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Music to US ears: European farmers get smallest price hike in a decade

Farmers throughout Western Europe are angry. They have burned food at borders , and blasted the European Community for failing to take their concerns to heart.

They were upset because EC agriculture ministers, pressured by the Reagan administration and EC budgetary constraints, agreed May 17 to raise farm prices by only 4 percent this year. (Farmers' incomes rose by 9 percent last year.)

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This price rise is the lowest in a decade, and could go a long way toward easing transatlantic tensions before next week's seven-nation economic summit in Williamsburg, Va.

For months, the Reagan administration has been saying the EC's $15 -million-a-year splurge on agricultural spending - two-thirds of the EC budget - has been giving EC farmers an unfair advantage over the US in competition for third-country markets. US officials, while arguing publicly the 4 percent price hike would continue to encourage surplus production, said privately the move could help ease transatlantic relations because the level of increase is relatively low.

''Our modest price increases are a signal. . . to the United States that we are prepared to do something,'' said president of EC Council of Agriculture Ministers Ignaz Kiechle. ''This is clearly a positive element for the (Williamsburg) summit.''

How much effect the small price increases will have on containing the long-awaited agriculture trade war between the US and the EC remains to be seen. Most observers agree that the decision will not do enough to discourage farmers from producing surpluses, and that the EC will have to unload these on the world market.

EC officials, however, emphasize that the price hikes agreed to for some items - including milk products and cereals, of which the world surplus is especially severe - were much smaller than the 4 percent average.

In the long run, sources say, the EC may reduce the level of subsidization for its farmers - and thereby remove a bone of contention with the US - simply because it cannot afford to do otherwise. And EC agricultural coffers could be further depleted if the June 6-7 EC summit adopts a formula which would change value-added tax rates. Countries that benefit from the EC's agricultural policy (like France) would pay more than those that do not (Britain). This would reduce Britain's bill by one-third - squeezing the EC's farm budget.

EC Agriculture Commissioner Poul Dalsager said the modest 4 percent farm price rise will cost the West European taxpayer about $400 million in 1983 and $ 685 million in 1984.

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''How can the community continue to spend two-thirds of its budget on agriculture-related projects,'' asks one independent analyst, ''when there are so many other problems that need attention?''

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