The United States appears headed for a confrontation with its European allies over charges the European Economic Community is illegally subsidizing agricultural exports.
U.S. producers of poultry, sugar, wheat flour and pasta have formally charged the EEC with undercutting their competitive position in world markets by providing export subsidies for European products in violation of the Subsidies Code of the General Agreement on Tariffs and Trade, which went into effect two years ago.
The Office of the Special Trade Representative has accepted all the complaints, which in effect makes them official government charges, and has begun the complex process of trying to resolve them through negotiations. If negotiations fail, the trade representative could recommend that President Reagan take retalitatory action against the Europeans.
The 1974 trade act sets a timetable for the negotiating process that could force the issue by this summer. The most advanced case, that of the flour millers, has already passed through the process of "consultation" and "conciliation" without results, and will be taken up by a hearing panel next month.
Though the specifics vary, the four cases all deal with allegations that the EEC nations, including France, West Germany, Italy and Britain, provide massive subsidies that enable their producers to undersell their U.S. competitors. The GATT subsidies code, to which the U.S. and the EEC subscribe, prohibits subsidies that give the recipient "more than an equitable share of world export trade."
The Europeans do not deny that they provide subsidies, but they do deny that they violate the agreement or that their producers have an unfair advantage. "The European community's export subsidy policy is not designed to undersell the market, it is designed to allow the Europeans to sell at world market prices, which are lower than their internal support prices," an EEC spokesman said yesterday. The code prohibits only "predatory pricing," she said.
In the aggregate, the four complaints say that the European subsidies cost the American producers many billions of dollars in sales each year. The complaints were filed by:
The National Broiler Council and several groups of poultry producers, including Delmarva Poultry Industry Inc. and the Virginia Poultry Federation. They charge that EEC subsidies of up to $100 million a year enable European producers to export 17 percent of their output each year while more efficient U.S. producers export only 4 percent, and that unfair European competition has virtually excluded American producers from the booming Middle Eastern market for whole frozen chickens.
Great Western Sugar Co. of Denver, a major refiner. Great Western said that the EEC, which was a net importer of sugar in 1975, has become the world's leading exporter of refined sugar in just six years through massive subsidies of its sugar-beet producers. The United States is an importer of sugar and does not compete on the world markets, but Great Western says its domestic price is depressed because the European subsidies drive down the overall world price, "resulting in a severe loss of $2.184 billion to U.S. sugar producers in 1981."
The Millers' National Federation, which says that subsidies have enabled European millers to capture "substantially all of the new wheat flour markets around the world," according to President Wayne E. Swegle. This complaint, first filed in 1975, was reactivated when the processing timetable was adopted by GATT, Swegle said, but the EEC is still trying to delay the proceedings by "spurious arguments."
The National Pasta Association, which claims that illegal EEC subsidies of Italian producers have enabled the Italians to increase their sales in the billion-dollar U.S. market by 34 percent since 1979 while domestic makers' sales stayed even.