Mr. YEUTTER. Well, I do not think it takes half of our tools and leverage away at all. Because there are some things that the Canadians would like from us on subsidies too.

Let me add that one of the reasons we did not get an Agreement on subsidies is that we had vigorous opposition from American governors on this point, who do not want to give up the privilege of U.S. subsidies. So it goes both ways.

Mr. BONKER. If the gentleman will yield for a moment.
Mr. SMITH. I would be happy to yield.

DIFFICULTY OF BILATERAL DEAL ON SUBSIDIES

Mr. BONKER. I find this whole question of subsidies extremely difficult to address for the United States, because, when it comes to agricultural subsidies, we rank among the major sinners and that is probably one of the reason the subsidy issue could not be addressed in the context of this trade package.

Indeed, if the United States and Canada were to phase-out their production subsidies, we would open up the rest of the world market for the Europeans to exploit. So that would be a very difficult thing to do. And the Canadian Government's real motive, in my judgment in pursuing these negotiations, was to get a blanket waiver from our countervailing and antidumping rules procedures.

I share the concerns expressed by the gentleman. I think he is right on target, but I think, within the context of this trade agreement, the very fact that we were able to hold firmly to our trade laws, so that we can deal with the problem of Canadian subsidies, I think is a real achievement.

Mr. SMITH. Well, to claim my time, I certainly have a great deal of respect for the gentleman from Washington, who has lived with this problem daily for so many years.

But I would hope that the administration could work out some acceptable solutions, beyond where we are right now because this is a tremendous problem for us. The producers of films, television, books, records, and all of the other cultural industries in this country are, I think, disadvantaged by it.

Mr. YEUTTER. I would like to comment on that latter issue, if I may, because many of those that are issues that have been around for a long time. On at least some of those, we think they are coming closer and closer to a situation where they can be resolved. So do not lose hope on some of those. That situation is changing as well.

Chairman FASCELL. Mr. Bonker?

JAPANESE COMMERCIAL WHALING ACTIVITIES

Mr. BONKER. Mr. Ambassador, just to shift to another perhaps novel issue-and you may not be prepared to respond. But it has to do with the Secretary of Commerce's recent effort to recommend to President Reagan that the Japanese be cited for their resumption of commercial whaling in violation of the International Whaling Commission Moratorium that recently went into effect.

This is done pursuant to both the Pell Amendment and the Magnusson-Packwood Amendment to the FCMA. I understand that

your department has problems with the President taking that action. Are you prepared to comment on it?

Mr. YEUTTER. Let me see if we have any whaling experts here. I am not sure.

Mr. BONKER. I think you need a Japanese expert.

Mr. YEUTTER. I do not think we have anybody here who is up to speed on that issue, Mr. Bonker.

Mr. BONKER. Well, I think the problem comes down to this. Our law specifies very clearly that if any other nation engages in commercial whaling in violation of the IWC policies and this case and moratorium that our government shall certify and restrict imports of Japanese fishery products.

Mr. YEUTTER. Yes.

Mr. BONKER. I understand that there is possible retaliation if we were to take that action, and that right now there is a fairly even flow in the export/import of fishery products with Japan. I would hope that the Administration would not be intimidated by possible retaliation if we were to take this action.

Mr. SMITH. Would the gentleman yield before the answer?
Mr. BONKER. Yes.

Mr. SMITH. I thank the gentleman for yielding.

I was under the impression that they were not resuming the commercial whaling. I thought they were doing research. That is what they told the whole world.

Mr. BONKER. Well, I am not sure that they need 300 Minke whales to carry out their research activities.

Mr. SMITH. Is there anybody else who is sure that they needed 300?

Mr. YEUTTER. I think Secretary Verity concluded that that was not a persuasive argument, which is why he proposed to take the action that he did. And my recollection, when this came up some time ago, was that we were fully supportive of the Congress/Department position on this. So I do not think that there is a problem.

Mr. BONKER. Well, let me ask you a question. I am feeling the pressure from my fisherman, frankly, because we are exporting fishery products to Japan. How would the USTR respond if the Japanese were to retaliate against those United States-imposed sanctions by cutting off our fishery exports to the United States? I know you have to deal with so many trade disputes and problems, but I rather imagine that this one is going to end up in your lap shortly.

