Reagan Calls for End to World's Farm Subsidies

Times Staff Writers

President Reagan, who less than two years ago signed the most expensive farm aid bill in history, called Friday for the elimination of agricultural subsidies worldwide by the year 2000 as a way of promoting better world economic health.

At the same time, Reagan said that the United States has made "real progress" in trimming its budget deficit, despite ongoing spending battles with Congress, thereby freeing for private investment abroad some of the foreign capital that has been tied up financing the U.S. debt.

Reagan's remarks, made in a speech televised by Worldnet and provided to networks around the world by the U.S. Information Agency, outlined goals and themes he will press on other government leaders at the seven-nation economic summit conference that begins here next week.

The President will take the opportunity to proselytize Britain, Canada, France, Italy, Japan and West Germany on the economic philosophy he has represented in the United States, based on lower taxes, less government regulation and greater emphasis on private business.

Governments, he said, must "move to dismantle trade-distorting subsidies and labor laws that promote unemployment."

"Agricultural subsidies, for instance, have been some of the worst culprits behind our growing trade frictions" by giving some sellers unfair advantages in world markets. "Let's jointly defuse this expensive farms race by setting a goal of a subsidy-free world for the year 2000," he said.

Past Opposition

In the past, Reagan has spoken against subsidies, while at the same time agreeing to continue them at home to protect U.S. farmers.

Farm price supports, which guarantee farmers a specific price for their crops--at a significant cost to the federal budget--grew six-fold from $4 billion in 1981 when Reagan took office to $25.8 billion in 1986.

While agriculture has not been a central issue at the previous 12 economic summit conferences, it has taken on growing importance recently, with a U.S. official saying that international farming is in a state of chaos, facing overproduction and depressed prices.

But any steps Reagan could take to encourage reduced subsidies could place him in conflict with American farmers, whose problems have become a prime issue in domestic politics.

Touching on another sensitive issue, the U.S. trade deficit, Reagan used the speech to call again upon two of the United States' closest allies, West Germany and Japan, to stimulate their economies to help reduce their trade surpluses with the United States.

'Free Pent-Up Demand'

If those nations' consumers had more disposable income to buy U.S. products, American manufacturers could expand their markets and increase employment, he said.

It is "essential" that West Germany adhere to its pledge to pump up its economy, which grew at a sluggish rate of 2.6% last year, Reagan said, and "Japan, too, could help right the imbalance in the world economy by righting the imbalance in its own economy. It's time for Japan to let free the pent-up consumer demand in their nation. Allow the Japanese people to enjoy more of the benefits of the remarkable economy they have worked so hard to build."

The President acknowledged that Japanese Prime Minister Yasuhiro Nakasone has recognized the need for such a course and sent a program to the Japanese Parliament.

On Friday, the Labor Department announced in Washington that unemployment in May remained stable at 6.3%, which White House spokesman Marlin Fitzwater called "good unemployment news on the eve of the economic summit."

To Meet With Pope

Reagan taped his speech Friday morning at the Villa Condulmer, an estate 12 miles north of Venice. He and his wife, Nancy, are staying there until the summit meetings begin Monday.

Today, they will fly to Rome, where the President will meet with Pope John Paul II and have lunch with Italian President Francesco Cossiga.

At the summit, Reagan will confer with Prime Minister Margaret Thatcher of Britain, Prime Minister Brian Mulroney of Canada, President Francois Mitterrand of France, Prime Minister Amintore Fanfani of Italy, Chancellor Helmut Kohl of West Germany, and Nakasone.

With the allies agreeing, in some cases only reluctantly, to support the United States' efforts to reach an agreement with the Soviet Union to eliminate medium-range nuclear missiles from Europe, Reagan, in his Friday speech, emphasized that the United States would not ignore its allies' defense needs.

The allies have expressed concern that the removal of the United States' "nuclear umbrella" would leave them vulnerable to the superior conventional forces maintained by the Warsaw Pact nations.

Defense Improvements Urged

"As long as the Soviet Union stockpiles chemical weapons and maintains massive conventional forces, poised in attack positions on its own territory and in Eastern Europe, the free nations of Europe must remain strong and ready," the President declared. "Indeed, given the Soviet superiority in these forces, we must improve our conventional defense capabilities, difficult and expensive as that might be."

"The United States will not waver in our commitment to the defense of Europe," he said.

A senior White House official said that Reagan raised the defense issue to offer Europe and Japan a "reassuring sign that we're not walking away from any commitments."

As soon as the summit ends, the foreign ministers of the North Atlantic Treaty Organization will meet in Reykjavik, and a key item on the agenda is the U.S. arms negotiating position.

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