U.S. MISSION TO THE EUROPEAN UNION
PRESS BRIEFING
GREG FRAZIER, SPECIAL TRADE NEGOTIATOR FOR AGRICULTURE AND FOOD POLICY
BRUSSELS, BELGIUM

SPECIAL TRADE NEGOTIATOR FRAZIER: I consulted with the Weather Channel last week, and they predicted a nice sunny day in Brussels today, and so I got on the airplane to take advantage of it.

Ambassador Barshefsky asked me to come to Brussels to spend some time talking to [European] Commission officials about beef and about bananas. Over the last several weeks, several months in fact, there have been some ongoing discussions, telephone calls, meetings on the margins of other conferences, between myself and some EU officials, as well as between other officials in the government. In light of all of those things and in light of the developments which have taken place in the last couple of days, particularly with respect to bananas, and also some growing momentum generally to solve some of these Transatlantic trade disputes and these two particular issues, she thought was an appropriate time that I come over and have the face-to-face meetings that have taken place over the last two days.

Just to lay out what has been going on before we talk about some of the specifics, and I'll only do that very generally and very briefly and then take questions from you all:

I spent the bulk of yesterday -- not the bulk of yesterday, all of yesterday -- talking about the banana issue. I had a very good session this morning talking about the beef problem and have also had the opportunity to meet with some officials on GMOs [genetically modified organisms] and biotechnology, and will continue to do that later today and tomorrow.

On the two specific issues at hand, the basic U.S. position that we enunciated a couple of weeks ago, on the current Commission proposal on the banana problem, stands. A number of the other parties to this dispute -- some of the supplying countries from Latin America -- have examined this proposal and have come to the conclusion that it has problems with respect to the WTO, that its implementation and actual management may raise further problems, and because of those two facts and their objections it does not appear that this is going to lead to a speedy resolution of it. The United States agrees with that assessment.

I think what we would like to do, as intractable and as difficult as this problem seems, is to take advantage, as I said earlier, of a renewed commitment on both sides of the Atlantic, I believe. You certainly all saw the article that was in the Financial Times yesterday about the President's views to attempt to resolve these two things. So, in addition to examining this proposal, it is our thinking that maybe we can apply some new and creative ways of looking at it and some new and creative energy towards it.

On the beef proposal, I would characterize the discussions this morning as very constructive. Some very useful ideas were put forward by the Commission officials, and at this stage it is incumbent upon me -- and I will do so -- to go back and talk to our industry, consult with other parts of the government and see how we can move forward. Not "if" we can move forward but "how" we can move forward because I think we do believe we can in fact move forward. That does not mean that there may not be problems down the road, but I do think that we think that we can move forward on that.

I had a delightful lunch at an Italian restaurant [laughter], and that with that I will close and if you have questions we will take them.

Question: When you say you believe you can move forward on the beef, is that as a result of the change in position on a part of the Cattlemen's Association that it is willing to accept compensation, that it could then use to promote its side of the story for beef in the European Union?

FRAZIER: I think that clearly the ability to move forward and the ability to come to some resolution of that is going to depend on the views of the Cattlemen. I think that you are referencing some comments and some positions that have been taken in the last couple of days. That's added momentum to this. I think that there have been some quiet exploration of some of these alternatives in the past, in the past several months. I think that some of the steps, most concretely what the Commission has done with respect to changing their testing requirements, is a positive. We took that as a positive signal, and I will leave it there. The Cattlemen concerns can better speak for themselves and more eloquently than I can, but I think your assessment is basically correct.

Q: The U.S. sanctions represent 116 million dollars a year, so I am just trying to think how much compensation are we really talking about here. If you look at the trade in hormone-free beef, it represents about 6,000 tons a year in 1998. The quota was around 12,000. So you are a long way from meeting that quota, because of the (inaudible) in the testing requirements. How big a quota do we really need to reach full compensation?

A: That is why people like me have jobs, to negotiate those things, and that is one of the central issues that we will be dealing with.

Q: Can you give us any clues?

A: No, I'll need to go back and talk to our industry, but that is clearly one of the central issues in reaching a settlement.

Q: Can you give us some idea why the banana proposal is not acceptable?

