Reagan Asks End To Farm Subsidies

Posted: July 07, 1987

WASHINGTON — The Reagan administration yesterday said it would eliminate the $31 billion U.S. farm-support system over the next 10 years if other nations agreed to phase out their agriculture-subsidy programs.

The offer was made in Geneva to the 93-nation General Agreement on Tariffs and Trade (GATT), which establishes rules for international trade and adjudicates disputes.

The proposal, similar to an unsuccessful plan the United States offered at the June summit of major industrial nations in Venice, is expected to encounter stiff opposition from the European Economic Community.

It would establish a standard way of measuring subsidies and require individual nations to decide how to eliminate them. It would apply to all farm commodities, forest products, fish, processed food and beverages.

The plan would require a complete revision of the U.S. agricultural assistance system, which pays farmers according to their production and restricts imports of some commodities while subsidizing exports of others.

Export subsidies, price supports, tariffs and quotas all would be subject to the phase-out. Disaster payments, domestic and foreign food assistance and farmer income-support payments not tied to production would be allowed to continue.

The U.S. government will spend roughly $25 billion in direct support for farmers this year. An additional $6 billion in supports will come from consumers in the form of higher government-mandated prices, according to the administration.

"It has become clear that ultimately no one benefits from the current agricultural policies employed around the world," President Reagan said.

But, he added, the nations must act together to avoid being hurt by countries that continue subsidies.

Major developed nations have accepted the goal of reducing agricultural subsidies, but Reagan was rebuffed in Venice when he proposed that nations agree to eliminate subsidies by the year 2000.

Principal opponents of the plan are expected to be the European Economic Community and Japan. The EEC has consistently rejected U.S. attempts to hasten farm-trade negotiations or establish a deadline for their conclusion.

In a soon-to-be-published study, the Organization of Economic Cooperation and Development ranks Japan as the greatest subsidizer in 1979-1981, followed by Scandinavian nations and the EEC. The U.S. subsidy was about 16 precent of farm income, or half the average for developed nations.

The Europeans "simply have no intention of doing away with all agricultural subsidies," said Sen. Kent Conrad (D., N.D.), who discussed farm-trade policy with top EEC officials last month. Spurred by memories of hunger after the world wars, the EEC is committed to ensuring an adequate food supply, he said.

Conrad, a member of the Senate agriculture committee, said the administration is "making a mistake" by floating a doomed proposal. It would be better, he said, to seek a phase-out of export subsidies only, and coordinate efforts to reduce surplus stocks.

The EEC has not officially responded to the administration proposals, said Bruno Julien, agriculture secretary for the EEC delegation in Washington. However, he said, "I don't think that we can make a commitment to eliminate all subsidies."

The United States will be addressing a broader forum at the GATT talks than it was in Venice and could find more support there.

U.S. Trade Representative Clayton Yeutter, in announcing the proposal here yesterday, noted that the 14-nation Cairns group of self-declared free-traders in agriculture could be more receptive to the plan. Members of the group, which includes Australia, New Zealand and Canada, have been pressing for elimination of trade-distorting farm subsidies.

"From Australia's standpoint, (the proposal) is an extremely far-reaching and constructive contribution to the issue," said Gred Wood, commercial minister for the Australian Embassy in Washington.

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