Europeans, U.S. Meet to Resolve Grain Sales Rift : Trade War Looms as Deadline Approaches

Negotiators from the European Community and the United States meet in Geneva today as worries grow that the two sides are on course for a damaging trade war that could sour transatlantic relations.

Senior officials from Brussels and Washington will try in two days of talks to break the deadlock over U.S. grains sales to Spain, a dispute widely described as the most serious in more than two decades of commercial rivalry between the two blocs.

The Europeans, who have a multibillion-dollar trade surplus with the United States, stand to lose a great deal.

The officials from both sides are trying to beat a January 31 deadline set by the United States for settling the dispute resulting from the loss of U.S. exports of feed grains to Spain since Madrid joined the EC a year ago.

Washington has already decided to impose a 200% duty on a range of imports from the EC if the dispute is not settled by then, an action that would trigger equivalent retaliation from the Community.

Chances are 50-50

There was little prospect of a breakthrough in Geneva, and last-minute talks are already planned in Washington in a week’s time.

EC External Relations Commissioner Willy de Clerq and Agriculture Commissioner Frans Andriessen, who will represent the EC in the Washington talks January 24-25, have put the chances of success at less than 50-50.

Officials and diplomats from both sides say neither wants a trade war, but they would not shy from one if the dispute remains unresolved.

The United States is demanding compensation for the loss of $430 million worth of maize exports to Spain a year, after complaining that its farm exports to the EC had declined in five years to $2 billion last year from about $7 billion.

The EC accepts that the U.S. grain trade has been damaged by Spanish accession and has offered limited compensation, arguing that the overall opening of the Spanish market since Madrid joined the EC would benefit U.S. exporters in general and should also be taken into account.