Reagan May Impose Stiff Tariffs : U.S., European Talks Fail to Resolve Trade Dispute

Top U.S. and European trade officials failed Saturday to work out a compromise to avert another step in a bitter dispute over agricultural trade, keeping open the possibility that the United States will impose stiff new tariffs Friday on a wide range of European luxury food items.

After daylong talks here between Clayton K. Yeutter, U.S. trade representative, and Willy de Cler, the chief external relations commissioner for the European Economic Community, spokesmen for the negotiators issued separate statements admitting failure but claiming limited progress and promising renewed negotiations this week after a round of consultations among the Europeans.

Top-Level Meeting Monday

De Cler left Washington for Brussels Saturday night to attend a top-level meeting Monday of the European Economic Community, also known as the Common Market.

“We were able to move closer together, but the issues are not resolved,” said Gary Holmes, a spokesman for Yeutter. He said “a few days remain” before the effective date for the retaliatory U.S. tariffs, and “we will be waiting to hear from them after Monday’s meeting in Brussels.”

“The negotiations are not yet completed,” Common Market spokesman Ella Krucoff said in a statement. “The position of the two sides has moved closer together. Each party will now proceed to the necessary consultations,” and the two sides will “resume contact within the next few days in the light of those consultations.”

Both sides declined to give any details on the day’s talks, or to characterize in what way the two sides moved somewhat closer to agreement. “There was movement, but not quite enough,” Holmes said. “But maybe an inch is as good as a mile, in this case.”

Upscale ‘Yuppie’ Products

After earlier failures to negotiate compensation for tariffs of up to 200% imposed by the European Economic Community that have effectively closed off U.S. exports of feed grains to Spain, President Reagan on Dec. 31 announced retaliatory 200% tariffs on a variety of upscale “yuppie” products much in demand in the recent import boom. These include French Brie and Camembert, French, Italian and Scandinavian blue mold cheeses, Dutch Edam cheeses, Belgian endive, jug white wine and expensive French brandy, canned Danish hams and English gin.

Warning that the retaliation is a ratcheting step in a trade war, the Europeans have threatened additional tariffs on American corn and sorghum, the two products at the core of the dispute in the first place.

The dispute has been simmering since last spring, when Spain, formerly a major customer of U.S. grain farmers, joined the Common Market and was obliged to adopt its rigidly protectionist agricultural policies.

This meant that corn and sorghum feed grains that formerly entered Spain duty free at world market rates now faced tariffs ranging up to 200%--a Common Market requirement aimed primarily at protecting French and other European grain farmers unable to produce efficiently enough to compete on the world market.

Entitled to Compensation

Under the rules of the General Agreement on Tariffs and Trade, a major supplier such as the United States is entitled to compensation when a trading group like the European Economic Community imposes a new tariff.

Yeutter and Agriculture Secretary Richard E. Lyng contend that lost sales to Spain are some $400 million--about the level of actual sales in 1983--while Common Market officials, pointing to lower sales in 1985, put the figure at less than $300 million. According to Agriculture Department statistics, the average from 1983-85 was $323 million, or 2.6 million tons of feed grains.

Yeutter has demanded that the Common Market lower its tariff barriers to the extent of buying 4 million tons of corn and sorghum feed grains a year on the world market--of which an estimated 2.8 million tons would come from the United States, thus making up for the lost Spanish market.

The Europeans have tried to find other solutions. They have offered to buy 1.6 million tons of corn and sorghum at a reduced tariff, arguing that the price, however artificially propped up, would still be below what the French grain farmers could profitably match.

Meanwhile, congressional Democrats, who have vowed to put new trade legislation at the top of their agenda, called Saturday for an across-the-board reform of the nation’s trade policy in their response to President Reagan’s weekly radio address.

Must Send Message

“We must send our trading partners a message from a united America. The White House, which once stalled, now says it is ready to work with Congress. That could be a big step in the right direction,” said Rep. Dan Rostenkowski (D-Ill.), who gave the address for his party.

Could Be ‘Second-Rate Power’

Rostenkowski, chairman of the House Ways and Means Committee, said that Americans spend nearly a half-billion dollars more on foreign goods each day than foreigners spend on American goods. “And now, as a result, we are the biggest debtor nation in the world,” in danger of becoming “a second-rate power with a declining standard of living,” he said.

Rostenkowski called on management and labor alike to adapt to the changes necessary to make American industry more competitive. But, he said that “making better products won’t help if other nations keep them out. Our trading partners must be convinced that we are ready to retaliate if they fail to play fair. Our government has a responsibility to promote American business by ensuring that all nations play by the same rules.”