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Subject: Europeans Move To Revive Stalled U.S. Trade Talks; EC's Negotiator Reassigned
Date: Wed, 11 Nov 92 04:42:03 EST
Message-ID: <18.1992Nov11.044204@AmeriCast.com>

Europeans Move To Revive Stalled U.S. Trade Talks; EC's Negotia-
tor Reassigned To End Impasse Over Oil Seeds<By Stuart Auerbach
and William Drozdiak=Washington Post Staff Writers=

The European Community acted last night to settle a trade war
with the United States by authorizing its agriculture commission-
er, Ray MacSharry, to reopen negotiations with Washington.

MacSharry bowed out of the talks last week and accused EC
President Jaques Delors, who is French, of undermining
MacSharry's position in the negotiations over U.S. objections to
European subsidies of oil-seed producers.

The collapse of the talks led U.S. Trade Representative Carla A.
Hills Thursday to announce that the United States would slap 200
percent retaliatory sanctions on $300 million worth of European
imports, largely French wines. France, in turn, had pressed for
European countries to draw up a list of U.S. goods for retaliato-
ry tariffs.

U.S. officials said yesterday's development, coming at an unan-
nounced meeting of the EC's inner cabinet, increased the chances
of settling the dispute - which has threatened to constrict the
world economy at a time of global recession. However, there was
no indication from Brussels that MacSharry had a mandate to offer
new concessions from the Europeans in the negotiations.

"After MacSharry's very public complaints about DeLors' interfer-
ence, we hope he would not come back without having something of
a mandate and without some sort of proposal for moving this for-
ward," a senior Bush administration official said last night.  As
an indication of the sense of crisis that the threatened trade
war has generated, the head of the world's leading trade body an-
nounced yesterday that he would embark soon on an effort to stave
off such a conflict between the United States and the European
Community.

Director General Arthur Dunkel of the 108-nation General Agree-
ment on Tariffs and Trade (GATT) said in Geneva that its members
asked him to shuttle between Washington and Brussels, where the
EC is headquartered, to fashion a compromise so that a global
trade pact could be achieved as soon as possible.

U.S. officials, though, said that Dunkel has no power to force a
solution on either the United States or the Europeans. While he
would conduct his shuttle diplomacy over the oil-seeds dispute,
his focus was on salvaging GATT's six years of fruitless negotia-
tions, known as the Uruguay Round, to strengthen the rules of
free trade.

"There is a deep sense of crisis, since it appears the Uruguay
Round is in danger of being lost," Dunkel said. "Failure is some-
thing which neither the world economy nor participating govern-
ments can afford."

A final settlement of the Uruguay Round trade talks could infuse
up to $200 billion into the world economy as markets drop bar-
riers and nations make more efficient use of their resources.

U.S. officials said settling the oil-seed dispute is the key to
the Uruguay Round. The issue arose as a result of complaints over
EC subsidies, which they said deprived them of the benefits of a
30-year-old agreement in which Europe cuts its oil-seed tariffs
to nothing in return for American trade concessions. Europe could
be a lucrative market for American growers of the seeds used in
cooking oil and in industrial applications.

Two GATT panels have upheld the U.S. position in the last five
years, but the Europeans have declined to offer a solution or ac-
cept binding arbitration.

European diplomats in Washington said the U.S. threat to retali-
ate against French white wine imports, which would triple their
cost and effectively wipe them out of the American market, had
succeeded in forcing European officials to realize the United
States was serious on the oil-seed subsidies. They saw the reap-
pointment of MacSharry to the farm talks as a rebuff to Delors,
who has denied any interference.

"The move tied his hands and restricted French action in in-
fluencing the talks. Delors will have to take a low profile on
this issue and be like Caesar's wife," said a European diplomat
in Washington.

Hills, in Washington yesterday, said the problem in reaching a
solution has been the deep spilts within the EC, with France
leading the hard-liners and Britain leaning toward the U.S. posi-
tion. While the government of Chancellor Helmut Kohl wants a
deal, Germany has played a muted role because it has large
numbers of oil-seed farmers.

In talks in Geneva last month, U.S. officials said that negotia-
tors reached a tentative settlement under which the EC would have
limited production to about 8.5 million tons a year. Later,
though, EC negotiators rescinded that that agreement and said
they would reduce their current 13 million-ton production to 11
million, which U.S. Agriculture Secretary Edward Madigan said was
unacceptable.

American farm interests would settle for the 8.5 million-ton lim-
it, sources said, and in the interests of achieving a deal the
Bush administration would likely go to a 9 million-ton figure.

Many developing countries have expressed alarm that the protract-
ed dispute between the world's two largest commercial powers
could spell disaster for countries seeking markets in industrial-
ized nations.

President Francois Mitterrand said on national television yester-
day that the U.S.-European trade dispute should not be allowed to
isolate France. After a meeting of EC foreign ministers Monday,
France's Roland Dumas said his country was willing to accept cuts
in subsidies to its oil-seed farmers provided it was done in the
context of overall reform of Europe's agriculture sector.

French wine exports earn more than $10 billion a year and form a
substantial part of the country's trade surplus, while the oil-
seed business involves about $2.3 billion a year.

A leading group of French wine exporters implored their govern-
ment in a memorandum released yesterday to "halt its policy of
confrontation with the United States and refrain from drawing up
countermeasures" that could trigger a spiraling trade war.

Alone among its European partners, France has argued that the
Community should wait until President-elect Clinton takes office
before pressing for a final deal. A quick accord with the Repub-
licans, the French argue, would have to be renegotiated with the
Clinton administration and a new Congress, meaning Europe would
be compelled to make multiple concessions.  Clinton, though, has
taken a hands-off stance in the dispute, saying it is up to
President Bush.

The delayed timetable would suit the political interests of
Mitterrand's unpopular Socialist government, which wants to wait
until after national elections in March before having to confront
a painful compromise that could enrage French farmers.

But Britain and Germany, along with other European states, insist
that the Community should strive to reach an agreement as quickly
as possible, certainly before the Republicans leave office in
January. They say that Clinton, as the first Democratic president
in 12 years, will respect a decent trade package wrapped up be-
fore he takes power because he will not want to be distracted
from applying his 100-day domestic legislative program.

France's European partners fear that despite Clinton's endorse-
ment of fair and open trade relations, the Democratic Party still
harbors protectionist factions that will clamor for special trade
considerations. Waiting even a few months, the British warn,
could court disaster if a fresh currency turmoil or some other
crisis of confidence exacerbated a deepening global recession.

EC Commission President Delors expressed renewed hopes yesterday
for an imminent breakthrough, saying he was "more optimistic than
ten days ago."

Rufus Yerxa, the deputy U.S. trade representative, said the Com-
munity would have to show greater flexibility. "We have been
pressing for three years, with all sorts of proposed compromises,
but the Community has maintained a very, very rigid position," he
said in an interview.

Yerxa said the U.S. sanctions were announced in a way "to maxim-
ize their impact and it is clear that we have got their atten-
tion. But whether it's enough for the Europeans to show more
flexibility is still unclear."Auerbach reported from Washington,
Drozdiak from Geneva.<02:15 11-11C9999-----

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.

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