Dow Jones: -- also. Meeting the Agriculture Minister.

Secretary Johanns: Yes.

Dow Jones: What will be the thrust of the discussions with the Indian Ministers as far as improvement of agriculture trade at the global level discussion? That has been a major issue, WTO talks have also been a little bit [inaudible].

Secretary Johanns: We talked about a number of issues. There were a lot of reasons why I wanted to come to India, and let me just mention those and then I’ll talk a little bit about trade.

The Knowledge Initiative between our countries is something that we are very pleased about, and because it’s an Agriculture Knowledge Initiative of course we would be very involved in that. So we’ve spent a great deal of time talking about that and how we can build that relationship. So that has occupied actually maybe even a majority of my time here.

Dow Jones: [Inaudible]?

Secretary Johanns: There are also bilateral issues. There are issues that involve India and the United States relative to trade and regulations and that sort of thing. So we’ve spent a fair amount of time talking about those.

Then of course there is the Doha Round. India has been a major participant in that round through Kamal Nath. So we spent some time talking about those talks and is there an opportunity for those talks to gain some new life? What would it take for that to happen? So our discussions have been very wide-ranging, I think very productive in that area.

We have appreciated India’s leadership in the talks and so it was good to be here and talk about those issues, too.

Dow Jones: There are certain contentious issues like relating to subsidies. Our argument has been that [inaudible] or United States [inaudible] subsidies which are trade distorting in nature. How do you look at that?

Secretary Johanns: A couple of things that I would offer. The first thing is, the United States when it comes to subsidies actually is not the largest subsidizer of agriculture. That distinction does rest with the European Union. They subsidize at a level that is 2.5 to 3 times greater than the United States. Japan is a very large subsidizer. In fact if you look at their overall agriculture, they are the largest or second largest subsidizer of agriculture. Then in third place would be the United States.

Our President over the last year and a half has indicated that we should have a goal of eliminating trade distorting subsidies, and he has repeated that goal on a number of occasions.

But the real benefit is going to come from increased market access. That’s where the developing world, the least developed countries have the greatest opportunity to lift people out of poverty. It’s through trade. So our proposals on reducing subsidies, the President’s discussion about eliminating trade distorting subsidies have been contingent on improved market access. And that’s not just for the United States, that’s because literally every economic study that has been done on the Doha Round has indicated that the greatest opportunity for economic advancement is not through the elimination of subsidies, it’s through achieving greater market access, the ability to sell products in the international market without the burdens of high tariffs and barriers that prevent that.

We want to do everything we can to make this round successful, but the studies are very clear that the real success of the round will be in reducing trade barriers such as high tariffs, opening up markets, and encouraging world trade.

Dow Jones: So that means that you have to go hand in hand as far as the removing of subsidies and greater market access, it would have to go together and not just refocus on a single objective of subsidies?

Secretary Johanns: Exactly.

Dow Jones: They are complementary --

Secretary Johanns: Yes, they are complementary. There are three pillars in the agricultural piece of the negotiations. Domestic support --

Dow Jones: Domestic support, export subsidies and --

Secretary Johanns: -- export subsidies and then the market access pillar.

Dow Jones: So any specific proposal you have for India in how it should go about removing its protectionist tariffs? That they should reduce tariffs to get [inaudible] in the developed world, maybe European Union, maybe US, maybe Japan. If it was then they should bring down their subsidies and we should bring down our tariffs?

Secretary Johanns: Any country, this would not be just about India. Many countries have high tariffs. Our goal here is to really achieve the promise of Doha which is to improve the world economy, to bring people out of poverty, to improve the lives of millions of people. That’s what the Doha Round was all about.

We are willing to do our part, we have said that from the beginning. But it all does fit together. We not only have to talk about the reduction of trade distorting subsidies, we have to talk about the reduction of tariffs. We have to talk about special products and sensitive products. We don’t want to be in a situation where what we achieve in terms of tariff reduction slips away by an endless number of special products designations. India has maintained that they should be allowed and all developing countries should be allowed to identify 20 percent of their tariff lines as special products. What that would mean is that 95 to 98 percent of their marketplace in agriculture would be protected. They would only trade with other countries when they chose to, in other words. So even though there may be some reduction in tariffs, if you have that much protected under the special products category, or for developed countries under the sensitive products category, it can slip away.

So all of these things need to fit together with a common theme of achieving a balanced Doha Round, reduction of trade distorting subsidies, reduction of tariffs, appropriate treatment of sensitive products and special products, and the elimination of export subsidies. It all has to fit.

Dow Jones: Regarding this proposal, what has been the response from the Indian side? You say you can’t allow all these products to slip into an endless list of special products.

