>> i call this meeting of the senate committee to order. the last couple of years, have been very busy for members of the senate agriculture committee as we work hard to produce a 2018 farm bill. that will provide certainty and predictability for the us farmers, ranchers and growers and everybody up and down the food chain. as i traveled kansas and other areas havinga farm bill in place , certainly talks about concerns that i hear about and the congress committee is doing our work, our very best to bill as soon as possible. but along with that, i also hear about trade. i hear from week growers about the need for market access to celebrate produce. i hear from the producers about barriers to trade that are preventing a project from entering export market. and i hear from producers all across the agriculture industry and all across our value chain about how trade policies and their prices, their decision and their livelihoods. these are not new concerns. the united states has long had to work to overcome barriers to tradearound the world . sometimes those barriers are regulations not based on sound science. they might impact pacific regions or products sometimes barriers are foreign government consistently choose not to adhere to or abide by the same rules which we all have agreed. we need to hold our trading partners accountable but i am concerned that some of the trade actions we have seen in recent years are causing uncertainty and unpredictability agriculture industry . on top of already low prices, the agriculture sector has seen negative impacts as a result of retaliatory trade actions. as time goes on without resolution the concern of losing long-term market access only grows. i know secretary perdue and the department of agriculture also work for long-term certainty made by temporary relief you are hard-working producers. for years, the united states has worked to establish itself as a reliable flyer around the world to domestic agriculture policies like the farmville and through strong international trade policies. free trade agreements including korea and many others have boosted the agriculture economy and supported broader us economic growth and of course, there's nafta.in the early 1900s as ranking member of the house agriculture committee, i traveled with my dear friend chairman dark of texas to build support for the brand-new north american free trade agreement or nafta. at that time, the total value of us agriculture exports was $33 billion. since 1994 when nafta went into force, the value of agriculture exports to canada as increase by 271 percent. to mexico by 305 percent and in 2017 a total value of us agriculture exports was over $138 billion. let me repeat that, over the time that nafta has been in force, thevalue of us agriculture imports have increased from 43 billion to over $138 billion . i've been encouraged to hear that the efforts to modernize and strengthen nafta has been progressive. the announcement a couple weeks ago that the us and mexico have reached an agreement that would preserve the trading agreement, the agriculture industry already enjoys was certainly very welcome news, the light at the end of the tunnel if you will. i know our team at the office of us trade representatives is working hard, even as we speak, to bring our friends from canada into the agreement as well. i hope we're news on a strong nafta agreement very soon. progress on nafta is important but equally so is the need for the united states to address that we continue pursuing new trade agreements all around the world. as we put the entire food and agriculture value chain relies on that effort. this was particularly recognized in the last farm bill process with congress led by this committee, created the position of the undersecretary for trade and agriculture affairs at the department of agriculture. i thank secretary perdue for implementing this new position undersecretary mckinney, thank you for your willingness to lead these efforts and for joining us today. ambassador dowd, it's great to have you working on behalf of agriculture. welcome back to the agriculture committee. your former stomping grounds and thank you to rob johnson, pardon me, joe hanson, chief economist at the departure of agriculture for being willing to share your expertise this morning as well. i look forward to hearing from all of you on your perspectives on trade and with that i recognize senators cavanaugh for any remarks she might have to make. >> thank you for holding this hearing to discuss what we know is one of the most pressing issues facing agriculture and i want to indicate my gratitude and thanks for your readership as we continue to work hard to get a farm bill done. i appreciate very much our working relationship on behalf of the senate and i would also note that even though the senate created its voting last night, members are hererather than on planes because of the importance of the subject . ambassador dowd and undersecretary mckinney and doctor johansson, welcome it's good to see you again . we all know that our farmers are no strangers. our farmers are no strangers to uncertainty. they experience it every day when they check the weather forecast , when they look at the markets and their crops are challenged by invading invasive pests and diseases and on top of all that, they are now more unknowns around agriculture exports and trade. mister chairman, you and i worked together on this not only here but as senior finance committee and we sit in a lot of meetings where we are bringing agriculture's needs. i had this hearing i had a call with agricultural leaders from across michigan to hear directly from them and no surprise, i heard loudly and clearly that our farmers need markets inorder to be successful and there are impacts that are occurring right now. because of the uncertainty . agriculture exports at over 8.4 billion to the us economy each year while supporting more than 1 million american jobs on and off the farm. we recognize this in the senate farmville by providing permanent expanded investments for critical trade promotion initiatives open new markets to american grown agriculture products. this kind of long-term market development as a michigan grown crops like cherries and navy beans naked on the plates all across the world. however, retaliatory tariffs are putting these trading relationships in so many more in jeopardy. it's estimated that american dairy farmers will pay a $1.5 billion this year. due to tariffs imposed by mexico and china. that's on top of the 40 million michigan very lost in income last year. due to canada's unfair pricing system. our farmers are also feeling impacts indirectly. when washington they can no longer ship their apples china, it makes it harder for michigan growers to be able to compete at home. to address the impact of the the administration has imposed up to 12 billion in emergency aid for some farmers. their reaction from many of the farmers i've spoken with is not surprising. they want trade, not eight. while i look forward to hearing more about the details and the methodology but buying this package, we must acknowledge that temporary solutions only go so far. we need to be mindful of the long-term impacts for agriculture. producers in my state are concerned that current and future administrative actions can result in agriculture permanently losing important trading partners. i agree that we need strong, meaningful trade enforcement. when actors like china break the rules i have been out there strongly and vocally on that but i agree it makes sense to update nafta. a lot has changed since its inception in 1994. there is certainly room for improvement in a number of areas when it comes to gary in canada and others. however, all negotiations must be done thoughtfully, looking at the long-term impacts and we also need to get them done. mister chairman, you and i urge the administration to get it right. american farmers cannot be collateral damage. there are many actions this administration can and should take now that will help our farmers long-term stability, not just short-term relief. from trade negotiations that stop exports to stopping unfair competition, i intend to raise several of these issues today as well as in writing to each of you. the bottom line is that agriculture would not be an afterthought with it comes to trade which is why we are here and all of us care deeply about this so i look forward to hearing from our witnesses and we are anxious to know how we can work with you to ensure our farmers are not left behind. thank you, mister chairman. >> thank you senator and welcome to our panel of witnesses for the committee as of this morning. our first witness is ambassador rick dowd who serves as archie agriculture negotiator in the office of us trade. representative . >> red was raised on a farm in kansas and graduated from kansas state university . formerly ball will be ever optimistic logic, from his work developing markets and the national catalan beef association, he certainly has an understanding of the trade impact on agriculture and finally, he worked on another important issue, something called the farm bill as a staffer during my time as ranking member. with his notable experience with global agriculture and trade, i am confident he will continue to represent the voices of farmers and ranchers in his current role at the ustr. ambassador dowd, welcome back and i look forward to your testimony. next we have undersecretary for trade ted mckinney who coordinates the agriculture trade across thedepartment of agriculture . undersecretary mckinney formerly served as director of the indiana state department of agriculture and then governors mike pence and eric holcomb. he also worked for 19 years with dow agro sciences and 14 years with lando as director of corporate global affairs. undersecretary mckinney hails from tifton indiana and is a graduate of purdue university. ted is no stranger to the committee as he was here farm for his confirmation hearings almost a year ago. welcome back undersecretary mckinney and ilook forward to your testimony . additionally, doctor rob johansson has agreed to join our witness panel as a resource for any question related to trade mitigation payments or activities at the department of agriculture. doctor johansson serves as chief economist at the department. thank you for joining us today. greg, why don't youstart off ? >> chairman roberts, ranking member stabinau, thank you for testifying on the administrations agricultural trade policy on behalf of president trump and ambassador lighthauser. we are working diligently to bring a successful closure to nafta that fulfills our trade promotion requirements. we have reached an agreement with mexico that improves on nafta in almost every way. agriculture maintains our farmers and ranchers tariff access to markets and modernizes the agreement in ways that will cut red tape on our southern border. >> .. >> the benefits of potential partners in southeast asia and africa. and i look forward to working with congress through the tpa process as these considerations evolve. increasingly, our dialogue with japan continues to be a priority for ustr. a high level delegation of japanese officials came to ustr last month to discuss ways to expand and improve our bilateral trade. these discussions are continuing when we fully recognize -- and we fully recognize the importance of expanding market access into japan. we are determined to put pour producers and agribusinesses on a level playing field with other countries such as australia, canada can the european union. in july, president trump launched an initiative to promote more free, fair and reciprocal trade. we understand that there are many sensitivities surrounding agricultural trade, but incliewding