The MacNeil/Lehrer Report; 8031; Politics of Grain

[Tease]

Pres. RONALD REAGAN: Indications are that we'll sell a record volume of grain to the Soviet Union this year. With the extension that we're now exploring, we'll be able to sell large quantities during the next year. In other words, the grainery door is open and the exchange will be cash on the barrelhead.

[Titles]

ROBERT MacNEIL: Good evening. As you just heard, President Reagan told hard-pressed American grain farmers today that he foresaw record sales to the Soviet Union this year. The President blamed President Carter's Soviet grain embargo for depressed grain prices. He told the National Corn Growers' Convention in Des Moines, Iowa, that his decision last Friday to extend the existing grain sales agreement with the Soviets for one year opened the way to larger sales. But that extension has angered European allies, smarting under the president's efforts to block their construction of a gas pipeline to the Soviet Union. French Agriculture Minister Edith Cresson said it was politically movtivated and inconsistent, adding, "Do what I say, but not what I do" could be Mr. Reagan's slogan. The British government today called the Reagan ban on sales of U.S. pipeline equipment redundant, repugnant, and ordered four British companies to ignore it. It's between the pressures of angry European allies and angry U.S. farmers, both with supporters in this administration, that Mr. Reagan has tried to maneuver. Tonight, the foreign and domestic politics of grain. Jim Lehrer is off; Charlayne Hunter-Gault's in Washington. Charlayne?

CHARLAYNE HUNTER-GAULT: Robin, at first glance it might appear that the farmers have nothing to be upset about. This year produced another banner harvest in both wheat and corn. But that's precisely the problem. Demand is down, both at home and abroad, so record harvests mean record stockpiles, and that in turn means lower commodity prices. That may be good news for the consumer, but it's very bad news for the farmer. Consider first the case of corn. It was selling for an average of $3.19 a bushel when Mr. Reagan took office 18 months ago. The latest price is $2.54 per bushel, a 20% decline. The story is much the same with wheat. An average bushel sold for $4.21 in January 1981.Wheat has since dropped to $3.29 a bushel, a 22% decline. Earlier this year the Reagan administration tried to get farmers to cut back on their planting, but farmers complained that the plan offered too little too late. Now the administration has a new plan, offering more incentives earlier for farmers to grow less in the next planting season. This afternoon, before some 5,000 farmers attending the Corn Growers' Convention, the president renewed his campaign pledges, including the main one on their minds.

Pres. REAGAN: But the commitment I'm most proud to have kept has been mentioned here already by your governor, and that was a more normal grain trading relationship with the Soviet Union, lifting the last administration's grain embargo. The lingering effects of that grain embargo are still hanging over the markets, and our nation's farmers are still suffering from those low prices. We had 70% of the Soviet market when the embargo was imposed. That fell to 25% during the embargo. At the same time, our competitors took advantage of this market that the last administration threw away. Well, we've restored to the American farmer a fair opportunity to export grain to the U.S.S.R. on a cash basis. Our efforts on behalf of the farmer suffered a setback, however, with the iron repression of the proud people of Poland. When martial law was declared in that country, U.S. officials weredeveloping a negotiating position on a new long-term grain agreement with the U.S.S.R.After the Soviet Union ignored our calls to aid restoration of basic human rights in Poland, we had no choice but to impose a number of sanctions against both countries, including postponement of negotiations on a long-term trade agreement with the Soviet Union. There is still no cause to celebrate in Poland. I am, however, somewhat encouraged by indications martial law may be relaxing. We'll continue to watch developments there in the hope that life will improve for the Poles and sanctions can be removed. In the meantime, we will explore a one-year extension of the current long-term grain agreement with the Soviet Union. I have also authorized the Secretary of Agriculture to consult with the Soviets on the subject of additional grain sales beyond the minimum purchase requirements of the current agreement. [applause] The extension would have the sanctity of a contract, insuring U.S. farmers access to the Soviet market. Indications are that we'll sell a record volume of grain to the Soviet Union this year. With the extension that we're now exploring, we'll be able to sell large quantities during the next year.In other words, the grainery door is open, and the exchange will be cash on the barrelhead. [applause] Farm exports will not be singled out as an instrument of foreign policy [applause] and can be used only as a part of a trade embargo if it is broad and supported by other nations across the board in a situation that would be so serious as to cause this action. We believe world markets must be freed of trade barriers and unfair trade practices. At home and abroad, we are committed to assuring the American farmer a market that will reward his investment and work and not punish him for his incomparable success.

