Mr. WOLPE. Thank you very much, Mr. Martin. Our last witness will be Ms. Veneman of the Department of Agriculture.

STATEMENT OF ANN VENEMAN, ASSOCIATE ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE, DEPARTMENT OF AGRICULTURE

Ms. VENEMAN. Thank you very much, Mr. Chairman, members of the-

Mr. WOLPE. Excuse me, Ms. Veneman. The other microphone is the committee microphone.

Ms. VENEMAN. Members of the subcommittees, I appreciate the opportunity to be here today to discuss the Free Trade Agreement. We have submitted a statement for the record. And I would like to summarize that statement.

For United States agriculture, Canada is both a major market and a major supplier. Total United States agricultural imports from Canada in 1986 reached nearly $2 billion, and Canadian imports from the United States were even higher at $2.7 billion.

Canadian is consistently our fifth or sixth largest agricultural customer. But it is also one of our foremost competitors and the largest U.S. supplier of similar agricultural products.

This agreement will provide United States and Canadian agricultural producers increased opportunities to market their products in the future with no tariff barriers and with fewer nontariff barriers. I would like to discuss some of the major provisions of the Agreement as they pertain to agriculture.

IMPACT OF TRADE AGREEMENT ON AGRICULTURE

First of all, in the area of tariffs, all agricultural tariffs between the United States and Canada will be eliminated within 10 years. This will facilitate trade and lead to higher efficiency. The agricultural sectors most likely to be affected by the tariff elimination will be fresh fruits and vegetables because some of the highest agricultural tariffs are applied on those products.

Tariffs on fruit and vegetables will be eliminated on a 10-year schedule. However, both countries will reserve the right for 20 years to apply a temporary duty on designated fruits and vegetables should there be import surges from the other country.

This will facilitate a smooth transition to a tariff-free border and prevent unnecessary hardship to fruit and vegetable producers.

In the area of subsidies, the United States and Canada have agreed to work together to achieve on a global basis the elimination of all subsidies which distort agricultural trade through multilateral negotiations such as the Uruguay Round.

This is consistent with the United States proposal for agriculture in the Uruguay Round, and neither country under the Agreement will use export subsidies on agricultural goods exported directly or indirectly to the other.

Each country has also agreed that no government entity will sell agricultural goods to the other country at a price below the acquisition price plus handling, storage, and other costs.

This will prevent the use of practices such as the sale of goods by a government entity from one country to the other at below cost.

Canada has agreed to exclude from the transport rates established under its Western Grain Transportation Act agricultural goods originating in Canada and shipped via West Coast ports for consumption in the United States.

As was previously indicated, both countries will retain the right to use their respective antidumping and countervailing duty laws, and this will apply to agriculture as well.

ELIMINATION OF CANADIAN IMPORT LICENSES

In the area of access issues, Canada has agreed to eliminate import licenses for United States wheat, barley, oats, and their products when United States Government support for the particular crop is equal to or less than that of Canada.

When this occurs, the elimination of licenses will provide greater access for the United States to the Canadian market for both grains and processed products containing grains.

Both countries have reserved the right to impose or reimpose restrictions on particular grains if imports increase significantly as a result of a substantial change in either country's support programs for that grain.

The two countries will exempt each other from the import quotas applied under their meat import laws unless those imports are frustrating import restrictions on meat imports from other countries.

In addition, Canada has agreed to the base level for its import quotas for-excuse me to increase the base level of its import quotas for eggs, chicken, turkey, and products to a level reflecting total shipments over the last five years.

This provision will increase the amount of guaranteed access to Canada.

TECHNICAL REGULATIONS

In the area of technical regulations, the United States and Canada have agreed to work together to harmonize technical regulations affecting agricultural food, beverage, and related goods.

These provisions will facilitate trade for both countries by eliminating, where possible, technical requirements that can amount to nontariff trade barriers.

I would also like to say a couple of words about the wine and distilled spirits chapter which is separate from the agricultural chapter. As mentioned by Congressman Lagomarsino, the Agreement should provide export opportunities for U.S. producers of wine and distilled spirits. The Agreement does not prohibit the regulation of wine and distilled spirits in either country, but it eliminates most significant Canadian discriminatory practices and prohibits discrimination in all new regulations.

The Agreement will not end every agricultural trade dispute between the United States and Canada. But it does provide a useful framework for moving toward freer and more open trade.

By calling for United States-Canadian consultations on agricultural trade issues twice a year, it should keep the trade liberalization process moving in the right direction.

The Agreement is an improvement over the current situation and a bold step toward significantly freer trade between our countries.

That completes my testimony, Mr. Chairman. I will be happy to answer questions.

[Prepared statement of Ms. Veneman follows:]

PREPARED STATEMENT OF ANN M. VENEMAN, ASSOCIATE ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE, DEPARTMENT OF AGRICULTURE

Mr. Chairman, members of the Subcommittees, I appreciate the opportunity to discuss the free trade agreement signed by President Reagan and Canadian Prime Minister Mulroney on January 2 and its provisions for agriculture.

For U.S. agriculture, Canada is both a major market and a major supplier. Total U.S. agricultural imports from Canada in 1986 reached nearly $2 billion and Canadian imports from the United States were even higher at $2.7 billion. Canada is consistently our fifth or sixth largest agricultural customer. But it is also one of our foremost competitors and the largest U.S. supplier of similar agricultural products.

For many

Much trade already crosses our mutual border. It is in the interest of both countries to enhance that trade and to expand it even further. businesses--on both sides of the border--freer trade translates into opportunities for economic growth.

After a year and a half of intense negotiations, the United States and Canada have reached an Agreement that, if approved, will ease restrictions that affect trade between our countries.

In addition to strengthening our important bilateral trade relationship with Canada, the Agreement represents an important step forward in broader trade liberalization. It includes a commitment for the United States and Canada to work together in the General Agreement on Tariffs and Trade for freer and fairer trade worldwide. Success in that effort would benefit the

agriculture sectors on both sides of the border.

The Agreement also would provide U.S. and Canadian agricultural producers increased opportunities to market their products in the future with no tariff barriers and with fewer nontariff barriers.

Tariffs

All agricultural tariffs between the United States and Canada will be eliminated within 10 years. This will facilitate trade and lead to higher efficiency. The agricultural sectors likely to be most affected by the tariff elimination will be fresh fruits and vegetables because some of the highest agricultural tariffs are applied on those products.

Tariffs on fruit and vegatables will be eliminated on a ten year schedule, however, both countries will reserve the right, for twenty years, to apply a temporary duty on designated fresh fruits and vegetables should there be

import surges from the other country. This will facilitate a smooth

transition to a tariff-free border and prevent unnecessary hardship to fruit and vegetable producers.