing government intervention in agricultural programs.

The industry and government representatives with whom I met appreciated the benefits of biotechnology and the use of genetically modified organisms. The United States is recognized as a leader in agricultural biotechnology. However, the British support of biotechnology is overshadowed by consumer concerns about food safety which extend to agriculture biotechnology. The UK government announced on March 20, 1996 that a new varient form of Creutzfeld Jakob Disease had been detected and its most likely explanation was bovine spongiform encephalopathy (BSE). This not only devastated the cattle industry but gave rise to a lack of confidence by British consumers in their government and in science. As a result of the BSE crises, 1.5 million head of cattle have been slaughtered, at a cost of $5.6 billion to the British taxpayers and the British cattle industry.

It was explained to me that when BSE first appeared, the British government assured consumers that British meat was safe and this reassurance was backed up by scientists. However, with the March 20^th announcement, many consumers lost confidence in both scientists and the government, feeling that they had been previously misled. There is a an intense effort by the British government to restore consumer confidence. The Ministry of Agriculture, Fisheries, and Food is planning to rename the Ministry to something that would better reflect consumer concerns, such as the Ministry of Food Safety and Consumer Protection. This is in response to problems the previous government had with food safety issues and to reflect the importance that the consumers play in the eyes of the new Labor Government. However, Minister Rooker indicated that new regulations were not needed to respond to the problems of the prior government. Rather, enforcing existing regulations should restore consumer confidence.

Minister Rooker maintained that there is an overriding need to regain consumer confidence. He also believes that it is imperative that consumer concerns be balanced against scientific evidence. While professing that "consumers come first," Minister Rooker was quick to note that, in the final analysis, decisions would have to be based on sound science. Much of the current attitude of suspicion and distrust in the UK in this regard has been driven by reactions to the BSE scare.

I was pleased to learn that it is generally accepted among the people with whom I spoke that the European Union would not seek to require the segregation of grains or other genetically modified products. When I met with EU Commissioner Franz Fishler in July, I advised him of the negative effect that grain segregation would have on United States exports. I told him it would be impossible for U.S. producers to segregate GMO grain.

Although it appears the grain segregation issue is off the table, it is being replaced by a labeling proposal. On July 25, the EU issued a press release that describes a EU-wide labeling program for all products manufactured from genetically modified organisms in the food chain. The policy includes voluntary labeling (e.g., "does not contain GMO's") which could be used for certified non-GMO products; mandatory labeling (e.g., "contains GMO's ") which would be required for products of known GMO origin and where the presence of GMO's can be scientifically determined; mandatory labeling (e.g., "may contain GMO's ") which would be required in cases where GMO products can not be excluded, but where no scientific evidence of the material is available, as in the case of bulk quantities. The labeling requirements would apply to genetically modified-food, animal feed, and seed.

It was suggested by private sector representatives that the words "may contain" on labels would imply that the seller of the product does not know what is in the product and this would cause problems with both the retailer and the brand owner. In the United Kingdom there are eight major retailers of food who sell 70% of all food products.

I heard criticisms of the manner in which genetically modified soybeans were introduced into the British market. It was thought by some that the introduction of this product was somewhat heavy-handed and it appeared to the British consumer that this product was being forced upon them. It was generally thought that a public relations program should be initiated to explain the benefits of GMO's to the consumer. Specifically, it should be emphasized that GMO's provide the ability to protect crops from insect damage and reduce pesticide use, provide for increased crop yields without increasing land use, and allow for greater agricultural efficiency. I reviewed advertisements which are being placed in publications in the United Kingdom and which make the point that biotechnology has the capacity to make a positive impact in the lives of consumers, including promoting and improving the quantity and quality of the food supply, health, and the environment. It is expected that these educational efforts will help allay public concerns regarding genetically modified organisms.

I was told that the philosophy of the prior British government was to let the market sort out the labeling/consumer confidence issue. However, the position of the new Labor government is to let industry resolve this issue.

I was asked how the United States handled the BST issue with milk several years ago. The British who asked this were surprised when they learned that the BST matter did not seem to pose much of a consumer confidence problem in the United States.

In July 1997, the European Union adopted a rule prohibiting the marketing of foods, pharmaceutical, and cosmetic products containing certain animal products. This was done at the urging of the United Kingdom and in response to the BSE scare. This EU rule will have a serious effect on US exports of pharmaceutical products, tallow, most cosmetics, and soap products. The United States tallow export market for the European Union is currently $100 million a year. However, under a broad reading of the directive, including the $4.5 billion pharmaceutical export market, this directive could impact at least a $5 billion annual U.S. export market. These EU restrictions on tallow and pharmaceutical products were developed to address the risk of BSE transmission.

