Good Afternoon. Thank you all for joining us to hear about our priorities for the next round of trade negotiations. My name is Manly Molpus and I am the President and CEO of the Grocery Manufacturers of America (or GMA). I am pleased to be here with my colleagues representing a broad cross-section of the food and agriculture industry.

With regard to the WTO Ministerial in Seattle, first let me say that I share many of the broad objectives for the agricultural negotiations of my farm, processing and distribution colleagues. Increased market access for the agricultural sector through tariff cuts and a reduction of internal and external support measures is a vital issue for GMA member companies and the economy as a whole.

I would like, however, to place particular emphasis on liberalization in the processed food sector during the next round of trade talks. It is interesting to note that consumer products now account for 39% of the U.S. exports in the agricultural sector. If you combine intermediate products, those that have undergone some processing, this figure jumps to 62% of the total agricultural exports. Globally, trade in processed food is growing at more than twice the rate of trade in primary agricultural products. By 2000, trade in processed or value-added products is predicted to account for 75% of global agrifood trade as compared with about 50% in 1985.

Yet, despite this impressive growth, barriers to processed foods and beverages remain significantly higher than those for many other products. The last negotiations delivered some benefits by lowering barriers and reducing subsidies to producers and exporters. However, the reductions in tariffs for processed foods and beverages were mostly at the lower end of the allowable range. Because the rules allowed countries to average their tariff cuts, countries naturally chose to make high percentage reductions on already low tariffs and lower percentage reductions on higher tariffs. Consequently, on tariffs on processed food products outside the US are as high as 50% whereas average industrial tariffs have declined to an estimated 4%.

This is why one of our core objectives is an approach to tariff reductions that will address the particular problems of the processed food sector and will place these products on par with their industrial counterparts. We support an approach that will eliminate tariff peaks — asymmetrically high tariffs and address the problem of tariff escalation —where tariffs increase with the level of processing. This approach should, in essence, reduce the higher tariffs faster than the lower ones to create a more level playing field for these products. We also recommend that governments worldwide work toward zero-for-zero tariff agreements on a number of products including, but not limited to pet foods, dry cereals, cocoa and cocoa containing products.

As you know, some of our member companies were the pioneering companies that first took their products abroad. In many markets around the world these products are as much household names in Asia and Latin America as at home in the US. Increasingly, more and more of the consumer food and beverage companies are becoming global players, as are their distributors and retailers. In some ways, barriers to the free movement of goods affect these companies more now that they are global entities. Global business transactions are hampered by tariff and non-tariff barriers to trade and inefficient customs procedures. Our ability to sell abroad is critical not only to GMA member companies but provides an auxiliary benefit to US farmers through increased processing of raw agricultural commodities processed here at home.

A complete list of our negotiating priorities for the processed food sector is available for your review, and time being short this afternoon, let me mention just a few more core negotiating objectives:

• We believe it is essential that all products remain on the table throughout the negotiations.
• We also believe that the massive export subsidies provided by many of our most important trading partners must be eliminated

Finally, I would like to discuss our perspective on one area that is outside the market access commitments: the Agreement on Sanitary and Phytosanitary Measures. We are pleased that the administration has decided that this agreement should not be opened or re-negotiated during the Seattle round. We believe that sound science must be the basis of any measures taken with respect to plant and animal health and safety. Any reopening of the Agreement at this time could lead to a weakening of its provisions.

We look forward to the Seattle Ministerial and the launching of a new round of trade negotiations. I am confident that successful negotiations in agriculture will reduce costs to food manufacturers and consumers, expand consumer choice and further open markets to US exports.