[Senate Hearing 107-1084]
[From the U.S. Government Publishing Office]
S. Hrg. 107-1084
CHEMICAL HARMONIZATION
=======================================================================
HEARING
before the
SUBCOMMITTEE ON CONSUMER AFFAIRS, FOREIGN COMMERCE AND TOURISM
OF THE
COMMITTEE ON COMMERCE,
SCIENCE, AND TRANSPORTATION
UNITED STATES SENATE
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
JULY 26, 2001
__________
Printed for the use of the Committee on Commerce, Science, and
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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
ERNEST F. HOLLINGS, South Carolina, Chairman
DANIEL K. INOUYE, Hawaii JOHN McCAIN, Arizona
JOHN D. ROCKEFELLER IV, West TED STEVENS, Alaska
Virginia CONRAD BURNS, Montana
JOHN F. KERRY, Massachusetts TRENT LOTT, Mississippi
JOHN B. BREAUX, Louisiana KAY BAILEY HUTCHISON, Texas
BYRON L. DORGAN, North Dakota OLYMPIA J. SNOWE, Maine
RON WYDEN, Oregon SAM BROWNBACK, Kansas
MAX CLELAND, Georgia GORDON SMITH, Oregon
BARBARA BOXER, California PETER G. FITZGERALD, Illinois
JOHN EDWARDS, North Carolina JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri GEORGE ALLEN, Virginia
BILL NELSON, Florida
Kevin D. Kayes, Democratic Staff Director
Moses Boyd, Democratic Chief Counsel
Mark Buse, Republican Staff Director
Jeanne Bumpus, Republican General Counsel
------
SUBCOMMITTEE ON CONSUMER AFFAIRS, FOREIGN COMMERCE
AND TOURISM
BYRON L. DORGAN, North Dakota, Chairman
JOHN D. ROCKEFELLER IV, West PETER G. FITZGERALD, Illinois
Virginia CONRAD BURNS, Montana
RON WYDEN, Oregon SAM BROWNBACK, Kansas
BARBARA BOXER, California GORDON SMITH, Oregon
JOHN EDWARDS, North Carolina JOHN ENSIGN, Nevada
JEAN CARNAHAN, Missouri GEORGE ALLEN, Virginia
BILL NELSON, Florida
C O N T E N T S
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Page
Hearing held on July 26, 2001.................................... 1
Statement of Senator Burns....................................... 18
Prepared statement........................................... 19
Statement of Senator Dorgan...................................... 1
Statement of Senator Fitzgerald.................................. 40
Witnesses
Fitchhorn, Ron, President, Illinois Corn Growers Association..... 32
Prepared statement........................................... 33
Hoeven, John, Governor of North Dakota, prepared statement....... 9
Johnson, Roger, Commissioner, North Dakota Department of
Agriculture.................................................... 4
Prepared statement........................................... 6
Timeline of NDDA Efforts on Pesticide Harmonization.......... 13
Johnson, Stephen L., Assistant Administrator, Office of
Pollution, Pesticides, and Toxic Substances, Environmental
Protection Agency.............................................. 20
Prepared statement........................................... 22
McClure, Dave, President of the Montana Farm Bureau, American
Farm Bureau Federation......................................... 41
Prepared statement........................................... 44
Joint Prepared Statement by Canada/U.S. Producer Consultative
Committee on Grain......................................... 42
Pomeroy, Hon. Earl, U.S. Representative from North Dakota........ 2
Vroom, Jay, President, American Crop Protection Association...... 34
Prepared statement........................................... 37
Zell, Hank, National Farmers Union............................... 46
Prepared statement........................................... 48
Appendix
Perdue, Art, General Manager, Farmers Union Oil Co., prepared
statement...................................................... 61
Stratton, Wendell, Chairman, Agriculture Retailers Association... 62
CHEMICAL HARMONIZATION
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Thursday, July 26, 2001
U.S. Senate,
Subcommittee on Consumer Affairs, Foreign Commerce
and Tourism,
Committee on Commerce, Science, and Transportation,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 9:08 a.m. in
room SR-253, Russell Senate Office Building, Hon. Byron L.
Dorgan, Chairman of the Subcommittee, presiding.
STATEMENT OF HON. BYRON L. DORGAN,
U.S. SENATOR FROM NORTH DAKOTA
Senator Dorgan. I call this hearing to order.
My name is Senator Dorgan. I chair this Subcommittee, and
Senator Burns is on his way. I believe he had a previous
engagement this morning and should be here shortly. I believe
Senator Ensign will also be with us this morning.
The point of this hearing is to examine S.532, introduced
by myself and Senator Burns, co-sponsored by Senators Baucus,
Cleland, Conrad, Daschle, Dayton, and Johnson. S.532 would
permit a State to register a Canadian pesticide for
distribution and use within that State if the pesticide is
substantially similar or identical to one already registered in
the United States.
The point is that there are significantly higher prices
being charged to U.S. farmers than Canadian counterparts for
exactly the same pesticides. We will be taking testimony today
from a number of witnesses on this subject. I look forward to
hearing their comments.
Let me describe just for a moment why I introduced the
legislation and describe the pricing differential with just a
couple of visuals. Pesticides that are identical or
substantially similar that are being sold in both the United
States and in Canada can cost U.S. farmers considerably more
money than their counterparts in Canada. Let me hold up a box
of Folicur. This box contains chemicals. This is a unique box
because it was originally marketed in the United States, but
because this company was short of this chemical in Canada this
box went to Canada and a Canadian label was slapped on it. So
you have a box with both a U.S. and a Canadian label.
The difference? It is the same chemical sold to farmers in
the United States and in Canada. Only one difference: $500
cheaper for this box in Canada. The only difference in the
marketing of this chemical to a Canadian farmer and a U.S.
farmer is the U.S. farmer is charged $500 more for this box and
the chemicals that are in this box.
Now, is there justification for that? In my judgment the
answer is no.
Let me give you another example. I will use a chart. This
chart is a chart that describes the chemical Puma Super, and in
this circumstance you have exactly the same quantity, the same
chemical, with a difference in cost. The U.S. farmer pays $9.61
an acre to apply this chemical--excuse me. The U.S. farmer pays
$15 an acre, the Canadian pays $9.61 an acre. So that is the
difference in price. The U.S. farmer is charged substantially
more for the identical chemical.
We have a box of Achieve. This is a chemical that is sold
in both the U.S. and in Canada. The difference with respect to
Achieve is only in price. For example, the price differential
is $6.34 an acre more for a U.S. farmer to apply this chemical
than for a Canadian farmer.
These are just three examples of chemicals that are either
identical or substantially the same that are priced
dramatically different for a U.S.farmer versus a Canadian
farmer. The question, is there justification for that,
especially inasmuch as the U.S.-Canada Free Trade Agreement and
NAFTA promise harmonization of chemical prices? My response is
there is no justification for it. My response is that this
represents overcharging of U.S. farmers and U.S. consumers for
essentially the same chemical.
How does it happen? Because it can happen, and we want to
change that with legislation. I know there are differences of
opinion with respect to this subject, but, as you might know
from my opening statement, I already have an opinion. I would
like us to see passage of the legislation that I have
introduced with Senator Burns. We will have both pros and cons
examined today on that subject.
Let me welcome my chemical Congressman Pomeroy and let me
also ask Commissioner Johnson to join him, and we will hear
from the first two witnesses. First, my colleague from the U.S.
House, Congressman Pomeroy, who has been very active on this
issue and has introduced legislation and been very involved in
writing legislation on this subject over the last couple of
years. Congressman Pomeroy, welcome.
STATEMENT OF HON. EARL POMEROY,
U.S. REPRESENTATIVE FROM NORTH DAKOTA
Mr. Pomeroy. Mr. Chairman, thank you very much. It is with
great pleasure that I say, ``Mr. Chairman.'' Farmers are hit
with low prices and farmers are hit with high prices: low
prices for the commodities they grow, high prices for the
inputs it takes to grow them. Hopefully, today it will be a
banner day to address those problems on both fronts.
As we meet here in the Senate, the House Agriculture
Committee begins its markup of the new farm program, adding
income support when prices collapse, something that should
never have been removed from the farm program in the first
place. On this side, this hearing, Mr. Chairman, advances the
Pesticide Harmonization Act, to allow our farmers to access
chemicals at the best available price irrespective of which
side of the border they are marketed on when there is no issue
of public health or safety presented.
The heart of the matter is whether chemical companies
should be allowed to hide behind EPA red tape and prevent
farmers from buying chemicals and pesticides at lower prices
than those available to Canadian farmers when there is no issue
of public health or safety presented. The current disparate
pricing system is based on the ability of chemical companies to
tightly control the distribution of their products and segment
the U.S.-Canadian market under the Federal Insecticide,
Fungicide, and Rodenticide Act (FIFRA).
The proposed legislation that would amend FIFRA would
guarantee, that the government retain control of the production
and distribution of potentially harmful chemicals and allows, I
believe, us to move in a very measured and prudent way to
address this problem. It is unfortunately at present being used
as a barrier to cross-border trading in chemicals, which allows
the discriminatory pricing strategies of the chemical
companies, inuring almost inevitably to the disadvantage of the
United States farmer.
In 1998, a survey conducted by the North Dakota
Agricultural Statistics Service showed that farmers in North
Dakota were paying between 117 percent and 193 percent higher
prices for pesticides than Canadian farmers. A more recent
study conducted this year by researchers at North Dakota State
University showed a 3 to 5 percent average increase in net farm
income if Canadian priced chemicals could be used in the United
States.
Through these studies, we are beginning to understand the
harsh impact the two-tiered pesticide pricing structure has on
our farmers.
Now, the Pesticide Harmonization Act, if enacted, would
eliminate the current barriers that prevent U.S. farmers,
dealers, and distributors from accessing pesticides from
Canadian sources. The bill would amend FIFRA to grant States
the authority to issue State registrations to parties who wish
to import Canadian pesticides that are identical or
substantially similar to products registered with EPA for use
in the United States.
By eliminating access barriers, this act would essentially
create a free market for pesticides and allow U.S. and Canadian
farmers to compete on a much more level playing field. The
legislation is reasonable and holds the potential to make a
substantial impact on the ongoing harmonization issues between
the United States and Canada.
As important as what the bill would do, it is also
important to know what it would not do. It would not endanger
human or environmental health. It will not allow dangerous
unapproved chemicals to enter U.S. borders and be applied on
U.S. cropland. In order to register a Canadian pesticide in the
United States, the State would have to certify that the
pesticide is substantially identical to the domestic pesticide
already registered for use in the United States, and that the
pesticide meets the strict standards of the EPA under FIFRA.
Given our proximity to the Canadian border, Mr. Chairman,
you know and I know that the disparate pricing is a very
substantial problem for farmers and a considerable aggravation
to the whole free trade environment. We have got to compete
with Canadian farmers post-harvest as their product comes
flooding into our market, diminishing the price our farmers can
get for their products. But pre-harvest the industry continues
to segment and price discriminate.
It is interesting to note the record of the industry, the
chemical and pesticide producers, on the NAFTA legislation.
They were all for it. They wanted a blended post-harvest
marketplace. Well, if they are going to have the post-harvest
market blended, they are going to have to be subject to more of
a blending pre-harvest as well. Their price discriminating
strategies simply cannot stand.
This legislation, Mr. Chairman, introduced in the Senate,
identical to what I have introduced in the House, was developed
over considerable negotiations between the North Dakota
Agriculture Department and the Environmental Protection Agency
under the prior administration. It is not entirely clear what
the position of the new administration is on this bill, but the
record of our President I think is very clear in terms of not
having a whole lot of patience for bureaucratic red tape not
related to health or safety disrupting normal market activity,
especially in a free trade environment. I do not think that the
President would want to assert EPA requirements not related to
health or safety that stop our farmers from getting the best
price.
In conclusion, I would just say that registrants simply are
able to sell pesticides at higher prices in the United States
than Canada because of differing regulatory schemes. This runs
contrary to the intentions of free trade between the two
nations and results in a situation where our producers compete
with Canadian producers on the output side, but not on the
input side.
Your bill, Mr. Chairman, addresses that very directly. I
congratulate you for introducing this legislation, for having
this hearing, and I look forward to working with you and the
administration to have this matter enacted.
Senator Dorgan. Mr. Pomeroy, thank you. Are you able to
stay for a few moments?
Mr. Pomeroy. Yes, I am.
Senator Dorgan. Why do we not hear from Commissioner
Johnson? Let me say, Commissioner Johnson, I think you have
done more work than anyone in State government in America on
this issue. The Committee thanks you very much for your
efforts. It would be very happy to hear your testimony.
STATEMENT OF ROGER JOHNSON, COMMISSIONER, NORTH DAKOTA
DEPARTMENT OF AGRICULTURE
Mr. Roger Johnson. Thank you, Mr. Chairman, and thank you
for all the work that you do on behalf of farmers across this
country, and in particular thank you for your efforts in
supporting this bill and in holding this hearing.
I am going to summarize my testimony. You have a written
copy and there are copies provided for others as well, I
believe. I am going to glance quickly through it and just hit
the highlights if I can.
Every day--and I think Congressman Pomeroy made this
point--every day Canadian grain moves freely across our border,
and it directly competes with wheat that we produce, grain that
we produce in North Dakota, in our domestic market as well as
in the international market. We have to face the same market
prices the Canadian grain faces with the products that we
produce in agriculture.
The difference, however, is that the costs of production in
our country are substantially higher, particularly as they
relate to pesticide prices. That is the central issue that we
are attempting to get at in this bill. The reason that prices
are higher here is because even though grain can move freely
south across the border and compete into our markets,
pesticides cannot. The border serves as an imaginary, and in
fact a substantial, barrier so that companies can in fact
segregate the market that would otherwise be one market into
two separate markets and charge different prices in the
respective markets.
Let there be no mistake about the central issue. The
central issue is that U.S. farmers pay substantially more for
farm chemicals than do our Canadian counterparts. Pricing
studies have repeatedly shown this to be the case.
Attached to my testimony in attachment 1, * I give you
detailed numbers that were generated about a year ago by the
Minnesota Association of Wheat Growers. They show that, for
example, in cereal grain production our producers pay as much
as 40 percent more than their Canadian counterparts.
I have also included as attachment 2 * in my testimony the
complete study done by Richard Taylor and Won Koo, researchers
for the Northern Plains Trade Research Center located at NDSU
that Congressman Pomeroy earlier cited. That study demonstrates
that there is about a $24 million disadvantage to the American
producers.
If you look at page 2 of my testimony, * I included a
chart. We just pulled out a handful of products in North
Dakota. We serve as sort of the clearinghouse through which
pesticides must go before they are allowed to be used in North
Dakota, and we listed there about 10 or 12 different products,
the approximate acreage that these products are used on, and
the price differences that apply.
The results show something more than a $32 million
disadvantage to our producers. Let there be no question about
the direct link between pesticide prices and net farm income,
either. The study I cited earlier, done by Koo and Taylor,
demonstrates clearly that there is a direct link, that in fact
just North Dakota hard red spring wheat producers alone face an
$11.6 million annual disadvantage.
This has been a large concern in the public in North
Dakota. I have included as attachments, in attachment 3, * a
copy of a resolution that was passed by the North Dakota
legislature. In the description of the resolution, it describes
it as being a resolution urging Congress to ensure the economic
viability and competitiveness of American farmers by adopting
legislation that would grant States the authority to issue
State registration to parties who wish to import Canadian crop
protection products that are identical or substantially similar
to products registered with EPA for use in the United States.
That language sounds an awful lot like the language that is
included in your bill, Mr. Chairman. In fact, this resolution
was specifically written and passed to express the support of
the North Dakota legislative assembly for this piece of
legislation.
But this is not just a North Dakota problem. It is a
national problem. I have included for you as attachments 4, 5,
and 6 * different pieces of evidence suggesting that the
problem goes much beyond North Dakota. First, about a year ago
we had a little issue--you talked about it in your opening
remarks--with a product called Achieve. I am not here to talk
about any one particular product because it is an issue that is
systemic, I think, through all the products.
But we had an issue with this product and on raising the
issue I wanted to send a letter to EPA saying: EPA, please help
us address this pricing problem that we have with pesticides in
North Dakota. What I did was I contacted a dozen of my
colleagues all along the border States with Canada. Within 5
days, 11 of the 12 signed onto a letter that went to EPA. That
is included as an attachment to you. *
Furthermore, a resolution expressing support for this bill
was presented by the National Association of State Departments
of Agriculture. All the 50 States are well on board with this
proposal. In attachment 6, * I give you language that was
adopted at the Agricultural Accord, a meeting of NAFTA
partners, both the Canadian ministers as well as our partners.
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* The Information referred to has been retained in the Committee
files.
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This act would solve the problem. We have approached this
problem from the administrative perspective, and I think you
will be hearing from Steve Johnson from EPA. In a moment we
will talk about what we have been trying to do there. We have
approached it from the judicial perspective and we are
approaching it from the legislative perspective. There are no
other ways to do this and this is the final, the ultimate fix
to this problem.
With that, Mr. Chairman, I see my time is up. I am strongly
in support of this legislation and urge the Committee to give
it a do-pass.
[The prepared statement of Mr. Roger Johnson follows:]
Prepared Statement of Roger Johnson, North Dakota Agriculture
Commissioner
Good morning. Chairman Dorgan and Members of the Sub-Committee, I
am North Dakota Agriculture Commissioner Roger Johnson. I appreciate
both the opportunity to offer testimony before you today and your
willingness to hold this hearing to discuss pesticide price
harmonization. I am here to testify in support of Senate Bill 532,
which deals with the issue of pesticide price harmonization, a pressing
issue in northern border states with nationwide impact.
Disparate chemical pricing harms U.S. farmers
Every day, Canadian grain moves freely south across the U.S./Canada
border to compete with domestic grain on the open market. Much of that
Canadian grain has been produced using pesticides that are identical in
chemical composition to pesticides registered for use in the U.S. but
offered at a price substantially lower in Canada. However, barriers
currently exist in federal statutes that prevent American growers or
pesticide dealers from legally importing Canadian pesticides without
the consent of the product registrant, even if the products are
identical in composition to pesticides registered with EPA for the
desired use. As a result, product registrants have been able to use the
U.S./Canada border to create two separate pesticide markets.
U.S. farmers pay more for farm chemicals
This system of segmented pesticide markets has resulted in
significant economic impacts to American farmers. Pesticide pricing
studies have repeatedly shown that American producers pay significantly
higher pesticide prices than do Canadian producers. For reference, I
have included a table of U.S. and Canadian pesticide prices recently
compiled by the Minnesota Association of Wheat Growers (Attachment 1).
* In cereal production, for example, herbicide prices are approximately
40 percent higher for American farmers than for their Canadian
counterparts.
I have also included a copy of a recent Northern Plains Trade
Research Center report by Richard Taylor and Won Koo that determined
North Dakota farmers would save approximately $24 million if they could
purchase pesticides at Canadian prices (Attachment 2--page 8, table 6).
*
Internal estimates at the North Dakota Department of Agriculture
show this cost disparity to be even higher. Conservative estimates,
using only a handful of common herbicides, indicate that North Dakota
farmers would save over $32 million per year if they could pay Canadian
prices.
Table 1. Cost Summary of Pesticides That are Substantially More
Expensive in North Dakota Than in Canada Based on 2000 Retail Prices.
------------------------------------------------------------------------
Price ND
Difference Acres Increased Cost
Product Active Ingredient per Acre (000) to ND Producers
($) a b ($)
------------------------------------------------------------------------
Achieve Tralkoxydim 6.34 280.4 1,776,334
Assert Imamethabenz 6.19 323.8 2,003,027
Avenge Difenzoquat 1.50 30.6 45,790
Bromac bromoxynil + MCPA 1.54 1757.6 2,714,437
Curtail M clopyralid + MCPA 1.87 70.8 132,296
Discover Clodinafop 2.70 72.3 195,196
Fargo Triallate 4.17 281.2 1,172,182
Liberty Glufosinate 11.46 111.6 1,278,802
Stinger Clopyralid 9.74 378.1 3,681,787
Puma Fenoxaprop 5.39 3641.6 19,628,224
------------------------------------------------------------------------
Total 32,628,174
------------------------------------------------------------------------
a Reflects the increased cost per acre in U.S. dollars in North Dakota
vs Canada. These figures are based on 2000 retail prices. North Dakota
retail prices were derived from the publication ``2001 North Dakota
Weed Control Guide'' prepared by NDSU Extension Service. Canadian
prices were derived from the publication ``Guide to Crop Protection
2001'' prepared by Saskatchewan Agriculture and Food. Price
differences are based on the same rate of active ingredient per acre.
b Product use numbers were obtained from the 2000 pesticide use survey
conducted by the North Dakota State University Extension Service.
Segmented markets and disparate pesticide prices have a direct
effect on the economic viability of American farming operations.
Pesticide costs are a major cash expense for producers and dramatically
impact farm profitability.
For example, 475 non-Red River Valley farms from North Dakota
enrolled last year in the Farm Business Management Program sponsored by
the North Dakota State Board for Vocational and Technical Education.
These farms reported an average crop chemical expense of $17,480 in the
year 2000. This figure represents 9.4 percent of a farm's average total
reported cash expense. For these representative farms, a 10 percent
decrease in chemical prices would have meant an increase of $1,748 or
3.2 percent in net farm income.
