Inside Washington / By SALLY SCHUFF, Feedstuffs Washington Editor
WASHINGTON, D.C. -- U.S. export credit guarantee programs are on the front burner, mostly because other countries hate them.
For instance, in 1997, when the Asian flu broke out just before Christmas in prime U.S. export markets, former UnderSecretary of Agriculture Gus Schumacher hustled off to Indonesia and Southeast Asia to try to forestall the lost U.S. sales.
By Jan. 5, he and his team of agriculture department trade specialists were able to offer a total of slightly more than $1 billion in U.S. export credit guarantees.
The funding, most of it from the GSM-102 program, which underwrites bank loans made for up to three years, was aimed at tempting financially stricken Asian customers to buy from U.S. sellers.
The effort was praised in the U.S., but U.S. competitors, particularly Australia, took it poorly. Australia likened the favorable credit terms, with longer repayment periods, to a government export subsidy. The European Union quickly seized on U.S. export credit guarantees as a leverage point to stall reducing its own export subsidies.
The GSM-102 and GSM-103, which has a payback period of three to seven years, are popular in the U.S. Nevertheless, the Asian flu episode helped to explain why that sentiment is not universal.
The whole thing is a hot issue right now. Last week, Agriculture Secretary Ann Veneman said the programs are vulnerable to a World Trade Organization (WTO) challenge unless an agreement could be reached at a Paris, France-based forum.
It's no secret that trade competitors would like to see U.S. export credit guarantees go away by reclassifying them as WTO-illegal export subsidies.
At a Senate Finance Committee trade hearing last week, former U.S. Trade Negotiator, Charles J. "Joe" O'Mara pointed out that during the Uruguay Round, "the U.S. came under enormous pressure from the Cairns Group and other agricultural exporting countries to accept disciplines on the use of export credit programs."
The U.S. resisted that pressure and was able to get a special exemption for export credit guarantee programs under the Rounds' Agreement on Agricultural, which mandated reductions for other farm subsidy programs.
In return, said O'Mara, who is now a lobbyist for the American Oilseed Coalition, the U.S. and other WTO members agreed "to work toward the development of internationally agreed disciplines to govern the provision of export credits, export credit guarantees or insurance programs."
Five years ago, the issue was referred to a forum at the Organization for Economic Cooperation & Development (OECD) in Paris for resolution.
The U.S. and others, except Canada, signed off on a recent OECD agreement that included shorter repayment limits for loans made under U.S. programs. Canada feared repercussions on the Canadian Wheat Board, but without the agreement of the Canadian government, settlement of the issue at the OECD can't proceed, and that has O'Mara and Venemen worried.
Veneman told the North American Agricultural Journalists meeting last week, "it is unlikely this issue will proceed any further (at OECD) because agreement could not be reached." Both she and O'Mara fear the U.S. could eventually face a challenge on the issue under WTO rules.
Technicalities in the Uruguay Round agreement would leave corn, oilseeds, oilseed meals, cotton, hides and skins, and tallow particularly at risk, O'Mara told the Senate committee last week.
Earlier in the week, Veneman said, "The question really is whether there will be an action filed and whether they (GSM export credit guarantees) will be deemed an export subsidy not subject to reduction commitments." If that happens, "We could lose them altogether. That's the risk we run on the other side," Veneman said.
Others disagreed. Democratic Sens. Tom Harkin (D., Iowa) and Max Baucus (D., Mont.) oppose the OECD proposal. In a letter, they said it "would essentially eliminate the long-term GSM-103 program and cut roughly in half the time allowed for repayment of other GSM credit and increase premiums and fees for GSM credit guarantees."
CoBank, the largest lender for grain sales from U.S. cooperatives, is said to be opposed to the OECD workout as well.
Copyright 2001, The Miller Publishing Company, a company of Rural Press Ltd.:
