EC to Slash Subsidies, Ending Pasta Dispute With U.S.

The United States and the European Community have settled their lengthy fight over Italian pasta, averting a possible transatlantic trading war, U.S. Trade Representative Clayton K. Yeutter announced Wednesday.

He said the EC agreed to cut sharply its subsidies on pasta exports, but added: “It should not be necessary to go to the brink of a trade war every time we have a trade dispute.”

In Brussels, officials said the deal, worked out in late-night telephone conversations between senior European Community and U.S. trade officials, was approved at a meeting Wednesday of ambassadors from the 12 EC member states. Italy backed the accord, which becomes effective Oct. 1.

U.S. pasta makers, who wanted an end to all subsidies, said in a statement that the agreement’s effect was not immediately clear and they would closely monitor it to see if it actually curbed or raised the price of Italian pasta.

The pact ends all subsidies--now about 12 cents a pound--on 50% of the EC shipments and cuts the subsidy on the rest by 27.5%. Yeutter said in a statement that he expected a further cut in the subsidies in coming months.

The European Community-U.S. fight over the pasta subsidy, which American pasta makers claimed was injuring their domestic sales, lasted for six years and brought charges and countercharges of retaliation from both sides.

Recently, the two had traded offers over the size of a subsidy cut, but last week the talks seemed deadlocked. EC Commissioner for External Affairs Willy de Clercq had said: “Without a miracle, we will be in a classic conflict.”

U.S. officials said then that if no pact were reached, they would impose tariffs on the pasta, and EC officials said they would likely counter with curbs on American lemons and walnuts.

Italian pasta sales in the United States 10 years ago were 14.5 million pounds. Last year they hit 110 million pounds, and the U.S. Pasta Makers Assn. estimated that they will hit 144 million pounds this year.

It was one of a number of issues the United States and the EC have been fighting out in recent years. Others include alleged EC subsidies for Airbus Industrie commercial aircraft and duties on U.S. grains following Spain and Portugal’s inclusion in the community.

Yeutter said that “ultimately, problems such as this one can only be resolved when subsidies are brought under control as part of an overall agricultural negotiation.”

President Reagan last month proposed broad talks under the General Agreement on Tariffs and Trade, the global trading body, to end world agricultural subsidies. U.S. and EC farm subsidies alone are estimated to cost each nation more than $20 billion a year.

Yeutter said the lengthy pasta fight also pointed up the need for stronger GATT dispute settlement procedures, saying “trade disputes should not be allowed to drag on indefinitely.” A recent dispute over citrus trade took the two sides 16 years to resolve.