By David Bowser

AUSTIN — As World Trade Organization negotiators wind up their hearings across the nation this week, Tim Galvin, administrator of the Foreign Agricultural Service at USDA, says that while the national economy has been booming, it has been a year of struggle and hardship for many parts of rural America.

"Much of agriculture is going through a difficult period right now," Galvin says.

An Iowa native, Galvin was on the House Agriculture Committee staff when Texas Democrat Kika de la Garza was chairman and worked in the office of Sen. Bob Kerry of Nebraska as the legislative assistant for agriculture and trade.

"At USDA, we are marshaling all of our resources to address this economic situation," Galvin says. "We're making sure that economic relief is getting to producers as soon as possible. Strengthening our farm safety net is at the top of the agenda."

He also believes consolidation and mergers sweeping agriculture should be subject to tight scrutiny.

But the tour of 12 hearings, called "listening sessions," deal not with general agricultural policies but trade policy specifically.

"We continue to press to open new markets for exports," Galvin says, because exports play a critical role in agriculture.

U.S. agricultural exports reached $58.6 billion in 1998 and account for nearly 750,000 jobs, he points out.

"Even in the current downturn, nearly 25 percent of agricultural sales are export sales compared with 10 percent on average for the rest of the economy," he says.

"About 96 percent of the potential customers for US. products, including agricultural products, live outside the United States," Galvin continues. "We must work to increase our opportunities to sell these products in global markets. Access to customers in foreign markets is a key factor to help U.S. agriculture."

Compared to the general economy, U.S. agriculture relies on export markets more, and those exports are projected to grow faster, the USDA official says.

The overall trend has been one of increasing exports for American agriculture. U.S. agricultural exports climbed to nearly $60 billion in 1996, up from $40 billion in 1990. Exports were down last year and will likely be down for 1999 as well, due to record worldwide crop production and a financial crisis in Asia.

"Although agricultural exports were nearly $54 billion last year, we project exports at about $49 billion this year," Galvin says. "I should point out that we expect export volumes to be up five percent this year. The fact that total value is down simply reflects the current low prices we're all experiencing."

When the global economy rebounds, the trend of increasing exports is projected to continue and exports should account for a larger percentage of farm income, he says.

"To be prosperous, we must increase our exports in those areas where we have a competitive advantage," Galvin contends. "U.S. agricultural productivity is increasing while domestic demand for agricultural products is growing more slowly. Therefore, we must develop new oversees markets for our products."

Expanding export markets, while not the only tool, is a very important tool for leading agriculture out of its current slump, he says, but the recovery is likely to be a gradual one.

"It is estimated that 45 percent of the world's economy outside the United States is now suffering recession or depression," he warns, "but there are some promising signs of recovery."

As a long term strategy, Galvin says, expanding the nation's agricultural export markets is critical.

"A key to expanding our export markets and increasing our access to customers outside the U.S. is through trade agreements," he says. "We would not be at our current level of exports if we had not negotiated trade agreements such as the Uruguay Round and the North American Free Trade Agreement. Trade agreements have clearly boosted exports."

After the implementation of the Uruguay Round, U.S. agricultural exports reached their highest level, he says.

"Of course, many factors, including exchange rates, affect the level of exports, but almost all economists agree that lowering trade barriers through trade agreements has been a critical factor," Galvin says.

Agricultural exports are estimated to be $5 billion more annually in the year 2005 than they would have been without the Uruguay Round of agreements, he notes.

"Other trade agreements have similar benefits," Galvin says. "It is estimated that in 1994, we sold $1.3 billion dollars more feed and citrus to Japan than we would have without the trade agreement we successfully negotiated with that country. For export growth to continue, we must move forward with our strategy for opening markets through trade agreements."

He says NAFTA is also fulfilling its promise for agriculture.

"Our NAFTA partners, Canada and Mexico, have become more important destinations for U.S. products," he says, "now accounting for over 25 percent of U.S. export sales, surpassing the total for the European Union.

"We estimate that in its first three years NAFTA can take credit for three percent additional exports to Mexico and seven percent additional exports to Canada."

