Dominican Republic-Central America-United States Free Trade Agreement Implementation Act

DOMINICAN REPUBLIC-CENTRAL AMERICA-UNITED STATES FREE TRADE AGREEMENT IMPLEMENTATION ACT

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Mr. GRASSLEY. Mr. President, last night we started debate on the Central American Free Trade Agreement. Last night, in addition to the economic factors involved in the approving of this bill, I spoke about the national security importance of this Central American Free Trade Agreement. I also talked--as, obviously, we do on most trade legislation--about the benefits of the agreement to the U.S. economy in general. This morning, I will focus on the benefits of this agreement for U.S. agriculture.

As a Senator from Iowa and as a person who lives on and has an interest in a family farm my son operates, I have major interest in the U.S. agricultural policies that benefit American farmers. Moreover, as chairman of the Finance Committee, I pay particularly close attention to trade issues as they affect agriculture.

I consulted frequently with the U.S. Trade Representative during negotiations on this agreement, the Central American Free Trade Agreement. I do that because that is the responsibility my committee has under trade promotion authority, which is a process by which Congress delegates the process of our carrying out our constitutional responsibility of control over international trade to the President to negotiate because it is quite impractical for 535 Members of Congress to negotiate with foreign countries.

U.S. negotiators went to great lengths to see that the Central American Free Trade Agreement would be a good agreement for American farmers. Their efforts were successful. The negotiations resulted in an agreement that is particularly strong for U.S. agriculture and the agribusiness community that affects so many nonfarm jobs throughout the United States.

I am fully convinced that implementation of this Central American Free Trade Agreement by the United States is in the best interests of U.S. agricultural producers. That is why I go to great lengths urging my colleagues to support it.

U.S. farmers and ranchers are well aware of the fact that the international playing field for agricultural exports is presently far from level. Average tariffs of other countries on imports of U.S. agricultural products in the case of most commodities is significantly higher than those imposed by the United States. That worldwide average would be 60-some percent of tariffs of U.S. agricultural products going into another country, whereas those same countries throughout the world bringing products into the United States face an average of only an 11-percent tariff.

It is common sense to negotiate other countries' tariffs against our agricultural products down some or a lot and hopefully down to a point where we are in a win-win situation for American agriculture and the nonfarm jobs involved in the processing and handling of agricultural products. That is our long-term goal. In fact, that is the goal we have right now in the Doha round World Trade Organization negotiations going on this year. That is for the entire 150 countries that are members of the World Trade Organization. We hope that Doha round is a major breakthrough for the reduction of high worldwide tariffs against agricultural products.

Now, as this unequal situation I just described has clearly demonstrated, and specifically in this trade relationship we have between the United States and these five countries of Central America, over 99 percent of agricultural products from Central American countries coming to the United States currently come in here not with an 11-percent average tariff I talked about worldwide, they come in with hardly any duty--except for an occasional product--and are duty free right now. That is unfair to American farmers.

When we send products down there, the average bound tariff of these five Central American countries is over 44 percent. The current trading relationship between the United States and the CAFTA countries is not only an unlevel playing field but also a one-way street. CAFTA farm products do not pay tolls to enter the U.S. market today. Yet U.S. agricultural products are charged hefty tolls to enter the markets of these five countries. This is all going to be changed by the Central American Free Trade Agreement. A downhill one-way street will become a level two-lane road.

Under the agreement, the CAFTA countries will eliminate tariffs on virtually all products. U.S. tariffs will remain largely unchanged. After all, the vast majority of agricultural products of the CAFTA countries already enters the United States duty free. For example, the treatment under the agreement of the four major U.S. commodities--pork, beef, corn, and soybeans--demonstrates how the Central American Free Trade Agreement will remove disadvantages faced by U.S. agricultural producers. These commodities are of importance not only to my State of Iowa but to most agricultural States in our country.