This direct link between pesticide prices and net farm income was
further supported by the Taylor-Koo report mentioned previously. Taylor
and Koo determined that net farm income for small size representative
farms would increase 5.2 percent if American farmers could pay the same
pesticide prices as their Canadian counterparts (Attachment 2--page
10). * This puts American producers at an immediate competitive
disadvantage, especially in the current agricultural economy. The
report also concludes that the negative economic impact for North
Dakota hard red spring wheat producers alone is $11.6 million
(Attachment 2--page 7). *
Public concern
Pesticide harmonization is a pressing issue in North Dakota. In the
57th North Dakota Legislative Assembly held in 2001, several bills and
resolutions dealt directly with the issue of pesticide harmonization.
An outcome of the session was the passage of North Dakota House Bill
1328, which created the Crop Protection Product Harmonization and
Registration Board. This Board, chaired by the governor's office and
including legislators, industry representatives, farmers, and myself,
was formed to address and resolve pesticide harmonization issues. The
57th Legislative Assembly also passed a resolution urging the U.S.
Congress to adopt legislation granting states the authority to issue
state registrations to parties who wish to import Canadian pesticides
that are identical or substantially similar to pesticides registered
for use in the United States. I have included a copy of this resolution
with my written testimony (Attachment 3). *
This is a national problem
It should be noted that pesticide price harmonization is not solely
a North Dakota issue. I have included a copy of a letter sent to the
Environmental Protection Agency (EPA) and signed by agriculture
commissioners and directors from 12 northern border states expressing
the need to eliminate barriers that segment Canadian and American
pesticide markets (Attachment 4). I have also included a copy of a
letter sent by the National Association of State Departments of
Agriculture to members of the U.S. Congress fully supporting this bill
(Attachment 5). * In addition, I have included a ``Joint Communique''
from the Tenth Meeting of the States/Provinces Agricultural Accord held
in July of 2000 (Attachment 6). * In the communique, senior
agricultural officials from Canada and the United States agreed on the
importance of allowing farmers to purchase pesticides from neighboring
countries.
The ``Pesticide Harmonization Act'' would solve the problem
My staff and I have worked extensively with EPA to identify legal
barriers that prevent parties from importing Canadian products for use
in the United States without the consent of the product registrant. At
the conclusion of that exercise, we worked collaboratively with North
Dakota's congressional delegation, the North Dakota Office of the
Attorney General, and EPA to draft this bill. If enacted, Senate Bill
532 would amend the Federal Insecticide, Fungicide, and Rodenticide Act
(FIFRA) to grant states the authority to issue state registrations to
parties who wish to import Canadian pesticides that are identical or
substantially similar to products registered with EPA for use in the
United States. (Attachment 7 provides a section-by-section analysis of
the bill). *
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* The Information referred to has been retained in the Committee
files.
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This bill creates a system in which a party can serve as a state
registrant for certain Canadian pesticides without the consent of the
primary registrant. A state registrant for the Canadian product is
necessary since it ensures that some party will assume responsibility
for distributing and re-labeling the product to meet EPA requirements.
To protect state registrants under this legislation, data compensation
requirements are waived. The costs associated with data development
would be waived because those costs should be included in the market
pricing strategy used by the companies in a joint U.S./Canada market.
In addition, the bill clearly states that state registrants would
assume liability only for those parts of the product ``production''
(re-labeling and distribution) for which they had control and/or
knowledge.
The ability to issue state registrations without the consent of
primary registrants is a critical component of this bill. My staff and
I have attempted repeatedly to work with product registrants to import
Canadian pesticides for use in the U.S. For example, we sent letters to
at least five different agricultural chemical companies in the fall of
1999 requesting their support to issue Section 24(c) Special Local
Needs registrations for certain Canadian pesticides that were allegedly
identical to more expensive products registered for use in the U.S. Not
one of those companies granted their consent to allow access to their
products at Canadian prices. Therefore, it is essential that a
mechanism be created in which access to Canadian pesticides is not
contingent upon primary registrant consent. This bill provides that
mechanism.
Sustains high environmental standards
A second major issue addressed in this bill is access to
proprietary chemical composition data. To prevent unreasonable adverse
effects to man or the environment and to ensure a safe and high-quality
food supply, state registrations under this bill are limited to
Canadian products that are identical or substantially similar to
products currently registered with EPA for the desired use. The bill
creates a mechanism that allows state regulatory agencies to access the
Confidential Statement of Formula (CSF) for both the Canadian and
comparable domestic pesticide products. This access to proprietary
chemical composition data is critical to ensure that the Canadian and
U.S. products are identical or substantially similar, and that the
Canadian products do not contain unregistered active or inert
ingredients.
Chemical distribution system would be maintained
In many rural communities, the agricultural chemical dealer is a
major part of the local economy. Therefore, we must ensure the economic
viability of pesticide retailers and the contributions that they make
to small towns across America. If this bill is enacted, I believe that
the majority of registrants will be chemical distributors who will use
the authority in the legislation to access Canadian pesticides from
Canadian wholesale markets. Re-labeling for purposes of the bill will
still be considered pesticide production, and it must be conducted at
registered EPA establishments. Unlike farmers or commodity groups,
distributors already have networks to accommodate product movement and
registered establishments where re-labeling can occur. Therefore, the
majority of Canadian pesticides imported under this bill will most
likely move through the existing pesticide distributor/retail networks.
The net effect will be a new, competitive market for these products,
and manufacturers will be forced to discontinue segmenting U.S. and
Canadian pesticide markets.
Recommendations for minor changes in bill draft
I would also like to suggest some minor changes to improve the
bill. First, Sections 3(B)(ii), 4(D), and 6(D) of the bill all discuss
labels ``approved by the Administrator''. However, the label referenced
in Section 3(B)(ii) is the Section 3 label of the comparable domestic
pesticide, while the label referenced in Sections 4(D) and 6(D) is an
approved state-specific label for a registration granted under this
bill. References to a ``label'' throughout the bill should clearly make
this distinction.
Second, I recommend adding definitions or changing the language
throughout the bill to differentiate more clearly primary registrants
(holders of the Section 3 registration of the comparable domestic
pesticide) from state registrants of a Canadian product for purposes of
this bill.
Third, I recommend removing Section 6(F) of the bill that
eliminates the reporting requirements of EPA establishments that re-
label Canadian pesticides for purposes of the bill. We must ensure that
importation of Canadian pesticides for purposes of this bill is
conducted in a controlled, responsible, and trackable manner.
Therefore, it is prudent to require state registrants under this bill
to track and report the quantities of Canadian pesticides they import
and re-label.
American farmers have proven repeatedly that they can produce the
safest, highest quality food in the world. However, in order to survive
economically and compete in today's markets, they need to be able to
operate on a level playing field with their competitors. Unfortunately,
American farmers are not competing on a level playing field for
pesticides. Instead, they compete in a free market with their outputs,
while being forced to purchase pesticide inputs in a segmented, unfair
and often higher-priced market. This bill provides an avenue for
American farmers to purchase pesticides at prices now only available to
their Canadian counterparts. Therefore, I would urge you to pass Senate
Bill 532.
Senator Dorgan. Mr. Johnson, thank you very much.
Let me put in the record the statement from Governor Hoeven
from North Dakota.
[The prepared statement of Governor Hoeven follows:]
Prepared Statement of John Hoeven, Governor of North Dakota
Chairman Dorgan, thank you for the opportunity to submit a written
statement in support of Senate Bill 532.
The facts of North Dakota's agricultural economy and the variety of
crops produced in the state will be well established by others
testifying before you today. It is also acknowledged by witnesses
appearing before you that our North Dakota farmers grow many of the
same crops as producers directly across the border in Canada, thereby
putting them in direct competition with their Canadian counterparts.
North Dakota farmers have been challenged by low-priced
commodities, higher input costs, and adverse long-term weather
conditions leading to increased disease, weed, and insect pressure.
These factors contribute to a the poor profit outlook for producers.
Costs are at a level where farmers simply cannot make a profit.
Because of increased pest problems coupled with high pesticide
costs, I support legislation which can help make more crop protection
products available to farmers at costs that are comparable to those
paid by their Canadian neighbors.
It is simply unfair that farmers, especially in a border state like
North Dakota, are placed at a competitive disadvantage to Canadian
farmers, both in terms of availability and price of pesticide products.
Pesticide companies are able to charge higher prices in the United
States because farmers are prohibited from purchasing similar products
in Canada and importing those products to the United States. This bill
seeks to provide for joint labeling, to effectively accomplish
harmonization of pesticide products and their prices.
The Environmental Protection Agency here in the United States and
its counterpart in Canada, the Pesticide Management Regulatory Agency
(PMRA), have tried to address the issue of product availability in
their respective countries. While I am encouraged by the EPA and PMRA's
progress regarding harmonization of new product registrations, the
heart of the issue lies with existing product availability and pricing.
While the pesticide companies often blame the regulatory agencies,
it is often the manufacturers themselves who make registration timing
decisions. The decision is impacted by expected return on investment
and anticipated competition. This bill will effectively give the states
the ability to register those products for the company, thereby
bringing those products to market more quickly, to the benefit of the
farmers and the companies.
North Dakota's legislature has worked to expedite the chemical
harmonization process, including providing the agriculture commissioner
with the authority to seek special emergency exemptions on products
registered in both countries. With my support, the legislature recently
created the Crop Protection Product Harmonization and Registration
Board. The bi-partisan board consists of elected state officials and
farmers who have a common mission of working with regulators and
pesticide manufacturers to make effective products available at fair
prices.
American and Canadian growers produce virtually identical crops and
are forced to compete with one another in the global market. Therefore
it is imperative that product availability and price stand on equal
footing across borders. Senate Bill 532 will be an important step in
amending the crop protection trade disparities between our two
countries. Free trade policies must be applied consistently. The
legislation may prove to be a tremendous asset in the effort to
standardize the prices paid for substantially equal pesticides on
either side of our shared border.
Let me ask a couple questions. One, obviously the first
question is, are you convinced that there is not a safety
issue? Some would allege, particularly from the chemical
industry, you know, there is a safety issue, that is why have
these registrations and so on. Congressman Pomeroy, is there a
safety issue here?
Mr. Pomeroy. Well, we have made certain in the legislation
that there is not a safety issue. The only products to be
allowed for purchase under this bill would be products that
have been registered in both countries. What would be required
is a State agriculture department to make a finding that the
product is identical or substantially similar in order to allow
the State-based registration. So we are talking about those
products which have already gone through the rigorous EPA
review and approval process.
I believe, Mr. Chairman, more needs to be done to harmonize
the way we register chemicals and pesticides on both sides of
the border. I think EPA and its Canadian counterpart have
really not stepped up to their assignment under NAFTA to bring
in place harmonized regimes of registration. Undoubtedly, that
has caused additional costs for the chemical pesticide
companies. I am sure they will tell you about that later in
this hearing.
But that is just tough. That should not in any way justify
this price discriminating practice that charges our farmers
more in a free trade environment where in the end they have got
to compete with that Canadian-harvested product grown cheaper.
Senator Dorgan. Let me also ask, Congressman Pomeroy, why
is this hard to do? One would think that with the story of
Achieve or other chemicals that we would just have a farmer go
up and purchase the chemical for the lower price and come back
down. What do we need from the EPA to make this happen?
Mr. Pomeroy. Well, I am very pleased that EPA has
approached this issue with an open mind, that they have not in
any way wanted their requirements that are related and based in
public health and safety to be used in a way that has nothing
to do with public health and safety, just to basically
facilitate price discrimination. They do not want chemical
companies hiding behind them so that they can charge U.S.
farmers more where there is not a public health or safety
issue.
As a result of that, the prior administration engaged in
negotiations to produce this bill and signed off on this
legislation. Again, it is unclear what the position of this
administration is. It is my sense that they would view this in
exactly the same sphere or maybe even be more impatient with
the practice of price discrimination by chemical companies than
the prior administration.
Senator Dorgan. Mr. Johnson, respond to the assertion by
the chemical industry that they pay more for testing and more
rigorous registration requirements in the U.S., therefore they
have justified charging higher prices in the U.S.?
Mr. Roger Johnson. Mr. Chairman, all the evidence that I
have seen suggests that the testing requirements are
substantially harmonized, that they are very close to identical
to the degree that they can be between the United States and
Canada. There is just no evidence that I am aware of that it
costs a lot more to register a product in the United States.
I expect that perhaps Steve Johnson from EPA could add more
to that, but that has certainly been my sense over the last
several years as I have studied this issue in some detail. I
have had extensive discussions with PMRA in Canada, which is
sort of the EPA equivalent, and with EPA down here and I am
just not aware that there is any validity to that argument.
Mr. Pomeroy. Mr. Chairman, I would just add to that. Even
if the costs are different, I believe in a free trade zone
there is not a rationale for price discrimination. For example,
doing business across the United States costs vary, but you do
not see marketing strategies placing on North Dakotans
significantly higher or lower costs than the prices charged in
Florida. You harmonize prices. You cost it out over the entire
market.
Well, now we are in our free trade zone with Canada and we
sure know that post-harvest. So pre-harvest if the costs are
different, that is just tough. You blend the costs over the
market and you are not allowed to price segment any more.
Senator Dorgan. Let me ask Commissioner Johnson to correct.
You indicated that the NDSU trade study described $24 million,
$23.9 million, increased costs for U.S. farmers. That is
actually just for North Dakotan farmers?
Mr. Roger Johnson. Yes, yes.
Senator Dorgan. Second and finally, the final question will
be just for the two of you. Can you describe for the record the
Achieve issue? We had a farmer in North Dakota that was going
to move to Canada--was going to go to Canada and bring Achieve
back. Would you describe that circumstance for the record,
because that is in many ways what kicked off a lot of this
activity.
Mr. Roger Johnson. Mr. Chairman, I would be glad to. I have
also copies of a time line of events that I will submit for the
record that sort of describes in more detail.
Mr. Roger Johnson. But very briefly, what happened is we
had a North Dakota farmer who went to Canada and bought some
Canadian Achieve, brought it across the border. We knew in
advance that he was going to do it. In fact, he told us. We
said: Well, you cannot do that; it would be illegal; and
besides, you will never get it through Customs.
Well, he called a couple days later and said: Guess what, I
am going to Canada. Well, in fact, I went up, I sent my wife to
Canada with the pickup truck. She came back with a load of
Achieve, got it through Customs, declared it in fact, and for
whatever reason it managed to get through.
I said to him at that point: Well, for God's sakes do not
use it, because if it does not have an EPA label it is a
violation if you use it.
Well, he used it. In fact he said it worked pretty good. We
then had a real issue and I had a number of conversations with
management in Zeneca, both in Canada and the U.S., to try and
figure out what we should be doing with this, because if in
fact it was an illegal product and it was different than what
was registered in the U.S. I had a legal obligation as the
enforcing agency of EPA laws in this case to quarantine that
farm, to destroy the grain, because it may be unfit for human
consumption.
So I called EPA, or the Achieve manufacturer, Zeneca. In
the end they confirmed that the Canadian product in fact was
absolutely identical and that in fact the product that was
used, the only difference was that it was twice as concentrated
as the U.S. version. But the Canadian version in fact had also
been registered at EPA, though it was not marketed here.
So, based on that, I said, okay, the product is legal, it
is the same. Zeneca told me it is the identical product that is
registered at EPA called Achieve 80DG. The one that is marketed
here is Achieve 40DG. So I got a copy of the registration for
80DG, which included the label, by the way, which is what's
required to be on a product in order for it to be used and U.S.
producers must follow that EPA-approved label.
I got a copy of the label, posted it to the Internet site,
provided directions for farmers to make sure they printed the
label off, went to Canada, purchased the product, applied the
label, brought it back, and used it according to the label
instructions. That is what they did.
What happened following that is the border got closed
because EPA had to require that Customs no longer allow the
product to cross the border, arguing that the labels were
attached in a fashion that was illegal, that being they were
taped to the box by a producer instead of being fastened by a
producer of the chemical product at a location with an EPA
establishment number.
So you know, the difference here is $10 an acre, is what
this farmer paid for the Canadian product, $16 an acre is what
he would have paid for the U.S. product. One thousand acres,
$6,000.
Mr. Pomeroy. Mr. Chairman, I want to commend Commissioner
Johnson from constructively responding to a situation that
faced him. I used to be a State regulator. Your responsibility
is to the public. The Agriculture Commissioner's responsibility
is to the public and to all farmers, not necessarily to make
certain that the optimal pricing strategies of the chemical
companies are adhered to.
So when there was no public health issue, no public safety
issue, a much cheaper product just across the border, I believe
the creative solution that he advanced should have been allowed
to continue; and that basically, when there is no dispute about
the content of the chemical or its approved status in the
United States, to have this stopped because of who is applying
the label is simply bureaucratic red tape at its worst, that
should not be permitted to prevent our farmers from getting
their best deal.
I really do think that the efforts of the North Dakota
Agreement Department, Roger Johnson and his staff, in advancing
this make a very compelling test case as to why the bill that
you have introduced should move forward.
Senator Dorgan. I think it would be helpful to have the
Achieve story's time line put in the record. If you would
submit it, we would have it included in the record.
Mr. Roger Johnson. I would be happy to do that.
[The material referred to follows:]
Timeline of NDDA Efforts on Pesticide Harmonization
February, 1997
Roger Johnson submitted a policy amendment to NASDA encouraging EPA
to increase resources and efforts in US/Canada Technical Working Group
on pesticides to harmonize pesticide regulations in the two countries.
More effort also needs to be focused on establishing tolerances for
pesticides registered in Canada and not in the US.
October 27, 1997
Roger Johnson submitted a letter to EPA Region VIII Administrator
encouraging EPA to step up its efforts toward ``harmonization of data
requirements in the registration of pesticides.''
February 25, 1998
Roger Johnson submitted an amendment to NASDA policy encouraging
EPA to disallow imports of Canadian commodities unless adequate
progress is made by the Technical Working Group to obtain registrations
in the US of Canadian registered pesticides.
March 2, 1998
NASDA approved a resolution submitted by North Dakota Agriculture
Commissioner Roger Johnson calling for harmonization of pesticide
regulations between the US and Canada.
May 6, 1999
Roger Johnson attended the North American Market for Pesticide
meeting in Washington DC. The purpose was to foster a dialogue among
stakeholders on issues related to pesticide harmonization and joint
registration of products. Specifically related to the differences in
product availability and to identify opportunities for enhancing
cooperation on pesticide harmonization issues (section IV A, E, and F
of handout).
May 17, 1999
Roger Johnson submitted a policy amendment to MASDA encouraging EPA
for international harmonization of data requirements, the presentation
of data and its interpretation, and risk assessment methodologies.
Harmonization must be to the highest possible standards.
May 24, 1999
Jeff Olson attended the Technical Working Group meeting in San
Antonio between EPA, PMRA, and the Mexican delegation. This was the
first meeting attended by Mexico. The North American Initiative (NAI)
provides for the conceptual framework for the work of the Technical
Working Group (TWG) to develop a North American market for pesticides
and to establish joint reviews and work sharing as routine by 2002.
The NAFTA Industry Work Group (IWG) reported on the outcome of a
NAFTA label and concluded that the creation of the NAFTA label for an
end product was impractical. The NAFTA IWG proposed the creation of a
container label for country specific directions for use.
June 28, 1999
Jeff Olson attended the first meeting dealing with the issue of
seed treatments with EPA and PMRA officials in Washington DC. There was
discussion on the timeline for reducing the use of Lindane in Canada
and the progress towards registration of Helix and Gaucho.
July, 1999
Roger Johnson submitted an action item to MASDA, urging NASDA to
organize a meeting with the officials from EPA, FDA, USDA, and USTR to
harmonize policies regarding chemical use and allowance on domestic and
imported food production.
September 15, 1999
Roger Johnson attended a meeting held with the Congressional
delegation and representatives from the EPA, USDA, FDA, and USTR to
discuss the differences in policies for allowing import of commodities
with residue from products not registered in the U.S.
October 1999
USDA releases report on ``Pesticide Price Differentials Between
Canada and the United States.''
October 16, 1999
Letters sent to four pesticide manufacturers, including Zeneca
Agro, requesting permission to add a Special Local Needs label to
Canadian pesticides.
October 26, 1999
Zeneca responded in a letter, saying Achieve' 80DG will
be discontinued worldwide over the next two years and would only be
available ``in the distribution channels'' until the stock runs out.
Zeneca said it will not produce an U.S. label for this reason.
October 27, 1999
Attended the first Harmonization Committee meeting at Minot. The
Department presented the Committee a copy of all the activities the
Department has participated in dealing with the pesticide harmonization
and price differential issues. The Committee suggested the Department
pursue EPA funding for harmonization efforts.
November 15-17, 1999
NDDA sponsored the Northern Plains Producer Conference attended by
400 to 500 U.S. and Canadian Producers in Fargo.
March 8, 2000
Jim Gray attended the second Harmonization Committee meeting in
Washington D.C. where the Committee met with ACPA to discuss pesticide
harmonization efforts by the industry.
April 14, 2000
Jeff Olson attended the North American Market for Pesticides in
Ottawa, Canada. Representatives from USEPA, USDA, Pest Management
Regulatory Agency (PMRA), Agriculture and Agri-Food Canada (AAFC),
Grower Associations, Industry Representatives, State, and Provincial
representatives to discuss the continued process toward pesticide
harmonization and joint registration of pesticide products.
May 2, 2000
NDDA received a request for a Special Local Needs label from Norac
Concepts, Canada for DCT seed treatment on dry beans. Need to overcome
the following issues to meet EPA requirements that are not friendly to
Harmonization: (1) EPA registered or approved sources; (2) EPA approved
label; (3) use and distribution restricted to MD; (4) acute toxicity
data even though it was not being ``used'' in the U.S.
