AUDIO: Agriculture Secretary Mike Johanns And US Trade Representative Rob Portman Hold Press Availability On Trade

AMBASSADOR PORTMAN: My voice is a little scratchy today but I don't think we need four bottles of water up here.

SEC. JOHANNS: Maybe they were anticipating really tough questions.

AMB. PORTMAN: Yes. So we may need all four by the end of this.

Thank you all very much for coming on a holiday Friday here locally, and I imagine I'll get to see some of you all over the next 10 days in Hong Kong.

Mike Johanns, Secretary of Agriculture, and I are leaving tomorrow morning along with the U.S. delegation made up of several agencies. We'll be flying directly from Washington to Hong Kong. We'll then be spending about 10 days in Hong Kong working through these WTO issues hoping that we can make progress toward a successful completion of the Doha Development Agenda by the end of 2006.

I am hopeful that in Hong Kong we can make incremental progress in a number of areas. One would certainly be a package for being sure that the least developed countries are assured that in this round they will receive very specific benefits to help them integrate fully into the global trading system and to be able to take advantage of the market opening opportunities that will arise from a successful Doha Round.

We've got a lot of work to do. Hong Kong will not be a time for us to make some major breakthroughs that the United States had hoped for, but we do hope that we can make incremental progress and establish building blocks that would go toward even more progress early in the new year.

In Hong Kong we will be stressing that improving market access is again the key to achieving the goals of the Doha round. We've said this many times, but it bears repeating-- the best way to promote development, expand economic opportunities and alleviate poverty in all countries is through expanded trade. And the only way to expand trade is for countries to open their markets in meaningful ways.

This is particularly true in agriculture, which from the start has been at the core of the Doha Round. It's a tough issue. It's always a tough political issue back home. It's one reason that agriculture has not been part of previous rounds with the exception of the Uruguay Round. The previous seven didn't include agriculture. But it's in agriculture where you find the highest tariffs and you find the highest trade-distorting subsidies.

It's also an area where many developing countries see that they have a comparative advantage. They have the ability to sell their products overseas and they're looking for a more level playing field.

That's why it I support Doha. The broad development goals of the Doha Round depend on progress in agriculture, and increasing market access in agriculture will benefit farmers everywhere. The World Bank has studied this and indicated that 93 percent of the gain in agriculture will come from gains in market access.

This is particularly true though among farmers in the developing world who confront an average world tariff of 62 percent in agriculture.

We must also reduce trade-distorting domestic supports. And the United States has taken the lead in putting a proposal on the table. It reduces trade-distorting supports here, in Europe, in Japan, and other countries that provide support -- and eventually under the U.S. proposal, eliminating trade-distorting support.

Progress in agriculture will then allow us to make parallel progress in other areas including reducing tariffs on manufactured products and opening up access to service providers. I say parallel because it's very important that we move together on all these fronts. Agriculture is at the core, and I don't think we can make progress on these other two central areas of the Doha Development Agenda without making progress on agriculture, but I understand that as the European Union has said repeatedly that we need to be sure that there is progress on all fronts. And therefore the progress needs to be parallel.

These other areas are extremely important in terms of market access. After all trade in manufactured products makes up two-thirds of global trade. And recall once again developing countries have the most to gain here because 70 percent of the tariffs that they pay are to other developing countries. So here reducing the barriers in south-to-south trade will be extremely important for development.

The United States has put forward bold proposals to open markets and end trade-distorting supports in agriculture, reduce industrial tariffs, and knock down barriers to services because we believe the Doha Round is a once-in-a-generation opportunity for us to enhance trade and therefore deliver the benefits of trade to people everywhere.

More and more I find the consensus among decision-makers including trade ministers, the consensus among economists, the consensus among people who may not be economists but who follow the trade area is that we must keep moving forward, as the WTO has done over the past five decades, in knocking down barriers to trade so that we can indeed achieve these benefits.

We've made some success along these lines just over the last week or so here in Washington. Our negotiators worked through the night and concluded a free trade agreement with Peru on Wednesday. This as you know is part of an overall effort to expand trade but specifically in the Andean countries, and we hope to have similar success with Columbia and Ecuador soon, and so further efforts to promote economic relations and political stability in our own region.

Also on Wednesday the House of Representatives approved a free trade agreement with Bahrain. The vote in the House of Representatives was the largest vote for a trade agreement since we passed trade promotion authority. This was a terrific step forward not only in advancing our deep commitment to the economic and political future of the Middle East by once again engaging with a country in the Middle East to expand trade as we have done with Jordan, Morocco and Israel, but it was also frankly very important in forging a stronger bipartisan pro-trade consensus in the U.S. Congress.