agriculture in any negotiation with the e.u. remains a priority for this administration. currently, the united states runs an agricultural trade deficit of over $15 billion with the e.u., which is partly indicative of the scope of market access issues and non-tariff barriers for u.s. agriculture into the e.u. in may i traveled to india -- every rice and wheat-producing country around the world should be concerned about the tradefects of india's -- [inaudible] we are pushing for the largest agricultural disputes in history against china for its market price support policies and unfair administration of its tariff rate quotas. we estimate china has exceeded its levels of domestic support for rice, wheat and corn by some $100 billion. we also estimate that if china had administered according to its wto commitments, they would have imported billions more in rice, wheat and corn from all sources. we currently have seven offensive wto disputes exclusively for u.s. agriculture and six more on retaliatory duties by our trading partners on agriculture and other products. under section 301 of the 74 trade act, ustr launched an investigation into china's unfair technology transfer regime. in response, ustr implemented tariffs on $50 billion of chinese imports while another $200 billion is under active consideration. these tariffs were spended to address longstanding and discriminatory chinese trade and investment practices with respect to intellectual property and to encourage china to eliminate its harmful behavior and adopt policies that will lead to fairer markets for all citizens. the correct response would be for china to change its unfair and criminatory ip practices, and until then -- discriminatory ip practices. working to address the damage inflicted by the unjustified retaliatory actions. finally, i am disappointed in that recent months our trading partners have decided to retaliate against $30 billion in our $143 billioning agricultural exports -- billion in agricultural exports. we are taking action at the wto to counter this unjustified retaliation. i often tell people that this -- the easy issues in agriculture were resolved a long time ago. for example, earlier this year ustr and usda, we announced access for u.s. pork to argentina and poultry to morocco. these are longstanding issues. understood secretary mckinney -- undersecretary mckinney and i will coordinate our efforts, and i thank the members of this committee for their time today, and i look forward to answering your questions. >> we thank you for your testimony, greg. undersecretary mckinney. >> thank you, mr. chairman. excuse me. thank you, mr. chairman, ranking member stabenow and members of the committee. it's good to be back with you. i'm pleased to be before you and welcome the opportunity to discuss the efforts of usda on behalf of u.s. ag exporters. first, i must thank the president and the secretary for their faith in me to take on this first-ever role as undersecretary of trade and foreign ag affairs and thank this committee for creating the opportunity for this in the 2014 farm bill and to secretary per due for making it happen. first, the mission area promotes ag exports, works to reduce trade barriers and opens new markets for farm products all in collaboration with our friends at ustr and other agencies. my area includes the ag service and now the -- [inaudible] office. as undersecretary, i embraced the charge to be american agriculture's unapologetic advocate around the world. and since the confirmation, i've done my best to earn that million miler club participant as the secretary expects. i think i'm about 300,000 right now. my travel began two weeks after the confirmation when we led a full ag trade mission group to india. since then i've been to mexico, central america, colombia, europe, brazil, japan, dubai, china, vietnam, southeast asia and some of these twice. all to advance our trade issues and expand exports. last week as an example i provided the key note address at ireland's ag science association, very good and interesting group, and prior to that was in brussels to meet with key members of the european commission. at all these stops, as with all others, i make clear that that we seek only free and fair two-way trade always based on science-based decision making. and those are all very important. looking ahead before the year's out, i'll lead an ag trade mission to south africa, simultaneously my colleagues with fas will lead a similar group to south africa. thereafter we'll be in the philippines and thailand. we will have doubled the number of formal ag trade missions from years past, and that doesn't include the bilateral, singular sort of me-only meetings on bilateral trips. a bit about ag trade accomplishments. ambassador doud touched on a couple of these. we are making some headway. last year these included easing of regulations on u.s. citrus into the e.u., resumption of u.s. ddgs into vietnam, reentry of u.s. chipping potatoes in japan and, very importantly, lifting of south korea's ban on the imports of u.s. poultry. in july secretary perdue himself celebrated the reintroduction of pork into argentina after more than 25 years. did so by slicing a 10-pound u.s. honey baked ham. and in august, ambassador lighthizer announced that morocco has agreed to allow poultry products for the first time ever. and we continue to work with greg and his colleagues on nafta. at any given time, i've got 6-20 people supporting nafta and other negotiations and glad to do it. and that doesn't touch many, many more we hope can be announced in coming weeks and months. a moment on codex. with respect to them, we have strengthened the group in numbers. we'll add outreach to the regions of the world and always will base it on good science but with great vigor. i'm trying to earn what i said to you would be a happy warrior. a little bit about mitigation, and you touched on this, mr. chairman. in response to unjustified retaliation by china in particular and other countries, the president directed secretary perdue to craft a short-term relief strategy to protect agriculture producers while the administration works on free, fair and reciprocal trade deals. and as you mentioned, it's a $12 billion, three-part mitigation program. let me touch very quickly. the first leg of the stool is the market facilitation program administered by my colleague, bill nor think, and his team at the farm service agency. it provides payments to producers of certain crops and livestock that are negatively affect by these unfair countertariffs. the second leg involves a food purchase and distribution program that's managed by my colleague, the undersecretary for the ag marketing area, and it affects and deals with affected commodities. the third leg of the stool, the ag trade promotion program, will be administered by my team. this is the $203 million in cost-share assistance -- let me repeat that, it's cost-share which ises the hallmark of that program -- and it'll be made available to eligible u.s. organizations who have suffered damage from these unjustified retaliated trade activity. that program will focus on new markets and mitigation in select existing markets. but more the former than the latter. areas of work include advertising, pr, points of sale demonstration, trade fairs, exhibits, market research and other activities. our group does this very well through a similar program that you know well, the market access program and the foreign market development program. in conclusion, the ag exports contribute to prosperity in and well beyond rural america. it's a privilege to serve as a strong ag advocate worldwide. mr. chairman, that concludes my statement. i'd be interested and please to answer any questions. >> [inaudible] johannson. >> thank you, chairman and ranking member. i'm happy to answer any questions that you may have regarding the marketing facilitation programs or on the food purchase and distribution program. thank you. >> only if we had more witnesses like yourself. [laughter] ambassador doud, i've been pleased to hear progress on finalizing a nafta agreement. i hope that preserves the strong trading relationship between the united states, mexico and canada if we can bring them along. there has been a great deal of discussion surrounding the success of the existing nafta agreement. generally for agriculture, the benefits are without question. there are examples, however, such as restrictive policies more especially with canada on grain grading standards or dairy where there is room for improvement with do no harm remaining the top priority of the ag sector. what opportunities do you see for farmers, ranchers and growers in a new and improved nafta. >> thank you, mr. chairman. you know, the first thing you have to do in these kinds of discussions is look towards the future. and, you know, it's been 25 years since nafta. what we have to think about, what things are going to look like in another 25 years. and i think the first piece of in this is, obviously, we keep the tariffs at zero. obviously, you know, the mantra of do no harm has been throughout this discussion. but in sanitary land, the issues that we deal with so very often between usda and ustr and agriculture, we've got to set the stage to improve the discussion and the dialogue in and a nafta and around the world, and i think we've done that with the additional ability to have conversations with regards to sps. and also, in particular, with ag biotechnology. the goal is to anticipate what we have coming around the corner in terms of the new gene editing technology, crisper, etc. and that, those are the areas that we work very hard on with mexico in this agreement. >> ambassador mckinney, beyond strengthening current agreements, we should be aggressively seeking new trade agreements with countries like japan, vietnam and the united kingdom. and others as well. how do you view the strategy on new free trade agreements working alongside what we are currently facing in market loss due to retaliatory tariffs? >> thank you, mr. chairman. well, there are two or three points. first, i think we've already exhibited some success. most of the countries that you heard me cite that we visited are ones we've not normally paid a lot of attention to. let me cite the trip, the ag trade mission to guatemala. i went thinking this would be a nice trip, we'd have some good results. the visit to guatemala, honduras and el salvador set the all-time record high many in sales of ag -- in sales of ag products from across the u.s. in the history of the foreign ag service. so much so that we had to set the top two aside to validate that they got the message to estimate conservatively what their sales might look like over the next 12 months. now, not all are this way, but we are seeing record attendance and record sales through these ag trade missions. so that's the first thing. the second thing is we look proactively, as we go on offense as ambassador doud said, you'll be pleased to know as we cited and listed the candidate countries we want to go pursue for free trade agreements or bilaterals or whatever you might call it, the good news is it was almost identity old to the -- identical to the list that greg and his team cited. certainly, the top five were in the same category. we took that as positive. many of the countries i listed are the ones that we're going to follow up later or ustr will take the lead on. so we're cultivating those and developing them. and finally, you know, i think that there is some evidence that we are seeing some growth in the countries that we've already opened. beef and pork, for example, in south korea after the agreement has been at record levels. and this is the pattern we'd like to emulate across the board. so i hope that that we're