Testimony
of the
North American Millers' Association
Presented by
Rick Cole
General Mills, Inc.
Minneapolis, MN
Before the
United States Trade Representative
September
24, 2004
Regarding
Potential Increase in Applied Duties on Imported Oats
in Response to European Union Enlargement and
Changes in the European Union Rice Import Regime
The North American Millers' Association (NAMA) is the trade association representing the US grain dry milling industry. NAMA's 46 members operate 170 oat, wheat and corn mills in 38 states. Their aggregate production capacity exceeds 160 million pounds of milled grain products each day, more than 95 percent of the industry total.
We strongly oppose the inclusion of oats, Harmonized Tariff Schedule #10040000, on the list of products for which higher duties are proposed by the United State Trade Representative (USTR) as a result of European Union enlargement and changes in the European Union rice import regime.
NAMA believes that retaliating against the EU by imposing prohibitive duties on oat imports from the EU would be inappropriate, ineffective and would cause disproportionate economic harm to U.S. interests. Further, it would impact the ability of a small but vital industry to provide American consumers with a basic staple food that is wholesome and affordable, but grown in insufficient quantities here in the US.
The proposed duty of 1.66 cents per kilogram is equivalent to $0.24/bushel or 14.6 percent of the value of the oats at current market values. That would have an enormous impact on this industry which operates on razor-thin or nonexistent margins.
Imports supply nearly 50 percent of all US oat uses, and up to 90 percent of food uses. That is fairly unique among the products on the retaliation list. With such a large percentage of oats for human and animal consumption in the US coming from either Canada or the EU, there would be a direct impact on the US oat market from disruptions in the EU import sector. It is in the national security interests of the US not to be reliant on the vagaries of weather in one country that serves as the source of a basic food commodity.
US farm programs and other government policies have discouraged oat production for decades. Not surprisingly, farmers have responded by growing fewer and fewer oats. As a result, US oat crops in recent years have been the smallest since USDA began keeping records shortly after the agency was created by President Abraham Lincoln.
It would be cruel irony for one element of the US government to directly encourage growers NOT to produce oats, only to have another element of the same government effectively eliminate an important source of oats to fill that vacuum.
While NAMA firmly believes in taking action to hold our trading partners to their commitments, we also strongly believe retaliation should not harm US domestic interests. One vital criterion for choosing products for retaliation should be the clear option of US substitutes for the products targeted. Under that criterion, oats would not be on the list of potential targets. Employing the Hippocratic oath – “First, do no harm” – would be appropriate. Said another way, it would be wrong to damage US oat industry interests as a response in a dispute in which they have no stake.
We are also troubled by the only two options USTR has in implementing such an action – 1) make the announcement effective at some time in the future or 2) make it effective immediately.
If advance notice is given, the market will quickly react and there will be an immense surge in imports immediately prior to its implementation. A full year's supply of high quality oats imported during a short period prior to implementation will disrupt normal marketing channels and send false signals to oat producers in Canada and the EU. Ironically, retaliation could actually result in higher prices and increased production in Europe.
On the other hand, if no notice is given, the market for oats in Canada and the US will react radically at the time of the tariff imposition, as Canada would be the only source of adequate supplies for the US market. A sharp run-up in the price of Canadian oats would trigger all the adverse effects cited in our previous statement - and then some. Any effective block on imports of EU oats will trigger a direct one-for-one increase in imports of Canadian oats. USTR is intimately involved in the current tension over US imports of Canadian grain, and we encourage the agency not to intentionally add to that tension.
In closing, we respectfully request that USTR remove oats from the retaliation list.
NAMA appreciates the opportunity to comment on this important trade policy issue and welcomes the opportunity to provide any additional material that would clarify our comments.
For additional information contact:
Jim Bair
Vice President
North American Millers' Association
202.484.2200 ext. 107
jbair@namamillers.org
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