UNDER SECRETARY SCHUMACHER: Governor, it's a great pleasure for me to be here. In fact, you're the only governor that has addressed any of our 12 sessions. So I'm very pleased that you have taken the time to show your interest and even stayed here for a couple of minutes to discuss this. So I'm very honored you're here and you've got a great state.

Frank Tarrant here found his wife here on the campus. Is that true, Frank? And I'm so pleased that Frank is back. And I'm pleased you met our young professionals who are the future of the foreign agriculture service. They got up at 5:30 and got on the bus. We tried to encourage them a little bit this morning to get going, but they're here.

And my great friend Jack Tarburton, who's president of NASDA, did a wonderful job. We had our meetings here over in Odessa, which was -- I had never been to that wonderful town, Governor, and it was terrific.

This hall is a marvelous hall. It sort of like reminds me of a little town hall in Lexington, Massachusetts. But it's quite historic and wonderful campus you have here as well. The Dean greeted us as we came in.

But Don Clifton has just been a tower, pushing, pushing, pushing, when these droughts come up, calling me all the time. C'mon, Gus, let's get this emergency payment out. Make it rain. And hopefully a couple years ago, Governor, we have a lot of farmers markets in the metro Washington area and they pushed that a little bit. And we have some farmers from Delaware. One of them I chat with from time to time. And I said, "How are things going in Delaware?"

And he said, this is two or three years ago, he said, "Terrific." He said, "You know, I got a new pickup."

And I said, "Geez, Charlie. How'd you get the new pickup?"

He said, "One of my neighbors is a grain farmer, actually was doing good, so he put bought a new pickup and I got the retrade. And the retrade looked awfully good."

What does he mostly do with his corn? Well, he sells it locally but one day he took a load in over to Salisbury, Frank Perdue's towers over there. And I said, "Well, does he sell to Frank Perdue?" And I think one of the colleagues from Frank Perdue's here. You come across the scale of purchase at Perdue and the price is posted. He says he took his son over because he wanted to get a picture with the load of corn $5.45 to put that up on the wall because he thought he could never see another one. Unfortunately, the price has gone down a little bit. It's about a dollar-and-a-half, Don, $2.

MR. CLIFTON: $1.90.

UNDER SECRETARY SCHUMACHER: You can't really cash flow on that. $4 soybeans. We are in real trouble, Governor, in rural America and your rural counties, corn and feed, corn and soybeans. As you mentioned, Delaware's doing very, very well economically, very diversified, but I think everywhere but agricultural, it's a seed of prosperity, but agriculture is an island of despair.

I've been all over the country everywhere in the last four or five months and it's very, very tough in rural America.

What I'd like to do briefly before we start I'd just like to mention a couple things. It is unusual to have the State Department here. But Mark has been tireless on the Russian front. Remember, Jack, we had that trouble with the Russians putting unscientific barriers up and Mark and the State Department just broke kneecaps on that issue. And we managed to get it going. We still have some problems in Russia with the economy, but we're coming back a little bit.

I think, Governor, we're getting about two or three hundred thousand tons now. Commercially we donate that and hope to get that market started. And then on the Chinese -- and Mark also negotiated the Food Aid agreement with Chris Goldthwait. The State Department is taking a much, much stronger interest in rural America. I'm very, very, pleased about that because we need the State Department. Sometimes in the past, that's not always been true in previous administrations. I won't go into those discussions. But the State Department now is, I think, back on track and we're working very closely with them.

Teresa Howse is here, negotiated in large part with her friends the Chinese agreement. Now, we hope the Chinese will sign that, Teresa, in the near future. Because, you know, for Alan Farm is here and I think it's Bob Turley, Charlie Kucharik will testify later.

But poultry getting beyond Hong Kong is going to be very, very, important for the chicken feed. We've had the Dominicans in, as well.

What I'd like to do is take about ten minutes and go through very quickly kind of where we are now on trade, where we hope to be in the next couple years, and a bit in the future and how important the next round is starting in Seattle on November 30th. And we hope to conclude that in three years.

One of the critical issues we hope to hear from you is this question of a full round versus taking some successes. And this is an area, Governor, for you to sweat out as well. For example, what happens if some of your industries can negotiate an early reduction in tariff? If we get that done. There are a lot of people on the industrial side who will say, well, let's then put that aside, negotiate it and implement it. My fear is then we leave agricultural at the end of the line and we are basically already given a charge on our tariffs. Other countries have not.

So I'm speaking now for agricultural, which is not always -- we're fairly tough on this. We would like to see everybody stay until the end so that we can get our agricultural talk on. Agricultural will be the most talked about. We don't want to see no early harvest to be implemented until a whole package is done. And I feel very strongly about that. Very strongly, indeed. I know it's not shared by anybody. Maybe, Governor, some of your industries will be very grouchy of me for even saying this, but I feel very strongly. As Jack knows, I kind of say what I have to say and get on with it.