already, even two weeks after my confirmation, starting to pave the way with many of these countries that we need to go back to. for sure, some will be long and arduous. i cite india. great country, one we must invest in. but i think for a while they're going to be very difficult with a tendency to throw tariffs up, as are many others. but this is where i appreciate the strong hand of the president, secretary perdue, ambassador lighthizer. people know we mean what we say, that we believe gsp, for example, is a serious thing that cannot be abused. that when you introduce non-tariff trade barriers -- which is very, very common -- that there's a consequence for that. so i think we're rounding a corner, and i'm very optimistic for the future. >> do you have any comment on this, ambassador doud? >> [inaudible] >> i think undersecretary mckipny summed it up very well, senator -- undersecretary mckinney summed it up very well, senator. >> i want to get into trade mitigation here just a moment. [inaudible conversations] under the trade assessment package the department is implementing atp, i beg my colleagues' deference here in going over time. i know you'll forgive me. [laughter] that will assist export es in market excess around the world. what i want to know is this program, does it complement existing export programs? you mentioned the market access program, the foreign market development program. how will you insure resources are not due public tiff? real -- duplicative? real quick, ambassador. >> sure, i can be quick. >> pardon me, assistant secretary. >> that's okay. i have a twin brother, so i answer to "hey, you." [laughter] they are highly complementary. and let me remind you if you haven't already heard, the market access program -- and now the complementary program that we're introducing -- are beloved. they might be one of the finest creations of u.s. government, they are that highly regarded. what people are look at is, first and primarily, where can these monies be applied where we haven't had the funds to invest in the future. i hear that many people lobby you folks for additional funds to map an fmd, so consider this as an opportunity for folks to go finally dive into export markets where they haven't been -- at least not at the present they'd like to. i think that's the first and primary focus. and for sure, some would like to dedicate some of these new funds, the surge, if i can use that word, into maybe mitigating some lost sales or some hurt feelings or whatever the case might be in existing markets. so as we speak now, there's a lot of discussion going with all the commodity organizations you might imagine, and they include the organizations and the products that come from all the farms and ranches in your states and that we're working with them. and we encourage creativity, new markets, some mitigation and products or programs that'll work full time. so, certainly, this is very much like the market access or foreign market development program. but, boy, oh, boy, is it exciting for them to finally get into some territories they haven't experienced yet. at least not very much. >> senator bennet had to leave in that he is going on a plane to colorado, but he had this question for dr. johannson. undersecretary mckinney, you can weigh in you want. which means i have another two minutes. the largest program in the administration's trade mitigation package is the market facilitation program. can you offer some background on how the department determined the methodology and the payment rates for the different commodities eligible for the program? and i say this, that when the secretary called me -- secretary perdue -- indicating that there would be a program like this even though many groups had gone to the white house and said we don't want aid, we want trade and that's sort of been hallmark. but we do have this mitigation program. i think that's probably the best description. but how are rates different for the program? i told the secretary that once you announce a program like this, you're going to have a heck of a time stopping it for the next year, next year and the next year. and every possible farm organization and commodity group will complain that it isn't equal to their circumstance, which i have heard virtually from every commodity organization and farm organization i know of. i think probably everybody here has. could you elucidate us on the methodology and how you came to that? >> thank you, mr. chairman. of course, senator bennet for his question, and i'm sure we've heard the similar question and ideas about how such a program could be designed from a variety of commodity groups as you can imagine, as you mentioned. so putting such a program together, we were, we were faced with the objective of trying to be equally fair across commodity groups, as fair as possible. we were also constrained a little bit by some of the existing tools that we have for developing such a program. so as you know, we utilized authorities under the cc c-section five, and that has certain prescriptions on how we should go about setting up such programs. but i think the main, the main point that i want to make today and i will point out that we are going to be publishing a white paper today and putting it on the usda office of the chief economist web site that explains this fully and, you know, we've been trying to do that in person meetings, but we're going to -- we've written it down, and we're going to be putting it out shortly. this is a trade program, retaliatory tariffs that we're trying to address. we weren't trying to address the vast array of other trade issues that have come up already today. this was specifically targeted to the 232 and 301 retaliatory tariffs, and so we wanted to make sure that our program was able to reflect those tariffs and those tariff levels from the countries that are levy aring those tariffs -- levying those tariffs on the specific commodities listed under those tariff regimes. and we wanted to do so in an equitable and consistent manner across the different commodity groups. so there are a lot of different models that can be developed to reflect trade damage. we wanted to focus on a trade damage approach which is similar to what we would normally use if we were to go and support ustr in actions at the wto in geneva, when we go there to argue that a country's actions are unwarranted and we are claiming damage from those actions. in that sense, we used a trade model that reflects, essentially -- as secretary bennet pointed out -- those commodities that were exported to the countries that are retaliating are going to show the highest damage from these tariffs. and that's why you see such a large component of the program being directed to producers of soybeans since soybeans was our largest export to china. and, on the other hand, for producers of corn, for example, we don't sell as much corn for a lot of reasons, understandably, but to the retaliating countries, the e.u. and china in this sense for corn. and that's why the payments to corn producers are so much smaller. so, essentially again, we just want to be consistent. we did know that for the majority of this program we were going to have to do a rulemaking in that sense. we also needed to follow the prescriptions that we would normally have to go through in order to publish a rule in the federal register and incorporating interagency comments from omb as well as other white house offices, ustr included. and so i'll stop there and see if we have any follow-up questions from some of the other members here. >> obviously senator bennet's time has expired, but senator hoeven just left. he wanted five minutes and whispered to me the question that he wanted to be answered. senators were up there at the white house on the day that the president announced the decision along with the president of the european common market no tariffs, that they had decided no tariffs would be the best policy, and we all applauded that. and then we went around the room and congressman newhouse from washington pointed out he was a cherry producer, lost his whole crop. and then i find there's nothing for cherries. now, i'm not here to advocate cherries in particular, but senator stabenow is on the floor. she gets that from everybody on her side of the aisle, i get it from people on my side of the aisle. so i'm very interested in your white paper. i know you're doing the best we can, and it's a difficult job, but you can understand our concern when people come and say, whoa, wait a minute. then, of course, you can get on the exclusion or the addition list, whichever one we're talking about of which there must be a thousand or two already on that list. senator stabenow. >> well, thank you, mr. chairman. you do a good lead-in, because i actually do advocate for cherries as well as a wide variety of commodities that we grow in michigan. and, of course, we care about what's happening all over the country. i do want to say thank you. my question was going to be about releasing the methodology and assumptions in calculating the amount of trade mitigation, and so i'll look forward as well. i know my growers do in terms of seeing the white paper. first for our ustr ag negotiator, greg doud, thank you for all of your efforts, ambassador. and i want to thank you and ambassador lighthizer for considering the cherry industry's petition to revoke turkey's unfair duty-free access for imports of cherry juice. we have a huge issue going on right now for that industry, as you know. and i hope we can expect a timely and favorable decision on this critical issue. let me talk about and ask you a question about nafta. we've heard about the initial agreement with mexico which contains a zero tariff on u.s. agricultural exports to mexico. however, many of our u.s. agricultural products including dairy and apples and pork face substantial tariffs in mexico due to the steel and aluminum tariffs. what's the path forward and timeline to reach an agreement with mexico to resolve these tariffs in a key export market for our u.s. farmers? >> senator, i appreciate the question. the answer is, first of all, the section 232 tariffs are administered by the department of commerce, not by ustr. >> sure. >> so that's not really something that's in our job jar -- >> i hope you will weigh in though because of the, what's happening. >> i appreciate your comments. my understanding is that part of the discussion is on a separate tract and not a part of what we're working on right now. >> really? okay. because, unfortunately, all of this is coming together from a producer standpoint, as you know. it hits -- doesn't matter which department, which agency, what effort. it lands on them. so they're deeply concerned. i want to talk a little bit more and ask dr. johannson about market facilitation program. and i'm anxious to see the methodology and so on. i had sent the department and the secretary a list of the commodities in michigan and their concerns and the number of way tariffs, non-tariff barriers and number of things that are happening that i had hoped would be considered. but they've pushed back on me about the fact that, about the fairness of what is happening already. and here's what i get asked. through the market that -- facilitation program to assist producers harmed by trade disruptions, usda's planning to provide $277 million in payments to our cotton producers. this is despite strong cotton prices in 2018 and recent forecasts that cotton prices will continue to increase over the coming months. in march usta used the same ccc charter act authority to make 150 million in direct payments only to cotton farmers. and i, certainly, you know, this is not about picking on cotton farmers, but we have a lot of folks that have been hit. at at the same time