May 25, 2000
NDDA was informed that a ND producer brought Achieve'
80DG down from Canada and declared it at U.S. Customs. Customs allowed
the product to pass through the border into North Dakota.
May 26, 2000
Commissioner Johnson wrote a letter to EPA Region 8 regarding
potential enforcement action against the producer who brought
Achieve' 80DG into the US. NDDA had a phone conversation
with a Zeneca employee and was informed that Achieve' 80DG
was already registered in the U.S., but not marketed here.
May 30, 2000
EPA confirmed that Achieve' 80DG was registered in the
U.S.
May 31, 2000
Commissioner Johnson held a press conference announcing his plan to
post the label, with the registration number, for Achieve'
80DG on the NDDA website. The label, along with instructions for
importing the herbicide, was posted the same day. EPA was notified of
the action taken.
June 1, 2000
NDDA learned of the first load of Achieve' 80DG crossing
the border into the United States, minus the import form 3540-1.
``Notice of Arrival of Pesticide and Devises''. NDDA was unaware of
this form. Zeneca contacted Commissioner Johnson asking for a meeting
to discuss his action. Jim Gray had a meeting with U.S. Customs at the
Pembina office.
June 2, 2000
Zeneca representatives flew to Bismarck to meet with Commissioner
Johnson, Attorney General Heitkamp, and staff members and express an
interest in resolving the situation. Johnson asked the company to
publicly approve North Dakota's action, and they refused. Zeneca argued
three reasons why the product was less expensive in Canada: (1)
exchange rate (2) Canadian farmers aren't making much money (3)
coagulation problems. During the same meeting, Zeneca confirmed that
there is no danger to human health or the environment with the use
Achieve' 80DG and that the coagulation problems with
Achieve' 80DG were resolved in the mid 90's. Zeneca also
promised a formal written response to North Dakota's action.
June 5, 2000
Instead of providing North Dakota with a formal written response,
Zeneca wrote EPA asking it to take action against North Dakota for
FIFRA violations and also asked for a meeting to discuss the matter.
June 8, 2000
After learning of Zeneca's letter and request for a meeting,
Commissioner Johnson asked to participate in the meeting. NDDA was
notified that EPA Region 8 had approved two 3540-1 forms. Commissioner
Johnson also attended the Harmonization Committee meeting in Northwood
and presented the Committee a detailed description of the Achieve/
Zeneca issue.
June 9, 2000
Zeneca met with EPA in Washington, DC to discuss the situation.
Commissioner Johnson and Attorney General Heitkamp joined the meeting
via telephone. Heitkamp promised to issue a formal written response to
EPA to address Zeneca's complaint. EPA notified NDDA that a decision
would be forthcoming by early the following week after EPA received
North Dakota's written response. That same day, EPA Region 8 stopped
issuing the form 3540-1, based on a directive from EPA in Washington.
June 12, 2000
Commissioner Johnson and Attorney General Heidi Heitkamp wrote EPA
to refute Zeneca's arguments raised in the June 5 letter.
June 13-14, 2000
Commissioner Johnson and Jeff Olson attended the Technical Working
Group conference at Ottawa, Canada. Attendants included EPA, PMRA, and
Mexico Agriculture representatives.
June 29, 2000
Top agriculture officials from the 12 border-states joined Johnson
in a letter asking EPA Administrator Carol Browner to help U.S. farmers
obtain pesticides at the same prices as Canadian farmers. On the same
day, the House Agriculture Committee held a hearing on agricultural
input issues. Among those testifying were Zeneca Ag Products Inc.
president, Robert Woods.
July 5, 2000
EPA sent a letter to NDDA responding to their action with
Achieve' 80DG and stated that placing a label on a pesticide
is considered ``producing'' and those labelers would need an EPA
``Establishment Number.''
July 7, 2000
US Senator Byron Dorgan blocked approval of two EPA nominees until
the matter is resolved.
July 12, 2000
NDDA sent a letter to EPA with recommended language and reasoning
for proposed federal legislation to facilitate Canadian pesticide
importation and use.
July 13, 2000
Commissioner Johnson sent a letter to EPA requesting their legal
position on affixing labels in regard to emergency exemptions and
special local needs (SLN) registrations. EPA sent NDDA reworked draft
legislation. The language stated that North Dakota needs to be listed
as the registrant. During phone conversations following receipt of the
EPA letter, NDDA stated that this requirement was unacceptable.
July 24-25, 2000
Commissioner Johnson, Assistant Attorney General Paul Germolus, and
NDDA Registration Specialist Jim Gray met with EPA attorneys and staff
to work on finalizing draft legislation.
July 26, 2000
The Midwestern Association of State Departments of Agriculture
adopted a resolution authored by Commissioner Johnson in support of
chemical price harmonization.
July 28, 2000
Tri-National Accord members supported harmonization efforts by
including language in their ``Joint Communique.'' The Accord is an
annual meeting of Commissioner Johnson's agricultural counterparts in
the U.S., Canada, and Mexico.
August 2, 2000
NDDA and EPA reached agreement on draft federal legislation.
August 11, 2000
Attorney General Heitkamp and Commissioner Johnson filed a lawsuit
against EPA regarding their interpretation of the Federal Insecticide,
Fungicide, and Rodenticide Act (FIFRA).
August 11, 2000
NDDA met with representatives of commodity groups, chemical
dealers, and distributors to seek input on the draft legislation. Input
from the meeting participants was then used to revise the draft
legislation.
August 25, 2000
Commissioner Johnson sent a letter to Jay Vroom, ACPA requesting a
meeting between ACPA and Commissioner Johnson to discuss how the
Department can help the industry in the registration process.
September 8, 2000
Draft legislation was forwarded to Congressman Pomeroy's office.
September 14, 2000
Congressman Earl Pomeroy introduced the ``Pesticide Harmonization
Act'' (H.R. 5187).
September 28, 2000
Commissioner Roger Johnson and staff attended the Harmonization
Committee meeting in Bismarck. Johnson briefed the Committee on the
lawsuit with EPA and other harmonization activities.
October 4, 2000
Roger Johnson received award from EPA for ``Exemplary State-EPA
teamwork in pesticide harmonization'' from Bill Yellowtail, EPA Region
VIII Administrator.
November 2, 2000
Jeff Olson and Jim Gray held a meeting with all commodity groups
and extension personnel to determine emergency exemption needs for the
2001 growing season.
November 28, 2000
Commissioner Roger Johnson, Jeff Olson, and Jim Gray presented an
open forum at the Agriculture Association annual meeting to discuss the
``Pesticide Harmonization Act'' and other avenues to achieve pesticide
harmonization.
December 1, 2000
U.S. Department of Justice filed a ``Motion to Dismiss and
Memorandum in Support of Motion to Dismiss'' in response to the lawsuit
filed by the State of North Dakota and the North Dakota Department of
Agriculture against EPA on August 11, 2000.
February 2, 2001
The State filed with the Federal Court its response brief in
opposition to the EPA's motion to dismiss. Lawsuit caption updated to
reflect present agency officials (Stenehjem, et al. v. Whitman, et al).
The Attorney General argued that the State has parens patriae standing
because the State is not questioning the validity of a federal statute.
Rather, the State was relying on the validity of a federal statute to
challenge the EPA's violation of the statute. Second, the State was
well within the 6-year statute of limitations since the State's ``right
of action'' did not accrue when the EPA exceeded its authority in
promulgating the regulations; the State's right of action accrued only
after the EPA applied the regulations in question against the State.
The State conceded to the dismissal of the Agriculture Commissioner as
a party to the action.
February 8, 2001
Commissioner Roger Johnson and Representative Earl Pomeroy sent a
letter to Jay Vroom, President of ACPA. In the letter, Johnson and
Pomeroy presented two proposals that would expedite pesticide
registrations and directly address the market access component of
pesticide harmonization. Johnson and Pomeroy also asked for ACPA's
assistance in drafting federal legislation to implement the proposals.
March 12-14, 2001
Jim Gray attended the AAPCO meeting in Washington DC While there,
Gray co-moderated a meeting of border state representatives, ACPA, and
industry representatives to discuss harmonization issues from the
industry perspective. Gray also presented the two proposals outlined in
the February 8, 2001, letter to ACPA, and asked for proposals to
address the market access component of pesticide harmonization.
April 10-11, 2001
Jeff Olson and Jim Gray attended a workshop on NAFTA Pesticide
Registration Issues sponsored by the NAFTA Industry Working Group.
Issues were centered around concerns by the pesticide industry. Six
topics for further research were drawn-up at the end of the workshop.
Jim Gray volunteered to lead the group to look at barriers and
solutions to product assess across international borders. Results of
their findings will be presented the full NAFTA Working Group in
November, 2001.
June 20, 2001
US District Judge Webb granted EPA's motion to dismiss ND's lawsuit
regarding Achieve.
July 26, 2001
Testifying in Washington DC, Commissioner Roger Johnson urged the
Senate Subcommittee on Consumer Affairs, Foreign Commerce, and Tourism
to pass the Pesticide Harmonization Act.
Senator Dorgan. Your testimony has been very helpful in
both cases. Congressman Pomeroy, you have introduced
legislation, I believe, and worked on this legislation in the
U.S. House.
Unless Senator Burns has questions for this panel, I would
release the panel and then call on Senator Burns for a
statement.
Senator Burns. Can I ask a question?
Senator Dorgan. Yes, of course.
STATEMENT OF HON. CONRAD BURNS,
U.S. SENATOR FROM MONTANA
Senator Burns. With the Chairman's permission, it would
seem to me that we are dealing with a situation here. You said
do not use it because the crop--the wheat might not be
acceptable or there would be some public risk in the safety of
that crop, the health of the public.
We take their wheat. It is used on theirs, and it comes
ripping across that border like you cannot believe. Now,
somewhere we have got to level this out. We have been trying to
deal with this normalization, but I will tell you, my friend,
our dear friends to the North--and I have had meetings up there
with them; we have met all over about this--They can dream up
more non-tariff barriers than anybody in the world and sit
there and be holier than thou. Then we come down here and our
chemical companies are not any better.
Now, I will tell you this. We have a circumstance that in
this country, the cost may not be in the testing or the
labeling of the product, but we have got other costs in that we
produce a product that is not safe for the public and it gets
through both--it flies--by both EPA and the company. We have
got that cost to look at because we do more things in the
preventative nature down here that are very costly than we do
in the actual testing of the product. I think we will talk
about that with another panel.
If you want to excuse these, then I have got a short
statement.
Senator Dorgan. We appreciate very much your testimony and
thank you for being here, Congressman Pomeroy and Commissioner
Johnson.
Why do we not ask Stephen Johnson, Assistant Administrator
for the Office of Pollution, Pesticides, and Toxic Substances
at the EPA, to come forward.
Before I call on Mr. Johnson for his testimony, let me
welcome Senator Burns. As I indicated when I started this
hearing, Senator Burns and I worked together with a number of
our colleagues to jointly introduce S.532. He has been very
instrumental in helping put that legislation together and I
welcome him here.
Senator Burns. Thank you, Senator Dorgan. This is not the
first year we have done this. We have been down this trail. You
know, there are a couple of things that we think about in this
town that really do not make headlines and are not the sexy
issues, and this is one of them. Then you want to go around the
corner and talk about weeds, and that does not go over very big
in these fancy, foo-foo, white wine and Grey Poupon parties
here in town. That is not a great subject to talk about,
either. So we will get that out of the way.
Mr. Chairman, thank you for holding this hearing, because I
think it is very important, and we want to welcome a couple of
my good friends from Montana: Dave McClure from Lewistown, the
President of the Montana Farm Bureau; and Hank Zell. I do not
know--Hank--oh, you are sitting back there hidden--Hank farms
up there on the high line and has been instrumental in a lot of
history along the Montana-Canadian border.
I am going to submit my statement, but I do want to bring
up the fact, what you mentioned a while ago, it just seems like
when we are dealing with the same chemicals, with the same
chemical properties and makeup, and then we have got that
border that seems like is a barrier, and sometimes it is used
as a price barrier and sometimes it is used as a trade barrier,
and it all depends what fits the situation, I guess, how we
apply it.
So I am looking forward to the testimony today and working
with the EPA and working with the Canadians. I think this is a
problem that we have to address on both sides, and I am not
really sure that our representative--that we should have a
representative here today from the ITR, the International Trade
Representative's office, because I think they have a stake in
this, too, because that is probably where it will be resolved
finally, by our Trade Representative and how we conduct
ourselves on that border, and especially the movement of farm
chemicals back and forth across that line.
So I will just put my statement in the record and I am
looking forward to the testimony today, especially Mr. Johnson
and the rest of the panel. I thank the Chairman.
[The prepared statement of Senator Burns follows:]
Prepared Statement of Hon. Conrad Burns, U.S. Senator from Montana
Thank you, Mr. Chairman, for holding this hearing on an issue of
great importance to the people of my home state of Montana and to the
rest of the country. I would also like to thank the witnesses for being
here, particularly the two men from Montana, Mr. Dave McClure,
President of the Montana Farm Bureau and Mr. Hank Zell of the Farmers
Union.
In the past, I have sponsored pesticide harmonization legislation.
Last year, Senator Dorgan sought to address this problem in the VA/HUD
Appropriations Conference. At that time, I committed myself to work
with him and move this legislation this year. I am a cosponsor of this
bill because of this commitment and to even out a serious trade
imbalance facing the agriculture industry in our country.
In my home state of Montana and many other western and mid-western
states, we have faced a number of trade disputes between Canada and the
United States. One of the most glaring discrepancies deals with
pesticides. Chemicals that are sold for one price just across the
border in Canada are sold at a considerably higher cost to American
producers. Why does this happen you may ask? The EPA places strong
regulations on chemicals used in the United States and therefore, the
chemical companies believe they should hike up the prices to pay for
their trouble.
The chemicals in Canada and the United States, in most cases, have
the exact same chemical properties and make up. The same company
manufactures them, but often gives them a different name and nearly
always prices the American chemicals higher. The crops treated with
chemicals our farmers are not allowed to use are easily imported into
the United States. These crops were developed at a lower production
cost and are now competing with American products. I am a strong
believer in fair trade, but for free trade to actually occur, this
problem must be addressed.
Currently, American farmers are facing a serious economic
recession. Prices are the lowest they have been in a number of years
and there does not appear to be a light at the end of the tunnel.
Additionally, the West is facing yet another year of severe drought.
Fertilizer costs are sky-rocketing with the high cost of fuel and
energy. Compounding their problem is being forced to pay twice as much
for nearly the same chemicals as their foreign neighbors.
If enacted, this bill would eliminate many of the current obstacles
and I would anticipate it leveling the playing field for our farmers.
It would allow states or individual producers to seek a registration
for a Canadian pesticide. This could only be done if, upon request by
the State, the pesticide is found to be identical or substantially
similar to the U.S. pesticide. The EPA still has final authority to
disapprove the registrations within 90 days. Once the pesticide is
found to be the same or similar and the EPA approves, the state or
individual can travel to Canada and purchase the chemical.
Our farmers and ranchers have been paying too much for their
pesticides and chemicals for too long. From my years as a football
referee, I learned everyone needs to follow the same rules to play the
game. We need to make sure Canadian farmers and U.S. farmers are
playing under the same rules and we are not making criminals out of
honest, hardworking farmers who cross the border to buy chemicals.
Senator Dorgan. Senator Burns, thank you very much.
Mr. Johnson, welcome from the EPA. We appreciate your being
here and why do you not proceed.
STATEMENT OF STEPHEN L. JOHNSON, ASSISTANT
ADMINISTRATOR, OFFICE OF POLLUTION, PESTICIDES,
AND TOXIC SUBSTANCES, ENVIRONMENTAL
PROTECTION AGENCY
Mr. Stephen Johnson. Good morning, Mr. Chairman, Senator
Burns, and thank you for the opportunity to appear before this
Subcommittee to discuss the concerns of American farmers
concerning pesticide pricing between the United States and
Canada. Roger Johnson of North Dakota and I have a long
personal relationship on this issue and I am very glad to
testify with him today.
Today I will provide you with information on the long-term
approach EPA is taking to address this issue, as well as
discuss the current legislation which moves to remedy these
pricing discrepancies in the near term.
As you know, EPA's legal authority over pesticides is to
ensure public health protection and environmental protection.
Our authority does not extend to pricing. Current U.S.
pesticides laws require an extensive scientific evaluation and
a pesticide registration before it can be sold and distributed
in the United States.
EPA is not aware of any evidence that indicates that
national pesticide registration requirements contribute
significantly to existing price differences. Many factors
contribute to pricing, such as marketing, availability, and
demand.
As all parties have acknowledged, this is a highly complex
issue. That said, I know that EPA has worked very closely with
Congressional staff over this last year as well as State
officials and others to explore remedies that would help
address pricing differences that U.S. farmers are experiencing.
EPA has made significant progress on a variety of
administrative and regulatory approaches to help facilitate
equal access and harmonization. However, long-term approaches
will not fully resolve this issue in the near term. Although
these efforts over time should significantly help alleviate
some of the pricing issues that exist today, let me describe
this morning some of the longer term, more strategic actions
that EPA is taking and partnerships that EPA has established to
address this important issue.
EPA is working closely with Canada and other trading
partners to break down barriers and to facilitate trade and
competitiveness. Together we are developing more consistent
regulatory and scientific requirements, registering needed
products, and supporting the principles of sustainable pest
management.
EPA's work on pesticide harmonization with Canada is
beginning to provide benefits directly to the American farmer.
In the long term, the creation and ongoing support of a North
American harmonized market for pesticides will ensure a level
playing field across borders, while maintaining our high
standard of protection for human health and the environment.
This effort is helping to break down the political and
regulatory barriers with respect to the delivery and use of
pest management tools on both sides of the border. An important
piece of work is the creation of a NAFTA label which will
enable the sale and distribution of a pesticide acrossNorth
America, thereby guaranteeing its availability at the same time
in the U.S. and Canada. One of the products under joint review,
which will be for use on northern crops, will serve as a pilot
for introduction of the NAFTA label. We believe expansion of
products under NAFTA labels will help break down potential
trade barriers.
The NAFTA pesticide group has enabled EPA and Canada to
work together on the entire range of pesticide regulatory
requirements, review procedures and programs. To date the vast
majority of data requirements and test guidelines that must be
adhered to in the registration process have been harmonized and
as a result of the work-sharing and joint reviews of recent
pesticide registration submissions, the harmonization of risk
assessment procedures is well under way between the U.S. and
Canada.
These are important milestones that are establishing the
framework for facilitating equal access to pesticides, which
could lead to more uniform pricing across borders. You have our
commitment to continue to work within our current authorities
to promote a level playing field for U.S. and Canada farmers.
Now, regarding a near-term solution, EPA stands ready to
work with Congress and others on possible legislative solutions
that effectively address observed differences in pesticide
pricing as long as the protection of public health and the
environment are not compromised. EPA understands that this
legislation is intended to create a structure which ensures
that appropriate safeguards remain in place to enable EPA to
achieve its primary mission, the protection of public health
and the environment.
However, there are some broad policy concerns with this
legislation that will need to be fully addressed and the
consequences fully considered. For example, a legislative
approach, like this with a focus on one country alone, may have
broad trade ramifications. EPA will continue to work with
Congressional staff to address these issues as they arise.
Another potential concern is that of implementation. For
example, there are important questions regarding a State's
ability to maintain confidential business information and other
trade secret information. Any legislation should also not place
unreasonable resource burdens on our pesticide registration
program or cause unintended consequences on other priorities
and regulated pesticides. Again, EPA will work with you closely
and your staff to help address these types of implementation
concerns.
In conclusion, EPA has worked very closely with
Congressional staff over this last year, as well as with State
officials here today, to help alleviate the concerns of U.S.
farmers that they have regarding differences in pesticide
price. EPA continues to seek and create effective mechanisms
that will ensure the safety of our health and environment while
also ensuring an equal playing field for our farmers.
In the long term, EPA is working to harmonize the
availability of pesticide products between the U.S. and Canada
through the NAFTA pesticide group. In the near term, with no
adequate administrative or regulatory option available to
address the potential pricing disparity between the U.S. and
Canada, EPA supports seeking an appropriate legislative
solution to this problem.
However, although the legislation as drafted does not
compromise protection of human health or the environment, which
is EPA's principal criterion, there are some implementation
issues and potential international trade concerns that we will
have to continue to address. If these issues are resolved, EPA
will be in a position to support this legislation.
Again, EPA commits to working with Congress, the States,
farmers, other Federal agencies, and industry to resolve these
concerns. I look forward to working with you and other members
of the Congress and other affected stakeholders on this
important issue.
I will be pleased to address any questions you may have.
[The prepared statement of Mr. Johnson follows:]
Prepared Statement of Stephen L. Johnson, Assistant Administrator,
Office of Pollution, Pesticides, and Toxic Substances,
Environmental Protection Agency
Introduction
Good morning Mr. Chairman and Members of the Subcommittee. Thank
you for the opportunity to appear before this Subcommittee to discuss
the concerns of American farmers with regard to with pesticide pricing
between the U.S. and Canada. The U.S. Environmental Protection Agency
(EPA) is committed to working with Congress, the states, farmers, other
Federal Agencies, and industry to address this ongoing concern.
Today, I will provide you with information on the long-term
approach EPA is taking to address this issue, as well as discuss the
current legislation which attempts to remedy these pricing
discrepancies in the near-term. As you likely know, EPA's legal
authority over pesticides is to ensure the protection of public health
and the environment; our authority does not extend to pricing. Current
U.S. pesticide laws require an extensive scientific evaluation and a
pesticide registration before it can be sold and distributed in the
U.S. Further, EPA is not aware of any evidence that indicates that
national pesticide regulatory requirements contribute significantly to
existing price differences. Many factors contribute to pricing, such as
marketing, availability, and demand. As all parties have acknowledged,
this is a highly complex issue.
