WASHINGTON, D.C. – The European Union has no desire to launch a new subsidy trade war with the United States, a senior EU official said last week.
But David Roberts, deputy director general of the Brussels-based European Commission, the EU’s administrative arm, also said the EU will continue to subsidize wheat exports whenever world prices fall below European prices.
With U.S. Department of Agriculture estimates that wheat prices will plummet this year, Roberts said it is a prescription for continued EU export subsidies this year.
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“If the short-term projections are accurate, then we will continue our subsidies during that period,” he said in an interview. “It is not a long-term export policy. It is just matching the fluctuations in world prices to intervene when export prices drop below our intervention price.”
Earlier, in a speech to the annual U.S. agricultural outlook forum, Roberts assured the Americans that despite its decision late last year to start export subsidies again, the EU is not trying to lure Americans into a trade war like the subsidy battle that drove prices down after 1985.
“Although export refunds have been re-introduced to enable (European) community exporters to follow the downward movement of world prices, we have neither the budgetary resources nor the intention of provoking a price war,” he said. “In these circumstances, it will be difficult to increase export volumes.”
Still against move
It may not be enough for the Americans, who see the European move back into export subsidies as a provocation.
For a time, as world grain prices soared, neither major trader resorted to export subsidies.
As prices have fallen, the EU has resumed the practice to allow its exporters to retain their share of markets and to get rid of surplus stocks.
Last week, U.S. agriculture secretary Dan Glickman said the EU actions, if continued, will not go unchallenged. He has asked for an increase in Export Enhancement Program funding.
So far, the U.S. has resisted the temptation to subsidize its exports. “But we can’t hold out unilaterally forever,” said Glickman.
Canada has been urging the U.S. to resist the temptation.
Despite world trade rules which set limits on export subsidies, they are loose enough to allow both trade giants to spend hundreds of millions of dollars each year in targeted subsidies. Smaller, lower-subsidy countries like Canada would get caught in the crossfire.
Roberts said the leaders of the EU are divided over the type of farm policy needed for the future.
He predicted that in the future policy, farm subsidy or commodity price levels will have less impact on European production and exports than decisions on production controls.
