Sugar, Dairy Quotas Raise Aussie Doubts Over US `Free Trade'

WHEN President Clinton was elected, Australian farmers worried that he might turn out to be more protectionist than former President Bush. Two recent moves by the United States Department of Agriculture (USDA) - cutting sugar import quotas and subsidizing US dairy exports to the Philippines - are starting to confirm those fears.

The USDA announced May 12 it would decrease the quota of sugar imports by 16 percent in the 1993/94 marketing year. While country-by-country quotas have not been released yet, Australia is estimating its cut to be about 10,000 tons on a pro rata basis.

While Canegrowers, the sugar growers' association, says that the sugar will be sold elsewhere, it will be at a lower price, and they expect to lose $3 million. The US has gradually been turning off the spigot of Australian sugar over the last decade. Sugar imports have declined 90 percent since the early 1980s, from more than 800,000 tons to an expected 86,000 tons next year.

"Coming on top of restraints on Australian meat exports and the impact of US export subsidies on Australian grains and cotton, US agricultural policy is turning 1993 into a bleak year for Australian farmers," says Trade Minister Peter Cook.

Ian Ballantyne, general manager of Canegrowers, says, "In the overall scheme, the loss of the 10,000 tons isn't the issue, the [main] issue is that there is a quota. What we'd always like to see is free access to market. But given that there is one, we'd like as large a slice as we could get."

John McQueen, head of the Australian Dairy Farmers' Federation, says that the industry has been getting signals from the USDA that it will use subsidies on dairy exports, known as DEEPs (dairy export enhancement program), on products going to the Philippines. The US has used these subsidies to compete with heavily subsidized European Community (EC) countries. But, says Mr. McQueen, the Philippines has "never had influence from the EC." The Philippines has always been a joint market for Australia and New Zealand.

McQueen says he sees the DEEPs as a "very disquieting thing." "The EC has reduced dairy subsidies by 5 percent just recently; at the same time we're seeing the US using dairy subsidies in markets where EC has not been playing," he says.

"One of the aspects about current change is that there's been a change in the mechanism in the way the US sets quotas. It does indicate change in principles applied in the past," says Bernard Milford, economic and technical services manager for the Canegrowers. It concerns Australia, he adds, because regardless of what the US has said about the international General Agreement on Tarriffs and Trade, Canegrowers questions US sincerity.

Guy Farmer, spokesman for the US Embassy in Canberra, says that the US has used agriculture subsidies in the Philippines before. He insists that the US will not give up this bargaining tool with the EC while the EC still subsidizes its farmers.

"There is a concern, not just in Australia but in a number of countries, that the US could become more protectionist," says McQueen of the Dairy Farmers' Federation.

Australia will raise these issues during trade talks in Washington May 26 and 27.