The Central American Free Trade Agreement countries currently apply tariffs of up to 47 percent on imports of U.S. pork. Their bound rates reach as high as 60 percent. Under the agreement, these tariffs of the Central American countries will be reduced to zero.

With beef, they apply tariffs of up to 30 percent on imports of U.S. beef. Their bound rates reach as high as 79 percent. Under CAFTA, these tariffs of the Central American countries will be reduced for our U.S. farmers to zero.

The CAFTA countries currently apply tariffs of up to 45 percent on imports of U.S. corn. Their bound rates reach as high as 75 percent. Under the agreement, tariffs of CAFTA countries on corn, the predominant product we export, will be reduced to zero, with the exception of the Dominican Republic, in which case duty-free access will be locked in.

Soybeans is another example. CAFTA countries currently apply tariffs up to 5 percent on imports of our soybeans and up to 20 percent on U.S. soybean oil. Their bound rates reach as high as 91 percent for soybeans, 60 percent for bean meal, and 232 percent for the soybean oil. Under the agreement, tariffs of the CAFTA countries on U.S. soybeans, bean meal, and soybean oil will be reduced to zero.

The leveling of the playing field with regard to CAFTA countries will result in real gains for U.S. agriculture. According to the Farm Bureau Federation, CAFTA would increase U.S. agricultural exports to those countries by $1.5 billion at the end of the full implementation. CAFTA will result in dollars in the pockets of U.S. farmers and ranchers.

Recognizing that CAFTA will profit their members, numerous agriculture and food organizations have expressed their support for this agreement. I have a letter from 73 such groups that back the agreement. These organizations represent diverse commodities produced in the area regions including among the 73 the Farm Bureau Federation, Soybean Association, Chicken Council, Corn Growers, Milk Producers, Pork Producers, Potato Council, Turkey Federation, Rice Federation.

Moreover, six former U.S. Secretaries of Agriculture, both Republican and Democrat, have announced their support for the Central American Free Trade Agreement. Let me read those: Ann Veneman, Republican; Dan Glickman, a Democrat; Mike Espy, Democrat; Clayton Yeutter, Republican; John Block, Republican; Bob Bergland, Democrat. They all noted in a recent letter to Congress that they back CAFTA ``because the benefits are very significant and the costs are minimal.''

I ask unanimous consent to have that letter printed in the RECORD.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

Letter From Former Secretaries of Agriculture to Members of the U.S. House of Representatives and the U.S. Senate

DEAR MEMBER OF CONGRESS:

As former secretaries of agriculture, we understand the importance of negotiating trade deals that minimize the costs and maximize the benefits to U.S. farmers, ranchers, and food and agriculture organizations. We support the Free Trade Agreement with Central America and the Dominican Republic (CAFTA-DR) because the benefits are very significant and the costs are minimal. We urge you to pass CAFTA-DR quickly and without amendment.

A vote for CAFTA-DR is a vote for fairness and for reciprocal market access. Under CAFTA-DR all of our food and farm products will receive duty free treatment when the agreement is fully implemented.

A vote against CAFTA-DR is a vote for one-way trade. Virtually all of what we import from the six CAFTA countries now enters the U.S. duty free as a result of the Generalized System of Preferences (GSP) and the Caribbean Basin Initiative (CBI). Yet, our food and agricultural exports to these six nations are restricted significantly because of high tariffs. As a result of the current one-way trade deal, we are running an agricultural trade deficit with these six countries.

In addition, a formal trade agreement with the United States will help ensure the economic stability and growth that the region needs to avoid a return to the civil wars, insurgencies, and dictatorships of the recent past. As economic freedom and democracy take deeper root, incomes will increase and demand for our food and agriculture products will expand.

Failure to approve CAFTA-DR will have a devastating effect on U.S. efforts to negotiate trade agreements on behalf of U.S. agriculture. The World Trade Organization Doha Development Round would be dealt a serious blow. Other countries would be less willing to negotiate with the United States knowing that CAFTA-DR, a trade agreement so clearly beneficial to U.S. interests, could be rejected by the U.S. Congress.

