The export subsidy program that farm-state senators forced on a reluctant Reagan administration as part of their price for supporting the compromise congressional budget resolution is turning out to be easier said than done.
The export payment-in-kind, which would use government-owned surplus farm goods as a sweetener to bolster slumping U.S. grain sales abroad, has raised a raft of questions about how far the program should go and whether it will work. Administration officials, senators and commodity representatives met twice behind closed doors last week to draw up more details of the $2 billion program hastily agreed to during the budget debate.
Sen. Jesse Helms (R-N.C.), outlining the problem after one of the meetings, said, "You've got this skeleton, and it looks fine. But then you try to fit the pieces into it and all kinds of problems come up."
When Agriculture Secretary John R. Block announced the program this month, he said it was "not good policy" and that it runs counter to the administration's free-trade beliefs. But he said it was the only way to combat unfair competition in commodity export sales.
"We are going on the attack in the international marketplace," Block said. Details were not clear, but the program apparently would use surpluses as a bonus to foreign buyers, either giving them more grain for their money or allowing traders to sell for less, with surpluses making up their losses.
Pressure on the administration to act has intensified this year as the Agriculture Department has lowered its 1985 export projections three times. The latest revision on Wednesday cut an additional $1 billion from this year's sales forecast, dropping it to $33.5 billion, a $10 billion decline since the 1981 peak.
"The outlook is getting worse," a recent USDA internal memo said. "U.S. agricultural exports declined a million tons in fiscal 1984, 4 million in fiscal 1985 and are now forecast to drop 12 million tons during the coming year."
Most experts attribute the decline to the strength of the dollar, which makes U.S. goods more expensive to foreign buyers. But others, such as Block and Daniel Amstutz, his undersecretary for international affairs, insist that federal farm-support programs have kept U.S. prices artificially high and have knocked U.S. farmers out of the competition.
Block said the program would be targeted at the European Economic Community (EEC) and at markets lost to American farmers because of EEC export subsidies. The secretary's announcement reportedly caused a flurry of concern at the State and Commerce departments and rankled the deal-making senators.
It also drew criticism from the EEC and sent a wave of nervousness though traders because of fears that huge new amounts of U.S. grain would further depress low prices and force the government to buy the additional surpluses of this year's crop.
Block said the first subsidized sale to a targeted market would be in early June. Legislators were told that the Agriculture Department would choose from among 23 nations it considers to be using unfair trade practices in competing with this country.
Apparently, though, there is basic disagreement between the senators who cut the budget deal and the administration over how the program should be set up.
Sen. Mark Andrews (R-N.D.) said the agreement called for the $2 billion to be spent in the first year and that it be applied across-the-board to export sales, not targeted to certain competitors.
"We have to act now. The administration has to get off the pot and announce its program," Andrews said after one of last week's meetings. Block, for his part, insisted that the program would be targeted, although he agreed to make it broader than his announcement indicated.
Helms said spending the $2 billion in the first year of the subsidy program would be "disastrous" for prices, flooding markets with excess U.S. commodities.
But the agricultural lobby and its friends on Capitol Hill are pushing for more export aid to beef up sales and reduce the costly federal stockpile of surplus grains.
"Commodity groups are concerned that the program is to be targeted and limited to unfair trading countries," one lobbyist said. "That wouldn't do much to expand exports and it would cause anxiety among our traditional trading partners. The net result would be to lose more markets."