Washington - The United States said it will revive agricultural export subsidies in a modified form to prop up U.S. farm prices and warn the European Union against unfair trading practices.
The move came amid skidding U.S. farm exports, softening world prices for commodities, and growing U.S. frustration with the Europeans over several thorny agricultural trade issues.
Agriculture Secretary Dan Glickman said the package of new measures will include reviving the Export Enhancement Program, which has been dormant for more than for a year. But for now at least, USDA will use EEP differently than in the past.
In February, USDA forecast U.S. farm exports in fiscal 1998 at $56 billion, down from a record $60 billion in 1996.
Because of the Asian crisis and strong U.S. dollar U.S. farm exports could drop even more, Glickman said Thursday.
The slump in exports has helped pushed U.S. wheat prices to to five-year lows, and most of the measures announced by Glickman grew out of a wheat industry "action plan."
Until the mid-1990s, USDA subsidized million of tonnes of wheat exports each year. But tight world wheat supplies prompted the United States to halt wheat export subsidies in 1995 and it has stayed on that course since then.
The measures would not revive traditional wheat export subsidies.
"As you are aware, this administration has not supported the use of EEP in cases where the economics clearly shows that EEP would actually result in lower prices and the mere transfer of U.S. tax dollars to foreign buyers," Glickman said.
But EEP remains a "critical tool in our trade arsenal, and one we should consider using in more creative ways," he said. One plan, still subject to administrative rulemaking, would allow USDA to use EEP funds to insure exporters against losses when selling to a market where there is a high risk the cargo could be rejected because of a dispute over quality standards.
Glickman said that could be used to reassure "nervous exporters" about making sales to China, once a grain quality dispute blocking U.S. wheat sales in resolved.
Another plan -- which would need legislative approval -- would allow USDA to use any EEP funds left over at the end of the year to buy wheat, rice or feed grain to refill the four-million-tonne Food Security Commodity Reserve.
It currently has about 2.5 million tonnes of wheat.
Glickman said he plans to begin using EEP to indemnify exporters for "lost sales due to specific injurious trade barriers" imposed by other countries.
To begin that new approach, Glickman said he is immediately reactivating EEP for the sale of broilers to the Middle East. That will compensate the U.S. poultry industry for lost sales to the European Union because of a EU refusal to recognize U.S. poultry safety standards as equivalent to its own, he said.
The agriculture department will also reallocate subsidy awards for about 30,000 tonnes of sales that were never actually shipped. That could boost U.S. dairy exports by at least $50 million, mostly to Mexico and the Caribbean.
The EU condemned the measures announced by Glickman.
"It is not in anyone's interest to get into a process of competing on export subsidies," a spokesman for European Farm Commissioner Franz Fischler told reporters in Brussels.
But U.S. Trade Representative Charlene Barshefsky told the Senate farm panel she was disturbed by a recent rise in the value of EU grain export subsidies and the unprecedented sale of subsidized EU barley to a California feed firm.
While the barley sale may be legal under the terms of the 1995 Uruguay Round trade agreement, it still violates the spirit of that pact, Barshefsky said.
Barshefsky expressed impatience with EU delays in opening its markets to U.S. hormone-treated beef and approving some genetically-modified corn. The corn approval delay costs U.S. exporters over $200 million in lost sales, Glickman said.
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