Testimony of DWAIN FORD
FIRST VICE PRESIDENT
AMERICAN SOYBEAN ASSOCIATION

before the U.S. - CHINA COMMISSION

August 2, 2001


Good morning, Mr. Chairman, and members of the committee. I am Dwain Ford, a soybean and corn producer from Kinmundy, Illinois. I currently serve as First Vice President of the American Soybean Association, which represents over 27,000 producer members on national issues of importance to all U.S. soybean farmers. On behalf of ASA, I commend you for holding this important hearing, and thank you for inviting us to participate.

The impact of increased Chinese imports of U.S. soybeans on U.S. farm prices and producer income has been clearly demonstrated in recent years. In 1999 and 2000, China's purchases of U.S. soybeans significantly increased, from $472 million in 1999 to $1.1 billion in 2000. For 2001, the export value of our soybeans to China is expected to be $1.28 billion. In 1998 and 1999 when economic problems in Asia, Russia, Eastern Europe, and Latin America stymied demand, and as global output of all oilseeds increased, it was continued exports to China that helped temper the price fall. Last marketing year, China passed Japan as the largest importer of U.S. soybeans, with total purchases of 5.2 million metric tons (191 million bushels), and in this current marketing year, China will increase its purchases by another half million metric tons, or nearly 20 million bushels. In fact, soybeans are now the largest U.S. agricultural export to China.

Even more impressive than current imports, however, is China's potential for increased imports of U.S soybeans and other agricultural products. Its population of over 1.2 billion is becoming increasingly urban, and demand is rising for a diet higher in vegetable oil and protein. China's per capita consumption of soybean meal is only 17.2 pounds annually compared to 174 pounds in Taiwan. If consumption rose to one-half of Taiwan's level, China would require additional soybean imports of 1.77 billion bushels, about 64 percent of annual U.S. production.

While these record exports are of significant importance to the American soybean farmer, they are of equal importance to the Chinese importers, processors, feed millers, livestock producers and consumers. U.S. soybean exports are supporting the rapid development of a modern soybean processing and feed milling industry dedicated to the processing and conversion of soybeans into livestock feeds. Our exports provide to the livestock producers the protein source for growing more efficiently swine, poultry and fish, with which to provide more and better quality food to the Chinese people. Not only do our soybean exports create jobs, they contribute to a more nutritious diet for those that consume the meat, milk, eggs and soy-based foods produced from them. Few exports play such an important role in the development, well-being and economic and political stability of a country.

With U.S. soybean prices and producer income so closely tied to China's import policies, negotiation of advantageous terms for trade in soybeans as a condition of China's accession to the WTO has been a critical goal for our industry. In 1994, ASA conditioned its support for the Uruguay Round Agreement on a commitment from the administration that oilseeds and oilseed products would be a key priority in these negotiations. Oilseed processors and producers have worked closely with the U.S. negotiating team during the past 6 years to ensure that accession will provide a significant increase in access to the Chinese market. And in testimony before Congress, ASA has repeatedly placed China WTO accession at the top of our list of actions needed to make the current market-oriented domestic farm program viable. These efforts have been justified, with China and the United States completing negotiations that are satisfactory to the American soybean industry. Not only has China agreed to bind its duties on soybeans and meal at 3 percent and five percent respectively, it will reduce its in-quota tariff on soybean oil from 13 percent to 9 percent. Its over-quota tariff on soybean oil will be reduced from 85 percent to 9 percent by 2006. The present monopoly on imports of soybean oil controlled by state trading enterprises will also be eliminated by 2006. In addition, soybean farmers are assured that tariff levels on soy will not exceed those of competitor oilseed crops or oils.
By reducing and binding tariff levels, these terms ensure that U.S. soybean producers and processors will have access to the Chinese market on a predictable basis. This will prevent any arbitrary decision to suddenly raise duties or impose quotas, which could and does happen under the present regime. In addition, these terms represent the "going-in" position for the next round of WTO negotiations. ASA will work with U.S. negotiators to improve on them in coming years. In addition, we may find China to be a key ally in the WTO on issues such as export subsidies, reform of State Trading Enterprises, and protecting trade in the products of agricultural biotechnology.
Such support on biotechnology is very important as China is currently developing regulations on the importation and use of biotech-enhanced products, which include soybeans. It is critical to our soybean exports that China resolve these rules in a rapid, transparent and non-trade distorting manner that will ensure that this important market is in no way disrupted.

Membership in the WTO goes far beyond the trade advantages our soybean farmer's gain from a more open market, with more equitable tariffs and greater transparency. Membership is a major step forward for China as it moves its trade policy from one of fiat and arbitrary decisions to the rules of international law. While there will be difficulties in the transition period, as the fine points of the rules are more closely interpreted and applied in practice, the changes will be profound, both in themselves and as the basis for further growth in the democratic process we all support for China.

We must be ever vigilant during the transitional phase to ensure complete and accurate compliance with the rules. This means that artificial trade barriers, disguised as arbitrary rules on the import of biotech-enhanced soybeans and unjustified phytosanitary regulations that serve as border restrictions to imports are aggressively challenged and, where necessary, responded to with trade retaliation.

As we are all aware, Mr. Chairman, U.S. soybean producers and industry members would not be able to benefit from this agreement when China joins the WTO without China having been granted Permanent Normal Trade Relations. Due to the efforts of such organizations as ASA, the active involvement of our USTR and the support of Congress, the status will be given to China once it becomes a permanent member of the WTO.

We appreciate the support of this committee on this vital issue, and pledge our continued efforts.
Thank you, Mr. Chairman. I will be glad to respond to any questions.