This statement is submitted by the National Confectioners Association and the Chocolate Manufacturers Association (NCA/CMA) in response to the public request from the FTAA Committee of Government Representatives on the Participation of Civil Society for comments on the negotiations in the Free Trade Area of the Americas. This submission echoes the aggressive trade liberalization initiatives the US confectionery industry has supported in other fora, including the Doha Round of trade negotiations.

Four hundred companies, all members of the Chocolate Manufacturers Association and the National Confectioners Association, manufacture more than 90% of the chocolate and confectionery products in the United States. Another 250 companies supply those manufacturers. The industry is represented in 35 states with particular concentration in Pennsylvania, New Jersey, Illinois, California, New York, Wisconsin, Texas, Virginia, and Ohio. Approximately 65,000 jobs in the US are directly involved in the manufacture of confectionery and chocolate products. When the distribution and sale of these products is taken into consideration, the employment effect triples.

II. SUMMARY OF THE US CONFECTIONERY INDUSTRY’S PRIORITIES

The US confectionery industry’s priorities in the FTAA Market Access negotiations support and complement the industry’s objectives in the Doha Round of the WTO negotiations, specifically -- increased access.

• First, access to world-price commodities. We urge the US to enter these negotiations prepared to significantly liberalize domestic sugar, peanut and dairy programs that make the US domestic cost of these essential raw materials for the confectionery industry two to three times the world price. Long term inability to improve US confectionery industry access to world price raw materials, in particular sugar, has driven, and will continue to drive production outside of the US costing the US economy jobs and revenue. Manufacturers are left with few options when other countries can export lower cost confectionery to the US at zero or minimum duty.

• Second and equally important, access for our members’ finished products exported to FTAA member countries at zero duty. We urge the member governments to enter the negotiations with the objective of eliminating high tariffs and non-tariff barriers to sugar confectionery, chocolate and chocolate confectionery products. Import duties on confectionery products can be as high as 65%, and on average are 19.9%. Confectionery from most FTAA countries already enter the United States duty free
   

The US confectionery industry has made free trade and the maintenance of an open US market an operating principle for 20 years. US tariffs on NCA / CMA members’ products are among the lowest in the world and there are no quantitative restrictions on imports of finished confectionery into the United States. In addition, more than 140 developing and least developed countries enjoy duty free access to the US confectionery market through the Generalized System of Preferences (GSP). Of those receiving GSP benefits, 29 are FTAA member countries. Confectionery products exported from FTAA members Canada and Mexico benefit from duty free or reduced duty access to the United States via the NAFTA.

The industry has maintained this free trade stance in spite of excessive raw material costs for sugar, dairy and peanuts which result from US domestic price support programs and tariff and non-tariff barriers that block US industry access to these commodities at world prices. Our industry pays 2-3 times the world price for these key inputs, incurring hundreds of millions of dollars in additional cost each year.
 

In order for US confectionery manufacturing facilities to remain competitive in both the domestic and world markets, we must have access to world price sugar, dairy and peanuts. We urge a systematic approach to the elimination of barriers to trade in these commodities globally and suggest that negotiators make full use of the FTAA negotiations as an impetus to liberalize import regimes, including the US import restraints on sugar, dairy and peanuts. Given that the Doha Round of WTO negotiations is to support increased market access for developing countries, liberalization for key raw material imports from FTAA members will progress that objective.

As the second largest user of sugar in the US, access to world-price sugar is important for the US confectionery industry. For 2001/02, world sugar exports are projected by the U.S. Department of Agriculture at 34.5 million metric tons, raw value. World production is projected at 126.8 million metric tons, raw value. Thus, over 27% of world production is exported. A higher percentage of sugar production is internationally traded than is the case for wheat (22% of 2001/02 world production), rice (6%), coarse grains (13%), and oilseeds (23%). Therefore, an international agricultural trade agreement that does not deal with sugar is close to a contradiction in terms.

According to USDA, the leading sugar-exporting nations for 2001/02 include two FTAA members: Brazil (9.50 million metric tons, raw value), the European Union (3.70), Australia (3.65), Thailand (3.55), Cuba (2.70), South Africa (1.50), Guatemala (1.19) and India (1.00).

Imports of sugar¹ from FTAA members have steadily decreased since 1998. In year 2001, imports were down 3.5% from the previous year. Based on USITC data, the US sources raw cane sugar of HTS code 1701.11.1000² from 22 of the FTAA member countries.³ Annual production from these countries in 2001 totaled 33 million metric tons; exports totaled more than 12 million mt.⁴ However, because of the tariff rate quota on sugar, US imports were limited to 715,500 metric tons, which represents merely 2.2% of production and 5.8% of FTAA exports. US negotiators should be prepared to significantly increase access to the US market for these developing countries’ exports.
 

