Toronto Summit Opens; No Farm Accord Likely : 7 Nations Doubtful on Limit on Subsidies

Leaders of the world’s seven largest industrial democracies signaled Sunday that they will be unable to agree on ways to speed up currently stalled talks aimed at reducing global farm subsidies, even though this has been billed as a key issue at their annual summit meeting here.

After an opening session Sunday afternoon, White House spokesman Marlin Fitzwater acknowledged that the farm subsidy issue “won’t be resolved at this summit,” and the seven leaders aren’t likely to issue any “admonitions” to negotiators to accelerate current trade-liberalization talks.

Reagan Cites Oversupply

During a discussion that lasted nearly three hours, President Reagan noted that most industrial countries are still producing an oversupply of farm products and that “the problem remains immense,” according to Fitzwater.

But the White House spokesman acknowledged that “the question of what to do about it and how fast it should be done is not one that has great unanimity behind it.”

The issue evoked strong emotions at the session from several of the leaders. Even British Prime Minister Margaret Thatcher, who is Reagan’s staunchest ally and called his proposal to phase out all farm subsidies “courageous,” conceded that it was “not realistic,” another summit spokesman said.

Failure by the summit leaders to adopt a strong position on the issue would mark a setback in the Administration’s long-standing efforts to bring about a major reduction in farm subsidies and global overproduction.

Besides the contentious farm issue, the seven leaders--representing the United States, Japan, West Germany, Britain, France, Italy and Canada--are slated to adopt a proposal to ease the debt burden of impoverished nations in Africa. They also plan to discuss a wide range of economic and political matters--from taxes and deregulation to drugs and hijacking.

Meanwhile, Treasury Secretary James A. Baker III acknowledged that the worsening drought in the American heartland will boost farm prices visibly, but he dismissed fears that the price boosts would lead to widespread inflation throughout the economy.

‘Some Higher Prices’

“There will be some higher commodity prices,” Baker said in a television interview, but added “we do not think that that will lead to a generalized increase, a substantial increase in inflationary pressures in the United States.”

At the same time, senior U.S. officials said privately that the drought has added to the U.S. conclusion that it cannot seek an agreement here to order trade negotiators in Geneva to develop a firm timetable by the end of the year for reducing worldwide farm subsidies.

Instead, the Administration is prepared to settle for vaguely worded language adopted at a prelude meeting in Paris early last month that falls short of Washington’s original goals.

Administration officials concede that higher commodity prices, by reducing the cost of government farm supports, take the pressure off Europe and Japan to accept cutbacks in their own programs.

The only thing that pushed the Europeans to the negotiating table in the first place, said Undersecretary of State W. Allen Wallis last week, “was the immense cost to the EC (European Communities) of supporting agricultural activities.” But now that prices are rising to a level that diminishes the need for additional subsidies, “the pressure is off on spending,” Wallis said.

Meanwhile, finance ministers of the seven nations agreed in a preliminary work session on the outlines of a proposal for each country to act on its own to provide debt relief for impoverished African nations.

Under the plan expected to be endorsed by the seven leaders, countries such as France and West Germany would simply forgive portions of the debt that African nations owe to them, while the United States, instead, would extend repayment.

Late Saturday, Japan joined Europe and Canada in announcing its own initiative to reduce the debts of the poorest African countries. On its own, Japan said it would give 17 impoverished debtors up to $1 billion a year to pay the cost of previous loans owed to the Japanese government. France announced last week it will forgive one-third of the debt the Africans owe to Paris.

The Administration had opposed all such plans until recently. But this month Baker announced that Washington would support the proposal if the U.S. could provide alternative relief by postponing the debt of the African countries rather than forgiving it outright.

Under U.S. law, the White House must get congressional approval before it can cancel any debts from foreign governments. Congress would not allocate the funds for such write-offs without taking the money from other important foreign aid programs that the Administration wants to preserve.

Such relatively modest economic initiatives are likely to be overshadowed by the more politically potent discussions of the global drug trade, terrorism and arms control.

But in an effort to keep attention on their recent economic successes, the leaders spent much of Sunday’s session congratulating themselves for policies they believe helped keep the global economy from cracking following the crash in world financial markets last October.

At the same time, they are all but certain to reaffirm an agreement reached last December among economic officials of the seven nations aimed at stabilizing exchange rates.