Monday 7 September 1992




Washington, Sep 3 (IPS) -- The day after U.S. President George Bush announced a major expansion in food export subsidies, the White House said it was ''pessimistic'' about reaching an early accord with the European Community (EC) on farm subsidies.

Spokesperson Marlin Fitzwater told reporters Friday that any agreement with the Europeans on the subsidies issue -- which has prevented a successful end to global trade negotiations for almost two years -- would take ''months at least''.

He added that the one-billion-dollar expansion of the export programme announced by Bush should not complicate efforts to conclude an accord being negotiated under the General Agreement on Tariffs and Trade (GATT).

''We have to stand up for the rights of our agricultural industry,'' he told reporters, adding, ''The EC has known our position and how hard we've been fighting to eliminate these subsidies, and I don't think they can expect us realistically to continue to endure this kind of unfair competition from them forever''.

Bush's announcement came amid reports from London's 'Financial Times' and elsewhere that U.S. and EC negotiators have stepped up efforts to achieve a breakthrough by mid-October on the subsidies issue that could pave the way to a final GATT agreement early next year.

The Times reported that secret talks began Wednesday after a meeting in Brussels early this week between U.S. Trade Representative Carla Hills, EC external affairs commissioner Frans Andriessen, and EC agriculture commissioner Ray MacSharry.

The reaction from EC headquarters in Brussels to Bush's announcement Wednesday was the initiation of an investigation whether the subsidy increase violates a ''standstill'' agreement by GATT negotiators which called on all parties not to introduce new measures that could threaten progress on a final accord.

U.S.-European trade relations were already troubled before Bush's action -- which he said was directed against the EC.

Washington has threatened to double tariffs on one billion dollars worth of European food products in what some analysts here warn could be the first battle in a full-fledged transatlantic trade war.

Bush's announcement -- which he said will result in the sale of three billion dollars worth of U.S. wheat to 28 countries -- is also likely to fuel the anger of other, albeit less important, wheat exporters.

Australian Prime Minister Paul Keating strongly assailed the new subsidies, saying they resulted from ''domestic policy pressures'' and could undermine hopes for a good GATT accord on farm products.

Bush's move also sets back Argentina and Canada which share important Third World export markets, such as Brazil, which was included among the countries eligible to receive subsidised U.S.


Most analysts here agree with Keating that the export expansion was politically motivated.

Like Bush's challenger in the November elections, Bill Clinton, they note that the White House itself called only one month ago for the elimination of the Export Enhancement Programme (EEP) under which the subsidies will be provided.

As a result of lagging demand, wheat prices have fallen steeply since February, making this summer the worst in almost 10 years for sales overseas.

Prodded by Republican lawmakers from the Midwest, as well as polls which show him trailing Clinton in farm states, Bush had a clear political interest in reversing his position on the EEP, even at the risk of complicating the GATT talks.

But Robert Dole, the Senate Minority leader from the wheat- growing state of Kansas, argued this week that expansion of the subsidies could be the ''spur'' that would persuade the EC to reduce their own subsidies as demanded by Washington in the GATT talks.