A: It has to do with the preferential treatment, the tariff levels that would be applied to ACP bananas -- African, Caribbean, Pacific bananas -- and basically reserving a special quota for them to the exclusion of other bananas. That preferential treatment is a problem in and of itself. Then if you look at the way -- one of my lawyers said, "You have the problem of the good, and then the person who sells the good," or services the good in this instance. And if you look at, practically speaking, who are the companies, or who are the people that sell that good, you see that that preferential tariff level then translates into preferential treatment for one set of companies over another set of companies, which is essentially the basis and the foundation of the current case. So, the problems that we have with the current regime are in many respects duplicated or replicated in the proposal that we are currently studying. Beyond that, we have questions about some of the details that may emerge as the Commission issues implementing regulations and actually manages the system. So it may be that we will have further problems once that is done, and that is a process that I don't know how long that will take before we actually see that. But that is essentially where the problems lie.

Q: You say that the preferential treatment is a particular problem. The Commission has said that the three tariffs will be managed in exactly the same way, which is the key to its WTO compatibility, albeit would be a preferential tariff. The Commission has said that it could review the tariff basically at any time to make sure there is no [inaudible] hindrance to the non-ACP [inaudible]. Is that something you have been discussing?

A: That is clearly one of the issues that we talked about, and it is our analysis, and it is the analysis that other parties to this dispute have done, that that level of tariff is prohibitive, and is a problem. I would go so far as to say that in a curious, kind of ironic way, the Commission's own reasoning and their own line sort of makes our point. That is, "If it proves to be prohibitive, and if it proves to be discriminatory, we'll change it." I mean, it is almost suggesting and hinting that in fact it could be -- which is exactly what our argument is.

Q: Is there a level at which you would think it is acceptable?

A: I do not know exactly what it is but the answer to your question is presumably yes, but not at the current level. Our analysis, the economic analysis that we have done, indicates that you will just not see bananas moving in to Europe at that tariff level.

Q: A second question. I mean the Commission has said essentially that it does not really matter what the U.S. thinks, and that it is a WTO matter, that the U.S. position is in a sense academic. That's why I am surprised that there have been talks all day yesterday because that certainly says to me that the Commission and the U.S. are working terribly hard together, you see what I mean...

A: Well, I appreciate their perspective that at the end of the day, the WTO is going to pass on this. But what we think will govern whether or not we continue to challenge it. And at this stage, we have got problems with it. So it is not totally irrelevant what we think. Moreover, it is not totally irrelevant what some of the other countries who are also parties to this dispute think. They have come to the same conclusion that we have. Or we have come to the same conclusion that they have.

Q: [inaudible]

A: As I said at the outset, the Commission has done a great deal of work on the system that they have in place. We have discussed it telephonically. There is a renewed, and sort of a new, commitment, at least in Washington, to try and solve some of these problems. Given the stage where things were here with this proposal and the level of our concern with it, Ambassador Barshefsky thought it was appropriate for me to come and have a face-to-face discussion and relay directly some of our concerns about the package and at the same time hear from the Commission what their views were. So that was what we spent yesterday doing.

Q: The two countries, as the complainants, are Ecuador -- who now agrees with First Come First Served -- and the U.S. The U.S. problem is that it cannot consolidate two big companies. Dole does agree with it, but Chiquita doesn't. Should there not be conciliation between Chiquita and Dole rather than between the EU and the U.S.?

A: There are a couple of things. First of all, some of the Latin American suppliers, besides Ecuador, have indicated that they have got problems with this system. They may pursue their own challenges. Secondly, I don't know exactly what Ecuador's position is on this. Ecuador will speak for itself. And so will Chiquita and so will Dole. I am not here representing Dole. I am not here representing Chiquita. I am representing the United States trade representative. And the concerns and the position that I am relaying to you, and to them, are the position of the United States government. I will let Dole and Chiquita speak for themselves.

Q: I am clear why you might make positive noises about the Brussels weather, and the Italian restaurant, and the beef. I am less clear on why you would make positive noises of this new cooperative spirit and work on the banana issue.

A: I haven't made a lot of positive noises on bananas, as a matter of fact.

Q: So, there is a positive spirit in the White House that you want this issue solved, but you are not being positive about whether you really see much progress on solving it.

A: Well, you know part of the process is, in fact, exactly the discussions I have been having the last couple of days, sitting down and going through it, having a better understanding. So we will see what comes out of that.

Look, these are difficult problems. They have both been around for a long time. If they were easy simple problems, somebody long before me would have solved them. And it may be somebody long after me that solves them, and it may be that you all are writing about these things for a long, long time. But I hope not. I really want you to move on to brighter, more interesting things, and we really do want to put some time and energy into seeing if we can solve them.

Q: [inaudible] The disputes are what give you your job. [laughter]

A: Well, part of my job is also trying to avoid these disputes.

Q: Could you accurately say that you would reconvene the panel if the banana regime came into force?