That said, I know EPA has worked very closely with congressional
staff over the last year, as well as with state officials and others,
to explore remedies that would help address prices differences that
U.S. farmers may be experiencing. EPA has made significant progress on
a variety of administrative and regulatory approaches that help
facilitate equal access and harmonization. However, these long-term
approaches will likely not fully resolve this issue in the near-term,
although these efforts, over time, should significantly help alleviate
some of the pricing issues that exist today.
A Long-Term Solution: Harmonization
First, let me describe some of the longer-term, more strategic
actions that EPA is taking, and partnerships that EPA has established,
to address this important issue. EPA is working closely with Canada and
other trading partners to break down barriers and facilitate trade and
competitiveness. Together, we are developing more consistent regulatory
and scientific requirements, registering needed products, and
supporting the principles of sustainable pest management. EPA's work on
pesticide harmonization with Canada, which began in earnest in 1993, is
beginning to provide benefits directly to the American farmer. In the
long term, the creation and ongoing support of a North American
harmonized market for pesticides will ensure a level playing field
across borders while maintaining our high standards of protection for
human health and the environment.
EPA has also had recent successes in facilitating free trade. In
December of 1998, the U.S. and Canada signed a formal agricultural
trade ``Record of Understanding.'' This agreement includes provisions
specific to pesticide harmonization by encouraging greater cooperation
among government regulators, growers, and the pesticide industry.
Subsequently, two public meetings, co-chaired by the Deputy Secretary
of the U.S. Department of Agriculture (USDA) and the Deputy Minister of
Agriculture and Agri-Food Canada (AAFC) were held in May 1999 and April
2000. These discussions have resulted in significant improvements in
the approach EPA and the Canadian Pest Management Regulatory Agency
(PMRA) are taking toward international harmonization. The Record of
Understanding has led to more frequent and open dialogue among EPA,
grower groups, and industry, which in turn, has begun to accelerate
regulatory harmonization. We have learned through this process that
harmonization depends on a partnership with our key public
stakeholders, growers, and industry, so that strategic planning and
priority setting across borders can occur simultaneously.
In April 2001, EPA, together with representatives from industry and
North American grower groups, participated in a tri-national workshop
on North American Free Trade Agreement (NAFTA) pesticide registration.
Participants identified, deliberated, and agreed to a number of
priorities for harmonization targets. As a result of this meeting, a
working group on equal access and joint labeling was established, with
officials of EPA and PMRA serving as a resource. EPA strongly supports
these broad-based efforts, which will move us closer to a harmonized
North American market for pesticides. In essence, this vision of a
North American market, elaborated by the NAFTA pesticides group,
promotes equal access to pesticides by offering incentives, a
harmonized review process, and work sharing across national boundaries.
This recent effort is helping to break down the political and
regulatory barriers with respect to the delivery and use of pest
management tools on both sides of the border. An important piece of
this work is the creation of a ``NAFTA label,'' which will help enable
the sale and distribution of a pesticide across North America, thereby
guaranteeing its availability at the same time in the U.S. and Canada.
We have already made strides in putting this into practice, building on
the existing Joint Registration Review program. The joint review
program has resulted in the simultaneous registration of nine new
pesticide products in the U.S. and Canada, with eight additional
products currently under review. The governments are also currently
sharing resources and scientific expertise, or ``work sharing,'' in
reviewing data on several other pesticide products. One of the products
under joint review, which will be for use on northern crops, will serve
as a pilot for introduction of a NAFTA label. We believe expansion of
products under NAFTA labels will help break down potential trade
barriers.
Overall, the NAFTA pesticide group has enabled EPA and PMRA to work
together on the entire range of pesticide regulatory requirements,
review procedures, and programs. Mexico is our other important partner,
and the Mexican pesticide regulatory authority participates on
individual projects as its resources permit. The NAFTA pesticide group
has improved governments' capacities to address trade irritants by
building national scientific and regulatory capabilities, by sharing
the data review burden, and by coordinating scientific and regulatory
decisions. To date, the vast majority of data requirements and test
guidelines that must be adhered to in the registration process have
been harmonized, and as a result of work sharing and joint reviews of
recent pesticide registration submissions, the harmonization of risk
assessment procedures is well underway between the U.S. and Canada.
These are important milestones that are establishing the framework for
facilitating equal access to pesticides, which could lead to more
uniform pricing across borders. You have our commitment to continue to
work within our current authorities as creatively and flexibly as
possible to promote a level playing field for U.S. and Canadian
farmers.
A Near-Term Solution
EPA stands ready to work with Congress and others on possible
legislative solutions that effectively address observed differences in
pesticide pricing, as long as the protection of public health and the
environment are not compromised. As you know, two bills have been
introduced, S.532 and H.R. 1084, which would amend Federal Insecticide,
Fungicide, and Rodenticide Act (FIFRA) to permit Canadian products that
are substantially similar to U.S. registered products to be imported
and registered in the U.S. The intent of this legislation is to help
alleviate as quickly as possible the inequities U.S. farmers may be
experiencing today as a result of pricing differences.
EPA's understanding is that this legislation, if passed, would
authorize a state to register certain Canadian pesticides, thus
allowing such pesticides to be imported into the U.S. for use in that
state. Any person or state may seek registration of a qualified
Canadian pesticide. To be qualified for registration under this
proposed legislation, a Canadian pesticide must be identical or
substantially similar in composition to a U.S. registered pesticide
that is not subject to any enforcement, administrative, or regulatory
review, control or action. There must also be a tolerance or tolerance
exemption for any intended use of the Canadian pesticide. In addition,
the Canadian pesticide must be registered in Canada by the registrant
of the comparable domestic pesticide or an affiliate of that
registrant. Once registered, the Canadian pesticide must bear only the
labeling required under this bill, which is essentially the EPA
approved labeling for the comparable domestic pesticide but excludes
use directions unrelated to the intended use(s) of the Canadian
pesticide in the U.S. Furthermore, the registrant must affix the
labeling required under this proposal to the Canadian pesticides at an
establishment registered with EPA.
The legislation would require that the registrant of the comparable
domestic pesticide provide to a state any information that is necessary
for the state to make the determinations required for registration,
providing that state can certify that it can and will maintain
confidentiality of any trade secrets and confidential commercial and
financial information provided by the registrant of the comparable
domestic pesticide. As drafted, the registrant of the Canadian
pesticide would not be liable for compensation for data supporting the
registration of such pesticide.
EPA understands that this legislation is intended to create a
structure which ensures that appropriate safeguards remain in place to
enable EPA to achieve its primary mission: the protection of public
health and the environment.
However, there are some broad policy concerns with this legislation
that will need to be fully addressed, and the consequences fully
considered. For example, a legislative approach like this, with a focus
on one country alone, may have broad trade ramifications. EPA will
continue to work with congressional staff to address these issues as
they arise.
Another potential concern is that of implementation. For example,
there are important questions regarding a state's ability to maintain
confidential business information and other trade secrets, which in
this legislation is a critical step in acquiring a state registration
of a Canadian pesticide. In fact, there are some states which are
required by right-to-know and other information disclosure laws to
reveal any information they may hold. Also, the current legislation
insulates state registrants from data compensation, potentially denying
manufacturers their rights to be compensated for the use of their data
to support registration. As a result, pesticide companies may take
legal action to prevent the states from collecting this data, or seek
compensation. We also must ensure that intellectual property rights are
protected. Furthermore, any legislation should not place unreasonable
resource burdens on our pesticide registration program, or cause any
unintended consequences on other priorities in regulating pesticides.
Again, EPA will continue to work closely with your staff to help
address these types of implementation concerns.
Conclusion
In conclusion, again, I would like to emphasize that EPA has worked
very closely with congressional staff over the last year, as well as
with state officials and others, to explore remedies that would help
alleviate the concerns U.S. farmers have regarding differences in
pesticide pricing. EPA continues to seek and create effective
mechanisms that will ensure the safety of our health and environment,
while also ensuring an equal playing field for our farmers.
In the long-term, EPA is working to harmonize the availability of
pesticide products between the U.S. and Canada through the NAFTA
pesticide group in cooperation with stakeholders, including
registrants, farmers, and concerned states. International harmonization
of pesticide regulation efforts continues to be a key focus for EPA,
and these efforts hold significant promise to help alleviate some of
the pricing issues that exist today.
In the near-term, with no adequate administrative or regulatory
option available to fully address the potential pricing disparity
between the U.S. and Canada, EPA supports seeking an appropriate
legislative solution to this problem. However, although the legislation
as drafted does not compromise protection of human health or the
environment--EPA's principal criterion--there are some implementation
issues and potential international trade concerns that EPA will
continue to address. If these issues are resolved, EPA would be in a
position to support this legislation. Again, EPA commits to working
with Congress, the states, farmers, other Federal Agencies, and
industry to resolve these concerns.
Thank you for the opportunity to discuss these matters. I look
forward to working with you and other members of Congress, and other
affected stakeholders on this important issue.
Senator Dorgan. Mr. Johnson, thank you very much for your
testimony. Let us go to the last page of your testimony and see
if we can dig into some of these issues. You said: ``However,
the legislation as drafted does not compromise the human health
or environment.'' So you are saying there is not a safety issue
from the standpoint of EPA?
``There are some implementation issues and potential
international trade concerns that EPA will need to address.''
Let us just deal with these implementation issues. My view is
that EPA is not really an agency that is terribly concerned
about trade issues. We are working on that with USTR. Frankly,
I do not think there are any trade issues here, but that is
just a difference between us.
Let us talk about any concerns that EPA has. If you
eliminate health and safety, which I think you have done in
your statement, what additional implementation concerns exist?
Mr. Stephen Johnson. Let me mention a few, Mr. Chairman.
One is access and the use of confidential business information.
For example, in order for a State to receive the 24D
registration and be able to make the determination that the
products are identical or substantially similar across the
borders, they have to have access, the States have to have
access, to this confidential or trade secret information in
order to make that determination.
The current legislation allows that. We are aware of some
States that have either public disclosure policies or laws in
place that require a State certainly as a policy to release
that information. Well, obviously it cannot be maintained
confidential at the same time it is going released. So we need
to address--and it is very State-specific. I am aware, I
believe the State of Washington as well as Vermont either have
a policy and-or a regulation in place.
So we would have to work through that, because a State has
to have the access to confidential business information and at
the same time they have to have the ability to protect that
confidential business information.
Senator Dorgan. But we could simply limit the legislation
so that the States could make a choice. They could either
access that information by passing a law--if for example the
State of Washington has a disclosure law that would compromise
this proprietary information, this legislation when passed
would essentially give rise to the choice: Do you want to pass
State legislation that allows the State regulatory authority
here to keep that proprietary information private? If you do,
you can take advantage of this legislation that we have passed
here in Congress. If not, you are out of luck.
It would seem to me that one is easy to deal with and we
can deal with that, which is a line or two in our bill to
provide that in only States in which they can maintain the
proprietary records in a private manner would it be effective.
So that is one; we can solve that.
Mr. Stephen Johnson. Well, I believe that we can work our
way through and solve all of these. Let me just mention a
couple of others.
Senator Dorgan. All right.
Mr. Stephen Johnson. One involves data compensation. As you
are well aware, under the current legislation States seeking to
register a Canadian pesticide would need the information, as I
have just mentioned. Current legislation allows the State to
acquire that data from manufacturers, but insulates the State
registrants from data compensation.
What has been characterized to me is that this potentially
denies manufacturers their rights to be compensated for use of
their data, and certainly some attorneys have advised us that
it is sort of unclear what a court would ultimately do, given
this situation, because it feels that their intellectual
property rights have been infringed. Again, I flag this as an
issue.
Senator Dorgan. I am not understanding that. Would you
explain more simply for me?
Senator Burns. Down on our level.
Mr. Stephen Johnson. Well, let me try to rephrase that. The
current law, pesticide law, allows for--the company has to
provide literally millions of dollars worth of testing data to
the agency.
Senator Dorgan. To the EPA?
Mr. Stephen Johnson. To the EPA.
Senator Dorgan. Right.
Mr. Stephen Johnson. So we receive probably somewhere
between 30 and $50 million worth of test data to license a
product. The current law says that if someone wants to use
those data to get a similar product registered, then those
companies have data compensation rights. In other words, they
have spent these millions of dollars and it is sort of only
fair that if somebody is going to use it that they have the
ability to be compensated.
So that is what the current law is. The legislation as
drafted protects the State or it says the State does not have
to compensate the companies.
Senator Dorgan. Does our legislation not only deal with
pesticides that are registered here? If that is the case, if
they have registered the pesticide, the company itself has made
a decision. They are not selling it here, they are just
registering it here and then withholding the sale. So I do not
understand why this would be an issue at all. The chemical
companies themselves would have made a decision to register,
but then withhold from sale.
If the State regulator certifies that it is essentially the
same chemical, it has been registered here and therefore there
are no safety issues. I do not understand what this issue is,
honestly.
Mr. Stephen Johnson. Well, I think that it probably gets to
more of a case where there is substantially similar, where it
may be a little slightly different product, but it is pretty
much substantially similar. So there may be some additional
data that would be necessary, but different than what the U.S.
registration was based upon. So again, I flag this as an area
that I am aware of that we need to work through on data
compensation.
Senator Dorgan. Excuse me. That is not typically an EPA
issue or an EPA concern, is it?
Mr. Stephen Johnson. Well, in one sense it is not. Our
responsibility is to make sure that when those instances happen
where there is data compensation rights, first of all, we have
to identify what data we used to make our decision for somebody
else, and if indeed we used that then the primary registrant or
chemical company has data compensation rights. So our
responsibility is first to say what we have done to make our
decision.
Second, the law requires that that company that used the
other data make an offer to pay. So as long as they have made
an offer to pay, then they have fulfilled their obligations
under EPA.
Senator Dorgan. I want to call on my colleague. Before I
do, I want to ask you one final question. If I might have that
box of Folicur one more time. Mr. Johnson, the current
situation I believe is this, and correct me if I am wrong. This
Folicur box contained a chemical that was marketed in both the
United States and Canada. This box actually was owned by a U.S.
farmer, but this is an unusual box in the sense that it was a
chemical that was being sold in the U.S., it was shipped by the
chemical company to Canada because they were short up in Canada
of this chemical, so that they also slapped a Canadian label on
it.
The only difference between the U.S. and Canada, the same
chemical, the same box, the U.S. farmer was charged $500 more
for the identical product than the Canadian farmer. If the
chemical company had decided, we are registered in both
countries with this product, but we now decide not to market it
in the United States anymore, we will just market it in Canada,
is it not the case that the U.S. farmer would be unable to
access this chemical despite the fact that it has been
registered in this country?
You say there are no safety issues, but the chemical
company controls, (A), the price, in this circumstance charging
the U.S. farmer a much higher price; and (B), the decision of
whether they will even market it in this country.
I guess my question is, because you come from a regulatory
agency dealing with health and safety, is there any
justification, on behalf of consumers now, U.S. consumers--that
is who we represent--is there any justification at all for the
chemical companies to have that capability?
Mr. Stephen Johnson. Again, our concern is the public
health and safety. In that case and in the other cases that you
mentioned, there was no concern over public health and safety.
We do not want, I do not want, our American farmers to be
disadvantaged and having to pay more than others. We believe
and I believe that there needs to be a level playing field.
Senator Dorgan. So there is no health or safety issue, but
the reason a chemical company could market this in Canada and
not in the U.S. and therefore prevent the U.S. farmer from
acquiring it, is they could hide behind the EPA even though
there is no safety issue at the present time, is that correct?
Mr. Stephen Johnson. That is a way of putting it, yes, that
is correct.
Senator Dorgan. Is that not using EPA as an unwitting
shield here, in a manner not intended by Congress?
Mr. Stephen Johnson. Well, I would rather not be in the
position that we are, but you are correct.
Senator Dorgan. I do not mean to use the term ``unwitting''
in an incorrect way.
You have been very helpful to us. I hope that we can expect
even more assistance to right a wrong. Clearly what is
happening here is wrong and we do not want in any way to raise
public safety questions. But nor do we want the chemical
industry to be able to use the EPA to describe prices on the
U.S. side of the border at a much higher level than prices they
charge on the Canadian side. It is just unfair for that to
continue to happen.
Let me call on my colleague Senator Burns.
Senator Burns. I have just a couple of questions. The NAFTA
label intrigues me. You will have to do some business with the
ITR's office, though.
Mr. Stephen Johnson. Well, actually we have, and they are
as well very excited about the NAFTA label. There is a chemical
company who has now submitted a NAFTA label for registration.
It is the first one that we have received. What it does--and
actually both Canada and the United States are both reviewing
the licensing application at the same time and looking at, if
you will, the one label that fits both of our needs.
As I said, this is the first time. We are very excited
about it because from a licensing standpoint, from a grower's
standpoint, from a health and safety standpoint, it just makes
good sense.
Senator Burns. Tell me about the attitude of our trading
partners to the South?
Mr. Stephen Johnson. They also would very much like to
participate in this kind of a process. They do not at this
point have a registration program quite as sophisticated as
both Canada and the United States does, but we are working with
them very cooperatively to allow free trade and to make sure
that what they are doing in Mexico is not in conflict with what
the U.S. is doing as well.
Senator Burns. Can this be--now, I have already answered
one question because you have a fungicide that was up here.
This is also extended to herbicides and fungicides?
Mr. Stephen Johnson. That is correct. It is all pesticides,
which includes insecticides, fungicides, rodenticides.
Senator Burns. Okay. Now, can you extend that also into the
animal health?
Mr. Stephen Johnson. Animal health as far as a pesticide,
that is correct.
Senator Burns. Because I can see as we expand the free
trade zone or the free trade talks going further into South
America, Argentina, Chile, and the chemicals that are used to
produce table grapes, strawberries, and melons of all shapes,
sizes, and descriptions, and also in livestock, and how they
take care of their livestock, would also--I can see this, this
NAFTA label, or a label that pertains to a trading agreement
being very beneficial.
Now, a while ago you said the business information and the
protection of intellectual properties. Can you be more specific
on that as far as your responsibility or the States'
responsibility in the licensing and testings of a product?
Mr. Stephen Johnson. Yes. When a company submits a
pesticide registration application to us, as I said, there is
literally millions of dollars worth of information. A portion
of that information is considered trade secret or confidential
information, typically the kind of information that is how the
product is actually developed, the synthesis procedure, and
things like that, that they have a great deal of patent both
responsibility and protection.
So that information is submitted to us. We have to go
through very rigorous procedures within the agency to ensure
that that trade secret data are maintained as trade secrets. So
in the case of the proposed legislation, in order for a State
to be able to make a determination that the product across the
board is identical or substantially similar they, the State,
would need to have access to this confidential information. Of
course, with the access also is the responsibility to make sure
the trade secret for confidential business information is
protected or is maintained.
My point earlier was that I am aware that some States have
some other laws and-or policies in place, which this kind of
information would be in conflict. So it is an issue that we
just have to resolve.
Senator Burns. Well, I am going to footnote. This is just
sort of a statement. Now, we know now doing business with
economies of scale there are going to be some differences.
There always are, and the translation or the exchange rate in
the moneys that are used.
But I will tell you, Mr. Johnson, we would not be here
having this hearing today if we had five dollar wheat. I will
guarantee you that, because the economy right now on the farm
is not in great shape.
I think what the American farmer right now is really
feeling, and this is the reason that we are trying to find ways
to run our operations more efficiently and probably do it on
less money, is that the American processor and the American
public still do not have a good idea of how we get more
dollars, more percentage of the consumer dollar, back on the
farm.
For years and years we operated around 15 to 17 cents and
it kind of fluctuated and agriculture did pretty good. Now we
are down around 9 or 10 and probably worse than that if you are
buying Wheaties by the pound in the grocery store. So that is
what is driving these issues, and our government has to be
responsive to those things and get aggressive with our trading
partners and find out how we can deal with the irritants on the
border, how maybe we can elevate the standard of living both in
agriculture on both sides of the line.
The Canadian farmer is not in any better shape than we are,
and I will say right now that the farm economy is what is
driving these issues, because I just have an idea that there
are going to be dramatic changes in the next 4 to 5 years in
agriculture that we have never seen before, and some of it I am
afraid will be on the negative side. That is what is driving
this dialogue.
So I thank you for coming today. I appreciate--and by the
way, I have got one thing. You said you are working very
closely with Congressional representatives up here. Your shadow
has never darkened my door. So give me a call.
Mr. Stephen Johnson. Senator, I would be happy to.
Senator Burns. Thank you very much.
Senator Dorgan. Mr. Johnson, just one or two final
questions. You indicate EPA is working closely with Canada and
other trading partners to break down barriers and facilitate
trade and competitiveness.
Mr. Stephen Johnson. Yes.
Senator Dorgan. Frankly I have been concerned about
harmonization efforts. I think we are much more interested in
doing new trade agreements than following up on requirements
from old agreements. We have, for example, this notion now that
we need to provide fast track authority. Well, my reaction is
maybe we should provide some requirements that we fast track a
few solutions to the problems created in the old agreements
before we give anybody fast track to go make new agreements.
But one of the issues in the NAFTA agreement was chemical
harmonization, and I know you say you are making some progress,
but I must confess to you I see precious little evidence of
that. Let me ask this question. Assuming this legislation does
not pass, let us assume this legislation does not move, is
there any expectation on your part that 2 years from now, 4
years from now, that our farmers will be able to access the
substantially similar chemicals from Canada and bring them
across the border?