Let me go to the next slide, Kathy. Kathy McKinnon is running the operations. Very important. The critical role of agricultural, and go to the next slide. If you want to turn around, these slides are actually quite interesting if you want to move your chairs around a little bit.

Basically, we're up to 60 billion a couple years ago when it was 5.45 for corn and $8.50 for your soybeans, or maybe even higher. What's the highest you ever got for soybeans here?

MR. CLIFTON: About 8.00.

UNDER SECRETARY SCHUMACHER: About $8. $6 would be great even for corn. Big employment, jobs, a lot. 700,000 jobs. A lot of acreage. 25 percent of cash receipts goes for ... and that's three times more for...

I feel strongly for no early agreements until we get agricultural buttoned down. And, of course, as the Governor said, most of our customers are 96 percent overseas.

This is one interesting slide, Governor, because if you see a '94 to '96, our trade surplus really went up. The agricultural economy nearly hit 30 percent of our cash receipts for exports but you could see down 11 percent is the overall economy. How dependent we are and you are in Delaware on agriculture exports to drive our world economy.

Next slide.

You can see the trend is terrific. Going out in 2000. But you can see '98, '99, we really hit a drop. I probably should have left, came out in '94, I probably should have retired in '98 and gone out for a peak. But in for dime and in for dollar, we're going to see it out.

This is an important slide. It's a bit busy. I'll translate these. You can see in some commodities, sun flower oil, almonds, we're 75 percent export dependent. For those of you in the cattle industry, you're 62 percent for your hides. Walnut, up in my stay in Massachusetts, 50 percent of the lobsters. And then we work down through the different commodities. But you can see, for example, for California, they are very, very dependent. Soybeans, 36 percent. These are some of the soybeans.

I didn't realize, Governor, the largest county in America in terms of soybean production is Sussex. Is it Sussex? But you see how important. Vegetable oil at the top, $1 billion. You move down to the bottom, $6 billion soybeans. So that's a major export for soybean to soybean yield.

Now for Don, those of us coming into farming or staying in farming, you can see how exports track land values in farm equity. Back in the late '70s, exports went booming up. Farm equity went booming up, came down in the mid '80s and now crept back up again. What's interesting is farm equity to date, Jack, has sustained itself even though exports and prices have dropped.

We anticipate land values in agriculture are going to plunge this spring in the year 2000 because of the low prices. Cash revenues are going to drop. Farmers simply aren't going to pay or bankers will not cash flow for lending unless the landlords will drop cash rates.

You can see the impact of the strong and the depreciating dollar on our trade. A busy slide. But you can see when we have a lower dollar, we do well.

Now, this is an important slide because when Teresa and her colleagues and the special trade representative and Joe Marr and others negotiated in USDA, the NAFTA and gap rounds, you can see how it's going to kick in. We feel in just a few years the implementation of the Uruguay round will give us another $5 billion in exports that we didn't have. NAFTA, 2.7 billion. And NAFTA's very important because with Asia having declined some, the NAFTA Mexico, especially, has been bumping up from about 3 billion to six-and-a-half billion and they're also taking some of our poultry but also our beef, corn, soybean, cotton, heartland crops. And if we didn't have Mexico, we would be in, as we say in the chicken industry, deep compost.

You can see the Japan beef and citrus and so forth.

So trade policy has been very, very important. It's somewhat esoteric but very, very important. A busy slide. These are in NAFTA, you can see NAFTA doing very well at the yellow, 34 percent. You see Canada and Mexico really coming up from 1990 to 1998. You can see Canada and Mexico also beginning to reach the Asian Pacific rim. We all rush off to Japan, we rush off to Hong Kong. We don't necessarily rush to Mexico City, Monterey, Guadalajara. I like Monterey, Guadalajara.

The commissioners have been working very hard. I think we can learn from the commissioners, Governor, that they are paying a lot of attention to Canada and Mexico through the accord. I think we need to brighten that up a little bit, spend a little more time on Aero Mexico and United to Mexico City rather than northwest to Tokyo, although that's a personal comment. I'm not sure our friends at STR fully shared that in terms of the timing, but you can see some of the history of the GAT. The multiletter agreements. The background for agriculture was the most important because we finally got agricultural in and we got disciplines.

Don Davis is here. Mr. Haviland from Virginia. But, you know, in terms of the disciplines that we go to enable your chicken as well and your cattle -- you're a big cattle state in Virginia. And those commodities are very, very important. We wouldn't have done as well, Don, if we didn't have those markets.

Now, as Teresa said, we have some very simple but very important objectives. And I want to hear from you on those objectives. This is what we're considering. We haven't buttoned it down and we need to get your views on this. So, for example, on SBS phytosanitary on the chicken industry is very important. But we need to get the major steps. In our next round, we need to get a further market access. We've done somewhat well on tariff cuts. We have classification but we don't have the tariffs down. We have five percent in agricultural; is that correct, Teresa? And our export markets we sell into are about 50 percent. We will have to move to get tariffs down.