commodities we produce in michigan -- dairy, corn, fruit and others -- continue to struggle with very low prices and receive less help through the administration's trade assistance plan. can you explain how usda determined that a commodity with increasing prices that received significant assistance earlier in the year should receive more assistance than the other commodities who have seen their prices go down? >> thank you, ranking member, for the question. it is, obviously, as i mentioned, there's a lot of different ways that we could have used estimation techniques to develop the program. this particular program that we're talking about today, the trade facilitation mitigation programs that the department's put together as undersecretary mckinney mentioned, the three different programs, and some are intended to address pieces that the others may not. in the case of prices, for example, as you mentioned, one of -- a lot of the commodity groups that have come in to talk to us have pointed at perhaps how much prices have changed since the late spring, early summer period when countries that were retaliating announced their activities. and prices have fallen dramatically since that point. of course, we've seen a lot of other reasons why prices may have fallen whether through increased production or weather conditions in other countries, for example. so when we put this program together, certainly one way we could have done this was by keying off of prices. we decided not to use the price-driven methodology but to look at gross trade damages. trade damages are going to be simply higher for those commodities that have exported significant quantities to china or to the other countries that are retaliating. and, of course, we sell a lot of cotton to china, and that's the reason why we would expect these tariffs to significantly impact cotton exports to china. so because of the, you know, because we use the trade -- sort of the wto approach of looking at trade damages and not necessarily looking specifically to prices, we show damages from the tariffs to the 232 and 301 actions to be what they are for soybeans, cotton, sorghum and down the list including some of the specialty crops and fruit and nut commodities. that being said, going forward into the fall as we see harvests continue and we see marketing conditions change, as you'll note we announced for the market facilitation program in particular the first phase of the program and the second phase, if needed, will be developed over the coming months and announced in december, and that may include consideration of other factors such as prices, trade, other tariffs that may occur. or as some of the other senators are likely to ask later today, basis of facts that you may see in this other part -- in other parts of the country. hopefully, that answers your question. >> well, sort of. [laughter] i guess i would say i'm still confused by an area where we see prices continuing to go up maybe not as high as they would have gone, but are still going up, and we have so many producers where it's actually going down in real terms. so i have one more quick follow-up, so, dr. johannson, to you. not every commodity affect by retaliatory tariffs has faced the same impacts from trade disruptions. and, for example, many producers of perishable commodities such as dairy and specialty crops were impacted immediately while other producers may have utilized forward contracting or futures markets to sell their crop before prices fell. how were these factors considered in allocating assistance under the tariff mitigation plan? >> no, i think your questions are raising a lot of the real key considerations that makes developing this program and is launching it in an equitable fashion as possible very difficult. there are a lot of, a lot of considerations such as, you know, we wanted to put the program out there in time for producers to respond to in a fairly rapid fashion. that's why the secretary announced this program at the beginning of september. we could have waited other time to see -- over time to see how sales and harvest had been affected, but we wanted to try and get this mitigation, these mitigation measures in place as quickly as possible. i would, i would say that we are trying to move forward on the perishable commodities in a similar fashion. we are working to address, for example, almonds and cherries. we're still working on those since they were a little bit more difficult to work into the two types -- three types of programs that we had. and, of course, all of the commodities are eligible and encouraged to work with undersecretary mckinney and his team on developing new markets. and maybe i should ask undersecretary mckinney if he wants to add anything to that effect. >> just that we've been meeting with, i think, every commodity group known to man and woman alike, and they are answering the challenge of being creative, looking at those new markets. and, again, it is open to all the cooperators who have been negatively affected. so that certainly includes the -- well, many, i would say all of the crops that i'm familiar with in michigan. so we'll have to see how they come out because we haven't finalized and haven't received their final proposals. those are due november 2, we'll then take til early, early january, and funds will be released. i didn't want add that in my testimony. >> thank you very much. and i will add some additional questions in writing, but as you know, it's not just retaliatory tariffs that are affecting. all of the other things that are happening around that. and so i would urge you to look at all of those impacts. thank you. >> senator boozman. >> thank you, mr. chairman. today's hearing is so important in regard to trade. it's all about trying to provide some certainty to our farm community that's struggling so, so very much. and then also the other thing that we've got going on is the farm bill. and i want to thank senator stabenow, senator roberts for providing the leadership that we need to get that done. again, that's all about certainty and trying to put the safety nets in place. so we do appreciate you, and even more importantly, your staffs for their hard work. we know who actually does the work around you. they're working hard. so i just got off my egg tour a couple weeks ago, traveling all around. we to that every year in arkansas. -- we do that every year in arkansas. and certainly, trade was right at the top regarding in the sense that always, it doesn't matter what the situation -- we've got a very difficult situation now -- the retaliatory actions are always against agriculture first. and that's the situation that we're in. and so i think, you know, the farmers in arkansas willing to work with the administration. they understand that we need not only free trade, but fair trade. owner, they are anxious to wrap this up as quickly as possible. the other thing, and our farmers are smart, they understand that we've got 95 -- we've got 5 customers in the united states, we've got 95 all over the world that we need to be selling to. people like japan, people like cuba, things like that. so can you tell us, ambassador doud and undersecretary mckinney, you talked about trade relationship with japan. can you expand on what the next steps should be in regard to getting a market like that in place? do you see an opportunity for the u.s./japan bilateral free trade agreement come to fruition? >> senate, this is probably -- senator, this is probably other than nafta top of mind. and our concern is that i believe it is in april of next year that europe, their trade agreement with japan will enter into force. obviously, canada and australia have trade agreements with japan as part of the tpp apparatus. so we're right here, right now. but sometime next year those three countries' tariffs are going to go down here, and we're going to still be up here. and the u.s. industries are already coming in to see me saying we need to address this. and let me assure you, we at ustr completely agree. there isn't anyone in the building that doesn't want to do a trade agreement with japan. we understand this is a sensitive issue. we understand japan would like us to be a part of tpp, but we're committed to engaging with this. and i know ambassador lighthizer, this is a top priority issue for him, for him and the administration, and we're going to continue to work on it. we've got to get there at some point, definitely. >> what other countries hold the greatest potential for getting an agreement worked out? >> when we refer to southeast asia, you know, the other country that is important to us is vietnam, obviously. and if you do vietnam and japan, that is -- we'd have agreements with, essentially, every other country that is tpp. another country that is quite interesting is the philippines. you know, i'm -- as the senate chairman knows, i'm an old wheat guy from kansas. even i was surprised to learn that the philippines is our number three market for u.s. wheat today. in my mind, senator, the philippines is a legitimate top ten market for u.s. agriculture. in a lot of ways -- and, ted, you can talk about this -- it's probably about where mexico was 25 years ago. and the, you know, we're having conversations with indonesia. we're -- but not in terms of a bilateral, but in terms of overall trade discussions. we're very interested in africa and getting something going there. and, obviously, down the road next year we'll see what evolves with the u.k. and brexit. i have to tell you, what i appreciate more than anything else is my boss, ambassador lighthizer, was in europe this week. and he said here in the senate when he testified and the first thing he said to commissioner mall strom when he was over there in this week was agriculture has to be a part of any trade discussion. that, to me, is just an incredibly important thing for u.s. agriculture. as we all know here, dealing with the europeans and agriculture -- [laughter] has been a difficult issue for all the time that we can remember. and i can't tell you how gratifying it is for the e.u./u.s. trade representative to say that the first thing in these kinds of discussions. >> no, that's excellent. and i know the -- i think i can speak for the committee that we will help you any way we can many that regard. very quickly because my time is out, but the iraqi tenders regarding rice, we had a situation where in the past they have disregarded -- we'ved had bids that were actually lower, better quality rice. the iraqis went with other countries for some reason. we've reached a little bit of an agreement there. i guess what i would like is just kind of a yes or no, you help us hold their feet to the fire in the sense of keeping their agreements and making sure that we have a free and fair situation in that regard? >> -- not only with rice, but with whatever comes up. >> yes, always. >> thank you very much. >> i would just add -- >> absolutely, senator. >> you should know that we talk, gosh, at least once and usually two or three times a week so that we're aligned. part of the reason for my going to some of these countries is we have a little more bandwidth particularly with what's going on with nafta and all the different other countries. so we intend to collaborate fully. still want to travel together to one or two locations. and again, i think -- i wouldn't want to suggest there's no bids going on in some of these countries where we want a new free trade agreement or bilateral or whatever you want to call it, but we certainly can build on that. not just the new ones. i tell you, the adequate mall la experience -- guatemala experience that i told you about, there are countries where we already have a free trade agreement or something of that sort that we can continue to build on. i