The United States occupies a rather unique position in the world wool trade - besides being one of the world's largest apparel wool producers, she also needs to supplement her requirements by sizeable imports from wool surplus countries. However, wool imports into the U.S. have a strong competitive advantage over domestic wools, not only price-wise but also on account of their uniformity and generally better preparation. For this reason the ability of the wool exporting countries to enlarge very substantially their markets in the U.S. by displacing some domestic wools is largely dependent on the American policy of sheltering and fostering the domestic wool industry. For decades, the traditional means of achieving this has been by levying specific tariff duties of varying height on fine apparel wools which proved to be a potential threat to finer Territory (i.e. domestic) grades. Non-competitive carpet wools, on the other hand, imported mainly from Argentina and Uruguay, have been exempt from duty. More recently, with the aim of stimulating wool production to a level compatible with the strategic raw material needs of the U.S., an incentive subsidy program administered by the U.S. Secretary of Agriculture has been superimposed on the existing tariff structure. It is the purpose of this paper to discuss the rationale of the new wool program against the background of the traditional American wool policy, and at a later stage, to explore its implications for American apparel wool imports in general and from Australia in particular.