Contradicting its professed allegiance to free trade, the Reagan administration yesterday called for restrictions on tobacco imports as a way of averting multimillion-dollar losses that are looming in the domestic tobacco price-support program.
Department of Agriculture officials told the International Trade Commission that unless quotas are established for foreign flue-cured tobacco, losses of $123 million, or possibly more, will be suffered by U.S. taxpayers. l
Testimony by Hoke Leggett, associate administrator of the Agricultural Stabilization and Conservation Service, was the broadest USDA concession so far that there may be serious problems in the controversial tobacco price-support program.
Tobacco-state advocates have long insisted that the support program is the smoothest running of the federal commodity loan schemes and operates at virtually no cost to taxpayers.
But the program's current difficulties -- and the potential they carry for losses because the Commodity Credit Corp. (CCC) is holding large amounts of low grade cigarette tobacco that may be sold only with difficulty -- have brought the support system under new criticism.
Critics have argued that unrealistically high price supports paid to farmers of flue-cured tobacco have encouraged overproduction of marginal-quality leaf that goes under government loan. Imported leaf, although of about equal quality, is preferred by cigarette manufacturers because it is cheaper.
Leggett told the ITC that efforts by USDA and farmers to reduce American production had not resulted in the intended reduction of the government-held stocks of lower quality leaf.
Unless that tobacco can be sold, the tax-supported CCC will lose the principal and interest that it expected to be returned by growers who put their product under loan. Leggett said the loss on current inventories could be as high as $123 million, but it could be more if imports are not slowed.
Under questioning by ITC members, Leggett also conceded that the USDA request for limitations on imports of flue-cured tobacco could be interpreted as running counter to the administration's emphasis on expansion of overseas markets for U.S. farmers.
USDA trade analysts and some tobacco industry officials are predicting that any curtailment of U.S. markets to foreign tobacco growers could quickly result in retaliation by overseas buyers against other American agricultural products.
In an exchange with ITC Chairman Bill Alberger, Leggett and USDA witnesses conceded that retaliation is a possibility. But they insisted that limits on imports are the only certain way to save the federal price-support program from suffering heavy losses. That position was supported by other witnesses, including North Carolina Gov. James B. Hunt Jr. and Farm Bureau groups from major tobacco states.
The ITC hearing will continue today with respresentatives of export-import and sales groups and foreign governments speaking against the call for import quotas. The commission has until Aug. 14 to make a recommendation to President Reagan, who can accept or reject its findings.
The ITC probe, to determine whether imports are adversely affecting the U.S. price support program, was requested as a favor to Hunt by President Carter two days before he left office in January. Since then, the issue has escalated into a bitter political spat between Hunt, the state's Democratic congressmen and Sen. Jesse Helms (R-N.C.), who has given only lukewarm support to the ITC investigation.