Mr. Stephen Johnson. In the short term, I do not believe
that we do have a solution other than legislation.
Senator Dorgan. So you believe the legislative solution is
the only mechanism to address this issue?
Mr. Stephen Johnson. Certainly in the short term.
Senator Dorgan. And you believe, from your testimony, that
there is a problem here with respect to equity and fairness?
Mr. Stephen Johnson. Yes.
Senator Dorgan. You do not believe there is a problem with
respect to safety, public safety, as the legislation is
drafted, is that correct?
Mr. Stephen Johnson. That is correct.
Senator Dorgan. And you will continue to work with us as we
strive to perfect this legislation? You have raised, I think,
for example in the issue with respect to proprietary
information some fair points. I do not know that that is an EPA
issue so much. It is more a corporate issue. But I think we
should probably add a very brief provision to this legislation
saying that those States in which the information would not be
held proprietary will not be able to participate until the
State legislatures make that judgment. That is an easy thing to
do.
I think if you would be willing to give us a list of the
things you think need to be done to improve this legislation,
as far as I am concerned--and I would hope to speak on behalf
of Senator Burns and the other co-sponsors--I think we would
want to make the changes, improve this legislation, and then we
would like to move it with the support of the EPA.
Mr. Stephen Johnson. I would be happy to do so.
Senator Dorgan. I would say that Administrator Whitman has
been extraordinarily helpful on a range of issues and, while I
do not know her well and have not worked with her a great deal,
those issues that we have worked with her on tell me that she
is somebody that wants to do the practical thing, figure out
what the problem is, find some solutions, and take practical
steps to solve some problems.
I like that attitude. I like an Administrator who does
that. That is a refreshing thing, because every agency has so
many attorneys telling the administrator of the agency why they
cannot do something. I think it is refreshing to find
administrators who say, let us solve problems. I think
Administrator Whitman is someone who wants to do that.
Senator Burns. Mr. Chairman, I also want to interject.
There have been two or three meetings already between the EPA
Administrator and the Secretary of Agriculture. That is unheard
of since I have been here, because we cannot get agencies to
talk to one another. They do not want to give up any of their
turf; we do not want to give away any of our secrets here in
this town. So that contributes to 17 square miles of logic-free
environment.
We are all in this thing together and the dialogue between
the agencies is going to have to be increased.
Senator Dorgan. Is that sound that you made a cutback or a
callas bell sound? I was trying to figure that out.
[Laughter.]
Senator Burns. I picked it up in Regent, North Dakota.
Senator Dorgan. You picked it up, but you did not keep it
long.
Mr. Johnson, we deeply appreciate your testimony, and not
just today, but we appreciate the work that you have done and
have been willing to do with us. We look forward to meeting
with you again, perfecting this legislation, getting the EPA's
written support, written unconditional support. We will try to
move that through the Congress.
Thank you very much.
Mr. Stephen Johnson. Thank you, Mr. Chairman. Thank you,
Senator Burns.
Senator Dorgan. Let me, while I excuse Mr. Johnson, call
the next panel forward: Mr. Ron Fitchhorn, President of the
Illinois Corn Growers Association, of Bloomington, Illinois;
Mr. Dave McClure, President of the Montana Farm Bureau. Mr. Art
Purdue was going to be with us, General Manager Cenex Minot,
North Dakota. He is not here because of a medical situation, so
he has submitted a statement. Mr. Jay Vroom, President of the
American Crop Protection Association; and Hank Zell, National
Farmers Union.
If you all would come forward and take a seat, we would
appreciate it.
Mr. Fitchhorn, you are President of the Illinois Corn
Growers. We will begin with you. Your entire statement will be
made a part of the record and we would ask you to summarize,
and we welcome you here today.
STATEMENT OF RON FITCHHORN, PRESIDENT, ILLINOIS CORN GROWERS
ASSOCIATION
Mr. Fitchhorn. Thank you, Chairman Dorgan and Senator
Burns. Thank you for this opportunity to appear before you
today on this very important issue. My name is Ron Fitchhorn
and I grow 2,000 acres of corn and soybeans in central
Illinois, and I also serve as the Illinois Corn Growers
Association President this year.
The issue of price disparity that the Committee is
addressing today has plagued U.S. farmers for many years.
However, awareness of these inconsistent pricing schemes is at
an all-time high. Increasing competition amongst the world's
farmers means U.S. growers are now keenly aware that unfair
agricultural input pricing subsidies are subsidizing the inputs
of our competitors. This puts America farmers at a
disadvantage.
Senator Dorgan's bill focuses on chemical inputs. However,
the same issue exists with seed pricing, both conventional and
in new seed varieties developed through biotechnology. Farmers
deal with many factors outside of their control in raising a
crop. Unlike the weather, I think we can have a positive impact
in addressing the issue of price disparity of inputs like
chemicals and seed.
Other panelists have noted the recently completed North
Dakota State University study which shows U.S. farmers were
paying substantially more for chemical inputs, specifically
herbicides, than farmers in neighboring Canada. Researchers
found that the net income for large, medium, and small sized
representative farms would increase 3.8, 4.6, and 5.2
respectively if Canadian priced herbicides could be used in the
United States.
The study went on to note that the total impact on U.S.
agriculture would be quite substantial, at least $1.46 per acre
in the herbicide industry alone.
These numbers are alarming, especially given the current
poor state agricultural economy in the United States. Pesticide
expenses in the United States increased from 1.2 percent of the
total production expenses in 1965 to 5.1 percent in 1999. Today
this means U.S. farmers are paying $6 million more for the
widely used herbicide called Roundup alone.
Although the study focused on North Dakota farmers for much
of the information, it can be applied to farmers in any State.
For example, in my home State of Illinois the price of
Atrazine, the most widely used herbicide in the State, was
$3.17 per pound during the time that the data was collected for
the North Dakota study. In Canada the same product sold for
$2.53. The same situation also exists for most of the other
chemical inputs used in Illinois. I would be happy to supply
the Committee with further data if necessary.
The Illinois Corn Growers Association has had many
discussions with input providers on the price disparity of
needed chemicals, but with limited response.
But two-tiered pricing does not stop with chemicals. In
January of 2000, the Government Accounting Office released a
study in which they found that the prices American farmers were
paying for biotech seed and conventional seed are likewise
distorted. The study looked at prices being paid by U.S.
farmers and those in Argentina.
The study found that U.S. farmers paid within the range of
20 to $23 for a 50-pound bag of Roundup Ready soybeans, while
the farmers in Argentina paid 12 to $15 for the same bag. For
BT corn seed this disparity also exists, with U.S. producers
paying 83 to $122 per 80,000-seed bag and Argentina's prices
ranging between 75 and $117.
Even this small margin is costing me approximately $5,000
on my operation this year. If you add in the $1.46 with the
herbicide, we are getting up toward $8,000 on my own operation.
Conventional seed is also more expensive in the United
States. Conventional soybean seed in the United States will
cost a grower 13 to $17 per bag and the Argentina farmer pays 8
to 10 for the same product.
In total, U.S. farmers pay much more for the inputs than
our competitors.
I commend you, Senator Dorgan, for your attempt to shed
light on this important issue. However, I would suggest that we
consider a further step to assure pricing fairness. It has been
difficult to monitor global price disparities because there is
no centralized recording requirement. I would urge Congress to
consider requiring USDA's Economic Research Service to publish
input prices every 2 years. This publication would be a useful
tool, especially if it includes the prices being paid by our
major competitors.
The Illinois Corn Growers Association believes it is
neither prudent nor logical to shackle U.S. farmers with higher
chemical prices than our competitors.
Thank you for your time and your consideration on this
matter.
[The prepared statement of Mr. Fitchhorn follows:]
Prepared Statement of Ron Fitchhorn, President, Illinois Corn Growers
Association
I would like to thank Chairman Dorgan, Ranking member Fitzgerald,
and the rest of the Committee for the opportunity to appear before you
today on this very important issue. My name is Ron Fitchhorn. I grow
2,000 acres of corn and soybeans on my Central Illinois farm. I also
serve as Illinois Corn Growers Association president.
The issue of price disparity that the Committee is addressing today
has plagued U.S. farmers for many years. However, awareness of these
inconsistent pricing schemes is at an all-time high. Increasing
competition amongst the world's farmers means U.S. growers are now
keenly aware that unfair agricultural input pricing subsidizes the
inputs of our competitors. This puts American farmers at a
disadvantage. Senator Dorgan's bill focuses on chemical inputs;
however, the same issue exists with seed prices for both conventional
and new seed varieties developed through biotechnology.
Farmers deal with many factors outside of their control in trying
to raise a crop. Unlike the weather, I think we can have a positive
impact in addressing the issue of price disparity of inputs like
chemicals and seed. Other panelists have noted the recently completed
North Dakota State University study (United States and Canadian
Agricultural Herbicide Costs: Impacts on North Dakota Farmers) which
showed U.S. farmers were paying substantially more for chemical
inputs--specifically herbicides--than farmers in neighboring Canada.
Researchers found that ``net farm income for large, medium, and
small size representative farms would increase 3.8%, 4.6% and 5.2%,
respectively, if Canadian priced herbicides could be used in the United
States.'' The study went on to note that the total impact on US
agriculture is $23.9 million, or $1.46 per acre in the herbicide
industry alone. These numbers are alarming, especially given the
current poor state of the agricultural economy in this nation.
Pesticide expenses in the United States increased from 1.2% of
total production expenses in 1965 to 5.1% in 1999. Today this means
U.S. farmers are paying $6 million more for the widely used herbicide
called Round-up alone.
Although the study focused on North Dakota farmers, much of the
information can be applied to farmers in any state. For example, in my
home state of Illinois the price for Atrazine, the most widely used
herbicide, was $3.17 per pound during the time the data was collected
for the North Dakota study. In Canada the same product sold for $2.53.
The same situation also exists for most of the other chemical inputs
used in Illinois. I would be happy to supply the Committee with this
data if necessary.
The Illinois Corn Growers Association has had many discussions with
input providers on the price disparity of needed chemicals, with
limited response. And this two-tiered pricing does not stop with
chemicals. In January 2000, the Government Accounting Office (GAO)
released a study (Information on Prices of Genetically Modified Seeds
in the United States and Argentina) in which they found the prices
American farmers are paying for biotech seed and conventional seed are
likewise distorted. The study looked at prices being paid by U.S.
farmers (specifically Iowa and Illinois farmers) and those in
Argentina.
The study found U.S. farmers pay within a range of $20-$23 per 501b
bag of Roundup Ready soybean seeds. Farmers in Argentina pay only $12-
$15 for same bag. For BT corn seeds, the disparity also exists--with
U.S. producers paying $83-$122 per 80,000 seed bag and Argentina prices
ranging between $75-$117. Even this small margin is costing me
approximately $5000 on my operation this year.
Conventional seed is also more expensive in the U.S. Conventional
soybean seeds in the U.S. will cost a grower $13-$17 per 80,000 seed
bag. Argentina's farmers pay $8-$10 for the same product.
In total, U.S. farmers pay much more for inputs than our
competitors. I commend Senator Dorgan for his attempt to shed light on
this important issue. However, I would suggest that we consider a
further step to assure pricing fairness. It has been difficult to
monitor global price disparities because there is no centralized
recording requirement. I would urge Congress to consider requiring
USDA's Economic Research Service (ERS) to publish input prices
(chemical and seed) every two years. This publication would be a useful
tool, especially if it includes the prices being paid by our major
competitors.
Illinois Corn Growers Association believes it is neither prudent
nor logical to shackle U.S. farmers with higher chemical prices than
our competitors. Thank you for your time and consideration on this
matter.
Senator Dorgan. Mr. Fitchhorn, thank you very much.
Why do we not just go down the row. Let me ask Mr. Jay
Vroom, President of the American Crop Protection Association,
to testify.
STATEMENT OF JAY VROOM, PRESIDENT, AMERICAN CROP PROTECTION
ASSOCIATION
Mr. Vroom. Thank you, Mr. Chairman, Senator Burns. We
appreciate the opportunity to be here today. We have submitted
a written statement and ask that that be entered into the
record. I would like to summarize a few thoughts if I might in
the time allotted for oral remarks.
No doubt that this is an important issue, both in terms of
the reality of the actual disparities in terms of product
availability and the unevenness that that has created in the
marketplace for my industry's crop protection products and
biotechnology products across this particular border. But it,
as it has been said earlier here by other witnesses and by
yourselves, this is not an issue just confined to the U.S.-
Canada border.
Likewise, there is a substantial perception problem that we
also think needs to be addressed, and more transparency and
information about what costs really are and what kinds of
inequities there might actually be in the marketplace is
appropriate.
For those who may be here today listening that are not
acquainted with the agricultural community, I think it is
important for this opportunity for me to point out that ACPA
and our member companies that we represent and their customers,
which are in some cases not members of ACPA, distributors of
agrichemicals in the United States and biotechnology seed
products, and the independent dealers across this country, have
worked extensively throughout the duration of our opportunity
to be in this marketplace for more than 40 years with our farm
customers.
I know of no one that actively participates in the United
States marketplace for these technologies that intentionally
discriminates against the American farmer. That is contrary to
everything that we do, including the advocacy for support of
farm programs that provide essential safety nets for the
American farmer, as well as advocacy for more free trade for
agricultural output, and also the fundamental positions that we
have taken and energy and resources that we put into advocating
for harmonization of rules and regulations and legislation that
govern our industry's products.
As I have thought about some of the remarks that have been
made here so far this morning, particularly around the
requirements of U.S. EPA and the Pesticide Management
Regulatory Authority in Canada, both are interesting case
studies in the old adage that, at least in terms of American
democracy, it is imperfect, it is ugly, it is run by human
beings, but it is the best system in the world and it is the
best system that has ever been implemented in the world.
Can it be better? Can our regulation of pesticides be
better, more fair or harmonized? And can we lower that barrier
that is the Canadian-U.S. border to create a more unitized
market for our industry products? Absolutely, and we commend
the things that EPA has done and achieved already, even working
with our industry and many grower groups on both sides of the
border, to effect some progress.
But let me tell you that, while the progress that has been
made, particularly in the last year or two, is substantial,
when put into context with the fact that we have been working
on this since 1988--even before there was a NAFTA, there was a
U.S.-Canada Free Trade Agreement, as those of you along the
northern tier States know all too well. We have been actively
investing in trying to move this ball forward in terms of
greater harmonization.
If you put it in the context of 12 to 13 years, the success
that we have got to show in terms of progress in harmonizing
and joint reviews and now on the verge of maybe having the
first NAFTA-labeled pesticide product available for U.S. and
Canadian and Mexican farmers, it is a pretty dismal record. So
we would like to go faster. We would like to see more progress
in that regard.
But we also commend the fact that we have a pretty good
system that has established an ability for my industry to have
incentives to innovate and develop billions of dollars worth of
products that have been very effectively used by American
farmers and farmers around the world. We are in favor of
greater harmonization and we look forward to working with you,
Mr. Chairman, and other Senators who are interested in this
issue, as well as our grower customers that are absolutely at
the forefront of this issue.
We recognize the fact that there is economic strife in the
farm economy. We feel it directly. As was reflected in my
written testimony, my industry's sales in the United States
have come down substantially in the last 3 years, even more
dramatically when measured against our peak sales years 1995
and 1996 in the United States. So we are suffering along with
our farm customers. I know that most personally because I am
from Illinois and I am still engaged in the family farm
operation with my cousins and brothers-in-law and I hear
regularly from them about the difficulties that are being
experienced by family farmers back in Illinois. So I understand
personally as well as professionally on behalf of representing
ACPA here today that these are issues that need to be
addressed.
We do have some serious concerns with some of the
provisions that are in your bill, Mr. Dorgan. But we would
commit ourselves to continue to work with your staff and EPA
and the grower interests to see if we can find some common
ground and move forward here.
With that, in conclusion, I thank you again for the
opportunity to be here and look forward to responding to any
questions.
[The prepared statement of Mr. Vroom follows:]
Prepared Statement of Jay Vroom, President, American Crop Protection
Association
Mr. Chairman and Members of the Committee:
I am Jay Vroom, President of the American Crop Protection
Association (ACPA). ACPA is a national trade association representing
the manufacturers, distributors and formulators of virtually all crop
protection chemicals and crop biotechnology products used in the United
States. I appreciate the opportunity to testify before you this morning
on pesticide and biotech seed harmonization issues.
Producing and marketing crop protection and the new array of
biotechnology products involves a complex matrix of factors, including
crops, competitive chemicals, soil/climate conditions, geographic
region, dealer and distributor incentives, volume discounts, patent
life, liability costs, minor use considerations, regulatory compliance,
regulatory delays, transition to and reinvestment in reduced risk
products, research and development costs, the state of the farm economy
and a multitude of other considerations, not the least of which is the
impact of the uncertain and inconsistent implementation of the Food
Quality Protection Act (FQPA).
We are pleased that our member company investments in research and
development have provided a vast arsenal of insect, disease and weed
control tools for American farmers. Yields of many crops in the U.S.
have doubled and tripled since the introduction of modern pesticides
and much of this increase is due to the effectiveness of these tools in
controlling crop pests. I believe it is important to recognize the
benefits of the U.S. crop protection industry and some of our major
accomplishments:
First and foremost is the vast array of tools we provide the
American farmer. Today we have more than 9,000 product
tolerances on crops from wheat, soybeans, canola, barley to
sunflowers, flax, zucchini and kiwi.
We understand that some growers, especially minor use
farmers, would like to have additional registrations and we'll
continue to work closely with growers, USDA, EPA and the NAFTA
Technical Working Group to accommodate these needs when
possible. For the last few years, for example, we have worked
very closely with the canola growers in their quest for more
pesticide tools in the U.S. Since this crop is comparatively
new in the U.S. compared to Canada, and the U.S.-planted
acreage is considerably smaller than in Canada, U.S. growers
are eager to gain access to products which have already been
registered across the border.
We are pleased that our work with the growers and EPA is
beginning to pay off. Since 1995, a significant number of new
pesticide uses have been registered for canola. EPA's current
FY 2001 work plan includes nine such uses, of which five have
been registered. In addition, credit is due to USDA's IR-4
program for its attention to and actions that have contributed
solutions in this minor use area.
There are multiple challenges to the crop protection and biotech
industry. We are committed to serving the American farmer by providing
the best technology at the farm gate and supporting their farm and
rural policy objectives in the legislative and regulatory arenas. The
Senate Agriculture Committee is addressing many of these issues and we
encourage Congress as they consider the current Farm Bill to help
increase exports, build domestic demand, reduce agriculture's
regulatory burden and provide affordable, workable risk management
tools to growers.
Recent years have certainly taken a toll on U.S. agriculture, with
declining prices, natural disasters, and distressed world economies.
Many U.S. farmers are experiencing serious financial problems. Congress
has provided emergency assistance to farmers, but the pain continues to
ripple throughout the farm economy, with ACPA members included in the
economic-pain quotient. Doane Agricultural Service reports that total
agricultural pesticide sales for all U.S. crops for all pesticide types
(including herbicides, insecticides, miticides, fungicides, plant
growth regulators, and nematicides) dropped by nearly 10 per cent from
$7.410 billion in 1998 to $6.691 billion in 1999. When the agriculture
economy is stressed, our member companies are negatively impacted also.
Our own association sales survey data shows that the total U.S. sales
of ACPA member companies declined from $8.327 billion in 1998 to $7.837
billion in 2000. Even more dramatic declines in our total sales can be
found if we go back to earlier years for comparison.
Relative to the subject of this hearing this morning, I would like
to address some of the key variables related to crop protection and
crop biotech product pricing.
1. Pesticide Registration Regulatory Processes / United States vs.
Canada
The most important factor in pricing differentials results from the
significant differences in product testing and registration standards
between the United States and Canada. At our own initiative, ACPA
formed a special Industry Working Group to help move the regulatory
harmonization process forward. We have been working with EPA and their
Canadian counterpart PMRA for the last several years to harmonize some
of these requirements so that products on both sides of the border
would be more equally available, and therefore likely to be more evenly
priced. It seems reasonable that the U.S. and Canada could mutually
accept pesticide tolerances, rather than have separate processes and
reviews. Although frustrated, we will continue to press our regulatory
bodies to move more expeditiously toward harmonization.
In the U.S., fewer than 1 in 20,000 compounds will make it from the
discovery laboratory to the farm field; and only after that one
chemical passes at least 120 or more federally mandated tests during a
period of 10 years or more at a total invested cost in the product's
development of upwards of $150 million. This time and cost is borne
completely by the initial registrant before one cent can be generated
in revenue. In Canada, a similar chemical would have to undergo
sometimes very different batteries of tests and procedures.
EPA implementation practices on FQPA are being exported to Canada
where worst-cased default decisions may be adopted in the name of
harmonization. This regulatory approach, if adopted, will reduce the
number of products available to growers on both sides of the border,
and will undoubtedly impact the prices of remaining products. The
registration processes in Canada including, testing and data
requirements, can be significantly different, sometimes resulting in
lesser cost and time between laboratory development and ultimate
marketplace sales.
2. Harmonization
Under the North American Free Trade Agreement (NAFTA), the
governments of Mexico, Canada and the United States formed the
Technical Working Group (TWG) on Pesticides in 1996. The scope of work
for the TWG has been to develop a coordinated pesticides regulatory
framework among NAFTA partners to address trade irritants, build
national regulatory/scientific capacity, share the review burden, and
coordinate scientific and regulatory decisions on pesticides. We
support the goals of NAFTA TWG which include: (1) Sharing the work of
pesticide regulation; (2) Harmonizing scientific and policy
considerations for pesticide regulations; (3) Reducing trade barriers;
and (4) Maintaining current high levels of protection of public health
and the environment while supporting the principles of sustainable pest
management.
