US-European Accord May Jump-Start GATT Talks

TRADE watchers hope last week's resolution of the United States-European farm subsidy dispute that headed off an impending trade war also paved the way for resolution of a broad global trade agreement.

Under threat of a heavy US tariff on $300 million of its agricultural exports the European Community acceded to Washington's demands to cut subsidies on oilseed production. But while EC officials lauded the agreement as "a breakthrough," France, which proved to be the major obstacle to negotiations, rejected it as selling out Europe's 9 million farmers. (See story, right.)

Conscious of recession in the world's leading industrialized nations, both US and EC negotiators were anxious to avoid a trade war that could have sent producers and markets into a tailspin.

The EC, which generally rules by consensus among its 12 members, is expected to overrule the French position. The French Parliament will consider the issue by mid-week.

US reaction was mixed. Congressional trade mavens, including Senate Finance Trade Subcommittee Chairman Max Baucus (D) of Montana and House Majority Leader Richard Gephardt (D) of Missouri, said that the Bush administration may be compromising too much on US interests. Senator Baucus says the oilseed deal allows France and other EC countries to subsidize extensive production that will continue to displace US exports.

American Farm Bureau Federation president Dean Kleckner expresses disappointment that the settlement took so long, and that the EC was not forced to reduce its subsidized oilseed production to a level "necessary to compensate US farmers for the harm caused them by EC subsidies." But, he says, "farmers on both sides of the Atlantic will benefit from this agreement because it avoids a costly trade war in farm commodities" and it "may clear the path for a successful conclusion ... to multilateral trade neg otiations."

The farm compromise will go to the General Agreement on Tariffs and Trade (GATT) for consideration. The dispute has virtually paralyzed negotiators who for six years have tried to overhaul the international commerce system in multilateral trade talks. GATT, composed of 108 members, is now expected to work relatively quickly through a broader set of issues, including textiles, manufactured goods, intellectual property, and financial services.

US Trade Representative Carla Hills says she looks forward to "tremendous progress" on the overall trade pact in the next several weeks. The EC's top trade official, Frans Andriessen, shares her enthusiasm and may visit French farmers to defend the deal. EC Agriculture Minister Ray MacSharry called the resolution a victory for world trade.

"The green light is given for the conclusion of other parts of the [GATT] agreement," says James Elles, member of the European Parliament and spokesman for its Finance Committee. "There is every bit of wisdom in resolving the GATT before the new Clinton administration comes in," he says. "It is better to deal with known quantities than the unknown."

While he has stated his support for a speedy resolution of GATT, President-elect Clinton has pledged to take a tougher stand on countries whose unfair trade practices adversely affect the US. He has urged a speedy implementation of US sanctions, when necessary.

Laura D'Andrea Tyson, a Clinton adviser on US technology and trade policy, says she believes that a GATT agreement will be reached soon. But, she says, it will still fall short of covering many impediments to international trade.

The US, Ms. Tyson says, should become more like its European and Asian competitors and nurture domestic producers.