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01/16/2000 / By Gregg Jones / The Dallas Morning News

COWRA, Australia -- Ian Donges is an amiable Aussie.

But if you want to see the brawny rancher smolder, ask him about the steep tariffs the Clinton administration slapped on Australian and New Zealand lamb imports in July.

"This is a classic case of where an industry that has been dying for 40 to 50 years, despite subsidies and other government assistance, goes to the president and gets more subsidies and more trade barriers," said Mr. Donges, 53, president of Australia's National Farmers Federation. "We're frustrated that U.S. farmers preach free trade all the time, yet their actions send a very different message."

Bev and Ian Donges and their daughter, Sarah, raise sheep in Cowra, Australia, where U.S. tariffs to protect American farmers have shut down processing plants and caused layoffs. "We didn't need this hypocrisy from the United States," Bev. Donges said.

Half a world away, Texas ranchers beg to differ. They say the lamb sanctions are a justifiable effort to give a struggling U.S. industry badly needed breathing room.

"The imports were a serious threat to our industry," said Pierce Miller, a fourth-generation rancher in San Angelo. "Now, as a result of the trade action, we have an opportunity to make ourselves more competitive."

The dispute offers insights into the raging international debate over free trade, fair trade and economic globalization -- a controversy brought sharply into focus by November's failed World Trade Organization meeting in Seattle.

The challenge facing the United States and other countries is how to balance the potential economic benefits of free trade against demands to protect domestic jobs.

In the United States, at least, the benefits of foreign trade are easy enough to measure: The United States exported $933.9 billion worth of goods and services in 1998, including $86.9 billion in Texas exports.

Millions of American jobs are directly or indirectly dependent on global trade -- like the Lockheed Martin workers in Fort Worth who build F-16 jet fighters for export or the Texas Instruments employees in Dallas who make digital signal processor chips shipped around the world.

But many other American jobs in industries like steel, textiles and sheep ranching are jeopardized by free trade, economists and industry representatives say.

"For segments of the American economy that are on the leading edge, free trade is great," said Charles Probant, 64, a San Angelo rancher. "For those of us in agriculture, free trade supports us like a rope supports a hanged man. It makes it very difficult."

In the United States and other countries, domestic pressures to protect imperiled industries have spawned a flurry of trade disputes in recent years.

Among the more high-profile cases, the United States is feuding with Japan over steel imports and the American use of "anti-dumping" laws to protect U.S. steel producers and other domestic industries from imports. The United States is also at odds with the European Union over everything from European banana import quotas to European Union restrictions on growth hormones in U.S. beef.

But there are dozens of less visible trade tiffs, like the U.S. sanctions against Australian and New Zealand lamb, Australian restrictions on U.S. pork, and U.S. barriers blocking shrimp from India, Pakistan, Malaysia and Thailand.

The danger is a steady escalation of protectionist measures and counter-measures that could choke off global trade and suffocate economic growth, trade experts say -- a worst-case scenario that the WTO is designed to head off.

President Clinton has made free trade and open markets a centerpiece of his foreign policy, proclaiming the United States to be "a champion of free trade."

But in Australia, where the U.S. lamb tariffs have sparked national outrage, recent U.S. actions speak much louder than words. And in Australia's countryside, as the tariffs claim local jobs and cut family incomes, the American paeans to free trade ring hypocritically hollow.

Australians say the tariffs call into question Washington's moral authority to lead the trade debate.

"The obvious conclusion to draw is that the United States espouses free trade when it suits it and espouses other attitudes when it doesn't," said Dr. Peter Barnard, general manager for economic, planning and market services at Meat & Livestock Australia, a Sydney-based industry group.

The roots of the dispute go back a decade, when Australian lamb producers decided that low lamb consumption made the United States an attractive target for a marketing push.

Australian producers set to work developing a bigger lamb specifically for the U.S. market and launched a campaign to persuade U.S. consumers to try lamb. They also talked with U.S. retailers and discount clubs and began delivering the boneless lamb and lamb steaks that appealed to American consumers.

The efforts quickly paid off. Australian lamb exports to the United States soared to 17,000 tons in 1998 from 5,000 tons in the late 1980s. With Australian and New Zealand lamb selling for up to 70 percent below U.S. market prices, imported lamb jumped to 30 percent of U.S. consumption in 1998 from 15 percent five years earlier.

