Good morning, Mr. Chairman and Members of the Committee. I am Gary Joachim, a soybean and corn farmer from Claremont, Minnesota, and member of the Board of Directors of the American Soybean Association. ASA represents 26,000 producer members on national issues important to all U.S. soybean producers.

We appreciate the invitation to appear before you today to present our views on the impact of issues related to agricultural biotechnology on exports of U.S. soybeans and soybean products. ASA is a strong supporter of biotechnology. We have supported domestic and global policies that encourage its acceptance and growth. At the same time, half of annual U.S. soybean production is exported. As a result, ASA’s support for this new technology recognizes the importance of maintaining access to foreign markets.

As you are aware, RoundUp(R) Ready soybeans were released for commercial production in 1996, after approval in the European Union and Japan. By 2002, 74 percent of the U.S. soybean crop was RoundUp(R) Ready. However, as questions about biotechnology have been raised overseas, ASA became concerned about the possible disruption of foreign market access resulting from delayed approvals of other new biotech soybean varieties.

In 1997, ASA sent letters asking the major biotech seed companies to not commercialize new biotech soybean varieties until they are approved for import in major foreign markets. In the event a company chooses to go forward with commercialization, ASA asked that they prevent the unapproved-overseas variety from entering export market channels. ASA provided a list of conditions we believe must be met to satisfy this assurance. Finally, ASA asked these companies to document that their production and marketing system meets these closed-loop safeguards.

As a result of these measures, we are confident that the only biotech soybean entering U.S. export channels is the RoundUp Ready(R) variety already approved for import in major foreign markets. However, delays in obtaining approvals in major foreign markets – particularly the European Union – is denying U.S. farmers the ability to grow several new biotech soybean varieties approved for U.S. planting. Clearly, the EU’s actions are affecting the soybean marketplace.

U.S. exports of soybeans and soybean products have been increasingly disrupted by the actions of various foreign governments. Chief among these is the European Union. Despite having approved RoundUp(R) Ready soybeans in 1996, the EU enacted a mandatory "labeling" law two years later which requires food manufacturers to attach a stigmatizing "GMO label" on any food products containing more than one percent of RoundUp Ready soybeans within that food’s soy protein ingredient component fraction. This has caused a large number of food manufacturers who market their products in the EU to switch-away from using U.S.-origin commodity soy protein as an ingredient, or to reformulate their products to exclude any soy ingredients, including even soybean oil.

In addition to the anti-biotech labeling regime already in place in the EU, seven EU Member States have indicated they will refuse to implement biotech approvals in their national regulations until the traceability and labeling regulation is adopted. The European Commission has periodically protested the de facto moratorium implied by these policies, but has taken no legal or punitive action to enforce its own policies.

In an effort to rationalize its inconsistent laws and member countries’ actions, the EU is preparing to adopt new regulations on mandatory tracing and mandatory labeling of biotech or biotech-derived products that would further restrict access for U.S. soybeans and soybean products. The EU’s proposed traceability regulation requires importers and food processors to trace biotech agricultural products and ingredients from farm to dinner table under a paperwork-intensive traceability and segregation regime. Compliance with this traceability regulation by U.S. exporters and food processors would be costly, onerous, and unworkable given the realities of bulk commodity production, marketing, transport, and food processing.

The EU’s proposed new traceability and labeling regulation requires that any shipment of agricultural commodities or any food product ingredient containing more than 0.9 percent biotech material be labeled as "containing biotech." Currently there also is discussion to further lower this threshold.

Additionally, the EU’s proposed regulation on Novel Food and Feed would be founded on the principle of process-based labeling rather than detection. In other words, it would not matter whether or not a product had any biotech presence; a product would have to be labeled simply if it was "derived" from biotechnology. For example, the labeling requirements would extend to refined soybean oil made from biotech soybeans and processed products containing such soybean oil, even though no modified protein or DNA is present in refined soybean oil, and it is impossible to scientifically determine if such oil is of "biotech origin" or not. Such a situation would fly in the face of proper scientific and verifiable evaluation and would leave the door wide open to misrepresentation and fraud.

It also should be noted that while soybean oil "derived from" biotech soybeans would have to be labeled, the EU’s proposed laws do not extend to biotech processing aids, such as enzymes, amino acids, and vitamins widely used in EU food production. It is perhaps worth noting that nearly all the manufacturers of these biotech processing aids European companies. The EU argues that such biotech products do not constitute a "material" part of the final product.

Our net assessment of the EU’s proposals are that they are highly discriminatory and are so commercially infeasible that European food manufacturers and U.S. food manufacturers wanting to market their products in the EU will inevitably continue the trend to reformulate their products using non-U.S. sources of protein and vegetable oil, rather than place a pejorative "GMO/biotech" label on U.S.-origin soy-containing foods or attempt to comply with costly traceability requirements.