In addition, this week we reached an agreement in the WTO on drug patents, which will allow the export of lifesaving drugs to developing countries that face public health crises but cannot produce drugs for themselves. As many of you know, this was a landmark accomplishment, something that had been worked on for over two years. It ensures that drugs will get to areas ravaged by HIV-AIDS and other serious health problems and epidemics. And it shows that by working together we can reach common ground on tough issues involved with international trade.

Now finally I want to mention that today I received a very hopeful letter from the heads of 11 major environmental organizations strongly supporting the U.S. efforts to reform rules on fish subsidies in the WTO. Our efforts on this very important matter should help stem the over-fishing that has put at risk 75 percent of the world's fish stocks. This could be a very important accomplishment of a successful Doha Round.

So it's been a good week in advancing trade liberalization, and we continue to work hard with our trade partners, consulting closely with members of Congress to ensure that as we go into Hong Kong we can continue to make progress.

Over the past week I've had the opportunity to speak with the chairs and the ranking members of the Agriculture Committees, Ways and Means Committees, Finance Committees, and a number of other members of Congress interested in trade. I've been able to give them an update on where we are with regards to Hong Kong and our talks. Unfortunately many of them are not going to be able to come to Hong Kong since the House and Senate will both be in session next week. And I'm sorry about that because it would have been a good opportunity for them to come and see firsthand the challenges we face and the opportunities that we face in the Doha Development Agenda.

But we are consulting very closely with Congress and will continue to do so as we move forward so that at the end of the day when as all of us hope we can come together with an agreement it's one that the U.S. Congress can support.

The United States will continue to play a leading role in Hong Kong in promoting an ambitious and comprehensive agreement, one year from now so that the Doha Development Round can be worthy of its name. President Bush has shown great vision and political courage in pushing for broad reductions in tariffs, cuts in trade-distorting subsidies in agriculture, and assistance to countries to help them integrate into the global trading system.

We have a chance here to lift tens or even hundreds of millions of people out of poverty. We have a chance here to truly give the global economy a shot in the arm that it needs. So we have to push hard for success next week in Hong Kong leading up to what should be a successful completion of the Doha Round by the end of 2006.

Thank you. And now Secretary Johanns would like to say a few words.

SEC. JOHANNS: Well, thank you Mr. Ambassador, and let me also offer my words of welcome. If I might just start out on a personal comment and thank the ambassador for all of his good work on this Doha Round-- he's done an excellent job. And I've had the opportunity to sit with him through hours and hours of negotiations. He represents our country well. I'm pleased to be a part of this team.

The road to Hong Kong has had many, many months behind it. It's covered a lot of miles in terms of travel. And while we hope our European friends and colleagues join us in consolidating the progress that we have made thus far by taking advantage of an opportunity to narrow our remaining differences, we also know that Hong Kong is a stop on the journey, but that the journey will continue.

Just eight weeks ago the United States put forward a very bold and a very generous proposal that actually cut -- and I would remind everyone will eventually eliminate -- trade-distorting farm subsidies in exchange for reciprocal cuts in protection by other nations.

It was met with universal approval around the world, and it brought this Doha Round back to life. And I would also add that the approval continues.

Doha's unique potential to generate economic growth and significantly help the poorest countries is a very real goal of what we are doing. And 70 percent of duties paid by developing countries are paid to other developing countries, largely a function of very high tariff rates. Reform will lead to more trade between developed and between developing countries.

The EU provides more than double the trade-distorting domestic support to its farmers than does the United States and has the ability to even go beyond that. We have asked for the support of our nation's ag industry and of Congress to help move the international trade agenda forward. And so far their support has been good.

And you can understand why if you think about it; 27 percent of U.S. farm receipts are from trade and agricultural exports, and we're expected to reach a record in 2006 yet again. We need to level the global playing field for American agricultural products by opening up the markets.

But we want to be clear, our proposals of course are part of an overall package. We do not cut our support 60 percent as proposed unless there are cuts that match our ambition, our bold ambition.

Now some might ask, why should the EU accept our proposal? It's not complicated. It's not a complicated proposal at all. Market access really does equal development. Many countries share our view that the EU falls short in offering greater access to protected farm markets. EU tariffs are very high, and tariff preferences favor our competitors. The EU still maintains it needs to designate, in addition to all of that, 8 percent of total tariff lines as sensitive products. So many countries that have analyzed the proposal as we have after the analysis look at it and say, well where is the market access?

The EU is the world's largest agricultural importer and exporter with imports increasing 43 percent from 2000 to 2004 while U.S. exports to the EU are basically stagnant.

I believe very strongly that most of the 148 WTO member-countries view Hong Kong as we do, as an opportunity to make tough decisions on the framework and for discussion to go forward. The U.S. is very, very committed to this Round and pushing very hard for a successful meeting. We're going to do everything we can to build consensus at the ministerial and move the negotiations forward.

