Back From the Trade-War Brink
AFTER going to the brink of a trade war, the United States and the European Community appear ready to resume talks on reducing subsidies for European oilseed growers.
The main obstacle to successful talks was France, whose activist farmers exert a powerful influence on decisionmaking in Paris. Through tractor blockades and demonstrations, the farmers already have made their feelings known about earlier decreases in EC subsidies.
A parliamentary election looms in March, and French politicians, including EC Commission President Jacques Delors, don't want to anger the farmers again.
Offsetting those concerns, however, are Europe's overall interests in the conclusion of a new worldwide agreement on liberalized trade. The current round of talks sponsored by the General Agreement on Tariffs and Trade (GATT) have run aground on farm-subsidy conflicts between the US and Europe.
Trade in oilseeds is a subset of larger agricultural issues, and it is the subject of separate, longer-running bilateral negotiations. But failure to compromise on oilseeds, with the resultant tariff war, could doom the broader GATT talks too.
Washington's response to last week's breakdown of the oilseed negotiations - announcement of a 200 percent tariff on French luxury products effective in early December - was not unanticipated. The talks have dragged on for six years. GATT panels twice ruled against the European subsidies, which have the effect of crowding American growers out of Europe's market. But the EC has refused to take corrective action.
France's Socialist government, worried about a trouncing in March, wanted to stand firm against the Americans. But others in the EC, particularly Germany and Britain, strongly favor compromise. That view apparently won.
Presumably, the Europeans will return to the US ready to make the small compromises needed to settle oilseed differences. Then both sides can proceed on to implementation of the new GATT pact, which could pump well over $100 billion into the world economy and help industrial and developing countries alike.