We have discussed this situation regularly with Administration officials, who have stated a willingness to consider filing a case with the WTO should the EU go forward. However, we are very concerned that, once in place, these new regulations covering traceability, labeling, and novel food and feed will be extremely difficult to repeal or modify – despite proposals for a two-year review of their "workability." And we are aware that, even should the U.S. win a WTO case, the EU could choose to pay compensation through other EU-U.S. trade concessions that will not restore our lost market share or otherwise indemnify our industry.

In contrast to the EU, Japan has taken a more rational approach that has not materially impeded access for U.S. soybean and soybean products, at least to date. Japan has enacted a mandatory food GMO-labeling law under which eligibility as a "non-GMO" product is based on commercial "best efforts" to prevent mix-in of biotechnology-derived commodities. Under this regulation, these food products are not required to be labeled as containing biotech material or ingredients. This requirement for commercial "best efforts," coupled with a 5% threshold for the Japanese government to investigate and prosecute labeling violations, has proven to be manageable for most exporters and food manufacturers, and U.S. soy exports to Japan have remained stable during the past five year period.

China has emerged in recent years as the largest foreign market for U.S. soybean exports.

While China has also become a significant producer and exporter of biotech cotton and other crops, its regulatory agencies have been highly unpredictable and inconsistent in establishing and enforcing regulations governing environmental and food safety testing of imported biotech crops and products. The result has been a roller coaster marketplace where U.S. exporters have come within weeks of canceling shipments of U.S. soybeans, and where contracting for new shipments actually came to a halt, for fear they would be rejected upon arrival at Chinese ports due to lack of acceptable documentation.

China’s Ministry of Agriculture (MOA) recently extended – for the second time – its deadline for issuing permanent safety certificates for imported RoundUp Ready(R) soybeans to April 20, 2004. This extension will allow applicable biotech seed companies to complete required field testing and analysis this year, and will enable U.S. soybean exports to reach China unimpeded this Fall and Winter. However, China’s MOA is now also demanding nutritional analysis and feeding trials that have already been done in other countries, making their duplication in China unnecessary. On the few occasions that Chinese government officials have publicly spoken about their motivation for such onerous regulation of biotech-containing commodity imports, they have specifically cited the EU "GMO" controversy.

ASA strongly supported China’s entry into the WTO, and worked hard with the U.S. Administration to obtain meaningful access for U.S. soybeans and soybean products in China’s WTO accession agreement. We are concerned by the willingness of China’s regulatory agencies to repeatedly move the regulatory target for approval of RoundUp Ready soybeans. Hopefully, continued vigilance and a demonstration that we will confront all efforts to restrict our market in China will improve this situation. The Administration and Congress must continue to insist that China’s political leadership honor and enforce its commitment made to President Bush that access to the Chinese market for U.S. soybean exports will not be restricted.

Among developing countries, recipients of U.S. humanitarian food assistance have become caught between their immediate need to alleviate hunger and malnutrition and fear that introducing biotech crops could restrict future access to the EU and other non-biotech markets. A commonly-stated concern of aid-recipient governments is that U.S. food aid provided in the form of viable kernels/beans might get planted by local farmers and mixed in with domestic production, thereby endangering that country’s ability to export potentially lucrative "GMO free" products to the EU in the future. USAID and USDA have reluctantly agreed to mandatory processing of U.S.-donated commodities to render them non-viable prior to shipment to Mozambique, Malawi, and Zimbabwe. Other countries are looking at similar restrictions. In addition, the governments of Lesotho and Swaziland have expressed concerns over the environmental safety of U.S. commodity donations.

We all recall the tragedy of Zambia’s government recently refusing U.S.-origin food aid, including soy products, due to presumed biotech content. Less well publicized has been the fact that the governments of Zimbabwe, Mozambique, Malawi, Uganda, India, and Ecuador have imposed restrictions that would have hindered the import and distribution of U.S. soy-containing food aid at one time or another. When investigated, each of these instances of food aid disruption has been shown to arise fundamentally as a result of these nations observing the "GMO controversy" which has become institutionalized in the EU.

A number of other nations that import soybeans and soy products commercially have also been influenced by the European Union’s putative concerns with agricultural biotechnology. On several occasions during the last six years, commercial imports of U.S. soybeans or products containing U.S. soy ingredients have been disrupted for a period of time in the countries of China, Saudi Arabia, and Egypt.

Coincident with and impacting decisions being made by individual countries on biotech regulatory issues are ongoing negotiations to establish international standards governing trade and labeling of biotech products. These include the Biosafety Protocol, being negotiated under the Convention on Biological Diversity (CBD), and the work of various committees established under the Codex Alimentarius Commission. Adoption of onerous biotech rules under the Protocol or the Codex would provide a sheen of legitimacy to the EU’s mandatory traceability and labeling regulations, and potentially encourage or even require other countries to follow suit.

