U.S.-EC talks falter sanctions loom

November 04, 1992|By New York Times News Service

CHICAGO -- American and European negotiators failed to achieve a breakthrough last night on an impasse over farm subsidies that has blocked world trade talks, making a trans-Atlantic trade war likely within days.

Agriculture Secretary Edward R. Madigan said he would recommend that President Bush impose prohibitive duties on certain European exports. The European Community is likely to retaliate against American exports.

The election of Gov. Bill Clinton makes retaliation even more likely, because world trade talks will probably be interrupted for months as Mr. Clinton picks new trade officials and reviews current U.S. negotiating positions.

Ray MacSharry, the European Community's agriculture commissioner, said the U.S. side had asked for excessive reductions in subsidized European grain exports and subsidized production of soybeans and other oilseeds.

"The demands," he said, "were too much." No further meetings are scheduled, Mr. MacSharry said.

Mr. Madigan said the European Community had refused to take account of reports by two international arbitration panels that concluded that European oilseed subsidies violate international free trade rules. "We believe that we have the moral high ground, the legal high ground and the intellectual high ground," he said.

Steve M. Yoder, president of the American Soybean Association, called for immediate penalties on European exports. "The United States has very little option except to retaliate," he said.

The prohibitive tariffs are likely to fall first on alcoholic beverages from France but may be extended to include wines from the rest of Europe, cut flowers, industrial products and even snails. Wine importers have lobbied heavily against the imposition of punitive import duties.

On June 9, Carla A. Hills, the U.S. trade representative, released a list of $2 billion worth of European farm exports and threatened to impose punitive duties on half the list if the oilseeds issue was not resolved.

At a White House meeting on Oct. 22, Mrs. Hills, Mr. Madigan and acting Secretary of State Lawrence S. Eagleburger agreed that tariffs would initially be imposed on up to $350 million worth of goods and eventually on up to $1 billion.

Mr. Madigan said the United States would review whether to prepare a supplemental list of exports that would be punished. U.S. officials say the list could include industrial products because Germany has been the main obstacle to an oilseed agreement and Germany exports mostly industrial goods to the United States, rather than farm goods.

The dispute about the oilseeds, used as animal-feed supplements and cooking oil, was the most important of the farm subsidy issues that have blocked an agreement in world trade talks for the last two years, European and American officials said yesterday.

European officials had offered to reduce their oilseed acreage, but the Americans wanted a binding commitment that actual production of oilseeds would also fall.

Mr. MacSharry organized a plan last May for reducing European subsidies through cuts in acreage, and he criticized the United States last night for refusing to negotiate on the basis on those cuts.

John S. Gummer, Britain's Farm minister, flew to Chicago Monday night and conferred with European Community negotiators here.

British Prime Minister John Major insisted on the current round of negotiations and appeared to have the most at stake. The British Parliament is scheduled to vote today on whether to approve the Maastricht agreement, which is intended to stimulate trade in Europe by creating a single European currency and by eliminating differences in social and economic policies among European Community members.

Political analysts in London have speculated that Mr. Major could be replaced as prime minister or could be forced to call general elections if he fails to get his fractious Conservative Party to support the Maastricht pact. Trade frictions with the United States could undermine support in Britain for the pact.

Among the 12 European Community nations, the main opponent of a trade pact has been France.

France is Europe's leading grain exporter, and has steadfastly resisted American demands that the European Community's tonnage of subsidized grain exports be reduced by 24 percent within six or seven years.

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