We believe that through this process, new product registrations can
be expedited and duplication of studies and analysis can be reduced,
ultimately providing greater market competition in both availability
and pricing. In order to get there, however, we need to continue
working through the TWG to harmonize guidelines, define the ``core
regulatory data set,'' and streamline the EPA registration process.
3. ``Pesticide Pricing Study on Differentials Between Canada and the
United States''
In 1999 USDA and Agri-Food Canada conducted a comprehensive study
of products and price differentials between the two countries, as
mandated in the U.S.-Canada Record of Understanding. The study was
conducted by expert researchers at the North Carolina State University
and University of Guelph in Ontario, Canada. The conclusions of the
study show that on a cost-per-treated acre basis, Canadian farmers
spend far more on chemical inputs in general than farmers in the
northern plains states. Selective use of the data may misrepresent the
author's findings, and we feel it is important to look at the whole
picture.
We believe that this governmental report reflects an accurate
snapshot of pricing between the two countries, concluding that some
pesticides are higher in the U.S., while others are higher in our
neighboring country. We would support this data being updated by a
credible governmental body, or its contractors, so a current and
accurate assessment can be conducted. Some of the key conclusions from
the 1999 Report are summarized below:
Individual Northern U.S. growers may have higher costs of
production than Canadian counterparts, but these have much more
to do with non-chemical issues such as land, labor and
management costs.
Some pesticide products have lower prices in Canadian
provinces than similar products in North Dakota. Conversely,
others are listed as being the opposite: lower priced in ND.
The marketplace factors given for price differentials include:
differences in patent protection length; differences in market
size and costs; differences in farmer demands; differences in
availability of alternative products.
ND growers generally spend less on weed control products
than their northern counterparts.
Frequently used products in Manitoba and Saskatchewan differ
from those frequently used in ND or MN.
There is a difference of US $3-4 on a per treated acre
basis, with ND growers spending less then growers in MB or SK.
Overall, cost-per-treated acre in ND is significantly lower
than in Canadian provinces.
The percent difference that Manitoba growers spend above ND
growers by crop was: +209 percent for wheat, +169 percent for
barley, +41 percent for canola, +29 percent for potatoes.
``The estimated impact of purchasing lower priced pesticides
in either Manitoba or North Dakota using existing herbicide
market shares is small on a per treated acre basis (usually
less than US $0.50 per acre).''
I would also like to refer the Subcommittee to the February 26,
1999 GAO report on pesticide pricing in Canada and the U.S., which
addresses the marketing complexities both within the U.S. and between
the two countries.
4. Cost of Liability
It is important to recognize what a litigious society the U.S. has
become and how this burden is factored into market strategies in
response to frivolous lawsuits. Much attention has been paid to the
notion of tort reform, but little has been accomplished in changing the
law or the practice of frivolous lawsuits.
U.S. agrochemical manufacturers understand these conditions all too
well. Our companies face a literal barrage of threatened or formal
legal actions covering the full range of liability exposures: product
performance, environmental damage, personal injury, and so on. Having
to defend the underlying business--whether through rigorous court
action or out of court settlement--is a real and growing cost of our
U.S. business. Some states are home to courts that encourage or allow
more frivolous litigation than others, accounting for different
underlying cost assumptions in different parts of our domestic markets.
Different crops vary widely in their overall per acre value. The
potential liability that accompanies the marketing of pesticides on
high-valued crops forces registrants to pay special attention to
conditions that might cause crop damage. These factors increase the
costs of products on some crops. Highly competitive marketing
strategies, including rebates, must also be accounted for in the
pricing of products to growers.
5. Labeling Issues of FIFRA and N.D. Department of Agriculture
Section 24(c) of the Federal Insecticide, Fungicide and Rodenticide
Act governs ways by which state governments can address special local
needs of an existing or imminent pest problem for which there is no
available federally registered pesticide product. The N.D. Department
of Agriculture has contacted several crop protection manufacturers to
see if there was interest in applying for 24(c) SLN for products they
marketed in Canada, which had same or similar formulations in North
Dakota at different prices. If legislation is considered, a minor
change to FIFRA Sec 24 (c) might give EPA additional authority to
address the concerns we are discussing this morning.
6. Biotech Seeds
Specific to the issue of biotech seed sales, our biotech member
companies market seeds on a global basis. Considering their substantial
investment in agricultural research, we strongly support protection of
their intellectual property rights. The ability to recoup their
investment costs based on the market value of their discovery is a
right, long championed in the U.S. The January 2000 GAO Report issued
last year comparing prices of biotech seeds indicated that a key reason
that the price of biotech soybeans was lower in Argentina than in the
U.S. was the lack of patent and other intellectual property protection
for these products in Argentina, including the lax enforcement of seed
laws there. The pricing differential between the two countries is a
result of weak controls that encourage black market seed sales, not
marketing practices by the technology providers. In the WTO dispute
settlement proceedings against Argentina last year, we were pleased
that members of Congress and the U.S. Special Trade Representative
urged the inclusion of intellectual property protection for
biotechnology.
Last month one of our technology providers announced the
elimination of separate technology fees for corn and soybean seed.
Starting with the 2002 planting season, growers will make a single
payment to the seed company for technology and seed, rather than
separate payments to the seed company and the technology provider for
the patented technology. This independent decision by one technology
company is an illustration of the fact that this market is rapidly
evolving and that market forces are functioning.
Summary
The frustrations around all these issues demonstrate the need to
aggressively pursue government-to-government harmonization. Pricing and
availability issues cannot be solved by individual state actions on
individual products. Our regulatory bodies have an obligation to
promulgate clear federal government rules and guidelines, so as to
avoid confusion and disruption in the marketplace.
The pricing of pesticides and biotech products takes into account
many factors that encompass research and development costs,
distribution and marketing costs, crop value and related liability,
availability of competitive products, state of the farm economy and
available patent life. The most important factor in our marketplace,
however, is a healthy customer. As stated earlier in this testimony,
our U.S. farmer customer is in dire economic straights, and so is our
industry. We hope that the issues of concern at this hearing can be
properly put in the larger context--that we have a regulatory system
that has enabled development and marketing of crop technology products
over the last several decades that have contributed to the U.S.
agricultural system being the envy of the world. Inadvertently
compromising the positive strength of this system could have profound,
long term negative impacts on our entire technology innovation system.
Thank you again for the opportunity to share our views with the
Subcommittee. We look forward to working with the Chairman and other
Senators to address the U.S.-Canada harmonization concerns discussed
here today.
Senator Dorgan. Mr. Vroom, thank you very much.
We are joined by Senator Fitzgerald. Would you like to make
a statement? We have two additional witnesses to testify.
STATEMENT OF HON. PETER FITZGERALD,
U.S. SENATOR FROM ILLINOIS
Senator Fitzgerald. I want mainly to thank Mr. Fitchhorn.
He is the President of the Corn Growers in Illinois, the new
President. I would like to welcome him, my constituent, here,
and Mr. Vroom, who indicated he was born and raised in
Illinois. I guess you are from Bureau County, is that right?
Mr. Vroom. Yes.
Senator Fitzgerald. So you are still an honorary
constituent, I guess. Welcome.
Senator Burns. He still votes there.
Senator Dorgan. Pardon?
Senator Burns. He still votes there.
Senator Fitzgerald. Do you still vote there?
Mr. Vroom. No, sir. I vote in the Commonwealth of Virginia.
[Laughter.]
Senator Fitzgerald. I want to thank you for being here.
I have not heard much on this issue from Illinois farmers.
I think it probably more pertains to the farmers along the
border in Senator Burns' and Senator Dorgan's states. But it is
a legitimate issue and I hope we can find out some solution
that helps the farmers in the northern tier of states around
the country.
I appreciate you all being here and thank the Chairman for
holding this hearing.
Senator Dorgan. Senator Fitzgerald, thank you very much.
Next we will hear from Mr. McClure. Mr. McClure, would you
proceed.
STATEMENT OF DAVE McCLURE, PRESIDENT OF THE
MONTANA FARM BUREAU, AMERICAN FARM BUREAU
FEDERATION
Mr. McClure. Good morning, Mr. Chairman and Committee
members. I am Dave McClure, a farmer and rancher from
Lewistown, Montana. I raise wheat, barley, cattle and hay. I am
also the President of the Montana Farm Bureau and a member of
the board of directors of the American Farm Bureau Federation.
I am testifying today on behalf of both the American Farm
Bureau and the Montana Farm Bureau.
The Farm Bureau is the Nation's largest farmer and rancher
organization, with over 5 million members in all 50 States and
Puerto Rico. As you know, Mr. Chairman, farmers and ranchers in
all 50 States have been facing some rather difficult hard times
in these past few years. These difficult times have forced
those of us in production agriculture to take a closer look at
our bottom line and attempt to do whatever we can to reduce any
unneeded costs and hopefully to realize a profit or simply
break even. This has been hard to achieve in recent years.
This examination has exposed a number of increasing costs
that farmers are now voicing concern about and attempting to
mitigate. Such expenditures include ever-increasing
environmental regulation costs, labor costs, energy costs, and
agricultural chemical costs, which is what we want to focus on
today.
Let me begin by saying the Farm Bureau strongly supports
Senate bill 532, the Pesticide Harmonization Act, which is also
co-sponsored by both Senators from my State, Senator Burns and
Senator Baucus. Mr. Chairman, from your opening comments I
realize that you do not have to be convinced on this bill.
Thank you for that.
This legislation would allow farmers, cooperatives, farm
supply stores access to lower-priced Canadian agricultural
chemicals that are identical or substantially similar to those
sold in the United States.
The high cost of some pesticides in the U.S. is
contributing to the current farm crisis by inflating
agricultural producer input costs. Producers in other nations,
such as Canada, use pesticides substantially similar in content
to those used in the U.S., but their farm products are often
less expensive. Under current law, U.S. producers cannot import
those pesticides from other nations.
We farm in a global market. Our competitors are not just
down the road, but around the world. To remain competitive and
hopefully profitable, we must constantly search for ways to
reduce our production costs. From the producer's point of view,
there is a price disparity among some agricultural chemicals in
the U.S. and Canada that impedes our competitiveness and
profitability.
We believe this legislation will work to remove that
disparity. Under the Pesticide Harmonization Act, States can
petition the Environmental Protection Agency to issue pesticide
labels to be placed on the Canadian products where the only
significant difference between the products is price. The U.S.
product label would allow our farmers to buy a Canadian
pesticide for use on their farms in the United States.
The Farm Bureau believes this legislation is a significant
step towards achieving the goals of gaining access to
affordable and needed products by U.S. farmers while at the
same time maintaining U.S. standards designed to protect U.S.
consumers, farmers, and the environment. Farmers in this
country need a level playing field to compete with foreign
growers and having equal access to less expensive crop
production materials will improve the competitive position of
U.S. producers.
Studies have been conducted of cost differences by USDA and
others and the results do demonstrate that similar compounds
used on both sides of the border can be priced differently.
While the U.S. grower does benefit by some examples of
pesticide cost comparisons, we also pay a much higher cost for
a variety of products, such as Roundup, Liberty, Puma, Buctril,
all of which are registered for use on U.S. crops such as wheat
and barley.
Sometimes these price differences are significant. Senator
Baucus has stated that recent surveys have shown that U.S.
farmers can pay as much as 117 percent to 193 percent more than
farmers in Canada for virtually the same products. Sometimes
these cost differences are less so, but a USDA study puts this
in perspective by stating that: ``Although pesticide
expenditures are not high for the study crops in the Canadian-
U.S. prairie area compared with some crops and areas, they are
relatively high compared with per-acre profits. A few dollars
of extra cost can make the difference between a profitable and
an unprofitable year.''
The American Farm Bureau and the Canadian wheat pools have
sponsored producer meetings for the last 3 years. This effort
has resulted in forming the U.S.-Canadian Producer Consultative
Committee on Grain. I represent the Montana Farm Bureau on that
committee. These exchanges have resulted in the identification
of issues that are important to grain producers in Canada and
the United States.
We reached a consensus that harmonization of pesticide
registration and labeling was desirable. There is no dispute on
that between producers on both sides of the border. If we can
solve this trade or border irritant, perhaps we can solve other
issues.
I would like to submit for the record a copy of the
committee's joint statement from March of this year.
[The material referred to follows:]
Joint Prepared Statement by Canada/U.S. Producer Consultative Committee
on Grain
The undersigned organization met in Winnipeg on March 30, 2001 in
an effort to facilitate dialogue between grain producers in Canada and
the United States.
We urge the Governments of Canada and the United States to
recognize us as the producer grain consultative group as identified in
the 1998 Canada/U.S. Record of Understanding.
The Canada/U.S. Producer Consultative Committee has reached
consensus that the following issues require the attention of producer
organizations and governments, or require further study:
Issue Categories
1. Current Canada/U.S. Grain Trade Issues that should be considered
by producers and their organizations
Disparities in government support distort production and
trade
Marketing structures differ--a monopoly marketing board is
operating in a free trade zone
Trade actions have broader effects than just the original
targets (e.g. Canadian corn countervail hurt Canadian hog
industry)
2. Current Canada/U.S. Grain Trade Issues that should be considered
by Governments
Definitions of and conditions for launching of trade
actions (CVD, AD, 301)
Pre-screen potential farm support programs and trade
practices for trade acceptability
Cost of trade actions are borne by producers who must
defend against them
3. Current Canada/U.S. Grain Trade Issues that require further
research and study
Disparities in government support distort production and
trade
Marketing structures differ--a monopoly marketing board is
operating in a free trade zone
Cost of trade actions are borne by producers who must
defend against them (contingency fund? Pre-screening?)
Taxation policies kind the services provided from tax
dollars, differ between Canada and the U.S.
Exchange rate impacts input costs, product pxices and
trade
Impact of IMF and the World Bank on trade and markets
Harmonization of grading systems
Country of origin labelling
4. General areas identified for proactive cooperation
Potential for trade actions (CVI), AD, 301) limit ability
to design support programs
WTO Agriculture Negotiations
EU Export Subsidies
Tariff and non-tariff barrier reductions
Domestic support definitions
SPS measures (precautionary principle)
Non-trade concerns (social, environmental, labor, animal
welfare etc.)
FTAA negotiations
Export subsidies
Domestic support definitions
SPS measures (precautionary principle)
Non-trade concerns (social, environmental, labor, animal
welfare etc.)
GMO Wheat--conditions for release
Foot and Mouth Disease--development of a common plan for
the grain industry
Harmonization of pesticide registration and labelling
5.Other Issues
Farm support and trade practices are capitalized into land
and machinery prices
US wheat sold into Canadian elevator system for export
must be segregated and identitied as US wheat
The Consultative Committee is committed to annual meetings
alternating between Canada and the United States to review and update
the work plan as a proactive effort to identify, study and resolve
potential trade issues.
Supported by:
Agricore Cooperative Ltd.
Idaho Farm Bureau
Keystone Agricultural Producers
Montana Farm Bureau
North Dakota Farm Bureau
South Dakota Farm Bureau
Western Canadian Wheat Growers Association
Wild Rose Agricultural Producers
Grain Growers of Canada
Kansas Farm Bureau
Minnesota Farm Bureau
Nebraska Farm Bureau
Saskatchewan Wheat Pool
Western Barley Growers Association
Wheat Export Trade Education Committee
Mr. McClure. I applaud EPA's efforts to work with our
international trade partners to promote consistency in various
regulatory and scientific requirements regarding pesticides,
such as the work being conducted with the technical working
group for pesticides developed under NAFTA. However, while the
administration's actions are helpful, they have not resolved
the issue.
The Farm Bureau does understand that, because pesticides
must be registered in the U.S. before they can be sold or
distributed, there are certain limits on EPA's involvement in
this issue, but EPA must continue to work within current
authorities to find solutions. We were pleased to hear the
statement of EPA Administrator Steve Johnson during his
confirmation hearing regarding the need for legislation, and I
quote from Mr. Johnson: ``I believe that legislation is needed
because there does not appear to be adequate administrative or
regulatory solutions.''
We encourage the EPA to continue to work closely with the
sponsors of bill 532 to address any specific technical concerns
that they may have with the bill. I hope that the agency can be
very supportive of this legislation, and it appears that they
are.
In summary, while the Farm Bureau understands that ag
chemical companies do have concerns with certain sectors of the
legislation, it is our hope that these issues can be openly
discussed and addressed. The Farm Bureau and the crop
protection industry have worked very well together in the past
and will continue to do so in the future to address our many
common concerns. It is our hope that we can work together to
achieve passage of this legislation.
Thank you, Mr. Chairman. I see my time is up. I will be
happy to answer any questions that you may have.
[The prepared statement of Mr. McClure follows:]
Prepared Statement of David McClure, President, Montana Farm Bureau
Federation
Good morning Mr. Chairman and Committee Members. I am Dave McClure
a farmer/rancher from Lewistown, Montana. I raise wheat, barley, cattle
and hay. I am also the president of Montana Farm Bureau and a member of
the board of directors of the American Farm Bureau Federation. I am
testifying today on behalf of both the American Farm Bureau Federation,
and the Montana Farm Bureau.
Farm Bureau is the nation's largest farmer and rancher organization
with over five million member families in all 50 states and Puerto
Rico. As you know Mr. Chairman, farmers and ranchers in all 50 states
have been facing some rather hard times these past few years. These
difficult times have forced those of us in production agriculture to
take a closer look at our bottom line and attempt to do whatever we can
to reduce any unneeded costs and hopefully realize a profit, or simply
break even. This has been hard to achieve in recent years. This
examination has exposed a number of increasing costs that farmers are
now voicing concern about and attempting to mitigate. Such expenditures
include ever increasing environmental regulation costs, labor costs,
energy costs and agricultural chemical costs, which is what we want to
focus on today.
Let me begin by saying that Farm Bureau strongly supports S.532,
the Pesticide Harmonization Act, which is sponsored by both senators
from my state, Senator Baucus and Senator Burns.
This legislation will allow farmers, cooperatives and farm supply
stores access to lower-priced Canadian agricultural chemicals that are
identical or ``substantially similar'' to those sold in the United
States. The high cost of some pesticides in the U.S. is contributing to
the current farm crisis by inflating agricultural producer input costs.
Producers in other nations, such as Canada, use pesticides
substantially similar in content to those used in the U.S., but the
foreign products are often less expensive. Under current law, U.S.
producers cannot import those pesticides from other nations.
We farm in a global market. Our competitors are not just down the
road but around the world. To remain competitive and hopefully
profitable, we must constantly search for ways to reduce our production
costs. From the producer's point of view, there is a price disparity
among some agricultural chemicals in the U.S. and Canada that impedes
our competitiveness and profitability. We believe that this legislation
will work to remove that disparity.
Under the Pesticide Harmonization Act, states could petition the
Environmental Protection Agency to issue pesticide labels that can be
placed on Canadian products when the only ``significant difference''
between the products is the price. The U.S. product label would allow
our farmers to buy the Canadian pesticide for use on their farms in the
U.S.
Farm Bureau believes this legislation is a significant step toward
achieving the goals of gaining access to affordable and needed products
for U.S. farmers while at the same time maintaining U.S. standards
designed to protect consumers, farmers and the environment. Farmers in
this country need a level playing field to compete with foreign growers
and having equal access to less expensive crop protection materials
will improve the competitive position of U.S. producers.
Studies have been conducted on cost differences by USDA and others,
and the results do demonstrate that similar compounds used on both
sides of the border can be priced differently. While the U.S. grower
does benefit in some examples of pesticide cost comparisons, we also
pay much higher costs for a variety of products such as Roundup,
Liberty, Puma and Buctril, all of which are registered for use in the
U.S. on crops such as wheat and barley.
Sometimes these price differences are significant. Senator Baucus
has stated that recent surveys have found that U.S. farmers can pay as
much as 117 percent to 193 percent more than farmers in Canada for
virtually the same product. Sometimes these cost differences are less
so. But, a USDA study puts this in perspective by stating that although
pesticide expenditures are not high for the study crops in the
Canadian/U.S. prairie area compared with some crops and areas, they are
relatively high compared with per acre profits. A few dollars of extra
cost can make the difference between a profitable and an unprofitable
year.''
The American Farm Bureau and the Canadian wheat pools have
sponsored producer meetings for the last three years. This effort has
resulted in forming the Canada/U.S. Producer Consultative Committee on
Grain. I represent Montana Farm Bureau on that committee. These
exchanges have resulted in the identification of issues that are
important to grain producers in Canada and the United States. We
reached consensus that harmonization of pesticide registration and
labeling was desirable. If we can solve this trade or border irritant,
perhaps we can solve other issues. I would like to submit for the
record a copy of the committee's joint statement from March of this
year.
I applaud EPA's efforts to work with our international trading
partners to promote consistency in the various regulatory and
scientific requirements regarding pesticides, such as the work being
conducted with the Technical Working Group for Pesticides developed
under NAFTA. However, while the administration's actions are helpful,
they have not resolved the issue.
Farm Bureau does understand that because pesticides must be
registered in the U.S. before they can be sold and distributed, there
are certain limits on EPA's involvement in this issue. But EPA must
continue to work within current authorities to find solutions.
We were pleased to hear the statement of EPA Assistant
Administrator Steve Johnson during his confirmation hearing regarding
the need for legislation to address this problem and I quote: ``I
believe that legislation is needed because there does not appear to be
adequate administrative or regulatory solutions.'' We encourage the EPA
to continue to work closely with you, Mr. Chairman, to address any
specific technical concerns they may have with the Pesticide
Harmonization Act. It our hope that the agency can be fully supportive
of this legislation.