Hong Kong, I would emphasize again as I have done in the past weeks, is part of a work in progress; it was never intended to be the end of the process. To achieve the tariff and subsidy free world envisioned by our President, we propose a practical two-stage reform initially by making deep cuts and then over time eliminating all trade-distorting subsidies.

It is our hope that we will have a successful meeting in Hong Kong, and we intend to do everything we can to accomplish just that. And then it is our hope that we can use that momentum to reach successful agreement in 2006.

Thank you very much.

AMB. PORTMAN: Questions? Start in the front here.

QUESTION: Jim Berger, Washington Trade Daily. Do you expect (off-mike) cotton initiative (unclear)?

AMB. PORTMAN: A cotton initiative package? First of all, we've had a great dialog with the C-4 cotton countries. In fact Karan Bhatia, my deputy, who's supposed to be with us right now is speaking with one of the trade ministers, Mr. Mi, I think from Mali, as we talk. So he couldn't be here. But we're in very close touch with them. As you know Secretary Johanns and I each went together to Burkina Faso to meet with the C-4 countries a month or so ago, and we think we have a good package that we've put together really over the last year or so since July 2004 when the framework was put together. And we continue to talk about that package. I think in Hong Kong we'll make some further progress in that regard.

With regard to cotton, just to put it in some perspective here for those of you who don't follow it as closely-- in July 2004 when the framework agreement was put together, we agreed to address cotton as part of the overall agriculture negotiations, not to separate it out but to deal with cotton expeditiously, ambitiously and specifically. And there's perhaps some deliberate ambiguity there with some of that WTO language, but the reality is the United States takes that very seriously. And we are addressing cotton very seriously and very specifically.

We also realize that it has to go along with the rest of the agriculture negotiation in order for it to be successful both in terms of marrying with the subsidy cuts that we hope will come out of the Doha process and the tariff reductions, but also frankly within our political system. It needs to be part of the overall package.

So that's what we're working toward. We're very proud of what we've done since July 2004. When you think about it there's been a lot of progress. I will start if I could just with the Step 2 Program, which is the major cotton export subsidy program, which Secretary Johanns sent to the Hill at the behest of the President with a recommendation for repeal. The House and Senate have now each passed repeal of the Step 2 program, and we hope that within the next couple weeks in Congress that the Step 2 program will be repealed altogether.

This is a major step forward since July 2004. Administratively the Secretary can speak to this, but he has also done all he can with regard to export credits in cotton. So this is something the Secretary has been very bold with.

In terms of the overall picture on trade-distorting support, our proposal is the most aggressive proposal on the table. It deals directly with the Marketing Loan Program, the countercyclical program, the very programs that our cotton farmers use here and that would cause trade distortion in global markets.

I will also say that the total amount of cotton produced by the C-4 countries is relatively small now compared to the overall trade in cotton. Percentage is what, about two percent of overall trade. We think this is a problem that we can focus on in a very specific way.

We also think the amount of distortion caused by our trade-distorting support is relatively small compared to the price of cotton. The IMF said it's, I think, 2.8 percent. The highest figure I've seen is about 10 percent. Some of the NGOs might say 10 or 12 percent, but let's say that the studies are between that range. We think this is an issue that can be dealt with very specifically; therefore, since 2004 we've stepped up our aid to these countries directly to affect the production and the marketing of cotton.

And when we were in Africa as you know we announced some additional funds for the Cotton Improvement Program. That's why I asked if you were talking about the Cotton Improvement Program, Jim, or the broader one. Another $5 million to add $7 million. This is directly to affect the efficiency of the production and marketing of cotton.

Why is that important? U.S. cotton farmers, as an example, are twice as productive as African cotton farmers. The per-acre yield is twice what it is in Africa. Again, if the distortion is between 2.8 and 12 percent, if it's 2 percent of the world's cotton, think what you could do by just increasing the efficiency. That's why we've directed a lot of funding, not just to Cotton Improvement Initiative but several other programs, that we can detail for you that Secretary Johanns, USAID, US Ag have done.

So we've really focused on this issue.

Then finally I just want to mention that the Millennium Challenge Corporation is directly focused on cotton. This is where we funnel most of our foreign aid now, as you know, through the Millennium Challenge account. And four of the five countries that are involved directly in this issue being Mali, Burkina Faso, Benin, Senegal -- not Chad. Just those four are eligible for MCC funding now. And in the next couple of years should the compacts move ahead as expected -- and as you know a number of these compacts have already moved almost to the closure stage -- there would be roughly $1 billion of U.S. taxpayer commitments to these countries, perhaps more, based on the compact numbers that we've seen.

