U.S.Agrees to Extend Truce in ‘Pasta War’ : Trade Dispute With Common Market Is on Hold Until Oct. 31

The United States and the Common Market have agreed to extend by more than three months a truce in an acrimonious trade dispute over Italian pasta, California nuts and lemons and Mediterranean citrus, U.S. Trade Representative Clayton K. Yeutter announced Friday.

Yeutter said that representatives of the Common Market in Brussels had confirmed that a pause agreed to July 9 now can be prolonged until Oct. 31.

Under the agreement, the 10-nation Common Market will drop its plan to raise tariffs on imports of American walnuts and lemons, a retaliatory step for a U.S. move June 20 to raise tariffs on imports of European pasta products.

In return, the United States will suspend the proposed higher tariffs of 40% on egg pasta and 25% on pasta made without eggs, duties that were to have been imposed Monday.

As a further element of the deal, the Europeans agreed to reduce by 45% existing subsidies on pasta exports, an important factor in the U.S. decision to move against a growing invasion of the American market by Italian pasta.

Finally, the Common Market agreed to take unspecified steps to make it easier for American lemons and oranges to penetrate the European market. Up to now, that market has been dominated by citrus from Morocco, Israel and nine other Mediterranean nations, which have been allowed into Common Market countries at lower tariff rates.

Development Policy

The Common Market has claimed that this differential is part of a development policy in the region. U.S. citrus exporters have claimed that it is discriminatory, costing them about $48 million last year in lost business.

“President Reagan’s decision to retaliate against the EC’s unfair trade practices on citrus has led to the resolution of our longstanding dispute over pasta and a commitment to resolve the citrus dispute,” Yeutter said in a statement.

But he warned: “If the EC fails to take satisfactory action on citrus by Oct. 31, both sides acknowledge that the U.S. reserves the right to retaliate against the EC’s discriminatory tariff treatment on U.S. citrus exports.”

Until the original truce in the “spaghetti war,” the dispute seemed in danger of escalating into a major trade battle.

Sen. Pete Wilson (R-Calif.) had proposed that the retaliatory tariffs on walnuts and lemons be countered by higher tariffs on wine imports from Europe, a step that would have extended the dispute to an area of trade that reached $1.8 billion last year.