Kohl Breaks Ranks on Agricultural Subsidies : Trade: The West German leader goes against the rest of Europe to end the impasse on price supports.

TIMES STAFF WRITER

The crack in the longstanding impasse between the United States and Europe over farm subsidies Monday came when West Germany broke ranks with its European partners to support President Bush in his campaign to move the current round of trade expansion talks off dead center.

For West German Chancellor Helmut Kohl, the desire to support the U.S. position on the politically sensitive agriculture issue appeared motivated by a desire to repay Bush for backing German unification earlier than any other leader and for Washington's willingness not to block Germany's move to provide massive support for the Soviet economy.

While France is likely to continue to drag its feet when the trade talks resume later this month, the United States and Germany found common ground in a new paper by a negotiating group in Geneva that is now expected to serve as the starting point for a compromise between the major food exporters and the Europeans.

"If we add some little things to this report and put some of the weights into different positions," a senior German official said, "this could be the basis to come to an agreement."

U.S. Agriculture Secretary Clayton K. Yeutter also hinted at support for the document.

"There are elements of the paper that we find objectionable," Yeutter told reporters. "But we see it as a very sound and sensible effort."

That agreement is expected to enable the summit leaders to provide the impetus needed to spur their own trade negotiators to work out a settlement in the key dispute.

The Bush Administration has long emphasized that a breakthrough on the issue of subsidies for food production is necessary to prevent the collapse of the wide-ranging, multilateral trade negotiations that are due to reach a climax at the end of this year.

"Agriculture is the key to the overall success of the negotiations," Yeutter said. Bush is "making the point very forcefully. . . . This is the most important economic action the world will confront" this year.

Echoing the U.S. position, the communique that the seven summit leaders will issue Wednesday is expected to declare that successful completion of the trade talks is the "highest priority on the international economic agenda" and is "essential for providing a framework for the economic integration of Eastern Europe and developing countries into the global economy."

Still unsettled are the specific instructions that the leaders will give negotiators on the farm issue. The language preferred by the United States would call on all countries to make "specific policy commitments" to reduce farm subsidies in all three areas under discussion--domestic farm supports, import barriers and export subsidies.

The Europeans were seeking broader language calling only for commitments "encompassing all measures that affect directly or indirectly import access and export competition."

What now seems likely is that the seven leaders will order negotiators to take the Geneva paper as a starting point. It proposes especially rapid reduction of export subsidies, conversion of import quotas to tariffs, which are easier to reduce, and a cap on overall domestic support.

The United States, which stands to gain from knocking down export barriers to farm products and is backed by most other trading nations, still faces stiff resistance from the European Community over details of an overall agricultural agreement. Any significant change would mean difficult political and social problems for Western Europe.

Officials in Europe have generally argued that any significant reduction in support for agriculture could unravel their nations' tightly knit social fabric, ruining many of Europe's small farmers and wreaking havoc in rural communities.

"We cannot apply free trade in agriculture," insisted Guy Legras, a top trade negotiator for the EC, the Brussels-based organization that unites 12 Western European nations.

While the farm dispute was at the top of the agenda Monday, negotiators for the heads of government were working behind the scenes to forge agreements on environmental issues and on how to handle the issue of providing significant aid to the Soviet Union and the emerging democracies in Eastern Europe.

Economic summits, held annually since 1975, bring together leaders from the seven largest non-Communist industrial powers--the United States, Japan, West Germany, France, Britain, Italy and Canada--to discuss a wide range of political and economic issues.

In the high-stakes clash over agriculture, Bush was determined to find a way to have a successful summit without any major disagreements, while also firmly supporting U.S. negotiators in achieving a breakthrough as the trade talks go down to the wire this year.

"Could the United States . . . be less stubborn and succeed?" asked U.S. Trade Representative Carla Anderson Hills. "The answer is no. Were we to make a concession and not get fundamental reform in agriculture . . . we would have 40 nations get up and leave these negotiations."

Times staff writer Art Pine contributed to this story.

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