About 74 percent of our compact has gone toward trade capacity-building, specifically in Benin it's for ports to be able to more efficiently export cotton. Burkina Faso has now put together the first part of its application. We're told that it focuses on cotton.

So when you look at the budgets of these countries for agriculture budget and so on, the hundreds of millions of dollars per country and the $1 billion dollars or more overall is a significant and very targeted and very specific way to address this problem.

So I just want to put that in some perspective for those of you who follow this issue. I know it's become kind of a cause celeb, in Hong Kong among some quarters. Don't think the United States isn't focused on it; we are. We think it's a problem. We want to address it, and we're doing so very aggressively.

Yes?

QUESTION: (off-mike)

AMB. PORTMAN: Too specific for you probably. I'm sorry. Russia probably doesn't care about that cotton program.

QUESTION: On, no, we do.

AMB. PORTMAN: Can I mention one more thing on cotton, since you want to get more specific? Market access. One thing the C-4 countries have been focused on is not just reducing the supports so that the price of cotton is higher, but also they want to be sure there's more market access for their cotton. And here the United States will be making some additional initiatives in terms of market access.

We believe there ought to be more market access, as our proposal on the table indicates, but specifically on cotton we are willing to do what we can to ensure that there is access in the key cotton markets around the world. And this is something I think you'll see more of next week in Hong Kong. So market access is also part of it.

Back to Russia. Sorry.

QUESTION: You mentioned (unclear) breakthrough. What about bilateral (unclear) with Russia? What would it take, what are the chances for it? And while we are at it, (unclear) Ukraine?

AMB. PORTMAN: The question is about Russia and the succession agreement to the WTO and specifically on our bilateral agreement with Russia. Recall you've got to go through the bilateral agreements with WTO members and then the multilateral agreement. We're still working with Russia on both of those agreements. We're hopeful that by the end of the year we can make substantial enough progress to be able to move ahead on the bilateral front, but we're not there yet. We still have four or five outstanding issues.

You don't want specifics necessarily, or do you?

QUESTION: I do.

AMB. PORTMAN: I'm not sure anybody else does.

QUESTION: Do you expect them (unclear) in your meeting with them?

AMB. PORTMAN: I don't know. Honestly we still have a number of outstanding issues, and some of them are fairly serious issues in the sense that they require the Russian government to take additional steps. One I will just mention which is something of great interest in the United States and particularly on Capitol Hill, and that's intellectual property protection. Intellectual property rights in Russia has become an increasing problem. My former colleagues on Capitol Hill are very well aware of this. The Russian Multilateral Agreement and its subsection to the WTO has to go through our Congress much like China's did because of Jackson-Vannick, and they need to be rewarded by our Congress with a PNTR, Permanent Normal Trade Relation status, they don't have now.

So we need to be very sensitive to the kind of bilateral and multilateral agreements Russia is willing to make in order to be sure that it can go through our political system. And we are not there yet, but we're hopeful that a lot of movement can be made even in the next several weeks.

QUESTION: If you have to bet, Russia or Ukraine?

AMB. PORTMAN: I'm not a betting man. I learned long ago I always lose those. They're both moving well in the sense of we hope that by the changes we've seen in the Ukraine -- legislators. You know they have made some changes in their intellectual property and other areas like agriculture that Ukraine can also come along. I would hope this would be done roughly in the same timeframe.

Yes?

QUESTION: (off-mike)

SEC. JOHANNS: Let me if I might address the question of subsidies in cotton. Your question is an excellent one and it could be posed to any wealthy country in today's world in agricultural trade. When it comes to subsidies, actually we don't set the standard. The high subsidies are paid by the European Union, Japan is next, and United States is actually third.

You could identify a number of products not just cotton where very easily the claim could be made that the trade distortion caused by very high tariffs keeping people out and very high subsidies rich countries subsidizing agriculture is leading to terrific distortion.

And that is the claim that is made over and over again.

We look at this WTO issue from a world standpoint. We want to do everything we can to help these five countries, and we have an excellent working relationship. We think for example through the Millennium Challenge that these countries will qualify; four out of the five at least are well on the way to qualifying. And that will be $1 billion dollars worth of real assistance to help them.

But if you're really going to make a difference in terms of least developed countries, which as we all acknowledge is really the poorest of the poor, it is the U.S. proposal that will do that. It's the proposal that basically says, let's make dramatic cuts in subsidies now. Let's make our markets open. Let's cut tariffs. And let's work toward a day where we will eliminate trade-distorting subsidies in their entirety.

And believe me, when you do that every developing country, every least-developing country in the world will see the immediate benefits.

Just in summary, that's why all of the studies that have looked at the Doha Round say that 90-some percent of the benefit is going to come from market access, opening up markets.

