Iron Curtain’s Fall Is Changing Old Trade Ways : Markets: France’s goose liver business is just one Western industry bracing for new challenges from the East Bloc.

In the food folklore of France, the rocky valleys along the Dordogne River in the Perigord region are special places.

For it is believed that farmers here grow the best corn for force-feeding geese to produce the grayish-pink liver known the world over as foie gras.

“It is a tradition here, passed on from father to son, mother to daughter,” farmer Raymond Chaud said with pride during a recent interview. “Only we French have the savoir-faire--the nose, the character and the taste--to make good fatted goose liver.”

But as Chaud knows, the best-kept secret of French foie gras is that a lot of it is not French at all. Tons of goose liver and duck liver are shipped to France every year, for processing and packaging, from farms in Hungary, Poland and Bulgaria.

Last year nearly half of the 5,500 tons of the goose liver processed in France came from these East European countries, to be cooked and packaged in oblong tins labeled Product of France.

Before the dramatic political and economic change that has recently been sweeping Eastern Europe, the goose liver connection was one of those quiet East-West relationships that seemed to benefit both sides.

Polish farmers in the Poznan region, along with Bulgarian farmers in collectives around Pleven, were paid hard Western currency for high-quality goose liver. Big food-processing firms here in Perigord got the liver at bargain prices and used the fame of French cuisine to sell it at several times the cost. But they took care to buy some liver from such French farmers as Chaud to keep the local tradition alive.

Now, in the face of emerging market economies in the East, the goose liver trade finds itself up against changing rules and roles, as does the East-West trade in such varied products as mushrooms, paprika, tractors, pigeons, horse meat and computer software--even blue jeans.

A French discount department store chain, Monoprix, recently began selling jeans designed in Italy and sewn in the Soviet Union. At $40, they are more expensive than other jeans sold in the chain’s stores, which run around $25.

Jacques Gallien, a buyer for Monoprix, said his original order of 15,000 pairs of jeans was virtually sold out after a short publicity campaign. “I’ve ordered another 10,000,” he said.

For Gallien, it was sort of a personal detente.

“I wanted to contrast the idea that jeans, created in the United States, are now being made by Russians,” he said. “I thought it was amusing that the first textiles we would import from the Russians would be jeans.”

Soviet jeans are not likely to challenge Levi Strauss or other big jeans makers for supremacy in the world market. But for other Western businesses, the implications raised by the changes in East Europe may be more serious.

The management of the world’s largest mushroom company, Royal Champignon of France, recently expressed alarm at the volume of Polish mushrooms coming into Western Europe by way of the Netherlands, where they are packaged as a Dutch product and are therefore covered by West European trade agreements.

French foie gras producers fear that the East Europeans will decide to go into business on their own and stop sending liver to France. They live in terror that some French company will leak the secrets of converting the liver into the renowned delicacy.

Jacques Rougie, a large foie gras producer in the Perigord town of Sarlat, talked about the problem.

“Fresh foie gras , “ he said, “sells on the Hungarian market for 120 francs a kilo ($20 for 2.2 pounds). In France, it costs 200 francs ($33). If you know that (after processing) the same product will sell for three or four times as much, you can understand why the countries of the East wish to export their own finished product.”

As a result of this perceived threat from the East, leaders of the French goose liver industry have gotten together to work out a strategy for holding on to their secrets.

In the nearby department (state) of Gers, Comtesse du Barry, one of France’s largest goose liver companies, which has done business with East European countries for years, now refuses to buy any foreign liver.

“We have enough fresh foie gras for our needs,” Francis LaCroix, the firm’s tough-talking director, said recently. “Why should I favor someone I don’t know?”

There is a foie gras producers’ association, and some members have proposed giving the French product a regional trademark similar to what the wine makers use.

For their part, the Hungarians think that the French are a bit premature in their fear of a changing market. Ferenc Toth, commercial secretary at the Hungarian Embassy in Paris, told a reporter:

“We would have to reconstruct our entire system of production and canning and find our own markets. Given our very serious internal problems and a decline in agricultural production, I don’t think it is realistic for the French to have too many illusions or fears right away.”

Still, Comecon, the 10-nation communist trading alliance, is unraveling rapidly in reaction to democratic reform, and Western countries will probably be importing smaller and smaller amounts of unprocessed farm products.

“Those Western companies that have a brain will go in and form joint ventures with their suppliers,” George F. Hemingway of Los Angeles, a specialist in trade with East Europe, commented recently. “The others will lose their source.”

Hemingway cited paprika, the condiment made of crushed red pepper, as an example. Hungary is the world’s No. 1 producer and exporter of paprika, with large markets in Austria, France, the United States and West Germany. Until recently, most of the Hungarian paprika exported to the West came in bulk quantities, because “they didn’t have state-of-the-art packaging equipment,” Hemingway said.

Now, Hungarian paprika producers have acquired advanced packaging equipment from the West and plan to sell directly to Western markets.

Hemingway also mentioned Digital Equipment Co. of Maynard, Mass., which recently entered into a joint venture with a Hungarian firm, Szamalk, to produce computer software. Under old Comecon rules, Hemingway said, no such agreement would have been possible.

“I think there will be a lot more of them,” he said.

According to economists with the Paris-based Organization of Economic Cooperation and Development, the first victims of this expanding competition will not be Western countries but developing countries.

In the first few years, one OECD analyst said, the main threat will be to developing countries that now face direct competition in the East, where they have traditionally sold their products. Such nations as India and Malaysia, he said, are more likely to be hurt than the countries of Western Europe.

Chaud, the Calviac-en-Perigord farmer, said the goose liver business is not as good as it once was. He has cut back to 150 geese from the 600 that he used to keep on his 20-acre farm two miles from the Dordogne. He has turned to alternate crops: tobacco, wheat and walnuts.

At the moment, he is building a guest house to accommodate tourists.

“In the old days,” he said, “we made a lot of money with our geese. But now the Hungarians are flooding the market. It’s not the golden egg it used to be.”