27 June 1997

US angry over EUs grain subsidy plan

A CEREAL subsidy war with the US could be triggered if Brussels market managers launch an agressive export campaign in the coming season.

US agriculture secretary, Dan Glickman, warned last weeks International Grains Council conference in London that he would re-introduce export enhancement subsidies to protect his farmers from unfair trading practices.

"If the EU starts to subsidise wheat exports again in the coming months, this will give us a serious problem," he said. "Subsidies are in our arsenal and we will use them if necessary. For nearly two years weve held our fire in hopes that others would cease theirs. But we will not do so alone for ever."

A return to some level of export subsidy by the commission is thought to be inevitable, with world prices now about $20/t below EU levels, and Europe heading for another big wheat surplus.

But, as well as warning about a return to restitutions, Mr Glickman also launched a stinging criticism of the commissions recent export tax, which had led to further market distortions.

The time had come for other governments to realise that their role was one of support, not intervention, said Mr Glickman. They should untangle themselves from the market-place so that farmers could plant to satisfy world demand rather than bureaucracy.

He was supported in these views by Michel Rouge, president of French trading firm, Compagnie Continentale. The EUs export tax had been first introduced in 1995 as an "exceptional emergency measure", to keep a lid on prices. But it had remained in force for eight months, well after the end of that crop year, and had since become a standard tool for regulating the market. It ran counter to the EUs commitment to free markets and had undermined its reputation as a reliable supplier.n