That's why it is so important that the EU match our proposal. We can work on these individual issues and we will. We want to.

In terms of beef, the answer to your question on Kobe beef is that we are ready. We have been through our rulemaking process, so we are ready to flip the switch and bring Kobe beef into our marketplace. And that can happen really any day. We are that far along in the process.

So I can tell you that it's not like we're out there trying to figure out how this happened simultaneously, but I can assure those in Japan that we anticipated that that issue would arise. We've gone through our rulemaking, our risk analysis, our scientific approach, and we're ready to bring Kobe beef in.

We are very, very encouraged by what's happening in Japan. I've said for some time now that we really are at the end stage of the process. But what's encouraging to me is that at every step in the process a step in the right direction toward allowing exports of U.S. beef into the Japanese market, the decision was made to allow that to occur at every single step in the process.

So we're now really down to a yes or no decision. We're hoping that that will happen within days, not weeks. I said that yesterday. We are very, very encouraged. And we will be ready to comply with regulations and rules that we have worked through with Japan on this issue.

And we have many in the United States that will be ready to do that. So I have a smile on my face, and it relates to Japan and the good work that's happened over there.

QUESTION: (off-mike)

AMB. PORTMAN: I'll have a good week, but I forgot to mention we'll see you Monday. Yes?

QUESTION: I'm curious about the flexibility you do have on this proposal to (unclear) countries as (unclear) initiative that being discussed. Also, (unclear) WTO ministerial staff. I know you're leaving tomorrow. (unclear).

AMB. PORTMAN: I'll probably end up meeting with most of our friends. We do get there on Sunday evening, and we have meetings all day Monday and Tuesday up until the plenary session, which I believe begins on Tuesday afternoon. This will include meetings with the so-called G-4, which is India, Brazil, the EU, and the United States. But also meeting with the G20 countries, developing countries, G90 developing countries, and an opportunity to reach out and meet with our free trade partners around the world.

We have a very busy agenda, very busy schedule, and one of the great things about this meeting for Secretary Johanns and myself is that we'll have the opportunity to compare notes and build on our economic relations with 148 other countries and entities--the EU of course representing 25 of those. And that's going to be a very positive aspect of the meeting for us.

With regard to the Hill, as you have seen from the reaction from Capitol Hill there is a general support for the direction that we've taken, but contingent upon having the package come together. And specifically with regard to agriculture subsidies some of the agriculture community and some who are representatives in Congress or Senators who represent agriculture interests are on the committees have particularly expressed that concern that there is no way that we can see unilaterally disarming unless we see market openings, the elimination of export subsidies and the other elements of our package.

And this makes sense. As Secretary Johanns said, the European Union as an example has the ability under the WTO to use four and a half times more domestic support, trade-distorting domestic support than the United States. They do use about three times more for the same production. As a percentage of their production Japan uses about three times more than the United States. Other countries do as well like Switzerland, Norway or Iceland.

So the United States is not, as Secretary Johanns said, at the top of that list. And yet we are the ones who are being most aggressive in saying, it's time to begin in the United States to reduce these trade-distorting supports in exchange for getting rid of the export subsidies and getting real market access.

I think with that combination we have a good deal of support going into Hong Kong from our congressional leadership in the key committees and in both houses of Congress.

Yes, sir?

QUESTION: What about quota-free duty free?

AMB. PORTMAN: I'm sorry. Quota free duty free. Well, as you recall back in 2001 WTO members as part of Doha agreed to make progress toward duty free/quota free. I hope that in Hong Kong we'll be able to take the next step in that, and that is as part of the least-developed country package of development. And recall this is the 49 countries who are truly the poorest countries of the poor as defined by the IFI, by the World Bank and others, that they will be able to get additional access to not just developed country markets like the United States but also some of the emerging developing country markets.

And as you know, the United States already has a number of preference programs in place-- most prominent would be our GSP program, General Systems and Preferences, and the AGOA Program for Africa, but also our CBI program and others.

So we already are relatively open to least developed programs. The IMF and World Bank does a study every year called the Global Monitoring Report. They analyze all of us in terms of our openness to developing countries. A lower number is better. The United States is at sixth. Canada is at seven; the EU's at 15.

And this is an indication that the United States is today the most open market to developing countries in terms of products across the board. This relates to tariffs, also relates to rules of origin, also relates to SPS treatment, sanitary and phytosanitary treatment, and so on. So the United States has been a leader in this, and we intend to continue to be a leader.

As to specifically how duty free/quota free will be implemented, in the United States it will be implemented through our existing programs. In other words, we will be doing this autonomously, as will other countries I believe. That means doing it through AGOA, through our GSP program and through our other preference programs. And where programs are not part of a preference program now they will be brought into that.

