The announcement by agriculture secretary Dan Glickman threatened to ignite an agricultural trade war at a time when world grain prices are slumping and the European Union has moved slowly to phase out generous farm subsidies.

Glickman said the department's Export Enhancement Program (EEP) will be used to subsidize 30,000 metric tons of US feed barley into Algeria, Cyprus and Norway. The department will issue invitations to US exporters for the barley subsidies within several days.

"Our action today demonstrates how seriously we view the EU sale," Glickman said. "It is intended to indicate the United States will respond to the use of inappropriate subsidies."

"We're not looking at this as a way to start any kind of global trade war," he added.

The planned US sale will precisely match an unusual EUsubsidized grain shipment to a California animal feed company, which has enraged US growers. EU officials tried to play down the shipment, due to arrive any day in Stockton, California, as a rare event unlikely to occur again.

The sale of subsidized finnish grain to US firm Penny Newman Co. is a legal transaction under World Trade Organization rules.

But US growers, who lost most agricultural subsidies under the landmark 1995 Farm Bill, said they feared the United States could become a permanent dumping ground for cheap EU barley if the current shipment went unchallenged.

Growers and farm state lawmakers demonstrated in front of the White House last week, complaining that subsidized shipments depressed already low prices.

The Clinton administration's tough response lays more groundwork for the next round of international trade talks in 1999, which are expected to focus on agricultural subsidies and state-owned trading enterprises. The United States contends that both distort world trade.

InBrussels, a bristling European Commission warned the United States that any resumption of its grain export subsidy program would hurt farmers on both sides of the Atlantic.

The commission also described as "bordering on the ridiculous" US farmers' claims that the subsidized shipment had caused domestic US prices to fall."It is neither in the US nor EU interest to get into a subsidy war. That would only benefit third-country producers and not farmers in the US or in the EU," Gerry Kiely, spokesman for European Farm Commissioner Franz Fischler said.

The EU has also said that a gap between US and world barley prices made it inevitable that some lower-priced foreign barley would be imported into the United States.

Canadian agriculture minister Lyle Vanclief criticized both the EU and the US response.

"We deplore the actions of both of them, and they're pushing toward the slippery slope," Vanclief said. "It depresses the world price of grains and uses tax payers' money to do it."

Some US analysts saidthe US subsidy would open the door to other mischief on the agriculture trade front.

"They can say it should not be seen as a precedent. But the fact is, that's what it is," said one US grain analyst, who spoke on condition of anonymity. "It makes a second decision to use EEP an easier decision to make."

The agriculture department last used the EEP to subsidize US grain sales in July 1995. It said earlier this month it would reactivate the EEP for sales of dairy and poultry products to selected markets.

US barley growers praised the announcement that will pay a cash bonus to exporters willing to lower their prices in order to make a sale into a targeted country.

"That's fantastic. That's what we wanted to hear," said Gerald Lacey, one of about 20 barley growers who gathered in Stockton to protest the arrival of the EU shipment.

In general, barley growers have been cautious about returning to full-blown use of the Export Enhancement Program because they support eliminating export subsidies in thenext round of world trade talks.

The US announcement came hours after American trade negotiators claimed a separate victory over the EU involving beef exports. A World Trade Organization arbitrator ruled that the EU would get 15 months -- not the four years it sought -- to comply with a recent decision requiring it to lift a ban on beef imports treated with hormones.

Meanwhile, the Clinton administration's decision to subsidise barley exports for the first time in nearly three years could open the door "to all kinds of mischief," the US export grain industry's top representative here said on Thursday.

"I don't think this is the time to use the Export Enhancement Programme (EEP)," Dan Amstutz, president of the North American Export Grain Association said. "I think it represents questionable public policy and I think it's regrettable that they did it."

Earlier on Wednesday, US agriculture secretary DanGlickman announced that the Clinton administration would subsidise the sale of 30,000 tonnes of US.

Barley to three traditional European Union markets in response to a subsidised sale of 30,000 tonnes of EU barley into California.

While US barley farmers were understandably angered by the EU sale, it would have been better if the Clinton administration had "just gone on from what was done," Amstutz said. "Much too much has been made about this flap."

Glickman emphasised in remarks to reporters that the administration's action was intended to respond to a specific incident and did not signal a return to a broader use of EEP.

A US grain industry analyst, who asked not to be identified, also expressed the same concerns as Amstutz.

"They can say it should not be seen as a precedent. But the fact is, that's what it is. It makes a second decision to use EEP an easier decision to make," the analyst said.

But like Glickman, USDA general sales manager Chris Goldthwait sought to dismiss those concerns.

The administration's action is "not... a harbinger of a broader use of EEP," Goldthwait said. "Thisis a very specific and targeted use of the programme in response to an incident that harmed American farmers."

In recent comments, Glickman expressed the view that using EEP broadly to subsidise bulk grain exports would probably not boost domestic prices, Goldthwait said. Barring some change in market conditions, that is likely to continue to be USDA's view, he said. Both Amstutz and the grain industry analyst also ridiculed the notion that the Clinton administration's action would cause trouble for the EU. "The European Union is not harmed by this," Amstutz said.