MacNEIL: After his speech, the President visited on a local farm and met a group of local farmers. One of those invited was Varel Bailey, who runs a medium-sized corn farm in Anita, Iowa. He's now managed to get back to Des Moines; he left the President only a few minutes ago to be with us in the studios of the Iowa Public Television Network. Mr. Bailey, listening to that speech on television this afternoon and hearing the frequent interruptions for applause, it seemed he got a very favorable reception. Is that the way you felt about it?

VAREL BAILEY: Well I think he did. There's not much question that the audience there appreciated those comments. There were quite a few farmers, though, that were sitting on their pocketbook, and were really -- really had wished that the President had been a little bit more specific and had gone on and built even more on his progression of events from last week, from the time that he divided the Russian pipeline from grain sales, then his subsequent announcement of the offer of the one-year extension -- we had hoped that he had gone into more detail there.On the other hand, I think you read it quite correctly. The crowd really appreciated the fact that the President did come out and talk about agriculture.

MacNEIL: Is this one-year extension of the Soviet long-term grain deal -- is that going to make any difference to farmers like you?

Mr. BAILEY: Well it will make a difference, and the reason it will is that the old agreement was about to run out, September 1, and we were finding that the Russians stopped buying several months ago, really. And so, in effect, had he not made an announcement of this type or something like it, we would have, in effect, had a blockage of grain trade to the Russians. So for many farmers the perspective we have is this was the minimum that he could have done.

MacNEIL: How bad is it for corn and wheat farmers like you. I mean, I've read descriptions that, while the rest of the country's in a recession, that the grain farmers are in a depression. Is that too dramatic a way of putting it?

Mr. BAILEY: Well, everything is in shades of gray here, and it's very difficult for me to come right out and say, yes, we are, because you will find some farmers that have a relatively good equity position in their operation that are doing quite well. Unfortunately, we have a group of young farmers that got into the business, let's say, in the last five years, that are very -- have a low equity position, pay a lot of interest, and we are really in jeopardy of losing that generation of farmers.

MacNEIL: You've just met with the President with a group of farmers. Did you get a chance to talk to him yourself?

Mr. BAILEY: Yes I did.

MacNEIL: What did you tell him?

Mr. BAILEY: Well, basically we started out by saying, Mr. President, you are in big trouble, your administration is in big trouble, here in the Middle West. This was -- is really your heartland, the place where your political base -- where you came from and your friends are. But the situation has slid such that we really want you to know that some indications need to be made to the farmers and agriculture in general, that this administration has not forgotten us, that we really are the base to this economy, and that we must build or make, work toward a turnaround in agriculture so that the entire economy can start back on the road to reconstruction.

MacNEIL: Is the grain deal the main thing in this, Mr. Bailey, or is it just part of the whole picture of the Reagan administration's handling of the economy? What really matters?

Mr. BAILEY: Well I think it's only part of it. As he pointed out in his speech, at one time we furnished 70% of the grain going into Russia, and now we're down around 20%. So we've really gone backward. The thing of it is that they're only about 20% of our market, and the other 80% of the export market goes to our regular customers, one of which is the Common Market. And so I think that even though the Russian deal gets the high visibility and everything that there's no question in my mind that this country must come up with an aggressive, national, if you will, export policy on agricultural products if we're to turn agriculture around.

MacNEIL: Well thank you. Charlayne?

HUNTER-GAULT: Another view now from a Washington-based expert who keeps a close watch on agricultural issues and publishes his observations in several newsletters. He is James Webster, a former Assistant Secretary of Agriculture in the Carter administration. Mr. Webster is also a commentator on Market to Market, a weekly agriculture program on PBS. Mr. Webster, in your view, how successful was the President in mending fences with the farmers today?

JAMES WEBSTER: Charlayne, I think he bought some time, but certainly farmers are going to be a lot more skeptical. They're going to be watching movement of prices over the next couple of months, and unless he can deliver that agreement with the Soviet Union, rather than just an offer of an agreement -- because an agreement takes two parties, and we haven't heard a response from the Soviet Union. And it's not at all clear that they'll take him up on it.

HUNTER-GAULT: Well what would be your guess?

Mr. WEBSTER: The prevailing guess in Washington is that they will, that they'll fuss and fume and posture a lot but they'll probably take it for economic reasons.

HUNTER-GAULT: Well how much of a difference will it make, in your view, to the troubles that the farmers are having?

Mr. WEBSTER: Well the agreement itself, certainly the one-year extension, isn't going to make that much difference. What will really make the difference is the amount of grain they buy. Most people in government are looking for another year next year about like this year -- 14, 15 million tons. Not enough really to make a significant dent in the kine of stockpiles that we have. So there's really no immediate prospect of a turnaround in those drastically reduced grain prices that you displayed at the beginning of the show.