But this is the way that we are going to implement it through our legislative process. It's how we would have to do it under our laws. And the question is, whether it will be with regard to every product or whether there will be some flexibility in terms of products and some flexibility over time. These are issues that still need to be worked out and will be addressed specifically in Hong Kong.

Yes?

QUESTION: (unclear, off-mike)

AMB. PORTMAN: I didn't know we had logic in school.

QUESTION: If agriculture is to be (unclear portion, off-mike).

AMB. PORTMAN: I want to hear the Secretary's answer. I think your logic is impeccable. I really do. I mean I think we're at the point where some have said the mandate that's existing from the member states of the commission has been reached. Others have said there's some room left. Others have said until recently it was exceeded. I understand today there was an announcement by the French government that in fact it has not been exceeded. So that has changed.

It's hard for me to speak to the mandate, but from the analysis that we've done it appears as though it's rather ambiguous. And so our response is, you know we'd hope that the EU would meet its responsibilities. And if that requires stretching the existing mandate, that's fine. If it requires a new mandate, that's fine. But the point is, they need to step up, and they need to do what's required in order for the Doha Round to be successful.

And I think your logic is inescapable, which is that agriculture is the key to unlock progress in other parts of the round and to bring the round together. And agriculture, of the three pillars, export competition, domestic support and market access, two are fairly well fleshed out and ready for negotiation. The third is not.

And whether it's a new proposal, frankly I don't think a new offer is what's necessary -- or whether it's simply working with other countries to reach a consensus on the appropriate proposal, we need to move forward. And this has been the consistent U.S. position ever since October 10 when we put our proposal on the table. We did so because we were told by others that in order to move forward on market access they needed to see more movement by the United States on domestic support given our 2002 Farm Bill, given the situation we were in. We did our part. And now we continue to urge others to do theirs.

I will say that I think the European Union has a good point in terms of their commercial interests and in terms of the political realities that I also face here, which is that the largest part of trade is not in agriculture. I think agriculture is 6.2 percent of our exports now. It's in manufactured products, it's in services. And here there is also a commitment under Doha to provide substantial new market access. And that's why I said earlier, in parallel we need to see movement in those areas as well by all of us including the advanced, developing countries.

And I think that is ultimately where the agreement is to be found is to have all of us come to the table and be willing in parallel to put forward our own offers and proposals on the broad range from services and manufactured products to agriculture, across the broad range to provide real market access.

That will do more for development than all of the checks that our governments can write, for trade capacity-building or for the enhanced integrated free market, or even for aid through an entity like the FCC. If we can come up with a way to truly expand trade, to enhance trade between these countries, the United States, least developed countries, between developing countries, that will make the most difference in terms of global economic growth and development.

So that's the U.S. position. I don't think it's particularly complicated. Not everybody agrees with us; I understand that. But I think that's the way to go beyond Hong Kong toward a successful conclusion of the Round.

In Hong Kong though I think we need to make progress to get there in two fronts. One is, again to give the least developed countries more assurance as to what they will get from the round, and that is basically the trade capacity help to be able to take advantage of the trade openings.

And second, we need to make incremental progress in all three of these areas: agriculture, manufacturing and services.

QUESTION: (unclear)

SEC. JOHANNS: U.S. inspection programs are really beyond a doubt safe. And I'll offer a couple thoughts on that. The analysis or report you referenced there, if you'd asked me a question where you said, Mike, your inspectors found zero problems, I'd say, wait a minute, that sounds rather remarkable; I wonder what's going on out there.

But the report actually indicates they're doing their job. They're identifying the issues that we need to deal with and then demanding that those issues be fixed.

The other thing I would tell you about Japan, and this is really unique to Japan -- as you know we've agreed in this first phase with Japan to start at meat from animals 20 months and under. And you're just not going to find BSE there. It's just not there. So from a number of standpoints, I can safely assure the Japanese consumer that beef is safe.

But probably the best assurance I can give them is as you know the Japanese process over the last two years has been enormously meticulously carried out, painstakingly so. At times we couldn't even detect progress. I mean that's how thorough and comprehensive this process was. And at every stage of the process the conclusion was reached that U.S. beef is safe as Japanese beef.

Then you do a comparison of the countries. We have a herd size of about 90 million. We process about 30 million animals a year, thereabouts, probably a little bit more than that. We've been able to identify since the enhanced surveillance started one case that was actually so difficult to find we had to test and test and test to find it even.

Japan is familiar with BSE. They've now identified their 20th case of BSE. So in working with the Japanese government and with food safety people it was not like we were working with people who had never had any exposure to BSE issues. So when you factor it all in, all the things we've done, I can assure the Japanese consumer beyond a shadow of a doubt that beef is safe. And we're very anxious to return it to their marketplace.

