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Subject: Behind the U.S.-European Trade Dispute<By Peter Behr>
Date: Fri, 6 Nov 92 05:06:14 EST
Message-ID: <20.1992Nov6.050614@AmeriCast.com>

Behind the U.S.-European Trade Dispute<By Peter Behr>

The quarrel between the United States and Europe that now
threatens to blow up into a full-scale trade war is rooted in a
30-year-old deal that went bad.

Here are the basics of the dispute.

The United States and the European Community had agreed to elim-
inate a series of taxes on imports, called tariff duties, which
raise the price of products purchased from abroad.

 It was part of a broad reduction of trade barriers in the years
following World War II that helped economies on both side of the
Atlantic to grow faster. The main U.S. beneficiaries of this par-
ticular deal were supposed to be soybean and sunflower producers.

 While Europeans agreed in principle to welcome these American
agriculture imports, however, they continued to defend their own
farmers, who are not only an important political bloc, but occupy
a cherished niche in European society.<What did the Europeans
do?<Starting in the 1970s, European governments began making sub-
sidy payments to their oilseed producers. These farmers expanded
their production, blocking U.S. rivals and capturing more of the
market for themselves, not only in Europe but elsewhere in the
world.  After failing to win compensation for its farmers during
the past four years and with U.S. farmers and lawmakers demanding
action, the administration said yesterday it would wait no
more.<What exactly are the penalties?

Unless there's a last-minute agreement, the U.S. government on
Dec. 5 will raise tariffs - an import tax - on three kinds of
products. The tariff on European wines, for example, would jump
by 200 percent and the price of a bottle of European wine costing
$10 wholesale would  be $30.<Will prices go up then?  Not neces-
sarily, or at least not by the full amount of the tariff. There
is a lot of European wine already in the United States that will
be sold before the higher-priced imports begin showing up in
stores. How long that will be isn't clear.<What could happen
next?

The Europeans could retaliate by raising tariffs on American im-
ports. And that could be just the start. The administration has
singled out a much larger range of products - cheese, cut
flowers, sausages, candy, furniture, machinery and more - on
which penalties could be imposed if the Europeans don't make a
deal.<How can a trade war be avoided?

 The United States wants European exporters to pay $1 billion to
the United States as compensation for all the U.S. soybeans that
didn't get sold during  the past 30 years. It also wants Europe-
ans to cut back on subsidies to  farmers.  Europeans say the
Americans are asking for too much.<Won't U.S. consumers end up
paying the bill?

Prices for wine and possibly many other European products would
rise, though an Agriculture Department official involved in the
dispute says he has seen no estimates of the impact.<How does all
this help American producers?

 <The $1 billion won't do them any good. But if the confrontation
leads to a settlement, a cutback in European subsidy payments
would put a financial squeeze on farmers there, causing prices to
rise and production to shrink, thus giving American producers a
better crack at foreign sales.<02:15 11-06C9999-----

Copyright 1992, The Washington Post.  This story is from the
Washington Post's Capitol Edition On-Line and is not to be ar-
chived or redistributed.

For more information, send-email to American Cybercasting Cor-
poration (usa@AmeriCast.COM)