In summary, while Farm Bureau understands that agricultural
chemical companies do have concerns with certain sections of the
legislation, it is our hope that these issues can be openly discussed
and addressed. Farm Bureau and the crop protection industry have worked
very well together in the past and will continue to do so to address
many common concerns. It is our hope that we can work together to
achieve passage of this legislation.
Thank you Mr. Chairman and Committee Members for the opportunity to
comment. I'll be happy to address any questions you may have for me
following the testimony of the other panelists.
Senator Dorgan. Mr. McClure, thank you very much. Finally,
we will hear from Hank Zell of the National Farmers Union. Mr.
Zell, welcome.
STATEMENT OF HANK ZELL, NATIONAL FARMERS UNION
Mr. Zell. Thank you, Chairman Dorgan and Ranking Member
Senator Burns of the Subcommittee. I am Hank Zell, a third
generation farmer--
Senator Dorgan. Will you pull the microphone closer,
please.
Mr. Zell. I am Hank Zell. I am a third generation grain and
livestock producer from Shelby, Montana. Shelby is a farming
community located about 85 miles north of Great Falls, 30 miles
south of the Canadian border. I farm 2400 acres of hard red
spring wheat each year and also maintain pasture for my
livestock herd.
It is a pleasure to be before you today on behalf of
300,000 family farm and ranch members of the National Farmers
Union to discuss the impact of differential prices of
pesticides between the U.S. and Canadian agricultural markets.
Mr. Chairman, the NFU commends you and Senators Burns, Baucus,
Conrad, Daschle, and Johnson for introducing S.532, legislation
to amend the Federal Insecticide, Fungicide, and Rodenticide
Act to establish conditions that would allow a State to
register Canadian pesticides for use within the State if the
products are substantially similar or identical to the ones
already registered in the U.S. We fully support this
legislative initiative.
Since ratification of the North American Free Trade
Agreement, U.S. farmers, especially those along the northern
tier States, have been frustrated with a number of trade issues
with Canada due to provisions of the agreement. Since adoption
of the agreement, Canadian exports of wheat and barley to the
U.S. have increased many-fold, even though the U.S. is a large
surplus producer of these crops. This has resulted in the
clogging of our transportation system, warehouse facilities,
and border, increased competition for sales in our own domestic
market, and reduced producer pricesfor wheat and barley.
There are numerous reasons why the open border with Canada
has harmed the U.S. producers that are beyond the scope of this
hearing. However, one key issue that has served to disadvantage
U.S. farmers relative to our Canadian neighbors is the effect
of our pesticide labeling regulations on production costs. U.S.
pesticide labeling requirements have clearly provided pesticide
manufacturers the opportunity to engage in differential pricing
for similar or identical products between the U.S. and Canadian
markets in ways that generally advantage Canadian farmers over
the U.S. producers without further contribution to the food
consumer, worker, or farm operator safety.
It seems hypocritical that, under the guise of free trade,
we allow the import of food products from other countries that
may be produced with pesticides that are illegal in this
country or applied in a manner that may well be outside the
strict limitations established under U.S. regulations, at the
same time U.S. farmers are prohibited from the opportunity to
purchase pesticide products in Canada that are identical to
those registered in this country.
The purpose of FIFRA is to utilize the best available
science in registering pesticide products to assure consumer
safety of the food products to which they are applied, as well
as to ensure their safe and effective use by producers and farm
workers. I do not believe it was the intent of Congressto
provide a shield for the manufacturers and marketers of
pesticides so they could gouge their U.S. customers.
Unfortunately, that is exactly the experience we face under the
U.S. current regulations.
The environmental and agronomic factors that affect my
farming operation are comparable to those experienced by
farmers in the Canadian prairies. However, their input cost
structure is significantly different than mine. Part of this
difference can be directly attributed to the difference in cost
of pesticides that I pay versus my Canadian neighbors who are
also my competitors in the agricultural market.
In the attached table I have provided a comparison of the
per acre cost of various registered pesticides that I utilize
on my farm and are typical for the spring wheat and barley
crops produced in the region in both the U.S. and Canada. The
U.S. pricing information was obtained from my local dealer. A
farm input supplier whose business is located just across the
border provided Canadian prices.
At a minimum, I must treat my 2400 wheat and barley acres
for two types of weeds, broadleaf and wild oats. In addition, I
generally spray two applications of a non-selective herbicide
and about 500 acres of fallow. Typically, I would apply Assert
to control wild oats and utilize a combination of Puma plus
Bronate for broadleaf weeds on my crop acres. My normal
practice is to apply Roundup on a portion of my summer fallow
to control weeds and conserve valuable moisture for the next
year's crop.
Under this scenario, my bill for pesticides will be $26,396
per year greater because I am an American farmer than if I was
a Canadian farmer. For me this is serious money. It represents
about 10 percent of my farm's total gross income.
Under the proposed legislation, a State such as Montana, a
farm organization or a farm supply company could serve as an
agent of a U.S. registrant for Canadian pesticides if they are
identical or substantially similar to U.S.-registered products.
Most, if not all, pesticides that I normally use fit into this
requirement and therefore would be eligible for purchase and
use on my farm after affixing the appropriate U.S. label,
registration label, on the containers.
While my cost of $26,396--while my savings--while my
$26,396 savings would be reduced by some additional
transportation and relabeling costs, the impact on my farm
would still be substantial.
The potential access to less costly pesticides provided by
this legislation should result in more consistent nationwide
and regional pricing policies by the manufacturers that will
benefit all producers who utilize these products that are
registered in both countries.
The National Farmers Union is not seeking to reduce the
level of regulations or oversight by the EPA for the safety of
agricultural pesticides, and this legislation does not weaken
that objective. It simply provides the opportunity for economic
relief from an artificially maintained pricing system affecting
products that have been approved and are compatible to those
registered by our EPA.
We support this legislation because it engenders fair
market conditions and competitiveness between the U.S. and
Canada by reducing the potential for differential pricing by
pesticide manufacturers and limiting their ability to hide
behind U.S. regulations.
Mr. Chairman, I appreciate the opportunity to share my
personal experiences with the Subcommittee today and offer the
support of the National Farmers Union for the pesticide
harmonization legislation and you and Senator Burns have
introduced. We are looking forward the working with you to
achieve passage of this important bill as expeditiously, as
soon as possible. I am pleased to respond to any questions you
or your colleagues may have.
[The prepared statement of Mr. Zell follows:]
Prepared Statement of Hank Zell, National Farmers Union
Chairman Dorgan, Ranking Member Fitzgerald, Members of the
Subcommittee. I am Hank Zell, a third generation grain and
livestock producer from Shelby, Montana. Shelby is a farming
community located about 85 miles north of Great Falls and 30
miles south of the Canadian border. I raise about 2400 acres of
hard red spring wheat and barley each year in a summer fallow
rotation and also maintain pasture for my livestock herd. It is
a pleasure to appear before you today on behalf of the 300,000
family farmer and rancher members of the National Farmers Union
(NFU) to discuss the impact of differential pricing of
pesticides between the U.S. and Canadian agricultural markets.
Mr. Chairman, the NFU commends you, and Senators Burns,
Baucus, Conrad, Daschle and Johnson for the introduction S.
532, legislation to amend the Federal Insecticide, Fungicide
and Rodenticide Act (FIFRA) to establish conditions that would
allow a state to register a Canadian pesticide for use within
that state if the products is substantially similar or
identical to one already registered in the U.S. We fully
support this legislative initiative.
Since the ratification of the Canada-U.S. Trade Agreement
(CUSTA), North American Free Trade Agreement (NAFTA) and the
Agreement on Agriculture in Uruguay Round of the World Trade
Organization (WTO); U.S. grain farmers, particularly those in
the northern tier of states, have been frustrated by a number
of trade issues with Canada due to provisions of the
agreements. Since adoption of the agreements, Canadian exports
of wheat and barley to the U.S. have increased many-fold, even
though the U.S. is a large surplus producer of these crops.
This has resulted in clogged transportation and warehousing
facilities near the border, increased competition for sales in
our own domestic market and reduced producer prices for wheat
and barley.
There are numerous reasons why the open border with Canada
that was created by trade agreements has harmed U.S. producers,
including Canada's regulated marketing and transportation
system, that are beyond the scope of this hearing. However, one
key economic issue that has served to disadvantage U.S. farmers
relative to our Canadian neighbors is the effect of our own
pesticide labeling regulations on production costs. U.S.
pesticide product labeling requirements have clearly provided
pesticide manufacturers the opportunity to engage in
differential pricing for similar or identical products between
the U.S. and Canadian markets in ways that generally advantage
Canadian farmers over U.S. producers without a further
contribution to food, consumer, worker or farm operator safety.
It seems hypocritical, that under the guise of free trade,
we allow the import of food products from other countries that
may be produced with pesticides that are illegal to use in this
country or applied in a manner that may well be outside the
strict limitations established under U.S. regulations. At the
same time U.S. farmers are prohibited from the opportunity to
purchase pesticide products in Canada that are identical to
those registered for use in this country.
The purpose of FIFRA, administered by the Environmental
Protection Agency (EPA), is to utilize the best available
science in registering pesticide products to assure consumer
safety of the food products to which they are applied as well
as ensure their safe and effective use by producers and farm
workers. I do not believe it was the intent of Congress to
provide a shield for the manufacturers and marketers of
pesticides so they could ``gouge'' their U.S. customers.
Unfortunately that is exactly the experience we face under
current U.S. regulations.
The environmental and agronomic factors that affect my
farming operation are comparable to those experienced by
farmers in the Canadian prairies. However, their input cost
structure is significantly different than mine. Part of this
difference is related to the type and level of federal and
provincial programs available to farmers when compared to those
in the U.S. a significant difference in farming costs, however,
can be directly attributed to the wide differential in the cost
of pesticides that I pay versus those paid by my Canadian
neighbors who are also my competitors in the agricultural
market.
In the attached table, I have provided a comparison of the
per acre costs for a variety of registered pesticides that I
utilize on my farm and are typical for the spring wheat and
barley crops produced in this region, in both the U.S. and
Canada. The U.S. pricing information was obtained from my local
dealer. A farm-input supplier whose business is located just
across the border provided Canadian prices. I believe these
pesticide prices are consistent with other information that has
also been provided the Subcommittee.
At a minimum, I must annually treat all 2400 of my wheat
and barley acres for two types of weeds--broadleaf weeds and
wild oats. In addition, I generally spray two applications of a
non-selective herbicide on about 500 acres of summer fallow.
Typically, I would apply the product Assert to control wild
oats, and utilize a combination of Puma plus Bronate for
broadleaf weeds on my crop acres. My normal practice is to also
apply Roundup on a portion of my summer fallow acres to control
weeds and conserve valuable soil moisture for the next year's
crop. Under this scenario, my bill for crop pesticides will be
$26,396 per year greater because I farm in the U.S., than if I
were a farmer in Canada. For me this is serious money,
representing about 10% of my farm's total gross crop income.
Under the proposed legislation, a state, such as Montana, a
farm organization or a farm supply company could serve as a
U.S. registrant for Canadian pesticides if they are identical
or substantially similar to U.S. registered products. Most, if
not all, of the pesticides I normally use fit within this
requirement and would therefore be eligible for purchase and
use on my farm after affixing the appropriate U.S. registration
label onto the container. While my $26,396 savings would be
reduced by some additional transportation and re-labeling
costs, the impact on my farm would still be substantial. The
potential access to less costly pesticides provided by this
legislation should result in more consistent nationwide and
regional pricing policies by the manufacturers that will
benefit all producers who utilize products that are registered
in both countries.
The NFU is not seeking to reduce the level of regulation
and oversight provided by the EPA for the safety of
agricultural pesticides. In fact, we support a more globally
harmonized system of regulation based on scientific principles
and risk assessment for these products to extend greater levels
of safety to all producers and consumers through regulations
that are comparable to those contained in the U.S. system. This
legislation does not weaken that objective. It simply provides
the opportunity for economic relief from an artificially
maintained pricing system affecting products that have been
approved or are comparable to those registered by the EPA.
We support this legislation because it engenders fair
market conditions and competition between the U.S. and Canada
by reducing the potential for differential pricing by pesticide
manufacturers. Additionally, it can provide greater equity and
economic opportunity for U.S. agricultural producers by
eliminating the ability of pesticide manufacturers to hide
behind a U.S. regulatory technicality.
Mr. Chairman, I appreciate the opportunity to share my
personal experiences with the Subcommittee today and offer the
support of the National Farmers Union for the pesticide
harmonization legislation you and Senator Burns have
introduced. We look forward to working with you to achieve
passage of this important bill as expeditiously as possible. I
will be pleased to respond to any questions you or your
colleagues may have.
Comparison of Canadian and U.S. Pesticide Costs per Acre
----------------------------------------------------------------------------------------------------------------
Canada
---------------------------- U.S. Price/A Difference
Chemical Pesticide Type Price/A Price/A (US (US $) U.S.-Canada
(Cdn $) $)*
----------------------------------------------------------------------------------------------------------------
Assert Herbicide 15.91 10.31 13.72 3.41
Banvel Herbicide 2.99 1.94 1.41 -0.53
Curtail Herbicide 10.55 6.84 9.53 2.69
Puma Super** Herbicide 15.96 10.34
Puma + Bronate Herbicide 17.02 6.68
Tilt Fungicide 13.76 8.92 10.87 1.95
Round Up Herbicide 4.50 2.92 5.10 2.18
----------------------------------------------------------------------------------------------------------------
*Canadian dollar = .6480 U.S. dollars
**Pre-mixed with Bronate, adds about U.S. $2.77 per acre to cost of Puma
Senator Dorgan. Mr. Zell, thank you very much.
Mr. Fitchhorn, you indicated that this problem exists not
just on the border, but around the country. How significant is
it in your State that farmers recognize the price disparity? In
my State or in Montana, where farmers could easily drive ten
miles near the border and go across and get a cheaper chemical,
they instantly recognize the unfairness and disparity. Do folks
in your State regularly recognize it?
Mr. Fitchhorn. Yes, we do. Even though you are highlighting
this up on the border, we for quite some time, quite a few
years, have been aware that there was a price disparity in
chemicals and seed even in South America and North America. We
have, like I said, we had quite a few meetings with seed
producers and herbicide companies, with very little being
resolved in those meetings.
Senator Dorgan. Mr. McClure, you support the legislation,
you indicated in your testimony. You heard the testimony by the
EPA. Are you satisfied that we are making progress on chemical
harmonization? What is your impression of where we are in that
subject?
Mr. McClure. Well, I would hope so. I was pleased to hear
that EPA was willing to work with you and the other sponsors to
make this thing work. But I also have to recall Mr. Johnson's
comments that probably the agency and the regulatory is
somewhat limited and legislation may be needed. Hopefully, this
will help us.
Senator Dorgan. Mr. Vroom, your organizations represents
the chemical manufacturers, is that correct?
Mr. Vroom. That is correct.
Senator Dorgan. Most of the major chemical manufacturers
would be in your organization?
Mr. Vroom. Yes.
Senator Dorgan. You heard my questions earlier and I read
your testimony last evening and listened to your testimony
earlier today. You in your testimony seem to suggest that there
is not a price difference. You referred to a USDA study. If
there is no price difference--I would contest that, of course.
But if there is not a significant price differential that
currently exists between the U.S. and Canada and if the EPA
says there is no safety issue, why then would a chemical
company care whether this legislation is enacted?
Mr. Vroom. Well, let me make clear that I absolutely and my
organization completely acknowledges the fact that there are
price differences between different markets for our industry
products, both those that are identical and those that are
substantially similar. Those that are off patent have generic
competition in some countries, not in others. Vast differences,
no question about that.
So I want to be clear that if you have misunderstood me to
suggest I do not think there is any price difference, that is
not what I intended to convey. I do think that some of the
arithmetic that has gone into trying to impute sort of an
aggregate differential, price and overall cost structure
differential disadvantage that might exist between Canada and
North Dakota or whatever, probably has suffered from efforts to
try to do quick studies.
The reason that I referred in our written testimony to the
1999 study that USDA and Agrifoods Canada jointly did is that
we think that that represents a more robust snapshot of the
marketplace at that point in time than the data that was used
by the State University researchers more recently, which is
more current, obviously, but not as robust in terms of an
overall look.
For instance, the NDSU study only looked at a handful, 20
different herbicide products. Our industry in the United States
markets hundreds of herbicide products. So there is a little
bit of out of context arithmetic that comes out of sort of the
bottom line of that.
But again, I want to emphasize that there is no question
about the fact that there are differences in prices and that is
from a manufacturers standpoint solely driven by the fact that
we are required, with the very minimal exceptions of those
products that are now finally in joint review between the U.S.
and Canada regulatory authorities, we are required to approach
these markets as distinct and separate markets. Frankly, as I
have told your staff and others that we have been visiting with
in recent weeks again over this issue, I think that our
companies have been so intentionally focused on responding to
the discrete regulatory authorities in these two sovereign
nations that they frankly have never thought much about the
fact, other than the few times that this kind of issue has been
discussed in public hearings and in the media and intensely in
your home State capital as the legislature and the
administrative branch, including Commissioner Johnson, have
raised this issue--but our companies have not thought much or
very often about the fact that there is a great deal of
transparency right along this border.
They price their products in order to be competitive, to
gain market share, to serve the farmer, and it has only been
recently that we have begun to think about the fact that, oh,
yes, there is a need to sort of keep your eyes on that these
markets adjoin each other.
Senator Dorgan. Mr. Vroom, I would guess it is not the
case, however, that the companies are required to treat these
as distinct and discrete markets in a manner that requires them
the price the product differently. For example, the Folicur
which I held up, there is nothing which would require the
manufacturer of Folicur to say to the U.S. producer, you pay
$500 more for this box than the Canadian one. There is nothing
that requires that.
Mr. Vroom. No. I am glad that you brought that example
along this morning because--and I brought along the complete
reference guide from about 40 of our member companies' labels
in the United States for 2001. As you can see, this is a
hundreds of pages thick book. Folicur is in here. The table
that shows how it is registered in the United States indicates
that 18 of the 52 authorities, including D.C. and Puerto Rico,
that are governed by U.S. EPA for pesticide regulations, 18 of
those entities, most of them States, do not have a label for
the use of Folicur, either.
So I am really keen to follow up with your staff after the
hearing to learn more about this particular instance. Did the
farmer in North Dakota that had this particular excess
inventory, was he asked by his dealer to sell it back through
that chain?
One of the other factors in this pricing mechanism in the
United States and almost identically in Canada is that
manufacturers publish suggested retail prices, but that is
hardly ever the price that the farmer pays. It may be more or
less than the farmer pays. The manufacturer almost always sells
to the distributor. The distributor then sells to an
independent dealer, and the dealer ultimately to the farmer.
Senator Dorgan. Yes, but we know what farmers pay. We are
comparing what the farmers can buy the chemical for in North
Dakota versus Canada. That is not some theoretical thing, and
that is why farmers are upset, because essentially the same
chemical is overpriced in the U.S. versus Canada, which is a
deliberate attempt by the chemical companies, as I indicated,
to use the EPA as a shield when in fact the EPA says there is
no safety issue here.
Mr. Vroom. My members, my manufacturers nor our
distributors are bound by suggested retail price lists, and the
market ultimately impacts what the margins are of profit that
are enjoyed by distributors and dealers. Those margins,
according to university studies that have been done over the
years, range anywhere from 2 or 3 percent markup, profit, gross
profit margin, to as much as 20 or 25 percent depending on the
product, the market, and the year.
It is another reason I think that the original USDA-Ag
Canada study had a lot more depth to it, in that it looked at
more than 20 products and over more than one year of price
experience.
Senator Dorgan. Except that it looked at the products that
were most frequently used. That would be the most logical thing
to look at. That is the final question. I will come back in
another round, but I still do not understand how the industry
opposes this legislation, supports globalization but opposes
this legislation, and then says that what is to me
discriminatory pricing and not as a result of discrete markets
or distinct markets, simply discriminatory pricing practices,
how it believes in a global market and can continue to do that
and yet take advantage of the global market for the inputs it
uses to produce chemicals.
Mr. Vroom. Simply by way of the fact that we are only
allowed to sell products that are registered in a country, and
that is established by the sovereign nations that control those
regulatory authorities. We are seeing some progress finally, as
I indicated earlier, over the last 15 years toward some
harmonization of regulatory requirements and processes and
joint reviews between countries.
Senator Dorgan. This is not about what you are allowed to
sell. It is about how you price. You changed the subject. I am
talking about how you price, not where you are allowed to sell.
Mr. Vroom. The manufacturers of these products do not set
the price that the farmers pay.
Senator Dorgan. Of course they do.
Mr. Vroom. Pardon me?
Senator Dorgan. How do you suggest the manufacturers are
not setting price? Clearly the increased price that is charged
the U.S. consumer versus Canada is as a result of the
manufacturers passing along an increased price to the
distributors in both countries. Do you disagree with that?
Mr. Vroom. I do not believe that the studies that you have
cited or that I am aware of that have been done around this
issue have looked at what manufacturer prices actually are.
They look at what the farmer pays, which is, as you just
stated, the important point at the end of the day anyway.
Senator Dorgan. Is the villain something other than the
manufacturer? Are you just shoehorning this off to a
distributor or a retailer?
