Pact Halts Stiff U.S. Tariffs on European Luxury Goods

American and European trade negotiators Thursday settled a bitter dispute over grain exports hours before a U.S. deadline, thereby almost certainly avoiding the imposition of steep retaliatory tariffs on a range of luxury food and wine imports from Europe.

But the compromise, announced here and at the Brussels headquarters of the European Communities, must still be approved by the Common Market’s 12 member countries, and late reports from there hinted that a special meeting of its foreign ministers may have to be convened today to keep the deal from falling through.

Under the agreement, which compensates the United States for grain sales lost to Spain and Portugal when those countries joined the Common Market, U.S. farmers will be able to sell annually as much as 2.6 million tons of corn and sorghum to Spain at world market prices and an additional 400,000 tons to Portugal.

In addition, an array of other agricultural and industrial products, including avocados, grapefruit and apple juice, chemicals, epoxy and aluminum products, will be allowed into Europe under lower tariffs.

In hailing the agreement, U.S. Trade Representative Clayton K. Yeutter said that the United States “will receive full and fair compensation” for trade losses suffered when the countries imposed the European Communities’ steep tariffs on agricultural products grown elsewhere. “As a result of this agreement, President Reagan will be suspending his order that tariffs on certain agricultural imports be raised up to 200%,” Yeutter said.

Agriculture Secretary Richard E. Lyng, in a separate statement, said the agreement will avoid “a trade war with our major trading partner.”

In announcing the agreement in Brussels, the Common Market’s chief negotiator, Willy de Cler, told a news conference that the hard-won accord is “a political solution to avoid a trade war.”

The settlement does not satisfy U.S. grain farmers, however. Bill Wilson, spokesman for the U.S. Feed Grains Council, said that his organization is “rather disappointed” with the terms of the compromise. “We were hoping the figures would be higher,” he said.

Deadline Today

When Spain and Portugal, both important buyers of American-grown corn and sorghum feed grains, joined the Common Market last spring and became subject to its fiercely protectionist trade policy, Reagan Administration officials claimed $377 million in lost sales annually to Spain alone and sought compensation.

With negotiations at an apparent impasse late last year, President Reagan in December announced retaliatory tariffs of up to 200% on an array of upscale “yuppie food” and drink imports, effective today.

Specifically, that prohibitive tariff would have been imposed on small canned hams from Denmark; blue mold cheese from France, Italy and Scandinavia; Edam and Gouda cheeses from the Netherlands; Brie, Camembert and other soft-ripened cheeses from France; Belgian endive and baby carrots in jars; ripe olives packed in brine; white “jug” wine priced at less than $4 a gallon before tax; brandies and cognac priced at more than $13 a gallon before tax, and English and Dutch gin.

The Europeans threatened retaliatory action against U.S. feed grains, rice and wheat if the new U.S. tariffs took effect.

Around-the-Clock Talks

With the U.S. deadline forcing the pace, Yeutter and De Cler negotiated in Washington last Saturday and pledged to keep talking by telephone as the differences between them slowly narrowed. On Wednesday, with Yeutter on a trip to Los Angeles, telephone negotiation moved to an around-the-clock schedule. Agreement finally was reached at 3 a.m. EST Thursday, M. Alan Woods, Yeutter’s deputy, said.

Two key European concessions involving Portugal and other potential U.S. exports to Europe brought the compensation up to the $377-million to $400-million level per year that the Administration had been demanding.

The Common Market dropped its insistence that Portugal take at least 15% of its feed grain imports from other Common Market countries. By so doing, Yeutter said, the European Communities provided an additional 400,000 tons of potential grain sales for American farmers.

The agreement will remain in effect for four years, at which time it will be reviewed and adjustments could be negotiated.

Variety of Products

An extra $70 million to $100 million in yearly sales to Europe is to come in such products as avocados; roasted nuts; dried onions; certain seeds; apple, cranberry, grapefruit and apple juice; bourbon; cigars; plywood; various chemicals, epoxies and aluminum plate.

“The hardest negotiation was on the feed grain numbers,” said Agriculture Undersecretary Daniel G. Amstutz, conceding that farmers won’t get all they wanted. “But, with this settlement, the U.S. will enjoy four times more in sales per year than would have been the case if there had been no agreement.”