tell them that we belief in two-way trade. i think there's an intimidation factor out there that we have to address. we are most certainly looking at two-way trade. and i think when we get there, it's a very positive relationship. so we're, once again, looking forward to these. >> thank you. >> senator klobuchar. >> thank you very much. thank you, all of you. i spoke with you earlier today. first of all, minnesota's fourth in the country for ag exports. it's very important to us and, certainly,ing with -- being a state where we can see canada from our porch, canada trade is very important. as i've told the ambassador before, we would like to see canada as part of any nafta agreement. so let me start with canada. the administration has signaled its intent to prioritize ending canada's class vii program, ambassador, which is essentially close the market to u.s. dairy producers as a part of the nafta negotiations. how have you engaged in these negotiations to insure that you as fairy producers can once again compete in the canadian market, and is it still a high priority? >> senator, this is the priority of the moment for us in agriculture. and i want to take a moment to tell you that -- [laughter] it has been an extraordinary effort to help ambassador lighthizer learn dairy. and chairman roberts, i remember being on this committee and having conversations about learning dairy. and how difficult that is. and let me assure you that ambassador lighthizer has -- we've spent an enormous amount of time working on this issue and in good faith, both countries are trying to resolve this issue. >> i understand. >> the challenge is that how desperate these two systems are between canada and the u.s. they're closeed finish their closed supply management system. we're working very hard to try to manage this, ask we're going to do our best. >> okay. turkey, we're number one for turkeys in minnesota. i always like to say that. are you focused on that market as well? and the other thing would be pork, making sure that mexico and canada are number two and three markets for pork and what's happening with those. >> yes, senator. the vernacular in these discussions is dairy, poultry and eggs. and pulte certainly includes turkey -- poultry certainly includes turkey. and with regard to pork, that is a high priority items as well. it's one of our major exports. >> i know japan came up earlier, but you mentioned looking into the benefits of increasing partners in southeast asia. what is the latest on administration's effort to engage japan in serious talks about a free trade agreement? >> well, as i indicated in my testimony, we had conversations last month. this is an issue that is, the vice president is directly engaged in, and i believe there will be continuing conversations coming up here. this is a very high priority issue for us. >> okay. the 25% duty placed on soybeans to china has caused significant disruptions given that 57% of all u.s. soybeans went to china last year. these duties have hit my state hard because about 60% of our state's soybeans are shipped to the west coast by rail. dr. johannson, when preparing the methodology to determine payments under the market facilitation program, was any consideration given to regional shipping disparries within -- disparities within each commodity? >> so that's a great question. facts are, obviously, very complicated to consider, but certainly we've been asked to look at that issue. when we put the current methodology together, we did not do regional effects. there were a number of factors to consider there, transportation certainly being one of them, storage capacity being another and availability, as you know, of rail shipment capacity to the pacific northwest, relative to capacity down to the gulf. those are all factors that we're actively examining and looking at and will be, you know, continuing to provide the secretary with that type of information. >> so will you take these unique regional impacts into account if usda determines that a second round of assistance is necessary? >> well, certainly we're continuing to consider that. i can't speak for the secretary or the interagency process, but i would imagine we'll bring that information to bear in terms of putting together if a second phase is required, we'll be considering that information, yes. >> thank you. and undersecretary mckinney, i will spare you questions as my colleagues are waiting. i want to thank you again for your good work and your minnesota connections, which we appreciate. >> thank you very much. >> thank you. >> senator ernst. >> thank you, mr. chair. and thanks to our witnesses today for being here. this is a really important topic, as you can tell by the attendance at this committee. trade is something that we are very, very end gaged in here in the united states -- engaged in here in the united states congress, and we want to make sure we're doing the right thing for our constituents. since the trade spat turned more into a trade war, grain prices have dropped anywhere from about 15-25%. and when we look at pork, we have seen their prices drop about a 25% as well. and i do want to thank president trump and secretary perdue for their commitment to america's farmers providing some relief. but we've heard time and time again today trade not aid. so while a lot of farmers and ranchers will be out there cashing those assistance checks, we have to make sure that our markets are being opened. so i am encouraged to hear that we're looking at japan and the e.u. and others. but we've got to get them done, folks. i await the day hen we actually see that done. -- when we actually see that done. many farmers across iowa were shocked when they saw that mere 1% -- or, excuse me, one cent point for our corn, for the reimbursement or the payment assistance. and through the market facilitation program despite the significant losses that we have seen since the trade tensions took hold. we've seen higher tariffs from china that have resulted in a 70% tax on u.s. ethanol exports. and prior to the tariff increases, us and all exports to china had been up 57% year-over-year. u.s. ethanol is now essentially shut out of a growing market while china is transitioning to e-10. so we are really missing out in that area. so can you walk me through how the usda arrived at the payment rate for those corn farmers, and did you, did your model calculate for the rate for the lost ethanol exports? >> so those are great questions. i'll just say quickly on the ethanol side while we did see some increases in ethanol, china had already taken some actions relative to our ethanol exports there that had reduced our exports of ethanol to china prior to the 232 and 301 actions of being take then. now, of course, they are also listed as being affected by the tariffs as well. that being said, the amount of ethanol we do sell to china would have -- would not been affected specifically looking at the 232 and 301 actions to a significant degree. and the programs were intended primarily to address producers, farmers and ranchers that were producing primary commodities and not processed, not on the process side. >> but it does have the direct effect for those corn farmers though. >> that's right. it certainly would. on the corn side, as i mentioned, earlier we looked at a trade model that's keying off of 2017 exports to the affected commodities. and i'll just provide a highlight here. on soybeans, for example, the value of soybean exports that were being affected by the tariffs was roughly 13.9, $14 billion. and on corn, for example, it was $300 million. so there was a significant difference between the amount of soybeans and other types of commodities relative to corn just because corn had -- corn shipments to the countries that are retaliating were relatively low compared to those other ones. and the met doug that we used were focusing on teeing off to our export values to those countries. >> okay. well, i appreciate that. again, we'd rather have trade, not aid. so we hope we don't have to see a second round. mr. doud, just very briefly, i met with some pork producers from iowa yesterday, and they are end encouraged by the administration's announcement regarding the modernized trade agreement with mexico, and we are a large exporter of pork to mexico. and so hog prices are at a 15-year low, and what approach are we, are we using to alleviate this pressure on the fork -- the pork producers? >> well, senator, i think the biggest thing we can do is get nafta wrapped up. and we're working on that as aggressively as we can. and, obviously, another critical market for our pork producers is japan. the chinese, you know, we export 1.25 million of pork. some pork was still getting in over the tariff because most of that is variety meats. but i would say, you know, we've seen some really interesting things occurring here recently in the lean hog futures contract related to african swine flu in china. >> right. >> and i think we all need to keep a very close eye on that. >> we certainly do. and just in wrapping up, mr. chair, i was on the production floor of a meat processer, a pork processer in iowa just a few weeks ago, and they are currently throwing away some very valuable organs that are normally imported to china but because of the tariffs, all of that is going to rennering. so very unfortunate situation for those producers. thank you. >> senator bennet, i regret to tell you that on your way out -- >> i'm here to reclaim my time. [laughter] >> i've already used five minutes of your time. [laughter] but out of the goodness of my heart -- >> restore my dignity -- >> out of the goodness of my heart and the good neighborly process with colorado -- >> thank you. >> -- and kansas and since you're no longer in the big 12 -- >> i will not go over my time. i appreciate et. >> i recognize -- >> i am grateful, mr. chair, mr. chairman, for holding this hearing. as you can see, there's enormous bipartisan interest, and i think that relates to the uncertainty that's been create here. and in fairness, it's not just -- senator ernst called it the trade war, it's also commodity prices that are low. and in my part of the country, drought creating really huge amounts of strain for our farmers and ranchers. my agriculture commissioner the other day said that you only get to be 22 once, and a young farmer only gets the chance once to decide when they're going to stay in the business or not. this kind of uncertainty really doesn't help, and our adversaries understand that which is why they're doing what they're doing to us i raised in this with ambassador lighthizer once, and he said, well, your farmers have my sympathy. i said they don't need your sympathy, they need you to act rationally and reasonably. appreciate your all being here today. i wanted to ask about the uncertainty i just discussed, but the opportunity costs that's happening to us since the beginning of the trump administration. there have been 11, by my count, free trade agreements that have been signed without the united states. and these are opportunities we've missed to open new export markets that cause real concern for my farmers and ranchers in colorado. and i'm deeply worried, and i wanted to ask you about this, ambassador doud, about the long-term consequences as other countries open up to fill these markets. pork exports to china and singapore are down by 14 and 40% respectively, meanwhile brazil is on track to capture more market share. in june alone china imported 1.6 million tons more soybeans from baa civil than in the previous year -- brazil than in the previous year due to tpp. losses by 2023 are estimated $550 million. here are some of the headlines from around the world. bloomberg: china reaches into russia's far east and hunts for cop spries. reuters -- supplies. reuters: brazil trade to reach new levels in global trade spat. it goes on and on. why u.s. frets over tariffs, u.s. and japan close a trade deal. farmers vie for soy contracts. i wonder, in your experience are shifts of this ago my nude -- magnitude in supply chains only temporary and that everything will just go back the way it was before in this these kinds of shifts? can you tell us how this trade war ends without american agriculture taking a step backward? >> senator, there's a lot of things to discuss there. let me talk about a couple. >> i will give you the rest of my time. [laughter] >> thank you. your point about the world being divvied up while we've been watching is a point that i've made many, many, many times. it's a point i made with ambassador lighthizer when i interviewed for this job. and, oh, by the way, i would comment that it took me 49 weeks from the time he offered me the job until the time that i got in the job. and that's been valuable time that it's cost us in terms of getting aggressive. i was recently in argentina, and my counterpart -- a young guy, his father actually works for jpmorgan in new york city. he works for the argentine government. he asked me how are things going in the free trade agreement? i said, well, you know, we have to see what happens with regard to brexit. he said i really hope you guys stumble and fall, because if you do, we're going to tell the u.k. we can offer you a much better deal. you're absolutely correct. the world is watching. but i want to make one point here while i have an opportunity with regard to china. and we all understand that we export $20 billion worth of agricultural products to china. it's our biggest market. but we also understand that china retaliated against agricultural products, in my opinion, because they viewed the power of this committee and the power of u.s. agriculture pretty create to sway opinion on this -- politically. but i don't think u.s. farmers are swayed, and here's why. we have one of the biggest wto cases in the world right now with regard to china and their domestic subsidies. we have another one regard to their tariff administration. they don't buy the wheat they said they would buy, they don't buy the corn, they buy no rice for us. their tariff on distiller's grain is 80%, they don't buy any poultry from us. we finally got a thimble full of beef in there after a 15 years of me personally working on that. the grain sorghum thing is difficult, and we aren't selling them almost what we think would be a billion dollars worth of pet food. the point being with china is that they need to change their behavior. and this is going on not just in agriculture, but in other things. and this is an administration and a president that's said we need to do something about this. >> i could not agree with you more. i mean, i don't need the lecture on that. that is my view. but it would seem to me that provoking a trade war with mexico, canada and the e.u. when the issue fundamentally is with china and when the growth for all of our farmers and ranchers in the west is going to come from the pacific rim seems insane. thank you, mr. chairman. >> senator fischer. .. it's about time. also, when you talk about the bilateral agreements that you're looking for, you heard from nebraska cattle feeder asking you when are we going to see that happen the japan. you kind of touched on night in an earlier question. do you want to elaborate on how you would answer that cattle feeder on how we are going to get that japanese market back and be able to grow a. >> senator, first of all let me say as you can tell when we begin to have these conversations i get pretty passionate. these are issues that i've been in town this is now my 26 year in the vast majority at that time has been working on this kind of things and these are very difficult things to resolve. when i was in omaha this week i gave an impassioned pete are what i thought was anyways come our friends from japan in the room and the importance of our relationship between u.s. farmers and japanese consumers. my first job out of graduate school was in portland, oregon and got a work on not discussion between evolving the relationship between our two countries. to me, that is a critically important relationship and its personal between farmer and consumer with the japanese people. we take that very, very seriously and i hope we have an opportunity here to sit down and engage with japan and really solidified that relationship for decades to come. >> i had the opportunity on monday to also meet with the japanese ambassador to the united states and we had a cordial but very frank conversation as well. i appreciated again you being there with a roundtable of nebraskans and alleviating a lot of their concerns about where we are on these agreements and carrying that message to the japanese ambassador that we are serious about these negotiations but there is, as you know, uncertainty out there. i would ask you when we are looking at the united dates and working on bilateral agreements with southeast asia, people understand that's going to be a great new market and you've heard, we all hear about the importance of not just maintaining the markets we have, but growing market opportunities for the great ag products we have. could you give us any information on what the status is negotiating with countries in southeast asia, what are you hearing about for issues and possibly concerns. i understand negotiations are delicate, but if you can give any information to this committee, certainly would appreciate it. >> senator, i'd be happy to talk to you privately, more about specifically what we are looking at, but i can assure you an enormous amount of groundwork has been done on this, particularly with regard to countries in southeast asia and hopefully very soon will be soon will appeal to talk more about that. >> that wasn't no. >> we are not quite ready yet, senator. >> i understand. i understand. i again would say to you when these agreements can be reached quickly that it's important for all of our producers and it's important to every citizen in the state of nebraska because the impact the agriculture has on our economy in the state. mr. undersecretary, you are also a nebraska and a thank you for returning tourists day. it is important that we hear from you, but it's also important usda has a seat at the table when we have these trade negotiations. that is why congress created the system in 2014 in the farm bill. we want to make sure that ag is fair and it's up front of any agreement. can you tell us if you are working with ambassador doud and with ambassador lighthizer to market for activities has this administration works to improve and update and negotiate existing and also new free trade agreements. >> simply put, yes and yes. greg and i talk at least once a week and usually it's together in here lately it has here lately it's been two, three, four times. we called each other internationally to give a heads up on things that have paid dividends. so yes. and like i said, because we've got a larger group that does policy in all kinds of trade work at any given time, we've got six to a dozen sometimes more working with supported the team. so i hope we can be a model of how the two agencies can elaborate. i would argue secretary purdue and lighthizer worked together as needed. they are busy, but there is no hesitancy to pick up a phone or somehow elaborate. i would say that our team is already hard at work. she talked about groundwork laid. you can pick any number of countries and we began to lay some of the big work -- basic work, facts, figures out of that. i meant what i said. trade has got to be a two-way street otherwise it's not a productive relationship. those kinds of work have been going on for some time and when her friends were ready to reveal those names, i bet you'll find you are right there at going the same countries. >> thank you for that. thank you was for coming to nebraska. i thank you for standing up for ag producers and working hard to get us better deals because we hear about of examples of neglect and i am a cattle rancher. i fully understand neglect over the years and i look forward to good deals in the future. thank you. >> the role i play out there, we each gave a keynote talk and i was with different groups because you and i have been together a few months ago and appreciated that very much. we go out of our way to touch -- keep in touch from cherry blossom festival. whatever you can do across the board to sustain a relationship. >> senator senator smith i apologize. >> thank you, mr. chairman and senator smith come an incredibly kind of you. thank you very much. ambassador dowd i get really passionate about this says to my friends on the committee. these are the lives of my fellow hoosiers at stake. we have friends who are going to lose their farms because of what is going on right now. secretary mckinney, as you no, these are hard times for indiana spammers. we've known each other for a long time. we've both been deeply involved in advocating on behalf of hoosier agriculture. yesterday at hoosier park farmers. they are getting crushed. i has to have the hardwood lumber companies. they are getting crushed. the cash prize for bushel beans this morning, $7.75. the cash price for corn, $3.13. a 180 bushels or cost for production is about $3.60. the math doesn't work. my question for you is what banker next spring if these prices are still the same as going to make a loan for inputs. if the cash price is $7.75, the cost of production is $9.20. what banker in her home state is going to make that loan? >> thank you, senator. good to see you again. your point is very valid. we've been four or five years of area depressed farm prices and that is for a number of prices. i would characterize a lot of them to unfair track practices. >> we were at about $10.70 before this price war started. that was the cash price for beans at that time. >> that's okay. thank you. yes, we were taking some short-term pain with the hopes of long-term gains. >> i do explain that to the farmer who's going to lose everything? >> that's very difficult and there will be some losses. [inaudible] >> excuse me, sir? >> you said take some losses. what if the folks i was with recently, kokomo, took me aside and said down the road there's a fellow who's going to lose everything. would you tell his kids come in this mckinney? >> is very difficult. we are trying to make corrections that will fix many of the trade issues have been suffering from a long time. my twin brother without pulling weeds because china has not approved 10 biotech trade, the longest in the 80s for months, the last 153. we can make a better day for this future farmers. >> he was able to be in the field pulling those soybeans. we have people who are going to lose everything unless something changes. we have seen in the last week that the administration has said, and you may know when, that they are about to implement another $200 billion in tariffs. and then there is a third tranche is coming -- i farmers keep coming in and asking them it's about as valid as the question as you'd ever get. when does this end? >> well, my hope is the work going on at ustr and not the japan, all the other bilaterals will bring us back. that is my intent in october during to support this. >> how to bring this back when we are in the process of another $200 billion in tariffs in the next month or so? they won't tell us the exact date when it's coming, but that is 200 more. it seems like the light at the end of the tunnel is a train coming out by farmers. they're farmers -- is going to go into farming when they look and say this is a situation? at tough and i talked to several and all i can say is we are rightsizing things