Statement of Sal Ferrara, President, Ferrara Pan Candy Company, Chicago, IL, on behalf of the National Confectioners Association
Testimony Before the Full Committee
of the House Committee on Ways and Means
April 21, 2005
Chairman Thomas, Ranking Member Rangel, Members of the Committee.
I am Salvatore Ferrara, President of Ferrara Pan Candy Company based in Chicago, Illinois. I am here to represent my own Company and the United States confectionery industry; and to stand with the many companies and associations from business and agriculture who are asking Congress to approve the free trade agreement with the Dominican Republic and the five Central American countries. This Agreement deserves Congress’s strong support because it will deliver solid economic benefits to the United States – almost $3 billion in increased export sales to the region are projected - and because it upholds the important principle that trade agreements negotiated by our country should be comprehensive. No product or sector should be excluded if we are to get the best deal for America.
My grandfather came from Italy to the United States in the late 1800’s and started the Ferrara Pan Candy Company in Chicago in 1908. It remains family owned today. We manufacture approximately 200 popular sugar and chocolate confectionery products. We employ 1,000 people total worldwide - 500 now in the U.S. - and generate employment for an estimated 1,500 additional people in the services and distribution sectors in the Chicago area.
Survival has not been easy. The greatest contemporary challenge has been the introduction of the U.S. sugar program in the 1980’s and consequent increase in the price of sugar - our principle raw material - to levels double and triple the world price. It is difficult to remain competitive either domestically or globally under this circumstance. It is estimated that as many as 26,500 jobs have been sacrificed in the food processing sector since 1997 owing to the high price of sugar imposed by the program. The New York Times reported that confectionery employment in Chicago alone declined from 13,600 in 1995 to 7,000 in 2004. My own company went from over a thousand U.S. employees to under 500 during that same time period. The loss of food processing and confectionery manufacturing does not happen in isolation. It has significant adverse consequences for U.S. farmers who supply key ingredients to the industry such as sugar, corn, dairy, peanuts, and almonds; and for the industrial and service sectors that support the industry.
I have been involved in business all my life and fully understand the challenge of staying competitive. In the long term it means better products, better service, and keen attention to delivering value to the consumer. However, Congress and the Administration also play an important role in keeping American business competitive. Trade agreements such as CAFTA-DR create millions of new customers. They remove tariff and non-tariff barriers to U.S. exports and in some cases create market access where none existed before. These agreements can also help make lower cost raw materials available to domestic manufacturers, including in the food industry, and this is vitally important in a price competitive global environment.
In this Agreement some 80% of the tariffs on U.S. exports of consumer and industrial goods, and 50% of the tariffs on agricultural exports to the region will go to zero immediately. The elimination of tariffs is important to business because high tariffs make products such as processed foods and confectionery unaffordable for consumers especially in developing countries. When the CAFTA-DR is fully implemented, U.S. processed food exports to the region could increase by as much as 84% with an estimated value of $662 million.
Furthermore, according to a study just released by the National Association of Manufacturers, the elimination of tariffs will not only increase overall exports to the region but will help U.S. exports remain competitive against China and other low cost Asian producers by eliminating tariffs on U.S. origin goods. As Congress is keenly aware, China is a major challenger in the global and regional trade arenas including the Americas.
The process of negotiating these agreements also provides a rare opportunity, and critical leverage, for eliminating non-tariff barriers in foreign markets. Non-tariff barriers are more subtle than tariffs but in some cases more damaging to U.S. exports. Trade agreements have shown themselves to be the most effective tools we have to dismantle long standing barriers.
Some would have you reject this agreement because a very small quantity of sugar is included equivalent to about 1% of the U.S. supply. They claim plunging prices and irrevocable damage. According to the International Trade Commission, the impact on the domestic sugar price would be less than one quarter of one cent. The facts are that U.S. sugar producers will not be harmed and U.S. agriculture and manufacturing will benefit substantially.
I respectfully encourage an offensive rather than defensive approach to all trade agreements. One that focuses on opening new markets, creating new customers, and helping make our domestic industries more competitive. Sacrificing the American confectionery and food manufacturing industry in order to exempt one commodity is not a sustainable strategy and will not result in increased manufacturing jobs in America.
There are more free trade agreements in the process of negotiation and each one is an opportunity. The ongoing World Trade Organization negotiations will be our principal opportunity to open markets globally and address foreign government subsidy practices which disadvantage U.S. farm exports. The CAFTA-DR is the first test of whether or not the United States is prepared to deal with everything on the table and in doing so get the best results for the overall U.S. economy. I urge you not to let us fail this test and to enact the CAFTA-DR Agreement without any changes to the sugar provision.
Thank you.