Australian Prime Minister Bob Hawke brought his country`s fight against grain subsidies to Chicago Monday, accusing America of playing ”international economic chicken.”
Subsidies to farmers threaten free trade, and arguments are invalid that the subsidies are necessary because of heavy European subsidies, Hawke told a luncheon of the Economic Club of Chicago.
”The reality is that in the end (the European Community) will not win, and America won`t, either. The only winner will be economic irrationality,”
he said.
Hawke attacked last month`s announcement that the U.S. would allow farmers to plant more wheat next year, a decision that revived the
longstanding dispute over subsidies between the U.S., the world`s largest producer of wheat, and Australia, which ranks fifth.
The reduction, to 10 percent from 27 percent, in the amount of arable land that will lie idle ”will add substantially to . . . world oversupply and further depress world prices,” Hawke said.
He acknowledged that American farmers are facing a tough time because of the drought but said that Australian wheat farmers, who have also suffered the hardship of drought, ”are nevertheless angry at what they see as a new and heavily subsidized grab for world wheat markets.”
But American farmers say they don`t see why they should reduce their acreage to help Australia.
”This is a classic example of where Australia is just dead wrong in criticizing us,” said Ross Korves, an economist with the American Farm Bureau Federation.
”America is the only country idling a huge amount of land to try to reduce oversupply, while they`re producing flat-out. But the U.S. is no longer willing to put a price umbrella on the world market and cut acreage in this country while countries like Australia produce what they like.”
Increasing the acreage planted next year may indeed lower prices, said Randy Green of the National Association of Wheat Growers, ”but why do we have to take action that benefits Australia?”
America only subsidizes U.S. grain prices to remain competitive in the face of massive European subsidies, Korves said.
”In a lot of cases, it is the U.S. and the Europeans who are slogging it out, and Australia gets caught in the crossfire,” Korves said.
Hawke was on a one day visit to Chicago as part of a tour of U.S. cities.
