Shultz Opposes Dole on Grain Sales to Soviets

Secretary of State George P. Shultz, in a direct challenge to Senate Majority Leader Bob Dole (R-Kan.), began a last-minute campaign Friday to block legislation that would permit the Soviet Union and China to buy U.S. grain at cut-rate prices with American taxpayers making up the difference.

Shultz said the measure has placed new strains on the U.S. alliance with Australia, already weakened by a festering dispute between Washington and Australia’s traditional partner, New Zealand.

“It is ridiculous for the United States to propose subsidizing our sales to the Soviet Union,” Shultz said during a breakfast with a group of reporters.

Approved as Rider

At Dole’s urging, the Senate approved the legislation this week as a rider on a routine House-passed bill relating to the Export-Import Bank. The GOP leader is running for reelection in Kansas and hopes to launch a presidential bid in Iowa, both major grain-producing states.

As a result of a compromise in the Senate, the legislation would expire at the end of the current fiscal year on Sept. 30, making it unlikely that the measure would affect a significant volume of trade. But an aide to Dole said the senator will try later to extend it to the coming year.

“This is largely symbolic at this point--a shot across the bow,” the aide said.

Nevertheless, the measure has touched off a storm of controversy in Australia, a major seller of wheat to both the Soviet Union and China. Prime Minister Bob Hawke has made a series of long and angry telephone calls this week to Shultz, Senate Foreign Relations Committee Chairman Richard G. Lugar (R-Ind.) and other officials.

“I couldn’t get the prime minister off the phone, he was so worked up about it,” Shultz said, recalling one conversation with Hawke.

Shultz said Hawke implied that the grain subsidies would indirectly make it easier for the Soviet Union to gain influence in the South Pacific region that has long been regarded as a U.S. lake.

The Soviets have been offering lucrative economic deals to the tiny island states in an apparent effort to obtain a foothold in the region. Shultz said Hawke complained that it would be much more difficult to persuade the economically strapped nations to reject the Soviet blandishments when the United States sought to solve its own economic problems by dealing with Moscow.

Congress last year adopted legislation authorizing subsidized grain sales to markets where other countries are selling grain at below world market prices. The measure was aimed primarily at subsidized grain marketing programs of the European Common Market.

Policy Decision

Despite its frequently stated opposition to protectionist trade measures, the Administration agreed to use the subsidies to try to dispose of grain surpluses. But the Administration decided as a matter of policy to deny subsidies for sales to countries with “non-market” economies, chiefly the Soviet Union and China.

The Dole bill would require the Administration to include in the subsidy program any nation with which the United States maintains trade relations, in effect giving the Administration a choice between approving the subsidies or imposing a total trade embargo.

Australia, which does not routinely subsidize agricultural exports, has complained that it would be unable to compete with bargain-priced U.S. grain.

Military Relationship

News reports from Canberra quoted Australian Treasurer Paul Keating as saying that Australia would be forced to reconsider its military relationship with the United States if subsidized sales are made.

U.S. officials doubt the Australians would go that far. Nevertheless, the U.S.-Australia relationship is at a sensitive stage after the dispute between the United States and New Zealand over New Zealand’s refusal to permit port calls by U.S. ships capable of carrying nuclear weapons.

As a result of the port dispute, the United States, in effect, excluded New Zealand from participation in the ANZUS (Australia, New Zealand and the United States) alliance. At that time, Washington said it will continue its close alliance with Australia.

Shultz and Australian Foreign Minister William Hayden are scheduled to confer in San Francisco next month in a truncated version of the ANZUS meeting.