And we'll work with the consumers. We know that it's been a very long process and we have work to do with the consumers. We're going to do everything we can to accomplish confidence in U.S. beef. And I'm very, very confident that we will achieve that.

AMB. PORTMAN: All the way in the back corner?

QUESTION: (off-mike)

AMB. PORTMAN: You're trying to make news here, aren't you? The GSP program as you know has to be reauthorized soon. I think our idea was to reauthorize it next year and we'll be looking at all these issues, countries, when they'd graduate from GSP, and products.

We do not intend to do that this weekend in Hong Kong or necessarily even in the WTO process because our GSP program is something which we take on on a unilateral basis to provide a preference program, and we can certainly exceed the duty free/quota free WTO program, which would be just for least-developed countries and would not include, you're right, countries like Brazil.

So I don't expect changes this weekend; nor do I necessarily expect changes in our GSP program to come out of the WTO process.

But we are looking at it. We're looking at the whole broad range.

In terms of textiles, we have not made a decision at this point. I indicated earlier that I believe there will need to be some flexibility with regard to all the commitments on duty free/quota free, not just from the United States but also from the European Union, Japan and others. But I do believe that we can expand our existing access.

And as I said earlier, based on the analysis, the U.S. provides the most access at this point. The fact that the United States has relatively low tariffs, 12 percent on agricultural products versus 62 percent world average, 30 percent in the EU; industrial tariffs we're at 3 percent versus the 30 percent international global average. We're relatively open.

And with regard to least developed countries, we're relatively open, the most open of the developed countries.

So we have a lot to be proud of. We also have a trade deficit as you know, which is historic. And one reason we have such a large trade deficit is we are relatively open. You look at our trade deficit, and you determine which of our imports are from developed and developing countries, more than half of our trade deficit this year will probably be as a result of products from developing countries. That trade deficit, as you know, is likely to be significantly more than the $670 billion trade deficit last year.

So the United States is relatively open already. We are willing to do more. And we are willing to do so in the context of the Doha Development Agenda.

I'll take a couple more. One more in the back and then we'll go up here to this gentleman.

QUESTION: (off-mike)

AMB. PORTMAN: Well, I spoke to Senator Grassley recently. First of all, I really appreciate his support. He's been a terrific ally of our bold agricultural proposal despite the fact that he's someone who is a leader on the Ag Committee and the Finance Committee, and has probably heard from some members of the ag community who are skeptical and concerned. He has stuck with it because he truly believes in the promise of market access for agriculture and for development and for economic growth. So I appreciate his support.

He did not tell me what apparently he told you about the breakthrough. I agree with him, it gets more difficult to conclude at the end of 2006 without a breakthrough. But my sense is, that if the Hong Kong meeting can educate those countries that have not been as engaged in this process to date, and if we can make as I said progress on the least developed country assurance, the Round will help them to be able to engage in trade, and if we can make some of that incremental progress then I think over the next few months it will become fairly obvious what we have to do. I think the pressure will mount. And I think with more information and more education it's more likely we can see that breakthrough coming after the first of the year.

If that happens, then I think we still have time. It won't be easy, but if you look at the history of the Uruguay Round a year or let's say nine months assuming it takes us awhile for that breakthrough would be adequate time for us to put together the tariff schedules and make the progress we need to make to have something finished by the end of 2006.

That's important as you know because in Congress Trade Promotion Authority may expire in 2007. The administration would hope for renewal, but last time it took nine years to renew TPA. So I think it's a risk for us not to complete in 2006 to be able to send something to the Congress in 2007.

Do you want to add to that?

SEC. JOHANNS: You know what I'd relate back to is that some weeks ago stories were written that the ag talks were absolutely stalled, there was a standoff. And then we put our proposal forward, and all of a sudden it was seen as a breakthrough really around the world. And we covered a lot of ground in that short period of time.

My belief is that when the EU steps up, there isn't any doubt it about that we can get an agreement done in 2006. A lot of work to be done even after the general framework is put together, but it is still very doable.

QUESTION: (off-mike)

AMB. PORTMAN: It's a good question. I don't necessarily share your pessimism about 2006 because as I said earlier I do believe that the building blocks are there to have an agreement come together early in 2006 and to be able to avoid the breakdown that you suggest.

I also don't agree with you on Cancun. I think the dynamics are very different. Were you at Cancun?

QUESTION: Yes.

AMB. PORTMAN: Well, you recall there you had the split between the developed countries and the developing countries. Here you have a very different sort of dynamic. And what we've talked about mostly today is how developed countries need to do more. Haven't we?