The future of American agriculture continues to lay in expanding opportunities for our exports in the global marketplace, where 96 percent of the world's population lives. We must not forego these opportunities, especially when the benefits to our nation are so unmistakable.

Ann M. Veneman.
Dan Glickman.
Mike Espy.
Clayton Yeutter.
John Block.
Bob Bergland.

Mr. GRASSLEY. Most sectors of U.S. agriculture support the CAFTA. I realize one--sugar--is a commodity we did not have their support. I respect the sugar industry. They are very important. Outside of that group, we have agriculture represented behind this group.

An economic study by the American Farm Bureau Federation confirms that CAFTA will not harm the U.S. sugar program or other agricultural commodities.

While CAFTA is important in itself for U.S. agriculture, the implementation of this agreement would boost U.S. efforts to liberalize agricultural trade around the world. The implementation of CAFTA would give further momentum toward the completion of agricultural negotiations in the Doha Round of the World Trade Organization, negotiations in which the United States is seeking to cut tariffs, harmonize levels of domestic support, and eliminate export subsidies.

Mr. President, CAFTA is a straightforward win for the bulk of U.S. agricultural producers. A current one-way trading relationship will end. The CAFTA countries will dismantle their tariffs to U.S. agricultural products while the United States will provide little additional access for CAFTA commodities. This will result in increased sales for U.S. agricultural exporters, sales of up to $1.5 billion a year by the end of the agreement's full implementation. Not surprisingly, CAFTA is widely supported in the U.S. agricultural community.

The CAFTA is good agricultural policy and good trade policy. I urge my colleagues to support it.

Mr. President, I yield to the Senator whatever time he needs.

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Mr. GRASSLEY. I will respond to some of the speakers through the course of debate on this bill who pointed to a report of the International Trade Commission on CAFTA as evidence that this trade agreement is not meaningful to the United States.

Let me explain that the International Trade Commission is an agency of the Federal Government, but it is an agency that is very independent, with 9-year terms for members to serve. They do a great deal of research in international trade and are very well respected for the reports they put out.

This report that was referred to as evidence of this trade agreement not being helpful to the United States misrepresents the scope of the International Trade Commission estimates as well as the scale of the CAFTA agreement itself. Critics point to one part of the International Trade Commission report which estimates the tariff and quota liberalizations under the agreement will result in zero percent change in welfare for the United States.

Now, those critics ignore the Commission's conclusion that if CAFTA is fully implemented, overall U.S. welfare will increase in a range of $135 million to $248 million, with minimal impact on U.S. employment and output.

In fact, the Commission estimates that no sector of the U.S. economy is likely to experience a decline in output, revenue, or employment greater than 2.5 percent once CAFTA is fully implemented.

So critics fail to acknowledge that the Commission's estimates are based only on the tariff and quota liberalization provided under this agreement. The Commission's estimates do not quantify the other very important elements of this agreement--which the people using this report to justify a vote against CAFTA take into consideration--such as the benefits from an improved regulatory environment, improved protection of intellectual property rights, efforts at trade facilitation, and liberalization of regulations governing investment and the provision of services we will sell to those countries of CAFTA.

The Commission report does not attempt to quantify any broader geopolitical benefit to the United States of improved economic well-being and political stability in the CAFTA countries as a result of the agreement. But the fact remains that those benefits--not referred to by the opponents of this agreement, who find it convenient to quote one part of a trade commission study but not the whole study--the fact remains, then, that if you look at the whole report of the International Trade Commission, those benefits are a part of this agreement, as well, and will materialize and are obviously good reasons for voting for this bill.

After some critics are done arguing that CAFTA is meaningless to the United States, they do, however, point to another part of the Commission's report and offer another doom-and-gloom scenario. They point to the Trade Commission's estimates that suggest that once CAFTA is implemented we will increase our bilateral trade deficit with these countries by as much as $110 million. Those critics ignore the Commission's conclusion that if you take into account likely changes in our global pattern of trade, once CAFTA is fully implemented, then our overall trade deficit is likely to decline by $750 million.

