The world's major industrial countries gave new political impetus Thursday to the current global trade-liberalization talks, warning that failure would have "negative consequences" for the world economy.
After a two-day meeting here, top economic policy-makers from the United States and 23 other rich countries issued a communique formally assigning the talks "the highest priority on the international economic agenda."
But the move--which was intended to breathe new life into the sputtering talks--was blunted by what the ministers conceded were "major stumbling-blocks in a number of key areas," including a U.S.-European fight over farm trade.
As expected, the communique showed the United States and Europe split over how far the negotiators should go to reduce agricultural supports. Washington wants to phase out export subsidies, but the Europeans do not.
Washington also lost a separate bid to persuade the ministers to call for further restrictions in the use of so-called tied aid--the practice of linking a country's foreign aid to promises by recipients to buy the donor country's exports.
The outcome of the session of the Paris-based Organization for Economic Cooperation and Development is a disappointment to the Bush Administration, which had hoped to use the high-level meeting to advance farm-trade reform.
Jean-Pascal Delamuraz, Switzerland's economics minister, who served as chairman of the OECD meeting, tried to play down the split over farm trade, calling the differences "important, but not terribly irreconcilable."
Negotiators for the United States and the European Community are expected to try to hammer out a compromise on the agricultural issue before the annual seven-nation economic summit July 9-11 in Houston.
Some U.S. strategists suggested that the failure of the OECD to heal the rift might well focus attention on the agriculture split and prompt other countries that support the U.S. view to step up their pressure on the EC.
However, U.S. officials conceded Thursday that if the rift continues at the Houston summit, it could jeopardize prospects for completing the broader trade talks in Geneva by the negotiators' target of early December.
The trade talks were not the only focus of the communique that the ministers issued Thursday. The document also:
* Warned against rising inflation in some industrial countries, urging that central banks continue to maintain tight money and credit policies.
* Urged industrialized countries to continue offering developing countries access to their domestic markets, even in the face of new demands by the emerging East European democracies.
* Called for increased global attention to environmental problems, many of which, it said, had acquired "a worldwide dimension"--particularly the issue of how to deal with what appears to be global warming.
The failure of the United States to win endorsement of new restrictions on the use of tied aid was not a critical setback. Although Washington had placed the issue on the agenda here, it was mainly to give it new emphasis.
Despite the short shrift that they gave the tied-aid issue, the ministers agreed to continue negotiating the U.S. proposal, with the aim of compiling a final report and recommendations by next May.
The U.S.-EC squabble over agricultural trade centers on how far negotiators in Geneva should go toward cutting farm subsidies and opening their countries' markets to more agricultural imports.
The talks in Geneva have already yielded an agreement in principle to seek a "substantial, progressive reduction" in agricultural programs and to lower barriers to imports of farm products.
But Washington wants all countries to commit to reducing export subsidies as well as traditional domestic agricultural supports, while the EC favors setting a broader target that it could meet by cutting domestic aid alone.