Meanwhile, the decades-long decline of the U.S. lamb industry was accelerating throughout the 1990s. More than 24,000 sheep-raising operations went out of business in the United States between 1993 and 1998, a 26 percent decline. That included 300 in Texas, which leads the nation in numbers of sheep producers and sheep, according to the American Sheep Industry Association.

During the same period, 140 federally sanctioned sheep and lamb slaughtering plants closed -- nearly 20 percent of the nation's total. One of the casualties was Monfort Inc.'s San Angelo plant, which closed in 1995 with the loss of about 125 jobs.

Overall, an estimated 50,000 sheep industry jobs were lost between 1993 and 1998, according to the American Sheep Industry Association.

U.S. sheep ranchers concede that drought, high production costs and other factors have contributed to their difficulties. But the most damage has been caused by soaring lamb imports, which "were coming in cheaper than our cost of production," Mr. Probant said.

In September 1998, the American Sheep Industry Association and its supporters filed a complaint with the U.S. International Trade Commission, the government agency that hears trade grievances. The so-called 201 petition, named for a section of the 1974 U.S. Trade Act, allows the government to take temporary action to protect an American industry injured by imports.

The aim was to give U.S. lamb producers "the respite needed to implement substantial efforts to become more competitive," the association's petition said.

After a six-month investigation, the commission ruled that imports represented a "threat" of substantial injury to U.S. sheep producers and processors. In March, a majority of commissioners recommended a 20 percent tariff on Australian and New Zealand lamb imports above the 1998 level, falling to 10 percent over a four-year period.

On July 8, after furious lobbying by U.S. and Australian ranchers and their political supporters, President Clinton announced his decision: a 9 percent tariff on all lamb imports from Australia and New Zealand up to the 1998 level, and a steep 40 percent tariff on imports above that amount, falling to 24 percent over a three-year period. He also promised a $100 million assistance package for U.S. lamb producers.

Australians reacted with outrage. "Damn Ewe" screamed the front-page headline in Sydney's Daily Telegraph. "Our lamb farmers vow revenge for Clinton's free trade hypocrisy." Another howled, "Political cowardice behind the U.S. lamb decision."

"We were astonished by the decision," said Dr. Barnard. "We always thought the American way was to award initiative and award effort. And our industry had shown initiative to develop the lamb market in the United States."

U.S. ranchers and Clinton administration officials, however, reject charges of hypocritical protectionism. They contend that WTO rules allow countries to impose temporary measures to protect industries under threat from imports.

"There's a thing called fair trade as opposed to free trade," said Mr. Miller, the San Angelo rancher. "I think that's why the World Trade Organization was set up -- to allow some means of redress to address dramatic changes in import flows. So in my mind, the system worked the way it was supposed to work."

Three years of tariffs on imports "is not an egregious example of pure protectionism," said Kimberly Elliott, a research fellow at the Institute for International Economics in Washington, D.C. "Unless the U.S. industry does in fact do some adjusting, three years of protection sort of delays the inevitable. The real question is whether there is a legitimate commitment to trying to actually become competitive."

Australians contend the U.S. sanctions were unjustified because their sheep producers aren't subsidized by the government and weren't "dumping" lamb on the American market -- that is, selling it for less than the cost of production.

Australia and New Zealand are appealing the U.S. tariffs to the WTO. But Australian ranchers say the damage will have been done by the time a decision is rendered later this year.

Already, Australian lamb prices have fallen sharply. Sheep slaughterhouses have laid off workers, and ranchers have been cutting hired labor and other costs.

In the meantime, Australian producers are bracing for up to $52 million in lost export sales over the next three years.

"Already, things have slowed down considerably," said Bev Donges. "We didn't need this hypocrisy from the United States."

Whether U.S. lamb producers can ever compete with their Australian and New Zealand counterparts is an open question. Australian ranchers say the U.S. industry's production costs are too high and average flock size of fewer than 100 sheep too small to be cost effective.

Mr. Miller, however, says the temporary sanctions at least offer a second chance for U.S. lamb producers, without crippling their Australian and New Zealand competitors.

"Hopefully, American producers will take advantage of this window to re-establish ourselves in a competitive position," he said. "I think we can make significant headway in certain areas in the three-year time period. What I'm looking for is a situation where we're treated fairly and so are the foreigners, and we can all stay in business.":