Now, how does the figure of $750 million get ignored, but a $110-million figure gets taken into consideration? Well, it is quite obvious that the people who are quoting from this report quote what benefits their position for voting against CAFTA and do not look at the overall beneficial impact of CAFTA on the United States.

That $750 million is a very important number. Our bilateral trade balance with individual countries or regions may be interesting to consider, but the one number that is of significance to our economic health is our overall trade deficit. According to the ITC, the International Trade Commission, CAFTA will help reduce that trade deficit by $750 million.

Now, all the people crying about our trade deficit, are they going to take into consideration $750 million? Why on Earth would we walk away from that benefit, as the opponents of this agreement will have the United States do with their ``no'' vote?

I hope this dispels the critics' misinformation about CAFTA. The fact is, when you read the ITC report in its entirety, it becomes clear that implementing CAFTA offers meaningful benefits to the United States, both in terms of improving the economic welfare of the United States and in terms of reducing our overall trade deficit.

Again, CAFTA offers us those benefits with minimal impact on U.S. employment and output. That is not what Senator Grassley says, that is what the International Trade Commission says. And if you add all the other economic and geopolitical benefits that are not readily quantified, I believe the tremendous benefit of this agreement to the United States is then seen in its proper light.

So I urge my colleagues not to be misled by the critics. The ITC report corroborates that CAFTA will be beneficial to the United States.

Also, let me suggest that during this debate, I have heard much talk about the lack of Government policies concerning the trade deficit. I am not here to justify any trade deficit. I am not here to say those people who say it is too big are wrong. But I think I have heard left out of this entire debate a policy that we have had under Republican and Democrat administrations for a long period of time, and that is, the freedom of the American consumer to have access to any product made anywhere in the world that they want to buy. Because we believe in freedom, we believe in choice for our consumers. We believe the consumer ought to have the benefit of choice, of quality, and price. And we happen to have the consumers of America buying much and saving little.

Now, is that right? I do not know. But people who are concerned about our trade deficit, do they want to shut off the faucet that allows our consumers to have the choice of anything? I may be speaking too sweepingly when I say this next sentence but I believe we let anything into our country that consumers want to buy, except for pharmaceutical drugs. Senator Dorgan and I have been working together to make sure the consumer has that choice as well, to drive down prices, and give them the best product they can get.

Now, I do not think anybody wants to take freedom of choice away from American consumers. If we are spending too much on consumer products, importing too much, maybe we ought to have more incentives for savings, maybe we ought to be, without a doubt, enforcing our antitrust laws, antisurging laws, countervailing duties to be applied, and all those things that need to be done about the problem that exists. But our deficit is overwhelming because of consumer products coming into the United States.

Wal-Mart brings in $18 billion from China--$18 billion of our imports; just one company. Now, when you go to Wal-Mart--I don't care. I happen to go to a Wal-Mart some. I don't go there as much as I go to our small businesses in Iowa to buy things but occasionally go there. Are you going to take that choice away from the American consumer by not having Wal-Mart import? I don't know. I don't see anybody suggesting that.

Somehow we are led to believe that China is like a Japan with these big surpluses. China has a trade deficit as well. China has 3 percent of our national debt in bonds. Japan has 8 percent. Yet you would think that somehow that 3 percent is a major problem.

I would suggest that what we ought to be doing here is encouraging our consumers to buy American, buy American, or don't buy so much consumer goods yourself, and invest that money that we send to Japan through Wal-Mart directly in U.S. bonds. Buy American products. Do as we did in World War I and World War II, be patriotic and buy U.S. bonds to help our economy.

Consumers in America are king. And when consumers in America decide to cut down on our trade deficit, it will be cut down. I think consumers ought to continue to be king in America because that is economic freedom, that is individualism, that is America.

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