that should've been resized over the many years past. when i was in front of your talked about the slippery slope of barriers. we are actually making headway in changing a cannot the only answer i can provide is you've got to write size this so the bright light is not a trained but the sign of a bright and sunny day. there are some regrets. it's like the 1980s and i went through those just as you were. so profoundly profoundly rightsizing summative better for farmers. >> mr. secretary with all due respect, those are not regrets, those are neighbors and their neighbors who are losing their farms, life streams, his kids are wondering my dad can't do us any more rmon can't do this anymore and this is completely self in foot bed. thank you, mr. chairman. thank you, mr. chairman. gentlemen come the thank you eberly will share the common goal of ensuring u.s. companies and farmers and ranchers are able to compete without being subject to unfair trade practices by other countries as a result of some of the attempts this administration has made of correct unfair trade by farmers and ranchers depend on sending much of what they produce across our borders and living in economic nightmare because they have been targeted by retaliatory tariffs. i am deeply concerned about the impact that today's retaliatory tariffs are having on u.s. agricultural products, especially considering the farmers and ranchers were already struggling with the week e.g. economy before the tariffs were imposed in commodity prices dropped. my greatest concern is not only for the 20 team@tribe, the succeeding years losses due to loss global market share of our products which may take years or decades to recapture. there's been some discussion about the potential for bilateral trade agreements. i would ask you a question i've asked other members of the administration because it seems to me at least if you want to send a message to china the best way to do that is start doing business with their competitors. under tpp, the tariff on american beef going into japan was going to drop from 30% down to 9%. i guess my question is there a possibility of rejoining the tpp and if not, when can we expect negotiations to begin on a bilateral agreement with japan, which is this potential market for u.s. beef among other things as our many of the countries in that region that were part of the transpacific partnership. >> senator, i don't know what the answer is other than what the president has indicated clearly. when i was in the room at one point he said i'd rather do a bilateral. i get a better deal and economically speaking, theoretically speaking is exactly right. the question is how we get down the road with japan and the question is for having those conversations. we'll continue to have those conversations. the vice president is working on that. certainly my boss is working on that and hopefully we can get there as quickly as possible. your point is extremely valid. other countries have beat us to the punch and we've got to get busy. >> and i appreciate that and i've heard that now for the last couple of years since we decided to pull out of tpp that we are working on bilateral trade agreements, but i don't see any evidence that we are. maybe there are discussions going on in the back channel way that are not visible to the rest of us, but it strikes me at least that these are huge missed opportunities from an economic standpoint, trading standpoint that the role the u.s. plays in that region of the world of national security implications among other things. i'm just really frustrated and obviously with the state of play in agriculture today were june 1st, soybeans or $10 a bushel, i was in the elevator in south dakota two days ago and they were 705 on the board. the base system and transportation cost continues to go up and most of the farmers tell me it could break even. you need at least $8 a bushel. if you didn't forward contract come as forward contract come as some of ours did, but a lot of them didn't. there have been not to look at the prospect of storing a lot of their soybeans because this market is just shot for the moment. there are no bids coming in from the p. m. w., which is where 65% of our soybeans in south dakota go. the concern and anxiety level is continuing to rise in farm country and my impression is that it seems to fall on ears around here. it is a design to provide some temporary relief and perhaps it will again. it's nothing more than a band-aid. we need to open up markets. even the implementation of that which i've expressed concerns about how that is being rolled out and how the formulas that are being used, they are using this year's production to make a payment per bushel when in fact there are a lot of areas in south dakota, other areas of the country where you had drought, flood, you don't have bushels this year and we came up with several other ways that we think make more sense in terms of determining how those payments might be distributed and suggest those to the department of agriculture but those two were rejected. just understand that these impacts are real. the economy in farm country continues to deteriorate. there will be more and more producers who are not going to be able to get operating loss next year and will be at risk of losing their operations. it doesn't seem to me at least that message as hard as they tried seems to be getting across to the administration. let's open discussions with tpp. i'm still at a loss as to why that is that something that's an option on the table. thank you, mr. chairman. >> senator smith. >> thank you, chair roberts. i would like to start off by thanking you in u.n. senator staff and hours well. in the discussion we're having here about the intense pressures in farm country all over and certainly minnesota. of how hard you and debbie are working to get the farm bill die. it is desperately needed and i don't use that word desperate lightly. i feel that the members of this committee, i had a chance to hear comments to questions on both sides of the aisle and i detect is not a partisan agreement you gentlemen understand that very well. -- understood it as well. i think dr. johansson, you understand that the package we've all been talking about is at best a small band-aid on a very big room. you're doing the best he can with what you're dealing with. but i've heard that time and time again for minnesota farmers is. i need a hand. i know you know that. both of you are very respect that and farm country in minnesota and i appreciate the conversations that we've had and i also appreciate this isn't the time and the place to negotiate in plain view what you're trying to accomplish with our trading partners around the world. but i'm wanting to convey to you the sense of urgency that i hear from the farm europe members from minnesota sitting right behind you today and what i heard, i'm going to go here for the farmers union members that i'm going to be a little bit late to talk to because i'm here. let me just go to something that you said and ambassador doud that concern me a little bit. senator stabenow is talking about the interplay between 232 tariffs that commerce is working on in the work that you are doing on the eg site to address these retaliatory tariffs. what can you tell this committee broadly about how the information is working together and wetland areas to try to bring this complex situation together with some coherence. >> senator, i'll be honest with you. i think a lot of that is discussions that i've been apart of. >> probably part of the problem. >> and i will tell you i very much want to convey a sense of urgency at ustr and my hope is we can get things wrapped up with nafta here and move onto other issues to begin to address these issues. we are behind the curve. no question about it. i cannot tell you enough how much i agree with your comments on the sense of urgency. >> with regard to nafta and canada, my college raised this until i come back to it briefly. as u.n. u.n. ambassador trains were working this right now, i want to make sure i understand i can go back to minnesota in the you folks are working on canada's class seven pricing scheme and you are working on expanding market access and you understand that we need a situation where we've got mexico and canada and the united states together. >> absolutely, senator. >> okay, thank you. let me just touch on one other thing. senator bennett raised this concern talking about how the administration is tittering placing terrorists on foreign autos and suvs and auto parts and the impact it would have the impact it would have on agriculture and thinking right now minnesota's pork producers particularly. can you address quickly what is this plan to stop future retaliatory tariffs on u.s. agriculture from companies like japan and south korea as we are pursuing the other hand of this potential retaliatory tariffs. >> senator again, again, to 32 is the department of commerce, it's not something i've been involved with. what we are trying to do is get to an opportunity where we can increase our access into countries like japan, et cetera and we are trying do as quickly as possible. >> and i appreciate that i know you do it happen with one hand over here in congress has a deep impact on what you're trying to do on the other hand. thank you. >> senator hoven. thank you, mr. chairman. appreciate all of you being here today. ambassador doud, what are the major new issues left to resolve in terms of getting canada into an agreement on nafta? what are the major issues and how we doing on getting that done? >> the major issues priority for a senator obviously. the grain grading issue and there's some wine issues we're working as well. >> on the grain grading, when it goes to inspection immediately classified as seed grain. i guess that is something -- that's ridiculous, right? you're going to get that address. >> of the truck priority for us, senator. >> good to hear. >> what is your essential get resolution of this in the near term? for example, in time to get canada and the agreement with mexico so that we can vote on it before the end of the year. >> senator, you're asking a lot of legal question that i don't necessarily know the answer to. i think our goal at this point, my understanding of it is that congress has been notified of the intent to bring both mexico and canada into this agreement and for my part in this, we are working day and night and as hard as we can to bring canada into this discussion and finalize the beard >> is another issue a table potatoes, red and yellow table potatoes with table potatoes were the key medians have restrictions under their canadian ministerial exemption and is part of the canada ag product act where they restrict shipments at table potatoes between provinces and of course exports to their country. at the same time the recently bringing fresh potatoes down and putting them into our market. are you addressing that in your negotiations. >> we recently becoming aware of the issue in her stature in the industry in my office to discuss that and that is definitely a priority. are looking at to figure out a result and will be happy to discuss that with you privately on some of the ideas that we have. >> let's do that because this is a clear trade earlier and there may be subsidies going on as well, which would not meet wto requirements. as they continue to push on dairy and on pork and poultry, they are doing exactly what, you know, we are trying to overcome which is trade barriers. they have to put all this product in our market and they are putting restrictions and barriers on our product. i hope you're dressing us and i believe you are. you're telling us he will address those issues. >> we are having conversations are looking into that. >> i want to be