Taming the Farm Trade

U.S. farm-export figures and a new policy statement on farm subsidies by President Reagan were released simultaneously the other day--a coincidence as instructive as it was sobering.

The agricultural exports totaled $35.2 billion in the fiscal year ending Oct. 1--a four-year high, though far short of the record $43.8 billion in fiscal 1980-81. The recent increase made a substantial contribution in the effort to tame the trade deficit.

But officials were quick to acknowledge that a substantial factor in the expansion of exports was the American export-subsidy program, which artificially lowers prices charged foreign consumers. The Export Enhancement Program alone triggered sales of $3.3 billion. Under its provisions, close to $1 billion in stored commodities were given as bonuses to exporters to enable them to sell the American commodities, primarily wheat, below cost. The program was intended as a response to the European Community’s export-subsidy program. Together the two programs have proved competitive, but they have also disrupted world markets, punishing some other exporting nations with few or no subsidies.

President Reagan’s new proposals concerning farm-export subsidies, like his earlier proposals, were intended to terminate all farm subsidies, not just export subsidies. The President had originally urged that all farm subsidies by phased out by the year 2000. Under Reagan’s revised proposal, he called for negotiations to work out a mutually agreeable schedule for the phase-out of subsidies.

It was a realistic response to the disappointing reaction of the European Community, which has refused to countenance a total cutoff but has already undertaken reductions in subsidies. Reagan was right the first time. But his new flexibility may help produce more movement when the major trading nations convene next month in Montreal for a mid-point assessment of the on-going negotiations to reach a new General Agreement on Tariffs and Trade in 1990. A major proposed element of the new GATT is agricultural trade.

“We have been told that the truck of agricultural trade talks is stuck in the potholes of rigid timetables and food security,” the President tolda meeting of the U.S. Chamber of Commerce.”This proposal represents a major effort by the United States to pull the truck out, fill in the holes and make sure the talks hum along to their 1990 destination.”

His acknowledgement that his earlier timetable was unrealistic came with a commitment of complete cooperation with President-elect George Bush in presenting the American position at Montreal. That assurance of continuity of the American trade policy was most useful. It may help discourage abuse of the new American flexibility by the Europeans, because Bush is expected to be as insistent as Reagan that firm targets be agreed on to facilitate the long-overdue process of dismantling the wasteful subsidies.