STATEMENT OF FLORIDA FRUIT & VEGETABLE ASSOCIATION 4401 E. COLONIAL DRIVE The Florida Fruit & Vegetable Association (Association or FFVA) welcomes the opportunity to provide comments to the Subcommittee on the impact and effectiveness of the Caribbean Basin Initiative. FFVA is a private non-profit agricultural cooperative of growers, shippers and processors of vegetables, citrus, sugarcane and tropical fruits. FFVA was organized under the laws of the State of Florida to provide a means of dealing with public and private agencies to aid in the recognition and solution of industry problems. FFVA has a long history of international trade involvement on behalf of its members and is active today in many U.S. agricultural trade policy matters. Initially, the Subcommittee should know that FFVA supported the concept of the CBI and, in fact, so testified in the hearings which led to the passage and enactment of the Caribbean Basin Economic Recovery Act (CBERA). FFVA continues to believe that the CBI can be effective in strengthening the relationship with our Caribbean neighbors by helping in the economic revitalization of the Caribbean Basin. We firmly believe that it is good policy and good business to promote the economic well-being of the Caribbean countries. FFVA, however, was and is concerned about the impact of the CBI on Florida agriculture. Specifically, we are concerned that the direct and indirect aid given to Caribbean countries by our government is promoting economic activity far beyond what a free market would dictate to the detriment of producers in Florida and, in the case where direct artificial competition has been created, producers in the Caribbean and producers in the United States have been harmed. Florida's predicament with regard to the impact of the CBI can be seen in the following: Florida, probably more than any other state, has much Caribbean Basin Initiative: Factors Affecting U.S. Agriculture, A Case Study by James E. Ross, Twenty-Sixth Session 1983-84, Executive Seminar in National and International Affairs, U.S. Department of State, Foreign Service Institute, p. 34. FFVA is particularly concerned with reports that the U.S. State Department's Agency for International Development (AID) has funded a number of projects in the Caribbean to develop fruit and vegetable production projects which will compete directly with Florida's producers for the U.S. market. Based on statements made by President Reagan, Trade Ambassador Yeutter, who specifically noted the growth in exports to the U.S. of fruits and vegetables from the Caribbean, and Administration officials before this Subcommittee, more such aid will be sought. FFVA agrees that before such aid be made, its impact on domestic industries be assessed. In addition, the basis for such aid should be reconsidered principally on the grounds that such aid will lead to direct competition with U.S. producers in the U.S. market with neither party benefiting economically. Such aid should be directed to nontraditional, noncompetitive exports to the U.S. for which there is either unfulfilled demand or demand which can be expanded. If the only way for a Caribbean country's product to be viable is to rely on grants from the U.S. government, then we must question the efficacy of such assistance. In 1984 AID alone provided close to $600 million in support of the CBI. Since the CBI began, over $2 billion in U.S. government resources have been committed. That's a lot of money. Has this funding promoted economic recovery and stability in the Caribbean countries? It may be too early to answer this question. Has this funding harmed Florida agriculture? We think it has and has created, in an artificial and non-market oriented fashion, the potential for great harm to Florida agricultural producers. Even our own Department of Agriculture is encouraging expansion of the Dominican Republic's horticultural exports by recommending "conversion of sugarcane lands to fruit and vegetable production." Foreign Agricultural Circular, Horticultural Products, FHORT 6-85, June 1985, p. 15. We We are concerned that monies are being poured into the Caribbean without regard to their impact on U.S. producers. think this is wrong. AID recently advised us that its agricultural development strategy is "aimed at broadening the base of agricultural development in the region through promotion of such nontraditional crops as fruits and vegetables." Letter dated February 10, 1986 from Dwight Ink, Assistant Administrator, Bureau for Latin America and the Caribbean to John M. Himmelberg, Washington Counsel, FFVA. We are concerned about AID monies going to Jamaica for its Crop Diversification Program to divert some 20,000 acres formerly in sugar to winter vegetable production for export to the U.S. We are concerned about 2% loans for vegetable production facilities which will not have to be repaid for several years after the facility is completed. We are concerned that AID has new projects scheduled totalling over $77 million for such things as agribusiness promotion (grant $1,800,000, loan $18,000,000), crop diversification/irrigation (grant $10,000,000, loan $5,000,000), high impact agriculture, marketing (grant $40,000,000). It seems to us that such expenditures have completely failed to take into account their disruptive and harmful effects on the domestic industry. We suggest again at a minimum an impact statement be prepared to see what effect such expenditures have in disrupting the market in the U.S. and the harm to domestic producers of competing products. We are not unmindful that we may be labeled as protectionist; however, such a charge is unfounded. If U.S. demand for a product can be identified and the quantity, quality and frequency of shipments to U.S. markets can be made from the Caribbean, then arguably there may be a basis for such funding. However, even in this case, we are compelled to ask the question what is the impact on the domestic industry. If grants of billions of dollars to the Caribbean countries are hurting U.S. producers then we are being subjected to a kind of reverse protectionism, i.e., preserve or increase Caribbean countries at whatever the cost Certainly, this is not right or fair. the U.S. grants to to U.S. producers. Indeed, some who have testified before this Subcommittee suggest that AID funds be exempted from Gramm-Rudman cuts and that some U.S. health and safety requirements be changed as they are "nothing more than disguised non-tariff barriers." Testimony of Bruce Zagaris and Constantine G. Papavizas, Berliner & Maloney, dated February 5, 1986. And, one commentator suggests that CBI countries be allowed to stabilize prices. Testimony of Stuart K. Tucker, February 25, 1986, p. 11. FFVA respectfully requests that AID grants, especially those for such things as high impact agriculture, marketing, should be cut notwithstanding the effects of Gramm-Rudman. Moreover, it may be that a significant portion of these monies are not even going to the CBI. For example, we have reviewed a feasibility study (179 pages) paid for in part by an AID grant to the National Food Processors Association with offices here in Washington. Another such grant we are told is for work being done at one of the universities in New Jersey. As for U.S. health and safety standards being non-tariff trade barriers, we suggest this is simply not the case. In fact, the opposite is true. The U.S. Department of Agriculture recently withdrew its financial support for the citrus canker eradication program in Florida, while at the same time it increased its support to find an alternate treatment for EDB on mangoes, a principal beneficiary of which is Haiti. The suggestion that CBI producers who are receiving grants from AID to subsidize their costs be allowed to fix prices is bad policy. Moreover, such a policy would put products from the Caribbean in such a tremendous advantage to U.S. commodities that even allowing for differences in quality U.S. producers would be seriously harmed. We suggest that it would be more appropriate |