President Reagan's proposal to eliminate farm subsidies could mean huge budget savings in the European Community and the United States, where nearly $300 billion has been spent in the last decade on price and income supports, Agriculture Department analysts said.
The proposal was formally presented last week to the 93-country General Agreement on Tariffs and Trade in Geneva.A new analysis of U.S. and EC agriculture shows that total spending for farm price and income supports recently is averaging more than $50 billion a year, up from less than $12 billion a year in 1977.
Including a forecast for 1987, U.S. spending during the period totals about $126 billion, compared with $170.1 billion for 10 countries of the EC, which does not include the two most recent bloc members, Portugal and Spain.
The 10 are: Belgium, Denmark, France, Greece, Ireland, Italy, Luxembourg, Netherlands, United Kingdom and West Germany.
The report said U.S. farm spending led the EC in only three years: 1983, 1985 and 1986. Last year was a record for both, with U.S. outlays rising to $25.8 billion and the EC's to $21.8 billion. In 1987, however, the EC is expected to regain the lead, with spending estimated at $26.2 billion, compared with a U.S. forecast of $25.3 billion.
"About two-thirds of U.S. expenditures are on grains, with an additional 9 percent on dairy," the report said. "In contrast, expenditures on grains were originally budgeted to account for about 15 percent of CAP (the EC's Common Agricultural Policy) expenditures in 1986, with two-thirds of that cost going for export refunds."
Beef and dairy subsidies accounted for almost 40 percent of the CAP expenditure's last year, the report said.
The analysis was prepared by the Economic Research Service as a staff report: "A Comparison of Agriculture in the United States and the EC." It was written by agency economists Mark Newman, Tom Fulton and Lewrene Glaser.
"One U.S. objective in current GATT negotiations is to promote liberalization of international trade," the report said. "According to (agency) analysis, there are no 'free traders' among the world's agricultural trading countries."
The report said a study of the protection afforded U.S. and EC farmers during the period of 1979-84 showed that overall protection was greater in Europe but was also important in the United States.
Estimates of "producer subsidy equivalents" (called PSEs) were developed to compare subsidy levels in selected countries. The PSEs are expressed as a percentage showing roughly what share of farmers' cash receipts come from subsidies.
For example, a PSE of 25 percent means the value of government assistance to farmers was found to equal one-fourth of their cash receipts. The heavier the subsidy, the higher the percentage.
The report said that during 1982-84, protection of sugar, wheat, corn and dairy producers was higher in the United States, while protection of beef and soybean producers was stronger in the EC.
When the PSEs for various commodities were averaged together, the overall level of protection of farmers through subsidies, import restrictions and other devices was greater in the EC than in the United States.
Overall, the average PSE for all commodities produced by farmers in the EC - weighted by values of production - was 31 percent in 1982-84, compared with 22 percent in the United States.