Statement of Shirley Christian, Business Manager
Frutarom, Inc., North Bergen, New Jersey
Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means
Hearing on the Use and Effect of Unilateral Trade Sanctions
May 27, 1999
Thank you Mr. Chairman and members of the Subcommittee for this opportunity to testify. My name is Shirley Christian. I am pleased to testify today on behalf of
Frutarom, Inc. in my capacity as Business Manager of Frutarom Meer’s gum division
. Frutarom is a leading processor and supplier of gum arabic in the world, and one of
only three processors in the United States. Gum arabic is an essential ingredient in
a wide variety of products important to the United States economy. Prior to the imposition of the sanctions, Sudan was our principal source of supply for gum arabic. Since their imposition, the importation of Sudanese gum arabic is banned.
Americas unilateral sanctions against Sudan have not hurt Sudan economically.
Sudan is free to trade with the rest of the world, and does.
Instead, the sanctions have been felt mainly by United States gum arabic processors, who have been left without adequate alternative product sources.
This has left us vulnerable to foreign competition in the United States and in international markets, and has left our customers and United States consumers subject to monopolistic practices of foreign processors.
Current trade data, which we have included with our submission to the Subcommittee, indisputably demonstrate that the Khartoum government remains unaffected by the sanctions.
Gum arabic is one of Sudan’s major exports.
Sudan has a ready market for gum arabic throughout Europe and particularly in France, where since the imposition of the U.S. sanctions French gum arabic processors have doubled their imports from Sudan and have moved aggressively to gain market share in the United States and in our export markets. It appears that those who benefit the most from United States unilateral sanctions against Sudan are our foreign competitors. They benefit from the failure of the United States government to first seek and enforce targeted and multilateral sanctions. They benefit from the failure of their governments to support human rights and antiterrorism policies of the United States. Those who lose are the parties our government should strive the most to protect and help.To understand the effect of unilateral sanctions against Sudan, to understand how unilateral sanctions have hurt our business and the business of our customers, you must understand the importance of this product to the United States economy.
Gum arabic is a natural gummy exudate obtained by tapping the branches of the Acacia Senegal tree.
It is grown primarily in what is known as the Gum Belt along the southern periphery of the Sahara Desert.
Approximately 80% of the world’s gum arabic is produced in Sudan. Much more important to our business, the finest quality gum arabic is found in Sudan.
Gum arabic production begins with the Sudanese farmer who tends his very valuable trees throughout the year.
At exactly the right time of year, determined by expertise acquired over many years, the farmer taps his trees.
Gum exudes where the bark has been cut and three weeks later the first gum arabic collection is made.
Millions of Sudanese men and women, of every ethnic background, rely on gum collection as a vital source of income.
Gum arabic is a remarkable substance.
It is used in products purchased every day by United States consumers. In pharmaceuticals, gum arabic is used as a binder in tableting.
In cough syrups it is used as a demulcent.
In the flavor and beverage industries it is a preferred emulsifier.
Gum arabic is used to stabilize foam in the manufacture of soft drinks and beer and to clarify wine.
As an emulsifier, gum arabic provides excellent shelf-life stability to oil-in-water emulsions and does not mask flavors with filmy texture or off-flavor on the tongue, features unmatched by synthetic additives.
In cosmetics, it functions as a stabilizer in lotions and screens.
Gum arabic increases the viscosity of cosmetics, imparts spreading properties, and gives a protective coating and smooth feel.
In lithography, it is used in the preparation of etching and plating solutions, plate washes, and protective coatings for the plates in storage.
In confections, it is used primarily to retard sugar crystallization and emulsify fat.
It also is used as a glaze component in chewing gums, cough drops, and lozenges.
In textiles, it is used as a fabric finish.
In foods, it is commonly used in meats, sauces and dressings, baked goods, candy, cheeses, ice creams, icings and numerous other food products.
The product is vital to the United States economy.
No substitutes match gum arabic’s extraordinary film-foaming and emulsifying qualities.
Users of gum arabic have encountered every form of disincentive to continue using this beleaguered product.
Famine, drought, pestilence, wild price swings, shortages, and political crises have given the broadest opportunity for suppliers of competitive products to replace gum arabic.
Synthetic imitators from modified starches and maltodextrins, and other products have been developed to take advantage of the vulnerability of supply of gum arabic, but these substitutes have failed to replace gum arabic in most pharmaceutical, food, and beverage products where taste, mouth feel, superior emulsification, low calorie value, high fiber content and extended product shelf-life are demanded by United States industries and consumers.
In the early 1970’s United States gum arabic consumption exceeded 33 million pounds per year.
The famine in the gum belt of 1973-1975 resulted in a tripling of gum prices and gum arabic usage was cut nearly in half.
Certain bulk usage applications in non-food products were permanently replaced.
We believe that most applications where gum arabic was substitutable were successfully targeted during this period.
Since the disastrous period of the 1970’s, and the droughts, shortages, and price increases during the 1980’s and 1990’s, gum arabic usage in the United States has not diminished.
The volume has actually grown roughly in line with the growth of the product category served.
Periodic displeasure with the challenges of supply have led to warnings of the product’s demise, but its film-foaming and emulsifying qualities have necessitated its survival.
The emphasis in recent years on the importance of "natural" and "soluble fiber" have further secured gum arabic’s position in the United States market.
The inability of certain industry sectors, such as the beverage, food and pharmaceutical industries, to secure high quality gum arabic would have an immediate and negative impact on the United States economy by lessening the quality of their products and reducing their sales. Competing imported products manufactured with gum arabic would gain a qualitative advantage, and thus would further damage United States producers.
Gum arabic grown in Chad holds the best promise of replacing Sudanese gum arabic, but only in the future.
