Panel Urges Defeat of Export Subsidy Limits

Associated Press

In a battle between two heavily subsidized industries, the Senate Commerce Committee Wednesday sided with maritime interests on the issue of whether to limit shipping subsidies paid on certain U.S. farm exports.

The panel voted 9 to 7 to send to the full Senate with a negative recommendation a bill restricting “cargo preference” law as it applies to overseas giveaways and subsidized sales of agricultural products.

Meanwhile, the Reagan Administration took a stand in favor of the farmers’ position, endorsing legislation similar to the measure the Senate committee snubbed.

Under a 30-year-old law, half of all government-generated cargoes must move on U.S.-flag vessels, a requirement designed to ensure business for the dwindling American maritime industry.


Proponents argue that while shipment by U.S. carriers often is more expensive than that offered by foreign competition, it is important to guarantee them business to preserve the industry for standby use in the event of war.

Agriculture Secretary John R. Block said the Senate committee’s vote was evidence of “the maritime industry once again putting their hand in the pocket of agriculture.”

Block told reporters, “The blended credit program is dead if we have to apply cargo preference . . . the martime industry killed it, and the burden’s on them.”

The policy attracted renewed attention in February when a U.S. District Court judge ruled that the 1954 act applies to farm goods sold with government-subsidized credit. Some $500 million in sales was suspended following the ruling, while the $40 million cargo cost was appealed.


Farm interests have since been scrambling to exempt the so-called “blended credit” sales promotion program from the shipping requirements, saying it imposes an unbearable extra weight on efforts to shore up sagging exports.

“If allowed to stand, the court’s decision will have a severe detrimental impact on the ability of the U.S. agricultural sector to maintain a competitive international position,” Budget Director David Stockman wrote in a letter Tuesday to the committee chairman, Sen. John Danforth, (R-Mo.)

The legislation reported unfavorably by the panel would free from the requirement all farm export programs aied at enhancing commercial sales. Famine relief and other giveaways under the Food for Peace program would remain subject to cargo preference.

It also would give the secretary of agriculture authority to exempt new export-promotion programs, such as the $2 billion “export payment-in-kind” program announced recently, from the cargo requirement.


“This sets a precedent for further erosion of cargo preference laws,” said Sen. Daniel Inouye, (D-Hawaii), who said current law ensures only a bare minimum level of business necessary to preserve the domestic shipping industry.

Sen. Ted Stevens, (R-Alaska), said that only 22 U.S.-flag vessels remain and that eroding the subsidy would mean the industry’s demise. He accused farm interests of greed, saying they already receive far more government help than the shipping industry--$13 billion last year, compared with a $500 million maritime subsidy.

But Danforth called cargo preference “the worst kind of special-interest legislation” and “the most anti-farmer legislation conceivable.”

“If we want to subsidize shipping, we should do so directly, not by hurting an already bankrupt sector of the economy,” Danforth said.


While a majority of the committee’s members, many from coastal states, disapproved of the bill, they were not in a position to stop it. The measure already had been endorsed by the Senate Agriculture Committee and sent to the full Senate.