Soviet Union, Canada Agree on Wheat Deal

Two days after ignoring a deadline to buy subsidized U.S. grain, the Soviet Union signed a five-year grain agreement with Canada on Thursday, calling for sales of least 25 million tons.

A Soviet delegation led by Foreign Minister Eduard A. Shevardnadze attended the signing ceremony in Ottawa.

The agreement, which took effect on Aug. 1, had been initialed and announced last December, and shipments have already begun.

“This is a very important deal for Canadian farmers in the light of a record crop coming off,” said Canadian Wheat Board Minister Charlie Mayer. “It means that in very difficult world markets, our largest customer has been willing to come and formally sign a long-term agreement.”

Canada, one of the world’s largest grain exporters, finds itself in a global price war because of a world glut of grain. Improved harvests in Third World countries such as China and India, which historically have imported grain, along with heavily subsidized production in Western Europe and the United States are among the causes.

Offer Rejected

The Soviet Union last month declined President Ronald Reagan’s controversial offer to sell 3.85 million tons of subsidized U.S. wheat, reportedly because it found even cheaper European supplies. The deadline for a Soviet response to the Washington offer was Sept. 30.

Canadian prairie farmers, reaping an anticipated record crop of 54 million tons of grain, have asked for up to $2.1 billion in subsidies to compensate for prices that have slumped about 20% this year.

Mayer indicated that Canada would have to match U.S. and European prices in order to conclude agreed sales with the Soviet Union. “If you’re going to sell grain, you have to be competitive in all things, including prices,” he said. Quality was another factor, he added.

The Soviets have complained about the quality of some grain on the world market.

Expires in 1991

The five-year pact, running from Aug. 1, 1986, to July 31, 1991, was signed by Mayer and Viktor M. Ivanov, Soviet deputy minister of foreign trade.

It had been initialed in Winnipeg last December. Mayer denied that the delay in signing was because of Soviet doubts on whether to proceed. He said both sides were waiting for an appropriate occasion.

But Canadian External Affairs Minister Joe Clark said securing the pact was a major goal during Shevardnadze’s visit, and the Soviet envoy told a Wednesday banquet that the agreement might be signed, but that he could not guarantee it.

The Soviet Union bought more than 30 million tons of Canadian grain under a previous five-year agreement that expired Aug. 1.

The Soviets complained of Canada’s huge trade surplus--a 57-to-1 advantage and surplus of nearly $1.1 billion--and both Clark and Mayer said Canada would move to open up its markets to more Soviet goods.

The two sides also renewed a most-favored-nation trade agreement for a further five years, extended a pact on economic, industrial, scientific and technological cooperation and brought into force an accord on the avoidance of double taxation.