US targets Italian pasta, Europe says nuts to American lemons

US-European relations could worsen because of . . . well . . . pasta. European pasta, to be exact. The tiff began a week ago, when the United States announced stiff new duties on foreign pasta coming into the country. Since most of it comes from Italy, the European Community has threatened to retaliate. Its target: US walnuts and lemons.

No one is sure how far the pasta-walnut-lemon controversy, which represents roughly $60 million a year in trade, will go. A US farm trade official says it's uncertain whether the US will retaliate further. Even so, it is one more sign of increasing US frustration over agricultural trade.

In several sectors of this diverse, traditionally free-trade industry, some are having second thoughts on the concept of free trade.

``I'm beginning to pick up doubts about whether we can be competitive,'' says Kenneth L. Bader, who heads the American Soybean Association. ``It's being built out of a real sense of frustration.''

In California, for example, specialty growers squeezed by subsidized European fruits and nuts are beginning to call for trade barriers.

``We're very, very free-trade oriented,'' says Frank Light, president of Sun-Diamond Growers of California, an umbrella cooperative. ``But we're going bankrupt very, very rapidly.''

Even among Midwestern grain farmers, some of whom grew rich in the '70s because of booming exports, there are second thoughts.

``What we're seeing in the US is a growing recognition that absolute forms of protection have to be dealt with,'' says Robbin S. Johnson, vice-president of public affairs for Cargill Inc. Absolute protection in the European Community and Japan is keeping out US farm products at a time when farmers here are facing increased competition from abroad.

Despite the fact that average US soybean and corn prices are at or near 25-year lows (adjusted for inflation), other countries undersell the US in world markets.

At $5.50 a bushel in April, the export price of Argentine soybeans undercut the Indiana price by 76 cents, according to a study in Successful Farming magazine. And in corn, a bushel from Argentina or Thailand beat the Iowa export price by 22 cents.

In its interim report, released in May, the commission that investigates agricultural trade suggested remedies that involve assigning higher priority to agriculture and food aid in US economic and foreign policy.

But the proposal gaining the most attention was a kind of trade protection plan called export promotion.

In May the Reagan administration reluctantly implemented such a program. The idea: boost exports by offering a bonus of surplus commodities. The original plan was to target these bonuses to markets that other countries had taken from the US by using export subsidies.

But some farm groups are calling for a broader program.

``We still -- and I hope always will -- oppose any kind of protectionism,'' says Paul Drazek, international trade specialist for the federation. But ``you've got to do something about those inequitable rules.''

The current pasta crisis is an example of US agriculture's complaints. Several years ago, US citrus growers complained the European Community was hurting business by giving tariff preferences to Mediterranean growers. When nothing was resolved -- even after a favorable ruling by a committee of the General Agreement on Tariffs and Trade (GATT, the international body governing such trade disputes) -- the US decided to act on pasta.

US officials argue the move was justified, especially since a GATT committee earlier had found that European pasta exports were unfairly subsidized. But European officials are reluctant to reduce supports for their farmers at a time of high general unemployment.

Fighting unfair trade rules with trade barriers of your own can be useful, economists say. But the danger is that the threat doesn't work. And the result -- even more trade barriers -- makes the situation even worse.

Is US agriculture becoming more protectionist? No, says Wayne Rasmussen, historian for the US Department of Agriculture. ``But the pressures of a depressed farm economy, are causing many farm sectors to back away from free-trade principles.''