USconcerns overstated

9 October 1998

USconcerns overstated

US COMMITMENT to free trade is being severely tested, according to William Motes of international commodity consultants, Sparks.

In response to growing economic and climatic difficulties for the countrys farmers, Washington is seeking to increase support levels, he told the Prague conference.

Transitional payments of $3.2bn (£1.9bn) under the 1996 "Freedom to Farm" Act have just been paid from the 1998 budget – to compensate farmers for phasing out the old deficiency payments. And, with a view to Novembers Congressional elections, a further $3bn from next years budget is likely to be paid early.

Combined with $1.5bn from the conservation reserve (long-term set-aside), $1bn in marketing loans and perhaps $4bn in emergency aid, US farmers could be getting $13bn (£7.74bn) of support in the space of two months, said Dr Motes.

But farmer complaints are being overstated, he suggested.

"There is an election year frenzy," said Dr Motes. "Producers are telling congressmen they will never make it another year without help. While farm incomes may fall 12% this year, remember they are falling from record highs."

The danger was that, if Washington gave in too easily, the 1996 Act could fall apart. "This would have a very negative impact as far as trade prospects are concerned."

&#8226 Mounting pressure on markets is also leading to tensions in central and eastern European countries, according to Katalin Kelemen of Hungarian grain trader, Gobona. "A trade war has started," she claimed. "Different countries have started to introduce protective measures against imports from their neighbours."

For example, Poland has increased duties by an across-the-board 10%, while Slovakia has put another 7% import tax on Hungarian beef, she said.

Farmer complaints in America are overstated, says William Motes of Sparks consultants.

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