Subsidized Sale of U.S. Wheat to Soviets Ordered

President Reagan, trying to chart a middle course between the demands of farm state lawmakers and the protests of Canada and Australia, Friday authorized sale to the Soviet Union of up to 4 million tons of American wheat during the next two months at subsidized bargain prices.

The decision was made amid a bitter debate over pending legislation to subsidize agricultural exports on a much wider scale. The limited program that Reagan approved fell well short of the desires of congressional Republicans, but it also avoided the worst fears of Canada and Australia, two of the nation’s oldest and closest allies.

Senate Majority Leader Bob Dole (R-Kan.), chief sponsor of legislation that would require the government to subsidize the sales of grain and other farm products to China and probably Japan as well as the Soviet Union, called the White House move “a step in the right direction.” However, he said he would continue to press for passage of his bill.

Australia’s minister of primary industry, John Kerin, said that he was disappointed by the decision but that it was much less damaging than the Dole legislation. Similarly, John Fieldhouse, a spokesman for the Canadian Embassy said: “It could have been worse.”

Administration officials said Reagan has not decided whether he will sign or veto Dole’s legislation, which appears likely to pass. The measure has split the Reagan Cabinet, winning the support of Agriculture Secretary Richard E. Lyng, Treasury Secretary James A. Baker III and Commerce Secretary Malcolm Baldrige but drawing protests from Secretary of State George P. Shultz and Defense Secretary Caspar W. Weinberger.

Australia and Canada warned that the Dole measure could touch off a trade war.

Cost Estimate Unavailable

Neither the White House nor the Agriculture Department would estimate the cost of the Soviet sales plan. White House spokesman Larry Speakes said the wheat would be sold at “current world market prices,” in effect matching subsidized export prices charged by the European Economic Community. Australia and Canada complained that the rate would undercut their prices, which are not subsidized.

Lyng said the subsidies were intended to encourage Moscow to abide by its agreement under a 1983 grain sale pact to buy at least 4 million tons of wheat in the fiscal year ending Sept. 30. Soviet purchases so far this year have been negligible.

When asked at a press conference if the Soviets would have met their obligations without the cut-rate pricing, Lyng said: “I think that they perhaps would not. The Soviets have told us that we were noncompetitive in world market prices.”

Figures compiled by the Canadian Embassy certainly support Lyng’s contention that the Soviets had lost interest in U.S. grain at unsubsidized prices. Moscow purchased 6.1 million tons of U.S. wheat and flour last fiscal year but has bought only 153,000 tons in the first 10 months of this fiscal year.

There is no way to be certain why the Soviets shunned U.S. sales this year. Supporters of the subsidy say U.S. prices were uncompetitive while opponents of the plan suggest that Moscow decided to wait out Washington and let U.S. political pressures produce a more favorable price.

Soviet Purchases

The Soviets have purchased about 4.3 million tons of European Common Market wheat at subsidized prices so far this year compared with 6 million tons last fiscal year. Canadian sales dropped from 7.6 million tons last year to 3.3 million so far this year. Australia’s share of the market has increased from 2 million last year to 2.7 million so far this year.

Dole, who has warned the White House that continued Republican control of the Senate may be riding on the outcome of the farm export debate, appeared at a Capitol Hill press conference with Sens. James Abdnor (R-S.D.) and Mark Andrews (R-N.D.). He said the Administration’s step was welcome but did not go far enough.

Andrews was even more emphatic: “I think they ought to just can the baloney and go ahead and do what we asked them to.”

Price Reductions

Kerin, the Australian cabinet official in charge of agriculture, said the Reagan action would force further reductions in the already depressed price of grain. But he said it was “preferable to any across-the-board extension” of farm export subsidies.

Kerin, in the United States at the head of a parliamentary committee opposing the Dole measure, said earlier that Australia would match the United States dollar for dollar in export subsidies. But he said such action probably would not be necessary in response to Reagan’s more limited action.

Fieldhouse, reading an official Canadian government statement, said: “It is not clear exactly how the U.S. Administration plans to induce the sale of 4 million tons of wheat to the Soviet Union. Therefore, we are unable at this time to assess the precise implications of this decision.”

Lyng said the program would use surplus government-owned wheat as bonuses in sales contracts to the Soviets. Four million tons is about 146.8 million bushels, a fraction of the surplus stockpile of about 1.9 billion bushels.

When asked if he was concerned that the program would mean that Soviet citizens would get U.S. grain at cheaper prices than American citizens, Lyng said: “I am more concerned about the benefits to American farmers.”

Staff writer Karen Tumulty contributed to this story.