Our members increasingly rely on foreign markets to achieve their revenue and profitability goals. Market access improvements will be critical if our members are to take advantage of new export opportunities in rapidly expanding FTAA markets.

The industry’s objective is the total elimination of tariffs on chocolate, chocolate confectionery and sugar confectionery products. We support the elimination of duties on all cocoa and cocoa-containing products that are classified in Chapter 18 of the Harmonized System. Duty elimination for these products would benefit cocoa producing developing countries in South America. Such trade liberalization could also ultimately lead to increased consumer demand for chocolate and non-chocolate confectionery products in markets around the world creating new opportunities for US exporters.

Secondly, we continue to support liberalization of all processed foods including chocolate, confectionery, and sweet biscuits. There are different approaches that can be used to achieve the final goal. The simplest is for countries to agree to a maximum rate for processed foods by a date certain, i.e. 5% by 2005. We are prepared to have all confectionery products included.

Tariffs in South America remain prohibitively high (10% - 65%) in at least half of the 33 markets. Bahamas and the Mercosur countries impose the highest tariff rates for confectionery imports. The average tariff in the region for confectionery is almost 20%.

There continue to be obstacles to US exports of confectionery products. While some of the regulatory practices identified are not trade barriers per se, they are being administered in such a way as to obstruct our members’ exports. Measures include:

• Limitations on the use of internationally approved food colors and food additives as well as unique color declaration labeling formats can create barriers to trade, as experienced in Chile. NCA / CMA urges harmonization of approved colors and additives as well as product labeling formats. 
• Pre-import product registration requirements as experienced in Argentina, Brazil, Ecuador, Venezuela, Colombia, Panama, Honduras, Guatemala, and El Salvador. Our members believe the responsibility for compliance with foreign market regulations should fall on the exporter. The US practice of market surveillance and enforcement has proven effective and should be an objective in the FTAA negotiations.
• Excessive certification, inspection, and other requirements. As an example, confectionery exports to Peru, Colombia and Venezuela require inspection and consular stamps on documents. Ecuador requires an inspection before each shipment. Such regulations make it more difficult to arrange shipments and require more information than necessary to ensure confectionery products meet health and safety requirements.
• Some members have highlighted intellectual property rights violations and concerns including piracy of brands, logos and trademarks. In Guatemala, an unrelated processed food company registered the trademark, logo and mascot of one NCA / CMA member. When contacted, the Guatemalan company that registered the brand insisted on $50,000 for the release of the brand. The member was eventually able to secure the release for $10,000. The entire process and negotiations delayed entrance into the market by more than two years. Similar experiences have been noted in Costa Rica, El Salvador, and the Dominican Republic.
• Some of our members have informed NCA / CMA that shipments to Brazil of industrial / bulk chocolate have been returned due to expiry labeling requirements. Mandatory manufacture labeling and expiration date labeling on each shipment on bulk chocolate has limited our members’ ability to ship stock that is anything but the most recently produced. Codex Standards do not require use-by dating of intermediary products destined for industrial production. It is unclear why Brazil is requiring expiry dating on such products when they are not intended for consumer until further processed and packaged for retail sale. If there is an expiry dating requirement, against what shelf-life standard is Brazil applying the requirement? We urge that FTAA member countries avoid unnecessary labeling requirements for products that are destined for industrial use.

NCA / CMA have consistently urged the elimination of these obstacles in bilateral, regional and multilateral fora as appropriate. We view the FTAA Market Access negotiations as a critical venue to address these barriers with the goal of eliminating any redundant, costly and unnecessary requirements among all FTAA member countries, and maximizing export opportunities for our members. Access achieved in the FTAA should:

• Allow US confectionery industry to export finished confectionery products with the absence of tariffs and regulatory barriers
• Provide lesser developed source countries with improved access to the US market, particularly for sugar, peanuts and dairy.
• Ensure that all FTAA members stand together in the WTO negotiations to achieve the elimination of export subsidies within 3 years.

NCA / CMA appreciate the opportunity to provide comments on the FTAA as negotiators prepare to further advance positions. We look forward to continuing to work with FTAA negotiators to ensure increased access to South American markets for our member companies’ confectionery products and access to world-priced essential commodities from the region.