Mr. YEUTTER. It could very well do so, Mr. Bonker.

Let me respond in just a general way. I think that is more appropriate than trying to indicate what we might or might not do in this particular case. And that is that I do not believe that we should ever be intimidated by a threat of counter-retaliation by a foreign country on any issue. I have heard that argument made on numerous occasions over the last 3 years. It has not affected any of my decisions yet, and certainly will not while I am here. Sometimes one has to take those chances.

Chairman FASCELL. Mr. Bonker, are you finished?

Mr. BONKER. I am through with Ambassador Yeutter. I am going to carry on a discussion with Mr. Smith. [Laughter.]

Chairman FASCELL. Well, you will have our rapt attention, I am

sure.

CONFLICTS BETWEEN TRADE BILL AND CANADA AGREEMENT

Mr. Ambassador, can you tell us if there are any provisions in the trade conference that you see at odds with the Free Trade Agreement, or that are incompatible with the Agreement?

Mr. YEUTTER. Let me ask our general counsel whether there is anything that merits mention. One that we had some discussion about this morning was this question of 50,000 barrels of oil coming from the North Slope. We will make sure that that one is worked out in such a fashion that there is no inconsistency.

I am not aware of any others that have arisen, but let me see if there is anybody in the back here.

Mr. Roh, in his inimitable wisdom says that we do not really know what is coming out of conference yet, so we cannot tell, and that is true. But we are not aware of anything at the moment that is troublesome.

GRAIN PRICING DECISIONS

Chairman FASCELL. Good. Let me ask you how we are handling the differences of how we set grain prices. The Canadian sets their prices through a central marketing board. We set them through the marketplace. How are those differences handled in the Agreement?

Mr. YEUTTER. Well, there are some implications to that in crossborder trade. They are fairly complicated, but let me try to give an oversimplified explanation. One of the concerns that we have about those Canadian practices is that they might permit a dual pricing system in Canada under which Canadian grain could be dumped into the United States market.

We believe that the Agreement satisfactorily resolves that concern by providing that any product of that nature that is exported from Canada to the United States must be sold at prices that reflect acquisitional costs plus all storage and transportation costs so that that so-called dual pricing system could not be used.

So, we believe that is one way in which this is done.

The other protection that is in the Agreement is that we are going both ways. Neither country can use export subsidies on agricultural products going to the other. We have the so-called Export Enhancement Program that we have been using to sell some grain around the world. Canadians were fearful that we might use that program to ship grain into Canada. We are of course concerned about the possibility of export subsidies on Canadian grain coming to the United States.

So, the Agreement provides no export subsidies on any product going between the two countries. Those are the two principal ways in which we hope we can keep the playing field level.

Chairman FASCELL. Thank you, Mr. Ambassador.

On behalf of the members of the committee, thank you for your presence here today, the presence of your staff, and particularly for the job that you have done on behalf of us all.

Thank you.

APPENDIX 1

PREPARED STATEMENT OF THE COALITION TO KEEP ALASKA OIL Mr. Chairman and Members of the Subcommittee:

The Coalition to Keep Alaska Oil, which consists of a diversified group of business, labor, consumer, and agricultural organizations, desires to lay before the Subcommittee the

following consequences concerning the Canada-United States FreeTrade Agreement (FTA).

Since the outset of the negotiations, the Coalition has opposed the inclusion of language in the FTA that would permit Canada to have access--for the first time--to Alaskan North Slope crude oil. Initially, the Administration proposed providing

Canada with 200,000 barrels per day. As finally negotiated, paragraph 3 of Annex 902.5 provides: "The United States of America shall exempt Canada from the prohibition on the exportation of Alaskan oil under section 7 (d) of the Export Administration Act of 1979, as amended, up to a maximum volume of 50,000 barrels per day on an annual average basis, subject to the condition that such oil be transported to Canada from a suitable location within the lower 48 states."

The omnibus trade bill also contains a provision under your jurisdiction that would give Canada limited access to North Slope crude, but on the condition that it be consumed in Canada and that an equal amount of Canadian crude be delivered to the United States. That is, in effect, an exchange having certain implications for transportation but maintaining the same net level of supply for this country. The FTA "condition" surrenders this feature, whatever its consequences for transportation may

be.