The Biosafety Protocol was completed in January 2000 and signed by more than 130 countries, not including the U.S. Among other purposes, it is intended to regulate international shipments containing any living organisms that could adversely impact the environment in an importing country. By twisting the original intent of the CBD, opponents of agricultural biotechnology were able to insert wording into the Protocol to justify its use as a tool for regulation of international shipments containing biotechnology-derived commodities (called "LMOs" in the Protocol), including establishing approval and labeling requirements for identifying their presence in shipments. The Protocol provides that these LMO-shipment regulation conditions be codified within two years of the Protocol’s ratification by a total of 50 countries – expected to occur during mid-2003.

Of particular concern, the Protocol includes a provision referencing the Precautionary Principle, which is being used by the EU to justify the use of unsubstantiated concerns about food safety – rather than science-based determinations – for restricting imports or production of biotech crops and products. Moreover, it is unclear from language in the Protocol whether it would take precedence over provisions in the WTO’s Sanitary and Phytosanitary (SPS) Agreement and Agreement on Technical Barriers to Trade (TBT), which require that any WTO member’s trade restrictions be based on sound science.

Since the U.S. is not a signatory to the Biosafety Protocol, the Administration has only marginal influence on how its regulatory provisions will be finalized and enforced. Based on the EU’s interpretation that the Protocol should take precedence over WTO agreements/rules in governing trade in biotech commodity products, however, developing countries are already beginning to follow the EU’s example. In ASA’s view, it is imperative that the U.S. and other concerned biotech-commodity exporting countries identify and develop an internationally-sanctioned alternative to the Biosafety Protocol for regulating biotech commodity trade in the immediate future.

The other multilateral negotiations that are addressing potential regulation of biotech commodity trade are taking place under the auspices of the Codex Alimentarius Commission. The Codex establishes international food safety standards, and is recognized as the official "referee" for cases brought under the WTO. Various Codex committees are dealing with different biotech commodity issues, including potential labeling requirements and whether to accept the Precautionary Principle as justification for restrictions placed on biotech commodity imports.

While the U.S. has full membership rights in Codex committee meetings, there has been an effective standoff between pro- and anti-biotech countries during the past four years. At this time, there is little optimism that these differences will be resolved in a way that allows Codex to protect against unilateral restrictions on biotech trade by a WTO member country, particularly if the Biosafety Protocol sets out guidelines that sanction such practices.

In our view, it is critical that Congress and the Administration develop a comprehensive strategy to improve the current international environment for trade in biotech crops and their products, which has recently become restrictive and is further threatened by the pending codification of more import restrictions in the Biosafety Protocol. This U.S. government strategy should include the following components:

1. The Administration should immediately prepare WTO cases to be filed against the EU’s planned traceability and labeling and novel food and feed regulations. Assurance that the U.S. would act forcefully will discourage other countries that are considering following the EU’s example.

2. The Administration should continue enlisting the support of other countries for a WTO complaint over the EU’s continuing illegal five-year moratorium on biotech approvals that has no scientific justification whatsoever. This issue should not be viewed strictly as U.S.-EU issue since all other countries interested in ensuring that science-based determinations underpin regulatory decisions should join in the complaint. We are gratified by press reports that numerous other countries, including Argentina, Australia, and Canada, among others, may join in the complaint. While it had been hoped that progress was going to be made in lifting the moratorium, EU member states blocking approvals have indicated that they will not give approvals until the EU finalizes and begins implementing the trade-restrictive traceability and labeling and novel food and feed regulations described earlier. The United States and other exporting countries must not accept the imposition of a set of discriminatory and non-science-based measures by the EU as a condition for ending another non-science-based decision making process.

3. Efforts by the Administration to help developing countries establish a sound scientific and regulatory infrastructure for setting environmental and food safety standards should be immediately and significantly enhanced. This effort should include additional funding for USAID’s sustainable development and trade enhancement initiatives, for the education-based programs sponsored by 1890 institutions, and for the Biotechnology in Agricultural Trade (BAT) program authorized in the 2002 Farm Bill. Under the BAT program, private sector organizations and USDA’s Foreign Agricultural Service would assist developing countries in establishing science-based regulations for approving production and importation of biotech crops and products.

4. The Administration must immediately identify a viable alternative to the Biosafety Protocol for regulating future trade in biotech crops and their products, and work with other biotech commodity-exporting countries to achieve its rapid adoption. One candidate would be regulation via the International Plant Protection Convention (IPPC), which is recognized under the WTO as the expert reference for standards governing shipments containing live plants, seeds, and plant pests. While IPPC standards could be developed to formally encompass biotech crops, there would need to be a concerted effort to push them forward rapidly to catch up with the timetable for the Biosafety Protocol.

As you can tell from our comments, Mr. Chairman, soybean producers are extremely concerned about the status of international trade in the products of agricultural biotechnology. We are even more concerned that, absent immediate and concerted action by our government and the governments of other biotech-commodity exporting countries, this trade environment could become much worse in the near future. We strongly urge you and this Committee to engage the Administration on this issue as soon as possible. ASA would welcome the opportunity to work closely with you in this endeavor.

Thank you again for inviting us to appear before you today.