Exports to Mexico and Canada grew 11 percent from 1997 to 1998 as overall U.S. exports fell six percent during that same timeframe.

"The NAFTA agreement helped offset sales declines that we experienced with several leading Asian markets," Galvin says. "On the other hand, we recognize that for all we have achieved for agriculture in our recent trade agreements, the playing field is far from level. There's much work to be done."

The General Agreement on Tariffs and Trade, when it was established in 1948, set the basic rules for international trade. A number of multilateral GATT negotiations, or rounds, took place between 1948 and the present. The most recent round, the Uruguay Round, concluded in 1994. The Uruguay Round established the World Trade Organization. It is basically a continuation of the GATT system.

"Uruguay Round agreements opened a new chapter in agricultural trade policy," Galvin says.

Many countries around the world agreed to new rules and specific commitments to reduce levels of protection and support that were barriers for trade, he explains. Agriculture finally became a full partner in the multi-lateral trade system.

"For the first time, countries had to make across-the-board cuts in agricultural tariffs," Galvin says. "For the first time, export subsidies had to be reduced. Internal support policies that distort trade had to be capped and reduced."

New rules set the scientific standard for measures that restrict imports on the basis of human, animal or plant health and safety, he says, and a new dispute settlement process was adopted. It is one we have successfully used in a number of cases, he claims.

"Something like 150 cases have been filed with the WTO over the last five years," Galvin says. "More than a third of those were brought by the U.S."

Most recent, he points out, was the settlement against the European Union's ban on beef from cattle produced with growth hormones and against the EU's banana import licensing regime, although the EU has yet to accept any beef. There was also a settlement against Japan for restrictive quarantine requirements on fresh fruit.

"We must now maintain a firm line to ensure the banana and hormone decisions are carried out so that U.S. exports have the access to determine their legal rights," Galvin says.

The Uruguay Round agreement was a good start, he contends, and it has contributed to increased U.S. ag exports, but the Uruguay Round was just a start and the first important step in global agricultural trade reform.

"We are now planning for the next major step, which will begin in Seattle on Nov. 30," Galvin says.

The ministers of 134 WTO member countries will meet in Seattle with negotiations starting next year. The scope and coverage of the negotiations has yet to be determined, but agriculture and services will be included, Galvin says.

He predicts the negotiations should last three years and be completed in 2004.

"In setting the agenda for the next WTO round of ag negotiations, we will build on the Uruguay Round of accomplishments," Galvin says. "Tariffs were reduced in the Uruguay Round, but they are still too high. Some countries maintain ag tariffs of 50 percent or more while the U.S. averages about eight percent. Our goal is to negotiate further reductions in these tariffs. We also want to expand market access under tariff rate quotas by increasing quota amount and decreasing the tariff outside the quota."

In addition, he is calling for reduction or elimination of export subsidies, especially with the European Union.

"The EU has outspent us by more than 20-to-one on export subsidies," Galvin says. "Last year, the EU accounted for 85 percent of the worldwide use of export subsidies."

Another problem with agricultural markets comes in the form of state trading enterprises, or STEs, which are government entities that act as trade monopolies. Galvin says that when an STE has government authority and monopoly power, it may be able to price products artificially low and unfairly increase market share.

"It is important that we develop stricter WTO rules to assure the STEs operate in a fair and transparent manner," he says.

Trade-destroying domestic support is being reduced under WTO rules, he says, but the playing field remains uneven. Domestic support in Europe and Japan remains high, for instance.

"Our goal for the next round is to make further progress in seeing that government assistance is provided in ways that do not distort markets," Galvin says. "Generous subsidy programs that encourage farmers to produce as much as possible without regard to efficiency or environmental costs can only be sustained by keeping out competition and dumping surplus production on world markets. That tends to hurt U.S. products."

Other goals include safety agreements based on sound science and allowing greater products resulting from scientific innovations such as biotechnology.

"Trade reform through the WTO provides the single best means for increased market access to U.S. products worldwide," Galvin contends.