HUNTER-GAULT: You mean the prices will stay low the way they are, or continue to go lower, or just stabilize?

Mr. WEBSTER: They're right now about at the price-support levels, and so they're not likely to go any lower because of domestic price-support levels. But there's nothing on the horizon that would suggest that they'll increase.

HUNTER-GAULT: You heard what Mr. Bailey said about his assessment of the problems of the farmers now and how he feels this whole grain business fits into the larger scheme of things. In your view, how much of a factor was the grain embargo in the troubles of the farmers?

Mr. WEBSTER: It had an effect, but it was grossly overstated. The problem is the Soviet Union got almost all of the grain they wanted. Certainly they got it from other countries. But those countries then didn't sell it to their traditional customers, and the U.S. did. The fact is that we had a record year for agricultural exports -- the highest ever -- in 1980, the year of the embargo.

HUNTER-GAULT: But Mr. Bailey just said that he feels that that's a part of the problem, that we need a more aggressive export policy.

Mr. WEBSTER: I don't know how we could have a more aggressive export policy. Under administrations Republican and Democrat over the last 10 years there has been, and continues to be, a very aggressive policy to maximize exports, interrupted by embargoes and by what we call the de facto embargo that President Reagan has maintained, by keeping the Soviets on a short leash, this year-to-year business, rather than what agriculture really wanted, which was a new, long-term agreement, with quantities in the 15 to 20 million ton per year area as opposed to the six or eight million tons that are in this one.

HUNTER-GAULT: You mentioned a 14.5 metric tons -- I think you just did -- that the Russians have been buying, but even up to now they've been allowed on paper to buy much more, I think something like 23 or 24 metric tons, and they haven't fulfilled their allowance. What's the problem?

Mr. WEBSTER: The Soviets are able to get about 30 million metric tons from other suppliers. And since the embargo they have gone to Canada, gone to Australia, gone to Argentina, and they are buying the maximum amount that they can get from most countries. That adds up to about 30 million tons; if they need 45 million metric tons, the other 15 comes from the United States. But I think it's important to note that the President pointed out today, cash on the barrelhead. Canada has just announced a $1 billion line of credit to the Soviet Union. Other exporters are offering credit. The Soviet Union is cash short. They're short of foreign currency right now. They're scrounging around to try to sell gola and do other things to find that foreign currency, and we're not going togive them the credit. And the others will take our business because they are.

HUNTER-GAULT: Well in that case, why -- if the President surely knows that, why is he so confident that we're going to have these record sales that we just heard him refer to in the tape?

Mr. WEBSTER: I don't know why he's that confident. I don't share his optimism. I wish I did.

HUNTER-GAULT: All right.Thank you. Robin?

MacNEIL: A number of the President's defense and foreign policy advisors are reported to have opposed any extension of the Soviet grain deal. Some Republican congressmen agree with him, including John LeBoutillier of New York, a freshman who serves on the Foreign Affairs Committee. How did you react to the President's speech in Iowa today and to Friday's announcement of the extension?

Rep. JOHN LeBOUTILLIER: Well, it didn't surprise me because we had been notified last week that he was going to make this announcement, and I have to say, politically he kept a pledge that he made during the 1980 primaries when he was in the Iowa caucus and he said that he would lift the embargo that President Carter had imposed. I don't agree with it, but at least he kept his commitment, which is a good thing.

MacNEIL: What do you think he should be doing?

Rep. LeBOUTILLIER: Well, all the discussion so far tonight has been on the issue of economics and what's good for agriculture. No one has taken into account what's good for American foreign policy and, which is the bigger question, how to contain the Soviet Union. And, as I understand it, the original grain deal signed in the early 1970s when Kissinger and Nixon were in power was part of the detente solution which was to have interlocking relationships between the Soviet Union and the United States in hopes that having mutual dependencies would be able -- would let us be able to moderate the Soviets' behavior. Now, ten years later, you have to ask yourself, has this worked? The Soviets have had their client states in Vietnam overcome all of Southeast Asia really. Certainly in Latin America Cuba has done a heck of job exporting their terrorism. In Angola, Ethiopia, Yemen, even in Iran they've participated, and certainly the disasters in Afghanistan and Poland don't add up to me that we have been able to moderate their behavior.

MacNEIL: But the previous administration slapped the grain embargo we've just been discussing on the Soviet Union for their invasion of Afghanistan --

Rep. LeBOUTILLIER: That's right.

