Shultz Cautions France on Trade War on Grain

Secretary of State George P. Shultz warned President Francois Mitterrand and Premier Jacques Chirac of France on Friday that the United States is ready to fight a trade war with the European Communities to protect its billion-dollar-a-year grain market in Spain and Portugal.

A senior State Department official told reporters that Shultz complained that Common Market regulations that have been adopted but not yet put into effect are illegal under international trading rules and are unacceptable to the United States.

Shultz met separately with the Socialist president and the conservative premier who heads a day-old government installed after the narrow victory of two conservative parties in last Sunday’s parliamentary elections. Chirac’s meeting with Shultz was his first high-level conference as premier.

Warning From Shultz

Reading from notes taken during the meetings, the U.S. official said Shultz told the French leaders that the United States and the 12-nation Common Market “must try to come to grips with this problem; maybe we can’t, and we’ll just have to fight it out.”

The official, who declined to be identified by name, said that Shultz pointed out that Washington could retaliate with tariffs of its own against Common Market products.

The Common Market’s disputed quota and market-share regulations were adopted after the Jan. 1 admission to the trading bloc of Spain and Portugal. The U.S. official said that it has not been determined when the regulations will go into effect and that Washington is determined to head them off before enforcement begins.

The regulations impose new restrictions on sales to Spain and Portugal by non-Common Market countries of soybeans, corn, wheat and sorghum. U.S. farmers sell $1 billion a year worth of those grains to the Iberian countries.

The official said the meetings were harmonious despite the stern tone of Shultz’s comments. Shultz said if a trade war is inevitable, the Americans and the Europeans should try to handle it in a way that would “not infect everything else.”

The official said that Mitterrand and Chirac agreed with Shultz that the issue must be thrashed out at a high political level, either at the economic summit meeting in Tokyo in June or in regular U.S.-Common Market talks in Brussels later in the year.

Shultz stopped off in Paris on his way to Turkey and Greece for the first trip by a U.S. secretary of state to the strategic southern flank of the Atlantic Alliance since Alexander M. Haig Jr. visited the countries in 1982. Greece is a Common Market member, but Turkey is not. On the way home, Shultz is scheduled to stop in Italy, another member of the trading bloc.

“We are going to be saying it in Greece, and we are going to be saying it in Italy,” the official said.

“Look what is happening in agriculture in the States--to lose a market of this size is intolerable,” the official said.

Shultz was in Paris for a speech to the European conference of the Stanford University Alumni Assn. In the address, Shultz, a Stanford business school professor on leave, said that recent advances in computer and communications technology pose a dilemma for closed societies like the Soviet Union. He said the situation can only help the United States and the West.

Shultz said only nations that permit the free flow of information and ideas can participate fully in what he described as the “information revolution” of computer data banks, robots and direct broadcast satellite television transmission.

Shultz said that Moscow and its East Bloc allies “face an agonizing choice: they can either open their societies to the freedoms necessary for the pursuit of technological advance, or they can risk falling even farther behind the West.”