A: I cannot unequivocally say that, but I think that we have made our position clear that we have WTO problems.

I think that the formal decision, the actual doing it, is going to take into account a lot of factors. But the tea leaves are certainly sort of pointing in that direction with what we see right now. The other question is whether or not this system actually comes to fruition, if it is actually in place. That is not a foregone conclusion.

Q: Given the ongoing discussions and the positive vibes on beef hormones, can I take it this pushes further into the distance implementation of carousel legislation?

A: Well, I don't know. That is a decision that is going to have to be taken over the next couple of weeks, and it is going to depend on, you know, where things go from here. I don't know. Open question still.

Q: You have said that the Commission proposal is not compatible with the WTO. But the First Come First Serve system, do you think that it is compatible or not?

A: Let me address that. We have said all along that one of the ways to resolve this in a WTO-compatible manner is through a First Come First Serve system. There are, however, the details of this First Come First Serve system, which are a problem. There are ways that one can be done that are compatible. And there are ways that it can be done that, in our view, it is not WTO compatible. And there are aspects of this proposal, as we have examined it, that raise WTO problems.

Q: What is it that won't be compatible with the WTO?

A: The exclusionary and preferential treatment of this particular commodity.

Q: Not First Come First Serve.

A: Under a true First Come First Serve system, it would, in fact, be the first bananas that arrive are the ones that get in. Well, that is not exactly what we have here, and that is where some of the key differences are.

Q: But you recognize that the EU's commitment, obligation, to have some kind of preference for bananas from ACP countries? If so, how do you propose preserving that? [inaudible] There is that commitment to them.

A: I appreciate that, but it can't be done to the detriment of other supplying counties, and it can't be done to the discrimination of other operators. And that is what this system perpetuates.

Q: So you would suggest aid instead of preference?

A: I would not, am not, and won't put myself in a position of suggesting how they ought to do that. I am just telling you that it can't be a system which discriminates against other suppliers and other companies.

Q: So the compatibility of the preferential tariff depends on its level, in fact?

A: Yes.

Q: To put this in laymen's Main Street terms, the problem is not the First Come First Serve idea. The problem is that we still retain in this European proposal the idea of preferences for the ACP countries.

A: The concept of First Come First Serve is not where the problem is; it is the way that -- the details.

Q: We are still discriminating between one supplier and another supplier.

A: Uh-huh.

Q: Excuse me if I haven't been up to date on the question of revising the list of European products subject to those $116 million.

A: There is no excuse. It has been so much in the news.

Q: It has been busy in the Balkans and all that kind of thing. Is that list being revised, or has the new one come out?

A: The new one has not come out.

Q: I thought of this notably because, you see, Evian water was rumored to be on it, and it is on the table today. Not to be facetious, but if it were to be on the list, it is rather interesting as Evian is bottled by a major French multinational agro-business, that would have more lobbying clout than, say, a bunch of French Norman camembert producers. Is that the intention of the new list?

A: We'll take that into consideration. [laughter]

Q: This is kind of a detailed question on the preferentiality of the EU plan. The EU insists that its third quota, which used to be for just ACP, is now open to any [inaudible]. Even though it has a preferential tariff for ACP, anybody can fill the quota.

A: But, as a practical matter the tariff levels are set in such a way that not everybody can.

Q: The tariff level, that is the problem? Because under WTO rules, you can have preferential tariffs.

A: But as a practical matter this one will not permit other bananas into it, and so there is the discriminatory effect. You are going to have all of the ACP bananas will be able to get into the market. And you are going to have a tremendous amount of Latin bananas which will not be able to get into the market. And so then, if you essentially have an all-come all-served ACP system, and a some-come and many-not-served system for the rest of the supplier countries, that is a problem. It continues one set of commodities being treated one way and another another way and, flowing in from that, one set of companies which provide that service being treated one way and another set another way. It is a fundamental problem.

Q: I want to ask about this renewed commitment to resolve trade disputes. We have a Summit coming up December 18. Is this some sort of deadline, or maybe a goalpost, for the U.S. and the EU, where they would like to see maybe one of these disputes resolved? And if not, what is the timeframe, then? You have a new Administration coming in. They need to get up to speed on the negotiations.

A: When you look at this from a practical standpoint, there will be a new Administration. And no matter which way the election goes, and on the outside chance that the Vice President doesn't win, you will have new folks that are going to come in. It will take a while to get it done. So, from that perspective there is this time period, and this opportunity, that is going to exist over the next few months that is not going to be replicated for quite some time. With respect to what the deadline is, my deadline is January 21st.

Thank you.