MacNEIL: -- and they're still in Afghanistan, so that didn't do any good either.

Rep. LeBOUTILLIER: Well, it probably didn't, probably because it wasn't strong enough. Probably what we need to do is something the President mentioned in his speech, which was have a complete trade embargo of which agriculture would only be part. I think the farmers --

MacNEIL: Rather than singling agriculture out.

Rep. LeBOUTILLIER: That's right. And I think he was right when he said we're not going to -- I wrote it down -- farm exports will not be singled out, they'll only be part of a broad trade embargo with other nations. This is the route that I think we should go, rather than single these men out.

MacNEIL: But wouldn't that still hurt American farmers more than anybody else, including the Soviet Union, because they, among all American producers, are most vulnerable on the export market?

Rep. LeBOUTILLIER: Yes and no. First of all, this is the disaster that this detente led us to. Originally, it was thought the Soviets would be dependent on us for this grain. Now you see a nice man like this farmer, Mr. Bailey, who is dependent on the Soviets to buy his product to keep his farm going. In effect, you have the heartland of America dependent on the Soviets to buy their products, and they're desparate to have an agreement signed with our most volatile and potent enemy.

MacNEIL: Coming back to the politics of this, aren't you as a Republican sensitive to the President's -- your party's -- political needs in the Midwest? Your party's leader in the House, Bob Michel, said that if this decision on the extension went against the farmers the political consequences could be devastating.

Rep. LeBOUTILLIER: Well, it could be, obviously. But that's why you have leadership in America. I think if a leader, and I think the President has the capability to do this, went to the farmers and said, "Look, a bigger question is facing us, which is the invasion of Poland and future invasions of other countries by the Soviet military machine. And we have a duty to stop this, and you as Americans, not just farmers but as Americans, have to be a part of this," I think they would go along. But they feel, correctly, that only they were being punished by this, because their products were being limited and no one else. Pepsi-Cola was still building plants and so forth in the Soviet Union, and that wasn't fair. Fairness is very important, and consistency is important.

MacNEIL: Thank you. Charlayne?

HUNTER-GAULT: Mr. Bailey, how would you react to that, if the President came to you just as the congressman outlined?

Mr. BAILEY: Well, I think that history proves the other way, and I'd just like to make a real important -- what I feel is an important point to the congressman. I wonder if we'd have had Pearl Harbor if we'd have been trading with Japan at the level that we were in food supplies. I think that history says that there's a period of isolation prior to most outbreaks of hostilities, and I think that we farmers are very much in the sight of foreign policy and interdependence when it comes to a perpetuation of peace and very much a perpetuation of our way of life and containment of the communist world. I do not agree with the dependent scenario that he laid out here.

HUNTER-GAULT: Congressman?

Rep. LeBOUTILLIER: Yes. Can I ask you a question then, sir?

Mr. BAILEY: Surely.

Rep. LeBOUTILLIER: At what point would Soviet action convince you that some type of embargo was necessary? If they put nuclear weapons in Havana, Cuba, if they invaded Western Europe, would you at that point say we have to do something economically to stop them?

Mr. BAILEY: I would say that the economic provisions we're talking here should be on the same level as the severance of diplomatic relations.

HUNTER-GAULT: Mr. Webster, is that how the majority of farmers in your experience see it, and what would be your comment on that?

Mr. WEBSTER: I think, as Mr. Bailey pointed out, that if the act of the Soviets were severe enough to invite unified retaliation from the free world, such as an invasion of Poland, farmers would respond. I think the initial response of farmers in January of 1980 when President Reagan imposed that embargo right before the Iowa caucuses was very positive. There was a lot of support for the embargo. But as time went on and it appeared that the embargo was not having the intended effect, and it appeared that the other exporters were not cooperating, then that farmer support started eroding. But he's right. There is a good deal of patriotism out there. I think that the congressman overstates the possible actions available to the United States in the present situation, because there is no unanimity. Witness the European reaction on the gas pipeline.Witness how the other grain exporters would deal with it. So we really don't have that leverage that he apparently thinks we have over grain which, by the way is not yours and mine or the government's, it's the property of American farmers, and I don't know how many of them are in the congressman's district in New York.

HUNTER-GAULT: What about that, Congressman?

Rep. LeBOUTILLIER: Well, I have to say in truth, I don't have too many farmers in my district, but I --

HUNTER-GAULT: But to his other point.