Mr. Vroom. No. What I am saying, Mr. Chairman, is that the
way these products are priced is much more complicated than
just a one product manager decision at a manufacturer corporate
headquarters. It is a function of not only what the
manufacturer's costs are and what they think they can sell
their product for at the distribution level, but also what the
market evolution is, how quickly can they expand the label's
authorized uses from EPA or in Canada from the regulatory
authority up there.
Most of the time we get a new chemical compound registered
for use, a company has had 10 to 15 years of development and
discovery investment before that first label use is authorized
by U.S. EPA. Normally they will only give you one or two crop
labels initially, when in fact the product was designed for use
on dozens or scores of different crops, and it takes years to
get those additional crops added to the label.
All of those costs are unknowns because you do not know how
quickly EPA will go in terms of making decisions. One of the
major herbicides, I might just tell you as an anecdote, that is
in the NDSU study that was cited in Commissioner Johnson's
testimony this morning is an older product that just came off
of patent in the United States last fall, has been off patent
for a while in Canada.
But a similar formulation label that will be of important
value to fallow wheat farmers in your State and along the
northern tier States has been waiting for registration. In
other words, another formulation, label expansion, the company
has been waiting for EPA to approve for some years, just got
approval a couple of weeks ago, and there is a strong
correlation between that regulatory decision and the occasion
of this hearing.
So all those are factors that go into the embedded costs of
these products from the manufacturer's standpoint. The
distributors also face a varied marketplace year to year. We
all do the best job that we can to support and supply the
American farmer. We do the same thing, I am sure, in the
Canadian market.
The sooner we get to many more NAFTA labels and greater
harmonization of product availability across the board, the
more quickly the concerns that you are here to express and are
the same in Montana and the other border States will be
resolved. Frankly, we do not think that additional legislation
is necessary in order for EPA to make faster and more effective
progress along these lines.
Senator Dorgan. I would just observe that the legislation
actually is a step toward harmonization. So if your industry
supports harmonization, you would want to support the
legislation.
Senator Burns.
Senator Burns. You have got to watch those final shots.
Mr. Vroom, give me your idea, what is your attitude toward
a NAFTA label or a label that would be acceptable in a trading
agreement?
Mr. Vroom. Well, we think it has a lot of merit as long as
it really is a level playing field in terms of being able to
get market access for NAFTA countries, for instance, in all
three countries simultaneously with the same data set
requirements and the same final decisionmaking on the part of
the regulatory authorities in all three countries.
If it is only half a loaf, then it can get very complicated
and tip the playing field in a direction that would not be
comfortable for our industry's economic interests.
One of the other problems with a NAFTA label concept is
that most likely it would be applied, as it is so far and
currently being entertained and developed, for new products.
New products typically are going to come into the U.S. market
through EPA approval at the rate of 12 to 15 a year. That is a
tiny drop in this overall bucket for a marketplace when you
consider that we have over 600 active ingredients currently in
the marketplace which are unevenly registered on both sides of
the U.S.-Canadian, and I might add also with regard to
Mexico's, border.
Another problem we have serious concerns around in terms of
the NAFTA label is, once you get past getting the product
approved, is regulatory oversight and enforcement. Clearly, as
we all know, the regulatory enforcement mechanism in Mexico is
far below what we have in the United States and even in Canada.
So we do have some concerns about government oversight and
enforcement capabilities in a Mexican context when you start to
approach a NAFTA label approach.
So there are a lot of other wrinkles that need to be
considered in this process. But generally we are very
enthusiastic because it can save our industry time and money in
terms of getting product to the marketplace.
Senator Burns. What intrigues me about it is if you say
their enforcement is weaker than ours, but once we find a
violation in the application or in the properties of the
product for application, if that product is kept out of this
market and cannot be shipped to this market, would that help
those folks in energizing their regulatory oversight?
Mr. Vroom. Yes. We think that once again, especially in the
NAFTA context, there are things that are practically achievable
with regard to sort of raising the enforcement capabilities of
the Mexican authorities. We have seen a lot of progress just in
terms of the learning that has been accomplished by way of the
meetings and interchanges that have come about through these
harmonization discussions with the regulators in all three
countries along with the stakeholders that are allowed to
participate in most of those meetings as well over much of the
last 10 years.
Senator Burns. Also now, whenever you start testing a new
product and you have got it refined to where you want it and
then you start making applications for licenses and the labels,
with regard to Canadian and the American situation, are you
doing the same exact labeling exercise in Canada as you have to
do in the United States?
Mr. Vroom. No, sir.
Senator Burns. In other words, Canadian authorities accept
an EPA label that has been perfected here in the United States
carte blanche?
Mr. Vroom. No, absolutely not. That is why this news that
we now have conceptual agreement between the United States,
Canada, and Mexican governments to proceed with the first NAFTA
label compound is almost earth-shattering. It represents a
willingness, particularly on the part of the Canadian
authorities, to accept some U.S. approaches that heretofore
they have been unwilling to reach in terms of accommodation and
compromise.
Senator Burns. But my first question was, do you have to
jump through the same hoops in Canada as you do in the United
States in order to get a product on the market?
Mr. Vroom. Some of them are the same and many of them are
different.
Senator Burns. Okay. I do not know.
Mr. Vroom. The battery of tests, the sort of baseline set
of tests that are required by U.S. EPA, exceed 120 different
human health and environmental safety tests. So there is all
kinds of detail, as you can imagine. We actually had one of our
member companies a few years ago in a House Ag Committee
hearing bring the entire data set that was submitted on a new
chemical compound. It was 35 to 40 cardboard boxes full of
scientific test data. So you can imagine how many variants you
can get into even just inadvertently between one regulatory
authority sort of parsing through that and setting up the test
protocols.
One government might say, well, we need a 90-day acute
exposure rat study. The next government might say, well, it
needs to be 120 days, and the next might say 180 days. That
requires an entirely different set of tests to be run, data to
be assembled and submitted.
Senator Burns. Well, I can see where there would be some
differences with regard to the countries and the difference
between how you use a chemical in Kansas and how you use it in
Montana because of moisture situations of soil types. There is
a lot of variables in there that are going to affect the use of
the product and I understand that.
I do not know why we are saddled with mostly doing the
testing in the United States, but we pay for that testing and
that is all paid for by the consumer and the farmer. That cost
is finally passed on to them. I have a feeling that sometimes I
think we pay--it is like doing business on the forest. If you
put up a forest sale and the whole world and the environmental
community says, we hate below-cost sales in forestry, when
basically a forest will put up a sale and they will pile
everything into that sale as far as their overhead is
concerned, so it does look like below-cost. It is unbelievable
how we do our bookkeeping on that.
But I appreciate your testimony here, and I understand you
were very supportive of an amendment to the Senate education
legislation that dealt with pesticides in schools. I would hope
that you would work with us with that same attitude. I think we
can find common ground here. I do not think that we are going
into an area where--I think most of us pretty much understand
the variables that we had, but the pricing situation, just like
I said, if we had three dollar corn and five dollar wheat,
there would not be any of us here today. We would be home
plowing corn. Of course, you do not do that much any more.
Mr. Fitchhorn. No, we use chemicals on it.
Senator Burns. You put chemicals on it. You ought to go
home and just hold, just plow and hold. I have been down that
track because I was born and raised just across the river from
you to the west, so I understand that.
I look forward to working with my colleagues on this
legislation and also with all of you, because I think we have
possibilities here. I am still intrigued with the label and
trading agreements. That may be part of our discussions as we
start talking about fast track, how are we going to deal with
the situations of how we do business and how we will compete on
the production agriculture side. We did not do that in NAFTA
and that is the reason I voted against NAFTA. They would not
take into consideration the rules and regulations on the
exchange of crops, especially the same crop, and that we were
operating out of two different rule books or three different
rule books and it would not work.
This label idea intrigues me and I think we have to pursue
it. If everybody operates out of the same rule book, then we
can make it work. But it has to be out of the same rule book.
Thank you, Mr. Chairman.
Senator Dorgan. Thank you.
Mr. Vroom, let me ask you just a couple of more questions.
Look, you represent the chemical manufacturers. I happen to
think that they are imposing prices on U.S. farmers that are
unfair relative to prices they apply to others. I do not think
you are a bad guy, but I just think the industry has the
opportunity to extract money out of the pockets of American
farmers in a way that is unfair.
Let me just ask you, if I can. I mentioned the chemical
Achieve. This is what started it all in North Dakota with
Commissioner Johnson and a farmer who wanted to put Achieve
that he bought in North Dakota on his crops in North Dakota.
Now, he went up to Canada and bought this chemical for a much,
much lower price than he could buy it in the U.S.
The Canadian farmer will put this on the Canadian farmer's
crop and then ship the crop to the U.S., so we are going to get
this chemical on their crop anyway, and the EPA says there is
no safety issue. The only issue is the chemical companies
charge more for this to American farmers than they do to the
Canadian farmers, and you are I think trying to tell me that it
is really not the manufacturers, it is some amorphous marketing
descriptions out there and it is distributors and retailers.
Look. Is it not the case that manufacturers are setting the
baseline prices for these chemicals, and they have decided that
they can extract a higher price from Americans and therefore
they do and they will? Our legislation is going to correct that
and you, on behalf of the chemical manufacturers, do not
support our legislation because you want to keep charging more
to the American consumer. What is wrong with that statement?
You disagree with my statement obviously, so tell me what is
wrong with the factual base of my assertion?
Mr. Vroom. Well, once again, I respectfully disagree with
the notion that manufacturers of agrichemicals are
discriminatorily pricing against American farmers. If you look
at the aggregate markets for our industry's products in the
United States, just in my written testimony, last year it was
over $7 billion U.S. currency. The Canadian market is probably
no more than $1 billion U.S. currency.
There is just no logic to the notion that we would want to
discriminate against the best customer base that we have in the
world.
Senator Dorgan. Except, Mr. Vroom, this [indicating] is
discrimination. This company with this chemical have said to
U.S. farmers: You pay more. Why? Because we insist you do. That
is discrimination. I am not talking about theory; I am talking
about reality. This is discriminatory. Do you not agree?
Mr. Vroom. No, I do not agree.
Senator Dorgan. Well then, how do you justify the pricing
differential?
Mr. Vroom. It is a marketing decision that that company
made in terms of the way that they priced it and sent it
through the distribution and dealer networks in both countries,
and also by way of the fact of how they chose to offer the
product in different forms in the U.S. and the Canadian
markets. They knew, as I am told, that the higher active
ingredient concentration that was and is sold in Canada is much
more applicable to ground rig application and that most of the
market in the United States would be for aerial or airplane,
fixed wing, application, and the higher concentration active
ingredient has physical property difficulties in aerial
application with regard to clogging the nozzles and pumping
mechanisms, and they were fearful of the fact that it would not
be effective in that sort of formulation.
So that is the rationale for the two different formulations
to be marketed different in the two different countries, in
part.
Senator Dorgan. But Mr. Vroom, the only method by which the
chemical companies could manufacturer a higher price for
American farmers versus the Canadian farmers for the same
product is to hide behind the EPA. The EPA is what allows you
to prevent an American farmer--I mean, plugging up a nozzle?
Well, maybe a farmer says, I am willing to see if a nozzle
plugs up, I am willing to go to Canada and bring it down. The
only reason they cannot bring Achieve down is because the
chemical companies are hiding behind the EPA, when in fact the
EPA says there is no safety issue here.
I do not want to be unfair to the chemical manufacturers,
but the evidence is overwhelming that there is an approach here
to say to the American consumer, you pay the highest prices,
and say to others, you pay the lower price, and the reason we
can extract the higher price from the American farmer and the
American consumer is because we have the ability to do it
because we can stop it from coming across the border.
We cannot stop the grain. The grain comes across that has
the Canadian chemical on it, but we can stop the American
farmer from going to Winnipeg and buying the chemical. It seems
patently unfair to me. It seems like it is kind of a sweetheart
deal for the chemical manufacturers.
Mr. Vroom. Could I make one other point?
Senator Dorgan. Of course.
Mr. Vroom. That is, I am not here to defend any one of my
member companies' specific product or pricing strategy. I want
to make it clear that it is my view and the association's view
that there are lots of examples where there are price
differentials, some of them actually where a product that is
identical or substantially similar is less expensive in the
United States than in Canada.
But if you look again at the vast marketplace that we are
talking about, the $7 billion market in the United States and
the $1 billion market in Canada, there are many more examples
where prices of these kinds of technology are more similar than
dissimilar. I think we have focused on a few examples of where
there are differentials, and I believe that it is fundamentally
a product of a free marketplace where prices will respond to
supply and demand.
There is no question but what focusing on those issues in
isolation creates the perception of a serious problem. I do not
think the problem is as great as some of the data would portray
in the way it is taken out of context. But we are committed to
working with you on a harmonization approach.
By the way, I think that Mr. Johnson, the new EPA Assistant
Administrator who was here earlier, probably has the ability to
drive a harmonization process much faster between the U.S. and
Canada than his predecessors in the last 8 years of the Clinton
Administration were able to do. So even without legislation, I
believe that EPA and the Canadian authorities can go faster and
address some of these what I would characterize as more
isolated problems and get a more level marketplace established
in those isolated and limited places where there are trade
irritant concerns.
Senator Dorgan. Mr. Vroom, there is no free market when Mr.
McClure cannot go to Canada to access the same chemical for a
lower price. So this free market stuff does not work with
respect to the border. The border is an impediment to free
markets.
You are an assertive witness on behalf of your industry. My
hope is that, if you support harmonization, that you would
support the legislation as a step towards harmonization. I
think price disparities that exist are at this point not
supportable, and I hope very much that, with the work by
Commissioner Johnson and my colleagues, that we can pass
legislation.
We have a disagreement here, obviously, and I do not mean
to badger you about the disagreement we have. I feel very
strongly and passionately that something is happening here that
is not isolated, it is not theoretical. It is real and it is
pervasive, especially for our farmers.
I must say that I do not agree that if wheat were five
dollars a bushel we would not be talking about this. I think
price discrimination when it exists is a bur under the saddle
of people who I think are the victims of it.
Let me make one additional point. That is, the testimony by
Mr. Johnson indicated--and I just want to put it in the
record--that EPA ``is not aware of any evidence that indicates
that national pesticide regulatory requirements contribute
significantly to existing price differences,'' because that has
been part of our discussion.
This has been an interesting hearing and the first step of
a journey that I hope will result in the passage of
legislation. I think the testimony we have received today will
be helpful, and this hearing is now adjourned.
[Whereupon, at 11:15 a.m., the Subcommittee was adjourned.]
A P P E N D I X
Prepared Statement of Art Perdue, General Manager,
Farmers Union Oil Co.
My name is Art Perdue, and I am the general manager of the Farmers
Union Oil Co. of Minot, N.D. We are a farm supply cooperative owned by
4000 farmers in a 10-county area around Minot. Our main product lines
are fuels and petroleum products, farm machinery, hardware, and
agronomy products, including crop nutrients and crop protection
products. Our total annual sales are about $40 million. Our annual
sales of crop protection products are about $3 million.
To start, I want to commend Sen. Dorgan and the other cosponsors of
S. 532 for your efforts to help provide farmers, cooperatives, and
other distributors access to lower cost crop protection products. The
problem that this legislation seeks to address is well documented and
deserves the attention of policy-makers in Congress.
The producers who are my patrons and the owners of the cooperative
are frustrated by the unfair treatment that currently exists. Across
the border, Canadian grain growers have access to crop protection
products that are identical to, or substantially the same, as products
that are offered in the United States. However, the price of these
products is less in Canada than the same or equivalent product that's
available through my local cooperative.
Even though the products are essentially the same, if they are not
labeled for use in the United States, I cannot access them in Canada
and distribute them to my patrons. Individual farmers cannot legally
buy them in Canada and use them on their North Dakota fields.
The goal of our nation's trade policy is to promote reducing trade
barriers and creating a more level playing field for agricultural
producers. But the North Dakota grain growers who are my patrons are
caught in a lose-lose situation. Canadian grain growers have access to
lower-cost production inputs, and our current trade rules allow them to
sell their grain in the United States, when the market here is
favorable. But U.S. growers cannot buy and use those same lower-cost
inputs, and so are put at a cost disadvantage compared to the Canadian
grower.
Long term, the solution to this problem must lie in harmonization
of product registration rules between the United States and Canada. But
we see little progress on that in the near term, so an interim solution
must be found. S. 532 offers such a solution.
My understanding of the bill is that it will allow a state to
register a Canadian product for distribution and use in that state as
long as the product is either identical to or substantially the same as
a product that is registered for use in the United States. For my
cooperative and my patrons, the bill would establish a procedure by
which North Dakota may apply for and receive an Environmental
Protection Agency label for agricultural chemicals sold in Canada.
Those products must be identical or substantially similar to products
used in the United States.
Under the provisions of this bill, my cooperative would gain the
flexibility to distribute lower-cost crop protection products. It also
would permit North Dakota growers to buy approved products in Canada
and use them on their farms.
As I have reviewed this bill and discussed it with other
cooperative managers in North Dakota, we have identified some
considerations that concern us.
It appears as though if my cooperative wishes to distribute a
Canadian crop protection product under the terms of this law, we become
responsible for re-labeling the product with a label approved by the
EPA. Similarly, if individual farmers choose to buy and use a Canadian
product under the terms of this law, they become individually
responsible for re-labeling that product.
My observation is that few crop protection product distributors,
and even fewer individual farmers, are in a position to handle this
responsibility. I would encourage a more active involvement by the
state in the actual re-labeling of products under this legislation.
Next, I want to encourage the authors to consider whether you wish
to allow individual farmers to seek a state registration.
First, as dealers, we have a concern about loss of business. By
making individual farmers eligible to apply for state registration of a
Canadian crop protection product, the legislation effectively
eliminates the role of the North Dakota dealer. Modern, technology-
driven crop production systems rely on a partnership between the grower
and a local dealer who assists in identifying appropriate products to
deal with site-specific problems in the field. The local dealer also
plays a role in assuring that the product is used properly. As dealers,
we compete with each other for the grower's business. While S. 532
assures price competition, I am concerned that it will not promote the
same level of close working relationship between the local dealer and
the grower.
Similarly, I am concerned that S. 532 does not adequately deal with
legal liability for either inadvertent or intentional misuse of the
product. If an individual grower buys a regulated product in Canada,
and sometime in the future there's a problem with the product, it
doesn't appear that there is any way to bring the Canadian dealer into
our U.S. civil justice system.
Finally, there's a stewardship issue. These registered products
require special knowledge for safe transportation and handling. In the
United States, people who transport these products are required to have
a special drivers license certification. There also are strict
requirements and limitations for handling the products, storage, spill
clean up, and use. We believe these requirements are best handled by
crop protection professionals who have the experience and training to
assure sound stewardship of the environment.
In closing, I want to thank you for the opportunity to present my
comments on this legislation. I would be pleased to answer any
questions about how this bill would affect my cooperative or my
patrons. Please direct your questions to me at the Farmers Union Oil
Co. My office phone is 701-852-2501, and my e-mail address is
[email protected].
______
Prepared Statement of Wendell Stratton, Chairman, Agriculture Retailers
Association
Mr. Chairman:
Thank you for the opportunity to submit comments on the proposed
Pesticide Harmonization Act, S. 532. Agricultural retailers provide
many valuable goods and services to our nation's farmers including crop
protection chemicals and professional guidance on mixing and
application of those chemicals as well as direct custom application.
As retailers we, like the farmers we serve, operate on thin profit
margins. Agricultural retailers have to meet many regulatory and
quality standards with regard to the U.S. Environmental Protection
Agency (EPA), Department of Transportation (DOT) regulations, and
Occupational Safety and Health Administration (OSHA) programs. We
appreciate the frustration of farmers and our retail members concerning
the different pesticide regulations and product testing standards
between the United States and Canada. These differences cause what is
perhaps the biggest area of frustration--product price differentials.
There are many factors influencing the price of pesticides in the
U.S. and Canada. In addition to different regulatory requirements,
reviews and timelines between the two countries, there are also
different patent periods. For example, when the patent recently expired
in the U.S. for glyphosate, we saw U.S. prices decline. Protecting
these patent rights is necessary to the manufacturers so they can
continue to reinvest in research and new product development, however
the eventual maturity of the patents will alleviate much of the price
differences. There are others forces at work that contribute to
different prices such as exchange rates. Several years ago, Canadian
farmers felt disadvantaged by cheaper pesticides in the U.S. and
petitioned their government for regulatory changes.
We believe the proposed language of the Pesticide Harmonization
Act, S.532 will place the burden of policing the application and
stewardship of products not registered or purchased in the U.S.
squarely on the shoulders of retailers. This burden would be further
increased if producers were able to purchase products in Canada, thus
taking away valuable business from Ag Retailers in the United States.
While it is true that Ag Retailers would be free to purchase products
in Canada as well, we believe that this is unlikely in most cases.
It is important to remember that most farmers rely heavily on their
local Ag Retailer for the majority of their information regarding crop
protection products. This could also mean that Ag Retailers could be
dealing with products using different and unfamiliar percentages of
active and inert ingredients, formulas, mixing directions and even
basic measurements, thus creating potential for crop injury as well
human exposure problems. Therefore, we believe the proposed language of
the Pesticide Harmonization Act, S.532 will add another tier of
complexities to the management and potential liability of a retailers'
business that is unwarranted at this time.
In addition, we share the concerns about S.532 raised by the
American Crop Protection (ACPA) in recent testimony before the Senate
Commerce Committee and echo EPA Assistant Administrator's testimony
that ``international harmonization of pesticide regulation efforts . .
. hold significant promise to help alleviate some of the pricing issues
that exist today.''
We look forward to working with you on expediting U.S.-Canada
regulatory harmonization and on any legislation under consideration.