The Minister for Trade, Senator Bob McMullan

The Minister for Primary Industries and Energy, Senator Bob Collins

MT93

1 July 1995

UNITED STATES AGRICULTURAL EXPORT SUBSIDIES

The United States decision to continue using the Export Enhancement Scheme (EEP) and the Dairy Export Incentive Program (DEIP) has received a mixed reaction from the Minister for Trade, Senator Bob McMullan, and the Minister for Primary Industries and Energy, Senator Bob Collins.

The Ministers said it is very disappointing that, with the strengthening of world prices in grain and dairy markets, the US has not taken the opportunity to substantially pare back the programs.

"Indeed, under current market conditions and in the light of the recent Uruguay Round outcomes, there would be merit in the US, and the European Union, reconsidering their subsidy programs," the Ministers said

"We are pleased that the US has heeded our requests not to extend its export subsidies into new markets, and we hope they continue this approach in the full year allocations to be announced around September.

"However, we continue to have concerns about the impact of the EEP and DEIP schemes on world markets as a whole."

Senator Collins and Senator McMullan have been working closely with Australian farm organisations to convey Australia's views both in Washington and the US Embassy in Canberra.

Following his recent visit to Washington, Senator Collins wrote to US Agriculture Secretary, Dan Glickman, to again register Australia's concerns.

The Ministers said the Australian Government continues to place great value on the assurance by President Clinton that the US would avoid using its export subsidy programs in ways that undermine Australia's interests.

"The US has indicated it has crafted the interim program to take account of the interests of non-subsidisers, and the Australian grain and dairy industries fall squarely into that category," the Ministers said.

"When I visit Washington in a couple of weeks, I will once again make the point that export subsidy practices are an ultimately ineffective way of promoting exports over the long term," Senator McMullan said.

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"I will also stress that, while the Uruguay Round outcome will reduce the size of US export subsidies, the operation of these programs still has the potential to seriously damage Australia's commercial interests through their price-depressing effects."

"The Government recognises the announcement for the first quarter includes some potential for "front end" loading.

"If first quarter quantities were annualised, subsidised exports from the US would exceed its Uruguay Round commitments for 1995/96.

"Senator Collins and I expect that the US will meet its full commitment under the Uruguay Round.

"Nevertheless, there is concern that the magnitude of the allocations will send the wrong message to the world on the US's commitment to cut back export subsidies," Senator McMullan said.

Senator Collins said world grain and dairy prices have strengthened considerably over recent times.

"Using subsidies in this climate means that the US is doing no more than damaging the returns for all exporters and wasting US taxpayers' funds, particularly in the growing Asian markets," Senator Collins said.

"The future impact of the EEP and DEIP on Australia will depend on how the programs are administered.

"The US is proposing changes to the operation of the programs and a number of options have been put forward for consideration, and the Australian Government and Australian industry will continue to be active in the debate.

"Australia remains concerned that in any new arrangements, the impact on Australia's grains and dairy exports is minimised," Senator Collins said.

Senator McMullan said the key to the impact of the EEP and the DEIP on Australian farmers over the next few years will be the outcome of the current debate in the US about the future of the farm support programs under the 1995 US farm Bill.

"I will be consulting closely with the Australian farm sector on this and other issues prior to my visit," Senator McMullan said.

Further information: Senator McMullan's office: Senator Collins' office:

John Flannery, (06) 277 7420, 018 482 887

Brian Johnstone, (06) 277 7520, 018 632 962