5 June 1998

No grain trade war

SUGGESTIONS that the EU and US are on the brink of a trade war over subsidised grain shipments are being downplayed by industry representatives.

Late last week US agriculture secretary, Dan Glickman, announ-ced he would be offering subsidies on 30,000t of barley under the countrys export enhancement programme – the first time they have been used in three years. The sales would be targeted at traditional EU markets, Algeria, Cyprus and Norway.

The move was made in direct retaliation for a 30,000t cargo of Finnish grain which arrived in California last weekend, assisted by a $50/t (£32/t) export restitution.

But counter-measures by the EU are thought unlikely. The commission has made it clear from the start that the original 30,000t load was a "one off", due to a particular trade opportunity, rather than any policy in Brussels.

The barley was originally intended for shipment to Saudi Arabia, following a major buying spree in March. But high prices in the US meant it made economic sense to transfer the load to California.

"The US is not excluded from the list of possible destinations when traders are granted export licences," says Home-Grown Cereals Authority economist, Stephen Thornhill. "The interior barley price in the US is significantly above the world price, at about $125/t compared with just $75/t. It must have looked attractive."

US retaliation was politically motivated, but the fact it was on a "one for one" basis suggested it was designed to satisfy internal pressures, rather than start a trade war, said Mr Thornhill.

This view is supported by US Department of Agriculture trade representatives in Brussels. "Dan Glickmans response was measured. It was targeted at specific markets, so as to provide minimum disruption to countries that trade without the use of subsidies," said a spokesman.

Philip Clarke