Reluctance to Curb Farm Subsidies Snags Trade Talks

Talks between the United States and the European Common Market on how far to go in reducing farm subsidies hit a serious impasse Thursday, threatening to jeopardize efforts by the world’s trade ministers to jump-start the stalled Uruguay Round of global trade-liberalization negotiations.

Although there still was a scant possibility that the two might reach a compromise in wee-hours negotiations Friday morning, officials of both delegations told reporters it was likely the agricultural talks would end in failure. “I think that it’s finished,” said U.S. Agriculture Secretary Richard Lyng. The Montreal session is slated to end Friday.

It was not immediately clear whether an impasse on the agriculture issue would scuttle agreements the ministers approved on 11 other items on this week’s agenda, including efforts to write new rules covering trade in services and tougher machinery for settling trade disputes between countries.

Some countries, notably Argentina and Chile, had threatened to block approval of agreements on other topics if the agriculture negotiations fell apart. Willy De Clercq, the Common Market’s trade minister, told reporters the delegates would have to decide later whether the rest of the accords could be saved.

The trade ministers, representing the United States and 95 other trading nations, failed to settle their differences over another major U.S. goal--an effort to strengthen protection for intellectual property. Officials said there was little chance of reviving the intellectual property issue unless the agriculture impasse was broken.

Both U.S. and European officials insisted that the collapse of the talks on agriculture would not necessarily wreck the overall negotiations, which are scheduled to continue until late 1990. “I don’t think we should dramatize things,” De Clercq said. “We still have a couple of years (of negotiations) left.”

Nevertheless, the fact that the United States and other major industrial nations did not win accords on two of the three biggest issues on the agendas was considered likely to cast a cloud over the talks and possibly intensify pressures on the upcoming Bush Administration to take a tough stance on trade.

The deadlock between the United States and Europe came over American demands that the trade ministers commit themselves to phasing out agricultural subsidies and trade barriers entirely by a specified date--a goal President Reagan has said was necessary to guarantee serious progress in reducing the cost of farm subsidies.

Common Market negotiators contend that agreeing to a complete elimination of current supports--even in 15 or 20 years, as the United States has been suggesting, would amount to dismantling Europe’s longstanding Common Agricultural Policy and risking serious political and social disruption. Europe has 11 million farmers, many on small, inefficient spreads. By contrast, the United States has only 2.5 million.

The agreement on services, worked out during an all-night bargaining session here, commits the trading nations to drafting plans for broadening foreigners’ access to their domestic markets for services--mainly by reducing existing trade barriers.

It also instructs negotiators to extend to industries in the service sector several key principles that now apply only to trade in goods--specifically, that countries treat foreign companies the same as they treat domestic firms, and that they offer the same privileges to companies from all countries.

Insurance Policy

At U.S. insistence, the accord also allows negotiators the option of conducting parallel, but separate talks to write rules to cover financial services--a move designed to provide other countries with a kind of insurance policy against possible demands by the Europeans that other countries offer European banks equal access to their own markets in exchange for entry into the new integrated European market now set to come about in 1992.

U.S. officials had been concerned, for example, that the Europeans would bar American banks from doing business in Europe unless Washington guaranteed that all European banks could do business throughout the United States. The federal government could not mandate this if it wanted to because banking in the United States is regulated partly by the states.

Besides the agreement on services, the ministers also approved accords that would:

- Reduce tariffs worldwide by an average 30% below their levels of September, 1986, when the Uruguay Round was launched.

- Strengthen the enforcement powers of General Agreement on Tariffs and Trade, including speeding up the time it takes for a GATT panel to decide whether a country has been engaging in unfair trade practices.

The group also had hoped to complete an accord involving textile agreements, but still had not hammered out an agreement as of late Thursday.

The weeklong session was called to provide high-level direction for the final two years of the overall talks, which were launched in 1986 in Punta del Este, Uruguay.

The agreement on a negotiating framework for the rules on trade in services was an important achievement for the Administration. Washington had been pushing for such an accord since early 1982, covering industries such as communications, shipping, banking, insurance and construction.