Rep. LeBOUTILLIER: Well, I think that's -- Let me read you a quote. "Trade, in my opinion, will bring an end to the ferocity and the crudity of Bolshevism surer than any other method." That was said by the British Prime Minister, David Lloyd George, in 1922, and you can't tell me that in the last 60 years by trading with the Soviets that they have become less crude or less ferocious. Quite to the contrary, this type of trading has fed their ferocity and allowed them to build a military machine that is second to none and moves throughout the world whenever it needs to to take territory. You talk about our European allies, I think the biggest problem with them is that we were not consistent. We said, you cannot build this pipeline that will enable you to trade with the Soviets, but we're going to go ahead and trade with them on grain. You have to be consistent. Either we're going to have all trade or no trade. Either we're going to look at business or we're going to look at a bigger goal which is to hurt the Soviet economy to the point where their military machine has to shrink instead of grow.

HUNTER-GAULT: Mr. Bailey, as a farmer and an American citizen, does that inconsistency in American foreign policy disturb you at all? That apparent inconsistency.

Mr. BAILEY: I can't pick up that degree of inconsistency, especially with the Western Europe thing, because Western Europe has been trading with the Russians on significant things, so our position point of don't build the pipeline and do sell grain is consistent on a military basis when it comes down to hard currency.

HUNTER-GAULT: Mr. Webster, how does the administration justify that apparent inconsistency?

Mr. WEBSTER: Well, the President made that clear in his news conference on Wednesday. It's a rationale developed for him by the Department of Agriculture that selling grain costs them hard currency. Eventually, the pipeline will allow them to earn hard currency. However, that overstates the case, because even the best, most optimistic estimates say that after 1990 if the pipeline is paid off that the best they could expect would be about 15 billion dollars a year, certainly not enough to get them out of their fiscal dilemmas.

HUNTER-GAULT: All right. Robin?

MacNEIL: Mr. Bailey, what do you say about the observation here by Mr. Webster a moment ago that America's competitors among the grain-producing countries are going to make it a lot easier for the Soviet Union to buy by offering credit whereas Mr. Reagan's going to demand cash on the barrelhead? Is that going to interfere?

Mr. BAILEY: Why, there's no question. Just business logic would say it's going to interfere. There's point though that I would like to discuss with Mr. Webster, and this is his point when he said that there's nothing more that the administration can do. When I talk with foreign customers, the thing that is always brought up to me is that you are not a reliable supplier anymore, and if we could get this administration to come down in favor of a sanctity of contract to prove our reliability in world markets again --

MacNEIL: He said that today in his speech, didn't he, the President?

Mr. BAILEY: Well, in shades of gray, again. He said, under the one-year extension there would be an effect of sanctity of contracts. Unfortunately, we in agriculture plan on being in business longer than this administration, and we would very much like support from this administration for legislation in the area of sanctity of contracts.

MacNEIL: Mr. Webster, can I in the couple of minutes remaining ask each of you about the politics of this? You heard Mr. Bailey say that he told the President a little while ago you're in serious trouble here. How serious would you estimate the erosion of Republican support for the President in this coming congressional election year in the farm belt?

Mr. WEBSTER: It appears to be substantial, Rob. The President went into this administration with a great deal of support, probably 80 percent or better among farmers, if I had to pick a number. That has eroded as this Soviet thing has been unsettled, as grain prices have eroded. There is no improvement in prices I'd say that a lot of Republican candidates are in serious trouble in grain country. I'd like to respond also to Mr. Bailey.The sanctity of contracts issue is a key one, and, if the United States would offer some guarantees that there would not be embargoes or that contracts would not be cut across as agriculture is asking for, that would enhance our ability to become a reliable supplier. However, the administration had an opportunity last week to go to Congress, chose not to.No President really is going to want to tie his hands that way.

MacNEIL: Mr. Bailey, you said you told the President you're in serious trouble. There are three Republican congressmen in Iowa and three Democrats at the moment. What does that spell for November, the way things look now?

Mr. BAILEY: Well, I guess the bets are even stephen right now. I don't know of any one that's willing to call the shots on it. It is really a difficult situation out here.

MacNEIL: So Congressman, is that a disaster in the Midwest for your party, or what?

Rep. LeBOUTILLIER: Well, I think if you shape the issue properly, it's still survivable.

MacNEIL: Survivable. We have to leave it there, to survive ourselves. Mr. Bailey, thank you very much for coming and joining us in Des Moines, Mr. Webster in Washington, Congressman LeBoutillier in New York. Good night, Charlayne.

HUNTER-GAULT: Good night, Robin.

MacNEIL: That's all for tonight.We will be back tomorrow night. I'm Robert MacNeil. Good night.