I explained to the British that under the WTO Sanitary and Phytosanitary Agreement, a country's sanitary measures to protect public and animal health must be based on scientific principles. The EU's Scientific Committee on Cosmetics recently stated that tallow can be safe under certain rendering processes. I emphasized that it is unacceptable for the EU to ignore scientific advice and implement restrictions that threaten U.S. exports. In addition, I emphasized that if the restriction is to address the risk of BSE transmission, the EU should recognize that BSE is not known to occur in the United States.

It was suggested that the decision on tallow was based upon the inability of the government to guarantee that the product was safe. However, it was also suggested that the decision could be as much political as it was scientific in that the UK has been subjected to an enormous amount of political pressure within the EU regarding BSE.

In 1989, the EU banned U.S. exports of red meat from animals treated with growth-promoting hormones. This ban costs our exporters $100 million annually in lost trade. The World Trade Organization, in its final dispute settlement report issued an August 18, 1997, ruled in favor of the United States and found that EU ban on hormone-treated meats violated free trade rules and is not based on sound scientific assessments. No scientific review has ever concluded that there is a need to ban consumption from hormone treated animals. Codex Alimentarias (a United Nations international scientific group) and the World Health Organization have both determined that there is no risk to the public health or well-being as a result of the use of growth promoting hormones for cattle. The EU's own scientists have confirmed the safety of these hormones. The 1982 "Lamming Committee" and the EU's 1995 Scientific Conference on Growth Promotion in Meat Production confirmed the safety of the veterinary drugs.

Now that the WTO has ruled in favor of the United States, the question is what action will the EU take. The EU is expected to appeal the decision. Under new WTO appellate procedure, the appeal must be completed within 3 months. If this initial ruling is upheld on appeal, and we expect it will be, the EU must come into conformity and eliminate its ban. The EU will likely have a maximum of 15 months in which to do so.

I emphasized to those with whom I met in London the importance of this decision as it relates to the entire WTO agreement. If the EU ignores the decision of the WTO dispute settlement panel on this issue, then there will be little likelihood that future decisions will be given credibility or force.

I was told that on the beef hormone issue some European governments are experiencing significant political pressure because of the perceived consumer sensitivities on this issue. Nonetheless, our discussions on the beef hormone issue gave me an opportunity to emphasize my two main objectives: 1) the importance of adhering to WTO decisions from its appellate bodies; and 2) that decisions must be made based on sound science. Otherwise, there will be no future for the WTO.

The United States, along with Ecuador, Guatemala, Honduras and Mexico, challenged the process by which the EU imports bananas. Preferential treatment is given by the EU to certain Caribbean countrys' exports of bananas and the method of the EU administration of the tariff rate quota (TRQ) was brought into question.

The WTO found in favor of the U.S. and the Latin American countries because the EU rules were inconsistent with WTO rules. The EU gave import licenses for Latin American bananas to French and British companies, taking away a major part of the business from U.S. companies. In addition, it was found that the EU required more burdensome licensing requirements for banana imports from Ecuador, Guatemala, Honduras, and Mexico than those from other countries. The discriminatory allocation of access to the EU market was not based on past levels of trade.

The WTO decision is an important precedent for how the WTO will look at TRQ's. Tariff rate quotas are used frequently for agriculture products and can amount to non-tariff trade barriers. For example, the Philippine government implemented its TRQ for pork and poultry by giving import licenses to its own pork and poultry producers. This set up a non-tariff trade barrier for U.S. exporters of pork and poultry because the holders of the Philippine import licenses do not use them. This is an issue that Members of the Committee and I discussed during our trip to the Philippines in May, 1997.

The EU appealed the WTO banana decision and Britain was supportive of that appeal. The WTO decision was upheld on appeal in September 1997.

I was told that the banana case is an issue of concern at the "highest levels" of the British government. That is, the Queen herself has taken an interest in this issue because of its potential impact on former colonies and possessions of the United Kingdom. The British with whom I spoke told me that the UK is concerned about the stability and welfare of the Caribbean Basin. They indicated that if the producers of bananas are unable to market their bananas they will be forced to turn to raising drugs, which will destabilize the region and cause problems for the United States.

However, the British appeared to realize that they will not be successful in this appeal. I emphasized that if the EU ignores the decision of the appellate panel, that could call into question the validity of the WTO.

It appears to me that the Europeans will request a negotiated settlement upon the loss of the appeal. As part of that negotiated settlement, the EU will request an extended period of time in which to permit an orderly transition from bananas to other crops in the Caribbean islands. This, however, is a matter which will be negotiated primarily by the office of United States Trade Representative. Upon my return, I discussed this with Ambassador-designate Peter Scher.