Yeutter Warns Trade War on Farm Goods May Erupt : Trade: The USDA chief says the key is whether Europe yields to U.S. demands to phase out subsidies.

Agriculture Secretary Clayton K. Yeutter warned Wednesday that an agricultural trade war could result if a deadlock over the United States’ demands at international trade talks continues through the end of the year.

The United States is seeking the removal of European farm export subsidies over 10 years.

If no agreement is reached, “I guarantee you the costs for some of our trading partners would increase dramatically,” said Yeutter, the luncheon speaker at a forum sponsored by the Journal of Commerce and the National Foreign Trade Council.

“The United States has to protect its own interests,” Yeutter said. “I’ve thought about how we can do that and hope I can keep those thoughts in the back of my mind and never have to surface them.”

Yeutter, while conceding that U.S. farm policies also distort trade, said U.S. export subsidies amount to less than $1 billion a year, while European help for farm exports comes to $10 billion annually.

“We all have to go down the reform road together,” Yeutter said.

Yeutter said proposals for cutting European subsidies in half are insufficient.

The Common Market’s export subsidies are intended to help relatively expensive European farm products compete against lower-priced goods in the world market.

U.S. negotiators unsuccessfully pushed their call to stop export subsidies, as well as an end to import barriers and domestic subsidies, at a meeting of the Organization for Economic Cooperation and Development last week in Paris.

“I am never surprised about intransigence on the part of the European Community,” Yeutter said of the deadlock.

U.S. Trade Representative Carla A. Hills and other officials have said the agricultural issue is the “linchpin” for all other topics in the current round of negotiations under the General Agreement on Tariffs and Trade, a forum for promoting freer trade.

The talks, known as the Uruguay Round, began in that country in 1986 and are to end this December in Brussels. The negotiations involve about 100 countries and are designed to reduce barriers to trade.

U.S. officials estimate that ending the farm subsidies could boost U.S. agricultural exports by $11 billion annually.

Common Market officials say the subsidies can be reduced but not eliminated because so many small farmers depend on them.