EEC Rejects U.S. Subsidy Proposal : Panel Instead Offers New Agricultural Import Limits

BRUSSELS — The European Economic Community, rejecting a U.S. proposal to end farm subsidies by the turn of the century, Wednesday proposed a package of new import restrictions that is bound to upset the Reagan Administration.

Calling the U.S. plan “unrealistic,” the EEC executive commission unveiled a plan that places new restrictions on agricultural imports as a precondition to making major cuts in its own swelling farm subsidies.

U.S. officials here declined comment on the plan. A U.S. farm trading association said, however, that the package “is more inward looking than it is toward liberalizing world trade.”

Frans Andriessen, the EEC farm commissioner, said limiting imports would help wean European farmers away from EEC handouts and prepare them for stiffer worldwide competition.

Andriessen said that once the restrictive measures were in place, the EEC would agree to make “substantial cuts” in its farm subsidies as part of a global plan to be negotiated in the current round of trade liberalization talks in the General Agreement on Tariffs and Trade.

But he emphasized the commission will not allow the GATT negotiations to “be an excuse for scrapping our own plan for internal trade reforms.” This was an apparent reference to the EEC’s plan to hold farm spending to half of its 1992 budget, which is expected to total the equivalent of $60 billion.

The community’s current farm spending amounts to $31 billion, or about 70% of its annual budget.

The program was presented as the EEC’s counterproposal to the Reagan Administration’s July plan to eliminate all farm subsidies worldwide by the year 2000.

Andriessen told a press conference that the U.S. plan offers no immediate solution to the rising cost of government subsidies and growing mountains of unwanted food.

The commissioner said “adjustment” measures would be needed for Europe’s grain, sugar and milk industries before subsidy cuts could be made.

Diplomats Cautious

For cereals, the commission proposed the creation of a cartel-like arrangement among the major producers to divide existing markets and, possibly, set world prices. It also proposed tariffs and other curbs on the import of animal feed substitutes as a means of protecting European grain farmers.

Similar restrictions would apply to dairy products and sugar, Andriessen said without elaborating.

He stressed that an agreement to cut subsidies must include all the EEC trading partners. “For us, this is an essential element of negotiations within GATT,” he said.

Dennis Blankenship of the U.S. Soybean Assn. said setting up farm cartels “is in direct contradiction to the U.S. position” of letting market forces dictate production and prices.

Diplomats from EEC countries also expressed reservations about the proposal to control farm imports. “This proposal must be read very, very carefully,” one diplomat said, predicting that the commission’s package is likely to run into opposition in some EEC capitals.

The plan must be approved by the 12 EEC member countries. It will be debated Oct. 19 by the community’s foreign ministers.

In a related development, the commission proposed setting up a permanent program to give away its surplus food to the poor and elderly.

Separately, officials said the EEC’s executive body took the first formal step toward suing its member countries for failing to draft a 1988 budget.

Jacques Delors, president of the EEC’s executive commission, formally notified the governing Council of Ministers that it missed an Oct. 5 deadline for submitting a spending plan to the European Parliament.

Under the community’s rules, the council now has two months to produce a budget. If none is submitted by Dec. 7, the commission has the authority to ask the European Court of Justice to force action on the budget. The community’s budget year begins Jan. 1.