The pasta-citrus trade war between the United States and Western Europe will be settled "within the next few weeks," U.S. Trade Representative Clayton Yeutter said Tuesday.
Yeutter said he based his optimism on discussions he had with European trade leaders last month.
"We've laid the groundwork to make progress," he said. "The negotiating climate has cleared considerably."
The trade representative, who holds the rank of ambassador, made the remarks to reporters after addressing the 67th annual meeting of the American Farm Bureau Federation, the nation's largest organization of farmers and ranchers with 3.4 million members.
The trade war flared last summer when President Reagan imposed high tariffs on European pasta exports in retaliation for years of high levies that have all but dried up U.S. citrus sales to the member countries of the Common Market. U.S. pasta makers also charged that the Europeans were "dumping" pasta on the American market--selling it abroad below cost. But Reagan postponed implementation of the pasta tariffs until last Oct. 31 to give the Europeans time to make a counterproposal.
That proposal proved inadequate, and on Nov. 1 Reagan increased the tariff on egg pasta to 25% of its value from 0.25%. The levy on non-egg pasta soared to 40% from 0.54%.
The Common Market immediately designated U.S. lemons and walnuts for retaliation, boosting the tariff on lemons to 20% and walnuts to 30% from the previous 8%. Because lemon sales to Europe have dwindled because of what the United States maintains is preferential treatment for Mediterranean citrus, the most telling impact was on walnuts, virtually all of which are grown in California.
That move--coming during the prime Christmas selling season--cost California walnut growers an estimated $24 million in lost sales. Many of the growers nonetheless supported Reagan's action as an overdue step to respond to foreign trade barriers.
Yeutter, a former assistant secretary of agriculture and head of the Chicago Mercantile Exchange, said the December discussions cleared up "a lot of misunderstandings."
In his speech to the federation, Yeutter said the 20% reduction in the value of the dollar since it peaked last February has modestly improved the ability of U.S. farm commodities to compete in world markets. Agricultural exports tumbled to about $33 billion last year from $44 billion in 1981.
"Another 10% to 15% reduction (in the value of the dollar) would make exports go like gangbusters," Yeutter said. Reducing the current $200-billion budget deficit and lowering interest rates further would go far toward lessening the dollar's persistent strength in foreign exchange markets, he added.
"Two dollar corn in Iowa or Nebraska is not $2 corn in Rotterdam or Yokohama," he said, referring to the effect of currency exchange rates on commodity prices.
Further aid for exports will eventually emerge from bilateral trade negotiations with Canada this spring and from a proposed new round of multilateral trade talks scheduled to start in September under the General Agreement on Tariffs and Trade. Yeutter said the United States intends to emphasize agricultural trade in the new round--the eighth since GATT's signing in 1947. Ninety nations have since signed the agreement, which seeks to set ground rules for world trade.
Got Short Shrift
"Agriculture got short shrift in previous rounds," he said. Export subsidies by the United States' trading partners have increased over the last decade. But, he warned, "we're going to have to give in order to get" in the eventual negotiations.
"Some of the impediments we have to agricultural trade--such as dairy quotas--are going to have to be removed, but we'll be better off for it in the long run," he said.
"We've got some opportunities now--clearly--to turn agriculture around," Yeutter concluded, advising the farm audience: "Tighten the belt one more notch, if you can, and hang in there. It's going to be better."
Senate Majority Leader Robert Dole (R-Kan.), addressing the same audience, echoed that assessment.
The new five-year farm program enacted last month will strengthen agricultural exports and help make 1986 "a watershed year for agriculture," Dole said.
"The cornerstone of the commodity programs is the reduction of price supports to make U.S. exports more competitive in international trade," he said.