A Message to U.S. Farmers From Down Under: Go It Alone : Head of Australian Agriculture Group Lectures Americans on Virtues of Abandoning Subsidies

NEW ORLEANS —  While American farmers reviewed farm legislation earlier this month, a straight-talking Australian sheep rancher urged them to do what his country has done--abandon government subsidies altogether.

“Farm programs are failing,” Ian McLachlan, president of the National Farmers’ Federation of Australia, told members of the American Farm Bureau Federation, the nation’s largest organization of family farmers and ranchers.

As a Pacific Basin competitor of the United States--and especially of California--McLachlan was particularly critical of the so-called export enhancement program, part of the Food Security Act of 1985. That program ensures participating farmers a profit regardless of what their crops earn on the world market--in effect, uncoupling the subsidy to farmers from market prices. Its primary goals were to sell off government-owned surplus stocks and regain overseas markets lost during the years of a strong dollar. In addition, an earlier farm program set U.S. commodity prices above world prices, enabling sometimes-subsidized foreign producers to gain huge chunks of global markets formerly dominated by American farmers.

McLachlan acknowledged the export program’s success “in fixing the problem you started” under the previous farm act, which rewarded farmers who increased production of subsidized crops. But, in an interview after his remarks to the American farmers, McLachlan said:

“We are horrified by programs like the export enhancement program. It may be effective in moving surpluses at home, but it doesn’t do anything for world prices but depress them even more.”

A Major Exporter

Australia is a leading world producer of wool, sheep and grains, and a major exporter of specialty produce and wine (also in competition with California). The country exports 80% of its agricultural production, which last year totaled about $18 billion (U.S.), McLachlan said. By comparison, California’s agricultural production earned farmers about $15 billion.

Australia, underpopulated and remote, cannot hope to compete with the European Common Market and the United States when it comes to farm subsidies, McLachlan said. So its farmers and ranchers “belatedly” decided to go their own way. He said they are better off without the government “because we’re making the right decisions” now in response to market forces.

For example, he said, when the United States targeted wheat exports for subsidies, Australian farmers, in individual decisions, cut back their wheat acreage by 21%. “They looked at the price and said it was no good,” McLachlan said. Wheat growers then quickly shifted their resources into other areas.

Such flexibility is impossible with even the best-intended government programs, he argued, and their absence has the virtue of keeping Australian farmers “from continuing to produce what no one wants.”

“This constant exposure to what is going on in the marketplace,” he told the American farmers, “is producing farm sectors in Australia, in New Zealand, in South America and other (Pacific Basin) countries which are becoming very lean, very aggressive.”

Reagan Backs Approach

McLachlan alluded to the so-called Committee of 13 Pacific exporting nations--including Argentina and Canada. The committee is determined to see that the Geneva-based General Agreement on Tariffs and Trade dismantles farm subsidies and trade barriers wherever they are found, said John Fulton Lewis, editor of 2-year-old Pacific Century, a monthly newsletter covering Pacific trade and development published in Lake Ridge, Va.

The Reagan Administration has called for such a multilateral approach to global free farm trade by the year 2000, though spokesmen for the European Community dismissed even that longer-term goal as unachievable.

“If the European Community and the United States do not begin a significant withdrawal from the subsidy syndrome,” Lewis warned in an interview, “the committee will seriously consider organizing its own free-trade zone to make life increasingly difficult for the EC and the U.S.”

McLachlan said that American farmers would find, as their Australian counterparts already are finding, that they can perform well in free-trade environment.

“The fact is that the best of you are probably better than the best of the rest of us--individually,” he said, “but collectively you are in grave danger because of your inflexibility. . . . I’ve got members (in Australia) saying to me, ‘For God’s sake, don’t tell those Americans to give up their protectionism because they’ll start to get internationally competitive.’ ”

Bid for Lost Markets

For every $1 Australian farmers earn from their crops, they receive 9 cents in additional payments from the government, McLachlan said. In contrast, their American counterparts receive 50 cents more, while EC farmers receive an additional $1.60, he said. Because of the Common Market’s system of subsidies and tariffs, McLachlan said, Australia has turned away from its traditional trading partners to concentrate on markets closer to home. Japan now is Australia’s No. 1 customer, followed by Taiwan, South Korea, Hong Kong and Singapore.

Meanwhile, California agriculture is working aggressively to regain lost markets and develop new ones in that same part of the world. Less than a year ago, the California State World Trade Commission opened a trade office in Tokyo, where major cooperatives like Sunkist Growers, the nation’s No. 1 citrus marketer, and Blue Diamond Growers, the leading almond exporter, also have full-time representation. Both continue to work through U.S. trade negotiators to get Japan to allow more fruit and nuts into the island nation.

Australians have no quarrel with privately initiated market development programs, McLachlan said, but they are fearful that current U.S. government pressures on Japan to buy more beef, citrus, rice and other agricultural products will yield “some cozy deals,” shutting out other nations.

“We have become increasingly apprehensive at the growing protectionism and the use of handouts around the world,” he said. Nonetheless, he predicted, the current web of farm subsidies will have to disappear simply because of their costliness.

“Politicians in the future . . . will have no choice,” McLachlan said. “Inevitably, the governments will walk away no matter what they want to do.”

AUSTRALIA’S MAJOR TRADE PARTNERS Total value, all exports: $24.6 billion (U.S.) Japan . . . 25.5% USA . . . 11.7% New Zealand . . . 5.0% China . . . 4.4% South Korea . . . 4.2% United Kingdom . . . 3.8% Taiwan . . . 3.4% West Germany . . . 3.1% Hong Kong . . . 3.0% France . . . 2.5% Others . . . 33.2% Source: Australian Trade Commission