The U.S. plan to subsidize farm exports by giving away government-owned surplus commodities drew criticism yesterday from other major agricultural exporters and raised concern on Capitol Hill that it might depress world prices more.
Under heavy pressure from farm-state legislators, the Reagan administration announced Wednesday that it would give exporters up to $2 billion worth of surpluses to help them combat subsidized competition by charging lower prices for American products.
The Chicago Board of Trade reacted quickly yesterday, even though details of the program were sketchy. Analysts said the export scheme sent corn and wheat futures prices down, led to doubts that it would increase exports and heightened fears of a trade war.
On Capitol Hill, under questioning by Sen. Tom Harkin (D-Iowa), Assistant Agriculture Secretary Robert Thompson agreed that the plan could depress world prices but said the risk would be lessened by aiming the subsidy at certain markets. He did not elaborate.
However, Ella Krucoff, speaking for the European Economic Community, which Agriculture Secretary John R. Block identified as one target of the U.S. plan, predicted that it would be "destructive to world markets" and make upcoming negotiations on farm trade policies even more difficult.
Krucoff described the U.S. action as "aggressive and not conducive for conducting trade talks . . . . We are very concerned about how we were singled out . . . . The ultimate effect could be the destruction of prices and further endangerment of the U.S. farmer. In the end, the large purchasers like the Soviet Union will benefit most."
An official of the French Embassy here said, "We're not enthusiastic about it, but what can we do? . . . . My hope is that it won't spill over on bilateral U.S.-EEC trade."
Block, in announcing the plan, acknowledged that it was "not good policy" and that it ran counter to the administration's free-trade theories. But he said the United States is "not going to stand idly by" while other producing nations subsidize agricultural exports.
The apparent contradiction between administration theory and action was noted by an Argentine Embassy official, who said, "We're absolutely disappointed. It affects the image of the Reagan administration, which talks about the necessity of free trade and then at last adopts unfair trade practices."
Argentina, which relies on the sale of about 9 million tons of wheat annually for badly needed income, would be adversely affected by the U.S. action, the embassy official said. He added that it could force Argentina to "rethink" its debt repayment agreement with the International Monetary Fund.
"This export income is very necessary to help us meet our external obligations," he said, adding that, "We do not subsidize our agriculture, we give no credit guarantees, and our prices are well below the U.S. prices because we are very efficient. We want to compete in a clean and sound position."
The administration's decision to adopt the subsidy program was reached last week after Sens. Mark Andrews (R-N.D.) and Edward Zorinsky (D-Neb.) made it part of their price for supporting the federal budget resolution.
Congressional sources, however, indicated that the budget deal might have been academic, since both the House and Senate Agriculture committees were moving rapidly toward inclusion of export subsidies in the 1985 farm bills they are writing.
Andrews defended the new subsidies yesterday as the only workable alternative to administration farm-bill proposals aimed at lowering federal farm support loan rates and reducing prices to stimulate exports, which account for about 40 percent of U.S. farm production.
But he said he worried that the program could be subject to "rip-offs" by exporting companies or others who might "line their pockets" unless the Agriculture Department closely monitors use of the surplus commodities.
Andrews called price-depression predictions "baloney." He added: "The administration has said that by lowering loan rates, we will drive others out of the export market. But that takes it out of the hide of rural America. It is better to use the federal stockpile than dropping the bottom out of our farm economy."