Secretary Johanns: A very important point. I’m not here to negotiate. I’m not the negotiator for the US. That’s Susan Schwab. I’m the Ag Secretary. But having said that, as Ag Secretary I have an opportunity to attend all of these negotiations, which I have.

I came here to talk about these issues because they’re so important. My belief is that India wants to achieve a successful Doha Round. Like every other country, they certainly have issues that are very concerning to them, where they want to achieve success. That would be the position of every country that is participating in these WTO negotiations.

What I have tried to encourage of India and what I would say the United States needs to do and the other 147 countries of the WTO, is we need to be flexible. We need to be willing to examine the possibilities of how this can fit together so we can have a trade agreement that does achieve the promise of Doha.

India’s response to that has I think been favorable. Again, I’m not here to negotiate. It’s not like we’ve been sitting down and negotiating specific items. But our discussions, our general discussions have been good.

Dow Jones: So you say around 20 percent of the tariff lines [inaudible]?

Secretary Johanns: Twenty percent of the tariff lines which the WTO has analyzed that and the conclusion of the World Trade Organization is that would protect 95-98 percent of the market. That would be basic --

Dow Jones: For agriculture?

Secretary Johanns: Yes. That would protect basically the entire market.

Dow Jones: Any specific commodities for bilaterals, moving up from the Doha Round and a voluntary issue in bilateral --

Secretary Johanns: We’re working on a number of issues. India of course wants to sell products to the United States and to date they have done that successfully. There is a trade imbalance in agricultural products between India and the United States and the imbalance is in favor of India. India sells more agricultural products to us than we sell to India. They have been successful in this relationship. Of course they would like to expand the products that they sell. Mangos would be a perfect example. That’s an issue we’ve been working on for some time, but it’s also an issue where I’m confident we’re going to achieve success.

So our goal is to try to have our piece of this done for the next mango crop which would be April of next year. That’s pretty ambitious, but we continue to focus on that as our goal.

Ellen, what other issues are we working on with India? Certainly wheat on our side.

Dow Jones: Wheat is one major issue.

Secretary Johanns: We have, India has purchased wheat this year in the international market, but we have not been successful at all, we have not sold any wheat to India this year. There are some reasons for that that we want to solve. India has very stringent sanitary/phytosanitary requirements. We raise the issue of whether there is some opportunity to solve some of that because they’re so stringent, they’re just virtually impossible to meet. So consequently we have not been successful in selling any wheat into India even though they have purchased large quantities.

Dow Jones: Do you think there will be such levels of being stringent uncalled for, we can reduce these sanitary and phytosanitary --

Secretary Johanns: In all trade there are tolerances. Nothing in the world of trade is absolute perfection. That’s why in just about any trade you work with, from automobiles to fruits and vegetables or grains, there are a level of tolerances. What we are trying to work toward with India is an approach that protects their interests while allowing trade to occur.

Dow Jones: Both have the same trouble.

Secretary Johanns: Yeah.

Dow Jones: Do you see India importing wheat next year?

Secretary Johanns: I don’t know. India will make an analysis of that and make a determination about their crop. I’m probably not a good person to answer that, but their Ag Minister would probably be better equipped to --

Dow Jones: But as and when India buys it should consider buying from the US.

Secretary Johanns: We would sure love to sell wheat to India. We export a lot of wheat from the United States, so for us that’s very positive.

Dow Jones: Moving from wheat to rice. Rice of the United States has been an issue in the European Union, one of the unauthorized strains, modified strains, finding its way [inaudible]. How do you see the US rice getting affected by this incident?

Secretary Johanns: It has an impact, although with our trading partners around the world we’ve had success in working through this issue. It is an unbelievable minute, unbelievable is not the right word. It is a very very minute quantity that they have discovered of GE rice and we have been able to establish that there is no risk whatsoever to human health. There is no risk to the environment. The strain, LR Rice 601 is actually going through a deregulation process in the United States which should be completed by the end of the year. At that point we will know if it’s going to be deregulated or not . We have not decided that yet. But that process -- We have done a lot of work on that process and we should be able to have an answer to that question we think probably by the end of the year. Sometimes these things can take longer, but we think by the end of the year.

Dow Jones: But in any case this rice was never authorized to be for human --

Secretary Johanns: This one particular strain, LR 601, no. Two other strains that have the same protein had been deregulated. But this particular strain, the deregulation process had started and then the company, Bayer, thought that they would not market this so it was not completed. But that’s the process I was referring to. It looks like that should be completed one way or another by the end of the year.

Dow Jones: So the two other rice strains with the same protein as LR 601 --

Secretary Johanns: Have been deregulated.

Dow Jones: And it will be totally pulled out of the market by end of this year?

Secretary Johanns: Not pulled out of the market. The 601 strain will have gone through our legal process at the USDA. If it successfully goes through that then we call it deregulation. We will deregulate that product so they could sell it if they chose to. Whether they will or not would be up to the company.