Current crop yields in Chad are immature and of lesser quality than Sudanese gum arabic, with viscosity levels as much as ten times higher than the levels present in the Sudanese product.
Much of the gum arabic we have purchased from Chad is of viscosity levels too high to be accepted by key industry sectors which we serve. The best method of achieving an appropriate viscosity level using Chadian gum arabic is by mixing the product with Chadian gum arabic containing lower viscosity levels, or blending the product with Sudanese gum arabic.
Mixing and blending are both processes which add considerable costs and can drive up the price of the customer specified product.
In some instances, even after costly mixing of the Chadian gum arabic, our customers have rejected orders, causing us to begin the expensive process again with a different batch of gum arabic.
But quality is not the only issue affecting Frutarom’s competitive position in United States and international markets.
Because of the artificial demand created by the unilateral sanctions, and despite its lesser quality, the price of the Chadian gum arabic is higher than world prices for the Sudanese product.
Currently, as a direct result of unilateral sanctions against Sudan, we are paying about 40% to 50% more for lower quality Chadian gum arabic than our European competitors are paying for the highly desirable Sudanese gum arabic.
Other factors may be driving up the price of the Chadian gum arabic.
It is not unthinkable that our European competitors might be bidding up the price in order to drive American processors out of business.
The other United States gum arabic processors have addressed this issue in their submission to the Subcommittee, and we urge you to carefully consider their statement.
Without authorization to import additional quantities of the Sudanese product, Frutarom and other United States processors will not be able to compete with our European counterparts in quality and price.
Recent cancellation of international orders placed with Frutarom, as well as current trade data, already show signs that United States processors are losing international export markets to our French competitors.
But much more threatening is the potential loss of the domestic market to France and other European competitors who have unfettered access to high grade Sudanese gum arabic.
French import data show that French imports of gum arabic from Sudan have doubled since the sanctions were imposed, more than compensating Sudan for the direct loss of United States gum arabic trade.
At the same time, French exports of gum arabic to the United States have reached a record high.
Incredibly, in just one year French imports of gum arabic from Sudan jumped from 5,556 tons during 1997 to 10,701 tons during 1998.
During the combined years of 1997 and 1998, French exports to the United States increased almost 60% over 1996 exports.
French import and export data for the first quarter of 1999 is not yet available to us, but United States import data for January and February of 1999 show that France has replaced Sudan as the leading exporter of gum arabic to the United States with a record 51% share of the U.S. import market, substantially up from the 23% share for the same period in 1998. (No significant increases were found in imports from the U.K.) And as expected, United States imports from Chad increased due to the sanctions, but only to a 45% share of U.S.
imports. If the Chadian product were of suitable quality, this number would be much higher and the French share much lower.
One concern we have with the sharp increase in French exports to the United States is that it coincides with the depletion of United States inventories of Sudanese gum arabic held by United States processors and other commercial sectors.
French processors must be well aware that the United States government has not granted waivers for imports of Sudanese gum arabic for 1999 and beyond.
The French trade data for 1998 show that 51% of its total gum arabic imports came from Sudan, and only about 28% imported from Chad. Because Chadian gum arabic is widely available from Frutarom and other United States processors, it seems unlikely that the rise in French exports to the U.S. is due to a demand for a Chadian product processed in France.
There can be no doubt that French exports to the United States include high quality Sudanese gum arabic which has been spray dried and processed in France and exported to the States as a product of France. Thus, the only differences resulting from the United States sanctions in gum arabic available prior to and after the November, 1997 Executive Order are that the French processors have replaced the U.S. processors and the French are now in the position to control the price of the Sudanese processed product.
We cannot match our European competitors in terms of price and quality in international markets.
Frutarom just lost a long-time customer in Asia for reasons our customer described as a product quality issue.
Our overseas customer of many years just broke its contract with us in favor of our French competitors, who are marketing the Sudanese processed product at prices United States processors are unable to offer for the Chadian product.
Frutarom’s loss of international business is not isolated.
Current trade data support the conclusion that this is a frequent occurrence.
A close examination of United States and French trade data show a loss of export market share to the French in traditional United States export markets.
The data show early signs of declines in exports to Mexico and certain South American countries such as Brazil, Colombia, Argentina, Chile, and Venezuela, with corresponding increases in French exports to these markets.
For the combined years of 1997 and 1998, French exports worldwide increased more than 40%. U.S. export data show that exports of gum arabic declined approximately 15% in 1998, from the previous year.
Due to our diminished inventories of Sudanese gum arabic, the decline in United States exports of gum arabic will continue in 1999 and become more pronounced by 2000 if the situation remains unchecked and relief is not granted.
All of the factors discussed today and all of the data submitted lead to two inevitable conclusions.
As a direct result of the unilateral sanctions, the United States has lost competitive position in the vital gum arabic trade, both domestically and internationally, and the French have picked up the slack and thereby canceled the effect of the sanctions.
It would have been just as effective to have sanctioned U.S. gum arabic processors directly and to have turned over the business to our European competitors, because this is the unintended result of the unilateral sanctions as they affect our gum arabic business.
We acknowledge that unilateral sanctions may be useful instruments of foreign policy when American interests are at stake and Americans are not unintentionally injured.
But the Congress should not support the imposition of unilateral sanctions, no matter how justifiable the provocation, when the only parties damaged by the sanctions are Americans.
Once again, I would like to thank the Chairman and the members of the Subcommittee for the privilege of appearing before you today.
I look forward to your questions and will be happy to provide you with any additional information that your staff may need in further analyzing unilateral trade sanctions.
United States Imports of Gum
ArabicQuantity in Kilograms
| 1999 Jan/Feb |
(Imposition of Sanctions)
Source: United States
Department of Commerce, Bureau of Census, Global Trade Database