clear they are our friends and neighbors no matter what, blew out reciprocity in our trade with canada. but again, the sense i'm getting from you is that canada wants to get a deal in time to be part before the end of the year. it's her since they're working towards that? >> senator, and the conversations that i've been a part of an both sides are working very hard together. >> in terms of -- secretary, anything you want to add as far as those questions? >> just over dedicating resources to help about the heavy lifting. absolutely. he made progress with the e.u. that puts pressure on china and shifting to china for a minute, north dakota alone sends $1.5 billion worth of soybeans to china every year. with an incredible amount of work into the shaping of the rail in built-up customers and identity preserved, all of these things and that creates a basis because now we have to try to go down to the goal or two that use coast and we are behind other states that are to the east of us. as you work on this assistant for the negotiations coming to need to take that into account. i don't know if this is something murdoch or johansen, but there's two questions here. if it's going to take longer china, where do we move the soybeans in the meantime one and two, as he put up the second half of this assistance, how are you going to accommodate some of that basis which producers have built up over many years and is a significant part of the disruption you need to take into account. those two questions. the markets on the basis on the assistance. >> thank you him a senator for the question. certainly we have been -- have to look at the basis issue and of course we know that the dakotas in the past have had basis problems with respect to transportation for example in 2014, 2015. >> be careful because i talk to the secretary nate came back with a positive answer which i appreciate your looking at this. this basis is overcome by all this work and that is disrupted by the tariffs. it's not just a locational issue. it's a function of the disruption which is why it is to be part of this calculation. >> we been looking up this particular issue to try and take into account regional differences by basis relative to previous years he says. we are looking at as you can imagine with as many commodities in a fairly complicated issue, but we are looking at regional basis as well as differences of those bases across time to try to identify whether and to what extent there be in effect at most by these terrorists right now. i will continue to do that and as the secretary mentioned, we look to the calculations for a potential second underpayments coming later this fall. >> and mr. secretary again, how to remove some product to in the meantime? it is hard for them to even take crop. >> i've made two or three notes about the basis regionalization and taken that into account. he raised the point this is a temporary thing. the mitigation plan is not meant to be repeated so the best thing we can say it's more intermediate to long-term play is to get the markets reopened. chun is a problem with that if you put in another market and that's always been so much time in southeast asia. >> we need that portion right now. >> my travels have been to man mark on man mark him of vietnam from his soon to be the philippines, indonesia, japan of course. so i would say we are focusing on that area. that's more intermediate to longer term play. thank you. >> first of all, let me thank you -- senator grassley, i just wrapped up by 56 county tour, senator grassley. he has a dq blizzard in indianola wherein he wrapped up his tour for the dirtiest time. my last 48 hours, mr. chairman -- 48 hours ago i was in jordan, montana and hashem, montana. i do a 56 county tour. it is not 99 counties that the chairman has come of the 56 counties in montana. i can tell you i heard a lot about the anxiety and concern going on right now on prices on our commodities, whole crops, we parlay come and talk to their cows a lot. there's three cows per person in montana. e.g. is our number one industry in ours date. that was on tuesday. today meeting with farm bureau just this morning, meeting with her grain growers, in fact, i cut short my farm bureau meetings like to get down here for the committee. they have a lot of things they want to talk about. one was good issues and they said, senator, ted downed to the ag committee hearing because you're talking about trade and that is their single biggest concern we have here today. that and the farm bill getting passed. he was 95% of the worlds population outside the united states. i think our farmers and ranchers amended clearly see the incredible opportunity before us to get to fair, free markets to reciprocity. the future of agriculture is getting access to those markets. in the short-term, there is a lot of concern, a lot of anxiety. i think you've heard that today from several senators who literally it's an existential threat to certain operations as we speak right now they may lose everything with what's going on now and prices. i think it is critical that we work in concert with our allies so the u.s. businesses, farmers, ranchers create a level playing field abroad. spent a lot of time working in international markets. spent six years on the ground in china. i have two kids were in hong kong in the 1990s as i was working on the have to expand those markets. and i believe that we should continue to reengage on tpp if we think about our strategy that relates to china. and i do see some merit in a lot of bilateral agreements. the problem we see right now in the negotiation they take up a lot of time. they're complicated. and agriculture as is true of business, time is money. as we step back and look at the big picture, i would highly encourage that we breathe think we engaging on tpp that will serve as a counterweight to china's growing influence not only in the region, but around the world. a recent hearing, secretary purdue agreed with me concerning the strong benefits of tpp. mr. mckinney, could you summarize some of the turf production center benefit to bp -- tpp to provide to ag committees? >> will try to answer that specific to any tariff reductions because tpp has been here and i think it's in the wings are going to be replaced by bilateral. my sense of what is going on here is we have been facing unfair trade their ears for a long time. if you're wondering whether these actions are helping us right size trade, the answer is unequivocally yes. it is true. i've been a part of that. that's one of those calls that greg and i shared. it comes slower than i would like. for misbehavior that's gone out there, there's been no leverage for a country misbehaving on the sanitary and even inside of rules. we've had some countries that we wanted deadbeat toc was then still got rejected. it is very true. so what we are seeing is change. we are seeing change her folks realizing the u.s. is finally very serious about this. the hope is i think, have to turn to others doing the negotiation, but my hope is that by bringing these tariffs and other pressures to bear will see changes behavior and thus tariffs will come down. that is my hope that i'm not in the middle of the negotiating room. that is our hope that usda to some other pressures we other pressures we are placing about realizing their tariffs and of course our tariffs coming out. that is our hope. >> so one of the areas we actually made some great progress on fairly recently was removing the ban on u.s. beef imports that china had placed that had been there for 16 years. i was over in china a year ago. we actually brought the montana stakes to the premiere and had a very good discussion in 60 days later that ban on u.s. beef imports we may have a significant setback and are seeing now with china and i completely understand and appreciate and respect the fact we needed to confront what was going on with the fair practices in china, intellectual property. notwithstanding the broader trade dispute with china, do you have any updates regarding the existing opportunities and challenges the u.s. ranchers would face in china's market and the prospects for long-term. you spend a lot of time in southeast asia recently. [inaudible] >> senator, on the beach side of the equation come you're absolutely correct it took us 15, 16 years to get in there. we still have significant issues with regard to their requirements, hormones, but it's definitely a step forward and there's a tremendous amount of work still has to be done here with china. i believe the size of the chinese beef market somewhere in the neighborhood of $4 billion the year in terms of what their imports are an rx for it so far have been in the tens of millions. we have an enormous amount of work. [inaudible] this is the issue of our time to work to build where it needs to be because as i indicated earlier there so many problems with china. to get issues resolved is enormous. >> one at a time, my greengrocer talking about making gains with wheat sales in china. you know how much we spent this year? zero. if i could just add, i think ag and energy were the only two to seriously engage in knots when we were over in june. greg and i took a whole team to negotiate. progress was made. not enough, but progress was made in the secretary said six invited some folks back we participated even the ag was not the focus. yesterday greg and i posted on june believed as a negotiator from china. i would like to say that i think once we can renegotiate whatever time that is on the ag can pick up where it left off and pick up and go. that's overlooking today when the time is ripe. there's so many issues across all the sectors. as far as ag, but then everything we can possibly do and then some to sustain and be ready when the time is to get the greenlight. thank you. >> thanks for comments. i do think we should take into consideration a blend of bilateral and multilateral trade agreement is a good strategy going forward. nokia and he over one at a time in a serious fashion is going to take a lot of time and were running out of time right now in ranch country. >> thank you, senator james. secretary mckinney, thank you for coming. ambassador doud, thank you for coming. don't forget that white paper. might want to get it to us as soon as you can. you have heard from several senators who work there and about that. i know you're going to work as hard as you can. i know that to be the case with greg. what concerns me -- well, most, but i guess equally with regards to restoring our markets is the opportunity and i hope we don't stumble on it and that is to somehow get back engaged with tpp. the reason i say that as you just read the news, watch the news, if you can stand to watch the news. in the news here do have the russians extending their blue water navy 200 miles. you've got the philippines, and everybody in the south china sea upset. that's a national security matter. also, set his tpp and it seems to me instead of going bilateral, bilateral, to get back in to tpp would really send a message to china. i have not visited all of those countries, but i have visited some and it's been a while but every one of them said we would prefer to do business with you as opposed to china. the next thing he said was, do you still have our back? and that is absolutely key. i'm not saying you're not trying to get it done, i think we had to our national security was in its that important. that will include our hearing today. thank you for taking time on agriculture trade to my fellow numbers would ask that any additional questions you have for the record would be submitted by business day from today or by 5:00 p.m. next thursday, september 20th. the committee is now adjourned. thank you. 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