And what Teresa and her team bid on China was to get their tariffs in the draft agreement down, Governor, from about 50 percent in agricultural down to 17 percent over the next four years. So we need to get that agreement signed caustically for your state, soybeans and chicken, it's critically important because China could be such a big importer of oil, vegetable meal and chicken parts.

Export subsidies in the EU, domestic subsidies are very important in the EU in the SPS.

And you can see in the WTO what I just mentioned on tariffs. So remember the average is 50 percent, EU 20 and we're down to 8.

Next one. This is what I call my Pacman slide because it indicates -- a few years ago we all played Pacman. The EU has 83 percent of the world's exports subsidies, 7 billion on the left. And you can see the United States at 1.4 billion. And, you know, that is so distorted. It's quite a good slide because it indicates that the EU is the absolute big enchilada, the big Pac person and just go gobbling up the rest of the world up with these very, very high export subsidies. That is a major initiative for us to get rid of those, not just reduce them, Governor, but to get rid of them. We would ask the help of the National Governors Association and the commissioners and others to keep putting pressure on us to make sure we stay the course on getting rid of those export subsidies.

We can compete. We can't compete against $7 billion of European taxpayer money on export subsidies. We just can't do that.

Chicken is very important. You know, in Allen's and Perdue and other chicken industries here in the peninsula, that you have a very difficult time competing against those EU poultry subsidies in the Middle East because they're really rationing it up.

On the domestic side, you can see, you know, they have about $60 billion and we have about $6 billion. So we're being out spent ten to one. Even though we've got some improvement in the EU, we need a major change, Jack, in our -- the EU is the big -- is the big one and we're focusing on that. We're also going to work hard to further Japan and Korea. But you see we have some work to do in the next round. And we won't have that clout if we let some of the industries get early invitation either in whole or altogether to put pressure on me and others either Japan or some of the big corporations in Europe. If they want to get their tariffs down here and get further access, they must give on agriculture.

We want to keep it all together. Together and united we stand. We come apart, we're not going to do as well, Governor. You may get pressure from your industries here in Wilmington, but I hope we can work together to stay the course in keeping this together.

Finally, I'll just end with a few of these. We want to negotiate substantial further tariff reductions, get those 50 percent down to a reasonable level. Get rid of export subsidies. Tighten rules on domestic support. Get rid of the state trading, especially in Canada, Australia, New Zealand, on our exports. Reform the tariff rate quote to say -- which are okay, but we think we need to get clarification. And particularly facilitate trade in new technology products.

I was very interested, Governor, in your comment that Wilmington and some of your firms are really beginning to ratchet up on the biotechnology. But if we can't get access for the products produced with biotechnology and agriculture, that's going to be very difficult.

I was quite surprised when we won the hormone case. We decided we would put a hundred percent tariff on those well-known Dover/Newark products fuqua, truffles and Roquefort cheese. So we have a hundred percent tariff. The French minister wasn't too happy about that. And he kind of was grumpy, grouchy. I think he hit a bad Roquefort day and he indicated in a radio interview that we had the worst food in the world.

The Secretary and I were uncomfortable with that statement and we called it intemperate and insulting. So we have a war of the words on food with our friends in France. So it would not be truffles, rock for the and fuqua on the menus in Dover, Newark and Wilmington starting next month. As the Governor said, sour grapes.

Here we are. We'd like to listen to you. You have some very major export industries in agriculture here. You have a very fine turnout and I'm looking forward to hearing from you today. It is being recorded. There's been a lot of attention to what you have said.

As the Governor and Jack have said, in the past, trade has been inside Washington. In fact, there's a newsletter, Governor, called "Inside Trade." And we stand to make this outside trade. We want to put it all on the record. We want to get your council to listen to you. We picked up a lot of very, very useful suggestions. For example, we one won, Jack, the hormone case. And I'm not an attorney, but, you know, in law, you know, if you win cases, sometimes you have to put up a bond. Sometimes you have to put up an escrow until you get appeals out. There's different ways of handling in domestic or English Saxon law, those issues.

In the WTO, if you lose a case, you appeal and you appeal and you do this and you do that. And it may be four or five months, 10-15 months or two years. One of the farmers suggested follow Anglo Saxon law and put up a bond. If they lose the hormone case, put up a couple hundred million dollars of European tax money, put it in escrow in an agreed bank and let the interest accumulate on that because we eventually won that and we could have used that on an annual. So you have a bond for every year you're not in compliance, you double the bond. And that, I think, is a pretty good idea. We may try and get that through the next round. Those are the kind of ideas we like to hear. We hadn't heard about that before.

I'm very honored you're here, Governor. I'm honored in order that Don and Jack and the team are here and counseled us on how we should start up the next round in Seattle in November of 1999. Thank you. I'll give it back to Don.