Bush, EC Renew Pledge to Complete Trade Accord : Economics: But they fail to make a breakthrough on agriculture, the thorniest of outstanding issues.

President Bush and European Community leaders pledged anew Saturday to quickly complete the current round of international trade negotiations, but they failed to make a breakthrough on the issue that has divided them for five years--agriculture.

“No big advance, but some advance,” said Frans Andriessen, the EC’s chief trade negotiator, after Bush met with Dutch Prime Minister Ruud Lubbers and European Commission President Jacques Delors.

However, there was apparently greater progress on some of the less-divisive issues in the trade talks, which involve more than 100 nations. U.S. officials, for example, reportedly agreed to open their banking, telecommunications, shipping and air transport sectors to greater international competition.

Bush conferred for about four hours with the EC leaders on his way to Washington from the North Atlantic Treaty Organization summit in Rome. With the President were Secretary of State James A. Baker III and Trade Representative Carla Anderson Hills.

“I am pleased today to report that the United States and the EC have made progress in just the past few days and have pledged to spare no effort to resolve the equally significant issues that are still outstanding,” Bush said.

He vowed to resist the protectionist pressures mounting in Congress as the U.S. economy weakens. “That way lies economic ruin,” he said, “a prescription for plunging us into the kind of impoverishing rivalry that ravaged our economies during the Great Depression.”

At a press conference, Bush said the talks yielded “a narrowing of differences and a commitment to concluding the (trade talks) successfully this year. . . . I think there’s a positive message here.”

Delors emerged upbeat on the chances of concluding a trade accord. “For the first time, I am reasonably optimistic,” he said.

But Lubbers, who participated in Saturday’s meeting because the Netherlands holds the EC’s rotating presidency, acknowledged that “there are still a number of problems that we have not solved. There is a gap.”

In a joint statement at the end of Saturday’s talks, Bush and the European leaders declared themselves “more than ever committed to an ambitious, global and balanced result” of the trade talks by year’s end.

The United States and its major trading partners have made such pledges before, most recently at last July’s summit meeting of the seven major industrial democracies.

The trade talks, called the Uruguay Round because they were launched in that country in 1986, were supposed to last only four years, but they faltered last December in a dispute over trade in agricultural goods.

Agriculture remains the thorniest issue. Bush and the European officials, in their joint declaration Saturday, conceded that “the remaining gap will not be easy to close, but we are both committed to do so.”

When the trade negotiations fell apart, the United States and other agricultural exporting countries were demanding that the EC slash its farm subsidies by 75% and its export subsidies--its costly payments to farmers to make up the difference between the world price and the higher European price of agricultural goods--by 90% to 100%.

At that time, the United States wanted to give the EC 10 years to achieve these goals. On Saturday, European officials said, the United States scaled back the time frame to five years, with a corresponding decrease in the reductions it seeks in EC farm subsidies.

One EC source, who asked not to be named, said the United States now is talking about a roughly 30% reduction in basic EC subsidies to farmers.

The EC has always wanted to use 1986, when its farm payments reached their peak, as the level from which subsidies should be reduced. As of last year, subsidies had already fallen about 15% from 1986 levels. Under the new five-year plan, that would leave only another 15% to go.

The EC’s farm subsidy program has become more generous this year, however, leaving a reduction of only 10% from 1986 levels. That would oblige the EC to cut another 20% in the next five years.

Delors said the EC is reforming its farm subsidy program, which soaks up more than half of the EC budget, independent of the trade talks.

“We intend to produce less, to import more and to export less,” he pledged. That, he said, would leave a greater share of the world market to the United States and the 14 major agricultural nations in the so-called Cairns Group.

Although farm subsidies are the knottiest issue in the trade talks, they are not the only one.

In a 10-page summary issued last Thursday, Arthur Dunkel, director general of the General Agreement on Tariffs and Trade, listed a host of others, most of which were addressed only briefly or not at all in Saturday’s meeting here.

GATT, as the Geneva-based organization is called, enforces current international trade agreements and is sponsoring the Uruguay Round negotiations.

Bridging the GATT Gap

Some of GATT’s unresolved issues: * Agriculture: EC subsidizes its 10 million farmers regardless of how much they produce, which has led to surpluses that are dumped on the world market, distorting trade and depressing prices. United States says these high agricultural subsidies hurt American farmers and wants greater cuts in subsidies than EC is contemplating.

* Services: Negotiators seek for the first time to establish international rules governing trade in services. It is in this area that United States showed new flexibility Saturday in banking, telecommunications, shipping and air transport.

* Textiles: Third World countries want greater access to the industrial countries’ markets, and negotiators seek to replace existing textile trade agreements between pairs of countries with a broad international accord.

* Market access: Negotiators have set a goal of a one-third reduction in tariffs on imports.

* Dumping: Existing rules prohibit companies from charging less for products sold for export than they charge in home market. United States and EC have used these rules to keep exports out. Japan and many newly industrialized countries want to relax rules.

* Intellectual property: United States and other industrial countries seek protection abroad of their trademarks, copyrights and patents.