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Barley Fueling Trade Complaints

May 2, 1998

WASHINGTON (AP) _ Somewhere out on the high seas, a 30,000-ton shipment of European-subsidized barley is headed to California and bringing trade tensions with the United States to a boil.

The Clinton administration has complained. Farm-state senators are rattling sabers. A dozen major farm groups have expressed ``grave concern″ to President Clinton about the implications for European-U.S. trade relations.

Barley growers are talking of picketing the ship when it arrives later this month. Sympathetic longshoremen would probably refuse to unload it.

``It’s caused a lot of consternation in a lot of sectors of agriculture,″ said Agriculture Secretary Dan Glickman, who has written a tough letter about the situation to his European Union counterpart.

But to the milling company that bought the Finnish barley, Penny-Newman Grain Co. of California, the explanation is simple: months of traffic jams stemming from the Union Pacific-Southern Pacific rail merger has frequently made it all but impossible to get shipments of domestic barley when they’re needed to meet feed demands for dairy customers.

``We bought it because we’re tired of putting up with the delays,″ said Kevin Hiedeman, a trader at Penny-Newman’s operation in Fresno, Calif. ``We had no idea any of this grain was subsidized.″

What Penny-Newman did is perfectly legal under international trading rules. But to politicians in Washington and U.S. farmers, the sale could set a precedent that would result in the dumping of cheaper grains of all kinds in the United States just as countries are gearing up for new international trade talks in 1999.

``This is like throwing a grenade,″ said Sen. Max Baucus, D-Mont. ``This just makes matters worse, and we won’t stand for it.″

Furthermore, barley growers contend the shipment has triggered a 24-cents-a-bushel drop in feed prices in California. They say the Europeans also have sold subsidized malting barley _ the kind used to make beer _ in Mexico and may try to sell some in the United States.

``This predatory attack on the U.S. barley markets and growing markets in Mexico must be stopped,″ said Herb Karst, president of the National Barley Growers Association.

But the ship is not stopping.

E.U. officials say the U.S. reaction is overblown and fed mainly by domestic political concerns, including farmers’ anger at the inability to open European markets to products such as hormone-treated beef and genetically engineered crops.

``It may be a buildup of frustration or resentment,″ said Ella Krucoff, spokeswoman for the E.U. in Washington. ``Let’s hope we’re not becoming a scapegoat.″

The implications of the barley incident are real. One of the main U.S. goals in the trade talks coming up next year is to reduce European export subsidies, estimated at $6.1 billion in 1997, and to force markets open by using science instead of politics to decide health and safety questions.

If Washington believes the E.U. is dumping cheaper grain in the United States, it will serve to raise the level of mistrust between the two sides.

``It is a situation that, left unattended, could unnecessarily complicate our agricultural trade relationship,″ Glickman said in a recent letter to E.U. officials.

In addition, low grain prices overall have many farmers clamoring for the United States to use some of its subsidy programs to help spark export sales and reduce huge stocks in storage, raising prices for this year’s harvest.

Meanwhile, out in California, Penny-Newman’s Heideman said he’s frustrated that politicians are focusing on the subsidy questions and not on solving the rail traffic jams, which last year forced some 93 million bushels of grain to be stored on the ground awaiting a rail car.

Because of the controversy, Heideman said he’s made phone calls around the world attempting to sell the barley, but it’s actually above world market prices and nobody’s interested.

Now, when the ship reaches the docks at Stockton, Calif., it could be forced by picketers to just sit there _ costing him money and giving dairy farmers fewer choices for their feed.

``I don’t want to hurt the American farmer. We won’t do it again.″

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