I'm not suggesting Hong Kong will be a successful meeting in terms of breaking the deadlock and coming up with the solution to be able to move Doha forward. I am suggesting it can be a constructive meeting where we make incremental progress on the building blocks including agriculture, and then progress on least developed countries and a package where they can feel more comfortable about their ability to integrate into the global trading system and take advantage of what the ultimate result in Doha should be.

But I think the dynamics are very different this time around.

QUESTION: Litigation?

AMB. PORTMAN: With regard to your litigation question, litigation has already commenced. We have already faced a case with regard to cotton. We may find ourselves facing other cases. The better solution is for us to deal with the subsidies head on.

As you know, WTO litigation, as important as it is, is far from perfect for both sides. The United States has won a number of WTO cases including as an example our beef hormone case with Europe. And yet we still have no access to the European market for our beef because you win a case and retaliation is set. And it's retaliation in terms of trade, which is an awfully inefficient way to retaliate because it ends up hurting both of you I think, and it doesn't necessarily result in progress.

I could name a number of other examples, some who perhaps might turn to us would talk about the Byrd amendment where we have retaliation currently in place, and yet we still have the Byrd amendment in place. So it's an imperfect system. A much better one would be for us to deal with the subsidies. And that's what we're advocating.

SEC. JOHANNS: Yes. What I would suggest here too is that there is a very fundamental difference. And here is the difference. The proposal that was put out by the United States about eight weeks ago has really caught the imagination of the world. It really has.

Now some, our friends from Brazil for example, when they talk about the proposal they say this is a really good proposal, we'd like to see if you could do more. But it really has caught the imagination of the world.

A minister from New Zealand described it as "very heady stuff." I really believe that the countries associated with the WTO look at that proposal which is on the table waiting for a response from the European Union to match its ambition, and those countries say, we can't afford to walk away from this, because if we do it's a once-in-a-generation opportunity that may be lost.

And the discussions we've had -- in fact in a recent meeting in Africa a minister said, "The U.S. proposal is the best proposal."

Now again, there is constant discussion about, what about this approach and that approach? And we've always said, Look, we're going to stay at the table and negotiate an agreement.

But I think the dynamic is so much different now because countries do not want to walk away from this very ambitious, bold proposal to open markets and bring down and eliminate trade-distorting subsidies. It really truly is a once-in-a-generation opportunity. Walk away and it's lost.

AMB. PORTMAN: That was so well-said I think we should end the press conference there. But I see one more question. He's very patient. And Doug. And then we'll break up.

QUESTION: (off-mike)

AMB. PORTMAN: I'll answer the second part of your question first. We saw some very hopeful signs last week, came out of the G7 Finance Ministers Meeting. Some of you followed that, where India and Brazil, China and others made statements that were consistent with progress in this notion of parallel progress on services and so-called NAVA (sp), which is the industrial tariff on the one hand and agriculture on the other hand.

So I am more hopefully frankly after the last week and after the G7 Finance Ministers Meeting. During that meeting, Secretary Johanns and I were in other meetings with trade ministers -- in Geneva, including Japan, the EU, Brazil, India, Australia. And there we also got some indications, more privately, that there is an understanding of the need for movement across the board.

So I am a little more hopeful actually in that regard. And I think going into Hong Kong we have some momentum there that I think people realize as I said earlier this is where the agreement is to be found.

What was the first part of your question? Aid for Trade? I haven't seen the report yet from Japan. I was assured by my colleagues from Japan that they would be coming out with a development package, which would include trade capacity building and other kinds of development aid. And I welcome that, I applaud them.

The United States, as you know, is leading the world with regard to trade capacity building, which is the kind of aid that we focus on in the WTO. Our number in 2005 is roughly $1.3 billion. That again puts the United States at the number one country in the world in terms of providing this kind of aid, even including all the EU countries. We're still number one. That's a 45 percent increase, you should know, from 2004-- which indicates, particularly in a tight budget year, the priority with which the United States attaches this Aid for Trade and trade capacity building.

In Hong Kong we plan to make additional comments regarding this matter because we think this is so important. We think the United States needs to continue to take a leadership role in helping countries be able to engage in the kinds of market openings we're advocating. So we'll continue to prioritize Aid for Trade, also called trade capacity building.

One thing I have found over the last week as I have worked with my own team and others in the administration on this development issue and funding, you can come up with all kinds of different pledges and different programs. I'd just encourage you to look below the surface at our proposal and others with regard to development funding.

What I'm talking about is funding that actually goes to capacity building to enable countries to engage in trade, not that anything's wrong with aid in general but I think you need to distinguish between the two. Frankly I haven't seen the Japanese package to know how they break that out. But I would say with regard to all these proposals they might want to look at that issue of aid in general versus aid that really affects a country's ability to engage in trade and therefore to take advantage of what the Doha Round has to offer.

Thank you all very much. Have a great holiday.