Again, we haven’t reached a final determination as to whether it will be deregulated or whether it won’t be deregulated. That process is going on, but that will be, we think that will be done by the end of the year.

Dow Jones: That would be later on.

Secretary Johanns: Yes.

Dow Jones: The other two rice strains with the same protein --

Secretary Johanns: They are deregulated. They have already gone through the process with the same protein. Different strains, same protein, but they’ve been through the process.

Dow Jones: You say they’ve still not decided whether they will deregulate it or --

Secretary Johanns: There are three strains. Two have been deregulated. The third one is 601. All had a common protein. This one, 601, is now going through that deregulation process.

Dow Jones: But that has had an impact on the sales to the European Union and European Union has put in place a procedure for inspection which you don’t approve.

Secretary Johanns: Yeah. The European Union has historically taken the position that they don’t allow genetically modified products. There are a few exceptions now, not very many. In fact we have had a WTO case on this issue.

Dow Jones: But then are you approaching this issue with the European Union to ensure that your rice sales, exports, continue?

Secretary Johanns: They have instituted a testing regimen, so we’ve been doing everything we can to work with the European Union on that.

Voice: That’s actually the only country where the reaction to trade has been that severe.

Secretary Johanns: That’s a good point. Other countries we’ve been able to deal with this issue. The European Union has taken a very severe approach to this. But the European Union historically has been anti-genetically modified products. Very anti.

Dow Jones: Japan and other countries where the US rice goes, it has been --

Secretary Johanns: Japan we sell short grain rice and medium grain.

Dow Jones: That is not affected.

Voice: Canada and Mexico, Latin America, those sales are --

Secretary Johanns: Certainly they’ve asked for information, we’ve provided that information and we’ve worked with them.

Dow Jones: Long grain rice was to Mexico --

Secretary Johanns: Canada, Mexico, Asia.

Dow Jones: So no issues --

Secretary Johanns: No, not Asia. Latin America.

Dow Jones: But on the whole, do you think your exports, rice exports are likely to come down in 2007 because of this issue?

Secretary Johanns: The area where you would impact and have some decline certainly would be the European Union, just simply because we have this hurdle that we’ve got to overcome. But so far, like I said, other parts of the world have asked for information than we’ve been able to work through it. It’s probably a little too early to tell in the end whether there is a net downward impact just simply because sales that you don’t make in one country may be made up in another country so it can be a little hard to predict. But certainly in the European Union, you’re having an impact. We’re seeing an impact. No doubt about it.

Dow Jones: But you are working, as you said, with them, how to --

Secretary Johanns: We sure hope to solve this problem with the European Union.

Dow Jones: You said the third strain is also on its way to --

Secretary Johanns: Deregulation. Yeah. We’ll see if it is or it isn’t, but the process is going on. I can’t pre-judge that process . That’s why I’m saying it might, it might not. We’re gathering input. W e get comments. We have to go through a regulatory process. In the end our scientists and our people at the USDA make a determination as to whether it will be deregulated. I never predict how those things will come out.

Dow Jones: So that is a legal process, and two of the strains are already --

Secretary Johanns: Exactly.

Dow Jones: Coming back to India, other than wheat, any specific commodity you want bilateral trade to go up? Because you said the balance has been in India’s favor, and you would like --

Secretary Johanns: There would be a number of products that we would love to see in this marketplace. Wheat --

Voice: Pet food was one example. That stopped because the Indian authorities thought we had [inaudible] influenza, which we don’t. So we’ve been providing them the documents for that.

Secretary Johanns: We have that.

Voice: There’s [inaudible], dairy products, animal genetics, where there’s a number of technical issues that we’re discussing with regard to these important protocols.

Dow Jones: Is it basically because of non-tariff issues, the sanitary and phytosanitary requirements? Or is it also because of tariffs?

Voice: There’s an interest in tariffs. For example, pistachios. I think edible oils. There’s a number of products where there’s tariffs.

Secretary Johanns: We deal with both issues, it just depends on the commodity and --

Dow Jones: But you would like the balance to be [inaudible] and the thrust will be on improvement of bilateral trade.

Secretary Johanns: Yeah. India has the same goal with us. Needless to say, they’ve had a very successful relationship. They’ve been selling more than we have. But they don’t want to stop there either. At least recently the big issue that we’ve been working on, and I’m confident that we’re making progress, is with mangos. As I said, we hope to have that issue addressed. Our goal is for the crop in April of ’07.

Dow Jones: And that is basically sanitary and phytosanitary?

Secretary Johanns: It was a sanitary/phytosanitary regulatory process. But it’s been going on years and years.

Dow Jones: I think my time is up.